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EX-31.2 - EX-31.2 - CKX, Inc. | y91067exv31w2.htm |
EX-31.1 - EX-31.1 - CKX, Inc. | y91067exv31w1.htm |
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K/A
Amendment No. 1
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2010 | ||
OR
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission file
no. 001-34794
CKX, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
27-0118168 (I.R.S. Employer Identification Number) |
650 Madison Avenue
New York, New York 10022
(Address of principal executive offices and Zip Code)
New York, New York 10022
(Address of principal executive offices and Zip Code)
Registrants telephone number, including area code:
(212) 838-3100
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the Act:
common stock, par value $0.01 per share
Securities registered pursuant to Section 12(g) of the Act:
common stock, par value $0.01 per share
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was require to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the voting and non-voting common
equity held by non-affiliates, based on the closing sales price
of the companys common stock as of June 30, 2010, was
$442,420,645.
As of March 4, 2011, there were 93,126,291 shares of
the registrants common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
Table of Contents
CKX,
Inc.
EXPLANATORY
NOTE
We are filing this Amendment No. 1 (the Amended
Report) to our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, as originally
filed with the Securities and Exchange Commission (the
SEC) on March 9, 2011 (the Original
Report), solely to amend and restate Items 10, 11,
12, 13 and 14 of Part III of the Original Report. This
Amended Report does not affect any other items in our Original
Report. Filed as exhibits to this Amended Report are the
certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. Because no financial statements are
contained in this Amended Report, certifications pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 are omitted.
Except as otherwise expressly stated in the items contained in
this Amended Report, this Amended Report continues to speak as
of the date of the Original Report and we have not updated the
disclosure contained herein to reflect events that have occurred
since the filing of the Original Report. Accordingly, this
Amended Report should be read in conjunction with our Original
Report and our other filings made with the SEC subsequent to the
filing of the Original Report. The filing of this Amended Report
shall not be deemed an admission that the Original Report when
filed included any untrue statement of a material fact or
omitted to state a material fact necessary to make a statement
therein not misleading.
In this Amended Report, the words we,
us, our, CKX, the
registrant and the Company collectively
refer to CKX, Inc., together with its subsidiaries and the
predecessor.
2
Form 10-K/A
Table of
Contents
3
Table of Contents
PART III
Item 10. | Directors, Executive Officers and Corporate Governance |
Executive
Officers and Directors of CKX, Inc.
The following table sets forth information regarding our
executive officers and directors as of April 29, 2011.
Name | Age | Positions | ||||
Michael G. Ferrel
|
62 | Chief Executive Officer, Chairman of the Board | ||||
Howard J. Tytel
|
64 | Senior Executive Vice President, Director of Legal and Governmental Affairs, Director | ||||
Thomas P. Benson
|
48 | Executive Vice President, Chief Financial Officer, Treasurer | ||||
Kraig G. Fox
|
42 | Executive Vice President, Chief Operating Officer | ||||
Edwin M. Banks
|
48 | Director | ||||
Bryan E. Bloom
|
52 | Director | ||||
Kathleen Dore
|
60 | Director | ||||
Jack Langer
|
62 | Director | ||||
Jacques D. Kerrest
|
64 | Director | ||||
Priscilla Presley
|
65 | Director |
Michael G. Ferrel was appointed Chief Executive Officer
and a member of our board of directors effective May 6,
2010. Mr. Ferrel currently serves as the Chairman of our
board of directors. From December 2008 until his appointment in
May 2010, Mr. Ferrel served as a consultant to the Company.
From May 2005 until December 2008, Mr. Ferrel served as
President, a director and a Member of the Office of the Chairman
of the Company. Prior to that, Mr. Ferrel was President and
Chief Executive Officer of FXM, Inc. since August 2000.
Mr. Ferrel served as President, Chief Executive Officer,
Member of the Office of the Chairman and a director of SFX
Entertainment from December 1997 through August 2000.
We believe Mr. Ferrels qualifications to sit on our
board of directors include, among other things, his history with
the Company and management, his years of executive leadership
and his experience in the entertainment and media industry.
Howard J. Tytel was appointed Senior Executive Vice
President, Director of Legal and Governmental Affairs, director
and Member of the Office of the Chairman effective
February 7, 2005. Mr. Tytel does not currently serve
as a Member of the Office of the Chairman because the position
no longer exists. Prior to joining us, since August 2000,
Mr. Tytel was Executive Vice President and Director of
Legal and Governmental Affairs of FXM, Inc. Mr. Tytel
served as Executive Vice President, General Counsel, Secretary,
a Member of the Office of the Chairman and a director of SFX
Entertainment from December 1997 through August 2000.
We believe Mr. Tytels qualifications to sit on our
board of directors include, among other things, his history with
the Company and management, his legal expertise and his industry
and prior board experience with six other public companies.
Thomas P. Benson was appointed Executive Vice President,
Chief Financial Officer and Treasurer effective February 7,
2005. Mr. Benson has served as Chief Financial Officer and
a director of FX Real Estate and Entertainment Inc. (currently
known as Circle Entertainment, Inc.) from January 2008 until
February 2009 and January 2009, respectively. Mr. Benson
served as Executive Vice President and Chief Financial Officer
of MJX Asset Management from November 2003 through April 2010.
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.
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Table of Contents
Kraig G. Fox was appointed Chief Operating Officer on
September 30, 2010. Mr. Fox has served as Chief
Corporate Development Officer, Executive Vice President and
Secretary of the Company since February 7, 2005. Prior to
that, Mr. Fox was Senior Vice President at FXM, Inc. since
August 2000. Mr. Fox served as Senior Vice President of MJX
Asset Management from 2003 until 2009. Mr. Fox was a Vice
President at SFX Entertainment from December 1998 through August
2000.
Edwin M. Banks was appointed to our board of directors on
February 8, 2005. Mr. Banks is the founder of
Washington Corner Capital Management, LLC, an investment
management company. Mr. Banks served as the Chief
Investment Officer of WRH Partners, a private investment firm,
and as a Senior Portfolio Manager for W. R. Huff Asset
Management Co., L.L.C. (Huff Asset Management), an
investment management firm, from June 1988 through October 2006.
Mr. Banks is currently a director of CVS Caremark, Inc. and
a member of its Audit Committee and Nominating and Governance
Committee. From May 2003 to June 2009, Mr. Banks served as
a director of Virgin Media, where he served as the chairman of
the compensation committee, chairman of the audit committee and
served on the executive committee.
We believe Mr. Banks qualifications to sit on our
board of directors include, among other things, his extensive
board experience on both public and private boards in the media
and communications industry, the healthcare industry, the food
industry and the energy industry. Mr. Banks has
participated in the management of over $10 billion in media
and communications investments and has extensive experience in
capital markets transactions. Mr. Banks is also a Chartered
Financial Analyst.
Bryan E. Bloom was appointed to our board of directors on
December 18, 2009. Mr. Bloom has been employed by Huff
Asset Management and its affiliates for the past sixteen years.
Prior to being employed by Huff Asset Management, 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
serves on numerous private boards. From March 2008 to April
2010, Mr. Bloom served on the board of directors of FX Real
Estate and Entertainment, Inc. (currently known as Circle
Entertainment, Inc.) as a representative of an affiliate of Huff
Asset Management. Also at the request of an affiliate of Huff
Asset Management, he had been an observer to the board of
directors of the Company for the three years prior to being
appointed a director. 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.
We believe Mr. Blooms qualifications to sit on our
board of directors include, among other things, his prior board
experience and expertise in financial matters.
Kathleen Dore was appointed to our board of directors on
December 14, 2010. Since December 2008, Ms. Dore has
served as Senior Advisor to Proteus International, Inc., a
management consulting firm specializing in organizational
vision, strategy and leadership, headquartered at 278 Route 299,
Highland, New York 12528. From 2004 to December 2008,
Ms. Dore served as President, Broadcasting at Canwest
Media, Inc. (Canwest), one of Canadas premier
media companies, where she was responsible for the
companys Canadian broadcast assets, including Global
Television, a national broadcasting network, E!, a second
television network, and twenty cable networks. After
Ms. Dore left Canwest in 2008, Canwest filed for and
obtained an order from the Ontario Superior Court of Justice
(Commercial List), granting creditor protection under the
Companies Creditors Arrangement Act (Canada) in October,
2009. In addition, Canwest also filed for protection under
Chapter 15 of the United States Bankruptcy Code in October,
2009. From 1982 to 2004, she served in various capacities,
including President, Entertainment Services, at Cablevision
Systems Corporation, Rainbow Media Division, where she was
responsible for cable networks AMC (American Movie Classics),
IFC (Independent Film Channel), WE (Womens Entertainment)
and Bravo. Ms. Dore served on the board of directors of
Blockbuster, Inc. from June 2010 to April 2011. In addition,
Ms. Dore currently serves on the board of the University of
Iowa Foundation and the Advisory Board of the Tippie College of
Business at the University of Iowa, as well as the boards of the
Womens Forum of New York, and the Union Square Partnership.
We believe Ms. Dores qualifications to sit on our
board of directors include, among other things, her extensive
industry experience and expertise in creation and exploitation
of media content and intellectual property rights, her network
of valuable contacts in the entertainment industry as a result
of her three decades of executive management experience at
various media companies, her years of executive leadership and
her expertise in business and corporate strategy.
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Jacques D. Kerrest was appointed to our board of
directors on October 25, 2010. From August 2008 until the
sale of the company in December 2010, Mr. Kerrest served as
Chief Financial Officer and Chief Operating Officer of
Actividentity Corp. (NASDAQ: ACTI), a software company. From
September 2004 until March 2008, Mr. Kerrest served as the
Chief Financial Officer of Virgin Media, Inc., a communications
company. From June 2003 to August 2004, Mr. Kerrest was the
Managing Director and Chief Financial Officer of Equant, N.V., a
global enterprise communications infrastructure company. From
August 1997 to May 2003, Mr. Kerrest was the Senior Vice
President and Chief Financial Officer of
Harte-Hanks,
Inc., a worldwide direct and targeted marketing company. From
August 1995 to July 1997, Mr. Kerrest served as the Chief
Financial Officer of Chancellor Broadcasting Company, a radio
broadcasting company. From 1993 to July 1995, Mr. Kerrest
was the Chief Financial Officer of Positive Communications,
Inc., a private telecommunications company.
We believe Mr. Kerrests qualifications to sit on our
board of directors include, among other things, his years of
executive leadership in the media industry, his expertise in
business, corporate strategy and financial matters and his prior
board and audit committee experience.
Jack Langer was appointed to our board of directors on
February 7, 2005. Mr. Langer is a private investor.
From April 1997 to December 2002, Mr. Langer was Managing
Director and the Global Co-Head of the Media Group at Lehman
Brothers Inc. From 1995 to 1997, Mr. Langer was the
Managing Director and Head of Media Group at Bankers
Trust & Company. From 1990 to 1994, Mr. Langer
was Managing Director and Head of Media Group at
Kidder Peabody & Company, Inc. Mr. Langer
also serves on the board of directors of SBA Communications
Corp. and Atlantic Broadband Group.
We believe Mr. Langers qualifications to sit on our
board of directors include, among other things, his experience
as the head of the media groups at major investment banks, his
prior board experience and his expertise in financial matters.
Priscilla Presley was appointed to our board of directors
by the holder of the Series C Convertible Preferred Stock
on February 8, 2005. Ms. Presley served as a director
of
Metro-Goldwyn-Mayer
Inc. from November 2000 to August 2006. From 1981 to 1998,
Ms. Presley served as Chairperson of Elvis Presley
Enterprises, Inc. In 2006, Ms. Presley launched a
collection of luxury bed linens called The Priscilla
Presley Collection. Ms. Presley is currently working
in an executive producer capacity on a remake of the Peter
Sellers film, The Party, with Darren Star and
Dreamworks and is developing a play based on her life story.
Series C
Director
In addition to its right to vote in the general election of
members to our board of directors, the Promenade Trust, the
holder of the Series C Preferred Stock, is entitled to
elect one member to the Companys board of directors,
referred to herein as the Series C Director.
Ms. Priscilla Presley currently serves on our board of
directors as the Series C Director and the holder of the
Series C Preferred Stock has confirmed its election of
Ms. Presley to continue to serve as the Series C
Director until the next annual meeting of stockholders or
earlier removal by the holder of the Series C Preferred
Stock in accordance with the Companys Certificate of
Incorporation. Ms. Presley has been deemed not to be an
independent director. Holders of our common stock are not
entitled to vote in the election of the Series C Director.
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.
Based solely on information furnished to us and contained in
reports filed with the SEC, as well as any written
representations that no other reports were required, we believe
that during 2010, all SEC filings of our directors and executive
officers and persons who own more than 10% of its outstanding
common stock were timely filed.
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Code of
Business Conduct and Ethics
We have a Code of Business Conduct and Ethics, which is
applicable to all of our employees and directors, including our
Chief Executive Officer, President, Chief Operating Officer,
Chief Financial Officer and Director of Legal and Governmental
Affairs. We also maintain a separate Code of Ethics for Senior
Financial Management which applies to our Chief Executive
Officer, Chief Financial Officer and other officers in our
finance department. The Code of Business Conduct and Ethics was
filed with the SEC as an exhibit to our Current Report on
Form 8-K,
filed on February 8, 2005, and can also be found on our
website at www.ckx.com. A copy of our Code
of Business Conduct and Ethics is also available, free of
charge, upon request directed to: CKX, Inc., 650 Madison Avenue,
New York, New York 10022, Attention: Corporate Secretary.
Corporate
Governance Guidelines
We have Corporate Governance Guidelines which provide, among
other things, that a majority of our board of directors must
meet the criteria for independence required by The NASDAQ Stock
Market®
and that we 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. 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 our website at
www.ckx.com. A copy of our Corporate Governance
Guidelines is also available, free of charge, upon request
directed to: CKX, Inc., 650 Madison Avenue, New York, New York
10022, Attention: Corporate Secretary.
Stockholder
Recommendations and Nominations
We do not currently have a formal policy with respect to the
consideration of candidates for director recommended by
stockholders. In connection with the 2010 annual meeting we did
not receive any stockholder recommendations or stockholder
nominations. Prior to our 2011 annual meeting of stockholders,
our nominating and corporate governance committee will consider
adopting a formal policy with respect to the consideration of
candidates for director recommended by stockholders.
Audit
Committee
The audit committee is currently comprised of
Messrs. Kerrest (chairman), Banks, Bloom and Langer. The
audit committee, among other things, 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.
All members of the audit committee are independent within the
meaning of the rules and regulations of the SEC and NASDAQ and
our Corporate Governance Guidelines. In addition, our board of
directors has determined that Mr. Kerrest 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 NASDAQ. The audit committees charter
can be found on our corporate website at www.ckx.com. A
copy of our audit committee charter is also available, free of
charge, upon request directed to: CKX, Inc., 650 Madison Avenue,
New York, New York 10022, Attention: Corporate Secretary.
Nominating
and Corporate Governance Committee
The nominating and corporate governance committee is currently
comprised of Messrs. Langer (chairman) and Bloom and
Ms. Dore. The 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
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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.
All members of the nominating and corporate governance committee
are independent within the meaning of the rules and regulations
of NASDAQ and our Corporate Governance Guidelines. The
nominating and corporate governance committees charter can
be found on our corporate website at www.ckx.com. A copy
of our nominating and corporate governance committee charter is
also available, free of charge, upon request directed to: CKX,
Inc., 650 Madison Avenue, New York, New York 10022, Attention:
Corporate Secretary.
Compensation
Committee
The compensation committee is currently comprised of
Messrs. Banks (Chairman) and Kerrest and Ms. Dore. The
compensation committee has responsibility for overseeing all
aspects of the compensation program for the Chief Executive
Officer and our other executive officers who report to the Chief
Executive Officer. In addition, the compensation committee
reviews and approves the annual compensation packages, including
incentive compensation programs, for the members of senior
management of each of our subsidiaries and divisions. The
compensation committee also administers our long-term incentive
compensation plans, including the CKX, Inc. 2005 Omnibus
Long-Term Incentive Compensation Plan and the CKX, Inc. 2011
Omnibus Long-Term Incentive Compensation Plan, and reviews and
makes recommendations to our full board of directors (or
approves) all awards of shares or share options pursuant to our
equity-based plans.
All members of the compensation committee have been deemed by
the board of directors to be independent within the meaning of
the rules and regulations of the SEC and NASDAQ, our Corporate
Governance Guidelines, and Internal Revenue Code
section 162(m). The compensation committees charter
can be found on our corporate website at www.ckx.com. A
copy of our compensation committee charter is also available,
free of charge, upon request directed to: CKX, Inc., 650 Madison
Avenue, New York, New York 10022, Attention: Corporate Secretary.
Item 11. | Executive Compensation |
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
of Compensation Program
Our philosophy on senior executive compensation is 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. The compensation committee and the Company are also
committed to the principles inherent in paying for performance
and structure the compensation program to deliver rewards for
exemplary performance and to withhold rewards and impose other
consequences in the absence of such performance.
The specific objectives of the compensation program are to:
| offer a total compensation program that is competitive with the compensation offered by the companies with which we compete for executive talent; | |
| provide incentives to achieve financial goals and objectives, both in terms of financial performance and stockholder return; | |
| provide opportunities for reward that foster executive retention; and | |
| ensure that the interests of our executives are aligned with those of our stockholders. |
The key elements of our annual executive compensation are base
salary, annual performance-based 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.
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In 2010, we undertook a significant reorganization and
realignment of our business including making significant changes
to our management team. In connection with the departures of
Messrs. Sillerman, Fuller and Dodds, we entered into
substantial severance
and/or
consulting arrangements with these individuals for a variety of
reasons, including to fulfill certain contractual obligations
and for creative and strategic purposes. In addition, in 2010,
we entered into new employment agreements with several members
of management, including some whose previous agreements were
expiring. As a result, the compensation committee has had the
opportunity to re-evaluate several aspects of the compensation
program and implement certain changes that it considers to be
best practices, including the elimination in those new
employment agreements of certain excise tax
gross-up
payments and single-trigger change- of-control payments. In
addition the compensation committee has continued to implement
aspects of the compensation program that it views as best
practices, such as a focus on a
pay-for-performance
philosophy, a risk analysis of the compensation program and a
mix of short- and long-term focused compensation.
Establishing
the Compensation Program
To assist the compensation committee in fulfilling its
responsibilities and to provide advice with respect to all
matters relating to executive compensation and the compensation
practices of similar companies, the compensation committee has
retained an independent compensation consultant, Lyons,
Benenson & Company Inc. The consultant is engaged by,
and reports directly to, the compensation committee and does not
perform other non-executive compensation consulting services for
us. Harvey Benenson generally attends all meetings of the
compensation committee on behalf of Lyons, Benenson &
Company Inc.
The compensation committees process of reviewing the
executive compensation program and setting compensation levels
for our named executive officers or NEOs
involves several components. During the first quarter of each
year, the compensation committee reviews each NEOs total
compensation. The compensation committee members also meet
regularly with the NEOs at various times during the year,
formally within board meetings, which allows the compensation
committee members to assess directly each NEOs
performance. The compensation committee also solicits input from
all non-employee directors as to the Chairman and Chief
Executive Officers performance during the year. These
inputs are used in considering the compensation for the Chairman
and Chief Executive Officer. In addition, the Chairman and Chief
Executive Officer annually presents his evaluation of each other
NEO to the compensation committee, which includes a review of
each officers contributions and performance over the past
year, as well as his strengths, weaknesses and potential. The
compensation committee also solicits input on the NEOs from
other committees of our board of directors, which input is used
in considering each NEOs contribution and performance over
the past year. The Chairman and Chief Executive Officer also
presents compensation recommendations for each other NEO for the
compensation committees consideration. Following the
Chairman and Chief Executive Officers presentation and a
review of data on competitive pay practices, the compensation
committee makes its own assessments and formulates compensation
decisions on each element of compensation for each of the NEOs.
The compensation committee makes its determinations after
reviewing and analyzing the compensation of key executive
officers in other communications and entertainment companies and
may be guided in its decision making by the results of such
analyses. The companies comprising this peer group
for 2010 were: 4kids Entertainment, Inc.; Cablevision Systems
Corporation; DreamWorks Animation SKG, Inc.; Gaiam, Inc.; Lions
Gate Entertainment Corp.; Live Nation, Inc.; Marvel
Entertainment, Inc.; Sirius XM Radio, Inc.; and World Wrestling
Entertainment, Inc. The compensation committee used this group
to consider the form and structure of compensation elements
among communications and entertainment companies having some
characteristics in common with us. The compensation committee
believes that there are no companies that are exactly comparable
to us due to the unique combination of assets that we hold. The
companies comprising the peer group, however, are all
entertainment-based, and in that regard the compensation
committee considers these companies to be reasonably comparable
to us in terms of business purpose. The compensation committee
also believes that these companies are representative of the
market place in which we compete for executive talent. The key
executive compensation structures and levels reported by these
companies were taken into account in determining the mix and
level of compensation for each of our key executives. Other
factors taken into account included the scope and impact and
complexity and difficulty of each of position, the specialized
knowledge that each incumbent possesses that is of particular
value to our
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company, the performance of each incumbent, and the criticality
of the incumbent to the short- and long-term success of the
company. Specific weights were not assigned to each factor;
rather the compensation committee evaluated all of these factors
in total in making its determinations on base salary levels,
target and maximum bonus opportunities and long-term incentive
compensation opportunities for each of our executives.
With respect to the compensation committees review of new
employment contracts with Messrs. Tytel and Benson in 2010,
the compensation committee also reviewed the incentive
arrangements with staff executives at The Walt Disney Company,
Time Warner and Comcast. Although all three of those companies
operate in the entertainment industry, because of their size,
which is significantly larger than the Company, the compensation
committee does not view them as being comparable. The structure,
but not the levels, of the incentive compensation arrangements
at those companies as they pertained to positions comparable to
Messrs. Tytel and Bensons positions were of interest.
They did not, however, play a significant role in determining
the compensation levels for the positions in question.
Components
of Compensation for Named Executive Officers
Base
Salary
The Company believes that entering into employment agreements
with its most senior executives helps ensure that our core group
of managers will be available to us and our stockholders on a
long-term basis. In February 2010, we entered into new
employment agreements with Messrs. Tytel and Benson
following the expiration of their original employment agreements
and we entered into a new employment agreement with
Mr. Ferrel upon his appointment as Chief Executive Officer
of the Company in May 2010. In establishing the salaries for
Messrs. Tytel and Benson under their new employment
agreements, the compensation committee reviewed the salaries of
other executives holding similar positions, with comparable
experience, at the peer group companies. Mr. Ferrels
salary under his new employment agreement was a result of
negotiations between the compensation committee and
Mr. Ferrel. In the new employment agreements with
Messrs. Tytel and Benson, the compensation committee
eliminated a provision from the original employment agreements
which provided for a non-discretionary annual escalation of base
salary. The employment agreement with Mr. Fox, which we
entered into with Mr. Fox prior to Mr. Fox becoming an
NEO and which was not initially subject to compensation
committee approval, contains a provision for an annual
escalation of base salary by five percent (5%).
For a detailed description of the employment agreements with the
NEOs, see Employment Agreements and Potential Payments
upon Termination or Change of Control below.
Annual
Incentives
2010
Annual Incentives
In March 2010, the compensation committee adopted a 2010 annual
incentive compensation plan applicable to
Messrs. Sillerman, Tytel and Benson. The 2010 annual
incentive compensation plan provided a target bonus for each
executive and established financial performance goals for us
which, if achieved at varying levels, would result in payment of
an escalating percentage of such target bonus to the executive.
The compensation committee selected OIBDAN-based financial
targets to measure achievement because it considered OIBDAN to
be an important indicator of the operational strengths and
performances of our businesses and because it was our preferred
measure of cash flow. OIBDAN, a non-GAAP financial metric
generally employed as a measure of cash flow, is defined for the
purposes of the senior executive incentive compensation plan as
operating income or loss and before corporate expense, non-cash
depreciation of tangible assets, non-cash amortization of
intangible assets, non-cash compensation and other non-cash
charges, such as charges for impairment of intangible assets and
certain one-time adjustments. In May 2010, following
Mr. Sillermans departure and in connection with
Mr. Ferrels appointment as Chief Executive Officer,
the compensation committee agreed that Mr. Ferrel would be
eligible to receive bonuses under our annual incentive
compensation plan but that any bonus paid to Mr. Ferrel for
2010 would be at the discretion of the compensation committee.
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The 2010 annual incentive compensation plan was structured as a
formulaic calculation, incorporating the OIBDAN budget goals
established by management at the outset of 2010, and
establishing threshold, target and maximum performance levels.
The OIBDAN performance levels were established following the
compensation committees consideration of managements
budget expectation for 2010 and other discussions that had taken
place with management in which the OIBDAN expectations for 2010
had been discussed.
Percentage of |
Percentage of |
|||||||||||
Corporate |
Performance |
Target Bonus |
||||||||||
Performance Level | OIBDAN(1) | Target | Fund Earned | |||||||||
($ in millions) | (%) | (%) | ||||||||||
Threshold
|
76.50 | 90 | 50 | |||||||||
Target
|
85.00 | 100 | 100 | |||||||||
Maximum
|
102.00 | 120 | 200 |
(1) | Amounts are after accrual for bonuses due at the indicated level of performance achievement. |
Between OIBDAN of $76.5 million and $85.0 million, the
percent of the target bonus would increase by five percentage
points for each one percentage point increment in OIBDAN between
$76.5 million and $85.0 million. Between OIBDAN of
$85.0 million and $102.0 million, the percent of the
target bonus would also increase by five percentage points for
each one percentage point increment in OIBDAN between
$85.0 million and $102.0 million. The 2010 annual
incentive compensation plan also established that the
compensation committee would adjust performance results at
year-end for the effect of non-recurring and previously
unforeseen matters and events that might have affected OIBDAN.
The compensation committee determined target bonus amounts for
each executive officer based on competitive data compiled on our
peer group as well as additional data (annual incentive
structures, not levels) drawn from the public filings pertaining
to key executive compensation in the additional peer companies
described above. The target amount for each executive, the total
formulaic amount earned and the total bonus paid to each
executive are reflected in the chart below (amounts in dollars
unless otherwise indicated):
Total Formulaic |
||||||||||||
Target |
Bonus Earned |
Total Bonus |
||||||||||
Executive Officer | Amount | Under Plan | Paid for 2010 | |||||||||
Michael G. Ferrel
|
| (1) | | 400,000 | ||||||||
Howard J. Tytel
|
450,000 | | 150,000 | |||||||||
Thomas P. Benson
|
350,000 | | 150,000 | |||||||||
Robert F. X. Sillerman
|
1,600,000 | | (2) | | (2) |
(1) | In establishing Mr. Ferrels eligibility to participate in the 2010 annual incentive compensation plan, the compensation committee determined that no target bonus would be established and that any bonus paid to Mr. Ferrel would be at the discretion of the compensation committee due to the fact that Mr. Ferrel was newly appointed as our Chief Executive Officer. | |
(2) | Mr. Sillermans employment with the Company ended on May 6, 2010. |
Although no bonuses were earned pursuant to the terms of the
2010 annual incentive compensation plan, Mr. Ferrel
reviewed with the Committee the accomplishments of each member
of the management team during the portion of the year following
the transition of the Chief Executive Officer position from
Mr. Sillerman to Mr. Ferrel. Mr. Ferrel indicated
that the top management team had been most effective in
implementing an organizational restructuring and in reducing
operating expenses. Mr. Ferrel also indicated that it would
be difficult to motivate the key managers going forward if their
efforts for the prior year were not recognized through the
payment of bonuses. For these reasons, Mr. Ferrel requested
that the Committee award the discretionary bonuses indicated
above to Messrs. Tytel and Benson. The Committee concluded
that Mr. Ferrel had met or exceeded the restructuring and
cost reduction goals it had established coincident with his
employment, and on that basis awarded him a discretionary bonus
of $400,000.
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Table of Contents
In addition to the annual incentive compensation plan described
above, in connection with the appointment of Robert Dodds as
Chief Executive Officer of 19 Entertainment on January 29,
2010, and the accompanying amendment to his employment
agreement, the compensation committee approved a calendar year
2010 bonus plan for Mr. Dodds. As described elsewhere,
Mr. Dodds employment with 19 Entertainment was
terminated on October 1, 2010. Upon the recommendation of
management, the compensation committee agreed that a portion of
Mr. Dodds severance payment was attributable to the
target bonus amount of £500,000 established by the bonus
plan applicable to Mr. Dodds.
As described below under Employment Agreements and
Potential Payments upon Termination or Change of Control,
the employment agreement with Mr. Fox, which we entered
into with him prior to Mr. Fox becoming an NEO and which
was not initially subject to compensation committee approval,
provides that Mr. Fox is entitled to receive a bonus
payment during each year or partial year of the term of his
agreement. In 2010, Mr. Fox received an annual bonus of
$125,000, which was the guaranteed minimum bonus pursuant to his
employment agreement.
Also as described below under Employment Agreements and
Potential Payments upon Termination or Change of Control,
Mr. Fuller received $11,857,866 of payments in 2010
pursuant to his post-employment consulting agreement with 19
Entertainment Limited. These payments compensated him for
providing consulting services, including executive producer
services, to 19 Entertainment in respect of its American
Idol, So You Think You Can Dance and If I Can Dream
programs and, through July 2010, for providing creative and
strategic advice with respect to our overall business.
2011
Annual Incentive Compensation Plan
In March 2011, the compensation committee adopted an annual
incentive compensation plan for 2011 applicable to
Messrs. Ferrel, Tytel, Benson and Fox. The 2011 annual
incentive compensation plan establishes financial performance
goals for us, which, if achieved at varying levels, results in
payment of an escalating percentage of the target bonus to the
executives. The compensation committee selected financial
targets based upon operating income (loss) before non-cash
depreciation of tangible assets and non-cash amortization of
intangible assets and non-cash compensation (EBITDA)
to measure achievement because it considers EBITDA to be an
important indicator of the operational strengths and
performances of our businesses. In 2011, we renamed our
preferred measure of cash flow from OIBDAN to EBITDA, but
consider the two measures to be equivalent.
The bonus for Mr. Fox will be governed by the terms of his
employment agreement; however, the compensation committee has
the discretion to grant additional amounts, if desired. All
other bonuses granted under the 2011 annual incentive
compensation plan will be based on our performance achievement
as measured by EBITDA, which will be weighted as seventy percent
(70%) of the total bonus, and on individual performance
assessments, which will be weighted as thirty percent (30%) of
the total bonus. The company performance component of the bonus
will be earned based upon the funding formula described below.
The individual performance component of the bonus will be
awarded at the discretion of the compensation committee. The
financial performance target is $61.5 million and is based
solely on an EBITDA target for us on a consolidated basis, after
accrual for all bonuses (the 2011 Performance
Target). For 2011, the compensation committee adopted
target bonuses for Mr. Ferrel of $1,000,000 ($700,000 based
upon our performance and $300,000 based upon individual
performance), for Mr. Tytel of $450,000 ($315,000 based on
our performance and $135,000 based on individual performance)
and for Mr. Benson of $350,000 ($245,000 based upon our
performance and $105,000 based on individual performance).
The funding formula for the bonuses of Messrs. Ferrel,
Tytel and Benson is as follows. Below the threshold of 95% of
the 2011 Performance Target, no bonus would be earned. At 95%
achievement of the 2011 Performance Target, 50% of the target
bonus based upon our performance would be earned. The percent of
the target bonus based upon our performance earned will increase
by ten percentage points for each one percentage point increment
in EBITDA between 95% and 100% of the 2011 Performance Target.
At 100% achievement of the 2011 Performance Target, 100% of the
target bonus based upon company performance would be earned. The
percent of the target bonus based upon our performance earned
will increase by five percentage points for each one percentage
point increment in EBITDA between 100% and 120% of the 2011
Performance Target. At 120% achievement of the 2011 Performance
Target, 200% of the target bonus based upon company performance
would be earned.
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Table of Contents
With respect to Mr. Foxs bonus for 2011, his
employment agreement provides that he shall receive a guaranteed
minimum annual bonus equal to 25% of his base salary for the
year. Mr. Fox could also earn additional bonus amounts
under the terms of his employment agreement if we meet certain
financial performance goals. The financial performance target
for 2011 is $55,664,000 and is based solely on an EBITDA target
for us on a consolidated basis (the Fox 2011 Performance
Target). Below the threshold of 90% of the Fox 2011
Performance Target, no additional bonus would be earned above
Mr. Foxs guaranteed minimum annual bonus. If we
achieve at least 90% of the Fox 2011 Performance Target, the
cash bonus payable to Mr. Fox would increase to an amount
equal to 50% of his base salary. If we achieve at least 100% of
the Fox 2011 Performance Target, the cash bonus payable to
Mr. Fox would increase to an amount equal to 75% of his
base salary. If we achieve at least 105% of the Fox 2011
Performance Target, the cash bonus payable to Mr. Fox would
increase to an amount equal to 100% of his base salary and a
grant of options to purchase 50,000 shares of our common
stock would be recommended for approval by management to the
compensation committee. The compensation committee retains the
discretion to approve such a grant.
Each of the target bonuses which are based upon our financial
performance described above are intended to qualify for the
exemption from the deduction limitations of Internal Revenue
Code section 162(m).
Long-Term
Incentives
We maintain the 2005 Omnibus Long-Term Incentive Plan (the
2005 Plan), which was adopted by our board of
directors in February 2005 and subsequently approved by our
stockholders at a special meeting in March 2005. This plan,
which is administered by the compensation committee, permits the
use of stock options, restricted stock, stock, performance
shares or awards, stock appreciation rights and other forms of
long-term incentives.
Upon the recommendation of management, in March 2010, the
compensation committee approved grants of stock options for
1,111,500 shares to 41 employees of the Company and
our subsidiaries. Among these stock options, 350,000 were
granted to Mr. Sillerman, 125,000 were granted to each of
Messrs. Tytel and Benson and 100,000 were granted to
Mr. Fox. In considering managements recommendations,
the compensation committee reviewed the duties and
responsibilities, salary levels and performance assessments of
each of the prospective stock option recipients (as well as each
executives existing stock ownership in us and the
existence or lack of any vesting provisions or restrictions on
resale with respect thereto) and approved all requested grants.
Mr. Foxs employment agreement provides that during
each year of its term, a grant of options to purchase
100,000 shares of our common stock would be recommended by
management to the compensation committee for approval. The
compensation committee retains the discretion to approve such a
grant. As noted above, for 2010, the compensation committee did
approve such a grant.
In January 2007, the compensation committee adopted a policy
whereby all annual awards of stock options issued in connection
with the year-end compensation review are to be granted on the
first business day that is 72 hours after the release of
our earnings. We believe that this policy aligns our
employees interests with those of our stockholders as the
price of award grants will be determined at a time when there is
maximum transparency regarding our financial results. In
addition to these annual grants, management and the compensation
committee retain the flexibility to make grants of equity awards
from time to time during the year, including to new employees.
Equity awards to new employees will be granted and priced at the
close of the market on the day that employment commences. In
accordance with this policy, all stock options approved by the
compensation committee in March 2010 were granted on
March 19, 2010, which was the first business day
72 hours after the filing of our annual report on
Form 10-K
for the year ended December 31, 2009.
In connection with the termination of Mr. Fullers
employment with 19 Entertainment in January 2010 (as more fully
described below under Employment Agreements and Potential
Payments upon Termination or Change of Control), options
to acquire 290,000 shares of common stock held by
Mr. Fuller, which had not yet vested became fully vested
and exercisable. In connection with the termination of
Mr. Sillermans employment with the Company in May
2010 (as more fully described below under Employment
Agreements and Potential Payments upon Termination or Change of
Control), options to acquire 600,000 shares of common
stock held by Mr. Sillerman, which had not yet vested
became fully vested and exercisable. In each case, the
compensation committee approved the terms of the separation with
the executive, including the acceleration of vesting of the
stock options.
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Table of Contents
Our board of directors adopted the CKX, Inc. 2011 Omnibus
Long-Term Incentive Compensation Plan, which we refer to herein
as the 2011 Plan, on March 31, 2011, subject to its receipt
of stockholder approval at our 2011 annual stockholders meeting.
The 2011 Plan is more fully described below under 2011
Omnibus Long-Term Incentive Compensation Plan.
Perquisites
We have historically provided our NEOs with certain perquisites
and other personal benefits. Perquisites to the named NEOs for
2010 included the following:
| A $24,000 car allowance to each of Messrs. Tytel and Benson, a $8,000 car allowance to Mr. Sillerman and a $760 car allowance to Mr. Fuller. We provided a $5,156 car insurance allowance to Mr. Dodds. | |
| Health and insurance premiums paid for each of Messrs. Tytel and Benson in the amount of $24,691, to Mr. Fox in the amount of 20,371, to Mr. Ferrel in the amount of $20,063, to Mr. Sillerman in the amount of 10,288 and for Mr. Dodds in the amount of $7,382. | |
| A contribution of £100 ($165 as of April 28, 2011) to a personal pension scheme maintained in the United Kingdom by Mr. Fuller on his behalf. | |
| Certain of our employees were permitted to provide services to Mr. Sillerman and/or entities he controls, provided that we were reimbursed for the fair value of such services, as determined by the compensation committee. The compensation committee determined the value of the services provided in 2010 by certain of our employees to Mr. Sillerman and/or entities he controls was $107,080. Mr. Sillermans salary and consulting payments for the year ended December 31, 2010, was reduced by such amount to compensate us for such services. |
401(k)
Plan
We maintain a retirement savings plan, or a 401(k) Plan, for the
benefit of its eligible employees. Employees eligible to
participate in our 401(k) Plan are those employees who have
attained the age of 21 and have been employed by us for a period
of at least three months. Employees may elect to defer their
compensation up to the statutorily prescribed limit. We match
100% of the first 3% of each employees salary deferred
into the plan and 50% of the next 2% of an employees
salary deferred into the plan in cash. The matching funds
provided by us, along with employees deferrals are 100%
vested when contributed. During 2010, we provided $9,800 in
matching contributions to our 401(k) Plan for each of
Messrs. Sillerman, Tytel and Benson and $2,750 in matching
contributions to our 401(k) Plan for Mr. Fox. The 401(k)
Plan is intended to qualify under Internal Revenue Code
sections 401(a) and 501(a). As such, the contributions to
the 401(k) Plan and earnings on those contributions are not
taxable to the employees until distributed from the plan, and
all contributions are deductible by us when made.
Internal
Revenue Code Section 162(m)
Beginning in 1994, the Omnibus Reconciliation Act of 1993
amended Internal Revenue Code section 162(m), limiting to
$1 million the amount that may be deducted by a publicly
held corporation for compensation paid to each of its named
executives in a taxable year, unless the compensation in excess
of $1 million is qualified performance-based
compensation. We and the compensation committee have
determined that our general policy is to design our short-term
and long-term compensation plans to qualify in part for the
exemption from the deduction limitations of Section 162(m)
and to be consistent with providing appropriate compensation to
executives. Stockholder approval of the 2005 Plan has previously
been sought and obtained, thereby ensuring that qualifying
grants made pursuant to that plan will qualify for the
performance-based exemption. Stockholder approval of the 2011
Plan will be sought at the 2011 annual stockholder meeting in
order to ensure that qualifying grants made pursuant to that
plan will qualify for the performance-based exemption. While the
compensation committee considers the impact of this rule when
developing executive compensation programs, it retains the
flexibility to structure our compensation programs in ways that
best promote our interests and the interests of our
stockholders. Except for a portion of the bonus amounts paid to
Messrs. Ferrel and Tytel, the compensation committee
believes that all payments made under the plan that
14
Table of Contents
resulted in an executive receiving in excess of
$1.0 million for 2010 are exempt from the limits on
deductibility pursuant to Internal Revenue Code
section 162(m).
Compensation
Committee Report*
The compensation committee has reviewed and discussed the
Compensation Discussion & Analysis with management
and, based on that review and discussion, recommends to the
board that it be included in our annual report on
Form 10-K
for the fiscal year ended December 31, 2010.
Members of the Compensation Committee
Edwin M. Banks, Chairman
Kathleen Dore
Jacques D. Kerrest
Kathleen Dore
Jacques D. Kerrest
* | The material in this report is not solicitation material, is not deemed filed with the Securities and Exchange Commission and is not incorporated by reference in any filing of the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filing. |
2010
Summary Compensation Table
The table below summarizes the compensation earned for services
rendered to us in all capacities for the fiscal year ended
December 31, 2010, by both individuals who served as our
Chief Executive Officer during 2010, by our Chief Financial
Officer and by the four other most highly compensated executive
officers employed by us (the named executive
officers) who served in such capacities during 2010.
Except as provided below, none of our named executive officers
received any other compensation required to be disclosed by law
or in excess of $10,000 annually.
Change in |
||||||||||||||||||||||||||||||||
Pension |
||||||||||||||||||||||||||||||||
Value and |
||||||||||||||||||||||||||||||||
Nonqualified |
||||||||||||||||||||||||||||||||
Deferred |
||||||||||||||||||||||||||||||||
Stock |
Option |
Compensation |
||||||||||||||||||||||||||||||
Fiscal |
Salary |
Bonus(1) |
Awards |
Awards |
Earnings |
All Other |
||||||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | Compensation | Total | ||||||||||||||||||||||||
Michael G. Ferrel
|
2010 | $ | 648,718 | $ | 400,000 | | | | $ | 126,515 | (3) | $ | 1,175,233 | |||||||||||||||||||
Chairman and Chief(2)
|
2009 | | | | | | $ | 113,746 | (4) | $ | 113,746 | |||||||||||||||||||||
Executive Officer
|
2008 | $ | 727,014 | | | | | $ | 56,986 | (5) | $ | 784,000 | ||||||||||||||||||||
Robert F.X. Sillerman
|
2010 | $ | 312,931 | (6) | $ | | | $ | 920,500 | (7) | | $ | 4,220,650 | (8) | $ | 5,454,081 | ||||||||||||||||
Former Chairman and
|
2009 | $ | 626,324 | (9) | $ | 506,000 | | $ | 497,500 | (10) | | $ | 231,413 | (11) | $ | 1,861,237 | ||||||||||||||||
Chief Executive Officer(6)
|
2008 | $ | 595,050 | (12) | $ | 1,150,000 | | | | $ | 216,692 | (13) | $ | 1,961,742 | ||||||||||||||||||
Thomas P. Benson
|
2010 | $ | 687,248 | $ | 150,000 | | $ | 328,750 | (14) | | $ | 58,491 | (15) | $ | 1,224,489 | |||||||||||||||||
Executive Vice President,
|
2009 | $ | 544,807 | $ | 300,000 | | $ | 199,000 | (16) | | $ | 57,546 | (17) | $ | 1,101,353 | |||||||||||||||||
Chief Financial Officer and Treasurer
|
2008 | $ | 519,078 | $ | 225,000 | | | | $ | 56,986 | (18) | $ | 801,064 | |||||||||||||||||||
Howard J. Tytel
|
2010 | $ | 845,007 | $ | 150,000 | | $ | 328,750 | (14) | | $ | 58,491 | (15) | $ | 1,382,248 | |||||||||||||||||
Senior Executive Vice President,
|
2009 | $ | 786,944 | $ | 102,781 | | $ | 199,000 | (16) | | $ | 57,546 | (17) | $ | 1,146,271 | |||||||||||||||||
Director of Legal and
|
2008 | $ | 749,684 | $ | 275,000 | | | | $ | 56,986 | (18) | $ | 1,081,670 | |||||||||||||||||||
Governmental Affairs
|
||||||||||||||||||||||||||||||||
Kraig G. Fox
|
2010 | $ | 506,250 | $ | 125,000 | | $ | 263,000 | (19) | | $ | 23,121 | (20) | $ | 917,371 | |||||||||||||||||
Executive Vice President,
|
2009 | $ | 418,066 | $ | 125,000 | | $ | 99,500 | (21) | | $ | 20,745 | (22) | $ | 663,311 | |||||||||||||||||
Chief Operating Officer
|
2008 | $ | 380,501 | $ | 135,000 | | $ | 30,090 | (23) | | $ | 20,998 | (22) | $ | 566,589 | |||||||||||||||||
Simon Fuller
|
2010 | $ | 28,425 | $ | | | | | $ | 14,155,123 | (26) | $ | 14,183,548 | |||||||||||||||||||
Former Chief Executive Officer of
|
2009 | $ | 828,198 | $ | 1,173,750 | | $ | 497,500 | (27) | | $ | 21,597 | (28) | $ | 2,521,045 | |||||||||||||||||
19 Entertainment Limited(24)(25)
|
2008 | $ | 1,038,757 | $ | 1,488,910 | $ | 1,700,000 | (29) | | | $ | 25,601 | (30) | $ | 4,253,268 | |||||||||||||||||
Robert Dodds
|
2010 | $ | 1,879,944 | $ | | | | | $ | 2,920,267 | (31) | $ | 4,800,211 | |||||||||||||||||||
Former Chief Executive Officer of
|
2009 | $ | 626,000 | $ | 469,500 | | $ | 248,750 | (32) | | $ | 11,593 | (33) | $ | 1,355,843 | |||||||||||||||||
19 Entertainment Limited(24)(25)
|
2008 | $ | 742,200 | $ | 185,600 | | $ | 17,700 | (34) | | $ | 12,138 | (35) | $ | 957,638 |
(1) | Bonus amounts are included in this Bonus column for the fiscal year in which the bonus was earned, although bonus amounts are typically paid in the first quarter of the following year. |
15
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(2) | Mr. Ferrel served as our President until his resignation on December 18, 2008. Mr. Ferrel then performed consulting services for us until he was appointed as our Chief Executive Officer on May 6, 2010. | |
(3) | Includes: (a) $20,063 of health and dental insurance premiums paid by us on behalf of Mr. Ferrel and (b) $106,452 of consulting payments made to Mr. Ferrel prior to May 6, 2010, pursuant to his consulting agreement with us. | |
(4) | Includes: (a) $23,746 of health and dental insurance premiums paid by us on behalf of Mr. Ferrel and (b) $90,000 of consulting payments made to Mr. Ferrel pursuant to his consulting agreement with us. | |
(5) | Includes: (a) $24,000 car allowance; (b) $23,786 of health and dental insurance premiums paid by us on behalf of Mr. Ferrel; and (c) $9,200 of matching contributions made by us to Mr. Ferrels account under our 401(k) Plan. | |
(6) | Mr. Sillermans employment with us ended on May 6, 2010, but we have engaged him to perform consulting services through May 30, 2011. The amount of $75,167 was withheld from Mr. Sillermans annual salary and $39,600 from his consulting payments during 2010 in anticipation of compensating us for services performed by our employees for Mr. Sillerman or entities he controls. The compensation committee determined that our employees have provided services valued at $107,080 for Mr. Sillerman in 2010. This amount has been included under the column All Other Compensation. In May 2011, we will apply the amount of $7,687, representing the difference between the amount withheld and the value of the services provided to Mr. Sillerman during 2010, to services provided in the first quarter of 2011. Although this amount will be paid in 2011, it is included under Salary above since it relates to Mr. Sillermans compensation for the fiscal year ended December 31, 2010. | |
(7) | Represents the weighted average fair value of $2.63 on the grant date of options to acquire 350,000 shares of our common stock granted to Mr. Sillerman on March 19, 2010. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(8) | Includes: (a) $8,000 car allowance; (b) $10,288 of health and dental insurance premiums paid by us on behalf of Mr. Sillerman; (c) $9,800 of matching contributions made by us to Mr. Sillermans account under our 401(k) Plan; (d) $107,080 for services provided by our employees for Mr. Sillerman and/or entities he controls; (e) $3,366,749 of severance; and (f) $718,733 of payments made to Mr. Sillerman pursuant to his consulting agreement with us. | |
(9) | The amount of $208,130 was withheld from Mr. Sillermans annual salary during 2009 in anticipation of compensating us for services performed by our employees for Mr. Sillerman or entities he controls. The compensation committee determined that our employees have provided services for Mr. Sillerman in 2009 valued at $173,867. This amount has been included under the column All Other Compensation. In March 4, 2010, we paid Mr. Sillerman the amount of $34,263, representing the difference between the amount withheld and the value of the services provided to Mr. Sillerman during 2009. Although this amount was paid in 2010, it is included under Salary above since it relates to Mr. Sillermans compensation for the fiscal year ended December 31, 2009. | |
(10) | Represents the weighted average fair value on the grant date of options to acquire 250,000 shares of our common stock granted to Mr. Sillerman on March 13, 2009. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(11) | Includes: (a) $24,000 car allowance; (b) $23,746 of health and dental insurance premiums paid by us on behalf of Mr. Sillerman; (c) $9,800 of matching contributions made by us to Mr. Sillermans account under our 401(k) Plan; and (d) $173,867 for services provided by our employees for Mr. Sillerman and/or entities he controls. | |
(12) | The amount of $172,954 was withheld from Mr. Sillermans annual salary during 2008 in anticipation of compensating us for services performed by our employees for Mr. Sillerman or entities he controls. The compensation committee determined that our employees have provided services for Mr. Sillerman in 2008 valued at $159,706. This amount has been included under the column All Other Compensation. In March 2009, we paid Mr. Sillerman the amount of $13,248, representing the difference between the amount withheld |
16
Table of Contents
and the value of the services provided to Mr. Sillerman during 2008. Although this amount was paid in 2009, it is included under Salary above since it relates to Mr. Sillermans compensation for the fiscal year ended December 31, 2008. | ||
(13) | Includes: (a) $24,000 car allowance; (b) $23,786 of health and dental insurance premiums paid by us on behalf of Mr. Sillerman; (c) $9,200 of matching contributions made by us to Mr. Sillermans account under our 401(k) Plan; and (d) $159,706 for services provided by our employees for Mr. Sillerman and/or entities he controls. | |
(14) | Represents the weighted average fair value of $2.63 on the grant date of options to acquire 125,000 shares of our common stock granted to the named executive officer on March 19, 2010. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(15) | Includes: (a) $24,000 car allowance; (b) $24,691 of health and dental insurance premiums paid by us on behalf of the named executive officer; and (c) $9,800 of matching contributions made by us to the named executive officers account under our 401(k) Plan. | |
(16) | Represents the weighted average fair value on the grant date of options to acquire 100,000 shares of our common stock granted to the named executive officer on March 13, 2009. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(17) | Includes: (a) $24,000 car allowance; (b) $23,746 of health and dental insurance premiums paid by us on behalf of the named executive officer; and (c) $9,800 of matching contributions made by us to the named executive officers account under our 401(k) Plan. | |
(18) | Includes: (a) $24,000 car allowance; (b) $23,786 of health and dental insurance premiums paid by us on behalf of the named executive officer; and (c) $9,200 of matching contributions made by us to the named executive officers account under our 401(k) Plan. | |
(19) | Represents the weighted average fair value of $2.63 on the grant date of options to acquire 100,000 shares of our common stock granted to Mr. Fox on March 19, 2010. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(20) | Includes: (a) $20,371 of health and dental insurance premiums paid by us on behalf of Mr. Fox; and (c) $2,750 of matching contributions made by us to Mr. Foxs account under our 401(k) Plan. | |
(21) | Represents the weighted average fair value on the grant date of options to acquire 50,000 shares of our common stock granted to Mr. Fox on March 13, 2009. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(22) | Represents health and dental insurance premiums paid by us on behalf of Mr. Fox. | |
(23) | Represents the weighted average fair value on the grant date of options to acquire 8,500 shares of our common stock granted to Mr. Fox on March 6, 2008. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(24) | With the exception of certain of the consulting fees paid to Mr. Fuller, these executives are paid in U.K. pounds sterling. The average exchange rates applied in 2008, 2009 and 2010 were $1.85518, $1.565 and $1.5517, respectively, per U.K. pound sterling. | |
(25) | Mr. Fuller resigned as Chief Executive Officer of 19 Entertainment Limited on January 13, 2010, but continues to perform consulting services for 19 Entertainment Limited. Mr. Dodds, who previously served as President of 19 Entertainment Limited since August 2006, was appointed to the position of Chief Executive Officer of 19 Entertainment Limited on January 29, 2010. Mr. Dodds employment with 19 Entertainment Limited ended on October 1, 2010. | |
(26) | Includes: (a) a $741 car allowance; (b) $2,296,516 of severance; and (c) $11,857,866 of payments made to Mr. Fuller pursuant to his consulting agreement with 19 Entertainment Limited. |
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(27) | Represents the weighted average fair value on the grant date of options to acquire 250,000 shares of our common stock granted to Mr. Fuller on March 13, 2009. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(28) | Includes a $21,597 car allowance. | |
(29) | Represents the fair value on the grant date of 200,000 shares of restricted stock granted to Mr. Fuller in 2008. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(30) | Includes a $25,601 car allowance. | |
(31) | Includes: (a) $5,032 car insurance; (b) $5,797 of health insurance premiums paid by 19 Entertainment on behalf of Mr. Dodds; and (c) $2,909,438 of severance. | |
(32) | Represents the weighted average fair value on the grant date of options to acquire 125,000 shares of our common stock granted to Mr. Dodds on March 13, 2009. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(33) | Includes: (a) $4,930 car insurance and (b) $6,663 of health insurance premiums paid by 19 Entertainment on behalf of Mr. Dodds. | |
(34) | Represents the weighted average fair value on the grant date of options to acquire 5,000 shares of our common stock granted to Mr. Dodds on March 6, 2008. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. | |
(35) | Includes: (a) $4,969 car insurance and (b) $7,169 of health insurance premiums paid by19 Entertainment on behalf of Mr. Dodds. |
Grants of
Plan-Based Awards in Fiscal Year 2010
We granted a total of 1,296,500 options pursuant to our 2005
Omnibus Incentive Compensation Plan during the fiscal year ended
December 31, 2010. The following table sets forth the
number of stock options granted to the named executive officers
in such fiscal year:
All |
||||||||||||||||||||||||||||||||||||||||||||
Other |
All Other |
Grant |
||||||||||||||||||||||||||||||||||||||||||
Stock |
Option |
Date |
||||||||||||||||||||||||||||||||||||||||||
Awards: |
Awards: |
Exercise |
Fair |
|||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts |
Estimated Future Payouts |
Number of |
Number of |
or Base |
Value of |
|||||||||||||||||||||||||||||||||||||||
Under Non-Equity Incentive |
Under Equity Incentive |
Shares |
Securities |
Price of |
Stock |
|||||||||||||||||||||||||||||||||||||||
Plan Awards | Plan Awards |
of Stock |
Underlying |
Option |
and |
|||||||||||||||||||||||||||||||||||||||
Grant |
Threshold |
Target |
Maximum |
Threshold |
Target |
Maximum |
or Units |
Options |
Awards |
Option |
||||||||||||||||||||||||||||||||||
Name | Date | ($) | ($) | ($) | ($) | ($) | ($) | (#)) | (#) | ($/Sh) | Awards | |||||||||||||||||||||||||||||||||
Michael G. Ferrel
|
| | | | | | | | | | | |||||||||||||||||||||||||||||||||
Robert F.X. Sillerman(2)
|
3/19/2010 | | | | | | | | 350,000 | $ | 5.66 | $ | 920,500 | (1) | ||||||||||||||||||||||||||||||
Thomas P. Benson
|
3/19/2010 | | | | | | | | 125,000 | $ | 5.66 | $ | 328,750 | (1) | ||||||||||||||||||||||||||||||
Howard J. Tytel
|
3/19/2010 | | | | | | | | 125,000 | $ | 5.66 | $ | 328,750 | (1) | ||||||||||||||||||||||||||||||
Kraig G. Fox
|
3/19/2010 | | | | | | | | 100,000 | $ | 5.66 | $ | 263,000 | (1) | ||||||||||||||||||||||||||||||
Simon Fuller(3)
|
| | | | | | | | | | | |||||||||||||||||||||||||||||||||
Robert Dodds(4)
|
| | | | | | | | | | |
(1) | The present value of each option is $2.63, the estimated fair value calculated using the Black-Scholes pricing model at the date of the option grant. The amounts reported in this column reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ASC Topic 718. For the assumptions made in such valuation, see note 13 to our consolidated financial statements contained in the Original Report. | |
(2) | Mr. Sillermans employment with us ended on May 6, 2010. | |
(3) | Mr. Fullers employment with 19 Entertainment Limited ended on January 13, 2010. | |
(4) | Mr. Dodds employment with 19 Entertainment Limited ended on October 1, 2010. |
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Outstanding
Equity Awards at December 31, 2010
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||||||
Incentive |
||||||||||||||||||||||||||||||||||||
Equity |
Plan |
|||||||||||||||||||||||||||||||||||
Incentive |
Awards: |
|||||||||||||||||||||||||||||||||||
Plan |
Market or |
|||||||||||||||||||||||||||||||||||
Awards: |
Payout |
|||||||||||||||||||||||||||||||||||
Equity |
Number of |
Value of |
||||||||||||||||||||||||||||||||||
Incentive |
Market |
Unearned |
Unearned |
|||||||||||||||||||||||||||||||||
Plan |
Number of |
Value of |
Shares, |
Shares, |
||||||||||||||||||||||||||||||||
Awards: |
Shares |
Shares |
Units or |
Units or |
||||||||||||||||||||||||||||||||
Number of |
Number of |
Number of |
or Units |
or Units |
Other |
Other |
||||||||||||||||||||||||||||||
Securities |
Securities |
Securities |
of Stock |
of Stock |
Rights |
Rights |
||||||||||||||||||||||||||||||
Underlying |
Underlying |
Underlying |
That |
That |
That |
That |
||||||||||||||||||||||||||||||
Unexercised |
Unexercised |
Unexercised |
Option |
Have |
Have |
Have |
Have |
|||||||||||||||||||||||||||||
Options |
Options |
Unearned |
Exercise |
Option |
Not |
Not |
Not |
Not |
||||||||||||||||||||||||||||
(#) |
(#) |
Options |
Price |
Expiration |
Vested |
Vested |
Vested |
Vested |
||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ($) | ($) | Date | (#) | (#) | (#) | ($) | |||||||||||||||||||||||||||
Michael G. Ferrel
|
| | | | | | | | | |||||||||||||||||||||||||||
Robert F.X. Sillerman(1)
|
250,000 | (2) | | | $ | 4.19 | 3/13/2019 | | | | | |||||||||||||||||||||||||
350,000 | (2) | | | $ | 5.66 | 3/19/2020 | | | | | ||||||||||||||||||||||||||
Thomas P. Benson
|
20,000 | 80,000 | (3) | | $ | 4.19 | 3/13/2019 | | | | | |||||||||||||||||||||||||
| 125,000 | (4) | | $ | 5.66 | 3/19/2020 | | | | | ||||||||||||||||||||||||||
Howard J. Tytel
|
20,000 | 80,000 | (3) | | $ | 4.19 | 3/13/2019 | | | | | |||||||||||||||||||||||||
| 125,000 | (4) | | $ | 5.66 | 3/19/2020 | | | | | ||||||||||||||||||||||||||
Kraig G. Fox
|
3,000 | 2,000 | (5) | | $ | 12.03 | 3/07/2017 | 2,000 | (6) | $ | 8,060 | (7) | | | ||||||||||||||||||||||
3,400 | 5,100 | (8) | | $ | 8.51 | 3/06/2018 | | | | | ||||||||||||||||||||||||||
10,000 | 40,000 | (9) | | $ | 4.19 | 3/13/2019 | | | | | ||||||||||||||||||||||||||
| 100,000 | (10) | | $ | 5.66 | 3/19/2020 | | | | | ||||||||||||||||||||||||||
Simon Fuller(11)
|
100,000 | (12) | | | $ | 12.20 | 7/19/2015 | | | | | |||||||||||||||||||||||||
250,000 | (12) | | | $ | 4.19 | 3/13/2019 | | | | | ||||||||||||||||||||||||||
Robert Dodds(13)
|
| | | | | | | | |
(1) | Mr. Sillermans employment with us ended on May 6, 2010. | |
(2) | In connection with the termination of Mr. Sillermans employment with us, the vesting of all of Mr. Sillermans stock options was accelerated as of such date and the respective expiration dates remained the tenth anniversary of the applicable grant. | |
(3) | 20,000 of the named executive officers options vested on March 13, 2010. Because this chart reflects outstanding grants as of December 31, 2010, 20,000 of the named executive officers options that vested on March 13, 2011, are reflected as unvested in the chart above. Of the remaining 60,000 options, 20,000 vest on March 13, 2012, 20,000 vest on March 13, 2013 and 20,000 vest on March 13, 2014. | |
(4) | Because this chart reflects outstanding grants as of December 31, 2010, 25,000 of the named executive officers options that vested on March 19, 2011, are reflected as unvested in the chart above. Of the remaining 100,000 options, 25,000 vest on March 19, 2012, 25,000 vest on March 19, 2013, 25,000 vest on March 19, 2014 and 25,000 vest on March 19, 2015. | |
(5) | 1,000 of Mr. Foxs options vested on March 7, 2008, 1,000 vested on March 7, 2009, and 1,000 vested on March 7, 2010. Because this chart reflects outstanding grants as of December 31, 2010, 1,000 of Mr. Foxs options that vested on March 7, 2011, are reflected as unvested in the chart above. The remaining 1,000 options vest on March 7, 2012. | |
(6) | Because this chart reflects outstanding grants as of December 31, 2010, 1,000 shares of restricted stock held by Mr. Fox that vested on March 5, 2011, are reflected as unvested in the chart above. The remaining 1,000 shares of restricted stock vest on March 5, 2012. | |
(7) | The closing price of our common stock on December 31, 2010, was $4.03. | |
(8) | 1,700 of Mr. Foxs options vested on March 6, 2009, and 1,700 vested on March 6, 2010. Because this chart reflects outstanding grants as of December 31, 2010, 1,700 of Mr. Foxs options that vested on March 6, 2011, are reflected as unvested in the chart above. Of the remaining 3,400 options, 1,700 vest on March 6, 2012 and 1,700 vest on March 6, 2013. |
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Table of Contents
(9) | 10,000 of Mr. Foxs options vested on March 13, 2010. Because this chart reflects outstanding grants as of December 31, 2010, 10,000 of Mr. Foxs options that vested on March 13, 2011, are reflected as unvested in the chart above. Of the remaining 30,000 options, 10,000 vest on March 13, 2012, 10,000 vest on March 13, 2013 and 10,000 vest on March 13, 2014. | |
(10) | Because this chart reflects outstanding grants as of December 31, 2010, 20,000 of Mr. Foxs options that vested on March 19, 2011, are reflected as unvested in the chart above. Of the remaining 80,000 options, 20,000 vest on March 19, 2012, 20,000 vest on March 19, 2013, 20,000 vest on March 19, 2014 and 20,000 vest on March 19, 2015. | |
(11) | Mr. Fullers employment with 19 Entertainment Limited ended on January 13, 2010. | |
(12) | In connection with the termination of Mr. Fullers employment with 19 Entertainment Limited on January 13, 2010, the vesting of all of Mr. Fullers stock options was accelerated as of such date and the respective expiration dates remained the tenth anniversary of the applicable date of grant. | |
(13) | Mr. Dodds employment with 19 Entertainment Limited ended on October 1, 2010, and all outstanding options were cancelled pursuant to their terms. |
2010
Fiscal Year Option Exercises and Stock Vested
Option Awards | Stock Awards | |||||||||||||||
Number of Shares |
Value |
Number of Shares |
Value |
|||||||||||||
Acquired on |
Realized on |
Acquired on |
Realized on |
|||||||||||||
Exercise |
Exercise |
Vesting |
Vesting |
|||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Michael G. Ferrel
|
||||||||||||||||
Robert F.X. Sillerman(1)
|
| | | | ||||||||||||
Thomas P. Benson
|
| | | | ||||||||||||
Howard J. Tytel
|
| | | | ||||||||||||
Kraig G. Fox
|
| | 1,000 | (2) | $ | 4,775 | ||||||||||
Simon Fuller(3)
|
| | | | ||||||||||||
Robert Dodds(4)
|
| | 139,553 | (5) | $ | 687,996 |
(1) | Mr. Sillermans employment with us ended on May 6, 2010. | |
(2) | The shares, which were granted to Mr. Fox on March 5, 2007, vested on March 5, 2010, pursuant to their terms. | |
(3) | Mr. Fullers employment with 19 Entertainment Limited ended on January 13, 2010. | |
(4) | Mr. Dodds employment with 19 Entertainment Limited ended on October 1, 2010. | |
(5) | The shares were originally received by Mr. Dodds in connection with the sale of Freedom Media Limited to 19 Entertainment Limited by Mr. Dodds in 2006. The vesting of the shares was accelerated on October 1, 2010, pursuant to the terms of the Compromise Agreement reached with Mr. Dodds in connection with the termination of his employment. |
Pension
Benefits
None of our named executive officers is covered by a company
sponsored pension plan or other similar benefit plan that
provides for payments or other benefits at, following or in
connection with retirement. However, Mr. Fuller maintains a
personal pension scheme in the United Kingdom. In 2010, 19
Entertainment contributed £100 ($165 as of April 28,
2011) to such plan on behalf of Mr. Fuller.
Nonqualified
Deferred Compensation
None of our named executive officers are covered by a defined
contribution or other plan that provides for the deferral of
compensation on a basis that is not-tax-qualified.
20
Table of Contents
Employment
Agreements and Potential Payments upon Termination or
Change-in-Control
Michael
G. Ferrel
In June 2010, we entered into an employment agreement with our
Chief Executive Officer, Michael G. Ferrel, effective
retroactively to May 6, 2010. Mr. Ferrels
employment agreement provides for an initial annual base salary
of $1,000,000. The amount of the base salary will be reviewed
annually by our board of directors and may be increased at the
discretion of the board, but not decreased. Mr. Ferrel is
eligible to receive during his continued satisfactory
performance of his employment agreement an annual cash bonus to
be determined in the discretion of our compensation committee.
In addition, Mr. Ferrel is eligible to receive an annual
grant of restricted stock, stock options or other equity awards
as determined by the compensation committee. The term of the
employment agreement commences on May 6, 2010, and
continues until February 1, 2013, and includes a
non-competition agreement between Mr. Ferrel and us which
is operative during the term.
The employment agreement provides that in the event
Mr. Ferrels employment is terminated without
cause, as specified in his agreement, other than in
connection with a change in control of the Company, he will be
entitled to receive (a) his base salary through the date of
termination, (b) a lump sum payment equal to two years of
his base salary in effect at the time of termination and
(c) a lump sum payment equal to $250,000 in consideration
for Mr. Ferrel continuing to be subject to the
non-competition provision of his employment agreement for six
months following termination. After February 1, 2011, the
lump sum payment described in clause (b) above will be
reduced by 1/24th for each full month that Mr. Ferrel
has been employed by us pursuant to his employment agreement,
provided that the payment will not be reduced below the amount
of his annual base salary in effect at the time of termination.
Under the terms of the employment agreement, if within
12 months following a change in control of the Company,
Mr. Ferrels employment is terminated without
cause, he will be entitled to (a) his base
salary through the date of termination, (b) an amount equal
to (i) 2.99 multiplied by (ii) the average annual
compensation received by Mr. Ferrel from the Company over
the five calendar years immediately preceding the date of the
change in control termination, with such product reduced by
(iii) the value of any benefit received from the
acceleration of lapsing of restrictions on stock or vesting of
options and (c) a lump sum payment equal to $250,000 in
consideration for Mr. Ferrel continuing to be subject to
the non-competition provision of his employment agreement for
six months following termination. The employment agreement
provides for certain payments to be made to Mr. Ferrel or
his estate upon his death or disability as more fully described
below under Potential Payments upon Death or
Disability. The employment agreement with Mr. Ferrel
was approved by our compensation committee in recognition of the
need to provide certainty to both us and Mr. Ferrel with
respect to his continued and active participation in our growth.
Thomas
P. Benson
Following expiration of Mr. Bensons original
employment agreement and upon recommendation of the Chief
Executive Officer, effective as of February 1, 2010, we
entered into a new employment agreement with Mr. Benson.
Mr. Bensons new employment agreement provides for an
initial annual base salary of $700,000. The amount of the base
salary will be reviewed annually by the compensation committee
and may be increased at the discretion of the compensation
committee, but not decreased. Mr. Benson is eligible to
receive during his continued satisfactory performance of his new
employment agreement an annual cash bonus to be determined in
the discretion of the compensation committee, provided that
Mr. Bensons minimum annual target cash bonus under
any incentive compensation plan adopted by the compensation
committee will be at least $350,000. In addition,
Mr. Benson is eligible to receive an annual grant of
restricted stock, stock options or other equity awards as
determined by the compensation committee. The employment
agreement extends for a term of three years beginning as of
February 1, 2010, and includes a non-competition agreement
between Mr. Benson and us which is operative during the
term.
The employment agreement with Mr. Benson provides that in
the event his employment is terminated without
cause, as specified in his agreement, other than in
connection with a change in control of the Company, he will be
entitled to receive his base salary through the date of
termination and a lump sum payment equal to two years of his
base salary in effect at the time of termination. After
February 1, 2011, the lump sum payment will be reduced by
1/24th for each full month that Mr. Benson has been
employed by the Company since February 1, 2010, provided
that the payment will not be reduced below the amount of his
annual base salary in effect at the time of termination. If
21
Table of Contents
within 12 months following a change in control of the
Company, Mr. Bensons employment is terminated without
cause, he will be entitled to his base salary
through the date of termination and a lump sum amount equal to
the greater of the payment described above with respect to a
termination without cause or one year of his base
salary in effect at the time of termination plus the amount of
the annual target cash bonus specified for the year in which
such termination occurs. The employment agreement provides for
certain payments to be made to Mr. Benson or his estate
upon his death or disability as more fully described below under
Potential Payments upon Death or Disability. The
employment agreement with Mr. Benson was approved by the
compensation committee in recognition of the need to provide
certainty to both us and Mr. Benson with respect to his
continued and active participation in our growth.
Howard
J. Tytel
Following expiration of Mr. Tytels original
employment agreement and after receipt of compensation committee
approval, effective February 1, 2010, we entered into a new
employment agreement with Mr. Tytel. Mr. Tytels
new employment agreement provides for an initial annual base
salary of $850,000. The amount of the base salary will be
reviewed annually by the compensation committee and may be
increased at the discretion of the compensation committee, but
not decreased. Mr. Tytel is eligible to receive during his
continued satisfactory performance of his new employment
agreement an annual cash bonus to be determined in the
discretion of the compensation committee, provided that
Mr. Tytels minimum annual target cash bonus under any
incentive compensation plan adopted by the compensation
committee will be at least $450,000. In addition, Mr. Tytel
is eligible to receive an annual grant of restricted stock,
stock options or other equity awards as determined by the
compensation committee. The employment agreement extends for a
term of three years beginning as of February 1, 2010, and
includes a non-competition agreement between Mr. Tytel and
us which is operative during the term.
The employment agreement with Mr. Tytel provides that in
the event his employment is terminated without
cause, as specified in his agreement, other than in
connection with a change in control of the Company, he will be
entitled to receive his base salary through the date of
termination and a lump sum payment equal to two years of his
base salary in effect at the time of termination. After
February 1, 2011, the lump sum payment will be reduced by
1/24th for
each full month that Mr. Tytel has been employed by the
Company since February 1, 2010, provided that the payment
will not be reduced below the amount of his annual base salary
in effect at the time of termination. If within 12 months
following a change in control of the Company,
Mr. Tytels employment is terminated without
cause, he will be entitled to his base salary
through the date of termination and a lump sum amount equal to
the greater of the payment described above with respect to a
termination without cause or one year of his base
salary in effect at the time of termination plus the amount of
the annual target cash bonus specified for the year in which
such termination occurs. The employment agreement provides for
certain payments to be made to Mr. Tytel or his estate upon
his death or disability as more fully described below under
Potential Payments upon Death or Disability. The new
employment agreement was approved by the compensation committee
in recognition of the need to provide certainty to both us and
Mr. Tytel with respect to his continued and active
participation in our growth.
Kraig
G. Fox
Our board of directors appointed Kraig G. Fox to serve as our
Chief Operating Officer on September 30, 2010. We had
previously entered into an employment agreement with
Mr. Fox as of October 1, 2009, with respect to
Mr. Foxs prior role as our Chief Corporate
Development Officer. On October 13, 2010, we and
Mr. Fox amended the employment agreement to reflect
Mr. Foxs new role with us and certain other terms.
Mr. Foxs employment agreement provides for an initial
annual base salary of $500,000, increased annually by five
percent. The amount of the base salary will be reviewed annually
by our board of directors and may be increased at the discretion
of the board, but not decreased. In addition, Mr. Fox is
eligible to receive during his continued satisfactory
performance of his employment agreement a guaranteed minimum
annual bonus equal to 25% of his base salary for the fiscal
year. In the event that we achieve certain percentages of an
annual performance target, the cash bonus payable to
Mr. Fox could increase in an amount up to 100% of his base
salary for the year in question and, if approved by our
compensation committee, could include a grant of stock options.
Moreover, Mr. Fox is eligible to receive an annual grant of
restricted stock, stock options or other equity awards as
determined
22
Table of Contents
by the compensation committee. The term of the employment
agreement commenced on October 1, 2009, and continues until
December 31, 2014, and includes a non-competition agreement
between Mr. Fox and us which is operative during the term.
The employment agreement provides for certain payments to be
made to Mr. Fox or his estate upon his death or disability
as more fully described below under Potential Payments
upon Death or Disability. In the event that, at the end of
the term of his employment agreement, Mr. Fox is ready,
willing and able to renew the agreement for an additional term
of not less than three years and on consistent terms with this
agreement and if we do not offer Mr. Fox such a renewal,
then Mr. Fox is entitled to a payment of (a) his base
salary then in effect for an additional
12-month
period and (b) continued eligibility to participate in any
benefit plans of the Company for an additional
12-month
period. Assuming such a non-renewal, the approximate amount that
would be due to Mr. Fox would be $661,262. In the event of
a change of control of the Company, Mr. Fox is entitled to
receive an additional
tax-gross up
payment to cover any taxes on the total amount he is entitled to
receive (as described below) so that Mr. Fox receives the
total amount, without any deduction for taxes. In the event of a
change in control or if there is a termination
without cause or a constructive termination
without cause, in addition to the foregoing, all
previously granted but unvested restricted shares of common
stock or options to purchase common stock shall vest fully.
The amendment to the employment agreement provides that in the
event Mr. Foxs employment is terminated without
cause or there is a constructive termination
without cause, as specified in his agreement, other than
due to disability or death, he will be entitled to receive
(a) his base salary through the date of termination,
(b) the cash equivalent of three years of his base salary
in effect at the time of termination, (c) a cash bonus for
each partial or full year remaining on the term of the amended
employment agreement equal to the average of all bonuses paid or
earned during the term of the amended employment agreement and
(d) continued eligibility to participate in any of our
benefit plans through the term. Under the terms of the amendment
to the employment agreement, following a change in control of
the Company, Mr. Fox may elect to terminate his employment
and accelerate the expiration date of the employment agreement,
in which case he will be entitled to (a) his base salary
through the date of termination, (b) the cash equivalent of
three years of his base salary in effect at the time of
termination, unless (i) the change in control of the
Company is consummated with any person with whom we have been
engaged in discussions during the six months before
October 13, 2010, and (ii) the change in control of
the Company is consummated or a definitive agreement with
respect to such change in control is executed within six months
after October 13, 2010, then he would be entitled to the
cash equivalent of four years of his base salary in effect at
the time of termination, (c) a cash bonus for each partial
or full year remaining on the term of the employment agreement
equal to the average of all bonuses paid or earned during the
term of the employment agreement and (d) continued
eligibility to participate in any of our benefit plans through
the term. The amendment to Mr. Foxs employment
agreement was approved by our compensation committee for several
reasons. First, Mr. Ferrel determined that elevating
Mr. Fox to the position of Chief Operating Officer was
critical to achieving the reorganization and expense reduction
objectives that had been established in connection with
Mr. Ferrels appointment as Chief Executive Officer.
Second, although the compensation committee requested a more
comprehensive amendment of Mr. Foxs existing
employment agreement that would have, among other matters,
further reduced the potential severance payments and eliminated
the provision for the excise tax gross-up, Mr. Fox would
not agree to the broader amendment of his existing agreement
(which, as was noted above in Compensation Discussion and
Analysis, was entered into by the company and
Mr. Fox, who was not then an NEO, without review and
approval by the compensation committee). Third, the severance
that would be due to Mr. Fox under certain circumstances
was being reduced by one year, which was clearly beneficial to
us and our shareholders.
Robert
F.X. Sillerman
In February 2005, we entered into an employment agreement with
Mr. Sillerman under which he served as Chairman and Chief
Executive Officer until the termination of his employment with
us on May 6, 2010. The employment agreement provided for an
initial annual base salary of $650,000, increased annually by
the greater of five percent or the rate of inflation.
Mr. Sillermans employment agreement commenced
February 8, 2005, and had a term of six years, expiring
February 7, 2011. Mr. Sillermans employment
agreement was subsequently amended in 2008 and 2009.
23
Table of Contents
In connection with Mr. Sillermans termination, we
agreed to the terms of a separation and consulting agreement.
Pursuant to the terms of the separation and consulting
agreement, we agreed to treat Mr. Sillermans
resignation as a constructive termination without
cause for purposes of Mr. Sillermans
pre-existing employment agreement with us. As a result,
Mr. Sillerman received a cash severance payment of
$3,316,749, we reimbursed Mr. Sillerman for certain
unreimbursed business expenses incurred prior to separation and
for $25,000 of legal fees incurred in connection with the
separation and consulting agreement, and Mr. Sillerman
received a cash payment of $95,721 in respect of his accrued but
unused vacation. We also agreed to provide Mr. Sillerman
with $25,000 in each of 2010, 2011 and 2012, and $10,000 each
year thereafter, to cover certain of Mr. Sillermans
health insurance costs. Pursuant to the terms of the agreement,
all of our stock options held by Mr. Sillerman under our
2005 Plan became immediately exercisable in connection with his
termination and, subject to Mr. Sillermans compliance
with certain terms of the separation and consulting agreement,
will remain exercisable for the remainder of their original
term. Similar to the terms of his pre-existing employment
agreement, we are obligated to provide Mr. Sillerman with a
Internal Revenue Code section 280G excess parachute
payment excise tax
gross-up in
certain circumstances. We also entered into a non-exclusive
consulting arrangement whereby Mr. Sillerman will receive a
consulting fee of $1 million in connection with his
continued availability to promote our best interests and the
best interests of our subsidiaries for a one-year period
following the execution of the separation and consulting
agreement. In addition to the consulting fee, Mr. Sillerman
will be reimbursed for the monthly cost of reasonable office
space, an administrative assistant and a car and driver until
December 31, 2011, with an aggregate monthly cost not to
exceed $25,000. In consideration for the severance payment and
the consulting fee, Mr. Sillerman released us from all
claims arising out of his employment, stockholder
and/or other
relationship with us and the termination of such relationships.
The indemnification and confidentiality provisions in
Mr. Sillermans pre-existing employment agreement are
to remain in full force and effect and we agreed to enter into a
mutual non-disparagement provision.
Simon
R. Fuller
In connection with our acquisition of 19 Entertainment, we
entered into an employment agreement with Simon Fuller under
which he served as the Chief Executive Officer of 19
Entertainment until his resignation on January 13, 2010.
The agreement was effective March 17, 2005, and provided
for a term of six years. The employment agreement provided for
an annual base salary of £480,000 (or $793,334 as of
April 28, 2011). Following Mr. Fullers
resignation, he is not entitled to receive any payments upon a
change in control.
On January 13, 2010, we and 19 Entertainment entered into a
compromise agreement with Mr. Fuller setting forth the
terms of the termination of Mr. Fullers employment
with 19 Entertainment. Under the compromise agreement, 19
Entertainment was required to pay Mr. Fuller a one time
compensation payment of £480,000 (or $773,962 as of
January 13, 2010) and a one time payment of
£500,000 (or $806,210 as of January 13, 2010) as
consideration for his ongoing confidentiality and certain other
obligations under the compromise agreement. The compromise
agreement provided for the accelerated vesting of 290,000
options to purchase shares of our common stock held by
Mr. Fuller. In addition, Mr. Fuller held
200,000 shares of restricted stock and 60,000 options that
had already vested prior to the date of the compromise agreement.
Also on January 13, 2010, 19 Entertainment and
Mr. Fuller entered into a Consultancy Deed, pursuant to
which 19 Entertainment has engaged Mr. Fuller as a
consultant to provide services, including executive producer
services, to 19 Entertainment in respect of its American Idol,
So You Think You Can Dance and If I Can Dream programs.
Mr. Fuller also agreed to provide creative and strategic
advice with respect to our overall business through
July 13, 2010, in consideration for which we will pay to
Mr. Fuller £1.5 million (or $2.4 million as
of January 13, 2010). In addition, in consideration for
providing these services, Mr. Fuller will receive 10% of
our net profits from each of the aforementioned programs for the
life of the programs as long as Mr. Fuller continues to
provide consulting services with respect to such programs (the
Creative Consulting Fee). For calendar year 2010,
Mr. Fuller received $5.0 million as an advance against
the Creative Consulting Fee, which was paid in the year ended
December 31, 2010; a balance for 2010 of $4.1 million
was paid in March 2011. For each year after 2010, subject to
certain conditions, Mr. Fuller will receive, as an annual
advance against the Creative Consulting Fee, $3.0 million
if Idols remains on the air and $2.0 million if So You
Think You Can Dance remains on the air. The advances are
non-refundable to us, but we may recoup the amount of such
advances within each year from the Creative Consulting Fee
payable to Mr. Fuller.
24
Table of Contents
Robert
Dodds
On January 29, 2010, Robert Dodds was appointed Chief
Executive Officer of 19 Entertainment. Prior to this
appointment, Mr. Dodds had served as President of 19
Entertainment since August 2006. In connection with this
appointment, 19 Entertainment and Mr. Dodds entered into an
Amendment to Mr. Dodds Service Agreement, which
provided that effective from January 1, 2010,
Mr. Dodds would receive an annual salary of
£1.5 million (or $2,479,170 as of April 28,
2011) and provided that the term of Mr. Dodds
Service Agreement ran until August 2011.
Due to the restructuring of 19 Entertainment that occurred in
2010, the employment of Mr. Dodds was terminated as of
October 1, 2010. On September 29, 2010, the Company
and 19 Entertainment entered into a compromise agreement with
Mr. Dodds setting forth the terms of the termination of his
employment with 19 Entertainment. Under the compromise
agreement, 19 Entertainment was required to pay Mr. Dodds a
one time severance payment of £1,870,000 (or $2,954,100 as
of October 1, 2010) and a one time payment of £5,000
(or $7,899 as of October 1, 2010) as consideration for his
ongoing confidentiality and certain other obligations under the
agreement. The compromise agreement also provided for the
accelerated vesting of 139,553 shares of our common stock
originally received by Mr. Dodds in connection with 19
Entertainments acquisition in 2006 of Freedom Media
Limited, which was owned by Mr. Dodds. Following
Mr. Dodds termination, he is not entitled to receive
any payments upon a change in control.
Potential
Payments upon Termination or Change of Control
The amount of compensation payable to each named executive
officer upon a termination without cause or a
constructive termination without cause as described
above is listed in the table below assuming a termination
without cause or a constructive termination
without cause occurred on December 31, 2010 (or on
the date of the triggering event if the named executive
officers termination actually occurred prior to
December 31, 2010):
Health/ |
||||||||||||||||||||||||
Insurance |
Restricted |
Stock |
||||||||||||||||||||||
Name | Salary | Bonus | Benefits | Stock(1) | Options(1) | Total | ||||||||||||||||||
Michael G. Ferrel
|
$ | 2,000,000 | $ | 250,000 | $ | 49,382 | | | $ | 2,299,382 | ||||||||||||||
Robert F.X. Sillerman(2)
|
$ | 3,316,749 | $ | | $ | 185,000 | (3) | | | $ | 3,501,749 | |||||||||||||
Thomas P. Benson
|
$ | 1,400,000 | $ | | $ | 49,382 | | | $ | 1,449,382 | ||||||||||||||
Howard J. Tytel
|
$ | 1,700,000 | $ | | $ | 49,382 | | | $ | 1,749,382 | ||||||||||||||
Kraig G. Fox
|
$ | 1,518,050 | $ | 494,503 | $ | 81,483 | $ | 8,060 | | $ | 2,102,096 | |||||||||||||
Simon Fuller(4)(5)
|
$ | 2,296,516 | | | | | $ | 2,296,516 | ||||||||||||||||
Robert Dodds(4)(6)
|
$ | 2,133,588 | $ | 775,850 | | | | $ | 2,909,438 |
(1) | Based upon a closing market price of $4.03 on December 31, 2010. | |
(2) | Mr. Sillermans employment with us ended on May 6, 2010. | |
(3) | Represents $25,000 for payments made or to be made in 2010, 2011 and 2012 and $10,000 per year for payments in each year for an estimate of the remainder of Mr. Sillermans natural life. | |
(4) | Amounts were paid in U.K. pounds sterling. The average exchange rate applied in 2010 was $1.5517 per U.K. pound sterling. | |
(5) | Mr. Fullers employment with 19 Entertainment Limited ended on January 13, 2010. | |
(6) | Mr. Dodds employment with 19 Entertainment Limited ended on October 1, 2010. |
25
Table of Contents
The amount of compensation payable to each named executive
officer upon a change of control as described above is listed in
the table below assuming a change of control occurred on
December 31, 2010:
Health/ |
||||||||||||||||||||||||
Insurance |
Restricted |
Stock |
||||||||||||||||||||||
Name | Salary | Bonus | Benefits | Stock(1) | Options(1) | Total | ||||||||||||||||||
Michael G. Ferrel
|
$ | 1,880,892 | $ | 250,000 | $ | 49,382 | | | $ | 2,180,274 | ||||||||||||||
Thomas P. Benson
|
$ | 1,400,000 | $ | | $ | 49,382 | | | $ | 1,449,382 | ||||||||||||||
Howard J. Tytel
|
$ | 1,700,000 | $ | | $ | 49,382 | | | $ | 1,749,382 | ||||||||||||||
Kraig G. Fox
|
$ | 1,518,050 | $ | 494,503 | $ | 81,483 | $ | 8,060 | | $ | 2,102,096 |
(1) | Based upon a closing market price of $4.03 on December 31, 2010. |
None of Messrs. Ferrel, Benson, Tytel, Fuller or Dodds
would be entitled to a tax
gross-up
payment on a change of control pursuant to the terms of their
employment or compromise agreements, as applicable. Under the
terms of Mr. Foxs employment agreement, in the event
a
change-in-control
payment constitutes an excess parachute payment, Mr. Fox is
entitled to receive an additional
tax-gross up
payment to cover taxes on the total amount so that he receives
the total amount, without any deduction for taxes. The terms of
the separation agreement between Mr. Sillerman and us
entitles Mr. Sillerman to receive an additional tax
gross-up
payment with respect to his
agreed-upon
constructive termination without cause severance
payment if such payment were later determined to be an excess
parachute payment. As all discussions with third parties to sell
us were terminated as of late October 2010, the payment to
Mr. Sillerman should not be treated as an excess parachute
payment in a hypothetical change of control on December 31,
2010. None of Messrs. Tytel, Benson, Fuller or Dodds was
entitled to a tax
gross-up
payment pursuant to the terms of their employment or compromise
agreements, as applicable. The estimated amount of such tax
gross-up
payments, along with the total amount that would be paid to each
of Messrs. Fox and Sillerman, are set forth in the table
below assuming December 31, 2010, as the date of the change
in control:
Total |
Total |
|||||||||||
(Before Tax |
Amount of |
(After Tax |
||||||||||
Gross-Up |
Gross-Up |
Gross-Up |
||||||||||
Name(1) | Payment) | Payment | Payment) | |||||||||
Kraig G. Fox
|
$ | 2,102,096 | $ | 3,730,180 | $ | 5,832,596 |
(1) | The foregoing table omits Mr. Sillerman because he would not have been entitled to receive any tax gross-up payment if a change of control had occurred on December 31, 2010. |
In addition to the foregoing, in the event of a
termination without cause, a constructive
termination without cause, or a change in
control, all previously granted but unvested restricted
shares of common stock or options to purchase common stock held
by Messrs. Tytel and Benson shall vest fully. In the event
of a termination without cause, a constructive
termination without cause, a change in control
or at the conclusion of the term of his employment agreement,
all previously granted but unvested restricted shares of common
stock or options to purchase common stock held by Mr. Fox
shall vest fully. As of December 31, 2010,
Messrs. Benson and Tytel each held unvested stock options
to acquire 205,000 shares of common stock and Mr. Fox
held stock unvested options to acquire 147,100 shares of
common sock. As of December 31, 2010, Mr. Fox held
2,000 unvested restricted shares of common stock.
As noted above under Employment Agreements and Potential
Payments upon Termination or Change-in-Control, all
options held by Mr. Fuller were vested upon the termination
of his employment with 19 Entertainment in January 2010 and all
options held by Mr. Sillerman were vested upon the termination
of his employment with us in May 2010. All unvested options held
by Mr. Dodds were cancelled upon his termination from 19
Entertainment in October 2010 and all vested options which had
not been previously exercised were forfeited 90 days
following his termination.
Potential
Payments upon Death or Disability
Pursuant to the employment agreements of Messrs. Ferrel,
Tytel, Benson and Fox, if such named executive officer suffers a
disability that continues for a period in excess of six
continuous months, he shall be entitled to his
26
Table of Contents
full salary and annual cash bonus for the first six months of
his disability and, thereafter, he would be entitled to an
accelerated payment equal to 75% of his salary for the remainder
of the term of his employment agreement. Assuming a disability
date of December 31, 2010, the approximate amount that
would be due would be $2,465,753 for Mr. Ferrel, $1,905,890
for Mr. Tytel, $1,674,315 for Mr. Benson and
$1,958,356 for Mr. Fox.
In the event of Mr. Foxs death during the term, the
employment agreement provides for payment to Mr. Foxs
estate of (a) all earned but unpaid base salary at the time
of his death plus an amount equal to two times the base salary
in effect at the time of death, (b) continued eligibility
for Mr. Foxs dependents to participate in any of our
benefit plans through the term and (c) accelerated vesting
of any stock options, restricted stock or other equity based
instruments previously granted to Mr. Fox. Assuming a date
of death of December 31, 2010, the approximate amount that
would be due to Mr. Foxs estate would be $1,131,484.
In the event of the death of Messrs. Ferrel, Tytel and
Benson during the term, such named executive officers
employment agreement provides for accelerated vesting of any
stock options, restricted stock or other equity based
instruments previously granted to the named executive officer.
Neither Messrs. Sillerman, Fuller nor Mr. Dodds were
contractually entitled to any payments from us upon his
respective death or disability as of December 31, 2010, due
to the earlier termination of his employment with us or 19
Entertainment, as applicable.
Compensation
of Non-Employee Directors
Employee directors do not receive any separate compensation for
their board service. Non-employee directors receive the
compensation described below.
For 2010, non-employee directors received an annual fee of
$85,000, paid half in cash and half in shares of restricted
common stock, or at their election all in shares of restricted
common stock (see below), plus $1,000 for attendance at each
meeting of our board of directors and $750 for attending each
meeting of a committee of which he is a member. The chairperson
of the audit committee received an additional annual fee of
$50,000 and each of the other members of the audit committee
received an additional fee of $10,000 for serving on the audit
committee, all of which were paid in cash. The chairperson of
the nominating and corporate governance committee received an
additional annual fee of $10,000 and each of the other members
of the nominating and corporate governance committee received an
additional annual fee of $5,000, all of which were paid in cash.
The chairperson of the compensation committee received an
additional annual fee of $25,000 and each of the other members
of the compensation committee received an additional annual fee
of $5,000, all of which was paid in cash. All non-employee
directors have the option to elect to receive 100% of their
compensation in shares of restricted common stock. We pay
non-employee directors on a quarterly basis and prices all
grants of common stock at the closing price on the last day of
the quarter for which such fees relate.
Messrs. Edwin Banks, Edward Bleier, Bryan Bloom, Jerry
Cohen, Carl Harnick and Jack Langer were members of a special
committee formed to evaluate and oversee any and all proposals
concerning any potential strategic transactions involving us.
Each special committee member was compensated for serving as a
member of the special committee. Our board of directors
authorized these payments to compensate the members of the
special committee for the significant additional time commitment
required of them in connection with their duties and
responsibilities as members of the special committee.
Messrs. Banks and Langer, the co-chairmen of the special
committee, each were paid a flat fee of $60,000 and the other
members of the special committee, were each paid a flat fee of
$25,000.
27
Table of Contents
The total compensation received by our non-employee directors
during fiscal year 2010 is shown in the following table:
Fees Earned |
||||||||||||
or Paid |
Stock |
|||||||||||
in Cash |
Awards |
Total |
||||||||||
Name | ($) | ($)(2) | ($)(1) | |||||||||
Edwin M. Banks
|
$ | 139,250 | $ | 42,500 | $ | 181,750 | ||||||
Edward Bleier
|
$ | 93,750 | $ | 42,500 | $ | 136,250 | ||||||
Bryan E. Bloom
|
$ | 85,125 | $ | 31,875 | $ | 117,000 | ||||||
Jerry L. Cohen(3)
|
$ | 25,000 | $ | 112,986 | $ | 137,986 | ||||||
Carl D. Harnick
|
$ | 130,750 | $ | 42,500 | $ | 173,250 | ||||||
Jack Langer
|
$ | 139,750 | $ | 42,500 | $ | 182,250 |
(1) | Represents compensation actually paid during the year ended December 31, 2010, which includes compensation for the fourth quarter of 2009 and the first three quarters of 2010. | |
(2) | Represents the total fair value on the grant date of stock awards made in 2010. For the assumptions made in such valuation, see note 13 to our Consolidated Financial Statements contained in the Original Report. All stock awards are made in shares of common stock and are granted under our 2005 Omnibus Long-Term Incentive Compensation Plan. In 2010, Mr. Cohen received 21,378 shares, each of Messrs. Banks, Bleier, Harnick and Langer, received 8,049 shares and Mr. Bloom received 6,033 shares. | |
(3) | Mr. Cohen elected to receive all of his director compensation in shares of common stock. |
As discussed above, the holder of our Series C Preferred
Stock is entitled to elect the Series C Director.
Ms. Priscilla Presley currently serves on our board of
directors as the Series C Director and the holder of the
Series C Preferred Stock has confirmed its election of
Ms. Presley to continue to serve as the Series C
Director until the next annual meeting of stockholders or
earlier removal by the holder of the Series C Preferred
Stock in accordance with our certificate of incorporation.
Ms. Priscilla Presley does not receive any compensation for
her service as a member of our board of directors.
Compensation
Committee Interlocks and Insider Participation in Compensation
Decisions
The members of the compensation committee during 2010 were
initially Messrs. Banks, Bleier and Bloom. On
December 14, 2010 following the annual meeting of
stockholders, our board of directors reconstituted the
membership of its committees, resulting in the appointment of
Messrs. Banks, Kerrest and Ms. Dore to serve as the
members of the compensation committee. During 2010, none of our
executive officers served as a director or member of a
compensation committee (or other committee serving an equivalent
function) of any other entity, whose executive officers served
as a director or member of our compensation committee. No
compensation committee members had any interlocking
relationships requiring disclosure under applicable rules and
regulations.
Risk
Assessment
Our board of directors has an active role, directly and through
its committees, in the oversight of our risk management efforts.
The board carries out this oversight role through several levels
of review. The board regularly reviews and discusses with
members of management information regarding the management of
risks inherent in the operations of our businesses and the
implementation of our strategic plan, including our risk
mitigation efforts. Each of the boards committees also
oversees the management of our risks that are under each
committees areas of responsibility. For example, the audit
committee oversees management of accounting, auditing, external
reporting, internal controls and cash investment risks. The
nominating and corporate governance committee oversees our
compliance policies, code of conduct, conflicts of interests,
director independence and corporate governance policies. The
compensation committee oversees risks arising from compensation
practices and policies, and concluded for 2010 that none of our
practices and procedures is reasonably likely to create a
material adverse risk to the Company. While each committee has
specific responsibilities for oversight of risk, the board is
regularly informed by each committee about such risks. In this
manner the board is able to coordinate its risk oversight.
28
Table of Contents
2011
Omnibus Long-Term Incentive Compensation Plan
The 2011 Plan was approved by our board of directors on
March 31, 2011, and will be submitted for the approval of
our stockholders at our 2011 annual stockholder meeting. Below
is a summary of the principal provisions of the 2011 Plan:
Purpose
The purpose of the 2011 Plan is to (i) enhance our ability
to attract highly qualified personnel, (ii) strengthen our
retention capabilities, (iii) enhance our long-term
performance and competitiveness, and (iv) align the
interests of the 2011 Plan participants (each, a
Participant) with those of our stockholders.
Shares Subject
to the 2011 Plan
The 2011 Plan permits grants of Stock Options
(Options), Share Appreciation Rights
(SARs), Restricted Shares, Restricted Share Units
(RSUs), Unrestricted Shares, Deferred Share Units
(DSUs), Performance Awards and Dividend Equivalent
Rights (DERs) (collectively, the
Awards). The 2011 Plan provides that no more than
1,500,000 shares of common stock may be issued pursuant to
Awards under the 2011 Plan, provided no more than
500,000 shares may be issued pursuant to Awards that are
not Options or SARs. In addition, if the 2011 Plan is approved
by our stockholders at its annual meeting, the shares of our
common stock available for awards under the 2005 Plan will
become available for Awards under the 2011 Plan, and no future
awards may be made under our 2005 Plan.
Administration
Either our board of directors or a committee appointed by our
board of directors will administer the 2011 Plan. Our board of
directors and any committee exercising discretion under the 2011
Plan from time to time are referred to herein as the
Committee. It is expected that the compensation
committee of our board of directors will act as the Committee
for purposes of the 2011 Plan. Subject to the terms of the 2011
Plan, the Committee has express authority to determine the
Eligible Persons (defined below) who will receive Awards, the
number of shares of common stock, units or dollars to be covered
by each Award and the terms and conditions of Awards. The
Committee has broad discretion to prescribe, amend, and rescind
rules relating to the 2011 Plan and its administration, to
interpret and construe the terms of the 2011 Plan and the terms
of all award agreements, and to take all actions necessary or
advisable to administer the 2011 Plan. Within the limits of the
2011 Plan, the Committee may accelerate the vesting of any
Award, allow the exercise of unvested Awards, and may modify,
replace, cancel or renew them.
Eligibility
The Committee may grant options that are intended to qualify as
incentive stock options, or ISOs, only to our and certain of our
affiliates employees, and may grant all other Awards to
our and our affiliates employees, directors and
consultants (each an Eligible Person). The 2011 Plan
provides that, during the term of the 2011 Plan, no Participant
may receive Options and SARs that relate to more than sixty
percent (60%) of the 1,500,000 total number of shares issuable
under the 2011 Plan as of its effective date, subject to
adjustments as provided in the 2011 Plan for stock splits, stock
dividends, recapitalizations and other similar events.
Types
of Awards
Options. Options granted under the 2011 Plan
provide Participants with the right to purchase shares of common
stock at a predetermined exercise price. The Committee may grant
options that are intended to qualify as ISOs or options that are
not intended to so qualify, referred to herein as Non-ISOs. The
2011 Plan also provides that ISO treatment may not be available
for options that become first exercisable in any calendar year
to the extent the fair market value, as of the option grant
date, of the underlying shares of common stock that are the
subject of the option exceeds $100,000.
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Share Appreciation Rights (SARs). A share
appreciation right generally permits a Participant who receives
it to receive, upon exercise, cash
and/or
shares of common stock equal in value to an amount determined by
multiplying (a) the excess of the fair market value, on the
date of exercise, of the shares of common stock with respect to
which the SAR is being exercised, over the exercise price of the
SAR for such shares by (b) the number of shares with
respect to which the SARs are being exercised. The Committee may
grant SARs in tandem with options or independently of them. SARs
that are independent of options may limit the value payable on
its exercise to a percentage, not exceeding 100%, of the excess
value.
Exercise Price for Options and SARs. The
exercise price of ISOs, Non-ISOs and SARs may not be less than
100% of the fair market value on the grant date of the shares of
common stock subject to the Award (110% of fair market value for
ISOs granted to our employees who, on the grant date, own stock
representing more than 10% of combined voting power of all
classes of our stock).
Exercise of Options and SARs. To the extent
exercisable in accordance with the award agreement granting
them, an option or SAR may be exercised in whole or in part, and
from time to time during its term, subject to earlier
termination relating to a holders termination of
employment or service. With respect to options, the Committee
has the discretion to accept payment of the exercise price in
any of several forms (or combination of them), including: cash
or check in U.S. dollars, certain shares of common stock, a
net exercise and cashless exercise under a program the Committee
approves. The term over which Participants may exercise options
and SARs may not exceed ten years from the date of grant (five
years in the case of ISOs granted to employees who, on the date
of grant, own stock representing more than 10% of the combined
voting power of all classes of our stock).
The Committee shall establish and set forth in the applicable
award agreement the terms and conditions on which an option or
SAR shall remain exercisable, if at all, following termination
of a Participants Continuous Service (as defined in the
2011 Plan). Pursuant to the 2011 Plan, the Committee may waive
or modify these provisions at any time. To the extent that a
Participant is not entitled to an option or SAR at the date of
his or her termination of Continuous Service, or if the
Participant (or other person entitled to exercise the option)
does not exercise the option or SAR to the extent entitled
within the time specified in the award agreement, the option or
SAR shall terminate and the shares underlying the unexercised
portion of the option or SAR shall revert to the 2011 Plan and
become available for future awards. All SARs may be settled in
cash or shares of our stock and shall be counted against the
number of shares available for awards under the 2011 Plan only
to the extent shares are issued upon settlement of the SARs.
Restricted Shares, Restricted Share Units (RSUs),
Unrestricted Shares, and Deferred Share Units
(DSUs). Under the 2011 Plan, the Committee may
grant restricted shares that are forfeitable until certain
vesting requirements are met, restricted share units which
represent the right to receive shares of common stock after
certain vesting requirements are met, and unrestricted shares as
to which the Participants interest is immediately vested.
Restricted shares are actual shares of our common stock and,
except as otherwise set forth in the award agreement, a
Participant granted restricted shares shall have all of the
rights of a stockholder, including the right to vote and the
right to dividends subject to any mandatory reinvestment
requirement imposed by the Committee. For restricted share or
RSU Awards, the 2011 Plan provides the Committee with discretion
to determine the terms and conditions under which a
participants interests in such Awards becomes vested,
provided that restricted shares and RSUs that vest solely based
on the performance of future services shall generally have a
vesting period of at least three years, subject to certain
exceptions provided in the 2011 Plan. The 2011 Plan provides for
DSUs in order to permit certain directors, consultants or
members of a select group of management or highly compensated
employees to defer their receipt of compensation payable in cash
or shares of common stock (including shares that would otherwise
be issued upon the vesting of restricted shares and restricted
share units), subject to terms that are provided in an award
agreement. Deferred share units represent a future right to
receive shares of common stock.
Performance and Cash-settled Awards. The 2011
Plan authorizes the Committee to grant performance-based awards
in the form of Performance Awards, including Performance Units,
to any Eligible Person. The Committee may or may not, at the
time of grant of a Performance Award, designate such Award as
Performance Compensation Awards, which are intended
to be exempt from Internal Revenue Code section 162(m)
limitations. In either case, Performance Awards vest and become
payable based upon the achievement, within the specified period
of time, of performance objectives applicable to the individual,
us or any of our affiliate. Performance Compensation Awards
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are payable in shares of common stock, cash or some combination
of the two; subject to an individual Participant limit of,
during all performance periods that include the grant date of
the Award, no more than 500,000 shares, subject to
adjustments as provided in the 2011 Plan for stock splits, stock
dividends, recapitalizations and other similar events (or, for
Performance Units to be settled in cash, U.S. $4,250,000).
The Committee decides the length of performance periods, but the
periods may not be less than one of our fiscal years.
With respect to Performance Compensation Awards, the 2011 Plan
requires that the Committee specify in writing the performance
period to which the Award relates, and an objective formula by
which to measure whether and the extent to which the Award is
earned on the basis of the level of performance achieved with
respect to one or more performance measures. Once established
for a performance period, the performance measures and
performance formula applicable to the Award may not be amended
or modified in a manner that would cause the compensation
payable under the Award to fail to constitute performance-based
compensation under Internal Revenue Code section 162(m).
Under the 2011 Plan, the possible performance measures include,
but are not limited to: (1) revenue, or sales (including
specific types or categories thereof) based on units and or
dollars; revenue or sales growth; revenue or sales growth
rate(s); (2) net income; income before capital costs;
pretax earnings; earnings before interest and taxes; earnings
before interest, taxes, depreciation, amortization; earnings
after interest expense and before extraordinary or special
items; (3) operating income; operating income before
non-cash depreciation of tangible assets and non-cash
amortization of intangible assets and non-cash compensation;
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 of our ongoing
bonus plans; (4) earnings; earnings per share;
(5) economic value added; (6) profitability; profit
margin; operating margin; (7) cash flow; increase in cash
flow; cash flow return on capital; cash flow return on tangible
capital; net cash flow; (8) return on net assets, average
assets, revenue, investment, capital, invested capital, or
equity; (9) market share (in aggregate or by segment);
(10) direct contribution; (11) working capital;
(12) management of budgeted costs or expenses (operating or
capital); (13) identification or consummation of investment
opportunities or completion of specified projects in accordance
with corporate business plan, including strategic mergers,
acquisitions or divestitures; (14) total stockholder
return; (15) debt reduction; (16) risk management;
(17) human resources management and development;
(18) consumer satisfaction and relationship management;
(19) production (in aggregate or by facility);
(20) shipments (in aggregate or by facility); and
(21) cash and cash equivalencies on hand. Each measure will
be, to the extent applicable, determined in accordance with
generally accepted accounting principles as consistently applied
by us (or such other standard applied by the Committee) and, if
so determined by the Committee, and in the case of a Performance
Compensation Award, to the extent permitted under Internal
Revenue Code section 162(m), adjusted to omit the effects
of extraordinary items, gain or loss on the disposal of a
business segment, unusual or infrequently occurring events and
transactions and cumulative effects of changes in accounting
principles. Performance measures may vary from performance
period to performance period, and from Participant to
Participant, and may be established on a stand-alone basis, in
tandem or in the alternative.
Dividend Equivalent Rights (DERs). The
Committee may grant DERs to any Eligible Person, and may do
either pursuant to an award agreement that is independent of any
other Award, or through a provision in another Award (other than
an Option or SAR) that DERs attach to the shares underlying the
Award. For example, and without limitation, the Committee may
grant a DER in respect of each share subject to a RSU Award, DSU
or Performance Share Award. Each DER represents the right to
receive amounts based on the dividends declared on shares as of
all dividend payment dates during the term of the DER as
determined by the Committee. Unless otherwise determined by the
Committee, a DER shall expire upon termination of the
Participants Continuous Service, provided that a DER that
is granted as part of another Award shall expire only when the
Award is settled or otherwise forfeited.
DERs will be paid out (i) on the date dividends are paid to
our stockholders if the Award occurs on a stand-alone basis and
(ii) on the vesting or later settlement date of another
Award if the DER is granted as part of it, unless otherwise
provided in an award agreement. With respect to DERs, payment of
all amounts will be in shares, with cash paid in lieu of
fractional shares, provided that the Committee may instead
provide in an award agreement for cash settlement of all or part
of the DERs. The Committee may impose such other terms and
conditions on the grant of a DER as it deems appropriate in its
discretion as reflected by the terms of the award agreement. The
Committee
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may establish a program under which DERs may be granted in
conjunction with other Awards. The Committee may also authorize,
for any Participant or group of Participants, a program under
which the payments with respect to DERs may be deferred pursuant
to certain terms and conditions.
Income
Tax Withholding
As a condition for the issuance of shares pursuant to the
Awards, the 2011 Plan requires participants to satisfy any
required federal, state, local or foreign withholding taxes.
Transferability
Except to the extent an Award provides otherwise, Awards may not
be sold, pledged, assigned, hypothecated, transferred or
disposed of other than by will or the laws of descent and
distribution, except to the extent the Committee permits
lifetime transfers in the form of a Non-ISO, Share-settled SAR,
Restricted Shares or Performance Shares to certain permitted
transferees as defined in the 2011 Plan.
Certain
Corporate Transactions
The Committee shall equitably adjust the number of shares
covered by each outstanding Award, and the number of shares that
have been authorized for issuance under the 2011 Plan but as to
which no Awards have yet been granted or that have been returned
to the 2011 Plan upon cancellation, forfeiture or expiration of
an Award, as well as the price per share covered by each such
outstanding Award, to reflect any increase or decrease in the
number of issued shares resulting from a stock split, reverse
stock split, stock dividend, combination, recapitalization or
reclassification of the shares, or any other increase or
decrease in the number of issued shares effected without receipt
of consideration by us. In the event of any such transaction or
event, the Committee may (and shall if we are not the surviving
entity or the shares are no longer outstanding) provide in
substitution for any or all outstanding Options under the 2011
Plan such alternative consideration (including securities of any
surviving entity) as it may in good faith determine to be
equitable under the circumstances and may require in connection
therewith the surrender of all Options so replaced. In any case,
such substitution of securities will not require the consent of
any person who is granted options pursuant to the 2011 Plan.
In addition, in the event of a Change in Control (as defined in
the 2011 Plan) but subject to the terms of any award agreements
or any employment or other similar agreement between us or any
our affiliates and a Participant then in effect, each
outstanding Award shall be assumed or a substantially equivalent
award shall be substituted by the surviving or successor
corporation or a parent or subsidiary of such surviving or
successor corporation upon the consummation of the transaction;
provided, however, that to the extent outstanding Awards are
neither being assumed nor replaced with substantially equivalent
Awards by the successor corporation, the Committee may in its
sole and absolute discretion and authority, without obtaining
the approval or consent of our stockholders or any Participant
with respect to his or her outstanding Awards, take one or more
of the following actions: (a) accelerate the vesting of
Awards for any period so that Awards shall vest (and, to the
extent applicable, become exercisable) as to the shares of
common stock that otherwise would have been unvested and provide
that our repurchase rights with respect to shares of common
stock issued pursuant to an Award shall lapse as to the shares
of common stock subject to such repurchase right;
(b) arrange or otherwise provide for payment of cash or
other consideration to Participants in exchange for the
satisfaction and cancellation of outstanding Awards; or
(c) terminate all or some Awards upon the consummation of
the transaction, provided that the Committee shall provide for
vesting of such Awards in full as of a date immediately prior to
consummation of the Change of Control. To the extent that an
Award is not exercised prior to consummation of a transaction in
which the Award is not being assumed or substituted, such Award
shall terminate upon such consummation.
Notwithstanding the above, in the event a Participant holding an
Award assumed or substituted by the successor corporation in a
Change in Control is Involuntarily Terminated (as defined in the
2011 Plan) by the successor corporation in connection with, or
within 12 months (or other period either set forth in an
award agreement, or as increased thereafter by the Committee to
a period longer than 12 months) following consummation of,
the Change in Control, then any assumed or substituted Award
held by the terminated Participant at the time of termination
shall accelerate and become fully vested (and exercisable in
full in the case of Options and SARs), and any repurchase
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right applicable to any shares of common stock shall lapse in
full unless the award agreement provides otherwise. The
acceleration of vesting and lapse of repurchase rights provided
for in the previous sentence shall occur immediately prior to
the effective date of the Participants termination.
Finally, in the event of the dissolution or liquidation of us
other than as part of a Change of Control, each Award will
terminate immediately prior to the consummation of such
dissolution or liquidation, subject to the ability of the
Committee to exercise any discretion authorized in the case of a
Change in Control.
Term
of the 2011 Omnibus Long-Term Incentive Compensation Plan;
Amendments or Termination
The term of the 2011 Plan is ten years from March 31, 2011,
the date it was approved by our board of directors. Our board of
directors may from time to time, amend, alter, suspend,
discontinue or terminate the 2011 Plan; provided that no
amendment, suspension or termination of the 2011 Plan shall
materially and adversely affect Awards already granted.
Furthermore, neither us nor the Committee shall, without
stockholder approval, allow for a repricing within the meaning
of the federal securities laws applicable to proxy statement
disclosures. In addition, the Committee may not cancel an
outstanding Option or SAR whose exercise price is greater than
fair market value at the time of cancellation for the purpose of
reissuing the Option or SAR to the Participant at a lower
exercise price or granting a replacement award of a different
type. Notwithstanding the foregoing, the Committee may amend the
2011 Plan to comply with changes in tax or securities laws or
regulations, or in the interpretation thereof.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Securities
Authorized for Issuance under Equity Compensation
Plans
The table below shows information with respect to our equity
compensation plans and individual compensation arrangements as
of December 31, 2010. For a description of our 2005 Omnibus
Long-Term Incentive Compensation Plan, see
Item 11. Executive Compensation
Compensation Discussion & Analysis
Long-Term Incentives.
(a) |
||||||||||||
Number of |
(b) |
|||||||||||
Securities to be |
Weighted-Average |
(c) |
||||||||||
Issued Upon |
Exercise Price of |
Number of |
||||||||||
Exercise of |
Outstanding |
Securities |
||||||||||
Outstanding |
Options, |
Remaining |
||||||||||
Options, Warrants |
Warrants and |
Available for |
||||||||||
Plan Category | and Rights | Rights | Future Issuance | |||||||||
(#) | ($) | (#) | ||||||||||
Equity compensation plans approved by security holders
|
1,423,100 | $ | 6.54 | 726,878 | ||||||||
Equity compensation plans not approved by security holders
|
| | |
On March 31, 2011, our Board of Directors approved our 2011
Omnibus Long-Term Incentive Compensation Plan, which will be
submitted for approval by our security holders at our 2011
annual stockholder meeting. For a description of our 2011
Omnibus Long-Term Incentive Compensation Plan, see
Item 11. Executive Compensation
Compensation Discussion & Analysis
Long-Term Incentives.
Security
Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information regarding the
number of shares of our common stock beneficially owned on
April 28, 2011, by:
| each person who is known by us to beneficially own 5% or more of our outstanding common stock, | |
| each of our directors and named executive officers as set forth in Executive Compensation and Related Information and | |
| all of our directors and executive officers, as a group. |
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Such information (other than with respect to our directors and
executive officers) is based on a review of statements filed
with the SEC pursuant to Sections 13(d), 13(f) and 13(g) of
the Exchange Act, with respect to our common stock
A person is deemed to be the beneficial owner of securities that
can be acquired within 60 days from the exercise of options
and warrants or the conversion of convertible securities.
Accordingly, common stock issuable upon exercise of options and
warrants that are currently exercisable or exercisable within
60 days of April 28, 2011, have been included in the
table with respect to the beneficial ownership of the person or
entity owning the options and warrants, but not with respect to
any other persons or entities.
Applicable percentage of ownership for each holder is based on
92,613,473 shares of our common stock outstanding on
April 28, 2011, plus any presently exercisable stock
options and warrants held by each such holder, and options and
warrants held by each such holder that will become exercisable
or convertible within 60 days after such date. Unless
otherwise indicated, we believe that all persons named in the
table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. Except as
otherwise set forth below, the address of each of the persons
listed below is
c/o CKX,
Inc., 650 Madison Avenue, New York, New York 10022.
Shares |
||||||||
Beneficially |
Percentage of |
|||||||
Name and Address of Beneficial Owner | Owned | Common Stock | ||||||
Beneficial Owners of 5% or More
|
||||||||
Robert F.X. Sillerman
|
19,783,311 | (1) | 21.4 | % | ||||
The Huff Alternative Fund, L.P.
|
13,946,612 | (2) | 15.1 | % | ||||
BlackRock, Inc.
|
12,565,298 | (3) | 13.6 | % | ||||
Capital Research Global Investors
|
6,579,685 | (4) | 7.1 | % | ||||
Directors and Executive Officers:
|
||||||||
Michael G. Ferrel
|
112,722 | * | ||||||
Howard J. Tytel
|
2,615,494 | (5) | 2.8 | % | ||||
Thomas P. Benson
|
1,415,780 | (6) | 1.5 | % | ||||
Kraig G. Fox
|
204,100 | (7) | ||||||
Edwin M. Banks
|
29,223 | (8) | * | |||||
Bryan Bloom
|
11,187 | (8) | * | |||||
Kathleen Dore
|
3,038 | (8) | * | |||||
Jacques D. Kerrest
|
54,449 | (9) | * | |||||
Jack Langer
|
88,846 | (10) | * | |||||
Priscilla Presley
|
6,000 | * | ||||||
All directors and executive officers as a group (10 individuals)
|
4,540,839 | 4.9 | % |
* | Represents less than 1%. |
(1) | Based on both internal information and information contained in a Schedule 13D/A filed with the SEC on August 8, 2010. Includes (i) 15,626,919 shares of common stock owned of record by Mr. Sillerman which shares have been pledged, together with certain other collateral, to secure a personal loan extended by Deutsche Bank Trust Company Americas to Mr. Sillerman, (ii) 1,000,000 shares of common stock owned of record by Laura Sillerman and (iii) 2,556,392 shares of common stock owned of record by Sillerman Capital Holdings, L.P., a limited partnership controlled by Mr. Sillerman through a trust for the benefit of Mr. Sillermans descendants. In addition, this also includes 600,000 shares of common stock subject to vested stock options. | |
(2) | Based on both internal information and information contained in a Schedule 13D/A filed with the SEC on April 3, 2007. Includes shares of common stock owned of record by an affiliated limited partnership of The Huff Alternative Fund, L.P. William R. Huff possesses the sole power to vote and dispose of all securities of CKX held by these two Huff entities, subject to certain internal compliance procedures. |
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(3) | Based solely on information contained in a Schedule 13G/A filed with the SEC on January 10, 2011, by BlackRock, Inc. (BlackRock), an investment advisor registered under the Investment Advisers Act of 1940. BlackRock is deemed to be the beneficial owner of 12,565,298 shares of common stock as a result of BlackRock acting as investment advisor to various investment companies registered under Section 8 of the Investment Company Act of 1940. | |
(4) | Based solely on information contained in a Schedule 13G/A filed with the SEC on February 9, 2011, by Capital Research Global Investors, a division of Capital Research and Management Company (CRMC), an investment adviser registered under the Investment Advisers Act of 1940. Capital Research Global Investors is deemed to be the beneficial owner of 6,579,685 shares of common stock as a result of CRMC acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. | |
(5) | Includes: (i) 2,126,232 shares of common stock owned of record by Mr. Tytel and Sandra Tytel, Mr. Tytels spouse, as tenants in common with rights of survivorship, (ii) 419,262 shares of common stock owned by the Sandra Tytel 1998 Trust for the benefit of Jennifer Tytel, (iii) 5,000 shares of common stock owned by the Tytel Family Foundation and (iv) 65,000 shares of common stock underlying presently exercisable stock options owned by Mr. Tytel. | |
(6) | Includes: (i) 1,350,780 shares of common stock owned of record by Mr. Benson and (ii) 65,000 shares of common stock underlying presently exercisable stock options owned by Mr. Benson. | |
(7) | Includes: (i) 150,000 shares of common stock owned of record by Mr. Fox and Allison Fox, Mr. Foxs spouse, as joint tenants with rights of survivorship; (ii) 5,000 shares of restricted common stock issued to Mr. Fox pursuant to our 2005 Omnibus Long-Term Incentive Compensation Plan; and (iii) 49,100 shares of common stock underlying presently exercisable stock options owned by Mr. Fox. | |
(8) | Issued pursuant to our 2005 Omnibus Long-Term Incentive Compensation Plan. | |
(9) | Includes: (i) 4,449 shares of restricted common stock issued pursuant to our 2005 Omnibus Long-Term Incentive Compensation Plan; and (ii) 50,000 shares of common stock owned by Mr. Kerrest and Sandra Kerrest, Mr. Kerrests spouse, as trustees for Jacques & Sandra Kerrest Revocable Trust U/A dated 05/09/95 and purchased on the open market. | |
(10) | Includes: (i) 38,846 shares of restricted common stock issued pursuant to our 2005 Omnibus Long-Term Incentive Compensation Plan; and (ii) 50,000 shares of restricted common stock granted in June 2005 in consideration for services provided in connection with the completion of the our public offering that went beyond the normal requirements of serving as a director or on a committee of the board of directors, as well as for Mr. Langers commitment to continue to serve as a financial expert on the board of directors and chairman of the nominating and corporate governance committee for a period of five years. One half of the shares received by Mr. Langer were subject to restrictions which lapsed ratably over five years, beginning on the first anniversary of the date of the grant, and the remaining shares were subject to forfeiture, on a pro rata basis, in the event Mr. Langer voluntarily resigned his position prior to the expiration of the five-year term. Of the 50,000 shares granted in June 2005, none remain subject to restrictions or forfeiture. |
The Promenade Trust holds all of our outstanding shares of
Series B Convertible Preferred Stock and our Series C
Preferred Stock. As of April 28, 2011, there were
1,491,817 shares of Series B Preferred Stock
outstanding and one share of Series C Preferred Stock
outstanding and entitled to vote at the annual meeting. Each
share of our Series B Preferred Stock and Series C
Preferred Stock will be entitled to vote on an as converted
basis, with each share entitled to one vote.
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Certain
Relationships and Related Transactions
The information set forth under Part I
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of
Operation Transaction with Simon Fuller and
Restructuring of 19 Entertainment,
Part I Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operation Executive Separation
Costs of the Original Report is incorporated herein by
reference.
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Services
Provided to Robert F.X. Sillerman
Certain of our non-management employees of the Company provided
services to Mr. Sillerman
and/or
certain affiliates during 2010. In 2010, our compensation
committee reviewed the amount of time spent on outside endeavors
by our employees on a quarterly basis, and to the extent the
compensation committee believed any such employee engaged in
outside activities at a level whereby he was being compensated
by the Company for the time spent on such outside activities,
the compensation committee could require that the employee
reduce the level of outside services being performed, and
further, could require that the recipient of such services
(either Mr. Sillerman or certain affiliates) reimburse us
for the compensation attributable to the time spent thereon. For
2010, the compensation committee determined that certain of our
non-management employees had provided services to
Mr. Sillerman with an aggregate value of $107,080.
Mr. Sillermans salary and consulting payments for the
year ended December 31, 2010, were reduced by such amount
to compensate us for such services.
Exercise
of Amended Put and Call Options
In March 2005, in connection with our acquisition of 19
Entertainment, certain sellers of 19 Entertainment entered into
Put and Call Option Agreements, as amended on June 8, 2009,
that provided them with certain rights whereby, during a period
of 20 business days beginning March 17, 2011, we could
exercise a call right to purchase the common stock of such
stockholders at a price equal to $24.72 per share and these
sellers could exercise a put right to sell the common stock to
us at a price equal to $13.18 per share. The put and call rights
applied to 1,675,296 of the shares issued in connection with the
19 Entertainment acquisition, 1,507,135 of which were owned by
Simon Fuller.
Immediately following execution of the amendment to the Put and
Call Option Agreement noted above, we exercised our right to
accelerate our call option with respect to 1,138,088 shares
at a reduced call price of $13.18 per share and paid to
Mr. Fuller a gross purchase price of $15.0 million.
Following this transaction, 537,208 shares remained subject
to the original terms of the Put and Call Option Agreements; the
sellers exercised their put option on March 25, 2011, with
respect to the remaining shares subject to the Put and Call
Option Agreement and we paid the sellers a gross purchase price
of $7.1 million.
Loan
to Promenade Trust
On December 8, 2009, we made a loan to The Promenade Trust
in the amount of approximately $0.5 million. The Promenade
Trust holds our Series B Convertible Preferred Stock and is
the owner of the minority equity interest in the Presley
Business. The principal amount of the loan along with interest
was repaid from the proceeds of the February 8, 2010,
quarterly dividend on the preferred stock. On July 1, 2010,
we made a loan of approximately $0.5 million to the holder
of our Series B Convertible Preferred Stock. The principal
amount of the loan along with interest was repaid from the
proceeds of the quarterly dividend on the preferred stock on
November 8, 2010.
650
Madison Avenue
We sublease from a third party the entire 16th and a
portion of the 15th floors at 650 Madison Avenue, for our
principal corporate offices in New York, New York. We sublicense
a portion of the 15th floor to each of Flag Anguilla
Management (Flag Anguilla), Flag Luxury Properties
and Circle Entertainment, Inc., (formerly known as FX Real
Estate and Entertainment, Inc.) (Circle
Entertainment), companies which are affiliated with Robert
F.X. Sillerman, our former Chairman and Chief Executive Officer.
The Company is responsible for payment of the full rental amount
each month to the sublandlord, and each of Flag Anguilla, Flag
Luxury Properties and Circle Entertainment pay its pro rata
share of the rent for the space it occupies to us. As of
December 31, 2010, and through March 2011, Flag Anguilla,
Flag Luxury Properties and Circle Entertainment were each
current on all rent payments.
Vendor
Loan
In 2007, we entered into a $1.8 million loan agreement with
a vendor that provides marketing and branding consulting
services to us. This vendor is owned by several individuals who
collectively own less than a one percent interest in us. The
loan bears interest at 10% per annum due monthly; interest
payments were current through
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March 2011. On January 14, 2011, we amended the loan
agreement, effective July 1, 2010, to extend the maturity
date from August 2012 to August 2013. Principal payments are due
each February during the years 2009 through 2013 based on a rate
of 50% of the vendors cash flow, as defined. No principal
payments were due or have been made through February 2011 as the
vendor had negative cash flow. The loan is personally guaranteed
by the four principals of the vendor. We also amended a
consulting agreement with the vendor that commenced in 2007 to
extend the expiration date from December 31, 2010, to
April 30, 2013. We paid monthly consulting fees totaling
$1.5 million in the years 2007 through 2010 under the
agreement. Commencing July 1, 2010, in lieu of payment of
the monthly consulting fee in cash, the monthly consulting fee
is deemed paid by reducing the outstanding balance of the loan.
The consulting agreement may be terminated by either party upon
60 days notice.
Consulting
Arrangement with Priscilla Presley
On February 7, 2005, Elvis Presley Enterprises, Inc. and
EPE Holding Corporation, our wholly-owned subsidiary, entered
into a consulting agreement with Ms. Priscilla Presley
securing Ms. Presleys consulting services in
connection with promotion of the Elvis Presley business. On
June 12, 2010, the consulting agreement was amended,
effective as of the date of the amendment, to increase
Ms. Presleys annual consulting fee to $800,000. In
connection with the execution of this amendment,
Ms. Presley received a $250,000 bonus in July 2010.
Approval
Process
In accordance with our policy to have all related party
transactions reviewed and unanimously approved or ratified by
our independent directors, all of the transactions disclosed
above were reviewed and unanimously approved or ratified by our
independent directors.
Director
Independence
Our board has determined that the following directors are
independent within the meaning of the rules and regulations of
The NASDAQ Stock
Market®:
Edwin M. Banks; Bryan Bloom; Kathleen Dore; Jacques D. Kerrest
and Jack Langer.
Item 14. | Principal Accounting Fees and Services |
Services
Provided by the Independent Registered Public Accounting Firm
and Fees Paid
The following table sets forth the fees paid by us and our
subsidiaries for services rendered by Deloitte &
Touche LLP for the years ended December 31, 2010, and
December 31, 2009:
2010 | 2009 | |||||||
Audit Fees(1)
|
$ | 2,975,115 | $ | 2,745,397 | ||||
Audit-Related Fees
|
| | ||||||
Tax Fees(2)
|
205,720 | 148,441 | ||||||
All Other Fees
|
| | ||||||
Total
|
$ | 3,180,835 | $ | 2,893,837 | ||||
(1) | Audit fees relate to the audit of annual financial statements, review of quarterly financial statements and any services normally performed by auditors in connection with statutory and regulatory filings. | |
(2) | Tax fees related to tax compliance, advice and tax planning. |
Audit
Committee Pre-Approval of Services Provided by Our Independent
Registered Public Accounting Firm
The audit committee of our 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
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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. Any non-audit work
by our independent registered public accounting firm that
commences prior to approval by the audit committee is subject to
a full refund of all fees paid by us. The audit committee has
delegated authority to pre-approve all non-audit services to the
chairman of the audit committee, provided such services do not,
in the aggregate, exceed $50,000 per project. In accordance with
the audit committee pre-approval policy, all audit and non-audit
services performed for us by our independent registered public
accounting firm were pre-approved by the audit committee, which
concluded that the provision of such services by
Deloitte & Touche LLP was compatible with the
maintenance of the firms independence in the conduct of
its auditing functions.
PART IV
Item 15. | Exhibits and Financial Statement Schedules |
(a)(3) Exhibits
Part IV of the Original Report is hereby amended to add the
exhibits listed below that are required to be filed in
connection with this Amended Report. See the separate
Exhibit Index attached hereto and incorporated herein.
Exhibit |
||||
Number | Description | |||
31 | .1 | Certification of Principal Executive Officer | ||
31 | .2 | Certification of Principal Financial Officer |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CKX, Inc.
By: |
/s/ THOMAS
P. BENSON
|
Thomas P. Benson
Chief Financial Officer, Executive Vice President
and Treasurer (Principal Financial and Accounting
Officer)
and Treasurer (Principal Financial and Accounting
Officer)
May 2, 2011
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INDEX TO
EXHIBITS
The documents set forth below are filed herewith.
Exhibit |
||||
Number | Description | |||
31 | .1 | Certification of Principal Executive Officer | ||
31 | .2 | Certification of Principal Financial Officer |
40