Unassociated Document
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by the Registrant þ
Filed
by a Party other than the Registrant o
Check the
appropriate box:
þ
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Preliminary Proxy
Statement
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Confidential, For Use of the
Commission Only (As Permitted by Rule
14a-6(e)(2))
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material under
§240.14a-12
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MAM
SOFTWARE GROUP, INC.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o
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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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o
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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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Maple
Park, Maple Court
Barnsley,
UK S75 3DP
011
44 1244 311794
Important
Notice Regarding the Availability of Proxy Materials
for
the Annual Meeting of Stockholders to Be Held on February 18, 2011
The
Notice of Annual Meeting, Proxy Statement
and
Annual Report on Form 10-K are available at:
[http://www.____________]
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON FEBRUARY 18, 2011
To
the Stockholders of MAM Software Group, Inc.:
NOTICE IS HEREBY GIVEN that an
Annual Meeting of Stockholders of MAM Software Group, Inc., a Delaware
corporation, will be held on February 18, 2011 at 10:00 a.m. (Eastern Standard Time)
at the office of Gersten Savage LLP, 600 Lexington Ave, 9 th Floor,
New York, NY 10022, for the following purposes:
1. To
elect six (6) members of the Company’s Board of Directors, each to serve until
the 2012 Annual Meeting of Stockholders and until their successors are elected
and qualified or until their earlier resignation or removal (“Proposal No.
1”);
2. To
consider and vote on a proposal to ratify the Board’s selection of KMJ Corbin
& Company LLP
as the Company’s independent auditors for the fiscal year ending June 30, 2011
(“Proposal No. 2”);
3. To
consider and vote on a proposal giving the Board the authority to effect a
reverse split of the Company’s outstanding common stock, at an exchange ratio
ranging between 1-for-2 and 1-for-100, with the exact exchange ratio to be
determined by the Board in its sole discretion, immediately followed by a
forward split of the Company’s outstanding common stock, at an exchange ratio
ranging between 2-for-1 and 50-for-1, with the exact exchange ratio to be
determined by the Board in its sole discretion, by filing amendments to the
Company’s Certificate of Incorporation (“Proposal No. 3”);
4.
To consider and act upon an advisory resolution on executive compensation
(“Proposal No. 4”);
5. To
consider and act upon an advisory resolution on the frequency of the
stockholders’ advisory resolution on executive compensation (“Proposal No. 5”);
and
6. To
consider and act upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The
foregoing items of business are more fully described in the Proxy Statement that
is attached and made a part of this Notice. Only stockholders of record of our
Common Stock, $0.0001 par value per share, at the close of business on January
3, 2011 will be entitled to notice of, and to vote at, the Annual Meeting of
Stockholders or any adjournment thereof.
A copy of
our Annual Report to Stockholders on Form 10-K for the year ended June 30, 2010,
which contains financial statements and other information of interest to
stockholders, accompanies this Notice and the enclosed Proxy
Statement.
All
stockholders are cordially invited to attend the Annual Meeting of Stockholders
in person. Your vote is important regardless of the number of shares you own.
Only record or beneficial owners of MAM’s Common Stock as of the Record Date may
attend the Annual Meeting in person. When you arrive at the Annual Meeting, you
must present photo identification, such as a driver’s license. Beneficial owners
also must provide evidence of stockholdings as of the Record Date, such as a
recent brokerage account or bank statement.
Whether
or not you expect to attend the Annual Meeting of Stockholders, please complete,
sign, date, and return the enclosed proxy card in the enclosed postage-paid
envelope in order to ensure representation of your shares. It will help in our
preparations for the meeting if you would check the box on the form of proxy if
you plan on attending the Annual Meeting. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
Barnsley,
UK
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By
Order of the Board of Directors,
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December
[__], 2010
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/s/ Michael G. Jamieson
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MICHAEL
G. JAMIESON
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Chief
Executive Officer
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TABLE
OF CONTENTS
PROXY
STATEMENT FOR 2010 ANNUAL MEETING OF STOCKHOLDERS
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1
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Information
Concerning the Proxy Materials and the Annual Meeting
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1
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Voting
Procedures and Vote Required
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1
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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3
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ELECTION
OF DIRECTORS (Proposal No. 1)
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6
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CORPORATE
GOVERNANCE
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8
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Board
of Directors
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8
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Director
Independence
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8
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Board
Meetings and Attendance
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8
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Annual
Meeting Attendance
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8
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Stockholder
Communications with the Board
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8
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Board
Committees
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8
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Family
Relationships
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9
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Involvement
in Certain Legal Proceedings
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9
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DIRECTOR
COMPENSATION FOR FISCAL 2009
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10
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INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
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11
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EXECUTIVE
COMPENSATION
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12
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Compensation
Discussion and Analysis
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12
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Compensation
Committee Report
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17
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Summary
Compensation Table for Fiscal Years 2010, 2009 and 2008
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18
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Employment
Agreements with Executive Officers
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19
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Other
Compensation
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20
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Outstanding
Equity Awards at 2009 Fiscal Year End
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21
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
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22
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COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
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25
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RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS (Proposal No.
2)
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26
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APPROVAL
OF REVERSE AND FORWARD SPLIT (Proposal No. 3)
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27
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APPROVAL
OF ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION PROPOSAL (Proposal No.
4)
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36
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APPROVAL
OF ADVISORY RESOLUTION ON THE FREQUENCY OF THE STOCKHOLDERS’ SAY ON PAY
PROPOSAL (Proposal No. 5)
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37
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AUDIT
COMMITTEE REPORT
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38
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STOCKHOLDER
PROPOSALS FOR 2011 ANNUAL MEETING
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39
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EXPENSES
AND SOLICITATION
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39
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OTHER
BUSINESS
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39
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ADDITIONAL
INFORMATION
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39
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PROXY
STATEMENT FOR 2011 ANNUAL MEETING OF STOCKHOLDERS
In this
Proxy Statement, MAM Software Group, Inc., a Delaware corporation, is referred
to as “MAM,” the “Company,” “we,” “us” and “our.”
Information
Concerning the Proxy Materials and the Annual Meeting
Proxies
in the form enclosed with this Proxy Statement are being solicited by our Board
of Directors for use at the 2011 Annual Meeting of our Stockholders to be held
at 10:00 a.m. (Eastern Standard Time) on February 18, 2011, at the office of
Gersten Savage LLP, 600 Lexington Ave, 9 th Floor,
New York, NY 10022, and at any adjournment thereof. Your vote is very important.
For this reason, our Board of Directors is requesting that you permit your
Common Stock, $0.0001 par value per share (“Common Stock”), to be represented at
the Annual Meeting by the proxies named on the enclosed proxy card. This
Proxy Statement contains important information for you to consider when deciding
how to vote on the matters brought before the meeting. Please read it
carefully.
Voting
materials, which include this Proxy Statement, the enclosed proxy card, and the
enclosed Annual Report to Stockholders on Form 10-K for the fiscal year ended
June 30, 2010, which contains financial statements and other information of
interest to stockholders, will first be mailed to stockholders on or about
[January 4, 2011].
Only
stockholders of record as of the close of business on January 3, 2011 (the
“Record Date”) of our Common Stock will be entitled to notice of, and to vote
at, the Annual Meeting. As of the Record Date, 138,733,246 shares of Common
Stock were issued and outstanding. Holders of Common Stock are entitled to one
vote per share held by them. Stockholders may vote in person or by proxy,
however, granting a proxy does not in any way affect a stockholder’s right to
attend the Annual Meeting and vote in person. Any stockholder giving a proxy has
the right to revoke that proxy by (i) filing a later-dated proxy or a written
notice of revocation with us at our principal offices at any time before the
original proxy is exercised or (ii) attending the Annual Meeting and voting in
person.
Michael
Jamieson and Gerry Czarnecki are named as attorneys-in-fact in the proxy. Mr.
Jamieson is our Chief Executive Officer and is also a member of our Board of
Directors. Mr. Czarnecki is Chairman of our Board of Directors. Mr. Jamieson or
Mr. Czarnecki will vote all shares represented by properly executed proxies
returned in time to be counted at the Annual Meeting, as described below under
“Voting Procedures.” Any stockholder granting a proxy has the right to withhold
authority to vote for any or all of the nominees to the Board of Directors.
Where a vote has been specified in the proxy with respect to the matters
identified in the Notice of the Annual Meeting, including the election of
directors, the shares represented by the proxy will be voted in accordance with
those voting specifications. If no voting instructions are indicated, your
shares will be voted as recommended by our Board on all matters, and as the
proxy holders may determine in their discretion with respect to any other
matters properly presented for a vote before the Annual Meeting.
The
stockholders will consider and vote upon (i) a proposal to elect six (6) members
of our Board of Directors, each to serve until the 2012 Annual Meeting of
Stockholders and until their successors are elected and qualified or until their
earlier resignation or removal; (ii) a proposal to ratify the Board’s selection
of KMJ Corbin & Company LLP as our independent
auditors for the fiscal year ending June 30, 2011; (iii) a proposal giving the
Board the authority to effect a reverse split of the Company’s outstanding
common stock, at an exchange ratio ranging between 1-for-2 and 1-for-100, with
the exact exchange ratio to be determined by the Board in its sole discretion,
followed by a forward split of the Company’s outstanding common stock, at an
exchange ratio ranging between 2-for-1 and 50-for-1, with the exact exchange
ratio to be determined by the Board in its sole discretion, by filing a
Certificate of Amendment to the Company’s Certificate of Incorporation (the
“Reverse/Forward Split”); (iv) a proposal to consider and act upon an advisory
resolution on executive compensation; and (v) a proposal to consider and act
upon an advisory resolution on the frequency of the stockholders’ advisory
resolution on executive compensation. Stockholders also will consider and act
upon such other business as may properly come before the Annual
Meeting.
Voting
Procedures and Vote Required
Mr.
Jamieson and/or Mr. Czarnecki will vote all shares represented by properly
executed proxies returned in time to be counted at the Annual Meeting. The
presence, in person or by proxy, of at least a majority of the issued and
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to establish a quorum for the transaction of business. Shares
represented by proxies pursuant to which votes have been withheld for any or all
of the nominees for directors, or which contain one or more abstentions, as well
as “broker non-vote” shares (described below) are counted as present for
purposes of determining the presence or absence of a quorum for the Annual
Meeting.
All
properly executed proxies delivered pursuant to this solicitation and not
revoked will be voted at the Annual Meeting as specified in such proxies. As
noted above, proxies will be voted as recommended by our Board on all matters
and will be voted in the discretion of the proxy holder on any other matters
that properly come before the Annual Meeting, if no voting instructions are
indicated.
Vote Required for Election of
Directors (Proposal 1). Our Certificate of Incorporation, as
amended, does not authorize cumulative voting. Delaware law and our Bylaws
provide that directors are to be elected by a plurality of the votes of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. This means that the six (6)
candidates receiving the highest number of affirmative votes at the Annual
Meeting will be elected as directors. Only shares that are voted in favor of a
particular nominee will be counted toward that nominee’s achievement of a
plurality. Shares present at the Annual Meeting that are not voted for a
particular nominee or shares present by proxy where the stockholder properly
withheld authority to vote for such nominee will not be counted toward that
nominee’s achievement of a plurality.
Vote Required for Ratification of
Auditors (Proposal 2) . Delaware law and our Bylaws provide
that, on all matters (other than the election of directors and except to the
extent otherwise required by our Certificate of Incorporation or applicable
Delaware law), the affirmative vote of a majority of the shares present, in
person or by proxy, and voting on the matter, will be required for approval.
Accordingly, the affirmative vote of a majority of the shares present at the
Annual Meeting, in person or by proxy, and voting on the matter, will be
required to ratify the Board’s selection of KMJ Corbin & Company LLP as our
independent auditors for the fiscal year ending June 30, 2010.
Vote Required for the
Reverse/Forward Split (Proposal 3) . Delaware law and our
Bylaws provide that, on all matters (other than the election of directors and
except to the extent otherwise required by our Certificate of Incorporation or
applicable Delaware law), the affirmative vote of a majority of the shares
outstanding entitled to vote, in person or by proxy, and voting on the matter,
will be required for approval. Accordingly, the affirmative vote of a majority
of the shares outstanding entitled to vote, in person or by proxy, and voting on
the matter, will be required to approve the Reverse/Forward Split
Proposal.
Vote Required for the Advisory
Resolution on Executive Compensation Proposal (Proposal 4)
.. This Proposal is non-binding on the company and our board of
directors.
Vote Required for the Advisory
Resolution on the Frequency of the Stockholders’ Say on Pay Proposal (Proposal
5) . This Proposal with respect to the frequency for
submission of a resolution to the shareholders soliciting support for the
company’s named executive officer compensation policies and programs is
non-binding on the company and our board of directors.
If you
hold shares beneficially in street name and do not provide your broker with
voting instructions, your shares may constitute “broker non-votes.” Generally,
broker non-votes occur on a matter when a broker is not permitted to vote on
that matter without instructions from the beneficial owner and instructions are
not given. Brokers that have not received voting instructions from their clients
cannot vote on their clients’ behalf on “non-routine” proposals. Broker
non-votes are not counted for the purposes of obtaining a quorum for the Annual
Meeting, and, in tabulating the voting result for any particular proposal,
shares that constitute broker non-votes are not considered entitled to vote. The
vote on Proposals 1, 3, 4, 5 is considered “non-routine” and the vote on
Proposal 2 is considered “routine.”
Abstentions
are counted as “shares present” at the Annual Meeting for purposes of
determining the presence of a quorum and with respect to any matters being voted
upon at the Annual Meeting. Abstentions will have no effect on the outcome of
the election of directors, but with respect to any other proposal an abstention
will operate to prevent the approval of such proposal to the same extent as a
vote against such proposal.
Votes at
the meeting will be tabulated by one or more inspectors of election appointed by
the Chief Executive Officer.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of December 11, 2010 by (a) each stockholder
who is known to us to own beneficially 5% or more of our outstanding Common
Stock; (b) all directors; (c) our executive officers, and (d) all executive
officers and directors as a group. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to
their shares of Common Stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with
respect to their shares of Common Stock. Unless otherwise identified, the
address of our directors and officers is c/o MAM Software Group, Inc., Maple
Park, Maple Court, Barnsley, UK S75 3DP.
Name and address of beneficial owner
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Amount and Nature of
Beneficial Ownership
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Percent of class of
Common Stock (1)
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Wynnefield
Persons (2)
c/o
Wynnefield Capital Inc.
450
Seventh Ave., Suite 509
New
York, NY 10123
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32,021,150 |
(3) |
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23.08 |
% |
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BBE
Group Holdings, LLC
145
East 57th Street, 10th Floor
New
York, NY 10022
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13,802,113 |
(4) |
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9.95 |
% |
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ComVest
Capital LLC
105
S. Narcissus Ave.
West
Palm Beach, FL 33401
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5,083,333 |
(5) |
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3.53 |
% |
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Directors
and Officers:
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Michael
Jamieson
Chief
Executive Officer
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2,260,000 |
(6) |
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1.63 |
% |
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Charles
F. Trapp
Chief
Financial Officer
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3,856,723 |
(7) |
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2.78 |
% |
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Frederick
Wasserman
Director
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497,873 |
(8) |
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0.36 |
% |
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Dwight
B. Mamanteo
Director
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2,149,906 |
(9) |
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1.55 |
% |
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Marcus
Wohlrab
Director
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245,644 |
(10) |
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0.18 |
% |
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Gerald
M. Czarnecki
Chairman
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3,028,714 |
(11) |
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2.18 |
% |
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W.
Austin Lewis IV (12)
c/o
Lewis Asset Management Corp.
500
5th Ave suite 2240, New York, NY 10110
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20,046,585 |
(13) |
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14.45 |
% |
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Directors
and Officers as a group (7 persons)
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32,085,445 |
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23.12 |
% |
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Former
Officers and Directors:
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Ian
Warwick
Chief
Executive Officer
and
Chairman
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4,561,452 |
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3.29 |
% |
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Simon
Chadwick
Chief
Operating Officer
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1,961,084 |
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1.41 |
% |
(1)
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Based on a total of 138,733,246
shares of Common Stock outstanding as of December 11, 2010. In accordance
with Securities and Exchange Commission rules, each person’s percentage
interest is calculated by dividing the number of shares that person owns
by the sum of (a) the total number of shares outstanding as of December 11
2010 plus (b) the number of shares such person has the right to acquire
within sixty (60) days of December 11,
2010.
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(2)
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Comprised of Wynnefield Partners
Small Cap Value, LP (“Wynnefield Partners”) and Wynnefield Partners Small
Cap Value LP I (“Wynnefield Partners I”), and the general partner of each
of these entities, Wynnefield Capital Management, LLC (“Wynnefield LLC”);
Wynnefield Small Cap Value Offshore Fund Ltd. (“Wynnefield Offshore”) and
its investment manager, Wynnefield Capital, Inc. (“Wynnefield Capital”);
Wynnefield Capital, Inc. Profit Sharing & Money Purchase Plan (the
“Plan”); Channel Partnership II, LP (“Channel”); Nelson Obus, who serves
as principal and co-managing member of Wynnefield Capital Management, LLC,
principal executive officer of Wynnefield Capital, Inc. and general
partner of Channel Partnership II, LP; and Joshua H. Landes, who serves as
principal and co-managing member of Wynnefield Capital Management, LLC and
executive officer of Wynnefield Capital, Inc. (collectively, the
“Wynnefield Persons”). Dwight Mamanteo, one of the Company’s directors, is
an investment analyst with Wynnefield Capital. Mr. Mamanteo exercises
neither voting nor dispositive control over the shares beneficially owned
by Wynnefield Capital. The Company has been informed that Nelson Obus and
Joshua H. Landes share voting and investment control over the shares
beneficially owned by Wynnefield Partners, Wynnefield Partners I,
Wynnefield Offshore, Wynnefield LLC, Wynnefield Capital and the Plan, and
that Nelson Obus exercises sole voting and investment control over the
shares beneficially owned by Channel. Based upon information
provided in a Schedule 13D/A filed with the SEC on November 8, 2010
and a Form 4 filed on December 16, 2010. Note that the
Wynnefield Persons’ shareholdings have been reduced by an aggregate of
3,125,002 shares to reflect the surrender of the Exchange Warrants by the
Wynnefield Partners Small Cap Value, LP, Wynnefield Partners Small Cap
Value, LP I, Wynnefield SmallCap Offshore Fund, Ltd and Channel
Partnership II, LP to the Company as part of the Company’s proposed
Exchange Offer.
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(3)
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Represents an aggregate of
32,021,150 shares of common stock, which are beneficially owned as
follows: (i) 7,578,593 shares of common stock are beneficially owned by
Wynnefield Partners; (ii) 10,178,851 shares of common stock are
beneficially owned by Wynnefield Partners I; (iii) 12,560,463 shares of
common stock are beneficially owned by Wynnefield Offshore; (iv) 44,743
shares of common stock are beneficially owned by the Wynnefield Capital,
Inc. Profit Sharing & Money Purchase Plan; and (v) 1,658,500 shares of
common stock are beneficially owned by Channel. Based upon
information provided in a Form 4 filed with the SEC on December 16,
2010.
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(4)
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Represents (i) 9,996,626 shares
of common stock owned by BBE Group Holdings, LLC of which Whitney S.
Quillen and Parker L. Quillen each is a director/trustee and each has
shared voting and disposition power over these shares, and (ii)
651,285 shares owned by Q Properties, L.P. and indirectly by
Whitney S. Quillen, which in his capacity as General Partner has the sole
power to dispose or to direct the disposition and 350,354 shares owned
indirectly by him as custodian of his minor children and (iii) 2,803,848
shares of common stock owned by Parker L.
Quillen.
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(5)
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Includes the following shares
owned by ComVest Capital LLC: (i) 1,000,000 shares issuable upon exercise
of warrants to purchase shares of Common Stock, which are currently
exercisable at $0.0916 per share and expire December 31, 2013; (ii)
2,083,333 shares issuable upon exercise of warrants to purchase shares of
Common Stock, which are currently exercisable at $0.2448 per share and
expire December 31, 2013; (iii) 2,000,000 shares issuable upon exercise of
warrants to purchase shares of Common Stock, which are currently
exercisable at $0.0916 per share and expire December 31, 2013, and
(iv) The Company has been informed that Comvest Capital
Advisors, LLC is the managing entity of ComVest Capital, LLC, and that
Gary Jaggard, managing director of Comvest Capital, LLC, exercises voting
and investment control over the shares beneficially owned by ComVest
Capital, LLC. See “Certain Relationships and Related Transactions and
Director Independence” for additional
detail.
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(6)
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Includes 780,000 vested shares of
an award of an aggregate of 1,000,000 restricted shares of Common Stock
granted by the Company on May 13, 2008 for services previously
rendered.
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(7)
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Includes 585,000 vested shares of
an award of an aggregate 750,000 restricted shares of Common Stock granted
by the Company on May 13, 2008 for services previously
rendered.
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(8)
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Includes (i) 19,500 vested shares
of restricted Common Stock of an award for an aggregate 25,000 shares of
restricted Common Stock granted on May 13, 2008 by the Company for
services previously rendered; (ii) 82,473 vested shares of restricted
Common Stock out of an award of an aggregate of 110,000 shares of
restricted Common Stock granted on October 6, 2008; and (iii) 85,226
vested shares of restricted Common Stock out of an award of an aggregate
of 204,545 shares of restricted Common Stock granted on July 1, 2009, and
(iv) 23,438 vested shares of restricted Common Stock out of an award of an
aggregate of 281,250 shares of restricted Common Stock granted on July 1,
2010, and (v) 49,650 shares which will vest within 60 days of December 11,
2010.
|
(9)
|
Includes (i) 19,500 vested shares
of restricted Common Stock of an award for an aggregate 25,000 shares of
restricted Common Stock granted on May 13, 2008 by the Company for
services previously rendered; and (ii) 59,804 vested shares of restricted
Common Stock (net of taxes) out of an award of an aggregate of 104,000
shares of restricted Common Stock granted on October 6, 2008; and (iii)
77,803 vested shares of restricted Common Stock (net of taxes) out of an
award of an aggregate of 236,364 shares of restricted Common Stock granted
on July 1, 2009, and (iv) 27,083 vested shares of restricted Common Stock
out of an award of an aggregate of 325,000 shares of restricted Common
Stock granted on July 1, 2010, and (v) 55,447 shares which will vest
within 60 days of December 11,
2010.
|
(10)
|
Includes (i) 19,500 vested shares
of restricted Common Stock of an award for an aggregate 25,000 shares of
restricted Common Stock granted on May 13, 2008 by the Company for
services previously rendered; (ii) 78,003 vested shares of restricted
Common Stock out of an award of an aggregate of 104,000 shares of
restricted Common Stock granted on October 6, 2008; and (iii) 78,845
vested shares of restricted Common Stock out of an award of an
aggregate of 190,909 shares of restricted Common Stock granted on July 1,
2009, and (iv) 21,875 vested shares of restricted Common
Stock out of an award of an aggregate of 262,500 shares of
restricted Common Stock granted on July 1, 2010, and (v) 46,451
shares which will vest within 60 days of December 11,
2010.
|
(11)
|
Includes (i) 14,236 vested shares
of restricted Common Stock (net of taxes) out of an award for an aggregate
25,000 shares of restricted Common Stock granted by the Company for
joining the Board of Directors on October 6, 2008; (ii) 87,476 vested
shares of restricted Common Stock (net of taxes) out of an award of an
aggregate of 140,000 shares of restricted Common Stock granted on October
6, 2008; and (iii) 86,175 vested shares of restricted Common Stock (net of
taxes) out of an award of an aggregate of 318,182 shares of restricted
Common Stock granted on July 1, 2009, (iv) 23,698 vested shares of
restricted Common Stock (net of taxes) out of an award of an aggregate of
437,500 shares of restricted Common Stock granted on July 1, 2010,
(v) 76,030 shares which will vest within 60 days of December 11,
2010, and (vi) 1,727,968 shares of common stock, of which
720,895 shares are held under the name of Gerald M. Czarnecki IRA
account.
|
(12)
|
W. Austin Lewis IV is the
portfolio manager and general partner of Lewis Asset Management Corp., the
investment manager of Lewis Opportunity Fund, LP and LAM Opportunity Fund,
LTD. Accordingly, Mr. Lewis is deemed to be the beneficial owner of
the shares owned by Lewis Opportunity Fund, LP and LAM Opportunity Fund,
LTD. and beneficially owned by Lewis Asset Management
Corp.
|
(13)
|
Represents (i) 5,835,591 shares
owned directly by W. Austin Lewis IV, including 14,000 vested shares of
restricted Common Stock out of an award of an aggregate of 25,000 shares
of restricted Common Stock granted on February 20, 2009 (ii) 43,602 vested
shares of restricted Common Stock out of an award of an aggregate 80,000
shares of restricted Common Stock granted on February 20, 2009; (iii)
65,759 vested shares of restricted Common Stock out of an award of an
aggregate of 181,818 shares of restricted Common Stock granted on July 1,
2009, (iv) 20,833 vested shares of restricted Common Stock out of an award
of an aggregate of 250,000 shares of restricted Common Stock granted on
July 1, 2010, (v) 14,168,342 shares of common stock owned by Lewis
Opportunity Fund, LP; and (vi) 49,319 shares which will vest
within 60 days of December 11,
2010.
|
ELECTION
OF DIRECTORS
(PROPOSAL
NO. 1)
The
following individuals have been nominated as members of our Board of Directors,
each to serve until the 2012 Annual Meeting of Stockholders, until their
successors are elected and qualified or until their earlier resignation or
removal. Pursuant to Delaware law and our Bylaws, directors are to be elected by
a plurality of the votes of the shares present in person or represented by proxy
at the Annual Meeting and entitled to vote on the election of directors. This
means that the six (6) candidates receiving the highest number of affirmative
votes at the Annual Meeting will be elected as directors. Only shares that are
voted in favor of a particular nominee will be counted toward that nominee’s
achievement of a plurality. Proxies cannot be voted for a greater number of
persons than the number of nominees named or for persons other than the named
nominees.
Following
is information about each nominee, including biographical data for at least the
last five years. Should one or more of these nominees become unavailable to
accept nomination or election as a director, the individuals named as proxies on
the enclosed proxy card will vote the shares that they represent for the
election of such other persons as the Board may recommend, unless the Board
reduces the number of directors. We have no reason to believe that any nominee
will be unable or unwilling to serve if elected as a director.
Name of Director
|
|
Age
|
|
Director since:
|
Michael
Jamieson
|
|
43
|
|
February
2010
|
Dwight
B. Mamanteo
|
|
41
|
|
March
2007
|
Marcus
Wohlrab
|
|
47
|
|
March
2007
|
Frederick
Wasserman
|
|
56
|
|
July
2007
|
Gerald
M. Czarnecki
|
|
70
|
|
August
2008
|
W.
Austin Lewis IV
|
|
34
|
|
January
2009
|
Michael Jamieson was appointed
to the Board and to the position of interim Chief Executive Officer in February
2010. He became the Company’s CEO in June, 2010. Mr.
Jamieson previously served as Chief Operating Officer and a director of the
Company from December 2005 to March 2007. Mr. Jamieson has served as
Managing Director of MAM’s subsidiary, MAM Software Ltd. (“MAM”), since
2004. Mr. Jamieson joined MAM in 1991 in its installation and
configuration department and has held a number of positions within MAM's
implementation and support departments until his appointment as Department
Manager for Workshop and Bodyshop Systems in 1995. Mr. Jamieson was promoted to
the position of Associate Director of Workshop and Bodyshop Systems in 2002
before taking his current role as Managing Director of MAM in 2004.
Dwight B. Mamanteo became a
Director of the Company on March 1, 2007. Mr. Mamanteo serves as the Chairman of
the Company’s Compensation Committee and as a member of the Company’s Audit
Committee and a member of the Company’s Governance and Nomination Committee.
Since November 2004, Mr. Mamanteo has served as a Portfolio Manager at
Wynnefield Capital, Inc., a private investment management firm. From April 2009
to November 2010, Mr. Mamanteo served on the Board of Directors of EasyLink
Services International Corporation (NasdaqCM: ESIC), a leading global provider
of on-demand electronic messaging and transaction services that help companies
optimize relationships with their partners, suppliers, customers, and other
stakeholders. From December 2007 to November 2008, Mr. Mamanteo served on the
Board of Directors and as the Chairman of PetWatch Animal Hospitals, Inc. (a
private company), a provider of primary care and specialized services to
companion animals through a network of fully-owned veterinary hospitals. From
September 2005 to November 2007, Mr. Mamanteo served on the Board of Directors
of Sherpa Service Corps, Inc (a private company), a service provider enabling
subscribing institutions to accelerate academic and other institutions’
enrollment of international students and facilitating the institutions’
compliance with federal statutory obligations. Prior to joining Wynnefield
Capital, Mr. Mamanteo worked in the field of technology for over 10 years in
various positions for BEA Systems, VISA International, Ericsson, UNISYS, and as
an independent consultant. Mr. Mamanteo received an M.B.A. from the
Columbia University Graduate School of Business and a BS in Electrical
Engineering from Concordia University (Montreal).
Marcus Wohlrab became a
Director of the Company on March 1, 2007. Mr. Wohlrab is the Chairman of the
Governance and Nomination Committee and is a member of the Compensation
Committee. From January 2010 to December 2010, Mr. Wohlrab served as
the CEO of Barclay Technologies Holding AG. Since December 2010, Mr. Wohlrab
serves as the CFO of Barclay Technologies Holding AG. In April 2001, Mr. Wohlrab
founded Easting Capital Limited, a company that serves as a placing agent for
credit and interest rate securities as well as negotiating public finance deals
for large infrastructure projects as well as private companies. Easting Capital
has recently been re-launched beginning 2008 with new shareholders and is now
known as Clearmond AG registered in Switzerland. From October 2000 to April
2001, Mr. Wohlrab was Executive Vice President Market Development for Easdaq,
the pan-European Stock Market for growth companies (later acquired by NASDAQ).
From January 1998 to September 2000, he served as Director Europe and Middle
East for NASDAQ International. He also founded, built and helped finance
WinWatch/WinVista, a software programming entity focused on Internet and Windows
security products. He was also Director of Corporate Finance for Modatech
Systems, Assistant Director for the Union Bank of Switzerland, Vice President of
Sales and Marketing for Paine Webber International, and Vice President for Wood
Gundy/CIBC/Oppenheimer. Mr. Wohlrab received a Bachelor of Science degree in
Mathematics and Geology from Devon University and is fluent in Italian, French,
German and English.
Frederick Wasserman became a
Director of the Company on July 17, 2007. Mr. Wasserman is the Chairman of the
Audit Committee and is a member of the Governance and Nomination Committee. Mr.
Wasserman is President of FGW Partners, LLC, a financial management consulting
firm he started, effective as of May 1, 2008. From August 2005 to December 2006,
he served as Chief Operating and Chief Financial Officer of Mitchell & Ness
Nostalgia Company, a manufacturer of licensed sportswear. From January 2001 to
February 2005, he served as President and Chief Financial Officer of Goebel of
North America, a subsidiary of the manufacturer of M.I. Hummel products, W.
Goebel Porzellanfabrik Company. From December 1995 to January 2001 he served as
Vice-President of Finance and Chief Financial Officer of Papel Giftware, serving
as the company’s interim president from May 2000 to January 2001. He also brings
13 years of public accounting experience, most notably work with each of Coopers
& Lybrand and Eisner & Company. He received a Bachelor of Science degree
in Economics from the University of Pennsylvania’s Wharton School, and has been
a Certified Public Accountant. Mr. Wasserman also serves as a Director for the
following companies: Acme Communications, Inc. (chairman- Nominating Committee,
member- Audit Committee), Breeze-Eastern Corporation (Chairman- Audit
Committee), TeamStaff, Inc. (Chairman- Board of Directors) and Gilman + Ciocia,
Inc. (Chairman- Compensation Committee, Member- Audit Committee).
From December 2006 to August 2010, Mr. Wasserman served on the Board of
Directors of Allied Defense Group (Member-Audit Committee, Ethics and Governance
Committee). From July 2007 to August 2010, he served on the Board of Directors
of Crown Crafts, Inc.
Gerald M. Czarnecki
became a lead Director of the Company on August 13, 2008 and Chairman of
our Board of Directors on September 23, 2009. Mr. Czarnecki is an ex officio
member of each of the Audit Committee, Compensation Committee and Governance and
Nomination Committee. Mr. Czarnecki has been the Chairman and CEO of The
Deltennium Group, Inc., a privately held consulting and direct investment firm,
since its founding in 1995. Since August 2007, Mr. Czarnecki has served as
President and CEO of 02Media, Inc., a private organization providing direct
response marketing campaign management and infomercial production, educational
and branded entertainment TV programming and Internet marketing campaign
management. From April 1, 2007 to January 15, 2008, Mr. Czarnecki served as
interim President & CEO of Junior Achievement Worldwide, Inc., where he also
serves on the board of directors, and as member of the Executive Committee, and
Chairman of its Human Resources, Compensation and Pension Committees. Mr.
Czarnecki is a member of the Board of Directors of State Farm Insurance Company
and is Chairman of the Audit Committee, and a member of the Board of Directors
of State Farm Bank and State Farm Fire & Casualty. He is also a member of
the advisory board for Private Capital, Inc. and serves as a member of the Board
of Trustees of National University and is Chairman of its Investment Committee.
In addition he is Chairman of the Board of National Leadership Institute, a
nonprofit organization dedication to facilitating quality leadership and
governance in nonprofit organizations; Chairman of the National Association of
Corporate Directors - Florida Chapter. Mr. Czarnecki holds a B.S. in Economics
from Temple University, and M.A. in Economics from Michigan State University, a
Doctor of Humane Letters from National University and is a Certified Public
Accountant. Mr. Czarnecki is also the author of five books on Leadership and
corporate governance. From June 2003 to April 2010, Mr. Czarnecki served on the
Board of Directors of Del Global Technology, Inc., where he also served as the
Chairman of its Audit Committee. From June 2006 to February 2010, Mr.
Czarnecki served on the Board of Directors of Junior Achievement of South
Florida, Inc .
W. Austin Lewis IV was
appointed to the Board on January 27, 2009. Mr. Lewis serves as a member of the
Audit Committee and the Compensation Committee. He currently serves as the Chief
Executive Officer of Lewis Asset Management Corp., an investment management
company headquartered in New York City which he founded in 2004. From 2003 to
2004, Mr. Lewis was employed at Puglisi & Company, a New York based
broker-dealer registered with FINRA, where he served as a registered
representative and managed individual client accounts, conducted due diligence
for investment banking activities and managed his own personal account. In 2002,
Mr. Lewis co-founded Thompson Davis, & Company, Inc., a registered
broker-dealer headquartered in Richmond, Virginia. From 1998 to 2002, Mr. Lewis
was employed by Branch Cabell and Company, Inc. in Richmond, Virginia (“Branch
Cabell”) where he was a registered representative. Following the November 2000
acquisition of Branch Cabell by Tucker Anthony Incorporated (“Tucker Anthony”),
Mr. Lewis served as a Vice-President for Tucker Anthony and subsequently RBC
Dain Rauscher, Inc. which acquired Tucker Anthony in August of 2001. Mr. Lewis
received his Bachelor of Science degree in Finance and Financial Economics from
James Madison University in 1998.
Required
Vote
Our
Certificate of Incorporation, as amended, does not authorize cumulative voting.
Delaware law and our Bylaws provide that directors are to be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the Annual Meeting and entitled to vote on the election of directors. This
means that the six (6) candidates receiving the highest number of affirmative
votes at the Annual Meeting will be elected as directors. Only shares that are
voted in favor of a particular nominee will be counted toward that nominee’s
achievement of a plurality. Shares present at the Annual Meeting that are not
voted for a particular nominee or shares present by proxy where the stockholder
properly withheld authority to vote for such nominee will not be counted toward
that nominee’s achievement of a plurality.
At
the Annual Meeting a vote will be taken on a proposal to approve the election of
the six (6) director nominees.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF THE
SIX (6) DIRECTOR NOMINEES.
CORPORATE
GOVERNANCE
Board
of Directors
The Board
oversees our business affairs and monitors the performance of our management. In
accordance with our corporate governance principles, the Board does not involve
itself in day-to-day operations. The directors keep themselves informed through
discussions with the Chief Executive Officer, other key executives and by
reading the reports and other materials sent to them and by participating in
Board and committee meetings. Our directors hold office until the next annual
meeting of stockholders and until their successors are elected and qualified or
until their earlier resignation or removal, or if for some other reason they are
unable to serve in the capacity of director.
Director
Independence
Our
determination of independence of directors is made using the definition of
“independent director” contained in Rule 5605(a)(2) of the rules of the NASDAQ
Stock Market (“NASDAQ”), even though such definitions do not currently apply to
us because we are not listed on NASDAQ. We have determined that Dwight B.
Mamanteo, Marcus Wohlrab, Frederick Wasserman, Gerald Czarnecki and Austin Lewis
are “independent” within the meaning of such rules. Michael Jamieson is not
“independent” under these rules, due to his position as our Chief Executive
Officer.
Board
Meetings and Attendance
During
fiscal 2010, the Board held thirty (30) physical and telephonic meetings. No
incumbent director attended, either in person or via telephone, fewer than 75%
of the aggregate of all meetings of the Board and committees, if any, on which
each director served. The Board also approved certain actions by
unanimous written consent.
Annual
Meeting Attendance
One of
the Company’s six directors attended our 2010 Annual Meeting of Stockholders,
which was held in Pompano Beach, Florida.
Stockholder
Communications with the Board
We have
not implemented a formal policy or procedure by which our stockholders can
communicate directly with our Board of Directors. Nevertheless, every effort has
been made to ensure that the views of stockholders are heard by the Board of
Directors or individual directors, as applicable, and that appropriate responses
are provided to stockholders in a timely manner. We believe that we are
responsive to stockholder communications, and therefore have not considered it
necessary to adopt a formal process for stockholder communications with our
Board. During the upcoming year, our Board will continue to monitor whether it
would be appropriate to adopt such a process.
Board
Committees
Our Board
of Directors has three standing committees of the Board: a Compensation
Committee, an Audit Committee and Governance and Nomination Committee. As of
December 11, 2010, the members of these committees are:
Compensation Committee
|
|
Audit Committee
|
|
Governance and Nomination
Committee
|
Dwight
B. Mamanteo - Chair
|
|
Frederick
Wasserman** - Chair
|
|
Marcus
Wohlrab – Chair
|
Marcus
Wohlrab
|
|
Dwight
B. Mamanteo
|
|
Dwight
B. Mamanteo
|
W.
Austin Lewis IV
|
|
W.
Austin Lewis IV
|
|
Frederick
Wasserman
|
Gerald
M. Czarnecki -ex officio member
|
|
Gerald
M. Czarnecki -ex officio member
|
|
Gerald
M. Czarnecki -ex officio
member
|
**The
Board of Directors has determined that Frederick Wasserman is an “audit
committee financial expert” as defined in Regulation S-K.
Audit
Committee
The Audit
Committee of the Board of Directors assists the Board of Directors in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing, and reporting practices of the Company, and such other duties as
directed by the Board. The Committee’s purpose is to oversee the accounting and
financial reporting processes of the Company, the audits of the Company’s
financial statements, the qualifications of the public accounting firm engaged
as the Company's independent auditor to prepare or issue an audit report on the
financial statements of the Company, and the performance of the Company's
internal and independent auditors. The Committee’s role includes a particular
focus on the qualitative aspects of financial reporting to shareholders, the
Company’s processes to manage business and financial risk, and compliance with
significant applicable legal, ethical, and regulatory requirements. The
Committee is directly responsible for the appointment, compensation, retention
and oversight of the independent auditor.
During
fiscal 2010, the Audit Committee held four (4) physical and telephonic
meetings.
The Audit
Committee’s charter was attached as Appendix A to the Company’s proxy statement
relating to the Company’s 2008 Annual Meeting of Stockholders, which was filed
with the SEC on May 15, 2008 and amended on May 19, 2008.
Compensation
Committee
The
Compensation Committee’s role is to discharge the Board’s responsibilities
relating to compensation of the Company’s executives, to produce an annual
report on executive compensation for inclusion in the Company’s proxy statement,
and to oversee and advise the Board on the adoption of policies that govern the
Company’s compensation programs, including stock and benefit plans.
During
fiscal 2010, the Compensation Committee held four (4) physical and telephonic
meetings.
The
Compensation Committee’s charter was attached as Appendix B to the Company’s
proxy statement relating to the Company’s 2008 Annual Meeting of Stockholders,
which was filed with the SEC on May 15, 2008 and amended on May 19,
2008.
Governance
and Nomination Committee
The
Governance and Nomination Committee’s role is to appoint nominees for election
to the Company’s Board of Directors, to identify and recommend candidates to
fill vacancies occurring between annual shareholder meetings, to review,
evaluate and recommend changes to the Company’s corporate governance policies,
and to review the Company's policies and programs that relate to matters of
corporate responsibility, including public issues of significance to the Company
and its stakeholders. The Governance and Nomination Committee does not consider
diversity in identifying nominees for director.
During
fiscal 2010, the Governance and Nomination Committee held three (3) physical and
telephonic meetings.
The
Governance and Nomination Committee’s charter was attached as Appendix C to the
Company’s proxy statement relating to the Company’s 2008 Annual Meeting of
Stockholders, which was filed with the SEC on May 15, 2008 and amended on May
19, 2008.
Family
Relationships
There are
no familial relationships among any of our officers and directors.
Involvement
in Certain Legal Proceedings
No
director, person nominated to become a director, executive officer, promoter or
control person of our company has, during the last ten years: (i) been convicted
in or is currently subject to a pending a criminal proceeding (excluding traffic
violations and other minor offenses); (ii) been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to any
Federal or state securities or banking or commodities laws including, without
limitation, in any way limiting involvement in any business activity, or finding
any violation with respect to such law, nor (iii) any bankruptcy petition been
filed by or against the business of which such person was an executive officer
or a general partner, whether at the time of the bankruptcy or for the two years
prior thereto.
In
addition, the Company is not engaged in, nor is it aware of any pending or
threatened, litigation in which any of its directors, executive officers,
affiliates or owner of more than 5% of the Company’s Common Stock is a party
adverse to the Company or has a material interest adverse to the
Company.
DIRECTOR
COMPENSATION FOR FISCAL 2010
During
fiscal 2010, directors who were not officers of the Company received a $10,000
annual retainer, with the exception of the Chairman of the Board of Directors,
who received a $35,000 annual retainer. Directors who were not
officers of the Company also received $7,500 for serving as Audit Committee
Chairman, $6,000 for serving as Chairman of the Governance and Nomination or
Compensation Committees, and $5,000 for serving as a Committee Member. Directors
who are also executive officers of the Company do not receive any additional
compensation for their service on the Board.
The
following table reflects all compensation awarded to, earned by, or paid to the
Company’s directors for the fiscal year ended June 30, 2010.
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Options
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compen-
sation
($)
|
|
|
Total
($)
|
|
Michael
G. Jamieson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Ian
Warwick
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Simon
Chadwick
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dwight
B. Mamanteo
|
|
|
26,000 |
(2) |
|
|
6,785 |
(3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32,785 |
|
Marcus
Wohlrab
|
|
|
21,000 |
|
|
|
7,987 |
(4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,987 |
|
Frederick
Wasserman
|
|
|
22,500 |
|
|
|
8,518 |
(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31,018 |
|
Gerald
M. Czarnecki
|
|
|
35,000 |
(6) |
|
|
8,359 |
(7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
43,359 |
|
W.
Austin Lewis IV
|
|
|
20,000 |
(8) |
|
|
8,353 |
(9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,353 |
|
(1)
|
The amount shown in the table
reflects the dollar amount recognized for fiscal 2010 financial statement
reporting purposes of the outstanding stock awards held by the directors
in accordance with FAS 123R. Refer to the Company’s Consolidated Financial
Statements for the Fiscal Years Ended June 30, 2010 and 2009, Note 1
“Stock Based Compensation” and Note 9 “Stockholders Equity” included in
the Company’s Annual Report on Form 10-K for the fiscal year ended June
30, 2010, with respect to valuation assumptions for this stock grant. The
directors held no other stock or option awards at June 30,
2010.
|
(2)
|
Includes 176,312 shares of Common
Stock valued at market price on the date of issuance, net of income taxes
of $4,550, and received in lieu of $19,500 of cash
compensation.
|
(3)
|
Includes 83,674 shares valued at
market price on the date of issuance, net of income taxes of
$2,433.
|
(4)
|
Includes 98,304 shares valued at
market price on the date of
issuance.
|
(5)
|
Includes 104,850 shares valued at
market price on the date of
issuance.
|
(6)
|
Includes 280,313 shares of Common
Stock valued at market price on the date of issuance, net of income taxes
of $12,250, and received in lieu of $22,750 of cash
compensation.
|
(7)
|
Includes 102,885 shares valued at
market price on the date of issuance, net of income taxes of
$4,502.
|
(8)
|
Includes 246,429 shares of Common
Stock valued at market price on date of issuance, and received in lieu of
$20,000 of cash
compensation.
|
(9)
|
Includes 101,276 shares valued at
market price on the date of
issuance.
|
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
Our
executive officers are:
Name
|
|
Age
|
|
Position
|
Michael
Jamieson
|
|
43
|
|
Chief
Executive Officer and Director
|
Charles
F. Trapp
|
|
61
|
|
Chief
Financial Officer
|
Biographical
information about Michael Jamieson appears on page 6 above.
Charles F. Trapp was appointed
Vice President of Finance and Chief Financial Officer on November 30, 2007, and
Executive Vice President and Chief Financial Officer on July 1,
2010. Prior to his employment with the Company, Mr. Trapp was the
co-founder and President of Somerset Kensington Capital Co., a Bridgewater, New
Jersey-based investment firm that provided capital and expertise to help public
companies restructure and reorganize from 1997 until November 2007. Earlier in
his career, he served as CFO and/or a board member for a number of public
companies, including AW Computer Systems, Vertex Electronics Corp., Worldwide
Computer Services and Keystone Cement Co. His responsibilities have included
accounting and financial controls, federal regulatory filings, investor
relations, mergers and acquisitions, loan and labor negotiations, and litigation
management. Mr. Trapp is a Certified Public Accountant and received his Bachelor
of Science degree in Accounting from St. Peter’s College in Jersey City, New
Jersey.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
The
Compensation Committee (the “Compensation Committee” or the “Committee”) of the
Board administers our executive compensation program. Each member of the
Committee is a non-employee and an independent director. The Compensation
Committee is responsible for establishing salaries, administering our incentive
programs, and determining the total compensation for our Chief Executive Officer
and other executive officers. The Compensation Committees seeks to achieve the
following goals with our executive compensation programs: to attract, motivate,
and retain key executives and to reward executives for value creation. The
Compensation Committee seeks to foster a performance-oriented environment
by tying a significant portion of each executive’s cash and equity
compensation to the achievement of performance targets that are important to the
Company and its stockholders. Our executive compensation program has three
principal elements: base salary, cash bonuses, and equity incentives under a
recently established 2007 Long-Term Stock Incentive Plan (the
“LTIP”).
Unless
otherwise noted, this Compensation Discussion and Analysis speaks as of the end
of the fiscal year ended June 30, 2009.
Compensation
Principles
We
believe the top growing companies design their compensation program to attract,
motivate, and retain highly talented individuals to drive business success. We
further believe that the ideal programs tend to be principle-based rather than
rules-based with such best practices compensation programs providing for the
opportunity for executives and other key employees to achieve significant
compensation upon the realization of objectives that clearly benefit a company
and its shareholders. The Committee believes that best-practices plan will
reflect the following principles:
(1) Compensation
should be related to performance
A proper
compensation program should reinforce our Company’s business and financial
objectives. Employee compensation will vary based on Company versus individual
performance. When the Company performs well against the objectives that the
Compensation Committee and Board will set, employees will receive greater
incentive compensation. To the extent the business does not achieve or meet
these objectives, incentive awards will be reduced or eliminated. An employee’s
individual compensation will also vary based on his or her performance,
contribution, and overall value to the business. Employees with sustained high
performance should be rewarded more than those in similar positions with lesser
performance.
(2) Our
employees should think like stockholders
The
second critical principle of our compensation programs should be to foster an
environment where our employees should act in the interests of the Company’s
stockholders. We believe that the best way to encourage them to do that is
through an equity interest in their company. Equity interest in a company can be
achieved in several respects: the establishment of equity incentive plans that
provide for the granting of equity-based awards, such as stock options and/or
restricted stock or performance share units to employees. This requires the
establishment of an omnibus long-term stock-based incentive plan, which LTIP was
approved and adopted by our Board and shareholders. While this plan also
provides for traditional stock options, we believe that options should not form
the dominant focus of a proper incentive plan and that performance share units
or performance vesting restricted stock grants represent a preferred form of
equity incentive. The philosophy behind such a structure is that as employees
earn more stock (as opposed to options) they will think more like stockholders.
Put another way, when all employees become owners, they think and behave like
owners.
(3) Incentive
compensation should be a greater part of total compensation for more senior
positions
The
proportion of an individual’s total compensation that varies with individual and
Company performance objectives should increase as the individual’s business
responsibilities increase. Thus, cash bonuses and LTIP-based compensation should
form the overwhelmingly dominant portion of overall compensation for the
Company’s senior employees and the milestones for payouts on those plans for our
senior employees are based entirely on corporate results.
Compensation
Targets
Our
Compensation Committee with the input of the officers of the Company has
established competitive targets for our executive officers that we believe
reflect the challenges of our business and create an equity-focused culture
throughout the entire Company.
We
believe that in allocating compensation among these elements, the compensation
of a company’s senior-most levels of management - those persons having the
greatest ability to influence a company’s performance - should be predominantly
performance-based, while more junior employees should receive a greater portion
of their compensation based on their base salary.
These
targets are described below under “Employment Agreements.”
Base
Salary and Cash Incentive
We divide
total cash compensation into a base salary portion and a cash incentive bonus
portion. The Compensation Committee establishes the Chief Executive Officer’s
targeted cash compensation first and then sets the cash compensation for other
officers accordingly, based on the function served by that officer, that
officer’s experience, and expected individual performance. Generally, we believe
that the higher the level of responsibility of the executive within our Company,
the greater the portion of that executive’s target total cash compensation that
consists of the cash incentive component. The higher the executive’s level of
responsibility within the Company, the greater the percentage of the executive’s
compensation that should be tied to the Company’s performance.
Equity
Incentive
Long-term
performance is achieved through an ownership culture that encourages such
performance by our executive officers through the use of stock and stock-based
awards. The Committee believes that the use of stock and stock-based awards
offers the best approach to properly achieving our goals. We believe that
stock-based compensation provide the principal method for executive officers to
acquire equity or equity-linked interests in the Company. We have implemented
the LTIP which we will utilize for such a purpose, which has received
shareholder approval.
Rationale
for Paying each Element
Base
compensation and participation in benefit plans are established to provide
employees with appropriate industry competitive terms. Director retainers are
paid partially to compensate directors for their considerable time investment
and to assist directors in covering their indirect operating expenses as
independent contractors. Annual incentive cash bonuses are paid to reward
employees for performance and stockholder value enhancement in the current year,
based upon targets set by the Board for the CEO and his direct reports, with the
CEO establishing the individual targets for all other employees.
LTIP
awards are designed to reward the building of long-term stockholder value, while
providing modest, interim rewards in the pursuit of such longer-term
objectives.
Determination
of Amounts to Pay
Base
salaries, benefits and potential cash bonuses are established based upon current
market conditions. Where needed, outside consultants may be retained to assist
in this process. Benefit plan structures may be evaluated periodically to
determine market competitiveness with similar companies.
Stock-based
awards to be granted are evaluated based upon projected total compensation
levels for participants assuming certain objectives are achieved. Since the
majority of the total potential compensation is based upon performance, our
expectation is that the total projected compensation level be well above
average, because the “at risk” compensation levels generally exceed 2/3 of
anticipated compensation under the assumption that bonus targets are met. The
Committee, taking into consideration management’s recommendations and with
sign-off from all independent directors, will set each year’s goals and
milestones, their weightings, and the formulas for award calculation. For
accounting purposes, cash elements are expensed as earned. LTIP awards are
expensed as provided for under FAS 123R, and are further described in the
footnotes to the audited financial statements included in this Annual Report on
Form 10-K.
How
the Elements Interact
While
each element is set with certain needs in mind, the Committee also looks at the
total compensation package for each individual to determine that the total
payout is appropriate to the level of responsibility attributable to each
participant. The total compensation package will also include any bonus amounts
and awards to be based on performance targets, when such targets are ultimately
set by the Committee.
Chief
Executive Officer Compensation
The
Compensation Committee uses the same factors in determining the compensation of
our CEO as it does for other senior officers. Mr. Warwick’s annual
base salary for fiscal 2009 was $300,000, pursuant to the terms of his
employment agreement which was entered into effective as of December 1, 2008 and
is described further below under “Employment Agreements.” The terms
of the Mr. Warwick’s employment agreement, a United Kingdom resident, also
entitle Mr. Warwick to a make-whole payment that will restore him to the British
Pound Sterling equivalent that existed on the effective date of
the agreement in the event that the value of the U.S. Dollar relative to
the British Pound Sterling increases such that his base salary is reduced, as a
result of such currency translation, by 10% or more.
Historically,
Mr. Warwick’s salary was set pursuant to his employment agreement that was
entered into with our former parent, ADNW. Following our spinoff from
ADNW, we entered into the employment agreement described below, and used a peer
group for comparison purposes for evaluation of his salary. The peer group was
determined by our independent directors. Our independent directors surveyed
companies whose revenue base and organizational size were consistent with ours
as well as several companies within our industry, which we defined as business
and supply chain management software solutions. The peer group was thus created
from a group of companies that were both similar in size as well as companies
within our industry segment. Finally, we compared the peer group to compensation
for similar companies that were in the midst of a turnaround.
Mr.
Warwick resigned from the Company effective January 31,
2010. Pursuant to the terms of the Separation Agreement entered into
on January 20. 2010 with Mr. Warwick, the Company agreed to pay $300,000 in
termination payments, payable over six months, and additional payments of
$75,000 if certain events occur.
Employment
Agreements
Effective
as of December 1, 2008 (the “Effective Date”), upon the approval of our Board of
Directors, we entered into employment agreements with each of Ian Warwick, our
President and Chief Executive Officer, Charles F. Trapp, our Executive Vice
President and Chief Financial Officer, and Simon Chadwick, our Executive Vice
President and Chief Operating Officer.
Ian
Warwick Employment Agreement
The
Employment Agreement with Mr. Warwick (the “Warwick Agreement”) is for an
initial term of two and one-half years from the Effective Date, and is
automatically renewable for successive one-year periods unless terminated by Mr.
Warwick or us. Mr. Warwick will receive an annual base salary of $300,000,
payable in U.S. dollars. The annual salary is increased to $350,000 upon our
achievement of a market capitalization goal of $50 million for at least 25
consecutive trading days. The terms of the Warwick Agreement also entitles Mr.
Warwick, a United Kingdom resident, to a make-whole payment that will
restore him to the British Pound Sterling equivalent that existed on the
Effective Date in the event that the value of the U.S. Dollar relative to the
British Pound Sterling increases such that his base salary is reduced, as a
result of such currency translation, by 10% or more (the “Make-Whole
Payment”).
The
Warwick Agreement also provides for an appointment to our Board of Directors, on
which Mr. Warwick already serves.
Mr.
Warwick is eligible for a performance-based annual cash incentive bonus of up to
150% of his base salary in any fiscal year depending on the extent to which the
applicable performance goal(s) of the Company, which are to be established by
our Compensation Committee or pursuant to a formal bonus plan, are achieved,
subject to any operating covenants in place with respect to outstanding bank
debt. The Compensation Committee established an EBITDA-related target for the
fiscal year ended June 30, 2009, with respect to Mr. Warwick’s potential
incentive bonus for fiscal 2009.
In
addition, Mr. Warwick is entitled to participate in all of our benefit plans and
our equity-based compensation plans, which currently consists of our LTIP.
Pursuant to the Warwick Agreement, Mr. Warwick is to be awarded two grants of
3-year performance share unit awards under the LTIP, each for 500,000
performance share units as a base objective, with 30% of the award vesting in
the first year of the grant provided that the base target for that year is
met, 30% of the award vesting in the second year of the grant provided that
the base target for the second year is met, and 40% of the award vesting in the
third and final year of the grant provided that the base target for the third
year is met (“Performance Share Units”). The performance measures for these
awards, which have been set by the Compensation Committee, are based on
increases in our earnings per share (“EPS”) and return on invested capital
(“ROIC”). Further, with respect to both awards in each grant year, (i) if the
Company’s results amount to less than 80% of the established target(s), none of
the awards will vest; (ii) if the Company’s results are equal to 80% of the
established target(s), 50% of the award will vest; (iii) if the Company’s
results are equal to 100% of the established target(s), 100% of the award
will vest; and (iv) if the Company’s results are equal to or better than 120% of
the established target(s), 150% of the award will vest. Results between these
established parameters will be interpolated.
The
Warwick Agreement also entitles Mr. Warwick to be granted options to purchase
300,000 shares of our common stock under the LTIP. These options will vest as to
one-third of the award on each of the first three anniversaries of the grant
date, at a strike price of $0.75, $1.00 and $1.25, respectively. The options
expire ten years from the grant date.
The
Warwick Agreement provides that in the event Mr. Warwick’s employment is
terminated for Good Reason, for any reason other than for Cause, Death or
Disability or for Good Reason during the 30-day period immediately following the
first anniversary of the Effective Date (the “Window Period”), he is entitled
to, among other things, a severance payment equal to his 12 months base salary.
In addition, under such circumstances, all of Mr. Warwick’s stock options, stock
appreciation rights and restricted stock will immediately vest and be payable in
shares of our common stock and all of his performance share units that would
vest in the course of any fiscal year shall vest on a pro rata
basis.
Mr.
Warwick resigned from the Company effective January 31,
2010. Pursuant to the terms of the Separation Agreement entered into
on January 20. 2010 with Mr. Warwick, the Company agreed to pay $300,000 in
termination payments, payable over six months, and additional payments of
$75,000 if certain events occur.
Charles
F. Trapp Employment Agreement
The
Employment Agreement with Mr. Trapp (the “Trapp Agreement”) is for an initial
term of one year from the Effective Date, and is automatically renewable for
successive one-year periods unless terminated by Mr. Trapp or us. Mr. Trapp will
receive an annual base salary of $220,000, payable in U.S. dollars. Mr. Trapp is
eligible for a performance-based annual cash incentive bonus of up to 150% of
his base salary in any fiscal year depending on the extent to which the
applicable performance goal(s) of the Company, which are to be established by
the Compensation Committee or pursuant to a formal bonus plan, are achieved,
subject to any operating covenants in place with respect to outstanding bank
debt. The Compensation Committee established an EBITDA-related target for the
fiscal year ended June 30, 2009, with respect to Mr. Trapp’s potential incentive
bonus for fiscal 2009.
In
addition, Mr. Trapp is entitled to participate in all of our benefit plans and
equity-based compensation plans, which currently consists of the LTIP. Mr. Trapp
will be awarded two grants of 3-year Performance Share Unit awards under the
LTIP, each for 300,000 performance share units as a base objective, with the
same terms, performance targets and metrics as Mr. Warwick’s Performance Share
Unit awards described above. Mr. Trapp also will be granted options to
purchase 100,000 shares of our common stock under the LTIP. These options will
vest as to one-third of the award on each of the first three anniversaries of
the grant date, at a strike price of $0.75, $1.00 and $1.25, respectively. The
options expire ten years from the grant date.
The Trapp
Agreement provides that in the event Mr. Trapp’s employment is terminated for
Good Reason, for any reason other than for Cause, Death or Disability or for
Good Reason during the Window Period, Mr. Trapp is entitled to, among other
things, a severance payment equal to his 12 months base salary, all of Mr.
Trapp’s stock options, stock appreciation rights and restricted stock shall
immediately vest and be payable in shares of our common stock and all of his
performance share units that would vest in the course of any fiscal year shall
vest on a pro rata basis. The Employment Agreement with Mr. Trapp was
not renewed on November 30, 2009, but Mr. Trapp has continued as Chief Financial
Officer and Vice President, Finance for the Company.
Simon
Chadwick Employment Agreement
The
Employment Agreement with Mr. Chadwick (the “Chadwick Agreement”) is for an
initial term of two years from the Effective Date, and is automatically
renewable for successive one-year periods unless terminated by Mr. Chadwick or
us. Mr. Chadwick will receive an annual base salary of $225,000, payable in U.S.
dollars. The terms of the Chadwick Agreement also entitles Mr. Chadwick, a
United Kingdom resident, to a Make-Whole Payment consistent with the one awarded
to Mr. Warwick.
The
Chadwick Agreement also provides for an appointment to our Board of Directors,
on which he already serves.
Mr.
Chadwick is eligible for a performance-based annual cash incentive bonus of up
to 150% of his base salary in any fiscal year depending on the extent to which
the applicable performance goal(s) of the Company, which are to be established
by the Compensation Committee or pursuant to a formal bonus plan, are achieved,
subject to any operating covenants in place with respect to outstanding bank
debt. The Compensation Committee established an EBITDA-related target for the
fiscal year ended June 30, 2009, with respect to Mr. Chadwick’s potential
incentive bonus for fiscal 2009.
In
addition, Mr. Chadwick is entitled to participate in all of our benefit plans
and our equity-based compensation plans, which currently consists of the LTIP.
Mr. Chadwick will be awarded two grants of 3-year Performance Share Unit awards
under the LTIP, each for 400,000 performance share units as a base objective,
with the same terms, performance targets and metrics as Mr. Warwick’s and Mr.
Trapp’s Performance Share Unit awards described above. The Chadwick Agreement
also grants Mr. Chadwick options to purchase 200,000 shares of our common stock
under the LTIP. These options will vest as to one-third of the award on
each of the first three anniversaries of the grant date, at a strike price of
$0.75, $1.00 and $1.25, respectively. The options expire ten years from the
grant date.
In the
event Mr. Chadwick’s employment is terminated for Good Reason, for any reason
other than for Cause, Death or Disability or for Good Reason during the Window
Period, Mr. Chadwick is entitled to, among other things, a severance payment
equal to his 12 months base salary, all of Mr. Chadwick’s stock options, stock
appreciation rights and restricted stock shall immediately vest and be payable
in shares of our common stock and all of his performance share units that would
vest in the course of any fiscal year shall vest on a pro rata
basis.
Mr.
Chadwick resigned from the Company effective January 31,
2010. Pursuant to the terms of the Separation Agreement entered into
on January 20. 2010 with Mr. Chadwick, the Company agreed to pay $225,000 in
termination payments, payable over six months, and additional payments of
$50,000 if certain events occur.
Severance
Benefits
As
described above, each of the employment agreements with our officers contains a
severance benefit for that officer if he or she is terminated other than for
cause or the officer leaves the Company after a change in control, provided they
leave for “good reason.” We provide this benefit because we want executives to
focus on the Company’s business and enhancing stockholder value without undue
concern about any possible loss of their job.
Retirement
Plans
We do not
offer retirement plans for our officers.
Change
in Control
Each
officer’s employment agreement contains standard provisions that protect that
officer in the event there is a change in control that has not been approved by
our Board of Directors. In addition, our LTIP provides for acceleration of
vesting in the event of a change in control.
The
precise terms and conditions of each employment agreement is described
above.
Perquisites
We offer
limited perquisites for our executives. We may offer life insurance policies for
our Named Executive Officers, but as of the date of this report, have yet to
establish those policies.
Board
Process
The
Compensation Committee of the Board of Directors approves all compensation and
awards to executive officers, which include the Chief Executive, the Chief
Financial Officer, and Chief Operating Officer, and any other Named Executive
Officers. Generally, on its own initiative the Compensation Committee reviews
the performance and compensation of the Chief Executive, Chief Financial
Officer, and Chief Operating Officer and, following discussions with those
individuals, establishes their compensation levels where it deems appropriate.
For the remaining officers, the Chief Executive Officer makes recommendations to
the Compensation Committee that generally, with such adjustments and
modifications that are deemed necessary or appropriate by the Committee, are
approved. With respect to equity-based compensation awarded to others, the
Compensation Committee grants restricted stock, generally based upon the
recommendation of the Chief Executive Officer.
The
Compensation Committee believes that objectives cannot be established in a
vacuum and thus invites management’s input into the establishment of milestones.
Although Committee meetings are held in executive session, without management’s
presence, the Committee (and from time to time individual members of the
Committee) routinely meets with senior officers of the Company to discuss
objectives, to explain the rationale for certain objectives or milestones, and
to assure that it has management’s input in assessing the consequences of
decisions made in Committee, for instance, the impact that its decisions may
have on our financial statements. The Committee’s interactions with management
seek to achieve a balance between receiving management’s buy-in for objectives
and assuring that management is not actually or effectively establishing the
terms and parameters for its own compensation.
Forward-Looking
Statements
Disclosures
in this Compensation Discussion & Analysis may contain certain
forward-looking. Statements that do not relate strictly to historical or current
facts are forward-looking and usually identified by the use of words such as
“anticipate,” “estimate,” “approximate,” “expect,” “intend,” “plan,”
“believe” and other words of similar meaning in connection with any discussion
of future operating or financial matters.
Without
limiting the generality of the foregoing, forward-looking statements contained
in this report include the matters discussed regarding the expectation of
compensation plans, strategies, objectives, and growth and anticipated financial
and operational performance of the Company and its subsidiaries. A variety of
factors could cause the Company’s actual results to differ materially from the
anticipated results or other expectations expressed in the Company’s
forward-looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company’s business and
forward-looking statements include, but are not limited to those set forth
herein.
Any
forward-looking statement speaks only as of the date on which such statement is
made and the Company does not intend to correct or update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Compensation
Committee Report
The
Report of the Compensation Committee (the “Compensation Report”) does not
constitute soliciting material and should not be deemed filed or incorporated by
reference into any other Company filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Compensation Report by reference therein.
Recommendations of the Compensation
Committee. We have reviewed and discussed the Compensation Discussion
& Analysis (“CD&A”) with the Company’s management. Based on this review
and these discussions, we recommended to the Board of Directors that the
CD&A be included in the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2010.
This
Compensation Report has been furnished by the Compensation Committee of the
Board of Directors.
Dwight B.
Mamanteo, Chair
Marcus
Wohlrab
W. Austin
Lewis IV
Gerald M.
Czarnecki - ex officio member
Summary
Compensation Table for Fiscal Years 2010, 2009 and 2008
The
following table sets forth information for the fiscal years ended June 30, 2010,
2009 and 2008 concerning the compensation paid and awarded to all individuals
serving as (a) our Chief Executive Officer, Michael G. Jamieson, as of the end
of our fiscal year ended June 30, 2010, (b) the two most highly compensated
executive officers (other than our Chief Executive Officer) of ours and our
subsidiaries who were serving as executive officers at the end of our fiscal
year ended June 30, 2010, whose total compensation exceeded $100,000 for these
periods, Charles F. Trapp, and (c) up to two additional individuals for whom
disclosure would have been provided pursuant to (b) except that they were not
serving as executive officers at the end of such fiscal years, Ian Warwick and
Simon Chadwick. These individuals may be collectively referred to
herein as our “Named Executive Officers.”
Name and
Principal Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-
qualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
G. Jamieson, (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
and Director
|
|
2010
|
|
|
80,428
|
|
|
—
|
|
|
|
17,600
|
(5)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ian
Warwick (2)
|
|
2010
|
|
|
475,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Former
Chief Executive
|
|
2009
|
|
|
292,828
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
292,828
|
|
Officer,
President and Director
|
|
2008
|
|
|
349,195
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
349,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simon
Chadwick (3)
|
|
2010
|
|
|
356,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Former
Chief Operating
|
|
2009
|
|
|
218,780
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
218,780
|
|
Officer and
Director
|
|
2008
|
|
|
259,402
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
259,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
F. Trapp (4)
|
|
2010
|
|
|
220,000
|
|
|
|
—
|
|
|
|
13,200
|
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
233,200
|
|
Executive
Vice President,
|
|
2009
|
|
|
224,166
|
|
|
|
—
|
|
|
|
5,775
|
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
229,941
|
|
and
Chief Financial Officer
|
|
2008
|
|
|
214,583
|
|
|
|
—
|
|
|
|
25,500
|
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
240,083
|
|
(1)
|
Reflects salary paid to Mr.
Jamieson for services rendered to us and our subsidiaries during fiscal
2010 as MAM’s Chief Executive Officer and President. Salary was
paid by a subsidiary of the Company in British pounds at an annual salary
of 122,000 GBP per year. Mr. Jamieson became Interim Chief
Executive Officer and Interim President on February 1, 2010 and was paid
50,830 GBP for the period from February 1, 2010 to June 30, 2010 pursuant
to the terms of Mr. Jamieson’s employment agreement with our
subsidiary. The amount shown for 2010 was translated to US
dollars based on a June 30, 2010 currency conversion rate of 1 GBP =
$1.5823 (or $80,428). Mr. Jamieson did not receive any additional
compensation for his services as a director on our Board of
Directors.
|
(2)
|
Mr. Warwick resigned his position
as Chief Executive Officer, President and Director effective as of January
31, 2010. Reflects salary paid to Mr. Warwick for services
rendered to us and our subsidiaries during fiscal 2010, 2009 and 2008 as
MAM’s Chief Executive Officer and President. The salary for the
period from July 1, 2009 to January 31, 2010 was paid in US dollars at an
annual base rate of $300,000 (or $175,000 for the period), pursuant
to the terms of Mr. Warwick’s employment agreement. Pursuant to
the terms of Mr. Warwick’s Separation Agreement he was paid $300,000
in six equal monthly installments of $50,000 per month. Mr.
Warwick was paid in British pounds at an annual salary of 175,000 GBP for
each of the 2008 fiscal year, and for the period from July 1, 2008 to
November 30, 2008 (or 72,916 GBP). Salary for the period from
December 1, 2008 through June 30, 2009 was paid in US dollars at an annual
base rate of $300,000 (or $175,000 for the period), pursuant to the terms
of Mr. Warwick’s employment agreement. The amount shown for
2008 was translated to US dollars based on a June 30, 2008 currency
conversion rate of 1 GBP = $1.9954. The portion of Mr.
Warwick’s salary for fiscal 2009 which was paid in British pounds (for the
period from July 1, 2008 through November 30, 2008) was translated to US
dollars based on the June 30, 2009 currency conversion rate of 1 GBP=
$1.61593 (or $117,828). Mr. Warwick did not receive any additional
compensation for his services as a director on our Board of
Directors.
|
(3)
|
Mr. Chadwick resigned his
position as Chief Operating Officer and Director effective as of January
31, 2010. Reflects salary paid to Mr. Chadwick for services
rendered to us and our subsidiaries during fiscal 2010, 2009 and 2008 as
MAM’s Chief Operating Officer. The Salary for the period from
July 1, 2009 to January 31, 2010 was paid in US dollars at an annual base
rate of $225,000 (or $131,250 for the period), pursuant to the terms of
Mr. Chadwick’s employment agreement. Pursuant to the terms of
Mr. Chadwick’s Separation Agreement he was paid $225,000 in six equal
monthly installments of $37,500 per month. Salary was paid in British
pounds at an annual salary of 130,000 GBP for each of the 2008 fiscal
year, and for the period from July 1, 2008 to November 30, 2008 (or 54,167
GBP). Salary for the period from December 1, 2008 through June
30, 2009 was paid in US dollars at an annual base rate of $225,000 (or
$131,250 for the period), pursuant to the terms of Mr. Chadwick’s
employment agreement. The amount shown for 2008 was translated
to US dollars based on a June 30, 2008 currency conversion rate of 1 GBP =
$1.9954. The portion of Mr. Chadwick’s salary for fiscal 2009
which was paid in British pounds (for the period from July 1, 2008 through
November 30, 2008) was translated to US dollars based on the June 30, 2009
currency conversion rate of 1 GBP= $1.61593 (or $87,530). Mr. Chadwick did
not receive any additional compensation for his services as a director on
our Board of Directors.
|
(4)
|
Mr. Trapp was appointed Vice
President Finance and Chief Financial Officer effective as of December 1,
2007. For the year ended June 30, 2010, the amount shown in the table
reflects salary in the amount of $91,667 earned for services in these
capacities between July 1, 2009 and November 30, 2009, pursuant to the
terms of Mr. Trapp’s employment agreement, as well as salary in the amount
of $128,333 earned for services between December 1, 2009 and June 30, 2010
pursuant to a month to month verbal agreement. The salary for fiscal 2010
also includes $22,000 that was deferred and contributed by Mr. Trapp to
the Company’s plan established under section 401(k) of the Internal
Revenue Code of 1986, as amended. For the year ended June 30,
2009, the amount shown in the table reflects salary in the amount of
$95,833 earned for services in these capacities between July 1, 2008 and
November 30, 2008, as well as salary in the amount of $128,333 earned for
services between December 1, 2008 and June 30, 2009 pursuant to the terms
of Mr. Trapp’s employment agreement. The salary for fiscal 2009 also
includes $20,500 that was deferred and contributed by Mr. Trapp to the
Company’s plan established under section 401(k) of the Internal Revenue
Code of 1986, as amended. For the year ended June 30, 2008, the
amount shown in the table reflects salary in the amount of $134,167 earned
for services between December 1, 2007 and June 30, 2008, as well as salary
in the amount of $80,416 earned for services as an accountant prior to his
appointment as an officer. The salary for fiscal 2008 also includes
$20,500 that was deferred and contributed by Mr. Trapp to the Company’s
plan established under section 401(k) of the Internal Revenue Code of
1986, as amended.
|
(5)
|
The amount shown in the “Stock
Awards” column reflects the dollar amount recognized for fiscal 2010
financial statement reporting purposes of the outstanding stock awards
held by Mr. Jamieson in accordance with FAS 123R. Stock award represent an
award on May 13, 2008 of 1,000,000 shares of Common Stock with a grant
date closing price of $0.10 per share, of which 34% or 340,000 shares
vested immediately on the date of grant. The remaining 66% of the shares
or 660,000 shares will vest in three equal installments of 220,000 shares
on each of the first, second and third anniversaries of the grant date.
The shares were not issued pursuant to any existing compensation plan.
Refer to the Company’s Consolidated Financial Statements for the Fiscal
Years Ended June 30, 2010 and 2009, Note 1 “Stock Based Compensation” and
Note 9 “Stockholders Equity” included in this Annual Report on Form
10-K, with respect to valuation assumptions for this stock grant. Mr.
Jamieson held no other stock or option awards at June 30, 2010 and 2009,
respectively.
|
(6)
|
The amount shown in the “Stock
Awards” column reflects the dollar amount recognized for fiscal 2010, 2009
and 2008 financial statement reporting purposes of the outstanding stock
awards held by Mr. Trapp in accordance with FAS 123R. Stock award
represent an award on May 13, 2008 of 750,000 shares of Common Stock with
a grant date closing price of $0.10 per share, of which 34% or 255,000
shares vested immediately on the date of grant. The remaining 66% of the
shares or 495,000 shares will vest in three equal installments of 165,000
shares on each of the first, second and third anniversaries of
the grant date. The shares were not issued pursuant to any existing
compensation plan. Refer to the Company’s Consolidated Financial
Statements for the Fiscal Years Ended June 30, 2010 and 20097, Note 1
“Stock Based Compensation” and Note 9 “Stockholders Equity” included
in this Annual Report on Form 10-K, with respect to valuation assumptions
for this stock grant. Mr. Trapp held no other stock or option awards at
June 30, 2010 and 20098,
respectively.
|
Employment
Agreements with Executive Officers
Effective
as of July 1, 2010, the first day of our fiscal year, upon the approval of our
Compensation Committee, we entered into employment agreements, including a bonus
plan, with each of Michael Jamieson, our President and Chief Executive Officer
and Charles F. Trapp, our Executive Vice President and Chief Financial
Officer.
Michael Jamieson Employment
Agreement
The
Employment Agreement with Mr. Jamieson (the “Jamieson Agreement”) is for an
initial term of three years from the Effective Date, and is automatically
renewable for successive one-year periods unless terminated by Mr. Jamieson or
us. Mr. Jamieson will receive an annual base salary of 150,000 GBP
(approximately US$225,000), payable in British Pounds Sterling.
Mr.
Jamieson is eligible for a performance-based annual cash incentive bonus
depending on the extent to which the applicable performance goal(s) of the
Company, which are to be established by our Compensation Committee of our Board
of Directors (“Compensation Committee”) or pursuant to a formal bonus plan, are
achieved, subject to any operating covenants in place with respect to
outstanding bank debt. The Compensation Committee established an EBITDA-related
target for the fiscal year ended June 30, 2011, with respect to Mr. Jamieson’s
potential incentive bonus for fiscal 2011.
In
addition, Mr. Jamieson is entitled to participate in all of our benefit plans
and our equity-based compensation plans, which currently consists of our 2007
Long-Term Incentive Plan (the “LTIP”). Pursuant to the Jamieson Agreement, Mr.
Jamieson is to be awarded 500,000 restricted common shares under the LTIP (the
“Stock Grant”). The shares will vest ratably over a three-year period,
with 20% vesting on the first anniversary of the Stock Grant, 30% vesting on the
second anniversary of the Stock Grant, and 50% vesting on the third anniversary
of the Stock Grant.
The
Jamieson Agreement also entitles Mr. Jamieson to be granted options to purchase
2,109,375 shares of our common stock under the LTIP (the “Option Grant”). These
options will vest on the third anniversary of the grant date, at a strike price
of $0.08 per share, depending on the extent to which certain performance targets
have been met. The options expire ten years from the grant date, if
vested. If the Company’s results: (i) amount to less than 80% of the
established target(s), none of the Option Grant will vest; (ii) are equal to 80%
of the established target(s), 25% of the Option Grant will vest; (iii) are equal
to 100% of the established target(s), 50% of the award will vest; and (iv) are
equal to or better than 120% of the established target(s), 100% of the Option
Grant will vest. Results between these established parameters will be
interpolated. The Option Grant will vest immediately upon a Change of
Control.
The
Jamieson Agreement provides that in the event Mr. Jamieson’s employment is
terminated by the Company other than for Cause or Disability, or Mr. Jamieson
shall terminate his employment for Good Reason, he is entitled to, among other
things, a severance payment equal to his 12 months base salary. In addition,
under such circumstances, all of Mr. Jamieson’s stock appreciation rights and
restricted stock will immediately vest and all vested stock options and stock
appreciation rights shall be payable in shares of our common stock.
Charles F. Trapp Employment
Agreement
The
Employment Agreement with Mr. Trapp (the “Trapp Agreement”) is for an initial
term of three years from the Effective Date, and is automatically renewable for
successive one-year periods unless terminated by Mr. Trapp or us. Mr. Trapp will
receive an annual base salary of $195,000, payable in U.S. dollars. Mr. Trapp is
eligible for a performance-based annual cash incentive bonus depending on the
extent to which the applicable performance goal(s) of the Company, which are to
be established by the Compensation Committee or pursuant to a formal bonus plan,
are achieved, subject to any operating covenants in place with respect to
outstanding bank debt. The Compensation Committee established an EBITDA-related
target for the fiscal year ended June 30, 2011, with respect to Mr. Trapp’s
potential incentive bonus for fiscal 2011.
In
addition, Mr. Trapp is entitled to participate in all of our benefit plans and
equity-based compensation plans, which currently consists of the LTIP. Pursuant
to the Trapp Agreement, Mr. Trapp is to be awarded 200,000 restricted common
shares under the LTIP (the “Stock Grant”). The shares will vest ratably
over a three-year period, with 20% vesting on the first anniversary of the Stock
Grant, 30% vesting on the second anniversary of the Stock Grant, and 50% vesting
on the third anniversary of the Stock Grant.
The Trapp
Agreement also entitles Mr. Trapp to be granted options to purchase 1,828,125
shares of our common stock under the LTIP (the “Option Grant”). These options
will vest on the third anniversary of the grant date, at a strike price of $0.08
per share, depending on the extent to which certain performance targets have
been met. The options expire ten years from the grant date, if vested. If
the Company’s results: (i) amount to less than 80% of the established target(s),
none of the Option Grant will vest; (ii) are equal to 80% of the established
target(s), 25% of the Option Grant will vest; (iii) are equal to 100% of the
established target(s), 50% of the award will vest; and (iv) are equal to or
better than 120% of the established target(s), 100% of the Option Grant will
vest. Results between these established parameters will be
interpolated. The Option Grant will vest immediately upon a Change of
Control.
The Trapp
Agreement provides that in the event Mr. Trapp’s employment is terminated by the
Company other than for Cause or Disability, or Mr. Trapp shall terminate his
employment for Good Reason, he is entitled to, among other things, a severance
payment equal to his 12 months base salary. In addition, under such
circumstances, all of Mr. Trapp’s stock appreciation rights and restricted stock
will immediately vest and all vested stock options and stock appreciation rights
shall be payable in shares of our common stock.
Other
Compensation
Other
than as described above, there were no post-employment compensation, pension or
nonqualified deferred compensation benefits earned by the executive officers
during the year ended June 30, 2010. We do not have any retirement,
pension, or profit-sharing programs for the benefit of our directors, officers
or other employees. The Board of Directors may recommend adoption of one or more
such programs in the future.
Outstanding
Equity Awards at 2010 Fiscal Year End
The
following table provides information relating to the vested and unvested option
and stock awards held by the named executives as of June 30, 2010. Each award to
each named executive is shown separately, with a footnote describing the award’s
vesting schedule.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(# Exercisable)
|
|
|
Number of
Securities
Underlying
Unexercised
Option
(# Unexercisable)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other Rights
That Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units
Or Other
Rights
That Have
Not
Vested
($)
|
|
Michael G. Jamieson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
220,000
|
(1)
|
|
$
|
17,600
|
(3)
|
|
|
—
|
|
|
|
—
|
|
Charles
F. Trapp
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
165,000
|
(2)
|
|
$
|
13,200
|
(3)
|
|
|
—
|
|
|
|
—
|
|
Ian
Warwick
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Simon
Chadwick
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
Stock awards represent an award
on May 13, 2008 to Mr. Jamieson of 1,000,000 shares of Common Stock with a
grant date fair value of $0.10 per share, of which 34%, or 340,000 shares,
vested immediately on the date of grant, 220,000 shares valued at $.035
per share vested on May 13, 2009 and 220,000 shares valued at $.08 per
share vested on May 13, 2010 The remaining 220,000 shares reflected in the
table, will vest on May 13, 2011. The shares were not issued pursuant to
any existing compensation
plan.
|
(2)
|
Stock awards represent an award
on May 13, 2008 to Mr. Trapp of 750,000 shares of Common Stock with a
grant date fair value of $0.10 per share, of which 34%, or 255,000 shares,
vested immediately on the date of grant and 165,000 shares valued at $.035
per share vested on May 13, 2009 and 165,000 shares valued at $.08 per
share vested on May 13, 2010. The remaining 165,000 shares reflected in
the table, will vest on May 13, 2011. The shares were not issued pursuant
to any existing compensation
plan.
|
(3)
|
Based on the closing price of
$0.08 of the Company’s Common Stock on June 30,
2010.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Transactions
with ComVest Capital LLC and its affiliate, Commonwealth Associates
LP
ComVest
Capital LLC
ComVest
Capital LLC (“ComVest”) is the Company’s senior secured lender. During
fiscal 2008, ComVest extended to the Company a $1,000,000 secured revolving
credit facility and a $5,000,000 term loan pursuant to the terms of a Revolving
Credit and Term Loan Agreement (the “Loan Agreement”), a Revolving Credit Note
and a Convertible Term Note, each dated December 21, 2007. The material
terms of these loans are described further below. In connection with this
transaction, the Company issued to ComVest warrants to purchase an aggregate of
5,083,333 shares of the Company’s common stock. The material terms of these
warrants are described further below.
At the
time the loans were made, ComVest was not a party related to the Company. Each
of these loans were made in the ordinary course of business, were made on the
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not related to the
lender and did not involve more than the normal risk of collectability or
present other unfavorable features. As a result of the issuance of the
Convertible Term Note and the warrants, ComVest became a shareholder of the
Company, and currently may be deemed to have beneficial ownership of
approximately 10.79% of the Company’s common stock (including certain
warrants held by Commonwealth Associates LP, see below).
Credit
Facility and Revolving Credit Note. Pursuant to the terms of the Loan Agreement,
the Credit Facility is available to the Company through November 30, 2009,
unless the maturity date is extended, or the Company prepays the Term Loan
(described below) in full, in each case in accordance with the terms of the Loan
Agreement. The Credit Facility provides for borrowing capacity of an amount up
to (at any time outstanding) the lesser of the Borrowing Base at the time of
each advance under the Credit Facility, or $1,000,000. The borrowing base
at any time will be an amount determined in accordance with a borrowing base
report that the Company is required to provide to the lender, based upon the
Company’s Eligible Accounts and Eligible Inventory, as such terms are defined in
the Loan Agreement. The Loan Agreement provides for advances to be limited
to (i) 80% of Eligible Accounts plus, in ComVest’s sole discretion, (ii) 40% of
Eligible Inventory, minus (iii) such reserves as ComVest may establish from time
to time in its discretion. As of June 30, 2009, the borrowing base was
$1,385,000.
In
connection with the Credit Facility, the Company issued a Revolving Credit Note
(the “Credit Note”) on December 21, 2007 payable to ComVest in the principal
amount of $1,000,000, initially bearing interest at a rate per annum equal to
the greater of (a) the prime rate, as announced by Citibank, N.A. from time to
time, plus two percent (2%), or (b) nine and one-half percent (9.5%). The
applicable interest rate will be increased by four hundred (400) basis points
during the continuance of any event of default under the Loan Agreement.
Interest is computed on the daily unpaid principal balance and is payable
monthly in arrears on the first day of each calendar month commencing
January 1, 2008. Interest is also payable upon maturity or
acceleration of the Credit Note. On June 17, 2010, the interest rate was
increased from 9.5% to 13.5% for an event of default under the Loan
Agreement.
During
the Company’s fourth fiscal quarter of 2008, the Company drew down $500,000 of
the Credit Facility, and drew down the remaining $500,000 during the first and
second fiscal quarter of 2009. As a result, as of June 30, 2009, the
outstanding principal due on the credit facility was $1,000,000, and as of June
30, 2009, the entire credit facility had been drawn down. As of June 30,
2009, the Company has not yet repaid any principal. As described above,
this loan currently bears interest at a rate of 13.5%. During fiscal 2008,
the Company paid $2,045 in interest payments, and during fiscal 2009, the
Company paid $117,281 including fees of $27,000.
Term Loan
and Convertible Term Note. In addition to the Credit Facility,
ComVest extended a Term Loan, evidenced by a Convertible Term Note (the “Term
Note”) issued on December 21, 2007, in the principal amount of $5,000,000. The
Term Loan was a one-time loan, and unlike the Credit Facility, the principal
amount is not available for re-borrowing. The Term Note bears interest at
a rate of eleven percent (11%) per annum, except that during the continuance of
any event of default, the interest rate will be increased to sixteen percent
(16%). On June 17, 2010, the interest rate was increased to 16% for an
event of default under the Loan Agreement.
Initially,
the Term Note was payable in 23 equal monthly installments of $208,333 each,
payable on the first day of each calendar month commencing January 1, 2009,
through November 1, 2010, with the balance due on November 30, 2010. The
amortization schedule was subsequently modified, and was delayed for one
year so that payments will commence on January 1, 2010, pursuant to an amendment
of the Loan Agreement during the quarter ended June 30, 2008 (see
below).
The
number of shares issuable upon conversion of the Term Note and the conversion
price may be proportionately adjusted in the event of any stock dividend,
distribution, stock split, stock combination, stock consolidation,
recapitalization or reclassification or similar transaction. In
addition, the number of conversion shares, and/or the conversion price may be
adjusted in the event of certain sales or issuances of shares of the Company’s
common stock, or securities entitling any person to acquire shares of common
stock, at any time while the Term Note is outstanding, at an effective price per
share which is less than the then-effective conversion price of the Term
Note. The principal and interest payable on the Term Note was initially
convertible into shares of the Company’s common stock at the option of ComVest,
at an initial conversion price of $1.50 per share. On July 3, 2008, the
conversion price was reduced to approximately $1.49 per share following the
Company’s subsequent issuance of shares of common stock and warrants at an
effectively lower price. Consequently, the number of shares issuable upon
conversion of the principal amount of the Term Note was increased to 3,361,345
shares from 3,333,333 shares. The Company also may require conversion of the
principal and interest under certain circumstances.
Since
December 21, 2007, the principal amount due on the Term Note has been
$5,000,000. As of June 30, 2009, the Company has not yet repaid any principal.
As described above, this loan currently bears interest at a rate of 16%. During
fiscal 2009 and 2008, the Company paid $842,000 and $290,278, respectively, in
interest payments.
Warrants.
In connection
with the Loan Agreement, the Company issued warrants to ComVest to purchase the
following amounts of shares of the Company’s common stock, exercisable after
December 21, 2007 and expiring December 31, 2013: a) warrants to purchase
1,000,000 shares of common stock at an initial exercise price of $0.3125 per
share; b) warrants to purchase 2,000,000 shares of common stock at an
initial exercise price of $0.39 per share; and c) warrants to purchase 2,083,333
shares of the Company’s common stock at an initial exercise price of $0.3625 per
share. The warrants also contain a cashless exercise feature. The
number of shares of common stock issuable upon exercise of the warrants, and/or
the applicable exercise prices, may be proportionately adjusted in the
event of any stock dividend, distribution, stock split, stock combination, stock
consolidation, recapitalization or reclassification or similar transaction. In
addition, the number of shares issuable upon exercise of the warrants,
and/or the applicable exercise prices may be adjusted, at any time while the
warrants are outstanding, in the event of certain issuances of shares of the
Company’s common stock, or securities entitling any person to acquire shares of
the Company’s common stock, at an effective price per share which is less than
the then-effective exercise prices of the warrants.
The
exercise prices for 3,000,000 of these warrants were subsequently modified in
connection with waivers the Company received for violations of one of the debt
covenants, as discussed further below.
Debt
Covenants. The Loan Agreement contains customary affirmative and negative
covenants, including:
(a)
Maximum
limits for capital expenditures of $600,000 per fiscal year;
(b)
Limitation on future borrowings, other than in certain circumstances, including
to finance capital expenditures;
(c) Limitation
on guaranteeing any obligation, except for obligations in the ordinary course of
business and obligations of the Company’s wholly owned subsidiaries incurred in
the ordinary course of business;
(d) Limitation
on entering Sales-Leaseback Transactions with respect to the sale or transfer of
property used or useful in the Company’s business operations;
(e) Limitation
on acquiring securities or making loans;
(f)
Limitation on acquiring real property;
(g) Limitation
on selling assets of the Company or permitting any reduction in the Company’s
ultimate ownership position of any subsidiary;
(h) Limitation
on paying dividends;
(i)
Limitation on selling any accounts receivable; and
(j)
Requiring that, at the end of any quarter of any fiscal year, the ratio of
(a) Earnings Before Interest, Depreciation, and Amortization (“EBIDA”) minus
capital expenditures incurred to maintain or replace capital assets, to (b) debt
service (all interest and principal payments), for the four (4) consecutive
quarters then ended, to be not less than 1.25 to 1.00 (the “EBIDA Ratio
Covenant”).
The Loan
Agreement is collateralized by a pledge of all of the Company’s assets and the
stock of the Company’s subsidiaries.
Amendments
to Loan Agreement and Waivers for Violations of Certain Covenants.
Subsequent to March 31, 2008, the Company notified ComVest that the Company had
incurred a loss of $1,897,000 for the three-month period ending March 31, 2008,
and as a result, the Company had a ratio of EBIDA to debt service of
(4.41):1.00, therefore violating the EBIDA Ratio Covenant described above.
ComVest agreed to grant the Company a waiver for the violation of this loan
covenant. On May 15, 2008, the Company and ComVest entered into a
Waiver and Amendment pursuant to which ComVest granted the waiver, and, in
consideration therefor, the Company reduced the exercise price for 1,000,000
warrants issued to ComVest in connection with the Loan Agreement from $0.3125
per share to $0.11 per share, and recognized the incremental fair value of the
modified warrants of $24,000 as additional interest expense. As a
result of ComVest granting this waiver, the Company was not in violation of
any loan covenants at March 31, 2008.
Subsequent
to June 30, 2008, the Company advised ComVest that the Company had incurred
a loss of $11,664,000 for the six-month period ending June 30, 2008, and that as
a result had again violated the EBIDA Ratio Covenant with an EBIDA to debt
service ratio of (2.26):1.00. ComVest agreed to provide the Company with
another waiver. In connection therewith, the Company and ComVest entered
into a letter agreement amending the Loan Agreement (the “September 23, 2008
Waiver and Amendment”) and modifying the EBIDA Ratio Covenant.
Pursuant to the September 23, 2008 Waiver and Amendment, the EBIDA Ratio
Covenant was waived for the quarter ending September 30, 2008 and was reduced to
0.62:100 from 1.25:1.00 for the quarter ended December 31,
2008. Additionally, the EBIDA Ratio Covenant was reset for future quarters
to 0.71:1.00 for the four quarters ended March 31, 2009; 0.50:1.00 for the four
quarters ended June 30, 2009; and 1.25:1.00 for the four quarters ended
September 30, 2009 and thereafter. Additionally, ComVest agreed to delay
the commencement of the loan amortization related to the Term Note for one year,
from January 1, 2009 to January 1, 2010. In consideration for these
modifications, the Company reduced the exercise price related to 2,000,000
warrants issued to ComVest in connection with the Loan Agreement from $0.39 to
$0.11. The incremental fair value of the modified warrants is $15,000,
which was recorded as an additional debt discount and is being amortized over
the remaining life of the term loan pursuant to EITF 96-19, “Debtor's Accounting
for a Modification or Exchange of Debt Instruments.” As a result of these
amendments, the Company was not in violation of any loan covenants at June 30,
2008.
Subsequent
to the end of the quarter ended December 31, 2008, the Company advised ComVest
that it had incurred a net loss of $5,349,000 for the six-month period
ended December 31, 2008, and that as a result, the Company’s ratio of EBIDA to
debt service was (1.41):1.00 in violation of the amended EBIDA Ratio
Covenant. ComVest agreed to extend an additional waiver of this covenant,
which was granted on February 10, 2009, under a Waiver and Amendment #2 letter
agreement (the “February 10, 2009 Waiver and Amendment”). In consideration
for the waiver, the Company agreed to increase the interest rate on the
$1,000,000 Credit Facility from 9.5% to 11%. As a result of ComVest
granting this waiver, the Company was not in violation of any loan covenants at
December 31, 2008. If the Company restores compliance with the EBIDA Ratio
Covenant as of the close of any quarter ending on or after March 31, 2009, then
the annual interest rate will be restored to 9.5%, effective as of the first day
of the calendar month next succeeding the Company’s demonstrated quarter-end
compliance with such covenant. Pursuant to a waiver and amendment, the annual
interest rate was be restored to 9.5% as the Company became compliant with the
covenant as of the close of the quarter ending on March 31, 2009. Following such
modification, the Company is in compliance with the loan covenants, and
accordingly, the interest rate on the Credit Facility was decreased from 11% to
9.5%, effective April 1, 2009.
After
obtaining the above-described waivers, the Company was not in violation of the
loan covenants at June 30, 2009.
As of
March 31, 2010, the Company did not meet the EBIDA Ratio Covenant of 1.25:1 as
required by the Loan Agreement, and Amendment. Our failure to maintain
this ratio constitutes an event of default under the terms of the Loan
Agreement. Under the terms of the Loan Agreement, if any event of default
occurs, the full principal amount of the Note, together with interest and other
amounts owing in respect thereof, to the date of acceleration shall become, at
ComVest’s election, immediately due and payable in cash. The Company has entered
into a forbearance agreement to resolve the default with ComVest.
As of
June 30, 2010, the Company did not meet the required EBIDA Ratio of 1.25:1 as
required by the amended Loan Agreement. The Company’s failure to maintain this
ratio constitutes an event of default under the terms of the Loan Agreement.
Under the terms of the Loan Agreement, if any event of default occurs, the full
principal amount of the Note, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become, at ComVest’s
election, immediately due and payable in cash. On September 8, 2010, the Company
entered into a “Forbearance Agreement” with ComVest. Under the Forbearance
Agreement ComVest agreed to forbear the exercise of its rights and remedies
under the Loan Agreement until November 30, 2010. The Company made a
nonrefundable payment to ComVest of $50,000 upon the execution and delivery of
the fee and agreed to make an additional payment of $75,000 by the earlier of
November 30, 2010 or the Company’s payment in full of its obligation to
ComVest. The above-mentioned fees are included in interest expense in the
condensed consolidated statement of income as of September 30,
2010.
The
ComVest Term Loan and Revolving Credit Facility were repaid on October 26,
2010.
Commonwealth
Associates LP
The
Company engaged Commonwealth Associates LP (“Commonwealth”) as its consultant
and exclusive merger and acquisitions advisor pursuant to a Consulting Agreement
dated June 3, 2008 (the “Consulting Agreement”). Commonwealth and ComVest are
entities that are under common control. The Consulting Agreement is for an
initial term of 24 months, and provides that Commonwealth will (i) be issued
warrants to purchase up to 3,000,000 shares of the Company’s common stock, which
will be exercisable for 5 years at a price of $0.30 per share, or the effective
price for the Company’s shares resulting from the sale of approximately
28,631,622 shares of ADNW’s common stock with respect to which Commonwealth may
act as placement agent, whichever is lower, and will contain anti-dilution
protection and a cashless exercise feature with respect to one-half of the
warrants; (ii) receive $15,000 per month for 18 months for its advisory
services beginning June 3, 2008 and (iii) receive a fee in connection with an
M&A transaction equal to 5% of the aggregate consideration paid or received
by the Company.
On July
3, 2008, the Company issued to Commonwealth warrants to purchase an aggregate of
1,000,000 shares of the Company’s common stock as compensation for work
performed in connection with the Company’s sale on July 3, 2008 of the 5,231,622
shares of ADNW common stock that it owned, which is further described in the
footnotes. The warrants are currently exercisable at an exercise price of $0.30
per share and expire on July 3, 2013. Additionally, during the year ended June
30, 2009, the Company paid $45,000 to Commonwealth, and recorded a
liability for unpaid fees of $135,000.
On August
3, 2009, the Company amended the financial advisory agreement and agreed to pay
Commonwealth $35,000 in August, and $25,000 in September and October of 2009, in
full satisfaction of the $135,000 liability.
On
December 31, 2009, the Company issued to Commonwealth, in settlement of a
contract, warrants to purchase an aggregate of 700,000 shares of the Company’s
common stock. The warrants are exercisable at $0.08 per share and expire
on December 31, 2014. The warrants were subsequently distributed to
Commonwealth investors.
Director
Independence
Our
determination of independence of directors is made using the definition of
“independent director” contained in Rule 5605(a)(2) of the Marketplace Rules of
the NASDAQ Stock Market (“NASDAQ”), even though such definitions do not
currently apply to us because we are not listed on NASDAQ. We have determined
that Dwight B. Mamanteo, Marcus Wohlrab, Frederick Wasserman and Gerald
Czarnecki are “independent” within the meaning of such rules. Michael
Jamieson is not “independent” under these rules, due to his position as our
Chief Executive Officer.
COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the
securities laws of the United States, our directors, executive (and certain
other) officers, and any persons holding ten percent or more of our Common Stock
must report on their ownership of the Common Stock and any changes in that
ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established. During the fiscal year ended June 30, 2010,
we believe that all reports required to be filed by such persons pursuant to
Section 16(a) were filed on a timely basis.
Leadership
Structure of the Board
The Board
of Directors does not currently have a policy on whether the same person should
serve as both the Chief Executive Officer and Chairman of the Board or, if the
roles are separate, whether the Chairman should be selected from the
non-employee directors or should be an employee. The Board believes that it
should have the flexibility to make these determinations at any given point in
time in the way that it believes best to provide appropriate leadership for the
Company at that time. Our current Chairman, Mr. Gerald M. Czarnecki, is not
an officer. Mr. Czarnecki has served as a member of our Board since August
2008.
Risk
Oversight
The Board
oversees risk management directly and through its committees associated with
their respective subject matter areas. Generally, the Board oversees risks that
may affect the business of the Company as a whole, including operational
matters. The Audit Committee is responsible for oversight of the Company’s
accounting and financial reporting processes and also discusses with management
the Company’s financial statements, internal controls and other accounting and
related matters. The Compensation Committee oversees certain risks related to
compensation programs and the Governance and Nomination Committee oversees
certain corporate governance risks. As part of their roles in overseeing risk
management, these Committees periodically report to the Board regarding
briefings provided by management and advisors as well as the Committees’ own
analysis and conclusions regarding certain risks faced by the Company.
Management is responsible for implementing the risk management strategy and
developing policies, controls, processes and procedures to identify and manage
risks.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL
NO. 2)
KMJ CORBIN & COMPANY LLP
(“KMJ Corbin”)
has served as our independent auditors since June 30, 2006 and has been
appointed by the Audit Committee of the Board of Directors to continue as our
independent auditors for the fiscal year ending June 30, 2011.
At the
Annual Meeting, the shareholders will vote on a proposal to ratify this
selection of the auditors. If this ratification is not approved by the
affirmative vote of a majority of the shares present at the Annual Meeting, in
person or by proxy, and voting on the matter, the Board will reconsider its
selection of auditors.
KMJ
Corbin has no interest, financial or otherwise, in our Company. We do not
currently expect a representative of KMJ Corbin to physically attend the
Annual Meeting, however, it is anticipated that a KMJ Corbin representative will
be available to participate in the Annual Meeting via telephone in the event he
or she wishes to make a statement, or in order to respond to appropriate
questions.
The
following table presents aggregate fees for professional services rendered by
our principal independent registered public accounting firm, KMJ Corbin for the
audit of our annual consolidated financial statements for the fiscal year ended
June 30, 2010 and 2009.
|
|
For the Year Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Audit
fees (1)
|
|
$
|
123,200
|
|
|
$
|
175,000
|
|
Audit-
related fees (2)
|
|
|
-
|
|
|
|
56,400
|
|
Tax
fees (3)
|
|
|
-
|
|
|
|
11,900
|
|
All
other fees
|
|
|
9,900
|
|
|
|
–
|
|
Total
fees
|
|
$
|
133,100
|
|
|
$
|
243,300
|
|
(1)
|
Audit fees are comprised of
annual audit fees and quarterly review
fees.
|
(2)
|
Audit-related fees for fiscal
years 2010 and 2009 are comprised of consent fees and work on registration
statements, consultation fees on accounting issues, and fees related to
the restatements of the fiscal 2008 quarterly reports that were filed in
fiscal 2009.
|
(3)
|
Tax fees are comprised of tax
compliance, preparation and consultation
fees.
|
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit
Committee pre-approves all audit and non-audit services provided by the
independent auditors prior to the engagement of the independent auditors with
respect to such services. The Chairman of the Audit Committee has been delegated
the authority by the Committee to pre-approve interim services by the
independent auditors other than the annual audit. The Chairman must report all
such pre-approvals to the entire Audit Committee at the next Committee
meeting.
Required
Vote
Delaware
law and our Bylaws provide that, on all matters (other than the election of
directors and except to the extent otherwise required by our Certificate of
Incorporation or applicable Delaware law), the affirmative vote of a majority of
the shares present, in person or by proxy, and voting on the matter, will be
required for approval. Accordingly, the affirmative vote of a majority of the
shares present at the Annual Meeting, in person or by proxy, and voting on the
matter, will be required to ratify the Boards selection of KMJ Corbin &
Company LLP as our independent auditors for the fiscal year ending June 30,
2010.
At
the Annual Meeting a vote will be taken on a proposal to ratify the selection of
KMJ Corbin as our independent auditors for the fiscal year ending June 30,
2011.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION
OF KMJ CORBIN AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
JUNE 30, 2011.
APPROVAL
OF REVERSE/FORWARD SPLIT
(PROPOSAL
NO. 3)
PROPOSAL
TO AMEND THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE
STOCK SPLIT IMMEDIATELY FOLLOWED BY A FORWARD STOCK SPLIT OF THE COMPANY’S
OUTSTANDING COMMON STOCK
Introduction
We are
asking our shareholders to approve an amendment to the Company’s Certificate of
Incorporation providing for a reverse stock split of the outstanding common
stock (the “ Reverse
Split ”), which the Board of Directors, in its discretion, would be
authorized to implement, with an exchange ratio ranging between 1-for-2 and
1-for-100 (each the “ Reverse Exchange Ratio ” and
collectively, the “ Reverse
Exchange Ratios ”), and immediately thereafter providing for a forward
stock split of the outstanding common stock (the “ Forward Split ”), which the
Board of Directors, in its discretion, would be authorized to implement, with an
exchange ratio ranging between 2-for-1 and 50-for-1 (each the “ Forward Exchange Ratio ” and
collectively, the “ Forward
Exchange Ratios ”). Together the Reverse Split and the Forward
Split may be referred to as the “ Reverse/Forward Split .”
The Reverse Exchange Ratio and the Forward Exchange Ratio, when discussed
together may be referred to as the “ Exchange Ratios
..”
The Board
believes that shareholder approval granting us discretion to set the actual
Exchange Ratios within the ranges articulated herein, rather than
shareholder approval of a specified exchange ratio, provides us with maximum
flexibility to react to then-current market conditions and volatility in the
market price of our common stock. If the Board elects to effect a
Reverse/Forward Split utilizing one of the Reverse Exchange Ratios and one of
the Forward Exchange Ratios, the Board will be deemed to have abandoned its
authorization related to the other Reverse Exchange Ratios or Forward Exchange
Ratios.
The
determination as to whether the Reverse/Forward Split will be effected and, if
so, pursuant to which Exchange Ratio, will be based upon those market or
business factors deemed relevant by the Board at that time, including, but not
limited to:
|
·
|
existing and expected
marketability and liquidity of our common
stock;
|
|
·
|
prevailing stock market
conditions;
|
|
·
|
business developments affecting
us;
|
|
·
|
our actual or forecasted results
of operations; and
|
|
·
|
the likely effect on the market
price of our common stock.
|
If the
Board elects to implement the Reverse/Forward Split, we intend to issue a press
release announcing the terms and effective date of the Reverse/Forward Split
before we file the Reverse/Forward Amendment with the Secretary of State of the
State of Delaware. We will also file notice with the Financial Industry
Regulatory Authority or “FINRA”, pursuant to Rule 10b-17 of the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”).
If
approved, the Reverse/Forward Split is expected to take place at the discretion
of the Board of Directors, but in any event prior to the 2012 Annual Meeting,
and without any additional action on the part of the holders of the Common
Stock. The proposed amendments to the Company’s Certificate of Incorporation
necessary to effect the Reverse/Forward Split are attached to this proxy
statement as Exhibit A. A summary overview of the Reverse/Forward Split
follows.
Summary
The Board
of Directors has authorized, and recommends for your approval, a reverse stock
split in a range of 1-for-2 to 1-for-100 followed immediately by a forward stock
split in the range of 2-for-1 to 50-for-1 of each share of our common stock. As
permitted under Delaware state law, stockholders whose shares of stock are
converted into less than 1 share in the reverse split will be converted
into the right to receive a cash payment. We refer to the reverse and forward
stock splits, together with the related cash payments to stockholders with small
holdings, as the “Reverse/Forward Split.” We believe that the Reverse/Forward
Split will result in significantly reduced stockholder record keeping and
mailing expenses to the Company, and provide holders of fewer than 100 shares
with a way to cash out their investments at no cost to them.
Effect
on Stockholders:
If
approved at the Special Meeting, the Reverse/Forward Split will have the
following effects on the Company’s stockholders, assuming that the Reverse
Exchange Ratio is set by our Board at 100-to-1 and the Forward Exchange Ratio is
set by our Board at 1-to-50:
Stockholder before completion of the Reverse/Forward
|
|
|
Split
|
|
Net Effect After Completion of the Reverse/Forward Split
|
Registered
stockholders holding 100 or more shares
|
|
Will
have between 2 and 50 shares depending on the forward split ratio set by
the Board.
|
|
|
|
Registered
stockholders holding fewer than 100 shares
|
|
Shares
will be converted into the right to receive cash at a price based on the
average daily closing price of the five days prior to and including the
effective date of the Reverse/Forward Split (see “Determination of
Cash-Out Price” at page 32). You will not have to pay any commissions or
other fees on this cash-out. Holders of these shares will not have any
continuing equity interest in the Company.
|
|
|
|
Stockholders
holding shares in street name through a nominee, such as bank or
broker
|
|
The
Company intends for the Reverse/Forward Split to treat stockholders
holding in street name through a nominee (such as a bank or broker)
identically as stockholders whose shares are registered in their names.
Nominees will be instructed to effect the Reverse/Forward Split for their
beneficial holders. However, nominees may have different procedures, and
The Company stockholders holding shares in street name should contact
their nominees.
|
Reasons
for the Reverse/Forward Split:
The Board
recommends that the stockholders approve the Reverse/Forward Split for the
following reasons. These, and other reasons, are described in detail under
“Background and Purpose of the Reverse/Forward Split” at page 30.
The Board
authorized the Reverse/Forward Split because we expect that the Reverse/Forward
Split will increase the market price of the common stock. In addition to
initially creating a higher price per share, we also believe that the
Reverse/Forward Split will make our common stock more attractive to a broader
range of institutional investors, professional investors and other members of
the investing public, many of whom have internal policies and practices that
either prohibit them from investing in low-priced stocks or tend to discourage
individual brokers from recommending low-priced stocks to their customers. In
addition, some of those policies and practices may function to make the
processing of trades in low-priced stocks economically unattractive to brokers.
Moreover, because brokers’ commissions on low-priced stocks generally represent
a higher percentage of the stock price than commissions on higher-priced stocks,
the current average price per share of common stock can result in individual
shareholders paying transaction costs representing a higher percentage of their
total share value than would be the case if the share price were substantially
higher.
Reducing
the number of outstanding shares of our common stock through the Reverse/Forward
Split is intended, absent other factors, to increase the per share market price
of our common stock. However, other factors, such as our financial results,
market conditions and the market perception of our business (including the
market’s perception of and reaction to a proposal for or the implementation of a
reverse stock split) may adversely affect the market price of our common stock.
As a result, there can be no assurance that the Reverse/Forward Split, if
completed at a net ratio that will reduce the number of shares outstanding, will
result in the intended benefits described above, that the market price of our
common stock will increase following the Reverse/Forward Split or that the
market price of our common stock will not decrease in the future.
In many
cases it is expensive for stockholders with fewer than 100 shares to sell their
shares on the open market. The Reverse/Forward Split allows stockholders with
small accounts to cash out their positions without transaction costs, such as
brokerage fees. However, if these stockholders do not want to cash out their
holdings of common stock, they will have the opportunity to purchase additional
shares on the open market to increase their account to at least 100 shares, or,
if applicable, consolidate/transfer their accounts into an account with at least
100 shares. These actions would need to be taken far enough in advance so that
the consolidation or the purchase is complete and settled by the close of
business on the record date of the Reverse/Forward Split. When our Board
decides to effect the Reverse/Forward Split, we intend to file a Certificate of
Amendment (in the form of Exhibit A attached
hereto) with the Delaware Secretary of State effecting the Reverse/Forward Split
as soon as practicable after we provide timely information on the
Reverse/Forward split in accordance with 10-day advance notice of the Reverse
Stock Split to the Financial Industry Regulatory Authority, or FINRA, pursuant
to Rule 10b-17 of the Exchange Act.
Structure
of the Reverse/Forward Split
The
Reverse/Forward Split includes both a reverse stock split and a forward stock
split of shares of the Company’s common stock. If the Reverse/Forward Split is
approved and occurs, the Reverse/Forward Split of the Company’s Common Stock
will become effective at the discretion of the Board of Directors on any date
designated by the Board of Directors (the “Effective Date”) prior to the 2012
Annual Meeting of Shareholders. All stockholders on the Effective Date
will receive 1 share of the Company common stock for every 100 shares of common
stock held in their accounts at that time, assuming that the Board establishes
the ratio at the maximum range of the Reverse Split. Transactions involving the
purchase or sale of the Company common stock not settled by 6:00 p.m. on
the Effective Date will be ignored for purposes of the Reverse/Forward Split.
Assuming a ratio of 100:1 for the Reverse Split, if a registered holder has 100
or more common shares, any fractional share in such account will NOT be cashed
out after the reverse split and the total number of shares held by such holder
will NOT change as a result of the Reverse/Forward Split. Any registered
stockholder who holds fewer than 100 shares of common stock, at the time of the
reverse stock split also referred to as a “Cashed-Out Stockholder”, will receive
a cash payment instead of fractional shares. This cash payment will be
determined and paid as described below under “Determination of Cash-Out Price”
at page 32.
Immediately
following the reverse split, all stockholders who are not Cashed-Out
Stockholders will receive up to 50 shares of common stock for every 1 share of
stock they held following the reverse stock split. We intend for the
Reverse/Forward Split to treat stockholders holding shares in street name
through a nominee (such as a bank or broker) identically as stockholders whose
shares are registered in their names and nominees will be instructed to effect
the Reverse/Forward Split for their beneficial holders. Accordingly, we also
refer to those street name holders who receive a cash payment instead of
fractional shares as “Cashed-Out Stockholders.” However, nominees may have
different procedures, and the Company stockholders holding shares in street name
should contact their nominees.
In
general, the Reverse/Forward Split can be illustrated by the following examples,
assuming that the Reverse Exchange Ratio is set by our Board at 100-to-1 and the
Forward Exchange Ratio is set by our Board at 1-to-50 and a per share cash-out
price of $0.1408:
Hypothetical Scenario
|
|
Result
|
Mr.
Smith is a registered stockholder who holds 72 shares in his account
immediately prior to the Reverse/Forward Split.
|
|
Instead
of receiving a fractional share (72/100) of a share) of common stock after
the reverse split, Mr. Smith’s 72 shares will be converted into the right
to receive cash. If the procedure described under “Determination of
Cash-Out Price” would result in a per share price of $[0.1408] per share,
Mr. Smith would receive $[10.14] ($[0.1408] × 72
shares).
|
|
|
|
|
|
Note:
If Mr. Smith wants to continue his investment in the Company, he can buy
at least 28 more shares of the Company common stock and hold them in
his account. Mr. Smith would have to act far enough in advance of the
Reverse/Forward Split so that the purchase is complete and settled by the
close of business on the record date for the Reverse/Forward
Split.
|
|
|
|
Ms.
Jones has 2 separate record accounts. As of the record date of the
Reverse/Forward Split, she holds 25 shares in one account and 45 shares in
the other. All of her shares are registered in her name
only.
|
|
Ms.
Jones will receive cash payments equal to the cash-out price of her shares
in each record account instead of receiving fractional shares
(25/100 share and 45/100 share). Assuming a hypothetical cash-out
price of $[0.1408] per share, Ms. Jones would receive two checks totaling
$[9.86] (25 × $[0.1408] = $[3.52];
45 × $[0.1408] = $[6.34];
$[3.52] + $[6.34] = $[9.86]).
|
|
|
|
|
|
Note:
If Ms. Jones wants to continue her investment in the Company, she can
consolidate/transfer her two record accounts prior to the record date of
the Reverse/Forward Split. Alternatively, Ms. Jones could buy at least
75 more shares for her first account and at least 55 shares for
her second account. In either case, her holdings will not be cashed out in
connection with the Reverse/Forward Split because she will hold at least
100 shares in each record account. She would have to act far enough
in advance so that the consolidation or the purchase is complete by the
close of business on the record date of the Reverse/Forward
Split.
|
Mr. Barber
holds 100 shares in his record account as of the date of the
Reverse/Forward Split.
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After
the Reverse/Forward Split, Mr. Blue will continue to hold shares of
the Company common stock based on the ratio established by the Board for
the Forward Split.
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Ms. Frank
holds 91 shares in a brokerage account as of the record date of the
Reverse/Forward Split.
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Ms. Frank
will receive cash payments equal to the cash-out price of her shares in
her brokerage account instead of receiving fractional shares. Assuming a
hypothetical cash-out price of $[0.1408] per share, Ms. Frank would
receive a check totaling $[12.81] ($[0.1408] × 91
shares).
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The
Company intends for the Reverse/Forward Split to treat stockholders
holding its shares in street name through a nominee (such as a bank or
broker) identically as stockholders whose shares are registered in their
names. Nominees will be instructed to effect the Reverse/Forward Split for
their beneficial holders. However, nominees may have different procedures
and stockholders holding shares in street name should contact their
nominees.
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Note:
If Ms. Frank wants to continue her investment in the Company, he
could buy at least 9 more shares for her account. In such case, her
holdings will not be cashed out in connection with the Reverse/Forward
Split because she will hold at least 100 shares in her nominee account.
She would have to act far enough in advance so that the purchase is
complete by the close of business on the record date of the
Reverse/Forward Split.
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Background
and Purpose of the Reverse/Forward Split
As of
January 3, 2011, the Company had approximately 1,747 shareholders, comprised of
approximately 743 holders of record and approximately 1,004 beneficial holders.
At January 3, 2011, approximately 375 registered holders of the Company common
stock owned fewer than 100 shares of stock, and approximately 201 beneficial
holders of the Company common stock owned fewer than 100 shares of stock. At
that time, these stockholders in total represented approximately 33% of the
total number of holders of the Company common stock, but owned approximately
0.009% of the total number of outstanding shares of common stock. Assuming all
576 record and beneficial holders of our stock were cashed out at the time of
the Reverse Split and before the Forward Split, we would be left with 1,171
shareholders post Reverse/Forward Split, well in excess of the 300 shareholder
threshold that would enable the Company to be eligbile to terminate its
reporting obligations under Section 12(g) or Section 15(d) of the Exchange
Act.
The
Reverse/Forward Split will provide common stockholders with fewer than 100
shares with a cost-effective way to cash out their investments because the
Company will pay all transaction costs such as brokerage or service fees in
connection with the Reverse/Forward Split. In most other cases, small
stockholders would likely incur brokerage fees disproportionately high relative
to the market value of their shares if they wanted to sell their stock. In
addition, some small stockholders might even have difficulty finding a broker
willing to handle such small transactions. The Reverse/Forward Split, however,
eliminates these problems for most small stockholders.
Moreover,
the Company will benefit from substantial cost savings as a result of the
Reverse/Forward Split. The costs of administering each registered stockholder’s
account are the same regardless of the number of shares held in each account.
Therefore, the Company’s costs to maintain thousands of small accounts are
disproportionately high when compared to the total number of shares involved.
These costs include printing and postage costs to mail the proxy materials and
annual report, and similar costs associated with required mailings to
stockholders holding shares in street name through a nominee (i.e. a bank
or broker). We expect that these costs will only increase over
time.
In light
of these disproportionate costs, the Board believes that it is in the best
interests of the Company and its stockholders as a whole to eliminate the
administrative burden and costs associated with record accounts with fewer than
100 shares, resulting in a potential annual savings of approximately $5,490.00
to the Company. The Board also believes that forward splitting the
stock immediately after the reverse in some proportion less than the reverse
split will provide additional liquidity by adding shares into the public
float. The Company believes that as a result of its efforts over the
past 12 months at improving the profitability of its US operations coupled with
its recent recapitalization will make its stock attractive to new
investors. While the reverse split process will assist in eliminating
smaller shareholders and the aforementioned administrative costs and burden, the
forward split will result in more shares being available and at a price per
share that will ideally encourage such new investors into our
stock. The Board believes that a simple reverse split, by itself,
will result in too few shares being available to new investors and may result in
a price per share of common stock that such potential investors will view as
being too high relative to technical and fundamental factors. The
Board believes that having the flexibility to forward split the stock as well as
to effect a reverse split will enable it better to manage or balance these
competing priorities. For these reasons, the Board is recommending
that the shareholders approve the amendment to the Certificate of Incorporation
as a forward split immediately after effecting the reverse split.
Effect
of the Reverse/Forward Split on the Company Stockholders
Stockholders
with a Record Account of Fewer than 100 Shares:
If we
complete the Reverse/Forward Split and you are a Cashed-Out Stockholder
(i.e., a stockholder holding fewer than 100 shares of the Company common
stock immediately prior to the reverse stock split):
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You will not receive fractional
shares of stock as a result of the reverse split in respect of your shares
being cashed out.
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Instead of receiving fractional
shares, you will receive a cash payment in respect of your affected
shares. See “Determination of Cash-Out Price” at
page 32.
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After the reverse split, you will
have no further interest in the Company with respect to your cashed-out
shares. These shares will no longer entitle you to the right to vote as a
stockholder or share in the Company’s assets, earnings, or profits or in
any dividends paid after the reverse split. In other words, you will no
longer hold your cashed-out shares, you will just have the right to
receive cash for these
shares.
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You will not have to pay any
service charges or brokerage commissions in connection with the
Reverse/Forward Split.
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As soon as practicable after the
time we effect the Reverse/Forward Split, you will receive a payment
for the cashed out shares you held immediately prior to the reverse split
in accordance with the procedures described below. In addition, you will
not be entitled to receive interest with respect to the period of time
between the date of the reverse split and the date you receive your
payment for the cashed out
shares.
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If you
hold Book-Entry Shares:
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Many of the Company’s registered
stockholders hold their shares in book-entry form under the Direct
Registration System for securities. These stockholders do not have stock
certificates evidencing their ownership of the Company’s common stock.
They are, however, provided with a statement reflecting the number of
shares registered in their
accounts.
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If you are a
Cashed-Out Stockholder who holds registered shares in a book-entry
account, you do not need to take any action to receive your cash
payment. We will
mail a check to you at your registered address as soon as practicable
after the date we affect the Reverse/Forward Split. By signing and cashing
this check, you will warrant that you owned the shares for which you
received a cash payment.
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If you
hold Certificated Shares:
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If you are a Cashed-Out
Stockholder with a stock certificate representing your cashed-out shares,
you will receive a transmittal letter from the Company as soon as
practicable after the date we effect the Reverse/Forward Split. The letter
of transmittal will contain instructions on how to surrender your
certificate(s) to the company’s transfer agent, Corporate Stock Transfer
for your cash payment. You will not
receive your cash payment until you surrender your outstanding
certificate(s) to Corporate Stock Transfer, together with a completed and
executed copy of the letter of transmittal. Please do not send your
certificates until you receive your letter of transmittal. For further information, see
“Stock Certificates” below.
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All
amounts owed to you will be subject to applicable federal income tax and state
abandoned property laws.
You will
not receive any interest on cash payments owed to you as a result of the
Reverse/Forward Split.
NOTE:
If you want to continue to hold the Company stock after the Reverse/Forward
Split, you may do so by taking either of the following actions far enough in
advance so that it is complete and settled by the record date of the
Reverse/Forward Split.
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1.
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purchase a sufficient number of
shares of the Company common stock on the open market so that you hold at
least 100 shares of common stock in your account prior to the record date
of the reverse split; or
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2.
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if applicable, consolidate
existing accounts so that you hold at least 100 shares of the Company
common stock in one account prior to the record date of the reverse
split.
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Registered
Stockholders with 100 or More Shares of Common Stock:
If you
are a stockholder with 100 or more shares of common stock as of the record date
of the Reverse/Forward Split, we will first convert your shares into one
half to one one hundredth (1/100) of the number of shares you held immediately
prior to the reverse split. One minute after the reverse split, at
6:01 p.m., we will reconvert your shares in the forward stock split into 2
to 50 times the number of shares you held after the reverse split, which is the
same number of shares you held before the reverse split. For example, if you
were an owner of 1,000 shares of common stock immediately prior to the reverse
split, your shares could be converted to 10 shares in the reverse split
and back to 500 shares in the forward split.
Street
Name Holders of the Company Common Stock:
The
Company intends for the Reverse/Forward Split to treat stockholders holding the
Company common stock in street name through a nominee (such as a bank or broker)
identically as stockholders whose shares are registered in their names. Nominees
will be instructed to effect the Reverse/Forward Split for their beneficial
holders. However, nominees may have different procedures and stockholders
holding the Company common stock in street name should contact their
nominees.
Current
and Former Company Employees and Directors and Effect on the Company’s Stock
Plans:
If you
are an employee or director of the Company (or a former employee or director),
you may own Company restricted stock and/or hold restricted stock units, options
to purchase the Company stock or other awards through the 2007 Long-term
Incentive Plan (the “LTIP”).
If you
hold fewer than 100 restricted shares of the Company stock granted pursuant to
the LTIP, those shares would be converted into the right to receive cash under
the Reverse/Forward Split. If you hold performance units, options to purchase
the Company stock, or other awards granted to you under the LTIP, the
Reverse/Forward Split impact your award(s) proportionately to the
Reverse/Forward Split as provided for in that plan.
The
Reverse/Forward Split, if approved by our Shareholders, will proportionately
affect the number of shares available under LTIP based on the Reverse Exchange
Ratio and the Forward Exchange Ratio ultimately effected by our Board. Our
LTIP provides that if the Company effects a subdivision or consolidation of
shares or other capital readjustment, including the payment of a stock dividend
or other increase or reduction of the number of shares of the Common Stock
outstanding, then (i) the number, class, and per share price of shares of Common
Stock subject to outstanding Options and other Awards (as those terms are
defined in the LTIP) and (ii) the number and class of shares then reserved for
issuance under the LTIP and the maximum number of shares for which Awards may be
granted to a Participant during a specified time period shall be appropriately
and proportionately adjusted. Our Compensation Committee is authorized
under the LTIP to effect all adjustments in proportion to the Reverse/Forward
Split.
Determination
of Cash-Out Price
In order
to avoid the expense and inconvenience of issuing fractional shares to
stockholders who hold less than one share after the reverse split, under
Delaware state law the Company may either arrange for the sale of these
fractional shares or pay cash for their fair value. If stockholders approve this
proposal at the Annual Meeting and the Reverse/Forward Split is completed, the
Board of Directors has indicated that it will elect to arrange for Corporate
Stock Transfer, the Company’s transfer agent, to sell a portion of these
fractional shares of common stock on the open market, and to have the Company
pay cash for the remaining fractional shares. In either case, the price paid to
stockholders with less than 100 shares will be determined based on the average
daily closing price per share of the common stock on the OTC Bulletin Board for
the five trading days immediately before and including the effective date of the
Reverse/Forward Split, without interest (the “Cash-Out Price”). Currently, the
Board intends to have the Company pay cash in an amount of up to $1,000 for the
fractional shares. If the Board revises its election, in its sole discretion, as
soon as practicable after the Annual Meeting we will publicly announce the
decision in a press release and post it on our website at http://www.mamsoftwaregroup.com
..
In
accordance with the Board’s current elections described above, as soon as
practicable after the date the Company effects the Reverse/Forward Split,
the transfer agent will sell a portion of the aggregated fractional shares of
the Cashed-Out Stockholders at the prevailing prices on the open market, in
round lots to the extent practicable.
Promptly
after the date on which we effect the Reverse/Forward Split, the Company intends
to deposit up to $1,000.00 with its transfer agent, which will be held in trust
with the proceeds from the open market sale for the benefit of the Cashed-Out
Stockholders. All Cashed-Out Stockholders will receive cash equal to the
Cash-Out Price of the shares they held immediately prior to the reverse split in
accounts with fewer than 100 shares of common stock, without interest. the
Company will pay all of the commissions and other out-of-pocket transaction
costs in connection with the sale. Until the proceeds of the sale and the
Company’s contribution have been distributed, the transfer agent will hold the
proceeds in trust for the Cashed-Out Stockholders. As soon as practicable after
the Reverse/Forward Split, the transfer agent will pay the cash to the
Cashed-Out Stockholders as described above in “Effect of the Reverse/Forward
Split on the Company Stockholders.”
All
Cashed-Out Stockholders will receive the same Cash-Out Price.
Effect
of the Reverse/Forward Split on the Company
The
Reverse/Forward Split will not affect the public registration of the Company’s
common stock with the SEC under the Securities Exchange Act of 1934, as amended.
The Company does not intend this transaction to be the first step of a
going-private transaction. On the contrary, our goal is to ultimately expand our
shareholder base by making our common stock more attractive. By reducing the
number of shareholders with fewer than 100 shares, we believe that the
Reverse/Forward Split will encourage a broader range of institutional investors,
professional investors and other members of the investing public, to take a
position in our common stock. As noted above, assuming a Reverse Split of 1:100
and a Forward Split of 50:1, we will be left with approximately 1,171
shareholders, which is well in excess of the 300 shareholder threshold that
would qualify the Company to be able to terminate its reporting obligations
under Section 12(g) or Section 15(d) of the Exchange Act.
The
number of shares of authorized common stock will not change as a result of the
Reverse/Forward Split. On [January 3, 2011], there are 138,733,246 shares of the
Company common stock issued and outstanding. Following the Reverse/Forward
Split, the total number of issued and outstanding shares of common stock will be
reduced by the aggregate number of fractional shares of the Cashed-Out
Stockholders that the Company purchases from the Cashed-Out Stockholders. The
par value of the Company’s common stock will remain at $.0001 per share after
the Reverse/Forward Split.
The total
number of shares that will be re-purchased by the Company is unknown. Also, we
do not know what the Cash-Out Price will be or, if applicable, what the net
proceeds of the sale of the aggregate fractional shares by the transfer agent
will be. However, if the Reverse/Forward Split had been completed as of
[January 3, 2011], the anticipated mailing date of this Proxy Statement,
when the average daily closing price per share of the Company common stock on
the OTC Bulletin Board for the five trading days immediately preceding and
including such date was $[___], then the cash payments that would have been
issued to Cashed-Out Stockholders, including both registered and street name
holders, instead of fractional shares would have been approximately $[____],
with approximately [____] shares of common stock purchased by the Company. The
actual amounts will depend on the number of Cashed-Out Stockholders on the date
we affect the Reverse/Forward Split and the Cash-Out Price of the shares, each
of which will vary from the number of such stockholders and price for the five
trading days immediately preceding and including [January 3, 2011].
Effect
on Par Value
The
proposed Forward Amendment will not affect the par value of our common stock,
which will remain at $0.0001.
Certain
Federal Income Tax Consequences
We have
summarized below the material federal income tax consequences to the Company and
stockholders resulting from the Reverse/Forward Split. This summary is based on
existing U.S. federal income tax law, which may change, possibly retroactively.
This summary does not discuss all aspects of federal income taxation which may
be important to you in light of your individual circumstances. Many stockholders
(such as financial institutions, insurance companies, broker-dealers, tax-exempt
organizations, and foreign persons) may be subject to special tax rules. Other
stockholders may also be subject to special tax rules, including but not limited
to: stockholders who received the Company stock as compensation for services or
pursuant to the exercise of an employee stock option, or stockholders who have
held, or will hold, stock as part of a straddle, hedging, or conversion
transaction for federal income tax purposes. In addition, this summary does not
discuss any state, local, foreign, or other tax considerations. This summary
assumes that you are a U.S. citizen and have held, and will hold, your shares as
capital assets for investment purposes under the Internal Revenue Code of 1986,
as amended (the “Code”). You should consult your tax advisor as to the
particular federal, state, local, foreign, and other tax consequences, in light
of your specific circumstances.
We
believe that the Reverse/Forward Split will be treated as a tax-free
“recapitalization” for federal income tax purposes. This will result in no
material federal income tax consequences to the Company.
The
federal income tax consequences to stockholders will depend in part on whether
the Board chooses to arrange for the sale of the Cashed-Out Stockholders’
fractional shares on the open market, or to purchase these fractional shares
directly. See “Determination of Cash-Out Price” above. The tax consequences of
these alternatives are discussed below.
Federal
Income Tax Consequences to Stockholders Who Are Not Cashed Out by the
Reverse/Forward Split:
If you
(1) continue to hold Company common stock immediately after the
Reverse/Forward Split, and (2) you receive no cash as a result of the
Reverse/Forward Split, you will not recognize any gain or loss in the
Reverse/Forward Split and you will have the same adjusted tax basis and holding
period in your Company common stock, as the case may be, as you had in such
stock immediately prior to the Reverse/Forward Split.
Federal
Income Tax Consequences to Cashed-Out Stockholders:
If you
receive cash as a result of the Reverse/Forward Split, your tax consequences
will depend on whether, in addition to receiving cash, you or a person or entity
related to you continues to hold Company common stock immediately after the
Reverse/Forward Split, as explained below.
Stockholders
Who Exchange All of Their Company Common Stock for Cash as a Result of the
Reverse/Forward Split.
If you
(1) receive cash in exchange for a fractional share as a result of the
Reverse/Forward Split, (2) you do not continue to hold any Company stock
immediately after the Reverse/Forward Split, and (3) you are not related to
any person or entity that holds Company common stock immediately after the
Reverse/Forward Split, you will recognize capital gain or loss. The amount of
capital gain or loss you recognize will equal the difference between the cash
you receive for your cashed-out stock and your aggregate adjusted tax basis in
such stock.
If you
are related to a person or entity who continues to hold Company common stock
immediately after the Reverse/Forward Split, you will recognize gain in the same
manner as set forth in the previous paragraph, provided that your receipt of
cash either (1) is “not essentially equivalent to a dividend,” or
(2) is a “substantially disproportionate redemption of stock,” as described
below.
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“Not Essentially Equivalent to a
Dividend.” You will satisfy the “not essentially equivalent to a dividend”
test if the reduction in your proportionate interest in Company resulting
from the Reverse/Forward Split is considered a “meaningful reduction”
given your particular facts and circumstances. The Internal Revenue
Service has ruled that a small reduction by a minority stockholder whose
relative stock interest is minimal and who exercises no control over the
affairs of the corporation will satisfy this
test.
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“Substantially Disproportionate
Redemption of Stock.” The receipt of cash in the Reverse/Forward Split
will be a “substantially disproportionate redemption of stock” for you if
the percentage of the outstanding shares of Company common stock owned by
you immediately after the Reverse/Forward Split is less than 80% of the
percentage of shares of Company common stock owned by you immediately
before the Reverse/Forward Split and you own less than 50% of the
outstanding shares of Company common stock after the Reverse/Forward
Split.
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In
applying these tests, you will be treated as owning shares actually or
constructively owned by certain individuals and entities related to you. If the
redemption of shares of Company common stock is not treated as capital gain
under any of the tests, then the entire amount of the payment you receive for
your shares will be treated first as ordinary dividend income to the extent of
your ratable share of Company’s undistributed earnings and profits, then as a
tax-free return of capital to the extent of your aggregate adjusted tax basis in
your shares, and any remaining gain will be treated as capital gain. See
“Maximum Tax Rates Applicable to Capital Gain” below.
Stockholders
Who Both Receive Cash and Continue to Hold Company Common Stock Immediately
After the Reverse/Forward Split.
If you
receive cash as a result of the Reverse/Forward Split and continue to hold
Company common stock immediately after the Reverse/Forward Split, you generally
will be subject to the same rules for determining tax treatment as described in
sub-paragraph a. above, the same as if you constructively continue to hold
shares of Company common stock. If you meet either the “not essentially
equivalent to a dividend” test or the “substantially disproportionate redemption
of stock “test, then you will recognize gain, but not loss, in an amount equal
to the lesser of (1) the excess of the sum of aggregate fair market value
of your shares of Company common stock plus the cash received over your adjusted
tax basis in the shares, or (2) the amount of cash received in the
Reverse/Forward Split. In determining whether you meet either test, you must
take into account as shares you own both shares of Company common stock that you
actually own and constructively own ( i.e., shares owned by
certain individuals or entities related to you) before and after the
Reverse/Forward Split. Your aggregate adjusted tax basis in your shares of
Company common stock held immediately after the Reverse/Forward Split will be
equal to your aggregate adjusted tax basis in your shares of Company common
stock held immediately prior to the Reverse/Forward Split, increased by any gain
recognized in the Reverse/Forward Split, and decreased by the amount of cash
received in the Reverse/Forward Split.
Any gain
or loss recognized in the Reverse/Forward Split will be treated, for federal
income tax purposes, as long-term capital gain or loss (assuming that your
receipt of cash either (1) is “not essentially equivalent to a dividend”
with respect to you, or (2) is a “substantially disproportionate redemption
of stock” with respect to you) provided that you have held your shares for more
than one (1) year. If you acquired shares redeemed in the Reverse/Forward
Split at different times, you will be required to compute such gain or loss and
determine whether such gain or loss is long-term or not, separately with respect
to each such acquisition of shares. In applying these tests, you may be able to
take into account sales of shares of Company common stock that occur
substantially contemporaneously with the Reverse/Forward Split. If your gain is
not treated as capital gain under any of these tests, the gain will be treated
as ordinary dividend income to you to the extent of your ratable share of
Company’s undistributed earnings and profits, then as a tax-free return of
capital to the extent of your aggregate adjusted tax basis in your shares, and
any remaining gain will be treated as a capital gain. Currently, long-term
capital gain and dividend income are both subject to a maximum income tax rate
of 15% for federal income tax purposes.
YOU
SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL,
FOREIGN, AND OTHER TAX CONSEQUENCES OF THE REVERSE/FORWARD SPLIT, IN LIGHT OF
YOUR SPECIFIC CIRCUMSTANCES.
Appraisal
Rights
Dissenting
stockholders do not have appraisal rights under Delaware state law or under
Company’s Certificate of Incorporation or By-laws in connection with the
Reverse/Forward Split.
Reservation
of Rights
We
reserve the right to abandon the Reverse/Forward Split without further action by
our stockholders at any time before the filing of the amendments to the
Certificate of Incorporation with the Delaware Secretary of State, even if the
Reverse/Forward Split has been authorized by our stockholders at the Annual
Meeting, and by voting in favor of the Reverse/Forward Split you are expressly
also authorizing us to determine not to proceed with the Reverse/Forward Split
if we should so decide.
Required
Vote
The
approval of the Forward Amendment authorizing the Reverse/Forward Split will
require the affirmative vote of the holders of a majority of the Company’s
outstanding shares of common stock entitled to vote, in person or by proxy,
provided a quorum is present. Thus, any abstentions or limited proxies
will be counted for the purpose of meeting the quorum requirements, and
abstentions will not count for purposes of determining the number of votes cast
in favor of this proposal.
At
the Annual Meeting a vote will be taken on a proposal to approve the
Reverse/Forward Split.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT OF THE
COMPANY’S
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE/FORWARD SPLIT OF
ITS
OUTSTANDING
COMMON STOCK
ADVISORY
RESOLUTION ON EXECUTIVE COMPENSATION
(PROPOSAL
NO. 4)
Recently
enacted federal legislation (Section 14A of the Exchange Act) requires that
we include in this Proxy Statement a non-binding stockholder vote on our
executive compensation as described in this Proxy Statement (commonly referred
to as “Say-on-Pay”) and a non-binding stockholder vote to advise on whether the
Say-on-Pay vote should occur every one, two or three years.
We
encourage stockholders to review the information set forth above under
“Compensation Committee Report” and “EXECUTIVE COMPENSATION”, including the
“Compensation Discussion and Analysis” and the tabular and narrative disclosure.
As noted in the Compensation Discussion and Analysis:
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Our goal is to attract, motivate,
and retain key executives and to reward executives for value
creation.
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We have structured our
compensation packages to foster a performance-oriented environment
by tying a significant portion of each executive’s cash and equity
compensation to the achievement of performance targets that are important
to the Company and its
stockholders.
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This is not a mechanical process,
and our Board of Directors has used its judgment and experience and works
with our Compensation Committee to determine the appropriate mix of
compensation for each
individual.
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Required
Vote
Because
the vote is advisory, it will not be binding upon the Board or the Compensation
Committee and neither the Board nor the Compensation Committee will be
required to take any action as a result of the outcome of the vote on this
Proposal. The Compensation Committee will carefully consider the outcome of the
vote when considering future executive compensation arrangements
THE
BOARD OF DIRECTORS STRONGLY ENDORSES THE COMPANY’S EXECUTIVE COMPENSATION
PROGRAM AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE FOLLOWING
RESOLUTION:
RESOLVED,
that the stockholders approve the compensation of the Company’s named executive
officers as described in this Proxy Statement under “Compensation Committee
Report”, “EXECUTIVE COMPENSATION”, including the “Compensation Discussion
and Analysis”, and the tabular and narrative disclosure.
ADVISORY
RESOLUTION ON THE FREQUENCY OF THE STOCKHOLDERS’ SAY ON PAY
(PROPOSAL
NO. 5)
As
mentioned above, recently enacted legislation requires that we include in this
Proxy Statement a separate non-binding stockholder vote to advise on whether the
Say-on-Pay vote should occur every one, two or three years. You have the option
to vote for any one of the three options, or to abstain on the
matter.
The Board
has determined that an advisory vote on executive compensation every three years
is the best approach for the Company based on a number of considerations,
including the following:
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Our compensation program is
designed to induce performance over a multi-year period. A vote held every
three years would be more consistent with, and provide better input on,
our long-term compensation, which constitutes a significant portion
of the compensation of our named executive
officers;
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A three-year vote cycle gives the
Board sufficient time to thoughtfully consider the results of the advisory
vote and to implement any desired changes to our executive compensation
policies and
procedures; and
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A three-year cycle will provide
stockholders sufficient time to evaluate the effectiveness of our short-
and long-term compensation strategies and the related business outcomes of
the Company.
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Required
Vote
Although
the vote is non-binding, our Board of Directors and the Compensation Committee
will take into account the outcome of the vote when making future decisions
about the Company’s executive compensation policies and procedures. The
Company’s stockholders also have the opportunity to provide additional feedback
on important matters involving executive compensation even in years when
Say-on-Pay votes do not occur. For example, as discussed under “Stockholder
Communications ”, the
Company provides stockholders an opportunity to communicate directly with the
Board, including on issues of executive compensation.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE TO CONDUCT AN ADVISORY VOTE ON
EXECUTIVE COMPENSATION EVERY THREE YEARS .
AUDIT
COMMITTEE REPORT
The
following Report of the Audit Committee (the “Audit Report”) does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this Audit Report by reference therein.
Role
of the Audit Committee
The Audit
Committee’s primary responsibilities fall into three broad
categories:
First,
the Committee is charged with monitoring the preparation of quarterly and annual
financial reports by the Company’s management, including discussions with
management and the Company’s outside auditors about draft annual financial
statements and key accounting and reporting matters;
Second,
the Committee is responsible for matters concerning the relationship between the
Company and its outside auditors, including recommending their appointment or
removal; reviewing the scope of their audit services and related fees, as well
as any other services being provided to the Company; and determining whether the
outside auditors are independent (based in part on the annual letter provided to
the Company pursuant to Independence Standards Board Standard No. 1);
and
Third,
the Committee reviews financial reporting, policies, procedures, and internal
controls of the Company.
The
Committee has implemented procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or appropriate to
each of the matters assigned to it under the Committee’s charter. In overseeing
the preparation of the Company’s financial statements, the Committee met with
management and the Company’s outside auditors, including meetings with the
Company’s outside auditors without management present, to review and discuss all
financial statements prior to their issuance and to discuss significant
accounting issues. Management advised the Committee that all financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee discussed the statements with both management and
the outside auditors. The Committee’s review included discussion with the
outside auditors of matters required to be discussed pursuant to Statement on
Auditing Standards No. 61 (Communication with Audit
Committees).
With
respect to the Company’s outside auditors, the Committee, among other things,
discussed with KMJ Corbin & Company LLP matters relating to its
independence, including the disclosures made to the Committee as required by the
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees).
Recommendations of the Audit
Committee . In reliance on the reviews and discussions referred to above,
the Committee recommended to the Board that the Board approve the inclusion of
the Company’s audited financial statements in the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2010, for filing with the
SEC.
This
report has been furnished by the Audit Committee of the Board of
Directors.
Frederick
Wasserman, Chair
Dwight B.
Mamanteo
W. Austin
Lewis IV
Gerald M.
Czarnecki – ex officio
STOCKHOLDER
PROPOSALS FOR 2012 ANNUAL MEETING
It is
contemplated that the next Annual Meeting of Stockholders will be held on or
about April 2012. Stockholders may submit proposals on matters appropriate for
stockholder action at annual meetings in accordance with the rules and
regulations adopted by the Securities and Exchange Commission. Any
proposal which an eligible stockholder desires to have included in our proxy
statement and presented at the 2012 Annual Meeting of Stockholders will be
included in our proxy statement and related proxy card if it is received by us a
reasonable time before we begin to print and send our proxy materials and if it
complies with Securities and Exchange Commission rules regarding inclusion
of proposals in proxy statements. In order to avoid controversy as to the date
on which we receive a proposal, it is suggested that any stockholder who wishes
to submit a proposal submit such proposal by Certified Mail, Return Receipt
Requested.
Other
deadlines apply to the submission of stockholder proposals for the 2012 Annual
Meeting that are not required to be included in our proxy statement under
Securities and Exchange Commission rules. With respect to these stockholder
proposals for the 2012 Annual Meeting, a stockholder’s notice must be received
by us a reasonable time before we begin to print and send our proxy materials.
The form of proxy distributed by the Board of Directors for such meeting will
confer discretionary authority to vote on any such proposal not received by such
date. If any such proposal is received by such date, the proxy statement for the
meeting will provide advice on the nature of the matter and how we intend to
exercise our discretion to vote on each such matter if it is presented at that
meeting.
EXPENSES
AND SOLICITATION
We will
bear the costs of printing and mailing proxies. In addition to soliciting
stockholders by mail or through our regular employees, we may request banks,
brokers and other custodians, nominees and fiduciaries to solicit their
customers who have shares of our Common Stock registered in the name of a
nominee and, if so, will reimburse such banks, brokers and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket costs. Solicitation
by our officers and employees may also be made of some stockholders following
the original solicitation.
OTHER
BUSINESS
The Board
of Directors knows of no other items that are likely to be brought before the
meeting except those that are set forth in the foregoing Notice of Annual
Meeting of Stockholders. If any other matters properly come before the meeting,
the persons designated on the enclosed proxy will vote in accordance with their
judgment on such matters.
ADDITIONAL
INFORMATION
We are
subject to the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and in accordance therewith, we file periodic reports,
documents and other information with the SEC relating to our business, financial
statements and other matters. Such reports and other information may be
inspected and are available for copying at the offices of the SEC, 100 F Street,
N.E., Washington, D.C. 20549 or may be accessed at www.sec.gov .
Information regarding the operation of the public reference rooms may be
obtained by calling the SEC at 1-800-SEC-0330. You are encouraged to review the
Annual Report on Form 10-K mailed along with these proxy materials, together
with any subsequent information we filed or will file with the SEC and other
publicly available information. A copy of any public filing is also
available, at no charge, by contacting our legal counsel, Gersten, Savage LLP,
Attn: David E. Danovitch, Esq. at 212-752-9700.
*************
It is
important that the proxies be returned promptly and that your shares be
represented. Stockholders are urged to mark, date, execute, and promptly return
the accompanying proxy card.
December
[__], 2010
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By
Order of the Board of Directors,
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/s/ Michael G. Jamieson
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MICHAEL
G. JAMIESON
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Chief
Executive Officer
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ANNUAL
MEETING OF STOCKHOLDERS OF
MAM
SOFTWARE GROUP, INC.
FEBRUARY
18, 2011
Please
mark, date, sign and mail your proxy card in the
envelope
provided as soon as possible
MARK,
DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE x
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL PROPOSALS.
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4. To consider and act upon an advisory
vote on compensation of named executive officers
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¨ FOR
THE PROPOSAL
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1. Election
of Directors
¨
FOR ALL NOMINEES
¨ Michael G.
Jamieson
¨ Dwight B.
Mamanteo
¨ Marcus
Wohlrab
¨ Frederick
G. Wasserman
¨ Gerald M.
Czarnecki
¨ W. Austin
Lewis IV
¨
WITHHOLD AUTHORITY
FOR ALL NOMINEES
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¨
AGAINST THE PROPOSAL
¨
ABSTAIN
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5. To consider and act upon an
frequency of advisory vote on the compensation of named executive
officers
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¨
FOR ALL EXCEPT
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(See
Instruction below)
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ONE
YEAR ¨
TWO YEARS ¨
THREE YEARS ¨
ABSTAIN ¨
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¨ ABSTAIN
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INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL
EXCEPT” and write the name of the nominee you wish to withhold authority
in the box below.
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To
change the address on your account, please
check ¨
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the
box at right and indicate your new address in the
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space
above. Please note that changes to the registered
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name(s)
on the account may be submitted via this method.
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2. To
consider and act upon a proposal to ratify the Board’s selection of
KMJ CORBIN & COMPANY
LLP as the Company’s independent auditors for the
fiscal year ending June 30, 2011.
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THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS MADE, THE PROXY SHALL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS, FOR THE RATIFICATION OF
KMJ CORBIN & COMPANY LLP AS THE COMPANY’S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2011, FOR THE REVERSE SPLIT OF
THE COMPANY’S OUTSTANDING COMMON STOCK, FOR THE FORWARD SPLIT OF
THE COMPANY’S OUTSTANDING COMMON STOCK, FOR THE APPROVAL
OF THE EMPLOYEE STOCK PURCHASE PLAN, FOR AN INCREASE IN THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY’S COMMON STOCK, AND, IN THE
CASE OF OTHER MATTERS THAT LEGALLY COME BEFORE THE MEETING, AS SAID
ATTORNEY(S) MAY DEEM ADVISABLE.
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¨ FOR
THE PROPOSAL
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¨
AGAINST THE PROPOSAL
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¨ ABSTAIN
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3. To
consider and act upon a proposal to amend the Company’s Certificate of
Incorporation to effect a Reverse Split, followed by a Forward Split, of
the Company’s outstanding common stock.
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PLEASE
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS ON
FEBRUARY 18, 2011 AT 10:00 A.M. (EASTERN STANDARD TIME) AT THE OFFICES OF
GERSTEN SAVAGE LLP, 600 LEXINGTON AVE., NEW YORK, NY 10022 ¨
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¨ FOR
THE PROPOSAL
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¨
AGAINST THE PROPOSAL
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¨ ABSTAIN
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Signature
of Stockholder ____________________ Date: _____________
Signature of Stockholder _____________
Date:_________
Note:
This proxy must be signed exactly as the name appears hereon. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full title
as such. If the signer is a corporation, please sign full corporate
name by a duly authorized officer, giving full title as such. If
signer is a partnership, please sign in partnership name by an authorized
person.
MAM
SOFTWARE GROUP, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 18, 2011
Revoking
all prior proxies, the undersigned, a stockholder of MAM SOFTWARE GROUP, INC.
(the “Company”), hereby appoints Michael Jamieson and Gerry Czarnecki or either
of them, as attorneys-in-fact and agents of the undersigned, with full power of
substitution, to vote all of the shares of the Company’s Common Stock, par value
$0.0001 per share (“Common Stock”), owned by the undersigned at the Annual
Meeting of Stockholders of the Company to be held on February 18, 2011 at the
offices of Gersten Savage LLP, 600 Lexington Ave., New York, New York 10022, at
10:00 a.m. Eastern Standard Time, and at any adjournment thereof, as fully and
effectively as the undersigned could do if personally present and voting, hereby
approving, ratifying, and confirming all that said attorney and agent or his
substitute may lawfully do in place of the undersigned as indicated on the
reverse.
IMPORTANT:
SIGNATURE REQUIRED ON THE REVERSE SIDE
EXHIBIT
A
AMENDMENT
TO CERTIFICATE OF INCORPORATION
This
Amendment assumes an exchange ratio of 1-for-100 for the reverse and a 50-for-1
ratio for the forward split for illustrative purposes only.
Reverse/Forward
Split of Common Stock.
(1)
Effective at 6:00 p.m. (Eastern Time) on the effective date of the certificate
of amendment adding this paragraph to Article Fourth of the Certificate of
Incorporation (the “Reverse Split Effective Time”), each share of the Common
Stock, par value $0.0001 per share, of the Corporation outstanding at the
Reverse Split Effective Time shall, without any action on the part of the holder
thereof, automatically be reclassified and changed into [one one-hundredth
(1/100th)] of a share of Common Stock, par value $0.0001 per share, of the
Corporation; provided,
however , that (i) if the foregoing reverse stock split (the “Reverse
Split”) would result in the record account of any holder of Common Stock having
a number of shares of Common Stock that is, in the aggregate, less than one (1)
share (“Fractional Shares”), such Fractional Shares shall, without any action on
the part of the holder thereof, automatically be canceled in the Reverse Split;
and (ii) in the Reverse Split, all of the Fractional Shares shall
automatically be converted into the right to receive the Trading Value thereof
upon surrender by the holder thereof of the certificate or certificates
representing such Fractional Shares. For purposes hereof, the term
“Trading Value” of any Fractional Shares shall mean the product of:
(A) the average daily closing price per share of the common stock on the
OTC Bulletin Board for the five trading days immediately before and including
the effective date of the Reverse/Forward Split, multiplied by (B) the number
of shares of Common Stock that were converted into such Fractional Shares as a
result of the Reverse Split. From and after the Reverse Split Effective
Time, each holder of Fractional Shares shall have no further interest as a
stockholder in the Corporation in respect of such Fractional
Shares.
Effective
at 6:01 p.m. (Eastern Time) on the effective date of the certificate of
amendment adding this paragraph to Article Fourth of the Certificate of
Incorporation (the “Forward Split Effective Time”): (i) each whole
share of the Common Stock, par value $0.0001 per share, of the Corporation
outstanding at the Forward Split Effective Time (after giving effect to the
Reverse Split at the Reverse Split Effective Time) shall, without any action on
the part of the holder thereof, automatically be reclassified and changed into
[fifty (50)] shares of Common Stock, par value $0.0001 per share, of the
Corporation; and (ii) fractions of a share outstanding at the Forward Split
Effective Time (after giving effect to the Reverse Split at the Reverse Split
Effective Time) shall be proportionately reclassified and changed.