SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a party other than the Registrant / /
Check the appropriate box:
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/ / 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)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 1999
------------------------
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, pursuant to due call by the Board of
Directors of the Company, at the Alexis Park Hotel, 375 E. Harmon Avenue, Las
Vegas, Nevada, on Friday, May 14, 1999, at 3 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 five directors for the ensuing year.
2. To consider and vote upon a proposal to approve our Employee Stock
Purchase Plan.
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1999.
4. To act upon any other business that may properly come before the meeting
or any adjournments thereof.
Pursuant to due action of the Board of Directors, only shareholders of
record on April 7, 1999 will be entitled to notice of and to vote at the meeting
or any adjournments thereof.
WHETHER OR NOT YOU PLAN TO COME TO THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE REPLY ENVELOPE PROVIDED. 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/ Lona M.B. Finley
Lona M.B. Finley,
SECRETARY
April 16, 1999
PROXY STATEMENT
OF
PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 14, 1999
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
14, 1999. The approximate date upon which this Proxy Statement and the
accompanying Proxy are expected to be first sent or given to shareholders is
April 16, 1999. 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 7, 1999 (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 Annual
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.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company's only outstanding class of voting securities is Common Stock,
$0.01 par value, of which 3,648,211 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) .................................................. 1,078,986 29.5%
Robert M. Mann(1) ...................................................... 44,000 1.2%
Peter D. Cleary(1) ..................................................... 37,600 1.0%
Steven M. Des Champs ................................................... 2,500 *
Lona M.B. Finley(1)(3) ................................................. 379,077 10.1%
Charles R. Patterson ................................................... 12,000 *
801 12th Avenue North
Minneapolis, MN 55411
Joel M. Koonce ......................................................... 14,500 *
5500 Cenex Drive
Inver Grove Heights, MN 55077
James M. Morrell ....................................................... 11,000 *
1323 Waterford Road
Woodbury, MN 55125
All officers and directors as a group (8 persons) ...................... 1,579,663 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 5,000 shares held by Ms. Finley as custodian for her son and 11,200
shares held as co-trustee for minor child also claimed by spouse a
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: Robert M.
Mann, 44,000 shares; Peter D. Cleary, 37,000 shares; Lona M.B. Finley,
119,591 shares; Charles R. Patterson, 11,000 shares; Joel M. Koonce, 11,000
shares; James L. Morrell, 11,000 shares; all executive officers and
directors as a group, 238,591 shares.
CERTAIN TRANSACTIONS
Johan P. Finley, the Company's President, Chief Executive Officer, Chairman
of the Board and controlling shareholder, received a fee in the amount of
$20,000 in 1998 and $70,000 in 1997 in exchange for giving a personal guarantee
of amounts loaned to the Company under certain bank lines of credit in 1998 and
1997.
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. Charles R.
Patterson, an incumbent director, has advised the Company that he will retire
from the Board on the date of the Annual Meeting. At this time, the Board of
Directors has not nominated a director to fill the vacancy that will be created
by Mr. Patterson's retirement. The Board of Directors has designated Johan P.
Finley, Peter D. Cleary, Joel M. Koonce, James L. Morrell 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 directors, and
the directors' respective terms of office is presented below.
JOHAN P. FINLEY, age 37 is the founder of the Company and has been its
President, Chief Executive Officer and Chairman of the Board of Directors of
the Company since its inception in February 1988. 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 41, has been a member of the Company's Board of
Directors since January 1996 and has been Executive Vice President of the
Company since November 1998. Prior to becoming Executive Vice President of
the Company, Mr. Cleary served as Vice President and Chief Financial Officer
since September 1995. From 1980 to 1995, Mr. Cleary served in various
positions with Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP),
most recently as Audit Manager. PricewaterhouseCoopers LLP provides
accounting services to the Company.
CHARLES R. PATTERSON, age 56, has been a member of the Company's Board of
Directors since March 1994. Since 1992, he has served as President of The
Walman Optical Company, a Minnesota manufacturer and distributor of
eyeglasses, accessories and ophthalmic examination equipment. He has served
in various capacities with Walman Optical since 1971. Mr. Patterson is a
member of the Board of Directors of F D Optical Manufacturing, Inc., a
Minnesota optical company, and also serves as a member of the Regional Board
of the Optical Laboratory Association of the United States.
2
JOEL M. KOONCE, age 60, 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. He is a member of the Board
of Directors of St. Paul Bank for Cooperatives.
JAMES L. MORRELL, age 45, 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 a director of MI
Acquisition Corp., the parent company of Miller & Schroeder Financial, Inc.
Miller & Schroeder has provided investment banking services to the Company.
LONA M.B. FINLEY, age 34, has been a member of Company's Board of Directors
since May 1998, Director of Compliance since January 1996, and Secretary and
Chief Administrative Officer of the Company since July 1998. Prior to
becoming Secretary, Ms. Finley served in various other positions with the
Company since 1988, most recently as Treasurer from December 1993 until
November 1998. Ms. Finley is the spouse of Johan P. Finley.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, which currently consists of
James L. Morrell and Joel M. Koonce. The Audit Committee reviews and makes
recommendations to the Board of Directors with respect to designated financial
and accounting matters. The Audit Committee held one meeting during 1998.
The Board of Directors has a Compensation Committee, which currently
consists of Johan P. Finley, Charles R. Patterson and Joel M. Koonce. The
Compensation Committee determines executive compensation and administers the
provisions of the Company's 1993 Stock Option Plan. The Compensation Committee
held four meetings during 1998.
The Board of Directors has no standing nomination committee.
During 1998, the Board of Directors held four 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 $7,500
and a fee of $1,000 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. 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 the director is
re-elected or is serving an unexpired term. Messrs. Patterson and Koonce each
received 10,000 such options in March 1994 and April 1994, respectively, 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. 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, Messrs. Morrell, Patterson and Koonce each received 5,000 such options,
which have an exercise price of $9.13 per share. 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
3
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. A shareholder who abstains with respect to the
election of Directors is considered to be present and entitled to vote on the
election of Directors at the Meeting, and is in effect casting a negative vote;
a shareholder (including a broker) who does not attend the Meeting and who does
not give authority to a proxy to vote, or withholds authority to vote, on the
election of Directors shall not be considered present and entitled to vote on
the election of Directors.
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.
EXECUTIVE OFFICERS
The Executive Officers of the Company are:
NAME AGE TITLE
- ------------------------------------ --- ------------------------------------------------------
Johan P. Finley..................... 37 Chief Executive Officer and President
Robert M. Mann...................... 41 Executive Vice President
Peter D. Cleary..................... 41 Executive Vice President
Steven M. Des Champs................ 34 Chief Financial Officer and Treasurer
Lona M.B. Finley.................... 34 Chief Administrative Officer, Secretary and Director
of Compliance
Johan P. Finley, is the founder of the Company and has been its President,
Chief Executive Officer and Chairman of the Board of Directors since its
inception in February 1988. In addition, Mr. Finley was the President and Chief
Executive Officer of RCM Inc. and Home Products from 1991 to 1994.
Robert M. Mann has been an Executive Vice President of the Company since
March 1995. Mr. Mann began his career in equipment financing and leasing in
1974. Prior to joining the Company, Mr. Mann was Senior Vice President of the
Capital Finance Division of ITT Commercial Finance. During his 15 years with
ITT, Mr. Mann also served in a variety of capacities including Manager-Portfolio
Control and Senior Analyst-Portfolio Control. Mr. Mann resigned from the Company
on April 15, 1999.
Peter D. Cleary has been an Executive Vice President of the Company since
November 1998. Prior to serving as Executive Vice President, Mr. Cleary served
as Vice President and Chief Financial Officer of the Company since September
1995. From 1980 until 1995, Mr. Cleary serviced in various positions with
Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP), most recently as
Audit Manager.
Steven M. Des Champs has been Chief Financial Officer and Treasurer of the
Company since November 1998. Prior to joining the Company, Mr. Des Champs served
as Director of Finance for Alliance Gaming Corp. since October 1995. From August
1988 until October 1995, Mr. Des Champs held various positions within KPMG Peat
Marwick, most recently as Senior Audit Manager.
4
Lona M.B. Finley has been Secretary of the Company since November 1998 and
Chief Administrative Officer since July 1998. Prior to becoming Secretary, Ms.
Finley has served in various other positions with the Company, most recently as
Treasurer from December 1993 until November 1998.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and each of the four other
executive officers who received total salary and bonus in excess of $100,000 in
1998.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- -------------------------------------- --------- ------------- ------------ ------------- -------------
Johan P. Finley ...................... 1998 $ 318,750 $ 96,320(6) 25,000 $ 29,009(1)
President and Chief Executive 1997 210,000 -- -- 153,104(1)
Officer 1996 159,135 33,902 -- 45,397(1)
Robert M. Mann ....................... 1998 $ 148,892 $ 13,671(6) -- $ 46,940(2)
Executive Vice President 1997 137,207 21,006 -- 9,550(2)
1996 127,764 19,165 9,020(2)
Peter D. Cleary ...................... 1998 $ 136,667 $ 16,250(6) 15,000 $ 32,747(3)
Executive Vice President 1997 100,000 15,500 -- 3,534(3)
1996 85,744 12,862 -- --
Steven M. Des Champs ................. 1998 $ 15,000(4) $ -- 50,000 $ --
Chief Financial Officer and
Treasurer
Lona M. B. Finley .................... 1998 $ 87,326 $ 19,700(6) 15,000 $ 3,681(5)
Chief Administrative Officer and 1997 60,615 9,223 -- 8,926(5)
Secretary 1996 57,775 8,469 -- 8,982(5)
- ------------------------
(1) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $5,000, $4,750 and $4,500 in 1998, 1997 and 1996, respectively, an
automobile allowance of $1,984 and $12,000 in 1997 and 1996, fees in the
amount of $20,000, $70,000 and $27,654 paid for personally guaranteeing bank
lines of credit in 1998, 1997 and 1996, respectively, personal use of a
Company automobile and reimbursement for moving and temporary living
expenses in the amount of $4,909 and $76,370 in 1998 and 1997.
(2) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $5,000, $4,750 and $2,877 in 1998, 1997 and 1996, respectively,
and an annual automobile allowance of $4,800, $4,800 and $4,500 in 1998,
1997 and 1996, and $37,140 reimbursement for moving and temporary living
expenses in 1998. Mr. Mann resigned from the Company on April 15, 1999.
(3) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $3,008 and $2,267 in 1998 and 1997, respectively, and
reimbursement for moving and temporary living expenses in the amount of
$29,739 and $1,267 in 1998 and 1997.
(4) Mr. Des Champs joined the Company on November 16, 1998.
(5) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $3,006, $3,751 and $3,582 in 1998, 1997 and 1996, respectively,
and an annual automobile allowance of $675, $5,175 and $5,400 in 1998, 1997
and 1996, respectively.
5
(6) Bonus amounts were paid in 1998 for work performed in 1997. No bonuses were
awarded to named executives for work performed in 1998.
EMPLOYMENT AGREEMENTS
In February 1998, the Company entered into a five-year employment agreement
with Johan P. Finley as President and Chief Executive Officer. 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 February 1995, the Company entered into a five-year employment agreement
with Robert M. Mann to serve as Executive Vice President. In accordance with an
income-based formula, Mr. Mann is eligible to earn a bonus of up to 20% of his
base salary. Under his employment agreement, Mr. Mann may receive an annual
discretionary bonus of up to 15% of his base salary. Mr. Mann resigned from the
Company on April 15, 1999.
In September 1995, the Company entered into an employment agreement with
Peter D. Cleary which renewed automatically for a one year term in September
1998 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.
In November 1998, the Company entered into a two-year employment agreement
with Steven M. Des Champs to serve as Chief Financial Officer. In accordance
with an income-based formula, Mr. Des Champs may earn a performance bonus of no
less than 10% of his base salary and is eligible to receive a discretionary
bonus of up to an additional 10% of his base salary. The agreement also provides
that Mr. Des Champs is entitled to a payment equal to nine months of his base
compensation then if effect if he terminates his employment with the Company
following a change in control or if the Company terminates his employment
without cause.
In March 1994, the Company entered into a three-year employment agreement
with Lona M.B. Finley which automatically renews for additional one-year terms.
In accordance with an income-based formula, Ms. Finley is eligible to earn a
bonus of up to 55% of her base salary. The agreement provides that Ms. Finley is
entitled to a payment in the amount of two times her base salary then in effect
upon a termination of her employment by the Company, a change in control of the
Company or a sale of a majority of the Company's assets.
Each employment agreement is subject to earlier termination for cause or
upon disability or death. In the case of disability, the Company has agreed to
continue salary payments for a six-month term. Messrs. Finley, Mann and Cleary
have agreed not to compete with the Company following termination of employment
for a period of two years. Mr. Des Champs is subject to a one-year non-compete
provision which is automatically reduced to nine months if Mr. Des Champs'
employment is terminated by the Company without cause.
6
The Company has a 401(k) profit-sharing 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.
1998 STOCK OPTION GRANTS
The following table summarizes stock option grants made in 1998 to the
executive officers named in the summary compensation table above, and the value
of the options held by such persons as of the end of 1998.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF OPTION TERM ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS ------------------------ PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERMS(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1) 1998 ($/SHARE) DATE 5% 10%
- ---------------------------------------- ----------- --------------- ----------- ----------- ---------- ----------
Johan P. Finley......................... 25,000 7.3% $ 10.04 5/14/08 $ 121,000 $ 341,000
Robert M. Mann.......................... -- -- -- -- -- --
Peter D. Cleary......................... 15,000 4.4% 9.13 5/14/08 86,000 218,000
Steven M. Des Champs.................... 50,000 14.6% 3.75 11/16/08 118,000 299,000
Lona M.B. Finley........................ 15,000 4.4% 10.04 5/14/08 72,000 205,000
- ------------------------
(1) Options become exercisable 20% per year over a five year period beginning
one year after the date of grant.
(2) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual assumed appreciation rates of 5% and 10%, as
set by the Securities and Exchange Commission, and therefore is not intended
to represent either historical appreciation or anticipated future
appreciation of the common stock.
1998 YEAR-END OPTION VALUE TABLE
The following table sets forth the number and dollar value of all exercises
of options and the number and aggregate dollar value of all unexercised options
held by the named executive officers as of the end of 1998. The value of each
unexercised, in-the-money option was determined by multiplying (i) the
difference between (a) the market price of a share of Common Stock as of the end
of 1998 ($2.88), and (b) the exercise price of the option, by (ii) the number of
shares subject to the option.
NUMBER OF SHARES SUBJECT TO VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------------- ----------------------------
NAME EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Johan P. Finley......................................... -- 25,000 $ -- $ --
Robert M. Mann.......................................... 34,000 20,000 5,000 --
Peter D. Cleary......................................... 34,000 35,000 16,000 7,500
Steven M. Des Champs.................................... -- 50,000 -- --
Lona M.B. Finley........................................ 116,591 15,000 23,000 --
7
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policies for all executive officers of
the Company. The Committee establishes the total compensation for the executive
officers in light of these policies. 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 1998 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 financial services industry.
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 financial
services industry 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 structure and earnings goals for the executive performance bonus program
are reviewed and adjusted annually by the Committee. Discretionary bonus awards
for the executive officers are initially determined by the Chief Executive
Officer and are submitted to the Committee for discussion and approval. 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 ("Incentive Options"), or those that do not
qualify as "incentive stock 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 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 342,000 shares
8
in 1998 and options to purchase 93,500 shares during the period from January 1,
1999 through April 7, 1999, all of which vest over a period of five years.
As of the Record Date, options to purchase 796,500 shares of Common Stock
were outstanding, with exercise prices ranging from $1.63 per share to $10.04
per share, to 60 employees, 201,900 of which are currently exercisable. In
addition, pursuant to the Stock Option Plan, newly elected non-employee
directors of the Company each receive an automatic grant of a Non-Statutory
Option to purchase 10,000 shares of Common Stock on the date they first become a
director. As of May 14, 1998, non-employee directors also receive an annual
grant of an option to purchase 5,000 shares of Common. No other options have
been granted or are expected to be granted to directors who are not also
executive officers or other employees. Future grants of options to executive
officers and other employees under the Stock Option Plan are not determinable.
EXECUTIVE OFFICER COMPENSATION
The executive officers' compensation was established at the beginning of
1998 and ratified by the Compensation Committee.
CEO COMPENSATION
In evaluating the compensation of Mr. Finley, the Committee considered both
qualitative and quantitative aspects of the Company's performance and negotiated
a new employment agreement for Mr. Finley which is described in "Executive
Compensation--Employment Agreements" above. Mr. Finley has served as the
Company's President and Chief Executive Officer since its inception. Effective
February 1, 1998, the Committee approved a new employment contract for Mr.
Finley which raised his base compensation to $325,000 annually. The increase in
Mr. Finley's base compensation was made after considering comparable data in the
industry, as well as the ongoing reliance by the Company on the substantial
sales efforts of Mr. Finley.
During 1998 the Company did not meet certain performance objectives spelled
out in Mr. Finley's employment agreement, and therefore no bonuses were paid to
Mr. Finley for 1998.
JOHAN P. FINLEY, CHARLES R. PATTERSON AND JOEL M. KOONCE
The Members of the Compensation Committee
9
COMPARATIVE STOCK PERFORMANCE
The table below compares the cumulative total shareholder return on the
Common Stock of the Company for the 57 month period ending December 31, 1998
with the cumulative total return, assuming reinvestment of dividends, of (i) the
Nasdaq Stock Market and (ii) an index of peer companies tha tthe Company
believes are comparable to the Company in terms of their lines of business. The
presentation assumes $100 was invested on May 19, 1994 (the first trading day
after the Company's initial public offering). The company peer group used in the
graph below consists of Casino Data Systems, Mikohn Gaming Corp., Paul-son
Gaming Corp., Shuffle Master Inc., Capital Associates Inc., PLM International
Inc. and Sunrise International Leasing Corp.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF 57 MONTH CUMULATIVE TOTAL RETURN*
AMONG PDS FINANCIAL CORP., THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
DOLLARS PDS Financial Corp.
5/19/94 100
12/94 116
12/95 30
12/96 35
12/97 135
12/98 63
*$100 INVESTED ON 5/19/94 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
DOLLARS Peer Group Nasdaq Stock Market (U.S.)
5/19/94 100 100
12/94 59 97
12/95 78 137
12/96 54 168
12/97 53 206
12/98 44 291
*$100 INVESTED ON 5/19/94 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
10
ITEM 2: PROPOSAL TO APPROVE THE PDS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
GENERAL
On January 30, 1999, the Board of Directors adopted the PDS Financial
Corporation Employee Stock Purchase Plan (the "Purchase Plan"), subject to
shareholder approval. The Purchase Plan provides for the purchase of shares of
Common Stock by employees of the Company and of its subsidiaries at the end of
any purchase period (the "Purchase Period"). The initial Purchase Period will
begin June 1, 1999. The Purchase Plan is intended to qualify under Section 423
of the Code.
The following summary of the Purchase Plan is qualified in its entirety by
reference to the full text of the Purchase Plan, which is attached to this Proxy
Statement as Exhibit A.
SUMMARY OF THE PURCHASE PLAN
PURPOSE. The purpose of the Purchase Plan is to provide employees of the
Company and certain related corporations with an opportunity to share in the
ownership of the Company by providing them with a convenient means for regular
and systematic purchases of Common Stock and, thus, to develop a stronger
incentive to work for the continued success of the Company.
ADMINISTRATION. The Purchase Plan will be administered by the Compensation
Committee of the Board of Directors or such other committee as established by
the Board of Directors (the "Committee"). The Committee may delegate its powers
and duties under the Purchase Plan to one or more members of the Board of
Directors, who may also be officers of the Company. The Committee has full
authority to interpret the Purchase Plan and establish rules and regulations for
the administration of the Purchase Plan. Decisions of the Committee are final
and binding on all parties who have an interest in the Purchase Plan. The Board
of Directors may exercise the Committee's powers and duties under the Purchase
Plan.
STOCK PURCHASES. The Purchase Plan permits Common Stock to be sold to
participating employees on the last business day of any Purchase Period at a
price equal to the lesser of (i) 85% of the fair market value of Common Stock on
the first business day of the Purchase Period or (ii) 85% of the fair market
value of Common Stock on the last business day of each Purchase Period. The
first Purchase Period will begin June 1, 1999 and end on the last business day
of September 1999. Thereafter, each three-month Purchase Period will begin on
the first business day in each of January, April, July and October of each year
and end on the last business day in each of March, June, September and December
of each year
ELIGIBILITY. Any employee of the Company or any subsidiary (other than any
employee whose customary employment is less than 20 hours per week or any
employee who has not been employed by the Company or its subsidiaries for more
than 3 months) is eligible to participate in the Purchase Plan. As of March 26,
1999, there were approximately 52 persons who were eligible to participate in
the Purchase Plan.
NUMBER OF SHARES. The Purchase Plan provides for the issuance of up to
150,000 shares of Common Stock, subject to adjustment in the event of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
amendment to the Company's Articles of Incorporation, reverse stock split,
merger, consolidation or otherwise. The shares of Common Stock to be sold under
the Purchase Plan may be authorized but unissued shares or shares acquired in
the open market or otherwise.
No participant may purchase (a) more than 24,000 shares under the Purchase
Plan for a given Purchase Period or (b) shares having a fair market value
(determined at the beginning of each Purchase Period) exceeding $25,000 under
the Purchase Plan and all other employee stock purchase plans (if any) for any
calendar year.
The closing price of the Company's Common Stock on March 26, 1999, as
reported by the Nasdaq National Market System, was $2.50 per share.
11
CERTAIN TERMS AND CONDITIONS. Participating employees may direct the
Company to make payroll deductions of any whole percentage from 1% through 15%
of their current, regular compensation (excluding annual bonuses, expense
allowances and all other forms of special compensation) for each pay period
during the Purchase Period. Participating employees may withdraw from the
Purchase Plan at any time (although no employee may enroll again after a
withdrawal until commencement of the next Purchase Period). Upon a participant's
termination of employment with the Company or a subsidiary for any reason,
participation in the Purchase Plan will cease. In the event of termination due
to death, the participant's estate may elect to have the balance of the
participant's share purchase account paid, in cash, to the participant's estate
or a designated beneficiary within 30 days after the end of the Purchase Period
during which such termination occurred. In the event of any other termination
other than termination due to normal or early retirement, the balance of the
participant's share purchase account will be paid, in cash, to the participant
within 30 days after such termination.
Promptly after the last day of each Purchase Period and subject to any terms
and conditions the Committee may impose, the Company will cause the Common Stock
purchased to be issued to the participants. All Common Stock issued under the
Plan will be issued in uncertificated form.
DURATION, TERMINATION AND AMENDMENT. Unless earlier discontinued or
terminated by the Board of Directors, the Purchase Plan shall automatically
terminate when all of the shares of Common Stock issuable under the Purchase
Plan have been sold. The Purchase Plan permits the Board of Directors to amend
or discontinue the Purchase Plan at any time, except that prior shareholder
approval will be required for any amendment which would (a) authorize an
increase in the number of shares of Common Stock which may be purchased under
the Purchase Plan, (b) permit the issuance of Common Stock before payment in
full is received, (c) increase the rate of payroll deductions above 15% of
compensation, (d) reduce the price per share at which the Common Stock may be
purchased, or (e) cause Rule 16b-3 under the Exchange Act to become unavailable
with respect to the Purchase Plan.
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 PDS Financial Corporation Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
PDS FINANCIAL CORPORATION EMPLOYEE STOCK PURCHASE PLAN.
ITEM 3: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At the meeting, a vote will be taken on a proposal to ratify the appointment
of PricewaterhouseCoopers LLP by the Board of Directors to act as independent
accountants of the Company for the fiscal year ending December 31, 1999.
PricewaterhouseCoopers LLP are independent accountants and auditors who have
audited the accounts of the Company annually since 1992.
Representatives of PricewaterhouseCoopers LLP 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
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS.
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.
12
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 and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and beneficial owners of more than ten percent
of the outstanding shares of Common Stock 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 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, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
ten-percent owners were satisfied except that Lona M.B. Finley was late
reporting changes in stock ownership of Johan Finley (of which she disclaims
beneficial ownership) on two occasions.
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, 1999, 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, 1999; 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/ Lona M.B. Finley
Lona M.B. Finley
SECRETARY
13
EXHIBIT A
PDS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I. INTRODUCTION
SECTION 1.01--PURPOSE. The purpose of the PDS Financial Corporation
Employee Stock Purchase Plan (the "Plan") is to provide employees of the Company
and certain Affiliates with an opportunity to share in the ownership of the
Company by providing them with a convenient means for regular and systematic
purchases of the Company's Stock and, thus, to develop a stronger incentive to
work for the continued success of the Company.
SECTION 1.02--RULES OF INTERPRETATION. It is intended that the Plan be an
"employee stock purchase plan" as defined in Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder. Accordingly, the Plan shall be interpreted and
administered in a manner consistent therewith if approved by the Company's
shareholders. All Participants in the Plan will have the same rights and
privileges consistent with the provisions of the Plan.
SECTION 1.03--DEFINITIONS. For purposes of the Plan, the following terms
will have the meanings set forth below:
(a) "ACCELERATION DATE" means either an Acquisition Date or a Transaction
Date.
(b) "ACQUISITION DATE" means (i) the date of public announcement of the
acquisition of "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") or any
successor rule thereto) of more than fifty percent (50%) of the outstanding
voting stock of the Company by any "person" (as defined in Section 13(d) of the
Exchange Act) other than the Company, by means of a tender offer, exchange offer
or otherwise; and (ii) the date five (5) business days after the date of public
announcement of the acquisition of beneficial ownership (as so defined) of more
than twenty-five percent (25%) but not more than fifty (50%) of the outstanding
voting stock of the Company by any person (as so defined) other than the
Company, by means of a tender offer, exchange offer or otherwise if, during such
five (5) business day period, the Board or the Committee has not, by resolution
duly adopted, elected that such acquisition not give rise to an Acquisition
Date. In any such resolution, the Board or Committee may elect that any
continued acquisition or acquisitions by the same person (as so defined) which
would otherwise trigger an Acquisition Date under clause (ii) above shall also
not give rise to an Acquisition Date.
(c) "AFFILIATE" means any parent or subsidiary corporation of the Company,
as defined in Sections 425(e) and 425(f) of the Code.
(d) "BOARD" means the Board of Directors of the Company.
(e) "COMMITTEE" means the committee described in Section 10.01 of the Plan.
(f) "COMPANY" means PDS Financial Corporation, a Minnesota corporation, and
its successors by merger or consolidation as contemplated by Article XI of the
Plan.
(g) "CURRENT COMPENSATION" means the gross cash compensation (including
wage, salary and overtime earnings) paid by the Company or a Participating
Affiliate to a Participant in accordance with the terms of employment, but
excluding all bonus payments, expense allowances and compensation payable in a
form other than cash.
(h) "FAIR MARKET VALUE" as of a given date means such value of the Stock
which is equal to (i) the last sale price of the Stock as reported on the Nasdaq
National Market System on such date, if the Stock is then quoted on the Nasdaq
National Market System; (ii) the average of the closing representative bid and
asked prices of the Stock as reported on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") on such date, if the Stock is then
quoted on Nasdaq; or (iii) the closing price of the Stock on such date on a
national securities exchange, if the Stock is then quoted on a national
securities exchange. If on a given date the Stock is not traded on an
established securities market, the
Committee shall make a good faith attempt to satisfy the requirements of this
Section 1.03(h) and in connection therewith shall take such action as it deems
necessary or advisable.
(i) "PARTICIPANT" means a Permanent Full-Time Employee who is eligible to
participate in the Plan under Section 2.01 of the Plan and who has elected to
participate in the Plan.
(j) "PARTICIPATING AFFILIATE" means an Affiliate which has been designated
by the Committee in advance of the Purchase Period in question as a corporation
whose eligible Permanent Full-Time Employees may participate in the Plan.
(k) "PERMANENT FULL-TIME EMPLOYEE" means an employee of the Company or a
Participating Affiliate as of the first day of a Purchase Period, including an
officer or director who is also an employee, except an employee whose customary
employment is less than twenty (20) hours per week or any employee who has not
been employed by the Company or its Participating Affiliates for more than three
months.
(l) "PURCHASE PERIOD" means the approximate three (3) month periods
beginning on the first business day in each of January, April, July and October
and ending on the last business day in each of March, June, September and
December of each year; PROVIDED, that the initial Purchase Period will commence
on June 1, 1999 and end on the last business day of September 1999; PROVIDED
FURTHER, that the then current Purchase Period will end upon the occurrence of
an Acceleration Date.
(m) "STOCK" means the Company s Common Stock, $.01 par value per share, as
such stock may be adjusted for changes in the stock or the Company as
contemplated by Article XI of the Plan.
(n) "STOCK PURCHASE ACCOUNT" means the account maintained on the books and
records of the Company recording the amount received from each Participant
through payroll deductions made under the Plan.
(o) "TRANSACTION DATE" means the date of shareholder approval of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company stock
would be converted into cash, securities or other property, other than a merger
of the Company in which shareholders immediately prior to the merger have the
same proportionate ownership of stock of the surviving corporation immediately
after the merger; (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company; or (iii) any plan of liquidation or dissolution of
the Company.
ARTICLE II. ELIGIBILITY AND PARTICIPATION
SECTION 2.01--ELIGIBLE EMPLOYEES. All Permanent Full-Time Employees shall
be eligible to participate in the Plan beginning on the first day of the first
full Purchase Period to commence after such person becomes a Permanent Full-Time
Employee. Subject to the provisions of Article VI of the Plan, each such
employee will continue to be eligible to participate in the Plan so long as he
or she remains a Permanent Full-Time Employee.
SECTION 2.02--ELECTION TO PARTICIPATE. An eligible Permanent Full-Time
Employee may elect to participate in the Plan for a given Purchase Period by
filing with the Company, in advance of that Purchase Period and in accordance
with such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company for such purpose (which authorizes
regular payroll deductions from Current Compensation beginning with the first
payday in that Purchase Period and continuing until the employee withdraws from
the Plan or ceases to be eligible to participate in the Plan).
SECTION 2.03--LIMITS ON STOCK PURCHASE. No employee shall be granted any
right to purchase Stock hereunder if such employee, immediately after such a
right to purchase is granted, would own, directly or indirectly, within the
meaning of Section 423(b)(3) and Section 424(d) of the Code, Stock possessing
five percent (5%) or more of the total combined voting power or value of all the
classes of the capital stock of the Company or of all Affiliates.
2
SECTION 2.04--VOLUNTARY PARTICIPATION. Participation in the Plan on the
part of a Participant is voluntary and such participation is not a condition of
employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS AND STOCK PURCHASE ACCOUNT
SECTION 3.01--DEDUCTION FROM PAY. The form described in Section 2.02 of the
Plan will permit a Participant to elect payroll deductions of any whole
percentage from one percent (1%) through fifteen percent (15%) of such
Participant's Current Compensation for each pay period. The Participant may
reduce or increase future payroll deductions (within the foregoing limitations)
by filing with the Company a form provided for such purpose. The effective date
of any reduction in future payroll deductions will be the first day of the next
succeeding pay period. The effective date of any increase in future payroll
deductions will be the first day of the next succeeding Purchase Period. Also,
the Participant may cease making payroll deductions at any time, subject to such
other limitations as the Company in its sole discretion may impose. In the event
that during a Purchase Period the entire credit balance in a Participant's Stock
Purchase Account exceeds 15% of such Participant's Current Compensation, then
payroll deductions for such Participant shall automatically cease, and shall
resume on the first pay period of the next Purchase Period.
SECTION 3.02--CREDIT TO ACCOUNT. Payroll deductions will be credited to the
Participant's Stock Purchase Account on each payday.
SECTION 3.03--INTEREST. No interest will be paid on payroll deductions or
on any other amount credited to, or on deposit in, a Participant's Stock
Purchase Account.
SECTION 3.04--NATURE OF ACCOUNT. The Stock Purchase Account is established
solely for accounting purposes, and all amounts credited to the Stock Purchase
Account will remain part of the general assets of the Company or the
Participating Affiliate (as the case may be).
SECTION 3.05--NO ADDITIONAL CONTRIBUTIONS. A Participant may not make any
payment into the Stock Purchase Account other than the payroll deductions made
pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
SECTION 4.01--NUMBER OF SHARES. Each Participant will have the right to
purchase on the last business day of the Purchase Period all, but not less than
all, of the largest number of whole shares of Stock that can be purchased at the
price specified in Section 4.02 with the entire credit balance in the
Participant's Stock Purchase Account, subject to the limitations that (a) no
more than Twenty Four Thousand (24,000) shares of Stock may be purchased under
the Plan by any one Participant for a given Purchase Period, and (b) in
accordance with Section 423(b)(8) of the Code, no more than Twenty-Five Thousand
Dollars ($25,000) in Fair Market Value (determined at the beginning of each
Purchase Period) of Stock and other stock may be purchased under the Plan and
all other employee stock purchase plans (if any) of the Company and the
Affiliates by any one Participant for any calendar year. If the purchases for
all Participants for any Purchase Period would otherwise cause the aggregate
number of shares of Stock to be sold under the Plan to exceed the number
specified in Section 10.03 of the Plan, each Participant shall be allocated a
pro rata portion of the Stock to be sold for such Purchase Period.
SECTION 4.02--PURCHASE PRICE. The purchase price for any Purchase Period
will be Eighty-five percent (85%) of the lower of (a) the Fair Market Value of
the Stock on the first business day of that Purchase Period and (b) the Fair
Market Value of the Stock on the last business day of that Purchase Period, in
each case rounded up to the next higher full cent.
3
ARTICLE V. EXERCISE OF RIGHT
SECTION 5.01--PURCHASE OF STOCK. On the last business day of a Purchase
Period, the entire credit balance in each Participant's Stock Purchase Account
will be used to purchase the largest number of whole shares of Stock purchasable
with such amount (subject to the limitations of Section 4.01) unless the
Participant has filed with the Company in advance of that date a form provided
by the Company which requests the distribution of the entire credit balance in
cash.
SECTION 5.02--CASH DISTRIBUTIONS. Any amount remaining in a Participant's
Stock Purchase Account after the last business day of a Purchase Period will be
paid to the Participant in cash within thirty (30) days after the end of that
Purchase Period; provided, however, that if the amount remaining in the
Participant's Stock Purchase Account at the end of a Purchase Period results
from the fact that such amount was not sufficient to purchase a whole share of
Stock, such amount will be transferred to the Participant's Stock Purchase
Account for the immediately succeeding Purchase Period.
SECTION 5.03--NOTICE OF ACCELERATION DATE. The Company shall use its best
efforts to notify each Participant in writing at least ten (10) days prior to
any Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN
SECTION 6.01--VOLUNTARY WITHDRAWAL. A Participant may, in accordance with
such terms and conditions as the Committee in its sole discretion may impose,
withdraw from the Plan and cease making payroll deductions by filing with the
Company a form provided for such purpose. In such event, the entire credit
balance in the Participant's Stock Purchase Account will be paid to the
Participant in cash within thirty (30) days. A Participant who withdraws from
the Plan will not be eligible to reenter the Plan until the beginning of the
next Purchase Period following the date of such withdrawal.
SECTION 6.02--DEATH. Participation in the Plan will cease on the date of
the Participant's death, and the entire credit balance in the Participant's
Stock Purchase Account will be paid to the Participant's estate in cash within
thirty (30) days. Each Participant, however, may designate one or more
beneficiaries who, upon death, are to receive the amount that otherwise would
have been paid to the Participant's estate and may change or revoke any such
designation from time to time. No such designation, change or revocation will be
effective unless made by the Participant in writing and filed with the Company
during the Participant's lifetime. Unless the Participant has otherwise
specified in the beneficiary designation, the beneficiary or beneficiaries so
designated will become fixed as of death so that, if a beneficiary survives the
Participant but dies before the receipt of the payment due such beneficiary, the
payment will be made to such beneficiary's estate.
SECTION 6.03--TERMINATION OF EMPLOYMENT. Participation in the Plan also
will cease on the date the Participant ceases to be a Permanent Full-Time
Employee for any reason other than death. In such event, the entire credit
balance in the Participant's Stock Purchase Account will be paid to the
Participant in cash within thirty (30) days. For purposes of this Section 6.03,
a leave of absence which has been approved by the Committee will not be deemed a
termination of employment as a Permanent Full-Time Employee.
ARTICLE VII. NONTRANSFERABILITY
SECTION 7.01--NONTRANSFERABLE RIGHT TO PURCHASE. The right to purchase
Stock hereunder may not be assigned, transferred, pledged or hypothecated
(whether by operation of law or otherwise) and will not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition or levy of attachment or similar process upon
the right to purchase will be null and void and without effect.
4
SECTION 7.02--NONTRANSFERABLE ACCOUNT. The amounts credited to a Stock
Purchase Account may not be assigned, transferred, pledged or hypothecated in
any way, and any attempted assignment, transfer, pledge, hypothecation or other
disposition of such amounts will be null and void and without effect.
ARTICLE VIII. STOCK ISSUANCE
SECTION 8.01--DELIVERY. Promptly after the last day of each Purchase Period
and subject to such terms and conditions as the Committee in its sole discretion
may impose, the Company will cause the Common Stock then purchased to be issued.
All Common Stock issued under the Plan will be issued in uncertificated form.
SECTION 8.02--SECURITIES LAWS. The Company shall not be required to issue
or deliver any Stock prior to registration under the Securities Act of 1933, as
amended, or registration or qualification under any state law if such
registration is required. The Company will use its best efforts to accomplish
such registration (if and to the extent required) not later than a reasonable
time following the Purchase Period, and delivery of Stock may be deferred until
such registration is accomplished.
SECTION 8.03--COMPLETION OF PURCHASE. A Participant will have no interest
in the Stock purchased until the same is issued.
SECTION 8.04--FORM OF OWNERSHIP. The Stock issued under the Plan will be
registered in the name of the Participant or jointly in the name of the
Participant and another person, as the Participant may direct on a form provided
by the Company.
ARTICLE IX. EFFECTIVE DATE AND AMENDMENT
OR TERMINATION OF PLAN
SECTION 9.01--EFFECTIVE DATE. The Plan was approved by the Board on January
30, 1999, and shall be effective upon approval by the shareholders of the
Company.
SECTION 9.02--PLAN COMMENCEMENT. The initial Purchase Period under the Plan
will commence June 1, 1999.
SECTION 9.03--POWERS OF BOARD. The Board may at any time amend or terminate
the Plan, except that no amendment will be made without prior approval of the
shareholders which would (a) authorize an increase in the number of shares of
Stock which may be purchased under the Plan, except as provided in Section
11.01, (b) permit the issuance of Stock before payment therefor in full, (c)
increase the rate of payroll deductions above fifteen percent (15%) of Current
Compensation, (d) reduce the price per share at which the Stock may be
purchased, or (e) absent such shareholder approval, cause Rule 16b-3 to become
unavailable with respect to the Plan.
SECTION 9.04--TERMINATION. The Plan will terminate upon the early to occur
of termination of the Plan by the Board of Directors or when the aggregate
number of shares of Stock to be sold pursuant to Section 10.04 of the Plan have
been sold.
ARTICLE X. ADMINISTRATION
SECTION 10.01--APPOINTMENT OF COMMITTEE. The Plan shall be administered by
the Compensation Committee of the Board or such other committee as determined
and established by the Board. The Committee may delegate its powers and duties
under the Plan to one or more members of the Board, who may also be officers of
the Company, subject to such terms, conditions and limitations as the Committee
may establish in its sole discretion.
SECTION 10.02--POWERS OF COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be
5
effective, and to adopt such other rules and regulations for administering the
Plan as it may deem appropriate. Decisions of the Committee will be final and
binding on all parties who have an interest in the Plan.
SECTION 10.03--POWER AND AUTHORITY OF THE BOARD. Notwithstanding anything
to the contrary contained herein, the Board may, at any time and from time to
time, without further action of the Committee exercise the powers and duties of
the Committee under the Plan.
SECTION 10.04--STOCK TO BE SOLD. The Stock to be issued and sold under the
Plan may be authorized but unissued shares or shares acquired in the open market
or otherwise. Except as provided in Section 11.01, the aggregate number of
shares of Stock to be sold under the Plan will not exceed One Hundred Fifty
Thousand (150,000) shares.
SECTION 10.05--NOTICES. Notices to the Committee should be addressed as
follows:
PDS Financial Corporation
Attention: Secretary
6171 McLeod Drive
Las Vegas, NV 89120
ARTICLE XI. ADJUSTMENT FOR CHANGES IN STOCK OR COMPANY
SECTION 11.01--STOCK DIVIDEND OR RECLASSIFICATION. If the outstanding
shares of Stock are increased, decreased, changed into or exchanged for a
different number or kind of securities of the Company, or shares of a different
par value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Articles of Incorporation, reverse stock split or otherwise, an appropriate
adjustment shall be made in the maximum numbers and kind of securities to be
purchased under the Plan with a corresponding adjustment in the purchase price
to be paid therefor.
SECTION 11.02--MERGER OR CONSOLIDATION. If the Company is merged into or
consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Stock granted under the Plan shall be construed and shall
take effect in accordance with the laws of the State of Minnesota.
6
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
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
/ / 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. Approval of the PDS Financial Corporation Employee Stock
Purchase Plan / / For / / Against / / Abstain
3. Ratification of the appointment of PricewaterhouseCoopers LLP
as independent accountants for 1999
/ / 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 AND 3 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
--------------------------
-------------------------------
-------------------------------
Signature(s) in Box
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.
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 Peter D. Cleary, 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 7, 1999, at the Annual
Meeting of Stockholders of the Company, to be held on Friday May 14, 1999 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