def14a
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12 |
BALLY TOTAL FITNESS HOLDING CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box): |
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on which the filing fee is calculated and state how it was determined): |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its filing. |
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BALLY TOTAL FITNESS HOLDING CORPORATION
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
Notice of Annual Meeting of Stockholders
To Be Held January 26, 2006
To our Stockholders:
The annual meeting of stockholders of Bally Total Fitness
Holding Corporation (the Company) will be held at
8:30 a.m. (local time) on January 26, 2006 at the
Renaissance Chicago OHare Hotel, 8500 West Bryn Mawr
Avenue, Chicago, Illinois for the following purposes:
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1. |
The election of three Class III Directors for three-year
terms expiring in 2008 (Item 1 on the white proxy card); |
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2. |
To vote on the approval of the 2006 Omnibus Equity Compensation
Plan (Item 2 on the white proxy card); |
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3. |
To ratify the appointment of KPMG LLP as independent auditor for
the Company for the fiscal year ending December 31, 2005
(Item 3 on the white proxy card); |
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4. |
To vote on a stockholder proposal regarding the repeal of
provisions of, or amendments to, the Companys by-laws if
any, adopted without stockholder approval after May 25,
2005 and prior to the annual meeting (the Pardus
Proposal), if such proposal is presented at the meeting
(Item 4 on the white proxy card); and |
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5. |
To vote on the granting of discretion to the proxies with
respect to the Liberation Proposal, if properly brought before
the meeting, and such other business as may properly come before
the annual meeting or any adjournment thereof. |
THE COMPANYS BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ITEMS 1, 2, 3 and 5 ON THE WHITE PROXY CARD. THE
COMPANYS BOARD OF DIRECTORS RECOMMENDS THAT YOU ABSTAIN
WITH RESPECT TO ITEM 4 ON THE WHITE PROXY CARD.
Stockholders of record as of the close of business on
December 20, 2005 will be entitled to notice of and to vote
at the annual meeting and any adjournment thereof. The transfer
books will not be closed.
The Board of Directors of Bally desires to have the maximum
stockholder representation at the annual meeting and
respectfully requests that you vote either via the internet,
touch-tone telephone or execute, date and return promptly the
enclosed white proxy card in the postage-paid envelope provided.
In order to attend the annual meeting, you must bring the
enclosed entrance pass with you. No one will be admitted without
the entrance pass.
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By order of the Board of Directors, |
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Marc D. Bassewitz, Secretary |
Chicago, Illinois
December 27, 2005
YOUR VOTE IS IMPORTANT!
PLEASE EXECUTE, DATE AND RETURN PROMPTLY THE ENCLOSED
WHITE PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED OR
VOTE VIA THE INTERNET OR TOUCH-TONE TELEPHONE.
TABLE OF CONTENTS
BALLY TOTAL FITNESS HOLDING CORPORATION
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 26, 2006
This proxy statement and the accompanying white proxy card are
being furnished in connection with the solicitation of proxies
by the Board of Directors of Bally Total Fitness Holding
Corporation, a Delaware corporation (Bally or the
Company), for use at the annual meeting of
stockholders to be held on January 26, 2006 at
8:30 a.m. (local time) and at any postponement or
adjournment of the meeting. This statement and the accompanying
white proxy card are being mailed to stockholders beginning on
or about December 27, 2005.
ABOUT THE MEETING
What is the Purpose of the Annual Meeting?
At the annual meeting, stockholders will elect three
Class III Directors, vote on the 2006 Omnibus Equity
Compensation Plan, vote on a proposal to ratify KPMG LLP as the
Companys independent auditor, vote on the Pardus Proposal
which is described on p. 40, if properly introduced at the
meeting, vote on the Liberation Proposal described on
pp. 41-43, if
properly brought before the meeting and act upon anything else
that properly comes before the meeting. In addition, after the
meeting, there will be a brief presentation by the Chairman of
the Board and a general discussion period during which
stockholders will have an opportunity to ask questions.
Who is Entitled to Vote?
Only stockholders of record at the close of business on the
record date, December 20, 2005, are entitled to receive
notice of the annual meeting and to vote the shares of common
stock that they held on that date at the meeting and any
postponement or adjournment of the meeting. Each outstanding
share entitles its holder to cast one vote on each matter to be
voted upon.
Who Can Attend the Meeting?
All stockholders as of the record date, or their duly appointed
proxies, may attend the meeting. Registration will begin at
7:30 a.m. Central Time. In order to attend the annual
meeting, you must bring your entrance pass.
What are the Boards Recommendations?
The Board of Directors (or the Board) recommends you:
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vote FOR the election of each of the Companys
Class III nominees; |
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vote FOR the adoption of the 2006 Omnibus Equity
Compensation Plan; |
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vote FOR the ratification of KPMG LLP as the Companys
independent auditor; and |
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ABSTAIN with respect to the Pardus Proposal. |
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vote FOR granting to the proxies discretion on the
Liberation Proposal if properly brought before the meeting and
all other matters as may properly come before the meeting. |
What Vote is Required to Approve Each Item?
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Election of Directors. The affirmative vote of the
holders of a majority of the shares represented in person or by
proxy at the meeting and entitled to vote on the election of
Directors will be required for the election of Directors. A
properly executed proxy marked WITHHOLD ALL with
respect to the election of one or more Directors will not be
voted with respect to the Director or Directors indicated,
although it will be counted for purposes of determining whether
there is a quorum. |
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Approval of New Equity Plan. The affirmative vote of the
holders of a majority of the shares represented in person or by
proxy at the meeting and entitled to vote will be required for
approval of the 2006 Omnibus Equity Compensation Plan. The rules
of the New York Stock Exchange (NYSE) further
require that at least a majority of the votes of shares of
common stock entitled to vote must be cast with respect to the
approval of the new equity plan. Pursuant the rules of the NYSE,
a broker may not vote on the adoption of or a material amendment
to an equity compensation plan such as the 2006 Omnibus Equity
Compensation Plan without instruction from the beneficial owner
of the shares held by such broker. Such broker non-votes will
not be considered present for purpose of calculating a majority
and, therefore, will have no effect on the outcome of the vote,
except to the extent a broker non-vote is not counted as a vote
cast for purposes of the NYSE majority vote
requirement. Thus, if a majority of the shares entitled to vote
are recorded as broker non-votes on this proposal, the broker
non-votes would prevent us from satisfying the NYSE requirement
that over 50% of the shares entitled to vote on the proposal
must actually be cast on the proposal. |
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Ratification of Auditors. The affirmative vote of the
holders of a majority of the shares represented in person or by
proxy at the meeting and entitled to vote will be required for
the ratification of KPMG as the Companys independent
auditor. The Companys By-Laws do not require the Company
to submit this proposal to the stockholders; however, the Board
of Directors believes that it is of sufficient importance to
seek ratification. Whether the proposal is approved or defeated,
the Board of Directors will reconsider its selection of KPMG. |
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Pardus Proposal. The affirmative vote of the holders of
75% of the shares outstanding and entitled to vote will be
required for approval of the Pardus Proposal. |
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Other Items. For each other item which properly comes
before the meeting, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy at the
meeting and entitled to vote on the item will be required for
approval, except for items calling for the amendment of the
Companys By-Laws
the approval of which requires the affirmative vote of the
holders of 75% of the shares outstanding and entitled to vote. |
What Should I Do with the GREEN Proxy Card I May Receive from
Certain of the Companys Shareholders?
On December 5, 2005, Pardus European Special Opportunities
Master Fund L.P. (Pardus) and certain of its
affiliates filed a preliminary proxy statement on
Schedule 14A with the Securities and Exchange Commission
(SEC), as amended on December 9, 2005, for the
purpose of proposing and soliciting proxies in support of a
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slate of three nominees, Charles J. Burdick, Barry R. Elson and
Don R. Kornstein, to stand for election to the Companys
Board at the Annual Meeting and a binding resolution to repeal
certain provisions or amendments of the By-Laws of the Company.
Pardus indicated it would solicit proxies on a GREEN proxy card.
Ballys Board recommends that you discard the GREEN proxy
card. The Board recommends that you sign, date and return the
WHITE proxy card. If you have already returned a GREEN proxy
card, you can effectively revoke it by signing, dating and
returning the WHITE proxy card.
What Should I Do with the GOLD Proxy Card I May Receive from
Certain of the Companys Shareholders?
On December 8, 2005, Liberation Investments, L.P.
(Liberation) and certain of its affiliates filed a
preliminary proxy statement on Schedule 14A with the
Securities and Exchange Commission (SEC), as amended
on December 14, 2005, for the purpose of proposing and
soliciting proxies in support of proposals to amend certain
provisions of the Companys Amended and Restated Bylaws and
to remove Paul A. Toback as Chief Executive Officer and
President of the Company. Liberation indicated that it would
solicit proxies on a GOLD proxy card.
Ballys Board recommends that you discard the GOLD proxy
card. The Board recommends that you sign, date and return the
WHITE proxy card. If you have already returned a GOLD proxy
card, you can effectively revoke it by signing, dating and
returning the WHITE proxy card.
What Happens If I Submit a Proxy Card Without Giving Specific
Voting Instructions?
Unless you give other instructions on your white proxy card, the
persons named as proxy holders on the white proxy card will vote
your shares as recommended by the Board of Directors. With
respect to any other proposals that properly come before the
meeting, the proxy holders will vote using their own discretion.
If you hold your shares in street name through a
broker or other nominee, your broker or nominee may not be
permitted to exercise voting discretion with respect to some of
the proposals to be acted upon. Pursuant to the rules of the New
York Stock Exchange, broker non-votes are not entitled to vote
on the implementation of equity compensation plans, such as the
plan set forth in Proposal 2 herein, without instruction
from the beneficial owner of shares held by such broker. Thus,
if you do not give your broker or nominee specific instructions,
your shares may not be voted on those proposals. Shares
represented by such broker non-votes will, however,
be counted in determining whether there is a quorum. Therefore,
any broker non-votes may have the effect of a vote
against such proposal.
What Constitutes a Quorum?
The presence at the meeting, in person or by proxy, of the
holders of a majority of the common stock outstanding on
December 20, 2005 will constitute a quorum, permitting the
meeting to conduct its business. As of the record date,
38,285,905 shares of common stock were outstanding.
Therefore, 19,181,238 shares represents a majority of the
common stock outstanding on December 20, 2005. Except as
otherwise required by law, proxies received but marked as
abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at
the meeting.
Will Abstentions Affect the Voting Results?
A properly executed proxy marked ABSTAIN with
respect to any matter will not be voted with respect to such
matter, although it will be counted for purposes of determining
whether there is a quorum. Accordingly, an abstention will have
the effect of a negative vote with respect to any matter
requiring at least a majority of shares outstanding or present
at the meeting.
How Do I Vote?
If you complete and properly sign the accompanying WHITE proxy
card and return it to LaSalle Bank N.A., our transfer agent and
registrar, it will be voted as you instruct on the WHITE proxy
card. If you attend
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the meeting, you may deliver your completed WHITE proxy card in
person, or you may vote in person. If you hold your shares in
the name of a bank, broker or other nominee, you will not be
able to vote in person at the annual meeting unless you have
previously specially requested and obtained a legal
proxy from your bank, broker or other nominee and present
it at the annual meeting. You may also vote via the internet as
explained in the voting instructions attached to your proxy
card. You may vote via the internet or telephone any time prior
to 11:59 p.m. Eastern Time, January 25, 2006.
Who Will Count the Vote?
At the meeting, the results of stockholder voting will be
tabulated by LaSalle Bank N.A., the independent inspector of
elections appointed by Bally for the meeting.
Can I Change My Vote or Revoke My Proxy After I Return My
Proxy Card?
Yes. Even after you have submitted your proxy, you may change
your vote at any time before the proxy is exercised by filing
with the Secretary of Bally either a notice of revocation or a
duly executed proxy bearing a later date. If you vote in person
at the meeting, your proxy will be revoked. However, attendance
at the meeting will not by itself revoke a previously granted
proxy. For shares held in street name, you may
revoke your previously-granted proxy by submitting new voting
instructions to your broker or nominee or contacting the person
responsible for your account and instructing that person to
execute on your behalf the WHITE proxy card as soon as possible.
Explanatory Note
Because the Company was in the process of restating its
financial statements, we did not hold our 2005 annual meeting
earlier in 2005. Now that we have filed our Annual Report on
Form 10-K for the
year ended December 31, 2004 as well as Quarterly Reports
on Form 10-Q for
the periods ended June 30, 2004, September 30, 2004,
March 31, 2005, June 30, 2005 and September 30,
2005, we are able to hold our annual meeting. Given the length
of time since the last annual meeting and the January 26,
2006 date for the annual meeting, this proxy statement contains
information for 2004 and information as of the latest
practicable date for 2005. Complete information for 2005 will
not exist at the time of mailing and, given the proximity of the
annual meeting to the end of 2005, the Company could not,
without unreasonable effort and expense, obtain complete
information for 2005 prior to the annual meeting. Consequently,
we will not have audited financial statements available for the
year ended December 31, 2005 prior to the annual meeting.
If necessary, we will supplement this proxy statement at a
reasonable time after additional information for 2005 becomes
available.
ELECTION OF DIRECTORS AND SECURITY OWNERSHIP
Proposal 1 Election of Directors
At the annual meeting, three Class III Directors are to be
elected to serve for three-year terms expiring in 2008 or until
their successors have been duly elected and qualified. Set forth
below are the names of, and certain information with respect to,
the persons nominated by the Board of Directors for election as
Class III Directors. It is intended that all duly executed
or duly tendered proxies in the accompanying form will be voted
for the election of such nominees (or such substitute nominees
as provided below), unless such authorization has been withheld.
Authority granted to the persons named in the proxy to vote for
the nominees is limited to the three nominees proposed by the
Board of Directors and named below, and proxies cannot be voted
for a greater number of persons than the number of nominees
named. The Board of Directors is not aware that any of the
nominees will be unavailable for service at the date of the
annual meeting. If a nominee is unable or unwilling to stand for
election at the annual meeting, the Board of Directors does not
intend to name additional nominees. The Company has a Nominating
and Corporate Governance Committee and all nominations are
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approved by the Board of Directors. The Board of Directors
recommends that its three nominees for directors be elected at
the Annual Meeting. The nominees are Eric Langshur, Charles J.
Burdick and Barry R. Elson. Each of these nominees has consented
to serve as a director if elected and has provided the Company
with the information relating to them that is required to be
included in this proxy statement. Mr. Langshur currently
serves as a director of the Company, and has served as a
director of the Company since 2004.
On November 17, 2005, Pardus, a stockholder of the Company
that, according to filings made with the SEC pursuant to
Section 13(d), 13(g) and 14(a) of the Securities Exchange
Act of 1934, as amended and the attendant regulations (the
Exchange Act), beneficially owns more than 5% of the
Companys common stock, nominated Charles J. Burdick, Barry
R. Elson and Don R. Kornstein for election to the Board.
Mr. Burdick serves on the Pardus Capital Management
(PCM) advisory board and Mr. Kornstein was a
part of Emannuel Pearlmans (a principal of Liberation
Investments, L.P. and its affiliates) insurgent board slate for
InterTan, Inc. In addition, from 1994 until 2000,
Mr. Kornstein served as the Chief Executive Officer,
President, and director of Jackpot Enterprises, Inc., a company
with which Emanuel Pearlman, a principal of Liberation was also
involved as a financial and strategic development advisor.
Although the Company and Pardus have been in discussions
concerning the nominees, they have not reached an agreement on a
slate of directors to present for election at the upcoming
annual meeting. The Company has nominated Mr. Burdick and
Mr. Elson, but has decided not to present
Mr. Kornstein for election, due in part to the concern that
given the relationship of Mr. Kornstein to Liberation and
Mr. Burdicks relationship to Pardus, the interests of
all shareholders and not just a particular constituency or
constituencies are better served by a slate which includes
Mr. Langshur in lieu of Mr. Kornstein. In fact, as
noted in Appendix A to Liberations amended
preliminary proxy filed with the SEC on December 14, 2005,
Don R. Kornstein, one of Pardus director
nominees, was suggested as a possible candidate by
Mr. Pearlman. We also believe that our stockholders
should be aware that Pardus has indicated an interest in
participating in or leading a recapitalization transaction
involving the Company, and Messrs. Burdick and Elson may
have a conflict of interest in connection with any such
transaction because of their nomination by Pardus and
Mr. Burdick also by virtue of his presence on the PCM
advisory board. It is not known whether the Company and Pardus
will have further discussions with respect to the slate of
directors.
If any nominee becomes unwilling or unable to become a member of
the Board of Directors for any reason before the election, such
person will not be elected to office.
In general, beneficial ownership includes those
shares a stockholder has the power to vote or transfer and stock
options that are exercisable currently or within 60 days.
Unless otherwise indicated, all information with respect to
ownership of common stock is as of December 16, 2005. On
December 16, 2005, Bally had outstanding
38,285,905 shares of common stock. The Common Shares Owned
column may include, in certain circumstances, shares of common
stock held in the name of the Directors or executive
officers spouse, minor children, or relatives sharing the
Directors or executive officers home, the reporting
of which is required by applicable rules of the Securities and
Exchange Commission (the SEC), but as to which
shares of common
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stock the Director or executive officer may have disclaimed
beneficial ownership. As used in the following tables, an
asterisk in the Percentage of Outstanding Stock column means
less than 1%.
Information regarding each of the nominees proposed by the Board
of Directors for election as Class III directors, along
with information concerning the present Class I and
Class II continuing directors of the Company, is set forth
below:
Nominees
CLASS III
Term Expiring at the Annual Meeting in 2008
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Common | |
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Options | |
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Beneficial | |
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Outstanding | |
Name |
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Owned | |
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Within 60 Days | |
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Ownership | |
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Stock | |
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Eric Langshur
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1,667 |
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1,667 |
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Charles J. Burdick
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Barry R. Elson
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Directors Continuing in Office
CLASS I
Term Expiring at the Next Succeeding Annual Meeting
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Common | |
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Options | |
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Total | |
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Percentage of | |
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Exercisable | |
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Beneficial | |
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Outstanding | |
Name |
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Owned | |
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Within 60 Days | |
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Ownership | |
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Stock | |
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Paul Toback
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135,000 |
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253,334 |
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388,334 |
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1 |
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Barry M. Deutsch
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5,300 |
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1,667 |
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6,967 |
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Steven S. Rogers
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CLASS II
Term Expiring at the Annual Meeting in 2007
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Name, Age, Principal Occupation |
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Outstanding | |
and Additional Information |
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Owned | |
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Within 60 Days | |
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Ownership | |
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James F. McAnally, M.D.
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12,500 |
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15,000 |
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32,500 |
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John W. Rogers, Jr.
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10,000 |
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3,333 |
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13,333 |
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Adam Metz
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20,000 |
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20,000 |
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Director Nominees
Eric Langshur, age 42, joined the Board as a
Director in December 2004. Mr. Langshur is the Founder and
Chief Executive Officer of TLContact, Inc., a privately held
company that delivers innovative patient communication and
education services to the healthcare industry. Prior to starting
TLContact in 2000, he served as President of Bombardier
Aerospace, CAS, where he led commercial aerospace service
operations for a world leader in the design and manufacture of
innovative aviation products and services for the business,
regional and amphibious aircraft markets. Prior to serving at
Bombardier, Mr. Langshur spent 13 years with United
Technologies Corporation, where he held a variety of senior
management and turnaround positions at Hamilton Sundstrand,
Pratt & Whitney and United Technologies corporate
office. Mr. Langshur currently serves as Chairman of
Ballys Audit Committee.
Charles J. Burdick, age 54, is not currently
serving as a Director. Mr. Burdick is a member of the
advisory board of Pardus Capital Management, L.P., a hedge fund,
and a non executive director of Singer & Friedlander, a
financial services group. From January 2005 until summer of
2005, he was the Chief Executive
6
Officer of HIT Entertainment Plc, a provider of pre-school
childrens entertainment. From 1996 until 2002, he was the
Chief Financial Officer and then from August 2002 until July
2004 he was the Chief Executive Officer and a director of
Telewest Communications, a cable company. Mr. Burdick was
nominated by Pardus European Special Opportunities Fund, L.P., a
stockholder of the Company that, according to filings made with
the SEC pursuant to Section 13(d), 13(g) and 14(a) of the
Exchange Act, beneficially owns more than 5% of the
Companys common stock.
Barry R. Elson, age 64, is not currently
serving as a Director. Mr. Elson is the Acting Chief
Executive Officer and a director of Telewest Global, Inc., a
provider of entertainment and communication services.
Mr. Elson became Chairman and a director of Telewest in
November 2003 and then in February 2004 he resigned as Chairman,
although not as a director, and was appointed as the Acting
Chief Executive Officer of Telewest Communications and the
Acting Chief Executive Officer of Telewest Global, Inc. From
July 2001 to October 2003, he was the President of Pilot
Associates, a management consulting/coaching firm. From November
2000 to June 2001, he was Chief Operating Officer of Urban
Media, a competitive local exchange carrier. Mr. Elson was
nominated by Pardus European Special Opportunities Fund, L.P., a
stockholder of the Company that, according to filings made with
the SEC pursuant to Section 13(d), 13(g) and 14(a) of the
Exchange Act, beneficially owns more than 5% of the
Companys common stock.
THE COMPANYS BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION
OF THE NOMINEES FOR CLASS III DIRECTOR NAMED ABOVE.
Continuing Directors
Paul A. Toback, age 42, was named Chairman of
the Board in May 2003 and joined the Board as a Director in
March 2003 and President and Chief Executive Officer since
December 2002. He was Executive Vice President from February
2002 to December 2002, Chief Operating Officer from June 2001 to
December 2002 and Senior Vice President, Corporate Development
from March 1998 to June 2001. Mr. Toback started with the
Company in September 1997. He is an attorney licensed to
practice in Illinois.
Barry M. Deutsch, age 42, joined the Board as
a Director in May 2004. Mr. Deutsch is the Chief Financial
Officer and Vice President of Business Development of Ovation
Pharmaceuticals, Inc., a fully-integrated pharmaceutical company
focused on specialty therapeutic areas. Prior to that
Mr. Deutsch served as Director, Corporate Finance of
Prudential Vector Healthcare Group, a unit of Prudential
Securities Incorporated, where he served as an investment banker
specializing in health care industry transactions.
Mr. Deutsch is a Certified Public Accountant.
James F. McAnally, M.D., age 56, joined the
Board as a Director in December 1995. Dr. McAnally is a
private practitioner who specializes in hypertension and kidney
disease. Dr. McAnally is also the Medical Director of
Nephrology Services at Trinitas Hospital in Elizabeth, New
Jersey and a Clinical Associate Professor of Medicine at Seton
Hall University, School of Graduate Medical Education.
Adam Metz, age 44, joined the Board as a
Director in December 2005. Mr. Metz is a co-founding
partner of Polaris Capital, LLC, a consulting and real estate
investment firm that was established in 2002. From 2000 to 2002,
Mr. Metz was the Executive Vice President and Chief
Investment Officer of Rodamco, North America, a real estate
investment fund which primarily owned regional shopping malls.
During 2000, Mr. Metz was President of Urban Shopping
Centers, a real estate investment trust that was purchased by
Rodamco in November 2000. Prior to his position as President,
Mr. Metz served as the Chief Financial Officer of Urban
Shopping Centers. He also serves as a director at General Growth
Properties, Inc., where he is a member of the Audit Committee.
John W. Rogers, Jr., age 47, joined the Board
as a Director in April 2003. Mr. Rogers is the Chairman and
Chief Executive Officer of Ariel Capital Management, LLC, a
privately held institutional money management firm and mutual
fund company which he founded in 1983. He also serves as a
director of Aon Corporation, Exelon Corporation, McDonalds
Corporation and as a trustee of Ariel Investment Trust.
Steven S. Rogers, age 48, joined the Board as
a Director in December 2005. Dr. Rogers is a professor of
finance and management at the Kellogg Graduate School of
Management at Northwestern University. He
7
also serves as a director at AMCORE Financial, Inc., S.C.
Johnson & Son, Inc., SUPERVALU, Inc. and Duquesne Light
Holdings, Inc, where he also serves on the Compensation,
Corporate Governance and Finance Committees. John W.
Rogers, Jr. and Steven S. Rogers are not related.
Director Whose Term is Expiring and is Not Standing for
Re-Election
J. Kenneth Looloian, age 83, joined the
Board as a Director in December 1995. Mr. Looloian is a
consultant to Di Giorgio Corporation and served as the Sr. Vice
President, Chief Financial Officer of New Jersey Bell Telephone
Company and Bellcore (now Telecordia Technologies) before his
retirement. Recently, due to a medical condition,
Mr. Looloian has not been actively participating in Board
matters.
Executive Officers
Paul A. Toback, age 42, was elected Chairman
of the Board in May 2003 and has served as a Director since
March 2003 and President and Chief Executive Officer since
December 2002. He was Executive Vice President from February
2002 to December 2002, Chief Operating Officer from June 2001 to
December 2002 and Senior Vice President, Corporate Development
from March 1998 to June 2001. Mr. Toback started with the
Company in September 1997. He is an attorney licensed to
practice in Illinois.
Julie Adams, age 60, was elected Senior Vice
President, Membership Services of the Company in February 2003.
Ms. Adams was Vice President of Membership Services from
November 1997 to February 2003.
Marc D. Bassewitz, age 49, was elected Senior
Vice President and General Counsel of the Company in January
2005. Prior to joining Bally, Mr. Bassewitz served as
outside counsel for the Company in his position as a partner at
Latham & Watkins LLP.
William G. Fanelli, age 43, was elected
Senior Vice President, Planning and Development of the Company
in March 2005. Mr. Fanelli held the position of Acting
Chief Financial Officer from April 2004 to March 2005, was
Senior Vice President, Finance from June 2001 to April 2004 and
was Senior Vice President, Operations from November 1997 to June
2001.
Carl J. Landeck, age 45, was elected Senior
Vice President and Chief Financial Officer of the Company in
March 2005. Prior to joining Bally, Mr. Landeck served as
Executive Vice President, Chief Financial and Administrative
Officer of Levitz Home Furnishings, Inc. from August 2001 to
December 2004, and was Executive Vice President, Finance and
Chief Financial Officer of Cablevision Electronics Investments,
Inc. from January 1998 to August 2001.
James A. McDonald, age 52, was elected Senior
Vice President and Chief Marketing Officer of the Company in May
2005. Prior to joining Bally, Mr. McDonald most recently
served as the Senior Vice President, Chief Brand Officer of
RadioShack, Inc.
Harold Morgan, age 49, was elected Senior
Vice President, Chief Administration Officer in February 2003.
Mr. Morgan held the position of Senior Vice President Human
Resources from December 1996 to February 2003.
John H. Wildman, age 46, was elected Senior
Vice President and Chief Operating Officer in December 2002.
Mr. Wildman was Senior Vice President, Sales and Marketing
from November 1996 to December 2002.
See Election of Directors and Security Ownership
Director Nominees and Continuing Directors for
information concerning the Directors.
8
Beneficial Ownership of Directors and Executive Officers
The following table shows the number of shares of Bally common
stock beneficially owned as of December 16, 2005 by the
directors, Named Executive Officers and all directors and
executive officers as a group. The Common Shares
Owned column includes, in certain circumstances, shares of
common stock held in the name of the directors or
executive officers spouse, minor children, or relatives
sharing the directors or executive officers home,
the reporting of which is required by applicable rules of the
SEC, but as to which shares of common stock the director or
executive officer may have disclaimed beneficial ownership. As
used in the following tables, an asterisk in the Percentage of
Outstanding Stock column means less than 1%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common | |
|
Options | |
|
Total | |
|
Percentage of | |
|
|
Shares | |
|
Exercisable | |
|
Beneficial | |
|
Outstanding | |
Beneficial Owner |
|
Owned(1) | |
|
Within 60 Days | |
|
Ownership | |
|
Stock* | |
|
|
| |
|
| |
|
| |
|
| |
Paul A. Toback(1)
|
|
|
135,000 |
|
|
|
253,334 |
|
|
|
388,334 |
|
|
|
1.0 |
% |
William Fanelli(1)
|
|
|
40,000 |
|
|
|
190,000 |
|
|
|
230,000 |
|
|
|
** |
|
Cary Gaan(1)
|
|
|
50,603 |
|
|
|
140,000 |
|
|
|
190,603 |
|
|
|
** |
|
Harold Morgan(1)
|
|
|
55,921 |
|
|
|
159,000 |
|
|
|
214,921 |
|
|
|
** |
|
John H. Wildman(1)
|
|
|
60,000 |
|
|
|
170,000 |
|
|
|
230,000 |
|
|
|
** |
|
Charles J. Burdick
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
|
Barry M. Deutsch
|
|
|
5,300 |
|
|
|
1,667 |
|
|
|
6,967 |
|
|
|
** |
|
Barry R. Elson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
|
Eric Langshur
|
|
|
|
|
|
|
1,667 |
|
|
|
1,667 |
|
|
|
** |
|
J. Kenneth Looloian
|
|
|
5,000 |
|
|
|
15,000 |
|
|
|
20,000 |
|
|
|
** |
|
James F. McAnally, M.D.
|
|
|
12,500 |
|
|
|
15,000 |
|
|
|
27,500 |
|
|
|
** |
|
Adam Metz
|
|
|
20,000 |
|
|
|
|
|
|
|
20,000 |
|
|
|
** |
|
John W. Rogers, Jr.
|
|
|
10,000 |
|
|
|
3,333 |
|
|
|
13,333 |
|
|
|
** |
|
Steven S. Rogers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
|
All Directors and executive officers as a group
(16 persons)(2)
|
|
|
775,074 |
|
|
|
1,002,334 |
|
|
|
1,777,408 |
|
|
|
4.6 |
% |
|
|
* |
Based on 38,285,905 shares of common stock outstanding. |
|
|
** |
Less than 1% of the outstanding common stock. |
|
|
(1) |
For Named Executive Officers, includes shares previously held as
nontransferable restricted shares, as to which restrictions
lapsed in 2005. See Compensation of Executive
Officers Summary Compensation Table
Note 3. |
|
(2) |
As of December 16, 2005, Julie Adams (Senior Vice
President, Membership Services), Marc D. Bassewitz (Senior Vice
President and General Counsel), Carl J. Landeck (Senior Vice
President and Chief Financial Officer) and James A. McDonald
(Senior Vice President and Chief Marketing Officer) owned
90,750, 130,000, 55,000 and 105,000 shares of common stock,
respectively, and 126,667, 73,000, 98,000 and 43,000 options,
respectively. |
9
Stockholders Who Own at Least 5% of Bally Common Stock
The following table shows all persons the Company knows to be
the beneficial owners of more than 5% of Bally common stock as
of December 20, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
Total Beneficial | |
|
Percent of | |
Name and Address of Beneficial Owner |
|
Ownership | |
|
Outstanding Stock(1) | |
|
|
| |
|
| |
Pardus Capital Management L.P.(2)(3)
|
|
|
5,450,000 |
|
|
|
14.2% |
|
|
1001 Avenue of the Americas, Suite 1100
New York, New York 10018 |
|
|
|
|
|
|
|
|
Emanuel R. Pearlman(2)(4)
|
|
|
4,134,450 |
|
|
|
10.8% |
|
Liberation Investments(2)(4)
|
|
|
|
|
|
|
|
|
|
11766 Wilshire Blvd. Suite #870
Los Angeles, CA 90025 |
|
|
|
|
|
|
|
|
Mark J. Wattles(2)(5)
|
|
|
3,425,100 |
|
|
|
8.9% |
|
Wattles Capital Management, LLC(2)(5)
|
|
|
|
|
|
|
|
|
|
7945 W. Sahara #205
Las Vegas, NV 89117 |
|
|
|
|
|
|
|
|
Columbia Wanger Asset Management, L.P.(WAM)(2)(6)
|
|
|
2,350,000 |
|
|
|
6.1% |
|
|
WAM Acquisition GP, Inc., the general
partner of WAM(2)(6)
Columbia Acorn Trust(2)(6)
227 West Monroe Street, Suite 3000,
Chicago, IL 60606 |
|
|
|
|
|
|
|
|
Dimensional Fund Advisors Inc.(2)(7)
|
|
|
2,297,400 |
|
|
|
6.0% |
|
|
1299 Ocean Ave, 11th Flr,
Santa Monica, CA 90401 |
|
|
|
|
|
|
|
|
Everest Capital Limited(2)(8)
|
|
|
2,047,724 |
|
|
|
5.3% |
|
|
The Bank of Butterfield Building
65 Front Street, 6th Floor,
P.O. Box HM2458
Hamilton HMJX Bermuda |
|
|
|
|
|
|
|
|
|
|
(1) |
The Company had 38,285,905 common shares outstanding as of
December 20, 2005. The Percent of Outstanding
Stock was calculated by using the disclosed number of
beneficially owned shares by the applicable beneficial owner and
related entities, as a group, as the numerator and the number of
the Companys outstanding common shares as of
December 16, 2005 as the denominator. |
|
(2) |
Represents a beneficial owner of more than 5% of the common
stock based on the owners reported ownership of shares of
common stock in filings made with the Securities and Exchange
Commission pursuant to Section 13(d), 13(g) and 16(a) of
the Securities Exchange Act of 1934, as amended and the
attendant regulations. Information with respect to each
beneficial owner is generally as of the date of the most recent
filing by the beneficial owner with the SEC and is based solely
on information contained in such filings. |
|
(3) |
Pardus European Special Opportunities Master Fund L.P., a
limited partnership formed under the laws of the Cayman Islands
(Pardus), is the holder of 5,450,000 shares of
common stock. Pardus Capital Management, L.P. (PCM),
a Delaware limited partnership, serves as the investment manager
of Pardus and possesses sole power to vote and direct the
disposition of all the shares held by the Fund. PCM is deemed to
beneficially own 5,450,000 shares of common stock. |
|
(4) |
Liberation Investments refers to Liberation
Investments, L.P., Liberation Investments Ltd. and Liberation
Investment Group LLC. Liberation Investments, L.P.
(LILP), a Delaware limited partnership, is the
beneficial owner of 2,662,963 shares of common stock.
Liberation Investments Ltd. (LILtd), a private
offshore investment corporation, is the beneficial owner of
1,436,487 shares of common stock. Mr. Pearlman is the
direct beneficial owner of 35,000 shares of common stock,
which vested upon the acquisition by Liberation of in excess of
10% of the common stock of the Company on |
10
|
|
|
May 4, 2005. Liberation Investment Group LLC
(LIG), the general partner of LILP and discretionary
investment adviser to LILtd, and Mr. Pearlman, the General
Manager, Chief Investment Officer and majority member of LIG,
are indirect beneficial owners of the shares held by LILP and
LILtd. |
|
|
(5) |
Mark J. Wattles is the sole member and manager of Wattles
Capital Management, LLC, a Delaware limited liability company,
and owns 100% of its membership interests. |
|
(6) |
Columbia Acorn Trust is an Investment Company under
Section 8 of the Investment Company Act of 1940. WAM is an
Investment Adviser registered under Section 203 of the
Investment Advisers Act of 1940; WAM Acquisition GP, Inc. is the
General Partner of the Investment Adviser. |
|
(7) |
Dimensional Fund Advisors Inc. (Dimensional),
an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, furnishes investment advice to
four investment companies registered under the Investment
Company Act of 1940, and serves as investment manager to certain
other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are Funds.
In its role as investment advisor or manager, Dimensional
possesses voting and/or investment power and may be deemed to be
the beneficial owner of the shares. Dimensional disclaims
beneficial ownership of such securities. |
|
(8) |
Everest Capital Limited is a Bermuda company. |
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table sets forth, as of December 31, 2004,
information concerning compensation plans under which the
Companys securities are authorized for issuance. The table
does not reflect grants, awards, exercises, terminations or
expirations since that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
Number of Securities | |
|
|
|
Remaining Available for | |
|
|
to be Issued Upon | |
|
Weighted-average | |
|
Future Issuance Under | |
|
|
Exercise of Outstanding | |
|
Exercise Price of | |
|
Equity Compensation Plans | |
|
|
Options, Warrants and | |
|
Outstanding Options, | |
|
(excluding securities | |
|
|
Rights | |
|
Warrants and Rights | |
|
reflected in column (a)) | |
|
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Plans approved by stockholders(1)
|
|
|
4,452,341 |
|
|
$ |
15.47 |
|
|
|
1,527,042(2) |
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,452,341 |
|
|
$ |
15.47 |
|
|
|
1,527,042(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The number of securities remaining for future issuance at
December 31, 2004 consisted of 1,512,042 shares
issuable under the Companys 1996 Long-Term Incentive Plan
and 15,000 shares under the Companys 1996
Non-Employee Directors Stock Option Plan. In November
1997, June 1999, December 2000 and June 2002, the 1996 Long-Term
Incentive Plan was amended to increase the aggregate amount of
shares outstanding that may be granted to an aggregate of
8,600,000. The first two amendments, which increased the number
of shares subject to the plan by a total of 2,500,000, were
approved by the Companys stockholders. |
|
(2) |
As of December 16, 2005 there were 59,461 shares
remaining for future issuance under the Companys 1996
Long-Term Incentive Plan, 62,000 shares remaining for
future issuance under the Inducement Plan and 10,000 shares
remaining for future issuance under the Companys 1996
Non-Employee Directors Stock Option Plan. |
See Compensation of Executive Officers for a
description of the Inducement Plan adopted by the Companys
Compensation Committee on March 8, 2005 and descriptions of
the material features of other equity compensation plans. See
Compensation of Executive Officers for a description
of grants made under the Companys 1996 Long-Term Incentive
Plan and the Inducement Plan to date in 2005.
11
APPROVAL OF 2006 OMNIBUS EQUITY COMPENSATION PLAN
Proposal 2 Approval of 2006 Omnibus Equity
Compensation Plan
General
Our Board of Directors has approved the Bally Total Fitness
Holding Corporation 2006 Omnibus Equity Compensation Plan (the
Plan) and is submitting the Plan for stockholder
approval. Under the Plan, we will be able to grant stock
options, stock units, stock awards, dividend equivalents and
other stock-based awards as a means to encourage participants to
focus on and contribute to increasing value for our
stockholders. Our employees and non-employee directors, and
employees of our subsidiaries, are eligible to participate in
the Plan. The Boards adoption of the Plan is conditioned
on stockholder approval. The affirmative vote of the holders of
a majority of the shares represented in person or by proxy at
the meeting and entitled to vote will be required for approval
of the new equity plan. The rules of the NYSE further require
that at least a majority of the votes of shares of common stock
entitled to vote must be cast with respect to the approval of
the new equity plan. The following is a summary of the material
terms of the Plan. A copy of the Plan is attached to this proxy
statement as Exhibit B.
This Plan is intended to replace the 1996 Long-Term Incentive
Plan of Bally Total Fitness Holding Corporation (the 1996
Plan), which will terminate on January 3, 2006
(although the terms of the 1996 Plan will continue to apply to
grants still outstanding thereunder).
Description of the Plan
Purpose: The purpose of the Plan is to provide the Board
of Directors sufficient tools to incentivize our employees and
non-employee directors to contribute to our economic success by
aligning their interests with the interests of the stockholders
through grants of equity-based awards. The Plan provides the
Compensation Committee of the Board of Directors greater
flexibility in designing executive compensation by offering a
broader spectrum of awards. The Plan is necessary in order that
the Board have the ability to continue to provide incentives to
executives that align their interests with the interests of the
stockholders. Absent shareholder approval of the Plan,
expiration of the 1996 Plan in January 2006 will leave the Board
without the ability to grant equity-based awards to employees
and non-employee directors other than inducement grants to new
employees.
Administration: With respect to grants made to employees,
the Plan will be administered and interpreted by the
Compensation Committee of the Board of Directors or another
committee appointed by the Board of Directors to administer the
Plan. With respect to grants made to non-employee directors, the
Plan will be administered by the Board or a committee to which
the Board delegates its authority. The term
Committee refers to the Board, or its delegate, or
the Compensation Committee, depending on the identity of the
grant recipient. The Committee has the authority to determine
the individuals to whom grants will be made, the time when
grants will be made and the type, size, and terms of each grant.
The Committee has the authority to amend the terms of any grant,
to the extent that the amendment does not materially impair the
rights or obligations of the recipient, unless the recipient
consents to the amendment or the amendment is required by law.
The Committee also has the authority to deal with any other
matters arising under the Plan. However, the Committee does not
have authority to reprice stock options awarded under the Plan
without stockholder approval.
Eligibility: Employees and non-employee directors of the
Company and employees of our subsidiaries are eligible to
participate in the Plan. For 2006, it is contemplated that
approximately 75 employees and
10 non-employee
directors will receive grants under the Plan. The Committee will
select the individuals who will participate in the Plan.
Grants: The Committee may make the following types of
grants under the Plan, with terms to be established by the
Committee:
|
|
|
|
|
Stock options, which may consist of incentive stock options,
within the meaning of Section 422 of the Internal Revenue
Code, and nonqualified stock options. |
12
|
|
|
|
|
Stock units, the value of which is based on the value of our
common stock. |
|
|
|
Stock awards, which are awards of shares of our common stock. |
|
|
|
Dividend equivalents in connection with grants of options, stock
units or other stock-based awards. |
|
|
|
Stock appreciation rights or other stock-based awards, which are
other awards based on or measured by the value of, or payable
in, shares of our common stock. |
Shares: The total aggregate number of shares of our
common stock that may be issued under the Plan is
2.5 million shares. Within the aggregate limit, the maximum
number of shares of our common stock that may be issued under
the Plan pursuant to Stock Awards, Stock Units and Other
Stock-Based Awards (as defined below) during the term of the
Plan is 2 million shares. These share limits will be
adjusted by the Committee in the event of a stock dividend,
spinoff, merger or other event affecting our capitalization.
Certain grants may be paid in cash. Grants paid in cash will not
count against the foregoing share limits.
For administrative purposes, the Committee will reserve shares
for issuance when grants payable in common stock are made under
the Plan. If and to the extent stock options granted under the
Plan terminate or are canceled, forfeited, exchanged or
surrendered without having been exercised, and if and to the
extent any stock awards, stock units, dividend equivalents or
other stock-based awards are forfeited, terminated or otherwise
not paid in full, the shares reserved for those grants will
again be available for issuance under the Plan. In addition,
shares surrendered in payment of the exercise price of an option
or any withholding taxes will again be available for issuance
under the Plan. Finally, to the extent that grants are paid in
cash, and not in shares of common stock, any shares previously
reserved for issuance pursuant to such grants will also be
available for issuance under the Plan.
Individual Limits: All grants other than dividend
equivalents will be expressed in shares. The maximum number of
shares of our common stock with respect to which all grants
other than dividend equivalents may be made under the Plan to
any individual during any calendar year is 500,000. The
foregoing share limit will be adjusted by the Committee in the
event of a stock dividend, spinoff, merger or other event
affecting the capitalization of the Company. The individual
limit will apply without regard to whether the grants are to be
paid in stock or cash. Cash payments (other than for dividend
equivalents) will equal the fair market value of the shares to
which the cash payment relates. An individual may not accrue
dividend equivalents during any calendar year in excess of
$1,000,000.
Options: The Committee will select the employees and
directors who will receive stock options. The Committee will
determine the number of shares that will be subject to each
grant of stock options and the terms of the options. Stock
options may consist of incentive stock options or nonqualified
stock options, within the meaning of Section 422 of the
Internal Revenue Code.
The exercise price of an option may be equal to or greater than
the fair market value of our common stock on the date of grant.
The exercise price may be paid (1) in cash, (2) if
permitted by the Committee, in shares of our common stock having
a fair market value on the date of exercise equal to the amount
of the exercise price, (3) through a broker by having the
broker sell our common stock simultaneously with the exercise of
the option, or (4) by any other method permitted by the
Committee. The Committee may grant dividend equivalents with
respect to options.
The term of each option will not exceed ten years. The Committee
will determine when options may be exercised. The Committee may
accelerate the exercisability of outstanding options at any time
for any reason. Except as provided in the grant letter, an
option may only be exercised while the participant is an
employee or a director. The grant letter will specify under what
circumstances a participant may exercise an option after
termination of employment or service.
Stock Units: The Committee may grant stock units to
employees and non-employee directors. Each stock unit represents
the right of the participant to receive a share of our common
stock or an amount based on the value of a share of our common
stock. The Committee will determine the number of stock units to
be granted and the terms applicable to each grant. The Committee
may grant dividend equivalents with respect to stock units. The
Committee will determine under what circumstances a participant
may retain stock units
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after termination of the participants employment or
service. Stock units will be paid in cash or in shares of our
common stock, or a combination of the two, as determined by the
Committee.
Stock Awards: The Committee may grant stock awards to
employees and directors. The Committee will determine the number
of shares that will be granted, any vesting or other
restrictions applicable to the shares and the conditions under
which any restrictions will lapse. Until any restrictions lapse,
a participant generally cannot sell, assign, transfer, pledge,
or otherwise dispose of stock awards. The Committee will
determine under what circumstances a participant may retain
stock awards after termination of the participants
employment or service. The Committee will determine to what
extent a participant will have the right to vote stock awards
and to receive any dividends or other distributions paid on
stock awards.
Dividend Equivalents: The Committee may grant dividend
equivalents in connection with grants under the Plan. A dividend
equivalent is an amount determined by multiplying the number of
shares of common stock subject to a grant by the per-share
dividend paid by us on our common stock. Dividend equivalents
may be paid to participants currently or may be deferred at the
discretion of the Committee. Dividend equivalents may be accrued
as a cash obligation, or may be converted to stock units, at the
discretion of the Committee. Unless the Committee determines
otherwise, deferred dividend equivalents will not accrue
interest. The Committee may provide that dividend equivalents
will be payable based on the achievement of performance goals.
The Committee may also provide that a participant may use
dividend equivalents to pay the exercise price of a stock
option. Dividend equivalents may be paid in cash or shares of
our common stock, or a combination of the two, at the discretion
of the Committee.
Stock Appreciation Rights: The Committee may grant stock
appreciation rights to anyone eligible to participate in the
Plan. Stock appreciation rights may be granted in connection
with, or independently of, any option granted under the Plan.
Upon exercise of a stock appreciation right, the grantee will
receive an amount equal to the excess of the fair market value
of our common stock on the date of exercise over the base amount
set forth in the grant agreement. The payment may be made in
shares of Common Stock, cash or a combination of cash and shares
of our common stock, as determined by the Committee. The
Committee will determine the period when stock appreciation
rights vest and become exercisable, the base amount for stock
appreciation rights and whether stock appreciation rights will
be granted in connection with, or independently of, any options.
The base amount of each stock appreciation right will be equal
to the per share exercise price of the related option or, if
there is no related option, an amount that is at least equal to
the value of a share of our common stock on the date of grant.
Stock appreciation rights may be exercised while the grantee is
our employee or an employee of a subsidiary or within a
specified period of time after termination of such employment or
service.
Other Stock-Based Awards: The Committee may grant other
stock-based awards that are based on or measured by the value
of, or payable in, shares of our common stock to employees or
directors. These other stock-based awards may be granted subject
to performance goals or other conditions. The Committee may also
grant dividend equivalents with respect to other stock-based
awards. Other stock-based awards may be paid in cash or in
shares of our common stock, or a combination of the two, at the
discretion of the Committee.
Deferrals: The Committee may permit a participant to
defer receipt of cash or shares that would otherwise be due to a
participant in connection with any grant. The Committee will
establish rules and procedures for any such deferrals consistent
with applicable requirements of Section 409A of the
Internal Revenue Code.
Transferability of Grants. Grants under the Plan are not
transferable by the participant except by will or the laws of
descent and distribution. Grants under the Plan may not be
pledged or otherwise encumbered by a participant or otherwise
subject to the claims of a participants creditors. The
Committee may provide in a grant agreement for the transfer of
non-qualified stock options to family members or charitable
institutions.
Qualified Performance-Based Compensation. The Committee
may determine that stock units, stock awards, dividend
equivalents, stock appreciation rights or other stock-based
awards granted to an employee will be considered qualified
performance-based compensation under Section 162(m)
of the Internal
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Revenue Code (see discussion of Section 162(m) under
Federal Income Tax Consequences below). For such
grants, the Committee will establish in writing, at the
beginning of the performance period: (1) the objective
performance goals that must be met in order for the grants to be
payable or the restrictions to lapse, (2) the period during
which performance will be measured, (3) the maximum amounts
that may be paid if the performance goals are met, and
(4) other conditions as the Committee deems appropriate.
The Committee may reduce, but not increase, the amount of
compensation that is payable upon achievement of the designated
performance goals.
The Committee will use objectively determinable performance
goals based on one or more of the following criteria, either in
absolute terms or in comparison to publicly available industry
standards or indices: earnings, revenue, operating margins and
statistics, operating or net cash flows, financial return and
leverage ratios, total stockholder returns, market share, or
strategic business criteria consisting of one or more Company or
business unit objectives based on meeting specified revenue
goals, market penetration goals, geographic business expansion
goals, cost targets, customer satisfaction goals, product
development goals, goals relating to acquisitions or
divestitures, or any other objective measure derived from any of
the foregoing criteria. The performance goals may relate to the
participants business unit or the performance of the
Company as a whole, or any combination.
Change of Control: If a change of control occurs, the
Committee may determine that (1) all outstanding options
will become fully exercisable, (2) the restrictions on all
outstanding stock awards will lapse, and (3) payment will
be made with respect to stock units, dividend equivalents or
other stock-based awards, in such amount and such form as may be
determined by the Committee provided that the payment amount
will deliver an equivalent value for the settled grant.
The Committee may determine that upon a change of control in
which we are not the surviving corporation (or we survive only
as a subsidiary of another corporation), all outstanding options
that are not exercised will be assumed by, or replaced with
comparable options by, the surviving corporation (or a parent or
subsidiary of the surviving corporation), and other grants that
remain outstanding will be converted to similar grants of the
surviving corporation (or a parent or subsidiary of the
surviving corporation).
In the event of a change of control, the Committee may require
that participants surrender their outstanding options in
exchange for a payment, in cash or stock, or the Committee may
terminate outstanding options after giving participants an
opportunity to exercise outstanding options. The Committee may
determine that participants holding stock units, dividend
equivalents or other stock-based awards will receive a payment
in settlement of the grants, in an amount and form determined by
the Committee.
A change of control is defined as:
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Any person, other than the Company and certain of its
affiliates, becomes the beneficial owner of 50% or more of our
outstanding stock or the voting power of our outstanding
securities. |
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Individuals who, as of December 2, 2005, constituted our
board of directors cease to constitute at least a majority of
our board of directors; provided, however, any change in the
members of the board of directors that is approved by at least a
majority of the board of directors (other than in connection
with an actual or threatened election contest) will be
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Completion of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets
of the Company (referred to as a corporate transaction) other
than a transaction in which (1) all or substantially all
our stockholders immediately before the transaction do not,
immediately after the transaction, own more than 60% of the then
outstanding shares and voting power of the surviving company, in
substantially the same proportions as their prior ownership of
our stock, (2) no person, other than the Company and
certain of its affiliates, beneficially owns 20% or more of our
outstanding stock or the voting power of our outstanding
securities, and (3) individuals who were members of the
incumbent board constitute at least a majority of the members of
the board of directors of the corporation resulting from the
corporate transaction. |
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Completion of a complete liquidation or dissolution of the
Company. |
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Other Corporate Transactions: In the event of an
acquisition or other corporate transaction, the Committee may
make grants to employees or directors in substitution for
outstanding grants made by the predecessor corporation, on such
terms as the Committee determines, including terms that vary
from the other terms and conditions of the Plan.
Amendment and Termination of the Plan: The Plan will
terminate on January 26, 2016. Our board may terminate or
amend the Plan earlier at any time. However, our board will not
amend the Plan without stockholder approval if stockholder
approval is required to comply with the Internal Revenue Code or
other applicable law or to comply with applicable stock exchange
requirements. The Plan may not be amended to permit repricing of
options granted under the Plan without stockholder approval.
The Plan must be reapproved by our stockholders no later than
the first stockholders meeting that occurs in the fifth year
following the year in which the stockholders previously approved
the qualified performance-based compensation
provisions of the Plan (as described above under Qualified
Performance-Based Compensation) if additional grants are
to be made as qualified performance-based
compensation and if required by Section 162(m) of the
Internal Revenue Code.
Federal Income Tax Consequences
The following description of the federal income tax consequences
of grants under the Plan is a general summary. State, local, and
other taxes may also be imposed in connection with grants. This
discussion is intended for the information of stockholders
considering how to vote at the annual meeting and not as tax
guidance to individuals who participate in the Plan.
Incentive Stock Options. There generally are no federal
income tax consequences to a participant or to the Company upon
the grant of an incentive stock option.
A participant will not recognize income for purposes of the
regular federal income tax upon the exercise of an incentive
stock option. However, for purposes of the alternative minimum
tax, in the year in which an incentive stock option is
exercised, the amount by which the fair market value of the
shares acquired upon exercise exceeds the exercise price will be
treated as an item of adjustment and included in the computation
of the recipients alternative minimum taxable income.
A participant will recognize income when he or she sells stock
acquired upon exercise of an incentive stock option. If the
shares acquired upon exercise of an incentive stock option are
disposed of after two years from the date the option was granted
and after one year from the date the shares were transferred
upon the exercise of the option, the participant will recognize
long-term capital gain or loss in the amount of the difference
between the amount realized on the sale and the exercise price.
The Company will not be entitled to any corresponding tax
deduction.
If a participant disposes of the shares acquired upon exercise
of an incentive stock option before satisfying both holding
period requirements (a disqualifying disposition), any gain
recognized on the disposition will be taxed as ordinary income
to the extent of the difference between the fair market value of
the shares on the date of exercise (or the sale price, if less)
and the exercise price. The Company generally will be entitled
to a deduction in that amount. The gain, if any, in excess of
the amount recognized as ordinary income will be a long-term or
short-term capital gain, depending upon the length of time the
shares were held before the disposition.
Nonqualified Stock Options: A participant who receives a
nonqualified stock option will recognize no income at the time
of the grant of the option. Upon exercise of a nonqualified
stock option, a participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the
shares of our stock on the date of exercise over the option
price. The basis in shares acquired upon exercise of a
nonqualified stock option will equal the fair market value of
such shares at the time of exercise, and the holding period of
the shares (for capital gain purposes) will begin on the date of
exercise. In general, the Company will be entitled to a business
expense deduction in the same amount and at the same time as the
participant recognizes ordinary income.
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Stock Units: A participant who receives a stock unit will
not recognize taxable income until the unit is paid to the
participant. When the unit is paid, the participant will
recognize ordinary income in an amount equal to the fair market
value of the stock and cash, if any, paid to the participant.
The Company generally will be entitled to a business expense
deduction in the same amount.
Stock Awards: A participant who receives a stock award
generally will not recognize taxable income until the stock is
transferable by the participant or no longer subject to a
substantial risk of forfeiture for federal tax purposes,
whichever occurs first. When the stock is either transferable or
is no longer subject to a substantial risk of forfeiture, the
participant will recognize ordinary income in an amount equal to
the fair market value of the shares at that time, less any
amounts paid for the shares. A participant may elect to
recognize ordinary income when a stock award is granted in an
amount equal to the fair market value of the shares at the date
of grant, determined without regard to the restrictions. The
Company generally will be entitled to a corresponding business
expense deduction in the year in which the participant
recognizes ordinary income.
Dividend Equivalents, Stock Appreciation Rights and Other
Stock-Based Awards: A participant will recognize ordinary
income when dividend equivalents, stock appreciation rights and
other stock-based awards are paid to the participant, in an
amount equal to the cash and the fair market value of any shares
paid to the participant. The Company generally will be entitled
to a corresponding business expense deduction when the
participant recognizes ordinary income.
Section 162(m): Section 162(m) of the Internal
Revenue Code generally disallows a public companys tax
deduction for compensation paid to the chief executive officer
and the four other most highly compensated executive officers in
excess of $1 million in any year. Compensation that
qualifies as qualified performance-based
compensation is excluded from the $1 million limit,
and, therefore, remains fully deductible by the company that
pays it. Assuming the Plan is approved by our stockholders, we
intend that options granted under the Plan will not be subject
to the Section 162(m) deduction limit, and we intend that
grants that are contingent on achievement of performance goals
as described in Qualified Performance-Based
Compensation above will not be subject to the
Section 162(m) deduction limit. Other grants under the Plan
may be subject to the deduction limit.
Section 409A: Section 409A of the Internal
Revenue Code imposes certain restrictions on deferred
compensation. We intend that all awards provided under the Plan
will satisfy the requirements of 409A of the Internal Revenue
Code. However, if an award of deferred compensation does not
comply with the requirements set forth in section 409A of
the Internal Revenue Code, the recipient of the deferred
compensation could be subject to a 20% excise tax on the amount
of compensation deferred, recognize immediate income on the
deferred compensation and accrue interest with respect to the
previously deferred compensation.
THE COMPANYS BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR ADOPTION OF THE 2006 OMNIBUS EQUITY COMPENSATION
PLAN.
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CORPORATE GOVERNANCE
Governance Principles
The Board of Directors Corporate Governance Guidelines,
which include guidelines for determining director independence
and qualifications for directors, are published on the Investor
Information Corporate Governance section of
Ballys website at www.ballyfitness.com. All of
Ballys other corporate governance materials, including the
committee charters and key practices, are also published on the
Investor Information Corporate Governance section of
Ballys website. These materials are also available in
print to any stockholder upon request. The Board regularly
reviews corporate governance developments and modifies its
Corporate Governance Guidelines, committee charters and key
practices as warranted. Any modifications are reflected on
Ballys website.
Director Independence
The Board of Directors has adopted standards for director
independence for determining whether a Director is independent
from management. These standards are based upon the listing
standards of the NYSE and applicable laws and regulations and
can be found in the Companys Corporate Governance
Guidelines. The Board of Directors has affirmatively determined,
based on these standards, that the following Directors are
independent: Mr. Burdick, Mr. Elson and
Mr. Langshur, all of whom are standing for election to the
Board, and Messrs. Deutsch, McAnally, Metz, J. Rogers and
S. Rogers, none of whom is standing for election to the Board.
The Board of Directors has also determined that Mr. Toback,
the Companys President and Chief Executive Officer, who is
not standing for election to the Board, is not independent.
Accordingly, eight of the nine Directors or nominees for
Director are independent. The Board has also determined that all
Board standing committees are composed entirely of independent
Directors.
Separate Sessions of Non-management Directors
The Corporate Governance Guidelines of the Company provide for
regular executive sessions of the non-management directors
without management participation. Consistent with the rules of
the NYSE, a non-management director is a director
who is not an officer of the Company within the
meaning of
Rule 16a-1(f)
under the Securities Act of 1933, as amended. The independent
Directors will meet in executive session at least four times
annually, and the Lead Independent Director, if appointed, shall
preside over such executive sessions. If a Lead Independent
Director has not been appointed, a non-employee director
selected by the non-employee directors will preside over such
sessions.
Code of Business Conduct, Practices and Ethics
All directors, officers and employees of Bally must act
ethically at all times and in accordance with the policies
comprising Ballys Code of Business Conduct, Practices and
Ethics (the Code), which is published on the
Investor Information Corporate Governance section of
Ballys website at www.ballyfitness.com and which is
available in print to any shareowner upon request. Any
transaction or personal relationship that might involve a
conflict of interest must be reviewed by the Audit Committee and
the Vice President of Internal Audit (the
Administrator) prior to consummation. Under the
Boards Corporate Governance Guidelines, any waivers of any
provision of the Code for directors or executive officers must
be approved by the Board or a committee of the board and must be
promptly disclosed to the Companys stockholders as
required by law or the rules of the NYSE.
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INFORMATION RELATING TO THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD
The business and affairs of the Company are managed by or under
the direction of the Board of Directors. The Boards goals
are to build long-term value for the Companys stockholders
and to assure the vitality of the Company for its customers,
employees and the other individuals and organizations that
depend on the Company. To achieve these goals, the directors
will monitor the performance of the Company by regularly
attending meetings of the Board and its committees and
consulting and communicating with the Chairman and other key
executives, outside auditors and external advisors such as legal
counsel and investment bankers.
The Board of Directors currently consists of eight directors,
seven of whom are independent under the NYSE listing standards.
The Board held twelve regularly scheduled meetings and no
special meetings during 2004. As of December 16, 2005, the
Board has held thirty-three regularly scheduled meetings and no
special meetings during 2005. Each director is expected to make
every effort to attend each Board meeting and each meeting of
any committee on which he or she sits. Each then-current
Director attended at least seventy-five percent meetings of the
Board of Directors and all committees on which the Director
served during 2004 and 2005 to date, other than
Mr. Looloian in 2005. Recently, due to a medical condition,
Mr. Looloian has not been actively participating in Board
or committee matters. All of the Directors then in office
attended the annual stockholder meeting in July 2004 and all
current Directors other than Mr. Looloian plan to attend
the annual meeting to be held on January 26, 2006.
The Board of Directors has the following committees: an Audit
Committee, a Compensation Committee, a Nominating and Corporate
Governance Committee, an Executive Committee and a Special
Demand Evaluation Committee. The general functions of the Audit
Committee, Compensation Committee and Nominating and Corporate
Governance Committee, the identity of such committees
members and the number of committee meetings held by such
committees during 2004 and to date in 2005 are set forth below.
Audit Committee
The current members of the Audit Committee are Mr. Langshur
(Chairman), Mr. Deutsch, Mr. Looloian,
Dr. McAnally and Mr. Metz. Mr. Langshur has been
a member of the Audit Committee since December 2004 and Chairman
since November 2005, succeeding Mr. Looloian. Mr. Metz
has been a member of the Audit Committee since December 2005.
During the year, the Board examined the membership of the Audit
Committee with regard to compliance with the NYSE rules
governing audit committees. Based upon this examination, the
Board confirmed that all members of the Audit Committee are
independent within the meaning of the NYSEs
rules. The Audit Committee assists the Board of Directors in
fulfilling its responsibility for oversight of the integrity of
the Companys financial statements, the Companys
compliance with legal and regulatory requirements, the
independent auditors qualifications and independence, and
the performance of the Companys internal audit function
and independent auditor. Additional responsibilities of the
Audit Committee are described in the revised charter of the
Audit Committee, which was approved by the Board of Directors on
January 28, 2004 and amended on March 8, 2005. A copy
of the charter of the Audit Committee is attached to this proxy
statement as Exhibit C and is also published on the
Companys website. The Audit Committee held eighteen
meetings during 2004 and to date, has held forty-two meetings in
2005.
The Board of Directors has determined that each member of the
Audit Committee is financially literate as such term
is defined in the listing standards of the NYSE. Additionally,
the Board of Directors has determined that Mr. Deutsch is
an audit committee financial expert under the
relevant rules of the SEC, and that at least Mr. Deutsch
has the requisite accounting/financial management expertise
required by the listing standards of the NYSE.
Compensation Committee
The current members of the Compensation Committee are
Mr. J. Rogers (Chairman), Mr. Deutsch,
Mr. Looloian, Dr. McAnally, Mr. Langshur and
Dr. S. Rogers. Mr. J. Rogers has been Chairman of the
Compensation Committee since July 2003. Mr. Langshur has
been a member of the Compensation Committee since December 2004.
Stephen Swid, formerly a director, was a member of the
Compensation
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Committee during 2004 and 2005, until his resignation as a
director in August of 2005. Dr. S. Rogers has been a member
of the Compensation Committee since December 2005. The Board has
determined that all members of the Compensation Committee are
independent within the meaning of the NYSEs
rules. On January 28, 2004, the Board approved a revised
Compensation Committee charter, pursuant to which the
Compensation Committee is authorized and directed to
(i) establish annual and long-term performance goals and
objectives for senior executives, (ii) evaluate the
performance of the Chief Executive Officer and other senior
executives in light of the approved performance goals and
objectives, (iii) set the compensation of the Chief
Executive Officer and other senior executives of Bally based
upon the evaluation of the performance of the Chief Executive
Officer and the other senior executives, respectively,
(iv) make recommendations to the Board of Directors with
respect to compensation, incentive compensation plans and
equity-based compensation plans for other Bally officers,
(v) prepare an annual self-evaluation of the Compensation
Committee, (vi) administer and review Ballys stock
option, bonus and long-term incentive compensation plans,
(vii) grant options and awards under all such plans and
(viii) approve all amendments to, and termination of, all
such plans. The Compensation Committee held six meetings during
2004 and to date, has held five meetings in 2005.
Nominating and Corporate Governance Committee
The current members of the Nominating and Corporate Governance
Committee are Dr. McAnally (Chairman), Mr. Looloian,
Mr. Deutsch, Mr. J. Rogers and Dr. S. Rogers.
Stephen Swid, formerly a director, was a member of the
Nominating and Corporate Governance Committee during 2004 and
2005, until his resignation as a director in August of 2005.
Dr. S. Rogers has been a member of the Nominating and
Corporate Governance Committee since December 2005. The Board of
Directors has determined that all members of the Nominating and
Corporate Governance Committee are independent
within the meaning of the NYSEs rules. The general
functions of the Nominating and Corporate Governance Committee
include recommending to the Board of Directors nominees for
election as Directors, consideration of the performance of
incumbent Directors in determining whether to nominate them for
re-election and making recommendations with respect to corporate
governance and organization and size of the Board of Directors
and its committees. The Nominating and Corporate Governance
Committee is also responsible for the Companys Corporate
Governance Guidelines, including reviewing them on at least an
annual basis and recommending changes as necessary. The
Nominating and Corporate Governance Committee held six meetings
during 2004 and to date, has held ten meetings in 2005.
On January 28, 2004, the Board of Directors approved a
charter for the Nominating and Corporate Governance Committee in
compliance with the listing standards of the NYSE. The
Companys Corporate Governance Guidelines include policies
with regard to stockholder recommendations of nominees to the
Board of Directors. On May 12, 2005, the Nominating and
Corporate Governance Committee Charter was amended to revise the
criteria used to evaluate candidates for nomination as directors.
The Nominating and Corporate Governance Committee will consider
nominees to the Board of Directors recommended by stockholders.
A recommendation will be considered if submitted in writing
addressed to Bally in care of Nominating and Corporate
Governance Committee, accompanied by a description of the
proposed nominees qualifications and other relevant
biographical information, and a written indication of the
consent of the proposed nominee. The Company has hired Russell
Reynolds, a search firm, to help identify and evaluate potential
nominees. Candidates for nomination as director are considered
on the basis of the following criteria, among others the
Nominating and Corporate Governance Committee deems appropriate,
including the specific needs of the Board at the time:
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wisdom, capability and integrity within their field or
profession; |
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broad business, management and/or public service experience; |
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general understanding of marketing, finance and other elements
necessary to the success of a publicly held company; |
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practical and mature business judgment; |
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represents no specific constituency other than the stockholders
generally; |
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no conflicts of interest or legal impediments that might
preclude service as a director; |
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ability and willingness to devote the time required to serve
effectively as a director and as a member of one or more
committees of the Board; and |
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diversity, experience or skills complementary to those of other
Board members. |
On the basis of the information gathered in this process, the
Nominating and Corporate Governance Committee will determine
which nominees to recommend to the Board. Recommendations
received prior to any Nominating and Corporate Governance
Committee meeting where director nominees are to be considered
will be considered at that meeting. The Nominating and Corporate
Governance Committee uses the same process for evaluating all
nominees, regardless of the source of the recommendation.
Contacting the Board of Directors
Stockholders who wish to communicate with the Board of Directors
may do so by sending written communications to the Board of
Directors at the following address: Board of Directors,
c/o Corporate Secretary, Bally Total Fitness Holding
Corporation, 8700 West Bryn Mawr Avenue, Chicago, Illinois
60631. Stockholders who wish to direct communications to only
the independent directors of Bally may do so by sending written
communications to the independent directors at the following
address: Independent Directors, c/o Corporate Secretary,
Bally Total Fitness Holding Corporation, 8700 West Bryn
Mawr Avenue, Chicago, Illinois 60631. Inquiries sent by mail
will be reviewed, sorted and, if appropriate, summarized by the
Companys Secretary before they will be forwarded to the
Board or an individual director.
Web-site Access to Charters
The charters for each of the standing committees of the Board of
Directors as well as our Corporate Governance Guidelines and
Code of Business Conduct, Practices and Ethics may be accessed
through our web-site at www.ballyfitness.com. Additionally,
copies may be requested in writing by submitting the request to
Corporate Secretary, Bally Total Fitness Holding Corporation,
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631.
Compensation of Directors
In 2004, members of the Board who were also employees of Bally
did not receive any additional compensation for service on the
Board or any committees of the Board. Members of the Board who
were not employees of Bally received an annual retainer of
$30,000, a $2,000 stipend for each Board meeting attended and
$1,000 for each committee meeting attended (providing such
committee meeting was not scheduled in conjunction with a Board
meeting). Non-employee directors also received additional
stipends for service on committees of the Board of
$1,000 per year for committee members or $2,000 per
year for committee chairman. Also, pursuant to Ballys 1996
Non-Employee Directors Stock Option Plan (the
Directors Plan), each non-employee director of
Bally is granted an option to purchase 5,000 shares of
common stock upon the commencement of service on the Board, with
another option to purchase 5,000 shares of common
stock granted on the second anniversary thereof. Additional
grants of options may be made from time to time pursuant to the
Directors Plan. Options under the Directors Plan are
generally granted with an exercise price equal to the closing
price in the Wall Street Journal on the date prior to the grant.
Option grants under the Directors Plan become exercisable
in three equal annual installments commencing one year from the
date of grant and have a
10-year term.
In 2005, the Company increased the stipend for non-employee
directors serving as committee chairmen from $2,000 to
$7,500 per year. In addition, as of November 30, 2005,
the following additional compensation for non-employee directors
became effective: (i) for the 2005 fiscal year, an
additional $50,000 cash retainer, (ii) the audit committee
chairman stipend was raised to $25,000, (iii) subject to
stockholder approval of an equity compensation plan, for fiscal
years ending after December 31, 2005, an annual grant of
$30,000 of equity compensation in the form of restricted stock
and/or options, and (iv) subject to stockholder approval of
21
an equity compensation plan, a grant of $20,000 of restricted
stock in 2006 and 2007. The annual retainer in 2006 will revert
to $30,000.
In addition to the retainers and fees listed above, the Company
reimburses the directors for their travel expenses incurred in
attending meetings of the Board or its committees, as well as
for fees and expenses incurred in attending director education
seminars and conferences. The directors do not receive any other
personal benefits.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth, for each of the years indicated,
the compensation paid by the Company to our Chief Executive
Officer and the four other most highly compensated executive
officers of Bally (the Named Executive Officers).
During these years, these officers were compensated in
accordance with our plans and policies.
Summary Compensation Table
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Long-Term | |
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Compensation Awards | |
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Annual Compensation | |
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Restricted | |
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Securities | |
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Other Annual | |
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Stock | |
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Underlying | |
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All Other | |
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Salary |
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Bonus | |
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Compensation | |
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Awards | |
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Options | |
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Compensation | |
Name and Principal Position |
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Year |
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($) |
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($)(1) | |
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($)(2) | |
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($)(3) | |
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(#) | |
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($)(4) | |
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Paul A. Toback
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2004 |
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575,000 |
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400,000 |
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Chairman, President, and |
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2003 |
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475,000 |
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300,000 |
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1,206,000 |
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200,000 |
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Chief Executive Officer |
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2002 |
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300,000 |
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300,000 |
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14,915 |
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William G. Fanelli(5)
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2004 |
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325,000 |
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200,000 |
(6) |
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1,000 |
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Acting Chief |
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2003 |
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325,000 |
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163,125 |
(6) |
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361,800 |
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120,000 |
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25,077 |
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Financial Officer |
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2002 |
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250,000 |
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160,000 |
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21,500 |
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Cary A. Gaan(7)
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2004 |
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375,000 |
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100,000 |
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751,000 |
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Senior Vice President, |
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2003 |
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375,000 |
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160,000 |
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361,800 |
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120,000 |
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1,000 |
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Secretary and General Counsel |
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2002 |
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325,000 |
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160,000 |
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1,000 |
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Harold Morgan
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2004 |
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300,000 |
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175,000 |
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1,000 |
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Senior Vice President, |
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2003 |
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300,000 |
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146,250 |
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361,800 |
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120,000 |
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1,000 |
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Chief Administrative Officer |
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2002 |
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225,000 |
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160,000 |
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1,000 |
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John H. Wildman
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2004 |
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325,000 |
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175,000 |
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Senior Vice President, |
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2003 |
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325,000 |
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138,125 |
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361,800 |
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120,000 |
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Chief Operating Officer |
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2002 |
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250,000 |
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165,000 |
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(1) |
The 2004 bonus represents the bonus earned in 2004 and paid in
March 2005. The 2003 bonus represents the bonus earned in 2003
and paid in April 2004. The 2002 bonus represents the bonus
earned in 2002 and paid in March 2003. |
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(2) |
Certain incidental personal benefits to executive officers of
Bally may result from expenses incurred by Bally in the interest
of attracting and retaining qualified personnel. These
incidental personal benefits made available to the Named
Executive Officers during 2004 are not described herein because
the incremental cost to Bally of such benefits did not exceed
the lesser of $50,000 or 10% of the total salary and bonus
during any reported year. |
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(3) |
These restricted shares were issued in the respective
recipients name and are held by Bally until the
restrictions lapse. Bally has not paid cash dividends, however,
were we to do so, we would pay dividends on restricted shares at
the same rate paid on all other Bally common shares. The
restrictions on these shares lapse four years after the date of
issuance, upon a change in control (as defined in the 1996 Plan)
of Bally, or the respective recipients death or
termination of employment other than for cause. The restriction
with respect to 100,000 of the shares issued to Mr. Toback
in 2003 lapse solely upon a change in control of Bally. On
December 31, 2004, the Named Executive Officers owned the
number of shares |
22
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set forth in the table below. The market value is based on the
closing price of a Bally common share of $4.24 on
December 31, 2004, the last trading day prior to the end of
the 2004 fiscal year. |
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Mr. Toback | |
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Mr. Fanelli | |
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Mr. Gaan | |
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Mr. Morgan | |
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Mr. Wildman | |
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Number of shares
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290,000 |
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125,000 |
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82,500 |
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90,000 |
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95,000 |
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Market value
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1,229,600 |
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$ |
530,000 |
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$ |
349,800 |
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$ |
381,600 |
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$ |
402,800 |
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During 2005, the acquisitions of Bally common stock by each of
Liberation Investments Group, LLC, Liberation Investments Ltd.,
Liberation Investments, L.P. and Emanuel R. Pearlman
(Liberation) and Pardus Capital Management L.P. to
levels in excess of 10% of Ballys outstanding common stock
constituted a change in control under the 1996
Long-Term Incentive Plan and the Inducement Plan, resulting in
the lapse of the restrictions on all previously issued shares of
restricted stock, including the shares set forth in the table
above and 35,000 shares of restricted stock granted to
Mr. Pearlman in 1998 while serving as a consultant to the
Company. As of December 16, 2005, Mr. Toback,
Mr. Fanelli, Mr. Gaan, Mr. Morgan and
Mr. Wildman owned 135,000, 40,000, 50,603, 55,921 and
60,000 shares, respectively, with a market value of
$892,350, $264,400, $334,486, $369,638 and $396,600,
respectively. The market value is based on the closing price of
a Bally common share of $6.61 on December 16, 2005. |
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(4) |
Represents amounts matched by Bally in connection with
participation in Ballys savings plans. |
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(5) |
Since March 28, 2005, William G. Fanelli has served as
Senior Vice President of Planning and Development. |
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(6) |
Includes a $25,000 bonus for serving as Acting Chief Financial
Officer. |
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(7) |
Since January 1, 2005, Cary A. Gaan has served as Senior
Vice President, Special Counsel to the President. |
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(8) |
Includes $750,000 paid in connection with Mr. Gaans
resignation as Senior Vice President, Secretary and General
Counsel pursuant to his amended employment agreement. |
The Company has not, and will not before the date of the annual
meeting, definitively determine who will be the four most highly
compensated executive officers (other than the chief executive
officer) in 2005. However, based solely on salary, the Company
believes that the four most highly compensated officers (other
than the chief executive officer) will be Mr. Landeck,
Mr. Morgan, Mr. Bassewitz and Mr. McDonald. In
2005, the salaries of Mr. Toback and the four most highly
compensated officers are as follows: $575,000 for
Mr. Toback, $400,000 on an annualized basis for
Mr. Landeck; $350,000 for Mr. Morgan; $350,000 for
Mr. Bassewitz; and $350,000 on an annualized basis for
Mr. McDonald. To date in 2005, Mr. Toback,
Mr. Landeck, Mr. Morgan, Mr. Bassewitz and
Mr. McDonald have received grants of 255,000, 155,000,
110,000, 165,000 and 155,000 shares of restricted stock,
respectively, and options for 232,000, 98,000, 113,000, 73,000
and 43,000 shares, respectively. Except for the tax
gross-up payments
related to the vesting of restricted stock referred to below and
incidental personal benefits, to date in 2005, Mr. Toback
and Mr. Morgan have not received any other compensation.
Except for a signing bonus of $25,000 paid to Mr. McDonald
in 2005 and incidental personal benefits, to date in 2005,
Mr. Landeck, Mr. Bassewitz and Mr. McDonald have
not received any other compensation. Incidental personal
benefits made available to Mr. Toback, M. Landeck,
Mr. Morgan, Mr. Bassewitz and Mr. McDonald during
2005 are not described herein because the incremental cost to
Bally of such benefits has not to date exceeded and is not
expected to exceed the lesser of $50,000 or 10% of the total
salary and bonus.
Employment Agreements
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Employment Agreement with Paul Toback |
On August 24, 2004, Bally entered into an employment
agreement with Mr. Toback to provide for him to continue as
Ballys President and Chief Executive Officer through
December 31, 2007. The termination date under
Mr. Tobacks prior employment agreement with Bally was
December 31, 2005. Mr. Toback and Bally terminated the
prior agreement and Bally did not incur any termination
penalties in connection with the termination. As in the prior
agreement, the term of this agreement will be automatically
extended each year for an additional 12 months commencing
December 31, 2007 unless either party provides notice of
intent not to renew at least 90 days prior to the
then-current termination date. The agreement provides for an
annual
23
base salary of $575,000, subject to increases at the discretion
of Bally, an annual incentive payment of up to 70% of
Mr. Tobacks base salary based on performance criteria
established by the Board, a tax
gross-up payment for
income taxes relating to the vesting of restricted stock and
additional perquisites.
If Mr. Tobacks employment is terminated by the
Company for other than cause and other than within two years
following a change in control, he will be entitled to
receive a lump sum payment equal to (i) the full amount of
the annual bonus for the immediately preceding calendar year if
such termination occurs prior to the payment of the bonus,
(ii) two times the sum of Mr. Tobacks annual
salary and target bonus, and (iii) compensation for any
unused earned vacation days. In addition, his outstanding
options and restricted stock will automatically become fully
vested, the exercise period of his options will continue for the
period he otherwise would have been able to exercise his options
if he remained employed and he will be entitled to continued
health coverage for a period equal to the period he was employed
by the Company. Under the employment agreement, cause is defined
as the conviction of a crime, the intentional or grossly
negligent disclosure of confidential or trade secret information
of the Company to anyone not entitled to such information, the
omission or dereliction of any duty of loyalty to the Company;
the failure to cure a material violation of the Companys
Code of Conduct or any other written Company policy within
thirty (30) days following the Companys written
notice to Mr. Toback of such material violation and the
steps required by Mr. Toback to effect such cure, or the
repeated failure to carry out the material components of his
duties despite specific written notice to do so by the Board.
In the event that Mr. Toback terminates his employment for
good reason or the Company terminates his employment for other
than cause within two years following a change in
control, Mr. Toback will be paid a lump sum payment equal
to (i) the full amount of the annual bonus for the
immediately preceding calendar year if such termination occurs
prior to the payment of the bonus, (ii) three times the sum
of Mr. Tobacks annual salary and target bonus, and
(iii) compensation for any unused earned vacation days. In
addition, his outstanding options and restricted stock will
automatically become fully vested, the exercise period of his
options will continue for the period he otherwise would have
been able to exercise his options if he remained employed, he
will be entitled to continued health coverage for a period equal
to the period he was employed by the Company and he will be
entitled to outplacement services. If it is determined that any
payment, distribution or benefit received by the executive from
the Company pursuant to his agreement or any stock award or
option plan would result in the imposition of excise tax, the
Company will pay the executive an additional amount such that
Mr. Toback will have sufficient funds, after paying all
additional taxes, in order to pay that excise tax. In connection
with the vesting of restricted stock in 2005, the Company made a
tax gross-up payment to
Mr. Toback of $838,777.
In the event Mr. Toback resigns without good reason on or
after July 1, 2005, he will be entitled to receive no less
than 60% of the sum of his annual salary plus target annual
bonus for the then-current calendar year, and may, upon Board
approval, receive payment greater than 60% of the sum of his
annual salary and target annual bonus upon giving ninety
(90) days advance written notice of his resignation
date. If Mr. Tobacks employment terminates on the
expiration date of the agreement, other than for cause, he will
be entitled to receive, one times his annual salary, payment of
the full amount of his annual bonus for the immediately
preceding calendar year if such termination occurs prior to the
payment of the bonus, payment of his unused vacation days and
medical benefits for a period of three years.
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Employment Agreement with Cary Gaan |
On November 24, 2004, Bally entered into an addendum to the
employment agreement with Mr. Gaan. The addendum provides
that Mr. Gaan resigned his position as Senior Vice
President, Secretary and General Counsel effective as of
January 1, 2005, and assumed the responsibilities and title
of Senior Vice President, Special Counsel to the President at a
reduced salary. The addendum recognizes that Mr. Gaan
received a payment in the amount of $750,000 in lieu of any
payment he would have been entitled to receive if an expiration
notice had been delivered by him or Bally stating that the
agreement would expire on the last day of the one year period
commencing on the date of delivery of such notice. The addendum
also amended the agreement to provide that if Bally terminated
Mr. Gaans employment for any reason other than for
cause or if Mr. Gaan delivered an expiration notice to
Bally, Bally would pay Mr. Gaan (i) his salary earned
but unpaid
24
through his termination date, (ii) any earned but unpaid
bonus for the previous year, (iii) any accrued but unused
vacation, (iv) any unreimbursed expenses incurred before
the last date of employment, (v) a prorated target bonus
for the year in which the termination of employment occurs and
(vi) continuation of group health coverage for a period of
18 months. Mr. Gaan is not entitled to receive any
further severance payments in connection with a termination of
employment. The term of Mr. Gaans employment
agreement, as revised, expires on December 31, 2005.
Commencing on January 1, 2006, the term of his agreement
extends each day by one day to create a new one-year term.
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Employment Agreements with Other Senior Executives |
Bally has entered into employment agreements with Carl Landeck,
Harold Morgan, Marc Bassewitz and Jim McDonald, effective as of
March 28, 2005, January 1, 2005, January 1, 2005
and May 2, 2005, respectively, for terms of three years
through December 31, 2007 with respect to Harold Morgan and
Marc Bassewitz, for a term of approximately three and a half
years through December 31, 2008 with respect to Carl
Landeck, and for a term of approximately three years through
May 1, 2008 with respect to Jim McDonald. The term of each
employment agreement will be automatically extended each year
for an additional 12 months on the anniversary date of the
respective termination date unless either party provides notice
of intent not to renew at least ninety (90) days prior to
the then-current termination date. In previous years, Bally
entered into employment agreements with both William Fanelli and
John Wildman, effective as of January 1, 2003 for a term of
three years through December 31, 2005. Commencing
January 1, 2005, the term of these older employment
agreements are extended each day by one day to create a new one
year term. At any time at or after January 1, 2005, Bally
or either Mr. Fanelli or Mr. Wildman may deliver
notice to the other party that the employment period shall
expire on the last day of the one year period commencing on the
date of delivery of such notice.
The foregoing agreements provide for an annual base salary
($325,000 for both Mr. Fanelli and Mr. Wildman;
$400,000 for Mr. Landeck; $350,000 for Mr. Morgan;
$350,000 for Mr. Bassewitz; and $350,000 for
Mr. McDonald), subject to increases at the discretion of
Bally, and a bonus payable at the discretion of Bally. In the
event of a termination of employment by the executive for good
reason or by the Company for other than cause within two years
following a change in control of Bally, the executive will be
paid a lump sum payment equal to (i) the full amount of the
annual bonus for the immediately preceding calendar year if such
termination occurs prior to the payment of the bonus, plus
(ii) two times the executives annual salary and
target bonus, plus (iii) compensation for any unused earned
vacation days. If it is determined that any payment,
distribution or benefit received by the executive from the
Company pursuant to his agreement or any stock award or option
plan would result in the imposition of excise tax, the Company
will pay the executive an additional amount related to the
excise tax. In addition, Mr. Morgan may voluntarily end his
employment within 120 days after Mr. Toback is no
longer the Chief Executive Officer of the Company and be paid a
lump sum amount equal to no less than 60% of the sum of his
annual salary plus target annual bonus for the then-current
calendar year, and may, upon Board approval, receive payment
greater than 60% of the sum of his annual salary and target
annual bonus upon giving sixty (60) days advance
written notice of his resignation date. Mr. Morgan is also
entitled to certain tax
gross-up payments for
income taxes relating to the vesting of his shares of restricted
stock. In connection with the vesting of restricted stock in
2005, the Company made a tax
gross-up payment to
Mr. Morgan of $296,641. Mr. McDonald will also receive
a guaranteed minimum bonus of $150,000 for fiscal 2005, payable
in March 2006, and received a $25,000 signing bonus upon
commencement of his employment. Mr. Landeck will also
receive a guaranteed minimum bonus of $100,000 for fiscal 2005,
payable in March 2006. In November 2005, the Company amended the
employments contracts with Messrs. Toback, Landeck,
Bassewitz, Morgan and McDonald to (i) include specific
language regarding the Company-provided disability insurance
memorializing the Companys standard policy and
(ii) eliminate an exception from the definition of
Change in Control for issuances of equity by the
Company.
25
Termination of Payments to Lee Hillman and John Dwyer
Effective December 11, 2002, Lee Hillman resigned as
Chairman and Chief Executive Officer. Effective April 28,
2004, John Dwyer resigned as Executive Vice President, Chief
Financial Officer and Director. In connection with the
resignations of Mr. Hillman and Mr. Dwyer, each of
them entered into a severance agreement with the Company.
Mr. Hillmans agreement provided that he would receive
certain benefits through December 31, 2005.
Mr. Dwyers agreement provided that he would be
available to consult with the Company through December 31,
2005. On February 8, 2005, the Company announced that its
Audit Committee investigation found multiple accounting errors
in the Companys financial statements and concluded that
both Mr. Hillman, as the former Chief Executive Officer and
Director, and Mr. Dwyer, as the former Chief Financial
Officer, were primarily responsible. In addition, the
investigation found, among other things, that certain accounting
policies and positions were suggested and implemented without a
reasonable empirical basis and concluded that Mr. Dwyer
made a false and misleading statement to the SEC. As a result of
these findings, the Company decided to make no further payments
to either Mr. Hillman or Mr. Dwyer under each of the
respective severance agreements.
Long-Term Incentive Plan
In January 1996, the Board of Directors of the Company adopted
the 1996 Long-Term Incentive Plan (the Incentive
Plan). The Incentive Plan provides for the grant of
non-qualified stock options, incentive stock options and
compensatory restricted stock awards (collectively
Awards) to officers and key employees of the
Company. Initially, 2,100,000 shares of common stock were
reserved for issuance under the Incentive Plan. The Incentive
Plan expires on January 3, 2006.
In November 1997, June 1999, December 2000 and June 2002 the
Incentive Plan was amended to increase the aggregate number of
shares of common stock that may be granted under the Incentive
Plan to an aggregate of 8,600,000 shares. At
December 5, 2005, 59,461 shares of common stock were
available for future grant under the Incentive Plan. Awards may
not be granted under the Incentive Plan after January 3,
2006.
Pursuant to the Incentive Plan, non-qualified stock options are
generally granted with an exercise price equal to or greater
than the fair market value of the common stock at the date of
grant. Incentive stock options must be granted at not less than
the fair market value of the common stock at the date of grant.
Option grants become exercisable at the discretion of the
Compensation Committee, generally in three equal annual
installments commencing one year from the date of grant. Option
grants in 2004, 2003 and 2002 have
10-year terms.
There were no grants made to the Named Executive Officers under
the 1996 Long-Term Incentive Plan in 2004. On March 8,
2005, the Companys Compensation Committee approved the
grant of a total of 1,027,000 stock options and shares of
restricted stock under the Companys 1996 Long-Term
Incentive Plan, including 395,000 stock options and
245,000 shares of restricted to the named executive
officers as of December 31, 2004. The exercise price of the
stock options was set at a 20% premium to the closing price of
the Companys common stock on the NYSE at March 7,
2005. The restrictions applicable to those restricted shares
lapsed in May 2005 under the terms of the Plans change in
control provisions. See Summary Compensation Table, Note 3.
On November 29, 2005, having not previously made any grants
in respect of 2005, the Companys Compensation Committee
approved the grant of a total of 1,022,000 stock options and
shares of restricted stock under the Companys 1996
Long-Term Incentive Plan, including 150,000 stock options and
330,000 shares of restricted stock to the named executive
officers as of December 31, 2004. The exercise price of the
stock options was set at $7.01, the closing price of the
Companys common stock on the NYSE at November 28,
2005.
Inducement Plan
On March 8, 2005, the Companys Compensation Committee
adopted an Inducement Plan as a means of providing equity
compensation in order to induce the acceptance and continuation
of employment of newly
26
hired officers and key employees of the Company and its
affiliates. The Company adopted the Inducement Plan because of
the 1996 Long-Term Incentive Plans potential lack of
sufficient shares available to provide necessary equity
inducement for new employees. Stockholder approval of the
Inducement Plan was not required under the rules of the NYSE.
Under the Inducement Plan, the Company (with the approval of the
Board of Directors, the Compensation Committee and/or their
delegates, hereinafter Administrator) may grant
common stock as a material inducement to eligible employees,
either from time to time in the discretion of the Administrator
or automatically upon the occurrence of specified events. The
Administrator in its sole discretion determines whether an award
may be granted, the number of shares of common stock awarded,
the date an award may be exercised, vesting periods, and
exercise price.
The Inducement Plan became effective upon its adoption and
continues for a 10-year
term ending March 8, 2015. The Inducement Plan provides for
the issuance of up to 600,000 shares of the Companys
common stock, and as of November 29, 2005, 385,000
restricted shares and stock options covering an additional
153,000 shares have been granted which includes the grant
of 55,000 restricted shares and 23,000 stock options under the
Plan to the Companys Chief Financial Officer pursuant to
his original employment arrangement with the Company. The
restrictions applicable to 330,000 of these restricted shares
lapsed in May and September 2005 under the terms of the
Plans change in control provision. See Summary
Compensation Table, Note 3.
Management Retirement Savings Plan
The Bally Total Fitness Holding Corporation Management
Retirement Savings Plan (the Retirement Plan) was a
deferred compensation plan designed to permit a select group of
management or highly compensated employees to enhance the
security of themselves and their beneficiaries following
retirement or other termination of their employment. The
Retirement Plan was intended to be an unfunded employee
pension benefit plan under the Employee Retirement Income
Security Act of 1974, as amended, and was maintained by Bally.
The Board, in its sole discretion, designated those members of
management or highly compensated employees who were eligible to
participate in the Retirement Plan.
The Company terminated the Retirement Plan as of August 23,
2004, per the decision of a majority of participants. In
accordance with its agreements, Bally funded the matching
contributions for 2003 to each participants account and no
matching contributions were made for 2004. In addition, as of
August 23, 2004, all matching contributions (whether vested
or unvested at the time) became 100% vested. As a result, all
monies in the plan were distributed to the participants. The
distribution was not subject to the 10% withdrawal penalty but
the monies distributed were classified as taxable income to each
participant for the year 2004 as required by the Internal
Revenue Service. Income received from the plan did not meet the
government requirements for rollover into an IRA, 401(k) or
other tax deferred retirement savings due to the
nonqualified nature of the Retirement Plan.
Annual Incentive Compensation for Fiscal Year 2004
The Company provides annual cash incentive compensation (the
Cash Bonus) for executive officers and other
employees in accordance with the established methodologies
approved by the Compensation Committee. The purpose of the Cash
Bonus is to provide an additional performance incentive for
certain senior executive and other key employees of Bally (the
Participants), as determined by the Compensation
Committee and based upon the recommendation of Ballys
management.
Each Participant has an annual target Cash Bonus amount that is
a percentage of his or her base salary. For 2004, the
Compensation Committee set target Cash Bonus levels consistent
with prior years at 70% of base salary for the CEO and 50% of
base salary for senior vice presidents. Fifty percent of the
Cash Bonus was paid in accordance with achievement of financial
performance targets, consisting of a percentage of EBIDTA and
gross committed revenues, as defined by the Compensation
Committee, and 50% of the Cash Bonus was paid in accordance with
the achievement of personal performance targets, as defined by
the Compensation Committee. Consistent with prior years, the
actual Cash Bonus payments may range from 0% to 150% of the
27
target Cash Bonus level, depending on the level of achievement
versus the established goals. For 2004, the Company paid the
following Cash Bonuses under the plan: $400,000 to
Mr. Toback: $175,000 to Mr. Fanelli: $100,000 to
Mr. Gaan: $175,000 to Mr. Wildman and $175,000 to
Mr. Morgan. The Cash Bonus amounts for 2004 were awarded on
March 8, 2005.
Annual Incentive Compensation for Fiscal Year 2005
Because the Cash Bonuses are determined in accordance with
achievement of financial targets in 2005, the Compensation
Committee will not determine the Cash Bonuses for 2005 until
complete financial information for 2005 becomes available. Thus,
the annual incentive compensation for fiscal year 2005 is not
available at the time of the filing of this proxy statement and
will not become available before the date of the annual meeting.
Stock Option and SAR Grants
No grants were made in fiscal 2004. As described above, on
March 8, 2005, the Companys Compensation Committee
approved stock option grants, including the grant of 395,000
options under the Companys 1996 Long-Term Incentive Plan
to the named executive officers as of December 31, 2004.
The exercise price of the options was set at a 20% premium to
the closing price of the Companys common stock on the NYSE
at March 7, 2005. As described above, effective as of
November 29, 2005, having not previously made any grants in
respect of 2005, the Companys Compensation Committee
approved the grant of a total of 150,000 stock options to the
named executive officers as of December 31, 2004. The
exercise price of the stock options was set at $7.01, the
closing price of the Companys common stock on the NYSE at
November 28, 2005.
Stock Option and SAR Exercises
The following table sets forth certain information concerning
exercises of stock options during 2004 and the first
11 months of 2005 by each of the Named Executive Officers
and their stock options outstanding as of December 31, 2004
and November 30, 2005. There have been no stock
appreciation rights granted by Bally to date.
Aggregated Option Exercises in Last Fiscal Year and
Option Values at End of Last Fiscal Year
|
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|
Number of Securities | |
|
Value of Unexercised | |
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|
|
|
|
|
Underlying Unexercised | |
|
In-the-Money Options | |
|
|
Shares | |
|
|
|
Options at December 31, 2004 | |
|
at December 31, 2004(1) | |
|
|
Acquired on | |
|
Value | |
|
| |
|
| |
Name |
|
Exercise (#) | |
|
Realized ($) | |
|
Exercisable (#) | |
|
Unexercisable (#) | |
|
Exercisable ($) | |
|
Unexercisable ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Paul A. Toback
|
|
|
0 |
|
|
|
0 |
|
|
|
186,668 |
|
|
|
303,332 |
|
|
|
0 |
|
|
|
0 |
|
Cary A. Gaan(2)
|
|
|
0 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
105,000 |
|
|
|
0 |
|
|
|
0 |
|
William G. Fanelli(3)
|
|
|
0 |
|
|
|
0 |
|
|
|
175,000 |
|
|
|
140,000 |
|
|
|
1,725 |
|
|
|
0 |
|
John H. Wildman
|
|
|
0 |
|
|
|
0 |
|
|
|
165,000 |
|
|
|
140,000 |
|
|
|
4,025 |
|
|
|
0 |
|
Harold Morgan
|
|
|
0 |
|
|
|
0 |
|
|
|
155,000 |
|
|
|
160,000 |
|
|
|
4,025 |
|
|
|
0 |
|
|
|
(1) |
Based on the closing price of Bally common stock on the New York
Stock Exchange on December 31, 2004, which was
$4.24 per share. |
|
(2) |
Cary A. Gaan served as Senior Vice President, Secretary and
General Counsel of the Company from 1977 through
December 31, 2004. Mr. Gaan currently serves as Senior
Vice President, Special Counsel to the President. |
|
(3) |
William G. Fanelli served as acting Chief Financial Officer from
April 2004 through March 2005. Mr. Fanelli currently serves
as Senior Vice President, Planning and Development. |
28
Aggregated Option Exercises as of December 16, 2005
and
Option Values as of December 16, 2005
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|
|
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|
|
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|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
|
|
|
|
Underlying Unexercised | |
|
In-the-Money Options | |
|
|
Shares | |
|
|
|
Options at December 16, 2005 | |
|
at December 16, 2005(1) | |
|
|
Acquired on | |
|
Value | |
|
| |
|
| |
Name |
|
Exercise (#) | |
|
Realized ($) | |
|
Exercisable (#) | |
|
Unexercisable (#) | |
|
Exercisable ($) | |
|
Unexercisable ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Paul A. Toback
|
|
|
0 |
|
|
|
0 |
|
|
|
253,334 |
|
|
|
298,666 |
|
|
|
38,000 |
|
|
|
427,000 |
|
Carl J. Landeck
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
98,000 |
|
|
|
0 |
|
|
|
277,500 |
|
Harold Morgan
|
|
|
36,000 |
|
|
|
99,243 |
|
|
|
159,000 |
|
|
|
143,000 |
|
|
|
22,230 |
|
|
|
203,400 |
|
Marc D. Bassewitz
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
73,000 |
|
|
|
0 |
|
|
|
137,500 |
|
James A. McDonald
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
43,000 |
|
|
|
0 |
|
|
|
74,000 |
|
|
|
(1) |
Based on the closing price of Bally common stock on the New York
Stock Exchange on December 16, 2005, which was
$6.61 per share. |
Compensation Committee Interlocks and Insider
Participation
During 2004, the following directors (none of whom was or had
been an officer or employee of the Company or any of its
subsidiaries) served on the Companys Compensation
Committee: John W. Rogers, Jr., Barry M. Deutsch
(since May 2004), Martin Franklin (resigned April 2004),
J. Kenneth Looloian, James F. McAnally and Stephen C.
Swid (resigned August 2005). During 2005, the following
directors (none of whom was or had been an officer or employee
of the Company or any of its subsidiaries) served on the
Companys Compensation Committee: John W. Rogers, Jr.,
Barry M. Deutsch, J. Kenneth Looloian, James F.
McAnally, Eric Langshur, Steven S. Rogers (since
December 2005), and Stephen C. Swid (resigned August 2005).
There were no interlocks during 2004 or to date in 2005 with
other companies within the meaning of the SECs rules.
29
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Companys Board of Directors
assists the Board of Directors in fulfilling its responsibility
for oversight of the integrity of the Companys financial
statements, the Companys compliance with legal and
regulatory requirements, the independent auditors
qualifications and independence, and the performance of the
Companys internal audit function and independent auditor.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal and disclosure controls (including internal controls
over financial reporting). The independent auditors are
responsible for performing an independent audit of the
Companys consolidated financial statements in accordance
with generally accepted auditing standards and for issuing a
report thereon.
In August 2004, the Audit Committee of the Board undertook an
independent investigation of certain aspects of the past
financial statements filed by the Company with the assistance of
independent legal counsel at Bingham McCutchen LLP
(Bingham) who consulted with accounting experts
PricewaterhouseCoopers LLP (PwC) and Marshall
Wallace, each retained by Bingham.
In November 2004, the Audit Committee announced that based on
the results of its investigation and in consultation with KPMG
LLP, the Companys independent registered public accounting
firm, it had determined financial statements and other
information pertaining to years-ended December 31, 2000,
2001, 2002 and 2003 and for the first quarter of 2004 should be
restated and should no longer be relied upon.
The Audit Committee completed its investigation on
February 8, 2005 and reported its results to the SEC. As a
result of the above events and circumstances, the Company
undertook a comprehensive review of its previously filed
consolidated financial statements since the year 2000, and on
November 30, 2005 filed its annual report on
Form 10-K for 2004
that contained restated financial information for years ended
December 31, 2000 and 2001 (unaudited) and restated
financial statements for years ended December 31, 2002 and
2003 (audited) along with its audited consolidated financial
statements for the year ended December 31, 2004. On
November 30, 2005, the Company filed a series of
Forms 10-Q for
2004 and 2005, including a
Form 10-Q for the
first quarter of 2005 that contained restated financial
statements (unaudited) for the first quarter of 2004. The Audit
Committee has overseen the internal review and the restatement
of the financial statements.
During the review and pursuant to managements evaluation
of internal controls pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, the Company also identified material
weaknesses in its internal controls. Management has concluded
that the companys disclosure controls and procedures were
not effective as of December 31 2004, March 31, 2005,
June 30, 2005 or September 30, 2005 due to material
weaknesses in internal control over financial reporting.
Management also has concluded that the Company did not maintain
effective internal control over financial reporting as of
December 31, 2004. In order to remediate the internal
controls over financial reporting, management has implemented or
is in the process of implementing various measures. The Audit
Committee is overseeing this process and is receiving regular
reports from management.
The Audit Committee has reviewed and discussed with management
and with KPMG the Companys financial statements for years
ended December 31, 2002 and 2003, as restated and the
Companys financial statements for the year ended
December 31, 2004, each of which was audited by KPMG.
Management represented to the Audit Committee that the
Companys consolidated financial statements were prepared
in accordance with generally accepted accounting principles. The
Audit Committee discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees), as amended.
The Audit Committee has received the written disclosures and the
letter from KPMG required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit
Committees). In addition, the Audit Committee has discussed with
the independent auditors the auditors independence from
the Company and its management.
Recently, due a medical condition, Mr. Looloian has not
been actively participating in Audit Committee matters.
Mr. Langshur was appointed by the Board of Directors in
November 2005 to serve as Chairperson of the Audit Committee.
30
In performing all of these functions, the Audit Committee acts
only in an oversight capacity and necessarily relies on the work
and assurances of the Companys management and independent
auditors. In reliance on the reviews and discussions referred to
in this Report and in light of its role and responsibilities,
the Audit Committee recommended to the Board of Directors, and
the Board approved, including the audited financial statements
of the Company in the Companys Annual Report on
Form 10-K for the
fiscal year ended December 31, 2004 for filing with the SEC.
|
|
|
Members of the Audit Committee,(1) |
|
|
Eric Langshur, Chairman |
|
Barry M. Deutsch |
|
J. Kenneth Looloian |
|
James F. McAnally, M.D. |
|
|
|
|
(1) |
Adam Metz joined the Board of Directors and the Audit Committee
on December 1, 2005 and thus did not participate in any
committee activities for the periods discussed in the Report.
Due to his illness, Mr. Looloian has not reviewed the
contents of the Report. |
31
REPORT OF THE COMPENSATION COMMITTEE
Overview
The Compensation Committee is responsible for establishing
compensation guidelines for officers and employees, and
administering the Companys stock option and other
incentive plans. The total direct compensation for the
Companys executives is made up of three elements: base
salary, annual performance based bonus and long-term incentive
program in the form of options and restricted stock.
Additionally, executives receive indirect compensation through
participation in employee benefit plans available to all
employees of the Company, such as health, life, disability
plans, tax qualified retirement plans and, until August 2004,
the Management Retirement Savings Plan, which was a
non-qualified retirement plan that was terminated at that time.
The compensation package for the Companys executives is
designed to provide executives with market competitive annual
salaries, performance based annual bonus as a means of
motivating them to achieve short-term business objectives, and
equity based compensation as a means of rewarding executives for
increased stockholder value over the longer term.
In setting the compensation for executives the Committee engaged
the services of an outside compensation consulting firm. This
consulting firm identified a peer group of companies based on
similar revenues, lines of business and geographic locations as
the Company. The Committee then examined base salaries, bonus
compensation and long-term incentives relative to this peer
group towards a goal of having direct total compensation to
adequately incent the officer group at competitive compensation
levels.
Base Salary
In setting executives salaries for 2004, the Committee
reviewed the compensation survey as compared to the selected
peer group. Each executive was then evaluated based on their
role and responsibilities within the Company, attainment of
individual objectives during the preceding year and the
Companys overall performance. For 2004, the Committee
determined to make no change to the salaries of the four most
highly compensated officers of the Company other than the Chief
Executive Officer (or the named executive officers),
in accordance with their employment agreements.
Annual Bonus Plan
In 2004 the officers and other employees were eligible to
receive bonuses based on the achievement of both Company and
individual performance goals established by the Committee, with
50% weight for corporate and individual objectives. The
individual executives target award is set based on their
position and job level. For 2004 the target bonus for the named
executive officers was 50% of base salary and the target bonus
for Mr. Toback, our Chairman and Chief Executive Officer,
was 70% of base salary. In 2004 the corporate objectives were
based on the Company achieving a percentage of targeted EBITDA
and gross committed revenues determined by the Compensation
Committee. The Companys actual performance in 2004 was
below targeted thresholds. However, the Committee determined
that each named executive officer met and exceeded their
targeted individual performance goals. The Committee determined
that in light of the extraordinary circumstances facing the
Company described above which were not contemplated at the time
the corporate performance goals were established, that annual
bonuses should be awarded at a level slightly higher than target
for the named executive officers. Accordingly, the named
executive officers received bonuses for 2004 which were
approximately 62% of Mr. Fanellis base salary, 27% of
Mr. Gaans base salary, 58% of Mr. Morgans
base salary and 54% of Mr. Wildmans base salary. A
portion of Mr. Fanellis bonus was in recognition of
his acting as Chief Financial Officer and a portion of
Mr. Gaans bonus was in recognition of his retirement
as General Counsel of the Company.
Long Term Incentives
The Compensation Committee believes stock ownership by
executives is important to aligning executives interest to
those of stockholders. Equity compensation takes the form of
stock options and restricted stock. The Committee believes it is
important that the Company grant a mixture of long term equity
instruments that in the aggregate provide both reward for value
appreciation as well as retention and tangible
32
value for services during and after the vesting period. As other
organizations have determined we feel by awarding both stock
options and restricted stock, we have aligned the executives
more appropriately than by rewarding only one type of stock
based equity instrument. The employment agreements of the
Companys executives also provide for the grant of stock
options and/or restricted stock and these grants provide a
significant inducement for the hiring and retention of key
employees.
Options granted to executives typically have a term of ten years
and vest over a three year period. The exercise price is
generally equal to or greater than the price of our stock on the
day prior to the option being granted. The options are used as a
value appreciation instrument as the executive realizes value
only if the stock price increases. This aligns the interests of
the executives with the interests of the stockholders. For 2004
performance, executives were granted options in 2005. Those
options were issued with an exercise price which was 20% over
the closing price of our common stock on the date of grant. In
addition, on November 29, 2005, having not previously made
any grants in respect of 2005, executives were granted options,
the exercise price of which was set at $7.01, the closing price
of the Companys common stock on the NYSE at
November 28, 2005. The Companys Compensation
Committee has also determined to consider implementation of
incentive and retention agreements and arrangements in
connection with the Companys announced exploration of
strategic alternatives.
Restricted stock awards are used by the Compensation Committee
as an incentive and retention device to reward the executive
over the long term and be aligned with the stockholders in
optimizing the value of the Company. Such awards can be granted
with performance vesting restrictions or with time vesting
restrictions. Restricted Stock issued with time vesting
restrictions typically vest after four years provided the
executive is employed by the Company on the vesting date. All
shares of restricted stock granted for 2004 performance were
actually granted in 2005 under the 1996 Long-Term Incentive Plan
and were generally to vest over four years. However, during
2005, the acquisition of Bally common stock by certain investors
in excess of 10% of Ballys outstanding common stock
constituted a change in control under the 1996
Long-Term Incentive Plan, resulting in the lapse of the
restrictions on all previously granted shares of restricted
stock. On November 29, 2005, having not previously made any
grants in respect of 2005, executives were granted restricted
stock.
The 1996 Long-Term Incentive Plan did not have sufficient shares
available to provide long term incentives for newly hired
executives. Because the Compensation Committee believes it is
important to continue to provide incentives to executives that
align their interests with the interests of the stockholders,
the Committee adopted the Inducement Plan.
The Compensation Committee continues to monitor recipients of
options and restricted stock and the number of equity awards
granted to executives based on past performance in order to
insure that such awards provide for the proper future incentive
as well as to be competitive within the marketplace for key
talent. We continue to monitor our use of stock options and the
potential dilution effects as we determine equity awards.
Chief Executive Officer Compensation
The Compensation Committee considered the following factors in
determining the base salary for 2004 for Paul Toback, our
Chairman and Chief Executive Officer: the Companys
performance relative to its profit plan for 2004, the leadership
provided through a challenging number of events during the past
year and the level of compensation paid to the highest paid
executive at companies within the selected peer group. Based on
these factors, the Committee established Mr. Tobacks
2004 base salary at $575,000. This placed Mr. Tobacks
base salary at slightly below the median of base salaries at
peer group companies.
In August 2004, the Committee approved a new employment
agreement for Mr. Toback. The agreement provides for, among
other things, a base salary of $575,000 and for him to continue
as the Companys President and Chief Executive Officer
through December 31, 2007. The agreement was amended in
November 2005 to (i) include specific language regarding
the Company-provided disability insurance memorializing the
Companys standard policy and (ii) eliminate an
exception from the definition of Change in Control
for issuances of equity by the Company.
33
For 2004, Mr. Toback was eligible to earn a cash bonus
ranging up to 70% of his base salary based on Company and
individual performance goals as described above. As mentioned
above, the Compensation Committee considered bonus payments to
the named executive officers, including Mr. Toback, and
considered the performance of the Company as compared to the
Company and individual performance goals for the 2004. Based on
the Companys performance, the Committee determined that
the Company performance goals were not met for 2004. The
Committee however, analyzed additional factors, including total
cash compensation necessary to meet the objectives of hiring and
retaining top executive talent; substantial progress in
addressing regulatory matters; and accomplishment of executive
management leadership objectives. The Committee determined to
weigh the actions of management initiated for investment in the
long-term growth of the Company against decisions that could
have been made for short-term results. Accordingly, the
Committee determined that based on these quantitative and
qualitative factors some level of annual bonus should be made to
Mr. Toback, at a level slightly above the targets
established. For 2004, the Committee determined that based on
the Companys performance Mr. Toback earned a bonus of
$400,000, which represented 70% of his base salary for fiscal
year 2004.
For his 2004 performance, Mr. Toback was also awarded
options to purchase 170,000 shares of the
Companys common stock at an exercise price equal to
$4.21 per share, which represents a premium of 20% over the
trading price of the Companys stock on the date the
options were granted. In addition, Mr. Toback was awarded
120,000 shares of restricted stock under the Companys
1996 Long Term Incentive Plan, which were generally to vest
after four years from the date of grant. However, during 2005,
the acquisitions of Bally common stock by Liberation in excess
of 10% of Ballys outstanding common stock constituted a
change in control under the 1996 Long-Term Incentive
Plan, resulting in the lapse of the restrictions on all shares
of restricted stock previously issued to Mr. Toback. In
connection with the vesting of restricted stock in 2005, the
Company made a tax
gross-up payment to
Mr. Toback of $838,777 to compensate him for the taxes
payable due to the vesting of restricted stock. In addition,
effective as of November 29, 2005, having not previously
made any grants in respect of 2005, the Companys
Compensation Committee approved the grant of 62,000 stock
options and 135,000 shares of restricted stock to
Mr. Toback under the Companys 1996 Long-Term
Incentive Plan. The exercise price of the stock options was set
at $7.01, the closing price of the Companys common stock
on the NYSE at November 28, 2005.
162(m) Discussion
Section 162(m) of the Internal Revenue Code limits the tax
deduction of a publicly held company allowed for compensation
paid its named executive officers to $1,000,000, unless such
amounts are performance based. Generally, the Compensation
Committee desires to maintain the tax deductibility of the
compensation paid to executive officers to the extent it is
feasible and consistent with the objectives of the
Companys compensation programs. The Compensation Committee
continues to consider ways to maximize the deductibility of
executive compensation, but intends to retain the discretion the
Compensation Committee deems necessary to compensate executive
officers in a manner commensurate with performance and the
competitive environment for executive talent. Accordingly, the
Compensation Committee may determine to pay compensation to the
named executive officers which may not be deductible under
162(m).
34
Review of all Components of Executive Compensation
The Compensation Committee has reviewed all cash and equity
components of the Companys named executive officers,
including salary, bonus, and long-term equity compensation. In
addition, the Compensation Committee has reviewed and considered
other indirect elements of the named executive officers
compensation including participation in tax qualified and
non-qualified retirement plans such as the Management Retirement
Plan, as well as certain perquisites available to the named
executive officers. These perquisites are not a significant
element of the executives compensation. When considering
any one component of the named executive officers total
compensation, the Compensation Committee considers such
component based on the aggregate amounts and mix of all the
components, taken as a whole. Based on this review, the
Committee finds that the total compensation paid to the named
executive officers in 2004 and to date in 2005 was reasonable
and not excessive.
|
|
|
Members of the Compensation Committee,(1) |
|
|
John W. Rogers, Jr., Chairman |
|
Barry M. Deutsch |
|
J. Kenneth Looloian |
|
James F. McAnally, M.D. |
|
Eric Langshur |
|
|
|
|
(1) |
Steven S. Rogers joined the Board of Directors and the
Compensation Committee on December 1, 2005 and thus did not
participate in any committee activities for the periods
discussed in the Report. Due to his illness, Mr. Looloian
has not reviewed the contents of the Report. |
35
PERFORMANCE GRAPH
Comparison of Cumulative Total Return*
Among Bally Total Fitness Holding Corporation, the
S&P 500 Index
and the Russell 2000 Consumer Discretionary Index
|
|
* |
$100 invested on 12/31/99 in stock or index-including
reinvestment of dividends. Fiscal year ending December 31. |
Copyright
©
2002, Standard & Poors, a division of The McGraw-Hill
Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
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|
|
|
|
|
|
|
Cumulative Total Return | |
|
|
| |
|
|
12/99 | |
|
12/00 | |
|
12/01 | |
|
12/02 | |
|
12/03 | |
|
12/04 | |
|
11/05 | |
BALLY TOTAL FITNESS HOLDING CORPORATION
|
|
|
100.00 |
|
|
|
126.93 |
|
|
|
80.79 |
|
|
|
26.57 |
|
|
|
26.23 |
|
|
|
15.89 |
|
|
|
26.27 |
|
S&P 500
|
|
|
100.00 |
|
|
|
90.89 |
|
|
|
80.09 |
|
|
|
62.39 |
|
|
|
80.29 |
|
|
|
89.02 |
|
|
|
93.37 |
|
RUSSELL 2000 CONSUMER DISCRETIONARY
|
|
|
100.00 |
|
|
|
76.05 |
|
|
|
90.74 |
|
|
|
74.13 |
|
|
|
105.29 |
|
|
|
125.63 |
|
|
|
127.98 |
|
36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
During 2004 and through November 30, 2005, Bally paid
approximately $3.3 million and $3.2 million,
respectively, for goods and services from a company which
employed a relative of Mr. Wildman. Bally believes that the
terms of these arrangements were at least as favorable to Bally
as those which could be obtained from unrelated parties.
INDEPENDENT AUDITORS
On March 25, 2004, we were notified by Ernst &
Young LLP (E&Y), our principal accountant, that
it had resigned. E&Ys resignation became effective on
May 10, 2004 with the filing of the Companys
Quarterly Report on
Form 10-Q for the
quarter ended March 31, 2004. On May 18, 2004, the
Company engaged KPMG LLP (KPMG) as its principal
accountants for the year ending December 31, 2004. The
decision to engage KPMG was made by the Audit Committee of the
Board of Directors. Subsequently, in November 2004, we engaged
KPMG to audit our consolidated financial statements for 2003 and
2002.
During the two years ended December 31, 2003, through
May 10, 2004, there were no disagreements between us and
E&Y on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to E&Ys
satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with this
report. There were no reportable events as defined in
Item 304(a)(1)(v) of
Regulation S-K.
E&Ys reports on our consolidated financial statements
for the years ended December 31, 2003 and 2002 did not
contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty or audit scope.
Principal Accountant Fees and Services
Fees Paid to the Principal Accountant-2004
As discussed above, KPMG was named our independent registered
public accounting firm in May 2004. The table below sets forth
all fees paid or accrued for the services of KPMG in 2004:
|
|
|
|
Audit fees:(1)
|
|
$7,988,800 |
Audit-related fees:(2)
|
|
37,750 |
|
|
|
|
Total audit and audit-related fees
|
|
$8,026,550 |
Tax fees
|
|
0 |
All other fees:
|
|
0 |
|
|
|
Total fees
|
|
$8,026,550 |
|
|
|
|
|
(1) |
Audit fees include work performed in connection with the audit
of the consolidated financial statements for the years ended
December 31, 2004, 2003 and 2002. It also includes fees for
professional services that are normally provided by our
registered public accounting firm in connection with statutory
and regulatory filings. |
|
(2) |
Audit related fees include work performed in connection with
separate audits of subsidiaries and affiliated entities not
required by statute or regulation. |
37
Fees Paid to the Principal Accountant-2003
As discussed above, E&Y resigned as our independent
registered public accounting firm effective May 10, 2004.
During 2004, E&Y had reviewed our interim condensed
consolidated financial statements for the quarter ended
March 31, 2004. Fees were paid to E&Y for the above
services during 2003 and through the date of their resignation
as our independent registered public accounting firm.
|
|
|
|
Audit fees:(1)
|
|
$1,844,000 |
Audit-related fees:(2)
|
|
24,000 |
|
|
|
|
Total audit and audit-related fees
|
|
$1,868,000 |
Tax fees
|
|
0 |
All other fees:(3)
|
|
2,500 |
|
|
|
Total fees
|
|
$1,870,500 |
|
|
|
|
|
(1) |
Audit fees include work performed in connection with the audit
of the consolidated financial statements for the years ended
December 31, 2003 and 2002. It also includes fees for
professional services that are normally provided by our
registered public accounting firm in connection with statutory
and regulatory filings. |
|
(2) |
Audit related fees include work performed in connection with
separate audits of subsidiaries and affiliated entities not
required by statute or regulation. |
|
(3) |
All other fees consist of a subscription to EY On-Line, an
accounting research tool. |
Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Registered Public
Accounting Firm
The Audit Committee has responsibility for retaining, setting
fees, and overseeing the work of the registered public
accounting firm. The retention of the firm is subject to
stockholder ratification. In recognition of this responsibility,
the Audit Committee has established a policy to pre-approve all
audit and permissible non-audit services provided by the
registered public accounting firm. The Audit Committee has
delegated pre-approval authority to the chairman of the
committee. The chairman must report any pre-approval decisions
to the Audit Committee at its next scheduled meeting for
approval by the Audit Committee as a whole.
38
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITOR FOR
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2005
Proposal 3 Ratification of the Appointment
of KPMG LLP as Independent Auditor for the Company for the
Fiscal Year Ending December 31, 2005.
In accordance with the Audit Committees charter, the Audit
Committee has appointed KPMG LLP as the Companys
independent auditor for the fiscal year ending December 31,
2005. KPMG has been the Companys independent auditor since
May 18, 2004, and is considered by management to be
well-qualified.
Stockholder ratification of the Audit Committees selection
of KPMG is not required by the Companys
By-Laws; however, the
Board of Directors believes that it is of sufficient importance
to seek ratification. In the event the stockholders do not
ratify the appointment of KPMG, the Board of Directors will
reconsider its selection of KPMG. In addition, even if the
stockholders ratify the selection of KPMG, the Audit Committee
may in its discretion appoint a different independent auditor at
any time during the year if the Audit Committee determines that
a change is in the best interest of the Company.
Representatives of KPMG are expected to be present at the annual
meeting of stockholders to respond to stockholders
questions and to have the opportunity to make any statements
they consider appropriate.
THE COMPANYS BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR RATIFICATION OF KPMG LLP AS INDEPENDENT AUDITOR
FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2005.
39
STOCKHOLDER PROPOSAL
Proposal 4 Pardus Proposal
On December 6, 2005, Pardus European Special Opportunities
Master Fund L.P., the beneficial owner of
5,450,000 shares of the Companys common stock, whose
address is c/o Pardus Capital Management L.P., 1001
Avenue of the Americas, Suite 1100, New York, New York,
10018, filed a preliminary proxy statement (which was amended on
December 9, 2005) soliciting proxies to take the following
action at the 2005 annual meeting:
RESOLVED, that each provision or amendment of the
By-laws of Bally Total
Fitness Holding Corporation (the Company) adopted by
the Board of Directors of the Company without the approval of
the Companys stockholders subsequent to May 25, 2005
(purportedly the last date of reported changes) and prior to the
approval of this resolution be, and they hereby are, repealed,
effective as of the time this resolution is approved by the
Companys stockholders.
THE COMPANYS BOARD OF DIRECTORS RECOMMENDS YOU ABSTAIN
WITH RESPECT TO THE PARDUS PROPOSAL FOR THE FOLLOWING
REASONS:
No provisions of or amendments to the Companys
by-laws have been
adopted by the Board of Directors without the approval of the
Companys stockholders subsequent to May 25, 2005. The
Company does not plan to adopt any provisions of or amendments
to the Companys
by-laws on or prior to
the annual meeting of stockholders without the approval of the
Companys stockholders in the future.
FOR THE FOREGOING REASONS, THE COMPANYS BOARD OF
DIRECTORS RECOMMENDS YOU ABSTAIN WITH RESPECT TO THE PARDUS
PROPOSAL. ADOPTION OF THIS PROPOSAL WILL REQUIRE THE AFFIRMATIVE
VOTE OF 75% OF THE SHARES OUTSTANDING AND ENTITLED TO
VOTE.
40
OTHER BUSINESS
In addition to the matters described above, after the meeting
there will be a brief presentation by the Chairman of the Board
and a general discussion period during which stockholders will
have an opportunity to ask questions.
Liberation Proposal
On December 8, 2005, Liberation Investments, L.P.,
Liberation Investments, Ltd., Liberation Investment Group LLC
and Emanuel R. Pearlman (collectively,
Liberation), the beneficial owners of
4,134,450 shares of the Companys common stock,
including 35,000 shares of restricted stock which vested in
2005 as a result of the acquisitions of Bally common stock by
Liberation, whose address is 11766 Wilshire Blvd.,
Suite No. 870, Los Angeles, California 90025, filed a
preliminary proxy statement (which was amended on
December 14, 2005) soliciting proxies to take the following
action at the 2005 annual meeting:
RESOLVED, that the stockholders of the Company do hereby
amend Article IV, Section 1, Article IV,
Section 2 and Article VIII, Section 5 of the
Amended and Restated Bylaws of Bally Total Fitness Holding
Corporation by deleting such sections in their entirety and
replacing them as follows (text to be added to the existing text
of the Bylaws hereby is underscored herein):
Article IV, Section 1, is amended and restated to
read:
The officers of the Corporation shall be chosen by the
Board of Directors, provided that the stockholders shall be
empowered to remove the Corporations Chief Executive
Officer and President from office by the affirmative vote of the
holders of a majority of the Corporations issued and
outstanding stock then entitled to vote. The Corporations
officers shall be a Chief Executive Officer, who shall also be
the Corporations President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also
choose a Chairman of the Board of Directors (who must be a
director) and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number
of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these
Bylaws. The officers of the Corporation need not be stockholders
of the Corporation nor, except in the case of the Chairman of
the Board of Directors, need such officers be directors of the
Corporation.
Article IV, Section 2, is amended and restated to
read:
The Board of Directors at its first meeting held after
each annual meeting of stockholders shall elect the officers of
the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors or the
stockholders, as the case may be. All officers of the
Corporation shall hold office until their successors are chosen
and qualified, or until their earlier resignation or removal
by the Board of Directors or the stockholders. Any
officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of
Directors. The Corporations Chief Executive Officer and
President may also be removed by the stockholders as provided in
Section 1 of this Article IV, and no person removed as
Chief Executive Officer and President shall thereafter be
appointed or reappointed by the Board of Directors to serve as
an officer of the Corporation. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of
Directors. The salaries of all officers who are directors of the
Corporation shall be fixed by the Board of Directors.
Article VIII, Section 5, is amended and restated to
read:
Section 2 of Article III, Section 1
of Article IV, Section 2 of Article IV and
this Section 5 of Article VIII of these Bylaws may
only be altered, amended, changed or repealed by action of the
stockholders of the Corporation.
FURTHER RESOLVED, that Paul A. Toback is hereby removed as
the Chief Executive Officer and President of the Company,
effective immediately.
41
THE COMPANYS BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR
GIVING THE COMPANYS PROXIES DISCRETION TO VOTE ON THIS
MATTER IF PROPERLY PRESENTED AT THE ANNUAL MEETING. THE
COMPANYS PROXIES INTEND TO VOTE AGAINST THE LIBERATION
PROPOSAL FOR THE FOLLOWING REASONS:
Emanuel Pearlman and Liberation have been attempting to insert
themselves into Ballys corporate board room for over a
year. They have initiated repeated demands, inquiries,
proposals, lawsuits and threats of lawsuits and made numerous
claims. Liberation has amended their Schedule 13D filings
no less than 17 times over the last eighteen months to update
their ever-evolving positions regarding the Company.
Mr. Pearlmans and Liberations latest
maneuver a proposal which would, among other things,
give stockholders the power to remove the Companys chief
executive officer is the most egregious of their
tactics, both as to the substance of the proposal and its true
purpose. The Board of Directors believes that it is not a good
faith proposal intended to enhance stockholder value.
The Board of Directors has determined that it must retain its
authority to manage the business and affairs of the Company,
including through the selection, supervision and removal of the
Companys Chief Executive Officer. First, the Board of
Directors believes this proposal is illegal under the Delaware
General Corporation Law, specifically Section 141(a), which
provides that [t]he business and affairs of [a Delaware
corporation] shall be managed by or under the direction of the
Board of Directors . . . . What is
more, the Board of Directors believes this proposal contravenes
Article Fifth of Ballys Certificate of Incorporation,
which provides, in relevant part, that:
The Board of Directors shall have the power to make, adopt,
alter, amend, change or repeal the Bylaws of the Corporation by
resolution adopted by the affirmative vote of a majority of the
entire Board of Directors.
As previously disclosed, the Company has filed a complaint for
declaratory relief on these issues with the Delaware Court of
Chancery and has asked the court to confirm that this proposal
violates both Section 141(a) and Article Fifth of the
Companys Certificate of Incorporation. The Company has
also filed a complaint arising from this proposal with the
United States District Court for the District of Delaware
accusing Liberation of violations of Section 14(a) of the
Securities Exchange Act of 1934 (the Exchange Act)
and Rule 14a-9
thereunder as well as Section 13(d) of the Exchange Act.
These proceedings are currently pending, and, while the Company
is unable to make predictions about their outcome, the Board of
Directors believes that the Company will ultimately be
successful on the merits in each case.
Aside from our belief in the illegality of this proposal (as
described in our complaint for declaratory relief discussed
above), the Board of Directors believes the proposal is
ill-advised from a governance perspective. Unlike the
Companys stockholders, the Board of Directors is
intimately familiar with Ballys operations as well as the
exigencies that confront the Company on a
day-to-day basis.
Consequently, the Board of Directors is in the best position to
evaluate the performance of the Companys Chief Executive
Officer and reach conclusions as to his retention, supervision
and removal. For similar reasons, the overwhelming majority of
public companies in the United States vest authority over the
chief executive in their boards of directors rather than their
stockholders, and the Company has no unique characteristics that
would warrant imposing such a drastic overhaul of mainstream
governance principles with respect to it. In addition, none of
Institutional Shareholder Services, the Council of Institutional
Investors or similar proxy voting and corporate governance
service providers has ever publicly supported the widespread
adoption of direct stockholder authority over chief executives
as a means to improve corporate governance.
The Board of Directors has previously affirmed its unqualified
support and continues to support current Chief Executive Officer
Paul A. Toback. Given that the Company reported a net
profit of $1.8 million for the first nine months of 2005,
compared to losses in 2003 and 2004, we believe that
Mr. Toback has steered the Company back on the right track.
He has made substantial progress toward rectifying the
accounting issues he inherited from prior management, including
recently completing the process of restating Ballys
financial statements for each of its reporting periods
commencing January 1, 2000, through March 31, 2004.
Ironically, two of the transactions which gave rise to
accounting issues relating to goodwill impairment were
transactions in which Mr. Pearlman served as Ballys
financial advisor under prior management. Mr. Toback has
strengthened the Companys senior management
team especially in the vitally important areas of
finance and accounting.
42
Bally has recruited a new CFO, Treasurer, Controller, Assistant
Controller, General Counsel, Chief Marketing Officer, Head of
Customer Relationship Marketing, Chief Information Officer and
Head of Training.
Mr. Toback has also begun to implement Ballys new
business plan, the initial effects of which are reflected in the
positive trend line in the Companys operating income.
Under Mr. Tobacks leadership, the Company has scaled
back its club expansion plans and begun to focus on improving
operating margins and cash flows from Ballys existing
fitness centers. The Company has radically changed the way it
sells and accounts for memberships. In the past, Bally only
offered multi-year membership contracts. Todays Bally
membership model is far more flexible, and consumer friendly.
Beginning in 2003, the Company introduced pay as you
go programs, which now represent up to 20 percent of
all new customers. More recently Bally introduced the Build Your
Own Membership plan, which simplifies the enrollment process,
eliminates the long, complicated contracts and enables customers
to choose the membership type, amenities, and pricing structure
they prefer. The
BYOMsm
program is now available nationwide.
Further, the Company is now implementing its new club staffing
and accountability model referred to as the New Club
Model. The Company also recently engaged J.P. Morgan
Securities Inc. to explore a range of strategic alternatives to
enhance stockholder value, which may include, but are not
limited to, a recapitalization, the sale of securities or assets
of the Company or the sale or merger of Bally with another
entity or strategic partner.
During this critical stage of implementation of Ballys new
business plan, the Board of Directors strongly believes it would
be imprudent indeed, foolhardy to remove
the most important officer of the Company, whose continued
leadership will be a key component of Ballys successful
emergence from this transitional period.
IF THE LIBERATION PROPOSAL PROPERLY COMES BEFORE THE MEETING,
THE PROPOSAL WILL REQUIRE THE AFFIRMATIVE VOTE OF 75% OF
THE SHARES OUTSTANDING AND ENTITLED TO VOTE AND THE PROXY
HOLDERS WILL USE THEIR DISCRETIONARY AUTHORITY AND VOTE AGAINST
THE PROPOSAL.
Management knows of no other business to be presented for action
at the annual meeting. If other matters properly come before the
annual meeting or any adjournment thereof, the persons named as
proxies will vote upon them in accordance with their best
judgment.
43
CERTAIN LEGAL PROCEEDINGS
Stockholder Derivative Lawsuits in Illinois State Court
On June 8, 2004, two stockholder derivative lawsuits were
filed in the Circuit Court of Cook County, Illinois, by two
Bally stockholders, David Schacter and James Berra, purportedly
on behalf of the Company against Paul Toback, J. Kenneth
Looloian, James McAnally and John Rogers, Jr., who are
current directors and/or officers, and Lee Hillman, John Dwyer,
Stephen Swid, George Aronoff, Martin Franklin and Liza Walsh,
who are now former officers and/or directors. These lawsuits
allege claims for breaches of fiduciary duty against those
individuals in connection with the Companys restatement
regarding the timing of recognition of prepaid dues. The two
actions were consolidated on January 12, 2005. By
stipulation of the parties, the consolidated lawsuit has been
stayed pending restatement of the Companys financial
statements. Under the current schedule, an amended consolidated
complaint is due by January 29, 2006. It is not yet
possible to determine the ultimate outcome of these actions.
Stockholder Derivative Lawsuits in Illinois Federal Court
On April 5, 2005, a stockholder derivative lawsuit was
filed in the United States District Court for the Northern
District of Illinois, purportedly on behalf of the Company
against certain current and former officers and directors of the
Company by another of the Companys stockholders, Albert
Said. This lawsuit asserts claims for breaches of fiduciary duty
in failing to supervise properly its financial and corporate
affairs and accounting practices. Plaintiff also requests
restitution and disgorgement of bonuses and trading proceeds
under Delaware law and the Sarbanes-Oxley Act of 2002. By
stipulation of the parties, the lawsuit has been stayed pending
restatement of the Companys financial statements. Under
the current schedule, an amended consolidated complaint is due
by January 29, 2006. It is not yet possible to determine
the ultimate outcome of this action.
Liberation Proposal Litigation
On December 5, 2005, the Company filed a complaint for
declaratory judgment in the Delaware Court of Chancery against
Liberation Investments, L.P., Liberation Investments, Ltd.,
Liberation Investment Group LLC and Emanuel R. Pearlman and has
asked the court to confirm that the Liberation Proposal violates
both Section 141(a) of the Delaware General Corporation Law
and Article Fifth of the Companys Certificate of
Incorporation. The Chancellor declined the Companys
request for an expedited hearing on the issues presented, and
the case remains pending.
On December 5, 2005, the Company filed a complaint against
Liberation Investments, L.P., Liberation Investments, Ltd.,
Liberation Investment Group LLC and Emanuel R. Pearlman in the
United States District Court for the District of Delaware
alleging that Liberation disclosures were in violation of
Section 14(a) of the Exchange Act and Rule 14a-9
thereunder as well as Section 13(d) of the Exchange Act. As
a result of the Companys successful request for expedited
discovery and an expedited preliminary injunction hearing,
defendants filed with the SEC supplemental proxy materials that
disclosed additional information that the Company had alleged
was required under Sections 13(d) and 14(a) of the Exchange
Act, and further disclosed the existence of disputes between the
Company and Liberation. In light of these additional
disclosures, on December 22, 2005 the Court dismissed the
preliminary injunction proceedings as moot. Although the Court
terminated the preliminary injunction proceedings, the Court did
not make any determination on the ultimate merits of the
Companys claims against Liberation. The Company contends
that Liberations disclosures continue to violate
Sections 13(d) and 14(a) of the Exchange Act, and the
proceedings remain pending.
It is not yet possible to determine the ultimate outcome of
these actions.
Liberation Rights Plan Litigation
On December 11, 2005, Liberation Investments, L.P., and
Liberation Investments Ltd. filed a complaint in the Delaware
Court of Chancery against the Company and Paul Toback, alleging
that the Companys
44
Shareholder Rights Plan adopted on October 18, 2005 is
invalid, and seeking a declaratory judgment to that effect, as
well as preliminary and permanent injunctive relief and damages.
The Company was served with the summons and complaint on
December 20, 2005. To date, no other activity has taken
place with respect to this litigation and these proceedings are
currently pending. It is not yet possible to determine the
ultimate outcome of this action.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Bally is required to identify any director, executive officer or
beneficial owner of more than ten percent of the common stock,
or any other person subject to Section 16 of the Exchange
Act, that failed to file on a timely basis, as disclosed in
their forms, reports required by Section 16(a) of the
Exchange Act. Based on a review of forms submitted to us, during
2004 and as of November 30, 2005, no persons were late in
filing these forms. All other such filing requirements were
complied with by our directors and executive officers.
EXPENSE OF SOLICITATION
The cost of this solicitation will be borne by Bally. In
addition to the use of the mail, proxy solicitation may be made
by telephone, facsimile,
e-mail and personal
interviews by regular employees of Bally. Bally has retained
MacKenzie Partners, Inc., 105 Madison Avenue, New York, New York
10016, to assist in the soliciting of proxies and will pay that
firm a fee of approximately $150,000, plus
out-of-pocket expenses
for such services. It is anticipated that MacKenzie Partners,
Inc. will employ approximately 60 persons to solicit the
Companys stockholders for the annual meeting. Bally will
also reimburse brokerage houses and others for their reasonable
expenses in forwarding proxy materials to beneficial owners of
common stock.
Appendix A to this proxy statement sets forth certain
information relating to the Companys directors, director
nominee, and officers of the Company who may be soliciting
proxies on the Companys behalf.
STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING
Bally expects to hold its next annual meeting of stockholders
before December 31, 2006. Stockholder proposals for
inclusion in the proxy materials relating to the next annual
meeting should be received by Bally at its principal executive
offices on or before March 31, 2006. Under the
Companys by-laws, in order to bring a proposal before the
annual meeting, a stockholder must give the Company notice of
the proposal not less than 60 days before the date of the
meeting. If, however, less than 70 days prior notice or
prior disclosure of the meeting date is given to stockholders,
stockholders may notify the Company of a proposal up until the
tenth day following the notice or disclosure. In accordance with
our by-laws, we expect
to give at least 70 days notice of the annual meeting.
Stockholder proposals should be directed to Corporate Secretary,
Bally Total Fitness Holding Corporation, 8700 West Bryn
Mawr Avenue, Chicago, Illinois 60631.
45
ANNUAL REPORT
Bally will provide without charge to any stockholder as of the
record date who so requests in writing a copy of its
Form 10-K and, if
specifically requested, the exhibits thereto. Requests for such
copies should be directed to Corporate Secretary, Bally Total
Fitness Holding Corporation, 8700 West Bryn Mawr Avenue,
Chicago, Illinois 60631.
|
|
|
By order of the Board of Directors, |
|
|
|
|
Marc D. Bassewitz, Secretary |
Chicago, Illinois
December 27, 2005
Please execute, date and return promptly
the enclosed white proxy card in the
postage-paid envelope provided or
vote via the internet or touch-tone telephone.
46
Appendix A
INFORMATION CONCERNING PERSONS WHO MAY BE DEEMED PARTICIPANTS
IN
THE COMPANYS SOLICITATION OF PROXIES
The following sets forth the name, principal business address
and the present principal occupation or employment, and the
name, principal business and address of any corporation or other
organization in which their employment is carried on, of the
directors, director nominee and officers of the Company who,
under SEC rules, may be deemed participants in the
Companys solicitation of proxies from its stockholders in
connection with the annual meeting.
Directors and Nominees
The principal occupations of the Companys directors and
director nominees who may be deemed participants in
the Companys solicitation are set forth in the section of
this proxy statement entitled Election of Directors and
Security Ownership Director Nominees and
Continuing Directors. The business addresses of the
Companys directors and director nominees are as follows:
|
|
|
Name |
|
Business Address |
|
|
|
Paul A. Toback
|
|
Bally Total Fitness Holding Corporation
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631 |
Barry M. Deutsch
|
|
Ovation Pharmaceuticals, Inc.
Four Parkway North, Suite 200
Deerfield, Illinois 60015 |
Eric Langshur
|
|
TLContact, Inc.
3047 North Lincoln Avenue, Suite 210
Chicago, Illinois 60657 |
J. Kenneth Looloian
|
|
DiGiorgio Corp.
380 Middlesex Avenue
Carteret, New Jersey 07008 |
James F. McAnally, M.D.
|
|
Trinitas Hospital Medical Office Bldg.
240 Williamson Street, Suite 307
Elizabeth, New Jersey 07202 |
Adam Metz
|
|
Polaris Capital LLC
1033 Skokie Blvd., Suite 660
Northbrook, Illinois 60062 |
John W. Rogers, Jr.
|
|
Ariel Capital Management, LLC
Ariel Mutual Funds
200 East Randolph, Suite 2900
Chicago, Illinois 60601 |
Steven S. Rogers
|
|
Northwestern University
J.L. Kellogg Graduate School of Management
2001 Sheridan Road
Evanston, Illinois 60201 |
A-1
Officers
The names and principal occupations of the Companys
officers who may be deemed participants in the
Companys solicitation of proxies are set forth in the
section of this proxy statement entitled Election of
Directors and Security Ownership. The business address is
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631. The
officers who may be deemed participants in the
solicitation are as follows:
Paul A. Toback
William J. Fanelli
Harold Morgan
John H. Wildman
Julie Adams
Marc D. Bassewitz
Carl J. Landeck
James A. McDonald
Information Regarding Ownership of the Companys
Securities by Participants
None of the persons listed above under Directors and
Nominees and Officers owns any of the
Companys securities of record but not beneficially. The
number of shares of Common Stock of the Company held by
directors, the director nominees and the officers as of
December 16, 2005, is set forth in the Election of
Directors and Security Ownership section of the proxy
statement.
Information Regarding Transactions in the Companys
Securities by Participants
The following table sets forth purchases and sales during the
past two years of shares of Common Stock of the Company by the
persons listed above under Directors and Nominees
and Officers. Unless otherwise indicated, all
transactions were in the public market and none of the purchase
price or market value of those shares is represented by funds
borrowed or otherwise obtained for the purpose of acquiring or
holding such securities. To the extent that any part of the
purchase price or market value of any of those shares is
represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities, the amount of
the indebtedness as of the latest practicable date is set forth
below. If those funds were borrowed or obtained otherwise than
pursuant to a margin account or bank loan in the regular course
of business of a bank, broker or dealer, a description of the
transaction and the parties is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase(Sales) of | |
|
|
|
|
|
|
Common Stock | |
|
|
Name |
|
Date |
|
(number of shares) | |
|
Note | |
|
|
|
|
| |
|
| |
Paul A. Toback
|
|
03/08/2005 |
|
|
120,000 |
|
|
|
2 |
|
|
|
03/08/2005 |
|
|
170,000 |
|
|
|
3 |
|
|
|
11/29/2005 |
|
|
135,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
62,000 |
|
|
|
3 |
|
|
|
12/02/2005 |
|
|
(421,804 |
) |
|
|
7 |
|
Barry M. Deutsch
|
|
05/05/2004 |
|
|
5,000 |
|
|
|
4 |
|
|
|
06/10/2004 |
|
|
5,000 |
|
|
|
1 |
|
Eric Langshur
|
|
12/16/2004 |
|
|
5,000 |
|
|
|
4 |
|
J. Kenneth Looloian
|
|
03/15/2004 |
|
|
2,500 |
|
|
|
1 |
|
|
|
12/15/2005 |
|
|
5,000 |
|
|
|
8 |
|
|
|
12/15/2005 |
|
|
(5,000 |
) |
|
|
7 |
|
James F. McAnally
|
|
03/15/2004 |
|
|
2,500 |
|
|
|
1 |
|
|
|
05/11/2004 |
|
|
5,000 |
|
|
|
1 |
|
|
|
12/15/2005 |
|
|
5,000 |
|
|
|
8 |
|
|
|
12/15/2005 |
|
|
(5,000 |
) |
|
|
7 |
|
Adam Metz
|
|
12/02/2005 |
|
|
5,000 |
|
|
|
4 |
|
|
|
12/13/2005 |
|
|
20,000 |
|
|
|
1 |
|
John W. Rogers, Jr.
|
|
04/14/2005 |
|
|
5,000 |
|
|
|
4 |
|
Steven S. Rogers
|
|
12/2/2005 |
|
|
5,000 |
|
|
|
4 |
|
A-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase(Sales) of | |
|
|
|
|
|
|
Common Stock | |
|
|
Name |
|
Date |
|
(number of shares) | |
|
Note | |
|
|
|
|
| |
|
| |
William Fanelli
|
|
05/11/2004 |
|
|
800 |
|
|
|
1 |
|
|
|
05/11/2004 |
|
|
4,200 |
|
|
|
1 |
|
|
|
03/08/2005 |
|
|
30,000 |
|
|
|
2 |
|
|
|
03/08/2005 |
|
|
60,000 |
|
|
|
3 |
|
|
|
11/29/2005 |
|
|
40,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
20,000 |
|
|
|
3 |
|
|
|
12/2/2005 |
|
|
(205,966 |
) |
|
|
7 |
|
|
|
12/5/2005 |
|
|
(10,000 |
) |
|
|
7 |
|
|
|
12/2/2005 |
|
|
15,000 |
|
|
|
8 |
|
|
|
12/5/2005 |
|
|
10,000 |
|
|
|
8 |
|
Harold Morgan
|
|
03/08/2005 |
|
|
55,000 |
|
|
|
2 |
|
|
|
03/08/2005 |
|
|
80,000 |
|
|
|
3 |
|
|
|
11/29/2005 |
|
|
55,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
23,000 |
|
|
|
3 |
|
|
|
12/2/2005 |
|
|
(201,000 |
) |
|
|
7 |
|
|
|
12/2/2005 |
|
|
(36,000 |
) |
|
|
7 |
|
|
|
12/2/2005 |
|
|
35,000 |
|
|
|
8 |
|
|
|
12/2/2005 |
|
|
1,000 |
|
|
|
8 |
|
John H. Wildman
|
|
03/08/2005 |
|
|
30,000 |
|
|
|
2 |
|
|
|
03/08/2005 |
|
|
60,000 |
|
|
|
3 |
|
|
|
11/29/2005 |
|
|
60,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
25,000 |
|
|
|
3 |
|
|
|
12/2/2005 |
|
|
(35,000 |
) |
|
|
7 |
|
|
|
12/2/2005 |
|
|
(185,000 |
) |
|
|
7 |
|
|
|
12/2/2005 |
|
|
35,000 |
|
|
|
8 |
|
Julie Adams
|
|
03/08/2005 |
|
|
15,000 |
|
|
|
2 |
|
|
|
03/08/2005 |
|
|
40,000 |
|
|
|
3 |
|
|
|
11/29/2005 |
|
|
40,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
20,000 |
|
|
|
3 |
|
|
|
12/2/2005 |
|
|
(25,000 |
) |
|
|
7 |
|
|
|
12/2/2005 |
|
|
25,000 |
|
|
|
8 |
|
|
|
12/15/2005 |
|
|
13,333 |
|
|
|
8 |
|
|
|
12/15/2005 |
|
|
(13,333 |
) |
|
|
7 |
|
|
|
12/15/2005 |
|
|
(2,500 |
) |
|
|
7 |
|
Marc D. Bassewitz
|
|
03/08/2005 |
|
|
10,000 |
|
|
|
2 |
|
|
|
03/08/2005 |
|
|
100,000 |
|
|
|
5 |
|
|
|
03/08/2005 |
|
|
25,000 |
|
|
|
3 |
|
|
|
03/08/2005 |
|
|
25,000 |
|
|
|
6 |
|
|
|
11/29/2005 |
|
|
55,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
23,000 |
|
|
|
3 |
|
|
|
12/16/2005 |
|
|
(35,000 |
) |
|
|
7 |
|
Carl J. Landeck
|
|
05/26/2005 |
|
|
100,000 |
|
|
|
5 |
|
|
|
05/26/2005 |
|
|
75,000 |
|
|
|
6 |
|
|
|
11/29/2005 |
|
|
55,000 |
|
|
|
5 |
|
|
|
11/29/2005 |
|
|
23,000 |
|
|
|
6 |
|
|
|
12/5/2005 |
|
|
(75,000 |
) |
|
|
7 |
|
A-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase(Sales) of | |
|
|
|
|
|
|
Common Stock | |
|
|
Name |
|
Date |
|
(number of shares) | |
|
Note | |
|
|
|
|
| |
|
| |
|
|
12/6/2005 |
|
|
(8,500 |
) |
|
|
7 |
|
|
|
12/9/2005 |
|
|
(16,500 |
) |
|
|
7 |
|
James A. McDonald
|
|
05/26/2005 |
|
|
100,000 |
|
|
|
5 |
|
|
|
05/26/2005 |
|
|
20,000 |
|
|
|
6 |
|
|
|
11/29/2005 |
|
|
55,000 |
|
|
|
2 |
|
|
|
11/29/2005 |
|
|
23,000 |
|
|
|
3 |
|
|
|
12/7/2005 |
|
|
(15,300 |
) |
|
|
7 |
|
|
|
12/9/2005 |
|
|
(34,700 |
) |
|
|
7 |
|
|
|
(1) |
Open market purchase |
|
(2) |
Grant of restricted stock award under the 1996 Long-Term
Incentive Plan |
|
(3) |
Grant of stock options under the 1996 Long-Term Incentive Plan |
|
(4) |
Automatic grant of stock options under 1996 Non-Employee
Directors Stock Option Plan upon joining the Board or
two-year anniversary of service as Director |
|
(5) |
Grant of restricted stock award under the Inducement Plan |
|
(6) |
Grant of stock options under the Inducement Plan |
|
(7) |
Open market sale |
|
(8) |
Exercise of stock options |
Miscellaneous Information Concerning Participants
Except as described in this Appendix A or otherwise
disclosed in this proxy statement, to the best of the
Companys knowledge, no person listed above under
Directors and Nominees and Officers or
any of his associates beneficially owns (within the
meaning of
Rule 13d-3 under
the Exchange Act), directly or indirectly, any shares or other
securities of the Company or any of its subsidiaries.
Furthermore, except as described in this Appendix I or
otherwise disclosed in this proxy statement, to the best of the
Companys knowledge, no such person or any of his
associates is either a party to any transaction or series of
similar transactions since December 1, 2004 or any
currently proposed transaction or series of similar transactions
(i) to which the Company or any of its subsidiaries was or
is to be a party, (ii) in which the amount involved exceeds
$60,000 and (iii) in which such person or associate had or
will have a direct or indirect material interest.
To the best of the Companys knowledge, except as described
in this Appendix A or otherwise disclosed in this proxy
statement, no person listed above under Directors and
Nominees and Officers or any of his associates
has entered into any arrangement or understanding with any
person with respect to (i) any future employment with the
Company or its affiliates or (ii) any future transactions
to which the Company or any of its affiliates will or may be a
party. Except as described in this Appendix A or otherwise
disclosed in this proxy statement, to the best of the
Companys knowledge, there are no contracts, arrangements
or understandings by any of the persons listed under
Directors and Nominees and Officers
within the past year with any person with respect to any of the
Companys securities, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees
against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies. Except as
described in this Appendix A or otherwise disclosed in this
proxy statement, to the best of the Companys knowledge, no
persons listed under Directors and Nominees and
Officers has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be
acted upon at the annual meeting of Bally stockholders (and no
other person who is a party to an arrangement or understanding
pursuant to which a nominee for election as director is proposed
to be elected, has any such interest).
A-4
Appendix B
BALLY TOTAL FITNESS HOLDING CORPORATION
2006 OMNIBUS EQUITY COMPENSATION PLAN
The purpose of the Bally Total Fitness Holding Corporation 2006
Omnibus Equity Compensation Plan (the Plan) is to
provide (i) designated employees of Bally Total Fitness
Holding Corporation (the Company) and its
subsidiaries, and (ii) non-employee members of the board of
directors of the Company with the opportunity to receive grants
of stock options, stock units, stock awards, dividend
equivalents and other stock-based awards. The Company believes
that the Plan will encourage the participants to contribute
materially to the growth of the Company, thereby benefitting the
Companys stockholders, and will align the economic
interests of the participants with those of the stockholders.
The Plan shall be effective as of January 26, 2006, subject
to approval by the stockholders of the Company.
Whenever used in this Plan, the following terms will have the
respective meanings set forth below:
|
|
|
(a) Board means the Companys Board
of Directors. |
|
|
(b) Change of Control shall mean the
happening of any of the following events: |
|
|
|
(i) An acquisition by any individual, entity, or group
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Exchange Act (an Entity) of beneficial ownership
(within the meaning of
Rule 13d-3
promulgated under the Exchange Act), of 50% or more of either
(A) the then-outstanding shares of common stock of the
Company (the Outstanding Company Common Stock), or
(B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in
the election of the directors (the Outstanding Company
Voting Securities); excluding, however, the following:
(x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by, or under common control with, the Company or
(z) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and
(C) of subsection (iii). |
|
|
(ii) A change in the composition of the Board such that the
individuals who, as of December 2, 2005 constituted the
Board (such Board shall be hereinafter referred to as the
Incumbent Board) cease for any reason to constitute
at least a majority of the Board; provided,
however, that for purposes of this definition, any
individual who becomes a member of the Board subsequent to
December 2, 2005, whose election, or nomination for
election, by the Companys stockholders was approved by a
vote of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent Board
(or deemed to be such pursuant to this provision), shall be
considered as though such individual were a member of the
Incumbent Board; and provided further, however,
that any such individual whose initial assumption of office
occurs as a result of or in connection with either an actual or
threatened election contest (as such terms are used in
Rule 14a-11 of the
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or
on behalf of an Entity other than the Board shall not be
considered as a member of the Incumbent Board; |
|
|
(iii) The consummation of a merger, reorganization,
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company other than a
transaction which results in (A) all or substantially all
of the stockholders of the Company who were beneficial owners of
the Outstanding Common Stock or Outstanding Company Voting
Securities immediately prior to such transaction beneficially
owning immediately after the transaction more than 60% of the
outstanding shares of common stock and the combined voting power
of the then-outstanding voting securities of |
B-1
|
|
|
the corporation resulting from such transaction (including,
without limitation, a corporation or other person which as a
result of such transaction owns the Company or all or
substantially all of the Companys assets either directly
or through one or more subsidiaries (a Parent
Company) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be); (B) no Entity
(other than the Company, any employee benefit plan (or related
trust) of the Company, the Corporation resulting from the
transaction or, if reference was made to a Parent Company for
purposes of determining whether (A) was satisfied in
connection with the applicable transaction, such Parent Company)
beneficially owning directly or indirectly 20% or more of the
outstanding shares of common stock of the corporation resulting
from such transaction or the combined voting power of the
outstanding voting securities of such corporation entitled to
vote generally in the election of directors unless such
ownership resulted solely from ownership of securities of the
Company prior to the transaction and (C) individuals who
were members of the Incumbent Board immediately after the
consummation of the transaction constituting at least a majority
of the members of the board of directors of the corporation
resulting from such transaction. |
|
|
(iv) A liquidation or dissolution of the Company. |
|
|
|
(c) Code means the Internal Revenue Code
of 1986, as amended. |
|
|
(d) Committee means (i) with
respect to Grants to Employees, the Compensation Committee of
the Board or another committee appointed by the Board to
administer the Plan, (ii) with respect to Grants made to
Non-Employee Directors, the Board, and (iii) with respects
to Grants that are intended to be qualified
performance-based compensation under section 162(m)
of the Code as well as Grants to Employees who are officers, a
committee that consists of two or more persons appointed by the
Board, all of whom shall be outside directors as
defined under section 162(m) of the Code and related
Treasury regulations and non-employee directors as
defined under
Rule 16b-3
promulgated under the Exchange Act. The Board or committee, as
applicable, that has authority with respect to a specific Grant
shall be referred to as the Committee with respect
to that Grant. |
|
|
(e) Company means Bally Total Fitness
Holding Corporation and any successor corporation. |
|
|
(f) Company Stock means the common stock
of the Company or such other securities of the Company that may
be substituted for common stock pursuant to Section 5(e). |
|
|
(g) Disability means that the
Participant qualifies to receive long-term disability payments
under the Companys long-term disability program, as it may
be amended from time to time. |
|
|
(h) Dividend Equivalent means an amount
determined by multiplying the number of shares of Company Stock
subject to a Grant by the per-share cash dividend, or the
per-share fair market value (as determined by the Committee) of
any dividend in consideration other than cash, paid by the
Company on its Company Stock. |
|
|
(i) Effective Date of the Plan means
January 26, 2006, subject to approval of the Plan by the
stockholders of the Company. |
|
|
(j) Employee means an employee of the
Employer (including an officer or director who is also an
employee). |
|
|
(k) Employer means the Company and its
subsidiaries. |
|
|
(l) Exchange Act means the Securities
Exchange Act of 1934, as amended. |
|
|
(m) Exercise Price means the per share
price at which shares of Company Stock may be purchased under an
Option, as designated by the Committee. |
|
|
(n) Fair Market Value of Company Stock
means as of any given date, unless the Committee determines
otherwise with respect to a particular Grant, (i) if the
principal trading market for the |
B-2
|
|
|
Company Stock is a national securities exchange such as the New
York Stock Exchange or the Nasdaq National Market, the last
reported sale price of Company Stock on the relevant date or (if
there were no trades on that date) the latest preceding date
upon which a sale was reported, (ii) if the Company Stock
is not principally traded on such exchange or market, the mean
between the last reported bid and asked
prices of Company Stock on the relevant date, as reported on
Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable and as the Committee
determines, or (iii) if the Company Stock is not publicly
traded or, if publicly traded, is not subject to reported
transactions or bid or asked quotations
as set forth above, the Fair Market Value per share shall be as
determined by the Committee. |
|
|
(o) Grant means an Option, Stock Unit,
Stock Award, SAR, Dividend Equivalent or Other Stock-Based Award
granted under the Plan. |
|
|
(p) Grant Agreement means the written
instrument that sets forth the terms and conditions of a Grant,
including all amendments thereto. |
|
|
(q) Incentive Stock Option means an
Option that is intended to meet the requirements of an incentive
stock option under section 422 of the Code or any successor
provision thereto. |
|
|
(r) Non-Employee Director means a member
of the Board who is not an employee of the Employer. |
|
|
(s) Nonqualified Stock Option means an
Option that is not intended to be an Incentive Stock Option. |
|
|
(t) Option means a right granted to a
Participant to purchase shares of Company Stock, as described in
Section 7. |
|
|
(u) Other Stock-Based Award means any
Grant based on, measured by or payable in Company Stock (other
than a Grant described in Sections 7, 8, 9 or 10 of
the Plan), as described in Section 11. |
|
|
(v) Participant means an Employee or
Non-Employee Director designated by the Committee to participate
in the Plan. |
|
|
(w) Plan means this Bally Total Fitness
Holding Corporation 2006 Omnibus Equity Compensation Plan, as in
effect from time to time. |
|
|
(x) SAR means a stock appreciation right
as described in Section 10. |
|
|
(y) Stock Award means an award of
Company Stock as described in Section 9. |
|
|
(z) Stock Unit means an award of a
phantom unit representing a share of Company Stock, as described
in Section 8. |
(a) Committee. The Plan shall be administered and
interpreted by the Committee. In its sole discretion, the Board
may at anytime and from time to time exercise any and all rights
and duties of the Committee under the Plan except with respect
to a matter that under
Rule 16b-3 of the
Exchange Act or section 162(m) of the Code or any
regulations or rules issued thereunder is required to be
determined in the sole discretion of the Committee. Committee
members may resign at any time by delivering written notice to
the Board. Vacancies in the Committee may only be filled by the
Board. To the extent permitted by applicable law, ministerial
functions may be performed by an administrative committee
comprised of Company employees appointed by the Committee. Any
delegation hereunder shall be subject to the restrictions and
limits that the Committee specifies at the time of such
delegation, and the Committee may at any time rescind the
authority so delegated or appoint a new delegate. At all times,
the delegate appointed under this Section 3 shall serve in
such capacity at the pleasure of the Committee.
(b) Committee Authority. A majority of the Committee
shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts
approved in writing by
B-3
a majority of the Committee in lieu of a meeting, shall be
deemed the acts of the Committee. Each member of the Committee
is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or
other employee of the Company or any subsidiary, the
Companys independent certified public accountants, or any
executive compensation consultant or other professional retained
by the Company to assist in the administration of the Plan. The
Committee shall have the sole authority to (i) determine
the Participants to whom Grants shall be made under the Plan,
(ii) determine the type, size and terms and conditions of
the Grants to be made to each such Participant,
(iii) determine the time when the grants will be made and
the duration of any applicable exercise or restriction period,
including the criteria for exercisability and the acceleration
of exercisability; provided, however, that the Committee shall
not have the authority to accelerate the vesting or waive the
forfeiture of any performance based awards granted pursuant to
Section 12, (iv) amend the terms and conditions of any
previously issued Grant, subject to the provisions of
Section 18 below, and (v) deal with any other matters
arising under the Plan.
(c) Committee Determinations. The Committee shall
have full power and express discretionary authority to
administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations,
agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in
its sole discretion. The Committees interpretations of the
Plan and all determinations made by the Committee pursuant to
the powers vested in it hereunder shall be conclusive and
binding on all persons having any interest in the Plan or in any
awards granted hereunder. All powers of the Committee shall be
executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives
of the Plan and need not be uniform as to similarly situated
Participants.
(a) Grants under the Plan may consist of Options as
described in Section 7, Stock Units as described in
Section 8, Stock Awards as described in Section 9, and
SARs or Other Stock-Based Awards as described in
Section 10. All Grants shall be subject to such terms and
conditions as the Committee deems appropriate and as are
specified in writing by the Committee to the Participant in the
Grant Agreement.
(b) All Grants shall be made conditional upon the
Participants acknowledgement, in writing or by acceptance
of the Grant, that all decisions and determinations of the
Committee shall be final and binding on the Participant, his or
her beneficiaries and any other person having or claiming an
interest under such Grant. Grants under a particular section of
the Plan need not be uniform as among the Participants.
(c) The Committee may make Grants that are contingent on,
and subject to, stockholder approval of the Plan or an amendment
to the Plan.
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5. |
Shares Subject to the Plan |
(a) Shares Authorized. The total aggregate number of
shares of Company Stock that may be issued under the Plan is
2,500,000 shares, subject to adjustment as described in
subsection (e) below.
(b) Limit on Stock Awards, Stock Units and Other
Stock-Based Awards. Within the aggregate limit described in
subsection (a), the maximum number of shares of Company
Stock that may be issued under the Plan pursuant to Stock
Awards, Stock Units and Other Stock-Based Awards during the term
of the Plan is 2,000,000 shares, subject to adjustment as
described in subsection (e) below.
(c) Source of Shares; Share Counting. Shares issued
under the Plan may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares
purchased by the Company on the open market for purposes of the
Plan. If and to the extent Options or SARs granted under the
Plan terminate, expire, or are canceled, forfeited, exchanged or
surrendered without having been exercised, and if and to the
extent that any Stock Awards, Stock Units, or Other Stock-Based
Awards are forfeited or terminated prior to vesting, or
otherwise are not paid in full, the shares reserved for such
Grants shall again be available for purposes of the Plan. Shares
of Company Stock surrendered in payment of the Exercise Price of
an Option shall again be available for purposes of the Plan.
Shares of Company Stock withheld for payment of applicable tax
withholding obligations with respect to the exercise or other
taxation of a Grant shall again be
B-4
available for purposes of the Plan. If SARs are exercised, only
the net number of shares actually issued upon exercise of the
SARs shall be considered issued under the Plan for purposes of
this subsection (c). To the extent that Grants are paid in
cash, and not in shares of Company Stock, any shares previously
reserved for issuance pursuant to such Grants shall again be
available for purposes of the Plan. Notwithstanding the
foregoing, no shares shall become available pursuant to this
section 5(c) to the extent that the transaction resulting
in the return of shares occurs more than ten years after the
date of the most recent stockholder approval of the Plan or such
return of shares would constitute a material
revision of the Plan subject to stockholder approval under
then applicable rules of the New York Stock Exchange (or any
applicable exchange or quotation system).
(d) Individual Limits. All Grants under the Plan
shall be expressed in shares of Company Stock. The maximum
aggregate number of shares of Company Stock with respect to
which all Grants may be made under the Plan to any individual
during any calendar year shall be 500,000 shares, subject
to adjustment as described in subsection (e) below. A
Participant may not accrue Dividend Equivalents during any
calendar year in excess of $1,000,000. The individual limits of
this subsection (d) shall apply without regard to
whether the Grants are to be paid in Company Stock or cash. All
cash payments (other than with respect to Dividend Equivalents)
shall equal the Fair Market Value of the shares of Company Stock
to which the cash payments relate.
(e) Adjustments. If there is any change in the
number or kind of shares of Company Stock outstanding
(i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of
shares, (ii) by reason of a merger, reorganization or
consolidation, (iii) by reason of a reclassification or
change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Company
Stock as a class without the Companys receipt of
consideration, or if the value of outstanding shares of Company
Stock is substantially reduced as a result of a spinoff or the
Companys payment of an extraordinary dividend or
distribution, the maximum number of shares of Company Stock
available for issuance under the Plan, the maximum number of
shares of Company Stock for which any individual may receive
Grants in any year, the number of shares covered by outstanding
Grants, the kind of shares issued and to be issued under the
Plan, and the price per share or the applicable market value of
such Grants shall be appropriately adjusted by the Committee, as
it may deem reasonably necessary, to reflect any increase or
decrease in the number of, or change in the kind or value of,
issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits
under such Grants; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any
adjustments determined by the Committee shall be final, binding
and conclusive. Any adjustment affecting a Grant made pursuant
to Section 12 shall be made consistent with the
requirements of section 162 (m) of the Code.
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6. |
Eligibility for Participation |
(a) Eligible Persons. All Employees, including
Employees who are officers or members of the Board, and all
Non-Employee Directors shall be eligible to participate in the
Plan.
(b) Selection of Participants. The Committee shall
select the Employees and Non-Employee Directors to receive
Grants and shall determine the number of shares of Company Stock
subject to each Grant.
(a) General Requirements. The Committee may grant
Options to an Employee or Non-Employee Director upon such terms
and conditions as the Committee deems appropriate under this
Section 7. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of
Options to Employees and Non-Employee Directors.
(b) Type of Option, Price and Term.
(i) The Committee may grant Incentive Stock Options or
Nonqualified Stock Options or any combination of the two, all in
accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees of the
Company or its parents or subsidiaries, as defined in
B-5
section 424 of the Code. Nonqualified Stock Options may be
granted to Employees or Non-Employee Directors.
(ii) The Exercise Price of Company Stock subject to an
Option shall be determined by the Committee and may be equal to
or greater than the Fair Market Value of a share of Company
Stock on the date the Option is granted; provided, however, that
an Incentive Stock Option may not be granted to an Employee who,
at the time of grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the
Company or any parent or subsidiary, as defined in
section 424 of the Code, unless the Exercise Price per
share is not less than 110% of the Fair Market Value of the
Company Stock on the date of grant.
(iii) The Committee shall determine the term of each
Option, which shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an
Employee who, at the time of grant, owns stock possessing more
than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary, as defined in
section 424 of the Code, may not have a term that exceeds
five years from the date of grant.
(c) Exercisability of Options.
(i) Options shall become exercisable in accordance with
such terms and conditions as may be determined by the Committee
and specified in the Grant Agreement. The Committee may
accelerate the exercisability of any or all outstanding Options
at any time for any reason.
(ii) The Committee may provide in a Grant Agreement that
the Participant may elect to exercise part or all of an Option
before it otherwise has become exercisable. Any shares so
purchased shall be restricted shares and shall be subject to a
repurchase right in favor of the Company during a specified
restriction period, with the repurchase price equal to the
lesser of (A) the Exercise Price or (B) the Fair
Market Value of such shares at the time of repurchase, or such
other restrictions as the Committee deems appropriate.
(iii) Options granted to persons who are non-exempt
employees under the Fair Labor Standards Act of 1938, as
amended, may not be exercisable for at least six months after
the date of grant (except that such Options may become
exercisable, as determined by the Committee, upon the
Participants death, Disability or retirement, or upon a
Change of Control or other circumstances permitted by applicable
regulations).
(d) Termination of Employment or Service. Except as
provided in the Grant Agreement, an Option may only be exercised
while the Participant is employed by the Employer, or providing
service as a Non-Employee Director. The Committee shall
determine in the Grant Agreement under what circumstances and
during what time periods a Participant may exercise an Option
after termination of employment or service.
(e) Exercise of Options. A Participant may exercise
an Option that has become exercisable, in whole or in part, by
delivering a notice of exercise to the Company. The Participant
shall pay the Exercise Price for the Option (i) in cash,
(ii) if permitted by the Committee, by delivery of or
attestation to ownership of shares of Company Stock owned by the
Participant and having a Fair Market Value on the date of
exercise equal to the Exercise Price, (iii) by payment
through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board, or (iv) by
such other method as the Committee may approve. Shares of
Company Stock used to exercise an Option shall have been held by
the Participant for the requisite period of time to avoid
adverse accounting consequences to the Company with respect to
the Option. Payment for the shares pursuant to the Option, and
any required withholding taxes, must be received by the time
specified by the Committee depending on the type of payment
being made, but in all cases prior to the issuance of the
Company Stock.
(f) Limits on Incentive Stock Options. Each
Incentive Stock Option shall provide that, if the aggregate Fair
Market Value of the stock on the date of the grant with respect
to which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year, under the Plan
or any other stock option plan of the Company or a parent or
subsidiary, as defined in section 424 of the Code, exceeds
$100,000, then the Option, as to the excess, shall be treated as
a Nonqualified Stock Option.
B-6
(g) The Participant shall give the Company prompt notice of
any disposition of shares of Company Stock acquired by exercise
of an Incentive Stock Option within two years from the date of
grant of such Option or one year after the transfer of such
shares of Company Stock to the Participant.
(a) General Requirements. The Committee may grant
Stock Units to an Employee or Non-Employee Director, upon such
terms and conditions as the Committee deems appropriate under
this Section 8. Each Stock Unit shall represent the right
of the Participant to receive a share of Company Stock or an
amount based on the value of a share of Company Stock. All Stock
Units shall be credited to bookkeeping accounts on the
Companys records for purposes of the Plan.
(b) Terms of Stock Units. The Committee may grant
Stock Units that are payable on terms and conditions determined
by the Committee, which may include payment based on achievement
of performance goals. Stock Units may be paid at the end of a
specified vesting or performance period, or payment may be
deferred to a date authorized by the Committee in a manner that
complies with section 409A of the Code. The Committee shall
determine the number of Stock Units to be granted and the
requirements applicable to such Stock Units.
(c) Payment With Respect to Stock Units. Payment
with respect to Stock Units shall be made in cash, in Company
Stock, or in a combination of the two, as determined by the
Committee. The Grant Agreement shall specify the maximum number
of shares that can be issued under the Stock Units.
(d) Requirement of Employment or Service. The
Committee shall determine in the Grant Agreement under what
circumstances a Participant may retain Stock Units after
termination of the Participants employment or service, and
the circumstances under which Stock Units may be forfeited.
(a) General Requirements. The Committee may issue
shares of Company Stock to an Employee or Non-Employee Director
under a Stock Award, upon such terms and conditions as the
Committee deems appropriate under this Section 9. Shares of
Company Stock issued pursuant to Stock Awards may be issued for
cash consideration or for no cash consideration, and subject to
restrictions or no restrictions, as determined by the Committee.
The Committee may establish conditions under which restrictions
on Stock Awards shall lapse over a period of time or according
to such other criteria as the Committee deems appropriate,
including restrictions based upon the achievement of specific
performance goals. The Committee shall determine the number of
shares of Company Stock to be issued pursuant to a Stock Award.
(b) Requirement of Employment or Service. The
Committee shall determine in the Grant Agreement under what
circumstances a Participant may retain Stock Awards after
termination of the Participants employment or service, and
the circumstances under which Stock Awards may be forfeited or
repurchased by the Company.
(c) Restrictions on Transfer. While Stock Awards are
subject to restrictions, a Participant may not sell, assign,
transfer, pledge or otherwise dispose of the shares of a Stock
Award except upon death as described in Section 15(a). Each
certificate for a share of a Stock Award shall contain a legend
giving appropriate notice of the restrictions in the Grant. The
Participant shall be entitled to have the legend removed when
all restrictions on such shares have lapsed. The Company may
retain possession of any certificates for Stock Awards until all
restrictions on such shares have lapsed.
(d) Right to Vote and to Receive Dividends. The
Committee shall determine to what extent, and under what
conditions, the Participant shall have the right to vote shares
of Stock Awards and to receive any dividends or other
distributions paid on such shares during the restriction period.
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10. |
Stock Appreciation Rights and Other Stock-Based Awards |
(a) SARs. The Committee may grant SARs to an
Employee or Non-Employee Director separately or in tandem with
an Option. The following provisions are applicable to SARs:
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(i) Base Amount. The Committee shall establish the
base amount of the SAR at the time the SAR is granted. The base
amount of each SAR shall be equal to the per share Exercise
Price of the related Option or, if there is no related Option,
an amount that is at least equal to the Fair Market Value of a
share of Company Stock as of the date of Grant of the SAR. |
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(ii) Tandem SARs. The Committee may grant tandem
SARs either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided,
however, that, in the case of an Incentive Stock Option, SARs
may be granted only at the date of the grant of the Incentive
Stock Option. In the case of tandem SARs, the number of SARs
granted to a Participant that shall be exercisable during a
specified period shall not exceed the number of shares of
Company Stock that the Participant may purchase upon the
exercise of the related Option during such period. Upon the
exercise of an Option, the SARs relating to the Company Stock
covered by such Option shall terminate. Upon the exercise of
SARs, the related Option shall terminate to the extent of an
equal number of shares of Company Stock. |
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(iii) Exercisability. A SAR shall be exercisable
during the period specified by the Committee in the Grant
Agreement and shall be subject to such vesting and other
restrictions as may be specified in the Grant Agreement. The
Committee may grant SARs that are subject to achievement of
performance goals or other conditions. The Committee may
accelerate the exercisability of any or all outstanding SARs at
any time for any reason. The Committee shall determine in the
Grant Agreement under what circumstances and during what periods
a Participant may exercise a SAR after termination of employment
or service. A tandem SAR shall be exercisable only while the
Option to which it is related is exercisable. |
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(iv) Grants to Non-Exempt Employees. SARs granted to
persons who are non-exempt employees under the Fair Labor
Standards Act of 1938, as amended, may not be exercisable for at
least six months after the date of grant (except that such SARs
may become exercisable, as determined by the Committee, upon the
Participants death, Disability or retirement, or upon a
Change of Control or other circumstances permitted by applicable
regulations). |
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(v) Value of SARs. When a Participant exercises
SARs, the Participant shall receive in settlement of such SARs
an amount equal to the value of the stock appreciation for the
number of SARs exercised. The stock appreciation for a SAR is
the amount by which the Fair Market Value of the underlying
Company Stock on the date of exercise of the SAR exceeds the
base amount of the SAR as described in subsection (i). |
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(vi) Form of Payment. The Committee shall determine
whether the stock appreciation for a SAR shall be paid in the
form of shares of Company Stock, cash or a combination of the
two. For purposes of calculating the number of shares of Company
Stock to be received, shares of Company Stock shall be valued at
their Fair Market Value on the date of exercise of the SAR. If
shares of Company Stock are to be received upon exercise of a
SAR, cash shall be delivered in lieu of any fractional share. To
the extent payment for a SAR is to be made in cash, the Grant
Agreement shall, to the extent necessary to comply with the
requirements to section 409A of the Code, specify the date
of payment, which may be different than the date of the exercise
of the SAR. If the date of payment for a SAR is later than the
date of exercise, the Grant Agreement may specify that the
Participant be entitled to earnings on such amount until paid. |
(b) Other Stock-Based Awards. The Committee may
grant other awards not specified in Sections 7, 8 or 9
above that are based on or measured by Company Stock to
Employees and Non-Employee Directors, on such terms and
conditions as the Committee deems appropriate. Other Stock-Based
Awards may be granted subject to achievement of performance
goals or other conditions and may be payable in Company Stock or
cash, or in a combination of the two, as determined by the
Committee in the Grant Agreement.
B-8
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11. |
Dividend Equivalents. |
(a) General Requirements. When the Committee makes a
Grant under the Plan or anytime between the date of a Grant and
the date the Grant is exercised, vests or expires, the Committee
may grant Dividend Equivalents in connection with the Grant,
under such terms and conditions as the Committee deems
appropriate under this Section 11. Dividend Equivalents may
be paid to Participants currently or may be deferred, as
determined by the Committee. All Dividend Equivalents that are
not paid currently shall be credited to bookkeeping accounts on
the Companys records for purposes of the Plan. Dividend
Equivalents may be accrued as a cash obligation, or may be
converted to Stock Units for the Participant, and deferred
Dividend Equivalents may accrue interest, all as determined by
the Committee. The Committee may provide that Dividend
Equivalents shall be payable based on the achievement of
specific performance goals. Dividend Equivalents granted with
respect to Options or SARs that are intended to be qualified
performance based compensation shall be payable, with respect to
pre-exercise periods, regardless of whether such Option or SAR
is subsequently exercised.
(b) Payment with Respect to Dividend Equivalents.
Dividend Equivalents may be payable in cash or shares of Company
Stock or in a combination of the two, as determined by the
Committee.
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12. |
Qualified Performance-Based Compensation |
(a) Designation as Qualified Performance-Based
Compensation. The Committee may determine that Stock Units,
Stock Awards, Dividend Equivalents or Other Stock-Based Awards
granted to an Employee shall be considered qualified
performance-based compensation under section 162(m)
of the Code, in which case the provisions of this
Section 12 shall apply and control over any contrary
provision in this Plan. The Committee may also grant Options or
SARs under which the exercisability of the Options is subject to
achievement of performance goals as described in this
Section 12 or otherwise.
(b) Performance Goals. When Grants are made under
this Section 12, the Committee shall establish in writing
(i) the objective performance goals that must be met,
(ii) the period during which performance will be measured,
(iii) the maximum amounts that may be paid if the
performance goals are met, and (iv) any other conditions
that the Committee deems appropriate and consistent with the
requirements of section 162(m) of the Code for
qualified performance-based compensation. The
performance goals shall satisfy the requirements for
qualified performance-based compensation, including
the requirement that the achievement of the goals be
substantially uncertain at the time they are established and
that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine
whether and to what extent the performance goals have been met.
The Committee shall not have discretion to increase the amount
of compensation that is payable, but may reduce the amount of
compensation that is payable, pursuant to Grants identified by
the Committee as qualified performance-based
compensation.
(c) Criteria Used for Objective Performance Goals.
The Committee shall use objectively determinable performance
goals based on one or more of the following criteria: stock
price, earnings per share, price-earnings multiples, net
earnings, operating earnings, revenue, number of days sales
outstanding in accounts receivable, productivity, margin, EBITDA
(earnings before interest, taxes, depreciation and
amortization), net capital employed, return on assets,
stockholder return, return on equity, return on capital
employed, growth in assets, unit volume, sales, cash flow,
market share, relative performance to a comparison group
designated by the Committee, or strategic business criteria
consisting of one or more objectives based on meeting specified
revenue goals, market penetration goals, customer growth,
geographic business expansion goals, cost targets or goals
relating to acquisitions or divestitures. The performance goals
may relate to one or more business units or the performance of
the Company as a whole, or any combination of the foregoing.
Performance goals need not be uniform as among Participants.
(d) Timing of Establishment of Goals. The Committee
shall establish the performance goals in writing either before
the beginning of the performance period or during a period
ending no later than the earlier of (i) 90 days after
the beginning of the performance period or (ii) the date on
which 25% of the performance period has been completed, or such
other date as may be required or permitted under applicable
regulations under section 162(m) of the Code.
B-9
(e) Certification of Results. The Committee shall
certify the performance results for the performance period
specified in the Grant Agreement after the performance period
ends. The Committee shall determine the amount, if any, to be
paid pursuant to each Grant based on the achievement of the
performance goals and the satisfaction of all other terms of the
Grant Agreement.
(f) Death, Disability or Other Circumstances. The
Committee may provide in the Grant Agreement that Grants under
this Section 12 shall be payable, in whole or in part, in
the event of the Participants death or Disability, a
Change of Control or under other circumstances consistent with
the Treasury regulations and rulings under section 162(m)
of the Code.
The Committee may permit or require a Participant to defer
receipt of the payment of cash or the delivery of shares that
would otherwise be due to the Participant in connection with any
Grant. The Committee shall establish rules and procedures for
any such deferrals, consistent with applicable requirements of
section 409A of the Code. Notwithstanding any provision of
the Plan to the contrary, in the event that following the
Effective Date the Committee determines that a Grant may be
subject to section 409A of the Code and related Department
of Treasury guidance, the Committee may adopt such amendments to
the Plan and the applicable Grant Agreements or take any other
actions that the Committee determines are necessary or
appropriate to (a) exempt the Grant from section 409A
of the Code and/or preserve the intended tax treatment of the
benefits with respect to the Grant, or (b) comply with the
requirements of section 409A of the Code and the applicable
guidance.
(a) Required Withholding. All Grants under the Plan
shall be subject to applicable federal (including FICA), state
and local tax withholding requirements. The Company may require
that the Participant or other person receiving or exercising
Grants pay to the Company the amount of any federal, state or
local taxes that the Company is required to withhold with
respect to such Grants, or the Company may deduct from other
wages paid by the Company the amount of any withholding taxes
due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so
permits, a Participant may elect to satisfy the Companys
tax withholding obligation with respect to Grants paid in
Company Stock by having shares withheld, at the time such Grants
become taxable, up to an amount that does not exceed the minimum
applicable withholding tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form
and manner prescribed by the Committee.
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15. |
Transferability of Grants |
(a) Restrictions on Transfer. No right or interest
of a Participant in any Grant may be pledged, encumbered or
hypothecated to or in favor of any party other than the Company
or a subsidiary. Except as described in
subsection (b) or (c) below, only the Participant
may exercise rights under a Grant during the Participants
lifetime, and a Participant may not transfer those rights except
by will or by the laws of descent and distribution. When a
Participant dies, the personal representative or other person
entitled to succeed to the rights of the Participant may
exercise such rights. Any such successor must furnish proof
satisfactory to the Company of his or her right to receive the
Grant under the Participants will or under the applicable
laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options to or for
Family Members. Notwithstanding the foregoing, the Committee
may provide, in a Grant Agreement, that a Participant may
transfer Nonqualified Stock Options to family members,
charitable institutions or one or more trusts or other entities
for the benefit of or owned by family members, consistent with
the applicable securities laws, according to such terms as the
Committee may determine; provided that the Participant receives
no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option
immediately before the transfer.
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16. |
Consequences of a Change of Control |
(a) In the event of a Change of Control, the Committee may
take any one or more of the following actions with respect to or
all outstanding Grants, without the consent of any Participant:
(i) the Committee may determine that outstanding Options
and SARs shall be fully exercisable, and restrictions on
outstanding Stock Awards and Stock Units shall lapse, as of the
date of the Change of Control or at such other time as the
Committee determines, (ii) the Committee may require that
Participants surrender their outstanding Options and SARs in
exchange for one or more payments by the Company, in cash or
Company Stock as determined by the Committee, in an amount equal
to the amount by which the then Fair Market Value of the shares
of Company Stock subject to the Participants unexercised
Options and SARs exceeds the Exercise Price, if any, and on such
terms as the Committee determines, (iii) after giving
Participants an opportunity to exercise their outstanding
Options and SARs, the Committee may terminate any or all
unexercised Options and SARs at such time as the Committee deems
appropriate, (iv) with respect to Participants holding
Stock Units, Other Stock-Based Awards or Dividend Equivalents,
the Committee may determine that such Participants shall receive
one or more payments in settlement of such Stock Units, Other
Stock-Based Awards or Dividend Equivalents, in such amount and
form and on such terms as may be determined by the Committee, or
(v) the Committee may determine that Grants that remain
outstanding after the Change of Control shall be converted to
similar grants of, or assumed by, the surviving corporation (or
a parent or subsidiary of the surviving corporation or
successor). Such acceleration, surrender, termination,
settlement or conversion shall take place as of the date of the
Change of Control or such other date as the Committee may
specify.
(b) Other Transactions. The Committee may provide in
a Grant Agreement that a sale or other transaction involving a
subsidiary or other business unit of the Company shall be
considered a Change of Control for purposes of a Grant, or the
Committee may establish other provisions that shall be
applicable in the event of a specified transaction.
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17. |
Requirements for Issuance of Shares |
No Company Stock shall be issued in connection with any Grant
hereunder unless and until all legal requirements applicable to
the issuance of such Company Stock have been complied with to
the satisfaction of the Committee. The Committee shall have the
right to condition any Grant made to any Participant hereunder
on such Participants undertaking in writing to comply with
such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or
advisable, and certificates representing such shares may be
legended to reflect any such restrictions. Certificates
representing shares of Company Stock issued under the Plan will
be subject to such stop-transfer orders and other restrictions
as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be
placed thereon. No Participant shall have any right as a
stockholder with respect to Company Stock covered by a Grant
until shares have been issued to the Participant.
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18. |
Amendment and Termination of the Plan |
(a) Amendment. The Board may amend or terminate the
Plan at any time; provided, however, that the Board shall not
amend the Plan without approval of the stockholders of the
Company if such approval is required in order to comply with the
Code or applicable laws, or to comply with applicable stock
exchange requirements. No amendment or termination of this Plan
shall, without the consent of the Participant, materially impair
any rights or obligations under any Grant previously made to the
Participant under the Plan, unless such right has been reserved
in the Plan or the Grant Agreement, or except as provided in
Sections 13 above or 19(b) below. Notwithstanding anything
in the Plan to the contrary, the Board may amend the Plan in
such manner as it deems appropriate in the event of a change in
applicable law or regulations.
(b) No Repricing Without Stockholder Approval.
Notwithstanding anything in the Plan to the contrary, the
Committee may not reprice Options, nor may the Board amend the
Plan to permit repricing of Options, unless the stockholders of
the Company provide prior approval for such repricing. The term
repricing shall have the meaning given that term in
section 303A(8) of the New York Stock Exchange Listed
Company Manual, as in effect from time to time.
B-11
(c) Stockholder Approval for Qualified
Performance-Based Compensation. If Grants are made
under Section 12 above, the Plan must be reapproved by the
Companys stockholders no later than the first stockholders
meeting that occurs in the fifth year following the year in
which the stockholders previously approved the provisions of
Section 12, if additional Grants are to be made under
Section 12 and if required by section 162(m) of the
Code or the regulations thereunder.
(d) Termination of Plan. The Plan shall terminate on
the day immediately preceding the tenth anniversary of its
Effective Date, unless the Plan is terminated earlier by the
Board or is extended by the Board with the approval of the
stockholders. The termination of the Plan shall not impair the
power and authority of the Committee with respect to an
outstanding Grant.
(a) Grants in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed
to (i) limit the right of the Committee to make Grants
under this Plan in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Grants
to employees thereof who become Employees, or for other proper
corporate purposes, or (ii) limit the right of the Company
to grant stock options or make other stock-based awards outside
of this Plan. Without limiting the foregoing, the Committee may
make a Grant to an employee of another corporation who becomes
an Employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation
involving the Company in substitution for a grant made by such
corporation. The terms and conditions of the Grants may vary
from the terms and conditions required by the Plan and from
those of the substituted stock incentives, as determined by the
Committee.
(b) Compliance with Law. The Plan, the exercise of
Options and the obligations of the Company to issue or transfer
shares of Company Stock under Grants shall be subject to all
applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent
of the Company that the Plan and all transactions under the Plan
comply with all applicable provisions of
Rule 16b-3 or its
successors under the Exchange Act. In addition, it is the intent
of the Company that Incentive Stock Options comply with the
applicable provisions of section 422 of the Code, that
Grants of qualified performance-based compensation
comply with the applicable provisions of section 162(m) of
the Code and that, to the extent applicable, Grants comply with
the requirements of section 409A of the Code. To the extent
that any legal requirement of section 16 of the Exchange
Act or section 422, 162(m) or 409A of the Code as set forth
in the Plan ceases to be required under section 16 of the
Exchange Act or section 422, 162(m) or 409A of the Code,
that Plan provision shall cease to apply. The Committee may
revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government
regulation. The Committee may also adopt rules regarding the
withholding of taxes on payments to Participants. The Committee
may, in its sole discretion, agree to limit its authority under
this Section.
(c) Enforceability. The Plan shall be binding upon
and enforceable against the Company and its successors and
assigns.
(d) Funding of the Plan; Limitation on Rights. This
Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Grants under
this Plan. Nothing contained in the Plan and no action taken
pursuant hereto shall create or be construed to create a
fiduciary relationship between the Company and any Participant
or any other person. No Participant or any other person shall
under any circumstances acquire any property interest in any
specific assets of the Company. To the extent that any person
acquires a right to receive payment from the Company hereunder,
such right shall be no greater than the right of any unsecured
general creditor of the Company.
(e) Rights of Participants. Nothing in this Plan
shall entitle any Employee, Non-Employee Director or other
person to any claim or right to receive a Grant under this Plan.
Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by
or in the employment or service of the Employer.
B-12
(f) No Fractional Shares. No fractional shares of
Company Stock shall be issued or delivered pursuant to the Plan
or any Grant. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(g) Employees Subject to Taxation Outside the United
States. With respect to Participants who are subject to
taxation in countries other than the United States, the
Committee may make Grants on such terms and conditions as the
Committee deems appropriate to comply with the laws of the
applicable countries, and the Committee may create such
procedures, addenda and subplans and make such modifications as
may be necessary or advisable to comply with such laws.
(h) Governing Law. The validity, construction,
interpretation and effect of the Plan and Grant Agreements
issued under the Plan shall be governed and construed by and
determined in accordance with the laws of the state of Delaware,
without giving effect to the conflict of laws provisions thereof.
(i) Indemnification. To the extent allowable
pursuant to applicable law, each member of the Committee or of
the Board shall be indemnified or held harmless by the Company
from any loss, cost, liability or expense that may be imposed
upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit or proceeding to which he
or she may be involved by reason of any action or failure to act
pursuant to the Plan and against and from any and all amounts
paid by him or her in satisfaction of judgment in such action,
suit or proceeding against him or her; provided he or she gives
the Company an opportunity to handle and defend the same before
he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such
persons may be entitled pursuant to the Companys
Certificate of Corporation or Bylaws as a matter of law, or
otherwise, any power that the Company may have to indemnify them
or hold them harmless.
(j) Relationship to other Benefits. No payment
pursuant to the Plan shall be taken into account in determining
any benefits pursuant to any pension, retirement, savings,
profit sharing, group insurance, welfare or other benefit plan
of the Company or any subsidiary except to the extent otherwise
expressly provided in writing in such other plan or in agreement
thereunder.
(k) Expenses. The expenses of administering the Plan
shall be borne by the Company.
B-13
Appendix C
BALLY TOTAL FITNESS HOLDING CORPORATION
(together with its subsidiaries, the Company)
AMENDED
AUDIT COMMITTEE CHARTER
The Board of Directors of the Company (the Board)
adopted and approved this amended charter (Charter)
of the Audit Committee (the Audit Committee) on
March 8, 2005.
A. The Audit Committee represents and assists the Board in
fulfilling its responsibility for oversight of:
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1. the integrity of the Companys financial statements; |
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2. the Companys compliance with legal and regulatory
requirements; |
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3. the independent auditors qualifications and
independence; and |
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4. the performance of the Companys internal audit
function and independent auditor. |
B. The independent auditor directly reports to the Audit
Committee. The Audit Committee is also charged with preparing an
audit committee report as required by the rules of the
Securities and Exchange Commission (the SEC) to be
included in the Companys annual proxy statement.
C. The Audit Committees responsibility is limited to
oversight. Although the Audit Committee has the responsibilities
set forth in this charter, it is not the responsibility of the
Audit Committee to plan or conduct audits or to determine that
the Companys financial statements and disclosure are
complete and accurate and are in accordance with generally
accepted accounting principles and applicable laws, rules and
regulations. These are the responsibilities of management, the
disclosure committee of the Company (the Disclosure
Committee), the internal auditor (or others responsible
for the internal audit function, including contracted
non-employee or audit or accounting firms engaged to provide
internal audit services) (the Internal Auditors) and
the independent auditor.
D. The Company shall provide for appropriate funding, as
determined by the Audit Committee, for payment of compensation
to the independent auditor for the purpose of rendering or
issuing an audit report or performing other audit, review or
attest services, for payment of compensation to any advisers
employed by the Audit Committee and for ordinary administrative
expenses of the Audit Committee that are necessary or
appropriate in carrying out its duties.
A. The Audit Committee will consist of at least three
members of the Board that the Board, in its business judgment,
determines are (or become within a reasonable time after being
appointed to the Audit Committee) financially literate. The
Board will include one member who qualifies as an audit
committee financial expert, as defined by the SEC. The Board
also must determine, in its business judgment, that at least one
member of the Audit Committee has accounting or related
financial management expertise in accordance with NYSE listing
standards. The Board may presume that a member meeting the
criteria for an audit committee financial expert satisfies this
requirement. Members may be removed from the Audit Committee,
with or without cause, by the Board.
B. Each member must be free of any relationship to the
Company that may interfere with his or her exercise of judgment
independent of management and the Company and must satisfy the
SECs and NYSEs requirements for independent director.
C-1
The Board will appoint one member of the Audit Committee as
chairperson, who will be responsible for leadership of the Audit
Committee, including preparing the agenda, presiding over the
meetings, making committee assignments and reporting to the
Board. The chairperson will also maintain regular liaison with
the Companys chief executive officer, chief financial
officer and manager of internal audit as well as the lead
partner for the independent auditor. The chairperson is hereby
delegated the authority to act on behalf of the Audit Committee
in his or her discretion and specifically to approve non-audit
services provided to the Company by the independent auditor,
subject to restrictions, if any, on delegation of the Audit
Committees duties and responsibilities provided by law,
regulation and the terms of this Charter.
The following tasks are the responsibility of the Audit
Committee.
A. Select, retain and terminate when appropriate, the
independent auditor, set the independent auditors
compensation, and pre-approve all audit services to be provided
by the independent auditor. The retention of the independent
auditor by the Audit Committee shall be subject to stockholder
ratification.
B. Oversee the work of the independent auditor (including
resolution of any disagreements between Company management and
the independent auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or related work
or performing other audit, review or attest services for the
Company.
C. Pre-approve all permitted non-audit services to be
performed by the independent auditor (including the fees and
terms thereof).
D. Establish procedures for the confidential and anonymous
receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or
auditing matters.
E. Engage independent counsel and other advisers as it
determines necessary to fulfill its responsibilities.
F. Determine the amounts necessary to pay:
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1. the independent auditor; |
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2. any advisers employed by the Audit Committee; and |
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3. the administrative expenses of the Audit Committee. |
G. Review determinations of the Disclosure Committee
regarding significant deficiencies or material weaknesses in the
Companys Disclosure Controls (as defined in the Disclosure
Committee Charter).
H. Recommend to the Board whether the financial statements
should be included in the Companys annual report on
Form 10-K and
provide the Company with the report of the Audit Committee with
respect to the audited financial statements for inclusion in
each of the Companys annual proxy statements.
I. At least annually:
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1. conduct a performance evaluation of the Audit Committee; |
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2. evaluate the adequacy of this Charter; |
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3. consider the independence of the independent auditor,
including whether the provision by the independent auditor of
permitted non-audit services is compatible with
independence; and |
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4. review and approve recommended changes to the Disclosure
Committee Charter proposed by the Disclosure Committee. |
J. Receive and respond appropriately to any report from the
independent auditor of information that an illegal act, whether
or not material to the financial statements of the Company, has
or may have occurred.
C-2
K. Review and discuss with management and the independent
auditor: (i) major issues regarding accounting principles
and financial statement presentations, including any significant
changes in the Companys selection or application of
accounting principles, and major issues as to the adequacy of
the Companys internal controls and any special audit steps
adopted in light of material control deficiencies; (ii) any
analyses prepared by management or the independent auditor
setting forth significant financial reporting issues and
judgments made in connection with the preparation of the
Companys financial statements, including analyses of the
effects of alternative GAAP methods on the Companys
financial statements; and (iii) the effect of regulatory
and accounting initiatives, including any off-balance sheet
structures, on the Companys financial statements.
L. Review with the independent auditor any problems or
difficulties the independent auditor may have encountered during
the course of the audit work, including any restrictions on the
scope of activities or access to required information or any
significant disagreements with management and managements
responses to such matters. The Audit Committee shall obtain from
the independent auditor assurances that Section 10A(b) of
the Exchange Act has not been implicated.
M. Before the independent auditor files its audit report
with the SEC, review and discuss with the independent auditor a
report from the independent auditor regarding:
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1. all critical accounting policies and practices used in
the annual report; |
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2. all alternative treatments within GAAP for policies and
practices of material items that were discussed with management,
including the ramifications of their use and the treatment
preferred by the independent auditor; and |
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3. other material written communications between the
independent auditor and management. |
N. At least annually, review the independence and quality
control procedures of the independent auditor and the experience
and qualifications of the independent auditors senior
personnel that are providing audit services to the Company. In
conducting its review, the Audit Committee shall:
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1. obtain and review a report by the independent auditor
describing the independent auditors internal
quality-control procedures and any material issues raised by the
most recent internal quality-control review, or peer review, of
the independent auditor or by any inquiry or investigation by
governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried
out by the firm, and any steps taken to deal with any such
issues; and |
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2. discuss with the independent auditor its independence
from the Company and obtain and review a written statement
prepared by the independent auditor describing all relationships
between the independent auditor and the Company, consistent with
the Independence Standards Board Standard 1, and consider
the impact that any relationship or services may have on the
objectivity and independence of the independent auditor. |
O. Assure the timely rotation of the lead audit partner as
required by law.
P. Review with management, the Disclosure Committee and the
independent auditor, before publication, the annual and
quarterly financial statements of the Company, including:
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1. the Companys disclosures under
Managements Discussion and Analysis of Financial
Condition and Results of Operations; |
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2. any material changes in accounting principles or
practices used in preparing the financial statements prior to
the filing of a report on
Form 10-K
or 10-Q with the
SEC; and |
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3. the items required by Statement of Auditing Standards
No. 61 in the case of the annual statements and Statement
of Auditing Standards No. 71 in the case of the quarterly
statements. |
Q. Discuss with management and the Disclosure Committee the
Companys earnings press releases prior to release, as well
as guidelines for financial information and earnings guidance
provided publicly.
C-3
R. Discuss with management the Company policies with
respect to risk assessment, risk management, and the
Companys significant risk exposures and the action that
management has taken to limit, monitor and control such expenses
and review contingent liabilities and risks and major
legislative and regulatory developments that could be material
to the Company.
S. Periodically meet separately with management, Internal
Auditors (or other personnel responsible for the internal audit
function) and the independent auditor.
T. Review with the independent auditor, the Internal
Auditors, the Disclosure Committee and management:
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1. the adequacy and effectiveness of the systems of
internal controls (including any significant deficiencies and
significant changes in internal controls reported to the Audit
Committee by the independent auditor or management), accounting
practices, and disclosure controls and procedures (and
management reports thereon), of the Company and its
subsidiaries; and |
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2. current accounting trends and developments. |
U. Set policies for hiring employees or former employees of
the independent auditor.
V. Report (i) regularly to the Board regarding the
activities of the Audit Committee; (ii) any issues that
arise with respect to the quality or integrity of the
Companys financial statements, the Companys
compliance with legal or regulatory requirements, the
performance and independence of the Companys independent
auditor, and the performance of the Companys internal
audit function; and (iii) any other matter the Audit
Committee determines is necessary or advisable to report to the
Board.
W. Discuss with management, the Disclosure Committee and
the independent auditor any related-party transactions brought
to the Audit Committees attention which could reasonably
be expected to be disclosed in the Companys financial
statements or other documents filed with the SEC.
X. Discuss with management and the independent auditor any
correspondence from or with regulators or governmental agencies,
any employee complaints or any published reports that raise
material issues regarding the Companys financial
statements, financial reporting process, accounting policies or
internal audit function.
Y. Discuss with the Companys General Counsel or
outside counsel any legal matters brought to the Audit
Committees attention that could reasonably be expected to
have a material impact on the Companys financial
statements.
Z. Oversee the implementation of the Code of Business
Conduct, Practices and Ethics (the Code) and review
any allegation that an executive officer or director may have
violated the Code and report its findings to the Board.
The Audit Committee shall meet at least four (4) times
during each fiscal year and more frequently as the Audit
Committee deems desirable.
C-4
BALLY TOTAL FITNESS HOLDING CORPORATION
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
www.ballyfitness.com
WHITE PROXY
BALLY TOTAL FITNESS HOLDING
CORPORATION
8700 West Bryn Mawr Avenue,
Chicago, Illinois 60631
This Proxy is Solicited on
Behalf of the Board of Directors
The undersigned hereby appoints
Marc D. Bassewitz and Harold Morgan, or either of them,
proxies of the undersigned, each with full power of
substitution, to vote all shares of the undersigned at the
annual meeting of stockholders of Bally Total Fitness Holding
Corporation to be held at 8:30 a.m. (local time) on
January 26, 2006 at the Renaissance Chicago OHare
Hotel, 8500 West Bryn Mawr Avenue, Chicago, Illinois, or at
any postponement(s) or adjournment(s) thereof.
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The Board of Directors
recommends a vote FOR proposal numbers 1, 2, 3 and
5. |
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The Board of Directors
recommends you ABSTAIN from voting for or against proposal
number 4. |
This proxy, when properly
executed, will be voted in the manner directed herein by the
undersigned stockholder. If no direction is made, this proxy
will be voted as follows: for proposal numbers 1, 2
and 3, abstain from voting for or against proposal
number 4, and in favor of granting discretionary authority
on proposal number 5. SEE REVERSE SIDE.
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(Comments/ Change of Address)
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(If you have written in the above
space, please mark the corresponding box on the reverse side.)
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5
FOLD
AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY BY
MAIL 5
ENTRANCE PASS ANNUAL
MEETING OF STOCKHOLDERS
This is an entrance pass for the
Annual Meeting
of Stockholders of Bally Total
Fitness Holding Corporation.
In order to attend the annual
meeting, you must bring this pass with you.
BALLY TOTAL FITNESS HOLDING
CORPORATION
PLEASE MARK VOTE IN OVAL IN THE
FOLLOWING MANNER USING DARK INK
ONLY.
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The Board of Directors
recommends a vote FOR ALL the below nominees. |
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For
All |
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Withhold
All |
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For All
Except |
1. Election of the following
Class III Director
nominees for three-year terms expiring in 2008: Eric
Langshur Charles J. Burdick Barry R. Elson
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Nominee
Exception
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INSTRUCTION: To withhold authority
to vote for any individual nominee, mark the FOR ALL
EXCEPT box and write the name(s) of the nominee(s) you do
not support on the line below. Your shares will be voted for the
remaining nominee(s).
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The Board of Directors
recommends a vote FOR the approval of the 2006 Omnibus
Equity Compensation Plan. |
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For |
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Against |
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Abstain |
2. Approval of the 2006
Omnibus Equity Compensation Plan
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The Board of Directors
recommends a vote FOR the ratification of the appointment of
KPMG LLP. |
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3. Ratification of the
appointment of KPMG LLP as independent auditor for the Company
for the fiscal year ending December 31, 2005
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The Board of Directors
recommends that you vote to ABSTAIN with respect to the below
stockholder proposal. |
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4. Proposal to repeal
provisions in the Companys By-laws, if any, adopted
without stockholder approval after May 25, 2005 and prior
to the annual meeting
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The Board of Directors
recommends that you vote FOR the granting of discretion on
the Liberation Proposal, if properly brought before the meeting,
and all other proposals that properly come before the
meeting. |
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5. In their discretion on all
other matters as may properly come before the annual meeting,
including any motion to adjourn or postpone the meeting or other
matters incidental to the conduct of the meeting
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Comments/ Change
of
Address
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Date
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Signature
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Title or Authority
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Signature (if held jointly)
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Note: Please sign as name
appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee, or guardian, please
give full title as such.
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5
FOLD
AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY BY
MAIL 5
BALLY TOTAL FITNESS HOLDING
CORPORATION
PROXY VOTING INSTRUCTION
CARD
Your vote is important. Casting
your vote in one of the three ways described on this instruction
card votes all shares of Common Stock of Bally Total Fitness
Holding Corporation that you are entitled to vote.
Please consider the issues
discussed in the proxy statement and cast your vote by:
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VIA INTERNET
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Accessing the
World Wide Web site http://www.cesvote.com and follow the
instructions to vote via the internet.
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BY PHONE
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Using a
touch-tone telephone to vote by phone toll free from the
U.S. or Canada. Simply dial 1-888-693-8683 and follow the
instructions. When you are finished voting, your vote will be
confirmed, and the call will end.
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BY MAIL
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Completing,
dating, signing and mailing the white proxy card in the
postage-paid envelope included with the proxy statement.
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You can vote by phone or via the
internet any time prior to 11:59 p.m. Eastern Time,
January 25, 2006. You will need the control number printed
at the top of this instruction card to vote by phone or via the
internet. If you do so, you do not need to mail in your proxy
card.