THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP AND THE TAUBMAN COMPANY LLC ELECTION AND OPTION DEFERRAL AGREEMENT (As amended and restated effective January 27, 2011)

1.     Election to Defer and Investment of Option Gain.  Upon exercise of the Option and in lieu of his receiving the full number of Units subject to the Option, Executive hereby elects to defer receipt of all of the Units attributable to the gain that would, but for this Agreement, be recognized for federal and state income tax purposes (the “Gain”) upon his exercise of the Option. Contemporaneously with Executive’s exercise of the Option, TRG shall direct the Manager to establish a bookkeeping reserve account (the “Deferred Compensation Account”to reflect the amount of the Gain. The Gain shall be the amount equal to the Fair Market Value of Units of Partnership subject to the Option on the Date of Exercise minus the Exercise Price (as such terms are defined in the Incentive Option Plan). The amount of Gain credited to the Deferred Compensation Account shall be deemed invested in phantom units of partnership interest in TRG ( the “Notional Units”). A Notional Unit will be utilized solely as a device for the measurement and determination of the amounts to be paid to or for the benefit of Executive pursuant to this Agreement and will not under any circumstances constitute or be treated as a trust fund of any kind. The actual number of Units to which Executive would otherwise be entitled under the Option Agreement upon exercise of the Option shall be reduced by the number of Notional Units.

 

(a) Distribution Equivalents.  On each date in which holders of actual Units of Partnership Interest receive distributions in respect of such Units of  Partnership  Interest, the Manager shall distribute to Executive an amount equal to (i) the distribution amount paid with respect to each actual Unit of  Partnership Interest on such distribution date, multiplied by (ii) the number of Notional Units credited to the Deferred Compensation Account as of the business day immediately preceding such distribution date (the “Distribution Equivalents”). Distribution Equivalents will be paid to Executive in cash lump sum payments.

 

(b) No Rights as a Partner.  A Notional Unit shall not represent an ownership interest in actual Units of Partnership Interest of TRG, and Executive shall have no rights as a partner in TRG with respect to the Notional Units credited to the Deferred Compensation Account.

2.     Vesting of Deferred Compensation Account.  The Deferred Compensation Account shall be fully vested and nonforfeitable at all times.

3.     Payment of Deferred Compensation Account/Discretionary Right to Withhold Units for Payment of Taxes.  Executive exercised the Option in four groups on the following dates:  (a) April 3, 2002, (b) April 16, 2002, (c) September 3, 2002; and (d) November 15, 2002.  All amounts credited to the Deferred Compensation Account relating to the Option exercise on these dates shall be distributed, subject to the last sentence in this paragraph 3, to Executive in the form of actual Units of Partnership Interest upon the earlier of (a) Executive’s separation from service, as defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or (b) December 1, 2017 (the “Applicable Date”).  Payment shall be made in equal annual installments over a ten-year period, i.e., each annual installment will be equal to 1/10th of the number of Notional Units in Executive’s Deferred Compensation Account on the initial payment commencement date; provided, however, that any fractional Notional Units otherwise payable in the annual installments under this method shall be aggregated to a whole number of Notional Units and shall be included in the first annual installment payment of Units of Partnership Interest.  Payment on account of Executive’s separation from service under clause (a) shall commence on the first day of the month coinciding with or next following the date that is the six-month anniversary of the date of Executive’s separation from service, and each subsequent payment shall be made on the succeeding anniversaries of the payment commencement date.  Payment under clause (b) shall commence on the Applicable Date, and each subsequent payment shall be made on the succeeding anniversaries of the payment commencement date.  Any portion of the Deferred Compensation Account that has not been distributed to Executive shall continue to be invested in Notional Units and Executive shall continue to receive Distribution Equivalents with respect to Notional Units in the Deferred Compensation Account.  At the time of payment, Executive shall tender to the Manager an amount sufficient to satisfy the statutory minimum tax withholding obligations that apply to the payment; provided, however, that the Manager may, in its discretion, require that a portion of the Units otherwise payable to Executive be withheld for payment of the statutory minimum tax withholding obligations, or otherwise designate the specific method of Executive’s payment of the statutory minimum tax withholding obligations (for example, by wire transfer, certified check, or other means acceptable to the Manager).

4.     Designation of Beneficiary; Payment on Account of Death.  Executive shall designate in writing and file with the Manager a designation of the beneficiary to receive benefits payable under this Agreement in the event of his death prior to separation from service or in the event of his death prior to his receipt of all amounts credited to the Deferred Compensation Account.  If Executive has not designated a beneficiary, such death benefit shall be paid to his estate.  Any beneficiary designation may be revoked or modified at any time by Executive, but only in a writing filed with the Manager.  Payment made on account of Executive’s death shall be made pursuant to the annual installment time and form of payment specified in paragraph 3 of this Agreement, and any change in the designated beneficiary by Executive shall not change the time or form of payments.

 

5.     Amendment.  This Agreement may be amended by the written agreement of TRG, the Manager and Executive at any time; provided, however, that no amendment shall reduce any benefits in which Executive has a vested interest prior to the effective date of the Amendment.

6.     Payment on Account of a Change in Control Event.  Notwithstanding any other provision of this Agreement, and effective only as to any Change in Control Event that occurs on or after the Applicable Date, all amounts credited to the Deferred Compensation Account shall be distributed, subject to the last sentence of paragraph 3, to Executive or, in the event of Executive’s death, his designated beneficiary in a lump sum payment in the form of actual Units of Partnership Interest upon the occurrence of any of the following circumstances:

8.     Subsequent Deferral Elections.  The parties to this Agreement may make a subsequent deferral election, as such term is defined by Treas. Regs. Section 1.409A-2(b)(1), as provided for under Code Section 409A, and only if the following requirements are met:

 

10.   Alienation or Assignment of Benefits.  Benefits payable pursuant to this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, or assignment.

11.   Ownership of Deferred Compensation Account.  Title to and beneficial ownership of any assets, whether Notional Units, Distribution Equivalents, cash or other investments which the Manager or TRG may set aside to fulfill its deferred obligation under this Agreement shall at all times remain with the Manager or TRG and neither Executive nor his beneficiary shall under any circumstances acquire any property interest in any specific assets of the Manager or TRG. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a fiduciary relationship between TRG or the Manager and Executive or any other person. Any funds which may be invested under the provisions of this Agreement shall continue for all purposes to be part of the general assets of the Manager or TRG and no person other than the Manager or TRG shall by virtue of the provisions of this Agreement have any interest in such funds. To the extent that any person acquires a right to receive payments from the Manager or TRG under this Agreement, such right shall be no greater than the right of an unsecured general creditor of the Manager or TRG. In the sole discretion of the Manager, all or any portion of the amounts credited to the Deferred Compensation Account may be contributed to a trust established by the Manager in connection with this Agreement. Neither Executive nor his beneficiary shall have the right to direct or require that the Manager contribute amounts to a trust. Any amounts so contributed shall be held, invested and administered to provide benefits under this Agreement except as otherwise required in the agreement governing the trust.

12.   Incentive Option Plan and 1992 Option Agreement.  This Agreement is separate from the Incentive Option Plan and 1992 Option Agreement; it is a stand alone agreement between the parties for the deferral of the gains that otherwise would be recognized as a result of Executive’s 2002 exercise of the Option; provided, however, that capitalized terms not otherwise defined in this Agreement shall have the meanings as defined in the Incentive Option Plan and 1992 Option Agreement.

13.   Continuing Offer Requirements.  If Executive is not permitted to be a partner of TRG under the terms of the Second Amended and Restated Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership, as the same has been amended or may be amended and/or supplemented at the time of any payment under this Agreement, then Executive shall comply with and be subject to the terms and conditions of Taubman Centers, Inc.’s Second Amended and Restated Continuing Offer, effective May 16, 2000, as the same has been or may be amended and/or supplemented (the “Continuing Offer”), which Continuing Offer requires the exchange of Units for common shares of Taubman Centers, Inc. at the time of payment.  Any exchange of Units for common shares of Taubman Centers, Inc. pursuant to the Continuing Offer and this paragraph 13 shall not operate and shall not be applied in any manner that constitutes a feature for the deferral of compensation under this Agreement.

14.   Changes in the Number of Units of Partnership Interest.  The number of Notional Units in Executive’s Deferred Compensation Account shall be adjusted, consistent with the requirements of Code Section 409A, to reflect a Unit of Partnership Interest split (including a reverse Unit of Partnership Interest split) or Unit of Partnership Interest dividend, provided that the only effect of the Unit of Partnership Interest Split (including a reverse Unit of Partnership Interest split) or Unit of Partnership Interest dividend is to increase (or decrease) on a pro rata basis the number of Units of Partnership Interest owned by the holders of Units of Partnership Interest, and, provided, further, that the Notional Units are proportionally adjusted to reflect the Unit of Partnership Interest split (including a reverse Unit of Partnership Interest split) or Unit of Partnership Interest dividend, and the aggregate value of the deferred amount subject to this Agreement is the same as the amount immediately preceding the adjustment.

15.   Code Section 409A Compliance.  The parties intend that this Agreement and any payments made pursuant to it shall comply with Code Section 409A.  Any provisions in this Agreement that would cause any amount deferred or payable under this Agreement to be includible in Executive’s gross income or subject to interest or penalties under Code Section 409A(a)(1) shall have no force and effect unless and until amended, pursuant to a permitted amendment method under Code Section 409A, to cause such amount to not be so includible.  Otherwise, to the extent that it is determined that any provision of, or any payment made or to be made under, this Agreement would not comply with Code Section 409A, this Agreement shall be interpreted and amended to the extent necessary for compliance with Code Section 409A to the extent permitted under Code Section 409A and the guidance issued thereunder.

16.   Miscellaneous.

17.   Execution.  To record the adoption of this Agreement, TRG, the Manager and Executive have caused the execution hereof as of the date first written above.