SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
SCHEDULE 14D-9
(RULE 14d-101)
Solicitation/Recommendation Statement Under
Section 14(d)(4) of the Securities Exchange Act of
1934
CKx, Inc.
(Name of Subject
Company)
CKx, Inc.
(Name of Person(s) Filing
Statement)
Common Stock, Par Value $0.01 Per Share
(Title of Class of
Securities)
12562M106
(CUSIP Number of Class of
Securities)
Howard J. Tytel
CKx, Inc.
650 Madison Avenue
New York, New York 10022
(212) 838-3100
(Name, Address and Telephone
Number of Person Authorized to Receive Notice and
Communications on Behalf of the
Person(s) Filing Statement)
With copies to:
David E. Shapiro, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1.
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SUBJECT
COMPANY
INFORMATION
.
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The name of the subject company to which this
Solicitation/Recommendation Statement on
Schedule 14D-9
(this
Schedule 14D-9
)
relates is CKx, Inc., a Delaware corporation (the
Company
or
CKx
). The
address of the principal executive offices of CKx is 650 Madison
Avenue, New York, New York 10022, and its telephone number is
(212) 838-3100.
The title of the class of equity securities to which this
Schedule 14D-9
relates is the common stock, par value $0.01 per share, of the
Company (the
Common Shares
, each a
Common Share
, and, the holders of such Common
Shares,
Stockholders
). As of the close of
business on May 13, 2011, there were 200,000,000 Common
Shares authorized, of which 92,613,473 were outstanding
(including restricted shares).
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ITEM 2.
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IDENTITY
AND BACKGROUND OF FILING
PERSON
.
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(a)
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Name and
Address of Person Filing this Statement.
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The name, address and telephone number of CKx, which is the
person filing this
Schedule 14D-9,
are set forth in Item 1(a), Subject Company
Information Name and Address.
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(b)
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Tender
Offer of Colonel Offeror Sub, LLC
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This
Schedule 14D-9
relates to the tender offer (the
Offer
) by
Colonel Offeror Sub, LLC, a Delaware limited liability company
(
Offeror
) and an indirect wholly owned
subsidiary of Colonel Holdings, Inc., a Delaware corporation
(
Parent
), which is a direct wholly owned
subsidiary of certain equity funds managed by Apollo Management
VII, L.P. (collectively, the
Apollo
Funds
) to purchase all of CKxs outstanding
Common Shares for $5.50 per Common Share, payable net to the
seller in cash without interest thereon, less any applicable
withholding taxes (the
Offer Price
), upon the
terms and subject to the conditions set forth in Offerors
Offer to Purchase dated May 17, 2011 (as amended or
supplemented from time to time, the
Offer to
Purchase
) and in the related Letter of Transmittal (as
amended or supplemented from time to time, the
Letter
of Transmittal
), copies of which are filed as Exhibits
(a)(1)(A) and (a)(1)(B) hereto, respectively, and are
incorporated herein by reference. The Offer is described in a
Tender Offer Statement on Schedule TO (as amended or
supplemented from time to time, the
Schedule TO
), which was filed by Offeror
with the U.S. Securities and Exchange Commission (the
SEC
) on May 17, 2011.
The Offer is being made pursuant to an Agreement and Plan of
Merger dated as of May 10, 2011, as amended on May 17, 2011
among CKx, Parent and Colonel Merger Sub, Inc., a Delaware
corporation (
Merger Sub
) and a direct wholly
owned subsidiary of Offeror (the
Merger
Agreement
). The Merger Agreement provides, among other
things, that after consummation of the Offer, Merger Sub will
merge with and into CKx (the
Merger
), with
CKx continuing as the surviving corporation and an indirect
wholly owned subsidiary of Parent (the
Surviving
Corporation
). At the effective time of the Merger,
each outstanding Common Share (other than Common Shares owned,
(i) directly or indirectly, by Parent, Offeror or CKx or
(ii) by any Stockholder who is entitled to and properly
exercises appraisal rights under the Delaware General
Corporation Law (the
DGCL
)) will be converted
into the right to receive the Offer Price. Copies of the Merger
Agreement and the amendment to the Merger Agreement are filed as
Exhibits (e)(1) and (e)(2) to this
Schedule 14D-9,
respectively, and are incorporated herein by reference.
References in this
Schedule 14D-9
to our unaffiliated stockholders are deemed to refer to holders
of our common stock other than members of our board of directors
(the
Board
), executive officers, the
Sillerman Stockholders (as defined herein), the Trust (as
defined herein), Parent, Offeror, Merger Sub, Apollo Management
VII, L.P. (
Apollo Management
) and the Apollo
Funds.
The Schedule TO states that the address of Offeror is
9 West 57th Street, New York, New York 10019, and
Offerors telephone number thereat is
(212) 515-3450.
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ITEM 3.
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PAST
CONTACTS, TRANSACTIONS, NEGOTIATIONS AND
AGREEMENTS
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(a)
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Arrangements
with Directors and Executive Officers of the Company.
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Arrangements
between CKx, Inc. and Current Executive Officers and
Directors
Certain executive officers and directors of CKx may be deemed to
have interests in the Offer and the Merger that are different
from, or in addition to, those of Stockholders generally. These
interests may present these individuals with certain potential
conflicts of interest. In reaching its decision to recommend
that Stockholders accept the Offer and tender their Common
Shares to Offeror pursuant to the Offer, the Board was aware of
these potential conflicts of interests and considered them,
along with other matters described below in Item 4(c),
The Solicitation or Recommendation Reasons for
the Recommendation.
For further information with respect to the compensation
arrangements between CKx and its executive officers and
directors and affiliates described in this Item 3, please
also see the Information Statement, including the information
under the heading Executive Compensation and Related
Matters.
Consideration
Payable Pursuant to the Offer
If the CKx directors and executive officers were to tender any
Common Shares they own pursuant to the Offer, excluding unvested
shares of restricted common stock of CKx (
Restricted
Shares
), which are discussed below, they would receive
the same cash consideration on the same terms and conditions as
the other Stockholders in the Offer. As of May 12, 2011,
the CKx directors and executive officers identified below owned
an aggregate number of 4,360,739 Common Shares, excluding
Restricted Shares. If the CKx directors and executive officers
were to tender all such Common Shares for purchase pursuant to
the Offer and those Common Shares were accepted for purchase by
Offeror, the CKx directors and executive officers would receive
an aggregate of $23,984,065 in cash under the terms of the Offer.
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Name
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Position
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Michael G. Ferrel
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Chief Executive Officer, Chairman of the Board
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Howard J. Tytel
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Senior Executive Vice President, Director of Legal Governmental
Affairs, Director
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Edwin M. Banks
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Director
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Bryan E. Bloom
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Director
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Jack Langer
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Director
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Jacques D. Kerrest
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Director
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Kathleen Dore
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Director
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Priscilla Presley
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Director
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Thomas P. Benson
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Executive Vice President, Chief Financial Officer, Treasurer
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Kraig G. Fox
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Executive Vice President, Chief Operating Officer
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Effect
of Consummation of Offer and Merger on Stock Options and
Restricted Shares
As of May 12, 2011, the CKx directors and executive
officers held 613,500 options to purchase Common Shares
(
Stock Options
) and 1,000 Restricted Shares.
Any Stock Options and Restricted Shares held by the CKx
directors and executive officers were issued pursuant to the CKx
2005 Omnibus Long-Term Incentive Compensation Plan.
Under the Merger Agreement, each Stock Option, whether vested or
unvested (including Stock Options held by executive officers and
directors), that is outstanding immediately prior to the
acceptance for payment by Offeror of Common Shares pursuant to
the Offer (the
Acceptance Time
) will be
cancelled in exchange for a cash payment (without interest, and
subject to deduction for any required tax withholding), to be
made as soon as practicable following the Acceptance Time equal
to the product of (i) the excess, if any, of the Offer
Price over the per-Common Share exercise price under such Stock
Option and (ii) the number of Common Shares subject to such
Stock Option. In addition, under the Merger Agreement, each
holder of Restricted
4
Shares, including executive officers and directors, will have
the right to tender the holders Restricted Shares into the
Offer, subject to and contingent upon the occurrence of the
Acceptance Time, at which time each tendered Restricted Share
will fully vest and be treated the same as other Common Shares
properly tendered into the Offer. Each Restricted Share that is
not tendered into the Offer will become fully vested at the
Acceptance Time and, upon the effective time of the Merger, will
be cancelled and converted into the Offer Price.
The following tables summarize, with respect to (1) each
CKx director and (2) each CKx named executive officer, the
aggregate value, as of May 12, 2011, of the Stock Options
and Restricted Shares held by each such director and named
executive officer, based on the Offer Price. CKx has no
executive officers other than the named executive officers.
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Common
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Aggregate
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Common
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Aggregate
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Shares
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Spread
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Shares
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Spread
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Total
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Subject to
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Value of
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Subject to
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Value of
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Value of
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Unvested
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Unvested
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Vested
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Vested
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Restricted
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Restricted
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Stock
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Stock
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Stock
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Stock
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Common
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Common
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Name
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Options (#)
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Options ($)
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Options (#)
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Options ($)
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Shares (#)
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Shares ($)
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Edwin M. Banks,
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Director
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0
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0
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0
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0
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0
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0
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Bryan E. Bloom,
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Director
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0
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0
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0
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0
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0
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0
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Kathleen Dore,
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Director
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0
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0
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0
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0
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0
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0
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Jack Langer,
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Director
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0
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0
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0
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0
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0
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0
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Jacques D. Kerrest,
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Director
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0
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0
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0
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0
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0
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0
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Priscilla Presley,
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Director
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0
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0
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0
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0
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0
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0
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Michael G. Ferrel,
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Chief Executive Officer and Chairman of the Board
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0
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0
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0
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0
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0
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0
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Howard J. Tytel,
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Senior Executive Vice President, Director of Legal and
Government Affairs, Director
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160,000
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78,600
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65,000
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52,400
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0
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0
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Thomas P. Benson,
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Executive Vice President, Chief Financial Officer, Treasurer
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160,000
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78,600
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65,000
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52,400
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0
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0
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Kraig G. Fox,
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Executive Vice President, Chief Operating Officer
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114,400
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39,300
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49,100
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26,200
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1,000
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5,500
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Summary
of Potential Payments upon or in Connection with a Change of
Control to Named Executive Officers
CKx is party to employment agreements that provide change of
control and severance benefits to certain of its named executive
officers, including Michael G. Ferrel, Howard J. Tytel, Thomas
P. Benson and Kraig G. Fox. Although Messrs. Robert F.X.
Sillerman, Simon Fuller and Robert Dodds are named executive
officers based on CKxs
Form 10-K
for the year ended December 31, 2010, as amended by
CKxs
Form 10-K/A
filed with the SEC on May 2, 2011, each of these
officers employment was terminated in 2010, and none of
these officers would, except as described below, receive any
payments or benefits in connection with the Offer or the Merger.
CKx has no executive officers other than the named executive
officers.
5
Employment Agreement for
Mr. Ferrel.
Under the employment agreement
for Michael G. Ferrel, the consummation of the Offer (either
alone or in combination with the Merger) would constitute a
change of control of CKx. In the event that his
employment is terminated without cause or there is a
constructive termination without cause within twelve
months following a change of control of CKx, he is entitled to
receive from CKx: (i) base salary through the date of his
termination of employment in a lump sum; (ii) an additional
lump-sum cash amount equal to the product of 2.99 and the
average annual compensation received by Mr. Ferrel from CKx
over the five calendar years immediately preceding the date of
his termination of employment, which amount is reduced by the
value of any benefit received from the acceleration of lapsing
of restrictions on Restricted Shares or vesting of Stock Options
so that the payment will not constitute an excess
parachute payment as defined by Section 280G of the
Internal Revenue Code; and (iii) $250,000 in exchange for
his agreeing to comply with restrictive covenants for six months
after his termination of employment.
Upon such a termination, Mr. Ferrel is also entitled to
receive continuation of health, welfare and life insurance
benefits for two years after his termination of employment (with
no additional cost or charge payable by the executive), reduced
by one month for each full month that he has been employed by
CKx pursuant to his employment agreement after February 1,
2011 and prior to the date of termination of employment
(provided that benefits continuation will not be less than
twelve months). If providing benefits continuation under the
terms of CKx plans would cause an adverse tax effect, CKx may
provide Mr. Ferrel with equivalent cash payments in lieu of
coverage under the plans at the same time that plan benefits
would otherwise be taxable to him.
Effective May 17, 2011, the employment agreement for
Mr. Ferrel was amended to provide that (i) a
resignation by him for any reason during the
30-day
period following six months after the effective time of the
Merger or a termination of his employment without cause during
the six-month period after the effective time of the Merger will
be treated as a constructive termination without
cause, and (ii) if he resigns during such
30-day
period or is terminated without cause during such six-month
period, he will be entitled to receive, in addition to base
salary through the date of his termination of employment and the
$250,000 payment described above, the greater of (A) the
severance amounts provided under his agreement in the event of a
constructive termination without cause not in
connection with a change of control, calculated as of
(x) the effective time of the Merger or (y) the date
of his resignation or termination, and (B) the severance
amount equal to 2.99 times the average annual compensation
received by him during the five calendar years immediately
preceding the date of his termination of employment, as
described above (provided that in each case the severance amount
will be reduced to the greatest amount that will result in no
portion being treated as an excess parachute payment
within the meaning of Section 280G of the Internal Revenue
Code if the after-tax proceeds to Mr. Ferrel would be
greater as a result of such reduction).
For purposes of Mr. Ferrels employment agreement:
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Cause
means (i) the executive engages in
any intentional act of fraud against CKx; (ii) the
executive engages in willful malfeasance or gross negligence in
his performance of the employment agreement or his capacity as
an employee of CKx; (iii) the executives refusal to
perform the duties required or requested of him consistent with
his obligations under the employment agreement; (iv) the
executives conviction of a felony or entering a plea of
nolo contendere to a felony charge; (v) a willful violation
by the executive of the written policies of CKx; (vi) a
willful unauthorized disclosure by the executive of trade
secrets or other confidential information of CKx; (vii) a
willful failure by the executive to cooperate with a bona fide
internal investigation or any investigation of CKx or an
employee thereof by any governmental or regulatory authority;
(viii) a willful failure to preserve, or intentional
destruction of, documents or other materials known to be
relevant to a bona fide internal investigation or any
investigation of CKx or an employee thereof by any governmental
or regulatory authority; or (ix) willful inducement by the
executive of others to fail to cooperate in any bona fide
internal investigation or any investigation of CKx or an
employee thereof by any governmental or regulatory authority.
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Constructive termination without cause
means
the termination of the executives employment at his
initiative after, without his prior written consent, one or more
of the following events which is uncured by CKx within
30 days after written notice of such event:
(i) requiring him to report to any person
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other than directly and exclusively to the Board; (ii) any
material diminution in duties, authority, or responsibilities;
(iii) a material breach by CKx of the employment agreement;
(iv) a material reduction in base salary; or
(v) relocating the executives principal place of work
to more than 25 miles from its current location.
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Employment Agreements for Messrs. Tytel and
Benson.
Under the employment agreements for
Messrs. Tytel and Benson, the consummation of the Offer
(either alone or in combination with the Merger) would
constitute a change of control of CKx. In the event
that the executives employment is terminated without
cause or there is a constructive termination
without cause, in each case within twelve months following
a change of control of CKx, each executive is entitled to
receive from CKx: (i) his base salary through the date of
termination of employment in a lump sum; and (ii) an
additional lump-sum cash amount equal to the greater of
(x) two years base salary in effect at the time of
the executives termination of employment, reduced by
1/24th for each full month that the executive has been
employed by CKx pursuant to the executives employment
agreement after February 1, 2011 and prior to the date of
termination of employment (provided that the payment will not be
reduced below the amount of the executives annual base
salary in effect at the time of his termination of employment),
and (y) one years base salary in effect at the time
of the executives termination of employment plus the
amount of the executives annual target cash bonus
specified for the year in which such termination of employment
occurs. Upon such a termination, the executive is also entitled
to receive continuation of health, welfare and life insurance
benefits for two years after his termination of employment (with
no additional cost or charge payable by the executive), reduced
by one month for each full month that the executive has been
employed by CKx pursuant to the executives employment
agreement after February 1, 2011 and prior to the date of
termination of employment (provided that benefits continuation
will not be less than twelve months). If providing benefits
continuation under the terms of CKx plans would cause an adverse
tax effect, CKx may provide the executive with equivalent cash
payments in lieu of coverage under the plans at the same time
that plan benefits would otherwise be taxable to the executive.
Effective May 17, 2011, the employment agreements for
Messrs. Tytel and Benson were amended to provide that
(i) a resignation by either of them for any reason during
the
30-day
period following six months after the effective time of the
Merger or a termination of his employment without cause during
the six-month period after the effective time of the Merger will
be treated as a constructive termination without
cause, and (ii) if either of them resigns during such
30-day
period or is terminated without cause during such six-month
period, he will be entitled to receive the greater of the
severance amounts described above calculated as of (x) the
effective time of the Merger or (y) the date of his
resignation or termination (provided that in each case the
severance amount will be reduced to the greatest amount that
will result in no portion being treated as an excess
parachute payment within the meaning of Section 280G
of the Internal Revenue Code if the after-tax proceeds to the
executive would be greater as a result of such reduction).
For purposes of Mr. Tytels and Mr. Bensons
employment agreements:
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Cause
has the definition set forth in
Mr. Ferrels employment agreement (summarized above).
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Constructive termination without cause
means
the termination of the executives employment at his
initiative after, without his prior written consent, one or more
of the following events which is uncured by CKx within
30 days after written notice of such event: (i) the
failure to elect the executive to any of the positions described
in his employment agreement; (ii) any material diminution
or adverse change in the duties, authority, responsibilities, or
positions of the executive; (iii) the removal of the
executive from any executive management position in a manner
contrary to his employment agreement or CKxs
then-effective certificate of incorporation or by-laws;
(iv) the assignment to the executive of duties or
responsibilities that result in a material and permanent adverse
change in the executives reporting relationship to other
executive positions within CKx; or (v) a reduction in base
salary or target bonus.
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Employment Agreement for Kraig G. Fox.
Under
the employment agreement for Kraig G. Fox, the consummation of
the Offer (either alone or in combination with the Merger) would
constitute a change of control of CKx. For the
60-day
period following the consummation of a change of control of CKx,
Mr. Fox may elect to terminate his employment and
accelerate the expiration date of his employment agreement, in
7
which case he will be entitled to the following payments and
benefits: (i) a lump-sum cash payment of his base salary
through the date of his termination of employment; (ii) a
lump-sum cash payment of three years base salary in effect
at the time of his termination of employment; (iii) a cash
bonus for each partial or full year remaining in the term of the
employment agreement equal to the average of all bonuses paid or
earned during the term of the employment agreement prior to his
termination of employment; and (iv) continuation of health,
welfare and life insurance benefits and perquisites (with no
additional cost or charge payable by Mr. Fox) through the
term of the employment agreement. If providing benefits
continuation under the terms of CKx plans would cause an adverse
tax effect, CKx may provide Mr. Fox with equivalent cash
payments in lieu of coverage under the plans at the same time
that plan benefits would otherwise be taxable to him.
Upon a change of control of CKx, all Restricted Shares and Stock
Options held by Mr. Fox vest in full and (in the case of
Stock Options) remain exercisable for the full maximum term of
the original grant or 10 years from the date of the change
of control, whichever is greater. Additionally,
Mr. Foxs noncompete obligations expire upon a change
of control of CKx, and under the terms of his employment
agreement, in the event his
change-of-control
payments constitute excess parachute payments,
Mr. Fox is entitled to receive an additional tax
gross-up
payment to cover any excise, federal or state income taxes on
all
change-of-control
payments and
gross-up
payments received by him such that he receives all
change-of-control
payments without any deduction for taxes.
For purposes of Mr. Foxs employment agreement:
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Cause
means (i) the executive is
convicted of, or enters a no contest plea to either a felony
involving moral turpitude or a misdemeanor involving moral
turpitude which would render the executive unable to perform his
duties set forth in the employment agreement; (ii) the
executive engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out his duties
under the employment agreement, resulting in material economic
harm to CKx; (iii) the executives disloyalty, willful
non-performance or willful misconduct or neglect (whether the
neglect arises from an act(s) or failure(s) to act) of his
duties under the employment agreement after (w) written
notice to the executive from either the Board or the chairman of
the Board, with reasonable specification of the matter(s) giving
rise to the notice, including notice of CKxs intent to
terminate the executives employment due to the matter(s)
described in such notice, and further stating the Boards
or the chairmans reasoned conclusion that it is impossible
for the executive to cure the matter(s) giving rise to the
notice within 30 days from the notice, (x) the
opportunity for the executive to respond in writing to the
written notice, with the assistance of any counsel deemed
appropriate by the executive (but at the executives
expense) not sooner than ten regular business days after
delivery of the written notice, (y) the opportunity for the
executive to be heard and to orally present his position during
a confidential meeting of the entire Board within ten business
days after the executives delivery to CKx of the
executives written response to the written notice, and
(z) a vote of not less than 66% of all members of the Board
finding that the matter(s) specified in the written notice
constitute cause for purposes of the employment
agreement; or (iv) any finding by the SEC pertaining to the
executive which, in the opinion of independent counsel selected
by CKx, could reasonably be expected to impair or impede the
employers ability to register, list, or otherwise offer
its stock to the public, or following any initial public
offering, to maintain itself as a publicly-traded company.
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Constructive termination without cause
means
the termination of the executives employment at his
initiative after, without his prior written consent, one or more
of the following events: (i) a reduction in base salary, or
the uncured failure by CKx to fulfill its obligations under the
employment agreement within 30 days after written notice
from the executive; (ii) the failure to elect the executive
to any position set forth in the employment agreement;
(iii) any material diminution or adverse change in duties,
authority, responsibilities, or positions; (iv) any attempt
to remove the executive from any executive management position
in a manner contrary to the employment agreement or CKxs
then-effective certificate of incorporation or by-laws;
(v) the assignment to the executive of duties or
responsibilities that are materially inconsistent or different
from those customarily performed by a person holding the
executive management positions to be held by the executive;
(vi) the failure of CKx to obtain the assumption in writing
of its obligation to perform this agreement by any successor to
all
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8
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or substantially all of the assets or business of CKx after a
merger, consolidation, sale, or similar transaction; or
(vii) the commencement by or against CKx or any of its
material subsidiaries of a voluntary or involuntary proceeding
seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law, or seeking the
appointment of a trustee, receiver, liquidator, or custodian of
it or any substantial part of its property, and consent by CKx
or any such material subsidiary to any such relief, or the
making of a general assignment for the benefit of creditors, or
failure generally to pay its debts as they become due, or taking
any corporate action to authorize any of the foregoing.
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Cancellation of Vested Stock Options Held by
Messrs. Sillerman and Fuller.
As discussed
above, each Stock Option, whether vested or unvested, that is
outstanding immediately prior to the Acceptance Time will be
cancelled in exchange for a cash payment equal to the product of
(i) the excess, if any, of the Offer Price over the
per-Common Share exercise price under such Stock Option and
(ii) the number of Common Shares subject to such Stock
Option. Although Messrs. Sillerman and Fuller are no longer
employed by CKx, each of them holds 250,000 vested Stock Options
with an exercise price of $4.19 per Common Share. In addition,
Mr. Sillerman holds 350,000 vested Stock Options with an
exercise price of $5.66 per Common Share and Mr. Fuller
owns 100,000 vested Stock Options with an exercise price of
$12.20 per Common Share. Except as otherwise provided in the
Sillerman Support Agreement with respect to such Stock Options
held by Mr. Sillerman, such Stock Options will be cancelled
in exchange for a cash payment computed in the manner described
above in connection with the Offer and the Merger (see table
below). The Support Agreement is described in more detail in
Item 4(d), The Solicitation or
Recommendation Intent to Tender below.
In addition to the interests described above, the compensation
committee of the Board may determine to pay annual bonuses in
respect of the 2011 fiscal year to Messrs. Ferrel, Tytel,
Benson and Fox at any time prior to the Acceptance Time, in an
aggregate amount not to exceed $2,000,000.
9
The table below quantifies the aggregate payments and benefits
that would become payable to CKxs named executive officers
upon or in connection with certain terminations of employment
after a change of control of CKx. The payments and benefits
shown in the table below assume that the relevant event
triggering the payment or benefit occurred on May 12, 2011.
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Perquisites/
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Tax
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Name
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Cash(1)
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Equity(2)
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Benefits(3)
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Reimbursement(4)
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Other(5)
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Total
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(a)
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($)(b)
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($)(c)
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($)(d)
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($)(e)
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($)(f)
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($)(g)
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Michael G. Ferrel
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1,944,551
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0
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0
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0
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250,000
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2,194,551
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Chairman and Chief
Executive Officer
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Robert F.X. Sillerman
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0
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327,500
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0
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0
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0
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327,500
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Former Chairman and
Chief Executive Officer
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Thomas P. Benson
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1,225,000
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131,000
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30,157
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0
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0
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1,386,157
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Executive Vice President,
Chief Financial Officer and
Treasurer
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Howard J. Tytel
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1,487,500
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131,000
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40,018
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0
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0
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1,658,518
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Senior Executive Vice
President, Director of
Legal and Governmental
Affairs
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Kraig G. Fox
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2,075,000
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71,000
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86,038
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3,976,274
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0
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6,208,312
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Executive Vice President,
Chief Operating Officer
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Simon Fuller
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0
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327,500
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0
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0
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0
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327,500
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Former Chief Executive
Officer of 19 Entertainment
Limited
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Robert Dodds
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0
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0
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0
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0
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0
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0
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Former Chief Executive
Officer of 19 Entertainment
Limited
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(1)
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Equals the aggregate dollar value of all double-trigger cash
severance payments payable to the executives assuming a
qualifying termination of employment (i.e., a termination
without cause or a constructive termination
without cause) occurs on the day of the change of control
of CKx, including lump-sum payments of base salary and, in the
case of Mr. Fox, a bonus of $500,000. See the narrative
disclosures above for more information.
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(2)
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Equals the aggregate dollar value of the following
single-trigger amounts: (i) in the case of Mr. Fox,
1,000 Restricted Shares for which vesting would be accelerated
upon the Acceptance Time that would be converted at the
effective time of the Merger into $5,500; and (ii) in the
case of Messrs. Sillerman, Benson, Tytel, Fuller, and Fox,
the cancellation of
in-the-money
Stock Options upon the Acceptance Time. Specifically: each of
Messrs. Sillerman and Fuller holds 250,000 vested
in-the-money
Stock Options with an exercise price of $4.19 per Share for a
total value of $327,500; each of Messrs. Tytel and Benson
holds 60,000 unvested
in-the-money
Stock Options with an exercise price of $4.19 per Share and
40,000 vested
in-the-money
Stock Options with an exercise price of $4.19 per Share for a
total value of $131,000; and Mr. Fox holds 30,000 unvested
in-the-money
Stock Options with an exercise price of $4.19 per Share and
20,000 vested
in-the-money
Stock Options with an exercise price of $4.19 per Share for a
total value of $65,500. See the narrative disclosures above for
more information.
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(3)
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Equals the aggregate dollar value of double-trigger health and
welfare benefits continuation assuming a qualifying termination
of employment (i.e., a termination without cause or
a constructive termination without cause) occurs on
the day of the change of control of CKx based on the assumptions
used for financial reporting purposes under generally accepted
accounting principles. See the narrative disclosures above for
more information.
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10
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(4)
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Under the terms of Mr. Foxs employment agreement, in
the event his
change-of-control
payments constitute excess parachute payments,
Mr. Fox is entitled to receive an additional tax
gross-up
payment to cover any excise, federal or state income taxes on
all
change-of-control
payments and
gross-up
payments received by him such that he receives all
change-of-control
payments without any deduction for taxes.
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(5)
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In the case of Mr. Ferrel, this includes $250,000 in
double-trigger payments exchange for his agreeing to comply with
restrictive covenants for six months after a qualifying
termination of employment after a change of control of CKx. The
table does not include the annual bonuses in respect of the 2011
fiscal year that may be paid to Messrs. Ferrel, Tytel,
Benson and Fox. See the narrative disclosures above for more
information.
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(b)
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Arrangements
with Parent.
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The
Merger Agreement.
The Merger Agreement, a copy of which is filed as Exhibit (e)(1)
hereto and is incorporated herein by reference, governs the
contractual rights among Parent, Merger Sub and CKx in relation
to the Offer and the Merger. The Merger Agreement has been filed
as an exhibit to this
Schedule 14D-9
to provide Stockholders with information regarding the terms of
the Merger Agreement and is not intended to modify or supplement
any factual disclosures about Parent, Offeror, Merger Sub or CKx
in CKxs public reports filed with the SEC. In particular,
the Merger Agreement and the summary of terms set forth in the
Offer to Purchase and incorporated by reference herein are not
intended to be, and should not be relied upon as, disclosure
regarding any facts and circumstances relating to Parent,
Offeror, Merger Sub or CKx. The representations and warranties
contained in the Merger Agreement have been negotiated among the
parties thereto with the principal purpose of establishing the
circumstances in which Parent or Offeror may have the right not
to consummate the Offer or the Merger, or a party may have the
right to terminate the Merger Agreement if the representations
and warranties of the other party prove to be untrue due to a
change in circumstance or otherwise, and to allocate risk
between the parties, rather than establishing matters as facts.
The representations and warranties may also be subject to a
contractual standard of materiality different from those
generally applicable to Stockholders and are qualified by
information set forth on confidential schedules. Accordingly,
Stockholders should not rely on the representations and
warranties contained in the Merger Agreement as matters of fact.
The Merger Agreement was amended by CKx, Parent and Merger Sub
on May 17, 2011 to make technical clarifications relating
to certain terms of the Merger Agreement. The foregoing summary
does not purport to be a complete description of the amendment
to the Merger Agreement and is qualified in its entirety by
reference to such amendment, a copy of which is filed as
Exhibit (3)(2) to this Schedule 14D-9, and is
incorporated herein by reference.
Equity
Commitment Letter.
As an inducement to CKx to enter into the Merger Agreement and
undertake the transactions contemplated thereby, including the
Offer and the Merger, the Apollo Funds have provided an equity
commitment letter to Parent (but not CKx) (the
Equity
Commitment Letter
) pursuant to which the Apollo Funds
have committed, subject to the conditions of the Equity
Commitment Letter, to fund cash equity in an aggregate amount
equal to (i) $200 million less (ii) the product
of (A) the Offer Price multiplied by (B) the number of
Sillerman Shares exchanged for Parent Common Shares (defined
below) pursuant to the Sillerman Support Agreement (defined
below), for the purpose of enabling (x) Parent to cause
Offeror to accept for payment and pay for any Common Shares
tendered pursuant to the Offer at the acceptance for payment by
Offeror of Common Shares pursuant to the Offer (the
Offer Amount
) and (y) Parent to make the
payments due under the Merger Agreement to Stockholders at the
closing of the Merger (the
Merger Amount
).
Each Apollo Funds aggregate funding obligation under the
Equity Commitment Letter is capped at its
pro rata
percentage of the cash equity. The foregoing summary of the
Equity Commitment Letter does not purport to be complete and is
qualified in its entirety by reference to the Equity Commitment
Letter, which is filed as Exhibit (e)(3) hereto and is
incorporated herein by reference.
11
Debt
Commitment Letter.
Parent and Merger Sub have received an amended and restated debt
commitment letter from Goldman Sachs USA (the
Debt
Commitment Letter
) to provide the following credit
facilities, subject to the conditions set forth in the Debt
Commitment Letter:
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to Parent, a tender facility of up to $200 million for the
purpose of financing the Offer and paying related fees and
expenses (the
Tender Facility
);
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to CKx, a $35.0 million senior secured revolving credit
facility (none of which is expected to be drawn at the closing
of the facility) for the purpose of providing ongoing working
capital and for other general corporate purposes of CKx and its
subsidiaries (the
Revolving Credit
Facility
); and
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to CKx (and, upon closing of the Merger, Parent, which will
assume all of the obligations of CKx, if any) a Senior Secured
Second-Priority Bridge Facility of up to $360 million for
the purpose of financing the Merger, repaying certain existing
indebtedness of CKx and paying related fees and expenses (the
Bridge Facility
and, together with the Tender
Facility and the Revolving Credit Facility, the
Credit
Facilities
).
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The availability of the Credit Facilities is subject, among
other things, to consummation of the Offer in accordance with
the Merger Agreement, unless a termination of the Offer shall
have occurred, in which case the availability of the Credit
Facilities is subject to the consummation of the Merger (in each
case without giving effect to any amendments or waivers to the
provisions of the Merger Agreement that are materially adverse
to the lead arranger or lenders under such facilities without
the consent of the commitment parties thereunder). The
availability of the Credit Facilities is also subject to, among
other things, payment of required fees and expenses, the funding
of the cash equity to be provided by the Apollo Funds, the
refinancing of certain of CKxs existing indebtedness and
the absence of certain types of other indebtedness, delivery of
certain historical and pro forma financial information, the
execution of certain guarantees and the creation of security
interests and the negotiation, execution and delivery of
definitive documentation. The foregoing summary of the Debt
Commitment Letter does not purport to be complete and is
qualified in its entirety by reference to the Debt Commitment
Letter, which is filed as Exhibit (e)(4) hereto and is
incorporated herein by reference.
Limited
Guarantee.
In addition to the Equity Commitment Letter, the Apollo Funds
have also provided CKx with a limited guarantee (the
Limited Guarantee
) in favor of CKx
guaranteeing the payment of up to $40,000,000 to pay any
termination fee owed by Parent to CKx pursuant to the Merger
Agreement. The foregoing summary of the Limited Guarantee does
not purport to be complete and is qualified in its entirety by
reference to that document, which includes certain conditions
and limitations including termination provisions. The foregoing
summary of the Limited Guarantee does not purport to be complete
and is qualified in its entirety by reference to the Limited
Guarantee, which is filed as Exhibit (e)(5) hereto and is
incorporated herein by reference.
Amendment
to Rights Plan.
In connection with CKxs execution of the Merger Agreement,
CKx and Mellon Investor Services LLC, as rights agent (the
Rights Agent
), entered into a Second
Amendment, dated May 10, 2011 (the
Second
Amendment
), to the Rights Plan, dated as of
June 24, 2010, between CKx and the Rights Agent (as amended
prior to the Second Amendment, the
Rights
Plan
). The Second Amendment provides that, among other
things, none of the Offer, the execution of the Merger Agreement
nor the consummation of the Merger or the other transactions
contemplated by the Merger Agreement will trigger the separation
or exercise of the Stockholders rights or any adverse
event under the Rights Plan. In particular, none of Parent,
Merger Sub, any person party to a support agreement or any of
their respective affiliates or associates will be or any of
their respective affiliates or associates will be deemed to be
an Acquiring Person (as defined in the Rights Agreement) solely
by virtue of the Offer, the approval, execution, delivery,
adoption or performance of the Merger Agreement or the
consummation of the Merger or any other transactions
contemplated by the Merger Agreement. The Second Amendment also
provides that all of the Stockholders rights triggerable
under the
12
Rights Plan will expire in their entirety immediately prior to
the earlier to occur of the Acceptance Time and the effective
time of the Merger without any payment to be made on behalf
thereof. The foregoing summary of the Second Amendment does not
purport to be complete and is qualified in its entirety by
reference to the Second Amendment, which is filed as Exhibit
(e)(6) hereto and is incorporated herein by reference.
Amendment
to Bylaws.
On May 9, 2011, the Board approved an amendment to the
Amended and Restated Bylaws of CKx, which amendment became
effective as of May 10, 2011. The amendment removed from
the bylaws the provision prohibiting action by Stockholders
without a meeting by written consent and added a provision
expressly permitting any action to be taken without a meeting if
a consent or consents in writing, setting forth the action so
taken, are signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. The foregoing
summary of the amendment to the Amended and Restated Bylaws does
not purport to be complete and is qualified in its entirety by
reference to the amendment, which is filed as Exhibit (e)(7)
hereto and is incorporated herein by reference.
ITEM 4.
THE
SOLICITATION OR RECOMMENDATION
.
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(a)
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Solicitation/Recommendation
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During a meeting held on May 9, 2011, the Board, by a
majority vote (with Ms. Priscilla Presley abstaining and
Mr. Bryan Bloom dissenting), (i) determined that the
terms of the Offer, the Merger and the other transactions
contemplated by the Merger Agreement were fair and advisable to
and in the best interests of CKx and Stockholders;
(ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, in all
respects; (iii) directed that the Merger Agreement be
submitted to Stockholders for adoption and approval (unless the
Merger is consummated by way of a short-form merger
in accordance with the applicable provisions of the DGCL) and
(iv) resolved to recommend that CKxs stockholders
accept the Offer and vote in favor of the adoption and approval
of the Merger Agreement and the transactions contemplated by the
Merger Agreement, including the Offer and the Merger (if
required by the DGCL) (the
Recommendation
).
Accordingly, the Board recommends that you ACCEPT the Offer
and tender your Common Shares into the Offer.
One director, Bryan Bloom, dissented to the approval of the
Merger Agreement and the transactions contemplated by the Merger
Agreement. Although Mr. Bloom concurred with the Board on
the challenges facing CKx and the risks associated with
remaining an independent company, he believed that the potential
growth opportunities available to CKx could create value over an
18 to 24 month period greater than the consideration being
offered by Apollo and believed that these opportunities
outweighed the attendant risks involved. Notwithstanding his
dissent, Mr. Bloom concurred with the Board that
Stockholders should be given the opportunity to evaluate the
transaction. Mr. Bloom also concurred with the Board in the
belief that the process conducted by the Board was substantively
and procedurally fair to Stockholders. While Mr. Bloom is
an employee of WRH Partners II, L.L.C.,
(
Huff
), the general partner of two beneficial
owners of Common Shares, Mr. Blooms views with
respect to the transaction were expressed in his capacity as a
director only and do not necessarily reflect the views of Huff.
Mr. Bloom has not made a decision as to whether or not he
intends to support the offer or tender any of his shares into
the offer.
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(b)
|
Background
of the Transaction
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Since CKxs inception in 2005, the Board has periodically
met with senior management of CKx to discuss and review
potential strategic directions for CKx in light of CKxs
financial performance, developments in the entertainment and
content management industries and the competitive landscape and
markets in which CKx operates. These meetings have also
addressed, from time to time, hypothetical acquisition or
business combinations involving various other parties.
13
On June 1, 2007, CKx announced that it had entered into a
series of agreements with 19X, Inc. (
19X
), an
investor group led by Robert F.X. Sillerman, the then Chairman
of the Board and Chief Executive Officer, and Simon Fuller, who,
at the time served as a director of CKx and as Chief Executive
Officer of 19 Entertainment Limited, a wholly-owned subsidiary
of CKx. Under the terms of these agreements, Stockholders were
to receive $13.75 per share in cash, plus a distribution of 50%
of the shares in FX Luxury Realty, LLC, an affiliate of
Mr. Sillerman that had real estate interests in Las Vegas,
Nevada. These agreements provided that Mr. Sillerman,
Mr. Fuller and certain other members of senior management
would retain all or a substantial portion of their respective
equity interests in the surviving company in a merger. 19X did
not have committed financing at the time of entry into the
agreements, but pursuant to the terms of the agreements, 19X had
60 days to deliver equity and debt commitment papers to CKx
in an amount sufficient to complete the transaction. The
agreements also contained a 45 day go-shop
period during which CKx and its representatives were permitted
to solicit third parties for offers with respect to a sale of
CKx. The closing price of the Common Shares on June 1, 2007
was $12.58. During the first go-shop period,
outbound inquiries were made to approximately 45 parties,
including 18 strategic parties and 27 financial sponsors, to
solicit interest in pursuing a transaction with CKx. No party
made an offer to the Board that the Board determined was
superior to the transaction with 19X during the
go-shop period.
On June 20, 2007, an affiliate of Apollo Management entered
into a confidentiality agreement with CKx for the purpose of
facilitating discussions with representatives of CKx and 19X
regarding financing of 19Xs potential transactions with
CKx. None of these discussions resulted in any agreements
between Apollo Management or any of its affiliates and CKx or
19X.
On July 31, 2007, Mr. Sillerman, on behalf of 19X,
informed the special committee of the Board that the recent
deterioration of credit conditions in the overall market had
made it uneconomic to execute the financing commitments on the
terms then being offered by 19Xs potential financing
sources. Mr. Sillerman requested an extension of the
deadline for providing signed financing commitment letters for
an additional period of up to 60 days, which extension was
granted by the special committee on August 1, 2007.
On September 28, 2007, CKx announced that it had further
amended its agreements with 19X. The amended agreements, among
other things, adjusted the consideration to Stockholders by
providing for a distribution of 100% of the shares in FX Real
Estate and Entertainment Inc. (a corporation to which all of the
ownership interests in FX Luxury Realty were contributed) to
Stockholders and reducing the cash portion of the consideration
by the incremental increase in value being received by
Stockholders as a result of this additional distribution of FX
Real Estate and Entertainment Inc. shares; extended the deadline
for 19X to deliver commitment papers to CKx for an additional
30 days; extended the outside date for the closing of the
transaction by 90 days; and provided for an additional
30 day go-shop period during which CKx could
continue to solicit third parties for offers with respect to a
sale of CKx. The closing price of the Common Shares on
September 28, 2007 was $10.57. During the second
go-shop period, three financial sponsors and two
strategic parties were contacted and each party declined to
participate in the evaluation of CKx. On November 7, 2007,
19X delivered fully executed financing commitment letters to the
special committee.
Between December 2007 and May 2008, 19X attempted to secure debt
and equity financing for the transaction as changes in economic
conditions had made funding under the terms and conditions of
the previously delivered commitment letters unlikely.
On May 27, 2008, CKxs agreement with 19X was again
amended to reduce the purchase price previously offered to
$12.00 per share; to provide for a third go-shop
period of approximately 60 days; and to provide for a later
outside date of September 30, 2008 for 19X to obtain
certain financing for the transaction, as the financing under
the commitment letters previously delivered to the special
committee was no longer viable. The closing price of the Common
Shares on May 27, 2008 was $10.21. No party made an offer
to the Board that the Board determined was superior to the
transaction with 19X during the third go-shop period.
On September 22, 2008, CKx announced that
Mr. Sillerman had informed CKx, on behalf of 19X, that in
light of recent turmoil in the financial sector and the related
tightening of the financing markets, that 19X would be unable to
consummate the pending acquisition of CKx. The closing price of
the Common Shares on September 22, 2008 was $6.76. On
November 1, 2008, 19X delivered a letter to the Board
terminating its agreements with 19X, citing the economic
conditions which made it impossible to consummate the
transaction,
14
while indicating that Mr. Sillerman and Mr. Fuller
intended to continue to pursue alternatives for an acquisition
of CKx. The closing price of the Common Shares on
November 3, 2008 (the first trading day after announcement
of the termination of these agreements) was $4.18. In connection
with the termination, 19X paid to CKx a termination fee of
$37,000,000 (paid by Mr. Sillerman delivering, on behalf of
19X, 3,339,350 Common Shares and a cash payment of $500,000; the
number of Common Shares delivered was calculated by using an
assumed value of $11.08 per Common Share as agreed upon in the
merger agreement). In December 2008, Mr. Sillerman and
Mr. Fuller, citing the continued global economic
difficulties and related credit freeze, informed CKx that they
no longer intended to actively pursue an alternate transaction
at that time for the acquisition of CKx.
Between December 2008 and December 2009, the Board continued to
discuss strategic alternatives for CKx and to solicit interest
from third parties, including both strategic parties and
financial sponsors, for a potential transaction involving CKx.
Members of the Board also received various inbound inquiries
during this time period. During this time period,
confidentiality agreements were executed with a total of eight
interested parties, representing both strategic acquirers and
financial sponsors, who were given the opportunity to conduct
due diligence with respect to CKx. Other than as described below
with respect to Party A, no party expressed an interest in
pursuing a transaction with CKx.
On November 19, 2009, a financial sponsor, whom we refer to
as Party A, submitted a preliminary, non-binding indication of
interest to CKx. The preliminary offer indicated an offer price
of $8.00 to $8.75 per share, subject to Party As due
diligence investigation. The closing price of the Common Shares
on November 18, 2009 was $6.07. The proposal described
Party As offer as fully funded and committed by Party A
and its affiliates and not dependent on outside financing. The
Board formed a Special Committee of the Board composed of all of
the independent directors and authorized the Special Committee
to evaluate, review and negotiate the non-binding proposal from
Party A and any and all other proposals concerning any potential
strategic transaction involving CKx or other alternatives. On
December 1, 2009, the Special Committee engaged
Gleacher & Company Securities, Inc.
(
Gleacher & Company
), as its
financial advisor in relation to any possible sale transaction
involving CKx. The Special Committee also engaged Wachtell,
Lipton, Rosen & Katz (
Wachtell
Lipton
) as its legal advisor at this time.
On December 2, 2009, Party A entered into a confidentiality
agreement with CKx. Throughout December of 2009, Party A
conducted due diligence on CKx, including to meet with
representatives of management and Gleacher & Company
on several occasions. On January 15, 2010, Party A informed
CKx that it had made a business decision to end discussions
involving a potential purchase of CKx.
On February 22, 2010, Party A submitted a revised
non-binding indication of interest to purchase CKx to the Board.
The non-binding proposal contained a proposed purchase price of
$5.50 per share, or up to $6.00 to $7.00 per share if its due
diligence supported additional EBITDA than the run-rate EBITDA
used in making its $5.50 per share offer. The closing price of
the Common Shares on February 19, 2010 (the last trading
day prior to Party As submission of its proposal) was
$3.96. The non-binding indication of interest provided that the
transaction was expected to be fully funded through committed
equity and debt financing from Party A and its affiliates, and
was not dependent on obtaining outside financing commitments. In
order to move forward with negotiations with CKx, Party A
required that CKx agree to a
21-day
exclusivity period. The Special Committee determined it was
advisable to move forward with Party A on an exclusive basis.
CKx entered into an exclusivity agreement and negotiated
exclusively with Party A with respect to a possible sale
transaction from February 25, 2010 through March 19,
2010. Throughout this period, Party A performed extensive
financial, legal, operational and accounting due diligence and
utilized financial, legal and accounting advisors that it had
retained.
On March 10, 2010, after Party A had concluded the majority
of its due diligence, Party A delivered a preliminary term sheet
to CKx which proposed a purchase price of $5.50 per share and
delivery of equity and debt commitment letters at the signing of
the definitive agreements relating to a transaction, although
Party As obligation to complete the transaction would be
subject to the receipt of debt financing. The closing price of
the Common Shares on March 9, 2010 was $5.17. The Special
Committee instructed Gleacher & Company to respond to
Party A to inform Party A that its offer was insufficient, and
that Party A needed to increase its offer price and that CKx
would not agree to any transaction that involved a financing
contingency. At this
15
time, Party A asked for an extension of exclusivity to work to
meet the Special Committees requirements. The Special
Committee determined that exclusivity should be extended to
March 25, 2010, and the parties later agreed to a further
extension of exclusivity through March 29, 2010. On
March 25, 2010, Party A informed Gleacher &
Company that it would not be able to increase its offer price
beyond $5.50 per share and that it would be unable to deliver
committed financing at signing of definitive documents relating
to a transaction. Counsel to Party A delivered a draft merger
agreement to Wachtell Lipton on March 28, 2010. The draft
merger agreement contained a financing contingency, which the
Special Committee informed Party A was not acceptable.
On March 29, 2010, in response to market rumors, CKx
publicly confirmed that it was engaged in discussions regarding
a possible transaction involving the sale of CKx. The closing
price of the Common Shares on March 29, 2010 was $6.15.
On March 30, 2010, CKx resumed discussions with various
other strategic parties and financial sponsors who expressed an
interest in a potential transaction involving CKx and responded
to several parties who had made inbound calls during the
exclusivity period. CKx entered into additional confidentiality
agreements with third parties and the parties continued their
due diligence of CKx. A draft merger agreement was sent to three
financial sponsors who expressed an interest in a transaction
with CKx. No potential strategic partners expressed an interest
in entering into confidentiality agreements. None of these
discussions resulted in an offer to purchase CKx or negotiation
of a definitive agreement.
On April 20, 2010, Gleacher & Company informed
the Special Committee that no other party with whom CKx was
holding discussions had indicated that it was willing to make an
offer to purchase CKx at this time. The Special Committee
discussed that Party A had still not obtained financing for the
transaction.
On April 30, 2010, Party A again reaffirmed its offer at
$5.50 per share to the Special Committee and indicated it still
expected to be able to obtain debt financing commitment letters
at the signing of definitive transaction documents. The closing
price of the Common Shares on April 29, 2010 was $6.15. The
Special Committee informed Party A that in light of the fact
that it had been 5 months since Party A had proposed a
fully funded transaction and no financing commitments had yet
been obtained that it would no longer be actively pursuing a
transaction with Party A.
On May 6, 2010, Mr. Sillerman resigned as Chairman and
Chief Executive Officer of CKx.
On May 28, 2010, CKx publicly confirmed that it had
received a proposal from a group of investors led by Simon
Fuller (who had since left his posts as a director of CKx and as
Chief Executive Officer of 19 Entertainment) to acquire CKx and
that the Board was evaluating the proposal, as well as other
potential strategic alternatives for CKx and publicly announced
that Gleacher & Company and Wachtell Lipton were
assisting in its evaluation. Over the two weeks that followed,
Gleacher & Company and CKx engaged in preliminary
discussions with Mr. Fuller and his representatives and
Mr. Fullers financial advisor conducted financial due
diligence. These discussions did not result in an offer to
purchase CKx.
Following his resignation, in May and June 2010,
Mr. Sillerman announced that he was reviewing alternatives
regarding his holdings in CKx, including acquiring additional
shares or seeking control of CKx either alone or in conjunction
with a financial partner. During the time period beginning in
June 2010 and continuing thereafter through the first part of
2011, Mr. Sillerman engaged in informal discussions from
time to time with persons who might provide financing for, or
participate in, an offer to acquire a controlling interest in
CKx and with persons who might be interested in agreeing not to
tender their shares in the offer, although none of these
discussions resulted in any agreements.
On June 22, 2010, Mr. Sillerman announced that an
entity, who we refer to as Party C, a financial sponsor, was
making a written proposal to the Board with respect to providing
liquidity to holders of the Common Shares. Mr. Sillerman
wrote to the Board and urged it to pursue this opportunity.
Following Mr. Sillermans renewed interest in a
transaction to acquire control of CKx, on June 24, 2010,
CKx adopted the Rights Plan.
On June 25, 2010, Party C expressed interest to CKx in
making an offer to purchase CKx. Party C executed a
confidentiality agreement with CKx and conducted due diligence
with CKx management on
16
June 28, 2010. These discussions did not result in an offer
to purchase CKx or in negotiation of a definitive agreement with
Party C.
On July 13, 2010, after Mr. Sillerman informally
indicated to CKx his interest in making an offer for CKx in
which certain substantial Stockholders would agree not to tender
their shares, CKx amended the Rights Plan to accommodate
agreements of this nature. Also on July 13, 2010, Apollo
Management entered into a joinder to Party As
confidentiality agreement with CKx pursuant to which certain
equity funds managed by Apollo Management would serve as a
potential financing source to Party A regarding a transaction
with CKx. These discussions did not result in an agreement
between Apollo Management or any of its affiliates and Party A
regarding any such transaction.
On August 9, 2010, at the request of Mr. Sillerman,
representatives from Gleacher & Company and from
Wachtell Lipton met with Mr. Sillerman, his advisors and
Party C to discuss Mr. Sillermans interest in
commencing a tender offer for a portion of the outstanding
Common Shares. On August 12, 2010, CKx received a
non-binding proposal from Mr. Sillerman with respect to the
potential tender offer. As contemplated, the offer would be for
all outstanding shares, subject to a minimum condition of
receiving in the offer a number of shares that together with
Mr. Sillermans shares would total a majority of the
Common Shares on a fully diluted basis, and subject to receiving
agreements from holders of approximately 30% of the outstanding
shares not to accept the offer and to remain as stockholders of
the surviving company. The contemplated price for the offer was
in the range of $5.50 and $5.75 per share. Mr. Sillerman
also stated that, if the offer were successful, he intended to
return as executive chairman of CKx and explore potential
acquisition or combinations involving media assets. These
discussions did not result in an offer to purchase CKx or in
negotiation of a definitive agreement with Mr. Sillerman.
On August 18, 2010, representatives of Apollo Management
first expressed to CKx that the Apollo Funds were interested in
making an offer to purchase CKx. Apollo Management executed a
confidentiality agreement with CKx and Apollo Management and its
representatives conducted due diligence with CKx management on
August 20, 2010 and extensive financial and operational due
diligence throughout August 2010 and September 2010. These
discussions did not result in an offer to purchase CKx or in
negotiation of a definitive agreement with Apollo Management at
this time. From time to time thereafter, representatives of
Mr. Sillerman and Apollo Management discussed the
possibility of such a transaction.
On October 25, 2010, at a meeting of the Board, the Board
considered whether to continue any discussions around a
potential sale of CKx. The Board considered the fact that 19X,
Mr. Sillermans investor group, had failed to complete
a transaction with CKx over a
16-month
period, and that two years of process following
Mr. Sillermans failed purchase attempt had failed to
produce any proposals that it determined were in the best
interests of Stockholders and no party who had been interested
in pursuing a transaction, including Party A and Apollo
Management, both of whom had made preliminary indications of
interest and conducted significant diligence, had obtained fully
funded and committed financing for a transaction. The Board, in
conjunction with senior management, concluded that ongoing sale
discussions were likely to be unproductive and disruptive to the
operation of CKxs businesses. It therefore determined that
it was advisable to publicly announce that it was terminating
discussions of any potential sale transaction and that it would
operate CKx on a standalone basis. CKx disclosed that the Board
or CKx might, at a future date, reconsider its alternatives. The
public announcement of termination of sale discussions was made
on October 27, 2010. The closing price of the Common Shares
on October 27, 2010 was $4.31.
In November 2010 and December 2010, CKx had preliminary
discussions regarding a potential preferred stock equity
investment by certain equity funds managed by Apollo Management.
These discussions did not result in the execution of any
definitive agreement. During January 2011 and February 2011,
Apollo Management did not submit any additional proposals for
any transaction with CKx at this time.
In March 2011, members of senior management of CKx received a
call from a financial advisor indicating that it had a
potentially interested purchaser for CKx, which was later
disclosed to be Party B. Senior management referred the call to
Gleacher & Company, who contacted the financial
advisor and advised that, unless Party B was able to submit a
fully funded and committed deal with respect to financing, the
Board would not consider the proposal.
17
On March 18, Party B, a financial sponsor, submitted a
non-binding indication of interest to the Board, proposing a
purchase of 100% of the outstanding Common Shares at an offer
price of $4.75 per share, which according to the letter,
represented a 22.1% premium over the closing price of $3.89 per
share on March 17. The proposal indicated that the offer
was expected to be financed through Party Bs equity
capital and outside debt financing, although Party B was
prepared to pay 100% of the purchase price with its equity
capital and the transaction would have no financing contingency.
Party B required exclusivity to move forward with negotiations
with CKx and expected to be able to complete its due diligence
and negotiate definitive transaction documents within
21 days. Party B submitted a revised proposal on
April 7, indicating that it would not require exclusivity
and would also be prepared to complete confirmatory due
diligence and negotiate definitive agreements within two weeks.
A further non-binding proposal was submitted by Party B on
April 10, increasing its offer price to $5.10 per share.
The closing price of the Common Shares on April 8 (the last
trading day prior to the submission of Party Bs revised
proposal) was $4.50.
On March 21, Michael Ferrel, Chairman and Chief Executive
Officer of CKx, received a non-binding indication of interest
from Party C. Party C proposed an offer price of $4.50 per
share, which, according to the letter, represented a 23% premium
to the previous months average share price. On
April 7, Party C provided a revised non-binding indication
of interest proposing an offer price of $5.25 per share, which,
according to the letter, represented a 38% premium to the
average share price for the 30 days prior to the date on
which rumors were circulated that a third party submitted a bid
for CKx. The letter indicated that Party Cs
internally-managed funds would fund all of the debt and equity
for the proposed transaction. Party C required exclusivity to
move forward in negotiations with CKx and indicated it would
need approximately two weeks to complete its due diligence.
On March 23, Apollo Management sent a non-binding
indication of interest to Mr. Ferrel indicating that the
Apollo Funds were once again interested in pursuing a
transaction with CKx to purchase 100% of the outstanding Common
Shares at an offer price of $5.00 per share, which, according to
the letter, represented an approximately 30% premium to the
closing share price as of October 27, 2010. The letter also
indicated that Apollo Management had obtained high quality
financing indications from credible institutions. On
April 6, Apollo Management submitted a further letter to
the Board reiterating its willingness to engage with CKx with
respect to a potential sale transaction and also indicated that
Apollo Management had made significant progress with respect to
securing equity and debt financing and expected to have a fully
funded and committed deal at the time of entry into definitive
agreements. After submission of the April 6 letter,
representatives from Apollo Management verbally confirmed to
Mr. Ferrel that certain equity funds managed by Apollo
Management were prepared to offer $5.50 per share. Apollo
Management indicated it would require exclusivity to move
forward with discussions with CKx and that it would need 15
business days to complete its due diligence and to negotiate
transaction documents.
On April 15, the Board met to discuss the three unsolicited
proposals for a sale of CKx that CKx had received from Apollo
Management, Party B and Party C over the previous few weeks. The
Board reviewed the three proposals with Gleacher &
Company and senior management and discussed re-engaging in a
process to explore strategic alternatives for CKx. In the course
of this discussion, the Board reviewed with management and
Gleacher & Company the current strategic position of
CKx, the current market environment and the ability of CKx to
continually grow and compete effectively in a challenging
business environment, including discussions around CKxs
ability to acquire desirable assets to increase stockholder
value. The Board concluded that, taking into consideration the
current strategic position of CKx and CKxs lack of success
in identifying significant acquisitions that could increase
stockholder value, it was advisable again to consider the
current proposals and to seek interest from other possible
strategic parties and financial sponsors. The Board also
determined that it would not grant exclusivity to any third
party.
At a meeting held on April 18, the Board instructed
Gleacher & Company and Wachtell Lipton on a proposed
process for soliciting interest in a sale of CKx and for
negotiating a definitive transaction with interested parties.
Gleacher & Company would first circulate to the Board
a list of potentially interested strategic parties and financial
sponsors to be contacted by Gleacher & Company.
Gleacher & Company would then contact these parties
and CKx would enter into confidentiality agreements with any
interested bidders. Gleacher & Company would, at the
same time, contact Apollo Management, Party B and Party C to
outline
18
the process. Interested bidders would then have approximately
three weeks to conduct due diligence and to negotiate the
transaction documents and at the end of this period, would be
required to submit a final bid to the Board. All parties were
told that they must provide evidence of committed financing to
the Board as soon as possible or may be disqualified from the
process.
On April 18, Gleacher & Company contacted Apollo
Management, Party B and Party C to outline the proposed sale
process. Party B and Party C executed confidentiality agreements
with CKx on April 20. Apollo Management, Party B and Party
C then began to work to complete their respective due diligence
on CKx, which continued over the following weeks. Each party was
told by Gleacher & Company that it would be required
to submit a final proposal for fully funded and committed offers
to purchase CKx (including fully negotiated transaction
documents) on May 6. On April 18, Gleacher &
Company also began to contact senior executives at other
potentially interested bidders for CKx, including three
additional financial sponsors and nine strategic acquirers. As a
result of these outbound inquiries, two additional financial
sponsors entered into confidentiality agreements with CKx. No
potential strategic acquirers expressed any interest in a
transaction involving CKx.
At the end of April 2011, representatives of Apollo Management
engaged in exploratory discussions with Mr. Sillerman
regarding the possible support of Mr. Sillerman for such an
acquisition of CKx by certain equity funds managed by Apollo
Management, including the terms under which Mr. Sillerman
and his affiliates might retain an interest in the surviving
company.
The Board met on April 27 to discuss the status of a potential
transaction with the interested parties. Gleacher &
Company indicated that both Apollo Management and Party B were
actively conducting due diligence and had had several meetings
with senior management and had met with representatives of The
Promenade Trust (the
Trust
) to discuss
treatment of the Series B Convertible Preferred Stock, par
value $0.01 per share, of CKx (the
Series B
Preferred Shares
) and the Series C Convertible
Preferred Stock, par value $0.01 per share, of CKx (the
Series C Preferred Share
and,
together with the Series B Preferred Shares, the
Preferred Shares
) in the transaction
along with related matters. Gleacher & Company also
indicated that Apollo Management was in discussions with
Mr. Sillerman in his capacity as a major Stockholder of CKx
regarding a possible support and non-tender arrangement.
Gleacher & Company indicated that Party C, despite its
initial indication of interest, had not conducted any
significant due diligence to date. Gleacher & Company
also confirmed to the Board that the two additional financial
sponsors who had signed confidentiality agreements had not
conducted any due diligence and indicated to
Gleacher & Company that neither was interested in
pursuing any transaction involving CKx. The Board inquired
whether either Apollo Management or Party B had indicated that
its due diligence had supported an offer price higher than $5.50
per share. Gleacher & Company indicated that neither
party had made any indication with respect to the offer price
other than the initial non-binding indications. The Board
directed Gleacher & Company to work to obtain an offer
price in excess of $5.50 per share from negotiations with Apollo
Management and Party B, and in conjunction with this directive,
modified the terms of Gleacher & Companys
engagement letter to provide financial incentives for
Gleacher & Company to obtain a price per share in
excess of $5.50. The Board also authorized Wachtell Lipton to
send draft transaction documents to the respective counsel of
Apollo Management, Party B and Party C, which Wachtell Lipton
sent later that day.
The draft merger agreement sent by Wachtell Lipton provided for
the transaction to be completed through a tender offer and
second step merger. The agreement also provided for a 20
business day go-shop period; for a fully funded and
committed deal with respect to financing with no financing
contingency; for the ability of CKx to seek specific performance
of the transactions contemplated by the agreement; and provided
for payment by CKx of a termination fee of 3% of the common
equity value of the transaction to accept a superior proposal.
Beginning on May 2, representatives of Mr. Sillerman
and his affiliates and Apollo Management engaged in exploratory
discussions concerning the terms of the possible support of
Mr. Sillerman and his affiliates for an acquisition
transaction by equity funds managed by Apollo Management,
including the terms of a possible support and non-tender
arrangement. During this period, Mr. Sillerman and his
representatives also had
19
exploratory discussions with Party B regarding the terms of
a possible support arrangement by Mr. Sillerman and his
affiliates of a transaction involving CKx and Party B.
The Board met on May 5 to discuss the status of a potential
transaction with the interested parties. Gleacher &
Company informed the Board that Apollo Management and Party B
continued to be interested in pursuing a transaction with CKx
and that both parties had indicated that they had substantially
completed their respective due diligence. Apollo Management and
Party B both indicated that they would be submitting revised
proposals, along with comments to the merger agreement
previously circulated by Wachtell Lipton, on May 6.
On May 6, CKx received a revised non-binding proposal from
Apollo Management. The proposal indicated that equity funds
managed by Apollo Management were prepared to offer $5.50 per
share in cash for 100% of the outstanding Common Shares, which,
according to the letter, represented an approximately 30%
premium to the closing share price of $4.25 on May 5, 2011.
The proposal also indicated that equity funds managed by Apollo
Management had received a definitive commitment for the debt
financing component of the transaction from Goldman Sachs and
Apollo Management provided a draft of an equity commitment
letter from certain equity funds managed by Apollo Management to
provide 100% of the equity portion of the funds required to
complete the transaction. The proposal contained a draft merger
agreement, equity commitment letter, limited guarantee and debt
commitment letter. Apollo Management requested a
10-day
exclusivity period to finalize the merger agreement and related
documents.
On May 6, Mr. Sillerman sent an email to CKx stating
that he understood that CKx was considering offers for the sale
of CKx and that he would support a cash offer at $5.50 per share
or higher.
The Board held a special meeting in the evening of May 6 to
discuss the proposal from Apollo Management. Representatives
from Wachtell Lipton indicated that Apollo Management required
as a condition to entry into a definitive merger agreement that
affiliates of Apollo Management have negotiated satisfactory
support agreements with Mr. Sillerman and the Trust; the
go-shop provision had been deleted; and damages
against Apollo Managements affiliates were limited to a
reverse termination fee equal to 5% of the value of the
transaction even in the case of a willful breach (although CKx
had the right to specific performance if all conditions to
closing were met and the debt financing had been funded); and
that Apollo Management had proposed a termination fee payable by
CKx to accept a superior offer of 5% of the common equity value
of the transaction, increased from the 3% proposed by CKx, plus
reimbursement of Apollo Managements and its
affiliates expenses in an uncapped amount.
Gleacher & Company indicated that representatives from
Party B had informed Gleacher & Company that Party B
was expected to submit a proposal later in the evening or in the
early hours of the following morning. Gleacher &
Company also told the Board that Party C had informed
Gleacher & Company that it was not interested in
pursuing a transaction with CKx at this time. The Board
determined, on the basis that it was likely to receive
additional proposals, that it would not grant Apollo Management
the requested exclusivity. In the event Apollo Management wished
to proceed on a non-exclusive basis, the Board authorized
Wachtell Lipton to negotiate the merger agreement and related
transaction documents with Apollo Management on terms acceptable
to CKx. Wachtell Lipton contacted counsel to Apollo Management
to negotiate the transaction documents on a non-exclusive basis.
In the early hours of May 7, Gleacher & Company
received a bid package from Party B. Party Bs non-binding
letter of intent indicated that it proposed to purchase 100% of
the outstanding Common Shares at a purchase price of $5.60 per
share. The letter of intent also indicated that Party B was
prepared to pay 100% of the equity capital from one of its
equity funds, and that Party B believed it could reach
definitive agreement with CKx in three days and requested
exclusivity during the
3-day
period. Party B also submitted a draft merger agreement, equity
commitment letter and limited guarantee. Wachtell Lipton
discussed with the Board the non-binding proposal received from
Party B and noted the following issues with respect to the draft
merger agreement from Party B: entry into the merger agreement
was conditioned on entering into arrangements with the Trust;
the go-shop provision had been deleted; and Party B
would have the ability to terminate the merger agreement for any
reason and pay CKx a $30,000,000 reverse termination free (and
therefore CKx was not entitled to specific performance under any
circumstance). Wachtell Lipton also noted that Party Bs
willingness to enter into the merger agreement was not
conditioned on entry into an agreement with
20
Mr. Sillerman and that the proposed termination fee that
Party B proposed to be payable by CKx to accept a superior offer
was less than the fee proposed by Apollo Management.
Gleacher & Company then advised Party B that CKx would
not agree to a period of exclusivity and that if Party B wished
to move forward on a non-exclusive basis, that its counsel
should work with Wachtell Lipton to finalize the merger
agreement and other transaction documents as soon as possible.
Over the remainder of May 7 and throughout the afternoon of
May 8, Wachtell Lipton negotiated with counsel to Apollo
Management and counsel to Party B with respect to the merger
agreements and related matters. Wachtell Lipton told both
counsel to Apollo Management and counsel to Party B that the
parties needed to improve their proposals by including a
go-shop provision, by reducing the proposed
termination fee and by permitting CKx to seek specific
performance of the merger agreement. Counsel to both Apollo
Management and counsel to Party B indicated that their
respective clients would not be willing to move forward on the
basis of the inclusion of a go-shop or where CKx had
a specific performance remedy (other than, in the case of Apollo
Management, the specific performance remedy available to CKx
when all conditions to closing are satisfied and the debt
financing has been funded).
The Board held an update call later that evening, where
Gleacher & Company and Wachtell Lipton reported on the
progress that had been made since the last update, including
that Apollo Management had proposed a reverse termination fee of
$35,000,000, which was higher than Party Bs proposed
reverse termination fee of $30,000,000, and Apollo Management
had lowered its expense reimbursement amount from $10,000,000 to
$7,500,000 and any reimbursement would be credited against the
proposed termination fee of $20,000,000. Wachtell Lipton
informed the Board that neither Apollo Management nor Party B
would agree to the inclusion of a go-shop provision.
Gleacher & Company then described to the Board its
efforts to confirm that Party Bs equity commitment was in
fact, fully funded. Gleacher & Company and Wachtell
Lipton had requested certain diligence items from Party B and
its counsel to confirm that Party B had access to equity in an
amount sufficient to pay the transaction consideration and
indicated that the due diligence provided by Party B and its
counsel prior to the time of the Board update call had been
insufficient to confirm that Party Bs offer was fully
funded. Gleacher & Company and Wachtell Lipton
indicated that they would continue to work to confirm Party
Bs access to adequate funding as soon as possible. The
Board directed Wachtell Lipton and Gleacher & Company
to continue to work with both Apollo Management and Party B to
improve the price and terms of the offers throughout the
evening, and that it should direct both parties to submit their
best and final bids for the Boards review by
7:00 p.m. EDT on May 9, and it was determined that the
Board would meet thereafter to consider the final bids.
Gleacher & Company and Wachtell Lipton continued to
negotiate with Apollo Management and Party B for the remainder
of May 8 and throughout the course of the day on May 9.
Gleacher & Company told Apollo Management that, if it
was going to continue to require entry into support agreements
with Mr. Sillerman and the Trust, Apollo Management needed
to finalize those arrangements as soon as possible and in any
event prior to the submission of its best and final bid.
Gleacher & Company also informed Apollo Management
that not every party was requiring entry into a support
agreement with Mr. Sillerman as a condition to its
agreement to a transaction. Apollo Management informed
Gleacher & Company that it had made significant
progress on reaching agreement with both Mr. Sillerman and
the Trust and anticipated it would be able to reach agreement at
the time of entry into a definitive transaction agreement.
Wachtell Lipton informed counsel to Apollo Management that,
contrary to what had been initially proposed by Apollo
Management, any support arrangements with Mr. Sillerman or
the Trust could not prohibit Mr. Sillerman or the Trust
from supporting a superior offer accepted by the Board and
resulting in termination of the merger agreement with affiliates
of Apollo Management. Counsel to Apollo Management later
informed Wachtell Lipton that Apollo Management had agreed that
any support agreement with either Mr. Sillerman or the
Trust would terminate if CKx terminates the merger agreement
with affiliates of Apollo Management. Counsel to Apollo
Management also sent a draft of the proposed support agreement
with Mr. Sillerman to Wachtell Lipton in the afternoon of
May 9. When Gleacher & Company expressed the
Boards concern about Apollo Managements ability to
complete its arrangements with Mr. Sillerman in the
necessary timeframe, Apollo Management agreed that, while it
wished to continue to work with Mr. Sillerman to agree on a
support and non-tender arrangement, it would not require
finalization of this agreement to enter into a definitive
transaction with CKx.
21
Gleacher & Company also spoke to representatives from
Party B to inform them that if Party B was going to continue to
require entry into arrangements with the Trust as a condition to
entering into a transaction with CKx, it needed to work quickly
to finalize these arrangements and to have them substantially
complete prior to the time of submitting its best and final bid.
After learning that Apollo Management anticipated that it would
reach agreement with the Trust and would be ready to submit this
agreement with its final bid package, Gleacher &
Company spoke to a representative of Party B to inform Party B
that it would also need to submit an agreement with the Trust
with its best and final bid package or agree to drop the
requirement. Party B then agreed to drop the requirement.
Both Gleacher & Company and Wachtell Lipton had
several conversations with representatives of Party B on May 9
with respect to working to confirm that Party Bs offer was
fully funded. None of these conversations resulted in the
production of sufficient confirmation by Party B that its equity
commitment was fully funded. Wachtell Lipton asked counsel to
Party B to provide the fund documentation for Party B. Party B
said that it would not provide the fund documentation citing
confidentiality concerns with respect to the identity of the
investors in Party B. Wachtell Lipton indicated that CKx was
willing to sign a confidentiality agreement and to review and
discuss the documents on a
counsel-to-counsel
basis to meet Party Bs confidentiality concerns. Wachtell
Lipton also informed counsel to Party B that they could redact
any references to specific investors. Counsel to Party B
refused. In a further conversation with Wachtell Lipton, counsel
to Party B who had participated in the formation of Party
Bs fund again refused to provide documentation but advised
Wachtell Lipton that the equity commitment required to fund the
transaction exceeded the allowable investment basket provided
for in the funds documentation. Gleacher &
Company called representatives from Party B to inquire whether
Party B had additional funding to close the gap between the
permitted investment amount by Party Bs fund and the total
amount of equity needed to fund the transaction. A
representative from Party B told Gleacher & Company
that Party B did not have definitive arrangements to close the
equity gap, but that Gleacher & Company should
trust Party Bs ability to arrange for
additional financing prior to the closing of any transaction.
Apollo Management contacted Gleacher & Company shortly
before 7:00 p.m. EDT to request a brief amount of time to
finalize its bid. Shortly thereafter, Apollo Management
submitted its best and final bid, which contained a bid letter
and drafts of all of the related transaction documents and also
included copies of draft support agreements with
Mr. Sillerman and the Trust. Shortly before the start of
the Board meeting, Wachtell Lipton received a revised draft
merger agreement from Party B and did not receive any of the
other related transaction documents or a bid letter.
In the evening on May 9, the Board convened a meeting to
review the final proposals received from both Apollo Management
and Party B. Wachtell Lipton summarized in full for the Board
and senior management the final proposals from both parties and
also highlighted the changes in the material terms. Apollo
Managements final proposal contained an offer price of
$5.50 per share; was fully funded and committed with respect to
the proposed equity and debt financing; contained an increased
reverse termination fee of $40,000,000; and provided for
specific performance where the conditions to closing of the
tender offer and the merger had been satisfied and the debt
financing was to be funded. Partys B final proposal
contained an offer price of $5.60 per share but was not
accompanied by evidence that its equity commitment could be
fully funded; did not provide for specific performance under any
circumstances; and contained a lower reverse termination fee of
$30,000,000.
The Board discussed the proposals from Apollo Management and
Party B. The Board discussed the fact that the offer from Party
B was not funded and did not provide for specific performance
and had a lower reverse termination fee. The Board also
considered the approximately four-year history of attempts to
enter into a transaction with various parties and the
consequences of entering into agreements that were not financed.
In light of these factors, the Board concluded that the Party B
proposal presented a substantially higher risk of
non-consummation and was not superior to the proposal from
Apollo Management, and not in the best interests of Stockholders
to accept the proposal.
Gleacher & Company then reviewed its financial
analysis regarding a proposed transaction at an offer price of
$5.50 per share, and rendered its oral opinion (subsequently
confirmed in writing) to the effect that, as of such date and
based upon and subject to the qualifications, limitations and
assumptions specified therein,
22
the price of $5.50 per share in cash to be received by
Stockholders (other than the Excluded Persons (as defined
below)) is fair, from a financial point of view, to
Stockholders. Wachtell Lipton then discussed the legal duties
and standards applicable to the decisions and actions being
considered by the Board.
A majority of the Board (with Ms. Priscilla Presley
abstaining and Mr. Bryan Bloom dissenting) resolved to
approve the Merger Agreement with affiliates of Apollo
Management and the transactions contemplated by the Merger
Agreement, including the Offer and the Merger.
Following the Board meeting, Gleacher & Company and
Wachtell Lipton informed representatives of Apollo Management
that the Board had approved its proposal and the parties and
their respective counsel finalized and the parties executed the
definitive transaction documents. Following the adoption of the
Second Amendment providing that entry into definitive
transaction documents and performance of the transactions
contemplated by such agreements would not trigger the provisions
of the Rights Plan, Apollo Management and its counsel also
finalized definitive support agreements with both
Mr. Sillerman and his affiliates and the Trust. Those
parties executed definitive agreements with affiliates of Apollo
Management concurrently with the execution of definitive
agreements between affiliates of Apollo Management and CKx. CKx
and Apollo Management then issued a joint press release prior to
the opening of the U.S. financial markets on May 10.
On May 17, 2011, Parent, Merger Sub and CKx executed an
amendment to the Merger Agreement as described in
Item 3(b), Past Contacts, Transactions, Negotiations
and Agreements Arrangements with Parent
The Merger Agreement.
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(c)
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Reasons
for the Recommendation
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In reaching its determination of the fairness of the terms of
the Offer and Merger and its decision to approve the Merger
Agreement and recommend that the holders of Common Shares accept
the Offer and tender their Common Shares pursuant to the Offer
and, if required by law, adopt and approve the Merger Agreement
and the transactions contemplated thereby, the Board considered
a variety of factors weighing in favor of the Offer and the
Merger, as well the risks associated with the Offer and the
Merger, including, among others, the material factors listed
below.
Expected
Benefits of the Offer and the Merger.
The Offer and the Merger are expected to result in several
benefits to all Stockholders, including the unaffiliated
stockholders, including the following factors which the Board
viewed as supporting its fairness determination. Where the
following section discusses factors or changes that could
potentially impact the financial performance or profitability of
CKx, or the price or trading range of the Common Shares, the
discussion is intended to refer to the Boards
consideration of the potential impact on the value of Common
Shares held by the unaffiliated stockholders of CKx.
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The Boards belief that the Offer and the Merger
represented the surest and best prospect for maximizing
stockholder value, based on the Boards assessment, after
consultation with its legal and financial advisors, of the
alternatives reasonably available to CKx. The Board reviewed the
possible alternatives to the Offer and the Merger (including the
possibility of continuing with CKxs current business
plan), the perceived risks and benefits of any such
alternatives, including the timing and likelihood of
consummating any such alternative, and it is the Boards
view that the Offer and Merger present a superior opportunity to
any such alternatives.
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The Boards understanding and analysis of the historical
and prospective operating environment and financial performance
of CKx, including the existing cash flow, liquidity and
financial flexibility of CKx on a stand-alone basis and the
ability of CKx to pursue growth opportunities and to expand into
new businesses.
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The risks of remaining an independent company and pursuing
CKxs strategic plan, including the risks relating to the
unpredictability of continued popularity of CKxs brands
and on-air talent, the upcoming expiration of certain key
contractual arrangements with third parties, and maintaining and
protecting CKxs intellectual property rights.
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The significance of consolidation and acquisition activity to
CKxs future growth plans and the Boards assessment
of the prospects of CKx being able to consummate such plans,
given the limited attractive opportunities that had been
identified to date, the range and availability of likely
opportunities in the future, CKxs financial resources on a
standalone basis relative to potential competitors and the
opportunities for acceptably accretive acquisitions.
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The Boards familiarity, based on multi-year strategic
reviews, with the range of possible partners for CKx and how
they would likely approach valuing CKx based on its financial
performance;
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The Board considered that CKx, with the assistance of its
management and advisors, had conducted a robust process for the
sale of CKx and had solicited interest from third parties,
including both strategic parties and financial sponsors over the
course of several years, had responded to the parties that made
inbound calls and unsolicited proposals and had executed
confidentiality agreements with interested parties.
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The Board reviewed the historical market prices, volatility and
trading information with respect to the Common Shares.
Specifically, the Board noted that the Offer Price represented
an approximately 24% premium over the closing price of the
Common Shares on May 9, 2011 and an approximately 38%
premium over CKxs average closing price over the six
months preceding the announcement of the Merger Agreement.
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The Board considered its understanding that the Offer and the
Merger likely would be completed based on, among other things,
the absence of a financing condition or any condition requiring
third party consents, the financing commitments received by
Parent for all of the funds needed to consummate the Offer and
the Merger, the financial strength of the Apollo Funds and the
financial institutions providing such commitments, the limited
number of conditions to the Offer and Merger, Apollo
Managements extensive prior experience in completing
acquisitions of other companies, and the fact that CKx has a
limited right to seek specific performance in the situation
where all of the conditions to the Offer and the Merger have
been satisfied or waived and the debt financing has been funded.
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The Boards belief that the transaction, by providing a
fixed cash price to Stockholders eliminates the risk of the
continued and demonstrated volatility of CKxs equity price
in the public markets.
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The financial strength of Apollo Management and its affiliates,
which maintain $70 billion of assets under management,
$15 billion of which represent funding commitments held by
Apollo Investment Fund VII, L.P. (
Apollo
VII
). The financial strength of Apollo VII contributes
to the certainty of closing and the certainty that all
Stockholders will expeditiously receive the all-cash
consideration of the Offer Price.
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After contacting 14 potential third-parties in April 2010, only
five parties signed confidentiality agreements and only one
other party (Party B) submitted a proposal, and that
proposal was not fully financed, contained a lower reverse
termination fee and did not provide for specific performance.
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CKxs right to withdraw or modify its recommendation in
favor of the Offer and the Merger or terminate the Merger
Agreement under certain circumstances, including its ability to
terminate the Merger Agreement in connection with a superior
offer, subject to the payment of a $20,000,000 fee and certain
other conditions, and in the event of certain breaches or
failures by Parent of its representations, warranties, covenants
or agreements set forth in the Merger Agreement.
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The opinion of Gleacher & Company delivered to the
Board on May 9, 2011, to the effect that, as of such date
and based upon and subject to the qualifications, limitations
and assumptions set forth therein, the $5.50 per Common Share in
cash to be received by Stockholders (other than Mr. Robert
F.X. Sillerman and the Affiliates and the Associates of
Mr. Robert F.X. Sillerman (the terms
Affiliate
and
Associate
as
used herein shall have the meanings ascribed to them under
Rule 405 of the Securities Act of 1933, as amended), such
persons being collectively referred to herein as the
Excluded Persons
), in the Offer and the
Merger is fair, from a financial point of view, to Stockholders.
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The fact that the transaction is structured as a tender offer
and a second step merger, which can often be completed more
promptly than would have been the case with a one-step merger,
meaning that all Stockholders can receive the consideration
value for their Common Shares more promptly.
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24
The Board also considered potential risks associated with the
Offer and the Merger in connection with its evaluation of the
fairness of the proposed transaction, including:
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The risk that Parent may terminate the Merger Agreement and not
complete the Offer in certain limited circumstances, including,
subject to certain conditions, if there is a Material Adverse
Effect (as defined in the Merger Agreement), or if CKx does not
perform its obligations under the Merger Agreement in all
material respects.
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The risks and costs to CKx if the Offer does not close,
including the potential diversion of management and employee
attention, potential employee attrition and the potential effect
on business and customer relationships.
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The covenant in the Merger Agreement prohibiting CKx from
soliciting other potential acquisition proposals and restricting
its ability to entertain other potential acquisition proposals
unless certain conditions are satisfied.
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The provision in the Merger Agreement requiring CKx to pay, if
the Merger Agreement is terminated under certain circumstances,
a $20,000,000 termination fee (inclusive of Parents
expenses) or, in other circumstances, Parents expenses up
to $7,500,000.
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The covenants in the Merger Agreement requiring CKxs
business prior to the completion of the Offer to be conducted in
the ordinary course, as well as various other operational
restrictions on CKx prior to the completion of the Merger, other
than with the consent of Parent, that could delay or prevent CKx
from undertaking business opportunities that could arise prior
to the consummation of the Offer and the Merger.
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The fact that Stockholders who tender their Common Shares (or
whose Common Shares are converted to cash in the Merger, if it
occurs) will not participate in any future earnings or growth of
CKx and will not benefit from any future appreciation in the
value of CKx.
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The fact that the all-cash consideration in the transaction will
be taxable for U.S. federal income tax purposes.
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The matters described above in Item 3(a), Past
Contracts, Transactions, Negotiations and Agreements
Arrangements with Directors and Executive Officers of CKx.
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In addition to the above, the Board considered the following
material factors in concluding that the transaction is
procedurally fair to all Stockholders:
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The fact that the Board retained independent financial advisors
and legal counsel to render advice with respect to the proposed
transaction.
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The Boards experience over the preceding four years and
familiarity with potential transaction partners and transaction
considerations.
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The fact that there was not an unaffiliated representative
acting on behalf of unaffiliated stockholders for purposes of
negotiating the terms of the transaction, but that the
independent directors met separately to discuss and review the
terms of the transaction.
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The Boards ability, prior to the consummation of the
Offer, to change its recommendation regarding the advisability
of the Offer and the Merger in the event of a superior proposal,
subject to the payment of a $20,000,000 termination fee and
certain other conditions of the Merger Agreement.
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The fact that CKxs unaffiliated stockholders will not be
obligated to tender their Common Shares in the Offer; and if
they so desire, will be able to exercise dissenters rights
with respect to the Merger.
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The Board based its ultimate decision on its business judgment
that the benefits of the Offer and the Merger to Stockholders
and to CKxs unaffiliated stockholders outweigh the
negative considerations. The Board determined that the Offer and
the Merger represent the best reasonably available alternative
to maximize stockholder value with the least risk of
non-completion. In the course of reaching its decision, the
Board did not consider the liquidation value of CKx because it
considered CKx to be a viable, going concern and therefore did
not consider liquidation value to be a relevant methodology and
because the Board believes that CKx would not be able to readily
liquidate or monetize its assets in a manner that would be
certain to yield value to CKx and its Stockholders in excess of
the Offer consideration. Further, the Board did not consider net
book value, which is an
25
accounting concept, as a factor because it believed that net
book value is not a material indicator of the value of CKx as a
going concern but rather is indicative of historical costs. The
Board also considered the historical trading prices of
CKxs stock, including, as discussed above, the fact that
the Offer Price represents an approximately 24% premium over the
closing price of the Common Shares on May 9, 2011 and an
approximately 38% premium over CKxs average closing price
over the six months preceding the announcement of the Merger
Agreement and the financial analyses conducted by
Gleacher & Company regarding CKx. Other than as
described under Background of the Transaction in
this Item 4, the Board did not consider any other firm
offers made for CKx during the last two years as there were no
such offers of which the Board was aware. The Board, having
reviewed the financial information and projections provided by
management to Gleacher & Company and found
Gleacher & Companys use of such projections, at
the direction of CKxs management, to be reasonable,
subject to the underlying assumptions regarding the nature of
the financial projections as described in Item 8(f),
Additional Information Projected Financial
Information below, and having understood the assumptions
and data contained within Gleacher & Companys
financial analyses, considered and adopted as its own the
financial analyses of Gleacher & Company in the course
of reaching their respective decisions.
This discussion of the information and factors considered by the
Board includes the material positive and negative factors
considered by the Board, but is not intended to be exhaustive
and may not include all of the factors considered by the Board.
The Board did not undertake to make any specific determination
as to whether any particular factor, or any aspect of any
particular factor, was favorable or unfavorable to its ultimate
determination, and did not quantify or assign any relative or
specific weights to the various factors that it considered in
reaching its determination that the Offer, the Merger, the
Merger Agreement and the other transactions contemplated by the
Merger Agreement are fair and advisable to and in the best
interests of CKx and its Stockholders. Rather, the Board
conducted an overall analysis of the factors described above,
including thorough discussion with, and questioning of, Company
management and CKxs outside advisors, and considered the
factors overall to be favorable to, and to support, its
determination. In addition, individual members of the Board may
have given different weight to different factors. It should be
noted that this explanation of the reasoning of the Board and
certain information presented in this section, is
forward-looking in nature and, therefore, that information
should be read in light of the factors discussed in
Item 8(l), Additional Information
Forward-Looking Statements.
Directors
and Officers.
To CKxs knowledge, after making reasonable inquiry, CKx
has been advised that Michael G. Ferrel, Howard J. Tytel, Edwin
M. Banks, Jack Langer, Jacques D. Kerrest, Kathleen Dore,
Thomas P. Benson and Kraig G. Fox intend to tender all of
their Common Shares pursuant to the Offer. In light of the
Promenade Support Agreement, Ms. Presley has agreed not to
tender her Common Shares pursuant to the Offer. Mr. Bloom
has not made a decision as to whether or not he intends to
support the offer or tender any of his shares into the offer.
For a discussion regarding the Boards decision with
respect to the Merger Agreement and the transactions
contemplated by the Merger Agreement, including the Offer and
the Merger, see
Solicitation/Recommendation
and Reasons for the Recommendation in this
Item 4.
Support
Agreements.
Sillerman Support Agreement.
In connection
with the Merger Agreement, on May 10, 2011, Parent, Robert
F.X. Sillerman, Sillerman Capital Holdings, L.P. and Laura
Sillerman (collectively, the
Sillerman
Stockholders
and the Common Shares owned by the
Sillerman Stockholders, the
Sillerman Shares
)
entered into a Non-Tender and Support Agreement, dated as of
May 10, 2011, by and among Parent and the Sillerman
Stockholders (the
Sillerman Support
Agreement
) relating to the Sillerman Shares, as
supplemented by the letter agreement dated as of May 16,
2011, by and among Parent and the Sillerman Stockholders. The
following summary does not purport to be a complete description
of the Sillerman Support Agreement and is qualified in its
entirety by reference to the Sillerman Support Agreement and the
Sillerman Letter Agreement, a copy of which is filed as Exhibit
(a)(2)(A) and (a)(2)(B), respectively, to this
Schedule 14D-9
and is incorporated herein by reference.
26
As of the date of the Sillerman Support Agreement, the Sillerman
Stockholders collectively owned 19,183,311 Sillerman Shares,
which, represents approximately 20.7% of the total number of
issued and outstanding Common Shares as of the close of business
on May 9, 2011. Pursuant to the Sillerman Support
Agreement, the Sillerman Stockholders agreed, among other
things, (i) not to, directly or indirectly, tender any
Sillerman Shares into the Offer, (ii) to contribute the
Sillerman Shares to Parent (or its affiliate) prior to the
Merger in exchange for cash at the same price per share as the
Offer Price, subject to certain conditions, or a combination of
cash and common stock of Parent (or its affiliate) in respect of
not more than one-half of the Sillerman Shares (the
Parent Common Shares
) valued at the same
price per share as the Offer Price and (iii) to vote in
favor of adoption of the Merger Agreement and the transactions
contemplated by the Merger Agreement, and against any
transaction or matter that would compete with, impede, interfere
with, adversely affect, tend to discourage or inhibit the
adoption of the Merger Agreement or the timely consummation of
the transactions contemplated by the Merger Agreement. The
Sillerman Stockholders are also obligated to exercise their
Stock Options to purchase Common Shares which are exercisable at
a price below the Offer price on a cashless basis to the extent
requested by Parent in order allow Parent to acquire 90% of the
total Common Shares outstanding, subject to the terms of the
Sillerman Support Agreement.
In addition, at the election of the Sillerman Stockholders and
subject to certain conditions, the Sillerman Stockholders will
be permitted to contribute or sell to Parent, after consummation
of the Offer but prior to the consummation of the Merger, a
portion of the Sillerman Shares at a price per share equal to
the Offer Price, in an amount not to exceed an aggregate amount
of $50 million and elect, on or after the effective time of
the Merger, subject to certain restrictions, to require Parent
(or its affiliate) to repurchase all or a portion of the Parent
Common Shares acquired by the Sillerman Stockholders for the
same per share consideration as payable in the Offer and the
Merger.
Each Sillerman Stockholder also agreed that it would not, and
would not permit or authorize any of its representatives,
directly or indirectly, to solicit, initiate, propose, encourage
or knowingly facilitate any inquiry, participate in any
discussions or negotiations regarding, or furnish to any person
any information or data with respect to, or otherwise cooperate
in any way with respect to any other acquisition proposal, and
that each Sillerman Stockholder would immediately cease all
existing discussions or negotiations with any person conducted
theretofore with respect to any other acquisition proposal and
advise Parent promptly of any other acquisition proposal or
inquiry with respect to an acquisition proposal that such
Sillerman Stockholder receives.
Each Sillerman Stockholder further agreed that, except for
certain permitted transfers, it would not until the effective
time of the Merger, directly or indirectly, sell, transfer,
assign, pledge, encumber or similarly dispose of any of the
Sillerman Shares, or enter into an option or other contract for
any such disposition, or deposit the Sillerman Shares into a
voting trust (except as provided in the Sillerman Support
Agreement) or grant any proxy with respect to the Sillerman
Shares.
In addition, each Sillerman Stockholder agreed to deliver
certificates representing the Sillerman Shares to, and executed
stock powers in favor of, a voting trust pursuant to a voting
trust agreement to be entered into among the voting trust,
Sillerman and Parent, within a prescribed period after the date
of the Sillerman Support Agreement as may be waived or extended
by Parent, and, in the event that a Sillerman Stockholder fails
to do so, the Sillerman Stockholder could forfeit certain rights
under the Sillerman Support Agreement.
If the Sillerman Stockholders acquire Parent Common Shares
pursuant to the Sillerman Support Agreement, they will be
required to enter into a stockholders agreement with Parent (or
its affiliate) and certain other investors in Parent (or its
affiliate) on or prior to the effective time of the Merger which
will govern the parties rights and obligations with
respect to capital stock of Parent (or its affiliate) following
completion of the Merger. Among other rights, Parent has agreed
that so long as the Sillerman Stockholders and any permitted
transferees own at least 50% of the Parent Common Shares issued
to them as of the effective time of the Merger (and, on or after
the second anniversary of the effective time of the Merger, in
no event less than 7.5% of all issued and outstanding Parent
Common Shares on a fully-diluted basis), Mr. Sillerman will
be entitled to appoint one director to the board of directors of
Parent (or its affiliate that issues the Parent Common Shares).
Parent has also agreed to reimburse the Sillerman Stockholders
for
27
reasonable
out-of-pocket
expenses incurred in connection with the transactions
contemplated by the Sillerman Support Agreement on the terms set
forth in the Sillerman Support Agreement. Parent has also agreed
that the Sillerman Stockholders (assuming the Sillerman
Stockholders elect to receive Parent Common Shares as provided
by the Sillerman Support Agreement) will be entitled to share
with Apollo Management or its affiliates in any transaction or
monitoring fees received by Apollo Management or such affiliates
(excluding the Termination Fee (as defined below in the Merger
Agreement))
pro rata
based upon relative ownership of
Parent (or its affiliate that issues the Parent Common Shares)
as determined on a fully-diluted basis. In addition, the
stockholders agreement will provide the Sillerman Stockholders
with rights, under certain circumstances, to participate in
sales, purchases and registrations of Parent Common Shares.
The Sillerman Support Agreement will terminate upon the earliest
of (i) the effective time of the Merger (subject to
exceptions for certain provisions intended to survive the
effective time), (ii) the date on which the Merger
Agreement is terminated and (iii) at the election of
Mr. Sillerman, on or after the date that is five months
after the date of the Sillerman Support Agreement, subject to an
extension not to exceed 60 calendar days so long as Parent
retains financing commitments with terms and conditions no less
favorable than those existing as of the date of the commencement
of the Offer.
Promenade Support Agreement.
Parent also
entered into a support letter agreement, dated as of
May 10, 2011, with the Trust (the
Promenade
Support Agreement
). The following summary does not
purport to be a complete description of the Promenade Support
Agreement and is qualified in its entirety by reference to the
Promenade Support Agreement, a copy of which is attached as
Exhibit (a)(2)(b) to this
Schedule 14D-9
and is incorporated herein by reference.
The Trust is the holder of all of the outstanding Preferred
Shares. The Promenade Support Agreement provides, among other
things, that the Trust will (i) vote in opposition to and
not support any transactions that compete with those
contemplated by the Merger Agreement, (ii) not transfer or
convert its Preferred Shares prior to the consummation of the
Merger and (iii) in its capacity as a holder of the
Preferred Shares, consent to the Merger (to the extent such
consent is necessary). The Promenade Support Agreement will
terminate if the Merger Agreement is terminated.
The Promenade Support Agreement also provides that the Trust
will contribute all of its Preferred Shares to Parent (or its
affiliate) prior to the Merger for Parent Preferred Shares.
After the completion of the Merger, the Trust will be entitled
to designate at least one designee to serve on the board of
directors of Parent (or its affiliate that issues the Parent
Preferred Shares), with the same compensation, expense
reimbursement and other benefits as any independent director of
such entity. The Trust is also entitled, upon the effectiveness
of the Merger, to reimbursement for all reasonable documented
out-of-pocket
expenses (including attorneys fees) incurred by or on its
behalf in connection with the Offer, the Merger and the other
transactions contemplated by the Merger Agreement and the
Promenade Support Agreement in an amount not to exceed $250,000,
in the aggregate. In addition, to the extent Apollo Management
or its affiliates receive transaction or monitoring fees in
connection with or following the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, the Trust
will receive a portion of such fees based on its pro rata
ownership of Parent (or its affiliate that issues the Parent
Preferred Shares) as determined on an as-converted basis.
ITEM 5.
PERSONS/ASSETS
RETAINED,
EMPLOYED, COMPENSATED OR
USED
.
Opinion
of the Financial Advisor to the CKx Board of Directors
The Board retained Gleacher & Company to provide
financial advisory services in connection with the Boards
consideration of strategic alternatives available to CKx and to
act as CKxs financial advisor in connection with the
transaction. CKx selected Gleacher & Company to act as
CKxs financial advisor on the basis of
Gleacher & Companys qualifications, expertise
and reputation as a financial advisor in strategic transactions
and its familiarity with CKx and its business. On May 9,
2011, at a meeting of the Board held to evaluate the
transaction, Gleacher & Company delivered to the Board
an oral opinion, which was subsequently confirmed by delivery of
a written opinion dated May 9, 2011, to the effect that, as
of the date of the opinion and based on and subject to the
factors, assumptions and limitations described in its opinion,
the consideration
28
to be paid to holders of CKx common stock (other than Excluded
Persons) in the transaction was fair, from a financial point of
view, to such holders.
The full text of the written opinion, dated May 9, 2011,
of Gleacher & Company, which describes, among other
things, the assumptions made, procedures followed, factors
considered and limitations on the review undertaken, is attached
as Exhibit (a)(2)(D) to this
Schedule 14D-9
and is incorporated by reference herein in its entirety. We urge
you to read the opinion carefully in its entirety.
Gleacher & Company provided its opinion to the Board
for the information and assistance of the Board in connection
with its consideration of the transaction. Gleacher &
Companys opinion does not address any other aspect of the
transaction and does not constitute a recommendation as to
whether the Board should recommend or proceed with the
transaction, nor does it constitute a recommendation to any
Stockholder as to whether such Stockholder should tender its
shares in connection with the Offer or how such holder should
vote or act with respect to the transaction or any related
matter.
In connection with its opinion, Gleacher & Company,
among other things:
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reviewed certain publicly available financial statements and
other business and financial information of CKx, including
research analyst reports;
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reviewed certain internal financial statements and other
financial and operating data concerning CKx prepared by the
management of CKx;
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analyzed certain financial forecasts prepared by the management
of CKx, which forecasts CKx has represented were at the time
consistent with the best judgments of CKxs management as
to the future financial performance of CKx and were at the time
the best currently available forecasts with respect to such
future financial performance of CKx;
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discussed the past and then-current operations and financial
condition and the prospects of CKx with senior executives of CKx;
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reviewed the reported prices and trading activity for CKxs
common stock;
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compared the financial performance of CKx and the prices and
trading activity of CKxs common stock with that of certain
other publicly traded companies and their securities that
Gleacher & Company considered to be generally relevant;
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reviewed a draft dated May 9, 2011, of the Merger
Agreement; and
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performed such other analyses, studies and investigations, and
considered such other factors, as Gleacher & Company
deemed appropriate.
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For the purposes of its opinion, Gleacher & Company
assumed and relied upon without independent verification the
accuracy and completeness of the financial, legal, regulatory,
tax, accounting and other information provided to, reviewed by
or discussed with Gleacher & Company (including
information that is available from generally recognized public
sources). Gleacher & Company assumed, with CKxs
consent, that the financial projections and valuation estimates
provided to Gleacher & Company by CKx were reasonably
prepared and were consistent with the best currently available
estimates and judgments of senior management of CKx as to the
future financial performance of CKx and the other matters
covered thereby. Gleacher & Company assumed no
responsibility for and expressed no view as to such projections
or any other forward-looking information or the assumptions on
which they were based, and Gleacher & Company relied
upon the assurances of the senior management of CKx that they
were unaware of any facts that would make the information
provided to or reviewed by Gleacher & Company
incomplete or misleading.
In preparing its opinion, Gleacher & Company did not
perform any independent valuation or appraisal of the assets or
liabilities (contingent, derivative, off-balance sheet or
otherwise) of CKx or its subsidiaries. Gleacher &
Company was not furnished with any such valuations or
appraisals. In particular, Gleacher & Company did not
express any opinion as to the value of any asset or liability of
CKx or any of its subsidiaries, whether at then-current market
prices or in the future. Gleacher & Company did not
assume any obligation to conduct, nor did it conduct, any
physical inspection of the properties or facilities of CKx. In
arriving at its opinion, Gleacher & Company did not
take into account any litigation that was pending or that may be
brought against CKx or any of its affiliates or representatives.
In addition, Gleacher & Company did not
29
evaluate the solvency of any party to the Merger Agreement under
any state or federal laws or rules, regulations, guidelines or
principles relating to bankruptcy, insolvency or similar matters.
For the purposes of its opinion, Gleacher & Company
assumed that there had not occurred any material change in the
assets, liabilities, financial condition, results of operations,
business or prospects of CKx or any of its subsidiaries since
the respective dates on which the most recent financial
statements or other information, financial or otherwise,
relating to CKx or any of its subsidiaries, was made available
to Gleacher & Company. In arriving at its opinion,
Gleacher & Company assumed, with CKxs consent,
that the final executed Merger Agreement would not differ in any
material respect from the draft Merger Agreement reviewed by it,
that the representations and warranties of each party to the
Merger Agreement were true and correct, that each party to the
Merger Agreement would perform all of the covenants and
agreements required to be performed by it thereunder and that
all conditions to the transaction set forth in the Merger
Agreement would be timely satisfied and not modified or waived
and that the transaction would be consummated in accordance with
the terms set forth in the Merger Agreement without
modification, waiver or delay, except, in each case, as would
not be material to Gleacher & Companys analyses.
In addition, Gleacher & Company assumed, with
CKxs consent, that any governmental, regulatory or third
party consents, approvals or agreements necessary for the
consummation of the transaction will be obtained without any
imposition of a delay, limitation, restriction or condition that
would, in any respect material to Gleacher &
Companys analyses, have an adverse effect on CKx or the
contemplated benefits of the transaction. Gleacher &
Company is not a legal, accounting, regulatory or tax expert and
with CKxs consent, Gleacher & Company relied,
without independent verification, on the assessment of CKx and
its advisors with respect to such matters.
Gleacher & Companys opinion was necessarily
based on economic, market and other conditions as in effect on,
and the information made available to Gleacher &
Company as of, May 9, 2011. Although subsequent
developments may affect Gleacher & Companys
opinion and the assumptions used in preparing it,
Gleacher & Company does not have any obligation to
update, revise or reaffirm its opinion. In addition
Gleacher & Company did not express any view or opinion
as to the price at which any share of CKx common stock or any
other security may trade at any time, including subsequent to
the date of its opinion.
Gleacher & Companys opinion addressed only the
fairness, from a financial point of view, to the holders of
CKxs common stock (other than the Excluded Persons) of the
consideration to be paid to such holders in the transaction.
Gleacher & Companys opinion did not express any
view as to the fairness of the transaction to, or any
consideration of, the holders of any other class of securities
of CKx, including the holders of CKxs Series B
Convertible Preferred Stock and Series C Convertible
Preferred Stock, creditors or other constituencies of CKx or its
subsidiaries or any other term of the transaction or the other
matters contemplated by the Merger Agreement or any related
agreement. Gleacher & Company was not asked to, and
did not, offer any opinion as to any other term or aspect of the
Merger Agreement or any other agreement or instrument
contemplated by or entered into in connection with the
transaction or the form or structure of the Merger Agreement or
the likely timeframe in which the transaction would be
consummated. Furthermore, Gleacher & Companys
opinion expressed no opinion with respect to the amount or
nature of any compensation to any officers, directors or
employees of any party to the transaction, or any class of such
persons relative to the consideration to be received by the
holders of CKx common stock in the transaction or otherwise or
with respect to the fairness of any such compensation.
Gleacher & Company did not express any opinion as to
any tax or other consequences that may result from the
transactions contemplated by the Merger Agreement, and
Gleacher & Companys opinion does not address any
legal, tax, regulatory or accounting matters, as to which they
understood CKx had received such advice as it deemed necessary
from qualified professionals, and which advice
Gleacher & Company relied upon in rendering their
opinion. Gleacher & Company did not express any view
or opinion as to the financing of the transaction or the terms
or conditions upon which was obtained. Gleacher &
Companys opinion did not address the underlying business
decision of CKx to engage in the transaction, or the relative
merits of the transaction as compared to any strategic
alternatives that may have been available to CKx.
Gleacher & Companys opinion was approved by the
Fairness Committee of Gleacher & Company.
30
Summary
of Material Financial Analyses
The following is a summary of the material analyses performed by
Gleacher & Company in connection with the delivery of
its oral opinion of May 9, 2011 and the preparation of its
written opinion of the same date. Some of these summaries of
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and alone are not a complete description of
Gleacher & Companys financial analyses. Except
as otherwise noted, the following quantitative information, to
the extent that it is based on market data, is based on market
data as it existed on or before May 9, 2011 and is not
necessarily indicative of current market conditions.
Historical Trading Multiples
Analysis.
Gleacher & Company analyzed
the current value of CKxs common stock, based on
CKxs historical observed trading multiples.
Gleacher & Company analyzed the enterprise value
(calculated by taking the fully diluted equity value of CKx
based on its closing stock price on May 6, 2011, plus debt,
preferred stock and minority interests, less cash and cash
equivalents), or EV, as a multiple of next twelve months, or
NTM, earnings before interest, taxes, depreciation and
amortization, or EBITDA (obtained by Gleacher &
Company from Capital IQ market data), of CKx as of May 6,
2011, the last trading day prior to Gleacher &
Companys delivery of its opinion, as well as the average
EV / NTM EBITDA multiples for the one year ended
May 6, 2011 and since September 22, 2008 (the date CKx
issued a press release indicating that Mr. Robert F.X.
Sillerman, on behalf of 19X, had notified the Board that he no
longer believed 19X would be in a position to consummate its
pending acquisition of CKx) to May 6, 2011.
Gleacher & Company then compared the historical
trading multiples described above to the historical trading
multiples of a composite of diversified media companies
comprised of The Walt Disney Company, Time Warner Inc., News
Corporation, Viacom Inc., CBS Corporation and Lions Gate
Entertainment Corp. and a composite of content management
companies comprised of Scripps Networks Interactive, Inc., Live
Nation Entertainment, Inc., Warner Music Group Corp., DreamWorks
Animation SKG, Inc., The Madison Square Garden Company and World
Wrestling Entertainment, Inc.
The results of this analysis was as follows:
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Average
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Current
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One Year
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Since September 22, 2008
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CKx
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5.6
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x
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5.5
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x
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6.1
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x
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Diversified Media
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9.0
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x
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8.8
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x
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8.0
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x
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Content Management
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7.7
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x
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7.9
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x
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7.6
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x
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This analysis indicated the following implied per share equity
reference range and implied EV, as a multiple of last twelve
months, or LTM, EBITDA multiple reference range for CKx based on
Gleacher & Companys selection of a reference
range of NTM EBITDA of 5.5x to 6.5x.
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Implied EV/LTM EBITDA
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Implied per Share Equity Reference Range for CKx
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Reference Range for CKx
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$3.67 - $4.36
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5.3x - 6.2x
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Comparable Companies
Analysis.
Gleacher & Company reviewed
and compared certain financial information and multiples for CKx
to publicly available information of certain publicly traded
companies in the media industry, which, in the exercise of its
professional judgment and based on its knowledge of the
industry, Gleacher & Company determined to be relevant
to its analysis and reasonably comparable to CKx in one or more
respects. Gleacher & Company divided the companies
that it determined to be comparable to CKx into two categories,
the first being diversified media companies and the second being
media companies that specialize in content management. Although
none of the selected comparable companies is identical or
directly comparable to CKx or its business, Gleacher &
Company chose the following selected comparable companies for
its analysis because they had publicly-traded equity securities
and participate in a variety of areas within the media industry,
in the case of the diversified media companies, or in content
management activities similar to those of CKx, in the case of
the content management companies.
For each of the selected companies, Gleacher & Company
calculated and compared certain financial information and
various financial market multiples and ratios based on
information obtained from SEC filings,
31
Institutional Brokers Estimate System and Wall Street
Research. For the purposes of its analyses, Gleacher &
Company reviewed a number of financial metrics, including
enterprise value as of May 6, 2011 as a multiple of
estimated EBITDA for calendar years 2011 and 2012. For purposes
of this analysis, CKxs enterprise value calculated as
fully-diluted market capitalization plus net debt, preferred
equity, and the implied fair market value of minority interest
based on CKxs current EBITDA trading multiple. Fair market
value of minority interest calculated as 15% of the implied
value of Elvis Presley Enterprises, based on its 2011E EBITDA of
$18.8 million and the EV / EBITDA multiple of CKxs
overall business, plus 20% of Muhammad Ali Enterprises, based on
its 2011E EBITDA of $2.1 million and the
EV / EBITDA multiple of CKxs overall business.
The results of these analyses are summarized in the following
table:
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EV/EBITDA
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2011E
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2012E
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Diversified Media Companies
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The Walt Disney Company
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9.0
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x
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8.2
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x
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Time Warner Inc.
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7.7
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7.2
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News Corporation
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7.8
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7.0
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Viacom Inc.
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8.7
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8.1
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CBS Corporation
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8.0
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7.2
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Lions Gate Entertainment Corp.
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16.1
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15.0
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Mean
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9.6
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x
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8.8
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x
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Median
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8.4
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7.7
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Content Management Companies
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Scripps Networks Interactive, Inc.
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8.8
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x
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7.8
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x
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Live Nation Entertainment, Inc.
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7.5
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6.8
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Warner Music Group Corp.*
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7.6
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7.7
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DreamWorks Animation SKG, Inc.
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9.2
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8.9
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The Madison Square Garden Company
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8.1
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6.6
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World Wrestling Entertainment, Inc.
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6.7
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6.0
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Mean
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8.0
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x
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7.3
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x
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Median
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7.9
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7.2
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Blended Mean
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8.8
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x
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8.0
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x
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Blended Median
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8.1
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7.4
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CKx Price on 5/6/2011 ($4.30)
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5.7
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x
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5.3
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x
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CKx Offer Price ($5.50)
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7.3
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x
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6.7
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x
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*
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Warner Music Group Corp.s EV is calculated as of
January 20, 2011 (prior to news reports indicating that the
company was seeking a buyer).
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Although the selected companies were used for comparison
purposes, no business of any selected company was either
identical or directly comparable to CKxs business.
Accordingly, Gleacher & Companys comparison of
selected companies to CKx and analysis of the results of such
comparisons was not purely mathematical, but instead necessarily
involved complex considerations and judgments concerning
differences in financial and operating characteristics and other
factors that could affect the relative values of the selected
companies and CKx.
Gleacher & Company selected a reference range of
estimated 2011 EBITDA multiple of 6.6x to 7.6x using the
arithmetic mean of the multiples of Live Nation Entertainment,
Inc. and World Wrestling Entertainment, Inc. (the two public
peer companies that Gleacher & Company determined to
be most similar to CKx) and a reference range of estimated 2012
EBITDA multiple of 5.9x to 6.9x based on the arithmetic mean of
the multiples of Live Nation Entertainment, Inc. and World
Wrestling Entertainment, Inc. Gleacher & Company used
the 2011 EBITDA projection it received from management of CKx
and the arithmetic mean of the two 2012 EBITDA projections that
it received from management of CKx (as further described below).
Gleacher & Company then used these derived reference
ranges of multiples to calculate a range of implied
32
prices per share of CKxs common stock. This analysis
indicated the following implied per share equity reference
ranges and implied EV / LTM EBITDA multiple reference
ranges for CKx:
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Financial Statistic
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Financial Statistic
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Implied per Share
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Implied EV/LTM
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Management
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Management
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Equity
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EBITDA
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Projections
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Projections
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Reference Range
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Reference Range
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(A Case)
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(B Case)
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for CKx
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for CKx
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2011E EBITDA
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$
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68.0
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$
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68.0
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$
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4.43 - $5.12
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6.3x - 7.3x
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2012E EBITDA
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$
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90.2
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$
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80.2
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$
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5.03 - $5.89
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7.1x - 8.3x
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Gleacher noted that the Offer Price of $5.50 was within or above
the selected range of implied values per share derived by the
comparable public company analysis.
Discounted Cash Flow
Analysis.
Gleacher & Company performed
a discounted cash flow analysis on CKx to calculate the present
value as of June 30, 2011 of the estimated standalone
unlevered free cash flows between fiscal years 2011 and 2015.
Estimates of unlevered free cash flows used for this analysis
utilized the five year projections prepared by CKxs
management that are described below in more detail.
Gleacher & Company also calculated a range of terminal
values assuming terminal year perpetuity growth rates of
normalized estimated free cash flow in 2015 ranging from (0.5%)
to 0.5%. The unlevered free cash flows and the range of terminal
values were discounted to present values using a range of
discount rates from 13% to 15%, which were chosen by
Gleacher & Company based upon an analysis of the
weighted average cost of capital of CKx. The present values of
unlevered free cash flows generated over the period described
above were then added to the present values of terminal values
resulting in a range of implied enterprise values for CKx. For
each such range of implied enterprise values,
Gleacher & Company derived ranges of implied equity
values for CKx.
At the direction of CKx, estimates of unlevered free cash flows
used for this analysis were based on two sets of projections
prepared by CKxs management for the projection period
between fiscal years 2011 and 2015. The two sets of projections
were substantially the same, except that one set, which is
referred to as the A Case, reflected more optimistic
assumptions with respect to the future performance of the
business while the other set, which is referred to as the
B Case, reflected less optimistic assumptions with
respect to the future performance of the business resulting in
approximately $10 million less EBITDA in years 2012E to
2015E than was reflected in the A Case.
Based on the discount rate and other assumptions set forth
above, the discounted cash flow analysis indicated the following
implied per share equity value reference ranges and implied
EV / LTM EBITDA multiple reference ranges for CKx
based on the two sets of projections provided by CKx management:
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Implied per Share Equity
|
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Implied EV/LTM EBITDA
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Reference Range for CKx
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Reference Range for CKx
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|
A Case
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$
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4.21 - $5.00
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6.0x - 7.1x
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B Case
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$
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3.82 - $4.53
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5.5x - 6.4x
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Miscellaneous
In connection with the review of the transaction by the Board,
Gleacher & Company performed a variety of financial
analyses for purposes of rendering its opinion. The preparation
of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, Gleacher &
Company considered the results of all of its analyses as a whole
and did not attribute any particular weight to any analysis or
factor it considered. Gleacher & Company believes that
selecting any portion of its analyses, without considering all
analyses as a whole, would create an incomplete view of the
process underlying the analyses and opinions. In addition,
Gleacher & Company may have given various analyses and
factors more or less weight than other analyses and factors, and
may have deemed various assumptions more or less probable than
other assumptions. As a result, the ranges of valuations
resulting from any particular analysis described above should
not be taken to be Gleacher & Companys view of
the actual value of CKx or its business. In performing its
analyses, Gleacher & Company made numerous assumptions
with respect to industry performance, general business and
economic conditions and other matters. Many of these assumptions
are beyond the control of CKx, CKxs management or
Gleacher & Company. Any estimates
33
contained in Gleacher & Companys analyses are
not necessarily indicative of future results or actual values,
which may be significantly more or less favorable than those
suggested by such estimates.
Gleacher & Company conducted the analyses described
above solely as part of its analysis of the fairness, from a
financial point of view, to the holders of CKx common stock
(other than the Excluded Persons) of the consideration to be
paid to such holders in the transaction and in connection with
the delivery of its opinion to the Board. These analyses do not
purport to be appraisals or to reflect the prices at which
businesses actually could be bought or sold.
The consideration to be paid pursuant to the transaction was
determined through negotiations between the Board and Apollo
Management and was approved by the Board. Gleacher &
Company provided advice to the Board during these negotiations.
Gleacher & Company did not, however, recommend any
specific consideration to CKx or the Board or that any specific
consideration constituted the only appropriate consideration for
the transaction.
Gleacher & Companys opinion and its presentation
to the Board were one of many factors taken into consideration
by the Board in deciding to approve the Merger Agreement.
Consequently, the analyses as described above should not be
viewed as determinative of the opinion of the Board with respect
to the consideration or of whether the Board would have been
willing to agree to different consideration. The foregoing
summary does not purport to be a complete description of the
financial analyses performed by Gleacher & Company.
Gleacher & Company has previously received a fee of
$1,200,000 for its services as CKxs financial advisor in
connection with a related earlier sales process of CKx
(described above in Item 4(b), The Solicitation or
Recommendation Background of the Transaction)
that was not consummated and will receive an additional fee of
$4,000,000 for its services in connection with the transaction,
which will become payable only if the transaction is
consummated. CKx has agreed to reimburse Gleacher &
Company for its expenses, including fees and disbursements of
Gleacher & Companys counsel, incurred in
connection with Gleacher & Companys engagement
and to indemnify Gleacher & Company, any controlling
person of Gleacher & Company and each of their
respective directors, officers, employees, agents and affiliates
against certain liabilities, including liabilities under the
federal securities laws, arising out of Gleacher &
Companys engagement. CKx has also agreed to pay
Gleacher & Company an additional tiered incentive fee
whereby Gleacher & Company would be entitled to
additional fees based on the incremental value above $5.50 per
share received by holders of CKx common stock in connection with
the transaction.
Gleacher & Company and its affiliates in the past have
provided investment banking and financial advisory services to
Apollo or its affiliates, for which Gleacher & Company
or certain of its affiliates received compensation. In addition,
Gleacher & Company and certain of its affiliates, and
certain of the employees of Gleacher & Company or its
affiliates, may have invested in companies affiliated or
associated with CKx and Apollo, Parent or Merger Sub and
investment funds managed by entities affiliated or associated
with CKx and Apollo, Parent or Merger Sub. Gleacher &
Company and its affiliates may have in the past provided, and
may in the future provide, financial advice and services to CKx,
Apollo, Parent or Merger Sub and their respective affiliates or
any company that may be involved in the transaction for which
Gleacher & Company and its affiliates have, or would
expect to, receive compensation. In the ordinary course of
business Gleacher & Company and certain of its
affiliates may trade the securities of CKx, Parent or Merger
Sub, one of their affiliates or any of their respective
portfolio companies for Gleacher & Companys own
account and for accounts of customers, and may at any time hold
a long and short position in any such securities.
|
|
ITEM 6.
|
INTEREST IN SECURITIES OF THE SUBJECT
COMPANY
.
|
No transactions in Common Shares have been effected during the
past 60 days by CKx or, to the knowledge of CKx, any
current executive officer, director, affiliate or subsidiary of
CKx, other than Common Shares received as compensation in the
ordinary course of business in connection with CKxs
employee benefit plans and payroll contributions to CKxs
401(k) plan, except as follows:
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On April 1, 2011, CKx issued 2,518 Common Shares for $4.22
per Common Share to each of Mssrs. Jack Langer, Jacques Kerrest,
Bryan Bloom and Edwin Banks and Ms. Kathleen Dore under
CKxs 2005 Omnibus Long-Term Incentive Compensation Plan;
|
34
|
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|
|
On April 21, 2011 the Howard and Sandra Tytel Family
Foundation, a charity founded by Howard J. Tytel and his spouse,
gifted an aggregate of 10,000 shares. The average of the
high and low market price on April 21, 2011 of our Common
Shares was $4.42 per Common Share.
|
|
|
ITEM 7.
|
PURPOSES
OF THE TRANSACTION AND PLANS OR
PROPOSALS
.
|
Except as set forth in this
Schedule 14D-9,
CKx is not engaged in any negotiations in response to the Offer
that relate to (a) a tender offer or other acquisition of
CKxs securities by CKx, any subsidiary of CKx or any other
person, (b) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving CKx or any subsidiary
of CKx, (c) any purchase, sale or transfer of a material
amount of assets by CKx or any subsidiary of CKx or (d) any
material change in the present dividend rate or policy, or
indebtedness or capitalization of CKx. Except as set forth
above, there are no transactions, resolutions of the Board,
agreements in principle or signed contracts entered into in
response to the Offer that relate to one or more of the matters
referred to in this paragraph.
|
|
ITEM 8.
|
ADDITIONAL INFORMATION TO BE
FURNISHED
.
|
|
|
(a)
|
Anti-Takeover
Statutes and Provisions.
|
As a Delaware corporation, CKx is subject to Section 203 of
the Delaware General Corporation Law (the
DGCL
). Under Section 203, certain
business combinations between a Delaware corporation
whose stock is publicly traded or held of record by more than
2,000 stockholders and an interested stockholder are
prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless:
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|
|
the transaction in which the stockholder became an interested
stockholder or the business combination was approved by the
board of directors of the corporation before the other party to
the business combination became an interested stockholder;
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|
|
|
upon completion of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the
commencement of the transaction (excluding for purposes of
determining the voting stock outstanding (but not the
outstanding voting stock owned by the interested stockholder)
the voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not
have a confidential right to tender or vote stock held by the
plan); or
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the business combination was approved by the board of directors
of the corporation and authorized by
66
2
/
3
%
of the outstanding voting stock not owned by the interested
stockholder.
|
A corporation may elect in its original certificate of
incorporation or through a subsequent amendment to its
certificate of incorporation or bylaws not to be governed by
Section 203 of the DGCL. The term business
combination is defined generally to include mergers or
consolidations between a Delaware corporation and an
interested stockholder, transactions with an
interested stockholder involving the assets or stock
of the corporation or its majority owned subsidiaries and
transactions which increase an interested
stockholders percentage ownership of stock. The term
interested stockholder is defined generally as a
stockholder who, together with affiliates and associates, owns
(or, under certain circumstances, within three years prior did
own) 15% or more of a Delaware corporations outstanding
voting stock. CKx has opted out of Section 203 in its
certificate of incorporation, so these restrictions will not be
applicable to the Offer, the Merger, the Merger Agreement and
other transactions contemplated thereby.
CKx conducts business in a number of states which have enacted
such anti-takeover laws. Should any person seek to apply any
state anti-takeover law, CKx and Merger Sub will, and are
required by the Merger Agreement to, take all action necessary
to render such statute inapplicable to the Merger and the other
transactions contemplated by the Merger Agreement. Although the
law is not entirely settled, federal cases have found state
anti-takeover statutes unconstitutional as applied to
corporations incorporated outside the state.
Holders of Common Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is completed,
Stockholders who have not tendered their Common Shares in the
Offer and have not voted in favor of the Merger or consented
thereto in writing, who timely submit a demand for appraisal in
35
accordance with Section 262 of the DGCL and who otherwise
comply with the applicable statutory procedures under the DGCL
will be entitled to receive a judicial determination of the fair
value of the Common Shares (exclusive of any element of value
arising from the accomplishment or expectation of the Merger)
and to receive payment of such fair value in cash (all such
Common Shares, the
Dissenting Shares
). Any
such judicial determination of the fair value of the Dissenting
Shares could be based upon considerations other than or in
addition to the Offer Price and the market value of the Common
Shares. The value so determined could be higher or lower than,
or the same as, the Offer Price or the consideration paid in the
Merger. Moreover, Parent could argue in an appraisal proceeding
that, for purposes of such a proceeding, the fair value of the
Dissenting Shares is less than the Offer Price. In the event
that any holder of Common Shares who demands appraisal under
Section 262 of the DGCL fails to perfect, or effectively
withdraws or loses his rights to appraisal as provided in the
DGCL, the Common Shares of such Stockholder will be converted
into the right to receive the Offer Price. Failure to follow the
steps required by Section 262 of the DGCL for perfecting
appraisal rights may result in the loss of such rights.
The foregoing summary of appraisal rights under Delaware law
does not purport to be a complete statement of the procedures to
be followed by Stockholders desiring to exercise any appraisal
rights available thereunder and is qualified in its entirety by
reference to Section 262 of the DGCL, the text of which is
set forth in Annex C hereto. The perfection of appraisal
rights requires strict adherence to the applicable provisions of
the DGCL. If a Stockholder withdraws or loses his right to
appraisal, such Stockholder will only be entitled to receive the
Offer Price. Notwithstanding anything to the contrary contained
in the Merger Agreement, each of CKx and Merger Sub have
acknowledged and agreed in the Merger Agreement that, with
respect to Dissenting Shares, the Surviving Corporation shall
not assert that the
Top-Up
Option (as defined below), the Common Shares issued pursuant to
the
Top-Up
Option (the
Top-Up
Option Shares
) or any cash or promissory note
delivered by Parent or Merger Sub to CKx as payment for any
Top-Up
Option Shares should be considered in connection with the
determination of the fair value of the Dissenting Shares in
accordance with Section 262(h) of the DGCL.
Additional notices regarding appraisal rights will be sent to
non-tendering holders of Common Shares in connection with the
completion of the Merger.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE
DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF
ANY SUCH RIGHTS.
Two lawsuits have been initiated on behalf of a putative class
of public stockholders of CKx concerning the Offer and the
Merger. One or both of the lawsuits name as defendants CKx, its
directors, Parent, Merger Sub and Apollo Global Management, LLC
and Apollo Global Management VII, L.P. and, in one case,
Mr. Sillerman. Both of the actions are pending in the Court
of Chancery of the State of Delaware, styled
Nierenberg
v.
CKx, Inc., et al.
(No. 5545-CC)
and
Vanwhy
v.
CKx, Inc., et al.
The
complaints allege, among other things, that certain defendants
breached their fiduciary duties in connection with the Offer,
the Merger and the other transactions contemplated by the Merger
Agreement by failing to obtain fair consideration for
Stockholders and approving terms in the Merger Agreement that
are allegedly unfair to public stockholders. One or both of the
complaints further allege that CKx, Parent, Merger Sub, Apollo
Global Management, LLC and Apollo Global Management VII, L.P.
and, in one case, Mr. Sillerman aided and abetted those
alleged breaches of duty. The complaints seek, among other
things, certification of a class consisting of owners of CKx
common stock, an order preliminarily and permanently enjoining
the proposed transaction, a judgment directing the individual
defendants to take all appropriate and necessary steps to
maximize stockholder value, an accounting by the defendants to
plaintiff for all damages allegedly caused by them, rescission
of the transaction if it is consummated and setting it aside or
awarding compensatory
and/or
rescissory damages, and attorneys fees and expenses. As of
the date of this filing, for procedural reasons, the Vanwhy
complaint had not yet been accepted by the Court of Chancery of
the State of Delaware. CKx and the other defendants believe the
plaintiffs allegations lack merit, and will contest them
vigorously.
The foregoing description does not purport to be complete and is
qualified in its entirety by reference to Exhibits (a)(5)(C) and
(a)(5)(D) which are incorporated herein by reference.
36
On June 7, 2010 a lawsuit styled
Leone v. Edwin M.
Banks, et al
(No. 650538/2010) was initiated on
behalf of a putative class of public stockholders of CKx. The
lawsuit names as defendants the members of the CKx board of
directors as of June 7, 2010. The action is pending in the
Supreme Court of the State of New York. The complaint alleges,
among other things, that the defendants breached their fiduciary
duties in connection with their consideration of various
potential sale transactions involving CKx by failing to
undertake an appropriate sales process for CKx. The complaint
seeks, among other things, certification of a class consisting
of owners of CKx common stock, an order preliminarily and
permanently enjoining the defendants from disenfranchising CKx
stockholders, a declaration that defendants breached their
fiduciary duties to CKx stockholders, an accounting by the
defendants to plaintiff for all damages allegedly caused by
them, and an award of compensatory
and/or
rescissory damages, and attorneys fees and expenses. It is
expected that this lawsuit will be amended to allege breaches of
fiduciary duties by the current members of the CKx board of
directors as they relate to the announced transaction with
affiliates of Apollo Management. CKx believes the
plaintiffs allegations lack merit, and will contest them
vigorously. The foregoing description does not purport to be
complete and is qualified in its entirety by reference to
Exhibit (a)(5)(F) which is incorporated herein by reference.
|
|
(d)
|
U.S.
Antitrust Compliance.
|
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR
Act
), and the related rules and regulations that have
been issued by the Federal Trade Commission (the
FTC
), certain acquisition transactions may
not be consummated until certain information and documentary
material has been furnished for review by the FTC and the
Antitrust Division of the Department of Justice (the
Antitrust Division
) and certain waiting
period requirements have been satisfied. These requirements
apply to Offerors acquisition of the Common Shares in the
Offer.
Under the HSR Act, the purchase of Common Shares in the Offer
may not be completed until the expiration of a fifteen-calendar
day waiting period which begins when Parent files a Pre-Merger
Notification and Report Form under the HSR Act with the FTC and
the Antitrust Division, unless such waiting period is earlier
terminated by the FTC and the Antitrust Division. If the
fifteen-calendar day waiting period expires on a federal holiday
or weekend day, the waiting period is automatically extended
until 11:59 p.m., New York City time, on the following
business day. CKx must file a Pre-Merger Notification and Report
Form within ten calendar days after Parent files its Pre-Merger
Notification and Report Form. Parent expects to file a
Pre-Merger Notification and Report Form under the HSR Act with
the FTC and the Antitrust Division in connection with the
purchase of Common Shares in the Offer on or about May 18,
2011, and, if so filed, the required waiting period will expire
at 11:59 p.m., New York City time, on or about June 2,
2011, unless earlier terminated by the FTC and the Antitrust
Division, or Parent receives a request for additional
information or documentary material prior to that time. If
within the waiting period either the FTC or the Antitrust
Division requests additional information or documentary material
from Parent, the waiting period with respect to the Offer would
be extended for an additional period of ten calendar days
following the date of Parents substantial compliance with
that request. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the HSR
Act rules. After that time, the waiting period may be extended
only by court order. The FTC or the Antitrust Division may
terminate the additional ten calendar day waiting period before
its expiration. In practice, complying with a request for
additional information and documentary material can take a
significant period of time. It is possible that Parent and CKx
may each be required to make subsequent HSR Act filings for
shares not acquired pursuant to the Offer prior to the initial
Expiration Date. In that event, there would be additional
waiting periods, as applicable under the HSR Act.
At any time before or after Parents acquisition of Common
Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as either deems
necessary or desirable in the public interest, including seeking
to enjoin the purchase of Common Shares pursuant to the Offer,
or seeking the divestiture of Common Shares acquired by Parent
or the divestiture of substantial assets of CKx or its
subsidiaries or Parent or its subsidiaries. At any time before
or after Parents acquisition of Common Shares pursuant to
the Offer, and notwithstanding the early termination of the
applicable waiting period under the HSR Act, any state or
private party could enjoin the purchase of Common Shares
pursuant to the Offer or seek structural or conduct relief.
37
Subject to the terms of the Merger Agreement, CKx has granted to
Merger Sub an irrevocable option (the
Top-Up
Option
), exercisable only on the terms and conditions
set forth in the Merger Agreement, to purchase, from CKx an
aggregate number of newly-issued Common Shares equal to the
lowest number of Common Shares that, when added to the number of
Common Shares owned by Parent or Merger Sub, together with the
number of Sillerman Shares (if any) held in a voting trust in
accordance with, or otherwise subject to voting arrangements
consistent with, the Sillerman Support Agreement, at the time of
such exercise, shall constitute one share more than 90% of the
total Common Shares then outstanding on a fully diluted basis
(and assuming the issuance of the
Top-Up
Option Shares). The summary of the
Top-Up
Option in Section I. 17 (The Merger and Certain Other
Agreements) of the Offer to Purchase is incorporated herein by
reference.
Section 253 of the DGCL provides that, if a parent
corporation owns at least 90% of each class of the stock of a
subsidiary, that corporation can effect a short-form merger with
that subsidiary without any action on the part of the subsidiary
or any other stockholders of the subsidiary. If Parent, Offeror,
Merger Sub and any other direct or indirect subsidiary of Parent
acquire at least 90% of each of the outstanding Common Shares,
the outstanding Series B Preferred Shares and the
outstanding Series C Preferred Share, Parent, Merger Sub
and CKx shall take all actions necessary and appropriate to
cause the Merger to become effective as soon as practicable
following the time such ownership is obtained without a meeting
of the Stockholders in accordance with Section 253 of the
DGCL.
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(g)
|
Approval
of Stockholders.
|
If approval of Stockholders is required under applicable law in
order to complete the Merger (
i.e.
, in the event that
Parent, Offeror, Merger Sub and any other direct or indirect
subsidiary of Parent do not collectively own at least 90% of the
outstanding Common Shares and are unable to complete a
short-form merger pursuant to Section 253 of the DGCL), the
Merger Agreement must be approved by (i) the holders of at
least a majority vote of the Common Shares and the Preferred
Shares, voting as a single class, and (ii) the holder of
the Preferred Shares. CKx will, as promptly as practicable after
the consummation of the Offer, duly set a record date for an
action by written consent of the Stockholders to adopt the
Merger Agreement and consummate the actions approved in such
stockholder consent. If the Merger Agreement cannot be approved
by a written consent of Stockholders without a meeting, CKx will
as promptly as practicable following the consummation of the
Offer (or, if requested by Parent, following termination of the
Offer), and after the related Proxy Statement is cleared by the
SEC for mailing to Stockholders, establish a record date for,
duly call and give notice of a special meeting of its
Stockholders.
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(h)
|
Projected
Financial Information.
|
CKxs senior management does not, as a matter of course,
make public projections as to future performance or earnings
beyond the current fiscal year and is especially wary of making
projections for extended periods due to the significant
unpredictability of the underlying assumptions and estimates.
However, CKx provided certain financial forecasts prepared by
senior management to Apollo Management, Parent and Merger Sub as
described in this Item 8(h). CKx also provided financial
forecasts to the Board and Gleacher & Company in
connection with their consideration of the Offer and the Merger
as described in Item 5,
Persons/Assets
Retained, Employed, Compensated or Used Opinion of
the Financial Advisor to the CKx Board of Directors. We
have also included the material projections described above in
Item 5, Persons/Assets Retained, Employed,
Compensated or Used Opinion of the Financial Advisor
to the CKx Board of Directors. We have included the
material projections, which were dated as of May 9, 2011
and utilized by Apollo Management, Parent and Merger Sub in this
Item 8(h) to provide our Stockholders access to this
information. The inclusion of the financial information in this
Item 8(h) and Item 5,
Persons/Assets
Retained, Employed, Compensated or Used Opinion of
the Financial Advisor to the CKx Board of Directors should
not be regarded as an indication that Apollo Management, Parent,
Merger Sub, the Board, Gleacher & Company, or any
other recipient of this information considered, or now
considers, it to be a reliable prediction of future results.
38
The projections reflect numerous estimates and assumptions with
respect to industry performance, general business, economic,
regulatory, market and financial conditions, as well as matters
specific to CKxs business. Many of these matters are
beyond CKxs control and the continuing uncertainty
surrounding general economic conditions and in the entertainment
and content management industries creates significant
uncertainty around the projections. As a result, there can be no
assurance that the projected results will be realized or that
actual results will not be significantly higher or lower than
projected. Since the projections cover multiple years, such
information by its nature becomes less reliable with each
successive year. The financial projections described in this
Item 8(h) were prepared solely for internal use and for the
use of Apollo Management, Parent and their respective advisors,
and the financial projections described above in Item 5,
Persons/Assets Retained, Employed, Compensated or
Used Opinion of the Financial Advisor to the CKx
Board of Directors, in connection with the potential
transaction and not with a view toward public disclosure or
toward complying with generally accepted accounting principles,
the published guidelines of the SEC regarding projections or the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of
prospective financial information. The projections included
herein were prepared by CKxs management. Neither
CKxs independent registered public accounting firm, nor
any other independent accountants, have compiled, examined, or
performed any procedures with respect to the prospective
financial information contained herein, nor have they expressed
any opinion or any other form of assurance on such information
or its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial
information. Furthermore, the financial projections in this
Item 8(h) do not take into account any circumstances or
events occurring after May 9, 2011, the date they were
prepared.
CKx has made publicly available its actual results of operations
for the quarter ended March 31, 2011. You should review
CKxs Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2011 filed on May 10,
2011 to obtain this information. See Where You Can Find
More Information. Readers of this
solicitation/recommendation statement are strongly cautioned not
to place undue reliance on the projections set forth below. No
one has made or makes any representation to any Stockholder
regarding the information included in these projections.
The inclusion of projections herein should not be regarded as an
indication that such projections will be an accurate prediction
of future events, and they should not be relied on as such.
Except as required by applicable securities laws, CKx undertakes
no obligation to update, or otherwise revise the material
projections to reflect circumstances existing after the date
when made or to reflect the occurrence of future events, even in
the event that any or all of the assumptions are shown to be in
error.
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|
|
|
|
|
|
|
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|
|
(Estimated)
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
|
(In millions)
|
|
Revenue
|
|
$
|
239.9
|
|
|
$
|
271.1
|
|
|
$
|
274.7
|
|
|
$
|
283.4
|
|
|
$
|
293.1
|
|
Expenses
|
|
|
(174.5
|
)
|
|
|
(183.5
|
)
|
|
|
(185.0
|
)
|
|
|
(191.1
|
)
|
|
|
(197.5
|
)
|
EBITDA
|
|
|
68.0
|
|
|
|
88.3
|
|
|
|
90.5
|
|
|
|
93.1
|
|
|
|
96.4
|
|
|
|
(i)
|
Section 14(f)
Information Statement.
|
The Information Statement attached as Annex A hereto is
being furnished in connection with the possible designation by
Parent after the Acceptance Time, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board,
other than at a meeting of the Stockholders as described in the
Information Statement, and is incorporated herein by reference.
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|
(j)
|
Annual
Report on
Form 10-K,
Quarterly Report on
Form 10-Q
and Current Reports on
Form 8-K.
|
For additional information regarding the business and financial
results of CKx, please see the following documents that have
been filed by CKx with the SEC, each of which is incorporated
herein by reference:
|
|
|
|
|
CKxs Annual Report on
Form 10-K
for the year ended December 31, 2010, as amended by
CKxs Annual Report on
Form 10-K/A
filed with the SEC on May 2, 2011;
|
39
|
|
|
|
|
CKxs Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2011, filed with the
SEC on May 9, 2011; and
|
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|
CKxs Current Reports on
Form 8-K
filed with the SEC on April 4, 2011 and May 11, 2011.
|
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|
(k)
|
Forward-Looking
Statements.
|
Information both included and incorporated by reference in this
Schedule 14D-9
may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among others,
statements about CKxs beliefs, plans, objectives, goals,
expectations, estimates and intentions that are subject to
significant risks and uncertainties and are subject to change
based on various factors, many of which are beyond our control.
The words may, could,
should, would, believe,
anticipate, estimate,
expect, intend, plan,
target, goal, and similar expressions
are intended to identify forward-looking statements. All
forward-looking statements, by their nature, are subject to
risks and uncertainties. CKxs actual future results may
differ materially from those set forth in our forward-looking
statements. CKxs ability to achieve our objectives could
be adversely affected by the factors discussed in our Annual
Report on
Form 10-K
for the year ended December 31, 2010 filed with the SEC on
March 3, 2011, as amended by CKxs Annual Report on
Form 10-K/A
filed with the SEC on May 2, 2011, as well as, among
others: (1) macroeconomic conditions and general industry
conditions such as the competitive environment;
(2) regulatory and litigation matters and risks;
(3) legislative developments; (4) changes in tax and
other laws and the effect of changes in general economic
conditions; (5) the risk that a condition to closing of the
transaction may not be satisfied; and (6) other risks to
consummation of the transaction, including the risk that the
transaction will not be consummated within the expected time
period.
ITEM 9.
EXHIBITS
.
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
(a)(1)(A)
|
|
Offer to Purchase, dated May 17, 2011 (incorporated by
reference to Exhibit (a)(1)(A) of the Schedule TO
filed by Colonel Holdings, Inc., Colonel UK Holdings Limited,
Colonel Offeror Sub, LLC, Colonel Merger Sub, Inc., Apollo
Management VII, L.P., CKx, Inc., Robert F.X. Sillerman,
Sillerman Capital Holdings, L.P., Laura Sillerman, The Promenade
Trust and Priscilla Presley on May 17, 2011).
|
(a)(1)(B)
|
|
Letter of Transmittal (incorporated by reference to
Exhibit (a)(1)(B) of the Schedule TO filed by Colonel
Holdings, Inc., Colonel UK Holdings Limited, Colonel Offeror
Sub, LLC, Colonel Merger Sub, Inc., Apollo Management VII, L.P.,
CKx, Inc., Robert F.X. Sillerman, Sillerman Capital Holdings,
L.P., Laura Sillerman, The Promenade Trust and Priscilla Presley
on May 17, 2011).
|
(a)(1)(C)
|
|
Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934, as amended, and
Rule 14f-1
thereunder (incorporated by reference to Annex A attached
to this
Schedule 14D-9).*
|
(a)(2)(A)
|
|
Non-Tender and Support Agreement, dated as of May 10, 2011,
by and among Parent and the Sillerman Stockholders (incorporated
by reference to Exhibit (d)(3) of the Schedule TO
filed by Colonel Holdings, Inc., Colonel UK Holdings Limited,
Colonel Offeror Sub, LLC, Colonel Merger Sub, Inc., Apollo
Management VII, L.P., CKx, Inc., Robert F.X. Sillerman,
Sillerman Capital Holdings, L.P., Laura Sillerman, The Promenade
Trust and Priscilla Presley on May 17, 2011).
|
(a)(2)(B)
|
|
Letter Agreement, dated as of May 16, 2011, by and among
Colonel Holdings, Inc., Robert F.X. Sillerman, Sillerman Capital
Holdings, L.P., and Laura Sillerman (incorporated by reference
to Exhibit (d)(4) to the Schedule TO filed by Colonel Holdings,
Inc., Colonel UK Holdings Limited, Colonel Offeror Sub,
LLC, Colonel Merger Sub, Inc., Apollo Management VII, L.P., CKx,
Inc., Robert F.X. Sillerman, Sillerman Capital Holdings, L.P.,
Laura Sillerman, The Promenade Trust and Priscilla Presley on
May 17, 2011).
|
(a)(2)(C)
|
|
Letter Agreement, dated as of May 10, 2011, between The
Promenade Trust and Parent (incorporated by reference to
Exhibit (d)(4) of the Schedule TO filed by Colonel
Holdings, Inc., Colonel UK Holdings Limited, Colonel Offeror
Sub, LLC, Colonel Merger Sub, Inc., Apollo Management VII, L.P.,
CKx, Inc., Robert F.X. Sillerman, Sillerman Capital Holdings,
L.P., Laura Sillerman, The Promenade Trust and Priscilla Presley
on May 17, 2011).
|
(a)(2)(D)
|
|
Letter from the Chairman of the Board to the Stockholders of
CKx, Inc. dated May 17, 2011.
|
40
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
(a)(2)(E)
|
|
Opinion of Gleacher & Company Securities, Inc., dated
May 9, 2011 (incorporated by reference to Annex B
attached to this
Schedule 14D-9).*
|
(a)(2)(F)
|
|
Presentation of Gleacher & Company Securities, Inc.,
dated May 9, 2011.
|
(a)(5)(A)
|
|
Press Release, dated May 10, 2011 (incorporated by
reference to the press release under cover of
Schedule 14D-9
filed by CKx, Inc. on May 11, 2011).
|
(a)(5)(B)
|
|
Press Release, dated May 17, 2011 (incorporated by
reference to Exhibit 99.1 on the Form
8-K
filed by
CKx on May 17, 2011).
|
(a)(5)(C)
|
|
General Corporation Law of the State of Delaware
Section 262 (incorporated by reference to Annex C
attached to this
Schedule 14D-9).*
|
(a)(5)(D)
|
|
Complaint filed in the Court of Chancery of the State of
Delaware, captioned Vanwhy v. CKx, Inc., et al.
|
(a)(5)(E)
|
|
Complaint filed in the Court of Chancery of the State of
Delaware, captioned Nierenberg v. CKx, Inc., et al. (Civil
Action
No. 5545-CC).
|
(a)(5)(F)
|
|
Complaint filed in the Supreme Court of the State of New York
County of New York, captioned Leone v. Edwin M. Banks, et al.
(Index No. 650538/2010).
|
(e)(1)
|
|
Agreement and Plan of Merger, dated as of May 10, 2011,
among CKx, Inc., Colonel Holdings, Inc. and Colonel Merger Sub,
Inc. (incorporated by reference to Exhibit 2.1 of the
Form 8-K
filed by CKx, Inc. on May 11, 2011).
|
(e)(2)
|
|
Amendment No. 1, dated as of May 17, 2011, to the Agreement
and Plan of Merger, among CKx, Inc., Colonel Holdings, Inc. and
Colonel Merger Sub, Inc. (incorporated by reference to
Exhibit 2.1 of the
Form 8-K
filed by CKx, Inc. on May 11, 2011).
|
(e)(3)
|
|
Equity Commitment Letter by Apollo Investment Fund VII,
L.P., Apollo Overseas Partners VII, L.P., Apollo Overseas
Partners (Delaware) VII, L.P., Apollo Overseas Partners
(Delaware 892) VII, L.P. and Apollo Investment Fund (PB)
VII, L.P. to Colonel Holdings, Inc., dated as of May 10,
2011 (incorporated by reference to Exhibit (d)(6) of the
Schedule TO filed by Colonel Holdings, Inc., Colonel UK
Holdings Limited, Colonel Offeror Sub, LLC, Colonel Merger Sub,
Inc., Apollo Management VII, L.P., CKx, Inc., Robert F.X.
Sillerman, Sillerman Capital Holdings, L.P., Laura Sillerman,
The Promenade Trust and Priscilla Presley on May 17, 2011).
|
(e)(4)
|
|
Amended and Restated Debt Commitment Letter by and among Goldman
Sachs Bank USA, Colonel Holdings, Inc. and Colonel Merger Sub,
Inc., dated as of May 10, 2011 (incorporated by reference
to Exhibit (b) of the Schedule TO filed by Colonel
Holdings, Inc., Colonel UK Holdings Limited, Colonel Offeror
Sub, LLC, Colonel Merger Sub, Inc., Apollo Management VII, L.P.,
CKx, Inc., Robert F.X. Sillerman, Sillerman Capital Holdings,
L.P., Laura Sillerman, The Promenade Trust and Priscilla Presley
on May 17, 2011).
|
(e)(5)
|
|
Limited Guarantee by Apollo Investment Fund VII, L.P.,
Apollo Overseas Partners VII, L.P., Apollo Overseas Partners
(Delaware) VII, L.P., Apollo Overseas Partners (Delaware
892) VII, L.P., Apollo Investment Fund (PB) VII, L.P. in
favor of CKx, Inc., dated as of May 10, 2011 (incorporated
by reference to Exhibit 2.2 of the
Form 8-K
filed by CKx, Inc. on May 11, 2011).
|
(e)(6)
|
|
Amendment No. 2, dated as of May 10, 2011, to the
Rights Agreement, dated as of June 24, 2010, as amended,
between CKx, Inc. and Mellon Investor Services LLC, as rights
agent (incorporated by reference to Exhibit 2.2 of the
Form 8-K
filed by CKx, Inc. on May 11, 2011).
|
(e)(7)
|
|
Amendment, effective as of May 10, 2011 to the Amended and
Restated Bylaws of CKx (incorporated by reference to
Exhibit 2.2 of the
Form 8-K
filed by CKx, Inc. on May 11, 2011).
|
(e)(8)(A)
|
|
Amendment to Employment Agreement, effective as of May 17, 2011,
between CKx, Inc. and Michael G. Ferrel (incorporated by
reference to Exhibit 10.1 of the Form 8-K filed by CKx, Inc. on
May 17, 2011).
|
(e)(8)(B)
|
|
Amendment to Employment Agreement, effective as of May 17, 2011,
between CKx, Inc. and Thomas P. Benson (incorporated by
reference to Exhibit 10.2 of the Form 8-K filed by CKx on May
17, 2011).
|
41
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
(e)(8)(C)
|
|
Amendment to Employment Agreement, effective as of May 17, 2011,
between CKx, Inc. and Howard J. Tytel (incorporated by reference
to Exhibit 10.3 of the Form 8-K filed by CKx on May 17,
2011).
|
(g)
|
|
Not applicable.
|
|
|
|
*
|
|
Included with the statement mailed to the Stockholders.
|
|
|
|
Certain portions of this document have been omitted pursuant to
a confidential treatment request.
|
42
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
CKX, INC.
Name: Howard J. Tytel
|
|
|
|
Title:
|
Senior Executive Vice President,
Director of Legal and
Governmental Affairs
|
Dated: May 17, 2011
43
Annex A
Information Statement
CKX, INC.
650 Madison Avenue
New York, New York 10022
INFORMATION STATEMENT
PURSUANT TO SECTION 14(f)
OF
THE SECURITIES EXCHANGE ACT OF
1934
AND
RULE 14f-1
THEREUNDER
NO VOTE
OR OTHER ACTION OF SECURITY HOLDERS IS REQUIRED IN CONNECTION
WITH THIS INFORMATION STATEMENT
This Information Statement is being mailed on or about May 17,
2011, as part of the Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9
)
to holders of common stock, par value $0.01 per share (the
Common Shares
), of CKx, Inc., a Delaware
corporation (the
Company
or CKx
or
we
or
us
or
our
). You are receiving this Information
Statement in connection with the possible election of persons
designated by Colonel Holdings, Inc., a Delaware corporation
(
Parent
), to at least a majority of the seats
on the Board of Directors of the Company (the
Board
).
On May 10, 2011, the Company, Parent and Colonel Merger Sub
Inc., a Delaware corporation (
Merger Sub
) and
an indirect wholly owned subsidiary of Parent, entered into an
Agreement and Plan of Merger, as amended on May 17, 2011 (the
Merger Agreement
). Pursuant to the Merger
Agreement, Merger Sub is required to commence a tender offer
(the
Offer
) to purchase all outstanding
Common Shares for $5.50 per Share, net to the seller in cash
without interest thereon, less any applicable withholding taxes
(the
Offer Price
), upon the terms and subject
to the conditions set forth in the Offer to Purchase dated May
17, 2011 (as amended or supplemented from time to time, the
Offer to Purchase
) of Colonel Offeror Sub,
LLC, a Delaware corporation (Offeror) and the direct
parent of Merger Sub and in the related letter of transmittal
(as amended or supplemented from time to time, the
Letter of Transmittal
), copies of which have
been mailed to the stockholders of the Company and are filed as
Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer
Statement on Schedule TO (as amended or supplemented from
time to time, the Schedule TO) which was filed
with the U.S. Securities and Exchange Commission (the
SEC
) on May 17, 2011.
The Merger Agreement provides, among other things, that as soon
as possible after consummation of the Offer, Merger Sub will
merge with and into the Company (the
Merger
),
with the Company continuing as the surviving corporation and a
wholly owned subsidiary of Parent. At the effective time of the
Merger, each outstanding Common Share (other than Common Shares
owned, (i) directly or indirectly, by Parent, Offeror or
the Company or (ii) by any stockholder of CKx who is
entitled to and properly exercises appraisal rights under the
Delaware General Corporation Law) will be converted into the
Offer Price. A copy of the Merger Agreement is filed as
Exhibit 2.1 of the
Form 8-K
filed by the Company on May 11, 2011, and is incorporated
herein by reference.
The Offer, the Merger and the Merger Agreement are more fully
described in the Offer to Purchase and the
Schedule 14D-9,
to which this Information Statement forms Annex A,
which was filed by the Company
A-1
with the SEC on May 17, 2011, and which is being mailed to
stockholders of the Company along with this Information
Statement.
This Information Statement is being mailed to you in accordance
with Section 14(f) of the Securities Exchange Act of 1934,
as amended (the
Exchange Act
), and
Rule 14f-1
promulgated thereunder. The information set forth herein
supplements certain information set forth in the
Schedule 14D-9.
Please read this Information Statement carefully.
You are
not, however, required to take any action in connection with the
matters set forth in this Information Statement.
Pursuant to the Merger Agreement, Offeror commenced the Offer on
May 17, 2011. The Offer is currently scheduled to expire at
12:00 midnight, New York City time, on June 14, 2011, unless
extended.
The information contained in this Information Statement
concerning Parent, Offeror, Merger Sub and their director
designees has been furnished to the Company by Parent and the
Company assumes no responsibility for the accuracy of any such
information.
GENERAL
INFORMATION
All Common Shares, shares of Series B Convertible Preferred
Stock, par value $0.01 per share (
Series B
Preferred Shares
), and shares of Series C
Convertible Preferred Stock, par value $0.01 per share
(
Series C Preferred Share
) are entitled
to vote together as a single class at a meeting of the
stockholders of the Company. Each Share, Series B Preferred
Share and Series C Preferred Share has one vote. In
addition, certain actions, including any mergers, require
affirmative vote of The Promenade Trust, as the holder of the
outstanding Series B Preferred Shares and the Series C
Preferred Share. The following table sets forth per class, the
number of authorized shares and the number of shares as of the
close of business on May 13, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
Class of Security
|
|
Authorized Shares
|
|
Shares Outstanding
|
|
Common Stock
|
|
|
200,000,000
|
|
|
|
|
|
|
|
92,613,473
|
|
Preferred Stock
|
|
|
75,000,000
|
|
|
|
Series B
|
|
|
|
1,491,817
|
|
|
|
|
|
|
|
|
Series C
|
|
|
|
1
|
|
DIRECTORS
DESIGNATED BY PARENT OR MERGER SUB
Right to
Designate Directors
The Merger Agreement provides that promptly upon the acceptance
for payment of, and payment by Offeror for, any Common Shares
pursuant to the Offer, and subject to applicable law, Parent
will be entitled to designate such number of members of the
Board, as rounded up to the next whole number, as is equal the
product of (i) the total number of directors on the Board
(giving effect to the election of any additional directors
pursuant to the Merger Agreement) and (ii) the percentage
that the number of Common Shares purchased in the Offer plus the
number of Common Shares held by Robert F.X. Sillerman, Sillerman
Capital Holdings, L.P. and Laura Sillerman (collectively, the
Sillerman Stockholders
and the Common Shares
owned by the Sillerman Stockholders, the
Sillerman
Shares
) and held in a voting trust in accordance with,
or otherwise subject to voting arrangements consistent with, the
Non-Tender and Support Agreement, dated as of May 10, 2011, by
and among Parent and the Sillerman Stockholders bears to the
total number of Common Shares outstanding, provided, that Parent
will be entitled to designate at least a majority of the members
of the Board for as long as Parent, its affiliates and the
Sillerman Stockholders beneficially own a majority of the Common
Shares. The Company will also, subject to applicable law, cause
individuals designated by Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the
Board of (i) each committee of the Board, (ii) each
board of directors (or similar body) of each subsidiary of the
Company and (iii) each committee (or similar body) of each
such board.
Following the election or appointment of Parents designees
and until the Merger is consummated, the Company will be
required to maintain at least two current independent members of
the Board. The Merger Agreement also sets forth procedures for
appointing replacements to fill vacancies among these
independent
A-2
directors. The approval of a majority of these independent
directors (or in the case where there are two or fewer
independent directors, the concurrence of one independent
director) will be required to authorize any amendment or
termination of the Merger Agreement by the Company requiring
action by the Board, any extension by the Company of the time
for the performance of any of the obligations or other acts of
Parent or Merger Sub or waiver of any of the Companys
rights thereunder.
Parents
Designees
Parent has informed the Company that promptly following its
payment for Common Shares pursuant to the Offer, Parent will
exercise its rights under the Merger Agreement to obtain
representation on, and control of, the Board by requesting that
the Company provide it with the maximum representation on the
Board to which it is entitled under the Merger Agreement. Parent
has informed the Company that it will choose its designees to
the Board from among the persons identified below. The following
table sets forth, with respect to each individual who may be
designated by Merger Sub, the name, age of the individual as of
the date hereof, and such individuals present principal
occupation and employment history during the past five years.
Unless otherwise indicated, all designees of Parent to the Board
have held the office and principal occupation identified below
for not less than five years.
|
|
|
|
|
|
|
|
|
|
|
Present Principal Occupation or Employment and
|
Name
|
|
Age
|
|
Employment History
|
|
Robert Falk
|
|
|
72
|
|
|
Partner of Apollo Management, L.P., an affiliate of Apollo
Global Management, LLC, Director of Parallel Petroleum LLC and
Director of Quality Distribution, Inc.
|
|
|
|
|
|
|
Mr. Falk joined Apollo Management in 1992.
|
Darren Glatt
|
|
|
35
|
|
|
Principal of Apollo Management, L.P., an affiliate of Apollo Global Management, LLC, Director of Charter Communications, Inc., Director of Principal Maritime Management and Director of Veritable Maritime Holdings LLC.
Prior to joining Apollo Management in 2006, Mr. Glatt worked at Apax Partners.
|
Stan Parker
|
|
|
35
|
|
|
Partner of Apollo Management, L.P., an affiliate of Apollo Global Management, LLC, Director of Affinion Group, Inc., Director of AMC Entertainment, Inc., Director of CEVA, Director of Charter Communications, Inc. and Director of Momentive Performance Materials Holdings LLC.
Mr. Parker previously served as Director of Momentive Performance Materials Holdings, Inc. (September 2006 October 2010), Director of Quality Distribution, Inc. (May 2008 November 2009) and Director of United Agri Products, Inc. (April 2004 June 2007).
Mr. Parker joined Apollo Management in 2000.
|
A-3
|
|
|
|
|
|
|
|
|
|
|
Present Principal Occupation or Employment and
|
Name
|
|
Age
|
|
Employment History
|
|
Lee Solomon
|
|
|
39
|
|
|
Senior Advisor with Apollo Investment Consulting, LLC.
Mr. Solomon previously served as Chief Operating Officer of Weistein Company, LLC (February 2008 October 2009) and Principal of Grosvenor Park Media (January 2005 January 2008).
Mr. Solomon joined Apollo Investment Consulting in 2009.
|
Aaron Stone
|
|
|
38
|
|
|
Partner of Apollo Management, L.P., an affiliate of Apollo Global Management, LLC, Director of AMC Entertainment, Inc., Director of Connections Academy, LLC, Director of Hughes Communications, Member of Hughes Network Systems, Director of Hughes Telematics, Director of Parallel Petroleum LLC and Director of The Civilians.
Mr. Stone previously served as Director of Educate, Inc. (April 2004 June 2007), Director of Intelstat Holdings, Ltd. (January 2005 February 2008), Director of SkyTerra Communications (2005 November 2008) and Director of Mobile Satellite Ventures, L.P. (June 2005 November 2008).
Mr. Stone joined Apollo Management in 1997.
|
Based on the present principal employment and employment history
of the designee directors listed above, which includes broad
experience in alternative asset management, capital investing
and the commercial utilization of entertainment content, Parent
believes each of the designee directors is qualified to serve on
the Board.
Parent has advised the Company that, to the best of its
knowledge, none of Parents designees to the Board has,
during the past five years, (i) been convicted in a
criminal proceeding (excluding traffic violations or
misdemeanors), (ii) been a party to any judicial or
administrative proceeding that resulted in a judgment, decree or
final order enjoining the person from future violations of, or
prohibiting activities subject to, U.S. federal or state
securities laws, or a finding of any violation of
U.S. federal or state securities laws, (iii) filed a
petition under federal bankruptcy laws or any state insolvency
laws or has had a receiver appointed for the persons
property, or (iv) been subject to any judgment, decree or
final order enjoining the person from engaging in any type of
business practice.
Parent has advised the Company that, to the best of its
knowledge, none of its designees is currently a director of, or
holds any position with, the Company or any of its subsidiaries.
Parent has advised the Company that, to the best of its
knowledge, none of its designees or any of his or her immediate
family members (i) has a familial relationship with any
directors, other nominees or executive officers of the Company
or any of its subsidiaries, or (ii) has been involved in
any transactions with the Company or any of its subsidiaries, in
each case, that are required to be disclosed pursuant to the
rules and regulations of the SEC, except as may be disclosed
herein.
It is expected that Parents designees will assume office
as promptly as practicable following the purchase by Offeror of
Common Shares pursuant to the Offer, which cannot be earlier
than 12:00 midnight, New York City time, on June 14, 2011, and
that, upon assuming office, Parents designees will
constitute at least a majority of the Board. To the extent the
Board will consist of persons who are not nominees of Parent,
the Board is expected to continue to consist of those persons
who are currently directors of the Company who do not resign.
A-4
BOARD OF
DIRECTORS
The Board currently consists of eight directors: Michael G.
Ferrel (Chairman), Howard J. Tytel, Edwin M. Banks,
Bryan E. Bloom, Jack M. Langer, Jacques D. Kerrest, Kathleen
Dore and Priscilla Presley. Edward Bleier, Jerry L. Cohen and
Carl D. Harnick, each of who had served as a director of the
Company since February 2005, did not seek re-nomination or
re-election to the Board at the 2010 annual meeting of
stockholders.
Set forth below are the names of the current directors, their
ages as of May 17, 2011, and their existing positions.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Michael G. Ferrel
|
|
|
61
|
|
|
Chief Executive Officer, Chairman of the Board
|
Howard J. Tytel
|
|
|
64
|
|
|
Senior Executive Vice President, Director of Legal Governmental
Affairs, Director
|
Edwin M. Banks
|
|
|
48
|
|
|
Director
|
Bryan E. Bloom
|
|
|
52
|
|
|
Director
|
Jack Langer
|
|
|
61
|
|
|
Director
|
Jacques D. Kerrest
|
|
|
64
|
|
|
Director
|
Kathleen Dore
|
|
|
60
|
|
|
Director
|
Priscilla Presley
|
|
|
65
|
|
|
Director
|
Biographical information relating to each of the director
nominees is set forth below:
Michael G. Ferrel
was appointed Chief Executive Officer
and a member of the Board effective May 6, 2010.
Mr. Ferrel currently serves as the Chairman of the Board.
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 the
Board include, among other things, his history with CKx 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 the
Board include, among other things, his history with CKx and
management, his legal expertise and his industry and prior board
experience with six other public companies.
Edwin M. Banks
was appointed to the Board 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., an investment management firm
(
Huff Asset Management
), 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.
Mr. Banks participated in
A-5
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.
We believe Mr. Banks qualifications to sit on the
Board 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 the Board 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, 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 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 the
Board include, among other things, his prior board experience
and expertise in financial matters.
Jack Langer
was appointed to the Board 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 the
Board 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.
Jacques D. Kerrest
was appointed to the Board 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 the
Board 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.
Kathleen Dore
was appointed to the Board 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
A-6
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 the
Board 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.
Priscilla Presley
was appointed to the Board by the
holder of the Series C Preferred Shares on February 8,
2005. Ms. Presley served as a director of
Metro-Goldwyn-Mayer
Inc. from November 2000 to August 2006 when it was sold. In
1981, Ms. Presley founded Elvis Presley Enterprises and served
as chairperson until 1998. In 2006, Ms. Presley launched
The Priscilla Presley Collection.
Series C
Director
In addition to its right to vote in the general election of
members to the Board, The Promenade Trust, the holder of the
Series C Preferred Share, is entitled to elect one member
to the Board (the
Series C Director
).
Ms. Priscilla Presley currently serves on the Board as the
Series C Director. 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.
Director
and Director Nominee Independence
In determining the independence of our directors and director
nominee, the Board considered transactions, relationships and
arrangements between each director and director nominee, or any
member of his or her immediate family, and the Company and its
subsidiaries and affiliates. The Board has determined that
Messrs. Banks, Bloom, Langer and Kerrest and Ms. Dore
are independent within the meaning of the rules and regulations
of The NASDAQ Stock
Market
®
(
NASDAQ
).
Board of
Directors; Committees
The Board conducts its business through meetings of the Board,
actions taken by written consent in lieu of meetings and by the
actions of its committees. During 2010, the Board held six
meetings and acted by unanimous written consent nine times.
Every director attended at least 75% of the meetings of the
Board, either in person or telephonically and every member of
each Board committee attended at least 75% of the meetings of
their respective committees. In addition, our independent
directors met in executive session each quarter in 2010.
The Board currently has three standing committees: an audit
committee, a compensation committee and a nominating and
corporate governance committee. The following chart sets forth
the current membership of
A-7
each Board committee and the number of meetings held during
2010. The Board reviews and determines the membership of the
committees at least annually.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
Committee
|
|
Position
|
|
Meetings
|
|
Audit Committee
|
|
Jacques D. Kerrest (Chairman)
Bryan Bloom
Jack Langer
Edwin M. Banks
|
|
|
9
|
|
Nominating and Corporate Governance Committee
|
|
Jack Langer (Chairman)
Bryan E. Bloom
Kathleen Dore
|
|
|
3
|
|
Compensation Committee
|
|
Edwin M. Banks (Chairman)
Jacques D. Kerrest
Kathleen Dore
|
|
|
7
|
|
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.
Information about the committees, their respective roles and
responsibilities and their charters is set forth below.
Audit
Committee
The audit committee is currently comprised of
Messrs. Kerrest (chairman), Banks, Bloom and Langer. The
audit committee, among other things, assists the Board 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, the Board 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 the Board for election by
stockholders at our annual meetings of stockholders. The
nominating and corporate governance committee also advises and
makes recommendations to the Board on all matters concerning
directorship practices and recommendations concerning the
functions and duties of the committees of the Board. To assist
in formulating such recommendations, the nominating and
corporate governance committee utilizes feedback that it
receives from the Boards 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
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
A-8
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 (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 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.
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 the Board 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 shall
have full and free access to officers and employees of the
Company and require the Board 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. If the
Merger and the other transactions contemplated by the Merger
Agreement are successfully consummated, no annual meeting of
stockholders will be held in 2011.
A-9
Communications
by Stockholders with Directors
We encourage stockholder communications to the Board
and/or
individual directors. Stockholders who wish to communicate with
the Board or an individual director should send their
communications to: CKX, Inc., 650 Madison Avenue, New York, New
York 10022, Attention: Corporate Secretary. Communications
regarding financial or accounting policies should be sent to the
attention of the chairman of the audit committee. Our corporate
secretary will maintain a log of such communications and will
transmit as soon as practicable such communications to the
chairman of the audit committee or to the identified individual
director(s), although communications that are abusive, in bad
taste or that present safety or security concerns may be handled
differently, as determined by our corporate secretary.
EXECUTIVE
OFFICERS
The following table sets forth the name, age as of May 17, 2011,
and position of each of our current executive officers:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Michael G. Ferrel
|
|
|
62
|
|
|
Chief Executive Officer, Chairman of the Board
|
Howard J. Tytel
|
|
|
64
|
|
|
Senior Executive Vice President, Director of Legal Governmental
Affairs, Director
|
Thomas P. Benson
|
|
|
48
|
|
|
Executive Vice President, Chief Financial Officer, Treasurer
|
Kraig G. Fox
|
|
|
42
|
|
|
Executive Vice President, Chief Operating Officer
|
Michael G. Ferrel.
Please see biography above under
Board of Directors.
Howard J. Tytel.
Please see biography above under
Board of Directors.
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.
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.
We have entered into employment agreements with all of our
executive officers, as described elsewhere in the information
statement.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of 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.
A-10
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the
number of Common Shares beneficially owned on May 13, 2011
by:
|
|
|
|
|
each person who is known by us to beneficially own 5% or more of
our outstanding Common Shares,
|
|
|
|
each of our directors, director nominees and named executive
officers as set forth in Executive Compensation and
Related Information, and
|
|
|
|
all of our directors and executive officers, as a group.
|
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 May 13, 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
May 13, 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.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
of Common Stock
|
|
|
Percentage of
|
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
|
Class
|
|
|
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, Director Nominees and Named 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 current 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
|
A-11
|
|
|
|
|
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.
|
|
(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 our
public offering that went beyond the normal requirements of
serving as a director or on a committee of the Board, as well as
for Mr. Langers commitment to continue to serve as a
financial expert on the Board 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 Series B
Preferred Shares and our Series C Preferred Shares. As of
May 13, 2011, there were 1,491,817 shares of
Series B Preferred Shares outstanding and one Series C
Preferred Share outstanding and entitled to vote at the annual
meeting. Each Series B Preferred Share and Series C
Preferred Share is entitled to vote on an as converted basis,
with each share entitled to one vote.
A-12
EXECUTIVE
COMPENSATION AND RELATED MATTERS
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.
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
A-13
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 the Board, 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
marketplace 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 position, the specialized
knowledge that each incumbent possesses that is of particular
value to our 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
A-14
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.
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.
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Percentage of
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Percentage of
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Corporate
|
|
Performance
|
|
Target Bonus
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|
OIBDAN(1)
|
|
Target
|
|
Fund Earned
|
|
|
($ millions)
|
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(%)
|
|
(%)
|
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Threshold
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76.50
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|
|
|
90
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|
|
|
50
|
|
Target
|
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|
85.00
|
|
|
|
100
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|
|
|
100
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|
Maximum
|
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|
102.00
|
|
|
|
120
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|
|
|
200
|
|
|
|
|
(1)
|
|
Amounts are after accrual for bonuses due at the indicated level
of performance achievement.
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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
A-15
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):
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Total Formulaic
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Total Bonus
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|
Target
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Bonus Earned
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Paid
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Executive Officer
|
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Amount
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Under Plan
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for 2010
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Michael G. Ferrel
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|
|
|
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400,000
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Howard J. Tytel
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450,000
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(1)
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150,000
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Thomas P. Benson
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350,000
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150,000
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Robert F.X. Sillerman
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1,600,000
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(2)
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(2)
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(1)
|
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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.
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(2)
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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.
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
A-16
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.
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 the Board 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, 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
A-17
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.
The Board 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. If the Merger
and other transactions contemplated by the Merger Agreement are
successfully consummated, no annual meeting of stockholders will
be held in 2011.
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.
|
A-18
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. If the
Merger and other transactions contemplated by the Merger
Agreement are successfully consummated, no annual meeting of
stockholders will be held in 2011. 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 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
* 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.
A-19
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
or
NEOs
) 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 $10,000 annually.
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Change in
|
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|
|
|
|
|
|
|
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|
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Pension Value
|
|
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|
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and
|
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Nonqualified
|
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Stock
|
|
Option
|
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Deferred
|
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|
|
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|
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Final
|
|
Salary
|
|
Bonus(1)
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
All Other
|
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Earnings ($)
|
|
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
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
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
|
|
|
2009
|
|
|
$
|
786,944
|
|
|
$
|
102,781
|
|
|
|
|
|
|
$
|
199,000
|
(16)
|
|
|
|
|
|
$
|
57,546
|
(17)
|
|
$
|
1,146,271
|
|
President, Director of Legal and Governmental Affairs
|
|
|
2008
|
|
|
$
|
749,684
|
|
|
$
|
275,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,986
|
(18)
|
|
$
|
1,081,670
|
|
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 Executive 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
|
|
|
2009
|
|
|
$
|
828,198
|
|
|
$
|
1,173,750
|
|
|
|
|
|
|
$
|
497,500
|
(27)
|
|
|
|
|
|
$
|
21,597
|
(28)
|
|
$
|
2,521,045
|
|
of 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
|
|
|
$
|
1,488,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,920,267
|
(31)
|
|
$
|
4,800,211
|
|
Former Chief Executive Officer
|
|
|
2009
|
|
|
$
|
626,000
|
|
|
$
|
469,500
|
|
|
|
|
|
|
$
|
248,750
|
(32)
|
|
|
|
|
|
$
|
11,593
|
(33)
|
|
$
|
1,355,843
|
|
of 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.
|
|
(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
|
A-20
|
|
|
|
|
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 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.
|
A-21
|
|
|
(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.
|
|
(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) $7,169 of
health insurance premiums paid by19 Entertainment on behalf of
Mr. Dodds.
|
A-22
Grants of
Plan-Based Awards in Fiscal Year 2010
We granted a total of 1,412,000 options pursuant to our 2005
Plan during the fiscal year ended December 31, 2010. The
following table sets forth the number of stock options granted
to our NEOs in such fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Date
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
of
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
Under Non- Equity Incentive
|
|
|
Under Equity Incentive Plan
|
|
|
Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
of Stock
|
|
|
|
|
|
|
Plan Awards
|
|
|
Awards
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
and
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Option
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Dodds(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 the Company ended on
October 1, 2010.
|
A-23
Outstanding
Equity Awards at December 31, 2010
|
|
|
|
|
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|
|
|
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|
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|
|
|
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|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Equity
|
|
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|
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|
|
Incentive
|
|
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|
Equity
|
|
Plan
|
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|
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Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market or
|
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|
|
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|
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|
Awards:
|
|
Payout
|
|
|
|
|
|
|
Equity
|
|
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|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
Number
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
|
|
|
Plan
|
|
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|
|
|
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 $4.03.
|
|
(8)
|
|
1,700 of Mr. Foxs options vested on March 6,
2009, and 1,700 vested on March 6, 2010. Because this chart
reflects outstanding grants as of December 31, 2010, 1,700
of Mr. Foxs options that vested on March 6,
2011, are reflected as unvested in the chart above. Of the
remaining 3,400 options, 1,700 vest on March 6, 2012 and
1,700 vest on March 6, 2013.
|
A-24
|
|
|
(9)
|
|
10,000 of Mr. Foxs options vested on March 13,
2010. Because this chart reflects outstanding grants as of
December 31, 2010, 10,000 of Mr. Foxs options
that vested on March 13, 2011, are reflected as unvested in
the chart above. Of the remaining 30,000 options, 10,000 vest on
March 13, 2012, 10,000 vest on March 13, 2013 and
10,000 vest on March 13, 2014.
|
|
(10)
|
|
Because this chart reflects outstanding grants as of
December 31, 2010, 20,000 of Mr. Foxs options
that vested on March 19, 2011, are reflected as unvested in
the chart above. Of the remaining 80,000 options, 20,000 vest on
March 19, 2012, 20,000 vest on March 19, 2013, 20,000
vest on March 19, 2014 and 20,000 vest on March 19,
2015.
|
|
(11)
|
|
Mr. Fullers employment with 19 Entertainment Limited
ended on January 13, 2010.
|
|
(12)
|
|
In connection with the termination of Mr. Fullers
employment with 19 Entertainment Limited on January 13,
2010, the vesting of all of Mr. Fullers stock options
was accelerated as of such date and the respective expiration
dates remained the tenth anniversary of the applicable date of
grant.
|
|
(13)
|
|
Mr. Dodds employment with 19 Entertainment Limited
ended on October 1, 2010, and all outstanding options were
cancelled pursuant to their terms.
|
2010
Fiscal Year Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
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 the Company ended on
May 7, 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 the Company ended on
January 13, 2010.
|
|
(4)
|
|
Mr. Dodds employment with the Company 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 NEOs are covered by a defined contribution or other
plan that provides for the deferral of compensation on a basis
that is not-tax-qualified.
A-25
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 the Board 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.
Effective May 17, 2011, the employment agreement for
Mr. Ferrel was amended to provide that (i) a
resignation by him for any reason during the
30-day
period following six months after the effective time of the
Merger or a termination of his employment without cause during
the six-month period after the effective time of the Merger will
be treated as a constructive termination without
cause, and (ii) if he resigns during such
30-day
period or is terminated without cause during such six-month
period, he will be entitled to receive, in addition to base
salary through the date of his termination of employment and the
$250,000 payment described above, the greater of (A) the
severance amounts provided under his agreement in the event of a
constructive termination without cause not in
connection with a change of control, calculated as of
(x) the effective time of the Merger or (y) the date
of his resignation or termination, and (B) the severance
amount equal to 2.99 times the average annual compensation
received by him during the five calendar years immediately
preceding the date of his termination of employment, as
described above (provided that in each case the severance amount
will be reduced to the greatest amount that will result in no
portion being treated as an excess parachute payment
within the meaning of Section 280G of the Internal Revenue
Code if the after-tax proceeds to Mr. Ferrel would be
greater as a result of such reduction).
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.
A-26
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, 2011, 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. 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.
Effective May 17, 2011, the employment agreement for
Mr. Benson was amended to provide that (i) a
resignation by him for any reason during the
30-day
period following six months after the effective time of the
Merger or a termination of his employment without cause during
the six-month period after the effective time of the Merger will
be treated as a constructive termination without
cause, and (ii) if he resigns during such
30-day
period or is terminated without cause during such six-month
period, he will be entitled to receive the greater of the
severance amounts described above calculated as of (x) the
effective time of the Merger or (y) the date of his
resignation or termination (provided that in each case the
severance amount will be reduced to the greatest amount that
will result in no portion being treated as an excess
parachute payment within the meaning of Section 280G
of the Internal Revenue Code if the after-tax proceeds to the
executive would be greater as a result of such reduction).
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
A-27
Company since February 1, 2011, 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.
Effective May 17, 2011, the employment agreement for
Mr. Tytel was amended to provide that (i) a
resignation by him for any reason during the
30-day
period following six months after the effective time of the
Merger or a termination of his employment without cause during
the six-month period after the effective time of the Merger will
be treated as a constructive termination without
cause, and (ii) if he resigns during such
30-day
period or is terminated without cause during such six-month
period, he will be entitled to receive the greater of the
severance amounts described above calculated as of (x) the
effective time of the Merger or (y) the date of his
resignation or termination (provided that in each case the
severance amount will be reduced to the greatest amount that
will result in no portion being treated as an excess
parachute payment within the meaning of Section 280G
of the Internal Revenue Code if the after-tax proceeds to the
executive would be greater as a result of such reduction).
Kraig
G. Fox
The Board 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 the Board 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 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.
A-28
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 stockholders.
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.
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
an 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
A-29
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 (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.
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
A-30
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/
|
|
Restricted
|
|
Stock
|
|
|
Name
|
|
Salary
|
|
Bonus
|
|
Insurance Benefits
|
|
Stock(1)
|
|
Option(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.
|
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/
|
|
Restricted
|
|
Stock
|
|
|
Name
|
|
Salary
|
|
Bonus
|
|
Insurance Benefits
|
|
Stock(1)
|
|
Option(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
A-31
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
|
|
Amount of
|
|
Total
|
Name
|
|
(Before Tax Gross-Up Payment)
|
|
Gross-Up Payment
|
|
(After Tax Gross-Up 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 unvested stock 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 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.
A-32
Compensation
of Non-Employee Directors
Directors who are employees of CKX 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, or at their election (as described below)
all in shares, plus $1,000 for attendance at each meeting of the
Board and $750 for attending each meeting of a committee of
which the director 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. CKX pays non-employee directors on a
quarterly basis and prices all grants of Common Shares 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 CKX in
2009. Each special committee member was compensated for serving
as a member of the special committee. The Board 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 $25,000.
The total compensation received by our non-employee directors
during fiscal year 2010 is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
Paid in Cash
|
|
Stock Awards
|
|
Total
|
Name
|
|
($)
|
|
($)(2)
|
|
($)(1)
|
|
Edwin M. Banks
|
|
$
|
139,250
|
|
|
$
|
42,250
|
|
|
$
|
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
Shares is entitled to elect the Series C Director.
Ms. Priscilla Presley currently serves on the Board as the
Series C Director and the holder of the Series C
Preferred Shares 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
the Board.
A-33
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, the Board 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
The Board 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.
RELATED
PARTY TRANSACTIONS
Certain
Relationships and Related Transactions
Transactions
with Simon Fuller and Restructuring of 19
Entertainment
On January 13, 2010, Simon Fuller left his position as a
director of our company and Chief Executive Officer of our 19
Entertainment business and the Company entered into a series of
agreements with Mr. Fuller (i) securing
Mr. Fullers long-term creative services as a
consultant, (ii) providing the Company with an option to
invest in XIX Entertainment, a new entertainment company that
Mr. Fuller has launched, and (iii) agreeing to the
termination of Mr. Fullers employment with 19
Entertainment. Upon entering into these agreements,
Mr. Fuller resigned as a director of the Company and as an
officer and director of 19 Entertainment. Pursuant to the
consultancy agreement, the Company has engaged Mr. Fuller
to provide services, including executive producer services, in
respect of the Companys
IDOLS
and
So You Think
You Can Dance
programs. In consideration for providing these
services, Mr. Fuller will receive 10% of the Companys
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. For
calendar year 2010, Mr. Fuller has received
$5.0 million as an advance against the consulting fee,
which was paid in the year ended December 31, 2010. For
each year after 2010, subject to certain conditions,
Mr. Fuller will receive, as an annual advance against the
consulting fee, $3.0 million if
American Idol
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 the Company, but we may recoup the amount of
such advances within each year from the consulting fee payable
to Mr. Fuller. For the year ended December 31, 2010,
the Company has recorded $9.1 million of the consulting fee
to cost of sales.
In addition to the aforementioned payment, Mr. Fuller
received an incremental $2.3 million in consideration for
providing creative and strategic advice with respect to the
overall business of the Company for the six-month period through
July 13, 2010. The Company also paid Mr. Fuller
$0.8 million in January 2010, representing consideration
for the Companys option to invest in
Mr. Fullers new entertainment
A-34
company. The Company elected not to exercise the option, which
expired on March 15, 2010. Mr. Fuller also received
$2.0 million in separation payments. The Company recorded
$0.6 million of share-based compensation expense in the
year ended December 31, 2010 due to the acceleration of the
vesting of stock options held by Mr. Fuller upon the
termination of his employment agreement. The Company recorded
$5.6 million to the provision for severance and other
restructuring-related costs in the year ended December 31,
2010 related to these agreements with Mr. Fuller.
In pursuit of the Companys business plan, on
August 11, 2010, certain of the businesses and assets of 19
Entertainment that the Company chose to exit were sold to XIX
Management, a company owned and controlled by Simon Fuller.
These businesses and assets, which included the Companys
interest in Beckham Brands Limited, an interest in a
fashion-based partnership and certain U.K. recorded music and
management assets, were sold for the approximate book value of
the transferred business. For the year ended December 31,
2010, these businesses generated $6.7 million of revenue,
had an operating loss of $1.4 million and had equity in
earnings of unconsolidated subsidiaries of $0.6 million.
For the 2009 fiscal year, the businesses had revenue of
$10.0 million, operating income of $0.5 million and
equity in earnings of affiliates of $0.6 million. The
impact of these divested businesses was not deemed significant
to warrant disclosure as discontinued operations. As part of
this transaction, 60 of the Companys employees whose
functions were dedicated to the transferred businesses became
direct employees of XIX Management
and/or
affiliates thereof and XIX Management
and/or
its
affiliates assumed certain lease obligations from the Company.
Because XIX Management is owned and controlled by Simon Fuller,
the above described transaction was deemed a related party
transaction. The terms of the agreement with XIX Management were
reached following extensive arms-length negotiation between the
parties. The Board of Directors, acting upon the unanimous
approval and recommendation of our independent directors,
approved the transaction.
In addition to the transaction described above, during the year
ended December 31, 2010, the Company terminated or exited
certain other business activities at 19 Entertainment. As a
result of this and the transaction with XIX Management, the
Company has substantially reduced 19 Entertainments
spending on programming and new development projects and the
associated selling, general and administrative expenses. As of
December 31, 2010, the Company has reduced 19
Entertainments headcount (including MBST and Storm) from
245 to 90 employees. The Company expects that the reduction
in headcount and certain other costs will result in annualized
cost savings of approximately $20 million at 19
Entertainment, of which approximately $10 million was
realized in 2010.
In connection with the actions described above, for the year
ended December 31, 2010, the Company incurred severance and
other restructuring-related costs, including charges related to
the closure of several offices, of $19.3 million. Certain
management, legal and accounting functions at 19 Entertainment
were absorbed by the Companys corporate staff.
In addition to the costs described above, 19 Entertainment
recognized a non-cash impairment charge of $2.5 million in
2009 to reduce the carrying amount of the assets of Storm Model
Management (Storm), a U.K.-based modeling agency, as
a result of Mr. Fullers resignation from 19
Entertainment and the resulting reduction in his role in the
management, oversight and direction of that business. The
Company acquired a 51% interest in Storm in the third quarter of
2009, with the expectation that Simon Fuller would be a key
contributor to its growth and operations.
Executive
Separation Costs
Robert F.X. Sillerman resigned as Chairman and Chief Executive
Officer of the Company and from the Companys Board of
Directors, effective as of May 7, 2010. In connection with
his resignation, Mr. Sillerman and the Company entered into
a separation and consulting agreement, pursuant to which the
Company agreed to treat Mr. Sillermans resignation as
a constructive termination without cause for
purposes of Mr. Sillermans pre-existing employment
agreement with the Company. As a result, Mr. Sillerman
received a cash severance payment of $3.4 million, which
amount became payable six months following the date of
Mr. Sillermans separation from the Company. The
Company has 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
A-35
health insurance costs. All Company stock options held by
Mr. Sillerman under the Companys 2005 Omnibus
Long-Term Incentive Compensation 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. The Company recorded
$1.3 million of share-based compensation expense in the
year ended December 31, 2010 related to this accelerated
vesting.
Mr. Sillerman and the Company also entered into a
non-exclusive consulting arrangement whereby Mr. Sillerman
is receiving a consulting fee of $1.0 million in
consideration for his continued availability to promote the best
interests of the Company and its subsidiaries on a monthly basis
for a one-year period ending on May 30, 2011. In addition
to the consulting fee, Mr. Sillerman is being reimbursed
for the monthly cost of certain business expenses through
December 31, 2011, at a monthly amount of $25,000.
In consideration for the severance payment and the consulting
fee, Mr. Sillerman released the Company from all claims
arising out of his employment, shareholder
and/or
other
relationship with the Company 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 the Company
and Mr. Sillerman agreed to enter into a mutual
non-disparagement provision.
The Company recorded severance costs of $0.3 million
related to the termination of two employees who reported to
Mr. Sillerman, professional fees of $0.1 million
related to the separation with Mr. Sillerman and
$0.9 million related to a consulting agreement with a
former executive as the Company has determined that it will not
require any services in the future under the agreement.
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.
A-36
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 Shares 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 Shares. 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 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.
A-37
STOCKHOLDER
PROPOSALS
We have an advance notice provision under our bylaws for
stockholder business to be presented at our annual meetings of
stockholders. Pursuant to our bylaws, in order for stockholder
business to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice
thereof in writing to our Corporate Secretary. To be timely, a
stockholders notice must be delivered to or mailed and
received at our principal executive offices not less than the
close of business 90 days, nor more than 120 days,
prior to the date of the anniversary of the previous years
annual meeting; provided, however, that in the event the annual
meeting is scheduled to be held on a date more than 30 days
prior to or delayed by more than 60 days after such anniversary
date, notice by a stockholder must be received not earlier than
the close of business 120 days prior to such annual
meeting, and not later than the later of (a) the close of
business 90 days prior to such annual meeting or
(b) the 10th day following the day on which notice of
the date of such annual meeting was mailed or public disclosure
of the date of such annual meeting was made by us.
If you wish to submit a stockholder proposal pursuant to
Rule 14a-8
under the Exchange Act for inclusion in our proxy statement for
our 2011 annual meeting of stockholders, you must submit the
proposal to our Corporate Secretary no later than
August 16, 2011, in accordance with
Rule 14a-8.
If next years annual meeting is held on a date more than
30 calendar days from December 14, 2011, a stockholder
proposal must be received by a reasonable time before we begin
to make our proxy solicitation materials accessible for such
annual meeting. Any stockholder proposals will be subject to the
requirements of the proxy rules adopted by the SEC.
Due to various circumstances and timing concerns, we held our
annual meeting for 2008 and 2009, and will hold our annual
meeting for 2010, in December of such year. In 2011, we intend
to return to our original schedule of holding our annual
meetings of stockholders during the second quarter of each year.
If the Merger and other transactions contemplated by the Merger
Agreement are successfully consummated, no annual meeting of
stockholders will be held in 2011.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange
Act and files reports and other information with the SEC. Such
reports and other information filed by us may be inspected and
copied at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549, as
well as in the SECs public reference rooms in New York,
New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the SECs
public reference rooms. The SEC also maintains an internet site
that contains reports, proxy statements and other information
about issuers, like us, who file electronically with the SEC.
The address of the SECs web site is
http://www.sec.gov
.
A-38
Annex B
1290 Avenue of the
Americas
New York, NY 10104
212
273-7100
212
752-2711
Fax
May 9, 2011
The Board of Directors
CKx, Inc.
650 Madison Avenue
New York, New York 10022
Members of the Board of Directors:
We understand that CKx, Inc., a Delaware corporation (the
Company
), proposes to enter into a
transaction whereby, pursuant to the terms of an Agreement and
Plan of Merger, dated as of May 10, 2011 (the
Merger Agreement
), among Colonel Holdings,
Inc., a Delaware corporation (
Parent
),
Colonel Merger Sub, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent (
Merger Sub
), and
the Company, (i) Merger Sub will make a tender offer (the
Tender Offer
) to purchase all of the
outstanding shares of common stock, par value $0.01 per share,
of the Company (the
Company Common Stock
), at
a purchase price of $5.50 per share in cash (the
Consideration
) and (ii) following the
completion of the Tender Offer, Merger Sub will be merged with
and into the Company, with the Company surviving as a wholly
owned subsidiary of Parent (the
Merger
and,
together with the Tender Offer, the
Transaction
), and each share of Company
Common Stock issued and outstanding immediately prior to the
Effective Time, other than (i) Support Agreement Shares (if
any) held in a voting trust or by Parent or its designee
pursuant to a Support Agreement that has not been terminated
prior to the Effective Time, (ii) Dissenting Shares and
(iii) Company Common Stock held in the treasury of the
Company and Company Common Stock owned, directly or indirectly,
by Parent or Merger Sub (other than Support Agreement Shares (if
any) held in a voting trust in accordance with a Support
Agreement) will be cancelled and converted into the right to
receive the Consideration, without interest thereon. Capitalized
terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Merger Agreement. We understand
that Parent is an affiliate of Apollo Global Management, LLC
(
Apollo
).
You have asked for our opinion, as of the date hereof, as to the
fairness from a financial point of view to the holders of the
Company Common Stock (other than Mr. Robert F.X. Sillerman
and the Affiliates and the Associates of Mr. Robert F.X.
Sillerman (the terms Affiliate and
Associate as used herein shall have the meanings
ascribed to them under Rule 405 of the Securities Act of
1933, as amended), such persons being collectively referred to
herein as the
Excluded Persons
) of the
Consideration to be paid to such holders in the Transaction.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial
statements and other business and financial information of the
Company, including research analyst reports;
(ii) reviewed certain internal financial statements and
other financial and operating data concerning the Company
prepared by the management of the Company;
(iii) analyzed certain financial forecasts prepared by the
management of the Company, which forecasts the Company has
represented to us are consistent with the best judgments of the
Companys management as to the future financial performance
of the Company and are the best currently available forecasts
with respect to such future financial performance of the Company;
B-1
The Board of Directors
CKx, Inc.
May 9, 2011
(iv) discussed the past and current operations and
financial condition and the prospects of the Company with senior
executives of the Company;
(v) reviewed the reported prices and trading activity for
the Company Common Stock;
(vi) compared the financial performance of the Company and
the prices and trading activity of the Company Common Stock with
that of certain other publicly traded companies and their
securities that we considered to be generally relevant;
(vii) reviewed a draft dated May 9, 2011, of the
Merger Agreement; and
(viii) performed such other analyses, studies and
investigations, and considered such other factors, as we have
deemed appropriate.
We have assumed and relied upon without independent verification
the accuracy and completeness of the financial, legal,
regulatory, tax, accounting and other information provided to,
reviewed by or discussed with us (including information that is
available from generally recognized public sources) for the
purposes of this opinion. With respect to the financial
projections provided to us, with your consent, we have assumed
that they have been reasonably prepared and are consistent with
the best currently available estimates and judgments of senior
management of the Company as to the future financial performance
of the Company and the other matters covered thereby. We assume
no responsibility for and express no view as to such forecasts
or any other forward-looking information or the assumptions on
which they are based, and we have relied upon the assurances of
the senior management of the Company that they are unaware of
any facts that would make the information provided to or
reviewed by us incomplete or misleading. In rendering our
opinion, we express no view as to the reasonableness of such
forward-looking information or any estimate, judgment or
assumption on which it is based. We have not performed any
independent valuation or appraisal of the assets or liabilities
(contingent, derivative, off-balance-sheet or otherwise) of the
Company or its subsidiaries nor have we been furnished with any
such valuations or appraisals. In particular, we do not express
any opinion as to the value of any asset or liability of the
Company or any of its subsidiaries, whether at current market
prices or in the future. We have not assumed any obligation to
conduct, nor have we conducted, any physical inspection of the
properties or facilities of the Company. In arriving at our
opinion, we have not taken into account any litigation that is
pending or may be brought against the Company or any of its
affiliates or representatives. In addition, we have not
evaluated the solvency of any party to the Merger Agreement
under any state or federal laws or rules, regulations,
guidelines or principles relating to bankruptcy, insolvency or
similar matters.
For purposes of rendering our opinion, we have assumed that
there has not occurred any material change in the assets,
liabilities, financial condition, results of operations,
business or prospects of the Company or any of its subsidiaries
since the respective dates on which the most recent financial
statements or other information, financial or otherwise,
relating to the Company or any of its subsidiaries, was made
available to us. We have also assumed, with your consent, that
the final executed Merger Agreement will not differ in any
material respect from the draft Merger Agreement reviewed by us,
that the representations and warranties of each party set forth
in the Merger Agreement are true and correct, that each party to
the Merger Agreement will perform all of the covenants and
agreements required to be performed by it thereunder and that
all conditions to the Transaction set forth in the Merger
Agreement will be timely satisfied and not modified or waived
and that the Transaction will be consummated in accordance with
the terms set forth in the Merger Agreement without
modification, waiver or delay, except, in each case, as would
not be material to our analyses. In addition, we have assumed,
with your consent, that any governmental, regulatory or third
party consents, approvals or agreements necessary for the
consummation of the Transaction will be obtained without any
imposition of a delay, limitation, restriction or condition that
would, in any respect material to our
B-2
The Board of Directors
CKx, Inc.
May 9, 2011
analyses, have an adverse effect on the Company or the
contemplated benefits of the Transaction. In addition, we are
not legal, accounting, regulatory or tax experts and with your
consent we have relied, without independent verification, on the
assessment of the Company and its advisors with respect to such
matters. Our opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. It should be understood
that, although subsequent developments may affect this opinion
and the assumptions used in preparing it, we do not have any
obligation to update, revise or reaffirm this opinion. We do not
express any view or opinion as to the price at which any share
of Company Common Stock or any other security may trade at any
time, including subsequent to the date of our opinion.
Our opinion addresses only the fairness, from a financial point
of view, to the holders of Company Common Stock (other than the
Excluded Persons) of the Consideration to be paid to such
holders in the Transaction, and we do not express any view as to
the fairness of the Transaction to, or any consideration of, the
holders of any other class of securities of the Company,
including the holders of Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock of the
Company, creditors or other constituencies of the Company or its
subsidiaries or any other term of the proposed Transaction or
the other matters contemplated by the Merger Agreement or any
related agreement. We have not been asked to, nor do we, offer
any opinion as to any other term or aspect of the Merger
Agreement or any other agreement or instrument contemplated by
or entered into in connection with the Transaction or the form
or structure of the Merger Agreement or the likely timeframe in
which the Transaction will be consummated. Furthermore, we
express no opinion with respect to the amount or nature of any
compensation to any officers, directors or employees of any
party to the Transaction, or any class of such persons, relative
to the Consideration to be received by the holders of Company
Common Stock in the Transaction or otherwise or with respect to
the fairness of any such compensation. We do not express any
opinion as to any tax or other consequences that may result from
the transactions contemplated by the Merger Agreement, nor does
our opinion address any legal, tax, regulatory or accounting
matters, as to which we understand the Company has received such
advice as it deems necessary from qualified professionals, and
which advice we have relied upon in rendering our opinion. We
express no view or opinion as to the financing of the
Transaction or the terms or conditions upon which it is
obtained. Our opinion does not address the underlying business
decision of the Company to engage in the Transaction or the
relative merits of the Transaction as compared to any strategic
alternatives that may be available to the Company. At your
request, we have contacted third parties to solicit indications
of interest in a possible transaction with the Company and held
discussions with certain of these parties prior to the date
hereof.
We have acted as financial advisor to the Board of Directors of
the Company in connection with the Transaction. We have not
acted as financial advisor to any party with regard to the
Transaction other than the Board of Directors of the Company. We
have previously received fees for our services as financial
advisor to the Special Committee
and/or
the
Board of Directors of the Company in connection with a related
earlier sales process that was not consummated and will receive
an additional fee for our services in connection with the
Transaction, which will become payable only if the Transaction
is consummated. In addition, the Company has agreed to reimburse
certain of our expenses and indemnify us for liabilities
relating to or arising out of our engagement. In the past, we
and certain of our affiliates, have provided investment banking
and financial advisory services to Apollo or its affiliates
unrelated to the proposed Transaction, for which we or certain
of our affiliates received compensation. In addition, we and
certain of our affiliates, and certain of our and their
respective employees, may have invested in companies affiliated
or associated with the Company and Apollo, Parent or Merger Sub
and investment funds managed by entities affiliated or
associated with the Company and Apollo, Parent or Merger Sub. We
and our affiliates may have in the past provided, and may in the
future provide, financial advice and services to the Company,
Parent or Merger Sub and their respective affiliates or
B-3
The Board of Directors
CKx, Inc.
May 9, 2011
any company that may be involved in the Transaction for which we
and our affiliates would expect to receive compensation. In the
ordinary course of business Gleacher & Company
Securities, Inc. (
Gleacher &
Company
) and certain of its affiliates may trade the
securities of the Company, Parent or Merger Sub, one of their
affiliates or any of their respective portfolio companies for
their own account and for accounts of customers, and may at any
time hold a long and short position in any such securities.
Our opinion expressed herein is provided for the information and
assistance of the Board of Directors of the Company in
connection with its consideration of the Transaction and does
not constitute a recommendation as to whether the Board of
Directors of the Company should recommend or proceed with the
Transaction, nor does it constitute a recommendation to any
holder of Company Common Stock as to whether such holder should
tender its shares in connection with the Tender Offer or how
such holder should vote or act with respect to the Transaction
or any matter related thereto.
Based upon and subject to the foregoing and such other matters
as we consider relevant, we are of the opinion that, as of the
date hereof, the Consideration to be paid to the holders of
Company Common Stock (other than the Excluded Persons) in the
Transaction is fair, from a financial point of view, to such
holders. This opinion has been approved by the Fairness
Committee of Gleacher & Company.
Very truly yours,
GLEACHER & COMPANY SECURITIES, INC.
/s/ Gleacher &
Company Securities, Inc.
B-4
Annex C
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262
§ 262.
Appraisal rights
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
corporation; the words stock and share
mean and include what is ordinarily meant by those words; and
the words depository receipt mean a receipt or other
instrument issued by a depository representing an interest in 1
or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 255, § 256,
§ 257, § 258, § 263 or
§ 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 255, 256, 257, 258, 263 and 264
of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 or
§ 267 of this title is not owned by the parent
immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a
C-1
provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section,
shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting (or such members who received
notice in accordance with § 255(c) of this title) with
respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice a
copy of this section and, if 1 of the constituent corporations
is a nonstock corporation, a copy of § 114 of this
title. Each stockholder electing to demand the appraisal of such
stockholders shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholders shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholders shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection
and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228, § 253, or § 267 of this
title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall
notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section and, if 1 of
the constituent corporations is a nonstock corporation, a copy
of § 114 of this title. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holders
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
holders shares. If such notice did not notify stockholders
of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of
such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such
second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holders shares in
accordance with this subsection. An affidavit of the secretary
or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who
C-2
is otherwise entitled to appraisal rights, may commence an
appraisal proceeding by filing a petition in the Court of
Chancery demanding a determination of the value of the stock of
all such stockholders. Notwithstanding the foregoing, at any
time within 60 days after the effective date of the merger
or consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of
C-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
C-4
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