UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Taubman Centers, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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SEC 1913 (02-02)
(TAUBMAN LOGO)
TAUBMAN CENTERS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD MAY 18, 2005
To the Shareholders of
Taubman Centers, Inc.
The Annual Meeting of Shareholders of TAUBMAN CENTERS, INC. (the "Company")
will be held on Wednesday, May 18, 2005, at the Community House, 380 South Bates
Street, Birmingham, Michigan, at 11:00 a.m., local time, for the following
purposes:
1. To elect two directors to serve until the annual meeting of
shareholders in 2008;
2. To adopt The Taubman Company 2005 Long-Term Incentive Plan;
3. To adopt the Taubman Centers, Inc. Non-Employee Directors' Stock
Grant Plan;
4. To ratify the appointment of KPMG LLP as the Company's independent
registered public accounting firm for the year ending December 31, 2005;
and
5. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 23, 2005 as
the record date for determining the shareholders that are entitled to notice of,
and to vote at, the annual meeting or any adjournment or postponement of the
annual meeting.
By Order of the Board of Directors
ROBERT S. TAUBMAN,
Chairman of the Board, President and
Chief Executive Officer
Bloomfield Hills, Michigan
April 5, 2005
EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE TO
ENSURE THE PRESENCE OF A QUORUM. ANY PROXY MAY BE REVOKED IN THE MANNER
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE MEETING.
TABLE OF CONTENTS
ABOUT THE MEETING........................................... 1
What is the purpose of the annual meeting?................ 1
Who is entitled to vote?.................................. 1
What counts as Voting Stock?.............................. 1
What is the Series B Preferred Stock?..................... 1
What constitutes a quorum?................................ 2
How do I vote?............................................ 2
Can I change my vote after I return my proxy card?........ 2
What are the Board's recommendations?..................... 2
What vote is required to approve each item?............... 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SHAREHOLDER MATTERS................ 4
Section 16(a) Beneficial Ownership Reporting Compliance... 7
Securities Authorized for Issuance Under Equity
Compensation Plans..................................... 8
ITEM 1 -- ELECTION OF DIRECTORS............................. 9
MANAGEMENT................................................ 9
Directors and Executive Officers.......................... 9
The Board of Directors and Committees..................... 10
Compensation of Directors................................. 12
Corporate Governance...................................... 13
Communicating with the Board.............................. 14
Certain Transactions...................................... 14
REPORT OF THE AUDIT COMMITTEE............................. 15
EXECUTIVE COMPENSATION.................................... 18
Summary Compensation Table................................ 18
Long-Term Performance Compensation Plan................... 19
Long-Term Incentive Plans -- 2004 Awards.................. 20
Annual Bonus Plan......................................... 20
Incentive Option Plan..................................... 20
Aggregated Option Exercises During 2004 And Year-End
Option Values.......................................... 21
Compensation Committee Report on Executive Compensation... 21
Shareholder Return Performance Graph...................... 23
Certain Employment and Consulting Arrangements............ 23
Change of Control Employment Agreements................... 24
Change of Control Severance Program....................... 25
ITEM 2 -- ADOPTION OF THE TAUBMAN COMPANY 2005 LONG-TERM
INCENTIVE PLAN............................................ 26
Description of the New Plan............................... 26
Federal Income Tax Consequences........................... 28
Awards Under the Plan..................................... 28
New Plan Benefits......................................... 28
ITEM 3 -- ADOPTION OF THE TAUBMAN CENTERS, INC. NON-EMPLOYEE
DIRECTORS' STOCK GRANT PLAN............................... 29
Description of the Director Plan.......................... 29
Federal Income Tax Consequences........................... 30
ITEM 4 -- RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM......................... 30
OTHER MATTERS............................................... 31
COSTS OF PROXY SOLICITATION................................. 31
ADDITIONAL INFORMATION...................................... 31
Presentation of Shareholder Proposals at 2006 Annual
Meeting................................................ 31
Annual Report............................................. 31
APPENDIX A -- THE TAUBMAN COMPANY 2005 LONG-TERM INCENTIVE
PLAN...................................................... A-1
APPENDIX B -- TAUBMAN CENTERS, INC. NON-EMPLOYEE DIRECTORS'
STOCK GRANT PLAN.......................................... B-1
TAUBMAN CENTERS, INC.
200 EAST LONG LAKE ROAD, SUITE 300
P.O. BOX 200
BLOOMFIELD HILLS, MICHIGAN 48303-0200
PROXY STATEMENT
This Proxy Statement contains information regarding the annual meeting of
shareholders of Taubman Centers, Inc. (the "Company") to be held at 11:00 a.m.,
local time, on Wednesday, May 18, 2005, at the Community House, 380 South Bates
Street, Birmingham, Michigan. The Company's Board of Directors is soliciting
proxies for use at the meeting and at any adjournment or postponement of that
meeting. The Company expects to mail this Proxy Statement on or about April 5,
2005.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the annual meeting, holders of the Company's Common Stock and Series B
Non-Participating Convertible Preferred Stock (the "Series B Preferred Stock"
and, together with the Common Stock, the "Voting Stock") will act upon the
matters outlined in the accompanying Notice of Meeting, including the election
of two directors to serve until the annual meeting of shareholders in 2008, the
adoption of The Taubman Company 2005 Long-Term Incentive Plan, the adoption of
the Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan and the
ratification of the Audit Committee's selection of the Company's independent
registered public accounting firm. In addition, management will report on the
performance of the Company and will respond to questions from shareholders.
Who is entitled to vote?
Only record holders of Voting Stock at the close of business on the record
date of March 23, 2005, are entitled to receive notice of the annual meeting and
to vote those shares of Voting Stock that they held on the record date. Each
outstanding share of Voting Stock is entitled to one vote on each matter to be
voted upon at the annual meeting.
What counts as Voting Stock?
The Company's Common Stock and Series B Preferred Stock constitute the
Voting Stock of the Company. The Common Stock and the Series B Preferred Stock
vote together as a single class. The Company's 8.30% Series A Cumulative
Redeemable Preferred Stock and 8% Series G Cumulative Redeemable Preferred Stock
(individually the "Series A Preferred Stock" and the "Series G Preferred Stock,"
and collectively, the "Non-Voting Preferred Stock") do not entitle their holders
to vote. Although the Company has authorized the issuance of shares of
additional series of Preferred Stock pursuant to the exercise of conversion
rights granted to certain holders of preferred equity in The Taubman Realty
Group Limited Partnership ("TRG"), the Company's majority-owned subsidiary
partnership through which the Company conducts all of its operations, at this
time no other shares of the Company's capital stock other than the Voting Stock
and the Non-Voting Preferred Stock are outstanding.
What is the Series B Preferred Stock?
The Series B Preferred Stock was first issued in late 1998 and is currently
held by partners in TRG other than the Company. The Series B Preferred Stock
entitles its holders to one vote per share on all matters submitted to the
Company's shareholders and votes together with the Common Stock on all matters
as a single class. In addition, the holders of Series B Preferred Stock (as a
separate class) are entitled to nominate up to four individuals for election as
directors. The number of individuals the holders of the Series B Preferred Stock
may nominate in any given year is reduced by the number of directors nominated
by such holders in
prior years whose terms are not expiring. Two current directors whose terms are
expiring, Robert S. Taubman and Lisa A. Payne, are being nominated by the
holders of the Series B Preferred Stock, and one current director whose term is
not expiring, William A. Taubman, was nominated by the holders of the Series B
Preferred Stock. The holders of Series B Preferred Stock are entitled to
nominate one more individual for election as a director of the Company, but they
have chosen not to do so with respect to this annual meeting. Therefore, the
holders of the Series B Preferred Stock retain the right to nominate one
additional nominee in the future.
What constitutes a quorum?
The presence at the annual meeting, in person or by proxy, of the holders
of a majority of the shares of Voting Stock outstanding on the record date will
constitute a quorum for all purposes. As of the record date, 81,040,840 shares
of Voting Stock were outstanding, consisting of 49,976,870 shares of Common
Stock and 31,063,970 shares of Series B Preferred Stock. Proxies received but
marked as abstentions and shares voted by brokers in the absence of beneficial
owners' instructions will be counted as present in determining whether or not
there is a quorum.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you attend the annual
meeting, you may deliver your completed proxy card in person or vote by ballot.
If you own your shares of Common Stock through a broker, trustee, bank or other
nominee but want to vote your shares in person, you should also bring with you a
proxy or letter from such broker, trustee, bank or other nominee confirming that
you beneficially own such shares.
Can I change my vote after I return my proxy card?
You may change your vote at any time before the proxy is exercised by
filing with the Secretary of the Company either a notice revoking the proxy or a
properly signed proxy that is dated later than the proxy card. If you attend the
annual meeting, the individuals named as proxy holders in the enclosed proxy
card will nevertheless have authority to vote your shares in accordance with
your instructions on the proxy card unless you indicate at the meeting that you
intend to vote your shares yourself.
What are the Board's recommendations?
Unless you give different instructions on the proxy card, the proxy holders
will vote in accordance with the recommendations of the Board of Directors. The
Board recommends a vote:
for election of the nominated slate of directors (see pages 9 through
26);
for adoption of The Taubman Company 2005 Long-Term Incentive Plan (see
pages 26 through 29);
for adoption of the Taubman Centers, Inc. Non-Employee Directors'
Stock Grant Plan (see pages 29 and 30); and
for ratification of KPMG LLP ("KPMG") as the Company's independent
registered public accounting firm for 2005 (see pages 30 and 31).
With respect to any other matter that properly comes before the annual
meeting, the proxy holders named in the proxy card will vote as the Board
recommends or, if the Board gives no recommendation, in their own discretion.
2
What vote is required to approve each item?
ELECTION OF DIRECTORS. Nominees who receive the most votes cast at the
annual meeting will be elected as directors. The slate of directors discussed in
this Proxy Statement consists of two individuals, one for each director whose
term is expiring. A properly signed proxy marked "WITHHOLD AUTHORITY" with
respect to the election of one or more directors will not be voted for the
director(s) so indicated, but it will be counted to determine whether there is a
quorum.
ADOPTION OF THE TAUBMAN COMPANY 2005 LONG-TERM INCENTIVE PLAN. The
affirmative vote of two-thirds of the shares of Voting Stock outstanding on the
record date will be necessary to adopt The Taubman Company 2005 Long-Term
Incentive Plan.
ADOPTION OF THE TAUBMAN CENTERS, INC. NON-EMPLOYEE DIRECTORS' STOCK GRANT
PLAN. The affirmative vote of two-thirds of the shares of Voting Stock
outstanding on the record date will be necessary to adopt the Taubman Centers,
Inc. Non-Employee Directors' Stock Grant Plan.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The
affirmative vote of two-thirds of the shares of Voting Stock outstanding on the
record date will be necessary to ratify the Audit Committee's appointment of
KPMG as the Company's independent registered public accounting firm for 2005.
Although shareholder approval of the appointment is not required by law and is
not binding on the Company, the Audit Committee will take the appointment under
advisement if such appointment is not approved by the affirmative vote of
two-thirds of the shares of Voting Stock outstanding on the record date.
OTHER MATTERS. If any other matter is properly submitted to the
shareholders at the annual meeting, its adoption will require the affirmative
vote of two-thirds of the shares of Voting Stock outstanding on the record date.
The Board of Directors does not propose to conduct any business at the annual
meeting other than as stated above.
EFFECT OF BROKER NON-VOTES AND ABSTENTIONS. The election of directors will
be determined by votes cast, and abstentions and broker non-votes, if any, will
be disregarded and will have no effect on the outcome of the vote. With regard
to each of the adoption of The Taubman Company 2005 Long-Term Incentive Plan,
the adoption of the Taubman Centers, Inc. Non-Employee Directors' Stock Grant
Plan and the ratification of the appointment of the Company's independent
registered public accounting firm, abstentions and broker non-votes, if any,
will have the same effect as a vote against the matter.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Voting Stock as of March 23, 2005. The share
information set forth in the table below (both numbers of shares and
percentages) reflects ownership of Common Stock and Series B Preferred Stock,
which vote together as a single class; however, the footnotes to the table
provide ownership information for the Common Stock and Series B Preferred Stock
on a separate basis, including (for any shareholder owning at least one percent
of the Common Stock or Series B Preferred Stock, as applicable) the percentage
of the outstanding shares of the separate class that the holder's shares
represent. Shares of the Company's 8.30% Series A Cumulative Redeemable
Preferred Stock and 8% Series G Cumulative Redeemable Preferred Stock are not
included in the table as such shares do not have voting rights except in certain
circumstances. Unless otherwise indicated in the table, each person's address is
care of Taubman Centers, Inc., 200 East Long Lake Road, Suite 300, P. O. Box
200, Bloomfield Hills, Michigan 48303-0200.
DIRECTORS, EXECUTIVE OFFICERS AND 5% NUMBER OF PERCENT OF
SHAREHOLDERS SHARES(1) SHARES(1)
------------------------------------------------------------ ---------- ----------
Robert S. Taubman........................................... 2,530,683(2) 3.1%
William S. Taubman.......................................... 1,669,121(3) 2.1%
Lisa A. Payne............................................... 408,328(4) *
Stephen J. Kieras........................................... 2,758(5) *
David T. Weinert............................................ 0 *
Courtney I. Lord............................................ 369,187(6) *
John L. Simon............................................... 6,712(7) *
Graham T. Allison........................................... 1,430(8) *
Allan J. Bloostein.......................................... 5,000(9) *
Jerome A. Chazen............................................ 10,000(10) *
Craig M. Hatkoff............................................ 0 *
Peter Karmanos, Jr. ........................................ 40,000(11) *
A. Alfred Taubman........................................... 22,963,212(12) 28.3%
Cohen & Steers, Inc. and related entities................... 4,908,763(13) 6.1%
757 Third Avenue
New York, New York 10017
Security Capital Research & Management Inc. ................ 4,272,125(14) 5.3%
10 South Dearborn Street, Suite 1400
Chicago, Illinois 60603
LaSalle Investment Management, Inc. ........................ 4,253,350(15) 5.2%
LaSalle Investment Management (Securities) L.P
200 East Randolph Drive
Chicago, Illinois 60601
4
DIRECTORS, EXECUTIVE OFFICERS AND 5% NUMBER OF PERCENT OF
SHAREHOLDERS SHARES(1) SHARES(1)
------------------------------------------------------------ ---------- ----------
Morgan Stanley.............................................. 4,207,761(16) 5.2%
Morgan Stanley Investment Management Inc.
1585 Broadway
New York, New York 10036
Barclays Global Investors, NA and related entities.......... 3,865,922(17) 4.8%
45 Fremont Street
San Francisco, CA 94105
Stitching Pensioenfonds ABP................................. 3,244,700(18) 4.0%
Oude Lindestraat 70
Postbus 2889
6401 DL Heerlen
The Netherlands
AEW Capital Management, L.P................................. 2,788,300(19) 3.4%
and related entities
World Trade Center East
Two Seaport Lane
Boston, MA 02110
Adelante Capital Management, LLC............................ 2,662,730(20) 3.3%
1995 University Avenue, Suite 225
Berkeley, CA 94704
Directors and Executive Officers as a Group (11 persons).... 3,036,536(21) 3.7%
---------------
* less than 1%
(1) The Company has relied upon information supplied by certain beneficial
owners and upon information contained in filings with the Securities and
Exchange Commission (the "SEC"). Figures shown include shares of Common
Stock and Series B Preferred Stock, which vote together as a single class
on all matters generally submitted to shareholders. Each share of Common
Stock and Series B Preferred Stock is entitled to one vote. Under certain
circumstances, the Series B Preferred Stock is convertible into Common
Stock at the ratio of 14,000 shares of Series B Preferred Stock for each
share of Common Stock (any resulting fractional shares will be redeemed for
cash). Except as set forth in note 2 below, share figures shown assume that
individuals who acquire Units of Partnership Interest upon the exercise of
options ("Incentive Options") granted under TRG's 1992 Incentive Option
Plan exchange the newly issued Units for an equal number of shares of
Common Stock under the Company's exchange offer (the "Continuing Offer") to
certain partners in TRG and holders of Incentive Options. Share figures
shown assume that outstanding Units are not exchanged for Common Stock
under the Continuing Offer (to avoid duplication, as a corresponding number
of shares of Series B Preferred Stock are held by each holder of Units of
Partnership Interest) and that outstanding shares of Series B Preferred
Stock are not converted into Common Stock. As of March 23, 2005, there were
81,040,840 outstanding shares of Voting Stock, consisting of 49,976,870
shares of Common Stock and 31,063,970 shares of Series B Preferred Stock.
(2) Consists of 5,925 shares of Series B Preferred Stock that Mr. Robert S.
Taubman owns, 1,338,496 shares of Series B Preferred Stock held by R &
W-TRG LLC ("R&W"), a company that Mr. Taubman and his brother, William S.
Taubman, own, 871,262 shares of Series B Preferred Stock subject to
issuance under the Deferral Agreement (as defined and described below) (or,
in the aggregate, 6.9% of the Series B Preferred Stock), 300,000 shares of
Common Stock owned by R&W, and 15,000 shares of Common Stock owned by his
wife and children for which Mr. Taubman disclaims any beneficial interest
(or, in the aggregate, less than 1.0% of the Common Stock). Excludes 5,925
Units of Partnership Interest that Mr. Robert S. Taubman owns, 1,338,496
Units of Partnership Interest held by R&W and 871,262 Units of Partnership
subject to issuance under the Deferral Agreement (to avoid duplication),
and excludes all shares of Voting Stock held by TRA Partners ("TRAP"),
5
Taubman Realty Ventures ("TRV"), Taub-Co Management, Inc. ("Taub-Co"), TG
Partners Limited Partnership ("TG") and TG Acquisitions ("TGA"), because
Mr. Taubman has no voting or dispositive control over such entities'
assets; see note 11 below. Mr. Taubman disclaims any beneficial interest in
the Voting Stock and Units held by R&W or the other entities described in
the previous sentence beyond his pecuniary interest in R&W or the other
entities. Pursuant to an Option Deferral Agreement entered into in December
2001 among the Manager, TRG and Mr. Taubman (the "Deferral Agreement"), Mr.
Taubman has deferred his right to receive 871,262 Units of Partnership
Interest (the "Deferred Units") pursuant to an incentive option granted to
Mr. Taubman in 1992 that Mr. Taubman exercised during 2002. Until the
Deferred Units are distributed in full, Mr. Taubman will receive
distribution equivalents on the Deferred Units in the form of cash payments
as and when TRG makes distributions on actual Units of Partnership Interest
outstanding. Beginning with the ten-year anniversary of the date of
exercise, the Deferred Units will be paid to Mr. Taubman in ten annual
installments. The Deferral Agreement will terminate and the Deferred Units
will be paid to Mr. Taubman in a single distribution upon the earlier of
Mr. Taubman's cessation of employment for any reason, a "change in control"
of TRG and TRG's permanent dissolution.
(3) Consists of 5,925 shares of Series B Preferred Stock that Mr. William S.
Taubman owns, 1,338,496 shares of Series B Preferred Stock held by R&W (or,
in the aggregate, 4.3% of the Series B Preferred Stock), 300,000 shares of
Common Stock owned by R&W and 24,700 shares of Common Stock owned by his
children and for which Mr. Taubman disclaims any beneficial interest (or,
in the aggregate, less than 1.0% of the Common Stock). Excludes 5,925 Units
of Partnership Interest that Mr. William S. Taubman owns and 1,338,496
Units of Partnership Interest held by R&W (to avoid duplication), and
excludes all shares of Voting Stock held by TRAP, TRV, Taub-Co, TG or TGA
because Mr. Taubman has no voting or dispositive control over such
entities' assets, see note 11 below. Mr. Taubman disclaims any beneficial
interest in the Voting Stock and Units held by R&W and the other entities
described in the previous sentence beyond his pecuniary interest in R&W and
the other entities.
(4) Consists solely of shares of Common Stock (less than 1.0%).
(5) Consists solely of shares of Common Stock (less than 1.0%) which Mr. Kieras
may be deemed to own through his investment in the Taubman Centers Stock
Fund, one of the investment options under the Company's 401(k) Plan.
(6) Mr. Lord ceased employment with the Company as of December 31, 2004 and is
currently serving as a consultant to the Company. Consists of 1,504 shares
of Common Stock owned by Mr. Lord, 530 shares of Common Stock owned by Mr.
Lord's wife for which he disclaims any beneficial interest (or, in the
aggregate, less than 1.0% of the Common Stock); and 367,153 shares of
Series B Preferred Stock (1.2%). Excludes 367,153 Units of Partnership
Interest held by Mr. Lord (to avoid duplication).
(7) Mr. Simon retired from his position with the Company effective December 31,
2004 but is currently serving as a consultant to the Company. Consists of
2,000 shares of Common Stock that Mr. Simon owns and 4,712 shares of Common
Stock (or, in the aggregate, less than 1.0% of the Common Stock) which Mr.
Simon may be deemed to own through his investment in the Taubman Centers
Stock Fund, one of the investment options under the Company's 401(k) Plan.
(8) Consists solely of shares of Common Stock (less than 1.0%).
(9) Consists solely of shares of Common Stock (less than 1.0%).
(10) Excludes 15,000 shares of Series A Preferred Stock owned by Mr. Chazen,
7,400 shares of Series A Preferred Stock owned by his wife, and 30,000
shares of Series A Preferred Stock owned by his children and for which Mr.
Chazen disclaims any beneficial ownership. The Series A Preferred Stock
does not entitle its holders to vote.
(11) Consists solely of shares of Common Stock (less than 1.0%).
(12) Includes 100 shares of Common Stock owned by Mr. A. Alfred Taubman's
revocable trust and 186,837 shares of Common Stock held by TRAP (or, in the
aggregate, less than 1.0% of the Common Stock). Mr. Taubman's trust is the
managing general partner of TRAP and has the sole authority to
6
vote and dispose of the Common Stock held by TRAP. Includes 9,875 shares of
Series B Preferred Stock held by Mr. A. Alfred Taubman's trust, 17,699,879
shares of Series B Preferred Stock owned by TRAP, 11,011 shares of Series B
Preferred Stock owned by TRV, of which Mr. Taubman's trust is the managing
general partner, and 4,958 shares of Series B Preferred Stock held by
Taub-Co. Because the sole holder of voting shares of Taub-Co is Taub-Co
Holdings Limited Partnership, of which Mr. Taubman's trust is the managing
general partner, Mr. Taubman may be deemed to be the beneficial owner of
the shares of Series B Preferred Stock held by Taub-Co. Mr. Taubman
disclaims beneficial ownership of any shares of Series B Preferred Stock
held by Taub-Co beyond his pecuniary interest in Taub-Co. Also includes
4,605,361 shares of Series B Preferred Stock owned by TG, and 445,191
shares of Series B Preferred Stock held by TGA (or, in the aggregate 73.3%
of the Series B Preferred Stock). Because Mr. Taubman, through control of
the managing partner of each of TRV, TG and TGA, has sole authority to vote
and (subject to certain limitations) dispose of the shares of Series B
Preferred Stock held by TRV and TG and TGA, respectively, Mr. Taubman may
be deemed to be the beneficial owner of all of the shares of Series B
Preferred Stock held by TRV, TG and TGA. Mr. Taubman disclaims beneficial
ownership of any shares of Series B Preferred Stock held by TRV, TG and TGA
beyond his pecuniary interest in those entities.
(13) Consists solely of shares of Common Stock (9.8%).
(14) Consists solely of shares of Common Stock (8.5%) held on behalf of other
persons, none of which holds more than 5% of the Common Stock; 3,141,700 of
the 4,272,125 shares are owned by Security Capital Preferred Growth
Incorporated.
(15) Consists solely of shares of Common Stock (8.5%) and includes ownership of
Common Stock on behalf of Stichting Pensioenfonds Voor de Gezondheid
Geestelijke en Maatschappelijke Belangen.
(16) Consists solely of shares of Common Stock (8.4%) held on behalf of various
investment advisory clients, none of which holds more than 5% of the Common
Stock.
(17) Consists solely of shares of Common Stock (7.7%) held in trust accounts for
the economic benefit of the beneficiaries of such accounts.
(18) Consists solely of shares of Common Stock (6.5%).
(19) Consists solely of shares of Common Stock (5.6%).
(20) Consists solely of shares of Common Stock (5.3%) held on behalf of clients.
(21) See Notes 2 through 5 and 8 through 11 above. Consists of an aggregate of
814,928 shares of Common Stock (1.6%), 1,350,346 shares of Series B
Preferred Stock and 871,262 shares of Series B Preferred Stock subject to
issuance under the Deferral Agreement (as defined and described in Note 2)
(or, in the aggregate, 7.0% of the Series B Preferred Stock).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities ("insiders") file reports of
ownership and changes in ownership with the SEC and to furnish copies of these
reports to the Company. Based on the Company's review of the insiders' forms
furnished to the Company and representations made by the Company's officers and
directors, no insider failed to file on a timely basis a Section 16(a) form with
respect to any transaction in the Company's equity securities, except that Mr.
Robert Taubman filed two Form 4s reporting a total of two transactions late, and
Mr. William Taubman filed one Form 4 reporting one transaction late.
7
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth certain information regarding the Company's
equity compensation plans as of December 31, 2004:
WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCES
TO BE ISSUED UPON EXERCISE OUTSTANDING UNDER EQUITY COMPENSATION
OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS PLANS (EXCLUDING SECURITIES
WARRANTS AND RIGHTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------------- ----------------- ------------------------------
Equity compensation plan
approved by security
holders(1)................... 559,442(2) $11.98 2,229,987
---------------
(1) The plan was approved by the Company's shareholders before the Company went
public in 1992 and was fully disclosed when the Company went public.
(2) 559,442 options were exercised, and 570,000 options were granted, between
January 1, 2005 and March 23, 2005; therefore, as of March 23, 2005 the
total number of shares of common stock to be issued upon exercise of
outstanding options is 570,000, with a weighted average exercise price of
$29.38, and the number of securities remaining available for future
issuances is 1,659,987 shares.
8
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors currently consists of eight members serving
three-year staggered terms. Two directors are to be elected at the annual
meeting to serve until the annual meeting of shareholders in 2008.
Each of the nominees has consented to serve a three-year term. If any of
them should become unavailable, the Board may designate a substitute nominee. In
that case, the proxy holders named as proxies in the accompanying proxy card
will vote for the Board's substitute nominee. Additional information regarding
the nominees, the directors whose terms are not expiring, and management of the
Company is contained under the caption "Management" below.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors currently consists of eight members divided into
three classes serving staggered terms. Under the Company's Restated Articles of
Incorporation, a majority of the Company's directors must not be officers or
employees of the Company or its subsidiaries. Officers of the Company serve at
the pleasure of the Board. The directors, executive officers, and nominees for
director of the Company are as follows:
TERM
NAME AGE TITLE ENDING
---- --- ----- ------
Robert S. Taubman(1).... 51 Chairman of the Board, President and Chief Executive Officer 2005
Lisa A. Payne(1)........ 46 Executive Vice President, Chief Financial and Administrative 2005
Officer, and Director
Graham T. Allison....... 65 Director 2006
Peter Karmanos, Jr. .... 62 Director 2006
William S. Taubman...... 46 Executive Vice President and Director 2006
Allan J. Bloostein...... 75 Director 2007
Jerome A. Chazen........ 78 Director 2007
Craig M. Hatkoff........ 51 Director 2007
Esther R. Blum.......... 50 Senior Vice President, Controller, and Chief Accounting Officer
Stephen J. Kieras....... 52 Senior Vice President, Development
David T. Weinert........ 45 Senior Vice President, Leasing
---------------
(1) Standing for re-election to a three-year term.
Robert S. Taubman is the Chairman of the Board, President and Chief
Executive Officer of the Company and The Taubman Company LLC (the "Manager"),
which is a subsidiary of TRG (the Company's operating partnership that manages
the Company's regional shopping center interests). Mr. Taubman has been a
director of the Company since 1992. Mr. Taubman is also a director of Comerica
Bank and of Sotheby's Holdings, Inc., the international art auction house. He is
also a member of the United States Department of Commerce Travel and Tourism
Promotion Advisory Board, a director of the Real Estate Roundtable, a Trustee of
the Urban Land Institute, a former trustee of the International Council of
Shopping Centers, and a former member of the Board of Governors of the National
Association of Real Estate Investment Trusts. Mr. Taubman is the brother of
William S. Taubman.
Lisa A. Payne is an Executive Vice President and the Chief Financial and
Administrative Officer of the Company and the Manager, a position which she has
held since 1997. Ms. Payne has been a director of the Company since 1997. Prior
to joining the Company in 1997, Ms. Payne was a vice president in the real
estate department of Goldman, Sachs & Co., where she held various positions
between 1986 and 1996. Ms. Payne serves as a trustee of Munder Series Trust and
Munder Series Trust II.
9
Graham T. Allison is the Douglas Dillon Professor of Government at Harvard
University and a director of CDC Nvest Funds. Mr. Allison has been a director of
the Company since 1996 and previously served on the Board from 1992 until 1993,
when he became the United States Assistant Secretary of Defense.
Peter Karmanos, Jr. is the founder and has served as a director since the
inception of Compuware Corporation, a global provider of software solutions and
professional services headquartered in Detroit, Michigan. Mr. Karmanos has
served as Compuware's Chairman since November 1978, and as its Chief Executive
Officer since July 1987. Mr. Karmanos serves as a director of Worthington
Industries, Inc. and Adherex Technologies, Inc. (listed on the Toronto Stock
Exchange). Mr. Karmanos has been a director of the Company since 2000.
William S. Taubman is an Executive Vice President of the Company and the
Manager, a position which he has held since 1994. Mr. Taubman has also been a
director of the Company since 2000. His responsibilities include the overall
management of the development, leasing, and center operations functions. He held
various other positions with the Manager prior to 1994. Mr. Taubman is the
brother of Robert S. Taubman.
Allan J. Bloostein is a former Vice Chairman of The May Department Stores
Company and the President of Allan J. Bloostein Associates, and serves as a
consultant in retail and consumer goods marketing. Mr. Bloostein was, until his
retirement during 2000, a director of CVS Corporation, which operates the CVS
Pharmacy chain, and is a director emeritus of certain mutual fund companies in a
Smith Barney Fund Family. Mr. Bloostein has been a director of the Company since
1992.
Jerome A. Chazen is Chairman Emeritus of Liz Claiborne, Inc. Mr. Chazen is
also Chairman of Chazen Capital Partners, a private investment company. Mr.
Chazen has been a director of the Company since 1992.
Craig M. Hatkoff served as Vice Chairman of Capital Trust, Inc., a real
estate investment management company listed on the New York Stock Exchange and
one of the largest dedicated real estate mezzanine lenders, from 1997 to 2000.
He has also served on the Board of Directors of Capital Trust since July 1997.
In 2002, Mr. Hatkoff became a trustee of the New York City School Construction
Authority, the agency responsible for the construction of all public schools in
New York City. Mr. Hatkoff is also Chairman of Turtle Pond Publications LLC,
which is active in children's publishing and entertainment and is a private
investor in other entrepreneurial ventures. Prior to joining Capital Trust,
Inc., Mr. Hatkoff was a founder and a managing partner of Victor Capital Group,
L.P., from 1989 until its acquisition in 1997 by Capital Trust, Inc. Mr. Hatkoff
has been a director of the Company since 2004.
Esther R. Blum is a Senior Vice President, the Controller, and Chief
Accounting Officer of the Company, a position she has held since 1999. Ms. Blum
became a Vice President of the Company in January 1998, when she assumed her
current principal functions. Between 1992 and 1997, Ms. Blum served as the
Manager's Vice President of Financial Reporting and served the Manager in
various other capacities between 1986 and 1992.
Stephen J. Kieras is Senior Vice President, Development of the Company, a
position he has held since September 2004. Mr. Kieras was a Group Vice
President, Development of the Company from 2001 to September 2004, a Vice
President, Development from 1998 to 2001 and a Director, Development from 1990,
when he joined the Company, to 1998.
David T. Weinert is Senior Vice President, Leasing of the Company, a
position he has held since July 2004. Mr. Weinert was a Group Vice President,
Leasing of the Company from 2001 to July 2004, a Vice President heading leasing
for the Company's western region based in San Francisco from 1992 to 2001 and
served the Company's leasing department in various other capacities between 1986
and 1992.
THE BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors currently consists of eight members
divided into three classes serving staggered three-year terms. The Company's
Board has determined, after considering all of the relevant facts and
circumstances, that Messrs. Allison, Bloostein, Chazen, Hatkoff and Karmanos are
"independent" from management, as defined by the rules adopted by the SEC, the
New York Stock Exchange listing requirements and the Company's Corporate
Governance Guidelines. To be considered independent, the Board must
10
determine that a director does not have any direct or indirect material
relationships with the Company and must meet the other criteria for independence
set forth in the Company's Corporate Governance Guidelines.
The Board of Directors held four meetings during 2004 and acted once by
unanimous written consent. The Board of Directors has four standing committees:
a five member Audit Committee, a three member Compensation Committee, a three
member Executive Committee, and a three member Nominating and Corporate
Governance Committee. The Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee are composed entirely of
independent directors. During 2004, all directors attended at least 75% of the
aggregate of the meetings of the Board of Directors and all committees of the
Board on which they served. Directors are expected to attend all meetings, and
it is the Company's policy to schedule a meeting of the Board of Directors on
the date of the annual meeting of shareholders. All eight board members attended
last year's annual meeting. In addition to attending Board and committee
meetings, directors fulfill their responsibilities by consulting with the Chief
Executive Officer and other members of management on matters that affect the
Company.
Non-management directors will hold regularly scheduled executive sessions
in which non-management directors meet without the presence of management. These
executive sessions are expected to occur around regularly scheduled meetings of
the Board of Directors. Each meeting the position of presiding director will be
rotated in alphabetical order among each non-management director. For more
information regarding the Company's Board of Directors and other corporate
governance procedures, please see "Corporate Governance." For information on how
you can communicate with the Company's non-management directors, including the
presiding director, please see "Communicating with the Board."
The Audit Committee consists of Jerome A. Chazen, Chairman, Graham T.
Allison, Allan J. Bloostein, Craig M. Hatkoff and Peter Karmanos, Jr. Each of
these directors is financially literate. The Audit Committee is responsible for
providing independent, objective oversight and review of the Company's auditing,
accounting and financial reporting processes, including reviewing the audit
results and monitoring the effectiveness of the Company's internal audit
function. In addition, the Audit Committee engages the independent registered
public accounting firm. The Audit Committee met eight times during 2004. A copy
of the Audit Committee's charter can be found on the Company's website,
www.taubman.com, in the Corporate Governance subsection of the Investor
Relations page ("Corporate Governance Section").
In October 2004, Myron E. Ullman resigned from the Company's Board of
Directors following his appointment as the Chairman and Chief Executive Officer
of JCPenney in order to avoid any appearance of conflict of interest. Mr. Ullman
had been a member of the Audit Committee and was an "audit committee financial
expert" under the definition of the SEC. Immediately following Mr. Ullman's
resignation, the Board of Directors began a search for an individual qualified
to become a member of the Board who would also meet the requirements of an
"audit committee financial expert." The Board has engaged a consultant to assist
with its search and is working thoughtfully and continually to identify suitable
candidates. As of the date of this Proxy Statement, the Board had not yet
identified a suitable candidate who would qualify as an audit committee
financial expert, but it expects to do so within the next several months.
The Compensation Committee consists of Craig M. Hatkoff, Chairman, Jerome
A. Chazen and Peter Karmanos, Jr. The Compensation Committee's primary
responsibility is to review the compensation and employee benefit policies
applicable to employees of the Manager and, in particular, senior management.
The Compensation Committee met twice during 2004. The Compensation Committee's
charter is posted in the Corporate Governance Section of the Company's web site.
The Executive Committee consists of Robert S. Taubman, Chairman, Graham T.
Allison, and Allan J. Bloostein. The Executive Committee has the authority to
exercise many of the functions of the full Board of Directors between meetings
of the Board and met once and acted by written consent six times during 2004.
The Nominating and Corporate Governance Committee consists of Allan J.
Bloostein, Chairman, Jerome A. Chazen and Craig M. Hatkoff. The committee met
twice in 2004. The Nominating and Corporate Governance Committee is responsible
for identifying individuals qualified to become Board members and recommending
director nominees for each Board committee, other than vacancies for which
holders of the
11
Series B Preferred Stock are entitled to propose nominees. In recommending
candidates to the Board, and as part of the selection and nomination process,
the Nominating and Corporate Governance Committee reviews the experience, mix of
skills and other qualities of a nominee to assure appropriate Board composition
after taking into account the current Board members and the specific needs of
the Company and the Board. The Board looks for individuals who have demonstrated
excellence in their chosen field, high ethical standards and integrity, and
sound business judgment. The process also seeks to ensure that the Board
includes members with diverse backgrounds, skills and experience, including
appropriate financial and other expertise relevant to the Company's business.
The Company also requires that independent directors comprise a majority of the
Board, and the nominee must not serve on more than five other public company
boards.
The Nominating and Corporate Governance Committee does not solicit director
nominations, but will consider recommendations by shareholders with respect to
elections to be held at an annual meeting, so long as such recommendations are
sent on a timely basis to the Secretary of the Company and are in accordance
with the Company's by-laws. The committee will evaluate nominees recommended by
shareholders against the same criteria that it uses to evaluate other nominees.
Under the Company's by-laws, shareholders must follow an advance notice
procedure to nominate candidates for election as directors (or to bring other
business before an annual meeting). Under these procedures, a shareholder that
proposes to nominate a candidate for director or propose other business at the
annual meeting of shareholders, must give the Company written notice of such
nomination or proposal not less than 60 days and not more than 90 days prior to
the first anniversary of the preceding year's annual meeting; if, however, the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the shareholder must be delivered not
less than 60 days and not more than 90 days prior to such annual meeting or the
10th day following the day on which public announcement of the date of the
annual meeting is first made by the Company. The notice must include:
- the name and address of the person or persons being nominated and such
other information regarding each nominated person that would be required
in a proxy statement filed pursuant to the SEC's proxy rules in the event
of an election contest;
- the name and address of the shareholder making the nomination;
- the class and number of shares of Company stock that the nominating
shareholder owns; and
- the consent of each nominee to serve as a director if elected.
The Nominating and Corporate Governance Committee is also responsible for
recommending to the Board appropriate Corporate Governance Guidelines applicable
to the Company and overseeing governance issues.
The committee generally relies on multiple sources for identifying and
evaluating nominees, including referrals from the Company's current directors
and management. As discussed above, the committee has retained a third party
search firm to assist the committee in locating and recruiting a suitable
candidate for the Board who would qualify as an "audit committee financial
expert." A copy of the charter for the Nominating and Corporate Governance
Committee is available on the Company's web site, www.taubman.com, in the
Corporate Governance Section.
COMPENSATION OF DIRECTORS
During 2004, the Company paid directors who are neither employees nor
officers of the Company or its subsidiaries an annual fee of $35,000, a meeting
fee of $1,000 for each Board or committee meeting attended, and reimbursed
outside directors for expenses incurred in attending meetings and as a result of
other work performed for the Company. For 2004, the Company paid fees in the
aggregate amount of $280,250 to Messrs. Allison, Bloostein, Chazen, Gilbert (who
retired from the Board in May 2004), Hatkoff and Karmanos and Myron E. Ullman,
III (who resigned from the Board of Directors in October 2004) for their
services as directors of the Company.
12
As part of its overall program of charitable giving, during 2004, TRG
maintained a charitable gift program for the Company's outside directors. Under
this charitable gift program, TRG matched an outside director's donation to one
or more qualifying charitable organizations. TRG limited matching contributions
to an aggregate maximum amount of $10,000 per director per year. Individual
directors derive no financial benefit from this program since all charitable
deductions accrue solely to TRG. During 2004, TRG made seven matching
contributions in the total amount of $60,000.
Effective as of January 1, 2005, the non-employee members of the Board of
Directors are compensated as follows:
- Annual Retainer: $35,000.
- Charitable Matching Contribution: None. The existing $10,000 annual
charitable matching contribution terminated.
- Meeting Fee (board meetings): $1,000 per meeting attended
- Meeting Fee (board committee meetings): $1,000 per meeting attended
- Annual Fee for Audit Committee Chair: $12,500
- Annual Fee for Compensation Committee Chair: $7,500
- Annual Fee for Nominating & Governance Committee Chair: $2,500
In addition to the amounts stated above, the Compensation Committee has
adopted the Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan which
provides for each non-employee director to receive shares of Common Stock having
a fair market value of $15,000 as part of their annual retainer. The adoption of
the Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan is subject to
approval by the Company's shareholders at the annual meeting.
The Company will also reimburse members of the Board of Directors for all
expenses incurred in attending meetings or performing their duties as directors.
Members of the Board of Directors who are employees or officers of the Company
or any of its subsidiaries will not receive any compensation for serving on the
Board of Directors or any committees thereof.
CORPORATE GOVERNANCE
The Board of Directors has adopted Corporate Governance Guidelines, a copy
of which can be found at the Company's web site in the Corporate Governance
Section. These guidelines address, among other things, a director's
responsibilities, qualifications, including independence, compensation and
access to management and advisors. The Nominating and Corporate Governance
Committee is responsible for overseeing and reviewing these guidelines and
recommending to the Board any changes to the guidelines.
The Board also has adopted a Code of Business Conduct and Ethics (the
"Code"), which sets out basic principles to guide the actions and decisions of
all of the Company's employees, officers and directors. The Code, which is also
available at www.taubman.com, in the Corporate Governance Section, covers topics
such as honesty, integrity, conflicts of interest, compliance with laws,
corporate opportunities, and confidentiality, as well as numerous other topics.
Waivers of the Code are discouraged, but any waiver that relates to the
Company's executive officers or directors may only be made by the Board or a
Board committee and will be publicly disclosed.
13
COMMUNICATING WITH THE BOARD
Any shareholder or interested party, who wishes to communicate with the
Board or any specific director, including non-management directors, the
presiding director, or committee members, may write to:
Taubman Centers, Inc.
Attn: Board of Directors
200 East Long Lake Road, Suite 300
P.O. Box 200
Bloomfield Hills, Michigan 48303-0200
Depending on the subject matter of the communication, management will:
- forward the communication to the director or directors to whom it is
addressed (matters addressed to the Chairman of the Audit Committee will
be forwarded unopened directly to the Chairman);
- attempt to handle the inquiry directly where the communication does not
appear to require direct attention by the Board, or an individual member,
e.g. the communication is a request for information about the Company or
is a stock-related matter; or
- not forward the communication if it is primarily commercial in nature or
if it relates to an improper or irrelevant topic.
To submit concerns regarding accounting matters, shareholders and other
interested persons may also call the Company's toll free, confidential hotline
number published in the Corporate Governance Section of the Company's web site
in the document entitled, "Procedures for Submitting Concerns About the
Company's Accounting and Auditing Matters."
Communications will be made available to directors at any time upon their
request.
CERTAIN TRANSACTIONS
The Manager is the manager of the SunValley Shopping Center in Contra Costa
County, California, and has been the manager since its development. TRG owns a
50% general partnership interest in SunValley Associates, a California general
partnership, which owns the center. The other 50% partner is an entity owned and
controlled by Mr. A. Alfred Taubman, the Company's largest shareholder, former
Chairman of the Board of Directors and the father of Robert and William Taubman.
SunValley's partnership agreement names TRG as the managing general partner and
provides that so long as TRG has an ownership interest in the property, the
Manager will remain its manager and leasing agent.
During 1997, TRG acquired an option to purchase certain real estate on
which TRG was exploring the possibility of developing a shopping center. A.
Alfred Taubman, Robert S. Taubman and William S. Taubman have a financial
interest in the optionor. Through December 31, 2000, TRG made payments of
$450,000 under the option agreement, but in 2000, TRG decided not to go forward
with the project. Pursuant to an agreement between TRG and the optionor, TRG is
to be reimbursed at the time of sale or lease of the real estate for $350,000 in
project costs, and upon receipt of such amount, the option will be terminated.
A. Alfred Taubman and certain of his affiliates receive various property
management services from the Manager. For such services, Mr. A. Taubman and
affiliates paid the Manager approximately $1.7 million in 2004.
During 2004, the Manager paid approximately $2.4 million in rent and
operating expenses for office space in the building in which the Manager
maintains its principal offices and in which A. Alfred Taubman, Robert S.
Taubman, and William S. Taubman have financial interests. In 2004, the Manager
renewed the office lease, extending the term to 2015. Effective May 1, 2005, the
first year annual rent will be $1.3 million, the second to fifth years' rent
will be $2.3 million per year and the sixth to tenth years' rent will be $2.5
million per year. The Manager has an option to reduce the amount of space leased
by up to 19% in 2005, and the Manager may surrender an additional 10% of space
in 2010. The Manager will also receive an allowance in 2005 of up to
14
$3.7 million based upon the actual amount of space leased. The lease also
provides for a five year renewal option at the end of the term.
The Taubman Asset Group, an entity which manages the personal assets of,
and provides administrative services to, the Taubman family, together with
certain members of the Taubman family, including A. Alfred Taubman
(collectively, the "Taubman Family"), utilize a portion of the Manager's
Bloomfield Hills, Michigan offices and a portion of the Manager's New York
offices. For the use of the office space, they paid the Manager approximately
$331,000 in 2004, representing their pro rata share of the total occupancy costs
paid by the Manager. In addition, employees of the Taubman Asset Group, A.
Alfred Taubman and certain employees of members of the Taubman Family and other
affiliated companies of the Taubman Family were enrolled in the benefit program
of the Manager. For participation in the Manager's benefit program, participants
paid the Manager approximately $590,000 in 2004, representing a 100%
reimbursement of the costs associated with their employees' participation in the
benefit program plus a 15% administrative fee. The Manager leases a corporate
jet for business use and was reimbursed approximately $160,000 in 2004 by the
Taubman Family for incidental personal use of the corporate jet.
The Audit Committee reviews business transactions between the Company and
its subsidiaries and related parties to ensure that the Company's involvement in
such transactions, including those described above, is on arm's length terms.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing independent,
objective oversight and review of the Company's accounting functions and
internal controls. The Audit Committee acts under a written charter, a copy of
which was attached as Appendix A to the Company's 2004 Proxy Statement and which
is also available on the Company's web site, www.taubman.com, in the Corporate
Governance Section. Each of the members of the Audit Committee is independent as
defined by the rules adopted by the SEC, the New York Stock Exchange and the
Company's Corporate Governance Guidelines. An Audit Committee member may not
simultaneously serve on more than two other audit committees of public
companies.
The responsibilities of the Audit Committee include engaging an accounting
firm to be the Company's independent registered public accounting firm.
Additionally, and as appropriate, the Audit Committee reviews and evaluates, and
discusses and consults with management, internal audit personnel and the
independent registered public accounting firm on matters which include the
following:
- the plan for, and the independent registered public accounting firm's
report on, each audit of the Company's financial statements;
- the Company's quarterly and annual financial statements contained in
reports filed with the SEC or sent to shareholders;
- changes in the Company's accounting practices, principles, controls or
methodologies, or in its financial statements;
- significant developments in accounting rules;
- the adequacy of the Company's internal accounting controls, and
accounting, financial and auditing personnel; and
- the continued independence of the Company's independent registered public
accounting firm and the monitoring of any engagement of the independent
registered public accounting firm to provide non-audit services.
The Audit Committee is responsible for recommending to the Board that the
Company's financial statements be included in the Company's annual report. The
Committee took a number of steps in making this recommendation for 2004. First,
the Audit Committee discussed with KPMG, the Company's independent registered
public accounting firm for 2004, those matters required to be communicated and
discussed between an issuer's independent registered public accounting firm and
its audit committee under applicable auditing
15
standards, including information regarding the scope and results of the audit.
These communications and discussions are intended to assist the Audit Committee
in overseeing the financial reporting and disclosure process. Second, the Audit
Committee discussed with KPMG its independence and received a letter from KPMG
and concerning such independence as required under applicable independence
standards for independent registered public accounting firms of public
companies. This discussion and disclosure informed the Audit Committee of KPMG's
independence, and assisted the Audit Committee in evaluating such independence.
Finally, the Audit Committee reviewed and discussed, with management and KPMG
(with regard to 2004 only), the Company's audited consolidated balance sheets
for December 31, 2004 and 2003, and consolidated statements of operations, cash
flows and shareowners' equity for the three years ended December 31, 2004. Based
on the discussions with KPMG concerning the audits, the independence
discussions, and the financial statement review and such other matters deemed
relevant and appropriate by the Audit Committee, the Audit Committee recommended
to the Board (and the Board agreed) that these financial statements be included
in the Company's 2004 Annual Report on Form 10-K.
AUDIT FEES. The Company was billed $963,500 by KPMG for 2004 for Audit
Services and was billed $912,550 by Deloitte and Touche LLP ("Deloitte") for
2003 for Audit Services. The Audit Committee appointed KPMG as the Company's
principal accountant for 2004 to replace Deloitte, which had served as the
Company's principal accountant for 2003. "Audit Services" consist of
professional services rendered by the Company's principal accountant for the
audits of the Company's annual financial statements and management's assessment
of the Company's internal control over financial reporting, review of the
financial statements included in the Company's quarterly reports on Form 10-Q
and services that are normally provided by the accountant in connection with
these filings. This includes $546,000 in 2004 and $618,400 in 2003 related to
individual shopping center audit reports and accounting consultations and
$32,500 in 2004 related to audit work done in connection with equity offerings.
All of the Audit Services provided to the Company by KPMG during 2004 and
Deloitte during 2003 were pre-approved by the Audit Committee.
AUDIT-RELATED FEES. The Company was billed $16,500 by KPMG in 2004 and
$20,100 by Deloitte in 2004 and 2003, respectively, for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit or review of the Company's financial statements. These
audit related services, consisting primarily of an audit of an employee benefit
plan, provided to the Company by KPMG and Deloitte were pre-approved by the
Audit Committee.
TAX FEES. The Company was billed $2,000 by KPMG in 2004 for the review of a
Form 5500 in connection with the audit of the Company's 401(k) plan. The Company
was billed $1,175,276 by Deloitte in 2003 for professional services related to
federal and state tax compliance, tax advice and tax planning. The tax fees paid
to Deloitte in 2003 included tax compliance fees of $953,953 and tax advice and
planning fees of $221,323. All of the tax related services provided to the
Company by KPMG during 2004 and Deloitte during 2003 were pre-approved by the
Audit Committee.
ALL OTHER FEES. The Company did not incur any other fees to KPMG in 2004 or
to Deloitte in 2003.
The Audit Committee, based on its reviews and discussions with management
and KPMG noted above, determined that the provision of these services was
compatible with maintaining KPMG's independence.
16
PRE-APPROVAL POLICIES AND PROCEDURES FOR AUDIT AND NON-AUDIT SERVICES. The
Audit Committee has developed policies and procedures concerning its
pre-approval of the performance of audit and non-audit services. These policies
and procedures provide that the Audit Committee must pre-approve all audit and
permitted non-audit services (including the fees and terms thereof) to be
performed for the Company. If a product or service arises that was not already
pre-approved, the Audit Committee has delegated to the Chairman of the Audit
Committee the authority to consider and pre-approve such services between
quarterly meetings of the Audit Committee. In pre-approving all audit services
and permitted non-audit services, the Audit Committee or a delegated member must
consider whether the provision of the permitted non-audit services is consistent
with maintaining the independence of the Company's independent registered public
accounting firm. Any interim approvals granted by the Chairman of the Audit
Committee are reported to the entire Audit Committee at its next regularly
scheduled meeting.
THE AUDIT COMMITTEE
Jerome A Chazen, Chairman
Graham T. Allison
Allan J. Bloostein
Craig M. Hatkoff
Peter Karmanos, Jr.
17
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of those persons who during 2004 were (i) the chief
executive officer and (ii) the other executive officers of the Company whose
compensation is required to be disclosed pursuant to the rules of the SEC (the
"Named Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------- LTIP ALL OTHER
SALARY BONUS(1) PAYOUTS(2) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)
--------------------------- ---- -------- -------- ------------ ------------
Robert S. Taubman.................... 2004 $778,846(3) $498,750 $1,313,516 $28,775(4)
Chairman of the Board, President and 2003 750,000 572,500 1,469,398 26,693
Chief Executive Officer 2002 750,000 468,750 1,251,250 25,467
Lisa A. Payne........................ 2004 $519,231(3) $375,000 $ 592,465 $26,202(5)
Executive Vice President and Chief 2003 500,000 370,625 622,056 27,874
Financial and Administrative Officer 2002 500,000 325,000 508,750 23,042
William S. Taubman................... 2004 $506,250(3) $332,500 $ 592,465 $28,372(6)
Executive Vice President 2003 487,500 370,625 611,587 26,341
2002 484,133 314,375 508,750 43,108
Stephen J. Kieras.................... 2004 $239,115(3) $231,000 $ 66,942 $19,764(7)
Senior Vice President, Development
David T. Weinert..................... 2004 $289,823(3) $540,800(8) $ 91,723 $25,344(9)
Senior Vice President, Leasing
Courtney I. Lord..................... 2004 $314,231(3) $242,000 $ 281,604 $24,964(11)
Former Senior Vice President, 2003 287,423 279,930 158,854 22,554
Leasing(10) 2002 278,654 276,494 -- 21,187
John L. Simon........................ 2004 $326,596(3) $281,500 $ 281,604 $27,864(14)
Former Senior Vice President, 2003 306,092 390,880 305,795 25,899
Development(12) 2002 298,125 268,413(13) 275,000 24,646
---------------
(1) Reflects bonus amounts awarded in 2004 under the Annual Bonus Plan and in
2003 and 2002 under the Senior Short-Term Incentive Plan.
(2) Reflects payouts of 1999, 2000 and 2001 Cash Awards made under the
Manager's Long-Term Performance Compensation Plan (the "Long-Term
Performance Plan"). Robert Taubman and William Taubman have elected to
defer receipt of the 1999 payout amounts in accordance with the terms of
the Long-Term Performance Plan. Amounts deferred under the Long-Term
Performance Plan accrue interest until the deferred payment date. The 2000
and 2001 Cash Awards were paid and included a premium as explained in the
following section (Long-Term Performance Compensation Plan). Awards made
pursuant to the Long-Term Performance Plan are not reportable on the date
of grant and, instead, are reported in the Long-Term Incentive Plan Awards
table immediately following.
(3) Salary amounts for 2004 include one additional pay period compared with
2003 and 2002.
(4) Includes $16,692 contributed to the defined contribution plan (the
"Retirement Savings Plan") on behalf of Mr. Robert S. Taubman and $12,083
accrued under the supplemental retirement savings plan (the "Supplemental
Retirement Savings Plan").
(5) Includes $16,692 contributed to the Retirement Savings Plan on behalf of
Ms. Payne and $9,510 accrued under the Supplemental Retirement Savings
Plan.
18
(6) Includes $16,692 contributed to the Retirement Savings Plan on behalf of
Mr. William S. Taubman and $11,680 accrued under the Supplemental
Retirement Savings Plan.
(7) Includes $16,692 contributed to the Retirement Savings Plan on behalf of
Mr. Kieras and $3,072 accrued under the Supplemental Retirement Savings
Plan.
(8) Includes $302,800 earned in 2004 as part of a compensation arrangement
entered into in connection with a promotion of and relocation by Mr.
Weinert in 1999.
(9) Includes $16,692 contributed to the Retirement Savings Plan on behalf of
Mr. Weinert and $8,652 accrued under the Supplemental Retirement Savings
Plan.
(10) Mr. Lord ceased serving as Senior Vice President, Leasing on June 30, 2004
but remained an employee of the Company through December 31, 2004 and is
currently serving as a consultant to the Company.
(11) Includes $16,692 contributed to the Retirement Savings Plan on behalf of
Mr. Lord, and $8,272 accrued under the Supplemental Retirement Savings
Plan.
(12) Mr. Simon retired from his position with the Company effective December 31,
2004 but is currently serving as a consultant to the Company.
(13) Excludes a $50,000 special bonus paid in June 2002 relating to 2001
compensation.
(14) Includes $16,692 contributed to the Retirement Savings Plan on behalf of
Mr. Simon and $11,172 accrued under the Supplemental Retirement Savings
Plan.
LONG-TERM PERFORMANCE COMPENSATION PLAN
The Long-Term Performance Plan was adopted by the Manager and approved by
TRG's compensation committee in 1996 (the Compensation Committee of the Board
now performs such functions). The Company's Long-Term Performance Plan was
amended effective January 1, 1999 (the "First Amendment") and again effective
January 1, 2000 (the "Second Amendment"). The following discussion relates to
the 2004 grants under the Long-Term Performance Plan that are reflected in the
Long-Term Incentive Plans -- 2004 Awards table.
The amount of a participant's award is based on individual and Company
performance for the fiscal year prior to the date of the award and the
individual's position in the Company. Each eligible participant is granted a
Cash Award (a "Cash Award") and the final payout value of an award is tied to
the achievement of a target compounded growth rate of the Company's per share
funds from operations, as publicly reported by the Company, subject to
reasonable adjustments such as changes in accounting policies and extraordinary
or non-recurring items, over the three-year vesting period of the award. If the
target is achieved, the payout amount of each Cash Award is increased, subject
to a maximum premium of 30%; otherwise the payout amount remains the amount of
the original grant. Each Cash Award vests on the third January 1 after the date
of grant. Upon vesting, the value of the award under the Long-Term Performance
Plan will be paid to the participant in a lump sum, unless the participant
elects to defer payment in accordance with the terms of the Long-Term
Performance Plan. The payout amount is determined on the vesting date, and such
amount will accrue interest from the vesting date until the deferred payment
date.
19
LONG-TERM INCENTIVE PLANS -- 2004 AWARDS(1)
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
PERFORMANCE OR PRICE-BASED PLAN
CASH OTHER PERIOD ------------------------------------------
NAME AND PRINCIPAL AWARDS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
POSITION ($) OR PAYOUT ($) ($)(2) ($)
------------------ ---------- ---------------- ------------ ------------ ------------
Robert S. Taubman............ $1,300,000 1/1/04-1/1/07 $1,300,000 $1,495,000 $1,690,000
Chairman of the Board,
President and Chief Executive
Officer
Lisa A. Payne................ $ 710,000 1/1/04-1/1/07 $ 710,000 $ 816,500 $ 923,000
Executive Vice President and
Chief Financial and
Administrative Officer
William S. Taubman........... $ 695,000 1/1/04-1/1/07 $ 695,000 $ 799,250 $ 903,500
Executive Vice President
Stephen J. Kieras............ $ 160,000 1/1/04-1/1/07 $ 160,000 $ 184,000 $ 208,000
Senior Vice President,
Development
David T. Weinert............. $ 131,875 1/1/04-1/1/07 $ 131,875 $ 151,656 $ 171,438
Senior Vice President,
Leasing
Courtney I. Lord............. $ 267,500 1/1/04-1/1/07 $ 267,500 $ 307,625 $ 347,750
Former Senior Vice President,
Leasing
John L. Simon................ $ 362,500 1/1/04-1/1/07 $ 362,500 $ 416,875 $ 471,250
Former Senior Vice President,
Development
---------------
(1) Awards were made under the Long-Term Performance Plan. Awards vest and,
unless deferred in accordance with the Long-Term Performance Plan, are
payable on the third January 1 after the date of grant.
(2) The target is the amount which would be payable if the target compounded
growth rate in per share funds from operations is achieved.
ANNUAL BONUS PLAN
For 2004, the Manager's officers and senior management received part of
their annual compensation pursuant to the Manager's Annual Bonus Plan. Under the
Annual Bonus Plan, bonuses are only paid if the Company's performance meets
certain funds from operations and net operating income growth hurdles which are
approved annually by the Board of Directors. Under the Annual Bonus Plan, a
total bonus pool will be determined based on Company performance. Payments to
individuals will then be determined based upon their annual performance review,
and bonuses can range from 0% to 200% of their target bonus amount.
INCENTIVE OPTION PLAN
TRG maintains the 1992 Incentive Option Plan for its employees with respect
to Units of Partnership Interest in TRG. Upon exercise, it is anticipated that
substantially all employees will exchange each underlying Unit for one share of
the Company's Common Stock under the Continuing Offer.
The Company's chief executive officer makes periodic recommendations to the
Compensation Committee of the Board, which, after reviewing such
recommendations, determines grants. The exercise price of each Incentive Option
is equal to the fair market value of a Unit of Partnership Interest on the date
of grant. The 1992 Incentive Option Plan was amended in December 2001 to permit
a holder of an Incentive Option to pay the exercise price in cash or by
surrender of Units of Partnership Interest having an aggregate fair market value
equal to the exercise price. In the event that the exercise price for an
Incentive Option is paid by surrendering Units of Partnership Interest, only
those Units of Partnership Interest issued to the optionee in
20
excess of the number of Units of Partnership Interest surrendered are counted
for purposes of determining the remaining number of Units of Partnership
Interest available for future grants of Incentive Options under the 1992
Incentive Option Plan.
Generally, Incentive Options granted prior to January 2005 vest in
one-third increments on each of the third, fourth, and fifth anniversaries of
the date of grant, although the Compensation Committee may allow an exercise at
any time more than six months after the date of grant. If the optionee's
employment terminates within the first three years for reasons other than death,
disability, or retirement, the right to exercise the Incentive Option is
forfeited. If the termination of employment is because of death, disability, or
retirement, the Incentive Option may be exercised in full. Outstanding Incentive
Options also vest in full upon the termination of the Manager's engagement by
TRG, upon any "change in control" of TRG, or upon TRG's permanent dissolution.
No Incentive Option may be exercised after ten years from the date of grant.
There were no Incentive Option grants to Named Officers in 2004.
AGGREGATED OPTION EXERCISES DURING 2004 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT YEAR END OPTIONS AT 12/31/04(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
Robert S. Taubman.... 197,508(2) $2,326,644 47,508 -- $ 962,512 --
Lisa A. Payne........ 600,828 7,804,341 -- -- -- --
William S. Taubman... 19,751(2) 232,667 508,008 -- 9,012,242 --
Stephen J. Kieras.... 3,951 47,333 -- -- -- --
David T. Weinert..... -- -- -- -- -- --
Courtney I. Lord..... -- -- -- -- -- --
John L. Simon........ -- -- -- -- -- --
---------------
(1) In accordance with the SEC's rules, based on the difference between fair
market value of Common Stock and the exercise price.
(2) Each of Mr. R. Taubman and Mr. W. Taubman elected to hold Units of
Partnership Interest in TRG upon exercise of their options rather than
converting into shares of the Company's Common Stock.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Section 162(m). Section 162(m) of the Internal Revenue Code of 1986, as
amended, provides that, subject to certain exceptions, the Company may not
deduct compensation exceeding $1 million in any one year paid to any one of the
Company's CEO and four highest compensated executive officers other than the
CEO. Section 162(m) excludes performance-based compensation meeting certain
requirements from the $1 million limitation. The Company may not be able to
deduct the full amount of its share of the Manager's tax deduction for
compensation to the Company's CEO and four highest compensated executive
officers other than the CEO to the extent that the Company's share of the
deduction for compensation of any such person exceeds $1 million in any one year
and such compensation does not meet the requirements for performance-based
compensation. This deduction limit does not apply to TRG or the Manager because
TRG and the Manager are partnerships for federal tax purposes.
Compensation Philosophy. The Manager has had a long-standing philosophy of
targeting executive compensation at a level above the average of competitive
practice. As part of this philosophy, the mix of compensation elements has
emphasized variable, performance-based programs. As a result of this philosophy,
the Manager has been successful at recruiting, retaining, and motivating
executives who are highly talented, performance-focused, and entrepreneurial.
The Compensation Committee has continued to apply this philosophy to its
decisions on compensation matters. The independent compensation consultant
retained by the Compensation Committee has compared the Manager's compensation
practices with those of industry competitors and confirmed that the 2004
compensation of the Named Officers was consistent with the Manager's
compensation philosophy.
21
The Manager's compensation program for executive officers consists of the
following key elements: annual compensation in the form of base salary, bonus
compensation under the Annual Bonus Plan and long-term compensation under the
Incentive Option Plan and the Long-Term Performance Plan. The compensation of
the Named Officers is determined based on their individual performance and the
performance of the Company, TRG, and the Manager.
Since 1996 and through 2004, awards under the Long-Term Performance Plan
have been selected over Incentive Options as the primary source of incentive
compensation to the executive officers. No Incentive Option grants were made
during 2004.
Base Salaries. Base salaries for the Manager's executive officers are
generally targeted at a level above the average for executives of industry
competitors. The salaries of the Named Officers are reviewed and approved by the
Compensation Committee based on its subjective assessment of each executive's
experience and performance and a comparison to salaries of senior management of
industry competitors.
Long-Term Performance Plan. In 2004, the Compensation Committee made grants
of Cash Awards under the Long-Term Performance Plan to the Named Officers, as
shown in the Long-Term Incentive Plans -- 2004 Awards table.
Compensation of Chief Executive Officer. Robert S. Taubman's base salary
for 2004 was at an annual rate of $750,000. Based on the Compensation
Committee's evaluation of Mr. Taubman's performance and the performance of the
Company and the report of the independent consultant, the Compensation Committee
confirmed that Mr. Taubman's base salary, his bonus under the Annual Bonus Plan
for 2004 in the amount of $498,750 and his incentive compensation under the
Long-Term Performance Plan, as set forth in the Summary Compensation Table and
Long-Term Incentive Plans -- Awards table, were consistent with the Manager's
compensation philosophy.
THE COMPENSATION COMMITTEE
Craig M. Hatkoff, Chairman
Jerome A. Chazen
Peter Karmanos, Jr.
22
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph sets forth the cumulative total returns on a $100
investment in each of the Company's Common Stock, the Morgan Stanley REIT Index,
the NAREIT Equity Retail REIT Index and the S&P Composite -- 500 Stock Index for
the period December 31, 1999 through December 31, 2004 (assuming, in all cases,
the reinvestment of dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
--------------------------------------------------------------------------------
Taubman
Centers,
Inc. $100.00 $111.03 $162.58 $190.00 $254.59 $386.26
Morgan
Stanley REIT
Index $100.00 $126.81 $143.08 $148.30 $202.79 $266.64
NAREIT Equity
Retail REIT
Index $100.00 $117.97 $153.86 $186.27 $273.39 $383.38
S&P 500 Index $100.00 $ 90.90 $ 80.09 $ 62.39 $ 80.29 $ 89.02
--------------------------------------------------------------------------------
Please note: The stock price performance shown on the graph above is not
necessarily indicative of future price performance.
CERTAIN EMPLOYMENT AND CONSULTING ARRANGEMENTS
In January 1997, the Manager entered into a three-year agreement with Lisa
A. Payne regarding her employment as an Executive Vice President and the Chief
Financial Officer of the Manager and her service to the Company in the same
capacities. In January 1999 and January 2000, the agreement was extended for an
additional year and continues to have automatic, one-year extensions unless
either party gives notice to the contrary. In March 2002, Ms. Payne became the
Manager's and Company's Chief Financial and Administrative Officer and continued
her position as an Executive Vice President of each entity. The employment
agreement provides for an annual base salary of not less than $500,000, to be
reviewed annually. The agreement also provides for Ms. Payne's participation in
the Manager's annual bonus plan, with a target award of $250,000 and a maximum
annual award of $375,000. Notwithstanding the foregoing, the Company, in its
sole discretion, may increase Ms. Payne's compensation at any time. Pursuant to
the agreement, if Ms. Payne's employment with the Company is terminated for any
reason other than (1) Ms. Payne's voluntary termination of her employment, (2)
death or disability or (3) a termination by the Company for "cause" (as defined
in the agreement), Ms. Payne shall be entitled to receive payment of her base
salary and
23
target bonus for the remaining term of her employment agreement, and all
benefits granted to Ms. Payne under the Company's various compensation plans
shall immediately vest in full.
In November 1999, the Manager entered into an employment agreement with
Courtney I. Lord pursuant to which Mr. Lord served as the Manager's Senior Vice
President of Leasing. On March 10, 2004, the Manager entered into a Termination
Agreement with Mr. Lord, pursuant to which he ceased being Senior Vice
President, Leasing as of June 30, 2004 but continued to be paid pursuant to his
employment agreement through December 31, 2004. Furthermore, on March 10, 2004,
the Manager entered into a Consulting Agreement with Mr. Lord pursuant to which
Mr. Lord has agreed to provide consulting services to the Manager effective
January 1, 2005 and terminating on December 31, 2005. Pursuant to the Consulting
Agreement, the Manager is obligated to pay Mr. Lord $10,000 per month for
consulting services up to a specified number of hours. Consulting services
provided by Mr. Lord in excess of these hours will be paid on an hourly basis.
In addition, the Manager agreed to reimburse Mr. Lord for the 18 month period
ending June 30, 2006 for the premiums then in effect for COBRA continuation
coverage and to reimburse him for the 6 month period commencing July 1, 2006 and
ending on December 31, 2006 up to the amount of COBRA continuation coverage
premiums for private health insurance obtained by Mr. Lord. Lastly, the Manager
agreed to vest Mr. Lord's Long-Term Performance Plan payments earned during his
employment, which will be paid in January of each year through 2007, and to make
a payment of $137,500 based upon Mr. Lord's 2004 job performance to be paid in
January 2008. The Consulting Agreement prohibits Mr. Lord during the term of the
Consulting Agreement and for a period of 12 months thereafter from providing any
services (i) to certain named competitors of the Company and (ii) to any
shopping center in excess of 200,000 square feet located within a specified
radius of a shopping center owned by TRG.
On July 8, 2004, the Manager entered into a Consulting and Non-Competition
Agreement with John L. Simon, pursuant to which he retired from his position as
Senior Vice President, Development effective December 31, 2004 and agreed to
serve as a consultant to the Manager for a period of two years thereafter.
Pursuant to the agreement, the Manager is obligated to pay Mr. Simon a bonus
under the Company's Annual Bonus Plan with respect to 2004 based on the
Company's performance and Mr. Simon's personal performance in 2004. The Manager
also is obligated to pay Mr. Simon $23,333 per month for his consulting services
up to a specified number of hours. Consulting services provided by Mr. Simon in
excess of these hours will be paid on an hourly basis. In addition, the Manager
agreed to reimburse Mr. Simon for the 18 month period ending June 30, 2006 for
the premiums then in effect for COBRA continuation coverage and to reimburse him
for the 6 month period commencing July 1, 2006 and ending on December 31, 2006
up to the amount of COBRA continuation coverage premiums, for private health
insurance obtained by Mr. Simon. Lastly, the Manager agreed to vest Mr. Simon's
Long-Term Performance Plan payments earned during his employment, which will be
paid in January of each year through 2007, and to make a payment of $156,750
based upon Mr. Simon's 2004 job performance to be paid in January 2008. The
Consulting Agreement prohibits Mr. Simon during the period ending January 15,
2008 from providing any services (i) to certain named competitors of the Company
and (ii) to any shopping center in excess of 200,000 square feet located within
a specified radius of a shopping center owned by TRG.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
In May 2003, the Company entered into change of control employment
agreements (the "Change of Control Agreements") with each of the persons who
were members of the Company's Operating Committee at that time, other than
Robert Taubman and William Taubman but including Lisa A. Payne. The Company also
entered into Change of Control Agreements with each of Stephen J. Kieras and
David T. Weinert in March 2005. The Change of Control Agreements have three-year
terms that automatically extend for an additional year on each anniversary of
the first day of their terms unless a notice not to extend is given by the
Company. If a "change of control" of the Company, as defined in the Change of
Control Agreements, occurs during the term of the Change of Control Agreements,
then the Change of Control Agreements become operative for a fixed three-year
period commencing on the date of the change of control and supersede any other
employment agreement between the Company and any of its affiliates, on the one
hand, and the executive, on the other.
24
Each Change of Control Agreement provides generally that the executive's
terms and conditions of employment, including position, location, compensation
and benefits will not be adversely changed during the three-year period after a
change of control. If the executive's employment is terminated by the Company
other than for cause, death or disability or if the executive resigns for "good
reason," as defined in the Change of Control Agreements during this three-year
period or upon certain terminations in connection with or in anticipation of a
change of control, the executive will generally be entitled to receive:
- an annual bonus for the year in which the termination of employment
occurs, pro-rated through the date of termination;
- two and a half times the executive's annual base salary and annual bonus;
- continued welfare benefits and perquisites for thirty months;
- $1,000 from the repurchase by the Manager of the participant's T-I REIT,
Inc. share granted to the participant under a bonus award agreement; and
- outplacement services.
The annual bonus components of this severance amount will be based on the
higher of the highest bonus paid to the executive during the three years prior
to the change of control or the most recent bonus paid to the executive prior to
the date of termination of employment. In addition to the benefits described
above for certain terminations within three years of a change in control, in
order to preserve an existing benefit under an employment agreement that the
Company entered into with Ms. Payne in January 1997, Ms. Payne's Change of
Control Agreement provides that, in the event that she terminates her employment
for any reason other than "good reason" during the 90-day period following a
change of control, she will be entitled to a payment equal to two times her base
salary and target bonus under the annual bonus plan, plus an annual bonus for
the year in which the termination occurs, pro-rated through the date of
termination.
Each Change of Control Agreement also provides that effective on the
occurrence of a change of control or a termination of employment of the
executive in anticipation of a change of control:
- all of the executive's equity-based compensation awards that are
outstanding on the date of the change of control will vest; and
- all of the executive's then-outstanding awards under the Long-Term
Performance Plan will vest and be immediately paid in full.
CHANGE OF CONTROL SEVERANCE PROGRAM
In May 2003, the Company adopted a Change of Control Severance Program (the
"Program") in which all of the individuals, other than Robert Taubman and
William Taubman, who are employed by the Company or any of its affiliates on the
date of a "change of control of the Company" as defined in the Program, and who
are not a party to the employment agreements described above, participate. The
Program superseded the Company's undocumented existing severance program and
provides benefits comparable to those the Company has provided in the past. The
Program provides generally that if a participant's employment with the Company
and any of its affiliates is terminated other than for cause, death or
disability or if the participant resigns for "good reason," as defined in the
Program, during the two-year period following a change of control, in the case
of participants who are Group Vice Presidents, or during the one-year period
following a change of control, in the case of all other participants, a
participant will be generally entitled to receive, subject to the participant's
execution and non-revocation of a release:
- a lump sum separation benefit equal to 1/12 of the participant's annual
base salary and annual bonus times the participant's years of service
with the Company and its affiliates;
- medical, dental and vision benefit continuation, and if eligible
immediately prior to the change of control or at any time thereafter,
executive disability benefit continuation, for a period equal to the
number of months of severance to which the participant is entitled;
25
- $1,000 from the repurchase by the Manager of the participant's T-I REIT,
Inc. share granted to the participant under a bonus award agreement; and
- outplacement services.
The separation benefit will be subject to a maximum of 24 months' base
salary and bonus and a minimum of 16 months' base salary and bonus in the case
of participants who are Group Vice Presidents, 12 months' base salary and bonus
in the case of participants who are exempt and Long-Term Performance
Plan-eligible associates (other than Group Vice Presidents), six months' base
salary and bonus, in the case of participants who are exempt and non-Long-Term
Performance Plan-eligible associates, and three months' base salary and bonus,
in the case of participants who are non-exempt associates. For participants who
are participants in the annual bonus plan, the annual bonus component of the
participant's separation benefit will be 130% of the higher of the participant's
target bonus for the year in which the change of control occurs and the highest
target bonus established for the participant in any subsequent year. For
participants who are participants in the Specialty Retail Bonus Plan or the
Leasing Bonus Plan, the annual bonus component of the participant's separation
benefit will be equal to the higher of (i) the average of the participant's
actual bonuses for the three years immediately preceding the change of control
(or, if the participant has not been employed by the Company and its affiliates
for three years prior to the change of control, such lesser number of years
during which the participant was employed by the Company and its affiliates) or
(ii) the highest actual bonus paid to the participant for any subsequent year
(if any).
The Program also provides that effective as of the occurrence of a change
of control:
- each participant's equity-based compensation awards will vest; and
- the participant's then outstanding awards under the Long-Term Performance
Plan will vest and be immediately paid in full.
ITEM 2 -- ADOPTION OF THE TAUBMAN COMPANY 2005 LONG-TERM INCENTIVE PLAN
The Manager currently maintains a Long-Term Performance Compensation Plan
(the "Existing Plan") whereby employees of Manager are granted cash awards on an
annual basis based on individual and Company performance for the applicable
fiscal year. The awards vest on the third January 1 after the date of grant,
subject to the Company's achievement of a target compounded growth rate of the
Company's per share funds from operations. Receipt of the payout amount may be
deferred at the election of the grant recipient. See "Executive
Compensation -- Long-Term Performance Compensation Plan" for a more detailed
description of the Existing Plan and awards granted under the Existing Plan.
In order to increase the amount of investment in the Company by the
employees of the Manager, to strengthen alignment between employee and
shareholder interests and to reinforce a long-term performance focus among the
Manager's employees, the Board of Directors adopted The Taubman Company 2005
Long-Term Incentive Plan (the "New Plan") on March 1, 2005, subject to
shareholder approval. If the New Plan is approved by the Company's shareholders,
no further grants will be made under the Existing Plan.
The Board of Directors believes that the New Plan will enhance the
Manager's ability to attract, retain, motivate and reward employees and to
motivate such employees to act in the long-term best interests of the Company. A
summary of the material provisions of the New Plan is set forth below and is
qualified in its entirety by the provisions of the New Plan, a copy of which is
included as Appendix A to this Proxy Statement.
DESCRIPTION OF THE NEW PLAN
Awards and Vesting. Awards under the New Plan will consist of restricted
stock units ("RSUs"). Each RSU will represent the right to receive upon vesting
one share of the Company's Common Stock. In addition, a participant will be
entitled to receive upon vesting a cash payment equal to the aggregate cash
dividends that would have been paid on such share of Common Stock if the share
had been outstanding from the date of the grant of the award to the vesting date
(the "Dividend Equivalent Amount"). Although the New Plan allows
26
the Compensation Committee to make grants at any time and to set the terms of
vesting for each award, the Company expects that awards generally will be
granted on an annual basis on or around March 1 of each year and vest on the
third anniversary of the grant date, provided that the participant is still an
employee of the Manager on the vesting date. In 2005, the Company expects to
grant awards in May 2005 if the New Plan is approved by the shareholders at the
annual meeting, and such awards would vest on March 1, 2008. Awards will vest
prior to the scheduled vesting date upon the death, retirement or disability of
the participant, a change in control of the Company (as discussed below) or the
termination without renewal of the Master Services Agreement between TRG and the
Manager. The Compensation Committee may also, in its discretion, accelerate the
vesting of any unvested accounts. Any unvested awards will be forfeited by a
participant if the participant's employment with the Company or any of its
affiliates is terminated for any reason other than death, retirement or
disability.
Eligibility. Awards may be made under the New Plan to any individual who is
an employee of the Company or any of its affiliates, but the Company currently
expects that awards will be made to management level employees only. Using such
criteria, on the date of this proxy statement, there were approximately 80
employees who would be eligible to participate in the New Plan.
Administration. The New Plan will be administered by the Compensation
Committee of the Board of Directors. Subject to the terms of the New Plan, the
Compensation Committee will have the sole discretionary authority to select
participants to receive awards, determine the number of restricted stock units
to be granted to each participant and the terms and conditions of awards, and to
interpret provisions of the New Plan.
Shares Available for Grant. A maximum of an aggregate of 1,500,000 shares
of the Company's Common Stock are available for issuance under the New Plan.
Adjustments. In the event of any change in the Company's capitalization,
such as a stock split or stock dividend, or any extraordinary corporate
transaction such as a merger, consolidation, separation, spin-off or other
distribution of stock or property of the Company, or any partial or complete
liquidation of the Company, the Compensation Committee shall adjust the number
of shares available for issuance under the New Plan and any outstanding grants
made under the New Plan as is consistent with the change and is determined by
the Compensation Committee in its sole discretion to be appropriate and
equitable and to prevent dilution or enlargement of rights.
Rights of Grant Recipients. A recipient of an award granted under the New
Plan will not have any rights as a shareholder of the Company unless and until
shares of the Company's Common Stock are issued upon vesting of the applicable
award.
Transferability. A participant's rights and interests under the New Plan
cannot be assigned or transferred other than by will or the laws of descent and
distribution.
Change in Control. All awards granted under the New Plan will vest, and the
New Plan will automatically terminate, upon the occurrence of a change in
control of the Company. A change in control is defined in the New Plan as either
(1) the acquisition by any person or group of persons, other than A. Alfred
Taubman or any of his immediate family members or lineal descendants, trusts for
the benefit of such persons or entities owned or controlled by such persons, of
beneficial ownership of 40% or more of the outstanding voting capital stock of
the Company or (2) the removal or election of a member of the Board of
Directors, which removal or election was not approved by a vote of at least 70%
of the directors comprising the Board of Directors on the date immediately
preceding the removal or election.
Effective Date, Duration and Amendment. The New Plan was adopted by the
Board of Directors on March 1, 2005, subject to shareholder approval. The New
Plan does not have a set termination date but may be terminated by the
Compensation Committee at any time and will terminate immediately upon the
dissolution of TRG or the termination of the Master Services Agreement between
TRG and the Manager. The Compensation Committee may revise or amend the New Plan
in its discretion from time to time, provided, however that no amendment or
termination of the New Plan will alter or impair any award previously granted
without the consent of the applicable grant recipient. In addition, any
amendment to the
27
New Plan which have any of the following effects will require shareholder
approval: (1) a material increase in the number of shares available under the
New Plan, (2) an expansion of the type of awards available under the New Plan,
(3) a material expansion in the class of individuals eligible to participate
under the New Plan or (4) a material change to the method of determining the
value of the shares issued under the New Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the material U.S. federal income
tax consequences associated with awards under the New Plan. This general summary
is based on existing U.S. laws and regulations, and there can be no assurance
that those laws and regulations will not change in the future. State and local
tax consequences, or tax consequences in other countries, may vary.
Generally, awards of RSUs made under the New Plan are not taxable to a
participant at the time of grant but instead are included in ordinary income (in
an amount equal to the fair market value of the shares on the vesting date) when
vesting occurs. In addition, the Dividend Equivalent Amount is included in
ordinary income on the vesting date. Any gain (or loss) realized upon a
subsequent disposition of the shares of the Company's Common Stock received on
the vesting date will generally constitute capital gain (or loss). The Manager
is entitled to a tax deduction in an amount equal to the ordinary income, if
any, recognized by the participant.
Section 162(m) of the Internal Revenue Code of 1986, as amended, provides
that, subject to certain exceptions, the Company may not deduct compensation
exceeding $1 million in any one year paid to any one of the Company's CEO and
four highest compensated executive officers other than the CEO. Section 162(m)
excludes performance-based compensation meeting certain requirements from the $1
million limitation. The New Plan is not structured to meet the requirements for
the performance-based compensation exception, and therefore, the Company may not
be able to deduct the full amount of its share of the Manager's tax deduction
for awards made under the New Plan to the Company's CEO and four highest
compensated executive officers other than the CEO to the extent that the
Company's share of the deduction for compensation of any such person exceeds $1
million in any one year.
AWARDS UNDER THE PLAN
On March 1, 2005, the Compensation Committee approved the aggregate value
of the initial awards to be made under the New Plan. The awards, which will only
be granted following shareholder approval of the New Plan, are summarized in the
table below. Any additional awards that may be granted under the New Plan in the
future are subject to the discretion of the Compensation Committee and,
therefore, are not determinable at this time.
NEW PLAN BENEFITS
NAME AND POSITION DOLLAR VALUE($)(1) NUMBER OF UNITS(2)
----------------- ------------------ ------------------
Robert S. Taubman.......................................... $1,553,000 (3)
Chairman of the Board, President and
Chief Executive Officer
Lisa A. Payne.............................................. $ 830,000 (3)
Executive Vice President and Chief
Financial and Administrative Officer
William S. Taubman......................................... $ 780,000 (3)
Executive Vice President
Stephen J. Kieras.......................................... $ 205,000 (3)
Senior Vice President, Development
David T. Weinert........................................... $ 213,500 (3)
Senior Vice President, Leasing
28
NAME AND POSITION DOLLAR VALUE($)(1) NUMBER OF UNITS(2)
----------------- ------------------ ------------------
Courtney I. Lord........................................... -- --
Former Senior Vice President, Leasing
John L. Simon.............................................. -- --
Former Senior Vice President, Development
Executive Group(4)......................................... $3,776,500 (3)
Non-Executive Director Group(5)............................ -- --
Non-Executive Officer Employee Group(6).................... $2,640,608 (3)
---------------
(1) Represents the estimated value of the units to be granted in May 2005.
(2) Each unit represents the right to receive, upon the vesting date of March 1,
2008 (unless otherwise vested earlier in accordance with the terms of the
New Plan), one share of the Company's Common Stock, plus a cash payment
equal to all dividends that would have been paid on such share if it had
been outstanding from the grant date to the vesting date.
(3) The number of units is not determinable at this time, as it will be based
upon the fair market value of the Company's Common Stock on the grant date.
(4) Includes all current executive officers (6 persons).
(5) Directors are not eligible to participate in the New Plan.
(6) Includes all employees, other than current executive officers, who will
receive grants under the New Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE TAUBMAN
COMPANY 2005 LONG-TERM INCENTIVE PLAN.
ITEM 3 -- ADOPTION OF THE TAUBMAN CENTERS, INC.
NON-EMPLOYEE DIRECTORS' STOCK GRANT PLAN
On December 7, 2004, the Board of Directors approved a change in the
compensation of non-employee members of the Board of Directors, which included
the payment in shares of the Company's Common Stock of a portion of the annual
retainer paid to non-employee members of the Board. On March 1, 2005, the Board
of Directors approved the Taubman Centers, Inc. Non-Employee Directors' Stock
Grant Plan (the "Director Plan"). The Director Plan is intended to increase the
ownership of the Company's Common Stock by members of the Board of Directors and
to better align the interests of directors with those of the Company's
shareholders. A summary of the material provisions of the Director Plan is set
forth below and is qualified in its entirety by the provisions of the Director
Plan, a copy of which is included as Appendix B to this Proxy Statement.
DESCRIPTION OF THE DIRECTOR PLAN
Administration. The Director Plan is administered by the Compensation
Committee of the Company's Board of Directors. Subject to the terms of the
Director Plan, the Compensation Committee will have the sole discretionary
authority to interpret provisions of the Director Plan.
Eligibility. All members of the Company's Board of Directors who are not
employees or officers of the Company or any of its affiliates are eligible to
receive grants under the Director Plan.
Awards. The Director Plan provides for an annual grant to each non-employee
director of the Company of that number of shares of the Company's Common Stock
having a fair market value (measured as of the date immediately prior to the
date of grant) of $15,000. The shares will be granted on a quarterly basis, in
advance.
Shares Available for Grant. The number of shares of Common Stock that can
be issued under the Director Plan is not limited, but awards cannot be made
other than those automatically granted pursuant to
29
the Director Plan as described above. Shares granted under the Director Plan
will be authorized but unissued shares or issued and re-acquired shares, as the
Compensation Committee may determine from time to time.
Effective Date, Duration and Amendment. If adopted by the Company's
shareholders at the 2005 annual meeting, the Director Plan will be effective as
of such date. The Director Plan will remain in effect until the tenth
anniversary of the effective date. The Compensation Committee may at any time
and from time to time alter, amend, suspend or terminate the Director Plan,
except that the approval of the Company's shareholders shall be required to (1)
materially increase the dollar amount of the shares which will be granted to
directors on an annual basis, (2) expand the type of awards available under the
Director Plan, (3) materially expand the class of persons eligible to receive
awards, (4) materially extend the termination date of the Director Plan or (5)
materially change the method of determining the value of the shares issued under
the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the material U.S. federal income
tax consequences associated with awards under the Director Plan. This general
summary is based on existing U.S. laws and regulations, and there can be no
assurance that those laws and regulations will not change in the future. State
and local tax consequences, or tax consequences in other countries, may vary.
Each director receiving shares pursuant to the Director Plan will recognize
ordinary income equal to the fair market value of the shares on the grant date,
and the Company will receive a corresponding deduction. Any gain (or loss)
realized upon a subsequent disposition of the shares will generally constitute
capital gain (or loss).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE TAUBMAN
CENTERS, INC. NON-EMPLOYEE DIRECTORS' STOCK GRANT PLAN.
ITEM 4 -- RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors recommends that the shareholders vote FOR the
appointment of KPMG as the Company's independent registered public accounting
firm for the year ending December 31, 2005. Although shareholder approval of the
appointment is not required by law and is not binding on the Company, the Audit
Committee will take the appointment of KPMG under advisement if such appointment
is not approved by the affirmative vote of two-thirds of the shares of Voting
Stock outstanding on the record date. KPMG served as the Company's independent
registered public accounting firm for 2004. The Company expects that
representatives of KPMG will be present at the annual meeting and will be
afforded an opportunity to make a statement if they desire to do so. The Company
also expects that such representatives will be available to respond to
appropriate questions addressed to the officer presiding at the meeting.
On March 9, 2004, the Audit Committee appointed KPMG as the independent
registered public accounting firm to audit the financial statements of the
Company for 2004 to replace Deloitte, which was informed on March 10, 2004 that
it would no longer serve as the Company's independent registered public
accounting firm. On May 18, 2004, the shareholders of the company ratified the
selection of KPMG at the annual meeting of shareholders.
The reports of Deloitte on the Company's financial statements for 2002 and
2003 contained no adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principle.
For 2002 and 2003 and the subsequent interim period through March 9, 2004, there
were no disagreements with Deloitte on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Deloitte, would have
caused them to make reference thereto in their reports on the financial
statements for such years. During 2002 and 2003 and the subsequent interim
period through March 9, 2004, there were no reportable events (as defined in
Item 304(a)(1)(v) of Regulation S-K). The Company provided Deloitte with a copy
of the statements made in this paragraph. A letter from Deloitte, dated March
10, 2004, stating its agreement
30
with such statements was included as an exhibit to the Company's Form 8-K, dated
March 9, 2004, filed with the Securities and Exchange Commission.
OTHER MATTERS
The Board of Directors does not know of any other matters to be determined
by the shareholders at the annual meeting; however, if any other matter is
properly brought before the meeting, the proxy holders named in the enclosed
proxy card intend to vote in accordance with the Board's recommendation or, if
there is no recommendation, in their own discretion.
COSTS OF PROXY SOLICITATION
The cost of preparing, assembling, and mailing the proxy material will be
paid by the Company. The Company will request nominees and others holding shares
for the benefit of others to send the proxy material to, and to obtain proxies
from, the beneficial owners and will reimburse such holders for their reasonable
expenses in doing so. Innisfree M&A Incorporated has also been hired to assist
the Company with the solicitation of proxies for a fee of approximately $12,000
and reimbursement for reasonable out of pocket expenses. In addition, the
Company's directors, officers and regular employees may solicit proxies by mail,
telephone, facsimile or in person, but they will not receive any additional
compensation for such work.
ADDITIONAL INFORMATION
PRESENTATION OF SHAREHOLDER PROPOSALS AT 2006 ANNUAL MEETING
Any shareholder proposal intended to be presented for consideration at the
annual meeting to be held in 2006 must be received by the Company at 200 East
Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan 48303-0200
by the close of business on December 6, 2005, and must otherwise be in
compliance with the Company's by-laws and the requirements of the proxy
solicitation rules of the SEC, for inclusion in the Company's proxy statement
and form of proxy relating to such meeting. Any shareholder proposal intended to
be presented for consideration at the 2006 annual meeting, but not intended to
be considered for inclusion in the Company's proxy statement and form of proxy
relating to such meeting, must be received by the Company at the address stated
above by the close of business on March 17, 2006 to be considered timely.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 2004,
including financial statements as of and for the year ended December 31, 2004
audited by KPMG, LLP, independent registered public accounting firm, and other
reports dated March 1, 2005, and financial statements as of and for the two
years ended December 31, 2003 audited by Deloitte & Touche LLP dated February 4,
2004, are being furnished with the Proxy Statement.
IN ADDITION, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 2004, AS FILED WITH THE SEC, WILL BE SENT TO ANY
SHAREHOLDER, WITHOUT CHARGE, UPON WRITTEN REQUEST SENT TO THE COMPANY'S
EXECUTIVE OFFICES: TAUBMAN CENTERS INVESTOR SERVICES, 200 EAST LONG LAKE ROAD,
SUITE 300, P.O. BOX 200, BLOOMFIELD HILLS, MICHIGAN 48303-0200.
31
Please complete the enclosed proxy card and mail it in the enclosed
postage-paid envelope as soon as possible.
By Order of the Board of Directors,
Robert S. Taubman,
Chairman of the Board, President and
Chief Executive Officer
April 5, 2005
32
APPENDIX A
THE TAUBMAN COMPANY
2005 LONG-TERM INCENTIVE PLAN
EFFECTIVE AS OF MAY 18, 2005
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 -- PURPOSE OF THE PLAN: TERM................................ A-1
1.1 Purpose of the Plan......................................... A-1
1.2 Term........................................................ A-1
ARTICLE 2 -- DEFINITIONS.............................................. A-1
ARTICLE 3 -- ADMINISTRATION: SHARES AVAILABLE......................... A-4
3.1 Administration.............................................. A-4
3.2 Binding Effect of Decisions................................. A-4
3.3 Expenses of Administration.................................. A-4
3.4 Indemnification............................................. A-4
3.5 Number of Shares Available for Grants....................... A-4
ARTICLE 4 -- PARTICIPATION; GRANTS; PARTICIPANT RIGHTS................ A-5
4.1 Participation............................................... A-5
4.2 Power to Grant Awards....................................... A-5
4.3 Participant to Have No Rights as a Shareholder in TCO with
Respect to RSUs............................................. A-5
ARTICLE 5 -- AWARD AGREEMENTS; ESTABLISHMENT AND MAINTENANCE OF SUB
ACCOUNTS; VESTING................................................... A-5
5.1 Agreements Evidencing Awards................................ A-5
5.2 Plan Provisions Control Award Terms......................... A-5
5.3 Establishment of Sub Accounts............................... A-5
5.4 Dividend Equivalents........................................ A-5
5.5 Vesting of Sub Accounts..................................... A-5
5.6 Acceleration of Vesting..................................... A-5
5.7 Forfeiture of Sub Accounts.................................. A-6
5.8 Statement of Account........................................ A-6
ARTICLE 6 -- PAYMENT; TAXATION; BENEFICIARIES OR REPRESENTATIVES...... A-6
6.1 Time and Manner of Payment.................................. A-6
6.2 Taxes....................................................... A-6
6.3 Dealings with Beneficiaries or Representatives of a
Participant................................................. A-6
ARTICLE 7 -- AMENDMENT AND TERMINATION OF THE PLAN.................... A-6
7.1 Amendment of the Plan....................................... A-6
7.2 Termination of the Plan..................................... A-7
7.3 Dissolution of TRG.......................................... A-7
7.4 Termination of Management Contract/Change of Control
Event....................................................... A-7
ARTICLE 8 -- BENEFICIARY DESIGNATION.................................. A-7
8.1 Beneficiary Designation..................................... A-7
8.2 In the Event of No Valid Designation........................ A-7
ARTICLE 9 -- GENERAL PROVISIONS....................................... A-8
9.1 Compliance with Applicable Laws and Regulations............. A-8
9.2 Status of Each Participant is that of an Unsecured General
Creditor.................................................... A-8
9.3 Non-assignability........................................... A-8
9.4 No Right to Continued Employment............................ A-8
9.5 Inspection of Records....................................... A-8
9.6 Section Titles.............................................. A-8
9.7 Severability................................................ A-8
9.8 Strict Construction......................................... A-8
9.9 Choice of Law............................................... A-8
A-i
THE TAUBMAN COMPANY
2005 LONG-TERM INCENTIVE PLAN
(EFFECTIVE AS OF MAY 18, 2005)
ARTICLE 1
PURPOSE OF THE PLAN; TERM
1.1 PURPOSE OF THE PLAN. The Taubman Company 2005 Long-Term Incentive
Plan, as the same may be amended from time to time, is intended to: (1) provide
compensation to certain key associates of the Company; (2) provide incentives to
associates of the Company to remain in the employ of the Company; (3) attract
new associates with outstanding qualifications to serve the Company; and (4)
increase Company management's ownership of shares of Taubman Centers, Inc. so as
to strengthen the alignment of interests between Company management and
shareholders of Taubman Centers, Inc., which is the general and managing partner
of The Taubman Realty Group Limited Partnership, with which the Company has
contracted to provide management, leasing, administration, and development
services.
1.2 TERM. Subject to shareholder approval, the Plan is effective as of May
18, 2005. The Plan will remain in effect until terminated or abandoned by action
of the Company and the Compensation Committee.
ARTICLE 2
DEFINITIONS
In the Plan, whenever the context so indicates, the singular or plural
number, and the masculine, feminine, or neuter gender shall each be deemed to
include the other, the terms "he," "his," and "him" shall refer to a
Participant, and the capitalized terms shall have the following meanings:
2.1 "ACCOUNT" means the record established and maintained to reflect the
full interest of a Participant in the Plan, consisting of the RSUs and Dividend
Equivalents to be Paid to the Participant pursuant to the Plan, and will not,
under any circumstances, constitute or be treated as a trust fund of any kind.
2.2 "ASSOCIATE" means an individual who is and continues to be employed by
the Company or an affiliate of the Company. An Associate shall cease to be an
Associate on the voluntary or involuntary termination of his employment with the
Company or an affiliate of the Company, for any reason, with or without Cause,
including death, Disability, or Retirement. Transfers of employment between the
Company and an affiliate of the Company, or between affiliates of the Company,
shall not affect an individual's status as an Associate for purposes of the Plan
and shall not be treated as a cessation of employment if the cessation of
employment with the Company or an affiliate of the Company is immediately
followed by employment with the Company or another affiliate of the Company.
Whether an authorized leave of absence, or an absence due to military or
government service, Disability, or any other reason, constitutes a cessation of
employment shall be determined by the Company.
2.3 "AWARD" means an award granted to a Participant by the Compensation
Committee pursuant to Article IV.
2.4 "AWARD AGREEMENT" means an agreement executed by the Company and a
Participant pursuant to Section 5.1 of the Plan.
2.5 "BENEFICIARY" means: (a) an individual, trust, estate, or family trust
who or that, by will or by operation of the laws of descent and distribution,
succeeds to the rights and obligations of a Participant under the Plan on the
Participant's death; or (b) an individual who, as a result of designation by a
Participant in a Beneficiary Designation, or as otherwise provided in Article 8,
succeeds to the rights and obligations of such Participant under the Plan on
such Participant's death.
2.6 "BENEFICIARY DESIGNATION" means a writing executed by the Participant
pursuant to Section 8.1 of the Plan.
A-1
2.7 "BOARD OF DIRECTORS" means the Board of Directors of TCO, including any
Committee or Committees of the Board of Directors established pursuant to the
by-laws of TCO.
2.8 "BUSINESS DAY" means any Day on which the New York Stock Exchange is
open for trading.
2.9 "CHANGE OF CONTROL EVENT" means either:
(a) any removal or election of a member of the Board of Directors,
which removal or election was not approved by a vote of at least 70% of the
directors comprising the Board of Directors on the date immediately
preceding the removal or election; or
(b) the acquisition by any person or group or persons (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended) other than A. Alfred Taubman or any of his immediate
family members or lineal descendants, any heir of the foregoing, any trust
for the benefit of any of the foregoing, any private charitable foundation
or any partnership, limited liability company, or corporation owned or
controlled by some or all of the foregoing, of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934) of 40% or more of the outstanding voting capital stock of TCO.
2.10 "COMMON STOCK" means the common stock of TCO, par value $0.01 per
share.
2.11 "COMPANY" means The Taubman Company LLC, a Delaware limited liability
company, and any successor interest to the business of The Taubman Company LLC
that has, by agreement, adopted the Plan.
2.12 "COMPENSATION COMMITTEE" or "COMMITTEE" means the Compensation
Committee of the Board of Directors.
2.13 "DAY" means each calendar day, including Saturdays, Sundays, and legal
holidays; provided, however, that if the Day on which a period of time for
consent, approval, or other action ends is not a Business Day, such period shall
end on the next Business Day.
2.14 "DISABILITY" or "DISABLED" means an Associate's physical or mental
condition resulting from any medically determinable physical or mental
impairment that renders such Associate incapable of engaging in any substantial
gainful employment and that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less than
three-hundred sixty-five (365) Days. Notwithstanding the foregoing, an Associate
shall not be deemed to be Disabled as a result of any condition that:
(a) was contracted, suffered, or incurred while such Associate was
engaged in, or resulted from such Associate having engaged in, a felonious
activity;
(b) resulted from an intentionally self-inflicted injury or an
addiction to drugs, alcohol, or substances which are not administered under
the direction of a licensed physician as part of a medical treatment plan;
or
(c) resulted from service in the Armed Forces of the United States for
which such Associate received or is receiving a disability benefit or
pension from the United States, or from service in the armed forces of any
other country irrespective of any disability benefit or pension.
The Disability of an Associate and the date on which an Associate ceases to
be employed by reason of Disability shall be determined by the Company, in
accordance with uniform principles consistently applied, on the basis of such
evidence as the Compensation Committee and the Company deem necessary and
desirable, and its good faith determination shall be conclusive for all purposes
of the Plan. The Compensation Committee or the Company shall have the right to
require an Associate to submit to an examination by a physician or physicians
and to submit to such reexaminations as the Compensation Committee or the
Company shall require in order to make a determination concerning the
Associate's physical or mental condition; provided, however, that: (a) an
Associate may not be required to undergo a medical examination more often than
once each one-hundred eighty (180) Days, nor at any time after the normal date
of the Associate's Retirement; and (b) the fees and expenses of any such medical
examination(s) shall be considered expenses of administering the Plan. If any
Associate engages in any occupation or employment
A-2
(except for rehabilitation as determined by the Compensation Committee) for
remuneration or profit, which activity would be inconsistent with the finding of
Disability, or if the Compensation Committee, on the recommendation of the
Company, determines on the basis of a medical examination that an Associate no
longer has a Disability, or if an Associate refuses to submit to any medical
examination properly requested by the Compensation Committee or the Company,
then in any such event, the Associate shall be deemed to have recovered from
such Disability.
2.15 "DIVIDEND EQUIVALENT" means the amount credited to the Participant's
Sub Account(s) pursuant to Section 5.4 of the Plan.
2.16 "DIVIDEND EQUIVALENT DATE" means any date on which a Sub Account is
credited with a Dividend Equivalent with respect to the number of RSUs then
credited to such Sub Account, which shall be the dividend record date of the
actual cash dividends distributed with respect to shares of Common Stock.
2.17 "EFFECTIVE DATE" of the Plan means May 18, 2005.
2.18 "GRANT DATE" means the date on which the Compensation Committee grants
an Award pursuant to the Plan, as specified in the Award.
2.19 "PARTICIPANT" means an Associate whom the Compensation Committee
designates to participate in the Plan and who has received an Award pursuant to
the Plan.
2.20 "PARTNERSHIP AGREEMENT" means The Second Amendment and Restatement of
Agreement of Limited Partnership of The Taubman Realty Group Limited
Partnership, as the same has been and may subsequently be amended and/or
supplemented.
2.21 "PAYMENT," "PAY," "PAYABLE" or "PAID" means:
(a) the transfer of shares of Common Stock equal to the number of RSUs
in the applicable Sub Account as of the Vesting Date, net of any taxes as
provided in Section 6.2; and
(b) the payment of a lump sum in cash equal to the Dividend Equivalent
amount credited to the applicable Sub Account as of the Vesting Date, net
of any taxes as provided in Section 6.2.
2.22 "PERSON" or "PERSONS" means an individual, partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association, or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane, or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision, or other instrumentality thereof, or any other entity.
2.23 "PLAN" means The Taubman Company Long-Term 2005 Incentive Plan,
effective as of May 18, 2005.
2.24 "RETIREMENT" means the termination of employment by an Associate after
the attainment of age sixty-two (62) or on such earlier date as required by
local law or as otherwise determined or approved by the Company.
2.25 "RSU" or "RESTRICTED STOCK UNIT" means the denomination used for
granting Awards pursuant to the terms of the Plan that represents one share of
Common Stock Payable to the Participant on the Vesting Date, and shall not
represent any ownership interest in any actual shares of Common Stock.
2.26 "SUB ACCOUNT" means the portion of a Participant's Account
attributable to a specific Award, which Sub Account will be credited and
maintained and will vest and be Paid, or be terminated or forfeited in
accordance with the terms of the Plan.
2.27 "TCO" means Taubman Centers, Inc., a Michigan corporation.
2.28 "TERMINATION FOR CAUSE" or "CAUSE" means termination of employment by
reason of an Associate's action or repeated acts, including without limitation
the commission of a felony, fraud, or willful misconduct, which has resulted, or
is likely to result, in damage to the Company, or an affiliate of the Company,
TCO, or TRG, as the Company may conclusively determine.
A-3
2.29 "TRG" means The Taubman Realty Group Limited Partnership, a Delaware
limited partnership.
2.30 "VESTING DATE" means, except as otherwise provided in the Plan, the
date that is the earlier of the date determined by the Compensation Committee
and set forth in the Award or the death, Retirement, or Disability of the
Participant for whom the Sub Account related to the Award is maintained,
dissolution of TRG, occurrence of a Change of Control Event, or termination
(without renewal) of the Master Services Agreement (as defined in the
Partnership Agreement).
ARTICLE 3
ADMINISTRATION; SHARES AVAILABLE
3.1 ADMINISTRATION. The Compensation Committee shall administer the Plan in
accordance with the Plan's terms. Except as otherwise provided in the
Partnership Agreement or the Plan, the Compensation Committee shall have the
sole discretionary authority to: (a) select the Associates who are to be granted
Awards under the Plan; (b) determine the RSUs to be granted to Associates and
the manner of making or determining such grants; (c) authorize the granting of
Awards; (d) interpret the Plan; (e) establish and modify administrative rules
for the Plan; (f) impose such conditions and restrictions on Awards as it
determines appropriate; and (g) take any other actions in connection with the
Plan and the Awards and make all determinations under the Plan as it may deem
necessary or advisable.
The Compensation Committee will consider recommendations from the Company
in exercising the discretion granted to the Compensation Committee under the
Plan. Action taken or not taken by the Company or the Compensation Committee on
one or more occasions shall be without obligation to take or not take such
action on any other occasion(s).
The Compensation Committee may delegate to one or more Persons any of its
powers provided or conferred, other than its power to authorize the granting of
Awards, or designate one or more Persons to do or perform those matters to be
done or performed by the Compensation Committee, including administration of the
Plan. Any Person or Persons delegated or designated by the Compensation
Committee shall be subject to the same obligations and requirements imposed on,
and shall have the same authority as, the Compensation Committee and its members
under the Plan.
3.2 BINDING EFFECT OF DECISIONS. The decision or action of the Company or
the Compensation Committee with respect to any question arising out of or in
connection with the administration, interpretation, and application of the Plan
and the rules and regulations promulgated in the Plan shall be final and
conclusive and binding on all Persons having any interest in the Plan.
3.3 EXPENSES OF ADMINISTRATION. The Company shall pay all costs and
expenses of administering the Plan.
3.4 INDEMNIFICATION. The Board of Directors, the Compensation Committee,
members of the Board of Directors and the Compensation Committee, each Person or
Persons designated or delegated by the Board of Directors or the Compensation
Committee, the Company and each affiliate of the Company, TCO, and TRG, and the
officers, partners, or agents of the Company shall be entitled to
indemnification and reimbursement from the Company and from TRG for any action
or any failure to act in connection with services performed by or on behalf of
the Compensation Committee or the Company to the fullest extent provided or
permitted by the Partnership Agreement, the operating agreement of the Company,
and by any insurance policy or other agreement intended for the benefit of the
Compensation Committee or an indemnified Person under this section, or by any
applicable law.
3.5 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to shareholder approval
at the 2005 annual shareholders' meeting, the number of shares of Common Stock
hereby reserved for issuance to Participants under the Plan shall be 1,500,000
shares. Shares available under the Plan shall be now or hereafter issued or
authorized but unissued. In the event of any change in corporate capitalization,
such as a stock split, issuance of stock dividends, or any corporate
transaction, such as a merger, consolidation, separation, spin-off, or other
distribution of stock or property of TCO, or any partial or complete liquidation
of TCO, such adjustment shall
A-4
be made in the number and/or price of shares of Common Stock that may be issued
under the Plan or subject to outstanding Awards granted under the Plan, as is
consistent with the change and may be determined to be appropriate and equitable
by the Compensation Committee, in its sole discretion, to prevent dilution or
enlargement of rights.
ARTICLE 4
PARTICIPATION; GRANTS; PARTICIPANT RIGHTS
4.1 PARTICIPATION. All Associates shall be eligible to receive Awards under
the Plan. The Participants shall be such Associates as the Compensation
Committee may select (who may include executive officers of the Company).
Participation in the Plan shall be based on the past and expected future
contribution of the Associate to the Company.
4.2 POWER TO GRANT AWARDS. The Compensation Committee shall grant Awards in
RSUs to such Associates in such amounts as the Compensation Committee shall
determine. In granting Awards to Associates, the Compensation Committee shall
consider recommendations made by the Company, taking into account individual
performance and such other criteria as the Company deems relevant.
4.3 PARTICIPANT TO HAVE NO RIGHTS AS A SHAREHOLDER IN TCO WITH RESPECT TO
RSUS. A Participant shall have no rights as a shareholder in TCO with respect to
RSUs in his Sub Accounts.
ARTICLE 5
AWARD AGREEMENTS; ESTABLISHMENT AND MAINTENANCE OF SUB ACCOUNTS; VESTING
5.1 AGREEMENTS EVIDENCING AWARDS. The terms of each Award shall be
evidenced by a written Award Agreement in such form as the Company may from time
to time determine, executed by the Company and the Participant. Such agreement
shall state the RSUs granted to the Participant, the Vesting Date of the Award,
and such other terms as the Company shall determine. Each Award Agreement shall
comply with, and be subject to, the terms and conditions of the Plan and such
other terms and conditions as the Company may deem appropriate. No Person shall
have any rights under any Award granted under the Plan unless and until the
Company and the Participant have executed an Award Agreement setting forth the
grant and the terms and conditions of the Award.
5.2 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall govern
all Awards granted under the Plan. In the event that any provision of an Award
Agreement conflicts with any term in the Plan as constituted on the Grant Date
of such Award, the term in the Plan shall control.
5.3 ESTABLISHMENT OF SUB ACCOUNTS. A separate Sub Account shall be
established for each Award granted to a Participant. The Sub Account shall be
deemed established as of the Grant Date. The RSUs credited to each Sub Account
shall equal the RSUs granted pursuant to each Award. Each Sub Account shall vest
as provided in Section 5.5, and, subject to the provisions of the Plan, shall be
Paid to the Participant as provided in Article 6.
5.4 DIVIDEND EQUIVALENTS. A Participant's Sub Account(s) will be credited,
as of each Dividend Equivalent Date, with an amount equal to the product of: (a)
the cash dividend amount declared with respect to a single share of Common Stock
on such Dividend Equivalent Date and (b) the number of RSUs credited to the Sub
Account as of such Dividend Equivalent Date.
5.5 VESTING OF SUB ACCOUNTS. Subject to the provisions of Sections 5.6 and
5.7, each Sub Account shall vest on the Vesting Date, provided the Participant
is still in the employ of the Company on such date.
5.6 ACCELERATION OF VESTING. Notwithstanding anything in the Plan to the
contrary, the Compensation Committee, in its discretion, on the recommendation
from the Company, may accelerate at any time the vesting of Sub Accounts that
have not previously become vested.
A-5
5.7 FORFEITURE OF SUB ACCOUNTS.
(a) If a Participant's employment with the Company is terminated for
any reason other than death, Disability, or Retirement, such Participant's
rights with respect to any Sub Accounts which have not become vested on or
prior to the date of the Participant's termination of employment will
terminate and be forfeited, and neither the Participant nor his
Beneficiaries, heirs, personal representatives, successors, or assigns
shall have any rights with respect to any such Sub Accounts.
(b) Notwithstanding any other provision of the Plan, all rights to any
Payments under the Plan to a Participant will be discontinued and
forfeited, and the Company will have no further obligation under the Plan
to such Participant (including with respect to vested Sub Accounts), if the
Participant is discharged from employment with the Company and such
discharge constitutes a Termination for Cause.
5.8 STATEMENT OF ACCOUNT. Within 100 Days after the end of each calendar
year, the Company shall submit to each Participant a statement of his Account
setting forth the Vesting Date for each of his Sub Accounts, the RSUs and
Dividend Equivalents credited to such Sub Accounts, and the current fair market
value of the Common Stock, all as of the close of business on December 31st of
such calendar year, or as of such other date(s) as the Company shall select.
ARTICLE 6
PAYMENT; TAXATION; BENEFICIARIES OR REPRESENTATIVES
6.1 TIME AND MANNER OF PAYMENT. As soon as administratively practicable
following the Vesting Date of a Participant's Sub Account, but no later than two
(2) months following the Vesting Date, the Company shall Pay to the Participant,
on satisfaction of any tax withholding obligations, the Participant's Sub
Account. Immediately prior to Payment to a Participant, TCO will issue and
transfer to the Company the necessary shares of Common Stock for Payment to the
Participant. Any and all RSUs and Dividend Equivalents due under the Plan shall
be the sole obligation of the Company.
6.2 TAXES. The Company shall arrange for the satisfaction of the statutory
minimum amount of tax required to be withheld under federal or any state or
local law in connection with any Payment under one of the following methods, as
determined by the Company in its discretion: (a) withholding from the Payment to
the Participant of sufficient cash and/or shares of Common Stock issuable under
the Award having a fair market value sufficient to satisfy the withholding
obligation, or (b) delivery to the Company by the Participant of an amount equal
to the withholding amount by wire transfer, certified check or other means
acceptable to the Company, or by additional payroll withholding in the event the
Participant fails to deliver the withholding amount. The Company may refuse to
make any Payment until the withholding obligation is satisfied.
6.3 DEALINGS WITH BENEFICIARIES OR REPRESENTATIVES OF A PARTICIPANT. The
Company may require such proper proof of death and such evidence of the right of
any Person other than a Participant to receive Payment of a Sub Account under
the Plan, as the Company deems necessary or advisable. The Company's
determination of death or Disability and of the right of any Person other than a
Participant to receive Payment of a Participant's Sub Account under the Plan
shall be conclusive. The acceptance of any Payment pursuant to Article 6 of the
Plan shall constitute a complete acquittance and discharge of full liability of
the Company under the Plan, and the Company shall be entitled to demand a
receipt and/or acquittance in full satisfaction of all claims against the
Company.
ARTICLE 7
AMENDMENT AND TERMINATION OF THE PLAN
7.1 AMENDMENT OF THE PLAN. The Compensation Committee may from time to time
suspend the Plan or revise or amend the Plan in any respect whatsoever;
provided, however, that except with the written consent of a Participant or as
otherwise specifically provided in the Plan, no amendment or suspension of the
Plan shall alter or impair any Award previously granted to such Participant
under the Plan. The following types of amendments will not be made without
approval of the Common Stock shareholders: (a) a material increase in
A-6
the number of shares of Common Stock available under the Plan; (b) an expansion
of the type of Awards available for grants under the Plan; (c) a material
expansion in the class of individuals eligible to participate under the Plan; or
(d) a material change to the method of determining the value of shares issued
under the Plan.
7.2 TERMINATION OF THE PLAN. The Compensation Committee shall have the
right and power to terminate the Plan at any time, and no Award shall be granted
under the Plan after such termination. Any Sub Account outstanding at the time
of termination of the Plan shall vest and become Payable to the same extent and
subject to the same terms and conditions, as provided in Article 6 of the Plan,
that would have applied to such Sub Account if the Plan had not been terminated.
7.3 DISSOLUTION OF TRG. The dissolution of TRG (provided that TRG is not
reconstituted as provided in the Partnership Agreement) shall cause the Plan to
terminate immediately without any further action on the part of the Compensation
Committee, and each outstanding Sub Account that is not then vested to vest
immediately and fully. On the dissolution of TRG, each Participant shall be Paid
his Account, as provided in Article 6 of the Plan. The grant of any Awards
pursuant to the Plan shall not affect in any way the right or power of the
Company or TRG to make changes to their business structures, or to merge,
dissolve, or terminate, or to sell or transfer any or all of their assets.
7.4 TERMINATION OF MANAGEMENT CONTRACT/CHANGE OF CONTROL EVENT. On the
termination of the Master Services Agreement (as defined in the Partnership
Agreement) between TRG and the Company, for any reason, without a renewal of
such Master Services Agreement, or on the occurrence of a Change of Control
Event, the Plan shall terminate immediately, without any further action on the
part of the Compensation Committee, and each outstanding Sub Account that is not
then vested shall vest immediately and fully. Each Participant shall be Paid his
Account as provided in Article 6 of the Plan.
ARTICLE 8
BENEFICIARY DESIGNATION
8.1 BENEFICIARY DESIGNATION. Each Participant may, at any time, designate
any Person or Persons as such Participant's Beneficiary or Beneficiaries (both
principal as well as contingent) to whom Payment under the Plan will be made in
the event of such Participant's death prior to Payment due such Participant
under the Plan. Such designation may be changed at any time prior to the
Participant's death, without consent of any previously designated beneficiary.
Any designation must be made in writing. A Beneficiary Designation shall be
effective only if properly completed and only on receipt by the Company. Any
properly completed Beneficiary Designation received by the Company prior to the
Participant's death shall automatically revoke any prior Beneficiary
Designation. In the event of divorce, the person from whom such divorce has been
obtained shall be deemed to have predeceased the Participant in determining who
shall be entitled to receive Payment pursuant to such Participant's Beneficiary
Designation, unless the Participant completes and submits after the divorce a
Beneficiary Designation which designates the former spouse as the Participant's
Beneficiary for purposes of the Plan.
8.2 IN THE EVENT OF NO VALID DESIGNATION. If a Participant fails to
designate a Beneficiary as provided above, or if all designated Beneficiaries
predecease (or are deemed to predecease) such Participant or die prior to
Payment of such Participant's Sub Accounts, then such Participant's designated
Beneficiary shall be deemed to be the Person or Persons surviving such
Participant in the first of the following classes in which there is a survivor,
share and share alike:
(a) Such Participant's surviving spouse.
(b) Such Participant's children, except that if any of such
Participant's children predecease the Participant but leave issue
surviving, then such issue shall take, by right of representation, the
share their parent would have taken if living. The term "children" shall
include natural or adopted children but shall not include a child (or
children) whom the Participant has placed for adoption or foster care.
(c) Such Participant's estate.
A-7
ARTICLE 9
GENERAL PROVISIONS
9.1 COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS. The Plan, the grant of
Awards under the Plan, and the obligation of the Company to deliver Payment in
settlement of Sub Accounts under the Plan shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
government or regulatory agency as may be required.
9.2 STATUS OF EACH PARTICIPANT IS THAT OF AN UNSECURED GENERAL
CREDITOR. Each Participant and his Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, interest, or claims in any specific
property or assets of the Company, TRG, TCO, nor of any entity for which the
Company or any affiliate of the Company provides services. Assets of the Company
or such other entities shall not be held under any trust for the benefit of any
Participant or his Beneficiaries, heirs, successors, or assigns, or held in any
way as collateral security for the fulfilling of the obligations of the Company
under the Plan. Any and all of the Company's and such other entities' assets
shall be, and remain, the general unrestricted assets of the Company or such
other entities. The Company's sole obligation under the Plan shall be merely
that of an unfunded and unsecured promise of the Company to Pay Participants in
the future, subject to the conditions and provisions of the Plan.
9.3 NON-ASSIGNABILITY. A Participant's rights and interests under the Plan
may not be assigned or transferred other than by will or the laws of descent and
distribution. No part of the amounts Payable under the Plan shall, prior to
actual Payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony, or separate maintenance owed by a Participant or any
other Person, or be transferable by operation of law in the event of a
Participant's or any other Person's bankruptcy or insolvency.
9.4 NO RIGHT TO CONTINUED EMPLOYMENT. No Associate or any other Person
shall have any claim or right to be granted an Award under the Plan. The
adoption and maintenance of the Plan, the granting of Awards pursuant to the
Plan, or the execution of an Award Agreement shall not be deemed to constitute a
contract of employment between the Company, an affiliate of the Company, or of
TRG or TCO, and any Associate or to be a condition of the employment of any
Person. The Plan and any Award granted under the Plan shall not confer on any
Participant any right with respect to continued employment by the Company or an
affiliate of the Company, nor shall they interfere in any way with the right of
the Company or an affiliate of the Company to terminate the employment of any
Participant at any time, and for any reason, with or without Cause, it being
acknowledged, unless expressly provided otherwise in writing, that the
employment of any Associate is "at will."
9.5 INSPECTION OF RECORDS. Copies of the Plan, records reflecting each
Participant's Sub Account(s), and any other documents and records that a
Participant is entitled by law to inspect shall be open to inspection by the
Participant and his duly authorized representative(s) at the office of the
Company at any reasonable business hour.
9.6 SECTION TITLES. Section titles are for descriptive purposes only and
shall not control or alter the meaning of the Plan as set forth in the text.
9.7 SEVERABILITY. Whenever possible, each provision in the Plan and every
Award at any time granted under the Plan shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of the
Plan or any Award at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then: (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law; and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
9.8 STRICT CONSTRUCTION. No rule of strict construction shall be implied
against the Company, TRG, TCO, the Compensation Committee, or any other Person
in the interpretation of any of the terms of the Plan, any Award granted under
the Plan, or any rule or procedure established by the Compensation Committee or
the Company.
9.9 CHOICE OF LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the internal laws of the State of Michigan and
construed in accordance therewith.
A-8
APPENDIX B
TAUBMAN CENTERS, INC.
NON-EMPLOYEE DIRECTORS' STOCK GRANT PLAN
(EFFECTIVE AS OF MAY 18, 2005)
The Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan, as it
may be amended from time to time (the "Plan"), is intended to provide
compensation to members of the Board of Directors of Taubman Centers, Inc., a
Michigan corporation (the "Company") who are not otherwise employees or officers
of the Company or any of its affiliates ("Non-Employee Directors"). The Plan is
effective from May 18, 2005, subject to shareholder approval, until May 18, 2015
or, if earlier, until it is terminated by action of the Company.
ANNUAL AWARDS. Each Non-Employee Director shall receive, on the first day
of each quarter as part of his annual retainer, a number of shares of common
stock of the Company, par value $0.01 per share, equal to $3,750 divided by the
Fair Market Value of the Common Stock on the business day (meaning any day on
which the New York Stock Exchange is open for trading) immediately before the
first day of the quarter. The shares will be authorized but unissued shares or
issued and re-acquired shares, as the Compensation Committee determines from
time to time.
For Plan purposes, FAIR MARKET VALUE OF THE COMMON STOCK means the per
share value of the common stock of the Company on a specified date, and is
determined as follows: (a) if the common stock is listed or admitted for trading
on any national securities exchange, the Fair Market Value of the Common Stock
is the closing price per share on such exchange on such date (or, if listed on
more than one exchange, the principal said exchange); or (b) if the common stock
is not traded on any national securities exchange, but is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System (NASDAQ
System) or any similar system of automated dissemination of quotations of prices
in common use, the Fair Market Value of the Common Stock is the price per share
equal to the mean between the closing high bid and the closing low bid on such
system on such date.
AMENDMENT OF THE PLAN. The Compensation Committee may from time to time
suspend the Plan or revise or amend the Plan in any respect whatsoever, provided
that the following types of amendments will not be made without approval of the
common stock shareholders: (a) an expansion of the type of awards available for
grants under the Plan; (b) a material expansion in the class of individuals
eligible to participate under the Plan; (c) a material expansion to the term of
the Plan; (c) a material change to the method of determining the value of shares
issued under the Plan, or (d) a material increase in the dollar amount of shares
to be granted on an annual basis to each Non-Employee Director under the Plan.
ADMINISTRATION. The Compensation Committee shall administer the Plan
according to its terms, and has complete discretionary authority to interpret
the Plan and to exercise all other rights and powers necessary to operate,
manage and administer the Plan, and its decisions shall be final and binding
upon the Non-Employee Directors. If the Fair Market Value of the Common Stock
cannot be determined under the definition above, the Compensation Committee may
determine the value in any method it chooses, using consistently applied uniform
principles.
B-1
[TAUBMAN LOGO] VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions and for electronic
200 EAST LONG LAKE RD. delivery of information up until 11:59 P.M. Eastern Time the day before the
SUITE 300 cut-off date or meeting date. Have your proxy card in hand when you
BLOOMFIELD HILLS, MI 48303 access the web site and follow the instructions to obtain your records and
to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Taubman Centers, Inc. in
mailing proxy materials, you can consent to receiving all future proxy statements,
proxy cards and annual reports electronically via e-mail or the Internet. To sign
up for electronic delivery, please follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree to receive or access
shareholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have
your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Taubman Centers, Inc., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: TAUBM1 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
TAUBMAN CENTERS, INC.
VOTE ON DIRECTORS
1. ELECTION OF DIRECTORS FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
Nominees: (each for a three-year term) ALL FOR ALL EXCEPT NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THE
01) Robert S. Taubman NOMINEE'S NAME ON THE LINE BELOW.
02) Lisa A. Payne 0 0 0
------------------------------------------------
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
2. ADOPTION OF LONG-TERM INCENTIVE PLAN 0 0 0
Adoption of The Taubman Company 2005 Long-Term Incentive Plan.
3. ADOPTION OF DIRECTOR STOCK PLAN 0 0 0
Adoption of the Taubman Centers, Inc. Non-Employee Director Stock
Grant Plan.
4. RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 0 0 0
Ratification of the selection of KPMG LLP as the independent registered
public accounting firm for 2005.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PARTNERSHIP OR OTHER BUSINESS ENTITY, PLEASE SIGN IN THE NAME OF THE ENTITY BY
AN AUTHORIZED PERSON.
For address changes and/or comments, please check this box
and write them on the back where indicated 0
YES NO
HOUSEHOLDING ELECTION - Please indicate if you
consent to receive certain future investor
communications in a single package per household 0 0
---------------------------------- ------------- ---------------------------------- -------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
PROXY
TAUBMAN CENTERS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - MAY 18, 2005
The undersigned appoints each of Robert S. Taubman and Lisa A. Payne,
with full power of substitution, to represent the undersigned at the annual
meeting of shareholders of Taubman Centers, Inc. on Wednesday, May 18, 2005,
and at any adjournment, and to vote at such meeting the shares of Common Stock
that the undersigned would be entitled to vote if personally present in
accordance with the following instructions and to vote in their judgment upon
all other matters that may properly come before the meeting and any
adjournment. The undersigned revokes any proxy previously given to vote at such
meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN FAVOR OF ITEMS (1)
THROUGH (4) IF NO INSTRUCTION IS PROVIDED.
This proxy also provides voting instructions for shares for which the
undersigned has the right to give voting instructions to Vanguard Fiduciary
Trust Company, Trustee of The Taubman Company and Related Entities Employee
Retirement Savings Plan (the Plan). This proxy, when properly executed, will be
voted as directed. If no direction is given to the Trustee, the Plan's Trustee
will vote shares held in the plan in the same proportion as votes received from
other participants in the Plan.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
ADDRESS CHANGES/COMMENTS:
--------------------------------------------
----------------------------------------------------------------------
(If you noted any Address Changes/Comments above, please mark
corresponding box on the reverse side.)
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
TAUBMAN CENTERS, INC.
PROXY
SERIES B NON-PARTICIPATING CONVERTIBLE PREFERRED STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - MAY 18, 2005
The undersigned appoints each of Robert S. Taubman and Lisa A. Payne, with full
power of substitution, to represent the undersigned at the annual meeting of
shareholders of Taubman Centers, Inc. on Wednesday, May 18, 2005, and at any
adjournment, and to vote at such meeting the shares of Series B
Non-Participating Convertible Preferred Stock that the undersigned would be
entitled to vote if personally present in accordance with the following
instruction and to vote in their judgment upon all other matters that may
properly come before the meeting and any adjournment. The undersigned revokes
any previously given to vote at such meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN FAVOR OF ITEMS (1)
THROUGH (4) IF NO INSTRUCTION IS PROVIDED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED POSTAGE PAID ENVELOPE.
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 THROUGH 4 Please mark [X]
your votes as
indicated in this
example
1. ELECTION OF DIRECTORS 2. ADOPTION OF LONG-TERM INCENTIVE PLAN
Nominees: Robert S. Taubman and Lisa A. Payne (each Adoption of The Taubman Company 2005 Long-
for a three-year term) Term Incentive Plan.
FOR WITHHOLD WITHHOLD AUTHORITY
AUTHORITY To vote for Nominee(s)
To vote for all Named below
Nominees FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
4. RATIFICATION OF INDEPENDENT
3. ADOPTION OF DIRECTOR STOCK PLAN REGISTERED PUBLIC ACCOUNTING FIRM
Adoption of the Taubman Centers, Inc. Non- Ratification of the selection of KPMG LLP as the
Employee Director Stock Grant Plan. independent registered public accounting firm for 2005.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as
such. If a corporation, partnership, or other
business entity, please sign in the name of the
entity by an authorized person.
----------------------------------------------------
Signature
Dated: , 2005
---------------------------------------