UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO.    )

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MGM MIRAGE

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MGM MIRAGE
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109

 

 

NOTICE OF ANNUAL MEETING TO BE HELD ON
June 15, 2010

 

 

 

To the Stockholders:

 

The Annual Meeting of Stockholders of MGM MIRAGE, a Delaware corporation (the “Company”), will be held at the ARIA Resort & Casino in the Bristlecone Ballroom 5 & 6 located within CityCenter at 3730 Las Vegas Boulevard South, Las Vegas, Nevada 89109, on June 15, 2010, at 10:00 a.m., Pacific Time, for the following purposes:

 

 

Stockholders of record at the close of business on April 21, 2010 are entitled to notice of and to vote at the Annual Meeting. A complete list of such stockholders will be available for examination by any stockholder during ordinary business hours at the Company’s executive offices, located at 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109, for a period of 10 days prior to the date of the Annual Meeting.

 

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE “FOR” PROPOSALS 1, 2 AND 3, AND “AGAINST” PROPOSAL 4.

 

By Order of the Board of Directors,

 

James J. Murren

Chairman of the Board, Chief

Executive Officer & President

 

April 30, 2010

 

PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD OR
SUBMIT YOUR PROXY USING THE INTERNET OR TELEPHONE.
Use of the enclosed envelope requires no postage for mailing in the United States.

 

MGM MIRAGE
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109

 

 

PROXY STATEMENT
April 30, 2010

 

 

General

 

The form of proxy accompanying this Proxy Statement and the persons named therein as proxies have been approved by, and this solicitation is made on behalf of, the Board of Directors of MGM MIRAGE (the “Board of Directors” or the “Board”) in connection with the Annual Meeting of Stockholders of MGM MIRAGE (the “Annual Meeting” or “Annual Meeting of Stockholders”) to be held at the ARIA Resort & Casino in the Bristlecone Ballroom 5 & 6 located within CityCenter at 3730 Las Vegas Boulevard South, Las Vegas, Nevada 89109, on June 15, 2010, at 10:00 a.m., Pacific Time, and at any postponements or adjournments thereof. MGM MIRAGE, together with its subsidiaries, is referred to herein as the “Company” unless the context indicates otherwise.

 

Matters to be considered and acted upon at the Annual Meeting are set forth in the Notice of Annual Meeting accompanying this Proxy Statement and are more fully outlined herein. On or about April 30, 2010, the Company mailed and/or made available this Proxy Statement and the enclosed proxy to each stockholder entitled to vote at the Annual Meeting.

 

Voting Rights and Outstanding Shares

 

Only stockholders of record of the Company’s common stock, $.01 par value per share (the “Common Stock”), as of April 21, 2010 will be entitled to vote at the Annual Meeting. The authorized capital stock of the Company presently consists of 600,000,000 shares of Common Stock. At the close of business on April 21, 2010, 441,270,746 shares of Common Stock were outstanding and entitled to vote. Each stockholder of record is entitled to one vote for each share held on that date on all matters that may come before the Annual Meeting. There is no cumulative voting in the election of directors.

 

You may vote in person by attending the Annual Meeting, by completing and returning a proxy by mail or by using the internet or telephone. To submit your proxy by mail, mark your vote on the enclosed Proxy Card, then follow the instructions on the card. To submit your proxy using the internet or by telephone, see the instructions on the proxy form and have the proxy form available when you access the internet website or place your telephone call. You may vote by internet or telephone until 8:59 p.m., Pacific Time, on June 14, 2010. If you are a stockholder of record and wish to vote in person at the Annual Meeting, you may do so. If you are a beneficial stockholder and wish to vote in person at the Annual Meeting, you must obtain the proxy from the bank, brokerage or other institutional account holding your shares and bring it with you to hand in with your ballot.

 

All shares of Common Stock represented by properly submitted proxies will be voted at the Annual Meeting in accordance with the directions on the proxies, unless such proxies have previously been revoked. If you are a stockholder of record and submit proxies with no voting direction indicated, the shares will be voted FOR the nominees for the Board of Directors listed in this Proxy Statement (Proposal 1), FOR the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered accounting firm (Proposal 2), FOR the amendment and restatement of the Company’s Certificate of Incorporation to change the name of the Company from “MGM MIRAGE” to “MGM Resorts International” (Proposal 3), and AGAINST the stockholder proposal (Proposal 4). If you are the beneficial owner of shares held in “street name” by a broker, your broker, as the record holder of the shares, must vote those shares in accordance with your instructions. In accordance with the rules of the New York Stock Exchange (the “Exchange”), certain

matters submitted to a vote of stockholders are considered by the Exchange to be “routine” items upon which brokerage firms may vote in their discretion on behalf of their customers if such customers have not furnished voting instructions within a specified period prior to the meeting. The ratification of the selection of the independent registered public accounting firm as our independent auditor for 2010 is considered a routine matter for which brokerage firms may vote shares for which they have not received instructions. For those matters that the Exchange determines to be “non-routine,” brokerage firms that have not received instructions from their customers do not have discretion to vote on these matters. We note that, unlike previous Annual Meetings of Stockholders, the election of directors will be considered a “non-routine” matter under the Exchange rules for this year and your broker will not be able to vote your shares with respect to Proposal 1 if you have not instructed your broker on how to vote. With respect to Proposal 3 and Proposal 4, the amendment and restatement of the Company’s Certificate of Incorporation to change the name of the Company from “MGM MIRAGE” to “MGM Resorts International” and the stockholder proposal are also considered non-routine matters and thus your broker may not vote your shares without your instructions.

 

By returning a signed Proxy Card by mail or by duly submitting a proxy by internet or telephone, you will confer discretionary authority on the named proxies to vote on any other business that shall properly come before the meeting or any adjournment or postponement thereof. Management knows of no other business to be transacted, but if any other matters do come before the meeting, the persons named as proxies or their substitutes will vote or act in their discretion with respect to such other matters.

 

Quorum and Votes Required

 

The presence, in person or by proxy, of the holders of at least a majority of the total number of outstanding shares of Common Stock is necessary to constitute a quorum at the meeting. Abstentions and broker non-votes are counted as present for the purpose of determining the presence or absence of a quorum for the transaction of business, but broker non-votes are not counted as votes cast “for” or “against” the proposals to be acted on at the meeting and will have no effect on the outcome of the vote on a proposal.

 

The affirmative vote of a plurality of the votes cast at the meeting will be required for the election of directors (Proposal 1). The affirmative vote of a majority of the shares of Common Stock represented at the meeting in person or by proxy and entitled to vote is necessary to ratify the appointment of Deloitte & Touche LLP (Proposal 2), to amend and restate the Company’s Certificate of Incorporation to change the name of the Company from “MGM MIRAGE” to “MGM Resorts International” (Proposal 3), and to approve the stockholder proposal (Proposal 4). A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, and will have no effect. With respect to Proposal 2, Proposal 3, and Proposal 4, a properly executed proxy marked “ABSTAIN,” although counted for purposes of determining whether there is a quorum, will not be voted. Accordingly, an abstention will have the same effect as a vote cast against Proposal 2, Proposal 3, and Proposal 4.

 

How to Revoke or Change Your Vote

 

Any proxy may be changed or revoked at any time prior to the Annual Meeting by submitting a new proxy with a later date, by a later telephone or internet vote (subject to the telephone or internet voting deadline), by voting in person at the Annual Meeting or by submitting a revocation in writing to the Secretary of the Company. Written revocations to the Company Secretary should be received no later than 5:00 p.m., Pacific Time, on June 14, 2010, and directed to: Corporate Secretary, MGM MIRAGE, 3950 Las Vegas Boulevard South, Las Vegas, Nevada 89119.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on June 15, 2010

 

As permitted by the Securities and Exchange Commission (the “SEC”), the Company is furnishing to stockholders its Notice of Annual Meeting, Proxy Statement, the Proxy Card and the Annual Report primarily over the internet. On or about April 30, 2010, we mailed to each of our stockholders (other than those who

previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials via the internet, and how to access the Proxy Card to vote on the internet or by telephone. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive, free of charge, paper copies of the proxy materials. If you received the notice you will not receive a paper copy of the proxy materials unless you request one.

 

Stockholders of Record.  If your shares are registered in your own name, you may request paper copies of the proxy materials by following the instructions contained in the notice. Stockholders who have already made a permanent election to receive paper copies of the proxy materials will receive a full set of the proxy documents in the mail.

 

Beneficial Stockholders.  If your shares are not registered in your name, you should receive written instructions on how to request paper copies of the proxy materials from your bank or broker. We recommend that you contact your bank or broker if you do not receive these instructions with the Company’s proxy materials.

 

Whether you received the Notice of Internet Availability of Proxy Materials or paper copies of our proxy materials, the Proxy Statement, the Proxy Card, the Annual Report, and any amendments to the foregoing materials that are required to be furnished to stockholders are available for you to review online at www.proxyvote.com.

 

How the Votes Will be Counted and Who Will Certify the Results

 

A representative of Broadridge Financial Solutions, Inc. will act as the independent Inspector of Elections and will count the votes, determine whether a quorum is present, evaluate the validity of proxies and ballots, and certify the results. The final voting results will be reported by the Company on a Current Report on Form 8-K to be filed with the SEC within 4 business days following the Annual Meeting.

 

Costs of Solicitation

 

Your proxy is being solicited by the Board of Directors on behalf of the Company and, as such, the Company will pay the costs of soliciting proxies. Proxies may be solicited on behalf of the Company by directors, officers or employees of the Company in person or by telephone, facsimile or other electronic means. We have retained Broadridge Financial Solutions, Inc. (“Broadridge”) to assist us with the solicitation of proxies and have agreed to pay Broadridge approximately $140,000, plus out-of-pocket expenses, for these services. We will also reimburse brokerage firms and other custodians, nominees and fiduciaries, upon request, for their reasonable expenses incurred in sending proxies and proxy materials to beneficial owners of our ordinary shares.

 

Delivery of One Proxy Statement and Annual Report to a Single Household to Reduce Duplicate Mailings

 

Each year in connection with the Annual Meeting of Stockholders, the Company is required to furnish to each stockholder of record a Proxy Statement and Annual Report and to arrange for a Proxy Statement, Annual Report and, if applicable, Notice of Internet Availability of Proxy Materials to be furnished to each beneficial stockholder whose shares are held by or in the name of a broker, bank, trust or other nominee. Because many stockholders hold shares of Common Stock in multiple accounts, this process may result in duplicate mailings of proxy materials to stockholders who share the same address. Stockholders can avoid receiving duplicate mailings and save the Company the cost of producing and mailing duplicate documents as follows:

 

Stockholders of Record.  If your shares are registered in your own name and you are interested in consenting to the delivery of a single copy of proxy materials (other than Proxy Cards), go directly to the following website at www.proxyvote.com and follow the instructions therein.

 

Beneficial Stockholders.  If your shares are not registered in your own name, your broker, bank, trust or other nominee that holds your shares may have asked you to consent to the delivery of a single copy of proxy

materials (other than Proxy Cards) if there are other stockholders who share an address with you. If you currently receive more than one copy of proxy materials at your household and would like to receive only one copy in the future, you should contact your nominee.

 

Right to Request Separate Copies.  If you consent to the delivery of a single copy of proxy materials but later decide that you would prefer to receive a separate copy of proxy materials for each account at your address, then please notify the Company or your nominee, as applicable, and the Company or your nominee will promptly deliver such additional proxy materials. If you wish to receive a separate copy of the proxy materials for each account at your address in the future, you may call toll-free at 1-800-542-1061 or write to Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood NY, 11717.

 

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SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

 

Shown below is certain information as of April 1, 2010 (except as otherwise described below) with respect to beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of shares of Common Stock by the only persons or entities known to the Company to be a beneficial owner of more than 5% of the outstanding shares of Common Stock, by the Named Executives, as defined under “Executive Compensation,” and by all directors and executive officers of the Company as a group who held office as of the date of this Proxy Statement. Information as of April 1, 2010 with respect to beneficial ownership of shares of Common Stock by the directors of the Company, including Named Executives who are also directors of the Company, is set forth under “Election of Directors — Information Concerning the Nominees” below.

 

 

 

 

 

ELECTION OF DIRECTORS
Proposal No. 1

 

One of the purposes of the Annual Meeting is to elect 13 directors, each of whom will serve until the next Annual Meeting of Stockholders or until his or her respective successor shall have been elected and qualified, or until his or her earlier resignation or removal. All of the nominees were elected as directors at the last Annual Meeting of Stockholders, with the exception of William A. Bible and Burton M. Cohen. If any of these nominees should be unavailable to serve as director, which contingency is not presently anticipated, it is the intention of the persons designated as proxies to select and cast their votes for the election of such other person or persons as the Board of Directors may designate. Pursuant to the Company’s Amended and Restated Bylaws, the Board of Directors may determine the number of directors, not to exceed 20, and has fixed the number of directors at 13.

 

The Board of Directors recommends a vote FOR adoption of this proposal.

 

Information Concerning the Nominees

 

The Company’s directors should be individuals with substantial accomplishments in their professional backgrounds, and should be leaders in the companies or institutions with which they are affiliated. They should be able to make independent, analytical inquiries and should exhibit practical wisdom and mature judgment. The Nominating/Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment, using its diversity of experience. The Nominating/Corporate Governance Committee, together with the Board, reviews, on an annual basis, the composition of the Board to determine whether the Board includes the right mix and balance of skills sets, financial acumen, general and special business experience and expertise, industry knowledge, diversity, leadership abilities, high ethical standards, independence, sound judgment, interpersonal skills, overall effectiveness and other desired qualities.

 

We identify and describe below the key experience, qualifications and skills, in addition to those discussed above, that the directors bring to the Board and that are important in light of the Company’s business.

 

 

The following table sets forth, for each nominee, his or her name, principal occupation for at least the past 5 years, beneficial ownership of Common Stock, age and certain other matters, in each case, as of April 1, 2010 (except as otherwise described below). The respective experiences, qualifications and skills the Board

considered in determining whether to recommend each director nominated for election are also included, immediately following such nominees’ individual biographies.

 

 

 

 

 

Stockholder Agreements

 

Company Stock Purchase and Support Agreement.  In August 2007, we entered into a Company Stock Purchase and Support Agreement, as amended in October 2007, with Infinity World Investments LLC, a Nevada limited liability company (“Infinity World”) and an indirect wholly-owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity (“Dubai World”).

The agreement provides that, as long as Infinity World and its affiliates, which we refer to, from time to time, as the “Infinity World group,” beneficially own at least 5% of our outstanding Common Stock, whenever we propose to sell shares of our Common Stock (except for shares issued under an employee benefit plan or other securities of the Company exercisable for or convertible into Common Stock), we will grant a preemptive right (which may be transferred to an affiliate of Infinity World) to acquire that number of shares needed to maintain the percentage ownership of the Infinity World group as calculated at the time we propose to sell shares. Infinity World elected not to exercise this right in connection with our May 2009 underwritten public offering of 143,000,000 shares of Common Stock and the issuance of an additional 21,450,000 shares of Common Stock pursuant to the underwriters’ over-allotment option. On April 15, 2010, we notified Infinity World that it has 20 days to exercise this right, in connection with our April 2010 offering of $1 billion in aggregate principal amount of 4.25% convertible senior notes and an over-allotment option of up to $150 million of additional aggregate principal amount of notes, to purchase notes in an aggregate principal amount equal to up to approximately 6.27% of the aggregate principal amount of the notes sold (including any notes sold upon exercise of the over-allotment option). Additionally, on April 19, 2010, we notified Infinity World that the initial purchasers notified us of their intention to exercise such option to purchase additional notes to cover over-allotments. On April 20, 2010, the Company announced that it had closed the private offering of $1.15 billion in aggregate principal amount of its 4.25% convertible senior notes due 2015. Initial purchasers exercised their option to purchase $150 million in aggregate principal amount of additional notes to cover over-allotments, which is included in the $1.15 billion of gross proceeds. Pursuant to the Company Stock Purchase and Support Agreement, Infinity World has agreed that the Infinity World group will not acquire beneficial ownership of more than 20% of our outstanding shares, subject to certain exceptions.

 

The agreement also provides that as long as the Infinity World group owns at least 5% of our outstanding Common Stock and the joint venture agreement contemplated under the agreement has not been terminated, Infinity World will have the right, subject to applicable regulatory approvals, to designate one nominee for election to our Board of Directors. If the Infinity World group beneficially owns at least 12% of our outstanding Common Stock, Infinity World will have the right to designate that the number of nominees for election to our Board of Directors is equal to the product (rounded down to the nearest whole number) of (x) the percentage of outstanding shares owned by the Infinity World group multiplied by (y) the total number of directors then authorized to serve on our Board of Directors. Based upon a Schedule 13D/A filed November 6, 2009 with the SEC by the Infinity World group, it owned 26,048,738 shares of our Common Stock, or approximately 5.9% of the outstanding shares. Infinity World has not, as yet, designated a nominee for the Board of Directors. If Infinity World designates a nominee for election to our Board of Directors after the Annual Meeting of Stockholders, our Board of Directors will, in accordance with the agreement, increase the authorized number of directors to 14 and appoint the nominee to serve on the Board until the next meeting of stockholders at which directors are to be elected.

 

Stockholder Support Agreement.  In August 2007, Infinity World also entered into a Stockholder Support Agreement with Tracinda. Under this agreement, Tracinda has agreed to vote its shares of our Common Stock in favor of Infinity World’s nominee(s) to the Board of Directors, subject to applicable regulatory approvals.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who beneficially own more than 10% of the Company’s Common Stock, to file reports of ownership and changes of ownership with the SEC. The reporting officers, directors and 10% stockholders are also required to furnish the Company with copies of all Section 16(a) forms that they file. Based solely upon a review of these filings and written representations from such directors, officers and 10% stockholders, we believe that all required Section 16(a) reports were timely filed during the fiscal year ended December 31, 2009, with the exception that: one report covering three transactions and another report covering two transactions were filed late by each of Daniel J. D’Arrigo, Phyllis A. James, Aldo Manzini, John M. McManus and Robert C. Selwood; and one report covering two transactions was filed late by each of Robert H. Baldwin, Alan Feldman, and Shawn T. Sani.

 

CORPORATE GOVERNANCE

 

Corporate Governance Guidelines

 

The Board of Directors has adopted corporate governance guidelines for the Company setting forth the general principles governing the conduct of the Company’s business and the role, functions, duties and responsibilities of the Board of Directors, including, but not limited to such matters as (i) Board composition and membership criteria, (ii) compensation, (iii) director orientation and continuing education, (iv) Board committees, (v) Board leadership, (vi) director access to officers, employees and independent advisors, (vii) management succession and (viii) annual performance evaluations of the Board and Board committees. The Company believes that these guidelines are in compliance with the listing standards adopted in 2003 by the Exchange. The Corporate Governance Guidelines are posted and maintained on the Company’s website at www.mgmmirage.com/corporategovernance under the caption “Corporate Governance Guidelines,” and a copy will be made available to any stockholder who requests it in writing.

 

Code of Conduct

 

The Board of Directors has adopted a Code of Business Conduct and Ethics and Conflict of Interest Policy (the “Code of Conduct”) that applies to all of the Company’s directors, officers and employees including our chief executive officer, chief financial officer and chief accounting officer. The Code of Conduct also applies to all relevant contractors and other agents performing services for or conducting work on behalf of the Company. The Code of Conduct establishes policies and procedures that the Board believes promote the highest standards of integrity, compliance with the law and personal accountability. The Code of Conduct is posted on the Company’s website at www.mgmmirage.com/codeofconduct under the caption “Code of Business Conduct and Ethics and Conflict of Interest Policy.” A summary of amendments and waivers to the Code of Conduct is also posted at the same website location at www.mgmmirage.com/codeofconduct under the general heading “Governance Documents.” The Code of Conduct is made available to all employees and is distributed to all of our employees in various formats. It is specifically provided to new directors, officers and key employees and is distributed annually to all of our directors, officers and key employees, each of whom is required to acknowledge its receipt and his or her understanding thereof and agreement to adhere to the principles contained therein. Additionally, the Company will provide a copy of the Code of Conduct, free of charge, to any stockholder who requests it in writing.

 

Director Independence

 

For a director to be considered independent, the Board must determine affirmatively that the director does not have any direct or indirect material relationship with the Company. The Board has established guidelines to assist in determining director independence, which conform to the independence requirements established by the Exchange’s listing standards. Using these guidelines, which are set forth in Section II of the Company’s Corporate Governance Guidelines and attached to this Proxy Statement as Appendix A, and considering information provided by each director including all facts and circumstances the Board deemed relevant, the Board of Directors has determined that Ms. Herman, Ms. McKinney-James and Messrs. Bible, Cohen, Davis, Guinn, Hernandez, Kerkorian, Mandekic, Taylor, and Wolzinger, who constitute a majority of the Board, are independent within the meaning of the rules of the Exchange. The Board had also determined that Alexander M. Haig and Dr. Joseph H. Sugerman met the standards of independence during the periods of their respective service on the Board.

 

All members of the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee must be independent directors as defined in the Corporate Governance Guidelines. For the purposes of determining whether a director who is a member of the Audit Committee is independent, the Company applies additional independence standards, including those of the SEC set forth in Rule 10A-3 of the Exchange Act, and the Corporate Governance Rules of the Exchange applicable to audit committee composition. The Board has determined that all members of the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee are independent and satisfy the relevant Company, Exchange or SEC additional requirements for the members of such committees.

Information Regarding the Board and Board Committees

 

Board of Directors.  The Board of Directors currently consists of 13 directors. Gary N. Jacobs left the Board effective December 15, 2009, and Alexander M. Haig, Jr. left the Board effective October 7, 2009. Dr. Joseph H. Sugerman joined the Board on August 25, 2009 and resigned effective February 25, 2010. Additionally, William A. Bible and Burton M. Cohen joined the Board on March 8, 2010 and April 13, 2010, respectively. The Board of Directors held 27 meetings during 2009. During 2009, each member of the Board of Directors, except Mr. Kerkorian, attended at least 75% of the aggregate of the total number of meetings held by the Board of Directors and the total number of meetings held by the committees on which he or she served. Directors are expected to attend each Annual Meeting of Stockholders. All of the members of the Board of Directors attended last year’s Annual Meeting except Messrs. Kerkorian and Haig.

 

Executive Committee.  The Executive Committee’s functions include, among other things, acting to approve routine but necessary matters between Board meetings and acting in areas requiring extraordinary or expeditious action when the entire Board cannot be convened. Actions of the Executive Committee are disclosed to the full Board no later than at the next meeting of the full Board. The current members of the Executive Committee are James J. Murren (Chair), Kenny C. Guinn, Alexis M. Herman, Roland Hernandez, Anthony Mandekic and Daniel J. Taylor. The Executive Committee held three meetings during 2009.

 

Audit Committee.  For a complete discussion of the functions of the Audit Committee, see “Corporate Governance — Audit Committee” below. The current members of the Audit Committee are Roland Hernandez (Chair), William A. Bible, Kenny C. Guinn, Alexis M. Herman and Rose McKinney-James. The Audit Committee held 11 meetings during 2009.

 

Compensation Committee.  For a complete discussion of the functions of the Compensation Committee, see “Corporate Governance — Compensation Committee” below. The current members of the Compensation Committee are Anthony Mandekic (Chair), Willie D. Davis, Kenny C. Guinn, Rose McKinney-James, Daniel J. Taylor and Melvin B. Wolzinger. The Compensation Committee held 13 meetings during 2009.

 

Nominating/Corporate Governance Committee.  For a complete discussion of the functions of the Nominating/Corporate Governance Committee, see “Corporate Governance — Nominating/Corporate Governance Committee” below. The current members of the Nominating/Corporate Governance Committee are Kenny C. Guinn (Chair), Willie D. Davis, Anthony Mandekic and Daniel J. Taylor. The Nominating/Corporate Governance Committee, which was formed in May 2009, held two meetings during 2009.

 

Diversity and Community Affairs Committee.  The functions of the Diversity and Community Affairs Committee include, among other things, reviewing and monitoring the implementation of the Company’s diversity and philanthropy initiatives. The current members of the Diversity and Community Affairs Committee are Alexis M. Herman (Chair), Willie D. Davis, Roland Hernandez, Anthony Mandekic and Melvin B. Wolzinger. The Diversity and Community Affairs Committee held five meetings during 2009.

 

Board Leadership Structure

 

Our Corporate Governance Guidelines provide that the roles of Chairman of the Board and Chief Executive Officer may be filled by the same or different individuals, which gives the Board the flexibility to determine whether these roles should be combined or separated based on the Company’s circumstances and needs at any given time. The Board has no formal policy regarding whether to combine or separate the position of Chairman and Chief Executive Officer, but generally believes that such decisions should be made in the context of succession planning. Currently, the Chief Executive Officer of the Company, James J. Murren, also serves as the Chairman of the Board. The Board believes that the Company and its stockholders are best served by having Mr. Murren act in both positions, as he is most familiar with our business and the challenges the Company faces in the current environment. Additionally, his experience and expertise make him best suited to set agendas (in consultation with the Lead Independent Director) for, and lead discussions of, strategic matters affecting the Company at this time. Further, our Corporate Governance Guidelines, policies and practices, combined with the strength of our independent directors and the role of the new Lead

Independent Director (discussed below) minimizes any potential conflicts that may result from combining the roles of Chief Executive Officer and Chairman of the Board.

 

In early 2010, the Board replaced the role of Presiding Director with that of Lead Independent Director, electing Mr. Hernandez to serve in this position, and enumerated specific responsibilities of the Lead Independent Director. Among other things, the Lead Independent Director is responsible for convening, chairing and setting the agenda for non-management executive sessions, acting as a liaison between directors and management, consulting with the Chief Executive Officer and Chairman of the Board regarding the agenda of Board and Executive Committee meetings and, on behalf of and at the discretion of the Board, meeting with stockholders and speaking for the Board in circumstances where it is appropriate for the Board to have a voice distinct from that of management.

 

In accordance with the applicable rules of the Exchange, the Board of Directors has scheduled regular executive sessions of the non-management directors in which directors have an opportunity to meet outside the presence of management. The non-management directors also have the opportunity to convene in executive sessions at every meeting of the Board, in their discretion. Such sessions are chaired by Mr. Hernandez, as the Lead Independent Director who was elected by, and serves at the pleasure of, the Board of Directors. The Board of Directors has established a process for stockholders and other interested parties to communicate with the Lead Independent Director, which is set forth in “Stockholder and Interested Parties Communications with Directors” below.

 

Risk Oversight

 

Our Board of Directors has overall responsibility for overseeing the management of the most significant risks facing the Company. As part of its decision making processes and meetings, our Board of Directors engages in regular risk assessments of the enterprise and management, focusing particularly on the areas of financial risk, regulatory and compliance risk and operational and strategic risk. Material risks and our management’s assessment of material risk facing the Company are presented by the Company’s officers and its legal counsel to the Board at our regularly scheduled Board meetings for the Board’s discussion and consideration in its oversight of the Company. When necessary, our Board convenes for special meetings to discuss important decisions facing the Company. The Board considers short-term and long-term risks when providing direction to the Company in connection with these important decisions and risk planning is a central part of the calculus in all the Board’s decision making.

 

While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also share in such responsibility. As part of their delegated areas of responsibility, each of the Board committees reviews and discusses in more detail those specific risk topics under their areas of responsibility consistent with their charter and such other responsibilities as may be delegated to them from the Board of Directors from time to time. In particular, the Audit Committee focuses on any significant risk exposures faced by the Company, including general business risk, financial risk, internal controls, regulatory and compliance matters, and material litigation and potential disputes and assesses the steps and processes management has implemented to monitor, control and/or minimize such exposures. In addition, the Compensation Committee reviews at least annually, the Company’s compensation policies and practices for executives, management employees and employees generally as they relate to the Company’s risk management practices, including the incentives established for risk-taking and the manner in which risks arising out of the Company’s compensation policies and practices are monitored and mitigated and any adjustments of compensation policies and practices that should be made to address changes in the Company’s risk profile. Likewise, the Nominating/Corporate Governance Committee has the responsibility of reviewing the Company’s corporate governance practices, including Board composition and succession planning and regularly assesses the Company’s preparation to address risks related to these areas as well as the other areas under its responsibility.

 

Audit Committee

 

The Audit Committee’s responsibilities are described in a written charter adopted by the Board of Directors. The charter, attached hereto as Appendix B, is posted on the Company’s website at

www.mgmmirage.com/auditcommittee under the caption “Audit Committee,” and a copy will be made available, free of charge, to any stockholder who requests it in writing.

 

The current members of the Audit Committee are Roland Hernandez (Chair), William A. Bible (who was appointed to the Audit Committee on April 13, 2010), Kenny C. Guinn, Alexis M. Herman and Rose McKinney-James. The Audit Committee is responsible for providing independent, objective oversight of the Company’s financial reporting system. Among its various activities, the Audit Committee reviews:

 

 

The Audit Committee also prepares the report that is required to be included in the Proxy Statement. In addition, the Audit Committee appoints the independent registered public accounting firm; reviews with such firm the plan, scope and results of such audit, and the fees for the services performed; and periodically reviews their performance and independence from management.

 

Under written guidelines adopted by the Board of Directors in connection with the Company’s Code of Conduct, the Audit Committee, or its designated member, is required to review reports of potential conflicts of interest involving directors and senior executives of the Company. With respect to such reports, it is the Audit Committee’s responsibility to determine whether a conflict exists and whether or not to waive the conflict. In determining whether a conflict of interest exists, the Audit Committee considers the materiality of the relationship between the third party and the Company pursuant to standards set forth in written guidelines. In determining whether a conflict of interest should be waived, the Audit Committee considers the effectiveness of any safeguards that may be implemented, the feasibility of the individual’s recusal in matters that affect the Company and the third party, and the materiality of lost services for the Company that may result from the recusal.

 

The Audit Committee meets regularly in open sessions with the Company’s management, independent registered public accounting firm and internal auditors. In addition, the Audit Committee meets regularly in closed executive sessions with the Company’s management, independent registered public accounting firm and internal auditors, and reports its findings to the Board of Directors.

 

The Board of Directors has determined that Mr. Hernandez, Mr. Bible, Mr. Guinn, Ms. Herman and Ms. McKinney-James meet the current independence and experience requirements of the Exchange’s listing standards. The Board of Directors has determined that each of the members of the Audit Committee is “financially literate” and that Messrs. Hernandez and Bible each qualify as an “audit committee financial expert,” as defined in the Exchange’s listing standards and the SEC’s regulations. In addition, the Board of Directors has determined that the service of Mr. Hernandez on other audit committees, as described earlier in the description of his principal occupation and other directorships under “Election of Directors,” would not impair his ability to effectively serve on the Company’s Audit Committee. The Board of Directors will review such determination at its meeting following the Annual Meeting of Stockholders, when it makes committee assignments for the coming year.

 

Compensation Committee

 

The Compensation Committee operates under a written charter adopted by the Board of Directors. The charter, attached hereto as Appendix C, is posted on the Company’s website at www.mgmmirage.com/compensationcommittee under the caption “Compensation Committee Charter,” and a copy will be made available, free of charge, to any stockholder who requests it in writing. The primary function of the Compensation Committee is to ensure that the compensation program for executives of the Company (i) is effective in attracting and retaining key officers, (ii) links pay to business strategy and performance, and (iii) is administered in a fair and equitable fashion in the stockholders’ interests. Among other things, the Compensation Committee recommends the executive compensation policy to the Board, determines compensation of

senior executives of the Company, determines the performance criteria and bonuses to be granted pursuant to the Company’s Annual Performance-Based Incentive Plan and administers and approves the granting of share-based awards under the Company’s Amended and Restated 2005 Omnibus Incentive Plan (the “Omnibus Incentive Plan”). The Compensation Committee’s authority and oversight extends to total compensation, including base salaries, bonuses, share-based awards, and other forms of compensation. See “Executive and Director Compensation and Other Information — Compensation Discussion and Analysis” below.

 

The Compensation Committee also prepares the annual Compensation Committee report appearing in the Company’s Proxy Statement. In addition, the Compensation Committee reviews and discusses with management the proposed Compensation Discussion and Analysis disclosure and determines whether to recommend it to the Board for inclusion in the Company’s Proxy Statement.

 

The Compensation Committee has considered and evaluated risks associated with our compensation programs, including the implementation and management thereof. Additionally, the Compensation Committee has discussed risk management practices with the entire Board of Directors, as well as the Audit Committee and certain of the Company’s executive officers.

 

Nominating/Corporate Governance Committee

 

During part of 2009, the Board of Directors did not have a standing nominating committee, and as a “controlled company” as defined by the Corporate Governance Rules of the Exchange, the Company was not required to have one. In connection with the Company ceasing to be a “controlled company” in May 2009, the Board of Directors formed the Nominating/Corporate Governance Committee comprised solely of independent directors in compliance with the Corporate Governance Rules of the Exchange. Prior to the formation of the Nominating/Corporate Governance Committee, identification, consideration and nomination of potential candidates to serve on the Board of Directors were conducted by the entire Board of Directors. The Nominating/Corporate Governance Committee’s responsibilities are described in a written charter adopted by the Board of Directors. The charter, attached hereto as Appendix D, is posted on the Company’s website at www.mgmmirage.com/nominatingcommittee under the caption “Nominating and Corporate Governance Committee,” and a copy will be made available, free of charge, to any stockholder who requests it in writing.

 

The Nominating/Corporate Governance Committee’s responsibilities include the selection of director nominees to be recommended to the Board of Directors and the development and review of the Corporate Governance Guidelines. Among other things, the Nominating/Corporate Governance Committee also (i) develops and makes recommendations to the Board of Directors for specific criteria for selecting directors, (ii) reviews and makes recommendations to the Board of Directors with respect to membership on committees of the Board of Directors, other than the Nominating/Corporate Governance Committee, (iii) develops, reassesses and makes recommendations to the Board of Directors with respect to succession plans of the Chief Executive Officer and the Company’s other key executive officers, (iv) oversees the annual self-evaluations of the Board of Directors, and (v) oversees the orientation program for new directors and continuing education for directors.

 

In determining the criteria for membership, the Nominating/Corporate Governance Committee considers the appropriate skills and personal characteristics required in light of the then-current makeup of the Board and in the context of the perceived needs of the Company at the time, including, among other things, the following experience and personal attributes: leadership abilities; financial acumen; general and special business experience and expertise; industry knowledge; high ethical standards; independence; sound judgment; interpersonal skills; and overall effectiveness.

 

The Nominating/Corporate Governance Committee also considers diversity when assessing the appropriateness of Board membership. Though diversity is not defined in the Corporate Governance Guidelines or in the Nominating/Corporate Governance Committee’s charter, each of which can be found under their respective captions at www.mgmmirage.com/corporategovernance, diversity is broadly interpreted by the Board to include viewpoints, background, experience, industry knowledge and geography, as well as more traditional characteristics of diversity, such as race and gender. We believe that our commitment to diversity is demonstrated by the current structure of our Board and the varied backgrounds and skill sets of our directors.

The Nominating/Corporate Governance Committee may receive recommendations for Board candidates from various sources, including the Company’s stockholders. In addition, the Nominating/Corporate Governance Committee may engage an independent executive search firm to assist in identifying qualified candidates. The Nominating/Corporate Governance Committee will review all recommended candidates in the same manner regardless of the source of the recommendation. Recommendations from public stockholders should be in writing and addressed to: Corporate Secretary, MGM MIRAGE, 3950 Las Vegas Boulevard South, Las Vegas, Nevada 89119, Attention: Stockholder Communications, and must include the proposed candidate’s name, address, age and qualifications together with the information required under federal securities laws and regulations. Such communication must be received in a timely manner and also include the recommending stockholder’s name, address and the number of shares of Common Stock, and the length of time, beneficially held. See “Notice Concerning Stockholder Proposals and Nominations” below.

 

Stockholder and Interested Parties Communications with Directors

 

The Board of Directors has established a process for stockholders and other interested parties to communicate with members of the Board, the non-management directors as a group and the Lead Independent Director. All such communications should be in writing and should be addressed to the Corporate Secretary, MGM MIRAGE, 3950 Las Vegas Boulevard South, Las Vegas, Nevada 89119, Attention: Stockholder Communications. All inquiries are reviewed by the Corporate Secretary, who forwards to the Board, the non-management directors or the Lead Independent Director, as applicable, a summary of all such correspondence and copies of all communications that he determines are appropriate, and consistent with, the Company’s operations and policies. Matters relevant to other departments of the Company are directed to such departments with appropriate follow-up to ensure that inquiries are responded to in a timely manner. Matters relating to accounting, auditing and/or internal controls are referred to the Chair of the Audit Committee and included in the report to the Board, together with a report of any action taken to address the matter. The Board of Directors or the Audit Committee, as the case may be, may direct such further action deemed necessary or appropriate.

 

Compensation Committee Interlocks and Insider Participation

 

Messrs. Mandekic and Taylor are employees of Tracinda and certain transactions between the Company and Tracinda are further discussed below.

 

TRANSACTIONS WITH RELATED PERSONS

 

Description of Transactions

 

Glaser, Weil, Fink, Jacobs, Howard & Shapiro, LLP, of which Gary N. Jacobs was formerly of counsel, has performed extensive legal services for the Company. Such services related to litigation, sales of securities, financing transactions, acquisitions and dispositions of certain assets and operations, tax matters and other business transactions, contracts and agreements. For the year ended December 31, 2009, the Company paid legal fees and costs to Glaser, Weil, Fink, Jacobs, Howard & Shapiro, LLP in the amount of $15 million. Mr. Jacobs was a senior partner of the firm until June 2000 when he became employed by the Company. He was of counsel to the firm until March 2009.

 

Robert H. Baldwin is a director of the Keep Memory Alive Foundation. For the year ended December 31, 2009, the Company made a contribution of cash, goods and services to the Keep Memory Alive Foundation in the aggregate amount of $476,000, and the Keep Memory Alive Foundation purchased goods and services from the Company and its subsidiaries in the amount of $869,000.

 

James J. Murren was a co-founder of, and currently serves as a director of, the Nevada Cancer Institute, a non-profit organization. Mr. Murren’s wife, Heather Hay Murren, was also a co-founder and served as the first Chairman of the Board of the Nevada Cancer Institute through its founding until June 2009. Mrs. Murren currently serves as a director of the Nevada Cancer Institute, along with Gary N. Jacobs and William M. Scott IV. For the year ended December 31, 2009, the Company made contributions of cash, goods and services

to the Nevada Cancer Institute in the amount of $93,000, and the Nevada Cancer Institute purchased goods and services from the Company and its subsidiaries in the amount of $286,000.

 

Gary N. Jacobs serves as a director of the Smith Center for Performing Arts in Las Vegas, Nevada. In 2007, the Company pledged a $1,000,000 contribution to the Smith Center for Performing Arts, of which $355,000 had been paid as of December 31, 2009 and $645,000 is scheduled to be paid over the next five years. The Company made payments to the Smith Center for Performing Arts totaling $50,000 in 2009, including $25,000 paid under the multi-year pledge.

 

For the year ended December 31, 2009, Kirk Kerkorian, the sole stockholder of Tracinda, and Tracinda collectively paid the Company the aggregate amount of $98,721 for hotel and other related services provided by the Company.

 

For the year ended December 31, 2009, the Company incurred expenses in connection with the Company’s use of Tracinda’s aircraft for a total amount of $150,918 pursuant to a Lease Agreement. Additionally, for the year ended December 31, 2009, Tracinda paid the Company a total amount of $30,608 as reimbursement of permitted expenses pursuant to a Time Sharing Agreement in connection with Tracinda’s use of the Company’s aircraft.

 

In connection with the sales of residential condominium units at CityCenter, a joint venture between the Company and Infinity World Development Corp., a wholly-owned subsidiary of Dubai World, certain of the directors, Named Executives and its principal stockholder and their immediate family members have entered into purchase agreements and have paid deposits. The prices paid pursuant to these purchase agreements were consistent with prices charged to unrelated third parties. In September 2009, CityCenter decided to discount the prices of its residential inventory by 30%. For the year ended December 31, 2009, the Company received payments related to the residential condominium units from Tracinda in the amount of $714,947 and from Gary N. Jacobs in the amount of $5,748.

 

Mandalay Resort Group, a subsidiary of the Company, entered into a time sharing agreement with James J. Murren in connection with his personal use of the Company’s aircraft. Under the time sharing agreement, Mr. Murren may lease the Company’s aircraft, including crew and flight services. See “Executive Compensation” for amounts reimbursed by Mr. Murren and for unreimbursed amounts that are considered perquisites.

 

Review, Approval or Ratification of Transactions

 

Our Board has approved separate written guidelines under the Company’s Code of Conduct for the reporting, review and approval of potential conflicts of interest (the “Conflict of Interest Guidelines”). Each potential conflict of interest that is reportable under the Conflict of Interest Guidelines is reviewed internally on a case-by-case basis. Any such reportable potential conflict of interest involving a director or senior executive, any of their respective spouses, minor children or other dependents, must be reviewed by the Audit Committee, or a designated member thereof. Furthermore, all such reportable potential conflicts of interest involving other employees, or their respective spouses, minor children or other dependents, are reviewed by the Company’s internal legal department.

 

Because the Conflict of Interest Guidelines were designed to implement a procedure by which the Company can review and take action with respect to potential conflicts of interest, the criteria for determining which proposed transactions are reportable under the Conflict of Interest Guidelines are based on various factors designed to determine the materiality of such transaction with respect to the corresponding employee or director, including the size of the transaction or investment, the nature of the investment or transaction, the nature of the relationship between the third party and the Company, the nature of the relationship between the third party and the director or employee, and the net worth of the employee or director, and are not based on the threshold set forth in Item 404(a) of Regulation S-K. Furthermore, the Conflict of Interest Guidelines are not applicable to any stockholder of the Company who is not otherwise an employee or a director of the Company. Therefore, while certain transactions that are reportable under Item 404(a) of Regulation S-K might be reportable under the Conflict of Interest Guidelines, none of the transactions reported under the “Description of Transactions” sub-section above was reported or reviewed pursuant to the Conflict of

Interest Guidelines. Nevertheless, prior to the dissolution of the management committee, each of such transactions reported above had been reported to, and reviewed and approved by, one or more of the disinterested members of the management committee pursuant to an informal procedure. Following the dissolution of the management committee, such transactions are reported in the first instance to the Office of the General Counsel or the Chairman of the Audit Committee, and disclosable transactions are subsequently reviewed and approved by the Audit Committee.

 

AUDIT COMMITTEE REPORT

 

The Audit Committee reviewed and discussed the audited financial statements with management and Deloitte & Touche LLP, the Company’s independent registered public accounting firm, and management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The discussions with Deloitte & Touche LLP included the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Oversight Board in Rule 3200T. The Audit Committee also received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Deloitte & Touche LLP their independence.

 

The Audit Committee also: (i) reviewed and discussed with management, the Company’s internal auditors and Deloitte & Touche LLP the Company’s internal control over its financial reporting process; (ii) monitored management’s review and analysis of the adequacy and effectiveness of those controls and processes; and (iii) reviewed and discussed with management and Deloitte & Touche LLP their respective assessment of the effectiveness and adequacy of the Company’s internal control over financial reporting.

 

Based on the Audit Committee’s review of the audited financial statements and the review and discussions described in the foregoing paragraphs, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended December 31, 2009 be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 for filing with the SEC.

 

ROLAND HERNANDEZ, Chair

KENNY C. GUINN

ALEXIS M. HERMAN

ROSE MCKINNEY-JAMES

 

In March 2010, Mr. Bible was appointed as a new director of the Company and subsequently named to the Audit Committee on April 13, 2010 and, as such, he was not able to participate in the relevant reviews and discussions noted above during 2009.

 

The foregoing report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent the Company specifically incorporates such report by reference therein.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee of the Board of Directors has reviewed and discussed the “Compensation Discussion and Analysis” included in this Proxy Statement with management. Based on the Compensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

ANTHONY MANDEKIC, Chair

WILLIE D. DAVIS

KENNY C. GUINN

ROSE MCKINNEY-JAMES

DANIEL J. TAYLOR

MELVIN B. WOLZINGER

 

The foregoing report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates such report by reference therein.

 

EXECUTIVE AND DIRECTOR COMPENSATION AND OTHER INFORMATION

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Roles in Establishing Compensation

 

Compensation Committee.  The Compensation Committee is responsible for establishing, implementing and reviewing the compensation program for our employees, including the executive officers. The compensation for our Named Executives is presented in the tables that follow this Compensation Discussion and Analysis, beginning with the “Summary Compensation Table.” Our “Named Executives” in any fiscal year are defined as any person who served as our Chief Executive Officer or Chief Financial Officer, our other three most highly compensated executive officers at the end of the last fiscal year, and up to two additional individuals who would have been Named Executives but for the fact that they were not serving as an officer at the end of that fiscal year. Accordingly, in 2009, our Named Executives were:

 

 

The Compensation Committee, among other things, recommends the executive compensation policy to our Board of Directors, determines compensation of our senior executives, determines the performance criteria and incentive awards to be granted pursuant to our Annual Performance-Based Incentive Plan for Executive Officers (the “Incentive Plan”) and administers and approves the granting of equity-based awards under our Omnibus Incentive Plan. The Compensation Committee’s authority and oversight extends to total compensation, including base salaries, bonuses, non-equity incentive awards, equity-based awards and other forms of compensation.

 

Executive Officers.  In carrying out its functions, the Compensation Committee obtains recommendations from senior executives with respect to various elements of compensation, including, but not limited to, determining the employees — other than the senior executives themselves — to whom share-based awards are granted and the amount of compensation to be paid to such employees. The Compensation Committee consults with the senior executives to obtain performance results, legal and regulatory guidance, and market and industry data that may be relevant in determining compensation. In addition, the Compensation Committee consults with the Chief Executive Officer regarding our performance goals and the performance of our executive officers. Furthermore, the Chief Executive Officer meets with the Chair of the Compensation Committee and our Lead Independent Director to discuss the Chief Executive Officer’s performance during the prior year, including with respect to strategic planning, geographical and market expansion, management of new operations, projects and investments, succession planning and interactions and working relations with the Board.

 

Other than in connection with negotiating their respective employment agreements and other than with respect to participation by our Chief Executive Officer in connection with determining the performance criteria for his annual bonus under our Incentive Plan, the executive officers do not participate in determining the

amount and type of compensation they are paid. Instead, the Compensation Committee’s assessment of the individual performance of the executive officers is based primarily on the Compensation Committee’s independent observation and judgment of the responsibilities, duties, performance and leadership skills of the executive officers as well as the Company’s overall performance.

 

Outside Consultants.  The Compensation Committee periodically engages outside consultants on various compensation-related matters. The Compensation Committee has the authority to engage the services of independent legal counsel and consultants to assist the Committee in analyzing and reviewing the compensation policies, the elements of compensation, and the aggregate compensation for the executive officers. Recently, the Compensation Committee engaged outside consultants as follows:

 

 

Objectives of Our Compensation Program

 

The Compensation Committee’s primary objectives in setting total compensation and the elements of compensation for each of the Named Executives are to:

 

 

Certain Factors in Determining Compensation

 

Employment Agreements.  We have entered into employment agreements with each of our Named Executives, including a new employment agreement, effective April 6, 2009, with Mr. Murren, our Chairman of the Board and Chief Executive Officer since December 2008. The Compensation Committee believes these agreements are necessary to retain and ensure the continued availability of the Named Executives to develop and implement our strategic plans throughout the world, including, for example, developing MGM MIRAGE Hospitality LLC’s projects. The employment agreements determine the annual base salaries and severance benefits for the Named Executives, in each case, as further described below.

 

Incentive Plan.  As further described below, the Compensation Committee adopts performance goals on an annual basis, including specific performance objectives, and establishes computation formulae or methods for determining each participant’s non-equity incentive award for that year under the Incentive Plan. Mr. Murren participates in determining the performance criteria for his annual bonus under the Incentive Plan. For fiscal year 2009, Messrs. Murren, Baldwin, and Jacobs were the sole participants in the Incentive Plan. For fiscal year 2010, Messrs. Murren, Baldwin, D’Arrigo and Selwood are the Named Executives eligible to participate in the Incentive Plan. The Compensation Committee has no discretion to increase the amount of any participant’s award as determined by the formula, but even if the performance goals are met for any particular year, the Compensation Committee may reduce or eliminate any participant’s award if it determines, in its sole and absolute discretion, that such a reduction or elimination is appropriate with respect to the participant’s performance or any other factors material to the goals, purposes, and administration of the

Incentive Plan. In December 2009, the Compensation Committee determined that it would not reduce or eliminate any of the participants’ awards for fiscal year 2009.

 

Impact of Tax Rules.  Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) disallows a tax deduction to public companies for compensation over $1 million paid to such company’s chief executive officer and its three other highest paid executive officers other than its chief financial officer. Qualifying performance-based compensation is not subject to the $1 million deduction limitation if certain requirements are met. The Compensation Committee has determined that compensation payable to these individuals should be structured to satisfy the requirements for qualified performance-based compensation whenever possible. Awards to these individuals under our Incentive Plan and certain annual grants of equity-based compensation they receive under our Omnibus Incentive Plan are intended to satisfy the requirements for qualifying performance-based compensation under Section 162(m) so that compensation paid pursuant to these awards and grants will be tax deductible. However, interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Compensation Committee can affect deductibility of compensation, and there can be no assurance that compensation paid to our executive officers who are covered by Section 162(m) will be deductible. In addition, the Compensation Committee reserves the right to use its judgment to authorize payment of compensation that may not be deductible when the Compensation Committee believes that such payments are appropriate and in the best interests of the Company, taking into consideration changing business conditions, the performance of its employees, and other relevant factors. In this regard, in 2009, the Compensation Committee approved discretionary cash bonuses to certain Named Executives, as discussed below.

 

Targeted Overall Compensation and Peer Group Review.  In order to assess whether the compensation awarded to our executive officers is fair and reasonable, the Compensation Committee periodically gathers and reviews data regarding the compensation practices and policies of other public companies in our industry. The peer group compensation data is reviewed as a check for the Compensation Committee to determine whether the compensation paid to our executive officers is generally competitive with that paid to the executive officers of our peer group companies. The Compensation Committee does not, however, annually adjust the compensation paid to our executive officers based on this information.

 

The relevant information for members of the peer group is gathered from publicly-available proxy data, which data generally reflects only the compensation paid by these companies in years prior to their disclosure. When reviewing the compensation of the Named Executives of the peer group, the Compensation Committee compares the market overlap, results of operations, stockholders’ equity and market capitalization of the peer group with ours. In addition, the Compensation Committee also reviews the total compensation, as well as the amount and type of each element of such compensation, of the Named Executives of the peer group with duties and responsibilities comparable to those of our Named Executives. In 2009, the Compensation Committee reviewed the compensation data of the following companies:

 

 

Elements of Compensation

 

Base Annual Compensation.  The Named Executives’ respective employment agreements provide for annual base salaries as described under “Certain Factors in Determining Compensation — Employment Agreements” and “Summary Compensation Table,” and the Named Executives generally remain at the annual base salaries under such employment agreements for the term of the agreement unless their roles or responsibilities materially change. In connection with finalizing the employment agreements (including any

amendments to such agreements) with the Named Executives, including the terms of Mr. Murren’s new employment agreement, the Compensation Committee approved the annual base salaries set forth in such agreements that it believed would be required to retain the services of the Named Executives for the term of the employment agreements and to reflect the minimum annual compensation that is appropriate for each of them based on their past and anticipated contributions to our business. In addition, Mr. Murren’s annual base salary was increased to $2,000,000 from $1,500,000 because of the additional duties and responsibilities attendant to his appointment as Chairman of the Board and Chief Executive Officer and the value and importance of the service that he will provide in the future. In connection with the negotiation of Mr. Murren’s employment agreement, the Compensation Committee engaged separate independent counsel, as well as FW Cook.

 

Non-Equity Incentive Awards.  Non-equity incentive awards under the Incentive Plan, when appropriate, are determined by the Compensation Committee after the end of the fiscal year. Only an individual who (a) at any time during the taxable year served as the chief executive officer or acted in such capacity, or (b) is among the four highest compensated executive officers and is designated by the Compensation Committee may participate in the Incentive Plan.

 

Within 90 days of the beginning of each calendar year, the Compensation Committee establishes performance goals, including specific performance objectives based on our financial performance targets approved by the Board and computation formulae or methods for determining each participant’s non-equity incentive award under the Incentive Plan for that year. For 2009, the Compensation Committee established performance objectives based on a percentage of “EBITDA.” As defined by the Compensation Committee for 2009, EBITDA consisted of corporate consolidated EBITDA excluding the following nonrecurring items: gains or losses from the sale of operating properties, EBITDA attributable to operations of assets for the period prior to their disposal, gains or losses on insurance proceeds related to asset claims, certain asset write-downs or write-ups, gains or losses from acquisition, sale, disposition or exchange of our debt securities, and certain legal and advisory fees. For 2009, the Compensation Committee established the EBITDA target at $1.4 billion, subject to potential downward adjustment in the case of certain discontinuances of operations. The Compensation Committee further determined that, in order for any grant to be earned under the Incentive Plan, the minimum performance measure during 2009 must have been at least $980 million (70% of the targeted EBITDA). In the event that 70% of the targeted EBITDA was achieved, the participants would be eligible to receive 50% of their target award. Thereafter, the awards would increase on a sliding scale basis, so that if, for example, 85% of the targeted EBITDA is achieved, the participants would be eligible to receive 75% of their target award, and if 100% of the targeted EBITDA is achieved, the participants would be eligible to receive 100% of their target award. Between 100% and 120% of targeted EBITDA, the bonus would increase proportionately up to a maximum amount equal to 150% of the target bonus, so that, for example, if 110% of the targeted EBITDA is achieved, the participant would be eligible to receive 125% of their target award. The Compensation Committee set the target non-equity incentive awards under the Incentive Plan for 2009 as $3.0 million, $2.4 million, and $1.65 million for Messrs. Murren, Baldwin, and Jacobs, respectively. Pursuant to the Incentive Plan, at or after the end of each calendar year, the Compensation Committee is required to certify in writing whether the pre-established performance goals and objectives were satisfied for that year. For 2009, the Compensation Committee performed this step in March 2010. In 2009, 88% of the targeted EBITDA was achieved such that Messrs. Murren and Baldwin, who were the only Named Executives eligible to receive a bonus under the Incentive Plan (Mr. Jacobs was determined to be ineligible because he was not employed on December 31, 2009), each received 80% of their target awards.

 

The awards discussed above are subject to potential repayment. The following rules shall apply if (1) there is a restatement of the Company’s financial statements for the fiscal year for which a bonus is paid, other than a restatement due to changes in accounting principles or applicable law, and (2) the Compensation Committee determines that a participant has received an “excess bonus” for the relevant fiscal year. First, the amount of the excess bonus shall be equal to the difference between the bonus paid to the participant and the payment or grant that would have been made based on the restated financial results. Second, the requirement to repay the excess bonus shall only exist if the Audit Committee has taken steps to consider restating the financials prior to the end of the third year following the year in question. Third, the

Compensation Committee shall take such action in its discretion that it determines appropriate to recover the excess bonus. Such actions may include recovery of such amount from the participant from any of the following sources: prior incentive compensation payments, future payments of incentive compensation, cancellation of outstanding equity awards, future equity awards, gains realized on the exercise of stock options, and direct repayment by the participant. A participant’s receipt of a bonus constitutes his agreement that, if requested by the Compensation Committee, he shall repay to the Company the excess bonus within 90 days of the time that he is notified by the Compensation Committee of the overpayment. Application of this policy does not preclude the Company from taking any other action to enforce a participant’s obligations to the Company, including termination of employment or institution of civil or criminal proceedings.

 

For 2010, the Compensation Committee has determined that, in order for any annual non-equity incentive award to be earned under the Incentive Plan, the minimum EBITDA during 2010 must be at least 70% of the targeted EBITDA for 2010, as approved by the Compensation Committee solely for the purposes of the Incentive Plan. The same definition of EBITDA as used in 2009 will be used for 2010 and the sliding scale described above will also apply. The Compensation Committee set the target non-equity incentive award under the Incentive Plan for 2010 as $4 million, $2.25 million, $375,000 and $375,000 for Messrs. Murren, Baldwin, D’Arrigo and Selwood, respectively. In determining the minimum performance measure and the target non-equity incentive award for 2010, the Compensation Committee considered the EBITDA projected by management for 2010 in relation to the prior year’s performance, general economic conditions, the competitiveness of our executive compensation within the industry, and the anticipated value of the services to be provided by the participants. Based on the foregoing, the Compensation Committee believed, at the time the target performance measure was set for 2010, that the target performance goals were attainable.

 

In addition, pursuant to his employment agreement, Mr. Murren is eligible to receive four additional equal cash awards of up to $4.25 million in the aggregate (“Additional Cash Awards”) to be awarded pursuant to the Incentive Plan, with one of such Additional Cash Awards to be vested at the end of each of four six-month periods starting on September 30, 2009. Such Additional Cash Awards will be in addition to any annual awards made to Mr. Murren under the Incentive Plan. In the event that any Additional Cash Awards vest and are earned, such Additional Cash Awards, unlike the awards made under the Incentive Plan, will not be subject to reduction at the discretion of the Compensation Committee. The Compensation Committee determined that, because the awards under the Incentive Plan may be reduced or eliminated at the discretion of the Compensation Committee, ensuring that a portion of Mr. Murren’s cash compensation that is dependent on our performance not be subject to reduction at the discretion of the Compensation Committee was important to assist the Company’s efforts in continuing to retain the services of Mr. Murren and to further align the interest of our Chief Executive Officer with those of our stockholders. Each of the Additional Cash Awards will be deemed vested and earned at the end of the corresponding six-month period if the EBITDA of the Company for such six-month period is equal to or higher than $350,000,000, subject to Mr. Murren’s continued employment through the end of such six-month period. Any Additional Cash Award that does not become vested and earned upon the end of the corresponding six-month period (solely as a result of the failure to meet the EBITDA target) will be deemed vested and earned on any subsequent vesting date in the event that the average EBITDA for the six-month periods beginning on April 1, 2009 and ending on such subsequent vesting date is equal to or greater than such target EBITDA for the corresponding six-month period; provided, however, the foregoing is not applicable if Mr. Murren’s employment has been terminated by the Company for good cause (as defined in his employment agreement) or by Mr. Murren without good cause (as defined in his employment agreement), in each case, on or prior to such subsequent vesting date. The Additional Cash Awards that are vested and earned prior to March 31, 2011 will be paid on March 31, 2011 (or within 10 business days thereafter) and the Additional Cash Awards that vest and are earned on March 31, 2011 will become payable on March 31, 2011 and must be paid within 90 days thereafter; provided, however, in the event that Mr. Murren’s employment is terminated prior to March 31, 2011 (other than by the Company for good cause or by Mr. Murren without good cause), the Company will make an irrevocable contribution to a grantor trust established in accordance with the terms of Mr. Murren’s employment agreement in an amount equal to the amount of any Additional Cash Award that is vested as of the date of termination or that becomes vested following such termination. The foregoing contribution(s), which shall accrue interest, will be made on the later of (i) the date of termination or (ii) the date such Additional Cash Award becomes vested, but no

later than 90 days thereafter. In the event of Mr. Murren’s death prior to March 31, 2011, any Additional Cash Award that is vested as of the date of his death or that becomes vested following the date of his death will be paid on the later of (i) the date of death or (ii) the date such Additional Cash Award becomes vested, but no later than 90 days thereafter.

 

In addition, the Compensation Committee has the ability to grant bonus awards outside of the Incentive Plan in accordance with the Compensation Committee’s discretion. Discretionary bonuses may be awarded in any amount that the Compensation Committee deems appropriate; provided, however, that any such bonus payments may not be entitled to the same beneficial tax treatment provided with respect to the non-equity incentive awards under the Incentive Plan. In 2009, Messrs. D’Arrigo, Selwood and Scott, who were not eligible to participate in the Incentive Plan, received annual bonuses in the amounts of $250,000, $250,000 and $75,000, respectively. Additionally, in March 2010, the Compensation Committee determined to award discretionary bonuses to Messrs. Murren, D’Arrigo and Selwood in the amounts of $500,000, $225,000 and $200,000, respectively in recognition of their efforts relating to the financing of CityCenter as well as executing capital raising transactions that improved the Company’s financial position.

 

Equity-Based Compensation.  The Compensation Committee grants equity-based compensation under the Omnibus Incentive Plan, which allows for the issuance of various forms of equity-based compensation, such as stock options, stock appreciation rights (“SARs”), restricted stock, and restricted stock units (“RSUs”). The Compensation Committee administers all aspects of the Omnibus Incentive Plan and is the only authorized body that can grant equity-based awards.

 

Prior to the Compensation Committee’s adoption in October 2008 of a new equity-based compensation policy (the “Annual Program”), the Compensation Committee had granted equity-based awards in connection with milestone events, such as in connection with a new hire, employment contract renewal, significant promotions, and significant corporate transactions. Although in exceptional circumstances the Compensation Committee may grant equity-based compensation outside the Annual Program, equity-based compensation to our employees, including the Named Executives, will be granted primarily under the Annual Program. The Compensation Committee adopted the Annual Program to reduce unintended discrepancies in equity-based compensation resulting from varying exercise prices of SARs and stock options depending on the year of issue, to provide similar vesting schedules for employees receiving the same type of awards during any given year, and to further align the interests of certain executives of the Company, including the Named Executives, with those of the stockholders by including a performance-based component with respect to equity-based awards to such executives. Pursuant to the Annual Program, existing employees with annual base salaries equal to or greater than $130,000 (among certain other requirements, and unless excluded on a case-by-case basis by the Compensation Committee) or any other existing employee approved by the Compensation Committee on a case-by-case basis may be eligible to receive equity-based awards annually on the anniversary of the Annual Program’s adoption.

 

The Compensation Committee has determined to issue both SARs and RSUs under the Annual Program. Each SAR entitles the recipient to receive upon exercise a payment in stock equal to the appreciation in the value of a share of Company stock from the date of issue to the date of exercise. Accordingly, the employee receives value from his or her SAR only if there is an increase in the value of a share. In contrast, each RSU entitles the holder to receive one share of Company stock at vesting. Thus, while an increase in the value of Company stock increases the value of each RSU, an RSU has value even if there is no increase in the value of a share — an RSU thus has value as a retention incentive even if there is no increase in stock price. The Compensation Committee has determined that a combination of both SARs and RSUs is the best design from an executive compensation perspective since this results in some retention incentive even when stock prices have not increased. As noted below, however, for more senior executives, 75% of the awards are in the form of SARs, in order to focus senior executives on stock price growth. SARs and RSUs vest ratably over four years. This vesting schedule encourages holders of awards to balance our short-term performance with the management of our long-term risks and long-term performance.

 

In connection with the Annual Program, the Compensation Committee reserves on an annual basis a pool of equity-awards comprised of SARs and RSUs based on a number of “SARs-equivalent” awards. With respect

to employees with annual base salaries equal to or greater than $250,000, including the Named Executives, 75% of the SARs-equivalent awards were made in the form of SARs and 25% in the form of RSUs. With respect to employees with annual base salaries below $250,000, 50% of the “SARs-equivalent” awards will be made in the form of SARs and 50% in the form of RSUs.

 

The Compensation Committee established performance objectives for RSUs issued to officers. The Compensation Committee determined that, in order for any RSUs awarded to the officers of the Company in 2009 to vest, Company EBITDA for the six-month period ending on June 30, 2010 must be at least 50% of the targeted EBITDA as determined in the budget adopted by the Board of Directors for such period, excluding certain predetermined items. For this purpose EBITDA is generally computed in the same manner as under the Incentive Plan.

 

In determining the size of the awards to be awarded to employees, the Compensation Committee does not take into account an employee’s holdings of vested but unexercised awards, believing that calibrating future awards based on the holdings of previously vested but unexercised awards would create incentives for employees to exercise or sell shares subject to their prior grants. The Compensation Committee also does not take into account the value realized by an employee during a fiscal year from the exercise of equity awards granted during a prior year, believing that value realized by an employee from the exercise of any such equity award relates to services provided during the year of the grant or of vesting and not necessarily during the year of exercise.

 

The Compensation Committee awarded equity-based compensation to the Named Executives in 2009 as follows:

 

 

The Compensation Committee believes that these awards of equity-based compensation, along with the grants of equity-based compensation in prior years, were sufficient to align the interests of the Named Executives with those of our stockholders.

 

As previously noted, the Compensation Committee may continue to grant in exceptional circumstances equity-based awards outside of the Annual Program. In particular, in connection with his new employment agreement, Mr. Murren was awarded 2,000,000 SARs under the Omnibus Incentive Plan, which SARs will expire seven years from the date of the grant. The Compensation Committee determined that, in light of Mr. Murren’s promotion during 2008 to Chairman of the Board and Chief Executive Officer and the resulting responsibility that has been assumed and will continue to be assumed by Mr. Murren, a significant equity-based award in connection with his new employment agreement was necessary to sufficiently compensate Mr. Murren, to assist the Company in the continued retention of his services, and to align Mr. Murren’s interest with those of our stockholders. The grant was designed to ensure that a significant portion of the grant would serve primarily to assist us in continuing to retain Mr. Murren’s services while any compensation from the remainder of the grant will be realized only upon a material increase in the value of our stockholders’ ownership in our shares. 1,000,000 of the SARs will vest over a period of four years, with 25% vesting each year if Mr. Murren is employed on the vesting date. To date, 250,000 of these SARs have vested. 500,000 of the SARs will vest over a period of four years, with 25% vesting each year if Mr. Murren is employed on the vesting date; provided that none of such SARs will be deemed vested unless the average closing price of our Common Stock is at least $8.00 during any 20 consecutive days period prior to the expiration of the employment agreement or, if Mr. Murren’s employment terminates earlier, prior to the end of the applicable vesting period following such termination. To date, 125,000 of these SARs have vested. The remaining 500,000 of the SARs will vest over a period of four years, with 25% vesting each year; provided that none of such SARs will be deemed vested unless the average closing price of our Common Stock is at least $17.00

during any 20 consecutive trading days prior to the expiration of the employment agreement or, if Mr. Murren’s employment terminates earlier, prior to the end of the applicable vesting period following such termination. In the event of termination of employment prior to the end of the employment agreement, the applicable vesting period is the earliest of (1) the fourth anniversary of the grant date, (2) two years following termination if Mr. Murren is terminated by the Company without good cause or terminates for good cause (for this purpose the two-year period is measured from the onset of disability in the event of termination due to disability), (3) the date of termination if Mr. Murren is terminated by the Company for good cause or terminates without good cause, (4) the date upon which the restrictive covenants in the employment agreement are violated, and (5) the date of a “discontinuing change of control,” as defined in the employment agreement. As a result of such grant, Mr. Murren was not eligible to receive additional awards of SARs under the terms of the Omnibus Incentive Plan during 2009.

 

In connection with any award of stock options or SARs, the exercise price for such stock options or SARs is established as the closing price of our Common Stock on the Exchange on the day of the Compensation Committee meeting on which such award is approved. With respect to a grant of an equity award to a new employee, although the Compensation Committee may pre-approve the terms of employment — including the proposed equity compensation — offered to a potential new employee prior to the acceptance or commencement of the employment, such grant of stock options or SARs made in connection with such new employment occurs at the next scheduled meeting of the Compensation Committee following the commencement of such employment, and the exercise price of stock options or SARs granted in connection with such employment is established as the closing price of our Common Stock on the Exchange on the date the Compensation Committee reaffirms such grant. With respect to equity awards granted in connection with the approval by the Compensation Committee of a new or revised employment agreement, such grants are approved and awarded at the regularly scheduled or special meeting of the Compensation Committee during which such employment agreement is approved. The Compensation Committee does not time the issuance or grant of any equity-based awards with the release of material, non-public information. In addition, we do not time the release of material non-public information for the purpose of affecting the value of equity awards. See “Severance Benefits and Change of Control” below for a discussion of the disposition of equity awards held by Named Executives upon termination of employment.

 

Retirement Benefits.  As part of our overall benefits program, we have provided a nonqualified deferred compensation plan (the “DCP”) and a supplemental executive retirement plan (the “SERP”) in addition to a traditional 401(k) plan. These programs have been designed to provide a measure of long-term security to the participants and to provide an additional incentive for the participants to remain with us.

 

In December 2007, the Compensation Committee determined that commencing January 1, 2008, no new persons would be added as participants in the SERP. In November 2008, as part of our ongoing cost savings measures, the Compensation Committee approved amendments to the DCP and SERP which suspended our matching contributions to the DCP for periods after January 1, 2009 and our contributions to the SERP for periods after October 1, 2008. In addition, we terminated certain predecessor DCP and SERP plans during 2008. The amendments also allowed participants to make one-time elections to receive, without penalty, all or a portion of their vested account balances under such plans in a lump sum payment within 60 days of January 1, 2009, consistent with certain transitional relief provided by the Internal Revenue Service pursuant to rules governing nonqualified deferred compensation. Payments made during 2009 pursuant to these elections to Messrs. Murren, D’Arrigo, Baldwin, Selwood and Jacobs were $3,547,280, $505,089, $1,462,535, $578,630 and $2,948,648, respectively.

 

The 401(k) match was suspended for all participants for 2009. Additionally, under the DCP, participants are permitted to defer any portion of their salary or non-equity incentive awards on a pre-tax basis and accumulate tax-deferred earnings on their accounts. Until January 1, 2009, we matched up to 4% of the participants’ base salary, less any amount contributed to the participants’ 401(k) plan, which contribution vests ratably over a 3-year period. The contributions made by participants vest immediately. All of the Named Executives except Mr. Scott are participants in the DCP. No Company contributions were made related to 2009 deferrals.

Under the SERP, which is a nonqualified plan, we made, until October 1, 2008, an annual contribution that is estimated to provide a retirement benefit up to 65% of the final five-year average annual salary of the participant. However, a participant is not guaranteed any specific amount of benefits upon retirement, but is entitled to only such amount of the vested contributions and earnings on such contributions available in such participant’s account at the time of retirement. All contributions to the SERP were made by us. A portion of such contributions vests over three years of participation in the SERP. The remainder of such contributions vests over the later of five years of participation in the SERP and 10 years of continuous service. All of the Named Executives except Mr. Scott are participants in the SERP. No contributions were made in 2009.

 

Perquisites and Other Benefits.  As an owner and operator of full-service hotels, we are able to provide many perquisites relating to hotel and related services, including security and in-town transportation, to the Named Executives at little or no additional cost to us. To the extent such products or services are for personal use, the Named Executives reimburse us for the cost of such product or service. We currently provide access to the fitness facilities located in the hotel in which a Named Executive’s office is located and offer certain products and services from our hotels at prices equal to our cost for such products and services. In addition, for our convenience and the convenience of our executive officers, we provide complimentary meals for business purposes at our restaurants to the Named Executives. As shown below in the Summary Compensation Table, the Company also provides tax gross-ups to certain of its Named Executives. Going forward, other than tax gross-ups that are required to be paid under existing employment agreements, the Compensation Committee does not intend to approve any further tax gross-ups.

 

Pursuant to his employment agreement and subject to certain conditions, Mr. Murren is permitted to use the aircraft owned by us for business purposes. Additionally, Mr. Murren may request the personal use of such aircraft; however, the Company is not obligated to make the aircraft available for more than two personal round trips in any calendar year, subject to certain conditions and the aircraft’s availability. For the year ended December 31, 2009, the Company invoiced Mr. Murren a total amount of $27,099 in connection with two of Mr. Murren’s personal flights, which amount represents a portion of the costs associated with such flights and was reimbursed by Mr. Murren pursuant to a Time Sharing Agreement. In 2009, the unreimbursed portion of the aggregate incremental costs associated with Mr. Murren’s personal use of the Company’s aircraft was $235,521 and $52,761 of this amount was imputed to his income.

 

In addition, the aggregate amount of premiums paid for group life insurance, short term disability insurance, long term disability insurance, business travel insurance, and health plan coverage and associated taxes on behalf of Messrs. Murren, D’Arrigo, Baldwin, Selwood, Scott and Jacobs in 2009 was $136,010, $24,295, $22,377, $21,327, $2,184, and $31,380, respectively. In addition, pursuant to his employment agreement, Mr. Murren will receive an annual $100,000 payment to be applied to his life insurance premiums or such other use as he determines.

 

The Company also paid legal fees on behalf of Messrs. Murren and Jacobs in conjunction with the negotiation of their employment agreements with the Company. In 2009, the Company paid $67,985 on behalf of Mr. Murren and $67,985 on behalf of Mr. Jacobs for such legal fees.

 

Severance Benefits and Change of Control.  In order to assist us in retaining the services of the executive officers, we have agreed to provide them with severance benefits in the event that their employment is terminated by the Company for other than good cause (as defined in their respective employment agreements), by the executives for good cause (as defined in their respective employment agreements) or in the event of a change of control (as defined in their respective employment agreements). The Compensation Committee believes the services of the Named Executives are extremely marketable, and that in retaining their services it is therefore necessary to provide assurances to the Named Executives that we will not terminate their employment without cause and without providing a certain level of severance benefits. When determining the level of the severance benefits to be offered in the employment agreements, the Compensation Committee also considered the period of time it would normally require an executive officer to find comparable employment. The details of the specific severance benefits available under various termination or change of control scenarios for the Named Executives are discussed in the “Potential Payments upon Termination or

Change-in-Control” section below, along with an estimate of the amounts to be paid to each Named Executive under each scenario.

 

Summary Compensation Table

 

The following table summarizes the compensation of the Named Executives for the years ended December 31, 2009, 2008 and 2007.

 

 

 

 

 

 

 

Grants of Plan-Based Awards

 

The table below sets forth certain information regarding plan-based awards granted during 2009 to the Named Executives.

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The table below sets forth certain information regarding outstanding equity awards of the Named Executives at December 31, 2009. This table does not include equity-based compensation in the form of RSUs granted to Named Executives in 2008 that were cancelled as a result of certain performance criteria not being met.