MAD CATZ INTERACTIVE INC DEF 14A 2007
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
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MAD CATZ INTERACTIVE, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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August 8, 2007
Dear Fellow Shareholder:
You are cordially invited to attend our Annual and Special Meeting of Shareholders on Friday, September 7, 2007, at 9:30 a.m., Pacific Time at Mad Catz, Inc.s offices located at 7480 Mission Valley Road, Suite 101, San Diego, California, 92108.
The business to be conducted at the Annual and Special Meeting is explained in the accompanying Notice of Annual and Special Meeting of Shareholders and Management Proxy Circular and Proxy Statement. At the Annual and Special Meeting, we will also discuss our results for the past year.
Whether or not you attend the Annual and Special Meeting, it is important that your shares be represented and voted at the Annual and Special Meeting. Please complete, sign, and date your proxy card today and return it in the envelope provided. If you decide to attend the Annual and Special Meeting and you are a registered shareholder, you will be able to vote in person, even if you have previously submitted your proxy.
Thank you for your continued support.
MAD CATZ INTERACTIVE, INC.
7480 MISSION VALLEY ROAD, SUITE 101
SAN DIEGO, CALIFORNIA 92108
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 7, 2007
The 2007 Annual and Special Meeting of Shareholders (the Meeting) of Mad Catz Interactive, Inc. (the Company) will be held at Mad Catz, Inc.s offices located at 7480 Mission Valley Road, Suite 101, San Diego, California, 92108, on Friday, September 7, 2007, beginning at 9:30 a.m., Pacific Time. The purposes of the Meeting are to:
The Board of Directors has fixed the close of business on August 8, 2007 as the record date for determining the shareholders entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof.
These items of business, including the nominees for director, are more fully described in the Management Proxy Circular and Proxy Statement accompanying this notice.
Whether or not you plan to attend the Meeting, we encourage you to vote your shares by proxy. This will ensure the presence of a quorum at the Meeting. Voting by proxy will not limit your right to change your vote or to attend the Meeting.
August 8, 2007
TABLE OF CONTENTS
MAD CATZ INTERACTIVE, INC.
7480 MISSION VALLEY ROAD, SUITE 101
SAN DIEGO, CALIFORNIA 92108
MANAGEMENT PROXY CIRCULAR AND PROXY STATEMENT FOR
THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 7, 2007
This Management Proxy Circular and Proxy Statement is furnished in connection with the solicitation by the Board of Directors (the Board) of Mad Catz Interactive, Inc. (the Company, Mad Catz, we or us) of proxies from the holders of shares of common stock of the Company to be voted at the Annual and Special Meeting of Shareholders to be held on Friday, September 7, 2007, beginning at 9:30 a.m., Pacific Time, at Mad Catz, Inc.s offices located at 7480 Mission Valley Road, Suite 101, San Diego, California, 92108 (the Meeting). This Management Proxy Circular and Proxy Statement, the proxy card, and our Annual Report will first be mailed to shareholders entitled to vote at the meeting on or about August 13, 2007.
MATERIALS AND OUR 2007 ANNUAL AND SPECIAL MEETING
Applicable regulatory policy requires your broker to seek voting instructions from you in advance of the Meeting. Every broker has its own mailing procedures and provides its own return instructions, which you should carefully follow in order to ensure that your shares are voted at the Meeting. The majority of brokers now delegate responsibility for obtaining instructions from clients to the Broadridge Communication Solutions, Canada (Broadridge). Broadridge mails a Voting Information Form instead of the form of proxy. You are asked to complete and return the Voting Information Form to Broadridge by mail or facsimile. Alternately, you can call the toll-free telephone number noted on your Voting Information Form to vote your shares. If you receive a Voting Information Form from Broadridge it cannot be used as a proxy to vote shares directly at the Meeting as the proxy must be returned to Broadridge in advance of the Meeting in order to have the shares voted.
ELECTION OF DIRECTORS
The Companys articles of incorporation provide that the Board shall consist of a minimum of three directors and a maximum of 12 directors. The Board currently consists of five members: Messrs. Geofrey Myers, Darren Richardson, Thomas R. Brown, Robert J. Molyneux, and William Woodward. All of the current directors of the Company are nominees for election at the Meeting. The Board has fixed the number of directors to be elected at the Meeting at five.
Each director elected at the Meeting will hold office for a one-year term until the 2008 Annual Meeting of Shareholders or until his successor is duly elected, unless prior thereto the director resigns or the directors office becomes vacant by reason of death or other cause. If any such person is unable or unwilling to serve as a nominee for the office of director at the date of the Meeting or any postponement or adjournment thereof, the proxies may be voted for a substitute nominee, designated by the proxy holders or by the present Board to fill such vacancy, or for the balance of those nominees named without nomination of a substitute, and the Board may be reduced accordingly. The Board has no reason to believe that any of such nominees will be unwilling or unable to serve if elected as a director.
The following information is furnished with respect to the Boards nominees for election as directors of the Company, including the nominees position with the Company, tenure as director and age as of August 8, 2007. Stock ownership information is shown under the heading Security Ownership of Certain Beneficial Owners and Management and is based upon information furnished by the respective individuals.
Set forth below is information regarding each of the above named individuals, including a description of his positions and offices with the Company, a description of his principal occupation and business experience during at least the last five years and directorships presently held by him in other companies.
Mr. Myers has been a director of the Company since September 2005 and was appointed Chairman of the Board in June 2006. Mr. Myers has been a partner in the law firm of Lang Michener LLP since 1984 and is the
Chair of Lang Micheners Corporate Finance/Securities Law Group and Natural Resources & Mining Law Group. Mr. Myers holds a Masters of Science degree and a Juris Doctor degree from the University of Toronto.
Mr. Richardson has been President and Chief Executive Officer of the Company since April 1, 2004, and a director of the Company since 2005. Prior to his appointment as President and Chief Executive Officer, Mr. Richardson served as Executive Vice President of the Company since October 1997 and as President and Chief Operating Officer of Mad Catz, Inc. since September 1999. Mr. Richardson served in several senior management capacities with Games Trader from 1997 until 1999, including Chief Operating Officer, and Vice President of Business Development, responsible for sales and marketing with a focus on new account development. He holds a Master of Business Administration degree from Trinity College, Dublin, and a Bachelor of Commerce degree from the University of Wollongong, Australia.
Thomas R. Brown
Mr. Brown has been a director of the Company since May 2006. Mr. Brown serves as President, Chief Executive Officer and director of American Technology Corporation, a leading innovator of highly intelligible, clear directed acoustic solutions, a position he has held since September 2006. Previously, he served as President of Brown Thompson Executive Search, a financial executive search firm, since April 2005. From April 2001 to September 2004, Mr. Brown was Executive Vice President and Deputy President of the Information Technology division of Sony Electronics, where he was responsible for supply chain operations including Information Technology, Procurement, North American Manufacturing Operations and Finance. He continued to consult with Sony Electronics on its ERP implementation from September 2004 to January 2005. From April 2000 to September 2004, Mr. Brown was concurrently the Executive Vice President and President of Information Technology Division for Sony Electronics, where he was responsible for establishing the North American personal computer division. Mr. Brown is currently a director of American Technology Corporation. Mr. Brown holds a Bachelor of Arts degree in Economics from Rutgers University. Mr. Brown is also a certified public accountant.
Robert J. Molyneux
Mr. Molyneux has been a Director of the Company since June 2006. Mr. Molyneux has been a principal in Imperial Capital Corporation, a private equity buy-out firm based in Toronto, Canada, since September 2004. Previously, Mr. Molyneux was President of Ravenna Capital Corporation, a private merchant banking firm he founded in 1992. Mr. Molyneux holds an Honours Bachelor of Business Administration degree from Wilfrid Laurier University.
Mr. Woodward has been a Director of the Company since June 2006. Mr. Woodward has been the Managing Director and a founder of Anthem Venture Partners since 2000. Prior to founding Anthem Venture Partners, Mr. Woodward was a Managing Director of Avalon Investments, an early-stage technology venture capital firm. Mr. Woodward has founded numerous technology companies, including Paracomp, which later became MacroMedia, Inc., the largest multimedia software company in the world at its initial public offering, and Pulse Entertainment, the worlds leading 3D animation engine and tools company for mobile communications. Mr. Woodward sits on the board of directors of several private companies, including Axiom Microdevices, Solarflare, Buzznet, Wavestream and Planet A.T.E., and is Chairman of the Board of Pulse Entertainment.
There is no family relationship between any executive officer or director of the Company and any other executive officer or director.
Cease Trading Orders or Corporate Bankruptcies
To the knowledge of management, none of the nominees for election as a director of the Company:
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE DIRECTOR.
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUDITOR
The Board and Audit Committee of the Board of the Company have recommended the accounting firm of KPMG LLP to be appointed as the Independent Registered Public Accounting Firm and Auditor for the Company for the fiscal year ending March 31, 2008.
Unless authority to vote is withheld, the persons named in the accompanying form of proxy intend to vote for the re-appointment of KPMG LLP, Charter Accountants, as the Independent Registered Public Accounting Firm and Auditor of the Company for the Companys fiscal year ended March 31, 2008 and to authorize the Board to fix the remuneration of the Independent Registered Public Accounting Firm and Auditor. KPMG LLP has been the independent auditor of the Company and its predecessors for ten years.
A representative of KPMG LLP is expected to attend the Meeting and will have an opportunity to make a statement if they desire to do so, and will be available to answer appropriate questions from shareholders.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDER APPROVAL OF THE RE-APPOINTMENT OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUDITOR OF THE COMPANY AND THE AUTHORIZATION OF THE BOARD OF DIRECTORS TO FIX THE REMUNERATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUDITOR.
Audit Fees for Fiscal 2006 and 2007
The aggregate fees billed to the Company by KPMG LLP, the Companys Independent Registered Public Accounting Firm and Auditor, for the fiscal years ended March 31, 2006 and 2007 are as follows:
The Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the independence of KPMG LLP, and has concluded that the provision of such services is compatible with maintaining the independence of the Companys auditors.
Representatives of KPMG LLP will be present at the Meeting, will be available to respond to questions and may make a statement if they so desire.
Audit Committee Policy Regarding Pre-Approval of Audit and Permissible Non-Audit Services of the Companys Independent Auditors
The Companys Audit Committee has established a policy that all audit and permissible non-audit services provided by the independent auditors will be pre-approved by the Audit Committee. These services may include audit services, audit-related services, tax services and other services. The Audit Committee considers whether the provision of each non-audit service is compatible with maintaining the independence of the Companys auditors. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Preliminary Note: The following Report of the Audit Committee of the Board does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent specifically incorporated by the Company.
The Audit Committee of the Board of Directors of the Company is composed of three independent directors as required by the listing standards of the American Stock Exchange and operates under a written charter adopted by the Board. The members of the Audit Committee for fiscal year 2007 were Thomas Brown (Chairman), Robert Molyneux and William Woodward.
Management is responsible for the Companys internal controls and the financial reporting process. KPMG LLP, the Companys Independent Registered Public Accounting Firm and Auditor for the fiscal year ended March 31, 2007, are responsible for performing an independent audit of the Companys consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and for issuing reports thereon. The Audit Committees responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with management and the independent accountants. Management represented to the Audit Committee that the Companys consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent accountants. The Audit Committee discussed with the independent accountants matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Companys Independent Registered Public Accounting Firm and Auditor also provided to the Audit Committee the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Audit Committee discussed with the independent accountants that firms independence. The Audit Committee also considered whether the provision of financial information systems design and other non-audit services by the independent accountants is compatible with their independence.
Based upon the Audit Committees discussion with management and the Companys Independent Registered Public Accounting Firm and Auditor and the Audit Committees review of the representation of management and the report of the independent accountants to the Audit Committee, the Audit Committee
recommended that the Board include the audited consolidated financial statements in the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2007 filed with the Securities and Exchange Commission.
Relevant Education and Experience of Audit Committee Members
By virtue of their prior history and business experience, each of Messrs. Brown, Molyneux and Woodward, the current members of the Companys Audit Committee, have the relevant experience to meaningfully contribute to the Audit Committee.
AND THE PRIOR GRANT OF STOCK OPTIONS
Shareholders are requested in this Proposal 3 to consider and if appropriate, to approve the Mad Catz Interactive, Inc. Stock Option Plan2007 (the 2007 Plan) and the grant under the 2007 Plan of options to purchase 1,000,000 shares of common stock. The Board has adopted, subject to shareholder approval, the 2007 Plan, and it will become effective upon approval by our shareholders. If approved, the 2007 Stock Plan will replace the Companys existing Amended and Restated Incentive Stock Option Plan (the Prior Plan), and no further grants will be made under the Prior Plan after the date of the Meeting. The Prior Plan, which is described in more detail below under Prior Plan, was established several years ago and since that date, there have been numerous changes in the rules and policies of among others, the Toronto Stock Exchange, relating to stock option plans and stock options, and accordingly, management believes that it is appropriate to establish the 2007 Plan to reflect these changes. Currently, there are options outstanding to purchase 2,731,334 shares of common stock pursuant to the terms of the Prior Plan and these options will continue to be outstanding, whether or not the 2007 Plan is approved by shareholders. In addition, options to purchase 1,000,000 shares of common stock have been granted on June 8, 2007 pursuant to the 2007 Plan, subject to shareholder approval of the 2007 Plan being obtained. These options, which may not be exercised unless and until this Proposal 3 is approved by shareholders, are exercisable at a price of U.S. $1.23 per share, which was the closing price of the Companys common shares on June 7, 2007 and have a 10 year term. These options vest and become exercisable (subject to shareholder approval being obtained to this Proposal 3) as to 25% on the first anniversary of the grant date and thereafter in 36 equal monthly installments, such that the options will be fully vested after 48 months. If shareholder approval to Proposal 3 is not obtained, the options granted under the 2007 Plan may not be exercised and will be cancelled. The options were granted to the following officers and employees of the Company:
The purpose of the 2007 Plan is to promote the long-term success of the Company and the creation of additional shareholder value by offering officers, directors, employees and consultants of the Company and its subsidiaries the opportunity to share in such long-term success by acquiring a proprietary interest in the Company. The 2007 Plan has been conditionally approved by the Toronto Stock Exchange, subject to receipt of the approval of a majority of the votes in respect of the matter cast at the Meeting.
The 2007 Plan provides for the grant of both incentive stock options and nonqualified stock options to eligible individuals. A summary of the principal provisions of the 2007 Plan is set forth below. The summary is qualified by reference to the full text of the 2007 Plan, which is attached as Annex A to this Proxy Statement.
The 2007 Plan is administered by the Board, which may delegate this authority to the Compensation and Corporate Governance Committee of the Board. Subject to the provisions of the 2007 Plan, the Board (or if authorized by the Board, the Compensation and Corporate Governance Committee) determines, among other things, the persons to whom from time to time awards may be granted, the number of shares subject to each
award, share prices, any restrictions or limitations on the awards, and any vesting, exchange, deferral, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the awards. The Compensation and Corporate Governance Committee may also delegate to the Chief Executive Officer the authority to allocate stock option grants among non-management employees within the terms of reference and scope as determined by the Compensation and Corporate Governance Committee.
Persons eligible to participate in the 2007 Plan are directors, officers and employees of or consultants to the Company or of any subsidiary of the Company, as determined by the Board or the Compensation and Corporate Governance Committee who demonstrate the potential of becoming key personnel of, or performing valuable services for the Company or any of its subsidiaries.
Limitation on Awards and Shares Available
The 2007 Plan authorizes up to 12% of the issued and outstanding shares of common stock of the Company to be reserved for issuance under stock option awards on an evergreen basis, which means that the number of shares reserved for issuance under the 2007 Plan is automatically increased from time to time so that the number of shares reserved under the 2007 Plan equals 12% of the issued and outstanding shares of common stock of the Company at each such time. As of the date hereof, the Company has 54,873,549 shares of common stock issued and outstanding and accordingly, initially 6,584,825 shares (being 12% of the number of shares issued and outstanding) will be reserved and available for issuance under the 2007 Plan. Any increase in the issued and outstanding shares of common stock will result in an increase in the available number of shares of common stock issuable under the 2007 Plan and any exercises of options will make new grants available under the 2007 Plan, effectively resulting in a re-loading of the number of options available to grant under the 2007 Plan.
Under the terms of the 2007 Plan, the aggregate number of common shares issued to insiders of the Company within any 12-month period, or issuable to insiders of the Company at any time, under the 2007 Plan and any other security-based compensation arrangement of the Company, may not exceed 10% of the total number of issued and outstanding common shares of the Company at such time. Insider is defined in the 2007 Plan to include directors and senior officers (and their respective associates) of the Company and of certain subsidiaries of the Company. Share compensation arrangements is defined under the 2007 Plan as any compensation or incentive mechanism involving the issuance or potential issuance of securities of the Company, including financially assisted share purchases, stock options and stock appreciation rights involving the issuance of authorized but unissued shares of the Company.
In addition, to prevent the dilution or enlargement of the rights of holders under the 2007 Plan, the 2007 Plan provides for the adjustment of the terms of the awards or the number of shares reserved for issuance thereunder in the event of any stock split, reverse stock split, stock dividend payable on our shares of common stock, combination or exchange of shares, or other extraordinary event occurring after the grant of an award. Shares of the Companys common stock that are awarded under the 2007 Plan will be authorized but unissued shares. If any award granted under the 2007 Plan is forfeited or terminated, the shares of common stock reserved for issuance pursuant to the award will be made available for future award grants under the 2007 Plan.
Stock options, including incentive stock options, as defined under Section 422 of the Internal Revenue Code (the Code), and nonqualified stock options may be granted under the 2007 Plan. Stock option grants to members of the Board will, unless otherwise determined by the Board or the Compensation and Corporate Governance Committee, vest and become exercisable immediately after such grant. Stock option grants to persons other than members of the Board will, unless otherwise determined by the Board or the Compensation and Corporate Governance Committee, vest and become exercisable as follows: 25% of the shares underlying such option shall
vest and become exercisable on the first anniversary of the date of grant and the remainder shall vest and become exercisable in 36 equal monthly installments. The option exercise price of all stock options granted pursuant to the 2007 Plan will be as determined by the Board or the Compensation and Corporate Governance Committee and will equal at least 100% of fair market value of the common stock of the Company on the date of grant. In no circumstances shall the exercise price of an option be less than the closing sale price of the common stock on the Toronto Stock Exchange (or on any other stock exchange on which the Companys shares are then listed) on the last trading day prior to the effective date of grant. The effective date of grant will not be earlier than the actual date of grant. Stock options granted under the 2007 Plan will have a term for exercise as determined by the Board or the Compensation and Corporate Governance Committee provided that such term will end on or before the tenth anniversary of the effective date of grant. The aggregate fair market value of the shares with respect to which options intended to be incentive stock options are exercisable for the first time by an optionee who is a citizen or resident of the United States in any calendar year may not exceed $100,000.
Upon the exercise of a stock option, the purchase price must be paid in full in either cash or its equivalent, or by tendering previously acquired shares of the Companys common stock with a fair market value at the time of exercise equal to the exercise price (provided such shares have been held for such period of time as may be required by the Board (or the Compensation and Corporate Governance Committee) in order to avoid adverse accounting consequences) or other property acceptable to the Board (or its designee) (including through the delivery of a notice that the participant has placed a market sell order with a broker with respect to shares then issuable upon exercise of the option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the option exercise price, provided that payment of such proceeds is then made to the Company upon settlement of such sale). However, no participant who is a member of the Board or an executive officer of the Company will be permitted to pay the exercise price of an option in any method in violation of Section 13(k) of the Securities Exchange Act of 1934, as amended.
The Company does not currently intend to provide financial assistance in connection with the exercise of stock options granted under the 2007 Plan.
Options granted under the 2007 Plan may only be assigned to: (i) a spouse of the optionee: (ii) a trustee, custodian or administrator acting on behalf of or for the benefit of the optionee or a spouse of the optionee; (iii) a registered retirement savings plan or a registered retirement income fund of the optionee or his or her spouse; (iv) a holding entity (as defined in National Instrument 45-106 of the Canadian Securities Administrators) of the optionee or his or her spouse; and (v) the legal personal representatives of a deceased optionee.
The Company prohibits its directors, officers and employees from trading in its securities with knowledge of any material information concerning the Company which has not been publicly disclosed. As it may be difficult from time to time for an individual to determine if he or she is in possession of material non-public information, the Company identifies certain restricted periods (or blackout periods) during which its personnel are not to trade in securities of the Company, which includes exercising stock options. The 2007 Plan permits options that would otherwise expire during or immediately following a blackout period to remain exercisable until the fifth business day following the cessation of such blackout period.
Cessation of Employment
If an optionee ceases to be a director, officer or employee of, or a consultant to, the Company or any of its subsidiaries, then unless otherwise determined by the Board or the Compensation and Corporate Governance Committee, the option will terminate and cease to be exercisable after 90 days from the earlier of the date on which the optionee ceases to be a director, officer, employee or consultant, or the date on which the optionee was given notice of dismissal.
Change in Control
In the event the Board recommends that shareholders accept or vote in favor of a bona fide offer for the shares of the Company that will result in a change of control of the Company, then all options which are outstanding, although not yet exercisable (vested), will become immediately exercisable, subject to the terms of the 2007 Plan. The Board may, in its discretion, give its express consent to the vesting of options which are outstanding, although not yet exercisable, upon receipt of an offer that it is not prepared to recommend. In addition, all options which are outstanding, although not yet exercisable, will automatically vest and become exercisable immediately prior a change in control transaction.
Amendment and Termination
The Board may terminate, amend, or modify the 2007 Plan at any time; provided, however, that shareholder approval must be obtained for (i) any amendment to comply with any applicable law, regulation or stock exchange rule; (ii) to reduce the exercise price of an option either directly or indirectly including by means of the cancellation of an option and the reissue of a similar option; (iii) to extend the period available to exercise an option beyond the normal expiration date (except in respect of blackout periods as provided in the 2007 Plan); (iv) to increase the levels of insider participation under the 2007 Plan; (v) to increase the maximum percentage that the number of shares reserved for issuance under the 2007 Plan may be of the number of issued and outstanding shares at any time (other than pursuant to the provisions of the 2007 Plan); (vi) to add any additional categories of persons eligible to receive options under the 2007 Plan; and (vii) to amend any assignment rights set forth in the 2007 Plan. All other amendments to the 2007 Plan could be made at the discretion of the Board of Directors. For example, the Boards discretion will include without limitation, authority to make amendments to clarify any ambiguity, inconsistency or omission in the 2007 Plan and other amendments of a clerical or housekeeping nature, to alter the vesting or termination provisions of any option or of the 2007 Plan, to modify the mechanics of exercise, and to add a financial assistance provision.
The 2007 Plan is intended to conform to the extent necessary with all provisions of the laws, regulations and rules of all public agencies and authorities applicable to the issuance and distribution of shares and to the listing of shares on any stock exchange on with the shares of the Company may be listed. The 2007 Plan will be administered, and options will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the 2007 Plan and options granted thereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
U.S. Tax Consequences
The tax consequences of the 2007 Plan under current United States federal law are summarized in the following discussion which deals with the general tax principles applicable to the 2007 Plan, and is intended for general information only. Alternative minimum tax, Canadian tax and state, provincial and local income taxes are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The tax information summarized is not tax advice.
Incentive Stock Options: An optionholder recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under section 422 of the Code. Optionholders who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon a sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If an optionholder satisfies such holding periods, upon a sale of the shares, the Company will not be entitled to any deduction for federal income tax purposes. If an optionholder disposes of shares within two years after the date of grant or within one year after the date of exercise (a disqualifying disposition), the difference between the
fair market value of the shares on the exercise date and the option exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the optionholder upon the disqualifying disposition of the shares generally will result in a deduction by the Company for federal income tax purposes.
Nonqualified Stock Options: Options not designated or qualifying as incentive stock options will be nonqualified stock options having no special tax status. An optionholder generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonqualified stock option, the optionholder normally recognizes ordinary income in the amount of the difference between the option exercise price and the fair market value of the shares on the exercise date. If the optionholder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonqualified stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as a capital gain or loss. No tax deduction is available to the Company with respect to the grant of a nonqualified stock option or the sale of the stock acquired pursuant to such grant. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the optionholder as a result of the exercise of a nonqualified stock option.
The Code allows publicly-held corporations to deduct compensation in excess of $1,000,000 paid to the corporations chief executive officer and its four other most highly compensated executive officers if the compensation is payable solely based on the attainment of one or more performance goals and certain statutory requirements are satisfied. The Company intends for stock options granted at fair market value to be deductible by the Company as performance-based compensation not subject to the $1,000,000 limitation on deductibility.
New 2007 Plan Benefits
The following table sets forth the grants that have been or are expected to be made to the executive officer named in the summary compensation table under Executive Compensation below and the specified groups set forth below under the 2007 Plan, subject to shareholder approval of the 2007 Plan.
Any future awards granted under to the 2007 Plan are subject to the discretion of the Board. Accordingly, the benefits or amounts that any participant or groups of participants will receive in future grants are not currently determinable.
The Prior Plan authorizes the Board of Directors to issue options to acquire shares in the common stock of the Company to directors, officers and employees of the Company or its subsidiaries and to other persons providing ongoing management or consulting services to the Company or its subsidiaries. The exercise price for
any option granted is fixed by the Board but in no event can the exercise price be less than the closing price of the Companys shares on the Toronto Stock Exchange on the last trading day prior to the grant of such option or if there is no closing price, at a price less than the average of the bid and ask prices on the Toronto Stock Exchange on such trading day. The maximum term of any option granted under the Prior Plan is 5 years and the Board of Directors may determine the terms of vesting, if any. If an optionholder under the Prior Plan ceases to be a director, officer or employee of the Company or any subsidiary or a consultant to the Company or any subsidiary, then all options held by such optionholder terminate and cease to be exercisable 90 days thereafter. The number of shares reserved for issuance to any one person pursuant to options granted under the Prior Plan together with shares reserved for issuance pursuant to other share compensation arrangements, may not exceed 5% of the number of shares of common stock then issued. The participation of insiders of the Company under the Prior Plan is limited such that insiders collectively, may not hold options or be issued shares within any 12-month period under the Prior Plan or any other share compensation arrangement exceeding 10% of the outstanding issue and individually, exceeding 5% of the outstanding issue. Outstanding issue is defined as the number of shares of the Company then issued and outstanding less any shares issued within the previous 12 months pursuant to share compensation arrangements. Options granted under the Prior Plan are non-assignable and non-transferable by the optionholder except that the personal representatives of a deceased optionholder may exercise an option.
At the meeting of shareholders of the Company held on September 5, 2001, shareholders approved an amendment to the Prior Plan to increase the maximum number of shares permitted to be reserved and issued under the Prior Plan from 4,000,000 shares to 6,000,000 shares. During the fiscal year ended March 31, 2007, options to purchase 2,880,000 shares of common stock were granted and options to purchase 1,373,833 shares expired or were cancelled unexercised. Currently, there are options outstanding to purchase 2,731,334 shares under the Prior Plan, being 4.98% of the number of shares currently issued and outstanding, and an additional 565,623 shares of common stock reserved and available for issuance under the Prior Plan. However, if shareholders approve the 2007 Plan, no additional options will be granted pursuant to the Prior Plan following the Meeting.
The affirmative vote of the majority of the shares present in person or represented by proxy and voted on the proposal at the Meeting is required to approve the 2007 Plan. Abstentions from voting and broker non-votes will have no effect on the approval or non-approval of this matter since only votes cast either for or against will be counted in determining whether the 2007 Plan has been approved by a majority of the votes cast thereon.
The Toronto Stock Exchange requires that the establishment of the 2007 Plan be approved by shareholders. In addition, because the 2007 Plan has an evergreen share reserve, the Toronto Stock Exchange requires that the 2007 Plan be approved by shareholders every three years, and the American Stock Exchange shareholder approval rules require that the term of the 2007 Plan not exceed 10 years unless shareholder approval is obtained every ten years. Unless a choice is otherwise specified, it is intended that the shares of common stock represented by the proxies hereby solicited will be voted for approval of the 2007 Plan and the prior grant of options thereunder.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MAD CATZ INTERACTIVE, INC. STOCK OPTION PLAN2007 AND THE PRIOR GRANT OF OPTIONS TO PURCHASE 1,000,000 SHARES OF COMMON STOCK THEREUNDER. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
SHARES TO EXTEND THE TERM OF EXERCISE FROM FIVE YEARS TO TEN YEARS
Shareholders are requested in this Proposal to consider and if thought appropriate, to approve the amendment to certain stock options (the Options) granted by the Company in October 2006 and January 2007, to purchase, in aggregate, 1,182,500 shares of common stock of the Company, so as to extend the term of exercise of such options from five years to ten years from the respective dates of grant. The Options were granted at a meeting of the Board of Directors held on October 13, 2006 and by written resolution of the Board dated January 16, 2007 to the persons and at the exercise prices set forth below. The Options were granted pursuant to the Companys Amended and Restated Incentive Stock Option Plan (the Prior Plan) which provides that option grants may have a maximum term of exercise of five years. At the time of grants however, recognizing the importance to the Company of providing strong incentives to key personnel over the longer term and with a view to further aligning the interests of key personnel with the interests of shareholders, the resolutions passed by the Board provided that subject to receipt of regulatory and shareholder approval, the Options would have a ten year term, rather than a five year term. A ten year term is also consistent with the term of options that have been granted and which will in future be granted under the 2007 Plan. The Options granted in October 2006 vest over a 48 month period and the Options granted in January 2007 vest over a 36 month period. The Options were granted as follows:
The amendment to the Options has been approved by the Toronto Stock Exchange, subject to receipt of shareholder approval. Approval requires the affirmative vote of a majority of the votes cast in respect thereof at the Meeting by shareholders of the Company but excluding the votes of all shares owned by the above-named optionees and their respective associates, which to the best of the Companys knowledge, total 200,000 shares.
Abstentions from voting and broker non-votes will have no effect on the approval or non-approval of this matter since only votes cast for or against will be counted in determining whether the amendment to the Options has been approved by a majority of the votes cast thereon, excluding any votes cast by the optionees and their associates. Unless a choice is otherwise specified, it is intended that the shares of common stock represented by the proxies hereby solicited will be voted for approval of the amendment. If the said approval is not received, the said options will continue to be outstanding and will have a five year term.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE OPTIONS TO PURCHASE 1,182,500 SHARES TO EXTEND THE TERM OF EXERCISE OF SUCH OPTIONS FROM FIVE YEARS TO TEN YEARS. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
The Board has developed corporate governance practices to help it fulfill its responsibility to shareholders to oversee the work of management in the conduct of the Companys business and to seek to serve the long-term interests of shareholders. The Companys corporate governance practices are memorialized in our Mandate of the Board of Directors of Mad Catz Interactive, Inc., our Codes of Conduct for Directors and for Employees and the Charters of the two committees of the Board. We continually review these governance practices and update them as necessary to reflect changes in regulatory requirements and evolving oversight practices. These documents are available on our website at www.madcatz.com and upon request in writing to our Secretary, Geofrey Myers.
Board of Directors
Our Board consists of five members. Four of our directors are independent under the requirements set forth in the American Stock Exchange (AMEX) listing rules and National Instrument 58-101Corporate Governance. For a director to be considered independent, the Board must determine that the director does not have a material relationship with the listed company that would interfere with the exercise of independent judgment. The Board has established guidelines to assist it in determining director independence, which conform to the independence requirements of the AMEX listing rules and National Instrument 58-101Corporate Governance. In addition to applying these independence guidelines, the Board considers all relevant facts and circumstances in making an independence determination, and not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. The Board has determined that Messrs. Brown, Myers, Molyneux and Woodward are independent.
Meetings of the Board of Directors
During fiscal year 2007, our Board held eight meetings. During fiscal year 2007, all of our directors attended in person or by telephone at least 75% or more of the aggregate number of Board meetings and committee meetings on which they served (during the periods for which they served as such). All directors are strongly encouraged to attend the Annual Meetings of shareholders, unless attendance would be impracticable or constitute an undue burden. Messrs. Myers, Richardson and Brown attended the 2006 Annual Meeting of Shareholders in person and each of our other directors participated by telephone.
Time is allotted at the end of each Board meeting for an executive session involving only our independent directors and non-management directors. Geofrey Myers, Chairman of the Board acts as presiding director at each executive session.
Committees of the Board of Directors
The Board has two standing committees: the Audit Committee and the Compensation and Corporate Governance Committee, each of which operated pursuant to a written charter adopted by the Board. The Board of Directors does not have an executive committee.
The Audit Committee was established in accordance with requirements of Section 3(a)(58)(A) of the Securities Exchange Act of 1934 and Multilateral Instrument 52-110Audit Committees. The Audit Committee selects and engages the Companys independent auditors, reviews the scope of audit engagements, reviews comment letters of such auditors and managements response thereto, approves professional services provided by such auditors, reviews the independence of such auditors, reviews any major accounting changes made or contemplated, considers the range of audit and non-audit fees, reviews the adequacy of the Companys internal accounting controls and annually reviews its charter and submits any recommended changes to the Board for its consideration. The Audit Committee consists of three members: Thomas R. Brown (Chairman), Robert
Molyneux and William Woodward. The Board has determined that each member of the Audit Committee is independent and meets the financial literacy requirements of the AMEX listing standards, that each member of the Audit Committee meets the enhanced independence standards established by the United States Securities and Exchange Commission (SEC) and that Mr. Brown qualifies as an audit committee financial expert as that term is defined in the rules and regulations established by the SEC. The Audit Committee held four meetings in fiscal year 2007.
Compensation and Corporate Governance Committee
The Compensation and Corporate Governance Committee establishes remuneration levels for the Chief Executive Officer, Chief Financial Officer and other executive officers of the Company, reviews significant employee benefit programs and establishes, as it deems appropriate, and administers executive compensation programs, including bonus plans, certain equity-based programs, deferred compensation plans and any other such cash or stock incentive programs. The Compensation and Corporate Governance Committee also identifies and recommends to the Board qualified candidates for nomination as directors of the Company, develops and recommends to the Board corporate governance principles applicable to the Company and oversees the evaluation of the Board and management of the Company. The Compensation and Corporate Governance Committee consists of three members: Geofrey Myers (Chairman), Robert Molyneux and William Woodward. The Board has determined that each member of the Compensation and Corporate Governance Committee is independent under the AMEX listing standards. The Compensation and Corporate Governance Committee held two meetings in fiscal year 2007.
Shareholder Communications with the Board of Directors
It is the Companys policy to forward to the directors any shareholder correspondence it receives that is addressed to them. Shareholders who wish to communicate with the directors may do so by sending their correspondence addressed to the director or directors as follows Attn: Corporate Secretary, Mad Catz Interactive, Inc., 181 Bay Street, Suite 2500, Toronto, Ontario M5J 2T7.
The Compensation and Corporate Governance Committee is responsible for reviewing and interviewing qualified candidates to serve on the Board, for making recommendations to the full Board for nominations to fill vacancies on the Board and for selecting the management nominees for the directors to be elected by the Companys shareholders at each Annual Meeting.
Although neither the Board nor the Compensation and Corporate Governance Committee has established specific minimum age, education, experience or skill requirements for potential directors, the Board believes that the appropriate mix of skills, experience, age and gender will help to enhance the performance of the Board. The Compensation and Corporate Governance Committee has been authorized by the Board to take into account all factors it considers appropriate in fulfilling its responsibilities to identify and recommend individuals to the Board as director nominees. Those factors may include, without limitation, the following:
Identification and Evaluation of Nominees
In making nominations for director, the Compensation and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue their service. Current members with qualifications and skills that are consistent with the independent directors criteria for Board service are re-nominated. As to new candidates, the Compensation and Corporate Governance Committee will generally poll the Board members and members of management for recommendations. The Compensation and Corporate Governance Committee may also review the composition and qualification of the boards of directors of the Companys competitors, and may seek input from industry experts or analysts. The Compensation and Corporate Governance Committee evaluates the qualifications, experience and background of potential candidates. In making their determinations, the Compensation and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best represent shareholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the Compensation and Corporate Governance Committee makes recommendations to the Board by a majority vote. Historically, the Board has not relied on third-party search firms to identify director nominees. The Board may in the future choose to engage third-party search firms in situations where particular qualifications are required or where existing contacts are not sufficient to identify an appropriate candidate.
The Compensation and Corporate Governance Committee may use multiple sources for identifying and evaluating nominees for directors, including referrals from the Companys current directors and management as well as input from third parties, including executive search firms retained by the Board. The Compensation and Corporate Governance Committee will obtain background information about candidates, which may include information from directors and officers questionnaires and background and reference checks, and will then interview qualified candidates. The Companys other directors will also have an opportunity to meet and interview qualified candidates. The Compensation and Corporate Governance Committee will then determine, based on the background information and the information obtained in the interviews, whether to recommend to the Board that a candidate be nominated to the Board.
The Compensation and Corporate Governance Committee may from time to time consider qualified nominees recommended by shareholders, who may submit recommendations to the Compensation and Corporate Governance Committee through a written notice as described under Shareholder Proposals below. Nominees for director who are recommended by shareholders will be evaluated in the same manner as any other nominee for director.
STATEMENT ON CORPORATE GOVERNANCE PRACTICES
The Ontario Securities Commission (the OSC) has issued guidelines for effective corporate governance under National Policy 58-201Corporate Governance Guidelines (the OSC Guidelines). The OSC Guidelines deal with matters such as the constitution and independence of corporate boards, their functions, the effectiveness and education of board members, and other items pertaining to sound corporate governance. The OSC has issued National Instrument 58-101Disclosure of Corporate Governance Practices (the Instrument) which requires that each listed company disclose, on an annual basis, its approach to corporate governance by disclosing the information required by the Instrument.
The Companys Board has adopted a formal mandate outlining its responsibilities. The Directors Code of Conduct and the Code of Conduct for the Companys employees have also been implemented. The mandate and
the codes of conduct, along with the charters of each of the Companys Audit Committee and Compensation and Corporate Governance Committee, may be viewed on the Companys website at www.madcatz.com. The Company intends to satisfy the disclosure requirement under Form 8-K regarding (1) any amendments to its Codes of Conduct, or (2) any waivers under its Codes of Conduct relating to the Chief Executive Officer and Chief Financial Officer by posting such information on our website at www.madcatz.com.
The Company believes that its corporate governance practices ensure that the business and affairs of the Company are effectively managed so as to enhance shareholder value. The disclosure requirements of the Instrument and a commentary on the Companys approach with respect to each requirement are set forth below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of August 8, 2007, 54,873,549 shares of Common Stock of the Company have been issued and are outstanding as fully paid and non-assessable, and carrying a right to one vote per share. The following table sets forth certain information regarding beneficial ownership of or control or direction over the Companys Common Stock as of August 8, 2007, by (i) each shareholder known by the Company to be a beneficial owner of more than 5% of any class of the Companys voting securities or to exercise control or direction over 10% or more of the shares of the Companys outstanding Common Stock, (ii) each director and nominee of the Company, (iii) the Chief Executive Officer and each additional executive officer named in the summary compensation table under Executive Compensation below and (iv) all directors, nominees and executive officers of the Company as a group. The Company believes that, except as otherwise noted, each individual named has sole investment and voting power with respect to the shares of Common Stock indicated as beneficially owned by such individual. Unless otherwise indicated, the business address of each named person is c/o Mad Catz, Inc., 7480 Mission Valley Road, Suite 101, San Diego, California 92108.
Compensation Discussion and Analysis
Objectives and Overview
The Company seeks to provide total compensation to its executive officers that is commensurate with responsibilities and competitive in terms of total potential value, and that is tailored to the unique characteristics of the Company, in order to create an executive compensation program that adequately rewards executive officers for their roles in creating value for the Companys stockholders. In the video game and entertainment accessory and software industry, where the Company competes for talent, base salary, annual cash bonuses, long-term equity compensation and employee perquisites are significant components of a competitive executive compensation program. The Company intends to be competitive with other similarly situated companies in its industry to permit it to attract and retain individuals with the skills necessary for the Company to execute its business plan.
In structuring its compensation program for executive officers, including the named executive officers who appear in the compensation tables following this Compensation Discussion and Analysis, the Companys fundamental objectives are to:
To accomplish these objectives the Company employs two overarching principles in structuring its executive compensation. First, the Company believes that a significant portion of an executives overall compensation opportunity should be at risk and based upon the performance of the Company. As a result, if the Company fails to achieve its financial goals, and/or if the Companys share price does not increase, significant portions of the total executive compensation package are not realized. The Company implements this principle by using variable elements, such as performance-based cash bonuses and equity incentive awards, as a significant portion of the total executive compensation package. Second, in structuring the performance-based elements of its compensation program, the Company seeks predominantly to reward overall performance by the Company, and only to a lesser extent, to reward individual executive performance. The Company believes this is appropriate to foster an environment of team work and to maximize the performance of the Company as a whole, as opposed to individuals within the Company. As a result, two significant variable components of executive compensation, namely management bonus plan awards and equity incentive awards, are most heavily weighted to Company goals and Company performance. The bonus plan rewards achievement of stated Company financial metrics, with individual performance playing a smaller role. Equity awards are intended to align the incentives of the recipients with those of the Companys shareholders.
Designing the Executive Compensation Program
The Companys executive compensation program is designed and implemented principally by the Compensation and Corporate Governance Committee with input from a number of sources, including the full Board, the Companys Chief Executive Officer and such additional compensation information as the
Compensation and Corporate Governance Committee deem appropriate. The Compensation and Corporate Governance Committee does not delegate, to management or any other parties, its duties to review the Companys executive compensation program, which it reviews annually.
In determining compensation for executive officers, the Compensation and Corporate Governance Committee annually reviews information which it deems relevant. The Compensation and Corporate Governance Committee also evaluates the Companys performance and generally determines whether the compensation elements and levels that it provides to its executive officers are appropriate relative to their counterparts, in light of each executive officers individual contribution to the Companys performance. The Compensation and Corporate Governance Committee does not believe that it is appropriate to establish compensation levels based on compensation provided by other companies. Instead, the Compensation and Corporate Governance Committee relies upon its judgment in making compensation decisions, after reviewing the performance of the Company and carefully evaluating each executive officers individual performance and the Companys performance during the year.
The Compensation and Corporate Governance Committee directly determines the compensation package provided to the Chief Executive Officer based on the Chief Executive Officers individual performance and the performance of the Company, receiving input as it deems appropriate. In addition to being reviewed and approved by the Compensation and Corporate Governance Committee, the compensation package for the Companys Chief Executive Officer is reviewed and approved by the full Board, other than the Companys Chief Executive Officer. For named executive officers other than the Chief Executive Officer, as well as for the Companys other executive officers, the Companys Chief Executive Officer makes recommendations for each individuals compensation package to the Compensation and Corporate Governance Committee. In making these recommendations the Chief Executive Officer considers the individuals performance, the individuals contribution to Company performance and input from the Companys Human Resources Department. The Compensation and Corporate Governance Committee discusses these recommendations with the Chief Executive Officer. The Committee further reviews and discusses these recommendations in executive session without any members of management present.
Elements of Executive Compensation
The Company seeks to achieve the objectives of its executive compensation program through a mix of cash and equity compensation, plus appropriate health, welfare and other benefits. The specific elements of executive compensation are described below:
Base Salary. The Company provides base salary to provide a stable annual salary at a level consistent with what it believes to be approximately the middle of the range of the market rate for the functions performed for companies with characteristics similar to those of the Company. Base salary for executive officers, including the Companys Chief Executive Officer, is determined on the date of hire, and evaluated annually thereafter or on any material change of duties, position, or in the market for compensation of such executive officers. In determining base salary for executive officers, the Compensation and Corporate Governance Committee considers individual and Company performance, potential of the executive officer to contribute to the long-term success of the Company, scope of responsibilities, experience and competitive salary practices.
Annual Cash Bonuses. In addition to base salary, a substantial portion of total potential compensation for executive officers may be provided through the opportunity to earn annual cash bonuses. Annual performance bonuses are intended to motivate executives to achieve the Companys short-term goals, and are directly tied to meeting one or more pre-established company financial goals and on individual executive performance. Cash bonus award payments are based upon the degree of success in meeting these goals. In June 2007, the Compensation and Corporate Governance Committee adopted a bonus award program for executive officers and employees based upon achievement of total Company financial performance goals and individual performance objectives. For executives that report to our Chief Executive Officer 75% of each executives target bonus potential is based on the total company performance goals and 25% is based on individual performance goals. In
December 2006, the Board approved bonus awards to the executive officers based on expected fiscal year 2007 Company performance. The bonuses were increased in June 2007 to reward and reflect the substantial improvement in the Companys 2007 performance against prior year results and expectations.
Long-Term Incentive Compensation. Long-term incentive compensation generally includes awards granted under the Companys stock option plan. Stock options are the only awards available for grant under the Companys stock option plan. The objective of equity compensation awards is to align executive officers interests with the longer term interests of shareholders. These awards, which are at risk and dependent on the creation of incremental shareholder value over several years, represent a portion of the total compensation opportunity provided for the executive officers. Award sizes are based on level of responsibility, the individuals potential to make significant contributions to the Company, individual performance, and award levels at other similar companies.
Other Benefits Programs. The Companys executive compensation program also includes what it believes to be competitive benefits plans and programs, including a 401(k) savings plan and health and welfare benefits, such as medical, dental, vision care and life insurance benefits. In addition, from time to time, the Company provides executive officers with perquisites and other personal benefits that it and the Compensation and Corporate Governance Committee believe are reasonable and consistent with its overall compensation philosophy to enable the Company to attract and retain the services of high-quality executive officers. The Compensation Committee periodically reviews the types and levels of perquisites that are provided to executive officers. Mr. Richardson is also provided a car allowance.
Severance Benefits. Upon termination of employment, most of our executive officers are entitled to receive severance payments under employment agreements or offer letters. In determining whether to approve and setting the terms of such severance arrangements, the Compensation and Corporate Governance Committee recognizes that executives, especially highly ranking executives, often face challenges securing new employment following termination. In addition, severance benefits are a component of compensation packages that are competitive with those of the Companys competitors. The Compensation and Corporate Governance Committee reviews and determines the severance benefits provided to executive officers in connection with reviewing employment agreements and offer letters. Information regarding the severance benefits to which our named executive officers are eligible is provided under the heading Employment Agreements; Potential Payments Upon Termination or Change-in-Control below.
Section 162(m) Treatment Regarding Performance-Based Equity Awards
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, a public company is generally denied deductions for compensation paid to the chief executive officer and the next four most highly compensated executive officers to the extent the compensation for any such individual exceeds one million dollars for the taxable year. The Companys executive compensation programs are designed to preserve the deductibility of compensation payable to executive officers, although deductibility will be only one among a number of factors considered in determining appropriate levels or types of compensation.
With compensation based on annual base salary, performance-based bonuses, long term equity incentives and employee perquisites and severance arrangements, the Company seeks to achieve its executive compensation goals with a plan that is designed to be simple, clear and understandable to employees and investors, and without the more complex types of compensation practices used by some companies. No loans or loan policy exists with respect to executive officers. There are no deferred compensation programs in effect aside from the qualified Section 401(k) plan and no Supplemental Executive Retirement Plan or similar plans exist for executive officers. While future events may dictate the addition of different or additional compensation methods, there is no present plan to change the simple compensation policy now in effect.
Compensation and Corporate Governance Committee Report
The Compensation and Corporate Governance Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussions, the Compensation and Corporate Governance Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2007 and in the Companys Proxy Statement for the 2007 Annual and Special Meeting of Shareholders.
The Compensation Committee
Geofrey Myers, Chair
Robert J. Molyneux
Summary Compensation Table
The table below summarizes the total compensation paid or earned by the Companys Chief Executive Officer, Chief Financial Officer and each of its three other most highly compensated executive officers, the named executive officers, for the fiscal year ended March 31, 2007.
Grant of Plan-Based Awards
The following table contains information regarding options granted during the fiscal year ended March 31, 2007 to the Companys named executive officers.
Outstanding Equity Awards At Fiscal Year-End
The following table contains information regarding unexercised options for each named executive officer outstanding as of March 31, 2007.
Compensation of Directors
The following table shows all the fees earned or cash paid by the Company during the fiscal year ended March 31, 2007 to the Companys non-employee directors, including to non-employee directors who resigned during the fiscal year. No option and restricted stock awards, long-term incentive plan payouts or other types of payments, other than the amount identified in the chart below, were paid to these directors during the fiscal year ended March 31, 2007.
The Companys non-employee directors receive the following compensation for board service: $35,000 annual retainer; $20,000 additional annual retainer to the Chairman of the Board; $10,000 additional annual retainer to the Audit Committee chair; and $5,000 additional annual retainer to the Compensation and Corporate Governance Committee chair. In addition, non-employee directors receive $2,500 for each Board meeting attended in person, $500 for each Board meeting attended by telephone that is shorter than 2 hours and $1,000 for each Board meeting attended by telephone that is longer than 2 hours. Members of the Audit Committee also receive $1,500 for each committee meeting attended and members of the Compensation and Corporate Governance Committee receive $1,000 for each committee meeting attended. Non-employee directors also receive an annual option grant of 50,000 shares of common stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding all of the Companys equity compensation plans as of March 31, 2007.
Employment Contracts; Potential Payments Upon Termination or Change-in-Control
Certain of the Companys executive officers whose compensation is required to be reported in the Summary Compensation Table are parties to written employment agreements with the Company. Among other things, these employment agreements contain severance and other provisions that will provide for payments to the executive officer following termination of employment with the Company. A summary of the employment agreements with our executive officers follows:
The Company is party to an employment agreement with Mr. Richardson, pursuant to which Mr. Richardson serves as President and Chief Executive Officer of the Company and Mad Catz, Inc. Under the terms of the amended employment agreement, Mr. Richardsons annual base salary is currently $387,375. The agreement provides for a three-year term and thereafter automatically renews for successive one-year periods unless either party gives prior notice of termination. The agreement has been extended for a one-year period. If, during the term of the agreement, there is a termination of employment without cause or in certain other specified circumstances, Mr. Richardson will be entitled to receive one years salary. These specified circumstances include where there has occurred a change of control in the Company or its wholly owned subsidiary Mad Catz, Inc.
The Company is party to an employment agreement with Stewart Halpern, pursuant to which Mr. Halpern serves as Chief Financial Officer of the Company and Mad Catz, Inc. Under the terms of the employment agreement, Mr. Halperns annual base salary is currently $251,856. The agreement provides for a three-year term and thereafter automatically renews for successive one-year periods unless either party gives prior notice of termination. If, during the term of the agreement, there is a termination of employment either without cause or in certain other specified circumstances, Mr. Halpern will be entitled to receive one years salary. These specified circumstances include where there has occurred a change of control in Mad Catz Interactive, Inc. or its subsidiary Mad Catz, Inc.
The Company is a party to an employment agreement with Whitney Peterson, pursuant to which Mr. Peterson serves as Vice President Corporate Development and General Counsel of Mad Catz, Inc. Under the terms of the employment agreement, Mr. Petersons annual base salary is currently $216,930. The agreement provides for a three-year term and thereafter automatically renews for successive one-year periods unless either party gives prior notice of termination. If, during the term of the agreement, there is a termination of employment either without cause or in certain other specified circumstances, Mr. Peterson will be entitled to receive one years salary. These specified circumstances include where there has occurred a change of control in Mad Catz Interactive, Inc. or its subsidiary Mad Catz, Inc.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
The members of the Companys Compensation and Corporate Governance Committee during fiscal 2007 were Geofrey Myers, Robert J. Molyneux and William Woodward. No member of the Companys Compensation and Corporate Governance Committee is a current or former officer or employee of the Company or any of its subsidiaries, and no director or executive officer is a director or executive officer of any other public corporation that has a director or executive officer who is also a director of the Company.
Related Party Transaction Approval Policy
The Board recognizes that related party transactions can present conflicts of interest and questions as to whether the transactions are in the best interest of the Company. Accordingly, the Board has adopted a policy and procedures for the review, approval and ratification of such transactions. For purposes of this policy, a related party transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, that is reportable under the Securities and Exchange Commissions rules regarding related party transactions.
Under this policy, a related party transaction should be approved or ratified based upon a determination that the transaction is in, or not opposed to, the best interest of the Company. The policy provides for the Compensation and Corporate Governance Committee to review and approve a transaction involving a director or the Chief Executive Officer, and for the Chief Executive Officer to review and approve a transaction involving any executive officer (other than the Chief Executive Officer and any executive who is also a director). Notice of a decision by the Chief Executive Officer to approve a related party transaction should be sent to the Compensation and Corporate Governance prior to finalizing the transaction, which may seek more information or call a meeting to review the transaction in greater detail. If a director or executive officer becomes aware of a transaction that should have been but was not approved in advance under this policy, he or she should report the transaction to whomever would have approved the transaction had it been submitted for advance approval. If the transaction is ongoing and revocable, it should be reviewed to determine whether ratification or other action should be taken. If the transaction is completed and not revocable, it should be evaluated to determine if any mitigation or other action should be taken. The Companys related party transaction policy also provides that certain transactions that meet the criteria set forth in the policy have standing pre-approval.
Management is expected to report to the Compensation and Corporate Governance any transaction with a related party that is not covered by this policy because it is not reportable under the SEC rules or that involves employment of an immediate family member not reported to the Compensation and Corporate Governance in advance as described above.
Certain Relationships and Related Person Transactions
From April 1, 2006 to the present, there have been no (and there are no currently proposed) transactions in which the amount involved exceeded $120,000 to which the Company or any of its subsidiaries was (or is to be) a participant and in which any executive officer, director, nominee for director, 5% beneficial owner of the Companys Common Stock or member of the immediate family of any of the foregoing persons had (or will have) a direct or indirect material interest. Geofrey Myers, a director of the Company, is a partner of Lang Michener LLP, a law firm we retained to perform certain legal services in fiscal years 2006 and 2007. We paid Lang Michener LLP $113,069 for legal services in fiscal year 2006 and $56,753 in fiscal year 2007. These fees did not exceed 5% of Lang Michener LLPs total revenues in either year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director, executive officer of the Company, and person who owns more than 10% of a registered class of the Companys equity securities is required by Section 16(a) of the Securities Exchange Act of 1934 to report to the Securities and Exchange Commission (the SEC) his or her transactions in the Companys securities. Regulations promulgated by the SEC require the Company to disclose in this Management Proxy Circular and Proxy Statement any reporting violations with respect to the 2007 fiscal year, which came to the Companys attention based on a review of the applicable filings required by the SEC to report such status as an officer or director or such changes in beneficial ownership as submitted to the Company. These statements are based solely on a review of the copies of such reports furnished to the Company by its officers, directors and security holders and a representation that such reports accurately reflect all reportable transactions as holdings. Other than Form 4s for each of our officers and directors for option grants that should have been filed on or before September 22, 2006, which were actually filed on October 5, 2006 and October 10, 2006, we believe that our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, have complied with all filing requirements of Section 16(a) for fiscal year 2007 applicable to such persons.
Shareholders wishing to submit proposals on matters appropriate for shareholder action to be presented at Mad Catz annual meeting of shareholders may do so in accordance with Rule 14a-8 promulgated under the Exchange Act. For such proposals to be included in our proxy materials relating to its 2008 Annual Meeting of Shareholders, all applicable requirements of Rule 14a-8 must be satisfied and such proposals must be received by the Company at its principal executive offices no later than April 15, 2008. Shareholders wishing to bring a proposal before the 2008 Annual Meeting of Shareholders in accordance with Canadian laws must provide written notice of such proposal to our Corporate Secretary at the principal executive offices of the Company no later than May 10, 2008.
The Board does not intend to bring any other business before the Meeting, and so far as is known to the Board, no matters are to be brought before the Meeting except as specified in the Notice of the Meeting. In addition to the scheduled items of business, the meeting may consider shareholder proposals (including proposals omitted from the Management Proxy Circular and Proxy Statement and form of Proxy pursuant to the proxy rules of the SEC) and matters relating to the conduct of the meeting. As to any other business that may properly come before the meeting, it is intended that proxies will be voted in respect thereof in accordance with the judgment of the persons voting such proxies.
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2007, as filed by us with the SEC (excluding exhibits), is a portion of the Annual Report that is being mailed, together with this Management Proxy Circular and Proxy Statement, to all shareholders entitled to vote at the Meeting. However, such Annual Report, including the Annual Report on Form 10-K, is not to be considered part of this proxy solicitation material.
COPIES OF THE ANNUAL REPORT ON FORM 10-K (INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES) MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE SECRETARY OF THE COMPANY, 181 Bay Street, Suite 2500, Toronto, Ontario M5J 2T7. A request for a copy of the Annual Report on Form 10-K must set forth a good-faith representation that the requesting party was either a holder of record or a beneficial owner of common stock of the Company on the Record Date. Exhibits to the Form 10-K, if any, will be mailed upon similar request and payment of specified fees to cover the costs of copying and mailing such materials.
Additional information relating to the Company may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Shareholders may contact the Secretary of the Company, 181 Bay Street, Suite 2500, Toronto, Ontario M5J 2T7 to obtain free of charge, copies of the Companys financial statements and Managements Discussion and Analysis (MD&A). Financial information is provided in the Companys comparative financial statements and MD&A for the Companys most recently completed financial year.
The contents and sending of this Management Proxy Circular and Proxy Statement have been approved by the Board of Directors of the Company.
August 8, 2007
MAD CATZ INTERACTIVE, INC.
STOCK OPTION PLAN2007
Section 1: Definitions. When used in this Plan, unless the context otherwise requires:
Section 2.1: Shares Available. The Board of Directors may from time to time grant and may delegate to the Compensation Committee authority to grant, in accordance with this Plan, Options to purchase Shares provided that the number of Shares reserved for issuance at any time pursuant to outstanding Options shall not exceed twelve percent (12%) of the Outstanding Issue at such time. The Compensation Committee may from time to time delegate to the Chief Executive Officer of the Corporation the authority to allocate Options among non-management employees within such terms of reference and scope as are determined by the Compensation Committee.
Section 2.2: Option Price. The price (expressed either in the currency of Canada or of the United States of America, as may be determined by the Board of Directors or the Compensation Committee) at which Shares may be purchased under any Option granted pursuant to this Plan shall be determined by the Board of Directors on the recommendation of the Compensation Committee or by the Compensation Committee (if so authorized by the Board of Directors), provided that the price per Share shall in no circumstances be less than the closing sale price of the Shares on The Toronto Stock Exchange (or on any other Stock Exchange on which the Corporations Shares are then listed) on the last trading day prior to the effective date of grant of such Option and if there is no such closing price, then the price per Share shall be not less than the simple average of the closing bid and ask prices on The Toronto Stock Exchange (or on any other Stock Exchange on which the Corporations Shares are
then listed) of the Shares on the last trading day prior to the effective date of grant of such Option. In no instance shall the effective date of grant be earlier than the actual date of grant.
Section 2.3: Adjustments. If prior to the complete exercise of any Option there shall be declared and paid a stock dividend upon the Shares of the Corporation or if such Shares shall be consolidated or subdivided or converted, exchanged or reclassified, or in any way substituted for, including without limitation, pursuant to an amalgamation, arrangement or merger, then the Option, to the extent that it has not been exercised, shall entitle the Optionee upon the future exercise of the Option to such number and kind of securities or other property, subject to the terms of the Option, to which the Optionee would have been entitled had the Optionee actually owned the Shares subject to the unexercised portion of the Option at the time of the occurrence of such stock dividend, consolidation, conversion, subdivision, exchange, reclassification or substitution; and the aggregate purchase price upon the future exercise of the Option shall be the same as if originally optioned Shares of the Corporation were being purchased hereunder. If any such event should occur, the number of Shares reserved for issuance pursuant to the Plan shall be similarly adjusted.
Section 2.4: Expiry of Options. If any Option shall expire or terminate for any reason without having been exercised in full, the unpurchased Shares subject thereto may again be used for the purposes of the Plan.
Section 2.5: Time of Issuance of Options. The Board of Directors or the Compensation Committee (if authorized by the Board of Directors) may at any time and from time to time grant Options pursuant to this Plan. Subject to the provisions of Section 2.6, nothing herein shall be construed to prohibit the granting of Options at different times to the same person.
Section 2.6: Persons Eligible. Persons eligible to receive Options shall be directors, officers and employees of or Consultants to the Corporation or of any Subsidiary who demonstrate the potential of becoming key personnel of, or performing valuable services for, the Corporation and/or a Subsidiary, in each case as the Board of Directors, on the recommendation of the Compensation Committee or the Compensation Committee (if authorized by the Board of Directors), may determine.
Notwithstanding anything to the contrary contained in the Plan, no Options may be granted to Insiders if such Options, together with any other Share Compensation Arrangements could result in:
Section 2.7: Number of Shares to be Optioned. The number of Shares to be optioned to any person shall be determined by the Board of Directors or the Compensation Committee (if authorized by the Board of Directors) in its sole discretion.
Section 2.8: Form of Options. An Option Agreement, in the form or substantially in the form set out in the schedule hereto, signed by the Chief Executive Officer, the Chief Financial Officer or such other officer of the Corporation as the Board of Directors may from time to time determine, shall be issued to each person to whom an Option is granted.
Section 2.9: Assignability of Options. Options and all rights thereunder may be assigned and transferred by the Optionee upon written notice to the Corporation to the following persons:
Except as hereinbefore provided, the Options and all rights thereunder shall be non-assignable and non-transferable by the Optionee and may not be pledged, hypothecated, charged or otherwise encumbered.
Section 2.10: Foreign Participants. In order to assure the viability of Options granted to Optionees employed in foreign countries, the Board of Directors or the Compensation Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Board of Directors may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall amend the Plan or any Option in a manner requiring shareholder approval under Section 7.1(b) unless such shareholder approval is obtained.
ARTICLE IIIEXERCISE OF OPTIONS
Section 3.1: Term and Vesting. The Board of Directors, on the recommendation of the Compensation Committee or the Compensation Committee (if authorized by the Board of Directors), shall determine the term during which each Option may be exercised (the last day of such term is herein referred to as the Normal Expiry Date) provided however that such term shall not exceed ten (10) years, subject to earlier termination as herein provided. The Board of Directors, on the recommendation of the Compensation Committee or the Compensation Committee (if authorized by the Board of Directors), shall determine at the time of grant the extent to which any Option may be exercised during the term of the Option. In the absence of such determination by the Board of Directors or the Compensation Committee:
Section 3.2: How Exercisable. An Option shall be exercisable by the Optionee from time to time by notice in writing to the Chief Executive Officer or Chief Financial Officer of the Corporation (or such other person as the Board of Directors or the Compensation Committee (if authorized by the Board of Directors) may from time to time appoint for purposes of receiving same) specifying the number of Shares to be purchased under such Option and accompanied by full payment, in the manner provided in Section 3.3, of the purchase price for the Shares to be issued.
Section 3.3: Consideration. The Compensation Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment (including, without limitation: (a) cash, (b) Shares
held for such period of time as may be required by the Compensation Committee in order to avoid adverse accounting consequences and having a fair market value on the date of delivery equal to the aggregate purchase price for the Shares to be issued, or (iii) other property acceptable to the Compensation Committee, including through the delivery of a notice that the Optionee has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Corporation in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Corporation upon settlement of such sale), and the methods by which Shares shall be delivered or deemed to be delivered to the Optionee. Notwithstanding any other provision of the Plan to the contrary, no Optionee who is a member of the Board or an executive officer of the Corporation within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option, or continue any extension of credit with respect to the exercise price of an Option with a loan from the Corporation or a loan arranged by the Corporation in violation of Section 13(k) of the Exchange Act.
Section 3.4: Issuance of Shares. The Optionee shall be entitled to be entered in the Share register of the Corporation, as of the day on which the Corporation receives the notice and payment referred to in Section 3.2, and, as promptly as practicable thereafter, to receive a certificate or certificates for the said number of Shares in respect of which the Option has been exercised.
Section 3.5: Termination of Options. Any Option not exercised with the period fixed for its exercise shall terminate and become void and of no effect.
Section 3.6: Cessation of Employment or Termination of Consulting Arrangements. If an Optionee ceases to be a director, officer or employee of or a Consultant to the Corporation or a Subsidiary, for any reason whatsoever, including death, then unless otherwise determined by the Board of Directors or the Compensation Committee (if authorized by the Board of Directors), all Options held by such Optionee shall cease to vest on the effective date on which such Optionee ceased to be a director, officer or employee of or a Consultant to the Corporation or a Subsidiary and all Options held by such Optionee shall terminate and cease to be exercisable at the close of business on the day which is ninety (90) days following the earliest to occur of:
The Optionee, or the legal personal representative of a deceased Optionee, as the case may be, shall be entitled to exercise any Options during the period set out above but only to the extent that such Options had vested and the Optionee was entitled to exercise such Options at the effective date on which the Optionee ceased to be a director, officer or employee of or a Consultant to the Corporation or a Subsidiary. For greater certainty, no Option may be exercised after the Normal Expiry Date except as provided in Section 3.7 hereof. An Optionee who takes a leave of absence approved by the Board of Directors or the Compensation Committee shall not be deemed to have ceased to be an officer or employee for purposes of this Section 3.6.
Section 3.7: Expiry During Blackout Periods. Notwithstanding the provisions of Section 3.1 and Section 3.6, no Option shall terminate and cease to be exercisable, whether as a result of the occurrence of the Normal Expiry Date or as a result of an Optionee ceasing to be a director, officer or employee of or a Consultant to the Corporation or a Subsidiary, prior to the fifth business day following the cessation of any restricted trading period imposed by the Corporation by which directors, officers and employees of the Corporation are prohibited from trading in securities of the Corporation (a Trading Blackout) then in effect and if a Trading Blackout is not then in effect, prior to the fifth business day following cessation of the most recent Trading Blackout.
Section 4.1: Limitation. The Corporations obligation to issue Shares in accordance with the terms of this Plan is subject to compliance with the laws, rules and regulations of all public agencies and authorities applicable to the issuance and distribution of such Shares and to the listing of such Shares on any Stock Exchange on which the Shares of the Corporation may be listed. Each Optionee, as a condition of the grant of an Option to such Optionee, agrees to comply with all such laws, rules and regulations and agrees to furnish to the Corporation all information and such undertakings as may be required to permit compliance with such laws, rules and regulations.
ARTICLE VU.S. OPTIONEE
Section 5.1: U.S. Optionee. Any Option granted under this Plan to a U.S. Optionee may be an ISO, but only if so designated by the Corporation in the agreement evidencing such Option. No provision of this Plan, as it may be applied to a U.S. Optionee, shall be construed so as to be inconsistent with any provision of Section 422 of the Code. Grants of Options to U.S. Optionees which are not ISOs may be granted pursuant to Section 2 hereof. Notwithstanding anything in this Plan contained to the contrary, the following provisions shall apply to incentive stock options granted to each U.S. Optionee:
ARTICLE VICHANGE OF CONTROL
Section 6.1: Acceptance of Offer. If a bona fide offer (the Offer) for Shares is made to shareholders of the Corporation generally, or to a class of shareholders of the Corporation which, if Options were exercised, would include Optionees, and the Offer, if accepted in whole or in part, would result in a Change of Control and if the Board of Directors recommends to shareholders of the Corporation to accept such Offer and/or to vote in favor of the Offer then, provided such recommendation is not withdrawn and notwithstanding Section 3.1 but subject to the other provisions hereof:
Section 6.2: Receipt of Offer. If a bona fide Offer for Shares is made to shareholders of the Corporation generally, or to a class of shareholders of the Corporation which, if Options were exercised, would include Optionees, and the Offer, if accepted in whole or in part, would result in the offeror exercising control over the Corporation within the meaning of subsection 1(3) of the Act then, notwithstanding Section 3.1 but subject to the other provisions hereof:
Section 6.3: Change of Control. If a transaction occurs that is not otherwise contemplated by this Article VI, and such transaction would, upon consummation, result in a Change of Control, then, notwithstanding Section 3.1 but subject to the other provisions hereof, any Options which are outstanding although not yet exercisable at the time such transaction is consummated shall automatically become exercisable immediately prior to the consummation of such transaction.
ARTICLE VIIAMENDMENT AND INTERPRETATION
Section 7.1: Amendment and Discontinuance.
Section 7.2: Interpretation. An Optionee shall not have any rights as a shareholder of the Corporation with respect to any Shares issuable on exercise of an Option until and only to the extent that such Optionee shall have exercised the Option in accordance with the terms of the Plan.
Section 7.3: Fractional Shares. No fractional Shares shall be issued upon the exercise of an Option. If as a result of any adjustment pursuant to Section 2.3 hereof an Optionee would become entitled to a fractional Share, the Optionee shall have the right to purchase only the next lower whole number of Shares and no payment or other adjustment will be made with respect to the fractional interest so disregarded.
Section 7.4: No Additional Rights Conferred. Nothing in the Plan nor any Option shall confer upon any Optionee any right to continue as an employee, officer or director of or Consultant to the Corporation or any Subsidiary or affect in any manner the right of the Corporation or any Subsidiary to terminate an Optionees office, employment or consulting arrangements at any time.
Adopted by the Board of Directors of Mad Catz Interactive, Inc.
Approved by the shareholders of Mad Catz Interactive this day of September, 2007.
MANDATE OF THE MAD CATZ INTERACTIVE, INC. BOARD OF DIRECTORS
The Board of Mad Catz Interactive, Inc., (the Company) believes that the appropriate mix of skills, experience, age and gender will help to enhance its performance. The Boards composition should reflect business experience compatible with the Companys business objectives.
The Board is comprised of five directors, all of whom are independent1. Pursuant to the Canada Business Corporations Act, at least 25% of the directors of the Company must be resident Canadians. The Chair of the Board is an independent director.
The Board shall meet at least four times annually, or more frequently, as circumstances dictate. In addition, the Board shall hold separate, regularly scheduled meetings of independent directors at which members of management are not present.
The Board shall develop clear position descriptions for directors, including the Chair of the Board and the Chair of each Board committee. Additionally, the Board, together with the Chief Executive Officer (CEO), shall develop a clear position description for the CEO, which includes defining managements responsibilities. The Board shall also develop or approve the corporate goals and objectives that the CEO is responsible for meeting.
The Board is elected by the shareholders and represents all shareholders interests in continuously creating shareholder value. The following is the mandate of the Board.
In addressing its mandate, the Board assumes responsibility for the following approvals:
Human Resources Approvals:
Administration and Compliance Approvals:
MAD CATZ INTERACTIVE, INC.
SOLICITED BY THE BOARD OF DIRECTORS OF THE CORPORATION FOR USE AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 7, 2007
The undersigned shareholder of Mad Catz Interactive, Inc. (the Corporation) hereby appoints Geofrey Myers, Chairman of the Board of Directors, or, failing him, Darren Richardson, President and Chief Executive Officer of the Corporation, or instead of either of the foregoing, as proxy of the undersigned with full power of substitution to attend, vote and otherwise act for and on behalf of the undersigned at the above-noted annual and special meeting of shareholders of the Corporation and any adjournment thereof (the Meeting) to the same extent and with the same powers as if the undersigned was present at the Meeting, and the person named is specifically directed to vote as indicated herein. The undersigned hereby undertakes to ratify and confirm all the said proxy may do by virtue hereof, and hereby revokes any proxy previously given in respect of the Meeting. Without limiting the general authorization and power hereby given, all of the common shares registered in the name of the undersigned are to be voted as follows:
Signature Signature of joint holder, if any Date
Please sign exactly as the shares are issued. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.