SCHEDULE 14A
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEWCASTLE INVESTMENT CORP.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[Newcastle Investment Corp. Logo]
NEWCASTLE INVESTMENT CORP.
April 28, 2004
Dear Fellow Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Stockholders of Newcastle Investment Corp. (the "Annual
Meeting") to be held at The Four Seasons Hotel, 57 East 57th Street, New York,
New York on Thursday, May 27, 2004, at 8:00 a.m., Eastern Time. The matters to
be considered by the stockholders at the Annual Meeting are described in detail
in the accompanying materials.
IT IS IMPORTANT THAT YOU BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU OWN OR WHETHER YOU ARE ABLE TO ATTEND THE ANNUAL
MEETING IN PERSON. Let me urge you to mark, sign and date your proxy card today
and to return it in the envelope provided.
Sincerely,
/s/ Wesley R. Edens
Wesley R. Edens
Chairman and Chief Executive Officer
NEWCASTLE INVESTMENT CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 2004
To the Stockholders of Newcastle Investment Corp.:
The annual meeting of stockholders of Newcastle Investment Corp., a
Maryland corporation, will be held at The Four Seasons Hotel, 57 East 57th
Street, New York, New York, on Thursday, May 27, 2004, beginning at 8:00 a.m.,
Eastern Time (the "Annual Meeting"). The matters to be considered by
stockholders at the Annual Meeting, which are described in detail in the
accompanying materials, are:
(i) a proposal to elect one Class II director to serve until the 2007
annual meeting of stockholders or until his successor is elected
and duly qualified;
(ii) a proposal to approve the appointment of Ernst & Young LLP as
independent auditors for the Company for fiscal year 2004; and
(iii) any other business that may properly come before the Annual
Meeting or any adjournment of the annual meeting.
Stockholders of record at the close of business on April 27, 2004 will be
entitled to notice of and to vote at the Annual Meeting. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS OF THE SIZE OF YOUR
HOLDINGS. A Proxy Statement, proxy card and self-addressed envelope are
enclosed. Whether or not you plan to attend the Annual Meeting in person, please
complete, date and sign the proxy card. Return it promptly in the envelope
provided, which requires no postage if mailed in the United States. If you are
the record holder of your shares and you attend the meeting, you may withdraw
your proxy and vote in person, if you so choose.
By Order of the Board of Directors,
/s/ Randal A. Nardone
Randal A. Nardone
Secretary
1251 Avenue of the Americas
16th Floor
New York, New York 10020
April 28, 2004
NEWCASTLE INVESTMENT CORP.
1251 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10020
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 2004
This Proxy Statement and the accompanying proxy card and notice of annual
meeting are provided in connection with the solicitation of proxies by and on
behalf of the board of directors of Newcastle Investment Corp., a Maryland
corporation, for use at the annual meeting of stockholders to be held on
Thursday, May 27, 2004, and any adjournments or postponements thereof (the
"Annual Meeting"). "We," "our," "us," "the Company" and "Newcastle" each refers
to Newcastle Investment Corp. The mailing address of our executive office is
1251 Avenue of the Americas, 16th Floor, New York, New York 10020. This Proxy
Statement, the accompanying proxy card and the notice of annual meeting are
first being mailed to holders of our common stock, par value $0.01 per share
(the "Common Stock"), on or about April 28, 2004.
A proxy may confer discretionary authority to vote with respect to any
matter presented at the Annual Meeting. At the date hereof, management has no
knowledge of any business that will be presented for consideration at the Annual
Meeting and which would be required to be set forth in this proxy statement or
the related proxy card other than the matters set forth in the Notice of Annual
Meeting of Stockholders. If any other matter is properly presented at the Annual
Meeting for consideration, it is intended that the persons named in the enclosed
form of proxy and acting thereunder will vote in accordance with their best
judgment on such matter.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Annual Meeting, stockholders of the Company's Common Stock will vote
upon:
(i) a proposal to elect one Class II director to serve until the 2007
annual meeting of stockholders or until his successor is elected
and duly qualified;
(ii) a proposal to approve the appointment of Ernst & Young LLP as
independent auditors for the Company for fiscal year 2004; and
(iii) any other business that may properly come before the annual
meeting of stockholders or any adjournment of the annual meeting.
GENERAL INFORMATION ABOUT VOTING
SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of our board of directors.
The expense of preparing, printing and mailing this proxy statement and the
proxies solicited hereby will be borne by the Company. In addition to the use of
the mail, proxies may be solicited by officers and directors, without additional
remuneration, by personal interview, telephone, telegraph or otherwise. The
Company will also request brokerage firms, nominees, custodians and fiduciaries
to forward proxy materials to the beneficial owners of shares held of record on
April 27, 2004 and will provide reimbursement for the cost of forwarding the
material.
STOCKHOLDERS ENTITLED TO VOTE
As of the date hereof, there are outstanding and entitled to vote
34,711,833 shares of our Common Stock. Each share of our Common Stock entitles
the holder to one vote. Stockholders of record at the close of business on April
27, 2004 are entitled to vote at the Annual Meeting or any adjournment thereof.
A stockholder list will be available for examination by Newcastle stockholders
at the Annual Meeting and at the office of the Company at 1251 Avenue of the
Americas, 16th Floor, New York, New York, 10020, during ordinary business hours
during the ten-day period prior to the Annual Meeting for any purpose germane to
the meeting.
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We also have outstanding 2,500,000 shares of our 9.75% Series B Cumulative
Redeemable Preferred Stock. These shares have no voting rights, except in
limited circumstances.
REQUIRED VOTE
A quorum will be present if the holders of a majority of the outstanding
shares entitled to vote are present, in person or by proxy, at the Annual
Meeting. If you have returned a valid proxy or, if you hold your shares in your
own name as holder of record and you attend the Annual Meeting in person, your
shares will be counted for the purpose of determining whether there is a quorum.
If a quorum is not present, the Annual Meeting may be adjourned by the chairman
of the meeting or by the vote of a majority of the shares represented at the
Annual Meeting until a quorum has been obtained.
For the election of the nominee to our board of directors, the affirmative
vote of a plurality of all the votes cast at the Annual Meeting is sufficient to
elect the director if a quorum is present. For the approval of Ernst & Young
LLP, the affirmative vote of a majority of the shares of our Common Stock cast
at the Annual Meeting is required to approve the matter.
If the enclosed proxy is properly executed and returned to us in time to be
voted at the Annual Meeting, it will be voted as specified on the proxy unless
it is properly revoked prior thereto. If no specification is made on the proxy
as to any one or more of the proposals, the shares of Common Stock represented
by the proxy will be voted as follows:
(i) FOR the election of the nominee to our board of directors;
(ii) FOR the approval of the appointment of Ernst & Young LLP as
independent auditors for the Company for fiscal year 2004; and
(iii) in the discretion of the proxy holder on any other business that
properly comes before the Annual Meeting or any adjournment or
postponement thereof.
Abstentions (and broker non-votes) will have no effect on the outcome of
the election of our board of directors, the appointment of Ernst & Young LLP or
any other matter for which the required vote is a majority of the votes cast. If
any other matters are properly presented at the Annual Meeting for
consideration, the persons named in the proxy will have the discretion to vote
on those matters for you. As of the date of this Proxy Statement, we are not
aware of any other matter to be raised at the Annual Meeting.
Abstentions and broker non-votes will be counted in determining the
presence of a quorum. "Broker non-votes" are instances where a broker holding
shares of record for a beneficial owner does not vote the shares because it is
precluded by rules of a stock exchange or the NASD from voting on a matter.
Under the rules of the New York Stock Exchange, brokers who hold shares in
"street name" may have the authority to vote on certain matters when they do not
receive instructions from beneficial owners. Brokers that do not receive
instructions are entitled to vote on the election of directors and the
ratification of the independent auditors. In determining whether the proposal to
ratify the appointment of the independent auditors has received the requisite
vote, abstentions will be disregarded and will have no effect on the outcome of
the vote. A vote "withheld" from a director nominee will have no effect on the
outcome of the vote because a plurality of the votes cast at the Annual Meeting
is required for the election of each director.
VOTING
If you hold your shares of our Common Stock in your own name as a holder of
record, you may instruct the proxies to vote your shares by signing, dating and
mailing the proxy card in the postage-paid envelope provided. In addition, you
may vote your shares of our Common Stock in person at the Annual Meeting.
If your shares of our Common Stock are held on your behalf by a broker,
bank or other nominee, you will receive instructions from them that you must
follow to have your shares voted at the Annual Meeting.
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RIGHT TO REVOKE PROXY
If you hold shares of our Common Stock in your own name as a holder of
record, you may revoke your proxy instructions through any of the following
methods:
- send written notice of revocation, prior to the Annual Meeting, to our
Secretary , Mr. Randal A. Nardone, at 1251 Avenue of the Americas, 16th
Floor, New York, New York 10020;
- sign, date and mail a new proxy card to our Secretary; or
- attend the Annual Meeting and vote your shares in person.
If shares of our Common Stock are held on your behalf by a broker, bank or
other nominee, you must contact them to receive instructions as to how you may
revoke your proxy instructions.
COPIES OF ANNUAL REPORT TO STOCKHOLDERS
A copy of our Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") for our latest fiscal year will be mailed to
stockholders entitled to vote at the Annual Meeting with these proxy materials
and is also available without charge to stockholders upon written request to:
Newcastle Investment Corp., 1251 Avenue of the Americas, 16th Floor, New York,
New York, 10020, Attention: Investor Relations.
VOTING RESULTS
American Stock Transfer & Trust Company, our independent tabulating agent,
will count the votes and act as the Inspector of Election. We will publish the
voting results in our Quarterly Report on Form 10-Q for the fiscal quarter
ending June 30, 2004, which we plan to file with the SEC in August 2004.
CONFIDENTIALITY OF VOTING
We keep all proxies, ballots and voting tabulations confidential as a
matter of practice. We permit only our Inspector of Election, American Stock
Transfer & Trust Company, to examine these documents.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The board of directors recommends a vote:
(i) FOR the election of the nominee to our board of directors; and
(ii) FOR the approval of the appointment of Ernst & Young LLP as
independent auditors for the Company for fiscal year 2004.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The first proposal is to elect one Class II director to serve until the
2007 annual meeting of stockholders or until his successor is elected and duly
qualified.
Our charter authorizes the number of directors to be not less than one, nor
more than fifteen. The number of directors on the board is currently fixed at
five. Our board of directors is divided into three classes. The members of each
class of directors serve staggered three-year terms.
Our current board of directors is classified as follows:
TERM
CLASS DIRECTOR EXPIRATION
- --------- ------------------- ----------
Class I.. Stuart A. McFarland 2006
Peter M. Miller 2006
Class
II..... David J. Grain 2004
Class
III.... Wesley R. Edens 2005
David K. McKown 2005
In general, the term for a Class I director expires in 2006, the term for a
Class II director expires in 2004 and the term for a Class III director expires
in 2005.
The board of directors has unanimously proposed the following director
nominee for election as a Class II director. The director nominee currently
serves on our board of directors.
TERM
CLASS NOMINEE EXPIRATION
- --------- ------------------- ----------
Class
II..... David J. Grain 2007
If the nominee becomes unable to stand for election as a director, an event
that our board of directors does not presently expect, the proxy will be voted
for a replacement nominee if one is designated by our board of directors. The
board of directors recommends a vote FOR the nominee.
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INFORMATION CONCERNING DIRECTORS AND THE DIRECTOR NOMINEE
Set forth below is certain biographical information for our directors,
including the director nominee, as well as the month and year each was first
elected as one of our directors and the beneficial ownership of shares of our
Common Stock as of April 13, 2004, after giving effect to outstanding options.
For a description of beneficial ownership, see the "Security Ownership of
Management and Certain Beneficial Owners" section, and the footnotes thereto,
included in this proxy statement.
WESLEY R. EDENS........................... Wesley R. Edens has been our Chief Executive Officer
and the Chairman of our board of directors since
inception. Mr. Edens is the Chairman of the Management
Chief Executive Officer and Chairman of Committee and co-founder of our manager. Mr. Edens is
the Board of Directors since inception also Chairman and Chief Executive Officer of Newcastle
Investment Holdings LLC (formerly Newcastle Investment
2,963,229 shares of our Common Stock Holdings Corp.) and Chairman and Chief Executive
beneficially owned Officer of Global Signal Inc. Mr. Edens was previously
a Managing Director of Union Bank of Switzerland from
Age: 42 May 1997 to May 1998. Mr. Edens served as Chief
Executive Officer, President and Chairman of the board
of directors of Capstead Mortgage Corporation from
April 2000 until July 2003.
DAVID J. GRAIN............................ David J. Grain has been a member of our board of
directors since October 2002. Mr. Grain was a director
of Newcastle Investment Holdings LLC (formerly
Director since October 2002 Newcastle Investment Holdings Corp.) from January 2002
to October 2002. Mr. Grain presently serves as the
3,385 shares of our Common Stock President of Global Signal Inc. (formerly Pinnacle
beneficially owned Holdings Inc.), whose equity is partially owned by
Fortress Investment Fund LLC, an affiliate of ours
Age: 41 managed by our manager. Prior to joining Global Signal
in February 2003, Mr. Grain served as Senior Vice
President at AT&T Broadband in New England. Prior to
joining AT&T in June 2000, Mr. Grain was a Principal
at Morgan Stanley from 1992 to June 2000.
STUART A. MCFARLAND....................... Stuart A. McFarland has been a member of our board of
directors since October 2002 and a member of the Audit
Committee of our board of directors since November
Director since October 2002 2002. Mr. McFarland was a director of Newcastle
Investment Holdings LLC (formerly Newcastle Investment
3,385 shares of our Common Stock Holdings Corp.) from May 1998 until October 2002. Mr.
beneficially owned McFarland is Managing Partner of Federal City Capital
Advisors. Previously, Mr. McFarland was President and
Age: 57 Chief Executive Officer of Pedestal Inc. Mr. McFarland
was Executive Vice President and General Manager of GE
Capital Mortgage Services and President and CEO of GE
Capital Asset Management Corporation from 1990 to
1995. Mr. McFarland presently serves as a Director of
Basis 100 Inc. and NCRIC Group Inc.
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DAVID K. MCKOWN........................... David K. McKown has been a member of our board of
directors and a member of the Audit Committee of our
board of directors since November 2002. Mr. McKown has
Director since November 2002 been a senior advisor to Eaton Vance Management, an
investment fund manager located in Boston,
3,385 shares of our Common Stock Massachusetts, since May 2000. From 1993 until April
beneficially owned 2000, Mr. McKown was a group executive of Diversified
Finance of BankBoston, N.A., a commercial bank. Mr.
Age: 66 McKown was chairman of the Domestic Senior Credit
Committee of BankBoston, N.A. from 1985 until 1990 and
was managing director for problem loan management of
BankBoston, N.A. from 1990 until 1993. Mr. McKown has
been a trustee of Equity Office Properties Trust since
July 1997 and a director of Safety Insurance Group
since November 2002.
PETER M. MILLER........................... Peter M. Miller has been a member of our board of
directors and a member of the Audit Committee of our
board of directors since February 2003. Mr. Miller is
Director since February 2003 a Managing Director at ING Financial Markets LLC and
Head of their Latin Debt Advisory Group since January
9,785 shares of our Common Stock 2003. Previously, he was responsible for ING's Latin
beneficially owned American Debt Products Group and has been with ING
since July 1989.
Age: 48
COMPENSATION OF DIRECTORS
Until the third quarter of 2003, we paid our directors a $20,000 annual
director's fee plus an additional $1,000 fee per every meeting over the fourth
meeting held in any year to each of our directors, other than Mr. Edens.
Effective as of the third quarter 2003, we now pay a $30,000 annual director's
fee to each of our directors, other than Mr. Edens. All members of our board of
directors are reimbursed for their costs and expenses in attending all meetings
of our board of directors. Fees to the directors may be made by issuance of
common stock, based on the value of such common stock at the date of issuance,
rather than in cash.
In addition, directors receive incentive compensation under the Newcastle
Investment Corp. Nonqualified Stock Option and Incentive Award Plan, which was
amended and restated on June 23, 2003, and further amended on February 11, 2004
(referred to herein as the incentive plan). Prior to the June 2003 amendment and
restatement, our incentive plan provided for (i) an initial grant of options to
purchase 2,000 shares of our common stock to each of our directors, other than
Mr. Edens, on the date of the first board of directors meeting attended by such
director, or, in the case of Mr. Grain and Mr. McFarland, at the time of our
initial public offering and (ii) an annual grant of options to purchase 2,000
shares of our common stock to each such director on the first business day after
our annual meeting of stockholders. The June 2003 amendment and restatement
replaced the automatic annual option grants with automatic annual awards of our
common stock valued at $15,000, based on the closing price of our shares on the
NYSE on the date of grant, to each of our directors who are not our officers or
employees, on the first business day after our annual meeting of stockholders
each year during which the incentive plan is in effect.
To date, we have granted to our four directors who are not our officers or
employees, (i) options to purchase an aggregate of 8,000 shares of our common
stock pursuant to initial option grants, (ii) options to purchase an aggregate
of 8,000 shares of our common stock pursuant to annual option grants granted on
May 30, 2003 after our annual meeting of stockholders (prior to the June 2003
amendment of our incentive plan) and (iii) a discretionary grant of an aggregate
of 1,540 shares (or 385 shares to each director) of our common stock with a
value of $30,000 (or $7,500 for each director, other than Mr. Edens).
The options all have an exercise price equal to 100% of the fair market
value of our common stock on the date of grant, subject to adjustment as
necessary to preserve the value of such options in connection with the
occurrence of certain events. The initial option grants made to our directors
upon joining our
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board of directors (or, in the case of Mr. Grain and Mr. McFarland, at the time
of our initial public offering) are fully vested at the time of grant. The
annual option grants, which were made to our directors following our annual
meeting of stockholders in May 2003, vest 25% on the date of grant and 25%
annually thereafter.
DETERMINATION OF DIRECTOR INDEPENDENCE
At least a majority of the directors serving on the board of directors must
be independent directors. For a director to be considered independent, the board
must determine that the director does not have any direct or indirect material
relationship with the Company. The board of directors has established
categorical standards to assist it in determining director independence, which
conform to the independence requirements in the New York Stock Exchange listing
rules. Under the categorical standards, a director will be independent unless:
(a) within the preceding five years: (i) the director was employed by the
Company or its manager; (ii) an immediate family member of the director was
employed by the Company or its manager as an officer; (iii) the director or an
immediate family member of the director received more than $100,000 per year in
direct compensation from the Company, its manager or any controlled affiliate of
its manager (other than director or committee fees and pension or other forms of
deferred compensation for prior service (provided such compensation is not
contingent on continued service)); (iv) the director was employed by or
affiliated with the independent auditor of the Company or its manager; (iv) an
immediate family member of the director was employed by the independent auditor
of the Company or its manager as a partner, principal or manager; or (v) an
executive officer of the Company or its manager was on the compensation
committee of a company which employed the director, or which employed an
immediate family member of the director as an executive officer; or
(b) he or she: (i) is an executive officer of another company that does
business with the Company and the annual sales to, or purchases from, the
Company are greater than two percent of such other company's consolidated gross
annual revenues; (ii) is an executive officer of another company which is
indebted to the Company, or to which the Company is indebted, and the total
amount of either company's indebtedness is greater than five percent of the
total consolidated debt of the company of which such director is an executive
officer; or (iii) serves as an officer, director or trustee of a charitable
organization, and the Company's charitable contributions to the organization are
greater than one percent of that organization's total annual operating budget.
In addition, the board of directors annually reviews all commercial and
charitable relationships of directors.
Whether directors meet these categorical independence tests will be
reviewed and will be made public annually prior to their standing for
re-election to the board. The board may determine, in its discretion, that a
director is not independent notwithstanding qualification under the categorical
standards. The board has determined that each of Messrs. McFarland, McKown and
Miller are independent for purposes of New York Stock Exchange Rule 303A and
each such director has no material relationship with the Company.
STATEMENT ON CORPORATE GOVERNANCE
Overview. We emphasize the importance of professional business conduct and
ethics through our corporate governance initiatives. Our board of directors
consists of a majority of independent directors (in accordance with the rules of
the New York Stock Exchange). Our Audit Committee, Nominating and Corporate
Governance Committee and Compensation Committee are each composed exclusively of
the independent directors.
We have adopted corporate governance guidelines and a code of business
conduct and ethics, which delineate our standards for our officers and
directors, and employees of our manager, Fortress Investment Group. LLC. Our
internet address is http://www.newcastleinv.com. We make available, free of
charge through a link on our site, our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to such
reports, if any, as filed with the SEC as soon as reasonably
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practicable after such filing. Our site also contains our code of business
conduct and ethics, code of ethics for officers, corporate governance
guidelines, and the charters of the Audit Committee, Nominating and Corporate
Governance Committee and Compensation Committee of our board of directors. You
may also obtain these documents by writing the Company at 1251 Avenue of the
Americas, 16th Floor, New York, New York 10020, Attention: Investor Relations.
The board of directors has adopted a Code of Business Conduct and Ethics
that applies to all employees of our external manager, and each of our directors
and officers, including our principal executive officer and principal financial
officer. The purpose of the Code of Business Conduct and Ethics is to promote,
among other things, honest and ethical conduct, full, fair, accurate, timely and
understandable disclosure in public communications and reports and documents
that the Company files with, or submits to, the SEC, compliance with applicable
governmental laws, rules and regulations, accountability for adherence to the
code and the reporting of violations thereof.
The Company has also adopted a Code of Ethics for Principal Executive
Officers and Senior Financial Officers which sets forth specific policies to
guide the Company's senior officers in the performance of their duties. This
code supplements the Code of Business Conduct and Ethics described above.
BOARD AND COMMITTEE MEETINGS
During the year ended December 31, 2003, our board of directors held 14
meetings. No director attended fewer than 75 percent of all meetings of our
board of directors and the committees on which such director served. The board
has three standing committees: the Audit Committee, the Compensation Committee
and the Nominating and Corporate Governance Committee. During 2003, the Audit
Committee met 10 times. The Compensation and Nominating and Corporate Governance
Committees were each formed in 2004 and have not met to date. Although director
attendance at the Company's annual meeting each year is encouraged, the Company
does not have an attendance policy. One director attended the 2003 annual
meeting.
Audit Committee. The members of the Audit Committee are Messrs. McFarland,
McKown and Miller. The Audit Committee is governed by a written charter adopted
by our board of directors and is composed of three independent directors (each
of whom has been determined by our board of directors to be independent in
accordance with the rules of the New York Stock Exchange), and, as a result, no
member has any relationship with the Company that may interfere with the
exercise of his independence from the Company and the Company's management. The
board has determined that each member of the Audit Committee has the ability to
read and understand fundamental financial statements. The board has determined
that Mr. McFarland qualifies as an "Audit Committee Financial Expert" as defined
by the rules of the SEC. Actions taken by the Audit Committee are reported to
the board of directors, usually at its next meeting.
The purpose of the Audit Committee is to provide assistance to the board in
fulfilling its legal and fiduciary obligations with respect to matters involving
the accounting, auditing, financial reporting, internal control and legal
compliance functions of the Company and its subsidiaries, including, without
limitation, assisting the board's oversight of (a) the integrity of the
Company's financial statements; (b) the Company's compliance with legal and
regulatory requirements; (c) the Company's independent auditors' qualifications
and independence; and (d) the performance of the Company's independent auditors
and the Company's internal audit function. The Audit Committee is responsible
for pre-approval of audit and, subject to de minimis exceptions, permitted
non-audit services.
Compensation Committee. The members of the Compensation Committee are
Messrs. McFarland, McKown and Miller, each an independent director (in
accordance with the rules of the New York Stock Exchange). It is responsible for
overseeing the annual review of the amended and restated management agreement
with the Company's manager, to administer and approve the grant of awards under
any incentive compensation plan, including any equity-based plan, of the Company
and to make recommendations to the board regarding director compensation. The
Compensation Committee has not met to date; however, the members of the
Compensation Committee, prior to formation of the
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Compensation Committee itself, conducted an annual review of the management
agreement in 2004 and advised the full board of directors that, in their view,
there was no contractual basis for the independent directors to recommend a
termination of the management agreement and that the management fees earned by
the manager are fair.
Nominating and Corporate Governance Committee. The Company has a
Nominating and Corporate Governance Committee (the "Nominating/Governance
Committee"). The members of the Nominating/ Governance Committee are Messrs.
McFarland, McKown and Miller, each an independent director (in accordance with
the rules of the New York Stock Exchange). The Nominating/Governance Committee
has not met to date. The functions of the Nominating/Governance Committee
include the following:
- recommending to the board individuals qualified to serve as directors of
the Company and on committees of the board;
- advising the board with respect to board composition, procedures and
committees;
- advising the board with respect to the corporate governance principles
applicable to the Company; and
- overseeing the evaluation of the board.
The Nominating/Governance Committee is governed by a charter, a current
copy of which is available on our corporate website at www.newcastleinv.com
under the heading "Investor Relations/ Corporate Governance." A copy of the
charter is also available in print to shareholders upon request, addressed to
the Company at 1251 Avenue of the Americas, 16th Floor, New York, New York
10020, Attention: Investor Relations.
The Nominating/Corporate Governance Committee, as required by the Company's
By-Laws, will consider director candidates recommended by stockholders. In
considering candidates submitted by stockholders, the Nominating/Corporate
Governance Committee will take into consideration the needs of the board of
directors and the qualifications of the candidate and may take into
consideration the number of shares held by the recommending stockholder and the
length of time that such shares have been held.
The Company's By-Laws provide certain procedures that a stockholder must
follow to nominate persons for election to the board of directors. Nominations
for director at an annual stockholder meeting must be submitted in writing to
the Company's Secretary at Newcastle Investment Corp., 1251 Avenue of the
Americas, 16th Floor, New York, New York 10020. The Secretary must receive the
notice of a stockholder's intention to introduce a nomination at an annual
stockholders meeting (together with certain required information set forth in
the Company's By-Laws): not later than the close of business on the 90th day nor
earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year's annual meeting; or in the event that the
date of the annual meeting is advanced or delayed by more than 30 days from such
anniversary date, not earlier than the close of business on the 120th day prior
to the date of mailing of the notice for such annual meeting and not later than
the close of business on the later of the 90th day prior to the date of mailing
of the notice for such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the Company.
The Nominating/Corporate Governance Committee will identify potential
nominees by asking current directors and executive officers to notify the
Committee if they become aware of suitable candidates. The Nominating/Corporate
Governance Committee also may, from time to time, engage firms that specialize
in identifying director candidates. As described above, the Committee will also
consider candidates recommended by stockholders.
The Nominating/Governance Committee believes that the qualifications for
serving as a director of the Company are possession, taking into account such
person's familiarity with the Company, of such knowledge, experience, skills,
expertise, integrity and diversity as would enhance the board's ability to
manage and direct the affairs and business of the Company, including, when
applicable, the ability of committees of the board to fulfill their duties
and/or to satisfy any independence requirements imposed by law, regulation or
NYSE listing requirement.
9
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
The board does not have an established process to receive communications
from stockholders. Rather, the board believes that management generally should
speak for the Company and the Chairman of the Board should speak for the board.
It is suggested that each director refer all inquiries from institutional
investors and other stockholders, analysts, the press or customers to the Chief
Executive Officer or his designee. Correspondence may be directed to the Company
at 1251 Avenue of the Americas, 16th Floor, New York, New York 10020, tel: (212)
798-6100.
AUDIT COMMITTEE REPORT
The report of our Audit Committee is provided below.
REPORT OF THE AUDIT COMMITTEE
In accordance with and to the extent permitted by the rules of the
Securities and Exchange Commission (the "SEC"), the information contained in the
following Report of the Audit Committee shall not be incorporated by reference
into any of the Company's future filings made under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and shall not be deemed to be
"soliciting material" or to be "filed" under the Exchange Act or the Securities
Act of 1933, as amended.
The Audit Committee oversees the Company's financial reporting process on
behalf of the board of directors. It is not the duty of the Audit Committee to
prepare the Company's financial statements, to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate in
accordance with generally accepted accounting principles. Management has the
primary responsibility for the financial statements and the reporting process
including the systems of internal controls. The independent auditors are
responsible for auditing the financial statements and expressing an opinion as
to whether those audited financial statements fairly present the financial
position, results of operations and cash flows of the Company in conformity with
generally accepted accounting principles.
The Audit Committee has reviewed and discussed with management the audited
financial statements in the annual report to stockholders.
The Audit Committee has discussed with the independent auditors the matters
required to be discussed by Statement of Auditing Standards 61, as modified or
supplemented, including the auditor's judgment as to the quality, not just the
acceptability, of the accounting principles, the consistency of their
application and the clarity and completeness of the audited financial
statements.
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independent Standards Board Standard
No. 1, as modified or supplemented, and has discussed with the independent
auditors their independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the board of directors (and the board agreed) that the
audited financial statements be included in the annual report on Form 10-K for
the year ended December 31, 2003 for filing with the SEC. The Audit Committee
and the board of directors also have recommended, subject to stockholder
approval, the selection of the Company's independent auditors for fiscal year
2004.
THE AUDIT COMMITTEE
Stuart A. McFarland
David K. McKown
Peter M. Miller
10
EXECUTIVE OFFICERS
The following table shows the names and ages of our present executive
officers and certain other corporate officers and the positions held by each
individual. A description of the business experience of each for at least the
past five years follows the table.
NAME AGE POSITION
- ---- --- --------
Wesley R. Edens........................... 42 Chief Executive Officer and
Chairman of the Board of Directors
Kenneth M. Riis........................... 44 President
Jonathan Ashley........................... 38 Vice President and Chief Operating
Officer
Debra A. Hess............................. 40 Chief Financial Officer and
Treasurer
Randal A. Nardone......................... 48 Vice President and Secretary
Erik P. Nygaard........................... 44 Vice President and Chief
Information Officer
For information regarding Mr. Edens see the "Information Concerning
Directors and the Director Nominee" section of this proxy statement.
KENNETH M. RIIS has been our President since our inception and a Managing
Director of our manager since December 2001. Mr. Riis is also the President of
Newcastle Investment Holdings LLC (formerly Newcastle Investment Holdings
Corp.). From November 1996 to December 2001, Mr. Riis was an independent
consultant for our manager as well as other financial companies. From 1989 to
1996, Mr. Riis was a Principal and Managing Director of the real estate finance
group at Donaldson, Lufkin & Jenrette.
JONATHAN ASHLEY has been our Chief Operating Officer since our inception
and a Managing Director of our manager since its formation in May 1998. Mr.
Ashley is also a Vice President and the Chief Operating Officer of Newcastle
Investment Holdings LLC (formerly Newcastle Investment Holdings Corp.). Mr.
Ashley previously worked for Union Bank of Switzerland from May 1997 to May
1998. Prior to joining Union Bank of Switzerland, Mr. Ashley worked for an
affiliate of BlackRock Financial Management, Inc. from April 1996 to May 1997.
Prior to joining BlackRock, Mr. Ashley worked at Morgan Stanley, Inc. in its
Real Estate Investment Banking Group. Prior to joining Morgan Stanley, Mr.
Ashley was in the Structured Finance Group at the law firm of Skadden, Arps,
Slate, Meagher & Flom LLP.
DEBRA A. HESS joined us as Chief Financial Officer in April 2003 and also
joined our manager at that time. Prior to joining the Company, Ms. Hess worked
in the Fixed Income Department of Goldman, Sachs & Co. since 1998. From 1993 to
1998, she was the head of financial reporting and accounting policy at Goldman
Sachs Group. Prior to joining Goldman, Sachs & Co., Ms. Hess worked at Chemical
Bank in the credit policy group. Prior to that, Ms. Hess was with Arthur
Andersen & Co. for five years as a senior auditor focused on financial
institutions and investment funds.
RANDAL A. NARDONE has been our Secretary since our inception. Mr. Nardone
is also a Vice President and the Secretary of Newcastle Investment Holdings LLC
(formerly Newcastle Investment Holdings Corp.). Mr. Nardone co-founded our
manager and has been Chief Operating Officer of our manager since its inception.
Mr. Nardone was previously a Managing Director of Union Bank of Switzerland from
May 1997 to May 1998. Prior to joining Union Bank of Switzerland in 1997, Mr.
Nardone was a principal of BlackRock Financial Management, Inc. Prior to joining
BlackRock, Mr. Nardone was a partner and a member of the executive committee at
the law firm of Thacher Proffitt & Wood.
11
ERIK P. NYGAARD has been our Chief Information Officer since our inception
and Chief Information Officer of our manager since its inception. Mr. Nygaard
co-founded our manager. Mr. Nygaard is also a Vice President and the Chief
Information officer of Newcastle Investment Holdings LLC (formerly Newcastle
Investment Holdings Corp.). Mr. Nygaard was previously a Managing Director of
Union Bank of Switzerland from May 1997 to May 1998. Prior to joining Union Bank
of Switzerland, Mr. Nygaard was a principal of BlackRock Financial Management,
Inc. From April 1990 to July 1994, Mr. Nygaard was a Director at Nomura
Securities International.
12
EXECUTIVE COMPENSATION
We are party to a management agreement with Fortress Investment Group,
dated as of June 6, 2002, as amended and restated on June 23, 2003, pursuant to
which Fortress Investment Group, our manager, provides for the day-to-day
management of our operations.
The management agreement requires our manager to manage our business
affairs in conformity with the policies and the investment guidelines that are
approved and monitored by our board of directors. Our manager's management of us
is under the direction of our board of directors. Our manager is responsible for
(i) the purchase and sale of real estate securities and other real
estate-related assets, (ii) the financing of our real estate securities and
other real estate-related assets, (iii) management of our real estate, including
arranging for purchases, sales, leases, maintenance and insurance, (iv) the
purchase, sale and servicing of loans for us, and (v) investment advisory
services. Our manager is responsible for our day-to-day operations and performs
(or causes to be performed) such services and activities relating to our assets
and operations as may be appropriate.
We pay our manager an annual management fee equal to 1.5% of our gross
equity, as defined in the management agreement. The management agreement
provides that we will reimburse our manager for various expenses incurred by our
manager or its officers, employees and agents on our behalf, including costs of
legal, accounting, tax, auditing, administrative and other similar services
rendered for us by providers retained by our manager or, if provided by our
manager's employees, in amounts which are no greater than those which would be
payable to outside professionals or consultants engaged to perform such services
pursuant to agreements negotiated on an arm's-length basis. The management
agreement provides that such costs shall not be reimbursed in excess of $500,000
per annum.
To provide an incentive for our manager to enhance the value of our common
stock, our manager is entitled to receive an annual incentive return (the
"Incentive Compensation") on a cumulative, but not compounding, basis in an
amount equal to the product of (A) 25% of the dollar amount by which (1) (a) our
funds from operations, as defined (before the Incentive Compensation) per share
of common stock (based on the weighted average number of shares of common stock
outstanding) plus (b) gains (or losses) from debt restructuring and from sales
of property per share of common stock (based on the weighted average number of
shares of common stock outstanding), exceed (2) an amount equal to (a) the
weighted average of the book value per share of common stock of the net assets
transferred to us on or prior to July 12, 2002 by Newcastle Investment Holdings
LLC, and the price per share of common stock in any of our subsequent offerings
(adjusted for prior capital dividends or capital distributions) multiplied by
(b) a simple interest rate of 10% per annum multiplied by (B) the weighted
average number of shares of common stock outstanding during such period.
The management agreement is for a term of one year and provides for
automatic one-year extensions from and after June 23, 2004. Our independent
directors review our manager's performance annually and the management agreement
may be terminated annually upon the affirmative vote of at least two-thirds of
our independent directors, or by a vote of the holders of a majority of the
outstanding shares of our common stock, based upon unsatisfactory performance
that is materially detrimental to us or a determination by our independent
directors that the management fee earned by our manager is not fair, subject to
our manager's right to prevent such a termination by accepting a mutually
acceptable reduction of fees. Our manager will be provided with 60 days' prior
notice of any such termination and will be paid a termination fee equal to the
amount of the management fee earned by our manager during the twelve-month
period preceding such termination which may make it more difficult for us to
terminate the management agreement. Following any termination of the management
agreement, we have the option to purchase our manager's right to receive the
Incentive Compensation at a cash price equal to the amount of the Incentive
Compensation that would be paid to the manager if our assets were sold for cash
at their then current fair market value (as determined by an appraisal, taking
into account, among other things, the expected future value of the underlying
investments) or otherwise we may continue to pay the Incentive Compensation to
our manager. In addition, if we do not purchase our manager's Incentive
Compensation, our manager may require us to purchase the same at the price
discussed above. In addition, the management agreement may be terminated by us
at any time for cause.
13
The principals of our manager are Messrs. Wesley R. Edens, Peter L. Briger,
Jr., Robert I. Kauffman, Randal A. Nardone and Michael E. Novogratz.
Because our management agreement provides that our manager will assume
principal responsibility for managing our affairs, our officers, in their
capacities as such, do not receive compensation directly from us. However, in
their capacities as officers or employees of our manager, or its affiliates,
they will devote such portion of their time to our affairs as is required for
the performance of the duties of our manager under the management agreement. Our
manager has informed us that, because the services performed by its officers or
employees in their capacities as such are not performed exclusively for us, it
cannot segregate and identify that portion of the compensation awarded to,
earned by or paid to our named executive officers by the manager that relates
solely to their services to us, other than any compensation paid to them in the
form of equity interests in us. Our manager intends to assign for no
consideration to certain of its officers a portion of the options (described
below) to purchase shares of our common stock granted to our manager in
connection with our equity offerings; assignments to those of our officers who
are subject to Section 16 reporting requirements will be reflected in applicable
forms.
Below is a summary of the fees and other amounts earned by our manager. The
summary of fees and other amounts for the year 2001 reflects amounts paid by
Newcastle Investment Holdings LLC to the manager. A portion of the fees and
other amounts for the year 2002 were paid by Newcastle Investment Holdings LLC
for the period from January 1, 2002 until our formation in June 2002.
2003 2002 2001
-------------- -------------- ------------
Management Fee(1)................................ $6.0 million $4.3 million $4.8 million
Expense Reimbursements(2)........................ $0.5 million $0.5 million $0.9 million
Incentive Compensation(3)........................ $6.2 million $3.5 million $2.8 million
Stock Options(4)................................. 788,227 shares 700,000 shares --
- ---------------
(1) We pay our manager an annual management fee equal to 1.5% of our gross
equity, as defined in our management agreement. Our manager uses the proceeds
from its management fee in part to pay compensation to its officers and
employees who, notwithstanding that certain of them also are our officers,
receive no cash compensation directly from us.
(2) Because our manager's employees perform certain legal, accounting, due
diligence tasks and other services that outside professionals or outside
consultants otherwise would perform, our manager is paid or reimbursed for the
cost of performing such tasks, provided that such costs and reimbursements are
no greater than those which would be paid to outside professionals or
consultants on an arm's-length basis. The management agreement provides that
such costs shall not be reimbursed in excess of $500,000 per annum. We also pay
all of our operating expenses, except those specifically required to be borne by
our manager under the management agreement. Our manager is responsible for all
costs incident to the performance of its duties under the management agreement,
including compensation of our manager's employees, rent for facilities and other
"overhead" expenses. The expenses required to be paid by us include, but are not
limited to, issuance and transaction costs incident to the acquisition,
disposition and financing of our investments, legal and auditing fees and
expenses, the compensation and expenses of our independent directors, the costs
associated with the establishment and maintenance of any credit facilities and
other indebtedness of ours (including commitment fees, legal fees, closing
costs, etc.), expenses associated with other securities offerings of ours, the
costs of printing and mailing proxies and reports to our stockholders, costs
incurred by employees of our manager for travel on our behalf, costs associated
with any computer software or hardware that is used solely for us, costs to
obtain liability insurance to indemnify our directors and officers, the
compensation and expenses of our transfer agent and fees payable to the New York
Stock Exchange.
(3) Our manager is entitled to receive annual incentive compensation pursuant to
the terms of the management agreement with us. The purpose of the incentive
compensation is to provide an additional incentive for our manager to achieve
targeted levels of funds from operations (including gains and losses) and to
increase our stockholder value. Our board of directors may request that our
manager accept all or a portion of its incentive compensation in shares of our
Common Stock, and our manager may elect, in its
14
discretion, to accept such payment in the form of shares, subject to limitations
that may be imposed by the rules of the NYSE or otherwise.
(4) As of December 31, 2003, our manager, through affiliates, had options to
purchase 1,488,227 shares of our common stock, which were issued in connection
with our equity offerings.
NEWCASTLE INVESTMENT CORP. NONQUALIFIED STOCK OPTION AND INCENTIVE AWARD PLAN
We have adopted the Newcastle Investment Corp. Nonqualified Stock Option
and Incentive Award Plan, amended and restated on June 23, 2003 and further
amended on February 11, 2004, referred to herein as the incentive plan, to
provide incentives to attract and retain the highest qualified directors,
officers, employees, advisors, consultants and other personnel. The incentive
plan is administered by our Compensation Committee. The maximum number of shares
of our common stock reserved and available for issuance for our first fiscal
year was 5,000,000 shares. For each year thereafter, the maximum number of
shares available for issuance under the incentive plan is that number of shares
equal to 15% of the number of our outstanding equity interests, but in no event
more than 10,000,000 shares in the aggregate over the term of the plan. Pursuant
to the February 11, 2004 amendment to the incentive plan, no stock option may be
granted to our manager (or its designee) in connection with any issuance by us
of equity securities in excess of ten percent (10%) of the number of equity
securities then being issued.
The incentive plan permits the granting of options to purchase common stock
that do not qualify as incentive stock options under section 422 of the Internal
Revenue Code. The exercise price of each option will be determined by the
committee and may be less than 100% of the fair market value of our common stock
subject to such option on the date of grant.
The terms of each option will be fixed by the committee. The committee will
determine at what time or times each option may be exercised and, subject to the
provisions of the incentive plan, the period of time, if any, after retirement,
death, disability or termination of employment during which options may be
exercised. Options become vested and exercisable in installments, and the
exercisability of options may be accelerated by the committee. Upon exercise of
options, the option exercise price must be paid in full either in cash or by
certified or bank check or other instrument acceptable to the committee or, if
the committee so permits, by delivery of shares of common stock already owned by
the optionee or, to the extent permitted by applicable law, by delivery of a
promissory note. The exercise price may also be delivered to us by a broker
pursuant to irrevocable instructions to the broker from the optionee.
At the discretion of the committee, stock options granted under the
incentive plan may include a "re-load" feature pursuant to which an optionee
exercising an option by the delivery of shares of common stock would
automatically be granted an additional stock option (with an exercise price
equal to the fair market value of the common stock on the date the additional
stock option is granted) to purchase that number of shares of common stock equal
to the number delivered to exercise the original stock option. The purpose of
this feature is to enable participants to exercise options using previously
owned shares of common stock while continuing to maintain their previous level
of equity ownership in us.
The committee may also grant stock appreciation rights, restricted stock,
performance awards, tandem awards and other stock and non-stock-based awards
under the incentive plan. These awards will be subject to such conditions and
restrictions as the committee may determine, which may include the achievement
of certain performance goals or continued employment with us through a specific
period.
Stock Option and Share Grants. In October 2002, in connection with our
initial public offering, we granted to Fortress Principal Investment Holdings
LLC, an affiliate of our manager, options representing the right to acquire 10%
of the number of shares offered and sold in our initial public offering, or
700,000 shares, at an exercise price per share equal to the initial public
offering price per share of the shares in our initial public offering ($13.00
per share). The options are exercisable as to 1/30 of the shares subject to the
option on the first day of each of the 30 calendar months following the date of
the grant. In connection with an offering in July 2003, we made a discretionary
grant under our incentive plan to an affiliate of our manager of an option to
purchase 460,000 shares of our common stock, representing 10% of the number of
shares offered thereby, as adjusted for the exercise of the underwriters'
over-allotment option, at the offering price of $20.35. The options are
exercisable as to 1/30 of the shares subject to the
15
option on the first day of each of the 30 calendar months following the date of
grant. In connection with an offering in November 2003, we granted to an
affiliate of our manager an option to purchase 328,227 shares of our common
stock, representing 10% of the number of shares offered thereby, at the offering
price of $22.85. In addition, in connection with an offering in January 2004, we
granted to an affiliate of our manager an option to purchase 330,000 shares of
our common stock, representing 10% of the number of shares offered thereby, at
the offering price of our shares of $26.30.
The manager options, described above, which were granted to an affiliate of
our manager in connection with the manager's efforts related to our offerings,
provide a means of performance-based compensation in order to provide an
additional incentive for our manager to enhance the value of our Common Stock.
We have no ownership interest in our manager. Fortress Investment Holdings LLC
is the sole member of our manager. The beneficial owners of Fortress Investment
Holdings LLC are Messrs. Wesley R. Edens, Peter L. Briger, Jr., Robert I.
Kauffman, Randal A. Nardone and Michael E. Novogratz.
At the time of our initial public offering, directors who were not our
officers or employees at the time were automatically granted an option to
purchase 2,000 shares of our common stock at an exercise price equal to the
initial public offering price pursuant to our incentive plan. In addition, our
incentive plan provided for the automatic grant to each of our two other such
directors, at the time they attended their first board meeting, of an option to
purchase 2,000 shares of our common stock at an exercise price equal to the fair
market value of our common stock on the date of grant. Pursuant to the
provisions of our plan in effect at the time of grant, each of our directors who
were not our officers or employees also received an automatic grant of an option
for 2,000 shares of our common stock on the first business day after our annual
meeting of our stockholders which was held on May 29, 2003. The director options
vest as follows:
- options for an aggregate of 8,000 shares, which were granted when each of
our directors, other than Mr. Edens, joined our board of directors,
vested immediately upon grant; and
- options for an aggregate of 8,000 shares, which were granted to our
directors, other than Mr. Edens, on May 30, 2003, after our annual
meeting of stockholders, vested 25% on the date of grant, with 25%
vesting on each anniversary of the date of grant thereafter.
In June 2003, our incentive plan was amended to replace the automatic
annual option grant with automatic annual awards of shares of our common stock
valued at $15,000, based on the closing price of our shares on the NYSE on the
date of grant, to our non-officer or non-employee directors. In addition, in
June 2003, each such director was granted a discretionary stock grant of our
common stock valued at $7,500 (or 385 shares).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Compensation decisions during the year ended December 31, 2003, pertaining
to the compensation of David Grain, President of Global Signal Inc. and a member
of our board of directors, were made by our Chairman and Chief Executive
Officer, Wesley R. Edens, who serves as Chairman and Chief Executive Officer of
Global Signal Inc.
16
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on shares of our Common Stock with the cumulative total return of the S&P
500 Stock Index*, the Russell 2000 Stock Index, the NAREIT All REIT Index and
the NAREIT Mortgage REIT Index.** The period shown commences on October 10,
2002, the date that our Common Stock was registered under Section 12 of the
Securities Exchange Act of 1934, and ends on December 31, 2003, the end of our
last fiscal year. The graph assumes an investment of $100 on October 10, 2002
and the reinvestment of any dividends. The stock price performance shown on the
graph is not necessarily indicative of future price performance.
(TOTAL RETURN PERFORMANCE GRAPH)
PERIOD ENDING
---------------------------------------------------------------
INDEX 10/10/02 12/31/02 03/31/03 06/30/03 09/30/03 12/31/03
- ----- -------- -------- -------- -------- -------- --------
Newcastle Investment
Corp..................... 100.00 130.92 137.15 164.82 198.47 243.45
S&P 500*................... 100.00 109.92 106.45 122.95 126.25 141.49
Russell 2000............... 100.00 114.35 109.22 134.80 147.04 168.39
NAREIT All REIT Index...... 100.00 109.15 110.06 125.55 136.86 151.14
NAREIT Mortgage REIT
Index.................... 100.00 121.30 124.74 157.05 160.94 190.91
- ---------------
* Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2004. Used with permission. All rights
reserved. crsp.com.
** Source: SNL Financial LC, Charlottesville, VA
In accordance with the rules of the SEC, this section entitled "Performance
Graph" shall not be incorporated by reference into any of our future filings
under the Securities Act or the Exchange Act, and shall not be deemed to be
soliciting material or to be filed under the Securities Act or the Exchange Act.
17
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
For purposes of this proxy statement a "beneficial owner" means any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares:
(i) voting power, which includes the power to vote, or to direct the voting
of, shares of our Common Stock; and/or
(ii) investment power, which includes the power to dispose, or to direct
the disposition of, shares of our Common Stock.
A person is also deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership of such security at any
time within 60 days.
Listed in the following table and the notes thereto is certain information
with respect to the beneficial ownership of shares of our Common Stock as of
April 13, 2004 by each person known by us to be the beneficial owner of more
than five percent of our Common Stock, and by each of our directors and
executive officers, individually and as a group.
NUMBER OF SHARES OF
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED PERCENT OF CLASS (2)
- ---------------------------------------- ------------------- --------------------
Cohen and Steers Capital Management, Inc.(3)....... 3,797,676 10.9%
Fortress Principal Investment Holdings II LLC(4)... 2,947,554 8.3%
FMR Corp.(5)....................................... 1,917,771 5.5%
Wesley R. Edens(6)................................. 2,963,229 8.4%
David J. Grain(7).................................. 3,385 *
Stuart A. McFarland(7)............................. 3,385 *
David K. McKown(7)................................. 3,385 *
Peter M. Miller(7)................................. 9,785 *
Jonathan Ashley.................................... 8,711 *
Debra A. Hess...................................... 1,000 *
Randal A. Nardone(6)............................... 2,948,554 8.3%
Kenneth M. Riis.................................... 20,000 *
Erik P. Nygaard(7)................................. 568,612 1.6%
All directors, nominees and executive officers as a
group
(10 persons)..................................... 3,582,492 10.1%
- ---------------
* Denotes less than 1%.
(1) The address of Fortress Principal Investment Holdings II LLC and all
officers, directors and the nominee listed above are in the care of Fortress
Investment Group LLC, 1251 Avenue of the Americas, 16th Floor, New York, New
York 10020.
(2) Percentage amount assumes the exercise by such persons of all options to
acquire shares of our Common Stock and no exercise by any other person.
(3) Based on information contained in a Schedule 13G/A filed with the SEC on
February 17, 2004. The address of Cohen & Steers Capital Management is 757 Third
Avenue, New York, New York 10017.
(4) Includes 2,255,109 shares of our Common Stock beneficially owned by Fortress
Principal Investment Holdings II LLC and options to acquire 692,445 shares of
our Common Stock, which represents the portion of the 1,702,227 options that are
currently exercisable and exercisable within 60 days of the date hereof
beneficially owned by Fortress Principal Investment Holdings LLC. The number of
shares beneficially owned by Fortress Principal Investment Holdings LLC are
included in the number of shares beneficially owned by Fortress Principal
Investment Holdings II LLC by virtue of the fact that Fortress Principal
Investment Holdings LLC and Fortress Principal Investment Holdings II LLC have
common owners. The beneficial owners of each of Fortress Principal Investment
Holdings II LLC and Fortress
18
Principal Investment Holdings LLC are Messrs. Wesley R. Edens, Peter L. Briger,
Jr., Robert I. Kauffman, Randal A. Nardone and Michael E. Novogratz.
(5) Based on information contained in a Schedule 13G filed with the SEC on
February 17, 2004. According to such Schedule 13G, various persons, as listed in
such Schedule 13G, have the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of the shares. The address of
FMR Corp. is 82 Devonshire Street, Boston, MA 02109.
(6) An aggregate of 2,947,554 of these shares are beneficially owned by Fortress
Principal Investment Holdings II LLC, as described in note 4.
(7) Includes options to acquire shares of our Common Stock that are currently
exercisable and exercisable within 60 days of the date hereof.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors, executive officers
and persons beneficially owning more than ten percent of a registered class of a
company's equity securities to file reports of ownership and changes in
ownership on Forms 3, 4, and 5 with the SEC and the New York Stock Exchange.
To our knowledge, based solely on review of the copies of such reports
furnished to us during the year ended December 31, 2003, all of our directors,
executive officers and greater-than-ten-percent owners were in compliance with
the Section 16(a) filing requirements, except that Fortress Principal Investment
Holdings, an affiliate of our manager (and the two executive officers of the
Company to whom its holdings are attributed, as described in the Security
Ownership of Management and Certain Beneficial Owners table above) failed to
timely file a Form 4 reflecting the grant of an option for 330,000 shares in
connection with the Company's January 2004 equity offering.
CHANGE IN CONTROL
We were formed in June 2002 for the purpose of separating the real estate
securities and certain credit leased operating real estate businesses from
Newcastle Investment Holdings LLC's other investments. In July 2002, Newcastle
Investment Holdings contributed to us certain assets and liabilities in exchange
for 16,488,517 shares of our common stock. We completed the initial public
offering of our common stock in October 2002, after which, Newcastle Investment
Holdings held approximately 70% of our outstanding stock. On May 19, 2003,
Newcastle Investment Holdings distributed to its stockholders all of the shares
of our common stock that it owned. As a result, Newcastle Investment Holdings no
longer owns any shares of our common stock.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In late March 2004, we and a private investment fund managed by an
affiliate of our manager co-invested and each indirectly own an approximately
49% interest in a limited liability company that has acquired, in a
sale-leaseback transaction, 203 properties from a public company for a purchase
price of approximately $154 million. The properties are subject to a number of
master leases, the initial term of which in each case is a minimum of 15 years.
This investment was financed with debt at the limited liability company level
and our investment in this entity, reflected as an investment in an
unconsolidated subsidiary on our consolidated balance sheet, was approximately
$27 million as of the date of acquisition. Our manager receives from the
affiliated private investment fund with which we co-invested, in addition to
management fees, incentive compensation if the fund's aggregate investment
returns exceed certain thresholds.
In January 2004, we purchased from an underwriter $31.5 million face amount
of B and BB rated securities of Global Signal Trust I, a special purpose vehicle
established by Global Signal Inc., at a price resulting in a weighted average
yield of approximately 9.00%. Two of our directors are the CEO and President of
Global Signal, Inc., respectively. A private equity fund managed by an affiliate
of our manager owns a significant portion of Global Signal Inc.'s common stock;
our manager receives from this private equity fund, in addition to management
fees, incentive compensation if the fund's aggregate investment returns exceed
certain thresholds. Pursuant to this underwritten 144A offering, approximately
$418.0 million of Global Signal Trust I securities were issued in 7 classes,
rated AAA though B, of which the B and BB classes constituted $73.0 million. The
balance of the B and BB securities were sold on identical terms to a private
investment fund managed by an affiliate of our manager and to a large third
party mutual fund complex; our manager receives from this private investment
fund, in addition to management fees, incentive compensation if the fund's
aggregate investment returns exceed certain thresholds. The proceeds of the 144A
offering were utilized by Global Signal Inc. to repay an existing credit
facility, to pay an extraordinary dividend of approximately $140 million to its
stockholders of which approximately $67 million was paid to the above-referenced
private equity fund, and for general working capital purposes.
In November 2003, we and a private investment fund managed by an affiliate
of our manager co-invested and each indirectly own an approximately 38% interest
in a limited liability company that has acquired approximately 130 real estate
related loans from a third party financial institution for a purchase price of
approximately $80.0 million. Our investment in this entity, reflected as an
investment in an unconsolidated subsidiary on our consolidated balance sheet,
was approximately $30.6 million at December 31, 2003. Our manager receives from
this private investment fund, in addition to management fees, incentive
compensation if the fund's aggregate investment returns exceed certain
thresholds. The remaining approximately 24% interest in the limited liability
company is owned by the above-referenced third party financial institution.
In July 2002, Newcastle Investment Holdings LLC contributed certain assets
and liabilities to us in exchange for all of the shares of our Common Stock. Our
chairman and chief executive officer also serves as chairman and chief executive
officer of Newcastle Investment Holdings. In addition, our manager, Fortress
Investment Group LLC, also serves as manager of Newcastle Investment Corp. At
the time the transfer of assets and liabilities from Newcastle Investment
Holdings to us was approved and other organizational matters were approved for
us, Newcastle Investment Holdings was our sole stockholder. As a result, these
matters were not approved at arm's length and the terms of the transfer may not
be as favorable to us as if the transfer was with an unaffiliated third party.
We may enter into future transactions with Newcastle Investment Holdings with
the approval of our independent directors. Currently, Newcastle Investment
Holdings does not own any shares of our Common Stock.
We are party to a management agreement with Fortress Investment Group LLC,
pursuant to which Fortress Investment Group LLC provides for the day-to-day
management of our operations. The management agreement requires our manager to
manage our business affairs in conformity with the policies and the investment
guidelines that are approved and monitored by our board of directors. Our
chairman and chief executive officer and all of our executive officers also
serve as officers of our manager. As a result, the management agreement between
us and our manager and the amendment to the
20
management agreement were not negotiated at arm's-length, and the terms,
including fees payable, may not be as favorable to us as if it had been
negotiated with an unaffiliated third party.
Since our manager also manages Newcastle Investment Holdings and other
entities, it may become subject to conflicts of interest with respect to
managing our interests and the interests of such entities.
We have not entered into any other transactions in which any other director
or officer or stockholder of ours or of our manager had any material interest.
Mr. Grain, a member of our board of directors, serves as President of
Global Signal Inc. (formerly Pinnacle Holdings Inc.), whose equity is partially
owned by Fortress Investment Fund, an affiliate of ours managed by our manager
and Mr. Edens, our Chairman and Chief Executive Officer serves as Chairman and
Chief Executive officer of Global Signal Inc.
Fortress Principal Investment Holdings LLC, an affiliate of our manager,
has options to purchase 1,702,227 shares of our Common Stock. Fortress Principal
Investment Holdings II LLC owns 2,255,109 shares of our common stock. The
beneficial owners of each of Fortress Principal Investment Holdings LLC and
Fortress Principal Investment Holdings II LLC are Messrs. Wesley R. Edens, Peter
L. Briger, Jr., Robert I. Kauffman, Randal A. Nardone and Michael E. Novogratz.
Fortress Investment Holdings LLC is the sole member of Fortress Investment
Group LLC, our manager. The beneficial owners of Fortress Investment Holdings
LLC are Messrs. Wesley R. Edens, Peter L. Briger, Jr., Robert I. Kauffman,
Randal A. Nardone and Michael E. Novogratz.
21
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
PROPOSED INDEPENDENT AUDITOR
Ernst & Young LLP, independent certified public accountants, has served as
independent auditors for us and our subsidiaries for the fiscal year ended
December 31, 2003. The Audit Committee of the board of directors has appointed
Ernst & Young LLP to be our independent auditors for the fiscal year ending
December 31, 2004 and has further directed that the selection of the independent
auditors be submitted for approval by the stockholders at the Annual Meeting.
Representatives of Ernst & Young LLP will be present at the Annual Meeting,
will be given the opportunity to make a statement, if they so desire, and will
be available to respond to appropriate questions from stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors recommends a vote FOR the approval of the
appointment of Ernst & Young LLP as independent auditors for the Company for
fiscal year 2004.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the years ended 2002 and 2003, we engaged Ernst & Young LLP to
provide us with audit and tax services. Services provided included the
examination of annual financial statements, limited review of unaudited
quarterly financial information, review and consultation regarding filings with
the Securities and Exchange Commission and the Internal Revenue Service,
assistance with management's evaluation of internal accounting controls,
consultation on financial and tax accounting and reporting matters, and
verification procedures as required by collateralized bond obligations. Fees for
2003 and 2002 were as follows:
YEAR AUDIT FEES AUDIT-RELATED FEES TAX-RELATED FEES ALL OTHER FEES
- ---- ---------- ------------------ ---------------- --------------
2003................. $ 776,800 $183,700 $132,500 $--
2002................. $1,889,000(1) $ 14,500 $ 65,000 $--
- ---------------
(1) Includes fees paid in connection with our initial public offering of $1.5
million in 2002.
Audit Fees. Audit fees are fees billed for the consolidated financial
statements as well as required audits of certain subsidiaries, consultation on
audit related matters and required review of SEC filings.
Audit Related Fees. Audit-related fees principally included attest
services not required by statute or regulation.
Tax Fees. Tax fees for the years ended December 31, 2003 and 2002 related
to tax planning and compliance and return preparation.
The Audit Committee has considered all services provided by the independent
auditors to us and concluded this involvement is compatible with maintaining the
auditors' independence.
The Audit Committee is responsible for appointing the Company's independent
auditor and approving the terms of the independent auditor's services. All
engagements for services after May 6, 2003 were pre-approved by the Audit
Committee. The Audit Committee has a policy for the pre-approval of all audit
and permissible non-audit services to be provided by the independent auditor.
This policy is subject to certain guidelines and pre-approved services
that, in the judgment of management and the auditor, would not violate the
auditor's independence. At the end of each quarter, or at any time cumulative
fees not previously reported to the Audit Committee exceed $500,000, management
creates a schedule of the services performed which the Audit Committee then
reviews and approves.
22
ADVANCE NOTICE FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
FOR 2005 ANNUAL MEETING
Proposals received from stockholders are given careful consideration by the
Company in accordance with Rule 14a-8 under the Exchange Act. Stockholder
proposals are eligible for consideration for inclusion in the proxy statement
for the 2005 annual meeting of stockholders if they are received by the Company
on or before December 28, 2004. Any proposal should be directed to the attention
of the Company's Secretary at 1251 Avenue of the Americas, 16th Floor, New York,
New York 10020.
In order for a stockholder proposal submitted outside of Rule 14a-8 to be
considered "timely" within the meaning of Rule 14a-4(c), such proposal must be
received by the Company not later than the last date for submission of
stockholder proposals under the Company's Bylaws. In order for a proposal
relating to business to be conducted at our 2005 annual meeting of stockholders
to be "timely" under the Company's Bylaws, it must be received by the secretary
of the Company at our principal executive office after the close of business on
December 28, 2004 and before the close of business on January 27, 2005. However,
in the event that the date of mailing of the notice of the 2005 annual meeting
of stockholders is advanced or delayed by more than 30 days from April 28, 2005,
a proposal by the stockholders to be timely must be received not earlier than
the close of business on the 120th day before mailing of notice of such meeting
and not later than the close of business on the later of the 90th day before
mailing of notice of such meeting or the 10th day after the day on which public
announcement of the date of such meeting is first made by the Company. For
additional requirements, a stockholder may refer to our Bylaws, a copy of which
may be obtained from our Secretary. If we do not receive timely notice pursuant
to our Bylaws, the proposal my be excluded from consideration at the meeting.
OTHER MATTERS
The board of directors knows of no other business to be brought before the
Annual Meeting. If any other matters properly comes before the Annual Meeting,
including a proposal omitted from this Proxy Statement in accordance with Rule
14a-8 under the Exchange Act, the proxies will be voted on such matters in
accordance with the judgment of the persons named as proxies therein, or their
substitutes, present and acting at the meeting.
No person is authorized to give any information or to make any
representation not contained in this proxy statement, and, if given or made,
such information or representation should not be relied upon as having been
authorized. The delivery of this proxy statement shall not, under any
circumstances, imply that there has not been any change in the information set
forth herein since the date of the proxy statement.
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC") at 450 Fifth
Street NW, Washington, D.C. 20549. You may read and copy any reports, statements
or other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York. Please call the SEC at (800) SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from commercial document retrieval services and on the web site
maintained by the SEC at www.sec.gov. Such information will also be furnished
upon written request to Newcastle Investment Corp., c/o Fortress Investment
Group LLC, 1251 Avenue of the Americas, 16th Floor, New York, NY 10020,
Attention: Investor Relations and can also be accessed through our website at
www.newcastleinv.com.
The SEC has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with respect to
two or more stockholders sharing the same address by delivering a single proxy
statement addressed to those stockholders. This process, which is commonly
referred to as "householding," potentially provides extra convenience for
stockholders and cost savings for companies. The Company and some brokers
household proxy materials, delivering a single proxy statement to multiple
stockholders sharing an address unless contrary instructions have been received
from the affected stockholders.
23
Once you have received notice from your broker or the Company that they or
the Company will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If,
at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement, please notify your broker if your shares
are held in a brokerage account or the Company if you hold registered shares.
You can notify the Company by sending a written request to, Newcastle Investment
Corp., 1251 Avenue of the Americas, 16th Floor, New York, New York 10020,
Attention: Investor Relations.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT
TO VOTE ON THE ELECTION OF ONE DIRECTOR AND THE APPROVAL OF ERNST & YOUNG LLP AS
OUR INDEPENDENT AUDITORS FOR FISCAL YEAR 2004. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT. THIS PROXY STATEMENT IS DATED APRIL 28, 2004. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY STATEMENT
TO STOCKHOLDERS NOR THE ELECTION OF THE NOMINEES DESCRIBED HEREIN WILL CREATE
ANY IMPLICATION TO THE CONTRARY.
By Order of the Board of Directors,
/s/ Randal A. Nardone
Randal A. Nardone
Secretary
New York, New York
April 28, 2004
24
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NEWCASTLE INVESTMENT CORP.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD May 27, 2004, the
undersigned appoints Wesley R. Edens and Randal A. Nardone, or either of them,
with full power of substitution, to attend the Annual Meeting of Stockholders of
NEWCASTLE INVESTMENT CORP. on May 27, 2004 (the "Annual Meeting"), and any
adjournments thereof, on behalf of the undersigned and to vote all shares which
the undersigned would be entitled to vote and to take all actions which the
undersigned would be entitled to take if personally present upon the following
matters set forth in the Notice of Annual Meeting and described more fully in
the Proxy Statement:
1. Proposal to elect one Class II director to serve until the 2007
annual meeting of stockholders or until his successor is elected and
duly qualified.
[ ] FOR the ONE nominee listed below (except as marked to
the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the ONE nominee listed
below --
David J. Grain
2. Proposal to approve the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year 2004.
[ ] FOR this appointment --
[ ] AGAINST this appointment --
[ ] ABSTAIN --
3. In their discretion, upon such other business as may properly come
before the meeting and any adjournments thereof.
This proxy, when properly executed, will be voted as directed. If this
proxy is executed but no direction is indicated, this proxy will be voted FOR
the proposal to elect one Class II director to serve until the 2007 annual
meeting of stockholders or until his successor is elected and duly qualified,
FOR the approval of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year 2004; and in the discretion of the
proxy holder on any other business that properly comes before the Annual Meeting
or any adjournment or postponement thereof. The undersigned hereby revokes any
proxy heretofore given with respect to such meeting.
PLEASE DATE, SIGN AND RETURN
PROXY PROMPTLY
Receipt of Notice of Annual
Meeting and Proxy Statement
is hereby acknowledged
---------------------------------------------------------
Stockholder's Signature
---------------------------------------------------------
Joint Holder's Signature (if applicable)
Date:
NOTE: Please sign exactly as the name appears on the records of the Company and
date. If the shares are held jointly, each holder should sign. When signing as
an attorney, executor, administrator, trustee, guardian, officer of a
corporation or other entity or in another representative capacity, please give
the full title under signature(s).