as a deduction from capital in excess of par value in the statements of shareholders’ equity in the accompanying financial  statements. Certain of such notes totaling $277 bear interest at rates ranging from 6.00% to 7.50%. The remainder of the  notes do not bear interest and become due at the time the underlying shares are sold. We have a stock incentive plan (the “1998 Plan”), which provides for the grant of equity-based awards during a  ten-year period, in the form of options to purchase shares (“Options”), stock appreciation rights (“SARs”), restricted stock  grants and performance unit awards (collectively, “Awards”). Options may be granted which are qualified as “incentive  stock options” within the meaning of Section 422 of the Code and Options which are not so qualified. Through 2001, the  Company had reserved for issuance 6,300,000 shares under the 1998 Plan. In 2002, an additional 5,000,000 shares were  reserved for issuance, increasing the total to 11,300,000. Additionally, the partnership agreement require us to sell shares to  the Operating Partnership, at fair value, sufficient to satisfy the exercising of stock options, and for us to purchase Units for  cash in an amount equal to the fair market value of such shares. Administration.  The 1998 Plan is administered by Simon Property’s Compensation Committee (the “Committee”).  The Committee, in its sole discretion, determines which eligible individuals may participate and the type, extent and terms of  the Awards to be granted to them. In addition, the Committee interprets the 1998 Plan and makes all other determinations  deemed advisable for the administration of the 1998 Plan. Options granted to employees (“Employee Options”) become  exercisable over the period determined by the Committee. The exercise price of an Employee Option may not be less than  the fair market value of the shares on the date of grant. Employee Options generally vest over a three-year period and expire  ten years from the date of grant. Automatic Awards For Eligible Directors.  Prior to May 7, 2003, the 1998 Plan provided for automatic grants of  Options to directors (“Director Options”) of Simon Property who are not also our employees or employees of our affiliates  (“Eligible Directors”). Each Eligible Director was automatically granted Director Options to purchase 5,000 shares upon  the director’s initial election to the Board, and upon each re-election, an additional 3,000 Director Options multiplied by  the number of calendar years that had elapsed since such person’s last election to the Board. The exercise price of Director  Options is equal to the fair market value of the shares on the date of grant. Director Options vest and become exercisable on  the first anniversary of the date of grant or in the event of a “Change in Control” as defined in the 1998 Plan. The last year  during which Eligible Directors received awards of Director Options was 2002. Pursuant to an amendment to the 1998 Plan approved by the stockholders effective May 7, 2003, Eligible Directors  now receive annual grants of restricted stock in lieu of Director Options. Each Eligible Director receives on the first day  of the first calendar month following his or her initial election as a director, a grant of 1,000 shares of restricted stock.  Thereafter, as of the date of each annual meeting of the Company’s stockholders, Eligible Directors who are re-elected as  directors receive a grant of 1,000 shares of restricted stock. In addition, Eligible Directors who serve as chairpersons of the  standing committees of the Board of Directors receive an additional annual grant in the amount of 500 shares of restricted  stock (in the case of the Audit Committee) or 300 shares of restricted stock (in the case of all other standing committees). Each award of restricted stock vests in four equal annual installments on January 1 of each year, beginning in the  year following the year in which the award occurred. If a director otherwise ceases to serve as a director before vesting,  the unvested portion of the award terminates. Any unvested portion of a restricted stock award vests if the director dies or  becomes disabled while in office or has served a minimum of five annual terms as a director, but only if the Compensation  Committee or full Board of Directors determines that such vesting is appropriate. The restricted stock also vests in the event  of a “Change in Control.” Once vested, the delivery of any shares with respect to a restricted stock award (including reinvested dividends) is  deferred under our Director Deferred Compensation Plan until the director retires, dies or becomes disabled or otherwise no  longer serves as a director. The Eligible Directors may vote and are entitled to receive dividends on the shares underlying the  restricted stock awards; however, any dividends on the shares underlying restricted stock awards must be reinvested in shares  and held in the Director Deferred Compensation Plan until the shares underlying a restricted stock award are delivered to  the former director. In addition to automatic awards, Eligible Directors may be granted discretionary awards under the 1998 Plan. 73 2003 annual report The Simon Property Group 1998 Stock Incentive Plan