<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] 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 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:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
<PAGE> 2
[CASINO DATA SYSTEMS LOGO]
3300 Birtcher Drive
Las Vegas, Nevada 89118
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 31, 1998
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 Corporate Offices of the Company located at 3300 Birtcher Drive,
Las Vegas, Nevada, on Friday, July 31, 1998, at 11:00 a.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 five 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 750,000 shares.
3. To approve the creation of the Company's 1998 Employee Stock
Purchase Plan and the reservation for issuance thereunder of 500,000 shares
of the Company's common stock.
4. 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
June 23, 1998 (the "Record Date") 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
/s/ Steven A. Weiss
Chairman of the Board of Directors
Las Vegas, Nevada
July 6, 1998
<PAGE> 3
PROXY STATEMENT
CASINO DATA SYSTEMS
3300 BIRTCHER DRIVE
LAS VEGAS, NEVADA 89118
-------------------------------------
PROXY STATEMENT
-------------------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JULY 31, 1998
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 31,
1998. Only stockholders of record at the close of business on June 23, 1998 (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 July 6, 1998.
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. Unless instructions to the contrary
are provided, the proxy will be voted in favor of: (a) the proposal to amend the
Company's 1993 Stock Option and Compensation Plan to increase the number of
shares of common stock issuable thereunder by 750,000 shares, (b) the proposal
to approve the creation of the Company's 1998 Employee Stock Purchase Plan and
the reservation for issuance thereunder of 500,000 shares of the Company's
common stock, and (c) the election of each of the director nominees named in the
proxy. The presence at the meeting of a stockholder will not revoke his or her
proxy. A proxy may be revoked at any time before it is voted by written notice
to the Company, addressed to Steven A. Weiss, Chairman of the Board of
Directors, at the principal offices of the Company or by giving written notice
to the Company at the meeting; provided, however, that 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 18,065,897 shares were outstanding as of the close of
business on June 23, 1998. 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
the Record Date, 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 five percent
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.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ --------- -------
<S> <C> <C>
Steven A. Weiss (2)......................................... 2,729,217(3) 15.0%
Howard Yenke................................................ -- --
Diana L. Bennett............................................ 23,025(4) *
William M. Mower............................................ 34,875(5) *
Phil E. Bryan............................................... 8,438(6) *
Thomas E. Gardner........................................... -- --
Russell C. Mix.............................................. 157,696(7) *
Daniel N. Copp.............................................. 8,750(8) *
All current executive officers, directors and director
nominees, as a group (6 persons).......................... 2,795,555(9) 15.3%
</TABLE>
- -------------------------
* Less than one percent.
(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 the Company's
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 126,062 shares that are exercisable within 60
days. Also includes 453,225 shares which are held by a trust for the benefit
of Mr. Weiss' spouse and 353,024 shares which are held by a trust of which
Mr. Weiss' spouse is one of the beneficiaries. Mr. Weiss disclaims
beneficial ownership of these shares.
(4) Includes options to purchase 22,500 shares that are exercisable within 60
days.
(5) Includes options to purchase 34,875 shares that are exercisable within 60
days.
(6) Includes options to purchase 8,438 shares that are exercisable within 60
days.
(7) Includes options to purchase 157,641 shares that are exercisable within 60
days.
(8) Based upon most recent Form 4 on file with the Securities and Exchange
Commission.
(9) Includes options to purchase 191,875 shares that are exercisable within 60
days.
2
<PAGE> 5
ELECTION OF DIRECTORS
Five 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. During 1997, Daniel N. Copp resigned and is
not standing for re-election. During 1998, Russell C. Mix resigned and is not
standing for re-election. William M. Mower has chosen not to stand for
re-election. The Board of Directors proposes for election the nominees listed
below. All of the persons listed below have consented to serve as a director, if
elected. 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 five 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.
<TABLE>
<S> <C>
Steven A. Weiss Chairman of the Board
Howard W. Yenke Chief Executive Officer
Diana L. Bennett President and Chief Operating Officer
Phil E. Bryan Director
Thomas E. Gardner Director
</TABLE>
STEVEN A. WEISS, age 35, founded the Company in June 1990 and has served as
the Company's Chairman of the Board since from June 1990 to August 1994, and
from November 1994 to the present. Mr. Weiss has served as an executive officer
of the Company since its inception, including as Chief Executive Officer and
currently serves as President of its Research and Development Division. 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.
HOWARD W. YENKE, age 61, joined the Company as Chief Executive Officer in
June 1998, and has served as a Director since June 1998. Prior to joining the
Company, Mr. Yenke served as President and Chief Executive Officer of Silent
Systems, Inc., a private company providing thermal and acoustic products to the
personal computer industry, a position he began in November 1997. From June 1996
to November 1997, Mr. Yenke served as President, Chief Executive Officer and
Director of Lanart Corporation, a privately held company providing LAN
connectivity solutions to the computer industry. Mr. Yenke was also President
and CEO of Enterprise Development Corporation of Palm Beach County, a
not-for-profit consulting services company from November 1994 to November 1996.
During the same time period, Mr. Yenke was President, CEO and Director of
Technology Deployment Holdings Company, Inc., a for profit investment firm. From
May 1994 to October 1994, Mr. Yenke served as President, CEO and Director of
ARCO Computer Products Company, a privately held company providing PC peripheral
products to the computer industry. From 1989 to 1994, Mr. Yenke was employed by
Boca Research, Inc. in several capacities including President and CEO. Prior
thereto, Mr. Yenke was employed by IBM Corporation for over 25 years in various
executive and management positions. Mr. Yenke also sits on the boards of
directors of Checkmate Electronics, Inc., Access Solutions International, Inc.,
and Communications Systems International.
DIANA L. BENNETT, age 49, has served as Chief Operating Officer since
January 1996, as President since May 1996, and as a Director since 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 in 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.
3
<PAGE> 6
PHIL E. BRYAN, JR., age 59, has served as Director of the Company since
April 1995. Mr. Bryan also served as Chief Executive Officer of the Company from
April 1995 to April 1996. Mr. Bryan became the Chief Operating Officer,
President and a director 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.
THOMAS E. GARDNER, age 60, is President of LJT Associates, a consulting
firm which provides strategic planning, financial and management services to
corporations and assists investors in late stage venture capital opportunities
and acquisitions, a position he has held since 1993. From 1990 to 1992, Mr.
Gardner was Director Treasury Management Information with BankBoston
Corporation. From 1979 to 1990 Mr. Garner was Senior Vice President and a member
of the senior management committee with a predecessor bank, Rhode Island
Hospital Trust National Bank, and acted as head of Treasury and Chairman of the
Asset and Liability Management Committee. Mr. Gardner is Chairman of the Board
of Directors of Access Solutions International, Inc. and a Director of Mossberg
Industries, Inc.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by each executive officer of
the Company whose salary during the year ended December 31, 1997, exceeded
$100,000, or would have exceeded $100,000 had they been employed by the Company
at the end of the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
FISCAL --------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION($)
--------------------------- ------ --------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Steven A. Weiss,................... 1997 300,000 -- -- 9,600(5)
Chairman of the Board 1996 279,500 -- -- 9,600(5)
1995 227,153 -- -- 9,600(5)
Kenneth S. Hardesty,............... 1997 14,423 -- 285,000 30,000(6)
Chief Executive Officer(1)
Diana L. Bennett,.................. 1997 200,000 -- 50,000 9,600(5)
President and Chief Operating 1996 160,778 45,000 55,000 9,563(5)
Officer(2)
Daniel N. Copp,.................... 1997 117,699 -- -- --
Chief Executive Officer(3)
Russell C. Mix,.................... 1997 138,382 -- -- --
Vice President, General 1996 130,000 24,000 29,000 9,600(5)
Counsel and Secretary(4) 1995 121,344 15,000 62,016 9,600(5)
</TABLE>
- -------------------------
(1) Mr. Hardesty served as the Company's Chief Executive Officer from December,
1997 to May 15, 1998.
(2) Ms. Bennett became an executive officer of the Company in January, 1996.
(3) Mr. Copp served as the Company's Chief Executive Officer from January 1997
to August, 1997.
(4) Mr. Mix resigned from his employment with the Company in November, 1997.
(5) Represents automobile allowances provided to the Company's executive
officers.
(6) Represents a relocation expense allowance paid pursuant to Mr. Hardesty's
employment agreement with the Company.
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 the
last fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE OF ASSUMED
--------------------------------------------------------- ANNUAL RATES
NUMBER OF PERCENTAGE OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTION EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Weiss............. -- -- -- -- -- --
Kenneth S. Hardesty......... 285,000 3.75 11-27-07 672,131 1,703,312
Diana L. Bennett............ 50,000 (3) (3) 127,791 323,848
Daniel N. Copp.............. -- -- -- -- -- --
Russell C. Mix.............. -- -- -- -- -- --
</TABLE>
- -------------------------
(1) All options were granted at a price equal to the fair market value of the
Company's common stock on the date of grant.
(2) Amounts 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 percent and 10 percent rates set by the Securities and Exchange
Commission, and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
(3) On January 2, 1997, pursuant to her employment agreement with the Company,
Ms. Bennett received a ten-year option grant for 30,000 shares at an
exercise price of $6.88 per share. In November 1997, this option was
repriced at $3.44 per share. Ms. Bennett also received a ten-year option
grant for 20,000 shares on September 23, 1997; this option is exercisable at
$5.00 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes information with respect to options held by
the executive officers named in the Summary Compensation Table and the value of
the options held by such persons as of the end of the last fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Weiss........... -- -- 126,062 19,500 -- --
Kenneth S. Hardesty....... -- -- -- 285,000 -- --
Diana L. Bennett.......... -- -- 22,500 52,500 -- --
Daniel N. Copp............ -- -- -- -- -- --
Russell C. Mix............ -- -- 157,641 -- -- --
</TABLE>
6
<PAGE> 9
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE LENGTH OF
UNDERLYING STOCK AT PRICE AT NEW ORIGINAL OPTION
OPTION TIME OF TIME OF EXERCISE TERM REMAINING AT
NAME DATE REPRICED REPRICING REPRICING PRICE DATE OF REPRICING
---- ------- ---------- --------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Weiss,................ 7-29-97 67,500 3.44 7.33 3.44 9 years
Chairman of the Board(1) 7-29-97 39,000 3.44 15.17 3.44 9 years
7-29-97 13,750 3.44 12.75 3.44 9 years
Diana L. Bennett,............... 7-29-97 25,000 3.44 15.00 3.44 9 years
President and Chief 7-29-97 30,000 3.44 6.88 3.44 10 years
Operating Officer(2)
Russell C. Mix,................. 7-29-97 13,500 3.44 6.11 3.44 7 years
Secretary(3) 7-29-97 13,500 3.44 10.44 3.44 7 years
7-29-97 50,625 3.44 7.33 3.44 8 years
7-29-97 28,125 3.44 12.00 3.44 8 years
</TABLE>
- -------------------------
(1) On the date of the repricing of these options, Mr. Weiss' options to
purchase 39,000 shares of the Company's common stock at an exercise price of
$15.17 per share were terminated.
(2) On the date of the repricing of these options, Ms. Bennett's options to
purchase an additional 30,000 shares of the Company's common stock at an
exercise price of $16.67 per share were terminated.
(3) On the date of the repricing of these options, options to purchase 24,000
and 5,000 shares of the Company's common stock at exercise prices of $15.17
and $15.00 per share, respectively, were terminated.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Weiss that
expires on December 31, 1998, is terminable by the Company or Mr. Weiss upon
notice. The agreement provides for an annual base 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.
On June 3, 1998, the Company entered into an employment agreement with
Howard Yenke that expires on June 3, 2000, and is terminable by either the
Company or Mr. Yenke upon notice. The agreement provides for an annual base
salary of $250,000. Mr. Yenke 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. Yenke under certain
circumstances, including in the event of a change in control of the Company.
The Company entered into an employment agreement with Ms. Bennett that
expires on December 31, 1998, and is terminable by the Company or Ms. Bennett
upon notice. The agreement provides for an annual salary of $200,000. Ms.
Bennett 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 Ms. Bennett 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 currently consists of Messrs. William
M. Mower, and Phil E. Bryan. William M. Mower's professional association is a
partner of Maslon, Edelman, Borman & Brand, LLP, which has rendered and will
continue to render legal services to the Company.
7
<PAGE> 10
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 or her 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, 1997 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.
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
effect 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.
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%), payable quarterly, dependent upon the
Company's earnings performance for such fiscal year.
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,
8
<PAGE> 11
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.
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 deductibilities 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
PHIL E. BRYAN
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission (the "SEC") 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
from its initial public offering on April 5, 1993 to December 31, 1997, to the
S&P 500 Stock Index and "peer group" indices created by the Company over the
same period. The Company has elected to change the "peer group" in order to more
accurately reflect its stock's performance against its competitors.
The "peer group" index that the Company used in the immediately preceding
fiscal year (the "Fiscal 1996 Peer Group") was comprised of the following gaming
equipment suppliers whose common stock was publicly traded as of April 5, 1993:
Acres Gaming, Inc., Alliance Gaming Corporation, GTech Holdings Corp.,
International Game Technology, Shuffle Master, Inc., Video Lottery Technologies,
Inc. and WMS Industries. Two additional competitors that the Company believes
are also more representative of its industry have been added. The new "peer
group" index (the "Fiscal 1997 Peer Group") currently includes Acres Gaming,
Inc., Alliance Gaming Corporation, GTech Holdings Corp., International Game
Technology, Shuffle Master, Inc., Video Lottery Technologies, Inc., WMS
Industries. Anchor Gaming and Silicon Gaming, Inc.
In the graph, the presentation assumes that the value of an investment in
each of the Company's common stock, the S&P 500 Index, and the two peer group
indices was $100 on April 5, 1993, and that any dividends paid were reinvested
in the same security.
<TABLE>
<CAPTION>
Measurement Period Casino Data Fiscal 1996 Fiscal 1997
(Fiscal Year Covered) Systems Peer Group Peer Group S&P 500
<S> <C> <C> <C> <C>
4/5/93 100.00 100.00 100.00 100.00
12/31/93 525.00 125.07 125.07 107.63
12/30/94 315.00 74.64 77.30 109.28
12/29/95 750.00 80.97 85.95 150.35
12/31/96 309.38 118.51 128.37 184.93
12/31/97 129.38 151.48 164.40 246.61
</TABLE>
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<PAGE> 13
CERTAIN TRANSACTIONS
William M. Mower, a director of the Company, is the sole shareholder of a
professional association that is a partner of Maslon, Edelman, Borman & Brand,
LLP, which has rendered and will continue to render legal services to the
Company.
In November, 1997, Russell C. Mix, a director of the Company, resigned his
position as Senior Vice President, General Counsel and Secretary. Upon his
resignation, the Company entered into a severance and consulting agreement with
Mr. Mix. The consulting arrangement provided for up to a six (6) month
consulting period at a monthly rate equivalent to his then current monthly
salary. At the termination of the consulting period, the severance agreement
provided for a severance payment equivalent to six (6) months of Mr. Mix's
salary.
A shareholder and former director of the Company and the spouse of the
Chairman of the Company (collectively the "Principals"), are majority
shareholders in Kiland Distributing Corporation ("KDC"), a distributor of the
Company's products in 1997. Prior to the third quarter of 1997, when the Company
opened its own offices in Minnesota, the Company utilized KDC for substantially
all sales in the Midwest region of the United States. During the nine (9) months
ended September 30, 1997, the Company made sales to KDC of approximately
$169,000. In September, 1997, the Company and KDC reached an agreement regarding
the settlement of accounts receivable of $3,059,497 for payment of approximately
$2,400,000 from KDC to the Company. Settlement included the transfer of
substantially all of KDC's assets to the Company which included cash, accounts
receivables and fixed assets. The settlement also included forgiveness of
certain accounts payable from the Company to KDC and the execution of an
unsecured Promissory Note in the amount of $144,000 from the Principals to the
Company. The Promissory Note bore interest at the rate of 10% per annum and has
been fully repaid. Concurrent with the settlement, the Company terminated its
business relationship with KDC.
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<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, in April, 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 stockholder approval, 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. The stockholders approved this amendment to the Plan on July 11, 1996.
Subject to the approval of the stockholders, in March, 1998, the Board of
Directors further amended the plan to increase the number of shares of common
stock reserved issuance pursuant to the Plan by 750,000 shares. The brief
summary of the Plan which follows is qualified in its entirety to the complete
text, a copy of which is attached to this Proxy Statement as Exhibit A.
GENERAL
The purposes 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 2,775,000 shares, subject to
adjustment in the event of a merger, recapitalization or other corporate
restructuring. This amount represents approximately 14.7 percent of the current
total issued and outstanding shares of common stock.
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 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.
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<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 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
stock shall have all of the right of a stockholder as to those shares.
STOCK AWARDS
Stock awards consist of the grant 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.
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<PAGE> 16
CASH AWARD
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.
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 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 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
modify the requirements as to eligibility for participation in the Plan, or (d)
materially increase the benefits accruing 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 the general terms 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 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
Company 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 aggregated purchase price of the shares of common stock as to which
the option is exercised and the aggregate fair market 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 Company will not be entitled to a federal income tax deduction in
14
<PAGE> 17
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.
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 an 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 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 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 Board recommends that Shareholders vote in favor of this proposal.
PROPOSAL TO APPROVE THE CASINO DATA SYSTEMS
1998 EMPLOYEE STOCK PURCHASE PLAN
On March 16, 1998, the Board of Directors of the Company adopted the 1998
Employee Stock Purchase Plan (the "1998 Purchase Plan"), subject to approval by
the Company's stockholders. The 1998 Purchase Plan is intended to create an
identity of interest between the Company's employees and shareholders by
providing employees with an incentive to purchase shares of the Company's common
stock. Under the terms of the 1998 Purchase Plan, employees may acquire shares
of the Company's stock at a 15 percent discount from their fair market value. In
addition, the 1998 Purchase Plan provides a mechanism whereby employees may pay
for their share purchases with periodic deductions from their payroll. The
complete text of the 1998 Purchase Plan is attached hereto as Appendix "B". In
the event that stockholder approval is not received, the 1998 Purchase Plan will
be terminated.
SCOPE
The 1998 Purchase Plan authorizes the issuance of up to 500,000 shares of
common stock to eligible participants. The 1998 Purchase Plan does not have a
stated term.
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<PAGE> 18
OFFERINGS UNDER THE 1998 PURCHASE PLAN
Each year, the Company will offer participants the option to purchase
shares of common stock through voluntary payroll deductions for up to 10 percent
of their base compensation. Substantially all of the Company's employees will be
eligible to participate in the 1998 Purchase Plan. Under the 1998 Purchase Plan,
the option exercise price for shares of common stock will be eighty-five percent
of the closing price of the Company's common stock as reported on Nasdaq (or any
other national securities exchange) on the first or the last day of each six
month Offering Period (as defined the 1998 Purchase Plan), whichever is lower.
Employees may acquire up to that number of full shares purchasable at the option
exercise price with ten percent of their compensation, subject to certain
limitations. Shares of the Company's common stock are purchased for the account
of each participant at the conclusion of the application Offering Period with
funds deducted from the participant's payroll during such period.
ELIGIBILITY
Subject to certain limitations involving the magnitude of (i) existing
beneficial ownership of the Company's common stock, and (ii) options to acquire
the Company's common stock previously granted during the year under all benefit
plans sponsored by the Company, all employees of the Company and its
subsidiaries who have completed 90 days of employment are eligible to
participate in the 1998 Purchase Plan.
ADMINISTRATION
The 1998 Purchase plan is administered by a committee established for such
purpose by the Company's Board of Directors. Expenses of administering the 1998
Purchase Plan, including interest paid on payroll deduction accounts that are
refunded to participants, are borne by the Company.
ADJUSTMENTS; TERMINATION; AND AMENDMENT
In the event of any change in the Company's capitalization, including any
merger, consolidation, acquisition or stock split, appropriate adjustments will
be made to the number and class of shares available under the 1998 Purchase
Plan, the price per share and the associated share purchase rights. The Board of
Directors may terminate or amend the 1998 Purchase Plan; provided, however, that
in the absence of stockholder approval, the Board may not: (i) increase the
maximum number of shares which may be issued under the Plan; or (ii) amend the
requirements as to the class of employees eligible to purchase stock under the
1998 Purchase Plan or permit the members of the Committee to purchase stock
under the 1998 Purchase Plan.
TAX TREATMENT OF THE PARTICIPATING EMPLOYEES
Participating employees will not recognize income for federal income tax
purposes either upon enrollment of the 1998 Purchase Plan or upon the purchase
of shares. All tax consequences are deferred until a participating employee
sells the shares, disposes of the shares by gift, or dies.
If shares are held for more than one year after the date of purchase and
more than two years from the applicable Exercise Date, or if the participating
employee dies while owning the shares, the participating employee realizes
ordinary income on a sale (or a disposition by way of gift or upon death) to the
extent of the lesser of (1) 15 percent of the fair market value of the shares;
or (2) the actual gain (the amount by which the market value of the shares on
the date of sale, gift or death exceeds the purchase price). All additional gain
upon the sale of shares is treated as long-term capital gain. If the shares are
sold and the sale price is less than the purchase price, there is no ordinary
income and the participating employee has a long-term capital loss for the
difference between the sale price and the purchase price.
If the shares are sold or are otherwise disposed of including by way of
gift (but not death, bequest or inheritance) (in any case a "disqualifying
disposition") within either the one year or the two year holding periods
described above, the participating employee realizes ordinary income at the time
of sale or other disposition, taxable to the extent that the fair market value
of the shares at the date of purchase is greater than
16
<PAGE> 19
the purchase price. This excess will constitute ordinary income (currently
subject to withholding) in the year of the sale or other disposition even if no
gain is realized on the sale or if a gratuitous transfer is made. The
difference, if any, between the proceeds of sale and the fair market value of
the shares at the date of purchase is a capital gain or loss.
TAX TREATMENT OF THE COMPANY
The Company will be entitled to a deduction in connection with the
disposition of shares acquired under the 1998 Purchase Plan only to the extent
that the participating employee recognizes ordinary income on a disqualifying
disposition of the shares. The Company will treat any transfer of record
ownership of shares as a disposition, unless it is notified to the contrary. In
order to enable the Company to learn of disqualifying dispositions and ascertain
the amount of the deductions to which it is entitled, participating employees
will be required to notify the Company in writing of the date and terms of any
disposition of shares purchased under the 1998 Purchase Plan.
The above discussion is intended to summarize the applicable provisions of
the Internal Code that are in effect as of the date hereof. The tax consequences
of participating in the 1998 Purchase Plan may vary with respect to individual
situations. Accordingly, employees should consult with their tax advisors in
regard to the tax consequences of participating in the 1998 Purchase Plan as to
both federal and state income tax considerations.
PROXIES AND VOTING
The Board recommends that Shareholders vote in favor of the 1998 Purchase
Plan.
PROPOSALS OF STOCKHOLDERS
All proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders of the Company must be received by the Company at its
executive offices on or before December 21, 1998.
OTHER MATTERS
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held six meetings and took one action in writing
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.
During 1997, the Company's audit committee consisted of Messrs. William M.
Mower and Phil E. Bryan. 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 met twice during the last fiscal year.
The Company's compensation and stock option committee, which consisted of
Messrs. William M. Mower and Phil E. Bryan, held no meetings during the last
fiscal year, but took action in writing. 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.
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<PAGE> 20
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, 1997, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were satisfied.
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.
The Board of Directors
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<PAGE> 21
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 2,775,000 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
A-1
<PAGE> 22
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 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.
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(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.
(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
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(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.
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
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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.
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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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
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Incentive that the right to make Elections shall not apply to such
Incentive. An Election is irrevocable.
(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.
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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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EXHIBIT B
CASINO DATA SYSTEMS
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Casino Data Systems' Employee Stock Purchase Plan (the "Plan") is
intended to provide a method whereby Employees of Casino Data Systems and its
subsidiaries (hereinafter jointly referred to as the "Company") will have an
opportunity to acquire an ownership interest (or increase an existing ownership
interest) in the Company through the purchase of shares of the Common Stock of
Casino Data Systems. It is the intention of the Company that the Plan qualify as
an "Employee stock purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"). The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. DEFINITIONS
(a) "Employee" means any person who is customarily employed more than
twenty (20) hours per week and more than five (5) months in a calendar year by
the Company. For purposes of this Section 2(a), the employment relationship
shall be deemed uninterrupted while the Employee is on sick leave or other leave
of absence approved by the Company. Where the period of leave exceeds ninety
(90) days and the Employee's right to re-employment is not guaranteed, either by
statute or by contract, for purposes of this Section 2(a), the employment
relationship will terminate on the ninety-first (91st) day of such leave,
thereby terminating such Employee's participation in the Plan.
(b) "Board" means the Board of Directors of Casino Data Systems.
(c) "Committee" means a committee consisting of the Executive Vice
President-Chief Financial Officer, Vice-President-Finance, and Corporate Counsel
(or replacement executives holding similar or other positions, determined within
the discretion of the Board of Directors).
(d) "Common Stock" means the common stock, no par value per share, of
Casino Data Systems.
(e) "Compensation" means, for the purposes of any offering pursuant to this
Plan, the employee's pre-tax base pay in effect as of the Enrollment Date (as
hereinafter defined). Compensation shall not include any deferred compensation
other than contributions by an individual through a salary reduction agreement
to a cash or deferred plan pursuant to Section 401(k) of the Code or to a
cafeteria plan pursuant to Section 125 of the Code.
(f) "Enrollment Date" shall mean the first day of each Offering Period.
(g) "Exercise Date" shall mean the last day of each Offering Period.
(h) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation, the NASDAQ National
Market or the NASDAQ SmallCap Market of the NASDAQ Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day on the date of such determination,
as reported in The Wall Street Journal or such other source as the Board
deems reliable; or
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the Common
Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Committee.
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(i) "Offering Period" shall mean a period of approximately six (6) months
during which an Option granted pursuant to the Plan may be exercised, commencing
on the first Trading Day on or after July 1 and January 1, each year, and
terminating on the last Trading Day in the respective period ending the
following December 31 and June 30 of each year; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the last Trading
Day on or before December 31, 1998. The duration of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(j) "Plan" shall mean this Employee Stock Purchase Plan.
(k) "Option" shall mean a right to purchase shares of Common Stock from the
Company at a price per share equal to the Purchase Price.
(l) "Purchase Price" shall mean an amount equal to eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock on the Enrollment Date
or the Exercise Date, whichever is lower.
(m) "Reserves" shall mean the number of shares of Common Stock covered by
each Option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under Option.
(n) "Subsidiary" shall mean any present or future corporation which is or
would constitute a "subsidiary corporation" as that term is defined in Section
424 of the Code.
(o) "Trading Day" shall mean a day in which national stock exchanges and
the NASDAQ Systems are open for trading.
3. ELIGIBILITY
(a) Participation in the Plan is voluntary. Participation in any one or
more of the offerings under the Plan shall neither limit, nor require,
participation in any other offering except as otherwise provided herein.
(b) Each Employee employed by the Company ninety (90) days or more on a
given Enrollment Date shall be eligible to participate in the Plan. No Employee
shall be granted an Option under the Plan:
(i) if, immediately after the grant, Employee would own more than five
percent (5%) of the total combined voting power or value of all classes of
stock of Casino Data Systems or any subsidiary thereof; all of Employee's
Options to acquire stock will be deemed to have been exercised for purposes
of determining both the number of shares owned by Employee and determining
the total number of shares issued and outstanding; or
(ii) if such Employee's rights to purchase stock under all Code
Section 423 stock purchase plans of the Company exceed $25,000 of the fair
market value of the stock (determined at the time such Option is granted)
for any calendar year in which such Option is outstanding; for purposes of
this Section, the rules of Section 423(b)(8) of the Code shall apply.
Further, no Employee may invest more than ten percent (10%) of his or her
Compensation in any Offering.
4. OFFERING DATES
The Plan shall be implemented by consecutive quarterly Offering Periods
with new Offering Periods commencing on the first Trading Day on July 1 and
January 1, each year, or on such other date as the Committee shall determine,
and continuing thereafter until terminated in accordance with Section 20 hereof;
provided, however, that the first Offering Period under the Plan shall commence
with the first Trading Day on or after the date on which the Company's
Registration Statement becomes effective with the Securities and Exchange
Commission and ending on the last Trading Day on or before December 31, 1998.
The Committee shall have the power to change the duration of Offering Periods
(including the commencement dates hereof) with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected
thereafter.
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5. PARTICIPATION
Any eligible Employee may become a participant by completing and delivering
the Subscription Agreement authorizing payroll deduction in the form of EXHIBIT
"A" to the Plan at least ten (10) days prior to an applicable Enrollment Date,
as determined by the Committee pursuant to Section 4. Participation in any one
or more of the Offerings under the Plan shall neither limit, nor require,
participation in any other Offering. However, an Employee who participates in
the Plan during one Offering will be deemed to have elected to participate in
each subsequent Offering, subject to eligibility requirements of Section 3 and
the withdrawal rights described in Section 10 hereof. Such Employee will also be
deemed to have authorized the same payroll deductions under Section 6 hereof for
each subsequent Offering; provided, however, that, during the Offering Period or
to each new Offering, the Employee may elect to change his or her payroll
deductions applicable to the next succeeding Offering Period by submitting a new
Subscription Agreement. Except as provided in Section 6(d) or 10, a Employee
will be permitted to change his or her payroll deduction only during an Offering
Period.
6. PAYROLL DEDUCTIONS
(a) At the time an Employee files his or her authorization for a payroll
deduction, he or she shall elect to have after-tax deductions made from his or
her compensation on each payday during any Offering in which he or she is an
Employee at a specified dollar amount: said dollar amount shall be in whole
dollars and may be any amount between a minimum of $5.00 and a maximum
percentage of ten percent (10%) of an Employee's Compensation as determined on
the applicable Offering Enrollment Date, subject to the eligibility limitations
set forth in Section 3(b).
(b) Payroll deductions for an Employee shall commence on the applicable
Offering Enrollment Date when the authorization for a payroll deduction becomes
effective and shall end on the Exercise Date of the Offering Period to which
such authorization is applicable unless sooner withdrawn or terminated by the
Employee as provided in Sections 10 or 11.
(c) All payroll deductions made for an Employee shall be credited to the
Employee's account under the Plan and shall be withheld in whole percentages
only. An Employee may not make any separate cash payment into such account.
(d) An Employee may discontinue payroll deductions at any time during the
applicable Offering Period; provided, however, that in the event of a withdrawal
of payroll deductions pursuant to Section 10, no less than twenty-one (21) days
written notice of withdrawal must be provided to the Company before the Offering
Exercise Date. The Management Committee may, in its discretion, limit the number
of participation rate changes during any Offering Period. The change in rate
shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new Subscription Agreement
unless the Company elects to give effect to the change in participation at an
earlier date. An Employee's Subscription Agreement shall remain in effect for
successive Offering Periods unless the Employee withdraws pursuant to Section 10
or terminates his or her employment as provided in Section 11 hereof.
(e) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, an Employee's payroll
deductions may be decreased to zero percent (0%) at any time during an Offering
Period. Payroll deductions shall recommence at the rate provided in such
Employee's Subscription Agreement at the beginning of the first Offering Period
which is scheduled to end in the following calendar year, unless the Employee's
employment is terminated as provided in Section 11 hereof.
(f) Employees must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, arising upon the exercise
of the Option or disposition of the underlying Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the Employee's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
B-3
<PAGE> 32
7. GRANTING OF OPTION
On the Enrollment Date of each Offering Period, an eligible participating
Employee shall be deemed to have been granted an Option to purchase on the
Exercise Date, a maximum number of whole shares of the Common Stock equal to an
amount determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Employee's account as of the
Exercise Date by the applicable Purchase Price, subject to Section 3(b) hereof.
Exercise of the Option shall occur as provided in Section 8 hereof, unless an
Employee has withdrawn pursuant to Section 10 hereof. The Option shall expire on
the last day of the Offering Period.
8. EXERCISE OF OPTION
Unless an Employee gives written notice to the Company as provided in
Section 10, the Option for the purchase of Common Stock with payroll deductions
made during any Offering will be deemed to have been exercised automatically on
the Exercise Date applicable to such Offering for the purchase of the number of
full shares of Common Stock which the accumulated payroll deductions in his or
her account at the time will purchase at the applicable Option price (but not in
excess of the number of shares for which Options have been granted the Employee
pursuant to Section 7(a), and any excess in his or her account at that time,
will be rolled into the Employee's account to be used for the next Enrollment
Period, unless the Employee withdraws, or his or her participation is terminated
under the Plan provisions in which case any excess will be returned to the
Employee.
9. ALLOCATION OF SHARES PURCHASED
As promptly as possible after the appropriate Exercise Date, the shares
purchased upon exercise of the Options will be allocated to each Employee's plan
account, unless the shares were purchased in the names of individual Employees.
The allocation will be made in whole shares.
10. WITHDRAWAL
(a) An Employee may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her Option under the Plan by giving no less than 21 days advance written notice
of withdrawal to the Company in the form of EXHIBIT "B" to this Plan. All of the
Employee's payroll deductions credited to his or her account shall be paid to
such Employee promptly after receipt of notice of withdrawal and such Employee's
Option for the Offering Period shall be automatically terminated, and no further
payroll deductions for the purchase of shares shall be made for such Offering
Period. If an Employee withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period unless the
Employee delivers to the Company a new Subscription Agreement.
(b) An Employee's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the Employee
withdraws.
11. TERMINATION OF EMPLOYMENT
Upon an Employee ceasing to be an Employee for any reason, he or she shall
be deemed to have elected to withdraw from the Plan and the payroll deductions
credited to such Employee's account during the Offering Period but not yet used
to exercise the Option shall be returned to such Employee; provided, however, in
the case of his or her death, to the person or persons entitled thereto under
Section 16 hereof, and such Employee's Option will terminate effective on the
date Employee ceases employment with the Company.
12. INTEREST
In no event will interest be paid or allowed on any money paid into the
Plan or credited to the account of any Employee.
B-4
<PAGE> 33
13. STOCK
(a) The maximum number of shares of Common Stock available for purchase by
all Employees under the Plan, subject to adjustment upon changes in
capitalization of Casino Data Systems as provided in Section 19, shall be
500,000 shares. Shares of Common Stock available for purchase under the Plan may
be treasury shares, authorized but unissued shares or shares acquired by or on
behalf of the Company in open market purchases. In the event that any Option to
purchase shares has not been exercised by any Employee for any reason prior to
the applicable Exercise Date, or if such Option shall terminate as provided
herein, shares that have not been so purchased hereunder shall again become
available for the purposes of the Plan, but such unpurchased shares shall not be
deemed to increase the aggregate number of shares specified above to be reserved
for purposes of the Plan. If the total number of shares for which Options are
exercised upon any Offering Exercise Date exceeds the maximum number of shares
for the applicable Offering, there will be a pro rata allocation of the shares
available for delivery and distribution in an equitable manner, and the balances
of payroll deductions credited to the account of each Employee under the Plan
will be returned to the Employee.
(b) An Employee will have no interest or voting rights in stock covered by
his or her Option until such Option has been exercised.
(c) Any dividends paid with respect to shares of Common Stock held by the
Plan on behalf of an Employee shall be credited to the account of such Employee.
(d) Subject to applicable prohibited sale or "black out" periods on trading
the Company's stock, imposed by the Committee, Employees and former Employees in
the Plan may cause the Plan to sell shares of Common Stock held in their account
on their behalf as of the fifth (5th) or twentieth (20th) day of any month, or
on the next succeeding business day if any such day is not a business day. The
Employee will be responsible for all fees or commissions in connection with such
sale.
14. ADMINISTRATION
The Plan shall be administered by the Committee. The interpretation and
construction of any provision of the Plan and adoption of rules and regulations
for administering the Plan shall be made by the Committee. Determinations made
by the Committee with respect to any matter or provision contained in the Plan
shall be final, conclusive and binding upon the Company and upon all Employees,
their heirs or legal representatives. Any rule or regulation adopted by the
Committee shall remain in full force and effect unless and until altered,
amended, or repealed by the Committee. The Board has delegated authority for
supervision of the routine administration of the Plan to the Committee. All
inquiries concerning the administration of the Plan or interpretation of the
Plan should be directed to the Committee.
15. TRANSFERABILITY
Neither payroll deductions credited to an Employee's account nor any rights
with regard to the exercise of an Option or to receive shares under the Plan may
be assigned, transferred, pledged or otherwise disposed of in any way (other
than by will, the laws of descent and distribution or as provided in Section 16
hereof) by the Employee. Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds from an Offering Period in accordance
with Section 10 hereof.
16. DESIGNATION OF BENEFICIARY
(a) An Employee may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the Employee's account under the Plan
in the event of such Employee's death subsequent to an Exercise Date on which
the Option is exercised, but prior to delivery to such Employee of such shares
and cash. In addition, an Employee may file a written designation of beneficiary
who is to receive any cash from the Employee's account under the Plan in the
event of such Employee's death prior to exercise of the Option. If an Employee
is married and the designated beneficiary is not the spouse, spousal consent
shall be required for such designation to be effective.
B-5
<PAGE> 34
(b) Such designation of beneficiary may be changed by the Employee at any
time by written notice. In the event of the death of an Employee and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Employee's death, the Company shall deliver such shares and/or cash
to the executor or administrator of the estate of the Employee, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the Employee, or if no
spouse, dependent or relative is known to the Company, then to such other person
as the Company may designate.
17. USE OF FUNDS
All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate the funds generated from such payroll deductions.
18. REPORTS
Individual accounts shall be maintained for each Employee in the Plan.
Statements of account shall be given to participating Employees at least
annually, which statements shall set forth the amounts of payroll deductions,
the Purchase Price, the number of shares purchased and the remaining cash
balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, MERGER
OR ASSET SALE
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
Employee may purchase each Purchase Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
Option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date"), and shall
terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board. The New Exercise Date shall
be before the date of the Company's proposed dissolution or liquidation. The
Committee shall notify each Employee in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the Employee's Option
has been changed to the New Exercise Date and that the Employee's Option shall
be exercised automatically on the New Exercise Date, unless prior to such date
the Employee has withdrawn from the Offering Period as provided in Section 10
hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding Option shall be assumed or an
equivalent Option substituted by the successor corporation or a parent or
subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Committee shall notify each Employee in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the Employee's Option has been changed to the New Exercise Date and
that the Employee's Option
B-6
<PAGE> 35
shall be exercised automatically on the New Exercise Date, unless prior to such
date the Employee has withdrawn from the Offering Period as provided in Section
10 hereof.
20. AMENDMENT OR TERMINATION
(a) The Board of Directors of the Company may, at any time and for any
reason, terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect Options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 19
hereof, no amendment may make any change in any Option theretofore granted which
adversely affects the rights of any Employee. To the extent necessary to comply
with Section 423 of the Code (or any successor rule or provision of any other
applicable law, regulation or stock exchange rule), the Company shall obtain
shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
Employee's rights may be considered to have been "adversely affected," the Board
(or its committee) shall be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by an Employee in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Employee properly correspond with amounts withheld form the Employee's
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.
21. NOTICES
All notices or other communications by an Employee to the Company under or
in connection with the Plan shall be deemed to have duly given when received in
the form specified by the Company at the location, or by the person, designated
by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued with respect to an Option unless the exercise of
such Option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN
The Plan shall become effective upon the earlier to occur of its adoption
by the Board of Directors or its approval by the shareholders of the Company. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 20 hereof.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD
To the extent permitted by any applicable laws, regulations, or stock
exchange rules if the Fair Market Value of the Common Stock on any Exercise Date
in an Offering Period is lower than the Fair Market Value of the Common Stock on
the Enrollment Date of such Offering Period, then all Employees in such Offering
Period shall be automatically withdrawn from such Offering Period immediately
after the exercise of their Option on such Exercise Date and automatically
re-enrolled in the immediately following Offering Period as of the first day
thereof.
B-7
<PAGE> 36
CASINO DATA SYSTEMS
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--JULY 31, 1998
The undersigned, a stockholder of Casino Data Systems (the
"Company"), hereby appoints Steven A. Weiss and Bruce W. Benson, 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 the Stockholders of
Casino Data Systems to be held at the corporate offices of the Company
located at 3300 Birtcher Drive, Las Vegas, Nevada, on Friday, July 31,
1998, at 11:00 a.m., and any adjournments or postponements thereof, upon
matters set forth below, with all the powers which the undersigned would
possess if personally present:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS:
FOR all nominees [ ] WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
(except as marked to the contrary below)
</TABLE>
Nominees for directorships, each for a one-year term:
STEVEN A. WEISS, HOWARD W. YENKE, DIANA L. BENNETT, PHIL E. BRYAN AND
THOMAS E. GARDNER
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided below.)
------------------------------------------------------------------------
2. APPROVAL OF 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 750,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF THE CREATION OF THE COMPANY'S 1998 EMPLOYEE STOCK
PURCHASE PLAN AND THE RESERVATION FOR ISSUANCE THEREUNDER OF 500,000
SHARES OF THE COMPANY'S COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Upon such other business as may properly come before the meeting and
any adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSALS TO
AMEND THE COMPANY'S 1993 STOCK OPTION AND COMPENSATION PLAN, AND TO
CREATE THE COMPANY'S 1998 EMPLOYEE STOCK OPTION PLAN, AND FOR ALL THE
NOMINEES TO THE BOARD OF DIRECTORS
(Continued, and TO BE DATED AND SIGNED on the reverse side)
<PAGE> 37
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- --------------------------------------------------------------------------------
(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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. It will be voted on the matters set forth on
the reverse side of this form as directed by the
stockholder, but if no direction is made in the space
provided, it will be voted FOR the proposal to amend the
Company's 1993 Stock Option and Compensation Plan to
increase the number of shares of common stock reserved
for issuance thereunder by 750,000 shares, and FOR the
proposal to create the 1998 Employee Stock Purchase Plan
and the reservation for issuance thereunder of 500,000
shares of the Company's common stock, and FOR the
election of all nominees to the Board of Directors.
Date: , 1998
--------------------------
--------------------------
--------------------------
(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.)
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