THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
AND THE TAUBMAN COMPANY LLC ELECTION AND
OPTION DEFERRAL AGREEMENT
_________________________
This Agreement dated as of the 28th day of December, 2001 is entered into
by and between The Taubman Realty Group Limited Partnership, a Delaware limited
partnership ("TRG"), The Taubman Company LLC, a Delaware limited liability
company, (the "Manager") and Xxxxxx X. Xxxxxxx (the "Executive").
RECITALS:
WHEREAS, TRG has engaged Manager, on an exclusive basis, to provide various
services, including management, leasing, development, acquisition and
administrative services, to TRG.
WHEREAS, TRG currently maintains The Taubman Realty Group Limited
Partnership 1992 Incentive Option Plan (as amended and restated effective as of
September 30, 1997) (the "Incentive Option Plan") to provide incentives to
employees of the Manager to remain in the employ of Manager for the benefit of
TRG, to encourage a proprietary interest in TRG, and to attract employees with
outstanding qualifications to serve the Manager on behalf of TRG;
WHEREAS, Executive was granted an incentive option (the "Option") to
purchase Fifteen Hundred (1,500) Units of Partnership Interest (as such term is
defined in the Incentive Option Plan) pursuant to an Option Agreement dated
November 20, 1992 (the "1992 Option Agreement"). In connection with the division
of Units of Partnership Interest effective September 30, 1997, Executive's
Option to purchase 1,500 Units of Partnership Interest was converted, effective
as of September 30, 1997, into an Option to purchase two million nine hundred
sixty two thousand, six hundred twenty (2,962,620) Units of Partnership
Interest;
WHEREAS, Executive wishes to give up his right to receive the Units subject
to the Option by making an election to defer receipt of the Units attributable
to the gains that would be recognized upon the exercise of the Option pursuant
to the terms and conditions of this Agreement; and
WHEREAS, TRG, the Manager and Executive, wish to modify the 1992 Option
Agreement to provide for the deferral of gains that would be recognized upon
Executive's exercise of the Option and to credit such gains to Deferred
Compensation Account (as defined in paragraph 1) maintained by the Manager in
consideration of the valuable services Executive performs for the benefit of the
Manager and TRG.
NOW, THEREFORE, TRG, the Manager and Executive, intending to be legally
bound, and in consideration of the agreements set forth herein, hereby agree as
follows:
1. Election to Defer and Investment of Option Gain. Upon exercise of the
Option and in lieu of his receiving the full number of Units subject to the
Option, Executive hereby elects to defer receipt of all of the Units
attributable to the gain that would, but for this Agreement, be recognized for
federal and state income tax purposes (the "Gain") upon his exercise of the
Option. Contemporaneously with Executive's exercise of the Option, TRG shall
direct the Manager to establish a bookkeeping reserve account (the "Deferred
Compensation Account") to reflect the amount of the Gain. The Gain shall be the
amount equal to the Fair Market Value of Units of Partnership subject to the
Option on the Date of Exercise minus the Exercise Price (as such terms are
defined in the Incentive Option Plan). The amount of Gain credited to the
Deferred Compensation Account shall be deemed invested in phantom units of
partnership interest in TRG ( the "Notional Units"). A Notional Unit will be
utilized solely as a device for the measurement and determination of the amounts
to be paid to or for the benefit of Executive pursuant to this Agreement and
will not under any circumstances constitute or be treated as a trust fund of any
kind. The actual number of Units to which Executive would otherwise be entitled
under the Option Agreement upon exercise of the Option shall be reduced by the
number of Notional Units.
(a) Distribution Equivalents. On each date in which holders of actual
Units of Partnership Interest receive distributions in respect of such
Units of Partnership Interest, the Manager shall distribute to Executive an
amount equal to (i) the distribution amount paid with respect to each
actual Unit of Partnership Interest on such distribution date, multiplied
by (ii) the number of Notional Units credited to the Deferred Compensation
Account as of the business day immediately preceding such distribution date
(the "Distribution Equivalents"). Distribution Equivalents will be paid to
Executive in cash lump sum payments.
(b) No Rights as a Partner. A Notional Unit shall not represent an
ownership interest in actual Units of Partnership Interest of TRG, and
Executive shall have no rights as a partner in TRG with respect to the
Notional Units credited to the Deferred Compensation Account.
2. Vesting of Deferred Compensation Account. The Deferred Compensation
Account shall be fully vested and nonforfeitable at all times.
3. Payment of Deferred Compensation Account. All amounts credited to the
Deferred Compensation Account shall be distributed to Executive in the form of
actual Units of Partnership Interest upon the earlier of (a) Executive's
termination of employment for any reason, or (b) the ten (10) year anniversary
of Executive's Date of Exercise of the Option. Payment shall be made in
substantially equal annual installments over a ten year period with the first
payment commencing on the first day of the month following (a) or (b) above and
each subsequent payment on the anniversary thereof.
Any portion of the Deferred Compensation Account which has not been
distributed to Executive shall continue to be invested in Notional Units and
Executive shall continue to receive Distribution Equivalents with respect to
Notional Units in the Deferred Compensation Account.
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4. Designation of Beneficiary. Executive shall designate in writing and
file with the Manager a designated beneficiary to receive benefits payable under
this Agreement in the event of his death prior to his receipt of all amounts
credited to the Deferred Compensation Account. If Executive has not designated a
beneficiary, such death benefit shall be paid to his estate. Any beneficiary
designation may be revoked or modified at any time by Executive but only in a
writing filed with the Manager.
5. Amendment. This Agreement may be amended by the written agreement of
TRG, the Manager and Executive at any time; provided, however, that no amendment
shall reduce any benefits in which Executive has a vested interest prior to the
effective date of the amendment.
6. Termination Upon Change of Control. Notwithstanding any other provision
of this Agreement, this Agreement will terminate immediately and all amounts
credited to the Deferred Compensation Account will be distributed to Executive
in a lump sum payment in the form of actual Units of Partnership Interest upon a
Change of Control Event (as defined in the Incentive Option Plan) which is
followed by Executive's termination of employment within six months of the
Change of Control Event.
7. Governing Law. This Agreement shall be construed in accordance with the
internal laws of the State of Michigan (excluding the choice of law rules
thereof).
8. Alienation or Assignment of Benefits. Benefits payable pursuant to this
Agreement shall not be subject in any manner to anticipation, alienation, sale,
transfer, or assignment.
9. Ownership of Deferred Compensation Account. Title to and beneficial
ownership of any assets, whether Notional Units, Distribution Equivalents, cash
or other investments which the Manager or TRG may set aside to fulfill its
deferred obligation under this Agreement shall at all times remain with the
Manager or TRG and neither Executive nor his beneficiary shall under any
circumstances acquire any property interest in any specific assets of the
Manager or TRG. Nothing contained in this Agreement and no action taken pursuant
to the provisions of this Agreement shall create or be construed to create a
fiduciary relationship between TRG or the Manager and Executive or any other
person. Any funds which may be invested under the provisions of this Agreement
shall continue for all purposes to be part of the general assets of the Manager
or TRG and no person other than the Manager or TRG shall by virtue of the
provisions of this Agreement have any interest in such funds. To the extent that
any person acquires a right to receive payments from the Manager or TRG under
this Agreement, such right shall be no greater than the right of an unsecured
general creditor of the Manager or TRG. In the sole discretion of the Manager,
all or any portion of the amounts credited to the Deferred Compensation Account
may be contributed to a trust established by the Manager in connection with this
Agreement. Neither Executive nor his beneficiary shall have the right to direct
or require that the Manager contribute amounts to a trust. Any amounts so
contributed shall be held, invested and administered to provide benefits under
this Agreement except as otherwise required in the agreement governing the
trust.
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10. 1992 Option Agreement. The 1992 Option Agreement, as modified by this
Agreement with respect to Executive's election to defer the Gain, shall remain
in full force and effect.
11. Miscellaneous. This Agreement is intended to be an unfunded, top hat
plan available only to a management or highly compensated employee within the
meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement
Income Security Act of 1974 (as amended "ERISA").
12. Execution. To record the adoption of this Agreement, TRG, the Manager
and Executive have caused the execution hereof as of the date first written
above.
TAUBMAN REALTY GROUP,
a Delaware limited partnership
By: Taubman Centers, Inc.
Its: Managing General Partner
By: /Xxxx Xxxxx/
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Xxxx Xxxxx
Its: Chief Financial Officer
THE TAUBMAN COMPANY LLC, Manager
a Delaware limited liability company
By: /Xxxx Xxxxx/
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Xxxx Xxxxx
Its: Chief Financial Officer
XXXXXX X. XXXXXXX, Executive
/Xxxxxx X. Xxxxxxx/
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