SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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 Section 240.14a-11 (c) or
Section 240.14a- 12
---
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
---
VENDINGDATA CORPORATION
-----------------------
(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)(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:
------------------------------------------------------------------
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:
------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 21, 2001
To the Stockholders of VendingData Corporation:
The Annual Meeting of the Stockholders (the "Annual Meeting") of
VendingData Corporation a Nevada corporation (formerly Casinovations
Incorporated and CVI Technology, Inc.) (the "Company"), will be held at the
principal offices of the Company at 6830 Spencer Street, Las Vegas, Nevada
89119, on Friday, December 21, 2001 at 10:00 a.m. local time, for the following
purposes:
(1) To elect Steven J. Blad and Ronald O. Keil as directors of the
Company for a term of one year; and
(2) To transact such other business as may properly come before
the Annual Meeting and any adjournments thereof.
Only stockholders of record at the close of business on November 20,
2001, are entitled to notice of and to vote at the Annual Meeting. The stock
transfer books will not be closed.
Stockholders are cordially invited to attend the Annual Meeting in
person. STOCKHOLDERS DESIRING TO VOTE IN PERSON MUST REGISTER AT THE ANNUAL
MEETING WITH THE INSPECTORS OF ELECTION PRIOR TO COMMENCEMENT OF THE ANNUAL
MEETING. IF YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON, WE URGE
YOU TO SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY AT YOUR EARLIEST
CONVENIENCE SO THAT YOUR SHARES MAY BE REGULARLY VOTED AT THE ANNUAL MEETING.
By order of the Board of Directors,
/s/ Stacie L. Brown
-----------------------------------
Stacie L. Brown
Secretary
Dated: November 30, 2001
VENDINGDATA CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
PAGE
----
VOTING SECURITIES ...............................................................3
ELECTION OF DIRECTORS............................................................5
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS.............6
Directors..............................................................6
Non-Director Executive Officers........................................7
Compensation of Non-Employee Directors.................................7
Board of Directors Meetings............................................7
Committees of the Board of Directors...................................7
Compensation of Executive Officer .....................................8
Employment Agreements..................................................9
Compliance with Section 16(a) of the Securities Exchange Act of 1934...9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................10
Conversion of Outstanding Indebtness..................................10
Private Placement of Common Stock.....................................10
Convertible Debt......................................................11
Indemnification of Directors and Officers.............................11
Transaction Review....................................................12
INDEPENDENT PUBLIC ACCOUNTANTS..................................................12
VOTING PROCEDURES...............................................................12
2002 ANNUAL MEETING OF STOCKHOLDERS.............................................13
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING...............................13
OTHER BUSINESS..................................................................13
EXHIBIT "A": CHARTER OF THE AUDIT COMMITTEE OF VENDINGDATA CORPORATION..........16
EXHIBIT "B": REPORT OF THE AUDIT COMMITTEE OF VENDINGDATA CORPORATION...........21
2
VENDINGDATA CORPORATION
6830 Spencer Street
Las Vegas, Nevada 89119
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of VendingData
Corporation (formerly Casinovations Incorporated and CVI Technology, Inc.) (the
"Company") in connection with the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held at the principal offices of the Company at
6830 Spencer Street, Las Vegas, Nevada 89119, on Friday, December 21, 2001 at
10:00 a.m. local time, and any adjournments thereof, for the purposes indicated
in the Notice of Annual Meeting of Stockholders.
THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. This Proxy Statement and the accompanying form of proxy are being
mailed to stockholders on or about November 30, 2001. The expenses of the
solicitation are to be borne by the Company.
Any stockholder giving a proxy has the power to revoke it prospectively
by giving written notice to the Company, addressed to Stacie L. Brown,
Secretary, at the Company's principal address before the Annual Meeting, by
delivering to the Company a duly executed proxy bearing a later date, by
notifying the Company at the Annual Meeting prior to the commencement of the
Annual Meeting, or by voting in person by ballot at the Annual Meeting after
notifying the inspectors of election of the stockholder's intention to do so
prior to the commencement of the Annual Meeting. The shares represented by the
enclosed proxy will be voted if the proxy is properly executed and received by
the Company prior to the commencement of the Annual Meeting, or any adjournment
thereof.
None of the proposals to be voted on at the Annual Meeting create a
right of appraisal under Nevada law. A vote "FOR" or "AGAINST" any of the
proposals set forth herein will only affect the outcome of the proposal.
VOTING SECURITIES
The close of business on November 20, 2001, has been fixed by the Board
of Directors of the Company (the "Board of Directors") as the record date for
determination of stockholders entitled to vote at the Annual Meeting. The
securities entitled to vote at the Annual Meeting consist of shares of common
stock, par value $.001, of the Company ("Common Stock"), with each share
entitling its owner to one vote. Common Stock is the only outstanding class of
voting securities authorized by the Company's Articles of Incorporation.
The number of outstanding shares of Common Stock at the close of
business on November 19, 2001, was 38,129,072 shares. The stockholders do not
possess the right to cumulate their votes for election of directors.
The following is a list of the beneficial stock ownership as of
November 19, 2001, of (1) all persons who beneficially owned more than 5% of the
outstanding Common Stock, (2) all directors, (3) all executive officers named in
the Summary Compensation Table (see page 8) and (4) all officers and directors
as a group at the close of business on November 19, 2001, according to
record-ownership listings as of that date, and according to verifications as of
November 19, 2001, which the Company solicited and received from each officer
and director:
3
Title of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership(1),(2) Class(2)
----- ---------------- -------------------- -----
Common Steven J. Blad 1,056,316(3) 2.7%
6830 Spencer Street
Las Vegas, Nevada 89119
Common James E. Crabbe 28,811,493(4) 73.5%
121 S.W. Morrison, Suite 1400
Portland, Oregon 97204
Common Eric S. Huson 2,518,024.5(5) 6.6%
668 Stone Pine Drive
Bend, OR 97701
Common Richard S. Huson Marital Trust 4,860,319(6) 12.7%
U/T/A dated 09/04/98
121 S.W. Morrison, Suite 1400
Portland, Oregon 97204
Common Ronald O. Keil 625,116(7) 1.6%
2904 N.E. Burton, Suite A
Vancouver, Washington 98662
Common Bob L. Smith 1,872,633(8) 4.9%
280 Liberty Street, S.E., Suite 300
Salem, Oregon 97301
Common All executive officers, directors and 30,021,339.5(9) 74.5%
director designees as a group (5 persons)
---------------------------
(1)Unless otherwise noted, the persons identified in this table have sole voting
and sole investment power with regard to the shares beneficially owned by them.
(2)Includes shares issuable upon the exercise of options and warrants
exercisable within 60 days of the stated date.
(3)Includes 175,100 shares issued to Mr. Blad directly, 1,216 shares issued to
the spouse of Mr. Blad, options to purchase 825,000 shares granted by the
Company and options to purchase 55,000 shares from the Richard S. Huson Marital
Trust U/T/A dated 09/04/98 (the "Huson Marital Trust"), the resulting trust of
the Richard S. Huson Revocable Trust U/T/A dated 09/04/98 (the "Huson Revocable
Trust").
(4)Includes 22,870,328 shares held by the James E. Crabbe Revocable Trust,
250,000 shares issuable upon the exercise of certain Warrants, 826,922 shares
issuable upon the conversion of debt, options to purchase 2,000 shares granted
by the Company, 97,116 shares of common stock held by the Richard S. Huson GST
Exempt Trust U/T/A dated 09/04/98 for which Mr. Crabbe holds the voting power,
and 4,765,127 shares of common stock held by the Huson Marital Trust for which
Mr. Crabbe holds voting power.
(5)Includes 70,000 shares issued to Tower Rock Partners, LLC, an entity in which
Mr. Huson owns an interest, 2,382,563.5 shares issued to the Huson Marital
Trust, a trust for which Mr. Huson is a beneficiary, 25,000 shares issuable upon
the exercise of certain Warrants, 38,461 shares issuable upon the conversion of
debt, and options to purchase 2,000 shares granted by the Company. As a result
of the power of attorney granted to James E. Crabbe, 2,382,563.5 shares are
4
voted by Mr. Crabbe, and are, therefore, included in the beneficial ownership of
each of James E. Crabbe, the Huson Marital Trust, and Eric Huson.
(6)Includes 4,765,127 shares of common stock issued directly to the Huson
Marital Trust, 37,500 shares issuable upon the exercise of certain Warrants, and
57,692 shares issuable upon the conversion of debt. As a result of the power of
attorney granted to James E. Crabbe, 4,765,127 shares are voted by Mr. Crabbe,
and are, therefore, included in the beneficial ownership of both the Huson
Marital Trust and Mr. Crabbe. In addition, 2,382,563.5 shares issued to the
Huson Marital Trust are also included in the beneficial ownership of Eric Huson,
as he is a co-beneficiary of the Huson Marital Trust.
(7)Includes 567,786 shares held directly by Ronald O. Keil, 28,330 shares held
by Mr. Keil's spouse, 25,000 shares issuable upon the exercise of certain
Warrants, and options to purchase 4,000 shares granted by the Company.
(8)Includes 767,545 shares held directly by Mr. Smith, 995,088 shares held by
VIP's Industries, Inc. ("VIP's"), an entity controlled by Mr. Smith, 1,000
shares held jointly by Mr. Smith and his daughter, 50,000 shares issuable upon
the exercise of certain Warrants held by VIP's, options to purchase 55,000
shares from the Huson Marital Trust, the resulting trust of the Huson Revocable
Trust, and options to purchase 4,000 shares granted by the Company.
(9)Includes 350,000 shares issuable upon the exercise of Warrants, 947,000
shares issuable upon the exercise of stock options, 865,383 shares issuable upon
the conversion of debt, and 27,858,956.5 shares issued directly.
ELECTION OF DIRECTORS
Following the Annual Meeting of Stockholders, the Board of Directors
will consist of five persons. The Bylaws of the Company provide for a Board of
Directors consisting of one to ten persons who are elected generally for a term
of one year. Directors are to serve until their successors are elected and have
qualified.
If the enclosed proxy is duly executed and received in time for the
Annual Meeting and if no contrary specification is made as provided therein, the
proxy will be voted in favor of electing the nominees Steven J. Blad and Ronald
O. Keil for terms of office expiring in 2002. If any such nominee shall decline
or be unable to serve, the proxy will be voted for such person as shall be
designated by the Board of Directors to replace any such nominee. The Board of
Directors presently has no knowledge or reason to believe that any of the
nominees will refuse or be unable to serve. Any vacancies on the Board of
Directors which occur during the year will be filled, if at all, by the Board of
Directors through an appointment of an individual to serve only until the next
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN
FAVOR OF THE ELECTION OF MESSRS. STEVEN J. BLAD
AND RONALD O. KEIL TO THE BOARD OF DIRECTORS.
5
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following information is furnished with respect to each member of
the Board of Directors and the Company's executive officers who are not
directors. There are no family relationships between or among any directors or
executive officers of the Company.
DIRECTORS
NAME AGE SINCE POSITION
---- --- ----- --------
Steven J. Blad 50 1998 Chief Executive Officer,
President, Treasurer and Director
James E. Crabbe 56 2000 Chairman of the Board
Eric S. Huson 31 2000 Director
Ronald O. Keil 69 1998 Director
Bob L. Smith 63 1998 Vice-Chairman of the Board
STEVEN J. BLAD. Mr. Blad was President and Chief Executive Officer of
Flagship Games International from 1987 to July 1991. From July 1991 to September
1994, Mr. Blad was a consultant for Marketing and Gaming in Atlanta, Georgia.
>From October 1994 to September 1996, Mr. Blad was a consultant for Spintek
Gaming Technologies. Mr. Blad joined the Company in October 1996 as Vice
President of Sales and Marketing until April 30, 1997, when he was named
President of the Company. Mr. Blad served in that position until May 27, 1998,
when he became Chief Executive Officer, President and Director of the Company.
Mr. Blad received a Bachelor of Arts degree in 1973 from Carson Newman. He
obtained a Masters of Arts degree in 1975 from Southern Baptist Graduate School.
>From 1975 to 1976, Mr. Blad attended additional graduate studies at the
University of Alabama.
JAMES E. CRABBE. Mr. Crabbe became a member and Vice-Chairman of the
Board of Directors on May 25, 2000, and on August 16, 2001, was elected Chairman
of the Board of Directors. From 1980 to November, 2000, when he retired, Mr.
Crabbe was the President of The Crabbe Huson Group, Inc., an investment
management company, in Portland, Oregon. Mr. Crabbe was granted a Series 63
Securities Dealer License in 1989 and earned a Bachelor of Science degree from
the University of Oregon in 1967.
ERIC S. HUSON. Mr. Huson became a member of the Board of Directors on
May 25, 2000. From May, 1999, to July, 2000, Mr. Huson was an Equities
Researcher employed with Despain and Coby LLC. Prior to working at Despain and
Coby LLC, Mr. Huson was Operations Manager at Rendova Boats LLC. Mr. Huson has a
Bachelor of Arts degree in History from Linfield College.
RONALD 0. Keil. Mr. Keil has been a member of the Board of Directors
since October 1998. Since July 1990, Mr. Keil and his son, Rick, own and operate
two supermarkets located in San Diego, California. From March 1995 to June 1998,
Mr. Keil was Managing Partner of RJL Properties, Inc. that owned and operated
four hotels and a mini-storage facility. In addition, from October 1993 to
January 1998, Mr. Keil owned a 142-room Holiday Inn located in Idaho Falls,
Idaho. From August 1987 to May 1997, Mr. Keil served as Chairman of the Board of
Directors of Veragon Corporation, now known as Drypers Corporation, a diaper
manufacturing company. From January 1960 to March 1985, Mr. Keil owned and
operated Keil's Food Stores, a regional chain of supermarkets located in
Washington and Oregon. Mr. Keil is a founder and director of the Bank of Clark
County, Oregon. Mr. Keil earned a Bachelor of Science degree in Business
Administration from Lewis and Clark College and has completed graduate work
towards an MBA from the University of Oregon.
6
BOB L. SMITH. Mr. Smith has been a member of the Board of Directors
since May 1998 and was Chairman of the Board from April 29, 1999 until August
16, 2001. Mr. Smith also serves as Chairman of the Board of Directors and Chief
Executive Officer of VIP's Industries, Inc., a company co-founded by Mr. Smith
in 1968 that oversees restaurant, hotel and real estate development in five
Western states. In 1966, he started the Bob L. Smith Real Estate Company,
concentrating on real estate and development in Oregon, Washington and Northern
California. From 1962 through 1965, Mr. Smith was Real Estate Analyst and
Marketing Supervisor with the American Oil Company. Mr. Smith currently serves
on the Board of Directors of Centennial Bank, Regency of Oregon (formerly Blue
Cross and Blue Shield of Oregon), The Crabbe-Huson Funds, Inc., an investment
management company of which Director James E. Crabbe is President, and Flying J.
Inc., an integrated oil company. Mr. Smith received a Bachelor of Science degree
in Business Administration from the University of Oregon in 1962.
NON-DIRECTOR EXECUTIVE OFFICERS
STACIE L. BROWN. Ms. Brown joined the Company in July 1999 as Corporate
Counsel. Previously, she was in private practice with Dickerson, Dickerson,
Consul & Pocker in Las Vegas, Nevada, from 1995-1999. Ms. Brown was admitted to
the State Bar of Nevada in 1995, and to the District of Columbia Bar in 1998.
Ms. Brown is admitted to practice before the U.S. District Court, District of
Nevada, the U.S. Courts of Appeal for the Ninth and District of Columbia
Circuits and the United States Supreme Court. Ms. Brown earned her juris doctor
from the University of Michigan School of Law in 1995 and received a Bachelor of
Arts degree in 1992 from Ball State University with a triple major in French,
Political Science and Telecommunications.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors' fees were $500 per quarter/meeting for 2000 and 2001 and are
paid to directors who are not employees of the Company. All expenses for meeting
attendance or out of pocket expenses connected directly with their
representation on the Board of Directors will be reimbursed by the Company.
Directors who are employees of the Company or its subsidiaries do not receive
compensation for their services as directors.
BOARD OF DIRECTORS MEETINGS
The Board of Directors generally meets quarterly, and in the twelve
months ended December 31, 2000, the Board of Directors held three meetings. All
directors attended at least 75% of the meetings held.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two standing committees, the Executive
Committee, which performs the functions of a compensation committee, and the
Audit Committee. The Board of Directors appointed Bob Smith, James Crabbe and
Steven Blad to serve on the Executive Committee. One function of the Executive
Committee is to review and make recommendations to the Board of Directors with
respect to the compensation of the Company's executive officers. The Audit
Committee acts pursuant to a written charter adopted by the Board of Directors
and attached as Exhibit "A". The Audit Committee currently consists of its
Chairman, Ronald O. Keil, and Eric S. Huson, a member, each of whom are
independent as defined in NASD Marketplace Rule 4200(a)(14). The purpose of the
Audit Committee is to review the internal controls and financial reporting of
the Company. The Executive Committee and the Audit Committee generally meet
quarterly. During the twelve months ended December 31, 2000, the Audit Committee
and the Executive Committee each held one meeting. The members of the Executive
Committee and the Audit Committee attended at least 75% of the meetings held. A
copy of the Report of the Audit Committee is attached as Exhibit "B".
7
COMPENSATION OF EXECUTIVE OFFICER
The following tables set forth compensation received by Steven J. Blad,
the Company's Chief Executive Officer, the only executive officer of the Company
whose total compensation for the year ended December 31, 2000, exceeded
$100,000.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by
or paid to, the Company's chief executive officer for services rendered in all
capacities during its fiscal years ended December 31, 2000, 1999, and 1998.
Annual Compensation Long Term Compensation
---------------------------------------- ----------------------------------------
Awards Payouts
----------------------------- ---------
Other Securities All
Name and Principal Salary Bonus Annual Restricted Under- LTIP Other
Position Year $ $ Compen- Stock Lying Payouts Compen-
sation Award(s) Options/SARs # $ sation
$ $ $(1)
-------------------------- ------- ---------- -------- --------- ------------ --------------- --------- -----------
Steven J. Blad, 2000 282,000 -0- -0- -0- 100,000 -0- -0-
Chief Executive Officer, 1999 218,363 -0- -0- -0- 600 -0- -0-
President, Treasurer and 1998 102,520 -0- -0- 10,000 200,000 -0- 91,500(2)
Director
(1)The Company provides certain perquisites and other personal benefits
to some or all of the executives. The un-reimbursed incremental cost to the
Company of providing perquisites and other personal benefits did not exceed, as
to any of the executives for any year, the lesser of $50,000 or 10% of the total
salary and bonus paid to such executive for such year.
(2)Represents the compensation received by Gametek, an entity
controlled by Steven J. Blad, in the fiscal years ended December 31, 1998.
Gametek provided sales, marketing and management consulting services to the
Company and received $91,500 in 1998.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock
options and stock appreciation rights during the fiscal year ended December 31,
2000, made to the named executive officer.
Individual Grants
---------------------------------------------------------------------------------------
Name Number of Securities Percent of Total Exercise or Expiration Date
Underlying Options/ Options/SARs Granted to Base Price
SARs Granted Employees in Fiscal Year(1) ($/Share)
----------------- -------------------- ------------------------------ ------------- ------------------
Steven J. Blad 100,000 59% $2.50 January 1, 2005
(1)For the year ended December 31, 2000, the Company granted to
employees options to purchase an aggregate of 169,500 shares of Common Stock.
8
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/SARS AT
ACQUIRED ON VALUE OPTIONS/SARS AT FISCAL YEAR
NAME EXERCISE (#) REALIZED ($) FISCAL YEAR END ($) END ($) (1)
-------------- ------------ ------------ ------------------- ---------------
Steven J. Blad 0 0 100,000 0
(1) Value based upon $.35 per share, the price at which the Company has most
recently sold its Common Stock.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
As none of the Company's named executive officers received any stock
options under a long-term incentive plan during the fiscal year ended December
31, 2000, a table reflecting the same has been intentionally omitted.
EMPLOYMENT AGREEMENTS
On August 10, 1999, the Company entered into an employment agreement
with Steven J. Blad, the Company's President and Chief Executive Officer. The
new employment agreement became effective as of January 1, 2000, and is for a
term of three years. Pursuant to the new employment agreement, Mr. Blad shall
receive a monthly base salary of $23,500.00 and 400,000 stock option rights with
an exercise price of $2.50 per share. With respect to the vesting of the
options, 100,000 stock options vested as of the effective date of the new
employment agreement, and 100,000 stock options vested as of January 31, 2001,
with the balance to vest over a three-year period thereafter as long as Mr. Blad
remains employed as the Company's President and Chief Executive Officer and
satisfies certain performance goals to be established by the Company's Board of
Directors. As with the prior employment agreement with Mr. Blad, the new
employment agreement contains provisions with respect to confidentiality and
non-competition.
On November 20, 2001, Mr. Blad's employment agreement was extended
through December 31, 2004, and, in connection with this extension, the Company
granted Mr. Blad 2,000,000 stock option rights with an exercise price of $.35
per share. With respect to the vesting of these options, 670,000 stock options
vested as of November 20, 2001, with the balance to vest over a two-year period.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of the
Company's Common Stock (collectively, "Reporting Persons") to file with the SEC
initial reports of ownership and changes in ownership of the Company's Common
Stock. Reporting Persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended December 31, 2000, all Reporting Persons complied with all applicable
filing requirements.
9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1999, the Company entered into a new employment agreement
with Steven J. Blad effective January 1, 2000, and on November 20, 2001, this
agreement was extended through December 31, 2004. The agreement provides for
monthly compensation of $23,500, which may be renegotiated. Pursuant to the
agreement, 100,000 options (exercisable at a price of $2.50 per share) were
granted upon the effective date of the agreement. The Company recorded
compensation expense related to the options granted for the excess of fair value
of the underlying common stock at a grant date ($2.60 per share) over the
exercise price of $2.50 per share for each grant. The agreement also provides
for the granting of 100,000 options ($2.50 per share) for each year (2000, 2001,
2002) based upon the Company meeting its goals provided by the Board of
Directors, and effective January 31, 2001, Mr. Blad had been granted a total of
200,000 options ($2.50 per share) pursuant to the agreement.
In connection with the November 20, 2001, extension of Mr. Blad's
employment agreement, the Company granted Mr. Blad 2,000,000 stock option rights
with an exercise price of $.35 per share. With respect to the vesting of these
options, 670,000 stock options vested as of November 20, 2001, with the balance
to vest over a two-year period.
During the year ended December 31, 1999, Richard S. Huson, former
Chairman of the Board and controlling stockholder of the Company, made loans to
the Company for working capital purposes. The balances payable by the Company
aggregated $261,194 at December 31, 2000. The Company executed a replacement
promissory note representing the aggregate amount of advances made by Mr. Huson
where the outstanding principal and interest is to be repaid at an interest rate
of 9.5% per annum in monthly installments of $10,791 beginning July 1, 1999.
Advances to the Company from shareholders and Board members during 2000
amounted to $1,450,000 in the form of long term notes with interest rates of 9%
or 9.5%.
CONVERSION OF OUTSTANDING INDEBTNESS
In May 1999, the Company and the Richard S. Huson Revocable Trust U/T/A
dated 09/04/98 (the "Huson Trust"), of which Richard S. Huson, a former director
and principal stockholder of the Company, was co-trustee, entered into a
subscription agreement whereby the Huson Trust agreed to convert a certain
portion of indebtedness owed by the Company to the Huson Trust in exchange for
shares of common stock at a conversion rate of $2.60 per share. Pursuant to the
terms of the subscription agreement, the Huson Trust converted $999,999 of
outstanding indebtedness into 384,615 shares of common stock and received a
replacement promissory note for the balance of the outstanding indebtedness.
PRIVATE PLACEMENT OF COMMON STOCK
In May 1999, the Company entered into a subscription agreement with
James E. Crabbe whereby he agreed to purchase 2,000,000 shares of the Company's
common stock for $2.60 per share for an aggregate subscription amount of
$5,200,000. Pursuant to the terms of the subscription agreement, the stockholder
delivered $1,300,000 upon execution of the subscription agreement and agreed to
pay the balance of $3,900,000, in no more than three equal installments of not
less than $1,300,000 by July 10, 1999. The Company received the payment of the
balance of $3,900,000 prior to July 10, 1999. The Company used the proceeds from
this private placement for general working capital purposes.
On September 22, 1999, the Company entered into subscription agreements
with certain stockholders of the Company whereby the stockholders agreed to
purchase 1,000,000 shares of the Company's common stock for $2.60 per share for
10
an aggregate subscription amount of $2,600,000. Of the 1,000,000 shares
purchased, these directors of the Company purchased an aggregate of 140,000
shares, and Mr. Crabbe's trust purchased 860,000 shares. The Company used the
proceeds from the private placement for working capital purposes.
For the 12 months ending December 31, 2000, the Company received
proceeds of $1,700,000, from members of the Board, a current shareholder and an
individual. The terms of the notes range from 9% to 10.5%. The notes also range
from 16 months to 22 months in term.
CONVERTIBLE DEBT
On May 25, 2000, the Board authorized a private placement of $2.2
million of convertible notes. The convertible notes accrue interest at 9.5% per
annum, mature two years from the date of issuance (where the holder has the
discretion to extend maturity date for up to three one-year periods) and are
convertible into shares of the Company's common stock one year after issuance at
a rate of $2.60 per share. The $2.2 million of convertible notes are convertible
into a maximum of 846,153 shares of the Company's common stock. In addition, for
each convertible note of $50,000, the Company issued a warrant to purchase
12,500 shares of the Company's common stock with an exercise price of $2.60.
With the approval of the Board, certain members of the Board and a
controlling stockholder, the Huson Trust, participated in the Company's private
placement of convertible notes. The following table summarizes the purchases of
convertible notes by members of the Board and certain stockholders.
NAME AMOUNT WARRANTS MATURITY CONVERTIBILITY
----------------------- ----------- --------- ------------------ ------------------
The James E. Crabbe $1,000,000 250,000 May 30, 2002 May 30, 2001
Revocable Trust
VIP's Industries, Inc. $200,000 50,000 May 31, 2002 May 31, 2001
Eric Huson $100,000 25,000 June 1, 2002 June 1, 2001
The Huson Trust $150,000 37,500 June 9, 2002 June 9, 2001
Ronald O. Keil $100,000 25,000 September 28, 2002 September 28, 2001
----------------------- ----------- ---------
TOTAL $1,550,000 387,500
The $200,000 in convertible notes purchased by and the warrants to
purchase 50,000 shares of the Company's common stock issued to VIP's Industries,
Inc., an entity controlled by the Chairman of the Board, were in exchange for
the cancellation of a prior convertible note dated March 22, 2000 in the
original principal amount of $200,000.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company shall indemnify to the fullest extent permitted by, and in
the manner permissible under the laws of the State of Nevada, any person made,
or threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that such
individual is or was a director or officer of the Company, or served any other
enterprise as director, officer or employee at the request of the Company. The
Board of Directors, in its discretion, shall have the power on behalf of the
Company to indemnify any person, other than a director or officer, made a party
to any action, suit or proceeding by reason of the fact that he/she is or was an
employee of the Company.
11
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Securities Act'") may be permitted to directors,
officers and controlling persons of the Company, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceedings) is asserted by such
director, officer, or controlling person in connection with any securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issues.
Further, the Company has obtained Directors and Officers Insurance.
Pursuant to the policy with Great American Insurance Company, the coverage
includes Company reimbursement and sections action claims entity coverage. The
coverage has a $3,000,000 aggregate limit of liability in each policy year
(inclusive of defense costs).
TRANSACTION REVIEW
The Company has adopted a policy that any transactions with directors,
officers or entities of which they are also officers or directors or in which
they have a financial interest, will only be on terms consistent with industry
standards and approved by a majority of the disinterested directors of the
Company's Board of Directors. Interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors of the Company
or a committee thereof which approves such transactions. If there are no
disinterested directors, the Company shall obtain a majority vote of the
stockholders approving the transaction.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent accountants are James E. Scheifley &
Associates, P.C. James E. Scheifley & Associates, P.C. has audited the Company's
financial statements since its inception. The Company does not presently expect
a representative of the independent auditors to be present at the meeting of
stockholders. The Board of Directors has not yet selected an auditor for the
year ended December 31, 2001.
VOTING PROCEDURES
With respect to the election of nominees to the Board of Directors, a
majority of a quorum of stockholders present in person or represented by proxy
voting "FOR" the election of said nominees is sufficient to approve the matters
being voted on at the meeting. A quorum of stockholders exists when a majority
of the stock issued and outstanding and entitled to vote at a meeting is
present, in person or represented by proxy, at the meeting. Abstentions are
effectively treated as votes "AGAINST" the election of the nominees to the Board
of Directors.
The Company will appoint two inspectors of election to: (i) determine
the number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of a proxy; (ii) receive votes, ballots, or consents; (iii)
hear and determine all challenges and questions in any way arising in connection
with the right to vote; (iv) count and tabulate all votes or consents; (v)
determine when the polls shall close; (vi) determine the results; and (vii)
perform any other act which may be proper to conduct the election or vote with
fairness to all stockholders.
12
2002 ANNUAL MEETING OF STOCKHOLDERS
The next Annual Meeting of Stockholders will be held in or about May
2002.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
The Annual Meeting of Stockholders in 2002 will be held in or about May
2002. Proposals of stockholders intended to be presented at the Annual Meeting
of Stockholders in 2002 pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934, as amended, must be received by the Company no later than January 7,
2002, to be considered for inclusion in the Company's proxy materials for that
meeting. The proposal must be mailed to the Company's principal executive
offices at 6830 Spencer Street, Las Vegas, NV 89119, Attention: Secretary.
OTHER BUSINESS
The Board of Directors does not know of any other business which will
be presented for action by the stockholders at this Annual Meeting. However, if
any business other than that set forth in the Notice of Annual Meeting of
Stockholders should be presented at the Annual Meeting, the members of the proxy
committee named in the enclosed proxy intend to take such action as will be in
harmony with the policies of the Board of Directors of the Company, and in that
regard will use their discretion and vote all proxies in accordance with their
judgment.
13
The Company's 2000 Report to Stockholders, including financial
statements at and for the periods ended December 31, 2000, was mailed to all
stockholders on June 22, 2001. These proxy materials are being mailed to all
stockholders of the Company as of November 20, 2001.
By order of the Board of Directors,
/s/ Stacie L. Brown
-----------------------------------
Stacie L. Brown
Secretary
Dated: November 30, 2001
THE COMPANY'S ANNUAL REPORT ON SEC FORM 10-KSB, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, FOR THE 12 MONTHS ENDED DECEMBER 31, 2000,
WILL BE FURNISHED WITHOUT CHARGE TO ANY BENEFICIAL OWNER OF SECURITIES ENTITLED
TO VOTE AT THIS ANNUAL MEETING. TO OBTAIN A COPY OF THE FORM 10-KSB, WRITTEN
REQUEST MUST BE MADE TO THE COMPANY, AND THE REQUESTING PERSON MUST REPRESENT IN
WRITING THAT SUCH PERSON WAS A BENEFICIAL OWNER OF THE COMPANY'S SECURITIES AS
OF NOVEMBER 20, 2001.
REQUESTS SHOULD BE ADDRESSED TO:
VendingData Corporation
Attention: Stacie L. Brown, Secretary
6830 Spencer Street
Las Vegas, Nevada 89119
14
VENDINGDATA CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, DECEMBER 21, 2001
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of VendingData Corporation hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders, Proxy
Statement, and Informational Statement to Stockholders in connection with the
Annual Meeting of Stockholders to be held at the principal offices of
VendingData Corporation, 6830 Spencer Street, Las Vegas, Nevada 89119, on
Friday, December 21, 2001 at 10:00 o'clock in the morning, local time, and
hereby appoints Steven J. Blad and James E. Crabbe, and each or any of them,
proxies, with power of substitution, to attend and to vote all shares the
undersigned would be entitled to vote if personally present at said Annual
Meeting and at any adjournment thereof. The proxies are instructed to vote as
follows:
(1) Election of Directors: FOR WITHHELD
STEVEN J. BLAD
FOR WITHHELD
RONALD O. KEIL
(2) In their discretion, upon such other matters as may properly come before the
Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
FAVOR OF ALL NOMINEES LISTED, AND IN THE DISCRETION OF THE PROXIES, ON OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
Date: ________________________________, 2001
Signature(s)
-------------------------------------------
-------------------------------------------
-------------------------------------------
NOTE: PLEASE SIGN PROXY EXACTLY AS YOUR NAME APPEARS.
-----------------------------------------------
Date the Proxy in the space provided. If shares are held in the name of two or
more persons, all must sign. When signing as attorney, executor, administrator,
trustee, or guardian, give full title as such. If signer is a corporation, sign
full corporate name by duly authorized officer.
15
EXHIBIT A
16
CHARTER
OF THE
AUDIT COMMITTEE
OF
VENDINGDATA CORPORATION
AS ADOPTED BY THE AUDIT COMMITTEE ON
DECEMBER 9, 1999
AND
AS APPROVED BY THE
BOARD OF DIRECTORS ON
DECEMBER 9, 1999
AND
AS AMENDED BY THE BOARD OF DIRECTORS ON
MAY 25, 2000
AND
AS AMENDED BY THE BOARD OF DIRECTORS ON
SEPTEMBER 6, 2000
I. Mission Statement
It is the mission of the Audit Committee (the "Committee") of
VendingData Corporation (the "Company") to assist the Board of Directors in
fulfilling its oversight responsibilities. The Committee shall monitor the
Company's systems of internal controls and its audit and financial reporting
processes, as well as the processes for monitoring the Company's compliance with
laws and regulations.
In performing its duties, the Committee will maintain effective working
relationships with the Board of Directors, management, and the auditors. In
order to effectively perform the duties of a Committee member, each member of
the Committee will obtain an understanding of the responsibilities of Committee
membership, as well as the Company's business, operations, and risks.
II. ORGANIZATION
The Board of Directors shall select the members of the Committee, which
shall be comprised of two (2) or three (3) outside directors who are independent
of the Company's management and who are financially literate or who shall become
financially literate within a reasonable period of time after being appointed to
the Committee. At least one member of the Committee shall have accounting or
related financial management expertise. The members of the Committee shall
appoint a Committee Chairperson (the "Chairperson").
III. MEETINGS
The Committee shall meet regularly to discuss financial information on
a timely basis. The number and length of the Committee's meetings shall be
determined after consideration of the Committee's objectives.
17
IV. REPORTING RESPONSIBILITIES
The Committee shall regularly update the Board of Directors on
Committee activities and shall make appropriate recommendations to the Board of
Directors.
V. ROLES AND GENERAL RESPONSIBILITIES
The Committee shall undertake the following roles and general
responsibilities:
1. Internal Controls
The Committee shall:
1. Communicate the importance of internal controls;
2. Measure and continually monitor the effectiveness of
the Company's financial and operating controls;
3. Evaluate the extent to which auditors review computer
systems and applications, the security thereof, and
the contingency plan which would become effective in
the event of a system breakdown;
4. Assess the extent to which management has implemented
auditors' recommendations; and
5. Foster positive communication among the auditors, the
Committee and management.
B. FINANCIAL REPORTING
The Committee shall:
1. Inquire about significant risks and exposures and
plans to minimize the same;
2. Review annual and interim financial statements and
determine their completeness and consistency with
known financial information;
3. Assess whether financial statements reflect generally
accepted accounting principles;
4. Meet with management and auditors to review the
financial statements and the results of the audit;
5. Review the Management Discussion and Analysis and
other sections of the annual report before its
release to ensure the information set forth therein
is adequate and consistent with the Committee's
knowledge of the Company and its operations;
6. Be briefed on the methods by which management
develops and summarizes quarterly financial
information;
18
7. Gather information as to whether actual financial
results varied significantly from projections;
8. Gain insight as to whether differences in financial
ratios and relationships are consistent with the
Company's operations and financing practices;
9. Ensure that generally accepted accounting principles
are consistently applied;
10. Consider any actual or proposed changes in financial
or reporting practices;
11. Verify that interim financial statements contain
adequate and appropriate disclosures; and
12. Ensure that auditors communicate specific matters to
the Committee.
C. COMPLIANCE WITH LAWS AND REGULATIONS
The Committee shall:
1. Review the results of management's investigation
regarding any fraudulent acts or accounting
irregularities;
2. Be satisfied that all regulatory matters have been
considered in the preparation of the Company's
financial statements; and
3. Review the findings of any examinations by regulatory
agencies such as the United States Securities and
Exchange Commission.
D. AUDITS
The Committee shall:
1. Review the proposed scope and approach of all audits;
2. Review the performance of the auditors and recommend
to the Board of Directors the appointment or
discharge of external auditors; and
3. Consider and confirm the independence of the external
auditors in accordance with professional standards.
E. MISCELLANEOUS
The Committee shall:
1. Meet privately, at the Committee's discretion, with
auditors and/or management to discuss particular
matters;
19
2. Ensure that the findings and recommendations of the
auditors are received and discussed on a timely
basis;
3. Review, with the Company's counsel, any legal matters
which could significantly impact the Company's
financial statements;
4. Perform oversight functions as requested by the Board
of Directors; and
5. Review and update the Committee's Charter and obtain
approval of such amendments from the Board of
Directors.
20
EXHIBIT B
21
VENDINGDATA CORPORATION
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of VendingData
Corporation (the "Company") has reviewed the Company's audited financial
statements for the fiscal year ended December 31, 2000. In conjunction with its
review, the Audit Committee has met with the management of the Company to
discuss the audited financial statements. In addition, the Audit Committee has
discussed with the Company's independent auditor, James E. Scheifley &
Associates, P.C. ("Scheifley & Associates"), the matters required pursuant to
SAS 61 and has received the written disclosures and the letter from Scheifley &
Associates required by Independence Standards Board Standard No. 1.
This report has been approved by all of the members of the Audit
Committee, each of whom has been determined to be independent pursuant to NASD
Marketplace Rule 4200(a) (14).
/s/ Ronald O. Keil
---------------------------------
Ronald O. Keil
/s/ Eric S. Huson
---------------------------------
Eric S. Huson
MEMBERS OF THE AUDIT COMMITTEE
November 29, 2001
22