SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 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)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[TAUBMAN LOGO]
TAUBMAN CENTERS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD MAY 30, 2002
To the Shareholders of
Taubman Centers, Inc.
The Annual Meeting of Shareholders of TAUBMAN CENTERS, INC. (the "Company")
will be held on Thursday, May 30, 2002, 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 2005;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the year ending December 31, 2002; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 1, 2002 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.
By Order of the Board of Directors
ROBERT S. TAUBMAN,
Chairman of the Board, President and
Chief Executive Officer
Bloomfield Hills, Michigan
April 12, 2002
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?..................... 3
What vote is required to approve each item?............... 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 4
Section 16(a) Beneficial Ownership Reporting Compliance... 8
ITEM 1 -- ELECTION OF DIRECTORS............................. 8
MANAGEMENT................................................ 9
Directors, Nominees and Executive Officers............. 9
The Board of Directors and Committees.................. 11
Compensation of Directors.............................. 12
Certain Transactions................................... 12
REPORT OF THE AUDIT COMMITTEE............................. 13
EXECUTIVE COMPENSATION.................................... 16
Summary Compensation Table............................. 16
Long-Term Incentive Plan -- 2001 Awards................ 18
Senior Short Term Incentive Plan....................... 18
Incentive Option Plan.................................. 18
Aggregated Option Exercises During 2001 and Year-End
Option Values......................................... 19
Long-Term Performance Compensation Plan................ 19
Compensation Committee Report on Executive
Compensation.......................................... 20
Shareholder Return Performance Graph................... 22
Certain Employment Arrangements........................ 22
ITEM 2 -- RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS.................................................. 24
OTHER MATTERS............................................... 24
COSTS OF PROXY SOLICITATION................................. 25
ADDITIONAL INFORMATION...................................... 25
Presentation of Shareholder Proposals at 2003 Annual
Meeting................................................ 25
Annual Report............................................. 25
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 Thursday, May 30, 2002, 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. The
Company expects to mail this Proxy Statement on or about April 12, 2002.
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 three-year terms, and the ratification of the Board's
selection of the independent auditors. In addition, management will report on
the performance of the Company during 2001 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 April 1, 2002, 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 (the "Series A Preferred Stock") does not entitle its
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 capital stock other than the Voting Stock and the Series
A 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. 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. In connection with Mr. A. Alfred Taubman's resignation from the Board
of Directors in December 2001, the holders of the Series B Preferred Stock
waived until May 2003 the nine member Board requirement set forth in the
Company's Articles, thereby permitting the size of the Board of Directors to be
temporarily reduced to eight members and eliminating the vacancy caused by such
resignation. 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 and, in
this year, by the seat eliminated when the Board of Directors was reduced to
eight members. The holders of Series B Preferred Stock are entitled to nominate
two individuals for election as directors of the Company at the annual meeting.
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 purposes of electing directors and ratifying the Board's
selection of auditors. As of the record date, 82,784,497 shares of Voting Stock
were outstanding. Proxies received but marked as abstentions and "broker
non-votes" that may result from beneficial owners' failure to give specific
voting instructions to their brokers or other nominees holding in "street name"
will be counted as present to determine whether 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.
2
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 8 through
24); and
for ratification of Deloitte & Touche LLP as the Company's independent
auditors for 2002 (see page 24)
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.
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.
RATIFICATION OF AUDITORS. The affirmative vote of a majority of the votes
cast at the annual meeting will be necessary to ratify the Board of Directors'
appointment of Deloitte & Touche LLP as the Company's independent auditors for
2002.
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 the election of two directors and the ratification of
auditors.
EFFECT OF BROKER NON-VOTES AND ABSTENTIONS. The election of directors and
the ratification of the Board's appointment of auditors will be determined by
votes cast. Because "broker non-votes" and abstentions are included only in the
calculation of shares present and do not count as votes cast, they will not
affect the election of directors and the ratification of auditors.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The Company owns a 62% managing partner's interest in TRG, through which
the Company conducts all of its operations. TRG is a partnership that owns,
develops, acquires, and operates regional shopping centers nationally. The
following table sets forth certain information regarding the beneficial
ownership of the Company's Voting Stock and of partnership interests in TRG
("Units of Partnership Interest" or "Units") as of April 1, 2002.
The share information in the table (both numbers of shares and percentages)
reflects ownership of Common Stock and Series B Preferred Stock, which for this
purpose are treated as a single class of voting stock; 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.
PERCENTAGE
UNITS OF OWNERSHIP OF
PARTNERSHIP UNITS OF
NO. OF PERCENT OF INTEREST IN PARTNERSHIP
DIRECTORS, EXECUTIVE OFFICERS AND 5% SHAREHOLDERS SHARES(1) SHARES(1) TRG INTEREST IN TRG
------------------------------------------------- ---------- ---------- ----------- ---------------
Robert S. Taubman............................. 3,919,506(2) 4.6%(2) 3,911,506(3) 4.5%
William S. Taubman............................ 753,489(4) * 739,989(5) *
Lisa A. Payne................................. 608,328(6) * 0 0
Courtney Lord................................. 195,129(7) * 193,095(8) *
John L. Simon................................. 26,918(9) * 0 0
Graham T. Allison............................. 1,430 * 0 0
Allan J. Bloostein............................ 5,000 * 0 0
Jerome A. Chazen.............................. 10,000(10) * 0 0
S. Parker Gilbert............................. 130,000(11) * 0 0
Peter Karmanos, Jr............................ 40,000(12) * 0 0
A. Alfred Taubman............................. 24,856,024(13) 30.0%(13) 24,669,087(14) 29.8%
Morgan Stanley, Dean Witter, & Co............. 6,123,024(15) 7.4%(15) 0 0
Morgan Stanley Dean Witter
Asset Management, Inc.
1585 Broadway
New York, New York 10036
Security Capital Group Incorporated........... 5,327,175(16) 6.4%(16) 0 0
Security Capital Research Management Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
LaSalle Investment Management, Inc............ 4,253,350(17) 5.1%(17) 0 0
LaSalle Investment Management
(Securities), L.P.
200 East Randolph Drive
Chicago, Illinois 60601
4
PERCENTAGE
UNITS OF OWNERSHIP OF
PARTNERSHIP UNITS OF
NO. OF PERCENT OF INTEREST IN PARTNERSHIP
DIRECTORS, EXECUTIVE OFFICERS AND 5% SHAREHOLDERS SHARES(1) SHARES(1) TRG INTEREST IN TRG
------------------------------------------------- ---------- ---------- ----------- ---------------
Cohen & Steers Capital Management, Inc........ 2,950,455(18) 3.6%(18) 0 0
757 Third Avenue
New York, New York 10017
GMPTS Limited Partnership(19)................. 2,890,925(20) 3.5%(20) 0 0
767 Fifth Avenue
New York, NY 10153
European Investors, Inc....................... 2,832,712(21) 3.4%(21) 0 0
EII Realty Securities, Inc.
667 Madison Avenue
New York, New York 10021
Stichting Pensioenfonds voor de Gezondheid,... 2,548,000(22) 3.1%(22) 0 0
Geestelijke en Maatschappelijke Belangen
Kroostwey-Noord 149
P. O. Box 117
3700 AC Zeist
The Netherlands
Directors and Executive Officers as a Group... 5,701,846(23) 6.5%(23) 4,844,590(23) 5.6%(23)
---------------
* less than 1%
(1) The Company has relied upon information supplied by certain beneficial
owners and upon information contained in filings with the Securities
Exchange Commission. 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). 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 (the "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 and
Unit figures shown assume that outstanding Units are not exchanged for
Common Stock under the Continuing Offer and that outstanding shares of
Series B Preferred Stock are not converted into Common Stock. As of April
1, 2002, there were 82,784,497 outstanding shares of Voting Stock,
consisting of 51,017,431 shares of Common Stock and 31,767,066 shares of
Series B Preferred Stock.
(2) Consists of 5,925 shares of Series B Preferred Stock that Mr. Robert S.
Taubman owns, 547,945 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 (or, in aggregate, 1.7% of Series B Preferred Stock),
3,357,636 shares of Common Stock that Mr. Taubman has the right to receive
in exchange for Units of Partnership Interest that are subject to vested
Incentive Options and an additional 8,000 shares of Common Stock owned by
his wife and son for which Mr. Taubman
5
disclaims any beneficial interest (or, in aggregate, 6.2% of Common Stock).
Excludes all shares of Voting Stock held by TRA Partners ("TRAP"), Taubman
Realty Ventures ("TRV"), Taub-Co Management, Inc. ("Taub-Co"), or TG
Partners, Limited Partnership ("TG"), because Mr. Taubman has no voting or
dispositive control over such entities' assets, see notes 13 and 14 below.
Mr. Taubman disclaims any beneficial interest in the Voting Stock held by
or through entities beyond his pecuniary interest in the entities that own
the securities.
(3) Consists of 5,925 Units of Partnership Interest that Mr. Robert S. Taubman
owns, 547,945 Units of Partnership Interest held by R&W, and 3,357,636
Units of Partnership Interest that Mr. Taubman has the right to receive
upon the exercise of vested Incentive Options. Excludes all Units of
Partnership Interest owned by TRAP, TRV, Taub-Co, or TG. Mr. Taubman
disclaims any beneficial ownership in the Units held by R&W or the other
entities beyond his pecuniary interest in R&W and the other entities.
(4) Consists of 5,925 shares of Series B Preferred Stock that Mr. William S.
Taubman owns, 734,064 shares of Common Stock that Mr. Taubman has the right
to receive upon the exchange of Units of Partnership Interest that are
subject to vested Incentive Options and 13,500 shares of Common Stock owned
by his children and for which Mr. Taubman disclaims any beneficial interest
(or, in aggregate, 1.4% of Common Stock). Excludes 547,945 shares of Series
B Preferred Stock that R&W holds and that are included in Robert S.
Taubman's holdings described above. Excludes all shares of Voting Stock
held by TRAP, TRV, Taub-Co, or TG because Mr. Taubman has no voting or
dispositive control over such entities' assets, see notes 13 and 14 below.
Mr. Taubman disclaims any beneficial interest in the Series B Preferred
Stock held by R&W and in the Voting Stock held by TRAP, TRV, Taub-Co, and
TG beyond his pecuniary interest in the entities that own the securities.
(5) Consists of 5,925 Units of Partnership Interest that Mr. William S. Taubman
owns and 734,064 Units of Partnership Interest subject to vested Incentive
Options held by Mr. Taubman. Excludes 547,945 Units that R&W holds and that
are included in Robert S. Taubman's holdings described above. Excludes all
Units of Partnership Interest owned by TRAP, TRV, Taub-Co, or TG. Mr.
Taubman disclaims any beneficial ownership in the Units held by R&W or the
other entities beyond his pecuniary interest in R&W and the other entities.
(6) Consists of 7,500 shares of Common Stock that Ms. Payne owns and 600,828
shares of Common Stock that Ms. Payne will have the right to receive in
exchange for Units of Partnership Interest that are subject to vested
Incentive Options (or, in aggregate, 1.2% of Common Stock).
(7) 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; and 193,095 shares of Series B Preferred Stock acquired by Mr.
Lord in exchange for all of Mr. Lord's equity interest in Lord Associates,
Inc. in November 1999. Does not include 174,058 shares of Series B
Preferred Stock acquired by Mr. Lord in connection with the Lord Associates
transaction for which Mr. Lord has granted to TG Partners an irrevocable
proxy and over which Mr. Lord has no voting or dispositive power, see note
14 below.
6
(8) Consists of 193,095 Units of Partnership Interest acquired by Mr. Lord in
exchange for all of Mr. Lord's equity interest in Lord Associates, Inc. in
November 1999. Does not include 174,058 Units of Partnership Interest
acquired by Mr. Lord in connection with the Lord Associates transaction for
which Mr. Lord has granted to TG Partners an irrevocable proxy, which are
not presently entitled to receive any partnership distributions, except
upon liquidation and over which Mr. Lord has no voting or dispositive
power. Such units are released from the irrevocable proxy and become
entitled to receive partnership distributions over the three years
remaining in the original five-year vesting period. See note 14 below. See
also "Certain Employment Arrangements."
(9) Consists of 2,000 shares of Common Stock that Mr. Simon owns, 3,191 shares
of 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, and 21,727 shares of Common Stock that Mr. Simon has
the right to receive in exchange for Units of Partnership Interest that are
subject to vested Incentive Options.
(10) Excludes 15,000 shares of Series A Preferred Stock owned by Mr. Chazen and
20,000 shares (or, in the aggregate, less than 1%) 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) Includes 80,000 shares of Common Stock held by The Gilbert 1996 Charitable
Remainder Trust, an irrevocable trust of which Mr. Gilbert is a co-trustee.
Mr. Gilbert disclaims any beneficial interest in such shares beyond any
deemed pecuniary interest as the result of his wife's current beneficial
interest in the trust.
(12) Consists solely of shares of Common Stock.
(13) 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. Mr.
Taubman's trust is the managing general partner of TRAP and has the sole
authority to vote and dispose of the Common Stock held by TRAP. The
remaining shares consist of 24,669,087 outstanding shares (or 77.7%) of
Series B Preferred Stock that may be deemed to be owned by Mr. Taubman in
the same manner as the Units of Partnership Interest described in note 14
below. Mr. Taubman disclaims any beneficial ownership of the Common Stock
or Series B Preferred Stock held by TRAP and the other entities identified
in note 14 below beyond his pecuniary interest in the entities that own the
securities.
(14) Consists of 9,875 Units of Partnership Interest held by Mr. A. Alfred
Taubman's trust, 17,699,879 Units of Partnership Interest owned by TRAP,
11,011 Units of Partnership Interest owned by TRV, of which Mr. Taubman's
trust is the managing general partner, and 1,975 Units of Partnership
Interest 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 Units of Partnership Interest held by Taub-Co. Mr.
Taubman disclaims beneficial ownership of any Units held by Taub-Co beyond
his pecuniary interest in Taub-Co. Also includes 6,327,098 Units of
Partnership Interest owned by TG Partners, 445,191 Units held by a
subsidiary of TG Partners (such subsidiary and TG Partners are collectively
7
referred to as "TG") and 174,058 Units of Partnership Interest which are
held by Mr. Lord but for which Mr. Lord has granted an irrevocable proxy to
TG Partners. The 174,058 Units held by Mr. Lord are not presently entitled
to any partnership distributions except in the event of a liquidation. Such
Units will be released from the irrevocable proxy and become entitled to
receive distributions over the three years remaining in the original
five-year vesting period. Because Mr. Taubman, through control of TRV's and
TG Partners' managing partner, has sole authority to vote and (subject to
certain limitations) dispose of the Units of Partnership Interest held by
TRV and TG, respectively, Mr. Taubman may be deemed to be the beneficial
owner of all of the Units of Partnership Interest held by TRV and TG. Mr.
Taubman disclaims beneficial ownership of any Units of Partnership Interest
held by TRG and TG beyond his pecuniary interest in those entities.
(15) Consists solely of shares of Common Stock (12.0%) held on behalf of various
investment advisory clients, none of which holds more than 5% of the Common
Stock.
(16) Consists solely of shares of Common Stock (10.4%).
(17) Consists solely of shares of Common Stock (8.3%) and includes ownership of
Common Stock on behalf of Stichting Pensioenfonds Voor de Gezondheid
Geestelijke en Maatschappelijke Belangen.
(18) Consists solely of shares of Common Stock (5.8%).
(19) Wholly-owned by two employee pension funds of General Motors Corporation.
(20) Consists solely of shares of Common Stock (5.7%).
(21) Consists solely of shares of Common Stock (5.6%).
(22) Consists solely of shares of Common Stock (5.0%).
(23) See Notes 2 through 12 above.
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 Securities Exchange Commission (the
"SEC"). Insiders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms that they file. 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.
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors 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 2005. The two nominees, Robert S.
Taubman and Lisa A. Payne, are both presently serving on the Board of Directors.
8
Both Robert S. Taubman and Lisa A. Payne have consented to serve a
three-year term. If either 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, NOMINEES AND EXECUTIVE OFFICERS
The Board of Directors consists of eight members divided into three classes
serving staggered terms. Under the Company's Articles of Incorporation, a
majority of the Company's directors must be neither officers nor employees of
the Company or its subsidiaries. Officers of the Company serve at the pleasure
of the Board.
The directors and executive officers of the Company are as follows:
TERM
NAME AGE TITLE ENDING
---- --- ----- ------
Robert S. Taubman*....... 48 Chairman of the Board, President and 2002
Chief Executive Officer
Lisa A. Payne*........... 43 Executive Vice President, Chief Financial 2002
and Administrative Officer, and Director
Graham T. Allison........ 61 Director 2003
Peter Karmanos, Jr. ..... 59 Director 2003
William S. Taubman....... 43 Executive Vice President and Director 2003
Allan J. Bloostein....... 72 Director 2004
Jerome A. Chazen......... 75 Director 2004
S. Parker Gilbert........ 68 Director 2004
Esther R. Blum........... 47 Senior Vice President, Controller, and
Chief Accounting Officer
Courtney Lord............ 51 Senior Vice President of Leasing
John L. Simon............ 55 Senior Vice President of Development
---------------
* 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 the indirect 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, and represents the Company as a director of fashionmall.com, Inc., a
company originally organized to market and sell fashion apparel and related
accessories and products over the internet. He is also a member of the Board of
Governors of the National Association of Real Estate Investment
9
Trusts, a director of the Real Estate Roundtable, a Trustee of the Urban Land
Institute, and a former trustee of the International Council of Shopping
Centers. 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. 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.
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 Farmington Hills, Michigan. Mr. Karmanos
has served as Compuware's Chairman since November 1978 and as its Chief
Executive Officer since July 1987. He is also a member of the Board of Trustees
of the Detroit Medical Center.
William S. Taubman is an Executive Vice President of the Company and the
Manager and has been a director of the Company since 2000. His responsibilities
include the overall management of the development, leasing, and center
operations functions. He has held various executive positions with the Manager
since prior to 1994. He is also a director of the Detroit Institute of Arts. 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 or trustee of over 20 mutual fund companies
that Salomon Smith Barney sponsors. Mr. Bloostein has been a director of the
Company since 1992.
Jerome A. Chazen is Chairman Emeritus of Liz Claiborne, Inc. He is a
director of fashionmall.com, Inc., a company originally organized to market and
sell fashion apparel and related accessories and products over the internet, and
Chairman of Chazen Capital Partners, a private investment company. Mr. Chazen
has been a director of the Company since 1992.
S. Parker Gilbert is a retired Chairman of Morgan Stanley Group, Inc. Mr.
Gilbert has been a director of the Company since 1992.
Esther R. Blum is a Senior Vice President, the Controller, and Chief
Accounting Officer of the Company. Ms. Blum became a Vice President of the
Company in January 1998, when she assumed her current principal functions, and a
Senior Vice President in March 1999. 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. Prior to joining the Manager in
1986, Ms. Blum was a C.P.A. and audit manager for Deloitte & Touche LLP.
10
Courtney Lord is the Manager's Senior Vice President of Leasing. Mr. Lord
became the Senior Vice President of Leasing of the Manager in November of 1999,
having been hired in connection with TRG's acquisition of all of the outstanding
stock of Lord Associates, Inc. Between 1989 and 1999, Mr. Lord served as
president of Lord Associates, Inc., a retail leasing firm based in Alexandria,
Virginia.
John L. Simon is the Manager's Senior Vice President of Development and has
served in such position since 1988.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four meetings and acted by
unanimous written consent twice during 2001. 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
Committee. During 2001, 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 fulfill their responsibilities not only by attending
Board and committee meetings, but also through consultation with the Chief
Executive Officer and other members of management on matters that affect the
Company.
During 2001, the Audit Committee consisted of Jerome A. Chazen, Chairman,
Graham T. Allison, Allan J. Bloostein, S. Parker Gilbert and Peter Karmanos, Jr.
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 recommends to the Board of Directors the appointment of the
independent auditors. The Audit Committee met twice during 2001.
During 2001, the Compensation Committee consisted of S. Parker Gilbert,
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 2001.
During 2001, the Executive Committee consisted of Robert S. Taubman,
Chairman, Allan J. Bloostein, and Graham T. Allison. 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 twice
during 2001.
During 2001, the Board's Nominating Committee consisted of Allan J.
Bloostein, Chairman, S. Parker Gilbert, and Robert S. Taubman. The Nominating
Committee is responsible for advising and making recommendations to the Board of
Directors on matters concerning the selection of candidates as nominees for
election as directors in the event a vacancy arises on the Board of Directors,
other than vacancies for which holders of the Series B Preferred Stock are
entitled to propose nominees. In recommending candidates to the Board, the
Nominating Committee seeks individuals of proven competence who have
demonstrated excellence in their chosen fields. The Nominating Committee does
not have a procedure for shareholders to submit nominee recommendations. The
Nominating Committee did not meet during 2001.
11
COMPENSATION OF DIRECTORS
During 2001, 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 2001, the Company incurred costs of
$214,000 relating to the services of Messrs. Allison, Bloostein, Chazen, Gilbert
and Karmanos, as directors of the Company.
As part of its overall program of charitable giving, TRG maintains a
charitable gift program for the Company's outside directors. Under this
charitable gift program, TRG matches an outside director's donation to one or
more qualifying charitable organizations. TRG generally limits 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 2001, TRG made 2 matching
contributions in the total amount of $10,000.
CERTAIN TRANSACTIONS
TRG recently entered into a definitive purchase and sale agreement to
acquire a 50% general partnership interest in SunValley Associates, a California
general partnership that owns the SunValley Shopping Center located in Contra
Costa County, California. The transaction is expected to close sometime during
the first half of 2002. The Manager has managed the property since its
development and will continue to do so after the acquisition. Although TRG is
purchasing its interest in SunValley from an unrelated third party, the other
partner is an entity owned and controlled by Mr. A. Alfred Taubman, the
Company's largest shareholder, recently retired Chairman of the Board of
Directors and the father of Robert and William Taubman. In determining whether
or not to proceed with the acquisition, the Company's directors considered,
among other things, the advice of independent outside counsel, the fact that the
purchase price of the interest had been negotiated at arm's length with the
independent third party, and Mr. A. Alfred Taubman's agreement to amend
SunValley's partnership agreement upon consummation of the acquisition to name
TRG as the managing general partner, to provide that so long as TRG has an
ownership interest in the property, the Manager will remain its manager and
leasing agent pursuant to an agreement containing the same favorable terms as in
the existing leasing and management agreement between SunValley and the Manager,
and to otherwise contain terms similar to partnership agreements the Company has
negotiated with unrelated third parties. Messrs. William and Robert Taubman
recused themselves from the Board's discussion regarding, and did not vote on
the decision to go through with, the acquisition. TRG will be represented by
independent outside counsel in the negotiation of a definitive partnership
agreement with Mr. A. Alfred Taubman.
When the Company acquired Lord Associates, Inc. in November 1999, Courtney
Lord, who in connection with such acquisition became the Manager's Senior Vice
President of Leasing, retained his interest in certain agreements with third
parties entitling him to receive a commission or other remuneration in the event
TRG purchases, leases and/or develops certain parcels of real estate. The
remuneration Mr. Lord is entitled to receive is fixed for certain agreements;
for others the remuneration ultimately paid to Mr. Lord will depend on the terms
of any transaction between TRG and such third party. During 2000, Mr. Lord
received $320,000 in commissions paid by the joint venture
12
between TRG and Swerdlow Real Estate Group to develop Dolphin Mall. During 2001,
Mr. Lord did not receive any such payments.
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 $3.1 million in 2001.
During 2001, the Manager paid approximately $2.7 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.
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. The option agreement required option payments of
$150,000 during each of the first five years, $400,000 in the sixth year, and
$500,000 in the seventh year. To date, TRG has made payments of $450,000. In
2000, TRG decided not to go forward with the project and reached an agreement
with the optionor to be reimbursed at the time of the sale or lease of the real
estate for an amount equal to the lesser of 50% of the project costs to date or
$350,000. Under the agreement, TRG's obligation to make further option payments
was suspended. TRG expects to receive $350,000 in total reimbursements, though
the timing will depend on the sale or lease of the real estate and is uncertain.
After receipt of such amount, the option will be terminated.
Committees of outside directors review 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 first
adopted and approved by the Board of Directors in 1993. Each of the members of
the Audit Committee is independent as defined in such charter and the New York
Stock Exchange listing standards. A copy of the Audit Committee Charter was
filed as an exhibit to the Company's Proxy Statement for the 2001 Annual
Shareholders Meeting in accordance with SEC requirements.
The responsibilities of the Audit Committee include recommending to the
Board an accounting firm to be engaged as the Company's independent accountants.
Additionally, and as appropriate, the Audit Committee reviews and evaluates, and
discusses and consults with management, internal audit personnel and the
independent accountants regarding, the following:
- the plan for, and the independent accountants' 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;
13
- 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 outside auditors and the
monitoring of any engagement of the outside auditors to provide non-audit
services.
In March 2002, the Audit Committee reviewed the Audit Committee Charter
and, after appropriate review and discussion, the Audit Committee determined
that the Committee had fulfilled its responsibilities under the Audit Committee
Charter.
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 2001. First,
the Audit Committee discussed with Deloitte & Touche LLP ("Deloitte"), the
Company's independent accountants for 2001, those matters required to be
communicated and discussed between an issuer's independent accountants and its
audit committee under applicable auditing 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 Deloitte its independence and received a letter from Deloitte
concerning such independence as required under applicable independence standards
for auditors of public companies. This discussion and disclosure informed the
Audit Committee of Deloitte's independence, and assisted the Audit Committee in
evaluating such independence. Finally, the Audit Committee reviewed and
discussed, with management and Deloitte, the Company's audited consolidated
balance sheets at December 31, 2001 and 2000, and consolidated statements of
income, cash flows and stockholders' equity for the three years ended December
31, 2001. Based on the discussions with Deloitte concerning the audit, 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 2001 Annual Report on Form 10-K.
AUDIT FEES. The aggregate fees billed for professional services rendered by
Deloitte for the audit of the Company's annual financial statements for the year
ended December 31, 2001 and its reviews of the financial statements included in
the Company's quarterly reports on Form 10-Q for fiscal year 2001 (collectively,
the "Audit Services"), were $870,000. This includes $408,000 related to
individual shopping center audit reports, an employee benefit plan audit and
accounting consultations.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The aggregate
fees billed for the provision by Deloitte of information technology services,
including the operation, design and implementation of hardware and software
which generated information significant to the Company's financial statements
(the "Financial Information Systems Design and Implementation Services"), for
fiscal year 2001, were $102,000.
14
ALL OTHER FEES. The aggregate fees billed for services rendered by
Deloitte, other than the Audit Services and the Financial Information Systems
Design and Implementation Services, for fiscal year 2001 were $1,249,000. These
services included fees for consulting services related to process improvement
projects in the development and leasing departments and tax consultations.
The Audit Committee, based on its reviews and discussions with management
and Deloitte noted above, determined that the provision of the Other Services
and the Financial Information Systems Design and Implementation Services by
Deloitte was compatible with maintaining Deloitte's independence.
THE AUDIT COMMITTEE
Jerome A Chazen, Chairman
Graham T. Allison
Allan J. Bloostein
S. Parker Gilbert
Peter Karmanos, Jr.
15
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of those persons who during 2001 were (i) the chief
executive officer and (ii) the other executive officers of the Company whose
compensation is required to be disclosed pursuant to the rules of the Securities
Exchange Commission (the "Named Officers"). As explained more fully below,
amendments to the Company's long-term compensation plan affected the manner in
which awards under such plan are reported. As a result, in order to understand
the total compensation granted to the Named Officers in 2001, the following
Summary Compensation Table must be read in conjunction with Long-Term Incentive
Plan Awards table contained on page 18.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------------------
AWARDS PAYOUTS
---------- ----------
NUMBER OF
SHARES
UNDERLYING LTIP ALL OTHER
SALARY BONUS(1) OPTIONS(2) PAYOUTS(3) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($) ($)
--------------------------- ---- ------ -------- ---------- ---------- ------------
Robert S. Taubman................ 2001 $750,000 $468,800 0 $1,196,250 $ 25,614(4)
Chairman of the Board, President 2000 750,000 450,000 0 0 25,678
and Chief Executive Officer 1999 750,000 500,625 0 0 23,320
Lisa A. Payne.................... 2001 $500,000 $325,000 0 $ 453,750 $ 22,444(5)
Executive Vice President and
Chief 2000 500,000 300,000 0 0 21,936
Financial and Administrative
Officer 1999 500,000 337,813 500,000 0 270,332
William S. Taubman............... 2001 $474,994 $312,500 0 $ 453,750 $ 25,135(6)
Executive Vice President 2000 468,270 285,000 0 0 25,111
1999 436,547 301,219 500,000 0 272,840
Courtney Lord(7)................. 2001 $273,656 $240,875 0 $ 0 $ 15,316(8)
Senior Vice President 2000 272,740 241,313 0 0 44,507
John L. Simon.................... 2001 $290,616 $255,063 0 $ 275,000 $ 24,506(9)
Senior Vice President 2000 282,500 230,325 0 0 24,353
1999 273,000 239,625 0 0 22,256
---------------
(1) Bonus amount awarded under the Senior Short Term Incentive Plan. Awards made
pursuant to the Manager's Long-Term Performance Compensation Plan are not
reportable on the date of grant and, instead, are reported in the Long-Term
Incentive Plan Awards table immediately following.
(2) All Incentive Options were granted under the Incentive Option Plan with
respect to Units of Partnership Interest exchangeable for an equal number of
shares of Common Stock pursuant to the Continuing Offer.
(3) Reflects payout of 1998 Cash Awards made under the Manager's Long-Term
Performance Compensation Plan (the "Performance Plan"). Robert Taubman and
William Taubman have elected to defer receipt of the payout amount in
accordance with the terms of the Performance Plan. Amounts deferred under
the Performance Plan accrue interest until the deferred payment date. The
Performance Plan was amended effective January 1, 1999 (the "First
Amendment") and further amended effective January 1, 2000 (the "Second
Amendment"). Prior to the Second Amendment awards made under the Performance
Plan were made in the form of Notional Shares of Common Stock and were
reported as restricted stock awards. The Second Amendment, in addition to
affecting future awards, modified the 1998 and 1999 awards, particularly
with regard to
16
the determination of the payout value of such awards. The payout value of
awards under the Performance Plan as revised by the Second Amendment is no
longer tied to the value of the Company's Common Stock, but instead is tied
to the achievement of a target compounded growth rate of the Company's per
share funds from operations over the three year vesting period of the award.
As a result of the change, awards are no longer reported as restricted stock
awards but instead are reflected in the Long-Term Incentive Plan Award Table
following and are denominated as Cash Awards. Because the Second Amendment
did not affect awards made in 1996 and 1997 which vested in 1999 and 2000,
respectively, these prior awards continue to be restricted stock awards and
as such were reported when granted as opposed to when paid. See "Long-Term
Performance Compensation Plan" below for more information about the
Performance Plan.
(4) Includes $13,692 contributed to the defined contribution plan (the
"Retirement Savings Plan") on behalf of Mr. Robert S. Taubman and $11,922
accrued under the supplemental retirement savings plan (the "Supplemental
Retirement Savings Plan").
(5) Includes $13,692 contributed to the Retirement Savings Plan on behalf of Ms.
Payne and $8,752 accrued under the Supplemental Retirement Savings Plan.
(6) Includes $13,692 contributed to the Retirement Savings Plan on behalf of Mr.
William S. Taubman and $11,443 accrued under the Supplemental Retirement
Savings Plan.
(7) Mr. Lord first became an executive officer of the Company on January 1,
2000.
(8) Includes $8,592 contributed to the Retirement Savings Plan on behalf of Mr.
Lord, and $6,724 accrued under the Supplemental Retirement Savings Plan.
(9) Includes $13,692 contributed to the Retirement Savings Plan on behalf of Mr.
Simon and $10,814 accrued under the Supplemental Retirement Savings Plan.
17
LONG-TERM INCENTIVE PLAN -- 2001 AWARDS(1)
NUMBER OF ESTIMATED FUTURE PAYOUTS UNDER
SHARES, PERFORMANCE OR NON-STOCK PRICE-BASED PLAN
UNITS OR OTHER PERIOD ------------------------------------
NAME AND OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
PRINCIPAL POSITION ($) OR PAYOUT ($) ($)(2) ($)
------------------ ------------ ---------------- ---------- ---------- ----------
Robert S. Taubman................. $1,122,375 1/1/01-1/1/04 $1,122,375 $1,290,731 $1,459,088
Chairman of the Board, President
and Chief Executive Officer
Lisa A. Payne..................... $ 506,250 1/1/01-1/1/04 $ 506,250 $ 582,188 $ 658,125
Executive Vice President and Chief
Financial and Administrative
Officer
William S. Taubman................ $ 506,250 1/1/01-1/1/04 $ 506,250 $ 582,188 $ 658,125
Executive Vice President
Courtney Lord..................... $ 240,625 1/1/01-1/1/04 $ 240,625 $ 276,719 $ 312,813
Senior Vice President
John L. Simon..................... $ 240,625 1/1/01-1/1/04 $ 240,625 $ 276,719 $ 312,813
Senior Vice President
-------------------------
(1) Awards were made under the Performance Plan. Awards vest and, unless
deferred in accordance with the Performance Plan, are payable on the third
January 1 after the date of grant. See "Long-Term Performance Compensation
Plan" below for more information about the Performance Plan.
(2) The target is the amount which would be payable if the target compounded
growth rate in per share funds from operations is achieved.
SENIOR SHORT TERM INCENTIVE PLAN
The Manager's officers and senior management receive part of their annual
compensation pursuant to the Manager's Senior Short Term Incentive Plan (the
"SSTIP"). Under the SSTIP, the actual amount awarded to a participant depends
upon a review and assessment of the employee's and the Company's performance.
Performance that meets expectations results in a bonus of approximately 100% of
an employee's target amount. Performance beyond expectations may result in an
employee receiving up to 150% of his target bonus. Performance below
expectations results in a payment of less than the bonus target.
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. Mr. Robert Taubman,
however, has elected to defer
18
his receipt of Units of Partnership Interest and right to exchange such Units
under the Continuing Offer, see "Certain Employment Arrangements."
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 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, an Incentive Option vests 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. As discussed under
"Compensation Committee Report on Executive Compensation," the 1992 Incentive
Option Plan has been replaced by the Performance Plan as the primary source of
long-term compensation. There were no Incentive Option grants to Named Officers
in 2001.
AGGREGATED OPTION EXERCISES DURING 2001 AND
YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT YEAR END AT 12/31/01(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Robert S. Taubman.... 0 $ 0 3,357,636 0 $12,542,746 0
Lisa A. Payne........ 0 0 317,218 283,610 764,742 707,372
William S. Taubman... 38,500 148,648 484,064 250,000 1,702,098 650,000
Courtney Lord........ 0 0 0 0 0 0
John L. Simon........ 32,919 128,863 21,727 0 23,582 0
-------------------------
(1) In accordance with the SEC's rules, based on the difference between fair
market value of Common Stock and the exercise price.
LONG-TERM PERFORMANCE COMPENSATION PLAN
The Performance Plan was adopted by the Manager and approved by TRG's
compensation committee in 1996 (the Compensation Committee of the Board now
19
performs such functions). The Company's 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 2001 grants under
the Performance Plan that are reflected in the Long-Term Incentive Plan -- 2001
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 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. Funds from Operations ("FFO") is defined as income before
extraordinary items, real estate depreciation and amortization, and the
allocation to the minority interest in TRG, less preferred dividends and
distributions. Gains on dispositions of depreciated operating properties are
excluded from FFO. In 2001, a $1.9 million charge related to a technology
investment was also excluded. Each Cash Award vests on the third January 1 after
the date of grant. Upon vesting, the value of the award under the 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 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.
Prior to the Second Amendment, awards were made in respect of Notional
Shares of Common Stock and the payout value of an award was based on the value
of the Company's Common Stock. The Second Amendment affected awards made for
fiscal years 1998 and 1999 as well as awards made after the effective date of
the Second Amendment. Awards made in 1998 and 1999 were converted from Notional
Shares into Cash Awards at a rate based on the value, determined by reference to
the price of the Company's Common Stock, of the Notional Shares held by the
individual at the time of the Conversion. The 1998 Cash Awards vested and,
unless deferred in accordance with the provisions of the Performance Plan, were
paid during 2001.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Revenue Reconciliation Act of 1993. The Omnibus Reconciliation Act of 1993
limits to $1 million the amount that may be deducted by a publicly held
corporation for compensation paid to each of its named executives in a taxable
year, unless the compensation in excess of $1 million is "qualified
performance-based compensation." Although TRG and the Manager are now part of
the Company's consolidated group for financial reporting purposes, this
deduction limit does not affect the Company and does not apply to TRG or the
Manager because TRG and the Manager are partnerships for federal tax purposes,
and the Company itself has no employees.
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
20
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 2001 compensation of the Named Officers was
consistent with the Manager's compensation philosophy.
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 SSTIP, and long-term compensation under the Incentive
Option Plan and the 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, awards under the Performance Plan have been selected over
Incentive Options as the primary source of incentive compensation to the
executive officers. Incentive Option grants have been and will continue to be
made in special situations.
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.
Performance Plan. In 2001, the Compensation Committee made grants of Cash Awards
under the Performance Plan to the Named Officers, as shown in the Long-Term
Incentive Plan -- 2001 Awards table.
Compensation of Chief Executive Officer. Robert S. Taubman's base salary for
2001 was at an annual rate of $750,000. Mr. Taubman's performance evaluation is
based 25% on the Compensation Committee's evaluation of his individual
performance and 75% on the Compensation Committee's evaluation of the
performance of the Company, which includes the consideration of objective and
subjective criteria. Based on that evaluation and the report of the independent
consultant, the Compensation Committee confirmed that Mr. Taubman's base salary,
his bonus under the SSTIP for 2001 in the amount of $468,800 and his incentive
compensation under the 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
S. Parker Gilbert, Chairman
Jerome A. Chazen
Peter Karmanos, Jr.
21
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 S&P Composite -- 500 Stock
Index, and the NAREIT Equity Retail REIT Index for the period December 31, 1996
through December 31, 2001 (assuming, in all cases, the reinvestment of
dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
TAUBMAN CENTERS, INC., THE NAREIT EQUITY RETAIL REIT INDEX,
AND THE S&P 500 INDEX
[LINE GRAPH]
--------------------------------------------------------------------------------------------------------------
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
--------------------------------------------------------------------------------------------------------------
Taubman Centers, Inc. $100.00 $108.29 $122.75 $104.00 $115.48 $169.09
NAREIT Equity Retail REIT Index $100.00 $116.95 $113.91 $100.50 $118.56 $154.63
S&P 500 Index $100.00 $133.36 $171.48 $207.56 $188.66 $166.24
--------------------------------------------------------------------------------------------------------------
Please note: The stock price performance shown on the graph above is not
necessarily indicative of future price performance.
CERTAIN EMPLOYMENT 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
22
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
SSTIP, with a target award of $250,000 and a maximum annual award of $375,000.
In November 1999, in connection with TRG's acquisition of the outstanding
stock of Lord Associates, Inc., the Manager entered into an employment agreement
with Courtney Lord pursuant to which Mr. Lord became the Manager's Senior Vice
President of Leasing. The agreement terminates on January 1, 2005 unless sooner
terminated by either the Company or Mr. Lord for cause or by Mr. Lord due to his
death, disability or voluntary termination. The employment agreement provides
for an annual base salary of not less than $270,000, to be reviewed annually.
The agreement also provides for Mr. Lord's participation in the Manager's SSTIP,
with a minimum award of $195,000 for each of the years beginning January 1, 2000
and January 1, 2001 and for a grant (effective January 1, 2000) of a Cash Award
having an initial payout value of $137,500 under the Performance Plan. Under the
Agreement, the Manager paid Mr. Lord $50,000 as a hiring bonus in 1999 and
reimbursed Mr. Lord for certain relocation expenses of approximately $26,500 in
2000. Mr. Lord has agreed that in the event his employment is terminated he will
not thereafter compete with the Company for a period (depending on the
circumstances surrounding such termination) of between one and two years. In
addition, part of the consideration received by Mr. Lord in exchange for his
shares of Lord Associates, Inc. included 435,153 Units of Partnership Interest
and 435,153 shares of Series B Preferred Stock. Units of Partnership Interest
granted to Mr. Lord are subject to vesting as described below and, once fully
vested, may be exchanged for shares of the Company's Common Stock under the
Continuing Offer. At this time, after taking into account Mr. Lord's exercise of
his rights under the Continuing Offer with respect to 68,000 Units of
Partnership Interest, Mr. Lord has both voting and distribution rights with
respect to 193,095 Units of Partnership Interest and 193,095 shares of Series B
Preferred Stock. Mr. Lord has granted an irrevocable proxy to TG Partners with
respect to the remaining Partnership Units and shares of Series B Preferred
Stock. The remaining Partnership Units are not entitled to receive partnership
distributions and allocations except upon liquidation. Under the terms of the
irrevocable proxy executed by Mr. Lord in favor of TG Partners and a letter
agreement between Mr. Lord and TRG, the remaining Partnership Units and shares
of Series B Preferred Stock will be released from the proxy and such Partnership
Units will become entitled to partnership distributions and allocations over a
period of five years. Mr. Lord has pledged 65,271 Partnership Units and shares
of Series B Preferred Stock to be released from the proxy as collateral for his
obligation to remit to TRG a portion of the cash consideration he received in
exchange for his shares of Lord Associates, Inc., in the event the acquired
business does not meet certain performance criteria. In addition, if Mr. Lord's
employment is terminated, the Manager has the right to purchase up to 100% of
any Partnership Units which have not been released from the proxy and become
entitled to partnership distributions and allocations for a cash lump sum
payment of $50,000.
23
In December 2001, the Manager, TRG and Robert S. Taubman entered into an
Option Deferral Agreement (the "Deferral Agreement") with respect to an
Incentive Option for 2,962,620 Units of Partnership Interest granted to Mr. R.
Taubman in 1992 pursuant to the 1992 Incentive Option Plan (the "Option"). The
Deferral Agreement provides for the deferral of gains (i.e. the difference
between the fair market value of the Units of Partnership Interest subject to
the Option and the aggregate exercise price of the Option) that would be
recognized by Mr. R. Taubman upon his exercise of the Option. Mr. R. Taubman is
expected to pay the exercise price for the Option by surrendering Units of
Partnership Interest held by him in accordance with the terms of the plan as
recently amended, see "Incentive Option Plan." Upon exercise of the Option, Mr.
R. Taubman will receive a number of Units of Partnership Interest having a fair
market value equal to the aggregate exercise price of the Option and will defer
receipt of the remaining Units of Partnership Interest covered by the Option for
a period of ten years from the date of exercise. Until the deferred amount has
been distributed in full, Mr. Taubman will receive distribution equivalents on
the deferred amounts 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 of
Partnership Interest will be paid to Mr. R. Taubman in ten annual installments.
The Deferral Agreement will terminate and the deferred Units of Partnership
Interest will be paid to Mr. R. Taubman in a single distribution upon the
earlier of Mr. R. Taubman's cessation of employment for any reason, a "change in
control" of TRG, and TRG's permanent dissolution.
ITEM 2 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP as the independent auditors to audit the
financial statements of the Company for 2002. The Board of Directors recommends
that the shareholders vote FOR the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 2002. Although
shareholder approval of the appointment is not required by law and is not
binding on the Board of Directors, the Board will take the appointment of
Deloitte & Touche LLP under advisement if such appointment is not approved by
the affirmative vote of a majority of the votes cast at the annual meeting.
The Company expects that representatives of Deloitte & Touche LLP 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 of Deloitte & Touche LLP will be available to respond to
appropriate questions addressed to the officer presiding at the meeting.
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.
24
COSTS OF PROXY SOLICITATION
The cost of preparing, assembling, and mailing the proxy material will be
borne by the Company. The Company will also 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.
ADDITIONAL INFORMATION
PRESENTATION OF SHAREHOLDER PROPOSALS AT 2003 ANNUAL MEETING
Any shareholder proposal intended to be presented for consideration at the
annual meeting to be held in 2003 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 10, 2002.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 2001,
including financial statements audited by Deloitte & Touche LLP, independent
accountants, and their reports dated February 12, 2002, is being furnished with
this Proxy Statement. IN ADDITION, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 2001, AS FILED WITH THE SECURITIES EXCHANGE
COMMISSION, 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.
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 12, 2002
25
TAUBMAN CENTERS, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS -- MAY 30, 2002
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 Thursday, May 30, 2002, 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) AND (2)
IF NO INSTRUCTION IS PROVIDED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PAID ENVELOPE.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2. Please mark [X]
your votes as
indicated in this
example
1. ELECTION OF DIRECTORS 2. RATIFICATION OF INDEPENDENT AUDITORS
Nominees: 01 Robert S. Taubman and 02 Lisa A. Payne Ratification of the selection of Deloitte & Touche LLP
(each for a three-year term) as independent auditors for 2002.
FOR WITHHOLD WITHHOLD AUTHORITY FOR AGAINST ABSTAIN
AUTHORITY to vote for Nominee(s) [ ] [ ] [ ]
to vote for all Nominees named below
[ ] [ ] [ ] ______________
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:_________________________________________________, 2002
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 30, 2002
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 Thursday, May 30, 2002, 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) AND (2)
IF NO INSTRUCTION IS PROVIDED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PAID ENVELOPE.
(PLEASE SIGN AND DATE BELOW)
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 Please mark [X]
your votes as
indicated in this
example
1. ELECTION OF DIRECTORS 2. RATIFICATION OF INDEPENDENT AUDITORS
Nominees: Robert S. Taubman and Lisa A. Payne Ratification of the selection of Deloitte & Touche LLP
(each for a three-year term) as independent auditors for 2002.
FOR WITHHOLD WITHHOLD AUTHORITY FOR AGAINST ABSTAIN
AUTHORITY To vote for Nominee(s)
To vote for all Named below
Nominees
[ ] [ ] [ ] ______________ [ ] [ ] [ ]
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:_____________________________________________________________________, 2002