<PAGE> 1
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 [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CASINO DATA SYSTEMS
- -------------------------------------------------------------------------------
(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] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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 transaction 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:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[CASINO DATA SYSTEMS LOGO]
3300 Birtcher Drive
Las Vegas, Nevada 89118
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 11, 1996
TO THE STOCKHOLDERS OF CASINO DATA SYSTEMS:
Please take notice that the Annual Meeting of Stockholders of Casino
Data Systems will be held, pursuant to due call by the Board of Directors of
the Company at the Mirage Hotel & Casino, Las Vegas, Nevada, on Thursday, July
11, 1996, at 2:00 p.m. Pacific Daylight Time, or at any adjournment or
adjournments thereof, for the purpose of considering and taking appropriate
action with respect to the following:
1. To elect eight directors.
2. To approve an amendment to the Company's 1993 Stock Option and
Compensation Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 675,000 shares.
3. To transact any other business as may properly come before the
meeting or any adjournments thereof.
Pursuant to due action of the Board of Directors, stockholders of
record on May 28, 1996, will be entitled to vote at the meeting or any
adjournments thereof.
A PROXY FOR THE MEETING IS ENCLOSED HEREWITH. YOU ARE REQUESTED TO
FILL IN AND SIGN THE PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, AND
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. THE GIVING OF SUCH PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE
MEETING.
By Order of the Board of Directors
Casino Data Systems
Russell C. Mix, Secretary
<PAGE> 3
PROXY STATEMENT
of
Casino Data Systems
3300 Birtcher Drive
Las Vegas, Nevada 89118
_________________________
PROXY STATEMENT
_________________________
Annual Meeting of Stockholders to be Held
July 11, 1996
PROXIES AND VOTING
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Casino Data Systems (the "Company") to
be used at the Annual Meeting of Stockholders of the Company to be held July
11, 1996. Only stockholders of record at the close of business on May 28, 1996
(the "Record Date") will be entitled to vote at the meeting or any adjournments
thereof. The approximate date on which this Proxy Statement and the
accompanying proxy were first sent or given to stockholders was June 7, 1996.
The presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock issued and outstanding is necessary to constitute a
quorum at the meeting. Proxies in the accompanying form which are properly
executed, duly returned to the Company and not revoked will be voted in
accordance with the instructions therein. IF NO INSTRUCTION IS GIVEN WITH
RESPECT TO ANY PROPOSAL TO BE ACTED UPON, THE PROXY WILL BE VOTED FOR THE
ELECTION OF ALL OF THE NOMINEES NAMED IN THE PROXY AND IN FAVOR OF PROPOSAL 2.
The presence at the meeting of a stockholder will not revoke his or her proxy.
However, a proxy may be revoked at any time before it is voted by written
notice to the Company, addressed to Russell C. Mix, Secretary, at the principal
offices of the Company or by giving written notice to the Company at the
meeting; however, a revocation shall not be effective until such notice has
been received by the Company and a revocation shall not affect a vote on any
matter cast prior to such receipt.
1
<PAGE> 4
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Company has outstanding one class of voting securities, Common
Stock, no par value, of which 17,732,198 shares were outstanding as of the
close of business on May 28, 1996. Each share of Common Stock is entitled to
one vote on all matters put to a vote of stockholders. The following table
sets forth as of May 28, 1996 certain information regarding the beneficial
ownership of shares of Common Stock by each director and/or director nominees
of the Company, each of the executive officers listed in the Summary
Compensation Table, each person known to the Company to be the beneficial owner
of more than 5% of the outstanding shares, and all directors and executive
officers as a group. Except as otherwise indicated, each stockholder has sole
voting and investment power with respect to the shares beneficially owned. All
share numbers and prices have been adjusted to reflect a 3 for 2 stock split
effected October 11, 1995 and a second 3 for 2 stock split effected on February
27, 1996 to stockholders of record on February 20, 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
NAME OF ------------------------
BENEFICIAL OWNER NUMBER PERCENT
- ---------------- ------ -------
<S> <C> <C>
Steven A. Weiss (2) 1,827,844(3) 10.31
G. Jack Kiland 450,900(4) 2.54
Russell C. Mix 86,165(5) *
Patrick W. Cavanaugh 72,984(6) *
Phil Bryan 56,250(7) *
William M. Mower 8,438(8) *
Robert Dickenson 6,750(9) *
Daniel N. Copp 2,750 *
Diana L. Bennett 525 *
Karl K. Hoagland III 0 *
Gilder, Gagnon, Howe & Co. 2,180,755(10) 12.30
All executive officers
and directors as a
group (9 persons) 2,512,606(11) 14.15
- ---------------------------
*Less than one percent.
</TABLE>
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes generally voting power
and/or investment power with respect to securities. Shares of Company
Common Stock subject to options currently exercisable or exercisable
within 60 days of the date hereof, are deemed outstanding for
computing the percentage ownership of the person holding such options
but are not deemed outstanding for computing the percentage ownership
of any other person. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed above,
based on information furnished by such owners, have sole investment
and voting power with respect to such shares, subject to community
property laws where applicable, and that there are no other
affiliations among the stockholders listed in the table.
(2) The address of such person is 3300 Birtcher Drive, Las Vegas, Nevada
89118.
(3) Includes options to purchase 30,938 shares that are exercisable within
60 days.
(4) Includes options to purchase 16,875 shares that are exercisable within
60 days.
(5) Includes options to purchase 86,110 shares that are exercisable within
60 days.
(6) Includes options to purchase 70,734 shares that are exercisable within
60 days.
(7) Includes options to purchase 56,250 shares that are exercisable within
60 days.
2
<PAGE> 5
(8) Includes options to purchase 8,438 shares that are exercisable within
60 days.
(9) Includes options to purchase 6,750 shares that are exercisable within
60 days.
(10) Based on the most recent Schedule 13G filed on May 15, 1995 with the
Securities and Exchange Commission. The address of Gilder, Gagnon,
Howe & Co. ("Gilder") is 1775 Broadway, New York, NY 10019. According
to Gilder's Schedule 13G, Gilder does not have sole voting power with
respect to such shares, shares voting and dispositive power over
283,275 of such shares and has sole dispositive power over 1,170,562
of such shares. Gilder disclaims beneficial ownership in customer
accounts over which one or another of its partners or employees may
have discretion to purchase or dispose of securities but over which
Gilder does not have discretion (1,170,562 as of 4/30/95), or in
accounts owned by its partners and by its partners' families in
accounts controlled by partners (267,525 as of 4/30/95), or in the
account of its firm profit sharing plan which is controlled by certain
of its partners (15,750 as of 4/30/95).
(11) Includes options to purchase 276,095 shares that are exercisable
within 60 days.
3
<PAGE> 6
ELECTION OF DIRECTORS
Eight directors are to be elected at the meeting, each director to
hold office until the next Annual Meeting of Stockholders, or until his or her
successor is elected and qualified. All of the persons listed below have
consented to serve as a director, if reelected. The Board of Directors
proposes for election the nominees listed below. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which otherwise would have been voted for such nominee will be voted
for such substitute nominee as may be selected by the Board of Directors.
Shares represented at the meeting in person or by proxy but not voted will
nevertheless be counted for purposes of determining the presence of a quorum.
Directors will be elected by a plurality of the votes cast. Only votes cast
for a nominee will be counted, except that the accompanying proxy will be voted
for the eight nominees named therein in the absence of instructions to the
contrary. Abstentions and instructions on the accompanying proxy card to
withhold authority to vote for one or more of the nominees will result in such
nominee(s) receiving fewer votes.
STEVEN A. WEISS, age 33, has served as the Company's Chairman of the
Board since he founded the Company in June 1990. Mr. Weiss has also served as
an executive officer of the Company since its inception, including as its Chief
Executive Officer and as President of its Research and Development Division.
Mr. Weiss was awarded the 1995 Supplier of the Year Aces of Gaming Award by HVS
Executive Search, a gaming industry consultant. Mr. Weiss designed the
prototype slot accounting and player tracking system that later developed into
the Company's OASIS information management system in 1991. Prior thereto, Mr.
Weiss was employed by Bally as a consultant for Bally's slot information
system.
G. JACK KILAND, age 63, has served as a Director of the Company since
December 1991 and as the Managing Director since December 1995. Mr. Kiland
also served as Treasurer from December 1992 to January 1994 and as Vice
President--Sales and Marketing from January 1993 until June 1994. Mr. Kiland
is also the chief executive officer of Kiland Distributing Corporation, a
supplier of gaming equipment to Native American casinos, which Mr. Kiland
founded in 1978.
DIANA L. BENNETT, age 47, joined the Company as Chief Operating
Officer in January 1996, became President in April 1996, and became a director
in June, 1996. Ms. Bennett has more than 25 years of gaming/hotel experience,
most recently serving as the Vice President and General Manager of the Sahara
from July to December 1995. Ms. Bennett served as the Vice President and
General Manager of the Colorado Belle/Edgewater Hotel/Casino in Laughlin,
Nevada from September 1994 to June 1995. Prior thereto, Ms. Bennett was
responsible for slot operations at the Luxor Las Vegas from May 1993 to
September 1994, the Excalibur Hotel and Casino from October 1991 to May 1993
and the Gold Strike Hotel and Gambling Hall from December 1987 to October 1991.
RUSSELL C. MIX, age 39, has been a director of the Company since
October 1994. Mr. Mix joined the Company as its Vice President--Administration
and General Counsel in March 1993, was named Secretary of the Company in May
1993 and was promoted to Senior Vice President in March 1994. Mr. Mix served
as a principal in the law firm formerly known as Korotkin & Mix, P.C. which
previously rendered legal services to the Company.
WILLIAM M. MOWER, age 38, has been a director of the Company since
March 1993. Since 1982, Mr. Mower has been engaged in the practice of law,
practicing primarily in the areas of gaming, securities and real estate law,
with the Minneapolis, Minnesota law firm of Maslon Edelman Borman & Brand, a
Professional Limited Liability Partnership, which has rendered and is
continuing to render legal services to the Company.
PHIL E. BRYAN, age 57, joined the Company as Chief Executive Officer
and Director in April 1995. Mr. Bryan became the Chief Operating Officer of
Boomtown, Inc. in April, 1996. Mr. Bryan has more than thirty years'
experience in the gaming industry, serving as President and Chief Executive
Officer of the Gold River Operating Corp. from January 1993 to February 1995.
Prior thereto, Mr. Bryan served as President of the Sands Hotel and Casino in
Las Vegas from January to April 1992 and as Chief Executive Officer of the
Peppermill Casino Resort in Reno, Nevada from August 1982 to January 1992.
Prior to his tenure at the Peppermill, Mr. Bryan served as Executive Vice
President and General Manager of the Maxim in Las Vegas. Mr. Bryan served two
terms as President of the Gaming Industry Association during his leadership at
the Peppermill. Mr. Bryan is a director of Boomtown, Inc.
4
<PAGE> 7
KARL K. HOAGLAND, III, age 31, has been a director of the Company
since January 1996. Mr. Hoagland has served in various capacities in the
Corporate Finance Department of Montgomery Securities from 1989 to 1996, most
recently as a Principal. Prior thereto, Mr. Hoagland served in the Merger and
Acquisitions Department of Goldman, Sachs & Co.
DANIEL N. COPP, age 51, joined the Company as a Director in June 1996.
Mr. Copp served as Senior Vice President of Circus Circus Enterprises, Inc.
from June 1995 through May 1996. From April 1994 through June 1995 he served
as an Executive Vice President and Chief Financial Officer for Circus Circus.
Mr. Copp has agreed to provide financial consulting services to Circus Circus
through May 1997. Prior to his tenure with Circus Circus Mr. Copp was employed
by Federal Express in various finance and communications capacities from 1983
to 1992.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for
each of the last three fiscal years awarded to or earned by each executive
officer of the Company whose salary and bonus during the year ended December
31, 1995 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
-------------------------------------------- ----------------
Other Annual Securities
Name and Salary Bonus Compensation Underlying
Principal Position Year ($) ($) ($) Options/SARs (#)
------------------ ---- ------ ------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Steven A. Weiss 1995 227,153 0 9,600(1) 25,312
(Chairman of the Board and President, 1994 150,000 10,000 9,600(1) 67,500
Research and Development Division) 1993 150,000 75,000 6,400(1) 0
Phil E. Bryan 1995 132,923 0 7,975(1) 112,500
(Chief Executive Officer and
Director)(2)
Russell C. Mix 1995 121,344 15,000 9,600(1) 62,016
(Senior Vice President, Secretary, 1994 105,000 33,000 9,600(1) 64,125
General Counsel and Director) 1993 56,700 10,000 26,700(4) 36,000
Patrick W. Cavanaugh 1995 121,344 15,000 9,600(1) 36,703
(Chief Financial Officer and Treasurer) 1994 88,400 33,000 9,600(1) 64,125
1993 34,000 5,000 6,400(1) 24,750
Robert M. Dickenson 1995 130,000 0 9,600(1) 27,562
(President CDS Gaming Company and 1994 137,300 1,500 9,600(1) 36,000
President, Video Interactive Gaming
Division) (4)
</TABLE>
(1) Automobile allowance.
(2) Mr. Bryan joined the Company in April 1995, and resigned as an officer
of the Company in April 1996.
(3) Includes relocation expense reimbursement of approximately $20,300
and automobile allowance of approximately $6,400.
(4) Mr. Dickenson joined the Company on January 1, 1994. Does not include
2,250 exercisable and 5,250 unexercisable options held by the reporting
person's spouse at December 31, 1995.
5
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes information with respect to options
granted to the executive officers named in the Summary Compensation Table
during fiscal year 1995.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Percentage of Stock Price
Number of Total Appreciation for
Securities Options/SARs Exercise Option Term(6)
underlying Granted to or Base --------------
Option/SARs Employees Price Expiration 10% 5%
Name Granted (#) in Fiscal Year ($/share) Date --- ---
---- ---------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Weiss 25,312(1)(2) 3% 5.33 04/04/00 $ 37,274 $ 82,366
Phil E. Bryan 112,500(1)(3) 13 5.33 04/06/00 165,769 366,306
Patrick W. 36,703(1)(2) 4 5.33 04/04/00 54,048 119,432
Cavanaugh
Russell C. Mix 33,891(1)(2) 4 5.33 04/06/00 49,908 110,283
28,125(1)(4) 3 6.39 07/10/00 41,416 91,519
Robert M. 27,562(1)(5) 3 5.33 04/04/00 40,587 89,687
Dickenson
- ----------------
</TABLE>
(1) All options are five-year options that were granted at a price equal to the
last sale price of the Company's Common Stock on the date prior to the
grant date.
(2) Options vest and become exercisable in three equal increments on the six
month, eighteen month and thirty month anniversary of the date of grant.
(3) Options vest and become exercisable in two equal installments on the first
and second anniversary of the date of grant.
(4) Options vest and become exercisable in two equal annual installments on the
six month and eighteen month anniversary of the grant date.
(5) Does not include 2,250 exercisable and 5,250 unexercisable options held by
the reporting person's spouse at December 31, 1995.
(6) Amounts for the executives shown in these columns have been derived by
multiplying the exercise price by the annual appreciation rate shown
(compounded for the term of the options), multiplying the result by the
number of shares covered by the options, and subtracting the aggregate
exercise price of the options. The dollar amounts set forth under this
heading are the result of calculations at the 5% and 10% rates set by the
SEC and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
6
<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes information with respect to options held by
the executive officers named in the Summary Compensation Table and the value of
the options held by such persons at the end of fiscal year 1995.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Shares Options/SARs at Options/SARs
Acquired Value FY-End (#) FY-End ($)(1)
on Exercise Realized Exercisable/ Exercisable/
Name (#) $ Unexercisable(1) Unexercisable
- ---- ---------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Steven A. Weiss 0 0 30,938/ 61,874 305,837/
611,651
Phil E. Bryan 0/112,500 0/1,275,750
Patrick W. Cavanaugh 0 0 47,109/ 78,469 464,421/
763,793
Russell C. Mix 0 0 46,172/111,469 473,820/1,189,043
Robert M. Dickenson (2) 0 0 21,188/ 42,374 183,722/ 367,421
- ------------------------
</TABLE>
(1) Based upon the difference between the option exercise price and the
last sale price of the common stock on December 29, 1995, which was
$16.67.
(2) Does not include 2,250 exercisable and 5,250 unexercisable options
held by the reporting person's spouse at December 31, 1995.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Weiss
which expires on December 31, 1997 and which may be terminated by the Company
or Mr. Weiss upon notice. The agreement, which was amended in April 1996,
provides for a base annual salary of $300,000. Mr. Weiss is subject to
certain non-competition provisions during the term of the employment agreement
and for two years thereafter, unless the employment agreement is terminated by
the Company or Mr. Weiss under certain circumstances, including in the event of
a change in control of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. William M.
Mower, and Karl K. Hoagland III. In January 1996, Karl K. Hoagland III
replaced Mr. Kiland as a member of the Committee. William M. Mower is the sole
shareholder of a professional association that is a partner in Maslon Edelman
Borman & Brand, a Professional Limited Liability Partnership, which has
rendered and will continue to render legal services to the Company. The
Company sells OASIS II casino management information systems and other products
to certain Native American casinos in the Midwest through Kiland Distributing
Corporation ("KDC"). Mr. G. Jack Kiland serves as a director, Chief Executive
Officer and is a majority stockholder of KDC. The Company has no distribution
agreement with KDC, but generally sells product to KDC at a discount which is
negotiated for each transaction. The Company generally offers KDC payment
terms that match the payment terms KDC has extended the Native American casino.
During 1995, the
7
<PAGE> 10
Company sold approximately $1,864,379 of OASIS II systems and other products to
KDC, of which approximately $415,000 was sold on extended payment terms and is
represented by a note receivable to the Company. Sales to KDC were $420,000
and $47,226 in 1993 and 1994, respectively. In September 1995, the Company
made a $120,000 working capital loan to KDC, evidenced by a note bearing
interest at a commercial bank's base rate plus 25 basis points, which
approximated 8.75% at December 31, 1995. Also, during the 1995 fiscal year,
Mr. Kiland was paid $18,000 for consulting services provided to the Company.
DIRECTOR COMPENSATION
Directors who are not also employees of the Company receive a $25,000
annual director's fee and are reimbursed for costs and expenses they incur to
attend board meetings. Directors who are not also employees of the Company are
entitled to participate in the Company's 1994 Non-employee Director Stock
Option Plan. This plan is a formula stock option plan that provides for the
initial grant of a stock option covering 11,250 shares upon a person joining
the Board and an annual stock option grant covering 5,625 shares at each annual
meeting of stockholders. Each option granted has a ten-year term, vests
equally over a two year period and has an exercise price equal to the fair
market value on the date of grant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally have
been made by the Compensation and Stock Option Committee (the "Compensation
Committee") of the Board. Each member of the Compensation Committee is a
non-employee director. All decisions by the Compensation Committee relating to
the compensation of the Company's executive officers are reviewed by the full
Board. Each executive officer who also serves as a director of the Company
abstains from the discussion and vote relating to his compensation. Pursuant
to rules designed to enhance disclosure of the Company's policies toward
executive compensation, set forth below is a report prepared by the
Compensation Committee addressing the Company's compensation policies for the
year ended December 31, 1995 as they affected the Company's executive officers.
The following report of the Compensation Committee, as well as the Performance
Graph set forth herein, are not soliciting materials, are not deemed filed with
the Securities and Exchange Commission (the "SEC") and are not incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in any such filing.
The Compensation Committee's executive compensation policies are
designed to provide competitive levels of compensation that integrate pay with
the Company's annual objectives and long-term goals, reward above-average
corporate performance, recognize individual initiative and achievements, and
assist the Company in attracting and retaining qualified executives. The
Compensation Committee intends to set executive compensation at levels that
the Compensation Committee believes to be consistent with others in the
Company's industry. In 1994 and also in 1996, the Compensation Committee had
engaged KPMG Peat Marwick LLP ("KPMG") to review the Company's executive
compensation programs.
There are three elements in the Company's executive compensation
program, all determined by individual and corporate performance.
- Base salary compensation
- Annual incentive compensation
- Stock options
Base salary compensation and increases are determined by the potential
impact the individual has on the Company, the skills and experiences required
by the job, and the performance and potential of the incumbent in the job.
Annual incentive compensation for executives of the Company has
previously been discretionary in nature and based upon a subjective evaluation
by the Compensation Committee of corporate operating earnings and revenue
growth and the executive's performance, as well as market conditions.
Effective in April 1996, the Compensation Committee instituted a bonus
incentive compensation plan which allows each executive to earn a percentage of
such executive's base salary (up to 50%) dependent upon the Company's earnings
performance for such fiscal year.
8
<PAGE> 11
Awards of stock grants under the Company's 1993 Stock Option and
Compensation Plan (the "Plan") are designed to promote the identity of
long-term interests between the Company's executives and its stockholders and
assist in the retention of executives. The Plan also permits the Committee to
grant stock options to key personnel. Options become exercisable based upon
criteria established by the Company.
While the value realizable from exercisable options is dependent upon
the extent to which the Company's performance is reflected in the market price
of the Company's common stock at any particular point in time, the decision as
to whether such value will be realized in any particular year is determined by
each individual executive and not by the Compensation Committee. Accordingly,
when the Committee recommends that an option be granted to an executive, that
recommendation does not take into account any gains realized that year by that
executive as a result of his or her individual decision to exercise an option
granted in a previous year.
Steven A. Weiss currently serves as the Company's Chairman of the
Board and Chief Executive Officer. Mr. Weiss' Employment Agreement expired on
January 31, 1996. Effective February 1, 1996, the Company entered into a new
employment agreement with Mr. Weiss providing for an annual base salary of
$217,000. Effective April 1, 1996, the Compensation Committee, after reviewing
information provided by KPMG relative to salaries paid to chief executives in
comparably companies in the casino industry, determined to amend this agreement
and increase Mr. Weiss' annual base salary to $300,000 per year. The
Compensation Committee, based in part upon information and advice provided by
KPMG, prepared an incentive compensation plan to cover Mr. Weiss, as well as
other executives in the Company, which in large part will be based upon the
Company's achievement of corporate performance goals and the executives'
achievement of individual performance goals.
The Compensation Committee does not anticipate that any of the
compensation payable to executive officers of the Company in the coming year
will exceed the limits and deducibilities set forth in section 162(m) of the
Internal Revenue Code of 1986, as amended. The Compensation Committee has not
established a policy regarding compensation in excess of these limits, but will
continue to monitor this issue.
By the Compensation and Stock Option Committee
WILLIAM M. MOWER
KARL K. HOAGLAND III
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line-graph presentation comparing cumulative,
five-year return to the Company's stockholders (based on appreciation of the
market price of the Company's Common Stock) on an indexed basis with (i) a
broad equity market index and (ii) an appropriate published industry or
line-of-business index, or peer group index constructed by the Company. The
following presentation compares the Company's Common Stock price in the period
from April 5, 1993 (the date of the Company's initial public offering) to
December 31, 1995, to the S&P 500 Stock Index and to a "peer group" index
created by the Company over the same period. The "peer group" index is
comprised of gaming equipment suppliers whose common stock was publicly traded
as of April 5, 1993, including Autotote Corp., GTech Holdings Corp.,
International Game Technology, International Totalizator Systems, Inc., Bally
Gaming International, Inc., Video Lottery Technologies, Inc. and WMS
Industries. The presentation assumes that the value of an investment in each
of the Company's Common Stock, the S&P 500 Index, and the peer group index was
$100 on April 5, 1993, and that any dividends paid were reinvested in the same
security.
COMPARISON OF 32 MONTH CUMULATIVE TOTAL RETURN*
AMONG CASINO DATA SYSTEMS, THE S & P 500 INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
4/06/93 12/93 12/94 12/95
------- ----- ----- -----
<S> <C> <C> <C> <C>
CASINO DATA SYSTEMS 100 219 131 313
PEER GROUP 100 108 60 48
S & P 500 100 108 109 150
</TABLE>
* $100 INVESTED ON 4/08/93 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
10
<PAGE> 13
CERTAIN TRANSACTIONS
The Company sells OASIS II casino management information systems and
other products to certain Native American casinos in the Midwest through KDC.
Mr. G. Jack Kiland serves as a director, Chief Executive Officer and is a
majority stockholder of KDC. The Company has no distribution agreement with
KDC, but generally sells product to KDC at a discount which is negotiated for
each transaction. The Company generally offers KDC payment terms that match
the payment terms KDC has extended the Native American casino. During 1995,
the Company sold approximately $1,864,379 of OASIS II systems and other
products to KDC, of which approximately $415,000 was sold on extended payment
terms and is represented by a note receivable to the Company. Sales to KDC
were $420,000 and $47,226 in 1993 and 1994, respectively. In September 1995,
the Company made a $120,000 working capital loan to KDC, evidenced by a note
bearing interest at a commercial bank's base rate plus 25 basis points, which
approximated 8.75% at December 31, 1995. Also, during the 1995 fiscal year,
Jack Kiland was paid $18,000 for consulting services provided to the Company.
William M. Mower, a director of the Company, is the sole stockholder
of a professional association that is a partner in Maslon Edelman Borman &
Brand, a Professional Limited Liability Partnership, which has rendered and
will continue to render legal services to the Company.
11
<PAGE> 14
PROPOSAL TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE
UNDER THE COMPANY'S 1993 STOCK OPTION AND COMPENSATION PLAN
On January 8, 1993, the Board of Directors and the stockholders of the
Company unanimously approved the Company's 1993 Stock Option and Compensation
Plan (the "Plan") covering 1,012,500 shares of Common Stock. Subject to
stockholder approval, on April 15, 1994, the Board of Directors by written
consent amended the Plan to increase the number of shares of Common Stock
reserved for issuance pursuant to the Plan by 337,500 shares. The stockholders
approved this amendment to the Plan on June 3, 1994. Subject to the approval of
the stockholders, in July 1995, the Board of Directors further amended the Plan
to increase the number of shares of Common Stock reserved for issuance pursuant
to the Plan by 675,000 shares. Of this increase, options representing
approximately 590,000 shares had been granted as of May 28, 1996, subject to
obtaining shareholder approval. The brief summary of the Plan which follows is
qualified in its entirety by reference to the complete text, a copy of which is
attached to this Proxy Statement as Exhibit A.
GENERAL
The purpose of the Plan is to increase stockholder value and to
advance the interests of the Company by furnishing a variety of economic
incentives ("Incentives") designed to attract, retain and motivate employees of
the Company.
The Plan provides that a committee (the "Committee") composed of at
least two members of the board of directors of the Company who have not
received Incentives under the Plan or any other plan of the Company for at
least one year may grant Incentives to employees in the following forms: (a)
stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted
stock; (e) performance shares; and (f) cash awards. Incentives may be granted
only to employees of the Company (including officers and directors of the
Company, but excluding directors of the Company who are not also employees of
or consultants to the Company) selected from time to time by the Committee.
The number of shares of Common Stock which may be issued under the
Plan if this amendment is approved may not exceed 2,025,000 shares, subject to
adjustment in the event of a merger, recapitalization or other corporate
restructuring. This represents approximately 11.4% of the outstanding shares
of Common Stock on May 28, 1996. On May 28, 1996, the last sale price of the
Common Stock as reported by the NASDAQ National Market Exchange was $13.125 per
share.
STOCK OPTIONS
Under the Plan, the Committee may grant non-qualified and incentive
stock options to eligible employees to purchase shares of Common Stock from the
Company. The Plan confers on the Committee discretion, with respect to any
such stock option, to determine the number and purchase price of the shares
subject to the option, the term of each option and the time or times during its
term when the option becomes exercisable. The purchase price for incentive
stock options may not be less than the fair market value of the shares subject
to the option on the date of grant. The number of shares subject to an option
will be reduced proportionately to the extent that the optionee exercises a
related Stock Appreciation Right ("SAR"). The term of a non-qualified option
may not exceed 10 years and one day from the date of grant and the term of an
incentive stock option may not exceed 10 years from the date of grant. Any
option shall become immediately exercisable in the event of specified changes
in corporate ownership or control. The Committee may accelerate the
exercisability of any option or may determine to cancel stock options in order
to make a participant eligible for the grant of an option at a lower price.
The Committee may approve the purchase by the Company of an unexercised stock
option for the difference between the exercise price and the fair market value
of the shares covered by such option.
The option price may be paid in cash, check, bank draft or by delivery
of shares of Common Stock valued at their fair market value at the time of
purchase or by withholding from the shares issuable upon exercise of the option
shares of Common Stock valued at their fair market value or as otherwise
authorized by the Committee.
12
<PAGE> 15
In the event that an optionee ceases to be an employee of the Company
for any reason, including death, any stock option or unexercised portion
thereof which was otherwise exercisable on the date of termination of
employment shall expire at the time or times established by the Committee.
STOCK APPRECIATION RIGHTS
A stock appreciation right or SAR is a right to receive, without
payment to the Company, a number of shares, cash or any combination thereof,
the amount of which is determined pursuant to the formula described below. A
SAR may be granted with respect to any stock option granted under the Plan, or
alone, without reference to any stock option. A SAR granted with respect to
any stock option may be granted concurrently with the grant of such option or
at such later time as determined by the Committee and as to all or any portion
of the shares subject to the option.
The Plan confers on the Committee discretion to determine the number
of shares as to which a SAR will relate as well as the duration and
exercisability of a SAR. In the case of a SAR granted with respect to a stock
option, the number of shares of Common Stock to which the SAR pertains will be
reduced in the same proportion that the holder exercises the related option.
The term of a SAR may not exceed ten years and one day from the date of grant.
Unless otherwise provided by the Committee, a SAR will be exercisable for the
same time period as the stock option to which it relates is exercisable. Any
SAR shall become immediately exercisable in the event of specified changes in
corporate ownership or control. The Committee may accelerate the
exercisability of any SAR.
Upon exercise of a SAR, the holder is entitled to receive an amount
which is equal to the aggregate amount of the appreciation in the shares of
Common Stock as to which the SAR is exercised. For this purpose, the
"appreciation" in the shares consists of the amount by which the fair market
value of the shares of Common Stock on the exercise date exceeds (a) in the
case of a SAR related to a stock option, the purchase price of the shares under
the option or (b) in the case of a SAR granted alone, without reference to a
related stock option, an amount determined by the Committee at the time of
grant. The Committee may pay the amount of this appreciation to the holder of
the SAR by the delivery of Common Stock, cash, or any combination of Common
Stock and cash.
RESTRICTED STOCK
Restricted stock consists of the sale or transfer by the Company to an
eligible employee of one or more shares of Common Stock which are subject to
restrictions on their sale or other transfer by the employee. The price at
which restricted stock will be sold will be determined by the Committee, and it
may vary from time to time and among employees and may be less than the fair
market value of the shares at the date of sale. All shares of restricted stock
will be subject to such restrictions as the Committee may determine. Subject
to these restrictions and the other requirements of the Plan, a participant
receiving restricted stock shall have all of the rights of a stockholder as to
those shares.
STOCK AWARDS
Stock awards consist of the transfer by the Company to an eligible
employee of shares of Common Stock, without payment, as additional compensation
for services to the Company. The number of shares transferred pursuant to any
stock award will be determined by the Committee.
PERFORMANCE SHARES
Performance shares consist of the grant by the Company to an eligible
employee of a contingent right to receive cash or payment of shares of Common
Stock. The performance shares shall be paid in shares of Common Stock to the
extent performance objectives set forth in the grant are achieved. The number
of shares granted and the performance criteria will be determined by the
Committee.
CASH AWARDS
A cash award consists of a monetary payment made by the Company to an
eligible employee as additional compensation for his services to the Company.
Payment may depend on the achievement of specified performance objectives. The
amount of any monetary payment constituting a cash award shall be determined by
the Committee.
13
<PAGE> 16
NON-TRANSFERABILITY OF MOST INCENTIVES
No stock option, a SAR, performance share or restricted stock granted
under the Plan will be transferable by its holder, except in the event of the
holder's death, by will or the laws of descent and distribution. During an
employee's lifetime, an Incentive may be exercised only by him or her or by his
or her guardian or legal representative.
AMENDMENT OF THE PLAN
The Board of Directors may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance may, subject to adjustment in the
event of a merger, recapitalization, or other corporate restructuring, (a)
change or impair, without the consent of the recipient thereof, an Incentive
previously granted, (b) materially increase the maximum number of shares of
Common Stock which may be issued to all employees under the Plan, (c)
materially change or expand the types of Incentives that may be granted under
the Plan, (d) materially modify the requirements as to eligibility for
participation in the Plan, or (e) materially increase the benefits accruing to
participants. Certain Plan amendments require stockholder approval, including
amendments which would materially increase benefits accruing to participants,
increase the number of securities issuable under the Plan, or change the
requirements for eligibility under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth certain United States income tax
considerations in connection with the ownership of Common Stock. These tax
considerations are stated in general terms and are based on the Code and
judicial and administrative interpretations thereof. This discussion does not
address state or local tax considerations with respect to the ownership of
Common Stock. Moreover, the tax considerations relevant to ownership of the
Common Stock may vary depending on a holder's particular status.
Under existing Federal income tax provisions, an employee who receives
a stock option or performance shares or a SAR under the Plan or who purchases
or receives shares of restricted stock under the Plan which are subject to
restrictions which create a "substantial risk of forfeiture" (within the
meaning of section 83 of the Code) will not normally realize any income, nor
will the Company normally receive any deduction for federal income tax purposes
in the year such Incentive is granted. An employee who receives a stock award
under the Plan consisting of shares of Common Stock will realize ordinary
income in the year of the award in an amount equal to the fair market value of
the shares of Common Stock covered by the award on the date it is made, and the
Company will be entitled to a deduction equal to the amount the employee is
required to treat as ordinary income. An employee who receives a cash award
will realize ordinary income in the year the award is paid equal to the amount
thereof, and the amount of the cash will be deductible by the Company.
When a non-qualified stock option granted pursuant to the Plan is
exercised, the employee will realize ordinary income measured by the difference
between the aggregate purchase price of the shares of Common Stock as to which
the option is exercised and the aggregate fair market value of shares of the
Common Stock on the exercise date, and the Company will be entitled to a
deduction in the year the option is exercised equal to the amount the employee
is required to treat as ordinary income.
Options which qualify as incentive stock options are entitled to
special tax treatment. Under existing federal income tax law, if shares
purchased pursuant to the exercise of such an option are not disposed of by the
optionee within two years from the date of granting of the option or within one
year after the transfer of the shares to the optionee, whichever is longer,
then (I) no income will be recognized to the optionee upon the exercise of the
option; (ii) any gain or loss will be recognized to the optionee only upon
ultimate disposition of the shares and, assuming the shares constitute capital
assets in the optionee's hands, will be treated as long-term capital gain or
loss; (iii) the optionee's basis in the shares purchased will be equal to the
amount of cash paid for such shares; and (iv) the Company will not be entitled
to a federal income tax deduction in connection with the exercise of the
option. The Company understands that the difference between the option price
and the fair market value of the shares acquired upon exercise of an incentive
stock option will be treated as an "item of tax preference" for purposes of the
alternative minimum tax. In addition, incentive stock options exercised more
than three months after retirement are treated as non-qualified options.
14
<PAGE> 17
The Company further understands that if the optionee disposes of the
shares acquired by exercise of an incentive stock option before the expiration
of the holding period described above, the optionee must treat as ordinary
income in the year of that disposition an amount equal to the difference
between the optionee's basis in the shares and the lesser of the fair market
value of the shares on the date of exercise or the selling price. In addition,
the Company will be entitled to a deduction equal to the amount the employee is
required to treat as ordinary income.
If the exercise price of an option is paid by surrender of previously
owned shares, the basis of the shares received in replacement of the previously
owned shares is carried over. If the option is a nonstatutory option, the gain
recognized on exercise is added to the basis. If the option is an incentive
stock option, the optionee will recognize gain if the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the applicable holding period. This gain will be added to the basis
of the shares received in replacement of the previously owned shares.
When a stock appreciation right granted pursuant to the Plan is
exercised, the employee will realize ordinary income in the year the right is
exercised equal to the value of the appreciation which he is entitled to
receive pursuant to the formula described above, and the Company will be
entitled to a deduction in the same year and in the same amount.
An employee who receives restricted stock or performance shares
subject to restrictions which create a "substantial risk of forfeiture" (within
the meaning of section 83 of the Code) will normally realize taxable income on
the date the shares become transferable or no longer subject to substantial
risk of forfeiture or on the date of their earlier disposition. The amount of
such taxable income will be equal to the amount by which the fair market value
of the shares of Common Stock on the date such restrictions lapse (or any
earlier date on which the shares are disposed of) exceeds their purchase price,
if any. An employee may elect, however, to include in income in the year of
purchase or grant the excess of the fair market value of the shares of Common
Stock (without regard to any restrictions) on the date of purchase or grant
over its purchase price. The Company will be entitled to a deduction for
compensation paid in the same year and in the same amount as income is realized
by the employee.
PROXIES AND VOTING
The affirmative vote of the holders of a majority of the voting power
present at a meeting at which a quorum is present is required to approve the
proposal to increase the number of shares of common stock reserved for issuance
under the Plan. A stockholder who abstains with respect to the proposed Plan
amendment is considered to be present and entitled to vote at the meeting, and
is in effect casting a negative vote, but a stockholder (including a broker)
who does not give authority to a Proxy to vote on the proposed Plan amendment
shall not be considered present and entitled to vote on the proposed amendment.
All shares represented by proxies will be voted for approval of the proposed
Plan amendment unless a contrary choice is specified.
PROPOSALS OF STOCKHOLDERS
All proposals of stockholders intended to be presented at the 1997
Annual Meeting of Stockholders of the Company must be received by the Company
at its executive offices on or before February 6, 1997.
15
<PAGE> 18
OTHER MATTERS
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings during the last fiscal year.
The Company has an audit committee and a compensation and stock option
committee, but does not have a nominating committee of the Board of Directors.
The Company's audit committee during 1995 consisted of Messrs. G.
Jack Kiland and William M. Mower. The audit committee recommends to the full
Board the engagement of the independent accountants, reviews the audit plan and
results of the audit engagement, reviews the independence of the auditors, and
reviews the adequacy of the Company's system of internal accounting controls.
The audit committee did not meet during the last fiscal year. In January 1996,
Karl K. Hoagland III replaced Mr. Kiland as a member of the audit and stock
option committees.
The Company's compensation and stock option committee, which consisted
of Messrs. William M. Mower and G. Jack Kiland held two meetings during the
last fiscal year. The compensation and stock option committee reviews the
Company's remuneration policies and practices, makes recommendations to the
Board in connection with all compensation matters affecting the Company and
administers the Plan.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has been the independent public accountants for
the Company since January 1993. A representative of KPMG Peat Marwick LLP is
expected to attend this year's Annual Meeting of Stockholders and have an
opportunity to make a statement and/or respond to appropriate questions from
stockholders.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the Nasdaq National Market. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on review of the
copies of such forms furnished to the Company, or written representations that
no Forms 5 were required, the Company believes that during the fiscal year
ended December 31, 1995, all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with.
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing
the proxy, Proxy Statement, Annual Report and other material which may be sent
to the stockholders in connection with this solicitation. Brokerage houses and
other custodians, nominees and fiduciaries may be requested to forward
soliciting material to the beneficial owners of stock, in which case they will
be reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail, but, in addition, officers and regular employees
of the Company may solicit proxies personally, by telephone, by telegram or by
special letter.
The Board of Directors does not intend to present to the meeting any
other matter not referred to above and does not presently know of any matters
that may be presented to the meeting by others. However, if other matters come
before the meeting, it is the intent of the persons named in the enclosed proxy
to vote the proxy in accordance with their best judgment.
By Order of the Board of Directors
Casino Data Systems
Russell C. Mix, Secretary
16
<PAGE> 19
EXHIBIT A
CASINO DATA SYSTEMS
1993 STOCK OPTION AND COMPENSATION PLAN, AS AMENDED
1. Purpose. The purpose of the 1993 Stock Option and Compensation
Plan (the "Plan") of Casino Data Systems (the "Company") is to increase
stockholder value and to advance the interests of the Company by furnishing a
variety of economic incentives ("Incentives") designed to attract, retain and
motivate employees and certain key consultants. Incentives may consist of
opportunities to purchase or receive shares of Common Stock, $0.01 par value,
of the Company ("Common Stock"), monetary payments or both on terms determined
under this Plan.
2. Administration. The Plan shall be administered by the stock option
committee (the "Committee") of the board of directors of the Company. The
Committee shall consist of not less than two directors of the Company and shall
be appointed from time to time by the board of directors of the Company. Each
member of the Committee shall be a "disinterested person" within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934, and the regulations
promulgated thereunder (the "1934 Act"). The board of directors of the Company
may from time to time appoint members of the Committee in substitution for, or
in addition to, members previously appointed, and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such times and places as it shall deem
advisable. A majority of the Committee's members shall constitute a quorum.
All action of the Committee shall be taken by the majority of its members. Any
action may be taken by a written instrument signed by majority of the members
and actions so taken shall be fully effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable. The
Committee shall have complete authority to award Incentives under the Plan, to
interpret the Plan, and to make any other determination which it believes
necessary and advisable for the proper administration of the Plan. The
Committee's decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants.
3. Eligible Participants. Employees of or consultants to the Company
or its subsidiaries or affiliates (including officers, and including directors
who are also employees of or consultants to the Company or its subsidiaries or
affiliates), shall become eligible to receive Incentives under the Plan when
designated by the Committee. Participants may be designated individually or by
groups or categories (for example, by pay grade) as the Committee deems
appropriate. Participation by officers of the Company or its subsidiaries or
affiliates and any performance objectives relating to such officers must be
approved by the Committee. Participation by others and any performance
objectives relating to others may be approved by groups or categories (for
example, by pay grade) and authority to designate participants who are not
officers and to set or modify such targets may be delegated.
4. Types of Incentives. Incentives under the Plan may be granted in
any one or a combination of the following forms: (a) incentive stock options
and non-statutory stock options (section 6); (b) stock appreciation rights
("SARs") (section 7); (c) stock awards (section 8); (d) restricted stock
(section 8); (e) performance shares (section 9); and (f) cash awards (section
10).
5. Shares Subject to the Plan.
5.1. Number of Shares. Subject to adjustment as provided in
Section 11.6, the number of shares of Common Stock which may be
issued under the Plan shall not exceed 2,025,000 shares of Common
Stock.
5.2. Cancellation. To the extent that cash in lieu of shares
of Common Stock is delivered upon the exercise of a SAR pursuant to
Section 7.4, the Company shall be deemed, for purposes of applying
the limitation on the number of shares, to have issued the greater of
the number of shares of Common Stock which it was entitled to issue
upon such exercise or on the exercise of any related option. In the
event that a stock option or SAR granted hereunder expires or is
terminated or cancelled unexercised as to any shares of Common Stock,
such shares may again be issued under the Plan either pursuant to stock
options, SARs or otherwise. In the event that shares of Common Stock
are issued as restricted stock or pursuant to a stock award and
thereafter are forfeited or reacquired by the Company pursuant to
rights reserved upon issuance thereof, such forfeited and reacquired
shares may again be issued under the Plan, either as restricted stock,
pursuant to stock
A-1
<PAGE> 20
awards or otherwise. The Committee may also determine to cancel, and
agree to the cancellation of, stock options in order to make a
participant eligible for the grant of a stock option at a lower price
than the option to be cancelled.
5.3. Type of Common Stock. Common Stock issued under the
Plan in connection with stock options, SARs, performance shares,
restricted stock or stock awards, may be authorized and unissued
shares.
6. Stock Options. A stock option is a right to purchase shares of
Common Stock from the Company. Each stock option granted by the Committee
under this Plan shall be subject to the following terms and conditions:
6.1. Price. The option price per share shall be determined by
the Committee, subject to adjustment under Section 11.6.
6.2. Number. The number of shares of Common Stock subject to
the option shall be determined by the Committee, subject to
adjustment as provided in Section 11.6. The number of shares of Common
Stock subject to a stock option shall be reduced in the same proportion
that the holder thereof exercises a SAR if any SAR is granted in
conjunction with or related to the stock option.
6.3. Duration and Time for Exercise. Subject to earlier
termination as provided in Section 11.4, the term of each stock
option shall be determined by the Committee but shall not exceed ten
years and one day from the date of grant. Each stock option shall
become exercisable at such time or times during its term as shall be
determined by the Committee at the time of grant. The Committee may
accelerate the exercisability of any stock option. Subject to the
foregoing and with the approval of the Committee, all or any part of
the shares of Common Stock with respect to which the right to purchase
has accrued may be purchased by the Company at the time of such accrual
or at any time or times thereafter during the term of the option.
6.4. Manner of Exercise. A stock option may be exercised, in
whole or in part, by giving written notice to the Company, specifying
the number of shares of Common Stock to be purchased and accompanied
by the full purchase price for such shares. The option price shall
be payable in United States dollars upon exercise of the option and
may be paid by cash; uncertified or certified check; bank draft; by
delivery of shares of Common Stock in payment of all or any part of
the option price, which shares shall be valued for this purpose
at the Fair Market Value on the date such option is exercised; by
instructing the Company to withhold from the shares of Common Stock
issuable upon exercise of the stock option shares of Common Stock in
payment of all or any part of the option price, which shares shall be
valued for this purpose at the Fair Market Value or in such other
manner as may be authorized from time to time by the Committee. Prior
to the issuance of shares of Common Stock upon the exercise of a stock
option, a participant shall have no rights as a stockholder.
6.5. Incentive Stock Options. Notwithstanding anything in
the Plan to the contrary, the following additional provisions shall
apply to the grant of stock options which are intended to qualify
as Incentive Stock Options (as such term is defined in Section 422A of
the Internal Revenue Code of 1986, as amended):
(a) The aggregate Fair Market Value (determined as
of the time the option is granted) of the shares of Common
Stock with respect to which Incentive Stock Options are
exercisable for the first time by any participant during any
calendar year (under all of the Company's plans) shall not
exceed $100,000.
(b) Any Incentive Stock Option certificate
authorized under the Plan shall contain such other provisions
as the Committee shall deem advisable, but shall in all events
be consistent with and contain all provisions required in
order to qualify the options as Incentive Stock Options.
(c) All Incentive Stock Options must be granted
within ten years from the earlier of the date on which this
Plan was adopted by board of directors or the date this Plan
was approved by the stockholders.
A-2
<PAGE> 21
(d) Unless sooner exercised, all Incentive Stock
Options shall expire no later than 10 years after the date of
grant.
(e) The option price for Incentive Stock Options
shall be not less than the Fair Market Value of the Common
Stock subject to the option on the date of grant.
(f) No Incentive Stock Options shall be granted to
any participant who, at the time such option is granted, would
own (within the meaning of Section 422A of the Code) stock
possessing more than 10% of the total combined voting power of
all classes of stock of the employer corporation or of its
parent or subsidiary corporation.
7. Stock Appreciation Rights. A SAR is a right to receive, without
payment to the Company, a number of shares of Common Stock, cash or any
combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 7.4. A SAR may be granted (a) with respect to any stock
option granted under this Plan, either concurrently with the grant of such
stock option or at such later time as determined by the Committee (as to all or
any portion of the shares of Common Stock subject to the stock option), or (b)
alone, without reference to any related stock option. Each SAR granted by the
Committee under this Plan shall be subject to the following terms and
conditions:
7.1. Number. Each SAR granted to any participant shall
relate to such number of shares of Common Stock as shall be
determined by the Committee, subject to adjustment as provided in
Section 11.6. In the case of a SAR granted with respect to a stock
option, the number of shares of Common Stock to which the SAR pertains
shall be reduced in the same proportion that the holder of the option
exercises the related stock option.
7.2. Duration. Subject to earlier termination as provided in
Section 11.4, the term of each SAR shall be determined by the
Committee but shall not exceed ten years and one day from the date of
grant. Unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the stock option, if any, to which it relates is
exercisable. The Committee may in its discretion accelerate the
exercisability of any SAR.
7.3. Exercise. A SAR may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number
of SARs which the holder wishes to exercise. Upon receipt of such
written notice, the Company shall, within 90 days thereafter, deliver
to the exercising holder certificates for the shares of Common Stock or
cash or both, as determined by the Committee, to which the holder is
entitled pursuant to Section 7.4.
7.4. Payment. Subject to the right of the Committee to
deliver cash in lieu of shares of Common Stock (which, as it pertains
to officers and directors of the Company, shall comply with all
requirements of the 1934 Act), the number of shares of Common Stock
which shall be issuable upon the exercise of a SAR shall be determined
by dividing:
(a) The number of shares of Common Stock as to which
the SAR is exercised multiplied by the amount of the
appreciation in such shares (for this purpose, the
"appreciation" shall be the amount by which the Fair Market
Value of the shares of Common Stock subject to the SAR on the
exercise date exceeds (1) in the case of a SAR related to a
stock option, the purchase price of the shares of Common Stock
under the stock option or (2) in the case of a SAR granted
alone, without reference to a related stock option, an amount
which shall be determined by the Committee at the time of
grant, subject to adjustment under Section 11.6); by
(b) The Fair Market Value of a share of Common Stock
on the exercise date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR,
the Committee may elect to pay the holder of the SAR cash equal to the Fair
Market Value on the exercise date of any or all of the shares which would
otherwise be issuable. No fractional shares of Common Stock shall be issued
upon the exercise of a SAR; instead, the holder of the SAR shall be entitled to
receive a cash adjustment equal to the same fraction of the Fair Market Value
of a share of Common Stock on the exercise date or to purchase the portion
necessary to make a whole share at its Fair Market Value on the date of
exercise.
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8. Stock Awards and Restricted Stock. A stock award consists of the
transfer by the Company to a participant of shares of Common Stock, without
other payment therefor, as additional compensation for services to the Company.
A share of restricted stock consists of shares of Common Stock which are sold
or transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. The transfer
of Common Stock pursuant to stock awards and the transfer and sale of
restricted stock shall be subject to the following terms and conditions:
8.1. Number of Shares. The number of shares to be transferred
or sold by the Company to a participant pursuant to a stock award or
as restricted stock shall be determined by the Committee.
8.2. Sale Price. The Committee shall determine the price, if
any, at which shares of restricted stock shall be sold to a
participant, which may vary from time to time and among participants
and which may be below the Fair Market Value of such shares of Common
Stock at the date of sale.
8.3. Restrictions. All shares of restricted stock
transferred or sold hereunder shall be subject to such restrictions
as the Committee may determine, including, without limitation any or
all of the following:
(a) A prohibition against the sale, transfer, pledge
or other encumbrance of the shares of restricted stock, such
prohibition to lapse at such time or times as the Committee
shall determine (whether in annual or more frequent
installments, at the time of the death, disability or
retirement of the holder of such shares, or otherwise);
(b) A requirement that the holder of shares of
restricted stock forfeit, or (in the case of shares sold to a
participant) resell back to the Company at his or her cost, all
or a part of such shares in the event of termination of his or
her employment or consulting engagement during any period in
which such shares are subject to restrictions;
(c) Such other conditions or restrictions as the
Committee may deem advisable.
8.4. Escrow. In order to enforce the restrictions imposed by
the Committee pursuant to Section 8.3, the participant receiving
restricted stock shall enter into an agreement with the Company setting
forth the conditions of the grant. Shares of restricted stock shall be
registered in the name of the participant and deposited, together with
a stock power endorsed in blank, with the Company. Each such
certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of
Common Stock represented by it are subject to the terms and
conditions (including conditions of forfeiture) contained in
the 1993 Stock Option and Compensation Plan of Casino Data
Systems (the "Company"), and an agreement entered into between
the registered owner and the Company. A copy of the Plan and
the agreement is on file in the office of the secretary of the
Company.
8.5. End of Restrictions. Subject to Section 11.5, at the
end of any time period during which the shares of restricted
stock are subject to forfeiture and restrictions on transfer, such
shares will be delivered free of all restrictions to the participant or
to the participant's legal representative, beneficiary or heir.
8.6. Stockholder. Subject to the terms and conditions of the
Plan, each participant receiving restricted stock shall have all
the rights of a stockholder with respect to shares of stock during any
period in which such shares are subject to forfeiture and restrictions
on transfer, including without limitation, the right to vote such
shares. Dividends paid in cash or property other than Common Stock
with respect to shares of restricted stock shall be paid to the
participant currently.
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9. Performance Shares. A performance share consists of an award which
shall be paid in shares of Common Stock, as described below. The grant of
performance share shall be subject to such terms and conditions as the
Committee deems appropriate, including the following:
9.1. Performance Objectives. Each performance share will be
subject to performance objectives for the Company or one of its
operating units to be achieved by the end of a specified period. The
number of performance shares granted shall be determined by the
Committee and may be subject to such terms and conditions, as the
Committee shall determine. If the performance objectives are achieved,
each participant will be paid in shares of Common Stock or cash. If
such objectives are not met, each grant of performance shares may
provide for lesser payments in accordance with formulas established in
the award.
9.2. Not Stockholder. The grant of performance shares to a
participant shall not create any rights in such participant as a
stockholder of the Company, until the payment of shares of Common Stock
with respect to an award.
9.3. No Adjustments. No adjustment shall be made in
performance shares granted on account of cash dividends which
may be paid or other rights which may be issued to the holders of
Common Stock prior to the end of any period for which performance
objectives were established.
9.4. Expiration of Performance Share. If any participant's
employment or consulting engagement with the Company is terminated
for any reason other than normal retirement, death or disability prior
to the achievement of the participant's stated performance objectives,
all the participant's rights on the performance shares shall expire
and terminate unless otherwise determined by the Committee. In the
event of termination by reason of death, disability, or normal
retirement, the Committee, in its own discretion may determine what
portions, if any, of the performance shares should be paid to the
participant.
10. Cash Awards. A cash award consists of a monetary payment made by
the Company to a participant as additional compensation for his or her services
to the Company. Payment of a cash award will normally depend on achievement of
performance objectives by the Company or by individuals. The amount of any
monetary payment constituting a cash award shall be determined by the Committee
in its sole discretion. Cash awards may be subject to other terms and
conditions, which may vary from time to time and among participants, as the
Committee determines to be appropriate.
11. General.
11.1. Effective Date. The Plan will become effective upon its
adoption by unanimous written action by all holders of shares of
Common Stock. Unless approved within one year after the date of the
Plan's adoption by the board of directors, the Plan shall not be
effective for any purpose.
11.2. Duration. The Plan shall remain in effect until all
Incentives granted under the Plan have either been satisfied by
the issuance of shares of Common Stock or the payment of cash or been
terminated under the terms of the Plan and all restrictions imposed on
shares of Common Stock in connection with their issuance under the Plan
have lapsed. No Incentives may be granted under the Plan after the
tenth anniversary of the date the Plan is approved by the stockholders
of the Company.
11.3. Non-transferability of Incentives. No stock option, SAR,
restricted stock or performance award may be transferred, pledged or
assigned by the holder thereof except, in the event of the holder's
death, by will or the laws of descent and distribution or pursuant to
a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act, or the rules thereunder, and the
Company shall not be required to recognize any attempted assignment of
such rights by any participant. During a participant's lifetime, an
Incentive may be exercised only by him or her or by his or her guardian
or legal representative.
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<PAGE> 24
11.4. Effect of Termination or Death. In the event that a
participant ceases to be an employee of or consultant to the
Company for any reason, including death, any Incentives may be
exercised or shall expire at such times as may be determined by the
Committee.
11.5. Additional Condition. Notwithstanding anything in this Plan
to the contrary: (a) the Company may, if it shall determine it
necessary or desirable for any reason, at the time of award of any
Incentive or the issuance of any shares of Common Stock pursuant to any
Incentive, require the recipient of the Incentive, as a condition to
the receipt thereof or to the receipt of shares of Common Stock issued
pursuant thereto, to deliver to the Company a written representation of
present intention to acquire the Incentive or the shares of Common
Stock issued pursuant thereto for his or her own account for investment
and not for distribution; and (b) if at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Incentive
or the shares of Common Stock issuable pursuant thereto is necessary on
any securities exchange or under any federal or state securities or
blue sky law, or that the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in
connection with the award of any Incentive, the issuance of shares of
Common Stock pursuant thereto, or the removal of any restrictions
imposed on such shares, such Incentive shall not be awarded or such
shares of Common Stock shall not be issued or such restrictions shall
not be removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Company.
11.6. Adjustment. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or
corporations, there shall be substituted for each of the shares of
Common Stock then subject to the Plan, including shares subject to
restrictions, options, or achievement of performance share objectives,
the number and kind of shares of stock or other securities to which the
holders of the shares of Common Stock will be entitled pursuant to the
transaction. In the event of any recapitalization, stock dividend,
stock split, combination of shares or other change in the Common Stock,
the number of shares of Common Stock then subject to the Plan,
including shares subject to restrictions, options or achievements of
performance shares, shall be adjusted in proportion to the change in
outstanding shares of Common Stock. In the event of any such
adjustments, the purchase price of any option, the performance
objectives of any Incentive, and the shares of Common Stock issuable
pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the Committee, to provide
participants with the same relative rights before and after such
adjustment.
11.7. Incentive Plans and Agreements. Except in the case of
stock awards or cash awards, the terms of each Incentive shall
be stated in a plan or agreement approved by the Committee. The
Committee may also determine to enter into agreements with holders of
options to reclassify or convert certain outstanding options, within
the terms of the Plan, as Incentive Stock Options or as non-statutory
stock options and in order to eliminate SARs with respect to all or
part of such options and any other previously issued options.
11.8. Withholding.
(a) The Company shall have the right to withhold
from any payments made under the Plan or to collect as a
condition of payment, any taxes required by law to be
withheld. At any time when a participant is required to pay
to the Company an amount required to be withheld under
applicable income tax laws in connection with a distribution
of Common Stock or upon exercise of an option or SAR, the
participant may satisfy this obligation in whole or in part by
electing (the "Election") to have the Company withhold from
the distribution shares of Common Stock having a value
up to the amount required to be withheld. The value of the
shares to be withheld shall be based on the Fair Market Value
of the Common Stock on the date that the amount of tax to be
withheld shall be determined ("Tax Date").
(b) Each Election must be made prior to the Tax
Date. The Committee may disapprove of any Election, may
suspend or terminate the right to make Elections, or may
provide with respect to any Incentive that the right to make
Elections shall not apply to such Incentive. An Election is
irrevocable.
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<PAGE> 25
(c) If a participant is an officer or director of
the Company within the meaning of Section 16 of the 1934 Act,
then an Election must comply with all of the requirements of
the 1934 Act.
11.9. No Continued Employment, Engagement or Right to Corporate
Assets. No participant under the Plan shall have any right, because
of his or her participation, to continue in the employ of, or
to continue his or her consulting engagement for, the Company for any
period of time or to any right to continue his or her present or any
other rate of compensation. Nothing contained in the Plan shall be
construed as giving an employee, a consultant, such persons'
beneficiaries or any other person any equity or interests of any kind
in the assets of the Company or creating a trust of any kind or a
fiduciary relationship of any kind between the Company and any such
person.
11.10. Deferral Permitted. Payment of cash or distribution
of any shares of Common Stock to which a participant is entitled
under any Incentive shall be made as provided in the Incentive.
Payment may be deferred at the option of the participant if provided in
the Incentive.
11.11. Amendment of the Plan. The Board may amend or
discontinue the Plan at any time. However, no such amendment or
discontinuance shall, subject to adjustment under Section 11.6, (a)
change or impair, without the consent of the recipient, an Incentive
previously granted, (b) materially increase the maximum number of
shares of Common Stock which may be issued to all participants under
the Plan, (c) materially increase the benefits that may be granted
under the Plan, (d) materially modify the requirements as to
eligibility for participation in the Plan, or (e) materially increase
the benefits accruing to participants under the Plan.
11.12. Immediate Acceleration of Incentives. Notwithstanding
any provision in this Plan or in any Incentive to the contrary,
(a) the restrictions on all shares of restricted stock award shall
lapse immediately, (b) all outstanding options and SARs will become
exercisable immediately, and (c) all performance shares shall be deemed
to be met and payment made immediately, if subsequent to the date that
the Plan is approved by the Board of Directors of the Company, any of
the following events occur unless otherwise determined by the board of
directors and a majority of the Continuing Directors (as defined
below):
(1) Any person or group of persons becomes the
beneficial owner of 30% or more of any equity security of the
Company entitled to vote for the election of directors;
(2) A majority of the members of the board of
directors of the Company is replaced within the period of less
than two years by directors not nominated and approved by the
board of directors; or
(3) The stockholders of the Company approve an
agreement to merge or consolidate with or into another
corporation or an agreement to sell or otherwise dispose of all
or substantially all of the Company's assets (including a plan
of liquidation).
For purposes of this Section 11.12, beneficial ownership by a person
or group of persons shall be determined in accordance with Regulation 13D (or
any similar successor regulation) promulgated by the Securities and Exchange
Commission pursuant to the 1934 Act. Beneficial ownership of more than 30% of
an equity security may be established by any reasonable method, but shall be
presumed conclusively as to any person who files a Schedule 13D report with the
Securities and Exchange Commission reporting such ownership. If the
restrictions and forfeitability periods are eliminated by reason of provision
(1), the limitations of this Plan shall not become applicable again should the
person cease to own 30% or more of any equity security of the Company.
For purposes of this Section 11.12, "Continuing Directors" are
directors (a) who were in office prior to the time any of provisions (1), (2)
or (3) occurred or any person publicly announced an intention to acquire 20% or
more of any equity security of the Company, (b) directors in office for a
period of more than two years, and (c) directors nominated and approved by the
Continuing Directors.
11.13. Definition of Fair Market Value. Whenever "Fair
Market Value" of Common Stock shall be determined for purposes
of this Plan, it shall be determined by reference to the last sale
price of a share of Common Stock on the principal United States
Securities Exchange registered under the 1934 Act on which the Common
Stock is listed (the "Exchange"), or, on the National Association of
Securities Dealers, Inc. Automatic Quotation System (including the
National Market System) ("NASDAQ") on the applicable date. If the
Exchange or NASDAQ is closed for trading on such date, or if the Common
Stock does not trade on such date, then the last sale price used shall
be the one on the date the Common Stock last traded on the Exchange or
NASDAQ.
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<TABLE>
<S><C>
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CASINO DATA SYSTEMS
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- JULY 11, 1996
The undersigned, a stockholder of Casino Data Systems, hereby appoints Steven A. Weiss and Russell C. Mix, and each of
them, as proxies, with full power of substitution, to vote on behalf of the undersigned the number of shares which the
undersigned is then entitled to vote, at the Annual Meeting of Stockholders of Casino Data Systems to be held at the Mirage
Hotel & Casino, Las Vegas, Nevada, on Thursday, July 11, 1996, at 2:00 p.m. Pacific Daylight Time, and at any and all
adjournments thereof, with all the powers which the undersigned would possess if personally present, upon:
(1) Election of Directors:
/ / FOR all nominees (except as marked to the / / WITHHOLD AUTHORITY (to vote for all nominees
contrary below) listed below)
Steven A. Weiss, G. Jack Kiland, Diana L. Bennett, Russell C. Mix,
William M. Mower, Phil Bryan, Karl K. Hoagland III, Daniel N. Copp
INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name on the space
provided below.
-------------------------------------------------------------------------------------------------------------
(2) To approve an amendment to the Company's 1993 Stock Option and Compensation Plan to increase the number
of shares of Common Stock reserved for issuance thereunder by 675,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
(3) Upon such other business as may properly come before the meeting or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
AND FOR PROPOSAL 2
(Continued, and TO BE COMPLETED AND SIGNED on the reverse side)
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
(Continued from other side)
The undersigned hereby revokes all previous proxies relating to the shares covered hereby and acknowledges receipt of the
Notice and Proxy Statement relating to the Annual Meeting of Stockholders.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. When properly executed, this proxy will be voted on the
proposals set forth herein as directed by the stockholder, but if no direction is made in the space provided, this proxy will
be voted FOR the election of all nominees for director and FOR Proposal 2.
Dated ____________________________________________ , 1996
_________________________________________________________
_________________________________________________________
(Stockholder must sign exactly as the name appears at left. When signed as a corporate officer, executor, administrator,
trustee, guardian, etc., please give full title as such. Both joint tenants must sign.)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
