Spintek Gaming Technologies, Inc.
1857 Helm Drive
Las Vegas, Nevada 89119
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 29, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders
(the "Meeting") of Spintek Gaming Technologies, Inc., a Nevada corporation (the
"Company") will be held at the Stardust Hotel and Casino, 3000 Las Vegas
Boulevard South, Las Vegas, Nevada 89109, in Salons One and Two, at 10:00 a.m.,
local time, on Tuesday, June 29, 1999, for the following purposes:
1. To elect a Class III director to serve until the 2001 Annual
Meeting or until his or her successor is duly elected and
qualified.
2. To ratify the selection of Joseph Decosimo & Company as the
Company's independent public accountants for fiscal year 1999.
3. 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 May 28, 1999, the record date fixed by the Board of Directors, are
entitled to notice of, and to vote at, the Meeting.
Stockholders are cordially invited to attend the Annual Meeting in
person. STOCKHOLDERS DESIRING TO VOTE IN PERSON MUST REGISTER AT THE ANNUAL
MEETING WITH THE INSPECTOR OF ELECTIONS PRIOR TO COMMENCEMENT OF THE ANNUAL
MEETING. IF YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO EXECUTE AND DATE THE ENCLOSED FORM OF PROXY AND TO FORWARD IT TO
THE SECRETARY OF THE COMPANY WITHOUT DELAY SO THAT YOUR SHARES MAY BE VOTED AT
THE ANNUAL MEETING. ANY PROXY GIVEN PURSUANT TO THIS SOLICITATION MAY BE REVOKED
AT ANY TIME BY SO NOTIFYING THE SECRETARY OF THE COMPANY IN WRITING PRIOR TO THE
MEETING OR BY SUBMITTING PRIOR TO THE MEETING A SUBSTITUTE PROXY BEARING A LATER
DATE.
A copy of the 1998 Form 10-KSB, Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, including financial statements for
the twelve months ended June 30, 1998, is enclosed.
By Order of the Board of Directors
Gary L. Coulter
Chairman of the Board and Chief Executive Officer
Las Vegas, Nevada
June 9, 1999
<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
_________________________________
PROXY STATEMENT
---------------
Approximate date proxy material first sent
to stockholders: June 9, 1999
---------------
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 1998 Annual Meeting of Stockholders of the Company (the "Meeting") to
be held at 10:00 a.m. local time at the Stardust Hotel and Casino, 3000 Las
Vegas Boulevard South, Las Vegas, Nevada 89109, in Salons One and Two, on
Tuesday, June 29, 1999, and any adjournments thereof. At the Meeting, the
stockholders will be asked to vote on the following matters:
1. To elect Thomas C. Burns, Ph.D. as a Class III director (the
"Nominee") to serve as a director of the Company until the
2001 Annual Meeting of Stockholders or until the successor is
duly elected and qualified.
2. To ratify the selection of Joseph Decosimo & Company as the
Company's independent public accountants for fiscal year 1999.
3. 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
June 9, 1999 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
stockholders in person or by telephone, telegraph or telecopy, following
solicitation by this Proxy Statement, but will not be separately compensated for
such services.
The Company's executive offices are located at 1857 Helm Drive, Las
Vegas, Nevada 89119, and the telephone at that address is (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 (1) elect
the Nominee to serve for the term stated herein, and (2) ratify the selection of
Joseph Decosimo & Company as the Company's independent accountants for the
fiscal year ending June 30, 1999. Your execution of the enclosed Proxy will not
affect your right as a stockholder to attend the Meeting and vote in person. 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
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Company an instrument revoking it, by submitting a substitute proxy bearing a
later date or by voting in person at the Meeting.
None of the proposals to be voted on at the Annual Meeting create a
right of appraisal under Nevada law. A vote "FOR" or "AGAINST" any of the
proposals set forth herein will only affect the outcome of the proposal.
Voting Securities and Rights Related Thereto
The Company has 100,000 shares of no par value preferred stock
authorized, none of which was outstanding (the "Preferred Stock"), and
500,000,000 shares of $.002 par value common stock authorized, of which
142,243,119 shares were issued and outstanding (the "Common Stock"), as of the
close of business on May 28, 1999 (the "Record Date"). Only holders of the
Common Stock 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.
On August 6, 1996, the Board of Directors was granted authority by
consent of a majority of the stockholders of the Company to issue up to 100,000
shares of the Preferred Stock. 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 8,241 shares of Preferred Stock to satisfy the
underlying debt of said Debenture, including accrued but unpaid interest. The
Preferred Stock was convertible into the Common Stock pursuant to the terms of
the Certificate of Designation.
During the period from February 28, 1998 through October 31, 1998, the
Company issued $5,000,000 of 6% Secured Convertible Notes in a private placement
(the "Notes"). The Notes were convertible into the Common Stock upon the terms
and conditions set forth in the Notes.
On April 26, 1999, the Company received notices of conversion in
accordance with the terms of the Preferred Stock and the Notes. The conversions
in respect of the Preferred Stock and Notes result in the issuance of
123,722,581 shares of the Common Stock. Following the conversions and upon
issuance of all shares, the Company has 142,243,119 shares of its Common Stock
issued and outstanding, no shares of its Preferred Stock issued and outstanding,
and no Notes issued and outstanding.
Beneficial Ownership
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 28, 1999 as to (a)
each director, (b) each executive officer identified in the Summary Compensation
Table below, (c) all directors and officers 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.
2
<PAGE>
Name and Address of Amount of Percent of
Beneficial Owner (1) Shares Class (2)
- --------------------------------- ----------- ----------
Directors and Executive Officers:
- ---------------------------------
Malcolm C. Davenport V 66,161,200(4) 45.7%
Gary L. Coulter 16,879,164(5) 10.6%
Robert E. Huggins 7,209,551(6) 4.8%
Thomas C. Burns, Ph.D. 744,857(7) .5%
Erik R. Batzloff 1,100,140(8) .8%
George P. Miller 186,214(9) .1%
All directors and executive officers
as a group (6 persons) 92,281,126(10) 54.1%
Five Percent (5%) or Greater Stockholders:
- ------------------------------------------
RBB Bank Aktiengesellschaft 52,288,224(3) 36.8%
Burgring 16, 8010 Graz, Austria
The Malcolm C. Davenport Family Trust 62,871,917 44.2%
409 10th Street
West Point, Georgia 31833
- -----------------
(1) The address of all directors and executive officers is
c/o the Company, 1857 Helm Drive, Las Vegas, Nevada 89119.
(2) Percent of class is based on the number of shares outstanding
on May 28, 1999. Percent of 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.
(3) RBB converted 8,241 shares of Preferred Stock (which
represented 100% of the Company's Preferred Stock outstanding)
into 51,837,334 shares of the Company's Common Stock effective
April 29, 1999, with 25,918,667 shares of the Common Stock
being issued on April 29, 1999 and May 6, 1999, respectively.
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 RBB 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 2,572,707 shares subject to
options that are currently exercisable or will become
exercisable within 60 days (including 2,227,309 options that
were issued in connection with the conversions of the
Preferred Stock and the Notes pursuant to the antidilution
provisions of the Option Agreements and The 1996 Stock Option
Plan), 313,416 shares held by Mr. Davenport's spouse, and
62,871,917 shares held by The Malcolm C. Davenport V Family
Trust (the "Trust"). Effective April 29, 1999, the Trust
converted its $4,300,000 investment in the Company's Notes
into 61,871,917 shares of the Company's Common Stock.
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<PAGE>
(5) Includes shares 488,843 owned and 16,390,321 shares subject to
options that are currently exercisable or will become
exercisable within 60 days, 14,189,856 of which were issued
pursuant to the antidilution provisions of the Option
Agreements and the 1996 Stock Option Plan in connection with
the conversion of the Preferred Stock and the Notes into
Common Stock.
(6) Includes 50,000 shares owned and 7,159,551 shares subject to
options that are currently exercisable or will become
exercisable within 60 days, 6,215,668 of which were issued
pursuant to the antidilution provisions of the Option
Agreements and the 1996 Stock Option Plan in connection with
the conversion of the Preferred Stock and the Notes into
Common Stock.
(7) Represents 744,857 shares subject to options that are
currently exercisable, including 644,857 of which were issued
pursuant to the antidilution provisions of the Option
Agreements and the 1996 Stock Option Plan in connection with
the conversion of the Preferred Stock and Notes into Common
Stock.
(8) Represents 1,100,140 shares subject to options that are
currently exercisable, including 952,442 of which were issued
pursuant to the antidilution provisions of the Option
Agreements and the 1996 Stock Option Plan in connection with
the conversion of the Preferred Stock and Notes into Common
Stock.
(9) Represents 186,214 shares subject to options that are
currently exercisable, including 161,214 of which were issued
pursuant to the antidilution provisions of the Option
Agreements and the 1996 Stock Option Plan in connection with
the conversion of the Preferred Stock and Notes into Common
Stock.
(10) Includes 28,153,785 shares subject to options that are
currently exercisable or will become exercisable within 60
days.
Proposal 1 on the Proxy Card
Nomination and Election of Directors
The Board of Directors is divided into three classes, each class to be
elected for three year terms. The Board of Directors has nominated Thomas C.
Burns, Ph.D. to serve as the Class III director to serve until the 2001 Annual
Meeting or until his successor is duly elected and qualified. It is intended
that the accompanying Proxy will be voted for the election of the Nominee as
director unless the Proxy contains contrary instructions. If the Nominee should
be unable to accept nomination or election as a director, which is not expected,
the Proxies may be voted with discretionary authority for a substitute
designated by the Board of Directors; provided, however, that the proxies may
not be voted for more than one nominee to the Board of Directors at the Meeting.
The election of a director requires the affirmative vote of a plurality of
shares present or represented at the Meeting.
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<PAGE>
The following sets forth certain information concerning the Nominee for
election to the Board of Directors:
Thomas C. Burns, Ph.D., age 60
Dr. Burns has been a director since December 1998 when he was
appointed by the remaining two board members to replace Mr. Patrick R.
McGrath, who resigned to pursue his other business interests. Dr.
Burns earned his Ph.D. in biopsychology from the University of
Georgia, Athens, Georgia in 1974. From December 1978 to the present,
he has maintained a private practice, initially in Savannah, Georgia
through April 1989 and in Jonesboro and Mableton, Georgia since April
1989, specializing in individual and group psychotherapy,
psychological assessment, consultation to management, team building,
executive mentoring, and staff development . In addition to his
private practice, he has served as a program director for Meadowbrook
Rehabilitation Group of Atlanta, managing their Subacute Neurological
Program from May 1990 to February 1993 and their Community Re-entry
Program from February 1993 to January 1994.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF THE NOMINEE TO
SERVE AS A CLASS III DIRECTOR.
Directors
The following sets forth certain information as to the Class I and
Class II members of the Board of Directors:
Class I, to be elected at the 2000 Annual Meeting of Stockholders:
Gary L. Coulter, age 53
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 July 1995 of Private
Biologicals Corporation, a developer of biological products and
treatments for cancer; 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 January 1998,
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; Director of
Tapistron International from April 1996 until present; private
practice of law in the state of Georgia from August 1992 until April
1996 ( from January 1996 until April 1996, private practice of law
with Malcolm C. Davenport V, a director of the Company).
Class II, to be elected at the 1999 Annual Meeting of Stockholders:
Malcolm C. Davenport V, age 47
Director of the Company since September 1995; Secretary of the Company
from October 1996 through February 1999. Mr. Davenport was a partner
in the law firm of Ponder and Davenport, P.C. from 1990 through
November 1992 and has practiced law in West Point, Georgia from
December 1992 through the present. From January 1996 until April 1996,
he and Mr. Coulter were partners in the law firm of Coulter &
Davenport located in Atlanta, Columbus and West Point, Georgia. Mr.
Davenport is
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<PAGE>
a member of both the Alabama and Georgia Bar Associations and is a
Certified Public Accountant and a member of the Alabam CPA Society.
From January 1995 to June 1998, he was a partner in the firm of
Davenport & Sikes, Certified Public Acountants in Roanoke, Alabama. He
is a director of several companies, including public companies
American Artists Film Corporation, a public company, ITC DeltaCom,
Inc., and ITC Holdings and several of its affiliates. Mr. Davenport
earned his Juris Doctorate from Cumberland School of Law at Sanford
University in Birmingham, Alabama.
No director is a party to any material legal proceeding adverse to the Company
nor has a material interest adverse to the Company. No director has, during the
past five years, been (i) an executive officer of any business that has had a
bankruptcy petition filed by or against such business, (ii) convicted in a
criminal proceeding or is subject to a pending criminal proceeding, (iii)
subject to any order, judgment or decree of any court of competent jurisdiction
enjoining, barring or suspending the director from involvement in any business,
securities or banking activity, or (iv) been found by a court of competent
jurisdiction to have violated any federal or state securities laws or
commodities laws.
There were 15 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 75% of the meetings. The Company does not have a nominating
committee of the Board of Directors. The Nominee for election as director at the
Meeting was selected by the Board of Directors of the Company. Further, the
Company does not have a compensation committee of the Board of Directors or an
audit committee of the Board of Directors.
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
the year ended June 30, 1998, Mr. Patrick McGrath, a member of the Board of
Directors for the period January 1998 through December 1998, received options to
purchase 100,000 shares of the Company's Common Stock based on the closing price
on the dates of the grant. In addition, Mr. McGrath and Mr. Davenport received
additional options to purchase 9,440 and 54,853 shares of Common Stock,
respectively, to avoid dilution of options they previously had been granted. All
of these options were vested as of June 30, 1998. Pursuant to the antidilution
provisions of the Option Agreements and the 1996 Stock Option Plan, Mr. McGrath
and Mr. Davenport were issued 705,732 and 2,227,311 options to acquire Common
Stock, respectively, in connection with the conversion of the Preferred Stock
and the Notes. Dr. Burns received 100,000 options to purchase shares of the
Company's Common Stock in December 1998 at the time he was appointed to be a
member of the Board of Directors, all of which were vested on the grant date. In
connection with the conversions of the Preferred Stock and Notes into Common
Stock, the antidilution provision of Dr. Burns Option Agreement and the 1996
Stock Option Plan increased his options by a total of 644,857 shares.
6
<PAGE>
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.
Name Age Title
- ---- --- -----
Gary L. Coulter 53 Chairman and Chief Executive Officer
Robert E. Huggins 51 President and Chief Operating Officer
George P. Miller 54 Chief Financial Officer
Erik R. Batzloff 45 Vice President - Compliance and Administration
For a description of Mr. Coulter's background, see "Nomination and Election of
Directors."
Mr. Huggins served as Senior Vice President for the Company since April
1997, and Chief Financial Officer since November 1995. As of July 1, 1998, Mr.
Huggins yielded his positions as Senior Vice President and Chief Financial
Officer, and was named President and Chief Operating Officer. Mr. Huggins is a
Certified Public Accountant ("CPA"), who from February 1992 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. Miller joined the Company on August 1, 1998 as Chief Financial Officer.
From July 1996 through July 1998, Mr. Miller was Director of Finance for Rio
Hotel & Casino, Inc., where he was responsible for financial reporting
activities, including SEC filings, and the coordination of internal/external
audit functions. From February 1994 through June 1996, he served as assistant
treasurer and corporate controller for Mikohn Gaming Corporation where he was
responsible for financial reporting and SEC filings for operations that included
multiple manufacturing/distribution facilities in the U.S. and internationally.
From 1991 to 1994, Mr. Miller was vice president and corporate controller of
Sahara Resorts, Inc., a public company that operated four hotel/casino
facilities in Las Vegas and Laughlin, Nevada. Mr. Miller served on the Board of
Directors of Sahara Resorts, now known as Santa Fe Gaming Corporation, until he
resigned due to his employment with the Rio Hotel & Casino in July 1996. Mr.
Miller is a Certified Public Accountant.
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.
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<PAGE>
No executive officer is a party to any material legal proceeding adverse to the
Company nor has a material interest adverse to the Company. No executive officer
has, during the past five years, been (i) an executive officer of any business
that has had a bankruptcy petition filed by or against such business, (ii)
convicted in a criminal proceeding or is subject to a pending criminal
proceeding, (iii) subject to any order, judgment or decree of any court of
competent jurisdiction enjoining, barring or suspending the director from
involvement in any business, securities or banking activity, or (iv) been found
by a court of competent jurisdiction to have violated any federal or state
securities laws or commodities laws.
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 $100,000 (the "Named Executive
Officers") during the fiscal years ended June 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------- ------------
Other Annual Securities
Name and Fiscal Compensation Underlying
Principal Position Year Salary ($)(1) Bonus ($)(2) ($) Options
- ------------------ ---- -------------- ------------- --- -------
<S> <C> <C> <C> <C> <C>
Gary L. Coulter (1)(3) 1998 248,067 0 39,346(4) 338,289
1997 156,000 0 18,206 1,162,176
Chairman of the Board of 1996 28,615 0 0 0
Directors and Chief
Executive Officer
Lanier M. Davenport (5) 1998 0 0 0 0
1997 72,923 0 8,432(6) 0
Chairman of the Board of 1996 65,640 0 68,483(6) 0
Directors and Chief
Executive Officer until
October 18, 1996
Robert E. Huggins (1) 1998 170,670 0 9,000(7) 155,431
1997 150,000 0 10,015(7) 508,452
President and Chief 1996 72,680 0 21,538(7) 0
Operating Officer
- ----------------
<FN>
(1) Salaries in fiscal 1998 and1997 includes $30,000 for each year
paid to Mr. Coulter and $30,000 each year paid to Mr. Huggins
in lump sums in November 1997 and February 1997, as an
incentive to remain with the Company as a result of a possible
change in control situation which occurred in November 1996.
(2) In June 1997, the Board of Directors approved a bonus plan
based on the total market value of all the issued and
outstanding Common Stock of the Company for the directors, key
employees and advisory directors of the Company. (See "Other
Long-Term Incentive Awards" below for a description of the
"Bonus Plan").
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(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. He relinquished his position as President and Chief
Operating Officer to Mr. Huggins in July 1998.
(4) Represents taxable fringe benefits for a leased car and
apartment in Las Vegas that were provided to Mr. Coulter
during fiscal 1998 and 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) Mr. Huggins relinquished his roles as Senior Vice President in
July 1998 and Chief Financial Officer in August 1998 to become
President and Chief Operating Officer of the Company.
(8) Includes taxable fringe benefits for automobile allowance and
health insurance of $9,000, $10,015 and $6,238 for fiscal
1998, 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, Chairman of the Board of Directors and Chief Executive
Officer since October 18, 1996, entered into an Employment Agreement with the
Company effective October 18, 1998. Mr. Coulter's employment agreement extends
until February 28, 2002, at which time the agreement will be automatically
renewed for another term of approximately 40 months. Mr. Coulter's base salary
from the effective date is $400,000 through December 31, 1999. Mr. Coulter is
also entitled to additional compensation based upon the cumulative aggregate
sales of the AccuHopper, AccuDrop and/or AccuFill Systems since the Company's
inception. Pursuant to the terms of his agreement, he is entitled to receive in
a single lump sum payment 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. Mr. Coulter is entitled to six months' severance pay if he resigns. In
addition, the Company pays an automobile allowance, certain personal air travel
and life insurance payable to his designated beneficiary. Mr. Coulter is also
entitled to options to purchase a minimum of at least 200,000 shares of Common
Stock each year of his employment agreement at the closing market price on the
date(s) of grant. He is eligible to participate in any employee benefit or bonus
plan provided by the Company pursuant to the terms of such agreement.
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<PAGE>
Robert E. Huggins, Senior Vice President and Chief Financial Officer
until July 1, 1998 when he was named President and Chief Operating Officer, has
an employment agreement with the Company extending through June 30, 2000. Mr.
Huggins' annual base salary was $186,000 on July 1, 1998 and pursuant to the
terms of his employment agreement 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 year's pay as
severance. The Company pays $750 per month to Mr. Huggins for an automobile
allowance and is to reimburse him for the cost of a country club membership not
to exceed $35,000. Mr. Huggins 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 any employee benefit or bonus plan provided by the Company
pursuant to the terms of such agreement.
The number of options reflected in each of the employment agreements do
not include options issued pursuant to the antidilution provisions of the Option
Agreements and the 1996 Stock Option Plan in connection with the conversion of
the Preferred Stock and Notes into Common Stock on April 29, 1999. See the
section entitled "Beneficial Ownership" on page 2.
Change in Control Severance Agreements
For the purpose of employment agreements between Messrs. Coulter and
Huggins, and 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 as of the specified date cease to constitute the
majority. As part of their respective employment agreements, in the event of a
Change in Control, Messrs. Coulter and Huggins 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. In addition to the Change in Control provisions in
their respective employment agreements discussed above, incentives granted to
Messrs. Coulter and Huggins pursuant to the Company's long-term incentive plan
mature immediately upon Change in Control or termination for any reason.
The notices of conversion by the holders of the Preferred Stock and the
Notes effective April 29, 1999 may have resulted in a Change in Control as the
term is defined in the respective employment agreements of Messrs. Coulter and
Huggins. The Company is currently negotiating with the parties regarding the
waiver of severance rights with respect to any Change in Control.
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<PAGE>
Options
The tables below set forth certain information regarding options
granted to the Named Executive Officers during fiscal 1998:
<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)(2) Fiscal Year Per Share Date
- ---- ------------- ----------- --------- ----
<S> <C> <C> <C> <C>
Gary L. Coulter 100,000 7.39% $0.52 4/15/08
238,289 17.61% $0.43 6/22/08
Robert E. Huggins 50,000 3.70% 0.52 4/15/08
105,431 7.79% 0.43 6/22/08
Erik R. Batzloff 27,426 2.03% 0.43 6/22/08
- --------------------
<FN>
(1) The options elected herein have a ten-year term and vest at the
discretion of the Board of Directors. There are three primary
vesting schedules including (I) 100% of the option shares
becoming exercisable on the date of grant; (ii) 25% of the option
shares becoming exercisable on the date of grant with an
additional 25% of the shares covered thereby becoming exercisable
on each successive anniversary date, with full vesting occurring
on the third anniversary date; and (iii) 25% of the option shares
vesting on each of the first, second, third and fourth
anniversary dates.
(2) The number of options reflected herein as of June 30, 1998 do not
include options issued pursuant to the antidilution provisions of
the Option Agreements and the 1996 Stock Option Plan in
connection with the conversion of the Preferred Stock and Notes
into Common Stock on April 29, 1999. See the section entitled
"Beneficial Ownership" on page 2.
</FN>
</TABLE>
<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, 1998 at June 30, 1998
------------------------- ---------------------
Shares Value
Name Acquired Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Coulter - $- 1,381,676 118,789 $207,907 $ 81,466
Robert E. Huggins - - 604,444 59,439 90,821 440,732
Erik R. Batzloff - - 86,349 86,349 7,912 18,345
</TABLE>
11
<PAGE>
Other Long-Term Incentive Awards
Effective June 1, 1997, the Company adopted the Bonus Plan to provide
incentive compensation to certain directors, key employees and advisory
directors. The Bonus Plan provides for stock appreciation rights to persons
covered by the Bonus Plan ("Participants"). Compensation under the Bonus Plan is
based on the award of performance units, which are defined as a percentage of
the total market value of the Company. Performance units are redeemable by the
Participants for a cash payment based upon an appreciation in the value of the
performance unit after the date of grant. The maximum number of performance
units that may be issued under the Bonus Plan shall not exceed an aggregate of
twelve percent (12%) of the total market value of the Company.
Performance units generally are vested upon issuance and mature at a rate
of 25% per year over a four-year period from the date granted, but the schedule
may be varied by the terms of the specific grant. After the first anniversary of
any grant of performance units, or earlier maturity, 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.
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 stockholder), 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 $1,920,000 during the
year ended June 30, 1996. Of that amount, $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 with an interest rate of 10% per annum. These notes were repaid in monthly
installments of $20,000, including interest, with the balance being repaid in
full in July 1998.
On August 14, 1997, Spinteknology, Inc., ("Spinteknology") 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 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 were 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 February 27, 1998, the Company initiated the $5 million private
placement of the Notes. The Trust purchased $4,300,000 of the Notes, including
purchases of $1,000,000 in March 1998, $900,000 in April 1998, $2,100,000 in
July 1998, and $300,000 in October 1998. A total of $197,566 in accrued interest
was due the Trust on February 28, 1999, the first annual interest payment date
on the Notes, which was not paid on that date pursuant to an agreement between
the Trust and the Company In March 1999, the Company paid the Trust $75,000 of
this interest, and in May 1999 entered into an agreement to pay the Trust in
monthly installments of $50,000 including interest at the rate of 10% per annum.
An additional $42,283 in interest accrued through April 29, 1999. In April 1999,
the Trust converted all of the Notes into 61,560,781 shares of the Company's
Common Stock.
12
<PAGE>
Malcolm C. Davenport V loaned Spinteknology $350,000 in January 1999
evidenced by a 10% note and secured by a pledge of the Company's patents,
copyrights and other intellectual property rights. At the time, the security
position was subordinate to the position of the holders of the Notes. In
addition, Mr. Davenport loaned Spinteknology $500,000 in February 1999. The two
loans were rewritten in May 1999 in the form of two notes, one in the amount of
$450,000 and one in the amount of $400,000, each of which bear interest at the
rate of 10% per annum and are secured by the Company's intellectual property
rights. The Company made a payment of $50,000 on the $450,000 note in May 1999,
including interest. The two loans, together with the interest due the Trust as
noted in the above paragraph, are to be repaid in a monthly installment of
$50,000, with the first such monthly payments being applied against the
obligation to the Trust, then to the $450,000 loan, and finally to the $400,000
loan. Based on this schedule, the Trust will be paid off at the end of August
1999, the $450,000 loan at the end of May 2000, and the $400,000 loan on
February 28, 2001.
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. On October 1, 1998, the note plus accrued interest in the
amount of $6,606 was converted into 120,938 shares of the Company's Common
Stock. The conversion price of $0.22 per share reflects a 32% discount from the
closing price of $0.33.
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 stockholders 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, 1998, the Reporting Persons have complied
with all applicable Section 16(a) filing requirements. The Company has listed
RBB 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.
Proposal 2 on the Proxy Card
Ratify Selection of Independent Accountants
The Board of Directors has re-appointed Joseph Decosimo & Company as
the Company's independent public accountants for the year ended June 30, 1999.
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 or she desires to do so. It is also
anticipated that such representative will be available to respond to
appropriate questions from stockholders. The ratification of the selection of
the independent accountants requires the affirmative vote of the holders of a
majority of the shares of the Company's Common Stock entitled to vote.
13
<PAGE>
Annual Report on Form 10-KSB
The Company's Form 10-KSB, Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, for the period ended June 30, 1998
was filed with the Securities and Exchange Commission on September 28, 1998. A
copy is furnished with this Proxy Statement to the stockholders of record.
Exhibits referenced in the Form 10-KSB that are not included with the Form
10-KSB will be available to the stockholder without charge upon written request
to George P. Miller, Chief Financial Officer, Spintek Gaming Technologies, Inc.,
1857 Helm Drive, Las Vegas, Nevada 89119.
Future Proposals of Stockholders
All proposals of stockholders intended to be presented at the 1999
Annual Meeting of Stockholders must be received by the Company not later than
January 30, 2000, for inclusion in the Company's proxy statement and form of
proxy relating to the 1999 Annual Meeting of Stockholders. 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 stockholder'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 one hundred
twenty days prior to the anniversary date of the immediately preceding annual
meeting. Such notice must set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Company; (c) description of all arrangements or understandings between the
stockholder 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 stockholder; (d) such other information regarding each nominee proposed by
such stockholder 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.
1857 HELM DRIVE, LAS VEGAS, NEVADA 89119 (702) 263-3660 FAX (702) 263-3680
<PAGE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPINTEK GAMING TECHNOLOGIES, INC.
1857 Helm Drive
Las Vegas, Nevada 89119
The undersigned stockholder 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, $.002 par value (the "Common Stock"), of Spintek Gaming
Technologies, Inc. (the "Company") held of record by the undersigned on May 28,
1999, at the Annual Meeting of Stockholders to be held on June 29, 1999 or any
adjournment thereof.
The Board of Directors recommends a vote FOR (1) and (2).
1. ELECTION OF DIRECTORS.
Dr. Thomas C. Burns to serve as a Class III director a three-year term
expiring at the 2001 Annual Meeting of Stockholders.
|_|FOR the Nominee |_| WITHHOLD AUTHORITY to vote for the Nominee listed above
2. RATIFY THE SELECTION OF JOSEPH DECOSIMO & COMPANY AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999.
FOR |_| AGAINST |_| ABSTAIN |_|
(Continued on reverse side.)
<PAGE>
3. 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 stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
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
