SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Shuffle Master, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
SHUFFLE MASTER, INC.
February 3, 1997
TO THE SHAREHOLDERS OF SHUFFLE MASTER, INC.:
You are cordially invited to attend the Annual Meeting of Shareholders
of Shuffle Master, Inc. to be held on Monday, March 10, 1997 at 10:00 a.m. at
Lutheran Brotherhood, 625 Fourth Avenue South, Minneapolis, Minnesota. I
encourage you to attend. Whether or not you plan to attend the meeting, I urge
you to complete and sign the accompanying Proxy and return it in the enclosed
envelope. Also attached for your review are the formal Notice of Annual Meeting
and Proxy Statement.
On behalf of your Board of Directors and employees, thank you for your
continued support of Shuffle Master, Inc.
Very truly yours,
John G. Breeding
CHAIRMAN OF THE BOARD
SHUFFLE MASTER, INC.
10901 Valley View Road
Eden Prairie, Minnesota 55344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 10, 1997
To the Shareholders of Shuffle Master, Inc.:
The Annual Meeting of Shareholders ("Annual Meeting") of Shuffle
Master, Inc. ("Shuffle Master" or the "Company") will be held on Monday, March
10,1997, at 10 a.m. at Lutheran Brotherhood, 625 Fourth Avenue South,
Minneapolis, Minnesota, for the following purposes:
1. To set the number of members of the Board of Directors at six.
2. To elect six (6) directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on January 22,
1997, are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
IN PERSON.
THIS NOTICE OF ANNUAL MEETING, THE ENCLOSED PROXY STATEMENT AND PROXY
ARE SENT TO YOU BY ORDER OF THE BOARD OF DIRECTORS.
Diane L. Breeding
SECRETARY
February 3, 1997
Eden Prairie, Minnesota
SHUFFLE MASTER, INC.
10901 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA 55344
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 10, 1997
This Proxy Statement is furnished to holders of shares of Common Stock
of Shuffle Master, Inc., as of January 22, 1997. This Proxy Statement is
furnished in connection with the Board of Directors' solicitation of the
enclosed Proxy for the Annual Meeting of Shareholders. A shareholder giving a
Proxy may revoke it at any time prior to the Annual Meeting by filing written
notice of the termination of the appointment with an officer of the Company, by
attending the Annual Meeting and voting in person, or by filing a new written
appointment of a Proxy with an officer of the Company. The revocation of a Proxy
will not affect any vote taken prior to such revocation. This Proxy Statement
was first mailed to shareholders on or about February 3, 1997.
All properly executed proxies received at or prior to the meeting will
be voted at the meeting. If a shareholder directs how a Proxy is to be voted
with respect to the business coming before the meeting, the Proxy will be voted
in accordance with the shareholder's direction. If a shareholder does not direct
how a Proxy is to be voted, it will be voted in favor of the proposals set forth
in the Notice of Annual Meeting and in favor of the election of the nominees
listed as directors in this Proxy Statement.
At the close of business on January 22, 1997, the record date for the
Annual Meeting, there were 10,998,542 shares of Common Stock outstanding. The
Company's only class of shares is Common Stock. Each share of Common Stock is
entitled to one vote on each matter properly coming before the meeting.
Cumulative voting for the directors is not permitted.
The cost of making this solicitation, including preparation and mailing
of the Notice of Annual Meeting, Proxy and Proxy Statement, and the costs
incurred by brokerage houses and other custodians, nominees and fiduciaries for
forwarding documents to shareholders will be paid by the Company. In certain
instances, officers of the Company may make special solicitations of proxies
either in person or by telephone. Expenses incurred in connection with these
solicitations will be paid by the Company.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that at each annual meeting the
shareholders may change the number of directors for the ensuing year; provided,
however, that the number may be increased by resolution of the Board of
Directors. The number of directors was set at six at the Annual Meeting of
Shareholders held on March 29, 1996. The Board increased the number of directors
to seven by resolution during the past year and added Mr. Richard Schuetz to the
Board. Mr. James R. Titze has decided not to stand for re-election as a board
member at the Annual Meeting. The Board of Directors, therefore, recommends the
number of directors be decreased from seven to six for the coming year. The
Board of Directors recommends decreasing the number of directors because it has
not yet identified a suitable candidate to fill the vacancy.
Directors are elected to serve a one-year term, and will serve until
the next Annual Meeting of Shareholders, or until their successors have been
duly elected and qualified. The affirmative vote of the holders of a majority of
the outstanding shares of Common Stock present in person or by proxy at the
annual meeting and entitled to vote is required to elect directors. Abstentions
are treated as present and entitled to vote and broker non-votes are treated as
not present and not entitled to vote. The Board of Directors recommends a vote
FOR electing the nominees for directors as set forth below.
All nominees have consented to serve if elected. If any nominee becomes
unable to serve, the persons named as proxies may exercise their discretion to
vote for a substitute nominee. The name, age, business experience and offices
held by each nominee for director are as follows:
<TABLE>
Name Age Company Position Director Since
---- --- ---------------- --------------
<S> <C> <C> <C>
John G. Breeding 58 Chairman of the Board and Director 1983
Joseph J. Lahti 36 President, Chief Executive Officer 1993
and Director
Diane L. Breeding 52 Secretary and Director 1983
David W. Rogers 45 Director 1994
Thomas A. Sutton 59 Director 1994
Richard J. Schuetz 46 Director 1996
</TABLE>
JOHN G. BREEDING is the founder of the Company and has been a director
since 1983 and the Chairman of the Board since 1991. Mr. Breeding served as
Chief Executive Officer from 1983 to June 1996, and was the Company's President
from 1983 to October 1995. Mr. Breeding is the husband of Diane L. Breeding.
JOSEPH J. LAHTI has served as a director since May 1993, as Chief
Operating Officer and Executive Vice President since December 1993, as President
since October 1995, and Chief Executive Officer since June 1996. He also served
as the Company's Chief Financial Officer from February 1994 to October 1995.
From 1989 through December 1993, Mr. Lahti was President of McQuillan Lahti
Wilcox, Inc., a financial management firm. Mr. Lahti also holds the position of
President of J.L. Holdings, Inc., a real estate acquisition, asset management
and financial consulting company.
DIANE L. BREEDING has been the Secretary of the Company and a director
since 1983. From January 1991 to September 1995, she served as the Company's
Vice President of Administration.
DAVID W. ROGERS is the President of Financial Markets Division of
Cargill, Inc., where he has been employed since 1973.
THOMAS A. SUTTON was employed by Borden, Inc. from 1972 to 1992, most
recently serving as Vice President Planning-Pasta Group. Since 1992, Mr. Sutton
has managed his personal investments.
RICHARD J. SCHUETZ has been the President and Chief Executive Officer
of the Stratosphere Corporation, a hotel and casino in Las Vegas, Nevada, since
August 1996. From September 1995 to August 1996, Mr. Schuetz was a self-employed
business consultant. Mr. Schuetz was the Vice President of Corporate Marketing
for Grand Casinos, Inc., a publicly-held casino management company, from
November 1991 to September 1995.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended October 31, 1996, the Board of Directors
held meetings on nine occasions. All Board members attended at least 75% of the
meetings, except Mr. Schuetz. Mr. Schuetz attended two out of the three meetings
held since he became a Board member in April 1996.
Standing committees of the Board of Directors include the Audit
Committee, the Compensation Committee, and the Option Committee. Mr. Titze
served on each of these committees during the fiscal year ended October 31,
1996. The replacement for Mr. Titze on each of these committees has not yet been
determined.
The Audit Committee currently consists of Messrs. Rogers and Sutton.
Its purpose is to recommend the appointment of the independent auditors for the
Company, review the scope of the audit, examine the auditors' reports, make
appropriate recommendations to the Board of Directors as a result of such review
and examination, and make inquiries into the effectiveness of the financial and
accounting functions and internal controls of the Company. The Audit Committee
met three times in fiscal 1996.
The Compensation Committee currently consists of Messrs. Rogers and
Sutton, and is responsible for recommending to the Board of Directors the
compensation of the executive officers of the Company. The Compensation
Committee met four times in fiscal 1996.
The Option Committee currently consists of Diane Breeding, and Messrs.
Rogers and Sutton, and is responsible for recommending individual stock option
grants to the Board of Directors. The Option Committee met four times in fiscal
1996.
EXECUTIVE OFFICERS
In addition to John G. Breeding and Joseph J. Lahti, whose biographies
are listed on page 2 herein, Thomas S. Nieman and Roger D. Young also serve as
executive officers of the Company.
THOMAS S. NIEMAN has been the Vice President of Marketing for the
Company since February 1995 and Vice President of Sales and Marketing since
December 1995. From January 1992 to January 1995, Mr. Nieman was Vice President
of Marketing for Bally Gaming, Inc., Las Vegas, Nevada. From September 1990 to
December 1991, Mr. Nieman was a partner with Iltis Nieman Associates, a market
communications consulting company based in Chicago, Illinois.
ROGER D. YOUNG has been the Vice President of Operations for the
Company since February 1996, and Chief Operating Officer since November 1996.
From September 1994 to February 1996, Mr. Young was the Vice President and
General Manager of Falcon Technologies, a privately-held hardware supplier to
the printing industry. From March 1992 to September 1994, Mr. Young was a
self-employed business consultant. Mr. Young was the Vice President of Sales for
Zetaco, Inc., a privately-held manufacturer of disk and tape controllers, from
January 1987 to March 1992.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons holding ten percent of the
Company's Common Stock to file reports regarding their ownership, acquisitions
and dispositions of the Company's Common Stock with the Securities and Exchange
Commission. All executive officers filed these reports as required during the
year ended October 31, 1996.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued for
services rendered in all capacities to the Company during the fiscal years ended
October 31, 1996, 1995 and 1994, for those executive officers whose compensation
earned in fiscal 1996 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Name and Fiscal ------------------------- ---------------- All Other
Principal Position Year Salary Bonus Options Compensation
- ------------------------------- ---------- ------------ --------- ---------------- -----------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Joseph J. Lahti(1) 1996 182,692 -- 61,590 --
President and Chief 1995 147,500 -- 66,575 --
Executive Officer 1994 84,808 -- 63,092 --
John G. Breeding(2) 1996 197,923 -- -- --
Chairman of the Board 1995 143,750 -- 61,650 --
1994 110,530 -- 13,175 --
Thomas S. Nieman(3) 1996 150,000 29,000 11,401 --
Vice President of 1995 106,250 11,480 22,500 --
Marketing and Sales
</TABLE>
- -----------------------
(1) Mr. Lahti began employment with the Company in December 1993, and became
the Company's Chief Executive Officer in June 1996.
(2) Mr. Breeding was the Company's Chief Executive Officer until June 1996.
(3) Mr. Nieman began employment with the Company in February 1995. Mr. Nieman
earned a bonus in fiscal 1996 for meeting certain product introduction
objectives.
OPTION GRANTS DURING THE FISCAL YEAR ENDED OCTOBER 31, 1996
The following table sets forth information with respect to each option
granted to the executive officers named in the Summary Compensation Table during
the fiscal year ended October 31, 1996:
<TABLE>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Percentage of Total Appreciation for Option Term(2)
Options Options Granted to Exercise Expiration -------------------------------
Name(1) Granted Employees in Fiscal Year Price Date 5% 10%
------- ------- ------------------------ ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph J. Lahti(3) 40,000 20.0 $11.38 10/2006 286,147 725,153
20,000 10.0 15.00 6/2006 188,668 478,123
1,590 .8 11.88 1/2006 11,874 30,092
Thomas S. Nieman 10,000 5.0 11.38 10/2006 71,537 181,288
1,401 .7 11.88 1/2006 10,463 26,515
</TABLE>
- ----------------------
(1) Mr. Breeding received no option grants in fiscal 1996.
(2) The compounding assumes a ten-year exercise period for all option
grants. These amounts represent certain assumed rates of appreciation,
based on Securities and Exchange Commission rules. Actual gains, if
any, on stock option exercises are dependent on the future performance
of the Common Stock, overall stock market conditions, and continued
employment of the option holder through the vesting period. The amounts
reflected in this table may not necessarily be achieved.
(3) The grant of 40,000 options to Mr. Lahti included certain vesting
limitations with regard to a loan advanced to Mr. Lahti, as discussed
under "Certain Relationships and Related Party Transactions."
AGGREGATE OPTIONS EXERCISED IN THE FISCAL YEAR ENDED OCTOBER 31, 1996 AND
OPTION VALUES AT OCTOBER 31, 1996
The following table sets forth certain information regarding options to
purchase shares of Common Stock exercised during the Company's fiscal year ended
October 31, 1996, and the number and value of options to purchase shares of
Common Stock held as of October 31, 1996, by the executive officers of the
Company named in the Summary Compensation Table:
<TABLE>
Value of Unexercised
Number of Options In-the-Money
Number of at October 31, 1996 Options at October 31, 1996(2)
Shares Acquired Value ------------------------------ --------------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- ---------- ------------ -------------- ------------ -----------------
(#) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Lahti -- -- 87,925 103,332 210,264 101,393
John G. Breeding(3)(4) -- -- 21,413 60,000 93,542 156,600
Thomas S. Nieman -- -- 10,901 22,000 11,115 7,410
</TABLE>
- ------------------
(1) Value Realized is the difference between the closing price per share on
the date of exercise, and the option price per share, multiplied by the
number of shares acquired upon exercise of the option.
(2) Value of Unexercised In-the-Money Options is the difference between the
closing price per share of $11.13 at October 31, 1996, and the exercise
price per share multiplied by the number of shares subject to options.
(3) Does not include option exercises (7,722) by Diane Breeding and does not
include unexercised options held by Diane Breeding.
(4) A grant of 60,000 options to Mr. Breeding in fiscal 1995 included vesting
limitations with regard to a loan advanced to Mr. Breeding, as discussed
under "Certain Relationships and Related Party Transactions." Although
20,000 of the 60,000 options granted have vested pursuant to a vesting
schedule, the exercise of these options is restricted until the loan is
repaid to the Company. These options are included as unexercisable at
October 31, 1996.
COMPENSATION OF DIRECTORS
To best align the interests of the outside directors with the
shareholders, the Board has elected not to receive any cash compensation and to
compensate outside directors with stock benefits through stock option grants.
Pursuant to the Company's Outside Directors' Option Plan (the "Directors'
Plan"), each director who is not an employee of the Company is entitled to
receive an annual non-discretionary grant of an option to purchase 3,000 shares
of Common Stock after each Annual Meeting of Shareholders. The exercise price of
the options is equal to the closing price of the Company's Common Stock on the
date of grant. The options are immediately exercisable and expire the earlier of
seven years from the date of grant, or thirty days after leaving the Board.
Directors who are not employees of the Company are also eligible for grants of
nonqualified options in addition to those provided by the Directors' Plan. The
Company's employee directors are eligible to be granted stock options pursuant
to the Company's 1993 Stock Option Plan. In August 1994, David W. Rogers, and
Thomas A. Sutton, non-employee directors, were each granted options to purchase
18,000 shares of Common Stock, at an exercise price of $6.00 per share, in
consideration for providing ongoing consulting services to the Company. Such
options vest over a three-year period, and expire in August 2004. At the March
1996 Annual Meeting, Messrs. Rogers and Sutton declined the annual
non-discretionary options grants under the Directors' Plan, and James R. Titze
and Diane L. Breeding were each granted options to purchase 3,000 shares of
Common Stock at an exercise price of $11.75. These options are immediately
exercisable and expire March 2003.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of outside directors and is responsible for developing and
making recommendations to the Board with respect to the Company's compensation
policies. In addition, the Committee, pursuant to authority delegated by the
Board, recommends on an annual basis the compensation to be paid to the Chief
Executive Officer and each of the other executive officers of the Company.
It is the intention of the Committee to utilize a pay-for-performance
compensation strategy that is directly related to achievement of the Company's
financial performance and growth objectives. The primary elements of the
executive compensation program are base salary, annual cash incentives based on
performance, and long-term incentives in the form of stock options. These
elements are designed to: (i) provide compensation opportunities that will allow
the Company to attract and retain talented executives who are essential to the
Company's success; (ii) provide compensation that rewards corporate performance
and motivates the executives to achieve corporate strategic objectives; and
(iii) align the interests of executives with the long-term interests of
shareholders through stock-based awards.
BASE SALARY
Base salaries of the Company's executive officers are intended to be
competitive with the median base salaries paid by other corporations engaged in
business similar to the Company, such as suppliers to the gaming industry. Base
salaries are determined for executive positions using compensation surveys,
taking into account variables such as geography, job comparability, size of the
company and its industry. In addition to base salary, executive officers are
eligible to participate in the Company's employee benefit plans on the same
terms as other employees, except that executive officers are not entitled to
annual employee option grants through the Employee Stock Option Plan.
INCENTIVE COMPENSATION
The purpose of the annual bonus program is to provide a short-term,
direct financial incentive in the form of an annual cash bonus to executive
officers if the Company achieves a targeted level of financial performance. Each
executive officer is eligible to receive a cash bonus determined by a formula
proposed by the Committee. Incentive compensation is reviewed annually. The
Committee may also provide cash bonus opportunities to the executive officers,
based on meeting certain operational objectives. No financial performance
objectives were paid to executive officers in fiscal 1996 since the Company
failed to meet its established financial goal.
LONG-TERM INCENTIVES
The 1993 Stock Option Plan is the basis of the Company's long-term
incentive plan for executive officers and other key employees. The objective of
this plan is to align executives' long-term interests with those of the
shareholders by creating a direct incentive for executives to increase
shareholder value. The stock option grants allow executives to purchase shares
of Company stock at a price equal to the fair market value of the stock on the
date of grant over a term of ten years. The award of option grants is consistent
with the Company's objective to include in total compensation a long-term equity
interest for executive officers, with greater opportunity for reward if
long-term performance is sustained.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Lahti became Chief Executive Officer of the Company in June 1996,
and has also served as its President since October 1995. Mr. Lahti began his
employment with the Company as its Chief Operating Officer and Executive Vice
President in December 1993.
Since Mr. Lahti became a member of the senior management of the
Company, revenues have grown from $554,000 for fiscal 1993 to $22,587,000 for
fiscal 1996, while net income increased to $2,768,000 in fiscal 1996 from a net
loss of $1,107,000 for fiscal 1993. The Company has successfully launched Let It
Ride(R) The Tournament(TM) in Nevada, and is currently operating a field test
for Let It Ride(R) The Tournament(TM) in Mississippi. The shuffler systems,
including sales and leases, have shown exceptional growth over the past four
years.
Mr. Lahti's base salary was increased to $225,000 from $185,000 in
November 1996. Mr. Lahti may also earn a performance bonus of up to two times
current salary if the Company achieves certain financial objectives for fiscal
1997 which were recommended by the Committee and approved by the Board of
Directors. Mr. Lahti did not earn a bonus for fiscal 1996 since the financial
performance objectives were not met.
CONCLUSION
The Committee believes that the executive compensation plan discussed
in this Proxy Statement is consistent with the overall corporate strategy for
continued growth in earnings and shareholder value.
David W. Rogers
James R. Titze
Thomas A. Sutton
MEMBERS OF THE COMPENSATION COMMITTEE
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return,
assuming $100 invested on December 8, 1992 (the day the Company's Common Stock
commenced trading on the Nasdaq Small-Cap Market), as if such amount had been
invested in each of: (i) the Company's Common Stock; (ii) the stocks included in
the Dow Jones Industrial Average; and (iii) a peer group index of twelve
companies(1) that market and sell products and services similar to those of the
Company. The Company elected to use this peer group index rather than a
published industry or line-of-business index because it believes this peer group
is comprised of companies whose business is comparable to that of the Company.
The graph assumes the reinvestment of all dividends and reallocation of invested
funds, based on market capitalization, at the beginning of each indicated
period.
<TABLE>
12/8/92 10/31/93 10/31/94 10/31/95 10/31/96
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Shuffle Master, Inc. $100.00 $400.00 $330.83 $489.98 $444.98
Dow Jones Industrial Average 100.00 113.75 123.74 154.65 188.91
Peer Group 100.00 126.18 71.39 57.85 78.94
</TABLE>
- -------------------------
(1) The peer group is comprised of the following companies: Alliance Gaming
Corp.; Autotote Corporation; Bally Gaming International, Inc. (prior to its
acquisition by Alliance Gaming Corp. in June 1996); Casino Data Systems
(first publicly traded April 1993); GTech Holdings Corporation;
International Game Technology; Mikohn Gaming Corporation (first publicly
traded November 1993); Scientific Games Holdings Corp. (first publicly
traded August 1993); Sodak Gaming, Inc. (first publicly traded June 1993);
Stuart Entertainment Inc.; Video Lottery Technologies; and WMS Industries,
Inc. Each company included in the peer group is engaged in the manufacture
and sale of gaming products.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 2, 1997, the number of
shares of Common Stock beneficially owned: (i) by each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock; (ii) by each director of the Company; (iii) by each executive
officer of the Company named in the Summary Compensation Table; and (iv) by all
executive officers and directors of the Company as a group.
<TABLE>
Number of Shares Beneficially Owned(1)
Name and Address --------------------------------------------------------------
of Beneficial Owner Shares Percent
- --------------------------------------------- ----------------------------- ------------------------------
<S> <C> <C>
John G. Breeding and Diane L. Breeding 1,011,184 9.1%
10901 Valley View Road
Eden Prairie, Minnesota 55344
Joseph J. Lahti 124,324 1.1%
10901 Valley View Road
Eden Prairie, Minnesota 55344
Thomas S. Nieman 10,901 *
1106 Palms Airport Drive
Las Vegas, NV 89119
David W. Rogers 21,150 *
15605 16th Pl. N.
Plymouth, Minnesota 55447
Richard J. Schuetz 6,000 *
Stratosphere Corporation
2000 So. Las Vegas Blvd.
Las Vegas, NV 80194
Thomas A. Sutton 18,000 *
20330 Knightsbridge Road
Shorewood, Minnesota 55331
James R. Titze 38,200 *
5666 Lincoln Drive
Minneapolis, Minnesota 55436
All directors and executive 1,234,759(2) 10.9%
officers as a group (9 persons)
</TABLE>
- -----------------------------
* Less than 1%
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them through the exercise of stock options,
as of January 2, 1997 or within 60 days of such date, are treated as
outstanding when determining the percent of the outstanding shares of
Common Stock owned by the individual and when determining the percent
owned by the group as follows: John G. Breeding and Diane L. Breeding,
24,412 shares; Joseph J. Lahti, 102,923 shares; Thomas S. Nieman, 10,901
shares; David W. Rogers, 13,500 shares; Richard J. Schuetz, 3,000 shares;
Thomas A. Sutton, 13,500 shares; and James R. Titze, 18,750 shares.
(2) Includes options to purchase 191,986 shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In February 1995, the Board of Directors of the Company approved a
$300,000 loan to Mr. Breeding. The loan has a floating rate and bears interest
at prime rate plus one percent, and must be paid in full within three years from
the date the loan was made. The loan is secured by a second mortgage on Mr.
Breeding's residence, and is further secured by a restriction on Mr. Breeding's
vesting schedule under his January 1995 grant of 60,000 stock options. The
restriction requires loan repayment before the options can be exercised.
In October 1996, the Board of Directors of the Company approved a
$300,000 loan to Mr. Lahti. These funds were advanced to Mr. Lahti in November
1996. The loan bears interest at 7 percent, and is secured by 17,000 shares of
Shuffle Master, Inc. Common Stock which were pledged as collateral. The note is
further secured by a restriction on Mr. Lahti's vesting schedule under his
October 1996 grant of 40,000 options. The restriction requires loan repayment
before the options can be exercised. The loan balance plus all accrued interest
is due November 1999.
As of October 31, 1996, the Company had an accounts receivable balance
due of $177,000 from the Stratosphere Corporation, for which Mr. Schuetz, a
director, is the President and Chief Executive Officer. The receivables resulted
from the sale of shuffling systems to Stratosphere Corporation, and the
Company's percentage billing for Let It Ride(R) The Tournament(TM). During
fiscal 1996, total revenue from Stratosphere Corporation was $338,000. Also in
fiscal 1996, the Company paid Stratosphere Corporation $250,000 for certain
marketing and advertising rights.
INDEPENDENT AUDITORS
Representatives of Deloitte & Touche LLP, the Company's independent
auditors for the fiscal year ended October 31, 1996, will be present at the
Annual Meeting. The Board of Directors has not yet selected its independent
auditors for the fiscal year ending October 31, 1997.
SUBMISSION OF SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit shareholders
of the Company to present proposals for shareholder action in the Company's
Proxy Statement. Shareholder proposals prepared in accordance with the proxy
rules intended to be presented at the Company's 1998 Annual Meeting must be
received by the Company on or before October 9, 1997.
OTHER BUSINESS
The Board of Directors of the Company does not intend to present any
business at the meeting other than the matters specifically set forth in this
Proxy Statement and knows of no other business to come before the meeting.
By Order of the Board of Directors
Diane L. Breeding,
Date: February 3, 1997 SECRETARY
SHUFFLE MASTER, INC. PROXY
10901 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA 55344
The undersigned hereby appoints John G. Breeding and Joseph J. Lahti, and each
of them with full power of substitution, his or her Proxies to represent and
vote, as designated below, all of the shares of Common Stock of Shuffle Master,
Inc., registered in the name of the undersigned on January 22, 1997, with the
powers the undersigned would possess if personally present at the Annual Meeting
of Shareholders to be held on Monday, March 10, 1997, at Lutheran Brotherhood,
625 Fourth Avenue South, Minneapolis, Minnesota, or at any adjournment thereof,
hereby revoking any proxy or proxies previously given.
1. Proposal to decrease the number of number of directors to six:
|_| FOR |_| AGAINST |_| ABSTAIN
2. Election of directors:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) below
(To WITHHOLD authority to vote for any individual nominee, draw a line
through the nominee's name below)
JOHN G. BREEDING JOSEPH J. LAHTI DIANE L. BREEDING
RICHARD J. SCHUETZ DAVID W. ROGERS THOMAS A. SUTTON
(CONTINUED, AND TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE)
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(CONTINUED FROM THE OTHER SIDE)
3. In their discretion, the appointed Proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting of
Shareholders or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS.
Date:___________________________________, 1997
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(Signature)
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(Second signature)
PLEASE DATE AND SIGN ABOVE exactly as your name
appears at left, indicating where appropriate,
official position or representative capacity.
