UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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FX REAL ESTATE AND ENTERTAINMENT INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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Persons who are to respond to the collection of information
contained in this form are not required to respond unless the
form displays a currently valid OMB control number.
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FX REAL
ESTATE AND ENTERTAINMENT INC.
650 Madison Avenue
New York, New York 10022
August 20,
2008
Dear Stockholders:
On behalf of the Board of Directors and Management of FX Real
Estate and Entertainment Inc., I cordially invite you to
attend our 2008 Annual Meeting of Stockholders to be held at the
offices of Greenberg Traurig, LLP, 200 Park Avenue, New York,
New York at 9:00 a.m., Eastern Daylight Time, on Wednesday,
September 24, 2008.
The matters to be presented to stockholders at the annual
meeting are described in the attached Notice of 2008 Annual
Meeting of Stockholders and Proxy Statement. Whether or not you
plan to attend the annual meeting, please vote as soon as
possible by completing, dating, signing and promptly mailing the
enclosed proxy card in the return envelope provided. If you
decide to attend the annual meeting, you may vote your shares in
person.
We appreciate your interest in and support of FX Real Estate and
Entertainment Inc. and look forward to seeing you at the annual
meeting.
ROBERT F.X. SILLERMAN
Chairman of the Board and
Chief Executive Officer
FX REAL
ESTATE AND ENTERTAINMENT INC.
NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, SEPTEMBER 24, 2008
August 20,
2008
Dear Stockholders:
You are cordially invited to attend the 2008 Annual Meeting of
Stockholders of FX Real Estate and Entertainment Inc. (the
Company) which will be held at the offices of
Greenberg Traurig, LLP, 200 Park Avenue, New York, New York at
9:00 a.m., Eastern Daylight Time, on Wednesday,
September 24, 2008. The principal business of the meeting
will be the consideration of the following matters:
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1.
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The election of seven directors until the next annual meeting of
stockholders and until their respective successors are duly
elected and qualified;
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2.
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The approval of the FX Real Estate and Entertainment Inc. 2007
Long-Term Incentive Compensation Plan;
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3.
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The approval of the FX Real Estate and Entertainment Inc. 2007
Executive Equity Incentive Plan;
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4.
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The ratification of the appointment of Ernst & Young
LLP to serve as the Companys independent registered public
accounting firm for its fiscal year ending December 31,
2008; and
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5.
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Such other business as may properly come before the annual
meeting and any adjournment or postponement of the meeting.
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The close of business on August 4, 2008 has been fixed by
our board of directors as the record date for determining the
holders of our common stock entitled to notice of, and to vote
at, the annual meeting and any adjournment or postponement
thereof. Each share of common stock is entitled to one vote. For
ten days prior to the meeting, a complete list of stockholders
entitled to vote at the annual meeting will be available for
examination by any stockholder, for any purpose relating to the
annual meeting, during ordinary business hours at the offices of
Greenberg Traurig, LLP, 200 Park Avenue, New York, New York
10166.
Enclosed herewith is the Companys 2007 Annual Report to
Stockholders, which contains, among other information, its
financial statements for the fiscal year ended December 31,
2007. The Annual Report does not constitute proxy soliciting
material.
Your vote is important, regardless of the number of shares you
own. Please vote as soon as possible to make sure that your
shares are represented at the annual meeting. To vote your
shares, you may complete and return the enclosed proxy card in
the envelope provided. If you are a holder of record, you may
also cast your vote in person at the annual meeting. If your
shares are held in street name (that is, held for
your account by a broker or other nominee), you will receive
instructions from your broker or nominee on how to vote your
shares.
By Order of the Board of Directors,
Secretary
FXRE REAL ESTATE AND ENTERTAINMENT INC.
2008 ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 24, 2008
PROXY STATEMENT
This Proxy Statement contains information related to the
Companys 2008 annual meeting of stockholders to be held at
the offices of Greenberg Traurig, LLP, 200 Park Avenue, New
York, New York at 9:00 a.m., Eastern Daylight Time, on
Wednesday, September 24, 2008 and at any adjournments or
postponements thereof. The approximate date that this Proxy
Statement, the preceding Notice of Annual Meeting and the
enclosed form of Proxy and the Companys 2007 Annual Report
to Stockholders are first being mailed to stockholders is
August 25, 2008. We are furnishing this Proxy Statement to
our stockholders as part of the solicitation of proxies by the
Companys board of directors for use at the annual meeting.
You should review this information in conjunction with the
Companys 2007 Annual Report to stockholders which
accompanies this Proxy Statement.
TABLE OF
CONTENTS
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1
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35
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35
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ANNEX A: 2007 Long-Term Incentive Compensation Plan
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A-1
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ANNEX B: 2007 Executive Equity Incentive Plan
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B-1
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ANNEX C: Audit Committee Charter
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C-1
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ii
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING
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Q:
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When and where will the annual meeting be held?
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A:
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The annual meeting of stockholders of FX Real Estate and
Entertainment Inc. (FXRE, the Company,
we, our or us) will be held
at the offices of Greenberg Traurig, LLP, 200 Park Avenue, New
York, New York, beginning at 9:00 a.m., Eastern Daylight
Time, on Wednesday, September 24, 2008.
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Q:
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Who is entitled to notice of, and to vote at, the annual
meeting?
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A:
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You are entitled to vote, in person or by proxy, at the annual
meeting if you owned shares of our common stock as of the close
of business (5:00 p.m.) on August 4, 2008, the record
date of the annual meeting. On the record date,
51,929,696 shares of our common stock were issued and
outstanding and held by 600 holders of record. Holders on the
record date of our common stock which is (1) held directly
in your name as the stockholder of record or (2) held for
you as the beneficial owner through a stockbroker, bank or other
nominee, are entitled to one vote per share at the annual
meeting.
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Q:
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What will stockholders be asked to consider and vote on at
the annual meeting?
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A:
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At the annual meeting, stockholders will be asked to consider
and vote on:
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a proposal to elect seven
directors to hold office until the next annual meeting of
stockholders and until their respective successors are duly
elected and qualified;
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a proposal to approve the FX Real
Estate and Entertainment Inc. 2007 Long-Term Incentive
Compensation Plan (the 2007 Long-Term Incentive
Compensation Plan);
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a proposal to approve the FX Real
Estate and Entertainment Inc. 2007 Executive Equity Compensation
Plan (the 2007 Executive Equity Compensation Plan);
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a proposal to ratify the
appointment of Ernst & Young LLP to serve as the
Companys independent registered public accounting firm for
its fiscal year ending December 31, 2008; and
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to transact such other business as
may properly come before the annual meeting and any adjournment
or postponement of the meeting.
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Q:
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Who is entitled to elect the eighth director nominee?
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A:
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Holders of our common stock will only be voting to elect the
seven director nominees named later in this Proxy Statement. The
eighth director nominee named later in this Proxy Statement is
the director nominee of the holder of the one outstanding share
of our preferred stock designated as the Non-Voting Designated
Preferred Stock. The holder of our Non-Voting Designated
Preferred Stock, voting as a separate class, is entitled to
elect one director at the annual meeting. Therefore, the holders
of our common stock, voting as a separate class, are entitled to
elect the other seven director nominees at the annual meeting.
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Q:
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How does the FXRE board of directors recommend that
stockholders vote?
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A:
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Our board of directors unanimously recommends that our
stockholders vote their shares
FOR
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the election of each of the seven
directors nominees named later in this proxy statement;
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the approval of the 2007 Long-Term
Incentive Compensation Plan;
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the approval of the 2007 Executive
Equity Incentive Plan; and
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the ratification of the
appointment of Ernst & Young LLP as our independent
registered public accounting firm.
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Unless you give other instructions on your proxy card, the
persons named as proxies on the proxy card will vote
FOR each of the seven director nominees and the
other proposals.
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We do not expect that any other matters will be brought before
the annual meeting. If, however, other matters are properly
presented, the persons named as proxies will vote the shares
represented by
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properly executed proxies in accordance with their judgment with
respect to those matters, including any proposal to adjourn or
postpone the annual meeting. No proxy that is voted against all
of the proposals will be voted in favor of any adjournment or
postponement of the annual meeting for the purpose of soliciting
additional proxies.
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Q:
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What vote is required to approve each proposal?
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A:
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Proposal 1: Election of Directors
. The
affirmative vote of a plurality of the votes cast, either in
person or by proxy, at the annual meeting is required for the
election of each of the seven director nominees. You may vote
for or withheld with respect to the
election of one or more of the directors. Only votes
for or withheld are counted in
determining whether a plurality has been cast in favor of a
director. Abstentions are not counted for purposes of the
election of directors, although they are counted for purposes of
determining whether there is a quorum. Stockholders do not have
the right to cumulate their votes for directors.
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Proposal 2: Approval of the 2007 Long-Term Incentive
Compensation Plan
. The affirmative
FOR
vote of the holders of a majority of all
shares casting votes, either in person or by proxy, at the
annual meeting is required to approve the 2007 Long-Term
Incentive Compensation Plan. This approval is required
(i) for purposes of compliance with certain exclusions from
the limitations of Section 162(m) of the Internal Revenue
Code of 1986, as amended, (ii) for purposes of compliance
with the requirements of incentive stock options under
Section 422 of the Internal Revenue Code and (iii) by
the applicable rules of The NASDAQ Global Market. A properly
executed proxy marked abstain with respect to this
proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Abstentions
and broker non-votes will have the same effect as a vote against
this proposal.
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Proposal 3: Approval of the 2007 Executive Equity
Incentive Plan
. The affirmative
FOR
vote of the holders of a majority of all shares casting votes,
either in person or by proxy, at the annual meeting is required
to approve the 2007 Executive Equity Incentive Plan. This
approval is required (i) for purposes of compliance with
certain exclusions from the limitations of Section 162(m)
of the Internal Revenue Code of 1986, as amended, (ii) for
purposes of compliance with the requirements of incentive stock
options under Section 422 of the Internal Revenue Code and
(iii) by the applicable rules of The NASDAQ Global Market.
A properly executed proxy marked abstain with
respect to this proposal will not be voted, although it will be
counted for purposes of determining whether there is a quorum.
Abstentions and broker non-votes will have the same effect as a
vote against this proposal.
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Proposal 4: Ratification of the Appointment of the
Independent Registered Public Accounting Firm
. The
affirmative
FOR
vote of the holders of a
majority of all shares casting votes either in person or by
proxy, at the annual meeting is required to ratify the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2008. While we are not required to submit this
matter to a vote of stockholders for ratification, our board of
directors is doing so, based upon the recommendation of the
audit committee, as a matter of good corporate practice. As
such, the voting approval threshold is required by the
applicable rules of The NASDAQ Global Market. A properly
executed proxy marked abstain with respect to this
proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Abstentions
and broker non-votes will have the same effect as a vote against
this proposal.
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As of the record date, our directors and executive officers and
their affiliates owned and were entitled to vote approximately
33,602,239 shares of our common stock, which represented
approximately 64.7% of our common stock outstanding on that
date. We currently anticipate that all of these persons will
vote their and their affiliates shares in favor of the
seven director nominees and the other proposals.
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Q.
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What is the quorum requirement with respect to the annual
meeting?
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A:
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The presence, in person or by proxy, at the annual meeting of
the holders of a majority of the shares of our common stock
outstanding on the record date will constitute a quorum.
Abstentions are counted as present for the purpose of
determining the presence of a quorum.
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A broker who holds shares in nominee or street name
for a customer who is the beneficial owner of those shares may
be prohibited from giving a proxy to vote those shares on any
proposal to be voted on at the annual meeting without specific
instructions from such customer with respect to such proposal.
Accordingly, if a broker receives voting instructions from a
customer with respect to one or more, but not all, of the
proposals to be voted on at the annual meeting, the shares
beneficially owned by such customer will not constitute
votes cast or shares entitled to vote
with respect to any proposal for which the customer has not
provided voting instructions to the broker. These so-called
broker non-votes will be counted as present at the
annual meeting for purposes of determining whether a quorum
exists.
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Q:
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What is the difference between a holder of record and a
beneficial owner of FXRE stock?
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A:
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Many of our stockholders hold their shares through a
stockbroker, bank or other nominee, rather than directly in
their own name. As summarized below, there are some distinctions
between shares held as a holder of record and those beneficially
owned.
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Holders of Record
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If your shares of FXRE stock are registered directly in your
name with our transfer agent, BNY Mellon, you are considered the
holder of record with respect to those shares and these proxy
materials are being sent directly to you by FXRE. As the holder
of record, you have the right to grant your voting proxy
directly to FXRE or to vote in person at the annual meeting. We
have enclosed a proxy card with this proxy statement for you to
use.
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Beneficial Owners
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If your shares of FXRE stock are held in a stock brokerage
account or by a bank or other nominee, you are considered the
beneficial owner of shares held in street name, and
these proxy materials are being forwarded to you by your broker
or nominee, who is considered the holder of record with respect
to those shares. As the beneficial owner, you have the right to
direct your broker or nominee how to vote and are also invited
to attend the annual meeting. Your broker or nominee has
enclosed a voting instruction card with this proxy statement for
you to use in directing the broker or nominee how to vote your
shares.
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Q:
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Who can attend the annual meeting?
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A:
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All stockholders as of the record date (August 4, 2008), or
their duly appointed proxies, may attend. Please note that if
you hold shares in street name (as described above,
that is, through a broker or other nominee), you will need to
bring a copy of a brokerage statement reflecting your stock
ownership as of the record date.
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How can I vote my shares in person at the annual meeting?
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A:
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Shares of our common stock held directly in your name as the
holder of record may be voted in person at the annual meeting.
If you choose to do so, please bring the enclosed proxy card or
proof of identification. Even if you plan to attend the annual
meeting, we recommend that you vote your shares in advance as
described below so that your vote will be counted if you later
decide not to attend the annual meeting. Shares held in
street name may be voted in person by you only if
you obtain a signed proxy from the record holder giving you the
right to vote the shares.
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Q:
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How can I vote my shares without attending the annual
meeting?
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A:
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Whether you hold shares directly as the holder of record or
beneficially in street name, you may direct your
vote without attending the annual meeting by completing and
mailing your proxy card in the enclosed postage pre-paid
envelope.
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Q:
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Can I vote by telephone or electronically?
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A:
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If your shares are held in street name, please check
your proxy card or contact your broker or nominee to determine
whether you will be able to vote by telephone or electronically.
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The deadline for voting by telephone or electronically is
11:59 p.m., Eastern Daylight Time, on September 23,
2008.
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Q:
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Can I change my vote after I have voted by proxy?
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A:
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Yes. You can change your vote at any time before your proxy is
voted at the annual meeting by revoking your proxy.
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If you are a holder of record of our common stock, you may
revoke your proxy by:
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attending the annual meeting and
voting your shares in person at the annual meeting. Your
attendance at the annual meeting alone will not revoke your
proxyyou must also vote at the annual meeting;
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filing an instrument in writing
with the Companys Secretary stating that you would like to
revoke your proxy; or
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filing another duly executed proxy
bearing a later date with the Companys Secretary so that
it arrives prior to the annual meeting.
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You should send your revocation or new proxy card to the
Companys Secretary, Mitchell J. Nelson, at FX Real Estate
and Entertainment Inc., 650 Madison Avenue, New York, New York
10022.
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If you beneficially own your shares in street name,
and you instructed a broker or other nominee to vote your
shares, you must follow your brokers or other
nominees, as applicable, directions in order to change
your vote.
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Q:
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What does it mean if I receive more than one proxy card or
voting instruction card?
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A:
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It means your shares are registered differently or are in more
than one account. Please provide voting instructions for each
proxy card you receive.
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Q:
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Who pays for the preparation of the proxy and soliciting
proxies?
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A:
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We will pay the cost of preparing, assembling and mailing the
Proxy Statement and the accompanying Notice of Annual Meeting,
Proxy Card and Annual Report to Stockholders. In addition to the
use of mail, our directors, officers and employees may solicit
proxies from stockholders by telephone or other electronic means
or in person. These persons will not receive additional
compensation for soliciting proxies. Arrangements also will be
made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the
beneficial owners of stock held of record by these persons, and
we will reimburse them for reasonable out-of-pocket expenses.
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Q:
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Where can I find the voting results of the annual meeting?
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A:
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We will announce preliminary voting results at the annual
meeting and publish final results in our Quarterly Report on
Form 10-Q
for the fiscal quarter ending September 30, 2008.
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WHO CAN
HELP ANSWER YOUR QUESTIONS
If you have any questions about any of the proposals to be
presented at the annual meeting or how to submit your proxy
card, or if you need additional copies of this proxy statement
or the enclosed proxy card or voting instructions, you should
contact:
FX REAL
ESTATE AND ENTERTAINMENT INC.
650 Madison Avenue
New York, New York 10022
Attn: Mitchell J. Nelson, Secretary
Telephone:
(212) 838-3100
Facsimile:
(212) 980-4455
4
FXRE
BOARD OF DIRECTORS
The Companys board of directors is currently comprised of
eight members: Robert F.X. Sillerman (Chairman), Paul C.
Kanavos, Barry A. Shier, Thomas P. Benson, David M. Ledy, Harvey
Silverman, Bryan E. Bloom and Michael J. Meyer.
Messrs. Kanavos, Ledy and Silverman were appointed to the
board of directors during the second half of 2007, while the
other members of the board were appointed on or after
December 31, 2007. Mr. Bloom serves as the board
representative of the holder of the one outstanding share of our
preferred stock, par value $0.01 per share, designated as the
Non-Voting Designated Preferred Stock. The holder of our
Non-Voting Designated Preferred Stock, voting as a separate
class, is entitled to elect one director at the annual meeting,
while the holders of our common stock, voting as a separate
class, are entitled to elect all other directors at the annual
meeting.
As described in Proposal No. 1 Election of
Directors, our board of directors nominating and
corporate governance committee has recommended, and the board
has nominated, each of Messrs. Sillerman, Kanavos, Shier,
Benson, Ledy, Silverman, Meyer and Bloom to stand for
re-election at the annual meeting. The holder of the Non-Voting
Designated Preferred Stock has informed us that it intends to
re-elect Mr. Bloom at the annual meeting to serve as its
board representative.
During 2007, the board of directors held one meeting and acted
by unanimous written consent 12 times. Each of
Messrs. Kanavos, Ledy and Silverman attended at least
seventy-five percent (75%) of the total number of meetings of
the board of directors and committees (if any) on which he
served that were held during the portion of 2007 for which he
served as director.
Corporate
Governance Guidelines and Director Independence
The Company has Corporate Governance Guidelines which provide,
among other things, that a majority of the Companys board
of directors must meet the criteria for independence required by
The NASDAQ Global Market and that the Company shall at all times
have an Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee, which committees will be
made up entirely of independent directors. . In particular,
Rules 4200 and 4350 of The NASDAQ Global Market require
that a majority of our board of directors qualify as
independent no later than January 10, 2009, the
first anniversary of the date of completion of the distribution
of our common stock by CKX, Inc. to its stockholders (the
CKX Distribution). We intend to comply with this
requirement.
Messrs. Ledy, Silverman and Meyer, whose biographical
information is included below under the heading
Executive Officers and Directors of FX Real Estate and
Entertainment Inc.,
have been appointed to our board
of directors as independent directors and qualify as such under
the applicable rules of The NASDAQ Global Market.
The Corporate Governance Guidelines also outline director
responsibilities, provide that the board of directors shall have
full and free access to officers and employees of the Company
and require the board of directors to conduct an annual
self-evaluation to determine whether it and its committees are
functioning effectively. The Corporate Governance Guidelines can
be found on the Companys website at
www.fxree.com
.
Code of
Business Conduct and Ethics
The Company has a Code of Business Conduct and Ethics, which is
applicable to all our employees and directors, including our
Chief Executive Officer, President, Chief Operating Officer,
Chief Financial Officer and General Counsel. The Code of
Business Conduct and Ethics was filed with the Securities and
Exchange Commission (the SEC) as an exhibit to the
Companys Annual Report on
Form 10-K
for the Year Ended December 31, 2007, filed with the SEC on
March 24, 2008 and can also be found on the Companys
website at
www.fxree.com
.
5
Board
Committees
The following chart sets forth the current membership of each
board committee. The board of directors reviews and determines
the membership of the committees at least annually.
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Committee
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|
Members
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|
Audit Committee
|
|
David M. Ledy (Chairman)
Michael J. Meyer
Harvey Silverman
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|
|
|
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|
|
|
Compensation Committee
|
|
David M Ledy (Chairman)
Michael J. Meyer
Harvey Silverman
|
|
|
|
|
|
|
|
|
|
Nominating and Corporate
Governance Committee
|
|
Harvey Silverman (Chairman)
David M. Ledy
Michael J. Meyer
|
Information about the committees, their respective roles and
responsibilities and their charters is set forth below.
Audit
Committee
The Audit Committee is currently comprised of Messrs. Ledy,
Meyer and Silverman. Mr. Ledy is the Chairman of the Audit
Committee. The Audit Committee assists our board of directors in
fulfilling its responsibility to oversee managements
conduct of our financial reporting process, including the
selection of our outside auditors, review of the financial
reports and other financial information we provide to the
public, our systems of internal accounting, financial and
disclosure controls and the annual independent audit of our
financial statements. The Audit Committee, comprised of
Messrs. Ledy and Silverman, did not meet during 2007.
All members of the Audit Committee are independent within the
meaning of the rules and regulations of the SEC, the
requirements of The NASDAQ Global Market and our Corporate
Governance Guidelines. In addition, Mr. Ledy is qualified
as an audit committee financial expert under the regulations of
the SEC and has the accounting and related financial management
expertise required by The NASDAQ Global Market. The Audit
Committees charter can be found on the Companys
website at
www.fxree.com
.
Compensation
Committee
We have a standing Compensation Committee currently comprised of
Messrs. Ledy, Meyer and Silverman. Mr. Ledy is the
Chairman of the Compensation Committee. The Compensation
Committee represents our Company in reviewing and approving the
executive employment agreements with our Chief Executive
Officer, President, Chief Operating Officer, Chief Financial
Officer, Chairman-Las Vegas Division and General Counsel. The
Compensation Committee also reviews managements
recommendations with respect to executive compensation and
employee benefits and is authorized to act on behalf of the
board of directors with respect thereto. The Compensation
Committee also administers the Companys stock option and
incentive plans, including our 2007 Long-Term Incentive
Compensation Plan and our 2007 Executive Equity Incentive Plan.
All members of the Compensation Committee are independent within
the meaning of the rules and regulations of the SEC, the
requirements of the NASDAQ Global Market and our Corporate
Governance Guidelines. The Compensation Committees charter
can be found on the Companys website at
www.fxree.com
. During 2007, the Compensation
Committee, comprised of Messrs. Ledy and Silverman, met two
(2) times.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee is currently
comprised of Messrs. Silverman, Ledy and Meyer.
Mr. Silverman is the Chairman of the Nominating and
Corporate Governance Committee. The
6
Nominating and Corporate Governance Committee is responsible for
recommending qualified candidates to the board for election as
directors of our Company, including the slate of directors
proposed by our board of directors for election by stockholders
at our annual meetings of stockholders. The Nominating and
Corporate Governance Committee also advises and makes
recommendations to the board of directors on all matters
concerning directorship practices and recommendations concerning
the functions and duties of the committees of the board of
directors. To assist in formulating such recommendations, the
Nominating and Corporate Governance Committee utilizes feedback
that it receives from the board of directors annual
self-evaluation process, which it oversees and which includes a
committee and director self-evaluation component. The Nominating
and Corporate Governance Committee developed and recommended to
the board of directors Corporate Governance Guidelines and will
review, on a regular basis, the overall corporate governance of
our Company. The Nominating and Corporate Governance Committee,
comprised of Messrs Silverman and Ledy, did not meet during 2007.
All members of the Nominating and Corporate Governance Committee
are independent within the meaning of our Corporate Governance
Guidelines and the regulations of The NASDAQ Global Market. The
Nominating and Corporate Governance Committees charter can
be found on the Companys website at
www.fxree.com
.
When considering the nomination of directors for election at an
annual meeting of stockholders or, if applicable, a special
meeting of stockholders, the Nominating and Governance Committee
takes into account all factors it considers appropriate, which
may include strength of character, mature judgment, career
specialization, relevant technical skills and the extent to
which the candidate would fill a present need on the board of
directors. The Nominating and Governance Committee may engage,
as appropriate, a third party search firm to assist in
identifying qualified candidates. The process may also include
interviews and all necessary and appropriate inquiries into the
background and qualifications of possible candidates. The
Nominating and Corporate Governance Committee does not currently
have a policy whereby it will consider recommendations from
stockholders for its director nominees, though it expects to
adopt such a policy prior to the 2009 annual meeting of
stockholders.
Communications
by Stockholders with Directors
The Company encourages stockholder communications to the FXRE
board of directors
and/or
individual directors. Stockholders who wish to communicate with
the FXRE board of directors or an individual director should
send their communications to the care of Mitchell J. Nelson,
Secretary, FX Real Estate and Entertainment Inc., 650 Madison
Avenue, New York, New York 10022. Communications regarding
financial or accounting policies should be sent to the attention
of the Chairman of the Audit Committee. Mr. Nelson will
maintain a log of such communications and will transmit as soon
as practicable such communications to the Chairman of the Audit
Committee or to the identified individual director(s), although
communications that are abusive, in bad taste or that present
safety or security concerns may be handled differently, as
determined by Mr. Nelson.
Director
Attendance at Annual Meetings
FXRE will make every effort to schedule its annual meeting of
stockholders at a time and date to accommodate attendance by
directors taking into account the directors schedules.
While all directors are encouraged to attend the FXRE annual
meeting of stockholders., there is no formal policy as to their
attendance at annual meetings of stockholders.
COMPENSATION
OF DIRECTORS
In 2007, our board of directors adopted a director compensation
policy. Directors who are also employees or officers of our
company or any of its subsidiaries do not receive any separate
compensation as a director. Each of our non-employee directors
receives an annual fee of $80,000. Each non-employee director
also receives an additional $1,000 for attendance at each
meeting of the board of directors and $750 for attendance at
each meeting of a committee of which he is a member. The
chairperson of the Audit Committee receives an additional fee of
$20,000 per annum and the chairperson of each other committee
receives an additional fee of $10,000 per annum. Each of the
other members of the Audit Committee receives $10,000 per
7
annum and the other members of each of the other committees
receive a fee of $5,000 per annum. All fees described above will
be payable half in cash and half in equity awards under the
Companys 2007 Long-Term Incentive Compensation Plan,
though each non-employee director will have the option to elect,
on an annual basis, to receive 100% of his compensation in
equity awards. We reimburse non-employee directors for actual
out-of-pocket expenses incurred.
During 2007, we did not pay any compensation to our non-employee
directors.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of shares of our common stock as of
August 4, 2008 by:
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each person or entity known by us to beneficially own more than
5% of the outstanding shares of our common stock,
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each of our named executive officers;
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each of our current directors; and
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all of our directors and executive officers, named as a group.
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Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes
voting or investment power with respect to the securities.
Unless otherwise noted, each beneficial owner has sole voting
and investing power over the shares shown as beneficially owned
except to the extent authority is shared by spouses under
applicable law. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person,
any shares of common stock subject to common stock purchase
warrants held by that person that are exercisable as of
August 4, 2008 or will become exercisable within
60 days thereafter are deemed to be outstanding, while such
shares are not deemed outstanding for purposes of computing
percentage ownership of any other person.
As of August 4, 2008, we had outstanding
51,929,696 shares of our common stock.
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Shares
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Beneficially
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Percentage of
|
Name and Address of Beneficial Owner (1)
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Owned
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Common Stock
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Beneficial Owners of 5% or More
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Robert F.X.
Sillerman
(2)
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17,154,460
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33.0%
|
Brett
Torino
(3)
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8,947,395
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16.5%
|
Paul C.
Kanavos
(4)
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7,477,398
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14.1%
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The Huff Alternative Fund,
L.P.
(5)
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6,739,542
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13.0%
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Directors and Named Executive Officers:
|
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Harvey
Silverman
(6)
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2,434,161
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4.6%
|
Barry A.
Shier
(7)
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1,357,145
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2.6%
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Thomas P. Benson
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417,234
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*
|
Mitchell J.
Nelson
(8)
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315,000
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*
|
David M. Ledy
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28,024
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*
|
Michael J. Meyer
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*
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Bryan E. Bloom
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*
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All directors and executive officers as a group (10
individuals)
(9)
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38,130,817
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67.5%
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*
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Represents less than 1%.
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(1)
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Except as otherwise set forth below, the address of each of the
persons listed below is
c/o FX
Real Estate and Entertainment Inc., 650 Madison Avenue, New
York, New York 10022.
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(2)
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Includes: (i) 16,087,543 shares of common stock owned
of record by Mr. Sillerman; (ii) 300,000 shares
of common stock owned of record by Laura Baudo Sillerman,
Mr. Sillermans spouse; and
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8
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(iii) 766,917 shares of common stock owned of record
by Sillerman Capital Partners, L.P., a limited partnership
controlled by Mr. Sillerman through a trust for the benefit
of Mr. Sillermans descendants.
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(3)
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Includes: (i) 176,238 shares of common stock owned of
record by Mr. Torino; (ii) 5,556,870 shares of
common stock owned of record by ONIROT Living Trust, dated
June 20, 2000, of which Mr. Torino is the trustee;
(iii) 1,071,429 shares of common stock owned of record
by TTERB Living Trust, of which Mr. Torino is the trustee;
and (iv) 2,142, 858 shares of common stock underlying
presently exercisable warrants owned of record by TTERB Living
Trust. These warrants are exercisable at prices of $4.50 per
share for 1,071,429 of the underlying shares and $5.50 per share
for 1,071,429 of the underlying shares.
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(4)
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Includes: (i) 4,980,284 shares of common stock owned
of record by Mr. Kanavos and his spouse Dayssi Olarte de
Kanavos, as joint tenants; (ii) 500,000 shares of
common stock owned of record by the Dayssi Olarte de Kanavos
2008 GRAT; (iii) 500,000 shares of common stock owned
of record by the Paul C. Kanavos 2008 GRAT;
(iv) 354,254 shares of common stock owned of record by
Mr. Kanavos, and (v) 1,142,860 shares of common
stock underlying presently exercisable warrants owned of record
by Mr. and Mrs. Kanavos. These warrants are exercisable at
prices of $4.50 per share for 571,430 of the underlying shares
and $5.50 per share for 571,430 of the underlying shares.
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(5)
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Held of record by The Huff Alternative Fund, L.P. and one of its
affiliated limited partnerships (together, the Huff
Entities). William R. Huff possesses the sole power to
vote and dispose of all the shares of common stock held by the
Huff Entities, subject to the internal screening procedures and
other securities law compliance policies that from time to time
require Mr. Huff to delegate to one or more employees of
the Huff Entities transaction and/or securities disposition
authority with respect to certain entities, including our
company. All such employees serve under the ultimate direction,
control and authority of Mr. Huff. Thus, Mr. Huff is
deemed to beneficially own 6,739,542 shares of common
stock. The address of the Huff Entities and Mr. Huff is 67
Park Place, Morristown, New Jersey 07960.
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(6)
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Includes: (i) 1,384,119 shares of common stock owned
of record by Mr. Silverman; (ii) 478,612 shares
of common stock owned of record by Silverman Partners, L.P., of
which Mr. Silverman is the sole general partner; and
(iii) 571,430 shares of common stock underlying
presently exercisable warrants owned of record by Silverman
Partners, L.P. These warrants are exercisable at prices of $4.50
per share for 285,715 of the underlying shares and $5.50 per
share for 285,715 of the underlying shares.
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(7)
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Includes: (i) 785,715 shares of common stock owned of
record by Mr. Shier and (ii) 571,430 shares of
common stock underlying presently exercisable warrants owned of
record by Mr. Shier. These warrants are exercisable at
prices of $4.50 per share for 285,715 of the underlying shares
and $5.50 per share for 285,715 of the underlying shares.
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(8)
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Includes: (i) 215,000 shares of common stock owned of
record by Mr. Nelson and his spouse Leslie Nelson, as joint
tenants, and (ii) 100,000 shares of common stock
underlying presently exercisable warrants owned of record by Mr.
and Mrs. Nelson These warrants are exercisable at prices of
$4.50 per share for 50,000 of the underlying shares and $5.50
per share for 50,000 of the underlying shares.
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(9)
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Includes an aggregate of 4,528,578 shares of common stock
underlying presently exercisable warrants described above in
notes 3, 4, 6, 7 and 8.
|
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act) requires our directors,
officers and persons who own more than 10% of our outstanding
common stock to file with the SEC initial reports of ownership
and changes in ownership of our Common Stock. Such individuals
are also required to furnish us with copies of all such
ownership reports they file.
Because our common stock was not registered under
Section 12 of the Exchange Act at any time during the year
ended December 31, 2007, our directors and executive
officers and greater than 10% stockholders were not subject to
or required to file reports under Section 16 of the
Exchange Act during 2007.
9
EXECUTIVE
OFFICERS AND DIRECTORS OF FX REAL ESTATE AND ENTERTAINMENT
INC.
The following table sets forth information regarding our
executive officers and directors.
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Name
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Age
|
|
Position
|
|
Robert F.X. Sillerman
|
|
60
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|
Chairman and Chief Executive Officer
|
Paul C. Kanavos
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50
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Director, President
|
Barry A. Shier
|
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52
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Director, Chief Operating Officer
|
Thomas P. Benson
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45
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|
Executive Vice President, Chief Financial Officer, Director
|
Brett Torino
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49
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Chairman Las Vegas Division
|
Mitchell J. Nelson
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60
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Executive Vice President, General Counsel, Secretary
|
David M. Ledy
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58
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Director
|
Harvey Silverman
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66
|
|
Director
|
Michael J. Meyer
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43
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|
Director
|
Bryan E. Bloom
|
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49
|
|
Director
|
Robert F.X. Sillerman
has served as Chairman of
the board of directors and Chief Executive Officer since
January 10, 2008. Mr. Sillerman has served as the
Chief Executive Officer and Chairman of CKX, Inc.
(CKX) since February 2005. Prior to that,
Mr. Sillerman was Chairman of FXM, Inc., a private
investment firm, from August 2000 through February 2005.
Mr. Sillerman is the founder and has served as managing
member of FXM Asset Management LLC, the managing member of MJX
Asset Management, a company principally engaged in the
management of collateralized loan obligation funds, from
November 2003 through the present. Prior to that,
Mr. Sillerman served as the Executive Chairman, a Member of
the Office of the Chairman and a director of SFX Entertainment,
Inc. from its formation in December 1997 through its sale to
Clear Channel Communications in August 2000.
Paul C. Kanavos
was elected a Director and
appointed President on August 20, 2007. Mr. Kanavos is
the Founder, Chairman and Chief Executive Officer of Flag Luxury
Properties, LLC. Prior to founding Flag Luxury Properties, he
worked for over 20 years at the head of Flag Management.
Most recently he has developed Ritz-Carltons in South Beach,
Coconut Grove and Jupiter as well as Temenos Anguilla.
Mr. Kanavos early career experience includes a
position at Chase Manhattan Bank, where he negotiated,
structured and closed over $1 billion in loans.
Barry Shier
was appointed Chief Operating Officer
and elected a Director on December 31, 2007. From 1984
through May 2000, Mr. Shier served in various executive
capacities for Mirage Resorts, Inc. and Golden Nugget, Inc., a
subsidiary of Mirage Resorts. During his tenure, he was
intimately involved in design development, marketing and
operations for the parent company. Mr. Shier served as the
Chairman and Chief Executive Officer for both Golden Nugget Las
Vegas Corporation, and Beau Rivage Resort and Casino in Biloxi,
Mississippi. He retired from Mirage Resorts, Inc in May 2000,
upon the sale of the company to MGM. Since his retirement from
Mirage Resorts in May 2000, Mr. Shier has focused his
efforts on private investments, and has done select gaming and
hotel industry consulting and lecturing, as well as various
philanthropic activities.
Thomas P. Benson
has served as a Director and
Chief Financial Officer since January 10, 2008.
Mr. Benson has served as the Executive Vice President,
Chief Financial Officer and Treasurer of CKX since February 2005
and was a director of CKX from February 2005 through May 2006.
Mr. Benson also serves as Executive Vice President and
Chief Financial Officer of MJX Asset Management, and serves on
the management advisory committee of FXM Asset Management.
Mr. Benson has been with MJX since November 2003.
Mr. Benson was Chief Financial Officer at FXM, Inc. from
August 2000 until February 2005. Mr. Benson served as a
Senior Vice President and Chief Financial Officer of SFX
Entertainment from March 1999 to August 2000, and as the Vice
President, Chief Financial Officer and a director of SFX
Entertainment from December 1997.
Brett Torino
has served as Chairman of our Las
Vegas Division since December 31, 2007. Since 1999, Brett
Torino has served as the Chief Executive Officer and President
of Torino Companies, LLC, which was founded in 1976.
Mr. Torino has led the development, construction and sale
of commercial, residential
10
and resort properties in California, Colorado. Nevada and
Arizona. The Torino Companies consist of a group of wholly owned
and geographically diverse affiliated companies best known for
their attached housing, multi-family residential projects and
commercial developments.
Mitchell Nelson
has served as Executive Vice
President and General Counsel since December 31, 2007.
Mitchell J. Nelson has served as Senior Vice President of
Corporate Affairs for Flag Luxury Properties, LLC since
February, 2003. He has also served as President of Atlas Real
Estate Funds, Inc., a private investment fund which invested in
United States-based real estate securities, and as counsel to
various law firms since 1994. Prior to that, he was a senior
real estate partner at the law firm of Wien, Malkin &
Bettex, with supervisory responsibility for various commercial
properties. Mr. Nelson was a director of The Merchants Bank
of New York and its holding company until its merger with, and
remains on the Advisory Board of, Valley National Bank.
Additionally, he has served on the boards of various
not-for-profit organizations, including as a director of the
92nd Street YMHA and a trustee of Collegiate School, both
in New York City.
David M. Ledy
was elected a director of the
Company in October 2007. Since June 30, 2004, he has served
as the Chief Operating Officer of U.S. Realty Advisors,
LLC, or USRA. USRA is an equity investor in corporate real
estate and provides real estate advisory services to a diverse
base of clients, including public companies, financial
institutions as well as major private developers and investors.
Prior to that, Mr. Ledy served as Executive Vice President
of USRA from April 15, 1991 to June 30, 2004. Prior to
joining USRA in 1991, Mr. Ledy was a partner in the New
York law firm of Shea & Gould where he was a member of
the real estate department and chairman of the real estate
workout group. Mr. Ledy was admitted to the United States
District Court for the Southern District of New York in 1975 and
the Courts of the State of New York in 1975.
Harvey Silverman
was elected a director of the
Company in October 2007. Mr. Silverman was a principal of
Spear, Leeds & Kellogg, a major specialist firm on the
New York Stock Exchange, for 39 years until its acquisition
by Goldman Sachs & Co. in October of 2000. Since then,
Mr. Silverman has been a private investor.
Michael J. Meyer
was elected a director of the
Company in May 2008. Mr. Meyer is the founding partner of
17 Broad LLC, a diversified investment vehicle and securities
consulting firm. Prior to founding 17 Broad, from 2002 to 2007,
Mr. Meyer served as Managing Director and Head of Credit
Sales and Trading for Bank of America. Prior to that,
Mr. Meyer spent four years as the Head of High Grade Credit
Sales and Trading for UBS.
Bryan E. Bloom
was elected a director of the
Company in May 2008. Mr. Bloom has served as counsel of
W.R. Huff Asset Management Co., L.L.C. and its affiliates for
the past fourteen years. Prior to being employed by Huff, he was
a tax partner at the law firm of Shanley &
Fisher, P.C. Mr. Bloom is a Trustee of the Adelphia
Recovery Trust, and has served on the Board of Impsat
Communications and numerous privately held companies. He has
been an adjunct professor at the graduate tax program at the
Fairleigh Dickenson University and authored and lectured for the
American Institute of Certified Public Accountants.
Future
Director Candidate
Carl D. Harnick currently serves as an independent director on
the board of directors of CKX. Upon the closing of the pending
CKX going private transaction, Mr. Harnick will resign from
the Board of Directors of CKX and will be immediately appointed
to serve as an independent director of our company. Upon his
expected appointment to serve on the board, it is anticipated
that Mr. Harnick will be appointed to serve as Chairman of
our Audit Committee, a position that he currently holds with
respect to the CKX board of directors. A complete biography for
Mr. Harnick is set forth below.
Carl D. Harnick,
73,
served as Vice
President and Chief Financial Officer of Courtside Acquisition
Corp from March 18, 2005 to July 2, 2007.
Mr. Harnick was a partner with Ernst & Young and
its predecessor for thirty years, retiring from the firm in
September 1997. Since leaving Ernst & Young,
Mr. Harnick has provided financial consulting services to
various organizations, including Alpine Capital, a private
investment firm, at various times since October 1997. He was a
director of Platinum Entertainment, Inc., a recorded music
company, from April 1998 through June 2000, Classic
Communications, Inc., a cable television company, from January
2000 through January 2003, and Sport Supply Group, Inc., a
direct mail marketer of sporting goods, from April 2003 through
11
August 2004, and currently serves as a director and chairman of
the audit committee of CKX. Mr. Harnick has been the
Treasurer as well as a Trustee for Prep for Prep, a charitable
organization, for more than fifteen years.
In addition to Mr. Harnick, we expect that one or more of
the current independent directors for CKX will be appointed to
our board of directors upon consummation of the acquisition of
CKX by 19X, Inc. (19X). If the CKX going private
transaction is not completed by January 10, 2009 or at all,
we will, to the extent necessary to comply with The NASDAQ
Global Markets independence requirements, identify and
appoint other individuals who qualify as independent
to serve as directors.
Non-Voting
Designated Preferred Stock Director
Under the terms of the Non-Voting Designated Preferred Stock,
the holder of the Non-Voting Designated Preferred Stock is
entitled to appoint a member our board of directors so long as
it continues to beneficially own at least 20% of the
6,611,998 shares of our common stock that it acquired
through (1) the CKX Distribution, (2) the exercise of
rights in our recently completed rights offering, and
(3) the purchase of shares that were not subscribed for in
our recently completed rights offering pursuant to its
investment agreement with us. Under the terms of the Non-Voting
Designated Preferred Stock as specified in the Certificate of
Designation, on May 14, 2008, the holder of the Non-Voting
Designated Preferred Stock selected Bryan Bloom as its designee
to serve on the Companys Board of Directors. At the
written request of the holder of the Non-Voting Designated
Preferred Stock, its director designee shall be appointed by the
board of directors to serve on each committee of the board of
directors to the extent permissible under the applicable rules
and regulations of the SEC or The NASDAQ Global Market, or
applicable law. In accordance with the terms of the Non-Voting
Designated Preferred Stock, Mr. Bloom (or any successor
designated by the holder) has the right, subject to any
restrictions of The NASDAQ Global Market or the SEC, or
applicable law, to be a member of, and the chairman of, any
committee of the Board of Directors formed for the purpose of
reviewing any related party transaction that is
required to be disclosed pursuant to Section 404 of the
Sarbanes Oxley Act of 2002 or any successor rule or regulation
or any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any of the
Companys directors, officers or affiliates, including any
such committee that may be formed pursuant to the applicable
rules and regulations of the SEC or The NASDAQ Global Market.
However, if Mr. Bloom (or any successor designated by the
holder) would not be deemed independent or disinterested with
respect to a related party transaction and therefore would not
satisfy The NASDAQ Global Market or other applicable
requirements for serving on the special committee formed with
respect thereto, Mr. Bloom (or any successor designated by
the holder) will not serve on the relevant special committee but
will have the right to attend meetings of such special committee
as an observer, subject to any restrictions of The NASDAQ Global
Market or applicable law. Furthermore, in the event that the
attendance at any meetings of any such special committee would
raise confidentiality issues as between the parties to the
transaction that, in the reasonable opinion of counsel to the
relevant special committee, cannot be resolved by a
confidentiality agreement, Mr. Bloom (or any successor
designated by the holder) shall be required to recuse himself
from such meetings.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
There are a number of conflicts of interest of which
stockholders should be aware regarding our ownership and
operations. For a summary of transactions involving related
parties, please see
Item 13. Certain
Relationships, Related Transactions, and Director
Independence
in our 2007 Annual Report to Stockholders
accompanying this Proxy Statement.
Board
Decisions and Certain Conflicts of Interest
Past and future decisions by our board regarding our future
growth, operations and major corporate decisions will be subject
to certain possible conflicts of interest. These conflicts may
have caused, and in the future may cause, our business to be
adversely affected. Nevertheless, our board will be responsible
for making decisions on our behalf. We have adopted a policy and
procedures with respect to interested transactions with related
persons. Under this policy and procedures, the board of
directors will convene a special committee comprised of
independent directors for the purpose of reviewing the material
facts of each interested transaction with related persons. In
determining whether to approve an interested transaction, the
acting special committee
12
will take into account, among other factors it deems
appropriate, whether the interested transaction is on terms no
less favorable than terms generally available to or from an
unaffiliated third-party under the same or similar circumstances
and the extent of each related persons interest in the
transaction.
PROPOSAL NO. 1
Our board of directors nominating and corporate governance
committee has recommended, and the board of directors has
nominated, each of the seven director nominees named below, all
of whom are current directors, to stand for re-election at the
annual meeting. The holders of our common stock, voting as a
separate class, are entitled to elect these seven director
nominees at the annual meeting. Each director nominee so elected
at the annual meeting will hold office until the next annual
meeting of stockholders and until his or her successor is duly
elected and qualified.
In addition, as described below under
Non-Voting
Designated Preferred Stock,
the holder of our
Non-Voting Designated Preferred Stock, voting as a separate
class, is entitled to elect one director at the annual meeting.
We expect each director nominee to be able to serve if elected.
If any nominee is not able to serve, proxies will be voted in
favor of the remainder of those nominated and may be voted for
substitute nominees, unless our board of directors chooses to
reduce the number of directors serving on the board.
Director
Nominees
Information about each director nominee, including the
directors business experience, independence status and
service on the boards of directors of other publicly traded
companies and investment companies, is set forth under
Executive Officers and Directors of FX Real Estate and
Entertainment Inc.
|
|
|
Robert F.X. Sillerman
|
|
Not Independent
|
Paul C. Kanavos
|
|
Not Independent
|
Barry A. Shier
|
|
Not Independent
|
Thomas P. Benson
|
|
Not Independent
|
David M. Ledy
|
|
Independent
|
Harvey Silverman
|
|
Independent
|
Michael J. Meyer
|
|
Independent
|
Vote
Required and Recommendation of Our Board of Directors
The affirmative vote of a plurality of the votes cast, either in
person or by proxy, at the annual meeting is required for the
election of each of the seven director nominees. You may vote
for or withheld with respect to the
election of one or more of the directors. Only votes
for or withheld are counted in
determining whether a plurality has been cast in favor of a
director. Abstentions are not counted for purposes of the
election of directors, although they are counted for purposes of
determining whether there is a quorum. Stockholders do not have
the right to cumulate their votes for directors.
Our board of directors unanimously recommends that you vote
FOR the election of each of the director nominees
named above.
Non-Voting
Designated Preferred Director
While not entitled to vote on the matters being brought for
stockholder action at the annual meeting, the holder of the
Non-Voting Designated Preferred Stock, voting as a separate
class, is entitled to elect one member to the Companys
board of directors, referred to herein as the Preferred
Director. Mr. Bryan E. Bloom currently serves on our
board of directors as the Preferred Director and the holder of
the Non-Voting Designated Preferred Stock has informed us that
it intends to re-elect Mr. Bloom at the annual meeting to
13
serve as its Preferred Director. Mr. Bloom has been deemed
not to be an independent director. Holders of our common stock
are not entitled to vote in the election of the Preferred
Director.
PROPOSAL NO. 2
Background
and Purpose
On December 17, 2007, our board of directors adopted the FX
Real Estate and Entertainment Inc. 2007 Long-Term Incentive
Compensation Plan, subject to stockholder approval.
At the annual meeting, we will be asking stockholders to approve
the 2007 Long-Term Incentive Compensation Plan.
The 2007 Long-Term Incentive Compensation Plan authorizes a
variety of equity based awards, including stock options, stock
appreciation rights, restricted stock, deferred stock, other
equity-related awards and performance awards that may be settled
in cash, stock or other property. The equity based awards
authorized under the 2007 Long-Term Incentive Compensation Plan
are summarized below under Summary of Material Provisions
of the 2007 Long-Term Incentive Compensation Plan.
The purpose of the 2007 Long-Term Incentive Compensation Plan is
to assist us in attracting, motivating, retaining and rewarding
high-quality executives and other employees, officers,
directors, consultants and other persons who provide services to
our company and its related entities. The 2007 Long-Term
Incentive Compensation Plan is intended to enable those persons
to acquire or increase a proprietary interest in us in order to
strengthen the mutuality of interests between them and our
stockholders, and to provide those such persons with performance
incentives to expend their maximum efforts in the creation of
stockholder value.
The 2007 Long-Term Incentive Compensation Plan is not subject to
any provision of the Employee Retirement Income Security Act of
1974, as amended, and is not qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the
Code).
Vote
Required and Recommendation of our Board of Directors
The affirmative vote of the holders of a majority of all shares
casting votes, either in person by proxy, at the annual meeting
is required to approve the 2007 Long-Term Incentive Compensation
Plan.
This approval is required (i) for purposes of compliance
with certain exclusions from the limitations of
Section 162(m) of the Code, (ii) for purposes of
compliance with the requirements of incentive stock options
under Section 422 of the Code and (iii) by the
applicable rules of The NASDAQ Global Market. A properly
executed proxy marked abstain with respect to this
proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Abstentions
and broker non-votes will have the same effect as a vote against
this proposal.
Our board of directors unanimously recommends a vote
FOR this proposal.
Summary
of Material Provisions of the 2007 Long-Term Incentive
Compensation Plan
The following is a summary of certain material provisions of the
2007 Long-Term Incentive Compensation Plan, which we refer to
therein as the 2007 Plan. This summary is qualified
in its entirety by reference to the complete text of the 2007
Plan. You are urged to read the actual text of the 2007 Plan in
its entirety which is set forth as Annex A to this proxy
statement.
Shares
Available for Awards; Annual Per-Person
Limitations
Under the 2007 Plan, 3,000,000 shares of our companys
common stock are reserved and available for delivery under the
2007 Plan. If any shares subject to an award are forfeited,
expire or otherwise terminate
14
without issuance of shares, or are settled for cash or otherwise
do not result in the issuance of shares, then the shares subject
to such forfeiture, expiration, termination, cash settlement or
non-issuance will again become available for awards under the
2007 Plan. The maximum number of shares of our common stock that
may be issued under the 2007 Plan as a result of the exercise of
incentive stock options, as defined under
Section 422 of the Code (ISOs), is 3,000,000.
The 2007 Plan imposes individual limitations on the amount of
certain awards in part to comply with Code Section 162(m).
Under these limitations, during any fiscal year the number of
stock options or stock appreciation rights granted to any one
participant may not exceed 1,000,000 shares of our common
stock and the number of restricted stock, deferred stock,
performance shares and other stock based awards may not exceed
1,000,000 shares of our common stock, subject to adjustment
in certain circumstances. The maximum number of shares of our
common stock that may be granted to any one participant over the
life of the 2007 Plan is 1,000,000. In addition, the maximum
dollar value payable to any one eligible person with respect to
performance awards is $5,000,000 with respect to any performance
period.
The compensation committee of our board of directors administers
the 2007 Plan. The compensation committee is authorized to
adjust the limitations described in the two preceding paragraphs
and is authorized to adjust outstanding awards (including
adjustments to exercise prices of options and other affected
terms of awards) in the event that a dividend or other
distribution (whether in cash, shares of common stock or other
property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange or other similar corporate
transaction or event affects our common stock so that an
adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants. The compensation
committee is also authorized to adjust performance conditions
and other terms of awards in response to these kinds of events,
upon a change in control, or in response to changes in
applicable laws, regulations or accounting principles.
Eligibility
The persons eligible to receive awards under the 2007 Plan are
the officers, directors, employees, consultants and other
persons who provide services to our company or any of its
related entities. An employee on leave of absence may be
considered as still in the employ of our company or a related
entity for purposes of eligibility for participation in the 2007
Plan. In this summary, we refer to an eligible person who
receives an award under the 2007 Plan as a
participant or a recipient.
Administration
The compensation committee administers the 2007 Plan. The 2007
Plan must be administered by members of our board of directors
who are non-employee directors as defined by
Rule 16b-3
of the Securities Exchange Act, outside directors
for purposes of Section 162(m) of the Code, and
independent as defined by The NASDAQ Global Market
(or any other national securities exchange on which any of our
securities may be listed for trading in the future). However, to
the extent that our board of directors elects and is permitted
to administer the 2007 Plan under its terms, only the
independent members of the board may exercise any
power or authority granted to administer the 2007 Plan. Subject
to the terms of the 2007 Plan, the compensation committee is
authorized to select eligible persons to receive awards,
determine the type and number of awards to be granted and the
number of shares of our common stock to which awards will
relate, specify times at which awards will be exercisable or
settleable (including performance conditions that may be
required as a condition thereof), set other terms and conditions
of awards, prescribe forms of award agreements (which need not
be identical for each participant), interpret and specify rules
and regulations relating to the 2007 Plan and make all other
determinations that may be necessary or advisable for the
administration of the 2007 Plan. In exercising any discretion
granted to the compensation committee under the 2007 Plan or
pursuant to any award, the compensation committee shall not be
required to follow past practices, act in a manner consistent
with the treatment of other eligible persons or participants.
15
Types
of Awards
Stock Options and Stock Appreciation Rights.
The
compensation committee is authorized to grant stock options,
including nonqualified stock options and ISOs, which can result
in potentially favorable tax treatment to a participant, and
stock appreciation rights.
Stock appreciation rights may be granted without regard to any
option (Stand-Alone Stock Appreciation Rights) or in
conjunction with all or part of any option granted under the
2007 Plan (Tandem Stock Appreciation Rights). Stock
appreciation rights entitle the participant to receive the
amount by which the fair market value of a share of our common
stock on the date of exercise exceeds the grant price of the
stock appreciation right, as determined by the compensation
committee.
The exercise price per share of an option and the grant price of
a stock appreciation right must not be less than 100% of the
fair market value of a share of our common stock on the date of
grant or, in the case of a Tandem Stock Appreciation Right, less
than the associated option exercise price. In the event a
participant is deemed to be a 10% owner of our company or one of
its subsidiaries, the exercise price of an ISO cannot be less
than 110% of the common stocks fair market value on the
date the ISO is granted. For purposes of the 2007 Plan, the term
fair market value means the fair market value of our
common stock, awards or other property as determined by the
compensation committee or under procedures established by the
compensation committee. Unless otherwise determined by the
compensation committee, the fair market value of a share of our
common stock as of any given date is the closing sale price per
share as reported on the principal stock exchange or market on
which our common stock is traded on the date immediately
preceding the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous
day on which a sale was reported. The maximum term of each
option or stock appreciation right, the times at which each
option or stock appreciation right will be exercisable, and
provisions requiring forfeiture of unexercised options or stock
appreciation rights at or following termination of employment or
service generally are fixed by the compensation committee except
that no option or stock appreciation right may have a term
exceeding 10 years (or 5 years in the case of an ISO
granted to a participant who is deemed to be a 10% owner of our
company or one of its subsidiaries). Options may be exercised by
payment of the exercise price in cash, shares, outstanding
awards or other property, as the compensation committee may
determine from time to time. Methods of exercise and settlement
and other terms of the stock appreciation rights are determined
by the compensation committee. A Tandem Stock Appreciation Right
may be granted at the same time as the related option is granted
or, for options that are not ISOs, at any time thereafter before
exercise or expiration of such option. A Tandem Stock
Appreciation Right may only be exercised when the related option
would be exercisable and the fair market value of the shares
subject to the related option exceeds the options exercise
price. Any option related to a Tandem Stock Appreciation Right
will no longer be exercisable to the extent the Tandem Stock
Appreciation Right has been exercised and any Tandem Stock
Appreciation Right will no longer be exercisable to the extent
the related option has been exercised.
Restricted and Deferred Stock.
The compensation
committee is authorized to grant restricted stock and deferred
stock. Restricted stock is a grant of shares of our common stock
which may not be sold or disposed of, and which will be subject
to any risks of forfeiture and other restrictions as the
committee may impose. A recipient granted restricted stock
generally has all of the rights of a stockholder of our company,
unless otherwise determined by the compensation committee. An
award of deferred stock confers upon the recipient the right to
receive shares of our common stock at the end of a specified
deferral period, subject to any risks of forfeiture and other
restrictions as the compensation committee may impose. Prior to
settlement, an award of deferred stock carries no voting or
dividend rights or other rights associated with share ownership,
although dividend equivalents may be granted, as discussed below.
Dividend Equivalents.
The compensation committee is
authorized to grant dividend equivalents conferring on
recipients the right to receive, currently or on a deferred
basis, cash, shares of our common stock, other awards or other
property equal in value to dividends paid on a specific number
of shares of our common stock or other periodic payments.
Dividend equivalents may be granted alone or in connection with
another award, may be paid currently or on a deferred basis and,
if deferred, may be deemed to have been reinvested in additional
shares of our common stock, awards or otherwise as specified by
the compensation committee.
16
Bonus Stock and Awards in Lieu of Cash
Obligations.
The compensation committee is authorized
to grant shares of our common stock as a bonus free of
restrictions, or to grant shares of common stock or other awards
in lieu of obligations of our company to pay cash under the 2007
Plan or other plans or compensatory arrangements, subject to any
terms as the compensation committee may specify.
Other Stock-Based Awards.
The compensation committee
is authorized to grant awards that are denominated or payable
in, valued by reference to, or otherwise based on or related to
shares of our common stock. The compensation committee
determines the terms and conditions of those awards.
Performance Awards.
The compensation committee is
authorized to grant performance awards to participants on terms
and conditions established by the compensation committee. The
performance criteria to be achieved during any performance
period and the length of the performance period is determined by
the compensation committee upon the grant of the performance
award, provided, that a performance period shall not be shorter
than twelve (12) months nor longer than five
(5) years. Performance awards may be valued by reference to
a designated number of shares of our common stock (in which case
they are referred to as performance shares) or by reference to a
designated amount of property including cash (in which case they
are referred to as performance units). Performance awards may be
settled by delivery of cash, shares or other property, or any
combination of those things, as determined by the compensation
committee. Performance awards granted to persons whom the
compensation committee expects will, for the year in which a
deduction arises, be covered employees (as defined
below) will, if and to the extent intended by the compensation
committee, be subject to provisions that should qualify those
awards as performance-based compensation not subject
to the limitation on tax deductibility by the company under Code
Section 162(m). For purposes of Section 162(m), the
term covered employee means the companys chief
executive officer and each other person whose compensation is
required to be disclosed in the companys filings with the
SEC by reason of the employee being among our four
(4) highest compensated officers for the taxable year
(other than our chief executive officer). If and to the extent
required under Section 162(m) of the Code, any power or
authority relating to a performance award intended to qualify
under Section 162(m) of the Code is to be exercised by the
compensation committee and not our board of directors.
If and to the extent that the compensation committee determines
that these provisions of the 2007 Plan are to be applicable to
any award, one or more of the following business criteria for
our company and its related entities, on a consolidated basis,
and/or
for
any of its related entities, or for business or geographical
units of our company
and/or
any
of its related entities (except with respect to the total
stockholder return and earnings per share criteria), will be
used by the compensation committee in establishing performance
goals for awards under the 2007 Plan: (1) earnings per
share; (2) revenues or margins; (3) cash flow;
(4) operating margin; (5) return on net assets,
investment, capital or equity; (6) economic value added;
(7) direct contribution; (8) net income; pretax
earnings; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; earnings after
interest expense and before extraordinary or special items;
operating income; income before interest income or expense,
unusual items and income taxes, local, state or federal and
excluding budgeted and actual bonuses which might be paid under
any ongoing bonus plans of the company; (9) working
capital; (10) management of fixed costs or variable costs;
(11) identification or consummation of investment
opportunities or completion of specified projects in accordance
with corporate business plans, including strategic mergers,
acquisitions or divestitures; (12) total stockholder
return; (13) debt reduction; (14) market share;
(15) entry into new markets, either geographically or by
business unit; (16) customer retention and satisfaction;
(17) strategic plan development and implementation,
including turnaround plans;
and/or
(18) the fair market value of a share of our common stock.
Any of the above goals may be determined on an absolute or
relative basis (
e.g.
, growth in earnings per share) or as
compared to the performance of a published or special index
deemed applicable by the compensation committee including, but
not limited to, the Standard & Poors 500 Stock
Index or a group of companies that are comparable to our
company. Performance goals must be established not later than
90 days after the beginning of the performance period
applicable to the performance awards or such other date as may
be required for performance-based compensation treatment under
Section 162(m).
After the end of each performance period, the compensation
committee will determine and certify whether the performance
goals have been achieved. The compensation committee will
exclude the impact of an
17
event or occurrence, or otherwise make adjustments to the
performance goals, which the compensation committee determines
should appropriately be excluded or made to avoid unanticipated
results or to otherwise ensure that the results are determined
in a manner consistent with the intention of the compensation
committee at the time it established the goals, including,
without limitation, exclusions or adjustments for
(i) restructurings, discontinued operations, extraordinary
items, and other unusual or non-recurring charges, (ii) an
event either not directly related to the operations of our
company or not within the reasonable control of our
companys management, or (iii) a change in accounting
standards required by generally accepted accounting principles.
The compensation committee may, in its discretion, determine
that the amount payable as a performance award will be increased
(except in the case of a covered employee) or reduced from the
amount of any potential award.
Other Terms of Awards.
Awards may be settled in the
form of cash, shares of our common stock, other awards or other
property, in the discretion of the compensation committee. The
compensation committee may require or permit participants to
defer the settlement of all or part of an award in accordance
with any terms and conditions that the compensation committee
may establish, provided that such deferral will satisfy the
requirements of Section 409A of the Code. The compensation
committee is authorized to place cash, shares of our common
stock or other property in trusts or make other arrangements to
provide for payment of our companys obligations under the
2007 Plan. The compensation committee may condition any payment
relating to an award on the withholding of taxes and may provide
that a portion of any shares of our common stock or other
property to be distributed will be withheld (or previously
acquired shares of our common stock or other property be
surrendered by the participant) to satisfy withholding and other
tax obligations. Awards granted under the 2007 Plan generally
may not be pledged or otherwise encumbered and are not
transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the
participants death, except that the compensation committee
may, in its discretion, permit transfers for estate planning or
other purposes subject to any applicable restrictions under
Rule 16b-3
of the Securities Exchange Act.
If any award constitutes a nonqualified deferred
compensation plan under Section 409A of the Code,
then the award will be subject to additional restrictions on
payment and other requirements if and to the extent required to
comply with Section 409A.
Awards under the 2007 Plan are generally granted without a
requirement that the recipient pay consideration in the form of
cash or property for the grant (as distinguished from the
exercise), except to the extent required by law. The
compensation committee may, however, grant awards in exchange
for other awards under the 2007 Plan, awards under other company
plans, or other rights to payment from our company, and may
grant awards in addition to and in tandem with other awards,
rights or other awards.
Acceleration
of Vesting; Change in Control
The compensation committee may provide in an award agreement, or
otherwise determine, that upon a change in control
(as defined in the 2007 Plan), (i) options and stock
appreciation rights that previously were not vested or
exercisable become immediately exercisable, or (ii) that
any restrictions, deferral of settlement and forfeiture
conditions applicable to restricted stock, deferred stock, or
other stock based awards immediately lapse. In addition, the
compensation committee may provide in an award agreement that
the performance goals relating to any performance award will be
deemed to have been met upon the occurrence of any change
in control.
Adjustment,
Amendment and Termination
Subject to certain limitations, the compensation committee is
authorized to make adjustments and alterations to awards
(including, in some cases, in a manner adverse to a participant)
in connection with a change in control, stock dividends or
distributions, recapitalizations, mergers and other corporate
events, as well as in recognition of other unusual or
nonrecurring events affecting our company or its related
entities and changes in financial reporting, laws, regulations,
taxes, business strategy and other matters. Our board of
directors may amend, alter, suspend, discontinue or terminate
the 2007 Plan or the compensation committees authority to
grant awards without further stockholder approval (and the
compensation committee may alter, amend or terminate any award
including, in any case, in a manner adverse to the rights of a
participant under an outstanding award), except stockholder
approval must be obtained for any amendment or alteration if
such
18
approval is required by law or regulation or under the rules of
The NASDAQ Global Market or any stock exchange or quotation
system on which shares of our common stock are then listed or
quoted, including any change in the exercise price of an option
if such change would constitute a repricing under such rules.
Thus, stockholder approval may not necessarily be required for
every amendment to the 2007 Plan which might increase the cost
of the 2007 Plan or alter the eligibility of persons to receive
awards. Stockholder approval will not be deemed to be required
under laws or regulations, such as those relating to ISOs, that
condition favorable treatment of participants on such approval,
although our board of directors may, in its discretion, seek
stockholder approval in any circumstance in which it deems such
approval advisable. However, no board or committee action may
materially and adversely affect the rights of a participant
holding any previously granted or outstanding award without such
affected participants consent. The 2007 Plan will
terminate at the earliest of (i) such time as no shares
remain available for issuance under the 2007 Plan,
(ii) termination of the 2007 Plan by our board of directors
or (iii) the tenth anniversary of the effective date.
Awards outstanding upon expiration of the 2007 Plan shall remain
in effect until they have been exercised or terminated, or have
expired.
Awards
Outstanding under the 2007 Plan
As of August 4, 2008, we had 1,115,000 stock options
outstanding under the 2007 Plan with a weighted average exercise
price of $5.50. There are currently no other types of awards
outstanding under the 2007 Plan.
On August 4, 2008, the record date, the last reported sales
price per share of our common stock on The NASDAQ Global Market
was $1.70.
19
The table below indicates, as of August 4, 2008, the
aggregate number of stock options outstanding under the 2007
Plan to each of our named executive officers and directors and
the groups indicated.
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|
|
Number of
|
|
|
|
Stock Options
|
Option Grantee
|
|
|
Outstanding
|
Robert F.X. Sillerman
|
|
|
|
Chairman of the Board and Chief Executive Officer*
|
|
|
-0-
|
|
|
|
|
Thomas P. Benson
|
|
|
|
Executive Vice President, Chief Financial Officer and Director*
|
|
|
-0-
|
|
|
|
|
Paul C. Kanavos
|
|
|
|
President and Director*
|
|
|
-0-
|
|
|
|
|
Barry A. Shier
|
|
|
|
Chief Operating Officer and Director*
|
|
|
-0-
|
|
|
|
|
Brett Torino
|
|
|
|
Chairman Las Vegas Division
|
|
|
-0-
|
|
|
|
|
Mitchell J. Nelson
|
|
|
|
Executive Vice President and General Counsel
|
|
|
-0-
|
|
|
|
|
Bryan E. Bloom
|
|
|
|
Director*
|
|
|
-0-
|
|
|
|
|
David M. Ledy
|
|
|
|
Director*
|
|
|
-0-
|
|
|
|
|
Michael J. Meyer
|
|
|
|
Director*
|
|
|
-0-
|
|
|
|
|
Harvey Silverman
|
|
|
|
Director*
|
|
|
-0-
|
|
|
|
|
All current executive officers, as a group (6 persons)
|
|
|
-0-
|
|
|
|
|
All current directors who are not executive officers, as a group
(4 persons)
|
|
|
-0-
|
|
|
|
|
All employees and consultants who have been granted options,
including all current officers who are not executive officers,
as a group(13)
|
|
|
1,115,000
|
|
|
|
|
|
|
|
*
|
|
The named person is a nominee for election as a director at the
annual meeting.
|
Federal
Income Tax Consequences
The following discussion of certain relevant federal income tax
consequences applicable to awards granted under the 2007 Plan is
a brief summary only, and reference is made to the Code and the
regulations and interpretations issued thereunder for a complete
statement of all relevant Federal tax consequences. This summary
is not intended to be exhaustive and does not address state,
local or foreign tax consequences. Moreover, because the tax
consequences to any recipient may depend on his particular
situation, each recipient should consult his tax adviser as to
the Federal, state, local and other tax consequences of the
grant or exercise of an award or the disposition of stock
acquired as a result of an award.
Nonqualified Stock Options.
On exercise of a
nonqualified stock option granted under the 2007 Plan, the
optionee will recognize ordinary income equal to the excess, if
any, of the fair market value on the date of exercise of the
shares of stock acquired on exercise of the option over the
exercise price. If the optionee is an employee of our company or
any of its related entities, that income will be subject to the
withholding of Federal income tax. The optionees tax basis
in those shares will be equal to their fair market value on the
date of exercise of the option, and his holding period for those
shares will begin on that date.
20
If an optionee pays for shares of stock on exercise of an option
by delivering shares of our companys stock, the optionee
will not recognize gain or loss on the shares delivered, even if
their fair market value at the time of exercise differs from the
optionees tax basis in them. The optionee, however,
otherwise will be taxed on the exercise of the option in the
manner described above as if he had paid the exercise price in
cash. If a separate identifiable stock certificate is issued for
that number of shares equal to the number of shares delivered on
exercise of the option, the optionees tax basis in the
shares represented by that certificate will be equal to his tax
basis in the shares delivered, and his holding period for those
shares will include his holding period for the shares delivered.
The optionees tax basis and holding period for the
additional shares received on exercise of the option will be the
same as if the optionee had exercised the option solely in
exchange for cash.
Our company will be entitled to a deduction for Federal income
tax purposes equal to the amount of ordinary income taxable to
the optionee, provided that amount constitutes an ordinary and
necessary business expense for our company and is reasonable in
amount, and either the employee includes that amount in income
or our company timely satisfies its reporting requirements with
respect to that amount.
Incentive Stock Options.
The 2007 Plan provides for
the grant of stock options that qualify as ISOs, as defined in
section 422 of the Code, which we refer to as ISOs. Under
the Code, an optionee generally is not subject to tax upon the
grant or exercise of an ISO. In addition, if the optionee holds
a share received on exercise of an ISO for at least two years
from the date the option was granted and at least one year from
the date the option was exercised, which we refer to as the
required holding period, the difference, if any,
between the amount realized on a sale or other taxable
disposition of that share and the holders tax basis in
that share will be long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on
exercise of an ISO before the end of the required holding
period, which we refer to as a disqualifying
disposition, the optionee generally will recognize
ordinary income in the year of the disqualifying disposition
equal to the excess, if any, of the fair market value of the
share on the date the ISO was exercised over the exercise price.
If, however, the disqualifying disposition is a sale or exchange
on which a loss, if realized, would be recognized for Federal
income tax purposes, and if the sales proceeds are less than the
fair market value of the share on the date of exercise of the
option, the amount of ordinary income recognized by the optionee
will not exceed the gain, if any, realized on the sale. If the
amount realized on a disqualifying disposition exceeds the fair
market value of the share on the date of exercise of the option,
that excess will be short-term or long-term capital gain,
depending on whether the holding period for the share exceeds
one year.
An optionee who exercises an ISO by delivering shares of stock
acquired previously pursuant to the exercise of an ISO before
the expiration of the required holding period for those shares
is treated as making a disqualifying disposition of those
shares. This rule prevents pyramiding on the
exercise of an ISO (that is, exercising an ISO for one share and
using that share, and others so acquired, to exercise successive
ISOs) without the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which
the fair market value of a share of stock acquired on exercise
of an ISO exceeds the exercise price of that option generally
will be an adjustment included in the optionees
alternative minimum taxable income for the year in which the
option is exercised. If, however, there is a disqualifying
disposition of the share in the year in which the option is
exercised, there will be no adjustment with respect to that
share. If there is a disqualifying disposition in a later year,
no income with respect to the disqualifying disposition is
included in the optionees alternative minimum taxable
income for that year. In computing alternative minimum taxable
income, the tax basis of a share acquired on exercise of an ISO
is increased by the amount of the adjustment taken into account
with respect to that share for alternative minimum tax purposes
in the year the option is exercised.
Our company is not allowed an income tax deduction with respect
to the grant or exercise of an ISO or the disposition of a share
acquired on exercise of an ISO after the required holding
period. However, if there is a disqualifying disposition of a
share, our company is allowed a deduction in an amount equal to
the ordinary income includible in income by the optionee,
provided that amount constitutes an ordinary and necessary
business expense for our company and is reasonable in amount,
and either the employee includes that amount in income or our
company timely satisfies its reporting requirements with respect
to that amount.
21
Stock Awards.
Generally, the recipient of a stock
award will recognize ordinary compensation income at the time
the stock is received equal to the excess, if any, of the fair
market value of the stock received over any amount paid by the
recipient in exchange for the stock. If, however, the stock is
not vested when it is received under the 2007 Plan (for example,
if the employee is required to work for a period of time in
order to have the right to sell the stock), the recipient
generally will not recognize income until the stock becomes
vested, at which time the recipient will recognize ordinary
compensation income equal to the excess, if any, of the fair
market value of the stock on the date it becomes vested over any
amount paid by the recipient in exchange for the stock. A
recipient may, however, file an election with the Internal
Revenue Service, within 30 days of his or her receipt of
the stock award, to recognize ordinary compensation income, as
of the date the recipient receives the award, equal to the
excess, if any, of the fair market value of the stock on the
date the award is granted over any amount paid by the recipient
in exchange for the stock.
The recipients basis for the determination of gain or loss
upon the subsequent disposition of shares acquired as stock
awards will be the amount paid for such shares plus any ordinary
income recognized either when the stock is received or when the
stock becomes vested. Upon the disposition of any stock received
as a stock award under the 2007 Plan, the difference between the
sales price and the recipients basis in the shares will be
treated as a capital gain or loss and generally will be
characterized as long-term capital gain or loss if the shares
have been held for more than one year from the date as of which
he or she would be required to recognize any compensation income.
Stock Appreciation Rights.
Our company may grant
Stand-Alone Stock Appreciation Rights or Tandem Stock
Appreciation Rights, under the 2007 Plan. Generally, the
recipient of a Stand-Alone Stock Appreciation Right will not
recognize any taxable income at the time the Stand-Alone Stock
Appreciation Right is granted.
With respect to Stand-Alone Stock Appreciation Rights, if the
recipient receives the appreciation inherent in the stock
appreciation rights in cash, the cash will be taxable as
ordinary compensation income to the recipient at the time that
the cash is received. If the recipient receives the appreciation
inherent in the stock appreciation rights in shares of stock,
the recipient will recognize ordinary compensation income equal
to the excess of the fair market value of the stock on the day
it is received over any amounts paid by the recipient for the
stock.
With respect to Tandem Stock Appreciation Rights, if the
recipient elects to surrender the underlying option in exchange
for cash or shares of stock equal to the appreciation inherent
in the underlying option, the tax consequences to the recipient
will be the same as discussed above relating to the Stand-Alone
Stock Appreciation Rights. If the recipient elects to exercise
the underlying option, the holder will be taxed at the time of
exercise as if he or she had exercised a nonqualified stock
option (discussed above), i.e., the recipient will recognize
ordinary income for Federal tax purposes measured by the excess
of the then fair market value of the shares of stock over the
exercise price.
In general, there will be no Federal income tax deduction
allowed to our company upon the grant or termination of
Stand-Alone Stock Appreciation Rights or Tandem Stock
Appreciation Rights. Upon the exercise of either a Stand-Alone
Stock Appreciation Right or a Tandem Stock Appreciation Right,
however, our company will be entitled to a deduction for Federal
income tax purposes equal to the amount of ordinary income that
the employee is required to recognize as a result of the
exercise, provided that the deduction is not otherwise
disallowed under the Code.
Dividend Equivalents.
Generally, the recipient of a
dividend equivalent award will recognize ordinary compensation
income at the time the dividend equivalent award is received
equal to the fair market value of the award received. Our
company generally will be entitled to a deduction for Federal
income tax purposes equal to the amount of ordinary income that
the employee is required to recognize as a result of the
dividend equivalent award, provided that the deduction is not
otherwise disallowed under the Code.
Section 409A of the Code.
The 2007 Plan is also
intended to comply with Section 409A of the Code to the
extent such section would apply to any award under the 2007
Plan. Section 409A of the Code governs the taxation of
deferred compensation. Any participant that is granted an award
that is deemed to be deferred compensation, such as a grant of
deferred stock, and does not comply with section 409A could
be subject to immediate taxation on the award (even if the award
is not exercisable) and an additional 20% tax on the award.
22
Section 162 Limitations.
The Omnibus Budget
Reconciliation Act of 1993 added Section 162(m) to the
Code, which generally disallows a public companys tax
deduction for compensation to covered employees in excess of
$1 million in any tax year, beginning on or after
January 1, 1994. Compensation that qualifies as
performance-based compensation is excluded from the
$1 million deductibility cap, and therefore remains fully
deductible by the company that pays it. Our company intends that
future awards granted to employees under the 2007 Plan whom the
compensation committee expects to be covered employees at the
time a deduction arises in connection with such options, may, if
and to the extent so intended by the committee, be granted in a
manner that will qualify as such performance-based
compensation, so that such awards would not be subject to
the Section 162(m) deductibility cap of $1 million.
Future changes in Section 162(m) or the regulations
thereunder may adversely affect our companys ability to
ensure that awards under the 2007 Plan will qualify as
performance-based compensation that are fully
deductible by our company under Section 162(m).
PROPOSAL NO. 3
APPROVAL
OF 2007 EXECUTIVE EQUITY INCENTIVE PLAN
Background
and Purpose
On December 17, 2007, our board of directors adopted the FX
Real Estate and Entertainment Inc. 2007 Executive Equity
Incentive Plan, subject to stockholder approval.
At the annual meeting, we will be asking stockholders to approve
the 2007 Executive Equity Incentive Plan.
The 2007 Executive Equity Incentive Plan authorizes the award of
stock options, including incentive stock options, as defined as
under Section 422 of the Code (ISOs), and
nonqualified stock options.
The purpose of the 2007 Executive Equity Incentive Plan is to
assist us in attracting, motivating, retaining and rewarding
high-quality executives and other employees, officers,
directors, consultants and other persons who provide services to
our company and its related entities. The 2007 Executive Equity
Incentive Plan is intended to enable those persons to acquire or
increase a proprietary interest in us in order to strengthen the
mutuality of interests between them and our stockholders, and to
provide those such persons with performance incentives to expend
their maximum efforts in the creation of stockholder value.
The 2007 Executive Equity Incentive Plan is not subject to any
provision of the Employee Retirement Income Security Act of
1974, as amended, and is not qualified under Section 401(a)
of the Code.
Vote
Required and Recommendation of our Board of Directors
The affirmative vote of the holders of a majority of all shares
casting votes, either in person by proxy, at the annual meeting
is required to approve the 2007 Executive Equity Incentive Plan.
This approval is required (i) for purposes of compliance
with certain exclusions from the limitations of
Section 162(m) of the Code, (ii) for purposes of
compliance with the requirements of incentive stock options
under Section 422 of the Code and (iii) by the
applicable rules of The NASDAQ Global Market. A properly
executed proxy marked abstain with respect to this
proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Abstentions
and broker non-votes will have the same effect as a vote against
this proposal.
Our board of directors unanimously recommends a vote
FOR this proposal.
Summary
of Material Provisions of the 2007 Executive Equity Incentive
Plan
The following is a summary of certain material provisions of the
2007 Executive Equity Incentive Plan, which we refer to therein
as the Equity Incentive Plan. This summary is
qualified in its entirety by reference to the complete text of
the Equity Incentive Plan. You are urged to read the actual text
of the Equity Incentive Plan in its entirety which is set forth
as Annex B to this proxy statement.
23
Shares
Available for Awards; Annual Per-Person
Limitations
Under the Equity Incentive Plan, 12,500,000 shares of our
companys common stock are reserved and available for
delivery under the Equity Incentive Plan. If any shares subject
to a stock option award are forfeited, expire or otherwise
terminate without issuance of shares, or are settled for cash or
otherwise do not result in the issuance of shares, then the
shares subject to such forfeiture, expiration, termination, cash
settlement or non-issuance will again become available for stock
option awards under Equity Incentive Plan. The maximum number of
shares of our common stock that may be subject to stock options
under the Equity Incentive Plan is 12,500,000.
The Equity Incentive Plan imposes individual limitations on the
amount of stock options in part to comply with Code
Section 162(m). Under these limitations, during any fiscal
year the number of stock options granted to any one participant
may not exceed 12,500,000 shares of our common stock. The
maximum number of shares of our common stock that may be granted
to any one participant over the life of the Equity Incentive
Plan is 12,500,000.
The compensation committee of our board of directors administers
the Equity Incentive Plan. The compensation committee is
authorized to adjust the limitations described in the two
preceding paragraphs and is authorized to adjust outstanding
stock options (including adjustments to exercise prices and
other affected terms of stock options) in the event that a
dividend or other distribution (whether in cash, shares of
common stock or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange or other similar
corporate transaction or event affects our common stock so that
an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants. The compensation
committee is also authorized to adjust performance conditions
and other terms of stock options in response to these kinds of
events or in response to changes in applicable laws, regulations
or accounting principles.
Eligibility
The persons eligible to receive awards under the Equity
Incentive Plan are the officers, directors, employees,
consultants and other persons who provide services to our
company or any of its related entities. An employee on leave of
absence may be considered as still in the employ of our company
or a related entity for purposes of eligibility for
participation in the Equity Incentive Plan. In this summary, we
refer to an eligible person who receives an award under the
Equity Incentive Plan as a participant or a
recipient.
Administration
The compensation committee administers the Equity Incentive
Plan. The Equity Incentive Plan must be administered by members
of our board of directors who are non-employee
directors as defined by
Rule 16b-3
of the Securities Exchange Act, outside directors
for purposes of Section 162(m) of the Code, and
independent as defined by The NASDAQ Global Market
(or any other national securities exchange on which any of our
securities may be listed for trading in the future). However, to
the extent that our board of directors elects and is permitted
to administer the Equity Incentive Plan under its terms, only
the independent members of the board may exercise
any power or authority granted to administer the Equity
Incentive Plan. Subject to the terms of the Equity Incentive
Plan, the compensation committee is authorized to select
eligible persons to receive stock option awards, determine the
type and number of stock options to be granted and the number of
shares of our common stock to which stock options will relate,
specify times at which stock options will be exercisable or
settleable (including performance conditions that may be
required as a condition thereof), set other terms and conditions
of stock options, prescribe forms of stock option agreements
(which need not be identical for each participant), interpret
and specify rules and regulations relating to the Equity
Incentive Plan and make all other determinations that may be
necessary or advisable for the administration of the Equity
Incentive Plan. In exercising any discretion granted to the
compensation committee under the Equity Incentive Plan or
pursuant to any option award, the compensation committee shall
not be required to follow past practices, act in a manner
consistent with the treatment of other eligible persons or
participants.
24
Types
of Stock Options
The compensation committee is authorized to grant stock options,
including ISOs, which can result in potentially favorable tax
treatment to the recipient, and nonqualified stock options.
The exercise price per share of a stock option must not be less
than 100% of the fair market value of a share of our common
stock on the date of grant. In the event a participant is deemed
to be a 10% owner of our company or one of its subsidiaries, the
exercise price of an ISO cannot be less than 110% of the common
stocks fair market value on the date the ISO is granted.
For purposes of the Equity Incentive Plan, the term fair
market value means the fair market value of our common
stock, stock options or other property as determined by the
compensation committee or under procedures established by the
compensation committee. Unless otherwise determined by the
compensation committee, the fair market value of a share of our
common stock as of any given date is the closing sale price per
share as reported on the principal stock exchange or market on
which our common stock is traded on the date immediately
preceding the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous
day on which a sale was reported. The maximum term of each stock
option, the times at which each stock option will be
exercisable, and provisions requiring forfeiture of unexercised
stock options at or following termination of employment or
service generally are fixed by the compensation committee except
that no stock option may have a term exceeding 10 years, or
5 years in the case of an ISO granted to a participant who
is deemed to be a 10% owner of our company or one of its
subsidiaries. Options may be exercised by payment of the
exercise price in cash, shares, outstanding awards or other
property, as the compensation committee may determine from time
to time.
Acceleration
of Vesting; Change in Control
The compensation committee may provide in an award agreement, or
otherwise determine, that upon a change in control
(as defined in the Equity Incentive Plan), stock options that
previously were not vested or exercisable become immediately
exercisable. In addition, the compensation committee may provide
in an option agreement that the performance goals relating to
any performance award will be deemed to have been met upon the
occurrence of any change in control.
Adjustment,
Amendment and Termination
Subject to certain limitations, the compensation committee is
authorized to make adjustments and alterations to option awards
(including, in some cases, in a manner adverse to a participant)
in connection with a change in control, stock dividends or
distributions, recapitalizations, mergers and other corporate
events, as well as in recognition of other unusual or
nonrecurring events affecting our company or its related
entities and changes in financial reporting, laws, regulations,
taxes, business strategy and other matters. Our board of
directors may amend, alter, suspend, discontinue or terminate
the Equity Incentive Plan or the compensation committees
authority to grant awards without further stockholder approval
(and the compensation committee may alter, amend or terminate
any award including, in any case, in a manner adverse to the
rights of a participant under an outstanding option award),
except stockholder approval must be obtained for any amendment
or alteration if such approval is required by law or regulation
or under the rules of The NASDAQ Global Market or any stock
exchange or quotation system on which shares of our common stock
are then listed or quoted, including any change in the exercise
price of an option if such change would constitute a repricing
under such rules. Thus, stockholder approval may not necessarily
be required for every amendment to the Equity Incentive Plan
which might increase the cost of the Equity Incentive Plan or
alter the eligibility of persons to receive option awards.
Stockholder approval will not be deemed to be required under
laws or regulations, such as those relating to ISOs, that
condition favorable treatment of participants on such approval,
although our board of directors may, in its discretion, seek
stockholder approval in any circumstance in which it deems such
approval advisable. However, no board action may materially and
adversely affect the rights of a participant holding any
previously granted or outstanding stock option without such
affected participants consent. The Equity Incentive Plan
will terminate at the earliest of (i) such time as no
shares remain available for issuance under the Equity Incentive
Plan, (ii) termination of the Equity Incentive Plan by our
board of directors or (iii) the tenth anniversary of the
effective date. Stock options outstanding upon expiration of the
Equity Incentive Plan shall remain in effect until they have
been exercised or terminated, or have expired.
25
Awards
Outstanding under the Equity Incentive Plan
As of August 4, 2008, we had 10,600,000 stock options
outstanding under the Equity Incentive Plan with a weighted
average exercise price of $17.01.
On August 4, 2008, the record date, the last reported sales
price per share of our common stock on The NASDAQ Global Market
was $1.70.
The table below indicates, as of August 4, 2008, the
aggregate number of stock options outstanding under the Equity
Incentive Plan to each of our named executive officers and
directors and the groups indicated.
|
|
|
|
|
|
|
Number of
|
|
|
|
Stock Options
|
Option Grantee
|
|
|
Outstanding
|
Robert F.X. Sillerman
Chairman of the Board and Chief Executive Officer*
|
|
|
6,500,000
|
|
|
|
|
Thomas P. Benson
Executive Vice President, Chief Financial Officer and Director*
|
|
|
600,000
|
|
|
|
|
Paul C. Kanavos
President and Director*
|
|
|
1,000,000
|
|
|
|
|
Barry A. Shier
Chief Operating Officer and Director*
|
|
|
1,500,000
|
|
|
|
|
Brett Torino
Chairman Las Vegas Division
|
|
|
400,000
|
|
|
|
|
Mitchell J. Nelson Executive Vice President and General Counsel
|
|
|
600,000
|
|
|
|
|
Bryan E. Bloom
Director*
|
|
|
-0-
|
|
|
|
|
David M. Ledy
Director*
|
|
|
-0-
|
|
|
|
|
Michael J. Meyer
Director*
|
|
|
-0-
|
|
|
|
|
Harvey Silverman
Director*
|
|
|
-0-
|
|
|
|
|
All current executive officers, as a group (6 persons)
|
|
|
10,600,000
|
|
|
|
|
All current directors who are not executive officers, as a group
(4 persons)
|
|
|
-0-
|
|
|
|
|
All employees who have been granted options, including all
current officers who are not executive officers, as a group (0)
|
|
|
-0-
|
|
|
|
|
*The named person is a nominee for election as a director at the
annual meeting.
Federal
Income Tax Consequences
The following discussion of certain relevant federal income tax
consequences applicable to stock options granted under the
Equity Incentive Plan is a brief summary only, and reference is
made to the Code and the regulations and interpretations issued
thereunder for a complete statement of all relevant Federal tax
consequences. This summary is not intended to be exhaustive and
does not address state, local or foreign tax consequences.
Moreover, because the tax consequences to any recipient may
depend on his particular situation, each recipient should
consult his tax adviser as to the Federal, state, local and
other tax consequences of the grant or exercise of an award or
the disposition of stock acquired as a result of an award.
Nonqualified Stock Options.
On exercise of a nonqualified
stock option granted under the Equity Incentive Plan, the
optionee will recognize ordinary income equal to the excess, if
any, of the fair market value on the date of exercise of the
shares of stock acquired on exercise of the option over the
exercise price.
26
If the optionee is an employee of our company or any of its
related entities, that income will be subject to the withholding
of Federal income tax. The optionees tax basis in those
shares will be equal to their fair market value on the date of
exercise of the option, and his holding period for those shares
will begin on that date.
If an optionee pays for shares of stock on exercise of an option
by delivering shares of our companys stock, the optionee
will not recognize gain or loss on the shares delivered, even if
their fair market value at the time of exercise differs from the
optionees tax basis in them. The optionee, however,
otherwise will be taxed on the exercise of the option in the
manner described above as if he had paid the exercise price in
cash. If a separate identifiable stock certificate is issued for
that number of shares equal to the number of shares delivered on
exercise of the option, the optionees tax basis in the
shares represented by that certificate will be equal to his tax
basis in the shares delivered, and his holding period for those
shares will include his holding period for the shares delivered.
The optionees tax basis and holding period for the
additional shares received on exercise of the option will be the
same as if the optionee had exercised the option solely in
exchange for cash.
Our company will be entitled to a deduction for Federal income
tax purposes equal to the amount of ordinary income taxable to
the optionee, provided that amount constitutes an ordinary and
necessary business expense for our company and is reasonable in
amount, and either the employee includes that amount in income
or our company timely satisfies its reporting requirements with
respect to that amount.
Incentive Stock Options.
The Equity Incentive Plan
provides for the grant of stock options that qualify as ISOs, as
defined in section 422 of the Code, which we refer to as
ISOs. Under the Code, an optionee generally is not subject to
tax upon the grant or exercise of an ISO. In addition, if the
optionee holds a share received on exercise of an ISO for at
least two years from the date the option was granted and at
least one year from the date the option was exercised, which we
refer to as the required holding period, the
difference, if any, between the amount realized on a sale or
other taxable disposition of that share and the holders
tax basis in that share will be long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on
exercise of an ISO before the end of the required holding
period, which we refer to as a disqualifying
disposition, the optionee generally will recognize
ordinary income in the year of the disqualifying disposition
equal to the excess, if any, of the fair market value of the
share on the date the ISO was exercised over the exercise price.
If, however, the disqualifying disposition is a sale or exchange
on which a loss, if realized, would be recognized for Federal
income tax purposes, and if the sales proceeds are less than the
fair market value of the share on the date of exercise of the
option, the amount of ordinary income recognized by the optionee
will not exceed the gain, if any, realized on the sale. If the
amount realized on a disqualifying disposition exceeds the fair
market value of the share on the date of exercise of the option,
that excess will be short-term or long-term capital gain,
depending on whether the holding period for the share exceeds
one year.
An optionee who exercises an ISO by delivering shares of stock
acquired previously pursuant to the exercise of an ISO before
the expiration of the required holding period for those shares
is treated as making a disqualifying disposition of those
shares. This rule prevents pyramiding on the
exercise of an ISO (that is, exercising an ISO for one share and
using that share, and others so acquired, to exercise successive
ISOs) without the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which
the fair market value of a share of stock acquired on exercise
of an ISO exceeds the exercise price of that option generally
will be an adjustment included in the optionees
alternative minimum taxable income for the year in which the
option is exercised. If, however, there is a disqualifying
disposition of the share in the year in which the option is
exercised, there will be no adjustment with respect to that
share. If there is a disqualifying disposition in a later year,
no income with respect to the disqualifying disposition is
included in the optionees alternative minimum taxable
income for that year. In computing alternative minimum taxable
income, the tax basis of a share acquired on exercise of an ISO
is increased by the amount of the adjustment taken into account
with respect to that share for alternative minimum tax purposes
in the year the option is exercised.
Our company is not allowed an income tax deduction with respect
to the grant or exercise of an ISO or the disposition of a share
acquired on exercise of an ISO after the required holding
period. However, if
27
there is a disqualifying disposition of a share, our company is
allowed a deduction in an amount equal to the ordinary income
includible in income by the optionee, provided that amount
constitutes an ordinary and necessary business expense for our
company and is reasonable in amount, and either the employee
includes that amount in income or our company timely satisfies
its reporting requirements with respect to that amount.
Section 409A of the Code.
The Equity Incentive
Plan is also intended to comply with Section 409A of the
Code to the extent such section would apply to any grant under
the Equity Incentive Plan. Section 409A of the Code governs
the taxation of deferred compensation. Any participant that is
awarded a stock option that does not comply with
section 409A could be subject to immediate taxation on the
award (even if the award is not exercisable) and an additional
20% tax on the award.
Section 162 Limitations.
The Omnibus Budget
Reconciliation Act of 1993 added Section 162(m) to the
Code, which generally disallows a public companys tax
deduction for compensation to covered employees in excess of
$1 million in any tax year, beginning on or after
January 1, 1994. Compensation that qualifies as
performance-based compensation is excluded from the
$1 million deductibility cap, and therefore remains fully
deductible by the company that pays it. Our company intends that
future stock options granted to employees under the Equity
Incentive Plan whom the compensation committee expects to be
covered employees at the time a deduction arises in connection
with such options, may, if and to the extent so intended by the
committee, be granted in a manner that will qualify as such
performance-based compensation, so that such options
would not be subject to the Section 162(m) deductibility
cap of $1 million. Future changes in Section 162(m) or
the regulations thereunder may adversely affect our
companys ability to ensure that awards under the Equity
Incentive Plan will qualify as performance-based
compensation that are fully deductible by our company
under Section 162(m).
PROPOSAL NO. 4
RATIFICATION
OF THE APPOINTMENT OF
THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP audited our consolidated financial
statements for the year ended December 31, 2007. We had no
disagreements with Ernst & Young LLP on accounting and
financial disclosures. The audit committee has appointed
Ernst & Young LLP to serve as our independent
registered public accounting firm for the year ending
December 31, 2008,
While we are not required to submit the appointment of our
independent registered public accounting firm to a vote of
stockholders for ratification, our board of directors is doing
so, based upon the recommendation of the audit committee, as a
matter of good corporate practice. If stockholders fail to
ratify the appointment, the audit committee will reconsider
whether to retain Ernst & Young LLP, and may retain
that firm or another without re-submitting the matter to our
stockholders. Even if our stockholders ratify the appointment,
the audit committee may, in its discretion, direct the
appointment of a different independent registered public
accounting firm at any time during the year if it determines
that such a change would be advisable and in the best interests
of us and our stockholders.
Representatives of Ernst & Young LLP are expected to
be present at the annual meeting and will have the opportunity
to make statements if they desire to do so and will be available
to respond to appropriate questions.
Vote
Required and Recommendation of our Board of Directors
The affirmative vote of the holders of a majority of all shares
casting votes, either in person or by proxy, at the annual
meeting is required to ratify the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for the year ending December 31, 2008.
Our board of directors unanimously recommends a vote
FOR this proposal.
28
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee currently consists of three directors, each
of whom, in the judgment of the Companys board of
directors, is independent within the meaning of
regulations of the SEC and the requirements of The NASDAQ Global
Market. The Audit Committee is currently comprised of
Messrs. Ledy, Meyer and Silverman. The Audit Committee acts
pursuant to a written charter that has been adopted by the
Companys board of directors. A copy of the charter is
attached to this proxy statement as Annex C to this proxy
statement and can be found on the Companys website at
www.fxree.com
.
The following is the report of the Audit Committee (with the
exception of Mr. Meyer who joined the Audit Committee
subsequent to December 31, 2007) with respect to the
Companys audited financial statements for its fiscal year
ended December 31, 2007. The information contained in this
report shall not be deemed to be soliciting material or to be
filed with the SEC, nor shall such information be incorporated
by reference into any future filing under the Exchange Act,
except to the extent that the Company specifically incorporates
it by reference in such filing.
In connection with the preparation and filing of the
Companys Annual Report on
Form 10-K
for its fiscal year ended December 31, 2007:
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(1)
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The Audit Committee reviewed and discussed the audited financial
statements with management;
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(2)
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The Audit Committee discussed with a member of Ernst &
Young LLP, the Companys independent registered public
accounting firm, the material required to be discussed by
Statement on Auditing Standards No. 61, Communication with
Audit Committees, (as may be modified or supplemented); and
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(3)
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The Audit Committee received the written disclosures and the
letter from Ernst & Young LLP required by the
Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as may be modified or
supplemented, and discussed with the independent auditor any
relationships that may impact its objectivity and independence
and satisfied itself as to the independence of the independent
registered public accounting firm.
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Based on the review and discussion referred to above, the Audit
Committee recommended to the Companys board of directors
(and the board approved) that the Companys audited
financial statements be included in the Companys Annual
Report on
Form 10-K,
as amended, for the fiscal year ended December 31, 2007,
filed with the SEC.
Members
of the Audit Committee
David M.
Ledy, Chairman
Harvey Silverman
SERVICES
PROVIDED BY THE INDEPENDENT PUBLIC ACCOUNTANT AND FEES
PAID
The following table sets forth the professional fees rendered by
Ernst & Young LLP for the audit of the Company and its
subsidiaries and its predecessors annual financial
statements for the years ended December 31, 2007 and
December 31, 2006 and other services rendered by
Ernst & Young LLP during those periods:
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2007
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2006
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Audit
Fees
(1)
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$
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2,454,300
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$
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321,400
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Audit-Related Fees
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Tax
Fees
(2)
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286,900
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9,200
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All Other Fees
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Total
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$
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2,741,200
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$
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330,600
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(1)
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Audit fees for 2007 include $1,703,300 associated with
accounting consultations, procedures necessary to perform audits
of the historical financial statements of the Metroflag
entities, as the Companys predecessor,
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29
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assistance with and review of the Companys registration
statement on
Form S-1,
as amended, and relating filings with the SEC, in connection
with the CKX Distribution.
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(2)
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Tax fees related to tax compliance, advice and planning of the
Company and the Metroflag entities, as the Companys
predecessors.
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Audit
Committee Pre-Approval of Services Provided by the Independent
Registered Public Accounting Firm
The Audit Committee of the board of directors maintains a
pre-approval policy with respect to material audit and non-audit
services to be performed by the Companys independent
registered public accounting firm in order to assure that the
provision of such services does not impair the accountants
independence. Before engaging the independent registered public
accounting firm to render a service, the engagement must be
either specifically approved by the Audit Committee, or entered
into pursuant to the pre-approval policy. Pre-approval authority
may be delegated to one or more members of the Audit Committee.
EXECUTIVE
COMPENSATION AND RELATED MATTERS
Executive
Compensation
During the year ended December 31, 2007, we did not pay any
compensation to our executive officers, Messrs. Kanavos,
Shier, Nelson and Torino, other than the grant of stock options.
On December 31, 2007, in accordance with the terms of their
employment agreements and under the terms of our 2007 Executive
Equity Incentive Plan, stock options were granted to
Messrs. Kanavos, Shier, Nelson and Torino to purchase up to
750,000, 1,500,000, 400,000 and 400,000 shares of our
common stock, respectively. The stock options granted to
Messrs. Kanavos, Nelson and Torino vest ratably over a five
year period from the date of grant and have an exercise price of
$20.00 per share. The stock options granted to Mr. Shier
vest ratably over a two year period from the date of grant, with
all of these options becoming exercisable at the end of such
two-year period, and have an exercise price of $10.00 per share.
For purposes of the SECs executive compensation rules,
none of these executive officers are deemed to have received any
reportable cash compensation in 2007 from having been granted
these stock options because we did not record any compensation
expense for them in our audited consolidated financial
statements for the year ended December 31, 2007. We did not
record any such compensation expense because these options were
granted at year end and corresponding expense was not material
to our statement of operations included in our consolidated
financial statements.
Compensation
Discussion and Analysis
We are newly formed and have only recently begun making payments
to our executive officers pursuant to their employment
agreements, as more fully described below under
Components of Compensation for Named Executive
OfficersEmployment Contracts.
Consequently, the
consideration of our compensation programs to date has been
limited.
We expect to more fully develop our compensation plans going
forward by using a combination of data regarding historical pay,
publicly available compensation data for public companies that
are engaged in our industry, in related industries, or that
possess size or other characteristics which are similar to ours,
and data which may be obtained by a compensation consultant for
us on public and private companies. We also expect to consider
other factors, including but not limited to:
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the individuals background, training, education and
experience;
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the individuals role with us and the compensation paid to
individuals in similar roles in the companies we consider to
have characteristics similar to ours;
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the market demand for specific expertise possessed by the
individual;
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the goals and expectations for the individuals position
and his or her success in achieving these goals; and
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a comparison of the individuals pay to that of other
individuals within the company with similar title, role,
experience and capabilities.
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30
Compensation
Committee
We have a standing Compensation Committee comprised of
Messrs. Ledy, Meyer and Silverman. Mr. Ledy is the
Chairman of the Compensation Committee. The Compensation
Committee represents our Company in reviewing and approving the
executive employment agreements with our Chief Executive
Officer, President, Chief Operating Officer, Chief Financial
Officer, Chairman-Las Vegas Division and General Counsel. The
Compensation Committee also reviews managements
recommendations with respect to executive compensation and
employee benefits and is authorized to act on behalf of the
board of directors with respect thereto. The Compensation
Committee also administers the Companys stock option and
incentive plans, including our 2007 Long-Term Incentive
Compensation Plan and our 2007 Executive Equity Incentive Plan.
All members of the Compensation Committee are independent within
the meaning of the rules and regulations of the SEC, the
requirements of the NASDAQ Global Market and our Corporate
Governance Guidelines. The Compensation Committees charter
can be found on the Companys website at
www.fxree.com
.
Overview
of Compensation Program
Because we are a recently formed company, we do not have a
definitive compensation program in place. We expect that a key
element of our philosophy on senior executive compensation will
be to ensure that all elements of our compensation program work
together to attract, motivate and retain the executive,
managerial and professional talent needed to achieve our
strategy, goals and objectives. Our company and the compensation
committee are committed to the principles inherent in paying for
performance and we expect that we will structure the
compensation program to deliver rewards for exemplary
performance and to withhold rewards and impose other
consequences in the absence of such performance.
Components
of Compensation for Named Executive Officers
The key elements of annual executive compensation are base
salary, other than with respect to Mr. Sillerman, annual
performance incentive awards and long-term incentive awards. In
considering appropriate levels of annual and long-term incentive
compensation, we take into account the extent to which existing
incentives, including each executives existing stock
ownership in us and the existence or lack of any vesting
provisions or restrictions on resale with respect thereto,
provide a sufficient degree of economic incentive to continue
our success.
Base
Salary
The compensation committee will annually review the base
salaries of the chief executive officer and other named
executive officers of our company. As described further below,
Mr. Sillerman will not receive any base salary under his
employment agreement. The agreement by Mr. Sillerman to
request no salary is based on his, and the companys,
belief that, based on his involvement in the formation of the
company and his interest in maximizing stockholder value, his
compensation should be tied to generating stockholder returns
through growth in value of our common stock. The salaries of the
named executive officers, other than Mr. Sillerman, were
set to reflect the nature and responsibility of each of their
respective positions and to retain a management group with a
proven track record. We believe that entering into employment
agreements with our most senior executives helps ensure that our
core group of managers will be available to us and our
stockholders on a long-term basis. The employment agreements of
Messrs. Kanavos, Torino, Benson, Nelson and Shier provide
for a base salary that escalates annually by an amount not less
than the greater of five percent or the rate of inflation. The
base salary for each named executive officer may be raised in
excess of this amount upon the recommendation and approval of
the Compensation Committee. None of the named senior executives
are guaranteed a bonus payment under the terms of his employment
agreement. For a detailed description of the employment
agreements see
Employment
Contracts
below.
Annual
Incentives
While we believe that annual incentive compensation motivates
executives to achieve exemplary results, no formal annual
incentive compensation plan for our named executive officers has
been adopted to
31
date. In large part, this decision reflects the view, jointly
held by management and the members of the compensation
committee, that during the formative phase in our development,
we should approach compensation cautiously.
Long-Term
Incentive Compensation Plan
Our 2007 Long-Term Incentive Compensation Plan was adopted by
our board of directors in December 2007 and is being presented
to our stockholders for approval at our 2008 annual meeting of
stockholders. For a more detailed description of our 2007
Long-Term Incentive Compensation Plan, please see
Proposal No. 2: Approval of 2007 Long-Term
Incentive Compensation Plan
above.
Executive
Equity Incentive Plan
Our 2007 Executive Equity Incentive Plan was adopted by our
board of directors in December 2007 and is being presented to
our stockholders for approval at our 2008 annual meeting of
stockholders. For a more detailed description of our 2007
Executive Equity Incentive Plan, please see
Proposal No. 3: Approval of 2007 Executive
Equity Incentive Plan
above.
Employment
Contracts
We have entered into employment agreements with
Messrs. Sillerman, Kanavos, Shier, Benson, Torino and
Nelson. Our compensation committee retained an independent
compensation consultant to provide independent review and
analysis of all senior executive compensation packages and plans
prior to approving the proposed employment agreements. We
entered into these agreements in recognition of the need to
provide certainty to both us and the individuals with respect to
their continued and active participation in our growth. The
employment agreement for each of Messrs. Sillerman,
Kanavos, Shier, Benson, Torino and Nelson is for a term of five
years. The provisions governing the commencement of the
employment terms for Messrs. Sillerman and Benson are
described below. The employment agreements include a
non-competition agreement between the executive officer and us
which will be operative during the term. Upon a change in
control, the executive officer will be able to terminate
his employment and, upon doing so, will no longer be subject to
the non-competition provisions.
Mr. Sillerman has elected not to receive an annual base
salary under the terms of his employment agreement. The decision
by Mr. Sillerman to request no salary was based on his, and
the companys, belief that, based on his involvement in the
formation of the company and his interest in maximizing
stockholder value, his compensation should be tied to generating
stockholder returns through growth in value of our common stock.
The employment agreements for Messrs. Kanavos, Shier,
Benson, Torino and Nelson provide for initial annual base
salaries of $600,000 for Mr. Kanavos, $2,000,000 for
Mr. Shier, $525,000 for Mr. Benson, $450,000 for
Mr. Torino and $525,000 for Mr. Nelson, increased
annually by the greater of five percent or the rate of inflation.
Under the terms of Mr. Shiers employment agreement,
Mr. Shier purchased 500,000 shares of our common stock
at a price of $5.14 per share on January 3, 2008 for an
aggregate purchase price of $2,570,000. Mr. Shier will not
be able to sell or otherwise transfer these shares until the
second anniversary of the date of purchase, except for estate
planning purposes subject to our advance written consent. On the
second anniversary of the date of purchase or as soon thereafter
as we are eligible to use a short-form registration statement on
Form S-3,
we will register these shares for resale with the Securities and
Exchange Commission.
In accordance with the terms of their employment agreements, we
have issued to Messrs. Sillerman, Kanavos, Benson, Torino
and Nelson, 6,000,000, 750,000, 400,000, 400,000 and 400,000
stock options, respectively. Under the terms of the employments
with Messrs. Kanavos, Torino and Nelson, these stock
options vest ratably over a five year period commencing with
effectiveness of the relevant employment agreement, and have a
strike price of $20.00 per share. Under the terms of the
employment agreements with Messrs. Sillerman and Benson, as
amended, these stock options vest ratably over a five year
period commencing upon acceptance of their positions as
executive officers of the Company, and have a strike price of
$20.00 per share. In accordance with the terms of
Mr. Shiers employment agreement, we have issued to
32
him options to acquire 1,500,000 shares of our common stock
at a price of $10.00 per share. The options vest ratably over a
two year period, with all such options becoming exercisable at
the end of two years. In addition, Mr. Shiers
employment agreement also entitles Mr. Shier to receive
options to purchase 200,000 shares per year over the next
five years, in each case with strike prices equal to the fair
market value when the grants occur. Such options vest on the
date of grant.
Mr. Sillermans employment agreement provides that if
Mr. Sillermans employment is terminated by us without
cause, or if there is a constructive
termination without cause, as such terms are defined in
the employment agreement, his non-compete shall cease to be
effective on the later of such termination or three years from
the effective date of the agreement. Mr. Sillermans
employment agreement specifies that he is required to commit not
less than 50% of his business time to our company, with the
balance of his business time to be governed by his employment
agreement with CKX or 19X, as the case may be.
Mr. Sillerman is currently party to an employment agreement
with CKX. Mr. Sillermans employment agreement with us
will become effective upon the earlier of (i) the date on
which the acquisition of CKX by 19X is consummated, and
(ii) the date on which the merger agreement between CKX and
19X is terminated. From January 10, 2008 until such time as
Mr. Sillermans employment agreement becomes effective
he will continue as a full-time employee of CKX and will, in
furtherance of CKXs obligations under the shared services
agreement, accept the position of Chief Executive Officer of our
company. Upon effectiveness of his employment agreement,
Mr. Sillermans employment agreement with CKX will be
revised to allow him to provide up to 50% of his work time on
matters pertaining to us. Similarly, his employment agreement
with us will allow him to provide up to 50% of his work time on
matters pertaining to CKX
and/or
19X.
Mr. Kanavos employment agreement permits him to spend
up to one-third of his work time on matters pertaining to Flag
Luxury Properties.
Mr. Benson is currently party to an employment agreement
with CKX. Mr. Bensons employment agreement with us
will become effective upon the earliest of (i) the date on
which the acquisition of CKX by 19X is consummated,
(ii) the date on which CKX hires a suitable replacement to
fill the role of Chief Financial Officer, the search for which
would only commence upon termination of the merger agreement
between CKX and 19X, and (iii) that date that is six months
following termination of the merger agreement between CKX and
19X. From the date of the CKX Distribution until such time as
Mr. Bensons employment agreement becomes effective
and he resigns from his position at CKX, Mr. Benson will
continue as a full-time employee of CKX and will, in furtherance
of CKXs obligations under the shared services agreement,
serve as Chief Financial Officer of our company. Upon
effectiveness of his employment agreement, Mr. Benson will
become a full-time employee of us, provided that his employment
agreement will permit him to spend up to one-third of his work
time on 19X matters.
Mr. Torinos employment agreement permits him to spend
up to one-third of his work time on matters unrelated to our
company, provided such matters are not competitive with our
business or are otherwise approved by our board.
Mr. Nelsons employment agreement permits him to spend
up to one-third of his work time on matters pertaining to Flag
Luxury Properties.
Shared
Services Agreement
In addition to entering into the employment agreements described
above, we are party to a shared services agreement with CKX,
pursuant to which employees of CKX, including members of senior
management, provide services for us, and certain of our
employees, including members of senior management, provide
services for CKX. The services to be provided pursuant to the
shared services agreement are expected to include management,
legal, accounting and administrative. For more detailed
information about the terms of the shared services agreement,
please see
Certain Relationships and Related
Transactions Shared Services Agreement
above.
Compensation
Committee Interlocks and Insider Participation
No member of our Compensation Committee was at any time during
the past fiscal year an officer or employee of us, was formerly
an officer of us or any of our subsidiaries or has an immediate
family member
33
that was an officer or employee of us or had any relationship
requiring disclosure under Item 404 of
Regulation S-K.
During the last fiscal year, none of our executive officers
served as:
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a member of the compensation committee (or other committee of
the board of directors performing equivalent functions or, in
the absence of any such committee, the entire board of
directors) or another entity, one of whose executive officers
served on our compensation committee;
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a director of another entity, one of whose executive officers
served on our compensation committee; and
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a member of the compensation committee (or other committee of
the board of directors performing equivalent functions or, in
the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers
served as a director of us.
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COMPENSATION
COMMITTEE REPORT
The compensation committee has reviewed and discussed with
management the Compensation Discussion and Analysis
set forth above. Based on such review, the related discussions
and such other matters deemed relevant and appropriate by the
compensation committee, the compensation committee has
recommended to the board of directors that the
Compensation Discussion and Analysis be included in
this Proxy Statement. This report is provided by the following
independent directors, who comprised the committee at the time
of such recommendation:
David M. Ledy (chairman)
Harvey Silverman
ANNUAL
REPORT
A copy of the Companys 2007 Annual Report to Stockholders
on
Form 10-K,
as amended, for the year ended December 31, 2007 is being
mailed to stockholders with this Proxy Statement. The
Form 10-K,
as amended, is also available on the Companys website at
www.fxree.com
.
DEADLINE
FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE 2009 ANNUAL MEETING OF FXRE STOCKHOLDERS
We have an advance notice provision under our bylaws for
stockholder business to be presented at annual meetings of
stockholders. Such provision states that in order for
stockholder business to be brought before an annual meeting by a
stockholder, such stockholder must have given timely notice
thereof in writing to the Secretary of the Company. To be
timely, a stockholders notice to the Secretary must be
delivered to or mailed and received at the principal executive
offices of the Company in the case of an annual meeting, not
less than ninety (90) days nor more than one hundred twenty
(120) days prior to the date of the anniversary of the
previous years annual meeting; provided, however, that in
the event the annual meeting is scheduled to be held on a date
more than thirty (30) days prior to or delayed by more than
sixty (60) days after such anniversary date, notice by the
stockholder in order to be timely must be so received not
earlier than the close of business one hundred twenty
(120) days prior to such annual meeting, and not later than
the later of the close of business ninety (90) days prior
to such annual meeting or the tenth (10th) day following the day
on which notice of the date of such annual meeting was mailed or
public disclosure of the date of such annual meeting was made by
the Company.
The Companys stockholders may submit for inclusion in the
Companys proxy statement for the 2009 annual meeting of
stockholders proposals on matters appropriate for stockholder
action at the 2009 annual meeting of stockholders consistent
with
Rule 14a-8
promulgated under the Exchange Act. The Company must receive
proposals that stockholders seek to include in the proxy
statement for the Companys 2009 annual
34
meeting by no later than February 11, 2009. If next
years annual meeting is held on a date more than 30
calendar days from May 10, 2009, a stockholder proposal
must be received by a reasonable time before the Company begins
to print and mail its proxy solicitation materials for such
annual meeting. Any stockholder proposals will be subject to the
requirements of the proxy rules adopted by the SEC.
INTEREST
OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director or executive officer of the Company at any time
since the beginning of the last fiscal year, nor any individual
nominated to be a director of the Company, nor any associate or
affiliate of any of the foregoing, has any material interest,
directly or indirectly, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the
annual meeting.
OTHER
MATTERS
Our board of directors does not intend to bring any matters
before the annual meeting other than those specifically set
forth in the notice of the annual meeting and, as of the date of
this proxy statement, does not know of any matters to be brought
before the annual meeting by others. If any other matters
properly come before the annual meeting, or any adjournment or
postponement of the annual meeting, it is the intention of the
persons named in the accompanying proxy to vote those proxies on
such matters in accordance with their best judgment.
WHERE YOU
CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and files reports and other information with the
SEC. Such reports and other information filed by the Company may
be inspected and copied at the SECs Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549, as
well as in the SECs public reference rooms in New York,
New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the SECs
public reference rooms. The SEC also maintains an Internet site
that contains reports, proxy statements and other information
about issuers, like us, who file electronically with the SEC.
The address of the SECs web site is
http://www.sec.gov
.
35
ANNEX A
FX REAL
ESTATE AND ENTERTAINMENT INC.
2007
LONG-TERM INCENTIVE COMPENSATION PLAN
2007
LONG-TERM INCENTIVE COMPENSATION PLAN
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Purpose
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A-1
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Definitions
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A-1
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Administration.
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A-5
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Shares Subject to Plan.
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A-6
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Eligibility; Per-Person Award Limitations
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A-7
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Specific Terms of Awards.
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A-8
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Certain Provisions Applicable to Awards.
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A-13
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Code Section 162(m) Provisions.
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A-15
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Change in Control.
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A-17
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General Provisions.
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A-19
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2007
LONG-TERM INCENTIVE COMPENSATION PLAN
1.
Purpose
. The
purpose of this 2007 LONG-TERM INCENTIVE COMPENSATION PLAN (the
Plan) is to assist FX Real Estate and Entertainment
Inc., a Delaware corporation (the Company) and its
Related Entities (as hereinafter defined) in attracting,
motivating, retaining and rewarding high-quality executives and
other employees, officers, directors, consultants and other
persons who provide services to the Company or its Related
Entities by enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the
Companys shareholders, and providing such persons with
long term performance incentives to expend their maximum efforts
in the creation of shareholder value.
2.
Definitions.
For
purposes of the Plan, the following terms shall be defined as
set forth below, in addition to such terms defined in
Section 1 hereof and elsewhere herein.
(a)
Award
means
any Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award, Share granted as a bonus or in lieu of
another Award, Dividend Equivalent, Other Stock-Based Award or
Performance Award, together with any other right or interest,
granted to a Participant under the Plan.
(b)
Award
Agreement
means any written agreement,
contract or other instrument or document evidencing any Award
granted by the Committee hereunder.
(c)
Beneficiary
and Beneficial Ownership
means the
person, persons, trust or trusts that have been designated by a
Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits
specified under the Plan upon such Participants death or
to which Awards or other rights are transferred if and to the
extent permitted under Section 10(b) hereof. If, upon a
Participants death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary
means the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(d)
Beneficial
Owner
shall have the meaning ascribed to such
term in
Rule 13d-3
under the Exchange Act and any successor to such Rule.
(e)
Board
means
the Companys Board of Directors.
(f)
Cause
shall,
with respect to any Participant, have the meaning specified in
the Award Agreement. In the absence of any definition in the
Award Agreement, Cause shall have the equivalent
meaning or the same meaning as cause or for
cause set forth in any employment, consulting, or other
agreement for the performance of services between the
Participant and the Company or a Related Entity or, in the
absence of any such agreement or any such definition in such
agreement, such term shall mean (i) the failure by the
Participant to perform, in a reasonable manner, his or her
duties as assigned by the Company or a Related Entity,
(ii) any violation or breach by the Participant of his or
her employment, consulting or other similar agreement with the
Company or a Related Entity, if any, (iii) any violation or
breach by the Participant of any non-competition,
non-solicitation, non-disclosure
and/or
other
similar agreement with the Company or a Related Entity,
(iv) any act by the Participant of dishonesty or bad faith
with respect to the Company or a Related Entity, (v) use of
A-1
alcohol, drugs or other similar
substances in a manner that adversely affects the
Participants work performance, or (vi) the commission
by the Participant of any act, misdemeanor, or crime reflecting
unfavorably upon the Participant or the Company or any Related
Entity. The good faith determination by the Committee of whether
the Participants Continuous Service was terminated by the
Company for Cause shall be final and binding for all
purposes hereunder.
(g)
Change in
Control
means a Change in Control as defined
in Section 9(b) of the Plan.
(h)
Code
means
the Internal Revenue Code of 1986, as amended from time to time,
including regulations thereunder and successor provisions and
regulations thereto.
(i)
Committee
means
the Compensation Committee of the Board; provided, however, that
if at any time, there shall fail to be a sitting Compensation
Committee or if there are no longer any members on the
Compensation Committee, then the Board shall serve as the
Committee. The Committee shall consist of at least two
directors, and each member of the Committee shall be (i) a
non-employee director within the meaning of
Rule 16b-3
(or any successor rule) under the Exchange Act, unless
administration of the Plan by non-employee directors
is not then required in order for exemptions under
Rule 16b-3
to apply to transactions under the Plan, (ii) an
outside director within the meaning of
Section 162(m) of the Code, and
(iii) Independent.
(j)
Consultant
means
any person (other than an Employee or a Director, solely with
respect to rendering services in such persons capacity as
a director) who is engaged by the Company or any Related Entity
to render consulting or advisory services to the Company or such
Related Entity.
(k)
Continuous
Service
means the uninterrupted provision of
services to the Company or any Related Entity in any capacity of
Employee, Director, Consultant or other service provider.
Continuous Service shall not be considered to be interrupted in
the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entities, or
any successor entities, in any capacity of Employee, Director,
Consultant or other service provider, or (iii) any change
in status as long as the individual remains in the service of
the Company or a Related Entity in any capacity of Employee,
Director, Consultant or other service provider (except as
otherwise provided in the Award Agreement). An approved leave of
absence shall include sick leave, military leave, or any other
authorized personal leave.
(l)
Covered
Employee
means the Person who, as of the end
of the taxable year, either is the principal executive officer
of the Company or is serving as the acting principal executive
officer of the Company, and each other Person whose compensation
is required to be disclosed in the Companys filings with
the Securities and Exchange Commission by reason of that person
being among the three highest compensated officers of the
Company as of the end of a taxable year, or such other person as
shall be considered a covered employee for purposes
of Section 162(m) of the Code.
(m)
Deferred
Stock
means a right to receive Shares,
including Restricted Stock, cash measured based upon the value
of Shares or a combination thereof, at the end of a specified
deferral period.
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(n)
Deferred Stock
Award
means an Award of Deferred Stock
granted to a Participant under Section 6(e) hereof.
(o)
Director
means
a member of the Board or the board of directors of any Related
Entity.
(p)
Disability
means
a permanent and total disability (within the meaning of
Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(q)
Discounted
Option
means any Option awarded under
Section 6(b) hereof with an exercise price that is less
than the Fair Market Value of a Share on the date of grant.
(r)
Dividend
Equivalent
means a right, granted to a
Participant under Section 6(g) hereof, to receive cash,
Shares, other Awards or other property equal in value to regular
dividends paid with respect to a specified number of Shares, or
other periodic payments.
(s)
Effective
Date
means the effective date of the Plan,
which shall be December 17, 2007, subject to approval
within twelve (12) months by the stockholders of the shares
entitled to vote thereon.
(t)
Eligible
Person
means each officer, Director,
Employee, Consultant and other person who provides services to
the Company or any Related Entity. The foregoing
notwithstanding, only employees of the Company, or any parent
corporation or subsidiary corporation of the Company (as those
terms are defined in Sections 424(e) and (f) of the
Code, respectively), shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An Employee on leave of
absence may be considered as still in the employ of the Company
or a Related Entity for purposes of eligibility for
participation in the Plan.
(u)
Employee
means
any person, including an officer or Director, who is an employee
of the Company or any Related Entity. The payment of a
directors fee by the Company or a Related Entity shall not
be sufficient to constitute employment by the
Company.
(v)
Exchange
Act
means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder
and successor provisions and rules thereto.
(w)
Fair Market
Value
means the fair market value of Shares,
Awards or other property as determined by the Committee, or
under procedures established by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of a Share as
of any given date shall be the closing sale price per Share
reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Shares are traded on
the date immediately preceding the date as of which such value
is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.
(x)
Good
Reason
shall, with respect to any
Participant, have the meaning specified in the Award Agreement.
In the absence of any definition in the Award Agreement,
Good Reason shall have the equivalent meaning or the
same meaning as good reason or for good
reason set forth in any employment, consulting or other
agreement for the performance of services between the
Participant and the Company or a Related Entity or, in the
absence of any
A-3
such agreement or any such
definition in such agreement, such term shall mean (i) the
assignment to the Participant of any duties inconsistent in any
material respect with the Participants position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as assigned by the Company or a
Related Entity, or any other action by the Company or a Related
Entity which results in a material diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company or a
Related Entity promptly after receipt of notice thereof given by
the Participant; or (ii) any material failure by the
Company or a Related Entity to comply with its obligations to
the Participant as agreed upon, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company or a Related Entity
promptly after receipt of notice thereof given by the
Participant.
(y)
Incentive Stock
Option
means any Option intended to be
designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(z)
Independent
, when
referring to either the Board or members of the Committee, shall
have the same meaning as used in the rules of the NASDAQ Global
Market or any national securities exchange on which any
securities of the Company are listed for trading, and if not
listed for trading, by the rules of the Nasdaq National Market.
(aa)
Incumbent
Board
means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(bb)
Option
means
a right granted to a Participant under Section 6(b) hereof,
to purchase Shares or other Awards at a specified price during
specified time periods.
(cc)
Optionee
means
a person to whom an Option is granted under this Plan or any
person who succeeds to the rights of such person under this Plan.
(dd)
Other Stock-Based
Awards
means Awards granted to a Participant
under Section 6(i) hereof.
(ee)
Participant
means
a person who has been granted an Award under the Plan which
remains outstanding, including a person who is no longer an
Eligible Person.
(ff)
Performance
Award
shall mean any Award of Performance
Shares or Performance Units granted pursuant to
Section 6(h).
(gg)
Performance
Period
means that period established by the
Committee at the time any Performance Award is granted or at any
time thereafter during which any performance goals specified by
the Committee with respect to such Award are to be measured.
(hh)
Performance
Share
means any grant pursuant to
Section 6(h) of a unit valued by reference to a designated
number of Shares, which value may be paid to the Participant by
delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination
thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time
of such grant or thereafter.
(ii)
Performance
Unit
means any grant pursuant to
Section 6(h) of a unit valued by reference to a designated
amount of property (including cash) other than Shares,
A-4
which value may be paid to the
Participant by delivery of such property as the Committee shall
determine, including cash, Shares, other property, or any
combination thereof, upon achievement of such performance goals
during the Performance Period as the Committee shall establish
at the time of such grant or thereafter.
(jj)
Person
shall
have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a group as defined in
Section 13(d) thereof.
(kk)
Related
Entity
means any Subsidiary, and any
business, corporation, partnership, limited liability company or
other entity designated by the Board, in which the Company or a
Subsidiary holds a substantial ownership interest, directly or
indirectly.
(ll)
Restricted
Stock
means any Share issued with the
restriction that the holder may not sell, transfer, pledge or
assign such Share and with such risks of forfeiture and other
restrictions as the Committee, in its sole discretion, may
impose (including any restriction on the right to vote such
Share and the right to receive any dividends), which
restrictions may lapse separately or in combination at such time
or times, in installments or otherwise, as the Committee may
deem appropriate.
(mm)
Restricted Stock
Award
means an Award granted to a Participant
under Section 6(d) hereof.
(nn)
Rule 16b-3
means
Rule 16b-3,
as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
(oo)
Shares
means
the shares of common stock of the Company, par value $.01 per
share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 10(c) hereof.
(pp)
Stock Appreciation
Right
means a right granted to a Participant
under Section 6(c) hereof.
(qq)
Subsidiary
means any corporation or other entity in which the Company has a
direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities
or interests of such corporation or other entity entitled to
vote generally in the election of directors or in which the
Company has the right to receive 50% or more of the distribution
of profits or 50% or more of the assets on liquidation or
dissolution.
(rr)
Substitute
Awards
means Awards granted or Shares issued
by the Company in assumption of, or in substitution or exchange
for, Awards previously granted, or the right or obligation to
make future Awards, by a company acquired by the Company or any
Related Entity or with which the Company or any Related Entity
combines.
3.
Administration.
(a)
Authority of the
Committee.
The Plan shall be administered
by the Committee except to the extent the Board elects to
administer the Plan, in which case the Plan shall be
administered by only those directors who are Independent
Directors, in which case references herein to the
Committee shall be deemed to include references to
the Independent
A-5
members of the Board. The
Committee shall have full and final authority, subject to and
consistent with the provisions of the Plan, to select Eligible
Persons to become Participants, grant Awards, determine the
type, number and other terms and conditions of, and all other
matters relating to, Awards, prescribe Award Agreements (which
need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and
interpret the Plan and Award Agreements and correct defects,
supply omissions or reconcile inconsistencies therein, and to
make all other decisions and determinations as the Committee may
deem necessary or advisable for the administration of the Plan.
In exercising any discretion granted to the Committee under the
Plan or pursuant to any Award, the Committee shall not be
required to follow past practices, act in a manner consistent
with past practices, or treat any Eligible Person or Participant
in a manner consistent with the treatment of other Eligible
Persons or Participants.
(b)
Manner of Exercise of
Committee Authority.
: The Committee, and not
the Board, shall exercise sole and exclusive discretion on any
matter relating to a Participant then subject to Section 16
of the Exchange Act with respect to the Company to the extent
necessary in order that transactions by such Participant shall
be exempt under
Rule 16b-3
under the Exchange Act. Any action of the Committee shall be
final, conclusive and binding on all persons, including the
Company, its Related Entities, Eligible Persons, Participants,
Beneficiaries, transferees under Section 10(b) hereof or
other persons claiming rights from or through a Participant, and
shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of
the Company or any Related Entity, or committees thereof, the
authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative
functions as the Committee may determine to the extent that such
delegation will not result in the loss of an exemption under
Rule 16b-3(d)(1)
for Awards granted to Participants subject to Section 16 of
the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as performance-based
compensation under Code Section 162(m) to fail to so
qualify. The Committee may appoint agents to assist it in
administering the Plan.
(c)
Limitation of
Liability.
The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely
or act upon any report or other information furnished to him or
her by any officer or Employee, the Companys independent
auditors, Consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the
Board, and any officer or Employee acting at the direction or on
behalf of the Committee or the Board, shall not be personally
liable for any action or determination taken or made in good
faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the
Company with respect to any such action or determination.
4.
Shares Subject to
Plan.
(a)
Limitation on Overall
Number of Shares Available for Delivery Under
Plan.
Subject to adjustment as provided in
Section 10(c) hereof, the total number of Shares reserved
and available for delivery under the Plan shall be three million
(3,000,000) Shares. Any Shares delivered under the Plan may
consist, in whole or in part, of authorized and unissued shares
or treasury shares.
A-6
(b)
Application of Limitation
to Grants of Award
. No Award may be granted
if the number of Shares to be delivered in connection with such
an Award or, in the case of an Award relating to Shares but
settled only in cash (such as cash-only Stock Appreciation
Rights), the number of Shares to which such Award relates,
exceeds the number of Shares remaining available for delivery
under the Plan, minus the number of Shares deliverable in
settlement of or relating to then outstanding Awards. The
Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in
the case of tandem or substitute awards) and make adjustments if
the number of Shares actually delivered differs from the number
of Shares previously counted in connection with an Award.
(c)
Availability of Shares
Not Delivered under Awards and Adjustments to Limits.
(i) If any Shares subject to an
Award are forfeited, expire or otherwise terminate without
issuance of such Shares, or any Award is settled for cash or
otherwise does not result in the issuance of all or a portion of
the Shares subject to such Award, the Shares shall, to the
extent of such forfeiture, expiration, termination, cash
settlement or non-issuance, again be available for Awards under
the Plan, subject to Section 4(c)(v) below.
(ii) Substitute Awards shall not
reduce the Shares authorized for grant under the Plan or
authorized for grant to a Participant in any period.
Additionally, in the event that a company acquired by the
Company or any Related Entity or with which the Company or any
Related Entity combines has shares available under a
pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares
available for delivery pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the
entities party to such acquisition or combination) may be used
for Awards under the Plan and shall not reduce the Shares
authorized for delivery under the Plan; provided that Awards
using such available shares shall not be made after the date
awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and
shall only be made to individuals who were not Employees or
Directors prior to such acquisition or combination.
(iii) Any Share that again becomes
available for delivery pursuant to this Section 4(c) shall
be added back as one (1) Share if such Shares were granted
under the Plan.
(iv) Notwithstanding anything in
this Section 4(c) to the contrary but subject to adjustment
as provided in Section 10(c) hereof, the maximum aggregate
number of Shares that may be issued under the Plan as a result
of the exercise of the Incentive Stock Options shall be three
million (3,000,000) Shares.
5.
Eligibility; Per-Person
Award Limitations.
Awards may be granted
under the Plan only to Eligible Persons. Subject to adjustment
as provided in Section 10(c), in any fiscal year of the
Company during any part of which the Plan is in effect, no
Participant may be granted (i) Options or Stock
Appreciation Rights with respect to more than one million
(1,000,000) Shares or (ii) Restricted Stock, Deferred
Stock, Performance Shares
and/or
Other
Stock-Based Awards with respect to more than one million
(1,000,000) Shares. The maximum number of Shares that may be
granted to any one Participant over the life of the Plan is one
million (1,000,000) Shares. In
A-7
addition, the maximum dollar value
payable to any one Participant with respect to Performance Units
is five million dollars ($5,000,000) with respect to any
Performance Period.
6.
Specific Terms of
Awards.
(a)
General.
Awards
may be granted on the terms and conditions set forth in this
Section 6. In addition, the Committee may impose on any
Award or the exercise thereof, at the date of grant or
thereafter (subject to Section 10(e)), such additional
terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of
the Participants Continuous Service and terms permitting a
Participant to make elections relating to his or her Award. The
Committee shall retain full power and discretion to accelerate,
waive or modify, at any time, any term or condition of an Award
that is not mandatory under the Plan. Except in cases in which
the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of
Delaware law, no consideration other than services may be
required for the grant (as opposed to the exercise) of any Award.
(b)
Options.
The
Committee is authorized to grant Options to any Eligible Person
on the following terms and conditions:
(i)
Exercise
Price.
Other than in connection with
Substitute Awards, the exercise price per Share purchasable
under an Option shall be determined by the Committee, provided
that such exercise price shall not be less than 100% of the Fair
Market Value of a Share on the date of grant of the Option and
shall not, in any event, be less than the par value of a Share
on the date of grant of the Option. If an Employee owns or is
deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company (or
any parent corporation or subsidiary corporation of the Company,
as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) and an Incentive Stock
Option is granted to such employee, the exercise price of such
Incentive Stock Option (to the extent required by the Code at
the time of grant) shall be no less than 110% of the Fair Market
Value of a Share on the date such Incentive Stock Option is
granted. Other than pursuant to Section 10(c), the
Committee shall not be permitted to (A) lower the exercise
price per Share of an Option after it is granted,
(B) cancel an Option when the exercise price per Share
exceeds the Fair Market Value of the underlying Shares in
exchange for another Award (other than in connection with
Substitute Awards), or (C) take any other action with
respect to an Option that may be treated as a repricing, without
approval of the Companys shareholders.
(ii)
Time and Method of
Exercise
. The Committee shall determine the
time or times at which or the circumstances under which an
Option may be exercised in whole or in part (including based on
achievement of performance goals
and/or
future service requirements), the time or times at which Options
shall cease to be or become exercisable following termination of
Continuous Service or upon other conditions, the methods by
which the exercise price may be paid or deemed to be paid
(including in the discretion of the Committee a cashless
exercise procedure), the form of such payment, including,
without limitation, cash, Shares (including without limitation
the withholding of Shares otherwise deliverable pursuant to the
Award), other Awards or awards granted under other plans of the
Company or a Related
A-8
Entity, or other property
(including notes or other contractual obligations of
Participants to make payment on a deferred basis provided that
such deferred payments are not in violation of the
Sarbanes-Oxley Act of 2002, or any rule or regulation adopted
thereunder or any other applicable law), and the methods by or
forms in which Shares will be delivered or deemed to be
delivered to Participants.
(iii)
Incentive Stock
Options
. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code. Anything in the
Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either
the Plan or any Incentive Stock Option under Section 422 of
the Code, unless the Participant has first requested, or
consents to, the change that will result in such
disqualification. Thus, if and to the extent required to comply
with Section 422 of the Code, Options granted as Incentive
Stock Options shall be subject to the following special terms
and conditions:
(A) the Option shall not be
exercisable for more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if a
Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the
Company (or any parent corporation or subsidiary corporation of
the Company, as those terms are defined in Sections 424(e)
and (f) of the Code, respectively) and the Incentive Stock
Option is granted to such Participant, the term of the Incentive
Stock Option shall be (to the extent required by the Code at the
time of the grant) for no more than five years from the date of
grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the Shares with respect to which Incentive Stock
Options granted under the Plan and all other option plans of the
Company (and any parent corporation or subsidiary corporation of
the Company, as those terms are defined in Sections 424(e)
and (f) of the Code, respectively) that become exercisable
for the first time by the Participant during any calendar year
shall not (to the extent required by the Code at the time of the
grant) exceed $100,000.
(c)
Stock Appreciation
Rights.
The Committee may
grant Stock Appreciation Rights to any Eligible Person in
conjunction with all or part of any Option granted under the
Plan or at any subsequent time during the term of such Option (a
Tandem Stock Appreciation Right), or without regard
to any Option (a Freestanding Stock Appreciation
Right), in each case upon such terms and conditions as the
Committee may establish in its sole discretion, not inconsistent
with the provisions of the Plan, including the following:
(i)
Right to
Payment.
A Stock Appreciation Right shall
confer on the Participant to whom it is granted a right to
receive, upon exercise thereof, the excess of (A) the Fair
Market Value of one Share on the date of exercise over
(B) the grant price of the Stock Appreciation Right as
determined by the Committee. The grant price of a Stock
Appreciation Right shall not be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date of grant,
in the case of a Freestanding Stock Appreciation Right, or less
than the associated Option exercise price, in the case of a
Tandem Stock Appreciation Right.
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Other than pursuant to
Section 10(c), the Committee shall not be permitted to
(A) lower the grant price per Share of a Stock Appreciation
Right after it is granted, (B) cancel a Stock Appreciation
Right when the grant price per Share exceeds the Fair Market
Value of the underlying Shares in exchange for another Award
(other than in connection with Substitute Awards), or
(C) take any other action with respect to a Stock
Appreciation Right that may be treated as a repricing, without
shareholder approval.
(ii)
Other
Terms
. The Committee shall determine at the
date of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be
exercised in whole or in part (including based on achievement of
performance goals
and/or
future service requirements), the time or times at which Stock
Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Shares will be delivered or deemed to be delivered to
Participants, whether or not a Stock Appreciation Right shall be
in tandem or in combination with any other Award, and any other
terms and conditions of any Stock Appreciation Right.
(iii)
Tandem Stock
Appreciation Rights
. Any Tandem Stock
Appreciation Right may be granted at the same time as the
related Option is granted or, for Options that are not Incentive
Stock Options, at any time thereafter before exercise or
expiration of such Option. Any Tandem Stock Appreciation Right
related to an Option may be exercised only when the related
Option would be exercisable and the Fair Market Value of the
Shares subject to the related Option exceeds the exercise price
at which Shares can be acquired pursuant to the Option. In
addition, if a Tandem Stock Appreciation Right exists with
respect to less than the full number of Shares covered by a
related Option, then an exercise or termination of such Option
shall not reduce the number of Shares to which the Tandem Stock
Appreciation Right applies until the number of Shares then
exercisable under such Option equals the number of Shares to
which the Tandem Stock Appreciation Right applies. Any Option
related to a Tandem Stock Appreciation Right shall no longer be
exercisable to the extent the Tandem Stock Appreciation Right
has been exercised, and any Tandem Stock Appreciation Right
shall no longer be exercisable to the extent the related Option
has been exercised.
(d)
Restricted Stock
Awards.
The Committee is
authorized to grant Restricted Stock Awards to any Eligible
Person on the following terms and conditions:
(i)
Grant and
Restrictions.
Restricted Stock Awards shall
be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may
impose, or as otherwise provided in this Plan, covering a period
of time specified by the Committee (the Restriction
Period). The terms of any Restricted Stock Award granted
under the Plan shall be set forth in a written Award Agreement
which shall contain provisions determined by the Committee and
not inconsistent with the Plan. The restrictions may lapse
separately or in combination at such times, under such
circumstances (including based on achievement of performance
goals
and/or
future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of
the Plan and any Award Agreement relating to a Restricted Stock
Award, a Participant granted Restricted Stock shall have all of
the rights of a shareholder, including the right to vote the
Restricted Stock and the right to receive dividends thereon
(subject
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to any mandatory reinvestment or
other requirement imposed by the Committee). During the
Restriction Period, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the
Participant.
(ii)
Forfeiture
. Except
as otherwise determined by the Committee, upon termination of a
Participants Continuous Service during the applicable
Restriction Period, the Participants Restricted Stock that
is at that time subject to a risk of forfeiture that has not
lapsed or otherwise been satisfied shall be forfeited and
reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that forfeiture conditions
relating to Restricted Stock Awards shall be waived in whole or
in part in the event of terminations resulting from specified
causes.
(iii)
Certificates for
Stock
. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may
require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable
to such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver
a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv)
Dividends and
Splits
. As a condition to the grant of a
Restricted Stock Award, the Committee may require or permit a
Participant to elect that any cash dividends paid on a Share of
Restricted Stock be automatically reinvested in additional
Shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by
the Committee, Shares distributed in connection with a stock
split or stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with
respect to which such Shares or other property have been
distributed.
(v)
Minimum Vesting
Period
. Except for certain limited situations
(including termination of employment, a Change in Control
referred to in Section 9, grants to new hires to replace
forfeited compensation, grants representing payment of earned
Performance Awards or other incentive compensation, or grants to
Directors), Restricted Stock Awards subject solely to future
service requirements shall have a Restriction Period of not less
than three years from date of grant (but permitting pro-rata
vesting over such time).
(e)
Deferred Stock
Award.
The Committee is authorized to grant
Deferred Stock Awards to any Eligible Person on the following
terms and conditions:
(i)
Award and
Restrictions.
Satisfaction of a Deferred
Stock Award shall occur upon expiration of the deferral period
specified for such Deferred Stock Award by the Committee (or, if
permitted by the Committee, as elected by the Participant). In
addition, a Deferred Stock Award shall be subject to such
restrictions (which may include a risk of forfeiture) as the
Committee may impose, if any, which restrictions may lapse at
the expiration of the deferral period or at earlier specified
times (including based on achievement of performance goals
and/or
future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine. A
Deferred Stock Award may be satisfied by delivery of Shares,
cash equal to the Fair Market Value of the specified number of
Shares covered by the Deferred Stock, or a combination thereof,
as determined by the
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Committee at the date of grant or
thereafter. Prior to satisfaction of a Deferred Stock Award, a
Deferred Stock Award carries no voting or dividend or other
rights associated with Share ownership.
(ii)
Forfeiture
. Except
as otherwise determined by the Committee, upon termination of a
Participants Continuous Service during the applicable
deferral period or portion thereof to which forfeiture
conditions apply (as provided in the Award Agreement evidencing
the Deferred Stock Award), the Participants Deferred Stock
Award that is at that time subject to a risk of forfeiture that
has not lapsed or otherwise been satisfied shall be forfeited;
provided that the Committee may provide, by rule or regulation
or in any Award Agreement, or may determine in any individual
case, that forfeiture conditions relating to a Deferred Stock
Award shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee
may in other cases waive in whole or in part the forfeiture of
any Deferred Stock Award.
(iii)
Dividend
Equivalents
. Unless otherwise determined by
the Committee at date of grant, any Dividend Equivalents that
are granted with respect to any Deferred Stock Award shall be
either (A) paid with respect to such Deferred Stock Award
at the dividend payment date in cash or in Shares of
unrestricted stock having a Fair Market Value equal to the
amount of such dividends, or (B) deferred with respect to
such Deferred Stock Award and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock,
other Awards or other investment vehicles, as the Committee
shall determine or permit the Participant to elect.
(f)
Bonus Stock and Awards in
Lieu of Obligations.
The Committee is
authorized to grant Shares to any Eligible Persons as a bonus,
or to grant Shares or other Awards in lieu of obligations to pay
cash or deliver other property under the Plan or under other
plans or compensatory arrangements, provided that, in the case
of Eligible Persons subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that
acquisitions of Shares or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Shares or Awards
granted hereunder shall be subject to such other terms as shall
be determined by the Committee.
(g)
Dividend
Equivalents.
The Committee is authorized to
grant Dividend Equivalents to any Eligible Person entitling the
Eligible Person to receive cash, Shares, other Awards, or other
property equal in value to the regular dividends paid with
respect to a specified number of Shares, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may
provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in
additional Shares, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of
forfeiture, as the Committee may specify.
(h)
Performance
Awards.
The Committee is authorized to grant
Performance Awards to any Eligible Person payable in cash,
Shares, or other Awards, on terms and conditions established by
the Committee, subject to the provisions of Section 8 if
and to the extent that the Committee shall, in its sole
discretion, determine that an Award shall be subject to those
provisions. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period
shall be determined by the Committee upon the
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grant of each Performance Award;
provided, however, that a Performance Period shall not be
shorter than 12 months nor longer than five years. Except
as provided in Section 9 or as may be provided in an Award
Agreement, Performance Awards will be distributed only after the
end of the relevant Performance Period. The performance goals to
be achieved for each Performance Period shall be conclusively
determined by the Committee and may be based upon the criteria
set forth in Section 8(b), or in the case of an Award that
the Committee determines shall not be subject to Section 8
hereof, any other criteria that the Committee, in its sole
discretion, shall determine should be used for that purpose. The
amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the
Performance Period or, in accordance with procedures established
by the Committee, on a deferred basis.
(i)
Other Stock-Based
Awards.
The Committee is authorized, subject
to limitations under applicable law, to grant to any Eligible
Person such other Awards that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based
on, or related to, Shares, as deemed by the Committee to be
consistent with the purposes of the Plan. Other Stock-Based
Awards may be granted to Participants either alone or in
addition to other Awards granted under the Plan, and such Other
Stock-Based Awards shall also be available as a form of payment
in the settlement of other Awards granted under the Plan. The
Committee shall determine the terms and conditions of such
Awards. Shares delivered pursuant to an Award in the nature of a
purchase right granted under this Section 6(i) shall be
purchased for such consideration, (including without limitation
loans from the Company or a Related Entity provided that such
loans are not in violation of the Sarbanes Oxley Act of 2002, or
any rule or regulation adopted thereunder or any other
applicable law) paid for at such times, by such methods, and in
such forms, including, without limitation, cash, Shares, other
Awards or other property, as the Committee shall determine.
7.
Certain Provisions
Applicable to Awards.
(a)
Stand-Alone, Additional,
Tandem, and Substitute Awards
. Awards granted
under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award
granted under another plan of the Company, any Related Entity,
or any business entity to be acquired by the Company or a
Related Entity, or any other right of a Participant to receive
payment from the Company or any Related Entity. Such additional,
tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for
another Award or award, the Committee shall require the
surrender of such other Award or award in consideration for the
grant of the new Award. In addition, Awards may be granted in
lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Related Entity,
in which the value of Stock subject to the Award is equivalent
in value to the cash compensation (for example, Deferred Stock
or Restricted Stock), or in which the exercise price, grant
price or purchase price of the Award in the nature of a right
that may be exercised is equal to the Fair Market Value of the
underlying Stock minus the value of the cash compensation
surrendered (for example, Options or Stock Appreciation Right
granted with an exercise price or grant price
discounted by the amount of the cash compensation
surrendered).
(b)
Term of
Awards.
The term of each Award shall be for
such period as may be determined by the Committee; provided that
in no event shall the term of any Option or
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Stock Appreciation Right exceed a
period of ten years (or in the case of an Incentive Stock Option
such shorter term as may be required under Section 422 of
the Code).
(c)
Form and Timing of
Payment Under Awards; Deferrals.
Subject to
the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Related Entity upon the
exercise of an Option or other Award or settlement of an Award
may be made in such forms as the Committee shall determine,
including, without limitation, cash, Shares, other Awards or
other property, and may be made in a single payment or transfer,
in installments, or on a deferred basis. Any installment or
deferral provided for in the preceding sentence shall, however,
be subject to the Companys compliance with the provisions
of the Sarbanes-Oxley Act of 2002, the rules and regulations
adopted by the Securities and Exchange Commission thereunder,
and all applicable rules of the NASDAQ Global Market or any
national securities exchange on which the Companys
securities are listed or quoted for trading and, if not listed
or quoted for trading on either the NASDAQ Global Market or a
national securities exchange, then the rules of the Nasdaq
National Market. The settlement of any Award may be accelerated,
and cash paid in lieu of Shares in connection with such
settlement, in the discretion of the Committee or upon
occurrence of one or more specified events (in addition to a
Change in Control). Installment or deferred payments may be
required by the Committee (subject to Section 10(e) of the
Plan, including the consent provisions thereof in the case of
any deferral of an outstanding Award not provided for in the
original Award Agreement) or permitted at the election of the
Participant on terms and conditions established by the
Committee. The Committee may, without limitation, make provision
for the payment or crediting of a reasonable interest rate on
installment or deferred payments or the grant or crediting of
Dividend Equivalents or other amounts in respect of installment
or deferred payments denominated in Shares.
(d)
Exemptions from
Section 16(b) Liability.
: It is the
intent of the Company that the grant of any Awards to or other
transaction by a Participant who is subject to Section 16
of the Exchange Act shall be exempt from Section 16
pursuant to an applicable exemption (except for transactions
acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award
Agreement does not comply with the requirements of
Rule 16b-3
then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform
to the applicable requirements of
Rule 16b-3
so that such Participant shall avoid liability under
Section 16(b).
(e)
Code
Section 409A.
(i) If any Award constitutes a
nonqualified deferred compensation plan under
Section 409A of the Code (a Section 409A
Plan), then the Award shall be subject to the following
additional requirements, if and to the extent required to comply
with Section 409A of the Code:
(A) Payments under the
Section 409A Plan may not be made earlier than (u) the
Participants separation from service, (v) the date
the Participant becomes disabled, (w) the
Participants death, (x) a specified time (or pursuant
to a fixed schedule) specified in the Award Agreement at the
date of the deferral of such compensation, (y) a change
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in the ownership or effective
control of the corporation, or in the ownership of a substantial
portion of the assets of the corporation, or (z) the
occurrence of an unforeseeble emergency;
(B) The time or schedule for any
payment of the deferred compensation may not be accelerated,
except to the extent provided in applicable Treasury Regulations
or other applicable guidance issued by the Internal Revenue
Service;
(C) Any elections with respect to
the deferral of such compensation or the time and form of
distribution of such deferred compensation shall comply with the
requirements of Section 409A(a)(4) of the Code; and
(D) In the case of any Participant
who is specified employee, a distribution on account of a
separation from service may not be made before the date which is
six months after the date of the Participants separation
from service (or, if earlier, the date of the Participants
death).
For purposes of the foregoing, the terms separation from
service, disabled, and specified
employee, all shall be defined in the same manner as those
terms are defined for purposes of Section 409A of the Code,
and the limitations set forth herein shall be applied in such
manner (and only to the extent) as shall be necessary to comply
with any requirements of Section 409A of the Code that are
applicable to the Award.
(ii) The Award Agreement for any
Award that the Committee reasonably determines to constitute a
Section 409A Plan, and the provisions of the Plan
applicable to that Award, shall be construed in a manner
consistent with the applicable requirements of
Section 409A, and the Committee, in its sole discretion and
without the consent of any Participant, may amend any Award
Agreement (and the provisions of the Plan applicable thereto) if
and to the extent that the Committee determines that such
amendment is necessary or appropriate to comply with the
requirements of Section 409A of the Code.
8.
Code Section 162(m)
Provisions.
Covered Employees. The Committee, in its discretion, may
determine at the time an Award is granted to an Eligible Person
who is, or is likely to be, as of the end of the tax year in
which the Company would claim a tax deduction in connection with
such Award, a Covered Employee, that the provisions of this
Section 8 shall be applicable to such Award.
(a)
Performance
Criteria.
If an Award is subject to this
Section 8, then the lapsing of restrictions thereon and the
distribution of cash, Shares or other property pursuant thereto,
as applicable, shall be contingent upon achievement of one or
more objective performance goals. Performance goals shall be
objective and shall otherwise meet the requirements of
Section 162(m) of the Code and regulations thereunder
including the requirement that the level or levels of
performance targeted by the Committee result in the achievement
of performance goals being substantially uncertain.
One or more of the following business criteria for the Company,
on a consolidated basis,
and/or
for
Related Entities, or for business or geographical units of the
Company
and/or
a
Related Entity (except with respect to the total shareholder
return and earnings per share criteria), shall be used by the
Committee in establishing performance goals for such Awards:
(1) earnings per share; (2) revenues or margins;
(3) cash flow; (4) operating margin; (5) return
on net assets, investment, capital, or equity; (6) economic
value added; (7) direct contribution; (8) net income;
pretax earnings; earnings
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before interest and taxes;
earnings before interest, taxes, depreciation and amortization;
earnings after interest expense and before extraordinary or
special items; operating income; income before interest income
or expense, unusual items and income taxes, local, state or
federal and excluding budgeted and actual bonuses which might be
paid under any ongoing bonus plans of the Company;
(9) working capital; (10) management of fixed costs or
variable costs; (11) identification or consummation of
investment opportunities or completion of specified projects in
accordance with corporate business plans, including strategic
mergers, acquisitions or divestitures; (12) total
shareholder return; (13) debt reduction; (14) market
share; (15) entry into new markets, either geographically
or by business unit; (16) customer retention and
satisfaction; (17) strategic plan development and
implementation, including turnaround plans;
and/or
(18) the Fair Market Value of a Share. Any of the above
goals may be determined on an absolute or relative basis or as
compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited
to, the Standard & Poors 500 Stock Index or a
group of companies that are comparable to the Company. The
Committee shall exclude the impact of an event or occurrence
which the Committee determines should appropriately be excluded,
including without limitation (i) restructurings,
discontinued operations, extraordinary items, and other unusual
or non-recurring charges, (ii) an event either not directly
related to the operations of the Company or not within the
reasonable control of the Companys management, or
(iii) a change in accounting standards required by
generally accepted accounting principles.
(b)
Performance Period;
Timing For Establishing Performance
Goals.
Achievement of performance goals in
respect of Performance Awards shall be measured over a
Performance Period no shorter than 12 months and no longer
than five years, as specified by the Committee. Performance
goals shall be established not later than 90 days after the
beginning of any Performance Period applicable to such
Performance Awards, or at such other date as may be required or
permitted for performance-based compensation under
Code Section 162(m).
(c)
Adjustments.
The
Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with Awards
subject to this Section 8, but may not exercise discretion
to increase any such amount payable to a Covered Employee in
respect of an Award subject to this Section 8. The
Committee shall specify the circumstances in which such Awards
shall be paid or forfeited in the event of termination of
Continuous Service by the Participant prior to the end of a
Performance Period or settlement of Awards.
(d)
Committee
Certification.
No Participant shall receive
any payment under the Plan that is subject to this
Section 8 unless the Committee has certified, by resolution
or other appropriate action in writing, that the performance
criteria and any other material terms previously established by
the Committee or set forth in the Plan, have been satisfied to
the extent necessary to qualify as performance based
compensation under Code Section 162(m).
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9.
Change in Control.
(a)
Effect of Change in
Control.
Subject to
Section 9(a)(iv), and if and only to the extent provided in
the Award Agreement, or to the extent otherwise determined by
the Committee, upon the occurrence of a Change in
Control, as defined in Section 9(b):
(i) Any Option or Stock
Appreciation Right that was not previously vested and
exercisable as of the time of the Change in Control, shall
become immediately vested and exercisable, subject to applicable
restrictions set forth in Section 10(a) hereof.
(ii) Any restrictions, deferral of
settlement, and forfeiture conditions applicable to a Restricted
Stock Award, Deferred Stock Award or an Other Stock-Based Award
subject only to future service requirements granted under the
Plan shall lapse and such Awards shall be deemed fully vested as
of the time of the Change in Control, except to the extent of
any waiver by the Participant and subject to applicable
restrictions set forth in Section 10(a) hereof.
(iii) With respect to any outstanding
Award subject to achievement of performance goals and conditions
under the Plan, the Committee may, in its discretion, deem such
performance goals and conditions as having been met as of the
date of the Change in Control.
(iv) Notwithstanding the foregoing or any
provision in any Award Agreement to the contrary, if in the
event of a Change in Control the successor company assumes or
substitutes for an Option, Stock Appreciation Right, Restricted
Stock Award, Deferred Stock Award or Other Stock-Based Award,
then each such outstanding Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award or Other
Stock-Based Award shall not be accelerated as described in
Sections 9(a)(i), (ii) and (iii). For the purposes of
this Section 9(a)(iv), an Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award or Other
Stock-Based Award shall be considered assumed or substituted for
if following the Change in Control the Award confers the right
to purchase or receive, for each Share subject to the Option,
Stock Appreciation Right, Restricted Stock Award, Deferred Stock
Award or Other Stock-Based Award immediately prior to the Change
in Control, the consideration (whether stock, cash or other
securities or property) received in the transaction constituting
a Change in Control by holders of Shares for each Share held on
the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the
transaction constituting a Change in Control is not solely
common stock of the successor company or its parent or
subsidiary, the Committee may, with the consent of the successor
company or its parent or subsidiary, provide that the
consideration to be received upon the exercise or vesting of an
Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award, for each Share
subject thereto, will be solely common stock of the successor
company or its parent or subsidiary substantially equal in fair
market value to the per share consideration received by holders
of Shares in the transaction constituting a Change in Control.
The determination of such substantial equality of value of
consideration shall be made by the Committee in its sole
discretion and its determination shall be conclusive and binding.
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(b)
Definition of
Change in Control.
Unless
otherwise specified in an Award Agreement, a Change in
Control shall mean the occurrence of any of the following:
(i) The acquisition by any Person
of Beneficial Ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of more than fifty percent
(50%) of either (A) the then outstanding shares of common
stock of the Company (the Outstanding Company Common
Stock) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the Outstanding
Company Voting Securities) (the foregoing Beneficial Ownership
hereinafter being referred to as a Controlling
Interest); provided, however, that for purposes of this
Section 9(b), the following acquisitions shall not
constitute or result in a Change in Control: (v) any
acquisition directly from the Company; (w) any acquisition
by the Company; (x) any acquisition by any Person that as
of the Effective Date owns Beneficial Ownership of a Controlling
Interest; (y) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
Related Entity; or (z) any acquisition by any entity
pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) below; or
(ii) During any period of two
(2) consecutive years (not including any period prior to
the Effective Date) individuals who constitute the Board on the
Effective Date (the Incumbent Board) cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by
the Companys shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Consummation of a
reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or
any of its Related Entities, a sale or other disposition of all
or substantially all of the assets of the Company, or the
acquisition of assets or equity of another entity by the Company
or any of its Related Entities (each a Business
Combination), in each case, unless, following such
Business Combination, (A) all or substantially all of the
individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of the value of the then
outstanding equity securities and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of members of the board of directors
(or comparable governing body of an entity that does not have
such a board), as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or
all or substantially all of the Companys assets either
directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person
A-18
(excluding any employee benefit
plan (or related trust) of the Company or such entity resulting
from such Business Combination or any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling
Interest) beneficially owns, directly or indirectly, fifty
percent (50%) or more of the value of the then outstanding
equity securities of the entity resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such entity except to the extent that such
ownership existed prior to the Business Combination and
(C) at least a majority of the members of the Board of
Directors or other governing body of the entity resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders
of the Company of a complete liquidation or dissolution of the
Company.
10.
General
Provisions.
(a)
Compliance With Legal and
Other Requirements.
The Company may, to the
extent deemed necessary or advisable by the Committee, postpone
the issuance or delivery of Shares or payment of other benefits
under any Award until completion of such registration or
qualification of such Shares or other required action under any
federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated
quotation system upon which the Shares or other Company
securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee, may consider
appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate
in connection with the issuance or delivery of Shares or payment
of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.
(b)
Limits on
Transferability; Beneficiaries.
No Award or
other right or interest granted under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of such Participant to any party, or
assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution or to a Beneficiary
upon the death of a Participant, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other
than Incentive Stock Options and Stock Appreciation Rights in
tandem therewith) may be transferred to one or more
Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the
extent such transfers are permitted by the Committee pursuant to
the express terms of an Award Agreement (subject to any terms
and conditions which the Committee may impose thereon). A
Beneficiary, transferee, or other person claiming any rights
under the Plan from or through any Participant shall be subject
to all terms and conditions of the Plan and any Award Agreement
applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions
deemed necessary or appropriate by the Committee.
A-19
(c)
Adjustments.
(i)
Adjustments to
Awards.
In the event that any extraordinary
dividend or other distribution (whether in the form of cash,
Shares, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event
affects the Shares
and/or
such
other securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the
Committee to be appropriate, then the Committee shall, in such
manner as it may deem equitable, substitute, exchange or adjust
any or all of (A) the number and kind of Shares which may
be delivered in connection with Awards granted thereafter,
(B) the number and kind of Shares by which annual
per-person Award limitations are measured under Section 5
hereof, (C) the number and kind of Shares subject to or
deliverable in respect of outstanding Awards, (D) the
exercise price, grant price or purchase price relating to any
Award
and/or
make provision for payment of cash or other property in respect
of any outstanding Award, and (E) any other aspect of any
Award that the Committee determines to be appropriate.
(ii)
Adjustments in Case of
Certain Transactions.
In the event of any
merger, consolidation or other reorganization in which the
Company does not survive, or in the event of any Change in
Control, any outstanding Awards may be dealt with in accordance
with any of the following approaches, as determined by the
agreement effectuating the transaction or, if and to the extent
not so determined, as determined by the Committee: (a) the
continuation of the outstanding Awards by the Company, if the
Company is a surviving entity, (b) the assumption or
substitution for, as those terms are defined in
Section 9(b)(iv) hereof, the outstanding Awards by the
surviving entity or its parent or subsidiary, (c) full
exercisability or vesting and accelerated expiration of the
outstanding Awards, or (d) settlement of the value of the
outstanding Awards in cash or cash equivalents or other property
followed by cancellation of such Awards (which value, in the
case of Options or Stock Appreciation Rights, shall be measured
by the amount, if any, by which the Fair Market Value of a Share
exceeds the exercise or grant price of the Option or Stock
Appreciation Right as of the effective date of the transaction).
The Committee shall give written notice of any proposed
transaction referred to in this Section 10(c)(ii) a
reasonable period of time prior to the closing date for such
transaction (which notice may be given either before or after
the approval of such transaction), in order that Participants
may have a reasonable period of time prior to the closing date
of such transaction within which to exercise any Awards that are
then exercisable (including any Awards that may become
exercisable upon the closing date of such transaction). A
Participant may condition his exercise of any Awards upon the
consummation of the transaction.
(iii)
Other
Adjustments.
The Committee (and the Board if
and only to the extent such authority is not required to be
exercised by the Committee to comply with Section 162(m) of
the Code) is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including
Performance Awards, or performance goals relating thereto) in
recognition of unusual or nonrecurring events (including,
without limitation, acquisitions and dispositions of businesses
and assets) affecting the Company, any Related Entity or any
business unit, or the financial statements of the Company or any
Related Entity, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or
business conditions or in view of the Committees
assessment of the business
A-20
strategy of the Company, any
Related Entity or business unit thereof, performance of
comparable organizations, economic and business conditions,
personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such adjustment
shall be authorized or made if and to the extent that such
authority or the making of such adjustment would cause Options,
Stock Appreciation Rights and Performance Awards granted
pursuant to Section 8(b) hereof to Participants designated
by the Committee as Covered Employees and intended to qualify as
performance-based compensation under Code
Section 162(m) and the regulations thereunder to otherwise
fail to qualify as performance-based compensation
under Code Section 162(m) and regulations thereunder.
(d)
Taxes.
The
Company and any Related Entity are authorized to withhold from
any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or
other payment to a Participant, amounts of withholding and other
taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as
the Committee may deem advisable to enable the Company or any
Related Entity and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating
to any Award. This authority shall include authority to withhold
or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of a Participants tax
obligations, either on a mandatory or elective basis in the
discretion of the Committee.
(e)
Changes to the Plan and
Awards.
The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committees
authority to grant Awards under the Plan, without the consent of
shareholders or Participants, except that any amendment or
alteration to the Plan shall be subject to the approval of the
Companys shareholders not later than the annual meeting
next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including,
without limitation,
Rule 16b-3
or Code Section 162(m)) or the rules of any stock exchange
or automated quotation system on which the Shares may then be
listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan
to shareholders for approval; provided that, without the consent
of an affected Participant, no such Board action may materially
and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may
waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any Award theretofore granted and any
Award Agreement relating thereto, except as otherwise provided
in the Plan; provided that, without the consent of an affected
Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant
under such Award.
(f)
Limitation on Rights
Conferred Under Plan.
Neither the Plan nor
any action taken hereunder or under any Award shall be construed
as (i) giving any Eligible Person or Participant the right
to continue as an Eligible Person or Participant or in the
employ or service of the Company or a Related Entity;
(ii) interfering in any way with the right of the Company
or a Related Entity to terminate any Eligible Persons or
Participants Continuous Service at any time,
(iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly
with other Participants and Employees, or (iv) conferring
on a Participant any of the rights of a shareholder of the
Company including, without limitation, any right to receive
dividends or distributions, any right to vote or act by written
consent, any right to attend
A-21
meetings of shareholders or any
right to receive any information concerning the Companys
business, financial condition, results of operation or
prospects, unless and until such time as the Participant is duly
issued Shares on the stock books of the Company in accordance
with the terms of an Award. None of the Company, its officers or
its directors shall have any fiduciary obligation to the
Participant with respect to any Awards unless and until the
Participant is duly issued Shares pursuant to the Award on the
stock books of the Company in accordance with the terms of an
Award. Neither the Company nor any of the Companys
officers, directors, representatives or agents are granting any
rights under the Plan to the Participant whatsoever, oral or
written, express or implied, other than those rights expressly
set forth in this Plan or the Award Agreement.
(g)
Unfunded Status of
Awards; Creation of Trusts.
The Plan is
intended to constitute an unfunded plan for
incentive and deferred compensation. With respect to any
payments not yet made to a Participant or obligation to deliver
Shares pursuant to an Award, nothing contained in the Plan or
any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company;
provided that the Committee may authorize the creation of trusts
and deposit therein cash, Shares, other Awards or other
property, or make other arrangements to meet the Companys
obligations under the Plan. Such trusts or other arrangements
shall be consistent with the unfunded status of the
Plan unless the Committee otherwise determines with the consent
of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds
in alternative investments, subject to such terms and conditions
as the Committee may specify and in accordance with applicable
law.
(h)
Nonexclusivity of the
Plan.
Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the
power of the Board or a committee thereof to adopt such other
incentive arrangements as it may deem desirable including
incentive arrangements and awards which do not qualify under
Section 162(m) of the Code.
(i)
Payments in the Event of
Forfeitures; Fractional Shares.
Unless
otherwise determined by the Committee, in the event of a
forfeiture of an Award with respect to which a Participant paid
cash or other consideration, the Participant shall be repaid the
amount of such cash or other consideration. No fractional Shares
shall be issued or delivered pursuant to the Plan or any Award.
The Committee shall determine whether cash, other Awards or
other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j)
Governing
Law.
The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any
Award Agreement shall be determined in accordance with the laws
of the State of Delaware without giving effect to principles of
conflict of laws, and applicable federal law.
(k)
Non-U.S. Laws.
The
Committee shall have the authority to adopt such modifications,
procedures, and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which
the Company or its Related Entities may operate to assure the
viability of the benefits from Awards granted to Participants
performing services in such countries and to meet the objectives
of the Plan.
A-22
(l)
Plan Effective Date and
Shareholder Approval; Termination of
Plan.
The Plan shall become effective on the
Effective Date, subject to subsequent approval, within
12 months of its adoption by the Board, by shareholders of
the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code
Sections 162(m) (if applicable) and 422,
Rule 16b-3
under the Exchange Act (if applicable), applicable requirements
under the rules of any stock exchange or automated quotation
system on which the Shares may be listed or quoted, and other
laws, regulations, and obligations of the Company applicable to
the Plan. Awards may be granted subject to shareholder approval,
but may not be exercised or otherwise settled in the event the
shareholder approval is not obtained. The Plan shall terminate
at the earliest of (a) such time as no Shares remain
available for issuance under the Plan, (b) termination of
this Plan by the Board, or (c) the tenth anniversary of the
Effective Date. Awards outstanding upon expiration of the Plan
shall remain in effect until they have been exercised or
terminated, or have expired.
A-23
ANNEX B
FX REAL ESTATE AND
ENTERTAINMENT INC.
2007 EXECUTIVE EQUITY INCENTIVE
PLAN
2007 EXECUTIVE EQUITY INCENTIVE
PLAN
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Purpose
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B-1
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Definitions
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B-1
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Administration
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B-4
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Shares Subject to Plan
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B-5
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Eligibility; Per-Person Limitations
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B-6
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Specific Terms of Options
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B-6
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Certain Provisions Applicable to Options
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B-8
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Change in Control
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B-10
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General Provisions
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B-12
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2007 EXECUTIVE EQUITY INCENTIVE
PLAN
1.
Purpose.
The
purpose of this 2007 EXECUTIVE EQUITY INCENTIVE PLAN (the
Plan) is to assist FX Real Estate and Entertainment
Inc., a Delaware corporation (the Company) and its
Related Entities (as hereinafter defined) in attracting,
motivating, retaining and rewarding high-quality executives and
other employees, officers, directors, consultants and other
persons who provide services to the Company or its Related
Entities by enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the
Companys shareholders, and providing such persons with
long term performance incentives to expend their maximum efforts
in the creation of shareholder value.
2.
Definitions.
For
purposes of the Plan, the following terms shall be defined as
set forth below, in addition to such terms defined in
Section 1 hereof and elsewhere herein.
(a)
Beneficiary
and
Beneficial Ownership
means
the person, persons, trust or trusts that have been designated
by an Optionee in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits
specified under the Plan upon such Optionees death or to
which Options or other rights are transferred if and to the
extent permitted under Section 9(b) hereof. If, upon an
Optionees death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary
means the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(b)
Beneficial
Owner
shall have the meaning ascribed to such term
in
Rule 13d-3
under the Exchange Act and any successor to such Rule.
(c)
Board
means the Companys Board of Directors.
(d)
Cause
shall, with respect to any Optionee, have the meaning specified
in the Option Agreement. In the absence of any definition in the
Option Agreement, Cause shall have the equivalent
meaning or the same meaning as cause or for
cause set forth in any employment, consulting, or other
agreement for the performance of services between the Optionee
and the Company or a Related Entity or, in the absence of any
such agreement or any such definition in such agreement, such
term shall mean (i) the failure by the Optionee to perform,
in a reasonable manner, his or her duties as assigned by the
Company or a Related Entity, (ii) any violation or breach
by the Optionee of his or her employment, consulting or other
similar agreement with the Company or a Related Entity, if any,
(iii) any violation or breach by the Optionee of any
non-competition, non-solicitation, non-disclosure
and/or
other
similar agreement with the Company or a Related Entity,
(iv) any act by the Optionee of dishonesty or bad faith
with respect to the Company or a Related Entity, (v) use of
alcohol, drugs or other similar substances in a manner that
adversely affects the Optionees work performance, or
(vi) the commission by the Optionee of any act,
misdemeanor, or crime reflecting unfavorably upon the Optionee
or the Company or any Related Entity. The good faith
determination by the Committee of whether the Optionees
Continuous Service was terminated by the Company for
Cause shall be final and binding for all purposes
hereunder.
(e)
Change in
Control
means a Change in Control as defined in
Section 8(b) of the Plan.
B-1
(f)
Code
means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions
and regulations thereto.
(g)
Committee
means the Compensation Committee of the Board; provided,
however, that if at any time, there shall fail to be a sitting
Compensation Committee or if there are no longer any members on
the Compensation Committee, then the Board shall serve as the
Committee. The Committee shall consist of at least two
directors, and each member of the Committee shall be (i) a
non-employee director within the meaning of
Rule 16b-3
(or any successor rule) under the Exchange Act, unless
administration of the Plan by non-employee directors
is not then required in order for exemptions under
Rule 16b-3
to apply to transactions under the Plan, (ii) an
outside director within the meaning of
Section 162(m) of the Code, and
(iii) Independent.
(h)
Consultant
means any person (other than an Employee or a Director, solely
with respect to rendering services in such persons
capacity as a director) who is engaged by the Company or any
Related Entity to render consulting or advisory services to the
Company or such Related Entity.
(i)
Continuous
Service
means the uninterrupted provision of
services to the Company or any Related Entity in any capacity of
Employee, Director, Consultant or other service provider.
Continuous Service shall not be considered to be interrupted in
the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entities, or
any successor entities, in any capacity of Employee, Director,
Consultant or other service provider, or (iii) any change
in status as long as the individual remains in the service of
the Company or a Related Entity in any capacity of Employee,
Director, Consultant or other service provider (except as
otherwise provided in the Option Agreement). An approved leave
of absence shall include sick leave, military leave, or any
other authorized personal leave.
(j)
Covered
Employee
means the Person who, as of the end of
the taxable year, either is the principal executive officer of
the Company or is serving as the acting principal executive
officer of the Company, and each other Person whose compensation
is required to be disclosed in the Companys filings with
the Securities and Exchange Commission by reason of that person
being among the three highest compensated officers of the
Company as of the end of a taxable year, or such other person as
shall be considered a covered employee for purposes
of Section 162(m) of the Code.
(k)
Director
means a member of the Board or the board of directors of any
Related Entity.
(l)
Disability
means a permanent and total disability (within the meaning of
Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(m)
Effective
Date
means the effective date of the Plan, which
shall be December 17, 2007, subject to approval within
twelve (12) months by the stockholders of the shares
entitled to vote thereon.
(n)
Eligible
Person
means each officer, Director, Employee,
Consultant and other person who provides services to the Company
or any Related Entity. The foregoing notwithstanding, only
employees of the Company, or any parent corporation or
subsidiary corporation of the Company (as those terms are
defined in Sections 424(e) and (f) of the Code,
B-2
respectively), shall be Eligible
Persons for purposes of receiving any Incentive Stock Options.
An Employee on leave of absence may be considered as still in
the employ of the Company or a Related Entity for purposes of
eligibility for participation in the Plan.
(o)
Employee
means any person, including an officer or Director, who is an
employee of the Company or any Related Entity. The payment of a
directors fee by the Company or a Related Entity shall not
be sufficient to constitute employment by the
Company.
(p)
Exchange
Act
means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and
successor provisions and rules thereto.
(q)
Fair Market
Value
means the fair market value of Shares,
Options or other property as determined by the Committee, or
under procedures established by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of a Share as
of any given date shall be the closing sale price per Share
reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Shares are traded on
the date immediately preceding the date as of which such value
is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.
(r)
Good
Reason
shall, with respect to any Optionee, have
the meaning specified in the Option Agreement. In the absence of
any definition in the Option Agreement, Good Reason
shall have the equivalent meaning or the same meaning as
good reason or for good reason set forth
in any employment, consulting or other agreement for the
performance of services between the Optionee and the Company or
a Related Entity or, in the absence of any such agreement or any
such definition in such agreement, such term shall mean
(i) the assignment to the Optionee of any duties
inconsistent in any material respect with the Optionees
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as assigned
by the Company or a Related Entity, or any other action by the
Company or a Related Entity which results in a material
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company or a Related Entity promptly
after receipt of notice thereof given by the Optionee; or
(ii) any material failure by the Company or a Related
Entity to comply with its obligations to the Optionee as agreed
upon, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the
Company or a Related Entity promptly after receipt of notice
thereof given by the Optionee.
(s)
Incentive Stock
Option
means any Option intended to be designated
as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(t)
Independent
,
when referring to either the Board or members of the Committee,
shall have the same meaning as used in the rules of the NASDAQ
Global Market or any national securities exchange on which any
securities of the Company are listed for trading, and if not
listed for trading, by the rules of the Nasdaq National Market.
(u)
Incumbent
Board
means the Incumbent Board as defined in
Section 8(b)(ii) of the Plan.
B-3
(v)
Option
means a right granted to an Optionee under Section 6(b)
hereof, to purchase Shares at a specified price during specified
time periods.
(w)
Option
Agreement
means any written agreement, contract or
other instrument or document evidencing any Option granted by
the Committee hereunder.
(x)
Optionee
means a person to whom an Option is granted under this Plan or
any person who succeeds to the rights of such person under this
Plan.
(y)
Person
shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, and shall include a
group as defined in Section 13(d) thereof.
(z)
Related
Entity
means any Subsidiary, and any business,
corporation, partnership, limited liability company or other
entity designated by the Board, in which the Company or a
Subsidiary holds a substantial ownership interest, directly or
indirectly.
(aa)
Rule 16b-3
means
Rule 16b-3,
as from time to time in effect and applicable to the Plan and
Optionees, promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act.
(bb)
Shares
means the shares of common stock of the Company, par value $.01
per share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 9(c) hereof.
(cc)
Subsidiary
means any corporation or other entity in which the Company has a
direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities
or interests of such corporation or other entity entitled to
vote generally in the election of directors or in which the
Company has the right to receive 50% or more of the distribution
of profits or 50% or more of the assets on liquidation or
dissolution.
(dd)
Substitute
Options
means options or other awards granted by
the Company in assumption of, or in substitution or exchange
for, Options previously granted, or the right or obligation to
make future grants or awards, by a company acquired by the
Company or any Related Entity or with which the Company or any
Related Entity combines.
3.
Administration.
(a)
Authority of the
Committee.
The Plan shall be administered by
the Committee except to the extent the Board elects to
administer the Plan, in which case the Plan shall be
administered by only those directors who are Independent
Directors, in which case references herein to the
Committee shall be deemed to include references to
the Independent members of the Board. The Committee shall have
full and final authority, subject to and consistent with the
provisions of the Plan, to select Eligible Persons to become
Optionees, grant Options, determine the type, number and other
terms and conditions of, and all other matters relating to,
Options, prescribe Option Agreements (which need not be
identical for each Optionee) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and
Option Agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other
decisions and determinations as the Committee may deem necessary
or advisable for the administration of the Plan. In exercising
any discretion granted to the Committee under the
B-4
Plan or pursuant to any Option
Agreement, the Committee shall not be required to follow past
practices, act in a manner consistent with past practices, or
treat any Eligible Person or Optionee in a manner consistent
with the treatment of other Eligible Persons or Optionees.
(b)
Manner of Exercise of
Committee Authority.
: The Committee, and not
the Board, shall exercise sole and exclusive discretion on any
matter relating to an Optionee then subject to Section 16
of the Exchange Act with respect to the Company to the extent
necessary in order that transactions by such Optionee shall be
exempt under
Rule 16b-3
under the Exchange Act. Any action of the Committee shall be
final, conclusive and binding on all persons, including the
Company, its Related Entities, Eligible Persons, Optionees,
Beneficiaries, transferees under Section 9(b) hereof or
other persons claiming rights from or through an Optionee, and
shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of
the Company or any Related Entity, or committees thereof, the
authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative
functions as the Committee may determine to the extent that such
delegation will not result in the loss of an exemption under
Rule 16b-3(d)(1)
for Options granted to Optionees subject to Section 16 of
the Exchange Act in respect of the Company and will not cause
Options intended to qualify as performance-based
compensation under Code Section 162(m) to fail to so
qualify. The Committee may appoint agents to assist it in
administering the Plan.
(c)
Limitation of
Liability.
The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely
or act upon any report or other information furnished to him or
her by any officer or Employee, the Companys independent
auditors, Consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the
Board, and any officer or Employee acting at the direction or on
behalf of the Committee or the Board, shall not be personally
liable for any action or determination taken or made in good
faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the
Company with respect to any such action or determination.
4.
Shares Subject to
Plan.
(a)
Limitation on Overall
Number of Shares Available for Delivery Under
Plan.
Subject to adjustment as provided in
Section 9(c) hereof, the total number of Shares reserved
and available for delivery under the Plan shall be twelve
million five-hundred thousand (12,500,000) Shares. Any Shares
delivered under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
(b)
Application of Limitation
to Grants of Option
. No Option may be granted
if the number of Shares to be delivered in connection with such
an Option exceeds the number of Shares remaining available for
delivery under the Plan, minus the number of Shares deliverable
in settlement of or relating to then outstanding Options. The
Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in
the case Substitute Options) and make adjustments if the number
of Shares actually delivered differs from the number of Shares
previously counted in connection with an Option.
B-5
(c)
Availability of Shares
Not Delivered under Options and Adjustments to Limits.
(i) If any Shares subject to an
Option are forfeited, expire or otherwise terminate without
issuance of such Shares or otherwise does not result in the
issuance of all or a portion of the Shares subject to such
Option, the Shares shall, to the extent of such forfeiture,
expiration, termination, cash settlement or non-issuance, again
be available for Options under the Plan.
(ii) Substitute Options shall not
reduce the Shares authorized for grant under the Plan or
authorized for grant to an Optionee in any period. Additionally,
in the event that a company acquired by the Company or any
Related Entity or with which the Company or any Related Entity
combines has shares available under a pre-existing plan approved
by shareholders and not adopted in contemplation of such
acquisition or combination, the shares available for delivery
pursuant to the terms of such pre-existing plan (as adjusted, to
the extent appropriate, using the exchange ratio or other
adjustment or valuation ratio or formula used in such
acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Options under
the Plan and shall not reduce the Shares authorized for delivery
under the Plan; provided that Options using such available
shares shall not be made after the date Options or grants could
have been made under the terms of the pre-existing plan, absent
the acquisition or combination, and shall only be made to
individuals who were not Employees or Directors prior to such
acquisition or combination.
(iii) Notwithstanding anything in
this Section 4(c) to the contrary but subject to adjustment
as provided in Section 9(c) hereof, the maximum aggregate
number of Shares that may be issued under the Plan as a result
of the exercise of the Incentive Stock Options shall be twelve
million five-hundred thousand (12,500,000) Shares shares.
5.
Eligibility; Per-Person
Limitations
.
Options may be granted under
the Plan only to Eligible Persons. Subject to adjustment as
provided in Section 9(c), in any fiscal year of the Company
during any part of which the Plan is in effect, no Optionee may
be granted Options with respect to more than twelve million
five-hundred thousand (12,500,000) Shares. The maximum number of
Shares that may be granted to any one Optionee over the life of
the Plan is twelve million five-hundred thousand (12,500,000)
Shares.
6.
Specific Terms of
Options.
(a)
General.
Options
may be granted on the terms and conditions set forth in this
Section 6. In addition, the Committee may impose on any
Option or the exercise thereof, at the date of grant or
thereafter (subject to Section 9(e)), such additional terms
and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine, including terms
requiring forfeiture of Options in the event of termination of
the Optionees Continuous Service and terms permitting an
Optionee to make elections relating to his or her Option. The
Committee shall retain full power and discretion to accelerate,
waive or modify, at any time, any term or condition of an Option
that is not mandatory under the Plan. Except in cases in which
the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of
Delaware law, no consideration other than services may be
required for the grant (as opposed to the exercise) of any
Option.
B-6
(b)
Grant of
Options.
The Committee is authorized to grant
Options to any Eligible Person on the following terms and
conditions:
(i)
Exercise
Price.
Other than in connection with
Substitute Options, the exercise price per Share purchasable
under an Option shall be determined by the Committee, provided
that such exercise price shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date
of grant of the Option and shall not, in any event, be less than
the par value of a Share on the date of grant of the Option. If
an Employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all classes
of stock of the Company (or any parent corporation or subsidiary
corporation of the Company, as those terms are defined in
Sections 424(e) and (f) of the Code, respectively) and
an Incentive Stock Option is granted to such employee, the
exercise price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than
110% of the Fair Market Value of a Share on the date such
Incentive Stock Option is granted. Other than pursuant to
Section 9(c), the Committee shall not be permitted to
(A) lower the exercise price per Share of an Option after
it is granted, (B) cancel an Option when the exercise price
per Share exceeds the Fair Market Value of the underlying Shares
in exchange for another Option (other than in connection with
Substitute Options), or (C) take any other action with
respect to an Option that may be treated as a repricing, without
approval of the Companys shareholders.
(ii)
Time and Method of
Exercise
. The Committee shall determine the
time or times at which or the circumstances under which an
Option may be exercised in whole or in part (including based on
achievement of performance goals
and/or
future service requirements), the time or times at which Options
shall cease to be or become exercisable following termination of
Continuous Service or upon other conditions, the methods by
which the exercise price may be paid or deemed to be paid
(including in the discretion of the Committee a cashless
exercise procedure), the form of such payment, including,
without limitation, cash, Shares (including without limitation
the withholding of Shares otherwise deliverable pursuant to the
grant), other options or other awards granted under other plans
of the Company or a Related Entity, or other property (including
notes or other contractual obligations of Optionees to make
payment on a deferred basis provided that such deferred payments
are not in violation of the Sarbanes-Oxley Act of 2002, or any
rule or regulation adopted thereunder or any other applicable
law), and the methods by or forms in which Shares will be
delivered or deemed to be delivered to Optionees.
(iii)
Incentive Stock
Options
. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code. Anything in the
Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either
the Plan or any Incentive Stock Option under Section 422 of
the Code, unless the Optionee has first requested, or consents
to, the change that will result in such disqualification. Thus,
if and to the extent required to comply with Section 422 of
the Code, Options granted as Incentive Stock Options shall be
subject to the following special terms and conditions:
(A) the Option shall not be
exercisable for more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if an
B-7
Optionee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of
the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent corporation or
subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f) of the Code,
respectively) and the Incentive Stock Option is granted to such
Optionee, the term of the Incentive Stock Option shall be (to
the extent required by the Code at the time of the grant) for no
more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the Shares with respect to which Incentive Stock
Options granted under the Plan and all other option plans of the
Company (and any parent corporation or subsidiary corporation of
the Company, as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) that become exercisable for
the first time by the Optionee during any calendar year shall
not (to the extent required by the Code at the time of the
grant) exceed $100,000.
7.
Certain Provisions
Applicable to Options.
(a)
Stand-Alone, Additional,
and Substitute Options
Options granted under
the Plan may, in the discretion of the Committee, be granted
either alone or in addition to or in substitution or exchange
for, any other Option or any award granted under another plan of
the Company, any Related Entity, or any business entity to be
acquired by the Company or a Related Entity, or any other right
of an Optionee to receive payment from the Company or any
Related Entity. Such additional, substitute or exchange Options
may be granted at any time. If an Option is granted in
substitution or exchange for another Option or award granted
under another plan, the Committee shall require the surrender of
such other Option or other award in consideration for the grant
of the new Option. In addition, Options may be granted in lieu
of cash compensation, including in lieu of cash amounts payable
under other plans of the Company or any Related Entity, in which
the value of Stock subject to the Option is equivalent in value
to the cash compensation, or in which the exercise price, grant
price or purchase price of the Option in the nature of a right
that may be exercised is equal to the Fair Market Value of the
underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price
or grant price discounted by the amount of the cash
compensation surrendered).
(b)
Term of
Options.
The term of each Option shall be for
such period as may be determined by the Committee; provided that
in no event shall the term of any Option exceed a period of ten
years (or in the case of an Incentive Stock Option such shorter
term as may be required under Section 422 of the Code).
(c)
Form and Timing of
Payment.
Subject to the terms of the Plan and
any applicable Option Agreement, payments to be made by the
Company or a Related Entity upon the exercise of an Option or
settlement of an Option may be made in such forms as the
Committee shall determine, including, without limitation, cash,
Shares, other Options or other property, and may be made in a
single payment or transfer, in installments, or on a deferred
basis. Any installment or deferral provided for in the preceding
sentence shall, however, be subject to the Companys
compliance with the provisions of the Sarbanes-Oxley Act of
2002, the rules and regulations adopted by the Securities and
Exchange Commission thereunder, and all applicable rules of the
NASDAQ Global Market or any national securities exchange on
which the
B-8
Companys securities are
listed or quoted for trading and, if not listed or quoted for
trading on either the NASDAQ Global Market or a national
securities exchange, then the rules of the NASDAQ Global Market.
The settlement of any Option may be accelerated, and cash paid
in lieu of Shares in connection with such settlement, in the
discretion of the Committee or upon occurrence of one or more
specified events (in addition to a Change in Control).
Installment or deferred payments may be required by the
Committee (subject to Section 9(e) of the Plan, including
the consent provisions thereof in the case of any deferral of an
outstanding Option not provided for in the original Option
Agreement) or permitted at the election of the Optionee on terms
and conditions established by the Committee. The Committee may,
without limitation, make provision for the payment or crediting
of a reasonable interest rate on installment or deferred
payments or the grant or other amounts in respect of installment
or deferred payments denominated in Shares.
(d)
Exemptions from
Section 16(b) Liability
.: It is the
intent of the Company that the grant of any Options to or other
transaction by an Optionee who is subject to Section 16 of
the Exchange Act shall be exempt from Section 16 pursuant
to an applicable exemption (except for transactions acknowledged
in writing to be non-exempt by such Optionee). Accordingly, if
any provision of this Plan or any Option Agreement does not
comply with the requirements of
Rule 16b-3
then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform
to the applicable requirements of
Rule 16b-3
so that such Optionee shall avoid liability under
Section 16(b).
(e)
Code
Section 409A.
(i) If any Option constitutes a
nonqualified deferred compensation plan under
Section 409A of the Code (a Section 409A
Plan), then the Option shall be subject to the following
additional requirements, if and to the extent required to comply
with Section 409A of the Code:
(A) Payments under the
Section 409A Plan may not be made earlier than (u) the
Optionees separation from service, (v) the date the
Optionee becomes disabled, (w) the Optionees death,
(x) a specified time (or pursuant to a fixed schedule)
specified in the Option Agreement at the date of the deferral of
such compensation, (y) a change in the ownership or
effective control of the corporation, or in the ownership of a
substantial portion of the assets of the corporation, or
(z) the occurrence of an unforeseeble emergency;
(B) The time or schedule for any
payment of the deferred compensation may not be accelerated,
except to the extent provided in applicable Treasury Regulations
or other applicable guidance issued by the Internal Revenue
Service;
(C) Any elections with respect to
the deferral of such compensation or the time and form of
distribution of such deferred compensation shall comply with the
requirements of Section 409A(a)(4) of the Code; and
(D) In the case of any Optionee who
is specified employee, a distribution on account of a separation
from service may not be made before the date which is six months
after the date of the Optionees separation from service
(or, if earlier, the date of the Optionees death).
B-9
For purposes of the foregoing, the terms separation from
service, disabled, and specified
employee, all shall be defined in the same manner as those
terms are defined for purposes of Section 409A of the Code,
and the limitations set forth herein shall be applied in such
manner (and only to the extent) as shall be necessary to comply
with any requirements of Section 409A of the Code that are
applicable to the Option.
(ii) The Option Agreement for any
Option that the Committee reasonably determines to constitute a
Section 409A Plan, and the provisions of the Plan
applicable to that Option, shall be construed in a manner
consistent with the applicable requirements of Section 409A
of the Code, and the Committee, in its sole discretion and
without the consent of any Optionee, may amend any Option
Agreement (and the provisions of the Plan applicable thereto) if
and to the extent that the Committee determines that such
amendment is necessary or appropriate to comply with the
requirements of Section 409A of the Code. No Option
Agreements shall be adjusted, modified or substituted for
without the consent of the Optionee if any such adjustments,
modifications or substitutions would cause the Option Agreement
to violate the requirements of Section 409A of the Code.
(a)
Effect of Change in
Control.
Subject to
Section 8(a)(iii), and if and only to the extent provided
in the Option Agreement, or to the extent otherwise determined
by the Committee, upon the occurrence of a Change in
Control, as defined in Section 8(b):
(i) Any Option that was not previously vested and
exercisable as of the time of the Change in Control, shall
become immediately vested and exercisable, subject to applicable
restrictions set forth in Section 9(a) hereof.
(ii) With respect to any outstanding Option subject
to achievement of performance goals and conditions under the
Plan, the Committee may, in its discretion, deem such
performance goals and conditions as having been met as of the
date of the Change in Control.
(iii) Notwithstanding the foregoing or any provision
in any Option Agreement to the contrary, if in the event of a
Change in Control the successor company assumes or substitutes
for an Option, then each such outstanding Option shall not be
accelerated as described in Sections 8(a)(i) and (ii). For
the purposes of this Section 8(a)(iii), an Option shall be
considered assumed or substituted for if following the Change in
Control the Option confers the right to purchase or receive, for
each Share subject to the Option immediately prior to the Change
in Control, the consideration (whether stock, cash or other
securities or property) received in the transaction constituting
a Change in Control by holders of Shares for each Share held on
the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the
transaction constituting a Change in Control is not solely
common stock of the successor company or its parent or
subsidiary, the Committee may, with the consent of the successor
company or its parent or subsidiary, provide that the
consideration to be received upon the exercise of an Option for
each Share subject thereto, will be solely common stock of the
successor company or its parent or subsidiary substantially
equal in fair market value to the per share consideration
received by holders of Shares in the transaction constituting a
Change in Control. The determination of such
B-10
substantial equality of value of
consideration shall be made by the Committee in its sole
discretion and its determination shall be conclusive and binding.
(b)
Definition of
Change in Control.
Unless
otherwise specified in an Option Agreement, a Change in
Control shall mean the occurrence of any of the following:
(i) The acquisition by any Person
of Beneficial Ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of more than fifty percent
(50%) of either (A) the then outstanding shares of common
stock of the Company (the Outstanding Company Common
Stock) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the Outstanding
Company Voting Securities) (the foregoing Beneficial Ownership
hereinafter being referred to as a Controlling
Interest); provided, however, that for purposes of this
Section 8(b), the following acquisitions shall not
constitute or result in a Change in Control: (v) any
acquisition directly from the Company; (w) any acquisition
by the Company; (x) any acquisition by any Person that as
of the Effective Date owns Beneficial Ownership of a Controlling
Interest; (y) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
Related Entity; or (z) any acquisition by any entity
pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) below; or
(ii) During any period of two
(2) consecutive years (not including any period prior to
the Effective Date) individuals who constitute the Board on the
Effective Date (the Incumbent Board) cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by
the Companys shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Consummation of a
reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or
any of its Related Entities, a sale or other disposition of all
or substantially all of the assets of the Company, or the
acquisition of assets or equity of another entity by the Company
or any of its Related Entities (each a Business
Combination), in each case, unless, following such
Business Combination, (A) all or substantially all of the
individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of the value of the then
outstanding equity securities and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of members of the board of directors
(or comparable governing body of an entity that does not have
such a board), as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or
all or substantially all of the Companys assets either
directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person
B-11
(excluding any employee benefit
plan (or related trust) of the Company or such entity resulting
from such Business Combination or any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling
Interest) beneficially owns, directly or indirectly, fifty
percent (50%) or more of the value of the then outstanding
equity securities of the entity resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such entity except to the extent that such
ownership existed prior to the Business Combination and
(C) at least a majority of the members of the Board of
Directors or other governing body of the entity resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders
of the Company of a complete liquidation or dissolution of the
Company.
(a)
Compliance With Legal and
Other Requirements.
The Company may, to the
extent deemed necessary or advisable by the Committee, postpone
the issuance or delivery of Shares or payment of other benefits
under any Option until completion of such registration or
qualification of such Shares or other required action under any
federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated
quotation system upon which the Shares or other Company
securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee, may consider
appropriate, and may require any Optionee to make such
representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate
in connection with the issuance or delivery of Shares or payment
of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.
(b)
Limits on
Transferability; Beneficiaries.
No Option
granted under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or
liability of such Optionee to any party, or assigned or
transferred by such Optionee otherwise than by will or the laws
of descent and distribution or to a Beneficiary upon the death
of an Optionee, and such Options that may be exercisable shall
be exercised during the lifetime of the Optionee only by the
Optionee or his or her guardian or legal representative, except
that Options (other than Incentive Stock Options) may be
transferred to one or more Beneficiaries or other transferees
during the lifetime of the Optionee, and may be exercised by
such transferees in accordance with the terms of such Option,
but only if and to the extent such transfers are permitted by
the Committee pursuant to the express terms of an Option
Agreement (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or
other person claiming any rights under the Plan from or through
any Optionee shall be subject to all terms and conditions of the
Plan and any Option Agreement applicable to such Optionee,
except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate
by the Committee.
(i)
Adjustments to
Options.
In the event that any extraordinary
dividend or other distribution (whether in the form of cash,
Shares, or other property),
B-12
recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event
affects the Shares
and/or
such
other securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the
Committee to be appropriate, then the Committee shall, in such
manner as it may deem equitable, substitute, exchange or adjust
any or all of (A) the number and kind of Shares which may
be delivered in connection with Options granted thereafter,
(B) the number and kind of Shares by which annual
per-person Option limitations are measured under Section 5
hereof, (C) the number and kind of Shares subject to or
deliverable in respect of outstanding Options, (D) the
exercise price, grant price or purchase price relating to any
Option
and/or
make
provision for payment of cash or other property in respect of
any outstanding Option, and (E) any other aspect of any
Option that the Committee determines to be appropriate.
(ii)
Adjustments in Case of
Certain Transactions
. In the event of any
merger, consolidation or other reorganization in which the
Company does not survive, or in the event of any Change in
Control, any outstanding Options may be dealt with in accordance
with any of the following approaches, as determined by the
agreement effectuating the transaction or, if and to the extent
not so determined, as determined by the Committee: (a) the
continuation of the outstanding Options by the Company, if the
Company is a surviving entity, (b) the assumption or
substitution for, as those terms are defined in
Section 8(b)(iii) hereof, the outstanding Options by the
surviving entity or its parent or subsidiary, (c) full
exercisability or vesting and accelerated expiration of the
outstanding Options, or (d) settlement of the value of the
outstanding Options in cash or cash equivalents or other
property followed by cancellation of such Options (which value
shall be measured by the amount, if any, by which the Fair
Market Value of a Share exceeds the exercise or grant price of
the Option as of the effective date of the transaction). The
Committee shall give written notice of any proposed transaction
referred to in this Section 9(c)(ii) a reasonable period of
time prior to the closing date for such transaction (which
notice may be given either before or after the approval of such
transaction), in order that Optionees may have a reasonable
period of time prior to the closing date of such transaction
within which to exercise any Options that are then exercisable
(including any Options that may become exercisable upon the
closing date of such transaction). An optionee may condition his
exercise of any Options upon the consummation of the transaction.
(iii)
Other
Adjustments
. The Committee (and the Board if
and only to the extent such authority is not required to be
exercised by the Committee to comply with Section 162(m) of
the Code) is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Options (including
performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions
and dispositions of businesses and assets) affecting the
Company, any Related Entity or any business unit, or the
financial statements of the Company or any Related Entity, or in
response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or
in view of the Committees assessment of the business
strategy of the Company, any Related Entity or business unit
thereof, performance of comparable organizations, economic and
business conditions, personal performance of an Optionee, and
any other circumstances deemed relevant; provided that no such
adjustment shall be authorized or made if and to the extent that
such authority or the making of such adjustment would cause
B-13
Options to Optionees designated by
the Committee as Covered Employees and intended to qualify as
performance-based compensation under Code
Section 162(m) and the regulations thereunder to otherwise
fail to qualify as performance-based compensation
under Code Section 162(m) and regulations thereunder.
(d)
Taxes.
The
Company and any Related Entity are authorized to withhold from
any Option granted, any payment relating to an Option under the
Plan, including from a distribution of Shares, or any payroll or
other payment to an Optionee, amounts of withholding and other
taxes due or potentially payable in connection with any
transaction involving an Option, and to take such other action
as the Committee may deem advisable to enable the Company or any
Related Entity and Optionees to satisfy obligations for the
payment of withholding taxes and other tax obligations relating
to any Option. This authority shall include authority to
withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of an
Optionees tax obligations, either on a mandatory or
elective basis in the discretion of the Committee.
(e)
Changes to the Plan and
Options.
The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committees
authority to grant Options under the Plan, without the consent
of shareholders or Optionees, except that any amendment or
alteration to the Plan shall be subject to the approval of the
Companys shareholders not later than the annual meeting
next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including,
without limitation,
Rule 16b-3
or Code Section 162(m)) or the rules of any stock exchange
or automated quotation system on which the Shares may then be
listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan
to shareholders for approval; provided that, without the consent
of an affected Optionee, no such Board action may materially and
adversely affect the rights of such Optionee under any
previously granted and outstanding Option. The Committee may
waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any Option theretofore granted and any
Option Agreement relating thereto, except as otherwise provided
in the Plan; provided that, without the consent of an affected
Optionee, no such Committee or the Board action may materially
and adversely affect the rights of such Optionee under such
Option.
(f)
Limitation on Rights
Conferred Under Plan.
Neither the Plan nor
any action taken hereunder or under any Option shall be
construed as (i) giving any Eligible Person or Optionee the
right to continue as an Eligible Person or Optionee or in the
employ or service of the Company or a Related Entity;
(ii) interfering in any way with the right of the Company
or a Related Entity to terminate any Eligible Persons or
Optionees Continuous Service at any time,
(iii) giving an Eligible Person or Optionee any claim to be
granted any Option under the Plan or to be treated uniformly
with other Optionees and Employees, or (iv) conferring on
an Optionee any of the rights of a shareholder of the Company
including, without limitation, any right to receive dividends or
distributions, any right to vote or act by written consent, any
right to attend meetings of shareholders or any right to receive
any information concerning the Companys business,
financial condition, results of operation or prospects, unless
and until such time as the Optionee is duly issued Shares on the
stock books of the Company in accordance with the terms of an
Option. None of the Company, its officers or its directors shall
have any fiduciary obligation to the Optionee with respect to
any Options unless and until the Optionee is duly
B-14
issued Shares pursuant to the
Option on the stock books of the Company in accordance with the
terms of an Option. Neither the Company nor any of the
Companys officers, directors, representatives or agents
are granting any rights under the Plan to the Optionee
whatsoever, oral or written, express or implied, other than
those rights expressly set forth in this Plan or the Option
Agreement.
(g)
Status of
Options.
The Plan is intended to constitute
an unfunded plan for incentive compensation. With
respect to any payments not yet made to an Optionee or
obligation to deliver Shares pursuant to an Option, nothing
contained in the Plan or any Option shall give any such Optionee
any rights that are greater than those of a general creditor of
the Company.
(h)
Nonexclusivity of the
Plan.
Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the
power of the Board or a committee thereof to adopt such other
incentive arrangements as it may deem desirable including
incentive arrangements and Options which do not qualify under
Section 162(m) of the Code.
(i)
Payments in the Event of
Forfeitures; Fractional Shares.
Unless
otherwise determined by the Committee, in the event of a
forfeiture of an Option with respect to which an Optionee paid
cash or other consideration, the Optionee shall be repaid the
amount of such cash or other consideration. No fractional Shares
shall be issued or delivered pursuant to the Plan or any Option.
The Committee shall determine whether cash, other Options or
other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j)
Governing
Law.
The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any
Option Agreement shall be determined in accordance with the laws
of the State of Delaware without giving effect to principles of
conflict of laws, and applicable federal law.
(k)
Non-U.S. Laws.
The
Committee shall have the authority to adopt such modifications,
procedures, and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which
the Company or its Related Entities may operate to assure the
viability of the benefits from Options granted to Optionees
performing services in such countries and to meet the objectives
of the Plan.
(l)
Plan Effective Date and
Shareholder Approval; Termination of
Plan.
The Plan shall become effective on the
Effective Date, subject to subsequent approval, within
12 months of its adoption by the Board, by shareholders of
the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code
Sections 162(m) (if applicable) and 422,
Rule 16b-3
under the Exchange Act (if applicable), applicable requirements
under the rules of any stock exchange or automated quotation
system on which the Shares may be listed or quoted, and other
laws, regulations, and obligations of the Company applicable to
the Plan. Options may be granted subject to shareholder
approval, but may not be exercised or otherwise settled in the
event the shareholder approval is not obtained. The Plan shall
terminate at the earliest of (a) such time as no Shares
remain available for issuance under the Plan,
(b) termination of this Plan by the Board, or (c) the
tenth anniversary of the Effective Date. Options outstanding
upon expiration of the Plan shall remain in effect until they
have been exercised or terminated, or have expired.
B-15
ANNEX C
FX REAL
ESTATE AND ENTERTAINMENT INC. (the Company)
AUDIT
COMMITTEE CHARTER
Purpose
The purpose of the Audit Committee (the Committee)
shall be as follows:
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To oversee the accounting and financial reporting processes of
the Company and audits of the financial statements of the
Company, in consultation with the Chief Financial Officer and
senior accounting staff of the Company.
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2.
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To provide assistance to the Board of Directors with respect to
its oversight of:
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(a)
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The integrity of the Companys financial statements;
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(b)
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The Companys compliance with legal and regulatory
requirements, including an evaluation of the performance and
competence of the Companys legal personnel as they relate
to the audit function and general maintenance of corporate
financial standards;
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(c)
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The independent auditors qualifications and independence;
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(d)
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The performance of the Companys internal audit function
and independent auditors; and
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(e)
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An evaluation of the performance and competence of the
Companys senior financial employees, including the Chief
Financial Officer.
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3.
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To prepare the report that SEC rules require be included in the
Companys annual proxy statement.
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Composition
The Committee shall consist of three or more members of the
Board of Directors, each of whom is determined by the Board of
Directors to be independent under the rules of the
NASDAQ Stock Market and the Sarbanes-Oxley Act. Notwithstanding
the foregoing, the Committee may consist of less than all
independent members until the first anniversary of
the Companys listing on the NASDAQ Stock Market in
connection with its initial public offering to the extent
permitted by the rules of the NASDAQ Stock Market.
Qualifications
All members of the Committee shall be able to read and
understand fundamental financial statements (or be able to do so
within a reasonable period of time after his or her appointment)
and at least one member must be a financial expert
under the requirements of the Sarbanes-Oxley Act.
C-1
Compensation
No member of the Committee shall receive compensation other than
directors fees for service as a director of the Company,
including reasonable compensation for serving on the Committee
and regular benefits that other directors receive.
Appointment
and Removal
The members of the Committee shall be appointed by the Board of
Directors and shall serve until such members successor is
duly elected and qualified or until such members earlier
resignation or removal. The members of the Committee may be
removed with cause by a majority vote of the Board of Directors,
and without cause by a majority vote of the independent
directors.
Chairman
A Chairman shall be elected by the full Board of Directors and
approved by a majority of the independent directors. The
Chairman will chair all regular sessions of the Committee and
set the agendas for Committee meetings.
Meetings
The Committee shall meet as frequently as circumstances dictate.
As part of its goal to foster open communication, the Committee
shall periodically meet separately with each of management and
the independent auditors to discuss any matters that the
Committee or the auditors believe would be appropriate to
discuss privately. In addition, the Committee should meet with
the independent auditors and management periodically to review
the Companys financial statements in a manner consistent
with that outlined in this Charter. The Chairman of the Board or
any member of the Committee may call meetings of the Committee.
All meetings of the Committee may be held telephonically.
All independent directors who are not members of the Committee
may attend meetings of the Committee, but may not vote. In
addition, the Committee may invite to its meetings any director,
member of management of the Company, and such other persons as
it deems appropriate in order to carry out its responsibilities.
The Committee may also exclude from its meetings any persons it
deems appropriate in order to carry out its responsibilities.
Duties
and Responsibilities
The Committee shall carry out the duties and responsibilities
set forth below. These functions should serve as a guide with
the understanding that the Committee may determine to carry out
additional functions and adopt additional policies and
procedures as may be appropriate in light of changing business,
legislative, regulatory, legal, or other conditions. The
Committee shall also carry out any other duties and
responsibilities delegated to it by the Board of Directors from
time to time related to the purposes of the Committee outlined
in this Charter. The Committee may perform any functions it
deems appropriate under applicable law, rules, or regulations,
the Companys by-laws, and the resolutions or other
directives of the Board, including review of any certification
required to be reviewed in accordance with applicable law or
regulations of the SEC.
C-2
In discharging its oversight role, the Committee is empowered to
study or investigate any matter of interest or concern that the
Committee deems appropriate. In this regard, the Committee shall
have the authority to retain, without seeking Board approval,
outside legal, accounting, or other advisors for this purpose,
including the authority to approve the fees payable to such
advisors and any other terms of retention.
The Committee shall be given full access to the Companys
internal audit group, Board of Directors, corporate executives,
and independent accountants as necessary to carry out these
responsibilities. While acting within the scope of its stated
purpose, the Committee shall have all the authority of the Board
of Directors, except as otherwise limited by applicable law.
Notwithstanding the foregoing, the Committee is not responsible
for certifying the Companys financial statements or
guaranteeing the auditors report. The fundamental
responsibility for the Companys financial statements and
disclosures rests with management and the independent auditors.
It also is the job of the CEO and senior management rather than
that of the Committee to access and manage the Companys
exposure to risk.
Documents/Reports
Review
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Discuss with management and the independent auditors prior to
public dissemination the Companys annual audited financial
statements and quarterly financial statements, including the
Companys disclosures under Managements
Discussion and Analysis of Financial Condition and Results of
Operations and discuss with the independent auditors the
matters required to be discussed by Statement of Auditing
Standards No. 61.
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Discuss with management and the independent auditors prior to
the Companys filing of any quarterly or annual report
(a) whether any significant deficiencies in the design or
operation of internal controls exist that could adversely affect
the Companys ability to record, process, summarize, and
report financial data; (b) the existence of any material
weaknesses in the Companys internal controls; and
(c) the existence of any fraud, whether or not material,
that involves management or other employees who have a
significant role in the Companys internal controls.
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3.
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Discuss with management and the independent auditors the
Companys earnings press releases (paying particular
attention to the use of any pro forma or
adjusted non-GAAP information), as well as financial
information and earnings guidance provided to analysts and
rating agencies. The Committees discussion in this regard
may be general in nature (
i.e.
, discussion of the types
of information to be disclosed and the type of presentation to
be made) and need not take place in advance of each earnings
release or each instance in which the Company may provide
earnings guidance.
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Discuss with management and the independent auditors the
Companys major financial risk exposures, the guidelines
and policies by which risk assessment and management is
undertaken, and the steps management has taken to monitor and
control risk exposure.
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C-3
Independent
Auditors
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Retain and terminate independent auditors and have the sole
authority to approve all audit engagement fees and terms as well
as all non-audit engagements with the independent auditors.
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Inform each public accounting firm performing work for the
Company that such firm shall report directly to the Committee.
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Oversee the work of any public accounting firm employed by the
Company, including the resolution of any disagreement between
management and the auditor regarding financial reporting, for
the purpose of preparing or issuing an audit report or related
work.
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Approve in advance any significant audit or non-audit engagement
or relationship between the Company and the independent auditors
using their best judgment and in compliance with rules regarding
prohibited nonauditing services, as may be specified
in the Sarbanes-Oxley Act of 2002 or applicable laws or
regulations.
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Review, at least annually, the qualifications, performance, and
independence of the independent auditors. In conducting its
review and evaluation, the Committee should:
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At least annually obtain and review a report by the
Companys independent auditor describing (i) the
auditing firms internal quality-control procedures;
(ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the auditing firm, or
by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the auditing firm, and
any steps taken to deal with any such issues; and (iii) to
assess the auditors independence, all relationships
between the independent auditor and the Company;
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(b)
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Ensure the rotation of the lead audit partner at least every
five years, and consider whether there should be regular
rotation of the audit firm itself;
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(c)
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Confirm with any independent auditor retained to provide audit
services for any fiscal year that the lead (or coordinating)
audit partner (having primary responsibility for the audit), or
the audit partner responsible for reviewing the audit, has not
performed audit services for the Company in each of the five
previous fiscal years of the Company; and
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(d)
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Take into account the opinions of management and the
Companys internal auditors (or other personnel responsible
for the internal audit function).
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Financial
Reporting Process
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In consultation with the independent auditors, management, and
the internal auditors, review the integrity of the
Companys financial reporting processes, both internal and
external. In that connection, the Committee should obtain and
discuss with management and the independent auditor reports from
management
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C-4
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and the independent auditor
regarding (a) all critical accounting policies and
practices to be used by the Company and the related disclosure
of those critical accounting policies under
Managements Discussion and Analysis of Financial
Condition and Results of Operations; (b) analyses
prepared by management
and/or
the
independent auditor setting forth significant financial
reporting issues and judgments made in connection with the
preparation of the financial statements, including all
alternative treatments of financial information within generally
accepted accounting principles that have been discussed with the
Companys management, the ramifications of the use of the
alternative disclosures, and treatments, and the treatment
preferred by the independent auditor; (c) major issues
regarding accounting principles and financial statement
presentations, including any significant changes in the
Companys selection or application of accounting
principles; (d) major issues as to the adequacy of the
Companys internal controls and any specific audit steps
adopted in light of material control deficiencies;
(e) issues with respect to the design and effectiveness of
the Companys disclosure controls and procedures,
managements evaluation of those controls and procedures,
and any issues relating to such controls and procedures during
the most recent reporting period; (f) the effect of
regulatory and accounting initiatives as well as off-balance
sheet structures on the financial statements of the Company; and
(g) any other material written communications between the
independent auditor and the Companys management.
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11.
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Review periodically the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the
financial statements of the Company.
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12.
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Review with the independent auditor any audit problems or
difficulties encountered and managements response thereto.
In this regard, the Audit Committee must regularly review with
the independent auditor (a) any audit problems or other
difficulties encountered by the auditor in the course of the
audit work, including any restrictions on the scope of the
independent auditors activities or on access to requested
information, and any significant disagreements with management
and (b) managements responses to such matters.
Without excluding other possibilities, the Committee may wish to
review with the independent auditor (i) any accounting
adjustments that were noted or proposed by the auditor but were
passed (as immaterial or otherwise), (ii) any
communications between the audit team and the audit firms
national office respecting auditing or accounting issues
presented by the engagement, and (iii) any
management or internal control letter
issued, or proposed to be issued, by the independent auditor to
the Company.
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13.
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Review and discuss with the independent auditor the
responsibilities, budget, and staffing of the Companys
internal audit function.
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C-5
Legal
Compliance/General
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14.
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Review periodically, with the Companys counsel, both
internal and external, any legal matter that could have a
significant impact on the Companys financial statements.
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15.
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Discuss with management and the independent auditors the
Companys guidelines and policies with respect to risk
assessment and risk management. The Committee should discuss the
Companys major financial risk exposures and the steps
management has taken to monitor and control such exposures.
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16.
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Set clear hiring policies for employees or former employees of
the independent auditors. At a minimum, these policies should
provide that any public accounting firm may not provide audit
services to the Company if the CEO, controller, CFO, chief
accounting officer, or any person serving in an equivalent
position for the Company was employed by the public accounting
firm and participated in any capacity in the audit of the
Company within one year of the initiation of the current audit.
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17.
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Establish procedures for (i) the receipt, retention, and
treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters;
and (ii) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable
accounting or auditing matters.
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Reports
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18.
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Prepare all reports required to be included in the
Companys proxy statement, pursuant to and in accordance
with applicable rules and regulations of the SEC.
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19.
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Report regularly to the full Board of Directors. In this regard,
the Audit Committee should review with the full Board any issues
that arise with respect to the quality or integrity of the
Companys financial statements, the Companys
compliance with legal or regulatory requirements, the
performance and independence of the Companys independent
auditors, or the performance of the internal audit function. The
Committee shall provide such recommendations as the Committee
may deem appropriate. The report to the Board of Directors may
take the form of an oral report by the Chairman or any other
member of the Committee designated by the Committee to make such
report.
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21.
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Maintain minutes or other records of meetings and activities of
the Committee.
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C-6
Limitation
of Audit Committees Role
With respect to the foregoing responsibilities and processes,
the Committee recognizes that the Companys financial
management, including its internal audit staff, as well as the
independent auditors have more time, knowledge, and detailed
information regarding the Company than do Committee members.
Consequently, in discharging its oversight responsibilities, the
Committee will not provide or be deemed to provide any expertise
or special assurance as to the Companys financial
statements or any professional certification as to the
independent auditors work.
While the Audit Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Audit
Committee to plan or conduct audits or to determine that the
Companys financial statements and disclosures are complete
and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent
auditor. It also is not the duty of the Committee to conduct
investigations or to assure compliance with laws and regulations
and the Companys internal policies and procedures.
C-7
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Please
Mark Here
for Address
Change or
Comments
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SEE
REVERSE
SIDE
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Please mark your
votes as indicated
in this example
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x
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1.
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ELECTION OF DIRECTORS
To elect seven directors of FX Real Estate and
Entertainment Inc.s board of directors until the next
annual meeting of stockholders and until their
respective successors are duly elected and qualified.
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FOR
ALL
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WITHHELD
FOR ALL
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EXCEPTIONS*
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01 Robert F. X. Sillerman
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05 David M. Ledy
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02 Paul C. Kanavos
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06 Harvey Silverman and
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03 Barry A. Shier
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07 Michael J. Meyer
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04 Thomas P. Benson
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(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the Exceptions box above and write that nominees
name in the space provided below.)
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*Exceptions
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FOR
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AGAINST
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ABSTAIN
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2.
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To approve the 2007 Long-Term Incentive Compensation Plan
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FOR
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AGAINST
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ABSTAIN
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3.
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To approve the 2007 Executive Equity Incentive Plan
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FOR
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ABSTAIN
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4.
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To ratify the appointment of Ernst & Young
LLP as our in dependent registered public
accounting firm for 2008
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In their discretion, the proxies are authorized to vote
upon any other business that may properly come before the
Annual Meeting.
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The undersigned hereby acknowledges receipt
of (i) the Notice of the Annual Meeting of
Stockholders, (ii) the accompanying proxy
statement and attached annexes; (iii) this
proxy card; and (iv ) the 2007 Annual Report
to Stockholders of FX Real Estate and
Entertainment Inc.
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
5
FOLD AND DETACH HERE
5
PROXY VOTING INSTRUCTIONS
Mail - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
PROXY
FX REAL ESTATE AND ENTERTAINMENT INC.
Annual Meeting of Stockholders SEPTEMBER 24, 2008
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Paul C. Kanavos and Mitchell J. Nelson, and each of them, with
power to act without the other and wit h power of substitution, as proxies and attorneys-in-fact
and hereby authorizes them to represent and vote, as provided on the other side, all the shares of
FX Real Estate and Entertainment Inc. Common Stock which the undersigned is entitled to vote, and,
in their discretion, to vote upon such other business as may properly come before the Annual
Meeting of Stockholders of the company to be held September 24, 2008 or at any adjournment or
postponement thereof, with all powers which the undersigned would possess if present at the
Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR THE NOMINEES FOR
DIRECTOR NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.
(Continued and to be marked, dated and signed, on the other side)
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Address Change/Comments
(Mark the corresponding box on the reverse side)
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5
FOLD AND DETACH HERE
5
You can now access your FX REAL ESTATE AND ENTERTAINMENT INC. account online.
Access your FX Real Estate and Entertainment Inc. stockholder account online via Investor
ServiceDirect
®
(ISD).
The transfer agent for FX Real Estate and Entertainment Inc. now makes it easy and convenient to
get current in formation on your shareholder account.
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View account status
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View certificate history
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View book-entry information
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View payment history for dividends
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Make address changes
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Obtain a duplicate 1099 tax form
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Establish/change your PIN
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Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Grafico Azioni FX Real Est And Ent (MM) (NASDAQ:FXRE)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni FX Real Est And Ent (MM) (NASDAQ:FXRE)
Storico
Da Set 2023 a Set 2024