Online gaming software developer CryptoLogic Limited has fired back at ex-CEO Javaid Aziz, claiming that he is in breach of various contractual obligations related to his severance from the company. CryptoLogic has said it’s entitled to get back more than €1.5 million currently held in escrow under the terms of his severance agreement. The company said the money would have been given to Aziz if there was a change of control by April 30, 2009, but CryptoLogic now states he has violated the agreement and it will seek to recoup the funds.
Dealings between the company and Aziz became tense when the former CEO released a regulatory filing in December 2008 outlining his views regarding the future strategic direction of the company. CryptoLogic countered shortly after with its own filing, stating that many of the matters raised by Aziz were already being addressed under the guidance of incumbent CEO Brian Hadfield. The company also denied an application by Aziz to appoint two nominees to the CryptoLogic Board of Directors, saying that such a move would neither serve the best interests of CryptoLogic nor its shareholders.
In response, Aziz requested for an Extraordinary General Meeting (EGM) of the shareholders to be convened, to which the company replied that it would respond in due course. It then announced Monday that it had served notice on Aziz, entitling CryptoLogic to €1.543 million.
“While we regret being forced to take this step, CryptoLogic made substantial payments and commitments to Mr. Aziz in negotiating his severance and we believe that his failure to adhere to his obligations has been damaging to the company and its shareholders,” said Hadfield. “This action is necessary to protect the interests of the company and its shareholders, which is at all times the sole focus of management and the Board.”
CryptoLogic also announced Monday that requisitions for an EGM of the shareholders received from Aziz and Cede & Co. on February 18, 2009 appear insufficient to cause one to be called. CryptoLogic’s Board of Directors believes that the demands do not relate to shares equaling a minimum of 10% of the issued and outstanding voting stock of the company, which is the threshold required to allow shareholders to requisition an EGM. In a letter sent on Monday, the company advised Aziz and Cede & Co. of the insufficiency of the requisitions and of various other deficiencies and concerns with respect to the requisitions.
CryptoLogic’s new business strategy is in the advanced stages of implementation and shareholders will have the chance to evaluate the company’s progress at an annual general meeting expected in late May or early June. “CryptoLogic’s management and board are focused and united on the strategy to return the company to profitability by continuing to add new customers, lower our costs, and lead the market with innovation,” said Hadfield. “Delivering value for customers and shareholders is our highest priority and we will not be distracted from that goal.”
CryptoLogic’s shares were down 4.58% at the time of writing Monday on the NASDAQ Stock Exchange, falling $0.23 compared with Friday’s close. The company can be found under the symbol “CRYP.”
