Proxy Statement (definitive) (def 14a)

Date : 04/21/2017 @ 2:31PM
Source : Edgar (US Regulatory)
Stock : Everi Holdings Inc. (EVRI)
Quote : 6.35  0.1 (1.60%) @ 4:02PM

Proxy Statement (definitive) (def 14a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.           )

 

 

 

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a‑12

 

Everi Holdings Inc.

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a‑6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 

 

 


 

 

W:/SEC/2017/05 CY PROXY/01 PROXY STMTS/DRAFT PROXY/EVERI_PROXYSTATEMENTCOVER_2017 (2).JPG

 

 


 

 

PICTURE 2

NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS

To the Holders of Common Stock of Everi Holdings Inc.:

The 2017 Annual Meeting of Stockholders of Everi Holdings Inc. (the “Annual Meeting”) will be held as follows:

 

 

When:

9:00 a.m., Pacific Time, Tuesday, May 23, 2017

 

 

Where:

Everi Holdings Inc. Corporate Headquarters

 

7250 S. Tenaya Way, Suite 100

 

Las Vegas, Nevada 89113

 

The purpose of the Annual Meeting is to consider and take action on the following proposals:

1.

To elect the one Class III director nominee named in this Proxy Statement;

2.

To vote on an advisory (non-binding) resolution to approve the compensation of our named executive officers as shown in this Proxy Statement;

3.

To vote on an advisory (non-binding) basis on the frequency of future advisory votes on the compensation of our named executive officers;

4.

To vote on a proposal to amend our Amended and Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), to replace supermajority voting requirements with majority voting  requirements in Article VII, Section B (amendments to our Second Amended and Restated Bylaws);

5.

To vote on a proposal to amend our Certificate of Incorporation to replace supermajority voting requirements with majority voting requirements in Article IX (certain amendments to our Certificate of Incorporation);

6.

To vote on a proposal to amend and restate the Everi Holdings Inc. 2014 Equity Incentive Plan to, among other things, increase the maximum aggregate number of shares that may be issued thereunder by 3,500,000 shares;

7.

To vote on a proposal to approve the material terms of the performance measures that apply to awards intended to qualify as performance-based compensation under the proposed Everi Holdings Inc. Amended and Restated 2014 Equity Incentive Plan;

8.

To ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and

9.

To transact such other business as may properly be brought before the Annual Meeting or any adjournment or postponement thereof.

Holders of record of Everi Holdings Inc. common stock at the close of business on April 7, 2017 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.

YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE ANNUAL MEETING. You are urgently requested to submit the enclosed proxy by telephone or through the Internet in accordance with the instructions provided to you. You

 


 

may also date, sign and mail the Proxy Card in the postage-paid envelope that is provided. Your proxy is revocable in accordance with the procedures set forth in the accompanying Proxy Statement.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on May 23, 2017. Our Proxy Statement is attached. Financial and other information concerning Everi Holdings Inc. is contained in our Annual Report to Stockholders for the fiscal year ended December 31, 2016 (the “2016 Annual Report”). A complete set of proxy materials relating to our Annual Meeting is available on the Internet. These materials, consisting of the Notice of 2017 Annual Meeting of Stockholders, Proxy Statement, Proxy Card and 2016 Annual Report are available and may be viewed at www.proxyvote.com .

 

 

 

By Order of the Board of Directors,

 

 

 

/s/ Michael D. Rumbolz

 

 

 

Michael D. Rumbolz

President and Chief Executive Officer

 

April 21, 2017

 

 

 


 

PROXY STATEMENT TABLE OF CONTENTS

 

 

PROXY STATEMENT SUMMARY  

1

PROXY STATEMENT  

4

QUESTIONS AND ANSWERS  

4

PROPOSAL 1 – ELECTION OF ONE CLASS III DIRECTOR  

11

BOARD AND CORPORATE GOVERNANCE MATTERS  

15

TRANSACTIONS WITH RELATED PERSONS  

26

EXECUTIVE OFFICERS  

27

PROPOSAL 2 – ADVISORY (NON-BINDING) VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS  

29

EXECUTIVE COMPENSATION  

30

Compensation Discussion and Analysis  

30

I. Executive Summary  

31

II. Compensation Philosophy and Objectives  

36

III. Compensation Decision Making Process  

36

IV. Compensation Competitive Analysis  

37

V. Elements of Compensation  

39

VI. Additional Compensation Policies and Practices  

43

Compensation Committee Report  

45

Compensation of Named Executive Officers  

46

2016 Summary Compensation Table  

46

2016 Grants of Plan-Based Awards  

48

Outstanding Equity Awards at December 31, 2016  

49

2016 Option Exercises and Stock Vested  

51

Employment Contracts, Termination of Employment and Change in Control Arrangements  

51

Pension Benefits and Nonqualified Deferred Compensation  

53

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  

54

PROPOSAL 3 – ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS  

56

PROPOSAL 4 – APPROVAL OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO REPLACE SUPERMAJORITY VOTING REQUIREMENTS WITH MAJORITY VOTING REQUIREMENTS IN ARTICLE VII, SECTION B (AMENDMENTS TO OUR BYLAWS)  

57

PROPOSAL 5 – APPROVAL OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO REPLACE SUPERMAJORITY VOTING REQUIREMENTS WITH MAJORITY VOTING REQUIREMENTS IN ARTICLE IX (CERTAIN AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION)  

57

PROPOSAL 6 – APPROVAL OF EVERI HOLDINGS INC. AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN  

59

EQUITY COMPENSATION PLAN INFORMATION  

70

PROPOSAL 7 – APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE MEASURES THAT APPLY TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION UNDER THE EVERI HOLDINGS INC. AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN  

71

PROPOSAL 8 – RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  

73

REPORT OF THE AUDIT COMMITTEE  

75

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE  

76

OTHER MATTERS  

76

ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL REPORT ON FORM 10-K  

76

APPENDIX A – RECONCILIATION OF NON-GAAP MEASURES  

A-1

APPENDIX B – PROPOSED FORM OF THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF EVERI HOLDINGS INC  

B-1

APPENDIX C – EVERI HOLDINGS INC. AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN  

C-1

 

 

 

 


 

PICTURE 7

PROXY STATEMENT SUMMARY

This Proxy Statement is being issued in connection with the solicitation of proxies by the Board of Directors of Everi Holdings Inc. for use at the 2017 Annual Meeting of Stockholders and at any adjournment or postponement thereof. On or about April 21, 2017, we will begin distributing to each stockholder entitled to vote at the 2017 Annual Meeting of Stockholders this Proxy Statement, a proxy card or voting instruction form and our 2016 Annual Report to stockholders. Shares represented by a properly executed proxy will be voted in accordance with instructions provided by the stockholder. This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all of the information you should consider. You should read the entire Proxy Statement before casting your vote.

General Information

 

 

 

 

Date and Time:

Tuesday, May 23, 2017

 

9:00 a.m. Pacific Time

 

 

Record Date:

April 7, 2017

 

 

Place:

Everi Holdings Inc. Corporate Headquarters

 

7250 S. Tenaya Way, Suite 100

 

Las Vegas, Nevada 89113

 

 

Voting:

 

 

 

 

Stockholders of record as of April 7, 2017 may cast their votes in any of the following ways:

 

 

 

 

 

 

 

 

PICTURE 3

    

PICTURE 4

    

PICTURE 5

    

PICTURE 6

Internet

 

Phone

 

Mail

 

In Person

Visit www.proxyvote.com . You will need the 16-digit number included in your proxy card, voter instruction form or notice.

 

Call 1-800-690-6903 or the number on your voter instruction form. You will need the 16-digit number included in your proxy card, voter instruction form or notice.

 

Send your completed and signed proxy card or voter instruction form to the address on your proxy card or voter instruction form.

 

If you plan to attend the meeting in person, you will need to bring a picture ID and proof of ownership of Everi Holdings Inc. common stock as of the record date.

 

1


 

Voting Matters and Board Recommendations

 

 

 

 

 

 

 

 

Board

 

Proposal

Description

Recommendation

Page (for more detail)

1

Election of one Class III director.

FOR the Board's nominee

11

2

Approval, on an advisory basis, of the compensation of our named executive officers.

FOR

29

3

Approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our named executive officers.

ONE YEAR

56

4

Approval of an amendment to our Amended and Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), to replace supermajority voting requirements with majority voting requirements in Article VII, Section B (amendments to our Second Amended and Restated Bylaws).

FOR

57

5

Approval of an amendment to our Certificate of Incorporation to replace supermajority voting requirements with majority voting requirements in Article IX (certain amendments to our Certificate of Incorporation).

FOR

57

6

Approval of an amendment and restatement of the Everi Holdings Inc. 2014 Equity Incentive Plan to, among other things, increase the maximum aggregate number of shares that may be issued thereunder by 3,500,000 shares.

FOR

59

7

Approval of the material terms of the performance measures that apply to awards intended to qualify as performance-based compensation under the proposed Everi Holdings Inc. Amended and Restated 2014 Equity Incentive Plan.

FOR

71

8

Ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.

FOR

73

 

 

2


 

Class III Director Nominee

 

·

Our single nominee is independent.

·

Our single nominee has served on our Board of Directors for less than one year.

·

Our single nominee is a highly-qualified individual with a diverse set of skills, background and experience.

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Director

    

 

    

 

Name

 

Age

 

Since

 

Principal (or Most Recent) Occupation

 

Current Committees

Linster W. Fox

 

67

 

May 2016

 

Former Executive Vice President, Chief Financial Officer and Secretary of SHFL Entertainment, Inc. and former member of Executive Advisory Board of the Lee Business School at the University of Nevada – Las Vegas.

 

Audit Committee (Chair); Compensation Committee; and Nominating and Corporate Governance Committee

 

Governance and Compensation Highlights

 

 

·

All of our directors are independent (other than our President and Chief Executive Officer).

·

We have adopted “plurality-plus” voting for directors (i.e., a plurality vote standard coupled with a mandatory resignation policy for nominees who fail to achieve an affirmative majority of votes cast).

·

Each of our Board committees is entirely independent.

·

We separate the roles of Chairman and Chief Executive Officer.

·

Our independent directors meet regularly in executive sessions without our Chief Executive Officer or other management present.

·

Our directors may not serve on a total of more than three public company boards without the approval of our Nominating and Corporate Governance Committee.

·

Our directors and officers are subject to stock ownership guidelines.

·

We have adopted an incentive compensation clawback policy.

·

We have adopted anti-hedging and anti-pledging policies.

·

We seek to pay our executives based on performance.

·

We have a Code of Business Conduct, Standards and Ethics and provide training to our employees on compliance.

·

We do not have a stockholder rights (poison pill) plan.

·

Our Board has established a formal process for executive succession planning.

 

 

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PICTURE 7

PROXY STATEMENT

QUESTIONS AND ANSWERS

Why am I receiving these proxy materials?

The Board of Directors (the “Board”) of Everi Holdings Inc., a Delaware corporation formerly known as Global Cash Access Holdings, Inc. (the “Company”), is furnishing these proxy materials to you in connection with the Company’s 2017 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will be held on Tuesday, May 23, 2017, at the Company’s Corporate Headquarters located at 7250 S. Tenaya Way, Suite 100, Las Vegas, Nevada 89113 beginning at 9:00 a.m., Pacific Time. You are invited to attend the Annual Meeting and are entitled and requested to vote on the proposals outlined in this proxy statement (“Proxy Statement”).

This Proxy Statement is dated April 21, 2017 and is first being mailed to stockholders on or about April 21, 2017.

What proposals will be voted on at the Annual Meeting and what are the recommendations of the Board?

There are eight proposals scheduled to be voted on at the Annual Meeting. The proposals, and the Board’s voting recommendations with respect to such proposals, are as follows:

 

 

 

 

 

 

Proposal

    

 

    

Board’s Voting 
Recommendations

1

 

Election of one Class III director to serve until the Company’s 2020 Annual Meeting of Stockholders.

 

For the Board’s nominee

2

 

Approval, on an advisory basis, of the compensation of our named executive officers as shown in this Proxy Statement.

 

FOR

3

 

Approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our named executive officers.

 

ONE YEAR

4

 

Approval of an amendment to our Amended and Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), to replace supermajority voting requirements with majority voting requirements in Article VII, Section B (amendments to our Second Amended and Restated Bylaws).

 

FOR

5

 

Approval of an amendment to our Certificate of Incorporation to replace supermajority voting requirements with majority voting requirements in Article IX (certain amendments to our Certificate of Incorporation).

 

FOR

6

 

Approval of an amendment and restatement of the Everi Holdings Inc. 2014 Equity Incentive Plan to, among other things, increase the maximum aggregate number of shares that may be issued thereunder by 3,500,000 shares.

 

FOR

7

 

Approval of the material terms of the performance measures that apply to awards intended to qualify as performance-based compensation under the proposed Everi Holdings Inc. Amended and Restated 2014 Equity Incentive Plan.

 

FOR

8

 

Ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm (“independent auditors”) for the fiscal year ending December 31, 2017.

 

FOR

 

4


 

Management does not know of any matters to be presented at the Annual Meeting other than those set forth in this Proxy Statement and in the Notice of 2017 Annual Meeting of Stockholders accompanying this Proxy Statement. Without limiting our ability to apply the advance notice provisions in our Second Amended and Restated Bylaws (“Bylaws”) with respect to the procedures that must be followed for a matter to be properly presented at an annual meeting, if other matters should properly come before the Annual Meeting, the proxy holders will vote on such matters in accordance with their best judgment. Our stockholders have no dissenter’s or appraisal rights in connection with any of the proposals to be presented at the Annual Meeting.

What is the record date and what does it mean?

The record date for the Annual Meeting is April 7, 2017 (the “Record Date”). The Record Date was established by the Board as required by Delaware law. Only holders of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at the close of business on the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. At the close of business on April 7, 2017, we had approximately 66,164,971 shares of Common Stock outstanding and entitled to vote.

Shares held in treasury by the Company are not treated as being issued or outstanding for purposes of determining the number of shares of Common Stock entitled to vote.

How many votes do I have?

Each holder of shares of Common Stock is entitled to one vote for each share of Common Stock owned as of the Record Date.

Who is a “stockholder of record” and who is a “beneficial holder”?

You are a stockholder of record if your shares of our Common Stock are registered directly in your own name with our transfer agent, Broadridge Financial Solutions, Inc. (“Broadridge”), as of the Record Date. You are a beneficial owner if a bank, brokerage firm, trustee or other agent (each, a “nominee”) holds your stock. This is often called ownership in “street name” because your name does not appear in the records of our transfer agent. If your shares are held in street name, you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your nominee to obtain a legal proxy or nominee’s proxy card and bring it to the Annual Meeting in order to vote.

Who votes shares held in “street name”?

If you are a beneficial owner of shares held in “street name” by a nominee or other holder of record, and you do not give that nominee or other record holder specific instructions as to how to vote those shares, then under the rules of the New York Stock Exchange (the “NYSE”), your nominee or other record holder may exercise discretionary authority to vote your shares only on routine proposals, which, in this Proxy Statement, includes only the ratification of the appointment of the Company’s independent auditors (Proposal 8). Without your specific instructions, however, your nominee or other record holder cannot vote your shares on non-routine proposals, which, in this Proxy Statement, include the election of one Class III director (Proposal 1), the approval, on an advisory basis, of the compensation of our named executive officers (Proposal 2), the approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our named executive officers (Proposal 3), the approval of the two proposals to amend our Certificate of Incorporation to replace supermajority voting requirements with majority voting requirements (Proposals 4 and 5), the approval of the amendment and restatement of the Everi Holdings Inc. 2014 Equity Incentive Plan to, among other things, increase the maximum aggregate number of shares that may be issued thereunder by 3,500,000 shares (Proposal 6), and the approval of material terms of the performance measures that apply to awards intended to qualify as performance-based compensation under the proposed Everi Holdings Inc. Amended and Restated 2014 Equity Incentive Plan (Proposal 7). Accordingly, if you do not instruct your nominee or other record holder how to vote with respect to Proposals 1, 2, 3, 4, 5, 6 or 7, no votes will be cast on your behalf with respect to such proposals (this is referred to as a “broker non-vote”). Your nominee or other record holder, however,

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will continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent auditors (Proposal 8). If you hold your shares in street name, please refer to the information forwarded by your nominee or other holder of record for procedures on voting your shares or revoking or changing your proxy. We encourage you to provide instructions to your nominee or other holder of record regarding the voting of your shares .

What constitutes a quorum?

The presence at the Annual Meeting, in person or represented by proxy, of a majority of the shares of Common Stock outstanding and entitled to vote on the Record Date will constitute a quorum permitting the proposals described herein to be acted upon at the Annual Meeting. Abstentions and broker non-votes are counted as present and are, therefore, included for purposes of determining whether a quorum of shares of Common Stock is present at the Annual Meeting.

What is the voting requirement to approve each of the proposals?

·

Election of one Class III director (Proposal 1) . The affirmative vote of a plurality of the outstanding shares of Common Stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote is required for the election to the Board of the Class III director nominee (meaning that the director nominee who receives the highest number of shares voted “for” his or her election is elected). Stockholders do not have the right to cumulate their votes in the election of directors. Votes that are withheld and broker non-votes will have no effect on the outcome of the election; however, a director nominee receiving a specified amount of “withhold votes” will trigger the Company’s guideline regarding majority voting for directors.

The Company amended its Corporate Governance Guidelines effective July 1, 2015 to include a guideline regarding majority voting for directors. Under the majority voting guideline, if a nominee for director in an uncontested election of directors (i.e., an election other than one in which the number of director nominees exceeds the number of directorships subject to election), does not receive the vote of at least “the majority of the votes cast” at any meeting for the election of directors at which a quorum is present and no successor has been elected at such meeting, the director will promptly tender his or her resignation to the Board. For purposes of this corporate governance guideline, “the majority of votes cast” means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election, and “votes cast with respect to that director’s election” includes votes to withhold authority, but excludes abstentions and broker non-votes (i.e., failures to vote with respect to that director’s election). If a nominee for director does not receive the majority of the votes cast in an uncontested election, then that director must promptly tender his or her resignation following certification of the stockholder vote. Thereafter, the Nominating and Corporate Governance Committee is required to make a recommendation to the Board on whether to accept or reject such resignation and whether any other actions should be taken. The Board is required to take action with respect to this recommendation within 90 days following certification of the stockholder vote and to promptly disclose its decision and decision-making process. Full details of this guideline are set out in our Corporate Governance Guidelines, which are publicly available at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents .

·

Approval, on an advisory basis, of the compensation of our named executive officers (Proposal 2) . The proposal to approve, on an advisory (non-binding) basis, the compensation of our named executive officers requires the affirmative vote of a majority of the shares of Common Stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote. Broker non-votes will have no effect on the outcome of this proposal, while abstentions will have the effect of a vote “AGAINST” this proposal. Although this vote is advisory and non-binding on our Board, the Board and the Compensation Committee will consider the voting results, along with other relevant factors, in connection with their ongoing evaluation of our compensation program.

·

Approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our named executive officers (Proposal 3) . This matter is being submitted to enable stockholders to express a preference

6


 

as to whether future advisory votes on named executive officer compensation should be held every year, every two years, or every three years. The affirmative vote of a majority of the shares of Common Stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote on the matter is required to approve the frequency of such future advisory votes. Broker non-votes will have no effect on the outcome of this proposal, while abstentions will have the effect of votes “AGAINST” all of the frequency alternatives. If a majority of the shares present, in person or represented by proxy, at the Annual Meeting and entitled to vote on the matter do not vote in favor of one of the three frequencies, the frequency which receives the highest number of votes will be considered to be the frequency favored by stockholders. Although this vote is advisory and non-binding on our Board, the Board and the Compensation Committee will consider the voting results, along with other relevant factors, in connection with their determination of the frequency of future advisory votes on the compensation of our named executive officers.

·

Approval of amendments to our Certificate of Incorporation to replace supermajority voting requirements with majority voting requirements (Proposals 4 and 5) . Each of the proposals to approve amendments to our Certificate of Incorporation to replace supermajority voting requirements with majority voting requirements requires the affirmative vote of not less than 66 2/3% of the outstanding shares of Common Stock entitled to vote generally in the election of directors. Broker non-votes and abstentions will have the effect of a vote “AGAINST” each of these proposals.

·

Approval of an amendment and restatement of the Everi Holdings Inc. 2014 Equity Incentive Plan to, among other things, increase the maximum aggregate number of shares that may be issued thereunder by 3,500,000 shares (Proposal 6) .   The proposal to approve an amendment and restatement of the Everi Holdings Inc. 2014 Equity Incentive Plan to, among other things, increase the maximum aggregate number of shares that may be issued thereunder by 3,500,000 shares, requires the affirmative vote of a majority of the shares of Common Stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote. Broker non-votes will have no effect on the outcome of this proposal, while abstentions will have the effect of a vote “AGAINST” this proposal.

·

Approval of the material terms of the performance measures that apply to awards intended to qualify as performance-based compensation under the proposed Everi Holdings Inc. Amended and Restated 2014 Equity Incentive Plan (Proposal 7) . The proposal to approve the material terms of the performance measures that apply to awards intended to qualify as performance-based compensation under the proposed Everi Holdings Inc. Amended and Restated 2014 Equity Incentive Plan requires the affirmative vote of a majority of the shares of Common Stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote. Broker non-votes will have no effect on the outcome of this proposal, while abstentions will have the effect of a vote “AGAINST” this proposal.

·

Ratification of the appointment of our independent auditors (Proposal 8) . The proposal to ratify the Audit Committee’s appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017 requires the affirmative vote of a majority of the shares of Common Stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote. Brokers have discretion to vote on the ratification of our independent auditors and, as such, no votes on this proposal will be considered broker non-votes. Abstentions will have the effect of a vote “AGAINST” this proposal.

7


 

All valid proxies received prior to the Annual Meeting will be exercised. All shares represented by a proxy will be voted, and where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If you are a stockholder of record and sign and return your proxy card or vote electronically without making any specific selections, then your shares will be voted in accordance with the recommendations of the proxy holders on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the Annual Meeting.

How do I vote my shares?

You can either attend the Annual Meeting and vote in person or give a proxy to be voted at the Annual Meeting. A proxy may be given in one of the following three ways:

·

electronically by using the Internet;

·

over the telephone by calling a toll-free number; or

·

by mailing the enclosed proxy card.

The Internet and telephone voting procedures have been set up for your convenience and are designed to authenticate stockholders’ identities, to allow stockholders to provide their voting instructions, and to confirm that their instructions have been recorded properly. The Company believes the procedures that have been put in place are consistent with the requirements of applicable law.

Specific instructions for stockholders who wish to use the Internet or telephone voting procedures are set forth on the enclosed proxy card. If your shares are held in street name by a nominee or other holder of record, you will receive instructions from the nominee or other record holder that you must follow in order to have your shares voted.

Who will tabulate the votes?

An automated system administered by Broadridge will tabulate votes cast by proxy at the Annual Meeting and a representative of Broadridge will tabulate votes cast in person at the Annual Meeting.

Is my vote confidential?

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except as necessary to meet applicable legal requirements or to allow for the tabulation and/or certification of the vote.

Can I change my vote after submitting my proxy?

You can change your vote at any time before your proxy is exercised at the Annual Meeting. You may do so in one of the following four ways:

·

submitting another proxy card bearing a later date;

·

sending a written notice revoking your proxy to the Corporate Secretary of the Company at 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada 89113;

·

submitting new voting instructions via telephone or the Internet (if initially able to vote in that manner); or

·

attending the Annual Meeting and voting in person.

If you hold your shares in “street name” through a nominee or other holder of record and you have instructed the nominee or other holder of record to vote your shares, you must follow the directions received from the nominee or other

8


 

holder of record to change those instructions. Please refer to the information forwarded by your nominee or other holder of record for procedures on revoking or changing your proxy.

Who is paying for this proxy solicitation?

This proxy solicitation is being made by the Company. The Company will bear the cost of soliciting proxies, including the cost of preparing, assembling, printing and mailing this Proxy Statement. The Company also will reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. In addition, proxies may be solicited by certain of the Company’s directors, officers and regular employees, either personally, by telephone, facsimile or e-mail. None of such persons will receive any additional compensation for their services.

How can I find out the voting results?

The Company will report the voting results in a Current Report on Form 8-K to be filed within four business days after the end of the Annual Meeting.

How do I receive electronic access to proxy materials for future annual meetings?

Stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies, which results in cost savings for the Company. If you are a stockholder of record and would like to receive future proxy materials electronically, you can elect this option by following the instructions provided when you vote your proxy over the Internet at www.proxyvote.com . If you choose to view future proxy statements and annual reports over the Internet, you will receive an e-mail notification next year with instructions containing the Internet address of those materials. Your choice to view future proxy statements and annual reports over the Internet will remain in effect until you contact either your nominee or other holder of record or the Company to rescind your instructions. You do not have to elect Internet access each year.

If your shares of Common Stock are registered in the name of a brokerage firm, you still may be eligible to vote your shares of Common Stock electronically over the Internet. A large number of brokerage firms are participating in the Broadridge online program, which provides eligible stockholders who receive a paper copy of this Proxy Statement the opportunity to vote via the Internet. If your brokerage firm is participating in Broadridge’s program, your proxy card will provide instructions for voting online. If your proxy card does not reference Internet information, please complete and return your proxy card.

How can I avoid having duplicate copies of the proxy statements sent to my household?

The Securities and Exchange Commission (“SEC”) has adopted rules that permit companies and intermediaries, such as brokers, to satisfy delivery requirements for annual reports and proxy statements with respect to two or more stockholders sharing the same address by delivering a single annual report or proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. Brokers with account holders who are stockholders of the Company may be householding the Company’s proxy materials. Once you have received notice from your broker that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report or proxy statement or if you are receiving multiple copies thereof and wish to receive only one, please notify your broker or notify the Company by sending a written request to the Company’s Investor Relations department at 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada 89113, telephone number (702) 855-3000.

When are stockholder proposals due for the 2018 Annual Meeting of Stockholders?

Stockholder proposals may be included in our proxy materials for an annual meeting so long as they are provided to us on a timely basis and satisfy certain other conditions established by the SEC, including specifically under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To be timely, a proposal to be included in our proxy

9


 

statement must be received at our principal executive offices, addressed to our Secretary of the Company, not less than 120 calendar days before the date of our proxy statement that was released to stockholders in connection with the previous year’s annual meeting. Accordingly, for a stockholder proposal to be included in our proxy materials for our 2018 Annual Meeting of Stockholders, the proposal must be received at our principal executive offices, addressed to our Secretary of the Company, not later than the close of business on December 22, 2017.

Subject to certain exceptions, stockholder business that is not intended for inclusion in our proxy materials may be brought before an annual meeting so long as notice of the proposal as specified by, and subject to the conditions set forth in, our Bylaws, is received at our principal executive offices, addressed to our Secretary of the Company, not earlier than the close of business on the 120th day, nor later than the close of business on the 90th day, prior to the first anniversary of the date of the preceding year’s annual meeting. For our 2018 Annual Meeting of Stockholders, proper notice of business that is not intended for inclusion in our proxy statement must be received no earlier than the close of business on January 23, 2018, nor later than the close of business on February 22, 2018.

A stockholder’s notice to the Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (a) the name and address of such stockholder, as they appear on the Company’s books, and of such beneficial owner, (b) the class and number of shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner, and (c) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Company’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company’s voting shares to elect such nominee or nominees.

10


 

PROPOSAL 1

ELECTION OF ONE CLASS III DIRECTOR

(Item No. 1 on the Proxy Card)

 

Our Certificate of Incorporation provides that the number of directors that shall constitute the Board shall be exclusively fixed by resolutions adopted by a majority of the authorized directors constituting the Board. The Company’s Bylaws state that the number of directors of the Company shall be fixed in accordance with the Company’s certificate of incorporation as then in effect. The authorized number of directors of the Company is currently set at seven, and there is one position on the Board that is currently vacant. Our Certificate of Incorporation and Bylaws provide that the Board shall be divided into three classes constituting the entire Board. The members of each class of directors serve staggered three-year terms. Proxies cannot be voted for a greater number of persons than the number of nominees named in this Proxy Statement. Currently, the Board is composed of the following six members:

 

 

 

 

 

 

Class

    

Directors

    

Term Expiration

I

 

E. Miles Kilburn and Eileen F. Raney

 

2018 Annual Meeting of Stockholders

II

 

Geoffrey P. Judge, Michael D. Rumbolz and Ronald V. Congemi

 

2019 Annual Meeting of Stockholders

III

 

Linster W. Fox

 

2017 Annual Meeting of Stockholders

Upon the recommendation of the Nominating and Corporate Governance Committee of the Board, the Board has nominated Linster W. Fox, who is currently a Class III Director of the Company, for reelection as a Class III Director of the Company, to serve a three-year term until the 2020 Annual Meeting of Stockholders and until a successor is duly elected and qualified or until his earlier resignation or removal. Mr. Fox has consented, if reelected as a Class III Director of the Company, to serve until his term expires. The Board believes that Mr. Fox will serve if elected, but if he should become unavailable to serve as a director, and if the Board designates a substitute nominee, the person or persons named as proxy in the enclosed form of proxy may vote for a substitute nominee recommended by the Nominating and Corporate Governance Committee and approved by the Board.

Information Concerning the Director Nominee

Information regarding the business experience of our nominee for election as a Class III Director is provided below.

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    The Board believes Mr. Judge is qualified to serve as a member of our Board due to his knowledge of the Company’s business and his experience in the financial services and payments industries.

 

Mr. Judge serves as a director of numerous privately held companies.

 

Linster W. Fox

Age 67                      

Linster W. Fox   has served as a member of the Board since May 2016. Mr. Fox served as Executive Vice President, Chief Financial Officer and Secretary of SHFL Entertainment, Inc., a global gaming supplier, from 2009 up until the company’s acquisition by Bally Technologies, Inc. in November 2013. He has also served on the Executive Advisory Board of the Lee Business School at the University of Nevada-Las Vegas from 2015 to 2016, served as interim Chief Financial Officer of Vincotech in 2009 and as Executive Vice President, Chief Financial Officer and Secretary of Cherokee International Corp. from 2005 to 2009. He has also served in a variety of executive roles over the course of 18 years at Anacomp, Inc., including Executive Vice President and Chief Financial Officer and as a member of the company’s Board of Directors. He began his career as an accountant at PriceWaterhouseCoopers LLC, is a Certified Public Accountant and has a B.S.B.A. from Georgetown University in Washington, D.C.

 

Skills and Qualifications : The Board believes Mr. Fox is qualified to serve as a member of our Board due to his experience in the gaming industry, as well as his status as an “audit committee financial expert.”

 

Other Directorships : None.

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THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION TO THE BOARD OF THE NOMINEE NAMED ABOVE.

Directors Not Up for Election

Each of the Company’s directors listed below will continue in office for the remainder of his or her term and until a successor is duly elected and qualified or until his or her earlier resignation or removal. Information regarding the business experience of each such director is provided below.

Class I Directors Whose Terms Will Expire in 2018

 

 

 

:   The Board believes Mr. Kilburn is qualified to serve as a member on our Board due to his management and investment experience in the financial technology and payments industry, as well as his status as an “audit committee financial expert.”

 

Mr. Kilburn serves as a director of numerous privately held companies.

 

 

E. Miles Kilburn

Age 54

E. Miles Kilburn has served as a member of the Board since March 2005 and currently serves as Chairman of the Board. Mr. Kilburn is the co-founder and a partner of Mosaik Partners, LLC, a venture capital firm focused on commerce enabling technology. He has been a private investor focused on the electronic payments sector since June 2004. Prior to that, Mr. Kilburn was Executive Vice President and Chief Strategy Officer of Concord EFS, Inc., a payment and network services company (which was acquired by First Data Corporation in February 2004), from 2003 to 2004, and Senior Vice President of Business Strategy and Corporate Development from 2001 to 2003. He served as Chief Executive Officer of Primary Payment Systems, Inc. (now Early Warning Services, LLC), a subsidiary of Concord EFS, Inc., from 2002 to 2003, and Chief Financial Officer from 1997 to 1999. From 1995 to 2001, Mr. Kilburn served in various roles at Star Systems, Inc., ultimately as Group Executive Vice President and Chief Financial Officer.

 

Skills and Qualifications :   The Board believes Mr. Kilburn is qualified to serve as a member on our Board due to his management and investment experience in the financial technology and payments industry, as well as his status as an “audit committee financial expert.”

 

Other Directorships: Mr. Kilburn serves as a director of numerous privately held companies.

 

Eileen F. Raney

Age 67

Eileen F. Raney has served as a member of the Board since February 2016. Ms. Raney has also served as Vice Chair of the Board of Governors and Chair of the Audit and Finance Committee of the University Medical Center of Southern Nevada since 2014. In 2016, she also became Chair of the Strategy Committee and remains as a member of the Audit and Finance Committee. She has been a member of the Advisory Board for the UNLV Libraries since 2010 and served as a member of the Board of Directors and the Board’s Finance Committee at the Nevada Health Centers, a federally qualified health center in Nevada, from 2013 to 2015. From January 2011 to November 2013, Ms. Raney served as a member of the Board and a member of the Audit, Compensation and Governance Committees of the Board of SHFL entertainment, Inc., a global gaming supplier that was acquired by Bally Technologies, Inc. in November 2013. From 1988 to 2007, Ms. Raney held numerous positions with Deloitte & Touche USA, LLP, where she was hired as a Director in 1988 and made Principal in 1990. Her last position prior to retirement was National Managing Principal, Research & Development and Member, Deloitte & Touche USA Executive Committee from 2003 to 2007. She was a member of the Deloitte Board of Directors from 2000 to 2003 while serving as the Human Capital E-Business Leader. She also held the positions of Global Leader, Integrated Health Group from 1996 to 2000; and Western Regional Leader and National Co-Leader, Integrated Health Group from 1988 to 1996.

 

Skills and Qualifications :   The Board believes Ms. Raney is qualified to serve as a member on our Board due to her experience in the gaming industry, as well as her status as an “audit committee financial expert.”

 

Other Directorships: Ms. Raney serves as a director of numerous privately held companies.

12


 

 

 

 

Class II Directors Whose Terms Will Expire in 2019

Geoffrey P. Judge

Age 63

Geoffrey P. Judge has served as a member of the Board since September 2006. Mr. Judge is a Venture Partner at iNovia Capital, a manager of early stage venture capital funds. He has been with this venture firm since 2010 and has been an active private equity investor since 2002. From 2003 to 2005, he was an investor in and the Chief Operating Officer of Preclick, a digital photography software firm. In 2002, he was the Chief Operating Officer of Media Solution Services, Inc., a provider of credit card billing insert media. From 1997 to 2002, Mr. Judge was a co-founder and Senior Vice President and General Manager of the media division of 24/7 Real Media. From 1995 to 1997, he was a Vice President of Marketing for iMarket, Inc., a software company. From 1985 to 1994, Mr. Judge was a Vice President and General Manager in the credit card division of American Express.

 

Skills and Qualifications : The Board believes Mr. Judge is qualified to serve as a member of our Board due to his knowledge of the Company’s business and his experience in the financial services and payments industries.

 

Other Directorships : Mr. Judge serves as a director of numerous privately held companies.

 

Michael D. Rumbolz

Age 63

Michael D. Rumbolz has served as our President and Chief Executive Officer since May 2016, having previously served as our Interim President and Chief Executive Officer since February 2016, and as a member of the Board since August 2010. From August 2008 to August 2010, Mr. Rumbolz served as a consultant to the Company advising the Company upon various strategic, product development and customer relations matters. Mr. Rumbolz served as the Chairman and Chief Executive Officer of Cash Systems, Inc., a provider of cash access services to the gaming industry, from January 2005 until August 2008 when the Company acquired Cash Systems, Inc. Mr. Rumbolz also has provided various consulting services and held various public and private sector employment positions in the gaming industry, including serving as Member and Chairman of the Nevada Gaming Control Board from January 1985 to December 1988. Mr. Rumbolz is a Director of Seminole Hard Rock Entertainment, LLC. Mr. Rumbolz is also the former Vice Chairman of the Board of Casino Data Systems, was the President and Chief Executive Officer of Anchor Gaming, was the Director of Development for Circus Circus Enterprises (later Mandalay Bay Group) and was the President of Casino Windsor at the time of its opening in Windsor, Ontario. In addition, Mr. Rumbolz is the former Chief Deputy Attorney General of the State of Nevada.

 

Skills and Qualifications:   The Board believes Mr. Rumbolz is qualified to serve as a member of our Board due to his experience in the cash access and gaming industries.

 

Other Directorships: Mr. Rumbolz currently serves as Chairman of the Board of Directors of Employers Holdings, Inc. (NYSE: EIG).

 

13


 

Ronald V. Congemi

Age 70

Ronald V. Congemi has served as a member of the Board since February 2013. Mr. Congemi is an active member of the Philadelphia Federal Reserve’s Payments Advisor Council and has served as a member of the Board of Directors of Clearent LLC, a merchant processing company, and as a consultant to the Acxsys Corporation of Canada, the operating arm of the Interac debit network of Canada. He was also a paid advisor to the Gerson Lehrman Group, a global advisory firm. Mr. Congemi previously served as the Chief Executive Officer of First Data’s Debit Services Group from 2004 until his retirement at the end of 2008. Mr. Congemi also served as Senior Vice President of Concord EFS, Inc., a payment and network services company (which was acquired by First Data Corporation in February 2004), and Concord’s Network Services Group. Mr. Congemi founded Star Systems, Inc., an ATM and Personal Identification Number, or PIN, debit network in the United States, and served as its President and Chief Executive Officer from 1984 to 2008.

 

Skills and Qualifications :   The Board believes Mr. Congemi is qualified to serve as a member of our Board due to his management experience in the payments industry.

 

Other Directorships: None.

 

 

14


 

BOARD AND CORPORATE GOVERNANCE MATTERS

Corporate Governance Philosophy

The business affairs of the Company are managed under the direction of the Board in accordance with the Delaware General Corporation Law, as implemented by the Company’s Certificate of Incorporation and Bylaws. The role of the Board is to effectively govern the affairs of the Company for the benefit of its stockholders and other constituencies. The Board strives to ensure the success and continuity of business through the selection of qualified management. It is also responsible for ensuring that the Company’s activities are conducted in a responsible and ethical manner. The Company is committed to having sound corporate governance principles. Highlights of our corporate governance structure and policies include:

·

All of our directors are independent (other than our President and Chief Executive Officer).

·

“Plurality-plus” voting for directors (i.e., a plurality vote standard coupled with a mandatory resignation policy for nominees who fail to achieve an affirmative majority of votes cast).

·

Regular executive sessions of independent directors.

·

Annual Board and committee self-evaluations.

·

Risk management oversight by the Board and committees.

·

Maintenance of a Code of Business Conduct, Standards and Ethics (and related training).

·

Formal Board process for executive succession planning.

·

Entirely independent Board committees.

·

Separate Chairman and Chief Executive Officer roles.

·

Anti-hedging and anti-pledging policies.

·

Director and officer stock ownership guidelines.

·

Cash and equity compensation clawback policy.

·

Executive compensation based on pay-for-performance philosophy.

·

Absence of stockholder rights (poison pill) plan.

Board Leadership Structure

The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands that there is no single, generally accepted approach to providing Board leadership, and that given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant. Currently, we separate the roles and responsibilities of the Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles. The Board believes this structure promotes balance between the Board’s independent authority to oversee our business and the Chief Executive Officer’s and his management team’s management of the business on a day-to-day basis. Currently, the Chief Executive Officer formulates our strategic direction and oversees the day-to-day management and performance of the Company, while the Chairman of the Board provides general guidance to the Chief Executive Officer and sets the agenda for and presides over Board meetings. This allows the Chief Executive Officer to focus his time and energy on operating and managing the Company while leveraging the experience and perspectives of the Chairman of the Board. The Board believes that Mr. Kilburn’s role as Chairman of the Board ensures a greater role for the non-management directors in the oversight of the Company and encourages greater participation of the non-management directors in setting agendas and establishing priorities and procedures for the work of the Board. The Board believes that having an independent Chairman of the Board

15


 

also enables non-management directors to raise issues and concerns for Board consideration without immediately involving management. In addition, Mr. Kilburn has been selected as the Presiding Director over meetings of our non-management directors that take place in executive session with no management directors or employees present. Our independent directors met in executive session with no management directors or employees present four times last year.

Board Role in Risk Oversight

Our Board is responsible for oversight of our risk assessment process. The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of our management team with respect to material risks that the Company faces, including operational, financial, legal and regulatory (including cybersecurity), strategic and reputational risks. The Board, or the applicable committee of the Board, receives these reports from members of our management team to enable it to identify material risks and assess management’s risk management and mitigation strategies. As part of its charter, our Audit Committee assesses risks relating to the Company’s financial statements and cybersecurity matters, oversees both the Company’s external and internal audit functions and oversees the Company’s compliance with applicable laws and regulations. Our Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Nominating and Corporate Governance Committee manages risks associated with the independence of the Board. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks and mitigation strategies.

Board Meetings and Attendance

During fiscal year 2016, the Board held seven meetings and each director attended at least 75% of such meetings of the Board that were held while such person was a director of the Company. The Company encourages, but does not require, its Board members to attend annual stockholders meetings. All of the Company’s then current Board members attended the Company’s 2016 Annual Meeting of Stockholders, in person or via teleconference.

Director Independence

Under independence standards established by the Board in accordance with the rules and regulations of the SEC and the NYSE, a director does not qualify as independent unless the Board affirmatively determines that the director does not have any material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company, which, in the opinion of our Board, would interfere with the exercise of independent judgment by the director in carrying out the responsibilities of a director. The Board considers such facts and circumstances as it deems relevant to the determination of director independence. To assist in making its determination regarding independence, the Board considers, at a minimum, the following categorical standards:

·

a director who is an employee, or whose immediate family member is an executive officer, of the Company or any of its subsidiaries is not independent until three years after the end of such employment relationship;

·

a director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from the Company or any of its subsidiaries, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent until three years after he or she ceases to receive more than $120,000 per year in such compensation;

·

a director who is affiliated with or employed by, or whose immediate family member is affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the Company or any of its subsidiaries is not “independent” until three years after the end of the affiliation or the employment or auditing relationship;

·

a director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Company’s or any of its subsidiaries’ present executives serve on that

16


 

company’s Compensation Committee is not “independent” until three years after the end of such service or the employment relationship;

·

a director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company (which does not include charitable entities) that makes payments to, or receives payments from, the Company or any of its subsidiaries for property or services in an amount which, in any single fiscal year, exceeds the greater of $1.0 million, or 2% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold; and

·

any director that has a material relationship with the Company shall not be independent. Any relationship not required to be disclosed pursuant to Item 404 of Regulation S-K of the Exchange Act shall be presumptively not material. For relationships not covered by the preceding sentence, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, shall be made by the Board.

The Board has determined that none of our current directors, other than Mr. Rumbolz, our President and Chief Executive Officer, has a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company), which, in the opinion of our Board, would interfere with the exercise of independent judgment by the director in carrying out the responsibilities of a director, and that each of the following current non-employee directors is independent within the meaning of independence as set forth in the rules and regulations of the SEC and the NYSE: Messrs. Kilburn, Judge, Fox and Congemi and Ms. Raney.

Committees of the Board

The Board has established three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each director attended at least 75% of the meetings of every committee on which each served and that were held while such person was a member of the applicable committee. In addition, from time to time, special committees may be established under the direction of the Board when necessary to address specific issues. The composition of the Board committees complies with the applicable rules of the SEC, the NYSE and applicable law. Our Board has adopted written charters for its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.

In February 2016, the composition of each committee’s membership was reconstituted. The table below depicts Committee membership for fiscal year 2016 prior to the reconstitution of the committee membership.  Our Board has determined that each of the members of our standing committees identified below was “independent,” as defined under and required by the rules of the SEC and the NYSE. Prior to his departure in February 2016, Mr. Chary, our former President and Chief Executive Officer and former director, did not serve on any committees of the Board.

Pre-Reconstitution

 

 

 

 

 

 

 

 

   

 

   

 

   

Nominating and

Name

 

Audit

 

Compensation

 

Corporate Governance

E. Miles Kilburn

 

Chair

 

Chair

 

X

Geoffrey P. Judge

 

X

 

-

 

Chair

Fred C. Enlow

 

X

 

X

 

-

Michael D. Rumbolz

 

X

 

X

 

-

Ronald V. Congemi

 

X

 

-

 

X

 

The table below depicts Committee membership for fiscal year 2016 following the reconstitution of the committee membership, as well as the current Committee membership as of the date of this Proxy Statement. Since February 2016, when he became our Interim President and Chief Executive Officer (prior to becoming our President and Chief Executive Officer in May 2016) and director, Mr. Rumbolz has not served on any committees of the Board. The current members of our standing committees, each of whom our Board has determined is “independent,” as defined under and required by the rules of the SEC and the NYSE, are identified in the following table.

17


 

Post-Reconstitution and Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-Reconstruction - February 2016

 

Current - Since July 2016

 

 

 

    

 

    

Nominating and

 

 

    

 

    

Nominating and

Name

 

Audit

 

Compensation

 

Corporate Governance

 

Audit

 

Compensation

 

Corporate Governance

E. Miles Kilburn (1)

 

Chair

 

Chair

 

X

 

X

 

X

 

X

Geoffrey P. Judge (2)

 

X

 

X

 

Chair

 

X

 

Chair

 

X

Fred C. Enlow (3)

 

X

 

X

 

X

 

-

 

-

 

-

Ronald V. Congemi (4)

 

X

 

X

 

X

 

X

 

X

 

X

Eileen F. Raney (5)

 

X

 

X

 

X

 

X

 

X

 

Chair

Linster W. Fox (6)

 

-

 

-

 

-

 

Chair

 

X

 

X


(1)

Mr. Kilburn served as the Chair of each of the Audit and Compensation Committees until July 19, 2016.

(2)

Mr. Judge was appointed to serve as a member of the Compensation Committee effective February 13, 2016. Mr. Judge was Chair of the Nominating and Corporate Governance Committee until July 19, 2016 and was appointed to serve as the Chair of the Compensation Committee effective July 20, 2016.

(3)

Mr. Enlow was appointed to serve as a member of the Nominating and Corporate Governance Committee effective February 25, 2016. Mr. Enlow retired as a director of the Board effective May 9, 2016.

(4)

Mr. Congemi was appointed to serve as a member of the Compensation Committee effective February 25, 2016.

(5)

Ms. Raney was appointed to serve as a member of the Audit, Compensation, and Nominating and Corporate Governance Committees effective February 25, 2016, and was appointed to serve as the Chair of the Nominating and Corporate Governance Committee effective July 20, 2016.

(6)

Mr. Fox was appointed to serve as a member of the Audit, Compensation, and Nominating and Corporate Governance Committees effective May 11, 2016 , and was appointed to serve as the Chair of the Audit Committee effective July 20, 2016.

Audit Committee. All of the members of the Audit Committee are independent for purposes of the listing standards of the NYSE as they apply to audit committee members. The Audit Committee met four times in fiscal year 2016. The Audit Committee has delegated responsibility to, among other things:

·

review the policies and procedures adopted by the Company to fulfill its responsibilities regarding the fair and accurate presentation of financial statements in accordance with generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the SEC and the NYSE;

·

review any analyses prepared by management and/or the Company’s independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including analyses of the effects of alternative GAAP methods on the financial statements;

·

review major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of any material control deficiencies;

·

discuss with management policies with respect to risk assessment and risk management, including information technology risks (inclusive of but not limited to data privacy and security issues) and

18


 

discuss the Company’s material financial risk exposures and the steps management has taken to monitor and control such exposures;

·

review with the Company’s independent auditor, management and internal auditors any information regarding any second opinions sought by management from an independent auditor with respect to the accounting treatment of a particular event or transaction;

·

review and discuss with management and the Company’s independent auditor the effect of regulatory and accounting initiatives, as well as off-balance sheet arrangements and aggregate contractual obligations, on the Company’s financial statements;

·

review and discuss reports from the Company’s independent auditor regarding: (a) critical accounting policies and practices to be used by the Company; (b) alternative treatments of financial information within GAAP that have been discussed with management, including ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent auditor; and (c) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences;

·

review certifications provided by the Company’s principal executive officer and principal financial officer pursuant to Sections 302 and 906 the Sarbanes-Oxley Act of 2002;

·

review and discuss with management press releases regarding the Company’s financial results and any other information provided to securities analysts and rating agencies, including any “pro-forma” information, “non-GAAP” measures or adjusted financial information; and

·

review and discuss the Company’s annual audited financial statements and quarterly financial statements with management and the Company’s independent auditor, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Additionally, the Audit Committee is responsible for reviewing and discussing with management the Company’s policies with respect to risk assessment and risk management. Further detail about the role of the Audit Committee in risk assessment and risk management is included in the section entitled “Board and Corporate Governance Matters — Board Role in Risk Oversight” above.

The Audit Committee has established policies and procedures for the pre-approval of services provided by the independent auditors. The Audit Committee has also established procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the Company.

The Audit Committee is required by rules of the SEC to publish a report to stockholders concerning the Audit Committee’s activities during the prior fiscal year. The Audit Committee’s report for 2016 and further detail about the role of the Audit Committee may be found in the “Report of the Audit Committee” later in this Proxy Statement immediately following “Proposal 8 — Ratification of the Appointment of Independent Registered Public Accounting Firm.“

The Board has determined that Mr. Fox, the Chair of the Audit Committee, and each of Mr. Kilburn and Ms. Raney, members of the Audit Committee, is an “audit committee financial expert” as defined under applicable federal securities laws.

Compensation Committee . All of the members of the Compensation Committee are independent for purposes of the listing standards of the NYSE. The Compensation Committee met five times during fiscal year 2016, either separately or in conjunction with full Board meetings. The Compensation Committee has delegated responsibility to, among other things:

19


 

·

annually review and approve the Company’s corporate goals and objectives relevant to Chief Executive Officer compensation, evaluate the Chief Executive Officer’s performance in light of such goals and objectives, and, either as a committee or together with the other independent directors (as directed by the Board), determine and approve the Chief Executive Officer’s compensation level based on this evaluation;

·

annually review and make recommendations to the Board with respect to non-Chief Executive Officer compensation and incentive compensation plans and equity based plans that are subject to Board approval;

·

annually review director compensation and benefits;

·

administer the Company’s non-equity incentive compensation plans and equity based plans in effect and as modified or adopted from time to time by the Board; provided that the Board shall retain the authority to interpret such plans;

·

approve any new equity compensation plan or any material change to an existing plan where stockholder approval has not been obtained; and

·

ensure appropriate overall corporate performance measures and goals are set and determine the extent that established goals have been achieved and any related compensation earned.

Pursuant to the authority granted to it in its charter, during 2016 the Compensation Committee engaged Aon Hewitt (“Aon”) as its independent executive compensation consultant. Please refer to the discussion of the “Compensation Decision Making Process — Role of Compensation Consultants” in the “Compensation Discussion and Analysis” section of this Proxy Statement for further details.

None of the Company’s management participated in the Compensation Committee’s decision to retain Aon; however, the Company’s management regularly interacted with Aon and provided information upon Aon’s request. Aon reported directly to the Compensation Committee, and the Compensation Committee may replace Aon or hire additional consultants at any time. Aon attended meetings of the Compensation Committee, as requested, and communicated with the Chair of the Compensation Committee between meetings; however, the Compensation Committee made all decisions regarding the compensation of the Company’s executive officers.

The Compensation Committee regularly reviews the services provided by its outside consultants and believes that Aon is independent in providing executive compensation consulting services. The Compensation Committee conducted a specific review of its relationship with Aon in 2016, and determined that Aon’s work for the Compensation Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the SEC and the NYSE. In making this determination, the Compensation Committee noted that during 2016:

·

Aon did not provide any services to the Company, or its management, other than services to the Compensation Committee, and its services were limited to executive and director compensation consulting. Specifically, it did not provide, directly or indirectly through affiliates, any non-executive compensation services, including, but not limited to, pension consulting or human resource outsourcing;

·

Fees from the Company were less than 1% of Aon’s total revenue;

·

Aon maintains a Conflicts Policy with specific policies and procedures designed to ensure independence;

·

None of the Aon consultants who worked on Company matters had any business or personal relationship with the Compensation Committee members;

20


 

·

None of the Aon consultants who worked on Company matters, or Aon, as a whole, had any business or personal relationship with executive officers of the Company; and

·

None of the Aon consultants who worked on Company matters directly own Company stock.

The Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis.

Nominating and Corporate Governance Committee. All of the members of the Nominating and Corporate Governance Committee are independent for purposes of the listing standards of the NYSE. The Nominating and Corporate Governance Committee met four times in fiscal year 2016. The Nominating and Corporate Governance Committee has delegated responsibility to, among other things:

·

develop and recommend to the Board, and implement, a set of corporate governance principles and procedures, which shall include, at a minimum, director qualifications and responsibilities, responsibilities of key Board committees, director compensation, director access to management and, as necessary and appropriate, independent advisors, annual Board performance evaluations, director orientation and continuing education and management selection and succession;

·

develop and recommend to the Board, and implement and monitor compliance with, a code of business conduct, standards and ethics for directors, officers and employees, and promptly disclose any waivers for directors or executive officers;

·

review and assess the adequacy of the corporate governance principals and code of business conduct, standards and ethics and recommend any changes;

·

oversee the evaluation of the Board and management on an annual basis;

·

conduct annual reviews of each director’s independence and make recommendations to the Board based on its findings;

·

assess the Board’s composition on an annual basis, including size of the Board, diversity, age, skills and experience in the context of the needs of the Board;

·

advise the Board on member qualifications for each Board committee, committee member appointments and removals, committee structure and operations (including authority to delegate to subcommittees) and committee reporting to the Board; and

·

identify individuals qualified to become Board members or executive officers, consistent with criteria approved by the Board, and select, or recommend that the Board select, the director nominees for the next annual meeting of stockholders or executive officer nominees.

Director Nomination Process

As provided in the charter of the Nominating and Corporate Governance Committee, nominations for director may be made by the Nominating and Corporate Governance Committee or by a stockholder of record entitled to vote. The Nominating and Corporate Governance Committee will consider and make recommendations to the Board regarding any stockholder recommendations for candidates to serve on the Board. Stockholders wishing to recommend candidates for consideration by the Nominating and Corporate Governance Committee may do so by writing to the Company’s Investor Relations Department, Attention Nominating and Corporate Governance Committee at 7250 South Tenaya Way, Suite 100, Las Vegas, NV 89113 and providing the candidate’s name, biographical data and qualifications, a document indicating the candidate’s willingness to serve if elected, and evidence of the nominating stockholder’s ownership of Common Stock. Submissions must be received at our principal executive offices, addressed to our Secretary of the Company, not earlier than the close of business on the 120th day, nor later than the close of business on the 90th day, prior to the first anniversary of

21


 

the date of the preceding year’s annual meeting. For our 2018 Annual Meeting of Stockholders, stockholder nominations must be received no earlier than the close of business on January 23, 2018 nor later than the close of business on February 22, 2018. There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by the committee or a stockholder. The Company does not pay any third party to identify or assist in identifying or evaluating potential nominees.

In reviewing potential nominees for the Board, the Nominating and Corporate Governance Committee considers the individual’s experience in the Company’s industry, the general business or other experience of the candidate, the needs of the Company for an additional or replacement director, the personality of the candidate, and the candidate’s interest in the business of the Company, as well as numerous other subjective criteria. Of greatest importance is the individual’s integrity, willingness to be involved and ability to bring to the Company experience and knowledge in areas that are most beneficial to the Company. The Board intends to continue to evaluate candidates for election to the Board on the basis of the foregoing criteria. A detailed description of the criteria used by the Nominating and Corporate Governance Committee in evaluating potential candidates may be found in the charter of the Nominating and Corporate Governance Committee which is posted on the Company’s website at ir.everi.com/investor-relations/corporate-governance/governance-documents . In general, the Nominating and Corporate Governance Committee seeks prospective nominees with a broad diversity of experience, professions, skills and backgrounds but has no formal policies and procedures for assessing, and does not assign any specific weights to, any particular criteria. Nominees are not discriminated against on the basis of gender, race, religion, national origin, sexual orientation, disability or any other basis prohibited by law.

Communication between Interested Parties and Directors

Stockholders and other interested parties may communicate with individual directors (including the Presiding Director), the members of a committee of the Board, the independent directors as a group or the Board as a whole by addressing the communication to the named director, the committee, the independent directors as a group or the Board as a whole, c/o Secretary of the Company, Everi Holdings Inc., 7250 South Tenaya Way, Suite 100, Las Vegas, NV 89113 or via electronic mail to secretary@everi.com . The Company’s Secretary will forward all correspondence to the named director, the committee, the independent directors as a group or the Board as a whole, except for spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, surveys, business solicitations or advertisements or patently offensive or otherwise inappropriate material. The Company’s Secretary may forward certain correspondence, such as product-related inquiries, elsewhere within the Company for review and possible response.

Relationships Among Directors or Executive Officers

There are no family relationships among any of the Company’s directors or executive officers.

Code of Business Conduct, Standards and Ethics and Corporate Governance Guidelines

We have adopted a Code of Business Conduct, Standards and Ethics for our directors, officers and other employees that is designed to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Code of Business Conduct, Standards and Ethics is available on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents . To the extent required by law, any amendments to, or waivers from, any provision of the Code of Business Conduct, Standards and Ethics will be promptly disclosed to the public. To the extent permitted by such legal requirements, we intend to make such public disclosure by posting the relevant material on our website in accordance with SEC rules. We have also adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities.

Access to Corporate Governance Policies

Stockholders may access the Board committee charters, the Code of Business Conduct, Standards, and Ethics and the Corporate Governance Guidelines at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents . Copies of the Board committee charters, the Code of Business Conduct, Standards and Ethics and Corporate Governance Guidelines will be provided to any stockholder

22


 

upon written request to the Secretary of the Company, Everi Holdings Inc., 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada 89113 or via electronic mail to secretary@everi.com .

2016 Director Compensation

We have a compensation program in place for our independent members of the Board for their service to the Company. Upon initial appointment to the Board, each non-employee director receives an option to purchase 100,000 shares of our Common Stock at an exercise price equal to the closing market price of our Common Stock at the date of grant. Historically, under our 2005 Stock Incentive Plan (the “2005 Plan”), for each grant, one eighth of the options vest after six months of service as a director, and the remainder vest ratably in equal monthly installments over the succeeding forty two months; provided, however, that all outstanding unvested options held by non-employee directors vest in their entirety upon a change of control of the Company. Currently, under the Everi Holdings Inc. 2014 Equity Incentive Plan (the “2014 Plan”), each grant is subject to vesting over four years, with 25% vesting on of the first four anniversaries of the date of grant.

Under this compensation program, the independent members of the Board receive an annual cash fee of $50,000, except for the Chair of the Board who receives an annual cash fee of $75,000. In addition, each member of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee receive an additional annual cash fee of $9,375, except for the Chair of each such committee who receives an annual cash fee of $25,000, $12,500, and $12,500, respectively.

In addition, the independent members of the Board are typically granted options to purchase shares of our Common Stock or awards of restricted shares of our Common Stock on an annual basis. Such option and restricted stock grants historically have vested upon a schedule similar to that of the initial grants. Grants made under the 2014 Plan, including the grants made to Ms. Raney in February 2016 and Mr. Fox in May 2016, are subject to equal annual vesting installments over four years. Option awards granted to the Board generally have a term of ten years.

The following table sets forth the compensation of our independent members of the Board for the fiscal year ended December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fees earned

    

 

 

    

 

 

    

 

 

 

 

 

or paid in

 

Stock

 

Option 

 

 

 

 

Name

 

cash

 

awards

 

awards (1)

 

Total

 

E. Miles Kilburn (2)

 

$

113,458

 

$

 —

 

$

101,868

 

$

215,326

 

Geoffrey P.   Judge (2)

 

 

80,124

 

 

 —

 

 

61,120

 

 

141,244

 

Fred C. Enlow (2)(3)

 

 

26,534

 

 

 —

 

 

 —

 

 

26,534

 

Ronald V. Congemi (2)

 

 

76,691

 

 

 —

 

 

61,120

 

 

137,811

 

Eileen F. Raney (2) (4)

 

 

67,577

 

 

 —

 

 

122,400

 

 

189,977

 

Linster W. Fox (2) (5)

 

 

57,082

 

 

 —

 

 

72,510

 

 

129,592

 


(1)

Represents the fair value of the directors’ equity awards in fiscal year 2016, as calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation. For a discussion of the assumptions made in the valuation of the directors’ stock option and restricted stock awards, see the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There were no restricted stock awards granted to our directors during the fiscal year ended December 31, 2016.

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(2)

At December 31, 2016, our independent directors had the following aggregate numbers of option awards and unvested stock awards outstanding:

 

 

 

 

 

 

 

    

 

    

Shares underlying

 

 

 

Unvested

 

outstanding

 

 

 

stock awards

 

options

 

E. Miles Kilburn

 

853

 

220,571

 

Geoffrey P. Judge

 

569

 

138,715

 

Fred C. Enlow

 

 —

 

 —

 

Ronald V. Congemi

 

 —

 

141,667

 

Eileen F. Raney

 

 —

 

100,000

 

Linster W. Fox

 

 —

 

100,000

 

 

(3)

Mr. Enlow retired as a director of the Board effective May 9, 2016.

(4)

Ms. Raney was appointed to serve as a member of the Audit, Compensation, and Nominating and Corporate Governance Committees effective February 25, 2016, and was appointed to serve as the Chair of the Nominating and Corporate Governance Committee effective July 20, 2016.

(5)

Mr. Fox was appointed to serve as a member of the Audit, Compensation, and Nominating and Corporate Governance Committees effective May 11, 2016 , and was appointed to serve as the Chair of the Audit Committee effective July 20, 2016.

Compensation Committee Interlocks and Insider Participation

During fiscal year 2016, no member of the Compensation Committee was, or formerly was, an officer or employee of the Company or its subsidiaries. During fiscal year 2016, no interlocking relationship existed between any member of the Company’s Board or Compensation Committee and any member of the Board of Directors or Compensation Committee of any other company, nor has such interlocking relationship existed in the past.

Chief Executive Officer and Senior Management Succession Planning

Our Board oversees Chief Executive Officer and senior management succession planning, which is reviewed at least annually. Our Chief Executive Officer, after consultation with other members of management, provides the Board with a list of key individuals with immediate impact, the critical area of such individual’s impact, short-term/interim action and long-term action. Our Board reviews this information with our Chief Executive Officer. Further, our Board periodically reviews the overall composition of our senior management’s qualifications, tenure and experience.

Regular Board and Committee Evaluations

The Board and the Audit, Compensation and Nominating and Corporate Governance Committees each have an annual evaluation process, which focuses on their role and effectiveness, as well as fulfillment of their fiduciary duties. In 2016, the evaluations were each completed anonymously to encourage candid feedback. The results of the evaluations are reported to and reviewed by the full Board. Each committee and the Board was satisfied with its performance and considered itself to be operating effectively, with appropriate balance among governance, oversight, strategic and operational matters.

Equity Ownership Policy

Equity ownership. On February 25, 2016, the Board adopted a Policy on Equity Ownership (the “Equity Ownership Policy”) for its named executive officers, other executive officers and non-employee directors, which provides that such persons shall, within five years of the later of: (i) February 25, 2016; and (ii) the date such person first becomes subject to this policy, own shares of the Company’s Common Stock with a certain value as detailed in this Proxy Statement. At December 31, 2016, all current named executive officers, other executive officers and non-employee directors either met the ownership

24


 

guidelines or were within the five-year phase-in period. For more information on the Equity Ownership Policy, see “Executive Compensation – Compensation Discussion and Analysis – Additional Compensation Policies and Practices – Equity Ownership Policy.”

Clawback. In February 2016, the Board adopted an Incentive Compensation Clawback Policy (the “Clawback Policy”). Pursuant to the Company’s Clawback Policy, in the event of a restatement of the Company’s financial results due to the misconduct of any employee, the Board or, if so designated by the Board, the Compensation Committee of the Board, is authorized to take action to recoup all or part of any incentive compensation received by a Section 16 officer of the Company. In determining whether to take action to recoup any incentive compensation received by a Section 16 officer of the Company, the Board or, if so designated, the Compensation Committee of the Board, will take into consideration whether the Section 16 officer engaged in the misconduct or was in a position, including in a supervisory role, to have been able to have reasonably prevented the misconduct that caused the restatement. For more information on the Clawback Policy, see “Executive Compensation – Compensation Discussion and Analysis – Additional Compensation Policies and Practices – Clawback Policy.”

No hedging. We do not believe our executive officers or directors should speculate or hedge their interests in our Common Stock. Our Insider Trading Policy therefore prohibits them from making short sales of our Common Stock or from purchasing or selling puts, calls or other derivative securities involving our stock.

No pledging. Our Insider Trading Policy prohibits our executive officers and directors from pledging our Common Stock.

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TRANSACTIONS WITH RELATED PERSONS

Review, Approval or Ratification of Transactions with Related Persons

Under procedures adopted by the Board, any transaction that is required to be reported under Item 404(a) of Regulation S-K promulgated by the SEC must be reviewed, approved or ratified by the Audit Committee. The types of transactions subject to these procedures include, but are not limited to: (i) the purchase, sale or lease of assets to or from a related person; (ii) the purchase or sale of products or services to or from a related person; or (iii) the lending or borrowing of funds from or to a related person. Approval of transactions with related persons shall be at the discretion of the Audit Committee, but the Audit Committee shall consider: (a) the consequences to the Company of consummating or not consummating the transaction; (b) the extent to which the Company has a reasonable opportunity to obtain the same or a substantially similar benefit of the transaction from a person or entity other than the related person; and (c) the extent to which the terms and conditions of such transaction are more or less favorable to the Company and its stockholders than the terms and conditions upon which the Company could reasonably be expected to negotiate with a person or entity other than the related person. Further, our Code of Business Conduct, Standards and Ethics requires our directors, officers and employees to raise with our General Counsel any material transaction or relationship that could reasonably be expected to give rise to a personal conflict of interest. Our Corporate Governance Guidelines also prohibit the Company’s making of any personal loans to directors, executive officers or their immediate family members.

Transactions with Related Persons in 2016

During fiscal year 2016, the Company did not engage in any transactions, and there are not currently proposed any transactions, or series of similar transactions, to which the Company was or will be a party, with related parties that required review, approval or ratification of the Audit Committee or any other committee.

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EXECUTIVE OFFICERS

On February 16, 2016, the Company’s Board announced that, effective February 13, 2016, Mr. Ram Chary was terminated from his position as President and Chief Executive Officer and as a director of the Company. Mr. Michael D. Rumbolz was appointed by the Board as Interim President and Chief Executive Officer, effective February 13, 2016, until the Company completed the process of hiring a permanent President and Chief Executive Officer. On and effective May 10, 2016, the Board appointed Mr. Rumbolz as President and Chief Executive Officer.

In addition to the information provided above in “Proposal 1 - Election of One Class III Director – Directors Not Up for Election – Class II Directors Whose Term will Expire in 2019” regarding Mr. Rumbolz, the following sets forth the Company’s current executive officers as of the date of this Proxy Statement:

 

 

 

 

 

Name

    

Age

    

Current Position and Offices

Michael D. Rumbolz

 

63

 

President, Chief Executive Officer and Director

Randy L. Taylor

 

54

 

Executive Vice President and Chief Financial Officer

Juliet A. Lim

 

54

 

Executive Vice President, Payments Business Leader, Chief Legal Officer and Corporate Secretary

David J. Lucchese

 

58

 

Executive Vice President, Digital and Interactive Business Leader

Edward A. Peters

 

54

 

Executive Vice President, Sales and Marketing

Dean A. Ehrlich

 

48

 

Executive Vice President, Games Business Leader

 

Randy L. Taylor has served as our Executive Vice President and Chief Financial Officer since March 2014. Prior to his appointment as Executive Vice President and Chief Financial Officer, Mr. Taylor had served as the Company’s Senior Vice President and Controller since November 20 1 1. Prior to joining the Company, Mr. Taylor served in various positions for Citadel Broadcasting Corporation, a radio broadcasting company, from April 1999 to September 2005 and from September 2006 to September 2011, including most recently, from 2008 to 2011, as Chief Financial Officer. In December 2009, Citadel Broadcasting Corporation filed a petition for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code and emerged from reorganization under Chapter 11 in June 2010. Mr. Taylor also served as the Vice President of Finance and Corporate Controller of Bally Technologies, Inc. from September 2005 to September 2006.

Juliet A. Lim has served as our Executive Vice President, Payments Business Leader, Chief Legal Officer and Corporate Secretary since January 2017 , having previously served as our Executive Vice President, Payments, General Counsel and Corporate Secretary since January 2015 and our Executive Vice President, General Counsel and Corporate Secretary from March 2014 to January 2015. Prior to joining the Company, Ms. Lim served as General Counsel and Corporate Secretary and Vice President of Human Resources of Clear Energy Systems, Inc. from June 2013 until February 2014. From January 2010 to May 2013, Ms. Lim served as the General Counsel and Corporate Secretary and Vice President of Human R esources of Arizona State University Foundation. Ms. Lim served as the Senior Vice President and Deputy General Counsel and in other senior legal positions at Fidelity National Information Services, Inc. and eFunds Corporation (which was acquired by Fidelity National in 2007), from June 2003 to November 2009. Ms. Lim also served as Vice President and Associate General Counsel of Honeywell, Inc. and was a partner at the law firm now known as Lewis Roca Rothgerber Christie LLP.

David J. Lucchese has served as our Executive Vice President, Digital and Interactive Business Leader since January 2017, having previously served as our Executive Vice President, Games since January 2015, our Executive Vice President, Client Operation from March 2014 to January 2015, and our Executive Vice President, Sales from April 2010 to March 2014. Prior to joining the Company, Mr. Lucchese served in various positions for Bally Technologies, Inc., including Vice President of Sales, Games from April 2005 to April 2010 and Senior Vice President of Sales, Systems from April 2003 to April 2005. Mr. Lucchese served as Vice President of Sales for Aristocrat Technologies, Inc. from July 2001 to February 2003.

Edward A. Peters has served as our Executive Vice President, Sales and Marketing since January 2015, having previously served as Senior Vice President, Sales for the Company since November 2014. Prior to joining the Company, Mr. Peters served in various senior executive positions during the past several years, including as Senior Vice President Business Development in Global Commercial Services from February 2010 through November 2014 for Fidelity Information Services;

27


 

Chief Information Officer for Silverton Bank from August 2004 through February 2010; and Senior Vice President for Prudential Bank from December 2000 through July 2004.

Dean A. Ehrlich has served as our Executive Vice President, Games Business Leader since January 2017, having previously served as an Executive Consultant to the Company since August 2016. Prior to joining the Company, Mr. Ehrlich served in various senior executive positions with WMS Industries Inc. during the past several years from May 2003 through July 2015, which was acquired by Scientific Games Corporation in late 2013, including as Senior Vice President Global Gaming Operations. Mr. Ehrlich spent several years at Anchor Gaming from October 1994 until May 2003, which was acquired by International Game Technology in late 2001, serving in multiple leadership roles with the most recent as General Manager for its Proprietary Games division.

 

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PROPOSAL 2

ADVISORY (NON-BINDING) VOTE TO APPROVE the compensation of our

named executive officers

(SAY-ON-PAY)

(Item No. 2 on the Proxy Card)

The Dodd-Frank Act, enacted in 2010, requires that companies provide their stockholders with the opportunity to vote, on an advisory (non-binding) basis, whether to approve the compensation of companies’ named executive officers, commonly referred to as a “say-on-pay” vote, at least once every three years. In a vote held at our 2011 annual meeting of stockholders, our stockholders voted in favor of holding say-on-pay votes annually. In light of this result and other factors considered by the Board, we adopted a frequency of obtaining say-on-pay votes on an annual basis.

The say-on-pay vote is a non-binding advisory vote on the compensation of our named executive officers as described in the “Compensation Discussion and Analysis” section, including the tabular disclosure and accompanying narrative disclosure regarding such compensation, in this Proxy Statement. The say-on-pay vote is not a vote to approve our general compensation policies, the compensation of our Board, or our compensation policies as they relate to risk management.

Our Compensation Committee, which is responsible for designing and administering our executive compensation program, has designed our executive compensation program to provide a competitive and internally equitable compensation and benefits package that reflects Company performance, job complexity and the strategic value of the applicable position, while ensuring long-term retention, motivation and alignment with the long-term interests of the Company’s stockholders. We encourage you to carefully review the “Compensation Discussion and Analysis” section of this Proxy Statement for additional details on the Company’s executive compensation, including our compensation philosophy and objectives and the processes our Compensation Committee and the Board used to determine the structure and amounts of the compensation of our named executive officers for the year ended December 31, 2016.

The vote solicited by this Proposal 2 is advisory and, therefore, is not binding on us, our Board or our Compensation Committee, nor will its outcome require us, our Board or our Compensation Committee to take any action. Moreover, the outcome of the vote will not be construed as overruling any decision by us or our Board. Furthermore, because this non-binding, advisory vote primarily relates to the compensation of our named executive officers that we have already paid or are otherwise contractually committed to pay, there is generally no opportunity for us to revisit these decisions. However, our Board, including our Compensation Committee, values the opinions of our stockholders and will consider our stockholders’ concerns and evaluate what actions, if any, may be appropriate for us to take in the future to address those concerns.  In 2016, our say-on-pay proposal received the support of 90.4% of the shares voted, which we believe indicates strong support for our compensation program and practices.  Nevertheless, we will continue to solicit feedback, engage with our investors, and evaluate the effectiveness of our pay practices in aligning management and stockholder interests.

Stockholders will be asked at the Annual Meeting to approve the following resolution pursuant to this Proposal 2:

“RESOLVED, that the stockholders of Everi Holdings Inc. approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S- K, set forth in the Company’s definitive proxy statement for the 2017 Annual Meeting of Stockholders.”

 

 

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

 

29


 

Executive Compensation

The Company is a holding company, the principal asset of which is the capital stock of Everi Payments Inc. (“Everi Payments”), and the capital stock of Everi Games Holding Inc. (“Everi Games Holding”), which is the parent of Everi Games Inc. (“Everi Games”). All of the executive officers of the Company are employees of Everi Payments, other than Mr. Lucchese who is an employee of Everi Games as of January 1, 2016, and all references in this Proxy Statement to executive compensation relate to the executive compensation paid by Everi Payments or Everi Games to such executive officers.

Compensation Discussion and Analysis

The following Compensation Discussion and Analysis (“CD&A”) describes the philosophy, objectives and structure of our 2016 executive compensation program. This CD&A is intended to be read in conjunction with the tables beginning on page 46, which provide further historical compensation information for our following named executive officers as of December 31, 2016 (“named executive officers” or “NEOs”) :

 

 

Name

Current Title

Michael D. Rumbolz (1)

President and Chief Executive Officer

Randy L. Taylor

Executive Vice President and Chief Financial Officer

Juliet A. Lim (2)

Executive Vice President, Payments Business Leader, Chief Legal Officer and Corporate Secretary

David J. Lucchese (3)

Executive Vice President, Digital and Interactive Business Leader

Edward A. Peters

Executive Vice President, Sales and Marketing

Ram Chary (4)

Former President and Chief Executive Officer


(1)

The Board appointed Mr. Rumbolz, a director of the Company, as the Interim President and Chief Executive Officer effective February 13, 2016 and as President and Chief Executive Officer effective May 10, 2016.

(2)

The Board appointed Ms. Lim as Executive Vice President, Payments Business Leader, Chief Legal Officer and Corporate Secretary effective January 3, 2017 . She had previously served as our Executive Vice President, Payments, General Counsel and Corporate Secretary since January 2015.

(3)

The Board appointed Mr. Lucchese as Executive Vice President, Digital and Interactive Business Leader effective January 3, 2017. He had previously served as our Executive Vice President, Games since January 2015.

(4)

The Board terminated Mr. Chary from his positions as President, Chief Executive Officer and Director effective February 13, 2016.

Quick CD&A Reference Guide

 

 

Executive Summary

Section I

Compensation Philosophy and Objectives

Section II

Compensation Decision Making Process

Section III

Compensation Competitive Analysis

Section IV

Elements of Compensation

Section V

Additional Compensation Practices and Policies

Section VI

 

30


 

I.              Executive Summary

Throughout 2016, the Company successfully implemented strategies that have stabilized the business and strengthened the Company going forward. This has included improving efficiencies, innovating new content and increasing discipline related to expense management. The Company has also improved product offerings and currently has its most diverse portfolio of gaming solutions. Although our share price and Adjusted EBITDA did not reflect these innovations and improvements in 2016, we believe that they have positioned the Company to deliver growth in 2017.

The Company’s executive compensation program is designed to pay for performance – that is, to reward executives in a manner that is proportionate to the achievement of established goals. These goals may be expressed in terms of Company-wide performance, operating segment performance or individual performance.

In short, we believe our pay program is effective, and the past year is a strong affirmation of this belief. Our business performance in 2016 has been reflected in our executive pay outcomes and Compensation Committee decisions. For example:

·

Low Short-Term Incentive Payouts: Our Adjusted EBITDA was $198.0 million, slightly below our threshold performance level. As such, executives did not receive any annual cash incentives for this financial goal, which accounted for 75% of their annual incentive (See Appendix A to this Proxy Statement for a reconciliation of financial measures prepared in accordance with GAAP to non-GAAP financial measures disclosed in this CD&A. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with GAAP).

·

No Base Salary Increases or Bonus Opportunity Increases: In light of corporate performance, the Compensation Committee determined that executives should not receive merit increases to base salary or any increases in target bonus opportunities in 2016.

·

Moderate Equity Grants in 2016: The Compensation Committee concluded that executive equity grants are a beneficial vehicle for retaining and motivating the executive team to pursue the creation of long-term sustainable stockholder value. However, the Compensation Committee also believed it was prudent to grant executives a moderate size grant, due to corporate performance in the past year and the disappointing stock price performance.

·

Redesigned Equity Grants for 2016: For the 2016 annual grants, the Compensation Committee also chose to alter the design of the long-term awards, wherein 67% of the awards were delivered as market-based stock options with a vesting price hurdle 50% greater than the closing stock price on the grant date.

·

Realizable Pay values: As discussed below, the realizable value of awards granted to executives over the last several years is far lower than the values displayed in the “2016 Summary Compensation Table”, demonstrating a link between pay and performance.

 

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Realizable Pay

Paying for performance continues to be the foundation of our compensation program. Our strong belief in this foundation can be demonstrated simply: we have granted options that do not vest unless significant stock price increases are achieved. Therefore, the grant date value of compensation packages (as displayed in the “2016 Summary Compensation Table”) are not at all reflective of the actual realizable pay value of the compensation packages received by the executive team over the last several years.

To demonstrate, the following chart shows the difference between the reported pay, as disclosed in the “2016 Summary Compensation Table”, of our NEO team and the realizable pay values of those awards as of the end of the 2016 fiscal year, and as of a more current date:

PICTURE 9

“SCT” pay is the pay levels as disclosed in the “2016 Summary Compensation Table” annually. This includes actual base salary, actual annual bonuses received, and long-term incentive components (restricted stock awards and annual stock option grants) based on the grant date fair value.

“Realizable” pay is defined as the compensation earned or deliverable for each year calculated as of the end of the 2016 fiscal year, including: actual salary received, actual annual bonuses received, and the intrinsic value of long-term incentive plan components, as valued on December 30, 2016 (the last trading day of the 2016 fiscal year) using the year-end share price of $2.17 per share, and as valued on March 16, 2017 (a recent date before this Proxy Statement was filed) using the closing share price on that date of $4.03 per share.

 

32


 

Components of Our Compensation Program

The Compensation Committee oversees our executive compensation program, which includes several compensation elements that have each been tailored to incentivize and reward specific aspects of Company performance that the Board believes are central to delivering long-term stockholder value. Key components of our 2016 compensation program are:

 

 

 

 

 

 

Base Salary

 

Individual salaries are established and negotiated at the time of hire and adjusted thereafter in the Compensation Committee’s discretion.

 

Initial salaries are set based on the executive officer’s scope of responsibilities in the context of the overall size of the Company and are designed to be competitive with market and industry norms, and to reflect individual performance.

 

Short-Term Incentives

 

Cash incentives are intended to reward the achievement of annual corporate financial goals as well as individual accomplishments and contributions.

 

For 2016, these cash incentives were based 75% on the achievement of Adjusted EBITDA goals and 25% on the achievement of Individual Performance Goals.

 

Long-Term Incentives

 

Long-term equity awards focused on incentivizing executives to deliver long-term stockholder value, while also providing a retention vehicle for top executive talent.

 

For 2016, we granted a mix of market-based stock options (67% of value mix) with challenging vesting price hurdles set at 50% above grant date closing price, and time-based stock options (33%).

 

33


 

Compensation Governance Practices

Our compensation governance framework and pay-for-performance philosophy provide appropriate incentives to our executives to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions.

 

Best Practices We Employ

ü

 

Majority of NEO compensation tied to long-term performance.

ü

 

Performance metrics are directly tied to value creation for stockholders.

ü

 

Robust stock ownership guidelines of 6x salary for the Chief Executive Officer, 3x for NEOs, and 5x annual cash retainer fees for non-employee directors.

ü

 

Incentive compensation “clawback” policy.

ü

 

Change in control severance requires a double trigger, commencing with equity award grants made in 2015.

ü

 

Compensation Committee is comprised entirely of independent directors.

ü

 

Compensation Committee engages an independent consultant.

ü

 

Compensation Committee regularly meets in executive session without management present.

ü

 

Proactive stockholder engagement process.

ü

 

Annual risk assessment of the compensation program.

ü

 

Incentive program design that discourages excessive risk taking.

ü

 

Hedging and short sales are not permitted.

ü

 

Pledging is not permitted without pre-approval.

ü

 

Supplemental Executive Retirement Plan (SERP) benefits are not provided. 

 

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2016 Target Total Compensation

To promote a performance-based culture that aligns the interests of management and stockholders, in 2016 the executive compensation program focused extensively on variable compensation. For example, our target pay mix is as follows:

 

 

PICTURE 7

PICTURE 8

 

2016 Say-on-Pay Vote and Stockholder Outreach

At our 2016 Annual Meeting of Stockholders, our say-on-pay proposal received the support of approximately 90.4% of the shares voted, which we believe indicates strong support for our compensation program and practices. Over several months prior to our 2016 Annual Meeting of Stockholders, our Compensation Committee and management team reached out to the majority of our top 20 stockholders, who held approximately 68.5% of our outstanding shares at the time, as well as with two leading proxy advisory firms, Institutional Shareholder Services, Inc. and Glass Lewis & Co. Our stockholders were pleased with the proposed changes we were already in the process of implementing, and our overall efforts to strengthen our compensation program and further align management and stockholder interests. We believe the support for these ongoing efforts to improve and refine our compensation program was reflected in the strong support for our 2016 say-on-pay proposal.

Chief Executive Officer Pay

Effective February 13, 2016, Michael D. Rumbolz, who has served as a director of the Company since August 2010, was named Interim President and Chief Executive Officer of the Company, replacing Ram Chary, whose employment with the Company was terminated as of February 13, 2016. In connection with his appointment, Mr. Rumbolz was awarded an option to purchase 465,116 shares of our Common Stock with an exercise price of $2.78 per share, with the shares underlying the option subject to vesting in 24 equal monthly installments. On February 25, 2016, Mr. Rumbolz and the Company entered into an Employment Agreement, effective February 13, 2016. Pursuant to the Employment Agreement, Mr. Rumbolz was entitled to receive a monthly base salary of $50,000, which was less than that of Mr. Chary’s monthly base salary, and was eligible for a one-time bonus of $100,000 upon the commencement of employment by the Company of a successor President and Chief Executive Officer on a non-interim basis. Mr. Rumbolz’s employment agreement did not otherwise provide for an annual cash incentive bonus, and he did not receive compensation as a director while serving as Interim President and Chief Executive Officer.

Effective May 10, 2016, the Board appointed Mr. Rumbolz as President and Chief Executive Office of the Company.  In connection with his appointment as  President and Chief Executive Officer, the Company and Mr. Rumbolz entered into an amendment to his Employment Agreement, effective May 10, 2016 wherein Mr. Rumbolz is eligible for an annual bonus in an amount of up to 150% of his then current base salary depending upon the achievement of certain performance criteria and goals to be determined. The target amount of the annual bonus, assuming the achievement of performance criteria and goals, is 100% of his then current base salary. Since Mr. Rumbolz was appointed the successor President and Chief Executive Officer of the Company, he did not receive the one-time $100,000 bonus referred to above.

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II.            Compensation Philosophy and Objectives

The principal objective of the Company’s executive compensation policies is to align the executives’ incentives with the achievement of the Company’s strategic goals, which are in turn designed to enhance stockholder value. In order to achieve that objective, the Company’s executive compensation policies are designed to help the Company attract and retain the services of key personnel who possess the necessary leadership and management skills, motivate key employees to achieve specified goals and ensure that compensation provided to key employees is both fair and reasonable in light of performance and competitive with the compensation paid to executives of similarly situated companies. The Company has attempted to design its executive compensation policies to incent its executives to achieve the Company’s strategic goals, while at the same time discouraging them and other employees from taking excessive risk.

Our executive compensation program consists of base salary, annual cash incentives, and long-term equity incentives, as well as benefits that are generally available to our salaried employees and limited perquisites. Perquisites generally include, among other things, moving expenses and reimbursement of other out-of-pocket expenses. We believe that spreading compensation across these three primary components achieves our compensation objectives:

ü

Promotes Pay-for-Performance

ü

Establishes competitive executive target pay levels

ü

Balances fixed and at-risk compensation appropriately

ü

Balances short-term and long-term goals appropriately

ü

Aligns the interests of management and stockholders

ü

Manages compensation risk

III.               Compensation Decision Making Process

Overall Compensation Determinations

All of our current NEOs are parties to employment agreements. The level of base salary to be paid to those officers over the term of their respective employment agreements and their individual target bonus percentages are initially determined in connection with the negotiation process relating to such agreements or any amendments thereof, and later adjusted as necessary during the Compensation Committee’s annual review of an executive’s performance.

Role of the Board

Our Board has appointed a Compensation Committee, consisting exclusively of independent directors. The Compensation Committee’s charter authorizes our Compensation Committee to review and approve or to recommend for approval to the full Board, the compensation of our Chief Executive Officer and other executives. Our Board has authorized our Compensation Committee to make various decisions with respect to executive compensation. However, the Board also may make determinations and approve compensation in its discretion, including where the Compensation Committee recommends that the Board considers such executive compensation matters.

Role of the Compensation Committee

Our Compensation Committee evaluates the performance of our Chief Executive Officer and approves the compensation for our Chief Executive Officer in light of the goals and objectives of our compensation program for that year. Our Compensation Committee annually assesses the performance of our other executives, and, based in part on the recommendations from our Chief Executive Officer, approves the compensation of these executives. Our Compensation Committee retains, and does not delegate, any of its responsibility to determine executive compensation.

36


 

Role of Management

At the request of our Compensation Committee, our Chief Executive Officer may attend a portion of our Compensation Committee meetings, including meetings at which our Compensation Committee’s compensation consultants are present. This enables our Compensation Committee to review, with our Chief Executive Officer, the corporate and individual goals that the Chief Executive Officer regards as important to achieve our overall business objectives. Our Compensation Committee also requests that our Chief Executive Officer assesses the performance of, and our goals and objectives for, certain other officers as deemed appropriate, including our other NEOs. In addition, our Compensation Committee may request certain other executives to provide input on executive compensation, including assessing individual performance and future potential, market data analyses and various compensation decisions relating to bonuses, equity awards and other pay during the year. None of our executives generally attends any portion of Compensation Committee meetings at which his or her compensation is discussed.

Role of Compensation Consultants

Pursuant to the authority granted to it in its charter, the Compensation Committee may engage an independent executive compensation consultant. The consultant reports directly to the Compensation Committee, who may replace the consultant or hire additional consultants at any time. The compensation consultant attends meetings of the Compensation Committee, as requested, and may communicate with the Chair of the Compensation Committee between meetings; however, the Compensation Committee makes all decisions regarding the compensation of the Company’s executive officers.

The compensation consultant provides services to the Compensation Committee, including, but not limited to: advice on compensation philosophy, incentive plan design, executive job compensation analysis, stockholder engagement and CD&A disclosure, among other compensation topics. The compensation consultant provides no additional services to the Company, other than the consulting services provided to the Compensation Committee. In 2016, Aon served as the Compensation Committee’s independent compensation consultant and provided the foregoing services to the Compensation Committee.

The Compensation Committee conducted a specific review of its relationship with Aon in 2016, and determined that Aon’s work for the Compensation Committee did not raise any conflicts of interest. Aon’s work has conformed with the independence factors and guidance provided by the Dodd-Frank Act, the SEC and the NYSE.

Compensation Risk Oversight

The Compensation Committee has reviewed and discussed the concept of risk as it relates to the Company’s compensation policies and it does not believe that the Company’s compensation policies encourage excessive or inappropriate risk taking. Further, the Compensation Committee has endorsed and adopted several measures in the past year to further discourage risk-taking, such as robust stock ownership guidelines for its executives and non-employee directors, and the adoption of a clawback policy that grants the Compensation Committee broad discretion to recover incentive awards from Section 16 officers in the unlikely event that incentive plan award decisions were based on financial results that are subsequently restated.

The Compensation Committee identified no material risks in the compensation programs in 2016.

IV.           Compensation Competitive Analysis

In 2015, the Compensation Committee worked with its independent consultant, Aon, to create a meaningful peer group for the purposes of assessing the competitiveness and appropriateness of the Company’s NEO compensation in the market. To formulate this peer group, the committee looked to identify two types of businesses: Games and Payments, which represent the two core businesses of the Company. From there, the Compensation Committee and Aon screened potential peers for similar size and complexity, using revenue, market capitalization, and enterprise value as its guiding metrics.

Given the complexities and volatility of the industry, the Compensation Committee believes it is not appropriate to rigidly benchmark executive pay to a specific percentile of the group. Instead, the Compensation Committee uses the

37


 

comparative data merely as a reference point in exercising its judgment about compensation design and setting appropriate target pay levels.

Our peer group has changed slightly in the past year: four peers (Coinstar, DreamWorks Animation SKG, LeapFrog Enterprises, and Heartland Payment Systems) are no longer publicly traded. As such, our peer group consists of the following companies:

Peer Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparator Company

    

Ticker

    

Revenue

    

Market Cap

    

Enterprise Value

    

Type

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($mm)

 

($mm)

 

($mm)

 

 

Boyd Gaming Corporation

 

BYD

 

$

2,184.0

 

$

2,268.8

 

$

5,340.0

 

Gaming

Scientific Games Corp.

 

SGMS

 

$

2,883.4

 

$

1,226.0

 

$

9,850

 

Gaming

Churchill Downs Inc.

 

CHDN

 

$

1,308.6

 

$

2,436.6

 

$

3,420.0

 

Gaming

JAKKS Pacific, Inc.

 

JAKK

 

$

706.6

 

$

82.3

 

$

219.5

 

Gaming

Zynga, Inc.

 

ZNGA

 

$

741.4

 

$

2,292.3

 

$

1,610.0

 

Gaming

Glu Mobile, Inc.

 

GLUU

 

$

200.6

 

$

258.9

 

$

186.2

 

Gaming

VeriFone Systems, Inc.

 

PAY

 

$

1,992.1

 

$

1,973.5

 

$

2,880.0

 

Payments

Euronet Worldwide, Inc.

 

EEFT

 

$

1,958.6

 

$

3,781.3

 

$

4,240.0

 

Payments

Moneygram International Inc.

 

MGI

 

$

1,630.4

 

$

627.6

 

$

1,630.0

 

Payments

Blackhawk Network Holdings, Inc.

 

HAWK

 

$

1,899.8

 

$

2,086.3

 

$

1,580.0

 

Payments

Cardtronics, Inc.

 

CATM

 

$

1,265.4

 

$

2,472.1

 

$

2,580.0

 

Payments

WEX Inc.

 

WEX

 

$

1,018.5

 

$

4,769.2

 

$

6,570.0

 

Payments

Green Dot Corporation

 

GDOT

 

$

718.8

 

$

1,182.0

 

$

999.1

 

Payments

Evertec, Inc.

 

EVTC

 

$

389.5

 

$

1,315.8

 

$

1,820.0

 

Payments

14 Peers

 

25th %ile

 

$

724.4

 

$

1,193.0

 

$

1,587.5

 

 

 

 

Median

 

$

1,287.0

 

$

2,029.9

 

$

2,200.0

 

 

 

 

75th %ile

 

$

1,943.9

 

$

2,400.5

 

$

4,035.0

 

 

Everi Holdings Inc.

 

 

 

$

859.5

 

$

143.3

 

$

1,443.0

 

 

 

 

Rank

 

 

34

%  

 

 3

%  

 

21

%  

 

 

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V.             Elements of Compensation

The Company’s executive compensation policy is simple and transparent in design, and consists primarily of base salary, annual cash incentive awards and long-term equity incentive awards for fiscal year 2016.

Summary Overview

 

 

 

 

 

Type

Element

Performance Period

Objective

Performance Measured and Rewarded for 2016

Fixed

Base Salary

Annual

Recognizes an individual’s role and responsibilities and serves as an important retention vehicle

Reviewed annually and set based on market competitiveness, individual performance and internal equity considerations

Annual Cash Incentive Plan

Performance -based

Annual Bonus

Annual

Rewards achievement of annual financial objectives and individual performance goals

 

Adjusted EBITDA (75%)

 

Individual Performance Goals (25%)

Long-Term Incentive Plan

Performance -based

Market-Based Stock Options

Long-Term

Supports the achievement of strong share price growth

Vesting price hurdle set 50% above grant date closing price

 

 

 

 

 

If vesting price hurdle is not met as of annual vesting date, the price hurdle must be obtained for 30 consecutive trading days for the awards to vest

 

Time-Based Stock Options

Long-Term

Aligns the interests of management and stockholders and serves an important retention vehicle

Vests ratably over four years

 

Base Salaries

Base salaries are intended to provide an appropriate level of assured cash compensation that is sufficient to retain the services of our executives. Base salaries are reviewed annually as part of the Company’s performance review process, and are determined based upon the following factors:

·

Position and responsibility;

·

Job performance, and expected contribution to the Company’s future performance;

·

Market factors, including the market compensation profile for similar jobs and the need to attract and retain qualified candidates for high-demand positions;

·

Internal value of the executive’s role based on the relative importance of the job as compared to the Company’s other executive officers, as measured by the scope of responsibility and performance expectations; and

·

Retention risk and the Company’s need to retain high performing and high potential executives.

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In 2016, in consideration of the above-mentioned factors, the Compensation Committee concluded that it was prudent to maintain current base salary levels.

 

 

 

 

 

 

 

 

 

 

    

2015

    

2016

 

NEO

    

Base Salary

 

Base Salary

% Change

Michael D. Rumbolz (1)

 

$

 —

 

$

600,000

n/a

Randy L. Taylor

 

 

400,000

 

 

400,000

0.0%

Juliet A. Lim

 

 

400,000

 

 

400,000

0.0%

David J. Lucchese

 

 

425,000

 

 

425,000

0.0%

Edward A. Peters

 

 

400,000

 

 

400,000

0.0%

Ram Chary (2)

 

 

800,000

 

 

800,000

0.0%


(1) Mr. Rumbolz’s employment began in February 2016.

(2) Mr. Chary’s employment was terminated in February 2016.

Annual Cash Incentives

All of our NEOs were eligible for the 2016 annual cash incentive plan, which promoted the Company’s pay-for-performance philosophy by providing executives with direct financial incentives in the form of annual cash incentive awards for achieving pre-determined individual and Company performance goals.

Each NEO’s annual cash incentive award target is established as a percentage of base salary. Such target cash bonus percentage was either negotiated and set forth in the NEO’s employment agreement or otherwise established by the Compensation Committee. The following targets, which were also used in 2015, were employed in 2016:

 

 

 

 

 

 

Name

    

Target

    

Maximum

 

 

 

( As a % of base salary)

 

Michael D. Rumbolz (1)

 

100

%  

150

Randy L. Taylor

 

50

%  

75

Juliet A. Lim

 

50

%  

75

David J. Lucchese

 

50

%  

75

Edward A. Peters

 

50

%  

100

Ram Chary (2)

 

100

%  

150


(1)

Mr. Rumbolz’s employment began in February 2016.

(2)

Mr. Chary’s employment was terminated in February 2016.

 

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2016 Performance Metrics

For 2016, the Company’s annual non-equity incentive plan for executives consisted of two performance metrics: (a) Adjusted EBITDA (75% weighting) and (b) Individual Performance Goals (25% weighting).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metric

 

Weight

 

Threshold - 1

 

Threshold - 2

 

Target

 

Threshold - 3

 

Maximum

 

Actual 
Performance

 

Adjusted EBITDA

 

75%

 

$203M to
$205M
50% to 75%

 

$205M to
$208M
75% to 100%

 

$208M to
$210M
100%

 

$210M to
$212M
100% to 125%

 

$212M to
$215M
125% to 150%

 

$198M

 

Individual Performance Goals

 

25%

 

$202.5M

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

 

In 2016, the Individual Performance Goals, established by the Compensation Committee, and weighted equally, consisted of goals related to:

 

 

continuing focus on increasing operational depth and efficiency to better position the Company to support implementation of growth strategy

pivoting from an individual product-centric marketing and sales approach to a solutions suite marketing and sales approach

 

 

 

 

Corporate Strategy

     Maintaining and expanding the Company’s gaming footprint through strategic gaming‑related acquisitions, alliances or technology development while seeking growth opportunities outside gaming that will bring value to gaming customers

      Continuing focus on increasing operational depth and efficiency to better position the Company to achieve its growth strategy

      Pivoting from an individual product-centric marketing and sales approach to a solutions suite marketing and sales approach

 

Leadership

     Aligning the strategic goals of the Board, Chief Executive Officer and senior management team

      Succession planning

 

Enhance Customer and Community Relationships

      Improving customer retention and satisfaction through the establishment of a robust technology development and testing discipline

      Implementation of a new delivery and service model

      Implementing a plan and process for measuring customer satisfaction

 

2016 Actual Payouts

 

For the year ended December 31, 2016, the Company reported Adjusted EBITDA of $198.0 million, which was less than the minimum thresholds of $203.0 million and $202.5 million for the objective (Adjusted EBITDA) and subjective (Individual Performance Goals) targets, respectively. Therefore, under the formula outlined above, the NEOs did not receive a payout with respect to such targets.

 

In addition to the Individual Performance Goals, the NEOs were assigned specific objectives. The Compensation Committee subjectively assessed the achievement of such additional objectives and determined that they were accomplished with respect to each NEO. The Compensation Committee also considered additional factors, including, among others, the Board of Directors’ decision to terminate the previous CEO in early 2016, certain challenges with the Company’s installed base of electronic gaming machines and the overall positive performance of the Payments segment. After such additional consideration, the Compensation Committee determined that it was appropriate to grant discretionary cash bonuses to the NEOs. As a result, the NEOs, including Mr. Rumbolz, received payouts that ranged from 13% – 22% of annualized base salaries, and are shown on the “2016 Summary Compensation Table” under the “Bonus” column.

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Long-Term Equity Incentive Awards

We believe that the award of stock-based compensation and incentives is an effective way of aligning our executives’ interests with the goal of enhancing stockholder value. Due to the direct relationship between the value of an equity award, on the one hand, and the Company’s stock price, on the other, we believe that equity awards motivate executives to manage the Company’s business in a manner that is consistent with stockholder interests. Equity awards are intended to focus the attention of the recipient on the Company’s long-term performance, which we believe results in improved stockholder value. Through the grant of stock options and restricted stock awards that vest over time, we can align executives’ interests with the long-term interests of our stockholders who seek appreciation in the value of our Common Stock. To that end, the time-based equity awards that we grant to executives typically vest and become fully-exercisable over a four-year period. The grant of equity awards also provides significant long-term earnings potential in a competitive market for executive talent.

The principal factors considered in granting stock options or restricted stock awards and determining the size of grants to executives are prior performance, level of responsibility, the amounts of other compensation attainable by the executive and the executive’s ability to influence the Company’s long-term growth and profitability. Our Compensation Committee does not apply any quantitative method for weighing these factors and a decision to grant an award is primarily based upon a subjective evaluation of the executive’s past performance as well as anticipated future performance.

Mix of Equity Incentive Awards

Our long-term equity compensation program currently consists of two award types:

·

Market-based stock option awards

·

Time-based stock option awards

2016 Awards

 

In keeping with the Company’s commitment to strengthening its overall corporate governance, including its compensation program, the Company worked with Aon in early 2016 to reassess the long-term incentive plan. In doing so, the Company and Aon studied peer group designs and prevalent market practices, and spoke with numerous stockholders to receive input. Ultimately, the Compensation Committee determined that there was great value in redesigning the long-term incentive plan to better incentivize, motivate and retain the executive team, while further strengthening and demonstrating the alignment of management and stockholder interests. As such, effective with the 2016 annual grant, the long-term incentive plan consists of a mix of market-based and time-based stock options.

PICTURE 12

 

42


 

VI.           Additional Compensation Policies and Practices

Equity Ownership Policy

The Company and its stockholders are best served by a board and executive team that manage the business with a long-term perspective. As such, the Company adopted the Equity Ownership Policy in February 2016, as the Company believes stock ownership is an important tool to strengthen the alignment of interests among stockholders, directors and executive officers. The policy provides that the applicable required level of equity ownership is expected to be satisfied by our directors and executive officers within five years of the later of: (i) February 25, 2016; and (ii) the date such person first becomes subject to the Equity Ownership Policy.

The Compensation Committee will receive periodic reports of the ownership achieved by each director and executive officer. Until such time as such person satisfies the equity ownership requirement, the achievement level of ownership will be determined by reference to the average closing stock price of our Common Stock during the fiscal year ended immediately prior to the determination date. Once the equity ownership requirement has been satisfied, future increases or decreases in the equity price of our Common Stock will not impact the compliance of our directors and executive officers with these guidelines, as long as such person holds the number of shares he or she had at the time he or she achieved the required ownership level.

The following table sets forth the required salary multiples for each category of person subject to the policy:

 

 

Current NEO

Required Salary Multiple

President and Chief Executive Officer

6x base salary

All other NEOs

3x base salary

Other officers

1x to 2x base salary

Outside directors

5x annual cash retainer

 

The value of all of the following types of Company stock or stock options owned by or granted to an executive, other officer or director qualifies toward the participant’s attainment of the target multiple of pay:

·

Shares owned outright/shares beneficially owned (including by a family member and/or in a trust)

·

Vested restricted stock

·

Shares owned through the Company’s 401(k) plan (if applicable)

·

Shares underlying vested, but unexercised, stock options (based on the excess of the market price of the stock over the exercise price and after deducting any tax withholding obligations)

At December 31, 2016, all current named executive officers, other officers and non-employee directors either met the ownership guidelines or were within the five-year phase-in period.

Clawback Policy

The Board of the Company adopted an Incentive Compensation Clawback Policy in February 2016, which entitles the Company to recover certain compensation previously paid to its Section 16 officers. The policy provides that, in the event of a restatement of the Company’s financial statement for any fiscal year commencing after December 31, 2015 that is due to the misconduct of any employee, the Board or, if so designated by the Board, the Compensation Committee of the Board, is authorized to take action to recoup all or part of any incentive compensation received by a Section 16 officer of the Company. For purposes of this policy, incentive compensation includes any cash compensation or an award of equity compensation from the Company that is based in whole or in part on the achievement of financial results by the Company, including, but not limited to, any bonus, incentive arrangement or equity award, but excluding base salary. The policy defines misconduct

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as the willful commission of an illegal act, fraud, intentional misconduct or gross recklessness in the performance of an employee’s duties and responsibilities. In determining whether to take action to recoup any incentive compensation received by a Section 16 officer of the Company, the Board or, if so designated, the Compensation Committee of the Board, will take into consideration whether the Section 16 officer engaged in the misconduct or was in a position, including in a supervisory role, to have been able to have reasonably prevented the misconduct that caused the restatement.

In addition, as directed by the Dodd-Frank Act, the SEC has issued proposed rules which, if adopted in final form, would require issuers to seek recovery from executive officers in certain circumstances involving financial restatements. As of the date of this Proxy Statement, the SEC has not issued final rules implementing this portion of the Dodd-Frank Act. Once the SEC issues final rules regarding the required form of a clawback policy under the Dodd-Frank Act, we expect to amend our Clawback Policy accordingly.

Anti-Hedging and Pledging Policies

Under our Insider Trading Policy, directors and executive officers, as well as other employees, are prohibited from engaging in the following activities with respect to the Company’s Common Stock:

·

Hedging their interest in Company shares by selling short or trading or purchasing “put” or “call” options on our Common Stock or engaging in similar transactions; and

·

Pledging any shares of our Common Stock without prior clearance from our Corporate Compliance Officer as outlined in our Insider Trading Policy.

As of the date of this Proxy Statement, no shares of Company Common Stock were pledged by any director or executive officer.

Tax Deductibility

Section162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally limits the corporate tax deduction for compensation paid to the chief executive officer and the three other most highly compensated executives (other than the Chief Financial Officer) to $1.0 million annually, unless certain requirements are satisfied. To maximize the corporate tax deduction, our incentive plans were designed so that certain awards under those plans can comply with the requirements of Section 162(m) of the Code. As the $1.0 million limit does not apply to compensatory amounts that qualify as performance-based compensation under Section 162(m), certain of our performance-based awards made pursuant to these plans are intended to qualify for corporate tax deductibility.

We intend to use performance-based compensation to minimize the effect of the limits imposed by Section 162(m) to the extent that compliance with Code requirements does not conflict with our compensation objectives. In some cases, however, we believe the loss of some portion of a corporate tax deduction may be necessary and appropriate in order to provide the compensation necessary to attract and retain qualified executives.

Retirement Plans

We have established and maintain a retirement savings plan under Section 401(k) of the Code to cover our eligible employees, including our executive officers. The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a tax deferred basis through contributions to the 401(k) plan. Our 401(k) plan is intended to constitute a qualified plan under Section 401(a) of the Code and its associated trust is intended to be exempt from federal income taxation under Section 501(a) of the Code. We make contributions to the 401(k) plan for the benefit of certain executive officers.

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Severance Benefits

In order to retain the ongoing services of our NEOs, we have provided the assurance and security of severance benefits and change in control payments, which is described below under the caption “Employment Contracts, Termination of Employment and Change in Control Arrangements.”

We believe that these severance benefits and change in control payments reflect the fact that it may be difficult for such executives to find comparable employment within a short period of time and that providing such benefits should eliminate, or at least reduce, the reluctance of senior executives to pursue potential change in control transactions that may be in the best interests of stockholders. We believe that these benefits are appropriate in size relative to the overall value of the Company.

Settlement with Ram Chary

On March 15, 2017, the Company entered into a Settlement Agreement and Mutual Release with Mr. Chary, its former President and Chief Executive Officer, whose last day with the Company was February 13, 2016, to resolve a dispute regarding the termination of Mr. Chary’s employment with the Company. Pursuant to this agreement, Mr. Chary received from the Company an amount equal to $4.6 million, inclusive of attorney fees and costs of $0.9 million, in satisfaction of all monetary obligations of the Company to Mr. Chary.  Each party also agreed to release certain claims they may have had against the other.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Members of the Compensation Committee:

Geoffrey P. Judge (Chair)

Ronald V. Congemi

Linster W. Fox

E. Miles Kilburn

Eileen F. Raney

 

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Compensation of Named Executive Officers

2016 Summary Compensation Table

The following table sets forth the total compensation earned for services rendered in 2016 by our principal executive officer (current and former), our principal financial officer and the three other persons whose total compensation for the fiscal year ended December 31, 2016 was in excess of $100,000 and who were serving as executive officers at the end of that fiscal year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and principal position

   

Year

   

Salary

   

Bonus (1)

  

Stock
awards
(2)

  

Option
awards
(3)

  

Non-equity
incentive plan
compensation
(4)

  

All other
compensation
(5)

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