SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
SODAK GAMING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO]
SODAK GAMING, INC.
5301 SOUTH HIGHWAY 16
RAPID CITY, SOUTH DAKOTA 57701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 7, 1998
TO THE SHAREHOLDERS OF SODAK GAMING, INC.:
The annual meeting of the shareholders of Sodak Gaming, Inc. (the
"Company") will be held on May 7, 1998, at 10:00 a.m. (MDT), at the Rushmore
Plaza Holiday Inn, 505 N. 5th Street, Rapid City, South Dakota, for the
following purposes:
1. To elect members of the Board of Directors of the Company.
2. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998.
3. To consider and act upon any other business as may properly come
before the meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 20, 1998 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE MEETING PLEASE COMPLETE, SIGN, DATE, AND MAIL
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE IN ORDER TO
SAVE ANY FURTHER SOLICITATION EXPENSE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY,
YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors:
/s/ Michael G. Wordeman,
Michael G. Wordeman,
Chairman of the Board of Directors and
Chief Executive Officer
Dated: April 7, 1998
<PAGE>
[LOGO]
SODAK GAMING, INC.
5301 SOUTH HIGHWAY 16
RAPID CITY, SOUTH DAKOTA 57701
------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1998
The enclosed proxy is solicited by the Board of Directors of Sodak Gaming,
Inc. (the "Company") in connection with the annual meeting of shareholders of
the Company to be held on May 7, 1998, and at any adjournment thereof. The cost
of solicitation, including the cost of preparing and mailing the Notice of
Annual Meeting of Shareholders and this Proxy Statement, will be paid by the
Company. Representatives of the Company may, without cost to the Company,
solicit proxies for the management of the Company by means of mail, telephone,
or personal calls. This Proxy Statement and the enclosed proxy are being mailed
to shareholders on or about April 7, 1998.
A proxy may be revoked before the meeting by giving written notice, in
person or by mail, of revocation to the Secretary of the Company or at the
meeting prior to voting in person. Unless revoked, properly executed proxies in
which choices are not specified by the shareholders will be voted "for" each
item described in this Proxy Statement for which no choice is specified; upon
all other matters, the persons named as proxies shall vote as they deem in the
best interests of the Company. In instances where choices are specified by the
shareholders in the proxy, those proxies will be voted or the vote will be
withheld in accordance with the shareholder's choice. Shares voted as
abstentions on any matter will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
meeting and as unvoted, although present and entitled to vote, for purposes of
determining the approval of each matter as to which the shareholder has
abstained. If a broker submits a proxy which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, those shares will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the meeting, but
will not be considered as present and entitled to vote with respect to such
matters.
Only shareholders of record at the close of business on March 20, 1998 will
be entitled to vote at the meeting or any adjournment thereof. At the close of
business on March 20, 1998, there were issued and outstanding 22,758,408 shares
of common stock of the Company, $0.001 par value (the "Common Stock"), the only
outstanding class of equity securities of the Company. Each shareholder has
cumulative voting rights in the election of directors and is, therefore,
entitled to (i) give one nominee a number of votes equal to the number of
directors to be elected (six) multiplied by the number of votes to which such
shareholder is entitled, or (ii) distribute the same number of votes among as
many nominees as such shareholder deems advisable. If no shareholder exercises
its right to cumulate
1
<PAGE>
votes, then directors will be elected by a majority vote with each share of
Common Stock entitled to one vote. Discretionary authority to cumulate votes is
being solicited by the Board of Directors. Unless otherwise directed by a
shareholder, the proxies named in the accompanying proxy card may elect to
cumulate votes cast pursuant to a proxy by casting all such votes for one
nominee or by distributing such votes among as many nominees as they deem
desirable. If a shareholder desires to restrict the proxies named In the
accompanying proxy card in casting votes for certain nominees, the shareholder
should give such direction on the proxy card. On all other matters other than
the election of directors, each share of Common Stock is entitled to one vote.
No matter to be presented at the meeting will entitle any shareholder of the
Company to appraisal rights.
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has
established the number of directors at six. Each director elected at an annual
meeting shall hold office until his or her successor is elected and qualified.
The following table sets forth information, including business experience
during the past five years as to the nominees for election as director.
The Board of Directors recommends that the shareholders vote "FOR" the
nominees.
2
<PAGE>
NOMINEES FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
NOMINEE BUSINESS EXPERIENCE
NAME, POSITIONS, AND DIRECTOR FOR TERM DURING THE PAST FIVE YEARS
OFFICES WITH THE COMPANY SINCE EXPIRING IN AGE AND OTHER DIRECTORSHIPS
- ----------------------------- -------- ----------- --- -----------------------------------------
<S> <C> <C> <C> <C>
Michael G. Wordeman 1989 1999 49 Chairman and Chief Executive Officer of
Chairman of the Board and the Company since 1989.
Chief Executive Officer
Roland W. Gentner 1990 1999 54 President and Chief Operating Officer
President, Chief Operating of the Company since 1993; Vice
Officer and Director President of the Company from 1991
to 1993.
Thomas Celani 1990 1999 42 Chief Executive Officer and owner of
Director Action Distributing Company since
1982.
Colin V. Reed 1992 1999 50 Executive Vice President (since June
Director 1995) and Chief Financial Officer (since
April 1997) of Harrah's Entertainment, Inc.
(formerly the Promus Companies
Incorporated ("Promus"); Senior Vice
President of Corporate Development for
Promus from 1990 to 1995.
Manuel Lujan, Jr. 1993 1999 69 United States Secretary of the
Director Department of the Interior from 1989 to
1993; United States Congressman for New
Mexico from 1969 to 1989; member of the
Board of Directors of Public Service
Company of New Mexico and First State Bank,
Albuquerque, New Mexico.
Ronnie Lopez 1993 1999 51 President of Phoenix International
Director Consultants since 1987; Director of
Bank of America-Arizona since 1991; member
of the Hispanic Congressional Caucus
Institute Board of Directors.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During 1997, the Board of Directors held four regular meetings. The Board
has established an Audit Committee and a Compensation Committee. During the past
year, the Audit Committee met four times and the Compensation Committee met four
times. Each incumbent member of the Board of Directors attended at least 75% of
the meetings of the Board of Directors and of the Committees of which such
director was a member.
The members of the Audit Committee are directors Gentner, Reed and Lujan.
The Audit Committee is charged with the responsibility for reviewing the
Company's auditing systems, monitoring accounting and financial reporting
practices throughout the Company, determining the adequacy of administrative and
internal accounting controls, monitoring compliance with the Company's
prescribed procedures
3
<PAGE>
and codes of conduct, and reviewing certain publicly disseminated financial
information. The Audit Committee functions include supervision of the
independent auditors, including recommendation of the engagement or discharge of
such auditors, and review with the independent auditors of the audit plan and
results of the auditing engagement.
The members of the Compensation Committee are directors Celani and Lujan.
The Compensation Committee is charged with the oversight responsibility for
adequacy and effectiveness of compensation and benefit plans. In addition, the
Compensation Committee makes recommendations to the Board of Directors regarding
remuneration arrangements for senior management and directors, adoption of
employee compensation and benefit plans, and the administration of such plans,
including the granting of stock options and other benefits.
The Board of Directors has no standing nomination committee.
4
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME, POSITIONS, AND BUSINESS EXPERIENCE
OFFICES WITH THE COMPANY AGE DURING THE PAST FIVE YEARS
- ------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Michael G. Wordeman 49 Chairman and Chief Executive Officer
Chairman of the Board and of the Company since 1989.
Chief Executive Officer
Roland W. Gentner 54 President and Chief Operating Officer
President, Chief Operating of the Company since 1993; Vice President
Officer and Director of the Company from 1991 to 1993.
David R. Johnson 48 Chief Financial Officer of the Company
Chief Financial Officer since February 1996; Business Consultant
from 1992 to February 1996;
President and Chief Financial
Officer of Zentec Corporation
from 1990 to 1992.
Michael G. Diedrich 43 Vice President and Secretary of the Company
Vice President, General Counsel since 1993; General Counsel of the Company
and Secretary since 1991.
Knute Knudson, Jr. 49 Vice President of the Company since 1993;
Vice President--Corporate Strategic Deputy Chief of Staff to the United States
Planning Secretary of the Interior from 1989 to 1993.
Kevin Buntrock 40 Vice President of the Company since 1993;
Vice President--Corporate General Manager of the Rushmore Plaza Civic
Development Center in Rapid City, South Dakota from 1985
to 1993.
Clayton R. Trulson 53 Vice President and Treasurer of the Company
Vice President--Finance since 1993; Chief Financial Officer of the Company
and Treasurer from 1992 to February 1996; Partner in the
accounting firm of McGladrey & Pullen from 1982
to 1992.
</TABLE>
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for the
last three years awarded to or earned by the Chief Executive Officer of the
Company and the four highest paid officers of the Company.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ------------------------
SECURITIES ALL OTHER
UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS SATION(2)
- ------------------------------------- ---- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Michael G. Wordeman 1997 $ 412,892 $ 0 80,000 $ 13,040
Chairman and Chief Executive 1996 $ 380,308 $ 0 80,000 $ 12,666
Officer 1995 $ 278,613 $ 161,141 50,000 $ 12,390
Roland W. Gentner 1997 $ 333,480 $ 0 60,000 $ 9,500
President, Chief Operating Officer 1996 $ 293,538 $ 0 60,000 $ 9,500
and Director 1995 $ 224,670 $ 130,934 34,000 $ 9,240
Ciro Batelli(3) 1997 $ 330,462 $ 0 0 $ 0
President, Sodak Gaming 1996 $ 45,458 $ 0 0 $ 0
International, Inc. (a wholly-owned
subsidiary of the Company)
Kevin Buntrock 1997 $ 154,956 $ 0 40,000 $ 8,930
Vice President--Corporate 1996 $ 146,769 $ 0 40,000 $ 9,118
Development 1995 $ 106,308 $ 40,853 24,000 $ 7,250
David R. Johnson(4) 1997 $ 167,783 $ 0 20,000 $ 61
Chief Financial Officer 1996 $ 157,106 $ 0 32,000 $ 0
</TABLE>
- -------------------
(1) Includes cash bonuses paid in the following year with respect to services
performed in the years indicated.
(2) The amounts shown in this column include Company contributions to the
Company's 401(k) plan and, for Mr. Wordeman, benefits of $3,540, $3,166 and
$3,150 for 1997, 1996 and 1995 attributable to an employee-owned life
insurance policy.
(3) Mr. Batelli joined Sodak Gaming International, Inc. in November 1996.
(4) Mr. Johnson joined the Company in February 1996.
EMPLOYMENT AGREEMENTS
Mr. Wordeman and Mr. Gentner each entered into an employment agreement with
the Company on June 30, 1993 (individually an "employment agreement," and
collectively the "employment agreements"). The employment agreements have five
year terms. Pursuant to the employment agreements, annual salaries paid to Mr.
Wordeman and Mr. Gentner are mutually agreed upon by the Company and Mr.
Wordeman and Mr. Gentner each year. Messrs. Wordeman and Gentner have agreed not
to compete with the Company while employed by the Company and for a two-year
period thereafter. However, if either executive is terminated for any reason
other than for "cause" or for "disability," the noncompetition period is limited
to the period of the term of each employment agreement, but only for so long as
the Company continues to fulfill its obligation to pay the compensation required
to be paid over the entire term of the employment agreement.
6
<PAGE>
STOCK OPTIONS
The Company maintains a 1993 Long-Term Incentive and Stock Option Plan (the
"1993 Option Plan"). The Company may grant stock options and other stock-based
awards to executive officers and other employees and consultants of the Company
under the 1993 Option Plan. The following table sets forth information with
respect to options granted to the named executive officers in 1997:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK APPRECIATION FOR
NUMBER OF OPTIONS EXERCISE OPTION TERM (2)
OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------------------
NAME GRANTED(1) EMPLOYEES SHARE DATE 5% 10%
- ------------- ---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Wordeman 80,000 23.4% $ 18.01 1/30/07 $ 1,037,237 $ 2,427,583
Mr. Gentner 60,000 17.5% $ 16.38 1/30/07 $ 617,889 $ 1,565,852
Mr. Batelli 0 0.0% N/A N/A $ 0 $ 0
Mr. Buntrock 40,000 11.7% $ 16.38 1/30/07 $ 411,926 $ 1,043,901
Mr. Johnson 20,000 5.8% $ 16.38 1/30/07 $ 205,963 $ 521,951
</TABLE>
- ------------------
(1) The options vest in four equal annual installments beginning January 30,
1998.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions. The
amounts reflected in this table may not necessarily be achieved.
The following table sets forth information with respect to the exercise of
options and the value options held by executive officers as of December 31,
1997:
AGGREGATED YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXCERCISED
SHARES OPTIONS AT END OF 1997(1) IN-THE-MONEY OPTIONS(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Wordeman 0 $ 0.00 75,774 175,258 $ 0 $ 0
Mr. Gentner 0 $ 0.00 48,266 127,422 $ 0 $ 0
Mr. Batelli 0 $ 0.00 0 0 $ 0 $ 0
Mr. Buntrock 0 $ 0.00 17,006 83,006 $3,000 $6,000
Mr. Johnson 0 $ 0.00 8,000 44,000 $ 0 $ 0
</TABLE>
- -------------------
(1) All of the options held by Mr. Wordeman are exercisable at prices ranging
from $6.46 to $18.01 per share, which prices were equal to 110% of the fair
market value of the common stock on the respective dates of each grant. All
of the options granted to Mr. Gentner prior to 1997 are exercisable at
prices ranging from $6.46 to $13.96 per share, which prices were equal to
110% of the fair market value of the common stock on the respective dates
of each grant. All of the options granted to Mr. Gentner in 1997 are
exercisable at a price of $16.38 per share, which was the fair market value
of the common stock on the date of grant. The options held by Mr. Johnson
are exercisable at prices of $12.69 to $16.38 per share, and all the
options held by Mr. Buntrock are exercisable at prices ranging from $5.88
to $16.38 per share, which prices were the fair market values of the common
stock on the respective dates of each grant.
(2) The closing price of the Company's Common Stock as reported on the NASDAQ
National Market on December 31, 1997 was $6.375.
7
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS
Other than its 1993 Option Plan, the Company does not maintain any
long-term incentive plans.
DIRECTOR COMPENSATION
The non-employee directors of the Company are currently compensated through
an annual grant of options to purchase 10,000 shares of the Company's Common
Stock at the fair market value of the Common Stock on the date of the option
grant. Non-employee directors are also paid $1,500 per month and $2,000 for each
board meeting they attend during the term for which they serve on the Company's
Board of Directors. In addition, board members are reimbursed for travel and
other expenses incurred in attending board meetings.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
The Securities and Exchange Commission has implemented a rule which
requires a company to disclose information with respect to reports that are
required to be filed under Section 16 of the Securities Exchange Act of 1934, as
amended, by directors, officers and 10% shareholders of such company, if any of
such reports are not filed timely. Based solely upon a review of Forms 3 and 4
and amendments thereto furnished to the Company during the year ended December
31, 1997 and Forms 5 and amendments thereto with respect to such year, the
Company has determined that all required filings were made in a timely manner.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW. The Compensation Committee of the Board of Directors (the
"Compensation Committee") reviews and establishes compensation strategies and
programs to ensure that the Company attracts, retains, properly compensates and
motivates qualified executives and other key employees. The Compensation
Committee consists of two non-employee directors. The Compensation Committee
typically meets each year in February or March, primarily to review and
determine bonuses for executives and other key personnel, and otherwise meets on
an as-needed basis. In the year ended December 31, 1997, the Compensation
Committee met four times.
The Compensation Committee believes that the Company's success depends
greatly on the efforts of its officers and other key personnel. The Compensation
Committee also believes the Company must compete with a number of other
businesses for qualified personnel. For these reasons, the Company seeks to
attract, retain and motivate its key employees with compensation that is
competitive within the overall business community and the gaming industry,
provided that performance of the Company and the individual warrant such
compensation.
EXECUTIVE COMPENSATION PROGRAM. As a person's level of responsibility
increases, greater portions of total compensation are based on performance (as
opposed to base salaries and benefits), competitive considerations give way to
performance considerations in justifying the absolute pay levels and the mix of
total compensation shifts toward stock, which aligns the long-term interests of
executives with those of shareholders.
At the senior executive levels, base salaries are average by industry
standards and are adjusted annually. The focus is on total compensation, which
consists of base salaries and "incentive compensation," the latter of which is
comprised of both cash and stock options. The total amount of incentive
compensation which the Board of Directors authorizes to be distributed each year
is a function of the executive population covered and the profit performance of
the Company as a whole in
8
<PAGE>
relation to the prior year. In determining the size of the annual incentive
compensation pool the Board takes into consideration both absolute results and
peer company comparisons of return on shareholders equity, growth in earnings
per share and market share. Accordingly, the intent is to have the incentive
compensation pool for each year go up or down on a leveraged basis tied to
performance measures.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The compensation of the Company's
Chief Executive Officer is based on an employment agreement entered into on June
30, 1993, which expires on June 30, 1998. The employment agreement provides that
Mr. Wordeman's annual salary shall be mutually agreed upon each year. The
agreement also entitles Mr. Wordeman to participate in any incentive
compensation plans which may be established by the Board of Directors of the
Company from time to time.
The Compensation Committee believes that the compensation arrangements with
Mr. Wordeman are consistent with the Company's overall approach to executive
compensation and serve to meet the Company's goal of retaining and motivating a
highly qualified Chief Executive Officer. The Compensation Committee believes
that the cash and equity incentives provide Mr. Wordeman with a long-term
incentive to remain with the Company, to contribute actively to the Company's
continued growth and development, and to manage the Company consistent with the
interests of its shareholders. As a long-term incentive, the Compensation
Committee believes Mr. Wordeman's current equity holdings will motivate
performance even if, in any particular year, pretax earnings decline from prior
years' levels.
SECTION 162(m) OF THE INTERNAL REVENUE CODE. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), generally limits the corporate
deduction for compensation paid to executive officers named in the proxy to one
million dollars, unless the compensation is performance-based. The Compensation
Committee's policy concerning the tax deductibility of executive compensation is
that generally all such compensation will be designed to be tax deductible under
Section 162(m) of the Code. However, the Compensation Committee reserves the
right to pay nondeductible compensation where the Compensation Committee
believes it would be in the best interests of the Company, such as to attract or
retain a key executive.
THOMAS CELANI and MANUEL LUJAN, JR.,
The Members of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Celani, a member of the Compensation Committee, was formerly an
officer of the Company.
9
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of (a) the Nasdaq Stock
Market Index (U.S. companies only) and (b) a peer group index comprised of
gaming companies that have Standard Industrial Classification Codes within Group
799 (the "Peer Group"). The graph assumes that $100 was invested in the
Company's Common Stock and the index at the close of trading on June 30, 1993,
and that dividends, if any, were reinvested.
The Peer Group index used in the performance graph below was developed
using stock performance data from all gaming companies trading on a national
stock exchange and on the Nasdaq Stock Market as of December 31, 1997 that have
Standard Industrial Classification Codes within Group 799. As of December 31,
1997, there were 53 distinct issues trading on national exchanges or on the
Nasdaq Stock Market identified by Standard Industrial Codes within Group 799.
Group 799 includes companies engaged in gaming operations or the distribution of
gaming equipment.
The Company will provide shareholders with a list of all companies that
comprise the Peer Group index upon a written request made to the Company at its
principal place of business in Rapid City, South Dakota.
COMPARISON OF 54 MONTH CUMULATIVE TOTAL RETURN*
AMONG SODAK GAMING, INC, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
[PLOT POINTS GRAPH]
- ------------------
* $100 INVESTED ON 6/30/93 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
10
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of Common Stock as of March 20, 1998 by: (i) each person who is known by the
Company to own beneficially more than 5% of the outstanding Common Stock, (ii)
each director of the Company, (iii) each officer of the Company named in the
Summary Compensation Table and (iv) by all executive officers and directors as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME(1) BENEFICIALLY OWNED(2) OUTSTANDING SHARES(2)
- ------------------------------------------------ ---------------------- ---------------------
<S> <C> <C>
Michael G. Wordeman(3) 3,454,532 15.9%
Roland W. Gentner(4) 2,274,688 9.9%
Thomas Celani(5) 3,048,000 13.4%
Harrah's Operating Company, Inc.(7) 3,192,488 14.0%
Colin V. Reed(5),(7) 45,000 *
Manuel Lujan, Jr.(6) 29,000 *
Ronnie Lopez(5) 35,075 *
Kevin Buntrock(3) 45,644 *
Ciro Batelli(8) 0 *
David R. Johnson(9) 21,000 *
All executive officers and directors as a group
(12 persons)(10) 12,235,899 52.6%
</TABLE>
- -------------------
*Less than 1%
(1) The address of each person who is the beneficial owner of more than 5% of
the Company's Common Stock is: c/o Sodak Gaming, Inc., 5301 South Highway
16, Rapid City, South Dakota 57701, other than Thomas Celani and Harrah's
Operating Company, whose addresses are c/o Action Distributing Company,
35601 Veronica, Livonia, Michigan 48510, and 206 North Virginia Street,
Reno, Nevada 89501, respectively.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes generally voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
the next 60 days are deemed outstanding for computing the percentage of the
person holding such options but are not deemed outstanding for computing
the percentage of any other person. Except as indicated by footnote, the
persons named In the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(3) Includes 138,532 shares of Common Stock issuable upon exercise of
outstanding options.
(4) Includes 92,188 shares of Common Stock issuable upon exercise of
outstanding options.
(5) Includes 34,000 shares of Common Stock issuable upon exercise of
outstanding options.
(6) Includes 20,000 shares of Common Stock issuable upon exercise of
outstanding options.
(7) Harrah's Entertainment, Inc. is the beneficial owner of Harrah's Operating
Company's interest in the Common Stock. Colin V. Reed is Harrah's designee
on the Company's Board of Directors and may be deemed to be the beneficial
owner of the Common Stock.
(8) Includes 44,012 shares of Common Stock issuable upon exercise of
outstanding options.
(9) Includes 21,000 shares of Common Stock issuable upon exercise of
outstanding options.
(10) See notes (3) through (9) above. Also includes 72,548 shares of Common
Stock issuable upon exercise of outstanding options and warrants in
addition to the options referred to in the preceding notes.
11
<PAGE>
PROPOSAL TO RATIFY APPOINTMENT OF AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending December 31, 1998. A
proposal to ratify that appointment will be presented at the 1998 Annual
Meeting. KPMG Peat Marwick LLP has served as the Company's auditors since
January 1, 1991. Representatives of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions
from shareholders. The affirmative vote of a majority of the outstanding shares
of the Company's Common Stock represented at the 1998 Annual Meeting is
necessary to approve the proposal.
MANAGEMENT RECOMMENDS A VOTE FOR THIS PROPOSAL.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Colin V. Reed, a director of the Company, is an executive officer of
Harrah's Entertainment, Inc., which, through its wholly owned subsidiary,
Harrah's Operating Company, Inc., currently manages the Harrah's Phoenix Ak-Chin
casino and entertainment complex near Phoenix, Arizona. Harrah's Operating
Company, Inc. owns approximately 14% of the Company's Common Stock. Harrah's
Operating Company, Inc. is required to pay to the Company 13 1/3% of Harrah's
management fee from the Harrah's Phoenix Ak-Chin pursuant to the terms of a
Stockholders Agreement dated October 30, 1992.
Ronnie Lopez, a director of the Company, is a principal of Phoenix
International Consultants. The Company has engaged Phoenix International
Consultants since May 1993 to provide consulting services in the area of
government and foreign relations. The Company paid Phoenix International
Consultants a total of $120,000 in 1997 for such services. The Company's
consulting arrangement with Phoenix International Consultants may be terminated
by either party at will.
OTHER MATTERS
The Board of Directors does not intend to present any business to the
meeting not mentioned in this Proxy Statement and currently knows of no other
business to be presented. If any other matters are brought before the meeting,
the persons named as proxies will vote on such matters in accordance with their
judgment of the best interests of the Company and the shareholders.
12
<PAGE>
PROPOSALS OF COMPANY SHAREHOLDERS
Proposals of Company shareholders intended to be presented at the Company's
1999 annual meeting of shareholders must be received by the Company not less
than 90 days prior to the meeting for inclusion in the Company's proxy statement
and form of proxy for that meeting. Any proposal submitted must be in compliance
with Rule 14a-8 as promulgated under the Securities Exchange Act of 1934, as
amended.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael G. Wordeman,
Michael G. Wordeman,
Chairman of the Board of Directors and
Chief Executive Officer
Dated: April 7, 1998
13
<PAGE>
PROXY
SODAK GAMING, INC.
5301 SOUTH HIGHWAY 16
RAPID CITY, SOUTH DAKOTA 57701
MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Michael G. Wordeman, Roland W. Gentner and David
R. Johnson, and each of them, with power to act without the other and with all
the right of substitution in each, the proxies of the undersigned to vote all
shares of Sodak Gaming, Inc. (the "Company") held by the undersigned on March
20, 1998, at the Annual Meeting of Shareholders of the Company, to be held on
May 7, 1998, at 10:00 A.M., at the Rushmore Plaza Holiday Inn, 505 North 5th
Street, Rapid City, South Dakota, and all adjournments thereof, with all powers
the undersigned would possess if present in person. All previous proxies given
with respect to the meeting are revoked.
Receipt of Notice of Annual Meeting of Shareholders and Proxy Statement is
acknowledged by your execution of this proxy. Complete, sign, date, and return
this proxy in the addressed envelope--no postage required. Please mail promptly
to save further solicitation expenses.
PROXY
1. ELECTION OF DIRECTORS: Nominees: Michael G. Wordeman, Roland W. Gentner,
Thomas Celani, Colin V. Reed, Manuel Lujan, Jr. and Ronnie Lopez
[ ] VOTE FOR all nominees listed above (except [ ] WITHHOLD AUTHORITY
vote withheld for the following nominees, to vote for all
if any, whose names are written below). nominees listed above.
---------------------------------------------------------------------------
NOTE: The proxies named above may choose to exercise cumulative voting in
the manner described in the accompanying Proxy Statement.
(CONTINUED, AND TO BE DATED AND SIGNED, ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
2. To ratify the selection of KPMG Peat Marwick LLP as independent auditors of
the Company for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To vote with discretionary authority upon such other matters as may come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED BY THE
UNDERSIGNED SHAREHOLDER, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL
NOMINEES FOR DIRECTOR NAMED IN ITEM 1 AND FOR PROPOSAL 2 LISTED HEREIN. UPON ALL
OTHER MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE
COMPANY.
SIGNATURE(S)
________________________________________
________________________________________
Dated:____________________________, 1998
INSTRUCTION: When shares are held by
joint tenants, all joint tenants should
sign. When signing as attorney,
executor, administrator, trustee,
custodian, or guardian, please give full
title as such. If shares are held by a
corporation, this proxy should be signed
in full corporate name by its president
or other authorized officer. If a
partnership holds the shares subject to
this proxy, an authorized person should
sign in the name of such partnership.
