UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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 ¨
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appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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Multimedia
Games, Inc.
(Name of
Registrant as Specified in its Charter)
N/A
(Name
of Person(s) Filing Proxy Statement if other than the
Registrant)
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of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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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)
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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March 19,
2009
Dear
Shareholder:
You are
cordially invited to attend the annual meeting of shareholders of Multimedia
Games, Inc., a Texas Corporation, to be held on
Monday, April 6, 2009 at 10:00 a.m. local time, at our corporate
office, located at 206 Wild Basin Road South, Building B,
Fourth Floor, Austin, Texas 78746.
Details of the business
to be conducted at the annual meeting are provided in the attached Notice of
Annual Meeting of Shareholders and Proxy Statement for Annual Meeting of
Shareholders. A copy of our Annual Report on Form 10-K, including Amendment
No. 1 thereto on Form 10-K/A, for our fiscal year ended
September 30, 2008 is also enclosed. On March 6, 2009,
we filed Amendment No. 2 to our Annual Report on Form 10-K for our
fiscal year ended September 30, 2008. A copy of Amendment No. 2,
as filed with the Securities and Exchange Commission, may be obtained by any
shareholder without charge by visiting our website located at HTTP://IR.MULTIMEDIAGAMES.COM/FINANCIALS.CFM or by
directing a written request to our Corporate Secretary at 206 Wild Basin
Road South, Building B, Fourth Floor, Austin,
Texas 78746.
Whether
or not you attend the annual meeting, it is important that your shares be
represented and voted at the meeting. To assure that your vote is counted,
please sign, date, and promptly return your proxy card in the enclosed
postage-prepaid envelope, or vote your shares as promptly as possible by
Internet, pursuant to the instructions set forth on the proxy card. If you
decide to attend the annual meeting and vote in person, your proxy will be
revoked automatically and only your vote at the annual meeting will be
counted.
YOUR
SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN THE ENCLOSED PROXY CARD, VOTE
YOUR SHARES BY TELEPHONE OR INTERNET, OR ATTEND THE ANNUAL MEETING IN
PERSON.
I
sincerely hope that you can find the time to attend this annual meeting. I look
forward to seeing you.
Respectfully
yours,
/s/ Anthony M. Sanfilippo
Anthony
M. Sanfilippo,
Chief
Executive Officer
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 6, 2009
TO THE
SHAREHOLDERS OF MULTIMEDIA GAMES, INC.:
NOTICE IS
HEREBY GIVEN that the 2009 Annual Meeting of Shareholders of Multimedia
Games, Inc., a Texas corporation, will be held on April 6, 2009, at 10:00
a.m. local time, at our corporate office, located at 206 Wild Basin Road
South, Building B, Fourth Floor, Austin, Texas 78746, for the
following purposes:
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1.
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To
elect the following nominees as directors to serve for the ensuing year
and until their respective successors are elected: Neil E. Jenkins,
Michael J. Maples, Sr., Emanuel R. Pearlman, Robert D.
Repass, Anthony M. Sanfilippo, Justin A. Orlando, and
Stephen J. Greathouse;
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2.
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To
ratify the appointment of BDO Seidman, LLP as our independent
registered public accountants for our fiscal year ending
September 30, 2009; and
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3.
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To
transact such other business as may properly come before the annual
meeting or any adjournment or adjournments
thereof.
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Each of
these items of business is more fully described in the Proxy Statement
accompanying this Notice.
Only
shareholders of record at the close of business on February 5, 2009
are entitled to notice of, and to vote at, the annual meeting. A complete list
of shareholders entitled to vote will be available for inspection by any
shareholder, for any purpose relating to the meeting, during normal business
hours at our principal executive offices, 206 Wild Basin South, Building B,
Fourth Floor, Austin, Texas, 78746, for ten days prior to the annual
meeting.
All of
you are invited to attend the annual meeting in person. However, to assure that
your vote is represented, you are urged to promptly mark, sign, and return the
enclosed proxy card in the enclosed postage-prepaid envelope, or vote your
shares as promptly as possible by Internet, pursuant to the instructions set
forth on the proxy card. If you receive more than one proxy card because you own
shares registered in different names or addresses, you should complete and
return each proxy card, or vote by Internet each such proxy card. If you attend
the annual meeting in person, and vote in person, your proxy will be revoked
automatically and only your vote at the annual meeting will be
counted.
By
order of the Board of Directors,
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/s/
Anthony M. Sanfilippo
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Anthony
M. Sanfilippo,
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Chief
Executive Officer
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Austin,
Texas
MULTIMEDIA
GAMES, INC.
206
WILD BASIN ROAD SOUTH
BUILDING
B, FOURTH FLOOR
AUSTIN,
TEXAS 78746
(512) 334-7500
PROXY
STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 6, 2009
General
The
accompanying proxy is solicited on behalf of the Board of Directors of
Multimedia Games, Inc., a Texas corporation, for use at our 2009 annual meeting
of shareholders. The annual meeting will be held on Monday,
April 6, 2009, at 10:00 a.m. local time, at our corporate office,
located at 206 Wild Basin Road South, Building B, Fourth Floor,
Austin, Texas 78746.
This
Proxy Statement and the enclosed proxy card are being mailed on or about
March 19, 2009 to all shareholders entitled to vote at the annual
meeting.
Voting
by proxy
You may
vote at the annual meeting by completing, signing and returning the enclosed
proxy card, or by properly following the instructions for Internet voting set
forth on the proxy card. If not revoked, your proxy will be voted at the annual
meeting in accordance with your instructions marked on the proxy card or
properly provided by Internet. If you fail to mark your proxy with instructions,
your proxy will be voted as follows:
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FOR
the election of the seven nominees for director listed in this Proxy
Statement; and
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FOR
the ratification of the appointment of BDO Seidman, LLP, as our
independent registered public accountants for our fiscal year ending
September 30, 2009.
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As to any
other matter that may be properly brought before the annual meeting, your proxy
will be voted as our Board of Directors may recommend. If our Board of Directors
makes no recommendation, your proxy will be voted as the proxy holders named in
your proxy card deem advisable. As of the date of this Proxy Statement, our
Board of Directors does not know of any other matter that is expected to be
presented for consideration at the annual meeting.
Broker
non-votes
A broker
non-vote occurs when a broker submits a proxy card with respect to shares held
in a fiduciary capacity (typically referred to as being held in “street name”)
but declines to vote on a particular matter because the broker has not received
voting instructions from the beneficial owner. Under the rules that govern
brokers who are voting with respect to shares held in street name, brokers have
the discretion to vote such shares on routine matters, but not on nonroutine
matters. Routine matters include the election of directors, increases in
authorized common stock for general corporate purposes, and ratification of
auditors. Nonroutine matters include approvals of and amendments to stock
plans.
You
may revoke your proxy and give a new proxy or vote in person
You may
revoke your proxy at any time prior to the voting of that proxy. To revoke a
prior proxy, you must do one of the following:
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Execute
and return a subsequently dated revised proxy
card;
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Deliver
an executed written notice of revocation to us addressed to Uri L.
Clinton, Inspector of Elections, at our principal executive offices, 206
Wild Basin South, Building B, Fourth Floor, Austin, Texas 78746;
or
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Attend
the annual meeting and vote in person at the
meeting.
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Voting
and quorum requirements at the meeting
The
specific proposals to be considered and acted upon at the annual meeting are
summarized in the accompanying notice and are described in more detail in this
Proxy Statement. Only holders of record of shares of our common stock at the
close of business on February 5, 2009 (the “record date”) are entitled
to notice of and to vote at the annual meeting. On the record date, there were
26,642,942 shares of our common stock outstanding and no shares of our
preferred stock outstanding. Each shareholder is entitled to one vote for each
share of common stock held by such shareholder on the record date.
In order
to have a meeting, it is necessary that a quorum be present. A quorum will be
present if a majority of the shares of common stock are represented at the
annual meeting in person or by proxy. Abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum.
Abstentions and broker non-votes will not be counted as having voted either for
or against a proposal. If a quorum is present, the affirmative vote of the
holders of a majority of the shares present or represented at the annual
meeting, and that actually vote for or against the matter, is required to
approve proposal two regarding the ratification of our independent accountants
for our fiscal year ending September 30, 2009.
With
respect to proposal one, our bylaws provide that in an uncontested election,
directors will be elected by a majority vote, meaning that a nominee will be
elected to our Board of Directors if the number of votes cast "for" such
nominee's election exceeds the number of votes cast "against" such nominee's
election. See "Corporate Governance Matters — Majority-Voting Standard for
Director Elections" on page 8.
All votes
will be tabulated by the inspector of election appointed for the annual meeting,
who will separately tabulate affirmative and negative votes, abstentions and
broker non-votes (i.e., a proxy submitted by a broker or nominee specifically
indicating the lack of discretionary authority to vote on the matter).
Abstentions and broker non-votes will be counted as present for purposes of
determining a quorum for the transaction of business but will not be counted for
purposes of determining whether each proposal has been approved. If your shares
are held in the name of a broker, trust bank, or other nominee, you will need to
bring a proxy or letter from that broker, trust company, or nominee that
confirms that you are the beneficial owner of those shares, and that such
broker, trust company, or nominee has not voted those shares in any proxy
submitted by it in connection with the annual meeting.
What
happens if a director nominee does not receive the required majority
vote?
Any
nominee who is not currently a member of our Board of Directors and who receives
a greater number of votes “against” his or her election than “for” his or her
election will not be elected to our Board of Directors. Additionally, each
nominee who is standing for reelection at the annual meeting has tendered an
irrevocable resignation from our Board of Directors that will take effect if the
nominee does not receive the required majority vote and our Board of Directors
accepts the resignation.
If our Board of Directors accepts the resignation, the nominee will no longer
serve on our Board of Directors, and if our Board of Directors rejects the
resignation, the nominee will continue to serve until his or her successor has
been duly elected and qualified or until his or her earlier disqualification,
death, resignation, or removal. See "Corporate Governance Matters —
Majority-Voting Standard for Director Elections" on page 8.
Solicitation
of proxies
We are
paying for all our costs incurred with soliciting proxies for the annual
meeting. In addition to solicitation by mail, we may use our directors,
officers, and regular employees to solicit proxies by telephone or otherwise.
Our directors, officers, and regular employees will not be specifically
compensated for these services. We will pay persons holding shares of common
stock for the benefit of others, such as nominees, brokerage houses, banks, and
other fiduciaries, for the expense of forwarding solicitation materials to such
beneficial owners.
PROPOSAL
ONE
ELECTION OF DIRECTORS
Nominees
and Vote Required to Elect Nominees
A board
of seven directors is to be elected at the annual meeting. Our bylaws provide
that in an uncontested election, directors will be elected by a majority vote,
meaning that a nominee will be elected to our Board of Directors if the number
of votes cast "for" such nominee's election exceeds the number of votes cast
"against" such nominee's election. See "Corporate Governance Matters —
Majority-Voting Standard for Director Elections" on page 8. You may vote
the number of shares of common stock you own for up to seven persons. Unless you
otherwise instruct by marking your proxy card, the proxy holders will vote the
proxies received by them FOR the election of each of the seven nominees named
below. If any of the nominees is unable or declines to serve as a director at
the time of the annual meeting, the proxies will be voted for any nominee
designated by our present Board of Directors to fill the vacancy. We have no
reason to believe that any of the nominees will be unable or unwilling to serve
if elected. The term of office of each person elected as a director will
continue until the next annual meeting of shareholders or until his successor
has been elected and qualified.
Our
bylaws set the size of our Board of Directors at seven members, or such other
number as set from time-to-time by resolution of our Board of Directors.
Following the annual meeting, our Board of Directors may increase the size of
our Board of Directors and fill any resulting vacancy or vacancies. If our Board
of Directors increases the size of our Board of Directors and elects a new
director to fill the resulting vacancy, the new director must stand for election
at the next year’s annual meeting.
Current
director John M. Winkelman has decided not to stand for re-election
this year.
The
following table sets forth the nominees, their ages, their principal positions
and the year in which each became a director. Each of the nominees was
recommended for selection by the Nominating and Corporate Governance Committee,
or the Governance Committee, and approved by the unanimous vote of our
independent directors.
Name of Nominee
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Age
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Positions and Offices
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Director Since
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Michael
J. Maples, Sr. (1)(2)
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66
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Director,
Chairman of the Board of Directors
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2004
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Robert
D. Repass (1)(2)
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48
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Director
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2002
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Neil
E. Jenkins (3)
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59
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Director
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2006
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Emanuel
R. Pearlman (1)(3)
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48
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Director
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2006
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Anthony
M. Sanfilippo
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50
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Director
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2008
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Stephen
J. Greathouse
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58
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Director
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n/a
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Justin
A. Orlando
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38
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Director
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n/a
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(1)
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Currently
a member of the Governance Committee (Mr. Pearlman serves as Chairman of
the committee).
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(2)
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Currently
a member of the Audit Committee (Mr. Repass serves as Chairman of the
committee).
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(3)
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Currently
a member of the Compensation Committee (Mr. Jenkins serves as Chairman of
the committee).
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Michael J.
Maples, Sr. has been a director of ours since August 2004 and has
served as Chairman of the Board of Directors since April 2006.
Mr. Maples held various management positions at Microsoft Corporation from
April 1988 to July 1995, including Executive Vice President of the
Worldwide Products Group. As a member of the Office of the President at
Microsoft, Mr. Maples reported directly to the Chairman. Previously,
Mr. Maples served as Director of Software Strategy for International
Business Machines Corp. Mr. Maples also currently serves on the boards of
Motive, Inc., a service management software company, Lexmark International,
Inc., a laser and inkjet printer company, and Sonic Corp., an operator and
franchisor of drive-in restaurants. Mr. Maples is currently a member of the
Board of Visitors of the Engineering School at the University of Oklahoma and
the College of Engineering Foundation Advisory Council at the University of
Texas at Austin. Mr. Maples received a B.S. in Electrical Engineering from
the University of Oklahoma and an MBA from Oklahoma City
University.
Robert D.
Repass has
been a director of ours since July 2002. In addition to his role as a
director, Mr. Repass serves as Chairman of the Audit Committee.
Mr. Repass was the managing partner of the Austin office of
PricewaterhouseCoopers from December 1997 to March 2000, and from
March 2000 until December 2001, Mr. Repass was a partner with
TL Ventures, a Philadelphia based venture capital firm. From
January 2002 until March 2002, Mr. Repass was a private
consultant. Mr. Repass has also served as Vice President and Chief
Financial Officer of Motion Computing, Inc., a mobile computing company,
from April 2002 through February 2009. Mr. Repass is currently a
partner with Maxwell, Locke & Ritter, an Austin based professional services
firm. From January 2003 until December 2005, Mr. Repass served on
the Board of Directors and as the Chairman of the Audit Committee of Bindview
Development Corporation, a software company. Mr. Repass has over
20 years of public accounting, Securities and Exchange Commission, or SEC,
and financial reporting experience. Mr. Repass received a B.S. in
Accounting from Virginia Tech.
Neil E.
Jenkins has been a director of ours since October 2006.
Since 2000, Mr. Jenkins has been an Executive Vice President and
Secretary and the General Counsel for Lawson Products, Inc., a publicly traded
industrial products company. From 1996 to 1999, Mr. Jenkins
owned an SCH Golf Franchise that specialized in tours to Scotland and
Ireland. Beginning in 1974, Mr. Jenkins began working in labor
relations for Bally Manufacturing Corporation, and continued in the legal
department, rising to the position of General Counsel, a capacity he served in
from 1985 to 1992. In 1993, Mr. Jenkins became a member
of Bally Gaming International’s Executive Team, where he helped coordinate
business development, legal, and licensing matters for Bally Manufacturing’s
gaming industry spin-off. Mr. Jenkins received a B.A. in Political Science
from Brown University, a Juris Doctor degree from Loyola University Chicago
School of Law, and a Master of Science degree in Financial Markets from the
Center for Law & Financial Markets at the Illinois Institute of
Technology.
Emanuel R.
Pearlman has been a director of ours since October 2006. He has more
than 20 years of experience in the investment community.
Mr. Pearlman is the founder and Chief Executive Officer of Liberation
Investment Group LLC, a New York-based investment management firm. Prior to
founding Liberation, Mr. Pearlman was the Chief Operating Officer of
Vornado Operating Corporation. For 14 years, Mr. Pearlman ran
Gemini Partners, which specialized in strategic block investing and financial
consulting. Mr. Pearlman’s experience in the gaming industry includes consulting to
Jackpot Enterprises and to Bally Entertainment Corporation, where he advised the
companies on their business and financial activities. Mr. Pearlman received
a B.A. in Economics from Duke University and an MBA from the Harvard Graduate
School of Business.
Anthony M.
Sanfilippo joined us as Chief Executive Officer and director in
June 2008. Mr. Sanfilippo brings to us more than 20 years' experience
with Harrah's Entertainment, Inc. (Harrah’s), the world's largest casino company
and a provider of branded casino entertainment. While at Harrah’s, Mr.
Sanfilippo served as President of both the Western Division
(2003 – 2004) and the Central Division (1997 – 2002 and
2004 – 2007), overseeing the operations of more than two dozen casino
and casino-hotel destinations. Mr. Sanfilippo was also part of the senior
management team that led the successful integration of numerous gaming companies
acquired by Harrah's, including Jack Binion's Horseshoe Casinos, the Grand
Casino & Hotel brand, Players International, and Louisiana Downs Racetrack.
In addition to his duties as divisional President, Mr. Sanfilippo was also
President and Chief Operating Officer for Harrah's New Orleans and a member of
the Board of Directors of Jazz Casino Corporation prior to its acquisition by
Harrah's. Mr. Sanfilippo has directed tribal gaming operations in Arizona,
California and Kansas, and has held gaming licenses in most states that offer
legalized gambling.
Stephen J.
Greathouse has been involved in the Las Vegas hotel and gaming industry
for more than 30 years, and from 1997 to 2005, he served as
Senior Vice President of Operations for the Mandalay Resort Group. Prior to his
time at Mandalay, in 1997, Mr. Greathouse served as President of
Boardwalk Hotel & Casino, Las Vegas, and from
1994 to 1997, he served as Chief Executive Officer and
Chairman of the Board of Alliance Gaming Corporation, (renamed “Bally
Technologies, Inc.” in 2006). Mr. Greathouse spent 16 years with
Harrah’s, starting as a Race & Sports Book Manager in Reno and working his
way up to President, Casino-Hotel Division. Mr. Greathouse is a
Commissioner for the Spending and Government Efficiency Commission (SAGE
Commission), a privately funded, bi-partisan panel created to review state
government operations that fall under the Executive Branch and to provide the
Governor of Nevada with recommendations for streamlining operations, improving
customer service, and maximizing the use of taxpayer dollars.
Mr. Greathouse received a B.S. in Business Administration from the
University of Missouri-Columbia.
Justin A.
Orlando is a managing director of Dolphin Limited Partnerships, a private
investment management firm focused on investing in undervalued public companies
across a diverse set of industries. Previously, from 1999 to 2002,
Mr. Orlando was a member of the healthcare investment banking group of
Merrill Lynch, Pierce, Fenner & Smith Incorporated where he was involved in
advisory work, financings, and control transactions. From
1996 to 1999, Mr. Orlando practiced corporate law with the law
firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP, focusing on
mergers and acquisitions and corporate finance transactions. Mr. Orlando
received a B.A. in History from the University of Chicago and a Juris Doctor
degree from the Columbia University School of Law.
Nominee
Recommendations
All
director nominees were approved by the Governance Committee for inclusion in our
proxy card for the annual meeting.
The
Governance Committee has proposed Stephen J. Greathouse as a nominee
to fill the vacancy created by Mr. Winkelman, who notified our Board of
Directors that he did not wish to stand for re-election in order to pursue
other business opportunities. The Governance Committee selected
Mr. Greathouse as a nominee after soliciting the names of potential
nominees from management and the existing directors. Mr. Greathouse's name
was suggested by our Chief Executive Officer, Mr. Sanfilippo.
Mr. Greathouse was interviewed by existing directors and was asked to
submit information concerning his experience and background. Upon completing
this process, the Governance Committee determined that Mr. Greathouse met
or exceeded our director nominee criteria (see “Corporate Governance
Matters - Director Nominations” on page 7), and, if elected, would
strengthen our Board of Directors and benefit us because of his
experience.
The
Governance Committee has proposed Justin A. Orlando as a nominee to fill a newly
created seat on our Board of Directors. The Governance Committee selected
Mr. Orlando as a nominee after he was recommended for election to our Board
of Directors by Dolphin Limited Partnership III, L.P. and certain
related entities, which beneficially owned approximately 7.1% of
the outstanding shares of our common stock as of February 23, 2009.
Mr. Orlando was interviewed by existing directors and was asked to submit
information concerning his experience and background. Upon completing this
process, the Governance Committee determined that Mr. Orlando met or
exceeded our director nominee criteria (see “Corporate Governance Matters -
Director Nominations” on page 7), and, if elected, would strengthen our
Board of Directors and benefit us because of his experience.
There are
no family relationships among any of our executive officers and
directors.
Agreement
with Liberation Investments
Each of
Messrs. Pearlman and Jenkins was originally appointed to our Board of Directors
in October 2006, nominated for inclusion on the slate of candidates for
election at the 2007 annual shareholders meeting and recommended by our
Board of Directors to the shareholders for election at the 2007 annual
meeting pursuant to an Agreement dated October 24, 2006, by and among
us and Liberation Investments, L.P., a Delaware limited partnership,
certain entities affiliated with Liberation Investments, L.P.,
Mr. Pearlman, an affiliate of Liberation Investments, L.P., and
Mr. Jenkins. A copy of the agreement is attached as Exhibit 10.1 to a
Current Report on Form 8-K filed by us with the SEC, on
October 26, 2006. The agreement does not require our Board of
Directors’ nomination of, or recommendation of a vote in favor of, either of
Messrs. Pearlman or Jenkins for election as directors at the 2009 annual
shareholders meeting, and our Board of Directors’ nomination and recommendation
of Messrs. Pearlman and Jenkins for election as directors at the 2009
annual shareholders meeting has not been made pursuant to any obligation arising
under such agreement or any other agreement.
Recommendation
of Our Board of Directors
Our
Board of Directors recommends that the shareholders vote “FOR” the nominees
named above.
CORPORATE
GOVERNANCE
Determination
of Independence
Our Board
of Directors has determined that Messrs. Maples, Repass, Winkelman,
Jenkins, Pearlman, Orlando and Greathouse each qualify as “independent”
directors under applicable Marketplace Rules of the Nasdaq Stock Market, Inc.
currently in effect (“the Nasdaq Marketplace Rules”). Therefore, a majority of
the members of our Board of Directors are “independent” as such term is defined
in such Marketplace Rules. In addition, our Board of Directors has reviewed and
considered facts and circumstances relevant to the independence of such members
and has determined that such members are independent.
The
independent directors have committed to hold formal meetings, separate from
management, which they intend to hold at least four times a year.
Meetings
of Our Board of Directors
During
our fiscal year ended September 30, 2008, our Board of Directors held
19 meetings. During that period, no director attended fewer than 75%
of the aggregate of (i) the total number of meetings of our Board of
Directors held during the period for which he was a director,
and (ii) the total number of meetings held by all committees of our
Board of Directors during the period that he served on such
committees.
Committees
of Our Board of Directors
Our Board
of Directors has three standing committees: the Audit Committee; the
Compensation Committee; and the Governance Committee. Currently, all of the
members of each of our committees are “independent,” as determined by our Board
of Directors and in accordance with Nasdaq Marketplace Rules. In addition, each
member of the Audit Committee also satisfies the independence requirements of
Rule-10A3(b)(1) of the SEC rules promulgated under the Securities Exchange
Act of 1934, as amended, or the 1934 Act.
Audit Committee.
The Audit Committee is currently comprised of Messrs. Maples, Repass, and
Winkelman. Mr. Repass serves as the Chairman of the Audit Committee. The
Audit Committee operates under a written charter adopted by our Board of
Directors, a current copy of which is located on our website under the “Investor
Relations” page. Our Internet website address is http://www.multimediagames.com.
A copy of the charter will also be made available free of charge upon written
request made to our Corporate Secretary, at 206 Wild Basin Road South, Building
B, Fourth Floor, Austin, Texas 78746. The primary purpose of the Audit Committee
is to assist our Board of Directors in monitoring:
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The
integrity of our financial
statements;
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The
independent auditor’s qualifications and independence;
and
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The
performance of our independent registered public
accountants.
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The Audit
Committee is also directly responsible for the appointment, compensation,
retention, and oversight of the work of our independent registered public
accountants, BDO Seidman, LLP, and the preparation of the Audit Committee
Report, which is included elsewhere in this Proxy Statement. Our independent
registered public accountants report directly to the Audit
Committee.
The Audit
Committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules
adopted thereunder, meets with management and the auditors prior to the filing
of all periodic reports under the 1934 Act, and prior to the filing of
officers’ certifications with the SEC to receive information concerning, among
other things, significant deficiencies, if any, in the design or operation of
our internal controls.
All Audit
Committee members are “independent” as defined and required under the Nasdaq
listing standards and the rules and regulations of the SEC. All Audit Committee
members also possess the level of financial literacy required by all applicable
laws and regulations. Our Board of Directors has determined that at least one
member of the Audit Committee, Mr. Robert D. Repass, is
a “financial expert,” and that Mr. Repass is “independent” as
defined by the rules and regulations of the SEC. The Audit
Committee Charter has been amended to
specifically state all of the Audit Committee
responsibilities set forth in Rule 10A-3(b)(2), (3), (4) and
(5) of the rules and regulations promulgated under the
1934 Act. The Audit Committee met 16 times during our fiscal year
ended September 30, 2008.
Compensation
Committee. The Compensation Committee currently is comprised of Messrs.
Winkelman, Jenkins and Pearlman. Mr. Jenkins serves as the Chairman of the
Compensation Committee. The Compensation Committee is charged with the
responsibility of determining (or recommending to the independent members of our
Board of Directors to determine) the compensation of all executive officers,
including our Chief Executive Officer, and directors.
In
June 2004, our Board of Directors approved a charter of the Compensation
Committee, a current copy of which is located on our website under the “Investor
Relations” page. Our Internet website address is http://www.multimediagames.com.
A copy of the charter of the Compensation Committee will also be made available
free of charge upon written request made to our Corporate Secretary, at 206 Wild
Basin Road South, Building B, Fourth Floor, Austin, Texas 78746. During our
fiscal year ended September 30, 2008, the Compensation Committee
met seven times and acted by written consent two times.
Nominating and
Corporate Governance Committee. The Governance Committee is currently
comprised of Messrs. Maples, Repass, and Pearlman. Mr. Pearlman serves as
Chairman of the Governance Committee. The primary purpose of the Governance
Committee is to identify and recommend to our Board of Directors individuals who
are qualified to become members of our Board of Directors and the committees of
our Board of Directors. The Governance Committee is also responsible for
recommending to our Board of Directors corporate governance principles,
providing oversight of the annual performance review process of our Board of
Directors and the committees of our Board of Directors, and facilitating
interaction between our management and our Board of Directors and committees of
our Board of Directors.
All
members of the Governance Committee meet the test for independence set forth in
the Nasdaq Marketplace Rules. In June 2004, our Board of Directors approved
a Charter of the Governance Committee, a current copy of which is located on our
website under the “Investor Relations” page. Our Internet website address is
http://www.multimediagames.com. A copy of the charter of the Governance
Committee will also be made available free of charge upon written request made
to our Corporate Secretary, at 206 Wild Basin Road South, Building B, Fourth
Floor, Austin Texas 78746. The Governance Committee met one time during our
fiscal year ended September 30, 2008.
Director
Nominations
Our
directors play a critical role in guiding our strategic direction and overseeing
the management of our business. The Governance Committee’s goal is to assemble a
Board of Directors that brings to us a variety of perspectives and skills
derived from high quality business and professional experience. Board of
Director candidates are considered based upon various criteria, such as their
business and professional skills and experiences, personal and professional
ethics, integrity and values, long-term commitment to representing the best
interests of our shareholders and inquisitive and objective perspective and
mature judgment. Additionally, director candidates must have sufficient time
available to perform all Board of Directors and committee responsibilities. When
reviewing potential director candidates, the Governance Committee considers the
following factors:
|
§
|
The
appropriate size of our Board of Directors and its
committees;
|
|
§
|
The
perceived needs of our Board of Directors for particular skills,
background, and business
experience;
|
|
§
|
The
skills, background, reputation, and business experience of nominees in
relation to the skills, background, reputation, and business experience
already possessed by other members of our Board of
Directors;
|
|
§
|
Nominees’
independence from management;
|
|
§
|
Nominees’
experience with accounting rules and
practices;
|
|
§
|
Nominees’
background with regard to executive
compensation;
|
|
§
|
Applicable
regulatory and listing requirements, including independence requirements
and legal considerations, such as antitrust
compliance;
|
|
§
|
The
benefits of a constructive working relationship among directors;
and
|
|
§
|
The
desire to balance the considerable benefit of continuity with the periodic
injection of the fresh perspective provided by new
members.
|
The
Governance Committee may also consider from time to time, such other factors as
it may deem to be in the best interests of our business and shareholders. Other
than considering the factors listed above, we have no stated minimum criteria
for director nominees. The Governance Committee does, however, believe it
appropriate for at least one member of our Board of Directors to meet the
criteria for an “Audit Committee financial expert” as defined by SEC rules, and
that a majority of the members of our Board of Directors meet the definition of
“independent” director under Nasdaq Marketplace Rules.
The
Governance Committee will review the qualifications and backgrounds of the
current directors, as well as the overall composition of our Board of Directors,
and recommend to our full Board of Directors the slate of directors to be
nominated for election at the annual meeting of shareholders. In the case of
incumbent directors whose terms of office are set to expire, the Governance
Committee reviews such directors to determine whether to recommend these
directors for re-election. In the case of new director candidates, the questions
of independence and financial expertise are important to determine what roles
can be performed by the candidate, and the Governance Committee determines
whether the candidate meets the independence standards set forth in the
Sarbanes-Oxley Act of 2002, and SEC and Nasdaq rules, and the level of the
candidate’s financial expertise. Candidates for nomination as director come to
the attention of the Governance Committee from time to time through incumbent
directors, management, shareholders, or third parties. These candidates may be
considered at meetings of the Governance Committee at any point during the year.
The evaluation process may also include interviews and additional background and
reference checks for non-incumbent nominees, at the discretion of the Governance
Committee.
Pursuant
to the Governance Committee Charter, the Governance Committee will consider
nominees recommended by shareholders. Any shareholder wishing to recommend a
director candidate for consideration by the Governance Committee must provide
written notice not later than November 19, 2009, to our Corporate
Secretary at 206 Wild Basin Road South, Building B, Fourth Floor, Austin
Texas 78746.
Director
Attendance at Annual Meetings
Our
policy is that all directors attend our annual meetings of shareholders. We take
great care in scheduling meetings at times when all of our directors are
available to attend such meetings. At our last annual meeting, which was held on
April 29, 2008, all of our then-current directors were in
attendance.
Majority-Voting
Standard for Director Elections
Our
Bylaws require that we use a majority-voting standard in uncontested director
elections and contain a resignation requirement for directors who fail to
receive the required majority vote. Under the majority-voting standard, a
director nominee must receive more votes cast "for" than "against" his or her
election in order to be elected to our Board of Directors. Any nominee who is
not currently a member of our Board of Directors and who receives a greater
number of votes “against” his or her election than “for” his or her election
will not be elected to our Board of Directors. Additionally, in accordance with
the majority-voting standard and resignation requirement, each nominee who is
standing for reelection at the annual meeting has tendered an irrevocable
resignation from our Board of Directors that will take effect if the nominee
does not receive the required majority vote and our Board of Directors accepts
the resignation If an incumbent director fails to receive the required vote for
re-election, the Governance Committee will act on an expedited basis to
determine whether to accept the director’s resignation and will submit such
recommendation for prompt consideration by our Board of Directors. Our Board of
Directors expects the director whose resignation is under consideration to
abstain from participating in any decision regarding that resignation. The
Governance Committee and Board of Directors may consider any factors they deem
relevant in deciding whether to accept a director’s resignation. If our Board of
Directors accepts the resignation, the nominee will no longer serve on our Board
of Directors, and if our Board of Directors rejects the resignation, the nominee
will continue to serve until his or her successor has been duly elected and
qualified or until his or her earlier disqualification, death, resignation, or
removal.
Shareholder
Communications with Our Board of Directors
Shareholders
may communicate with our Board of Directors by transmitting correspondence by
mail to the address below, or electronically through the “Investor Relations –
Corporate Governance Communications” form located on our website, which is
www.multimediagames.com.
Multimedia
Games, Inc.
ATTN:
Chairman of the Board of Directors
206 Wild
Basin Road South
Building
B, Fourth Floor
Austin,
Texas 78746
The
communications will be transmitted to the appropriate leadership of our Board of
Directors as soon as practicable, unless our Corporate Secretary, in
consultation with our legal counsel, determines there are safety or security
concerns that mitigate against further transmission of the communication. Our
Board of Directors shall be advised of any communication withheld for safety or
security reasons as soon as practicable.
Code
of Business Conduct and Ethics
We have
adopted a Code of Business Conduct and Ethics applicable to our officers,
directors, and employees and which includes a separate, additional Code of
Ethics for our principal executive officer, principal financial officer, and
principal accounting officer. This code, including the separate, additional code
for our principal executive officer, principal financing officer, and principal
accounting officer, is available free of charge by writing to our Corporate
Secretary at 206 Wild Basin Road South, Building B, Fourth Floor, Austin,
Texas 78746, or is publicly available on the “Investor Relations” page
(under Corporate Governance) of our Internet website located at
http://www.multimediagames.com. If we make any amendments to this code other
than technical, administrative, or other non-substantive amendments, or grant
any waivers, including implicit waivers, from a provision of the code to our
principal executive officer, principal financial officer, principal accounting
officer, or controller, or other persons performing similar functions that
requires disclosure by law or Nasdaq listing standard, we will disclose the
nature of the amendment or waiver, its effective date and to whom it applies on
our website or in a report on Form 8-K filed with the SEC.
Director
Compensation and Indemnification
We
maintain a plan to compensate the members of our Board of Directors for their
services as directors, including serving on committees of our Board of
Directors. Under the Director Compensation Plan, each of our directors
receives $37,500 per year, except for the Chairman of our Board
of Directors, who receives $75,000 per year. In addition, each
director receives $500 for each Board of Directors meeting attended in
person and $250 for each Board of Directors meeting attended by
telephone. Directors also receive the following amounts for serving on
committees of our Board of Directors:
Audit
Committee. The members of the Audit Committee each receive an
additional $15,000 per year for serving on the Audit Committee, except for
the Chairman of the Audit Committee, who receives $25,000 per year for
serving on the Audit Committee as its chairman. Each Audit Committee member also
receives $400 for each Audit Committee meeting attended in person
and $200 for each Audit Committee meeting attended by
telephone.
Nominating and
Corporate Governance Committee. The members of the Governance Committee
each receive an additional $7,500 per year for serving on the Governance
Committee, except for the Chairman of the Governance Committee, who receives
$15,000 per year for serving on the Governance Committee as its chairman.
Each Governance Committee member also receives $400 for each Governance
Committee meeting attended in person and $200 for each Governance Committee
meeting attended by telephone.
Compensation
Committee. Historically, the members of the Compensation Committee each
received $5,000 per year for serving on the Compensation Committee, except
for the Chairman of the Compensation Committee, who received $10,000 per
year. Effective as of October 1, 2008, the annual payment for serving
on the Compensation Committee was increased to $15,000, except for the
Chairman, who will receive $25,000 per year. Each Compensation Committee
member also receives $400 for each Compensation Committee meeting attended
in person and $200 for each Compensation Committee meeting attended by
telephone.
Other Committees
of Our Board of Directors. The members of any other committee of our
Board of Directors which may be established from time to time, each receive an
additional $5,000 per year for serving on any such committee, except for
the chairman of any such committee, who receives $10,000 per year for
serving as chairman. Each member of any such committee also receives $400
for each meeting of such committee attended in person and $200 for each
meeting of such committee attended by telephone.
In
general, each sitting outside director will receive an option grant on an annual
basis for 10,000 shares of common stock that will vest six months from the
date of grant, subject to restrictions which prevent the sale of such shares.
These restrictions on the sale of the underlying shares lapse with respect
to 25% of the shares annually.
Our
Articles of Incorporation, as amended, limit the personal liability of our
directors for breaches of fiduciary duties. Our Bylaws require us to indemnify
our directors to the fullest extent permitted by Texas law. We have entered into
indemnification agreements with our directors and officers. These
indemnification agreements are intended to permit indemnification of our
directors and officers to the fullest extent now or hereafter permitted by the
Texas Business Corporation Act.
DIRECTOR
COMPENSATION TABLE FOR OUR
FISCAL
YEAR ENDED SEPTEMBER 30, 2008
The
following table provides a summary of total compensation paid to the Company’s
outside directors during the fiscal year ended
September 30, 2008.
Name
|
|
Fees Earned
or
Paid in
Cash
(1)
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards (2)
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil
E. Jenkins
|
|
|
67,300 |
|
|
|
– |
|
|
|
43,378 |
|
|
|
– |
|
|
|
110,678 |
|
Michael
J. Maples, Sr. (3)
|
|
|
108,600 |
|
|
|
– |
|
|
|
43,378 |
|
|
|
– |
|
|
|
151,978 |
|
Emanuel
R. Pearlman
|
|
|
51,600 |
|
|
|
– |
|
|
|
43,378 |
|
|
|
– |
|
|
|
94,978 |
|
Robert
D. Repass
|
|
|
81,500 |
|
|
|
– |
|
|
|
43,378 |
|
|
|
– |
|
|
|
124,878 |
|
John
M. Winkelman
|
|
|
90,400 |
|
|
|
– |
|
|
|
43,378 |
|
|
|
– |
|
|
|
133,778 |
|
|
(1)
|
Reflects
the amount of cash compensation earned by directors, including annual
retainers for Board of Directors and committee service, and meeting
fees.
|
|
(2)
|
Represents
the dollar amount recognized for financial statement reporting purposes
with respect to the grant date fair value of option grants made to each
director during the fiscal year ended September 30, 2008. The
fair value was estimated using the Black-Scholes option pricing model in
accordance with SFAS 123R.
|
|
(3)
|
Mr. Maples
serves as the Company’s non-executive Chairman of the Board of
Directors.
|
Compensation
Committee Interlocks and Insider Participation
During
the fiscal year ended September 30, 2008, the Compensation Committee
of our Board of Directors consisted of Mr. Winkelman and
Mr. Mr. Pearlman. Neither of these individuals has served at any time
as an officer or employee of the Company or is an Executive Officer at any
company where an Executive Officer of the Company
serves on the Compensation Committee.
PROPOSAL
TWO
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Audit
Committee of our Board of Directors has selected BDO Seidman, LLP as independent
registered public accountants to audit our consolidated financial statements for
the fiscal year ending September 30, 2009. BDO Seidman, LLP has
served as our independent registered public accountants since their appointment
in our 1999 fiscal year. A representative of BDO Seidman, LLP is
expected to be present at the annual meeting, with the opportunity to make a
statement if the representative desires to do so, and is expected to be
available to respond to appropriate questions.
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$ |
892,947 |
|
|
$ |
952,870 |
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees
|
|
|
145,000 |
|
|
|
155,900 |
|
|
|
|
|
|
|
|
|
|
Tax
Fees
|
|
|
128,251 |
|
|
|
108,883 |
|
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
1,166,198 |
|
|
$ |
1,217,653 |
|
Audit
Fees. Audit Fees represent fees for professional services provided in
connection with the audit of our annual financial statements and of management’s
assessment and the operating effectiveness of internal control over financial
reporting including in our Form 10-K, the quarterly reviews of financial
statements included in our Form 10-Q filings and other statutory or
regulatory filings.
Audit-Related
Fees. Audit-Related Fees are fees for assurance and related services that
are reasonably related to the attendance at the Audit Committee meetings and our
Annual Shareholders’ Meeting. This category includes fees related to assistance
in employee benefit and compensation plan audits, SAS 70 audits and
consulting on financial accounting/reporting standards.
Tax Fees.
Tax Fees primarily include professional services performed with respect to
preparation and review of our original and amended tax returns and those of our
consolidated subsidiaries, and for state, local and international tax
consultation. Tax fees also include professional fees related to research and
development tax credit studies.
All Other
Fees. All Other Fees includes the aggregate fees for products and
services provided by BDO Seidman, LLP that are not reported under “Audit Fees,”
“Audit Related Fees” or “Tax Fees.” There were no other fees in the fiscal years
ended September 30, 2008, and
September 30, 2007.
The Audit
Committee has also adopted procedures for pre approving all audit and non-audit
services provided by BDO Seidman, LLP. These procedures include reviewing a
budget for audit and permitted non-audit services. The budget includes a
description of, and a budgeted amount for, particular categories of non-audit
services that are recurring in nature, and therefore anticipated at the time the
budget is submitted. Audit Committee approval is required to exceed the budget
amount for a particular category of non-audit services, and to engage the
independent auditor for any non-audit services not included in the budget. For
both types of pre-approval, the Audit Committee considers whether such services
are consistent with the SEC’s rules on auditor independence. The Audit Committee
has considered whether the provision by BDO Seidman, LLP of non-audit services
included in the fees set forth in the table above is compatible with maintaining
the independence of BDO Seidman, LLP, and has concluded that such services are
compatible with BDO Seidman, LLP’s independence as our
auditors.
Shareholder
ratification of the appointment of BDO Seidman, LLP as our independent
registered public accountants is not required by our bylaws or other applicable
legal requirement. However, the appointment of BDO Seidman, LLP is
being submitted to the shareholders for ratification. If the shareholders fail
to ratify the appointment, the Audit Committee will reconsider whether or not to
retain the firm. Even if the appointment is ratified, the Audit Committee at its
discretion may direct the appointment of a different independent registered
public accountant at any time during the year if it determines that such a
change would be in the best interests of the Company and its
shareholders.
Recommendation
of Our Board of Directors
Upon
the recommendation of the Audit Committee, our Board of Directors recommends
that the shareholders vote “FOR” the ratification of BDO Seidman, LLP as our
independent public accountants for our fiscal year ending September 30,
2009.
OTHER
MATTERS
We know
of no other matters to be submitted to the shareholders at the annual meeting.
If any other matters properly come before the annual meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as our Board of Directors may recommend, or, in the absence of a
recommendation, as such persons deem advisable. Discretionary authority with
respect to such matters is granted by execution of the enclosed
proxy.
OWNERSHIP
OF SECURITIES
Security
Ownership of Management and Certain Beneficial Owners
The
following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of February 23, 2009 by
(i) each person known by us to own beneficially more than 5% of
the outstanding shares of our common stock, (ii) each director and director
nominee, (iii) each Named Executive Officer as identified on page 32,
and (iv) all of our directors and executive officers as a
group:
Beneficial Owner (1)
|
|
Number
of Shares
Beneficially Owned
|
|
|
Percent of Class
(2)
|
|
Baupost
Group LLC/MA
|
|
|
2,600,000 |
(3) |
|
|
9.8 |
% |
PAR
Investment Partners, L.P.
|
|
|
2,344,723 |
(4) |
|
|
8.8 |
% |
Dolphin
Limited Partnership III, L.P.
|
|
|
1,887,935 |
(5) |
|
|
7.1 |
% |
Dimensional
Fund Advisors, Inc.
|
|
|
1,767,623 |
(6) |
|
|
6.6 |
% |
Epoch
Investment Partners, Inc.
|
|
|
1,624,383 |
(7) |
|
|
6.1 |
% |
Anthony
M. Sanfilippo
|
|
|
1,751,800 |
(8) |
|
|
6.3 |
% |
Randy
Cieslewicz
|
|
|
118,825 |
(9) |
|
|
* |
|
Clifton
E. Lind
|
|
|
1,103,534 |
(10) |
|
|
4.0 |
% |
Gary
L. Loebig
|
|
|
227,602 |
(11) |
|
|
* |
|
P.
Howard Chalmers
|
|
|
151,248 |
(12) |
|
|
* |
|
Scott
Zinnecker
|
|
|
168,750 |
(13) |
|
|
* |
|
Michael
J. Maples, Sr.
|
|
|
97,500 |
(14) |
|
|
* |
|
Robert
D. Repass
|
|
|
192,500 |
(15) |
|
|
* |
|
John
M. Winkelman
|
|
|
240,000 |
(16) |
|
|
* |
|
Neil
E. Jenkins
|
|
|
20,000 |
(17) |
|
|
* |
|
Emanuel
R. Pearlman
|
|
|
43,891 |
(18) |
|
|
* |
|
Justin
A. Orlando
|
|
|
— |
(19) |
|
|
* |
|
Stephen
J. Greathouse
|
|
|
— |
|
|
|
* |
|
All
executive officers and directors (16 persons) as a
group
|
|
|
5,390,650 |
(20) |
|
|
17.2 |
% |
|
*
|
Represents
beneficial ownership of less than one
percent.
|
|
(1)
|
Unless
otherwise noted, the address for all officers and directors is the address
of our principal executive offices at 206 Wild Basin Road South,
Building B, Fourth Floor, Austin, Texas
78746.
|
|
(2)
|
Percentages
of ownership are based on 26,642,942 shares of common stock outstanding on
February 23, 2009. Shares of common stock subject to stock
options which are currently exercisable or will become exercisable within
60 days after February 23, 2009, are deemed outstanding for
computing the percentage for the person or group holding such options, but
are not deemed outstanding for computing the percentage for any other
person or group.
|
|
(3)
|
Pursuant
to Schedule 13G/A dated February 12, 2009, filed with the
Securities and Exchange Commission, Baupost Group, LLC/MA reported
that as of December 31, 2008, it had sole voting power over
2,600,000 shares and sole dispositive power of 2,600,000 shares
and that its address is 10 St. James Avenue, Suite 1700,
Boston, Massachusetts, 02116.
|
|
(4)
|
Pursuant
to Schedule 13G dated February 17, 2009, filed with the
Securities and Exchange Commission, PAR Investment
Partners, L.P. reported that as of December 31, 2008, it
had sole voting power over 2,344,723 shares and sole dispositive
power of 2,344,723 shares and that its address is One International
Place, Suite 2401, Boston, Massachusetts
02110.
|
|
(5)
|
Pursuant
to Schedule 13D/A dated January 8, 2008, filed with the
Securities and Exchange Commission, Dolphin Limited
Partnership III, L.P. reported that as of
December 26, 2008, it and certain related entities had shared
voting power over 1,887,935 shares (excludes expired options to
purchase 20,000 shares) and shared dispositive power over
1,887,935 shares and that its address is 156 W. 56th Street,
Suite 1203, New York, New
York 10019.
|
|
(6)
|
Pursuant
to Schedule 13G/A dated February 9, 2009, filed with the
Securities and Exchange Commission, Dimensional Fund Advisors, Inc.
reported that as of December 31, 2008, it had sole voting power
over 1,722,617 shares and sole dispositive power over
1,767,623 shares and that its address is 1299 Ocean Avenue,
Santa Monica,
California 90401.
|
|
(7)
|
Pursuant
to Schedule 13G dated February 17, 2009, filed with the
Securities and Exchange Commission, Epoch Investment Partners, Inc.
reported that as of December 31, 2008 it and certain related
entities had shared voting power over 1,624,383 shares and shared
dispositive power of 1,624,383 shares and that its address is
640 5th Avenue, 18th Floor, New York, New York
10019.
|
|
(8)
|
Consists
of (i) 451,800 shares owned by Mr. Sanfilippo, and
(ii) 1,300,000 shares issuable upon the exercise of stock
options that are currently
exercisable.
|
|
(9)
|
Consists
of (i) 13,200 shares owned by Mr. Cieslewicz, and (ii) 105,625 shares
issuable upon the exercise of stock options that are currently
exercisable.
|
|
(10)
|
Consists
of (i) 63,560 shares owned by Mr. Lind, (ii) 997,024 shares
issuable upon the exercise of options that are currently exercisable,
(iii) 27,000 shares held in various retirement accounts, and
(iv) 15,950 shares held by the Lind Family
Partnership.
|
|
(11)
|
Consists
of (i) 1,000 shares owned by Mr. Loebig, and (ii) 226,602 shares issuable
upon the exercise of stock options that are currently
exercisable.
|
|
(12)
|
Consists
of 151,248 shares issuable upon the exercise of stock options that are
currently exercisable.
|
|
(13)
|
Consists
of 168,750 shares issuable upon the exercise of stock options that are
currently exercisable.
|
|
(14)
|
Consists
of (i) 30,000 shares owned by Mr. Maples, and (ii) 67,500 shares
issuable upon the exercise of stock options that are currently
exercisable.
|
|
(15)
|
Consists
of 192,500 shares issuable upon the exercise of stock options that are
currently exercisable.
|
|
(16)
|
Consists
of (i) 20,000 shares owned by Mr. Winkelman, and (ii) 220,000
shares issuable upon the exercise of stock options that are currently
exercisable.
|
|
(17)
|
Consists
of 20,000 shares issuable upon the exercise of stock options that are
currently exercisable.
|
|
(18)
|
Pursuant
to Schedule 13D/A filed with the Securities and Exchange Commission on
January 14, 2009, Mr. Pearlman’s interest consists of
(i) 3,931 shares owned by Liberation Investment Group, LLC,
(ii) 19,960 shares owned by Beach Lane Opportunity, LLC, and
(iii) 20,000 shares issuable upon the exercise of stock options.
Mr. Pearlman is the Chief Executive Officer and majority member of
Liberation Investment Group, LLC and managing member of Beach Lane
Opportunity, LLC, and may be deemed to share voting and dispositive power
over the shares held by each of Liberation Investment Group, LLC and
its related entities and Beach Lane
Opportunity, LLC.
|
|
(19)
|
Mr. Orlando,
as a member of a “group” for the purposes of Rule 13d-5(b)(1) of the
1934 Act, is deemed to beneficially own the shares beneficially owned
by the other members of the group affiliated
with Dolphin Limited Partnership III, L.P.
Mr. Orlando disclaims beneficial ownership of the shares owned in the
aggregate by the other members of the
group.
|
|
(20)
|
Consists
of (i) 604,560 shares owned directly,
(ii) 66,841 shares owned indirectly, and (iii) 4,719,249
shares issuable upon the exercise of stock options that are currently
exercisable.
|
REPORT
OF THE AUDIT COMMITTEE
The Audit
Committee oversees our accounting and financial reporting process on behalf of
our Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process, including internal control
systems. Our independent registered public accounting firm is responsible for
performing an independent audit of our consolidated financial statements in
accordance with the standards of the Public Accounting Oversight Board (United
States) and for issuing a report thereon. Additionally, the independent
registered public accounting firm is responsible for performing an independent
audit of management’s assessment and the operating effectiveness of internal
controls over financial reporting and for issuing a report thereon.
Based on
the Audit Committee’s:
|
§
|
Review
of our audited consolidated financial statements for our fiscal year ended
September 30, 2008;
|
|
§
|
Discussions
with our management regarding our audited financial
statements;
|
|
§
|
Receipt
of written disclosures and the letter from our independent registered
public accounting firm required by Independence Standards Board Standard
No. 1;
|
|
§
|
Discussions
with our independent registered public accounting firm regarding the
firm’s independence and the matters required to be discussed by the
Statement on Auditing Standards
61 and 90; and
|
|
§
|
Other
matters the Audit Committee deemed relevant and
appropriate.
|
The Audit
Committee recommended to our Board of Directors that the audited financial
statements as of and for our fiscal year ended September 30, 2008, be
included in our Annual Report on Form 10-K for our fiscal year ended
September 30, 2008, for filing with the SEC.
AUDIT
COMMITTEE
|
|
Robert
D. Repass, Chairman
|
Michael
J. Maples, Sr.
|
John
M. Winkelman
|
OFFICERS
AND DIRECTORS
Set forth
below is information regarding the executive officers and directors of the
Company as of February 23, 2009.
Name
|
|
Age
|
|
Positions and Offices
|
Michael
J. Maples, Sr. (1)(2)
|
|
66
|
|
Director,
Non-Executive Chairman of the Board
|
John
M. Winkelman (2)(3)(4)
|
|
62
|
|
Director
|
Robert
D. Repass (1)(2)
|
|
48
|
|
Director
|
Emanuel
R. Pearlman (1)(3)
|
|
48
|
|
Director
|
Neil
E. Jenkins (3)
|
|
59
|
|
Director
|
Anthony
M. Sanfilippo
|
|
50
|
|
President,
Chief Executive Officer and Director
|
Adam
D. Chibib
|
|
42
|
|
Senior
Vice President and Chief Financial Officer
|
Patrick
J. Ramsey
|
|
35
|
|
Senior
Vice President and Chief Operating Officer
|
Virginia
E. Shanks
|
|
48
|
|
Senior
Vice President and Chief Marketing Officer
|
Uri
L. Clinton
|
|
36
|
|
Senior
Vice President, General Counsel, and Corporate
Secretary
|
Mick
D. Roemer
|
|
56
|
|
Senior
Vice President of
Sales
|
|
(1)
|
Member
of the Nominating and Corporate Governance
Committee.
|
|
(2)
|
Member
of the Audit Committee.
|
|
(3)
|
Member
of the Compensation Committee.
|
|
(4)
|
Mr. Winkelman
is not standing for re-election as a member of the Board of Directors at
the annual meeting.
|
Officers
Anthony M.
Sanfilippo joined us as Chief Executive Officer and director in
June 2008. Mr. Sanfilippo brings to Multimedia Games more than
20 years' experience with Harrah's Entertainment, Inc. (Harrah’s), the
world's largest casino company and a provider of branded casino entertainment.
While at Harrah’s, Mr. Sanfilippo served as President of both the Western
Division (2003-2004) and the Central Division (1997-2002 and 2004-2007),
overseeing the operations of more than two dozen casino and casino-hotel
destinations. Mr. Sanfilippo was also part of the senior management team
that led the successful integration of numerous gaming companies acquired by
Harrah's, including Jack Binion's Horseshoe Casinos, the Grand Casino &
Hotel brand, Players International, and Louisiana Downs Racetrack. In addition
to his duties as divisional President, Mr. Sanfilippo was also President
and Chief Operating Officer for Harrah's New Orleans and a member of the Board
of Directors of Jazz Casino Corporation prior to its acquisition by Harrah's.
Mr. Sanfilippo has directed tribal gaming operations in Arizona, California
and Kansas, and has held gaming licenses in most states that offer legalized
gambling.
Adam D. Chibib
was appointed Chief Financial Officer of Multimedia Games in
February 2009. Mr. Chibib brings over 18 years of financial
management and technology industry experience to the Company, as well as
relevant public company experience. Prior to joining us, Mr. Chibib ran a
financial consulting practice as a sole proprietor, where he assisted
early-stage technology companies with debt and equity fund raising, business
model and process improvement implementation, and merger and acquisition
advisory services. Mr. Chibib previously served
as Chief Financial Officer at NetSpend Corporation
(June 2007-July 2008); as Interim
Chief Financial Officer at Internet RIET while also working as a consultant
with GrowLabs, LLC (January 2006-June 2007); as
Chief Financial Officer at Tippingpoint Technologies
(January 2004-January 2006); as Chief
Financial Officer at Waveset Technologies (April 2003-December 2003); and as
Chief Financial Officer at BroadJump, Inc. (November 1998-March 2003). In each case
he was an integral member of the senior management teams that consistently
improved revenues and cash flow and was responsible for all internal operations.
In addition, as Controller at Tivoli Systems (February 1997-January 1999),
Mr. Chibib’s responsibilities included managing the worldwide accounting
and treasury functions of a $1 billion software company. Mr. Chibib
has also held various positions, including senior level positions, at Coopers
& Lybrand, LLP and Price Waterhouse, LLP. Mr. Chibib received a
B.B.A. in Accounting from the University of Texas at Austin. He is a
Certified Public Accountant.
Patrick J. Ramsey
became our Chief Operating Officer in September 2008. Previously,
Mr. Ramsey was employed as the Vice President and Executive Associate to
the Vice Chairman of Harrah’s Entertainment, Inc. from
November 2007-September 2008, where he worked on domestic and
international development, design and construction, and sports and
entertainment. Prior to joining the corporate office of Harrah’s Entertainment
in Las Vegas, Mr. Ramsey worked as the Vice President of Slot Operations,
Slot Performance, and Security Operations at Caesars Atlantic City
(May 2006-November 2007). Mr. Ramsey has held several other
positions with Harrah’s Entertainment, Inc., including roles in the Central
Division headquarters based in Memphis (November 2004-May 2006) and at
several of the Chicagoland properties (June 2003-November 2004).
Mr. Ramsey received a B.A. in Economics from Harvard University and an
MBA from the Kellogg School of Management at Northwestern
University.
Virginia (Ginny)
E. Shanks joined us as Chief Marketing Officer in July 2008.
Ms. Shanks brings to Multimedia Games more than 25 years of marketing
experience in gaming entertainment, most recently as Senior Vice President of
Brand Management for Harrah's Entertainment, Inc., the world's largest casino
company and provider of branded casino entertainment. During her time with
Harrah's Entertainment, Ms. Shanks was responsible for maximizing the value
of the company's key strategic brands – Caesars, Harrah's, and Horseshoe
Casinos; the Total Rewards player loyalty program; and the World Series of
Poker. In addition to setting overall corporate brand strategy, Ms. Shanks
oversaw sports and entertainment marketing, strategic alliances, consumer
insights, public relations, and nationwide casino promotions. Ms. Shanks
holds a Bachelor of Science degree from University of Nevada-Reno.
Uri L.
Clinton joined us as General Counsel and Secretary in August 2008.
Mr. Clinton serves as chief legal counsel for all business operations,
corporate governance, regulatory compliance and licensing in the Legal Affairs
Department. Mr. Clinton's professional experience includes more than
10 years of business and legal experience including six years in the Law
Department at Harrah's Entertainment, Inc. (August 2002-August 2008),
most recently serving as Vice President of Legal Affairs for its Central
Division. In that capacity and in earlier positions, Mr. Clinton served as
business operations and regulatory compliance legal counsel for more than
13 casino/hotels located in seven Native American and commercial gaming
jurisdictions. Additionally, Mr. Clinton served as lead counsel for several
of Harrah's enterprise-wide departments and initiatives, including its National
Casino Marketing Air Charter program, Risk Management Department, Corporate
Diversity, and the 2004 integration of several Horseshoe branded casinos
into the Harrah's corporate structure. Mr. Clinton received a B.A. in
Political Science from the University of Nevada-Las Vegas in 1994, a Juris
Doctorate from Gonzaga University School of Law in 1997, and an MBA from
the Vanderbilt University Owen Graduate School of Management
in 2007.
Mick D.
Roemer became our Senior Vice President of Sales in January 2009,
bringing more than 25 years of gaming equipment sales and marketing
experience to the Company. Since 2007, Mr. Roemer has consulted with
gaming companies in the areas of game content, intellectual property, and sales
and marketing planning, and has worked in an advisory capacity with Multimedia
Games since May 2008 in support of the Company’s efforts to expand its
penetration into the Class III gaming market. Prior to 2007,
Mr. Roemer served as Senior Vice President of Sales, Marketing and Product
Development for Bally Technologies (2000-2007), contributing to Bally’s
significant increase in market share with gaming units shipped growing from
fewer than 9,000 units in 2000 to more than 22,000 units
in 2007. Mr. Roemer also previously served as Vice President of
Marketing for International Gaming Technologies (IGT), Vice President of
Sales for Powerhouse/VLC and Senior Vice President and General Manager of Anchor
Gaming. Mr. Roemer holds a B.S. in Marketing from Oklahoma State
University.
Directors
For
additional information about the non-employee nominees for director, see
“Proposal One-Election of Directors.”
Section 16(A) Beneficial
Ownership Reporting Compliance
Based
solely on a review of Forms 3, 4 and 5 submitted to us during and with respect
to our fiscal year ended September 30, 2008, we believe all statements
of beneficial ownership that were required to be filed with the SEC were timely
filed, except Mr. Clinton filed a Form 4 on August 25, 2008
reporting a transaction that occurred on August 16, 2008.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
This
Compensation Discussion and Analysis provides information regarding the
following:
|
§
|
The
objectives of our executive compensation program, including the behaviors
and results it is designed to encourage and
reward;
|
|
§
|
The
roles and responsibilities of management and the Compensation Committee in
the governance of our executive compensation
program;
|
|
§
|
The
elements of our executive compensation program and its purposes;
and
|
|
§
|
The
Compensation decisions with respect to our fiscal year ended
September 30, 2008.
|
Objectives
of the Executive Compensation Programs
The
objective of our executive compensation program is to align the compensation
paid to our executive officers with shareholder and customer interests (on both
a short-term and long-term basis); attract, retain and motivate highly qualified
executive talent; and provide appropriate rewards for achievement of business
objectives and growth in shareholder value. It is the Company’s objective that
executive compensation be directly related to the achievement of our planned
goals, and the enhancement of corporate and shareholder value. The Compensation
Committee recognizes that the industry sector in which we operate is both highly
competitive and is challenged by significant legal and regulatory uncertainty.
In addition, the technology-related experience and skills of our executive
officers have applications to many other industry sectors besides our own. As a
result, there is substantial demand for qualified, experienced executive
personnel of the type we need to achieve our objectives. The Compensation
Committee considers it crucial that the Company be assured of retaining and
rewarding our senior executives, who are essential to the attainment of our
long-term goals.
For these
reasons, the Compensation Committee believes the Company’s executive
compensation arrangements must remain competitive with those offered by other
companies of similar size, scope, performance levels and complexity of
operations.
For the
purposes of this Compensation Discussion and Analysis, the capitalized term
“Named Executive Officers” (or “NEOs”) refers to the executives who are named in
the Summary Compensation Table below. Included among the NEOs are Messrs.
Clifton E. Lind, Gary L. Loebig, P. Howard Chalmers and Scott A.
Zinnecker. Mr. Lind served as our President and Chief Executive Officer
until his resignation from such offices and as a director of the Company
effective March 31, 2008. Mr. Lind remained an employee of the
Company following his resignation as an executive officer and director of the
Company until his termination from the Company effective May 1, 2008.
Mr. Loebig served as our Interim President and Chief Executive Officer from
March 31, 2008, until the hiring of Mr. Sanfilippo, effective
June 15, 2008. Mr. Loebig remained an employee of the Company until
his resignation from the Company effective September 19, 2008. Mr. Chalmers
served as our Senior Vice President of Planning and Corporate Communications
until August 31, 2008 when his role and responsibilities were revised such that
he was no longer an executive officer; Mr. Chalmers remained an employee of
the Company until his termination effective December 31, 2008.
Mr. Zinnecker served in various roles with the Company until his
termination effective September 30, 2008; most recently, he held the
role of Executive Vice President and Acting Chief Operating
Officer.
The
Company entered into certain agreements with Messrs. Lind, Loebig, Chalmers and
Zinnecker upon the termination of their employment. Information regarding these
agreements is provided below in the section titled “Employment And Termination
Arrangements And Change-In-Control Benefits.
Determining
Executive Compensation
Management.
Our management sets the strategic direction for the Company and strives to
design and maintain compensation programs that motivate behaviors among the
executive officers that are consistent with the Company’s strategic goals and
objectives. Each year, the Chief Executive Officer, with assistance from other
members of management, as appropriate, conducts a review process covering each
of the executive officers reporting to the Chief Executive Officer. This annual
review process focuses on an evaluation of overall Company performance and the
performance of each such executive officer, including an evaluation of
compensation levels delivered through each element of compensation (as described
below), competitive practices and trends, and specific compensation issues as
they arise. Based on the outcomes of this review process, the Chief Executive
Officer makes recommendations to the Compensation Committee regarding the
compensation of each of the executive officers reporting directly to him. This
recommendation typically provides information regarding adjustments, if any, to
base salaries, annual incentive bonus award payments, and equity-based incentive
awards.
During
fiscal year 2008, the Company successfully recruited several individuals to
join the Company in senior executive roles. The compensation arrangements with
these new Executive Officers are described below in the section titled
“Employment and Termination Arrangements and Change-In-Control Benefits.” The
Board of Directors believes the addition of these executives is critical to the
development and execution of strategic objectives that will guide the Company’s
future and support the creation of shareholder value.
Compensation
Committee. The Company’s Board of Directors established the Compensation
Committee in 1996 at the time of our initial public offering. The Compensation
Committee operates pursuant to a charter, which is available on the “Investor
Relations” page of the Company’s website at www.multimediagames.com. As stated
in the charter, the purpose of the Compensation Committee is to discharge the
Board’s responsibilities relating to compensation and benefits of the Company’s
executive officers and directors. The current members of the Compensation
Committee are Messrs. Jenkins (Chairman), Pearlman and Winkelman, who are each
“independent” directors, as required by Nasdaq Marketplace Rules. The
Compensation Committee convened seven times during fiscal year 2008 to discuss
Company compensation programs and issues. The Compensation Committee also took
action by written consent twice during the fiscal year ended
September 30, 2008.
The
Compensation Committee has overall responsibility for the approval of executive
and director compensation programs that are appropriate, consistent with the
Company’s compensation philosophy, and support the Company’s business goals and
objectives. Specifically, the Compensation Committee has authority and
responsibility for the review, evaluation and approval of the compensation
structure and levels for all of the executive officers. The Compensation
Committee also approves all employment, severance, or change-in-control
agreements, and special or supplemental benefits or provisions applicable to
executive officers. The Compensation Committee is also responsible for reviewing
and making periodic recommendations to the Board regarding the compensation of
directors.
Each
year, the Compensation Committee reviews the compensation recommendations
submitted by the Chief Executive Officer. In general, the Chief Executive
Officer’s recommendations consider the following:
|
§
|
Performance
versus stated individual and Company business goals and
objectives;
|
|
§
|
Internal
equity (i.e., considering the pay for similar jobs and jobs at different
levels within the Company) and the critical nature of each Executive
Officer to the Company’s past and future
success;
|
|
§
|
The
need to retain talent; and
|
|
§
|
The
compensation history of each Executive Officer, including the value and
number of stock options awarded in prior
years.
|
The
Compensation Committee believes that input from management provides useful
information and perspective to assist the Committee with the determination of
its own views on compensation. Although the Compensation Committee receives
information and recommendations regarding the design and level of compensation
of the executive officers from management, the Compensation Committee makes the
final decisions as to the plan design and compensation levels for these
executives.
In making
decisions on each executive officer’s compensation, the Committee considers the
nature and scope of all elements of the executive officer’s total compensation
package, the executive officer’s responsibilities, and the competitive posture
of the executive officer’s current compensation. The Committee also evaluates
each executive officer’s performance through reviews of objective results (both
Company and individual results), reports from the Chief Executive Officer and
other senior management regarding the executive’s effectiveness in supporting
the Company’s key strategic, operational and financial goals and, in some cases,
personal observation.
With
respect to the compensation of the Chief Executive Officer, the Committee is
responsible for the periodic review and approval of his total compensation,
including annual incentive bonus awards and equity-based incentive compensation.
The Committee also develops annual performance goals and objectives, and
conducts an evaluation of the Chief Executive Officer’s performance relative to
these goals and objectives. The Committee considers and discusses the Chief
Executive Officer’s compensation in executive session without the Chief
Executive Officer present.
The
Compensation Committee has the sole authority to obtain advice from consultants,
legal counsel, accounting, or other advisors, as appropriate, to perform the
Committee’s duties and responsibilities. The Committee did not engage a
compensation consultant to assist with the evaluation or review of the
compensation programs for its executive officers for the fiscal year ended
September 30, 2008.
Elements
of Executive Compensation
Management
and the Compensation Committee strive to implement executive compensation
programs that are designed to attract and retain individuals who possess the
qualities necessary to successfully execute the Company’s business strategy, and
to support the Company’s long-term financial success and drive shareholder
value. The key elements of our executive compensation program are as
follows:
Element
|
|
Objectives and Basis
|
|
Form
|
|
|
|
|
|
Base
Salary
|
|
Provide
base compensation that reflects each Executive Officer’s responsibilities,
tenure and performance and is competitive for each role.
|
|
Cash
|
|
|
|
|
|
Annual
Incentive Bonus
|
|
Annual
incentive to drive Company and individual performance.
|
|
Cash
|
|
|
|
|
|
Equity-Based
Incentives
|
|
Long-term
incentives to drive Company performance and align the Executive Officers’
interests with shareholders’ interests; retain Executive Officers through
vesting and potential wealth accumulation.
|
|
Stock
options
|
|
|
|
|
|
Health
and Welfare Benefits
|
|
Provide
for the health and wellness of our Executive Officers.
|
|
Various
plans (described below)
|
|
|
|
|
|
Retirement
and Savings Plan
|
|
Assist
employees with retirement savings and capital accumulation on a
tax-advantaged basis.
|
|
401(k)
Plan, with Company matching contributions.
|
|
|
|
|
|
Perquisites
|
|
On
a very limited basis, support Company business interests.
|
|
Club
membership
|
|
|
|
|
|
Discretionary
Bonuses and Awards
|
|
Attract
top executive talent from outside the Company; retain Executive Officers
through vesting and potential wealth accumulation; and recognize
promotions and significant individual contributions to the
Company.
|
|
Cash
and stock options
|
|
|
|
|
|
Severance
and Change-in-
Control
Benefits
|
|
Provide
financial security to Executive Officers and protect Company interests in
the event of the termination of employment; attract and retain top
executive talent.
|
|
Cash
severance and acceleration of vesting of nonvested outstanding stock
options
|
Cash
Compensation
The
Company believes that annual cash compensation should be paid commensurate with
attained performance. Accordingly, our cash compensation consists of fixed base
compensation, paid in the form of an annual base salary, and an annual incentive
bonus program that is designed to motivate and serve as a reward for the
Company’s overall performance. The Compensation Committee supports management’s
compensation philosophy of moderate fixed compensation with the potential for
significant bonuses for achieving performance-related goals. Base salary and
bonus award decisions are made as part of the Company’s structured annual review
process.
Base
Salary. Base salaries are paid to our executive officers to provide an
appropriate fixed component of compensation. The base salary paid to each
executive officer generally reflects the officer’s responsibilities, tenure,
individual job performance, measurable contribution to our success, special
circumstances, and pay levels of similar positions with comparable companies in
the industry. Management and the Compensation Committee review the base salary
of each executive officer, including the Chief Executive Officer, on an annual
basis. When reviewing each executive officer’s base salary, the Compensation
Committee considers the level of responsibility and complexity of the executive
officer’s job, whether individual performance in the prior year was particularly
strong or weak, how the executive officer’s salary compares to the salaries of
other Company executives, and salaries paid for the same or similar positions.
In addition to these annual reviews, management and the Committee may, at any
time, review the salary of an executive officer who has received a significant
promotion, whose responsibilities have been increased significantly, or who is
the object of competitive recruitment. Any adjustments are based on increases in
the cost of living, job performance of the executive officer over time, and the
expansion of duties and responsibilities, if any. No pre-determined weight or
emphasis is placed on any one of these factors.
The
following table summarizes the base salaries for each of the Named Executive
Officers during the fiscal year ended September 30, 2008:
Name
|
|
Annual Base
Salary
Effective
10/01/2007
|
|
|
Adjustments
|
|
|
Annual Base
Salary
Effective
09/30/2008
|
|
Anthony M. Sanfilippo (1)
|
|
|
— |
|
|
|
— |
|
|
$ |
450,000 |
|
Gary
L. Loebig (2)
|
|
$ |
194,250 |
|
|
|
— |
|
|
|
— |
|
Clifton
E. Lind (2)
|
|
$ |
450,000 |
|
|
|
— |
|
|
|
— |
|
Randy
S. Cieslewicz (3)
|
|
$
|
212,500
|
|
|
$
|
22,500 (+10.6 |
)%
|
|
$
|
235,000
|
|
P.
Howard Chalmers (4)
|
|
$
|
189,000
|
|
|
$
|
(75,600
(-40.0
|
)
)%
|
|
$
|
113,400
|
|
Scott
A. Zinnecker (2)
|
|
$ |
189,000 |
|
|
|
— |
|
|
|
— |
|
|
(1)
|
Mr. Sanfilippo
was hired as President, Chief Executive Officer and a director the Company
effective June 15, 2008. Additional details regarding the terms
of his employment are provided
below.
|
|
(2)
|
Messrs.
Loebig, Lind and Zinnecker each terminated their employment with the
Company on or before
September 30, 2008.
|
|
(3)
|
Mr. Cieslewicz received a market-based adjustment to his salary effective July 28, 2008.
On December 1, 2008, Mr. Cieslewicz resigned from the
Company effective
February 15, 2009.
|
|
(4)
|
Effective
August 31, 2008, the role and responsibilities of Mr. Chalmers were
revised such that he was no longer an executive officer of the Company.
Consistent with this change, his salary was reduced. He remained an
employee of the Company until his termination effective
December 31, 2008.
|
The base
salaries for each of the recently-hired executive officers (i.e., Messrs.
Sanfilippo, Ramsey, Clinton, Roemer, and Ms. Shanks) were the result of
negotiations between the Company and each individual. In each case, the Company
believes that the salaries are appropriate, competitive, and were necessary to
attract the caliber of executive-level talent that each of these individuals
possess. Specific salary levels were agreed to based upon each individual’s
salary level at their previous employers, the roles and positions each would be
assuming with Multimedia Games, and other career opportunities that they were
considering.
Annual Incentive
Bonus. The Company’s annual incentive bonus program is intended to
motivate the NEOs to achieve superior Company financial performance, recognize
and reward the executive officers for their contributions when superior annual
performance is achieved, and provide compensation opportunities which are
aligned with competitive practices. The program is designed so that the annual
incentive bonus can potentially be the largest component of cash compensation
only if the executive and the Company are able to meet or exceed
performance-related goals that, if attained, are expected to result in an
increase in overall company and shareholder value. Bonus award payments are
typically made in the first quarter of the fiscal year following the year in
which they were earned.
Historically
under our annual incentive bonus program, the NEOs did not have pre-set
performance goals or annual bonus targets, expressed as a percentage of base
salary. Rather, an annual incentive bonus pool was funded as a percentage of the
Company reported pre-tax income, which was the sole corporate measure of
performance for the funding of an incentive bonus pool. The bonus pool funding
percentage was developed and approved by the Board of Directors periodically,
based on the Company’s expected performance and an assessment of appropriate
awards the annual incentive bonus pool might generate given different
performance levels. If the Company’s performance resulted in the funding of the
annual incentive bonus pool, then the Chief Executive Officer would have
recommended to the Compensation Committee a bonus award amount for each of the
other NEOs. The Chief Executive Officer’s recommendations would have been based
on his assessment of each such NEOs contribution to the execution of the
Company’s business plans. The Compensation Committee would have considered the
Chief Executive Officer’s recommendations, and made changes to the recommended
award amounts, as appropriate. The Chief Executive Officer’s bonus award was
determined solely by the Compensation Committee based on its evaluation of his
performance.
With the
hiring of several new executive officers during fiscal year 2008, the
Company is implementing a new annual incentive approach. Under this
approach, each of the Executive Officers is assigned a target annual bonus
opportunity, expressed as a percentage of the executive’s annual base salary.
Subject to the achievement of pre-established performance targets, the
Executives Officers may earn an annual incentive bonus award above or below the
bonus target opportunity. The Compensation Committee determined that a
target-based annual incentive approach would allow for greater alignment between
annual bonus awards and Company performance than the previous approach.
Specifically, the Compensation Committee believes that the proposed target-based
annual incentive approach will facilitate the use of performance measures that
are aligned with the creation of shareholder value, and thus provide a direct
incentive for Executive Officers to perform.
We
anticipate the Compensation Committee will evaluate potential annual incentive
bonuses for fiscal year 2009 based on a number of factors, including but
not limited to, achievement of operational goals, the Company’s EBITDA
performance (EBITDA is defined as Earnings Before Interest, Taxes, Amortization,
Depreciation and Accretion of Contract Rights) and EBITDA less capital
expenditures, relative to predetermined targets.
For
fiscal year 2008, two NEOs earned bonuses. Pursuant to the terms of his
Employment Agreement dated May 29, 2008, Mr. Loebig was awarded a
bonus in the aggregate amount of $119,231 (consisting of $69,231 in
additional compensation related to his term as Interim Chief Executive Officer
and a $50,000 cash bonus at the completion of his term) in recognition of
his service as the Company’s Interim President and Chief Executive Officer. This
bonus was paid to Mr. Loebig on June 20, 2008. Mr. Sanfilippo
earned a bonus award of $181,731 in recognition of his service during
fiscal year 2008 under the terms of his employment agreement, which
provides him with a target bonus opportunity equal to 150% of his base
salary, and a maximum bonus opportunity of 300% of his base salary. For
fiscal year 2008, Mr. Sanfilippo's performance was evaluated based on the
following objectives set forth shortly after his employment with the Company:
(i) review the current profitability and future viability of each of the
Company's product lines; (ii) assess the Company's organizational
structure; (iii) establish relationships with stakeholders of the Company;
and (iv) review the Company's expense structure. The Board of Directors’
assessment of his performance following the completion of the year determined
that, in the aggregate, Mr. Sanfilippo met these objectives, and thus
awarded him a bonus award equal to 150% of the base salary he earned during
the fiscal year 2008. The bonus will be paid to Mr. Sanfilippo during
fiscal year 2009. These awards are reflected in the “Bonus” column in the
Summary Compensation Table.
Due to
the dynamic nature of the Company’s industry, which is driven by economic and
regulatory conditions, and customer preferences, the Company believes that the
periodic use of discretion in the determination of bonus award amounts is
appropriate and optimizes the overall value of the bonus program. This approach
facilitates teamwork and collaboration among the executive officers, and allows
them to not be limited to pre-established goals should operating conditions
change during the year.
Equity-Based
Incentives
We
provide our Executive Officers with long-term compensation in the form of
equity-based incentives, which are intended to align the interests of our
Executive Officers with the interest of the Company’s shareholders by supporting
the creation of long-term value for the organization, facilitate significant
long-term retention, and be consistent with competitive market practices. Over
time, it is the Compensation Committee’s intent that equity-based compensation
should represent a significant portion of each executive officer’s total
compensation, and the primary equity-based incentive vehicle we have used has
been stock options. Nonqualified and incentive stock options have been granted
to the Company’s executive officers and other employees. The Company expects to
continue to issue stock options to new employees as they are hired, as well as
to current employees as incentives from time to time. Our rationale for granting
stock options is as follows:
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We
believe that stock options are highly effective at aligning the long-term
interests of our Executive Officers with the interests of our
shareholders;
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The
grant of stock options to Executive Officers has been an essential
ingredient to enabling us to achieve our growth and attain our business
objectives; and
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We
regularly face significant legal, regulatory and competitive challenges to
our business that require extraordinary commitments of time and expertise
by the Executive Officers, who have met these challenges and made these
extraordinary commitments, largely because of the reward and incentive
provided by the historical and prospective grant of stock
options.
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The
Compensation Committee periodically reviews the need to make grants of stock
options to the executive officers, typically based on recommendations from
management. When approving the grants of stock options, the Compensation
Committee considers the number and terms of options previously granted, industry
practices, the executive officer’s level of responsibility, and assumed
potential stock value in the future.
The
Company’s equity-based incentive awards are designed to comply with
Section 162(m) of the IRS code to allow tax deductibility of the awards.
Stock options are awarded under the Company’s stock plans – the 1996 Stock
Incentive Plan, the 2000, 2001, 2002, 2003 Stock Option Plans,
and an Ad Hoc Stock Option Plan. Our Board of Directors has also adopted a
2008 Employment Inducement Award Plan. Individual grants of options are
documented by stock option agreements which contain the specific terms and
provisions pertaining to each grant, including vesting, option term, exercise
price, and termination provisions. Options granted to the Executive Officers and
other employees generally vest over four years and expire seven years from the
date of grant. The exercise price of stock options granted to executive officers
is equal to the market value of a share of Company common stock on the date of
grant. Therefore, our executive officers will receive no benefit from the stock
options unless the value of a share of common stock exceeds the exercise
price.
Stock
option grants to Executive Officers and other employees have historically
consisted of a combination of incentive stock options, or ISOs,
and nonqualified stock options, or NQSOs. The use of ISOs has allowed
recipients to take advantage of certain tax benefits the ISOs afford under
Section 422 of the Internal Revenue Code (and any successor provision of
the Code having a similar intent).
During
the fiscal year ended September 30, 2008, the Compensation Committee
approved grants of stock options to Messrs. Loebig, Cieslewicz and
Zinnecker, consisting of a combination of ISOs and NQSOs. The options will
vest and become exercisable over four years. The Compensation Committee approved
these grants as an incentive to retain the services of these individuals during
a period of transition, to keep them engaged in the Company’s day-to-day
operations, and to contribute institutional knowledge which was valuable to the
new executive team as they developed a new strategy for the
Company.
Upon
commencement of their employment with the Company, the Compensation Committee
approved grants of stock options to Mr. Sanfilippo and the other
recently-hired Executive Officers (i.e., Messrs. Ramsey, Clinton, Roemer, and
Ms. Shanks). These grants were made to provide an immediate incentive for
these individuals to focus on the creation of shareholder value. In addition,
the Company believes the level of these equity awards were necessary to attract
these executives, and in some instances, replace certain equity opportunities
they had at their previous employers. Details of Mr. Sanfilippo’s stock
option grant are provided below in the section titled “Compensation of the Chief
Executive Officer.” Additional information is also provided in the section
titled “Employment and Termination Arrangements and Change-In-Control
Benefits.”
Other
than the stock option awards described above, none of the other Named Executive
Officers received grants of stock options or any other form of equity-based
incentives during the fiscal year ended
September 30, 2008.
The
Company does not currently maintain required levels of stock ownership by the
Executive Officers. The Company does have in place “Procedures and Guidelines
Governing Securities Trades by Company Personnel,” in order to comply with
federal and state securities laws governing (a) trading in Company
securities while in the possession of “material nonpublic information”
concerning the Company, and (b) tipping or disclosing material nonpublic
information to outsiders. In order to prevent even the appearance of improper
trading or tipping, the Company has adopted this policy for all of its
directors, officers and employees, venture capital and other entities (such as
trusts and corporations) over which such employees, officers or directors have
or share voting or investment control and specially designated outsiders who
have access to the Company’s material nonpublic information
Benefit
Programs and Perquisites
We
provide our executive officers with benefits that are intended to be a part of a
competitive total compensation package and that will permit us to attract and
retain highly-qualified executives. These benefits include health and welfare
benefits, a retirement and savings plan, and a perquisite limited to the Chief
Executive Officer. Each of these benefits is described below.
Health and
Welfare Benefits. The Company’s benefits program is designed to provide
employees (including the executive officers) and their families with security
and well being, and is an important part of the total compensation package.
These benefits are divided into the following major categories:
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Health
Care Benefits – medical, dental and vision insurance
coverage;
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Life
and disability Benefits – basic, optional life and accident insurance as
well as short and long-term disability
coverage;
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Flexible
Spending Accounts – health care and dependent care tax-free accounts;
and
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Work
Life Benefits – employee assistance with everyday issues, financial and
legal issues, parenting, childcare, education and elder
care.
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Executive
officers participate in these benefits programs on the same relative basis as
our other employees.
Retirement and
Savings. The Company maintains an employee retirement and savings plan
pursuant to Section 401(k) of the Internal Revenue Code, or the 401(k)
Plan. The purpose of the 401(k) Plan is to permit employees, including
executive officers, to accumulate funds for retirement on a tax-advantaged
basis. Specifically, the 401(k) Plan permits each eligible employee to
contribute on a pre-tax basis a portion of his compensation to the 401(k)
Plan (for calendar year 2008, the maximum amount of compensation that may be
contributed to the 401(k) Plan was $15,500). The Company makes a
matching contribution to the 401(k) Plan that is equal to 100% of the
first 3% of compensation contributed by employees and 50% of the
next 2% of compensation contributed by employees to
the 401(k) Plan.
The
Company does not maintain a tax-qualified defined benefit retirement plan. In
addition, the Company does not maintain any non qualified supplemental
retirement plans or deferred compensation plans for the executive
officers.
Perquisites.
The Company does not provide perquisites to executive officers, except for
monthly club membership dues that were paid on behalf of Mr. Lind during
his tenure as President and Chief Executive Officer. Two club memberships were
primarily used for business purposes, including sales and customer entertainment
and Board of Directors dinners. The value of this benefit to Mr. Lind in
the fiscal year ended September 30, 2008, is included in the “All
Other Compensation” column in the Summary Compensation Table.
Compensation
of the Chief Executive Officer
Mr. Sanfilippo
commenced employment with the Company as President and Chief Executive Officer,
effective June 15, 2008. In accordance with the terms of his
employment agreement (key terms of which are described below),
Mr. Sanfilippo receives an annual base salary of $450,000. In
addition, he has an opportunity to earn an annual bonus equal to 150% of his
base salary upon achievement of certain performance targets approved by the
Company’s Board of Directors, and up to a maximum of 300% of his base salary for
overachievement of such performance targets. As noted above, Mr. Sanfilippo
earned a bonus award of $181,731 in recognition of his service during the
fiscal year. Upon the execution of his employment agreement, Mr. Sanfilippo
was granted 1,300,000 stock options. The options became immediately exercisable,
but are subject to a vesting over four years in equal quarterly installments.
Mr. Sanfilippo’s total compensation package was determined as the result of
a negotiation process between Mr. Sanfilippo and the Compensation
Committee. The Compensation Committee believes the structure of the compensation
package, as well as the targeted and potential value of the package, provides a
competitive opportunity that is strongly aligned with shareholder
interests.
Mr. Loebig
was appointed Interim President and Chief Executive Officer on
March 31, 2008, a position he held until the hiring of
Mr. Sanfilippo effective June 15, 2008. In connection with his
appointment to such offices, the Company entered into an Employment Agreement
with Mr. Loebig, which is described below in the section titled “Employment
and Termination Arrangements and Change-In-Control Benefits.” Pursuant to the
terms of Mr. Loebig’s Employment Agreement, he received a bonus award
of $119,231 (consisting of $69,231 in additional compensation related
to his term as Interim Chief Executive Officer and a $50,000 cash
bonus at the completion of his term) in recognition of his service during the
fiscal year. On July 14, 2008, Mr. Loebig was granted
80,000 stock options. The grant consisted of a combination of
23,643 ISOs and 56,357 NQSOs. One-fourth of the options will vest on
the first anniversary of the grant date; the remaining options will vest in
equal quarterly increments over the following three years.
Mr. Lind
served as the Company’s President and Chief Executive Officer until his
resignation from such offices, effective March 31, 2008. He remained
an employee of the Company until his termination on May 1, 2008, at which time
he and the Company entered into certain agreements related to his termination.
Key terms of these agreements are described below. Mr. Lind’s annual base
salary was $450,000 for the period during which he was employed by the
Company in fiscal year 2008. Mr. Lind did not receive a bonus award for his
service during the fiscal year, nor did the Company grant options to him during
fiscal 2008.
EMPLOYMENT
ARRANGEMENTS AND CHANGE-IN-CONTROL BENEFITS
The
Company is party to employment agreements with a total of six current executive
officers, including Mr. Sanfilippo. In addition, we entered into certain
agreements with Messrs. Lind, Loebig, Chalmers and Zinnecker to define
certain arrangements regarding their terminations from the Company. The
following paragraphs provide summaries of the agreements with the Named
Executive Officers.
Agreements with
Anthony M. Sanfilippo. On June 15, 2008, the Company entered into
certain agreements with Mr. Sanfilippo, including an employment agreement
that sets forth certain terms and conditions relating to his employment as
President and Chief Executive Officer of the Company. Mr. Sanfilippo’s
employment agreement provides that he will receive an annual base salary
of $450,000, subject to covenants in the employment agreement and in an
Agreement Regarding Proprietary Developments, Confidential Information and
Non-Solicitation. The annual salary will be subject to an annual review by the
Board of Directors or Compensation Committee. In addition, he has an opportunity
to earn an annual bonus equal to 150% of his base salary upon achievement of
certain performance targets approved by the Company’s Board of Directors, and up
to a maximum of 300% of his base salary for overachievement of such performance
targets. The employment agreement also specifies that Mr. Sanfilippo will
be eligible to enroll in the Company’s benefit programs and vacation policies as
they are established from time-to-time for senior-level executive employees, or
be reimbursed for the cost to purchase comparable coverage at a benefit level
consistent with other senior-level executive employees. Mr. Sanfilippo will
also be reimbursed for the cost of co-payments under his current health and
medical benefit plans, and annual physical examinations for Mr. Sanfilippo
and his spouse.
For a
period of six months following the effective date of the employment agreement,
the Company paid expenses related to Mr. Sanfilippo’s commuting between
Austin, Texas (the Company’s home office location) and each of his home offices
in Germantown, Tennessee and Salt Lake City, Utah; as well reasonable costs of a
furnished executive apartment in Austin, Texas, car rental and other related and
reasonable expenses. The Company will pay for the reasonable moving expenses for
Mr. Sanfilippo’s relocation to Austin, Texas, excluding any costs
associated with buying or selling a home.
Upon the
execution of the employment agreement, Mr. Sanfilippo was granted 1,300,000
stock options. The options became immediately exercisable, but are subject to a
vesting over four years in equal quarterly installments. In addition, he agreed
to purchase 250,000 shares of the Company’s Common Stock pursuant to a Stock
Purchase Agreement, under which the shares were purchased at a price
of $4.68 per share, such price being the fair market value of each such
share on the effective date of the agreement.
In the
event of Mr. Sanfilippo’s death or disability, voluntary termination, or
termination for cause (each as defined within the employment agreement), he
shall not be entitled to receive any severance, other than accrued but unpaid
salary, vacation, vested benefits, and unreimbursed expenses. Further, the
Company’s other obligations under the employment agreement shall cease. In the
event of Mr. Sanfilippo’s termination without cause or his termination of
employment for good reason (each as defined within the employment agreement),
the Company: (i) shall pay Mr. Sanfilippo (a) in the event that the
termination occurs on or before June 15, 2009, one year of base salary
continuation and target bonus, or (b) in the event that the termination occurs
after June 15, 2009, two years of base salary continuation and two years of
target bonus; and (ii) if Mr. Sanfilippo elects to continue health coverage
under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the Company
will pay the premiums in an amount sufficient to maintain the level of health
benefits in effect on his last day of employment, for a period of up to one year
after the termination. The same termination benefits would apply in the event of
Mr. Sanfilippo’s termination without cause or his termination for good
reason, within one year following a Change of Control. In addition, the stock
options granted to Mr. Sanfilippo upon the commencement of his employment
with the Company would become fully vested in the event of his termination
without cause or his termination for good reason, within one year following a
Change of Control. The Company’s obligation to provide the severance benefits
set forth above is contingent upon Mr. Sanfilippo’s execution of a mutual
release of claims satisfactory to the Company.
Agreements with
Gary L. Loebig. Upon his resignation on September 19, 2008, the
Company entered into certain agreements with Mr. Loebig, including a
Termination of Employment Agreement and a Separation and Release Agreement. The
Termination of Employment Agreement provides for the termination of an
employment agreement between the Company and Mr. Loebig, dated May 29,
2008. That Employment Agreement outlined the terms and conditions of his
employment as the Company’s Interim President and Chief Executive Officer, roles
he held from March 31, 2008 until the hiring of Mr. Sanfilippo
effective June 15, 2008. Under the terms of the Employment Agreement,
Mr. Loebig’s salary was unchanged; however, he was entitled to receive a
bonus (the “Cash Bonus”) in the amount of $25,000 per month for the period
during which he held the titles of Interim President and Chief Executive
Officer. As described above, Mr. Loebig received payment of the Cash Bonus
pursuant to these terms.
The
Termination of Employment Agreement provided for the payment to Mr. Loebig
of one-half of the annual base salary defined in the employment agreement, as
well as any accrued but unpaid salary, vacation, vested benefits, and
unreimbursed expenses through the date of his termination.
The
Separation and Release Agreement also provides for the continuation of the terms
and provisions of Stock Option Agreements between the Company and
Mr. Loebig, in existence upon his termination. In the event of a Change of
Control, these stock option agreements provide for full vesting of all nonvested
stock options held by Mr. Loebig.
The
Company and Mr. Loebig also entered into a Consulting Agreement, under
which he will provide consulting services a minimum of one day per month and a
maximum of four days per month, at the request of the Company’s Chief Executive
Officer or the Company’s Board of Directors. The agreement will terminate on
September 19, 2009. In consideration for his consulting services,
Mr. Loebig will receive a fee in the amount of $3,200 per month. In
addition, he will continue his participation in the Company’s health care
benefit plans for himself and his spouse for the term of the
agreement.
Agreements with
Clifton E. Lind. Upon his resignation on May 1, 2008, the
Company entered into certain agreements with Mr. Lind, including a
Termination of Employment Agreement and a Separation and Release Agreement. The
Termination of Employment Agreement provides for the termination of an
employment agreement between the Company and Mr. Lind, dated September
9, 2004, as well as payment to Mr. Lind of any accrued but unpaid
salary, vacation, vested benefits, and unreimbursed expenses through the date of
his termination. The Separation and Release Agreement provided for the
termination of the severance provisions of Mr. Lind’s employment agreement
with the Company, as well as the reimbursement of up to an aggregate
of $7,500 for the fees and expenses of a single special counsel to
Mr. Lind, incurred in the course of negotiating the Separation and Release
Agreement, the Termination of Employment Agreement, and a Consulting
Agreement.
The
Separation and Release Agreement also provides for the continuation of the terms
and provisions of Stock Option Agreements between the Company and Mr. Lind,
in existence upon his termination. In the event of a Change of Control, these
stock option agreements provide for full vesting of all nonvested stock options
held by Mr. Lind.
The
Company and Mr. Lind also entered into a consulting agreement, under which
he will provide consulting services a minimum of four days per month and a
maximum of twelve days per month, at the request of the Company’s Chief
Executive Officer or the Company’s Board of Directors. The agreement will
terminate on May 31, 2011. In consideration for his consulting services,
Mr. Lind will receive fees in the amount of $30,000 per month for
the period May 2008 through October 2008; $25,000 per month for the
period November 2008 through April 2009; $22,500 per month for
the period May 2009 through October 2010; and $20,000 per month
for the period November 2010 through May 2011. In addition, he will
continue his participation in the Company’s health care benefit plans for
himself and his spouse for the term of the agreement.
Agreement with P.
Howard Chalmers. Effective August 31, 2008, the role and
responsibilities of Mr. Chalmers were revised such that he was no longer an
Executive Officer of the Company. Effective on that date, the Company entered
into an agreement with Mr. Chalmers, under which he agreed to a reduction
in the annual rate of his base salary from $189,000 to $113,400,
continuing through the earlier of (i) December 31, 2008 or, (ii) his
acceptance of other employment or consulting engagement requiring a majority of
his business time and attention with compensation at an annual rate aggregating
more than $150,000. The agreement also provided that he would continue to
be eligible for Company benefits consistent with those he received prior to the
agreement.
In
addition, the agreement established that beginning January 1, 2009,
Mr. Chalmers would provide consulting services to the Company as reasonably
requested for a period ending June 30, 2009. During that consulting
period, he would receive consulting fees at an hourly rate, or a project fees to
be determined for services actually rendered, but not receive salary, benefits,
or other compensation from the Company. The agreement also provides, in exchange
for the confirmation and execution of a general release of all claims against
the Company, for the continuation of the terms and provisions of Stock Option
Agreements between the Company and Mr. Chalmers in existence upon his
termination.
Mr. Chalmers
remained an employee of the Company until his termination effective
December 31, 2008, and has subsequently commenced consulting services
to the Company in accordance with the terms of the agreement.
Agreements with
Scott A. Zinnecker. Upon his resignation on September 30, 2008,
the Company entered into certain agreements with Mr. Zinnecker, including a
Separation, Release and Indemnification Agreement. In consideration for his
execution of the agreement, Mr. Zinnecker received a severance payment of
$58,153.92, equal to four months of his annual base salary, less customary
payroll deductions, as well as any accrued but unpaid salary, vacation, vested
benefits, and unreimbursed expenses through the date of his termination. The
agreement also provides for the continuation of the terms and provisions of
Stock Option Agreements between the Company and Mr. Zinnecker in existence
upon his termination.
The
Company and Mr. Zinnecker also entered into a consulting agreement, under
which he will provide consulting services at the request of the Company’s Chief
Executive Officer or the Company’s Board of Directors. The agreement will
terminate on July 15, 2009. In consideration for his consulting
services, Mr. Zinnecker will receive a fee in the amount of $150 per hour
for all services provided upon the Company’s request. There is no minimum number
of hours required as part of the consulting agreement, and there are certain
limits as to the maximum days per month which Mr. Zinnecker may provide
services.
Agreements with
Virginia E. Shanks. On July 22, 2008, the Company entered into
an executive employment agreement with Ms. Shanks, which sets forth certain
terms and conditions relating to her employment as the Company’s Senior Vice
President and Chief Marketing Officer. Ms. Shanks’ employment agreement
provides that she will receive an annual base salary of $250,000, subject
to covenants in the employment agreement and in an Agreement Regarding
Proprietary Developments, Confidential Information and Non-Solicitation. The
annual salary will be subject to an annual review by the Company’s Chief
Executive Officer. In addition, she has an opportunity to earn an annual bonus
equal to 60% of her base salary upon achievement of certain performance targets
approved by the Company’s Chief Executive Officer, and up to a maximum of 100%
of her base salary for overachievement of such performance targets. The
employment agreement also specifies that Ms. Shanks will be eligible to
enroll in the Company’s benefit programs and vacation policies as they are
established from time-to-time for senior-level executive
employees.
Pursuant
to the employment agreement, on July 22, 2008 the Company granted
Ms. Shanks 250,000 stock options pursuant to the Company’s 2008 Employment
Inducement Award Plan. The options became immediately exercisable, but are
subject to vesting over four years. Specifically, one-sixteenth (1/16) of the
options vest on October 22, 2008, with the remaining options vesting
one-sixteenth (1/16) quarterly until fully vested.
Ms. Shanks
will serve as Vice President of Sales until her successor is chosen and
qualified or until her death, resignation, retirement, disqualification or
removal. If there is a Change of Control of the Company, Ms. Shanks may, in
certain circumstances, receive one year of base salary and one year of a target
bonus payment; provided, however, that if the Change of Control occurs after
July 22, 2009, Ms. Shanks would, in such circumstances, receive two
years of base salary and two years of target bonus payments. Ms. Shanks is
eligible to receive a gross-up payment in the event that any payment by the
Company to or for the benefit of Ms. Shanks is subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
Agreements with
Uri L. Clinton. On August 16, 2008, the Company entered into an
executive employment agreement with Mr. Clinton, which sets forth certain
terms and conditions relating to his employment as the Company’s General
Counsel. Mr. Clinton’s employment agreement provides that he will receive
an annual base salary of $250,000, subject to covenants in the employment
agreement and in an Agreement Regarding Proprietary Developments, Confidential
Information and Non-Solicitation. The annual salary will be subject to an annual
review by the Company’s Chief Executive Officer. In addition, he has an
opportunity to earn an annual bonus equal to 60% of his base salary upon
achievement of certain performance targets approved by the Company’s Chief
Executive Officer, and up to a maximum of 100% of his base salary for
overachievement of such performance targets. The employment agreement also
specifies that Mr. Clinton will be eligible to enroll in the Company’s
benefit programs and vacation policies as they are established from time-to-time
for senior-level executive employees.
Pursuant
to the employment agreement, on August 16, 2008 the Company granted
Mr. Clinton 250,000 stock options pursuant to the Company’s 2008
Employment Inducement Award Plan. The options became immediately exercisable,
but are subject to vesting over four years. Specifically,
one-sixteenth (1/16) of the option vests on November 16, 2008,
with the remaining options vesting one-sixteenth (1/16) quarterly until
fully vested.
Mr. Clinton
will serve as General Counsel until his successor is chosen and qualified or
until his death, resignation, retirement, disqualification or removal. If there
is a Change of Control of the Company, Mr. Clinton may, in certain
circumstances, receive one year of base salary and one year of a target bonus
payment; provided, however, that if the Change of Control occurs after
August 16, 2009, Mr. Clinton would, in such circumstances,
receive two years of base salary and two years of target bonus payments.
Mr. Clinton is eligible to receive a gross-up payment in the event that any
payment by the Company to or for the benefit of Mr. Clinton is subject to
the excise tax imposed by Section 4999 of the Internal Revenue
Code.
Agreements with
Patrick R. Ramsey. On September 14, 2008, the Company entered into
an executive employment agreement with Mr. Ramsey, which sets forth certain
terms and conditions relating to his employment as the Company’s Senior Vice
President and Chief Operating Officer. Mr. Ramsey’s employment agreement
provides that he will receive an annual base salary of $300,000, subject to
covenants in the employment agreement and in an Agreement Regarding Proprietary
Developments, Confidential Information and Non-Solicitation. The annual salary
will be subject to an annual review by the Company’s Chief Executive Officer. In
addition, he has an opportunity to earn an annual bonus equal
to 60% of his base salary upon achievement of certain performance
targets approved by the Company’s Chief Executive Officer, and up to a maximum
of 100% of his base salary for overachievement of such performance targets.
The employment agreement also specifies that Mr. Ramsey will be eligible to
enroll in the Company’s benefit programs and vacation policies as they are
established from time-to-time for senior-level executive employees.
For a
period of six months following the effective date of the employment agreement,
the Company will pay expenses related to Mr. Ramsey’s commuting between
Austin, Texas (the Company’s home office location) and Las Vegas, Nevada; as
well reasonable costs of an apartment in Austin, Texas, car rental and other
related and reasonable expenses. The Company will pay for the reasonable moving
expenses for Mr. Ramsey’s relocation to Austin, Texas.
Pursuant
to the employment agreement, on September 14, 2008 the Company granted
Mr. Ramsey 300,000 stock options pursuant to the Company’s
2008 Employment Inducement Award Plan. The options became immediately
exercisable, but are subject to vesting over four years. Specifically,
one-fourth (1/4) of the options vest on September 14, 2009 and the
remaining options vest in equal quarterly installments until fully
vested.
Mr. Ramsey
will serve as Chief Operating Officer until his successor is chosen and
qualified or until his death, resignation, retirement, disqualification or
removal. If there is a Change of Control of the Company, Mr. Ramsey may, in
certain circumstances, receive one year of base salary and one year of a target
bonus payment; provided, however, that if the Change of Control occurs after
September 14, 2009, Mr. Ramsey would, in such circumstances,
receive two years of base salary and two years of target bonus payments.
Mr. Ramsey is eligible to receive a gross-up payment in the event that any
payment by the Company to or for the benefit of Mr. Ramsey is subject to
the excise tax imposed by Section 4999 of the Internal Revenue
Code.
Agreement with
Mick Roemer. On January 12, 2009, the Company entered into an
executive employment agreement with Mr. Roemer, which sets forth certain
terms and conditions relating to his employment as Senior Vice President of
Sales of the Company. Mr. Roemer’s employment agreement provides that he
will receive an annual base salary of $200,000, subject to covenants in the
employment agreement and in an Agreement Regarding Proprietary Developments,
Confidential Information and Non-Solicitation. The annual salary will be subject
to an annual review by the Company’s Chief Executive Officer. In addition, he is
entitled to receive a quarterly incentive bonus (the “Incentive Bonus“) upon the
achievement of new sales and new placement goals mutually agreed to by and
between Mr. Roemer and the Company’s Chief Executive Officer for each
quarter. The Incentive Bonus shall not exceed $100,000 in any individual twelve
(12) month period. In addition to the Incentive Bonus, Mr. Roemer has an
opportunity to earn an annual bonus equal to 60% of his base salary upon
achievement of certain performance targets approved by the Company’s Chief
Executive Officer, and up to a maximum of 100% of his base salary for
overachievement of such performance targets. The employment agreement also
specifies that Mr. Roemer will be eligible to enroll in the Company’s
benefit programs and vacation policies as they are established from time-to-time
for senior-level executive employees.
Pursuant
to the employment agreement, the Company granted Mr. Roemer 200,000 stock
options pursuant to the Company’s 2008 Employment Inducement Award Plan. The
options became immediately exercisable, but are subject to vesting over four
years. Specifically, one-fourth (1/4) of the options will vest on the first
anniversary of the grant date and the remaining options vest in equal quarterly
installments until fully vested.
Mr. Roemer
will serve as Senior Vice President of Sales until his successor is chosen and
qualified or until his death, resignation, retirement, disqualification or
removal. If there is a Change of Control of the Company, Mr. Roemer may, in
certain circumstances, receive one year of base salary and one year of a target
bonus payment; provided, however, that if the Change of Control occurs after
January 12, 2009, Mr. Roemer would, in such circumstances, receive two
years of base salary and two years of target bonus payments. Mr. Roemer is
eligible to receive a gross-up payment in the event that any payment by the
Company to or for the benefit of Mr. Roemer is subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
Agreement with
Adam D. Chibib. On February 1, 2009, the Company entered into
an executive employment agreement with Mr. Chibib, which sets forth certain
terms and conditions relating to his employment as Senior Vice President and
Chief Financial Officer of the Company, effective as of February 10, 2009.
Mr. Chibib’s employment agreement provides that he will receive an annual
base salary of $250,000, subject to covenants in the employment agreement and in
an Agreement Regarding Proprietary Developments, Confidential Information and
Non-Solicitation, and a sign-on bonus of $15,000. The annual salary will be
subject to an annual review by the Company’s Chief Executive Officer. In
addition, he has an opportunity to earn an annual bonus equal to 60% of his
base salary upon achievement of certain performance targets approved by the
Company’s Chief Executive Officer, and up to a maximum of 100% of his base
salary for overachievement of such performance targets. In addition, beginning
on April 1, 2009, Mr. Chibib will be eligible for a separate
discretionary bonus in an amount up to but not exceeding $20,000 per
quarter, based upon criteria for quarterly objectives as set by the Company’s
Chief Executive Officer. The employment agreement also specifies that
Mr. Chibib will be eligible to enroll in the Company’s benefit programs as
they are established from time-to-time for senior level executive
employees.
Pursuant
to the employment agreement, on February 10, 2009, the Company granted
Mr. Chibib 250,000 stock options pursuant to the Company’s
2008 Employment Inducement Award Plan. The options became immediately
exercisable, but are subject to vesting over four years. Specifically,
one-fourth (1/4) of the options vest on February 10, 2010,
and the remaining options vest in equal quarterly installments until fully
vested.
Mr. Chibib
will serve as Senior Vice President and Chief Financial Officer until his
successor is chosen and qualified or until his death, disability, resignation,
retirement, disqualification or removal. In the event that a Change of Control
occurs after February 10, 2009, Mr. Chibib would, in certain
circumstances, receive two years of base salary and two years of target bonus
payments. Mr. Chibib is eligible to receive a gross-up payment in the event
that any payment by the Company to or for the benefit of Mr. Chibib is
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code.
Change-in-Control
Benefits. Generally, the Company does not provide executive officers with
any special benefits that are triggered solely upon a change-in-control.
However, upon a change-in-control, virtually all of the Company’s outstanding
stock options, including those held by our executive officers, become fully
vested. Change-in-control generally refers to certain corporate transactions
involving the Company such as a merger or consolidation, sale of assets,
dissolution or the acquisition by any person of at least 51% of our voting
stock. The Compensation Committee believes that for senior executives, including
the Named Executive Officers, accelerated vesting of stock options in the event
of a change-in-control is generally appropriate because in some
change-in-control situations, equity of the target company is cancelled making
immediate acceleration necessary in order to preserve the value of the option
grants. In addition, the Company relies on long-term incentive awards to provide
our executive officers with the opportunity to accumulate substantial resources
to fund their retirement income, and the Compensation Committee believes that a
change in control event is an appropriate liquidation point for awards designed
for such purpose.
General Severance
Plan. In June 2007, the Company established the Multimedia Games,
Inc. Severance Plan for Select Employees (“Severance Plan”). Under this plan,
and other than for Mr. Sanfilippo and other executive officers with whom
the Company has employment agreements, it is at the discretion of the Plan
Administrator, and subject to approval by the Company’s Chief Executive Officer,
whether an executive officer, or any employee, would be entitled to receive any
cash severance benefits due to an involuntary termination of employment.
However, in no event may cash severance benefits exceed twice an executive
officer’s annual compensation (generally defined as base salary) for the
calendar year preceding the calendar year during which the executive officer
involuntarily terminated. The Severance Plan Administrator is the Company’s
Senior Vice President of Human Resources.
Under the
Severance Plan, there are no commitments for the Company to make severance
payments to any employee, including any of the Named Executive Officers. Any
payments made pursuant to the Plan are determined on a case-by-case basis. No
payments were made under the Severance Plan to any current or former executive
officers during the fiscal year ended
September 30, 2008.
Compliance with
Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code restricts deductibility of executive compensation paid to
our Chief Executive Officer and each of the four other most highly compensated
executive officers holding office at the end of any year to the extent such
compensation exceeds $1,000,000 for any of such officers in any year and
does not qualify for an exception under Section 162(m) or related
regulations. The Committee’s policy is to qualify its executive compensation for
deductibility under applicable tax laws to the extent practicable. Income
related to stock options granted under our equity compensation plans generally
qualifies for an exemption from these restrictions imposed by
Section 162(m). In the future, the Committee will continue to evaluate the
advisability of qualifying its executive compensation for full
deductibility.
REPORT
OF THE COMPENSATION COMMITTEE
We, the
Compensation Committee of the Board of Directors, have reviewed and discussed
the foregoing Compensation Discussion and Analysis with the management of the
Company. Based on such review and discussion, we are of the opinion that the
executive compensation policies and plans provide appropriate compensation to
properly align the Company’s performance and the interests of its shareholders
through the use of competitive and equitable executive compensation in a
balanced and reasonable manner, for both the short and long-term. Accordingly,
we have recommended to the Board of Directors that the foregoing Compensation
Discussion and Analysis be included in the Company’s Annual Report on
Form 10-K for the year ended September 30, 2008, and in the proxy
statement relating to the Company’s 2009 Annual Meeting of
Shareholders.
Submitted
by the Compensation Committee of the Board of Directors:
COMPENSATION
COMMITTEE
|
|
Neil
E. Jenkins, Chairman of the Compensation Committee
|
John
M. Winkelman
|
Emanuel
R. Pearlman
|
SUMMARY
COMPENSATION TABLE
The
following summary compensation table sets forth information concerning aggregate
compensation earned by or paid to (i) the individual serving as our Chief
Executive Officer during our 2008 fiscal year, (ii) the individuals
serving as our Chief Financial Officer during our 2008 fiscal year, and
(iii) our three other highly compensated executive officers who served in
such capacities during fiscal year 2008 but were not serving in such roles
as of September 30, 2008. We refer to these individuals as our “Named
Executive Officers.” Except for Mr. Sanfilippo, our Chief Executive
Officer, and Mr. Cieslewicz, our Chief Financial Officer, none of our
Executive Officers employed by us at the end of fiscal year 2008 received
compensation in excess of $100,000 during fiscal
year 2008.
Name and Principal Position
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Stock
Option
Awards (1)
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
(2)
($)
|
|
|
Total
($)
|
|
Anthony M. Sanfilippo (3)
President and Chief Executive
Officer
|
2008
|
|
|
121,154 |
|
|
|
181,731 |
|
|
|
— |
|
|
|
211,610 |
|
|
|
— |
|
|
|
— |
|
|
|
30,844 |
|
|
|
545,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. Loebig (4)
|
2008
|
|
|
194,250 |
|
|
|
119,231 |
|
|
|
— |
|
|
|
63,265 |
|
|
|
— |
|
|
|
— |
|
|
|
31,832 |
|
|
|
408,578 |
|
Former
President and
Chief
Executive Officer
|
2007
|
|
|
192,827 |
|
|
|
— |
|
|
|
— |
|
|
|
53,251 |
|
|
|
— |
|
|
|
— |
|
|
|
7,414 |
|
|
|
253,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clifton E. Lind (5)
|
2008
|
|
|
275,192 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
119,383 |
|
|
|
394,575 |
|
Former
President and
Chief
Executive Officer
|
2007
|
|
|
450,000 |
|
|
|
— |
|
|
|
— |
|
|
|
80,220 |
|
|
|
— |
|
|
|
— |
|
|
|
17,493 |
|
|
|
547,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Cieslewicz
(6)
|
2008
|
|
|
215,962 |
|
|
|
— |
|
|
|
— |
|
|
|
201,437 |
|
|
|
— |
|
|
|
— |
|
|
|
8,670 |
|
|
|
426,069 |
|
Vice
President and
Chief
Financial Officer
|
2007
|
|
|
176,346 |
|
|
|
52,500 |
|
|
|
— |
|
|
|
113,868 |
|
|
|
— |
|
|
|
— |
|
|
|
8,554 |
|
|
|
351,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.
Howard Chalmers
|
2008
|
|
|
182,505 |
|
|
|
— |
|
|
|
— |
|
|
|
23,896 |
|
|
|
— |
|
|
|
— |
|
|
|
7,331 |
|
|
|
213,732 |
|
Former
Senior Vice President of Planning and Corporate
Communications
|
2007
|
|
|
187,616 |
|
|
|
— |
|
|
|
— |
|
|
|
56,707 |
|
|
|
— |
|
|
|
— |
|
|
|
7,625 |
|
|
|
251,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott A. Zinnecker
(7)
Executive
Vice President
|
2008
|
|
|
181,731 |
|
|
|
— |
|
|
|
— |
|
|
|
22,948 |
|
|
|
— |
|
|
|
— |
|
|
|
7,550 |
|
|
|
212,229 |
|
(1)
|
Amounts
disclosed in the “Option Awards” column relate to grants of stock options
made under one or more of the Company’s stock option plans (See
“Item 11. Executive Compensation”). With respect to each stock option
grant, the amounts disclosed generally reflect the compensation cost that
the Company recognized for financial accounting purposes in
fiscal year 2008, in accordance with Statement of Financial
Accounting Standards No. 123 (revised), “Share-Based Payment,” or
SFAS 123(R). Generally, SFAS 123(R) requires the full grant-date
fair value of a stock option award to be amortized and recognized as
compensation cost over the service period that relates to the
award.
|
(2)
|
Amounts
disclosed in the “All Other Compensation” column include the following
Company contributions to the 401(k) Plan accounts of each Named
Executive Officer for fiscal years 2008 and 2007, respectively:
Mr. Sanfilippo, $4,154 and $0; Mr. Loebig, $10,448 and $7,414;
Mr. Lind, $13,597 and $15,931; Mr. Cieslewicz, $8,640 and
$8,554; Mr. Chalmers, $7,301 and $7,625; and Mr. Zinnecker,
$7,280 (2008 only). Mr. Sanfilippo’s amount also includes
relocation costs of $26,690. Amounts for Messrs. Loebig and Lind include
payouts in respect of unused vacation of $21,354 and $101,674,
respectively. Amounts for Messrs. Lind and Zinnecker include reimbursement
for health club fees under the Company’s “Good Health” program of $138 and
$240, respectively. Amounts for Messrs. Loebig. Lind, Cieslewicz, Chalmers
and Zinnecker include a $30 gift card provided to all employees at
Thanksgiving. The amount for Mr. Lind includes the Company’s direct
payment and reimbursement for his payment of membership fees and costs
related to business entertainment at certain clubs in the amount
of $3,944.
|
(3)
|
Mr. Sanfilippo
commenced his employment with the Company effective June 15, 2008. In
recognition of his service during fiscal year 2008, he was awarded a
pro-rata bonus under the terms of his employment
agreement.
|
(4)
|
Mr. Loebig
was awarded a bonus in recognition of his service as the Company’s Interim
President and Chief Executive Officer. This bonus was paid to
Mr. Loebig prior to his termination from the Company, effective
September 18, 2008.
|
(5)
|
Effective
March 31, 2008, Mr. Lind resigned as President, Chief Executive
Officer and a director of the Company and ceased to be an Executive
Officer of the Company.
|
(6)
|
Mr. Cieslewicz
received three cash payments during fiscal year 2007, each in the amount
of $17,500, in recognition of his efforts and service as the Company’s
Interim Chief Financial Officer between May 2006 and April
2007.
|
(7)
|
Mr. Zinnecker
was not a Named Executive Officer for the fiscal year ended
September 30, 2007; as such, data is not provided for him for
that fiscal year.
|
GRANTS
OF PLAN-BASED AWARDS IN OUR FISCAL YEAR ENDED
SEPTEMBER 30, 2008
The
following table provides information regarding grants of plan-based awards made
to each of the Named Executive Officers during the fiscal year ended
September 30, 2008.
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under
Equity Incentive Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Date
Award
Approved
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
All Other
Stock Awards:
Number of Shares
of Stock or Units
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Exercise or
Base Price of
Options Awards
($/Sh)
|
|
|
Grant Date
Fair Value of
Stock and
Option Awards
($) (1)
|
|
Mr. Sanfilippo(2)
|
|
6/15/08
|
|
|
6/15/08
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,300,000 |
|
|
|
4.68 |
|
|
|
2,900,300 |
|
Mr. Loebig(3)
|
|
7/14/08
|
|
|
7/14/08
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,643 |
|
|
|
3.59 |
|
|
|
39,597 |
|
|
|
7/14/08
|
|
|
7/14/08
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
56,357 |
|
|
|
3.59 |
|
|
|
94,387 |
|
Mr. Cieslewicz(3)
|
|
7/14/08
|
|
|
7/14/08
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
3.59 |
|
|
|
25,122 |
|
|
|
7/14/08
|
|
|
7/14/08
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
65,000 |
|
|
|
3.59 |
|
|
|
108,862 |
|
P.
Howard Chalmers
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mr. Zinnecker(3)
|
|
7/14/08
|
|
|
7/14/08
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,000 |
|
|
|
3.59 |
|
|
|
66,992 |
|
|
1.
|
The
amounts disclosed in the “Grant date fair value of stock and option
awards” column were computed in accordance with
SFAS 123(R).
|
|
2.
|
On
June 15, 2008, the Board of Directors approved an award to
Mr. Sanfilippo of 1,300,000 nonqualified stock options, or NQSOs, in
connection with his appointment as the Company’s President and Chief
Executive Officer. These awards were issued under the Company’s 2008
Employment Inducement Award Plan. The options became immediately
exercisable, but are subject to a vesting over four years in equal
quarterly installments.
|
|
3.
|
These
awards were issued under the Company’s 2002 Stock Option
Plan.
|
OUTSTANDING
EQUITY AWARDS AT OUR FISCAL YEAR ENDED SEPTEMBER 30, 2008
The
following table provides information concerning the current holdings of stock
options by the Named Executive Officers as of September 30, 2008. This
table includes unexercised and unvested option awards. Individual equity grants
are shown separately for each such Named Executive Officer.
|
|
|
|
Option Awards
|
Name
|
|
Grant
Date
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(1)
|
|
|
Option
Exercise
Price
($)
(2)
|
|
Option
Expiration
Date
|
Mr. Sanfilippo (3)
|
|
6/15/08
|
|
|
1,300,000 |
|
|
|
— |
|
|
|
4.6800 |
|
6/15/18
|
|
|
Total
|
|
|
1,300,000 |
|
|
|
— |
|
|
|
|
|
|
Mr. Loebig
(4)
|
|
3/21/01
|
|
|
20,000 |
|
|
|
— |
|
|
|
2.3959 |
|
3/21/11
|
|
|
3/21/01
|
|
|
19,102 |
|
|
|
— |
|
|
|
2.3959 |
|
3/21/11
|
|
|
9/21/01
|
|
|
8,436 |
|
|
|
— |
|
|
|
3.7667 |
|
9/21/11
|
|
|
9/21/01
|
|
|
141,564 |
|
|
|
— |
|
|
|
3.7667 |
|
9/21/11
|
|
|
3/25/05
|
|
|
37,500 |
|
|
|
12,500 |
|
|
|
7.6100 |
|
3/25/15
|
|
|
7/14/08
|
|
|
— |
|
|
|
23,643 |
|
|
|
3.5900 |
|
7/14/18
|
|
|
7/14/08
|
|
|
— |
|
|
|
56,357 |
|
|
|
3.5900 |
|
7/14/18
|
|
|
Total
|
|
|
226,602 |
|
|
|
92,500 |
|
|
|
|
|
|
Mr. Lind
(3)
|
|
5/29/00
|
|
|
54,000 |
|
|
|
— |
|
|
|
1.0000 |
|
5/29/10
|
|
|
3/21/01
|
|
|
133,024 |
|
|
|
— |
|
|
|
2.3959 |
|
3/21/11
|
|
|
9/21/01
|
|
|
300,000 |
|
|
|
— |
|
|
|
3.7667 |
|
9/21/11
|
|
|
9/21/01
|
|
|
30,000 |
|
|
|
— |
|
|
|
3.7667 |
|
9/21/11
|
|
|
9/24/02
|
|
|
40,000 |
|
|
|
— |
|
|
|
8.2750 |
|
9/24/12
|
|
|
11/13/02
|
|
|
10,774 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
11/13/02
|
|
|
389,226 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
9/24/03
|
|
|
40,000 |
|
|
|
— |
|
|
|
16.8125 |
|
9/24/13
|
|
|
Total
|
|
|
997,024 |
|
|
|
— |
|
|
|
|
|
|
Mr. Cieslewicz
|
|
1/24/02
|
|
|
70,000 |
|
|
|
— |
|
|
|
10.1500 |
|
1/24/12
|
|
|
3/25/05
|
|
|
3,125 |
|
|
|
3,125 |
|
|
|
7.6100 |
|
3/25/15
|
|
|
8/4/05
|
|
|
7,500 |
|
|
|
3,750 |
|
|
|
9.9700 |
|
8/4/15
|
|
|
4/6/07
|
|
|
3,304 |
|
|
|
20,324 |
|
|
|
11.7500 |
|
4/6/17
|
|
|
4/6/07
|
|
|
21,696 |
|
|
|
54,676 |
|
|
|
11.7500 |
|
4/6/17
|
|
|
7/14/08
|
|
|
— |
|
|
|
15,000 |
|
|
|
3.5900 |
|
7/14/18
|
|
|
7/14/08
|
|
|
— |
|
|
|
65,000 |
|
|
|
3.5900 |
|
7/14/18
|
|
|
Total
|
|
|
105,625 |
|
|
|
161,875 |
|
|
|
|
|
|
Mr. Chalmers
|
|
11/13/02
|
|
|
32,322 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
11/13/02
|
|
|
78,150 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
11/13/02
|
|
|
2,026 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
10/15/04
|
|
|
1 |
|
|
|
— |
|
|
|
12.0950 |
|
10/15/14
|
|
|
10/15/04
|
|
|
19,999 |
|
|
|
— |
|
|
|
12.0950 |
|
10/15/14
|
|
|
3/25/05
|
|
|
10,386 |
|
|
|
6,250 |
|
|
|
7.6100 |
|
3/25/15
|
|
|
3/25/05
|
|
|
8,364 |
|
|
|
— |
|
|
|
7.6100 |
|
3/25/15
|
|
|
Total
|
|
|
151,248 |
|
|
|
6,250 |
|
|
|
|
|
|
Mr. Zinnecker
|
|
11/13/02
|
|
|
32,322 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
11/13/02
|
|
|
117,678 |
|
|
|
— |
|
|
|
9.2800 |
|
11/13/12
|
|
|
3/25/05
|
|
|
12,502 |
|
|
|
6,250 |
|
|
|
7.6100 |
|
3/25/15
|
|
|
3/25/05
|
|
|
6,248 |
|
|
|
— |
|
|
|
7.6100 |
|
3/25/15
|
|
|
7/14/08
|
|
|
— |
|
|
|
40,000 |
|
|
|
3.5900 |
|
7/14/18
|
|
|
Total
|
|
|
168,750 |
|
|
|
46,250 |
|
|
|
|
|
|
|
(1)
|
Stock
options are generally subject to ratable vesting over four years. Options
granted to Mr. Sanfilippo are exercisable immediately but vest over
four years in equal quarterly installments. Options to other NEOs listed
above vest 25% on each of the first four anniversaries of their
grant date.
|
|
(2)
|
The
option exercise price is equal to the closing share price of the Company’s
stock on the day of grant.
|
OPTION
EXERCISES AND STOCK VESTED IN OUR FISCAL YEAR ENDED
SEPTEMBER 30, 2008
The
following table provides information regarding stock options exercised during
the fiscal year ended September 30, 2008, including the number of
shares acquired upon exercise and the value (value of common stock in excess of
exercise price at date of exercise) realized, before payment of applicable
withholding tax.
|
|
Option Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
|
|
Mr. Sanfilippo
|
|
|
— |
|
|
|
— |
|
Mr. Loebig
|
|
|
— |
|
|
|
— |
|
Mr. Lind
(1)
|
|
|
37,500 |
|
|
|
227,779 |
|
Mr. Cieslewicz
|
|
|
— |
|
|
|
— |
|
Mr. Chalmers
|
|
|
— |
|
|
|
— |
|
Mr. Zinnecker
|
|
|
— |
|
|
|
— |
|
|
(1)
|
Reflects the exercise of stock
options by Mr. Lind on November 6, 2007. The options
had an exercise price of $1.2709 per
share.
|
PENSION
BENEFITS IN OUR FISCAL YEAR ENDED SEPTEMBER 30, 2008
The
Company does not maintain a tax-qualified defined benefit retirement
plan.
NONQUALIFIED
DEFERRED COMPENSATION IN OUR FISCAL YEAR ENDED
SEPTEMBER 30, 2008
The
Company does not maintain any non-qualified supplemental retirement plans or
deferred compensation plans for our executive officers.
POTENTIAL
TERMINATION PAYMENTS
This
section describes and quantifies potential payments that may be made or benefits
that may provided to each Named Executive Officer at, following, or in
connection with the resignation, severance, retirement, or other termination of
the Named Executive Officer or a Change of Control of the Company. For this
purpose, it is assumed that each of the foregoing events occurred on the last
day of the Company’s fiscal year ended September 30, 2008. The
determination of potential payments and benefits is based on specific factors
and assumptions which are further discussed below. Since these factors and
assumptions are subject to change, the payments and benefits that may actually
be made to a Named Executive Officer may differ materially from the payments and
benefits disclosed in this section.
Mr. Chalmers
terminated his employment with the Company effective
December 31, 2008. For purposes of this disclosure (which assumes
certain termination events occurred on the last day of the Company’s fiscal
year) and pursuant to the Company’s General Severance Plan, Mr. Chalmers
would, at the discretion of the Plan Administrator, have been eligible to
receive cash severance benefits not to exceed twice his annual compensation
(which was $113,400 as of September 30, 2008) in the event of his
Involuntary Termination without Cause, or Voluntary Resignation for Good Reason,
or his Termination without Cause following a Change in Control. Details
regarding actual termination arrangements for Mr. Chalmers are provided in
the section titled “Employment And Termination Arrangements And
Change-In-Control Benefits.”
Potential
termination payment values are not provided for Messrs. Loebig, Lind and
Zinnecker, each of whom terminated their employment with the Company on or
before September 30, 2008; additional details regarding termination
arrangements for Messrs. Loebig, Lind and Zinnecker are provided in the section
titled “Employment And Termination Arrangements And Change-In-Control
Benefits.”
Anthony
M. Sanfilippo
Termination Event
|
|
Cash
Severance
($)
|
|
|
Acceleration and
Other Benefits from
Stock Options (1)
($)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
Retirement
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Death
or Disability
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Voluntary
Resignation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Termination
for Cause
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Involuntary
Termination without Cause, or Voluntary Resignation for Good Reason (2)
|
|
|
1,125,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,125,000 |
|
Change
in Control without Termination
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Termination
without Cause following a Change in Control (2)
|
|
|
1,125,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,125,000 |
|
|
(1)
|
The
amounts reflect the aggregate in-the-money value of all nonvested
outstanding stock options, based on the Company’s closing share price
of $4.33 on
September 30, 2008.
|
|
(2)
|
Pursuant
to Mr. Sanfilippo’s Employment Agreement (described in the section
titled “Employment And Termination Arrangements And Change-In-Control
Benefits”), in the event that the termination occurs on or before June 15,
2009, the Company would pay his one year of base salary continuation and
target bonus; or in the event that the termination occurs after June 15,
2009, two years of base salary continuation and two years of target
bonus.
|
Randy
S. Cieslewicz
Termination Event
|
|
Cash
Severance
($)
|
|
|
Acceleration and
Other Benefits from
Stock Options (1)
($)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
Retirement
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Death
or Disability
|
|
|
— |
|
|
|
59,200 |
|
|
|
— |
|
|
|
59,200 |
|
Voluntary
Resignation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Termination
for Cause
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Involuntary
Termination without Cause, or Voluntary Resignation for Good Reason (2)
|
|
|
235,000 |
|
|
|
59,200 |
|
|
|
— |
|
|
|
294,200 |
|
Change
in Control without Termination
|
|
|
— |
|
|
|
59,200 |
|
|
|
— |
|
|
|
59,200 |
|
Termination
without Cause following a Change in Control (2)
|
|
|
235,000 |
|
|
|
59,200 |
|
|
|
— |
|
|
|
294,200 |
|
|
(1)
|
The
amounts reflect the aggregate in-the-money value of all nonvested
outstanding stock options, based on the Company’s closing share price
of $4.33 on
September 30, 2008.
|
|
(2)
|
Pursuant
to the Company’s General Severance Plan, Mr. Cieslewicz would, at the
discretion of the Plan Administrator, be eligible to receive cash
severance benefits not to exceed twice his annual compensation. For
purposes of this disclosure, the amounts reflect the lump sum payment
equal to 12 months of his annual base salary of $235,000 as
of
September 30, 2008.
|
CERTAIN
INFORMATION NOT DEEMED INCORPORATED BY REFERENCE
IN
ANY SECURITIES AND EXCHANGE COMMISSION FILINGS
Notwithstanding
anything to the contrary set forth in any of our previous or future filings
under the Securities Act of 1933, or the Securities Act, or the 1934
Act that might incorporate all or portions of future filings, including this
Proxy Statement, with the SEC, in whole or in part, the Report of the
Compensation Committee of our Board of Directors and the Report of the Audit
Committee of our Board of Directors shall not be deemed to be incorporated by
reference into any such filing or deemed to be “soliciting material” or “filed”
with the SEC under the Securities Act or the 1934 Act, or subject to the
liabilities of Section 18 of the 1934 Act. In addition, this Proxy
Statement includes certain website addresses intended to provide inactive,
textural references only. The information on these websites shall not be deemed
part of this Proxy Statement.
DEADLINE
FOR RECEIPT OF SHAREHOLDER PROPOSALS
2010
ANNUAL MEETING
Shareholders
who, in accordance with SEC Rule 14a-8, wish to present proposals for inclusion
in our proxy statement and form of proxy for our next annual meeting must submit
their proposals so that they are received by us at our principal executive
offices, addressed to our Corporate Secretary, no later than
November 19, 2009. Shareholder proposals not submitted for inclusion
in next year’s proxy statement and form of proxy, but instead sought to be
presented directly at our next annual meeting of shareholders, may be brought
before the annual meeting so long as we receive notice of the proposal,
addressed to the Corporate Secretary, at our principal executive offices, no
later than November 19, 2009. If received after
November 19, 2009, such proposals will be considered untimely. Unless
we receive notice in the manner and by the dates specified above, the proxy
holders shall have discretionary authority to vote for or against any such
proposal presented at our next annual meeting of shareholders.
ANNUAL
REPORT
A copy of
our annual report for our fiscal year ended September 30, 2008,
including Amendment No. 1 thereto, has been mailed concurrently with this
Proxy Statement to all shareholders entitled to notice of and to vote at the
annual meeting. The annual report, including the amendment thereto, is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
FORM
10-K
We filed
an annual report on Form 10-K with the SEC on December 15, 2008, an
Amendment No. 1 on Form 10-K/A thereto with the SEC on
January 28, 2009, and an Amendment No. 2 on Form 10-K/A
thereto with the SEC on March 6, 2009. Shareholders may obtain a copy of
our annual report, including the amendments thereto, without charge, by writing
to our Corporate Secretary at our principal executive offices, located at
206 Wild Basin Rd South, Bldg B, Suite 400, Austin,
Texas 78746.
|
/s/
Anthony M. Sanfilippo
|
|
President
and Chief Executive Officer
|