SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
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))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PDS FINANCIAL CORPORATION
- -----------------------------------------------------------------------
(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):
/X/ 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:
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(2) Aggregate number of securities to which transaction
applies:
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(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):
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 2001
------------------------
TO THE SHAREHOLDERS OF PDS FINANCIAL CORPORATION:
Please take notice that the annual meeting of shareholders of PDS Financial
Corporation (the "Company") will be held at the Alexis Park Hotel, 375 E. Harmon
Avenue, Las Vegas, Nevada, on Friday, May 11, 2001, at 3:00 p.m., or at any
adjournment or adjournments thereof, for the purpose of considering and taking
appropriate action with respect to the following:
1. To elect six directors for the ensuing year.
2. To ratify the appointment of the firm of Piercy, Bowler, Taylor & Kern,
Certified Public Accountants & Business Advisors, A Professional
Corporation, as the independent accountants of the Company for the fiscal
year ending December 31, 2001.
3. To amend the 1993 Stock Option Plan to provide for the issuance of an
additional 250,000 shares of stock.
4. To change the name of the Company to PDS Gaming Corporation.
5. To act upon any other business that may properly come before the meeting
or any adjournments thereof.
Only shareholders of record on April 6, 2001 will be entitled to notice of
and to vote at the meeting or any adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE REPLY ENVELOPE PROVIDED TO ENSURE THE PRESENCE OF A QUORUM.
YOUR COOPERATION IN PROMPTLY SIGNING AND RETURNING YOUR PROXY WILL HELP AVOID
FURTHER SOLICITATION EXPENSE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY
DO SO AT ANY TIME BEFORE IT IS EXERCISED.
By order of the Board of Directors,
PDS Financial Corporation
/s/ Joe S. Rolston IV
Joe S. Rolston IV,
SECRETARY
April 17, 2001
PROXY STATEMENT
OF
PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 2001
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PDS Financial Corporation (the "Company")
to be used at the Annual Meeting of Shareholders of the Company to be held
May 11, 2001 (the "Meeting"). The approximate date upon which this Proxy
Statement and the accompanying Proxy are expected to be first sent or given to
shareholders is April 17, 2001. Each shareholder who signs and returns a Proxy
in the form enclosed with this Proxy Statement may revoke the same at any time
prior to its use by giving notice of such revocation to the Company in writing,
in open meeting or by executing and delivering a new Proxy to the Secretary of
the Company. Unless so revoked, the shares represented by each Proxy will be
voted at the meeting and at any adjournments thereof. Presence at the meeting of
a shareholder who has signed a Proxy does not alone revoke that Proxy.
Only shareholders of record at the close of business on April 6, 2001 (the
"Record Date") will be entitled to vote at the Meeting or any adjournments
thereof. All shares which are entitled to vote and are represented at the
Meeting by properly executed proxies received prior to or at the Meeting, and
not revoked, will be voted at the Meeting in accordance with the instructions
indicated on such proxies.
The total number of votes cast by all shareholders either present at the
Meeting or voting by proxy will determine whether an item of business is
approved. A majority of the outstanding shares must be represented in person or
by proxy in order to consider the items of business at the Meeting. Shares as to
which the holder has abstained on any matter (or has withheld authority for a
director) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the Meeting and, for
purposes of determining the approval of each matter as to which the shareholder
has abstained, as having not been voted in favor of such matter. If a broker
submits a proxy that indicates the broker does not have discretionary authority
as to certain shares to vote on one or more matters, those shares will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the Meeting, but will not be considered
as present and entitled to vote with respect to such matters.
A shareholder may revoke his or her proxy at any time before it is voted by
written notice addressed to the Secretary of the Company at the offices of the
Company, by filing another proxy bearing a later date with the Secretary or by
appearing at the meeting and voting in person.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company's only outstanding class of voting securities is Common Stock,
$0.01 par value, of which 3,718,357 shares were outstanding as of the close of
business on the Record Date. Each share of Common Stock is entitled to one vote
on all matters put to a vote of shareholders.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each person
known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding Common Stock, (ii) each director, (iii) each executive
officer of the Company included in the Summary Compensation Table set forth
under the caption "Executive Compensation" below, and (iv) all executive
officers and directors as a group.
Unless otherwise indicated, each of the following persons has sole voting
and investment power with respect to the shares of Common Stock set forth
opposite their respective names:
NAME NUMBER(4) PERCENT OF CLASS
- ---- --------- ----------------
Johan P. Finley(1)(2).............................. 1,086,586 29.0%
Peter D. Cleary(1)................................. 100,035 2.6%
Lona M.B. Finley(1)(3)............................. 394,377 10.3%
Joel M. Koonce(1).................................. 19,500 *
James L. Morrell(1)................................ 16,000 *
Patrick R. Cruzen(1)............................... 2,500 *
All officers and directors as a group (8
persons)......................................... 1,633,054 40.6%
- ------------------------
* Less than 1%
(1) The address of such person is 6171 McLeod Drive, Las Vegas, NV 89120.
(2) Includes 11,200 shares held as co-trustee for minor child also claimed by
spouse as co-trustee. Mr. Finley disclaims beneficial ownership of the
shares held by Lona M.B. Finley, his spouse.
(3) Includes 37,000 shares held by Ms. Finley as custodian for her minor
children and 11,200 shares held as co-trustee for minor child also claimed
by spouse as co-trustee. Ms. Finley disclaims beneficial ownership of the
shares held by Johan P. Finley, her spouse.
(4) Includes shares of Common Stock issuable to the following persons upon
exercise of options that are currently exercisable or that will become
exercisable within 60 days of the date of this Proxy Statement: Johan P.
Finley, 30,000 shares; Peter D. Cleary, 93,000 shares; Lona M.B. Finley,
125,591 shares; Joel M. Koonce, 16,000 shares; James L. Morrell, 16,000
shares; Patrick R. Cruzen, 2,500 shares; all executive officers and
directors as a group, 301,091 shares.
CERTAIN TRANSACTIONS
Johan P. Finley, the Company's Chief Executive Officer, Chairman of the
Board and controlling shareholder, received a fee in the amount of $20,000 in
1999 and $20,000 in 1998 in exchange for providing a personal guarantee of
amounts loaned to the Company under certain bank lines of credit.
ITEM 1: ELECTION OF DIRECTORS
The number of directors currently serving on the Company's Board of
Directors is six. Each director holds office until the next Annual Meeting of
Shareholders or until his or her successor is elected and qualified. The Board
of Directors has designated the incumbent directors, Johan P. Finley, Peter D.
Cleary, Joel M. Koonce, James L. Morrell, Patrick R. Cruzen and Lona M.B. Finley
as nominees for reelection to the Board of Directors of the Company. Each of the
nominees has consented to serve as director, if elected.
Certain biographical information furnished by the Company's six incumbent
directors, and the directors' respective terms of office, is presented below.
JOHAN P. FINLEY, age 39, is the founder of the Company and has been its
Chief Executive Officer and Chairman of the Board of Directors since the
Company's inception in February 1988. He was President of the Company from its
inception to July 1999. In addition, Mr. Finley was the President and Chief
Executive Officer of RCM Inc. and Home Products, Inc. from 1991 to 1994.
PETER D. CLEARY, age 43, has been a member of the Company's Board of
Directors since January 1996 and has been President and Chief Operating Officer
of the Company since July 1999. He was Executive Vice President of the Company
from November 1998 to July 1999. Prior to that, Mr. Cleary
2
served as Vice President and Chief Financial Officer from September 1995 to
November 1998. From 1980 to 1995, Mr. Cleary served in various positions with
Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP), most recently as
Audit Manager.
JOEL M. KOONCE, age 62, has been a member of the Company's Board of
Directors since April 1994. From 1986 to 1998, he served as Chief Financial and
Administrative Officer of CENEX, Inc., a distributor of petroleum and agronomy
products and other farm supplies located in St. Paul, Minnesota. Prior to
joining CENEX, Mr. Koonce served in various management positions with Land
O'Lakes, most recently as Vice President of Administration and Planning for
Agricultural Services. Mr. Koonce served in various management positions for
General Mills from 1965 to 1981.
JAMES L. MORRELL, age 47, has been a member of the Company's Board of
Directors since March 1996. He has been an independent financial consultant
since 1996. From 1986 to 1995, Mr. Morrell was employed by Dain Bosworth
Incorporated, where he held a number of management positions, most recently
Managing Director, Corporate Finance. Mr. Morrell is also acting Chief Financial
Officer of Miller & Schroeder Financial, Inc., and a director of MI Acquisition
Corp., the parent company of Miller & Schroeder Financial, Inc. Miller &
Schroeder has provided investment banking services to the Company.
PATRICK R. CRUZEN, age 54, has been a member of the Company's Board of
Directors since June 2000. He is currently President of Cruzen & Associates,
which offers a wide range of project-based services to the gaming industry.
Mr. Cruzen was previously President and Chief Operating Officer of Grand Casinos
from 1994 to 1996. From 1990 until 1994, Mr. Cruzen served as Senior Vice
President of Finance/Administration of MGM Grand, Inc.
LONA M.B. FINLEY, age 36, has been a member of Company's Board of Directors
since May 1998, and has been an Executive Vice President and Assistant Secretary
since February 2001 and Chief Administrative Officer since July 1998.
Ms. Finley has served in various other positions with the Company since 1988,
and is the spouse of Johan P. Finley.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, which currently consists of Joel M. Koonce (Chairman),
James L. Morrell and Patrick R. Cruzen, reviews and makes recommendations to the
Board of Directors with respect to designated financial and accounting matters.
The Audit Committee held six meetings during 2000.
The Compensation Committee, which currently consists of Patrick R. Cruzen
(Chairman), Johan P. Finley and Joel M. Koonce, determines executive
compensation and administers the provisions of the Company's 1993 Stock Option
Plan. The Compensation Committee held four meetings during 2000.
The Board of Directors has no standing nominations committee.
During 2000, the Board of Directors held seven meetings. All incumbent
directors attended 100% of those meetings of the Board and committees on which
they were members that were held while they were serving on the Board or on such
committees.
COMPENSATION OF DIRECTORS
Each non-employee Board member receives an annual cash retainer of $10,000
and a fee of $1,750 for each Board meeting attended. Upon election or
appointment to the Board of Directors, each non-employee director is
automatically granted a non-qualified option to purchase 10,000 shares of the
Company's Common Stock at its fair market value on the date of grant.
Mr. Koonce received 10,000 such options in April 1994 which have an exercise
price of $5.00 per share. Mr. Morrell received 10,000 such options in
March 1996 with an exercise price of $2.50 per share. These options have a term
of ten years and
3
become exercisable as to 2,500 shares on the date of each Annual Meeting of
Shareholders at which the director is re-elected or is serving an unexpired
term. In June 2000, upon election to the Board of Directors, Mr. Cruzen received
10,000 options, which have an exercise price of $1.22 per share. These options
have a term of ten years and become exercisable as to 2,500 shares on the date
of each Annual Meeting of Shareholders at which Mr. Cruzen is re-elected or is
serving an unexpired term. Beginning May 14, 1998, the Company implemented a
policy to grant a non-qualified stock option to purchase 5,000 shares of the
Company's Common Stock at its fair market value on the date of grant to each
non-employee director on an annual basis. In May 1998, May 1999 and May 2000,
Messrs. Morrell and Koonce each received 5,000 such options, which have an
exercise price of $9.13, $2.94 and $1.34 per share, respectively. These options
have a term of ten years and become exercisable as to 1,000 shares on the date
of each Annual Meeting of Shareholders at which the director is re-elected or is
serving an unexpired term. The Company reimburses officers and directors for
their authorized expenses.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Common Stock of the Company present and entitled to vote
on the election of Directors or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required for election to the Board of
the nominees named above.
All shares represented by proxies will be voted for the election of the
foregoing nominees unless a contrary choice is specified. If any nominee
withdraws or otherwise becomes unavailable for any reason, the proxies that
would otherwise have been voted for such nominee will be voted for such
substitute nominee as may be selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES.
4
EXECUTIVE OFFICERS
As of the Record Date, the Executive Officers of the Company are:
NAME AGE TITLE
- ---- -------- -----
Johan P. Finley........................... 39 Chief Executive Officer and Chairman of
the Board(1)
Peter D. Cleary........................... 43 President and Chief Operating Officer(2)
Lona M.B. Finley.......................... 36 Executive Vice President, Chief
Administrative Officer and Assistant
Secretary(3)
Joe S. Rolston IV......................... 37 Executive Vice President, General Counsel
and Secretary(4)
Martha Vlcek.............................. 40 Chief Financial Officer and Treasurer(5)
- ------------------------
(1) Mr. Finley is the founder of the Company and has been its Chief Executive
Officer and Chairman of the Board of Directors since the Company's inception
in February 1988. He was President of the Company from its inception to
July 1999.
(2) Mr. Cleary has been a member of the Company's Board of Directors since
January 1996 and has been President and Chief Operating Officer of the
Company since July 1999. He was Executive Vice President of the Company from
November 1998 to July 1999. Prior to that, Mr. Cleary served as Vice
President and Chief Financial Officer from September 1995 to November 1998.
(3) Ms. Finley has been a member of Company's Board of Directors since
May 1998, and has been an Executive Vice President and Assistant Secretary
since February 2001 and Chief Administrative Officer since July 1998.
Ms. Finley has served in various other positions with the Company since
1988.
(4) Mr. Rolston has been an Executive Vice President, General Counsel and
Secretary of the Company since February 2001. Prior to that, he served as
Senior Vice President and General Counsel since April 1999.
(5) Ms. Vlcek has been Chief Financial Officer and Treasurer of the Company
since October 2000. Prior to that, she served as Controller since
July 1999.
5
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and the only other
executive officer as of December 31, 2000 who received total salary and bonus in
excess of $100,000 in 2000 (the "Named Executive Officers").
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- -------- -------- ------------ ------------
Johan P. Finley .......................... 2000 $325,000 $50,000 25,000 $ 8,642(1)
Chief Executive Officer and Chairman of 1999 325,000 -- 25,000 32,980(1)
the Board 1998 318,750 -- 25,000 29,009(1)
Peter D. Cleary .......................... 2000 $140,000 -- -- $ 3,964(2)
President and Chief Operating Officer 1999 140,000 $ 5,430 75,000 4,083(2)
1998 136,667 -- 15,000 32,747(2)
- ------------------------
(1) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $5,250, $5,000, and $5,000 in 2000, 1999 and 1998, respectively,
Company-paid life insurance premiums in the amount of $2,092 and $3,792 in
2000 and 1999, respectively, an automobile allowance of $1,300 and $4,188 in
2000 and 1999, respectively, fees in the amount of $20,000 in each of the
years 1999 and 1998 paid for personally guaranteeing bank lines of credit
and reimbursement for moving and temporary living expenses in the amount of
$4,909 in 1998.
(2) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $3,964, $4,083 and $3,008 in 2000, 1999 and 1998, respectively,
and reimbursement for moving and temporary living expenses in the amount of
$29,739 in 1998.
EMPLOYMENT AGREEMENTS
The following information describes the employment agreements of the Named
Executive Officers.
In February 1998, the Company entered into a five-year employment agreement
with Johan P. Finley. The agreement provides for a monthly salary of $27,083
which is subject to annual increases as recommended by the Compensation
Committee and approved by the Board of Directors. Mr. Finley also receives a
grant of 25,000 stock options each year during the term of the agreement, each
of which vests over a five year period. The agreement provides for annual
bonuses in increments of $50,000 if the Company meets certain earnings per share
projections. The agreement provides that Mr. Finley is entitled to an automobile
of his selection, a life insurance policy and certain other benefits that are
generally available to salaried employees of the Company. The agreement provides
that Mr. Finley is entitled to a payment in the amount of two times his base
salary in effect upon a termination of his employment by the Company, change in
control of the Company or a sale of the majority of the Company's assets. The
agreement also provides that if a majority of the Company's stock is sold to a
single purchaser or a group of purchasers at a per share price equal to 130% of
the average stock price for the previous 180 days, the Company will pay
Mr. Finley a premium bonus equal to two years of base compensation in effect at
the time of sale.
In September 1995, the Company entered into an employment agreement with
Peter D. Cleary which renewed automatically for a one-year term in
September 2000 and will continue to automatically renew for additional one-year
terms unless terminated by either party. In accordance with an income-based
formula, Mr. Cleary is eligible to earn an annual bonus of up to 32.5% of his
base salary. Under his employment agreement, Mr. Cleary may receive an annual
discretionary bonus of up to 15% of his base salary.
6
Each employment agreement is subject to earlier termination for cause or
upon disability or death. Messrs. Finley and Cleary have agreed not to compete
with the Company following termination of employment for a period of two years.
The Company has a 401(k) profit-sharing plan and an employee stock purchase
plan for its employees and may adopt additional bonus, pension, profit-sharing,
retirement or similar plans in the future.
STOCK OPTIONS
In the event of dissolution, liquidation or a change in control of the
Company (as described in the Stock Option Plan), all outstanding options under
the Stock Option Plan will become exercisable in full and each optionee will
have the right to exercise his or her options or to receive a cash payment in
certain circumstances.
2000 STOCK OPTION GRANTS
The following table summarizes certain information concerning stock option
grants made in 2000 to the Named Executive Officers. Shown are hypothetical
gains that could be realized for the respective options, based on assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
options were granted over the term of the options. Any amount realized upon
exercise of the options will depend upon the market price of the Company's
common stock at the time the option is exercised relative to the exercise price
of the option. There is no assurance that the amounts reflected in this table
will be realized.
POTENTIAL REALIZABLE
OPTION TERM VALUE AT ASSUMED
PERCENT OF ------------------------ ANNUAL RATES
NUMBER OF TOTAL OF STOCK
SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERMS
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(1) 2000 ($/SHARE) DATE 5% 10%
- ---- ---------- ------------ ----------- ---------- --------- ---------
Johan P. Finley...................... 25,000 7.7% $1.75 1/31/05 $18,000 $40,000
Peter D. Cleary...................... -- -- -- -- -- --
- --------------------------
(1) Options become exercisable 20% per year over a five-year period beginning
one year after the date of the grant.
2000 YEAR-END OPTION VALUE TABLE
The following table sets forth the number and aggregate dollar value of all
unexercised options held by the Named Executive Officers as of the end of 2000.
At December 31, 2000, the exercise price of all options held by the Named
Executive Officers exceeded the market price of a share of common stock. There
were no options exercised by the Named Executive Officers during 2000.
NUMBER OF SHARES SUBJECT TO VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000
---------------------------- ----------------------------
NAME EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- ---- ----------- -------------- ----------- --------------
Johan P. Finley.............................. 16,250 58,750 -- --
Peter D. Cleary.............................. 75,000 69,000 -- --
7
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors may
exercise the full powers of the Board in all matters relating to the
compensation of the Company's Chief Executive Officer and an incentive plan for
certain key management personnel. The Committee is composed of two non-employee
directors and one employee director.
The following report describes the Company's executive compensation program
and discusses the factors considered by the Committee in determining the
compensation of the Company's Chief Executive Officer and other executive
officers for its 2000 fiscal year.
COMPENSATION PHILOSOPHY
The goals for the executive compensation program are to:
- Motivate executives to assist the Company in achieving superior levels of
financial and stock performance by closely linking executive compensation
to performance in those areas; and
- Attract, retain and motivate executives by providing compensation and
compensation opportunities that are comparable to those offered by other
companies in the gaming and financial services industries.
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
The elements of the executive compensation program are designed to meet the
Company's compensation philosophy. Currently, the Executive Compensation Program
is comprised of annual cash compensation and longer-term stock compensation.
Annual cash compensation consists of base salary and performance bonuses.
For lower-level employees, salaries are set to be competitive for the industry
or marketplace, as appropriate, and bonuses are designed to represent a
relatively small percentage of annual cash compensation. For higher-level
employees, base salaries are in the low to average range for the gaming and
financial services industries and potential bonuses constitute a high percentage
of annual cash compensation. The Company's executive compensation bonus program
has two components: (1) a bonus of up to a specified percentage of base salary
is based upon the Company's earnings performance for the year, and (2) an
additional bonus of up to 15% of base salary can be awarded at the discretion of
the Compensation Committee (the "Committee"). The executive officers'
compensation was established at the beginning of 1998 and ratified by the
Committee.
The structure and earnings goals for the executive performance bonus program
are reviewed and adjusted annually. Discretionary bonus awards for the executive
officers are determined by the Chief Executive Officer and are submitted to the
Committee for discussion. An executive officer's discretionary bonus is based
upon the officer's duties and responsibilities, individual performance and
future potential. Many of these assessments are subjective in nature and are
made annually on a case-by-case basis.
The Company's 1993 Stock Option Plan as amended provides for the granting of
options ("Options") to purchase up to an aggregate of 1,350,000 shares of Common
Stock to certain key employees, officers, directors and consultants of the
Company. Options granted under the Stock Option Plan may be either Options that
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("Incentive Options"), or those that
do not qualify as Incentive Options ("Non-Statutory Options"). The Stock Option
Plan is administered by the Board of Directors and the Committee, which
determines the persons who are to receive Options, the terms and number of
shares subject to each Option and whether the Option is an Incentive Option or a
Non-Statutory Option.
The Company currently anticipates that new executive officers would be
granted options at the time of hiring, which options would typically vest over a
number of years. The Committee believes these grants are
8
in line with external, competitive opportunities and provide a stronger, more
direct motivation to executive officers to increase stockholder value. The
Company awarded options to purchase a total of 326,000 shares in 2000 and
options to purchase 64,000 shares during the period from January 1, 2001 through
April 6, 2001, all of which vest over a period of five years.
As of the Record Date, options to purchase 963,000 shares of Common Stock
were outstanding, with exercise prices ranging from $1.06 per share to $10.04
per share, to 60 employees, 299,000 of which are currently exercisable. Future
grants of options to executive officers and other employees under the Stock
Option Plan are not determinable.
CEO COMPENSATION
In evaluating the compensation of Mr. Finley, the Committee considered both
qualitative and quantitative aspects of the Company's performance. Mr. Finley
has served as the Company's Chief Executive Officer since its inception.
Mr. Finley's base compensation was established after considering comparable data
in the gaming and financial services industries, as well as the ongoing reliance
by the Company on the substantial sales efforts of Mr. Finley. The Committee
negotiated an employment agreement in February 1998 for Mr. Finley, which is
described in "Executive Compensation--Employment Agreements" above.
During 2000, the Company met certain of the performance objectives spelled
out in Mr. Finley's employment agreement, and a bonus of $50,000 was paid in
February 2001 to Mr. Finley accordingly. The Committee determined not to raise
his base compensation.
COMPENSATION COMMITTEE
Patrick R. Cruzen, Chairman
Johan P. Finley
Joel M. Koonce
9
COMPARATIVE STOCK PERFORMANCE
The following graph is a comparison as of December 31, 2000 of cumulative
total return on investment among the Company, the NASDAQ Composite Index (the
"NASDAQ Index") and an index of peer companies that the Company believes are
comparable to the Company in terms of their lines of business (the "Peer Group
Index"):
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG PDS FINANCIAL CORP.,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP**
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PDS FINANCIAL CORP. PEER GROUP NASDAQ STOCK MARKET (U.S.)
12/95 100.00 100.00 100.00
12/96 116.67 123.03 88.84
12/97 450.00 150.68 144.82
12/98 208.33 212.46 114.29
12/99 112.53 394.82 137.82
12/00 81.27 237.37 232.93
*$100 INVESTED ON 12/31/95 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
** PEER GROUP INDEX IS COMPRISED OF THE FOLLOWING COMPANIES:
COMPANY TICKER SYMBOL
- ------- -------------
Casino Data Systems......................................... CDS
Mikohn Gaming Corp.......................................... MIKN
Paul Son Gaming Corp........................................ PSON
PLM International Inc....................................... PLM
Shuffle Master Inc.......................................... SHFL
The following companies, included in the prior year's Peer Group, ceased
doing business in 2000, and are therefore no longer included in the Peer Group:
Capital Associates, Inc..................................... CAH
Sunrise International Leasing Company....................... SUNL
10
ITEM 2: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At the meeting, a vote will be taken on a proposal to ratify the appointment
of Piercy, Bowler, Taylor & Kern ("PBTK") by the Board of Directors to act as
independent accountants of the Company for the fiscal year ending December 31,
2001. PBTK are independent accountants and auditors who have audited the
consolidated financial statements of the Company and its subsidiaries beginning
with the calendar year ended December 31, 1999.
Representatives of PBTK will attend the shareholder meeting. They will have
the opportunity to make a statement if they desire to do so, and will be
available to answer appropriate questions that may be asked by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF PIERCY,
BOWLER, TAYLOR & KERN AS INDEPENDENT ACCOUNTANTS.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three members of the Board of Directors
and operates under a written charter adopted by the Board (Exhibit A). The Board
of Directors has reviewed The Nasdaq Stock Market rules and has determined that
all members of the Audit Committee are independent as defined under Nasdaq's
rules. The Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial
statements with the Company's management.
2. The Audit Committee has discussed with PBTK, the Company's independent
accountants, among other things, the matters required to be discussed by SAS
61 (Communication with Audit Committees).
3. The Audit Committee has received the written disclosures and the
representations from PBTK required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and has discussed
with PBTK their independence.
4. Based on the review and discussion of the above information, the Audit
Committee recommended to the Board of Directors of the Company, and the
Board has approved, that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Joel M. Koonce, Chairman
James L. Morrell
Patrick R. Cruzen
AUDIT AND NON-AUDIT FEES
For the fiscal year ended December 31, 2000, fees for services provided by
PBTK were as follows:
A. Audit and review of financial statements for fiscal year
ended December 31, 2000 and for reviews of financial
statements included in the Company's quarterly reports
on Form 10-Q............................................ $85,720
B. Financial information systems design and
implementation............................................ --
C. All other services...................................... 59,490
The Audit Committee has considered the effect of non-audit services provided
by PBTK on PBTK's independence, and does not believe that such independence has
been impaired or otherwise compromised.
11
ITEM 3: PROPOSAL TO AMEND 1993 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
ISSUANCE THEREUNDER FROM 1,350,000 TO 1,600,000 SHARES
The Board of Directors approved, subject to shareholder approval, an
amendment to the Company's 1993 Stock Option Plan (the "Plan") to increase the
number of shares of Common Stock available for issuance thereunder from
1,350,000 shares to 1,600,000 shares. Of the 1,350,000 shares currently
authorized for issuance pursuant to the Plan, approximately 32,000 shares were
available to the Company as of April 6, 2001 for future option grants. The Board
of Directors believes that the Plan has been and continues to be an important
incentive in attracting, retaining and motivating key employees, and that it is
appropriate to increase the number of shares available for option grants and
other awards under the Plan at this time. Approval of the proposed amendment to
increase the number of authorized shares under the Plan will ensure that
sufficient shares are available to enable the Committee to achieve the
objectives of the Plan to aid in maintaining and developing personnel capable of
assuring the future success of the Company, to offer such personnel additional
incentives to put forth the maximum effort for the success of the business and
to afford them an opportunity to acquire an interest in the Company through
stock options.
The Plan authorizes the granting of Incentive Options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as Non-Statutory Options. Options may be granted to employees, including
officers and directors who are employees, to non-employee directors and to
consultants of the Company or its parents, subsidiaries or affiliates. However,
only employees of the Company or its parent or subsidiary companies are eligible
to receive Incentive Stock Options. The Code also contains additional
limitations restricting the number of shares granted to an optionee that may be
treated as Incentive Stock Options. The Plan will terminate in April 2003. The
Code requires shareholder approval of any amendment increasing the number of
shares available for issuance pursuant to Incentive Stock Options granted under
the Plan.
The Plan is administered by the Compensation Committee (the "Committee").
The Committee determines whether each option is to be an Incentive Option or
Non-Statutory Option, and determines the terms of options granted under the
Plan, including the exercise price, the number of shares subject to the option
and the period of exercisability. No Incentive Option may be exercised more than
ten years after its grant date, provided, however, that no Incentive Stock
Option granted to a person owning more than 10% of the total combined voting
power of all classes of stock of the Company or any parent or subsidiary of the
Company ("Ten Percent Stockholder") may be exercised more than five years from
the date the option is granted. To the extent the aggregate fair market value,
determined at the time the option is granted, of the Common Stock with respect
to which all Incentive Options are exercisable for the first time by an employee
during any calendar year exceeds $100,000, such options shall be treated as
options which do not qualify as Incentive Options. During the lifetime of the
optionee, only the optionee may exercise the option. In the event of a merger of
the Company in which the Company is not the surviving corporation or a
dissolution, liquidation or sale of substantially all of the Company's assets,
all outstanding options will become exercisable at least ten days prior to such
event on such terms as the Committee shall determine, unless the successor
corporation assumes the outstanding options or substitutes substantially
equivalent options.
The exercise price of all Incentive Stock Options granted under the Plan
must be not less than the fair market value of the Common Stock of the Company
at the time the Incentive Stock Options are granted, as determined according to
the Plan. The exercise price of any Incentive Stock Options granted to a Ten
Percent Stockholder must be not less than 110% of the fair market value of the
Common Stock of the Company at the time the Incentive Stock Options are granted,
as determined by the Board of Directors or the Committee in good faith.
12
Under the Plan, the Committee may permit participants, subject to the
discretion of the Committee and upon such terms and conditions as it may impose,
to surrender shares of Common Stock (either shares received upon the exercise of
the option or shares previously owned by the optionee) to the Company to satisfy
federal and state withholding tax obligations. In addition, the Committee may
grant, subject to its discretion and such rules as it may adopt, a bonus to a
participant in order to provide funds to pay all or a portion of federal and
state taxes due as a result of the exercise of the option. The amount of any
such bonus will be taxable to the participant as ordinary income, and the
Company will have a corresponding deduction equal to such amount (subject to the
tax rules concerning reasonable compensation.)
TAX TREATMENT
The grant of a stock option pursuant to the Plan will result in no tax
consequences to the optionee or the Company. The holder of an Incentive Option
generally will have no taxable income upon exercising an Incentive Option
(except that the alternative minimum tax may apply), and the Company generally
will receive no tax deduction when an Incentive Option is exercised. Upon
exercise of a Non-Statutory Option, the optionee must recognize ordinary income
equal to the excess of the fair market value of the shares acquired on the date
of exercise over the option price, and the Company will be entitled to a tax
deduction for the same amount for its taxable year in which the exercise occurs.
The tax consequences to an optionee of a disposition of shares acquired through
the exercise of an option will depend on how long the shares have been held and
upon whether such shares were acquired by exercising an Incentive Option or a
Non-Statutory Option. Generally, there will be no tax consequence to the Company
in connection with a disposition of shares acquired under an option except that
the Company may be entitled to a tax deduction in the case of a disposition of
shares acquired under an Incentive Option before the applicable Incentive Option
holding period has been satisfied.
Special rules apply in the case of individuals subject to Section 16(b) of
the Securities Exchange Act of 1934. In particular, under current law, shares
received pursuant to the exercise of a stock option may be treated as restricted
as to transferability and subject to a substantial risk of forfeiture for a
period of up to six months after the date of exercise. Accordingly, unless a
special tax election is made, the amount of ordinary income recognized and the
amount of the employer's deduction may be determined as of such later date.
The affirmative vote of a majority of the shares of Common Stock entitled to
vote and present in person or by proxy at the Annual Meeting is required for the
approval of the amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE 1993
STOCK OPTION PLAN.
ITEM 4: APPROVAL OF AMENDMENT TO COMPANY'S ARTICLES OF
INCORPORATION TO EFFECTUATE A NAME CHANGE
The Company was incorporated under the laws of the State of Minnesota in
1988. The Company originally operated as a leasing company, specializing in
vehicle and general equipment leasing transactions. However, between 1979 and
1988, gaming activities by various Indian tribes developed. The growth of Indian
gaming served as a catalyst for additional business opportunities for the
Company. The Company began providing equipment financing for new Indian gaming
facilities in the Upper Midwest in early 1991. Since 1994, substantially all of
the Company's gross originations have resulted from transactions in the gaming
industry.
Due to the shift in its business operations, the Company's Board of
Directors has determined that it will be in the best interests of the Company
and its shareholders to change its name from PDS Financial Corporation to PDS
Gaming Corporation. The objective of the name change is to more accurately
reflect the current business activities of the Company in its name. The Company
believes that the name change better communicates the Company's products and
services to market participants in the gaming industry.
13
The Board of Directors approved a resolution to amend the Articles of
Incorporation on August 4, 2000 to change the Company's name to PDS Gaming
Corporation, subject to shareholder approval. By approving this proposal, the
shareholders will authorize the Board of Directors to amend the Company's
Articles of Incorporation accordingly. The amendment embodies Article I changing
the text to:
"Article I. The name of this corporation shall be PDS Gaming Corporation."
After the name change, the Company's Nasdaq SmallCap trading symbol will be
changed from PDSF to PDSG. It will not be necessary for you to surrender your
share certificates upon approval of the proposed name change. Rather, when share
certificates are presented for transfer, new share certificates bearing the name
PDS Gaming Corporation will be issued.
Management expects the formal implementation of the name change with the
Minnesota Secretary of State to be completed by the end of May 2001, after
shareholder approval at the Annual Meeting. There will be no adverse tax
consequences associated with this name change.
The affirmative vote of a majority of the shares of Common Stock entitled to
vote and present in person or by proxy at the Annual Meeting is required for the
approval of amendment to the Company's Articles of Incorporation to effectuate a
name change.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO EFFECTUATE A NAME CHANGE FROM PDS
FINANCIAL CORPORATION TO PDS GAMING CORPORATION.
OTHER MATTERS
As of this date, the Board of Directors does not know of any business to be
brought before the meeting other than as specified above. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with their judgment
on such matters.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities
("Ten Percent Owners") to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and monthly reports of changes in ownership
of a registered class of the Company's equity securities. Directors, executive
officers and Ten Percent Owners are also required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 2000, all
Section 16(a) filing requirements applicable to its directors, executive
officers and Ten Percent Owners were satisfied except that the Form 3 for
Mr. Cruzen was filed late.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders must be received by the Secretary of the Company, PDS
Financial Corporation, 6171 McLeod Drive, Las Vegas, NV 89120, no later than
December 17, 2001, for inclusion in the Proxy Statement for such annual meeting.
Management may use discretionary authority to vote against any shareholder
proposal presented at the next annual meeting if: (1) such proposal has been
properly omitted from the Company's proxy materials under federal securities
law; or (2) notice of such proposal was not submitted to the Secretary of the
Company at the address indicated on the cover of this proxy statement by
December 17, 2001 or does not
14
otherwise comply with requirements in the Company's bylaws; or (3) the proponent
has not solicited proxies in compliance with federal securities law for the
holders of at least the percentage of the Company's voting shares required to
carry the proposal.
SOLICITATION OF PROXIES
The Company will bear the cost of preparing, assembling and mailing the
Proxy Statement, Annual Report and other material which may be sent to the
shareholders in connection with this solicitation. Brokerage houses and other
custodians, nominees and fiduciaries may be requested to forward soliciting
material to the beneficial owners of stock, in which case they will be
reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail, but, in addition, officers and regular employees of
the Company may solicit proxies personally, by telephone, by facsimile or by
special letter.
The Board of Directors does not intend to present to the meeting any other
matter not referred to above and does not presently know of any matters that may
be presented to the meeting by others. However, if other matters come before the
meeting, it is the intent of the persons named in the enclosed Proxy to vote the
Proxy in accordance with their best judgment.
/s/ Joe S. Rolston IV
Joe S. Rolston IV,
SECRETARY
15
EXHIBIT A
PDS FINANCIAL CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
Approved: June 6, 2000
I. PURPOSE
This charter governs the operations of the Audit Committee. The Committee
shall review and reassess this charter at least annually and recommend any
changes to the Board of Directors for approval.
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: (1) the
quality and integrity of the financial reports and other significant financial
information of the Corporation; (2) the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics; and (3) the
Corporation's accounting and financial reporting processes generally. Consistent
with this function, the Audit Committee should encourage continuous improvements
of, and should foster adherence to, the Corporation's policies, procedures and
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV. of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of two or more directors (increasing
to three or more directors at May 31, 2001) who shall serve at the pleasure of
the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. All
members of the Committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. The Chairman of the Board shall appoint the Chair. The
duties and responsibilities of a member of the Audit Committee are in addition
to those duties set out for a member of the Board.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee shall meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee shall meet with the independent accountants and
management quarterly to review the Corporation's financial statements consistent
with IV.3 (below).
A-1
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Reassess the adequacy of this Charter periodically (not less than annually)
and recommend appropriate changes to the Board for approval.
2. Review the Corporation's audited annual financial statements, including
reports on Form 10-K, and any reports or other significant financial
information submitted to any governmental body, or the public, including any
certification, report, opinion, or review rendered by the independent
accountants, including reviewing the nature and extent of any significant
changes in accounting principles or the application therein.
3. Review with the financial management and the independent accountants
quarterly financial statements on Form 10-Q prior to its filing. If
circumstances dictate that such communications cannot be made prior to the
filing, then they should be made as soon as practicable in the
circumstances.
INDEPENDENT ACCOUNTANTS
4. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the fees
and other compensation to be paid to the independent accountants. On an
annual basis, the Committee shall review and discuss with the accountants
all significant relationships the accountants have with the Corporation to
determine the accountants' independence.
5. Review the performance of the independent accountants and make
recommendations to the Board regarding the appointment or termination of the
independent accountants.
6. Periodically consult with the independent accountants out of the presence of
management about internal controls and the fullness and accuracy of the
organization's financial statements.
7. Review the range and cost of audit and nonaudit services performed by the
independent accountants.
8. Discuss with the independent auditor the matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the conduct of the audit.
FINANCIAL REPORTING PROCESSES
9. In consultations with the independent accountants and management, review the
integrity of the organization's financial reporting processes, both internal
and external, including the adequacy of the Corporation's systems of
internal control.
10. Consider the independent accountants' judgment about the quality and
appropriateness of the Corporation's accounting principles as applied in its
financial reporting.
11. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and the practices as suggested by the
independent accountants and management.
PROCESS IMPROVEMENT
12. Establish regular and separate systems of reporting to the Audit Committee
by management and independent accountants regarding any significant
judgments made in management's preparation of the financial statements and
the view of each as to appropriateness of such judgments.
A-2
13. Following completion of the annual audit, review separately with each of
management and the independent accountants, any significant difficulties
encountered during the course of the audit, including any restrictions on
the scope of work or access to required information.
14. Review any significant disagreements among management and the independent
accountants in connection with the preparation of the financial statements.
15. Review with the independent accountants and management the extent to which
changes or improvements in financial or accounting practices, as approved by
the Audit Committee, have been implemented. (This review should be conducted
at an appropriate time subsequent to implementation of changes or
improvements, as decided by the Committee.)
ETHICAL AND LEGAL COMPLIANCE
16. Review policies and procedures with respect to officer's expense accounts
and prerequisites, including their use of corporate assets and consider the
results if any review of these areas by the independent accountant.
17. Review the Corporation's compliance with the Ethical Code, and ensure that
management has the proper review system in place to ensure that the
Corporation's financial statements, reports and other financial information
disseminated to the public and governmental organizations satisfy legal
requirements.
18. Review with the Corporation's counsel, legal compliance matters including
corporate securities trading policies.
19. Review with the Corporation's counsel, any legal matter that could have a
significant impact on the organization's financial statements.
20. Perform any other activities consistent with this Charter, the Corporation's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
21. Report committee actions to the Board with such recommendations as the
Committee may deem appropriate.
22. Prepare a letter for inclusion in the in the Corporation's annual report
that describes the Committee's composition and responsibilities and how they
are discharged.
23. Investigate any matter brought to the Committee's attention within the scope
of its duties, with the power to retain outside counsel for this purpose, if
in its judgment, such action is appropriate.
A-3
PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE, LAS VEGAS, NV 89120 PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
appoints Johan P. Finley and Joe S. Rolston IV, and each of them, with power to
act without the other and with all the right of substitution in each, the
proxies of the undersigned to vote all shares of PDS Financial Corporation (the
"Company") held by the undersigned on April 6, 2001, at the Annual Meeting of
Stockholders of the Company, to be held on Friday May 11, 2001 at 3:00 p.m., at
the Alexis Park Hotel, 375 East Harmon Avenue, Las Vegas, Nevada, and all
adjournments thereof, with all powers the undersigned would possess if present
in person. All previous proxies given with respect to the meeting are revoked.
Receipt of Notice of Annual Meeting of Stockholders and Proxy Statement is
acknowledged by your execution of this proxy. Complete, sign, date, and return
this proxy in the addressed envelope--no postage required. Please mail promptly
to save further solicitation expenses.
SEE REVERSE FOR VOTING INSTRUCTIONS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
1. Election of 01 Johan P. Finley 02 Peter D. Cleary 03 James L. Morrell
directors: 04 Lona M.B. Finley 05 Joel M. Koonce 06 Patrick R. Cruzen
/ / Vote FOR / / Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. Ratification of the appointment of Piercy, Bowler, Taylor & Kern, Certified
Public Accountants & Business Advisors, A Professional Corporation, as
independent accountants for 2001.
/ / For / / Against / / Abstain
3. Amend the 1993 Stock Option Plan to provide for the issuance of an
additional 250,000 shares of stock.
/ / For / / Against / / Abstain
4. Change the name of the Company to PDS Gaming Corporation.
/ / For / / Against / / Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS PROVIDED BY THE UNDERSIGNED
STOCKHOLDER, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES FOR
DIRECTOR NAMED IN ITEM 1 AND FOR PROPOSALS 2, 3 AND 4 LISTED HEREIN. UPON ALL
OTHER MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE
COMPANY.
Address Change? Mark Box / /
Indicate changes below:
Date
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Signature(s)
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR
ON PROXY. IF HELD IN JOINT TENANCY, ALL
PERSONS MUST SIGN. TRUSTEES,
ADMINISTRATORS, ETC., SHOULD INCLUDE TITLE
AND AUTHORITY. CORPORATIONS SHOULD PROVIDE
FULL NAME OR CORPORATION AND TITLE OF
AUTHORIZED OFFICER SIGNING THE PROXY.