Spintek Gaming Technologies, Inc.
901 Grier Drive, Suite B
Las Vegas, Nevada 89119
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 21, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of
Stockholders of Spintek Gaming Technologies, Inc., a California corporation (the
"Company") will be held at the Sam's Town Hotel and Gambling Hall, 5111 Boulder
Highway, Las Vegas, Nevada at 10:00 a.m., local time, on Wednesday, January 21,
1998, for the following purposes:
1. To elect a board of directors to serve until the next annual
meeting of the Company's stockholders and until their
successors have been elected and qualify.
2. To approve the Amendment to the Spintek Gaming Technologies,
Inc. 1996 Stock Option Plan.
3. To approve the Agreement of Merger and Plan of Reorganization
pursuant to which the Company's state of incorporation would
be changed from California to Nevada.
4. To ratify the selection of Joseph Decosimo & Company as the
Company's independent public accountants for fiscal year 1998.
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record of the Company's common stock at the close of
business on December 4, 1997, the record date fixed by the Board of Directors,
are entitled to notice of, and to vote at, the meeting.
We hope that you will be able to attend the Meeting, but, in any event,
please sign, date and return promptly the enclosed proxy in the envelope so that
your shares may be voted at the meeting.
By Order of the Board of Directors
Gary L. Coulter
Chairman of the Board and
Chief Executive Officer
Las Vegas, Nevada
December 4, 1997
<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
PROXY STATEMENT
Approximate date proxy material first sent
to stockholders: December 15, 1997
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Spintek Gaming Technologies, Inc. (the "Company") in connection
with the Annual Meeting of Stockholders of the Company (the "Meeting") to be
held at 10:00 a.m. local time at Sam's Town Hotel and Gambling Hall, 5111
Boulder Highway, Las Vegas, Nevada, on Wednesday, January 21, 1998, and any
adjournments or postponement thereof. At the Meeting, the stockholders will be
asked to vote on the following matters:
1. To elect a board of directors to serve until the next annual
meeting of the Company's stockholders and until their
successors have been elected and qualify.
2. To approve the Amendment to the Spintek Gaming Technologies,
Inc. 1996 Stock Option Plan.
3. To approve the Agreement of Merger and Plan of Reorganization
pursuant to which the Company's state of incorporation would
be changed from California to Nevada.
4. To ratify the selection of Joseph Decosimo & Company as the
Company's independent public accountants for fiscal year 1998.
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Solicitation and Revocation of Proxies
Solicitation of proxies by mail is expected to commence on or about
December 15, 1997 and the cost thereof will be borne by the Company. The Company
may pay persons holding shares in their names or the names of their nominees for
the benefit of others, such as brokerage firms, banks, depositories, and other
fiduciaries, for costs incurred in forwarding soliciting materials to their
principals. Members of the management of the Company may also solicit some
stockholders in person or by telephone, telegraph or telecopy, following
solicitation by this Proxy Statement, but will not be separately compensated for
such solicitation services.
The Company's executive offices are located at 901 Grier Drive, Suite
B, Las Vegas, Nevada 89119, telephone (702) 263-3660.
All shares represented by the accompanying proxy, if the proxy is
properly executed and returned, will be voted as specified by the stockholder.
If no contrary instructions are given, such shares will be voted to (i)
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<PAGE>
elect the three director nominees named herein for the term stated herein, (ii)
authorize and approve the Amendment to the 1996 Stock Option Plan, (iii)
authorize and the Agreement of Merger and Plan of Reorganization pursuant to
which the Company's state of incorporation would be changed from California to
Nevada, and (iv) ratify the selection of Joseph Decosimo & Company as the
Company's independent accountants for fiscal year. Any stockholder has the power
to revoke his or her proxy at any time before it has been voted by filing with
the Secretary of the Company an instrument revoking it, by submitting a
substitute proxy bearing a later date or by voting in person at the Meeting.
Under California law, shares represented by proxies that reflect
abstentions or "broker non-votes" (i.e. shares held by a broker or nominee which
are represented at the Meeting, but with respect to which such broker or nominee
is not empowered to vote on a particular proposal) will be counted as shares
that are present and entitled to vote for purpose of determining the presence of
a quorum. Any shares not voted (whether by abstention, broker non-vote, or
otherwise) will have no impact in the election of directors, except to the
extent that the failure to vote for an individual results in another individual
receiving a larger proportion of votes. Any shares represented at the Meeting
but not voted (whether by abstention, broker non-vote or otherwise) with respect
to the proposal to approve the change of corporation jurisdiction from
California to Nevada will have no effect on the vote for such proposal except to
the extent the number of abstentions causes the number of shares voted in favor
of the proposal not to equal or exceed a majority of the quorum required for the
Meeting. Any shares represented at the Meeting but not voted (whether by
abstention, broker non-vote or otherwise) with respect to the proposal to
approve the amendment to the 1996 Employee Stock Option Plan will have no effect
on the vote for such proposal except to the extent the number of abstentions
causes the number of shares voted in favor of the proposal not to equal or
exceed a majority of the quorum required for the Meeting. Any shares represented
at the Meeting but not voted (whether by abstention, broker non-vote or
otherwise) with respect to the proposal to ratify the selection of Joseph
Decosimo and Company as the Company's independent public accountants for fiscal
year 1998 will have no effect on the vote for such proposal except to the extent
the number of abstentions causes the number of shares voted in favor of the
proposal not to equal or exceed a majority of the quorum required for the
Meeting.
Your execution of the enclosed Proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any stockholder giving
a proxy has a right to revoke it at any time by either (a) a later dated proxy,
(b) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (c) attendance at the Meeting and voting in person.
Voting Securities and Principal Stockholders
The Company has 100,000 shares of preferred stock authorized, of which
8,741 shares were outstanding, and 100,000,000 shares of common stock
authorized, of which 17,187,323 shares were outstanding, as of the close of
business on December 4, 1997 (the "Record Date"). Only common stockholders of
record on the books of the Company at the close of business on the Record Date
will be entitled to vote at the Meeting. Each share of common stock is entitled
to one vote. Representation at the Meeting by the holders of a majority of the
outstanding common stock of the Company, either by personal attendance or by
proxy, will constitute a quorum. Preferred stock has no right to vote on any
matters.
Changes in Control
On August 6, 1996, the Board of Directors was granted authority by a
consent of a majority of the stockholders of the Company to issue up to 100,000
shares of preferred stock, without nominal or par value per share. Pursuant to
the provisions of the terms of a $7,143,000, 4% Convertible Debenture with RBB
Bank Aktiengesellschaft ("RBB"), the Board of Directors issued shares of
preferred stock to satisfy the underlying debt
4
<PAGE>
of said Debenture while incorporating certain rights of the Debenture holder
into the preferred stock. RBB currently holds 8,741 shares of preferred stock.
Certain mandatory and optional redemption provisions apply to the
preferred stock. The Company has the right, in its sole discretion, to redeem
some or all of the preferred stock in the event that the shareholder's optional
conversion rights are exercised. The Company, if it chooses to redeem, shall
redeem a pro-rata amount from each shareholder submitting shares of preferred
stock for conversion. The Company has the obligation to redeem the preferred
stock in the event that the Company transfers substantially all of its assets or
if a change in control occurs (i.e. (i) anyone other than the Company, any
subsidiary of the Company or any employee benefit plan of the Corporation
beneficially owns a majority of the voting stock of the Company, or (ii) the
Company is involved in certain mergers or consolidations not effected solely to
change the jurisdiction of incorporation of the Company).
In addition, the Company has issued Warrants to Third World
Investments, Ltd. to acquire 250,000 shares of common stock of the Company at an
exercise price that ranges from $1 to $2 per share exercisable in the whole or
part between October 1, 1996 and September 30, 2001.
The effect of the preferred stock issued to satisfy the indebtedness of
the Debenture and convertible into common stock and the outstanding Warrants is
to create the possibility of a change in control of the majority of the common
stock of the Company.
Beneficial Ownership
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of the Record Date as to
(a) each director, (b) each executive officer identified in the Summary
Compensation Table below, (c) all officers and directors of the Company as a
group, and (d) each person known to the Company to beneficially own five percent
or more of the outstanding shares of common stock.
<TABLE>
<CAPTION>
Name and Address of Amount of Percent of
Title of Class Beneficial Owner Shares Class (2)(3)
- -------------- -------------------------- ----------------- ------------
<S> <C> <C>
Directors and Executive Officers:
Common Malcolm C. Davenport V (1) 2,372,256 (4) 13.3%
Common Gary L. Coulter (1) 1,127,904 (5) 6.2%
Common Robert E. Huggins (1) 558,452 (6) 3.2%
Common All directors and executive
officers as a group (6 persons)(1) 4,163,066 (7) 21.6%
Five Percent (5%) or Greater Shareholders:
Common RBB Bank Aktiengesellschaft
Burgring 16, 8010 Graz, Austria 12,689,873 (3) 45.0%
Common Lanier M. Davenport, Sr.
P. O. Box 178 1,220,776 7.1%
Lookout Mtn., TN 37350
Common Starr S. Dav port
P. O. Box 187 1,096,953 (8) 6.4%
Lookout Mtn. TN 37350
- -----------------
<FN>
(1) The address of all directors and executive officers is c/o the
Company, 901-B Grier Drive, Las Vegas, Nevada 89119.
(2) Percent of class is based on the number of shares outstanding on the
Record Date. Percent of the class includes, with respect to each named
person, the number of shares of common stock, if any, which the
stockholder has the right to acquire within 60 days of such date.
Percent of class also includes, with respect to each named person,
1,400,880 shares of common stock to be issued to the Malcolm C.
Davenport V Family Trust in satisfaction of certain indebtedness to
the Trust. See "Certain Transactions."
(3) The percentage for RBB has been computed after giving effect to
certain rights to acquire common stock arising out of the Company's
issuance of its Series A 4% Convertible Preferred Stock. At October
31, 1997, RBB Bank was the holder of all of the Company's 8,741
outstanding preferred shares. Had RBB converted its preferred shares
as of this date, there would be substantial dilution of the percentage
of class held by the named shareholder. RBB would have received an
additional approximate 11,000,000 shares based on the five day average
of the closing bid price of the Company's common stock (the five days
used for this calculation for computational purposes only was the five
days ended October 31, 1997; changes in the Company's closing bid
price of its common stock will effect the number of shares subject to
conversion.) Such a conversion, had it occurred October 31, 1997,
would have given RBB control of approximately 45% of the outstanding
common stock. Percent of class for RBB includes approximately the
above mentioned 11,000,000 additional shares. RBB disputes its
designation as a beneficial owner. RBB takes the position that it does
not control or direct the distribution or voting of the shares and
that it only holds the shares for the true beneficial owners. RBB has
represented to the Company that none of the beneficial owners it holds
shares for has beneficial ownership of five percent (5%) or greater of
the class.
(4) Includes 313,416 shares owned and 290,544 shares subject to options
that are currently exercisable or will become exercisable within 60
days, 313,416 shares held by Mr. M. Davenport's spouse, and 1,875,723
shares by the Malcolm C. Davenport V Family Trust in which Mr. M.
Davenport as a co-trustee has certain beneficial control, though no
economic interest.
(5) Includes 11,000 shares owned and 1,116,904 shares subject to options
that are currently exercisable or will become exercisable within 60
days.
(6) Includes 50,000 shares owned and 508,452 shares subject to options
that are currently exercisable or will become exercisable within 60
days.
(7) Includes 2,024,854 shares subject to options that are currently
exercisable or will become exercisable within 60 days.
(8) Includes 470,121, shares held by the minor children of Lanier M.
Davenport and Starr S. Davenport, with respect to which each disclaims
any beneficial ownership. As custodial parent, Ms. Davenport has the
authority to vote the minor children's shares on their behalf.
</FN>
</TABLE>
6
<PAGE>
Nomination and Election of Directors
Proposal 1 on the Proxy Card
The Company's directors are to be elected at each annual meeting of
stockholders. The authorized number of directors of the Company according to its
Bylaws is three. Further, California corporate law states that the minimum
number of directors shall not be less than three. At this Meeting, three
directors are to be elected to serve until the next annual meeting of the
stockholders and until their successors are elected and qualify. The election of
three directors will comply with Nevada corporate law and the Bylaws of the
Company following the reincorporation in Nevada. Nevada corporate law and the
Bylaws of the Company are discussed in Proposal 3.
The three nominees for election as directors at this Meeting set forth
in the table below are all recommended by the Board of Directors of the Company.
Messrs. Coulter and M. Davenport were elected as directors at the last annual
meeting. In the event that any of the nominees for director should become unable
to serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominee(s) as may be
recommended by the Company's existing Board of Directors.
The three nominee-directors receiving the highest number of votes cast
at the Meeting will be elected as the Company's directors to serve until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. Subject to certain exceptions specified below, stockholders of
record on the Record Date are entitled to cumulative voting in the election of
the Company's directors (i.e., each stockholder is entitled to cast a number of
votes determined by multiplying the number of shares held by each stockholder
times the number of directors to be elected) and may cast all of their votes so
determined for one person, or spread their votes among two or more persons as
they see fit. No stockholder shall be entitled to cumulate votes for a given
nominee for director unless such nominee's name has been placed in nomination 90
days in advance of the meeting and the stockholder has given notice at the
Meeting, prior to the voting, of the stockholder's intention to cumulate his or
her votes. If any one stockholder has given such notice, all stockholders may
cumulate their votes for candidates in nomination. Discretionary authority to
cumulate votes is hereby solicited by the Board of Directors.
The following table sets forth certain information concerning the
nominees for election as a director, his name, all positions with the Company
held by him, and his principal occupation:
Gary L. Coulter, age 51
Chairman of the Board and Chief Executive Officer of the Company since
October 1996; Vice Chairman and Chief Operating Officer of the Company from
April 1996 until October 1996; President, Chief Operating Officer, and
Director from April 1994 until March 1996 of Private Biologicals
Corporation, a developer of biological products and treatments for cancer;
private practice of law in he state of Georgia from August 1992 until
December 1992; Chief Executive Officer and Director from December 1992
until March 1994 of Omega International, Inc., developer of natural
products for the treatment of autoimmune diseases; President, Chief
Operating Officer, and Director from March 1986 until August 1, 1992 of
Woodruff Investment Co., a developer, manager, and financier of real estate
investments; from April 1996 to present, Vice-Chairman of the Board of
Directors of Tapistron International, Inc., a publicly-traded company that
filed for protection from creditors under Chapter 11 of the United States
Bankruptcy Code in June 1996 and emerged from bankruptcy August 2, 1997;
and from January 1996 until April 1996, private practice of law with
Malcolm C. Davenport V, a director of the Company.
Malcolm C. Davenport V, age 46
Director of the Company since September 1995 and Secretary since October
1996; private practice of law in Dalton, Georgia from 1990 through November
1992 as a partner in the firm of Ponder and Davenport, P. C.; private
practice of law in his own name in Lanett, Alabama and West Point, Georgia
from January 1993 through January 1995; private practice of law from West
Point, Georgia with Gary L. Coulter, Chairman of the Board and Chief
Executive Officer of the Company from January 1996 until April 1996 as a
partner in the firm of Coulter & Davenport, P.C.; private practice as a
certified public accountant in Roanoke, Alabama, from January 1995 to the
present as Davenport & Sikes, Certified Public Accountants; and private
director of other reporting companies: ITC Holding, and several of its
subsidiaries; and American Artists Film Corporation.
7
<PAGE>
Patrick W. McGrath, age 43
Independent Investor and Corporate Financial Advisor, 1992 through 1997;
Special Assistant to C.E.O. Waterford Crystal from 1974 through 1978;
Former Executive Director, Waterford Glass, P.L.C. from 1981 through 1986;
Director, Crest Investment Trust, Ltd., from 1984 through 1992; and,
Executive Vice President, St. George Crystal Glass, from 1986 through 1988.
Mr. McGrath holds a Bachelor of Business Science degree from Trinity
College, Dublin and a Masters in Business Administration from Harvard
University.
There were 45 meetings of the Board of Directors of the Company during
the last fiscal year of the Company. Each of the directors of the Company has
attended at least 95% of the meetings. The Company does not have a nominating
committee of the Board of Directors. The nominees for election as directors at
the Meeting were selected by the Board of Directors of the Company. The Company
also does not have a compensation committee of the Board of Directors or an
audit committee of the Board of Directors.
8
<PAGE>
Director Compensation
For service on the Board of Directors, directors who are not employees
of the Company currently receive no compensation for each meeting of the Board
of Directors other than options to purchase common stock of the Company and
reimbursement for expenses which are related to attending Board meetings. During
fiscal 1997 the sole outside director received options to purchase 290,544
shares of common stock at the closing market price on the date of grant. All
options granted will have vested as of the date of Meeting. Directors who are
employees of the Company receive no additional compensation for serving on the
Board of Directors.
Certain Transactions
The Lanier M. Davenport, Sr. Family Trust and the Malcolm C. Davenport
V Family Trust, the trustees of which are Malcolm C. Davenport V, Director of
the Company and brother of Lanier M. Davenport (former Chairman and Chief
Executive Officer of the Company and current shareholder), and Malcolm C.
Davenport, Jr., a stockholder of the Company and father of Lanier M. Davenport
and Malcolm C. Davenport V, made advances in the amount of $70,000 during fiscal
1997 and $1,920,000 during the year ended June 30, 1996. The $70,000 advanced in
fiscal 1997 was received on July 12, 1996 and was repaid with interest on July
31, 1996. Of the $1,920,000 advanced in fiscal 1996, $1,000,000 was converted
into 454,545 shares of common stock of the Company on April 14, 1996 and an
additional $440,000 was converted into 401,141 shares of common stock of the
Company on July 16, 1996. All of the shares of common stock issued in
satisfaction of this debt have not been registered and were issued with
restrictive legends.
The remaining $480,000 plus accrued interest of $15,542 was converted
to demand notes which bear an interest rate of 10% per annum and are to be
repaid at $20,000 per month including interest. The unpaid principal balance on
the notes at September 30, 1997 was approximately $279,000 plus accrued
interest.
On August 14, 1997, Spinteknology, Inc., a wholly-owned subsidiary of
the Company, entered into a $500,000, 12% promissory note agreement with the
Malcolm C. Davenport V Family Trust (the "Trust"), a stockholder. On October 1,
1997, the Trust elected to convert the note plus accrued interest of
approximately $4,000 thereon, into 1,400,880 shares of the Company's $0.002 par
value common stock. The conversion price of $0.36 per share reflects a 32%
discount from the closing price of $0.53 per share on October 1, 1997. The
shares will be issued as a result of the conversion on or about November 30,
1997. The shares issued as a result of the conversion have not been registered
and bear a restrictive legend.
On October 18, 1996, Mr. Lanier Davenport resigned as Chairman of the
Board of Directors and as Chief Executive Officer of the Company. Mr. Lanier
Davenport, in conjunction with his resignation, contributed 1,300,000 of the
shares of common stock he owned in the Company back to the Company in an effort
to enhance shareholder value. Such contribution of shares was recorded as
treasury stock on December 31, 1996 with a basis at par value, or $2,600. Prior
to July 1, 1996, Mr. Lanier Davenport, or companies with which he was
affiliated, made loans and advances to the Company in the aggregate amount of
$356,000 at an annual interest rate of 10% in the form of demand notes, of which
$145,108, plus accrued and unpaid interest of $10,951, remained outstanding as
of June 30, 1996. During fiscal 1997, the Company accrued additional interest in
the amount of $2,964 and repaid $123,694 and $10,612 for principal and interest,
respectively. The remaining $21,414 of principal and $3,304 of interest were
contributed back to the Company in an effort to enhance shareholder value. Such
contribution was recorded as additional paid in capital by the Company on
December 31, 1996. At June 30, 1997 the Company did not owe any monies to Mr.
Lanier Davenport.
Malcolm C. Davenport, Jr. made loans to the Company during fiscal 1996
in the aggregate amount of $418,500 at an annual interest rate of 10% in the
form of demand notes. At June 30, 1996, the balance payable for principal and
accrued interest on the notes was $323,000 and $21,850, respectively. During
fiscal 1997, the Company accrued additional interest in the amount of $15,866
and paid $50,000 to Mr. Malcolm C. Davenport, Jr., of which $30,000 was applied
to principal with the remaining $20,000 applied to interest payable on the
notes. On December 31, 1996 the unpaid principal and interest in the amount of
$303,000 and $7,717 were contributed back to the Company in an effort to enhance
shareholder value. Such contribution was recorded as additional paid
9
<PAGE>
in capital by the Company. At June 30, 1997 the Company did not owe any monies
to Mr. Malcolm C. Davenport, Jr.
Sarah L. Davenport, stockholder of the Company and mother of both
Lanier Davenport and Malcolm C. Davenport V, made loans in the aggregate amount
of $20,000 in the form of demand notes with an annual interest rate of 10%
during fiscal 1996. At June 30, 1997 none of the principal or interest accrued
on the notes had been repaid. During fiscal 1997, an additional $2,200 of
interest was accrued on the debt. At June 30, 1997 the unpaid principal balance
on the notes remained at $20,000, plus accrued of $4,042.
Davenport Investments, Inc., a corporation controlled by Lanier
Davenport, was party to an agreement whereby it received lease payments for
office space used by the Company for its corporate offices in Chattanooga,
Tennessee. Such agreement terminated September 30, 1996. During the years ended
June 30, 1997 and June 30, 1996, the Company made lease payments to Davenport
Investments, Inc. in the amount of $3,655 and $19,346, respectively.
During April 1997, Mr. Malcolm C. Davenport V made loans in the
aggregate amount of $150,000 in the form of demand notes with an annual interest
rate of 9.5%. On May 7, 1997, the principal and accrued interest of $1,015 on
the notes was repaid.
Coulter & Davenport, Attorneys-at-Law, whose partners were Gary L.
Coulter, Esq., Chairman and Chief Executive Officer of the Company, and Malcolm
C. Davenport V, Esq., Director of the Company, billed the Company for legal fees
and expenses in fiscal 1996 in the aggregate amount of $162,754 of which
$117,754 remained outstanding as of June 30, 1996. On April 1, 1996, Mr. Coulter
resigned from the partnership to devote full time to his duties with the
Company. During fiscal 1997, the balance owed at June 30, 1996 was repaid.
Interest expense to all related parties was $51,584, $65,418 and
$117,002 for the periods March 31, 1995(Inception) to June 30, 1996, the year
ended June 30, 1997, and March 31, 1995 (Inception) to June 30, 1997,
respectively.
The Company has made loans as part of an agreement dated April 13, 1995
to Spintek International, Inc., a corporation controlled by Lanier M. Davenport,
former Chairman and Chief Executive Officer of the Company and current
shareholder, in the aggregate amount of approximately $186,000 at an annual
interest rate of 10% in the form of demand notes, of which $159,910 plus accrued
and unpaid interest of $17,366 remained outstanding as of June 30, 1997.
Executive Compensation and Other Information
Executive Officers
The following table sets forth the names and ages of the executive
officers of the Company, all positions held with the Company and a description
of the business experience of each individual for at least the past five years.
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Gary L. Coulter 51 Chairman and Chief Executive Officer
Robert E. Huggins 50 Senior Vice President and Chief Financial Officer
Erik R. Batzloff 44 Vice President - Compliance and Administration
Robert G. Guinn, Jr. 31 Vice President - Research and Development
</TABLE>
For a description of Mr. Coulter's background, see "Proposal 1- Election of
Directors."
Mr. Huggins has been Senior Vice President for the Company since April 1997
and Chief Financial Officer since November 1995. Mr. Huggins is a Certified
Public Accountant ("CPA"), who from February 1992
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<PAGE>
until February 1995 served as the Chief Accounting Officer and Secretary for
Elsinore Corporation ("Elsinore"), a publicly-traded company. In November 1995,
eight months after his resignation from Elsinore, the company filed for
protection from creditors under Chapter 11 of the United States Bankruptcy Code.
Prior to February 1992, Mr. Huggins served in various capacities with other
gaming companies, including: Vice President, Finance and Chief Financial Officer
for United Gaming, Inc. (now Alliance Gaming, Inc.), as well as President of two
of its casino subsidiaries, Controller for Caesars Palace in Las Vegas; and
Controller for M&R Investments, Inc. (Dunes Hotel & Country Club). Prior to his
experience in industry, Mr. Huggins was a CPA with the firm of Haskins & Sells
(now Deloitte & Touche, LLP) for four years.
Mr. Batzloff joined the Company in November 1996 and has served as Vice
President - Compliance and Administration since 1997. From September 1992 until
November 1996, he had similar responsibilities with Mikohn, Inc., a manufacturer
of gaming devices and associated equipment. From July 1985 until September 1992,
Mr. Batzloff worked for United Gaming, Inc. (now Alliance Gaming, Inc.)
beginning as a technical writer and ending his tenure with United Gaming, Inc.
as the investor relations officer.
Mr. Guinn has been Vice President of Research, Development and
Manufacturing for the Company since April 1997. From January 1992 until joining
the Company, Mr Guinn was Vice President of Engineering for Casino Data Systems,
the manufacturer and developer of an on-line slot information and management
system. He was Southern Region Support Manager for Bally Systems from August
1987 until January 1992.
Executive Compensation
The following table sets forth information concerning compensation of the
chief executive officer and all other executive officers of the Company whose
salary and bonus exceeded an annual rate of $100,000 during the fiscal years
ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
--------------------------------------- ---------------
Other Annual Securities
Name and Fiscal Compensation ($) Underlying
Principal Position Year Salary($)(1) Bonus($)(2) Options
- ------------------ ---- ------------ ----------- ---------------- -------
<S> <C> <C> <C> <C> <C>
Gary L. Coulter (1)(3) 1997 156,000 0 18,206 (4) 1,162,176
Chairman of the Board of 1996 28,615 0 0 0
Directors and Chief
Executive Officer
Lanier M. Davenport (5) 1997 72,923 0 8,432 (6) 0
Chairman of the Board 1996 65,640 0 68,483 (6) 0
of Directors and Chief
Executive Officer until
October 18, 1996
Robert E. Huggins (1) 1997 150,000 0 10,015 (7) 508,452
Senior Vice President and 1996 72,680 0 21,538 (7) 0
Chief Financial Officer
- ----------------
<FN>
(1) Salaries in fiscal 1997 includes $30,000 paid to Mr. Coulter and $30,000 paid to Mr. Huggins in a lump
sum in February 1997 as an incentive to remain with the Company during a possible change in control
situation.
(2) In June 1997, the Board of Directors approved a bonus plan based on stock price performance for the
11
<PAGE>
executive officers, directors and advisory directors of the
Company. Please refer to the Long-Term Incentive Plan Table
below for a description of the plan.
(3) Mr. Coulter joined the Company as Vice Chairman and Chief Operating Officer in April 1996 and assumed
the positions of Chairman of the Board and Chief Executive Officer in October 1996.
(4) Represents taxable fringe benefits for a leased car and apartment in Las Vegas which were provided to Mr.
Coulter during fiscal 1997.
(5) In October 1996, Mr. Davenport resigned as Chairman of the Board and Chief Executive Officer and Mr.
Coulter became Chairman and Chief Executive Officer.
(6) Includes taxable fringe benefits for automobile allowance and
health insurance of $8,432 and $17,504 for fiscal 1997 and
1996, respectively. In addition, fiscal 1996 includes $50,979
of consulting for the Company's subsidiary, Spintek Gaming,
Inc., and the conversion of options to purchase 4,000 common
shares of Spintek Gaming, Inc. into actual shares of the
common stock of the Company in conjunction with the
acquisition of Spintek Gaming, Inc. on September 14, 1995.
(7) Includes taxable fringe benefits for automobile allowance and health insurance of $10,015 and $6,238 for
fiscal 1997 and 1996, respectively. In addition, fiscal 1996 includes $15,300 of consulting fees for services
rendered to the Company prior November 15, 1995, the date he was hired as Chief Financial Officer by
the Company.
</FN>
</TABLE>
Employment Agreements
Gary L. Coulter was named Chairman of the Board of Directors and Chief
Executive Officer on October 18, 1996. In conjunction with his appointment as
Chairman and CEO, Mr. Coulter's employment agreement was modified and extended
for two years, until October 17, 1998. Mr. Coulter's annual base salary was
$200,000 at July 1, 1997 and pursuant to the terms of his employment agreement,
he is entitled to receive two years' severance pay if there is a change in
control of the Company or if he is terminated for any reason other than for
failure to perform his duties, conviction of a felony, dishonesty or illegal
acts. In addition, the Company pays for a leased automobile and an apartment for
Mr. Coulter. Mr. Coulter is also entitled to options to purchase a minimum of at
least 100,000 shares of common stock at the closing market price on the date(s)
of grant each year of his employment agreement and is eligible to participate in
employee benefit or bonus plan provided by the Company pursuant to the terms of
such agreement.
Robert E. Huggins, Chief Financial Officer, has an employment agreement
with the Company extending through October 17, 1998. Mr. Huggins' annual base
salary was $140,000 at July 1, 1997 and pursuant to the terms of his employment
agreement, he is entitled to receive two years' severance pay if there is a
change in control of the Company. Further, if he is terminated for any reason
other than for failure to perform his duties, conviction of a felony, dishonesty
or illegal acts he is entitled to receive one years pay as severance. The
Company pays $750 per month to Mr. Huggins for an automobile allowance. Mr.
Huggins is also entitled to options to purchase a minimum of at least 50,000
shares of common stock at the closing market price on the date(s) of grant each
year of his employment agreement and is eligible to participate in employee
benefit or bonus plan provided by the Company pursuant to the terms of such
agreement.
Change in Control Severance Agreements
For the purpose of certain employment agreements of the Company, a
"Change in Control" generally is deemed to occur if: (i) any person or group of
affiliated persons other than the Company or certain affiliated entities becomes
the owner of 40% or greater of the voting securities of the Company; (ii) the
Company is involved in a merger or consolidation (with exceptions for certain
events); or (iii) the persons who constituted a majority of the Board of
Directors on October 18, 1996 cease to constitute the
12
<PAGE>
majority. As part of Mr. Coulter's and Mr. Huggins' employment agreements, in
the event of a Change in Control, each may elect to consider themselves
immediately terminated and entitled to two years' salary as severance, to be
paid in a lump sum in no less than thirty (30) days from the earlier of the date
of the Change in Control and/or the date either or both of them elects
termination. No Change in Control has occurred under those agreements.
In addition to the Change in Control provisions in the respective
employment agreements discussed above, incentives granted to Mr. Coulter and Mr.
Huggins pursuant to the Company's Long- Term Incentive Plan mature immediately
upon Change in Control or termination for any reason.
Options
The tables below set forth certain information regarding options
granted to the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
-------------------------------------------------------------------
Percent of
Number of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (1) Fiscal Year Per Share Date
<S> <C> <C> <C> <C>
Gary L. Coulter 600,000 (2)(3) 26.81% $0.50 12/09/06
100,000 (3) 4.74% 0.31 2/12/07
100,000 (4) 4.74% 0.20 6/02/07
362,176 (6) 16.19% 0.20 6/03/07
Robert E. Huggins 250,000 (2)(3) 11.17% 0.50 12/09/06
50,000 (3) 2.23% 0.31 2/12/07
50,000 (5) 2.23% 0.20 6/02/07
158,452 (7) 7.08% 0.20 6/03/07
- --------------------
<FN>
(1) The options elected herein have a ten year term.
(2) These options were expressly approved by the stockholders of the Company at the Annual Meeting on
December 10, 1996.
(3) These options vested 100% on the date of grant.
(4) These options vest on December 31, 1997.
(5) These options vested 100% on November 15, 1997.
(6) 316,904 of these options vested on the date of grant and the remaining 45,272 will vest on December 31, 1997.
(7) 135,816 of these options vested on the date of grant and the remaining 22,636 vested on November 15, 1997.
</FN>
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at June 30, 1997 at June 30, 1997
------------------------ -----------------
Shares Value
Name Acquired Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Coulter ______ $______ 1,016,904 145,272 $164,666 $ 50,845
Robert E. Huggins ______ ______ 435,816 72,636 71,911 25,423
</TABLE>
Other Long-Term Incentive Awards
Effective June 1, 1997, the Company adopted a bonus plan to provide
incentive compensation to certain key employees, directors and advisory
directors. The plan provides for stock appreciation rights to employees covered
by the plan. Compensation under the plan is based on the award of performance
units, which are defined as a percentage of the total market value of the
Company and which have a value related to the appreciation in the value of the
Company's common stock. The maximum number of performance units that may be
issued under the plan shall not exceed an aggregate of twelve percent (12%) of
the total market value of the Company.
Performance units are vested upon issuance and mature at a rate of 25% per
year over a four year period from the date granted. After the first anniversary
of any grant of performance units, participants may elect to receive payments
which represent the appreciation in value of the performance unit from the date
granted through the date such payment is elected. A participant is entitled to
receive payments following termination if an election to receive such payments
is made prior to the third anniversary of termination; or, at the Company's
discretion following the third anniversary of termination if no such election is
made by the participant.
The following table sets forth the number of performance units granted to
each of the named executives in fiscal 1997 under the Company's Bonus Plan which
was adopted by the Board of Directors in June 1997.
<TABLE>
<CAPTION>
Long-Term Incentive Plans -- Awards in Last Fiscal Year
Number Performance or
Shares, Units Other Period
Or Other Until Maturation
Name Rights(1) Or Payout
---- --------- ---------
<S> <C> <C>
Gary L. Coulter(2) 46.93 6/3/97 - 6/3/01
Robert E. Huggins(2) 20.53 6/3/97 - 6/3/01
<FN>
(1) Units so awarded are exercisable commencing 12 months after the
grant date with 25% of the units covered thereby becoming
exercisable at that time with an additional 25% of the units
becoming exercisable on each successive anniversary date, with
full maturity occurring on the fourth anniversary date. The value
of each unit is evidenced by a percentage (1/10th of 1%) of the
increase in the market value of all of the common stock of the
Company from the date of grant to each annual measurement date;
or, the date on which an individual terminates based on his then
mature units. See (2) below.
(2) Units granted to Mr. Coulter and Mr. Huggins mature immediately
upon termination for any reason.
</FN>
</TABLE>
14
<PAGE>
Compliance with Section 16 of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
directors, executive officers and 10% or greater shareholders of the Company
("Reporting Persons") to file with the Securities and Exchange Commission
initial reports of ownership (Form 3) and reports of changes in ownership of
equity securities of the Company (Form 4 and Form 5). To the Company's
knowledge, based solely on its review of the copies of such reports furnished to
the Company and written representations that certain reports were not required,
during the fiscal year ended June 30, 1997, the Reporting Persons have complied
with all applicable Section 16(a) filing requirements. The Company has listed
RBB Bank as a beneficial owner of more than ten percent (10%) of a class of
stock, but RBB disputes beneficial ownership. RBB has represented to the Company
that it holds stock for the true beneficial owners and that none of these owners
hold ten percent (10%) or more of the Company's stock.
Amendment to 1996 Stock Option Plan
Proposal 2 on the Proxy Card
Subject to the approval of the shareholders, on October 31, 1997, the
Board of Directors approved the Amendment to the Spintek Gaming Technologies,
Inc. 1996 Stock Option Plan (the "Plan"). The brief summary of the Plan which
follows is qualified in its entirety by reference to the complete text of the
Plan, a copy of which is attached to this Proxy Statement as Exhibit A which is
hereby incorporated by reference to and is a part hereof.
The 1996 Stock Plan shall be amended to increase the number of shares
of Common Stock of the Company available for grants and awards of nonqualified
stock options and incentive stock options to executive officers, other key
employees, independent directors and consultants of the Company, up to
4,000,000.
The purpose of the Plan is to enable executive officers, other key
employees, independent directors, advisory directors and consultants of the
Company to participate in the ownership of the Company. The Plan is designed to
attract and retain executive officers, other key employees, independent
directors, advisory directors and consultants and to provide incentives to such
persons to maximize performance. The Plan provides for the award to executive
officers, other key employees, independent directors, advisory directors and
consultants of the Company of nonqualified stock options and incentive stock
options and provides for the grant to executive officers, other key employees,
independent directors, advisory directors and consultants of nonqualified stock
options.
The Plan is administered by the Board of Directors, which is
authorized to select from among the eligible participants the individuals to
whom options are to be granted and to determine the number of shares to be
subject thereto and the terms and conditions thereof. The members of the Board
who are not affiliated with the Company will select from among the eligible
participants the individuals to whom nonqualified stock options are to be
granted, except as set forth below, and will determine the number of shares to
be subject thereto and the terms and conditions thereof. The Board is also
authorized to adopt, amend and rescind rules relating to the administration of
the Plan.
Nonqualified stock options will provide for the right to purchase
stock at a specified price which may be less than fair market value on the date
of grant (but not less than par value), and usually will become exercisable in
installments after the grant date. Nonqualified stock options may be granted for
any reasonable term.
Incentive stock options will be designed to comply with the provisions
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
will be subject to restrictions contained in the Code, including exercise prices
equal to at least 100% of fair market value of Company stock on the grant date
and a ten year restriction on their term. These options may be subsequently
modified to
15
<PAGE>
disqualify them from treatment as incentive stock options.
The Company estimates that in the fiscal 1998, it will issue to
executive officers, other key employees, independent directors, advisory
directors and consultants of the Company options to purchase at least 600,000
shares of common stock pursuant to the Plan. This estimate is subject to change
according to the business judgment of the stock plan committee, if any, or the
Board of Directors.
The affirmative vote of the holders of 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 to approve the Plan. All
shares represented by proxies will be voted FOR approval of the proposed Plan
unless a contrary choice is specified.
Recommendation of Your Board of Directors "For" the Proposal
The Board of Directors has unanimously approved and recommends a vote
FOR the approval of the proposed amendments to the 1996 Stock Option Plan as
described above. Stockholders should note that because the sole existing outside
Director has received, and will continue to receive (subject to re-election),
stock options under the Plan, he may have a personal interest in the proposal
and its approval by stockholders. However, the Board believes that the proposed
amendment to the plan is in the best interest of the Company and its
stockholders.
Change the State of Incorporation of the Company
Proposal 3 on the Proxy Card
The Board of Directors has unanimously adopted the Agreement of Merger
and Plan of Reorganization (the "Agreement") whereby the Company's state of
incorporation would be changed from California to Nevada. The Board of Directors
recommends that the stockholders of the Company approve the Agreement attached
hereto as Exhibit B.
The following summary is qualified in its entirety by reference to the
more precise terms and conditions as reflected in the Agreement attached hereto
as Exhibit B. For purposes of this summary, the term "Old Spintek" refers to the
existing company and the term "New Spintek" refers to Spintek Gaming
Technologies, Inc., a Nevada corporation and a wholly-owned subsidiary of
Spintek.
New Spintek was formed for the specific purpose of effectuating the
reincorporation of Old Spintek to the State of Nevada. New Spintek's authorized
number of shares of common stock is 100,000,000 and authorized number of shares
of preferred stock is 100,000.
General
The proposed reincorporation will be effected by the creation of New
Spintek. Pursuant to the Agreement and Articles of Merger, Old Spintek will
merge with and into New Spintek and the shareholders of Old Spintek will become
shareholders of New Spintek.
Upon the effectiveness of the Merger, (i) the legal existence of Old
Spintek as a separate corporation will cease, (ii) New Spintek will succeed to
the assets and assume the liabilities of Old Spintek, and (iii) each outstanding
share of Old Spintek common stock and each share of Series A Preferred Stock
will automatically be converted into one share of Series A Preferred Stock of
New Spintek and (iv) each option and warrant for Old Spintek common stock will
automatically be converted into an option or warrant for New Spintek common
stock. THUS, IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF OLD SPINTEK TO
EXCHANGE THEIR EXISTING STOCK CERTIFICATE FOR STOCK CERTIFICATES OF NEW SPINTEK.
16
<PAGE>
Implementation of Proposal Three will effect a change in the legal
domicile of the Company by the creation of a Nevada corporation and certain
other changes of a legal nature, but will not result in a change in the name,
business, management, location of the principal executive offices, or assets,
liabilities or net worth of Spintek. Further, except as explained herein,
Proposal Three will not result in any substantial differences between the
charter documents of Old Spintek and New Spintek. However, as a result of the
corporate laws of the States of California and Nevada which differ in some
areas, some differences between the charter documents of Old Spintek and New
Spintek do exist. See "Principal Differences Between the Bylaws of Old Spintek
and New Spintek." Old Spintek's stock option plan, including any amendments
thereto, will become New Spintek's stock option plan, and each outstanding
option issued pursuant thereto will automatically be converted into an option to
purchase the same number of shares of New Spintek stock, at the same option
price per share and upon the same terms and subject to the same conditions as
set forth in such stock option plans. Old Spintek's other employee benefit plans
and arrangements will also become New Spintek's employee benefit plans upon the
same terms and subject to the same conditions.
In accordance with California law, the affirmative vote of the holders
of at least a majority of the outstanding shares of Old Spintek common stock is
required for approval of Proposal Three, including approval of the Merger
Agreement and the other terms of the proposed Merger. It is anticipated that the
Merger will become effective as soon as practicable following shareholder
approval. However, pursuant to the Merger Agreement, the Merger (and thus the
propose reincorporation) may be abandoned, even after shareholder approval has
been obtained, if circumstances arise which, in the opinion of Old Spintek's
Board of Directors, make it inadvisable to proceed with the Merger. In addition,
the Merger Agreement may be amended prior to the Effective Date, either before
or after shareholder approval thereof, subject to the applicable law. Under
California law, dissenters' appraisal rights are not available to holders of Old
Spintek's common stock and Series A Preferred Stock in connection with Proposal
Three.
Principal Reasons for Reincorporation
The Board of Directors of the Company believes that the Plan is in the
best interest of the Company and the Company's shareholders because the
administrative inconvenience and cost of maintaining the corporate domicile of
the Company in California where the Company does not conduct any business is not
justified. Further, Nevada imposes no corporate income taxes which would provide
significant savings for the Company if and when taxable income is realized by
the company.
Principal Differences Between the Corporation Laws of California and Nevada
The corporation laws of California and Nevada differ in a number of
respects. It is impracticable to summarize all of the differences in the Proxy
Statement, but certain significant differences between the corporation laws of
California and Nevada that could materially affect the rights of shareholders of
Old Spintek are as follows:
1. TAKE-OVER PROTECTIONS. The Nevada statutes contain certain take-over
protection legislation in the "Control Shares Act" and the "Business Combination
Act." California law provides no such protection to its corporations. Nevada
"Control Shares" laws forbid an "Interested Stockholder" from voting his shares
on any matter any time his ownership interests crosses any one of three
ownership thresholds in the corporation. If at any time the Interested
Shareholder's ownership interest exceeds twenty percent ownership interest,
one-third ownership interest, or if it acquires a majority interest, the
disinterested stockholders must vote in the Interested Stockholder's favor
before the Interested Stockholder can vote the shares it acquired.
Nevada's Control Shares Act covers corporations with 200 or more
stockholders of which at least 100 are Nevada residents and which actually
conduct business in Nevada. A Nevada corporation can
17
<PAGE>
remove itself from the operation of the Control Shares Act by so providing in
its Articles or Bylaws (which may be amended by a vote of the directors alone)
no later than the tenth day after the acquiring stockholder triggers the
operation of the Control Shares Act by crossing one of the three thresholds.
Nevada's corporate law also contains the Business Combination Act. This
statute covers all Nevada corporations with a class of shares registered with
the Securities Exchange Commission under Section 12 of the Securities Exchange
Act and which have 200 or more stockholders. The corporation can opt out of the
Business Combination Act in its original Articles. The surviving corporation
will not opt out of the Business Combination Act.
The Business Combination Act prevents mergers with an Interested
Stockholder, the sale or mortgage of assets equalling five percent of the market
value of the corporation's assets to a disinterested stockholder, the sale of
five percent of stock to the Interested Stockholder, or a liquidation of any
Nevada corporation for a period of five years after the Interested Stockholder
first acquires its stock. An "Interested Stockholder" is one who owns ten
percent or more of a Nevada corporation's voting stock. These combinations are
permitted if the Interested Stockholder first acquired its stock with board of
director approval or if the particular combination was approved by the board of
directors before it acquired its stock. A combination can also be consummated
with the Interested Stockholder if all other holders of the corporation's common
stock receive the highest price the Interested Stockholder paid for any of the
Interested Stockholder's stock.
2.CUMULATIVE VOTING FOR DIRECTORS. Under cumulative voting, each share of
stock entitled to vote in the election of directors has a number of votes equal
to the number of directors to be elected. A shareholder may then cast all of its
votes for a single candidate, or may allocate them among as many candidates as
such shareholder may choose. Under California law, a company with securities
listed on the NASDAQ National Market System may eliminate cumulative voting
either in its articles of incorporation or bylaws. Under Nevada law, shares may
not be cumulatively voted for the election of directors unless the articles of
incorporation specifically provides for cumulative voting. The Articles of
Incorporation and Bylaws of New Spintek do not provide for cumulative voting in
the election of directors.
3. CHANGE IN NUMBER OF DIRECTORS. Under California law, the board of
directors may fix the exact number of directors or fix the exact number of
directors within a range provided in the articles of incorporation or bylaws.
Any change in the range must be approved by the shareholders. If no range is
provided, any change in the authorized number of directors must be approved by
the shareholders. California law requires a minimum of three directors. Nevada
law similarly provides the board of directors may fix the exact number of
directors within a range provided in the articles of incorporation or bylaws.
Moreover, any change in the range may be made and approved by the board of
directors. However, Nevada law only requires a minimum of one director. The
number of directors for New Spintek will be no less than two nor more than nine.
4. REMOVAL OF DIRECTORS. Under California law, a director may be removed
without cause by shareholder vote, provided that the shares voted against such
removal would not be sufficient to elect the director under cumulative voting
rules. The New Spintek Bylaws, like Old Spintek's current Bylaws, provide that
such meetings may be called by the Board of Directors, Chairman of the Board,
the President, Vice President, Secretary or by shareholders entitled to cast not
less than 10% of the votes at the meeting. Under Nevada law, unless the articles
of incorporation provide for a greater percentage, any director may be removed
from office by the vote of stockholders representing two-thirds of the
outstanding voting power. In the event of cumulative voting, no director may be
removed unless such director can not be elected by application of cumulative
voting. New Spintek's Articles of Incorporation do not provide for a greater
percentage than state law to remove a director.
5. LIMITATION ON CALL OF SPECIAL MEETINGS OF SHAREHOLDERS. Under California
law, a special meeting of shareholders may be called by the board of directors,
the chairman
18
<PAGE>
of the board, the President, a shareholder entitled to cost not less than 10% of
the votes at the special meeting, or such additional persons as may be provided
in the articles of incorporation or bylaws. Under Nevada law, a special meeting
of shareholders may be called by the board of directors, the chairman of the
board, the president, the holders of shares entitled to cast not less than 10%
of the votes at the special meeting, or such additional persons as may be
provided in the articles of incorporation or bylaws. Limitation of shareholders'
rights to call special meetings would generally be considered to have an
anti-takeover effect.
6. SHAREHOLDER VOTE FOR MERGERS. Nevada law provides for a shareholder vote
only by shareholders of both the acquiring and acquired corporations to approve
mergers, except as limited below, and by shareholders of the selling corporation
for the sale of substantially all of its assets. California law relating to
mergers and other corporate reorganizations differs from Nevada law in a number
of respects, requiring a shareholder vote in more situations than does Nevada
law. California law provides for a shareholder vote by shareholders of both the
acquiring and acquired corporations to approve mergers and by shareholders of
the selling corporation for the sale by a corporation of substantially all of
its assets, as well as for a shareholder vote of an acquiring corporation in
either share for share exchanges or sale of assets reorganizations and a
shareholder vote of any parent corporation whose equity securities are being
issued or transferred in connection with a corporate reorganization. Further,
California law generally requires a class vote when a vote is required, whereas
Nevada law generally does not.
Nevada law does not require a shareholder vote of the acquiring corporation
as the surviving corporation in a merger if (a) the merger agreement does not
amend the existing certificate of incorporation, (b) each outstanding share of
the acquiring corporation before the merger is unchanged, and (c) the number of
shares to be issued by the acquiring corporation in the merger does not exceed
20% of the shares outstanding immediately prior to such issuance. California law
contains a similar exception to shareholder voting requirements for
reorganizations where shareholder control is not diluted more than one-sixth
(1/6) as a result of the reorganization, although in California the dilution
test applies to both surviving and nonsurviving corporations involved in the
same merger or reorganization.
7. DISSENTERS' RIGHTS. Under both California and Nevada law, a shareholder
of a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to receive cash equal to the fair
market value of the shares held by such shareholder (as determined by a court of
competent jurisdiction or by agreement of the shareholder and the corporation),
in lieu of the consideration such shareholder would otherwise receive in the
transaction. The laws of California and Nevada differ with respect to the
circumstances under which dissenters' rights of appraisal are available.
California law does, in general, afford dissenters' rights in a sale of
substantially all assets reorganization, and the exclusions from dissenters'
rights in mergers are somewhat different from those in Nevada. For example, in
the case of a corporation whose shares are listed on a national securities
exchange, dissenters' rights would nevertheless be available in certain
transactions for any shares with respect to which there are certain restrictions
on transfer and for any class with respect to which 5% or more of such class
claims dissenters' rights. Also, under California law, shareholders of a
corporation involved in a reorganization are not entitled to dissenters' rights
if the corporation, or its shareholders immediately before the reorganization,
or both, will own more than five-sixths (5/6) of the voting power of the
surviving or acquiring corporation or its parent entity. Nevada law does not
require dissenters' rights with respect to (a) a sale of substantially all
assets reorganization, (b) a merger by a corporation, the shares of which are
either listed on a national securities exchange or widely-held by more than
2,000 shareholders of record if shareholders receive shares of the surviving
corporation or of a listed or widely-held corporation, or (c) a merger in which
the corporation is the surviving corporation provided that no vote of its
shareholders is required to approve the merger. For a discussion of the
circumstances in which a vote of shareholders is not required, see "Shareholder
Vote for Mergers".
8. LOANS TO OFFICERS. Under California law, a corporation may only make
loans to guaranty the obligations of, or otherwise assist its officers or
employees (or those of its subsidiaries) if
19
<PAGE>
such loan or guarantee is approved by a majority of the corporation's
shareholders or, for corporations with 100 or more shareholders of record, by
its board of directors pursuant to a shareholder-approved bylaw. Under Nevada
law, there is no specific restriction with respect to a corporation's making
such loans to, guarantying the obligations of, or otherwise assisting, its
officers or employees (or those of its subsidiaries). However, such transactions
may be void or voidable if the transaction at issue is not fair to the
corporation at the time it is authorized or approved by the board of directors.
9. INDEMNIFICATION. Although California and Nevada have similar laws with
respect to indemnification by a corporation of its officers, directors,
employees and other agents, Nevada's laws with respect to indemnification are
slightly more permissive. For example, the laws of both states permit
corporations to adopt a provision in their charter eliminating the liability of
a director (and also an officer in Nevada) to the corporation or its
shareholders for monetary damages for breach of the director's fiduciary duty of
care (and the fiduciary duty of loyalty as well in the case of Nevada). The
limitations of liability of directors provisions permissible under California
and Nevada also may not limit a director's liability for violation of, or
otherwise relieve Spintek or its directors from the necessity of complying with,
federal or state securities laws, or affect the availability of non-monetary
remedies such as injunctive relief or rescission. There are nonetheless
significant differences between the laws of the two states respecting
indemnification and limitation of liability.
The Bylaws of Old Spintek eliminate the liability of directors to the
fullest extent permissible under California law. California law does not permit
the elimination of monetary liability where such liability is based on: (a)
intentional misconduct or knowing and culpable violation of law; (b) acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its shareholders, or that involve the absence of good faith on
the part of the director; (c) receipt of an improper personal benefit; (d) acts
or omissions that show reckless disregard of the director's duty to the
corporation or its shareholders, where the director in the ordinary course of
performing a director's duties should be aware of a risk of serious injury to
the corporation or its shareholders; (e) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation and its shareholders; (f) interested transactions
between the corporation and a director in which a director has a material
financial interest; or (g) liability for improper distributions, loans or
guarantees. The Bylaws of New Spintek likewise eliminate the liability of
directors and officers to the fullest extent permissible under Nevada law. Under
Nevada law, such provision may not eliminate or limit director or officer
liability only for: (a) acts or omissions which involve international
misconduct, fraud, or a knowing violation of law; or (b) the payment of unlawful
dividends or distributions.
California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine, and (b) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or pending action or
amounts incurred in defending a pending action which is settled or otherwise
disposed of without court approval. Indemnification is permitted by California
law only for acts taken in good faith and believed to be in the best interests
of the corporation and its shareholders, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party), or the court
handling the action. California law requires indemnification when the individual
has successfully defended the action on the merits. Nevada law generally permits
indemnification of expenses incurred in the defense or settlement of a
derivative or third-party action, provided there is a determination by a
disinterested quorum of the directors, by independent legal counsel, or by a
majority vote of a quorum of the stockholders that indemnification is proper in
the circumstances. Without court approval, however, no indemnification may be
made in respect of any derivative action in which such person is adjudged liable
for negligence or misconduct in the performance of his or her duty to the
corporation.
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Nevada law requires indemnification relating to a successful defense on the
merits or otherwise.
10. INSPECTION OF SHAREHOLDERS' LIST. California law provides for an
absolute right of inspection of a shareholders' list for persons holding 5% or
more of the corporation's voting shares or persons holding 1% or more of such
shares who have filed a Schedule 14B with the Securities and Exchange Commission
relating to the election of directors. Generally, a Schedule 14B must be filed
by any shareholder engaged in the solicitation of proxies, as such terms are
defined by the federal securities laws, in connection with a contested election
of directors. Nevada law permits any person who has been a shareholder of record
for at least 6 months, or any person holding at least 5% of all outstanding
shares, to inspect the shareholders list of a corporation for a purpose
reasonably related to such person's interest as a shareholder.
11. PAYMENTS OF DIVIDENDS. Under California law, any distributions
(including dividends and repurchases of shares) are limited either to retained
earnings or to an amount that would leave the corporation with tangible assets
in an amount equal to at least 125% of its tangible liabilities and with current
assets in an amount at least equal to its current liabilities (or 125% of its
current liabilities if the average pre-tax and pre-interest earnings for the
preceding two fiscal years were less than the average interest expenses for such
years). Such limitations are applied on a consolidated basis. Nevada law permits
the payment of dividends if, after the dividends have been paid, the corporation
is able to pay its debts as they become due in the usual course of business
(equity test for insolvency) and the corporation's total assets are not less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were to be dissolved at the time of the dividend payment, to
satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the dividend (i.e., the
balance sheet test for insolvency). In addition, Nevada law generally provides
that a corporation may redeem or repurchase its shares only if the same equity
and balance sheet tests for insolvency are satisfied. In determining whether the
balance sheet test has been satisfied, the board of directors may: (a) use
financial statements prepared on the basis of accounting practices that are
reasonable under the circumstances; (b) make its determination based on a fair
valuation, including, but not limited to, unrealized appreciation and
depreciation; or (c) make its determination based upon any other method that is
reasonable in the circumstances.
12. STOCK SPLITS AND REVERSE STOCK SPLITS. Under California law, no
shareholder approval is necessary for a corporation to effect a stock split by
an amendment to its articles of incorporation. However, shareholder approval is
necessary to effect a reverse stock split. Under Nevada law, the board of
directors may effect a stock split or reverse stock split without shareholder
approval provided that the stock split or reverse stock split is applied on the
outstanding and authorized shares proportionally.
PRINCIPAL DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION AND BYLAWS OF
SPINTEK-NEVADA AND SPINTEK-CALIFORNIA
The Articles of Incorporation and Bylaws of Spintek-California will differ
from those of Spintek- Nevada in the following principal respects:
1. NUMBER OF DIRECTORS. Pursuant to Section 2 of Article III of
Spintek-Nevada's Bylaws, the number of directors will be not less than two nor
more than nine. The number or range of authorized directors of Spintek-Nevada
can be changed by Board resolution alone through an amendment to the Bylaws. If
the Reincorporation Proposal is approved, the directors of Spintek-California on
the Effective Date of the Merger will continue to serve as directors of
Spintek-Nevada after the Merger.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
No gain or loss will be recognized to Old Spintek with respect to the
transfer of its assets to New
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Spintek, solely in exchange for shares of New Spintek and the assumption by New
Spintek of the liabilities of Old Spintek pursuant to Code Sections 361(a) and
357(a).
No gain or loss will be recognized to New Spintek upon the receipt of
the assets of Old Spintek in exchange for Old Spintek common stock or Series A
Preferred Stock. (Section 1032(a)). The basis of the assets of Old Spintek in
the hands of New Spintek will be the same as the basis of such assets in the
hands of Old Spintek immediately prior to the exchange pursuant to Code Section
362(b).
The holding period of the assets of Old Spintek acquired by New
Spintek will include the period during which those assets were held by Old
Spintek immediately prior to the exchange pursuant to Code Section 1223(2).
No gain or loss will be recognized to the shareholders of Old Spintek
upon the receipt of New Spintek common stock or Series A Preferred Stock solely
in exchange for their Old Spintek common stock or Series A Preferred Stock
pursuant to Code Section 354(a)(1). The basis of the shares of New Spintek
common stock or Series A Preferred Stock received by shareholders of Old Spintek
will be, in each instance, the same as the basis of the Old Spintek common stock
or Series A Preferred Stock surrendered in exchange therefore pursuant to Code
Section 358(a)(1). The holding period of the New Spintek common stock or Series
A Preferred Stock to be received by the shareholders of Old Spintek will include
the holding period of the Old Spintek common stock or Series A Preferred Stock
surrendered in exchange therefor, provided the shares of Spintek common stock or
Series A preferred stock were held as a capital assets on the date of exchange
pursuant to Code Section 1223(1).
For the purpose of section 381 of the Code, New Spintek will be
treated as if there had been no reorganization. Accordingly, the taxable year of
Old Spintek will not end on the Effective Date of the Merger and the tax
attributes of Old Spintek enumerated in section 381(c) shall be taken into
account by New Spintek as if there had been no reorganization (Section
1.381(b)-1(a)(2) of the Income Tax Regulations). The part of the taxable year of
Old Spintek before the reorganization and the part of the taxable year of New
Spintek after the reorganization will constitute a single tax year of New
Spintek and, therefore, Old Spintek will not be required to file a federal
income tax return for any portion of such taxable year as provided by Rev. Rul.
57-276, 1957-1 C.B. 126).
RIGHTS OF DISSENTING SHAREHOLDERS
Dissenters' rights are not available to holders of Spintek's common
stock and Series A Preferred Stock with respect to Proposal Three.
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 proposed Plan 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 to approve the Merger Agreement. A
shareholder who abstains with respect to the proposed Merger Agreement is
considered to be present and entitled to vote at the Meeting, and is in effect
casting a negative vote, but a shareholder (including a broker) who does not
attend or give authority to a Proxy to vote on the proposed Merger Agreement
shall not be considered present and entitled to vote on the proposed Merger
Agreement. All shares represented by proxies will be voted FOR approval of the
proposed Plan unless a contrary choice is specified.
Recommendation of Your Board of Directors "For" the Proposal
The Board of Directors has unanimously adopted the Merger Agreement
and recommends a vote FOR the proposed Merger to change the state of
incorporation of the Company from California to Nevada.
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Ratify Selection of Independent Accountants
Proposal 4 on the Proxy Card
The Board of Directors has re-appointed Joseph Decosimo & Company as
the Company's independent public accountants for the year ended June 30, 1998.
Although not required by law or otherwise, the selection is being submitted to
the stockholders of the Company as a matter of corporate policy for their
approval. Joseph Decosimo & Company, an international firm of certified public
accountants, has audited the financial statements of the Company since 1995. It
is anticipated that a representative of Joseph Decosimo & Company will be
present at the meeting and, if present, such representative will be given the
opportunity to make a statement if he desires to do so. It is also anticipated
that such representative will be available to respond to appropriate questions
from stockholders.
Recommendation of Your Board of Directors "For" the Proposal
The Board of Directors has unanimously adopted the Merger Agreement
and recommends a vote FOR the proposed Merger to change the state of
incorporation of the Company from California to Nevada.
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REPORT ON FORM 10-KSB
A copy of the Company's Report on Form 10-KSB for the period ended June 30, 1997
and amended thereto; filed with the Securities and Exchange Commission
(including related financial statements and schedules) is included with this
Proxy Statement, in lieu of an Annual Report to Shareholders. If a shareholder
does not receive a copy with this Proxy Statement, a copy will be available to
the shareholder without charge, upon written request to Robert E. Huggins, Chief
Financial Officer, Spintek Gaming Technologies, Inc., 901-B Grier Drive, Las
Vegas, Nevada 89119. Exhibits referenced in the Form 10-KSB that are not
included with the Form 10-KSB will also be available to the shareholder without
charge upon written request to Mr. Huggins for the same.
Future Proposals of Stockholders
All proposals of stockholders intended to be presented at the 1998
annual meeting of stockholders must be received by the Company not later than
June 20, 1998, for inclusion in the Company's 1998 proxy statement and form of
proxy relating to the 1998 annual meeting. Upon timely receipt of any such
proposal, the Company will determine whether or not to include such proposal in
the proxy statement and proxy in accordance with applicable regulations and
provisions governing the solicitation of proxies.
Under the Bylaws of the Company, stockholders entitled to vote in the
election of directors may nominate one or more persons for election as directors
only if written notice of such shareholder's intent to make such nomination or
nominations has been given either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Company not later than ninety days
prior to the anniversary date of the immediately preceding annual meeting. Such
notice must set forth: (a) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the shareholder is a holder of record of stock of the
Company; (c) description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities Exchange Commission; and (e) the
consent of each nominee to serve as a director of the Company if so elected.
OTHER MATTERS
The Management of the Company does not know of any other matters which are to be
presented for action at the Meeting. SHOULD ANY OTHER MATTERS COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF, THE PERSONS NAMED IN THE ENCLOSED PROXY WILL
HAVE THE DISCRETIONARY AUTHORITY TO VOTE ALL PROXIES RECEIVED WITH RESPECT TO
SUCH MATTERS IN ACCORDANCE WITH THEIR COLLECTIVE JUDGMENT.
BY ORDER OF THE BOARD OF DIRECTORS
Gary L. Coulter
Chairman of the Board
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
SPINTEK GAMING TECHNOLOGIES, INC.
901-B GRIER DRIVE, LAS VEGAS, NEVADA 89119
(702) 263-3660 FAX (702) 263-3680
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EXHIBIT A
THE 1996 STOCK OPTION PLAN
(AS AMENDED)
OF
SPINTEK GAMING TECHNOLOGIES, INC.
Spintek Gaming Technologies, Inc., a California corporation, has
adopted The 1996 Stock Option Plan (As Amended) of Spintek Gaming Technologies,
Inc. (the "Plan"), effective October 16, 1996, for the benefit of its eligible
employees, consultants and directors. The Plan consists of two plans, one for
the benefit of key Employees (as such term is defined below), Independent
Directors (as such term is defined below) and consultants and a second solely
for the benefit of Independent Directors.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and consultants to further the growth, development and financial
success of the Company by personally benefitting through the
ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to
the long range success of the Company by offering them an
opportunity to own stock in the Company and/or rights which will
reflect the growth, development and financial success of the
Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this Plan they
shall have the meaning specified below, unless the context clearly
indicates otherwise.
1.2 Board. "Board" shall mean the Board of Directors of the Company.
1.3 Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the
following transactions:
(a) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company)
directly or indirectly acquires beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board does
not recommend such stockholders to accept; or
(b) there is a change in the composition of the Board over a
period of twenty-four (24) consecutive months (or less) such
that a majority of the Board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy
contests for the election of Board members, to be comprised
of individuals who either (i) have been Board members
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continuously since the beginning of such period or (ii) have
been elected or nominated for election as Board members
during such period by at least a majority of the Board
members described in clause (i) who were still in office at
the time such election or nomination was approved by the
Board.
1.4 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 Committee. "Committee" shall mean the Board or any Compensation
Committee of the Board, or another committee, or a subcommittee of the
Board, appointed as provided in Section 6. 1.
1.6 Common Stock. "Common Stock" shall mean the common stock of the
Company.
1.7 Company. "Company" shall mean Spintek Gaming Technologies, Inc., a
California corporation.
1.8 Corporate Transaction. "Corporate Transaction" shall mean any of
the following stockholder-approved transactions to which the Company
is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal
purpose of which is to change the State in which the Company
is incorporated, form a holding company or effect a similar
reorganization as to form whereupon this Plan and all
Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete
liquidation or dissolution of the Company in a transaction
not covered by the exceptions to clause (a), above; or
(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person
or persons different from those who held such securities
immediately prior to such merger.
1.9 Director. "Director" shall mean a member of the Board.
1.10 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
1.11 Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.12 Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be (i) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock are
then trading, if any (or as reported on any composite index which
includes such principal exchange), on the trading day previous to such
date, or if shares were not traded on the trading day previous to such
date, then on the next preceding date on which a trade occurred, or
(ii) if Common Stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the
trading day previous to such date as
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reported by NASDAQ or such successor quotation system; or (iii) if
Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a
share of Common Stock as established by the Committee (or the Board,
in the case of grants to Independent Directors) acting in good faith.
1.13 Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of
the Code and which is designated as an Incentive Stock Option by the
Committee.
1.14 Independent Director. 'Independent Director" shall mean a member
of the Board who is not an Employee of the Company.
1.15 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by
the Committee.
1.16 Option. "Option" shall mean a stock option granted under Article
III of this Plan. An Option granted under this Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or
an Incentive Stock Option; provided, however, that Options granted to
Independent Directors and consultants shall be Non-Qualified Stock
Options.
1.17 Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.18 Plan. "Plan" shall mean The 1996 Stock Option Plan (As Amended)
of Spintek Gaming Technologies, Inc.
1.19 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
1.20 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.21 Subsidiary. "Subsidiary" shall mean (i) any corporation in an
unbroken chain of corporations beginning with the Company if each of
the corporations other than the last corporation in the unbroken chain
then owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations
in such chain and (ii) any partnership or limited liability company in
which the Company (A) directly or indirectly holds a managing partner
or managing member interest or (B) is entitled to 50 percent or more
of the profits or assets upon dissolution.
1.22 Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of an Optionee as a consultant to
the Company or a Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding
terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of
limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether
particular
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leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in
writing.
1.23 Termination of Directorship. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases
to be a Director for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death
or retirement. The Board, in its sole and absolute discretion, shall
determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.
1.24 Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between an Optionee
and the Company or any Subsidiary is terminated for any reason, with
or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a
simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the
Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the
Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment;
provided, however, that, with respect to Incentive Stock Options, a
leave of absence, change in status from an employee to an independent
contractor or other change in the employee-employer relationship shall
constitute a Termination of Employment if, and to the extent that,
such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the
then applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in
writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan. The shares of stock subject to Options
shall be Common Stock, initially shares of the Company's Common Stock.
The aggregate number of such shares which may be issued upon exercise
of such options under the Plan shall not exceed 4,000,000 shares of
Common Stock. The shares of Common Stock issuable upon exercise of
such options may be either previously authorized but unissued shares
or treasury shares.
2.2 Add-back of Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other award under
this Plan, expires or is canceled without having been fully exercised,
or is exercised in whole or in part for cash as permitted by this
Plan, the number of shares subject to such Option or other right but
as to which such Option or other right was not exercised prior to its
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expiration, cancellation or exercise may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2. 1.
Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 7.3 and become exercisable with respect
to shares of stock of another corporation shall be considered canceled
and may again be optioned, granted or awarded hereunder, subject to
the limitations of Section 2. 1. Shares of Common Stock which are
delivered by the Optionee or withheld by the Company upon the exercise
of any Option under this Plan, in payment of the exercise price
thereof, may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2. 1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned if
such action would cause an Incentive Stock Option to fail to qualify
as an incentive stock option under Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Any Employee, Independent Director or consultant
selected by the Committee pursuant to Section 3.4(a)(i) shall be
eligible to be granted an Option.
3.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or any then existing Subsidiary or parent
corporation (within the meaning of Section 422 of the Code) unless
such Incentive Stock Option conforms to the applicable provisions of
Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted unless such Option, when granted, qualifies as
an "incentive stock option" under Section 422 of the Code. No
Incentive Stock Option shall be granted to any person who is not an
Employee.
3.4 Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this
Plan:
(i) Determine which Employees are key
Employees and select from among the key
Employees, Independent Directors or
consultants (including Employees,
Independent Directors or consultants who
have previously received Options or
other awards under this Plan) such of
them as in its opinion should be granted
Options;
(ii) Determine the number of shares to be
subject to such Options granted to the
selected key Employees, Independent
Directors or consultants;
(iii) Determine whether such Options are to be
Incentive Stock Options or Non-Qualified
Stock Options and whether such Options
are to qualify as performance-based
compensation as described in Section
162(m)(4)(C) of the Code; and
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(iv) Determine the terms and conditions of
such Options, consistent with this Plan;
provided, however, that the terms and
conditions of Options intended to
qualify as performance-based
compensation as described in Section
162(m)(4)(C) of the Code shall include,
but not be limited to, such terms and
conditions as may be necessary to meet
the applicable provisions of Section
162(m) of the Code.
(b) Upon the selection of a key Employee, Independent Director
or consultant to be granted an Option, the Committee shall
instruct the Secretary of the Company to issue the Option
and may impose such conditions on the grant of the Option as
it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and
on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee,
Independent Director or consultant that the Employee,
Independent Director or consultant surrender for
cancellation some or all of the unexercised Options or other
rights which have been previously granted to him under this
Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may have an option price
lower (or higher) than the exercise price of such
surrendered Option or other award, may cover the same (or a
lesser or greater) number of shares as such surrendered
Option or other award, may contain such other terms as the
Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from
treatment as an "incentive stock option" under Section 422
of the Code.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms
and conditions as the Committee (or the Board, in the case of grants
to Independent Directors) shall determine, consistent with this Plan.
Stock Option Agreements evidencing Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code shall contain such terms and conditions as may be necessary
to meet the applicable provisions of Section 162(m) of the Code. Stock
Option Agreements evidencing Incentive Stock Options shall contain
such terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code.
4.2 Option Price. The price per share of the shares subject to each
Option shall be set by the Committee; provided, however, that such
price shall be no less than the par value of a share of Common Stock,
unless otherwise permitted by applicable state law, and (i) in the
case of Incentive Stock Options and Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, such price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted;
(ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes
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of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code) such price
shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; and (iii) in the case
of grants to Independent Directors, such price shall equal 100% of the
Fair Market Value of a share of Common Stock on the date the Option is
granted; provided, however, that the price of each share subject to
each Option granted to Independent Directors on the date of the
initial public offering of Common Stock shall equal the initial public
offering price per share of Common Stock.
4.3 Option Term. The term of an Option shall be set by the Committee
in its discretion; provided, however, that, (i) in the case of grants
to Independent Directors, the term shall be not more than ten (10)
years from the date the Option is granted, and (ii) in the case of
Incentive Stock Options, the term shall not be more than ten (10)
years from the date the Incentive Stock Option is granted, or five (5)
years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the
Committee may extend the term of any outstanding Option in connection
with any Termination of Employment or Termination of Consultancy of
the Optionee, or amend any other term or condition of such Option
relating to such a termination.
4.4 Option Vesting
(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the
Committee and the Committee may determine that an Option may
not be exercised in whole or in part for a specified period
after it is granted. At any time after grant of an Option,
the Committee may, in its sole and absolute discretion and
subject to whatever terms and conditions it selects,
accelerate the period during which an Option.
(b) No portion of an Option which is unexercisable at
Termination of Employment, Termination of Directorship or
Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by
the Committee in the case of Options granted to Employees,
Independent Directors or consultants either in the Stock
Option Agreement or by action of the Committee following the
grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first
time by an Optionee during any calendar year (under the Plan
and all other incentive stock option plans of the Company
and any Subsidiary) exceeds $100,000, such Options shall be
treated as Non-Qualified Options to the extent required by
Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in
the order in which they were granted. For purposes of this
Section 4.4(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such
stock is granted.
4.5 Consideration. In consideration of the granting of an Option, the
Committee may
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require the Optionee to agree, in the written Stock Option Agreement,
to remain in the employ of (or to consult for or to serve as an
Independent Director of, as applicable) the Company or any Subsidiary
for a period of at least one year after the Option is granted or, in
the case of an Independent Director, to the end of such Independent
Director's current Board term (or such shorter period as may be fixed
in the Stock Option Agreement or by action of the Committee or the
Board following grant of the Option). Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any
right to continue in the employ of, or as a consultant for, the
Company or any Subsidiary, or as a director of the Company, or shall
interfere with or restrict in any way the rights of the Company and
any Subsidiary, which are hereby expressly reserved, to discharge any
Optionee at any time for any reason whatsoever, with or without good
cause.
4.6 Other Terms. The Stock Option Agreement may contain such other
terms and conditions as the Committee may deem appropriate, including,
but not limited to, the granting of rights to require the Company to
register the securities received upon exercise; provided, however,
that no term may be included which would violate the terms of this
Plan or any applicable law.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect
to fractional shares and the Committee (or the Board, in the case of
Options granted to Independent Directors) may require that, by the
terms of the Option, a partial exercise be with respect to a minimum
number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of
Options granted to Independent Directors pursuant to Section
3.4(d)) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or
other person then entitled to exercise the Option or such
portion;
(b) Such representations and documents as the Committee (or
the Board, in the case of Options granted to Independent
Directors, in its absolute discretion, deems necessary or
advisable to effect compliance with all applicable
provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations.
The Committee or Board may, in its absolute discretion, also
take whatever additional actions it deems appropriate to
effect such compliance including, without limitation,
placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant
to Section 7.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or
persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for
the shares with
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respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board, in the case
of Options granted to Independent Directors) may in its
discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is
exercised; or (ii) allow payment, in whole or in part,
through the delivery of shares of Common Stock owned by the
Optionee, duly endorsed for transfer to the Company with a
Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion
thereof.
5.3 Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates
for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all
stock exchanges on which such class of stock is
then listed;
(b) The completion of any registration or other
qualification of such shares under any state or
federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any
other governmental regulatory body which the
Committee or Board shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance
from any state or federal governmental agency
which the Committee (or Board, in the case of
Options granted to Independent Directors) shall,
in its absolute discretion, determine to be
necessary or advisable;
(d) The lapse of such reasonable period of time
following the exercise of the Option as the
Committee (or Board, in the case of Options
granted to Independent Directors) may establish
from time to time for reasons of administrative
convenience; and
(e) The receipt by the Company of full payment for
such shares, including payment of any applicable
withholding tax.
5.4 Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company
in respect of any shares purchasable upon the exercise of any part of
an Option unless and until certificates representing such shares have
been issued by the Company to such holders.
5.5 Ownership and Transfer Restrictions. The Committee, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set
forth in the respective Stock Option Agreement and may be referred to
on the certificates evidencing such shares. The Committee may require
the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock
Option within (i) two years from the date of granting such Option to
such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to such
requirement to give prompt notice of disposition.
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ARTICLE VI
ADMINISTRATION
6.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the
Committee under this Plan) shall consist solely of two or more
Independent Directors appointed by and holding office at the pleasure
of the Board, each of whom is (i) a "non-employee director" (as
defined by Rule 16b-3), (ii) to the extent required by the applicable
provisions of Rule 16b-3, a "disinterested person" (as defined by Rule
16b-3) and (iii) an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
6.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in
accordance with its provisions. The Committee shall have the power to
interpret this Plan and the agreements pursuant to which Options are
granted or awarded, and to adopt such rules for the administration,
interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of
its members in office, shall conduct the general administration of the
Plan with respect to grants to Independent Directors. Any such grant
or award under this Plan need not be the same with respect to each
Optionee. Any such interpretations and rules with respect to Incentive
Stock Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any time and
from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under
Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the sole
discretion of the Committee.
6.3 Majority Rule; Unanimous Written Consent. The Committee shall act
by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument
signed by all members of the Committee.
6.4 Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with
the administration of this Plan shall be borne by the Company. The
Committee may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall
be entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall
be final and binding upon all Optionees, Grantees, Restricted
Stockholders, the Company and all other interested persons. No members
of the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to
this Plan or Options, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Not Transferable. Options under this Plan may not be sold,
pledged, assigned, or transferred in any manner other than by will or
the laws of descent and distribution or pursuant to a QDRO, unless and
until such rights or awards have been exercised, or the shares
underlying such rights or awards have been issued, and all
restrictions applicable to such shares have lapsed. No Option or
interest or right therein shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be
null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.
During the lifetime of the Optionee, only he may exercise an Option or
other right or award (or any portion thereof) granted to him under the
Plan, unless it has been disposed of pursuant to a QDRO. After the
death of the Optionee, any exercisable portion of an Option or other
right or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement
or other agreement, be exercised by his personal representative or by
any person empowered to do so under the deceased Optionee's will or
under the then applicable laws of descent and distribution.
7.2 Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 7.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board or the Committee. However,
without approval of the Company's stockholders given within twelve
months before or after the action by the Board or the Committee, no
action of the Board or the Committee may, except as provided in
Section 7.3, increase the limits imposed in Section 2.1 on the maximum
number of shares which may be issued under this Plan, and no action of
the Committee may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. No
amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, alter or impair any rights or
obligations under any Options theretofore granted or awarded, unless
the award itself otherwise expressly so provides. No Options may be
granted or awarded during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock
Option be granted under this Plan after the first to occur of the
following events:
(a) The expiration of ten years from the date the Plan is adopted
by the Board; or
(b) he expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 7.4.
7.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 7.3(d), in the event that the Committee
(or the Board, in the case of grants to Independent Directors)
determines that any dividend or other distribution (whether in
the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split,
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reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company (including,
but not limited to a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction
or event, in the Committee's sole discretion (or in the case of
grants to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to an Option, then
the Committee (or the Board, in the case of grants to Independent
Directors) shall, in such manner as it may deem equitable, adjust
any or all of
(i) the number and kind of shares of Common
Stock (or other securities or property)
with respect to which Options may be
granted under the Plan (including, but
not limited to, adjustments of the
limitations in Section 2.1 on the
maximum number and kind of shares which
may be issued),
(ii) the number and kind of shares of Common
Stock (or other securities or property)
subject to outstanding Options, and
(iii) the grant or exercise price with respect
to any Option.
(b) Subject to Sections 7.3(b)(vii) and 7.3(d), in the event of
any Corporate Transaction or other transaction or event described
in Section 7.3(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or
the financial statements of the Company or any affiliate, or of
changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of grants to
Independent Directors) in its discretion is hereby authorized to
take any one or more of the following actions whenever the
Committee (or the Board, in the case of grants to Independent
Directors) determines that such action is appropriate in order to
prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with
respect to any option, right or other award under this Plan, to
facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or
the Board, in the case of grants to Independent Directors)
may provide, either by the terms of the agreement or by
action taken prior to the occurrence of such transaction or
event and either automatically or upon the optionee's
request, for either the purchase of any such Option for an
amount of cash equal to the amount that could have been
attained upon the exercise of such option, right or award or
realization of the optionee's rights had such option, right
or award been currently exercisable or payable or fully
vested or the replacement of such option, right or award
with other rights or property selected by the Committee (or
the Board, in the case of grants to Independent Directors)
in its sole discretion;
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<PAGE>
(ii) In its sole and absolute discretion, the Committee (or
the Board, in the case of grants to Independent Directors)
may provide, either by the terms of such Option or by action
taken prior to the occurrence of such transaction or event
that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or
the Board, in the case of grants to Independent Directors)
may provide, either by the terms of such Option or by action
taken prior to the occurrence of such transaction or event,
that for a specified period of time prior to such
transaction or event, such option, right or award shall be
exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in (i) Section 4.4
or (ii) the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or
the Board, in the case of grant to Independent Directors)
may provide, either by the terms of such Option or by action
taken prior to the occurrence of such transaction or event,
that upon such event, such option, right or award be assumed
by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar
options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and
kind of shares and prices; and
(v) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or
the Board, in the case of grants to Independent Directors)
may make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of
(including the grant or exercise price), and the criteria
included in, outstanding options which may be granted in the
future.
(vi) None of the foregoing discretionary terms of this
Section 7.3(b) shall be permitted with respect to Options
granted to Independent Directors to the extent that such
discretion would be inconsistent with the applicable
exemptive conditions of Rule 16b-3. In the event of a Change
in Control or a Corporate Transaction, to the extent that
the Board does not have the ability under Rule 16b-3 to take
or to refrain from taking the discretionary actions set
forth in Section 7.3(b)(iii) above, each Option granted to
an Independent Director shall be exercisable as to all
shares covered thereby upon such Change in Control or during
the five days immediately preceding the consummation of such
Corporate Transaction and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or
the vesting schedule of such Options. In the event of a
Corporate Transaction, to the extent that the Board does not
have the ability under Rule 16b-3 to take or to refrain from
taking the discretionary actions set forth in Section
7.3(b)(ii) above, no Option granted to an Independent
Director may
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<PAGE>
be exercised following such Corporate Transaction unless
such Option is, in connection with such Corporate
Transaction, either assumed by the successor or survivor
corporation (or parent or subsidiary thereof) or replaced
with a comparable right with respect to shares of the
capital stock of the successor or survivor corporation (or
parent or subsidiary thereof).
(c) Subject to Section 7.3(d) and 7.8, the Committee (or the
Board, in the case of grants to Independent Directors) may, in
its discretion, include such further provisions and limitations
in any Option as it may deem equitable and in the best interests
of the Company.
(d) With respect to Incentive Stock Options and Options intended
to qualify as performance-based compensation under Section
162(m), no adjustment or action described in this Section 7.3 or
in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such option
or stock appreciation right to fail to so qualify under Section
162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to
the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee (or the Board, in
the case of grants to Independent Directors) determines that the
option or other award is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any
option, right or award shall always be rounded to the next whole
number.
(e) In the event of any Corporate Transaction, each outstanding
Option shall, immediately prior to the effective date of the
Corporate Transaction, automatically become fully exercisable for
all of the shares of Common Stock at the time subject to such
rights or fully vested, applicable, and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.
However, an outstanding right shall not so accelerate if and to
the extent: (i) such right is, in connection with the Corporate
Transaction, either to be assumed by the successor or survivor
corporation (or parent thereof) or to be replaced with a
comparable right with respect to shares of the capital stock of
the successor or survivor corporation (or parent thereof) or (ii)
the acceleration of exercisability of such right is subject to
other limitations imposed by the Plan Administrator at the time
of grant. The determination of comparability of rights under
clause (i) above shall be made by the Plan Administrator, and its
determination shall be final, binding and conclusive.
7.4 Approval of Revised Plan by Stockholders. This Revised Plan will
be submitted for the approval of the Company's stockholders within
twelve months after the date of the Board's initial adoption of this
Plan. Options may be granted prior to such stockholder approval,
provided that such Options shall not be exercisable prior to the time
when this Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said
twelve-month period, all Options previously granted under this Plan
shall thereupon be canceled and become null and void.
7.5 Tax Withholding. The Company shall be entitled to require payment
in cash or
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deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with
respect to the issuance, vesting or exercise of any Option. The
Committee (or the Board, in the case of grants to Independent
Directors) may in its discretion and in satisfaction of the foregoing
requirement allow such Optionee to elect to have the Company withhold
shares of Common Stock otherwise issuable under such Option or other
award (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.
7.6 Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of
an Option granted under this Plan. The terms and conditions of any
such loan shall be set by the Committee.
7.7 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the
Plan, the Committee (or the Board, in the case of grants to
Independent Directors) shall have the right (to the extent consistent
with the applicable exemptive conditions of Rule 16b-3) to provide, in
the terms of Options or other awards made under the Plan, or to
require the recipient to agree by separate written instrument, that
(i) any proceeds, gains or other economic benefit actually or
constructively received by the recipient upon any receipt or exercise
of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award
shall terminate and any unexercised portion of such award (whether or
not vested) shall be forfeited, if (a) a Termination of Employment,
Termination of Consultancy or Termination of Directorship occurs prior
to a specified date, or within a specified time period following
receipt or exercise of the award, or (b) the recipient at any time, or
during a specified time period, engages in any activity in competition
with the Company, or which is inimical, contrary or harmful to the
interests of the Company, as further defined by the Committee (or the
Board, as applicable).
7.8 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this
Plan, and any Option granted to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3 of the
Exchange Act) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan
and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan or any Option
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements.
7.9 Effect of Plan Upon Options and Compensation Plans. The adoption
of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company (i) to
establish any other forms of incentives or compensation for Employees,
Independent Directors or consultants of the Company or any Subsidiary
or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose
including but not by way of limitation,
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the grant or assumption of options in connection with the acquisition
by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or
association.
7.10 Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of
Common Stock under this Plan or under Options hereunder are subject to
compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion
of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall,
if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or
desirable to assure compliance with all applicable legal requirements.
To the extent permitted by applicable law, the Plan or Option granted
hereunder shall be deemed amended to the extent necessary to conform
to such laws, rules and regulations.
7.11 Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this
Plan.
7.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the
State of Nevada without regard to conflicts of laws thereof.
* * *
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PROXY SPINTEK GAMING TECHNOLOGIES, INC. PROXY
901-B Grier Drive, Las Vegas, Nevada 89119
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints Malcolm C. Davenport V
and Gary L. Coulter, as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of common stock of Spintek Gaming Technologies, Inc. (the "Company"),
held of record by the undersigned on December 4, 1997, at the Annual Meeting of
Shareholders to be held on January 21, 1998, or any adjournment thereof.
The Board of Directors recommends a vote FOR (1), (2), (3) and (4).
1. ELECTION OF dIRECTORS Nominees to serve a one-year term expiring in 1998:
Malcolm C. Davenport V Gary L. Coulter Patrick W. McGrath
___ FOR all nominees (except names marked to the contrary above).
___ WITHHOLD AUTHORITY to vote for all nominees listed above.
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
nominee's name in the list above).
2. APPROVE THE AMENDMENT TO THE SPINTEK GAMING TECHNOLOGIES, INC. 1996 STOCK
OPTION PLAN.
FOR ___ AGAINST ___ ABSTAIN ___
3. APPROVE THE AGREEMENT OF MERGER AND PLAN OF REORGANIZATION PURSUANT TO WHICH
THE COMPANY'S STATE OF INCORPORATION FROM CALIFORNIA TO NEVADA.
FOR ___ AGAINST ___ ABSTAIN ___
4. RATIFY THE SELECTION OF JOSEPH DECOSIMO & COMPANY AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1998.
FOR ___ AGAINST ___ ABSTAIN ___
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 THROUGH 4.
Please sign exactly as name appears on your certificate. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
DATED: ____________________________
________________________________________________
Signature
________________________________________________
Signature if held jointly
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