<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
PDS Financial Corporation
--------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) 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:
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[ ] 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>
PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1998
------------------------
TO THE STOCKHOLDERS OF PDS FINANCIAL CORPORATION
Please take notice that the annual meeting of stockholders of PDS Financial
Corporation (the "Company") will be held, pursuant to due call by the Board of
Directors of the Company, at the Marquette Hotel, 710 Marquette Avenue,
Minneapolis, Minnesota, on Thursday, May 14, 1998, at 3:30 p.m., or at any
adjournment or adjournments thereof, for the purpose of considering and taking
appropriate action with respect to the following:
1. To elect six directors for the ensuing year.
2. To consider and vote upon a proposal to approve an amendment to the
Company's 1993 Stock Option Plan to increase the number of shares of Common
Stock available for issuance thereunder from 1,100,000 shares to 1,350,000
shares.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent accountants of the Company for the fiscal year ending December
31, 1998.
4. To act upon any other business that may properly come before the
meeting or any adjournments thereof.
Pursuant to due action of the Board of Directors, only stockholders of
record on March 27, 1998 will be entitled to notice of and to vote at the
meeting or any adjournments thereof.
WHETHER OR NOT YOU PLAN TO COME TO THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE REPLY ENVELOPE PROVIDED. YOUR COOPERATION IN PROMPTLY SIGNING
AND RETURNING YOUR PROXY WILL HELP AVOID 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/ Peter D. Cleary
Peter D. Cleary
SECRETARY
April 10, 1998
<PAGE>
PROXY STATEMENT
OF
PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PDS Financial Corporation (the "Company")
to be used at the Annual Meeting of Stockholders of the Company to be held May
14, 1998. The approximate date upon which this Proxy Statement and the
accompanying Proxy are expected to be first sent or given to stockholders is
April 10, 1998. Each stockholder who signs and returns a Proxy in the form
enclosed with this Proxy Statement may revoke the same at any time prior to its
use by giving notice of such revocation to the Company in writing, in open
meeting or by executing and delivering a new Proxy to the Secretary of the
Company. Unless so revoked, the shares represented by each Proxy will be voted
at the meeting and at any adjournments thereof. Presence at the meeting of a
stockholder who has signed a Proxy does not alone revoke that Proxy.
Only stockholders of record at the close of business on March 27, 1998 (the
"Record Date") will be entitled to vote at the meeting or any adjournments
thereof. All shares which are entitled to vote and are represented at the Annual
Meeting by properly executed proxies received prior to or at the Meeting, and
not revoked, will be voted at the Meeting in accordance with the instructions
indicated on such proxies.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company's only outstanding class of voting securities is Common Stock,
$0.01 par value, of which 3,571,474 shares were outstanding as of the close of
business on the Record Date. Each share of Common Stock is entitled to one vote
on all matters put to a vote of stockholders.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each person
known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding Common Stock, (ii) each director, (iii) each executive
officer of the Company, and (iv) all executive officers and directors as a
group. Unless otherwise indicated, each of the following persons has sole voting
and investment power with respect to the shares of Common Stock set forth
opposite their respective names:
<TABLE>
<CAPTION>
PERCENT OF
NAME NUMBER(4)(5) CLASS
- -------------------------------------- ------------- ------------
<S> <C> <C>
Johan P. Finley(2)(1) 1,086,486 30.4%
Robert M. Mann(1) 34,000 *
Peter D. Cleary(1) 24,600 *
Lona M.B. Finley(1)(3) 377,577 10.2%
Charles R. Patterson 11,000 *
801 12th Avenue North
Minneapolis, MN 55411
Joel M. Koonce 13,000 *
5500 Cenex Drive
Inver Grove Heights, MN 55077
James L. Morrell 7,500 *
1323 Waterford Road
Woodbury, MN 55125
David R. Mylrea 1,093 *
8824 Windsor Terrace
Brooklyn Park, MN 55443
All officers and directors as a group 1,555,256 41.2%
(8 persons)
</TABLE>
- ------------------------
* Less than 1%
<PAGE>
(1) The address of such person is 6171 McLeod Drive, Las Vegas, NV 89120.
(2) Includes 11,200 shares held as co-trustee for minor child also claimed by
spouse a co-trustee. Mr. Finley disclaims beneficial ownership of the shares
held by Lona M.B. Finley, his spouse.
(3) Includes 5,000 shares held by Ms. Finley as custodian for her son and 11,200
shares held as co-trustee for minor child also claimed by spouse a
co-trustee. Ms. Finley disclaims beneficial ownership of the shares held by
Johan P. Finley, her spouse.
(4) Includes shares of Common Stock issuable to the following persons upon
exercise of options that are currently exercisable or that will become
exercisable within 60 days of the date of this Proxy Statement: Robert M.
Mann, 34,000 shares; Peter D. Cleary, 24,000 shares; Lona M.B. Finley,
116,591 shares; Charles R. Patterson, 10,000 shares; Joel M. Koonce, 10,000
shares; James L. Morrell, 7,500 shares; all executive officers and directors
as a group, 202,091 shares.
CERTAIN TRANSACTIONS
Johan P. Finley, the Company's President, Chief Executive Officer,
controlling stockholder and Chairman of the Board, received a fee in the amount
of $70,000 and $27,654 in exchange for giving a personal guarantee of amounts
loaned to the Company under its bank lines of credit in 1997 and 1996,
respectively.
David R. Mylrea, a director of the Company, entered into an agreement to
provide certain legal services to the Company during 1998. The Company expects
to pay total fees of approximately $120,000 in 1998 to Mr. Mylrea pursuant to
this agreement. This agreement will terminate in the event Mr. Mylrea accepts
full-time employment elsewhere.
ITEM 1: ELECTION OF DIRECTORS
Six directors are to be elected at the meeting, each director to hold office
until the next Annual Meeting of Stockholders or until his successor is elected
and qualified. Each of the persons listed below, except for Lona M.B. Finley, is
now serving as a Director of the Company and has consented to continue to serve
as a Director, if elected. The Board of Directors proposes for election the
following nominees:
JOHAN P. FINLEY, age 36, is the founder of the Company and has been its
President, Chief Executive Officer and Chairman of the Board of Directors of the
Company since its inception in February 1988. In addition, Mr. Finley was the
President and Chief Executive Officer of RCM Inc. and Home Products, Inc. from
1991 to 1994.
PETER D. CLEARY, age 40, has been Secretary of the Company since January
1998, Vice President and Chief Financial Officer since September 1995 and has
been a Director of the Company since January 1996. From 1980 to 1995, Mr. Cleary
served in various positions with Coopers & Lybrand L.L.P., most recently as
Audit Manager. Coopers & Lybrand L.L.P. provides accounting services to the
Company.
CHARLES R. PATTERSON, age 55, has been a member of the Company's Board of
Directors since March 1994. Since 1992, he has served as President of The Walman
Optical Company, a Minnesota manufacturer and distributor of eyeglasses,
accessories and ophthalmic examination equipment. He has served in various
capacities with Walman Optical since 1971. Mr. Patterson is a member of the
Board of Directors of F D Optical Manufacturing, Inc., a Minnesota optical
company, and also serves as a member of the Regional Board of the Optical
Laboratory Association of the United States.
JOEL M. KOONCE, age 59, has been a member of the Company's Board of
Directors since April 1994. Since 1986, he has served as Chief Financial and
Administrative Officer of CENEX, Inc., a distributor of petroleum and agronomy
products and other farm supplies located in St. Paul, Minnesota. Prior to
joining CENEX, Mr. Koonce served in various management positions with Land
O'Lakes, most recently as Vice
2
<PAGE>
President of Administration and Planning for Agricultural Services. Mr. Koonce
served in various management positions for General Mills from 1965 to 1981. He
is Chairman of the Board of Directors of St. Paul Bank for Cooperatives.
JAMES L. MORRELL, age 44, has been a member of the Company's Board of
Directors since March 1996. He is currently an independent business consultant.
From 1986 to 1995, Mr. Morrell was employed by Dain Bosworth Incorporated, where
he held a number of management positions, most recently Managing Director,
Corporate Finance.
LONA M.B. FINLEY, age 33, has been nominated for membership on the Board of
Directors and has been the Treasurer of the Company since December 1993 and
Director of Compliance since January 1997. Prior to becoming Treasurer, Ms.
Finley served in various other positions with the Company since 1988. Her
current duties include oversight of the compliance, human resources and treasury
functions. Ms. Finley in the spouse of Johan P. Finley.
Directors of the Company are elected to serve until their successors are
duly elected and qualified. Each non-employee Board member receives an annual
cash retainer of $2,500, which will be increased to $7,500 effective May 14,
1998, and a fee of $1,000 for each Board meeting attended. Upon election or
appointment to the Board of Directors, each non-employee director is
automatically granted a non-qualified option to purchase 10,000 shares of the
Company's Common Stock at its fair market value on the date of grant. These
options have a term of ten years and become exercisable as to 2,500 shares on
the date of each Annual Meeting of Stockholders at which the director is
re-elected or is serving an unexpired term. Messrs. Patterson and Koonce each
received 10,000 such options in March 1994 and April 1994, respectively, which
have an exercise price of $5.00 per share. Mr. Morrell received 10,000 such
options in March 1996 with an exercise price of $2.50 per share. Beginning May
14, 1998, the Company intends to grant a non-qualified stock option to purchase
5,000 shares of the Company's Common Stock at its fair market value on the date
of grant to each non-employee director on an annual basis. These options have a
term of ten years and become exercisable as to 1,000 shares on the date of each
Annual Meeting of Stockholders at which the director is re-elected or is serving
an unexpired term. The Company reimburses officers and directors for their
authorized expenses.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, which currently consists of
James L. Morrell and Joel M. Koonce. The Audit Committee reviews and makes
recommendations to the Board of Directors with respect to designated financial
and accounting matters. The Audit Committee held one meeting during 1997.
The Board of Directors has a Compensation Committee, which currently
consists of Johan P. Finley, Charles R. Patterson and Joel M. Koonce. The
Compensation Committee determines executive compensation and administers the
provisions of the Company's 1993 Stock Option Plan. The Compensation Committee
held one meeting during 1997.
The Board of Directors has a Compliance Committee, which currently consists
of Lona M.B. Finley, Peter D. Cleary, James L. Morrell, Lon H. Shepard, the
Company's Compliance Officer and Michael G. Alonso, the Company's non-employee
gaming industry counsel. The Compliance Committee oversees compliance with the
rules and regulations of the various gaming regulatory bodies in the
jurisdictions in which the Company transacts business. The Compliance Committee
held three meetings during 1997.
The Board of Directors has no standing nomination committee.
During 1997, the Board of Directors held four meetings. All incumbent
directors attended 100% of those meetings of the Board and committees on which
they were members that were held while they were serving on the Board or on such
committees.
3
<PAGE>
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Common Stock of the Company present and entitled to vote
on the election of Directors or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required for election to the Board of
the nominees named above. A stockholder who abstains with respect to the
election of Directors is considered to be present and entitled to vote on the
election of Directors at the Meeting, and is in effect casting a negative vote;
a stockholder (including a broker) who does not attend the Meeting and who does
not give authority to a proxy to vote, or withholds authority to vote, on the
election of Directors shall not be considered present and entitled to vote on
the election of Directors.
All shares represented by proxies will be voted for the election of the
foregoing nominees unless a contrary choice is specified. If any nominee
withdraws or otherwise becomes unavailable for any reason, the proxies that
would otherwise have been voted for such nominee will be voted for such
substitute nominee as may be selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and each of the three
other executive officers who received total salary and bonus in excess of
$100,000 in 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION ALL
-------------------------------- ------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------- --------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Johan P. Finley ............ 1997 $ 210,000 -- -- $ 153,104(1)
President and Chief 1996 159,135 $ 35,145 -- 44,154(1)
Executive Officer 1995 154,500 -- 16,620(1)
Robert M. Mann ............. 1997 $ 137,207 $ 21,006 -- $ 9,550(2)
Executive Vice President 1996 127,764 20,508 -- 7,677(2)
1995 98,800 9,360 54,000 33,740(2)
Peter D. Cleary ............ 1997 $ 100,000 $ 15,500 -- $ 3,534(3)
Chief Financial Officer 1996 85,744 12,862 -- --
1995(3) 23,805 -- 54,000 --
David R. Mylrea ............ 1997 $ 103,184 $ 51,137 -- $ 58,473(4)
Chief Operating Officer 1996 110,210 16,893 -- 19,460(4)
and Secretary(4) 1995 107,000 9,360 7,500 10,020(4)
</TABLE>
- ------------------------
(1) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $4,750, $4,500 and $4,620 in 1997, 1996 and 1995, respectively, an
automobile allowance of $1,984 in 1997 and $12,000 in 1996 and 1995, fees in
the amount of $70,000 and $27,654 paid for personally guaranteeing bank
lines of credit in 1997 and 1996, respectively, personal use of a Company
automobile and reimbursement for moving and temporary living expenses in the
amount of $76,370 in 1997.
(2) Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $4,750 and $2,877 in 1997 and 1996, an annual automobile allowance
of $4,800, $4,800 and $3,800 in 1997, 1996 and 1995, respectively and
reimbursement for moving and temporary living expenses in the amount of
$29,940 in 1995.
4
<PAGE>
(3) Mr. Cleary joined the Company in September 1995. Consists of Company
contributions to a 401(k) profit sharing plan in the amount of $2,267 in
1997 and reimbursement for moving and temporary living expenses in the
amount of $1,267 in 1997.
(4) Mr. Mylrea terminated his employment with the Company in November 1997.
Consists of Company contributions to a 401(k) profit sharing plan in the
amount of $3,748, $4,060 and $4,620 in 1997, 1996 and 1995, respectively, an
annual automobile allowance of $4,725, $5,400 and $5,400 in 1997, 1996 and
1995, respectively, severance pay in the amount of $50,000 in 1997 and a
transaction-related fee in the amount of $10,000 in 1996.
EMPLOYMENT AGREEMENTS
In September 1993, the Company entered into a five-year employment agreement
with Johan P. Finley as President and Chief Executive Officer. Mr. Finley is
entitled to an annual bonus during the term of his agreement of up to 7% of the
Company's pre-tax income. The agreement provides that Mr. Finley is entitled to
a payment in the amount of two times his base salary in effect upon a
termination of his employment by the Company, change in control of the Company,
or a sale of the majority of the Company's assets. The agreement will
automatically renew for additional one-year periods at the expiration of the
term, provided that either Mr. Finley or the Company may prevent the renewal by
written notice at least 30 days prior to the expiration of the term.
In February 1995, the Company entered into a five-year employment agreement
with Robert M. Mann to serve as Executive Vice President. In accordance with an
income-based formula, Mr. Mann is eligible to earn a bonus of up to 16% of his
base salary. Under his employment agreement, Mr. Mann may receive an annual
discretionary bonus of up to 15% of his base salary.
In September 1995, the Company entered into an employment agreement with
Peter D. Cleary to serve as Chief Financial Officer and Vice President. This
contract automatically renewed for another year in September 1997. In accordance
with an income-based formula, Mr. Cleary is eligible to earn an annual bonus of
up to 32.5% of his base salary. Under his employment agreement, Mr. Cleary may
receive an annual discretionary bonus of up to 15% of his base salary.
In March 1994, the Company entered into a three-year employment agreement
with Lona M.B. Finley. This contract automatically renewed for an additional
year. In accordance with an income-based formula, Ms. Finley is eligible to earn
a bonus of up to 55% of her base salary. The agreement provides that Ms. Finley
is entitled to a payment in the amount of two times her base salary then in
effect upon a termination of her employment by the Company, a change in control
of the Company or a sale of a majority of the Company's assets.
In January 1994, the Company entered into a five-year employment agreement
with David R. Mylrea to serve as Chief Operating Officer, General Counsel and
Secretary. In accordance with an income-based formula, Mr. Mylrea was eligible
to earn a bonus of up to 55% of his base salary. Under his employment agreement,
Mr. Mylrea could receive an annual discretionary bonus of up to 15% of his base
salary. Mr. Mylrea terminated his employment with the Company in November 1997.
Each employment agreement is subject to earlier termination for cause or
upon disability or death. In the case of disability, the Company has agreed to
continue salary payments for a six-month term. Mr. Finley has agreed not to
compete with the Company following termination of employment for a period of one
year, and Messrs. Mylrea, Mann and Cleary are subject to two-year non-compete
provisions.
The Company has a 401(k) profit-sharing plan for its employees and may adopt
additional bonus, pension, profit-sharing, retirement, or similar plans in the
future.
5
<PAGE>
STOCK OPTIONS
There were no stock options granted in 1997 to the executive officers named
in the compensation table set forth above.
In the event of dissolution, liquidation, or an event changing control of
the Company (as described in the Stock Option Plan), all outstanding options
under the Stock Option Plan will become exercisable in full and each optionee
will have the right to exercise his or her options or to receive a cash payment
in certain circumstances.
The following table sets forth the number and dollar value of all exercises
of options and the number and aggregate dollar value of all unexercised options
held by the named executive officers as of the end of 1997. The value of each
unexercised, in-the-money option was determined by multiplying (i) the
difference between (a) the market price of a share of Common Stock as of the end
of 1997 ($6.75), and (b) the exercise price of the option, by (ii) the number of
shares subject to the option.
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT TO VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
SHARES ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- ---------------------------- --------------- ------------ ----------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Johan P. Finley -- -- -- -- -- --
Robert M. Mann -- -- 24,000 30,000 $ 55,480 $ 52,500
Peter D. Cleary -- -- 24,000 30,000 $ 105,480 $ 127,500
David R. Mylrea 152,955 $ 1,214,080 -- -- -- --
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policies for all executive officers of
the Company. The Committee establishes the total compensation for the executive
officers in light of these policies. The Committee is composed of two
non-employee directors and one employee director.
The following report describes the Company's executive compensation program
and discusses the factors considered by the Committee in determining the
compensation of the Company's Chief Executive Officer and other executive
officers for its 1997 fiscal year.
COMPENSATION PHILOSOPHY
The goals for the executive compensation program are to:
- Motivate executives to assist the Company in achieving superior levels of
financial and stock performance by closely linking executive compensation
to performance in those areas; and
- Attract, retain and motivate executives by providing compensation and
compensation opportunities that are comparable to those offered by other
companies in the financial services industry.
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
The elements of the executive compensation program are designed to meet the
Company's compensation philosophy. Currently, the Executive Compensation Program
is comprised of annual cash compensation and longer-term stock compensation.
Annual cash compensation consists of base salary and performance bonuses.
For lower level employees, salaries are set to be competitive for the industry
or marketplace, as appropriate, and bonuses are designed to represent a
relatively small percentage of annual cash compensation. For higher-level
employees, base salaries are in the low to average range for the financial
services industry and potential
6
<PAGE>
bonuses constitute a high percentage of annual cash compensation. The Company's
executive compensation bonus program has two components: (1) a bonus of up to a
specified percentage of base salary is based upon the Company's earnings
performance for the year, and (2) an additional bonus of up to 15% of base
salary can be awarded at the discretion of the Compensation Committee.
The structure and earnings goals for the executive performance bonus program
are reviewed and adjusted annually by the Committee. Discretionary bonus awards
for the executive officers are initially determined by the Chief Executive
Officer and are submitted to the Committee for discussion and approval. An
executive officer's discretionary bonus is based upon the officer's duties and
responsibilities, individual performance and future potential. Many of these
assessments are subjective in nature and are made annually on a case-by-case
basis.
The Company's 1993 Stock Option Plan as amended provides for the granting of
options ("Options") to purchase up to an aggregate of 1,100,000 shares of Common
Stock to certain key employees, officers, directors and consultants of the
Company. Options granted under the Stock Option Plan may be either Options that
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986 ("Incentive Options"), or those that do not
qualify as "incentive stock options" ("Non-Statutory Options"). The Stock Option
Plan is administered by the Board of Directors and the Committee, which
determines the persons who are to receive Options, the terms and number of
shares subject to each Option and whether the Option is an Incentive Option or a
Non-Statutory Option. See "Item 2: Proposal To Amend 1993 Stock Option Plan To
Increase The Number Of Shares Of Common Stock Available For Issuance Thereunder
From 1,100,000 To 1,350,000 Shares."
The Company currently anticipates that new executive officers would be
granted options at the time of hiring, which options would typically vest over a
number of years. The Committee believes these grants are in line with external,
competitive opportunities and provide a stronger, more direct motivation to
executive officers to increase stockholder value. The Company awarded options to
purchase a total of 178,500 shares in 1997 and options to purchase 59,000 shares
during the period from January 1, 1998 through March 9, 1998, all of which vest
over a period of years.
As of March 9, 1998, options to purchase 547,681 shares of Common Stock were
outstanding, with exercise prices ranging from $1.50 per share to $7.88 per
share, to 38 employees, 242,272 of which are currently exercisable. In addition,
pursuant to the Stock Option Plan, newly elected non-employee directors of the
Company each receive an automatic grant of a Non-Statutory Option to purchase
10,000 shares of Common Stock on the date they first become a director. The
Compensation Committee has approved an annual grant of an option to purchase
5,000 shares of Common Stock beginning May 14, 1998 to non-employee directors.
During 1997, no options were granted to non-employee directors. Future grants of
options to executive officers and other employees under the Stock Option Plan
are not determinable.
EXECUTIVE OFFICER COMPENSATION
The executive officers' compensation was established at the beginning of
1997 and ratified by the Compensation Committee.
JOHAN P. FINLEY, CHARLES R. PATTERSON AND JOEL M. KOONCE
The Members of the Compensation Committee
ITEM 2: PROPOSAL TO AMEND 1993 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
ISSUANCE THEREUNDER FROM 1,100,000 TO 1,350,000 SHARES
The Board of Directors has approved, subject to shareholder approval, an
amendment to the Company's 1993 Stock Option Plan to increase the number of
shares of Common Stock available for
7
<PAGE>
issuance thereunder from 1,100,000 shares to 1,350,000 shares. Of the 1,100,000
shares currently authorized for issuance pursuant to the Stock Option Plan,
235,765 shares were available to the Company as of March 9, 1998 for future
option grants. The Board of Directors believes that the Stock Option Plan has
been and continues to be an important incentive in attracting, retaining and
motivating key employees, and that it is appropriate to increase the number of
shares available for option grants and other awards under the Stock Option Plan
at this time. Approval of the proposed amendment to increase the number of
authorized shares under the Stock Option Plan will assure that sufficient shares
are available to enable the Committee to achieve the objectives of the Stock
Option Plan to aid in maintaining and developing personnel capable of assuring
the future success of the Company, to offer such personnel additional incentives
to put forth maximum effort for the success of the business and to afford them
an opportunity to acquire an interest in the Company through stock options.
The Stock Option Plan authorizes the granting of Incentive Options within
the meaning of Section 422 of the Code as well as Non-Statutory Options. Options
may be granted to employees, including officers and directors who are employees,
to non-employee directors upon election or appointment to the Board, and to
consultants of the Company or its parents, subsidiaries or affiliates. However,
only employees of the Company or its parent or subsidiary companies are eligible
to receive incentive stock options. The Code also contains additional
limitations restricting the number of shares granted to an optionee that may be
treated as incentive stock options. The Stock Option Plan will terminate in
April 2003.
The Stock Option Plan is administered by Compensation Committee. The
Committee determines whether each option is to be an incentive stock option or
Non-Statutory Option, and determines the terms of options granted under the
Stock Option Plan, including the exercise price, the number of shares subject to
the option and the period of exercisability. No Incentive Option may be
exercised more than ten years after its grant date, and no option granted to a
person owning more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company ("Ten Percent
Stockholder") may be exercised more than five years from the date the option is
granted. To the extent the aggregate fair market value, determined at the time
the option is granted, of the Common Stock with respect to which all Incentive
Options are exercisable for the first time by an employee during any calendar
year exceeds $100,000, such options shall be treated as options which do not
qualify as Incentive Options. During the lifetime of the optionee, only the
optionee may exercise the option. In the event of a merger of the Company in
which the Company is not the surviving corporation or a dissolution, liquidation
or sale of substantially all of the Company's assets, all outstanding options
will become exercisable at least ten days prior to such event on such terms as
the Committee shall determine, unless the successor corporation assumes the
outstanding options or substitutes substantially equivalent options.
The exercise price of all Incentive Options granted under the Stock Option
Plan must not be less than the fair market value of the Common Stock of the
Company at the time the option is granted, as determined according to the Stock
Option Plan. The exercise price of any option granted to a Ten Percent
Stockholder may not be less than 110% of the fair market value of the Common
Stock of the Company at the time the option is granted, as determined by the
Board of the Committee in good faith.
Under the Stock Option Plan, the Committee may permit participants, subject
to the discretion of the Committee and upon such terms and conditions as it may
impose, to surrender shares of Common Stock (either shares received upon the
exercise of the option or shares previously owned by the optionee) to the
Company to satisfy federal and state withholding tax obligations. In addition,
the Committee may grant, subject to its discretion and such rules as it may
adopt, a bonus to a participant in order to provide funds to pay all or a
portion of federal and state taxes due as a result of the exercise of the
option. The amount of any such bonus will be taxable to the participant as
ordinary income, and the Company will have a corresponding deduction equal to
such amount (subject to the usual rules concerning reasonable compensation.)
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TAX TREATMENT
The grant of a stock option pursuant to the Plan will result in no tax
consequences for the optionee or the Company. The holder of an Incentive Option
generally will have no taxable income upon exercising the Incentive Option
(except that the alternative minimum tax may apply), and the Company generally
will receive no tax deduction when an Incentive Option is exercised. Upon
exercise of a Non-Statutory Option, the optionee must recognize ordinary income
equal to the excess of the fair market value of the shares acquired on the date
of exercise over the option price, and the Company will then be entitled to a
tax deduction for the same amount. The tax consequences to an optionee of a
disposition of shares acquired through the exercise of an option will depend on
how long the shares have been held and upon whether such shares were acquired by
exercising an Incentive Option or a Non-Statutory Option. Generally, there will
be no tax consequence to the Company in connection with a disposition of shares
acquired under an option except that the Company may be entitled to a tax
deduction in the case of a disposition of shares acquired under an Incentive
Option before the applicable Incentive Option holding period has been satisfied.
Special rules apply in the case of individuals subject to Section 16(b) of
the Securities Exchange Act of 1934. In particular, under current law, shares
received pursuant to the exercise of a stock option may be treated as restricted
as to transferability and subject to a substantial risk of forfeiture for a
period of up to six months after the date of exercise. Accordingly, unless a
special tax election is made, the amount of ordinary income recognized and the
amount of the employer's deduction may be determined as of such later date.
The affirmative vote of a majority of the shares of Common Stock entitled to
vote and present in person or by proxy at the Annual Meeting is required for the
approval of the amendment to the Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE STOCK
OPTION PLAN.
ITEM 3: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At the meeting, a vote will be taken on a proposal to ratify the appointment
of Coopers & Lybrand L.L.P. by the Board of Directors to act as independent
accountants of the Company for the fiscal year ending December 31, 1998. Coopers
& Lybrand L.L.P. are independent accountants and auditors who have audited the
accounts of the Company annually since 1992.
Representatives of Coopers & Lybrand L.L.P. will attend the stockholder
meeting. They will have the opportunity to make a statement if they desire to do
so, and will be available to answer appropriate questions that may be asked by
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF COOPERS &
LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
As of this date, the Board of Directors does not know of any business to be
brought before the meeting other than as specified above. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with their judgment
on such matters.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's
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equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and beneficial
owners of more than ten percent of the outstanding shares of Common Stock are
also required by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and ten-
percent owners were satisfied.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received by the Secretary of the Company, PDS
Financial Corporation, 6171 McLeod Drive, Las Vegas, NV 89120, no later than
December 15, 1998, for inclusion in the Proxy Statement for such annual meeting.
SOLICITATION OF PROXIES
The Company will bear the cost of preparing, assembling and mailing the
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 facsimile 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.
Peter D. Cleary
SECRETARY
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PDS FINANCIAL CORPORATION
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120
APRIL 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Johan P. Finley and Peter D. Cleary, 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 PDS Financial
Corporation (the "Company") held by the undersigned on March 27, 1998, at the
Annual Meeting of Stockholders of the Company, to be held on May 14, 1998, at
3:30 P.M., at the Marquette Hotel, 701 Marquette Avenue, Minneapolis, Minnesota,
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.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS PROVIDED BY THE
UNDERSIGNED STOCKHOLDER, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL
NOMINEES FOR DIRECTOR NAMED IN ITEM 1 AND FOR PROPOSALS, 2 and 3 LISTED HEREIN.
UPON ALL OTHER MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST
INTERESTS OF THE COMPANY.
Receipt of Notice of Annual Meeting of Stockholders 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.
P R O X Y
1. ELECTION OF DIRECTORS: Nominees: Johan P. Finley, Peter D. Cleary, Charles R.
Patterson, Joel M. Koonce, James L. Morrell and Lona M.B. Finley.
/ / VOTE FOR all nominees listed / / WITHHOLD AUTHORITY
above (except vote withheld for to vote for all nominees listed
the following nominees, if any, above
whose names are written below).
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2. To amend the 1993 Stock Option Plan to increase the number of shares of
Common Stock available for issuance thereunder from 1,100,000 to 1,350,000
shares.
FOR / / AGAINST / / ABSTAIN / /
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
accountants of the Company for the fiscal year ending December 31, 1998.
FOR / / AGAINST / / ABSTAIN / /
4. To vote with discretionary authority upon such other matters as may come
before the meeting.
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.
SIGNATURE(S)
___________________________________
___________________________________
Dated: ______________________, 1997
