UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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-12
Taubman Centers, Inc.
--------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(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:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(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):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
--------------------------------------------------------------------------------
[ ] 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:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
(TAUBMAN LOGO)
TAUBMAN CENTERS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD MAY 15, 2006
To the Shareholders of
Taubman Centers, Inc.:
The Annual Meeting of Shareholders of TAUBMAN CENTERS, INC. (the "Company")
will be held on Monday, May 15, 2006, at The Townsend Hotel, 100 Townsend
Street, Birmingham, Michigan 48009, at 11:00 a.m., local time, for the following
purposes:
1. To elect three directors to serve until the annual meeting of
shareholders in 2009;
2. To ratify the appointment of KPMG LLP as the Company's independent
registered public accounting firm for the year ending December 31, 2006;
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 March 23, 2006 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, 2006
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, OR VOTE
VIA TELEPHONE OR INTERNET (AS INDICATED ON YOUR PROXY CARD), 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 of
shareholders?.......................................... 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 if I don't vote for some of the items listed on my
proxy card?............................................ 2
What does it mean if I receive more than one proxy
card?.................................................. 3
What are the Board's recommendations?..................... 3
What vote is required to approve each item?............... 3
How can I access the Company's proxy materials and annual
report on Form 10-K?................................... 3
Is a registered list of shareholders available?........... 4
How do I find out the voting results?..................... 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SHAREHOLDER MATTERS................ 5
Section 16(a) Beneficial Ownership Reporting Compliance... 8
Securities Authorized For Issuance Under Equity
Compensation Plans..................................... 9
ITEM 1 -- ELECTION OF DIRECTORS
MANAGEMENT................................................ 11
Directors and Executive Officers.......................... 11
The Board of Directors and Committees..................... 13
Compensation of Directors................................. 15
Corporate Governance...................................... 16
Communicating with the Board.............................. 16
Related Party Transactions................................ 17
REPORT OF THE AUDIT COMMITTEE............................. 18
EXECUTIVE COMPENSATION.................................... 20
Summary Compensation Table................................ 20
Incentive Option Plan..................................... 21
Option Grants in 2005..................................... 21
Aggregate Option Exercises During 2005 And Year-End Option
Values................................................. 22
Compensation Committee Interlocks and Insider
Participation.......................................... 22
Compensation Committee Report on Executive Compensation... 22
Shareholder Return Performance Graph...................... 25
Certain Employment and Consulting Arrangements............ 25
Change of Control Employment Agreements................... 26
Change of Control Severance Program....................... 27
ITEM 2 -- RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM......................... 27
OTHER MATTERS............................................... 27
COSTS OF PROXY SOLICITATION................................. 28
ADDITIONAL INFORMATION...................................... 28
Presentation of Shareholder Proposals at 2007 Annual
Meeting................................................ 28
Householding.............................................. 28
Annual Report............................................. 28
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 Monday, May 15, 2006, at The Townsend Hotel, 100 Townsend Street,
Birmingham, Michigan 48009. The Company's Board of Directors is soliciting
proxies for use at such meeting and at any adjournment or postponement of such
meeting. The Company expects to mail this Proxy Statement on or about April 5,
2006.
ABOUT THE MEETING
What is the purpose of the annual meeting of shareholders?
At the annual meeting of shareholders, 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 three directors to serve until the annual meeting of
shareholders in 2009 and the ratification of the appointment of KPMG LLP
("KPMG") as the Company's independent registered public accounting firm. In
addition, management will report on the performance of the Company and will
respond to appropriate questions from shareholders. The Company expects that
representatives of KPMG will be present at the annual meeting as well. KPMG will
be afforded an opportunity to make a statement if they desire to do so, and the
Company expects that such representatives will be available to respond to
appropriate questions addressed to the officer presiding at the meeting.
Who is entitled to vote?
Only record holders of Voting Stock at the close of business on the record
date of March 23, 2006 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, 8% Series G Cumulative Redeemable Preferred Stock
and 7.625% Series H Cumulative Redeemable Preferred Stock (individually the
"Series A Preferred Stock," the "Series G Preferred Stock" and the "Series H
Preferred Stock," and collectively, the "Non-Voting Preferred Stock") do not
entitle their holders to vote. Furthermore, 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 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. One current director whose term is expiring, William A. Taubman, is
being nominated by the holders of the Series B Preferred Stock, and two current
directors whose terms are not expiring, Robert S. Taubman and Lisa A. Payne,
were 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.
The Series B Preferred Stock was first issued in late 1998 and is currently
held by partners in TRG other than the Company. Only TRG partners can acquire
shares of Series B Preferred Stock; for nominal consideration, TRG partners can
acquire such number of shares of Series B Preferred Stock equal to the number of
TRG units that they hold. If a TRG partner tenders their TRG units for Common
Stock under the Company's continuing offer (described herein), they are required
to redeem an equal number of shares of Series B Preferred Stock. If a partner
exercises TRG incentive options and they elect to hold TRG units, they may also
acquire an equal number of Series B shares; as of the date hereof, only Robert
Taubman and William Taubman are TRG partners who are eligible to receive TRG
incentive options. If a non-TRG partner exercises TRG incentive options, the TRG
units are automatically converted to shares of Common Stock under the continuing
offer and such persons cannot acquire shares of Series B Preferred Stock.
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, 81,043,433 shares
of Voting Stock were outstanding, consisting of 52,774,536 shares of Common
Stock and 28,268,897 shares of Series B Preferred Stock. Broker non-votes
(defined below) and proxies received but marked as abstentions or "WITHHOLD
AUTHORITY" 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. You may also vote via telephone
or internet (as indicated on your proxy card). 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 and giving you the power to vote 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 properly file such notice or new
proxy.
What if I don't vote for some of the items listed on my proxy card?
If you return your signed proxy card but do not mark selections, the
selections not marked will be voted in accordance with the recommendations of
the Board of Directors.
If you hold your Voting Stock in street name through a broker and do not
return the proxy card, the broker or other nominee will determine if it has the
discretionary authority to vote on the particular matter. Under applicable law,
brokers have the discretion to vote on routine matters, such as the uncontested
election of directors and ratifying the appointment of the Company's independent
registered public accounting firm, but do not have discretion to vote on
non-routine matters. If the broker does not have discretionary authority
2
to vote on a particular proposal, the absence of votes on that proposal with
respect to your Voting Stock will be considered "broker non-votes" with regard
to that matter. Voting stock subject to broker non-votes will be considered
present at the meeting for purposes of determining whether there is a quorum but
the broker non-votes will not be considered votes cast with respect to that
proposal.
What does it mean if I receive more than one proxy card?
It generally means your shares are registered differently or are in more
than one account. Please provide voting instructions for all of the proxy cards
you receive.
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 11 through
18); and
for ratification of KPMG as the Company's independent registered
public accounting firm for 2006 (see page 27).
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 three 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 such
director(s) so indicated and will have no effect on the outcome of the vote.
Broker non-votes, if any, will be disregarded and will have no effect on the
outcome of the vote.
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 2006.
Abstentions will have the same effect as a vote against the matter. 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.
How can I access the Company's proxy materials and annual report on Form 10-K?
The Corporate Governance subsection under "Investor Relations" on the
Company's website, http://www.taubman.com(1), provides access, free of charge,
to Securities and Exchange Commission ("SEC") reports as soon as reasonably
practicable after the Company electronically files such reports with, or
furnishes such reports to, the SEC, including proxy materials, Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to these reports. The reference to our
---------------
(1) The reference to the Company's website address is not intended to function
as a hyperlink and, except as specified herein, the information contained on
such website is not part of this proxy statement.
3
website address in this proxy statement is not intended to function as a
hyperlink and, except as specified herein, the information contained on such
website is not part of this proxy statement. IN ADDITION, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005, 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.
You may also read and copy any materials that the Company files with the
SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC
20549. You may obtain information on the operations of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC, including the Company, at
http://www.sec.gov. The SEC maintains a website that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC, including the Company, at http://www.sec.gov.
Is a registered list of shareholders available?
The names of shareholders of record entitled to vote at the annual meeting
will be available to shareholders entitled to vote at the meeting on Monday, May
15, 2006 at The Townsend Hotel for any purpose reasonably relevant to the
meeting.
How do I find out the voting results?
Preliminary voting results will be announced at the annual meeting, and
final voting results will be published in the Company's Quarterly Report on Form
10-Q for the quarter ending June 30, 2006.
4
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, 2006. 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 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, 8% Series G Cumulative
Redeemable Preferred Stock and 7.625% Series H Cumulative Redeemable Preferred
Stock are not included in the table as such shares do not have voting rights
except in certain limited circumstances. Unless otherwise indicated in the
table, each person's address is c/o Taubman Centers, Inc., 200 East Long Lake
Road, Suite 300, P. O. Box 200, Bloomfield Hills, Michigan 48303-0200.
NUMBER OF PERCENT OF
DIRECTORS, EXECUTIVE OFFICERS AND 5% SHAREHOLDERS(1) SHARES(1) SHARES(1)
---------------------------------------------------- ---------- ----------
Robert S. Taubman........................................... 2,815,872(2) 3.4%
William S. Taubman.......................................... 1,936,630(3) 2.4%
Lisa A. Payne............................................... 177,675(4) *
Stephen J. Kieras........................................... 7,456(5) *
David T. Weinert............................................ 4,546(6) *
Graham T. Allison........................................... 2,561(7) *
Allan J. Bloostein.......................................... 5,335(8) *
Jerome A. Chazen............................................ 11,413(9) *
Craig M. Hatkoff............................................ 3,435(8) *
Peter Karmanos, Jr. ........................................ 51,131(10) *
William U. Parfet........................................... 13,005(11) *
A. Alfred Taubman........................................... 22,963,212(12) 28.3%
Cohen & Steers, Inc. and related entities................... 4,819,103(13) 5.9%
280 Park Avenue, 10th Floor
New York, New York 10017
LaSalle Investment Management, Inc. and related entity...... 4,579,978(14) 5.7%
200 East Randolph Drive
Chicago, Illinois 60601
Security Capital Research & Management Inc. and related
entity.................................................... 3,808,960(15) 4.7%
10 South Dearborn Street, Suite 1400
Chicago, Illinois 60603
Morgan Stanley and related entity........................... 3,525,478(16) 4.4%
1585 Broadway
New York, New York 10036
Stitching Pensioenfonds ABP................................. 3,025,500(17) 3.7%
Oude Lindestraat 70
Postbus 2889
6401 DL Heerlen
The Netherlands
AEW Capital Management, L.P. and related entities........... 3,008,127(18) 3.7%
World Trade Center East
Two Seaport Lane
Boston, MA 02110
5
NUMBER OF PERCENT OF
DIRECTORS, EXECUTIVE OFFICERS AND 5% SHAREHOLDERS(1) SHARES(1) SHARES(1)
---------------------------------------------------- ---------- ----------
Adelante Capital Management, LLC............................ 2,661,793(19) 3.3%
555 12th Street, Suite 2100
Oakland, CA 94607
The Vanguard Group, Inc..................................... 2,648,880(20) 3.3%
100 Vanguard Blvd.
Malvern, PA 19355
Directors and Executive Officers as a Group (13 persons).... 3,165,532(21) 3.9%
---------------
* less than 1%
(1) The Company has relied upon information supplied by certain beneficial
owners and upon information contained in filings with the SEC. Each share
of Common Stock and Series B Preferred Stock is entitled to one vote. A "5%
shareholder" is defined as a holder of five percent of either the Common
Stock or Series B Preferred Stock, while "Percent of Shares" provides
information on the percentage of voting securities owned on an aggregate
basis. 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
regarding Units subject to issuance under the Deferral Agreement (as
defined below), share figures shown assume that individuals who acquire
Units of Partnership Interest in TRG ("Units") upon the exercise of options
("Incentive Options") granted under TRG's 1992 Incentive Option Plan will
immediately 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 also 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) and
that outstanding shares of Series B Preferred Stock are not converted into
Common Stock. As of March 23, 2006, there were 81,043,433 beneficially
owned shares of Voting Stock, consisting of 52,774,536 shares of Common
Stock and 28,268,897 shares of Series B Preferred Stock.
References below to shares of Common Stock subject to issuance under the
Company's Non-Employee Directors' Deferred Compensation Plan ("Deferred
Compensation Plan") refer to restricted stock units granted under the
Deferred Compensation Plan. Such restricted units are fully vested at the
time of grant but do not have voting rights.
(2) Consists of (i) 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 owned by Mr. Taubman and his brother, William
S. Taubman, and 871,262 shares of Series B Preferred Stock subject to
issuance under the Deferral Agreement (as defined and described below) (in
the aggregate, 7.6% of the Series B Preferred Stock), and (ii) 550,000
shares of Common Stock owned by R&W, 33,068 shares of Common Stock that Mr.
Taubman has the right to receive upon the exercise and conversion of
Incentive Options that will vest within 60 days of the record date, and
17,121 shares of Common Stock owned by his wife and children for which Mr.
Taubman disclaims any beneficial interest (in the aggregate, 1.1% of the
Common Stock). To avoid duplication, excludes 5,925 Units that Mr. Robert
S. Taubman owns, 1,338,496 Units held by R&W and 871,262 Units subject to
issuance under the Deferral Agreement. Also excludes all shares of Voting
Stock held by TRA Partners ("TRAP"), 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 12 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 Taubman Company
LLC (the "Manager"), TRG and Mr. Taubman (the "Deferral Agreement"), Mr.
Taubman deferred his right to receive 871,262 Units (the "Deferred Units")
pursuant to an incentive option granted to Mr. Taubman
6
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 outstanding. Beginning with the earlier of
Mr. Taubman's cessation of employment for any reason or 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 a "change in control" of TRG if followed by Mr. Taubman's termination
of employment within six months of such "change of control."
(3) Consists of (i) 5,925 shares of Series B Preferred Stock that Mr. William
S. Taubman owns, and 1,338,496 shares of Series B Preferred Stock held by
R&W (in the aggregate, 4.8% of the Series B Preferred Stock), and (ii)
550,000 shares of Common Stock owned by R&W, 16,609 shares of Common Stock
that Mr. Taubman has the right to receive upon the exercise and conversion
of Incentive Options that will vest within 60 days of the record date, and
25,600 shares of Common Stock owned by his children and for which Mr.
Taubman disclaims any beneficial interest (in the aggregate, 1.1% of the
Common Stock). To avoid duplication, excludes 5,925 Units that Mr. William
S. Taubman owns and 1,338,496 Units held by R&W. Also 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
12 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 of 160,002 shares of Common Stock and 17,673 shares of Common
Stock that Ms. Payne has the right to receive upon the exercise and
conversion of Incentive Options that will vest within 60 days of the record
date (in the aggregate, less than 1.0% of the Common Stock).
(5) Consists of 3,091 shares of Common Stock 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, and 4,365 shares of
Common Stock that Mr. Kieras has the right to receive upon the exercise and
conversion of Incentive Options that will vest within 60 days of the record
date (in the aggregate, less than 1.0% of the Common Stock).
(6) Consists solely of 4,546 shares of Common Stock which Mr. Weinert has the
right to receive upon the exercise and conversion of Incentive Options that
will vest within 60 days of the record date (less than 1.0% of the Common
Stock).
(7) Consists of 1,430 shares of Common Stock and 1,131 shares of Common Stock
subject to issuance under the Deferred Compensation Plan (in the aggregate,
less than 1.0% of the Common Stock). See Note 6 of "Securities Authorized
For Issuance Under Equity Compensation Plans" below for a description of
the Deferred Compensation Plan.
(8) Consists solely of shares of Common Stock (less than 1.0% of the Common
Stock).
(9) Consists of 10,000 shares of Common Stock and 1,413 shares of Common Stock
subject to issuance under the Deferred Compensation Plan (in the aggregate,
less than 1.0% of the Common Stock). Excludes 15,000 shares of Series A
Preferred Stock owned by Mr. Chazen, 4,214 shares of Series A Preferred
Stock owned by his wife, and 19,500 shares of Series A Preferred Stock
owned by his children and for which Mr. Chazen disclaims any beneficial
ownership.
(10) Consists of 50,000 shares of Common Stock and 1,131 shares of Common Stock
subject to issuance under the Deferred Compensation Plan (in the aggregate,
less than 1.0% of the Common Stock).
(11) Consists of 12,645 shares of Common Stock and 360 shares of Common Stock
subject to issuance under the Deferred Compensation Plan (in the aggregate,
less than 1.0% of the Common Stock).
(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 (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 vote and
dispose of the Common Stock held by TRAP. Also includes 9,875 shares of
Series B Preferred Stock held by Mr. Taubman's trust, 17,699,879 shares of
Series B Preferred Stock owned by TRAP,
7
4,605,361 shares of Series B Preferred Stock owned by TG, 445,191 shares of
Series B Preferred Stock held by TGA, 11,011 shares of Series B Preferred
Stock owned by TRV, and 4,958 shares of Series B Preferred Stock held by
Taub-Co. (in the aggregate 80.6% of the Series B Preferred Stock) To avoid
duplication, excludes TRG units of the same amount as Series B Preferred
Stock held by such entities. 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, and therefore 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.
Mr. Taubman, through control of the managing partner of each of TRV
(through Mr. Taubman's trust), TG and TGA, also 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, and therefore 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) Pursuant to Schedule 13G/A filed on February 13, 2006. Consists solely of
shares of Common Stock (9.1% of the Common Stock).
(14) Pursuant to Schedule 13G/A filed on February 14, 2006. Consists solely of
shares of Common Stock (8.7% of the Common Stock).
(15) Pursuant to Schedule 13G/A filed on February 15, 2006. Consists solely of
shares of Common Stock (7.2% of the Common Stock) held on behalf of other
persons, none of which holds more than 5% of the Common Stock.
(16) Pursuant to Schedule 13G/A filed on February 15, 2006. Consists solely of
shares of Common Stock (6.7% of the Common Stock) held on behalf of various
investment advisory clients, none of which holds more than 5% of the Common
Stock.
(17) Pursuant to Schedule 13G/A filed on February 14, 2006. Consists solely of
shares of Common Stock (5.7% of the Common Stock).
(18) Pursuant to Schedule 13G/A filed on February 13, 2006. Consists solely of
shares of Common Stock (5.7% of the Common Stock).
(19) Pursuant to Schedule 13G filed on February 14, 2006. Consists solely of
shares of Common Stock (5.0% of the Common Stock) held on behalf of
clients.
(20) Pursuant to Schedule 13G filed on February 13, 2006. Consists solely of
shares of Common Stock (5.0% of the Common Stock).
(21) Consists of an aggregate of (i) 847,871 shares of Common Stock, 92,019
shares of Common Stock that such persons have the right to receive upon the
exercise and conversion of Incentive Options that have vested or will vest
within 60 days of the record date, and 4,035 shares of Common Stock subject
to issuance under the Directors' Deferred Compensation Plan (in the
aggregate, 1.8% of the Common Stock), and (ii) 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 (see Note 2 above) (in the aggregate,
7.6% 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 (i)
Jerome Chazen filed one Form 4, reporting a total of five transactions, late,
(ii) Robert Taubman filed one Form 4, reporting a total of two transactions,
late, (iii) William Taubman filed one Form 4, reporting a total of two
transactions, late, and (iv) William Parfet filed his Form 3 late.
8
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, 2005:
WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO BE EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCES
ISSUED UPON EXERCISE OF OUTSTANDING UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, OPTIONS, WARRANTS PLANS (EXCLUDING SECURITIES
WARRANTS AND RIGHTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------------- ----------------- ------------------------------
Equity compensation plan $30.13(4) 2,738,944(5)
approved by security
holders(1)(2)................ 991,043(3)
Equity compensation plans not --(7) --(8)
approved by security
holders(6)................... 2,506
------- ------ ---------
Total..................... 993,549 $30.13 2,738,944
======= ====== =========
---------------
(1) Consists of TRG's 1992 Incentive Option Plan, as amended, and the Company's
The Taubman Company 2005 Long-Term Incentive Plan. Under the 1992 Incentive
Option Plan, employees receive Units of Partnership Interest in TRG upon the
exercise of their vested options, and each Unit can be converted into one
share of Common Stock under the Continuing Offer. Under The Taubman Company
2005 Long-Term Incentive Plan, employees receive restricted stock units,
which represent the right to one share of Common Stock upon vesting. The
Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan was also
approved by security holders, but is not included in the table above because
issuances under such plan consist of stock grants with no exercise price and
such plan does not have a limit on the aggregate number of shares that can
be issued thereunder. Under the Taubman Centers, Inc. Non-Employee
Directors' Stock Grant Plan, non-employee directors receive grants of Common
Stock on a quarterly basis having a value of $3,750.
(2) No options were exercised, and 233,418 options were granted, between January
1, 2006 and March 23, 2006. 1,732 restricted stock units vested, and 122,658
restricted stock units were granted, between January 1, 2006 and March 23,
2006. Therefore, as of March 23, 2006, the total number of shares in column
(a) would be 1,347,119, and the total number of shares in column (c) would
be 2,382,868. As of March 23, 2006, the outstanding options had a weighted
average exercise price of $32.34.
(3) Consists of 852,139 outstanding options under the 1992 Incentive Option Plan
and 138,904 restricted stock units under The Taubman Company 2005 Long-Term
Incentive Plan.
(4) Excludes restricted stock units issued under The Taubman Company 2005
Long-Term Incentive Plan because they are converted into Common Stock on a
one-for-one basis at no additional cost.
(5) Consists of 1,377,848 options available for issuance under the 1992
Incentive Option Plan and 1,361,096 restricted stock units available for
issuance under The Taubman Company 2005 Long-Term Incentive Plan.
(6) Consists of the Company's Non-Employee Directors' Deferred Compensation
Plan, which was approved by the Board in May 2005. The Deferred Compensation
Plan gives each non-employee director of the Company the right to defer the
receipt of all or a portion of his or her annual director retainer until the
termination of such director's service on the Board and for such deferred
compensation to be denominated in restricted stock units. The number of
restricted stock units received equals the deferred retainer fee divided by
the fair market value of the common stock on the business day immediately
before the date the director would otherwise have been entitled to receive
the retainer fee. The restricted stock units represent the right to receive
equivalent shares of Common Stock at the end of the deferral period. During
the deferral period, when the Company pays cash dividends on the Common
Stock, the directors' deferral accounts are credited with dividend
equivalents on their deferred restricted stock units, payable in additional
restricted stock units based on the then-fair market value of the Common
Stock. Each Director's account is 100% vested at all times.
9
In addition, the table does not reflect the Company's 401K savings plan,
which permits employees to invest in the Taubman Centers Stock Fund.
(7) The restricted stock units are excluded because they are converted into
Common Stock on a one-for-one basis at no additional cost.
(8) The number of securities available for future issuance is unlimited and will
reflect whether non-employee directors elect to defer all or a portion of
their annual retainers.
10
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members serving
three-year staggered terms. Three directors are to be elected at the annual
meeting to serve until the annual meeting of shareholders in 2009. The Board of
Directors recommends that the shareholders vote FOR each of the three directors
listed below that stand for election.
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 nine 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
---- --- ----- ------
Graham T. Allison(1).... 66 Director 2006
Peter Karmanos, 63 Director 2006
Jr.(1)................
William S. Taubman(1)... 47 Chief Operating Officer and Director 2006
Allan J. Bloostein...... 76 Director 2007
Jerome A. Chazen........ 79 Director 2007
Craig M. Hatkoff........ 52 Director 2007
Robert S. Taubman....... 52 Chairman of the Board, President and 2008
Chief Executive Officer
Lisa A. Payne........... 47 Vice Chairman, Chief Financial Officer and Director 2008
William U. Parfet....... 59 Director 2008
Esther R. Blum.......... 51 Senior Vice President, Controller and Chief Accounting Officer
Stephen J. Kieras....... 52 Senior Vice President, Development of
The Taubman Company LLC
David T. Weinert........ 46 Senior Vice President, Leasing of
The Taubman Company LLC
Robert R. Reese......... 42 Senior Vice President, Chief Administrative Officer of
The Taubman Company LLC
---------------
(1) Standing for re-election to a three-year term.
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
11
Executive Officer since July 1987. Mr. Karmanos serves as a director of
Worthington Industries, Inc. and served as a director of Adherex Technologies,
Inc. (listed on the Toronto Stock Exchange) through July 15, 2005. Mr. Karmanos
has been a director of the Company since 2000.
William S. Taubman is the Chief Operating Officer of the Company, appointed
in 2005, and served as Executive Vice President of the Company from 1994 to
2005. Mr Taubman is also the Executive Vice President of the Manager, a position
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 has been the Chairman of Chazen Capital Partners, a
private investment company, since 1996. Mr. Chazen is also the Chairman Emeritus
of Liz Claiborne, Inc., a company he founded with four other partners in 1976.
He also serves as a board member, executive or trustee for numerous educational
and charitable organizations. 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.
From 2002-2005, Mr. Hatkoff was 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 a co-founder of the Tribeca Film
Festival. 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.
Robert S. Taubman is the Chairman of the Board, and President and Chief
Executive Officer of the Company and the Manager, which is a subsidiary of TRG.
Mr. Taubman has been Chairman since December 2001 and President and CEO since
1990. 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 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 the Chief Financial Officer and Vice Chairman of the
Company, as appointed in 2005, and previously served as the Executive Vice
President and the Chief Financial and Administrative Officer of the Company from
1997 to 2005. 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.
William U. Parfet is currently chairman and chief executive officer of MPI
Research, a Michigan-based, privately-held research laboratory conducting risk
assessment toxicology studies. From 1993 to 1996, he served as president & chief
executive officer of Richard-Allan Medical Industries (now Fisher Scientific), a
worldwide manufacturer of surgical and laboratory products. Prior to that, he
had served in a variety of positions at The Upjohn Company, a pharmaceutical
company, most recently as Vice Chairman of the Board. He currently serves on the
boards of Monsanto Company, where he chairs the Audit Committee, PAREXEL,
12
and Stryker Corporation, where he is the lead director and chairs the Audit
Committee. Mr. Parfet has been a director of the Company since 2005.
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 Taubman
Company LLC, a position he has held since September 2004. Mr. Kieras was a Group
Vice President, Development of The Taubman Company LLC from 2001 to September
2004, a Vice President, Development from 1998 to 2001 and a Director,
Development from 1990, when he joined The Taubman Company LLC, to 1998.
David T. Weinert is Senior Vice President, Leasing of The Taubman Company
LLC, a position he has held since July 2004. Mr. Weinert was a Group Vice
President, Leasing of The Taubman Company LLC from 2001 to July 2004, a Vice
President heading leasing for The Taubman Company LLC's western region based in
San Francisco from 1992 to 2001 and served The Taubman Company LLC's leasing
department in various other capacities between 1986 and 1992.
Robert R. Reese is Senior Vice President, Chief Administrative Officer of
The Taubman Company LLC, a position he has held since June 2005. Mr. Reese was
Senior Vice President, Strategy and Business Performance of The Taubman Company
LLC from 2004 to June 2005. Prior to joining Taubman, Mr. Reese was a partner in
the Chicago-based management consulting firm of RNW Consulting from 1998 to
2004, where he advised Taubman on a range of corporate performance initiatives.
Earlier in his career he served as a senior manager with Accenture and a vice
president at Citibank.
THE BOARD OF DIRECTORS AND COMMITTEES
During 2005, the Board consisted of nine directors, held four meetings and
acted once by unanimous written consent. The table below sets forth the
membership and meeting information for the four standing committees of the Board
in 2005(1):
NOMINATING AND
CORPORATE
NAME AUDIT COMPENSATION GOVERNANCE EXECUTIVE
---- -------- ------------ -------------- ---------
Graham T. Allison......................... X -- -- X
Peter Karmanos, Jr. ...................... X X -- --
William S. Taubman........................ -- -- -- --
Allan J. Bloostein........................ X -- Chairman X
Jerome A. Chazen.......................... Chairman X X --
Craig M. Hatkoff.......................... X Chairman X --
Robert S. Taubman......................... -- -- -- Chairman
Lisa A. Payne............................. -- -- -- --
William U. Parfet(2)...................... -- -- -- --
Meetings................................ 7 3 10 1
Action by Unanimous Written Consent..... -- -- -- 1
---------------
(1) On March 8, 2006, the Board changed the composition of the four standing
committees. As of March 23, 2006, the committees now consist of the
following directors: (1) Audit -- Messrs. Chazen (Chairman), Hatkoff and
Parfet; (2) Compensation -- Messrs Hatkoff (Chairman), Chazen and Karmanos,
Jr.; (3) Nominating and Corporate Governance -- Messrs. Bloostein
(Chairman), Allison and Parfet; and (4) Executive -- Messrs. R. Taubman
(Chairman), Allison and Bloostein.
(2) Mr. Parfet became a director in December 2005, and joined the Audit
Committee in March 2006.
13
The Company's Board has determined, after considering all of the relevant
facts and circumstances, that Messrs. Allison, Bloostein, Chazen, Hatkoff,
Karmanos and Parfet 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 determine that a director does not have any direct or indirect
material relationships with the Company and must meet the categorical and other
criteria for independence set forth in the Company's Corporate Governance
Guidelines.
The Audit Committee, the Compensation Committee and the Nominating and
Corporate Governance Committee are composed entirely of independent directors.
During 2005, all directors attended at least 75%, in aggregate, of the meetings
of the Board of Directors and all committees of the Board on which they served,
except Mr. Parfet who joined the Board in December 2005. Directors are expected
to attend all meetings, including the annual meeting of shareholders, 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 members of the Board in 2005, except
Mr. Parfet (who was not a director of the Company at such time), 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 hold regularly scheduled executive sessions in
which non-management directors meet without the presence of management. These
executive sessions generally occur around regularly scheduled meetings of the
Board of Directors. Each meeting, the position of presiding director is rotated
in alphabetical order among the non-management directors. For more information
regarding the Company's Board of Directors and other corporate governance
procedures, see "Corporate Governance" below. For information on how you can
communicate with the Company's non-management directors, including the presiding
director, see "Communicating with the Board" below.
Audit Committee. 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. See "Report of the Audit Committee." 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").
Each of the directors on the Audit Committee is financially literate. The
Board of Directors has determined that Mr. Parfet qualifies as an "audit
committee financial expert" within the meaning of SEC regulations and that he
has the accounting and related financial management expertise required by the
NYSE listing requirements.
Compensation Committee. The Compensation Committee's primary
responsibility is to review the compensation and employee benefit policies
applicable to employees of The Taubman Company LLC (the "Manager") and, in
particular, senior management. See "Compensation Committee Report on Executive
Compensation." The Compensation Committee's charter is posted at www.taubman.com
in the Corporate Governance Section.
Executive Committee. The Executive Committee has the authority to exercise
many of the functions of the full Board of Directors between meetings of the
Board.
Nominating and Corporate Governance Committee. 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 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
14
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 committee generally relies on multiple sources for identifying and
evaluating nominees, including referrals from the Company's current directors
and management. In 2005, the Nominating and Corporate Governance Committee
engaged Highland Partners to assist the committee in identifying nominees for an
open position on the Board. Mr. Parfet was introduced to the committee as a
candidate for the Board position by Robert Taubman, who was an acquaintance of
Mr. Parfet. The committee spent nearly a year evaluating numerous candidates and
conducting interviews before finally choosing to nominate Mr. Parfet.
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.
The Company did not receive any timely nominations of directors by shareholders
for the 2006 annual meeting of shareholders.
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.
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 2005, the Company paid directors who are neither employees nor
officers of the Company or its subsidiaries an annual fee of $35,000 and a
meeting fee of $1,000 for each Board or committee meeting attended. In addition,
the chair of the audit, compensation and nominating and corporative governance
committees received an annual fee of $12,500, $7,500 and $2,500, respectively.
Furthermore, directors who are neither employees nor officers of the Company or
its subsidiaries each received shares of Common Stock having a fair market value
of $3,750 each quarter (in advance) as part of their annual retainer pursuant to
the Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan; however,
certain of such directors deferred the receipt of such shares in accordance with
the Non-Employee Directors' Deferred Compensation Plan. See Note 6 of
"Securities Authorized For Issuance Under Equity Compensation Plans" above for a
description of such deferred compensation plan. In 2005, the Company paid fees,
in cash and stock, in the aggregate amount of: (i) $54,500 to Mr. Allison, (ii)
$70,000 to Mr. Bloostein, (iii) $86,000 to Mr. Chazen,
15
(iv) $75,000 to Mr. Hatkoff and (v) $53,500 to Mr. Karmanos, for their services
as directors of the Company. Mr. Parfet did not receive any cash or shares of
common stock in 2005 under the Company's stock grant plan.
Members of the Board of Directors who are employees or officers of the
Company or any of its subsidiaries do not receive any compensation for serving
on the Board of Directors or any committees thereof.
The Company reimburses all directors for expenses incurred in attending
meetings or performing their duties as directors.
CORPORATE GOVERNANCE
The Board of Directors has adopted Corporate Governance Guidelines, a copy
of which can be found at the Company's web site, www.taubman.com, 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, also available
at the Company's web site 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 on the Company's website in the
Corporate Governance Section.
The Company is required to comply with the NYSE listing standards
applicable to corporate governance and on May 20, 2005, the Company timely
submitted to the NYSE the Annual CEO Certification, pursuant to Section 303A.12
of the NYSE's listing standards, whereby the Chief Executive Officer of the
Company, Robert S. Taubman, certified that he is not aware of any violation by
the Company of the NYSE's corporate governance listing standards as of the date
of the certification. In addition, the Company has filed with the SEC, as
exhibits to its Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 2005, respectively, and its Annual Report on Form 10-K
for the year ended December 31, 2005, certifications by the Company's CEO and
CFO in accordance with Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
A copy of the Company's committee charters, Code of Business Conduct and
Ethics and Corporate Governance Guidelines 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.
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);
16
- 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 at www.taubman.com in the Corporate Governance Section in the
document entitled, "Procedures for Submitting Concerns About the Company's
Accounting and Auditing Matters." Employees may submit such concerns on a
confidential and anonymous basis.
Communications will be made available to directors at any time upon their
request.
RELATED PARTY 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.
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 $1.6 million in 2005.
During 2005, the Manager paid approximately $1.9 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. The office lease, which was
renewed in 2004, effective May 1, 2005 terminates in April 2015. The lease also
provides for a five year renewal option at the end of the term. During 2005, the
Manager had an option to reduce the amount of space leased by up to 19% but
elected not to do so. The Manager also has an option to surrender an additional
10% of space in 2010. Effective May 1, 2005, the first year annual rent is $1.4
million, the second to fifth years' rent will be $2.4 million per year and the
sixth to tenth years' rent will be $2.6 million per year. The Manager received
an allowance in 2005 for $3.4 million based upon the actual amount of space
leased. In 2006, the Manager will receive an additional allowance of $368,000
based upon the square footage not surrendered in 2005.
The Taubman Asset Group, an entity which manages the personal assets of,
and provides administrative services to, 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
$235,000 in 2005, representing their pro rata share of the total occupancy
costs. In addition, Taubman Asset Group also paid the Manager approximately
$326,000 for their pro rata share of office renovation costs. The Taubman Asset
Group also received approximately $214,000 as their share of the allowance. 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 $720,000 in 2005, representing 100% reimbursement of the costs
associated with their employees' participation in the benefit program plus a 15%
administrative fee. Offsetting this expense is a $144,000 refund paid, by the
Manager, due to a health and dental surplus as a result of lower claims. This
refund was calculated based on their share of participating employees' in the
benefit program. The Manager leases a corporate jet for business use and was
reimbursed approximately $273,000 in 2005 by the Taubman Family for incidental
personal use of the corporate jet, representing 100% of the incremental costs of
such use.
17
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.
As of the date hereof, TRG has received $342,000 in connection with such
reimbursement obligations.
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 at www.taubman.com in the Corporate Governance Section. Each
of the members of the Audit Committee is independent as independence for audit
committee members is 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 2005. First,
the Audit Committee discussed with KPMG, the Company's independent registered
public accounting firm for 2005, those matters required to be communicated and
discussed between an issuer's independent registered public accounting firm 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 KPMG its independence and received a letter from KPMG 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.
18
Finally, the Audit Committee reviewed and discussed, with management and KPMG
(with regard to 2004 and 2005 only), the Company's audited consolidated balance
sheets for December 31, 2005 and 2004, and consolidated statements of
operations, cash flows and shareowners' equity for the two years ended December
31, 2005. The Company's principal accountant in 2003 was Deloitte & Touche LLP.
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 2005 Annual Report on Form 10-K.
AUDIT FEES. The Company was billed $1,148,141 and $963,500 by KPMG for
Audit Services in 2005 and 2004, respectively. "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 $593,000 and $546,000 in 2005 and 2004,
respectively, related to individual shopping center audit reports and accounting
consultations and $42,000 and $32,500 in 2005 and 2004, respectively, related to
audit work done in connection with equity offerings. All of the Audit Services
provided to the Company by KPMG during 2005 and 2004 were pre-approved by the
Audit Committee.
AUDIT-RELATED FEES. The Company was billed $17,500 and $16,500 by KPMG in
2005 and 2004, 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 were pre-approved by the Audit Committee.
TAX FEES. The Company was billed $2,100 and $2,000 by KPMG in 2005 and
2004, respectively, for the preparation of a Form 5500 in connection with the
audit of the Company's 401(k) plan. All of the tax related services provided to
the Company by KPMG during 2005 and 2004 were pre-approved by the Audit
Committee.
ALL OTHER FEES. The Company did not incur any other fees to KPMG in 2005
or 2004.
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.
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
Craig M. Hatkoff
William U. Parfet
19
EXECUTIVE COMPENSATION
The following tables set forth information concerning the annual and
long-term compensation of those persons who during 2005 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 AWARDS PAYOUTS
-------------------- ----------------------- ----------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
SALARY(1) BONUS(2) AWARDS(3) OPTIONS PAYOUTS(4) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
--------------------------- ---- --------- -------- ---------- ---------- ---------- ------------
Robert S. Taubman......... 2005 $750,000 $609,375 $949,257 99,202 $1,436,640 $32,834(5)
Chairman of the Board, 2004 778,846 498,750 -- -- 1,313,516 28,775
President and Chief 2003 750,000 572,500 -- -- 1,469,398 26,693
Executive Officer
Lisa A. Payne............. 2005 $500,000 $406,250 $507,347 153,019 $ 823,440 $31,196(6)
Vice Chairman and 2004 519,231 375,000 -- -- 592,465 26,202
Chief Financial Officer 2003 500,000 370,625 -- -- 622,056 27,874
William S. Taubman........ 2005 $487,500 $406,250 $476,757 49,825 $ 654,080 $32,254(7)
Chief Operating Officer 2004 506,250 332,500 -- -- 592,465 28,372
2003 487,500 370,625 -- -- 611,587 26,341
Stephen J. Kieras(8)...... 2005 $274,615 $295,750 $125,303 93,095 $ 79,232 $23,160(9)
Senior Vice President, 2004 239,115 231,000 -- -- 66,942 19,764
Development of TTC
David T. Weinert(10)...... 2005 $294,615 $316,875 $130,500 93,638 $ 100,740 $28,011(12)
Senior Vice President, 2004 289,823(4) 540,800(11) -- -- 91,723 25,344
Leasing of TTC
---------------
(1) Salary amounts for 2004 include one additional pay period compared with
2005 and 2003.
(2) Reflects bonus amounts awarded in 2004 and 2005 under the Annual Bonus Plan
and in 2003 under the Senior Short-Term Incentive Plan.
(3) Reflects the dollar value of 2005 awards of restricted stock units under
The Taubman Company 2005 Long-Term Incentive Plan based on the closing
price of $31.31 on the date of grant. The number of restricted stock units
granted in 2005 were as follows: (a) Mr. R. Taubman, 30,318 units, (b) Ms.
Payne, 16,204 units, (c) Mr. W. Taubman, 15,227 units, (d) Mr. Kieras,
4,002 units and (e) Mr. Weinert, 4,168 units. Each restricted stock unit
granted in 2005 represents the right to receive, upon the vesting date of
March 1, 2008 (unless otherwise vested earlier in accordance with its
terms), one share of Common Stock, plus a cash payment equal to all
dividends that would have been paid on such shares if they had been
outstanding from the grant date to the vesting date. See "Compensation
Committee Report on Executive Compensation" below for a description of the
plan.
As of December 31, 2005, the aggregate amount of restricted stock units
held by each Named Officer, and the dollar value of such units (based on
the closing price of $34.75 on December 31, 2005) is:
NUMBER OF RESTRICTED
NAME STOCK UNITS VALUE
---- -------------------- ----------
Robert S. Taubman......................................... 30,318 $1,053,551
Lisa A. Payne............................................. 16,204 $ 563,089
William S. Taubman........................................ 15,227 $ 529,138
Stephen J. Kieras......................................... 4,002 $ 139,070
David T. Weinert.......................................... 4,168 $ 144,838
20
(4) 2003, 2004 and 2005 amounts reflect payouts of 2000, 2001 and 2002 Cash
Awards, respectively, made under the Manager's Long-Term Performance
Compensation Plan. The 2000, 2001 and 2002 Cash Awards included a premium.
See "Compensation Committee Report on Executive Compensation" below for a
description of the plan.
(5) Includes $17,100 contributed to the defined contribution plan (the
"Retirement Savings Plan") on behalf of Mr. Robert S. Taubman and $15,734
accrued under the supplemental retirement savings plan (the "Supplemental
Retirement Savings Plan").
(6) Includes $17,100 contributed to the Retirement Savings Plan on behalf of
Ms. Payne, $12,052 accrued under the Supplemental Retirement Savings Plan
and $2,044 for travel reimbursements deemed compensation under Internal
Revenue Service rules.
(7) Includes $17,100 contributed to the Retirement Savings Plan on behalf of
Mr. William S. Taubman and $15,154 accrued under the Supplemental
Retirement Savings Plan.
(8) Mr. Kieras became an executive officer in September 2004.
(9) Includes $17,100 contributed to the Retirement Savings Plan on behalf of
Mr. Kieras and $6,060 accrued under the Supplemental Retirement Savings
Plan.
(10) Mr. Weinert became as executive officer in July 2004.
(11) 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.
(12) Includes $17,100 contributed to the Retirement Savings Plan on behalf of
Mr. Weinert and $10,911 accrued under the Supplemental Retirement Savings
Plan.
INCENTIVE OPTION PLAN
TRG maintains the 1992 Incentive Option Plan for its employees with respect
to Units of Partnership Interest in TRG. Upon exercise, it is anticipated that
substantially all employees will exchange each underlying Unit for one share of
the Company's Common Stock under the Continuing Offer.
OPTION GRANTS IN 2005
NUMBER OF UNITS OF
PARTNERSHIP INTEREST PERCENT OF TOTAL GRANT DATE
UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE OR BASE PRESENT
NAME GRANTED (#) (1) EMPLOYEES IN 2005 PRICE ($/UNIT) EXPIRATION DATE VALUE(2)
---- -------------------- ------------------ ---------------- --------------- ----------
Robert S. Taubman....... 99,202 11% $31.31 5/18/15 $510,593
Lisa A. Payne........... 100,000 11% $29.38 3/4/15 $318,500
53,019 6% $31.31 5/18/15 $272,889
William S. Taubman...... 49,825 6% $31.31 5/18/15 $256,449
Stephen J. Kieras....... 80,000 9% $29.38 3/4/15 $254,800
13,095 1% $31.31 5/18/15 $ 67,400
David T. Weinert........ 80,000 9% $29.38 3/4/15 $254,800
13,638 2% $31.31 5/18/15 $ 70,195
---------------
(1) Exchangeable for an equal number of shares of Common Stock under the
Company's Continuing Offer. Each option with a 3/4/15 expiration date vests
in one-third increments at each of the third, fifth, and seventh years of
the grant anniversary if continuous service has been provided and certain
conditions dependent on the Company's market performance in comparison to
its competitors have been met. Each option with a 5/18/15 expiration date
vests in one-third increments at each of the first, second, and third years
of the grant anniversary, if continuous service has been provided. The
options have ten-year contractual terms from the date of grant.
21
(2) The Company has estimated the value of the options issued in 2005 using a
Black-Scholes valuation model based on the following assumptions: expected
volatility of 21.0%, expected dividend of 4.0%, expected term of 7.0 years,
and risk-free rates of 3.83% to 4.15%. Expected volatility and dividend
yields are based on historical volatility and yields of the Company's stock,
respectively, as well as other factors. In developing the assumption of
expected term, the Company has considered the vesting and contractual terms
as well as the expected terms of options disclosed by members of its peer
group. The risk-free rates used are based on the U.S. Treasury yield curves
in effect at the time of grants. For the options for which vesting is
dependent on the Company's market performance in comparison to its
competitors, the Company used a Monte Carlo simulation to estimate the
probability of the vesting conditions being met.
AGGREGATED OPTION EXERCISES DURING 2005 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
Robert S. Taubman...... 47,508(2) $ 917,855 99,202 $341,255
Lisa A. Payne.......... -- -- -- 153,019 -- 719,385
William S. Taubman..... 508,008(2) 8,534,715 49,825 171,398
Stephen J. Kieras...... -- -- -- 93,095 -- 474,647
David T. Weinert....... -- -- -- 93,638 -- 476,515
---------------
(1) In accordance with the SEC's rules, based on the difference between fair
market value of Common Stock, which was $34.75 on December 31, 2005 (the
closing price), 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 INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Craig M. Hatkoff (Chairman),
Jerome A. Chazen and Peter Karmanos, Jr. None of the members of the Compensation
Committee is or has been an officer or an employee of the Company. In addition,
during 2005, none of the Company's executive officers served on the board of
directors or compensation committee (or committee performing equivalent
functions) of any other company that had one or more executive officers serving
on the Company's Board of Directors or Compensation Committee.
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,
22
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 2005 compensation of the Named Officers was consistent
with the Manager's compensation philosophy.
The Manager's compensation program for executive officers currently
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 Taubman Company 2005
Long-Term Incentive Plan. The compensation of the Named Officers is determined
based on their individual performance and the performance of the Company, TRG,
and the Manager.
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.
Bonuses. Under the Annual Bonus Plan, bonuses are only paid if the
Company's performance meets certain funds from operations and net operating
income growth targets which are approved annually by the Board of Directors. The
funds for the total bonus pool are determined based on Company performance.
Payments to individuals are then determined based upon their annual performance
review, and bonuses can range from 0% to 200% of their target bonus amount.
Incentive Option Plan. The Compensation Committee determines the grants of
incentive options under the Manager's Incentive Option Plan to the Named
Officers, as shown in the table entitled "Incentive Option Grants in 2005." 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, and a person is permitted to
pay such exercise price by surrendering a portion of the Units of Partnership
Interest that would be otherwise received upon exercise. The Compensation
Committee may allow an exercise at any time more than six months after the date
of grant, but Incentive Options generally vest in one-third increments over a
period of years. If the optionee's employment terminates prior to vesting 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.
The Taubman Company 2005 Long-Term Incentive Plan. The Compensation
Committee made grants of restricted stock units under The Taubman Company 2005
Long-Term Incentive Plan ("LTIP")to the Named Officers in 2005, as shown in the
table entitled "Summary Compensation Table." Awards under the LTIP consist of
restricted stock units ("RSUs"). Each RSU represents the right to receive upon
vesting one share of the Company's Common Stock. Upon vesting, a participant
will be entitled to receive a cash payment equal to the aggregate cash dividends
that would have been paid on such shares of Common Stock as if outstanding from
the date of the grant. Although the LTIP allows 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. 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 defined therein) 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. A recipient of an award granted under the LTIP
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.
23
Long-Term Performance Compensation Plan. From 1996 through 2004, awards
under the Long-Term Performance Compensation Plan were generally favored over
Incentive Options as the primary source of incentive compensation to the
executive officers. There were no awards made under the Long-Term Performance
Compensation Plan in 2005, and the Company will not make any new awards under
the Long-Term Performance Compensation Plan in the future, due to the
implementation of The Taubman Company 2005 Long-Term Incentive Plan. Previously,
employees of the Manager received 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, as publicly reported by the Company, subject to reasonable
adjustments such as changes in accounting policies and extraordinary or
non-recurring items, over the 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. Upon vesting, the value of the award under the Long-Term
Performance Compensation Plan is 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 Compensation 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.
Compensation of Chief Executive Officer. Robert S. Taubman's base salary
for 2005 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 2005 in the amount of $609,375 and his incentive compensation under the
Incentive Option Plan and The Taubman Company 2005 Long-Term Incentive Plan, as
set forth in the Summary Compensation Table and the table entitled "Incentive
Option Grants in 2005," were consistent with the Manager's compensation
philosophy.
THE COMPENSATION COMMITTEE
Craig M. Hatkoff, Chairman
Jerome A. Chazen
Peter Karmanos, Jr.
24
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 MSCI US REIT Index, the
NAREIT Equity Retail REIT Index and the S&P Composite -- 500 Stock Index for the
period December 31, 2000 through December 31, 2005 (assuming, in all cases, the
reinvestment of dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
--------------------------------------------------------------------------------
Taubman
Centers,
Inc. $100.00 $146.43 $171.12 $229.29 $347.87 $418.72
MSCI US REIT
Index $100.00 $112.83 $116.94 $159.91 $210.26 $235.78
NAREIT Equity
Retail REIT
Index $100.00 $130.42 $157.90 $231.75 $324.98 $363.33
S&P 500 Index $100.00 $ 88.11 $ 68.64 $ 88.33 $ 97.94 $102.75
--------------------------------------------------------------------------------
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. Since the end of the initial term of such employment agreement, the
agreement has been extended pursuant to one-year automatic renewals in
accordance with its terms. The agreement shall continue to be extended pursuant
to the one-year automatic renewal provision unless either party gives notice to
the contrary. The employment agreement provides for an annual base salary of not
less than $500,000, with consideration of upward adjustments 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 target bonus for the
25
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 June 2005, Ms. Payne became the Company's and Manager's Vice Chairman in
addition to her role as Chief Financial Officer.
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.
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 Compensation Plan will vest and be immediately paid in full.
26
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 Change of Control Agreements described above,
participate. 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, various compensation and benefits
specified therein.
ITEM 2 -- 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, 2006. 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 and 2005. Deloitte & Touche LLP
("Deloitte") served as the Company's independent registered public accounting
firm for 2003. 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 1, 2005, the Audit Committee appointed KPMG as the independent
registered public accounting firm to audit the financial statements of the
Company for 2005. On May 18, 2005, the shareholders of the Company ratified the
selection of KPMG at the annual meeting of shareholders. See "Report of the
Audit Committee" for a description of fees and other matters related to KPMG's
provision of services to the Company.
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 (the date KPMG replaced Deloitte
as the Company's independent registered public accounting firm), 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 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.
27
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. 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 2007 ANNUAL MEETING
Any shareholder proposal intended to be presented for consideration at the
annual meeting to be held in 2007 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, 2006, 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 2007 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 between February 15, 2007 and the close of business on March 16, 2007 to
be considered timely.
HOUSEHOLDING
The Company has elected to send a single copy of its annual report and this
Proxy Statement to any household at which two or more shareholders reside unless
one of the shareholders at such address provides notice that they wish to
receive individual copies or has elected electronic delivery of proxy materials.
This "householding" practice reduces the Company's printing and postage costs.
Shareholders may request to discontinue or re-start householding, or to request
a separate copy of the 2006 annual report and proxy statement, as follows:
- Shareholders owning their Voting Stock through a bank, broker or other
holder of record should contact such record holder directly; and
- Record shareholders should contact ADP Investor Communications, toll-free
at 1-800-542-1061, or may write to: ADP Investor Communications,
Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 2005,
including financial statements for the years ended December 31, 2005 and 2004
audited by KPMG, LLP, the Company's independent registered public accounting
firm, and financial statements for the year ended December 31, 2003 audited by
Deloitte & Touche LLP, the Company's former independent registered public
accounting firm, are being furnished with the Proxy Statement.
Please complete the enclosed proxy card and mail it in the enclosed
postage-paid envelope as soon as possible. Alternatively, please vote via
telephone or internet (as indicated on your proxy card).
By Order of the Board of Directors,
Robert S. Taubman,
Chairman of the Board, President and
Chief Executive Officer
April 5, 2006
28
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 2006
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 Monday, May 15, 2006, 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.
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.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
------------------------------------------------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS
------------------------------------------------------------------------------------------------------------------------
Nominees FOR WITHHOLD WITHHOLD
AUTHORITY AUTHORITY
to vote for all Nominees to vote for Nominees(s)
named below
/ /
------------------------------------------------------------------------------------------------------------------------
01 William S. Taubman / / / /
------------------------------------------------------------------------------------------------------------------------
02 Graham T. Allison / / / /
------------------------------------------------------------------------------------------------------------------------
03 Peter Karmanos, Jr. / / / /
------------------------------------------------------------------------------------------------------------------------
(each for a three year term)
-------------------------------------------------------------
2. RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
------------------------------------------------------------------------------------------------------------------------
Ratification of the selection of KPMG LLP as independent FOR AGAINST ABSTAIN
registered public accounting firm for 2006. / / / / / /
------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------
Signature
Dated: , 2006
/\ FOLD AND DETACH HERE /\
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 15, 2006
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 Monday, May 15, 2006, 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.
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
Nominees: William S. Taubman, Graham T. Allison and Peter
Karmanos, Jr. (each for a three-year term)
FOR WITHHOLD WITHHOLD AUTHORITY
AUTHORITY To vote for Nominee(s)
To vote for all Named below
Nominees
/ / / / / /
---------------------
2. RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ratification of the selection of KPMG LLP as
independent registered public accounting firm for
2006.
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