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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB/A
AMENDMENT NO. 1
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File No.: 0-23928
PDS FINANCIAL CORPORATION
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(Name of Small Business Issuer in its Charter)
Minnesota 41-1605970
------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6171 McLeod Drive, Las Vegas, Nevada 89120
-----------------------------------------------------------
(Address of Principal Executive Office, Including ZIP Code)
(702) 736-0700
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.01 par value
Common Stock
Purchase Warrants
-----------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months
(or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check whether there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B and no disclosure will be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
the Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: $36,015,000
The aggregate market value of voting stockheld by nonaffiliates of the Issuer on
March 22, 1999, was $5,256,000.
The number of shares outstanding of the Issuer's only class of common stock on
March 22, 1999, was 3,648,211.
Documents Incorporated by Reference: Portions of the Registrant's Proxy
Statement for its 1999 Annual Meeting of Shareholders (the "Proxy Statement")
are incorporated by reference in Part III.
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PDS Financial Corporation hereby amends its Annual Report of Form 10KSB
for the year ended December 31, 1998 to (i) restate whether no disclosure
will be contained, to the best of the Registrant's knowledge, in definitive
proxy statements incorporated by reference in Part III of this Form 10-KSB
and (ii) restate Item 13(a) to replace the employment agreement between the
Registrant and Johan Finley filed as Exhibit 10.5 to the Form 10-KSB with the
employment agreement between the Registrant and Johan Finley attached hereto
as Exhibit 10.5 and to file a power of attorney as Exhibit 24.1.
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K.
(a) EXHIBITS
The following exhibits are included with this Annual Report on Form
10-KSB (or incorporated by reference) as required by Item 601 of Regulation S-B.
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<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
Incorporated by Reference:
3.1 Amended and Restated Articles of Incorporation(4)
3.2 Articles of Amendment to Articles of Incorporation(4)
3.3 Articles of Amendment to Articles of Incorporation(4)
3.4 Articles of Amendment of Amended and Restated Articles of
Incorporation(4)
3.5 Bylaws of the Registrant (1)
4.1 Specimen of Common Stock Certificate
4.3 Form of Warrant to Purchase 25,000 Shares of Common Stock, dated
December 15, 1994, issued to Miller & Schroeder Investments
Corporation(2)
4.4 Form of Warrant to Purchase 145,000 Shares of Common Stock, dated
May 24, 1994 (2)
10.1 Industrial Real Estate Lease dated April 29, 1997, between the
Registrant, as Tenant, and Patrick Commerce Center, LLC, as
Landlord (4)
10.2 1993 Stock Option Plan, as amended (1)
10.3 Form of Incentive Stock Option Agreement (1)
10.4 Form of Non-Qualified Stock Option Agreement
10.7 Employment Agreement between the Registrant and Robert M. Mann (3)
10.8 Employment Agreement between the Registrant and Peter D. Cleary (3)
10.9 Employment Agreement between the Registrant and Lona M. B. Finley
10.10 Employment Agreement between the Registrant and Steven M. Des
Champs (6)
10.11 Form of Tax Indemnification Agreement between the Registrant and
Johan P. Finley (1)
10.12 Revolving Credit and Security Agreement, dated April 9, 1997
between BNY Financial Corporation as Lender and as Agent and the
Registrant and PDS Financial Corporation-Nevada as Borrowers (4)
10.13 Loan and Security Agreement, dated October 29, 1998 between Heller
Financial, Inc., as Lender and the Registrant as Borrower (6)
10.14 Loan and Security Agreement, dated October 29, 1998 between Heller
Financial, Inc., as Lender and PDS Financial Corporation-Nevada, as
Borrower (6)
10.15 Master Loan Agreement by and among the Registrant, PDS Financial
Corporation - Nevada and Miller & Schroeder Investments
Corporation, date May 26, 1998 (5)
10.16 Master Loan Agreement by and among the Registrant, PDS Financial
Corporation - Nevada and Miller & Schroeder Investments
Corporation, date December 15, 1998 (6)
10.17 Loan Agreement, dated August 5, 1998 between U.S. Bank, as Lender
and the Registrant as Borrower (5)
10.18 Agreement between the Registrant and David R. Mylrea (4)
</TABLE>
- -------------------
(1) Incorporated by reference to the Registrant's previously filed Form
SB-2 Registration Statement
No. 33-76948C
(2) Incorporated by reference to the Registrant's previously filed Form
SB-2 Registration Statement
No. 33-88692
(3) Incorporated by reference to the Registrant's previously filed Form
10-KSB for the year ended December 31, 1995
(4) Incorporated by reference to the Registrant's previously filed Form
10-KSB for the year ended December 31, 1997
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(5) Incorporated by reference to the Registrant's previously filed Form
10-QSB for the quarter ended June 30, 1998
(6) Incorporated by reference to the Registrant's previously filed post
effective amendment on Form S-3 to Form SB-2 Registration Statement
No. 33-49199
Exhibits Submitted Herewith:
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<S> <C>
10.5 Employment Agreement between the Registrant and Johan P. Finley
*21.1 Subsidiaries of the Registrant
*23.1 Consent of Independent Accountants
24.1 Power of Attorney
*27.1 Financial Data Schedule for the year ended December 31, 1998
*99.1 Cautionary Statements
</TABLE>
(b) REPORTS ON FORM 8-K.
The Registrant did not file any reports on Form 8-K for the quarter ended
December 31, 1998.
* Filed previously.
3
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SIGNATURES
Pursuant to the requirements of 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PDS FINANCIAL CORPORATION
By /s/ Johan P. Finley
---------------------------
Johan P. Finley
Chief Executive Officer
Date: April 21, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has also been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on April 21, 1999.
Name Title
---- -----
By /s/ Johan P. Finley Chairman of the Board,
-------------------------- Chief Executive Officer,
Johan P. Finley President and Director
(Principal Executive Officer)
By /s/ Steven M. Des Champs Chief Financial Officer
-------------------------- (Principal Financial & Accounting Officer)
Steven M. Des Champs
By * Director
--------------------------
Peter D. Cleary
By * Director
--------------------------
Joel M. Koonce
By Director
--------------------------
James L. Morrell
By * Director
--------------------------
Lona M.Finley
By Director
--------------------------
Charles R. Patterson
* /s/ Johan P. Finley
--------------------------
Attorney in Fact
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EXHIBIT INDEX
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<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.5 Employment Agreement between the Company and
Johan P. Finley
24.1 Power of Attorney
</TABLE>
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this 1st
day of February, 1998, by and between PDS Financial Corporation, a Minnesota
Corporation (hereinafter referred to as "Employer"), and Johan P. Finley
(hereinafter referred to as "Employee").
R E C I T A L S
WHEREAS, Employer is in the business of providing financing, leasing and
equipment sales to the gaming industry.
WHEREAS, Employee will act as President and Chief Executive Officer of
Employer;
and
WHEREAS, Employer and Employee desire to renew and amend Employee's
Employment Agreement pursuant to the terms of this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending legally to be bound, hereby agree as
follows:
1. APPOINTMENT. Employer hereby employs Employee as President and Chief
Executive Officer pursuant to the terms and provisions of this Agreement.
Employee hereby agrees to use his best efforts on behalf of Employer pursuant to
the terms of this Agreement.
2. DUTIES. Employee shall carry out such duties commensurate with the
title of President and Chief Executive Officer and such other duties as shall be
assigned to him by Employer's Board of Directors.
3. TERM. The term of employment ("Term of Employment" or "Term") shall
commence February 1, 1998, and shall continue for five (5) years unless
terminated by either party pursuant to the terms of this Agreement
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4. TERMINATION. Notwithstanding the specific provisions of Paragraph 3
hereof, the Term of Employment may be terminated as set forth herein.
4.1 TERMINATION FOR CAUSE. Notwithstanding any provision to the
contrary, the Term of Employment may be terminated immediately by Employer
at any time, without notice and shall be deemed terminated for cause, upon
the occurrence of any of the following events:
4.1.1. The conviction of Employee in a court of law of any
crime that constitutes a felony which involves dishonest or moral
turpitude; or
4.1.2. Employee's continued, repeated and willful violation of
specific written directions of the Board of Directors; or
4.1.3. Employee's repeated and/or willful failure to perform
his duties in accordance with the provisions of this Agreement after
written notice from the Board of Directors and Employee's failure or
refusal to resolve such matters within a reasonable period of time.
In the event of termination for cause, Employee shall not be entitled to
receive salary, severance pay or employee benefits other than as required
by law.
4.2 TERMINATION OF CONTRACT BY EMPLOYEE. Notwithstanding anything to
the contrary in this Agreement, Employee shall have the right to terminate
the Term of Employment at any time, upon thirty (30) day's notice to
Employer. Employer shall have the option to require Employee to work
during the notice period, or may accept Employee's resignation effective
immediately
4.3 OTHER TERMINATION. In the event of Employee's death or if
Employee is determined by a licensed physician of the state in which
Employee maintains his permanent residence to be mentally incompetent,
Employer may terminate this Agreement; provided, however, that Employee or
Employee' surviving spouse or heirs, as the case may be, shall receive
Employee's Base Salary for the remaining Term of this Agreement, or for two
years, whichever is greater, which sum shall be payable in equal
installments on the 1st and 15th day of each month during the remaining
Term.
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5. COMPENSATION. For all services to be rendered by Employee, during the
first year of this Agreement, Employee shall receive a salary equal to $27,083
per month, payable in equal installments on the 1st and 15th day of each month
or any other period designated by the Company, subject to annual increases as
recommended by the Compensation Committee and approved by the Board of
Directors.
As additional compensation to Employee during the Term of this Agreement,
Employer's Board of Directors shall establish and approve on an annual basis EPS
(Earnings per share) Projections for Employer (the "Approved Projections"),
which shall become an attachment to the agreement. If Employer achieves and
maintains 50 percent of the Approved Projections for any year (the "Base
Level"), Employer shall pay to Employee, as additional compensation, a sum equal
to $50,000. If Employer achieves 75 percent of the Approved projections during
any year, Employer shall pay to Employee, as additional compensation, an
additional $50,000. If Employer achieves 100 percent of the Approved
Projections, Employer shall pay to Employee, as additional compensation, an
additional $50,000. For every 25% above 100% that Employer achieves during any
year, Employer shall pay to Employee, as additional compensation, an additional
$50,000 per increase, pro rata.
6. EXPENSES - Upon submission of proper vouchers or receipts, Employer
will pay or reimburse Employee for authorized travel or entertainment expenses
relating to Employer's customers and other employees as are reasonably incurred
by him in accordance with Employer's entertainment expense policies and in
connection with the business of Employer, during the Term of Employment.
7. BENEFITS - Employee will be entitled to benefits as outlined in the
Employee Handbook which includes insurance, retirement and other benefits as are
generally available to salaried employees of Employer, subject to any
limitations on such benefits to officers, directors or highly paid employees in
order that such benefit programs qualify under Federal or State law for favored
tax or other treatment. Such benefits may be changed from time to time by
Employer.
Employer agrees to provide Employee with an automobile of Employee's selection
and Employer shall reimburse Employee for all expenses incurred in connection
with insurance, maintenance and use of said automobile. In the event of
termination of this Agreement, Employer shall transfer title to the vehicle
to Employee for a sum equal to the net book value of the automobile, which
shall be considered additional compensation to Employee.
Company will provide Employee with Life Insurance renewable annually to be paid
to his designated beneficiary in the amount not to exceed an annual premium of
$20,000.00.
3
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If during the Term of Employment, Employer is sold either through a transaction
involving the sale of a majority of Employer's stock to a single purchaser (or
to a group of purchasers) or through a transaction involving the sale of the
majority of Employer's assets, Employer shall pay to Employee a Sale Bonus equal
to two (2) years of Base Compensation in effect at the time of the sale. The
Sale Bonus shall be payable in a single payment due within 30 days of completion
of the sale. In addition to the Sale Bonus, if Employer is sold through a
transaction involving the sale of the majority of Employer's stock for a per
share price equal to 130% of the average stock price for the previous 180 days,
Employer shall pay to Employee a Premium Bonus equal to two (2) years of the
Base Compensation in effect at the time of the sale. The Premium Bonus shall be
payable in a single payment due within 30 days of completion.
8. STOCK OPTIONS - Employer will grant to Employee 25,000 options per
year to purchase shares of Employer's common stock over a five-year period.
Employee's stock option rights will be more fully defined in a separate
agreement.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the course of
employment, Employee will have knowledge of Employer's process, data,
techniques, computer software or hardware, trade secrets, clients, plans for
marketing and expansion, and other information that is proprietary in nature
with respect to Employer and the conduct of Employer's business (collectively
"Confidential Information"). During the Employment Term and following the
termination of this employment, for whatever reason, Employee agrees not to
disclose, divulge, make public, or use to the detriment of Employer, whether for
the benefit of himself or others, any Confidential Information except as is
permitted or required in the performance of Employee's duties for Employer or as
is authorized in writing by Employer. Upon termination of Employee's
employment, he shall return to Employer all Confidential Information in whatever
format and including any and all copies. The covenants provided in this Section
shall survive the termination of Employee's employment and this Agreement.
11. COVENANT NOT TO COMPETE.
11.01 During the Employment Term and for a period of two (2) years
following the termination of the employment, for whatever reason, except as
excluded in Section 4.3., Employee agrees not directly or indirectly, to
engage in any business which is in competition with that of Employer within
the United States of America or Canada (including federally recognized
Indian reservations) (the "Territory"). For purposes of this provision,
Employee will be deemed to engage in a business by accepting employment
with, rendering service to, or participating as a shareholder, director,
officer, employee, consultant, independent contractor, sales representative
or serving in any capacity similar to the foregoing on behalf of said
business. A business shall be deemed to be in competition with Employer if
its primary business is leasing, financing, reconditioning or selling used
gaming or gambling equipment, or furniture, fixtures or equipment
designated for use or installation in gambling facilities, and/or it
engages in origination or securitization of leases involving gaming
equipment and/or gaming related equipment.
11.02 During the Employment Term and for a period of two (2) years
following the termination of the employment, for whatever reason, Employee
agrees not, directly or
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indirectly, on his own account or for another, to either solicit any customer
or business of Employer nor to divert any customer or business from Employer.
11.03 During the Employment Term and for a period of two (2) years
following the termination of the employment, for whatever reason, Employee
agrees not directly or indirectly, to solicit for employment or employ any
employee or independent contractor of Employer.
11.04 In consideration for the two (2) years non-compete period
the Employee will receive two (2) years of base salary paid monthly as
severance pay.
12. MISCELLANEOUS PROVISIONS
12.01 Governing Law - This Agreement shall in all respects be
subject to, and governed by, the laws of the State of Nevada
12.02 Severability - The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the validity or
enforceability or any other provision and this Agreement shall be construed
in all respects as if such invalid or unenforceable provision had never
been in the Agreement.
12.03 Waiver - A party's failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect the
validity or enforceability or constitute a waiver of future enforcement of
that provision or of any other provision of this Agreement by the party or
any other party.
12.04 If Employer requests that Employee assist in litigation or
administrative proceedings in which Employee has knowledge or had
involvement during Employee's term of Employment, Employer shall reimburse
Employee within 30 days for all documented and submitted expenses incurred
in providing such services.
12.05 Notice - Notices to or for the respective parties shall be
given in writing and delivered in person or mailed by certified or
registered mail, return receipt requested, addressed to the respective
party at the address set out below, or at such other address as either
party may elect to provide in advance in writing to the other party:
EMPLOYEE: Johan P. Finley
EMPLOYER: PDS Financial Corporation
c/o Orine Green, Human Resources Manager
6171 McLeod Dr.
Las Vegas, NV 89120-4048
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12.06 Assignment - This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, assigns, heirs and personal
representatives, except that the rights and benefits of either of the
parties under this Agreement may not be assigned without the prior written
consent of the other party.
12.07 Amendments - This Agreement may be amended at any time by
mutual consent of the parties hereto, with any such amendment to be invalid
unless in writing, signed by the Company and the Employee.
12.08 Entire Agreement - Except for the separate documents
referenced above, this Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, relating to the employment of the Employee
by Employer not contained herein shall be of any force or effect.
12.09 Binding Arbitration; Injunctive Relief - Any controversy,
dispute, or claim arising under this Agreement which cannot be resolved to
the mutual satisfaction of the parties hereto shall be determined by
arbitration in the City of Las Vegas, Nevada, pursuant to the provisions of
the Nevada Uniform Arbitration Act. If the parties can agree on the
selection of an arbitrator, then the decision or award of that arbitrator
shall be final and binding on the parties. If they are unable to agree on
the arbitrator, each party shall select one arbitrator within fifteen (15)
days after demand for arbitration, and the two arbitrators so selected
shall select a third arbitrator within fifteen (15) days following their
initial selection. Any decision by two of the three arbitrators shall be
final and binding on the parties. Any decision or award under this Section
7.09 may be entered and a judgment obtained thereon in the Eighth Judicial
District Court of the State of Nevada. The nonprevailing party shall
reimburse the prevailing party for its reasonable attorneys' fees and costs
incurred in connection with the arbitration and/or court action. In the
event that a violation of this Agreement warrants injunctive relief,
including a violation of Sections 11.01, 11.02 or 11.03, the party who
desires such relief shall be entitled to seek such relief in the Eighth
Judicial District Court of the State of Nevada.
12.10 Burden and Benefit - This Agreement shall be binding upon,
and shall inure to the benefit of, the Employer and Employee, and their
respective heirs, personal and legal representatives, successors, and
assigns.
12.11 References to Gender and Number Terms - In construing this
Agreement, feminine or neuter pronouns shall be substituted for those
masculine in form and vice versa, and plural terms shall be substituted for
singular and singular for plural in any place in which the context so
requires.
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12.12 Headings - The various headings in this Agreement are
inserted for convenience only and are not part of this Agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
the day and year first written above.
"EMPLOYER" "EMPLOYEE"
PDS FINANCIAL CORPORATION
By:
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Its: Johan P. Finley
---------------------------
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EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Johan P. Finley and Steven M. Des
Champs (with full power to act alone), as his true and lawful
attorneys-in-fact and agents, with full powers of substitution and
resubstitutions, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to Annual Report on Form 10-KSB of PDS
Financial Corporation, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or their substitute or
substitutes, lawfully do or cause to be done by virtue hereof.
Name Title Dated
/s/ Johan P. Finley President, Chief Executive April 21, 1999
- ------------------------ Officer and Director
Johan P. Finley
/s/ Steven M. Des Champs Chief Financial Officer April 21, 1999
- ------------------------
Steven M. Des Champs
/s/ Peter D. Cleary Director April 21, 1999
- ------------------------
Peter D. Cleary
/s/ Lona M. Finley Director April 21, 1999
- ------------------------
Lona M.Finley
- ------------------------ Director April __, 1999
Charles R. Patterson
/s/ Joel M. Koonce
- ------------------------ Director April 21, 1999
Joel M. Koonce
- ------------------------ Director April __, 1999
James L. Morrell
