-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NGGf9OgcqBuEcbyXoGhQPiCRIv5Rwkg6rswnGXYckyRNCrD4CQN/UyiYFsZYk1bf qTukG4cSToZx0ELT3TX5uw== 0000898822-03-000507.txt : 20030512 0000898822-03-000507.hdr.sgml : 20030512 20030512171617 ACCESSION NUMBER: 0000898822-03-000507 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20030512 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TAUBMAN CENTERS INC CENTRAL INDEX KEY: 0000890319 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 382933632 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42862 FILM NUMBER: 03693457 BUSINESS ADDRESS: STREET 1: 200 E LONG LAKE RD STREET 2: SUITE 300 P O BOX 200 CITY: BLOOMFIELD HILLS STATE: MI ZIP: 48303-0200 BUSINESS PHONE: 2482586800 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TAUBMAN CENTERS INC CENTRAL INDEX KEY: 0000890319 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 382933632 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 200 E LONG LAKE RD STREET 2: SUITE 300 P O BOX 200 CITY: BLOOMFIELD HILLS STATE: MI ZIP: 48303-0200 BUSINESS PHONE: 2482586800 SC 14D9/A 1 may12sched14d9a.txt AMENDMENT NO. 30 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------------- SCHEDULE 14D-9/A SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 30) --------------------- TAUBMAN CENTERS, INC. (Name of Subject Company) TAUBMAN CENTERS, INC. (Name of Person(s) Filing Statement) COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) 876664103 (CUSIP Number of Class of Securities) --------------------- LISA A. PAYNE TAUBMAN CENTERS, INC. 200 EAST LONG LAKE ROAD SUITE 300, P.O. BOX 200 BLOOMFIELD HILLS, MICHIGAN 48303 (248) 258-6800 (Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications on Behalf of the Person(s) Filing Statement) -------------------- WITH COPIES TO: CYRIL MOSCOW JEFFREY H. MIRO ADAM O. EMMERICH HONIGMAN MILLER SCHWARTZ AND KENNETH H. GOLD TREVOR S. NORWITZ COHN, LLP MIRO, WEINER & KRAMER ROBIN PANOVKA 2290 FIRST NATIONAL BUILDING 38500 WOODWARD AVENUE, WACHTELL, LIPTON, ROSEN 660 WOODWARD AVENUE SUITE 100 & KATZ DETROIT, MICHIGAN 48226-3583 BLOOMFIELD HILLS, 51 WEST 52ND STREET (313) 465-7000 MICHIGAN 48303 NEW YORK, NEW YORK 10019 (248) 646-2400 (212) 403-1000 [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. ================================================================================ This Amendment No. 30 amends and supplements the Solicitation/ Recommendation Statement on Schedule 14D-9 initially filed with the Securities and Exchange Commission (the "Commission") on December 11, 2002 (as subsequently amended, the "Schedule 14D-9"), by Taubman Centers, Inc., a Michigan corporation (the "Company" or "Taubman Centers") relating to the tender offer made by Simon Property Acquisitions, Inc. ("Offeror"), a wholly owned subsidiary of Simon Property Group, Inc. ("Simon") and Westfield America, Inc. ("Westfield"), as set forth in a Tender Offer Statement filed by Simon on Schedule TO, dated December 5, 2002 (the "Schedule TO") and a Supplement to the Offer to Purchase as subsequently amended, dated January 15, 2003 filed by Simon on Schedule TO-T/A (Amendment No. 6) (the "Supplement"), to pay $20.00 net to the seller in cash, without interest thereon, for each Common Share, upon the terms and subject to the conditions set forth in the Schedule TO and the Supplement as subsequently amended. Unless otherwise indicated, all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Schedule 14D-9. ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND ARRANGEMENTS. Item 3 is hereby amended and supplemented by adding thereto the following: In order to ensure that the associates of Taubman Centers are able to focus on conducting the business of the Company rather than being distracted by events surrounding the hostile takeover bid by Simon and Westfield, the Board of Directors of the Company has decided to implement a program that will provide a measure of protection for associates who are terminated following a change in control. These arrangements, which are described below, will apply to all employees of the Company other than Robert and William Taubman. Under the program, an associate will receive benefits if there is both a change in control of the Company (as defined) and a termination or constructive termination of that associate's employment. The program is also intended to protect the Company from the attempts of competitors, including Simon and Westfield, to take advantage of the situation by seeking to hire away key employees from the Company. The Company retained a nationally-recognized compensation consulting firm to determine best practices related to such arrangements. After considering the recommendations of the consultants and reviewing the results of their survey of regional mall REITs, shopping center and office REITS, as well as companies in other industries, the Board has determined to enter into and adopt the following arrangements. CHANGE OF CONTROL EMPLOYMENT AGREEMENTS The Company has adopted and plans to enter into change of control employment agreements with each of Lisa A. Payne, Courtney Lord and John L. Simon. TRG has guaranteed the Company's obligations under the Agreements. The employment agreements have three-year terms that 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 or any of its affiliates. If a "change of control," as defined in the agreements, of the Company occurs during the term of an agreement, then the agreement becomes operative for a fixed three-year period commencing on the date of the change of control and supersedes any other employment agreement between the Company and any of its affiliates, on the one hand, and the executive, on the other. Each 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 agreements during this three-year period or upon certain terminations in connection with or in anticipation of a change of control, the executive will be generally entitled to receive: o an annual bonus for the year in which the termination of employment occurs, pro-rated through the date of termination, o two and a half times the executive's annual base salary and annual bonus, o continued welfare benefits and perquisites for thirty months, and o 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, 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 employment 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 SSTIP, rather than the payments and benefits specified above. Each 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: o all of the executive's equity-based compensation awards that are outstanding on the date of the change of control will vest, and o all of the executive's then-outstanding awards under the Long-Term Performance Compensation Plan will be immediately paid in full. Each employment agreement provides that if any payments or benefits that the executive receives are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, the payments under the agreement will be reduced to the maximum amount that could be paid to the executive without subjecting the executive to any taxes under Section 4999. Under the terms of each employment agreement, the Company is responsible for paying, or causing its affiliates to pay, all legal fees and expenses reasonably incurred by the executive in any dispute concerning the interpretation or enforcement of the agreement. CHANGE OF CONTROL SEVERANCE PROGRAM The Company has adopted a Change of Control Severance 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 that a change of control occurs and who are not party to the employment agreements described above participate. The program supercedes that Company's undocumented existing severance program and provides benefits comparable to those the Company has provided in the past. The program provides generally that if a participant's employment with the Company and any of its affiliates is terminated other than for cause, death or disability or if the participant resigns for "good reason," as defined in the program, during the two-year period following a change of control, in the case of participants who are Group Vice Presidents, or during the one-year period following a change of control, in the case of all other participants, a participant will be generally entitled to receive, subject to the participant's execution and non-revocation of a release: o a lump sum separation benefit equal to 1/12 of the participant's annual base salary and annual bonus, times the participant's years of service with the Company and its affiliates, o medical, dental and vision benefit continuation, and if eligible immediately prior to the change of control or at any time thereafter, executive disability benefit continuation, for a period equal to the number of months of severance to which the participant is entitled, o repurchase for $1000 by the Taubman Company Limited Partnership of the participant's T-I REIT share granted to the participant under a bonus award agreement, and o outplacement services. The separation benefit will be subject to a maximum of 24 months' base salary and bonus and a minimum of 16 months' base salary and bonus, in the case of participants who are Group Vice Presidents, 12 months' base salary and bonus, in the case of participants who are exempt and LTPC plan-eligible associates (other than Group Vice Presidents), six months' base salary and bonus, in the case of participants who are exempt and non-LTPC plan-eligible associates, and three months' base salary and bonus, in the case of participants who are non-exempt associates. For participants who are participants in the SSTIP, the annual bonus component of the participant's separation benefit will be 130% of the higher of the participant's target bonus for the year in which the change of control occurs and the highest target bonus established for the participant in any subsequent year. For participants who are participants in the Specialty Retail Bonus Plan or the Leasing Bonus (WITY) Plan, the annual bonus component of the participant's separation benefit will be equal to the higher of (i) the average of the participant's actual bonuses for the three years immediately preceding the change of control (or, if the participant has not been employed by the Company and its affiliates for three years prior to the change of control, such lesser number of years during which the participant was employed by the Company and its affiliates) or (ii) the highest actual bonus paid to the participant for any subsequent year (if any). The program also provides that effective as of the occurrence of a change of control: o each participant's equity-based compensation awards will vest, and o the participant's awards under the Long-Term Performance Compensation Plan will be immediately paid in full. The program provides that if any payments or benefits that any participant receives are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, the payments under the program will be reduced to the maximum amount that could be paid to such participant without subjecting the participant to any taxes under Section 4999. Under the terms of the program, the Company is responsible for paying, or causing its affiliates to pay, all reasonable legal fees and expenses incurred by a participant in any dispute concerning the interpretation or enforcement of the agreement, provided that the Company and its affiliates will not be obligated to reimburse a participant for legal fees and expenses incurred in connection with a claim that is frivolous or maintained in bad faith. The Company's board of directors reserves the right to amend, modify, suspend or terminate the program at any time, but no amendment, modification, suspension or termination after the occurrence of a change of control that has the effect of reducing or diminishing the right of any participant will be effective without the written consent of the participant. In the event of an impending change of control, the committee administering the program may appoint a person independent of the Company to be the committee that administers the program effective upon the occurrence of the change of control and such committee may not be removed following a change of control. The Company and its affiliates are jointly and severally liable for the Company's obligations under the change of control severance program. ITEM 9. EXHIBITS. Item 9 is hereby amended and supplemented by adding thereto the following: EXHIBIT NO. DESCRIPTION ___________ ___________ (e)(11) Form of Change of Control Employment Agreement (e)(12) Change of Control Employment Agreement by and between Taubman Centers, Inc., Taubman Realty Group Limited Partnership and Lisa A. Payne (e)(13) Taubman Centers, Inc. Change of Control Severance Program SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: May 12, 2003 Taubman Centers, Inc. By: /s/ Lisa A. Payne ---------------------------- Lisa A. Payne Executive Vice President, Chief Financial Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ___________ ___________ (e)(11) Form of Change of Control Employment Agreement (e)(12) Change of Control Employment Agreement by and between Taubman Centers, Inc., Taubman Realty Group Limited Partnership and Lisa A. Payne (e)(13) Taubman Centers, Inc. Change of Control Severance Program EX-99 3 may12exe11tosched14d9a.txt FORM OF CHANGE OF CONTROL EMPLOYMENT AGREEMENT CHANGE OF CONTROL EMPLOYMENT AGREEMENT AGREEMENT, dated as of the [____] day of May, 2003 (this "Agreement"), by and between Taubman Centers Inc., a Michigan corporation (together with its successors, "Taubman"), Taubman Realty Group Limited Partnership, a Delaware limited partnership ("TRG") and [_________] (the "Executive"). WHEREAS, the Board of Directors of Taubman (the "Board"), has determined that it is in the best interests of Taubman and its stockholders to assure that the Company (as defined below) will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused Taubman to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Coverage Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Coverage Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Coverage Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, Taubman shall give notice to the Executive that the Coverage Period shall not be so extended. (c) "Affiliated Company" means any company controlled by, controlling or under common control with Taubman. (d) "Change of Control" means the first to occur of any of the following events: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than an Existing Shareholder (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 33% or more of either (A) the then-outstanding shares of common stock of Taubman (the "Outstanding Taubman Common Stock") or (B) the combined voting power of the then-outstanding voting securities of Taubman entitled to vote generally in the election of directors (the "Outstanding Taubman Voting Securities"); provided, however, that, for purposes of this Section 1(d), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from Taubman, (ii) any acquisition by Taubman, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Taubman or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C); (2) Any time at which individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Taubman's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Taubman or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Taubman, or the acquisition of assets or stock of another entity by Taubman or any of its subsidiaries (each, a "Business Combination"), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Taubman Common Stock and the Outstanding Taubman Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns Taubman or all or substantially all of Taubman's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Taubman Common Stock and the Outstanding Taubman Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Taubman or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 33% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; (4) Approval by the stockholders of Taubman of a complete liquidation or dissolution of Taubman; or (5) Termination, non-renewal, material amendment or material modification of the Master Services Agreement between TRG and The Taubman Company LLC dated as of November 30, 1992, as amended through the date hereof or the Corporate Services Agreement between the Taubman and the Taubman Company LLC dated as of November 30, 1992, as amended through the date hereof, other than any such termination, non-renewal, amendment or modification which has been previously approved by a majority of the Independent Directors (as defined in Taubman's Restated Articles of Incorporation) serving on the Incumbent Board. (e) "Company" means Taubman and the Affiliated Companies. (f) "Existing Shareholder" means A. Alfred Taubman or any of his issue or any of his or their respective descendants, heirs, beneficiaries or donees or any trust, corporation, partnership, limited liability company or other entity if substantially all of the economic interests in such entity are held by or for the benefit of such persons. SECTION 2. EMPLOYMENT PERIOD. Taubman hereby agrees to continue, or to cause one of the Affiliated Companies to continue, the Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). The Employment Period shall terminate upon the Executive's termination of employment for any reason. SECTION 3. TERMS OF EMPLOYMENT. (a) Position and Duties. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 35 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary") at an annual rate at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed for increase, but not decrease, at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus earned under the Company's Annual Incentive Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus, and annualized in the case of any bonus earned for a partial fiscal year) (the "Recent Annual Bonus"). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the "Recent Annual Bonus" shall mean the Executive's target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment Period, the Executive shall be entitled to participate in all cash incentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company. Notwithstanding any provision in any plan or award agreement to the contrary, effective as of the Effective Date, each and every stock option, restricted stock award, restricted stock unit award and other equity-based award held by the Executive that is outstanding as of the Change of Control shall immediately vest and become exercisable, and each compensation award (as defined in the Long-Term Performance Compensation Plan (the "LTPC Plan")) granted under the LTPC Plan outstanding as of the Change of Control shall vest and become immediately payable in full (along with any Premium (as defined in the LTPC Plan) thereon, if the FFO Per Share Growth Rate (as defined in the LTPC Plan) for the three full calendar years preceding the date of the Change of Control equals or exceeds 10%). (4) WELFARE BENEFIT PLANS. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company. (6) FRINGE BENEFITS. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company. (7) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company. (8) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If Taubman determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. Taubman may terminate the Executive's employment during the Employment Period with or without Cause. "Cause" means: (1) the willful and continued failure of the Executive to perform substantially the Executive's duties (as contemplated by Section 3(a)(1)(A)) with the Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive's delivery of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of Taubman that specifically identifies the manner in which the Board or the Chief Executive Officer of Taubman believes that the Executive has not substantially performed the Executive's duties, or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of Taubman or a senior officer of Taubman or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason or by the Executive voluntarily without Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of Taubman's ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediately preceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by Taubman to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive's mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect the Executive's ability to terminate employment for Good Reason. (d) NOTICE OF TERMINATION. Any termination by Taubman for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or Taubman to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or Taubman, respectively, hereunder or preclude the Executive or Taubman , respectively, from asserting such fact or circumstance in enforcing the Executive's or Taubman's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by Taubman for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30 days after the giving of such notice), as the case may be, (2) if the Executive's employment is terminated by Taubman other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, and (3) if the Executive resigns without Good Reason, the date on which the Executive notifies the Company of such termination, and (4) if the Executive's employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, Taubman terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) Taubman shall pay, or shall cause one of the Affiliated Company to pay, to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid; (ii) the Executive's business expenses that are reimbursable pursuant to Section 3(b)(5) but have not been reimbursed by the Company as of the Date of Termination; (iii) the Executive's Annual Bonus for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs if such bonus has been determined but not paid as of the Date of Termination; (iv) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365; and (v) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii), (iii), (iv) and (v), the "Accrued Obligations"); (B) the amount equal to the product of (i) two and a half (2.5) and (ii) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and (2) for 30 months after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) and Section 3(b)(6) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their families; provided, however, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employer provided plan, the medical and other welfare benefits described herein shall terminate. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) Taubman shall provide, or shall cause one of the Affiliated Companies to provide, the Executive with outplacement benefits through the services of an independent outplacement consulting firm selected by Taubman during the 12-month period following the Date of Termination; and (4) to the extent not theretofore paid or provided, Taubman shall timely pay or provide, or shall cause one of the Affiliated Companies to timely pay or provide, to the Executive any Other Benefits (as defined in Section 6). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, Taubman shall provide, or shall cause one of the Affiliated Companies to provide, the Executive's estate or beneficiaries with the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company to the estates and beneficiaries of peer executives of the Company under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by Taubman by reason of the Executive's Disability during the Employment Period, Taubman shall provide, or shall cause one of the Affiliated Companies to provide, the Executive with the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated by Taubman for Cause during the Employment Period, Taubman shall provide to the Executive, or shall cause one of the Affiliated Companies to provide to Executive, (1) the Executive's Annual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligations under this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, Taubman shall provide to the Executive, or shall cause one of the Affiliated Companies to provide to the Executive, the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with Taubman or any of the Affiliated Companies at or subsequent to the Date of Termination ("Other Benefits") shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive receives payments and benefits pursuant to Section 5(a) of this Agreement, the Executive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company, unless otherwise specifically provided therein in a specific reference to this Agreement. SECTION 7. FULL SETTLEMENT. Taubman's obligation to make or cause one of the Affiliated Companies to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. Taubman shall pay, or cause one of the Affiliated Companies to pay, as incurred (within 15 days following Taubman's receipt of an invoice from the Executive), to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by Taubman, any of the Affiliated Companies, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. REDUCTION OF PAYMENTS. (a) For purposes of this Section 8: (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii) "Separation Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section); (iii) "Present Value" shall mean such value determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean an amount expressed in Present Value that maximizes the aggregate Present Value of Separation Payments without causing any Payment to be nondeductible because of Section 280G of the Code. (b) Taubman shall select, in its discretion, a nationally recognized accounting firm (the "Accounting Firm") to make the determinations contemplated by this Section 4(g). Anything in the Plan to the contrary notwithstanding, in the event that the Accounting Firm determines that receipt of all Payments would subject the Participant to tax under Section 4999 of the Code, the aggregate Separation Payments shall be reduced (but not below zero) to meet the definition of Reduced Amount. (c) If the Accounting Firm determines that aggregate Separation Payments should be reduced to the Reduced Amount, Taubman shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect, in his or her sole discretion, which and how much of the Separation Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Separation Payments equals the Reduced Amount), and shall advise Taubman in writing of his or her election within ten days of his or her receipt of notice. If no such election is made by the Executive within such ten-day period, Taubman may elect which of such Separation Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Separation Payments equals the Reduced Amount) and shall notify the Executive promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon Taubman and the Affiliated Companies and the Executive and shall be made within 60 days of a termination of employment of the Executive. As promptly as practicable following such determination, Taubman shall pay or distribute, or shall cause one of the Affiliated Companies to pay or distribute, to or for the benefit of the Executive such Separation Payments as are then due to the Executive under this Agreement, and shall promptly pay or distribute, or cause to be paid or distributed, to or for the benefit of the Executive in the future such Separation Payments as become due to the Executive under this Agreement. (d) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against Taubman or any of the Affiliated Companies or the Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed to or for the benefit of the Executive shall be repaid by the Executive; provided, however, that no such payment shall be made by the Executive if and to the extent such payment would neither reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. (e) All fees and expenses of the Accounting Firm in implementing the provisions of this Section 8 shall be borne by the Company. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to Taubman or any of the Affiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of Taubman or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of Taubman, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon Taubman and its successors and assigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by Taubman. (c) Each of Taubman and TRG will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its business and/or assets to assume expressly and agree to perform this Agreement in the same manner and to the same extent that it would be required to perform it if no such succession had taken place. "Taubman" means Taubman as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. "TRG" means TRG as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of [MICHIGAN], without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: At the most recent address on file at the Company if to Taubman: Taubman Centers, Inc. 200 East Long Lake Road Suite 300 Bloomfield Hills, Michigan 48304 Attention: General Counsel if to TRG: Taubman Realty Group Limited Partnership 200 East Long Lake Road Suite 300 Bloomfield Hills, Michigan 48304 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) Taubman may withhold or cause to be withheld from any amounts payable under this Agreement such United States federal, state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or Taubman's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or Taubman may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive, Taubman and TRG acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and Taubman or any of the Affiliated Companies, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, except as specifically provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof SECTION 12. GUARANTEE. TRG hereby irrevocably, absolutely and unconditionally guarantees the payment of all compensation and benefits (the "Benefits") that Taubman is obligated to provide or cause to be provided to the Executive under this Agreement. This is a guarantee of payment and not a collection, and is the primary obligation of TRG, and the Executive may enforce this guarantee against TRG without any prior enforcement of the obligation to make the Benefits against Taubman. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, Taubman and TRG have each caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ---------------------------------------------- [Executive] ---------------------------------------------- TAUBMAN CENTERS INC. As guarantor of Taubman Centers Inc.: ---------------------------------------------- TAUBMAN REALTY GROUP LIMITED PARTNERSHIP EX-99 4 may12exe12tosched14d9a.txt LISA PAYNE CHANGE OF CONTROL EMPLOYMENT AGREEMENT CHANGE OF CONTROL EMPLOYMENT AGREEMENT AGREEMENT, dated as of the 12th day of May, 2003 (this "Agreement"), by and between Taubman Centers Inc., a Michigan corporation (together with its successors, "Taubman"), Taubman Realty Group Limited Partnership, a Delaware limited partnership ("TRG") and Lisa A. Payne (the "Executive"). WHEREAS, the Board of Directors of Taubman (the "Board"), has determined that it is in the best interests of Taubman and its stockholders to assure that the Company (as defined below) will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused Taubman to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Coverage Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Coverage Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Coverage Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, Taubman shall give notice to the Executive that the Coverage Period shall not be so extended. (c) "Affiliated Company" means any company controlled by, controlling or under common control with Taubman. (d) "Change of Control" means the first to occur of any of the following events: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than an Existing Shareholder (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 33% or more of either (A) the then-outstanding shares of common stock of Taubman (the "Outstanding Taubman Common Stock") or (B) the combined voting power of the then-outstanding voting securities of Taubman entitled to vote generally in the election of directors (the "Outstanding Taubman Voting Securities"); provided, however, that, for purposes of this Section 1(d), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from Taubman, (ii) any acquisition by Taubman, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Taubman or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C); (2) Any time at which individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Taubman's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Taubman or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Taubman, or the acquisition of assets or stock of another entity by Taubman or any of its subsidiaries (each, a "Business Combination"), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Taubman Common Stock and the Outstanding Taubman Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns Taubman or all or substantially all of Taubman's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Taubman Common Stock and the Outstanding Taubman Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Taubman or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 33% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; (4) Approval by the stockholders of Taubman of a complete liquidation or dissolution of Taubman; or (5) Termination, non-renewal, material amendment or material modification of the Master Services Agreement between TRG and The Taubman Company LLC dated as of November 30, 1992, as amended through the date hereof or the Corporate Services Agreement between the Taubman and the Taubman Company LLC dated as of November 30, 1992, as amended through the date hereof, other than any such termination, non-renewal, amendment or modification which has been previously approved by a majority of the Independent Directors (as defined in Taubman's Restated Articles of Incorporation) serving on the Incumbent Board. (e) "Company" means Taubman and the Affiliated Companies. (f) "Existing Shareholder" means A. Alfred Taubman or any of his issue or any of his or their respective descendants, heirs, beneficiaries or donees or any trust, corporation, partnership, limited liability company or other entity if substantially all of the economic interests in such entity are held by or for the benefit of such persons. SECTION 2. EMPLOYMENT PERIOD. Taubman hereby agrees to continue, or to cause one of the Affiliated Companies to continue, the Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). The Employment Period shall terminate upon the Executive's termination of employment for any reason. SECTION 3. TERMS OF EMPLOYMENT. (a) Position and Duties. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 35 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary") at an annual rate at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed for increase, but not decrease, at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus earned under the Company's Annual Incentive Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus, and annualized in the case of any bonus earned for a partial fiscal year) (the "Recent Annual Bonus"). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the "Recent Annual Bonus" shall mean the Executive's target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment Period, the Executive shall be entitled to participate in all cash incentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company. Notwithstanding any provision in any plan or award agreement to the contrary, effective as of the Effective Date, each and every stock option, restricted stock award, restricted stock unit award and other equity-based award held by the Executive that is outstanding as of the Change of Control shall immediately vest and become exercisable, and each compensation award (as defined in the Long-Term Performance Compensation Plan (the "LTPC Plan")) granted under the LTPC Plan outstanding as of the Change of Control shall vest and become immediately payable in full (along with any Premium (as defined in the LTPC Plan) thereon, if the FFO Per Share Growth Rate (as defined in the LTPC Plan) for the three full calendar years preceding the date of the Change of Control equals or exceeds 10%). (4) WELFARE BENEFIT PLANS. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company. (6) FRINGE BENEFITS. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company. (7) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company. (8) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If Taubman determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. Taubman may terminate the Executive's employment during the Employment Period with or without Cause. "Cause" means: (1) the willful and continued failure of the Executive to perform substantially the Executive's duties (as contemplated by Section 3(a)(1)(A)) with the Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive's delivery of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of Taubman that specifically identifies the manner in which the Board or the Chief Executive Officer of Taubman believes that the Executive has not substantially performed the Executive's duties, or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of Taubman or a senior officer of Taubman or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason or by the Executive voluntarily without Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of Taubman's ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediately preceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by Taubman to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason pursuant to a Notice of Termination given during the 90-day period immediately following the Effective Date (a "Window Period Termination") shall be deemed to be a termination for Good Reason for all purposes of this Agreement. The Executive's mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect the Executive's ability to terminate employment for Good Reason. (d) NOTICE OF TERMINATION. Any termination by Taubman for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or Taubman to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or Taubman, respectively, hereunder or preclude the Executive or Taubman , respectively, from asserting such fact or circumstance in enforcing the Executive's or Taubman's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by Taubman for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30 days after the giving of such notice), as the case may be, (2) if the Executive's employment is terminated by Taubman other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, and (3) if the Executive resigns without Good Reason, the date on which the Executive notifies the Company of such termination, and (4) if the Executive's employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, Taubman terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) Taubman shall pay, or shall cause one of the Affiliated Company to pay, to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid; (ii) the Executive's business expenses that are reimbursable pursuant to Section 3(b)(5) but have not been reimbursed by the Company as of the Date of Termination; (iii) the Executive's Annual Bonus for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs if such bonus has been determined but not paid as of the Date of Termination; (iv) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365; and (v) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii), (iii), (iv) and (v), the "Accrued Obligations"); (B) the amount equal to the product of (i) in the case of a Window Period Termination, two, and in all other cases, two and a half and (ii) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and (2) other than in the event of a Window Period Termination, for 30 months after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) and Section 3(b)(6) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their families; provided, however, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employer provided plan, the medical and other welfare benefits described herein shall terminate. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) other than in the event of a Window Period Termination, Taubman shall provide, or shall cause one of the Affiliated Companies to provide, the Executive with outplacement benefits through the services of an independent outplacement consulting firm selected by Taubman during the 12-month period following the Date of Termination; and (4) to the extent not theretofore paid or provided, Taubman shall timely pay or provide, or shall cause one of the Affiliated Companies to timely pay or provide, to the Executive any Other Benefits (as defined in Section 6). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, Taubman shall provide, or shall cause one of the Affiliated Companies to provide, the Executive's estate or beneficiaries with the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company to the estates and beneficiaries of peer executives of the Company under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by Taubman by reason of the Executive's Disability during the Employment Period, Taubman shall provide, or shall cause one of the Affiliated Companies to provide, the Executive with the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated by Taubman for Cause during the Employment Period, Taubman shall provide to the Executive, or shall cause one of the Affiliated Companies to provide to Executive, (1) the Executive's Annual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligations under this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, Taubman shall provide to the Executive, or shall cause one of the Affiliated Companies to provide to the Executive, the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with Taubman or any of the Affiliated Companies at or subsequent to the Date of Termination ("Other Benefits") shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive receives payments and benefits pursuant to Section 5(a) of this Agreement, the Executive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company, unless otherwise specifically provided therein in a specific reference to this Agreement. SECTION 7. FULL SETTLEMENT. Taubman's obligation to make or cause one of the Affiliated Companies to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. Taubman shall pay, or cause one of the Affiliated Companies to pay, as incurred (within 15 days following Taubman's receipt of an invoice from the Executive), to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by Taubman, any of the Affiliated Companies, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. REDUCTION OF PAYMENTS. (a) For purposes of this Section 8: (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii) "Separation Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section); (iii) "Present Value" shall mean such value determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean an amount expressed in Present Value that maximizes the aggregate Present Value of Separation Payments without causing any Payment to be nondeductible because of Section 280G of the Code. (b) Taubman shall select, in its discretion, a nationally recognized accounting firm (the "Accounting Firm") to make the determinations contemplated by this Section 4(g). Anything in the Plan to the contrary notwithstanding, in the event that the Accounting Firm determines that receipt of all Payments would subject the Participant to tax under Section 4999 of the Code, the aggregate Separation Payments shall be reduced (but not below zero) to meet the definition of Reduced Amount. (c) If the Accounting Firm determines that aggregate Separation Payments should be reduced to the Reduced Amount, Taubman shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect, in his or her sole discretion, which and how much of the Separation Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Separation Payments equals the Reduced Amount), and shall advise Taubman in writing of his or her election within ten days of his or her receipt of notice. If no such election is made by the Executive within such ten-day period, Taubman may elect which of such Separation Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Separation Payments equals the Reduced Amount) and shall notify the Executive promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon Taubman and the Affiliated Companies and the Executive and shall be made within 60 days of a termination of employment of the Executive. As promptly as practicable following such determination, Taubman shall pay or distribute, or shall cause one of the Affiliated Companies to pay or distribute, to or for the benefit of the Executive such Separation Payments as are then due to the Executive under this Agreement, and shall promptly pay or distribute, or cause to be paid or distributed, to or for the benefit of the Executive in the future such Separation Payments as become due to the Executive under this Agreement. (d) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against Taubman or any of the Affiliated Companies or the Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed to or for the benefit of the Executive shall be repaid by the Executive; provided, however, that no such payment shall be made by the Executive if and to the extent such payment would neither reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. (e) All fees and expenses of the Accounting Firm in implementing the provisions of this Section 8 shall be borne by the Company. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to Taubman or any of the Affiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of Taubman or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of Taubman, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon Taubman and its successors and assigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by Taubman. (c) Each of Taubman and TRG will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its business and/or assets to assume expressly and agree to perform this Agreement in the same manner and to the same extent that it would be required to perform it if no such succession had taken place. "Taubman" means Taubman as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. "TRG" means TRG as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of [MICHIGAN], without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: At the most recent address on file at the Company if to Taubman: Taubman Centers, Inc. 200 East Long Lake Road Suite 300 Bloomfield Hills, Michigan 48304 Attention: General Counsel if to TRG: Taubman Realty Group Limited Partnership 200 East Long Lake Road Suite 300 Bloomfield Hills, Michigan 48304 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) Taubman may withhold or cause to be withheld from any amounts payable under this Agreement such United States federal, state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or Taubman's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or Taubman may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive, Taubman and TRG acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and Taubman or any of the Affiliated Companies, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, except as specifically provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof including without limitation the Employment Agreement between The Taubman Company Limited Partnership, a Michigan Limited Partnership, and the Executive dated as of January 3, 1997. SECTION 12. GUARANTEE. TRG hereby irrevocably, absolutely and unconditionally guarantees the payment of all compensation and benefits (the "Benefits") that Taubman is obligated to provide or cause to be provided to the Executive under this Agreement. This is a guarantee of payment and not a collection, and is the primary obligation of TRG, and the Executive may enforce this guarantee against TRG without any prior enforcement of the obligation to make the Benefits against Taubman. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, Taubman and TRG have each caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ---------------------------------------------- LISA PAYNE ---------------------------------------------- TAUBMAN CENTERS INC. As guarantor of Taubman Centers Inc.: ---------------------------------------------- TAUBMAN REALTY GROUP LIMITED PARTNERSHIP EX-99 5 may12exe13tosched14d9a.txt TAUBMAN CHANGE OF CONTROL SEVERANCE PROGRAM TAUBMAN CENTERS INC. CHANGE OF CONTROL SEVERANCE PROGRAM INTRODUCTION The Board of Directors of Taubman Centers, Inc. (together with its successors, "Taubman") recognizes that the possibility of a Change of Control and the uncertainty it creates, may result in the loss or distraction of employees of the Company to the detriment of Taubman and its shareholders. The Board considers the avoidance of such loss and distraction to be essential to protecting and enhancing the best interests of Taubman and its shareholders. The Board also believes that when a Change of Control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested service from employees regarding the best interests of Taubman and its shareholders without concern that employees might be distracted or concerned by the personal uncertainties and risks created by the perception of an imminent or occurring Change of Control. In addition, the Board believes that it is consistent with the Company's employment practices and policies and in the best interests of Taubman and its shareholders to treat fairly its employees whose employment terminates in connection with or following a Change of Control. Accordingly, the Board has determined that appropriate steps should be taken to assure the Company of the continued employment and attention and dedication to duty of its employees and to seek to ensure the availability of their continued service, notwithstanding the possibility or occurrence of a Change of Control. Therefore, in order to fulfill the above purposes, the following plan has been developed and is hereby adopted. 1. Establishment of Plan. As of the Effective Date, the Taubman Centers Inc. Change of Control Severance Program is hereby established, as set forth in this document. 2. Definitions. As used herein the following words and phrases shall have the following respective meanings: (a) Affiliated Company. Any company controlled by, controlling or under common control with Taubman. (b) Associate. Any regular, full-time or part-time employee of Taubman or any Affiliated Company. (c) Base Salary. The amount a Participant is entitled to receive as wages or salary on an annualized basis, excluding all bonus, overtime and incentive compensation, payable by the Company as consideration for the Participant's services. (d) Board. The Board of Directors of Taubman. (e) Bonus Amount. For Participants who are participants in the Senior Short Term Incentive Plan, an amount equal to 130% of the higher of (i) the Participant's target bonus for the year in which the Change of Control occurs and (ii) the highest target bonus established for the Participant for any subsequent year (if any). For Participants who are participants in the Specialty Retail Bonus Plan or the Leasing Bonus (WITY) Plan, an amount equal to the higher of (i) the average of the Participant's actual bonuses for the three years immediately preceding the Change of Control (or, if the Participant has not been employed by the Company for three years prior to the Change of Control, such lesser number of years during which the Participant was employed by the Company) or (ii) the highest actual bonus paid to the Participant for any subsequent year (if any). (f) Cause. A termination for "Cause" shall have occurred where a Participant's employment is terminated because of (i) the willful and continued failure of the Participant to perform substantially the Participant's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness); (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or (iii) the Participant's conviction of, or plea of nolo contendere to, a felony. (g) Change of Control. The first to occur of any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than an Existing Shareholder (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 33% or more of either (A) the then-outstanding shares of common stock of Taubman (the "Outstanding Taubman Common Stock") or (B) the combined voting power of the then-outstanding voting securities of Taubman entitled to vote generally in the election of directors (the "Outstanding Taubman Voting Securities"); provided, however, that, for purposes of this Section 2(g), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from Taubman, (ii) any acquisition by Taubman, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Taubman or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 2(g)(iii)(A), 2(g)(iii)(B) and 2(g)(iii)(C); (ii) Any time at which individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by Taubman's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Taubman or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Taubman, or the acquisition of assets or stock of another entity by Taubman or any of its subsidiaries (each, a "Business Combination"), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Taubman Common Stock and the Outstanding Taubman Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns Taubman or all or substantially all of Taubman's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Taubman Common Stock and the Outstanding Taubman Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Taubman or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 33% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; (iv) Approval by the stockholders of Taubman of a complete liquidation or dissolution of Taubman. (v) Termination, non-renewal, material amendment or material modification of the Master Services Agreement between the Taubman Realty Group Limited Partnership and The Taubman Company LLC dated as of November 30, 1992, as amended through the date hereof or the Corporate Services Agreement between the Taubman and The Taubman Company LLC dated as of November 30, 1992, as amended through the date hereof, other than any such termination, non-renewal, amendment or modification which has been previously approved by a majority of the Independent Directors (as defined in the Taubman's Restated Articles of Incorporation) serving on the Incumbent Board. (h) Code. The Internal Revenue Code of 1986, as amended from time to time. (i) Committee. Subject to Section 12, the Compensation Committee of the Board. (j) Company. Taubman and the Affiliated Companies. (k) Compensatory Award. As defined in Section 4(d). (l) Date of Termination. As defined in Section 4(b). (m) Disability. A termination for "Disability" shall have occurred if a Participant's employment is terminated because of a disability entitling him or her to long-term disability benefits under the applicable long-term disability plan of the Company. (n) Effective Date. [May [ ], 2003]. (o) Existing Shareholder. A. Alfred Taubman or any of his issue or any of his or their respective descendants, heirs, beneficiaries or donees or any trust, corporation, partnership, limited liability company or other entity if substantially all of the economic interests in such entity are held by or for the benefit of such persons. (p) Good Reason. With respect to any Participant, the occurrence of any of the following events after a Change of Control, without the Participant's prior written consent: (i) a reduction in the Participant's Base Salary below the Required Base Salary; (ii) a material and adverse change in the Participant's duties, reporting relationship and responsibilities in comparison to the duties, reporting relationship and responsibilities enjoyed by the Participant immediately prior to the Change of Control; (iii) a material reduction in the aggregate level of the incentive compensation and employee benefits offered to the Participant in comparison to the incentive compensation and benefits arrangements provided to the Participant immediately prior to the Change of Control; or (iv) a requirement that the Participant be based at a location more than 35 miles from the location where the Participant was based and performed services immediately prior to the Change of Control. (q) LTPC Plan. The Taubman Company Long-Term Performance Compensation Plan, as amended. (r) Monthly Pay. The quotient obtained by dividing (i) the sum of (A) the Participant's Required Base Salary and (B) the Participant's Bonus Amount by (ii) 12. (s) Outplacement Benefits. Company-provided outplacement benefits through the services of an independent outplacement consulting firm selected by the Company (i) for Participants who are Group Vice Presidents, during the 12-month period following the Date of Termination; (ii) for Participants who are Exempt and LTPC Plan-eligible Associates (other than Group Vice Presidents), during the 6-month period following the Date of Termination; (iii) for Exempt and non-LTPC Plan-eligible Associates, during the 3-month period following the Date of Termination, and (iv) for Non-Exempt Associates, in the form of a 3-day seminar. (t) Participant. An Associate who meets the eligibility requirements of Section 3. (u) Plan. The Taubman Centers Inc. Change of Control Severance Program. (v) Qualifying Termination. A termination of a Participant's employment within two years following a Change of Control, in the case of a Group Vice President, and, within one year following a Change of Control, in the case of any other Participant, (i) by the Company other than for Cause, death or Disability or (ii) by the Participant for Good Reason. (w) Release. As defined in Section 4(h). (x) Required Base Salary. With respect to any Participant, the higher of (i) the Participant's Base Salary as in effect immediately prior to the Change of Control and (ii) the Participant's highest Base Salary in effect at any time thereafter. (y) Separation Benefit. As defined in Section 4(b). (z) Separation Period. With respect to any Participant, the period beginning on the Participant's Date of Termination and continuing for a number of months equal to the Participant's Years of Service determined as of the Date of Termination; provided, that the maximum Separation Period shall be 24 months and the minimum Separation Period (i) for Participants who are Group Vice Presidents shall be 16 months, (ii) for Participants who are Exempt and LTPC Plan-eligible Associates (other than Group Vice Presidents) shall be 12 months, (iii) for Participants who are Exempt and non-LTPC Plan-eligible Associates shall be six months, and (iv) for Participants who are Non-Exempt Associates shall be three months. (aa) WARN. As defined in Section 4(b). (bb) Year of Service. A twelve-month continuous period of employment or a portion of such period, including periods of authorized vacation, authorized leave of absence and short-term disability leave, with the Company or its predecessors or successors rounded up to the nearest whole number. 3. Eligibility. Each Associate (other than Robert Taubman and William Taubman) who is an Associate on the date of a Change of Control and is not party to a Change of Control Employment Agreement shall be a Participant in the Plan. The Committee may also designate any other Associate as a Participant. Notwithstanding the foregoing, the Committee may cause any Associate to cease to be a Participant at any time prior to the occurrence of a Change of Control, provided that such action is not taken in connection with or in anticipation of a Change of Control. 4. Separation Benefits. (a) Right to Separation Benefit. A Participant shall be entitled to receive from the Company a Separation Benefit in the amount provided in Section 4(b) if a Participant suffers a Qualifying Termination. (b) Separation Benefits. In the event that a Participant suffers a Qualifying Termination, the Company shall pay such Participant, within 15 days of the date such termination takes effect (the "Date of Termination") or, if later, on the date the Participant's Release ceases to be revocable, a lump sum in cash (the "Separation Benefit") equal to the Monthly Pay times the number of months in the Separation Period, reduced by (i) any amounts otherwise due to the Participant under the Worker Adjustment and Retraining Notification Act and the regulations promulgated thereunder, as amended, or any similar state or local statute ("WARN"), (ii) the amount of base salary paid to the Participant by the Company after notice is given to a Participant pursuant to WARN and (iii) any other cash severance payments to which the Participant is legally entitled to receive from the Company. (c) Welfare Benefits; Outplacement; T-I REIT Share. A Participant entitled to a Separation Benefit will continue to be provided, during the Separation Period, with medical, dental and vision benefits, and executive long-term disability benefits (if the Participant was eligible for such executive long-term disability benefits immediately prior to the Change of Control or at any time thereafter), in each case, comparable in scope and cost to the Participant to the benefits that would have been provided if the Participant had continued to be an Associate, for the Separation Period; provided, that if the Participant becomes re-employed with another employer and is eligible to receive any such benefits from such employer, the benefits provided pursuant to this sentence shall terminate. In addition, a Participant entitled to a Separation Benefit (i) will be provided with the Outplacement Benefits and (ii) as of the Date of Termination, the Participant shall tender any T-I REIT share that was granted to such Participant by the Taubman Company Limited Partnership (the "Partnership") pursuant to a Bonus Award Agreement and the Partnership shall redeem the tendered T-I REIT share for $1000, together with any accrued but unpaid dividends thereon. (d) Compensatory/LTPC Plan Awards. Notwithstanding any provision in any plan or award agreement to the contrary, effective as of the Change of Control, each and every stock option, restricted stock award, restricted stock unit award and other equity-based award held by the Participant that is outstanding as of the Change of Control shall immediately vest and become exercisable. In addition, effective as of the Change of Control, each compensation award (as defined in the LTPC Plan) granted under the LTPC Plan outstanding as of the Change of Control shall vest and become immediately payable in full (along with any Premium (as defined in the LTPC Plan) thereon, if the FFO Per Share Growth Rate (as defined in the LTPC Plan) for the three full calendar years preceding the date of the Change of Control equals or exceeds 10%). (e) Maximum Separation Benefit. Notwithstanding Section 4(b) above, the maximum amount payable under Sections 4(b) and (c) shall be the amount required in order for the Plan to comply with Section 2510.3-2(b)(1)(ii) of the Department of Labor Regulations. (f) Other Benefits Payable. Nothing in this Plan shall prevent or limit a Participant's continuing or future participation in any benefit, bonus, incentive or other plan, program, arrangement or policy provided by the Company for which a Participant and/or Participant's dependents may qualify. Amounts that are vested benefits or that a Participant and/or a Participant's dependents are otherwise entitled to receive under any plan, program, arrangement, or policy of the Company shall be payable in accordance with such plan, program, arrangement or policy. The Separation Benefit provided pursuant to Section 4(b) above shall be provided in addition to, and not in lieu of, all other accrued or vested or earned but deferred compensation, rights, options or other benefits which may be owed to a Participant upon or following termination, including but not limited to accrued vacation or sick pay, amounts or benefits payable under any bonus or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar or successor plan. (g) Certain Reduction of Payments by the Company. (i) For purposes of this Section 4(g): (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of a Participant, whether paid or payable pursuant to this Plan or otherwise; (ii) "Separation Payment" shall mean a Payment paid or payable pursuant to this Plan (disregarding this Section); (iii) "Present Value" shall mean such value determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean an amount expressed in Present Value that maximizes the aggregate Present Value of Separation Payments without causing any Payment to be nondeductible because of Section 280G of the Code. (ii) The Committee shall select, in its discretion, a nationally recognized accounting firm (the "Accounting Firm") to make the determinations contemplated by this Section 4(g). Anything in the Plan to the contrary notwithstanding, in the event that the Accounting Firm determines that receipt of all Payments would subject the Participant to tax under Section 4999 of the Code, the aggregate Separation Payments shall be reduced (but not below zero) to meet the definition of Reduced Amount. (iii) If the Accounting Firm determines that aggregate Separation Payments should be reduced to the Reduced Amount, Taubman shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof, and the Participant may then elect, in his or her sole discretion, which and how much of the Separation Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Separation Payments equals the Reduced Amount), and shall advise Taubman in writing of his or her election within 15 days of his or her receipt of notice. If no such election is made by the Participant within such 15-day period, Taubman may elect which of such Separation Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Separation Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon the Company and the Participant and shall be made within 60 days of a termination of employment of the Participant. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of the Participant such Separation Payments as are then due to the Participant under this Plan and shall promptly pay to or distribute for the benefit of the Participant in the future such Separation Payments as become due to the Participant under this Plan. (iv) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of a Participant pursuant to this Plan which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of a Participant pursuant to this Plan could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Participant which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of a Participant shall be repaid to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such amount shall be payable by a Participant to the Company if and to the extent such repayment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. (v) All fees and expenses of the Accounting Firm in implementing the provisions of this Section 4(g) shall be borne by the Company. (h) Release and Waiver. Notwithstanding any other provision of this Plan, the right of a Participant to receive severance benefits hereunder shall be subject to the execution and non-revocation by the Participant of a release and waiver substantially in the form attached hereto as Exhibit A (a "Release"). 5. Full Settlement. Subject to Section 4(g), the Company's obligation to make the payments provided for in this Plan and otherwise to perform its obligations hereunder shall be absolute and unconditional and shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against a Participant or others. In no event shall a Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to such Associate under any of the provisions of this Plan. The Company shall pay as incurred (within 15 days following the Company's receipt of an invoice from a Participant), to the full extent permitted by law, all legal fees and expenses that the Participant may reasonably incur as a result of any contest by the Company, the Participant or others of the validity or enforceability of, or liability under, any provision of this Plan or any guarantee of performance thereof (including as a result of any contest by the Participant about the amount of any payment pursuant to this Plan), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code; provided, that the Company shall not be obligated to reimburse a Participant for legal fees and expenses incurred in connection with a claim that is frivolous or maintained in bad faith and the Company shall be entitled to recoup any such fees and expenses which it has already paid on behalf of the Participant. 6. Controlling Law. This Plan shall be construed and enforced according to the internal laws of the State of Michigan to the extent not preempted by Federal law, which shall otherwise control. 7. Amendments; Termination. The Board reserves the right to amend, modify, suspend or terminate the Plan at any time; provided that no such amendment, modification, suspension or termination after the occurrence of a Change of Control that has the effect of reducing or diminishing the right of any Associate, shall be effective without the written consent of the Associate. 8. Assignment. Taubman shall require any corporation, entity, individual or other person who is the successor (whether direct or indirect by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all the business and/or assets of Taubman to expressly assume and agree to perform, by a written agreement in form and in substance satisfactory to Taubman, all of the obligations of Taubman under this Plan. As used in this Plan, the term "Taubman" shall mean Taubman as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Plan by operation of law, written agreement or otherwise. It is a condition of this Plan, and all rights of each person eligible to receive benefits under this Plan shall be subject hereto, that no right or interest of any such person in this Plan shall be assignable or transferable in whole or in part, except by operation of law, including, but not by way of limitation, lawful execution, levy, garnishment, attachment, pledge, bankruptcy, alimony, child support or qualified domestic relations order. 9. Withholding. The Company may withhold from any amount payable or benefit provided under this Plan such Federal, state, local, foreign and other taxes as are required to be withheld pursuant to any applicable law or regulation. 10. Gender and Plurals. Wherever used in this Plan document, words in the masculine gender shall include masculine or feminine gender, and, unless the context otherwise requires, words in the singular shall include the plural, and words in the plural shall include the singular. 11. Plan Controls. In the event of any inconsistency between this Plan document and any other communication regarding this Plan, this Plan document controls. 12. Post-Change of Control Committee. This Plan shall be administered by the Committee, provided that in the event of an impending Change of Control, the Committee may appoint a person independent of the Company or persons operating under its control or on its behalf to be the Committee effective upon the occurrence of a Change of Control and such Committee shall not be removed following a Change of Control. The decision of the Committee upon all matters within the scope of its authority shall be conclusive and binding on all parties. 13. Benefits Claims and Appeals. The Committee shall establish a claims and appeals procedure. The Committee shall have full discretionary authority to determine the amount and timing of any benefit to be paid under the Plan. Unless otherwise required by applicable law, such procedures will provide that the Participant has not less than sixty (60) days following receipt of any adverse benefit determination within which to appeal the determination in writing with the Committee, and that the Committee must respond in writing within sixty (60) days of receiving the appeal, specifically identifying those Plan provisions on which the benefit denial was based and indicating what, if any, information the Participant must supply in order to perfect a claim for benefits. 14. Indemnification. To the extent permitted by law, the Company shall indemnify the Committee from all claims for liability, loss, or damage (including the payment of expenses in connection with defense against such claims) arising from any act or failure to act in connection with the Plan. 15. Joint and Several Liability. Taubman and each of the Affiliated Companies shall be jointly and severally liable for all obligations of the Company under the Plan. -11- Exhibit A Release (a) General Release. In consideration for the Separation Benefit and the other benefits provided to Employee under the Taubman Centers Inc. Change of Control Severance Program (the "Plan"), Employee, to the fullest extent permitted by law, hereby waives, releases, and discharges the Company, together with its current and former officers, directors, agents, employees, subsidiaries, affiliated entities, related entities, attorneys, any other representatives, and successors in interest (collectively referred to as the "Company"), jointly and severally, from any claims and any causes of action arising in the course of or out of or otherwise relating to Employee's employment with Company or the termination of Employee's employment with Company under any state and federal statutes, including the Age Discrimination in Employment Act, 29 USC Sec. 621 et seq., and under the common law. Employee and the Company intend that, to the fullest extent permitted by law, these waivers, releases, and discharges will be a general release, will extinguish any claims and any causes of action, will preclude any lawsuit or any other legal claim by Employee against the Company about anything that occurred before the date of this Agreement. This Agreement includes a release of Employee's right to file a lawsuit or to seek individual remedies or damages in any EEOC-filed court action, and this release will apply to any charge of discrimination about any events that occurred up to the date of the signing of this Agreement. The only claims and causes of action that Employee is not waiving, releasing, and discharging are for the Separation Benefit and the other benefits to which Employee is entitled under the Plan, any vested benefits to which Employee may be entitled under the Company's plans listed in Exhibit A hereto, and any claims and causes of action that, as a matter of law, cannot be waived, released, and discharged. (b) Advice of Counsel. The Company has advised Employee to consult with an attorney of Employee's choice before signing this Agreement. (c) Sufficient Time to Review Agreement. Employee has had a sufficient amount of time totaling at least twenty-one (21) days to consider the terms of this Agreement, to discuss all aspects of this Agreement with Employee's attorney, if Employee chose to do that and to decide whether to accept it. No change to this Agreement, whether material or immaterial, will initiate a new twenty-one (21) day period. (d) Early Submission of Agreement. Employee may voluntarily and knowingly sign, but is not required to sign, this Agreement before the end of the twenty-one (21) day period. The Company has made no promises, inducements, representations, or threats to cause Employee to sign this Agreement before the end of the twenty-one (21) day period. If Employee voluntarily and knowingly signs this Agreement before the end of the twenty-one (21) day period, the mandatory seven (7) day revocation period set forth below will start on the day after the day on which Employee signs this Agreement. (e) Knowing and Voluntary Acceptance. Employee has carefully read this Agreement, understands it, and is entering it knowingly and voluntarily, which means no one is forcing or pressuring Employee to sign it. (f) No Reliance on Any Other Representation. In signing this Agreement, Employee has not relied upon any the Company representation or statement, either oral or written, about the subject matter of this Agreement that is not set forth in this Agreement. (g) Right to Revoke. Employee is entitled to revoke this Agreement within seven (7) days after the date on which Employee signs it. The seven (7) days will start on the day after the day on which Employee signs this Agreement. The Agreement will not become effective or enforceable unless and until this revocation period has expired without any revocation having occurred. The Company will not pay Employee the Severance Benefit or provide any other benefits under the Plan unless and until this revocation period has expired without any revocation having occurred. If Employee revokes this Agreement during the seven (7) day revocation period, the Agreement will not be effective or enforceable, and Employee will not receive the Severance Benefit or any of the other benefits under the Plan. (h) Revocation Procedure. To be effective, any revocation must be in writing, addressed to the Company, and either postmarked within the seven (7) day revocation period or hand-delivered to the Company within the seven (7) day revocation period. If revocation is made by mail, mailing by certified mail return receipt requested is recommended to show proof of mailing. Such revocation should be sent to the following address Director of Associate Relations, Human Resources Department, Taubman Centers, Inc., 200 E Long Lake Road, Bloomfield Hills, MI 48303. (i) Effect of Failure to Revoke. Employee understands that by signing this Agreement and by not revoking the Agreement during the seven (7) day revocation period, Employee agrees to be bound by this Agreement. -----END PRIVACY-ENHANCED MESSAGE-----