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- Businesses Performing Well
- Longer-Term Management and Board Positioning and Enhancements
- Cancellation of Management Incentive Plan and Entitlement Reductions
TORONTO, ONTARIO--(Marketwired - Feb 22, 2016) - The Intertain Group Limited ("Intertain") (TSX:IT)(OTCQX:ITTNF) today announced the completion of its Independent Committee review, outlined longer term management and board positioning including to add additional senior executive resources at Intertain Bahamas and the intended recruitment of a Chief Executive Officer with leading operational expertise, and announced the permanent cancellation of its Management Incentive Plan as well as other agreed reductions in its executive compensation obligations.
Completion of Independent Committee Process
The Independent Committee has completed its work and reiterated its principal conclusions as initially reported in Intertain's press release of February 8, 2016. The Committee concluded that the allegations and innuendo of the short seller related to the quality and financial performance of the underlying businesses of Intertain are grossly erroneous.
As an additional example of the magnitude of the errors of the Spruce Report in fundamental respects, the actual adjusted cumulative operating cash flows of Intertain through Q3 2015 are over 700 percent higher than claimed in the Spruce Report. Simply put, the Spruce Report's claims in respect of the quality and performance of Intertain's underlying businesses are wrong in every material respect.
"The Committee has finished its work and reported to the Board of Directors," Stan Dunford, Chairman of the Board of Intertain, said. "We want to stress that our work with our independent advisors has exposed the gross inaccuracies in the central elements of the Spruce Report relating to the quality and performance of Intertain's underlying businesses."
Management and Board Repositioning and Strengthening
Through the intensive review undertaken by the Independent Committee, and as a result of further consideration by the Board, Intertain recognizes the critical importance of strong and deep management at Intertain Bahamas, which manages some of Intertain's more valuable operating businesses. In order to augment the management resources and gaming expertise at Intertain Bahamas, Keith Laslop, Intertain's Chief Financial Officer, is relocating to a new senior operational management position at Intertain Bahamas. Over the coming months, Intertain expects to recruit additional experienced personnel to join the management of Intertain Bahamas. To accommodate Mr. Laslop's move, Intertain expects to announce shortly the appointment of a highly qualified interim Chief Financial Officer at Intertain.
Additionally, John Kennedy FitzGerald, Intertain's Chief Executive Officer, has advised the Board of his belief that the core business assets for Intertain's continued growth and prosperity are now in place. In that regard, Mr. FitzGerald's view is that the central focus of the Chief Executive Officer will change from asset acquisition to operational excellence and that the Board should pursue a process for the recruitment of a new Chief Executive Officer with this demonstrated skill competency.
The Board has considered Mr. FitzGerald's view and agreed with it and will be pursing the process of recruiting a new operationally-focused Chief Executive Officer. Intertain intends to include in its search suitably experienced and qualified candidates based in European cities closer to Intertain's core operations. The Board will update shareholders periodically on this process.
The Board has also determined, in connection with Intertain's upcoming annual meeting of shareholders, or as soon thereafter as is practicable, to seek to bring one or two new experienced and qualified directors onto the Board as part of a Board-renewal process.
Mr. FitzGerald said, "We have assembled a terrific group of industry leading assets and I am fortunate to work with strong executives in our operating businesses. While we will continue to consider appropriate M&A opportunities to further strengthen our portfolio and we continue to receive expressions of interest from third parties interested in acquiring our assets, I have advised the Board for some time that the longer term focus of our CEO should be on operations and I look forward to passing the baton when the Board has identified the right person to lead us in the next stage of our growth."
Mr. Dunford said: "While the past few months have been hard for all of us, the strengthening of our management ranks for our growing and more complicated business, the recruitment of additional Board skillsets to help strengthen our governance oversight and ultimately the addition of a CEO with a focus on operational excellence will all contribute to a better Intertain."
Cancellation of Management Incentive Plan and Reduction in Severance Entitlements
Intertain is also pleased to announce the permanent cancellation, effective immediately, of its Management Incentive Plan. As part of that cancellation, Messrs. FitzGerald and Laslop have voluntarily agreed to relinquish any right to any future payments under the Management Incentive Plan, including those related to the prior acquisitions completed by Intertain. Further, Messrs. FitzGerald and Laslop have also voluntarily agreed to reduce their severance entitlements, including in connection with any change of control, by 25%. These accommodations will materially reduce Intertain's future payment obligations to the benefit of all Intertain shareholders.
"Keith and I are extremely proud of the quality of the businesses owned by Intertain and the transactions which have created Intertain," Mr. FitzGerald said. "We recognize the market concern about the potential magnitude of future payment obligations and we and the Board also heard our shareholders regarding the Management Incentive Plan. We offered to permanently cancel the Management Incentive Plan and materially reduce our entitlements to further strengthen our alignment with shareholder interests. Recent months have been difficult for us as we have seen untrue statements made about us and our motivations negatively impacting Intertain's share price and reputation while our businesses continue to grow and outperform. We have made these accommodations in order to reinforce our desire for Intertain to move forward with an emphasis on our businesses."
Mr. Dunford added: "On behalf of the Board and our shareholders, we appreciate the material accommodation shown by John and Keith. In reflection, we have realized the Management Incentive Plan had flaws in both design and result and we have all faced up to that. John, Keith and the Board have heard our shareholders and this is an important step forward for all of us."
Update on Implementation
In the company's February 8, 2016 press release, Intertain noted that it would be taking measures to improve certain aspects of its corporate processes and controls and approvals processes. In connection with the now completed work of the Independent Committee, new procedures and processes in this regard have been approved by the Board for implementation.
These new procedures and processes include requirements for additional Board information and approvals. They are intended in part to address the issues referenced in Intertain's February 8, 2016 press release related to certain payments previously made by Intertain that were recorded and fully expensed by it as transaction expenses in connection with its prior acquisitions. The Committee identified three such payments, collectively aggregating approximately Cdn. $7.8 million, made to nominee corporations understood to be controlled by a director of an Intertain subsidiary with such monies being held for the benefit of third party service providers to Intertain. All parties to these arrangements have advised that the monies are being held exclusively for the benefit of the third parties.
"We have kept our promise and strengthened our corporate and approval processes," Mr. Dunford added. "We are looking forward to getting back to business and reporting our Q4 2015 results in a few weeks' time. It is a time of growth and change at Intertain; rapid growth can be difficult. We have taken stock and hit the reset button. Our senior executives have joined the Board in these measures. I thank them and again I thank our shareholders for their input and patience as we look forward to strong results and a better Intertain."
About The Intertain Group Limited
Intertain is an online gaming company that provides entertainment to a global consumer base. Intertain currently offers bingo and casino to its customers using the InterCasino www.intercasino.com, Costa www.costabingo.com, Vera&John www.verajohn.com, Jackpotjoy www.jackpotjoy.com, and Botemania www.botemania.es brands. For more information about Intertain, please visit www.intertain.com.
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The Intertain Group Limited