Exhibit 10.4

 

CERTIFICATE OF DESIGNATION

OF

SERIES 2010 LTIP UNITS
OF

SIMON PROPERTY GROUP, L.P.

 

WHEREAS, Simon Property Group, L.P. (the “Partnership”), is authorized to issue
LTIP Units to executives of Simon Property Group, Inc., the General Partner of
the Partnership (the “General Partner”), pursuant to Section 9.3(a) of the
Eighth Amended and Restated Limited Partnership Agreement of the Partnership
(the “Partnership Agreement”).

 

WHEREAS, the General Partner has determined that it is in the best interests of
the Partnership to designate a series of LTIP units that are subject to the
provisions of this Designation and the related Award Agreement (as defined
below); and

 

WHEREAS, Sections 7.3 and 9.3(c) of the Partnership Agreement authorize the
General Partner, without the approval of the Limited Partners, to set forth in
an LTIP Unit Designation (as defined in the Partnership Agreement) the
performance conditions and economic rights including distribution and conversion
rights of each class or series of LTIP Units.

 

NOW, THEREFORE, the General Partner hereby designates the powers, preferences,
economic rights and performance conditions of the Series 2010 LTIP Units.

 

ARTICLE I
DEFINITIONS

 

Except as otherwise expressly provided herein, each capitalized term shall have
the meaning ascribed to it in the Partnership Agreement.  In addition, as used
herein:

 

“Adjustment Events” has the meaning provided in Section 2.2 hereof.

 

“Award Agreement” means any one of the three forms of Series 2010 LTIP Unit
Award Agreements approved by the Compensation Committee of the Board of
Directors of the General Partner and entered into with the holder of the number
of Award LTIP Units specified therein.

 

“Award Date” means March 16, 2010.

 

“Award LTIP Units” means the number of LTIP Units issued pursuant to an Award
Agreement and does not include the Earned LTIP Units or Vested LTIP Units that
the Award LTIP Units may become.

 

“Conversion Date” has the meaning provided in Section 4.3 hereof.

 

“Conversion Notice” has the meaning provided in Section 4.3 hereof.

 

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“Earned LTIP Units” means the number of Award LTIP Units that are determined by
the Committee to have been earned pursuant to an Award Agreement.

 

“Economic Capital Account Balances” means, with respect to the LTIP Unitholders,
their Capital Account balances, plus the amount of their share of any Partner
Minimum Gain or Partnership Minimum Gain, in either case to the extent
attributable to their ownership of LTIP Units.

 

“Liquidating Gain” means gain allocated to the holders of Earned LTIP Units
pursuant to Section 3.1 of this Designation.

 

“LTIP Units” means Award LTIP Units, Earned LTIP Units and Vested LTIP Units.

 

“LTIP Unitholder” means a person that holds LTIP Units.

 

“Parity Series” means any other series of LTIP Units entitled to the same
allocations of Profits and Losses as the LTIP Units designated hereby.

 

“Partnership Unit Economic Balance” shall mean (i) the Capital Account balance
of the General Partner plus the amount of the General Partner’s share of any
Partner Minimum Gain or Partnership Minimum Gain, in each case to the extent
attributable to the General Partner’s Partnership Units divided by (ii) the
number of the General Partner’s Partnership Units.

 

“Partnership Units” or “Units” has the meaning set forth in the Partnership
Agreement.

 

“Special Distributions” means distributions designated as a capital gain
dividend within the meaning of Section 875(b)(3)(C) of the Code and any other
distribution that the General Partner determines is not made in the ordinary
course.

 

“Vested LTIP Units” means Earned LTIP Units that have satisfied the time-based
vesting requirements of an Award Agreement.

 

ARTICLE II
ECONOMIC TERMS AND VOTING RIGHTS

 

2.1           DESIGNATION AND ISSUANCE.  THE GENERAL PARTNER HEREBY DESIGNATES A
SERIES OF LTIP UNITS ENTITLED THE SERIES 2010 LTIP UNITS.  THE NUMBER OF
SERIES 2010 LTIP UNITS THAT MAY BE ISSUED PURSUANT TO THIS DESIGNATION IS THE
TOTAL NUMBER OF AWARD LTIP UNITS ISSUED ON THE AWARD DATE. THE AWARD LTIP UNITS
SHALL BE TREATED AS HAVING BEEN ISSUED ON THE AWARD DATE, AND THE HOLDERS OF
AWARD LTIP UNITS SHALL BE DEEMED ADMITTED AS A LIMITED PARTNER OF THE
PARTNERSHIP ON THE AWARD DATE.

 

2.2           UNIT EQUIVALENCE.  EXCEPT AS OTHERWISE PROVIDED IN THIS
DESIGNATION, THE PARTNERSHIP SHALL MAINTAIN, AT ALL TIMES, A ONE-TO-ONE
CORRESPONDENCE BETWEEN LTIP UNITS AND PARTNERSHIP UNITS FOR CONVERSION,
DISTRIBUTION AND OTHER PURPOSES, INCLUDING WITHOUT LIMITATION COMPLYING WITH THE
FOLLOWING PROCEDURES.  IF AN ADJUSTMENT EVENT (AS DEFINED BELOW) OCCURS,

 

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THEN THE GENERAL PARTNER SHALL MAKE A CORRESPONDING ADJUSTMENT TO THE LTIP UNITS
TO MAINTAIN A ONE-TO-ONE CONVERSION AND ECONOMIC EQUIVALENCE RATIO BETWEEN
PARTNERSHIP UNITS AND LTIP UNITS.  THE FOLLOWING SHALL BE “ADJUSTMENT EVENTS”: 
(A) THE PARTNERSHIP MAKES A DISTRIBUTION OF PARTNERSHIP UNITS OR OTHER EQUITY
INTERESTS IN THE PARTNERSHIP ON ALL OUTSTANDING PARTNERSHIP UNITS (OTHER THAN A
DISTRIBUTION OF PARTNERSHIP UNITS MADE CONCURRENTLY WITH A STOCK DIVIDEND PAID
BY THE GENERAL PARTNER IN ACCORDANCE WITH REV. PROC. 2010-12 OR ANY SIMILAR
POLICY OR PRONOUNCEMENT OF THE INTERNAL REVENUE SERVICE), (B) THE PARTNERSHIP
SUBDIVIDES THE OUTSTANDING PARTNERSHIP UNITS INTO A GREATER NUMBER OF UNITS OR
COMBINES THE OUTSTANDING PARTNERSHIP UNITS INTO A SMALL NUMBER OF UNITS, OR
(C) THE PARTNERSHIP ISSUES ANY PARTNERSHIP UNITS OR OTHER EQUITY IN THE
PARTNERSHIP IN EXCHANGE FOR ITS OUTSTANDING PARTNERSHIP UNITS BY WAY OF A
RECLASSIFICATION OR RECAPITALIZATION OF ITS PARTNERSHIP UNITS.  IF MORE THAN ONE
ADJUSTMENT EVENT OCCURS, THE ADJUSTMENT TO THE LTIP UNITS NEED BE MADE ONLY ONCE
USING A SINGLE FORMULA THAT TAKES INTO ACCOUNT EACH AND EVERY ADJUSTMENT EVENT
AS IF ALL ADJUSTMENT EVENTS OCCURRED SIMULTANEOUSLY.  FOR THE AVOIDANCE OF
DOUBT, THE FOLLOWING SHALL NOT BE ADJUSTMENT EVENTS:  (X) THE ISSUANCE OF
PARTNERSHIP UNITS FROM THE PARTNERSHIP’S SALE OF SECURITIES OR IN A FINANCING,
REORGANIZATION, ACQUISITION OR OTHER BUSINESS TRANSACTION, (Y) THE ISSUANCE OF
PARTNERSHIP UNITS PURSUANT TO ANY EMPLOYEE BENEFIT OR COMPENSATION PLAN OR
DISTRIBUTION REINVESTMENT PLAN, OR (Z) THE ISSUANCE OF ANY PARTNERSHIP UNITS TO
THE GENERAL PARTNER IN RESPECT OF A CAPITAL CONTRIBUTION TO THE PARTNERSHIP OF
PROCEEDS FROM THE SALE OF SECURITIES BY THE GENERAL PARTNER.  IF THE PARTNERSHIP
TAKES AN ACTION AFFECTING THE PARTNERSHIP UNITS OTHER THAN ACTIONS SPECIFICALLY
DESCRIBED ABOVE AS CONSTITUTING ADJUSTMENT EVENTS AND, IN THE OPINION OF THE
GENERAL PARTNER, SUCH ACTION WOULD REQUIRE AN ADJUSTMENT TO THE LTIP UNITS TO
MAINTAIN THE ONE-TO-ONE CORRESPONDENCE DESCRIBED ABOVE, THE GENERAL PARTNER
SHALL HAVE THE RIGHT TO MAKE SUCH ADJUSTMENT TO THE LTIP UNITS, TO THE EXTENT
PERMITTED BY LAW, IN SUCH MANNER AND AT SUCH TIME AS THE GENERAL PARTNER, IN ITS
SOLE DISCRETION, MAY DETERMINE TO BE APPROPRIATE UNDER THE CIRCUMSTANCES.  IF AN
ADJUSTMENT IS MADE TO THE LTIP UNITS AS HEREBY PROVIDED, THE PARTNERSHIP SHALL
PROMPTLY FILE IN THE BOOKS AND RECORDS OF THE PARTNERSHIP A CERTIFICATE SETTING
FORTH SUCH ADJUSTMENT AND A BRIEF STATEMENT OF FACTS REQUIRING SUCH ADJUSTMENT,
WHICH CERTIFICATE SHALL BE CONCLUSIVE EVIDENCE OF THE CORRECTNESS OF SUCH
ADJUSTMENT ABSENT MANIFEST ERROR.  PROMPTLY AFTER FILING SUCH CERTIFICATE, THE
PARTNERSHIP SHALL MAIL A NOTICE TO EACH LTIP UNITHOLDER SETTING FORTH THE
ADJUSTMENT TO HIS OR HER LTIP UNITS AND THE EFFECTIVE DATE OF SUCH ADJUSTMENT.

 

2.3           DISTRIBUTIONS OF NET OPERATING CASH FLOW.  AWARD LTIP UNITS SHALL
BE TREATED AS ONE-TENTH OF A PARTNERSHIP UNIT FOR PURPOSES OF
SECTION 6.2(B)(III) OF THE PARTNERSHIP AGREEMENT, EXCEPT THAT AWARD LTIP UNITS
SHALL NOT BE ENTITLED TO ANY SPECIAL DISTRIBUTIONS.  DISTRIBUTIONS WITH RESPECT
TO AN AWARD LTIP UNIT ISSUED DURING A FISCAL QUARTER SHALL BE PRORATED AS
PROVIDED IN SECTION 6.2(B)(II) OF THE PARTNERSHIP AGREEMENT.

 

2.4           LIQUIDATING DISTRIBUTIONS.  IN THE EVENT OF THE DISSOLUTION,
LIQUIDATION AND WINDING UP OF THE PARTNERSHIP, DISTRIBUTIONS TO HOLDERS OF AWARD
LTIP UNITS SHALL BE MADE IN ACCORDANCE WITH SECTION 8.2(D) OF THE PARTNERSHIP
AGREEMENT.

 

2.5           FORFEITURE.  ANY AWARD LTIP UNITS AND EARNED LTIP UNITS THAT ARE
FORFEITED PURSUANT TO THE TERMS OF AN AWARD AGREEMENT SHALL IMMEDIATELY BE NULL
AND VOID AND SHALL CEASE TO BE OUTSTANDING OR TO HAVE ANY RIGHTS EXCEPT AS
OTHERWISE PROVIDED IN THE AWARD AGREEMENT.

 

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2.6           VOTING RIGHTS.  HOLDERS OF AWARD LTIP UNITS AND EARNED LTIP UNITS
SHALL NOT BE ENTITLED TO VOTE ON ANY OTHER MATTER SUBMITTED TO THE LIMITED
PARTNERS FOR THEIR APPROVAL UNLESS AND UNTIL SUCH UNITS CONSTITUTE VESTED LTIP
UNITS.

 

ARTICLE III
TAX PROVISIONS

 

3.1           SPECIAL ALLOCATIONS OF PROFITS.  PROFITS REALIZED IN CONNECTION
WITH A SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE PARTNERSHIP
(“LIQUIDATING GAIN”) SHALL, AFTER ALLOCATIONS TO THE PREFERRED UNITS, BE
ALLOCATED TO THE HOLDERS OF EARNED LTIP UNITS OR ANY PARITY SERIES UNTIL THE
ECONOMIC CAPITAL ACCOUNT BALANCE OF EACH SUCH HOLDER, TO THE EXTENT ATTRIBUTABLE
TO SUCH HOLDER’S OWNERSHIP OF EARNED LTIP UNITS OR PARITY SERIES, IS EQUAL TO
SUCH HOLDER’S PARTNERSHIP UNIT ECONOMIC BALANCE ATTRIBUTABLE TO SUCH EARNED LTIP
UNITS OR PARITY SERIES.  LIQUIDATING GAIN SHALL BE TAKEN INTO ACCOUNT WHENEVER
CAPITAL ACCOUNTS ARE ADJUSTED AS A RESULT OF AN ADJUSTMENT TO THE GROSS ASSET
VALUE OF THE PARTNERSHIP’S ASSETS.  NOTWITHSTANDING THE FOREGOING, LIQUIDATING
GAIN SHALL NOT BE ALLOCATED TO LTIP UNITS TO THE EXTENT SUCH ALLOCATION WOULD
CAUSE THE LTIP UNITS TO FAIL TO QUALIFY AS A “PROFITS INTEREST” WHEN GRANTED. 
GAIN ALLOCATED TO EARNED LTIP UNITS PURSUANT TO THIS SECTION 3.1 SHALL BE
ALLOCATED IN THE FOLLOWING ORDER:

 

(A)           FIRST, TO VESTED LTIP UNITS IN PROPORTION TO THE MAXIMUM AMOUNT OF
GAIN THAT COULD BE ALLOCATED TO SUCH VESTED LTIP UNITS PURSUANT TO THIS
SUBPARAGRAPH.

 

(B)           SECOND, TO EARNED LTIP UNITS THAT ARE NOT VESTED LTIP UNITS IN
PROPORTION TO THE MAXIMUM AMOUNT OF GAIN THAT COULD BE ALLOCATED TO SUCH EARNED
LTIP UNITS PURSUANT TO THIS SUBPARAGRAPH.

 

If an LTIP Unitholder forfeits any Earned LTIP Units to which gain has been
previously allocated under this Section, the Capital Account associated with the
forfeited Earned LTIP Units will be reallocated to that LTIP Unitholder’s
remaining Earned LTIP Units at the time of forfeiture to the extent necessary to
cause the Economic Capital Account Balance of such remaining Earned LTIP Units
to equal the Partnership Unit Economic Balance of such Earned LTIP Units.  To
the extent any gain is not reallocated in accordance with the foregoing
sentence, such gain shall be forfeited.

 

3.2           ALLOCATIONS WITH RESPECT TO AWARD LTIP UNITS.  THE FOLLOWING
PROVISIONS APPLY TO ALLOCATION OF PROFITS AND LOSSES WITH RESPECT TO AWARD LTIP
UNITS:

 

(A)           EXCEPT AS PROVIDED IN SECTION 3.1, NO PROFITS THAT THE GENERAL
PARTNER DETERMINE ARE ATTRIBUTABLE TO A SPECIAL DISTRIBUTION SHALL BE ALLOCATED
TO AWARD LTIP UNITS.

 

(B)           EXCEPT AS PROVIDED IN SECTION 3.2(A), EACH AWARD LTIP UNIT SHALL
BE TREATED AS ONE-TENTH OF A PARTNERSHIP UNIT FOR PURPOSES OF ALLOCATION OF
PROFITS AND LOSSES PURSUANT TO SECTION 6.1(B)(3) OF THE PARTNERSHIP AGREEMENT.

 

3.3           ALLOCATIONS WITH RESPECT TO EARNED LTIP UNITS.  EXCEPT AS PROVIDED
IN SECTION 3.1(A), EARNED LTIP UNITS SHALL BE TREATED AS PARTNERSHIP UNITS WITH
RESPECT TO THE ALLOCATION OF PROFITS AND LOSSES.

 

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3.4           SAFE HARBOR ELECTION.  TO THE EXTENT PROVIDED FOR IN REGULATIONS,
REVENUE RULINGS, REVENUE PROCEDURES AND/OR OTHER IRS GUIDANCE ISSUED AFTER THE
DATE OF THIS DESIGNATION, THE PARTNERSHIP IS HEREBY AUTHORIZED TO, AND AT THE
DIRECTION OF THE GENERAL PARTNER SHALL, ELECT A SAFE HARBOR UNDER WHICH THE FAIR
MARKET VALUE OF ANY LTIP UNITS ISSUED AFTER THE EFFECTIVE DATE OF SUCH
REGULATIONS (OR OTHER GUIDANCE) WILL BE TREATED AS EQUAL TO THE LIQUIDATION
VALUE OF SUCH LTIP UNITS (I.E., A VALUE EQUAL TO THE TOTAL AMOUNT THAT WOULD BE
DISTRIBUTED WITH RESPECT TO SUCH INTERESTS IF THE PARTNERSHIP SOLD ALL OF ITS
ASSETS FOR THE FAIR MARKET VALUE IMMEDIATELY AFTER THE ISSUANCE OF SUCH LTIP
UNITS, SATISFIED ITS LIABILITIES (EXCLUDING ANY NON-RECOURSE LIABILITIES TO THE
EXTENT THE BALANCE OF SUCH LIABILITIES EXCEED THE FAIR MARKET VALUE OF THE
ASSETS THAT SECURE THEM) AND DISTRIBUTED THE NET PROCEEDS TO THE LTIP
UNITHOLDERS UNDER THE TERMS OF THIS AGREEMENT).  IN THE EVENT THAT THE
PARTNERSHIP MAKES A SAFE HARBOR ELECTION AS DESCRIBED IN THE PRECEDING SENTENCE,
EACH LTIP UNITHOLDER HEREBY AGREES TO COMPLY WITH ALL SAFE HARBOR REQUIREMENTS
WITH RESPECT TO TRANSFERS OF SUCH LTIP UNITS WHILE THE SAFE HARBOR ELECTION
REMAINS EFFECTIVE.  IN ADDITION, UPON A FORFEITURE OF ANY LTIP UNITS BY ANY LTIP
UNITHOLDER, GROSS ITEMS OF INCOME, GAIN, LOSS OR DEDUCTION SHALL BE ALLOCATED TO
SUCH LTIP UNITHOLDER IF AND TO THE EXTENT REQUIRED BY FINAL REGULATIONS
PROMULGATED AFTER THE EFFECTIVE DATE OF THIS DESIGNATION TO ENSURE THAT
ALLOCATIONS MADE WITH RESPECT TO ALL UNVESTED LTIP UNITS ARE RECOGNIZED UNDER
CODE SECTION 704(B).

 

ARTICLE IV
CONVERSION

 

4.1           CONVERSION RIGHT.  SUBJECT TO THE LIMITATION SET FORTH IN
SECTION 4.2 HEREOF, AN LTIP UNITHOLDER SHALL HAVE THE RIGHT TO CONVERT VESTED
LTIP UNITS TO PARTNERSHIP UNITS BY GIVING NOTICE TO THE PARTNERSHIP AS PROVIDED
IN SECTION 4.3 HEREOF.

 

4.2           LIMITATION ON CONVERSION RIGHTS.  THE MAXIMUM NUMBER OF VESTED
LTIP UNITS THAT AN LTIP UNITHOLDER MAY CONVERT IS EQUAL TO (A) THE ECONOMIC
CAPITAL ACCOUNT BALANCE OF THE LTIP UNITHOLDER WHICH IS ATTRIBUTABLE TO HIS OR
HER VESTED LTIP UNITS DIVIDED BY (B) THE PARTNERSHIP UNIT ECONOMIC BALANCE, IN
EACH CASE DETERMINED AS OF THE EFFECTIVE DATE OF THE CONVERSION.  AFTER EACH
CONVERSION OF VESTED LTIP UNITS, FOR PURPOSES OF DETERMINING THE NUMBER OF
VESTED LTIP UNITS THAT MAY SUBSEQUENTLY BE CONVERTED, THE ECONOMIC CAPITAL
ACCOUNT BALANCE OF THE REMAINING VESTED LTIP UNITS SHALL BE REDUCED BY THE
PRODUCT OF THE PARTNERSHIP UNIT ECONOMIC BALANCE AND THE NUMBER OF CONVERTED
VESTED LTIP UNITS.

 

4.3           EXERCISE OF CONVERSION RIGHT.  IN ORDER TO EXERCISE THE RIGHT TO
CONVERT A VESTED LTIP UNIT, THE LTIP UNITHOLDER SHALL GIVE NOTICE (A “CONVERSION
NOTICE”) IN THE FORM ATTACHED HERETO AS EXHIBIT A TO THE GENERAL PARTNER NOT
LESS THAN SIXTY (60) DAYS PRIOR TO THE DATE SPECIFIED IN THE CONVERSION NOTICE
AS THE EFFECTIVE DATE OF THE CONVERSION (THE “CONVERSION DATE”). THE CONVERSION
SHALL BE EFFECTIVE AS OF 12:01 A.M. ON THE CONVERSION DATE WITHOUT ANY ACTION ON
THE PART OF THE LTIP UNITHOLDER OR THE PARTNERSHIP.

 

4.4           EXCHANGE FOR SHARES.  AN LTIP UNITHOLDER MAY ALSO EXERCISE HIS
RIGHT TO EXCHANGE THE PARTNERSHIP UNITS TO BE RECEIVED PURSUANT TO THE
CONVERSION NOTICE TO SHARES OR CASH, AS SELECTED BY THE GENERAL PARTNER, IN
ACCORDANCE WITH ARTICLE XI OF THE PARTNERSHIP AGREEMENT; PROVIDED, HOWEVER, SUCH
RIGHT SHALL BE SUBJECT TO THE TERMS AND CONDITIONS OF ARTICLE II OF THE
PARTNERSHIP AGREEMENT AND MAY NOT BE EFFECTIVE UNTIL SIX (6) MONTHS FROM THE
DATE THE VESTED LTIP UNITS THAT WERE CONVERTED TO PARTNERSHIP UNITS BECAME FULLY
VESTED.

 

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4.5           FORCED CONVERSION.  IN ADDITION, THE GENERAL PARTNER MAY, UPON NOT
LESS THAN TEN (10) DAYS’ NOTICE TO AN LTIP UNITHOLDER, REQUIRE ANY HOLDER OF
VESTED LTIP UNITS TO CONVERT THEM INTO UNITS SUBJECT TO THE LIMITATION SET FORTH
IN SECTION 4.2.  THE CONVERSION SHALL BE EFFECTIVE AS OF 12:01 A.M. ON THE DATE
SPECIFIED IN THE NOTICE FROM THE GENERAL PARTNER.

 

4.6           NOTICES.  NOTICES PURSUANT TO THIS ARTICLE SHALL BE GIVEN IN THE
SAME MANNER AS NOTICES GIVEN PURSUANT TO THE PARTNERSHIP AGREEMENT.

 

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EXHIBIT A

 

Conversion Notice

 

The undersigned hereby gives notice pursuant to Section 4.3 of the Certificate
of Designation of Series 2010 LTIP Units of Simon Property Group, L.P. (the
“Designation”) that he elects to convert          Vested LTIP Units (as defined
in the Designation) into an equivalent number of Partnership Units (as defined
in the Eighth Amended and Restated Limited Partnership Agreement of Simon
Property Group, L.P. (the “Partnership Agreement”)).  The conversion is to be
effective on                                , 20      .

 

IN WITNESS WHEREOF, this Conversion Notice is given this        day of
                          , 20      , to Simon Property Group, Inc. in
accordance with Section 12.2 of the Partnership Agreement.

 

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