Registration No. 333-
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As filed with the Securities and Exchange Commission on November 26, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
TAUBMAN CENTERS, INC.
(Exact Name of Registrant as Specified in its Articles of Incorporation)
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Michigan 38-2033632
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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200 East Long Lake Road
Bloomfield Hills, Michigan 48304
(810) 258-6800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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Copy to:
Robert S. Taubman David A. Handelsman, Esq.
Taubman Centers, Inc. Miro Weiner & Kramer
200 East Long Lake Road 500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304 Suite 100
(810) 258-6800 Bloomfield Hills, Michigan 48304
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. |x|
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Title of Each Class of Proposed Maximum Aggregate Amount of Registration
Securities to Be Registered Offering Price (1) Fee (2)
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Common Stock and
Common Stock Warrants $250,000,000 $75,757.58
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(1) Estimated solely for purposes of calculating the registration fee. The
aggregate maximum offering price of all securities registered under the
Registration Statement will not exceed $250,000,000.
(2) Calculated pursuant to Rule 452(o).
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, BUT IT HAS NOT BEEN DECLARED
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION
DATED NOVEMBER 26, 1996
$250,000,000
TAUBMAN CENTERS, INC.
COMMON STOCK AND WARRANTS
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Taubman Centers, Inc. (the "Company") may offer from time to time (i)
shares of its common stock, par value $0.01 per share ("Common Stock") and (ii)
warrants to purchase Common Stock ("Warrants") with an aggregate public offering
price of up to $250 million in amounts, at prices, and on terms to be determined
at the time of the offering. The Common Stock and Warrants (collectively, the
"Securities") may be offered separately or together, in amounts, at prices, and
on terms to be described in one or more supplements to this Prospectus (each, a
"Prospectus Supplement").
The specific terms of the Securities with respect to which this Prospectus
is being delivered will be set forth in the applicable Prospectus Supplement and
will include, as applicable: (i) in the case of Common Stock, the offering price
and (ii) in the case of Warrants, the specific title and aggregate number,
offering price, duration, exercise price, and detachability provisions. Such
specific terms may also include additional limitations on direct or beneficial
ownership and restrictions on transfer to assist in maintaining the Company's
qualification as a real estate investment trust (a "REIT") for Federal income
tax purposes or for other reasons. See "Restrictions on Transfer."
Each Prospectus Supplement will also contain any additional information
not contained in this Prospectus relating to any material United States Federal
income tax considerations relating to an investment in, and any listing on a
securities exchange of, the Securities offered by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from
time to time by the Company, or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission, or discount arrangement
between or among them will be set forth in, or will be calculable from, the
information in the accompanying Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold by the Company through agents,
underwriters, or dealers without delivery of a Prospectus Supplement describing
the method and terms of the offering of such Securities.
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See the discussion under the caption "Risk Factors" beginning on
page 1 of this Prospectus for a discussion of certain
factors relating to an investment in the Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1996.
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TABLE OF CONTENTS
Page
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The Company............................................................ 1
Risk Factors........................................................... 1
Use of Proceeds........................................................ 6
Certain Provisions of the Articles of Incorporation and By-laws........ 6
Description of Common Stock............................................ 8
Description of Warrants................................................ 9
Restrictions on Transfer............................................... 10
Federal Income Tax Considerations...................................... 12
ERISA Considerations................................................... 27
Plan of Distribution................................................... 29
Legal Matters.......................................................... 30
Experts................................................................ 30
Available Information.................................................. 31
Incorporation by Reference............................................. 31
Glossary............................................................... 33
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THE COMPANY
The Company believes that it is organized and operates in such a manner so
as to qualify as a real estate investment trust (a "REIT") under the Internal
Revenue Code of 1986. The Company is the managing general partner of The Taubman
Realty Group Limited Partnership ("TRG"), an operating partnership that engages
in the ownership, operation, management, leasing, acquisition, development,
redevelopment, expansion, financing, and refinancing of regional shopping
centers. TRG owns as its primary assets interests in regional retail shopping
centers located throughout the United States (the "Taubman Shopping Centers" or
"Centers"). TRG has interests in certain Centers through partnerships (the
"Joint Ventures" and, together with the partnerships owning Taubman Shopping
Centers that are 100% beneficially owned by TRG, the "Center Owners") with
unaffiliated third parties (the "Joint Venture Partners"). TRG also owns
development projects for future regional shopping centers and more than a 99%
beneficial interest in The Taubman Company Limited Partnership (the "Manager"),
which manages the Taubman Shopping Centers and provides other services to TRG
and the Company. TRG also has the entire beneficial interest in various grantor
trusts established by TRG (the "TRG Trusts") to serve as TRG's partners in the
Center Owners of the wholly-owned Taubman Shopping Centers. See "Glossary" for
the definitions of certain terms used in this Prospectus.
The Company's executive offices are maintained by the Manager at 200 East
Long Lake Road, Bloomfield Hills, Michigan 48304, Telephone: (810) 258-6800.
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
Equity Real Estate Investments
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Economic Performance and Value of Shopping Centers Dependent on Many Factors
Shopping center economic performance and values could be adversely
affected by a number of factors, including changes in the national, regional,
and local economic climate, the quality and philosophy of management, local
conditions (such as the supply of retail space), the attractiveness of the
properties to tenants and their customers, the ability and willingness of the
owner to provide adequate maintenance and insurance, operating costs, and the
public perception of the safety of customers at the shopping centers. In
addition to the factors affecting economic performance of shopping centers,
shopping center values could be adversely affected by such factors as government
regulations and changes in real estate zoning and tax laws, interest rate
levels, the availability of financing, and potential liability under
environmental and other laws. Adverse changes in one or more of these factors
could adversely affect the Company's income and cash available for distribution,
as well as the value of its investment in TRG.
Dependence on Rental Income from Real Property
Substantially all of the Company's income is derived (through its interest
in TRG) from rental income from real property. If the sales of stores operating
in the Centers decline sufficiently, tenants might be unable to pay their
existing minimum rents or expense recovery charges, since such rents and charges
would represent a higher percentage of their sales. In addition, if there were
such declines in sales, new tenants would be less likely to be willing to pay
minimum rents as high as they would otherwise pay. In a recessionary
environment, such risks are increased.
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The Company's income and cash available for distribution would be
adversely affected if lessees were unable to meet their lease obligations or if
one or more of the Center Owners were unable to lease space (or collect rental
payments). In the event of default by a lessee, the relevant Center Owner may
experience delays in enforcing its rights as lessor and may incur substantial
costs in protecting its investment.
Inability to Compete
The Taubman Shopping Centers compete with other retailers in attracting
customers. Regional shopping centers face increasing competition from discount
stores, outlet malls, discount shopping clubs, and direct mail and
telemarketing. There are numerous shopping centers that compete with the Taubman
Shopping Centers in seeking tenants to lease space in commercial properties and
numerous companies that compete with TRG in seeking properties for acquisition
or development. No assurance can be given that the Taubman Shopping Centers will
be able to compete successfully in the future. The inability of one or more
Taubman Shopping Centers to compete successfully would adversely affect TRG's
revenues and, consequently, the Company's income and funds available to pay
dividends.
Conflicts of Interest with Joint Venture Partners in Jointly Owned Centers
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Certain Taubman Shopping Centers are owned by Joint Ventures consisting of
TRG and one or more Joint Venture Partners who have no interest in TRG. Sales or
transfers of interests in the Joint Ventures are subject to buy-sell provisions
and rights of first refusal or first offer. A right of first refusal generally
requires a partner desiring to sell its interest to a third party to offer the
interest first to the other partner on the same terms and conditions offered by
the third party. A right of first offer generally requires a partner that does
not yet have a third party offer (but that desires to sell its interest) to
first offer the partnership interest to the other partner for a specified price.
If the other partner declines to purchase, the offering partner may then attempt
to sell its interest to a third party on terms not materially less favorable to
the offering partner than those offered to its partner. A buy-sell provision
generally allows either partner to initiate a process that will result in one of
the partners purchasing the other partner's interest. The initiating partner may
specify the price at which it would be willing to sell its interest or purchase
its partner's interest, and the other partner then elects whether to sell or buy
at the specified price. These provisions and rights may work to the advantage or
disadvantage of TRG because, among other things, they may provide an opportunity
to acquire the interests of the Joint Venture Partners on advantageous terms or
require TRG to make decisions as to the purchase or sale of interests in a Joint
Venture at a time that is disadvantageous to TRG.
In addition, the consent of each Joint Venture Partner could be required
with respect to certain major transactions, such as refinancing, encumbering, or
the expansion or sale of, the relevant Taubman Shopping Center. The interests of
the Joint Venture Partners and those of TRG are not necessarily aligned in
connection with the resolution of such issues. Accordingly, TRG may not be able
to favorably resolve any such issue, or TRG may have to provide financial or
other inducement to the Joint Venture Partner to obtain such resolution.
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Failure to Qualify as a REIT
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Although the Company believes that it is organized and operates in such a
manner so as to qualify as a REIT under the Internal Revenue Code of 1986 (the
"Code"), no assurance can be given that the Company will remain so qualified.
Qualification as a REIT involves the application of highly technical and complex
Code provisions for which there are only limited judicial or administrative
interpretations. The complexity of these provisions and applicable Treasury
Regulations is also increased in the context of a REIT that holds its assets in
partnership form. The determination of various factual matters and circumstances
not entirely within the Company's control may affect its ability to qualify as a
REIT. In addition, no assurance can be given that legislation, new regulations,
administrative interpretations, or court decisions will not significantly change
the tax laws with respect to the qualification as a REIT or the Federal income
tax consequences of such qualification.
If in any taxable year the Company fails to qualify as a REIT, the Company
would not be allowed a deduction for distributions to shareholders in computing
its taxable income and would be subject to Federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. As a result, the amount available for distribution to the Company's
shareholders would be reduced for the year or years involved. In addition,
unless entitled to relief under certain statutory provisions, the Company would
also be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification was lost.
Notwithstanding that the Company currently operates in a manner designed
to qualify as a REIT, future economic, market, legal, tax, or other
considerations may cause the Company to determine that it is in the best
interest of the Company and its shareholders to revoke the REIT election. The
Company would be disqualified to elect treatment as a REIT for the four taxable
years following the year of such revocation.
Inability to Comply with REIT Distribution Requirements
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REIT Requirements
To obtain the favorable tax treatment for REITs qualifying under the Code,
the Company generally will be required each year to distribute to its
shareholders at least 95% of its otherwise taxable income (after certain
adjustments). In addition, the Company will be subject to a 4% nondeductible
excise tax on the amount, if any, by which certain distributions paid by it with
respect to any calendar year are less than the sum of 85% of its ordinary income
for the calendar year, 95% of its capital gains net income for the calendar year
and any undistributed taxable income from prior periods. Failure to comply with
the 95% distribution requirement would result in the Company failing to qualify
as a REIT and the Company's income being subject to tax at regular corporate
rates.
Inability of the Company to Maintain its Distribution Policy
The Company intends to make distributions to its shareholders to comply
with the 95% distribution provision of the Code and to avoid the nondeductible
excise tax discussed above. The Company's income consists almost entirely of the
Company's share of the income of TRG, and the Company's cash flow consists
almost entirely of its share of distributions from TRG. No assurance can be
given that the Company's share of distributions from TRG will be
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sufficient to enable it to pay its operating expenses and meet the distribution
requirements discussed above.
Bankruptcy of Others
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Bankruptcy of Anchors
Several department store companies operating anchors at regional shopping
centers have filed for protection under the United States Bankruptcy Code. In
TRG's experience, anchors have continued to operate their stores at the Taubman
Shopping Centers during bankruptcy proceedings, until and unless the proceedings
have resulted in liquidation. In the event of liquidation, the store site and
related property (or the leasehold interest) are generally sold at auction. In
TRG's experience, the bankruptcy of department store companies has not had a
materially adverse effect on TRG's financial condition; however, anchor closings
could result in reduced customer traffic and lower mall tenant sales.
A number of department store companies that operate anchors at shopping
centers were acquired by other department store companies. As a result, there
are fewer independent department store chains in existence today. Accordingly,
the bankruptcy of any one department store chain could involve more anchors at
the Taubman Shopping Centers than may have been the case when there was less
concentration in the department store industry.
Bankruptcy of Mall Tenants
Mall tenants at Taubman Shopping Centers may seek the protection of the
bankruptcy laws, which could result in the termination of such tenants' leases
and thus cause a reduction in the cash flow generated by the Taubman Shopping
Centers.
Bankruptcy of Joint Venture Partners
The bankruptcy of a Joint Venture Partner could adversely affect the
relevant Taubman Shopping Center, principally because of the problems created by
dealing with a bankruptcy court regarding material partnership decisions. Under
the bankruptcy laws, TRG would be precluded by the automatic stay from taking
certain actions which affect the estate of the Joint Venture Partner without
prior approval of the bankruptcy court, which would, in most cases, entail prior
notice to other parties and a hearing in the bankruptcy court. At a minimum, the
requirement of approval may delay the taking of such actions. If a Joint Venture
has incurred recourse obligations, the discharge in bankruptcy of a Joint
Venture Partner might result in the ultimate liability of TRG for a greater
portion of such obligations than it would otherwise bear. In addition, even in
situations where the Joint Venture Partner (or its estate) was not completely
relieved of liability for such obligations, TRG, as a general partner of the
Joint Venture, might be required to satisfy such obligations and then rely upon
a claim against the Joint Venture Partner's estate for reimbursement.
Effect of Uninsured Loss on Profitability
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Each Center Owner carries comprehensive liability, fire, flood,
earthquake, extended coverage, and rental loss insurance, with policy
specifications and insured limits customarily carried for similar properties.
There are, however, certain types of losses (generally of a catastrophic nature,
such as from wars, riots, or civil disturbances) that are generally not
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insured either because they are uninsurable or not economically insurable.
Should an uninsured loss occur, the Center Owner could lose invested capital in,
and anticipated profits from, the property; the property of the Center Owner
would nevertheless continue to be subject to the obligation of any mortgage
indebtedness. Any such loss could adversely affect the profitability and cash
flow of TRG and, therefore, the Company. The Company believes that the Taubman
Shopping Centers are adequately insured in accordance with industry standards.
Liabilities for Environmental Matters
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Under various Federal, state and local environmental laws, ordinances, and
regulations, the Company, TRG, or the Manager, as the case may be, in connection
with the ownership (direct or indirect), operation, management, and development
of real properties, may be considered an owner or operator of such properties or
may have arranged for the disposal or treatment of hazardous or toxic
substances, and therefore may become potentially liable for removal or
remediation costs, as well as certain other potential costs that could relate to
such hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such laws often impose liability without regard to
whether the owner or operator know of, or was responsible for, the release of
such hazardous or toxic substances.
Of the Centers, one is located in a region that has been used extensively
to store various petroleum products; one is located over an oil field and
several abandoned oil wells and is adjacent to an active oil production
facility; and one is situated on land that was previously used as a landfill.
In addition, certain environmental laws impose liability for release of
asbestos- containing materials ("ACMs") into the air, and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. There are ACMs at most of the Taubman Shopping Centers,
primarily in the form of floor tiles and mastics.
Although there can be no assurances, the Company is not aware of any
environmental liability relating to the above matters or generally to the
Taubman Shopping Centers or any other property in which the Company, TRG, or the
Manager has or had an interest (whether as an owner or operator) that the
Company believes would have a material adverse effect on the Company's or TRG's
business, assets, or results of operations. The existence of any such
environmental liability could have an adverse effect on TRG's cash flow and the
funds available to the Company to pay dividends.
Treatment of Assets of the Company as Plan Assets under ERISA
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The Company believes that shares of Common Stock are, and that other
Securities offered hereby will be, "publicly-offered securities" for purposes of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
that, consequently, the assets of the Company are not, and will not be, "plan
assets" of an ERISA plan, individual retirement account, or other non-ERISA plan
that invests in the Common Stock or other Securities. Were the Company's assets
deemed to be plan assets of any such plan, then TRG's and the Company's ability
to engage in business transactions would be hampered because: (i) certain
persons exercising discretion as to the Company's assets might be considered to
be fiduciaries under ERISA; (ii) transactions involving the Company undertaken
at their direction or pursuant to their advice might violate ERISA; and (iii)
certain transactions that the Company might enter
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into in the ordinary course of its business might constitute "prohibited
transactions" under ERISA and the Code.
Sale of the Taubman Shopping Centers
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Under TRG's partnership agreement, upon the sale of a Center or TRG's
interest in a Center, TRG may be required to distribute to its partners all of
the cash proceeds received by TRG from such sale. If TRG made such a
distribution, the sale proceeds would not be available to finance TRG's
activities, and the sale of a Center may result in a decrease in funds generated
by continuing operations and in distributions to TRG's partners, including the
Company.
Restrictions on Control of TRG
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TRG's Partnership Committee has final authority over the management of
TRG's business. As a result of provisions in TRG's Partnership Agreement, the
Company may not be able to designate a majority of the members of the
Partnership Committee prior to owning, under certain circumstances, up to 61.5%
of TRG. Currently, the Company designates five of the 13 Partnership Committee
members.
Ownership Limit and Other Provisions of the Articles and Bylaws
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The general limitation on ownership of the Company's Regular Capital Stock
and other provisions of the Company's Articles and Bylaws could have the effect
of discouraging offers to acquire the Company and of inhibiting a change of
control, which could adversely affect the shareholders' ability to receive a
premium for their shares in connection with such a transaction. See "Certain
Provisions of the Articles and Bylaws" and "Restrictions on Transfer."
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company anticipates that the net proceeds from the sale of the Securities will
be available for general corporate purposes, which may include the acquisition
of additional regional retail shopping centers, other properties, interests in
such centers or other properties, or additional interests in TRG. TRG may use
any proceeds contributed or otherwise transferred to TRG to repay or prepay
indebtedness of TRG, including secured indebtedness, finance capital
expenditures, including expansions and development activities, acquisitions,
working capital, and for other general partnership activities.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
Set forth below is a description of certain provisions of the Company's
Second Amended and Restated Articles of Incorporation (the "Articles") and the
Company's Bylaws (the "Bylaws") as in effect on the date of this Prospectus. The
description is a summary only, and is qualified in its entirety by reference to
the Articles and Bylaws, which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
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Under the Articles, the Company is authorized to issue a total of 300
million shares of Capital Stock, consisting of 250 million shares of Common
Stock and up to 50 million shares of Preferred Stock. The term "Capital Stock"
means Common Stock, Preferred Stock, and Excess Stock, and the term "Regular
Capital Stock" means shares of Common Stock and Preferred Stock that have not
become Excess Stock. See "Restrictions on Transfer."
Staggered Board of Directors
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The Bylaws provide that the Board of Directors will be divided into three
classes of directors, each class constituting approximately one-third of the
total number of directors, with the classes serving staggered three-year terms.
The Articles provide that 40% of the Company's Directors must be "Independent,"
as defined in the Articles (in general, a Director is Independent if he is not
affiliated with A. Alfred Taubman or his affiliates or certain pension trusts of
General Motors Corporation or their affiliates (the "GM Trusts")). The
classification of the Board of Directors will have the effect of making it more
difficult for shareholders to change the composition of the Board of Directors
because only a minority of the directors are elected at any one time. The
Company believes, however, that the longer terms associated with the classified
Board of Directors will help to ensure continuity and stability of the Company's
management and policies.
The classification provisions could also have the effect of discouraging a
third party from accumulating a large block of the Company's stock or attempting
to obtain control of the Company, even though such an attempt might be
beneficial to the Company and some, or a majority, of its shareholders.
Number of Directors; Removal
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The Articles provide that the number of directors will be fixed by the
Bylaws. The Bylaws currently provide that the number of directors will be 11 or
such greater number as is necessary to ensure that 40% of the directors are
Independent Directors.
Directors may be removed only upon the affirmative vote of two-thirds of
the outstanding shares of Capital Stock entitled to vote.
Preferred Stock
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The Articles authorize the Board of Directors to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the preferences, rights (including voting and conversion
rights), and other terms of such series. The Company believes that the ability
of the Board of Directors to issue one or more series of Preferred Stock will
provide the Company with increased flexibility in meeting corporate needs. The
authorized shares of Preferred Stock, as well as unissued shares of Common
Stock, are available for issuance without further action by the Company's
shareholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. Although the Board of Directors has no
present intention to do so, it could issue a series of Preferred Stock that
(because of its terms) could impede a merger, tender offer, or other transaction
that some of the Company's shareholders might believe to be in their best
interests or in which shareholders might receive a premium over the
then-prevailing market prices for their shares.
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Amendment of Articles of Incorporation and Bylaws
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The Articles may be amended only by the affirmative vote of two-thirds of
the outstanding Capital Stock entitled to vote. A majority of the disinterested
members of the Board of Directors, together with a majority of the disinterested
Independent Directors may amend the Bylaws at any time, except with respect to a
bylaw that is adopted by the shareholders and that, by its terms, can be amended
only by the shareholders. The shareholders can amend the Bylaws only upon the
affirmative vote of two-thirds of the outstanding Capital Stock entitled to
vote.
Ownership Limit
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The General Ownership Limit set forth in the Company's Articles could have
the effect of discouraging offers to acquire the Company and of increasing the
difficulty of consummating any such acquisition. See "Restrictions on Transfer."
DESCRIPTION OF COMMON STOCK
General
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Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock, holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
shareholders and are entitled to receive ratably such dividends as may be
declared on the Common Stock by the Board of Directors in its discretion from
funds legally available for the payment of dividends. In the event of the
liquidation, dissolution, or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of all debts
and other liabilities and any liquidation preference of the holders of Preferred
Stock.
Currently, a majority of the outstanding shares of Common Stock is
required for a quorum. Any action requiring shareholder approval (other than the
election of directors) will be approved upon the affirmative vote of the holders
of two-thirds of the outstanding shares of Capital Stock entitled to vote
(currently, two-thirds of the outstanding shares of Common Stock because no
Preferred Stock has been issued). Directors are elected by a plurality of the
votes cast. Holders of Common Stock do not have cumulative voting rights in the
election of directors. Holders of shares of Common Stock do not have preemptive
rights, which means they have no right to acquire additional securities that the
Company may issue.
Because the Board of Directors has the power to establish the preferences
and rights of each series of Preferred Stock, it may afford the holders of any
series of Preferred Stock powers, preferences, and rights (voting or otherwise)
senior to the rights of the holders of Common Stock. See "Restrictions on
Transfer" and "Certain Provisions of the Articles of Incorporation and Bylaws."
The Common Stock is listed on the NYSE under the symbol "TCO." The Company
will apply to the NYSE to list any additional Common Stock to be sold pursuant
to any Prospectus Supplement, and the Company anticipates that such shares will
be so listed.
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Registrar and Transfer Agent
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The registrar and transfer agent for the Common Stock is Chase Manhattan
Bank.
DESCRIPTION OF WARRANTS
The Company has no Warrants outstanding; however, as of September 30,
1996, up to approximately 97.6 million shares of Common Stock may be issued (i)
in exchange for TRG Units of Partnership Interest upon acceptance by certain TRG
partners or employees of the Manager of the Company's Continuing Offer to
exchange Units (including Units issuable upon the exercise of Incentive Options
under TRG's Incentive Option Plan) for Common Stock or (ii) by the Company in
one or more public offerings to raise funds to enable it to satisfy its
obligations pursuant to the Cash Tender Agreement to purchase the TRG Units held
by the GM Trusts and A. Alfred Taubman and members of his family.
The Company may issue Warrants for the purchase of shares of Common Stock.
Warrants may be issued independently or together with any other Securities
offered by any Prospectus Supplement and may be attached to or separate from
such Securities. Each series of Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent specified in the applicable Prospectus Supplement (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with holders or beneficial
owners of Warrants. The foregoing sets forth certain general terms and
provisions of the Warrants offered by this Prospectus. Further terms of the
Warrants and the applicable Warrant Agreements will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:
(i) the title of such Warrants;
(ii) the aggregate number of such Warrants;
(iii) the price at which such Warrants will be issued;
(iv) the number of shares of Common Stock purchasable upon exercise of
such Warrants;
(v) the designation and terms of the other Securities, if any, with
which such Warrants are issued, and the number of such Warrants
issued with each such Security;
(vi) the date, if any, on and after which such Warrants and the related
shares of Common Stock will be separately transferable;
(vii) the price at which each share of Common Stock purchasable upon
exercise of such Warrants may be purchased;
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(viii)the date on which the right to exercise such Warrants will commence
and the date on which such right will expire;
(ix) the minimum or maximum amount of such Warrants that may be exercised
at any one time;
(x) information with respect to book-entry procedures, if any;
(xi) a discussion of certain Federal income tax considerations; and
(xii) any other terms of such Warrants, including terms, procedures, and
limitations relating to the exchange and exercise of such Warrants.
See "Certain Provisions of the Articles of Incorporation and Bylaws,"
"Description of Common Stock," and "Restrictions on Transfer" for a general
description of the Common Stock to be acquired upon the exercise of Warrants.
RESTRICTIONS ON TRANSFER
To maintain its qualification as a REIT, the Company cannot be "closely
held" within the meaning of applicable provisions of the Code and Treasury
Regulations. In general, a REIT is "closely held" if five or fewer individuals
(as defined by the Code and Regulations) own more than 50% in value of the
REIT's outstanding capital stock. Under the Company's Articles, in general, no
shareholder may own more than 8.23% in value of the Company's Capital Stock
(which term refers to Regular Common Stock, Regular Preferred Stock, and Excess
Stock) (the "General Ownership Limit"). The GM Trusts may collectively own the
greater of 8,731,426 shares of Regular Capital Stock (which term refers to
shares of Common Stock and Preferred Stock that are not Excess Stock) and 19.8%
in value of the outstanding Capital Stock; the AT&T Master Pension Trust (the
"AT&T Trust and, together with the GM Trusts, the "Trusts") may own the greater
of 6,059,080 shares of Regular Capital Stock and 13.74% in value of the
outstanding Capital Stock; and the Trusts may own, in the aggregate, the greater
of 14,790,506 shares of Regular Capital Stock and 33.54% in value of the
outstanding Capital Stock (each such variation from the General Ownership Limit
is referred to as an "Existing Holder Limit"). In addition, the Board of
Directors has the authority to allow a "Look Through Entity" to own up to 9.9%
in value of the Capital Stock (the "Look Through Entity Limit"). A "Look Through
Entity," in general, is an entity (other than a qualified trust under section
401(a) of the Code, an entity that owns 10% or more of the equity of any tenant
from which the Company or TRG receives or accrues rent from real property, or
certain tax exempt entities described in the Articles) whose beneficial owners,
rather than the entity, would be treated as owning the Capital Stock owned by
such entity.
The Articles provide that if the transfer of any shares of Regular Capital
Stock or a change in the Company's capital structure would cause any person (the
"Purported Transferee") to own Regular Capital Stock in excess of the General
Ownership Limit (which refers to 8.23% in value of the outstanding Capital
Stock) or the Look Through Limit (which refers to 9.9% in value of the
outstanding Capital Stock) or in excess of the applicable Existing Holder Limit
(which is the greater of the fixed number of shares of Regular Capital Stock and
percentage in value of the outstanding Capital Stock applicable to the relevant
Trust, as described above), then the transfer is void ab initio (the General
Ownership Limit,
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the Look Through Limit, and the Existing Holder Limit are referred to
collectively as the "Ownership Limits"). It is possible, however, that a
transfer of Regular Capital Stock in violation of one of the Ownership Limits
could occur without the Company's knowledge. Accordingly, the Articles provide
that if notwithstanding the provisions of the Articles, the transfer
nevertheless occurs or a change in capital structure causes a person to own in
excess of any of the Ownership Limits, the shares in excess of such Ownership
Limit automatically acquire the status of "Excess Stock." Shares that have
become Excess Stock continue to be issued and outstanding shares of Common Stock
or Preferred Stock, as the case may be.
A Purported Transferee of Excess Stock acquires no rights to those shares.
Rather, all rights associated with the ownership of those shares (with the
exception of the right to be reimbursed for the original purchase price of those
shares) immediately vest in one or more charitable organizations designated from
time to time by the Company's Board of Directors (each, a "Designated Charity").
An agent designated from time to time by the Board of Directors (each, a
"Designated Agent") will act as attorney-in-fact for the Designated Charity to
vote the shares of Excess Stock and to take delivery of the certificates
evidencing the shares that have become Excess Stock and any distributions paid
to the Purported Transferee with respect to those shares. The Designated Agent
will sell the Excess Stock, and any increase in value of the Excess Stock
between the date it became Excess Stock and the date of sale will inure to the
benefit of the Designated Charity.
A Purported Transferee must notify the Company of any transfer resulting
in shares converting into Excess Stock, as well as such other information
regarding such person's ownership of the Company's Capital Stock as the Company
requests. In addition, any person holding 5% or more of the Company's Capital
Stock must provide the Company with information regarding such person's
ownership of Capital Stock.
Under the Articles, only the Designated Agent has the right to vote shares
of Excess Stock; however, the Articles also provide that votes cast with respect
to certain irreversible corporate actions (e.g., a merger or sale of the
Company) will not be invalidated if erroneously voted by the Purported
Transferee. The Articles also provide that a director is deemed to be a director
for all purposes, notwithstanding a Purported Transferee's unauthorized exercise
of voting rights with respect to shares of Excess Stock in connection with such
director's election.
The General Ownership Limit will not be automatically removed even if the
REIT provisions are changed so as to no longer contain any ownership
concentration limitation or if the concentration limitation is increased. In
addition to preserving the Company's status as a REIT, the effect of the General
Ownership Limit is to prevent any person from acquiring unilateral control of
the Company. Any change in the General Ownership Limit would require an
amendment to the Articles. Currently, amendments to the Articles require the
affirmative vote of holders owning not less than two-thirds of the outstanding
Capital Stock entitled to vote.
All certificates evidencing shares of Capital Stock bear or will bear a
legend referring to the restrictions described above.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain Federal income tax considerations
that may be relevant to a prospective purchaser of Securities, is based upon
current law, and is not tax advice. The applicable Prospectus Supplement will
contain information about specific Federal income tax considerations relating to
the purchase and ownership of Warrants. This discussion does not address all
aspects of taxation that may be relevant to particular shareholders in light of
their personal investment or tax circumstances or to certain types of
shareholders (including insurance companies, financial institutions, or
broker-dealers) subject to special treatment under the Federal income tax laws.
This discussion was prepared by Miro Weiner & Kramer, counsel to the
Company, and is based on current provisions of the Code, existing, temporary,
and currently proposed Treasury Regulations under the Code, the legislative
history of the Code, existing administrative rulings and practices of the IRS,
and judicial decisions. No assurance can be given that legislative, judicial, or
administrative changes will not affect the accuracy of any statements in this
Prospectus with respect to transactions entered into or contemplated prior to
the effective date of such changes.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP, AND SALE OF THE
SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT
TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES
OF SUCH PURCHASE, OWNERSHIP, SALE, AND ELECTION AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
General
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The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code and applicable Treasury Regulations, which are the
requirements for qualifying as a REIT (the "REIT Requirements"). The Company
believes that it is organized and operates in such a manner as to qualify for
taxation as a REIT under the Code, and the Company intends to continue to
operate in such a manner; however, no assurance can be given that it has
operated in such a manner or that it will continue to operate in a manner so as
to qualify or remain qualified.
The REIT Requirements relating to the Federal income tax treatment of
REITs and their shareholders are highly technical and complex. The following
discussion sets forth only a summary of the material aspects of those sections.
Taxation of the Company
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As a REIT, the Company generally will not be subject to Federal corporate
income taxes on that portion of its ordinary income or capital gain that is
currently distributed to shareholders.
The REIT provisions of the Code generally allow a REIT to deduct dividends
paid to its shareholders. This deduction for dividends paid to shareholders
substantially eliminates the Federal "double taxation" on earnings (once at the
corporate level and once again at the shareholder level) that results from
investment in a corporation.
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Even if the Company qualifies for taxation as a REIT, the Company may be
subject to Federal income tax as follows:
First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income and undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to
the "alternative minimum tax" on its items of tax preference, if any.
Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" (generally, property acquired by
reason of a default on a lease or an indebtedness held by a REIT) that is
held primarily for sale to customers in the ordinary course of business or
(ii) other nonqualifying net income from foreclosure property, it will be
subject to tax at the highest corporate rate on such income.
Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property
held primarily for sale to customers in the ordinary course of business,
other than foreclosure property), such income will be subject to a 100%
tax.
Fifth, if the Company should fail to satisfy the 75% gross income
test or the 95% gross income test (as discussed below) and has nonetheless
maintained its qualification as a REIT because certain other requirements
have been met, it will be subject to a 100% tax on the gross income
attributable to the greater of the amount by which the Company fails the
75% or 95% test, multiplied by a fraction intended to reflect the
Company's profitability.
Sixth, if the Company should fail to distribute with respect to each
calendar year at least the sum of (i) 85% of its REIT ordinary income from
such year, (ii) 95% of its REIT capital gain net income for such year, and
(iii) any undistributed taxable income from prior periods, the Company
would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
Seventh, if a REIT acquires any asset from a C corporation (i.e.,
generally a corporation subject to full corporate-level tax) in a
carryover basis transaction (or if a REIT such as the Company holds assets
beginning on the first day of the first taxable year for which the Company
qualifies as a REIT) and the REIT subsequently recognizes gain on the
disposition of such asset during the 10-year period (the "Recognition
Period") beginning on the date on which the asset was acquired by the REIT
(or the REIT first qualified as a REIT), then the excess of (a) the fair
market value of the asset as of the beginning of the applicable
Recognition Period, over (b) the REIT's adjusted basis in such asset as of
the beginning of such Recognition Period will be subject to tax at the
highest regular corporate rate, pursuant to guidelines issued by the IRS
(the "Built-in Gain Rules").
Requirements for Qualification
- ------------------------------
To qualify as a REIT, the Company must meet the requirements discussed
below relating to the Company's organization, sources of income, nature of
assets, and distributions
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of income to shareholders.
Organizational Requirements
The Code defines a REIT as a corporation, trust, or association:
(i) that is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest;
(iii) that would be taxable as a domestic corporation but for the
REIT Requirements;
(iv) that is neither a financial institution nor an insurance
company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more
persons; and
(vi) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or
indirectly through the application of certain attribution
rules, by five or fewer individuals (as defined in the Code to
include certain entities).
In addition, certain other tests, described below, regarding the nature of its
income and assets must also be satisfied.
The Code provides that conditions (i) through (iv), inclusive, must be met
during the entire taxable year and that condition (v) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months.
The Company satisfies the requirements set forth in (i) through (v) above
and believes that it satisfies the requirement set forth in (vi) above. In
addition, the Company's Articles currently include certain restrictions
regarding transfer of the Company's shares, and the Company's Continuing Offer
to certain individuals in TRG to exchange Units of Partnership Interest for
shares of Common Stock includes certain restrictions on who is entitled to
exercise rights under the Continuing Offer. In both cases, these restrictions
are intended (among other things) to assist the Company in continuing to satisfy
the share ownership requirements described in (v) and (vi) above.
Income Tests
To maintain qualification as a REIT, there are three gross income
requirements that must be satisfied annually.
o First, at least 75% of the Company's gross income, excluding gross
income from certain dispositions of property held primarily for sale
to customers in the ordinary course of a trade or business
("prohibited transactions"), for each taxable year must be derived
directly or indirectly from investments relating to real property or
mortgages (including "rents from real property" and, in certain
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circumstances, interest) or from certain types of temporary
investments.
o Second, at least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be
derived from such real property investments described above and from
dividends, interest, and gain from the sale or disposition of stock
or securities or from any combination of the foregoing.
o Third, short-term gain from the sale or other disposition of stock
or securities held for less than one year, gain from prohibited
transactions, and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary
conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from
prohibited transactions) for each taxable year.
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share of
the assets of the partnership and is deemed to be entitled to the income of the
partnership attributable to such share. In addition, the character of the assets
and gross income of the partnership retain the same character in the hands of
the REIT for purposes of the REIT Requirements, including satisfying the gross
income tests and the asset tests. Accordingly, the Company's proportionate share
of the assets, liabilities, and items of income of TRG, including TRG's
proportionate share of the assets, liabilities, and items of income of the
Manager and of the Center Owners, will be treated as assets, liabilities, and
items of income of the Company for purposes of applying the requirements
described in this Prospectus, provided that each of the Joint Ventures is
treated as a partnership for federal income tax purposes and that none of the
other Center Owners or the TRG Trusts are taxable as corporations for Federal
income tax purposes. See the discussion below under "-- Tax Aspects of TRG --
Classification."
Rents received or deemed to be received by the Company will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met.
o First, the amount of rent must not be based in whole or in part on
the income or profits of any person. An amount received or accrued
generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Rents based on net income or
profits do not include rents received from a tenant based on the
tenant's income from the property if the tenant derives
substantially all of its income with respect to such property from
the leasing or subleasing of substantially all of such property,
provided that the tenant receives from subtenants only amounts that
would be treated as rents from real property if received directly by
a REIT.
o Second, the Code provides that rents received from a tenant will not
qualify as "rents from real property" in satisfying the gross income
tests if the REIT, or an owner of 10% or more of the REIT, directly
or constructively owns 10% or more of such tenant (a "Related Party
Tenant").
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o Third, if rent attributable to personal property, leased in
connection with a lease of real property, is greater than 15% of the
total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents
from real property."
o Finally, if a REIT provides services to tenants of a property, the
rent received from such property will qualify as "rents from real
property" only if the services are of a type that a tax-exempt
organization can provide to its tenants without causing its rental
income to be unrelated business taxable income under the Code (that
is, if such services are "usually or customarily rendered in
connection with the rental of space for occupancy only" and are not
otherwise considered "primarily for the tenant's convenience").
Services which would give rise to unrelated business taxable income
("Prohibited UBTI Service Income") if provided by a tax-exempt
organization must be provided by an "independent contractor" (as
defined in the Code) who is adequately compensated and from whom the
REIT does not derive any income. In any event, receipts from
services furnished (whether or not rendered by an independent
contractor) which are not customarily provided to tenants in
properties of a similar class in the geographic market in which the
property is located will in no event qualify as "rents from real
property."
Substantially all of the Company's income is derived from its partnership
interest in TRG. Currently, TRG's real estate investments give rise to income
that enables the Company to satisfy all of the income tests described above.
TRG's income is largely derived from its interests in the Taubman Shopping
Centers, which for the most part, qualify as "rents from real property" for
purposes of the 75% and the 95% gross income tests. TRG also derives income from
its partnership interest in the Manager and, to the extent dividends are paid by
the Manager's managing partner ("Taub-Co"), from TRG's interest in Taub-Co.
The Company believes that neither TRG nor any of the Center Owners charges
rent from any property that is based in whole or in part on the income or
profits of any person (except by reason of being based on a fixed percentage of
receipts or sales, as described above). The Company believes that neither TRG
nor any of the Center Owners derives rent attributable to personal property
leased in connection with real property that exceeds 15% of the total rents.
The Company does not believe that it derives rent from property rented to
a Related Party Tenant; however, the determination of whether the Company owns
10% or more of any tenant is made after the application of complex attribution
rules under which the Company will be treated as owning interests in tenants
that are owned by its "Ten Percent Stockholders." In identifying the Company's
Ten Percent Stockholders, each individual or entity will be treated as owning
Common Stock and Preferred Stock held by related individuals and entities.
Accordingly, the Company cannot be absolutely certain whether all Related Party
Tenants have been or will be identified. Although rent derived from a Related
Party Tenant will not qualify as rents from real property and, therefore, will
not be qualifying income under the 75% or 95% gross income tests, the Company
believes that the aggregate amount of such rental income (and any other
nonqualifying income) in any taxable year will not exceed the limits on
nonqualifying income under such gross income tests. See "--Failure to Qualify."
TRG has entered into an agreement with the Manager, pursuant to which the
Manager
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provides all services that TRG requires in connection with the operation of the
Taubman Shopping Centers. As a result of TRG's ownership interests in the
Manager and Taub-Co, the Manager does not qualify as an independent contractor
from whom the Company derives no income. The Company believes, however, that no
amounts of rent should be excluded from the definition of rents from real
property solely by reason of the failure to use an independent contractor since
TRG will hire an independent contractor to the extent necessary to qualify
rental income as rents from real property under Section 856(d)(1).
The Manager receives fees in exchange for the performance of certain
management and administrative services, including fees to be received pursuant
to agreements with the Company and TRG. A portion of those fees will accrue to
the Company because TRG owns a limited partnership interest in the Manager. The
Company's indirect interest in the management fees generated by the Manager
generally may not be qualified income under the 75% or 95% gross income tests
(at least to the extent attributable to properties in which TRG has no interest
or to a Joint Venture Partner's interest in a property). In any event, the
Company believes that the aggregate amount of such fees (and any other
nonqualifying income) in any taxable year has not exceeded and will not exceed
the limits on nonqualifying income under the 75% and 95% gross income tests.
The term "interest," for purposes of satisfying the income tests,
generally does not include any amount received or accrued (directly or
indirectly) if the determination of such amount depends in whole or in part on
the income or profits of any person. An amount received or accrued generally
will not be excluded from the term "interest," however, solely by reason of
being based on a fixed percentage or percentages of receipts or sales. TRG or
the Center Owners may advance money from time to time to tenants for the purpose
of financing tenant improvements. The Company and TRG do not intend to charge
interest that will depend in whole or in part on the income or profits of any
person.
The term "prohibited transaction," for purposes of the income tests and
the excise tax described below, generally means a sale or other disposition of
property (other than foreclosure property) that is held primarily for sale to
customers in the ordinary course of a trade or business. Any gross income
derived from a prohibited transaction is taken into account in applying the 30%
test (and the net income from any such transaction is subject to a 100% tax).
TRG owns interests in real property that is situated on the periphery of certain
of the Taubman Shopping Centers. The Company and TRG believe that this
peripheral property is not held for sale to customers and that the sale of such
peripheral property is not in the ordinary course of TRG's business. Whether
property is held "primarily for sale to customers in the ordinary course of its
trade or business" depends, however, on the facts and circumstances in effect
from time to time, including those relating to a particular property. As a
result, no assurance can be given that the Company can avoid being deemed to own
property that the IRS later characterizes as property held "primarily for sale
to customers in the ordinary course of its trade or business."
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if (i) the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, (ii) the
Company attaches a schedule of the sources of its income to its return, and
(iii) any incorrect information on the schedule was not due to fraud with intent
to evade tax. It is not possible, however, to state whether in all circumstances
the Company would be
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entitled to the benefit of these relief provisions. For example, if the Company
fails to satisfy the gross income tests because nonqualifying income that the
Company intentionally earns exceeds the limits on such income, the IRS could
conclude that the Company's failure to satisfy the tests was not due to
reasonable cause. As discussed above in "Federal Income Tax
Considerations--Taxation of the Company," even if these relief provisions apply,
a tax would be imposed with respect to the excess gross income. No similar
mitigation provision applies to provide relief if the 30% income test is failed,
and in such case, the Company will cease to qualify as a REIT. See "Federal
Income Tax Considerations--Failure to Qualify."
Asset Tests
The Company, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets.
o First, at least 75% of the value of the Company's total assets,
including its allocable share of assets held by TRG, must be
represented by real estate assets (which for this purpose include
stock or debt instruments held for not more than one year purchased
with the proceeds of a stock offering or a long-term (at least five
years) debt offering of the Company), cash, cash items, and
government securities.
o Second, not more than 25% of the value of the Company's total assets
may be represented by securities other than those in the 75% asset
class.
o Third, of the investments included in the 25% asset class, the value
of any one issuer's securities owned by the Company may not exceed
5% of the value of the Company's total assets, and the Company may
not own more than 10% of any one issuer's outstanding voting
securities.
The Company is deemed to own its proportionate share of all of the assets
owned by TRG and the Center Owners in which TRG is a partner. The Company
believes that more than 75% of the value of TRG's assets qualify as "real estate
assets." TRG's interest in Taub-Co should not violate the prohibition against a
REIT's ownership of more than 10% of the voting securities of any one issuer.
The Company believes that the value of the Company's proportionate share of
TRG's interest in Taub-Co does not exceed 5% of the total value of the Company's
assets, and the Company does not expect that it will exceed 5% in the future.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by a
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company believes that it maintains adequate records of the
value of its assets to ensure compliance with the asset tests and to enable the
Company to take such other action within 30 days after the close of any quarter
as may be required to cure any noncompliance. There can be no assurance,
however, that such other action will always be successful.
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Annual Distribution Requirements
In order to be treated as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
at least equal to (i) the sum of (a) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (b) 95% of the net income, if any, from foreclosure property
in excess of the special tax on income from foreclosure property, minus (ii) the
sum of certain items of noncash income.
In addition, during its Recognition Period, if the Company disposes of any
asset that was held by the Company prior to January 1, 1992, or that is
otherwise subject to the Built-in Gain rules, the Company may be required,
pursuant to guidance to be issued by the IRS, to distribute at least 95% of the
Built-in Gain (after tax), if any, recognized on the disposition of such asset.
Any such distributions must be paid in the taxable year to which they relate, or
in the following taxable year if declared before the Company timely files its
tax return for such year and if paid on or before the first regular dividend
payment after such declaration.
To the extent that the Company does not distribute all of its net capital
gain or distributes at least 95% (but less than 100%) of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular ordinary and
capital gains corporate tax rates.
Furthermore, if the Company fails to distribute during each calendar year
at least the sum of (a) 85% of its REIT ordinary income for such year, (b) 95%
of its REIT capital gain net income for such year, and (c) any undistributed
taxable income from prior periods, the Company will be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. The Company intends to make timely distributions sufficient to
satisfy this annual distribution requirement.
The Company's REIT taxable income consists substantially of the Company's
distributive share of the income of TRG. Currently the Company's REIT taxable
income is less than the cash flow it receives from TRG, due to the allowance of
depreciation and other non-cash charges in computing REIT taxable income.
Accordingly, the Company anticipates that it will generally have sufficient cash
or liquid assets to enable it to satisfy the 95% distribution requirement.
It is possible that, from time to time, the Company may not have
sufficient cash or other liquid assets to meet the 95% distribution requirement
due to the insufficiency of cash flow from TRG in a particular year or to timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of such
expenses in arriving at taxable income of the Company. In the event that such an
insufficiency or such timing differences occur, in order to meet the 95%
distribution requirement, the Company may find it necessary to arrange for
short-term, or possibly long-term, borrowings or to pay dividends in the form of
taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Company will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
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Failure to Qualify
- ------------------
If the Company fails to qualify for taxation as a REIT in any taxable
year, the Company will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Distributions to
shareholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. In such event,
to the extent of current and accumulated earnings and profits, all distributions
to shareholders will be taxable as ordinary income, and subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief. For example, if the Company fails to satisfy
the gross income tests because nonqualifying income that the Company
intentionally earns exceeds the limits on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable cause.
See "Federal Income Tax Considerations -- Requirements for Qualification --
Income Tests."
Taxation of U.S. Shareholders
- -----------------------------
As used in the following discussion, the term U.S. Shareholder means a
holder of shares of Common Stock (the "Shares") that (for United States Federal
income tax purposes) (i) is a citizen or resident of the United States, (ii) is
a corporation, partnership, or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or (iii) is
an estate or trust the income of which is subject to United States Federal
income taxation regardless of its source. For any taxable year for which the
Company qualifies for taxation as a REIT, amounts distributed to taxable U.S.
Shareholders will be taxed as follows.
Distributions Generally
Distributions to U.S. Shareholders, other than capital gain dividends
discussed below, constitute dividends to such shareholders up to the amount of
the Company's current or accumulated earnings and profits and are taxable to
such shareholders as ordinary income. Such distributions are not eligible for
the dividends-received deduction for corporations. Under current law, the
maximum Federal income tax rate applicable to ordinary income of individuals is
39.6% and applicable to corporations is 35%. To the extent that the Company
makes distributions in excess of its current or accumulated earnings and
profits, such distributions will first be treated as a tax-free return of
capital, reducing the tax basis in the U.S. Shareholders' Shares, and
distributions in excess of the U.S. Shareholders' tax basis in their respective
Shares are taxable as gain realized from the sale of such shares. A dividend
declared by the Company in October, November, or December of any year payable to
a shareholder of record on a specified date in any such month is treated as both
paid by the Company and received by the shareholder on December 31 of such year,
provided that the dividend is actually paid by the Company during January of the
following calendar year. Shareholders may not include on their own income tax
returns any tax losses of the Company. Pursuant to Regulations to be promulgated
by the Treasury, a portion of the Company's distributions may be subject to the
alternative minimum tax to the extent of the Company's items of tax preference,
if any, allocated to the shareholders.
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The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax discussed in
"Federal Income Tax Considerations -- Taxation of the Company" above. As a
result, U.S. Shareholders may be required to treat certain distributions that
would otherwise result in a tax-free return of capital as taxable dividends.
Moreover, any "deficiency dividend" will be treated as a "dividend" (an ordinary
dividend or a capital gain dividend, as the case may be), regardless of the
Company's earnings and profits.
Capital Gain Dividends
A dividend paid to a U.S. Shareholder that is properly designated by the
Company as a capital gain dividend will be treated as long-term capital gain (to
the extent it does not exceed the Company's actual net capital gain) for the
taxable year without regard to the period for which the shareholder has held his
Shares; however, corporate shareholders may be required to treat up to 20% of
certain capital gains dividends as ordinary income. Capital gain dividends are
not eligible for the dividends-received deduction for corporations.
Passive Activity Loss and Investment Interest Limitations
Distributions from the Company and gain from the disposition of Shares
will not be treated as passive activity income, and therefore, U.S. Shareholders
generally will not be able to apply any "passive losses" against such income.
Dividends from the Company (to the extent they do not constitute a return of
capital) and gain from the disposition of shares generally may be treated as
investment income for purposes of the investment interest limitation.
Certain Dispositions of Shares
A U.S. Shareholder will recognize gain or loss on the sale or exchange of
Shares to the extent of the difference between the amount realized on such sale
or exchange and the shareholder's tax basis in such Shares. Such gain or loss
generally will constitute long-term capital gain or loss if the shareholder has
held such shares for more than one year. Losses incurred on the sale or exchange
of Shares held for six months or less (after applying certain holding period
rules), however, will generally be deemed long-term capital loss to the extent
of any long-term capital gain dividends received by the U.S. Shareholder with
respect to such Shares.
Treatment of Tax-Exempt Shareholders
Distributions from the Company to a tax-exempt employee's pension trust or
other domestic tax-exempt shareholder will not constitute "unrelated business
taxable income" ("UBTI") unless such shareholder has borrowed to acquire or
carry the Shares or the Company is a "pension-held REIT," as discussed below.
Qualified trusts that hold more than 10% (by value) of the shares of
certain REITs ("pension-held REITS") may be required to treat a certain
percentage of such a REIT's distributions as UBTI. This requirement will apply
only if (i) the REIT would not qualify as such for Federal income tax purposes
but for the application of a "look-through" exception to the five-or-fewer
requirement applicable to shares held by qualified trusts and (ii) the REIT is
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<PAGE>
"predominantly held" by qualified trusts. A REIT is predominantly held if either
(i) a single qualified trust holds more than 25% by value of the REIT interests
or (ii) one or more qualified trusts, each owning more than 10% by value of the
REIT interests, hold in the aggregate more than 50% of the REIT interests. The
percentage of any REIT dividend treated as UBTI is equal to the ratio of (a) the
UBTI earned by the REIT (treating the REIT as if it were a qualified trust and
therefore subject to tax on UBTI) to (b) the total gross income (less certain
associated expenses) of the REIT. A de minimis exception applies when the ratio
set forth in the preceding sentence is less than 5% for any year. For these
purposes, a qualified trust is any trust described in section 401(a) of the Code
and exempt from tax under section 501(a) of the Code. The provisions requiring
qualified trusts to treat a portion of REIT distributions as UBTI will not apply
if the REIT is able to satisfy the five-or-fewer requirement without relying
upon the "look-through" exception. The Company believes that it is not a
"pension-held REIT." No assurance can be given, however, that the Company will
not become a pension- held REIT in the future.
Additional Tax Consequences for Holders of Warrants
See the applicable Prospectus Supplement for a discussion of any
additional tax consequences for holders of Warrants offered by such Prospectus
Supplement.
Special Tax Considerations for Foreign Shareholders
- ---------------------------------------------------
The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, and foreign
trusts and estates (collectively, "Non-U.S. Shareholders") are complex, and the
following discussion is intended only as a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of Federal, state, and local income tax laws on an investment in the
Company, including any reporting requirements.
In general, a Non-U.S. Shareholder will be subject to regular United
States income tax with respect to its investment in the Company if such
investment is "effectively connected" with the Non-U.S. Shareholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Shareholder that
receives income that is (or is treated as) effectively connected with a U.S.
trade or business may also be subject to the branch profits tax under Section
884 of the Code, which is payable in addition to regular United States corporate
income tax. The following discussion will apply to Non-U.S. Shareholders whose
investment in the Company is not so effectively connected.
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent made out of current or accumulated
earnings and profits. Generally, any ordinary income dividend will be subject to
a United States withholding tax equal to 30% of the gross amount of the dividend
unless such tax is reduced by an applicable tax treaty. Such a distribution of
cash in excess of the Company's earnings and profits will be treated first as a
return of capital that will reduce a Non-U.S. Shareholder's basis in its Shares
(but not below zero) and then as gain from the disposition of such shares, the
tax treatment of which is described under the rules discussed below with respect
to disposition of Shares.
Distributions by the Company that are attributable to gain from the sale
or exchange
22
<PAGE>
of a United States real property interest will be taxed to a Non-U.S.
Shareholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Shareholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Shareholder will be taxed at the
normal capital gain rates applicable to a U.S. Shareholder (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder that is not entitled to treaty exemption.
The Company will be required to withhold from distributions to Non-U.S.
Shareholders, and remit to the IRS, (i) 35% of designated capital gain dividends
(or, if greater, 35% of the amount of any distributions that could be designated
as capital gain dividends) and (ii) 30% of ordinary dividends paid out of
earnings and profits. In addition, if the Company designates prior distributions
as capital gain dividends, subsequent distributions, up to the amount of such
prior distributions, will be treated as capital gain dividends for purposes of
withholding. A distribution in excess of the Company's earnings and profits may
be subject to 30% dividend withholding if at the time of the distribution it
cannot be determined whether the distribution will be in an amount in excess of
the Company's current and accumulated earnings and profits. Tax treaties may
reduce the Company's withholding obligations. If the amount withheld by the
Company with respect to a distribution to a Non-U.S. Shareholder exceeds such
shareholder's United States tax liability with respect to such distribution (as
determined under the rules described in the two preceding paragraphs), the
Non-U.S. Shareholder may file for a refund of such excess from the IRS. It
should be noted that the 35% withholding tax rate on capital gain dividends
currently corresponds to the maximum income tax rate applicable to corporations,
but is higher than the 28% maximum rate on capital gains of individuals.
Unless the Shares constitute a "United States real property interest"
within the meaning of FIRPTA, the sale of Shares by a Non-U.S. Shareholder
generally will not be subject to United States taxation. The Shares will not
constitute a United States real property interest if the Company is a
"domestically controlled REIT." A domestically controlled REIT is a REIT in
which at all times during a specified testing period less than 50% in value of
its shares is held directly or indirectly by Non-U.S. Shareholders. Currently,
the Company believes that it is a domestically controlled REIT, and therefore
the sale of Shares is not subject to taxation under FIRPTA. However, because the
Shares are or may be publicly traded, no assurance can be given that the Company
will continue to be a domestically controlled REIT. If the Company does not
constitute a domestically controlled REIT, whether a Non-U.S. Shareholder's sale
of Shares would be subject to tax under FIRPTA as a sale of a United States real
property interest would depend on whether the shares were "regularly traded" (as
defined by applicable Treasury Regulations) on an established securities market
(e.g., the New York Stock Exchange, on which the Common Stock is listed) and on
the size of the selling shareholder's interest in the Company.
If the gain on the sale of the Shares were subject to taxation under
FIRPTA, the Non- U.S. Shareholder would be subject to the same treatment as a
U.S. Shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). In any event, a purchaser of Shares from a Non-U.S.
Shareholder will not be required under FIRPTA to withhold on the purchase price
if the purchased Shares are "regularly traded" on an established securities
market or if the
23
<PAGE>
Company is a domestically controlled REIT. Otherwise, under FIRPTA the purchaser
of Shares may be required to withhold 10% of the purchase price and remit such
amount to the IRS, and the Company may be required to withhold 10% of certain
distributions to Non-U.S. Shareholders. Notwithstanding the foregoing, capital
gain not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if the
Non-U.S. Shareholder is a nonresident alien individual who is present in the
United States for 183 days or more during the taxable year and certain other
conditions apply, in which case the nonresident alien individual will be subject
to a 30% tax on such individual's capital gains.
Information Reporting Requirements and Backup Withholding Tax
- -------------------------------------------------------------
Under certain circumstances, U.S. Shareholders of Shares may be subject to
backup withholding at a rate of 31% on payments made with respect to, or cash
proceeds of a sale or exchange of, Shares. Backup withholding will apply only if
the holder (i) fails to furnish its taxpayer identification number ("TIN")
(which, for an individual, would be his social security number), (ii) furnishes
an incorrect TIN, (iii) is notified by the IRS that it has failed properly to
report payments of interest and dividends, or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that it is subject to backup withholding
for failure to report interest and dividend payments. Backup withholding will
not apply with respect to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. U.S. Shareholders should consult
their own tax advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption. Backup
withholding is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a U.S. Shareholder will be allowed as a
credit against such U.S. Shareholder's United States Federal income tax
liability and may entitle such U.S. Shareholder to a refund, provided that the
required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Shareholders, and Non-U.S. Shareholders
should consult their tax advisors with respect to any such information reporting
and backup withholding requirements. Backup withholding with respect to Non-U.S.
Shareholders is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a Non-U.S. Shareholder will be allowed
as a credit against any United States Federal income tax liability of such Non-
U.S. Shareholder. If withholding results in an overpayment of taxes, a refund
may be obtained, provided that the required information is furnished to the IRS.
Tax Aspects of TRG
- ------------------
The following discussion summarizes certain Federal income tax
considerations applicable solely to the Company's investment in TRG. The
discussion does not cover state or local tax laws or any Federal tax laws other
than income tax laws.
Classification
The Company is entitled to include in its income its distributive share of
TRG's income and to deduct its distributive share of TRG's losses only if TRG
and each Joint Venture is
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<PAGE>
classified for Federal income tax purposes as a partnership rather than as an
association taxable as a corporation, and none of the other Center Owners or the
TRG Trusts are classified for Federal income tax purposes as associations
taxable as corporations.
An organization formed as a partnership will be treated as a partnership
for Federal income tax purposes rather than as a corporation only if it has no
more than two of the four corporate characteristics that the Treasury
Regulations use to distinguish a partnership from a corporation for tax
purposes. These four characteristics are continuity of life, centralization of
management, limited liability, and free transferability of interests.
TRG has not requested, and does not intend to request, a ruling from the
IRS that it will be treated as a partnership for Federal income tax purposes.
The Company believes that TRG does not possess more than two corporate
characteristics and thus is properly treated as a partnership for Federal income
tax purposes. The Company also believes that each of the Joint Ventures is
properly treated as a partnership for Federal income tax purposes and that none
of the other Center Owners or the TRG Trusts are taxable as a corporation for
Federal income tax purposes. No assurance can be given that the IRS will not
challenge the status of TRG or a Joint Venture as a partnership for Federal
income tax purposes or the non-corporate status of the other Center Owners or
the TRG Trusts for Federal income tax purposes. If such challenge were sustained
by a court, TRG, the Center Owners, or the TRG Trusts would be treated as a
corporation for Federal income tax purposes, as described below. In addition,
the Company's belief is based on existing law, which is to a great extent the
result of administrative and judicial interpretation. No assurance can be given
that administrative or judicial changes would not modify these conclusions.
If for any reason, TRG, any Center Owner, or any TRG Trust were taxable as
a corporation rather than as a partnership or trust for Federal income tax
purposes, the Company would not be able to satisfy the income and asset
requirements for REIT status. See "Federal Income Tax Considerations --
Requirements for Qualification -- Income Tests" and "Federal Income Tax
Considerations -- Requirements for Qualification -- Asset Tests." In addition,
any change in TRG's status or that of a Center Owner or a TRG Trust for tax
purposes might be treated as a taxable event, in which case the Company might
incur a tax liability without any related cash distribution. Further, in the
case of TRG or an affected Center Owner, items of income and deduction of TRG or
the affected Center Owner would not pass through to its partners, and its
partners would be treated as shareholders for tax purposes. TRG or the affected
Center Owner would be required to pay income tax at corporate tax rates on its
net income, and distributions to its partners would constitute dividends that
would not be deductible in computing TRG's or the affected Center Owner's
taxable income. Likewise, if a TRG Trust were taxable as a corporation, items of
income and deduction would not pass through to its beneficiary, which would be
treated as a shareholder for tax purposes. Such TRG Trust would be required to
pay income tax at corporate tax rates on its net income, and distributions would
constitute dividends that would not be deductible in computing such TRG Trust's
taxable income.
25
<PAGE>
Income Taxation of TRG and Its Partners
- ---------------------------------------
Partners, Not TRG, Subject to Tax
A partnership is not a taxable entity for Federal income tax purposes.
Rather, the Company is required to take into account its allocable share of
TRG's income, gains, losses, deductions, and credits for any taxable year of TRG
ending within or with the taxable year of the Company, without regard to whether
the Company has received or will receive any distribution from TRG.
Tax Allocations with Respect to Contributed Properties
Pursuant to Section 704(c) of the Code, income, gain, loss, and deduction,
including depreciation, attributable to appreciated or depreciated property that
is contributed to a partnership in exchange for an interest in the partnership
must be allocated for Federal income tax purposes in a manner such that the
contributor is charged with, or benefits from, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount of
such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of the contributed property at the time of
contribution and the adjusted tax basis of such property at the time of
contribution. TRG's partnership agreement requires allocations of income, gain,
loss, and deduction attributable to such contributed property to be made in a
manner that is consistent with Section 704(c) of the Code. Any income, gain,
loss, or deduction in excess of that specially allocated to the contributing
partners pursuant to Section 704(c) of the Code is allocated to TRG's partners
in accordance with their percentage interests.
Accordingly, depreciation on any property contributed to TRG is allocated
to each contributing partner in a manner designed to reduce the difference
between such property's fair market value and its tax basis, using methods that
are intended to be consistent with statutory intent and Treasury Regulations
under Section 704(c) of the Code. On the other hand, depreciation with respect
to any property purchased by TRG subsequent to the admission of the Company in
late 1992 will be allocated among the partners in accordance with their
respective percentage interests in TRG.
Sale of TRG's Property
- ----------------------
Generally, any gain realized by TRG on the sale of property held by TRG or
a Center Owner for more than one year will be long-term capital gain, except for
any portion of such gain that is treated as depreciation or cost recovery
recapture. Under Section 704(c) of the Code and the Treasury Regulations
governing the revaluation of TRG assets and the restatement of its capital
accounts to fair market value, any unrealized gain attributable to appreciation
in the regional shopping center interests prior to the admission of the Company
to TRG in late 1992 ("Built-in-Gain") must, when recognized, be allocated to the
contributing partners. Such Built-in-Gain would generally be equal to the
difference between the fair market value of the property upon the Company's
admission and the adjusted tax basis of TRG in such property. Thus, the Company
will not incur a tax on such Built-in-Gains because (except as noted in the
following sentence) they must be allocated to partners in TRG other than the
Company. In addition, any Built-in-Gain with respect to properties contributed
to TRG subsequent to the Company's admission to TRG must be allocated to the
contributing partners. As a consequence of its 1% pre-contribution interests in
two of the Taubman
26
<PAGE>
Shopping Centers, the Company will be allocated an equivalent portion of
pre-contribution gain in the event of a disposition of either property. Further,
depreciation will be allocated to reduce the disparity between fair market value
and tax basis with respect to appreciated property contributed to TRG or
otherwise held by TRG prior to the Company's admission to TRG. Such allocations
will permit the GM Trusts and the Company to claim larger depreciation
deductions because they have contributed solely unappreciated property.
The Company's share of any gain realized by TRG on the sale of any
property held by TRG or a Center Owner as inventory or other property held
primarily for sale to customers in the ordinary course of TRG's or a Center
Owner's trade or business will, however, be treated as income form a prohibited
transaction that is subject to a 100% penalty tax. See "Federal Income Tax
Considerations -- Taxation of the Company -- Income Tests." Such prohibited
transaction income will also have an adverse effect on the Company's ability to
satisfy the income tests for REIT status. See "Federal Income Tax Considerations
- -- Requirements For Qualification -- Income Tests" above. Under existing law,
whether property is held as inventory or primarily for sale to customers in the
ordinary course of TRG's or a Center Owner's trade or business is a question of
fact that depends on all the facts and circumstances with respect to the
particular transaction. TRG and the Center Owners intend to hold the Taubman
Shopping Centers for investment with a view to long-term appreciation, and to
engage in the business of acquiring, developing, owning, and operating the
Taubman Shopping Centers, including peripheral land, consistent with TRG's and
the Center Owners' investment objectives.
State and Local Taxes
- ---------------------
The Company is, and its shareholders may be, subject to state, local, or
other taxation in various state, local, or other jurisdictions, including those
in which they transact business or reside. The tax treatment in such
jurisdictions may differ from the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on their investment in
the Company.
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transaction provisions of Section 4975 of the Code that may be
relevant to prospective investors. This discussion does not purport to deal with
all aspects of ERISA or the Code that may be relevant to particular investors in
light of their particular circumstances. A PROSPECTIVE INVESTOR THAT IS AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX QUALIFIED RETIREMENT PLAN, AN IRA
OR A GOVERNMENTAL, CHURCH OR OTHER PLAN THAT IS EXEMPT FROM ERISA IS ADVISED TO
CONSULT ITS OWN LEGAL ADVISOR REGARDING THE SPECIFIC CONSIDERATIONS ARISING
UNDER APPLICABLE PROVISIONS OF ERISA, THE CODE AND STATE LAW WITH RESPECT TO THE
PURCHASE, OWNERSHIP, OR SALE OF THE SECURITIES BY SUCH PLAN OR IRA.
27
<PAGE>
Fiduciary Duties and Prohibited Transactions
- --------------------------------------------
A fiduciary of a pension, profit-sharing, retirement, or other employee
benefit plan subject to ERISA (an "ERISA Plan") should consider the fiduciary
standards under ERISA in the context of the ERISA Plan's particular
circumstances before authorizing an investment of any portion of the ERISA
Plan's assets in the Securities. Accordingly, such fiduciary should consider (i)
whether the investment satisfies the diversification requirements of Section
404(a)(1)(C) of ERISA; (ii) whether the investment is in accordance with the
documents and instruments governing the ERISA Plan as required by Section
404(a)(1)(D) of ERISA; (iii) whether the investment is prudent under Section
404(a)(1)(B) of ERISA; and (iv) whether the investment is solely in the
interests of the ERISA Plan participants and beneficiaries and for the exclusive
purpose of providing benefits to the ERISA Plan participants and beneficiaries
and defraying reasonable administrative expenses of the ERISA Plan as required
by Section 404(a)(1)(A) of ERISA.
In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA or certain other plans (collectively, a "Plan") and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA and "disqualified persons" within the meaning of the Code). Thus, a Plan
fiduciary or person making an investment decision for a Plan also should
consider whether the acquisition or the continued holding of the Securities
might constitute or give rise to a direct or indirect prohibited transaction.
Plan Assets
- -----------
The prohibited transaction rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity in
which the Plan invests and, in certain circumstances, the assets of the entity
in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13, 1986,
the United States Department of Labor, the governmental agency primarily
responsible for administering ERISA, adopted a final regulation (the "DOL
Regulation") establishing the standards it will apply in determining whether an
equity investment in an entity will cause the assets of such entity to
constitute "plan assets." The DOL Regulation applies for purposes of both ERISA
and Section 4975 of the Code.
Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," the Plan's
assets generally would include both the equity interest and an undivided
interest in each of the entity's underlying assets unless certain specified
exceptions apply. The DOL Regulation defines a publicly-offered security as a
security that is "widely held," "freely transferable," and either part of a
class of securities registered under Section 12(b) or 12(g) of the Exchange Act
or sold pursuant to an effective registration statement under the Securities Act
(provided the securities are registered under the Exchange Act within 120 days
after the end of the fiscal year of the issuer during which the offering
occurred). The Securities offered by this Prospectus will be sold in an offering
registered under the Securities Act, and the Company anticipates the Securities
will be registered under Section 12(b) or Section 12(g) of the Exchange Act if
required to comply with the DOL Regulation.
28
<PAGE>
The DOL Regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. A class of securities will not fail to be
"widely held," however, solely because the number of independent investors falls
below 100 subsequent to the initial public offering as a result of events beyond
the issuer's control. The Company expects the Securities to be "widely held"
upon completion of any offering.
The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as will be the case with any offering, certain restrictions ordinarily
will not affect, alone or in combination, the finding that such securities are
freely transferable. The Company believes that the restrictions imposed under
the Articles on the transfer of the Securities are limited to restrictions on
transfer generally permitted under the DOL Regulation and are not likely to
result in the failure of the Securities to be "freely transferable." See
"Restrictions on Transfer." The DOL Regulation only establishes a presumption in
favor of a finding of free transferability; therefore, no assurance can be given
that the Department of Labor and the Treasury Department would not reach a
contrary conclusion with respect to the Securities. Any additional transfer
restrictions imposed on the transfer of the Securities will be discussed in the
applicable Prospectus Supplement.
Assuming that the Securities will be "widely held" and "freely
transferable," the Company believes that the Securities will be publicly-offered
securities for purposes of the DOL Regulation and that the assets of the Company
will not be deemed to be "plan assets" of any Plan that invests in the
Securities.
PLAN OF DISTRIBUTION
The Company may sell the Securities to or through underwriters and also
may sell the Securities directly to investors or through agents. Any such
underwriter or agent involved in the offer and sale of the Securities will be
named in the applicable Prospectus Supplement. The distribution of the
Securities may be effected from time to time in one or more transactions at a
fixed price or prices, which may be changed, related to prevailing market prices
at the time of sale or at negotiated prices. The Company may also, from time to
time, authorize underwriters acting as the Company's agents to offer and sell
the Securities upon the terms and conditions set forth in the applicable
Prospectus Supplement.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize, may be deemed to be underwriting discounts and commissions under the
Securities Act.
Underwriters, dealers, and agents who participate in the distribution of
Securities may be entitled, pursuant to agreements entered into with the
Company, to indemnification by the
29
<PAGE>
Company against certain liabilities, including liabilities under the Securities
Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on the dates stated
in such Prospectus Supplement. Each Contract will be for an amount not less
than, and the aggregate principal amount of Securities sold pursuant to
Contracts will be not less or more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Securities covered by its Contracts
may not at the time of delivery be prohibited under the laws of any jurisdiction
in the United States to which such institution is subject and (ii) if the
Securities are being sold to underwriters, the Company will have sold to such
underwriters the total principal amount of the Securities less the principal
amount of such Securities cover by Contracts.
Underwriters, dealers, agents, and their affiliates may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Securities, the obligations of the underwriters to purchase such
Securities will be subject to certain conditions precedent, and each of the
underwriters with respect to such Securities will be obligated to purchase all
of the Securities allocated to it if any such Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
LEGAL MATTERS
The validity of the Securities offered by this Prospectus, as well as
certain tax matters, will be passed upon for the Company by Miro Weiner &
Kramer, 500 N. Woodward Avenue, Suite 100, Bloomfield Hills, Michigan 48304.
Jeffrey H. Miro, a senior member of Miro Weiner & Kramer, is the Secretary of
the Company.
EXPERTS
The financial statements of (i) Taubman Centers, Inc., (ii) The Taubman
Realty Group Limited Partnership, and (iii) the Unconsolidated Joint Ventures of
The Taubman Realty Group Limited Partnership and the related financial statement
schedules incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, and the historical
summaries of Fairlane Town Center incorporated in this Prospectus by reference
from the Company's Current Report on Form 8-K dated July 19, 1996, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
30
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements, and
other information filed by the Company with the Commission can be inspected and
copied at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Company's Common Stock is traded on the New
York Stock Exchange (the "NYSE"). These reports, proxy statements, and other
information filed by the Company can also be inspected at the NYSE's offices at
20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). In accordance
with the rules and regulations of the Commission, this Prospectus omits certain
of the information contained in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information concerning the
Company and the Securities offered by this Prospectus, reference is hereby made
to the Registration Statement and the exhibits and schedules filed with the
Registration Statement, which may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of
which may be obtained from the Commission at prescribed rates. The Commission
maintains a World Wide Web Site (http://www.sec.gov) that contains such material
regarding issuers that file electronically with the Commission. The Registration
Statement has been so filed and may be obtained at such site. Any statements
contained in this Prospectus concerning the provisions of any document are not
necessarily complete, and in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act (file number 1-11530) are incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
(c) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996;
(d) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996;
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<PAGE>
(e) the Company's Current Report on Form 8-K dated May 14, 1996;
(f) the Company's Current Report on Form 8-K dated June 27, 1996;
(g) the Company's Current Report on Form 8-K dated July 19, 1996; and
(h) the description of the Company's Common Stock contained in the
Company's registration statement filed under the Exchange Act and
any amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act (including any documents incorporated by reference
in such documents) after the date of this Prospectus and prior to the
termination of the offering of the Securities offered by this Prospectus shall
be deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing such documents.
Any statement contained in a document incorporated or deemed incorporated
by reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus, any accompanying Prospectus Supplement, or in any other subsequently
filed document that also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any accompanying Prospectus Supplement.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated by reference in this
Prospectus (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Written or oral requests for
copies should be directed to Taubman Centers, Inc., 200 East Long Lake Road,
Bloomfield Hills, Michigan 48304, Attention: Chief Financial Officer (telephone:
(810) 258-6800).
32
<PAGE>
GLOSSARY
Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:
"ACMs" means asbestos-containing materials.
"Articles" means the Company's Second Amended and Restated Articles of
Incorporation.
"Asset Tests" means, under the DOL Regulation's guidelines for an entity
to qualify as a real estate operating company, the requirement that on certain
specified valuation dates, at least 50% of its assets (valued at cost and
excluding certain short-term investments) be invested in real estate which is
managed or developed and with respect to which such entity has the right to
substantially participate directly in the management or development activities.
"AT&T Trust" means the AT&T Master Pension Trust.
"Built-in-Gain" has the meaning ascribed to it under the caption "Federal
Income Tax Considerations -- Taxation of the Company."
"Capital Stock" means the Company's Common Stock, Preferred Stock, and
Excess Stock.
"Cash Tender" means the right that certain partners in TRG have to tender
their Units of Partnership Interest to the Company for cash, which the Company
anticipates it will obtain through the sale of additional shares of Common
Stock.
"Cash Tender Agreement" means the agreement among the Company, the GM
Trusts, and A. Alfred Taubman' trust, setting forth the terms and conditions of
the Cash Tender.
"Center Owners" means, collectively, the Joint Ventures, and the entities
owning Taubman Shopping Centers that are 100% beneficially owned by TRG.
"Centers" means the Taubman Shopping Centers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company.
"Company" means Taubman Centers, Inc., a Michigan corporation.
"Continuing Offer" means the continuous, irrevocable offer that Company
has made to all present (and may, in the discretion of the Company, make to
certain future) holders of partnership interests in TRG other than the GM Trusts
and A. Alfred Taubman and affiliates.
"DOL" means the United States Department of Labor.
33
<PAGE>
"DOL Regulation" means a regulation, issued by the DOL, defining "plan
assets."
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Plan" means a pension, profit-sharing, or other employee benefit
plan subject to Title I of ERISA.
"Excess Stock" means shares owned, or deemed to be owned, or transferred
to a shareholder in excess of the General Ownership Limited or an Existing
Holder Limit.
"Existing Holder Limit" means the maximum shares of Regular Capital Stock
that the Trusts may own: the greater of 8,731,426 shares and 19.8% in value of
the Capital Stock, in the case of the GM Trusts collectively; the greater of
6,059,080 shares and 13.74% in value of the Capital Stock, in the case of the
AT&T Trust; and the greater of 14,790,506 shares and 33.54% in value of the
Capital Stock, in the case of the Trusts collectively.
"General Ownership Limit" means the ownership of more than 8.23% in value
of the Capital Stock.
"GM Trusts" means the General Motors Hourly-Rate Employes Pension Trust
and the General Motors Salaried Employes Pension Trust.
"Incentive Option" means an option granted, or that may be granted, under
the Incentive Option Plan.
"Incentive Option Plan" means TRG's 1992 Incentive Option Plan, pursuant
to which TRG has granted, and may grant, Incentive Options to employees of the
Manager, entitling them to acquire Units of Partnership Interest that may then
be exchanged for shares of Common Stock Pursuant to the Continuing Offer.
"Independent Directors" means the directors of the Company who are
unaffiliated with TRG, the TG Affiliates, and the GM Trusts.
"IRA" means an individual retirement account.
"IRS" means the United States Internal Revenue Service.
"Joint Ventures" means partnerships with unaffiliated third parties
through which TRG has interests in certain Centers.
"Look Through Limit" means the up to 9.9% in value of the outstanding
Capital Stock that a Look Through Entity may own under certain circumstances.
"Manager" means The Taubman Company Limited Partnership, a Delaware
limited partnership, which is more than 99% beneficially owned by TRG.
"Non-U.S. Shareholders" means non-resident alien individuals, foreign
corporations, foreign partnerships and foreign trusts and estates.
34
<PAGE>
"Ownership Limits" means the General Ownership Limit, the Look Through
Limit, and the Existing Holder Limit.
"Partnership Agreement" means the partnership agreement of TRG.
"Partnership Committee" means the partnership committee of TRG in which
governance of TRG is vested.
"Preferred Stock" means the Preferred Stock of the Company.
"Prohibited UBTI Service Income" means services that would give rise to
UBTI.
"Recognition Period" means the recognition period pertaining to
Built-in-Gain as defined pursuant to Regulations to be issued under Section
337(d) of the Code.
"Regular Capital Stock" means shares of Common Stock and Preferred Stock
that have not become Excess Stock.
"REIT" means a real estate investment trust as defined pursuant to
Sections 856 through 860 of the Code.
"REIT Requirements" means the requirements for qualifying as a REIT under
the Code and Treasury Regulations.
"Related Party Tenant" means a tenant that is owned, directly or
constructively, by a REIT or an owner of 10% or more of a REIT.
"Securities" means the Common Stock and Warrants offered by this
Prospectus and the applicable Prospectus Supplement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Taub-Co" means Taub-Co Management, Inc., a Michigan corporation formerly
known as The Taubman Company, Inc., which is the Manager's managing general
partner and predecessor-in-interest.
"The Taubman Company Limited Partnership" means a Delaware limited
partnership that is the Manager and that provides substantially all property
management and leasing services for each Taubman Shopping Center and corporate,
development, administrative, and acquisition services for TRG and the Company.
"Taubman Shopping Centers" means the regional shopping centers in which
TRG has ownership interests.
"Ten Percent Stockholder" means each individual or entity which owns,
either directly or through related individuals and entities under the applicable
attribution rules of the Code, 10% or more of the Company's outstanding shares
of Capital Stock.
"TG" means TG Partners Limited Partnership, a Delaware limited
partnership, which is a general partner in TRG and affiliates of A. Alfred
Taubman.
35
<PAGE>
"TG Affiliates" means TG, A. Alfred Taubman, the members of his family,
his and their affiliates, the original partners in TRG and any affiliate of an
original partner in TRG or of any member of an original partner's family, and
all officers and employees of the Manager for so long as they are actively
employed by the Manager, and for so long as such individuals are so included,
any affiliate of such individuals, officers and employees.
"Treasury Regulations" means the Income Tax Regulations promulgated under
the Code.
"TRG" means The Taubman Realty Group Limited Partnership, a Delaware
limited partnership.
"TRG Trusts" means the trusts, of which TRG is the sole beneficiary, which
are (or in the future will become) a partner with TRG in certain of the Center
Owners.
"Trusts" means the GM Trusts and the AT&T Trust.
"UBTI" means unrelated business taxable income as defined in Section
512(a) of the Code.
"Units of Partnership Interest" means the units into which partnership
interests of TRG are divided, as provided in the Partnership Agreement, and as
the same may be adjusted, as provided in the Partnership Agreement.
36
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution. (1)
- -------
Registration Fee................................... $ 75,757.58
Legal Fees and Expenses............................ 200,000.00(2)
Accounting Fees and Expenses....................... 150,000.00(2)
Blue Sky Fees and Expenses......................... 7,500.00(2)
Miscellaneous...................................... 100,000.00(2)
-----------
Total.............................................. $533,257.58(2)
===========
(1) Excluding underwriting fees and commissions.
(2) Estimated.
Item 15. Indemnification of Directors and Officers.
- -------
The Registrant's Articles of Incorporation provide that no director of the
Registrant shall be liable to the Registrant or the shareholders for monetary
damages for breach of the director's fiduciary duty. Such provision does not
limit a director's liability to the Registrant or its shareholders resulting
from:
(i) a breach of the director's duty of loyalty to the Registrant or its
shareholders;
(ii) acts or omissions of the director not in good faith or that involve
intentional misconduct or knowing violation of law;
(iii) a violation of Section 551(1) of the Michigan Business Corporation
Act (relating to unlawful payments of dividends);
(iv) a transaction from which the director derived an improper personal
benefit; or
(v) any act or omission occurring prior to November 20, 1992.
The Registrant's Articles of Incorporation provide for mandatory
indemnification by the Registrant of its directors (including directors of
subsidiaries) to the fullest extent permitted or not prohibited by existing law
or to such greater extent as may be permitted or not prohibited under succeeding
provisions of law. The Registrant's Articles of Incorporation provide that the
Registrant shall pay the expenses incurred by a director of the Registrant
(including a director of a subsidiary) in defending a civil or criminal action,
suit, or proceeding involving such person's acts or omissions as a director of
the Registrant (or of a subsidiary).
The Registrant's Articles of Incorporation authorize the Registrant to
indemnify any officer of the Registrant (or of a subsidiary), if such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Registrant or its shareholders and,
with respect to a criminal action or proceeding, if the person had no
II-1
<PAGE>
reasonable cause to believe his or her conduct was unlawful. Unless ordered by a
court, indemnification of an officer shall be made by the Registrant only as
authorized in a specific case upon the determination that indemnification of the
officer is proper in the circumstances because he or she has met the applicable
standard of conduct. Such determination shall be made (i) by majority vote of
the directors of the Registrant who are not parties to the action, suit or
proceeding, (ii) by independent legal counsel in a written opinion, or (iii) by
the shareholders of the Registrant. The Registrant's Articles of Incorporation
authorize the Registrant to pay the expenses incurred by an officer in defending
a civil or criminal action, suit, or proceeding in advance of the final
disposition thereof, upon receipt of an undertaking by or on behalf of such
officer to repay the expenses if it is ultimately determined that the person is
not entitled to be indemnified by the Registrant. Such undertaking shall be by
unlimited general obligation of the person on whose behalf advances are made but
need not be secured.
The Registrant has the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
Registrant or is liable as a director of the Registrant, or is or was serving,
at the request of the Registrant, as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, regardless of whether the
Registrant would have power to indemnify him against such liability.
The Registrant has purchased a policy of directors' and officers'
insurance that insures both the Registrant and its officers and directors
against expenses and liabilities of the type normally insured against under such
policies, including the expense of the indemnifications described above.
Item 16. Exhibits
- -------
Exhibit
Number
-------
1* -- Form of Underwriting Agreement.
4(a) -- Second Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996).
4(b) -- By-Laws, as amended (incorporated by reference to Exhibit 3
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30,1996).
4(c)* -- Form of Warrant Agreement.
5 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to the validity of the Securities.
8 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to certain tax matters.
23(a) -- Consent of Deloitte & Touche LLP.
II-2
<PAGE>
23(b) -- Consent of Miro Weiner & Kramer (included in Exhibits 5 and
8).
24 -- Powers of Attorney.
* To be filed by amendment or incorporated by reference.
Item 17. Undertakings.
- -------
The Registrant undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in this
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
Paragraphs (1)(i) and (1)(ii) above do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
II-3
<PAGE>
The Registrant undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefor, unenforceable. In the
event that claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes to supplement the Prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the Prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bloomfield Hills, State of Michigan, on the 26th day
of November, 1996.
TAUBMAN CENTERS, INC.
By: /S/ROBERT S. TAUBMAN
--------------------
Robert S. Taubman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board November 26, 1996
- --------------------------
A. Alfred Taubman
* Vice Chairman of the Board November 26, 1996
- --------------------------
Robert C. Larson
/S/ROBERT S. TAUBMAN President, Chief Executive November 26, 1996
- -------------------------- Officer, and Director
Robert S. Taubman
/S/BERNARD WINOGRAD Chief Financial Officer November 26, 1996
- -------------------------- and Director
Bernard Winograd
/S/RICHARD B. MCGLINN Chief Accounting Officer November 26, 1996
- --------------------------
Richard B. McGlinn
* Director November 26, 1996
- --------------------------
Graham Allison
* Director November 26, 1996
- --------------------------
Claude M. Ballard
* Director November 26, 1996
- --------------------------
W. Gordon Binns, Jr.
* Director November 26, 1996
- --------------------------
Allan J. Bloostein
* Director November 26, 1996
- --------------------------
Jerome A. Chazen
* Director November 26, 1996
- --------------------------
S. Parker Gilbert
* Director November 26, 1996
- --------------------------
W. Allen Reed
*By: /S/BERNARD WINOGRAD
-------------------
Bernard Winograd
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number
-------
1* -- Form of Underwriting Agreement.
4(a) -- Second Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996).
4(b) -- By-Laws, as amended (incorporated by reference to Exhibit 3
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30,1996).
4(c)* -- Form of Warrant Agreement.
5 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to the validity of the Securities.
8 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to certain tax matters.
23(a) -- Consent of Deloitte & Touche LLP.
23(b) -- Consent of Miro Weiner & Kramer (included in Exhibits 5 and
8).
24 -- Powers of Attorney.
* To be filed by amendment or incorporated by reference.
Exhibit 5
MIRO WEINER & KRAMER
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
SUITE 100
500 NORTH WOODWARD AVENUE
P.O. BOX 908
BLOOMFIELD HILLS, MICHIGAN 48303-0908
TELEPHONE (810) 646-2400
FACSIMILE (810) 646-2681
November 25, 1996
Taubman Centers, Inc.
200 East Long Lake Road
Bloomfield Hills, Michigan 48304
Re: Registration Statement on Form S-3 (the "Registration Statement")
Gentlemen:
This opinion is furnished to you (the "Company") in connection with the filing
of the Company's Registration Statement with the Securities and Exchange
Commission on or about November 25, 1996. Terms used in this opinion letter that
are defined in the Registration Statement and that are not otherwise defined in
this opinion letter shall have the meanings ascribed to them in the Registration
Statement.
You have supplied us with, and we have examined in our capacity as counsel to
the Company, such documents and other information as we deem necessary and
relevant as a basis for the opinion expressed below. In all such examinations,
we have assumed the genuiness of all signatures and all original and certified
documents and the conformity to original and certified documents of all copies
submitted to us as conformed or photostatic copies. As to various questions of
fact material to such opinions, we have relied upon statements or certificates
of officers and representatives of the Company and others.
We have also assumed that the Company's Board of Directors will have duly
authorized the issuance of the Common Stock and Common Stock Warrants at, or
prior to, the time of their issuance and that they are paid for in accordance
with such authorization.
Based upon the foregoing, it is our opinion that the Common Stock and Common
Stock Warrants registered under the Registration Statement will, when issued, be
duly and validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement, and we further consent to the reference to our Firm under the caption
"Legal Matters" in the Prospectus that constitutes a part of the Registration
Statement.
Very truly yours,
/S/MIRO WEINER & KRAMER
Exhibit 8
MIRO WEINER & KRAMER
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
SUITE 100
500 NORTH WOODWARD AVENUE
P.O. BOX 908
BLOOMFIELD HILLS, MICHIGAN 48303-0908
TELEPHONE (810) 646-2400
FACSIMILE (810) 646-2681
November 25, 1996
Taubman Centers, Inc.
200 East Long Lake Road
Bloomfield Hills, Michigan 48304
Gentlemen:
Reference is made to that certain Registration Statement on Form S-3 to be filed
with the Securities and Exchange Commission on or about November 25, 1996, with
respect to the offering by Taubman Centers, Inc., from time to time of up to
$250 million of its securities (the "Registration Statement") and to the
Prospectus included in the Registration Statement (the "Prospectus"). In our
opinion, the discussion in the Prospectus under the caption "Federal Income Tax
Considerations," accurately summarizes in all material respects the matters
discussed. We consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
/S/MIRO WEINER & KRAMER
Exhibit 23 (a)
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in this Registration Statement of
Taubman Centers, Inc. on Form S-3 of our reports dated February 29, 1996, on the
financial statements of Taubman Centers, Inc., the consolidated financial
statements and related schedules of The Taubman Realty Group Limited Partnership
appearing in the Annual Report on Form 10-K of Taubman Centers, Inc. for the
year ended December 31, 1995, and our report dated July 31, 1996, on the
historical summaries of revenues and direct operating expenses of Fairlane Town
Center for the three years ended December 31, 1995, appearing in the Current
Report on Form 8-K of Taubman Centers, Inc. dated July 19, 1996. We also consent
to the reference to us under the heading "Experts" in the Prospectus, which is
part of such Registration Statement.
Deloitte & Touche LLP
Detroit, Michigan
November 25, 1996
Exhibit 24
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 29th day of October, 1996.
/S/GRAHAM ALLISON
-----------------
Graham Allison
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 31st day of October, 1996.
/S/W. GORDON BINNS, JR.
-----------------------
W. Gordon Binns, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 6th day of November, 1996.
/S/A. ALFRED TAUBMAN
--------------------
A. Alfred Taubman
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 28th day of October, 1996.
/S/ROBERT C. LARSON
-------------------
Robert C. Larson
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 28th day of October, 1996.
/S/ALLAN J. BLOOSTEIN
---------------------
Allan J. Bloostein
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 4th day of November, 1996.
/S/JEROME A. CHAZEN
-------------------
Jerome A. Chazen
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 1st day of November, 1996.
/S/W. ALLEN REED
----------------
W. Allen Reed
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 2nd day of November, 1996.
/S/CLAUDE M. BALLARD
--------------------
Claude M. Ballard
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Bernard Winograd and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, as a Director of the Company, the Company's Registration Statement on
Form S-3, and any and all amendments thereto (including post-effective
amendments), to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act,
the rules, regulations, and requirements of the Commission in respect thereof,
and the securities or "Blue Sky" laws of any State or other governmental
subdivision; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Each such attorney or agent shall have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 4th day of November, 1996.
/S/S. PARKER GILBERT
--------------------
S. Parker Gilbert
