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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE TO/A
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
TAUBMAN CENTERS, INC.
(Name of Subject Company (Issuer))
SIMON PROPERTY ACQUISITIONS, INC.
SIMON PROPERTY GROUP, INC.
(Names of Filing Persons (Offerors))
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
876664103
(CUSIP Number of Class of Securities)
James M. Barkley, Esq.
Simon Property Group, Inc.
National City Center
115 West Washington Street
Suite 15 East
Indianapolis, IN 46024
Telephone: (317) 636-1600
(Name, Address and Telephone Numbers of Person
Authorized to Receive Notices and Communications on Behalf of Filing Persons)
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Copies to:
Steven A. Seidman, Esq.
Robert B. Stebbins, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
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CALCULATION OF
FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$1,119,305,574 $223,861.11
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* Estimated for purposes of calculating the amount of the filing fee only.
Calculated by multiplying $18.00, the per share tender offer price, by
62,183,643 shares of Common Stock, consisting of (i) 52,205,122 outstanding
shares of Common Stock, (ii) 2,269 shares of Common Stock issuable upon
conversion of 31,767,066 outstanding shares of Series B Non-Participating
Convertible Preferred Stock, (iii) 7,097,979 shares of Common Stock
issuable upon conversion of outstanding partnership units of The Taubman
Realty Group, Limited Partnership ("TRG") and (iv) 2,878,273 shares of
Common Stock issuable upon conversion of outstanding options (each of which
entitles the holder thereof to purchase one partnership unit of TRG which,
in turn, is convertible into one share of Common Stock), based on the
Registrant's Schedule 14D-9 filed on December 11, 2002 and the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30, 2002.
** The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th
of one percent of the value of the transaction.
|X| Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $223,861.11 Filing Party: Simon Property Group, Inc.
Form or Registration No.: Schedule TO (File No. 005-42862) Date Filed: December 5, 2002
|_| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
|_| Check the appropriate boxes below to designate any transactions to which
the statement relates.
|X| third-party tender offer subject to Rule 14d-1.
|_| issuer tender offer subject to Rule 13e-4.
|_| going-private transaction subject to Rule 13e-3.
|_| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting
the results of the tender offer: |_|
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SCHEDULE TO
This Amendment No. 3 amends and supplements the Tender Offer
Statement on Schedule TO originally filed with the Securities and Exchange
Commission (the "Commission") on December 5, 2002, as amended and supplemented
by Amendment No. 1 thereto filed with the Commission on December 16, 2002 and by
Amendment No. 2 thereto filed with the Commission on December 27, 2002 (as
amended and supplemented, the "Schedule TO"), relating to the offer by Simon
Property Acquisitions, Inc., a Delaware corporation (the "Purchaser") and wholly
owned subsidiary of Simon Property Group, Inc., a Delaware corporation ("SPG
Inc."), to purchase all of the outstanding shares of common stock, par value
$.01 per share (the "Shares"), of Taubman Centers, Inc. (the "Company") at a
purchase price of $18.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated December 5, 2002 (the "Offer to Purchase") and in the related
Letter of Transmittal (which, together with any supplements or amendments,
collectively constitute the "Offer"). This Amendment No. 3 to the Schedule TO is
being filed on behalf of the Purchaser and SPG Inc.
Capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Offer to Purchase and the Schedule TO, as
applicable.
The item numbers and responses thereto below are in accordance
with the requirements of the Schedule TO.
ITEM 11. ADDITIONAL INFORMATION.
On December 27, 2002, SPG Inc. and the Purchaser filed an
amended complaint (the "Amended Complaint") in the United States District Court
for the Eastern District of Michigan against the Company, the Company Board and
certain members of the Taubman family which added a claim that the amendment to
the Company's By-Laws adopted by the Company Board on December 20, 2002 (the
"By-Law Amendment"), purporting to eliminate the right of the holders of 25% of
the outstanding voting shares of the Company to call a special meeting and set
the date thereof, is null, void and of no further force and effect. The Amended
Complaint alleges that the By-Law Amendment has the purpose and effect of
interfering with the shareholder franchise and constitutes an inequitable
manipulation of the corporate machinery and a breach of the Company Board's
fiduciary duties.
ITEM 12. EXHIBITS.
(a)(5)(E) First Amended Complaint filed by Simon Property Group, Inc.
and Simon Property Acquisitions, Inc. on December 27, 2002 in the
United States District Court for the Eastern District of Michigan
against the Company, the Company Board and certain members of the
Taubman family.
SIGNATURE
After due inquiry and to the best of their knowledge and
belief, the undersigned hereby certify as of December 30, 2002 that the
information set forth in this statement is true, complete and correct.
SIMON PROPERTY GROUP, INC.
By: /s/ JAMES M. BARKLEY
---------------------------------------------
Name: James M. Barkley
Title: Secretary and General Counsel
SIMON PROPERTY ACQUISITIONS, INC.
By: /s/ JAMES M. BARKLEY
---------------------------------------------
Name: James M. Barkley
Title: Secretary and Treasurer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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(a)(5)(E) First Amended Complaint filed by Simon Property Group, Inc.
and Simon Property Acquisitions, Inc. on December 27, 2002 in the
United States District Court for the Eastern District of Michigan
against the Company, the Company Board and certain members of the
Taubman family.
EXHIBIT (a)(6)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
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:
SIMON PROPERTY GROUP, INC., and
SIMON PROPERTY ACQUISITIONS, INC., :
Plaintiffs, :
- against - :
CIVIL ACTION NO. 02-74799
TAUBMAN CENTERS, INC., A. ALFRED :
TAUBMAN, ROBERT S. TAUBMAN, LISA JUDGE VICTORIA A. ROBERTS
A. PAYNE, GRAHAM T. ALLISON, PETER :
KARMANOS, JR., WILLIAM S. TAUBMAN,
ALLAN J. BLOOSTEIN, JEROME A. :
CHAZEN, AND S. PARKER GILBERT,
:
Defendants.
:
:
- --------------------------------------------x
SPG'S FIRST AMENDED COMPLAINT FOR
DECLARATORY AND INJUNCTIVE RELIEF
Plaintiffs Simon Property Group, Inc. ("SPG"), and Simon Property
Acquisitions, Inc. ("SPA"), by their undersigned attorneys, as their first
amended complaint against defendants, allege as follows:
PRELIMINARY STATEMENT
1. SPG, the nation's largest retail mall real estate investment
trust, with 249 malls and shopping centers in 36 states, has offered an
extraordinary opportunity to the public stockholders of Taubman Centers, Inc.
(the "Company") to sell their shares to SPG for $18.00 in cash. This price
represents approximately a 33% premium to the closing market price of the
Company's common stock on the day SPG made its initial $17.50 offer to the
Company in October of this year. It is also higher than the price at which the
Company's shares have ever
traded. SPG's offer is not conditioned on the receipt of financing or any due
diligence investigation of the Company. SPG has formally commenced a tender
offer through SPA, a subsidiary of SPG, which would allow the Company's
shareholders to take advantage of SPG's compelling offer and directly tender
their shares to SPA (the "SPG Tender Offer").
2. While SPG seeks nothing more than to give the Company's public
shareholders a full and fair opportunity to consider the merits of its offer,
that opportunity is being thwarted by the Taubman family, which flatly opposes
the offer and refuses even to discuss it. This is despite the fact that the SPG
offer gives the Taubman family complete flexibility to retain, sell or exchange
its economic stake as it wishes. Of greater and more immediate concern, however,
is that the family, which owns only 1% of the economic interest in the Company,
purports to wield an effective veto power over the offer to the public
shareholders who own the remaining 99%. The Taubmans have erected their
purported veto power through a series of tactical corporate mechanisms giving it
a blocking voting position against unsolicited takeovers. As detailed below,
these include:
(a) a provision in the Company's Articles of Incorporation (or
"charter"), extraordinary in that it is unalterable and
unwaivable by the Company's board of directors, preventing any
outside party from acquiring more than 9.9% of the Company's
capital stock absent amendment of the charter by a two-thirds
shareholder vote (the "Excess Share Provision");
(b) providing to the Taubman family, for nominal consideration,
without shareholder approval as required under Michigan statutory
law, a new series of voting preferred stock (the "Series B
Preferred Stock") that
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increased its purported voting power over the Company from less
than 1% to just over 30%;(1)
(c) in direct response to SPG's offer, the acquisition of an
additional 3% of voting power by exercising options and
persuading several close associates of the family to sign over
voting rights on their shares, designed to ensure the Taubmans'
veto power over any sale (the "New 3% Shares"); and
(d) most recently, enacting an amendment to the Company's by-laws to
eliminate the right of the shareholders to call a special meeting
on their own, and to set the date of such meeting. This improper
amendment was passed specifically in reaction to SPG's
announcement that it intended to call a special meeting to allow
the shareholders to vote to remove impediments to SPG's tender
offer. If allowed to stand, this amendment will enable the
Company's board to delay such a special meeting by several weeks
if not months, thereby interfering with the shareholders' voting
rights and their ability to consider SPG's tender offer.
3. Whatever the motivation for and validity of any of these actions
taken individually -- and there is ample basis for challenging them in both
respects -- taken in tandem, their practical effect is to foreclose an all-cash
premium tender offer that the Company's public shareholders may well consider to
be in their economic interest to accept. Several shareholder
- ----------
(1) As detailed below, the Michigan Control Share Act, M.B.C.A. Section 450.1790
et seq., required that the Taubmans' purported increase in voting power from
less than 1% to over 30% be approved by a shareholder vote. No such vote was
held, and accordingly the shares of Series B Preferred Stock held by the
Taubmans have no voting rights.
-3-
lawsuits have already been filed against the Company and its board of directors
alleging that the board is improperly acting out of self-interest to frustrate
SPG's offer and to deny what one of those lawsuits terms the "extremely generous
premium" afforded by the offer. An analyst following the Company recently stated
that SPG's offer "represents a valuation well in excess of where the shares have
traded any time in the past and well in excess of where the shares may trade in
the foreseeable future." So that the shareholders at least be given a choice as
to whether to accept the offer, relief from this Court is necessary to declare
invalid and enjoin any vote by the Taubmans of their purported blocking
position, as well as the recent by-law amendment, that would have the effect of
disenfranchising the public shareholder body who own 99% of the economic
interest in the Company.
4. Such relief has become necessary not only because of the
practical operation of the various procedural impediments created by the board
and the Taubmans, but because the Company's board of directors is simply
slavishly following the dictates of the Taubman family. Without engaging in a
careful, independent and deliberate consideration of the SPG offer, the board
has supinely accepted the Taubman family line that because of the family's
asserted veto power, there is nothing to talk about and any efforts to purchase
the Company would not be "productive." Indeed, within one hour of SPG's public
announcement of its offer to the board on November 13, 2002, the Company, at the
behest of the Taubman family, summarily rejected it.
5. Directors have a fiduciary duty not to allow the corporate
machinery to be used in a manner injurious to the public shareholders, and
controlling shareholders, such as the Taubmans, likewise have a duty to exercise
their control in a fair and equitable manner. Having
-4-
caused or allowed the Series B Preferred Stock to be given to the Taubman family
while aware of the Excess Share Provision embedded in the Company's charter,
which, in conjunction with the New 3% Shares, operate to preclude SPG's all-cash
offer, the board must now act affirmatively to protect the Company's
shareholders and not resign itself to domination and control by the Taubman
family, whose interests directly contravene the best interests of the Company's
shareholders.
PARTIES
6. Plaintiff SPG is organized and exists under the laws of the State
of Delaware and has its principal place of business located at 115 West
Washington Street, Suite 15 East, Indianapolis, Indiana. SPG is a
self-administered and self-managed real estate investment trust ("REIT"). SPG is
the managing general partner of Simon Property Group, L.P. (the "SPG Operating
Partnership"). Through the SPG Operating Partnership, SPG is engaged in the
ownership, operation, leasing, management, acquisition, expansion and
development of real estate properties, primarily regional malls and community
shopping centers. SPG owns 5,500 shares of the Company's common stock.
7. Plaintiff SPA is organized and exists under the laws of the State
of Delaware and has its principal place of business located at 115 West
Washington Street, Suite 15 East, Indianapolis, Indiana. SPA is a wholly-owned
subsidiary of SPG and is the entity that is making the SPG Tender Offer. SPA
owns 5,500 shares of the Company's common stock.
8. The Company, also a REIT, is organized and exists under the laws
of the State of Michigan and has its principal place of business located at 200
East Long Lake Road, Suite 300, Bloomfield Hills, Michigan. The Company conducts
its operations through The
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Taubman Realty Group Limited Partnership ("TRG"), a real estate company, which
manages the Company's properties and business affairs. The Company is the
managing general partner of, and has an approximate 62% interest in, TRG.
(Approximately 30% of the remaining interest in TRG is owned by the Taubman
family and 8% is owned by other investors.)
9. Defendant A. Alfred Taubman is the founder of the Company and,
upon information and belief, currently resides in Rochester, Minnesota. Alfred
Taubman was a director of the Company from its incorporation in 1973 until his
resignation in December 2001. Alfred Taubman has a 0.4% economic interest in the
Company. By contrast, he purportedly has nearly 30% voting power in the Company
(individually and through various entities under his control). He possesses this
purported voting power principally through the Series B Preferred Stock. Alfred
Taubman has previously served as the Chairman of the Board of Sotheby's
Holdings, Inc., and as a director of Livent, Inc., and Hollinger International,
Inc.
10. Defendant Robert S. Taubman is Chairman of the Board, President
and Chief Executive Officer of the Company, and, upon information and belief,
resides in Michigan. Robert Taubman has served as a director of the Company
since 1992. Robert Taubman is also a director of Comerica Bank and of Sotheby's
Holdings, Inc., and represents the Company as a director of fashionmall.com,
Inc. Robert Taubman, or entities he controls, owns less than 1% of the
outstanding voting shares of the Company's stock. He is the brother of defendant
William Taubman and the son of defendant Alfred Taubman. In his capacity as
Chairman of the Board, President and Chief Executive Officer of the Company,
Robert Taubman was paid $2,439,864 in total compensation for fiscal year 2001,
including $750,000 in salary, $468,000 in bonuses, $1,196,250 in deferred
compensation, and $25,614 in other compensation.
-6-
11. Defendant William S. Taubman is a director and Executive Vice
President of the Company, and, upon information and belief, resides in Michigan.
William Taubman has served as a director of the Company since 2000. William
Taubman has held various executive positions with The Taubman Company LLC, which
is an indirect subsidiary of TRG. William Taubman is the brother of defendant
Robert Taubman and the son of defendant Alfred Taubman. In his capacity as a
director and Executive Vice President of the Company, William Taubman was paid
approximately $1,266,079 in total compensation for fiscal year 2001, including
$474,994 in salary, $312,500 in bonus, $453,450 in deferred compensation, and
$25,135 in other compensation.
12. Defendant Lisa A. Payne ("Payne") is a director, Executive Vice
President, and Chief Financial and Administrative Officer of the Company, and,
upon information and belief, resides in Michigan. Payne has served as a director
of the Company since 1997.
13. Defendant Graham T. Allison ("Allison") is a director of the
Company, and, upon information and belief, resides in Massachusetts. He has
served as a director of the Company since 1996. Allison previously served as a
director of the Company for one year, from 1992 through 1993.
14. Defendant Peter Karmanos, Jr. ("Karmanos"), is a director of the
Company, and, upon information and belief, resides in Michigan. He has served as
a director of the Company since 2000. Karmanos is also a director of Detroit
Renaissance, an urban renewal organization, of which defendant Alfred Taubman
has also served as a director.
-7-
15. Defendant Allan J. Bloostein ("Bloostein") is a director of the
Company, and, upon information and belief, resides in Connecticut. Defendant
Bloostein has served as a director of the Company since 1992.
16. Defendant Jerome A. Chazen ("Chazen") is a director of the
Company, and, upon information and belief, resides in New York. Defendant Chazen
has served as a director of the Company since 1992. Chazen is Chairman of Chazen
Capital Partners, a private investment company, and along with Robert Taubman is
also a director of fashionmall.com, Inc.
17. Defendant S. Parker Gilbert ("Gilbert") is a director of the
Company, and, upon information and belief, resides in New York. Gilbert has
served as a director of the Company since 1992. He is a retired Chairman of
Morgan Stanley Group, Inc.
18. Defendants Robert Taubman, William Taubman, Payne, Allison,
Karmanos, Bloostein, Chazen and Gilbert are referred to herein collectively as
the "Director Defendants." Defendants Bloostein, Chazen and Gilbert have been
directors of the Company for approximately ten years, and Allison for
approximately seven years. Because all four have served on the Company's board
for more than three years, none of Allison, Bloostein, Chazen, or Gilbert
qualifies as an "Independent Director" under Michigan Business Corporations Act
Section 450.1107, which provides that an "Independent Director" is a director
who "[d]oes not have an aggregate of more than 3 years of service as a director
of the corporation, whether or not as an independent director." In fact, all of
the non-officer/non-employee directors are dominated and controlled by, and are
beholden to, the Taubman family and do not possess the independence necessary to
qualify as independent directors.
-8-
JURISDICTION AND VENUE
19. This court has jurisdiction pursuant to 28 U.S.C. Section 1332,
as plaintiffs and defendants are citizens of different states, and the amount in
controversy exceeds the sum or value of $75,000, exclusive of interest and
costs.
20. Defendants are subject to personal jurisdiction in this judicial
district, and transact business in this judicial district.
21. Venue is proper in this judicial district pursuant to 28
U.S.C. Section 1391(a)(2), as a substantial part of the events and omissions
giving rise to this action occurred in this district.
BACKGROUND
SPG'S OFFER TO PURCHASE TAUBMAN CENTERS
22. On October 16, 2002, SPG made a written proposal to defendant
Robert Taubman to purchase all of the outstanding common stock of the Company at
a significant premium to its current market price.
23. On October 21, 2002, without the benefit of discussing with SPG
the details of its proposal, and, upon information and belief, without
disclosure to the Company's board of directors or stockholders, Robert Taubman
summarily rejected SPG's proposal.
24. In a letter dated October 22, 2002, SPG reiterated the basic
terms of its offer. SPG proposed that it would pay $17.50 in cash for each share
of Company common stock, which represented a 30% premium to the $13.50 closing
market price of the Company's common stock on the date of this letter. SPG also
gave the Taubman family a choice. The Taubman family could exchange its limited
partnership interests in TRG for limited partnership interests in the SPG
Operating Partnership. Alternatively, the Taubman family could remain
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limited partners in TRG. Thus, SPG's offer to purchase the outstanding common
stock would not impact the Taubman family's economic interests in any way if the
Taubman family so wished. Nor would the offer jeopardize the Company's status as
a REIT for tax purposes, the purported rationale for the Excess Share Provision
in the Company's charter. SPG's proposal also expressly stated that it was not
subject to the receipt of financing or any due diligence investigation of the
Company or its subsidiaries.
25. On October 28, 2002, Robert Taubman again rejected SPG's
proposal, and on October 29, 2002, sent a summary one-paragraph letter, which
conclusorily stated: "The Board is unanimous in concluding that the company has
no interest whatsoever in pursuing a sale transaction, and that discussion as to
such a transaction would not be productive."
26. On November 13, 2002, SPG publicly announced its offer to the
board. SPG also apprised the Company's board regarding SPG's flexibility in
structuring the deal to allow the Taubman family to retain, sell or exchange
their interests as they wished.
27. Less than one hour later, the Company issued a press release
stating that:
"The Taubman Centers Board of Directors has unanimously
rejected this proposal. In addition, the Taubman family has
informed the Board that it is categorically opposed to the
sale of the Company. Given the family's position, any efforts
to purchase Taubman Centers would not be productive."
THE TAUBMAN FAMILY FURTHER ACTS TO
SOLIDIFY ITS BLOCKING POSITION AND ENTRENCH ITSELF
28. Within days of SPG' s public announcement of its initial $17.50
all cash offer, the Taubman family began to solidify its voting power and to
further entrench itself. On November 15, 2002, the Taubman family issued a press
release and filed a corresponding Schedule 13D with the Securities and Exchange
Commission ("Schedule 13D"), announcing that
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pursuant to certain "voting agreements" certain non-family stockholders had
given Robert Taubman proxies to vote their shares and that the Taubman family
now controlled over one-third of the Company's outstanding voting stock. All of
the stockholders mentioned in the Company's November 15, 2002 press release were
either holding companies for the Taubman family, or close friends (or entities
controlled by close friends) of the Taubman family.
29. More specifically, as disclosed in the Schedule 13D, on November
14, 2002, Alfred Taubman's two sons -- Robert and William -- exercised a total
of 300,000 options; Robert Larson, former vice chairman of the board, purchased
266,366 shares in the open market; The Max M. Fisher Revocable Trust purchased
150,000 shares in the open market; and Mr. Larson, Max M. Fisher, and John and
Terry Rakolta (and entities they control), each of whom is a close personal
friend of Alfred Taubman, transferred voting power over an aggregate of
2,440,762 shares to Robert Taubman.
30. Thus, at a time when the board should have been evaluating SPG's
premium all-cash offer on the merits, the Taubman family was hurriedly acting to
further entrench itself by adding to its blocking position. As disclosed in the
Schedule 13D, Robert Taubman entered into the voting agreements "for the
purposes of preventing an unsolicited takeover of the Company" and, as a result,
"Robert S. Taubman together with the Taubman family controls 33.6% of the vote
of the capital stock of the Company." The Schedule 13D announced that Robert
Taubman and the Taubman family, as a group, now had the intention and absolute
ability to block the SPG Tender Offer.
31. As detailed more fully below, the acquisition of voting power by
the Taubman family with respect to the New 3% Shares was a "control share
acquisition" because,
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as a result, the Taubman family's claimed voting power -- individually, as well
as through various family members, trusts and other members of a group which
includes the Taubman family -- in the Company increased from about 30% to 33.6%.
32. The events triggering the filing of the recent Schedule 13D also
constituted the formation of a "group" with respect to the entire 33.6% voting
power claimed by Robert Taubman and the Taubman family, and hence was a control
share acquisition. Under Michigan law, such a transaction required the approval
of a majority of the holders of the disinterested shares for the Taubman family
to acquire the right to vote those shares. No such approval was sought or
obtained.
THE SPG TENDER OFFER
33. On December 5, 2002, SPA commenced a tender offer to purchase the
Company's outstanding common stock for $18.00 in cash per share. The SPG Tender
Offer is conditioned on a number of events, including that the Excess Share
Provision be amended or waived as to SPG and that there be validly tendered and
not withdrawn shares of the Company's common stock representing at least
two-thirds of the Company's total voting power. If the Taubman family is
permitted to vote the Series B Preferred Stock and the New 3% Shares, then, as a
practical matter, the SPG Tender Offer will not be consummated.
34. The SPG Tender Offer is also conditioned on SPG being granted
full voting rights for all shares acquired in the SPG Tender Offer under the
Michigan Control Share Act, or that the Michigan Control Share Act does not
apply to the shares being acquired in the SPG Tender Offer or is invalid. For
purposes of satisfying this condition, SPG previously commenced steps, including
filing preliminary proxy materials with the SEC, to demand that a
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special meeting of the Company's shareholders be called (the "Control Share
Special Meeting"), at which the Company's shareholders would be asked to vote to
approve full voting rights for the shares to be acquired in the SPG Tender
Offer. A majority vote of the Company's shareholders would have been necessary
for approval of voting rights for these shares if the Michigan Control Share
applied to the transaction.
35. Evidently recognizing that the Company's disinterested
shareholders would vote overwhelmingly to approve voting rights for SPG to
enable the SPG Tender Offer to be completed, the board -- five days after
learning of SPG's intention to call the Control Share Special Meeting -- amended
the Company's by-laws to opt out of the Michigan Control Share Act, citing the
"cost and distracting nature of a special meeting of shareholders." As a result,
the Control Share Special Meeting will not be held, although, as discussed
below, SPG still intends to request a special meeting to propose the repeal of
the Excess Share Provision.
36. On December 10, 2002, the Company formally rejected the SPG
Tender Offer, reiterating the opposition of the board and the Taubman family to
the offer. While claiming that the offer was "inadequate" from a financial
standpoint, the Company gave no indication of what an "adequate" offer would be.
To the contrary, while citing a number of purported "reasons" for rejecting the
offer, the Company continued to cite and rely on "the fact that the Taubman
family and other shareholders, with a combined voting power of over a third of
the total voting power of the Company's capital stock have indicated they do not
intend to tender their Common Shares and have taken the firm position that they
are not interested in pursuing a sale transaction." In other words, regardless
of the merits of the offer, the Company is not for
-13-
sale at any price because of the Taubman family's "firm position" in which the
board is acquiescing.
THE COMMON STOCK OF TAUBMAN CENTERS
HAS SIGNIFICANTLY UNDERPERFORMED THE MARKET
37. The Company was incorporated in Michigan in 1973 and had its
initial public offering (the "IPO") in 1992. Upon completion of the IPO, the
Company became the managing general partner of TRG. Upon information and belief,
the Company currently has a 62% managing general partnership interest in TRG,
through which the Company conducts all of its operations.
38. The stock price of the Company has underperformed the market in
recent months and years. From October 1998 until October 22, 2002 (the day SPG
made its initial $17.50 offer to the Company), the Company's shares declined 4%,
even though the average stock price of comparable REITs increased for the same
period.
39. Market observers familiar with the Company have attributed its
recent underperformance to bad management. As one analyst was recently quoted as
saying, if SPG is successful in acquiring the Company, "[y]ou would be swapping
bad management for good management." A University of Michigan finance professor,
commenting on the Company, explained to the DETROIT FREE PRESS that typical
targets of takeovers are "ones that are doing poorly financially" and that SPG
sees in Taubman Centers a company that is "not performing up to its potential."
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THE SERIES B PREFERRED STOCK IS GIVEN TO THE FAMILY
WITHOUT A PROPER PURPOSE OR A SHAREHOLDER VOTE
40. Prior to August 1998, the Taubman family's voting power in the
Company and economic interest in the Company were both below 1%. The remainder
of the voting and economic interests in the Company were in the hands of the
public shareholders. The Company and TRG were (and remain) separate legal
entities, a design originally created to provide tax benefits to the Taubman
family. Prior to August 1998, TRG was controlled by a 13-member Partnership
Committee, on which the Taubman family held only a minority of four seats. The
Taubman family owned approximately 23% of the partnership units of TRG, while
General Motors Pension Trust ("GMPT") owned approximately 37% of the partnership
units and the remainder were owned by the Company. Decisions of the Partnership
Committee and control of TRG were governed by majority vote. Thus, as of August
1998, the Taubman family did not hold a blocking position with respect to either
the Company or TRG. At any time prior to August 1998, if an offer (such as the
SPG Tender Offer) to acquire shares of the Company's common stock were received,
the public shareholders of the Company would have been free to amend the
Company's charter to repeal the Excess Share Provision and take any other
actions necessary to ensure that they received the highest value for their
shares without fear of a Taubman family veto.
41. This entire structure was drastically and improperly altered
through an August 1998 restructuring that was designed to give the Taubman
family substantial veto powers in the Company that they were not and are not
entitled to exercise. Through this transaction the Board, in breach of its
fiduciary duty and Michigan statutory law, purportedly increased the
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Taubman family's voting power in the Company, notwithstanding the lack of a
parallel change in the Taubman family's economic interest in the Company.
42. Specifically, on August 19, 1998, the Company announced that it
had purchased the TRG partnership units owned by GMPT (the "GMPT Exchange"). As
a result of its purchase, the Company obtained a controlling interest in TRG. In
connection with the GMPT Exchange, although not announced in any public filings
until after the transaction, the Company, for the nominal amount of $38,400,
determined to give to the remaining limited partners in TRG (consisting
primarily of the Taubman family) one share of the new Series B Preferred Stock
in the Company for each TRG unit held by those limited partners. The transaction
concerning the Series B Preferred Stock was not submitted to a shareholder vote,
nor was it even disclosed in the press release announcing the GMPT Exchange.
Indeed, the Series B Preferred Stock transaction was not even mentioned until,
on October 15, 2002, nearly two months after the GMPT Exchange was publicly
announced, the Company made a filing with the Securities and Exchange Commission
cryptically stating that it "became obligated" to issue the Series B Preferred
Stock to the Taubman family in connection with the GMPT Exchange. Even then, the
filing provided no explanation of the fact that the Series B Preferred Stock
purported to give the Taubman family virtual veto power over major transactions
concerning the Company and, in particular, unsolicited takeover attempts.
43. The Series B Preferred Stock purported to increase the Taubman
family's voting power in the Company from less than 1% to 30%. The Series B
Preferred Stock, if valid, gives the Taubman family effective control over
decisions affecting the Company's public stockholders even though the family's
economic interest in the Company is DE MINIMIS. Thus,
-16-
the Taubman family could vote its shares to effectively block amendments to the
Company's charter and any other action requiring a two-thirds vote of the voting
stock. Prior to receiving the Series B Preferred Stock, the Taubman family did
not possess such control or veto powers over the Company. The Series B Preferred
Stock is convertible to common stock at a ratio of 14,000 shares to one;
therefore, all of Alfred Taubman's Series B shares, if converted to common
stock, would amount to less than 2,000 common shares out of more than 51 million
shares of common stock.
44. The following table illustrates the purported change in ownership
at the Company by virtue of the transfer of the Series B Preferred Stock to the
Taubman family:
TAUBMAN
FAMILY TAUBMAN
TOTAL PUBLIC FAMILY PUBLIC
VOTING STOCKHOLDERS ECONOMIC STOCKHOLDERS
POWER IN TOTAL VOTING INTEREST ECONOMIC
THE POWER IN THE IN THE INTEREST IN
COMPANY COMPANY COMPANY THE COMPANY
- ------------------------------------------------------------------------------------
Pre-GMPT Exchange less than 1% more than 99% less than 1% more than 99%
Post-GMPT Exchange 30% 70% 1% 99%
45. On August 18, 1998, the Company told the public in a press
release accompanying the GMPT Exchange transaction:
With the [Company] now having a majority and
controlling interest in TRG, we will dissolve the TRG
Partnership Committee. GMPT will relinquish its two
seats on the [Company's] board of directors resulting
in the [Company] having a majority of independent
directors.
-17-
46. The press release did not disclose that, in connection with the
GMPT Exchange, the Company would give the Series B Preferred Stock to the
limited partners in TRG, consisting primarily of the Taubman family, and thus
endow the Taubmans with a purported 30% voting position over the Company.
47. The acquisition of the Series B Preferred Stock by the Taubman
family -- and the effective control that such an acquisition handed to the
Taubman family -- was a "control share acquisition" under the Michigan Control
Share Act, because the Taubman family's ostensible voting power in the Company
was increased from (1) less than one-fifth, to (2) between one-fifth and
one-third. Under the Control Share Act, for the Taubman family to acquire the
right to vote those shares, the transaction required the approval of a majority
of the Company's shareholders. No such approval was ever sought or given, and
those shares therefore have no voting rights.
48. The Taubman family and the other limited partners paid an
aggregate of only $38,400 for the shares of Series B Preferred Stock in the 1998
control share transaction, although the stock provided the Taubman family with a
purported 30% vote and substantial veto powers over the Company. The transfer of
the Series B Preferred Stock had no valid corporate purpose, and was designed
simply to bestow upon the Taubman family extraordinary powers and rights, and to
dilute the voting power of the public shareholders. No fair consideration was
paid by the Taubman family for the Series B Preferred Stock.
49. The terms of the Series B Preferred Stock, set forth in the
charter, make it clear that the holders would wield extreme -- indeed,
dispositive -- power with respect to the voting rights of the Company. Each
share of Series B Preferred Stock purportedly would entitle
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the holder to vote with the holders of the Company's common stock on all matters
submitted to the Company's shareholders.
THE COMPANY'S EXCESS SHARE PROVISION AS ADOPTED AND APPLIED
BY THE COMPANY'S BOARD OF DIRECTORS HAS SIGNIFICANT ANTI-TAKEOVER EFFECT
50. Article III, Section 2, Subsection (d) of the Company's Articles
of Incorporation (the "Articles"), the Excess Share Provision, is designed to
prohibit the ownership by any person, as defined by the Articles, of shares in
excess of 8.23% of the "aggregate value" of the outstanding common stock and
preferred stock of the Company. Subject to certain specified exceptions, any
transfer that would result in any person owning in excess of 8.23% of the
aggregate value of the outstanding common stock and preferred stock of the
Company (or 9.99% where the board has exempted a person from the 8.23% limit),
is purportedly void AB INITIO as to the shares of common stock and/or preferred
stock that are in excess of the limit, and the intended transferee acquires no
rights -- including voting rights -- in such shares.
51. Although it is not uncommon for a REIT to include an excess share
provision in its Articles or by-laws to ensure compliance with the Internal
Revenue Code, which prohibits five or fewer individuals from owning in the
aggregate in excess of 50% of the value of the shares of a REIT, such provisions
invariably grant the REIT's board of directors the discretion to waive the
limitation with respect to particular acquirors. This gives the board discretion
to act in the best interests of the stockholders. In any event, acquisition of a
REIT by a REIT, as is contemplated by SPG's offer, would not implicate the REIT
status rules of the Internal Revenue Code.
52. The Company's Excess Share Provision is far more restrictive
because it cannot be waived by the board to allow any person to own more than
9.9% of the aggregate
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value of the Company's outstanding capital stock, even if the board believes
that such a transaction is in the Company's best interests, and even if (as
here) the transaction does not jeopardize the Company's status as a REIT for tax
purposes. This provision may only be amended or eliminated by a two-thirds vote
of the Company's voting stock. The non-waivability of the Excess Share Provision
is fundamentally unfair where, as shown above, the Taubman family and its
friends now purport to control more than one-third of the Company's outstanding
voting stock, because the Excess Share Provision cannot be amended or eliminated
without the affirmative vote and imprimatur of the Taubman family -- if the
Taubman family is permitted to vote the Series B Preferred Stock and the New 3%
Shares. The Company did not disclose to the public stockholders at any time that
the non-waivable Excess Share Provision would effectively be forever embedded in
the Articles by virtue of the Series B Preferred Stock given to the Taubman
family.
53. Although the Company's board cannot directly waive the Excess
Share Provision, given the impediment that the Excess Share Provision, in
conjunction with the Series B Preferred Stock and the New 3% Shares, poses to
the public shareholders' consideration of the offer, the board should not permit
the Taubman family to vote its Series B Preferred Stock or the New 3% Shares at
any shareholder vote that affects the ability of the SPG Tender Offer to
proceed. The family's economic interest in TRG, the Company's operating
partnership, is in a separate legal entity and does not justify a veto power
over the ability of the public shareholders of the Company (the publicly-traded
REIT) to take advantage of the SPG Tender Offer. The board's current and
continuing failure to prevent the family from voting its purported blocking
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position simply confirms that the board continues to defer completely to the
wishes of the Taubman family at the expense of the public stockholders.
SPG TAKES STEPS TO ALLOW THE COMPANY'S SHAREHOLDERS TO REMOVE THE EXCESS SHARE
PROVISION AND THE COMPANY'S BOARD ACTS TO THWART AND IMPEDE THOSE STEPS
54. On December 16, 2002 SPG announced that it had filed a
preliminary proxy statement with the SEC to enable SPG to solicit proxies from
shareholders of the Company to call a special meeting of the Company's
shareholders. The purpose of the meeting (the "Excess Share Provision Special
Meeting") would be to allow the Company's shareholders to vote on a proposal to
amend the Company's charter so that the purchase of shares by SPG in connection
with its tender offer would not trigger the Excess Share Provision. Under its
by-laws, the Company is required to hold a special meeting if presented with
proxies from holders of at least 25% of the Company's outstanding voting shares.
Under the Company's by-laws (as they existed on December 16, 2002), holders of
25% of the Company's outstanding voting shares were able to call a special
meeting "at any time and for any purpose" upon notice to be given at least 10
and not more than 60 days prior to the meeting.
55. Four days later, on December 20, 2002, in direct reaction to
SPG's announced intention to call a special meeting, the Company announced that
the board, at a meeting that day, had amended the Company's by-laws purportedly
"to specify in more detail the timing and procedures that would apply to a
special meeting requested by the shareholders." In fact, the purpose and effect
of the amendment (the "Meeting Delay Amendment") is to delay and impede SPG's
ability to convene a special meeting to propose the elimination of the Excess
Share Provision that stands in the way of SPG presenting its offer to the
shareholders. Whereas
-21-
the prior by-laws permitted holders of 25% of the Company's voting shares
unilaterally to call a special meeting to be held on a date of their choosing
between 10 and 60 days after providing notice thereof, the amended by-laws
eliminate this right.
56. The Meeting Delay Amendment instead provides that, upon
shareholder request, it is the COMPANY that calls the meeting and selects the
date. The Meeting Delay Amendment further provides that, within 10 business days
after receiving notice of a request by holders of 25% of the Company's voting
shares for a special meeting, the board is to fix a record date and meeting date
for such special meeting, "which meeting date shall be set for not less than 30
nor more than 90 days after the date of such board action." In other words, by
virtue of the Meeting Delay Amendment the board has arrogated to itself the
power to set the meeting date and to delay it by several weeks -- if not months
- -- beyond the date that could have been chosen by the shareholders. The Meeting
Delay Amendment has no valid corporate purpose, and constitutes an improper
interference with the shareholder franchise.
57. In announcing the Meeting Delay Amendment, the board reiterated
its opposition to the SPG Tender Offer and specifically recommended to the
Company's shareholders that they vote against SPG's proposal to eliminate the
Excess Share Provision at the Excess Share Provision Special Meeting. The board
also made a point of saying that "Holders of more than a third of the voting
power ...will vote against" SPG's proposal to amend the charter to eliminate the
Excess Share Provision, thereby serving as a reminder that the Taubman family,
if permitted to vote its Series B Preferred Stock and New 3% Shares, has an
effective veto power over the SPG Tender Offer.
-22-
DECLARATORY AND INJUNCTIVE RELIEF
58. The Court may grant the declaratory and injunctive relief sought
herein pursuant to 28 U.S.C. Section 2201 and Fed. R. Civ. P. 57 anD 65. A
substantial controversy exists because the board is breaching its fiduciary
duties by allowing a stockholder -- who owns 1% of the economic interest in the
Company -- to tell it what to do. The board has failed -- and continues to fail
- -- to discharge its fiduciary duties by failing to give independent scrutiny and
evaluation to SPG's premium all cash offer, thus depriving the public
shareholders of the right to choose for themselves whether to accept the SPG
offer. Furthermore, the Taubman family is also breaching the duties that it
owes, as a purported controlling shareholder, to the public stockholders by not
giving the public shareholders the opportunity to consider SPG's offer -- a
transaction that, if the Taubman family chooses, will have no impact on the
Taubman family's economic interests, but will substantially benefit the public
stockholders.
59. The interests of defendants in maintaining their grip over the
Company is adverse to the interest of the Company's common stockholders in
maximizing the value of their holdings. Any purchase by SPG of the Company's
outstanding publicly held stock has effectively been rendered impossible because
of the non-waivable Excess Share Provision in conjunction with the veto powers
purportedly bestowed upon the Taubman family. SPG's ability to obtain the
necessary two-thirds vote at the Excess Share Provision Special Meeting to
remove the Excess Share Provision from the Company's charter -- and therefore to
satisfy a condition to the SPG Tender Offer -- will be rendered futile if the
Taubman family is permitted to vote the Series B Preferred Stock and the New 3%
Shares at that meeting. The existence of this controversy -- especially given
the public tender offer currently in effect -- is causing confusion
-23-
and uncertainty in the market for public securities. Investors do not know
whether, or when, they will have the opportunity to avail themselves of an
advantageous all cash offer for their shares. Declaratory relief will serve the
public interest by affording relief from such uncertainty and by permitting the
holders of the Company's stock to maximize the value of their holdings by, at
the very least, having the opportunity to consider the SPG Tender Offer.
60. Injunctive and declaratory relief is required, INTER ALIA, to
declare that the Taubman family's Series B Preferred Stock and the New 3% Shares
cannot vote at the Excess Share Provision Special Meeting or any other meeting,
to prevent the board from permitting the Taubman family's Series B Preferred
Stock and the New 3% Shares to be voted, to prevent the Taubman family from
voting that stock at any meeting of shareholders, to prevent the board from
using the Meeting Delay Amendment to impede and delay SPG's ability to convene
the Excess Share Provision Special Meeting and present its offer to the public
shareholders, and to eliminate the uncertainty as to whether and when the
Company's public shareholders will be permitted to achieve a superior
transaction in the sale of their corporation.
FIRST CLAIM FOR RELIEF
MICHIGAN CONTROL SHARE ACT
(MICHIGAN BUSINESS CORPORATION ACT SECTION 450.1790 et seq. -- AGAINST ALL
DEFENDANTS)
61. Plaintiffs repeat and reallege Paragraphs 1 through 60 as if
fully set forth herein.
62. The Michigan Control Share Act, Chapter 7B of the Michigan
Business Corporation Act (M.B.C.A. Section 450.1790 et seq.), applies to the
Company.
63. Pursuant to the Michigan Control Share Act, control shares are
shares of a corporation that, when added to the pre-existing shares owned by a
person or in respect to which
-24-
that person may exercise or direct the exercising of voting power, would entitle
that person, immediately after the acquisition of the shares, directly or
indirectly, alone or as part of a group, to exercise or direct the exercise of
the voting power of the corporation within any of the following ranges:
(a) at least one-fifth, but less than one-third, of all voting power;
(b) at least one-third, but less than a majority, of all voting
power; or
(c) a majority of all voting power.
64. Pursuant to the Michigan Control Share Act, a control share
acquisition is any direct or indirect acquisition of ownership of, or the power
to direct the exercise of voting power with respect to, issued and outstanding
control shares.
65. A person who acquires shares in a control share acquisition
without the affirmative vote of a majority of the holders of all disinterested
shares entitled to vote does not acquire the right to vote those control shares.
66. The Series B Preferred Stock increased the Taubman family's
claimed voting power with respect to the Company's issued and outstanding shares
from less than 1% to 30%. In other words, the Taubman family's voting power
purportedly increased from (a) less than one-fifth, to (b) between one-fifth and
one-third, and therefore constituted a control share acquisition pursuant to
M.B.C.A. Section 450.1790(2)(a).
67. On or about November 13, 2002, in connection with the events
described in the Schedule 13D, the Taubman family members who hold Series B
Preferred Stock formed a group with respect to the voting of the Series B
Preferred Stock and the New 3% Shares, giving
-25-
the group a collective 33.6% of the voting power in the Company. The formation
of the group also constituted a control share acquisition pursuant to M.B.C.A.
Section 450.1790(2)(b).
68. The holders of the Company's disinterested voting stock have not
voted to confer any voting rights on the Series B Preferred Stock acquired by
the Taubman family in 1998 or with respect to the voting power to be exercised
by the Taubman family members who hold Series B Preferred Stock as part of the
group formed in connection with the events described in the Schedule 13D.
69. Accordingly, plaintiffs seek (i) a declaration that pursuant to
the Michigan Control Share Act, the Taubman family's Series B Preferred Stock
does not have any voting rights, and (ii) injunctive relief prohibiting the
Taubman family from voting the Series B Preferred Stock.
70. Plaintiffs have no adequate remedy at law.
SECOND CLAIM FOR RELIEF
MICHIGAN CONTROL SHARE ACT
(MICHIGAN BUSINESS CORPORATION ACT SECTION 450.1790 et seq. - AGAINST ALL
DEFENDANTS)
71. Plaintiffs repeat and reallege Paragraphs 1 through 70 as if
fully set forth herein.
72. The Michigan Control Share Act, Chapter 7B of the Michigan
Business Corporations Act (M.B.C.A. Section 450.1790 et seq.), applies to the
Company.
73. Pursuant to the Michigan Control Share Act, control shares are
shares of a corporation that, when added to the pre-existing shares owned by a
person or in respect to which that person may exercise or direct the exercising
of voting power, would entitle that person, immediately after the acquisition of
the shares, directly or indirectly, alone or as part of a group,
-26-
to exercise or direct the exercise of the voting power of the corporation within
any of the following ranges:
(a) at least one-fifth, but less than one-third, of all voting power;
(b) at least one-third, but less than a majority, of all voting
power; or
(c) a majority of all voting power.
74. Pursuant to the Michigan Control Share Act, a control share
acquisition is any direct or indirect acquisition of ownership of, or the power
to direct the exercise of voting power with respect to issued and outstanding
control shares.
75. A person who acquires shares in a control share acquisition
without the affirmative majority vote of the holders of all disinterested shares
entitled to vote does not acquire the right to vote those control shares.
76. On November 15, 2002, the Taubman family announced in the
Schedule 13D that certain non-family stockholders, including Robert Larson, Max
Fisher and the Rakolta family (and entities they control), had given Robert
Taubman irrevocable proxies to vote their shares. In addition, the Taubman
family announced that Robert Taubman and William Taubman had exercised a total
of 300,000 options. As a consequence of these developments, the Taubman family
announced that it now controlled over one-third of the Company's outstanding
voting stock.
77. Even if the 1998 acquisition of the Series B Preferred Stock was
not a control share acquisition, the increase of the Taubman family's voting
power from 30% to 33.6% by virtue of the New 3% Shares was a control share
acquisition. In other words, the Taubman family's voting power purportedly
increased from (a) between one-fifth and one-third, to (b)
-27-
between one-third and a majority, and constituted a control share acquisition
pursuant to M.B.C.A. Section 450.1790(2)(b).
78. On or about November 13, 2002, in connection with the events
described in the Schedule 13D, the Taubman family members who hold Series B
Preferred Stock formed a group with respect to the voting of the Series B
Preferred Stock and the New 3% Shares, giving the group a collective 33.6% of
the voting power in the Company. The formation of the group also constituted a
control share acquisition pursuant to M.B.C.A. Section 450.1790(2)(b).
79. The holders of the Company's disinterested voting stock have not
voted to confer any voting rights on the New 3% Shares or the Series B Preferred
Stock.
80. Accordingly, plaintiffs seek (i) a declaration that pursuant to
the Michigan Control Share Act, the New 3% Shares and Series B Preferred Stock
do not have any voting rights, and (ii) injunctive relief prohibiting the
Taubman family from voting the New 3% Shares or Series B Preferred Stock.
81. Plaintiffs have no adequate remedy at law.
THIRD CLAIM FOR RELIEF
DECLARATORY JUDGMENT
(INVALIDITY OF TAUBMAN FAMILY VOTING RIGHTS AND MEETING DELAY AMENDMENT
(AGAINST ALL DEFENDANTS)
82. Plaintiffs repeat and reallege Paragraphs 1 through 81 as if
fully set forth herein.
83. The Series B Preferred Stock and the New 3% Shares do not have
the right to vote and should not be allowed to vote at any meeting of
shareholders because, INTER ALIA:
-28-
(a) the board is following the dictates of the Taubman family without
engaging in a searching, independent and deliberative consideration of the SPG
offer, and passively accepting the Taubman family's position that it controls a
blocking voting position when, in fact, that position was largely obtained
without the shareholder vote required under the Michigan Control Share Act;
(b) the board has created, and continues to allow, an effective veto
position for the Taubman family by giving them the Series B Preferred Stock for
no fair consideration for the improper purpose of insulating the Company from
third-party proposals such as the SPG Tender Offer;
(c) the board is depriving the public stockholders of the opportunity
to consider SPG's offer and effectively removing from the shareholders the
choice of whether or not to tender their shares;
(d) the board is acquiescing in the Taubman family's arbitrary,
irrational and spiteful conduct towards the public shareholders and SPG, that is
designed solely to entrench the Taubman family;
(e) the board is permitting the Series B Preferred Stock given to the
Taubman family and the New 3% Shares to effectively prevent amendment of the
charter to remove the Excess Share Provision, and failing to take steps to
remove this impediment; and
(f) the Series B Preferred Stock held by the Taubman family and the
New 3% Shares have no voting rights under the Michigan Control Share Act.
84. The Meeting Delay Amendment is a breach of fiduciary duty by the
board and an inequitable manipulation of the corporate machinery for an improper
purpose, to wit: to
-29-
delay, impede and interfere with the ability of the Company's shareholders to
exercise their right to vote to remove impediments to the SPG Tender Offer.
85. Plaintiffs have been damaged, and continue to be damaged, as a
direct result of defendants' conduct.
86. Accordingly, plaintiffs seek a declaration that (a) the Taubman
family may not validly vote the Series B Preferred Stock and the New 3% Shares
under circumstances that would have the effect of foreclosing the SPG Tender
Offer and disenfranchising the public shareholder body, including at the Excess
Share Provision Special Meeting; and (b) the Meeting Delay Amendment is null and
void and of no further force and effect.
87. Plaintiffs have no adequate remedy at law.
FOURTH CLAIM FOR RELIEF
BREACH OF FIDUCIARY DUTY -- AGAINST ALFRED TAUBMAN AND THE DIRECTOR DEFENDANTS
88. Plaintiffs repeat and reallege Paragraphs 1 through 87 as if
fully set forth herein.
89. Directors of Michigan corporations, such as the Company, owe a
fiduciary duty to the Company's stockholders. Directors also have a fiduciary
duty to refrain from interfering with the shareholder franchise and from
inequitably manipulating the corporate machinery for improper purposes. In
addition, directors have a duty to give due consideration in good faith to a
proposal of a material transaction and to act in the best interests of the
stockholders.
90. Pursuant to Michigan Business Corporation Act Section 450.1541a,
directors are required to discharge their duties in good faith, witH the care
that an ordinarily prudent person in
-30-
a like position would exercise under similar circumstances, and in a manner they
reasonably believe to be in the best interests of the corporation.
91. The conduct set forth above constitutes a continuing breach of
the board of directors' fiduciary duties to the Company's non-Taubman family
stockholders.
92. Plaintiffs have been damaged, and continue to be damaged, as a
direct result of defendants' conduct.
93. Accordingly, plaintiffs seek injunctive relief prohibiting the
Taubman family from voting the shares of Series B Preferred Stock and the New 3%
Shares, and enjoining the Director Defendants from enforcing or applying the
Meeting Delay Amendment in connection with the Excess Share Provision Special
Meeting or otherwise to impede or delay the ability of the Company's
shareholders to vote to remove impediments to the SPG Tender Offer.
94. Plaintiffs have no adequate remedy at law.
FIFTH CLAIM FOR RELIEF
BREACH OF FIDUCIARY DUTY
(AGAINST ALFRED TAUBMAN, ROBERT TAUBMAN AND WILLIAM TAUBMAN)
95. Plaintiffs repeat and reallege Paragraphs 1 through 94 as if
fully set forth herein.
96. If the Taubman family's Series B Preferred Stock and the new 3%
Shares are entitled to be voted, then the Taubman family, including Alfred,
Robert and William Taubman, owns or controls more than a third of the voting
power of the Company and has an effective veto over the SPG Tender Offer.
However, the Taubman family owns only 1% of the economic interests in the
Company.
-31-
97. The Taubman family, including defendants Alfred, Robert and
William Taubman, exercises control over the business affairs of the Company and
owes fiduciary duties to the Company's non-family shareholders.
98. The Taubman family is exercising actual domination and control
over the passive board. Rather than considering the benefits that the SPG offer
presents to the public stockholders, and taking affirmative steps to allow the
shareholders to reap the benefits of the SPG offer, the board is acting at the
direction and behest of the Taubman family.
99. If the Taubman family's Series B Preferred Stock and the New 3%
Shares are entitled to vote, then the Taubman family -- through its stock
ownership and the other conduct described herein -- is a "controlling"
shareholder.
100. As a controlling shareholder, the Taubman family owes fiduciary
duties to the Company's other shareholders. The Taubman family owns only 1% of
the economic interests in the Company, but purports to wield over 33% of the
Company's voting power. A proper discharge of the Taubmans' fiduciary duties
requires that the Taubman family refrain from voting its Series B Preferred
Stock and the New 3% Shares because persons with a 1% economic stake in the
Company should not be able to use their voting power to deny the overwhelming
shareholder body a right to consider freely and fairly an all-cash offer in
their economic interests. This disparity threatens to inflict serious harm and
injury to the Company's public shareholders, who stand to gain enormous
financial benefits if the Taubman family does not vote its Series B Preferred
Stock and the New 3% Shares.
101. Plaintiffs have been damaged, and continue to be damaged, as a
result of the Taubman family's conduct.
-32-
102. Accordingly, plaintiffs seek (i) a declaration that the Taubman
family's voting of its Series B Preferred Stock and the New 3% Shares
constitutes a breach of the fiduciary duties owed by the Taubman family to the
Company's shareholders, and (ii) injunctive relief prohibiting the Taubman
family from voting its shares of Series B Preferred Stock and the New 3% Shares.
103. Plaintiffs have no adequate remedy at law.
IRREPARABLE INJURY
104. Plaintiffs repeat and reallege Paragraphs 1 through 103 as if
fully set forth herein.
105. Plaintiffs and the holders of the Company's common stock face the
prospect of immediate, severe and irreparable injury should the Taubman family
be permitted to vote the Series B Preferred Stock and the New 3% Shares. If the
requested relief is not granted, the conditions to the extremely valuable and
compelling SPG Tender Offer, including those relating to the Excess Share
Provision Special Meeting, will not be satisfied, and SPG will lose the unique
opportunity to make its tender offer. Furthermore, the public stockholders will
lose the unique opportunity to participate in the SPG Tender Offer and receive a
premium for their shares. In addition, if the requested relief is not granted,
defendants will successfully impede and frustrate the public stockholders' right
to vote and interfere with the shareholder franchise.
106. Voting of the Series B Preferred Stock and the New 3% Shares
will, unless enjoined, impede the SPG Tender Offer, interfere with the voting
rights of the non-Taubman family stockholders, disenfranchise the holders of the
Company's common stock, and
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deprive those stockholders of a premium bid for their shares that they would
otherwise be able to consider.
107. If the Meeting Delay Amendment is permitted to stand, the ability
of the Company's disinterested shareholders to vote to repeal the Excess Share
Provision, and thereby facilitate the completion of the SPG Tender Offer, will
also be substantially impeded and delayed.
WHEREFORE, plaintiffs respectfully demand that the Court enter
judgment against defendants and in favor of plaintiffs, and that the Court issue
an Order:
(a) Declaring that pursuant to the Michigan Control Share Act, the
Series B Preferred Stock and the New 3% Shares do not have any voting rights;
(b) Preliminarily and permanently enjoining the Director Defendants
from allowing the Taubman family to vote its Series B Preferred Stock and the
New 3% Shares;
(c) Preliminarily and permanently enjoining the Taubman family from
voting its Series B Preferred Stock and the New 3% Shares;
(d) Declaring that the Director Defendants have breached -- and are
breaching -- their fiduciary duties owed to the Company's shareholders;
(e) Declaring that the Taubman family has breached -- and is
breaching -- its fiduciary duties owed to the Company's shareholders;
(f) Preliminarily and permanently enjoining the Director Defendants
from enforcing or applying the Meeting Delay Amendment in connection with the
Excess Share Provision Special Meeting or otherwise to impede or delay the
ability of the Company's shareholders to vote to remove impediments to the SPG
Tender Offer;
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(g) Declaring that the Meeting Delay Amendment is null and void and
of no further force and effect; and
(h) Granting to plaintiffs such other and further relief as the Court
deems fair and equitable.
Dated: December 27, 2002
Respectfully submitted,
MILLER, CANFIELD, PADDOCK &
STONE, P.L.C.
By: /s/ Todd A. Holleman
--------------------------
Todd A. Holleman (P57699)
Carl H. von Ende (P21867)
150 West Jefferson, Suite 2500
Detroit, Michigan 48226-4415
Telephone: (313) 963-6420
Facsimile: (313) 496-7500
Attorneys for Plaintiffs
Of Counsel:
Richard L. Posen
John R. Oller
Tariq Mundiya
Scott S. Rose
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Facsimile: (212) 728-8111
DELIB:2377921.1\121245-00001
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