UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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INTERCONTINENTALEXCHANGE, INC.

 

NOTICE OF 2007 ANNUAL MEETING

 

AND

 

PROXY STATEMENT

 

 

March 30, 2007

 

Dear Stockholder:

 

On behalf of the Board of Directors and management of IntercontinentalExchange, Inc., I am pleased to invite you to the 2007 Annual Meeting of Stockholders. The Annual Meeting will be held at The Ritz Carlton, Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia 30326 on Thursday, May 10, 2007 at 8:30 a.m., local time.

 

The attached Notice of Annual Meeting and Proxy Statement describe the formal business to be transacted at the Annual Meeting. Our directors and officers, as well as representatives from our independent registered public accounting firm will be present to respond to appropriate questions from stockholders.

 

Whether or not you plan to attend the meeting in person, please mark, date, sign and return the enclosed proxy card in the envelope provided or vote telephonically or electronically using the Internet voting procedures described on the proxy card, at your earliest convenience.

 

Sincerely,

 

 

Jeffrey C. Sprecher

Chairman and Chief Executive Officer

 

IntercontinentalExchange, Inc.

2100 RiverEdge Parkway, Suite 500

Atlanta, Georgia 30328

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 10, 2007

 

 

 

NOTICE HEREBY IS GIVEN that the 2007 Annual Meeting of Stockholders of IntercontinentalExchange, Inc. will be held at The Ritz Carlton, Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia 30326 on Thursday, May 10, 2007 at 8:30 a.m., local time, for the purposes of considering and voting upon:

 

1. The election of eleven directors to serve until the 2008 Annual Meeting of Stockholders;

 

2. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007; and

 

3. Such other business as may properly come before the Annual Meeting or any adjournments thereof. The Board of Directors is not aware of any other business to be presented to a vote of the stockholders at the Annual Meeting.

 

The Board of Directors has fixed the close of business on March 21, 2007 as the record date for determining the stockholders entitled to notice of and to vote at the meeting and any adjournment thereof.

 

If you hold your shares through a broker or nominee, you will need to bring either a copy of the voting instruction card provided by your broker or nominee, or a copy of a brokerage statement showing your ownership as of March 21, 2007.

 

A list of stockholders entitled to vote at the 2007 Annual Meeting of Stockholders will be available for inspection upon request of any stockholder for a purpose germane to the meeting at our principal offices, 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia during the ten days prior to the meeting, during ordinary business hours, and at The Ritz Carlton, Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia 30326 during the meeting.

 

WHETHER OR NOT YOU EXPECT TO ATTEND, STOCKHOLDERS ARE REQUESTED TO VOTE THEIR SHARES VIA TELEPHONE OR THE INTERNET (BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD) OR TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

 

By Order of the Board of Directors.

 

 

Jeffrey C. Sprecher

Chairman and Chief Executive Officer

 

Atlanta, Georgia

March 30, 2007

IntercontinentalExchange, Inc.

2100 RiverEdge Parkway, Suite 500

Atlanta, Georgia 30328

 

 

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 10, 2007

 

 

This Proxy Statement is furnished to the stockholders of IntercontinentalExchange, Inc. in connection with the solicitation of proxies by our Board of Directors to be voted at the 2007 Annual Meeting of Stockholders and at any adjournments thereof (the “Annual Meeting”). The Annual Meeting will be held at The Ritz Carlton, Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia 30326 on Thursday, May 10, 2007 at 8:30 a.m., local time. When used in this Proxy Statement, the terms “we,” “us,” “our,” “IntercontinentalExchange” and “ICE” refer to IntercontinentalExchange, Inc.

 

The approximate date on which this Proxy Statement and form of proxy card are first being sent or given to stockholders is March 30, 2007.

 

VOTING

 

General

 

The securities that can be voted at the Annual Meeting consist of our common stock, $0.01 par value per share (the “Common Stock”). Each share of Common Stock entitles its owner to one vote on each matter submitted to the stockholders for approval. The holders of Common Stock will vote together as a single class on all matters presented to the stockholders for their vote or approval, including the election of directors and ratification of the appointment of our independent registered public accounting firm. The record date for determining the holders of Common Stock who are entitled to receive notice of and to vote at the Annual Meeting is March 21, 2007. On the record date, 68,985,458 shares of Common Stock were outstanding and eligible to be voted at the Annual Meeting.

 

Quorum and Vote Required

 

The presence, in person or by proxy, of a majority of the issued and outstanding shares of our Common Stock is necessary to constitute a quorum at the Annual Meeting. Abstentions and “broker non-votes” will be counted for purposes of determining whether a quorum is present. Once a share is represented for any purpose at the Annual Meeting, it will be deemed represented for quorum purposes for the remainder of the meeting and any adjournment thereof.

 

In voting with regard to the election of eleven directors (Proposal 1), stockholders may vote in favor of all nominees, withhold their votes as to all nominees or withhold their votes as to specific nominees. Under our Amended and Restated Bylaws, directors are elected by a plurality of the votes cast by the holders of shares represented and entitled to vote at the Annual Meeting. Accordingly, the nominees receiving the highest number of votes “for” will be elected. Votes that are withheld will have no effect on the election of directors.

 

In voting with regard to the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm (Proposal 2), stockholders may vote in favor of the proposal, against the proposal or may abstain from voting. Under our Amended and Restated Bylaws, the vote required to approve Proposal 2 is the affirmative vote of the majority of votes cast for or against the matter at the Annual Meeting. Abstentions will have no effect on the outcome of the vote on Proposal 2.

 

Broker Non-votes

 

A “broker non-vote” occurs when your broker submits a proxy for your shares but does not indicate a vote on a particular matter because the broker has not received voting instructions from you and does not have authority to vote on that matter without such instructions. “Broker non-votes” are treated as present for purposes of determining a quorum but are not counted as withheld votes, votes against the matter in question or as abstentions.

 

Under the rules of the New York Stock Exchange (the “NYSE”), if your broker holds shares in your name and delivers this Proxy Statement to you, the broker, in the absence of voting instructions from you, is entitled to vote your shares on Proposals 1 and 2.

 

Proxy Voting Procedures and Revocability of Proxy

 

You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the annual meeting. You can always change your vote at the meeting. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct.

 

If your shares are held in your name, you can vote by proxy in two convenient ways:

 

 

All properly executed proxies received in time to be voted at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions noted on the proxy card. If you execute your proxy card but do not give instructions, the shares represented by a proxy will be voted “FOR” the election of all director nominees and “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm.  If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon such matters according to their judgment.

 

You may revoke a proxy at any time before it is exercised by filing a written revocation with the Secretary of ICE, submitting a proxy bearing a later date (including by telephone or the Internet), or voting in person at the meeting. Please note, however, that under the rules of the NYSE, any beneficial owner of our Common Stock whose shares are held in street name by a member brokerage firm may revoke its proxy and vote its shares in person at the Annual Meeting only in accordance with applicable rules and procedures as employed by such beneficial owner’s brokerage firm.

 

Proxy Solicitation

 

In addition to soliciting proxies through the mail, we may solicit proxies through our directors, officers and employees in person and by telephone or facsimile. Brokerage firms, nominees, custodians and fiduciaries also may be requested to forward proxy materials to the beneficial owners of shares held of record by them. We will pay all expenses incurred in connection with the solicitation of proxies.

 

Annual Report

 

The Annual Report of IntercontinentalExchange, Inc. for the fiscal year ended December 31, 2006 is being mailed with this Proxy Statement. Stockholders are referred to the Annual Report for financial and other information about us. The Annual Report is not a part of this Proxy Statement. The Annual Report is also available on our website at www.theice.com. We will also provide a copy of the Annual Report to stockholders at no charge upon written request to IntercontinentalExchange, Inc., 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328, Attn: Investor Relations.

 

Availability of Certain Documents

 

We are required to file annual, quarterly and current reports, proxy statements and other reports with the Securities and Exchange Commission (the “SEC”). Copies of these filings are available through our website at www.theice.com or the SEC’s website at www.sec.gov. We will furnish copies of our SEC filings (without exhibits), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, without charge to any stockholder upon written or oral request to us at IntercontinentalExchange, Inc., 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328, Attn: Investor Relations, telephone: 770-857-4700, e-mail ir@theice.com.

 

In accordance with a notice sent to certain street name stockholders of Common Stock who share a single address, only one copy of this Proxy Statement and our Annual Report is being sent to that address unless we received contrary instructions from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if any stockholder residing at such an address wishes to receive a separate copy of this Proxy Statement or our 2006 Annual Report, he or she may contact us at IntercontinentalExchange, Inc., 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328, Attn: Investor Relations, telephone: 770-857-4700, e-mail: ir@theice.com, and we will deliver those documents to such stockholder promptly upon receiving the request. Any such stockholder may also contact Investor Relations if he or she would like to receive separate proxy statements and annual reports in the future. If you are receiving multiple copies of our annual report and proxy statement, you may request “householding” in the future by also contacting Investor Relations.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information, based on data provided to us or filed with the SEC, with respect to beneficial ownership of shares of our Common Stock as of March 12, 2007 for (i) each person known by us to beneficially own more than five percent of the outstanding shares of our Common Stock, (ii) each director and nominee for election as a director, (iii) each of our executive officers named in the Summary Compensation Table of this Proxy Statement (the “Named Executive Officers” or “NEOs”), and (iv) all of our directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the SEC and includes having voting and/or investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons and entities named in the table below have sole voting and sole investment power with respect to the shares set forth opposite each person’s or entity’s name.

 

Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days of March 12, 2007 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. As of March 12, 2007, there were 68,954,708 shares of Common Stock issued

and outstanding. Unless otherwise indicated, the address for each of the individuals listed in the table is c/o IntercontinentalExchange, Inc, 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328.

 

 

 

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

Nominees for Election as Directors at the 2007 Annual Meeting

 

On the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated the persons named below for election as directors at the Annual Meeting, each to serve for a one year term expiring at the next annual meeting. Each director will hold office until his or her successor is duly elected and qualified or until the director’s earlier resignation or removal. All of the nominees, except for Fred W. Hatfield, currently are members of the Board of Directors. The Board of Directors has determined that eight of the eleven nominees are independent under NYSE listing requirements and our Corporate Governance Principles, which are available on our website at www.theice.com. Mr. Sprecher is not deemed independent because he is an employee of ICE, Mr. Schoenhut is not deemed independent because of his involvement with the operations of the Board of Trade of the City of New York, Inc., or NYBOT, which is a significant subsidiary of ICE, as well as his commercial relationships with NYBOT, and Dr. Sandor is not deemed independent due to his position as Chairman and Chief Executive Officer of the Chicago Climate Exchange, Inc., an entity with which ICE has certain commercial relationships. The Nominating and Corporate Governance Committee and the Board of Directors have determined that Mr. Hatfield, a new director nominee, is independent. The Nominating and Corporate Governance Committee and the Board of Directors considered the fact that Mr. Hatfield is the Senior Public Policy Advisor at Patton Boggs LLP, a law firm that ICE has retained to perform certain lobbying work at a monthly retainer of $25,000 ($300,000 annually). Mr. Hatfield is the person primarily responsible for providing the services to ICE in connection with the engagement of Patton Boggs. After reviewing the amount of consideration being paid to the law firm, the size of the law firm, the indirect benefit to Mr. Hatfield and the immaterial amount of consideration to ICE and the law firm, it was determined that Mr. Hatfield satisfies the standards for independence to serve as an independent director. Due to the indirect benefit to Mr. Hatfield regarding fees paid to Patton Boggs, he will only be eligible to serve on the Nominating and Corporate Governance Committee.

 

Each of the nominees has confirmed that he or she expects to be able to continue to serve as a director until the end of his or her term. If, however, at the time of the meeting, any of the nominees named below is not available to serve as a director (an event which the Board of Directors does not anticipate), all the proxies granted to vote in favor of such director’s election will be voted for the election of such other person or persons, if any, recommended by the Nominating and Corporate Governance Committee and designated by the Board of Directors. The size of ICE’s Board of Directors is currently set at eleven and there are eleven director nominees to be elected to the Board of Directors. Proxies cannot be voted for a greater number of directors than the eleven nominees as stated in this Proxy Statement.

Set forth below are the nominees’ names, biographical information, age and the year in which each was first elected a director of ICE, except as to Mr. Hatfield, who is not currently a director:

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.

 

Meetings and Committees of the Board of Directors

 

The Board of Directors conducts its business through meetings of the full Board of Directors and through committees of the Board of Directors, consisting of an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. In 2006, our Board of Directors held 13 meetings, the Audit Committee held nine meetings, the Compensation Committee held seven meetings and the Nominating and Corporate Governance Committee held six meetings. All directors attended at least 75% of the aggregate of meetings of the Board of Directors and meetings of the committees of which they are a member. ICE’s policy is that all directors and nominees should attend annual meetings of stockholders, and we currently expect that all of our directors and nominees will attend this Annual Meeting. All members of our Board of Directors at the time attended last year’s meeting.

 

Audit Committee

 

The Audit Committee is comprised solely of directors who meet the independence requirements of the NYSE and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are financially literate, as required by NYSE. At least one member of the Audit Committee is an audit committee financial expert, as defined by the rules and regulations of the SEC. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to:

 

 

The Audit Committee is governed by the Audit Committee Charter approved by our Board of Directors. The charter is available on our website at www.theice.com. We will also provide a copy of the charter to stockholders upon request.

 

The members of the Audit Committee are Messrs. Salerno (Chairperson), Crisp and Martell. Mr. Forneri served on the Audit Committee until the end of fiscal year 2006 and Mr. Martell joined the Audit Committee upon the closing of the merger with NYBOT, which was January 12, 2007. The Board of Directors has determined that Mr. Salerno is an audit committee financial expert. The composition of our committees is currently being reviewed and we anticipate that the composition of our Audit Committee may change at the time of the Annual Meeting.

 

Compensation Committee

 

The Compensation Committee is comprised solely of directors who meet NYSE independence requirements, meet the requirements for a “Nonemployee Director” under the Exchange Act, and meet the requirements for an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Compensation Committee:

 

 

 

The Compensation Committee is governed by the Compensation Committee Charter approved by the Board of Directors. The charter is available on our website at www.theice.com. We will also provide a copy of the charter to stockholders upon request.

 

The members of the Compensation Committee currently are Ms. Sprieser (Chairperson) and Messrs. Forneri and Tese. The composition of our committees is currently being reviewed and we anticipate that the composition of our Compensation Committee may change at the time of the Annual Meeting.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee is comprised solely of directors who meet NYSE independence requirements. The Nominating and Corporate Governance Committee assists the Board of Directors in:

 

 

The Nominating and Corporate Governance Committee is governed by the Nominating and Corporate Governance Committee Charter approved by our Board of Directors. The charter is available on our website at www.theice.com. We will also provide a copy of the charter to stockholders upon request.

 

The members of the Nominating and Corporate Governance Committee currently are Messrs. Tese (Chairperson) and Crisp. The composition of our committees is currently being reviewed and we anticipate that the composition of our Nominating and Corporate Governance Committee may change at the time of the Annual Meeting.

 

CORPORATE GOVERNANCE

 

Independent Directors

 

The Corporate Governance Policies adopted by our Board of Directors, described further below, provide that a majority of our directors must be “independent directors” and specify independence standards consistent with NYSE listing standards. The nominees for director are such that immediately after the election of the nominees to the Board of Directors, a majority of all directors holding office will be independent directors. The Nominating and Corporate Governance Committee and the Board of Directors have determined that all directors and nominees, except for Mr. Sprecher, Dr. Sandor and Mr. Schoenhut, do not have any relationship that would interfere with the exercise of independent judgment in carrying out their responsibilities as directors and are independent in accordance with NYSE listing standards and our Corporate Governance Policies.

 

Nomination of Directors

 

The Board of Directors is responsible for approving candidates for board membership. The Board of Directors has delegated the screening and recruitment process to the Nominating and Corporate Governance Committee. More specifically, our Nominating and Corporate Governance Committee and the Board of Directors have adopted the IntercontinentalExchange, Inc. Policy Regarding Qualification and Nomination of Director Candidates.

 

The Nominating and Corporate Governance Committee seeks to create a Board of Directors that consists of a diverse group of qualified individuals that function effectively as a group. Qualified candidates for director are those who, in the judgment of the Nominating and Corporate Governance Committee, possess all of the following personal attributes and a sufficient mix of the experience attributes to assure effective service on the Board of Directors. Personal attributes of a candidate considered by the Nominating and Corporate Governance Committee include: leadership, ethical nature, contributing nature, independence, interpersonal skills and effectiveness. Experience attributes of a candidate considered by the Nominating and Corporate Governance Committee include: financial acumen, general business experience, industry knowledge, diversity of view points, special business experience and expertise. When the Nominating and Corporate Governance Committee reviews a potential new candidate, the Nominating and Corporate Governance Committee looks specifically at the candidate’s qualifications in light of the needs of the Board of Directors and IntercontinentalExchange at that time given the then current mix of director attributes.

 

The Nominating and Corporate Governance Committee will utilize a variety of methods for identifying and evaluating nominees for director. The Nominating and Corporate Governance Committee will periodically assess the appropriate size of the Board of Directors and whether any vacancies on the Board of Directors are expected. In the event that vacancies are anticipated or otherwise arise, the Nominating and Corporate Governance Committee will seek to identify director candidates based on input provided by a number of sources, including: (i) Nominating and Corporate Governance Committee members, (ii) other directors, (iii) management and (iv) stockholders of IntercontinentalExchange. The Nominating and Corporate Governance Committee also has the authority to consult with or retain advisors or search firms to assist in the identification of qualified director candidates.

 

In accordance with NYSE listing standards, we ensure that at least a majority of our Board of Directors is independent under the NYSE definition of independence, and that the members of the Board of Directors as a group maintain the requisite qualifications under NYSE listing standards for populating the Audit, Compensation and Nominating and Corporate Governance Committees.

 

The Nominating and Corporate Governance Committee considers nominees recommended by stockholders as candidates for election to the Board of Directors. A stockholder wishing to nominate a candidate for election to the Board of Directors at an annual meeting is required to give written notice to the Secretary of ICE of his or her intention to make a nomination. Pursuant to our Amended and Restated Bylaws, the notice of nomination must be received not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year; provided, however, that if and only if the annual meeting is not scheduled to be held within a period that commences 30 days before and ends 30 days after such anniversary date, the stockholder notice must be given by the later of the close of business on the date 90 days prior to such annual meeting date or the close of business on the tenth day following the date on which the annual meeting is publicly announced or disclosed. Please see “Stockholders’ Proposals for 2008 Annual Meeting” below for additional information.

 

To recommend a nominee, a stockholder should write to Secretary, c/o IntercontinentalExchange, Inc., 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328. Any such recommendation must include:

 

 

 

Once director candidates have been identified, the Nominating and Corporate Governance Committee will then evaluate each candidate in light of his or her qualifications and credentials, and any additional factors that the Nominating and Corporate Governance Committee deems necessary or appropriate, including those set forth above. Qualified prospective candidates will be interviewed by our Chairman and Chief Executive Officer and at least one member of the Nominating and Corporate Governance Committee. The full Board of Directors will be kept informed of the candidate’s progress. Using input from such interviews and other information obtained by the Nominating and Corporate Governance Committee, the Nominating and Corporate Governance Committee will evaluate whether a prospective candidate is qualified to serve as a director and, if so qualified, will seek the approval of the full Board of Directors of the nomination of the candidate or the election of such candidate to fill a vacancy on the Board of Directors.

 

Existing directors who are being considered for re-nomination will be re-evaluated by the Nominating and Corporate Governance Committee based on each director’s satisfaction of the qualifications described above and his or her performance as a director during the preceding year. All candidates submitted by stockholders will be evaluated in the same manner as candidates recommended from other sources, provided that the procedures set forth above have been followed.

 

All of the current nominees for director recommended for election by the stockholders at the 2007 Annual Meeting are current members of the Board of Directors, except Mr. Hatfield. Jeffrey C. Sprecher, our Chairman and Chief Executive Officer, recommended Mr. Hatfield as a nominee to the Nominating and Corporate Governance Committee. Two of the nominees who are also current members of the Board of Directors, Mr. Martell and Mr. Schoenhut, were appointed to the Board of Directors in connection with the closing of the NYBOT merger on January 12, 2007. Based on the Nominating and Corporate Governance Committee’s evaluation of each nominee’s satisfaction of the qualifications described above and their performance as directors in 2006, the Nominating and Corporate Governance Committee determined to recommend the nominees for re-election, or election in the case of Mr. Hatfield. The Nominating and Corporate Governance Committee has not received any nominations from stockholders for the 2007 Annual Meeting.

 

Board of Directors Governance Principles

 

We have adopted the IntercontinentalExchange, Inc. Board of Directors Governance Principles that guide the Board of Directors on matters of corporate governance, including composition of the Board of Directors; duties and responsibilities of the Board of Directors; committees of the Board of Directors; Board of Directors leadership, functioning and evaluation; director independence, orientation, compensation, education and access to management; Board of Directors access to independent advisors; and director compliance with the Code of Business Conduct and Ethics. As specified by the Governance Principles, the Chief Executive Officer of ICE shall be the Chairman of the Board and the independent directors shall elect from their ranks a lead director. The independent directors of ICE have elected Fred Salerno as the lead director, a position he held throughout 2006. As lead director, Mr. Salerno presides at all executive sessions of the non-management directors. The Governance Principles also provide that non-management directors meet in executive session without the participation of management at all regularly scheduled meetings of the Board of Directors as deemed necessary and may be called at any other time as necessary to fulfill the Board of Directors’ responsibilities. In addition, the Governance Principles also state that if all non-management directors are not independent

directors, then the independent directors will meet at least once annually. A copy the Board of Directors Governance Principles is available on our website at www.theice.com. We will provide a copy of the Board of Directors Governance Principles to stockholders upon request.

 

Code of Business Conduct and Ethics

 

We have adopted the IntercontinentalExchange, Inc. Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees. The Code of Business Conduct and Ethics meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K, and applies to our Chief Executive Officer and Chief Financial Officer (who is both our principal financial and principal accounting officer), as well as all other employees, as indicated above. The Code of Business Conduct and Ethics also meets the requirements of a code of conduct under NYSE listing standards. The Code of Business Conduct and Ethics is available on our website at www.theice.com. We will provide a copy of the Code of Business Conduct and Ethics to stockholders upon request.

 

Communications with the Board of Directors

 

We have established a process for interested parties to communicate with members of the Board of Directors. If you have any concern, question or complaint regarding any accounting, auditing or internal controls matter, as well as any issues arising under our Code of Business Conduct and Ethics or other matters that you wish to communicate to our Board of Directors or non-management directors, send these matters in writing to IntercontinentalExchange, Inc., c/o Legal Department, 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328. Information about our Board of Directors communications policy can be found on our website at www.theice.com under the links “About ICE — Investor Resources — Corporate Governance — Board Communications Policy.”

 

COMPENSATION DISCUSSION & ANALYSIS

 

Introduction

 

Our Compensation Committee is charged with the responsibility of administering all aspects of our executive compensation programs. The Compensation Committee is composed of three directors, each of whom is a “non-employee director,” as defined in Rule 16b-3 promulgated under the Exchange Act, and an “outside director,” as defined pursuant to Section 162(m) of the Code. The Compensation Committee determines the type and level of compensation for executive officers (generally defined as Section 16 officers under the Exchange Act, but the Compensation Committee has historically included all corporate officers under this definition), reviews the performance of the Chief Executive Officer, and oversees the administration of ICE’s annual incentive plan and all of ICE’s equity compensation plans. The Compensation Committee’s Charter, which is periodically reviewed and revised by the Compensation Committee and the Board of Directors, outlines the specific responsibilities of the Compensation Committee.

 

In this section, we discuss certain aspects of our compensation program as it relates to our principal executive officer (Jeffrey C. Sprecher, Chairman and Chief Executive Officer), our principal financial officer (Richard V. Spencer, Senior Vice President, Chief Financial Officer), and our three other most highly-compensated executive officers in 2006 (Charles A. Vice, President and Chief Operating Officer; David S. Goone, Senior Vice President, Chief Strategic Officer; and Edwin D. Marcial, Senior Vice President, Chief Technology Officer). These individuals are referred to as our “Named Executive Officers” or “NEOs”.

 

Compensation Objectives, Components and Practices

 

Our executive compensation philosophy is to tightly link compensation with individual achievement, company performance, and the creation of stockholder value. This is accomplished through four primary objectives:

 

 

Our compensation program offers several distinct elements that are designed to support and reward the achievement of the objectives outlined above, including:

 

 

For each NEO, ICE reviews each element of compensation against relevant and available market data, and targets the competitive market range, which has historically been between the 50th and 60th percentile. Overall, ICE focuses on the “total cost of management,” which is a comprehensive review of all compensation elements for the corporate officer group. We strive to maintain a low fixed cost structure, which generally consists of the base salary, benefits and perquisites elements described above. The variable compensation elements consist of the annual incentives and equity awards, which are designed to deliver value to the executives only if we achieve our performance objectives. ICE has maintained a “pay for performance” orientation since the founding of ICE in May 2000. While ICE does not maintain formal targets for the allocation of total compensation through each of the compensation elements outlined above, our compensation structure is designed to deliver the majority of its value through variable pay elements.

 

The Compensation Committee utilizes a peer group to benchmark its compensation program. ICE’s peer group includes comparably-sized financial exchanges, financial services providers and related companies based on metrics such as revenue, market capitalization, and number of employees. The peer group is reviewed

annually by the Compensation Committee and adjustments are made as necessary. The Compensation Committee also reviews annually the executive pay practices of these peer companies as reported in industry surveys, public filings of specific companies and reports from compensation consulting firms. This information is considered when making recommendations for each element of compensation. For 2006, this peer group was comprised of 18 publicly traded financial exchanges and “e-financial services” companies that were comparable to ICE in terms of revenue, net income, employees, revenue per employee, and market capitalization. The 2006 comparator group consisted of the following companies:

 

 

Compensation Consultant

 

The Compensation Committee has engaged a compensation consulting firm to serve as its external advisor since the founding of ICE in 2000. Compensia, Inc. served as the Compensation Committee’s primary advisor since August 2004. In May 2006, the Compensation Committee also retained Towers Perrin to advise the Compensation Committee on executive compensation matters as requested by the Compensation Committee. A representative from one of these firms attends most Compensation Committee meetings and is available between meetings to act as a resource for the Compensation Committee and management. The Compensation Committee determines in its sole discretion which compensation consultant to retain for various services, and the consultant reports directly to the Compensation Committee. Use of a particular consulting firm by the Compensation Committee does not preclude management from hiring the same consulting firm, and in the past, management has hired each of Compensia and Tower Perrin for compensation benchmarking.

 

Base Salary

 

ICE targets a base salary for each officer that is between the median and 60th percentile of the market depending on the officer’s experience in their respective position and individual performance. Executive officers are eligible for a base salary increase each year that is determined under the business-wide performance review process and salary increase guidelines.

 

In early 2006, the Compensation Committee met to review and approve base salary increases for the group of executive officers. The Compensation Committee reviewed a comprehensive benchmarking report from Compensia, Inc. at its March 2006 meeting. This report relied on base salary comparisons against peer companies and published compensation surveys. Generally, ICE’s executive officers were positioned within its target market position between the 50th and 60th percentile. However, a number of officers had significant changes in their duties and responsibilities in late 2005 and early 2006, such as Charles Vice’s appointment as President and Chief Operating Officer in October 2005, David Goone’s appointment as Chief Strategic Officer in May 2006, and several other new corporate officer appointments. Based on ICE management’s recommendations, in May 2006, the Compensation Committee approved the following salary increases effective as of January 1, 2006: Mr. Sprecher’s salary increased from $675,750 to $725,000, Mr. Spencer’s salary increased from $420,000 to $460,000, Mr. Vice’s salary increased from $420,000 to $500,000, Mr. Goone’s salary increased from $400,000 to $460,000, and Mr. Marcial’s salary increased from $350,000 to $365,000. In making these decisions, in addition to the position changes, the Compensation Committee considered the scope of the officer’s particular job, his or her performance in the job, the expected value of the officer’s future impact or contribution to ICE’s success and growth, geographic pay differentials, ICE’s recent fiscal performance, and market competitiveness.

 

The Compensation Committee must approve base salary changes for each of its executive officers, and can exercise its discretion to modify any recommendations regarding proposed salary adjustments.

 

Annual Incentives

 

ICE’s annual bonus plan is structured to deliver total cash compensation (base salary plus annual incentive) that is competitive with our peers for commensurate performance, and we target a range between the median and 60th percentile of the market depending on the officer’s experience in their respective position and corporate and individual performance. Target annual incentive award opportunities are established at the beginning of the fiscal year and are reviewed annually. For 2006, the bonus targets were 85% of base salary for the Chief Executive Officer (increased from 75% of salary in 2005), 70% of base salary for the President (increased from 60% of salary in 2005), and 55% to 60% of base salary for Senior Vice Presidents. The increases in the bonus targets were based on competitive benchmarking by the Compensation Committee’s compensation consultant. Despite these targets, actual awards granted in any year may range from no payouts to bonus payments above the established target level based on company and individual performance. Historically, we have not paid bonuses to executive officers in excess of 200% of the established target level. However, the Compensation Committee reserves the right to make awards in excess of target levels if dictated by individual performance and total compensation considerations.

 

We grant bonus awards based on the achievement of specific, well-defined Management Business Objectives (“MBOs”) that are established by the Compensation Committee early in each fiscal year. Each year, we establish a bonus pool for all employee awards, the size of which is determined primarily based on our performance against a series of financial and non-financial MBOs (e.g., revenue growth; net income performance; Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”); market share; new customer acquisition; and other key performance metrics). Individual awards are granted based on the employee’s performance against a series of individual performance metrics. This performance review necessarily involves a subjective assessment of corporate and individual performance by the Compensation Committee. Moreover, the Compensation Committee does not base its considerations on any single performance factor, but rather considers a mix of factors that balance both growth and profitability metrics and evaluates company and individual performance against that mix. The Compensation Committee believes that it is appropriate to use subjective assessments for the annual incentive determination in light of ICE’s limited operating history, its rapidly changing industry, the existence of few direct peer companies, and the challenges inherent in establishing objective and strictly budgeted goals in this environment. The Compensation Committee reviews ICE’s performance relative to the MBOs throughout the year on a quarterly basis, and also monitors and approves the bonus accruals throughout the fiscal year. The Compensation Committee strives to set the performance targets for the annual incentive plan at a level that are achievable but challenging, and incorporate a significant degree of “stretch” to encourage outstanding corporate performance. The payout structure is leveraged to provide higher payouts in years of exceptional performance while performance below the target level(s) will yield less.

 

In December 2006, the Compensation Committee reviewed ICE’s performance against the MBOs established for the year and, by applying the framework discussed above, authorized payouts that, on average, were 197% of the target annual bonus award for NEOs, with no NEO awarded a payout in excess of 200% of his established target. While reviewing ICE’s performance, the Compensation Committee examined financial and non-financial targets to determine the annual bonus awards. The non-financial targets used in 2006 included the execution of a definitive merger agreement with NYBOT, the completion of an SEC-registered secondary equity offering, the growth in trading volumes in both its futures and OTC markets, including in key contracts such as the WTI oil futures contract, and improvements made to ICE’s trading platform and in its operational metrics. The financial targets used in 2006 included a consolidated revenue target, consolidated net income target and consolidated EBITDA target. In 2006, consolidated revenue was $313.8 million, or growth of 101%, as compared to 2005 revenue of $155.9 million, consolidated net income was $143.3 million, or growth of 255%, as compared to 2005 net income of $40.4 million, and consolidated EBITDA was $217.9 million, or growth of 200%, as compared to 2005 EBITDA of $72.6 million.

 

ICE has used these combined financial and non-financial metrics to determine annual bonus awards for the last four years and annually reviews the metrics to be used for the next year. The following annual incentive awards for fiscal year 2006 were paid in cash and were approved by the Compensation Committee: Mr. Sprecher: $1,232,500, Mr. Spencer: $500,000, Mr. Vice: $700,000, Mr. Goone: $550,000, and Mr. Marcial: $401,500. Annual incentive awards are payable in cash, and generally paid in January of the year following the completed fiscal year. All annual incentive awards for the NEOs were paid in cash during January 2007, and included in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.

 

Equity Compensation

 

The Compensation Committee believes that long-term incentives, primarily delivered through equity grants, are an effective vehicle to align the interests of executive officers with those of stockholders, encourage ownership in ICE and serve as a retention tool through multi-year vesting schedules. ICE is sensitive to the concerns of its stockholders regarding the potential dilutive impact of equity awards, and also takes into account the relevant accounting and tax impact of all potential forms of equity awards in designing its grants. Equity awards are designed to target an individual grant date value between the market median to 60th percentile of ICE’s peer group, though actual awards may vary based on individual performance, internal equity considerations (including historical equity awards) and retention objectives.

 

Historically, we have relied on grants of stock options under the 2000 Stock Option Plan, which provide value to the executive only if our stock price increases, generally vesting over a three-year or four-year schedule. In 2004, the Compensation Committee and Board of Directors approved the adoption of the 2004 Restricted Stock Plan in order to attract, retain, and reward executive officers for the accomplishments of long-term performance goals and to provide the executive officers with the opportunity to obtain an equity interest in ICE. ICE’s 2004 restricted stock unit awards for executive officers were based on a combination of time-vesting and performance-vesting shares that are linked to the cumulative EBITDA performance between 2005 and 2007. As part of the adoption of the 2004 Restricted Stock Plan, we initiated a tender exchange process whereby six of the executive officers surrendered 817,600 stock options that had been granted in 2002 at a strike price of $12.00 per share in exchange for the receipt of 586,462 time-vesting restricted shares and 586,462 performance-vesting restricted shares at a fair market value of $8.00 per share. One additional executive officer was a new hire in June 2004, and received a grant of 38,750 time-vesting restricted shares and 38,750 performance-vesting restricted shares at a fair market value of $8.00 per share. The 2004 restricted stock unit awards were designed as a multi-year equity grant, with no additional equity awards planned through at least 2005. Accordingly, there were no equity grants to any of the individuals in the Summary Compensation table in 2005.

 

In 2006, the Compensation Committee approved two equity awards for certain executive officers. In February 2006, the Compensation Committee awarded restricted stock units that vest over a three-year schedule (one-third annually on the anniversary of the grant date) to the NEOs. This award was targeted at 50% of the then-current annual equity grant guidelines for these officers based on benchmarking data from Compensia, Inc., and the award was issued primarily for the successful completion of our initial public offering in November 2005. For the NEOs, the February 22, 2006 awards consisted of the following grants: 19,200 restricted stock units for Mr. Sprecher, 9,000 restricted stock units for Messrs. Spencer, Vice, and Goone, and 5,900 restricted stock units for Mr. Marcial.

 

In December 2006, the Compensation Committee approved a refresher equity award to the executive officer group that included a mix of stock options and performance-based restricted stock units that are earned based on the accomplishment of 2007 EBITDA performance and vest based on continued employment. The range of shares that can be issued under the performance-based awards ranges from zero for performance below the threshold performance target, 50% of the target award for performance at the threshold, 100% of the target award for performance at the target, and 250% of the target award for performance at the maximum performance level. Both of these awards vest over a three-year vesting schedule. The Compensation Committee relied on benchmarking data from Towers Perrin to construct grant guidelines for these equity awards. Additionally, the Compensation Committee also approved various equity awards for new hires in October 2006, but none of these October awards included NEOs. For the NEOs, the December 22, 2006

awards consisted of the following grants: 38,720 stock options and 19,360 performance-based restricted stock units at “target performance” for Mr. Sprecher, 12,100 stock options and 8,470 restricted stock units at “target performance” for Mr. Vice, 10,890 stock options and 6,050 restricted stock units at “target performance” for Mr. Goone, and 8,470 stock options and 4,840 restricted stock units at “target performance” for Mr. Marcial. The December 22, 2006 stock options had a strike price of $104.23, which was the closing price of our Common Stock on the grant date. As of the date of this Proxy Statement, ICE has not determined that it is probable that the 2007 EBITDA target will be met and has not begun to expense these awards under Statements of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). However, the full range of awards for each NEO is illustrated in the “2006 Grants of Plan-Based Awards” table below.

 

We do not maintain formal targets for the allocation of various forms of non-cash awards. For the NEOs, ICE places a heavier emphasis on performance-based rewards that are generally comprised of a combination of stock options that only deliver value if our share price increases above the strike price on the date of grant and other forms of performance-based awards that incorporate stretch targets so that the awards “pay for themselves” though increased earnings. In some cases, the Compensation Committee has utilized time-vesting restricted stock in order to give NEOs an immediate link to the creation of stockholder value and to serve as a retention device. The Compensation Committee monitors the mix of equity awards by reviewing competitive equity data provided by its compensation consultant.

 

Equity awards are either approved at a regularly scheduled Compensation Committee meeting or via action by unanimous written consent after prior review and discussion of grant materials. ICE management is not authorized to approve equity awards, and does not have the discretion or authority to govern the timing of equity awards. Any equity awards that are approved outside of a regularly scheduled Compensation Committee meeting require the signature and date of execution from each Compensation Committee member in order to establish a measurement date under SFAS 123R. We use the closing price of our Common Stock on the NYSE on the grant date for purposes of establishing the strike price of stock options and for accounting purposes of other equity awards. We have not issued stock options with an exercise price below the fair market value of our Common Stock. The Compensation Committee does not seek to time the approval of equity awards with the release of material, non-public information.

 

Benefits and Perquisites

 

The benefits and perquisites offered to our executive officers are substantially the same as those offered to all ICE employees. We provide medical insurance, life and disability insurance, and other benefits to executives that are generally available to other employees. For our U.S. executive officers, ICE provides an enhanced term life insurance benefit (calculated at five times salary less $100,000) and a supplemental disability insurance benefit that is designed to approximate the total benefit level (60% of eligible compensation) that cannot be afforded through the limits in our group disability plans ($10,000 per month). Our contributions to these benefits programs are included in the “All Other Compensation” section of the Summary Compensation table. Currently, there are no other perquisites provided to any of our executive officers that would require disclosure in the Summary Compensation Table, such as club memberships, financial planning services, personal use of corporate aircraft, charitable contribution matching programs, or tax gross-ups on such perquisites.

 

Retirement Plans

 

We provide retirement benefits to our U.S. corporate officers through a 401(k) retirement plan on the same terms and conditions as those offered to all ICE employees. Generally, we provide a matching contribution of 100% of the first 5% of employee deferrals of eligible compensation, subject to Internal Revenue Service limits. We do not offer a defined benefit pension plan or any other form of supplemental executive retirement plan.

 

Stock Ownership Guidelines

 

The Compensation Committee believes that it is in the best interest of stockholders for ICE’s executives and directors to own a significant amount of ICE Common Stock. Accordingly, at its December 2006 meeting, the Compensation Committee adopted stock ownership guidelines applicable to all of ICE’s corporate officers, based on a multiple of base salary for executives and a multiple of the annual retainer for directors. The stock ownership guidelines are as follows:

 

 

Ownership, for purposes of these guidelines, includes shares of ICE common stock that are owned outright (including those held by a spouse or dependent children) and unvested restricted stock/units. Unexercised stock options, unearned performance-based restricted shares, and stock appreciation rights do not count towards these ownership guidelines. In light of the fact that our executives have only been able to transact in our shares since May 2006 and in order to afford time for individual financial planning to meet these guidelines, the Compensation Committee adopted a four-year transition period for executives and directors to meet these guidelines. The Compensation Committee will monitor the ownership levels of its executives and directors during this transition period.

 

Policy on Deductibility of Compensation

 

Section 162(m) generally provides that publicly held companies may not deduct compensation paid to certain of its top executive officers to the extent that such compensation exceeds $1 million per officer in a calendar year. Compensation that is “performance-based compensation” within the meaning of the Code does not count toward the $1 million limit. Performance-based compensation that has been approved by ICE’s stockholders is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals and the Compensation Committee of the Board of Directors that establishes such goals consists only of “outside directors” (as defined for purposes of Section 162(m)).

 

ICE’s policy is to maximize the deductibility of executive compensation so long as the deductibility is compatible with the more important objectives of retaining executives and maintaining competitive performance-based compensation that is aligned with strategic business objectives. The Company attempts to structure its compensation arrangements in a manner that would be consistent with the requirements of Section 162(m) of the Internal Revenue Code (the “Code”) were that provision to apply to ICE. ICE is currently in a post-IPO transition period during which the requirements of Section 162(m) of the Code do not apply.

2006 COMPENSATION INFORMATION

 

Summary Compensation Table

 

The following table presents information relating to the compensation earned by the Named Executive Officers for the fiscal year ended December 31, 2006.

 

SUMMARY COMPENSATION TABLE

 

 

 

Notes

 

The following table details the incremental cost of perquisites received by each of the named executives, as well as the other elements of compensation listed in the “all other compensation” column of the summary compensation table, for fiscal year ended December 31, 2006.

 

2006 ALL OTHER INCOME

 

 

 

Notes

 

 

2006 Grants of Plan-Based Awards

 

     The following table presents information relating to equity awards granted to the Named Executive Officers in fiscal year 2006, and any previous awards for which we recorded a compensation expense in our financial statements for the fiscal year ended December 31, 2006. References in the table to “2000 SOP” refer to the 2000 Stock Option Plan, “2005 EIP” refer to the 2005 Equity Incentive Plan and “ABP” refer to the Annual Bonus Plan.

 

2006 GRANTS OF PLAN-BASED AWARDS

 

 

 

Notes

 

Outstanding Equity Awards at Fiscal Year End

 

     The following table presents information relating to outstanding equity awards held by the Named Executive Officers as for the fiscal year ended December 31, 2006, based on the closing price of $107.90 for our Common Stock on the NYSE on December 29, 2006. References in the table to “2000 SOP” refer to the 2000 Stock Option Plan, “2004 RSP” refer to the 2004 Restricted Stock Plan and “2005 EIP” refer to the 2005 Equity Incentive Plan.

 

2006 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

 

 

Notes

 

 

 

Option Exercises and Stock Vested During 2006

 

The following table presents information relating to stock option awards exercised and restricted stock issued, respectively, during fiscal year 2006 for the Named Executive Officers.

 

2006 OPTION EXERCISES AND STOCK VESTED

 

 

 

Notes

 

 

Nonqualified Defined Contribution and Other Deferred Compensation Plans

 

We do not maintain any nonqualified defined contribution plans or cash-based nonqualified deferred compensation plans, such as a supplemental executive retirement plan, 401(k) excess plan, or other vehicles to defer the receipt of cash compensation. However, we believe that the awards of restricted stock units in 2004 under the 2004 Restricted Stock Plan require disclosure in the table below due to the fact that the issuance of shares pursuant to these awards are made in accordance with individual deferral elections regarding the timing of distributions. These awards are also disclosed in the 2006 Outstanding Equity Awards at Fiscal Year-End and the 2006 Option Exercises and Stock Vested tables.

 

The following table presents information relating to the vesting and issuance of restricted stock unit awards held by the Named Executive Officers for the fiscal year ended December 31, 2006, based on the closing price of $107.90 for ICE’s Common Stock on the NYSE on December 29, 2006.

 

2006 NON-QUALIFIED DEFINED CONTRIBUTION AND

OTHER DEFERRED COMPENSATION PLANS

 

 

 

Notes

 

 

Employment Agreements and Other Factors Affecting 2006 Compensation

 

We have entered into employment agreements with each of the NEOs, which contain provisions that govern compensation in the event of termination for cause, termination by ICE before a change in control, and termination by ICE after a change in control. The material provisions regarding the employment agreements and the provisions governing these termination scenarios are described below. Copies of the employment agreements for all NEOs have been filed as exhibits to our Registration Statement on Form S-1 as part of our initial public offering in November 2005.

 

Term of Employment

 

Each agreement provides for an initial employment term of two or three years, depending on the executive. The initial term is three years for Messrs. Sprecher, Vice, Spencer and Goone, and two years for Mr. Marcial. The initial term of each agreement will be automatically extended every six months during the term of each agreement so that the remaining term of the agreement is never more than three years or less than two and a half years, in the case of Messrs. Sprecher, Vice, Spencer and Goone, and never more than two years or less than one and a half years in the case of Mr. Marcial, unless either ICE or the executive, prior to the date of extension, give written notice to the other that there will be no extension. The effect of this provision is to ensure that the term remaining under any of these agreements is never more than six months less than the initial term.

 

Compensation

 

Each employment agreement provides for an initial annual base salary. Each of these executives is also eligible to receive an annual bonus and to receive from time to time grants of awards under the 2000 Stock Option Plan, 2004 Restricted Stock Plan and 2005 Equity Incentive Plan, in each case as determined by the Compensation Committee or by ICE’s board of directors as a whole.

 

Exclusivity

 

Each employment agreement permits the executive to serve on the board of directors of those business, civic and charitable organizations on which he was serving on the date that ICE signed his employment agreement, as long as doing so has no significant and adverse effect on the performance of his duties and responsibilities or the exercise of his powers under his employment agreement. Each executive is not permitted, however, to serve on any other boards of directors and shall not provide services to any for-profit organization on or after the date that ICE signed his employment agreement without the written consent of the chair of the Compensation Committee (in the case of Messrs. Sprecher, Vice, Spencer and Goone) or ICE’s chief executive officer (in the case of Mr. Marcial).

 

Non-competition

 

Each executive agrees under his employment agreement that for the term of his employment agreement or, if less, for the one-year period which starts on the date that his employment terminates, not to assume or perform any managerial or supervisory responsibilities and duties that are substantially the same as those that he performs for ICE for any other business entity that engages in any business-to-business electronic exchange for trading commodities in which ICE is engaged as of the date of termination of the executive’s employment or in which ICE proposes to engage under its business plan as in effect on such date, if any site of any of the offices or equipment of such competitive business is located in the United States, Canada, Mexico, Central America, South America or in any country that is a member of the European Union. The employment agreements of Messrs. Vice, Spencer, Goone and Marcial provide that they may own up to five percent of the stock of a publicly traded company that engages in such competitive business so long as they are only passive investors and are not actively involved in such company in any way.

 

Non-solicitation

 

Each executive is restricted from soliciting, for the purpose of competing with ICE or its affiliates, any of its customers or customers of its affiliates with whom the executive had contact, knowledge or association (1) at any time during the executive’s employment with ICE or its affiliates and (2) at any time during the twenty-four month period immediately preceding the beginning of the “restricted period.” “Restricted period” means the remainder of the executive’s term of employment without regard to the reason for the executive’s termination of employment (as such initial term may have been extended under the agreement).

 

Each executive is restricted from soliciting, for the purpose of competing with ICE or its affiliates, any other officer, employee or independent contractor of ICE or its affiliates with whom the executive had contact, knowledge or association to terminate his or her employment or business relationship with ICE or its affiliates (1) at any time during the executive’s employment with ICE or its affiliates and (2) at any time during the twelve month period immediately preceding the beginning of the “restricted period.”

 

Bonuses

 

Each executive is eligible, under his employment agreement, to receive an annual bonus each year that is reasonable in light of his contribution for that year in relation to the contributions made and bonuses paid to ICE’s other senior executives for such year.

 

Other Provisions

 

Each of the executives named above is subject to customary confidentiality provisions during the term of employment and for a specified period after termination, and each executive must not use or disclose any of ICE’s trade secrets for as long as they remain trade secrets.

 

Termination for Cause or Executive Resignation Other than for Good Reason

 

If ICE terminates an executive for “Cause,” as such term is defined below, or any such executive resigns other than for “Good Reason,” as such term is defined below, ICE must pay the executive, among other benefits, all accrued but unpaid salary, annual bonus, if any, and unreimbursed expenses.

 

Termination Unrelated to a Change in Control

 

If the termination of an executive is unrelated to a change in control, ICE must continue to pay his or her salary and bonus for the remainder of the employment term, over time as it would normally be paid, with the bonus so paid equal to the greater of the last annual bonus paid to him prior to termination and his target bonus for the applicable year. In addition, any stock options or other equity awards granted after the date of the applicable employment agreement will become exercisable or earned upon the executive’s termination. In addition, ICE must continue to make available coverage under the employee benefits plans as if an executive remained employed for the “Welfare Benefit Continuation Period,” which is defined as two years for Messrs. Sprecher, Vice, Spencer and Goone, and one and one-half years for Mr. Marcial. If an executive delivers written notice that there will not be an extension of the agreement to ICE, the Welfare Benefit Continuation Period is the shorter of the period defined above or the balance of the Term of the Employment Agreement.

 

“Cause,” as used in the employment agreements, generally means: (1) the employee is convicted of, pleads guilty to, or otherwise admits to any felony or act of fraud, misappropriation or embezzlement; (2) the employee knowingly engages or fails to engage in any act or course of conduct that is (a) reasonably likely to adversely affect ICE’s rights or qualification under applicable laws, rules or regulations to serve as an exchange or other form of a marketplace for trading commodities or (b) that violates the rules of any exchange or market on which ICE effects trades (or at such time are actively contemplating effecting trades) and is reasonably likely to lead to a denial of ICE’s right or qualification to effect trades on such exchange or market; (3) there is any act or omission by the employee involving malfeasance or gross negligence in the performance of his duties and responsibilities or the exercise of his powers to the material detriment of ICE; or (4) the employee (a) breaches any of the covenants made under his employment agreement or (b) violates any provision of any code of conduct adopted by ICE that applies to him if the consequence to such violation ordinarily would be a termination of his employment.

 

“Change in Control,” as used in the employment agreements, generally means (1) any person is or becomes the beneficial owner, directly or indirectly, of securities representing 30% or more of the combined voting power of any outstanding ICE securities eligible to vote in an election of directors (subject to certain exceptions, including if such person is the executive, an entity controlled by the executive or group of which the executive is a member), (2) during any period of two years or less, the individuals who constitute the Board of Directors at the beginning of such period cease, for any reason, to constitute at least a majority of the Board of Directors, unless the election or nomination for election of each new director was approved by at least two-thirds of the directors then still in office who were directors at the beginning of the period; (3) any dissolution or liquidation of ICE or any sale or disposition of 50% or more of ICE’s assets or business; or (4) the consummation of any reorganization, merger, consolidation or share exchange or similar form of corporate transaction involving ICE, unless (a) the persons who were the beneficial owners of outstanding ICE securities eligible to vote in an election of directors immediately before the consummation of such transaction hold more than 60% of the voting power immediately following the consummation of such transaction, and (b) each such person holds such securities in substantially the same proportion immediately following the consummation of such transaction as each such person had held immediately prior to the consummation of such transaction.

 

“Good Reason” generally means: (1) there is a material reduction or, after a change in control, any reduction, in the executive’s base salary or opportunity to receive any annual bonus and stock option grants without the executive’s express written consent; (2) there is a material reduction or, after a change in control, any reduction in the scope, importance or prestige of the executive’s duties; (3) ICE transfers the executive’s primary work site to a site that is more than thirty miles from his then current work site; (4) ICE, after a change in control, changes the executive’s job title or fails to continue to make available to the executive the same or equivalent plans, programs and policies; (5) there is a material breach or, after a change in control, any breach of his or her employment agreement; or (6) in the case of Mr. Sprecher, ICE fails to nominate the executive for re-election to its board of directors.

 

Termination Following a Change in Control

 

If the termination occurs after the effective date of a change in control of ICE, ICE must pay the executive a lump sum amount of cash equal to a multiple of his salary and bonus. This multiple is three for Messrs. Sprecher, Vice, Spencer and Goone, and two for Mr. Marcial. In these circumstances, the applicable bonus amount will be the greater of the executive’s last annual bonus and the executive’s target bonus, as previously determined by the Board of Directors, for the year in which the executive is terminated. ICE will also provide gross up payments to the terminated executive as necessary to compensate him for liability for certain excise taxes that may become due as a result of payments called for under the employment agreement. In addition, ICE must continue to make available coverage under the employee benefits plans as if an executive remained employed for the “Welfare Benefit Continuation Period,” which is defined as two years for Messrs. Sprecher, Vice, Spencer and Goone, and one and one-half years for Mr. Marcial. If an executive delivers written notice to ICE, the Welfare Benefit Continuation Period is the shorter of the period defined above or the balance of the Term of the Employment Agreement.

 

An executive terminated following, or as a result of, a change in control will be entitled to exercise his or her stock options that had been granted after entering into the employment agreement for the same period as if the executive had continued in employment through the remainder of his or her term. All of the executive’s stock options or other forms of equity awards granted after the date of the employment agreement will become exercisable or vest upon the executive’s termination.

 

The following table presents the estimated benefits and payments for termination of the NEOs unrelated to a change in control and following a change of control, assuming the termination took place on the last business day of the most recently completed fiscal year. For certain items below, the values use a closing price of $107.90 for our Common Stock on the NYSE on December 29, 2006.

 

TERMINATION BY ICE WITHOUT CAUSE

 

2006 Payments on Termination