ALLIANCE GAMING CORP, S-4, 1996-03-07

ALLIANCE GAMING CORP
S-4, 1996-03-07
MISCELLANEOUS AMUSEMENT & RECREATION

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<PAGE>

REGISTRATION NO. 33-

--------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------

ALLIANCE GAMING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

--------------

NEVADA 7993 88-0104066
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)

4380 BOULDER HIGHWAY JOHN W. ALDERFER
LAS VEGAS, NEVADA CHIEF FINANCIAL OFFICER
(702) 435-4200 4380 BOULDER HIGHWAY
(ADDRESS, INCLUDING ZIP CODE, AND LAS VEGAS, NEVADA 89121
TELEPHONE NUMBER, INCLUDING (702) 435-4200
AREA CODE, OF REGISTRANT'S PRINCIPAL (ADDRESS, INCLUDING ZIP CODE, AND
EXECUTIVE OFFICES) TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
LAWRENCE LEDERMAN, ESQ. GERALD ADLER, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
1 CHASE MANHATTAN PLAZA 919 THIRD AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10022
TELEPHONE (212) 530-5000 TELEPHONE (212) 891-9440

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement is declared
effective and the effective time of the merger (the "Merger") of BGII
Acquisition Corp. (the "Merger Subsidiary"), a wholly-owned subsidiary of
Alliance Gaming Corporation ("Alliance" or the "Registrant"), with and into
Bally Gaming International, Inc. ("BGII"), pursuant to the Agreement and Plan
of Merger, dated as of October 18, 1995 among Alliance, the Merger Subsidiary
and BGII, as amended (the "Merger Agreement"), as described in the enclosed
Joint Proxy Statement/Prospectus included as Part I of this Registration
Statement.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]

CALCULATION OF REGISTRATION FEE

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE AMOUNT TO PRICE PER OFFERING REGISTRATION
REGISTERED(1) BE REGISTERED UNIT PRICE(2) FEE(3)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.10 per share
15% Non-Voting Junior
Special Stock, Series
B, $.10 par value
- ------------------------------------------------------------------------------------------
Total................... $72,271,320 $100.00
</TABLE>
- -------------------------------------------------------------------------------

(1) This Registration Statement relates to securities of Alliance issuable to
holders of shares of common stock, par value $.01 per share, of BGII
("BGII Common Stock") in the Merger.

(2) Based upon the product of (a) 9,799,501, the maximum number of shares of
BGII Common Stock that will be outstanding immediately prior to the Merger
and (b) $7.375, the market value of the outstanding BGII Shares, based on
the average of the high and low sales price of BGII Common Stock reported
on the NASDAQ National Market System on March 6, 1996.

(3) Pursuant to Rule 457(f)(3) under the Securities Act of 1933, as amended
(the "Act"), the amount of cash to be paid by Alliance to BGII
stockholders in the Merger ($76,730,093) has been deducted from the value
of the BGII Common Stock to be received by Alliance in the Merger
($72,271,320), thereby leaving an amount less than zero. Therefore,
pursuant to Section 6(b) of the Act, Alliance is paying to the Commission
the minimum required fee of $100.00.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

ALLIANCE GAMING CORPORATION

CROSS-REFERENCE SHEET
FOR
REGISTRATION STATEMENT ON FORM S-4 AND PROSPECTUS

<TABLE>
<CAPTION>
LOCATION IN JOINT PROXY
FORM S-4--ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
--------------------------------- -----------------------
<C> <S>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus. Facing Page of the Registration
Statement; Cross-Reference Sheet;
Outside Front Cover Page of Joint
Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................... AVAILABLE INFORMATION; TABLE OF
CONTENTS
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information.... SUMMARY; RISK FACTORS;
COMPARATIVE PER SHARE MARKET
PRICE DATA AND DIVIDEND POLICY;
COMPARATIVE PER SHARE DATA; THE
COMPANIES--Gaming Regulation and
Licensing; THE MERGER--Certain
Federal Income Tax Consequences

4. Terms of the Transaction............... SUMMARY--The Merger; THE MERGER;
COMPARISON OF STOCKHOLDER RIGHTS;
FINANCIAL MATTERS AFTER THE
MERGER--Accounting Treatment;
CERTAIN PROVISIONS OF THE MERGER
AGREEMENT

5. Pro Forma Financial Information........ UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
6. Material Contacts With the Company
Being Acquired......................... THE MERGER--Background of the
Merger; CERTAIN PROVISIONS OF THE
MERGER AGREEMENT--Conduct of
Business Pending the Merger
7. Additional Information Required For
Reoffering by Persons and Parties
Deemed to be Underwriters.............. Not Applicable
8. Interests of Named Experts and Counsel. LEGAL OPINIONS; EXPERTS
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants............................ Not Applicable
11. Incorporation of Certain Information by
Reference.............................. Not Applicable
12. Information With Respect to S-2 or S-3
Registrants............................ Not Applicable
13. Incorporation of Certain Information by
Reference.............................. Not Applicable
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
LOCATION IN JOINT PROXY
FORM S-4--ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
--------------------------------- -----------------------
<C> <S>
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants.......... COMPARATIVE PER SHARE DATA;
SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA OF
ALLIANCE; MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF
ALLIANCE; THE COMPANIES--
ALLIANCE GAMING CORPORATION;
AUDITED CONSOLIDATED FINANCIAL
STATEMENTS OF
ALLIANCE
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies.. Not Applicable
16. Information With Respect to S-2 or S-3
Companies.................................. Not Applicable
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies.................. COMPARATIVE MARKET PRICE DATA;
SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA OF
BGII; THE COMPANIES--BALLY
GAMING INTERNATIONAL, INC.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited......... SUMMARY--The Meetings; THE
MEETINGS; THE MERGER--
Interests of Certain Persons
in the Merger; THE COMPANIES;
ELECTION OF ALLIANCE
DIRECTORS; BGII PLANS AND
AMENDMENTS; ELECTION OF
DIRECTORS OF BGII; STOCKHOLDER
PROPOSALS
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or
in an Exchange Offer....................... Not Applicable
</TABLE>
<PAGE>

PRELIMINARY PROXY MATERIAL

[BALLY GAMING LETTERHEAD]

March , 1996

Dear Bally Gaming Stockholders:

You are cordially invited to attend the Annual Meeting of Stockholders of
Bally Gaming International, Inc. ("BGII") to be held on April 2, 1996 at 9:00
a.m. at the Alexis Park Resort, located at 375 East Harmon Avenue, Las Vegas,
Nevada. At the meeting you will be asked to approve the merger of BGII and a
subsidiary of Alliance Gaming Corporation ("Alliance"), pursuant to the
Agreement and Plan of Merger, dated as of October 18, 1995, by and among BGII,
Alliance and BGII Acquisition Corp., a subsidiary of Alliance (as amended and
restated, the "Merger Agreement"). Certain amendments to the BGII incentive
plans are also contemplated by the Merger Agreement, as described therein. As
a result of the merger, each share of BGII Common Stock will be converted into
the right to receive $11.70 in value consisting of (i) $7.83 in cash, (ii)
$3.57 of Alliance Series B Special Stock and (iii) $.30 of Alliance Common
Stock. Ladenburg, Thalmann & Co. Inc., BGII's financial advisor, has rendered
an opinion to the effect that, as of the date of the opinion and based upon
the considerations described therein, the consideration in the Merger is fair
to BGII stockholders from a financial point of view.

The Board of Directors of BGII believes the proposed merger is in the best
interest of BGII and its stockholders and recommends that you vote FOR
approval of the merger. Stockholders should review the enclosed Proxy
Statement/Prospectus which describes in detail certain risks and benefits
inherent in the Merger.

The directors and executive officers of BGII have informed BGII that they
intend to vote their shares in favor of the merger. In addition, Alliance has
agreed in the Merger Agreement to vote its 1,000,000 shares of BGII Common
Stock in favor of the merger.

You will also be asked to elect seven nominees to the Board of Directors,
each of whom is currently serving as a Board member and upon re-election will
serve until the earlier of the effective time of the merger or the next annual
meeting of stockholders of BGII and the election and qualification of their
successors. Your Board of Directors recommends that you vote FOR the proposed
slate of Directors.

The attached Proxy Statement/Prospectus describes the proposed transactions
more fully. Please give this information your careful attention. Also enclosed
is a copy of BGII's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.

It is important that your shares be represented at the Annual Meeting
whether or not you are personally able to attend. In order that you will be
represented, we ask you to complete and return the enclosed Proxy Card
promptly.

Sincerely,

Richard Gillman
Chairman of the Board and Chief
Executive Officer

Questions concerning the voting of the your shares should be directed to
MacKenzie Partners, Inc., toll-free at (800) 322-2885.
<PAGE>

PRELIMINARY PROXY MATERIAL

BALLY GAMING INTERNATIONAL, INC.
6601 SOUTH BERMUDA ROAD
LAS VEGAS, NEVADA 89119-3605

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 2, 1996

To The Stockholders of
Bally Gaming International, Inc.

The Annual Meeting of Stockholders (the "Meeting") of BALLY GAMING
INTERNATIONAL, INC. ("BGII") will be held on Tuesday, April 2, 1996, at the
Alexis Park Resort located at 375 East Harmon Avenue, Las Vegas, Nevada at
9:00 a.m., local time, for the following purposes:

1. To approve the Agreement and Plan of Merger, dated as of October 18,
1995, by and among BGII, Alliance Gaming Corporation ("Alliance") and BGII
Acquisition Corp., a wholly owned subsidiary of Alliance (the "Merger
Subsidiary"), as amended and restated (the "Merger Agreement"), including
approval of the merger of BGII with the Merger Subsidiary, pursuant to the
terms of such Merger Agreement and approval of the 1994 Stock Option Plan
for Non-Employee Directors, as amended, and Amendments No. 3 to each of the
1991 Incentive Plan and the 1991 Non-Employee Directors' Plan. As a result
of the Merger, each share of BGII Common Stock will be converted into the
right to receive $11.70 in value consisting of (i) $7.83 in cash, (ii)
$3.57 of Alliance Series B Special Stock and (iii) $.30 of Alliance Common
Stock.

2. To elect seven directors to hold office until the earlier of (i) the
effective time of the Merger, or (ii) the next Annual Meeting of
Stockholders and until their successors are elected and qualified; and

3. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.

The Board of Directors has fixed March 3, 1996 as the record date for
determination of stockholders entitled to notice of and to vote at the Meeting
and any adjournments or postponements thereof. Accordingly, only holders of
record of Common Stock of Bally Gaming International, Inc. at the close of
business on such date shall be entitled to vote at the Meeting and any
adjournment or postponement thereof.

By Order of the Board of Directors

NEIL E. JENKINS
Executive Vice President and
Secretary

March , 1996
Las Vegas, Nevada

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE RETURN
STAMPED ENVELOPE PROVIDED.
<PAGE>

ALLIANCE GAMING CORPORATION

4380 BOULDER HIGHWAY

LAS VEGAS, NEVADA 89121

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 2, 1996

To the Stockholders of

Alliance Gaming Corporation

The Annual Meeting of Stockholders (the "Meeting") of Alliance Gaming
Corporation ("Alliance") will be held on Tuesday, April 2, 1996, at Sam's Town
Hotel & Gambling Hall Conference Center, located at 5111 Boulder Highway, Las
Vegas, Nevada at 2:00 p.m., local time, for the following purposes:

1. To approve the Agreement and Plan of Merger, dated as of October 18,
1995, by and among Bally Gaming International, Inc. ("BGII"), Alliance and
BGII Acquisition Corp., a wholly owned subsidiary of Alliance (the "Merger
Subsidiary"), as amended and restated (the "Merger Agreement"), including
approval of the merger of the Merger Subsidiary with and into BGII.

2. To elect two directors to hold office until the annual meeting of
stockholders to be held in 1998 or until their successors are elected and
qualified; and

3. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.

The Board of Directors has fixed March 4, 1996 as the record date for
determination of stockholders entitled to notice of and to vote at the Meeting
and any adjournments or postponements thereof. Accordingly, only holders of
record of Common Stock of Alliance Gaming Corporation at the close of business
on such date shall be entitled to vote at the Meeting and any adjournment or
postponement thereof.

By Order of the Board of Directors

DAVID JOHNSON

Secretary

March , 1996
Las Vegas, Nevada

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE RETURN
STAMPED ENVELOPE PROVIDED.
<PAGE>

SUBJECT TO COMPLETION

MARCH 7, 1996

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PRELIMINARY PROXY MATERIAL
ALLIANCE GAMING CORPORATION
AND
BALLY GAMING INTERNATIONAL, INC.
JOINT PROXY STATEMENT

----------

ALLIANCE GAMING CORPORATION
PROSPECTUS

This Joint Proxy Statement/Prospectus (this "Proxy Statement/Prospectus") is
being furnished to stockholders of Alliance Gaming Corporation ("Alliance") and
Bally Gaming International, Inc. ("BGII") in connection with the solicitation
of proxies by the respective Boards of Directors of such corporations for use
at their respective Meetings of Stockholders (including any adjournments or
postponements thereof) to be held on Tuesday, April 2, 1996. This Proxy
Statement/Prospectus relates to the proposed merger (the "Merger") of BGII with
BGII Acquisition Corp. (the "Merger Subsidiary"), a wholly-owned subsidiary of
Alliance, pursuant to the Agreement and Plan of Merger dated as of October 18,
1995, as amended and restated (the "Merger Agreement"), among Alliance, the
Merger Subsidiary and BGII, a copy of which is attached hereto as Annex I.

At the effective time of the Merger (the "Effective Time"), BGII will merge
with the Merger Subsidiary, with BGII being the surviving corporation and
becoming a wholly-owned subsidiary of Alliance. The separate corporate
existence of the Merger Subsidiary will cease at the Effective Time. See "The
Merger--Effective Time."

The Merger Agreement provides that BGII stockholders will receive in the
Merger, in exchange for each of their issued and outstanding shares of common
stock, par value $.01 per share, of BGII ("BGII Common Stock") (i) an amount of
cash
(Continued on following page)

STOCKHOLDERS OF ALLIANCE AND BGII SHOULD CAREFULLY CONSIDER THE MATTERS SET
FORTH UNDER "RISK FACTORS" COMMENCING AT PAGE 25 HEREIN, AND "THE MERGER--
CONSIDERATIONS FOR ALLIANCE STOCKHOLDERS" AND "--CONSIDERATIONS FOR BGII
STOCKHOLDERS", COMMENCING AT PAGE 105 HEREIN.

HOLDERS OF BGII COMMON STOCK ARE ENTITLED TO APPRAISAL RIGHTS UNDER SECTION
262 OF THE DELAWARE GENERAL CORPORATION LAW AS TO SHARES OWNED BY THEM. FAILURE
TO STRICTLY COMPLY WITH SECTION 262 WILL RESULT IN THE LOSS OF APPRAISAL
RIGHTS. SEE "THE MERGER--APPRAISAL RIGHTS" AND ANNEX VI HERETO.

See "Definition Cross-Reference", commencing on page vii, for the location of
definitions for certain capitalized terms used herein.

This Proxy Statement/Prospectus and the accompanying forms of proxy are first
being mailed to stockholders of Alliance and BGII on or about March 13, 1996.

THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

----------

NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL
BOARD HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS OR THE INVESTMENTS MERITS OF THE SECURITIES OFFERED
HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION NOR THE REGULATORY AUTHORITY
OF ANY OTHER STATE HAS CONFIRMED THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS.

----------

The date of this Proxy Statement/Prospectus is March 11, 1996.
<PAGE>

(Continued from previous page)

(the "Cash Consideration") determined by dividing $76,700,000 by the number of
shares of BGII Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares which are held by BGII, Alliance or their
respective subsidiaries) ("Converted Shares"), (ii) a fraction of a share of
common stock, $.10 par value, of Alliance ("Alliance Common Stock") having a
value determined in accordance with the Merger Agreement of $.30 (the "Common
Stock Consideration") and (iii) that number of shares (or fractions thereof)
of 15% Non-Voting Junior Special Stock, Series B, $.10 par value, of Alliance
(the "Series B Special Stock"), having a value as determined in accordance
with the Merger Agreement equal to $11.40 less the Cash Consideration (the
"Special Stock Consideration", and together with the Common Stock
Consideration, the "Share Consideration", and the Share Consideration together
with the Cash Consideration, the "Merger Consideration"). Based upon the
number of outstanding Converted Shares as of the date of this Proxy
Statement/Prospectus, stockholders will receive $11.70 in value consisting of
$7.83 in cash, $3.57 worth of Series B Special Stock, and $.30 worth of
Alliance Common Stock for each share of BGII Common Stock, as described
herein. Former stockholders of BGII will own approximately 3% of Alliance
Common Stock immediately following the consummation of the Merger assuming an
average Alliance stock trading price of $3.75 and issuance of 13.307 million
shares of Alliance Common Stock in the Merger and related transactions, and in
a planned financing transaction expected to occur simultaneously with the
Merger, although such financing may involve different levels of issuance of
debt and equity securities. See "The Merger--Merger Consideration" and "--
Ownership of Alliance Common Stock Immediately After the Merger".

NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ALLIANCE OR BGII. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED HEREIN
WITH RESPECT TO ALLIANCE AND ITS SUBSIDIARIES HAS BEEN PROVIDED BY ALLIANCE
AND THE INFORMATION CONTAINED HEREIN WITH RESPECT TO BGII AND ITS SUBSIDIARIES
HAS BEEN PROVIDED BY BGII.

AVAILABLE INFORMATION

Alliance and BGII are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Alliance and BGII with the
Commission may be inspected and copied at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of all or part of such materials also may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition,
material filed by each of Alliance and BGII may be inspected at the offices of
The Nasdaq Stock Market, Inc. ("NASDAQ"), 1735 K Street, N.W., Washington,
D.C. 20006.

Alliance has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Alliance Common Stock and Series B Special Stock to be issued
pursuant to the Merger Agreement. This Proxy Statement/Prospectus, which is a
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits thereto. Such additional
information may be inspected, without charge, at the Commission's principal
office in Washington, D.C. and copies may be obtained from the Commission upon
payment of the prescribed fee. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated in this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by Alliance (File No. 0-
4281) or BGII (File No. 1-19624) pursuant to the Exchange Act are incorporated
by reference in this Proxy Statement/Prospectus:

1. Alliance's Annual Report on Form 10-K for the fiscal year ended June
30, 1995, as amended and restated on March 4, 1996.

2. Alliance's Quarterly Reports on Form 10-Q for the quarterly periods
ended September 30, 1995 and December 31, 1995.

3. BGII's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.

4. BGII's Current Report on Form 8-K dated January 23, 1996.

i
<PAGE>

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO ALLIANCE TO
ALLIANCE GAMING CORPORATION, 4380 BOULDER HIGHWAY, LAS VEGAS, NV 89121
(TELEPHONE NUMBER (702) 435-4200), ATTENTION: JOHN W. ALDERFER, SENIOR VICE
PRESIDENT FINANCE AND ADMINISTRATION OR, IN THE CASE OF DOCUMENTS RELATING TO
BGII, TO BALLY GAMING INTERNATIONAL, INC., 6601 S. BERMUDA ROAD, LAS VEGAS,
NEVADA 89119 (TELEPHONE NUMBER (702) 896-7700), ATTENTION: NEIL E. JENKINS,
EXECUTIVE VICE PRESIDENT AND SECRETARY. IN ORDER TO ENSURE DELIVERY OF THE
DOCUMENTS PRIOR TO THE STOCKHOLDER MEETING, REQUESTS SHOULD BE RECEIVED BY
MARCH 19, 1996.

A copy of the BGII Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 is being mailed to BGII stockholders, and a copy of the
Alliance Annual Report on Form 10-K/A, as amended and restated, for the fiscal
year ended June 30, 1995 is being mailed to Alliance stockholders, with this
Proxy Statement/Prospectus.

ii
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .......................... i
DEFINITION CROSS-REFERENCE................................................ vii
SUMMARY................................................................... 1
The Companies............................................................ 1
The Meetings............................................................. 3
The Merger............................................................... 5
Election of Alliance Directors........................................... 21
BGII Plans and Amendments................................................ 21
Election of BGII Directors............................................... 24
RISK FACTORS.............................................................. 25
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALLIANCE............... 34
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BGII................... 35
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.............. 38
AUXILIARY FINANCING INFORMATION........................................... 49
SUPPLEMENTAL ANALYSIS OF CASH FLOW AVAILABLE FOR NET INTEREST EXPENSE..... 50
COMPARATIVE PER SHARE MARKET PRICE DATA AND DIVIDEND POLICY............... 53
COMPARATIVE PER SHARE DATA................................................ 54
INTRODUCTION.............................................................. 55
THE COMPANIES............................................................. 56
ALLIANCE GAMING CORPORATION.............................................. 56
General................................................................. 56
Machine Management Operations........................................... 56
Nevada................................................................. 56
Louisiana.............................................................. 58
Casino Operations....................................................... 59
Tavern Operations....................................................... 59
Manufacturing Operations................................................ 60
Competition............................................................. 60
Patents, Copyrights and Trade Secrets................................... 61
Business Development Activity........................................... 61
Business Strategy....................................................... 62
Employees............................................................... 63
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF ALLIANCE............................................... 64
BALLY GAMING INTERNATIONAL, INC. ........................................ 70
General................................................................. 70
Gaming.................................................................. 72
Products............................................................... 72
New Product Introduction............................................... 73
Product Development.................................................... 74
Competition............................................................ 74
Sales and Marketing.................................................... 76
Customers.............................................................. 77
Assembly Operations.................................................... 77
Systems................................................................. 78
Products............................................................... 78
Product Development.................................................... 78
Primary Markets........................................................ 79
Sales and Marketing.................................................... 79
Customers.............................................................. 79
Competition............................................................ 79
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
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<S> <C>
Bally Wulff............................................................. 80
Products............................................................... 80
Industry............................................................... 80
Product Development.................................................... 81
Sales and Marketing.................................................... 82
Customers.............................................................. 82
Assembly Operations.................................................... 83
Competition............................................................ 83
Trade Name License...................................................... 83
Employees............................................................... 84
Properties.............................................................. 84
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF BGII .......................................... 84
GAMING REGULATION AND LICENSING.......................................... 92
THE MEETINGS.............................................................. 102
Time, Date and Place of the Meetings..................................... 102
Matters to be Considered at the Meetings................................. 102
Vote Required............................................................ 103
Voting of Proxies........................................................ 103
Revocability of Proxies.................................................. 103
Record Date; Stock Entitled To Vote; Quorum.............................. 104
Solicitation of Proxies.................................................. 104
THE MERGER................................................................ 105
General.................................................................. 105
Considerations for Alliance Stockholders................................. 105
Considerations for BGII Stockholders..................................... 105
Background of the Merger................................................. 106
Alliance's Reasons for the Merger; Recommendations of the Alliance Board
of Directors............................................................ 116
BGII's Reasons for the Merger; Recommendations of the BGII Board of Di-
rectors................................................................. 116
Form of the Merger....................................................... 118
Merger Consideration..................................................... 118
Ownership of Alliance Common Stock Immediately After the Merger.......... 118
Opinion of BGII Financial Advisor........................................ 118
Prior Opinions of BGII Financial Advisor................................. 129
Effective Time........................................................... 154
Financing................................................................ 155
Regulatory Filings and Approvals......................................... 155
Treatment of BGII Warrants and Employee and Director Stock Options....... 156
Interests of Certain Persons in the Merger............................... 157
Appraisal Rights......................................................... 160
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................. 162
CERTAIN PROVISIONS OF THE MERGER AGREEMENT................................ 164
Procedure for Exchange of BGII Certificates.............................. 164
Certain Representations and Warranties................................... 165
Conduct of Business Pending the Merger................................... 165
Additional Agreements.................................................... 167
Conditions to Consummation of the Merger................................. 168
Termination.............................................................. 170
Expenses and Termination Fees............................................ 171
Amendment and Waiver..................................................... 172
DESCRIPTION OF ALLIANCE CAPITAL STOCK..................................... 172
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 174
</TABLE>

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<TABLE>
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MANAGEMENT BEFORE AND AFTER THE MERGER.................................... 177
FINANCIAL MATTERS AFTER THE MERGER........................................ 179
Accounting Treatment..................................................... 179
Common Stock Dividend Policy After the Merger............................ 179
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT........... 180
Alliance................................................................. 180
BGII..................................................................... 182
Principal Stockholders of BGII......................................... 182
Security Ownership of Management of BGII............................... 183
LITIGATION MATTERS........................................................ 184
ELECTION OF ALLIANCE DIRECTORS............................................ 188
General.................................................................. 188
Stockholders Agreement................................................... 189
Meetings of the Board of Directors; Committees........................... 190
Limitation on Liability.................................................. 191
Compliance with Section 16(a) Under the Securities Exchange Act of 1934.. 191
Executive Compensation................................................... 192
Summary Compensation Table.............................................. 192
Option/SAR Grants in Last Fiscal Year................................... 193
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values................................................................. 193
Compensation of Directors............................................... 193
Employment and Severance Arrangements................................... 193
Compensation Committee Interlocks and Insider Participation............. 195
Board Compensation Committee Report on Executive Compensation........... 195
Stock Performance Graph................................................. 197
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF ALLIANCE................ 198
BGII PLANS AND AMENDMENTS................................................. 200
1991 Incentive Plan..................................................... 200
Amendments to the 1991 Plan............................................. 202
Benefits Table.......................................................... 204
Reasons and Recommendation.............................................. 204
1991 Non-Employee Directors Plan........................................ 204
Amendments to the 1991 Directors Plan................................... 206
Benefits Table.......................................................... 206
Reasons and Recommendation.............................................. 207
1994 Stock Option Plan for Non-Employee Directors, As Amended........... 207
Benefits Table.......................................................... 209
Reasons and Recommendation.............................................. 209
ELECTION OF DIRECTORS OF BGII............................................. 210
Directors/Nominees....................................................... 210
Meetings of the Board of Directors; Committees........................... 211
BGII EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION........................ 212
Executive Officers....................................................... 212
Compliance with Exchange Act............................................. 212
Summary Compensation Table............................................... 213
Stock Option and SAR Grants.............................................. 214
Aggregated Option/SAR Exercise in Last Fiscal Year and Fiscal Year-End
Option/SAR Values....................................................... 214
Long-Term Incentive Plan Awards.......................................... 214
Compensation of Directors................................................ 215
Employment Contracts, Retirement Plans and Change-in-Control
Arrangements............................................................ 216
REPORT OF THE BGII COMPENSATION AND STOCK OPTION COMMITTEE................ 224
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions.................................................. 227
Performance Graph........................................................ 228
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF BGII.................... 228
</TABLE>

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<TABLE>
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<S> <C>
LEGAL OPINIONS............................................................. 229
EXPERTS.................................................................... 229
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS........................... 229
STOCKHOLDER PROPOSALS...................................................... 230
INDEX TO FINANCIAL STATEMENTS.............................................. 231
</TABLE>

LIST OF ANNEXES

Annex I..................... Amended and Restated Agreement and Plan of
Merger

Annex II.................... Opinion of Ladenburg, Thalmann & Co. Inc. dated
January 19, 1996

Annex III................... Amendment No. 3 to Bally Gaming International,
Inc. 1991 Incentive Plan
Annex IV.................... Amendment No. 3 to Bally Gaming International,
Inc. 1991 Non-Employee Directors' Plan
Annex V..................... Bally Gaming International, Inc. 1994 Stock
Option Plan for Non-Employee Directors

Annex VI.................... Section 262 of the Delaware General Corporation
Law
Annex VII................... Certificate of Designations, Preferences and
Relative, Participating, Optional and Other
Special Rights of Special Stock and
Qualifications, Limitations and Restrictions
Thereof of 15% Non-Voting Junior Special
Stock, Series B, of Alliance Gaming
Corporation
</TABLE>

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<PAGE>

DEFINITION CROSS-REFERENCE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10% Stockholder............................................................
1991 Directors Plan........................................................
1991 Plan..................................................................
1992 Plan..................................................................
1994 Plan..................................................................
Advisors...................................................................
Alliance...................................................................
Alliance Action............................................................
Alliance Annual Meeting....................................................
Alliance Board.............................................................
Alliance Certificate.......................................................
Alliance Common Stock......................................................
Alliance Nevada Subsidiaries...............................................
Alliance Offer.............................................................
Alliance Proposal..........................................................
Alliance Record Date.......................................................
Alliance Subsidiaries......................................................
Alternative Proposal.......................................................
Amended Fiorella Action....................................................
Amended VSI Loan...........................................................
Antitrust Division.........................................................
Automaten..................................................................
Bally Wulff................................................................
BEC........................................................................
BGII.......................................................................
BGII Action................................................................
BGII Annual Meeting........................................................
BGII Board.................................................................
BGII Certificates..........................................................
BGII Common Stock..........................................................
BGII Plans.................................................................
BGII Record Date...........................................................
BGII Subsidiaries..........................................................
By-Laws....................................................................
Camptown...................................................................
Cash Consideration.........................................................
Casino Control Act.........................................................
CCC........................................................................
Clark County Board.........................................................
Code.......................................................................
Commission.................................................................
Committee..................................................................
Common Stock Consideration.................................................
Compensation Committee.....................................................
Consent Solicitation.......................................................
Convertible Debentures.....................................................
Corporate Licensee.........................................................
Covered Employees..........................................................
CSI........................................................................
CTC........................................................................
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Debentures.................................................................
Devices....................................................................
Disqualified Individuals...................................................
DGCL.......................................................................
Division...................................................................
EBITDA.....................................................................
Effective Time.............................................................
Employee Options...........................................................
EPS Growth Target..........................................................
Exchange Act...............................................................
Exchange Agent.............................................................
Fair Grounds...............................................................
Fidelity Funds.............................................................
Financing..................................................................
Financing Condition........................................................
Fiorella, Cignetti and Neuman Actions......................................
FMR........................................................................
FMTC.......................................................................
Game Maker (R).............................................................
Gaming.....................................................................
GSA........................................................................
GSI........................................................................
HFS........................................................................
HSR Act....................................................................
IGT........................................................................
Incentive Warrants.........................................................
Indebtedness...............................................................
Insiders...................................................................
ISOs.......................................................................
Jackpot....................................................................
KFP........................................................................
KGP........................................................................
KIC........................................................................
Kirkland...................................................................
Ladenburg..................................................................
LEDGC......................................................................
Licensees..................................................................
Louisiana Riverboat Act....................................................
Louisiana Act..............................................................
Market Price Target........................................................
MCC........................................................................
Meeting....................................................................
Merger.....................................................................
Merger Agreement...........................................................
Merger and Related Proposals...............................................
Merger Consideration.......................................................
Merger Subsidiary..........................................................
Mississippi Act............................................................
Mississippi Commission.....................................................
Mississippi Regulations....................................................
Mizpah.....................................................................
</TABLE>

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NAI........................................................................
Named Executive Officers...................................................
NASDAQ.....................................................................
NASDAQ/NMS.................................................................
Nevada Act.................................................................
Nevada Board...............................................................
Nevada Commission..........................................................
Nevada Control Share Acquisition Act.......................................
New Jersey Commission......................................................
NGCL.......................................................................
NGM........................................................................
Noncompete Agreement.......................................................
Nonstatutory Options.......................................................
NQSOs......................................................................
OTBs.......................................................................
Performance Period.........................................................
Performance Units..........................................................
Plantation.................................................................
Proxy Statement/Prospectus.................................................
Qualifiers.................................................................
RCC........................................................................
RCVP.......................................................................
Registered Corporation.....................................................
Registration Statement.....................................................
Reliance Period............................................................
Revised Alliance Offer.....................................................
Revised WMS Proposal.......................................................
Right......................................................................
Rights Plan................................................................
SARs.......................................................................
Securities Act.............................................................
September 13 Materials.....................................................
Series B Special Stock.....................................................
Severance Agreement........................................................
Share......................................................................
Share Consideration........................................................
Sigma......................................................................
Slot.......................................................................
Special Stock..............................................................
Special Stock Consideration................................................
SPRs.......................................................................
Stockholder Plaintiffs.....................................................
Strougo Action.............................................................
SVS........................................................................
Systems....................................................................
Universal..................................................................
V.A.T. ....................................................................
VDSI.......................................................................
Vertriebs..................................................................
VLTs.......................................................................
VLTS.......................................................................
Voting Stock...............................................................
VSI........................................................................
</TABLE>

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<TABLE>
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<S> <C>
VSI Loan...................................................................
Wilms Warrants.............................................................
WMS........................................................................
WMS Action.................................................................
WMS Agreement..............................................................
WMS Common Stock...........................................................
WMS Merger.................................................................
</TABLE>

x
<PAGE>

SUMMARY

The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus and does not purport to be complete. Reference is
made to and this summary is qualified in its entirety by the more detailed
information contained elsewhere or incorporated by reference in this Proxy
Statement/Prospectus and the Annexes hereto. Stockholders are urged to read
this Proxy Statement/Prospectus and the Annexes hereto in their entirety.
Except as otherwise noted, as used in this Proxy Statement/Prospectus the term
"Alliance" refers to Alliance Gaming Corporation and its consolidated
subsidiaries and affiliates, and the term "BGII" refers to Bally Gaming
International, Inc. and its consolidated subsidiaries and affiliates. See
"Definition Cross-Reference," commencing on page vii, for the location by page
number of definitions for certain defined terms used herein.

THE COMPANIES

ALLIANCE GAMING CORPORATION Alliance is a diversified gaming company that
4380 Boulder Highway Las operates gaming devices (primarily video poker
Vegas, NV 89121 (702) 435- devices and slot machines). Alliance is the
4200 largest private gaming machine management
operator in Nevada and one of the largest in the
United States. In its Nevada gaming machine
management operations, Alliance selects, owns,
installs, manages and services gaming devices in
third-party owned local establishments. Also in
Nevada, Alliance owns and operates one full
service small casino and leases and operates a
small casino, one small casino-hotel and one
tavern.

Alliance has expanded its gaming machine
management operations to Louisiana, where it
operates its poker devices at the only racetrack
and associated off-track betting parlors ("OTBs")
in the greater New Orleans area. In March 1995,
Alliance completed its acquisition of the general
partnership interest in the Rainbow Casino
Vicksburg Partnership, L.P. ("RCVP"). RCVP owns a
dockside casino in Vicksburg, Mississippi.
Alliance manages the casino pursuant to a long-
term management contract. Alliance also designs
and manufactures gaming devices which are used
exclusively in its Nevada operations. See "The
Companies--Alliance Gaming Corporation."

BALLY GAMING INTERNATIONAL, BGII, through subsidiaries in the United States
INC. and Germany, designs, manufactures and
6601 S. Bermuda Road distributes electronic gaming machines,
Las Vegas, NV 89119 principally in the United States and Europe.
(702) 896-7700 BGII's United States subsidiary also designs,
assembles and sells, primarily for casino
operators in the United States, computerized
monitoring systems for slot and video gaming
machines. BGII also distributes, in Germany,
other recreational and amusement machines
manufactured by third parties. See "The
Companies--Bally Gaming International, Inc."

BGII's domestic subsidiary is Bally Gaming, Inc.,
which has two business units, the first,
operating under the name Bally Gaming ("Gaming"),
designs, manufactures and distributes a variety
of electronic reel-type (or "slot") machines and
video gaming machines, with variations of design,
payment features and coinage

1
<PAGE>

acceptance. Gaming historically has marketed
these gaming machines in the United States, to
casinos in Atlantic City and Nevada and more
recently in other jurisdictions. Gaming also
distributes slot machines and video gaming
machines outside the United States, principally
in Europe, and, to a lesser extent, in Canada,
the Far East, Latin America and the Caribbean.
Gaming markets its machines through its own sales
force and independent distributors. The second
business unit which Bally Gaming, Inc. operates
is its Bally Systems division ("Systems"), which
designs, assembles and sells computerized
monitoring systems for slot and video gaming
machines which provide casino operators with data
relative to a machine's accounting, security and
maintenance functions in a real time environment.
See "The Companies--Bally Gaming International,
Inc.--Gaming" and "The Companies--Bally Gaming
International, Inc.--Systems".

BGII's German subsidiaries, which operate under
the name Bally Wulff ("Bally Wulff"), design,
manufacture and distribute coin-operated, wall-
mounted, electronic gaming machines known as wall
machines. Bally Wulff markets its wall machines,
as well as wall machines and other recreational
and amusement machines manufactured by third
parties, including pool tables, air-hockey,
pinball machines, jukeboxes and arcade games, to
operators of arcades, taverns, hotels and
restaurants in Germany. Product sales are made
through Bally Wulff's 23 regional sales offices
in Germany and through independent distributors.
See "The Companies--Bally Gaming International,
Inc.--Bally Wulff".

BGII was formed in August 1991 by Bally
Entertainment Corporation ("BEC") to consolidate
BEC's gaming machine manufacturing and
distribution operations.

Prior to the formation of BGII in August 1991,
BEC's gaming operations in Germany were conducted
through two direct subsidiaries of BEC, Bally
Wulff Automaten GmbH ("Automaten") and Bally
Wulff Vertriebs GmbH ("Vertriebs"), and its
domestic operations were conducted through
certain subsidiaries and divisions of BEC.
Through stock and asset transfers effected in
connection with the formation of BGII, Automaten
and Vertriebs became subsidiaries of BGII, and
the assets comprising BGII's domestic operations
were transferred to Gaming.

In November 1991, BEC completed an initial public
offering of shares of BGII Common Stock owned by
BEC and in July 1992, BEC completed another
public offering of shares of BGII Common Stock
owned by BEC. All of the net proceeds of these
public offerings were received by BEC other than
the net proceeds from over-allotment shares sold
by BGII in the initial public offering.
Subsequently, BEC sold a substantial portion of
its remaining shares of BGII Common Stock and
currently owns less than 3% of the outstanding
BGII Common Stock. See "The Companies--Bally
Gaming International, Inc."

2
<PAGE>

THE MEETINGS

Meetings of Stockholders.... Alliance. The Annual Meeting of Stockholders of
Alliance will be held at Sam's Town Hotel &
Gambling Hall Conference Center, 5111 Boulder
Highway, Las Vegas, Nevada, on Tuesday, April 2,
1996, at 2:00 p.m., local time (the "Alliance
Annual Meeting").

BGII. The Annual Meeting of Stockholders of BGII
will be held at the Alexis Park Resort, located
at 375 East Harmon Avenue, Las Vegas, Nevada, on
Tuesday, April 2, 1996, at 9:00 a.m., local time
(the "BGII Annual Meeting" and, together with the
Alliance Annual Meeting, the "Meetings").

See "The Meetings--Time, Date and Place of the
Meetings."

Matters to Be Considered at
the Meeting................
Alliance. At the Alliance Annual Meeting, holders
of Alliance Common Stock will consider and vote
upon (i) a proposal to approve and adopt the
Merger Agreement, (ii) the election of two
directors to hold office until the annual meeting
to be held in 1998 or until their successors are
elected and qualified, and (iii) such other
proposals as may properly come before the
Alliance Annual Meeting. See "The Meetings--
Matters to be Considered at the Meetings".

BGII. At the BGII Annual Meeting, holders of BGII
Common Stock will consider and vote upon (i) a
proposal (the "Merger and Related Proposals") to
approve the Merger Agreement, including (a) the
merger of BGII with the Merger Subsidiary
pursuant to the terms of the Merger Agreement and
(b) the 1994 Stock Option Plan for Non-Employee
Directors, as amended, (the "1994 Plan"), and
Amendments No. 3 to each of the 1991 Incentive
Plan (the "1991 Plan") and the 1991 Non-Employee
Directors' Plan (the "1991 Directors Plan") to
provide that, notwithstanding the change of
control of BGII resulting from the Merger,
options outstanding under such plans (A) shall
vest and remain exercisable until the earlier of
(1) the expiration of the original option period,
(2) three years after the completion of the
Merger or (3) except with respect to Messrs.
Gillman, Kloss and Jenkins, the period ending on
the date on which the option holder's employment
is terminated for cause or voluntarily by such
employee and (B) will be exercisable immediately
after the Effective Time for the consideration
and at the price provided for in the Merger
Agreement; (ii) the election of a board of seven
directors to hold office until the earlier of the
Effective Time of the Merger or the next BGII
Annual Meeting of Stockholders and until their
successors are elected and qualified; and (iii)
such other business as may properly come before
the BGII Annual Meeting. See "The Meetings--
Matters to be Considered at the Meetings".

Votes Required.............. Alliance. In order to effect the Merger, the
Merger Agreement must be approved by the
affirmative vote of the holders of a majority of
the shares of Alliance Common Stock voting at the
Alliance Annual Meeting. The failure to vote
shares by abstention will have the same

3
<PAGE>

effect as a vote against the Merger Agreement
while non-votes will not have the same effect as
a vote against the Merger Agreement. Directors
are elected by a plurality of votes cast at the
Alliance Annual Meeting. The failure to vote
shares, either by abstention or non-vote, will
not have the same effect as a vote against the
nominees to the Alliance Board. See "The
Meetings--Votes Required".

Certain executive officers and directors of
Alliance have advised Alliance that they intend
to vote the 6,617,415 shares of Alliance Common
Stock, representing approximately 51% of the
outstanding Alliance Common Stock, as to which
they have voting power FOR the approval and
adoption of the Merger Agreement and the election
of the Alliance Board nominees set forth herein.
This would insure adoption of the Merger
Agreement and election of the Alliance Board
nominees by the Alliance stockholders. See
"Security Ownership of Certain Beneficial Holders
and Management--Alliance".

BGII. The Merger and Related Proposals must be
approved by the affirmative vote of the holders
of a majority of the outstanding shares of BGII
Common Stock entitled to vote thereon. The
failure to vote shares, either by abstention or
non-vote, will have the same effect as a vote
against the Merger and Related Proposals.

Directors are elected by majority vote of the
shares of BGII Common Stock present at the BGII
Annual Meeting in person or by proxy. The failure
to vote shares by abstention will have the same
effect as a vote against the nominees for
election as directors. See "The Meetings--Votes
Required".

As of the record date, the directors and
executive officers of BGII owned 364,025 shares
of BGII Common Stock representing approximately
3.4% of the outstanding shares of BGII Common
Stock. The directors and executive officers of
BGII have informed BGII that they intend to vote
their shares in favor of the Merger and Related
Proposals and the election of the nominees for
the Board of Directors of BGII (the "BGII Board")
as set forth herein. Alliance has agreed in the
Merger Agreement to vote its 1,000,000 shares of
BGII Common Stock (representing approximately
9.3% of the number outstanding) in favor of the
Merger and Related Proposals. See "The Meetings--
Votes Required".

Record Date................. Alliance. The record date for the Alliance Annual
Meeting is March 4, 1996 (the "Alliance Record
Date"). Accordingly, holders of record of
Alliance Common Stock as of such date will be
entitled to notice of and to vote at the Alliance
Annual Meeting. See "The Meetings--Record Date;
Stock Entitled to Vote; Quorum".

BGII. The record date for the BGII Annual Meeting
is March 3, 1996 (the "BGII Record Date").
Accordingly, holders of record of BGII Common
Stock as of such date will be entitled to notice
of and to vote at the BGII Annual Meeting. See
"The Meetings--Record Date; Stock Entitled to
Vote; Quorum".

4
<PAGE>

Proxies..................... The grant of a proxy on the enclosed Alliance or
BGII form does not preclude a stockholder from
voting in person. A stockholder may revoke a
proxy at any time prior to its exercise by
submitting a new proxy at a later date, by filing
with the Secretary of Alliance (in the case of an
Alliance stockholder) or the Secretary of BGII
(in the case of a BGII stockholder) a duly
executed revocation of proxy bearing a later date
or by voting in person at the relevant Meeting.
Attendance at the relevant Meeting will not of
itself constitute revocation of a proxy. See "The
Meetings--Voting of Proxies" and "--Revocability
of Proxies".

THE MERGER

Form of the Merger.......... At the Effective Time, BGII will merge with the
Merger Subsidiary with BGII being the surviving
corporation. The separate corporate existence of
the Merger Subsidiary will cease at the Effective
Time. See "The Merger--Form of the Merger".

Conversion of the BGII In the Merger, each issued and outstanding share
Common Stock............... of BGII Common Stock (other than shares held by
stockholders who perfect appraisal rights under
the DGCL, or shares held by BGII, Alliance or
their respective subsidiaries) will be converted
into the right to receive (i) an amount of cash
(the "Cash Consideration") determined by dividing
$76,700,000 by the number of shares of BGII
Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares
which are held by BGII, Alliance or their
respective subsidiaries) ("Converted Shares"),
(ii) a fraction of a share of Alliance Common
Stock (the "Common Stock Consideration") equal to
the quotient of $.30 and the Alliance Average
Trading Price (defined in the Merger Agreement as
the average of the closing prices of Alliance
Common Stock as reported through the NASDAQ
National Market System ("NASDAQ NMS") on each of
the ten consecutive trading days ending on (and
including) the third trading day prior to the
consummation of the Merger) and (iii) that number
of shares (or fraction thereof) of 15% Non-Voting
Junior Special Stock, Series B, $.10 par value,
of Alliance (the "Series B Special Stock"),
having a value, as determined based on the gross
cash offering price at which shares of Series B
Special Stock are issued for cash pursuant to a
registered public offering, equal to $11.40 less
the Cash Consideration (the "Special Stock
Consideration," and together with the Common
Stock Consideration, the "Share Consideration,"
and the Share Consideration together with the
Cash Consideration, the "Merger Consideration").
See "The Merger--Merger Consideration". No
fractional shares of Alliance Common Stock will
be issued; instead, fractions will be paid in
cash based on the closing price of Alliance
Common Stock on the date of the Effective Time.
Fractional Shares of Series B Special Stock will
be issued. See "Certain Provisions of the Merger
Agreement--Procedure for Exchange of BGII
Certificates".

Based on the number of outstanding Converted
Shares as of the date of this Proxy
Statement/Prospectus, stockholders would receive

5
<PAGE>

approximately $7.83 in cash for each share of
BGII Common Stock, $3.57 worth of Series B
Special Stock and $.30 worth of Alliance Common
Stock for each share of BGII Common Stock, as
described herein. See "The Merger--Merger
Consideration".

Description of Series B
Special Stock

Dividends...............
The Series B Special Stock will entitle holders
thereof to a semi-annual dividend in an amount
per share of $7.50 payable in cash, or at
Alliance's option, until the seventh anniversary
of the Effective Time in additional shares of
Series B Special Stock (valued at the liquidation
value of $100 per share (the "Liquidation
Value")), provided that after the first dividend
payment date following the fifth anniversary of
the Effective Time the portion of the dividend
that can be so paid in additional shares is
limited to $4.00 per share. Alliance currently
expects that so long as the Series B Special
Stock remains outstanding, it will, subject to
the terms thereof, pay dividends thereon accruing
through the first dividend payment date occurring
after the seventh anniversary of the Effective
Time in additional shares of such stock, rather
than in cash.

Voting Rights...........
Upon default in the payment of dividends for
three consecutive dividend payment dates, the
number of directors constituting the Alliance
Board will be increased by two, and not more than
two, and the holders of shares of Series B
Special Stock will have the right, voting
separately as a class, to elect two directors to
the Alliance Board. Such right will exist until
all dividends accumulated on such shares have
been paid or set apart for payment in full. In no
event will the holders of Series B Special Stock
have the right to elect more than two directors
in the aggregate.

Ranking.................
Upon liquidation, the holders of shares of Series
B Special Stock are entitled (subject to prior
preferences and other rights of any senior equity
securities and in proportion to any parity stock)
to be paid in cash out of the assets of Alliance
an amount equal to the Liquidation Value plus an
amount equal to all accrued and unpaid dividends
and distributions. While Alliance has the ability
to issue equity securities ranking senior in
right of payment to the Series B Special Stock,
it has no present intention of issuing any such
securities. Therefore, immediately following the
Merger, no equity security will be senior to the
Series B Special Stock and only the Alliance
Common Stock will be junior to the Series B
Special Stock.

Redemption.............. The Series B Special Stock can be redeemed at any
time in whole or in part at the option of
Alliance for cash at a price equal to the
Liquidation Value plus any accrued and unpaid
dividends or distributions to the date of
redemption. All shares of Series B Special Stock
are required to be redeemed in cash on the eighth
anniversary of the date of initial issuance at
the price stated above. If Alliance fails to
redeem such shares by that date, then the number
of directors constituting the Alliance Board will
be increased by two, and not more than two, and
the holders of the shares of Series

6
<PAGE>

B Special Stock will have the right until all
such shares are redeemed, voting separately as a
class, to elect two directors to the Alliance
Board. If Alliance fails to redeem all the shares
of Series B Special Stock by such date, dividends
on such securities will continue to accrue until
the date of redemption and no dividend or other
distribution can be paid to holders of any equity
security ranking junior to the Series B Special
Stock and no shares of such junior stock can be
purchased or redeemed by Alliance until the date
of redemption. In no event will holders of Series
B Special Stock be entitled to elect more than
two directors in total.

Limited Remedies........ Upon the failure of Alliance to redeem the
outstanding shares of Series B Special Stock by
the eighth anniversary of the date of initial
issuance or upon default in the payment of
dividends for three consecutive dividend payment
dates, the holders of Series B Special Stock will
have no remedies, except as described above.
Other than as described above, the holders of
shares of Series B Special Stock have no other
voting rights except as required by law.

Amendment to Terms...... The Series B Special Stock shall have the terms
set forth above; provided, however, that if the
Series B Special Stock is sold to the public on
terms more favorable than those summarized above,
the Series B Special Stock will be issued on such
more favorable terms.

NASDAQ Quotation........ Alliance has applied to have the Series B Special
Stock quoted on NASDAQ NMS. While fractional
shares of Series B Special Stock will be issued
in the Merger, holders of fractional shares will
not be able to trade such fractional shares on
NASDAQ NMS. See "Description of Alliance Capital
Stock".

BGII Warrants and Options... The Merger Agreement also provides that, at the
Effective Time, Alliance will assume BGII's
obligations with respect to each outstanding
stock option and warrant to purchase shares of
BGII Common Stock, subject to certain
modifications which are being presented for
approval by BGII stockholders as part of the
Merger and Related Proposals. See "BGII Plans and
Amendments". The BGII stock options and warrants
assumed by Alliance will have the same terms and
conditions as those of the applicable stock
option plans and agreements and warrant
agreements pursuant to which such options and
warrants were issued except that (i)(A) all BGII
stock options subject to provisions of stock
option plans which shorten the exercise period by
reason of the Merger and (B) all BGII stock
options held by directors of BGII regardless of
any provision in any BGII stock option held by
such director or the BGII stock option plan
pursuant to which such BGII stock option was
granted which may shorten the exercisability
thereof as a result of such person ceasing to be
a director, officer or employee of BGII shall be
amended to the extent necessary to permit such
BGII stock option to remain exercisable for the
lesser of (x) the original full option period,
(y) three years after the Effective Time of the
Merger or (z) except with respect to Messrs.
Gillman, Kloss and Jenkins, the

7
<PAGE>

period ending on the date on which the option
holder's employment is terminated for cause or
voluntarily by such employee; and (ii) unless the
terms thereof explicitly require otherwise, each
BGII stock option and warrant will be exercisable
for the Merger Consideration per share of BGII
Common Stock subject to such option or warrant at
the option price or exercise price of such BGII
stock option or warrant in effect immediately
prior to the Effective Time, except that at the
election of any person (other than Messrs.
Gillman, Jenkins and Kloss) who is an employee of
BGII immediately prior to the Effective Time
(such election to be made in writing to BGII on
or prior to the Effective Time), any such BGII
option held by such person (not more than
552,500) will instead be exercisable for a number
of shares of Alliance Common Stock equal to the
number of shares of BGII Common Stock subject
thereto at an exercise price equal to the
Alliance Average Trading Price.

Absent such amendment, options outstanding under
each of the 1991 Plan and 1991 Directors Plan
would terminate in accordance with the present
terms of such plans. Under the 1991 Plan and the
1991 Directors Plan, as currently in effect, upon
BGII stockholder approval of the Merger (a) all
options outstanding shall become fully vested and
exercisable with respect to the total number of
shares of BGII Common Stock underlying each such
option and (b) all options outstanding shall
terminate not later than 180 days in the case of
the 1991 Plan and 90 days in the case of the 1991
Directors Plan after BGII stockholder approval of
the Merger.

In general, the effect of the amendments to the
1991 Plan and the 1991 Directors Plan would
change (i) the length of the relevant time period
in which an option holder would be permitted to
exercise his options, (ii) the date of
commencement of such time period which would
change from the 180-day (in the case of the 1991
Plan) or 90-day (in the case of the 1991
Directors Plan) period following BGII stockholder
approval of the Merger to the three-year period
following the Effective Time and (iii) the
consideration for which, and under certain
circumstances, the price at which the option may
be exercised. See "BGII Plans and Amendments".

At February 19, 1996, an aggregate of 1,052,500
shares of BGII Common Stock were subject to
options granted to employees and directors under
various stock option plans or as replacement
options with respect thereto and an aggregate of
1,498,000 shares of BGII Common Stock were
subject to warrants issued by BGII in connection
with certain financing transactions.

Approval and adoption of the Merger Agreement by
the holders of Alliance Common Stock will
constitute approval and adoption of the BGII
stock option plans and the amendments thereto
referred to above which Alliance has agreed to
assume at the Effective Time. See "The Meetings--
Matters to be Considered at the Meetings--
Alliance" and "BGII Plans and Amendments".

8
<PAGE>

Ownership of Alliance
Common Stock Immediately
After the Merger...........

Former stockholders of BGII will own
approximately 3.0% of the Alliance Common Stock
immediately following consummation of the Merger.
The percentage of ownership of Alliance Common
Stock shown above is calculated based on the
number of shares of Alliance Common Stock
outstanding as of February 5, 1996, assuming an
Alliance Average Trading Price of $3.75 and
issuance of 13,307,000 shares of Alliance Common
Stock in the Merger and related transactions, and
in a planned financing transaction expected to
occur simultaneously with consummation of the
Merger, but such financing may involve different
amounts of debt and equity securities. See "The
Merger--Ownership of Alliance Common Stock
Immediately After the Merger".

Recommendation of the
Alliance Board of
Directors.................. The Alliance Board, by unanimous vote, (i)
determined that the Merger is consistent with,
and in furtherance of, the long-term business
strategies of Alliance and is fair to, and in the
best interest of, Alliance and its stockholders,
(ii) approved and adopted the Merger Agreement,
(iii) approved the Merger and the other
transactions contemplated by the Merger
Agreement, (iv) recommended approval and adoption
of the Merger Agreement and the other
transactions contemplated thereby by the holders
of Alliance Common Stock and (v) recommended that
stockholders vote in favor of the nominees to the
Alliance Board. In considering the recommendation
of the Alliance Board with respect to the Merger
Agreement and the transactions contemplated
thereby, Alliance stockholders should be aware
that certain members of Alliance's management and
Board of Directors have certain interests in the
Merger that are in addition to the interests of
Alliance stockholders generally. See "Risk
Factors--Alliance and BGII Conflicts of Interest"
and "The Merger--Interests of Certain Persons in
the Merger".

Recommendation of the BGII
Board of Directors.........
The BGII Board, by unanimous vote (i) determined
that the Merger is consistent with, and in
furtherance of, the long-term business strategies
of BGII and is fair to, and in the best interest
of, the holders of BGII Common Stock, (ii)
determined that the Merger Consideration is fair,
from a financial point of view, to the holders of
the BGII Common Stock, (iii) approved the Merger
and adopted the Merger Agreement (including
provisions relating to BGII's incentive plans)
and (iv) recommended the approval and adoption of
the Merger and Related Proposals by the holders
of BGII Common Stock. In considering the
recommendation of the BGII Board with respect to
the Merger Agreement and the transactions
contemplated thereby, BGII stockholders should be
aware that certain members of BGII's management
and Board of Directors have certain interests in
the Merger that are in addition to the interests
of BGII stockholders generally, including changes
in the terms of option awards and certain
payments in connection with the termination or
continuation

9
<PAGE>

of their respective employment agreements. See
"Risk Factors-- Alliance and BGII Conflicts of
Interest"; and "--Absence of Special Committee";
"The Merger--Interests of Certain Persons in the
Merger" and "BGII Executive Officers and
Executive Compensation". The BGII Board, by
unanimous vote, recommends the election of the
nominees for directors. See "The Merger--BGII's
Reasons for the Merger; Recommendations of BGII
Board of Directors".

In 1993 the BGII Board determined that a long-
term strategic partnership or business
combination would be in the best interests of
BGII and its stockholders. In June 1995, BGII
entered into a merger agreement (the "WMS
Agreement") with WMS Industries Inc. ("WMS"). At
the meeting in which the Board approved the
original Merger Agreement, as executed on October
18, 1995, the Board had determined for reasons
discussed under "The Merger--Background of the
Merger" that a merger with WMS was unlikely to
occur. In light of the foregoing, the BGII Board
considered the following factors during their
deliberation with respect to the Merger
Agreement: (i) the number of shares for which
cash consideration would be paid increased from
5,400,000 shares under a then-pending Alliance
tender offer to 5,900,000 under the Merger
Agreement; (ii) the terms of the Alliance
permanent financing which were included in the
Merger Agreement as a condition to closing would
permit the combined entity the opportunity to
operate and grow; (iii) the Exchange Ratio was
subject to a collar and the Alliance Common Stock
was then trading above the lower end of the
collar; and (iv) BGII stockholders would retain
their ability to benefit from the continued
growth of BGII through their stock ownership of
the combined entity after the Merger. The Board
also considered information concerning the
business of Alliance and BGII and the financial
presentation (including factors considered in
connection with such presentation) and opinion of
Ladenburg, Thalmann & Co. Inc. ("Ladenburg") as
to the fairness, from a financial point of view,
of the Merger Consideration to holders of BGII
Common Stock, as more fully described under the
caption "The Merger--Prior Opinions of BGII
Financial Advisor".

The BGII Board considered the following factors
during their deliberation with respect to the
amended Merger Agreement, as executed on January
23, 1996: (i) the $11.70 value of the Merger
Consideration under the amended Merger Agreement
approximates the market value of the Merger
Consideration under the original Merger
Agreement; (ii) the Cash Consideration under the
amended Merger Agreement is the same as under the
original Merger Agreement; (iii) the Alliance
Series B Special Stock is senior in right of
payment to the Alliance Common Stock; (iv) the
restructuring of the Merger Agreement facilitates
Alliance's ability to raise the financing
necessary to close the Merger and therefore
increases the certainty that the Merger will
close; (v) the pricing of the Series B Special
Stock for purposes of the Merger would be

10
<PAGE>

based on the price of such security to the
public; and (vi) the pricing mechanism for the
Alliance Common Stock to be issued in the Merger
is not subject to a collar and the Alliance
Common Stock was trading below the lower end of
the collar previously applicable to the Merger
pricing. The foregoing factors set forth in
clauses (i) through (vi) above, as well as
Ladenburg's opinion, support the BGII Board's
determination with respect to the fairness of the
Merger to the BGII stockholders. The BGII Board
based its decision to approve and recommend to
stockholders the amended Merger Agreement on its
determination with respect to the fairness of the
Merger, as well as its prior determination that a
long-term strategic partnership is in the best
interest of BGII and its stockholders. The BGII
Board also considered information concerning the
business of Alliance and BGII and the financial
presentation (including factors considered in
connection with such presentation) and opinion of
Ladenburg as to the fairness, from a financial
point of view, of the Merger Consideration under
the amended Merger Agreement to holders of BGII
Common Stock, as more fully described under the
caption "The Merger--Opinion of BGII Financial
Advisor."

Opinion of BGII Financial Ladenburg has delivered its written opinion to
Advisor.................... the BGII Board to the effect that, as of January
19, 1996, the Merger Consideration under the
amended Merger Agreement is fair, from a
financial point of view, to the holders of BGII
Common Stock.

Ladenburg's determination that the consideration
in the Merger under the amended Merger Agreement
is fair from a financial point of view is based
on the quantitative and qualitative analyses used
to evaluate BGII and Alliance. Ladenburg
conducted a number of valuation analyses to
compare a range of consideration values to be
received in the Merger under the amended Merger
Agreement and determined a range of per share
equity values for BGII and Alliance. Ladenburg
also analyzed pro forma results for a combination
of BGII with Alliance under the original Merger
Agreement and under the amended Merger Agreement.
The analyses used to determine per share equity
values for Alliance included a historical market
price analysis, a market multiples analysis, an
acquisition multiples analysis, a discounted cash
flow analysis and a break-up valuation analysis.
Ladenburg used the median per share equity value
from each analysis to develop a range of values.
Ladenburg considered this range of per share
values in evaluating the stock portion of the
consideration in the Merger under the amended
Merger Agreement. Ladenburg also compared the
consideration to be received in the Merger under
the amended Merger Agreement to the range of
derived equity values for BGII. The analyses used
to determine per share equity values for BGII
included a historical market price analysis, a
market multiples analysis, an acquisition
multiples analysis, a discounted cash flow
analysis and a takeover premium analysis.
Ladenburg then compared the consideration to be
received in the Merger under the original Merger
Agreement to the

11
<PAGE>

consideration to be received in the Merger under
the amended Merger Agreement and compared the pro
forma results and prospects for BGII in a
combination with Alliance under the original
Merger Agreement to BGII in a combination with
Alliance under the amended Merger Agreement.

For information on the assumptions made, matters
considered and limits of the review by Ladenburg,
stockholders are urged to read in its entirety
the opinion of Ladenburg, a copy of which is
attached as Annex II to this Proxy
Statement/Prospectus and "The Merger--Opinion of
BGII Financial Advisor."

Ladenburg had delivered its oral opinion to the
BGII Board to the effect that, as of October 17,
1995, the Merger Consideration under the original
Merger Agreement was fair, from a financial point
of view, to the holders of BGII Common Stock and
that the merger contemplated by the WMS Agreement
(the "WMS Merger") was not as favorable as the
Merger under the original Merger Agreement, from
a financial point of view, to BGII's
stockholders. Ladenburg considered WMS's original
offer which had an exchange ratio of .55 shares
of WMS Common Stock for each share of BGII Common
Stock and required the sale of Bally Wulff as a
precondition to closing and not the increased
exchange ratio in the Revised WMS Proposal, due
to the fact that WMS had placed several
conditions on its increased offer which BGII
could not or would not meet, including certain
restrictions on the sale of Bally Wulff and the
securing of the breakup fee.

The Merger Agreement originally contained a cash
election feature, the elimination of which was
subsequently approved by the BGII Board of
Directors. Ladenburg advised the BGII Board that
the elimination of the cash election feature does
not affect the value of the aggregate
consideration delivered to BGII stockholders and
therefore Ladenburg would not deliver a separate
fairness opinion with respect to the amendment of
the Merger Agreement to eliminate the cash
election feature.

Ladenburg's determination that the consideration
in the Merger under the original Merger Agreement
was fair and that the WMS Merger was not as
favorable as the Merger under the original Merger
Agreement, from a financial point of view, was
based on the quantitative and qualitative
analyses used to evaluate BGII, Alliance and WMS.
Ladenburg conducted a number of valuation
analyses to compare a range of consideration
values to be received in the Merger under the
original Merger Agreement and the WMS Merger and
determined a range of per share equity values for
BGII and Alliance. Ladenburg also analyzed pro
forma results for a combination of BGII with
Alliance and with WMS. The analyses used to
determine per share equity values for Alliance
included a historical market price analysis, a
market multiples analysis, an acquisition
multiples analysis, a discounted cash flow
analysis and a break-up valuation analysis.
Ladenburg used the median per share

12
<PAGE>

equity value from each analysis to develop a
range of values. Ladenburg considered this range
of per share values in evaluating the stock
portion of the consideration in the Merger.
Ladenburg also compared the consideration to be
received in the Merger to the range of derived
equity values for BGII. The analyses used to
determine per share equity values for BGII
included a historical market price analysis, a
market multiples analysis, an acquisition
multiples analysis, a discounted cash flow
analysis and a takeover premium analysis.
Ladenburg then compared the consideration to be
received in the Merger under the original Merger
Agreement to the consideration in the WMS Merger
and compared the pro forma results and prospects
for BGII in a combination with Alliance to BGII
in a combination with WMS.

In view of the fact that the Revised WMS Proposal
was subject to conditions that BGII was unable or
unwilling to fulfill, the Board determined that
it was not representative of the value to be
received upon a sale of BGII. Therefore Ladenburg
considered only the terms of the WMS Agreement in
evaluating the terms of the Merger Agreement. In
addition, the BGII Board considered only the
terms of the WMS Agreement in evaluating
Ladenburg's opinion and the terms of the Merger
Agreement and concluding that the Merger
Consideration was a fair price for BGII.

For information on the assumptions made, matters
considered and limits of the reviews by Ladenburg
with respect to opinions delivered by Ladenburg
prior to January 19, 1996, see "The Merger--Prior
Opinions of BGII Financial Advisor".

Conditions to Consummation
of the Merger and
Termination................
The obligations of Alliance and BGII to
consummate the Merger are subject to various
conditions, including obtaining requisite
stockholder and regulatory approvals and
Alliance's obtaining $150,000,000 in financing on
commercially reasonable terms, with such
financing including (i) the sale for cash
pursuant to a registered public offering of
Series B Special Stock (which may not be sold as
part of a unit with any other security) in which
Alliance receives gross cash proceeds prior to
the payment of expenses and underwriting
discounts and commissions of at least $15,000,000
and (ii) at least $100,000,000 of bank debt,
other debt having a term of at least four years
and/or equity of any type (provided that any
preferred stock shall not be redeemable (other
than at the option of Alliance) for at least four
years) (the "Financing Condition"). See "Certain
Provisions of the Merger Agreement--Conditions to
Consummation of the Merger".

13
<PAGE>

has not occurred at or before 11:59 p.m. New York
time on May 3, 1996; provided, however, the right
to terminate the Merger Agreement pursuant to
clause (i) or (ii) above will not be available
for any party whose failure to fulfill any of its
obligations under the Merger Agreement has been
the cause of or resulted in the occurrence of any
of the events described in clauses (i) or (ii)
above, (iii) its stockholders do not approve the
Merger at its Meeting or (iv) the other party has
breached any representation, warranty, covenant
or agreement in the Merger Agreement such that
the closing conditions could not be expected to
be satisfied by May 3, 1996. See "Certain
Provisions of the Merger Agreement--Termination".

BGII may also terminate the Merger Agreement if
(i) the BGII Board fails to make, withdraws, or
modifies or changes its recommendation of the
Merger based on the BGII Board's good faith
determination, after consultation with counsel,
that making such recommendation, or the failure
to withdraw, modify or change such
recommendation, could reasonably be deemed a
breach of its fiduciary duties under applicable
law, (ii) the BGII Board recommends to BGII
stockholders an Alternative Proposal (as herein
defined) that the BGII Board determines in good
faith, after consultation with its financial
advisors, is likely to be more favorable, from a
financial point of view, to BGII's stockholders
than the Merger or (iii) Alliance engages in any
merger, acquisition, disposition or similar
transaction with a third party which transaction
requires the approval of Alliance stockholders.
See "Certain Provisions of the Merger Agreement--
Termination".

In the event the Merger Agreement is not approved
by BGII's stockholders, BGII will terminate the
Merger Agreement. Upon termination of the Merger
Agreement, BGII will continue as an independent
company and may explore a strategic business
combination with other suitable companies. BGII
has not identified any entity with which it would
pursue a strategic business combination in the
event of termination of the Merger Agreement. It
is unlikely that BGII would enter into a business
combination transaction since the marketplace has
been aware of BGII's interest in a possible
business combination transaction and no parties
other than WMS and Alliance have made bids for
BGII. Accordingly, if the Merger is not approved
or not consummated for some other reason, BGII
would most likely continue as an independent
company. See "The Merger--Considerations for BGII
Stockholders".

Effective Time..............
The Merger will become effective upon the filing
of a Certificate of Merger with the Secretary of
State of the State of Delaware after the
satisfaction or waiver of the conditions set
forth in the Merger Agreement. This is expected
to occur on or after April 25 but not later than
May 3, 1996. The financing referred to above
under "Conditions to Consummation of the Merger
and Termination" will be consummated at the same
time. See "The Merger--Effective Time".

14
<PAGE>

Interests of Certain
Persons in the Merger......
In considering the recommendation of the BGII
Board with respect to the Merger Agreement and
the transactions contemplated thereby, BGII
stockholders should be aware that certain members
of BGII's management and Board of Directors have
certain interests in the Merger that are in
addition to the interests of BGII stockholders
generally, including in connection with the
termination of their respective employment
agreements. See "Risk Factors--Alliance and BGII
Conflicts of Interest" and "The Merger--Interests
of Certain Persons in the Merger" and "BGII
Executive Officers and Executive Compensation."
If the Merger is consummated, Messrs. Gillman and
Jenkins would be entitled to certain lump-sum
payments, without discount to present value, in
connection with the termination of their
respective employment agreements and performance
unit awards. Alliance has consented to payment of
the following amounts: Richard Gillman,
$8,000,000 payable $5,000,000 in cash and
$3,000,000 in Alliance Common Stock (valued at
the Alliance Average Trading Price which shall
not be deemed greater than $6.00 or less than
$4.25); and Neil Jenkins, $1,320,000 payable
$825,000 in cash and $495,000 in Alliance Common
Stock (valued at the Alliance Average Trading
Price which shall not be deemed greater than
$6.00 or less than $4.25). The Merger Agreement
provides that the above-described payments to Mr.
Gillman and Mr. Jenkins are subject to approval
by BGII. The BGII Board has approved the
$5,000,000 cash payment to Mr. Gillman and the
above-described payments to Mr. Jenkins. Mr.
Kloss and Alliance have agreed that at the
Effective Time he will receive $1,500,000 in cash
and $3,000,000 in Alliance Common Stock (valued
at the Alliance Average Trading Price which shall
not be deemed greater than $6.00 or less than
$4.25) and that he would continue as president of
Gaming for a period of one year at a salary of
$250,000 per annum. Mr. Kloss and Alliance have
also agreed that his current employment
arrangement with Bally Wulff would continue until
the end of its term in May 1998 and that Mr.
Kloss would be entitled to certain bonus payments
based on future performance. Mr. Conover and
Alliance have agreed that at the Effective Time,
he will receive $702,000, payable $234,000 in
cash and $468,000 in Alliance Common Stock
(valued at the Alliance Average Trading Price
which shall not be deemed greater than $6.00 or
less than $4.25). In addition, options held by
each non-employee director of BGII which are
outstanding under the 1991 Directors Plan or 1994
Plan will be exercisable for the Merger
Consideration per share of BGII Common Stock
subject to the stock options and the term during
which such options may be exercised will be
extended. See "BGII Plans and Amendments--1991
Directors Plan" and "The Merger--Interests of
Certain Persons in the Merger". Executive
officers and directors of BGII currently hold
options exercisable into 565,000 shares of BGII
Common Stock. Assuming the Merger Consideration
is worth $11.70 per share, and assuming the
amendments to the 1991 Plan and 1991 Directors
Plan are adopted, such options would be
exercisable immediately after

15
<PAGE>

the Effective Time for $6,610,500 worth of
Alliance Common Stock without taking into account
the exercise price of such options. The BGII
Board was aware of these interests and considered
them, among other matters, in approving the
Merger Agreement and the transactions
contemplated thereby. See "Risk Factors--Alliance
and BGII Conflicts of Interest" and "--Absence of
Special Committee" and "The Merger--Interests of
Certain Persons in the Merger". In addition, the
exercise period of certain outstanding stock
options held by BGII's executive officers will be
extended. See "BGII Plans and Amendments". As of
the date of this Proxy Statement/Prospectus,
BGII's executive officers are as follows: Richard
Gillman (Chairman of the Board and Chief
Executive Officer), Hans Kloss (President and
Chief Operating Officer of BGII and Managing
Director of Bally Wulff), Neil E. Jenkins
(Executive Vice President and Secretary), Scott
Schweinfurth (Senior Vice President, Chief
Financial Officer and Treasurer) and Robert
Conover (President of Bally Systems, a division
of Bally Gaming, Inc.). With the exception of
Messrs. Kloss and Conover, who will continue to
be employed by the combined company following the
Merger, and Messrs. Gillman and Jenkins, who will
no longer be employed by the combined company
following the Merger, no determination has yet
been made as to which, if any, of the other
executive officers will be employed by Alliance
after the Merger. See "The Merger--Interests of
Certain Persons in the Merger" for a discussion
of amounts to which such officers are entitled
under their respective employment agreements and
under BGII's incentive plans as a result of the
Merger and such termination.

In considering the recommendation of the Alliance
Board with respect to the Merger Agreement and
the transactions contemplated thereby, Alliance
stockholders should be aware that certain members
of Alliance's management and Board of Directors
have certain interests in the Merger that are in
addition to the interests of Alliance
stockholders generally. See "Risk Factors--
Alliance and BGII Conflicts of Interest" and "The
Merger--Interests of Certain Persons in the
Merger". If the Merger is consummated, certain
executive officers and directors of Alliance will
be entitled to receive certain options and
warrants to purchase Alliance Common Stock. See
"Risk Factors--Alliance and BGII Conflicts of
Interest" and "The Merger--Interest of Certain
Persons in the Merger". The Alliance Board was
aware of these interests and considered them,
among other matters, in approving the Merger
Agreement and the transactions contemplated
thereby.

Expenses.................... BGII has agreed in the Merger Agreement that BGII
will pay Alliance a fee of $2,800,000 in the
event Alliance has not breached its obligations
under the Merger Agreement and the Merger
Agreement is terminated by BGII because (i) the
BGII Board recommends to BGII stockholders an
alternative proposal that the BGII Board
determines in good faith, after consultation with
its

16
<PAGE>

financial advisors, is likely to be more
favorable, from a financial point of view, to
BGII's stockholders than the Merger; (ii) the
BGII Board fails to make, withdraws, or modifies
or changes its recommendation of the Merger based
on the BGII Board's good faith determination,
after consultation with counsel, that making such
recommendation, or the failure to withdraw,
modify or change such recommendation, could
reasonably be deemed a breach of its fiduciary
duties under applicable law or (iii) if BGII's
stockholders do not approve and adopt the Merger
Agreement at the BGII Annual Meeting and within
six months after such termination by BGII a
transaction occurs or is announced that would
result in a change in control of BGII or the sale
or other disposition by BGII of substantial
assets.

BGII has also agreed in the Merger Agreement that
in the event Alliance has not breached its
obligations under the Merger Agreement and the
Merger Agreement is terminated for any reason
other than breach by Alliance of its obligations
under the Merger Agreement or its failure to
obtain the required financing where such failure
is not primarily attributable to BGII, BGII will
reimburse Alliance for its out-of-pocket costs
and expenses incurred in connection with the
transactions contemplated by the Merger Agreement
and its prior tender offer and consent
solicitation, including, without limitation, fees
and disbursements of counsel, financial advisors
and accountants, amounts previously paid as
indemnities to BGII and its directors or
otherwise incurred in respect of the termination
of the WMS Agreement and financing commitment
fees and expenses up to but not in excess of the
sum of $2,000,000 (but without limit in certain
circumstances). See "Certain Provisions of the
Merger Agreement--Expenses and Termination Fees".

Alliance has agreed in the Merger Agreement that
if the Merger Agreement is terminated by Alliance
because its stockholders do not approve the
Merger Agreement at the Alliance Annual Meeting
and prior to such termination any person shall
have acquired beneficial ownership of, or any
group shall have been formed which beneficially
owns or has the right to acquire beneficial
ownership of, more than 35% of the then
outstanding Alliance Common Stock, Alliance shall
pay to BGII a fee of $2,800,000.

Alliance has also agreed in the Merger Agreement
that if the Merger Agreement is terminated by
Alliance because Alliance's stockholders do not
approve the Merger Agreement at the Alliance
Annual Meeting, then Alliance shall reimburse
BGII for all of its out-of-pocket costs and
expenses, without limit, incurred in connection
with the transactions contemplated by the Merger
Agreement and the Alliance Offer and Consent
Solicitation, including, without limitation, fees
and disbursements of counsel, financial advisors
and accountants. See "Certain Provisions of the
Merger Agreement--Expenses and Termination Fees".

17
<PAGE>

Financing...................
Section 7.1.6. of the Merger Agreement stipulates
as a condition to the Merger that Alliance obtain
$150,000,000 of financing, with such financing to
include the sale for cash pursuant to a
registered public offering of Series B Special
Stock on commercially reasonable terms in which
Alliance receives $15,000,000 in gross proceeds
(prior to payment of expenses and underwriting
discounts and commissions) and at least
$100,000,000 of bank debt, other indebtedness
having a term of at least four years and/or
equity of any type (provided that any preferred
stock shall not be redeemable (other than at the
option of Alliance) for at least four years). In
order to satisfy the financing condition and
provide for working capital, Alliance currently
plans to raise such financing by issuing in an
underwritten transaction $100,000,000 of senior
secured notes with a 5 to 7 year maturity and the
remainder by issuing in separate underwritten
transactions shares of Alliance Common Stock and
shares of Series B Special Stock (the
"Financing"), each expected to occur at the same
time as the Merger. In addition, although the
parties' obligations to consummate the Merger is
conditioned on receipt of $15,000,000 in gross
proceeds from the sale of Series B Special Stock,
Alliance has agreed in the Merger Agreement to
file with the Commission a registration statement
covering at least $25,000,000 of Series B Special
Stock and use its reasonable commercial efforts
to attempt to sell pursuant to a public offering
$25,000,000 of Series B Special Stock (valued at
the liquidation value thereof). However, failure
to sell the additional Series B Special Stock
(above the $15,000,000 gross proceeds amount
which is a condition to the parties' obligations
under the Merger Agreement) will not excuse
either party from consummating the Merger. The
Financing could also involve other public or
private issuances of debt (including convertible
debt or debt accompanied by warrants) and/or
equity securities or foreign or domestic bank
loans. See "Certain Provisions of the Merger
Agreement--Conditions to Consummation of the
Merger" and "The Merger--Financing". The proceeds
of the Financing are expected to be used as
follows: (i) $76,700,000 to pay the Cash
Consideration; and (ii) approximately $69,900,000
to refinance existing BGII indebtedness, with the
remainder to be used to pay transaction fees and
expenses. Any excess will be used for working
capital purposes.

Regulatory Approvals Certain aspects of the Merger will require
Required................... notification to, and/or approvals from, certain
Federal and state authorities, including gaming
authorities, as well as in certain of the foreign
jurisdictions in which Alliance and/or BGII
currently operate. It is a condition to the
obligations of Alliance under the Merger
Agreement that approvals from certain state
(including Nevada) gaming regulators which are
required before the Effective Time are so
obtained. Gaming regulators in certain
jurisdictions, including the gaming regulators in
Nevada, will not act with respect to applications
for such approval until stockholders of both
Alliance and BGII have approved the Merger. An
application for the acquisition of control

18
<PAGE>

of BGII by Alliance and related matters has been
filed with the Nevada Gaming Commission and is
expected to be considered at its regularly
scheduled meeting in April 1996, although no
assurance can be given in that regard. Alliance
and BGII expect to receive all required pre-
closing approvals from gaming regulators prior to
the time the Merger is currently anticipated to
be consummated, although no assurances can be
given in that regard. See "The Merger--Regulatory
Filings and Approvals".

BGII's activities with regard to its former VLT
distributor in Louisiana have been the subject of
inquiries by gaming regulators, including
regulators in Louisiana and New Jersey. For a
discussion of such inquiries and their effect on
BGII and the surviving corporation after the
consummation of the Merger, see "Risk Factors--
Ongoing BGII Regulatory Investigations" and
"Litigation Matters".

Appraisal Rights............ Under Delaware law, holders of shares of BGII
Common Stock are entitled to appraisal rights in
the Merger under Section 262 of the Delaware
General Corporation Law (the "DGCL").
Stockholders who elect to demand appraisal of
their shares must comply with the requirements
set forth in that section, which is attached as
Annex VI hereto. FAILURE TO STRICTLY COMPLY WITH
THESE REQUIREMENTS WILL RESULT IN THE LOSS OF
APPRAISAL RIGHTS. Holders of shares of Alliance
Common Stock will not have appraisal rights under
Nevada law with respect to the Merger. See "The
Merger--Appraisal Rights" and Annex VI hereto.

Federal Income Tax
Consequences of the
Merger.....................
In the Merger, holders of BGII Common Stock
generally will recognize capital gain or loss
equal to the difference between (x) the tax basis
for the shares of BGII Common Stock surrendered
and (y) the sum of (i) the cash received,
including cash received in lieu of fractional
shares plus (ii) the fair market value of the
shares of Alliance Common Stock received plus
(iii) the fair market value of the Series B
Special Stock received. The fair market value of
each share of Alliance Common Stock or Series B
Special Stock received by a holder of BGII Common
Stock will equal the mean between the highest and
lowest quoted selling prices of the Alliance
Common Stock or Series B Special Stock on the
date of the Effective Time.

Holders of shares of Series B Special Stock will
recognize ordinary income upon the payment of a
dividend (to the extent of Alliance's current or
accumulated earnings and profits) of additional
shares of Series B Special Stock equal to the
fair market value of such additional shares. The
fair market value of each share of Series B
Special Stock paid as a dividend will equal the
mean between the highest and lowest quoted
selling prices of the Series B Special Stock on
the date of the payment. A distribution in excess
of

19
<PAGE>

Alliance's current and accumulated earnings and
profits will be a tax free return of capital to
the extent of a holder's tax basis in the Series
B Special Stock, and thereafter, capital gain
income.

Risk Factors................ Stockholders of Alliance and BGII should
carefully evaluate the matters set forth under
"Risk Factors" and "Litigation Matters".

Executive Officers and
Directors After the
Merger.....................

The directors and executive officers of Alliance
will continue in office following the Merger and
two directors will be elected at the Alliance
Annual Meeting. See "Management Before and After
the Merger" and "Election of Alliance Directors".
No determination has been made as to which BGII
officers will be employed by Alliance following
the consummation of the Merger with the exception
of Hans Kloss and Robert Conover, who will be
continuing with the combined entity, and Richard
Gillman and Neil Jenkins who will not continue to
be employed by the combined entity following the
consummation of the Merger. Following
consummation of the Merger, Alliance intends to
evaluate the composition of the Alliance Board to
insure that the Alliance Board includes
individuals having appropriate skills and
experience in light of the expanded scope of
Alliance's operations.

FINANCIAL MATTERS AFTER THE MERGER

Accounting Treatment........ The Merger will be accounted for by Alliance
under the "purchase" method of accounting in
accordance with generally accepted accounting
principles. Therefore, the aggregate
consideration paid by Alliance in connection with
the Merger will be allocated to BGII's assets and
liabilities based on their fair values with any
excess being treated as excess of purchase cost
over amount assigned to net assets acquired. The
assets and liabilities and results of operations
of BGII will be consolidated into the assets and
liabilities and results of operations of Alliance
subsequent to the Effective Time. See "Financial
Matters After the Merger--Accounting Treatment".

Dividend Policy After the It is the current intention of the Alliance Board
Merger..................... not to pay cash dividends on the Alliance Common
Stock following the Merger. The payment of future
dividends will be determined by the Alliance
Board in light of Alliance's alternative
opportunities for investment and the earnings and
financial condition of Alliance and its
subsidiaries, among other factors. See "Financial
Matters After the Merger--Common Stock Dividend
Policy After the Merger". Alliance intends to pay
dividends on the Series B Special Stock in
accordance with its terms. See "Description of
Alliance Capital Stock--Description of Series B
Special Stock".

TRADEMARKS AND TRADE NAMES.. The trademarks, trade names and service marks
used in this Proxy Statement/Prospectus in
connection with Alliance and BGII and their
respective subsidiaries, affiliates, and
businesses are

20
<PAGE>

proprietary or licensed to Alliance or BGII or
their subsidiaries or affiliates, as the case may
be. BGII licenses the name "Bally" from BEC for
use in its business pursuant to a trademark
license agreement. See "Risk Factors--BGII
Tradename", "The Companies--Bally Gaming
International, Inc.--Gaming--Trade Name License"
and "Litigation Matters".

Litigation.................. WMS has instituted a lawsuit in New York State
Court against BGII alleging, among other things,
that $4.8 million is due and payable from BGII to
WMS as a result of BGII's termination of the WMS
Agreement. See "Litigation Matters" for a
description of this claim as well as certain
purported class actions and other pending
litigation and claims.

On November 20, 1995, Alliance, the Merger
Subsidiary and BGII commenced an action against
BEC in Federal District Court in Delaware seeking
a declaratory judgment that the combined company
following the Merger will be permitted to use the
trade name "Bally" (the "Alliance Action"). On
November 28, 1995, BEC commenced an action
against BGII, Gaming, Alliance and the Merger
Subsidiary in Federal District Court in New
Jersey seeking to enjoin such parties from using
the "Bally" trade name (the "BEC Action"). On
February 16, 1996, BGII received notice from BEC
alleging that BGII had violated the License
Agreement by, among other things, granting to
Marine Midland Business Loans, Inc. a security
interest in general intangibles. In such notice,
BEC also stated that as a result of the
foregoing, it was immediately terminating the
License Agreement. BGII does not believe that it
has violated the terms of the License Agreement
and BGII will defend its position against BEC's
claims. See "Litigation Matters".

ELECTION OF ALLIANCE
DIRECTORS

Slate of Nominees...........
The following persons have been nominated by the
Alliance Board for election to the Alliance
Board: Christopher Baj and David Robbins.

Term upon Election.......... Upon election, each nominee would hold office
until the Annual Meeting of Stockholders in 1998.

Recommendation of Alliance The Alliance Board recommends that stockholders
Board...................... vote in favor of the nominees for the Alliance
Board.

See "Election of Alliance Directors".

BGII PLANS AND AMENDMENTS

1994 Stock Option Plan for
Non-Employee Directors, as
amended....................
The 1994 Plan provides for the grant of options
to each non-employee director to purchase 25,000
shares of BGII Common Stock and provides that, at
the Effective Time (a) all options outstanding
under the 1994 Plan shall vest and remain
exercisable with respect to the total number of
shares of BGII Common Stock

21
<PAGE>

underlying each such option, (b) all options
outstanding under the 1994 Plan shall remain
exercisable until the earlier of (i) the
expiration of the original term of the option
grant (without regard to Section 10 of the 1994
Plan or other Change of Control provisions within
the applicable award agreement), or (ii) three
years from the Effective Time, (c) all provisions
in the 1994 Plan and any applicable award
agreement which terminate, or otherwise shorten
the period in which an option would be
exercisable by an optionee who is a director of
BGII as a result of such person ceasing to be a
director, officer or employee of BGII shall be of
no further force or effect and (d) each
outstanding option shall be exercisable, at the
exercise price of the option, for the Merger
Consideration per share of BGII Common Stock
subject to the option.

The 1994 Plan was designed to enable BGII to
secure non-employee persons of requisite business
experience and ability to serve on the BGII
Board. Further, the 1994 Plan is designed to
provide the participants the opportunity to
benefit from the Merger by allowing the exercise
of their options for a three-year period after
the Effective Time. The value to be received upon
exercise of an option under the 1994 Plan is
$11.70, which is the value of the per share
Merger Consideration as well as the value to be
received on a per share basis under the 1991
Plan (assuming the employees do not elect to
receive Alliance Common Stock in lieu of Merger
Consideration upon exercise of their options) and
1991 Directors Plan. See "BGII Plans and
Amendments".

Amendment No. 3 to the 1991
Incentive Plan and 1991
Non-Employee Directors'
Option Plan................

Amendment No. 3 to the 1991 Incentive Plan
provides that upon the Effective Time (a) all
options outstanding under the 1991 Plan shall
vest and remain exercisable until the earlier of
(i) the expiration of the original term of the
option grant (without regard to Section 17 of the
1991 Plan or other Change of Control provisions
within the applicable award agreement), (ii)
three years from the Effective Time or (iii)
except with respect to Messrs. Gillman, Kloss and
Jenkins, in the event the option holder's
employment is terminated for cause (which is not
defined in the 1991 Plan) or such employee
voluntarily terminates his employment, on the
date of such termination, (b) all provisions in
the 1991 Plan and any applicable award agreement
which terminate the exercise period during which
an option would be exercisable by an optionee who
is a director of BGII as a result of such person
ceasing to be a director, officer or employee, as
the case may be, of BGII shall be of no further
force or effect, and (c) each outstanding option
shall be exercisable, at the exercise price of
such option, for the Merger Consideration per
share of BGII Common Stock subject to such
option; provided however, that in the event the
holder of such option has delivered proper notice
of election to BGII prior to the Effective Time,
each option held by such holder shall be
exercisable for that number of shares

22
<PAGE>

of Alliance Common Stock equal to the number of
shares of BGII Common Stock subject to such
option at an exercise price equal to the Alliance
Average Trading Price.

Amendment No. 3 to the 1991 Directors Plan
provides that upon the Effective Time (a) all
options outstanding under the 1991 Directors Plan
shall vest and remain exercisable until the
earlier of (i) the expiration of the original
term of the option grant (without regard to
Section 13 of the 1991 Directors Plan or other
Change of Control provisions within the
applicable award agreement) or (ii) three years
from the Effective Time, (b) all provisions in
the 1991 Directors Plan and any applicable award
agreement which terminate, or otherwise shorten
the exercise period during which an option would
be exercisable by an optionee who is a director
of BGII as a result of such person ceasing to be
a director, officer or employee of BGII shall be
of no further force or effect and (c) each
outstanding option shall be exercisable, at the
exercise price of the option, for the Merger
Consideration per share of BGII Common Stock
subject to the option. See "BGII Plans and
Amendments".

In the event the above-described amendments are
not approved, pursuant to each of the 1991 Plan
and the 1991 Directors Plan, as currently in
effect, upon BGII stockholder approval of the
Merger (a) all options outstanding shall become
fully vested and exercisable with respect to the
total number of shares of BGII Common Stock
underlying each such option and (b) all options
outstanding shall terminate not later than 180
days in the case of the 1991 Plan, and 90 days in
the case of the 1991 Directors Plan after BGII
stockholder approval of the Merger. See "BGII
Plans and Amendments".

In general, the effect of the amendments to the
1991 Plan and the 1991 Directors Plan would
change (i) the length of the relevant time period
in which an option holder would be permitted to
exercise his options (ii) the date of
commencement of such time period which would
change from the 180-day (in the case of the 1991
Plan) or 90-day (in the case of the 1991
Directors Plan) period following BGII stockholder
approval of the Merger to the three-year period
following the Effective Time, and (iii) the
consideration for which and, under certain
circumstances, the price at which the option may
be exercised. See "BGII Plans and Amendments".

The purpose of each Amendment No. 3 is to provide
participants in the respective Plans the
opportunity to benefit from the Merger by
allowing the exercise of their options for a
three-year period after the Effective Time, which
options at the Effective Time will represent
options to purchase Alliance Common Stock. In
addition, the purpose of Amendment No. 3 to the
1991 Plan is to provide employees with the option
of electing to retain the ability to participate
in any growth of BGII through ownership of
Alliance

23
<PAGE>

Common Stock. Assuming that employees do not
elect to receive Alliance Common Stock in lieu of
Merger Consideration, the value received upon
exercise of an option under the 1991 Plan is
$11.70, which is the value of the per share
Merger Consideration as well as the value to be
received on a per share basis under the 1991
Directors Plan and 1994 Plan. In addition, the
purpose of Amendment No. 3 to the 1991 Directors
Plan is designed to provide the participants the
opportunity to benefit from the Merger Agreement
by allowing the exercise of their options for a
three year period after the Effective Time. The
value to be received upon exercise of an option
under the 1991 Directors Plan is $11.70, which is
the value of the per share Merger Consideration
as well as the value to be received on a per
share basis under the 1991 Plan (assuming that
employees do not elect to receive Alliance Common
Stock in lieu of Merger Consideration upon
exercise of their options) and 1994 Plan.

Recommendation of BGII
Board of Directors.........
The BGII Board recommends that BGII stockholders
vote in favor of the proposal regarding the
Merger Agreement, which includes the approval of
the 1994 Stock Option Plan for Non-Employee
Directors, as amended, and Amendment No. 3 to
each of the 1991 Incentive Plan and 1991 Non-
Employee Directors' Option Plan. See "The
Merger--BGII's Reasons for the Merger;
Recommendations of the BGII Board of Directors".

ELECTION OF BGII DIRECTORS

Slate of Nominees........... The following persons have been nominated by the
BGII Board for election to the BGII Board, each
of whom is currently a director of BGII: Richard
Gillman, Hans Kloss, Neil E. Jenkins, Charles C.
Carella, James J. Florio, Lewis Katz and Kenneth
D. McPherson.

Term upon Election.......... Upon election, each nominee would hold office
until the earlier of (x) the Effective Time or
(y) the next Annual Meeting of Stockholders of
BGII and the election and qualification of their
successors.

Recommendation of BGII
Board of Directors.........
The BGII Board recommends stockholders vote in
favor of the nominees for the BGII Board. See
"The Merger--BGII's Reasons for the Merger;
Recommendations of the BGII Board of Directors".

24
<PAGE>

RISK FACTORS

Stockholders of Alliance and BGII should consider carefully all of the
information contained in this Proxy Statement/Prospectus and, in particular,
the following:

Implementation of Merger. Alliance's future operations and earnings will
be largely dependent upon Alliance's ability to integrate the businesses
separately conducted by Alliance and BGII prior to the Merger. Alliance and
BGII currently operate in different segments of the gaming industry, with
virtually no overlap in their activities. There can be no assurance that
Alliance will successfully integrate the former separate businesses of
Alliance and BGII, and a failure to do so would have a material adverse
effect on Alliance's results of operations and financial condition.
Additionally, although Alliance does not currently have any specific
acquisition plans, the need to focus management's attention on integration
of the separate businesses may limit Alliance's ability to successfully
pursue acquisitions or other opportunities related to its business for the
foreseeable future. Although Alliance plans to introduce more sophisticated
technology into BGII's gaming devices, there is no assurance that it will
succeed in doing so. While management cannot precisely quantify such
savings, Alliance expects to realize cost savings of approximately $5.0
million on an annual basis (primarily through the reduction of duplicative
costs, such as facility, legal, accounting and compensation costs) as a
result of the Merger. In order to achieve these cost savings, Alliance
believes it will incur initial costs of $1.0 million. The achievement of
these savings is significantly dependent on the successful implementation
of the Merger. There can be no assurance, however, that such savings will
be achieved or sustained. See "Unaudited Pro Forma Condensed Combined
Financial Information".

Operating History-Recent Losses. Alliance incurred net losses of $3.7
million, $13.1 million, $10.8 million and $5.0 million and $9.4 million
during the fiscal years ended June 30, 1993, 1994 and 1995 and the six
months ended December 31, 1994 and 1995, respectively, whereas BGII had net
income of $5.3 million, a net loss of $23.4 million, net income of $3.8
million and a net loss of $3.4 million for the fiscal years ended December
31, 1992, 1993, 1994 and 1995, respectively. Alliance management believes
that of the losses of Alliance during the fiscal years ended June 30, 1993,
1994 and 1995, approximately $900,000, $6.4 million, and $2.4 million,
respectively, were attributable to non-recurring items primarily reflecting
the discontinuance of businesses and prior management strategies. In
addition, BGII management believes that of BGII's loss for its fiscal year
ended December 31, 1995, $5.8 million was attributable to certain unusual
charges incurred by BGII. Nevertheless, there can be no assurance that
Alliance will be profitable in the future or that future results will
improve as a result of the Merger. On a pro forma basis for the 12-month
period ended June 30, 1995 and the six-month period ended December 31,
1995, after giving effect to the Merger and the Financing, the combined
company would have had net losses, prior to accruing dividends on the
Series B Special Stock, of $3.381 million and $7.494 million, respectively.
Accrued dividends on the Series B Special Stock will be $11.7 million in
the first year. See "Unaudited Pro Forma Condensed Combined Financial
Information", "Selected Historical Consolidated Financial Data of Alliance"
and "Selected Historical Consolidated Financial Data of BGII".

High Leverage and Fixed Charges after the Merger. Alliance will have a
substantial amount of indebtedness after the Merger and the Financing. As
of December 31, 1995, on a pro forma basis after giving effect to the
Merger and the Financing, Alliance would have had outstanding debt of
approximately $200 million and a long-term debt to equity ratio of 5.1 to
1. See "Unaudited Pro Forma Condensed Combined Financial Information". In
addition, if the maximum amount of dividends on the Series B Special Stock
were paid in kind, the liquidation value of Series B Special Stock would
accrete to $181 million after seven years. On a pro forma basis, Alliance
would have annual fixed charges of approximately $56.5 million, including
$11.7 million of dividends on the Series B Special Stock, for the twelve
month period ended December 31, 1995. Alliance's post-Merger high level of
indebtedness will have important consequences, including without limitation
the following: (i) significant interest expense, dividend requirements,
principal repayment and special stock redemption obligations (after eight
years) resulting in substantial annual fixed charges and significant
repayment obligations in the future; (ii) significant limitations on
Alliance's ability to obtain additional financing, make capital
expenditures and acquisitions and take advantage of other significant
business opportunities that may arise; and (iii) increased

25
<PAGE>

vulnerability to adverse general economic and industry conditions. In
addition, debt instruments issued in connection with the Financing will
likely include change of control provisions and restrictive covenants
prohibiting or limiting, among other things, the sale of assets, the
incurrence of additional debt and liens and the payment of dividends. Non-
compliance could result in the acceleration of such indebtedness. The
indebtedness of Alliance's controlled subsidiary Video Services, Inc.
("VSI") and the indebtedness of RCVP, of which a subsidiary of Alliance is
general partner, also contain similar restrictive covenants, non-compliance
with which could result in the acceleration of such indebtedness.

The ability of Alliance to make interest and principal payments on its
debt following the Merger will depend on its ability to generate sufficient
cash flow from operations. On a pro forma basis after giving effect to the
Merger and the Financing, Alliance's earnings would have been inadequate to
cover fixed charges and special stock dividends by $12.5 million and
$12.042 million for the year ended June 30, 1995 and the six-month period
ended December 31, 1995, respectively. Future operating results are subject
to significant business, economic, regulatory and competitive uncertainties
and contingencies, many of which are beyond the control of Alliance. There
can be no assurance that Alliance will be able to generate the cash flow
necessary to permit Alliance to meet its debt service obligations. If
Alliance is unable to generate sufficient cash flow from operations in the
future, it may be required to refinance all or a portion of its existing
debt or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could
be obtained on terms that are favorable or acceptable to Alliance. Any
inability of Alliance to service its indebtedness would have a significant
adverse effect on Alliance and the market value and marketability of
Alliance Common Stock and the Series B Special Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation of
Alliance".

Working Capital. Alliance believes that its cash flow needs for the next
12 months will increase as a result of an increase in accounts receivable
relating to the introduction of new machines and the expected increases in
production and sales levels from recent historical levels. Alliance expects
that cash flow generated by operations and other available cash will be
sufficient to satisfy its normal working capital needs and currently
intends to raise $40 million of the $180 million through the sale of
Alliance Common Stock, the proceeds of which will be used for working
capital purposes. Failure to obtain close to $180 million in financing
might leave the combined company without enough working capital, making it
impractical to proceed with the Merger. See "Auxiliary Financing
Information". In order to be competitive in meeting the growing customer
demand for financing of gaming equipment in emerging gaming markets,
Alliance also plans to continue, subsequent to the Merger, to involve
third-party finance companies or secure additional financing, although
there can be no assurance that such additional financing will be obtained.
Failure to obtain such financing on terms acceptable to Alliance could
impair Alliance's operations and ability to pursue its business strategy.

Financing Condition. The consummation of the Merger is conditioned on
Alliance obtaining, on commercially reasonable terms and conditions, $150
million of financing. Alliance and its financial advisors have not yet
determined the precise composition of the approximately $180 million it
currently intends to raise to pay the Cash Consideration, repay BGII
indebtedness and pay related fees and expenses. Alliance currently intends
to raise $40 million of the $180 million through the sale of Alliance
Common Stock, the proceeds of which will be used for working capital
purposes. See "Auxiliary Financing Information". The Unaudited Pro Forma
Condensed Combined Financial Information was prepared assuming the issuance
of $100 million of debt, $10 million of Alliance Common Stock and $40
million of Series B Special Stock. The actual amounts raised will depend
upon a number of factors, including market conditions, the price of
Alliance Common Stock and other factors beyond the control of Alliance
management. See "The Merger--Financing". Although Alliance believes that it
will be able to obtain such financing, there can be no assurance to that
effect, and the precise amount or composition of financing is uncertain and
the terms thereof may be onerous. If such financing is not obtained, the
Merger Agreement would likely be terminated. Upon termination of the Merger
Agreement, BGII would continue as an independent publicly-traded
corporation and may explore a strategic business combination with other
suitable companies.

26
<PAGE>

Tax Considerations. The Merger Consideration received by a holder of BGII
Common Stock in the Merger, including the value of the Share Consideration,
will be taxable to the holder. Resales of Alliance Common Stock to obtain
cash to pay such taxes will be affected by, among other things, the
liquidity of the market for Alliance Common Stock. Historical trading
volumes of Alliance Common Stock have been relatively low.

Louisiana Law. Under the Louisiana Act (as defined in "The Companies--
Gaming Regulation and Licensing"), no entity which is licensed or has a
direct or indirect financial interest in an entity licensed as a
manufacturer of video draw poker devices may be licensed as a distributor
or device owner. See "The Companies--Gaming Regulations and Licensing".
This law will have the effect of making it unlawful for the combined
company to both manufacture and distribute such devices for use in
Louisiana. Consequently, following the Merger, BGII will not be allowed to
sell such devices to entities currently subject to the Louisiana Act. Such
law would not impose restrictions on sales of parts or other equipment by
the combined company and would not prohibit sales of BGII products to
riverboats and land-based casinos. BGII's aggregate VLT business was less
than 2% of BGII's consolidated sales during 1995.

Investment in Minority-Owned Subsidiary. Alliance invested $1,580,000
for a 50% interest in Kansas Financial Partners, LLC ("KFP") in 1994. KFP
owns a second mortgage in the amount of $3,205,000, plus accrued interest,
secured by a greyhound racing facility in Frontenac, Kansas, owned by
Camptown Greyhound Racing, Inc. ("Camptown"). Camptown filed for protection
under Chapter 11 of the U.S. Bankruptcy Code in January of 1996. KFP
intends to pursue its rights to protect its collateral, including
foreclosing on the second mortgage, which would require KFP to assume or
pay the first mortgage of approximately $2,000,000. There can be no
assurance that KFP will be able to gain control of the greyhound racing
facility and obtain a license to operate the facility, or that Alliance
will be able to recover its investment in KFP. Additionally, Alliance owns
a 50% interest in Kansas Gaming Partners, LLC ("KGP") which owns the rights
to operate gaming devices and/or casino style gaming at the greyhound
racing facility if and when such gaming becomes legal in Kansas. While
Alliance understands that the Kansas legislature may consider two gaming
bills this session, there can be no assurance that gaming of any type will
ever be legalized for operation at the greyhound track. See "The
Companies--Alliance Gaming Corporation--Business Development Activity."

Series B Special Stock. The Series B Special Stock dividend may be paid-
in-kind ("PIK") in whole or in part until after the seventh anniversary of
the Effective Time. The Series B Special Stock is mandatorily redeemable on
the eighth anniversary of the Effective Time; however, if Alliance fails to
so redeem all outstanding shares of the Series B Special Stock by such
date, the remedies of holders are limited to the right to elect two
directors to the Alliance Board, and to prohibit the payment of dividends
or other distributions on, or the purchase or redemption of, any other
stock of Alliance ranking junior to or pari passu with the Series B Special
Stock. Although Alliance has applied to have the Series B Special Stock
quoted on NASDAQ NMS, there is no assurance that this will occur, and the
Series B Special Stock has no existing trading market and there can be no
assurance as to the type of trading market that will develop. The Series B
Special Stock will be callable at any time at Alliance's option at the
liquidation value of $100 per share (the "Liquidation Value") plus all
accrued and unpaid dividends and distributions. The Series B Special Stock
does not limit Alliance's right to issue other series of special stock
ranking prior to or on a parity with the Series B Special Stock as to
receipt of dividends or distributions. Furthermore, while fractional shares
of Series B Special Stock will be issued in the Merger, holders of
fractional shares will not be able to trade such fractional shares on
NASDAQ NMS. These factors may adversely affect the market price and
marketability of the Series B Special Stock. The Merger Agreement permits
the Series B Special Stock to have terms different from those described in
the Merger Agreement; while such terms must be at least as favorable as
those so described, it may not be possible to determine whether particular
terms are more or less favorable, and some terms may be more favorable for
certain types of investors than others. Ladenburg did not express any
opinion as to the value of the Series B Special Stock or the price at which
it will trade subsequent to the Effective Time.

27
<PAGE>

Possible Change in Control. Alfred Wilms holds approximately 39%, and
Kirkland Investment Corporation ("KIC") holds 10.3%, of the outstanding
shares of Alliance Common Stock and, accordingly, are together able to
elect all directors of Alliance. Mr. Wilms is contractually obligated until
September 21, 1997 to vote his shares of Alliance Common Stock in favor of
four nominees of KIC to Alliance's seven-member Board of Directors.
However, following consummation of the Merger and the Financing, pursuant
to which an estimated 13.307 million or more additional shares of Alliance
Common Stock will be issued, Mr. Wilms and KIC will own in the aggregate
only approximately 25% of the outstanding shares of Common Stock.
Accordingly, following the Merger, no one person or group will hold a
majority interest in Alliance, and it is possible that Alliance could be
subject to a change in control, either pursuant to a takeover attempt or
otherwise, to a greater degree than has been the case.

Alliance Options and Convertible Securities. Alliance has outstanding
options and convertible securities, many of which are held by management
and principal stockholders, which can be exercised for or converted into in
the aggregate approximately 18,500,000 shares of Alliance Common Stock.
Warrants exercisable for an additional 2,500,000 shares will be issued to
Alliance affiliates in connection with the Merger. See "The Merger--
Interests of Certain Persons in the Merger". The potential issuance of such
21,000,000 shares of Alliance Common Stock may depress the upside price
potential of Alliance Common Stock. Although many of these exercises and
conversions will likely not occur unless the price of Alliance Common Stock
increases substantially from current levels, conversion and exercise of
these securities would result in substantial dilution to the interests of
other stockholders.

Fairness Opinion. Ladenburg has delivered its written opinion to the
Board of Directors of BGII to the effect that, as of January 19, 1996, the
Merger Consideration is fair, from a financial point of view, to the
holders of BGII Common Stock. This opinion has not been updated to the date
of this Proxy Statement/Prospectus and will not be updated at the Effective
Time. Stockholders should note that there can be no assurance with respect
to whether, if requested to do so, Ladenburg could deliver an updated
fairness opinion with respect to the Merger. Stockholders should also note
that Ladenburg will participate as co-managing underwriter in the offering
of the Alliance debt and equity securities comprising the Financing. Acting
in such capacity may constitute a conflict of interest with their capacity
as financial advisor to BGII. Ladenburg did not express any opinion as to
the value of the Series B Special Stock or the price at which it will trade
subsequent to the Effective Time.

Volatility of Stock Price. There can be no assurance with respect to the
prices at which the Alliance Common Stock and Series B Special Stock will
trade after the date hereof or after the Effective Time. As of March 8,
1996, the closing price of the Alliance Common Stock as reported on the
NASDAQ NMS was $ . The trading price of Alliance Common Stock and Series
B Special Stock could be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results and other events or
factors, including the success of Alliance's development activities,
legislation approving or defeating gaming, other governmental actions,
developments in the gaming industry generally and announcements by Alliance
or by competitors. Historical trading volumes for Alliance Common Stock
have been relatively low and research coverage for Alliance Common Stock is
limited. See "Comparative Per Share Market Price Data and Dividend Policy".
In addition, the stock market, and the gaming industry in particular, have
experienced extreme price and volume fluctuations in a manner which has
often been unrelated to the operating performance of such companies. These
broad market fluctuations may adversely affect the market price of Alliance
Common Stock and Series B Special Stock. A shift away from investor
interest in gaming in general could adversely affect the trading price of
Alliance Common Stock and Series B Special Stock in a manner unrelated to
Alliance's operating performance.

Alliance and BGII Conflicts of Interest. In considering the
recommendation of each Board with respect to the Merger Agreement and the
transactions contemplated thereby, Alliance and BGII stockholders should be
aware that certain members of Alliance's and BGII's management and boards
have certain interests in the Merger that are in addition to the interests
of stockholders generally, including changes in the terms of options and,
in certain cases, changes in their employment arrangements or payments in
connection with the termination of their respective employment agreements.
See "Election of Alliance

28
<PAGE>

Directors--Alliance Executive Compensation", "BGII Executive Officers and
Executive Compensation" and "The Merger--Interests of Certain Persons in
the Merger". The Alliance Board and the BGII Board were aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.

Absence of Special Committee. No special committee of either the Alliance
Board or the BGII Board was appointed to evaluate the terms of the Merger
or, with respect to the BGII Board, the 1994 Plan and Amendments No. 3 to
the 1991 Plan and 1991 Directors Plan. The BGII Board determined that it
was not necessary to appoint a special committee since it was the Board's
opinion that, (i) in general, the interests of the Board members coincided
with those of the stockholders in that each group would benefit from an
increase in the value paid for BGII Common Stock in the Merger and (ii) the
conflicts presented did not rise to a level of significance which would
warrant appointment of a special committee. In the opinion of the Alliance
Board, it was not necessary to appoint a special committee since the
conflict presented did not rise to a level of significance which would
warrant such an appointment.

Certain Considerations for BGII Stockholders. In the event the Merger
Agreement is not approved by BGII stockholders, BGII will terminate the
Merger Agreement. Upon termination of the Merger Agreement, BGII will
continue as an independent publicly-traded corporation and may explore a
strategic business combination with other suitable companies. BGII has not
identified any entity with which it would pursue a strategic business
combination in the event of termination of the Merger Agreement. It is
unlikely that BGII would enter into a business combination transaction
since the marketplace has been aware of BGII's interest in a possible
business combination transaction and no parties other than WMS and Alliance
have made bids for BGII. Accordingly, if the Merger is not approved or
consummated for some other reason, BGII would most likely continue as an
independent company.

In the event that the BGII stockholders do not approve the Merger
Agreement and the Merger Agreement is terminated, BGII will not be able to
enter into a transaction resulting in a change of control of BGII or a sale
or other disposition by BGII of substantial assets for a period of six
months following the termination of the Merger Agreement without payment to
Alliance of a fee of $2,800,000. In the event that the Merger Agreement is
terminated under certain circumstances BGII will reimburse Alliance for its
out-of-pocket fees and expenses incurred in connection with the Alliance
Offer, the Consent Solicitation and the transactions contemplated by the
Merger Agreement. Under certain circumstances such expense reimbursement is
limited to $2,000,000. See "Certain Provisions of the Merger Agreement--
Expenses and Termination Fees".

If the BGII stockholders approve the Merger and the Merger is
consummated, then the current stockholders of BGII will become stockholders
of Alliance. In light of the fact that each share of BGII Common Stock will
be converted into cash, Alliance Common Stock and Series B Special Stock as
a result of the Merger, a BGII stockholder would hold a much smaller
percentage of ownership of Alliance than he holds of BGII, with less
ability to have his stock ownership affect the election of directors and
other matters presented to stockholders generally. In addition, as a
stockholder of Alliance, a BGII stockholder would own an interest in a
corporation engaged in businesses which are in addition to BGII's current
business. See "The Companies--Alliance Gaming Corporation" for a
description of the business in which Alliance is engaged.

Bally Wulff Sales. Bally Wulff's new wall machine unit sales decreased by
approximately 8% in the year ended December 31, 1995 as compared to the
year ended December 31, 1994. Management believes new wall machine revenues
for the last six months of 1995 were adversely affected by an industry
downturn caused by regulations imposed in Germany limiting the number of
wall machines per square footage in arcade locations effective January 1,
1996, thereby reducing sales opportunities. Management expects the adverse
impact of such regulations to continue during the first six months of 1996.

Competition With Customers. BGII currently supplies gaming machines to
certain customers which are in competition with Alliance. It is possible
that, because of such competition, certain of these customers may cease
purchasing gaming machines from BGII after the Merger. Alliance and BGII do
not believe that

29
<PAGE>

such discontinuations will be material. BGII sells gaming devices
principally to casinos; Alliance operates only two small casinos and
therefore does not believe that it would be perceived as a significant
competitor by prospective BGII casino customers. While Alliance does have
substantial machine management operations, BGII sales to machine management
operators have historically been, and are likely to remain, insignificant.
Nevertheless, discontinuance of purchases by customers could adversely
affect the combined company's sales.

Competition

Gaming. The market for gaming machines is extremely competitive, and
there are a number of established, well-financed and well-known companies
producing machines that compete with each of the product lines in each of
the markets for Gaming. Gaming's major competitors are International Game
Technology, Inc. ("IGT"), Universal Distributing of Nevada, Inc.
("Universal"), Sigma Games, Inc. ("Sigma"), WMS and in the international
marketplace companies marketing gaming machines under the brand names of
Aristocrat, Atronic, Cirsa and Novomatic. In addition, certain technology
oriented companies have announced their intention to enter into the gaming
machine business. BGII management believes that its competitors generally
have greater capital resources than the combined company would. Competition
among gaming product manufacturers, particularly with respect to sales of
gaming machines into new and emerging markets, is based on competitive
customer pricing and financing terms, appeal to the player, quality of the
product, and an extensive distribution and sales network. Sales to
established casinos in Nevada normally require completion of a successful
trial period for the machines in the casino.

Systems. The competition for the data systems designed and sold by
Systems currently consists of IGT, Computer Data Systems ("CDS"), and, to a
lesser extent, Gaming Systems International, Inc. ("GSI") and Acres Gaming,
Inc. Competition is keen in this market due to the number of providers and
the limited number of casinos and the jurisdictions in which they operate.
Pricing, product feature and function, accuracy, and reliability are all
main factors in determining a provider's success in selling its system.
Systems believes the future success of its operations will be determined by
its ability to bring new and innovative products to the marketplace and at
the same time maintaining the base of loyal existing customers.

Bally Wulff. Germany's wall machine manufacturing industry is dominated
by Bally Wulff and two of its competitors. These three entities are
believed collectively to account for more than 90% of the entire market for
wall machines (which exists almost exclusively in Germany). Bally Wulff
competes with many companies in the distribution of coin-operated amusement
games, some of which are larger and have greater resources than the
combined company. Bally Wulff's two major competitors own and operate a
significant number of arcades, which may give them a competitive advantage
arising from a built-in market for their games and the ability to test
market new games in their own arcades.

Machine Management Operations. The competition for obtaining and renewing
gaming device routes in Nevada is high and continues to intensify. Such
competition has, over time, reduced Alliance's profit margins for such
operations. In addition, such competition has required Alliance to provide
substantial financial incentives and incur financial risks to retain or
obtain certain gaming device route locations. Such incentives include long-
term lease commitments, guarantees of leases in favor of owners of local
establishments, substantial advance deposits, payments of lease rentals in
advance and loans for buildings and tenant-improvement costs. Although
Alliance believes that it now has adequate procedures for evaluating and
managing such risks, historically substantial losses have been incurred in
connection with such transactions reflecting, in part, former management's
willingness to accept higher levels of risk to further its former policy of
emphasizing market share. Notwithstanding the change in Alliance's business
strategy to one emphasizing profitability rather than market share, to some
extent the future success of Alliance's machine management business will
continue to be dependent on its ability and willingness to provide such
financial inducements. Although Alliance has historically generated
sufficient new machine management contracts to offset the loss of old
machine management contracts, due to increased competition, the increased
sophistication and bargaining power of customers and possibly other factors
not yet known,

30
<PAGE>

there can be no assurance that Alliance will be able to obtain new machine
management contracts or renew or extend its current space leases or
revenue-sharing arrangements upon their expiration or termination, or that,
if renewed or extended, the terms will be favorable to Alliance.

Casinos. The operation of casinos and taverns is also a highly
competitive business. The principal competitive factors in the industry
include the quality and location of the facility, the nature and quality of
the amenities and customer services offered and the implementation and
success of marketing programs. In Nevada, the principal competition for
Alliance's operations comes from larger casinos and taverns focusing on the
local market, although strip and downtown hotels and casinos also attract
gaming customers from the local market. In Louisiana, Alliance is subject
to extensive competition for contracts to operate video poker devices, and
its racetrack and OTB parlors compete with various truck stops and
locations with liquor licenses throughout the New Orleans area, as well as
riverboat gaming and one land-based casino which may reopen in New Orleans.
Dockside gaming in Mississippi also attracts players from the New Orleans
area, and Alliance's one dockside casino in Vicksburg, Mississippi faces
substantial direct competition from other dockside gaming facilities in the
region.

See "The Companies--Alliance Gaming Corporation" and "The Companies--
Bally Gaming International, Inc.".

Product Development. The future success of the combined company depends
to a large extent upon its ability to design, manufacture and market
technologically sophisticated products that achieve high levels of player
acceptance. The development of a successful new product or product design
by a competitor could adversely affect sales of the combined company's
products and force it to respond quickly with its own competing products.
Alliance's plans with respect to the introduction of more sophisticated
technology into the gaming device market are designed to lead to an
increase in market share and profitability. See "The Companies--Alliance
Gaming Corporation" and "The Companies--Bally Gaming International, Inc.".
However, no products incorporating such technology have reached the
development stage, and there is no assurance that any such products will be
developed, or that if developed they will be commercially successful.

Customer Financing. Management believes that customer financing terms
have become an increasingly important competitive factor in certain
emerging markets. Competitive conditions sometimes require Gaming to grant
extended payment terms on gaming machines and other gaming equipment.
Approximately 75% of Gaming's slot and video gaming machine customers pay
within 90 days or less. Approximately 25% of Gaming's sales in certain
emerging gaming markets such as riverboat casinos and Indian gaming casinos
are financed over extended periods as long as 36 months and bear interest
at rates ranging from 8% to 14%. While customer financings are normally
collateralized by such equipment, the resale value of the collateral in the
event of a default may be less than the amount financed. Accordingly,
Gaming has greater exposure to the financial condition of its customers in
emerging markets than has historically been the case in established markets
like Nevada and Atlantic City.

In addition, in certain situations, Gaming has participated in the
financing of other gaming related equipment manufactured by third parties
in the emerging North American gaming markets. Management believes that
financing of customer sales has become an increasingly important factor in
certain emerging markets. International sales are generally consummated on
a cash basis or financed over a three-month period.

Gaming made a significant financial commitment in connection with the
development of the Louisiana market for VLTs, which became operational in
July 1992. However, Gaming terminated its exclusive distributor of VLTs in
Louisiana in May 1993, and thereafter the distributor filed a voluntary
bankruptcy petition under Chapter 11 of the Bankruptcy Code. Gaming expects
to continue the sale of VLT machines, parts and equipment, on a limited
basis, in the Louisiana market through new relationships with licensed
entities on a non-exclusive basis. However, no assurance can be made that
such sales of VLT machines, parts and equipment will continue or will be
sufficient to allow the combined company to obtain a desirable

31
<PAGE>

rate of return on its investment in the Louisiana market. See "The
Companies--Gaming Regulation and Licensing".

Sales to Emerging Gaming Markets. The continued growth of the emerging
markets for gaming machines is contingent upon the public's acceptance of
these markets and an ongoing regulatory approval process by Federal, state
and local governmental authorities. BGII cannot predict which new
jurisdictions or markets, if any, will approve the operation of gaming
machines, the timing of any such approval or the level of Gaming's
participation in any such new markets.

Foreign Operations. BGII's business in foreign markets is subject to the
risks customarily associated with such activities. These risks include
fluctuations in foreign currency exchange rates and controls,
expropriation, nationalization and other economic, tax and regulatory
policies of local governments as well as the laws and policies of the
United States affecting foreign trade and investment. BGII does not
generally enter into foreign exchange contracts to hedge its exposure to
foreign exchange rate fluctuations.

Departure of BGII Management. Following the Merger, Alliance will not
retain the services of certain members of BGII's most senior management.
Alliance has limited expertise in the business of manufacturing gaming
devices and no experience in managing foreign operations. Alliance may need
to hire qualified personnel to replace BGII's management. There can be no
assurance that Alliance will be able to manage the business successfully
without such personnel, or that it will be successful in recruiting
personnel with the requisite expertise for this purpose.

Bally Tradename. The "Bally" tradename is an important component of
BGII's marketing strategy. BEC, the licensor of the "Bally" tradename, has
claimed that a merger between BGII and another entity may result in the
loss of BGII's right to use such tradename, although BGII and Alliance
management believes this claim to be without merit. BEC has purported to
terminate BGII's license to use such tradename. See "Litigation Matters"
for a description of such claim, as well as other claims, and related
litigation.

Strict Regulation by Gaming Authorities. The manufacture and distribution
of gaming machines and the conduct of gaming operations is subject to
extensive Federal, state, local and foreign regulation. Although the laws
and regulations of the various jurisdictions in which Alliance and BGII
operate vary in their technical requirements and are subject to amendment
from time to time, virtually all of these jurisdictions require licenses,
permits, documentation of the qualification, including evidence of
integrity and financial stability, and other forms of approval for
companies engaged in the manufacture and distribution of gaming devices and
gaming operations as well as for the officers, directors, major
stockholders and key personnel of such companies. To date Alliance and BGII
and their key personnel have obtained, or applied for, all government
licenses, permits and approvals necessary for the manufacture and
distribution, and operation where permitted, of their gaming machines in
the jurisdictions in which Alliance and BGII currently do business.
However, no assurance can be given that such licenses, permits or approvals
will be given or renewed in the future or that they will obtain the
licenses necessary to operate in emerging markets. There can also be no
assurance that required regulatory approvals for the Merger will be
obtained or, that if obtained, will be obtained on a timely basis.

BGII was pursuing a permanent manufacturer's license for Gaming as it
relates to the land-based casino in New Orleans. However, in November 1995,
the operator of the land-based casino in New Orleans filed for bankruptcy
reorganization and ceased operations. That action resulted in the
termination of funding for the regulatory operations of the Louisiana
Economic Development Gaming Corporation ("LEDGC") and, shortly thereafter,
the Attorney General of Louisiana took control of the agency and
effectively closed its operations and dismissed its President and
employees. The foregoing occurred prior to completion of review of Gaming's
pending application. In addition, BGII's application for renewal of
Gaming's license as a gaming-related casino service industry in New Jersey
is pending before the New Jersey Casino Control Commission (the "CCC"). The
governor of Louisiana has proposed a referendum on the legality of gaming
activities in Louisiana, which proposal will be considered at the special
session of the legislature which convenes in March. A negative outcome in
such referendum could materially adversely effect Alliance. See "The
Companies--Gaming Regulation and Licensing."

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<PAGE>

Ongoing BGII Regulatory Investigations. In May 1994, an investigation of
BGII's former VLT Louisiana distributor culminated in the indictment by a
United States grand jury and subsequent conviction in New Orleans of 18
individuals including certain of the former distributor's officers,
directors, employees and others. In addition, Alan Maiss, a former director
and president of BGII, pled guilty to misprision of a felony in connection
with such investigation. BGII, its subsidiaries and its current employees
were not subject to such investigation. BGII's activities with regard to
its former VLT distributor in Louisiana have been the subject of current
inquiries by gaming regulators. The gaming authorities in Ontario, Canada,
who have investigated the matters, issued a gaming registration to Bally
Gaming, Inc. on February 8, 1996. Each of the LEDGC and the CCC is
currently reviewing such proceedings in connection with Gaming's
application for a permanent license or a license renewal. An adverse
determination by a gaming regulator in any jurisdiction could result in the
loss of the BGII's ability to do business in that jurisdiction (but it is
not expected that Alliance's or its current subsidiaries' ability in any
such jurisdiction would necessarily be affected) and could have the effect
of discouraging gaming operators from doing business with Alliance. In
addition, further regulatory scrutiny of BGII in other jurisdictions may
follow. See "The Companies--Gaming Regulation and Licensing."

Gaming Taxes. Alliance believes that the prospect of significant tax
revenue is one of the primary reasons that many jurisdictions have
legalized various forms of gaming. As a result, gaming operators are
typically subject to significant taxes and fees in addition to corporate
income taxes, and such taxes and fees are subject to increase at any time.
Any material increase in these taxes or fees, which could occur
prospectively or retroactively, would adversely affect the combined entity
resulting from the Merger. Sales of Wulff's products in Germany are
generally subject to V.A.T. The operations of Wulff had benefitted from a
special tax rebate that was phased out from January 1, 1992 to January 1,
1994. Alliance pays and expects to continue to pay substantial taxes and
fees in Nevada, Louisiana and Mississippi and expects to pay substantial
taxes and fees in any other jurisdiction in which it conducts gaming
operations.

Litigation. On November 20, 1995, following claims by BEC that BGII's
license to use the "Bally" tradename would terminate upon consummation of
the Merger, Alliance, the Merger Subsidiary and BGII commenced an action
against BEC in Federal District Court in Delaware District Court seeking a
declaratory judgment that the combined company following the Merger will be
permitted to use the "Bally" tradename. On November 28, 1995, BEC commenced
an action against BGII, Gaming, Alliance and the Merger Subsidiary in
Federal District Court in New Jersey seeking to enjoin such parties from
using the "Bally" tradename. On February 16, 1996, BGII received notice
from BEC alleging that BGII had violated the License Agreement by, among
other things, granting to Marine Midland Business Loans, Inc. ("Marine
Midland"), the lender which provides Bally Gaming, Inc.'s revolving line of
credit, a security interest in general intangibles. In such notice, BEC
also stated that as a result of the foregoing, it was immediately
terminating the License Agreement. Stockholders of Alliance and BGII should
read the description of these and other litigation proceedings currently
pending against Alliance and BGII, as well as certain purported class
actions, under the caption "Litigation Matters". Loss of the "Bally"
tradename may have a material adverse effect on the business, results of
operations and financial condition of the combined entity, taken as a
whole. WMS has instituted a lawsuit in New York State Court against BGII
alleging, among other things, that $4.8 million is due and payable from
BGII to WMS as result of the termination of the WMS Agreement.

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<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALLIANCE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table sets forth selected consolidated financial data of
Alliance and has been derived from, and should be read in conjunction with,
the audited consolidated financial statements of Alliance, including the notes
thereto, as of and for the fiscal years ended June 30, 1991, 1992, 1993, 1994
and 1995, and the unaudited interim consolidated financial statements of
Alliance, including notes thereto, for the six months ended December 31, 1994
and 1995.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEARS ENDED JUNE 30, ENDED DECEMBER 31,
-------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
--------- -------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA
Revenues:
Gaming
Routes............... $ 77,150 $ 77,940 $ 96,282 $ 102,830 $106,827 $52,511 $52,621
Casinos and taverns.. 11,281 11,560 12,526 15,679 21,287 7,861 21,679
Food and beverage
sales................ 3,120 3,376 4,184 4,480 3,847 1,950 1,923
Net equipment
sales(1)............. 214 379 99 65 27 16 6
--------- -------- -------- --------- -------- --------- ---------
91,765 93,255 113,091 123,054 131,988 62,338 76,229
Costs and expenses:
Cost of gaming
Routes............... 58,299 58,585 72,614 76,332 79,875 39,214 40,361
Casinos and taverns.. 8,528 8,459 8,667 11,871 11,436 4,653 9,887
Cost of food and
beverage............. 2,249 2,367 2,876 3,084 2,795 1,414 1,426
Cost of equipment
sales................ 151 284 49 20 12 9 1
Selling, general &
administrative....... 8,059 8,950 12,667 13,555 14,633 6,486 9,398
Business development
costs................ -- -- 900 1,192 7,843 3,508 10,737
Corporate
administrative
expenses............. 7,567 5,290 6,191 7,882 9,735 4,302 3,037
Bad debt expense...... 4,845 539 461 705 400 -- --
Write-off of
inventory,
intangibles and other
assets............... 4,982 -- -- -- -- -- --
Loss on abandoned
casinos.............. 7,847 2,307 -- 3,713 -- -- --
Loss on abandoned
taverns.............. -- -- -- 2,638 -- -- --
Depreciation and
amortization......... 7,092 7,355 8,718 9,530 9,520 4,613 4,906
--------- -------- -------- --------- -------- --------- ---------
Total costs and
expenses.......... 109,619 94,136 113,143 130,522 136,249 64,199 79,753
--------- -------- -------- --------- -------- --------- ---------
Operating loss.......... (17,854) (881) (52) (7,468) (4,261) (1,861) (3,524)
Other income (expense)
Interest income....... 1,750 1,324 998 2,084 2,798 1,504 818
Interest expense...... (4,663) (4,505) (5,046) (6,830) (8,133) (3,915) (4,288)
Other, net............ (1,007) (618) 450 (673) (890) (455) (1,649)
--------- -------- -------- --------- -------- --------- ---------
Loss before taxes....... (21,774) (4,680) (3,650) (12,887) (10,486) (4,727) (8,643)
Income tax (expense)
benefit................ 5,958 -- -- (241) (265) (290) (788)
--------- -------- -------- --------- -------- --------- ---------
Net loss........... $ (15,816) $ (4,680) $ (3,650) $ (13,128) $(10,751) $ (5,017) $ (9,431)
========= ======== ======== ========= ======== ========= =========
Net loss per common
share.................. $ (1.73) $ (0.51) $ (0.38) $ (1.28) $ (0.95) $ (0.45) $ (0.79)
========= ======== ======== ========= ======== ========= =========
Deficit of earnings to
fixed charges.......... $ (21,774) $ (4,680) $ (3,650) $ (12,887) $(10,487) $ (4,726) $ (8,644)
========= ======== ======== ========= ======== ========= =========
Pro forma deficit of
earnings to fixed
charges(2)............. $ -- $ -- $ -- $ -- $ (826) $ (2,943) $ (6,205)
========= ======== ======== ========= ======== ========= =========
Pro forma deficit of
earnings to fixed
charges and Series B
Special Stock
Dividend(3)............ $ -- $ -- $ -- $ -- $(12,500) $ (8,780) $ (12,042)
========= ======== ======== ========= ======== ========= =========
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
--------- -------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash
equivalents............ $ 5,774 $ 10,239 $ 9,580 $ 37,085 $ 13,734 $ 28,189 $ 15,729
Securities available for
sale................... -- -- -- 12,489 23,680 12,596 13,739
Net working capital..... 10,450 11,557 7,991 50,926 31,552 40,087 20,109
Total assets............ 79,024 75,594 73,768 119,416 126,348 115,353 116,872
Total long term debt,
including current
maturities............. 44,450 43,282 44,798 90,726 101,397 89,375 100,106
Total stockholders'
equity (deficiency)(4). 27,008 23,660 22,665 15,099 9,985 13,917 (717)
</TABLE>
- --------
(1) Includes sales to related parties of $86 (1991), $236 (1992), $2 (1993),
$6 (1994), $0 (1995).

(2) Includes the effect of the anticipated Merger and Financing as discussed
in "Unaudited Pro Forma Condensed Combined Financial Information".

(3) Includes the effect of the anticipated Merger and Financing as discussed
in "Unaudited Pro Forma Condensed Combined Financial Information" and the
issuance of Series B Special Stock.

(4) No dividends were paid during any period presented.

34
<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BGII
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following tables set forth selected financial data of BGII (consolidated
or combined), Wulff, Gaming and Systems which has been derived from and should
be read in conjunction with the audited consolidated financial statements of
BGII including the notes thereto as of and for the years ended December 31,
1991, 1992, 1993, 1994 and 1995. See "Basis of Presentation and Description of
Business" in Notes to Consolidated Financial Statements. The selected
historical consolidated financial data for the periods prior to November 18,
1991 (the date BGII completed its initial public offering of common stock)
present, on an historical cost basis the financial position and results of
operations of the subsidiaries and divisions of BEC which formerly conducted
operations as Wulff, Gaming and Systems. The results of operation for Wulff
and Gaming include an allocation of BGII, the parent company, revenues and
expenses.

BALLY GAMING INTERNATIONAL, INC.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1991 1992 1993(A) 1994(A) 1995(A)
---------- ---------- ----------- ----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............... $ 153,648 $ 163,781 $ 168,707 $ 236,192 $249,312 (b)
Cost of sales.......... 102,357 99,906 121,710 (c) 157,059 163,131 (b)
Selling, general and
administrative ex-
penses................ 36,725 46,348 57,357 (d) 59,989 65,289
Provision for doubtful
receivables........... 2,176 3,597 8,176 (e) 5,763 6,712 (b)
Unusual charges........ -- -- -- -- 5,816 (f)
Interest expense,
primarily charged by
BEC in 1991........... 1,602 1,951 4,424 6,768 6,853
Provision for income
taxes................. 5,784 6,725 4,242 2,820 4,904
Income (loss) before
extraordinary gain.... 5,004 5,254 (27,202) 3,793 (3,393)
Extraordinary gain on
early extinguishment
of debt............... -- -- 3,759 -- --
Net income (loss)...... 5,004 5,254 (23,443) 3,793 (3,393)
Income (loss) per share
before extraordinary
gain.................. .48 .50 (2.54) .35 (.31)
Extraordinary gain on
early extinguishment
of debt per share..... -- -- .35 -- --
Net income (loss) per
share................. .48 .50 (2.19) .35 (.31)
Pro forma net income... 2,435(g) -- -- -- --
Pro forma net income
per share............. .23(g) -- -- -- --
Average number of
common shares
outstanding........... 10,450 10,573 10,685 10,727 10,776
Ratio of earnings to
fixed charges......... 6.51 6.19 -- 1.93 1.21
Deficit of earnings to
fixed charges......... -- -- $22,960 -- --
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........ $ 69,350 $ 82,481 $ 83,009 $ 95,772 $97,357
Property, plant and
equipment, net........ 19,650 18,695 24,042 24,358 23,244
Total assets........... 131,342 150,805 170,830 192,242 194,316
Long-term debt, less
current maturities.... 5,369 25,867 50,673 53,762 54,987
Stockholders' equity... 98,605 101,277 74,879 85,883 88,410
</TABLE>
- --------
(a) Includes results from the acquisition of a distribution business by Wulff
in January 1993.
(b) Includes the impact of sales returns of $.3 million and a provision for
doubtful receivables of $.9 million recorded in the second quarter of 1995
by Gaming related to two riverboats at the River City Complex in New
Orleans which had filed for bankruptcy.
(c) Includes $6.2 million in charges to increase inventory valuation reserves
in 1993 principally related to inventory originally intended for sale in
the Louisiana VLT market.
(d) Includes $1.2 million in charges related to a management reorganization at
Gaming in 1993.
(e) Includes a provision for doubtful receivables totaling $5.1 million
recorded by Gaming in 1993 related to a former distributor who filed for
bankruptcy during the second quarter of 1993.
(f) Includes $4.0 million in merger transaction costs and related litigation
expenses, a provision of $.8 million at Wulff to write down to net
realizable value the carrying value of a building to be sold and a
provision of $1.0 million to increase Wulff's tax reserves primarily for
value added taxes.
(g) Includes pro forma income tax information for the year ended December 31,
1991 to reflect the provision for income taxes and net loss as if Gaming
and Systems had filed separate income tax returns. The pro forma
information assumes that Gaming and Systems would have been unable to
utilize such operating losses on a carry back basis.

35
<PAGE>

WULFF

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993(A) 1994(A) 1995(A)
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................ $118,104 $108,036 $112,601 $111,068 $130,655
Cost of sales........... 73,959 65,595 73,669 72,021 88,146
Selling, general and ad-
ministrative expenses.. 23,032 25,202 28,717 27,910 31,455
Provision for doubtful
receivables............ 1,638 1,464 513 1,905 1,697
Unusual charges......... -- -- -- -- 3,776(b)
Interest expense........ 336 737 1,453 1,398 1,284
Provision for income
taxes.................. 8,353 6,725 4,232 2,600 4,619
Net income.............. 10,786 8,313 4,017 5,234 (322)
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ 48,223 $ 51,276 $ 44,537 $ 48,933 $ 48,689
Property, plant and
equipment, net......... 4,235 4,181 10,300 11,543 11,174
Total assets............ 85,376 75,013 81,899 97,537 100,207
Long-term debt, less
current maturities..... 4,951 -- 5,038 5,006 4,721
Stockholder's equity.... 56,139 63,338 54,925 60,849 56,099
- --------
(a) Includes acquisition of distribution business in January 1993.
(b) Includes $2.0 million in merger transaction costs and related litigation
expenses, a provision of $.8 million to write down to net realizable value
the carrying value of a building to be sold and a provision of $1.0 million
to increase Wulff's tax reserves primarily for value added taxes.

GAMING

<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................ $ 34,010 $ 53,121 $ 48,512 $117,840 $108,423(a)
Cost of sales........... 29,405 35,773 48,507(b) 86,834 77,965(a)
Selling, general and ad-
ministrative expenses.. 10,953 17,624 23,478(c) 25,847 26,720
Provision for doubtful
receivables............ 349 2,133 8,200(d) 3,583 3,925(a)
Unusual charges......... -- -- -- -- 2,040(e)
Interest expense,
primarily charged by
BEC in 1991............ 1,153 1,671 3,457 5,359 5,664
Provision (credit) for
income taxes........... (2,406) -- 10 220 285
Loss before extraordi-
nary gain.............. (5,444) (4,080) (35,140) (4,003) (8,176)
Extraordinary gain on
early extinguishment of
debt................... -- -- 3,759 -- --
Net loss................ (5,444) (4,080) (31,381) (4,003) (8,176)
Pro forma net loss...... (7,850)(f) -- -- -- --
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ 15,788 $ 30,204 $ 34,302 $ 36,676 $ 31,492
Property, plant and
equipment, net......... 15,198 13,952 12,937 11,843 11,330
Total assets............ 43,009 66,145 72,875 78,316 75,630
Long-term debt, less
current maturities..... 418 26,785 44,774 47,450 49,091
Stockholder's equity.... 31,533 27,695 10,319 6,514 (2,928)
</TABLE>
- --------
(a) Includes the impact of sales returns of $.3 million and a provision for
doubtful receivables of $.9 million recorded in the second quarter of 1995
related to two riverboats at the River City Complex in New Orleans which
had filed for bankruptcy.
(b) Includes $6.2 million in charges to increase inventory valuation reserves
in 1993 principally related to inventory originally included for sale in
the Louisiana VLT market.
(c) Includes $1.2 million in charges related to a management reorganization in
1993.
(d) Includes a provision for doubtful receivables totaling $5.1 million
recorded in the third quarter of 1993 related to a former distributor who
filed for bankruptcy during the second quarter of 1993.
(e) Includes $2.0 million in merger transaction costs and related litigation
expenses.
(f) Includes pro forma income tax information for the year ended December 31,
1991 to reflect the provision for income taxes and net loss as if Gaming
had filed a separate income tax return. The pro forma information assumes
that Gaming would have been unable to utilize such operating loss on a
carryback basis.

36
<PAGE>

SYSTEMS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1991 1992 1993 1994 1995
------ ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues........................... $3,375 $6,035 $12,021 $13,388 $20,717
Cost of sales...................... 834 1,492 3,381 4,273 7,305
Selling, general and administrative
expenses.......................... 2,740 3,522 5,162 6,232 7,113
Provision for doubtful receivables. 189 -- (537) 275 1,090
Interest expense................... 113 -- 3 33 15
Provision (credit) for income tax-
es................................ (163) -- -- -- --
Net income (loss).................. (338) 1,021 4,012 2,575 5,194
Pro forma net loss................. (501)(a) -- -- -- --
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.................... $2,483 $3,159 $ 7,149 $ 9,563 $14,987
Property, plant and equipment, net. 217 562 805 972 740
Total assets....................... 4,111 5,466 9,611 12,561 17,680
Long-term debt, less current matu-
rities............................ -- -- 14 19 17
Stockholder's equity............... 3,082 4,103 7,940 10,516 15,710
</TABLE>
- --------
(a) Include pro forma income tax information for the year ended December 31,
1991 to reflect the provision for income taxes and net loss as if Systems
had filed a separate income tax return. The pro forma information assumes
that Systems would have been unable to utilize such operating loss on a
carryback basis.

BALLY GAMING INTERNATIONAL, INC.

SUPPLEMENTARY DATA

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------- ------------ -------------- -------------
1994 1995 1994 1995 1994 1995 1994 1995
----- ------ ----- ----- ------ ------ ----- ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
Revenues................ $61.7 $ 68.3 $58.9 $69.2 $ 49.3 $ 51.5 $66.3 $ 60.3
Gross profit............ 19.4 24.8 17.6 23.9 16.3 17.7 25.8 19.8
Operating income (loss). 4.0 6.7 2.7 4.6 1.2 (1.3) 5.5 (1.6)
Net income (loss)....... 1.3 2.8 1.6 1.1 (1.4) (3.8) 2.2 (3.5)
Net income (loss) per
share of common stock.. $ .12 $ .27 $ .15 $ .10 $ (.13) $ (.35) $ .21 $ (.33)
WULFF
Revenues................ $29.1 $ 36.0 $21.4 $35.5 $ 26.4 $ 27.0 $34.2 $ 32.2
Gross profit............ 10.0 12.4 5.6 11.9 8.9 9.3 14.5 8.9
Operating income (loss). 2.5 3.8 (.4) 3.0 2.5 .8 4.6 (2.0)
Net income (loss)....... 1.1 1.4 (.1) 1.0 1.3 (.3) 3.0 (2.4)
GAMING
Revenues................ $30.2 $ 28.0 $35.0 $33.0 $ 21.4 $ 24.0 $31.3 $ 23.4
Gross profit............ 7.4 8.6 9.2 9.0 5.2 7.0 9.2 5.9
Operating income (loss). 1.0 1.0 1.8 .6 (1.8) (1.6) .6 (2.2)
Net income (loss)....... (.3) (.6) .4 (.9) (3.2) (3.0) (1.1) (3.7)
SYSTEMS
Revenues................ $ 3.0 $ 6.1 $ 4.3 $4.2 $ 2.8 $ 2.4 $ 3.3 $ 8.0
Gross profit............ 2.0 3.9 2.8 3.0 2.2 1.5 2.1 5.0
Operating income........ .5 2.1 1.3 1.0 .5 (.5) .3 2.6
Net income.............. .5 2.1 1.3 1.0 .5 (.5) .3 2.6
</TABLE>

37
<PAGE>

ALLIANCE GAMING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The Unaudited Pro Forma Condensed Combined Statements of Operations present
results of operations of the combined company assuming the Merger and related
transactions including the Financing occurred on July 1, 1994 for the
statements for the twelve months ended June 30, 1995 and for the six months
ended December 31, 1995, and on July 1, 1993 for the statements for the six
months ended December 31, 1994, and that the Rainbow Casino operations were
consolidated. Adjustments necessary to reflect these assumptions and to
restate historical combined results of operations are presented in the
Adjustments columns, which are further described in the Notes to Unaudited Pro
Forma Condensed Combined Financial Information.

The Unaudited Pro Forma Condensed Combined Balance Sheet presents the
financial position of the combined company assuming the Merger and related
transactions, including the Financing, occurred on December 31, 1995.
Adjustments necessary to reflect this assumption and to restate historical
combined balance sheets are presented in the Pro Forma Adjustments column,
which are further described in the Notes to Unaudited Pro Forma Condensed
Combined Financial Information.

The historical unaudited financial information for Alliance is derived from
the audited financial statements of Alliance for the year ended June 30, 1995,
and the unaudited reports of Alliance for the six-month periods ended December
31, 1994 and 1995. The historical unaudited financial information for BGII is
derived from the unaudited interim information generated as of and for the
periods ended June 30, 1994 and 1995. BGII operating results for the twelve-
month period ended June 30, 1995 are calculated by subtracting the unaudited
six-month period ended June 30, 1994 results from the audited year ended
December 31, 1994 results and adding the unaudited six-month period ended June
30, 1995 results. BGII operating results for the six-month periods ended
December 31, 1994 and 1995 are calculated by subtracting the unaudited six-
month periods ended June 30, 1994 and 1995 results from the audited years
ended December 31, 1994 and 1995 results, respectively.

The Supplemental Unaudited Pro Forma Information presents pro forma cash
flow and fixed charges information. Additionally, the Supplemental Unaudited
Pro Forma Condensed Combined Statements of Operations reflect pro forma
earnings for the twelve-month period ended December 31, 1995 assuming the
Merger and related transactions, including the Financing, and the effect of
consolidating the Rainbow Vicksburg operating results, occurred on January 1,
1995. The related pro forma adjustments are consistent with those assumed
elsewhere herein.

The following information does not purport to present the financial position
or results of operations of Alliance had the Merger and events assumed therein
occurred on the dates specified, nor is it necessarily indicative of the
results of operations of the combined company as they may be in the future or
as they may have been had the Merger and related transactions, including the
Financing, and the effect of consolidating the Rainbow Casino operating
results, been consummated on the dates shown. The Unaudited Pro Forma
Condensed Combined Financial Information should be read in conjunction with
the audited and unaudited historical consolidated financial statements and
related notes thereto of Alliance and BGII included elsewhere herein.

38
<PAGE>

ALLIANCE GAMING CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
DECEMBER 31, 1995(1)(2)
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA COMBINED
ALLIANCE BGII COMBINED ADJUSTMENTS PRO FORMA
-------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and Securities
Available for Sale..... $ 29,468 $ 5,526 $ 34,994 $142,050 (a) $ 1,854
(70,688)(b)
(76,700)(c)
(7,559)(c)
(10,410)(c)
2,285 (d)
(12,118)(e)
Receivables, net........ 3,110 87,176 90,286 90,286
Inventories............. 672 51,591 52,263 52,263
Other................... 3,395 3,983 7,378 7,378
-------- -------- -------- --------
Total Current Assets..... 36,645 148,276 184,921 151,781
Property and Equipment,
net..................... 50,870 23,244 74,114 74,114
Other Assets:
Long Term Receivables,
net.................... 4,809 9,981 14,790 14,790
Excess of Costs Over Net
Assets of Acquired
Businesses, net........ 3,733 5,434 9,167 45,974 (c) 55,141
Intangible Assets, net.. 11,638 5,380 17,018 5,202 (c) 22,220
Investment in Minority
Owned Subsidiary....... 1,585 1,585 1,585
Other, net.............. 7,592 2,001 9,593 5,725 (a) 14,821
(497)(b)
-------- -------- -------- --------
Total Other Assets....... 29,357 22,796 52,153 108,557
-------- -------- -------- --------
Total Assets............. $116,872 $194,316 $311,188 $334,452
======== ======== ======== ========
Current Liabilities:
Accounts Payable........ $ 2,295 $ 18,556 $ 20,851 $ 20,851
Accrued Liabilities..... 10,187 17,406 27,593 (3,174)(e) 24,419
Current Maturities of
Long Term Debt......... 4,054 14,957 19,011 (14,957)(b) 4,054
-------- -------- -------- --------
Total Current
Liabilities............. 16,536 50,919 67,455 49,324
-------- -------- -------- --------
Long Term Debt, Less
Current Maturities...... 96,052 54,987 151,039 100,000 (a) 196,052
(54,987)(b)
Other Liabilities........ 4,082 4,082 4,082
-------- -------- -------- --------
Total Liabilities........ 116,670 105,906 222,576 249,458
Minority Interest........ 919 919 919
Series B Special Stock... 40,000 (a) 75,014
35,014 (c)
Stockholders' Equity
(Deficiency):
Common Stock, Par....... 1,298 108 1,406 267 (a) 1,829
78 (c)
186 (c)
(108)(c)
Paid-in Capital......... 32,134 68,345 100,479 7,508 (a) 49,281
(68,345)(c)
2,862 (c)
6,777 (c)
Retained Earnings
(Accumulated Deficit).. (32,562) 1,842 (30,720) (744) (b) (41,970)
(497) (b)
(1,842) (c)
777 (d)
(8,944)(e)
Cumulative Translation
Adjustments............ 18,662 18,662 (18,662)(c)
Other Stockholders'
Equity................. (1,587) (547) (2,134) 547 (c) (79)
1,508 (d)
-------- -------- -------- --------
Total Stockholders'
Equity (Deficiency)..... (717) 88,410 87,693 9,061
-------- -------- -------- --------
Total Liabilities and
Stockholders' Equity
(Deficiency)............ $116,872 $194,316 $311,188 $334,452
======== ======== ======== ========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

39
<PAGE>

ALLIANCE GAMING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995(1)(3)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ALLIANCE BGII PRO FORMA
--------------------------------- ------------------------------- AS ----------------------
AS AS ADJUSTED
HISTORICAL ADJUSTMENTS ADJUSTED HISTORICAL ADJUSTMENTS ADJUSTED COMBINED ADJUSTMENTS COMBINED
---------- ----------- -------- ---------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming........... $128,114 $14,809 (f) $142,923 $ $ $ $142,923 $ $142,923
Food and
Beverage Sales. 3,847 891 (f) 4,738 4,738 4,738
Net Equipment
Sales.......... 27 27 248,701 248,701 248,728 248,728
Other........... 4,432 4,432 4,432 4,432
-------- -------- -------- -------- -------- --------
Total Revenues... 131,988 147,688 253,133 253,133 400,821 400,821
-------- -------- -------- -------- -------- --------
Operating Costs:
Gaming.......... 91,311 2,127 (f) 93,438 93,438 93,438
Food and
Beverage....... 2,795 334 (f) 3,129 3,129 3,129
Equipment Sales. 12 12 157,538 157,538 157,550 157,550
Selling, General
and
Administrative. 32,611 9,716 (f) 39,153 68,651 68,651 107,804 (5,000)(h) 101,135
(3,174)(g) (1,669)(i)
Unusual charges. 500 500 500 (250)(i) 250
Depreciation and
Amortization... 9,520 893 (f) 10,413 8,482 8,482 18,895 1,207 (j) 23,171
2,783 (k)
(214)(l)
500 (m)
-------- -------- -------- -------- -------- --------
Total Operating
Costs........... 136,249 146,145 235,171 235,171 381,316 378,673
-------- -------- -------- -------- -------- --------
Operating Income
(Loss).......... (4,261) 1,543 17,962 17,962 19,505 22,148
Other Income
(Expenses):
Interest Income. 2,798 2,798 2,798 2,798
Interest
Expense........ (8,133) (988)(f) (9,121) (7,090) (7,090) (16,211) (4,910)(m) (21,121)
Royalty......... (810) (2,621)(f) (3,431) (3,431) (3,431)
Minority
interest....... (397) (397) (397) (397)
Other, net...... 317 101 (f) 418 418 (1,241)(n) (823)
-------- -------- -------- -------- -------- --------
Income (Loss)
Before Taxes.... (10,486) (8,190) 10,872 10,872 2,682 (826)
Domestic Tax
Expense......... (265) (265) (290) (290) (555) (555)
Foreign Tax
Benefit
(Expense)....... (5,779) (5,779) (5,779) 3,779 (o) (2,000)
-------- -------- -------- -------- -------- --------
Net Income
(Loss).......... $(10,751) $ (8,455) $ 4,803 $ 4,803 $ (3,652) $ (3,381)
======== ======== ======== ======== ======== --------
Series B Special $(11,674)
Stock Dividend.. --------
Net Loss
Applicable to $(15,055)
Common Shares... ========
Loss Per Common
Share(6)........ $ (.95) $ .45 $ (.91)
======== ======== ========
Supplemental Information:(7)

Pro Forma Cash Flow
Information:
Cash Flows from Operating Activities................................................................. $ 8,092
========
Cash Flows from Investing Activities................................................................. $(26,936)
========
Cash Flows from Financing Activities................................................................. $ (757)
========
Pro Forma Deficit of Earnings to Fixed Charges ....................................................... $ (826)
========
Pro Forma Deficit of Earnings to Fixed Charges and Series B Special Stock Dividend ................... $(12,500)
========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

40
<PAGE>

ALLIANCE GAMING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1995(1)(4)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ALLIANCE BGII PRO FORMA
---------------------------------- ---------------------------------- AS ADJUSTED ----------------------
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL ADJUSTMENTS AS ADJUSTED COMBINED ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming.......... $74,300 $ $74,300 $ $ $ $ 74,300 $ $ 74,300
Food and Bever-
age Sales...... 1,923 1,923 1,923 1,923
Net Equipment
Sales.......... 6 6 108,893 108,893 108,899 108,899
Other........... 2,884 2,884 2,884 2,884
------- ------- -------- -------- -------- --------
Total Revenues... 76,229 76,229 111,777 111,777 188,006 188,006
------- ------- -------- -------- -------- --------
Operating Costs:
Gaming.......... 50,248 50,248 50,248 50,248
Food and Bever-
age............ 1,426 1,426 1,426 1,426
Equipment Sales. 1 1 71,093 71,093 71,094 71,094
Selling, General
and Administra-
tive........... 23,172 200(q) 23,372 33,204 33,204 56,576 (2,500)(r) 44,639
(9,437)(s)
Unusual Charges. 5,316 5,316 5,316 (1,750)(s) 3,566
Depreciation and
Amortization... 4,906 4,906 5,079 5,079 9,985 604 (t) 12,119
1,392 (u)
(112)(v)
250 (w)
------- ------- -------- -------- -------- --------
Total Operating
Costs........... 79,753 79,953 114,692 114,692 194,645 183,092
------- ------- -------- -------- -------- --------
Operating Income
(Loss).......... (3,524) (3,724) (2,915) (2,915) (6,639) 4,914
Other Income (Ex-
penses):
Interest Income. 818 818 818 818
Interest Ex-
pense.......... (4,288) (4,288) (3,284) (3,284) (7,572) (2,716)(w) (10,288)
Royalty......... (1,908) (1,908) (1,908) (1,908)
Minority Inter-
est............ (276) (276) (276) (276)
Other, net...... 535 535 535 535
------- ------- -------- -------- -------- --------
Income (Loss) Be-
fore Taxes...... (8,643) (8,843) (6,199) (6,199) (15,042) (6,205)
Domestic Tax Ex-
pense........... (788) (788) (165) (165) (953) (953)
Foreign Tax (Ex-
pense) Benefit.. (961) (961) (961) 625 (x) (336)
------- ------- -------- -------- -------- --------
Net Loss......... $(9,431) $(9,631) $ (7,325) $ (7,325) $(16,956) $ (7,494)
======= ======= ======== ======== ======== --------
Series B Special $ (5,838)
Stock Dividend.. --------
Net Loss Applica-
ble to Common
Shares.......... $(13,332)
========
Loss per Common $ (.79) $ (.68) $ (.78)
Share(6)........ ======= ======== ========
Supplemental In-
formation:(7)
- ----------------
Pro Forma Cash Flow Information:
Cash Flows from Operating Activities.......................................................................... $ 20,609
========
Cash Flows from Investing Activities.......................................................................... $ 215
========
Cash Flows from Financing Activities.......................................................................... $ (5,357)
========
Pro Forma Deficit of Earnings to Fixed Charges................................................................. $ (6,205)
========
Pro Forma Deficit of Earnings to Fixed Charges and Series B Special Stock Dividend............................. $(12,042)
========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

41
<PAGE>

ALLIANCE GAMING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1994(1)(4)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ALLIANCE BGII PRO FORMA
------------------------------------ ---------------------------------- AS ADJUSTED ----------------------
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL ADJUSTMENTS AS ADJUSTED COMBINED ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming.......... $60,372 $ 9,261 (p) $69,633 $ $ $ $69,633 $ $ 69,633
Food and Bever-
age Sales...... 1,950 666 (p) 2,616 2,616 2,616
Net Equipment
Sales.......... 16 16 113,123 113,123 113,139 113,139
Other........... 2,475 2,475 2,475 2,475
------- ------- -------- -------- ------- --------
Total Revenues... 62,338 72,265 115,598 115,598 187,863 187,863
------- ------- -------- -------- ------- --------
Operating Costs:
Gaming.......... 43,867 1,442 (p) 45,309 45,309 45,309
Food and Bever-
age............ 1,414 257 (p) 1,671 1,671 1,671
Equipment Sales. 9 9 70,835 70,835 70,844 70,844
Selling, General
and
Administrative. 14,296 6,255 (p) 18,543 33,472 33,472 52,015 (2,500)(r) 49,515
(2,008)(q)
Depreciation and
Amortization.... 4,613 906 (p) 5,519 4,608 4,608 10,127 604 (t) 12,261
1,392 (u)
(112)(v)
250 (w)
------- ------- -------- -------- ------- --------
Total Operating
Costs........... 64,199 71,051 108,915 108,915 179,966 179,600
------- ------- -------- -------- ------- --------
Operating Income
(Loss).......... (1,861) 1,214 6,683 6,683 7,897 8,263
Other Income (Ex-
penses):
Interest Income. 1,504 1,504 1,504 1,504
Interest Ex-
pense.......... (3,915) (748)(p) (4,663) (3,521) (3,521) (8,184) (2,479)(w) (10,663)
Royalty......... (1,665)(p) (1,665) (1,665) (1,665)
Minority Inter-
est............ (169) (169) (169) (169)
Other, net...... (286) 73 (p) (213) (213) (213)
------- ------- -------- -------- ------- --------
Income (Loss) Be-
fore
Taxes........... (4,727) (3,992) 3,162 3,162 (830) (2,943)
Domestic Tax Ex-
pense........... (290) (290) (170) (170) (460) (460)
Foreign Tax
(Expense)
Benefit......... (2,121) (2,121) (2,121) 1,379(x) (742)
------- ------- -------- -------- ------- --------
Net Income
(Loss).......... $(5,017) $(4,282) $ 871 $ 871 $(3,411) $ (4,145)
======= ======= ======== ======== ======= --------
Series B Special $ (5,838)
Stock Dividend.. --------
Net Loss
Applicable to
Common Shares... $ (9,983)
========
Loss per Common $ (.45) $ .08 $ (.61)
Share(6)........ ======= ======== ========

<CAPTION>
<S> <C>
Supplemental Information:(7)
Pro Forma Cash Flow Information:
Cash Flows from Operating Activities.......................................................................... $ 9,446
========
Cash Flows from Investing Activities.......................................................................... $(11,243)
========
Cash Flows from Financing Activities.......................................................................... $ (1,569)
========
Pro Forma Deficit of Earnings to Fixed Charges................................................................. $ (2,943)
========
Pro Forma Deficit of Earnings to Fixed Charges and
Series B Special Stock Dividend............................................................................... $ (8,780)
========
Pro Forma Cash Flow Information:
Cash Flows from Operating Activities..........................................................................
Cash Flows from Investing Activities..........................................................................
Cash Flows from Financing Activities..........................................................................
Pro Forma Deficit of Earnings to Fixed Charges.................................................................
Pro Forma Deficit of Earnings to Fixed Charges and
Series B Special Stock Dividend...............................................................................
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

42
<PAGE>

ALLIANCE GAMING CORPORATION

SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1995(1)(5)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ALLIANCE BGII PRO FORMA
---------------------------------- ------------------------------- AS -----------------------
AS AS ADJUSTED
HISTORICAL ADJUSTMENTS ADJUSTED HISTORICAL ADJUSTMENTS ADJUSTED COMBINED ADJUSTMENTS COMBINED
---------- ----------- -------- ---------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming............. $142,042 $5,548(y) $147,590 $ $ $ $147,590 $ $147,590
Food and Beverage
Sales............. 3,820 225(y) 4,045 4,045 4,045
Net Equipment
Sales............. 17 17 244,471 244,471 244,488 244,488
Other ............. 4,841 4,841 4,841 4,841
-------- -------- -------- -------- -------- --------
Total Revenues...... 145,879 151,652 249,312 249,312 400,964 400,964
-------- -------- -------- -------- -------- --------
Operating Costs:
Gaming............. 97,692 685(y) 98,377 98,377 98,377
Food and Beverage.. 2,807 77(y) 2,884 2,884 2,884
Equipment Sales.... 4 4 157,796 157,796 157,800 157,800
Selling, General
and
Administrative.... 41,487 3,461(y) 43,982 68,383 68,383 112,365 (5,000)(aa) 96,259
(966)(z) (11,106)(bb)
Unusual Charges.... 5,816 5,816 5,816 (2,000)(bb) 3,816
Depreciation and
Amortization...... 9,813 (13)(y) 9,800 8,953 8,953 18,753 1,207 (cc) 23,029
2,783 (dd)
(214)(ee)
500 (ff)
-------- -------- -------- -------- -------- --------
Total Operating
Costs.............. 151,803 155,047 240,948 240,948 395,995 382,165
-------- -------- -------- -------- -------- --------
Operating Income
(Loss)............. (5,924) (3,395) 8,364 8,364 4,969 18,799
Other Income
(Expenses):
Interest Income.... 2,112 2,112 2,112 2,112
Interest Expense... (8,506) (240)(y) (8,746) (6,853) (6,853) (15,599) (5,147)(ff) (20,746)
Royalty............ (2,718) (956) (y) (3,674) (3,674) (3,674)
Minority Interest.. (504) (504) (504) (504)
Other, net......... 1,138 28 (y) 1,166 1,166 (1,241)(gg) (75)
-------- -------- -------- -------- -------- --------
Income (Loss) Before
Taxes.............. (14,402) (13,041) 1,511 1,511 (11,530) (4,088)
Domestic Tax
Expense............ (763) (763) (260) (260) (1,023) (1,023)
Foreign Tax
(Expense) Benefit.. (4,644) (4,644) (4,644) 3,025 (hh) (1,619)
-------- -------- -------- -------- -------- --------
Net Income (Loss)... $(15,165) $(13,804) $ (3,393) $ (3,393) $(17,197) $ (6,730)
======== ======== ======== ======== ======== --------
Series B Special $(11,674)
Stock Dividend..... --------
Net Loss Applicable $(18,404)
to Common Shares... ========
Loss Per Common $ (1.33) $ (.31) $ (1.10)
Share(6)........... ======== ======== ========
Supplemental Information:(7)
Pro Forma Cash Flow
Information:
Cash Flows from Operating Activities.................................................................... $ 19,255
========
Cash Flows from Investing Activities.................................................................... $(15,478)
========
Cash Flows from Financing Activities.................................................................... $ (4,545)
========
Pro Forma Deficit of Earnings to Fixed Charges........................................................... $ (4,088)
========
Pro Forma Deficit of Earnings to Fixed Charges and Series B Special Stock Dividend ...................... $(15,762)
========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

43
<PAGE>

ALLIANCE GAMING CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. The Unaudited Pro Forma Condensed Combined Financial Statements of
Operations are presented as if the combination of Alliance and BGII
occurred on July 1, 1994 for the statements of operations for the twelve
months ended June 30, 1995 and for the six months ended December 31, 1995,
and on July 1, 1993 for the statement of operations for the six months
ended December 31, 1994. The Unaudited Pro Forma Condensed Combined Balance
Sheet is presented assuming the combination occurred on December 31, 1995
for purposes of presenting the pro forma balance sheet. The combination is
expected to be recorded as a purchase transaction in accordance with
generally accepted accounting principles and, accordingly, BGII assets and
liabilities are presented at their estimated fair values as of that date.

The Merger Agreement provides that BGII stockholders will receive in the
Merger, in exchange for each of their issued and outstanding shares of
common stock, (i) an amount of cash (the "Cash Consideration") determined
by dividing $76,700,000 by the number of shares of BGII Common Stock issued
and outstanding immediately prior to the Effective Time ($7.83 per share
for purposes of presentation of the pro forma financial information), (ii)
a fraction of a share of Alliance Common Stock equal to the quotient of
$.30 and the Alliance Average Trading Price (as defined in the Merger
Agreement) and (iii) that number of shares (or fractions thereof) of 15%
Non-Voting Junior Special Stock, Series B, $.10 par value, of Alliance (the
"Series B Special Stock"), having a value as determined in accordance with
the Merger Agreement equal to $11.40 less the Cash Consideration of $7.83,
or $3.57 per share for purposes of presentation of the pro forma financial
information.

Alliance and its financial advisors have not yet determined the precise
amount or composition of the capital it intends to raise to pay the Cash
Consideration, repay BGII indebtedness and pay related fees and expenses.
These Unaudited Pro Forma Condensed Combined Financial Statements assume
the issuance of $100 million of debt financing, $10 million of Alliance
Common Stock and $40 million of Series B Special Stock. Pursuant to the
amended Merger Agreement, it is a condition that Alliance must obtain
$150,000,000 in financing on commercially reasonable terms, with such
financing to include (i) the sale for cash pursuant to a registered public
offering of Series B Special Stock (which may not be sold as part of a unit
with any other security) in which Alliance receives gross cash proceeds
prior to the payment of expenses and underwriting discounts and commissions
of at least $15,000,000 and (ii) at least $100,000,000 of bank debt, other
debt having a term of at least four years and/or equity of any type,
provided that any special stock shall not be redeemable (other than at the
option of Alliance) for at least four years. The Series B Special Stock has
various dividend and liquidation preferences, and is mandatorily
redeemable, with certain defined redemption features, and is therefore
excluded from the Stockholders' Equity Section of the Pro Forma Condensed
Combined Balance Sheet. See "Description of Alliance Capital Stock". The
actual amounts and securities issued will depend upon a number of factors,
including market conditions, the price of Alliance Common Stock and other
factors beyond the control of Alliance management. As is more fully
explained in "Auxiliary Financing Information", Alliance currently intends
to raise approximately $180 million, with the additional funds to be used
for working capital purposes.

Foreign taxes result from the income generated by Bally Wulff. Domestic
taxes result from federal consolidated Alternative Minimum Taxes and state
and local income taxes.

The Rainbow Casino in Vicksburg began operations in July 1994. In March
1995, Alliance completed its acquisition of the general partnership
interest in the limited partnership owning the casino and from that point
forward the Rainbow Casino's operations have been consolidated with those
of Alliance. The Rainbow Casino's operating results have been included in
the pro forma condensed combined statements of operations as if it was
wholly-owned for each period presented.

Certain reclassifications of BGII balances have been made to conform to the
Alliance reporting format.

44
<PAGE>

The following adjustments have been made to arrive at the Unaudited Pro
Forma Condensed Combined Financial Information:

2. Pro Forma Condensed Combined Balance Sheet Adjustments as of December 31,
1995

(a) To adjust for the net cash proceeds of the debt financing and sale of
Alliance Common Stock and Series B Special Stock, less estimated costs
and fees which have been capitalized in the case of the debt and Series
B Special Stock, and netted against the proceeds in the case of the
common stock.

(b) To adjust for the repayment of $69.944 million of BGII debt as such
instruments are intended to be repaid with the proceeds of the
Financing plus the remaining original issue discount and other costs
associated with the prepayment of the BGII debt totaling $.774 million.
Additionally, certain deferred financing costs related to the BGII debt
totaling $.497 million will be written off. A vote in favor of the
Merger by a BGII stockholder is necessarily an authorization of BGII
making an offer to repay BGII's $40,000,000 principal amount of 10 3/8%
Senior Secured Notes in accordance with, and as required under, the
terms thereof.

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Consideration paid:
Cash paid for original 1 million shares of BGII Common
Stock owned by Alliance.................................. $ 10,410
Cash consideration........................................ 76,700
Value of Alliance Common Stock to be exchanged for BGII
shares................................................... 2,940
Value of Series B Special Stock to be exchanged for BGII
shares................................................... 35,014
Contract termination costs for certain BGII personnel (see
below)................................................... 9,320
--------
Total consideration....................................... 134,384
Estimated value of BGII's underlying net assets........... 88,410
--------
Excess of costs over the net assets of BGII acquired...... $ 45,974
========
</TABLE>

The compensation to be paid to BGII personnel consists of cash payable
to Messrs. Gillman and Jenkins totaling $5.825 million and Alliance
Common Stock valued at $3.495 million (the number of shares will be
determined using the Alliance Average Trading Price but in no event
more than $6 nor less than $4.25). As each of the above individuals
will not be employed by the combined company after the Merger, such
costs have been included in the computation of goodwill. The Merger
Agreement provides that the above-described payments to Mr. Gillman
and Mr. Jenkins are subject to approval by BGII. The BGII Board has
approved the $5,000,000 cash payment to Mr. Gillman and the above-
described payments to Mr. Jenkins.

Consideration to be paid to Messrs. Kloss and Conover consists of
$1.734 million in cash and $3.468 million of Alliance Common Stock
(the number of shares will be determined using the Alliance Trading
Price but in no event more than $6 nor less than $4.25). As Messrs.
Kloss and Conover will remain with Alliance, such amounts have been
capitalized and will be amortized over the 2.5 and 1 year life of each
of their employment agreements, respectively. These transactions have
been given simultaneous effect in the Unaudited Pro Forma Condensed
Combined Financial Statements since they are conditions of the Merger
Agreement.

The allocation of purchase cost in the pro forma financial statements
is based on available information. After consummation of the Merger,
Alliance will arrange for independent appraisal of the significant
assets and liabilities to determine the final allocation of purchase
cost. Alliance management does not currently believe that any
adjustments to the final allocation of purchase price will have a
material effect on the pro forma financial statements.

(d) To add back the $1.508 million valuation adjustment net of the tax
effect of $0.777 million, for the Alliance-owned BGII Common Stock,
representing the difference between the purchase cost of $10.41 million
and the market value at December 31, 1995 of $8.25 million.

45
<PAGE>

(e) To record the payment of certain Merger and related expenses assumed to
be incurred prior to and concurrent with the pro forma balance sheet
date totaling $12.118 million of which $3.174 million has been accrued
for at December 31, 1995.

3.Pro Forma Condensed Combined Statements of Operations Adjustments for the
Year Ended June 30, 1995

(f) To recognize operations of the Rainbow Casino as if owned for the
entire year.

(g) Alliance development expenses, which relate solely to mergers and
acquisitions, were reduced to $3.0 million annually resulting in an
adjustment of $3.174 million. Such adjustment does not include any
effect from the elimination of direct costs related to the Merger shown
separately in (i) below. The reduction to $3.0 million reflects the
elimination of costs that were being incurred prior to Alliance's
accomplishment of its strategic plan to acquire a major gaming machine
manufacturing company. To accomplish this reduction Alliance reduced
payroll costs and fees paid to consultants and legal costs related to
non-BGII transactions it had been pursuing.

(h) To adjust for cost savings identified to date including elimination of
certain duplicative costs, such as facility, legal, accounting and
compensation, which total approximately $5.0 million on an annual
basis.

(i) To eliminate costs associated with the Merger transaction incurred by
Alliance and BGII totaling $1.669 million and $0.25 million,
respectively, consisting of legal, accounting, investment banking fees
and related costs.

(j) To record the amortization on the goodwill resulting from the Merger.
The goodwill is being amortized over 40 years.

(k) To amortize the costs associated with the termination of Messrs. Kloss
and Conover's existing employment contracts with BGII over the life of
their respective employment contracts.

(l) To eliminate the amortization of goodwill on the historical financial
statements of BGII.

(m) To adjust for the interest expense on the $100 million of debt and to
amortize the debt which Alliance currently plans to issue as part of
the financing of the Merger, at an assumed rate of 12%, and to amortize
the debt issuance costs over 7 years, net of the elimination of the
interest on the BGII debt being refinanced. For every .5% change in the
interest rate for the $100 million debt financing, the correlating
change in interest expense for the year would be $0.5 million on a pre-
tax basis.

(n) To adjust for the costs associated with BGII's debt prepayment
consisting of the original issue discount, prepayment costs and
deferred financing costs totaling $1.241 million.

(o) To adjust for the effect of foreign income tax savings resulting from
acquisition restructuring which will enable Alliance to allocate items
such as interest expense to the German subsidiary.

4. Pro Forma Condensed Combined Statements of Operations Adjustments for the
Six-Month Periods Ended December 31, 1994 and 1995

(p) To recognize operations of the Rainbow Casino as if owned for each
period.

(q) Alliance development expenses, which relate solely to mergers and
acquisitions, were reduced to $3.0 million annually. For the six-month
period ended December 31, 1994, Alliance exceeded this $3.0 million
annualized amount by $2.008 million, but in the most recent six-month
period ended December 31, 1995 Alliance was below this annualized
amount by $0.2 million. The elimination of direct costs related to the
Merger is shown separately in (s) below.

(r) To adjust for cost savings identified to date including elimination of
certain duplicative costs, such as facility, legal, accounting and
compensation, which total approximately $5.0 million on an annual
basis.

(s) To eliminate costs associated with the Merger transaction, consisting
of legal, accounting, investment banking fees and related costs,
incurred by Alliance of $9.437 million and incurred by BGII of $1.75
million, for the six-month period ended December 31, 1995. No such
merger costs were incurred by either company in the six-month period
ended December 31, 1994.

46
<PAGE>

(t) To record the amortization of the goodwill resulting from the Merger.
The goodwill is being amortized over 40 years.

(u) To amortize the costs associated with the termination of Messrs. Kloss
and Conover's existing employment contracts with BGII over the life of
their respective employment contracts.

(v) To eliminate the amortization of goodwill on the historical financial
statements of BGII.

(w) To adjust for the interest expense on the $100 million of debt which
Alliance currently plans to issue as part of the financing of the
Merger at an assumed rate of 12%, and to amortize the debt issuance
costs over 7 years, net of the elimination of the interest on the BGII
debt being refinanced.

(x) To adjust for the effect of foreign income tax savings resulting from
acquisition restructuring which will enable Alliance to allocate items
such as interest expense to the German subsidiary.

5. Supplemental Pro Forma Condensed Combined Statements of Operations
Adjustments for the Twelve-Month Period Ended December 31, 1995

Alliance management believes that it is useful to present an unaudited pro
forma statement of operations for the most recent twelve-month period in
addition to those already presented because it is more representative of
normal operations. This presentation assumes that the transaction occurred
on January 1, 1995. All relevant adjustments have been presented consistent
with the Pro Forma Adjustments and the adjustments to earnings before
interest, taxes, depreciation and amortization ("EBITDA") noted above.

(y) To recognize operations of the Rainbow Casino as if owned for the
entire year.

(z) Alliance development expenses were reduced to $3.0 million annually,
resulting in a cost reduction on a pro forma basis of $0.966 million
for the twelve-month period ended December 31, 1995. The development
expenses exceeded this $3.0 million annual amount during the first six
month period ended June 30, 1995 by $1.166 million; however,
development expenses were below this annual amount during the six month
period ended December 31, 1995 by $0.2 million. The elimination of
direct costs related to the Merger is shown separately in (bb) below.

(aa) To adjust for cost savings identified to date including elimination of
certain duplicative costs, such as facility, legal, accounting and
compensation, which total approximately $5.0 million on an annual
basis.

(bb) To eliminate costs associated with merger transactions incurred by
Alliance and BGII of $11.106 million and $2.0 million, respectively,
consisting of legal, accounting, investment banking fees and related
costs.

(cc) To record the amortization of the goodwill resulting from the Merger.
The goodwill is being amortized over 40 years.

(dd) To amortize the costs associated with the termination of Messrs. Kloss
and Conover's existing employment contracts with BGII over the life of
their respective employment contracts.

(ee) To eliminate the amortization of goodwill on the historical financial
statements of BGII.

(ff) To adjust for the interest expense on the $100 million of debt which
Alliance currently plans to issue as part of the financing of the
Merger, at an assumed rate of 12%, and to amortize the debt issuance
costs over 7 years, net of the elimination of the interest on the BGII
debt being refinanced.

(gg) To adjust for the costs associated with the BGII debt consisting of
the original issue discount, prepayment costs and deferred financing
costs totaling $1.241 million.

(hh) To adjust for the effect of foreign income tax savings resulting from
acquisition restructuring which will enable Alliance to allocate items
such as interest expense to the German subsidiary.

47
<PAGE>

6.Share Information

The following table reflects computations of the pro forma number of shares
of Alliance Common Stock outstanding and the per share computations (shares
in millions):

<TABLE>
<CAPTION>
12 MONTHS 6 MONTHS 6 MONTHS 12 MONTHS
ENDED JUNE 30, ENDED DEC. 31, ENDED DEC. 31, ENDED DEC. 31,
1995 1995 1994 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Historical weighted
average shares
outstanding............ 11.2 11.8 11.0 11.3
Shares to be sold in
Offerings.............. 2.7 2.7 2.7 2.7
Shares to be issued to
BGII stockholders...... .8 .8 .8 .8
Shares to be issued to
terminate contracts for
certain BGII personnel. 1.9 1.9 1.9 1.9
---- ------ ---- ------
Pro forma weighted
average shares
outstanding.......... 16.6 17.2 16.4 16.7
==== ====== ==== ======
<CAPTION>

Effect of the Merger on the shareholders of Alliance, assuming a
stock price of $3.75, is as follows (shares in millions):
<S> <C> <C>
Shares of Alliance
Common Stock
outstanding at December
31, 1995............... 12.987
Shares of BGII Common
Stock outstanding at
December 31, 1995...... 10.799
Less the shares of
BGII Common Stock
already owned by
Alliance............. 1.000
------
BGII Common Stock to
be converted....... 9.799
------
Common Stock to be
issued to BGII
stockholders........... 0.784
Common Stock to be
issued to terminate
contracts for certain
BGII personnel......... 1.857
Common Stock to be sold
in Common Stock
Offering and/or Private
Placement.............. 2.667
------
Pro forma total
outstanding shares. 18.295
Former BGII
stockholders' ownership
of Alliance............ 4.29%
</TABLE>

In conjunction with the Merger, Alliance currently plans to raise
additional capital in excess of the $150 million of financing required in
the Merger Agreement. Including the effects of the additional capital
Alliance currently plans to raise, former BGII stockholders' ownership of
Alliance will be 3.0%. See "Auxiliary Financing Information".

7. Supplemental Information

Additional supplemental information regarding cash flow and fixed charges
has been presented with adjustments consistent with those shown in the pro
forma operating results. The earnings required to cover the special stock
dividend fixed charge have been presented excluding the effects of income
taxes due to the fact that the pro forma results of operations reflect
losses from continuing operations, resulting in a computed effective tax
rate from continuing operations that is not meaningful.

48
<PAGE>

AUXILIARY FINANCING INFORMATION

Although the Merger Agreement is conditioned on Alliance raising $150
million in financing, Alliance plans to raise approximately $180 million, with
the additional $30 million to be raised through the sale of Alliance Common
Stock (the "Auxiliary Financing"), the proceeds of which will be used for
working capital purposes. The Auxiliary Financing will increase the Cash and
Securities Available for Sale as shown in the Pro Forma Condensed Combined
Balance Sheet from $1,854,000 to $31,604,000 and will increase Stockholders'
Equity as shown therein from $9,061,000 to $38,811,000. There is no assurance
that the Auxiliary Financing can be obtained. See "Risk Factors--Financing
Condition". Failure to obtain the Auxiliary Financing would not under the
terms of the Merger Agreement excuse the parties from consummating the Merger.
However, consummating the Merger without the Auxiliary Financing might leave
the combined company without enough working capital, making it impractical to
proceed with the Merger. Alliance believes it unlikely that it would obtain
financing to satisfy the Financing Condition without being able also to obtain
the Auxiliary Financing.

For purposes of additional analysis, the following information reflects
certain historical, pro forma and pro forma as adjusted information for the
Auxiliary financing, for certain per share, fixed charges and debt service.
Alliance and its financial advisors have not yet determined the composition of
the proposed financing. The pro forma financial statements were prepared
assuming $100 million of debt financing at 12%, $40 million of Series B
Special Stock with a dividend of 15%, and $10 million of Alliance Common
Stock, assuming a stock price of $3.75. The Auxiliary Financing is assumed to
be comprised of $30 million of Alliance Common Stock, assuming a stock price
of $3.75. Additionally, information is provided to gauge the sensitivity given
changes in some of the key elements of the Financing, including changes in the
interest rate on the debt, the special stock dividend rate, the common stock
price and the composition of the Auxiliary Financing.

With the $180 million of Financing, every .5% change in the interest rate on
the $100 million of debt financing would cause a change in interest expense of
$.5 million. This would cause the denominator in both the earnings to fixed
charges and debt service coverage ratios to change by $.5 million. For the
twelve-month period ended December 31, 1995, the impact of an increase in the
rate would cause the loss per common share to increase from $(.75) to $(.77),
compared to the pro forma loss per share of $(1.10).

With the $180 million of Financing, every .5% change in the dividend rate on
the $40 million of Series B Special Stock would cause a change in the dividend
of $.269 million. This would cause the denominator in the earnings to fixed
charges ratio to change by $.269 million. For the twelve-month period ended
December 31, 1995, an increase in this rate would cause the loss per common
share to increase from $(.75) to $(.76), compared to the pro forma loss per
share of $(1.10).

By changing the assumed Alliance Average Trading Price by $.50, the number
of shares to be issued in the Merger and related transactions would change by
816,000 common shares (2,047,000 shares assuming the $30 million of Auxiliary
Financing). For the twelve-month period ended December 31, 1995 a decrease of
$.50 in the Alliance Average Trading Price would cause the loss per share to
decrease from $(1.10) to $(1.05) (from $(.75) to $(.72) assuming the Auxiliary
Financing).

If the composition of the Auxiliary Financing were to change, whereby there
was an increase in the debt financing of $10 million and a corresponding
decrease in the sale of Alliance Common Stock, there would be a corresponding
increase in interest expense of $1.2 million, and a corresponding decrease in
the debt service coverage ratio from 2.6 to 2.4. The pro forma loss per share
would decrease from $(1.10) to $(.89) which results from the increased
interest expense which is offset by the dilutive effects of the shares issued
in the Auxiliary Financing.

49
<PAGE>

SUPPLEMENTAL ANALYSIS OF CASH FLOW AVAILABLE FOR NET INTEREST EXPENSE

Alliance management believes that it is important to present supplementally
an analysis of its net interest expense service capability, given the leverage
ratio of the combined company. Reference should be made to the pro forma
financial information presented elsewhere herein. The information presented in
the following schedule is being presented solely as additional information to
assist investors in evaluating the combined company's expected ability to
service net interest obligations resulting from the long-term debt as
presented in the pro forma financial information. Although the company's
measure purports to indicate cash flow available for paying interest expense,
it may not fully reflect the company's capability to pay cash interest
requirements because it does not reflect other cash obligations and
requirements, such as mandatory payments on debt principal and preferred stock
redemptions and dividends, and operating requirements relating to capital
maintenance and expansion.

Alliance management believes that this information is a useful adjunct to
net income, cash flows and other GAAP measurements. However, this supplemental
information should not be construed as an alternative to net income or any
other GAAP measure of performance as an indicator of Alliance's performance or
to cash flows generated by operating, investing and financing activities or as
an indicator of cash flows or a measure of liquidity.

Alliance management has made certain adjustments to EBITDA resulting in a
computed net interest expense service capability. As is more fully described
below, such adjustments consist of the elimination of certain charges that
management has determined to be one-time or unusual, as well as adjustments
made to reflect the most recent operating results of the Rainbow Casino by
annualizing the most recent six month operating results, and presenting such
results as if they had occurred for each period presented. The concept of one-
time or unusual charges is not defined in GAAP, but such items have been
consistently disclosed as either one-time or unusual charges in each of the
companies' financial statements. In making these adjustments, management
considered all items deemed non-recurring; revenues as well as expenses. There
can be no assurance that other unusual charges will not occur in the future,
nor can there be any assurance that the cash flow available for net interest
expense service capability would actually be achieved.

50
<PAGE>

SUPPLEMENTAL ANALYSIS OF CASH FLOW AVAILABLE FOR NET INTEREST EXPENSE

(IN THOUSANDS)
<TABLE>
<CAPTION>
CASH FLOW
AVAILABLE
ALLIANCE BGII FOR NET
---------------------- ---------------------- INTEREST
HISTORICAL AS ADJUSTED HISTORICAL AS ADJUSTED SYNERGIES EXPENSE
---------- ----------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995
Operating Income (Loss). $(4,261) $ 1,543 $17,962 $17,962
Depreciation and Amorti-
zation................. 9,520 10,413 8,482 8,482
Royalty................. (810) (3,431) -- --
------- ------- ------- -------
EBITDA................. $44,449 8,525 $26,444 26,444
======= ------- ======= -------
Reclassification of
certain direct merger
costs................. 1,669 250
Adjustments:
Rainbow Operations..... 5,035
Other Unusual or Nonre-
curring Charges....... 2,367 1,950
------- -------
Cash Flow Available for
Net Interest Expense... $17,596 $28,644 $5,000 $51,240
======= ======= ====== =======
Net Interest Expense.... $18,323
=======
FOR THE SIX MONTH PERIOD
ENDED DECEMBER 31, 1994
Operating Income (Loss). $(1,861) $ 1,214 $ 6,683 $ 6,683
Depreciation and Amorti-
zation................. 4,613 5,519 4,608 4,608
Royalty................. (1,665)
------- ------- ------- -------
EBITDA................. $ 2,752 5,068 $11,291 11,291
======= ------- ======= -------
Reclassification of
certain direct merger
costs................. 3,215
Adjustments:
Rainbow Operations.....
Other Unusual or Nonre-
curring Charges....... -- 800
------- -------
Cash Flow Available for
Net Interest Expense... $ 8,283 $12,091 $2,500 $22,874
======= ======= ====== =======
Net Interest Expense.... $ 9,159
=======
FOR THE SIX MONTH PERIOD
ENDED DECEMBER 31, 1995
Operating (Loss)........ $(3,524) $(3,724) $(2,915) $(2,915)
Depreciation and Amorti-
zation................. 4,906 4,906 5,079 5,079
Royalty................. (1,908) (1,908) -- --
------- ------- ------- -------
EBITDA................. $ (526) (726) $ 2,164 2,164
======= ------- ======= -------
Reclassification of
certain direct merger
costs................. 9,437 1,750
Adjustments:
Rainbow Operations..... (92)
Other Unusual or Nonre-
curring Charges....... 4,266
------- -------
Cash Flow Available for
Net Interest Expense... $ 8,619 $ 8,180 $2,500 $19,299
======= ======= ====== =======
Net Interest Expense.... $ 9,470
=======
FOR THE TWELVE MONTH PE-
RIOD ENDED DECEMBER 31,
1995
Operating Income (Loss). $(5,924) $(3,395) $ 8,364 $ 8,364
Depreciation and Amorti-
zation................. 9,813 9,800 8,953 8,953
Royalty................. (2,718) (3,674) -- --
------- ------- ------- -------
EBITDA................. $ 1,171 2,731 $17,317 17,317
======= ------- ======= -------
Reclassification of
certain direct merger
costs................. 11,106 2,000
Adjustments:
Rainbow Operations..... 1,728
Other Unusual or Nonre-
curring Charges....... 2,367 5,416
------- -------
Cash Flow Available for
Net Interest Expense... $17,932 $24,733 $5,000 $47,665
======= ======= ====== =======
Net Interest Expense.... $18,634
=======
</TABLE>

The above supplemental analysis should be read in conjunction with the pro
forma statements of operations presented on pages 40 through 43, and the notes
thereto. In this regard, the combined company's pro forma fixed charges, both
before and after the special stock dividend for the year ended June 30, 1995
were a deficit of $.826 million and $12.5 million, respectively. The combined
company's pro forma fixed charges deficit for the twelve months ended December
31, 1995 were $4.088 million, and $15.762 million after the special stock
dividend. The combined company's pro forma fixed charges deficit for the six
month period ended December 31, 1994 was $2.943 million and $8.78 million
after the special stock dividend. The combined company's pro forma fixed
charges deficit for the six month period ended December 31, 1995 was $6.205
million and $12.042 million after the special stock dividend.

51
<PAGE>

The direct merger costs have been reclassified and presented in computing
the separate company cash flows available for net interest expense, as
management believes that such presentation provides additional relevant
information to the current shareholders of each company, after eliminating
each of the companies' direct costs related to the Merger.

Direct Merger Costs. Both Alliance and BGII have incurred direct costs
related to the Merger consisting of legal, accounting, investment banking
fees and related costs. For Alliance, such costs totalled $1.669 million,
$0, $9.437 million and $11.106 million for the year ended June 30, 1995,
the six months ended December 31, 1994, the six months ended December 31,
1995 and the twelve month period ended December 31, 1995, respectively.
BGII's direct costs incurred relating to the Merger totalled $.25 million,
$0, $1.75 million and $2 million for the year ended June 30, 1995, the six
months ended December 31, 1994, the six months ended December 31, 1995 and
the twelve months ended December 31, 1995, respectively.

The adjustments which were made in determining the supplemental analysis of
net interest expense service capability which were not considered in the
preceding Unaudited Pro Forma Condensed Combined Statements of Operations
reflect the following:

Rainbow Operations. The final elements of the Rainbow Casino facility,
consisting of an 89-room motel and an amusement park and the completion of
the casino exterior decor, parking, landscaping and signage, were not
completed until July 1995, although the Rainbow Casino had been open
without these amenities since July 1994. Therefore Alliance management
believes that the results of operations for the six months ended December
31, 1995 after considering seasonality (which was immaterial) are more
reflective of the property's ongoing results of operations. Accordingly,
such results have been annualized based on the actual results for the six
months ended December 31, 1995, as Alliance management believes that such
results better portray the Rainbow Casino's contribution to cash flow
available for net interest expense. This annualization involves forward-
looking statements that involve risks and uncertainties, including the
risks of competition, gaming regulation and the other risks detailed in
this Proxy Statement-Prospectus, including under "Risk Factors".

BGII One-Time Costs. Certain unusual charges incurred by BGII consist of
costs relating to a regulatory investigation and legal proceedings in
Louisiana totaling $1.0 million, legal costs related to a former executive
totaling $.5 million, and legal costs related to the BEC trademark
litigation that were directly caused by the investigation totaling $.2
million during the year ended June 30, 1995. For the six months ended
December 31, 1994, the non-recurring charges consisted of legal costs
relating to Louisiana of $.3 million and legal costs related to the former
executive of $.5 million. Results for the six months ended December 31,
1995 were adjusted for non-cash charges consisting of a reserve for German
VAT taxes and the write-down of a building in Germany, which had been
acquired in the purchase of a distributor and never used by BGII, to its
net realizable value in anticipation of its sale, totaling $1.816 million,
as well as to adjust for costs relating to Louisiana of $.7 million for the
six months ended December 31, 1995. During the year ended December 31,
1995, legal costs relating to Louisiana totalled $1.4 million, legal costs
related to the BEC trademark litigation totalled $.2 million, and charges
in Germany were $1.816 million. Such costs are considered to be non-
recurring.

During the year ended December 31, 1995, BGII entered into a merger
agreement with WMS, which BGII ultimately terminated to enter into the
Merger Agreement with Alliance. The one-time costs related to this
transaction were based on management's assessment and allocation of the
total costs incurred for both the WMS and Alliance merger transactions and
totalled $.25 million, $0, $1.75 million and $2 million for the year ended
June 30, 1995, six months ended December 31, 1994, the six months ended
December 31, 1995 and the twelve months ended December 31, 1995,
respectively.

Alliance One-Time Costs. One-time charges incurred by Alliance consist of
an executive signing bonus of $1.3 million paid in Alliance Common Stock
and $1.1 million of termination costs for certain directors. These charges
were incurred during the quarter ended June 30, 1995 and are therefore
included as adjustments only for the twelve months ended June 30, 1995 and
December 31, 1995.

52
<PAGE>

COMPARATIVE PER SHARE MARKET PRICE DATA AND DIVIDEND POLICY

Alliance Common Stock and BGII Common Stock are listed on the NASDAQ NMS
under the symbols "ALLY" and "BGII", respectively. The following table sets
forth, for the calendar quarters indicated, the high and low sales prices per
share of Alliance Common Stock and BGII Common Stock as reported on NASDAQ
NMS.

<TABLE>
<CAPTION>
ALLIANCE BGII
COMMON STOCK COMMON STOCK
-------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ----
<S> <C> <C> <C> <C>
1993
First Quarter........................... $ 7 3/4 $5 5/8 $14 3/8 $ 9 1/8
Second Quarter.......................... 10 1/4 6 7/8 14 1/8 10
Third Quarter........................... 9 3/8 6 7/8 20 5/8 10 1/8
Fourth Quarter.......................... 11 1/2 7 7/8 22 1/2 15
1994
First Quarter........................... $10 1/4 $7 $17 3/4 $13 1/2
Second Quarter.......................... 7 1/4 5 1/4 16 11 5/8
Third Quarter........................... 8 1/2 5 1/8 14 1/8 11
Fourth Quarter.......................... 7 7/8 5 1/4 14 1/8 7 1/4
1995
First Quarter........................... $ 8 $5 1/2 $10 5/8 $ 6 1/8
Second Quarter.......................... 6 1/8 4 3/8 11 3/8 7 3/4
Third Quarter........................... 6 4 5/8 12 1/2 9 1/8
Fourth Quarter.......................... 5 5/8 2 3/4 12 8
1996
First Quarter through March , 1996....
</TABLE>

The following table sets forth the closing prices per share of Alliance
Common Stock and the BGII Common Stock as reported on the NASDAQ NMS and the
equivalent per share price (as explained below) of BGII Common Stock on
April 17, 1995, the business day preceding public announcement of BGII's
intention to enter into the WMS Agreement, on October 18, 1995, the day the
original Merger Agreement was entered into, on January 23, 1996, the date the
amendment to the Merger Agreement was entered into, and on March , 1996.

<TABLE>
<CAPTION>
ALLIANCE BGII EQUIVALENT
COMMON COMMON PER SHARE
STOCK STOCK PRICE
-------- ------ ----------
<S> <C> <C> <C>
April 17, 1995.............................. $5 1/4 $ 8 1/2 $11.70
October 18, 1995............................ $4 1/2 $10 7/8 $11.70
January 23, 1996............................ $4 3/16 $ 7 3/8 $11.70
March , 1996.............................. $ $ $11.70
</TABLE>

The equivalent per share price of a share of BGII Common Stock represents
the value of the Merger Consideration based on the closing price of a share of
Alliance Common Stock on such date and assuming the Series B Special Stock is
worth its liquidation value.

The market price of shares of Alliance Common Stock and BGII Common Stock
are subject to fluctuation. As a result, Alliance and BGII stockholders are
urged to obtain current market quotations.

No cash dividends were declared or paid by Alliance during the fiscal years
ended June 30, 1994 or June 30, 1995 or by BGII during the fiscal years ended
December 31, 1993, December 31, 1994 or December 31, 1995, or thereafter. The
Alliance Board does not currently intend to pay cash dividends on Alliance
Common Stock. See also "Financial Matters After the Merger--Common Stock
Dividend Policy After the Merger". TheSeries B Special Stock will accrue
dividends at the rate of 15% per year, which may be paid for a period of time
in the form of additional Series B Special Stock. See "Description of Alliance
Capital Stock--Description of Series B Special Stock."

On March 4, 1996, there were approximately 1,615 holders of record of
Alliance Common Stock. On March 3, 1996, there were approximately 371 holders
of record of BGII Common Stock.

53
<PAGE>

COMPARATIVE PER SHARE DATA

The following table sets forth certain unaudited per share data of Alliance
and BGII on both historical and pro forma combined bases and on an equivalent
pro forma basis for BGII. This table should be read in conjunction with the
historical financial statements and pro forma financial information, and the
related notes thereto, of Alliance and BGII appearing elsewhere in this Proxy
Statement/Prospectus. See "Unaudited Pro Forma Condensed Combined Financial
Information", "Index to Alliance Financial Statements" and "Index to BGII
Financial Statements". Unaudited pro forma combined and equivalent pro forma
per share data reflect the combined results of Alliance and BGII, after giving
effect to the Merger as if it had occurred on June 30 or December 31, 1995, in
the case of book value data, and on July 1, 1994 and January 1, 1995, in the
case of operating data. The unaudited pro forma financial data are presented
for informational purposes only, and are not necessarily indicative of the
operating results or financial position that would have occurred had the
Merger and other transactions presented in the unaudited pro forma combined
financial information been completed on the dates indicated nor is it
indicative of future operating results or financial position.

For purposes of calculating equivalent share data, it has been assumed (for
illustrative purposes only) that each share of BGII Common Stock is exchanged
in the Merger for $7.83 in cash and .08 of a share of Alliance Common Stock,
which is the Common Stock Consideration that would be received if the Alliance
Average Trading Price is $3.75, and .0357 of a share of Series B Special Stock
(assuming the Series B Special Stock is issued pursuant to a registered public
offering at par). The closing price of Alliance Common Stock on March , 1996
was $ . See "Risk Factors--Volatility of Stock Price" and "The Merger--
Merger Consideration".

COMPARATIVE PER SHARE DATA

<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION
AS OF AND FOR THE
AS OF AND FOR THE AS OF AND FOR THE TWELVE MONTHS
FISCAL YEAR ENDED SIX MONTHS ENDED ENDED DECEMBER 31,
JUNE 30, 1995 DECEMBER 31, 1995 1995
------------------- ----------------- ------------------------
<S> <C> <C> <C>
ALLIANCE
Net loss per share
Historical............ $(.95) $(.79) $(1.33)
Pro forma............. $(.91) $(.78) $(1.10)
Dividends per common
share
Historical............ $ .00 $ .00 $ .00
Book value per common
share
Historical............ $ .86 $(.06) $ (.06)
Pro forma............. -- $ .50 $ .50
<CAPTION>
SUPPLEMENTAL INFORMATION
AS OF AND FOR THE AS OF AND FOR THE AS OF AND FOR
TWELVE MONTHS ENDED SIX MONTHS ENDED THE YEAR
JUNE 30, 1995 DECEMBER 31, 1995 ENDED DECEMBER 31, 1995
------------------- ----------------- ------------------------
<S> <C> <C> <C>
BGII
Income (loss) per common
share
Historical............ $ .45 $(.68) $ (.31)
Pro forma equivalent
(1).................. $(.07) $(.06) $ (.09)
Dividends per common
share
Historical............ $ .00 $ .00 $ .00
Book value per common
share
Historical............ $9.08 $8.19 $ 8.19
Pro forma equivalent
(1).................. -- $ .04 $ .04
</TABLE>
- --------
(1) The pro forma equivalent is calculated by multiplying .08, which is the
illustrative number described in the paragraph preceding this table, by
Alliance's pro forma book value and net income per common share as of and
for the twelve-month period ended June 30 and December 31, 1995,
respectively, which have been prepared using adjustments consistent with
those included in the Unaudited Pro Forma Condensed Combined Financial
Information contained elsewhere in this Proxy Statement/Prospectus. The
pro forma equivalent calculation does not give effect to the portion of
the Merger Consideration consisting of the Cash Consideration or the
Special Stock Consideration.

54
<PAGE>

INTRODUCTION

This Proxy Statement/Prospectus is being furnished to stockholders of
Alliance in connection with the solicitation of proxies by the Alliance Board
for use at the Alliance Annual Meeting to be held at Sam's Town Hotel &
Gambling Hall Conference Center, located at 5111 Boulder Highway, Las Vegas,
Nevada, on Tuesday, April 2, 1996, at 2:00 p.m., local time, and at any
adjournment or postponement thereof.

This Proxy Statement/Prospectus is being furnished to stockholders of BGII
in connection with the solicitation of proxies by the BGII Board for use at
the BGII Annual Meeting to be held at the Alexis Park Resort, located at 375
East Harmon Avenue, Las Vegas, Nevada, on Tuesday, April 2, 1996, at 9:00
a.m., local time, and at any adjournment or postponement thereof.

This Proxy Statement/Prospectus also constitutes a prospectus of Alliance
with respect to shares of Alliance Common Stock and shares of Series B Special
Stock issuable to the holders of BGII Common Stock in the Merger, excluding
shares which may become issuable by reason of the exercise of outstanding BGII
options and warrants prior to the Effective Time.

55
<PAGE>

THE COMPANIES

Alliance believes that the Merger would represent the acquisition, at a
reasonable price, of a company that is a significant factor, with a well-known
name, in a related segment of the gaming industry, where Alliance could apply
its technological expertise to maximum effect. The Merger would make Alliance
a much larger company with a higher profile in the gaming industry. A key
focus of the strategy of the combined company will be to seek to use advanced
technology to improve gaming's entertainment value and security. Alliance
believes that the gaming industry despite its rapid growth has been relatively
slow to modernize its gaming and security systems. It is hoped that the
combined company can become a substantial supplier of innovative products in
the gaming industry. Set forth below is an overview of the businesses
currently conducted by each company. With the combination of BGII's product
lines and distribution strengths and Alliance's technological capabilities,
the Alliance Board believes that Alliance/BGII can be a key supplier in
filling the growing demand for innovative products in the gaming industry,
thus maximizing stockholder value.

ALLIANCE GAMING CORPORATION

GENERAL

Alliance Gaming Corporation ("Alliance") is a diversified gaming company
which (at June 30, 1995) operated approximately 7,184 gaming devices
(primarily video poker devices and slot machines). Alliance is the largest
private gaming machine management operator in Nevada and one of the largest in
the United States. In its Nevada gaming machine management operations,
Alliance selects, owns, installs, manages and services gaming devices
(approximately 5,208 as of June 30, 1995) in third-party owned local
establishments such as taverns, restaurants, supermarkets, drug stores and
convenience stores (approximately 516 locations as of June 30, 1995). Also in
Nevada, Alliance owns and operates one full service small casino and leases
and operates a small casino, one small casino-hotel and one tavern which
collectively have approximately 648 gaming devices and 9 table games. In the
fiscal year ended June 30, 1992, Alliance expanded its gaming machine
management operations to Louisiana, where it is the operator of approximately
694 video poker devices at the only racetrack and associated off-track betting
parlors ("OTBs") in the greater New Orleans area. In March 1995, Alliance
completed its acquisition of the general partnership interest in the Rainbow
Casino Vicksburg Partnership, L.P. ("RCVP"). RCVP owns a dockside casino in
Vicksburg, Mississippi which contains approximately 579 gaming devices and 28
table games. Additionally, Alliance manages the casino pursuant to a long term
management contract. Alliance had previously acquired 45% of RCVP through a
limited partnership interest acquired in July 1994. Alliance also designs and
manufactures gaming devices which are used exclusively in its Nevada
operations.

Alliance was incorporated in Nevada on September 30, 1968 under the name
Advanced Patent Technology. Alliance changed its name to Gaming and
Technology, Inc. in 1983, to United Gaming, Inc. in 1988 and to Alliance
Gaming Corporation on December 19, 1994. Alliance conducts its gaming
operations through directly and indirectly owned subsidiaries.

MACHINE MANAGEMENT OPERATIONS

Nevada

Operations. Alliance's Nevada machine management operations involve the
selection, ownership, installation, operation and maintenance of video poker
devices, reel-type slot machines and other gaming devices in local
establishments such as taverns, restaurants, supermarkets, drug stores and
convenience stores operated by third parties ("local establishments").
Alliance's gaming machine management operations target local residents who
generally frequent local establishments close to their homes.

The following table sets forth certain historical data concerning Alliance's
Nevada gaming machine management operations:

<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------------------
1991 1992 1993 1994 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Number of gaming devices owned.................... 5,240 5,505 5,121 5,148 5,208
Number of locations............................... 527 552 508 496 516
</TABLE>

56
<PAGE>

Alliance enters into gaming device route agreements with local
establishments through either space leases or revenue-sharing agreements. In
revenue sharing arrangements, most common with taverns, restaurants and
convenience stores, Alliance does not pay rent, but rather receives a
percentage of the revenues from the gaming devices. In revenue sharing
arrangements, both the owner of the local establishment and Alliance must have
a gaming license. In space lease arrangements, most common with supermarkets
and drug stores, Alliance pays a fixed rental to the owner of the local
establishment and Alliance receives all of the revenues derived from the
gaming devices. In such arrangements, only Alliance (and not the establishment
owner) is required to hold a gaming license. Most of the local establishments
serviced by Alliance are restricted by law to operating no more than 15 gaming
devices.

Revenue-sharing arrangements accounted for approximately 80%, 86%, 86%, 86%
and 86% of the Nevada gaming device route revenues and 77%, 80%, 78%, 80% and
78% of its operating Nevada route gaming devices in fiscal 1993, 1994 and 1995
and the six-month periods ended December 31, 1994 and December 31, 1995,
respectively. At December 31, 1995, the weighted average remaining term of
Alliance's revenue sharing arrangements was approximately 3.9 years. Space
lease arrangements accounted for approximately 20%, 14%, 14%, 14% and 14% of
the Nevada gaming route revenues and 23%, 20%, 22%, 20% and 22% of its
operating Nevada route gaming devices in fiscal 1993, 1994 and 1995 and the
six-month period ended December 31, 1994 and December 31, 1995, respectively.
At December 31, 1995, the weighted average remaining term of Alliance's space
leases was 2.9 years.

Alliance has historically been able to renew or replace revenues from
expiring agreements with revenues generated by renewal or replacement
contracts. However, during the past few years, greater competitive pressures
in the gaming route business have increased the portion of gaming route
revenues payable to the local establishment, decreasing Alliance's gross
margins from these operations. As a result, Alliance has refocused its Nevada
gaming machine management operations to emphasize return on investment rather
than increasing market share and has undertaken a systematic review process to
adjust its contract mix to emphasize higher margin contracts and, where
permissible, cancelling or not renewing unprofitable contracts.

Marketing. Alliance believes it has a diversified customer base with no one
customer accounting for more than 10% of Alliance's revenues generated from
Nevada gaming machine management operations during the fiscal year ended June
30, 1995, although approximately 14.1% of such revenues was generated through
an affiliated group of such customers. Such affiliated group consists of eight
partnerships each having one individual partner who is common to all such
partnerships. As the largest Nevada gaming machine management operator,
Alliance believes that it is able to differentiate itself from its competitors
through a full-service operation providing its customers marketing assistance
and promotional allowances and using its advanced design capabilities to
provide gaming devices with features customized to customers' needs, such as
Gambler's Choice, a multi-game device tailored to the local gaming market.

Strategy. Alliance believes that technological enhancements are the key to
improving the appeal of its games and locations, thereby increasing operating
margins. As a result, Alliance has developed and is currently testing a new
system called "Gamblers Bonus". Gamblers Bonus is designed as a cardless slot
players' club and player tracking system which will allow multiple route
locations to be linked together into a distributed gaming environment. Through
this technology, Alliance will be able to provide its players and customers
with many of the same gaming choices currently available only in a larger
scale casino environment such as multi-location progressive jackpots, bigger
jackpot payouts and traditional players' club enhancements. Additionally,
Alliance will offer a series of new and unique games available only to members
of the Gamblers Bonus players' club. Alliance believes Gamblers Bonus will
improve both the revenues and operating efficiencies of its Nevada machine
management operations and has the potential to enhance the basic structure of
the machine management segment of the gaming industry.

Alliance is continuing its efforts to achieve cost reductions (subsequent to
cost reductions made in fiscal 1994) and adjust its contract mix to emphasize
higher margin arrangements designed to induce location owners to increase
gaming revenues. Additionally, in keeping with the trends in the Nevada
market, Alliance is updating

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its gaming device base with bill-acceptor equipped gaming devices which are
also expected to improve revenues and operating efficiencies. Alliance
continues to investigate further technological enhancements. Alliance believes
that following these steps will maximize the potential of its mature Nevada
gaming machine management operations in the current competitive environment.
In addition, Alliance intends to utilize its expertise in Nevada gaming route
operations to develop new route operation opportunities in less mature
markets.

Louisiana

Operations. In March 1992, Alliance obtained a contract to operate video
poker gaming devices in the greater New Orleans, Louisiana area through its
controlled subsidiary, Video Services, Inc. ("VSI"). Alliance entered into an
operating agreement which runs through May 2002 with Fair Grounds Corporation,
Jefferson Downs Corporation and Finish Line Management Corporation
(collectively, "Fair Grounds") for Alliance to be the exclusive operator of
video poker devices at the only racetrack and ten associated OTB parlors in
the greater New Orleans area. Alliance selects, installs, manages and services
video poker devices for each of the 10 facilities owned by Fair Grounds for
which it receives a percentage of the revenue generated by the devices.
Alliance currently has installed 694 video poker devices in Louisiana.

Under the Louisiana gaming laws and regulations, the majority stockholder of
any entity operating video poker devices in Louisiana must be a domiciled
resident of the State of Louisiana. As a result, Alliance owns 49% of the
capital stock of VSI and three prominent members of the Louisiana business and
legal community own the remaining 51%. Alliance, however, owns all the voting
stock of VSI and the majority of its officers and directors are Company
employees. Alliance has a 71% interest in dividends of VSI in the event
dividends are declared. Alliance also formed two other Louisiana subsidiaries,
Southern Video Services, Inc. ("SVS") and Video Distributing Services, Inc.
("VDSI"). Both SVS and VDSI are structured in a manner similar to VSI except
that Alliance is entitled to receive 60% of any SVS dividends. Under the terms
of its contract with Fair Grounds, Alliance must conduct any additional video
poker operations in Louisiana other than gaming at racetracks or OTB parlors
through SVS. To date, SVS and VDSI have not engaged in business in Louisiana.
In addition, Alliance and Fair Grounds have certain mutual rights of first
refusal to participate in certain Louisiana riverboat gaming opportunities of
the other party on terms and conditions to be specified.

Alliance is prohibited by the Louisiana Act from engaging in both the
manufacture and operation of gaming devices in Louisiana and, therefore,
Alliance does not manufacture its own gaming devices for use in Louisiana.

On December 17, 1993, Alliance incurred a fire loss at the Fairgrounds Race
Course in New Orleans where Alliance operated 199 gaming devices prior to the
fire, 193 of which were destroyed in the fire. Alliance was fully insured for
all equipment, leasehold improvements, other assets and business income with
the exception of immaterial deductibles. From December 17, 1993 through June
30, 1995, Alliance recorded approximately $488,000 of income from business
interruption insurance proceeds. Alliance is discussing settlement of
additional business interruption claims with the insurance carrier.

Marketing. VSI has developed an extensive marketing program under the name
"The Players Room" which is designed to attract primarily local residents to
its facilities. Media placement has focused on newspaper and radio advertising
with promotions including a player's club, direct mailings and offerings of a
wide range of prizes.

Strategy. Alliance intends to selectively expand its operations in the
greater New Orleans area by increasing the number of video poker devices in
certain of its existing locations as demand warrants, as well as investigating
the addition of new locations under its current contract with the Fair Grounds
in areas where competitive factors are favorable. Under the Louisiana Act,
racetracks and OTB parlors are permitted to install an unlimited number of
video poker devices while truckstops and taverns may install only limited
numbers of such devices.

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CASINO OPERATIONS

On July 16, 1994, the Rainbow Casino located in Vicksburg, Mississippi
permanently opened for business. Through a wholly-owned subsidiary, Alliance
originally purchased a 45% limited partnership interest in RCVP, a Mississippi
limited partnership which owns the casino, all assets (including the gaming
equipment) associated with the casino and certain adjacent parcels of land.
The 55% general partnership interest in RCVP was held by The Rainbow Casino
Corporation, an unaffiliated Mississippi corporation ("RCC"). Pursuant to a
management agreement dated October 29, 1993, and which terminates on December
31, 2010, Alliance through a wholly-owned subsidiary also serves as manager of
the casino. In connection with the completion of the casino and the
acquisition of its original 45% limited partnership interest, Alliance funded
a $3,250,000 advance to RCC on the same terms as RCC's financing from
Hospitality Franchise Systems, Inc. ("HFS") (other than the fact that such
advance is subordinate to payments due to HFS). Under the terms of this
financing, Alliance received a royalty of 5.2% of annual gross revenues. On
March 29, 1995, Alliance consummated certain transactions whereby Alliance
acquired from RCC the controlling general partnership interest in RCVP and
increased its partnership interest. In exchange for the commitments by
National Gaming Mississippi, Inc. ("NGM") and Alliance to provide additional
financing (up to a maximum of $2,000,000 each) to be used for the completion
of certain incomplete elements of the project which survived the opening of
the casino (for which RCC was to have been responsible, but failed to satisfy)
and a $500,000 payment also funded jointly by NGM and Alliance paid to HFS as
a waiver fee, the following occurred: (i) a subsidiary of Alliance became the
general partner and RCC became the limited partner and (ii) the respective
partnership interests were adjusted. As a result of this adjustment, RCC is
entitled to receive 10% of the net available cash flows after debt service and
other items, as defined (which amount increases to 20% of cash above
$35,000,000 (i.e. only on such incremental amount)), for a period of 15 years,
such period being subject to one year extensions for each year in which a
minimum payment of $50,000 is not made. Also, Alliance's 5.2% royalty on gross
revenues was terminated on the date it became the general partner. The entire
project consists of the Rainbow Casino and also includes an 89-room Days Inn
hotel and a 10-acre indoor and outdoor entertainment complex called Funtricity
Entertainment Park, which was developed by a subsidiary of Six Flags. Both the
hotel and entertainment park were substantially completed in late May 1995.
The entire property, known as Vicksburg Landing, is the only destination of
its kind in Mississippi containing a casino/family entertainment complex.

In April 1990, Alliance purchased, for an aggregate purchase price of
$9,700,000, substantially all of the assets of the Plantation Casino (the
"Plantation") located near the border of Reno and Sparks in northern Nevada.
The Plantation is a 20,000-square-foot casino containing 477 gaming devices,
keno and 7 table games, including blackjack, craps, roulette and poker. In
addition, the Plantation offers a race and sports book which is leased to an
independent race and sports book operator. The Plantation, which also includes
an approximately 300-seat restaurant, is convenient to both Reno and Sparks
and caters to the local market.

In July 1993, Alliance began leasing and operating the casino at the 326-
room Quality Inn located approximately one mile from the Las Vegas Strip. The
casino at Quality Inn contains 156 gaming devices and 3 table games.
Alliance's lease to operate this facility expired in July 1995. Alliance has
chosen not to exercise its renewal rights under this lease. Alliance is
currently operating under modified lease terms which expired in December 1995
but have been extended and may further be extended in 60-day increments.

Marketing. Alliance's casinos target the cost-conscious local market.
Alliance promotes its casinos primarily by providing quality food at
reasonable prices and through special promotional events. Alliance believes
its experience with operating small casinos targeted to local markets will
enable it to effectively operate casinos in emerging gaming jurisdictions that
have similar characteristics.

TAVERN OPERATIONS

Alliance currently operates its one tavern in the Las Vegas area. The tavern
was acquired when the owner of the location defaulted on its sublease with
Alliance. The location operates a total of 25 gaming devices.

The remaining term of the lease on the tavern is 4 years. The lease payment
is approximately $9,000 per month. Alliance's tavern operation is designed to
attract the local customer and emphasize repeat business.

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Due to continuing operating losses and the incompatibility of small
independent tavern operations with Alliance's overall business strategy, in
fiscal 1994 Alliance elected to dispose of its operated taverns. As a result
of this decision, Alliance wrote down certain assets related to the taverns to
their net realizable value and expensed the present value of future lease
payments net of assumed future sublease income. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Alliance--
Results of Operations--Fiscal 1995 Compared with Fiscal 1994--Expenses".
Subsequently, Alliance sold all six tavern locations to an unaffiliated third
party. However, it will continue to operate one of those tavern locations
until the purchaser receives the applicable gaming approvals, which approvals
are expected by the end of March 1996. No material gain or loss was recognized
upon consummation of this sale, but Alliance expects ongoing results of
operations to improve as a result of the disposition of these unprofitable
tavern locations.

In the future, although it does not intend to, Alliance may acquire other
taverns due to defaults of current tenants on their subleases or otherwise. In
each such case, Alliance will evaluate the prospects and determine the best
method of disposing of such locations.

MANUFACTURING OPERATIONS

Alliance currently manufactures and distributes gaming devices in Nevada for
use in its gaming device route operations. Alliance manufactured approximately
80% of the gaming devices currently used in its Nevada machine management
operations. The manufacturing process generally involves the assembly of
standard components which are readily available from various sources. Alliance
is not dependent upon any one supplier for the materials or components used in
its manufacturing operations.

Alliance also participates in the development of gaming ideas, technology
and manufacturing. Alliance has developed gaming devices with bill acceptor
and ticket printer features, as well as touch screen and multi-game
capabilities. Alliance anticipates utilizing these devices in many of its
Nevada gaming device route locations instead of the traditional coin-operated
devices. Alliance believes the adoption of the bill acceptor and ticket
printer features will increase the reliability of its Nevada gaming devices,
thereby reducing service costs. Alliance believes its development and
manufacturing capabilities are a competitive advantage.

COMPETITION

Nevada. Gaming of all types is available throughout Nevada in numerous
locations, including many locations similar to those at which Alliance
operates gaming devices. All of these other gaming opportunities may compete
directly or indirectly with Alliance. Many of Alliance's competitors possess
substantially greater financial and other resources than Alliance. Many of
such competitors include large casino-hotels which offer more variety and
amenities and may be perceived to have more favorable locations than Alliance.

Alliance is subject to substantial direct competition for its space lease
and revenue sharing gaming device locations from several large gaming machine
management operators and numerous small operators, located principally in Las
Vegas, Reno and the surrounding areas. Alliance and Jackpot are the dominant
gaming machine management operators in Nevada. The principal method of
competition for gaming machine management operators include the economic terms
of the space lease or revenue sharing arrangement, the services provided and
the reputation of the machine management operator. Price competition is
intense and has reduced Alliance's gross margin on such operations over the
past several years as the percentage of the gaming device revenues retained by
local establishment owners has increased. Alliance expects this trend to
continue.

The operation of casinos and taverns is also a highly competitive business.
The principal competitive factors in the industry include the quality and
location of the facility, the nature and quality of the amenities and customer
services offered and the implementation and success of marketing programs.
Alliance's primary casino and tavern operations focus on the local market
rather than the tourist market. Accordingly, Alliance believes that the
principal competition for Alliance's operations comes from larger "locals"
casinos and taverns, although strip and downtown hotels and casinos also
attract gaming customers from the local market.

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Louisiana. Alliance is subject to extensive competition for contracts to
operate video poker devices and Alliance's racetrack and OTB parlors compete
with various truck stops and locations with liquor licenses throughout the New
Orleans area. Each truck stop is permitted to operate up to 50 video poker
devices and each tavern is permitted to operate up to 3 video poker devices.
In addition, Louisiana has authorized river boat gaming statewide and several
riverboats are operating in Orleans Parish. Riverboats are permitted to have
live table games and an unlimited number of gaming devices, including slot
machines. Louisiana has also authorized one land-based casino, permitted to
include live table games and an unlimited number of gaming devices, which is
now open and operating in temporary facilities in New Orleans.

The adjacent state of Mississippi has legalized dockside gaming, which
attracts many local and tourist players from the New Orleans area. Alliance
has one such casino located in Vicksburg, Mississippi. Dockside gaming in
Mississippi, riverboat casinos in Louisiana and the land-based casino in
Orleans Parish have a wide variety of gaming devices and table games, while
the Louisiana Act limits Alliance's operations to video poker devices only.
Further, the Louisiana Act limits the jackpot that may be paid by a video
poker device to a maximum of $1,000 per play in some cases and $500 per play
in others while other gaming activities have no such limits.

Mississippi. Dockside gaming, in the form of full-service casinos, is legal
throughout the state of Mississippi with no limit on the number of licenses to
be granted by the state gaming authorities. As a result, the operation of
casinos has become a highly competitive business. As in Nevada, the principal
competitive factors in the industry include the quality and location of the
facility, the nature and quality of the amenities and customer services
offered and the implementation and success of marketing programs. The Rainbow
Casino appeals to both locals and visitors to historic Vicksburg, Mississippi.
The Rainbow Casino is the fourth gaming facility to open in Vicksburg,
Mississippi and, as such, faces substantial direct competition for gaming
customers in the region.

PATENTS, COPYRIGHTS AND TRADE SECRETS

Alliance does not believe patent, copyright or trademark protection to be
material to its current business. However, Alliance has copyrighted both the
source code and the video presentation of its games and registered many of
these copyrights with the U.S. Copyright Office under the Copyright Act of
1976. Game version upgrades and new games are currently in the process of
United States patent and copyright registration. Such copyrights expire at
various dates from September 2056 to October 2065. In addition, some of the
games have federal and/or state trademarks registered with the U.S. Patent and
Trademark office. Some of the games (either currently used or reserved for
future development) also are covered by patents filed with the U.S. Patent and
Trademark office. Such patents expire at various dates from May 2008 to March
2012.

Alliance has registered the trademark "CEI" and its design and the logos of
United Gaming, Inc. and United Coin Machine Co. with the U.S. Patent and
Trademark Office.

BUSINESS DEVELOPMENT ACTIVITY

Through a wholly-owned subsidiary, Native American Investments, Inc.
("NAI"), Alliance has a contract to develop Class II and III gaming
opportunities with an Indian tribe in California. Class II gaming includes
bingo, pulltabs and non-banking card games that are already permitted in a
state, and is subject to the concurrent jurisdiction of the National Indian
Gaming Commission ("NIGC") and the applicable Indian tribe. Class III gaming
is a residual category composed of all forms of gaming that are not Class I
gaming (which consists of non-commercial social games played solely for prizes
of minimal value or traditional forms of Indian gaming) or Class II gaming,
including casino style gaming. The contract is subject to negotiations
resulting in satisfactory compacts with the state and approval of the contract
by the National Indian Gaming Commission. The Governor of California has to
date refused to negotiate a compact covering Class III electronic gaming
devices and house-banked games in California and is currently engaged in
related litigation over the scope of gaming issue with certain Indian tribes.
In one case, Rumsey Indian Rancheria vs. Wilson, which had been appealed to
the U.S.

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Ninth Circuit Court of Appeals, a three-judge panel ruled that the State of
California may be obligated to negotiate compacts with Indian tribes for Class
III gaming with respect to electronic gaming devices to the extent such gaming
devices are "permitted" under California law. The Ninth Circuit specifically
declined to make such a ruling on its own accord and instead determined to
remand that specific question back to the United States District Court for the
Eastern District for decision. The remand has not yet occurred, however, as
the Ninth Circuit still has under review whether to reconsider its prior
decision. This review is based upon the recent decision issued by a California
state court in Western Telecon v. California State Lottery. In that case, a
three-judge panel from the Second Appellate District Court of Appeals ruled
that the state's lottery machines are the legal equivalent of slot machines.
Upon reconsideration, the Court upheld the prior ruling; however, the Court
stated that it did not matter whether keno was a slot machine or a banking
game because the State Lottery Act authorizes the State Lottery to offer its
games in both forms. Thus, the Court declined to specifically rule that the
lottery game was in fact a slot machine. This decision has been appealed to
the California Supreme Court. Based on Western Telecon, the Ninth Circuit in
Rumsey stayed the remand proceedings to permit briefing on the applicability
of Western Telecon to the Rumsey issue. The parties are currently awaiting the
Ninth Circuit's decision in light of Western Telecon. There can be no
assurance as to the ultimate outcome of these litigation activities or the
successful completion or operation of any part of this project.

Alliance and Casino Magic Corporation, through wholly-owned subsidiaries,
are members in Kansas Gaming Partners, LLC ("KGP") and Kansas Financial
Partners, LLC ("KFP"), both Kansas limited liability companies. Under an
option agreement (the "Option Agreement") granted to KGP by Camptown Greyhound
Racing, Inc. ("Camptown") and the Racing Association of Kansas--Southeast
("TRAK Southeast"), KGP has been granted the exclusive right, which right
expires on September 13, 2013, to operate gaming devices and/or casino-type
gaming at Camptown's racing facility in Frontenac, Kansas if and when such
gaming is permitted in Kansas. In December 1994, Camptown received a
$3,205,000 loan from Boatmens' Bank which was guaranteed by KFP. Alliance and
Casino Magic Corporation each invested $1,580,000 in KFP which was used to
purchase a certificate of deposit to collateralize its guaranty. Construction
of Camptown's racing facility has been completed and the facility opened for
business in May 1995. The racing facility was temporarily closed on November
5, 1995 due to poor financial results. Camptown filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in January 1996 and has stated an
intention to reopen for business following bankruptcy reorganization.
Boatmen's Bank demanded payment of the Camptown loan from KFP under the terms
of the guaranty. KFP paid the loan and Boatmen's Bank returned KFP's
certificate of deposit and KFP assumed Boatmen's Bank's position in the loan
to Camptown which is secured by a second mortgage on Camptown's greyhound
racing facility in Frontenac, Kansas. TRAK Southeast and Camptown continue to
be bound by the Option Agreement. KFP intends to vigorously pursue all of its
rights and remedies which may include, among other things, seeking authority
from the bankruptcy court to commence a foreclosure action. In the case of a
foreclosure action, KFP would be required to assume or pay the existing first
mortgage of approximately $2,000,000 if KFP becomes the purchaser at any such
sale. Alliance intends to continue to monitor its investment in KFP. Alliance
believes that the Kansas legislature may consider at least two gaming bills
this session. One bill, if approved by two thirds of both houses of the Kansas
legislature, would call for a public vote to amend the Kansas constitution to
allow gaming devices to be operated at up to two gaming locations in each
legislative district, with one location being reserved for any licensed pari-
mutuel location in the district. The second bill, if passed by a majority of
both houses of the Kansas legislature, would allow, subject to a local option
election of the citizens in the county, gaming devices to be operated at
licensed pari-mutuel race tracks.

BUSINESS STRATEGY

Alliance's business strategy with respect to its existing lines of business
is to utilize its diversified gaming expertise, strengthened executive
management, business partners and investment community relationships to pursue
a variety of business and investment opportunities in existing market areas
such as Las Vegas and other Nevada locations, as well as emerging gaming
markets, including land-based, dockside or riverboat (including Native
American owned) casinos, the operation of gaming machine management operations
and the supply and management of gaming devices. With the acquisition of BGII,
a significant element of this strategy will have been accomplished.

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Alliance believes it is well positioned to capitalize on investment
opportunities in both existing gaming markets, especially in Nevada, as well
as emerging jurisdictions as a result of (i) its diversified gaming expertise
including gaming machine management, casino operations and gaming device
design and manufacture, (ii) an experienced management team, (iii) its
affiliation with Kirkland-Ft. Worth Investment Partners, L.P. ("Kirkland") and
Gaming Systems Advisors, L.P. ("GSA") and (iv) its demonstrated ability to
expand its gaming operations to new jurisdictions, as evidenced by its
operations in Louisiana and Mississippi.

EMPLOYEES

As of June 30, 1995, Alliance employed approximately 825 persons in the
State of Nevada and approximately 10 persons in various states related to its
business development activities, VSI employed approximately 62 persons in the
State of Louisiana and RCVP employed 347 persons in the State of Mississippi.
None of such employees is covered by a collective bargaining agreement.
Alliance believes its relationships with its employees are satisfactory.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF ALLIANCE

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1995, Alliance had working capital of approximately
$20,109,000, a decrease of approximately $11,637,000 from June 30, 1995. The
decrease in working capital is due in part to a decrease in cash and cash
equivalents which were used to fund development activities in connection with
Alliance's business strategy. As of December 31, 1995, Alliance had
$29,468,000 in cash, cash equivalents and securities available for sale, of
which approximately $7,000,000 is necessary to fund ongoing gaming operations
in the ordinary course of business. At June 30, 1995, Alliance had working
capital of approximately $31,746,000 and $37,414,000 in cash, cash equivalents
and securities available for sale.

During the six months ended December 31, 1995, Alliance incurred
approximately $10,737,000 in costs associated with pursuit of Alliance's
business strategy. Included in these costs are expenses of $9,437,000
associated with Alliance's making the Alliance Offer and Consent Solicitation,
and subsequently entering into a definitive merger agreement with BGII. During
fiscal 1995, Alliance incurred approximately $7,843,000 in expenses associated
with pursuit of Alliance's business strategy. Alliance's strategy is to use
its strengthened management team, diversified gaming expertise and business
and investment community relationships to develop new opportunities in the
operation of land-based (including Native American owned), dockside and
riverboat casinos, gaming systems and technology and the supply and management
of gaming devices.

On July 16, 1994 the Rainbow Casino in Vicksburg, Mississippi permanently
opened for business. In connection with the completion of the casino and the
acquisition of its original 45% limited partnership interest, through a
wholly-owned subsidiary, Alliance funded a $3,250,000 advance to RCC on the
same terms as RCC's financing from HFS. On March 29, 1995, Alliance
consummated certain transactions whereby Alliance acquired from RCC the
controlling general partnership interest in RCVP and increased its partnership
interest. In exchange for the commitments by NGM and Alliance to provide
additional financial (up to a maximum of $2,000,000 each) to be used for the
completion of certain incomplete elements of the project which survived the
opening of the casino (for which RCC was to have been responsible, but failed
to satisfy) a commitment by Alliance to fund any additional capital necessary
for the completion, upgrading or working capital of the project, and a
$500,000 payment also funded jointly by NGM and Alliance paid to HFS as a
waiver fee, the following occurred: (i) a subsidiary of Alliance became the
general partner and RCC became the limited partner of RCVP and (ii) the
respective partnership interests were adjusted. As adjusted, RCC is entitled
to receive 10% of the net available cash flows, as defined (which amount shall
increase to 20% of cash above $35,000,000 (i.e. only on such incremental
amount)), for a period of 15 years, such period being subject to one-year
extensions for each year in which a minimum payment of $50,000 is not made. In
addition, if during any continuous 12-month period until December 31, 1999 the
casino achieves earnings from the project of at least $10.5 million, before
deducting depreciation, amortization, certain debt payments and substantially
all taxes, then Alliance will be obligated to pay to certain principals of the
original partnership an amount aggregating $1 million in cash or shares of
Alliance Common Stock.

Alliance and Casino Magic Corporation, through wholly-owned subsidiaries,
are members in KGP and KFP, both Kansas limited liability companies. Under an
option agreement granted to KGP by Camptown and TRAK Southeast, KGP has been
granted the exclusive right, which right expires on September 13, 2013, to
operate gaming devices and/or casino-type gaming at Camptown's racing facility
in Frontenac, Kansas if and when such gaming is permitted in Kansas. In
December 1994, Camptown received a $3,205,000 loan from Boatmens' Bank which
was guaranteed by KFP. Alliance and Casino Magic Corporation each invested
$1,580,000 in KFP which was used to purchase a certificate of deposit to
collateralize its guaranty. Construction of Camptown's racing facility has
been completed and the facility opened for business in May 1995. The racing
facility was temporarily closed on November 5, 1995 due to poor financial
results. Camptown filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in January 1996 and has stated an intention to reopen for
business following bankruptcy reorganization. Boatmen's Bank demanded payment
of the Camptown loan from KFP under the terms of the guaranty. KFP paid the
loan and Boatmen's Bank returned KFP's certificate of deposit and KFP assumed
Boatmen's Bank's position in the loan to Camptown which is secured by a second
mortgage on

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Camptown's greyhound racing facility in Frontenac, Kansas. TRAK Southeast and
Camptown continue to be bound by the Option Agreement. KFP intends to
vigorously pursue all of its rights and remedies which may include, among
other things, seeking authority from the bankruptcy court to commence a
foreclosure action. In the case of a foreclosure action, KFP would be required
to assume or pay the existing first mortgage of approximately $2,000,000 if
KFP becomes the purchaser at any such sale. Alliance intends to continue to
monitor its investment in KFP. Alliance believes that the Kansas legislature
may consider at least two gaming bills this session. One bill, if approved by
two thirds of both houses of the Kansas legislature, would call for a public
vote to amend the Kansas constitution to allow slot machines at up to two
gaming locations in each legislative district, with one location being
reserved for any licensed pari-mutuel location in the district. The second
bill, if passed by a majority of both houses of the Kansas legislature, would
allow, subject to a local option election of the citizens in the county, slot
machines at licensed pari-mutuel race tracks.

Cash provided by operations for the six months ended December 31, 1995
decreased by approximately $1,588,00 from amounts reported for the prior year
period. The change is primarily attributable to the Rainbow Casino, offset by
an increase in business development costs over the same period from the prior
year of $7,229,000, primarily related to the Merger.

Cash provided by operations for fiscal 1995 decreased approximately
$8,105,000 from amounts reported for fiscal 1994. Included in the prior year's
cash flows from operations was a non-recurring gain of $3,600,000 associated
with the termination of Alliance's letter agreement with Capital Gaming
International, Inc. and $6,351,000 of charges related to Alliance's decision
to exit the downtown Las Vegas gaming market and dispose of its tavern
operations. Exclusive of these prior year items, expenditures related to
supporting Alliance's business strategy increased approximately $3,051,000.
Long-term accrued expenses decreased by approximately $1,031,000 as Alliance
paid rent and other exit expenses against the amounts accrued in fiscal 1994
as noted above. The remaining change in accrued expenses accounted for a use
of cash in the amount of $4,710,000. These uses of cash were partially offset
by an increase in cash flows from operations of approximately $2,666,000 from
Alliance's ongoing business operations and an operating cash contribution of
approximately $3,089,000 from the first year of operations by the Rainbow
Casino. Significant non-cash items added back to cash flows from operations
for 1995 include $1,313,000 in non-cash compensation expense and $1,075,000
related to certain service contracts and termination costs.

Cash provided by investing activities for the six months ended December 31,
1995 increased $12,403,000 from the same period in the prior year due
primarily to the proceeds from the sale of approximately $8,015,000 of
securities available for sale. Also, net collections on receivables improved
by $3,299,000 compared to the same period last year.

Cash flows used for investing activities in fiscal year 1995 decreased by
$5,651,000 from the prior year. Net collections on receivables improved by
$2,605,000 compared to fiscal 1994 as receivable activity returned to
historical norms. In fiscal 1994, Alliance funded approximately $7,250,000 in
loans to Capital Gaming International Inc. and the original general partner in
RCVP which additions were partially offset by increased collections of
receivables related primarily to the collection of the Capital Gaming loan in
fiscal 1994.

Cash used in financing activities for the six months ended December 31, 1995
declined $76,000 from the same period last year due primarily to Alliance's
borrowing of $682,000 in the period.

Cash flows from financing activities in fiscal year 1995 declined
$48,402,000 from fiscal 1994. In the prior year, Alliance completed the
private placement of $85,000,000 aggregate principal amount of its 7.5%
convertible subordinated debentures due 2003 (the "Debentures"). Concurrent
with the closing of the issuance of the Debentures, Kirkland invested
$5,000,000 in Alliance in exchange for 1,333,333 shares of Alliance's Non-
Voting Junior Convertible Special Stock and warrants to purchase up to
2,750,000 shares of Alliance Common Stock, subject to certain conditions. A
portion of the net proceeds from these transactions was used to repay
previously existing debt and accrued interest of approximately $38,245,000.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") as
a percent of the related revenues changed for Nevada gaming machine management
operations from 15.3% in fiscal 1994 to 16.7% in fiscal 1995 and to 14.8% in
the first six months of fiscal 1996 and for Louisiana gaming machine
management

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<PAGE>

operations from 18.9% to 21.5% and to 24.1% for the same periods. EBITDA as a
percent of revenues for the casino operations (excluding discontinued
operations), excluding certain one-time charges, was 18.2% in fiscal 1994 and
23.3% in fiscal 1995 and 30.9% in the first six months of fiscal 1996. The
increase in the first six months of fiscal 1996 was due primarily to the
acquisition of the Rainbow Casino. EBITDA should not be construed as an
alternative to net income or any other GAAP measure of performance as an
indicator of Alliance's performance or to cash flows generated by operating,
investing and financing activities as an indicator of cash flows or a measure
of liquidity. Management believes that EBITDA is a useful adjunct to net
income and other GAAP measurements and is a conventionally used financial
indicator. Earnings were inadequate to cover fixed charges by $11.5 million
and $9.8 million during the twelve months ended June 30, 1995 and the six
months ended December 31, 1995, respectively.

Management believes Alliance's present working capital and funds generated
from operations will be sufficient to meet its existing commitments, debt
payments and other obligations as they become due. However, it remains a part
of Alliance's business strategy to seek on a more limited basis additional
gaming opportunities, including opportunities in which its route and casino
experience may be applicable. As part of its business activities, Alliance is
regularly involved in the identification, investigation and development of
such opportunities. Accordingly, in order to support such activities, Alliance
may in the future elect to issue additional debt or equity securities if and
when appropriate opportunities become available on terms satisfactory to
management (in addition to the Financing). See "Unaudited Pro Forma Condensed
Combined Financial Statements" and "The Merger--Financing".

RESULTS OF OPERATIONS

SIX MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH SIX MONTHS ENDED DECEMBER
31, 1994.

Revenues

Total revenues for the six months ended December 31, 1995 were $76,229,000,
an increase of $13,891,000 (22.3%) over those for the same period in 1994.
Revenues from all gaming route operations increased $110,000 (0.2%) to
approximately $52,621,000 in the first six months of fiscal 1996. Revenues
from the Louisiana route operations increased $147,000 (an increase of 1.9%)
primarily as a result of an expansion of operations from the opening of a new
OTB parlor in October 1995. Revenue from Nevada route operations decreased
approximately $36,000 (0.1%) over those for the same period last year. The
decrease in the Nevada gaming route revenues was attributable to a $0.52
decrease in the average net win per gaming device per day for the six months
ended December 31, 1995 compared to the same period in 1994 (accounting for a
decrease of approximately $499,000) which exceeded an increase in the weighted
average number of gaming devices on location for the six months ended December
31, 1995 as compared to the same period in 1994 (accounting for an increase of
approximately $463,000). Revenues from casino and tavern operations, including
food and beverage sales, increased approximately $13,791,000 (140.6%) during
the current six months as compared to those for the prior year as revenues
recognized from the Rainbow Casino, which were consolidated beginning March
29, 1995, exceeded the revenues lost with the termination of Alliance's lease
at the Royal Casino and the reduction of operations at Alliance's tavern
locations.

Cost and Expenses

Cost of Revenues. Cost of gaming route revenues for the six months ended
December 31, 1995 increased $1,147,000 (2.9%) over the same period in 1994.
Costs of revenues from route operations in Louisiana decreased $53,000 (a
decrease of 1.1% from last year) as revenues decline primarily as a result of
the increased competition in that market. Costs of gaming revenues for Nevada
gaming route revenues increased $1,200,000 (3.5%) as compared to the prior
year and increased slightly as a percent of Nevada gaming route revenues
primarily due to increased costs associated with additional and renewed space
lease contracts. Cost of route revenues includes rents under both space lease
and revenue sharing arrangements, gaming taxes and direct labor, including
related taxes and benefits. The cost of casino and tavern revenues including
costs of food and beverage revenues increased $5,246,000 (86.5%) compared to
1994 results primarily due to the Rainbow Casino cost of revenues which were
consolidated beginning March 29, 1995. This increase was partially offset by
the termination of Alliance's lease at the Royal Casino. Cost of casino and
tavern revenues include cost of goods sold, gaming taxes, rent and direct
labor, including related taxes and benefits.

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<PAGE>

Expenses. For the six months ended December 31, 1995 Alliance incurred
business developmental costs associated with pursuing Alliance's business
strategy of approximately $10,737,000, an increase of $7,229,000 (206.1%) over
the same period from last year. These business development expenses include
ongoing salaries and wages, related taxes and benefits, professional fees,
travel expenses and other expenses associated with supporting Alliance's
business strategy. Current year development costs also include expenses of
$9,437,000 associated with the Alliance Offer, Consent Solicitation, and the
Merger, which are non-recurring. During the six-month period ended December
31, 1995, excluding the costs related to the Merger, Alliance's business
development costs were approximately $1.3 million. The level of business
development activities, exclusive of Merger costs, has been reduced from prior
periods due to the termination of two executives in this business unit in
order to reduce costs, and the relocation of this unit to lower cost office
space. Alliance believes that such reduced level of costs will be adequate to
pursue its business development strategies on a more limited basis in
accordance with its business plan following consummation of the Merger.

Selling, general and administrative expenses for the period increased
approximately $2,912,000 (44.9%) from the prior year. Expenses for casinos and
taverns increased $3,629,000 (198.3%) from the prior year primarily due to the
Rainbow Casino expenses which were consolidated beginning March 29, 1995. This
increase was partially offset by the termination of Alliance's lease at the
Royal Casino and the reduction of operations at Alliance's tavern locations.
Such expenses related to gaming route operations decreased $717,000 (15.4%)
from the prior year reflecting steps taken to control costs, including reduced
staffing levels. Corporate general and administrative expenses decreased
$1,265,000 (29.4%). This decrease was caused primarily by controlling costs
and reducing staffing levels. Alliance expects that there may be further
increases in selling, general and administrative expenses related to the
addition of new management and development personnel and other costs
associated with supporting Alliance's business strategy.

Included in last year's other income and expenses is a charge of $404,000
representing Alliance's equity in the net loss of the Rainbow Casino in its
first six months of operations prior to Alliance's acquisition of the general
partnership interest in RCVP on March 29, 1995.

Interest expense for the period increased $373,000 from the same period last
year due principally to the increased interest expense related to the debt of
Rainbow Casino.

FISCAL 1995 COMPARED WITH FISCAL 1994

Revenues

Total revenues for the fiscal year ended June 30, 1995 were approximately
$131,988,000, an increase of $8,934,000 (7.3%) over those for fiscal 1994.
Revenues from all gaming route operations increased $3,997,000 (3.9%) to
approximately $106,827,000 in fiscal 1995. Revenues from route operations in
the state of Louisiana declined $1,796,000 (10.3%) primarily as a result of
increased competition from riverboat operations. Revenue from Nevada route
operations increased approximately $5,739,000 (6.7%) over those for the same
period last year. The increase in the Nevada gaming route revenues was
attributable to a $2.15 increase in the average net win per gaming device per
day in fiscal 1995 compared to fiscal 1994 (accounting for approximately
$4,042,000 of such increase) and an increase in the weighted average number of
gaming devices on location during fiscal 1995 as compared to fiscal 1994
(accounting for an increase of approximately $1,751,000). Revenues from casino
and tavern operations, including food and beverage sales, increased
approximately $4,975,000 (24.6%) during fiscal 1995 as compared to those for
the prior year as revenues recognized from the Rainbow Casino, which were
consolidated beginning March 29, 1995, exceeded the revenues lost with the
closing of the Company's properties in downtown Las Vegas and the termination
of Alliance's lease at the Royal Casino.

Costs and Expenses

Costs of Revenues. Cost of gaming route revenues for the fiscal year ended
June 30, 1995 increased $3,543,000 (4.6%) over that for fiscal 1994. Costs of
revenues for route operations in Louisiana decreased $1,199,000 (a decrease of
10.7% from last year) as revenues declined primarily as a result of increased
competition in that market. As a percent of related revenues, Louisiana route
costs of revenues remained relatively constant. Cost of gaming revenues for
Nevada gaming route revenues increased $4,742,000 (7.3%) as compared to the
prior year and increased slightly as a percent of Nevada gaming route revenues
due primarily to increased costs associated with additional and renewed space
lease contracts. Cost of route revenues includes

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<PAGE>

rents under both space lease and revenue sharing arrangements, gaming taxes
and direct labor, including related taxes and benefits. The cost of casino and
tavern revenues, including the cost of food and beverage sales, decreased
$724,000 (4.8%) compared to fiscal 1994 primarily due to the closing of
Alliance's properties in downtown Las Vegas and the termination of Alliance's
lease at the Royal Casino. These decreases were partially offset by Rainbow
Casino costs of revenues which were consolidated beginning in March 1995. Cost
of casino and tavern revenues includes cost of goods sold, gaming taxes, rent
and direct labor expenses, including taxes and benefits. Although the gross
margin percentage for Nevada operations declined slightly during fiscal 1995,
the decline was completely offset by the addition of the Rainbow Casino and a
small improvement in the Louisiana gross margin percentage. As a result, the
total cost of revenues as a percentage of total revenues declined by 2.9%
compared to fiscal 1994.

Expenses. For fiscal 1995, Alliance incurred development costs associated
with pursuing Alliance's long term growth strategy of approximately
$7,843,000, an increase of approximately $6,651,000 (558.0%) from fiscal 1994.
Included in the development costs for fiscal 1995 was $1,669,000 of costs
related to the Merger. Included as an offset to development costs for fiscal
1994 was a non-recurring gain of $3,600,000 related to Alliance's effort to
acquire Capital Gaming International, Inc. Prior year development costs also
include certain significant expenses associated with Alliance's purchase of
NAI. Development costs include salaries and wages, related taxes and benefits,
professional fees, travel expenses, payments to third parties for business
development options and other expenses associated with supporting the
Company's long-term growth strategy. With the exception of the significant
costs expected to be incurred in conjunction with the Merger, Alliance expects
to continue to incur a significant level of development costs although at a
reduced level compared to fiscal 1995 due to the termination of two executives
in this business unit in order to reduce costs and its relocation to lower
cost office space. Alliance believes that such reduced costs will be adequate
to pursue its business development strategies on a more limited basis in
accordance with its business plan following consummation of the Merger.

Corporate administrative expenses for fiscal 1995 were approximately
$9,735,000, an increase of $1,853,000 over the same amounts for fiscal 1994.
The primary cause for the increase was $1,331,000 in compensation expense
recognized upon the issuance of 250,000 shares of Alliance Common Stock to
Steve Greathouse, Alliance's President, Chief Executive Officer and Chairman
of the Board, in connection with his employment agreement. Also contributing
to the increase in corporate administrative expenses are $485,000 of expenses
related to certain service contracts and termination costs. Corporate
administrative expenses include salaries and wages, related taxes and
benefits, professional fees and other expenses associated with maintaining the
corporate office and providing centralized corporate services for Alliance.

Exclusive of the development and corporate expenses noted above, selling,
general and administrative expenses for fiscal 1995 increased $1,078,000
(7.9%) from the prior year. Selling, general and administrative expenses
related to gaming route operations decreased $1,340,000 (13.8%) from fiscal
1994. Selling, general and administrative expenses for Louisiana route
operations declined approximately $660,000 (23.8%) as staff reductions and
cost containment measures were implemented to counter increased competition in
that market. The same costs for Nevada route operations decreased $680,000
(9.8%) as the benefit of staff reductions and cost controls taken in late
fiscal 1994 was realized. Selling, general and administrative costs increased
for casino and tavern operations by $1,595,000 (44.0%) from the prior year.
The acquisition of the Rainbow Casino, which contributed $1,984,000 to the
increase, was partially offset by the closing of Alliance's downtown Las Vegas
properties and the termination of the lease at the Royal Hotel. Also
contributing to the increase in selling, general and administrative expenses
were $478,000 of expenses related to certain service contracts and termination
costs. Selling, general and administrative expenses may be subject to further
increases.

In fiscal 1994, due to continuing losses from operations, negative cash
flows and incompatibility with Alliance's long-term growth strategy, the
Alliance Board resolved to 1) exit the downtown Las Vegas gaming market and 2)
dispose of the currently operated small independent tavern operations. Based
on these decisions, Alliance recognized total expenses of approximately
$5,883,500 in fiscal 1994. As a result of the decision to exit the downtown
Las Vegas gaming market, in September 1994, Alliance substantially reduced
operations at both the Trolley Stop Casino and Miss Lucy's Gambling Hall &
Saloon. Included in the 1994 statements of operations are total expenses of
approximately $3,246,000 related to these actions. The total charge included
approximately $488,000 related to the write-down of assets and approximately
$2,758,000 representing primarily the present

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<PAGE>

value of the future lease payments net of estimated future sublease income.
The decision to withdraw from the tavern business resulted in expenses of
approximately $2,638,000 being recognized in fiscal 1994. Approximately
$1,813,000 of the total amount was related to the write down of assets while
approximately $825,000 represented primarily the present value of the future
lease payments net of estimated future sublease income.

On December 17, 1993, Alliance incurred a fire loss at the Fairgrounds Race
Course in New Orleans, Louisiana where Alliance operated 199 gaming devices
prior to the fire (of which 193 were destroyed by the fire) through its
controlled subsidiary, VSI. Alliance was fully insured for all equipment,
leasehold improvements, other assets and business income with the exception of
approximately $46,000 in deductibles. During fiscal 1995, Alliance recorded
approximately $247,000 of income from business interruption insurance proceeds
compared to $241,000 of such proceeds in the prior year. Alliance is
discussing settlement of additional business interruption claims with the
insurance carrier. Alliance has also received insurance proceeds based on the
replacement value of the assets destroyed in the fire and, therefore,
recognized a gain of approximately $156,000 which is included in other income
in fiscal 1994.

FISCAL 1994 COMPARED WITH FISCAL 1993

Revenues

Total revenues for the fiscal year ended June 30, 1994 were approximately
$123,054,000 for fiscal 1994 an increase of $9,963,000 (8.8%) over those for
fiscal 1993. Revenues from all gaming route operations increased $6,548,000
(6.8%) to approximately $102,830,000 in fiscal 1994. Route operations in the
state of Louisiana contributed $5,222,000 (an increase of 42.9%) to the
overall increase in route revenues as Alliance continued to experience
increasing demand in that relatively young market. Revenue from Nevada route
operations increased approximately $1,326,000 (1.6%) over those for the same
period last year. The increase in the Nevada gaming route revenues was
attributable to a $1.30 increase in the average net win per gaming device per
day in fiscal 1994 compared to fiscal 1993 (accounting for an increase of
approximately $2,608,000 of such increase) which was partially offset by a
decrease in the weighted average number of gaming devices on location during
fiscal 1994 as compared to fiscal 1993 (accounting for a decrease of
approximately $1,282,000). Revenues from casino and taverns increased
approximately $3,449,000 (20.6%) during fiscal 1994 as compared to those for
the prior year due to the continued expansion of casino operations and
operating additional troubled tavern locations.

Costs and Expenses

Costs of Revenues. Cost of gaming route revenues for the fiscal year ended
June 30, 1994 increased $3,718,000 (5.1%) over that for fiscal 1993. Route
operations in Louisiana contributed $2,854,000 (an increase of 40.6% from last
year) to the overall increase. Cost of gaming revenues for Nevada gaming route
revenues increased $864,000 (1.3%) as compared to the prior year. The increase
to cost of Nevada route revenues was primarily due to an increase in location
operators' share of gaming revenues caused by replacing a large space lease
contract with revenue-sharing arrangements. Cost of route revenues includes
rents under both space lease and revenue sharing arrangements, gaming taxes
and direct labor, including related taxes and benefits. The cost of casino and
tavern revenue increased $3,412,000 (29.6%) compared to fiscal 1993 primarily
due to the first full year of operations of two small casinos and the first
full year of operating the hotel and food and beverage operations at the
Mizpah. Previously, Alliance had operated only the casino at the Mizpah, but
in January, 1993 began operating the entire facility including food and
beverage operations to insure its availability for the casino. Cost of casino
and tavern revenues includes cost of goods sold, gaming taxes, rent and direct
labor expenses, including taxes and benefits. Although the gross margin
percentage from Nevada operations declined during fiscal 1994, the decline was
offset by increases in the Louisiana operating margin percentage. As a result,
the combined cost of gaming revenues as a percentage of gaming revenues
remained relatively constant from fiscal 1993 to fiscal 1994.

Expenses. In August 1994, due to continuing losses from operations, negative
cash flows and incompatibility with Alliance's long-term growth strategy,
Alliance's Board of Directors resolved to 1) exit the downtown Las Vegas
gaming market and 2) dispose of the currently operated small independent
tavern operations. Based on these decisions, Alliance recognized total
expenses of approximately $5,883,500 in fiscal

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<PAGE>

1994. As a result of the decision to exit the downtown Las Vegas gaming
market, in September 1994, Alliance substantially reduced operations at both
the Trolley Stop Casino and Miss Lucy's Gambling Hall & Saloon. Included in
the 1994 statements of operations are total expenses of approximately
$3,246,000 related to these actions. The total charge included approximately
$488,000 related to the write-down of assets and approximately $2,758,000
representing primarily the present value of the future lease payments net of
estimated future sublease income. The decision to withdraw from the tavern
business resulted in expenses of approximately $2,638,000 being recognized in
fiscal 1994. Approximately $1,813,000 of the total amount was related to the
write down of assets while approximately $825,000 represented primarily the
present value of the future lease payments net of estimated future sublease
income.

Alliance's lease at the Mizpah has a remaining lease term of approximately
8.5 years with an option on Alliance's behalf to terminate the lease
arrangement at any time after December 31, 1995 with 120 days notice. In
September 1994, the Company notified the landlord of the Mizpah of its intent
to exercise the termination clause of its lease at the earliest possible date
of January 1, 1996 and give 120 days notice at that time. As a result of this
decision, Alliance recognized additional charges of $467,500 in fiscal 1994.

Also included in selling, general and administrative expenses for fiscal
1994 are development costs associated with pursuing Alliance's long term
growth strategy of approximately $1,192,000. These developmental costs include
approximately $4,792,000 in legal fees, travel expenses and other expenses
associated with supporting Alliance's long-term growth strategy, which
expenses are partially offset by the $3,600,000 recovered under the Capital
Gaming termination agreement. Fiscal 1994 was the first year in which
significant funds were expended in pursuit of this strategy.

Exclusive of the reserves, write downs and development expenses noted above,
selling, general and administrative expenses for fiscal 1994 increased
$1,679,000 (8.5%) from the prior year. The primary causes for the increase
include a $400,000 fiscal 1994 bonus granted to Shannon L. Bybee as part of
the restructuring of his employment with Alliance, $350,000 in fees incurred
under the one year consulting contract with Carole A. Carter, the former
President and Chief Operating Officer of Alliance, continued expansion of the
Louisiana route operations which contributed approximately $546,000 to the
overall increase and $274,000 of overall increases in Nevada route operations.
The general and administrative costs for casinos and taverns were $3,622,000
or 18.0% of related revenues for fiscal 1994 as compared to $3,511,000 or
21.0% for fiscal 1993. The same costs for gaming device route operations were
$9,736,000 or 9.5% of revenues for fiscal 1994 and $8,916,000 or 9.3% of
revenues for fiscal 1993.

Bad debt expense in fiscal 1994 increased 52.9% to approximately $705,000 as
compared to the 1993 year expense of $461,000 due primarily to the financial
difficulties of a particular customer in Northern Nevada.

On December 17, 1993, Alliance incurred a fire loss at the Fairgrounds Race
Course in New Orleans, Louisiana where Alliance operated 199 gaming devices
prior to the fire (of which 193 were destroyed by the fire) through its
controlled subsidiary, Video Services, Inc. Alliance is fully insured for all
equipment, leasehold improvements, other assets and business income with the
exception of approximately $46,000 in deductibles. Through June 30, 1994,
Alliance had recorded approximately $241,000 of income from business
interruption insurance proceeds. Alliance will continue to receive proceeds
under this policy while the Fairgrounds Race Course is rebuilt. Alliance has
also received insurance proceeds based on the replacement value of the assets
destroyed in the fire and, therefore, recognized a gain of approximately
$156,000 which is included in other income in fiscal 1994.

BALLY GAMING INTERNATIONAL, INC.

GENERAL

BGII was formed in August 1991 by BEC to consolidate BEC's gaming machine
manufacturing and distribution operations. See "Bally Gaming International,
Inc.--Notes to Consolidated Financial Statements--Basis of Presentation and
Description of Business". BGII, through subsidiaries in Germany and the United
States, designs, manufactures and distributes electronic gaming machines,
principally in the United States and Europe. BGII also distributes,
principally in Germany, other recreational and amusement machines manufactured

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by third parties. BGII's United States subsidiary also designs, assembles and
sells computerized monitoring systems for use by casinos and other operators
of gaming equipment.

BGII's domestic subsidiary, Bally Gaming, Inc., has two business units:
first, a gaming machine business unit (previously defined herein as Gaming)
and second, through Bally Gaming Inc.'s Bally Systems division (previously
defined herein as Systems), a data systems and software and hardware support
unit. Gaming designs, manufactures and distributes a variety of electronic
reel-type (or "slot") and video gaming machines, with variations of design,
payment features and coinage acceptance. Gaming historically has marketed
these machines in the United States to casinos in Atlantic City and Nevada and
more recently in other jurisdictions, including riverboat casinos and casinos
on Indian lands. Gaming also distributes slot machines and video gaming
machines outside the United States, principally in Europe and, to a lesser
extent, in Canada, the Far East, Latin America and the Caribbean. Gaming
markets its machines principally through its own sales force and, to a lesser
extent, through independent distributors.

Systems designs, assembles and sells, primarily to casino operators in the
United States, computerized monitoring systems for slot and video gaming
machines which provide casino operators with data relative to a machine's
accounting, security and maintenance functions in a real time environment.
Systems markets its products and services primarily through its own sales
force.

BGII's German subsidiaries, which operate under the name Bally Wulff,
design, manufacture and distribute coin-operated, wall-mounted electronic
gaming machines known as wall machines. Bally Wulff markets its wall machines,
as well as wall machines and other recreational and amusement machines
manufactured by third parties, including pool tables, dart games, pinball
machines, jukeboxes and arcade games, to operators of arcades, taverns, hotels
and restaurants, in Germany. Product sales are made through Bally Wulff's 23
regional sales offices in Germany and through independent distributors.

Although Bally Wulff and Gaming had previously been subsidiaries of BEC,
they conducted their business as separate entities prior to the formation of
BGII. BGII has increased, and intends to further increase, the cooperation
between its business units including sharing design and engineering expertise,
and exchanging information concerning customers' preferences, distribution
strategies and the gaming market generally.

The following table sets forth the revenues and operating income (loss) from
each of BGII's business units and net income (loss) (in millions):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Bally Wulff...................................... $112.6 $111.1 $130.7
Gaming........................................... 48.5 117.8 108.4
Systems.......................................... 12.0 13.4 20.7
Consolidation adjustments........................ (4.4) (6.1) (10.5)
-------- -------- --------
BGII ............................................ $ 168.7 $ 236.2 $ 249.3
======== ======== ========
OPERATING INCOME (LOSS):
Bally Wulff...................................... $ 9.7 $ 9.2 $ 5.6
Gaming........................................... (31.7) 1.6 (2.2)
Systems.......................................... 4.0 2.6 5.2
Consolidation adjustments........................ (.6) -- (.2)
-------- -------- --------
Total operating income (loss).................... (18.5) 13.4 8.4
Interest expense................................. 4.4 6.8 6.9
-------- -------- --------
Income (loss) before income taxes and
extraordinary gain.............................. (23.0) 6.6 1.5
Provision for income taxes....................... 4.2 2.8 4.9
Extraordinary gain from early extinguishment of
debt............................................ 3.8 -- --
-------- -------- --------
Net income (loss)................................ $ (23.4) $ 3.8 $ (3.4)
======== ======== ========
</TABLE>

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<PAGE>

The information provided includes allocation of parent company revenues and
expenses and intercompany transactions which are eliminated on a consolidated
basis. The amounts presented in the above table may not add due to rounding.
In the table above "Systems" refers to the Bally Systems division of Bally
Gaming, Inc.

GAMING

Gaming commenced operations in 1964 as a division of BEC. In the early
years, the gaming machine market was highly restricted with slot machine sales
in Nevada being the primary market. Gaming faced little competition in Nevada
until the late 1970's and early 1980's when IGT was able to capture a dominant
position in the emerging video poker market, the fastest growing segment of
the gaming machine market in Nevada at that time and during much of the
1980's. The emergence of the Atlantic City gaming market in the early 1980's
provided a further opportunity for other gaming machine manufacturers to enter
the market, in part because the regulations imposed by the New Jersey Casino
Control Commission encouraged new competitors.

In the mid 1980's, management's slow response to rapidly evolving
technology, new competitors and changing customer preferences worked to
further diminish Gaming's market position, particularly in Nevada. In
addition, Gaming's sales and distribution efforts in certain international
markets were curtailed. Accordingly, Gaming lost approximately 80% of its
historical market share of the overall gaming machine market and, until
recently, did not take advantage of emerging markets. As a result of these
factors, among others, Gaming has operated at a loss for each of the preceding
ten fiscal years. BGII's future operating results will depend in part upon
Gaming's ability to continue to improve its business in its traditional
markets and to increase its efforts in new markets for gaming machines, as
well as Gaming's ability to develop and sell competitive products for such
markets. See "Product Development" and "New Product Introduction" and
"Management Discussion and Analysis of Financial Condition and Results of
Operations of BGII."

Since 1991, BGII's management has initiated steps to increase its share of
gaming machine sales in traditional markets and to capture increased gaming
machine market share in new and emerging jurisdictions. Specifically, Gaming
has increased research and development efforts, focusing on upgrading its
gaming machine product line, and increased its sales and marketing efforts.
See "New Product Introduction".

Gaming introduced its new "ProSeries(TM)" reel spinning slot machines during
the third quarter of 1993 and its multi-game touch screen machine, the V7000
Game Maker(R) ("Game Maker(R)"), during the third quarter of 1994. BGII's
management believes that Gaming has begun to recognize the results of an
extensive product development effort which Gaming has undertaken over the past
several years. Revenues from the sales of Game Maker(R) machines were
approximately $.1 million, $6.7 million and $27.4 million during the years
ended December 31, 1993, 1994 and 1995, respectively. Revenues from the sales
of ProSeries(TM) machines were approximately $19.3 million, $86.2 million and
$57.1 million during the years ended December 31, 1993, 1994 and 1995,
respectively. See "New Product Introduction". However, there can be no
assurance that such effort will continue to result in increased market share
or profitability.

Products

Gaming designs, manufactures and distributes a variety of electronic slot
and video gaming machines, with variations of design, payment features and
coinage acceptance. New game personalities and themes are introduced
periodically in order to satisfy customer demand and to compete with product
designs introduced by competitors. In the past, Gaming had designed,
manufactured and distributed VLTs, which are generally operated by, or under
the regulation of, state or provincial lottery commissions. The VLT business
was less than 2% of revenues during 1993, 1994 and 1995. Gaming will pursue
this business only on a selected basis in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
BGII" for information relating to unit sales of Gaming's machines. In
addition, Gaming sells and services used gaming machines and sells parts for
existing machines. Sales of used gaming machines increased in 1995 as
management implemented a process to reduce used inventory levels.

72
<PAGE>

The following table sets forth the percentages of Gaming's revenue provided
by each of its major product lines during the periods shown:

<TABLE>
<CAPTION>
PERCENTAGE OF
REVENUES
-------------------
YEAR ENDED
DECEMBER 31,
-------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Slot machines........... 67.0% 74.2% 52.8%
Video gaming machines... 18.9 16.3 31.0
Other (primarily used
machines, parts and
services).............. 14.1 9.5 16.2
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>

Gaming offers a variety of different models of its reel-type slot machines.
Machines are differentiated from one another by graphic design and theme,
cabinet style and size, payout, reel type/design and minimum/maximum betting
amount. Machines are normally produced to specific order, with design and
configuration customized to a customer's particular requirements. Customers
may also change from one gaming model to another gaming model by ordering a
"conversion kit" which consists of artwork, reel strips and a computer chip.
Such conversions can be done by the customer at its location. Gaming's video
gaming machines are designed to simulate various live card games and keno
through a video display, and with the introduction of its Game Maker(R),
Gaming now offers multiple games within one gaming device. In 1995, Gaming
introduced a bar top and slant top model of the Game Maker(R) to help fill out
the line of Game Maker(R) products.

Gaming machines have a mechanical life that can exceed 10 years. However in
the established markets, Gaming's experience is that casino operators usually
replace gaming machines between three to seven years. The factors which result
in replacement of gaming machines sooner than their mechanical life include
technological advances, development of new games, new sound and visual
features and changing preferences of casino patrons.

New Product Introduction

During the third quarter of 1993, Gaming introduced its new ProSeries(TM)
product line of reel-spinning slot machines for casino customers. The Pro
Series(TM) was the result of a comprehensive product development effort which
began in 1991. The development process included extensive testing of the new
products in-house and on casino floors for reliability and player appeal.
Based on Gaming's sales of the ProSeries(TM) products to date, management of
BGII believes that the ProSeries(TM) has been the catalyst to allow Gaming to
increase market share in traditional and emerging markets for gaming machines
as the product becomes accepted by casino customers.

The ProSeries(TM) includes a complete line of reel-spinning slot machines
which incorporate features such as an imbedded bill acceptor located above the
traditional coin acceptor, a design option for a larger than normal coin
hopper and other hardware and software features which are believed to be
popular with casinos and their customers. The ProSeries(TM) slot machines are
manufactured in various sizes and colors and are offered in both traditional
upright or slant top cabinets. Various models can be selected from an
extensive game library. The visual aspects of the product are upgraded and
customized by BGII's graphic arts and silkscreen departments.

During the third quarter of 1994, Gaming introduced its new, innovative,
multi-game touch screen machine, the Game Maker(R). The Game Maker(R) can
offer up to 10 different video games within one gaming device. Various games
can be selected from a game library that has over 200 games. The games
simulate various card games, Keno and popular reel spinning games. The Game
Maker(R) machines contain imbedded bill acceptors and many other features
believed to be popular with casinos and their customers. The Game Maker(R)
machines are available in upright, bartop and slant top cabinets. Based on
Gaming's sales of this product to date, management believes that Gaming is
more competitive than in the past in the video gaming device market.

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<PAGE>

Product Development

Gaming develops its products for both the domestic and international market.
Gaming's product development process is divided into two areas, hardware and
software. Major areas of hardware development include cabinet style,
electronic capability, machine handle, coin hopper and bill acceptor. Hardware
development efforts are focused upon player appeal, product reliability and
ease of maintenance. Development cycles for hardware can range from a few days
for simple enhancements to more than a year for new electronics or new
mechanical packages.

The software development process for new games, which includes graphics
development, involves a continuous effort requiring relatively significant
human resource allocations. Creativity in software development is an important
element in product differentiation as the major manufacturers sometimes use
similar hardware technology. Ideas for new models are generated both
internally and from customers. Gaming can design the software and artwork for
a new model in as little as two weeks, excluding regulatory approval. All new
or modified hardware and software is designed to satisfy all applicable
testing standards and must receive the approval of the appropriate gaming
regulatory agency based substantially on satisfying such applicable testing
standards before such gaming product can be offered for play to the public.
Most gaming jurisdictions rely upon and accept the certification of selected
independent laboratories that a gaming product meets the applicable testing
standards.

Regulatory approval for new or modified hardware and software changes takes
from 30 days to three months or more. On an annual basis, Gaming expects to
introduce approximately 25 new games to the market. However, no assurance can
be made with respect to the rate of new model introductions.

During 1993, 1994 and 1995, Gaming spent $3.0 million, $3.5 million and $3.7
million, respectively, on product research and development.

Competition

The market for gaming machines is dominated by a single competitor, IGT.
There are a number of other well established, well-financed and well-known
companies producing machines that compete with each of Gaming's lines in each
of Gaming's markets. The other major competitors are Universal Distributing of
Nevada, Inc. ("Universal"), Sigma Games, Inc. ("Sigma") and WMS and in the
international marketplace, companies marketing gaming machines under the brand
names of Aristocrat, Atronic, Cirsa and Novomatic. Other companies have
announced their intention to enter into the gaming machine business.
Management believes that these competitors generally have greater capital
resources than Gaming. Competition among gaming product manufacturers,
particularly with respect to sales of gaming machines into new and emerging
markets, is based on competitive customer pricing and financing terms, appeal
to the player, quality of the product, and an extensive distribution and sales
network. Sales to established casinos in Nevada normally require completion of
a successful trial period for the machines in the casino. Management believes,
based on its general knowledge of the industry, that Gaming is the second
largest manufacturer of gaming machines in the world.

The future success of BGII, to a large extent, will be dependent upon the
ability of Gaming to design, manufacture and market technologically
sophisticated products that achieve high levels of player acceptance. The
development of a successful new product or product design by a competitor
could adversely affect sales of Gaming's products and force Gaming to respond
quickly with its own competing products. In addition, management believes that
customer financing terms have become an increasingly important competitive
factor in certain emerging markets. Competitive conditions sometimes require
Gaming to grant extended payment terms on gaming machines and other gaming
equipment. While these financings are normally collateralized by such
equipment, the resale value of the collateral in the event of a default may be
less than the amount financed. Accordingly, Gaming will have greater exposure
to the financial condition of its customers in emerging markets than has
historically been the case in established markets like Nevada and Atlantic
City. Also, because certain of Gaming's competitors generally have greater
financial resources than Gaming, Gaming will continue to need to rely on third
party financing arrangements in order to compete in providing financing to
customers. See

74
<PAGE>

"Management's Discussion and Analysis of Financial Condition and Results of
Operations of BGII--Liquidity and Capital Resources."

Primary Markets

Gaming's primary markets for its gaming machine products are the United
States and Europe and, to a lesser extent, Canada, the Far East, Latin America
and the Caribbean. The following table sets forth the percentage of Gaming's
new units sales by customers during the periods shown below.

<TABLE>
<CAPTION>
PERCENTAGE OF NEW UNITS SOLD
---------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------
JURISDICTION 1993 1994 1995
------------ --------- --------- ---------
<S> <C> <C> <C>
Nevada and Atlantic City................. 27% 34% 42%
International............................ 27 21 30
Riverboats............................... 31 31 12
Indian Gaming............................ 12 13 14
Other.................................... 3 1 2
--------- --------- ---------
100% 100% 100%
========= ========= =========
</TABLE>

United States Traditional Markets. Within the United States, Nevada
represents the largest installed base of gaming machines with an estimated
185,000 machines in place. Atlantic City is the other "traditional market"
with an estimated base of approximately 30,000 machines. Product sales in
these markets are primarily to established casino customers to either replace
existing machines or as part of an expansion or refurbishment of the casino.
Also, because gaming machine revenues have increased at a higher rate than
table game revenues over the past decade, casino operators have continuously
increased floor space dedicated to gaming machines. In addition, major casino
openings in Nevada and the success of casinos in emerging markets are likely
to further increase competitive pressures on casino operators to replace
existing equipment with new machines on an accelerated basis.

United States Non-Traditional Markets.

Riverboat casinos began operating in 1991 and, as of December 31, 1995,
riverboat casinos were operating in Indiana, Iowa, Illinois, Mississippi,
Missouri and Louisiana. Additionally, several other states have riverboat
casino legislation under consideration. The estimated installed base of gaming
machines on riverboats is approximately 61,000 machines as of December 31,
1995.

Casino-style gaming continues to expand on North American Indian lands.
Indian gaming is regulated under the Indian Gaming Regulatory Act of 1988
which permits specific types of gaming. Pursuant to these regulations,
permissible gaming devices are denoted as "Class III Gaming" which requires,
as a condition to implementation, that the Indian tribe and the state
government in which the Indian lands are located enter into a compact
governing the terms of the proposed gaming. Gaming's machines are placed only
with Indian gaming operators who have negotiated a compact with the state and
received approval by the U.S. Department of the Interior. Gaming has, either
directly or through its distributors, sold machines for casinos on Indian
lands in the following states: Arizona, Connecticut, Iowa, Michigan,
Minnesota, Mississippi, Montana, New Mexico, North Dakota, South Dakota and
Wisconsin. Compacts have also been approved in Oregon, Colorado and Louisiana,
although Gaming made no deliveries to Indian gaming operators in these
jurisdictions during 1995. In addition to the approved states, Class III
compacts are under consideration in several states including Alabama,
California, Maine, Massachusetts, Rhode Island, Texas and Washington. The
estimated installed base of all Indian gaming machines at December 31, 1995
was approximately 52,000 units.

In addition to riverboat and Indian land casinos, there are currently
casinos in Colorado and South Dakota. The estimated installed base of machines
in these markets at December 31, 1995 was approximately 13,000 machines.

75
<PAGE>

VLTs are presently legal and in operation in Louisiana, Montana, South
Dakota, Oregon, West Virginia (on a trial basis), Rhode Island and several
provinces in Canada. Gaming has sold its VLT products into Louisiana, Montana,
South Dakota, West Virginia and several provinces in Canada; however,
aggregate sales during the last three years in those markets have not been
significant.

Gaming had sold approximately 1,860 VLTs in the Louisiana market during
1992. In the following year, Gaming terminated its local distributor, which
had the required state licenses in order to operate as a VLT distributor, and
the distributor then filed for Chapter 11 bankruptcy protection. Subsequently,
a Chapter 11 Trustee was appointed and that individual also obtained the
required state licenses. Gaming has done business in Louisiana through the
licensed Trustee in order to serve its existing end customers with parts and
service for Gaming's VLT machines. The Trustee is now administering a plan of
liquidation approved by the Bankruptcy Court and, under that plan, will
ultimately surrender his Louisiana VLT distributor's license upon completion
of his duties. Gaming has not entered into any new distributorship agreement
covering VLTs since terminating its former distributor in 1993. However, on a
limited basis, Gaming expects to continue the sale of VLT machines and
associated parts and equipment in the Louisiana market through new
relationships with licensed entities on a non-exclusive basis.

The continued growth of these and other emerging markets for gaming machines
is contingent upon the public's acceptance of these markets and an ongoing
regulatory approval process by Federal, state and local governmental
authorities. Management cannot predict which new jurisdictions or markets, if
any, will approve the operation of gaming machines, the timing of any such
approval or the level of Gaming's participation in any such new markets.

International. In addition to the domestic markets, Gaming is also expanding
in international markets. Gaming's primary international market is Europe, and
to a lesser extent, Canada, the Far East, Latin America and the Caribbean.
Gaming has begun, and plans to continue, expansion into the Australian market
and in 1995 established an office in Sydney, Australia. No new machines have
yet been sold into Australia.

The percentage of Gaming's international revenues by geographic area for the
periods indicated are set forth below:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Europe (including sales to GmbH)..................... 69.2% 55.6% 51.4%
Canada............................................... 12.7 16.6 21.6
Latin America........................................ 16.3 20.5 19.7
Far East............................................. 1.8 4.4 4.0
Other................................................ -- 2.9 3.3
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
</TABLE>

Sales and Marketing

Gaming uses a direct sales force, an independent distributor network and one
of Bally Wulff's subsidiaries, Bally Gaming International GmbH ("GmbH") to
sell its products. Approximately 84% of new machine unit sales over the past
three years have been generated through Gaming's own sales force, 8% through
GmbH and 8% through outside distributors (including foreign distributors).

Gaming currently has a direct sales staff of approximately 20 and operates
offices in Las Vegas, Reno and Elko, Nevada; Atlantic City, New Jersey;
Biloxi, Mississippi; Rosemont, Illinois; and Dania, Florida. Gaming currently
uses distributors for sales to certain specific markets in the United States
as well as certain European jurisdictions. Gaming's agreements with
distributors do not specify minimum purchases but generally provide that
Gaming may terminate such agreements if certain performance standards are not
met.

76
<PAGE>

Gaming's marketing strategy is to offer its customers not only a full
product line but also ongoing game development. Gaming's library contains
numerous game variations. Converting machines to the newest games and changing
the glass design can be accomplished quickly.

In addition to offering an expansive product line, Gaming provides
customized services in response to specific casino requests. These services
include high quality silkscreen printing of gaming machine glass, customized
game development and interior design services. Gaming also offers customized
design services that utilize computer aided design and studio software
programs. Gaming's design department can generate a casino floor layout and
can create a proposed slot mix for its customers. In many of the emerging
markets, Gaming provides assistance to customers including the selection of
related equipment such as slot stands, chairs, etc. and a recommended layout
of the casino floor as well as a mix of machine models.

Gaming often accepts used machines as trade-ins toward the purchase of new
gaming equipment. While a small secondary market exists in the United States,
used machines can be resold into the international market. While some used
equipment is reconditioned for direct sale, much is sold in container lots on
an "as is" condition through independent brokers.

Gaming typically offers a 90-day labor and up to a one-year parts warranty
for new gaming machines sold and is actively involved in customer service
after the original installation. The Company provides several after- sale,
value added services to its customers including customer education programs, a
24-hour customer service hot-line, and on-line technical service and customer
notification bulletins.

Approximately 75% of Gaming's slot and video gaming machine sales are on
terms of 90 days or less. Approximately 25% of Gaming's sales in certain
emerging markets such as riverboat and Indian gaming casinos are financed over
extended periods as long as 36 months and bear interest at rates ranging from
8% to 14%. These sales are normally collateralized by the machines sold;
however, the resale value in the event of a default may be less than the
amount financed. In addition, in certain situations, Gaming has participated
in the financing of other gaming related equipment manufactured by third
parties in the emerging markets. International sales are generally consummated
on a cash basis or financed over a period of one year or less. Management
believes that financing of customer sales has become an increasingly important
factor in certain emerging markets. See "Competition".

Customers

Gaming's existing slot and video machine customer base includes casinos and
route operators. The demand for slot machines and video gaming machines varies
depending on new construction and renovation of casinos and other facilities
with needs for new equipment. Since machines are not replaced each year, many
current customers will need only product maintenance in the near future.
Growth will depend on Gaming's ability to obtain new customers and take
advantage of the newly emerging markets. For the year ended December 31, 1995,
Gaming's largest customer accounted for approximately 5% of Gaming's sales
while Gaming's top ten customers, excluding GmbH, aggregated approximately 25%
of Gaming's revenues. During that period, sales to GmbH accounted for
approximately 9% of Gaming's revenues.

Assembly Operations

Gaming's Las Vegas facility was built in 1990 specifically for the design,
manufacture and distribution of gaming equipment. The 150,000 square foot
facility was designed to better serve Gaming's customer base with various cost
savings resulting from the relocation. This facility was designed to meet
fluctuating product design demands and volume requirements, and BGII
management believes the facility enables Gaming to increase production without
significant capital expenditures.

BGII management believes that its assembly operations allow for rapid
generation of different models to fill orders quickly and efficiently. Another
major advantage of the existing plant operation is the system by which

77
<PAGE>

machines can be altered in many ways including the size, type and color of
glass, sound and payoff patterns to produce a "customized" product for each
customer. Gaming keeps an inventory of parts that allow machines to be altered
quickly to conform with a particular customer's design/feature request. Gaming
designs all of the major assemblies that are incorporated into the final
machine configuration.

Gaming has made a significant commitment to the graphic art and screen-
printing operations in its Las Vegas facility. Management believes such
commitment results in improved response time for new artwork and reduced labor
costs in the screen-printing production department.

SYSTEMS

Systems designs, assembles, and sells computerized monitoring systems ("SDS
6000") for slot and video gaming machines which provide casino operators with
data relative to a machine's accounting, security, and maintenance functions
in a real time environment. The system also provides data to and receives data
from, other third party player tracking computer and software applications
allowing casinos to track their players to establish and compile individual
player profitability and other demographic information.

Products

SDS 6000 is comprised primarily of (1) hardware consisting of
microcontroller based printed circuit boards which are installed within the
slot and video machines as well as card reader displays and keypads which
provide casinos the ability to track player gaming activity and to monitor
access to slot and video machines by the casino's employees, (2) application
software developed by Systems which provides access to the slot machine's
activity data gathered by the microcontroller hardware, and (3) third party
RISC based minicomputers on which the application software resides. Systems
also provides software and hardware support services, including maintenance,
repair and training for purchasers of its monitoring systems.

Product Development

Systems' product development is divided into two areas, hardware and
software. The major areas of hardware development include microcontroller
circuit board design and programming as well as user interface devices such as
card readers, keypads and displays. Hardware development efforts are focused
upon the casino operator in terms of functionality, product reliability and
ease of maintenance and customer appeal in terms of appearance and ease of
use. Development cycles for hardware can vary between a few months for minor
revisions to more than a year for major design changes or for changes made by
various slot manufacturers to which Systems' product must communicate with and
be physically integrated into. Software development results in (1) periodic
product releases that include new features which extend and enhance the SDS
6000 product, (2) periodic maintenance releases which enable casino operators
to correct problems or improve the usability of the system and (3)
documentation needed to install and use the system.

In 1995, the hardware and software groups from Systems, as well as engineers
from Gaming, coordinated efforts to develop a form of cashless wagering that
uses bar coded coupons which can be read by the bill validators in Gaming's
slot machines which are connected to an SDS 6000 system. Testing and
regulatory approval is being pursued by Systems in anticipation of a 1996
release to casino operators. In 1996, Systems and Gaming development groups
will continue to direct development efforts towards other forms of cashless
wagering for use on Gaming's slot machines and the SDS 6000 system.

During 1993, 1994 and 1995, Systems spent $1.4 million, $1.7 million and
$1.9 million, respectively on product research and development.

In July 1992, BGII reached an agreement for an exclusive license until
December 31, 2005, subject to extension, of a patent relating to the use of
credit cards in gaming machines, and acquired 1% of the stock of Scotch Twist,
Inc., a private company which granted this license, in exchange for the
issuance of 100,001 shares

78
<PAGE>

of the Company's Common Stock. The licensing agreement requires the Company to
commit $1.2 million in research and development costs related to the patent,
plus any costs related to obtaining required regulatory approvals and
licenses. As of December 31, 1995 approximately $1 million has been spent
relative to this commitment.

Primary Markets

Systems' primary markets for its computerized slot monitoring systems are
the United States and, to a lesser extent, Canada, New Zealand, Latin America,
Europe, and the Caribbean. Systems has approximately 60,000 game monitoring
units (GMU's) installed, or in the process of being installed, in all markets
of which approximately 53,000 are in the United States. Jurisdictions within
the United States include Indian gaming, riverboats, and traditional land-
based casinos predominantly in Nevada and Atlantic City, New Jersey.

Sales and Marketing

Systems has a direct sales force which produces the majority of its sales.
Gaming's sales force and Gaming's independent distributor network produce the
balance of Systems sales primarily in situations where customers are making
slot machine and computerized slot monitoring system purchase decisions at the
same time. Over the past three years, Systems' own sales force has generated
approximately 78% of its sales with 22% being generated through Gaming's sales
force and independent distributor network.

Systems offers its customers the option of signing separate hardware and
software maintenance agreements at the time of sale. These agreements are for
periods of one year and automatically renew unless otherwise canceled in
writing by the customer or Systems. After an initial warranty period,
typically 90 days, the customer is invoiced a monthly hardware and software
maintenance fee which provides essentially for repair and/or replacement of
malfunctioning hardware and software fixes, software version upgrades, and on-
call support for software.

Systems offers limited financing terms, normally less than one year, for
sales to new installations. Most sales, however, are invoiced on a net 30 day
basis.

Customers

Systems customers are casino operators. The demand for computerized slot
monitoring systems is driven either by regulatory requirement in a given
jurisdiction and/or by a casino operator's competitive need to properly track
their players' activity, establish and compile individual player profitability
and other demographic information, all of which is of particular importance to
casinos in developing marketing strategies. Systems revenues are derived
equally from selling to new installations as well as to existing customers who
are either expanding their casino floors or are upgrading their hardware to a
new product release. Future growth will be based on further expansion in the
established and emerging markets as well as continued development efforts by
Systems to provide customers with new and innovative hardware and software
product offerings.

Competition

Although there are numerous companies providing computerized slot monitoring
systems to casino operators, the competition currently consists of IGT,
Computer Data Systems ("CDS"), and, to a lesser extent, Gaming Systems
International ("GSI") and Acres Gaming. Competition is keen in this market due
to the number of providers and the limited number of casinos in the
jurisdictions in which they operate. Pricing, product feature and function,
accuracy, and reliability are all main factors in determining a providers'
success in selling its system. Systems believes the future success of its
operations will be determined by its ability to bring new and innovative
products to the market place and at the same time maintain a base of loyal
existing customers.

79
<PAGE>

BALLY WULFF

Bally Wulff's manufacturing operations were founded in Berlin in 1950 and
sold to BEC in 1972. In 1974, BEC acquired Vertriebs, a distribution company
in Hannover, Germany, to increase Bally Wulff's distribution capabilities. BEC
made significant changes in the composition of Bally Wulff's senior management
in 1981. Bally Wulff's management team successfully transformed Bally Wulff by
reversing losses and generating significant growth in revenues and
profitability through new product introductions, the implementation of a
concerted marketing and sales effort, product quality improvement, and the
implementation of more efficient production methods and tighter cost controls.

Products

Bally Wulff produces and distributes wall machines, under the trade name
"Bally Wulff", for operation in arcades, hotels, restaurants and taverns in
Germany. These wall machines are coin-operated, armless gaming devices similar
to slot machines that award winnings for matching numbers or symbols on three
to five wheels or drums. Unlike traditional slot machines, wall machines are
generally not found in Germany's government regulated casinos. Each game costs
up to 40 pfennigs (approximately $.28) to play, although the player may
deposit larger amounts to provide continuous play but not to increase payoffs.
German regulations limit the maximum payout to ten times the player's stake
(DM 4.00 or approximately $2.80 per game). Prior to April 1993, the maximum
coin drop per game was 30 pfennigs (approximately $.21) and the maximum
player's stake was DM 3.00 (approximately $2.10). In April 1993, the German
government approved an increase in the maximum coin drop to 40 pfennigs per
game, although 30 pfennig machines are still permitted to be manufactured and
sold. Current models of wall machines provide the player the opportunity to
win 100 special games on one play, which increases the potential amount that
can be won on the minimum coin-drop. German regulations require a minimum
payback of 60% for wall machines, although many machines are programmed to pay
back at higher rates to encourage play. All wall machines manufactured after
1992 must have meters that monitor the amount inserted by players and paid-out
by the machine. As of January 1, 1997, all wall machines in use must be
metered. See "Government Regulation--German Regulation."

In addition to manufacturing wall machines, Bally Wulff distributes wall
machines and other recreational and amusement coin-operated machines
manufactured by third parties to provide a more extensive line of products to
its customers. These machines include pool tables, dart games, pinball
machines, jukeboxes and arcade games and are distributed primarily for use in
arcades, restaurants, hotels and taverns. GmbH distributes traditional slot
machines, manufactured primarily by Gaming, principally to customers in
Europe, Russia and, through its branch office in Johannesburg, South Africa,
the African continent. The following table sets forth the percentage of Bally
Wulff's revenues by product line during the periods shown:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Wall machines manufactured by Bally Wulff...... 42.8% 50.8% 37.5%
Recreational and amusement machines and third
party wall machines distributed............... 36.4 20.0 22.3
Slot machines distributed...................... 5.0 6.3 11.2
Other (primarily used machines, parts and serv-
ices)......................................... 15.8 22.9 29.0
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
</TABLE>

Industry

The German amusement game industry, an historically stable market,
experienced significant growth in 1990 and during the first half of 1991 due
to initial sales into the area formerly known as East Germany which, prior to
German reunification, was a highly restricted market. The total number of new
wall machines sold in Germany in 1991 and 1990 was approximately 70,000 and
65,000, respectively, which represented an approximate 20,000 machine increase
over an average year. Sales levels to East Germany began to decline in

80
<PAGE>

the second half of 1991. In the latter part of 1992 and during 1993, a decline
in aggregate sales of new wall machines occurred. BGII management believes
this decline was attributed to uncertainty surrounding the German government's
pending approval of 40 pfennig wall machines and increases to value added tax
("V.A.T.") and leisure taxes. Prior to April 1993, the maximum initial coin
drop in wall machines was 30 pfennigs. This regulatory change, which was
approved in April 1993, apparently caused some customers to defer purchases
prior to this regulatory proposal pending its outcome. The demand for 40
pfennig machines was strong for several months following its approval.
However, the market for wall machines in the second half of 1993 was
substantially less than expected in light of the approval of 40 pfennig
machines. BGII management believes the industry was adversely impacted by
depressed economic conditions and higher taxes during this period. Several of
the industry's largest operators of wall machines went through financial
restructurings and the installed base of wall machines may have declined in
1993 and into 1994, as some operators elected not to immediately replace older
wall machines with new products. Approximately 50,000 and 40,000 new wall
machine units were sold in Germany in 1992 and 1993, respectively. During mid
1994, the German government effected a tax law revision based on a European
Court ruling, whereby V.A.T. charged to the operators of wall machines was
significantly reduced. BGII management believes this tax law revision, offset
in part by increased leisure taxes, caused the aggregate new wall machine unit
sales to increase to approximately 47,000 units in 1994. Effective January 1,
1996, a regulatory change took effect requiring all arcade operators to have
at least 15 square meters of space for each wall machine. Starting in mid-1995
arcade operators began removing wall machines from their arcades to meet the
requirements of this new regulation. Despite this adverse impact, the demand
for new wall machines remained at approximately 47,000 units in 1995. Demand
for used wall machines increased in 1995. See "Government Regulation--German
Regulation" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations of BGII."

One of the most important markets for wall machines in Germany is the arcade
market. A significant number of arcades are owned by competitors of Bally
Wulff who are able to introduce their own machines into the arcades and
generally do not purchase wall machines from Bally Wulff. Bally Wulff's two
largest competitors, NSM, AG and Gauselmann, AG, own arcades containing
approximately 15% of the wall machines in Germany. Management believes Bally
Wulff's share of the installed base of German wall machines was approximately
27% in 1995, compared to 28% in 1994 and 28% in 1993. The German government
has implemented regulations designed to limit the number of arcades and the
number of wall machines in each arcade. These regulations also require that
all wall machines manufactured since January 1, 1993 have internal meters to
track activity. On an ongoing basis, the German legislative authorities
regulate and monitor the wall machine industry so as to ensure certain
manufacturing standards and the fairness of each machine to users. The most
significant legislation presently affecting the wall machine industry relates
to prescribed licensing procedures, the use, installation and operation of
wall machines and the taxation of wall machines. There have been no recent
material changes in these ongoing legislative regulations. See "Risk Factors--
Bally Wulff Sales" and "The Companies--Gaming Regulation and Licensing--German
Regulation."

Product Development

Management believes that Bally Wulff's wall machines are viewed as premium
products because of their quality, dependability, ease of service and proven
ability to attract players and generate revenue. Bally Wulff designs its
machines to appeal to each of the three categories of participants in the
distribution process -- Bally Wulff's sales representatives and independent
distributors, the owner/operators of the machines, and the players. The sales
representatives and distributors require machines with broad appeal that are
easy to demonstrate and sell. The owner/operators desire reasonably priced
machines that are easy to collect from and service and that are proven revenue
generators. The players prefer entertaining machines that are simple to play
and have unique features.

Bally Wulff's management has formed design teams which are responsible for
generating ideas for creative new machines. These teams are comprised of
representatives of each department involved in the production and distribution
of machines, such as art design, engineering, manufacturing, marketing and
sales. The design teams meet for three days each calendar quarter at a site
away from Bally Wulff's headquarters. The teams analyze

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<PAGE>

machines currently being marketed by Bally Wulff and its competitors to assess
their strengths and weaknesses and then suggest ideas for new machines. These
ideas are reviewed to determine which machines should be produced on a trial
basis. Bally Wulff typically pursues 15 to 20 projects at any given time, and
approximately 12 to 15 machines are submitted for licensing each year. These
new machines are built in limited quantities and then test marketed for three
to six months. Generally, less than one-half of the new machines tested are
put into full scale production. Management believes this process of generating
new ideas and then turning only a limited number of the ideas into machines
which will reach the mass market is responsible for the high quality of Bally
Wulff's machines and their continued acceptance and success in the
marketplace. Because the machines have a reputation for quality, Bally Wulff
is often able to produce and market a particular model for up to two years,
which management believes, based upon its experience in the relevant
marketplace and feedback from customers, exceeds the industry average.

During 1993, 1994 and 1995, Bally Wulff spent approximately $3.3, $3.5 and
$3.6 million, respectively, on product research and development.

Sales and Marketing

Bally Wulff sells approximately 94% of its products through its own sales
force of 56 people located in its 23 regional sales offices. Independent
German distributors account for approximately 6% of sales. Approximately 97%
of Bally Wulff's sales of new wall machines are in the German market. The
sales offices are operated as independent profit centers and are assigned
geographic areas for which they are responsible for sales, servicing the
machines and assisting in collecting customers' accounts receivable balances.
GmbH maintains a sales office in Hannover for the distribution of traditional
slot machines, principally in Europe, and has opened an office in
Johannesburg, South Africa for the sale and distribution of traditional slots
into that market.

Bally Wulff devotes substantial time, money and effort marketing and
promoting its products. Bally Wulff takes an active part in the annual
Amusement Game Fair which is held each January in Frankfurt, Germany. Bally
Wulff introduces new products at this event.

The wall machines manufactured and sold by Bally Wulff generally sell for
prices ranging from DM 5,000 to DM 8,000 (approximately $3,493 to $5,590).
Most machines distributed by Bally Wulff are paid for in full within 90 days
after the sale. Remaining sales of machines are financed by Bally Wulff
generally over a 12-month period. For this reason, Bally Wulff establishes an
internal credit rating and credit limit for each customer. Under Bally Wulff's
conditions of sale, title to a machine is retained by Bally Wulff until the
machine has been paid for in full. In approximately 60% of its sales, Bally
Wulff accepts wall machines and/or other recreational and amusement equipment
as trade-ins toward the purchase of new machines. To the extent possible, the
used machines are then resold.

In January of 1993, Bally Wulff acquired the assets of an independent
distributor of wall machines and other recreational and amusement machines in
Germany. As a result of the acquisition in 1993, Bally Wulff's sales offices
increased in number from 21 to 25. In 1994, one office was closed and two
offices were consolidated, bringing the total offices to 23 at December 31,
1994. No offices closed or consolidated during 1995 and no new offices were
opened. Revenues generated by the distributor in 1993, 1994 and 1995 were
$20.0, $14.7 and $10.5 million, respectively.

Customers

Each of Bally Wulff's top ten customers in 1995 has maintained its
relationship with Bally Wulff for over three years. For the fiscal year ended
December 31, 1995, no single customer accounted for more than 3% of Bally
Wulff's sales, while Bally Wulff's top ten customers accounted for
approximately 10% of Bally Wulff's sales.

Bally Wulff's customer base for wall machines may be divided into two
categories which differ based on the preferences of their clientele. Arcade
operators are generally interested in purchasing the newest products in the
hopes that a new innovation will result in a high level of public demand to
play the new "hot" product.

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Hotels, restaurants and taverns, on the other hand, are generally more
inclined to purchase lower priced existing models with proven earnings records
to provide as an amenity to customers.

Assembly Operations

Bally Wulff's manufacturing process is primarily an assembly operation. Its
manufacturing facility consists of a four-story, 100,000 square foot building
in Berlin, Germany. Bally Wulff purchases its key raw materials, subassemblies
and fabricated parts from a variety of suppliers, and most parts are purchased
from multiple suppliers. While there exist no formal long-term contract
commitments to any single supplier, Bally Wulff has placed certain standing
orders with suppliers through 1996 to help assure the availability of specific
quantities on an as-needed basis. These orders are cancelable by Bally Wulff
at any time without penalty. Most of the component parts are standard on all
models of all Bally Wulff's wall machines, which promotes easy conversion from
the production of one model to another in response to customer demand. Except
in connection with certain promotions, Bally Wulff generally maintains low
inventory levels of assembly parts, and the amount of work-in -process is
generally less than the number of machines sold in one week.

Because of its manufacturing structure, Bally Wulff is capable of
substantially increasing its wall machine output without significant capital
expenditures. Bally Wulff continues to improve its manufacturing efficiency
and productivity through the use of computer-aided design systems, automated
production equipment and devotion of substantial resources to product quality
control.

Competition

Germany's wall machine manufacturing industry is dominated by Bally Wulff
and two of its competitors. BGII believes these three entities collectively
account for more than 90% of the entire market. Since 1986, and until 1994,
Bally Wulff increased its market share of new wall machines. Management
attributed this increased market share to its reputation as a manufacturer of
high quality products and its effective sales and marketing, as well as
responsive after-market service. Management believes based upon experience in
the marketplace and feedback from customers, that Bally Wulff's share of the
German new wall machine market unit sales was approximately 26% in fiscal
1995.

Bally Wulff competes with many companies in the distribution of coin-
operated amusement games, some of which are larger and have greater resources
than Bally Wulff. Bally Wulff's two major competitors own and operate a
significant number of arcades, which may give them a competitive advantage
arising from a built-in market for their games and the ability to test market
new games in their own arcades. Bally Wulff's management believes that the
primary competitive factors in the coin-operated amusement game market are the
quality and depth of the product line, price and customer service which
includes the ability to fill orders quickly and efficiently.

TRADE NAME LICENSE

Pursuant to a Trademark and License Agreement, as amended, between BEC and
BGII (the "License Agreement"), BGII licenses the name "Bally" from BEC for
use in the businesses of BGII. In 1992, BGII paid $3.5 million to BEC in the
form of an offset against a tax receivable which was owed by BEC to BGII for
the licensing rights. See "Notes to Consolidated Financial Statements--Summary
of Significant Accounting Policies--Intangible Assets."

On March 27, 1995, BEC filed an action in the United States District Court,
District of New Jersey, seeking to revoke BGII's right to the use of the Bally
tradename under the terms of the License Agreement. On March 31, 1995, BGII
and BEC entered into a Trademark License and Settlement Agreement pursuant to
which the above-described action was settled. BGII agreed to pay BEC a per
machine royalty of $25 on the first 20,000 new machines sold annually on or
after March 31, 1995 and $30 per machine for new machine unit sales in excess
of 20,000 gaming machines, with a minimum annual royalty of $500,000 per year
for the initial five year term of the amended agreement and subject to annual
renewal thereafter. In addition, BGII agreed to rebate to BEC an amount for
every new gaming machine sold to BEC or its affiliates for two years. As part
of the settlement, BGII retained its right to the use of the Bally trade name
for an initial period of five years with annual extensions thereafter at the
option of BGII. The settlement has not had a significant impact on BGII's
financial

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<PAGE>

position, results of operations or cash flows. BEC has asserted that its
permission is required for the surviving company in the Merger to continue to
utilize the Bally tradename, an assertion which BGII has denied. On February
16, 1996, BGII received notice from BEC alleging that BGII had violated the
License Agreement by, among other things, granting to Marine Midland Business
Loans, Inc. ("Marine Midland"), the lender which provides Bally Gaming Inc.'s
revolving line of credit, a security interest in general intangibles. In such
notice, BEC also stated that as a result of the foregoing, it was immediately
terminating the License Agreement. BGII does not believe that it has violated
the terms of the License Agreement and BGII will defend its position against
BEC's claims. See the description of the foregoing claims and related
litigation under "Risk Factors--BGII Tradename" and "Litigation Matters".

EMPLOYEES

As of February 1, 1996, Gaming had approximately 400 employees, Wulff had
approximately 440 and Systems had approximately 100 employees. None of
Gaming's or Systems' employees are covered by collective bargaining
agreements. Wulff's employees are covered by German regulations which apply
industry-wide and are developed, to some extent, through negotiations between
representatives of the metal working industry employers and the trade union
representing the employees. These regulations are in the nature of collective
bargaining agreements and cover the general terms and conditions of such items
as wages, vacations and work hours. The regulations codify what are considered
the common standards of employment in the German metal working industry. BGII
believes that relations with its employees are satisfactory.

PROPERTIES

BGII is headquartered in Las Vegas, Nevada and its four principal facilities
are located in Las Vegas and Reno, Nevada; Berlin, Germany and Hannover,
Germany. The Las Vegas facility is a 150,000 square foot manufacturing and
office facility on a ten acre site owned by Bally Gaming, Inc. Operations
commenced there in September 1990. The Reno facility includes approximately
40,000 square feet of leased office and warehousing space. The lease on the
Reno facility expires in 2004. The Berlin facility is an approximately 100,000
square foot section of a four-story building, and is Wulff's headquarters and
manufacturing facility. The Berlin facility is leased from the Berlin
government pursuant to a lease which expires December 3, 1997 with an option
to extend the lease for four years. The Hannover facility is an approximately
16,000 square foot building primarily used for distribution of wall machines
and other coin-operated amusement machines. The Hannover facility is leased
pursuant to a lease which expires in 1998.

In addition to the principal facilities, BGII has numerous leased locations
and several owned locations in Germany which are primarily used for sales and
service offices as well as for warehousing purposes. The leased locations have
terms of occupancy varying from month-to-month tenancies to term leases.
Management believes that its existing facilities are adequate for its
operations.

In addition to the Las Vegas, Nevada facility, Bally Gaming, Inc. owns a
building in Atlantic City, New Jersey which it leases to a third party. BGII
currently leases sales office facilities in Absecon, New Jersey; Biloxi,
Mississippi; Rosemont, Illinois; Dania, Florida; Elko, Nevada; Syndey,
Australia and Johannesburg, South Africa.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF BGII

BGII was formed in August 1991 to consolidate BEC's gaming machine
manufacturing and distribution operations which are conducted through Wulff,
Gaming and Systems. The operations of Wulff were conducted through Automaten
and Vertriebs, two direct subsidiaries of BEC, until their transfer to BGII in
contemplation of the initial public offering of BGII Common Stock. The
operations of Gaming and Systems were conducted as divisions or subsidiaries
of BEC until substantially all of the assets and liabilities of these
divisions and subsidiaries were transferred to BGII in contemplation of the
initial public offering of BGII Common Stock. For purposes of this Management
Discussion and Analysis of Financial Condition and Results of Operations, the
operations of Wulff, Gaming, and Systems are described separately as well as
on a consolidated basis. The results of operations for Wulff and Gaming
include an allocation of BGII, the parent company, revenue and expenses and
intercompany transactions which are eliminated on a consolidated basis.

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<PAGE>

RESULTS OF OPERATIONS

The following tables set forth, for the periods indicated, the percentage of
revenues represented by items reflected in BGII's consolidated statements of
operations.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
CONSOLIDATED
Revenues:
Sales........................................... 97.5% 97.9% 98.1%
Other........................................... 2.5 2.1 1.9
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Costs and expenses:
Cost of sales................................... 72.1% 66.5% 65.4%
Selling, general and administrative............. 34.0 25.4 26.2
Provision for doubtful receivables.............. 4.9 2.4 2.7
Unusual charges................................. -- -- 2.3
------- ------- -------
111.0 94.3 96.6
------- ------- -------
Operating income (loss)........................... (11.0) 5.7 3.4
Interest expense.................................. 2.6 2.9 2.8
------- ------- -------
Income (loss) before income taxes and extraordi-
nary gain........................................ (13.6) 2.8 .6
Provision for income taxes........................ 2.5 1.2 2.0
------- ------- -------
Income (loss) before extraordinary gain........... (16.1) 1.6 (1.4)
Extraordinary gain on early extinguishment of
debt............................................. 2.2 -- --
------- ------- -------
Net income (loss)................................. (13.9)% 1.6% (1.4)%
======= ======= =======
WULFF
Revenues:
Sales........................................... 96.6% 96.3% 97.1%
Other........................................... 3.4 3.7 2.9
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Costs and expenses:
Cost of sales................................... 65.4% 64.9% 67.4%
Selling, general and administrative............. 25.5 25.1 24.1
Provision for doubtful receivables.............. .5 1.7 1.3
Unusual charges................................. -- -- 2.9
------- ------- -------
91.4 91.7 95.7
------- ------- -------
Operating income.................................. 8.6 8.3 4.3
Interest expense.................................. 1.3 1.3 1.0
------- ------- -------
Income before income taxes........................ 7.3 7.0 3.3
Provision for income taxes........................ 3.7 2.3 3.5
------- ------- -------
Net income........................................ 3.6% 4.7% (.2)%
======= ======= =======
Additional information (approximate units):
New wall machines sold by Wulff................. 12,552 13,100 12,000
======= ======= =======
</TABLE>

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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
GAMING
Revenues:
Sales.......................................... 98.3% 99.3% 98.9%
Other.......................................... 1.7 .7 1.1
------- ------- -------
100.0% 100.0% 100%
======= ======= =======
Costs and expenses:
Cost of sales.................................. 100.0% 73.7% 71.9%
Selling, general and administrative............ 48.4 21.9 24.6
Provision for doubtful receivables............. 16.9 3.0 3.6
Unusual charges................................ -- -- 1.9
------- ------- -------
165.3 98.6 102.0
------- ------- -------
Operating income (loss).......................... (65.3) 1.4 (2.0)
Interest expense................................. 7.1 4.6 5.2
------- ------- -------
Loss before income taxes and extraordinary gain.. (72.4) (3.2) (7.2)
Provision for income taxes....................... -- .2 .3
------- ------- -------
Loss before extraordinary gain................... (72.4) (3.4) (7.5)
Extraordinary gain on early extinguishment of
debt, net of income taxes....................... 7.7 -- --
------- ------- -------
Net loss......................................... (64.7)% (3.4)% (7.5)%
======= ======= =======
Additional information (units):
New slot machines sold......................... 7,749 17,655 11,948
New video gaming machines sold................. 2,205 3,807 6,080
Other.......................................... 202 163 56
------- ------- -------
Total.......................................... 10,156 21,625 18,084
======= ======= =======
SYSTEMS
Revenues:
Sales.......................................... 100.0% 100.0% 100.0%
Other.......................................... -- -- --
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Costs and expenses:
Cost of sales.................................. 28.2% 32.0% 35.3%
Selling, general and administrative............ 42.8 46.5 34.3
Provision for doubtful receivables............. (4.4) 2.1 5.3
------- ------- -------
66.6 80.6 74.9
------- ------- -------
Operating income................................. 33.4 19.4 25.1
Interest expense................................. -- .2 --
------- ------- -------
Income before income taxes....................... 33.4 19.2 25.1
Provision for income taxes....................... -- -- --
------- ------- -------
Net income....................................... 33.4% 19.2% 25.1%
======= ======= =======
Additional information:
New installations implemented.................. 6 11 9
======= ======= =======
</TABLE>

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Year ended December 31, 1995 compared to year ended December 31, 1994

Wulff

Wulff's revenues for the year ended December 31, 1995 were $130.7 million
compared to $111.1 million in 1994, an increase of $19.6 million (18%). This
improvement resulted from the favorable effect of currency translation rates
in the 1995 period, an increase in slot and video gaming machines sold by
Vertriebs wholly-owned subsidiary, GmbH, and an increase in used equipment and
recreation and amusement machine sales offset in part by a decrease in new
wall machine units sold by 8% and a decrease in the average selling price for
new wall machines by 8.4%. Revenues from GmbH increased by 99% due to
increased new casino openings and greater market penetration in Western and
Central Europe and in Africa. Management believes the overall decline in the
value of the dollar against the German mark increased revenues by $15.0
million in 1995. New and used wall machine sales for the last six months of
1995 were impacted by regulations, which became effective January 1, 1996,
limiting the number of wall machines per square meter in arcade locations,
thereby reducing new sales opportunities. Industry-wide demand for new
machines was adversely effected by this new regulation while demand for used
machines increased dramatically. The decrease in demand for new wall machines
resulted in increased competition based on sales price resulting in the
reduction in average selling price for new units during the year. Management
expects the demand for new wall machines to continue to be lower than prior
year levels during the first half of 1996. Revenues from the distribution of
recreational and amusement machines increased by approximately 8.7% during
1995.

Operating income was $5.6 million for 1995 compared to $9.2 million in 1994,
a decrease of $3.6 million or 40%. This decrease resulted from lower gross
margins, higher selling, general and administrative expenses, and unusual
charges, offset in part by a lower provision for doubtful receivables. Gross
margins for 1995 were 33% compared to 35% in the prior year. Gross margin was
unfavorably impacted by higher unit costs associated with lower production
levels, a change in product mix to lower margin used machines and a decrease
in average selling price of new wall machines sold. Selling, general and
administrative expenses increased by $3.5 million resulting from the effect of
currency translation rates between years and costs associated with the
increased revenues in GmbH. Wulff recorded unusual charges in 1995 of $.8
million to writedown to net realizable value the carrying value of a building
to be sold and $1.0 million to increase its tax reserves primarily for value
added taxes. In addition, Wulff incurred $2.0 million of unusual charges
representing an allocation of merger transaction costs and litigation expenses
related to the proposed merger with WMS, which has since been terminated, and
to a tender offer from Alliance which was subsequently terminated in
connection with the execution of a definitive merger agreement between the
Company and Alliance.

The effective tax rate for the year ended December 31, 1995 was 50% compared
to an effective rate of 26% in 1994. The 1994 rate was lower due to
implementation of a tax planning strategy that reduced the effective tax rate
by approximately 50%.

Gaming

Gaming's revenues for the year ended December 31, 1995 were $108.4 million
compared to $117.8 million in 1994, a decrease of $9.4 million or 8%. New
gaming machines sold decreased to 18,084 units in 1995 from 21,625 units in
1994, a decrease of 16%. This decline in new unit sales was caused principally
by a reduced number of new casino openings, especially in the riverboat
markets, partially offset by increased sales in the Nevada market. The
increase in sales into the Nevada market occurred principally due to the
popularity of Gaming's new Game Maker (R) machine, a multi-game, touch screen
video device which accounted for 26% of Gaming's unit sales in 1995. The
average price of new gaming machines sold increased approximately 3% in 1995
principally due to proportionately greater sales of the higher priced Game
Maker (R) machine. Revenues from new machines decreased to $90.9 million in
1995 from $106.6 million in 1994. Revenues from sales of used equipment
increased by 121% to $9.2 million in 1995. In addition, revenues from sales of
service parts and interest income from financing customer receivables
increased by $2.3 million in 1995.

Gaming incurred an operating loss of $2.2 million for 1995 compared to
operating income of $1.6 million in the 1994 period, a decline of $3.8
million. The decline in operating results was principally due to the impact

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of the aforementioned decrease in revenues, higher selling, general and
administrative costs and higher bad debt provisions and unusual charges
offset, in part, by an increase in gross margin.

Gross margin as a percentage of total revenues was 28% for 1995 compared to
26% in 1994. Lower costs of materials in 1995 were offset, in part, by
decreased absorption of manufacturing overhead expenses attributable to the
decline in new sales units for 1995.

Selling, general and administrative expenses increased to $26.7 million in
1995 compared to $25.8 million in 1994, an increase of 3%. The $.9 million
increase resulted principally from an increase in legal expenses primarily
related to legal costs in Louisiana. Despite the decrease in unit sales in
1995, the provision for doubtful accounts increased $.3 million resulting from
the closure of certain riverboat casinos. Gaming incurred $2.0 million of
unusual charges in 1995 representing an allocation of merger transaction costs
and litigation expenses related to the proposed merger with WMS, which has
since been terminated, and to a tender offer from Alliance which was
subsequently terminated in connection with the execution of a definitive
merger agreement between the Company and Alliance.

Systems

Systems' revenues for the year ended December 31, 1995 were $20.7 million, a
55% increase compared to 1994. This increase is primarily attributable to the
increased number of game monitoring units ("GMUs") sold to both new casinos
and to existing customers which expanded their casinos, upgraded their current
systems due to new products, or replaced existing systems. In 1995 Systems
sold approximately 22,000 GMUs compared to 13,000 in 1994. During 1995,
Systems products were installed in 9 new locations and as of December 31,
1995, Systems had 50 installations on-line. The average price of a GMU sold
during 1995 decreased by 1.5% from the 1994 average price.

Systems' operating income was $5.2 million in 1995 compared to $2.6 million
in 1994, a 100% increase. This increase resulted from increased GMUs sold,
partially offset by lower gross margins, higher selling, general and
administrative expenses and a higher provision for doubtful receivables. Gross
margin was 65% in 1995 compared to 68% in 1994. This decrease results from the
decrease in the average selling price of a GMU during 1995, higher product
costs and a provision for product upgrades. Selling, general and
administrative expenses increased by $.9 million in 1995 principally as a
result of higher compensation costs to support the business and higher
facility costs for the 1995 year as 1994 was only impacted for six months by
the higher costs resulting from Systems occupying its new facility in July
1994. The provision for doubtful accounts of $1.1 million in 1995 was
primarily attributable to one riverboat customer.

Consolidated

Revenues for the year ended December 31, 1995 were $249.3 million, net of
eliminations, compared to $236.2 million in 1994, an increase of 6%. This
increase is due to the aforementioned increase at Wulff and Systems partially
offset by the aforementioned decrease in Gaming's revenues.

The Company has operating income of $8.4 million for 1995 compared to $13.4
million in the 1994 period. The decrease in operating results of $5.0 million
was caused principally by the unusual charges recorded in 1995 along with the
aforementioned decrease in Wulff and Gaming's operating results partially
offset by the aforementioned increase in operating income at Systems.

Interest expense was $6.9 million in 1995 compared to $6.8 in 1994.

The net loss for 1995 was $3.4 million or $.31 per share compared to net
income of $3.8 million or $.35 per share in 1994. This decline in net income
resulted from the after tax effect of $5.3 million in unusual charges and an
increase in the effective income tax rate primarily due to the aforementioned
higher effective tax rate in Germany in 1995.

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Year ended December 31, 1994 compared to year ended December 31, 1993

Wulff

Wulff's revenues for the year ended December 31, 1994 were $111.1 million
compared to $112.6 million in 1993, a decrease of $1.5 million (1%). New wall
machine unit sales of Wulff's products increased approximately 4% in 1994.
Additionally, the average selling price for new wall machine units sold
increased approximately 10% due principally to popular models introduced by
Wulff in the latter part of 1994. Revenues from the distribution of
recreational and amusement machines, new wall machines manufactured by third
parties, used wall machines and other revenues decreased approximately 17% in
the 1994 period due in part to depressed economic conditions in Germany and
increased competition in the lower margin recreational and amusement sales
markets. Currency translation rate adjustments of Wulff's revenues into U.S.
dollars increased revenues by $2.3 million in the 1994 period due to
fluctuations in the German mark versus the U.S. dollar.

Wulff's operating income was $9.2 million for 1994 compared to operating
income of $9.7 million in the 1993 period. The $.5 million decrease in 1994
compared to 1993 was caused principally by the aforementioned decrease in
revenues and a $1.4 million increase in the provision for bad debts, offset,
in part, by a slight improvement in Wulff's gross margin as a percentage of
total revenues and a decrease in selling, general and administrative expenses
of approximately 3%. The increase in Wulff's provision for bad debts was
caused by an increase in Wulff's accounts and notes receivable balances in the
1994 period as well as the general impact of depressed economic conditions on
some of Wulff's customers.

Gaming

Gaming's revenues for the year ended December 31, 1994 were $117.8 million
compared to $48.5 million in 1993, an increase of $69.3 million (143%). New
gaming machines sold increased to 21,625 units in 1994 from 10,156 units in
1993, an increase of 112%. The introduction of Gaming's new S5500
ProSeries(TM) line of slot machines and its new Game Maker (R), a multi-game
touch screen device in the second half of 1993 and 1994, respectively, as well
as the proliforation of legalized gaming in riverboat markets, contributed to
this increase of units sold. The average price of gaming machines sold
increased 18% in 1994 due to additional features, such as the embedded bill
acceptor, in the new machine and fewer sales through distributors in 1994.
Aggregate revenues from new machines increased to $106.6 million in 1994 from
$41.7 million in 1993. Revenues from other sources, including interest income,
increased $4.4 million from $6.8 million in 1993 to $11.2 million in 1994,
primarily due to increased sales of used units and machine accessories.

Gaming's operating income was $1.6 million for 1994 compared to an operating
loss of $31.7 million in the 1993 period, an improvement of $33.3 million. The
1993 operating loss includes $12.5 million of unusual charges principally
relating to the writedown of inventories originally intended for the Louisiana
VLT market and provision for bad debts relating to Gaming's former distributor
in Louisiana. The improvement in operating results was principally due to the
abovementioned increase in revenues, higher gross margins realized from
increased absorption of manufacturing overhead costs coupled with lower costs
of materials, offset, in part, by higher selling, general and administrative
costs as well as higher bad debt provisions and interest costs.

Cost of sales as a percentage of Gaming's total revenues, was 73% in 1994
compared to 87% in 1993, excluding an inventory valuation adjustment in 1993
of $6.2 million (13% of 1993 total revenues). The lower cost of sales is due
to increased absorption of overhead manufacturing expenses attributable to
increased production in 1994 vs. 1993 and lower costs of materials attributed
to ongoing redesign of products and volume discounts from suppliers.

Selling, general and administrative expenses increased to $25.9 million in
1994 compared to $23.4 million in 1993, an increase of 11%. The $2.5 million
increase was caused principally by increased staffing levels in the sales
departments and sales related costs associated with the aforementioned sales
volume increase in 1994 compared to 1993. Bad debt expenses provisions
increased to $3.6 million in 1994 from $3.2 million in 1993,

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excluding a $5.1 million increase in the provision in 1993 primarily relating
to Gaming's former distributor of VLT devices in Louisiana. This $.4 million
increase (13%) resulted primarily from increased sales volume in the 1994
period.

Systems

Systems' revenues for the year ended December 31, 1994 were $13.4 million
compared to $12.0 million in the comparable 1993 period, an increase of $1.4
million (12%). Continued growth in emerging markets, particularly with casinos
on Indian lands and on riverboats, contributed to an increase in the demand
for gaming monitoring systems and the increase in Systems' revenues.

Systems' operating income was $2.6 million for the year ended December 31,
1994 compared to $4.0 million for the year ended December 31, 1993. This
decrease in operating income of $1.4 million was caused primarily by slightly
lower gross profit margins as a percentage of revenues, higher selling,
general and administrative costs and a higher provision for bad debts offset,
in part, by the aforementioned increase in revenues. Selling, general and
administrative expenses increased $1.1 million due to higher sales levels,
increased staffing levels and increased facility costs. The provision for bad
debts increased $.8 million due to the increase in revenues and higher
accounts receivable balances outstanding during the period.

Consolidated

Revenues for the year ended December 31, 1994 were $236.2 million, net of
eliminations, compared to $168.7 million in 1993, an increase of 40%. This
increase is due to the aforementioned increase at Gaming and Systems partially
offset by the aforementioned decrease in Wulff's revenues.

BGII had operating income of $13.4 million for 1994 compared to an operating
loss of $18.5 million in the 1993 period. The improvement in operating results
of $31.9 million was caused principally by the aforementioned improvement in
Gaming's operating results partially offset by the aforementioned decline in
operating income at Systems and Wulff.

Interest expenses was $6.8 million in 1994 compared to $4.4 in 1993. This
increase was caused by higher borrowings outstanding and higher interest rates
in 1994.

BGII's effective tax rate in 1994 and 1993 differs from the U.S. statutory
rate of 34% principally due to the lack of tax benefits available for
operating losses generated in the U.S.

LIQUIDITY AND CAPITAL RESOURCES

Prior to the formation of BGII, Wulff, Gaming and Systems conducted their
businesses as separately managed entities. Wulff historically generated more
cash than required for its operating activities and capital expenditures and
paid dividends to BEC equal to most of its excess cash. Gaming historically
has not generated sufficient net cash from operations to fund its operating
activities and capital expenditures. Systems has historically generated more
cash than required for its operating activities and capital expenditures.

In July 1993, BGII completed a private placement of $40 million principal
amount of 10 3/8% Senior Secured Notes, due July 1998 ("Senior Secured
Notes"), and 1.2 million Common Stock Purchase Warrants exercisable at $12.50
per share after the BGII Common Stock has traded at or above $20 per share for
20 consecutive trading days and under certain other transactions. BGII used
$21.6 million of the gross proceeds of the Senior Secured Notes to redeem all
of its then outstanding 6% Senior Convertible Debentures due 2002. The Senior
Secured Notes are collateralized by a pledge of the outstanding capital stock
of Automaten and Vertriebs and a guarantee by Bally Gaming, Inc. BGII used the
remaining net proceeds of this financing following the redemption of the 6%
Senior Convertible Debentures, for working capital and general corporate
purposes.

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During March 1993, Wulff obtained two bank revolving lines of credit that
provide for borrowings up to DM18,250,000 (approximately $12.8 million at
December 31, 1995) which had been fully utilized at December 31, 1995. In May,
1995, Wulff obtained a working capital line of credit that provides for
borrowings up to DM16,300,000 (approximately $11.4 million at December 31,
1995) of which approximately $3.1 million has been borrowed at December 31,
1995. Bally Gaming, Inc. obtained a bank revolving line of credit in March
1993 which, as amended, provides for borrowings tied to a percentage of Bally
Gaming, Inc.'s eligible (as defined in the credit agreement) inventory and
accounts receivable with a maximum borrowing capacity of $15.0 million with
the expiration date of March 31, 1997. At December 31, 1995, Bally Gaming,
Inc.'s eligible borrowing capacity under this agreement was approximately
$15.0 million of which $9.4 million was outstanding. Through bank credit
agreements at Wulff and Bally Gaming, Inc., BGII has unused lines of credit of
approximately $13.9 million at December 31, 1995.

Management believes that customer financing terms have become an
increasingly important competitive factor in certain emerging markets.
Competitive conditions sometimes require Gaming and Systems to grant extended
payment terms on gaming machines and other gaming equipment. While these
financings are normally collateralized by such equipment, the resale value of
the collateral in the event of a default may be less than the amount financed.
Accordingly, Gaming and Systems have greater exposure to the financial
condition of its customers in emerging markets than has historically been the
case in established markets like Nevada and Atlantic City. Also, since certain
of Gaming's and Systems' competitors have greater financial resources, Gaming
and Systems may need to rely on third party financing arrangements in order to
compete in providing financing to customers.

BGII believes that working capital needs of BGII for the next 12 months
include an increase in accounts receivable relating to the increasing need to
finance customers in certain emerging markets and the expectation that
production and sales levels may increase from recent historical levels. BGII
expects that cash flow generated by operations and borrowings available under
bank revolving lines of credit will be sufficient to satisfy BGII's normal
working capital needs. Gaming also plans to continue to evaluate the need to
involve third-party finance companies or acquire additional financing in order
to be competitive in meeting customer demand for financing of gaming equipment
in emerging markets, although management can give no assurances that such
additional financing will be obtained.

In January 1993, Wulff acquired the assets of an independent distributor of
wall machines and recreational and amusement machines for approximately $8.4
million and an assumption of $2.8 million in mortgages payable. BGII does not
have any significant capital commitments and does not foresee any significant
increase in capital expenditures during 1996.

The following table is a summary of the significant elements of BGII's cash
flows for the years ended December 31, 1993, 1994 and 1995 (in millions).

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1993 1994 1995
------ ----- -----
<S> <C> <C> <C>
Cash provided by (used in) operations:
Net income (loss) plus net non-cash charges............ $ (4.6) $19.7 $14.3
Changes in operating assets and liabilities:
Receivables............................................ (17.6) (15.8) (10.3)
Inventories............................................ (15.1) (3.9) (2.2)
Accounts payable and accrued liabilities............... 9.8 2.7 .6
Other.................................................. (2.0) (1.5) 1.4
------ ----- -----
$(29.5) $ 1.2 $ 3.8
====== ===== =====
Capital expenditures..................................... $ (6.5) $(9.5) $(8.2)
====== ===== =====
</TABLE>

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BGII's cash flows from operations during the three year period ended
December 31, 1995 were significantly impacted by changes in operating assets
and liabilities as discussed below:

. Accounts and notes receivable generally increased or decreased in amounts
proportionate to sales activities and were impacted by the financing
terms offered to customers, particularly in the emerging markets.

. Inventories generally fluctuate in relation to changes in product lines,
marketing strategies and sales. Gaming's inventories decreased in 1995
principally due to lower unit sales during the last six months of the
year. Gaming's inventories increased during the 1994 and 1993 periods due
to the introduction of its new ProSeries(TM) line of gaming machines in
the third quarter of 1993 and the introduction of the Game Maker(R) in
the third quarter of 1994, which resulted in increased production
activity and higher finished goods, including an increase in trial units
in Nevada, and raw material inventory.

. During the year ended December 31, 1995, Gaming's accounts payable and
accrued expenses decreased in amounts generally corresponding to the
decrease in inventory.

In 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" ("SFAS No. 121") was issued which will be effective for BGII's
year ended December 31, 1996. This statement requires that long-lived assets
and certain identifiable intangible assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate the carrying
amount of such assets may not be recoverable. Management believes that if SFAS
No. 121 had been early adopted at December 31, 1995, it would not have had a
material effect on the financial position, results or operations or cash flows
of BGII.

In 1995, Statement of Financial Accounting Standards No. 123, "Accounting
for Awards of Stock-Based Compensation to Employees" ("SFAS No. 123") was
issued which will be effective for BGII's year ended December 31, 1996. SFAS
No. 123 provides alternative accounting treatment to APB No. 25 with respect
to stock-based compensation and requires certain additional disclosures,
including disclosures if BGII elects not to adopt the accounting requirements
of SFAS No. 123. At this point, BGII does not anticipate adopting the
accounting requirements of SFAS No. 123 and therefore in future years would
expect to provide the required additional disclosures in the footnotes to the
consolidated financial statements.

IMPACT OF INFLATION AND FOREIGN CURRENCY TRANSLATION

Inflation has not had a significant effect on BGII's operations during the
three years ended December 31, 1995.

Substantially all of Wulff's transactions are denominated in Deutsche Marks.
The Deutsche Mark is the functional currency used by BGII to translate Wulff's
financial statements. Therefore, BGII is exposed to foreign exchange rate
risk. BGII does not generally enter into foreign exchange contracts to hedge
its exposure to foreign exchange rate fluctuations.

GAMING REGULATION AND LICENSING

The manufacture and distribution of gaming machines is subject to extensive
Federal, state, local and foreign regulation. Although the laws and
regulations of the various jurisdictions in which each of Alliance and BGII
operate and into which Alliance may expand its gaming operations vary in their
technical requirements and are subject to amendment from time to time,
virtually all of these jurisdictions require licenses, permits, documentation
of qualification, including evidence of financial stability, and other forms
of approval for companies engaged in the manufacture and distribution of
gaming devices as well as for the officers, directors, major stockholders and
key personnel of such companies.

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Nevada. The ownership and operation of casino gaming facilities in Nevada,
and the manufacture and distribution of gaming devices and cashless wagering
systems for use or play in Nevada, or for distribution outside of Nevada, are
subject to (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (the "Nevada Act") and (ii) various local ordinances and
regulations. Alliance's gaming, manufacturing, distributing and slot machine
management operations and BGII's manufacturing, distribution and slot route
operations are subject to the licensing and regulatory control of the Nevada
State Gaming Control Board (the "Nevada Board"), the Nevada Gaming Commission
(the "Nevada Commission"), the County Liquor and Gaming Licensing Board (the
"Clark County Board") and various other county and city regulatory agencies,
all of which are collectively referred to as the "Nevada Gaming Authorities".

The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things, (i) the prevention of unsavory or unsuitable persons
from having any direct or indirect involvement with gaming at any time in any
capacity; (ii) the strict regulation of all persons, locations, practices,
associations and activities related to the operation of licensed gaming
establishments and the manufacture and distribution of gaming devices and
equipment; (iii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective control over the
financial practices of licensees, including establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the preventing of
cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Change in such laws,
regulations and procedures could have an adverse effect on the gaming related
operations conducted by Alliance and BGII.

Alliance and BGII are registered with the Nevada Commission as publicly
traded corporations ("Registered Corporations"). Alliance's direct and
indirect subsidiaries which conduct gaming operations at various locations,
operate a gaming device route and manufacture and distribute slot machines and
gaming devices (collectively, the "Alliance Nevada Subsidiaries") and BGII's
subsidiary, Gaming, are required to be licensed by the Nevada Gaming
Authorities. Gaming, the operating subsidiary for BGII's domestic gaming
operations, which operates a gaming device route and manufactures and
distributes slot machines and gaming devices, is also required to be licensed
by the Nevada Gaming Authorities. The licenses held by the Alliance Nevada
Subsidiaries and Gaming require the periodic payments of fees, or fees and
taxes, and are not transferable. Alliance and BGII have been found suitable to
own the stock of the Nevada Subsidiaries and Gaming, respectively, each of
which is a corporate licensee (individually, a "Corporate Licensee" and
collectively, "Corporate Licensees") under the terms of the Nevada Act. As
Registered Corporations, Alliance and BGII are required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information which the Nevada Commission may require. No person may
become a stockholder of or receive any percentage of the profits from the
Corporate Licensees without first obtaining licenses and approvals from the
Nevada Gaming Authorities. Alliance, BGII and the Corporate Licensees have
obtained from the Nevada Gaming Authorities the various registrations,
approvals, permits and licenses required in order to engage in gaming
activities, gaming device route operations, and in the manufacture and
distribution of gaming devices for use or play in Nevada or for distribution
outside of Nevada, as the case may be.

The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, Alliance, BGII or the
Corporate Licensees in order to determine whether such individual is suitable
or should be licensed as a business associate of a gaming licensee. Officers,
directors and key employees of Alliance or BGII who are actively and directly
involved in the licensed activities of the Corporate Licensees may be required
to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing for any cause which
they deem reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information
followed by a thorough investigation. The applicant for licensing or a finding
of suitability must pay all the costs of the investigation. Changes in
licensed positions must be reported to the Nevada Gaming Authorities and in
addition to their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have jurisdiction to
disapprove a change in a corporate position.

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If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with Alliance, BGII or the Corporate Licensees, the companies
involved would have to sever all relationships with such person. In addition,
the Nevada Commission may require Alliance, BGII or the Corporate Licensees to
terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.

Alliance, BGII and the Corporate Licensees that hold nonrestricted licenses
are required to submit detailed financial and operating reports to the Nevada
Commission. A nonrestricted license is a license for an operation consisting
of 16 or more slot machines, or a license for any number of slot machines
together with any other game, gaming device, race book or sports pool at one
establishment. Substantially all material loans, leases, sales of securities
and similar financing transactions by the Corporate Licensees that hold a
nonrestricted license must be reported to or approved by the Nevada
Commission.

If it were determined that the Nevada Act was violated by a Corporate
Licensee, the licenses it holds could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, Alliance, BGII the Corporate Licensees and the
persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission.
Further a supervisor could be appointed by the Nevada Commission to operate
any nonrestricted gaming establishment operated by a Corporate Licensee and,
under certain circumstances, earnings generated during the supervisor's
appointment (except for reasonable rental of the casino) could be forfeited to
the State of Nevada. Limitation, conditioning or suspension of the gaming
licenses of the Corporate Licensees or the appointment of a supervisor could
(and revocation of any gaming license would) materially adversely affect the
gaming related operations of Alliance and BGII.

Any beneficial holder of Alliance's or BGII's voting securities, regardless
of the number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of Alliance's or
BGII's voting securities determined if the Nevada Commission has reason to
believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in conducting any such
investigation.

The Nevada Act requires any person who acquires more than 5% of a Registered
Corporation's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of
a Registered Corporation's voting securities apply to the Nevada Commission
for a finding of suitability within 30 days after the Chairman of the Nevada
Board mails the written notice requiring such filing. Under certain
circumstances, an "institutional investor" as defined in the Nevada Act, which
acquires more than 10%, but not more than 15%, of a Registered Corporation's
voting securities may apply to the Nevada Commission for a waiver of such
finding of suitability if such institutional investor holds the securities for
investment purposes only. An institutional investor shall not be deemed to
hold voting securities for investment purposes unless the voting securities
were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of
directors of the Registered Corporation, any change in the Registered
Corporation's corporate charter, bylaws, management, policies or operations of
the Registered Corporation, or any of its gaming affiliates, or any other
action which the Nevada Commission finds to be inconsistent with holding the
Registered Corporation's voting securities for investment purposes only.
Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters
voted on by stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for informational
purposes and not to cause a change in its management, policies or operations;
and (iii) such other activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder of voting
securities who must be found suitable is a corporation, partnership or trust,
it must submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of
investigation.

Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board may be found unsuitable.

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The same restrictions apply to a record owner if the record owner, after
request, fails to identify the beneficial owner. Any stockholder found
unsuitable and who holds, directly or indirectly, any beneficial ownership of
the common stock beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense. Each of Alliance and BGII is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with
Alliance, BGII, or the Corporate Licensees, Alliance or BGII as the case may
be (i) pays that person any dividend or interest upon voting securities of
Alliance or BGII, as the case may be, (ii) allows that person to exercise,
directly or indirectly, any voting right conferred through securities held by
that person, (iii) pays remuneration in any form to that person for services
rendered or otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities, including, if
necessary, the immediate purchase of said voting securities for cash at fair
market value. Additionally, the Clark County Board has taken the position that
it has the authority to approve all persons owning or controlling the stock of
any corporation controlling a gaming license.

The Nevada Commission may, in its discretion, require the holder of any debt
securities of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security if the Nevada Commission has
reason to believe that such ownership would otherwise be inconsistent with the
declared policies of the State of Nevada. If the Nevada Commission determines
that a person is unsuitable to own such security, then pursuant to the Nevada
Act, the Registered Corporation can be sanctioned, including the loss of its
approvals, if, without the prior approval of the Nevada Commission, it (i)
pays the unsuitable person any dividend, interest or any distribution
whatsoever; (ii) recognizes any voting right by such unsuitable person in
connection with such securities; (iii) pays the unsuitable person remuneration
in any form; or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation or similar
transaction.

Alliance and BGII are each required to maintain current stock ledgers in
Nevada which may be examined by the Nevada Gaming Authorities at any time. If
any securities are held in trust by an agent or by a nominee, the record
holder may be required to disclose the identity of the beneficial owner to the
Nevada Gaming Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. Alliance and BGII are each also
required to render maximum assistance in determining the identity of the
beneficial owner. The Nevada Commission has the power to impose a requirement
that a Registered Corporation's stock certificates bear a legend indicating
that the securities are subject to the Nevada Act. The Nevada Commission has
imposed this requirement on Alliance and BGII.

Neither Alliance nor BGII may make a public offering of its securities
without the prior approval of the Nevada Commission if the securities or
proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or to retire or extend obligations incurred for
such purposes. Any such approval, if granted, does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful. The Nevada
Commission has also imposed a requirement on Alliance and BGII that it must
receive the prior administrative approval of the Nevada Board Chairman for any
offer for the sale of an equity security in a private transaction.

Changes in control of Alliance or BGII through merger, consolidation, stock
or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby he obtains control, may not occur without the
prior approval of the Nevada Commission. Entities seeking to acquire control
of a Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming control of
such Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control to be investigated and licensed as a part of the approval process
relating to the transaction. The Merger and certain related transactions
require the prior approval of the Nevada Commission.

The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada corporate gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse

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affects of these business practices on Nevada's gaming industry and to further
Nevada's policy to: (i) assure the financial stability of corporate gaming
licensees and their affiliates; (ii) preserve the beneficial aspects of
conducting business in the corporate form; and (iii) promote a neutral
environment for orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Nevada Commission before a Registered
Corporation can make exceptional repurchases of voting securities above the
current market price thereof and before a corporate acquisition opposed by
management can be consummated. The Nevada Act also requires prior approval of
a plan of recapitalization proposed by the Registered Corporation's Board of
Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.

License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada, and to the
counties and cities in which the Licensees' respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either (i) a percentage of the gross revenues received, (ii) the number of
gaming devices operated, or (iii) the number of games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. The
Corporate Licensees that hold a license as an operator of a gaming device
route or a manufacturer's or distributor's license also pay certain fees to
the State of Nevada.

Any person who is licensed, required to be licensed, registered, required to
be registered, or under common control with such persons (collectively
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation by the Nevada Board of its participation in such foreign gaming.
The revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. Licensees are also subject
to disciplinary action by the Nevada Commission if they knowingly violate any
laws of the foreign jurisdiction pertaining to the foreign gaming operation,
fail to conduct the foreign gaming operation in accordance with the standards
of honesty and integrity required of Nevada gaming operations, engage in
activities that are harmful to the state of Nevada or its ability to collect
gaming taxes and fees or employ a person in the foreign operations who has
been denied a license or finding of suitability in Nevada on the ground of
personal unsuitability.

The sale of alcoholic beverages at establishments operated by a Corporate
Licensee are subject to licensing, control and regulation by applicable local
regulatory agencies. All licenses are revocable and are not transferable. The
agencies involved have full power to limit, condition, suspend or revoke any
such license, and any such disciplinary action could (and revocation would)
have a material adverse affect upon the operations of the Corporate Licensees.

Louisiana. The manufacture, distribution, servicing and operation of video
draw poker devices ("Devices") in Louisiana is subject to the Louisiana Video
Draw Poker Devices Control Law and the Rules and Regulations promulgated
thereunder (the "Louisiana Act"). Licensing and regulatory control is provided
by the Video Gaming Division of the Gaming Enforcement Section of the Office
of State Police within the Department of Public Safety and Corrections (the
"Division"). The laws and regulations of the Division are based upon a primary
consideration of maintaining the health, welfare and safety of the general
public and upon a policy which is concerned with protecting the video gaming
industry from elements of organized crime, illegal gambling activities and
other harmful elements as well as protecting the public from illegal and
unscrupulous gaming to ensure the fair play of Devices. The newly elected
Governor of Louisiana has called for a referendum to determine the future of
land based casinos, riverboats, and video poker machines taken as a group. In
response to this issue, a number of legislators have expressed the view that
the voters should have a choice as to whether to continue to allow any or all
of the above types of gaming. To date no action has been taken. A negative
outcome in such referendum could materially adversely affect Alliance.

Each of the indirect operating subsidiaries for Alliance's gaming operations
in Louisiana, VSI and SVS, has been granted a license as a Device owner by the
Division. The other indirect subsidiary of Alliance, VDSI, has been granted a
license as a distributor by the Division. Gaming has been granted a license as
a manufacturer

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by the Division. These gaming subsidiaries are Louisiana Licensees under the
terms of the Louisiana Act. The licenses held by the Louisiana Licensees
expire at midnight on June 30 of each year and must be renewed annually
through payment of fees. All license fees must be paid on or before May 15 in
each year licenses are renewable.

The Division may deny, impose a condition on or suspend or revoke a license,
renewal or application for a license for violations of any rules and
regulations of the Division or any violations of the Louisiana Act. In
addition, fines for violations of gaming laws or regulations may be levied
against the Louisiana Licensees and the persons involved for each violation of
the gaming laws. The issuance, condition, denial, suspension or revocation is
a pure and absolute privilege and is at the discretion of the Division in
accordance with the provisions of the Louisiana Act. A license is not property
or a protected interest under the constitution of either the United States or
the State of Louisiana.

The Division has the authority to conduct overt and covert investigations of
any person involved directly or indirectly in the video gaming industry in
Louisiana. This investigation may extend to information regarding a person's
immediate family and relatives and their affiliations with certain
organizations or other business entities. The investigation may also extend to
any person who has or controls more than a 5% ownership, income or profits
interest in an applicant for or holder of a license or who is a key employee,
or who has the ability to exercise significant influence over the licensee.
All persons or entities investigated must meet all suitability requirements
and qualifications for a licensee. The Division may deny an application for
licensing for any cause which it may deem reasonable. The applicant for
licensing must pay a filing fee which also covers the cost of the
investigation.

In order for a corporation to be licensed as a distributor by the Division,
a majority of the stock of the corporation must be owned by persons who have
been domiciled in Louisiana for a period of at least two years prior to the
date of the application.

In addition to licensure as a manufacturer of Devices under the Louisiana
Act, Gaming has been licensed by the Division as a manufacturer under the
Louisiana Riverboat Economic Development and Gaming Control Act (the
"Louisiana Riverboat Act"). Gaming's application for a permanent
manufacturer's license as it relates to the land-based casino is pending
before the LEDGC. See "Risk Factors--Ongoing BGII Regulatory Investigation".

The Division and the LEDGC have notified Alliance that it will be necessary
to obtain approval from them prior to the Effective Time.

Mississippi. The manufacture, distribution, ownership and operation of
gaming devices in Mississippi is subject to extensive state and local laws and
regulations, including the Mississippi Gaming Control Act (the "Mississippi
Act") and the regulations (the "Mississippi Regulations") promulgated
thereunder. The Mississippi Gaming Commission (the "Mississippi Commission")
oversees licensing and regulatory compliance. Gaming in Mississippi can be
legally conducted only on vessels of a certain minimum size in navigable
waters of the Mississippi River or in waters of the State of Mississippi which
lie adjacent and to the south (principally in the Gulf of Mexico) of the
counties of Hancock, Harrison and Jackson, and only in counties in Mississippi
in which the registered voters have not voted to prohibit such activities. The
voters in Jackson County, the southeastern-most county of Mississippi, have
voted to prohibit gaming in that county. However, gaming could be authorized
in Jackson County should the voters fail to disapprove of gaming in that
county in any referendum, which could be held annually. The underlying policy
of the Mississippi Act is to ensure that gaming operations in Mississippi are
conducted (i) honestly and competitively, (ii) free of criminal and corruptive
influences and (iii) in a manner which protects the rights of the creditors of
gaming operations. Gaming in the future may also be legally conducted on
American Indian lands in Mississippi as regulated in part by the 1988 Indian
Gaming Regulatory Act, which activity will not be subject to the Mississippi
Act.

The Mississippi Act requires that a person (including any corporation or
other entity) must be licensed to conduct gaming activities in Mississippi. A
license to own and operate gaming devices will be issued only for a specified
location which has been approved as a gaming site by the Mississippi
Commission. Alliance through

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its interest in RCVP must apply for renewal of such licenses, which renewal
cannot be assured. BGII's subsidiary holds a license to manufacture and
distribute gaming devices. The Mississippi Act also requires that each officer
or director of a gaming licensee, or other person who exercises a significant
influence over the licensee, either directly or indirectly, must be found
suitable by the Mississippi Commission. In addition, any employee of the
licensee who is directly involved in gaming must obtain a work permit from the
Mississippi Commission. The Mississippi Commission will not issue a license or
make a finding of suitability unless it is satisfied, only after an extensive
investigation paid for by the applicant, that the persons associated with the
gaming licensee or applicant for a license are of good character, honesty and
integrity, with no relevant or material criminal record. In addition, the
Mississippi Commission will not issue a license unless it is satisfied that
the licensee is adequately financed or has a reasonable plan to finance its
proposed operations from acceptable sources, and that persons associated with
the applicant have sufficient business probity, competence and experience to
engage in the proposed gaming enterprise. The Mississippi Commission may
refuse to issue a work permit to a gaming employee (i) if the employee has
committed larceny, embezzlement or any crime of moral turpitude, or knowingly
violated the Mississippi Act or Mississippi Regulations, or (ii) for any other
reasonable cause. If an employee is denied a license, Alliance must terminate
his or her employment.

The Mississippi Commission has the power to deny, limit, condition, revoke
and suspend any license, finding of suitability or registration, or fine any
person, as it deems reasonable and in the public interest, subject to an
opportunity for a hearing. The Mississippi Commission may fine any licensee or
person who was found suitable up to $100,000 for each violation of the
Mississippi Act or the Mississippi Regulations which is the subject of an
initial complaint, and up to $250,000 for each such violation which is the
subject of any subsequent complaint. The Mississippi Act provides for judicial
review of any final decision of the Mississippi Commission by petition to a
Mississippi Circuit Court, but filing of such petition does not necessarily
stay any action by the Mississippi Commission pending a decision by the
Circuit Court.

Each gaming licensee must pay a license fee to the State of Mississippi
based upon "gaming receipts" (generally defined as gross receipts less payouts
to customers as winnings). The license fee equals four percent of gaming
receipts of $50,000 or less per month, six percent of gaming receipts over
$50,000 and up to $134,000 per month and eight percent of gaming receipts over
$134,000 per month. The foregoing license fees are allowed as a credit against
any Mississippi State income tax liability for the year paid. An additional
license fee, equal to $100 for each table game conducted or planned to be
conducted on the gaming premises, is payable to the State annually in advance.
Municipal and county fees may also be assessed and vary from jurisdiction to
jurisdiction. All taxes and fees must be paid timely in order to retain a
gaming license. The Mississippi Act also imposes certain audit and record
keeping laws and regulations, primarily to ensure compliance with the
Mississippi Act, including compliance with the provisions relating to the
payment of license fees.

Under the Mississippi Regulations, a gaming licensee cannot be publicly
held, although an affiliated corporation, such as Alliance, may be publicly
held so long as Alliance registers with and gets the approval of the
Mississippi Commission. In addition, approval of any subsequent public
offerings of the securities of Alliance must be obtained from the Mississippi
Commission if any part of the proceeds from that offering are intended to be
used to pay for or reduce debt used to pay for the construction, acquisition
or operation of any gaming facility in Mississippi.

Under the Mississippi Regulations, a person is prohibited from acquiring
control of a licensee without the prior approval of the Mississippi
Commission. Any person who, directly or indirectly, or in association with
others, acquires beneficial ownership of more than five percent of a licensee
must notify the Mississippi Commission of this acquisition. The Mississippi
Commission may require that a person be found suitable if that person holds
between a five percent and ten percent ownership position and must require
that a person be found suitable if that person owns more than ten percent of a
licensee. Furthermore, regardless of the amount of ownership, any person who
acquires beneficial ownership may be required to be found suitable if the
Mississippi Commission has reason to believe that the acquisition of such
ownership would be inconsistent with the declared policy of Mississippi. Any
person who is required to be found suitable must apply for a finding of
suitability from the Mississippi Commission within 30 days after being
requested to do so, and must deposit with the State

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Tax Commission a sum of money which is adequate to pay the anticipated
investigatory costs associated with such finding. Any person who is found not
to be suitable by the Mississippi Commission will not be permitted to have any
direct or indirect ownership in the licensee. Any person who is required to
apply for a finding of suitability and fails to do so, or who fails to dispose
of his or her interest in the licensee if found unsuitable, is guilty of a
misdemeanor. If a finding of suitability with respect to any person is not
applied for where required, or if it is denied or revoked by the Mississippi
Commission, the licensee is not permitted to pay such person for services
rendered, or to employ or enter into any contract with such person.

Dockside casinos may be required to be moved to a "safe harbor" in the event
of a threatened hurricane. The appropriate county civil defense director will
determine when such movement is required. In general, it is anticipated that
casino vessels will have to be moved in the event of a Class III or more
severe hurricane warning, where there is the possibility of 125 miles per hour
wind speeds. The movement of a casino barge will not necessarily insure
protection against damage or destruction by a hurricane. Furthermore, the
removal of a casino barge will generally require several days, and as a
consequence, the casino barge will be out of business during that movement,
even if no hurricane strikes the casino site.

Any permanently moored vessel used for casino operations must meet the fire
safety standard of the Mississippi Fire Prevention Code, the Life Safety Code
and the Standards for the Construction and Fire Protection of Marine
Terminals, Piers and Wharfs of the National Fire Protection Association.
Additionally, any establishment to be constructed for dockside gaming must
meet the Southern Standard Building Code or the local building code, if such a
local building code has been implemented at the casino's site.

While unpowered and permanently moored vessels do not require certification
by the United States Coast Guard, the Mississippi Commission has engaged the
American Bureau of Shipping, an independent consulting agency, which will
inspect and certify all casino barges with respect to stability and single
compartment flooding integrity, in accordance with Mississippi Regulations.

The laws and regulations permitting and governing Mississippi casino gaming
were adopted during 1990 and 1991, and the first casinos opened in August
1992. Consequently, the interpretation and application of Mississippi law and
regulations may evolve over time, and any such changes may have an adverse
effect on Mississippi licensees.

New Jersey. BGII's subsidiary, Gaming, is licensed by the New Jersey Casino
Control Commission (the "New Jersey Commission") as a gaming-related casino
service industry ("CSI") in accordance with the New Jersey Casino Control Act
(the "Casino Control Act").

Prior to expiration of the initial license period, Gaming filed an
application for renewal of its license, which application has been deemed
complete by the New Jersey Commission. Consequently, pending formal renewal of
the license, Gaming is permitted to continue doing business with New Jersey
casino licenses.

In considering the qualifications of an applicant for a CSI license, the New
Jersey Commission may require that the officers, directors, key personnel,
financial sources and stockholders (in particular those with holdings in
excess of 5%) of the applicant and its holding and intermediary companies
demonstrate their qualifications. In this regard, such persons and entities
may be investigated and may be required to make certain regulatory filings and
to disclose and/or to provide consents to disclose personal and financial
data. The costs associated with such investigation are typically borne by the
applicant.

Additional Jurisdictions. Each of Alliance and BGII, in the ordinary course
of its business, routinely considers business opportunities to expand its
gaming operations into additional jurisdictions.

Although the laws and regulations of the various jurisdictions in which BGII
operates or into which Alliance may expand its gaming operations vary in their
technical requirements and are subject to amendment from time to time,
virtually all of these jurisdictions require licenses, permits, documentation
of qualification, including evidence of financial stability, and other forms
of approval for companies engaged in the manufacture and distribution of
gaming devices as well as for the officers, directors, major stockholders and
key personnel of such companies.

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To date, BGII, Gaming, Bally Wulff and their key personnel have obtained, or
applied for, all government licenses, permits and approvals necessary for the
manufacture and distribution, as permitted, of their gaming machines in the
jurisdictions in which BGII and its subsidiaries currently do business. BGII
and the holders of its securities may be subject to the provisions of the
gaming laws of each jurisdiction where BGII or its subsidiaries are licensed
and/or conduct business, including, without limitation, the States of Arizona,
Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New Mexico,
South Dakota, Wisconsin, and the local regulatory authorities within each such
state as well as Australian, Canadian and other foreign gaming jurisdictions
in which BGII and its subsidiaries are licensed or conduct business. In the
event the Merger is consummated, Alliance will be required to be licensed in
each of these jurisdictions.

Holders of common stock of an entity licensed to manufacture and sell gaming
devices, and in particular those with holdings in excess of 5%, should note
that local laws and regulations may affect their rights regarding the purchase
of such common stock and may require such persons or entities to make certain
regulatory filings, or seek licensure, findings of qualification or other
approvals. In some cases this process may require the holder or prospective
holder to disclose and/or provide consents to disclose personal and financial
data in connection with necessary investigations, the cost of which are
typically borne by the applicant. The investigatory and approval process can
take three to six months to complete under normal circumstances.

As previously noted, Alliance has agreed to acquire BGII which is licensed
in many states as a manufacturer of gaming devices. If Alliance is successful
in its attempted acquisition, it will be required to be licensed in each of
these states.

Federal Registration. The operating subsidiaries of Alliance and BGII that
are involved in gaming activities are required to file annually with the
Attorney General of the United States in connection with the sale,
distribution or operation of gaming devices. All currently required filings
have been made.

German Regulation

German legislative authorities regulate and monitor the wall machine
industry so as to ensure certain manufacturing standards and the fairness of
each machine to users. The most significant legislation presently affecting
the wall machine industry relates to prescribed licensing procedures, the use,
installation and operation of machines and the taxation of same.

Wall machine manufacturers are dependent upon the successful introduction of
new products each year and currently are required to receive prior government
approval for each new product introduction. Manufacturers are required to
apply for licenses through an agency of the German federal Ministry of
Economics. Such agency maintains a policy of accepting only two concurrent
licensing applications from an individual applicant at any given time. Bally
Wulff, through affiliates and subsidiaries, is in a position to file up to six
concurrent applications. After receiving a prototype of a machine for which
the applicant seeks government licensing approval, the federal agency
deliberates for periods that range from approximately 6 to 24 months. If that
product is approved, the wall machine manufacturer is permitted to reproduce
the sample machine initially submitted for government approval. Every wall
machine carries with it a small license card that permits the machine to be
operated for up to four years, after which it may not be used in Germany. In
Germany, wall machines sold via the secondary market may be operated by a new
owner but only for the residual time remaining on each machine's four-year
life. In addition to licensing requirements for manufacturers, any person or
entity which intends to operate a licensed wall machine must apply to local
regulatory authorities for a license, which will not be granted by the
authorities if facts justify the assumption that the applicant does not
possess the requisite reliability. In this proceeding, the applicant must
furnish a police certificate of conduct.

German legislation prohibits the play of wall machines by individuals under
age 18. Voluntary agreements among manufacturers and certain amusement game
trade associations, among other things, restrict wall machine advertising and
the ability of a player to play more than two machines at once, require all
machines to carry

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visible warning notices and provide that every wall machine is automatically
switched off for three minutes after one hour of continuous play.

In April 1993, the German government increased the maximum coin drop per
game from 30 pfennigs (approximately $.21) to 40 pfennigs (approximately $.28)
although 30-pfennig machines are still permitted to be manufactured and sold.

The Spielverordnung (gaming ordinance) specifically governs wall machines.
These regulations limit game payouts to DM 4.00 (approximately $2.80) per
game, require a minimum payout percentage, detail where the machines may be
installed, how many may be installed and by whom, which games are prohibited,
the technical requirements of the machines and technical review and approval.
Operators must comply with regulations which stipulate how many machines may
operate within defined square foot areas (15 square meters per machine, with a
maximum of ten machines per location). The Spielverordnung was modified in
1985 to achieve a significant reduction of gaming machines. Gaming halls,
which through December 19, 1985 had more gaming machines than permitted under
the revised regulations, have a transition period through December 31, 1995 to
comply with the revised regulations. Such facilities were allowed to keep the
1985 number of wall machines until December 31, 1990. During the period
January 1, 1991 to December 31, 1995 they are entitled to two-thirds of such
total number, but they must be in compliance with the new limits by January 1,
1996. In taverns, restaurants, hotels and certain other establishments, no
more than two gaming machines are permitted. See "Risk Factors--Bally Wulff
Sales".

The Baunutzungsverordnung (building construction ordinance) governs the
zoning classification of land and the type and density of development within
the various zoning classifications. Effective January 27, 1990, the
Baunutzungsverordnung was amended essentially to restrict the development of
larger gaming halls to core commercial areas, limit the permissibility of
smaller gaming halls in various types of mixed use zones and to ban gaming
halls in all types of residential and industrial use areas. Prior to such
amendment, gaming halls, regardless of size, were generally allowed in core,
business, mixed and industrial zones. In addition, on a case by case basis,
each local zoning agency is authorized to exclude certain types of otherwise
permissible uses, including gaming halls.

Subject to certain exceptions, V.A.T. of 15% is generally assessed on the
sale or supply of any goods and services in Germany. Since the total amount
paid for particular goods or services is considered to be the gross price in
calculating such tax, the actual rate is 13.04%. With respect to operators of
gaming machines, prior to January 1, 1994, V.A.T. was to have been assessed at
a rate of 0.1304 times a multiplier of 2.5 times the amount remaining in the
cash box after payouts to players. Commencing January 1, 1994 the basis for
taxation was changed to .1304 times the cash handled by a machine. The rule
requiring a minimum payout percentage is applied to the amount remaining in
the cash box net of such V.A.T. Depending on the municipality in which a
machine is located, operators may also have to pay a monthly leisure tax on
each machine of up to DM 600 (approximately $419).

The business conducted by Bally Wulff had benefited from the Berlin
Promotion Act, a special tax statute which was intended to support the economy
of West Berlin in various ways. With the reunification of Germany, the need
for benefits provided by the law is perceived to have decreased. Consequently,
the German government has enacted amendments to the Berlin Promotion Act which
are designed to phase out, over a number of years, most of the tax benefits
and incentives provided by the law. These tax benefits and incentives have
been changed in five ways. The V.A.T. rebates of up to 10% to enterprises
located in West Berlin for sales to German customers outside West Berlin were
eliminated by January 1, 1994, which began with an initial 30% decrease on
January 1, 1992, and continued with further decreases of 20% on July 1, 1992,
25% on January 1, 1993 and 25% on January 1, 1994. The V.A.T. rebates of 4.2%
for German (other than West Berlin) enterprises which purchase goods from West
Berlin enterprises were abolished effective July 1, 1991; special accelerated
depreciation allowances which permitted West Berlin taxpayers to write off 75%
of the cost of qualifying fixed assets at any time during the first three
years after acquisition have been modified to limit the write off to 50%;
certain special investment subsidies have been restricted and were completely
eliminated by the end of 1994; and tax credits on German federal income taxes
are being reduced from 22.5% in 1990 to 20% in 1991, 13.5% in 1992, 9.0% in
1993 and 4.5% in 1994, and were phased out completely by December 31, 1994.

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THE MEETINGS

TIME, DATE AND PLACE OF THE MEETINGS

This Proxy Statement/Prospectus is being furnished to holders of Alliance
Common Stock in connection with the solicitation of proxies by the Board of
Directors of Alliance for use at the Alliance Annual Meeting to be held on
Tuesday, April 2, 1996 at Sam's Town Hotel & Gambling Hall Conference Center,
511 Boulder Highway, Las Vegas, Nevada 89121, commencing at 2:00 p.m., local
time, and at any adjournment or postponement thereof.

This Proxy Statement/Prospectus is being furnished to holders of BGII Common
Stock in connection with the solicitation of proxies by the Board of Directors
of BGII for use at the BGII Annual Meeting to be held on Tuesday, April 2,
1996 at the Alexis Park Resort, located at 375 East Harmon Avenue, Las Vegas,
Nevada, commencing at 9:00 a.m., local time, and at any adjournment or
postponement thereof.

MATTERS TO BE CONSIDERED AT THE MEETINGS

Alliance. At the Alliance Annual Meeting, holders of Alliance Common Stock
will consider and vote upon proposals to approve and adopt the Merger
Agreement and to elect two directors. Alliance's stockholders will also
transact such other business as may properly come before the Alliance Annual
Meeting.

Pursuant to the Merger Agreement, Alliance has agreed to assume all of
BGII's obligations under the BGII 1994 Stock Option Plan for Non-Employee
Directors, the BGII 1991 Incentive Plan and the BGII 1991 Non-Employee
Directors' Plan as in effect at the Effective Time. Approval and adoption of
the Merger Agreement by the stockholders of Alliance will constitute approval
and adoption of such plans.

Only holders of Alliance Common Stock of record at the close of business on
the Alliance Record Date will be entitled to vote at the Alliance Annual
Meeting or any adjournment or adjournments of such meeting. There were
12,987,483 shares of Alliance Common Stock outstanding on the Alliance Record
Date. Each share of Alliance Common Stock entitles the holder thereof to one
vote.

THE BOARD OF DIRECTORS OF ALLIANCE HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. THE BOARD OF DIRECTORS OF ALLIANCE ALSO RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS.

BGII. At the BGII Annual Meeting, holders of BGII Common Stock will consider
and vote (i) to approve the Merger Agreement, including (a) the merger of BGII
and the Merger Subsidiary pursuant to the terms of the Merger Agreement and
(b) the 1994 Stock Option Plan for Non-Employee Directors and Amendments No. 3
to each of the 1991 Incentive Plan and the 1991 Non-Employee Directors Plan to
provide that, notwithstanding the change of control of BGII resulting from the
Merger, options outstanding under such plans (A) shall remain exercisable
until the earlier of (1) the expiration of the original option period, (2)
three years after the completion of the Merger or (3) except with respect to
certain employees, the date of termination of the option holder's employment
for cause or by such employee voluntarily and (B) will be exercisable
immediately after the Effective Time for the consideration and at the price
provided for in the Merger Agreement; (ii) to elect a board of seven directors
to hold office until the earlier of the Effective Time of the Merger or the
next BGII Annual Meeting of Stockholders and until their successors are
elected and qualified; and (iii) on such other business as may properly come
before the meeting.

THE BOARD OF DIRECTORS OF BGII HAS UNANIMOUSLY APPROVED THE MERGER AND
RELATED PROPOSALS AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF EACH OF
THE MERGER AND RELATED PROPOSALS. THE BOARD OF DIRECTORS OF BGII ALSO
RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS.

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VOTE REQUIRED

Alliance. The affirmative vote of the holders of a majority of the shares of
Alliance Common Stock voting is required to approve and adopt the Merger
Agreement. The failure to vote shares by abstention will have the same effect
as a vote against the Merger Agreement while non-votes will not have the same
effect as a vote against the Merger Agreement. Each share of Alliance Common
Stock is entitled to one vote. Directors will be elected by a plurality of
votes. The failure to vote, either by abstention or non-vote, like a vote
against the nominee to the Alliance Board, will not have any effect on the
election of directors.

Certain executive officers and directors of Alliance have advised Alliance
that they intend to vote the 6,617,333 shares of Alliance Common Stock,
representing approximately 51% of the outstanding Alliance Common Stock, as to
which they have voting power, FOR the approval and adoption of the Merger
Agreement and the election of the Alliance Board nominees set forth herein.
This would insure adoption of the Merger Agreement and election of the
Alliance Board nominees by the Alliance stockholders. See "Security Ownership
of Certain Beneficial Holders and Management--Alliance".

BGII. The affirmative vote of the holders of a majority of the outstanding
shares of BGII Common Stock entitled to vote thereon is required to approve
and adopt the proposed Merger and the Related Proposals. The failure to vote
shares, either by abstention or non-vote, will have the same effect as a vote
against the Merger Agreement and Related Proposals. Directors are elected by
majority vote of the shares of BGII Common Stock present at the BGII Annual
Meeting in person or by proxy. The failure to vote shares by abstention will
have the same effect as a vote against the nominees for election as directors.
Each share of BGII Common Stock is entitled to one vote.

As of the Record Date, the directors and executive officers of BGII owned
364,025 outstanding shares of BGII Common Stock representing approximately
3.4% of the outstanding shares of BGII Common Stock. The directors and
executive officers of BGII have informed BGII that they intend to vote their
shares of BGII Common Stock in favor of the Merger and Related Proposals and
the election of the nominees for the BGII Board of Directors named herein. In
addition, Alliance is required under the Merger Agreement to vote its
1,000,000 shares of BGII Common Stock (representing approximately 9.3% of the
number outstanding) in favor of the Merger. See "Security Ownership of Certain
Beneficial Owners and Management--BGII".

VOTING OF PROXIES

Shares represented by properly executed proxies received in time for the
Meetings will be voted at such meetings in the manner specified by the holders
thereof. Proxies for Alliance Common Stock which are properly executed but
which do not contain voting instructions will be voted in favor of approval
and adoption of the Merger Agreement and the election of directors nominated
by Alliance. Proxies for BGII Common Stock which are properly executed but
which do not contain voting instructions will be voted in favor of approval of
each of the Merger and Related Proposals and in favor of the election of
directors nominated by BGII.

It is not expected that any matter other than those referred to herein will
be brought before either of the Meetings. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to such matters.

REVOCABILITY OF PROXIES

The grant of a proxy on the enclosed Alliance or BGII form does not preclude
a stockholder from voting in person. A stockholder may revoke a proxy at any
time prior to its exercise by submitting a new proxy at a later date, by
filing with the Secretary of Alliance (in the case of an Alliance stockholder)
or the Secretary of BGII (in the case of a BGII stockholder) a duly executed
revocation of proxy bearing a later date or by voting in person at the
relevant Meeting. Attendance at the relevant Meeting will not of itself
constitute revocation of a proxy.

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RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM

Alliance. Only holders of record of Alliance Common Stock at the close of
business on March 4, 1996 will be entitled to receive notice of and to vote at
the Alliance Annual Meeting. As of that date, there were 12,987,483 shares of
Alliance Common Stock outstanding. A majority of the outstanding shares of
Alliance Common Stock must be represented in person or by proxy at the
Alliance Annual Meeting in order for a quorum to be present.

BGII. Only stockholders of record of BGII Common Stock at the close of
business on March 3, 1996 will be entitled to receive notice of and to vote at
the BGII Annual Meeting. As of that date, there were 10,799,501 shares of BGII
Common Stock outstanding. A majority of the outstanding shares of BGII Common
Stock must be represented in person or by proxy at the BGII Annual Meeting in
order for a quorum to be present.

SOLICITATION OF PROXIES

Each of Alliance and BGII will bear the cost of the solicitation of proxies
from its own stockholders, except that Alliance and BGII will share equally
the cost of printing this Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of each of
Alliance and BGII may solicit proxies from stockholders of such company by
telephone or telegram or in person. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and Alliance and BGII will reimburse such custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
connection therewith.

BGII has retained Mackenzie Partners, Inc. to assist in the solicitation of
proxies for a fee of $15,000, plus reasonable out-of-pocket expenses.

STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.

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THE MERGER

GENERAL

The discussion in this Proxy Statement/Prospectus of the Merger and the
description of the principal terms of the Merger Agreement are subject to and
qualified in their entirety by reference to the Merger Agreement, a copy of
which is attached hereto as Annex I. While Alliance and BGII believe that such
description covers the material terms of the Merger Agreement, all
stockholders of Alliance and BGII are urged to read the Merger Agreement in
its entirety.

CONSIDERATIONS FOR ALLIANCE STOCKHOLDERS

Alliance stockholders should carefully consider all of the information set
forth in this Proxy Statement/ Prospectus, including the following factors:

Benefits of the Merger. Alliance believes that the Merger would represent
the acquisition, at a reasonable price, of a company that is a significant
factor, with a well-known name, in a related segment of the gaming industry,
where Alliance could apply its technological expertise to maximum effect as
contemplated in its business strategy. The Merger would make Alliance a much
bigger company with a higher profile in the gaming industry.

Risks and Adverse Effects of the Merger. Possible detriments of the Merger
for Alliance include that it will require incurrence of substantial amounts of
relatively high-cost debt and issuance of large amounts of equity; that BGII
is bigger than Alliance and operates in a sector of the gaming industry where
Alliance has little direct expertise, making implementation of the Merger
possibly more difficult; and that Alliance's technological capabilities have
not been tested and may not lead to commercially marketable enhancements in
BGII's product lines.

Conflicts of Interest. As described in "The Merger--Interests of Certain
Persons in the Merger", Joel Kirschbaum, a Director of and Consultant to
Alliance, Anthony DiCesare, a Director and Executive Vice President--
Development of Alliance and Craig Fields, Vice Chairman of the Alliance Board,
have certain interests in the Merger that are in addition to the interest of
Alliance stockholders generally, including the receipt by such persons of
certain Alliance securities if the Merger is consummated.

CONSIDERATIONS FOR BGII STOCKHOLDERS

BGII stockholders should carefully consider all of the information set forth
in this Proxy Statement/Prospectus, including the following factors:

Benefits of the Merger. In the Merger, BGII stockholders will receive
(assuming no change in the number of Converted Shares), in exchange for each
share of BGII Common Stock, $7.83 in cash, as well as $.30 of Alliance Common
Stock and $3.57 of Series B Special Stock.

Risks and Adverse Effects of the Merger. BGII stockholders should be aware
of risks and/or adverse effects arising in connection with the Merger
including risks related to (i) Alliance's operating history and recent losses,
(ii) the incurrence by Alliance of substantial amounts of relatively high-cost
debt and special stock and the issuance of large amounts of equity, (iii) the
volatility of the price of Alliance Common Stock due to low trading volumes,
limited research coverage and the potential issuance of large numbers of
additional shares of Alliance Common Stock on conversion or exercise of
outstanding options, warrants or convertible securities, (iv) the uncertainty
in whether a trading market for the Series B Special Stock will develop, the
pay-in-kind feature

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on such security, the limited remedies available if Alliance fails to redeem
the Series B Special Stock on the stated redemption date, the ability of
Alliance to issue securities senior in right of payment to the Series B
Special Stock and the inability of holders of Series B Special Stock to trade
fractional shares of such security on NASDAQ NMS, and (v) the possibility of
substantial dilution of interests of Alliance stockholders in light of the
number of outstanding options and warrants for 21,000,000 shares of Alliance
Common Stock. In addition, BGII is bigger than Alliance and operates in a
sector of the gaming industry where Alliance has little direct expertise,
making implementation of the Merger possibly more difficult, and Alliance's
technological capabilities have not been tested and may not lead to
commercially marketable enhancements in BGII's product lines. Moreover, BGII
stockholders should note that the ability of BGII stockholders to participate
in the growth of the combined entity will be rather limited since (i) former
stockholders of BGII will own approximately 3.0% of Alliance Common Stock
immediately following the consummation of the Merger and therefore will hold a
much smaller percentage of ownership in Alliance than they hold in BGII, with
less ability to have their stock ownership affect the election of directors
and other matters presented to stockholders generally and (ii) the Series B
Special Stock that former BGII stockholders will receive as part of the Merger
Consideration must be redeemed by Alliance no later than the eighth
anniversary of the date of its initial issuance. See "Risk Factors--Operating
History--Recent Losses", "--Financing Condition" and "--Alliance Options and
Convertible Securities".

Conflicts of Interest. In considering the recommendation of the BGII Board
with respect to the Merger and Related Proposals, BGII stockholders should be
aware that certain members of BGII's management and Board have certain
interests that are in addition to the interests of stockholders generally. See
"The Merger--Interests of Certain Persons in the Merger."

Termination of Merger Agreement. In the event the Merger Agreement is not
approved by BGII stockholders, BGII will terminate the Merger Agreement and
may be required to pay substantial termination fees and expenses. Upon
termination of the Merger Agreement, BGII will continue as an independent
publicly-traded corporation and may explore a strategic business combination
with other suitable companies. See "Risk Factors--Certain Considerations for
BGII Stockholders".

BACKGROUND OF THE MERGER

In the spring of 1993, Mr. Neil Nicastro, President and Co-Chief Executive
Officer of WMS, had separate meetings or telephone conversations with Mr.
Richard Gillman, Chairman of the Board and Chief Executive Officer of BGII,
Mr. Hans Kloss, a Director and the President and Chief Operating Officer of
BGII, Mr. Arthur Goldberg, a former director of BGII, and representatives of
FMR Corp. and related companies (which collectively hold all of BGII's $40
million Senior Secured Notes), in order to explore the possibility of a
business combination transaction between WMS and BGII. None of these
preliminary discussions led to any specific transaction proposals.

In December 1993, the BGII Board discussed the long-term benefits of BGII
combining with another entity in the gaming industry or other similar
regulated business. The BGII Board directed BGII management to prepare an
analysis of the relative benefits to BGII on a long-term basis of a business
combination versus BGII's growth potential on a stand alone basis. In January
1994, management orally presented such analyses to the Board. The analyses
focused on (i) the financial strength of competitors of BGII, (ii) BGII's
continuous need to access capital, (iii) the effect on BGII of the economic
recession in Europe and (iv) the rapidly changing technologies and competitive
environment. Management stated that competitors with better access to capital
could adversely affect BGII's ability to sell products at optimal terms.
Larger competitors would be able to produce products at lower cost. In
addition, larger competitors could market products on the basis of aggressive
financing terms. Management stated that BGII needed periodic infusions of cash
and that the incurrence of more debt would probably not be prudent at that
time. Management noted that although the majority of BGII's revenues had
historically been generated in Germany, the severe recession in Germany and
throughout Europe could erode BGII's revenue base, thereby affecting growth in
the U.S. Lastly, management stated that companies operating in fields related
to gaming could bring strength to gaming machine operations through their
technology and research and development capability. The Board then discussed
the issues raised by management, as well as the future development of the
gaming industry in general and its greater reliance on computer technology and
management information systems. The Board determined that in light of the
foregoing factors, a long term strategic partnership or business combination
would be in the best interests of BGII and its stockholders.

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Meetings between representatives of BGII and representatives of Alliance had
first occurred in November 1993 in contemplation of a potential transaction
between the two companies. In late November 1994 conversations once again
commenced between representatives of Alliance and representatives of BGII.
BGII and Alliance met a number of times beginning in November 1994 to consider
such a combination. However, BGII was unwilling to grant Alliance access to
the substantial amounts of confidential information it sought to evaluate the
proposed combination unless Alliance signed a confidentiality agreement
prohibiting Alliance from seeking control of BGII without its consent. Despite
extensive negotiations, BGII and Alliance were unable to agree on the terms of
such a provision, and no agreement in principle for a business combination was
reached.

In December 1994, Mr. Neil Nicastro determined to explore again the
possibility of a business combination transaction with BGII. Mr. Neil Nicastro
contacted representatives of Oppenheimer, WMS' investment bankers, and
requested that Oppenheimer make contact with Ladenburg, BGII's investment
bankers. Mr. Neil Nicastro also had a brief meeting in January 1995 with Mr.
Kloss to gauge BGII's possible interest in such a transaction.

In March 1995, representatives of WMS and BGII and their respective counsel
met to discuss the general terms of a transaction and the issues presented by
combining the companies. At that time, WMS indicated its interest in pursuing
a stock-for-stock transaction which BGII also indicated it would prefer.
Through Ladenburg, WMS was advised that it should make a formal written
proposal to BGII. On March 23, 1995, WMS delivered its written proposal to
BGII outlining the proposed terms and conditions for a merger of the two
companies. The letter set forth WMS's basic framework for a tax-free stock-
for-stock transaction at an exchange ratio in excess of 0.5 shares of WMS
Common Stock for each share of BGII Common Stock. The proposal was for the
exchange ratio to remain fixed and not subject to adjustment by reason of
changes in the market price of shares of either company. On March 27, 1995,
through its counsel, BGII informed WMS of its interest in pursuing a
transaction, but that BGII was not prepared to proceed on the terms set forth
in WMS' March 23, 1995 letter because the BGII Board did not believe that the
exchange ratio set forth therein reflected an adequate price for the
acquisition of BGII.

On April 10, 1995, Mr. Louis Nicastro, Chairman of the Board and Co-Chief
Executive Officer of WMS, and Mr. Neil Nicastro, along with WMS' counsel and
investment banker, met with BGII's Board of Directors. At the meeting, Mr.
Neil Nicastro gave a brief overview of WMS and its business and expressed his
interest in pursuing a transaction.

On April 14, 1995, Mr. Neil Nicastro, along with WMS' counsel and investment
banker, met with Messrs. Gillman and Kloss, as well as with BGII's counsel and
investment bankers. During this meeting general discussions were held
concerning a proposed transaction, the terms of a letter of intent to be
executed between the parties with respect thereto, as well as the due
diligence process to be conducted and an exclusivity period for further
negotiations.

During the next several days, WMS and BGII negotiated the terms of a letter
of intent. On April 17, 1995, WMS and BGII signed a letter of intent with
respect to a merger between the two companies in which stockholders of BGII
would receive at least 0.6 shares of common stock of WMS ("WMS Common Stock")
for each outstanding share of BGII Common Stock. The letter stated that WMS
would consider a higher exchange ratio should its due diligence review
indicate such a valuation was warranted. The letter of intent further provided
that the proposed merger was subject to, among other things, negotiation of a
mutually satisfactory form of definitive merger agreement and completion of a
satisfactory due diligence investigation by each party. The letter of intent
provided for a 25-day exclusivity period for negotiating the merger agreement.
The due diligence process was not completed within the 25-day exclusivity
period, but the parties continued negotiations. As a result of these
negotiations, BGII and WMS agreed to reduce the exchange ratio to 0.55 shares
of WMS common stock and to condition the merger on the disposition of Bally
Wulff under circumstances that could result in an additional distribution to
BGII's stockholders.

During the week of June 12, 1995, Alliance proposed to BGII to acquire BGII
for $12.50 per share in a combination of cash and Alliance Common Stock. On
June 19, 1995 Alliance made this proposal public. On

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June 19, 1995 WMS' representatives informed BGII that a merger agreement would
have to be executed no later than June 21, 1995 or WMS would terminate
negotiations with BGII.

In the evening of June 21, 1995, the BGII Board held a meeting to review the
current status of the WMS proposal. BGII's representatives reported on the
discussions with Alliance as well as the status of the negotiations with WMS.
The Board discussed each proposal at length. The Board was informed that on
the day that Alliance made public its proposal to acquire BGII for $12.50 per
share in a combination of cash and stock, Mr. Gillman had instructed Ladenburg
to arrange a meeting with Alliance's banks and to ascertain whether Alliance
and its banks were aware of and had considered certain due diligence issues
that WMS had already considered and incorporated into its proposal. Before
such meeting was arranged, Alliance's counsel informed BGII's counsel that
Alliance would insist on a mutual due diligence procedure as a condition to
allowing BGII to meet with Alliance's banks. However, BGII insisted upon
Alliance entering into a standstill agreement prior to its commencement of any
due diligence investigation. Since agreement could not be reached with respect
to a standstill provision, no progress had been made.

The Board discussed the terms of each of the transactions proposed by WMS
and by Alliance. With respect to the WMS transaction, the Board discussion
focused on the following terms: (i) the requirement that Bally Wulff be sold
or otherwise disposed of prior to closing, (ii) the requirement that the U.S.
operations of BGII be debt-free, (iii) the tax-free nature of the transaction,
and (iv) the lack of a collar or other parameters defining the exchange rate
at which shares of BGII Common Stock would be converted into shares of WMS
Common Stock. The BGII Board determined that the conditions set forth in
clauses (i) and (ii) above could be met and that given the proposed exchange
ratio and the trading history of WMS Common Stock, the lack of the parameters
set forth in clauses (iii) and (iv) was acceptable.

With respect to Bally Wulff, the Board discussions focused on the terms
under which the sale of Bally Wulff would satisfy the condition to closing and
whether a sale of Bally Wulff was possible under such terms. Representatives
of Ladenburg stated that they believed there were potential buyers that would
be willing to purchase Bally Wulff on such terms. Given the foregoing, the
BGII Board determined that the condition requiring the sale of Bally Wulff
could be met. The BGII Board did not direct Ladenburg or others to undertake
any action to confirm Ladenburg's belief that there were potential buyers of
Bally Wulff because it believed that it was premature to solicit interest in
purchasing Bally Wulff prior to BGII entering into a definitive agreement with
WMS which required the sale of Bally Wulff.

The Board also discussed the termination fee provisions within the WMS
proposal, and were advised that, based on research conducted by each of BGII's
and WMS' investment bankers, the fees of approximately 4% of the transaction
value were reasonable.

With respect to the Alliance Proposal, the Board discussed (i) the fact that
the Alliance Proposal was conditioned upon Alliance obtaining financing, (ii)
the value of the consideration being offered by Alliance given its recent
stock price, (iii) the ability of Alliance to pay the cash consideration
included in its offer in light of the fact that Alliance's financing
commitment was contingent on due diligence, (iv) the value of the Alliance
Common Stock to be issued in the transaction given the dilutive effect of such
issuance,(v) regulatory licensing issues surrounding the transaction and (vi)
the unwillingness of Alliance and its representatives to make available due
diligence materials to BGII or to sign a confidentiality and standstill
agreement with BGII in order to gain access to BGII confidential information.
Based on such discussions, as well as the Ladenburg opinion discussed below,
the Board determined that (i) the financing necessary for Alliance to
consummate the transaction was conditional, (ii) the value of the
consideration offered under the Alliance Proposal was less than that of the
consideration offered under the WMS proposal, (iii) Alliance's ability to pay
the cash portion of the consideration included in its offer was doubtful given
the conditional nature of Alliance's financing, (iv) the value of the Alliance
Common Stock to be issued in the transaction would be adversely impacted by
the dilutive effect of such issuance, (v) regulatory licensing issues
surrounding an Alliance/BGII combination could probably be resolved more
quickly than those with respect to a WMS/BGII combination (although not as
quickly as Alliance had publicly stated) and (vi) Alliance's unwillingness to
supply due diligence material to BGII or to sign a

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confidentiality and standstill agreement with BGII indicated its willingness
to acquire BGII in an unnegotiated takeover.

Ladenburg advised the Board with respect to each proposal. Ladenburg
rendered a fairness opinion with respect to the WMS Merger to the Board at
that meeting and indicated that it could not render an opinion that Alliance's
proposal was fair, from a financial point of view, to BGII's stockholders. For
a discussion of the June 21, 1995 Ladenburg opinion, see "The Merger--Prior
Opinions of BGII Financial Advisor." The BGII Board approved the WMS Agreement
and related proposals and recommended that the WMS Agreement and related
proposals be submitted to BGII stockholders for their approval. The WMS
Agreement was executed later that same night.

On June 30, 1995, Alliance filed with the Commission a Schedule 13D stating
that it had acquired approximately 9.3% of the outstanding shares of BGII
Common Stock. On July 25, 1995, Alliance announced its intention to commence a
tender offer and commenced litigation against BGII, its directors and WMS in
Delaware Chancery Court alleging that the BGII Board breached its fiduciary
duty in entering into the WMS Agreement (the "Alliance Action"). On July 28,
1995, Alliance commenced a tender offer for a number of shares of BGII Common
Stock sufficient to give Alliance beneficial ownership of a majority of such
shares. The offer (the "Alliance Offer") provided for Alliance to pay $12.50
in cash in the tender offer for 4,400,000 shares of BGII Common Stock
(representing approximately 45% of such shares outstanding, excluding shares
owned by Alliance) and to issue Alliance Common Stock in a back-end merger.
The shares of Alliance Common Stock issuable in such merger would be valued at
their average closing price for a period of 10 NASDAQ NMS trading days ending
five trading days prior to consummation of such merger, subject to an
appropriate collar, equal to the price paid in the tender offer. The Alliance
Offer was subject to a number of conditions, including Alliance's obtaining
financing.

On August 7, 1995, the BGII Board met to consider the Alliance Offer. At the
meeting, Ladenburg delivered its opinion that the transactions proposed by
Alliance were not as favorable as the WMS Merger, from a financial point of
view, to BGII's stockholders. Ladenburg also indicated that it could not
render an opinion regarding the fairness of the transactions proposed by
Alliance, from a financial point of view, to BGII's stockholders due to the
speculative nature and undefined collar on Alliance's proposal, as well as
Alliance's lack of disclosure regarding BGII's obligation to offer to repay
$40 million principal amount of debt resulting from a change of control and
disregard for BGII's non-compete agreement with BEC. For a discussion of the
August 7, 1995 Ladenburg opinion, see "The Merger--Prior Opinions of BGII
Financial Advisor." The Board's discussion of the Alliance Offer focused on
certain of the same factors raised during Ladenburg's presentation of its
opinion, including: (i) the value of the consideration offered being uncertain
and less than the value offered under the WMS Agreement, (ii) the ability of
Alliance to obtain the financing necessary to complete the Alliance Offer and
back-end merger being doubtful, (iii) the speculative nature and undefined
collar in the Alliance proposals, (iv) the lack of disclosure by Alliance
regarding BGII's obligation to offer to repay $40 million principal amount of
debt resulting from a change of control and the belief that Alliance had no
plan which would enable it to repay the $40 million, (v) Alliance's position
that the Alliance Offer would not result in a breach of BGII's non-compete
agreement with BEC and the lack of disclosure regarding Alliance's reasoning
underlying such position, and (vi) the Alliance Offer was a taxable
transaction to stockholders which would affect some BGII stockholders and not
affect others depending on the tax basis and status of individual BGII
stockholders. The BGII Board rejected the Alliance Offer as inadequate, highly
conditional and not in the best interests of BGII or its stockholders and
recommended that its stockholders reject the Alliance Offer.

On September 1, 1995, Alliance announced through a press release that it had
extended the expiration of the Alliance Offer to September 29, 1995 and that
it had accepted commitments for $65 million in financing for the Alliance
Offer which were not conditioned upon due diligence with respect to BGII.

On September 5, 1995, BGII commenced litigation against Alliance and its
directors alleging that Alliance had deliberately provided misleading
information to BGII stockholders, gaming regulators and the financial markets
in its tender offer documentation and seeking to enjoin the Alliance Offer
(the "BGII Action"). On or

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about September 6, 1995, WMS commenced an action in the United States District
Court, Southern District of New York (the "WMS Action"), seeking to enjoin the
Alliance Offer and to prevent alleged continuing and threatened violations by
Alliance of the Federal securities laws and other violations. The WMS Action
alleged that Alliance had made untrue statements and had omitted to state
material facts in its tender offer documents. WMS also alleged that Alliance
illegally and improperly interfered with the WMS Agreement.

On September 11, 1995, the Board of Directors of BGII adopted a Shareholder
Rights Plan which was later amended on October 10, 1995 (as amended, the
"Rights Plan"), pursuant to which BGII declared a dividend of one preferred
stock purchase right (a "Right") for each outstanding share of BGII Common
Stock, payable to stockholders of record on September 22, 1995. The Rights
Plan was adopted by the BGII Board to ensure that BGII's stockholders would
have an opportunity to select between the WMS Merger and the Alliance Offer.
By its terms, the Rights Plan will expire on the earlier of (i) June 30, 1996,
(ii) 60 days after a stockholders meeting at which a majority of BGII
stockholders fail to approve the WMS Agreement or (iii) December 31, 1995 if
no such stockholder meeting is held on or prior to such date. The Rights Plan
expired on December 31, 1995 in accordance with its terms.

On September 12, 1995, Alliance commenced its consent solicitation of BGII
stockholders seeking to remove the BGII Board, to elect a slate of nominees,
to repeal certain provisions of the BGII Bylaws and to increase the quorum
requirement for certain stockholder meetings to 90% (the "Consent
Solicitation").

On September 13, 1995, BGII mailed a letter from the Chairman of the Board
dated September 12, 1995, to BGII's stockholders and issued a press release
(the "September 13 Materials"), each of which urged BGII stockholders to
reject the Alliance Offer. As of September 13, 1995, Alliance had not proposed
a collar which would determine the amount of Alliance Common Stock to be
issued in the back-end merger. The BGII Board believed that absent the
parameters of the collar, BGII stockholders could not make an informed
decision regarding the amount of consideration to be issued in the back-end of
the Alliance proposal and specifically, whether Alliance's representation that
BGII stockholders would receive $12.50 worth of Alliance Common Stock was
meaningful. The BGII Board also expressed concerns regarding the terms of the
bridge financing with which Alliance planned to acquire BGII.

On September 20, 1995, Alliance issued a press release announcing that it
had increased the number of shares of BGII Common Stock to be purchased in the
Alliance Offer to 5,400,000 and increased the offer price to $13.00 in cash
net to the seller. In a second press release issued by Alliance on September
21, 1995, Alliance stated that it had established the collar for the exchange
ratio applicable to the second-step merger in its proposed acquisition of
BGII. Alliance stated that for each share of BGII Common Stock, BGII
stockholders would receive $13.00 worth of Alliance stock valued by averaging
the closing price of Alliance Common Stock for a period of ten NASDAQ trading
days ending five trading days prior to the closing of such merger, but in no
case more than 3.059 shares nor less than 2.167 shares of Alliance Common
Stock (the "Alliance Collar").

On September 21, 1995, BGII issued a press release which urged its
stockholders not to tender their shares to Alliance and not to sign Alliance's
Consent Solicitation until the BGII Board had had an opportunity to review the
revised offer.

On September 25, 1995 BGII issued a press release announcing that WMS was
prepared to increase the exchange ratio used to determine the merger
consideration payable under the WMS Agreement from .55 of one share of WMS
Common Stock to .625 of one share of WMS Common Stock for each share of BGII
Common Stock (the "Revised WMS Proposal"). The terms of the Revised WMS
Proposal also included amending the condition to the WMS Merger regarding the
disposition of Bally Wulff to require that Bally Wulff be sold prior to the
WMS Merger for a minimum sales price of $60 million of net proceeds to BGII,
all of which would be retained by the merged entity. In addition, such
disposition would be required to be effected as a sale of Bally Wulff. These
terms differed from the WMS Agreement which required that Bally Wulff be sold
for a minimum of $55 million of net proceeds to BGII and that proceeds from
such sale in excess of $55 million would be distributed to stockholders. In
addition, the terms of the Revised WMS Proposal differed from the WMS

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Agreement in that the proposal did not permit the spin-off of Bally Wulff as
an alternative to its sale. The Revised WMS Proposal also required that the
obligation of BGII to pay WMS fees and expenses of up to $4.8 million under
certain circumstances upon termination of the Merger Agreement be secured.
Lastly, the Revised WMS Proposal required that the payments to be made to
Messrs. Gillman, Kloss and Jenkins upon the closing of the Merger representing
payments under their respective Performance Units and/or Stock Payment Right
awards would be based on an exchange ratio at the time of vesting equal to .55
of one share of WMS Common Stock rather than the increased exchange ratio of
.625 of one share of WMS Common Stock.

On September 26, 1995, the BGII Board met to consider (i) the Alliance Offer
as amended, to purchase 5,400,000 shares of BGII Common Stock at a price net
in cash to the seller of $13.00, upon the terms and conditions set forth in
the Offer to Purchase, dated July 28, 1995 and Supplement thereto, dated
September 22, 1995 and the related Letter of Transmittal (which together
constituted the "Revised Alliance Offer") and (ii) the Revised WMS Proposal.
In considering the conditional nature of the Revised WMS Proposal, the BGII
Board identified the likelihood of selling Bally Wulff for $60 million of net
proceeds as a critical factor in determining whether the proposal could
progress to a definitive agreement and ultimately the effectuation of the WMS
Merger. As of the date of the meeting, BGII had met with a group of investors,
led by Mr. Hans Kloss, President and Chief Operating Officer of BGII and
Managing Director of Bally Wulff, and the group's potential financing sources
concerning their interest in purchasing Bally Wulff. Such group had indicated
an interest in purchasing Bally Wulff for $60 million in cash net to BGII. The
BGII Board considered Mr. Kloss' group the most likely potential purchaser
since Mr. Kloss' knowledge of Bally Wulff permitted him to proceed quickly and
his investor group's offer met the conditions of the Merger Agreement. At the
meeting Mr. Kloss reported to the BGII Board that his group was willing to
purchase Bally Wulff for $60 million net proceeds subject to negotiation of a
definitive purchase agreement. Mr. Kloss also reported to the BGII Board that
he believed there were few outstanding issues concerning the sale, each of
which could be resolved in a timely manner. Based on the foregoing, the BGII
Board determined that the Revised WMS Proposal, although not a firm offer, was
a proposal which could be reduced to a definitive agreement in a timely manner
and that the conditions to the consummation of such agreement could be
satisfied.

The BGII Board compared the consideration to be received by BGII
stockholders under the Revised WMS Proposal and the terms of the WMS
Agreement. Based on the closing price of $21 3/8 of WMS Common Stock on
September 26, 1995 and assuming Bally Wulff was sold for $60 million of net
proceeds, BGII stockholders would receive $13.36 of WMS Common Stock under the
Revised WMS Proposal as opposed to $11.76 of WMS Common Stock and $.44 cash
(from the distribution of certain proceeds from the sale of Bally Wulff) under
the WMS Agreement. The BGII Board determined that the $13.36 worth of WMS
Common Stock was preferable to the $12.20 represented by the combination of
WMS Common Stock and cash. At the meeting, Ladenburg delivered its opinion
that the terms of the Revised Alliance Offer, including the terms of the
proposed merger as set forth in Amendment No. 12 to the Schedule 14D-1 filed
with the Commission on September 22, 1995, were not as favorable as the
Revised WMS Proposal, from a financial point of view, to BGII's stockholders.
The BGII Board determined that the Revised WMS Proposal offered greater
economic value to BGII's stockholders than the Revised Alliance Offer and
recommended that its stockholders reject the Revised Alliance Offer. In
reaching its decision that the Revised WMS Proposal offered greater economic
value to BGII stockholders than the Revised Alliance Offer, the BGII Board
considered the following. The increase of the exchange ratio to determine
merger consideration from .55 to .625 of one share of WMS Common Stock would
result in BGII stockholders receiving consideration worth $13.36, based on the
closing price of WMS Common Stock on September 26, 1995, which would be
greater than the $13.00 in cash and Alliance Common Stock proposed under the
Revised Alliance Offer. The collar proposed under the Revised Alliance Offer
would not protect BGII stockholders from receiving less than $13.00 per share
if the value of Alliance stock falls below $4.25. The BGII Board considered
the value of Alliance Common Stock in light of the high costs of Alliance's
financing and Alliance's existing capital structure. The BGII Board also
considered the opinion of Ladenburg that the terms of the Revised Alliance
Offer, including the terms of the proposed merger as set forth in the Schedule
14D-1, were not as favorable as the Revised WMS Proposal, from a financial
point of view, to BGII's stockholders.

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Representatives of BGII and WMS continued to negotiate the definitive terms
of the Revised WMS Proposal throughout the period of October 2, 1995 to
October 17, 1995, and negotiations between Mr. Hans Kloss' investor group and
WMS concerning the sale of Bally Wulff continued during this period as well.
Negotiations between WMS and BGII focused on the requirement that the
obligation of BGII to pay WMS fees and expenses of up to $4.8 million under
certain circumstances upon termination of the WMS Merger Agreement be secured.
BGII investigated various methods of securing such payment obligations,
including the use of Gaming's line of credit, obtaining a letter of credit or
dividending cash from Bally Wulff to BGII for such purposes. Gaming's lender
would not permit the line of credit to be used for such purposes, and the BGII
Board determined that the remaining alternatives were either too costly or
commercially impracticable. Therefore BGII attempted during negotiations to
persuade WMS to revise the security condition to the Revised WMS Offer. In
addition, negotiations between WMS and BGII focused on the condition requiring
the sale of Bally Wulff. The terms of such sale as contemplated under the
Revised WMS Offer would require any purchaser to agree not to compete. BGII
attempted to persuade WMS to agree to more flexible terms with respect to such
sale as BGII believed that such flexibility would enhance the ability of BGII
to complete such a sale. The requirement that the payments to be made to
Messrs. Gillman, Kloss and Jenkins be based on an exchange ratio of .55 rather
than .625 was considered by the BGII Board to be an issue to be negotiated and
resolved between Alliance and each of Messrs. Gillman, Kloss and Jenkins and
did not affect the BGII Board's conclusion with respect to the Revised WMS
Proposal.

Negotiations between WMS and Mr. Kloss' investor group concerning the sale
of Bally Wulff concerned a number of issues, including (i) whether the
purchaser would be subject to non-competition provisions or limitations on the
use of the "Bally" trademark, (ii) which party would bear the risk for
currency exchange rate fluctuations, (iii) whether Bally Wulff would be
permitted to dividend or otherwise transfer cash to BGII during the period
between the execution of a purchase agreement and closing, and (iv) whether
certain deductions, such as transaction expenses, were to be made from the
gross purchase price to determine whether the minimum net proceeds condition
was met. No definitive agreement had been reached among the parties with
respect to any of the foregoing issues.

On October 11, 1995, counsel for Alliance sent a letter to counsel for BGII,
proposing a transaction on the following terms in an effort to settle pending
litigation (the "Alliance Proposal"). The transaction proposed pursuant to
such letter provided that among other things, (i) BGII would terminate the WMS
Agreement and Alliance would terminate the Alliance Offer and its Consent
Solicitation, (ii) BGII and Alliance would enter into a merger agreement
providing for the merger of BGII with and into Alliance, such merger to be a
cash election merger in which 5,900,000 shares of BGII Common Stock would be
exchanged for $13.00 cash and the remainder to be exchanged for $13.00 worth
of Alliance Common Stock, determined in the manner and subject to the collar
set forth in the Alliance Offer, and (iii) Alliance's obligation to consummate
the merger would be subject to Alliance obtaining permanent financing.

The BGII Board was apprised of the Alliance Proposal at a meeting of the
Board of Directors held on October 13, 1995. At such meeting, the Board
reviewed the status of negotiations with WMS concerning the Revised WMS
Proposal. The Board was informed that Ladenburg, on BGII's behalf, was
negotiating with several groups regarding the sale of Bally Wulff. A
significant due diligence investigation had been conducted in late August 1995
by one such group, a foreign strategic buyer, which had with its legal and
financial representatives met with Bally Wulff management as well as
representatives of BGII at Bally Wulff's facilities in Germany. Discussions
with such foreign strategic buyer ended when it indicated that its bid for the
purchase of Bally Wulff would be below the $55 million net proceeds condition
of the WMS Agreement. Preliminary discussions at Bally Wulff's facilities had
also been held in the fall of 1995 with a foreign financial buyer. Such buyer
had indicated an interest in purchasing Bally Wulff at a price of
approximately $60 million subject to further due diligence and an agreement by
BGII and its successors to indemnify such buyer against certain breaches of
representations for a period of two years following the closing. Discussions
with the foreign financial buyer were terminated because of restrictions WMS
imposed on BGII preventing it from meeting certain terms requested by the
potential buyer regarding indemnification, non-compete and trade name issues.
In addition, in

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the fall of 1995 a U.S. financial buyer had indicated an interest in
purchasing Bally Wulff and had received certain preliminary information and a
draft sale agreement. No preliminary negotiations commenced with the U.S.
financial buyer because it indicated an interest very late in the sale process
and it had not yet performed due diligence or made a bid.

In addition, Mr. Kloss reported to the Board that negotiations between his
investor group and WMS regarding the sale of Bally Wulff had been slowed by
additional terms recently presented by WMS and received unfavorably by his
investor group. It was reported to the Board of Directors that no progress had
been made in structuring security for the $4.8 million termination fee under
the WMS Agreement and that WMS had not agreed to forego this condition. Based
on the foregoing, the Board considered it likely that a definitive agreement
would not be reached with respect to the Revised WMS Proposal. Ladenburg
reported to the Board that the economic value to stockholders of each of the
Alliance Proposal and the WMS Merger Agreement was substantially equivalent.
Ladenburg was not requested to, and did not, deliver a fairness opinion with
respect to the Alliance Proposal at this time. Subsequently, Ladenburg
delivered an oral opinion on October 17 and a written opinion on November 3
that the Alliance Proposal, from a financial point of view, is fair to BGII
stockholders. On the basis of the foregoing, the Board authorized
representatives of BGII to discuss and negotiate with Alliance the terms of
the Alliance Proposal.

During the period between October 13 and October 17, representatives of
Alliance and BGII met to negotiate with respect to the Alliance Proposal. The
principal areas of negotiation included the amount of and the conditions under
which a fee would be payable in connection with termination of the Merger
Agreement, the extent to and conditions under which either party would be
entitled to reimbursement for expenses in connection with such termination,
the terms of the Financing Condition, the terms of the indemnity that would
protect BGII and its officers and directors from a claim by WMS for the
breakup fee under the WMS Agreement and the duration and scope of Alliance's
agreement not to seek control of BGII following termination of the Merger
Agreement. Negotiations with respect to the Financing Condition were driven by
the BGII Board's concern with the financial stability of the combined company
following the Merger. Representatives of Alliance had informed BGII that
Alliance intended to raise $150,000,000 to $200,000,000 of financing in
connection with the Merger. Given the magnitude of such amount, the BGII Board
believed that the terms of the Financing Condition (applicable to $150,000,000
of such financing) would permit the combined company to raise the intended
financing without jeopardizing its financial viability. See "Certain
Provisions of the Merger--Conditions to Consummation of the Merger".

On October 17, 1995 the BGII Board met to consider the Alliance Proposal in
light of the negotiations which had occurred since the previous Board meeting.
The Board was advised that with respect to the sale of Bally Wulff no progress
had been made since the previous meeting. The Board determined that in light
of the lack of progress with respect to the sale of Bally Wulff, it was likely
that the Revised WMS Offer could not be negotiated to a definitive agreement
and that the present WMS Agreement would never close. Ladenburg orally
delivered its opinion to the BGII Board that the Alliance Proposal, from a
financial point of view, is fair to BGII stockholders. The Board then
discussed the status of negotiations with Alliance and directed
representatives to continue such negotiations.

The BGII Board reconvened on the evening of October 17 and was updated on
the status of negotiations with Alliance. After lengthy discussions concerning
the terms of the Merger Agreement, the Board approved the Merger Agreement and
Related Proposals and recommended that the Merger Agreement and Related
Proposals be submitted to BGII stockholders for their approval. In reaching
its decision, the Board considered the following factors: (i) the number of
shares for which cash consideration would be paid increased from 5,400,000
shares under the Alliance Offer to 5,900,000 under the Merger Agreement; (ii)
the terms of the Alliance permanent financing which are included in the Merger
Agreement as a condition to closing would permit the combined entity the
opportunity to operate and grow; (iii) the Exchange Ratio was subject to a
collar; and (iv) BGII stockholders would retain their ability to benefit from
the growth of BGII through their stock ownership of the combined entity after
the Merger. In its analysis of the foregoing factors the BGII Board took into
account certain risks and adverse effects to BGII stockholders associated
therewith and described herein under the caption "Risk

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Factors--Implementation of the Merger"; "--Operating History--Recent Losses";
"--High Leverage and Fixed Charges after the Merger"; "--Working Capital"; "--
Tax Considerations"; "--Alliance Options and Convertible Securities"; "--
Volatility of Stock Price"; "--Alliance and BGII Conflicts of Interest"; "--
Absence of Special Committee"; "--Certain Considerations for BGII
Stockholders"; "--Competition with Customers"; "--Competition"; "--Customer
Financing"; "--Departure of BGII Management"; "--Bally Tradename"; and "--
Litigation"; and "The Merger--Considerations for BGII Stockholders". Despite
such risks and adverse effects, the Board approved the Merger and Related
Proposals.

In view of the fact that the Revised WMS Offer was subject to conditions
that BGII was unable or unwilling to fulfill, the Board determined that it was
not representative of the value to be received upon a sale of BGII. Therefore,
Ladenburg considered only the terms of the WMS Agreement in evaluating the
fairness of the Merger Consideration. In addition, the BGII Board considered
only the terms of the WMS Agreement in evaluating Ladenburg's opinion and the
terms of the Merger Agreement and concluding that the Merger Consideration was
a fair price for BGII.

On October 18, 1995, the Merger Agreement was executed by the parties
thereto. Subsequently, Alliance terminated the Alliance Offer and its Consent
Solicitation and withdrew the Alliance Action, and BGII withdrew the BGII
Action.

On December 11, 1995, the Board of BGII approved an amendment to the Merger
Agreement to delete a cash election feature and add provisions with respect to
appraisal rights of BGII stockholders that had been in the Merger Agreement as
originally executed.

The BGII Board considered the following factors during its discussion of the
amendment to the Merger Agreement. BGII representatives believed that the cash
election would be exercised by vast majority of BGII stockholders resulting in
a pro ration of the cash consideration among all stockholders making such
election. BGII representatives also believed that smaller individual
stockholders, due to problems with respect to the completion and return of the
appropriate forms, were more likely to comprise stockholders not electing to
participate in the cash election. The amendment would eliminate the risk that
smaller stockholders would be omitted from the proration pool of the cash
consideration by inadvertently failing to make a cash election, by providing
that (i) the aggregate cash and stock consideration paid to BGII stockholders
remain unchanged, (ii) the cash election feature of the originally executed
Merger Agreement be deleted and (iii) the receipt by each stockholder of the
per share cash and stock consideration which it would have received under the
originally executed agreement had the cash election been made with respect to
all outstanding shares of BGII Common Stock. Ladenburg advised the BGII Board
that the elimination of the cash election feature does not affect the value of
the aggregate consideration delivered to BGII stockholders and therefore
Ladenburg would not deliver a separate fairness opinion with respect to the
amendment to the Merger Agreement. The Board accepted Ladenburg's analyses as
reasonable. The BGII Board approved the amendment in order to ensure that each
stockholder of BGII will receive the same amount and form of consideration per
share in the Merger.

In late December 1995, representatives of Alliance proposed a restructuring
of the transactions contemplated under the Merger Agreement in order to
increase the certainty of Alliance's ability to raise necessary financing, and
in turn, consummate the Merger Agreement. Representatives of BGII informed
Alliance that they were willing to discuss alternative structures, but BGII
would not accept a restructuring which reduced the amount of cash
consideration delivered to BGII stockholders. On this basis, representatives
of Alliance and BGII negotiated the terms of the Merger Consideration under
the Merger Agreement as presently in effect. In addition, changes to the
treatment in the Merger of BGII employee stock options as well as the terms of
the standstill provisions were negotiated. With respect to changes to the
terms of the BGII employee stock options, the terms of the original Merger
Agreement had provided that upon the Effective Time (i) each BGII option would
be exercisable for that whole number of shares of Alliance Common Stock
(rounded up to the nearest whole share) into which the number of shares of
BGII Common Stock subject to such option immediately prior to the Effective
Time would be converted, at an option price equal to the per share option
price prior to the Effective Time divided by

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the Exchange Ratio (as defined below) and (ii) the terms regarding termination
and expiration of the options were the same as appear in the amended Merger
Agreement. For purposes of the foregoing, "Exchange Ratio" means a number of
shares of Alliance Common Stock determined by dividing (x) $13.00 by (y) the
Average Alliance Trading Price (calculated in substantially the same method as
under the amended Merger Agreement); provided however, that the Exchange Ratio
shall not be greater than 3.059 or less than 2.167. See "BGII Plans and
Amendments" for a description of the present treatment of BGII options. Upon
request by Alliance, management of BGII and Alliance prepared updated seven
year projections to correspond with the seven year debt financing.

On January 15, 1996, the BGII Board was advised of the negotiations with
respect to the amendment to the Merger Agreement. During its discussion
regarding the amended Merger Agreement, the BGII Board considered that the
values of the Merger Consideration under the original and amended Merger
Agreement. Given the recent trading prices of Alliance Common Stock, the
Merger Consideration under the original Merger Agreement would be valued at
approximately $11.70. The Merger Consideration under the amended Merger
Amendment would be valued at $11.70, consisting of (i) $7.83 in cash, (ii)
$3.57 of Series B Special Stock and (iii) $.30 of Alliance Common Stock. The
Board also noted that (i) under the original and amended Merger Agreement, the
cash consideration remained the same at $7.83, (ii) the $3.57 of Series B
Special Stock to be issued under the amended Merger Agreement was senior to
the Alliance Common Stock, a fact which the Board considered important in
light of Alliance's capitalization and (iii) the $.30 of Alliance Common Stock
allowed BGII stockholders to retain an ability to benefit from any continued
growth of BGII through their stock ownership of the combined entity after the
Merger. The BGII Board also considered the lack of a collar with respect to
the pricing mechanism for the Alliance Common Stock and the BGII Board agreed
that negotiations should continue regarding the amended Merger Agreement.

On January 17, 1996, the BGII Board met to consider the amended Merger
Agreement. Ladenburg orally delivered its opinion to the Board that the Merger
Consideration under the amended Merger Agreement, from a financial point of
view, is fair to BGII stockholders. After lengthy discussion concerning the
terms of the amended Merger Agreement, the Board approved the amended Merger
Agreement and Related Proposals and recommended the Merger Agreement and
Related Proposals be submitted to BGII stockholders for their approval. In
reaching its decision, the Board considered the following factors: (i) the
$11.70 value of the Merger Consideration under the amended Merger Agreement
approximates the market value of the Merger Consideration under the original
Merger Agreement; (ii) the Cash Consideration under the amended Merger
Agreement is the same as under the original Merger Agreement; (iii) the
Alliance Series B Special Stock is senior in right of payment to the Alliance
Common Stock; (iv) the restructuring facilitates Alliance's ability to raise
the financing necessary to close the Merger and therefore increases the
certainty that the Merger will close; (v) the pricing of the Series B Special
Stock for purposes of the Merger would be based on the price of such security
to the public in a contemporaneous underwritten offering; and (vi) the pricing
mechanism for the Alliance Common Stock to be issued in the Merger is not
subject to a collar and therefore BGII stockholders are protected against any
further reduction in the price of Alliance Common Stock prior to the Effective
Date.

On January 23, 1996, the Alliance Board met to consider the amended Merger
Agreement, including the deletion of the cash election feature and addition of
provisions with respect to appraisal rights and the restructuring of the
transaction described above. After lengthy discussion concerning the terms of
the amended Merger Agreement, the Board approved the amended Merger Agreement
and recommended that the amended Merger Agreement be submitted to Alliance
stockholders for their approval. In reaching its decision, the Board
considered the following factors: (i) the $11.70 value of the Merger
Consideration under the amended Merger Agreement approximates the market value
of the Merger Consideration under the original Merger Agreement; (ii) the
decrease in the amount of Alliance Common Stock from as much as approximately
12 million shares under the original Merger Agreement to approximately 784,000
under the amended Merger Agreement and the inclusion of the Series B Special
Stock results in less dilution of the Alliance Common Stock than under the
original Merger Agreement, which enhances the possibility of Alliance
obtaining financing on terms acceptable to Alliance and therefore increases
the likelihood of the Merger being consummated; and (iii) the dividends on the
Series B Special Stock do not have to be paid in cash, except that following
the first dividend payment date following the fifth anniversary of the
Effective Time until the first dividend payment date following the seventh
anniversary of the Effective Time, such dividend is partially payable in cash
and following that until redemption, the dividend is payable entirely in cash.

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ALLIANCE'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE ALLIANCE BOARD OF
DIRECTORS

The Alliance Board believes that the Merger is consistent with, and in
furtherance of, the long term business strategies of Alliance and is fair to,
and in the best interests of, Alliance and its stockholders. While it is not
possible to fully quantify the benefits that will result from the Merger, the
Alliance Board believes that a combination of Alliance and BGII will result in
a larger combined business and give Alliance stockholders the opportunity to
participate in a company covering a wider spectrum of gaming interests. The
combined company will have a reasonable capital structure and capital for
future growth. The synergies that should result from combining Alliance's and
BGII's respective businesses should result in overhead cost savings of $5
million on an annual basis because of greater efficiencies and better
utilization of staff and facilities. Although BGII operates in a sector of the
gaming industry where Alliance has little direct expertise, making
implementation of the Merger possibly more difficult, combining Alliance's
ideas for technological improvement and BGII's market share should make the
merged company more competitive in the gaming machine market. While Alliance's
technological capabilities have not been tested or resulted in significant
product development for Alliance, and may not lead to commercially marketable
enhancements in BGII's product lines, the Board considered in its
determination that the combination of Alliance and BGII is consistent with
Alliance's strategic plan to use technology to improve gaming's entertainment
value and security. With the combination of BGII's product lines and
distribution and Alliance's technological capabilities, the Board believes
that the combined company can be a key supplier in filling the growing demand
for innovative products in the gaming industry, thus maximizing stockholder
value, although there can be no assurance that this will be the case. See
"Risk Factors--Implementation of the Merger" and "--Product Development". The
Alliance Board believes that all of the factors listed above support the
fairness of the Merger to Alliance and its stockholders and believes that all
such factors support its recommendations that stockholders approve and adopt
the Merger Agreement. In considering the recommendation of the Alliance Board,
Alliance stockholders should be aware that certain members of Alliance's
management and the Alliance Board have interests in the Merger that are in
addition to the interests of Alliance stockholders generally. The Alliance
Board was aware of these interests and considered them, among other matters,
in approving the Merger Agreement and the transactions contemplated thereby.
See "Interests of Certain Persons in the Merger".

BGII'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BGII BOARD OF DIRECTORS

The BGII Board believes that the Merger is in the best interests of BGII and
its stockholders. In 1994 the BGII Board determined that a long-term strategic
partnership or business combination would be in the best interests of BGII and
its stockholders. In June 1995, BGII entered into the WMS Agreement. At the
meeting in which the Board approved the original Merger Agreement, the Board
had determined for reasons discussed under "Background of the Merger" that a
merger with WMS was unlikely to occur. In light of the foregoing, the BGII
Board considered the following factors during their deliberation with respect
to the original Merger Agreement: (i) the number of shares for which cash
consideration would be paid increased from 5,400,000 shares under the Alliance
Offer to 5,900,000 under the Merger Agreement; (ii) the terms of the Alliance
permanent financing which are included in the Merger Agreement as a condition
to closing would permit the combined entity the opportunity to operate and
grow; (iii) the Exchange Ratio was subject to a collar; and (iv) BGII
stockholders would retain their ability to benefit from the growth of BGII
through their stock ownership of the combined entity after the Merger. The
foregoing factors set forth in clauses (i) through (iii) above, as well as
Ladenburg's opinion, support the BGII Board's determination with respect to
the fairness of the Merger to the BGII stockholders. The BGII Board based its
decision to approve and recommend to stockholders the Merger Agreement on its
determination with respect to the fairness of the Merger, as well as (i) its
prior determination that a long-term strategic partnership is in the best
interest of BGII and its stockholders and (ii) BGII stockholders would retain
their ability to benefit from the continued growth of BGII through their stock
ownership of the combined entity after the Merger. The BGII Board considered
the following factors during their deliberation with respect to the amended
Merger Agreement: (i) the $11.70 value of the Merger Consideration under the
amended Merger Agreement approximates the market value of the Merger
Consideration under the original Merger Agreement; (ii) the Cash Consideration
under the amended Merger Agreement is the same as under the original Merger
Agreement; (iii) the Series B Special Stock is senior in right of payment to
the Alliance Common Stock; (iv) the

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restructuring facilitates Alliance's ability to raise the financing necessary
to close the Merger and therefore increases the certainty that the Merger will
close; (v) the pricing of the Series B Special Stock for purposes of the
Merger would be based on the price of such security to the public in a
contemporaneous underwritten public offering; and (vi) the pricing mechanism
for the Alliance Common Stock to be issued in the Merger is not subject to a
collar. The foregoing factors set forth in clauses (i) through (vi) above, as
well as Ladenburg's opinion, support the BGII Board's determination with
respect to the fairness of the Merger to the BGII stockholders. In determining
fairness from a financial point, the BGII Board relied on the opinion of
Ladenburg rather than the projections presented to the BGII Board by BGII
management or Ladenburg, since such determination with respect to fairness is
related to an array of qualitative and quantitative factors of which
projections form only one component, and Ladenburg had, as the BGII Board's
financial advisors, made a thorough review of such factors, including the
projections, in order to deliver its opinion to the BGII Board. See "Opinion
of BGII Financial Advisor." The BGII Board based its decision to approve and
recommend to stockholders the Merger Agreement on its determination with
respect to the fairness of the Merger, as well as its prior determination that
long-term strategic partnership is in the best interest of BGII and its
stockholders.

The Board also considered that adopting the option plan proposals and
amending the employment agreements of Messrs. Gillman and Jenkins are
conditions to the Merger. The Board noted that certain members of BGII's
management and Board had interests in the Merger and the Related Proposals
that are in addition to BGII stockholders generally. Each of Messrs. Gillman,
Kloss and Jenkins are parties to employment agreements and hold performance
unit awards which contain "change of control" provisions. In addition, all of
the Board members and senior management of BGII hold options which would be
affected by the option plan amendments. See "Interests of Certain Persons in
the Merger". Messrs. Gilman and Jenkins, under their respective employment
agreements which were entered into in 1994, are entitled to certain
termination payments upon approval of the Merger by BGII stockholders. During
the period in which BGII and Alliance negotiated the original Merger
Agreement, Alliance and representatives of Messrs. Gillman and Jenkins
negotiated the terms of the termination payments to be received by them in
connection with the Merger. Alliance consented to the payment of cash and
Alliance Common Stock with the aggregate value of $8,000,000 and $1,320,000
with respect to Messrs. Gillman and Jenkins, respectively. The Merger
Agreement provides that the above-described payments to Mr. Gillman and Mr.
Jenkins are subject to approval by BGII. The BGII Board has approved the cash
payment of $5,000,000 to Mr. Gillman, and the above-described payment to Mr.
Jenkins. Mr. Kloss and Alliance have agreed that at the Effective Time he will
receive $1,500,000 in cash and $3,000,000 in Alliance Common Stock (valued at
the Alliance Average Trading Price, provided, however, that the Alliance
Average Trading Price will not be deemed greater than $6.00 or less than
$4.25) and that he would continue as president of Gaming for a period of one
year at a salary of $250,000 per annum. Mr. Kloss and Alliance have also
agreed that his current employment arrangement with Bally Wulff would continue
until the end of its term in May 1998 and that Mr. Kloss would be entitled to
certain bonus payments based on future performance. Although Messrs. Gillman
and Jenkins would be entitled under their respective employment agreements to
receive termination payments upon approval of the Merger by BGII stockholders,
each has agreed to waive such rights if the Merger is not consummated. A total
of 565,000 options (covering shares with a value of $6,610,500 assuming a BGII
Common Stock price of $11.70 and without taking into account the exercise
price of such options) are held by officers and directors of BGII and affected
by the option plan amendments contemplated under the Merger Agreement.

Although the BGII Board agreed in the Merger Agreement not to solicit other
bids for the sale of BGII, it considered that the Merger Agreement permits the
Board to negotiate with third parties submitting unsolicited bona fide offers
to acquire BGII to the extent that failure to do so would be a breach of the
directors' fiduciary duties to BGII stockholders. Ladenburg, at the request of
the Board, responded to parties that had contacted BGII and were interested in
a possible transaction with BGII. With the exception of WMS and Alliance, no
other potential acquirors made any offer to acquire BGII. Further, in addition
to the effort made by BGII, the marketplace was aware of BGII's interest in
such a transaction for a long time, but BGII received no other unsolicited
bids.

The BGII Board by unanimous vote (i) determined that the Merger Agreement
and Related Proposals are consistent with, and in furtherance of, the long-
term business strategies of BGII and are fair to, and in the best

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interest of, the holders of BGII Common Stock, (ii) determined that the Merger
Consideration is fair, from a financial point of view, to the holders of the
BGII Common Stock, (iii) approved and adopted the Merger Agreement and Related
Proposals and (iv) recommended approval and adoption of the Merger Agreement
and Related Proposals by the holders of BGII Common Stock.

FORM OF THE MERGER

If the Alliance stockholder and BGII stockholder approvals are obtained and
all other conditions to the Merger are satisfied or waived, the Merger
Subsidiary will be merged with and into BGII, the separate existence of the
Merger Subsidiary will cease and BGII will continue as the surviving
corporation and a wholly owned subsidiary of Alliance. All property, rights,
privileges, powers and franchises of BGII and the Merger Subsidiary will vest
in the surviving corporation and all debts, liabilities and duties of BGII and
the Merger Subsidiary will become debts, liabilities and duties of the
surviving corporation. The Certificate of Incorporation and By-laws of BGII
will be the Certificate of Incorporation and By-laws of the surviving
corporation. The directors and officers of the Merger Subsidiary will be the
directors and officers of the surviving corporation.

MERGER CONSIDERATION

At the Effective Time, all outstanding shares of BGII Common Stock (other
than those held by stockholders who have perfected appraisal rights under the
DGCL) will cease to be outstanding, and subject to the terms, conditions and
procedures set forth in the Merger Agreement, holders of shares of BGII Common
Stock will receive for each share of BGII Common Stock (i) an amount of cash
(the "Cash Consideration") determined by dividing $76,700,000 by the number of
shares of BGII Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares which are held by BGII, Alliance or their
respective subsidiaries) ("Converted Shares"), (ii) a fraction of a share of
Alliance Common Stock equal to the quotient of $.30 and the Alliance Average
Trading Price and (iii) that number of shares (or fractions thereof) of Series
B Special Stock, having a value as determined in accordance with the Merger
Agreement equal to $11.40 less the Cash Consideration. The "Alliance Average
Trading Price" means the average daily closing price per share, rounded to
three decimal places, of Alliance Common Stock as reported through the NASDAQ
NMS for ten consecutive trading days ending on (and including) the third
trading day prior to the Effective Time. For purposes of the Merger Agreement,
the value of the Series B Special Stock shall be the value of the gross cash
offering price at which shares of Series B Special Stock are issued for cash
pursuant to a registered public offering.

OWNERSHIP OF ALLIANCE COMMON STOCK IMMEDIATELY AFTER THE MERGER

Former stockholders of BGII will own approximately 3.0% of the outstanding
Alliance Common Stock immediately following consummation of the Merger
assuming an Alliance Common Stock trading price of $3.75, and issuance of
13.307 million shares of Alliance Common Stock in the Merger and related
transactions, and in the Financing. See "Risk Factors--Alliance Options and
Convertible Securities", "The Merger--Financing" and "--Merger Consideration".

OPINION OF BGII FINANCIAL ADVISOR

At a meeting of the BGII Board of Directors held on January 19, 1996 to
consider and vote on the amended Merger Agreement, Ladenburg delivered a
written opinion to the Board of Directors of BGII to the effect that, as of
such date, the consideration in the Merger is fair, from a financial point of
view, to BGII's stockholders. A copy of the written opinion of Ladenburg dated
January 19, 1996 is attached hereto as Annex II. BGII stockholders are urged
to read the opinion in its entirety for assumptions made and matters
considered by Ladenburg.

The BGII Board of Directors selected Ladenburg as its financial advisor
because it is an internationally recognized investment banking firm and, as
part of its investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, merchant banking, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. BGII did not consider any

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other financial advisors. Ladenburg has rendered financial advisory services
in the past to BGII including investment banking services in connection with
BGII's initial public offering in November 1991, a debt refinancing in July
1993, and a shareholder rights plan in January 1993.

BGII has agreed to compensate Ladenburg the following fees for its services
during the term of its agreement with Ladenburg or within twelve months
thereafter: (i) in connection with certain transactions (which would include
the Merger) a transaction fee equal to seven tenths of one percent (0.7%) of
the aggregate consideration (as defined in BGII's agreement with Ladenburg) of
such transaction, subject to a minimum fee of $1,000,000 on each completed
transaction, (ii) in connection with services rendered with respect to the
Alliance Offer, including any opinion delivered in connection therewith a fee
in the amount of $750,000 payable on the termination of the Alliance Offer (or
the termination of the Merger Agreement) and (iii) in connection with a sale
of equity or debt securities of BGII or a wholly-owned subsidiary thereof, a
transaction fee equal to 5% of the aggregate value of any equity securities
raised, 3% of the aggregate value of any subordinated indebtedness raised and
1% of the aggregate value of any senior indebtedness raised. Except as noted
above, all such fees are to be paid in cash at the closing of each such
transaction. In addition, BGII shall pay Ladenburg a single fee of $200,000
for any opinions requested by the Board of Directors of BGII customarily
provided under the circumstances as to the fairness from a financial point of
view of any consideration to be paid to BGII or its shareholders in connection
with any of the above-referenced transactions if such opinions are publicly
disclosed in a proxy statement, or $100,000 if such opinions are for the
private use of the Board of Directors of BGII. BGII has also agreed to
reimburse Ladenburg for its reasonable out-of-pocket expenses, including
attorneys' fees and disbursements and sales, and to indemnify Ladenburg
against certain liabilities. BGII has in the past paid Ladenburg customary
fees for its financial advisory services. Ladenburg also received warrants to
purchase 150,000 shares of BGII Common Stock at a price of $15.00 per share
for its investment banking services in connection with BGII's initial public
offering in November 1991.

Information and Materials Considered

In rendering its oral and written opinions, Ladenburg among other things,
(i) reviewed the Alliance Merger Agreement; (ii) reviewed a draft of the
amendment to the Merger Agreement; (iii) held discussions with certain senior
officers, directors and other representatives and advisors of BGII and certain
senior officers and other representatives and advisors of Alliance concerning
the business, operations and prospects of BGII and Alliance; (iv) examined
certain publicly available business and financial information relating to BGII
and Alliance as well as seven-year financial forecasts and other data relating
to BGII (the material assumptions of which are described below under "(iv)
Valuation of BGII's Stock (a) Historical and Projected Financial Performance")
and seven-year financial forecasts and other data relating to Alliance which
were provided to Ladenburg by the respective managements of BGII and Alliance,
including information relating to certain strategic implications and
operational benefits anticipated from a merger with Alliance; (v) reviewed,
among other things: the current and historical market prices of BGII and
Alliance stock, the respective companies' historical earnings, capitalization,
cash position and financial condition; (vi) analyzed certain financial, stock
market and other publicly available information relating to the businesses of
other companies whose operations Ladenburg considered comparable to those of
BGII and Alliance; (vii) evaluated the potential pro forma financial impact of
a merger with Alliance on BGII and Alliance and the relative contribution of
BGII and Alliance to selected pro forma financial data of the combined
company; and (viii) conducted such other examinations and considered such
other financial, economic and market criteria as it deemed necessary to arrive
at its opinion.

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express any opinion as to what the value of the Alliance Common or Series B
Special Stock actually will be when issued to BGII stockholders or the price
at which the Alliance Common or Series B Special Stock would trade subsequent
to the Effective Time. In addition, Ladenburg did not make or obtain an
independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of BGII or Alliance, nor did Ladenburg make a complete physical
inspection of the properties or assets of BGII or Alliance. Ladenburg was not
requested to, and did not, solicit third party indications of interest in
acquiring all of BGII. No other limitations were imposed by BGII on Ladenburg
with respect to the investigations made or procedures followed by Ladenburg in
rendering its opinion.

THE FULL TEXT OF THE WRITTEN OPINION OF LADENBURG DATED JANUARY 19, 1996,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS
ANNEX II AND IS INCORPORATED HEREIN BY REFERENCE. BGII STOCKHOLDERS ARE URGED
TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. LADENBURG'S OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE MERGER FROM A FINANCIAL POINT OF VIEW AND
DOES NOT ADDRESS ANY OTHER ASPECT OF THE AMENDED MERGER AGREEMENT OR RELATED
TRANSACTIONS. THE SUMMARY OF THE OPINION OF LADENBURG SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.

Overview of Analyses

Ladenburg used both quantitative and qualitative assessments to evaluate
BGII and Alliance. Ladenburg's determination that the consideration in the
Merger is fair from a financial point of view, is based on all the
quantitative and qualitative analyses described herein. Ladenburg conducted a
number of valuation analyses of consideration values to be received in the
Merger and determined a range of per share equity values for BGII and
Alliance. The analyses used to determine per share equity values for Alliance
included a historical market price analysis, a market multiples analysis, an
acquisition multiples analysis, a discounted cash flow analysis and a break-up
valuation analysis. Ladenburg used the median per share equity value from each
analysis to develop a range of values. Ladenburg considered this range of per
share values in evaluating the Common Stock Consideration in the Merger.
Ladenburg also compared the consideration to be received in the Merger to the
range of derived equity values for BGII. The analyses used to determine per
share equity values for BGII included a historical market price analysis, a
market multiples analysis, an acquisition multiples analysis, a discounted
cash flow analysis and a takeover premium analysis.

Qualitative Considerations

In addition to financial analyses, Ladenburg considered a number of
qualitative factors related to the Merger. Ladenburg did not apply weightings
to any of these qualitative analyses. Among the qualitative factors relating
to the Merger, Ladenburg noted that: (i) the financing would have commercially
reasonable terms and would
satisfy the repayment of the Senior Secured Notes; (ii) the value to the BGII
stockholders of the Series B Special Stock is ensured by the sale of identical
listed securities to the market; (iii) the combined entities would be highly
leveraged with significant debt service requirements; (iv) the Series B
Special Stock benefits from a higher ranking than the common stock in a highly
leveraged transaction; and (v) the transaction is taxable.

Quantitative Analyses

Ladenburg's analyses were based on the following data for BGII: (i)
10,799,501 shares outstanding; (ii) $71.0 million of debt, including
approximately $53.5 million of domestic debt and $17.5 million of Bally Wulff
debt; (iii) $1.3 million of cash and equivalents; and (iv) $9.3 million for
the cost of buying out certain management contracts. Ladenburg's analyses were
based on the following data for Alliance: (i) 13,672,150 shares of Alliance
Common Stock outstanding, based on 11,654,150 shares of Alliance Common Stock
outstanding on November 13, 1995, the conversion of the 1,333,333 shares of
Junior Convertible Special Stock into a like number of shares of Alliance
Common Stock, and the net issuance of 684,667 shares of Alliance Common Stock
upon the exercise of in-the-money options and warrants using the treasury
stock method and a share price of $3.75, which was the closing price on
January 12, 1996; (ii) $100.6 million of debt; (iii) $24.2

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million cash and equivalents (excluding the $10.4 million Alliance had spent
to purchase 1,000,000 shares of BGII); and (iv) $19.6 million of EBITDA for
the twelve months ended September 30, 1995 before non-recurring charges of
$2.3 million related to non-recurring compensation expenses and certain
service contracts and termination costs, and $11.7 million resulting from non-
recurring business development expenses. The pro forma analyses were based on
the following data for a combination of BGII and Alliance: $200.6 million of
debt, $62.8 million of Special Stock; and $36.7 million of cash and
equivalents.

(i) Comparison of the Amended Alliance Merger and the Alliance
Merger. Ladenburg compared the consideration to be received by BGII
stockholders under the amended Merger Agreement and the original Merger
Agreement. The consideration under the amended Merger Agreement transactions
had a value of $11.70 which consisted of $7.83 in cash, $3.57 in Series B
Special Stock and $0.30 in Alliance Common Stock. The cash consideration was
derived by taking the aggregate cash consideration of $76.7 million under the
amended Merger Agreement and dividing it by 9.8 million shares, the number of
outstanding shares of BGII Common Stock not owned by Alliance. The value of
the Series B Special Stock was derived by taking the aggregate Special Stock
Consideration of $35.0 million and dividing it by 9.8 million shares, the
number of outstanding shares of BGII Common Stock not owned by Alliance. The
value of the Alliance Common Stock was derived by multiplying a range of
Alliance stock prices, including the average closing price of Alliance Common
Stock for the ten trading days ending three trading days prior to January 12,
1996 of $3.27, by their respective exchange ratios. Ladenburg assumed that
BGII's Special Stock Consideration to be received by BGII stockholders would
have a market value of $3.57 per share. Ladenburg made this assumption based
on the fact that Alliance is required to sell an identical security to the
public and that therefore a true market value for the security would be
independently proven. The analysis showed that the total consideration
received by BGII's stockholders would be $11.70 under each stock price
scenario.

The consideration under the original Merger Agreement had a range of values
from $11.48 to $13.00 which consisted of $7.83 in cash and $3.65 to $5.17 in
Alliance Common Stock. The cash consideration was derived by taking the
aggregate cash consideration of $76.7 million under the original Alliance
Merger Agreement and dividing it by 9.8 million shares, the number of shares
of BGII Common Stock not owned by Alliance. The value of the Alliance Common
Stock was derived by multiplying a range of Alliance stock prices, including
the average closing price of Alliance's stock for the ten trading days ending
five trading days prior to January 12, 1996 of $3.22, by their respective
exchange ratios. The analysis showed that based on Alliance's current market
price, the total consideration to BGII stockholders would be $11.75 per share.

(ii) Pro Forma Analysis. Ladenburg analyzed the pro forma financial results
of a combination of Alliance and BGII pursuant to the terms of the amended
Merger Agreement. Additionally, Ladenburg compared these results to certain
key pro forma financial results of a combination of Alliance and BGII pursuant
to the terms of the original Merger Agreement. For this analysis, Ladenburg
used projections for BGII as provided by its management, the material
assumptions of which are described below, and projections for Alliance as
provided by its management; certain capital structure assumptions were made by
Ladenburg.

The material assumptions used in the combination of Alliance and BGII were
under the amended Merger Agreement:

(a) approximately $5.0 million in operating expense savings;

(b) pro forma Alliance results for the acquisition of additional
ownership of the Rainbow Casino;

(c) amortization over thirty years of the goodwill of $42.9 million
created from the amount by which Alliance's total consideration exceeded
BGII's book value and amortization over seven years of the transaction fees
related to the issuance of $100 million of new debt;

(d) a reduction of $7.0 million in interest expense for the repayment of
all of BGII's debt at September 30, 1995;

(e) an increase in interest expense for the issuance of $100 million of
new debt at an interest rate of 14.0%;

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(f) the sale to the public at par of $25.0 million of Series B Special
Stock with a 15% dividend, paying a 15% payment-in-kind (PIK) dividend in
years one to five, a 7% cash and 8% PIK dividend in years six and seven,
and 15% cash dividend in year eight;

(g) a $55.0 million equity investment in Alliance at $4.00 per share,
based on the recent trading range of the company's common stock;

(h) a cash payment of $7.83 per share for 9.8 million BGII shares;

(i) the issuance to BGII stockholders of $37.8 million in Series B
Special Stock with the same terms as the publicly issued Special Stock; and

(j) the issuance of 1.0 million shares of Alliance Common Stock at an
assumed per share price of Alliance Common Stock of $3.27 (based on the
average closing price of Alliance Common Stock for the ten trading days
ending three NASDAQ NMS trading days prior to January 12, 1996) to BGII
stockholders in exchange for 9.8 million BGII shares.

The material assumptions used in the combination of Alliance and BGII under
the original Alliance Merger Agreement were:

(a) approximately $5.0 million in operating expense savings;

(b) pro forma Alliance results for the acquisition of additional
ownership of the Rainbow Casino;

(c) amortization over thirty years of the goodwill of $43.4 million
created from the amount by which Alliance's total consideration exceeded
BGII's book value and amortization over seven years of the transaction fees
related to the issuance of $150 million of new debt;

(d) a reduction in of $7.0 million interest expense for the repayment of
all of BGII's debt at September 30, 1995;

(e) an increase in interest expense for the issuance of $150 million of
new debt at an interest rate of 14.0%;

(f) a $30 million equity investment in Alliance at $4.00 per share, based
on the recent trading range of the BGII Common Stock;

(g) a cash payment of $7.83 per share for 9.8 million BGII shares; and

(h) the issuance of 13.1 million shares of Alliance Common Stock at an
assumed per share price of Alliance Common Stock of $3.22 (based on the
average closing price of Alliance Common Stock for the ten trading days
ending five NASDAQ NMS trading days prior to January 12, 1996) to BGII
stockholders in exchange for the balance of 3.9 million BGII shares and as
part of management compensation.

The comparison of the original Merger Agreement pro forma financial
information to the amended Merger Agreement pro forma financial information
yielded the following results for the latest twelve months ended June 30,
1995: (i) a loss per share of $0.49 under the original Merger Agreement
compared to a loss per share of $0.65 under the amended Merger Agreement; (ii)
an EBITDA to net interest expense coverage ratio of 2.1x under the original
Merger Agreement compared to 2.9x for the amended Merger Agreement; (iii) a
debt plus Special Stock to EBITDA ratio of 5.1x under the original Merger
Agreement compared to 5.4x under the amended Merger Agreement; (iv) a debt
plus Special Stock to equity ratio of 3.5x under the original Merger Agreement
compared to 4.6x under the amended Merger Agreement; and (v) a debt plus
Special Stock to tangible equity ratio of 263.6x under the original Merger
Agreement compared to (21.0x) under the amended Merger Agreement. For the
projected twelve months ending June 30, 1996, the comparison showed: (i) a
loss per share of $0.28 under the original Merger Agreement compared to a loss
per share of $0.41 under the amended Merger Agreement; (ii) an EBITDA to net
interest expense coverage ratio of 2.1x under the original Merger Agreement
compared to 2.9x under the amended Merger Agreement; (iii) a debt plus Special
Stock to EBITDA ratio of 5.0x under the original Merger Agreement compared to
5.2x under the amended Merger Agreement; (iv) a debt plus Special Stock to
equity ratio of 3.4x under the original Merger Agreement compared to 4.5x
under the amended Merger Agreement; and (v) a debt plus Special Stock to
tangible equity ratio of 63.0x under the original

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Merger Agreement compared to (27.7x) under the amended Merger Agreement. For
the projected twelve months ending December 31, 1996, the comparison showed:
(i) earnings per share of $0.18 under the original Merger Agreement compared
to $0.03 under the amended Merger Agreement; (ii) an EBITDA to net interest
expense coverage ratio of 2.4x under the original Merger Agreement compared to
3.4x under the amended Merger Agreement; (iii) a debt plus Special Stock to
EBITDA ratio of 4.2x under the original Merger Agreement compared to 4.5x
under the amended Merger Agreement; (iv) a debt plus Special Stock to equity
ratio of 3.3x under the original Merger Agreement compared to 3.9x under the
amended Merger Agreement; and (v) a debt plus Special Stock to tangible equity
ratio of 30.3x under the original Merger Agreement compared to (358.0x) under
the amended Merger Agreement.

(iii) Valuation of Alliance's Stock. Ladenburg evaluated Alliance's stock
through various methods described below.

(a) Historical and Projected Financial Performance. Ladenburg reviewed
Alliance's historical financial performance for the five fiscal years ended
June 30, 1995 and three months ended September 30, 1995. The financial
results showed that Alliance had net losses for each of the periods
reviewed and negative tangible net worth at September 30, 1995. Alliance
had a net loss of $15.8 million for the 1991
fiscal year, $4.7 million for the 1992 fiscal year, $3.7 million for the
1993 fiscal year, $13.1 million for the 1994 fiscal year, $10.8 million for
the 1995 fiscal year, and $3.4 million for the first quarter ended
September 30, 1995. Alliance's tangible net worth at September 30, 1995 was
negative $8.0 million.

(b) Historical Market Price Analysis. Ladenburg examined the closing
market prices of the Alliance Common Stock over the 90-day trading period
prior to January 12, 1996 during which time the closing market price ranged
from $3.00 to $5.50 and was an average of $3.27 per share for the ten
trading days prior the three trading days prior to January 12, 1996.

(c) Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for Alliance which determined the implied public market value
based on the multiples of comparable public companies. Ladenburg derived
two sets of results based upon the multiples of the one public company that
is directly comparable to Alliance, Jackpot Enterprises, Inc. ("Jackpot"),
and based upon the multiples of a group of public companies which had some
similarity to Alliance. The results of this analysis indicated a range of
per share equity values of $0.54 to $9.24, the median of which was $2.01.

For all the comparable public companies, Ladenburg derived the following
median common stock trading multiples: (i) net sales; (ii) EBITDA; (iii)
operating income (EBIT); (iv) pre-tax income; (v) net income; (vi)
projected net income; and (vii) book value. Net sales, EBITDA and EBIT
multiples are based on total enterprise value divided by each financial
measure, respectively. Enterprise value is defined as the market value of
common stock (which is the total shares outstanding multiplied by the stock
price per share), plus total debt, less cash and cash equivalents. The pre-
tax income, net income, projected net income, and book value multiples are
derived by dividing the market value of the common stock or per share stock
price by the appropriate financial item. Equity calculations were derived
for net sales, EBITDA, EBIT, pre-tax, net income, projected net income and
book value. The equity valuations for Alliance based on net sales, EBITDA
and EBIT were calculated by multiplying Alliance's net sales, EBITDA and
EBIT by the median net sales, EBITDA and EBIT multiples, then subtracting
total debt and adding cash and cash equivalents. For the valuations based
on pre-tax, net income, projected net income and book value, Ladenburg
multiplied Alliance's pre-tax income, net income, projected net income and
book value by the median pre-tax, net income, projected net income and book
value multiples to arrive at equity values. Equity value was then divided
by the total number of Alliance shares outstanding to derive equity value
per share.

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earnings for fiscal year one, (vii) 8.7x as a multiple projected earnings
for fiscal year two, and (viii) 2.0x as a multiple of book value. Ladenburg
considered Jackpot to be the one public company which most resembled
Alliance. The market multiples for Jackpot were as follows: (i) 0.8x as a
multiple of net sales, (ii) 4.4x as a multiple of EBITDA, (iii) 8.2x as a
multiple of EBIT, (iv) 10.6x as a multiple of pre-tax income, (v) 15.7x as
a multiple of net income, (vi) 14.0x as a multiple of projected earnings
for fiscal year one, (vii) 12.8x as a multiple of projected earnings for
fiscal year two, and (viii) 1.8x as a multiple of book value. The market
multiples for Alliance were as follows: (i) 0.8x as a multiple of net
sales, (ii) 5.8x as a multiple of EBITDA, (iii) 12.3x as a multiple of
EBIT, (iv) 25.9x as a multiple of pre-tax income, (v) 25.5x as a multiple
of net income, and (vi) 4.4x as a multiple of book value. Other multiples
for Alliance were not meaningful because they were negative.

(d) Acquisition Multiples Analysis. Ladenburg conducted an acquisition
multiples analysis which was similar to the market multiples analysis but
instead relied upon multiples from comparable merger and acquisition
transactions. For purposes of this analysis, the purchase price was equal
to the amount paid for the target's equity and the transaction value was
equal to the purchase price, plus the target's outstanding interest-bearing
debt, less cash and cash equivalents.

Ladenburg compared multiples from merger and acquisition transactions of
the following target and acquiring companies, respectively: the acquisition
of the Sahara Hotel & Casino by William Bennett, the acquisition of the
Texas Gambling Hall & Hotel by Station Casinos, the acquisition of the
Hacienda Hotel & Casino by Circus Circus Enterprises, the acquisition of
Gold Strike Resorts by Circus Circus Enterprises, the acquisition of
Caesars World Inc. by ITT Corporation, the acquisition of Jazz Enterprises
by Argosy Gaming Co., the pending acquisition of the Alladin Hotel by Sigma
Summer Family Trust of NY, the acquisition of IGT/EDT's route business by
Jackpot, and the acquisition of BGII's route business by Jackpot.

The median blended multiples for the selected transactions were as
follows: (i) 0.9x as a multiple of sales, (ii) 6.9x as a multiple of
EBITDA, (iii) 29.0x as a multiple of EBIT, (iv) 35.3x as a multiple of net
income, and (v) 2.5x as a multiple of book value. A range of equity values
was divided by the number of shares outstanding to derive a range of per
share values. The range of implied equity values per share of Alliance was
$1.40 to $18.07, the median of which was $4.59. Ladenburg concluded that
the median value per share best represented the implied value of Alliance
for this methodology as it encompasses all the valuation measures in a
balanced manner.

(e) Discounted Cash Flow Analysis. Ladenburg conducted a discounted cash
flow analysis which derived equity values based on the present value of
future net cash flows, less current total debt, plus current total cash.
The equity value was then divided by the number of shares outstanding to
derive equity value per share. The cash flows were discounted using a range
of discount rates based on a slight premium to the weighed average cost of
capital for the peer group or, where available, the weighted average cost
of capital for the entity being valued. For purposes of this analysis,
annual free cash flow equaled de-levered net income, plus depreciation,
less capital expenditures, less the change in working capital. In the exit
year, free cash flow also included proceeds from the sale of the business,
which is typically assumed only for valuation purposes as a more
representative "terminal value" rather than using cash flows in perpetuity.
The terminal value was determined by applying an exit multiple based on the
median EBITDA multiple of comparable public companies. Ladenburg applied
exit multiples of 5.2x to 7.2x to the casino operations and 3.4x to 5.4x to
the route operations and used discount rates of 12% to 14%. The equity
value ranged from $3.13 to $6.13, the median of which was $4.58 per share.

(f) Break-up Valuation. Ladenburg developed a valuation based on a break-
up of Alliance's business segments which resulted in a value of $4.69 per
share of Alliance. Ladenburg broke Alliance's operations into two business
segments, (i) the Rainbow Casino in Vicksburg, Mississippi and (ii) slot
routes and small casinos.

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Alliance's management projection based on current run rates of 45.0%) to
the total projected annual revenues, which after royalty fees and minority
interest resulted in EBITDA from the casino available to Alliance of $8.4
million. This number was multiplied by the median EBITDA multiple for
emerging market casinos of 6.2x to derive enterprise value.

The equity value for the slot route and small casinos segment was
determined by subtracting the latest twelve months direct expenses and
selling, general and administrative expenses from the latest twelve months
revenues to derive EBITDA. This was then multiplied by the EBITDA multiple
of 4.4x for Jackpot, which has comparable business operations, to derive an
implied enterprise value. The implied enterprise values from the two
business segments were added together and total debt was subtracted and
cash was added to arrive at the total implied equity value for Alliance
which was then divided by the fully diluted shares outstanding to determine
the per share value.

(iv) Valuation of BGII's Stock. Ladenburg evaluated BGII's stock through
various methods described below.

(a) Historical and Projected Financial Performance. Ladenburg reviewed
(i) seven-year projections for BGII as provided by its management based on
assumptions management believed were reasonable and independently developed
seven-year projections based on assumptions believed by Ladenburg to be
reasonable, and (ii) seven year projections of Alliance's management for
the fiscal years ended June 30, 1996 to 2002. The seven-year projections
for BGII prepared by its management and prepared by Ladenburg contain
income statements, balance sheets, and cash flows, for fiscal year ended
December 31, 1996 through 2002.

The material assumptions contained in BGII management's seven year
projections were:

(i) for Gaming, unit sales of 22,000 in 1996; 25,100 in 1997; 28,100
in 1998; 31,500 in 1999; 34,600 in 2000; 38,100 in 2001; and 41,900 in
2002. Based on management's estimates of worldwide unit sales in 1996,
units sales equated to a market share of approximately 19% in 1996.
Management assumed a compounded annual increase in unit sales of
approximately 11% from 1997 to 2002;

(ii) average unit sales prices increase from $5,288 in 1996 to $5,576
in 2002;

(iii) Gaming machine revenues increase by 12% compounded annually for
the seven year period ended fiscal 2002;

(iv) an approximately 9% increase in other revenue, which includes
accessories and used machines, in the years 1996 to 2002;

(v) gross margins increase from approximately 34% in 1996 to 38% in
2002 as a result of lower average material costs, manufacturing and
engineering efficiencies, plus the benefit of spreading the fixed
overhead costs over a greater number of units produced;

(vi) selling, general and administrative expenses (including the
provision for bad debts estimates at 2.5% of revenues) increase by
approximately 9% per year in 1996 to 2002;

(vii) for Bally Systems, an increase of EBITDA of approximately 10%
compounded annually from 1996 to 2002;

(viii) for Bally Wulff, Deutschmark projections translated at an
exchange rate of DMI.5/US$1; gross margins increasing from
approximately 38% to 40% from 1996 to 2002 and EBITDA margins
increasing from approximately 14% in 1996 to 17% in 2002;

(ix) flat parent expenses (corporate overhead) of $4.8 million from
1996 through 2002;

(x) depreciation and amortization expense decreasing from
approximately $9.3 million in 1996 to $8.8 million in 2002;

(xi) interest expense decreasing from approximately $7.0 million in
1996 to $5.5 million in 2002 due to the gradual decrease in the
company's level of borrowings; and

(xii) consolidated taxes decreasing from approximately 44% in 1996 to
38% in 2002.

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Ladenburg believed management's projections to be very aggressive due to
their highly optimistic assumptions regarding sales increases and
aggressive increases in gross and operating margins. Ladenburg noted that
while management had made substantial progress in turning around Gaming's
operations and improving margins, it had achieved this success only in the
last few quarters. Ladenburg considered that Gaming's 1995 estimated
results did not meet budgeted sales and profit projections for fiscal 1995.
As a result, Ladenburg placed little weight on management's seven year
projections. Therefore, Ladenburg developed projections based on reasonable
assumptions it deemed would be used by a knowledgeable third party. These
projections were based principally on maintaining EBITDA margins slightly
below management's projections for 1996, and smaller increases in unit
sales than assumed by management.

Ladenburg believed that management's projected increases in unit sales
were optimistic given the overwhelmingly stronger position of IGT (with a
market share of approximately 75%), a near-term stagnant market and
increased competition. Moreover, IGT is a significantly more profitable and
better capitalized company that offers more extensive services to customers
(including progressive systems, sophisticated casino floor layout services
and in-house financing of sales, among others) than Gaming. A displacement
of IGT by Gaming would seem difficult given IGT's entrenched position and
greater financial resources and ability to cut prices in the face of
attempted increases in sales by Gaming. Even so, Ladenburg gave some credit
to management's expected increase in sales, though was less aggressive in
such projected gains.

The material assumptions contained in Ladenburg's projections for the
years 1996 to 1999 were:

(i) for Gaming, unit sales of 21,500 in 1996, followed by an increase
of 7.5% per year in 1997 through 2002; market share (based on
management's estimate of worldwide unit sales) of 19% in 1996 and an
annual increase in unit sales of approximately 7.5% thereafter;

(ii) average unit sales prices were equal to those assumed by
management;

(iii) other revenues equal to those assumed by management;

(iv) gross margins remain flat at 33% in the years 1996 to 2002;

(v) a flat EBITDA margin of 10.0% from 1996 to 2002, due to higher
selling, general and administrative expenses which offset gains in
gross margin;

(vi) assumptions for Bally Systems, Bally Wulff and parent (corporate
overhead) were the same as those assumed by management; and

(vii) capital expenditures, depreciation, amortization, interest
expense and tax rates as outlined above.

The following projections were prepared by Ladenburg in connection with
the delivery of its written opinion to the BGII Board dated as of January
19, 1996, and are intended as forward looking statements. Such projections
should be read in conjunction with the "Risk Factors" identified herein and
are based upon the assumptions set forth herein under "The Merger--Opinion
of BGII Financial Advisor". Stockholders of BGII and Alliance should
consider that each of such Risk Factors, or two or more considered jointly,
could cause the actual results of BGII to differ materially from the
results set forth in the following projections and the assumptions on which
they are based.

The projections are based upon a number of estimates and assumptions
that, while considered reasonable, are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond the control of BGII, and upon assumptions with respect to
future business decisions which are subject to change. Accordingly, there
can be no assurance that the projections will be achieved. The projections
and actual results will vary, and those variations may be material.
Projections are necessarily speculative in nature and it is usually the
case that one or more of the assumptions does not materialize. The
inclusion of projections herein should not be regarded as representations
by BGII, Ladenburg or any other person that the projections will be
achieved.

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The projections were not prepared with a view to complying with the
presentation of prospective financial statements published by the American
Institute of Certified Public Accountants. BGII's independent accountants,
Coopers & Lybrand LLP, and Alliance's independent accountants, KPMG Peat
Marwick LLP, have neither examined nor compiled nor had any other
involvement with the preparation of the accompanying prospective financial
information and accordingly do not express an opinion or any other form of
assurance with respect thereto, nor do they assume any responsibility for
these projections.

BGII

PROJECTED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
--------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $265,566 $288,270 $304,997 $325,466 $345,593 $366,753 $389,945
Depreciation and
Amortization........... 9,308 9,201 9,352 9,043 8,691 8,706 8,824
Interest Expense........ 6,978 6,714 6,356 5,991 5,734 5,484 5,484
Provision for Income
Taxes.................. 6,794 8,541 9,565 11,343 12,758 14,209 15,697
Net Income.............. 8,686 12,069 14,391 17,419 20,026 22,678 25,408
Earnings Per Share...... $ .80 $ 1.12 $ 1.33 $ 1.61 $ 1.85 $ 2.10 $ 2.35
</TABLE>

(b) Historical Market Price Analysis. Ladenburg examined the closing
market prices of BGII's stock over the 90-day trading period prior to
January 12, 1996 during which time the closing market price ranged from
$7.81 to $12.38. Ladenburg also reviewed the closing market prices over the
30 days prior to the April 18, 1995 announcement of a merger with WMS
during which time the closing market price ranged from $7.25 to $10.25.

(c) Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for BGII which determined a range of values based on the multiples
of comparable public companies. The result of this analysis indicated that
the median implied equity value per share was $8.89.

For all comparable public companies, Ladenburg derived the following
median common stock trading multiples: (i) net sales; (ii) EBITDA; (iii)
operating income (EBIT); (iv) pre-tax income; (v) net income; (vi)
projected net income; and (vii) book value multiples. Equity valuations for
BGII based on net sales, EBITDA and EBIT were calculated by multiplying its
estimated twelve months ended December 31, 1995 net sales, EBITDA and EBIT
by the median net sales, EBITDA and EBIT multiples, then subtracting total
debt, the cost of buying out certain management contracts, and adding cash
and cash equivalents. For valuations based on pre-tax income, net income,
projected net income book value, Ladenburg multiplied BGII's estimated
twelve months ended December 31, 1995 value by the appropriate median
multiples and subtracted the cost of buying out certain management
contracts to arrive at equity value. Equity value was then divided by the
total number of BGII shares outstanding to derive equity value per share.

For purposes of its analysis, Ladenburg selected the following comparable
public companies: Acres Gaming, Inc., Casino Data Systems, GTECH Holdings
Corporation, Innovative Gaming Corporation of America, IGT, International
Lottery, Inc., Mikohn Gaming Corporation, and VLTS. The median market
multiples for the selected group of comparable companies were as follows:
(i) 2.2x as a multiple of sales, (ii) 8.5x as a multiple of EBITDA, (iii)
10.9x as a multiple of EBIT, (iv) l0.0x as a multiple of pre-tax income,
(v) 21.3x as a multiple of net income, (vi) 14.6x as a multiple of
projected earnings for fiscal year one, (vii) 11.3x as a multiple of
projected earnings for fiscal year two and (viii) 2.7x as a multiple of
book value. The market multiples for BGII were as follows: (i) 0.6x as a
multiple of net sales, (ii) 5.3x as a multiple of EBITDA, (iii) 7.7x as a
multiple of EBIT, (iv) 7.3x as a multiple of pre-tax income, (v) 13.7x as a
multiple of net income, (vi) 11.8x as a multiple of projected earnings for
fiscal year two, and (viii) 0.9x

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as a multiple of book value. The comparable company median multiples
indicated a range of per share equity values of $5.44 to $42.90, the median
of which was $8.89 per share. Ladenburg concluded that the
median value per share best represented the implied value of BGII for this
methodology as it encompasses all the valuation measures in a balanced
manner.

Ladenburg compared multiples from merger and acquisition transactions of
the following target and acquiring companies, respectively: Marvin H.
Sugarman Products, Inc. and Racing Technology, Inc. and Autotote Corp.;
United Wagering Systems, Inc. and Video Lottery Technologies, Inc.; Global
Gaming and Anchor Gaming; Connecticutt Off Track Betting and Autotote
Corp.; ETAG Group and Autotote Corp.; AmTote International, Inc. and GTECH
Holdings Corp.; Automated Wagering and VLTS; Electronic Data Technologies
and IGT; and BGII (initial public offering), spin-off by BEC. The median
multiples for the selected transactions were as follows: (i) 0.9x as a
multiple of sales, (ii) 6.2x as a multiple of EBITDA, (iii) 9.5x as a
multiple of EBIT, (iv) 23.8x as a multiple of net income, and (v) 1.6x as a
multiple of book value. The range of equity values was divided by the
number of shares outstanding to derive a range of per share values. The
range of implied equity values per share of BGII was $5.44 to $13.25, the
median of which was $6.16. Ladenburg concluded that the median value per
share best represented the implied value of BGII for this methodology as it
encompasses all the valuation measures in a balanced manner.

(d) Discounted Cash Flow Analysis. Ladenburg conducted a discounted cash
flow analysis which derived equity values based on the present value of
future net cash flows, less current total debt, plus current total cash.
The equity value was then divided by the number of shares outstanding to
derive equity value per share. The cash flows were discounted using a range
of discount rates based on a slight premium to the weighed average cost of
capital for the peer group or, where available, the weighted average cost
of capital for the entity being valued. For purposes of this analysis,
annual free cash flow equaled de-levered net income, plus depreciation,
less capital expenditures, less the change in working capital. In the exit
year, free cash flow also included proceeds from the sale of the business,
which is typically assumed only for valuation purposes as a more
representative "terminal value" rather than using cash flows in perpetuity.
The terminal value was determined by applying an exit multiple based on the
median EBITDA multiple of comparable public companies. Ladenburg used
discounted cash flow analyses for Gaming and Bally Wulff separately, which
were then combined for a total value, and applied discount rates and exit
multiples as follows: (i) for Gaming, cash flows were discounted using a
range of discount rates of 13% to 15% with exit multiples of 7.5x to 9.5x
and (ii) for Bally Wulff, a discount range of 16% to 18% was applied with
exit multiples of 5.6x to 7.6x.

The equity value per share ranged from $7.34 to $13.12 based on
independently developed projections ($12.39 to $19.96 based on management's
projections) with a median equity value per share of $10.13 based on
independently developed projections ($16.05 based on management's
projections).

(e) Takeover Premium Analysis. Ladenburg included a takeover premium
analysis which examined recent premiums paid in the acquisitions of public
companies. For purposes of this analysis, premiums were defined as the
excess, in percentage terms, of the per share purchase price relative to
the target's stock price prior to announcement of the transaction. The
median premiums paid for public companies were 26.5% and 26.8%, one day and
one week, respectively, prior to the announcement of the transaction. The
percentage premiums were applied to BGII's stock price prior to the April
18, 1995 announcement of a merger with WMS to derive a range of per share
values for BGII and prior to January 12, 1996. Based on the announcement
date of April 18, 1995, the range of values per share for BGII derived from
the application of premiums was $10.75 to $11.98, the median of which was
$11.13. Based on the January 12, 1996 date,

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the range of values per share for BGII derived from the application of
premiums was $9.88 to $11.11, the median of which was $10.28.

Comparison of the Amended Alliance Merger Consideration to BGII Per Share
Values

Ladenburg concluded that the consideration to be received by BGII's
stockholders under the amended Merger Agreement is fair, from a financial
point of view, to BGII's stockholders, as of January 19, 1996, based on, among
other things, the following considerations: (i) the Alliance consideration to
be received by BGII's stockholders of $11.70 was higher than the range of per
share values for BGII of $6.16 to $11.13 (excluding the value of $16.05
derived in the discounted cash flow analysis based on management's projections
upon which Ladenburg applied little weighting); and (ii) the value for the
Alliance consideration to be received by BGII's stockholders represents a
premium to BGII's closing stock price on the day prior to the announcement of
the WMS Merger of 38% and a premium of 50% to BGII's closing Common Stock
price on the day prior to January 12, 1996.

Comparison of the Amended Alliance Merger to the Alliance Merger

Ladenburg noted that the consideration of $11.70 per share to be received by
BGII's stockholders under the amended Merger Agreement was fairly equivalent
to the current value of $11.75 per share to be received by BGII stockholders
under the original Merger Agreement. In addition, Ladenburg noted the
significant decline in BGII's results in the last two quarters of fiscal 1995
compared to results for the first two quarters of fiscal 1995, and the
potential impact of such a trend on the company's projected earnings.

Limitations of Analysis

Although each analysis employed by Ladenburg in rendering its opinion is
summarized above, the above summary does not purport to be a complete
description of Ladenburg's analyses and contains those aspects of the
Ladenburg's analyses deemed relevant by BGII. In its analyses, Ladenburg made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, based on, among
other things, information provided to (and relied upon by) Ladenburg by BGII,
many of which are beyond the control of BGII or Ladenburg. Any estimates
contained in Ladenburg's analyses are not necessarily indicative of actual
values, which may be significantly more or less favorable than as set forth
therein. Additionally, estimates of the value of businesses do not purport to
be appraisals or necessarily to reflect the prices at which businesses
actually may be sold. Because such estimates are inherently subject to
uncertainty since the assumptions upon which such estimates are based may not
materialize, neither BGII nor Ladenburg nor any other person assumes
responsibility for the accuracy of such estimates. Ladenburg's analysis does
not reflect, among other things, actual 1995 financial results of Alliance,
BGII or Bally Wulff, revised prospects for their respective businesses,
changes in general business and economic conditions or any other transaction
or event that has occurred or that may occur and that was not anticipated at
the time such materials were prepared.

PRIOR OPINIONS OF BGII FINANCIAL ADVISOR

As discussed in "The Merger--Background of the Merger", Ladenburg had
delivered opinions to the BGII Board at each of its meetings held June 21,
1995, August 7, 1995 and October 17, 1995. In its opinion, delivered June 21,
1995 (the "June Opinion"), Ladenburg advised the BGII Board that, as of such
date, the WMS Exchange Ratio is fair, from a financial point of view, to the
holders of BGII Common Stock. In its opinion delivered August 7, 1995 (the
"August Opinion"), Ladenburg advised the BGII Board that, as of such date, the
transactions proposed by Alliance are not as favorable as the WMS Merger, from
a financial point of view, to BGII's stockholders. The August Opinion also
stated that Ladenburg is unable to render an opinion with respect to
Alliance's proposals due to the speculative nature and undefined collar in
Alliance's proposal, as well as Alliance's lack of disclosure regarding BGII's
obligation to offer to repay $40 million principal amount of debt resulting
from a change of control and its disregard of BGII's non-compete agreement
with BEC. The foregoing factors were no longer applicable to Ladenburg's
analysis on October 17,1995, the date upon which it delivered

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to the BGII Board its oral opinion and on November 3, 1995 the date that it
rendered to BGII Board its written opinion, in each case that the Alliance
Proposal, from a financial point of view, is fair to BGII stockholders. Prior
to Ladenburg rendering its opinion on October 17, 1995 (the "October
Opinion"), Alliance had presented to BGII and its representatives a reasonable
plan for financing for the transaction, including repayment of the $40 million
of BGII debt which would come due. In addition, Alliance had proposed a collar
defining the Exchange Ratio, and had discussed alternatives with respect to
the BEC non-compete. Moreover, at that time, it had been determined that a
merger with WMS was unlikely to occur for the reasons discussed in "Background
of the Merger."

Set forth below with respect to each of the June, August and October
opinions is a summary of the background information supporting such opinion
and Ladenburg's evaluation of each of the items considered by it in
formulating such opinion.

THE JUNE OPINION

At a meeting of the BGII Board of Directors held on June 21, 1995 to
consider and vote on the WMS Agreement, Ladenburg delivered its written
opinion to the Board of Directors of BGII to the effect that, as of such date,
the WMS Exchange Ratio is fair, from a financial point of view, to the holders
of BGII Common Stock. Ladenburg's opinion regarding the fairness of the WMS
Exchange Ratio assumed a sale of Bally Wulff for $55 million of net proceeds.

Information and Materials Considered

In rendering its opinion, Ladenburg among other things, (i) reviewed the WMS
Agreement; (ii) held discussions with certain senior officers, directors and
other representatives and advisors of BGII and certain senior officers and
other representatives and advisors of WMS concerning the business, operations
and prospects of BGII and WMS; (iii) examined certain publicly available
business and financial information relating to BGII and WMS as well as certain
financial forecasts and other data for BGII and WMS which were provided to it
by the respective managements of BGII and WMS, including information relating
to certain strategic implications and operational benefits anticipated from
the Merger; (iv) reviewed the financial terms of the WMS Merger as set forth
in the WMS Agreement relating to, among other things: current and historical
market prices of the BGII Common Stock and the WMS Common Stock, the
respective companies' historical and projected earnings, and the
capitalization, cash position and financial conditions of BGII and WMS; (v)
analyzed certain financial, stock market and other publicly available
information relating to the business of other companies whose operations it
considered comparable to those of BGII and WMS; (vi) evaluated the potential
pro forma financial impact of the Merger on WMS and the relative contribution
of BGII and WMS to selected pro forma financial data of the combined company,
and (vii) considered such other financial, economic and market criteria as it
deemed necessary to arrive at its opinion.

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not requested to, and did not, solicit third party indications of interest in
acquiring all or any part of BGII. In addition, although Ladenburg evaluated
the WMS Exchange Ratio from a financial point of view, Ladenburg was not asked
to and did not recommend the specific consideration payable in the Merger. In
rendering its opinion of June 21, 1995, Ladenburg did not evaluate any
alternative transactions to the Merger and did not compare the WMS Exchange
Ratio to the Alliance proposal. Subsequent to Alliance's commencement of its
tender offer, Ladenburg opined, on August 7, 1995, that the WMS Merger was
more favorable to the stockholders of BGII from a financial point of view than
the Alliance tender offer and proposed back-end merger, and, on September 26,
1995, that the Revised WMS Merger is more favorable to the stockholders of
BGII, from a financial point of view, than the Revised Alliance Offer and
proposed back-end merger. No other limitations were imposed by BGII on
Ladenburg with respect to the investigations made or procedures followed by
Ladenburg in rendering its opinion.

Overview of Analyses

Ladenburg used both quantitative and qualitative assessments to evaluate
BGII and WMS. Ladenburg's determination of the fairness of the Exchange Ratio,
from a financial point of view, is based on all the quantitative and
qualitative analyses described herein. Ladenburg conducted a number of
valuation analyses to determine a range of per share equity values for BGII
and WMS. These analyses included a historical market price analysis, a market
multiples analysis, an acquisition multiples analysis, a discounted cash flow
analysis, and a takeover premium analysis for BGII and a historical market
price analysis, a market multiples analysis, and a discounted cash flow
analysis for WMS. Ladenburg used the median per share equity value from each
analysis to develop a range of values for each company. Ladenburg applied the
WMS Exchange Ratio to the range of WMS per share equity values to determine
the value of the consideration to be received by BGII stockholders in the WMS
Merger. Ladenburg then compared the value range of the consideration to its
range of values for BGII. Additionally, Ladenburg conducted a market multiples
analysis, a discounted cash flow analysis, and a leveraged buyout analysis for
Bally Wulff. Ladenburg provided these analyses of Bally Wulff to the BGII
Board to assist in its evaluation of the prospects for selling Bally Wulff for
at least $55 million. Ladenburg did not provide an opinion as to the fairness
of a sale of Bally Wulff for at least $55 million.

Qualitative Considerations

In addition to financial analyses, Ladenburg considered a number of
qualitative factors for each company as well as for the Merger. Ladenburg did
not apply weightings to any of the qualitative considerations. Among the
qualitative factors it noted for BGII that: (i) it has the number two market
position in an industry dominated by IGT; (ii) it has a worldwide well
recognized brand name; (iii) it has had a recent turnaround of financial
results, although it was still in the early stages of such turnaround, (iv)
the gaming machine market is expected to show long-term growth; (v) its
unresolved regulatory issues in Louisiana could impact its gaming licenses in
other jurisdictions; and (vi) it was potentially under-reserved for certain
off-balance sheet liabilities. Ladenburg noted for WMS that: (i) it is a
recognized leader in coin-operated amusement games; (ii) it has proven
technology and game development experience; (iii) it has a proven record of
developing popular video games; (iv) it has successfully entered and has
achieved a leadership position in the video lottery terminal market in a short
time frame; (v) it has a healthy balance sheet with cash and equivalents of
approximately $100 million; (vi) its Common Stock is listed on the NYSE and
trades on average in excess of 120,000 shares daily; (vii) a portion of its
recent earnings was comprised of non-recurring licensing income; (viii) its
hotel operations have been a drag on consolidated earnings results; (ix) the
pinball market is not expected to experience much growth; and (x) it had not
yet received gaming license approval in Nevada.

Among the qualitative considerations of the WMS Merger, Ladenburg noted that
the combination of WMS and BGII, which are competitors, would result in
increased market share, create opportunities for overhead cost savings and
lower production costs and create a company with a strong financial foundation
and capital for future growth. The WMS Merger was a tax-free transaction and
would enable BGII's stockholders to participate in the potential future growth
of BGII.

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Quantitative Analysis

For purposes of its analyses, Ladenburg reviewed the historical and
projected performance of BGII and WMS. Ladenburg's analyses were based on the
following data for BGII: (i) 10,750,000 shares outstanding; (ii) $73.9 million
of debt, including approximately $53.1 million of domestic debt and $20.8
million of Bally Wulff debt; (iii) $4.0 million of cash; and (iv) $12.0
million for the cost of buying out certain management contracts; and for WMS
(i) 24,105,000 shares outstanding; (ii) $57.5 million of debt (excluding debt
specific to its hotel operations); and (iii) $98.0 million of cash.

(i)Historical Market Price Analysis. Ladenburg compared the closing market
prices of each of the BGII Common Stock and the WMS Common Stock over
the 30-day trading period prior to June 21, 1995, as well as periods
prior to the April 18, 1995 announcement date. For the 30-day trading
period prior to June 21, 1995, the closing market price ranged from
$8.50 to $11.13 for BGII and $18.25 to $20.50 for WMS. For periods prior
to April 18, 1994, the closing market price ranged from $7.25 to $10.25
for BGII and $19.00 to $21.88 for WMS. Application of the WMS Exchange
Ratio of 0.55x to the range of WMS closing stock prices prior to the
April 18, 1995 announcement date indicated a premium of 2.0% to 17.4% to
the high closing price for BGII during the same period.

(ii)Historical and Projected Financial Performances. Ladenburg reviewed (i)
five-year projections for BGII as provided by its management based on
assumptions management believed were reasonable and independently
developed five-year projections based on assumptions which Ladenburg
believed to be reasonable and (ii) one year projections of WMS as
provided by its management for the fiscal year ended June 30, 1996 from
which Ladenburg extrapolated an additional four years of projections
based on industry trends and discussions with WMS' management. The five-
year projections for BGII prepared by its management and prepared by
Ladenburg contain income statements, balance sheets and cash flows for
fiscal years ended December 31, 1995 through 1999. The material
assumptions contained in management's five year projections were:

(i) for Gaming, unit sales of 22,400 in 1995; 29,100 in 1996; 35,500 in
1997; 43,050 in 1998; and 49,500 in 1999. Based on management's
estimated worldwide unit sales, these amounts equated to market
shares of approximately 20% in 1995, increasing over time to 33% in
1999;

(ii) average unit sales prices increase from $5,100 in 1995 to $5,650 in
1999;

(iii) Gaming machine revenues increase by 25% compounded annually for the
five year period ended fiscal 1999;

(iv) an approximately 23% increase in other revenue, which includes
accessories and used machines, in the years 1995 to 1999;

(v) gross margins increase from approximately 31% in 1995 to 42% in
1999 as a result of lower average material costs, manufacturing and
engineering efficiencies, plus the benefit of spreading the fixed
overhead costs over a greater number of units produced; gross
margins of 42% in 1999 would approximately equal the level
experienced by IGT for the six months ended March 31, 1995;

(vi) selling, general and administrative expenses (including the
provision for bad debts estimated at 2.5% of revenues) increase by
approximately 47% in 1995 (due to increases in research and
development, sales and marketing), followed by increases of
approximately 25% per year in 1996 to 1999;

(vii) for Bally Systems, an increase in EBIT of approximately 19%
compounded annually from 1995 to 1999;

(viii) for Bally Wulff, Deutschmark projections translated at a management
suggested exchange rate of DM1.5/US$1; flat gross margins of
approximately 41-42% in 1995 to 1999 and EBITDA margins of 18% in
1995, followed by an increase from approximately 17% to 18% from
1996 to 1999;

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(ix) increase in parent expenses (corporate overhead) from approximately
$5.6 million in 1995 to $8.5 million in 1999.

For items after EBITDA, based on discussion with management, Ladenburg
assumed depreciation and amortization expense equal to historical levels
and adjusted to account for projected capital expenditures of $6 million
annually. Ladenburg also assumed decreasing net interest expense (as a
result of relatively flat borrowings offset by interest income on
increasing consolidated cash balance) and a tax rate of 39% in 1995,
decreasing to a tax rate of 36% in the years 1996 to 1999.

Ladenburg relied upon management's projections for 1995 as outlined
above. The material assumptions contained in Ladenburg's projections for
the years 1996 to 1999 were:

(i) unit sales increase by 15% per year in 1996 to 1999; market share
(based on management's estimate of worldwide unit sales) of 20% in
1995 increases to 26% in 1999;

(ii) average unit sales prices were equal to those assumed by
management;

(iii) other revenues equal to those assumed by management;

(iv) gross margins increase from approximately 31% in 1995 to a flat 33%
in the years 1996 to 1999;

(v) a flat EBITDA margin of 10.5% from 1995 to 1999, due to higher
selling, general and administrative expenses which offset gains in
gross margin;

(vi) assumptions for Bally Systems, Bally Wulff and parent (corporate
overhead) were the same as those assumed by management;

(vii) capital expenditures, depreciation, amortization, interest expense
and tax rates as outlined above.

Ladenburg's determination of the fairness of the Exchange Ratio,
from a financial point of view, is based on all of the quantitative
and qualitative analyses described herein, however, Ladenburg
placed little weight on management's five year projections due to
their highly optimistic assumptions regarding sales increases
resulting from gains in market share and aggressive increases in
gross and operating margins. Ladenburg noted that while management
had made substantial progress in turning around Gaming's operations
and improving margins, it had achieved this success only in the
last few quarters. Ladenburg considered that Gaming did not meet
budgeted sales and profit projections for fiscal 1994 and year-to-
date through April 30, 1995. Therefore, Ladenburg developed
projections based on reasonable assumptions it deemed would be used
by a knowledgeable third party. These projections were based
principally on maintaining EBITDA margins at the fiscal 1995 level,
which were at an all-time high for at least the past five years,
and smaller gains in market share than assumed by management.

Ladenburg believed that management's projected gains in market
share were optimistic given the overwhelmingly stronger position of
IGT (with a market share of approximately 75%), a near term
stagnant market and increased competition (including from a well-
capitalized WMS). Moreover, IGT is a significantly more profitable
and better capitalized company that offers more extensive services
to customers (including progressive systems, sophisticated casino
floor layout services and in-house financing of sales, among
others) than Gaming. A displacement of IGT by Gaming would seem
difficult given IGT's entrenched position and greater financial
resources and ability to cut prices in the face of attempted gains
in share by Gaming. Even so, Ladenburg gave some credit to
management's expected gains in market share, though was less
aggressive in such projected gains.

(iii)
Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for each of BGII and WMS which determined a range of values
based on the multiples of comparable public companies. The results of
this analysis indicated that the median implied equity value per share
was $8.23 for BGII and $22.18 for WMS.

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For all the comparable public companies, Ladenburg derived the following
median common stock trading multiples: (i) net sales; (ii) EBITDA; (iii)
operating income (EBIT); (iv) pre-tax income; (v) net income; (vi)
projected net income; and (vii) book value. Net sales, EBITDA and EBIT
multiples are based on total enterprise value divided by each financial
measure, respectively. Enterprise value is defined as the market value
of common stock (which is the total shares outstanding multiplied by the
stock price per share), plus total debt, less cash and cash equivalents.
The pre-tax income, net income, projected net income, and book value
multiples are derived by dividing the market value of the common stock
or per share stock price by the appropriate financial item. Equity
valuations for BGII based on net sales, EBITDA and EBIT were calculated
by multiplying its net sales, EBITDA and EBIT by the median net sales,
EBITDA and EBIT multiples then subtracting total debt and the cost of
buying out certain management contracts, and adding cash equivalents.
For valuations based on pre-tax income, net income, projected net income
and book value, Ladenburg multiplied BGII's value by the appropriate
median multiples and subtracted the cost of buying out certain
management contracts to arrive at equity value. Equity value was then
divided by the total number of BGII shares outstanding to derive equity
value per share.

Equity valuations for WMS based on net sales, EBITDA and EBIT were
calculated by multiplying its net sales, EBITDA and EBIT by the median
net sales, EBITDA and EBIT multiples, then subtracting total debt and
adding cash and cash equivalents. For valuations based on pre-tax
income, net income, projected net income and book value, Ladenburg
multiplied WMS' value by the respective median multiples to arrive at
equity value. Equity value was then divided by the total number of WMS
shares outstanding to derive equity value per share.

For purposes of its analysis with respect to BGII, Ladenburg selected
the following comparable public companies: Acres Gaming, Inc., Casino
Data Systems, GTECH Holdings Corporation, Innovative Gaming Corporation
of America, IGT, International Lottery, Inc., Mikohn Gaming Corporation,
and VLTS. The median market multiples for the selected group of
comparable companies were as follows: (i) 2.2x as multiple of sales,
(ii) 9.3x as a multiple of EBITDA, (iii) 9.2x as a multiple of EBIT,
(iv) 8.9x as a multiple of pre-tax income, (v) 13.8x as a multiple of
net income, (vi) 10.5x as a multiple of projected earnings for fiscal
year one, (vii) 8.0x as a multiple of projected earnings for fiscal year
two, and (viii) 2.4x as a multiple of book value. The market multiples
for BGII were as follows: (i) 0.8x as a multiple of net sales, (ii) 7.7x
as a multiple of EBITDA, (iii) 16.4x as a multiple of EBIT, (iv) 13.1x
as a multiple of pre-tax income, (v) 22.3x as a multiple of net income,
(vi) 13.4x as a multiple of projected earnings for fiscal year one (vii)
13.6x as a multiple of projected earnings for fiscal year two, and
(viii) 1.2x as a multiple of book value. The comparable company
multiples indicated a range of per share equity values of $5.75 to
$42.05, the median of which was $8.23 per share. Ladenburg concluded
that the median value per share best represented the implied value of
BGII for this methodology as it encompasses all the valuation measures
in a balanced manner.

For purposes of this analysis with respect to WMS, Ladenburg divided
WMS' operations into two segments and valued each based on market
multiples of selected public comparable. The segments consisted of
amusement games (pinball, video arcade games, home video games and VLT
and gaming machines) and resort hotel operations.

In the case of the games segment, Ladenburg selected arcade game
companies including Conquest Industries in the U.S. and Namco, Nintendo,
Sega Enterprises and Taito in Japan. For the home video game segment,
Ladenburg selected Acclaim Entertainment, Activision, Atari, Broderbund
Software, Electronic Arts, Gametek, Sierra On-Line, Spectrum Holobyte in
the U.S.A. and Capecom, Namco, Nintendo, Sega Enterprises and Tecom in
Japan. Ladenburg also selected gaming machine companies including Acres
Gaming, Casino Data Systems, GTech, Innovative Gaming, IGT,
International Lottery, Mikohn Gaming and VLTS. The median market
multiples for the arcade game segment were as follows: (i) 0.9x as a
multiple of sales, (ii) 31.9x as a multiple of EBIT, (iii) 38.7x as a
multiple of net income, (iv) 19.1x as a multiple of projected earnings
for fiscal year one, (v) 16.0x as a multiple of projected earnings for
fiscal year two, and (vi) multiples of EBITDA, pre-tax income and book
value were not

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meaningful. The median market multiples for the home video games segment
was as follows: (i) 1.8x as a multiple of sales, (ii) 12.5x as a
multiple of EBITDA, (iii) 19.5x as a multiple of EBIT, (iv) 17.7x as a
multiple of pre-tax income, (v) 25.2x as a multiple of net income, (vi)
27.2x as a multiple of projected earnings for fiscal year one, (vii)
22.6x as a multiple of projected earnings for fiscal year two, and
(viii) 2.6x as a multiple of book value. The median market multiples for
the gaming machines segment were the same as those presented for the
Gaming market multiples analysis. The market multiples for WMS were as
follows: (i) 1.2x as a multiple of net sales, (ii) 15.8x as a multiple
of EBITDA, (iii) 25.6x as a multiple of EBIT, (iv) 29.5x as a multiple
of pre-tax income, (v) 65.5x as a multiple of net income, (vi) 27.8x as
a multiple of projected earnings for fiscal year one, (vii) 16.7x as a
multiple of projected earnings for fiscal year two, and (viii) 2.3x as a
multiple of book value.

Ladenburg weighted the arcade game multiples by a factor of 40%, home
video game multiples by a factor of 40%, and the gaming machine
multiples by a factor for 20% to account for the relative contribution
of WMS' profits by the respective components for the games segment. The
resulting blended multiples were applied to WMS' games segment's
financials to derive a range of values.

For the resort hotel segment, Ladenburg selected Crystal Mountain,
Extech, Marriot International, Sonesta International Hotels, Swiss
Chalet, the Jockey Club, Western Standard and Winter Sports as
comparable public companies. The median market multiples for the group
were as follows: (i) 1.2x as multiple of sales, (ii) 7.3x as multiple of
EBITDA, (iii) 11.6x as a multiple of EBIT, (iv) 7.6x as a multiple of
pre-tax income, (v) 14.6x as a multiple of net income, (vi) 19.9x as a
multiple of projected earnings for fiscal year one, (vii) 16.8x as a
multiple of projected earnings for fiscal year two and (viii) 1.5x as a
multiple of book value. Ladenburg applied the market multiples to each
of the financial results of the Condado Plaza, the El San Juan and
Williams Hospitality to derive valuations for 100% of each entity.
Ladenburg then multiplied the value of each of WMS' resort operations by
WMS' respective ownership of each entity (95% for the Condado, 50% for
the El San Juan and 62% for Williams Hospitality) to derive WMS' total
equity value of its Puerto Rico hotel operations. Ladenburg assumed no
value for the equity ownership of the El Conquistador due to the highly
leveraged nature and negative earnings of this resort.

Ladenburg added the range of equity values derived, based on each
multiple, for the games segment and WMS' ownership of its hotel
operations to derive a range of total equity values for the entire
company and divided the range by the number of WMS shares outstanding to
derive range of equity values per share. The range of per share equity
values was $7.72 to $36.46, the median of which was $22.18. Ladenburg
concluded that the median value per share best represented the implied
value of BGII for this methodology as it encompasses all the valuation
measures in a balanced manner.

(iv)Acquisition Multiples Analysis. Ladenburg conducted an acquisition
multiples analysis which was similar to the market multiples analysis
but instead relied upon multiples form comparable merger and acquisition
transactions. For purposes of this analysis, the purchase price was
equal to the amount paid for the target's equity and the transaction
value was equal to the purchase price, plus the target's outstanding
interest-bearing debt, less cash and cash equivalents.

Ladenburg compared multiples from merger and acquisition transactions of
the following target and acquiring companies, respectively: BGII
(initial public offering), spinoff by BEC; Connecticut Off Tack Betting
and Autotote Corp.; and Global Gaming and Anchor Gaming. The median
multiples for the selected transactions were as follows: (i) 0.7x as a
multiple of sales, (ii) 6.2x as a multiple of EBITDA, (iii) 9.5x as a
multiple of EBIT, (iv) 28.6x as a multiple net income, (v) 1.6x as a
multiple of book value, and (vi) 13.3x as a multiple of projected
earnings. The range of equity values was divided by the number of shares
outstanding to derive a range of per share values. The range of implied
equity values per share of BGII was $6.24 to $13.37, the median of which
was $9.45. Ladenburg concluded that the median value per share best
represented the implied value of BGII for this methodology as it
encompassed all the valuation measures in a balanced manner. Due to lack
of comparable transactions

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with publicly available financial data, Ladenburg was unable to develop
a reliable valuation range for WMS using this method.

(v)Discounted Cash Flow Analysis. Ladenburg conducted a discounted cash
flow analysis which derived equity values based on the present value of
future net cash flows, less current total debt, plus current total cash.
The equity value was then divided by the number of shares outstanding to
derive equity value per share. The cash flows were discounted using a
range of discount rates based on a slight premium to the weighted
average cost of capital for the peer group or, where available, the
weighted average cost of capital for the entity being evaluated. For
purposes of this analysis, annual free cash flow equaled de-levered net
income, plus depreciation, less capital expenditures, less the change in
working capital. In the exit year, free cash flow also included proceeds
from the sale of the business, which is typically assumed only for
valuation purposes as a more representative "terminal value," rather
than using cash flows in perpetuity. The terminal value was determined
by applying an exit multiple based on the median EBITDA multiple of
comparable public companies. Ladenburg used discounted cash flow
analyses for Gaming and Bally Wulff separately, which were then combined
for a total value, and applied discount rates and exit multiples as
follows: (i) for Gaming, cash flows were discounted using a range of
discount rates of 13% to 15% with exit multiples of 7x to 9x and (ii)
for Bally Wulff, a discount range of 16% to 18% was applied with exit
multiples of 5.3x to 6.8x.

The discounted cash flow analysis for WMS consisted of a discounted cash
flow analysis for the two segments of WMS--games (pinball, video arcade,
home video games and gaming machines) and hotels. Ladenburg used a
blended terminal multiple for the games segment based on the relative
contribution to the total games segment's profits by each of its
components. Ladenburg derived discounted cash flows for each of the
Condado Plaza, the El San Juan and Williams Hospitality and multiplied
their results by WMS' respective ownership of each of these entities.
Ladenburg assumed no value for the equity ownership of the El
Conquistador due to the highly leveraged nature and negative earnings of
this resort. The cash flows were discounted using a range of discount
rates of 12% to 14% for WMS' games segment and 10% to 12% for WMS' hotel
segment and a blended terminal multiple of 10x to 12x for WMS' games
segment and 6x to 8x for WMS' hotel segment.

The equity value per share for BGII ranged from $8.44 to $13.47 based on
independently developed projections ($19.88 to $28.71 based on
management's projections) and $29.03 to $35.92 for WMS. The median
equity value per share was $10.88 based on independently developed
projections ($24.16 based on management's projections) for BGII, and
$32.37 for WMS.

(vi)Takeover Premium Analysis. Ladenburg included a takeover premium
analysis which examined recent premiums paid in the acquisition of
public companies. For purposes of this analysis, premiums were defined
as the excess, in percentage terms, of the per share purchase price
relative to the target's stock price prior to announcement of the
transaction. The median premiums paid for public companies were 28.6%
and 26.8%, one day and one week, respectively, prior to the announcement
of the transaction. The percentage premiums were applied to BGII's stock
price prior to the April 18, 1995 announcement of the BGII-WMS
transaction to derive a range of per share values for BGII. Based on the
announcement dated of April 18, 1995, the range of values per share for
BGII derived from the application of premiums was $10.93 to $11.59, the
median of which was $11.10.

Comparison of WMS Merger Consideration to BGII Per Share Values

Ladenburg concluded that the WMS Exchange Ratio is fair, from a financial
point of view, to BGII's stockholders, based on the qualitative considerations
noted above and, among other things, the following facts: (i) the range of
implied values for WMS stock to be received by BGII's stockholders of $11.00
to $17.80 (which is the range of values for WMS' stock multiplied by the WMS
Exchange Ratio) was virtually higher than the range of per share values for
BGII of $8.23 to $11.10 (excluding the value of $24.16 derived in the
discounted cash flow analysis based on management's projections upon which
Ladenburg applied little weighting); and (ii)

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the range of values for WMS stock to be received by BGII's stockholders
represents a premium to BGII's closing stock price on the day prior to the
announcement of the WMS Merger of 29% to 109%.

Analysis of Bally Wulff

Ladenburg advised the BGII Board that, although in its view Bally Wulff was
worth in excess of $55 million, for purposes of rendering its opinion it had
assumed a sale of Bally Wulff resulting in net proceeds to BGII of $55
million. Ladenburg separately evaluated Bally Wulff using both qualitative and
quantitative assessments. Among the qualitative factors it noted that (i)
Bally Wulff is a market lender and has a strong franchise and brand name and
(ii) that Bally Wulff has consistent and strong historical profits. Ladenburg
conducted (a) a market multiples analysis, (b) a discounted cash flow
analysis, and (c) a leveraged buy-out analysis (which methods are described
above.) In each analysis, Ladenburg derived the equity value for Bally Wulff
and subtracted $55 million, which represents the minimum net proceeds required
in the Merger which is the amount needed to repay BGII's domestic debt of
approximately $55 million, to derive the net value to BGII's stockholders. The
per share equity values therefore represent the excess proceeds that would be
distributed to BGII's stockholders.

(i)Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for Bally Wulff which determined the implied public market
value based on the multiples of comparable public companies. The results
of the market multiple analysis indicated a range of excess proceeds to
be distributed to BGII's stockholders, after the repayment of $55
million of BGII domestic debt, of $2.05 to $13.66 and a median of $3.44.
Ladenburg concluded that the median value per share best represented the
implied value of Wulff's proceeds, in excess of the $55 million,
available for distribution since the median encompasses all the
valuation measures in a balanced manner. For purposes of this analysis
with respect to Bally Wulff, Ladenburg compared the multiples of the
following public companies: GTech Holdings Corp., Innovative Gaming
Corp., IGT, International Lottery, Inc. and VLTS. The median market
multiples for the selected group of comparable companies were as
follows: (i) 2.8x as a multiple of sales, (ii) 10.6x as a multiple of
EBITDA, (iii) 11.2x as a multiple of EBIT, (iv) 10.0x as a multiple pre-
tax income, (v) 18.4x as a multiple of net income, (vi) 13.5x as a
multiple of projected earnings for fiscal year one, (vii) 15.1x as a
multiple of projected earnings for fiscal year two, and (viii) 3.7x as a
multiple of book value. These multiples were then discounted by 33% due
to the following considerations: (i) comparable companies are public,
U.S. corporations in contrast to Bally Wulff, a private, German company;
(ii) comparable companies operate in a growing worldwide market with
greater growth potential as compared to Bally Wulff which operates in a
highly regulated German market with no prospects for growth; and (iii)
comparable U.S. companies are not exposed to the same currency exchange
rate risk as Bally Wulff.

(ii)Discounted Cash Flow Analysis. Ladenburg conducted a discounted cash
flow analysis of Bally Wulff which derived equity values based on the
present value of future net cash flows, less current total debt, plus
current total cash in the same manner as the analysis described above
conducted by Ladenburg with respect to BGII and WMS. The cash flows were
discounted using a range of discount rates of 16% to 18% for Bally Wulff
and a terminal multiple of 5.3x to 6.8x.

The equity value per share after the repayment of $55 million of BGII
domestic debt using the discounted cash flow analyses ranged from $1.08
to $3.45 for Bally Wulff, with a median equity value per share of $2.23.
Ladenburg concluded that the median value per share best represented the
implied value of Wulff's proceeds, in excess of the $55 million,
available for distribution since the median encompasses all the
valuation measures in a balanced manner.

Leveraged Buy-out Analysis. The leveraged buy-out analysis for Bally
Wulff derived an equity value based on the price a financial buyer could
pay in a leveraged transaction. This analysis determined equity values
based on operating projections and general assumptions indicated by
current market conditions. Ladenburg constructed capital structures that
met the risk-return requirements of today's equity investors and senior
and subordinated lenders. Ladenburg advised the BGII Board that it was
using assumptions applicable in the United States and that leveraged
buy-outs in Germany may involve different assumptions. Capital
structures were derived by applying certain parameters with respect to
(iii)

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interest rates, coverage ratios and returns on investments. Assuming
that all outstanding interest-bearing debt was refinanced, the equity
value equaled total capitalization (new debt plus new equity), less
outstanding interest-bearing debt, less estimated buyer's transaction
costs. This analysis showed an implied equity value for Bally Wulff in
excess of $55 million.

Limitations of Analyses

Although each analysis employed by Ladenburg in rendering its opinion is
summarized above, the above summary does not purport to be a complete
description of Ladenburg's analyses and contains those aspects of the
Ladenburg's analysis deemed relevant by BGII. In its analyses, Ladenburg made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, based on, among
other things, information provided to (and relied upon by) Ladenburg by BGII,
many of which are beyond the control of BGII or Ladenburg. Any estimates
contained in Ladenburg's analyses are not necessarily indicative of actual
values, which may be significantly more or less favorable than as set forth
therein. Additionally, estimates of the value of businesses do not purport to
be an appraisal or necessarily reflect the prices at which the business
actually may be sold. Because such estimates are inherently subject to
uncertainty since the assumptions upon which such estimates are based may not
materialize, neither BGII nor Ladenburg nor any other person assumes
responsibility for the accuracy of such estimates. Ladenburg's analysis does
not reflect among other things, actual 1995 financial results of BGII, WMS or
Bally Wulff, revised prospectus for their respective businesses, changes in
general business and economic conditions or any other transaction or event
that has occurred or that may occur and that was not anticipated at the same
such materials were prepared.

The Alliance Proposal

Ladenburg derived a preliminary summary pro forma analysis for a combination
of BGII and Alliance as indicated by the proposed Alliance transaction. The
analysis showed a highly leveraged and unstable financial structure with
approximately only 1.0x EBITDA to gross interest expense coverage, debt to
equity of 4.1x, and debt to EBITDA of 10.3x. Additionally, Ladenburg noted
that (i) the proposed Alliance transaction is taxable; (ii) Alliance had not
addressed how the BGII stock already owned by Alliance would be treated in the
proposed transaction; (iii) Alliance had losses for the past four years, a
highly leveraged balance sheet, and no tangible net worth; (iv) there are no
apparent operational or financial benefits derived from a combination of
Alliance and BGII; (v) Alliance's common stock is thinly traded and has
limited research coverage; and (vi) there is no visible upside in Alliance's
stock price. Ladenburg indicated to the BGII Board that it could not render an
opinion regarding the fairness of the Alliance transaction from a financial
point of view, to BGII's stockholders because of the highly speculative nature
of the Alliance proposal due to, among other things, the conditional nature of
its financing, as its identified lenders indicated only an interest in
financing the Alliance proposal subject to due diligence and committed take-
out refinancing within one year, and the undefined collar on Alliance's stock
which could impact valuation substantially. In addition, Alliance did not
address the non-compete agreement with BEC, a violation of which could result
in the loss of BGII's brand name and one of its major customers.

THE AUGUST OPINION

At a meeting of the BGII Board of Directors held on August 7, 1995,
Ladenburg delivered its written opinion to the Board of Directors of BGII to
the effect that, as of such date, the transactions proposed by Alliance are
not as favorable as the Merger, from a financial point of view, to BGII's
stockholders. The opinion also stated that Ladenburg is unable to render an
opinion that, as of such date, the transactions proposed by Alliance are fair,
from a financial point of view, to BGII's stockholders. Ladenburg was unable
to render such opinion due to the speculative nature and undefined collar on
Alliance's proposal, as well as Alliance's lack of disclosure regarding BGII's
obligation to offer to repay $40 million principal amount of debt resulting
from a change of control and disregard of BGII's non-compete agreement with
BEC.

Information and Materials Considered

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senior officers and other representatives and advisors of WMS concerning the
business, operations and prospects of BGII and WMS; (iii) examined certain
publicly available business and financial information relating to BGII and WMS
as well as certain financial forecasts and other data relating to BGII and WMS
which were provided to it by the respective managements of BGII and WMS,
including information relating to certain strategic implications and
operational benefits anticipated from the WMS Merger; (iv) reviewed the
financial terms of the Merger as set forth in the WMS Agreement relating to,
among other things: current and historical market prices of the BGII Common
Stock and the WMS Common Stock, the respective companies' historical and
projected earnings, and the capitalization, cash position and financial
conditions of BGII and WMS; (v) analyzed certain financial, stock market and
other publicly available information relating to operations it considered
comparable to those of BGII and WMS; (vi) evaluated the potential pro forma
financial impact of the WMS Merger on WMS and the relative contribution of
BGII and WMS to selected pro forma financial data of the combined company,
(vii) reviewed Alliance's Purchaser's Offer to Purchase, dated as of July 28,
1995 (the "Offer to Purchase"); (viii) examined certain publicly available
business and financial information relating to Alliance; (ix) discussed with
management information relating to certain strategic implications and the
combined operations of Alliance and BGII; (x) reviewed the financial terms of
the proposed Alliance transaction set forth in the Offer to Purchase relating
to, among other things: current and historical market prices of BGII and
Alliance Common Stock, the respective companies' historical earnings, and the
capitalization, cash position and financial condition of BGII and Alliance;
(xi) analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations
Ladenburg considered comparable to those of Alliance; (xii) evaluated the
potential pro forma financial impact of the proposed Alliance transactions on
BGII and Alliance and the relative contribution of BGII and Alliance to
selected pro forma financial data of the combined company; and (xiii)
considered such other financial, economic and market criteria as it deemed
necessary to arrive at its opinion.

In rendering its opinion, Ladenburg assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with Ladenburg. With respect to financial forecasts and other
information provided to or otherwise reviewed by or discussed with Ladenburg,
the management of BGII advised Ladenburg that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgements of management of BGII as to the future
financial performance of BGII and the strategic implications and operational
benefits anticipated from the Merger and a combination with Alliance.
Ladenburg assumed, with the consent of BGII's Board of Directors, that the WMS
Merger would be treated as a tax-free reorganization for federal income tax
purposes. Ladenburg's opinion relates to the relative values of the WMS Merger
and the proposed Alliance transaction. Ladenburg did not express any opinion
as to what the value of the WMS or the Alliance stock actually will be when
issued to BGII stockholders or the price at which the WMS or Alliance stock
would trade subsequent to the WMS Merger or the proposed Alliance
transactions. In addition, Ladenburg did not make or obtain an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of BGII, WMS, or Alliance, nor did Ladenburg make a complete physical
inspection of the properties or assets of BGII or WMS and made no physical
inspection of the properties or assets of Alliance. Ladenburg was not
requested to, and did not, solicit third party indications of interest in
acquiring all or any part of BGII. Subsequent to Alliance's commencement of
its tender offer, Ladenburg opined on September 26, 1995, that the Revised WMS
Merger is more favorable to the stockholders of BGII, from a financial point
of view, than the revised Alliance tender offer and proposed back-end merger.
No other limitations were imposed by BGII on Ladenburg with respect to the
investigations made or procedures followed by Ladenburg in rendering its
opinion.

Overview of Analyses

Ladenburg used both quantitative and qualitative assessments to evaluate
BGII, WMS and Alliance. Ladenburg's determination that the transactions
proposed by Alliance are not as favorable as the WMS Merger, from a financial
point of view, is based on all the quantitative and qualitative analyses
described herein. Ladenburg conducted a number of valuation analyses to
compare a range consideration values to be receive in the proposed Alliance
transactions and the WMS Merger and determined a range of per share equity
values for

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Alliance. Ladenburg also analyzed pro forma results for a combination of BGII
with WMS and with Alliance. The analyses used to determine per share equity
values for Alliance included a historical market price analysis, a market
multiples analysis, and a break-up valuation analysis. Ladenburg used the
median per share equity value from each analysis to develop a range of values.
Ladenburg considered this range of per share values in evaluating the stock
portion of the consideration in the back-end merger portion of the proposed
Alliance transactions. Ladenburg then compared the consideration to be
received in the Merger to the consideration proposed in the Alliance
transaction and compared the pro forma results and prospects for BGII in
combination with WMS to BGII in combination with Alliance.

Qualitative Considerations

In addition to financial analyses, Ladenburg considered a number of
qualitative factors for the comparisons of the WMS Merger to the proposed
Alliance transactions. Ladenburg did not apply weightings to any of the
qualitative analyses. Among the qualitative factors, Ladenburg noted that (i)
Alliance's financing is not committed and is contingent upon substantial due
diligence by Alliance and its financing sources, Alliance securing permanent
financing and additional equity contribution to Alliance; (ii) Alliance's
offer dated June 19, 1995 had changed from 60% cash to 43% cash; (iii) the
proposed Alliance transactions are taxable; (iv) there are no apparent
operational or financial benefits derived from a combination of Alliance and
BGII; (v) Alliance's proposal ignored certain non-compete issues with BEC;
(vi) there is a risk to BGII that it would lose certain customers from a
combination of Alliance and BGII due to potential conflicts of interest with
those customer's businesses; (vii) Alliance's common stock is thinly traded
and has limited research coverage; (viii) there is no visible upside in
Alliance's stock price; and (ix) Alliance has an overhang of 16 million shares
which depresses the upside price potential of its stock.

Quantitative Analysis

For purposes of its analyses, Ladenburg used the same data for BGII and WMS
that it used in its opinion dated June 21, 1995. Additionally, Ladenburg
reviewed the historical financial performance of Alliance and projections from
an update to a Gerard Klauer Mattison & Co. research report dated February 9,
1995. Ladenburg's analyses were based on the following data for Alliance: (i)
14,038,074 shares of common stock outstanding, based on 11,654,150 shares of
common stock outstanding on May 9, 1995, the conversion of the 1,333,333
shares of Junior Convertible Special Stock into a like number of shares of
common stock, and the net issuance of 1,050,591 shares of common stock upon
the exercise of in-the-money options and warrants using the treasury stock
method and an Alliance share price of $5.125 on August 4, 1995; (ii) $102.7
million of debt; and (iii) $32.2 million excess cash which is equal to the
amount of cash and cash equivalents Alliance reported in its March 31, 1995
Form 10-Q less $7.0 million of cash balances required in its operations as
reported necessary by Alliance. The pro forma analyses were based on the
following data for a combination of BGII and WMS: (i) $90.9 million of debt;
and $77.9 million of cash and equivalents; and for a combination of BGII and
Alliance: (i) $252.7 million of debt; and (ii) $50.0 million of cash and
equivalents.

(i)Comparison of the WMS Merger and the Alliance Proposal. Ladenburg
compared the pre-tax consideration to be received by BGII stockholders
in the WMS Merger and in the proposed Alliance transactions. The pre-tax
consideration in the WMS Merger had a value of $12.76 which consisted of
$12.31 of WMS stock and $0.45 of cash. The value of the WMS stock was
derived by multiplying the closing price of WMS' stock on August 4,
19945 (the last closing price prior to August 7, 1995, the date of the
opinion) of $22.375 by the WMS Exchange Ratio of 0.55x. The cash
consideration was derived by taking the cash which would be received in
a $60 million sale of Bally Wulff (the purchase of which management had
discussed at the time) and dividing the net proceeds of such sale in
excess of $55 million by 11,230,000 shares, the total number of BGII
shares outstanding, including 480,000 shares issuable subject to
performance units, which is what would be distributed to BGII
stockholders.

The pre-tax consideration in the proposed Alliance transactions had a
range of values from $8.94 to $12.50 which consisted of $5.38 in cash
(assuming all of BGII's stockholders tendered their shares in the
Alliance Offer) and $3.56 to $7.12 in Alliance stock. The cash
consideration was derived by taking the aggregate cash consideration of
$55 million in the Alliance Offer and dividing it by 10.2 million

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shares, the number of fully diluted BGII shares not owned by Alliance.
The value of the Alliance stock was derived by multiplying a range of
Alliance stock prices, including the closing price of Alliance's stock
on August 4, 1995 (the last closing price prior to August 7, 1995, the
date of the opinion) of $5.125, by their respective exchange ratios.
Alliance had stated that the stock portion of its proposed transaction
was subject to an "appropriate collar" to prevent its current
stockholders from suffering dilution. Ladenburg assumed a collar of an
approximately 22% decrease in the price of Alliance's stock to be
reasonable. The analysis showed that if the price of Alliance's stock
were to fall below $4.00 per share, the value of the Alliance stock
received by BGII's stockholders would fall below $7.12 and therefore the
total consideration to BGII stockholders would be less than $12.50 per
share.

A second analysis regarding the pre-tax consideration in the proposed
Alliance transaction had a range of values from $6.47 to $12.43 which
consisted of $5.38 cash (assuming all of BGII's stockholders
participated in the Alliance Offer) and $1.09 to $7.05 in Alliance
stock. The cash consideration was derived as described above. The value
of the Alliance stock was derived by determining the per share equity
value for Alliance after giving effect to the proposed transactions and
multiplying by a range of exchange ratios. A range of equity values was
derived by taking the projected pro forma EBITDA for the combination of
Alliance and BGII of $32.8 million for the latest twelve months ended
March 31, 1995, $46.8 million for the projected fiscal year ending June
30, 1996, and $50.0 million for a hypothetical upside case and
multiplying each EBITDA by a multiple of 7.5x to determine an implied
enterprise value. Ladenburg considered a 7.5x EBITDA multiple reasonable
based on comparable multiples for the general universe of publicly
traded stocks in the gaming industry as well as the purchase price
multiple of BGII implied by Alliance's proposed transactions. Pro forma
debt was subtracted from the enterprise value and pro forma cash was
added to derive total equity value. The total equity value was divided
by the pro forma number of shares outstanding, based on a range of
Alliance stock prices and exchanges ratios, to determine equity value
per share. The range of equity values per share were then multiplied by
the number of shares to be received by BGII stockholders in each
scenario to determine the value of the shares issued to the BGII
stockholders.

It was noted that while only the cash consideration received by BGII
stockholders in the WMS Merger, which makes up a small part of the
overall consideration, is taxable, the entire consideration received by
BGII stockholders in the proposed Alliance transaction is taxable.

(ii)Pro Forma Analysis. Ladenburg analyzed the pro forma financial results
of a combination of Alliance and BGII pursuant to the terms of the
proposed transactions. Additionally, Ladenburg compared these results to
certain key pro forma financial results of a combination of WMS and BGII
pursuant to the terms of the Merger. For the pro forma analysis with
Alliance, Ladenburg used projections for BGII as provided by its
management, and projections for Alliance as described in an update to a
Gerard Klauer Mattison & Co. research report dated February 9, 1995.

The pro forma financial results of a combination of Alliance and BGII
showed: (i) a capital structure that fails basic credit analysis, with
over $250 million of debt and approximately $33 million of EBITDA
(before non-recurring charges at Alliance) resulting in a EBITDA to
gross interest expense coverage ratio of 1.22x and a debt to EBITDA
ratio of 7.7x; (ii) net income losses of approximately $22 million for
the twelve month period ended March 31, 1995, net income losses of
approximately $12 million for the projected fiscal year ending June 30,
1995, and net income losses of approximately $3 million for the
projected fiscal year ending June 30, 1996; (iii) tangible book value of
approximately $10 million (after Alliance $20 million equity infusion
for which Alliance stated that it did not have a committed source at the
time); and (iv) no cash flow available for working capital.

The comparisons of the WMS pro forma financial information to the
Alliance pro forma financial information yielded the following results
for the projected fiscal year ending June 30, 1995: (i) earnings per
share of $0.69 for WMS compared to a loss of $0.37 for Alliance; (ii) a
debt to EBITDA ratio of 1.54x for WMS compared to 7.09x for Alliance;
(iii) a debt to equity ratio of 0.27x for WMS compared to 2.39 x for
Alliance; and (iv) a debt to tangible equity ratio of 0.42x for WMS
compared to 24.13x

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for Alliance. For the projected fiscal year ending June 30, 1996, the
comparisons showed: (i) earnings per share of $1.47 for WMS compared to
a loss of $0.08 for Alliance; (ii) a debt to EBITDA a ratio of 0.89x for
WMS compared to 5.40x for Alliance; (iii) a debt to equity ratio of
0.24x for WMS compared to 2.46x for Alliance; and (iv) a debt to
tangible equity ratio of 0.35x for WMS compared to 32.51x for Alliance.

(iii)
Valuation of Alliance's Stock. Ladenburg evaluated Alliance's stock
through various methods described below.

(a)Historical Financial Statements. Ladenburg reviewed Alliance's
historical financial performance for the four fiscal years ended June
30, 1994 and for the latest twelve month period ended March 31, 1995.
The financial results showed that Alliance had net losses for each of
the periods reviewed and negative tangible net worth at March 31, 1995.

(b)
Historical Market Price Analysis. Ladenburg examined the closing market
prices of Alliance's stock over the 90-day trading period prior to
August 4, 1995 during which time the closing market price ranged from
$4.38 to $6.13.

(c)Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for Alliance which determined the implied public market value
based on multiples of comparable public companies. Ladenburg derived two
sets of results based upon the multiples of Jackpot, the one public
company that is directly comparable to Alliance and based upon the
multiples of a group of public companies which had some similarity to
Alliance. The results of this analysis indicated that the median implied
equity value per share was $2.16.

For all the comparable public companies. Ladenburg derived the following
median common stock trading multiples: (i) net sales; (ii) EBITDA; (iii)
operating income (EBIT); (iv) pre-tax income; (v) net income; (vi)
projected net income; and (vii) book value. Equity calculations could be
derived only for net sales and book value because all of Alliance's
historical and projected EBITDA, EBIT, pre-tax income, net income, and
projected net income numbers produced negative values. The equity
valuations for Alliance based on net sales were calculated by
multiplying Alliance's net sales by the net sales multiples, then
subtracting total debt and adding cash and cash equivalents. For the
valuation based on book value, Ladenburg multiplied Alliance's book
value by the book multiple to arrive at equity value.

For purposes of its analysis, Ladenburg selected the following public
companies: Alpha Hospitality Corp., Ameristar Casinos, Inc., Anchor
Gaming, Argosy Gaming Corp., Casino America, Inc., Casino Magic Corp.,
Jackpot, Lady Luck Gaming Corp., Players International, Inc., and
President Casinos, Inc. The median market multiples for the selected
group of comparable companies were as follows: (i) 1.7x as multiple of
net sales, and (ii) 3.1x as a multiple of book value. Ladenburg
considered Jackpot to be the one public company with most resemble
Alliance and was the only directed comparable. The market multiples for
Jackpot were as follows: (i) 0.7x as a net sales, (ii) 4.2x as a
multiple of EBITDA, (iii) 8.5x as a multiple of EBIT, (iv) 11.1x as a
multiple of pre-tax income, (v) 18.7x as a multiple of net income, (vi)
16.2x as a multiple of projected net income, and (vii) 1.6x as a
multiple of book value. The market multiples for Alliance were as
follows: (i) 1.0x as a multiple of net sales, (ii) 17.3x as a multiple
of EBITDA, and (iii) 4.5x as a multiple of book value. Other multiples
for Alliance were not meaningful because they were negative.

(d)Break-up Valuation. Ladenburg analyzed the valuation of Alliance's
business segments which resulted in a value of $3.34 per share of
Alliance. Ladenburg broke Alliance's operations into two business
segments, (i) the Rainbow Casino in Vicksburg, MS and (ii) slot routes
and small casinos.

To determine the equity value of the Rainbow Casino, in which Alliance
increased its ownership on March, 29, 1995 and began consolidating in
its financial statements, Ladenburg first derived implied total annual
revenues by taking the number of slot machines and the number of table
games in the casino and multiplying them by the latest three month
average win per day in the Vicksburg gaming market for slot machines and
table games, respectively and multiplying that by 365 for the number of
days in

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the year. Ladenburg determined total EBITDA by applying the EBITDA
margin the casino had achieved during the six months of operations ended
December 31, 1994 to the total projected annual revenues, which after
royalty fees resulted in EBITDA from the casino available to Alliance of
$2.7 million. This number was multiplied by the median EBITDA multiple
for emerging market casinos of 8.3x to derive enterprise value; debt
specific to the Rainbow Casino of $13.9 million was subtracted to arrive
at the implied equity value for the casino.

The equity value for the slot route and small casinos segment was
determined by subtracting the latest twelve months direct expenses and
annualized selling, general and administrative expenses for the nine
months ended March 31, 1995 from the latest twelve months revenues to
derive EBITDA. This was then multiplied by the EBITDA multiple of 4.2x
for Jackpot, which has comparable business operations, to derive an
implied value. The implied values from the two business segments were
added together and total debt was subtracted and cash was added to
arrive at the total implied equity value for Alliance which was then
divided by the fully diluted shares outstanding to determine the per
share value.

Comparison of the Merger to the Proposed Alliance Transactions

Ladenburg concluded that the transactions proposed by Alliance are not as
favorable as the Merger, from a financial point of view, to BGII's
stockholders, based on, among other things, the following considerations: (i)
the conditional nature of the proposed Alliance transactions compared to the
Merger which had been agreed to in the Merger Agreement; (ii) the total pre-
tax consideration in the Merger is greater than the range of total pre-tax
consideration in the proposed Alliance transactions; (iii) the total
consideration from the Alliance transactions is taxable while only a small
portion of the Merger consideration is taxable; (iv) the Merger would result
in a strong, well-capitalized company with positive growth prospects while the
Alliance transactions would result in an unstable, highly leveraged company
with expected losses and would be reliant upon achieving aggressive
projections to prevent insolvency; (v) WMS has a significant amount of cash
flow to fund future growth while Alliance does not; (vi) there is significant
overhang in Alliance's stock; (vii) the lack of liquidity and upside potential
in Alliance's stock; and (viii) the risk of customer and trade name loss in
the Alliance proposal.

Limitations of Analyses

Although each analysis employed by Ladenburg in rendering its opinion is
summarized above, the above summary does not purport to be a complete
description of Ladenburg's analyses and contains those aspects of the
Ladenburg's analyses deemed relevant by BGII. In its analyses, Ladenburg made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, based on, among
other things, information provided to (and relied upon by) Ladenburg by BGII,
many of which are beyond the control of BGII or Ladenburg. Any estimates
contained in Ladenburg's analyses are not necessarily indicative of actual
values, which may be significantly more or less favorable than as set forth
therein. Additionally, estimates of the value of businesses do not purport to
be appraisals or necessarily to reflect the prices at which businesses
actually may be sold. Because such estimates are inherently subject to
uncertainty since the assumptions upon which such estimates are based may not
materialize, neither BGII nor Ladenburg nor any other person assumes
responsibility for the accuracy of such estimates. Ladenburg's analysis does
not reflect, among other things, actual 1995 financial results of BGII, WMS,
Bally Wulff or Alliance, revised prospects for their respective businesses,
changes in general business and economic conditions or any other transaction
or event that has occurred or that may occur and that was not anticipated at
the time such materials were prepared.

THE OCTOBER OPINION

At a meeting of the BGII Board of Directors held on October 17, 1995 to
consider and vote on the Alliance Proposal and the WMS Merger, Ladenburg
delivered an oral opinion to the BGII Board to the effect that, as of such
date, the consideration in the Merger was fair, from a financial point of
view, to BGII's stockholders and that the WMS Merger was not as favorable as
the Merger, from a financial point of view, to BGII's stockholders.

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Ladenburg considered WMS's original offer which had an exchange ratio of .55
shares of WMS Common Stock for each share of BGII Common Stock and required
the sale of Bally Wulff as a precondition to closing (and not the increased
exchange ratio in the Revised WMS Proposal, due to the fact that WMS had
placed several conditions on its increased offer which BGII would not meet,
including certain restrictions on the sale of Bally Wulff and the
securitization of the breakup fee). On September 26, 1995, Ladenburg delivered
an opinion to the BGII Board which considered the terms of the Revised WMS
Proposal, but on October 17, 1995, the BGII Board determined it likely that a
definitive agreement would not be reached with respect to the Revised WMS
Proposal due to the status of negotiations regarding such proposal. Therefore,
with respect to the oral opinion delivered on October 17, 1995, Ladenburg
considered only the terms of the original WMS offer. The oral opinion was
conditional upon Ladenburg's confirmatory due diligence with respect to
Alliance. On November 3, 1995, Ladenburg delivered a written opinion to the
BGII Board to the effect that, as of such date, the consideration in the
Merger was fair, from a financial point of view, to BGII's stockholders and
that the WMS Merger was not as favorable as the Merger, from a financial point
of view, to BGII's stockholders. The Merger Agreement originally contained a
cash election feature the elimination of which was subsequently approved by
the BGII Board. Ladenburg advised the BGII Board at a meeting held to approve
such amendment that the elimination of the cash election feature does not
affect the value of the aggregate consideration delivered to BGII stockholders
and therefore Ladenburg would not deliver a separate fairness opinion with
respect to the amendment of the Merger Agreement.

Information and Materials Considered

In rendering its oral and written opinions, Ladenburg, among other things,
(i) reviewed the Merger Agreement; (ii) held discussions with certain senior
officers, directors and other representatives and advisors of BGII and certain
senior officers and other representatives and advisors of Alliance concerning
the business, operations and prospects of BGII and Alliance; (iii) examined
certain publicly available business and financial information relating to BGII
and Alliance as well as five-year financial forecasts and other data relating
to BGII (the material assumptions of which are described below under "(iv)
Valuation of BGII's Stock--(a) Historical and Projected Financial
Performance") and four-year financial forecasts and other data relating to
Alliance which were provided to it by the respective managements of BGII and
Alliance, including information relating to certain strategic implications and
operational benefits anticipated from a merger with Alliance; (iv) reviewed,
among other things: the current and historical market prices of BGII and
Alliance Common Stock, the respective companies' historical earnings, and the
capitalization, cash position and financial condition of BGII and Alliance;
(v) analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations
Ladenburg considered comparable to those of BGII and Alliance; (vi) evaluated
the potential pro forma financial impact of a merger with Alliance on BGII and
Alliance and the relative contribution of BGII and Alliance to selected pro
forma financial data of the combined company; (vii) reviewed the WMS
Agreement; (viii) held discussions with certain senior officers, directors and
other representatives and advisors of BGII and certain representatives and
advisors of WMS concerning the Revised WMS Proposal; (ix) held discussions
with certain senior officers, directors and other representatives and advisors
of BGII and certain senior officers and other representatives and advisors of
WMS concerning the business, operations and prospects of BGII and WMS; (x)
examined certain publicly available business and financial information
relating to BGII and WMS as well as certain financial forecasts and other data
relating to BGII and WMS which were provided to it by the respective
managements of BGII and WMS, including information relating to certain
strategic implications and operational benefits anticipated from a merger with
WMS; (xi) reviewed, among other things: the current and historical market
prices of BGII and WMS stock, the respective companies' historical and
projected earnings, and the capitalization, cash position and financial
condition of BGII and WMS; (xii) analyzed certain financial, stock market and
other publicly available information relating to the businesses of other
companies whose operations it considered comparable to those of BGII and WMS;
(xiii) evaluated the potential pro forma financial impact of a merger with WMS
on BGII and WMS and the relative contribution of BGII and WMS to selected pro
forma financial data of the combined company; and (xiv) conducted such other
examinations and considered such other financial, economic and market criteria
as it deemed necessary to arrive at its opinion.

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In rendering its opinions, Ladenburg assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with Ladenburg. With respect to financial forecasts and other
information provided to or otherwise reviewed by or discussed with Ladenburg,
the management of BGII advised Ladenburg that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of BGII as to the future
financial performance of BGII and the strategic implications and operational
benefits anticipated from a combination with Alliance and a combination with
WMS. Ladenburg's opinion relates to the relative values of the Merger and the
WMS Merger. Ladenburg did not express any opinion as to what the actual value
of the Alliance Common Stock or the WMS Common Stock will be when or if issued
to BGII stockholders or the price at which the Alliance Common Stock or WMS
Common Stock would trade subsequent to the Merger or the WMS Merger. In
addition, Ladenburg did not make or obtain an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of BGII,
Alliance, or WMS, nor did Ladenburg make a complete physical inspection of the
properties or assets of BGII, Alliance or WMS. Ladenburg was not requested to,
and did not, solicit third party indications of interest in acquiring all of
BGII. No other limitations were imposed by BGII on Ladenburg with respect to
the investigations made or procedures followed by Ladenburg in rendering its
opinion.

Overview of Analyses

Ladenburg used both quantitative and qualitative assessments to evaluate
BGII, Alliance and WMS. Ladenburg's determination that the consideration in
the Merger is fair and that the WMS Merger is not as favorable as the Merger,
from a financial point of view, is based on all the quantitative and
qualitative analyses described herein. Ladenburg conducted a number of
valuation analyses to compare a range of consideration values to be received
in the Merger and the WMS Merger and determined a range of per share equity
values for BGII and Alliance. Ladenburg also analyzed pro forma results for a
combination of BGII with Alliance and with WMS. The analyses used to determine
per share equity values for Alliance included a historical market price
analysis, a market multiples analysis, an acquisition multiples analysis, a
discounted cash flow analysis and a break-up valuation analysis. Ladenburg
used the median per share equity value from each analysis to develop a range
of values. Ladenburg considered this range of per share values in evaluating
the stock portion of the consideration in the Merger. Ladenburg then compared
the consideration to be received in the Merger to the consideration in the WMS
Merger and compared the pro forma results and prospects for BGII in a
combination with Alliance to BGII in a combination with WMS. Ladenburg also
compared the consideration to be received in the Merger to the range of
derived equity values for BGII. The analyses used to determine per share
equity values for BGII included a historical market price analysis, a market
multiples analysis, an acquisition multiples analysis, a discounted cash flow
analysis and a takeover premium analysis.

Qualitative Considerations

In addition to financial analyses, Ladenburg considered a number of
qualitative factors related to the Merger and the WMS Merger. Ladenburg did
not apply weightings to any of these qualitative analyses. Among the
qualitative factors relating to the Merger, Ladenburg noted that (i) it is a
taxable transaction; (ii) there are limited operational benefits derived from
a combination of Alliance and BGII; (iii) it would close after the expiration
of the non-compete agreement with BEC; (iv) it would have financing with
commercially reasonable terms and would permit the repayment of $40 million of
BGII Senior Notes; (v) the combined entities would be highly leveraged with
significant debt service requirements; (vi) it enables BGII's stockholders to
participate in the potential future growth of BGII; (vii) Alliance Common
Stock is thinly traded and has limited research coverage; and (viii) Alliance
Common Stock has a stock overhang from the potential issuance of over 21
million shares resulting from options, warrants and convertible debentures
which depresses the upside price potential of its stock.

Among the qualitative factors relating to the WMS Merger, Ladenburg noted
that (i) the Revised WMS Proposal with the increased exchange ratio had never
been formally made to BGII in writing; (ii) new restrictions

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on terms of the sale of Bally Wulff, including a restrictive non-compete
agreement and revocation of the right to use the Bally name, made the sale of
Bally Wulff difficult; (iii) it is a tax-free transaction; (iv) it allows BGII
stockholders to participate in the upside of BGII; (v) the combined entities
have a strong financial foundation; (vi) the combined entities provide
opportunities for overhead cost savings and lower production costs; (vii)
joining forces with a competitor facilitates a gain in market share for BGII;
(viii) there are opportunities to benefit from WMS's video game technology
expertise and BGII's gaming industry expertise; (ix) the stock of WMS is
listed on the New York Stock Exchange and trades in excess of 120,000 shares
daily; (x) WMS stock is not subject to a collar; and (xi) the stock of WMS had
been trading down with an average closing price of $19.33 for the week ended
November 3, 1995 compared to an average closing price of $22.27 for the month
of September 1995.

Quantitative Analyses

Ladenburg's analyses were based on the following data for BGII: (i)
10,799,501 shares outstanding; (ii) $75.3 million of debt, including
approximately $56.7 million of domestic debt and $18.6 million of Bally Wulff
debt; (iii) $3.5 million of cash and equivalents; and (iv) $9.3 million for
the cost of buying out certain management contracts. Ladenburg's analyses were
based on the following data for Alliance: (i) 13,896,372 shares of Alliance
Common Stock outstanding, based on 11,654,150 shares of Alliance Common Stock
outstanding on September 25, 1995, the conversion of the 1,333,333 shares of
Special Stock into a like number of shares of Alliance Common Stock, and the
net issuance of 908,889 shares of Alliance Common Stock upon the exercise of
in-the-money options and warrants using the treasury stock method and a share
price of $4.50, which was the closing price on November 3, 1995; (ii) $101.4
million of debt; (iii) $27.0 million cash and equivalents (excluding the $10.4
million Alliance had spent to purchase 1,000,000 shares of BGII); and (iv)
$16.8 million of EBITDA for the fiscal year ended June 30, 1995 before non-
recurring charges of $2.3 million related to non-recurring compensation
expenses and certain service contracts and termination costs, and $7.8 million
resulting from non-recurring business development expenses. Ladenburg's
analyses were based on the following data for WMS: (i) 24,106,300 shares
outstanding; (ii) $90.2 million of debt; and (iii) $93.8 million of cash and
equivalents. The pro forma analyses were based on the following data for a
combination of BGII and Alliance: $251.4 million of debt and $29.8 million of
cash and equivalents. The pro forma analyses were based on the following data
for a combination of BGII and WMS: $90.2 million of debt and $70.3 million of
cash and equivalents.

(i) Comparison of the Alliance Merger and the WMS Merger. Ladenburg
compared the pre-tax consideration to be received by BGII stockholders
in the Merger and in the WMS Merger. The pre-tax consideration in the
revised proposed Alliance transactions had a range of values from
$11.48 to $13.00 which consisted of $7.83 in cash and $3.65 to $5.17 in
Alliance Common Stock. The cash consideration was derived by taking the
aggregate cash consideration of $77 million in the Alliance Offer and
dividing it by 9.8 million shares, the number of shares of BGII Common
Stock not owned by Alliance. The value of the Alliance Common Stock was
derived by multiplying a range of Alliance stock prices, including the
average closing price of Alliance's Common Stock for the ten trading
days ending five trading days prior to November 3, 1995 of $4.70, and
two assumed prices which are below Alliance's collar, $4.00 and $3.00,
by their respective exchange ratios. The analysis showed that if the
price of Alliance Common Stock stays within the collar, the value of
the Alliance stock received by BGII's stockholders would be $5.17 and
the total consideration to BGII stockholders would be $13.00 per share.

The pre-tax consideration in the WMS Merger had a range of values of
$10.45 to $12.54 which consisted of $10.45 to $12.10 of WMS Common Stock
and $0.00 to $0.44 of cash. The value of the WMS Common Stock was
derived by multiplying a range of prices of WMS Common Stock of $19.00
to $22.00, comparable to the trading range for the 90-day period prior
to October 1, 1995 by the exchange ratio of 0.55x. The cash
consideration was derived by taking the cash which would be received in
a $55 million and $60 million sale of Bally Wulff and dividing the net
proceeds of such

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sale in excess of the sum of $55 million by 11,279,501 shares, the total
number of shares of BGII Common Stock outstanding including 480,000
shares issuable subject to performance units, which is what would be
distributed to BGII stockholders.

(ii) Pro Forma Analysis. Ladenburg analyzed the pro forma financial results
of a combination of Alliance and BGII pursuant to the terms of the
Merger. Additionally, Ladenburg compared these results to certain key
pro forma financial results of a combination of WMS and BGII pursuant
to the terms of the WMS Merger. For this analysis, Ladenburg used
projections for BGII as provided by its management, the material
assumptions of which are described below, and projections for Alliance
and WMS as provided by their respective managements.

The material assumptions used in the combination of Alliance and BGII
were:

(a) approximately $5.0 million in operating expense savings;

(b) pro forma Alliance results for the acquisition of additional
ownership of the Rainbow Casino;

(c) amortization over thirty years of the goodwill of $50.3 million
created from the amount by which Alliance's total consideration
exceeded BGII's book value and amortization over seven years of the
transaction fees related to the issuance of $150 million of new
debt;

(d) a reduction in interest expense for the repayment of all of BGII's
debt;

(e) an increase in interest expense for the issuance of $150 million of
new debt at an interest rate of 14.0%;

(f) a $30 million equity investment in Alliance at $4.50 per share,
based on Alliance's Stock Purchase Agreement dated September 15,
1995;

(g) a cash payment of $13.00 per share for 5.9 million BGII shares; and

(h) the issuance of 10.8 million shares of Alliance stock at an assumed
per share price of Alliance stock of $4.70 (based on the average
closing price of Alliance's stock for the ten trading days ending
five NASDAQ NMS trading days prior to November 3, 1995) to BGII
stockholders in exchange for the balance of 3.9 million BGII shares.

The material assumptions used in the combination of WMS and BGII were:

(a) the sale of Bally Wulff for $55 to $60 million;

(b) approximately $2.3 million in operating expense savings and
approximately $500,000 less in general expenses, which BGII had
incurred in connection with negotiating a merger;

(d) amortization over thirty years of the goodwill of $55.5 million
created from the amount by which WMS' total consideration exceeded
BGII's book value;

(e) a reduction in interest expense for the repayment of all of BGII's
debt; and

(f) the issuance of 6.2 million shares of WMS stock to BGII stockholders
in exchange for their 10.8 million shares and 480,000 performance
units.

The comparison of the Alliance pro forma financial information to the WMS
pro forma financial information yielded the following results for the
latest twelve months ended June 30, 1995: (i) a loss per share of $0.35
for Alliance compared to earnings per share of $0.61 for WMS; (ii) an
EBITDA to gross interest expense coverage ratio of 1.6x for Alliance
compared to 7.4x for WMS; (iii) a debt to EBITDA ratio of 5.3x for
Alliance compared to 1.7x for WMS; (iv) a debt to equity ratio of 3.3x
for Alliance compared to 0.3x for WMS; and (v) a debt to tangible equity
ratio of (43.2x) for Alliance compared to 0.4x for WMS. For the projected
twelve months ending June 30, 1996, the comparison
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showed: (i) earnings per share of $0.19 for Alliance compared to $1.57
for WMS; (ii) an EBITDA to gross interest expense coverage ratio of 2.2x
for Alliance compared to 12.9x for WMS; (iii) a debt to EBITDA ratio of
3.9x for Alliance compared to 0.9x for WMS; (iv) a debt to equity ratio
of 3.0x for Alliance compared to 0.2x for WMS; and (iv) a debt to
tangible equity ratio of 252.4x for Alliance compared to 0.3x for WMS.

A second analysis regarding the pro forma valuation in the Merger yielded
values with a range to BGII stockholders from $11.39 to $17.16 based on
the actual combined EBITDA of $47.8 million for the twelve months ended
June 30, 1995, projected combined EBITDA of $64.6 million for the twelve
months ending June 30, 1996, and a hypothetical upside combined EBITDA of
$65.0 million. The range of values consisted of $7.83 cash and $3.56 to
$9.33 in Alliance Common Stock. The cash consideration was derived by
taking the aggregate cash consideration of $77 million in the Alliance
Offer and dividing it by 9.8 million shares, the number of shares of BGII
Common Stock not owned by Alliance. The value of the Alliance stock was
derived by determining the per share equity value for Alliance after
giving effect to the Merger and multiplying by a range of exchange
ratios. A range of equity values was derived by taking the pro forma
EBITDA's for the combination of Alliance and BGII and multiplying each
EBITDA by a multiple of 7.5x to determine an implied enterprise value.
Ladenburg considered a 7.5x EBITDA multiple reasonable based on
comparable multiples for the general universe of publicly traded stocks
in the gaming industry. Pro forma debt was subtracted from the enterprise
value and pro forma excess cash was added to derive total equity value.
The total equity value was divided by the pro forma number of shares
outstanding, based on a range of Alliance stock prices and exchange
ratios of 2.167 to 3.059 (such ratios being applicable to the Merger
Agreement prior to the amendment thereof to eliminate the cash election
feature), to determine equity value per share. The range of equity values
per share were then multiplied by the number of shares to be received by
BGII stockholders in each scenario to determine the value of the shares
issued to the BGII stockholders.

(iii) Valuation of Alliance's Stock. Ladenburg evaluated the Alliance
Common Stock through various methods described below.

(a) Historical and Projected Financial Performance. Ladenburg reviewed
Alliance's historical financial performance for the five fiscal
years ended June 30, 1995. The financial results showed that
Alliance had net losses for each of the periods reviewed and
negative tangible net worth at June 30, 1995. Alliance had a net
loss of $15.8 million for the 1991 fiscal year, $4.7 million for the
1992 fiscal year, $3.7 million for the 1993 fiscal year, $13.1
million for the 1994 fiscal year, and $10.8 million for the 1995
fiscal year. Alliance's tangible net worth at June 30, 1995 was
negative $6.3 million.

(b) Historical Market Price Analysis. Ladenburg examined the closing
market prices of the Alliance Common Stock over the 90-day trading
period prior to November 3, 1995 during which time the closing
market price ranged from $4.48 to $6.06 and was an average of $4.70
per share for the ten trading days prior to the five trading days
prior to November 3, 1995.

(c) Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for Alliance which determined the implied public market
value based on the multiples of comparable public companies.
Ladenburg derived two sets of results based upon the multiples of
the one public company that is directly comparable to Alliance,
Jackpot Entertainment, Inc. ("Jackpot"), and based upon the
multiples of a group of public companies which had some similarity
to Alliance. The results of this analysis indicated a range of per
share equity values of $0.15 to $10.05, the median of which was
$1.77.

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multiples are based on total enterprise value divided by each
financial measure, respectively. Enterprise value is defined as the
market value of common stock (which is the total shares outstanding
multiplied by the stock price per share), plus total debt, less cash
and cash equivalents. The pre-tax income, net income, projected net
income, and book value multiples are derived by dividing the market
value of the common stock or per share stock price by the appropriate
financial item. Equity calculations were derived for net sales,
EBITDA, projected net income and book value, but not EBIT, pre-tax
income or net income, because Alliance's historical numbers were
negative and produced negative values. The equity valuations for
Alliance based on net sales and EBITDA were calculated by multiplying
Alliance's net sales and EBITDA by the median net sales and EBITDA
multiples, then subtracting total debt and adding cash and cash
equivalents. For the valuations based on projected net income and
book value, Ladenburg multiplied Alliance's projected net income and
book value by the median projected net income and book value
multiples to arrive at equity values. Equity value was then divided
by the total number of Alliance shares outstanding to derive equity
value per share.

For purposes of its analysis, Ladenburg selected the following public
companies: Alpha Hospitality Corp., Ameristar Casinos, Inc., Anchor
Gaming, Argosy Gaming Corp., Casino America, Inc., Casino Magic
Corp., Jackpot, Lady Luck Gaming Corp., Players International, Inc.,
and President Casinos, Inc. The median market multiples for the
selected group of comparable companies were as follows: (i) 1.6x as a
multiple of net sales, (ii) 7.2x as a multiple of EBITDA, (iii) 9.3x
as a multiple of EBIT, (iv) 9.4x as a multiple of pre-tax income, (v)
14.3x as a multiple of net income, (vi) 13.8x as a multiple of
projected earnings for fiscal year one; (vii) 9.0x as a multiple of
projected earnings for fiscal year two and (viii) 2.3x as a multiple
of book value. Ladenburg considered Jackpot to be the one public
company which most resembled Alliance. The market multiples for
Jackpot were as follows: (i) 0.8x as a multiple of net sales, (ii)
4.6x as a multiple of EBITDA, (iii) 8.8x as a multiple of EBIT, (iv)
11.2x as a multiple of pre-tax income, (v) 16.7x as a multiple of net
income, (vi) 14.1x as a multiple of projected net income, and (vii)
1.8x as a multiple of book value. The market multiples for Alliance
were as follows: (i) 0.9x as a multiple of net sales, (ii) 15.4x as a
multiple of EBITDA, and (iii) 5.3x as a multiple of book value. Other
multiples for Alliance were not meaningful because they were
negative.

(d) Acquisition Multiples Analysis. Ladenburg conducted an acquisition
multiples analysis which was similar to the market multiples
analysis but instead relied upon multiples from comparable merger
and acquisition transactions. For purposes of this analysis, the
purchase price was equal to the amount paid for the target's equity
and the transaction value was equal to the purchase price, plus the
target's outstanding interest-bearing debt, less cash and cash
equivalents.

Ladenburg compared multiples from merger and acquisition transactions
of the following target and acquiring companies, respectively: the
acquisition of the Sahara Hotel & Casino by William Bennett, the
acquisition of the Texas Gambling Hall & Hotel by Station Casinos, the
acquisition of the Hacienda Hotel & Casino by Circus Circus
Enterprises, the acquisition of Gold Strike Resorts by Circus Circus
Enterprises, the acquisition of Caesars World Inc. by ITT Corporation,
the acquisition of Jazz Enterprises by Argosy Gaming Co., the pending
acquisition of the Aladdin Hotel by the Sigman Summer Family Trust of
NY, the acquisition of IGT/EDT's route business by Jackpot, and the
acquisition of BGII's route business by Jackpot.

The median blended multiples for the selected transactions were as
follows: (i) 0.9x as a multiple of sales, (ii) 6.9x as a multiple of
EBITDA, (iii) 29.0x as a multiple of EBIT, (iv) 35.3x as a multiple of
net income, and (v) 2.5x as a multiple of book value, A range of
equity values was divided by the number of shares outstanding to
derive a range of per share values. The range of implied equity values
per share of Alliance was $1.80 to $5.97, the median of which was
$2.54. Ladenburg concluded that the median value per share best
represented the implied value of Alliance for this methodology as it
encompasses all the valuation measures in a balanced manner.

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(e) Discounted Cash Flow Analysis. Ladenburg conducted a discounted cash
flow analysis which derived equity values based on the present value
of future net cash flows, less current total debt, plus current
total cash. The equity value was then divided by the number of
shares outstanding to derive equity value per share. The cash flows
were discounted using a range of discount rates based on a slight
premium to the weighted average cost of capital for the peer group
or, where available, the weighted average cost of capital for the
entity being valued. For purposes of this analysis, annual free cash
flow equaled de-levered net income, plus depreciation, less capital
expenditures, less the change in working capital. In the exit year,
free cash flow also included proceeds from the sale of the business,
which is typically assumed only for valuation purposes as a more
representative "terminal value" rather than using cash flows in
perpetuity. The terminal value was determined by applying an exit
multiple based on the median EBITDA multiple of comparable public
companies. Ladenburg applied exit multiples of 6.2x to 8.2x to the
casino operations and 3.6x to 5.6x to the route operations and used
discount rates of 12% to 14%. The equity value per share ranged from
$5.00 to $8.42, the median of which was $6.65 per share.

(f) Break-up Valuation. Ladenburg developed a valuation based on a
break-up of Alliance's business segments which resulted in a value
of $4.78 per share of Alliance. Ladenburg broke Alliance's
operations into two business segments, (i) the Rainbow Casino in
Vicksburg, MS and (ii) slot routes and small casinos.

To determine the equity value of the Rainbow Casino, in which
Alliance increased its ownership on March 29, 1995 and which Alliance
then began consolidating in its financial statements, Ladenburg
assumed total annual revenues of $30.0 million which was a discount
to Alliance's management projection of $33.0 million. Ladenburg
determined total EBITDA by applying an EBITDA margin of 40.0% (a
discount to Alliance's management projection based on current run
rates of 45.0%) to the total projected annual revenues, which after
royalty fees and minority interest resulted in EBITDA from the casino
available to Alliance of $8.4 million. This number was multiplied by
the median EBITDA multiple for emerging market casinos of 7.2x to
derive enterprise value.

The equity value for the slot route and small casinos segment was
determined by subtracting the latest twelve months direct expenses
and selling, general and administrative expenses from the latest
twelve months revenues to derive EBITDA. This was then multiplied by
the EBITDA multiple of 4.6x for Jackpot, which has comparable
business operations, to derive an implied enterprise value. The
implied enterprise values from the two business segments were added
together and total debt was subtracted and cash was added to arrive
at the total implied equity value for Alliance which was then divided
by the fully diluted shares outstanding to determine the per share
value.

(iv) Valuation of BGII's Stock. Ladenburg evaluated BGII's stock through
various methods described below.

(a) Historical and Projected Financial Performance. Ladenburg reviewed
(i) five-year projections for BGII as provided by its management
based on assumptions management believed were reasonable and
independently developed five-year projections based on assumptions
believed by Ladenburg to be reasonable, and (ii) four year
projections of Alliance's management for the fiscal years ended June
30, 1996 to 1999. The five-year projections for BGII prepared by its
management and prepared by Ladenburg contain income statements,
balance sheets, and cash flows for fiscal years ending December 31,
1995 through 1999.

The material assumptions contained in management's five year
projections were:

(i) for Gaming, unit sales of 21,600 in 1995; 29,100 in 1996; 35,500
in 1997; 43,050 in 1998; and 49,500 in 1999. Based on
management's estimated worldwide unit sales, these amounts
equated to market shares approximately 19% in 1995, increasing
over time to 33% in 1999;

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(ii) average unit sales prices increase from $5,000 in 1995 to $5,650
in 1999;

(iii) Gaming machine revenues increase by 27% compounded annually for
the five year period ended fiscal 1999;

(iv) an approximately 24% increase in other revenue, which includes
accessories and used machines, in the years 1995 to 1999;

(v) gross margins increase from approximately 31% in 1995 to 42% in
1999 as a result of lower average material costs and
manufacturing and engineering efficiencies, plus the benefit of
spreading the fixed overhead costs over a greater number of units
produced; gross margins of 42% in 1999 would approximately equal
the level experienced by IGT for the six months ended March 31,
1995;

(vi) selling, general and administrative expenses (including the
provision for bad debts estimated at 2.5% of revenues) remain
flat in 1995 and increase by approximately 47% in 1996 (due to
increased in research and development, sales and marketing),
followed by increases of approximately 25% per year in 1997 to
1999;

(vii) for Systems, an increase of EBIT of approximately 19%
compounded annually from 1995 to 1999;

(viii) for Bally Wulff, Deutschmark projections translated at an
exchange rate of DM1.43/US$1; flat gross margins of
approximately 40-41% from 1995 to 1999 and EBITDA margins of
approximately 16% in 1995, increasing to 17% in 1999;

(ix) increase in parent expenses (corporate overhead) from
approximately $5.5 million in 1995 to $8.5 million in 1999.

For items after EBITDA, based on discussions with management,
Ladenburg assumed depreciation and amortization expense equal to
historical levels and adjusted to account for projected capital
expenditures of $6 million annually. Ladenburg also assumed
decreasing net interest expense (as a result of relatively flat
borrowings offset by interest income on increasing consolidated cash
balances) and a tax rate of 39% in 1995, decreasing to a tax rate of
36% in the years 1996 to 1999.

Ladenburg relied upon management's projections for 1995 as outlined
above. The material assumptions contained in Ladenburg's projections
for the years 1996 to 1999 were:

(i) unit sales increase by 15% per year in 1996 to 1999; market share
(based on management's estimate of worldwide unit sales) of 19%
in 1995 to 26% in 1999;

(ii) average unit sales prices were equal to those assumed by
management;

(iii)other revenues equal to those assumed by management;

(iv) gross margins increase from approximately 31% in 1995 to a flat
33% in the years 1996 to 1999;

(v) a flat EBITDA margin of 10.6% from 1996 to 1999 due to higher
selling, general and administrative expenses which offset gains
in gross margin;

(vi) assumptions for Bally Systems, Bally Wulff and parent (corporate
overhead) were the same as those assumed by management;

(vii) capital expenditures, depreciation, amortization, interest
expense and tax rates as outlined above.

Ladenburg believed management's projections to be very aggressive due
to their highly optimistic assumptions regarding sales increases
resulting from gains in market share and aggressive

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increases in gross and operating margins. Ladenburg noted that while
management had made substantial progress in turning around Gaming's
operations and improving margins, it had achieved this success only
in the last few quarters. Ladenburg considered that Gaming did not
meet budgeted sales and profit projections for fiscal 1994 and year-
to-date through September 30, 1995. As a result, Ladenburg placed
little weight on management's five year projections. Therefore,
Ladenburg developed projections based on reasonable assumptions it
deemed would be used by a knowledgeable third party. These
projections were based principally on maintaining EBITDA margins at
the fiscal 1995 level, which were at an all-time high for at least
the past five years, and smaller gains in market share than assumed
by management.

Ladenburg believed that management's projected gains in market share
were optimistic given the overwhelmingly stronger position of IGT
(with a market share of approximately 75%), a near-term stagnant
market and increased competition. Moreover, IGT is a significantly
more profitable and better capitalized company that offers more
extensive services to customers (including progressive systems,
sophisticated casino floor layout services and in-house financing of
sales, among others) than Gaming. A displacement of IGT by Gaming
would seem difficult given IGT's entrenched position and greater
financial resources and ability to cut prices in the face of
attempted gains in share by Gaming. Even so, Ladenburg gave some
credit to management's expected gains in market share, though was
less aggressive in such projected gains.

(b) Historical Market Price Analysis. Ladenburg examined the closing
market prices of BGII's stock over the 90-day trading period prior
to November 3, 1995 during which time the closing market price
ranged from $9.13 to $12.38. Ladenburg also reviewed the closing
market prices over the 30 days prior to the April 18, 1995
announcement of the WMS Agreement during which time the closing
market price ranged from $7.25 to $10.25.

(c) Market Multiples Analysis. Ladenburg conducted a market multiples
analysis for BGII which determined a range of values based on the
multiples of comparable public companies. The result of this
analysis indicated that the median implied equity value per share
was $11.75.

For all comparable public companies, Ladenburg derived the following
median common stock trading multiples: (i) net sales; (ii) EBITDA;
(iii) operating income (EBIT); (iv) pre-tax income; (v) net income;
(vi) projected net income; and (vii) book value multiples. Equity
valuations for BGII based on net sales, EBITDA and EBIT were
calculated by multiplying its net sales, EBITDA by the median net
sales, EBITDA and EBIT multiples, then subtracting total debt, the
cost of buying out certain management contracts, and adding cash and
cash equivalents. For valuations based on pre-tax income, net income,
projected net income book value, Ladenburg multiplied BGII's value by
the appropriate median multiples and subtracted the cost of buying
out certain management contracts to arrive at equity value. Equity
value was then divided by the total number of BGII shares outstanding
to derive equity value per share.

For purposes of its analysis, Ladenburg selected the following
comparable public companies: Acres Gaming, Inc., Casino Data Systems,
GTECH Holdings Corporation, Innovative Gaming Corporation of America,
IGT, International Lottery, Inc., Mikohn Gaming Corporation, and
VLTS. The median market multiples for the selected group of
comparable companies were as follows: (i) 2.3x as a multiple of
sales, (ii) 8.4x as a multiple EBITDA, (iii) 12.6x as a multiple of
EBIT, (iv) 11.6x as a multiple of pre-tax income, (v) 17.7x as a
multiple of net income, (vi) 17.6x as a multiple of projected
earnings for fiscal year one, (vii) 10.6x as a multiple of projected
earnings for fiscal year two and (viii) 2.6x as a multiple of book
value. The market multiples for BGII were as follows: (i) 0.8x as a
multiple of net sales, (ii) 7.6x as a multiple of EBITDA, (iii) 11.1x
as a multiple of EBIT, (iv) 11.8x as a multiple of pre-tax income,
(v) 26.5x as a multiple of net income, (vi) 14.4x as a multiple of
projected earnings for fiscal year one, (vii) 14.6x as a multiple of
projected earnings for fiscal year two and (viii) 1.3x as a multiple
of book value. The comparable company median multiples indicated a
range of per share equity values of $7.01 to

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$46.76, the median of which was $11.75 per share. Ladenburg concluded
that the median value per share best represented the implied value of
BGII for this methodology as it encompasses all the valuation
measures in a balanced manner.

(d) Acquisition Multiples Analysis. Ladenburg conducted an acquisition
multiples analysis which was similar to the market multiples
analysis but instead relied upon multiples from comparable merger
and acquisition transactions. For purposes of this analysis, the
purchase price was equal to the amount paid for the target's equity
and the transaction value was equal to the purchase price, plus the
target's outstanding interest-bearing debt, less cash and cash
equivalents.

Ladenburg compared multiples from merger and acquisition transactions
of the following target and acquiring companies, respectively: Marvin
H. Sugarman Products, Inc. and Racing Technology, Inc. and Autotote
Corp.: United Wagering Systems, Inc. and Video Lottery Technologies,
Inc.; Global Gaming and Anchor Gaming; Connecticut Off Track Betting
and Autotote Corp.; ETAG Group and Autotote Corp.; AmTote
International Inc. and GTECH Holdings Corp.; Automated Wagering and
VLTS; Electronic Data Technologies and IGT; and BGII (initial public
offering), spin-off by BEC. The median multiples for the selected
transactions were as follows: (i) 0.9x as a multiple of sales, (ii)
6.2x as a multiple of EBITDA, (iii) 9.5x as a multiple of EBIT, (iv)
23.8x as a multiple of net income, and (v) 1.6x as a multiple of book
value. The range of equity values was divided by the number of shares
outstanding to derive a range of per share values. The range of
implied equity values per share of BGII was $7.32 to $13.33, the
median of which was $9.72. Ladenburg concluded that the median value
per share best represented the implied value of BGII for this
methodology as it encompasses all the valuation measures in a
balanced manner.

(e) Discounted Cash Flow Analysis. Ladenburg conducted a discounted cash
flow analysis which derived equity values based on the present value
of future net cash flows, less current total debt, plus current
total cash. The equity value was then divided by the number of
shares outstanding to derive equity value per share. The cash flows
were discounted using a range of discount rates based on a slight
premium to the weighed average cost of capital for the peer group
or, where available, the weighted average cost of capital for the
entity being valued. For purposes of this analysis, annual free cash
flow equaled de-levered net income, plus depreciation, less capital
expenditures, less the change in working capital. In the exit year,
free cash flow also included proceeds from the sale of the business,
which is typically assumed only for valuation purposes as a more
representative "terminal value" rather than using cash flows in
perpetuity. The terminal value was determined by applying an exit
multiple based on the median EBITDA multiple of comparable public
companies. Ladenburg used discounted cash flow analyses for Gaming
and Bally Wulff separately, which were then combined for a total
value, and applied discount rates and exit multiples as follows: (i)
for Gaming, cash flows were discounted using a range of discount
rates of 13% to 15% with exit multiples of 7x to 9x and (ii) for
Bally Wulff, a discount range of 16% to 18% was applied with exit
multiples of 5.3x to 6.8x.

The equity value per share ranged from $8.05 to $12.98 based on
independently developed projections ($19.25 to $27.94 based on
management's projections) with a median equity value per share of
$10.44 based on independently developed projections ($23.46 based on
management's projections).

(f) Takeover Premium Analysis. Ladenburg included a takeover premium
analysis which examined recent premiums paid in the acquisitions of
public companies. For purposes of this analysis, premiums were
defined as the excess, in percentage terms, of the per share
purchase price relative to the target's stock price prior to
announcement of the transaction. The median premiums paid for public
companies were 30.3% and 27.5%, one day and one week, respectively,
prior to the announcement of the transaction. The percentage
premiums were applied to BGII's stock price prior to the April 18,
1995 announcement of the WMS Agreement to derive a range of per
share

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values for BGII. Based on the announcement date of April 18, 1995,
the range of values per share for BGII derived from the application
of premiums was $10.99 to $12.30, the median of which was $11.32.

Comparison of the Alliance Merger Consideration to BGII Per Share Values

Ladenburg concluded that the consideration to be received by BGII's
stockholders in the Merger is fair, from a financial point of view, to BGII's
stockholders, as of November 3, 1995, based on, among other things, the
following considerations: (i) the range of implied values for the Alliance
consideration to be received by BGII's stockholders of $11.48 to $13.00 was
within or higher than the range of per share values for BGII of $9.72 to
$11.75 (excluding the value of $23.46 derived in the discounted cash flow
analysis based on management's projections upon which Ladenburg applied little
weighting); and (ii) the range of values for the Alliance consideration to be
received by BGII's stockholders represents a premium to BGII's closing stock
price on the day prior to the announcement of the WMS Agreement of 35% to 53%.

Comparison of the Merger to the WMS Merger

Ladenburg concluded that the WMS Merger is not as favorable as the Merger,
from a financial point of view, to BGII's stockholders, based on, among other
things, the fact that the range of total pre-tax consideration in the Merger
is greater than the range of total pre-tax consideration in the WMS Merger,
and that meeting the condition of the sale of Bally Wulff in the WMS Merger
would be problematic given conditions imposed by WMS on the terms of the sale
that would subject the purchaser to certain noncompetition agreements. The
comparison of the consideration in the WMS Merger to the consideration in the
Merger was limited to a pre-tax basis because each BGII stockholder is subject
to different tax rates, thereby making an after-tax calculation difficult, and
because the comparison is more meaningful on a comparable basis.

Limitations of Analyses

Although each analysis employed by Ladenburg in rendering its opinion is
summarized above, the above summary does not purport to be a complete
description of Ladenburg's analyses and contains those aspects of Ladenburg's
analyses deemed relevant by BGII. In its analyses, Ladenburg made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, based on, among other
things, information provided to (and relied upon by) Ladenburg by BGII, many
of which are beyond the control of BGII or Ladenburg. Any estimates contained
in Ladenburg's analyses are not necessarily indicative of actual values, which
may be significantly more or less favorable than as set forth therein.
Additionally, estimates of the value of businesses do not purport to be
appraisals or necessarily to reflect the prices at which businesses actually
may be sold. Because such estimates are inherently subject to uncertainty
since the assumptions upon which such estimates are based may not materialize,
neither BGII nor Ladenburg nor any other person assumes responsibility for the
accuracy of such estimates. Ladenburg's analysis does not reflect, among other
things, actual 1995 financial results of BGII or Alliance revised prospects
for their respective businesses, changes in general business and economic
conditions or any other transaction or event that has occurred or that may
occur and that was not anticipated at the time such materials were prepared.

EFFECTIVE TIME

The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware in such form as required
by, and executed in accordance with the relevant provisions of, the DGCL or at
such later time as is specified in such certificate. Such filing will be made
as promptly as practicable after the satisfaction or waiver of the conditions
set forth in the Merger Agreement. The Merger Agreement may be terminated by
either party if, among other things, stockholder approval is not obtained by
either Alliance or BGII or if the parties do not receive all required
regulatory approvals and consents with respect to the Merger. See "Certain
Provisions of the Merger Agreement--Termination" and "--Conditions to
Consummation of the Merger." Because Nevada Gaming Commission approval is not
expected before late April 1996, the Effective Time is expected to occur on or
after April 25, 1996 but not later than May 3, 1996.

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FINANCING

In connection with the Merger, Alliance will require $76.7 million for the
Cash Consideration, and approximately $69.9 million to refinance outstanding
BGII debt, with the remainder to be used to pay transaction fees and expenses.
Any excess will be used for working capital purposes. Although the Merger
Agreement contains a condition requiring $150 million in financing, Alliance
currently intends to obtain $180 million in such financing by issuing in
underwritten transactions $100 million worth of senior secured notes with a
five to seven year maturity (the "Debt Financing") and the remainder by
issuing in separate underwritten transactions shares of Alliance Common Stock
and Series B Special Stock. See "Certain Provisions of the Merger Agreement--
Conditions to Consummation of the Merger" and "Auxiliary Financing
Information". However, the Financing could also involve other public or
private issuances of debt (including convertible debt or debt accompanied by
warrants) and/or equity securities or foreign or domestic bank loans. Alliance
and its financial advisors have not yet determined the precise composition of
this financing. The actual amounts of debt and equity of various types raised
will depend upon a number of factors, including market conditions, the price
of Alliance Common Stock and other factors beyond the control of Alliance
management. The interest rates on any debt financing could be fixed or
floating, and such financing could require prepayments prior to maturity,
periodically and/or as a result of asset dispositions, excess cash flow or
issuances of equity. Prepayment at Alliance's option may be prohibited or may
require payment of a premium. To the extent the Debt Financing involves
commitments for future loans, such commitments may be conditioned on continued
compliance by the combined companies with the terms of the loan agreements and
the absence of material adverse change in the combined companies' business.
Any debt financing may be secured by some or all of the combined company's
assets. Events of default resulting in acceleration of the maturity of any
debt financing are likely to include failure to make required payments,
breaches of covenants or representations, default with respect to other debt
securities, failure to satisfy judgments and certain events of bankruptcy or
insolvency. Any debt financing is likely to include a change of control
provision and restrictive covenants prohibiting or limiting, among other
things, mergers, sales of assets, making of acquisitions and other
investments, capital expenditures, transactions with affiliates, entry into
new lines of business, the incurrence of additional debt and liens and the
payment of dividends, in addition to a minimum consolidated net worth
requirement and certain ratio coverage tests. Non-compliance could result in
the acceleration of such indebtedness.

The closing of the Debt Financing and the Equity Financing is expected to
occur simultaneously with, and will be conditioned upon, the closing of the
Merger. There can be no assurance that the Debt Financing and the Equity
Financing will be consummated on terms satisfactory to Alliance. In the event
that either of such offerings is not consummated, Alliance would pursue any
other alternatives available to it at that time. Any public offering of
Alliance's securities requires the prior approval of the Nevada Commission.
Any sale of an equity security by Alliance in a private transaction requires
the prior administrative approval of the Nevada Board Chairman.

REGULATORY FILINGS AND APPROVALS

Certain Federal, state, local and foreign regulatory requirements must be
complied with before the Merger is consummated.

The Merger is subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations promulgated thereunder, which provide that certain transactions
may not be consummated until required information and materials have been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") and certain
waiting periods have expired or been terminated. The required information and
materials were filed with the Antitrust Division and the FTC by Alliance on
August 3, 1995 and by BGII on August 14, 1995 in connection with the Alliance
Offer. On August 18, 1995, the waiting period expired. No separate filing is
believed necessary with respect to the Merger. The requirements of the HSR Act
will be satisfied if the Merger is consummated within one year from the
termination of the waiting period.

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However, the Antitrust Division and the FTC may challenge the Merger on
antitrust grounds either before or after expiration of the waiting period.
Accordingly, at any time before or after the Effective Time, either the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, or certain other
persons could take action under the antitrust laws, including seeking to
enjoin the Merger. There can be no assurance that a challenge to the Merger
will not be made or that, if such a challenge is made, Alliance and BGII will
prevail.

Gaming Regulatory Approvals. Alliance or its subsidiaries and BGII or its
subsidiaries each hold required gaming registrations, licenses and permits or
have pending applications for licenses and permits in numerous jurisdictions.
See "The Companies--Gaming Regulation and Licensing". In each gaming
jurisdiction, certain regulatory requirements must be complied with and/or
certain approvals must be obtained in connection with the Merger. All
jurisdictions require notification, whether before or after the Effective
Time. Certain jurisdictions require approval prior to the Effective Time.
These jurisdictions include, without limitation, Nevada, Colorado, Mississippi
and Louisiana. Certain jurisdictions such as, without limitation, Arizona, New
Jersey and certain Canadian jurisdictions require post-Effective Time
approval. The receipt of required approvals from Nevada and Mississippi is a
condition to Alliance's obligations under the Merger Agreement.

Review of the Merger by gaming regulatory authorities will involve
examination of the structure of the combined company and its related companies
after the Merger and its financial stability, and may require the
demonstration of the qualifications of key individuals associated with the
combined company and its related companies, i.e. officers, directors, major
shareholders and other individuals deemed appropriate by the gaming regulatory
authorities ("Qualifiers"). The approval process may require the filing of
business entity disclosures or other applications for the combined company and
its related companies as well as personal history disclosures or applications
for qualification by Qualifiers.

The failure to obtain Merger approval for the transaction or the failure to
comply with the procedural requirements as prescribed by any gaming regulatory
authority or the failure of the combined company, its related companies or any
individual associated with such entities to qualify or make disclosure or
application as required under the laws and regulations of any gaming
regulatory authority may result in the loss of license or denial of
application for licensure in any such jurisdiction.

TREATMENT OF BGII WARRANTS AND EMPLOYEE AND DIRECTOR STOCK OPTIONS

The Merger Agreement provides that, at the Effective Time, Alliance will
assume BGII's obligations with respect to each outstanding stock option and
warrant to purchase shares of BGII Common Stock, subject to the following
modifications. See "BGII Plans and Amendments." The BGII stock options and
warrants assumed by Alliance will have the same terms and conditions as those
of the applicable stock option plans and agreements and warrant agreements
pursuant to which such options and warrants were issued except that (i)(A) all
BGII stock options subject to provisions of stock option plans which shorten
the exercise period by reason of the Merger and (B) all BGII stock options
held by directors of BGII regardless of any provision in any BGII stock option
held by such director or the BGII stock option plan pursuant to which such
BGII stock option was granted that may shorten the exercisability thereof as a
result of such person ceasing to be a director, officer or employee of BGII
shall be amended (which amendment is submitted for approval of the BGII
stockholders herein) to the extent necessary to permit such BGII stock option
to remain exercisable for the lesser of (x) the original full option period,
(y) three years after the Effective Time of the Merger or (z) except in the
case of Messrs. Gillman, Kloss and Jenkins, in the event the option holder's
employment is terminated for cause or such employee voluntarily terminates his
employment, the period ending on the date of such termination; and (ii) each
BGII stock option and warrant, unless the terms thereof explicitly require
otherwise, will be exercisable for the Merger Consideration per share of BGII
Common Stock subject to any such option or warrant at an option price or
exercise price per share of Alliance Common Stock equal to the option price or
exercise price per share of the BGII Common Stock subject to such BGII stock
option or warrant in effect immediately prior to the Effective Time, except
that at the election of any other person (other than Messrs. Gillman, Jenkins
and Kloss) who is an employee of BGII immediately prior to the Effective Time
(such election to be made in writing to BGII on or

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prior to the Effective Time), any such BGII option held by such person (not
more than 552,500) will be instead exercisable for a number of shares of
Alliance Common Stock equal to the number of shares of BGII Common Stock
subject thereto at an exercise price equal to the Alliance Average Trading
Price.

At February 19, 1996, an aggregate of 1,052,500 shares of BGII Common Stock
were subject to options granted to employees and directors under various stock
option plans or as replacement options with respect thereto. Under the terms
of such plans the employee and director stock options will become immediately
exercisable upon consummation of the Merger.

At March 1, 1996, an aggregate of 1,498,000 shares of BGII Common Stock were
subject to warrants issued by BGII in connection with certain financing
transactions. The warrants will be treated in accordance with their terms.

Alliance has reserved for issuance the number of shares of Alliance Common
Stock and shares of Series B Special Stock that will become issuable upon
exercise of the BGII stock options and warrants after the Effective Time.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

BGII

In considering the recommendation of the BGII Board with respect to the
Merger Agreement, and the transactions contemplated thereby, BGII stockholders
should be aware that certain members of BGII's management and Board of
Directors have certain interests in the Merger and Related Proposals that are
in addition to the interests of BGII stockholders generally. The BGII Board
was aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby. See
"Risk Factors--Alliance and BGII Conflicts of Interest" and "--Absence of
Special Committee". As of the date of this Proxy Statement/Prospectus, BGII's
executive officers are as follows: Richard Gillman (Chairman of the Board and
Chief Executive Officer), Hans Kloss (President and Chief Operating Officer of
BGII and Managing Director of Bally Wulff), Neil E. Jenkins (Executive Vice
President and Secretary), Scott Schweinfurth (Senior Vice President, Chief
Financial Officer and Treasurer) and Robert Conover (President of Systems).
With the exceptions of Hans Kloss and Robert Conover, who will continue to be
employed by the combined company following the Merger, and Richard Gillman and
Neil Jenkins, who will not be employed by the combined entity, the current
BGII executive officers and directors (if any) who will be employed by
Alliance have not yet been determined.

Employment Agreements.

Richard Gillman. Under his employment agreement with BGII (see "BGII
Executive Officers and Executive Compensation--Employment Contracts,
Retirement Plans and Change-in-Control Arrangements"), upon completion of the
Merger, Mr. Gillman will be entitled to receive a lump sum payment, without
discount to present value, equal to his base salary for the remainder of the
term of his employment agreement (which will expire in mid-January 1999) and
the bonus amounts he would otherwise be entitled to for the balance of the
term of his employment agreement in installments consistent with past
practice. Mr. Gillman's bonus is an amount equal to 2% of BGII's annual pre-
tax income. Mr. Gillman is also entitled to continue to participate in all
benefit plans of BGII. The Merger Agreement provides that Alliance will honor
all employment agreements to which BGII is a party. Alliance has consented to
the payment of the following amounts to Mr. Gillman at the Effective Time:
$5,000,000 in cash and $3,000,000 in Alliance Common Stock (valued at the
Alliance Average Trading Price, provided, however, that the Alliance Average
Trading Price will not be deemed greater than $6.00 or less than $4.25) in
connection with the termination of his employment agreement and Performance
Units described below. The Merger Agreement provides that the above-described
payments to Mr. Gillman are subject to approval by BGII. The BGII Board has
approved the $5,000,000 cash payment to Mr. Gillman. Although Mr. Gillman
would be entitled under his employment agreement to these benefits upon
approval of the Merger by BGII stockholders, Mr. Gillman has agreed to waive
such rights if the Merger is not consummated. Mr. Gillman

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is also a party to an agreement with BEC that restricts Mr. Gillman and any
entity with which he may be affiliated from competing with BEC in the casino
business. BGII is a party to a similar agreement with BEC. Alliance has agreed
to indemnify Mr. Gillman from any loss or liability to BEC arising under his
agreement with BEC by reason of the execution of the Merger Agreement by BGII.

Hans Kloss. Under his employment agreement with BGII (see "BGII Executive
Officers and Executive Compensation--Employment Contracts, Retirement Plans
and Change-in-Control Arrangements"), upon completion of the Merger, Mr. Kloss
will be entitled to receive a lump sum cash, without discount to present
value, equal to his base salary for the remainder of the term of his
employment agreement (which will expire in mid-May 1998) and in customary
installments, the bonus amounts he would otherwise be entitled to for the
balance of the term of his employment agreement. Mr. Kloss' bonus is an amount
equal to 3% of BGII's annual pre-tax income, which excludes any income or loss
from Bally Wulff. Mr. Kloss is also entitled to continue to participate in all
benefit plans of BGII. Mr. Kloss and Alliance have agreed that at the
Effective Time he will receive $1,500,000 in cash and $3,000,000 in Alliance
Common Stock (valued at the Alliance Average Trading Price, provided, however,
that the Alliance Average Trading Price will not be deemed greater than $6.00
or less than $4.25) and that he would continue in his capacity as president of
Gaming for a period of one year at a salary of $250,000 per annum. Mr. Kloss
and Alliance have also agreed that (i) his current employment arrangement with
Bally Wulff would continue until the end of its term in May 1998, (ii) he
would be entitled to a bonus of $500,000 at the successful closing of certain
specified financing arrangements and (iii) he would receive an additional
bonus of either (A) $250,000 in each of calendar years 1996 and 1997 to be
paid upon Bally Wulff's successfully making its amortization schedule payments
on the above-mentioned European bank financing in such year or (B) a bonus
based upon the performance of Gaming in 1996 of up to $750,000 if the number
of verified sales of gaming machine units reaches specified levels. Mr. Kloss
would also be entitled to receive the payments in respect of his performance
unit and stock performance right awards described below. See "Performance
Units" and "Stock Payment Rights and Restricted Stock".

Neil Jenkins. Under his employment agreement with BGII (see "BGII Executive
Officers and Executive Compensation--Employment Contracts, Retirement Plans
and Change-in-Control Arrangements"), upon completion of the Merger, Mr.
Jenkins would be entitled to receive a lump sum payment, without discount to
present value, equal to his base salary and bonus for a 24-month period.
Alliance has consented to the payment of the following amounts to Mr. Jenkins
at the Effective Time: $825,000 in cash and $495,000 in Alliance Common Stock
(valued at the Alliance Average Trading Price, provided, however, that the
Alliance Average Trading Price will not be deemed greater than $6.00 or less
than $4.25) in satisfaction of his employment agreement and Performance Units
described below. The Merger Agreement provides that the above-described
payments to Mr. Jenkins are subject to approval by BGII. The BGII Board has
approved the above-described payments to Mr. Jenkins. Although Mr. Jenkins
would be entitled under his employment agreement to these benefits upon
approval of the Merger by BGII stockholders, Mr. Jenkins has agreed to waive
such rights if the Merger is not consummated.

Performance Units. BGII has outstanding 480,000 Performance Units (as
defined herein) that are subject to restrictions on transfer, risk of
forfeiture and vesting requirements which were previously issued pursuant to
the 1992 Plan (as defined herein). Each Performance Unit entitles the holder
to receive one share of BGII Common Stock plus an additional amount of cash
equal to 50% of the fair market value of such share on the date of vesting.

As a result of the Merger, the performance standards set forth in the BGII
1992 Restricted Stock Plan will be satisfied and the Performance Units will
vest. At such time as the Performance Units vest, payment for each Performance
Unit must be made as soon as practicable wholly or partially in cash and
payment shall not consist of more than one share of BGII Common Stock or its
equivalent at the time of payment for each Performance Unit. As of February
19, 1996, Messrs. Gillman, Kloss, Jenkins and Conover held 200,000, 200,000,
40,000 and 40,000 Performance Units, respectively. The employment of Messrs.
Gillman and Jenkins by BGII will terminate at the Effective Time and all of
the Performance Units held by them will become fully vested. The value of the
Performance Units held by each of Messrs. Gillman, Kloss, Jenkins and Conover
is $3,510,000, $3,510,000,

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$702,000 and $702,000, respectively, based on $11.70, the value of the Merger
Consideration. The aggregate benefits to be received by them under their
employment agreements as a result of the Merger and under BGII's incentive
plans, including the foregoing value of the Performance Units, would be
$8,000,000, $4,500,000, $1,320,000 and $702,000, respectively. Although under
the 1992 Plan, the Performance Units would vest upon approval of the Merger by
BGII stockholders, Messrs. Gillman and Jenkins have agreed to waive such
rights if the Merger is not consummated. See "BGII Executive Officers and
Executive Compensation--Long-Term Incentive Plan Awards." As noted above,
Messrs. Gillman, Kloss, Jenkins and Conover have agreed to accept specified
amounts in satisfaction of payments under such agreements and plans.

Stock Option Plans. The Merger Agreement provides that, at the Effective
Time, Alliance will assume BGII's obligations with respect to each outstanding
stock option and warrant to purchase shares of BGII Common Stock, subject to
the following modifications. See "BGII Plans and Amendments." The BGII stock
options and warrants assumed by Alliance will have the same terms and
conditions as those of the applicable stock option plans and agreements and
warrant agreements pursuant to which such options and warrants were issued
except that (i)(A) all BGII stock options subject to provisions of stock
option plans which shorten the exercise period by reason of the Merger and (B)
all BGII stock options held by directors of BGII regardless of any provision
in any BGII stock option held by such director or the BGII stock option plan
pursuant to which such BGII stock option was granted that may shorten the
exercisability thereof as a result of such person ceasing to be a director,
officer or employee of BGII, shall be amended (which amendment is submitted
for approval of the BGII stockholders herein) to the extent necessary to
permit such BGII stock option to remain exercisable for the lesser of (x) the
original full option period, (y) three years after the completion of the
Merger or (z) except with respect to Messrs. Gillman, Kloss and Jenkins, the
period ending on the date on which the option holders' employment is
terminated for cause or voluntarily by such employee; and (ii) each BGII stock
option and warrant will be exercisable for the Merger Consideration per share
of BGII Common Stock subject to such option or warrant at the option price per
share such BGII stock option or warrant in effect immediately prior to the
Effective Time, except that at the election of any person (other than Messrs.
Gillman, Jenkins and Kloss) who is an employee of BGII immediately prior to
the Effective Time (such election to be made in writing to BGII on or prior to
the Effective Time), any such BGII option held by such person (not more than
552,500) will be instead exercisable for a number of shares of Alliance Common
Stock equal to the number of shares of BGII Common Stock subject thereto at an
exercise price equal to the Alliance Average Trading Price.

Absent approval of Amendments No. 3 to the 1991 Plan and 1991 Directors
Plan, options outstanding under each of the 1991 Plan and 1991 Directors Plan
would terminate in accordance with the present terms of such plans. Under the
1991 Plan and the 1991 Directors Plan, as currently in effect, upon BGII
stockholder approval of the Merger (a) all options outstanding shall become
fully vested and exercisable with respect to the total number of shares of
BGII Common Stock underlying each such option and (b) all options outstanding
shall terminate not later than 180 days in the case of the 1991 Plan, and 90
days in the case of the 1991 Directors Plan, after BGII stockholder approval
of the Merger. No amendments to the outstanding warrants to purchase BGII
Common Stock are being proposed pursuant to the Merger Agreement.

In general, the effect of the amendments to the 1991 Plan and the 1991
Directors Plan would change the length of the relevant time period in which an
option holder would be permitted to exercise his options as well as the date
of commencement of such time period and the consideration receivable upon
exercise of such options. Such time period would change from the 180 day (in
the case of the 1991 Plan) or 90 day (in the case of the 1991 Directors Plan)
period following BGII stockholder approval of the Merger to the three year
period following the Effective Time subject to certain exceptions. The
consideration receivable upon exercise would change from shares of BGII Common
Stock to the Merger Consideration and/or Alliance Common Stock. See "BGII
Plans and Amendments" and "Treatment of BGII Warrants and Employee and
Director Stock Options".

Indemnification and Insurance. The Merger Agreement provides for
indemnification of, and maintenance of liability insurance for, directors and
officers of BGII in respect of actions or omissions occurring at or prior to
the Effective Time, including, without limitation, the transactions
contemplated by the Merger Agreement as well

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as termination of the WMS Agreement. See "Certain Provisions of the Merger
Agreement--Additional Agreements--Indemnification of Directors and Officers".

ALLIANCE

In considering the recommendation of the Alliance Board with respect to the
Merger Agreement, and the transactions contemplated thereby, Alliance
stockholders should be aware that certain members of Alliance's management and
the Alliance Board have certain interests in the Merger that are in addition
to the interests of Alliance stockholders generally. The Alliance Board was
aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.

Joel Kirschbaum. Pursuant to a letter agreement dated June 25, 1993 among
Gaming System Advisors, L.P. ("GSA"), Alliance and Mr. Wilms, Alliance engaged
GSA to assist it in among other things, identifying opportunities for
strategic transactions and in structuring and negotiating such transactions.
The letter agreement provides that upon consummation of such a transaction,
GSA will receive as compensation for its services a number of warrants to
purchase Alliance Common Stock (which have an exercise price of $1.50 but
which are divided equally among warrants which become exercisable when the
price of Alliance Common Stock reaches $11, $13 and $15 per share). Each such
warrant entitles the holder thereof to purchase one share of Alliance Common
Stock. Pursuant to the letter agreement, upon consummation of the Merger, GSA
will be entitled to receive approximately 2,500,000 of such warrants. Joel
Kirschbaum, a director of and consultant to Alliance, is the president, sole
director and sole stockholder of GSA, Inc. ("GSI"), the sole general partner
of GSA. The percentage of such warrants to be distributed to GSI by GSA has
not yet been determined. The warrants will expire if not exercised prior to
the sixth anniversary of their issuance.

Anthony DiCesare. Pursuant to an agreement with GSI, Mr. DiCesare, a
director and Executive Vice President--Development of Alliance, has the right
to receive 20% of the warrants (which percentage may increase in certain
circumstances) to be distributed to GSI by GSA in connection with the
consummation of the Merger.

Craig Fields. Pursuant to his employment contract with Alliance, Dr. Fields,
Vice Chairman of the Alliance Board, will within 30 days of the consummation
of the Merger receive options (with an exercise price equal to the average
Alliance Common Stock closing price for the five trading days ending two days
prior to the announcement of Alliance's intention to consummate the Merger) to
purchase 150,000 shares of Alliance Common Stock.

APPRAISAL RIGHTS

Holders of shares of BGII Common Stock are entitled to appraisal rights
under Section 262 of the DGCL ("Section 262") as to shares owned by them.
Under Section 78.482 of the Nevada General Corporation Law (the "NGCL"),
appraisal rights are afforded only to stockholders of a constituent
corporation to a merger. Accordingly, holders of shares of Alliance Common
Stock will not have appraisal rights under Section 78.482 of the NGCL in
respect of the Merger. Section 262 is reprinted in its entirety as Annex VI to
this Joint Proxy Statement/Prospectus. All references in Section 262 and in
this summary to a "stockholder" are to the record holder of the shares of BGII
Common Stock as to which appraisal rights are asserted. A person having a
beneficial interest in shares of BGII Common Stock that are held of record in
the name of another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner to perfect whatever appraisal rights the beneficial owner may
have.

The following discussion summarizes the material elements of the law
relating to appraisal rights but is not a complete statement of such rights
and is qualified in its entirety by reference to Annex VI. THIS DISCUSSION AND
ANNEX VI SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER OF BGII COMMON STOCK WHO
WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE
RIGHT TO DO SO BECAUSE FAILURE STRICTLY TO COMPLY

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WITH THE PROCEDURES SET FORTH HEREIN AND THEREIN WILL RESULT IN THE LOSS OF
APPRAISAL RIGHTS.

Each stockholder electing to demand the appraisal of his or her shares of
BGII Common Stock shall deliver to BGII, BEFORE the taking of the vote on the
Merger at the BGII Annual Meeting, a written demand for appraisal of his or
her shares of BGII Common Stock. ANY SUCH STOCKHOLDER MUST MAIL OR DELIVER HIS
OR HER WRITTEN DEMAND TO THE SECRETARY OF BGII AT 6601 S. BERMUDA ROAD, LAS
VEGAS, NEVADA 89119. The written demand for appraisal must specify the
stockholder's name and mailing address, the number of shares of BGII Common
Stock owned, and that the stockholder is thereby demanding appraisal of his or
her shares of BGII Common Stock. This written demand for appraisal must be in
addition to and separate from any proxy or vote against the Merger. Voting
will not constitute a demand for appraisal within the meaning of Section 262.
Any stockholder electing to demand his or her appraisal rights will not be
granted appraisal rights under Section 262 if such stockholder has either
voted in favor of the Merger or consented thereto in writing (including by
granting the proxy solicited by this Joint Proxy Statement/Prospectus or by
returning a signed proxy without specifying a vote against the Merger or a
direction to abstain from such vote). ACCORDINGLY, A VOTE IN FAVOR OF THE
MERGER OR A PROXY EXECUTED WITHOUT INSTRUCTIONS WILL CONSTITUTE A WAIVER OF
APPRAISAL RIGHTS. Additionally, appraisal rights will not be granted under
Section 262 if the stockholder does not continuously hold through the
Effective Time the shares of BGII Common Stock with respect to which he or she
demands appraisal.

A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the BGII
Certificate or Certificates. If the shares of BGII Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
such demand must be executed by the fiduciary. If the shares of BGII Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, such person is acting as agent for the record owner.

A record owner, such as a broker, who holds shares of BGII Common Stock as
nominee for others, may exercise appraisal rights with respect to the shares
of BGII Common Stock held for all or less than all beneficial owners of shares
of BGII Common Stock to which such person is the record owner. In such case
the written demand must set forth the number of shares of BGII Common Stock
covered by such demand. Where the number of shares of BGII Common Stock is not
expressly stated, the demand will be presumed to cover all shares of BGII
Common Stock outstanding in the name of such record owner. Beneficial owners
who are not record owners and who intend to exercise appraisal rights should
instruct the record owner to comply strictly with the statutory requirements
with respect to the exercise of appraisal rights before the taking of the vote
on the Merger at the BGII Annual Meeting.

Within 120 days after the Effective Time, either the surviving corporation
in the Merger or any stockholder who has complied with the required conditions
of Section 262 may file a petition in the Delaware Court of Chancery (the
"Delaware Chancery Court") demanding a determination of the value of the
shares of BGII Common Stock. If a petition for an appraisal is timely filed,
after a hearing on such petition, the Delaware Chancery Court will determine
which stockholders are entitled to appraisal rights and will appraise the
shares of BGII Common Stock owned by such stockholders, determining the fair
value of such shares of BGII Common Stock, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining such fair value, the Delaware Chancery Court is to
take into account all relevant factors. In Weinberger v. UPO Inc., et al.,
decided February 1, 1983, the Delaware Supreme Court discussed the factors
that could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that in making this determination of fair value
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts

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which could be ascertained as of the date of the merger which throw any light
on future prospects of the merged corporation. Section 262 provides that fair
value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger." In Weinberger, the Delaware
Supreme Court construed Section 262 to mean that "elements of future value,
including the nature of the enterprise, which are known or susceptible of
proof as of the date of the merger and not the product of speculation, may be
considered".

Stockholders considering seeking appraisal should have in mind that the
"fair value" of their shares of BGII Common Stock determined under Section 262
could be more than, the same or less than the consideration being paid to the
BGII stockholders in the Merger, and that opinions of investment banking firms
as to fairness, from a financial point of view, are not opinions as to fair
value under Section 262. The cost of the appraisal proceeding may be
determined by the Delaware Chancery Court and taxed against the parties as the
Delaware Chancery Court deems equitable in the circumstances. Upon application
of a dissenting stockholder, the Delaware Chancery Court may order that all or
a portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all shares of BGII Common Stock entitled to appraisal.

Within 120 days after the Effective Time, any stockholder who has complied
with the requirements for exercise of appraisal rights, as discussed above, is
entitled, upon written request, to receive from the surviving corporation in
the Merger a statement setting forth the aggregate number of shares not voted
in favor of the Merger and with respect to which demands for appraisal have
been made and the aggregate number of holders of such shares. Such statement
must be mailed within 10 days after the written request therefor has been
received by the surviving corporation in the Merger.

Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, from and after the Effective Time, be entitled to vote for any
purpose the shares of BGII Common Stock subject to such demand or to receive
payment of dividends or other distributions on such shares of BGII Common
Stock, except for dividends or distributions payable to stockholders of record
at a date prior to the Effective Time.

At any time within 60 days after the Effective Time, any stockholder shall
have the right to withdraw his or her demand for appraisal and to accept the
terms offered in the Merger; after this period, the stockholder may withdraw
his or her demand for appraisal only with the consent of the surviving
corporation in the Merger. If no petition for appraisal is filed with the
Delaware Chancery Court within 120 days after the Effective Time,
stockholders' rights to appraisal shall cease. Inasmuch as Alliance will have
no obligation to cause the surviving corporation in the Merger to file such a
petition, and has no present intention to do so, any stockholder who desires
such a petition to be filed is advised to file it on a timely basis. However,
no petition timely filed in the Delaware Chancery Court demanding appraisal
may be dismissed without the approval of the Delaware Chancery Court, and such
approval may be conditioned upon such terms as the Delaware Chancery Court
deems just.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

The following is a description of the material Federal income tax
consequences of the Merger to the holders of BGII Common Stock. The
description is based on currently existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations thereunder,
current administrative rulings and court decisions, all of which are subject
to change (possibly on a retroactive basis) and any such change could affect
the continuing validity of this description. The Federal income tax
description set forth below may not be applicable to certain classes of
taxpayers, including insurance companies, securities dealers, financial
institutions, foreign persons, persons who acquired shares of BGII Common
Stock pursuant to the exercise of employee stock options or rights or
otherwise as compensation and persons in special situations such as those who
hold BGII Common Stock as part of a hedging or conversion transaction or
straddle. Holders of BGII Common Stock are urged to consult their tax advisors
as to their respective personal tax situations including the applicability and
effect of state, local and other tax laws.

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In the Merger, holders of BGII Common Stock generally will recognize capital
gain or loss equal to the difference between (x) the tax basis for the BGII
Common Stock surrendered and (y) the sum of (i) the cash received, including
cash received in lieu of fractional shares plus (ii) the fair market value of
the Alliance Common Stock received plus (iii) the fair market value of the
Series B Special Stock received. The fair market value of each share of
Alliance Common Stock or Series B Special Stock received by a holder of BGII
Common Stock will equal the mean between the highest and lowest quoted selling
prices of the Alliance Common Stock or Series B Special Stock on the date of
the Effective Time (which value may not equal the value used to determine the
number of Alliance Common Stock shares or shares of Series B Special Stock to
be received in the Merger). Holders must determine gain or loss separately for
each block of shares of BGII Common Stock (i.e., shares of BGII Common Stock
acquired at the same cost in a single transaction) exchanged pursuant to the
Merger. The capital gain or loss will be long-term if, as of the Effective
Time, the shares had been held by a holder of BGII Common Stock for more than
one year and will be short-term if, as of the Effective Time, the shares were
held by a holder of BGII Common Stock for one year or less. Short-term capital
gain is subject to a maximum marginal federal income tax rate of 39.6%. For
individuals, long-term capital gain is currently subject to a maximum marginal
federal income tax rate of 28%. The current maximum long-term capital gain
rate for corporations is 35%. Legislation passed by the Congress and vetoed by
the President would, if eventually enacted, reduce the individual long-term
capital gain tax rate to a maximum of 19.8%. The proposed effective date of
the pending legislation precedes the expected Effective Time.

Any shares of Alliance Common Stock or Series B Special Stock received by a
holder of shares of BGII Common Stock in exchange for shares of BGII Common
Stock will have a tax basis equal to the fair market value of each share of
Alliance Common Stock or share or fraction thereof of Series B Special Stock
received by the stockholder at the Effective Time. The holders of shares of
BGII Common Stock will commence a new holding period on the day after the
Effective Time for any share of Alliance Common Stock or share or fraction of
a share of Series B Special Stock received in the Merger.

Holders of Series B Special Stock will recognize ordinary income upon the
payment of a dividend (to the extent of Alliance's current or accumulated
earnings and profits) of additional shares of Series B Special Stock equal to
the fair market value of such additional shares. The fair market value of each
share of Series B Special Stock paid as a dividend will equal the mean between
the highest and lowest quoted selling prices of Series B Special Stock on the
date of payment. A distribution in excess of Alliance's current and
accumulated earnings and profits will be a tax free return of capital to the
extent of a holder's tax basis in the Series B Special Stock, and thereafter,
capital gains income. The capital gain will be long-term if, as of the date of
payment, the shares had been held by a holder of the Series B Special Stock
for more than one year, and will be short-term if, as of the date of payment,
the shares had been held by a holder of Series B Special Stock for one year or
less.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE STOCKHOLDER OF THE
PROPOSED MERGER, INCLUDING FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.

For a discussion of the federal income tax consequences of compensation
payable in connection with the Merger, see "BGII Plans and Amendments" and
"BGII Executive Officers and Executive Compensation--Employment Contracts,
Retirement Plans and Change-in-Control Arrangements."

The foregoing description of the material federal income tax consequences of
the Merger to the stockholders of BGII is qualified in its entirety by
reference to the opinion of Milbank, Tweed, Hadley & McCloy attached as an
exhibit to the Registration Statement.

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CERTAIN PROVISIONS OF THE MERGER AGREEMENT

The following is a summary of the material provisions of the Merger
Agreement not summarized elsewhere in this Proxy Statement/Prospectus. A copy
of the Merger Agreement is attached as Annex I to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement.

PROCEDURE FOR EXCHANGE OF BGII CERTIFICATES

As soon as practicable after the Effective Time, Alliance will cause
American Stock Transfer & Trust Company, in its capacity as Exchange Agent
(the "Exchange Agent"), to mail to each BGII stockholder a letter of
transmittal and instructions for use in effecting the surrender of
certificates representing shares of BGII Common Stock outstanding immediately
prior to the Effective Time (the "BGII Certificates") in appropriate and
customary form. Upon surrender of a BGII Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly and properly
executed, the holder of such BGII Certificate will be entitled to receive in
exchange therefor a certificate (the "Alliance Certificate") representing the
Share Consideration and the Cash Consideration which such holder has a right
to receive in respect of the shares of BGII Common Stock formerly evidenced by
such BGII Certificate, together with any dividends and other distributions
payable to such holder and cash in lieu of fractional shares of Alliance
Common Stock as described below, and the BGII Certificate so surrendered will
be cancelled. Until surrender, each BGII Certificate will, at and after the
Effective Time, be deemed to represent only the right to receive, upon
surrender of such BGII Certificate, the Merger Consideration with respect to
the shares of BGII Common Stock represented thereby, together with any
dividend and other distributions payable to such holder as described below,
but subject to the payment of cash in lieu of fractional shares of Alliance
Common Stock as described below. Shares of Alliance Common Stock and shares of
Series B Special Stock issued in the Merger will be issued and be deemed to be
outstanding as of the Effective Time. If any Alliance Certificate is to be
issued in a name other than that in which the BGII Certificate surrendered in
exchange therefor is registered or any cash payment is to be paid other than
to the registered holder of the BGII Certificate so surrendered, it will be a
condition to such exchange and/or payment, as the case may be, that the BGII
Certificate so surrendered be properly endorsed and otherwise in proper form
for transfer and that the person requesting such exchange and/or payment, as
the case may be, pay any transfer or other taxes required by reason of the
issuance of such Alliance Certificate, in the name other than that of, and/or
payment to a person other than, as the case may be, the registered holder of
the BGII Certificate so surrendered.

No fraction of a share of Alliance Common Stock will be issued in the
Merger. In lieu of any such fractional shares, each holder of BGII Common
Stock upon surrender of a BGII Certificate for exchange will be paid an amount
in cash (without interest), rounded to the nearest cent, determined by
multiplying (i) the per share closing price on the NASDAQ of Alliance Common
Stock on the date of the Effective Time by (ii) the fractional interest of
Alliance Common Stock to which such holder would otherwise be entitled (after
taking into account all shares of BGII Common Stock held of record by such
holder at the Effective Time). Fractional shares of Series B Special Stock
will be issued in connection with the Merger. While fractional shares of
Series B Special Stock will be issued in the Merger, holders of such
fractional shares will not be able to trade such fractional shares on NASDAQ
NMS.

No dividends or other distributions declared or made with respect to
Alliance Common Stock or Series B Special Stock with a record date on or after
the Effective Time will be paid to the holder of a BGII Certificate entitled
by reason of the Merger to receive an Alliance Certificate until such holder
surrenders such BGII Certificate.

Neither BGII nor Alliance shall be liable to any BGII stockholder for any
Merger Consideration or cash in lieu of fractional shares properly delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.

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The stock transfer books of BGII shall be closed as of the Effective Time,
and thereafter there shall be no further registration of transfers of shares
of BGII Common Stock that were outstanding prior to the Effective Time.

BGII STOCKHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.

CERTAIN REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties of
Alliance and BGII relating to, among other things, the following matters
(which representations and warranties are subject, in certain cases, to
specified exceptions): (i) the due organization, valid existence and good
standing, and similar corporate matters with respect to, each of Alliance, the
Merger Subsidiary, BGII, each subsidiary of Alliance (the "Alliance
Subsidiaries") and each subsidiary of BGII (the "BGII Subsidiaries"); (ii) the
authorization, execution, delivery, performance by and enforceability of the
Merger Agreement and the transactions contemplated thereby; (iii) the absence
of any governmental or regulatory authorization, consent or approval required
to consummate the Merger, other than as disclosed; (iv) the absence of any (a)
conflict with such party's charter or by-laws, (b) violation of applicable
law, gaming licenses, permits, registrations or other approvals or (c)
conflict with certain contracts, other than as disclosed; (v) each of
Alliance's and BGII's capital structure; (vi) the ownership of the capital
stock of, and all other ownership interest in, each BGII Subsidiary; (vii)
reports and other documents filed with the Commission and other regulatory
authorities and the accuracy of the information contained therein; (viii) the
absence of certain changes or events having a material adverse effect on the
business, results of operations, financial conditions or assets of Alliance,
any Alliance Subsidiary, BGII or any BGII Subsidiary; (ix) certain tax matters
and the payment of taxes; (x) the qualification, operation and liability under
certain employee benefit plans of Alliance and the Alliance Subsidiaries or
BGII and the BGII Subsidiaries; (xi) the absence of material pending or
threatened litigation; (xii) certain environmental matters; (xiii) the right
to use all material patents, copyrights, trademarks and trade names; (xiv)
compliance with applicable law; (xv) the absence of any brokerage, finder's or
investment banker fee due in connection with the Merger (except, in the case
of Alliance to Donaldson, Lufkin & Jenrette Securities Corporation and GSI
and, in the case of BGII, to Ladenburg); (xvi) the opinion of BGII's financial
advisor as to the fairness of the financial terms of the Merger to the BGII
stockholders; and (xvii) gaming regulatory authority in order to conduct the
business of the respective parties.

CONDUCT OF BUSINESS PENDING THE MERGER

BGII has agreed that prior to the Effective Time, unless Alliance shall
otherwise agree in writing, BGII shall, and shall cause the BGII Subsidiaries
to, use their reasonable best efforts to carry on their respective businesses
in the usual, regular and ordinary course in substantially the same manner as
previously conducted. In addition, BGII shall, and shall cause the BGII
Subsidiaries to, use their reasonable best efforts to preserve intact their
present business organizations, maintain their current licenses and permits,
keep available the services of their present officers and key employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and on-going
businesses shall be unimpaired at the Effective Time, except such impairment
as would not have a material adverse effect on BGII. BGII also agreed to, and
to cause the BGII Subsidiaries to, use their reasonable best efforts to, (i)
maintain insurance coverages and its books, accounts and records in the usual
manner consistent with prior practices; (ii) comply in all material respect
with all laws, ordinances and regulations of governmental entities applicable
to BGII and the BGII Subsidiaries; (iii) maintain and keep its properties and
equipment in good repair, working order and condition, ordinary wear and tear
excepted; and (iv) perform in all material respects its obligations under all
contracts and commitments to which it is a party or by which it is bound.

BGII further agreed that, except as required or permitted by the Merger
Agreement, BGII will not and will not propose to (i) sell or pledge or agree
to sell or pledge any capital stock owned by it in any BGII Subsidiary,

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(ii) amend its Certificate of Incorporation or By-laws, or, except as by court
order, hold any meeting of stockholders or (other than in opposition to a
third party solicitation) solicit any stockholder action by written consent,
(iii) split, combine or reclassify its outstanding capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of BGII, or declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property or (iv) directly or indirectly redeem, purchase or otherwise acquire
or agree to redeem, purchase or otherwise acquire any shares of BGII capital
stock. In addition, BGII agreed that it will not, nor will it permit any BGII
Subsidiary to, (i) except as required or permitted by the Merger Agreement,
issue, deliver or sell or agree to issue, deliver or sell any additional
shares of, or rights of any kind to acquire any shares of, its capital stock
of any class or incur any liability in respect of (a) borrowed money, (b)
capitalized lease obligations, (c) deferred purchase price of property or
services (other than trade payables in the ordinary course) and (d) guarantees
of any of the foregoing ("Indebtedness") (other than pursuant to existing
lines of credit for use in the ordinary course of business and consistent with
past practices) or any option, rights or warrants to acquire, or securities
convertible into, shares of capital stock other than issuances of BGII Common
Stock disclosed to Alliance in the Merger Agreement; (ii) except as required
or permitted by the Merger Agreement, acquire, lease or dispose or agree to
acquire, lease or dispose of any capital assets or any other assets other than
in the ordinary course of business; (iii) incur additional Indebtedness or
encumber or grant a security interest in any asset or enter into any other
transaction other than in each case in the ordinary course of business; (iv)
acquire or agree to acquire by merging or consolidating with, or by purchasing
a substantial equity interest in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, except that BGII may create new wholly-owned subsidiaries in
the ordinary course of business; or (v) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing.

BGII further agreed in the Merger Agreement that it will not, nor will it
permit any BGII Subsidiary to, except as permitted by the Merger Agreement or
required to comply with applicable law or the Merger Agreement or pursuant to
the terms of existing agreements that were not required to be disclosed
pursuant to the Merger Agreement, (i) adopt, enter into, terminate or amend
any bonus, profit sharing, compensation, severance, termination, stock option,
pension, retirement, deferred compensation, employment or other BGII
compensation plan, agreement, trust, fund or other arrangement for the benefit
or welfare of any director, officer or current or former employee, (ii)
increase in any manner the compensation or fringe benefit of any director or
officer or of any employee (except, with respect to employees, for normal
increases in the ordinary course of business that are consistent with past
practice and that, in the aggregate, do not result in a material increase in
benefits or compensation expense to BGII and any BGII Subsidiary relative to
the level in effect prior to such amendment), (iii) pay any benefit not
provided under any existing compensation plan or arrangement, (iv) grant any
awards under any bonus, incentive, performance or other compensation plan or
arrangement (including, without limitation, the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any benefit plans
or agreements or awards made thereunder), (v) take any action to fund or in
any other way secure the payment of compensation or benefits under any
employee plan, agreement, contract or arrangement or BGII compensation plan
other than in the ordinary course of business consistent with past practice or
(vi) adopt, enter into, amend or terminate any contract, agreement, commitment
or arrangement to do any of the foregoing, provided, however, that nothing
contained in the Merger Agreement shall prevent BGII or any BGII Subsidiary
from paying any bonus to or increasing the compensation of any employee in
accordance with the terms of any employment agreement for such employee that
was provided to Alliance prior to the date of the Merger Agreement.

BGII also agreed that prior to the Effective Time, (i) BGII shall provide to
Alliance within 45 days after the end of each month such financial statements
as are customarily prepared by BGII on a monthly basis and shall provide to
Alliance, as promptly as practicable, such summary financial information as is
customarily provided to the Chairman and Chief Executive Officer and Chief
Financial Officer of BGII; (ii) BGII and each BGII Subsidiary shall consult
with Alliance on a regular basis with respect to all operating decisions which
could be expected to result in a material change in the business of BGII or
any BGII Subsidiary as presently operated or which are not in the ordinary
course of business; (iii) BGII and each BGII Subsidiary shall permit
representatives

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of Alliance and prospective providers of financing to have full and
unrestricted access to such information, documents, facilities and personnel
as they may from time to time request; and (iv) BGII will provide reasonable
cooperation in helping Alliance obtain the financing referred to below under
"Conditions to Consummation of the Merger".

Alliance has agreed that prior to the Effective Time, unless BGII shall
otherwise agree in writing except as otherwise required by the Merger
Agreement, Alliance shall, and shall cause the Alliance Subsidiaries to, use
their reasonable best efforts to preserve their relationships with customers,
suppliers and others having business dealings with them and maintain their
current licenses and permits to the end that their goodwill and on-going
businesses shall be unimpaired at the Effective Time, except such impairment
as would not have a material adverse effect on Alliance. In addition, Alliance
agreed that it shall, and shall cause the Alliance Subsidiaries to use their
reasonable best efforts to (i) maintain insurance coverage and its books,
accounts and records in the usual manner consistent with prior practices; (ii)
comply in all material respects with all laws, ordinances and regulations of
governmental entities applicable to Alliance and the Alliance Subsidiaries;
(iii) maintain and keep its properties and equipment in good repair, working
order and condition, ordinary wear and tear excepted; and (iv) perform in all
material respects its obligations under all contracts and commitments to which
it is a party or by which it is bound, in each case other than where the
failure to so maintain, comply or perform, either individually or in the
aggregate, would result in a material adverse effect on Alliance. Alliance
also agreed that it would not (i) amend any of the material terms or
provisions of the Alliance Common Stock; (ii) take any action that would
result in the failure to maintain the trading of Alliance Common Stock on
NASDAQ; or (iii) declare or pay any dividend or distribution on any
outstanding shares of its capital stock.

Alliance also agreed that prior to the Effective Time, (i) Alliance shall
provide to BGII within 25 days after the end of each month such financial
statements as are customarily prepared by Alliance on a monthly basis; (ii)
Alliance and each Alliance Subsidiary shall promptly advise BGII of
developments which could be expected to result in a material change in the
business of Alliance or any Alliance Subsidiary as presently operated; and
(iii) subject to Alliance's contractual obligations to maintain
confidentiality of certain agreements to which Alliance or any Alliance
Subsidiary is a party, Alliance and each Alliance Subsidiary shall permit
representatives of BGII to have access to such information, documents,
facilities and personnel as BGII may from time to time request.

Each of Alliance and BGII agreed to promptly give written notice to the
other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event which would cause or
constitute a breach of any of its representations, warranties or covenants
contained or referenced in the Merger Agreement and to use all reasonable
efforts to prevent or promptly remedy the same.

ADDITIONAL AGREEMENTS

Securities Filings. Alliance and BGII have agreed to cooperate in the
preparation of certain required registrations and filings with the Commission
and Alliance has agreed to file the Registration Statement and take
appropriate steps to have the Registration Statement be declared effective by
the Commission and to obtain all necessary state securities laws or "Blue Sky"
permits or approvals which may be required. Alliance has also agreed to
promptly prepare and file with the SEC a registration statement covering the
sale of at least $25,000,000 (valued at the liquidation value thereof) of
Series B Special Stock, and BGII has agreed to cooperate therewith.

Alternative Proposals. BGII agreed that, prior to the Effective Time, (i)
neither it nor any of the BGII Subsidiaries shall, and it shall use reasonable
efforts to cause its officers, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of the BGII Subsidiaries) not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a
merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, BGII or any BGII Subsidiary (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal") or engage in any

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negotiations or enter into any agreement concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal, (ii) it shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted prior to the execution
of the Merger Agreement with respect to any of the foregoing, and it shall
take the necessary steps to inform the individuals or entities referred to
above of the obligations undertaken in the Merger Agreement with respect
thereto and (iii) it shall notify Alliance as promptly as practicable if any
such inquiries or proposals are received by, any such requested from, or any
such negotiations or discussions are sought to be initiated or continued with,
it; provided, however, that nothing contained in the Merger Agreement shall
prohibit the Board of Directors of BGII from (a) after notice to Alliance,
furnishing information to, or entering into negotiations or discussions with,
any person or entity that makes an unsolicited bona fide Alternative Proposal
if the Board of Directors of BGII determines in good faith, after consultation
with counsel, that the failure to do so could reasonably be deemed a breach of
its fiduciary duties under applicable law, (b) failing to make, withdrawing,
modifying or changing the recommendation referred to the BGII stockholders,
the approval and adoption of the Merger Agreement if the Board of Directors of
BGII determines in good faith, after consultation with counsel, that making
such recommendation, or the failure to withdraw, modify or change such
recommendation, could reasonably be deemed a breach of its fiduciary duties
under applicable law, (c) recommending to the BGII stockholders an Alternative
Proposal that the Board of Directors of BGII determines in good faith, after
consultation with its financial advisor, is likely to be more favorable, from
a financial point of view, to the BGII stockholders, than the Merger or (d) to
the extent applicable, complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Alternative Proposal.

Indemnification of Directors and Officers. Alliance and BGII have agreed in
the Merger Agreement that the provisions of the Certificate of Incorporation
of the surviving corporation with respect to indemnification on the date of
the Merger Agreement shall not be amended, repealed or otherwise modified for
a period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at that date of the
Merger Agreement were directors or officers of BGII in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), unless
such modification is required by law. Alliance has agreed to indemnify the
directors and officers of BGII to the maximum extent permitted by law against
all loss, cost and expense reasonably incurred by them as a result of the
termination of the WMS Agreement following the date of the Merger Agreement
until its termination (and unless the Merger Agreement is terminated by
Alliance on the basis of certain material breaches by BGII, thereafter).
Without limiting the obligations under the previous sentence, for a period of
six years after the Effective Time, the surviving corporation will maintain in
effect insurance policies, covering the directors and officers of BGII
immediately prior to the Effective Time, for claims made within such six-year
period with respect to directors' and officers' liability for activities taken
or not taken on or prior to the Effective Time, such policies to be comparable
in all material respects (including dollar amount and scope of coverage) to
the policies maintained by BGII for such purpose on the execution of the
Merger Agreement. Alliance's indemnity obligations as described above are
conditioned upon the indemnitees' granting Alliance the rights to defend and
settle claims, their reasonable cooperation with Alliance in connection with
such claims as described in the Merger Agreement and on their using
commercially reasonable efforts to contest any liability and to recover under
applicable insurance policies (to which recovery Alliance is subrogated).

Registration Rights. Alliance agreed to use its reasonable best efforts to
cover in the Registration Statement resales of Alliance Common Stock and
Series B Special Stock issued in the Merger by individuals who immediately
prior to the effective time were directors or executive officers of BGII,
including without limitation shares issued to such persons pursuant to
severance or termination agreements.

CONDITIONS TO CONSUMMATION OF THE MERGER

The obligations of Alliance and BGII to consummate the Merger are subject to
the satisfaction of, or where legally permissible, waiver of, various
conditions, including (i) the effectiveness of the Registration Statement

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and the absence of any stop order suspending the effectiveness thereof and any
proceedings for that purpose initiated or, to the knowledge of Alliance or
BGII, threatened by the Commission; (ii) the approval and adoption of the
Merger Agreement and the Merger by the requisite vote of the BGII stockholders
and the Alliance stockholders; (iii) no governmental entity or Federal or
state court having competent jurisdiction having enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which
is in effect and which materially restricts, prevents or prohibits
consummation of the Merger or any transaction contemplated by the Merger
Agreement; provided, however, that the parties have agreed to use their
reasonable best efforts to cause any such decree, judgment, injunction or
other order to be vacated or lifted; (iv) Alliance obtaining $150,000,000 of
financing on commercially reasonable terms, with such financing including (A)
the sale for cash pursuant to a registered public offering of Series B Special
Stock (which may not be sold as part of a unit with any other security) in
which Alliance receives gross proceeds, prior to payment of underwriter
spreads and commissions, of at least $15,000,000 and (B) at least $100,000,000
of bank debt, other indebtedness having a term of at least four years and/or
equity of any type (provided that any preferred stock shall not be redeemable
other than at the option of Alliance for at least four years); and (v) other
than the filing of the Certificate of Merger in accordance with the DGCL, all
licenses, permits, registrations, authorizations, consents, waivers, orders or
other approvals required to be obtained from and all filings, notices or
declarations required to be made, by Alliance or any Alliance Subsidiary, and
BGII or any BGII Subsidiary, in order to consummate the Merger and the
transactions contemplated by the Merger Agreement having been obtained from,
and made with, all required governmental entities, without any material
condition thereto.

The obligations of Alliance to effect the Merger and the transactions
contemplated by the Merger Agreement are also subject to the following
conditions: (i) each of the representations and warranties of BGII contained
in the Merger Agreement being true and correct as of the Effective Time,
except (a) for changes specifically permitted by the Merger Agreement and (b)
that those representations and warranties which address matters only as of a
particular date are required to remain true and correct as of such date; (ii)
BGII having performed or complied in all material respects with all agreements
and covenants required by the Merger Agreement to be performed or complied
with by it on or prior to the Effective Time; (iii) BGII having entered into
amendments to the employment agreements with each of Richard Gillman and Neil
Jenkins in form and content satisfactory to Alliance and such individuals;
(iv) no event shall have occurred which would have a material adverse effect
on the business, results of operation, financial condition, properties or
assets of BGII and the BGII Subsidiaries, taken as a whole; (v) receipt by
BGII of all third party consents which may be required to avoid the breach of
any material agreements to which BGII or any BGII Subsidiary is a party,
including consents of lessors, in order to consummate the Merger and the
transactions contemplated by the Merger Agreement; and (vi) all licenses,
permits, registrations, authorizations, consents, waivers, orders or other
approvals required to be obtained from, and filings, notices or declarations
required to be made with, the States of Nevada, New Jersey, Mississippi and
Louisiana in order to permit BGII and any BGII Subsidiary to conduct its
business in the foregoing jurisdictions after the Effective Time in the same
manner as conducted by it prior to the Effective Time shall have been obtained
or made.

The obligations of BGII to effect the Merger and the transactions
contemplated by the Merger Agreement are also subject to the following
conditions: (i) each of the representations and warranties of Alliance
contained in the Merger Agreement being true and correct as of the Effective
Time, except (a) for changes specifically permitted by the Merger Agreement
and (b) that those representations and warranties which address matters only
as of a particular date are required to remain true and correct as of such
date; (ii) Alliance having performed or complied in all material respects with
all agreements and covenants required by the Merger Agreement to be performed
or complied with by it on or prior to the Effective Time; (iii) Alliance
having used reasonable commercial efforts to (x) complete the sale on
reasonable commercial terms, pursuant to a registered public offering, of at
least $25,000,000 liquidation value of Series B Special Stock at or prior to
the Effective Time and (y) cause the Series B Special Stock to be listed on a
national securities exchange or quoted on NASDAQ as promptly as practicable if
the criteria for such listing or qualification are satisfied; (iv) no event
having occurred which would have a material adverse effect on the business,
results of operation, financial condition, properties

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or assets of Alliance and the Alliance Subsidiaries, taken as a whole; (v)
receipt by Alliance of all third party consents which may be required to avoid
the breach of any material agreements to which Alliance or any Alliance
Subsidiary is a party, including consents of lessors, in order to consummate
the Merger and the transactions contemplated by the Merger Agreement; and (vi)
all licenses, permits, registrations, authorizations, consents, waivers,
orders or other approvals required to be obtained from, and filings, notices
or declarations required to be made with, the State of Nevada and the State of
Mississippi, in order to permit Alliance and any Alliance Subsidiary to
conduct its business in the foregoing jurisdictions after the Effective Time
in the same manner as conducted by it prior to the Effective Time shall have
been obtained or made.

BGII has not identified any entity with which it would pursue a strategic
business combination in the event of termination of the Merger Agreement. It
is unlikely that BGII would enter into a business combination transaction
since the marketplace has been aware of BGII's interest in a possible business
combination transaction and no parties other than WMS and Alliance have made
bids for BGII. Accordingly, if the Merger is not approved or consummated for
some other reason, BGII would most likely continue as an independent company.

TERMINATION

The Merger Agreement may be terminated at any time prior to the Effective
Time by mutual consent of Alliance and BGII, or by either party if (i) any
governmental entity whose approval is required for consummation of the Merger
denies approval of the Merger and such denial becomes final and nonappealable,
(ii) the Effective Time shall not have occurred at or before 11:59 p.m. New
York time on May 3, 1996; provided, however, the right to terminate the Merger
Agreement pursuant to clause (i) or (ii) above shall not be available for any
party whose failure to fulfill any of its obligations under the Merger
Agreement has been the cause of or resulted in the occurrence of any of the
events described in clauses (i) or (ii) above, (iii) its stockholders do not
approve the Merger at its Meeting or (iv) the other party has breached any
representation, warranty, covenant or agreement in the Merger Agreement such
that the closing conditions could not be expected to be satisfied by May 3,
1996. The Merger Agreement provides, however, that no termination will become
effective until all payments payable in connection with the Merger Agreement
are paid.

BGII may also terminate the Merger Agreement if (i) the BGII Board fails to
make, withdraws, or modifies or changes its recommendation of the Merger based
on the BGII Board's good faith determination, after consultation with counsel,
that making such recommendation, or the failure to withdraw, modify or change
such recommendation, could reasonably be deemed a breach of its fiduciary
duties under applicable law, (ii) the BGII Board recommends to BGII
stockholders an Alternative Proposal (as herein defined) that the BGII Board
determines in good faith, after consultation with its financial advisors, is
likely to be more favorable, from a financial point of view, to BGII's
stockholders than the Merger or (iii) Alliance engages in any merger,
acquisition, disposition or similar transaction with a third party which
transaction requires the approval of Alliance stockholders.

Alliance has agreed in the Merger Agreement that if the Merger Agreement is
terminated by (i) BGII due to a material breach of a material agreement of
Alliance, a material breach of any material representation or warranty of
Alliance, or Alliance engaging in a merger, acquisition disposition or similar
transaction with a third party which transaction requires the approval of
Alliance stockholder; (ii) either party due to the failure of the Effective
Time to occur by 11:59 p.m. New York time on May 3, 1996 other than as a
result of Section 7.2.11 or 7.3.7 or (iii) Alliance due to a material breach
of any material agreement (except for certain breaches which have a material
adverse affect on whether the Merger will be consummated or the value of BGII
to Alliance and which occurred after January 19, 1996, or prior to such date
if Alliance had no knowledge of such breach as of such date) or representation
or warranty (except for certain breaches which have a material adverse affect
on whether the Merger will be consummated or the value of BGII to Alliance and
which occurred after January 19, 1996, or prior to such date if Alliance had
no knowledge of such breach as of such date) of BGII then in the case of the
circumstance referred to in clauses (i) and (ii) above, for a period of a year
(but if such circumstance is the failure to obtain financing primarily
attributable to BGII, six months), and in the case of the circumstance

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referred to in clause (iii), for six months, it will not acquire or agree,
offer, seek or propose to acquire beneficial ownership of BGII or any of its
assets or businesses, any securities issued by it or any options or rights to
acquire such ownership or seek or propose to influence or control the
management or policies of BGII or enter into discussions, negotiations,
arrangements or understandings with respect to the foregoing. The foregoing
limitations do not apply if a person commences a tender offer for, or acquires
35% of, BGII Common Stock. BGII agrees in the Merger Agreement not to enter
into, and not to authorize its subsidiaries to enter into, a business
combination following the termination of the Merger Agreement with any person
without providing Alliance 90 days' notice thereof and an opportunity to enter
into an agreement on similar terms as those described in such notice.
Furthermore, if during any period in which Alliance is subject to the
foregoing limitations, BGII recommends an alternate proposal to its
stockholders pursuant to which a majority of BGII shares will be exchanged for
less than $11.70, then such limitation will immediately cease.

EXPENSES AND TERMINATION FEES

Under the Merger Agreement, except as described below, each party to the
Merger Agreement has agreed to bear all fees and expenses incurred by such
party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of the Merger Agreement and
the transactions contemplated thereby, including, without limitation,
financial advisors', attorneys', accountants' and other professional fees and
expenses, except that (i) the filing fee in connection with the filing of the
Registration Statement or this Proxy Statement/Prospectus with the Commission
and (ii) the expenses incurred in connection with the printing and mailing of
the Registration Statement and this Proxy Statement/Prospectus shall be shared
equally by BGII and Alliance. See "Unaudited Pro Forma Condensed Combined
Financial Statements".

BGII has agreed in the Merger Agreement that BGII shall pay Alliance a fee
of $2,800,000 if the Merger Agreement is terminated by BGII because (i) the
BGII Board recommends to the BGII stockholders an Alternative Proposal that
the BGII Board determines in good faith, after consultation with its financial
advisors, is likely to be more favorable, from a financial point of view, to
BGII's stockholders than the Merger; (ii) the BGII Board fails to make,
withdraws, or modifies or changes its recommendation of the Merger based on
the BGII Board's good faith determination, after consultation with counsel,
that making such recommendation, or the failure to withdraw, modify or change
such recommendation, could reasonably be deemed a breach of its fiduciary
duties under applicable law; or (iii) BGII's stockholders do not approve and
adopt the Merger Agreement at the BGII Annual Meeting and within six months
after such termination by BGII a transaction occurs or is announced that would
result in a change in control of BGII or the sale or other disposition by BGII
of substantial assets.

BGII has also agreed in the Merger Agreement that if the Merger Agreement is
terminated other than due to a material breach of a material agreement or
representation or warranty in the Merger Agreement by Alliance, the failure of
Alliance's stockholders to approve and adopt the Merger Agreement or the
failure of the Financing Condition not primarily attributable to BGII, within
two business days after such termination, BGII shall reimburse Alliance for
its out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by the Merger Agreement, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, the Alliance Offer and Consent Solicitation with respect to BGII,
amounts paid to indemnify BGII directors and officers and any amounts paid to
BGII to indemnify BGII for losses in connection with the break up fee
contemplated by the WMS Agreement and financing commitment fees or expenses,
up to but not in excess of the sum of $2,000,000 unless the termination occurs
because (i) the BGII Board recommends to the BGII stockholders an Alternative
Proposal that the BGII Board determines in good faith, after consultation with
its financial advisors, is likely to be more favorable, from a financial point
of view, to BGII's stockholders than the Merger; or (ii) if (a) BGII's
stockholders do not approve and adopt the Merger Agreement at the BGII Annual
Meeting, or (b) the BGII Board fails to make, withdraws, or modifies or
changes its recommendation of the Merger based on the BGII Board's good faith
determination, after consultation with counsel, that making such
recommendation, or the failure to withdraw, modify or change such
recommendation, could reasonably be deemed a breach of its fiduciary duties
under applicable law and in either case within six

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<PAGE>

months after such termination by BGII a transaction occurs or is announced
that would result in a change in control of BGII or the sale or other
disposition by BGII of substantial assets.

Alliance has agreed in the Merger Agreement that if the Merger Agreement is
terminated by Alliance because Alliance stockholders do not approve the Merger
Agreement at the Alliance Annual Meeting and prior to such termination any
person shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act) or the right to acquire beneficial
ownership, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership, of more than 35% of the then outstanding Alliance Common
Stock, within two days after such termination, Alliance shall pay to BGII a
fee of $2,800,000.

Alliance has also agreed in the Merger Agreement that if the Merger
Agreement is terminated by Alliance because Alliance stockholders do not
approve the Merger Agreement at the Alliance Annual Meeting and the previous
paragraph is not applicable then, within two business days after such
termination, Alliance shall reimburse BGII for its out-of-pocket costs and
expenses incurred in connection with the transactions contemplated by the
Merger Agreement and the Alliance Offer, including, without limitation, fees
and disbursements of counsel, financial advisors and accountants.

Alliance has also agreed to indemnify BGII against any amount (not in excess
of $4,800,000) paid by BGII pursuant to provisions in the WMS Agreement
providing for a break-up fee upon termination of such agreement. If the Merger
Agreement is terminated in circumstances where Alliance is entitled to receive
the $2,800,000 fee referred to above, this indemnity ceases and BGII must
refund any amounts received under this provision.

AMENDMENT AND WAIVER

Subject to applicable law, the Merger Agreement may be amended by action
taken by or on behalf of the respective Boards of Directors of Alliance or
BGII at any time prior to the Effective Time; provided, however, that after
approval of the Merger by the stockholders of BGII, no amendment which under
applicable law may not be made without the approval of the stockholders of
BGII may be made without such approval. In the event that the Merger Agreement
is amended in any material respect after the mailing of this Proxy
Statement/Prospectus and before approval by the BGII stockholders, Alliance
and BGII intend to amend this Proxy Statement/Prospectus as required by
applicable law and distribute such amended Proxy Statement/Prospectus or other
information which is suitable to comply with law. BGII and Alliance do not
intend to furnish stockholders with new proxy cards if such an event occurs.
In such case, stockholders may obtain additional proxy cards in the case of
BGII, from BGII at Bally Gaming International, Inc., 6601 S. Bermuda Road, Las
Vegas, NV 89119 (telephone number (702) 896-7700 and fax number (702) 896-
7990), Attention: Neil Jenkins, Executive Vice President and Secretary or
BGII's proxy solicitor, MacKenzie Partners, 156 Fifth Avenue, New York, New
York 10010, (telephone number (800) 322-2885) and in the case of Alliance,
from Alliance Gaming Corporation, 4380 Boulder Highway, Las Vegas, NV 89121
(telephone number (702) 435-4200 and fax number (702) 435-7788), Attention:
John W. Alderfer, Chief Financial Officer.

At any time prior to the Effective Time, either Alliance or BGII may (i)
extend the time for the performance of any of the obligations or other acts of
the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained in the Merger Agreement or in any
document delivered pursuant thereto and (iii) waive compliance by the other
party with any of the agreements or conditions contained therein.

DESCRIPTION OF ALLIANCE CAPITAL STOCK

Alliance's Articles of Incorporation, as amended (the "Articles of
Incorporation"), authorize the issuance of 185,000,000 shares of capital
stock, of which 175,000,000 shares are designated as Common Stock, par value
$0.10 per share, and 10,000,000 shares are designated as Special Stock, par
value $0.10 per share ("Special

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<PAGE>

Stock"). As of March 4, 1996, 12,987,483 shares of Alliance Common Stock were
issued and outstanding and no shares of Special Stock were issued and
outstanding.

COMMON STOCK

Holders of Alliance Common Stock are entitled to cast one vote per share on
all matters on which Alliance's stockholders are entitled to vote. The number
of votes required to take any action by Alliance's stockholders are as
provided in the NGCL or the Alliance Articles of Incorporation. Holders of
Alliance Common Stock are not entitled to cumulate their votes. Holders of
Alliance Common Stock are entitled to receive dividends when and as declared
by the Alliance Board out of funds legally available for the payment thereof.
The Articles of Incorporation provide that once the subscription price or par
value of any share of Alliance Common Stock has been paid in, such share shall
be non-assessable and shall not be subject to assessment to pay the debts of
Alliance. Subject to any preferential rights which may be granted to holders
of series of Special Stock, holders of Alliance Common Stock are entitled to
share ratably in all assets of Alliance that are legally available for
distribution to its stockholders in the event of its liquidation or
dissolution. Holders of Alliance Common Stock have no preemptive rights nor
are there any subscription, redemption or conversion privileges associated
with the Alliance Common Stock.

SPECIAL STOCK

The Articles of Incorporation provide that the Special Stock may be issued
from time to time upon such terms and conditions and for such consideration as
may be provided by the Alliance Board. The Special Stock may be issued in one
or more series, each series to have such designations, rights, preferences and
privileges as may be determined by the Board at the time of issuance. Alliance
has no current intention to issue any series of Special Stock with the
exception of the Series B Special Stock as described herein.

DESCRIPTION OF SERIES B SPECIAL STOCK

The Alliance Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Special Stock and
Qualifications, Limitations and Restrictions Thereof (the "Certification of
Designations") of the 15% Non-Voting Junior Special Stock, Series B (the
"Series B Special Stock"), which is attached as Annex VII hereto, provides
that holders of shares of Series B Special Stock are entitled to receive semi-
annual dividends, as and when declared by the Alliance Board in an amount per
share equal to $7.50 payable in cash, except that the Company may at its
option pay such dividends accruing through the first Dividend Payment Date (as
defined below) occurring next after the seventh anniversary of the Effective
Time in whole or in part in additional shares of Series B Special Stock (or
fractions thereof) in an amount equal to such dividend, with each share of
Series B Special Stock valued at $100 (the "Liquidation Value"), provided that
after the first Dividend Payment Date (as defined below) occurring next after
the fifth anniversary of the Effective Time the portion of any such dividend
that may be so paid is limited to $4.00. Dividends are payable on the first
day in each year of the first and seventh months of each year following the
date of initial issuance beginning on the first day of the seventh month
following the date of initial issuance or such other dates as set by the
Alliance Board (each a "Dividend Payment Date"). Dividends are cumulative and
will accrue from and after the date of initial issuance. Dividends payable for
any partial dividend period (including the period from the date of initial
issuance until the first day of the month next following the month in which
the date of initial issuance occurred) will be computed on the basis of the
actual days elapsed in such period over a year of 365 or 366 days. Unless all
dividends are paid on the Series B Special Stock that have accrued and is
continuing, no dividend or other distribution can be paid to holders of any
equity security ranking junior to the Series B Special Stock and no shares of
such junior security can be purchased or redeemed by Alliance. Alliance
currently expects that so long as shares of the Series B Special Stock remain
outstanding, it will, subject to the terms thereof, pay dividends accruing
thereon through the first dividend payment date occurring after the seventh
anniversary of the Effective Time in additional shares of such stock.

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<PAGE>

Upon liquidation, the holders of shares of Series B Special Stock are
entitled (subject to prior preferences and other rights of any senior equity
securities and on a parity with other securities ranking equally) to be paid
out of assets of Alliance in cash or property valued at its fair market value
(as determined in good faith by the Alliance Board) an amount equal to the
Liquidation Value plus an amount equal to all accrued and unpaid dividends and
distributions thereon. While Alliance has the ability to issue equity
securities ranking senior in right of payment to the Series B Special Stock,
it does not presently intend to issue any such securities. Therefore,
immediately following the Merger, no equity security will be senior to the
Series B Special Stock and only the Alliance Common Stock will be junior to
the Series B Special Stock.

The Series B Special Stock has no voting rights except as required by law
and except in the case where dividends payable on shares of the Series B
Special Stock have been in arrears for three consecutive dividend payment
dates, at which time the number of directors constituting the Alliance Board
will be increased by two and the holders of shares of Series B Special Stock
will have the right, voting separately as a class, to elect two directors to
the Alliance Board until all dividends accumulated on such shares have been
paid or set apart for payment in full. The Series B Special Stock has no other
voting rights.

Alliance may at its option redeem all, or any number less than all, of the
outstanding shares of Series B Special Stock at any time at a price per share
equal to the Liquidation Value per share plus an amount equal to all accrued
and unpaid dividends and distributions thereon to the date of redemption.
Alliance is required to redeem at the above mentioned price all of the
outstanding shares of Series B Special Stock by the eighth anniversary of the
date of issuance. If Alliance fails to redeem such shares by that date, then
the number of directors constituting the Alliance Board will be increased by
two and the holders of the shares of Series B Special Stock, voting as a
class, will have the right to elect two directors to the Alliance Board until
all such shares are redeemed. The total number of directors which the holders
of Series B Special Stock shall have the right to elect may not exceed two.
Dividends on such shares will continue to accrue, and no dividend or
distribution can be paid to holders of any equity security ranking junior to
the Series B Special Stock and no shares of such equity securities can be
purchased or redeemed by Alliance, until the date of redemption. Holders of
the Series B Special Stock have no other remedy than those described above if
Alliance fails to redeem all the outstanding shares of Series B Special Stock
on such date.

Fractional shares of Series B Special Stock will entitle the holder to
receive dividends and distributions and to exercise voting rights in
proportion to the fractional holding.

The Series B Special Stock shall have the terms set forth above; provided
that if the Series B Special Stock is sold to the public at terms more
favorable than those summarized above, the Series B Special Stock will be
issued on such more favorable terms.

Alliance has applied for NASDAQ NMS quotation for the Series B Special
Stock.

COMPARISON OF STOCKHOLDER RIGHTS

Upon consummation of the Merger, the stockholders of BGII will become
stockholders of Alliance and their rights will be governed by Alliance's
Articles of Incorporation and Bylaws, which differ in certain material
respects from BGII's Articles of Incorporation and Bylaws. The rights of
former BGII stockholders, as stockholders of Alliance, will be governed by the
NGCL instead of by the DGCL. Nevada is the jurisdiction of incorporation of
Alliance and Delaware is the jurisdiction of incorporation of BGII. The
material differences between the current rights of BGII stockholders and the
rights of holders of Alliance Common Stock following consummation of the
Merger are described below. The following discussion applies only to the
rights of holders of Alliance Common Stock. The rights of holders of Series B
Special Stock are described above under "Description of Alliance Capital
Stock."

The following comparison of the NGCL and Alliance's Articles of
Incorporation and Bylaws, on the one hand, and the DGCL and BGII's Certificate
of Incorporation and Bylaws, on the other, is not intended to be

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<PAGE>

complete and is qualified in its entirety by reference to Alliance's Articles
of Incorporation and Bylaws and BGII's Certificate of Incorporation and
Bylaws. Copies of Alliance's Articles of Incorporation and Bylaws are
available for inspection at the offices of Alliance and copies will be sent to
the holders of BGII Common Stock or Alliance Common Stock upon request to:
David D. Johnson, Senior Vice President, General Counsel and Secretary,
Alliance Gaming Corporation, 4380 Boulder Highway, Las Vegas, NV 89121,
facsimile number (702) 454-0478. Copies of BGII's Certificate of Incorporation
and Bylaws are available for inspection at the principal executives offices of
BGII and copies will be sent to holders of BGII Common Stock upon request to
Neil Jenkins, Secretary, Bally Gaming International, Inc., 6601 S. Bermuda
Road, Las Vegas, NV 89119.

Directors. Alliance's Bylaws provide that the number of directors
constituting the Alliance Board will be fixed from time to time by resolution
of the Alliance Board, and that the number of directors may not be less than
three nor more than nine. Alliance's bylaws further provide that the directors
shall be classified into three classes of directors each serving three-year
terms. The Alliance Board currently consists of six directors. BGII's Bylaws
provide that the number of directors constituting the BGII Board will be fixed
from time to time by resolution of the BGII Board, and that the number of
directors may not be less than three. The BGII Board currently consists of
seven directors.

Election of Directors. Alliance's Bylaws provide that directors are elected
by the affirmative vote of a plurality of the shares of Alliance Common Stock
present in person or by proxy at the annual meeting at which such election
will occur. BGII's Bylaws provide that directors are elected by a majority
vote of the shares of BGII Common Stock present in person or by proxy at the
meeting at which such election will occur.

Removal of Directors; Filling Vacancies on the Board of Directors. Under the
NGCL, any director may be removed from office upon the vote of stockholders
representing not less than two-thirds of the voting power of the issued and
outstanding stock entitled to vote thereon. Alliance's Bylaws provide that any
director may be removed (i) with or without cause by the affirmative vote of
at least two-thirds of the outstanding shares of Alliance Common Stock at a
special meeting of the stockholders called for that purpose and (ii) with
cause, by action of the Alliance Board. Neither the NGCL nor Alliance's By-
Laws contain a specific definition of cause, and Alliance is not aware of
Nevada judicial interpretation of such phrase. Under the DGCL, any director
may be removed from office upon the affirmative vote of the holders of a
majority of the shares entitled to vote at an election of directors. As a
result of the Merger, it will be more difficult for former BGII stockholders
to remove directors.

Alliance's Bylaws provide that any vacancy on the board of directors may be
filled by a majority of the remaining directors even if they are less than a
quorum, except that a vacancy created by removal of a director by the
stockholders may be filled by the stockholders at the meeting at which the
removal was effected. BGII's Bylaws provide that all vacancies on the board of
directors may be filled by a majority of the remaining directors even if they
are less than a quorum. Accordingly, it will be more difficult for former BGII
stockholders to replace directors.

Restrictions on Business Combinations/Corporate Control. The DGCL contains
provisions restricting the ability of a corporation to engage in business
combinations with an interested stockholder. Under the DGCL, except under
certain circumstances, a corporation is not permitted to engage in a business
combination with any interested stockholder for a three-year period following
the date such stockholder became an interested stockholder. The DGCL defines
an interested stockholder, generally, as a person who owns 15% or more of the
outstanding shares of such corporation's voting stock.

Certain provisions of the NGCL (the "Nevada Control Share Acquisition Act")
disallow the exercise of voting rights with respect to "control shares" of an
"issuing corporation" held by an "acquiring person," unless such voting rights
are conferred by a majority vote of the disinterested stockholders or if,
prior to the acquiring person's acquisition of the control shares, the
articles of incorporation or bylaws of the issuing corporation state that such
provisions of the NGCL do not apply to the issuing corporation. Alliance's By-
Laws currently contain such a statement.

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<PAGE>

The NGCL also contains provisions restricting the ability of a corporation
to engage in any combination with an interested stockholder unless the
combination complies with certain fair price specifications or unless the
board of directors of the corporation approved of the interested stockholder's
acquisition of shares. The NGCL defines an interested stockholder, generally,
as a person who owns 10% or more of the outstanding shares of such
corporation's voting stock.

The NGCL also provides that directors may resist a change or potential
change in control of the corporation if the directors by a majority vote of a
quorum determine that the change or potential change is opposed to or not in
the best interests of the corporation (a) upon consideration of the interests
of the corporation's stockholders and any of the following: (i) the interests
of the corporation's employees, suppliers, creditors and customers, (ii) the
economy of the state and nation, (iii) the interests of the community and of
society and (iv) the long-term as well as short-term interest of the
corporation and its stockholders, including the possibility that these
interests may be best served by the continued independence of the corporation,
or (b) because the indebtedness and other obligations to which the corporation
or any successor may become subject in connection with the change or potential
change in control provides reasonable grounds to believe that, within a
reasonable time, the corporation or any successor would have fewer assets than
liabilities or become insolvent or the subject of bankruptcy proceedings.

As a result of these provisions, following the Merger, former BGII
stockholders may be less likely to benefit from certain change of control
transactions which are opposed by the Alliance Board even though favored by a
majority of the Alliance stockholders.

Special Meetings. Alliance's Bylaws provide that special meetings of
stockholders may be called by a majority of the Alliance Board, the Chairman
of the Board or the President and must be called by the President or Secretary
at the request, in writing, of a majority of Alliance's Board or stockholders
owning at least a majority of shares of Alliance Common Stock then issued and
outstanding and entitled to vote. BGII's Bylaws provide that special meetings
of stockholders may be called by the Chairman of the Board, the President, or
the BGII Board.

Share Exchange. The NGCL provides that a corporation may acquire all of the
outstanding shares of one or more classes or series of another corporation in
exchange or any other shares, obligations or other securities of the acquiring
corporation or for cash or other property if the board of directors of each
corporation adopts, and its stockholders entitled to vote thereon approve, the
exchange. The DGCL has no such provision.

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<PAGE>

MANAGEMENT BEFORE AND AFTER THE MERGER

The name, age, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Alliance
are set forth below. No director or executive officer of Alliance is related
by blood, marriage or adoption to any other director or executive officer. The
current executive officers and directors of BGII, if any, who will be employed
by Alliance have not yet been determined, with the exceptions of Hans Kloss,
who will continue as President of Gaming, and Richard Gillman and Neil
Jenkins, who will not be employed by the combined entity.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND OCCUPATIONS,
NAME AGE OFFICES OR EMPLOYMENTS HELD DURING THE PAST FIVE YEARS
- ---- --- -----------------------------------------------------------
<S> <C> <C>
STEVE GREATHOUSE........ 45 Chairman of the Board of Directors, President
and Chief Executive Officer of Alliance,
March 1995 to present; Director of Alliance,
October 1994 to present; President and Chief
Executive Officer of Alliance, August 1994
to present; President of Harrah's Casino
Hotels Division of The Promus Companies,
Inc., September 1993 to July 1994; President
of Harrah's Southern Nevada, July 1991 to
September 1993; Chief Operating Officer of
Harrah's Southern Nevada, 1990 to September
1993; Executive Vice President of Harrah's
Southern Nevada, 1990 to July 1991.
ANTHONY L. DICESARE..... 33 Director and Executive Vice President-
Development of Alliance, July 1994 to
present; employee of KIC, April 1991 to July
1994; associate of Wasserstein, Perella &
Co., Inc., September 1989 to April 1991.
DR. CRAIG FIELDS........ 49 Vice Chairman of the Board of Directors of
Alliance, March 1995 to present; Director of
Alliance, October 1994 to present;
President, Chairman and CEO of
Microelectronics and Computer Technology
Corporation, 1990 to 1994.
JOEL KIRSCHBAUM......... 44 Director of and consultant to Alliance, March
1995 to present; Chairman of the Board of
Directors of Alliance, July 1994 to March
1995; Sole stockholder, director and officer
of KIC, which is the sole general partner of
Kirkland, January 1991 to present; General
Partner, Goldman, Sachs & Co., 1984 to 1990.
Sole stockholder, director and officer of
GSI, which is the sole general partner of
GSA.
DAVID ROBBINS........... 36 Director of Alliance, July 1994 to present;
Attorney, O'Sullivan Graev & Karabell, LLP,
September 1995 to present; Attorney, Kramer,
Levin, Naftalis, Nessen, Kamin & Frankel,
May 1993 to September 1995; Attorney, Cahill
Gordon & Reindel, September 1984 to May
1993.
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND OCCUPATIONS,
NAME AGE OFFICES OR EMPLOYMENTS HELD DURING THE PAST FIVE YEARS
- ---- --- -----------------------------------------------------------
<S> <C> <C>
ALFRED H. WILMS......... 51 Director of Alliance, November 1983 to
present; Chief Executive Officer of
Alliance, December 1984 to July 1994;
Chairman of the Board of Directors of
Alliance, August 1986 to July 1994.
Currently Director and President of
Aqualandia (a waterpark in Europe), Director
and President of Gibsa (a real estate
company located in Spain) and Director of
Jardin Parks (a real estate company located
in Spain).
SHANNON L. BYBEE........ 56 Executive Vice President--Government Affairs
and Special Advisor to the Board of
Directors of Alliance, July 1994 to present;
President and Chief Operating Officer of
Alliance, July 1993 to July 1994; Director
of The Claridge Hotel and Casino
Corporation, August 1988 to present; Chief
Executive Officer of The Claridge Hotel and
Casino Corporation, August 1989 to July
1993; Associate Professor at the William F.
Harrah College of Hotel Administration and
the UNLV International Gaming Institute at
the University of Nevada, Las Vegas, July
1994 to present.
JOHN W. ALDERFER........ 51 Senior Vice President--Finance and
Administration of Alliance, December 1993 to
present; Chief Financial Officer and
Treasurer of Alliance, September 1990-
present; Vice President of Alliance, 1990-
December 1993; Chief Financial Officer of
The Bicycle Club (a Los Angeles-based card
casino), February 1989-September 1990.
DAVID D. JOHNSON........ 44 Senior Vice President, General Counsel and
Secretary, April 1995 to present; Attorney
with Schreck, Jones, Bernhard, Woloson and
Godfrey, January 1987 to April 1995.
ROBERT L. MIODUNSKI..... 45 Senior Vice President of Alliance's Nevada
Route Group, March 1994 to present;
president of Mulholland-Harper Company, a
sign manufacturing and service company,
January 1991 to March 1994; Various
positions with Federal Signal Company, the
most recent being Vice President and General
Manager of the Midwest Region of the Sign
Group, 1984 to 1990.
ROBERT M. HESTER........ 40 Vice President--Human Resources and
Administration of Alliance, December 1993 to
present; Director of Human Resources of
Alliance, October 1993 to December 1993;
Director of Human Resources for Sam's Town
Hotel and Casino, 1989 to 1993.
</TABLE>

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<PAGE>

Following consummation of the Merger, Alliance intends to evaluate the
composition of its board of directors to insure that the board includes
individuals having appropriate skills and experience in light of the expanded
scope of Alliance's operations following the Merger.

FINANCIAL MATTERS AFTER THE MERGER

ACCOUNTING TREATMENT

The Merger will be accounted for by Alliance under the "purchase" method of
accounting in accordance with generally accepted accounting principles.
Therefore, the aggregate consideration paid by Alliance in connection with the
Merger will be allocated to BGII's assets and liabilities based on their fair
values with any excess being treated as excess of purchase cost over amount
assigned to net assets acquired. The assets and liabilities and results of
operations of BGII will be consolidated into the assets and liabilities and
results of operations of Alliance subsequent to the Effective Time.

COMMON STOCK DIVIDEND POLICY AFTER THE MERGER

It is the current intention of the Alliance Board not to pay cash dividends
on the Alliance Common Stock following the Merger. Future dividends will be
determined by the Alliance Board in light of Alliance's alternative
opportunities for investment and the earnings and financial condition of
Alliance and its subsidiaries, among other factors.

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<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT

ALLIANCE

The following table sets forth certain information as of March 4, 1996 with
respect to the beneficial ownership of Alliance's Alliance Common Stock, which
constitutes Alliance's only outstanding class of voting securities, by (i)
each person who, to the knowledge of Alliance, beneficially owned more than 5%
of Alliance Common Stock, (ii) each director of Alliance, (iii) the executive
officers of Alliance named in the Alliance summary compensation table and (iv)
all executive officers and directors of Alliance as a group:

<TABLE>
<CAPTION>
AMOUNT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
------------------------ -------------------- -------------------
<S> <C> <C>
Alfred H. Wilms................... 7,034,082(2) 46.9%
Donaldson, Lufkin & Jenrette 1,586,500(3) 13.6%
Securities Corporation...........
140 Broadway
New York, New York 10005
Joel Kirschbaum
Kirkland Investment Corporation
Kirkland-Ft. Worth Investment
Partners, L.P.
535 Madison Avenue
New York, New York 10022......... 1,333,333(4) 10.3%
Gaming Systems Advisors, L.P.
535 Madison Avenue
New York, New York 10022......... -- (5) --
Steve Greathouse.................. 332,500(6) 2.5%
Anthony L. DiCesare............... -- (7) --
Dr. Craig Fields.................. 125,000(8) *
David Robbins..................... 20,000(9) *
Shannon L. Bybee.................. 210,000(10) *
John W. Alderfer.................. 162,000(11) *
David D. Johnson.................. -- --
Robert L. Miodunski............... 17,000(12) *
All executive officers and
directors as a group
(14 persons)....................... 9,294,615(13) 59.3%
</TABLE>
- --------
*Less than 1%.
(1) Excludes the effect of (a) the issuance of (i) 2,750,000 warrants to KIC
in connection with its investment in Alliance, and (ii) 1,250,000
warrants to GSA pursuant to the GSA Advisory Agreement, both of which
become exercisable in equal amounts only when the price reaches $11, $13
and $15, (b) shares covered by employee stock options other than those
deemed beneficially owned by executive officers and directors.
(2) Includes 2,000,000 shares represented by the warrants issued to Mr.
Wilms. Mr. Wilms' mailing address is 4380 Boulder Highway, Las Vegas,
Nevada 89121.
(3) Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and certain
affiliated entities filed on February 14, 1995 a Schedule 13G indicating
ownership of (i) 1,086,500 shares issuable upon conversion of Convertible
Debentures held by it and (ii) 500,000 shares which may be acquired upon
exercise of certain warrants issued to DLJ.
(4) Based upon information contained in a Schedule 13D filed on June 23,
1994, as amended on September 28, 1995 and November 6, 1995, provided to
Alliance by such persons (except as to percent of class) which indicated
that each of them held sole voting and disposition over all such shares.
Of such shares, certain amounts have been or may be sold or distributed
to L. H. Friend, Weinress & Frankson, Inc., Mr. DiCesare and, possibly,
certain other persons, as set forth in the Schedule 13D provided to
Alliance by Joel Kirschbaum, KIC, Kirkland and GSA.
(5) Based upon information contained in a Schedule 13D filed on June 23,
1994, as amended on September 28, 1995 and November 6, 1995, provided to
Alliance by such person jointly with Joel Kirschbaum, KIC and Kirkland.
(6) See "Election of Alliance Directors--Executive Compensation--Employment
and Severance Arrangements".

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<PAGE>

(7) Based upon information contained in a Schedule 13D, filed on June 23,
1994, as amended on September 28, 1995 and November 6, 1995, provided to
Alliance by Joel Kirschbaum, KIC, Kirkland and GSA. As set forth in such
Schedule 13D, as amended, Mr. DiCesare has certain rights to receive a
portion of the securities that KIC would be entitled to receive upon
dissolution of Kirkland and that GSI would be entitled to receive upon
dissolution of GSA.
(8) Includes 125,000 shares subject to options that are currently exercisable
or will become exercisable within 60 days.
(9) Pursuant to options granted to Mr. Robbins by Kirkland. Based on
information contained in the Schedule 13D referred to in Note 7 above.
(10) Includes 210,000 shares subject to options that are currently exercisable
or will become exercisable within 60 days.
(11) Includes 162,000 shares subject to options that are currently exercisable
or will become exercisable within 60 days.
(12) Includes 17,000 shares subject to options that are currently exercisable
or will become exercisable within 60 days.
(13) Includes 2,676,200 shares subject to options and warrants that are
currently exercisable or will become exercisable within 60 days.

STOCKHOLDERS AGREEMENT

On July 14, 1994, as contemplated by the Stockholders Agreement, the Board
of Directors was reconfigured to consist of four persons designated by KIC
(Messrs. Kirschbaum, DiCesare, David Robbins and Jay R. Gottlieb) and three
persons designated by Mr. Wilms (Messrs. Wilms, David A. Scheinman and Sidney
Sosin). The Stockholders Agreement and related transactions are more fully
described in the Alliance Forms 8-K dated June 25, 1993, September 21, 1993
and July 14, 1994 and in its Information Statement dated June 29, 1994. On
October 20, 1994, the Stockholders Agreement was amended to reconfigure the
Board of Directors of Alliance to consist of four persons designated by KIC
(Messrs. Kirschbaum, DiCesare, Robbins and Gottlieb), one person designated by
Mr. Wilms (Mr. Wilms) and two new directors designated by a majority of the
Board of Directors of Alliance. The Stockholders Agreement obligates Mr. Wilms
to vote his shares for such persons nominated by KIC. On October 20, 1994 Mr.
Greathouse and Dr. Fields were appointed to the Board to fill vacancies
created upon the resignation of Messrs. Scheinman and Sosin. As amended, the
Stockholders Agreement also provides that Mr. Wilms may designate two persons
(currently Messrs. Scheinman and Sosin) (the "Advisors") who will be observers
of, and advisors to, the Board of Directors and who will be entitled to attend
all of the Alliance Board of Directors' meetings and receive all information
furnished to members of the Board. Mr. Wilms and/or at least one Advisor will
be entitled to attend all meetings of the committees of Alliance's and its
subsidiaries' boards of directors. In addition, Mr. Wilms is contractually
obligated until September 21, 1997 to vote his shares of Alliance Common Stock
in favor of four nominees of KIC to the Alliance Board.

Consummation of the Merger and the Financing will result in significant
dilution of the security ownership of the holders listed above. Based upon the
assumptions that (i) the Alliance Average Trading Price is $3.75, (ii) 10.7
million shares of Alliance Common Stock are issued in the Equity Financing and
(iii) certain warrants and convertible debentures vest, the percentages listed
above will be reduced by approximately 49% from their present levels.

181
<PAGE>

BGII

PRINCIPAL STOCKHOLDERS OF BGII

The following table sets forth certain information as of March 1, 1996
concerning persons which, to the knowledge of BGII, beneficially own more than
five percent (5%) of the outstanding shares of BGII's Common Stock:

<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
NATURE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL BGII COMMON
BENEFICIAL OWNER OWNERSHIP STOCK(1)
------------------- ---------- -------------
<S> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, MA 02109............................ 1,643,550(2) 13.7%
Richard Gillman
c/o Bally Gaming International, Inc.
2501 Fire Road
Absecon, NJ 08201........................... 326,025(3) 3.0%(3)
Alliance Gaming Corporation
4380 Boulder Highway
Las Vegas, NV 89121......................... 1,000,000(4) 9.3%
</TABLE>
- --------
(1) Based upon 10,799,501 shares of BGII Common Stock outstanding on March 1,
1996. Each beneficial owner's percentage holdings have been calculated
assuming full exercise of warrants or stock options, if any, exercisable
by such holder within 60 days of March 1, 1996.
(2) FMR Corp. is a holding company, one of whose principal assets is Fidelity
Management & Research Company ("Fidelity"), an investment adviser
(registered under Section 203 of the Investment Advisers Act of 1940) to
certain investment companies registered under Section 8 of the Investment
Company Act of 1940 and serves as investment advisor to certain other
funds which are generally offered to limited groups of investors (the
"Fidelity Funds"). Fidelity Management Trust Company ("FMTC") is a wholly-
owned subsidiary of FMR Corp. and is a bank as defined under Section
3(a)(6) of the Exchange Act and trustee or managing agent for certain
private investment accounts and serves as investment advisor to certain
other funds which are generally offered to limited groups of investors
(the "Accounts"). FMR Corp. beneficially owns, through Fidelity, as
investment advisor to the Fidelity Funds, 1,400,000 shares of BGII Common
Stock and through FMTC, the managing agent for the Accounts, 243,500
shares of BGII Common Stock. The aggregate number of shares held by the
Fidelity Funds includes 1,200,000 shares of BGII Common Stock issuable
upon exercise of certain warrants which are currently exercisable. The
information set forth in the table with respect to FMR Corp. and the
information set forth in the foregoing text of this footnote was obtained
from a Statement on Schedule 13D, dated October 6, 1993, filed by FMR with
the Commission, as amended by Amendment No. 1 thereto, dated December 8,
1993, Amendment No. 2 thereto, dated January 15, 1995 and Amendment No. 3
thereto dated February 13, 1996. Pursuant to an Order of the Nevada
Commission, entered on September 23, 1993, certain funds and accounts
managed or advised by FMR and its affiliates and affiliates of such funds
and accounts may own shares of BGII Common Stock only to the extent that
their aggregate actual ownership of shares of BGII Common Stock (excluding
unexercised warrants) does not exceed 15% of the outstanding shares of
BGII Common Stock.
(3) Shares indicated as owned by such individual do not include 300,000 shares
owned of record by BEC subject to stock options granted by BEC to Mr.
Gillman which are the subject of litigation between BEC and Mr. Gillman.
If such shares were included, the percentage of outstanding BGII Common
Stock beneficially owned by Mr. Gillman would be 5.7%. The shares
indicated in the table include 150,000 shares subject to stock options
granted under BGII's 1991 Incentive Plan which currently are exercisable
(or become exercisable within 60 days of March 1, 1996).
(4) The information set forth in the table and in this footnote was obtained
from a Statement on Schedule 13D, dated June 28, 1995, filed by Alliance
with the Commission.

182
<PAGE>

SECURITY OWNERSHIP OF MANAGEMENT OF BGII

The following table sets forth, as of March 1, 1996, certain information
concerning ownership of shares of BGII Common Stock by each director of BGII,
each executive officer of BGII named in the Summary Compensation Table, and by
all executive officers and directors of BGII as a group:

<TABLE>
<CAPTION>
NUMBER
OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS(1)
---------------- ------- ----------
<S> <C> <C>
Richard Gillman....................................... 326,025 3.0%(2)
Hans Kloss............................................ 187,500 1.7%(3)
Neil E. Jenkins....................................... 122,500 1.1%(4)
Charles C. Carella.................................... 41,666 *(5)
James J. Florio....................................... 33,333 *(6)
Lewis Katz............................................ 41,666 *(5)
Kenneth D. McPherson.................................. 41,666 *(5)
Scott Schweinfurth.................................... 10,000 *(7)
Robert Conover........................................ 63,000 *(8)
All directors and named executive officers of BGII as
a group
(9 persons).......................................... 867,356 7.7%(9)
</TABLE>
- --------
* Less than 1%.
(1) Based upon 10,799,501 shares of BGII Common Stock outstanding as of March
1, 1996. Each beneficial owner's percentage holdings have been calculated
assuming full exercise of stock options exercisable by such holder within
sixty days of March 1, 1996.
(2) Shares indicated as owned by such individual do not include 300,000 shares
owned of record by BEC subject to stock options granted by BEC to Mr.
Gillman which are the subject of litigation between BEC and Mr. Gillman.
If such shares were included, the percentage of outstanding BGII Common
Stock beneficially owned by Mr. Gillman would be 5.7%. The shares
indicated in the table include 150,000 shares subject to stock options
granted under the 1991 Plan (as defined herein) which currently are
exercisable (or become exercisable within 60 days of March 1, 1996).
(3) Shares indicated as owned by such individual include 75,000 shares subject
to stock options granted under the 1991 Plan which currently are
exercisable (or become exercisable within 60 days of March 1, 1996). Also
includes 40,000 shares of restricted stock granted under the 1991 Plan
with respect to which restrictions have lapsed (or will lapse within 60
days of March 1, 1996).
(4) Shares indicated as owned by such individual include 75,000 shares subject
to stock options granted under the 1991 Plan which currently are
exercisable (or become exercisable within 60 days of March 1, 1996).
(5) Shares indicated as owned by such individual include 25,000 shares subject
to stock options granted under the 1991 Directors' Plan (as defined
herein) and 8,333 shares subject to stock options granted under the 1994
Plan (as defined herein), which currently are exercisable (or become
exercisable within 60 days of March 1, 1996).
(6) Shares indicated as owned by such individual include 8,333 shares subject
to stock options granted under the 1991 Directors' Plan and 8,333 shares
subject to stock options granted under the 1994 Plan, which currently are
exercisable (or become exercisable in 60 days of March 1, 1996).
(7) Shares indicated as owned by such individual include 10,000 shares subject
to stock options granted under the 1991 Plan which currently are
exercisable (or become exercisable within sixty days of March 1, 1996).
(8) Shares indicated as owned by such individual include 35,000 shares subject
to stock options granted under the 1991 Incentive Plan which currently are
exercisable (or become exercisable within 60 days of March 1, 1996).
(9) Shares indicated as owned by such individuals include 503,331 shares which
may be acquired by exercise of options and which are currently exercisable
(or become exercisable within 60 days of March 1, 1996).

183
<PAGE>

LITIGATION MATTERS

On or about June 19, 1995, three purported class actions were filed in the
Chancery Court of Delaware by BGII stockholders against BGII and its directors
(the "Fiorella, Cignetti and Neuman Actions"). The Fiorella and Neuman
Actions, in identical complaints, alleged that BGII's directors had breached
their fiduciary duties of good faith, fair dealing, loyalty and candor by
approving the WMS Merger instead of the transaction proposed by Alliance, by
not properly exposing BGII for sale, and by failing to take all reasonable
steps to maximize stockholder value. These actions sought injunctions to
prevent BGII from proceeding with, consummating or closing the WMS Merger, and
to rescind it should it be consummated, as well as compensatory damages. The
Cignetti Action made similar allegations, and also alleged that BGII had in
place a shareholders' rights plan, commonly known as a "poison pill". The
Cignetti Action sought an injunction requiring BGII to negotiate with all bona
fide parties or other potential acquirees or to conduct an unencumbered market
check in a manner designed to maximize shareholder value, and preventing BGII
from implementing any unlawful barriers to the acquisition of BGII by any
third party or taking other actions that would lessen its attractiveness as an
acquisition candidate. The Cignetti Action also specifically requested an
injunction barring triggering of BGII's alleged "poison pill" until full
consideration was given to the Alliance Proposal (subsequently superseded by
the execution of the Merger Agreement), and sought compensatory damages.

Also on or about June 19, 1995, a purported class action was filed in the
Delaware Court of Chancery by a BGII stockholder against BGII and its
directors and Alliance (the "Strougo Action"). The Strougo Action alleged that
the proposal made by Alliance (subsequently superseded by the execution of the
Merger Agreement) to acquire BGII stock was at a grossly unfair and inadequate
price; that BGII's directors had breached their fiduciary duties by failing
seriously to consider potential purchasers for BGII other than Alliance; and
that the transaction proposed by Alliance was wrongful, unfair and harmful to
BGII public stockholders. The Strougo Action sought a declaration that
defendants had breached their fiduciary duties; an injunction preventing the
consummation of the Alliance transaction or requiring its rescission; an order
requiring defendants to permit a stockholders' committee to participate in any
process undertaken in connection with the sale of BGII; and compensatory
damages.

On or about July 6, 1995, the plaintiffs in the Fiorella, Cignetti, Neuman
and Strougo Actions (collectively, the "Stockholder Plaintiffs") filed with
the Court a motion to consolidate the four actions.

On or about July 27, 1995, certain of the Stockholder Plaintiffs filed an
amended complaint (the "Amended Fiorella Action") that adopted certain
allegations concerning self-dealing by BGII directors in connection with the
WMS Agreement; added a claim relating to BGII's alleged failure to hold an
annual meeting as required; and added WMS as defendant. The Amended Fiorella
Action also alleged that BGII intended, in violation of Delaware law, to sell
Bally Wulff without first seeking stockholder approval of the sale. The action
sought an order enjoining defendants from proceedings with, consummating or
closing the WMS Merger, or rescinding it if it closed; preventing the sale of
Bally Wulff without prior stockholder approval; declaring invalid BGII's
agreement to pay WMS a fee if the WMS Agreement is terminated by BGII in
certain circumstances; compelling an auction of BGII and the provision of due
diligence to Alliance; scheduling an immediate meeting of BGII stockholders;
and awarding compensatory damages. Alliance and BGII believe these lawsuits
are without merit and intend to vigorously defend these actions.

On September 14, 1995, a stockholders' class and derivative action was
commenced against Alliance by Richard Iannone, an Alliance stockholder, the
members of its current Board of Directors and certain of its former directors
in Federal District Court in Nevada asserting, among other matters, that
Alliance has wasted corporate assets in its efforts to acquire BGII by, among
other things, agreeing to onerous and burdensome financing arrangements that
threaten Alliance's ability to continue as a going concern and that Alliance
had made false and misleading statements and omissions in connection with that
effort by failing to disclose the need to refinance an additional $53 million
of existing BGII indebtedness, by failing to disclose how Alliance would
recapitalize the indebtedness of a combined Alliance/BGII and by failing to
disclose the leading role played by Richard Rainwater in Alliance's efforts to
acquire control of BGII which, given assurances made by Alliance to gaming

184
<PAGE>

regulators in Nevada that the unlicensed Rainwater would not play an active
role in the management of BGII, could expose Alliance to suspension or
revocation of its Nevada gaming license. In addition, the stockholder action
against Alliance alleges that (i) Alliance substantially inflated its results
of operations by selling gaming machines at inflated prices in exchange for
promissory notes (without any down payment) which Alliance knew could not be
paid in full but which Alliance nevertheless recorded at full value, (ii)
Alliance doctored reports sent to its route customers and (iii) the directors
of Alliance had caused Alliance to engage in self-dealing transactions with
certain directors which resulted in the exchange of Alliance assets for assets
and services of vastly lesser value. On September 21, 1995, a United States
magistrate denied the plaintiffs' request for expedited discovery, stating the
Iannone was not an adequate representative and was not likely to succeed on
the merits. On October 4, 1995, the defendants filed a motion to dismiss the
action. On December 18, 1995, the plaintiff filed an amended shareholder
derivative complaint. The plaintiff is no longer asserting any claims.

On October 23, 1995, WMS instituted a suit in New York State Court against
BGII for BGII's failure to pay $4.8 million upon termination of the WMS
Agreement. BGII believes this lawsuit to be without merit and intends to
vigorously defend this action. On November 22, 1995, BGII answered the
complaint and brought counterclaims against WMS alleging that WMS repudiated
and breached the WMS Agreement by, among other things, failing to act in good
faith toward the consummation of the WMS Merger, advising BGII that it would
not perform as agreed but would impose new conditions on the WMS Merger,
acting in excess of its authority and undermining the ability of BGII to
perform the WMS Agreement. Pursuant to the Merger Agreement, Alliance has
agreed to indemnify BGII against such a claim under certain circumstances. See
"Certain Provisions of the Merger Agreement--Expenses and Termination Fees".

In June 1995, BEC asserted that a certain agreement between BEC and BGII
(the "Noncompete Agreement") prohibits the use by BGII of the tradename
"Bally" if it is merged with a company that is in the casino business within
or without the United States and operates such business prior to January 8,
1999. BGII believes such claim is entirely without merit since the restriction
referred to expires on January 8, 1996 and in any event does not relate to the
use of the "Bally" tradename, which is covered by the License Agreement. The
restriction in the Noncompete Agreement will not have any impact on the
combined company after the Merger since the effective time of the Merger
contemplates a closing of the Merger after the restriction in the Noncompete
Agreement lapses. BEC has not reasserted this position since it was informed
by BGII in July 1995 that the restriction lapses on January 8, 1996.
Consequently, BGII believes BEC has determined not to contest BGII's position.

BEC has also asserted that its permission is required for use of the "Bally"
tradename by any entity other than BGII and that a merger between BGII and
another company would violate the terms of the License Agreement. BGII has
denied these claims and believes that the surviving company in the Merger will
be permitted to use the "Bally" tradename in accordance with the terms of such
License Agreement. BGII believes that no breach of such License Agreement is
caused by the Merger and the use of the "Bally" tradename by the surviving
corporation. In a letter dated November 9, 1995, BEC reasserted its position.
On November 20, 1995, Alliance, the Merger Subsidiary and BGII commenced an
action against BEC in Federal District Court in Delaware seeking a declaratory
judgment, among other things, that the surviving company in the Merger will be
permitted to use the "Bally" tradename in accordance with the terms of the
License Agreement, and seeking injunctive relief (the "Alliance Action"). On
November 28, 1995, BEC commenced an action against BGII, Bally Gaming, Inc.,
Alliance and the Merger Subsidiary in Federal District Court in New Jersey to
enjoin the defendants from using the "Bally" tradename (the "BEC Action"). The
BEC Action alleges that BGII's continued use of the tradename after the Merger
will (1) constitute a prohibited assignment of BGII's rights to use the
tradename and (2) exceed the scope of the license granted to BGII because BGII
will be under the control of Alliance. Also on November 28, 1995, BEC filed a
motion to dismiss, transfer to New Jersey, or stay the Alliance Action pending
resolution of the BEC Action. On December 15, 1995, BEC filed a motion for a
preliminary injunction in the BEC Action. At a hearing on January 17, 1996,
the court declined to issue a preliminary injunction, but held BEC's motion in
abeyance pending the defendants' motion to dismiss and for summary judgment,
which the defendants had filed on December 26, 1995. BGII, Bally Gaming, Inc.,
Alliance

185
<PAGE>

and the Merger Subsidiary intend to vigorously defend their position in these
actions. However, there can be no assurance that BEC will not be successful in
its action to prohibit the surviving corporation in the Merger from using the
"Bally" tradename. The loss of the "Bally" tradename may have a material
adverse effect on the gaming machine operations of the surviving corporation
in the Merger.

On February 16, 1996, BGII received notice from BEC alleging that BGII had
violated the License Agreement by, among other things, granting to Marine
Midland a security interest in general intangibles. In such notice, BEC also
stated that as a result of the foregoing, it was immediately terminating the
License Agreement. BGII does not believe that it has violated the terms of the
License Agreement and BGII will defend its position against BEC's claims.

In 1994, after an intensive federal investigation of Gaming's former
Louisiana distributor, eighteen individuals were indicted on charges of
racketeering and fraud against Gaming and the Louisiana regulatory system.
Among those indicted were the former distributor's stockholders, directors,
employees and others alleged to be associated with organized crime. Fifteen
entered pleas of guilty before trial and the remaining three were convicted in
October 1995. Gaming was never a subject or target of the federal
investigation.

Prior to the conclusion of the federal criminal case, BGII's activities with
regard to its former VLT distributor in Louisiana were the subject of
inquiries by gaming regulators and a report by the New Jersey Division of
Gaming Enforcement ("DGE") dated August 24, 1995. The New Jersey Casino
Control Commission ("CCC") has indicated that it will hold a hearing on the
matter, but no date has been set at this time. The New Jersey report makes no
specific recommendations for action by the CCC. The gaming authorities in
Ontario, Canada, who have investigated the matters, have issued a gaming
registration to the Company's subsidiary Bally Gaming, Inc. on February 8,
1996.

The DGE's report is similar in many respects to one prepared by the
President of the LEDGC in January 1995. Hearings on that report were held in
January, 1995 and on February 7, 1995 the Board of Directors of the LEDGC
found all of the allegations of its President's report to be without merit and
granted a license to BGII and has announced that it will continue to monitor
BGII's conduct in light of any further information disclosed as a result of
the trial of the eighteen defendants (all of whom have now plead or been found
guilty) and other regulatory proceedings. In November 1995, the operator of
the land based casino in New Orleans filed for bankruptcy reorganization and
ceased operations. That action resulted in the termination of funding for the
LEDGC regulatory operation and shortly thereafter, the Attorney General of
Louisiana took control of the agency and effectively closed its operations.
LEDGC's President and employees were dismissed. The foregoing occurred prior
to completion of review of the Company's pending application.

BGII believes that the information contained in the DGE's report does not
differ in any material respect from the prior report to the LEDGC the
conclusions of which were found to be without merit in February 1995. An
adverse determination by a gaming regulator in any jurisdiction could result
in the loss of BGII's ability to do business in that jurisdiction. Further
regulatory scrutiny in other jurisdictions would be likely to follow. BGII
would appeal any adverse finding, as was the case when BGII successfully
appealed the LEDGC President's decision in January, 1995.

Any company which acquires a controlling interest in BGII would have to meet
the requirements of all governmental bodies which regulate BGII's gaming
business. A change in the make-up of BGII's Board of Directors and management
would require the various gaming regulators to examine the qualifications of
the new board and management. The past conduct of management, which may be re-
examined in conjunction with hearings in New Jersey and Louisiana, would
normally not be a controlling factor in passing upon the suitability of a
successor group when that prior management group would no longer be in control
of BGII. Absent actual approval of the successor interests controlling BGII
after merger or other acquisition, there can be no assurances that
governmental authorities would give required approvals to any particular
persons or groups.

On September 25, 1995, BGII was named as a defendant in a class action
lawsuit filed in the United States District Court, District of Nevada, by
Larry Schreier on behalf of himself and all others similarly situated (the

186
<PAGE>

"plaintiffs"). The plaintiffs filed suit against the Company and approximately
45 other defendants (each a "defendant," and collectively the "defendants").
Each defendant is involved in the gaming business as either a gaming machine
manufacturer, distributor, or casino operator. The class action lawsuit arises
out of alleged fraudulent marketing and operation of casino video poker
machines and electronic slot machines. The plaintiffs allege that the
defendants have engaged in a course of fraudulent and misleading conduct
intended to induce people in playing their gaming machines based on a false
belief concerning how those machines actually operate as well as the extent to
which there is actually an opportunity to win on any given play. The
plaintiffs allege that the defendants' actions constitute violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and give rise to
claims of common law fraud and unjust enrichment. The plaintiffs are seeking
monetary damages in excess of one billion dollars, and are asking that any
damage awards be trebled under applicable federal law. BGII believes the
plaintiffs' lawsuit to be without merit and intends to vigorously defend these
actions.

187
<PAGE>

ELECTION OF ALLIANCE DIRECTORS

GENERAL

Alliance's Bylaws provide that the Board of Directors of Alliance will
consist of no fewer than three or more than nine directors, with the exact
number to be fixed by the Board of Directors. Alliance's Bylaws provide that
the Board of Directors of Alliance will be divided into three classes as
nearly equal in number as possible, with each class having a term of three
years. The Board of Directors of Alliance has fixed the number of directors at
seven, two of whom will be elected at the Annual Meeting. See "Stockholders
Agreement".

Christopher Baj and David Robbins have been nominated to serve for a term of
three years, each to serve until his respective successor shall have been
elected and shall qualify, and each has indicated his willingness to serve if
elected. Proxies received by the Alliance Board will be voted for Messrs. Baj
and Robbins. Although the Alliance Board does not anticipate that either
nominee will be unavailable for election, in the event of such occurrence the
proxies will be voted for such substitute, if any, as the Board of Directors
may designate.

The following table sets forth the names of, and certain information with
respect to, the two persons nominated by Alliance at the Meeting and each
other director of Alliance who will continue to serve as a director after the
Meeting.

<TABLE>
<CAPTION>
POSITIONS
CURRENTLY
DIRECTOR TERM HELD WITH
NOMINEES FOR DIRECTOR AGE SINCE EXPIRES ALLIANCE
--------------------- --- -------- ------- ---------
<S> <C> <C> <C> <C>
Christopher Baj.................... 36 N/A 1998 N/A
David Robbins(4)................... 36 1994 1998 Director
<CAPTION>
CONTINUING DIRECTORS
--------------------
<S> <C> <C> <C> <C>
Anthony DiCesare(2)(3)............. 33 1994 1996 Executive Vice
President--Development
and Director
Dr. Craig Fields(2)................ 49 1994 1997 Vice Chairman of the
Board
Steve Greathouse................... 45 1994 1997 President, Chief
Executive Officer and
Chairman of the Board
Joel Kirschbaum (3)................ 44 1994 1996 Director
Alfred H. Wilms (1)(2)(3)(4)....... 51 1983 1997 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Executive Committee
(3) Member of Nominating Committee
(4) Member of Compensation Committee

Anthony L. DiCesare was employed by KIC from April 1991 to July 1994 and
joined Alliance as Executive Vice President--Development and as a director in
July 1994. Prior to that time and following his graduation from business
school in 1989, he was employed as an associate at Wasserstein, Perella & Co.,
Inc., where he worked in the Mergers and Acquisitions group. Mr. DiCesare
graduated from Harvard College with an A.B. degree in economics in 1985 and
from the Harvard Business School, from which he obtained an M.B.A. degree, in
1989.

Dr. Craig Fields was appointed a director in October 1994 and became Vice
Chairman of the Alliance Board in March 1995. Dr. Fields was employed by the
U.S. Department of Defense Advanced Research Projects Agency from 1974 to
1990. He joined the Microelectronics and Computer Technology Corporation
("MCC") in 1990 as President and later became Chairman and CEO. He left MCC in
1994, and serves as director of two publicly traded corporations in addition
to Alliance, Ensco, Inc. and Projectavision, Inc.

188
<PAGE>

Steve Greathouse joined Alliance as President and Chief Executive Officer in
August 1994 and was appointed a director in October 1994. Mr. Greathouse, who
has held various positions in the gaming industry since 1974, served as the
President of Harrah's Casino Hotels Division of The Promus Companies from
September 1993 to July 1994, Inc. In this position, Mr. Greathouse had
responsibility for Harrah's resorts in Las Vegas, Laughlin, Reno, Lake Tahoe
and Atlantic City. From July 1991 to September 1993, Mr. Greathouse served as
President and Chief Operating Officer of Harrah's Southern Nevada, overseeing
the operations of Harrah's Las Vegas and Harrah's Laughlin. From 1990 to
September 1993, Mr. Greathouse served as Chief Operating Officer of Harrah's
Southern Nevada. From 1990 to July 1991, Mr. Greathouse served as Vice
President of Harrah's Southern Nevada. Mr. Greathouse is an active member and
has served as the Chairman of the Board of the Nevada Resort Association and
is currently Chairman of the Board of United Way of Southern Nevada. He has
also served as a member of the Board of Directors of the Las Vegas Convention
and Visitors Authority and on the Executive Committee of the Nevada
Development Authority. Mr. Greathouse is a graduate of the University of
Missouri.

Joel Kirschbaum was appointed a director in July 1994. Mr. Kirschbaum is the
sole stockholder, director and officer of KIC, which is the sole general
partner in Kirkland, and of GSI, the sole general partner in GSA. He has been
engaged in operating the businesses of KIC and Kirkland since January 1991
when KIC and Kirkland were established, and GSI and GSA since June 1993. Prior
to that time, he worked at Goldman, Sachs & Co. for 13 years, during the last
six of which he was a General Partner. When he established KIC and Kirkland,
Mr. Kirschbaum resigned his general partnership interest in Goldman, Sachs &
Co. and became a limited partner. Mr. Kirschbaum resigned his limited
partnership interest in Goldman, Sachs & Co. in November 1993. Mr. Kirschbaum
is a graduate of Harvard College and has a joint J.D./M.B.A. degree from
Harvard Law School and Harvard Business School.

Christopher Baj has provided financial and operational consulting services
to various clients since April 1987 to the present. From January 1993 to
December 1995, Mr. Baj was also employed as the senior manager of Stanley L.
Levin, CPA. From April 1987 to December 1992, Mr. Baj was employed as the
senior consultant at Levin, Callaghan & Nawrocki, CPA's. Mr. Baj is a
Certified Public Accountant and a graduate of the Bernard M. Baruch College of
the City University of New York.

David Robbins was appointed a director in July 1994. Mr. Robbins has been an
attorney with O'Sullivan, Graev & Karabell from July 1995 to present. From May
1993 to July 1995, Mr. Robbins was an attorney with Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel. From September 1984 to May 1993, Mr. Robbins was an
attorney at Cahill, Gordon & Reindel.

Alfred H. Wilms has served as a director of Alliance since November 1983. He
served as Chief Executive Officer of Alliance from December 1984 to July 1994
and as Chairman of the Board of Alliance from August 1986 to July 1994. From
1976 through 1989, Mr. Wilms served as President of Wilms Distributing
Company, Inc. and Wilms Export Company, N.V., a Belgian company engaged in the
distribution of amusement and gaming equipment. From 1971 through 1976, Mr.
Wilms held various positions with Bally Continental, including positions in
research and development, marketing, sales, gaming operation and management,
and, from 1974 through 1979, he served as a director of Bally Manufacturing
Corp. Mr. Wilms is currently President and a director of Aqualandia, the
largest waterpark in Europe; President and a director of Gibsa, a real estate
company located in Spain; and a director of Jardin Parks, a real estate
company located in Spain. Mr. Wilms is a citizen and resident of Belgium.

See "Litigation Matters" for a discussion of certain litigation currently
pending against current directors.

STOCKHOLDERS AGREEMENT

189
<PAGE>

Gottlieb) and three persons designated by Mr. Wilms (Messrs. Wilms, David A.
Scheinman and Sidney Sosin). The Stockholders Agreement and related
transactions are more fully described in the Alliance Forms 8-K dated June 25,
1993, September 21, 1993 and July 14, 1994 and in its Information Statement
dated June 29, 1994. On October 20, 1994, the Stockholders Agreement was
amended to reconfigure the Board of Directors of Alliance to consist of four
persons designated by KIC (Messrs. Kirschbaum, DiCesare, Robbins and
Gottlieb), one person designated by Mr. Wilms (Mr. Wilms) and two new
directors designated by a majority of the Board of Directors of Alliance. The
Stockholders Agreement obligates Mr. Wilms to vote his shares for such persons
nominated by KIC. On October 20, 1994 Mr. Greathouse and Dr. Fields were
appointed to the Board to fill vacancies created upon the resignation of
Messrs. Scheinman and Sosin. As amended, the Stockholders Agreement also
provides that Mr. Wilms may designate two persons (currently Messrs. Scheinman
and Sosin) (the "Advisors") who will be observers of, and advisors to, the
Board of Directors and who will be entitled to attend all of the Alliance
Board of Directors' meetings and receive all information furnished to members
of the Board. Mr. Wilms and/or at least one Advisor will be entitled to attend
all meetings of the committees of Alliance's and its subsidiaries' boards of
directors. In addition, Mr. Wilms is contractually obligated until September
21, 1997 to vote his shares of Alliance Common Stock in favor of four nominees
of KIC to the Alliance Board.

MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES

During the fiscal year ended June 30, 1995, the Board of Directors of
Alliance held 22 meetings. All directors attended at least 75 percent of the
aggregate of all meetings of the Board of Directors of Alliance and of all
committees on which such person served during such period.

Executive Committee. The Executive Committee of the Board of Directors is
presently comprised of Messrs. Fields (Chairman), DiCesare and Wilms. The
Executive Committee may exercise the powers of the full Board of Directors in
the management of the business and affairs of Alliance. The Executive
Committee did not meet during the fiscal year ended June 30, 1995.

Audit Committee. The Audit Committee of the Board of Directors is presently
comprised of Messrs. Robbins (Chairman) and Wilms. The functions of the Audit
Committee include reviewing and making recommendations to the Board of
Directors with respect to the engagement or re-engagement of an independent
accounting firm to audit Alliance's financial statements for the then current
fiscal year; the policies and procedures of Alliance and management in
maintaining Alliance's books and records and furnishing information necessary
to the independent auditors; the adequacy and implementation of Alliance's
internal controls, including the internal audit function and the adequacy and
competency of the related personnel; and such other matters relating to
Alliance's financial affairs and accounts as the Committee may in its
discretion deem desirable. The Audit Committee met three times during the
fiscal year ended June 30, 1995.

Nominating Committee. The Nominating Committee of the Board of Directors of
Alliance is presently comprised of Messrs. Kirschbaum (Chairman), DiCesare and
Wilms. This Committee advises and makes recommendations to the Board on all
matters concerning the selection of candidates as nominees for election as
directors. The Committee did not meet during the last fiscal year. For the
immediate future, nominations to the Board of Directors are expected to be
made pursuant to the Stockholders Agreement. See "Stockholders Agreement."

Compensation Committee. The Compensation Committee of Alliance is presently
comprised of Messrs. Robbins and Wilms. This Committee makes recommendations
concerning the compensation of Alliance's executive officers. The Compensation
Committee met three times during the fiscal year ended June 30, 1995 in
executive session or in conjunction with the entire Alliance Board.

Steve Greathouse, Chairman of the Board, has also served as President and
Chief Executive Officer of Alliance since August 1994. Anthony DiCesare has
held the position of Executive Vice President--Development since July 1994.
Alfred Wilms served as Chief Executive Officer of Alliance from December 1984
to July 1994.

190
<PAGE>

No other member of Alliance's Board of Directors was an officer or employee of
Alliance or any subsidiary during the fiscal year ended June 30, 1995 or is a
former officer of Alliance or any subsidiary.

Since July 1, 1994, certain directors have been involved in transactions in
which Alliance was a party and in which the amount involved exceeded $60,000.
See "Certain Relationships and Related Transactions of Alliance".

The compensation of directors is described under "Executive Compensation--
Compensation of Directors".

LIMITATION ON LIABILITY

Article VI of Alliance's Articles of Incorporation limits the liability of
Alliance's directors and officers. It provides that a director or officer of
Alliance shall not be personally liable to Alliance or its stockholders for
monetary damages for breach of fiduciary duty as a director or officer, except
for liability (i) for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law or (ii) for the payment of dividends in
violation of Section 78.300 of the NGCL. It also provides that any repeal or
modification of the foregoing provision by the stockholders of Alliance shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of Alliance existing at the time
of such repeal or modification.

COMPLIANCE WITH SECTION 16(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires Alliance's directors and
executive officers, and persons who own more than ten percent of a registered
class of Alliance's equity securities ("Insiders"), to file with the
Commission initial reports of ownership and reports of changes in ownership of
Alliance Common Stock. Insiders are required by the Commission's regulations
to furnish Alliance with copies of all Section 16(a) reports filed by such
persons. To Alliance's knowledge, based solely on its review of the copies of
such reports furnished to Alliance and written representations from certain
Insiders that no other reports were required, during the fiscal year ended
June 30, 1994 all Section 16(a) filing requirements applicable to Insiders
were complied with, except that Mr. Wilms' year-end report on Form 5 was filed
late.

191
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or to be paid by
Alliance to Alliance's chief executive officer and its four other most highly
compensated executive officers receiving over $100,000 per year for services
rendered in all capacities to Alliance during the fiscal year ended June 30,
1995 (the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE*

<TABLE>
<CAPTION>
FISCAL ANNUAL COMPENSATION
YEAR ----------------------------------- LONG-TERM
NAME AND ENDING OTHER ANNUAL COMPENSATION ALL OTHER
PRINCIPAL POSITION JUNE 30, SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
------------------ -------- -------- ---------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Steve Greathouse (2).... 1995 $338,462 $1,312,500 -- 500,000 $4,638
President, Chairman of
the 1994 -- -- -- -- --
Board and Chief 1993 -- -- -- -- --
Executive Officer
Shannon L. Bybee (3).... 1995 180,577 -- (4) -- 13,398
Executive Vice
President-- 1994 271,154 400,000(5) (4) 315,000 20,588
Government Affairs 1993 -- -- -- -- --
John W. Alderfer........ 1995 228,756 -- (4) 150,000 19,127
Senior Vice President, 1994 222,137 50,000 (4) -- 19,622
Treasurer and Chief 1993 164,615 -- (4) -- 21,066
Financial Officer
Robert L. Miodunski..... 1995 175,000 75,000(6) (4) -- 4,816
Senior Vice President-- 1994 47,115 15,000(5) (4) 85,000 807
Nevada Route Operations 1993 -- -- (4) -- --
Robert L. Saxton........ 1995 175,000 35,000 (4) -- 5,988
Vice President--Casino 1994 123,077 15,000 (4) 110,000 5,723
Operations 1993 106,346 15,000 (4) -- 7,283
</TABLE>
- --------
* As used in the tables provided under the caption "Executive Compensation,"
the character "--" is used to represent "zero."
(1) "All Other Compensation" includes (i) contributions made by Alliance to
Alliance's Profit Sharing 401(k) Plan in the amounts of $0, $924, $1,744,
$0 and $202 for 1995 on behalf of Mr. Greathouse, Mr. Bybee, Mr. Alderfer,
Mr. Miodunski and Mr. Saxton, respectively, and (ii) payments made by
Alliance in the amounts of $4,638, $12,474, $17,383, $4,816 and $5,786 for
1995 on behalf of Mr. Greathouse, Mr. Bybee, Mr. Alderfer, Mr. Miodunski
and Mr. Saxton, respectively, in connection with their health, life and
disability insurance.
(2) Mr. Greathouse joined Alliance as President and Chief Executive Officer in
August 1994 and assumed the position of Chairman of the Board of Directors
in March 1995.
(3) Mr. Bybee joined Alliance in July 1993 as President and Chief Operating
Officer. On July 15, 1994, he assumed the role of Executive Vice
President--Government Affairs.
(4) The aggregate amount of such compensation to be reported herein is less
than the lesser of either $50,000 or 10 percent of the total annual salary
and bonus reported for the named executive officer.
(5) The cash bonus attributable to fiscal 1994 was paid in the first quarter
of fiscal 1995.
(6) The cash bonus attributable to fiscal 1995 was paid in the first quarter
of fiscal 1996.

192
<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table relates to options granted during the fiscal year ended
June 30, 1995:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
---------------------------------------------- ASSUMED ANNUAL RATES
OF STOCK
% OF TOTAL PRICE APPRECIATION FOR
GRANTED OPTION TERMS
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ------- --------------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steve Greathouse........ 250,000 11.12% $5.750 7/25/04 $ 905,000 $ 2,290,000
83,333(1) 3.71% 1.500 -- -- 1,279,995
83,333(1) 3.71% 1.500 -- -- 1,279,995
83,334(1) 3.71% 1.500 -- -- 1,280,010
Shannon L. Bybee........ -- -- -- -- -- --
John W. Alderfer........ 150,000 6.67% 5.875 2/22/03 554,250 1,404,750
Robert L. Miodunski..... -- -- -- -- -- --
Robert L. Saxton........ -- -- -- -- -- --
</TABLE>
- --------
(1) Grant of warrants to purchase up to 250,000 shares of Alliance Common
Stock which vest one year after the grant date and in three equal tranches
when the market price of the Alliance Common Stock reaches $11, $13 and
$15 per share, respectively.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES

The following table relates to options exercised during the fiscal year
ended June 30, 1995 and options outstanding at June 30, 1995:

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JUNE 30, 1995 JUNE 30, 1995
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steve Greathouse........ -- -- -- 500,000 -- $3,031,250
Shannon L. Bybee........ -- -- 105,000 210,000 -- --
John W. Alderfer........ -- -- 87,000 150,000 $527,438 909,375
Robert L. Miodunski..... -- -- 17,000 68,000 -- --
Robert L. Saxton........ 6,000 $34,050 46,000 92,000 278,875 557,750
</TABLE>

COMPENSATION OF DIRECTORS

Directors of Alliance who are also employees are not separately compensated
for their services as directors. Fee arrangements with other Directors of
Alliance are presently as follows: (i) Mr. Kirschbaum, $250,000 per year for
all services as a director and member of the Nominating Committee; (ii) Dr.
Fields, $250,000 per year for all services as Vice Chairman of the Board and
Chairman of the Executive Committee; (iii) Mr. Wilms, $150,000 per year for
all services as a director and member of various committees; and (iv) Mr.
Robbins, $35,000 per year for all services as a director and member of various
committees. Directors are also reimbursed for their reasonable out-of-pocket
expenses incurred on company business. From time to time in the past,
directors have also been provided with stock options.

EMPLOYMENT AND SEVERANCE ARRANGEMENTS

Alliance has agreed to employ Mr. Greathouse for a term of three years at a
base salary of $400,000, plus a bonus to be determined by the Board of
Directors. Mr. Greathouse's first year bonus was determined to be no less than
$200,000, but has not yet been paid. In addition, Mr. Greathouse received
(i) 250,000 shares of Alliance Common Stock, (ii) warrants to purchase 250,000
shares of Alliance Common Stock on terms substantially similar to the warrants
issued to GSA in September 1993 ("Incentive Warrants"), which Incentive
Warrants became exercisable in August 1995, and (iii) options to purchase
250,000 shares of Alliance Common Stock at $5.75 per share pursuant to
Alliance's 1991 Stock Option Plan ("Employee Options"), which Employee Options
will vest ratably over a three-year period. The exercisability of the
Incentive Warrants and the Employee Options may be accelerated in the event
that Joel Kirschbaum or Richard Rainwater sells or otherwise divests all of
their respective holdings (whether direct or indirect) in Alliance Common
Stock. Mr. Rainwater has announced that he intends to divest himself of his
holdings. In addition, if such an event occurs, Mr. Greathouse will
not be required to comply with the one-year "noncompete" restriction under his
employment agreement. The

193
<PAGE>

arrangement with Mr. Greathouse entitles him to receive coverage under
Alliance welfare plans and the reimbursement of certain expenses.

Alliance is party to an Amended Executive Severance Agreement with Shannon
L. Bybee (the "Severance Agreement"). The Severance Agreement provides, among
other things, that Mr. Bybee is entitled to be retained by Alliance for a
three-year period from the time of Mr. Greathouse's election as President in
August 1994 for an annual fee of $150,000 per year. In addition, Mr. Bybee
received options to purchase 315,000 shares of Alliance Common Stock at an
exercise price of $7.625 per share, vesting annually over a three-year period
commencing July 26, 1994, with an expiration date of July 26, 2003. Mr. Bybee
currently holds the positions of Executive Vice President -- Government
Affairs and Special Advisor to the Board of Directors.

Alliance is party to an Employment Agreement, dated February 23, 1993, with
Mr. Alderfer. Such Employment Agreement generally provides for the
preservation of Mr. Alderfer's employment for a period of three years
following certain changes in control of Alliance. During each year in this
three-year period, Mr. Alderfer, unless he is terminated by Alliance "for
cause" or resigns for other than "good reason" will be entitled to receive (i)
an annual salary not less than his then current annual salary, (ii) a bonus no
less than the lesser of (a) the bonus, if any, specified for him in Alliance's
incentive compensation program for fiscal 1994 or (b) the average of the
bonuses paid to him for the three immediately preceding years and (iii)
continuation of benefits under any employee benefit plan or bonus plan which
Alliance provides for its employees. In addition, Mr. Alderfer's Employment
Agreement provides that in the event he is terminated by Alliance other than
"for cause" or resigns from Alliance for "good reason," all options to
purchase Alliance Common Stock held by him will immediately vest. In May 1994,
Mr. Alderfer's Employment Agreement was amended to provide for a specified
additional bonus and for the calculation of future year increases in base
compensation. "Good reason" is defined as any downward alteration in position,
status or responsibility, a reduction in the base salary, bonus and/or
benefits of Mr. Alderfer or failure to increase his salary by 7% or more from
the preceding 12-month period or the relocation of his place of employment to
a location which is more than 20 miles from Las Vegas. "Cause" is defined as
willful failure to perform duties (other than incapacity caused by physical or
mental illness), denial of a gaming license, conviction of a crime
constituting a felony, dishonesty, embezzlement or common law fraud, which is
material and intended to result in personal enrichment. If, hypothetically,
Mr. Alderfer had been terminated other than "for cause" or had resigned for
other than "good reason," at December 1, 1995, Alliance would have been
obligated to pay approximately $467,272 under the severance provisions
described above, and all options held by him would have become immediately
exercisable.

Alliance is party to an Employment Agreement with Mr. Miodunski, terminating
in August 1998, which generally provides for a base salary of $200,000 per
year, participation in Alliance's compensation programs for corporate
officers, receipt of 85,000 stock options under the 1991 Plan to vest over a
five year period, and severance benefits in an amount equal to the lesser of
one year's base salary and the amount of salary he would have received for the
remainder of the employment term if Mr. Miodunski is terminated prior to
August 1998 without cause. "Cause" is defined as a conviction of any
misdemeanor involving moral turpitude, or any felony, misappropriation or
embezzlement from Alliance, denial or rejection of any gaming license or
permit or commission of any act that could reasonably be expected to result in
such denial or rejection, a breach of the non-competition clause or the
confidential information and non-disparagement clause or the persistent
failure or refusal after notice to comply with duties or obligations under the
Employment Agreement.

Alliance is party to an Employment Agreement with Ms. McIlwain which
generally provides for a two-year term from June 1, 1994 at a base salary of
$130,000 per year, participation in Alliance's compensation programs for
corporate officers, receipt of 60,000 stock options under the 1991 Plan to
vest over a five-year period, and severance benefits of one year's base salary
if Ms. McIlwain is terminated without cause. "Cause" is not defined in Ms.
McIlwain's Employment Agreement and neither the NGCL nor Alliance's By-laws
contain a specific definition thereof, and Alliance is not aware of any
judicial interpretation of such phrase in Nevada.

194
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year ended June 30, 1995, the Alliance Board established a
Compensation Committee. The initial members of the Compensation Committee were
Jay R. Gottlieb, Chairman, and Messrs. Robbins and Wilms. Upon Mr. Gottlieb's
resignation from the Alliance Board in May 1995, the Compensation Committee
was comprised of Mr. Robbins and Mr. Wilms.

The Compensation Committee was established to make recommendations to the
Board from time to time as to the compensation and bonus payable to Alliance's
Chief Executive Officer, including the establishment and implementation of
criteria for determining such compensation and bonus, and to make
recommendations to Alliance's executive officers regarding compensation for
other employees of Alliance. The Compensation Committee met three times during
the fiscal year ended June 30, 1995, either in executive session or in
conjunction with the entire Alliance Board. The Executive Committee made
various recommendations to the Alliance Board regarding the implementation of
performance criteria for determining the bonus of Alliance's chief executive
officer under his employment agreement with Alliance. In addition, in
consultation with the Chief Executive Officer, the Compensation Committee made
recommendations to the Alliance Board regarding salaries, option grants and
bonuses payable or issuable to officers of Alliance.

Since July 1, 1995, certain directors have been involved in certain
transactions in which Alliance was a party and in which the amount involved
exceeded $60,000. See "Certain Relationships and Related Transactions".

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Board Compensation Committee Report on Executive Compensation shall not
be deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement/Prospectus into any filing under the Securities
Act or under the Exchange Act, except to the extent that Alliance specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.

During fiscal 1995, the compensation recommendations made by the
Compensation Committee in respect of Alliance's executive officers were
influenced significantly by various factors, including the continued growth of
the gaming business and the need to attract and retain top-flight talent, the
pursuit of gaming opportunities in new and emerging jurisdictions and
Alliance's work on significant and material transactions, including Alliance's
pursuit of BGII. Accordingly, Alliance believes that the demand for management
with gaming industry experience has heightened significantly over the recent
term and that such competitive pressures constitute a significant factor in
making compensation decisions designed to attract, retain and motivate key
executives.

Although the Alliance Board's compensation decisions have been strongly
affected recently by competitive pressures as well as the need to retain
executive talent during Alliance's transition, the Alliance Board and the
Compensation Committee continue to believe that long-term executive
compensation tied to the creation of stockholder value should constitute a
significant component of the compensation to be earned by its executive
officers. Thus, it has been Alliance's policy to attempt to restrain base cash
compensation (subject to competitive pressures), while providing the incentive
for management to increase stockholder value by providing such officers with
significant numbers of market-price stock options that will not confer value
upon the officers unless and until Alliance's share price rises. The Alliance
Board expects that stock options will continue to constitute a significant
component of the compensation package provided to executive officers. In the
past, stock option grants to management have reflected an exercise price equal
to the trading price of Alliance Common Stock at the time of such grant. The
Alliance Board and the Compensation Committee presently expect that most if
not all future grants will be structured in a similar manner.

The Chief Executive Officer of Alliance during fiscal 1995 was Steve
Greathouse, who received base compensation of $400,000 and was entitled to a
bonus based upon the criteria set forth in his employment agreement, as
further articulated by the Executive Committee and the Compensation Committee.
Bonuses were also paid during fiscal 1995 to Robert L. Miodunski and Robert L.
Saxton.

195
<PAGE>

The Compensation Committee believes that cash bonuses are appropriate based
upon the current performance of Alliance's businesses compared to its internal
expectations and general business conditions. With the exception of the bonus
paid to Steve Greathouse referred to above, all bonuses paid to Alliance
executives during the fiscal year ended June 30, 1995 were based upon
performance.

Respectfully submitted,

David Robbins

Alfred H. Wilms

Members of Compensation Committee

196
<PAGE>

STOCK PERFORMANCE GRAPH

The following graph compares Alliance's cumulative total stockholder return
on its Alliance Common Stock (no dividends have been paid thereon) with the
cumulative total return, assuming reinvestment of dividends, of (i) The NASDAQ
Stock Market (US) and (ii) an index of peer companies that Alliance believes
are comparable in terms of their lines of business for the five fiscal years
in the period ending June 30, 1995. The presentation assumes $100 was invested
on June 30, 1990 (the last trading day prior to the end of Alliance's 1990
fiscal year). The peer company group consists of Jackpot Enterprises, Inc.,
Video Lottery Technology, Inc. and WMS.

[GRAPH APPEARS HERE]

<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ALLIANCE , NASDAQ INDEX AND PEER GROUP INDEX

<CAPTION>
Measurement period ALLIANCE NASDAQ PEER GROUP
(Fiscal year Covered) Index Index
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
Measurement PT -
1990 $ 100 $ 100 $ 100
1991 23.61 105.88 102.68
1992 90.28 127.2 202.21
1993 102.78 159.97 311.39
1994 58.33 161.56 187.52
1995 67.36 215.37 195.74
</TABLE>

197
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF ALLIANCE

In March 1992, Mr. Wilms committed to provide a $6.5 million five-year,
unsecured, subordinated loan (the "VSI Loan") to Alliance's majority
controlled subsidiary, VSI. As consideration for this commitment, Alliance
issued to Mr. Wilms five-year warrants to purchase 200,000 shares of Alliance
Common Stock at $2.50 per share and agreed to issue an additional warrant to
purchase 1,800,000 shares of Alliance Common Stock at a purchase price of
$2.50 per share upon funding of the full amount of such loan. Mr. Wilms is
entitled to one demand and unlimited piggyback registration rights covering
resale of the Alliance Common Stock underlying the warrants. The exercise
price of the warrants (the "Wilms Warrants") was determined based on an
analysis of, and fairness opinion with respect to, the transaction and on the
price range of the Alliance Common Stock during a period prior to announcement
of Alliance's expansion into Louisiana. The last reported sale price of the
Alliance Common Stock on the NASDAQ NMS on March 2, 1992 (the date Alliance
announced its expansion into Louisiana), March 24, 1992 (the date of the
fairness opinion referred to above) and March 27, 1992 (the date Mr. Wilms
committed to provide the $6.5 million loan to VSI), was $6.375, $8.625 and
$8.125 per share, respectively. The VSI loan, as amended, requires quarterly
interest and principal payments with an interest rate equal to 200 basis
points above the London InterBank Offered Rate, adjusted quarterly. One basis
point is equivalent to .01%. The VSI Loan is currently held by N.V.
Continental Trust Company ("CTC"), a Belgian corporation owned by Mr. Wilms
and members of his family.

At June 30, 1993, Mr. Wilms had funded $6.0 million of the VSI Loan. On
August 2, 1993, the Board unanimously approved (except that Mr. Wilms
abstained from voting) the execution of a new Loan and Security Agreement (the
"Amended VSI Loan") and amendment of the Wilms Warrants. CTC assumed Mr.
Wilms' rights and obligations under the Amended VSI Loan. The Amended VSI Loan
grants CTC a security interest in substantially all of VSI's present and
future personal property; provided, however, that CTC's security interest will
be subordinated to (i) purchase money indebtedness incurred by VSI in the
purchase from unaffiliated persons of inventory or equipment, including gaming
devices, computer equipment and furniture and fixtures, and (ii) working
capital loans to VSI from unaffiliated persons which are deemed in good faith
by VSI's Board of Directors to be necessary and beneficial to VSI in its
ordinary business activities (as defined in the Amended VSI Loan).

The Amended VSI Loan matures on September 1, 1998 and provides for quarterly
principal payments beginning September 1, 1993, rising from approximately
$280,000 to $360,000 over its term. CTC has funded the full $6.5 million
original principal amount of the Amended VSI Loan and Alliance has issued to
Mr. Wilms the warrant to purchase 1.8 million shares of Alliance Common Stock.
Pursuant to the Amended VSI Loan, the maturity date of the VSI loan was
extended one year and the terms of the Wilms Warrants were also amended to
extend their exercise period to September 1, 1998 and to provide for a
"cashless" exercise of the Wilms Warrants under certain circumstances. In a
cashless exercise, Mr. Wilms would receive the number of shares of Alliance
Common Stock of Alliance equal to that for which a Wilms Warrant is then being
exercised less that number of shares having a fair market value equal to the
exercise price for those shares covered by such exercise. In addition, Mr.
Wilms will be permitted to surrender all or part of CTC's note evidencing the
Amended VSI Loan in payment of the cash exercise price of the Wilms Warrants.
Mr. Wilms' one demand and unlimited piggyback registration rights with respect
to the shares deliverable under the Wilms Warrants were modified to conform
them procedurally with those in the Stockholders Agreement. No change was made
in the interest rate applicable to the Amended VSI Loan (from VSI Loan) or in
the number of shares or the exercise price of the Wilms Warrants. Alliance
agreed to pay Mr. Wilms out-of-pocket expenses incurred in connection with the
transactions with Kirkland, the restructuring of the VSI Loan and the related
documentation in an aggregate amount of $201,750. As of June 30, 1994 the
aggregate amount of the Amended VSI Loan outstanding was approximately $5.4
million.

Under the terms of the Letter Agreement, dated as of June 25, 1993, between
Kirkland, KIC, Alliance and, as to certain provisions, Mr. Wilms, and the
related Securities Purchase Agreement, dated as of September 21, 1994,
Alliance agreed, following the delivery of a Control Notice (which occurred on
September 21, 1993), to make payments to Kirkland at the rate of $350,000 per
year in reimbursement to Kirkland for its aggregate costs

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<PAGE>

and expenses as related to Alliance, until the first to occur of (i) September
21, 1995 and (ii) the Licensing Date (i.e. June 23, 1994). Such payments
aggregated approximately $272,000, $346,000 and $597,000 in fiscal years 1993
through 1995, respectively.

In connection with the closing of the Kirkland Investment and the related
Nevada licensing process (completed June 23, 1994), Alliance is obligated to
reimburse Kirkland for an aggregate of approximately $312,000 in out-of-pocket
expenses.

In connection with its retention of GSA for financial advisory services,
Alliance has issued to it 1,250,000 warrants to purchase Alliance Common Stock
with an exercise price of $1.50 as provided in the GSA Advisory Agreement.

David Robbins, a director of Alliance appointed to the Board of Directors in
July 1994, was employed until July 1995 by the law firm of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel which has represented Alliance in various
matters. The firm received fees from Alliance of $1,046,000 and $493,000 in
fiscal 1994 and 1995, respectively.

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<PAGE>

BGII PLANS AND AMENDMENTS

Approval of the Merger Agreement by BGII stockholders will constitute the
approval of the 1994 Stock Option Plan for Non-Employee Directors, as amended
(the "1994 Plan") and the approval of the amendments contemplated under
Section 2.1.3 of the Merger Agreement to BGII's 1991 Incentive Plan (the "1991
Plan") and 1991 Non-Employee Directors' Option Plan (the "1991 Directors
Plan") (the 1991 Plan, the 1991 Directors Plan and the 1994 Plan are referred
to herein collectively as the "BGII Plans"). The BGII Board of Directors
recommends a vote FOR the approval of such proposal. See "The Merger--BGII's
Reasons for the Merger; Recommendations of the BGII Board of Directors." The
1994 Plan and the amendments to each of the 1991 Plan and 1991 Directors Plan
provide that upon the Effective Time all stock options issued pursuant to such
BGII Plan shall vest and remain exercisable for the lesser of (i) the original
full exercise period, (ii) three years from the Effective Time or (iii) except
with respect to Messrs. Gillman, Kloss and Jenkins, the period ending on the
date the option holder's employment is terminated for cause or by such
employee voluntarily. In addition, provisions within BGII Plans which shorten
the period during which stock options may be exercised as a result of a
director ceasing to be a director, officer or employee, as the case may be, of
BGII shall be terminated and of no further force and effect and options shall
be exercisable for the consideration and at the price provided for in the
Merger Agreement. Each of the 1991 Plan, the 1991 Directors Plan, and
amendments thereto and the 1994 Plan is summarized below.

1991 INCENTIVE PLAN

The following is a summary of the material provisions of the 1991 Plan.

General. In November 1991, BGII adopted the 1991 Plan. Amendments No. 1 and
No. 2 to the Plan were subsequently adopted and all references herein to the
1991 Plan shall mean the 1991 Plan as amended by Amendments No. 1 and No. 2
thereto. The 1991 Plan was approved by stockholders and complies with Rule
16b-3 promulgated under the Exchange Act. The 1991 Plan provides for the grant
of stock options, stock appreciation rights ("SARs") and restricted stock to
employee directors who are not members of the Compensation and Stock Option
Committee of the Board of Directors (the "Committee"), officers, key employees
and consultants. Options granted under the 1991 Plan may be either Incentive
Stock Options ("ISOs") qualifying under Section 422 of the Code or Non-
Qualified Stock Options ("NQSOs"). The aggregate number of shares of BGII
Common Stock which may be delivered under the 1991 Plan and the 1991 Directors
Plan may not exceed 1,250,000 shares. No awards may be granted ten years after
the date of the adoption of the 1991 Plan. The 1991 Plan is designed to
encourage directors, officers, key employees and consultants of BGII and its
subsidiaries to acquire or increase their ownership of BGII Common Stock on
reasonable terms, and to foster in participants a strong incentive to put
forth maximum effort for the continued success and growth of BGII and its
subsidiaries, to aid in retaining individuals who put forth such efforts, and
to assist in attracting the best available individuals to BGII and its
subsidiaries in the future.

The Committee administers the 1991 Plan. The Committee has the full power
and authority, subject to the provisions of the 1991 Plan, to designate
participants, grant awards and determine the provisions applicable to each of
the awards. Each member of the Committee is a "disinterested person" within
the meaning of Rule 16b-3 under the Exchange Act.

The 1991 Plan may be amended at any time and from time to time by the Board
of Directors of BGII, but no amendment shall be made without the approval of
the stockholders of BGII if stockholder approval would be required under
Section 422 of the Code or Rule 16b-3 under the Exchange Act. The 1991 Plan
provides that no amendment of the 1991 Plan shall be made which would impair
any rights of any holder of any award without his consent.

Options and SARs. The terms of specific options are determined by the
Committee. Unless the Committee, in its discretion, determines otherwise, non-
qualified stock options will be granted with an option price equal to the fair
market value of the shares of BGII Common Stock to which the non-qualified
stock option relates on the date of grant. In no event may the option price
with respect to an ISO granted under the 1991 Plan be less than

200
<PAGE>

the fair market value of such BGII Common Stock to which the incentive stock
option relates on the date the incentive stock option is granted. However, in
the case of an ISO granted to a holder of shares representing at least 10% of
the total combined voting power of BGII, or of any subsidiary or parent
thereof (a "10% Stockholder"), the per share exercise price shall not be less
than 110% of the fair market value of the BGII Common Stock on the date of the
grant. Each option will be exercisable during the period or periods specified
in the option agreement, which shall not exceed ten years from the date of
grant. Additionally, ISOs must be exercised within ten years after the date of
the grant (within five years, if granted to a 10% Stockholder). In addition,
no participant may be granted ISOs to purchase more than $100,000 of BGII
Common Stock during any calendar year.

SARs are rights granted to participants to receive shares of BGII Common
Stock and/or cash in an amount equal to the excess of (i) the fair market
value of the shares of BGII Common Stock on the date the SARs are exercised
over (ii) the fair market value of the shares of BGII Common Stock on the date
the SARs were granted or, at the discretion of the Committee, the date the
option was granted, if granted in tandem with an option granted on a different
date.

Each option and SAR granted under the 1991 Plan may be exercisable for a
term of not more than ten years after the date of grant. ISOs and SARs granted
in tandem with ISOs may only be exercised when the fair market value of BGII
Common Stock is greater than the option price. Certain other restrictions
apply in connection with the timing of the exercise of certain awards.

Upon the exercise of an option or SAR, the option holder shall pay BGII the
exercise price plus, at the option of BGII, the amount of the required Federal
and state withholding taxes, if any. The 1991 Plan allows the participant to
pay the exercise price (i) in cash, previously owned shares of BGII Common
Stock or any combination thereof or (ii) pursuant to a cashless exercise
program in the event BGII elects to establish such a program. The 1991 Plan
also allows participants to elect to have shares withheld upon exercise for
the payment of withholding taxes.

Restricted Stock. Restricted stock awards are rights granted to an employee
to receive shares of BGII Common Stock without payment but subject to
forfeiture and other restrictions as set forth in the 1991 Plan. Generally,
the restricted stock awarded, and the right to vote such stock or to receive
dividends thereon, may not be sold, exchanged or otherwise disposed of during
the restricted period. In addition, restricted stock shall be forfeited to
BGII without notice and without consideration therefor immediately upon
termination of a participant's employment with BGII for any reason. The 1991
Plan provides that the restrictions applicable to an award of restricted stock
shall lapse with respect to one-third of the shares constituting such award on
each anniversary of the date of grant. The 1991 Plan provides that, at the
discretion of the Committee, BGII may pay cash to participants to insure that
the participant will receive the BGII Common Stock net of all taxes imposed on
such participant related to the receipt of BGII Common Stock and cash payments
under the 1991 Plan.

Change in Control. The 1991 Plan provides that in the case of a Change in
Control (as defined therein), each award granted under the 1991 Plan shall
terminate 90 days after the occurrence of such Change in Control, but, in the
event of any such termination: (a) the award holder shall have the right,
commencing at least five days prior to such Change in Control and subject to
any other limitation on the exercise of such award in effect on the date of
exercise, (i) to immediately exercise any options not in tandem with SARs in
full, without regard to any vesting limitations, to the extent they shall not
have been theretofore exercised, and (ii) to exercise, at any time after the
six month anniversary of the date of grant of the SAR (but subject to the
restrictions of paragraph (e)(3)(iii) of Rule 16b-3), any SARs or options in
tandem with SARs in full, without regard to any vesting limitations, to the
extent they shall not have been theretofore exercised, provided, however, that
no SAR or option in tandem with an SAR shall terminate prior to the end of the
first Window Period (as defined in the 1991 Plan) following the occurrence of
such Change in Control; and (b) all restrictions on restricted stock awards
shall immediately lapse and certificates for the affected shares and the cash
payment required by Section 12.2 of the 1991 Plan (if any payment is due)
shall be appropriately distributed.

Each option, SAR and option granted in tandem with an SAR outstanding at the
date of the Change in Control shall terminate, in all events, no later than
180 days after the occurrence of such Change in Control. The manner of
application of the foregoing provisions shall be determined by the Committee
in its sole discretion.

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<PAGE>

For purposes of the 1991 Plan, "Change in Control" means a change in control
of BGII of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act (as
in effect on the date the 1991 Plan was adopted by the Board), whether or not
BGII is then subject to such reporting requirement; provided, that, without
limitation, such a Change in Control shall be deemed to have occurred if:

(a) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) other than BEC is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of BGII representing 40% or more of the combined voting power of BGII's
then outstanding securities;

(b) BEC becomes the beneficial owner, directly or indirectly, of
securities of BGII representing less than 40% of the combined voting power
of BGII's then outstanding securities;

(c) during any period of two consecutive years (not including any period
prior to the adoption of the 1991 Plan) there shall cease to be a majority
of the Board comprised of Continuing Directors (as defined within the 1991
Plan); or

(d) (i) the stockholders of BGII approve a merger or consolidation of
BGII with any other corporation, other than a merger or consolidation which
would result in the voting securities of BGII outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least
80% of the combined voting power of the voting securities of BGII or such
surviving entity outstanding immediately after such merger or
consolidation, or

(ii) the stockholders of BGII approve a plan of complete liquidation of
BGII or an agreement for the sale or disposition by BGII of all or
substantially all BGII's assets.

Notwithstanding the foregoing, an event or occurrence (or a series of events
or occurrences) which would otherwise constitute a Change in Control under the
foregoing shall not constitute a Change in Control for purposes of the 1991
Plan if the Board, by majority vote, determines that a Change in Control does
not result therefrom; but only if Continuing Directors constitute a majority
of the directors voting in favor of such determination. Further, an event or
occurrence (or a series of events or occurrences) which would not otherwise
constitute a Change in Control under the foregoing shall be deemed to
constitute a Change in Control for purposes of the 1991 Plan if the Board, by
majority vote, determines that a Change in Control does result therefrom; but
only if Continuing Directors constitute a majority of the directors voting in
favor of such determination.

AMENDMENTS TO THE 1991 PLAN

Under Section 17 of the 1991 Plan, as currently in effect, at the Effective
Time, (a) all options outstanding under the 1991 Plan shall have previously
become fully vested and exercisable with respect to the total number of shares
of BGII Common Stock underlying each such option and (b) all options
outstanding under the 1991 Plan shall terminate not later than 180 days after
the Effective Time.

The Board of Directors has adopted Amendment No. 3 to the 1991 Plan which
provides that upon the Effective Time (a) all options outstanding under the
1991 Plan shall vest and remain exercisable until the earlier of (i) the
expiration of the original term of the option grant (without regard to Section
17 of the 1991 Plan or other Change of Control provisions within the
applicable award agreement), (ii) three years from the Effective Time or (iii)
except with respect to Messrs. Gillman, Kloss and Jenkins, in the event the
option holder's employment is terminated for cause (which is not defined in
the 1991 Plan) or such employee voluntarily terminates his employment, on the
date of such termination, (b) all provisions in the 1991 Plan and any
applicable award agreement which terminate the exercise period during which an
option would be exercisable by an optionee who is a director of BGII as a
result of such person ceasing to be a director, officer or employee, as the
case may be, of BGII shall be of no further force or effect and (c) each
outstanding option shall be exercisable, at the exercise price of such option,
for the Merger Consideration per share of BGII Common Stock; provided however,
that in the event the holder of such option (other than Messrs. Gillman,
Jenkins and Kloss)

202
<PAGE>

who is an employee of BGII immediately prior to the Effective Time has
delivered proper notice of election to BGII prior to the Effective Time, each
option held by such holder shall be exercisable for that number of shares of
Alliance Common Stock equal to the number of shares of BGII Common Stock
subject to such option at an exercise price equal to the Alliance Average
Trading Price. If approved by stockholders, Amendment No. 3 would become
effective upon the Effective Time. The foregoing summary of the material
provisions of Amendment No. 3 to the 1991 Plan should be read in conjunction
with, and is qualified in its entirety by, reference to the complete text of
Amendment No. 3 as set forth in Annex III to this Proxy Statement/Prospectus.
Stockholder approval of the Amendment is required under Rule 16b-3.

Federal Income Tax. No income will be recognized by an optionee at the time
a NQSO is granted. Ordinary income, subject to withholding, generally will be
recognized by an optionee at the time a NQSO is exercised in an amount equal
to the excess of the fair market value on the exercise date of the shares
issued to the optionee over the option price. Gain or loss on a subsequent
disposition of the shares will be capital gain or loss assuming that the stock
is held as a capital asset (i.e., generally for investment purposes) and any
such capital gain or loss will be long-term capital gain or loss if the shares
are held for more than one year. BGII will be entitled to a deduction for
federal income tax purposes at the same time and in the same amount as the
amount included in income by the optionee with respect to his NQSO, subject to
the usual rules as to reasonableness of compensation, the requirement that
BGII satisfy certain withholding and/or reporting obligations, and, if
applicable, the limitations of Code Section 162(m), described below.

No ISOs have been issued under the 1991 Plan, and BGII does not intend to
issue any ISOs under the 1991 Plan in the future.

Code Section 162(m) generally provides that the annual deduction available
to a publicly-held corporation with respect to applicable remuneration paid to
certain highly compensated employees ("covered employees") is limited to
$1,000,000 (reduced by the amount of any compensation which is not deductible
because it constitutes an "excess parachute payment" within the meaning of
Code Section 280G). Compensation payable pursuant to plans or arrangements
existing during the period during which the company was not publicly-held are,
for a certain period (the "Reliance Period"), not subject to the $1,000,000
deduction limitation if certain requirements are satisfied. Thus, compensation
payable under options granted within the Reliance Period under a plan subject
to this transition rule is not subject to the $1,000,000 deduction limitation.
The Reliance Period ends on the earlier of certain dates, including the date
that the plan or arrangement is materially modified (i.e., modified to
increase compensation). Qualified performance-based compensation, including
the compensation element of a stock option granted with an exercise price
equal to the fair market value of the stock on the date of grant under a plan
satisfying certain requirements, also is exempt from the $1,000,000 deduction
limitation. BGII believes that Amendment No. 3 will not constitute a material
modification of the 1991 Plan (which was in existence during the period prior
to which BGII became publicly held). However, if it were determined that the
adoption of Amendment No. 3 constitutes a material modification of the 1991
Plan and the options thereunder, then compensation relating to the options
issued thereunder may be subject to the $1,000,000 deduction limitation,
because the options would be treated as being reissued with an exercise price
lower than the fair market value of the underlying stock on the date of grant
of the options.

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<PAGE>

BENEFITS TABLE

Set forth below is a table disclosing the options granted under the 1991
Plan currently held by the individuals identified:

<TABLE>
<CAPTION>
DOLLAR
NAME AND PRINCIPAL POSITIONS: VALUE(1) OPTIONS
----------------------------- -------- -------
<S> <C> <C>
Richard Gillman......................................... 0 150,000
Chairman of the Board and Chief Executive Officer
Hans Kloss.............................................. 0 75,000
President and Chief Operating Officer BGII and
Managing Director of Bally Wulff
Neil E. Jenkins......................................... 0 75,000
Executive Vice President and Secretary
Scott Schweinfurth...................................... 0 30,000
Senior Vice President, Chief Financial Officer
and Treasurer
Robert Conover.......................................... 0 35,000
President, Bally Systems Division
All Executive Officers as a Group....................... $ 0 365,000
All Current Non-employee Directors...................... 0 0
All Employees including Officers who are not Executive
Officers............................................... $ 0 502,500
</TABLE>
- --------
(1) Based on the difference between the exercise price of such options and the
closing price of BGII Common Stock on February 16, 1996 of $7.75.

REASONS AND RECOMMENDATION

The Board of Directors has adopted Amendment No. 3 to the 1991 Plan and
recommends its adoption by the stockholders of BGII. The purpose of the
Amendment is to allow the participants in the 1991 Plan the opportunity to
benefit from the Merger by allowing the exercise of their options, which, at
the Effective Time, shall represent options to purchase Merger Consideration,
or upon election, Alliance Common Stock. In general, the effect of the
amendment to the 1991 Plan would change (i) the length of the relevant time
period in which an option holder would be permitted to exercise his options,
(ii) the date of commencement of such time period which would change from the
180 day period following BGII stockholder approval of the Merger to the three
year period following the Effective Time, and (iii) the consideration for
which and the price at which the option may be exercised. The terms of
Amendment No. 3 were adopted to give employees a fair opportunity to exercise
their options after the Merger and to provide employees with the option of
electing to retain the ability to participate in any growth of BGII through
ownership of Alliance Common Stock. Assuming that employees do not elect to
receive Alliance Common Stock in lieu of Merger Consideration upon exercise of
their options, the value received upon exercise of an option under the 1991
Plan is $11.70, which is the value of the per share Merger Consideration as
well as the value to be received on a per share basis under the 1991 Directors
Plan and 1994 Plan (assuming that the Alliance Common Stock is trading at the
Alliance Average Trading Price).

1991 NON-EMPLOYEE DIRECTORS PLAN

The following is a summary of the material provisions of the 1991 Directors
Plan.

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<PAGE>

General. In November 1991, BGII adopted the 1991 Directors Plan. Amendments
No. 1 and No. 2 to the 1991 Directors Plan were subsequently adopted and all
references herein to the 1991 Directors Plan shall mean the 1991 Directors
Plan as amended by Amendment No. 1 and No. 2 thereto. The 1991 Directors Plan
was approved by the stockholders of BGII and complies with Rule 16b-3. The
1991 Directors Plan provides for the grant of non-qualified stock options to
non-employee directors of BGII. The aggregate number of shares of BGII Common
Stock which may be delivered under the 1991 Plan and the 1991 Directors Plan
may not exceed 1,250,000 shares. The 1991 Directors Plan is designed to enable
BGII to secure non-employee persons of requisite business experience to serve
on the Board of Directors of BGII, motivate non-employee directors to enhance
future growth of BGII by furthering their identification with the interests of
BGII and its stockholders, and assist in retaining non-employee directors.

The 1991 Directors Plan may be amended at any time and from time to time by
the Board of Directors of BGII, but no amendment shall be made without the
approval of the stockholders of BGII if stockholder approval would be required
under Section 422 of the Code or Rule 16b-3 under the Exchange Act. The 1991
Directors Plan provides that no amendment of the 1991 Directors Plan shall be
made which would impair any rights of any holder of any award without his
consent.

Options. Under the 1991 Directors Plan, each non-employee director who was a
member of the Board on the closing date of BGII's initial public offering
received an option to purchase 25,000 shares of BGII Common Stock effective on
the date of such closing, and each director who is elected to the Board after
such date is granted an option to purchase 25,000 shares of BGII Common Stock
effective as of the date of his election. The exercise price of the shares of
BGII Common Stock subject to options granted under the 1991 Directors Plan
shall be the fair market value of the shares of BGII Common Stock on the date
of grant. The 1991 Plan provides that an option grant shall vest and become
exercisable with respect to one-third of the underlying shares of BGII Common
Stock on each anniversary of the date of grant. Options terminate when the
holder ceases to be a director or ten years from the date of grant.

Upon the exercise of an option, the option holder shall pay BGII the
exercise price plus, at the option of BGII, the amount of the required Federal
and state withholding taxes, if any. The 1991 Directors Plan allows the
participant to pay the exercise price (i) in cash, previously owned shares of
BGII Common Stock or any combination thereof or (ii) pursuant to a cashless
exercise program in the event BGII elects to establish such a program. The
1991 Directors Plan also allows participants to elect to have shares withheld
upon exercise for the payment of withholding taxes.

Change in Control. The 1991 Directors Plan provides that in the case of a
Change in Control, each award granted under the 1991 Directors Plan shall
terminate 90 days after the occurrence of such Change in Control, but, in the
event of any such termination, the award holder shall have the right,
commencing at least five days prior to such Change in Control and subject to
any other limitation on the exercise of such award in effect on the date of
exercise, to immediately exercise any options in full, without regard to any
vesting limitations, to the extent they shall not have been theretofore
exercised.

For purposes of the 1991 Directors Plan, "Change in Control" is defined as
described above in connection with the 1991 Plan.

Federal Income Tax. No income will be recognized by an optionee at the time
an option is granted. Ordinary income, subject to withholding, generally will
be recognized by an optionee at the time an option is exercised in an amount
equal to the excess of the fair market value on the exercise date of the
shares issued to the optionee over the option price. Gain or loss on a
subsequent disposition of the shares will be capital gain or loss assuming
that the stock is held as a capital asset (i.e., generally for investment
purposes) and any such capital gain or loss will be long-term capital gain or
loss if the shares are held for more than one year. BGII will be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as the amount included in income by the optionee with respect to his
option, subject to the usual rules as to reasonableness of compensation, the
requirement that BGII satisfy certain withholding and/or reporting
obligations, and, if

205
<PAGE>

applicable, the limitations of Code Section 162(m), described above under
"BGII Plans and Amendment--1991 Incentive Plan".

AMENDMENTS TO THE 1991 DIRECTORS PLAN

Under Section 13 of the 1991 Directors Plan, as currently in effect, at the
Effective Time, (a) all options outstanding under the 1991 Directors Plan
shall have previously become fully vested and exercisable with respect to the
total number of shares of BGII Common Stock underlying each such option and
(b) all options outstanding under the 1991 Directors Plan shall terminate not
later than 90 days after the Effective Time.

The Board of Directors has adopted Amendment No. 3 to the 1991 Directors
Plan which provides that upon the Effective Time (a) all options outstanding
under the 1991 Directors Plan shall vest and remain exercisable until the
earlier of (i) the expiration of the original term of the option grant
(without regard to Section 13 of the 1991 Directors Plan or other Change of
Control provisions within the applicable award agreement) or (ii) three years
from the Effective Time, (b) all provisions in the 1991 Directors Plan and any
applicable award agreement which terminate, or otherwise shorten the exercise
period during which an option would be exercisable by an optionee who is a
director of BGII as a result of such person ceasing to be a director, officer
or employee of BGII shall be of no further force or effect and (c) each
outstanding option shall be exercisable, at the exercise price of the option,
for the Merger Consideration per share of BGII Common Stock subject to the
option. If approved by stockholders, Amendment No. 3 would become effective
upon the Effective Time. The foregoing summary of the material provisions of
the 1991 Directors Plan should be read in conjunction with, and is qualified
in its entirety by, reference to the complete text of Amendment No. 3 as set
forth in Annex IV to this Proxy Statement/Prospectus. Stockholder approval of
the Amendment is required under Rule 16b-3.

BENEFITS TABLE

Set forth below is a table disclosing the options granted under the 1991
Directors Plan currently held by the individuals identified.

<TABLE>
<CAPTION>
DOLLAR
NAME AND PRINCIPAL POSITIONS VALUE(1) OPTIONS
---------------------------- -------- -------
<S> <C> <C>
Richard Gillman.......................................... $ 0 0
Chairman of the Board and Chief Executive Officer
Hans Kloss............................................... $ 0 0
President and Chief Operating Officer BGII and
Managing Director of Bally Wulff
Neil E. Jenkins.......................................... $ 0 0
Executive Vice President and Secretary
Scott Schweinfurth....................................... $0 0
Senior Vice President, Chief Financial Officer
and Treasurer
Robert Conover........................................... $ 0 0
President, Bally Systems Division
All Executive Officers as a Group........................ $ 0 0
All Non-Employee Directors as a Group.................... $ 0 100,000
All Employees, including Officers who are not
Executive Officers....................................... $ 0 0
</TABLE>
- --------
(1) Based on the difference between the exercise price of such options and the
closing price of BGII Common Stock on February 16, 1996 of $7.75.

206
<PAGE>

REASONS AND RECOMMENDATION

The Board of Directors has adopted Amendment No. 3 to the 1991 Directors
Plan and recommends its adoption by the stockholders of BGII. The purpose of
Amendment No. 3 is to provide the participants in the 1991 Directors Plan the
opportunity to benefit from the Merger by allowing the exercise of their
options, which, at the Effective Time, shall represent options to purchase
Alliance Common Stock. In general, the effect of the amendment to the 1991
Directors Plan would change (i) the length of the relevant time period in
which an option holder would be permitted to exercise his options, (ii) the
date of commencement of such time period which would change from the 90 day
period following BGII stockholder approval of the Merger to the three year
period following the Effective Time, and (iii) the consideration for which the
option may be exercised. The terms of Amendment No. 3 were adopted to give
non-employee directors a fair opportunity to exercise these options. The value
to be received upon exercise of an option under the 1991 Directors Plan is
$11.70, which is the value of the per share Merger Consideration as well as
the value to be received on a per share basis under the 1991 Plan (assuming
that employees do not elect to receive Alliance Common Stock in lieu of Merger
Consideration upon exercise of their options) and 1994 Plan.

1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, AS AMENDED

The following is a summary of the material provisions of the 1994 Plan. Such
summary should be read in conjunction with, and is qualified in its entirety
by, reference to the complete text of the 1994 Plan as set forth in Annex V to
this Proxy Statement/Prospectus.

General. On April 25, 1994, BGII adopted the 1994 Plan. The 1994 Plan was
subsequently amended in connection with the execution of the Merger Agreement.
All references herein to the 1994 Plan shall mean the 1994 Plan, as amended.
The 1994 Plan provides for the grant of non-qualified stock options to non-
employee directors. The aggregate number of shares of BGII Common Stock which
may be delivered under the 1994 Plan may not exceed 250,000 shares. The 1994
Plan is being submitted for stockholder approval in order to comply with Rule
16b-3. The 1994 Plan is designed to enable BGII to secure non-employee persons
of requisite business experience and ability to serve on the Board of
Directors of BGII and to motivate non-employee directors to exert their best
efforts on behalf of BGII, thus enhancing the value of BGII for the benefit of
BGII stockholders.

The 1994 Plan may be amended at any time and from time to time by the
Committee. The 1994 Plan provides that no amendment of the 1994 Plan shall be
made which would impair any rights of any holder of any award without his
consent.

Options. Under the 1994 Plan, each non-employee director who was a member of
the Board on the date of the adoption of the 1994 Plan received an option
exercisable to purchase 25,000 shares of BGII Common Stock effective on such
date, and each director who is elected to the Board after such date is granted
an option to purchase 25,000 shares of BGII Common Stock effective as of the
date of his election. The exercise price of the shares of BGII Common Stock
subject to options granted under the 1994 Plan shall be the fair market value
of the shares of BGII Common Stock on the date of grant. The 1994 Plan
provides that an option grant shall vest and become exercisable with respect
to one-third of the underlying shares of BGII Common Stock on each anniversary
of the date of grant. Options terminate when the holder ceases to be a
director or ten years from the date of grant.

Upon the exercise of an option, the option holder shall pay BGII the
exercise price plus, at the option of BGII, the amount of the required Federal
and state withholding taxes, if any. The 1994 Plan allows the participant to
pay the exercise price (i) in cash, previously owned shares of BGII Common
Stock or any combination thereof or (ii) pursuant to a cashless exercise
program in the event BGII elects to establish such a program. The 1994 Plan
also allows participants to elect to have shares withheld upon exercise for
the payment of withholding taxes.

Change in Control. For purposes of the 1994 Plan, "Change in Control" is
defined as described above in connection with the 1991 Plan. The 1994 Plan
provides that, except as described below, in the case of a Change

207
<PAGE>

in Control, each award granted under the 1994 Plan shall terminate 90 days
after the occurrence of such Change in Control, but, in the event of any such
termination, the award holder shall have the right, commencing at least five
days prior to such Change in Control and subject to any other limitation on
the exercise of such award in effect on the date of exercise, to immediately
exercise any options in full, without regard to any vesting limitations, to
the extent they shall not have been theretofore exercised.

The 1994 Plan provides that, notwithstanding the foregoing, at the Effective
Time (a) all options outstanding under the 1994 Plan shall vest and remain
exercisable until the earlier of (i) the expiration of the original term of
the option grant (without regard to Section 10 of the 1994 Plan or other
Change of Control provisions within the applicable award agreement), or (ii)
three years from the Effective Time, (b) all provisions in the 1994 Plan and
any applicable award agreement which terminate, or otherwise shorten the
period in which an option would be exercisable by an optionee who is a
director of BGII as a result of such person ceasing to be a director, officer
or employee of BGII shall be of no further force or effect and (c) each
outstanding option shall be exercisable, at the exercise price of the option,
for the Merger Consideration per share of BGII Common Stock subject to the
option.

208
<PAGE>

BENEFITS TABLE

Set forth below is a table disclosing the options granted under the 1994
Plan currently held by the individuals identified:

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS: DOLLAR VALUE(1) OPTIONS
----------------------------- --------------- -------
<S> <C> <C>
Richard Gillman.................................. $0 0
Chairman of the Board and
Chief Executive Officer
Hans Kloss....................................... $0 0
President and Chief Operating
Officer BGII and Managing Director of
Bally Wulff
Neil E. Jenkins.................................. $0 0
Executive Vice President
and Secretary
Scott Schweinfurth............................... $0 0
Senior Vice President, Chief Financial Officer
and Treasurer
Robert Conover................................... $ 0 0
President, Bally
Systems Division
All Executive Officers as a Group................ $0 0
All Non-Employee Directors as a Group............ $0 100,000
All Employees, including Officers who are not
Executive Officers............................... $0 0
</TABLE>
- --------
(1) Based on the difference between the exercise price of such options and the
closing price of BGII Common Stock on February 16, 1996 of $7.75.

REASONS AND RECOMMENDATION

The Board of Directors has adopted the 1994 Plan and recommends its adoption
by the stockholders of BGII. As stated above, the 1994 Plan when adopted by
the Board was designed to enable BGII to secure non-employee persons of
requisite business experience and ability to serve on the Board of Directors
of BGII and motivate non-employee directors to exert their best efforts on
behalf of BGII, thus enhancing the value of BGII for the benefit of BGII's
stockholders. Further, the 1994 Plan is designed to provide the participants
the opportunity to benefit from the Merger by allowing the exercise of their
options. The value to be received upon exercise of an option under the 1994
Plan is $11.70, which is the value of the per share Merger Consideration as
well as the value to be received on a per share basis under the 1991 Plan
(assuming that employees do not elect to receive Alliance Common Stock in lieu
of Merger Consideration upon exercise of their options) and 1991 Directors
Plan. In general, the effect of the relevant provisions of the 1994 Plan would
fix the length of the relevant time period in which an option holder would be
permitted to exercise his options as well as the date of commencement of such
time period to be the three year period following the Effective Time. The
Board considered all of the foregoing factors in approving the 1994 Plan.

209
<PAGE>

ELECTION OF DIRECTORS OF BGII

DIRECTORS/NOMINEES

Seven directors of BGII will be elected at the meeting, each to hold office
until the earlier of (x) the Effective Time or (y) the next Annual Meeting of
Stockholders of BGII and the qualification and election of their successors.
All nominees are presently directors of BGII. The entire Board of Directors of
BGII is comprised of seven members. During 1995, no director attended fewer
than 75% of the aggregate number of meetings of the Board of Directors, or a
committee thereof upon which he served.

Unless otherwise directed, all proxies (unless revoked or suspended) will be
voted for the nominees named below. If any nominee shall be unavailable for
election or upon election should be unable to serve, the proxies will be voted
for the election of such other person as shall be determined by the persons
named in the proxy in accordance with their judgment. BGII is not aware of any
reason why any nominee should become unavailable for election, or if elected,
should be unable to serve as a director.

<TABLE>
<CAPTION>
NAME POSITION WITH BGII AGE
- ---- ------------------ ---
<S> <C> <C>
Richard Gillman................ Chairman of the Board and Chief Executive 64
Officer
Hans Kloss..................... Director, President, Chief Operating 54
Officer, Managing Director of Bally Wulff
Automaten GmbH and Bally Wulff Vertriebs
GmbH
Neil E. Jenkins................ Executive Vice-President, Secretary and 46
Director
Charles C. Carella............. Director 62
James J. Florio................ Director 58
Lewis Katz..................... Director 54
Kenneth D. McPherson........... Director 61
</TABLE>

RICHARD GILLMAN has been Chairman of the Board and Chief Executive Officer
of BGII since August 1991 and was President of BGII from October 1991 to May
1993. Mr. Gillman was the President, Chief Operating Officer and a director of
BEC and held those positions from 1990 to January 1993. Mr. Gillman was also
Chairman of the Board and President of Bally's Park Place, Inc. and served as
such from 1979 to January 1993 and was President and Chief Operating Officer
of GNOC Corp. and served as such from 1987 to January 1993. Mr. Gillman is a
director/officer of Mascott Corp. Mr. Gillman was also a director of Bally's
Grand, Inc. from 1987 to 1991. On October 3, 1991, certain holders of debt of
Bally's Grand, Inc., a BEC subsidiary that holds its Nevada casinos, filed an
involuntary Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court in the
Southern District of New York. Each of Bally's Park Place, Inc. and GNOC Corp.
is a wholly-owned subsidiary of BEC. Prior to the filing of its Chapter 11
petition, Bally's Grand, Inc. was a subsidiary of BEC.

HANS KLOSS has been a Director of BGII since August 1991 and President and
Chief Operating Officer of BGII since May 1993. Mr. Kloss has been the
Managing Director of BGII's German subsidiaries, Bally Wulff Automaten GmbH
and Bally Wulff Vertriebs GmbH, since 1981 and has been employed by those
companies since 1970.

NEIL E. JENKINS has been a Director of BGII since August 1991 and Executive
Vice-President since October 1991. Mr. Jenkins was an Executive Vice-President
of BEC and held this position from June 1991 to December 1992. Mr. Jenkins was
also Secretary and General Counsel of BEC from 1985 to December 1992. Mr.
Jenkins is also a director of NextHealth, Inc.

CHARLES CARELLA has been a Director of BGII since June 1992. Mr. Carella is
the Senior Managing Partner and Chairman of the Executive Committee of the law
firm of Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein and has
been with such firm for more than the past five years. Mr. Carella is also a
director of Di Giorgio Corporation, Inc. a wholesale food sales concern and
distributor.

210
<PAGE>

JAMES J. FLORIO has been a Director of BGII since March 1994. Mr. Florio
served as Governor of New Jersey from 1990 through 1994 and was a member of
Congress from 1974 through 1990. Mr. Florio was a partner in the law firm
Mudge Rose Guthrie Alexander & Ferdon from January 1994 to September 1995. Mr.
Florio has been a partner at the law firm of Florio and Perucci since October
1995.

LEWIS KATZ has been a Director of BGII since September 1992. Mr. Katz is the
President of the law firm of Katz, Ettin, Levine, Kurzwell & Weber, P.A. and
has been with such firm for more than the past five years. Mr. Katz is also
the Chief Executive Officer of Kinney Systems, Inc., a regional parking
concern operating in several cities on the East Coast, and has held this
position since January 1991. Mr. Katz is also a director of F.P.A.
Corporation, a home building concern.

KENNETH D. MCPHERSON has been a Director of BGII since September 1992. Mr.
McPherson is Senior Lawyer and Chairman of the law firm Waters, McPherson,
McNeill, P.C. and has been with such firm for more than the past five years.
Since 1992, Waters, McPherson, McNeill, P.C. was provided legal services to
BGII and BGII plans to also retain the firm during 1996. Mr. McPherson is also
a director of Orange & Rockland Utilities.

There are no family relationships among any directors or executive officers
of BGII.

See "Litigation Matters" for a discussion of certain litigation currently
pending against current directors.

MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES

During the fiscal year ended December 31, 1995, the Board of Directors held
27 formal meetings and acted by written consent on 1 occasion. BGII's Board of
Directors currently has three standing committees: the Audit Committee, the
Compensation and Stock Option Committee, and the Nominating Committee.

Audit Committee. The Audit Committee currently is composed of directors
Carella and Florio, neither of whom is otherwise affiliated with BGII. The
general functions of the Audit Committee include selecting the independent
auditors (or recommending such action to the Board of Directors), evaluating
the performance of the independent auditors and their fees for services,
reviewing the scope of the annual audit with the independent auditors and the
results of the audit with management and the independent auditors, consulting
with management, internal auditors, if any, and the independent auditors as to
the systems of internal accounting controls, and reviewing the nonaudit
services performed by the independent auditors and considering the effect, if
any, on their independence. During fiscal 1995, the Audit Committee held 3
formal meetings.

Compensation and Stock Option Committee. The Compensation and Stock Option
Committee currently is composed of directors Katz and McPherson. The general
functions of the Compensation and Stock Option Committee include approval (or
recommendation to the Board of Directors) of the compensation arrangements for
senior management, directors and other key employees, review of benefit plans
in which officers and directors are eligible to participate, and periodic
review of the equity compensation plans of BGII and the grants under such
plans. The Compensation and Stock Option Committee is also responsible for
preparation of the Compensation Committee Report on Executive Compensation
(included in this Proxy Statement/Prospectus). During fiscal 1995, the
Compensation and Stock Option Committee held 2 formal meetings and acted by
unanimous written consent on 1 occasion.

Nominating Committee. The Nominating Committee currently is composed of
directors Carella, Katz and McPherson. The general functions of the Nominating
Committee include recommending to the Board of Directors nominees for election
as directors; recommending to the Board of Directors nominees to fill
vacancies and newly created directorships as they occur; and consideration of
the performance of incumbent directors in determining whether to recommend
their nomination for re-election. This committee does not currently solicit
nominees from stockholders or consider nominees of stockholders. During fiscal
1995, the Nominating Committee held no formal meetings.

211
<PAGE>

BGII EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION

EXECUTIVE OFFICERS

Information with respect to each executive officer of BGII who presently
serves as, and is nominated for re-election as, a director of BGII is set
forth under "Election of Directors of BGII--Directors/Nominees." Set forth
below are the names of the additional executive officers of BGII and certain
information concerning each of them.

<TABLE>
<CAPTION>
NAME POSITION WITH BGII AGE
---- ------------------ ---
<S> <C> <C>
Scott Schweinfurth............. Senior Vice-President, Chief Financial 42
Officer and Treasurer
Robert Conover................. President, Bally Systems Division 50
</TABLE>

SCOTT SCHWEINFURTH has been Senior Vice-President, Chief Financial Officer
and Treasurer of BGII since March 1995. Prior to joining BGII, Mr.
Schweinfurth was a partner at the accounting firm of Ernst & Young LLP and its
predecessor, Arthur Young & Company, from October 1988 and an employee of such
firm since September 1976.

ROBERT CONOVER is the President of the Bally Systems Division and has held
that position since November 1990. Mr. Conover also serves as Vice-President
and Chief Information Officer of BEC and has served as such since December
1992. Mr. Conover is also Senior Vice-President in charge of Management
Information Systems Operations at the BEC subsidiaries that operate casino
hotels, and has held that position since 1983. On October 3, 1991, certain
holders of debt of Bally's Grand, Inc., a BEC subsidiary that holds its Nevada
casinos, filed an involuntary Chapter 11 bankruptcy petition in the U.S.
Bankruptcy Court in the Southern District of New York. Prior to the filing of
its Chapter 11 petition, Bally's Grand, Inc. was a subsidiary of BEC.

There are no family relationships among any directors or executive officers
of BGII.

COMPLIANCE WITH EXCHANGE ACT

BGII's executive officers and directors are required under the Exchange Act
to file reports of ownership and changes in ownership with the Commission and
NASDAQ. Copies of those reports must also be furnished to BGII.

Based solely on a review of the copies of reports furnished to BGII and
written representations as to required reports, BGII believes that during the
preceding year all filing requirements applicable to executive officers and
directors have been complied with other than Mr. Schweinfurth's initial Form 3
which was filed late. No representation letters with respect to such filings
have been received by BGII from ten percent stockholders.

212
<PAGE>

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and each of the four most highly
compensated executive officers of BGII other than the Chief Executive Officer
for services rendered in all capacities to BGII and its subsidiaries during
the fiscal years ended December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS(2)
--------------------------- ---------------------
RESTRICTED
NAME AND PRINCIPAL STOCK OPTIONS/ ALL OTHER
POSITIONS: YEAR SALARY ($) BONUS ($) AWARDS ($) SARS (#) COMPENSATION ($)(3)
------------------ ---- ---------- --------- ---------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Richard Gillman......... 1995 $496,154 $ 0 $ 0 0 $ 0
Chairman of the Board
and 1994 $410,902 $130,000 $ 0 0 $ 0
Chief Executive Officer 1993 $471,155 $ 0 $ 0 0 $ 0
Hans Kloss.............. 1995 $358,787(4) $536,652(4) $ 0 0 $47,695(4)(7)
President and Chief
Operating 1994 $244,636(4) $630,066(4) $ 0 0 $60,979(4)(7)
Officer BGII and 1993 $238,020(4) $635,209(4) $812,500(5) 100,000(6) $46,780(4)(7)
Managing Director of
Bally Wulff
Neil E. Jenkins......... 1995 $261,038 $ 0 $ 0 0 $ 6,055(7)
Executive Vice President 1994 $285,545 $ 40,000 $ 0 0 $ 6,000(7)
and Secretary 1993 $241,846 $ 0 $ 0 0 $ 6,007(7)
Scott Schweinfurth...... 1995 $127,500 $ 30,000 $ 0 30,000 $50,000(8)
Senior Vice President, 1994 $ 0 $ 0 $ 0 0 $ 0
Chief Financial Officer 1993 $ 0 $ 0 $ 0 0 $ 0
and Treasurer
Robert Conover.......... 1995 $106,512(9) $ 50,000 $ 0 0 $ 0
President, Bally 1994 $ 84,009(9) $ 50,000 $ 0 0 $ 0
Systems Division 1993 $ 95,000(9) $ 40,000 $ 0 0 $ 0
</TABLE>
- --------
(1) The value of perquisites and other personal benefits, securities and other
property paid to or accrued for each of the named executive officers did
not exceed $50,000 or 10% of such officer's total reported salary and
bonus, and thus they are not included in the table.
(2) In addition to plans which provide restricted stock, stock options and
SARs, BGII maintains a long-term incentive plan under which performance
units are awarded. See "Long-Term Incentive Plan Awards".
(3) See "Long-Term Incentive Plan Awards" for awards granted to each of the
named executive officers pursuant to BGII's long-term incentive plan.
(4) Based on the average currency translation rate during 1995, 1994 and 1993
of 1 DM = $.6987, $.6183 and $.6053 for the portion of such compensation
paid in German Marks.
(5) Represents the market value on the date of grant of 100,000 shares of
restricted stock awarded under the 1991 Incentive Plan. The award vests in
five equal installments on May 15 of each of 1994, 1995, 1996, 1997 and
1998. Of the 100,000 shares granted, 60,000 shares were still subject to
restriction as of December 31, 1995. The value of the 100,000 shares at
December 31, 1995 was $812,500.
(6) In 1993, Mr. Kloss was also granted 100,000 Stock Payment Rights ("SPRs").
Each SPR consists of the right to receive from BGII an amount in cash
equal to the excess (if any) of (i) the fair market value of one share of
BGII Common Stock (a "Share") on the date the SPR is exercised over (ii)
the fair market value of one Share on May 14, 1993. The fair market value
of one share of BGII Common Stock on May 14, 1993 was $11.625. The award
of SPRs shall vest ratably over the term of the employment agreement such
that 20,000 SPRs shall become exercisable at the end of each full year of
service thereunder, provided that in the event of a change of control of
BGII (as defined in Mr. Kloss' employment agreement), all SPRs will become
immediately vested in full and shall be exercisable immediately. See
"Employment Contracts, Retirement Plans and Change-in-Control
Arrangements" for a further discussion of the SPRs held by Mr. Kloss.
(7) Consists of payments made by BGII on insurance policies for the benefit of
the executive officer. See "Employment Contracts, Retirement Plans and
Change-in-Control Arrangements."
(8) Consists of $50,000 moving allowance.
(9) Represents compensation paid by BGII to BEC to reimburse it for the
portion of Mr. Conover's compensation which was allocated to services
rendered by him to BGII.

213
<PAGE>

STOCK OPTION AND SAR GRANTS

The following table relates to options granted during the fiscal year ended
December 31, 1995:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS TERMS
------------------------------------------- -----------------------
% OF TOTAL
GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ------- --------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard Gillman......... 0 N.A. N.A. N.A. N.A. N.A.
Hans Kloss.............. 0 N.A. N.A. N.A. N.A. N.A.
Neil Jenkins............ 0 N.A. N.A. N.A. N.A. N.A.
Scott Schweinfurth...... 30,000 100% $7.875 4/02/05 $384,900 $612,900
Robert Conover.......... 0 N.A. N.A. N.A. N.A. N.A.
</TABLE>

AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

The following table summarizes for each of the named executive officers the
number of stock options and SARs exercised during the fiscal year ended
December 31, 1995, the aggregate dollar value realized upon exercise, the
total number of unexercised options and SARs, if any, held at December 31,
1995 and the aggregate dollar value of in-the-money, unexercised options and
SARs, held at December 31, 1995. The value realized upon exercise is the
difference between the fair market value of the underlying stock on the
exercise date and the exercise or base price of the option or SAR. The value
of unexercised, in-the-money options and SARs at fiscal year-end is the
difference between its exercise or base price and the fair market value of the
underlying stock on December 31, 1995, which was $8 1/8 per share.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS AT OPTIONS/SARS AT
SHARES VALUE DECEMBER 31, 1995* DECEMBER 31, 1995
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Gillman......... 0 N/A 150,000 0 N.A. N.A.
Hans Kloss.............. 0 N/A 115,000 60,000 N.A. N.A.
Neil Jenkins............ 0 N/A 75,000 0 N.A. N.A.
Scott Schweinfurth...... 0 N/A 0 30,000 N.A. $7,500
Robert Conover.......... 0 N/A 35,000 0 N.A. N.A.
</TABLE>
- --------
* All holdings reflected for each officer reflect stock options except for
Mr. Kloss who at December 31, 1995 held 75,000 exercisable stock options,
40,000 exercisable SPRs and 60,000 unexercisable SPRs.

LONG-TERM INCENTIVE PLAN AWARDS

The following table summarizes awards of performance units that are subject
to restrictions on transfer, risk of forfeiture and vesting requirements (the
"Performance Units") granted under BGII's 1992 Restricted Stock Performance
Plan (the "1992 Plan") to each of the named executive officers. The awards
were granted during the fiscal year ended December 31, 1993. During the fiscal
year ended December 31, 1994, the terms of such awards were modified by adding
the performance criteria to vesting of such awards described in clauses (iii)
and (iv) in the paragraph directly below.

Each Performance Unit is equal in value to one share of BGII Common Stock,
plus an additional amount in cash equal to 50% of the value of one share of
BGII Common Stock, based on the fair market value of the BGII Common Stock at
the date the award vests. Payments are to be made in BGII Common Stock and/or
cash as determined by the Compensation and Stock Option Committee of BGII's
Board of Directors. The Performance

214
<PAGE>

Units will vest over a specified time frame if any of the following occur: (i)
the cumulative annual growth rate in BGII's consolidated earnings per share of
its BGII Common Stock for any three consecutive years in the five year period
of fiscal years 1993-1997 (the "Performance Period") equals or exceeds 35%
(the "EPS Growth Target") or (ii) the fair market value of the BGII Common
Stock (as determined based on the market price of the BGII Common Stock)
equals or exceeds $40 per share for at least 20 of 30 consecutive trading days
(the "Market Price Target"), or (iii) BGII receives proceeds of $30 million in
a financing transaction or transactions meeting the conditions specified in
the award agreement governing the grant of Performance Units, or (iv) BGII
consummates a business combination meeting the conditions specified in the
award agreement governing the grant of Performance Units; provided, however,
that if (i) BGII's earnings per share growth in any consecutive three years
during the Performance Period is at least 85% of the EPS Growth Target, or
(ii) BGII's stock price at any time in the Performance Period is at least 85%
of the Market Price Target, at least 70% of the Performance Units will vest.

Under the terms of the 1992 Plan, all Performance Units outstanding at the
Effective Time will vest as a result of the Merger.

<TABLE>
<CAPTION>
NUMBER OF
NAME PERFORMANCE UNITS PERFORMANCE PERIOD
---- ----------------- ------------------
<S> <C> <C>
Richard Gillman...................... 200,000 1/1/93-12/31/97
Hans Kloss........................... 200,000 1/1/93-12/31/97
Neil Jenkins......................... 40,000 1/1/93-12/31/97
Robert Conover....................... 40,000 1/1/93-12/31/97
</TABLE>

See "The Merger--Interests of Certain Persons in the Merger" for a
discussion of arrangements between each of the above-named officers and
Alliance with respect to the treatment of the Performance Units in the event
the Merger is consummated.

COMPENSATION OF DIRECTORS

Directors' Fees. Each director who is not an employee of BGII receives an
annual retainer of $15,000, plus $1,000 for each Board of Directors' meeting
attended (including as part of each such meeting any committee meetings held
on the same date), $500 for any committee meetings attended that were not held
on the same date as a Board of Directors' meeting and reimbursement for travel
expenses. Directors who are also employees receive no additional compensation
in their capacity as director.

Stock Options. Under the 1991 Directors Plan, upon becoming a director, each
non-employee director receives an option to purchase 25,000 shares of BGII
Common Stock at an exercise price equal to the fair market value at the date
of grant and which vests over three years. Upon his appointment as a director
in June 1992, Mr. Carella received options for 25,000 shares at an exercise
price of $14.75 per share. Each of Messrs. Katz and McPherson received options
for 25,000 shares on becoming a director in September 1992, also exercisable
at $14.50 per share. In February 1994, Mr. Florio received options to purchase
25,000 shares, exercisable at $14.50 per share. Options granted under the 1991
Directors Plan may not be exercised after ten years from the date of grant. No
options may be granted after ten years from the date of the adoption of the
1991 Directors Plan. In the event of a change of control (as defined in the
1991 Directors Plan), all options outstanding under the 1991 Directors Plan
shall become immediately exercisable, subject to any other limitation on such
exercise in effect on the date of exercise, commencing at least five days
prior to the change of control. See "BGII Plans and Amendments--1991 Non-
Employee Directors' Plan."

Under the 1994 Plan, upon becoming a director, each non-employee director
receives an option to purchase 25,000 shares of BGII Common Stock at an
exercise price equal to the fair market value at the date of grant and which
vests over three years. In addition, under the 1994 Plan, in April 1994, each
of Messrs. Carella, Florio, Katz and McPherson received options for 25,000
shares exercisable at $12.875 per share. Options granted under the 1994 Plan
may not be exercised after ten years from the date of grant. No options may be
granted after ten years from the date of the adoption of the 1994 Plan. In the
event of a change of control (as defined in the 1994 Plan), all options
outstanding under the 1994 Plan shall become immediately exercisable
commencing at least five days prior to the change of control. See "BGII Plans
and Amendments--1994 Stock Option Plan for Non-Employee Directors".

215
<PAGE>

EMPLOYMENT CONTRACTS, RETIREMENT PLANS AND CHANGE-IN-CONTROL ARRANGEMENTS

BGII (or its subsidiaries) has employment contracts with its named-executive
officers, as set forth below. For arrangements between each of the named
executive officers and Alliance in the event the Merger is approved and
consummated, see "The Merger--Interests of Certain Persons in the Merger."

Richard Gillman. Until January 1993, Mr. Gillman was employed by BEC and
received no compensation from BGII for his services to BGII during fiscal 1991
or 1992 (other than certain option grants). Mr. Gillman entered into an
employment agreement with BGII which became effective as of January 1, 1993
with an initial term ending on December 31, 1995. The initial term of the
employment agreement is automatically extended by one additional year on each
January 18th until either party has given the other notice in accordance with
the employment agreement that it desires that the term not be automatically
extended. The employment agreement provides for a base annual salary of
$500,000, which shall be adjusted annually for cost of living increases and
may also be increased by such amounts as may be determined by the Committee.
The employment agreement also provides for the payment of annual bonus amounts
of additional compensation equal to 2% of the annual pre-tax income of BGII,
and an annual bonus to be determined by the Committee.

The employment agreement provides that the Board of Directors may terminate
Mr. Gillman's employment in the event of Mr. Gillman's total disability (as
defined in the employment agreement). Upon such termination Mr. Gillman will
be entitled to receive his base salary for a period of six months, offset by
any payments received under BGII's long-term disability plan and bonus
amounts, prorated for the number of days for which he was employed during the
half year in which the termination occurred. In addition, Mr. Gillman will be
entitled to receive any bonuses awarded for prior periods and not yet paid, as
well as long term disability payments offset by any payments received from
BGII's disability plan equal to 50% of his then effective base salary until
the earliest to occur of the cessation of his disability, his death or the end
of the term of the employment agreement. In such event, Mr. Gillman will be
entitled to continue to participate in all benefit plans of BGII in which he
participated on the date of termination of employment until the earlier to
occur of the cessation of his disability, his death or the end of the term of
the agreement, and Mr. Gillman will also be entitled to receive other benefits
to which he is then entitled under the applicable plans and programs of BGII.
The term "total disability" as defined in Mr. Gillman's employment agreement
means Mr. Gillman's failure to substantially discharge his duties under such
agreement for at least six consecutive months due to his physical or mental
illness or disability.

In the event that BGII terminates Mr. Gillman's employment without cause or
changes a title of Mr. Gillman or substantially reduces his duties or
functions from those that such an officer normally performs or has been
performing, BGII shall be deemed to have constructively terminated Mr.
Gillman's employment without cause and Mr. Gillman may elect to terminate his
services at that time. In such event or in the event BGII terminates Mr.
Gillman's employment without cause, Mr. Gillman will be entitled to receive
from BGII, in installments consistent with prior practice, the full amount of
his base salary and bonus amounts that he would otherwise be entitled to for
the balance of the term of the employment agreement. Mr. Gillman will also be
entitled to continue to participate in all employee benefit plans in which he
was participating on the date of termination of his employment, including the
continuation of all life, disability, accident, and medical insurance benefits
available to him on such date, until the earlier of (i) the end of the term of
the employment agreement or (ii) the date he receives equivalent coverage and
benefits under the plans and programs of a subsequent employer. Under Mr.
Gillman's employment agreement, the term "without cause" means termination of
his employment for reasons other than (i) his intentional or grossly negligent
refusal to perform such duties as are consistent with his positions with BGII,
(ii) his fraud, dishonesty, or deliberate injury to BGII or its subsidiaries
in the performance of his duties, (iii) his failure to qualify (or remain
qualified) for any suitability or licensing requirement to which he may be
subject by reason of his position with BGII or its subsidiaries or (iv) any
material breach of any provision of his employment agreement.

If Mr. Gillman voluntarily terminates or is asked to terminate his
employment with BGII within two years of a change of control of BGII (as
defined within the employment agreement), Mr. Gillman is entitled to receive a
lump sum payment equal to his base salary for the remainder of the term of his
employment agreement and the bonus amounts he would otherwise be entitled to
for the balance of the term of his employment agreement in

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installments consistent with past practice. In such event, Mr. Gillman shall
also be entitled to continue to participate in all benefit plans of BGII in
which he participated on the date of termination of employment until the
earlier of the end of the term of the employment agreement or the date Mr.
Gillman receives equivalent coverage and benefits from a subsequent employer.
In addition, for a 36 month period after such termination, BGII will provide
Mr. Gillman with life, disability, accident and health insurance benefits
substantially similar to those which were receivable by Mr. Gillman
immediately prior to the date of such termination (subject to reduction to the
extent similar benefits are received by him during the period following such
termination). Under Mr. Gillman's employment agreement, a "Change in Control"
means a change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, whether or not BGII is then subject to
such reporting requirements; provided that, without limitation, such a Change
in Control shall be deemed to have occurred if: (i) any "person" (as defined
in subsections 13(d) and 14(d) of the Exchange Act), other than a person with
which he is affiliated or of which he is a part, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of BGII representing 25% or more of the combined
voting power of BGII's then outstanding securities; (ii) during any period of
two consecutive years or less (not including any period prior to the effective
date of such employment agreement) there shall cease to be majority of the
Board of Directors of BGII comprised of Continuing Directors (as defined
below); or (iii) the stockholders of BGII approve (A) a merger or
consolidation of BGII with any corporation, other than a merger or
consolidation that would result in the voting securities of BGII outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the combined voting power of the voting securities of
BGII or such surviving entity outstanding immediately after such merger or
consolidation, or (B) a plan of complete liquidation of BGII or an agreement
for the sale or disposition by BGII of all or substantially all of its assets.
An event or occurrence (or a series of events or occurrences) that would not
otherwise constitute a Change in Control under the foregoing shall constitute
a Change in Control for purposes of such employment agreement if the BGII
Board, by majority vote, determines that a Change in Control does result
therefrom, but only if Continuing Directors constitute a majority of the
directors voting in favor of such determination. "Continuing Directors" means
individuals who constitute the Board of Directors of BGII as of the effective
date of the employment agreement and any new director(s) whose election by
such Board of nomination for election by BGII's stockholders was approved by a
vote of at least two-thirds of the directors then in office who either were
directors as of the effective date of the employment agreement or whose
election or nomination for election was previously so approved.

In the event of Mr. Gillman's death, his estate will be entitled to continue
to receive 50% of the bonus amounts to which he was otherwise entitled during
the remainder of the term of the employment agreement.

Pursuant to an Award Agreement with BGII, Mr. Gillman has been granted
200,000 Performance Units under the 1992 Plan. For a description of the terms
of the award, see the discussion of Performance Units under "Long-Term
Incentive Plan Awards" above. The employment of Mr. Gillman by BGII will
terminate at the Effective Time and all of the Performance Units held by him
will become fully vested. Although under the 1992 Plan, all outstanding
Performance Units would vest upon approval of the Merger by BGII stockholders,
Mr. Gillman has agreed to waive such rights and receive certain payments of
cash and Alliance Common Stock in connection with the termination of his
employment agreement and the satisfaction of his Performance Unit award. See
"The Merger--Interests of Certain Persons in the Merger."

If payments made to Mr. Gillman pursuant to the employment agreement after a
change of control are considered excess parachute payments under the Code
Section 280G (see discussion below), additional compensation is required to be
paid to Mr. Gillman to the extent necessary to eliminate the economic effect
on him of the resulting excise tax. Any such payments by BGII would be
nondeductible for Federal income tax purposes.

Hans Kloss. Mr. Kloss was appointed President and Chief Operating Officer of
BGII in May 1993, and in connection therewith entered into an employment
agreement with each of BGII and Bally Gaming, Inc., effective May 15, 1993,
with a term ending on May 14, 1998. (Mr. Kloss also is a party to employment
agreements with

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each of BGII's subsidiaries, Bally Wulff Automaten GmbH ("Automaten") and
Bally Wulff Vertriebs GmbH ("Vertriebs"), the terms of which are discussed
below.) The employment agreement provides for a base annual salary of $18,000
which may be increased by such amounts as may be determined by the Committee.
In December 1994, the Committee increased Mr. Kloss' base salary to $100,000
per year. The employment agreement also provides for the payment of an amount
equal to 3% of the sum of annual net pre-tax income of BGII and Bally Gaming,
Inc. on a consolidated basis. Such amount shall be calculated without regard
to (i) income or loss of Automaten, Vertriebs or any other foreign subsidiary
and (ii) bonus payments to Mr. Kloss. Mr. Kloss is also entitled to payment of
an annual bonus as determined by the Committee.

The employment agreement provides that the Board of Directors may terminate
Mr. Kloss's employment in the event of Mr. Kloss' total disability (as defined
in the employment agreement). Upon such termination Mr. Kloss will be entitled
to receive his base salary for a period of six months, offset by any payments
received under BGII's long-term disability plan, and bonus amounts, prorated
for the number of days for which he was employed during the half year in which
the termination occurred. In addition, Mr. Kloss will be entitled to receive
any bonuses awarded for prior periods and not yet paid, as well as long term
disability payments. In such event, Mr. Kloss will be entitled to continue to
participate in all benefit plans of BGII in which he participated on the date
of termination of employment until the earlier to occur of the cessation of
his disability, his death or the end of the term of the agreement. In such
event, Mr. Kloss will also be entitled to receive other benefits to which he
is then entitled under the applicable plans and programs of BGII. The term
"total disability" as defined in Mr. Kloss' employment agreement means Mr.
Kloss' failure to substantially discharge his duties under such agreement for
at least six consecutive months due to his physical or mental illness or
disability.

In the event that BGII terminates Mr. Kloss' employment without cause or
changes a title of Mr. Kloss or substantially reduces his duties or functions
from those that such an officer normally performs or has been performing, BGII
shall be deemed to have constructively terminated Mr. Kloss' employment
without cause and Mr. Kloss may elect to terminate his services at that time.
In such event or in the event BGII terminates Mr. Kloss' employment without
cause, Mr. Kloss will be entitled to receive from BGII, in installments
consistent with prior practice, the full amount of his base salary and bonus
amounts that he would otherwise be entitled to for the balance of the term of
the employment agreement. Mr. Kloss will also be entitled to continue to
participate in all employee benefit plans in which he was participating on the
date of termination of his employment, including the continuation of all life,
disability, accident, and medical insurance benefits available to him on such
date, until the earlier of (i) the end of the term of the employment agreement
or (ii) the date he receives equivalent coverage and benefits under the plans
and programs of a subsequent employer. Under Mr. Kloss' employment agreement,
the term "without cause" means termination of his employment for reasons other
than (i) his intentional or grossly negligent refusal to perform such duties
as are consistent with his positions with BGII, (ii) his fraud, dishonesty, or
deliberate injury to BGII or its subsidiaries in the performance of his
duties, (iii) his failure to qualify (or remain qualified) for any suitability
or licensing requirement to which he may be subject by reason of his position
with BGII or its subsidiaries or (iv) any material breach of any provision of
his employment agreement.

If Mr. Kloss voluntarily terminates, or is asked to terminate, his
employment with BGII within two years of a change of control of BGII (as
defined in the employment agreement), Mr. Kloss will be entitled to receive a
lump sum payment equal to his base salary for the remainder of the term of his
employment agreement and the bonus amounts he would otherwise be entitled to
for the balance of the term of his employment agreement in installments
consistent with past practice. In such event, Mr. Kloss shall also be entitled
to continue to participate in all benefit plans of BGII in which he
participated on the date of termination of employment until the earlier of the
end of the term of the employment agreement or the date Mr. Kloss receives
equivalent coverage and benefits from a subsequent employer. Under Mr. Kloss'
employment agreement, a "Change in Control" means a change in control of the
Company of a nature that would be required to be reported in response to Item
6 (e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not BGII is then subject to such reporting requirements; provided
that, without limitation, such a Change in Control shall be deemed to have
occurred if: (i) any "person" (as defined in subsections 13(d) and 14(d) of
the Exchange Act), other than a

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person with which he is affiliated or of which he is a part, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of BGII representing 25% or more of the combined
voting power of BGII's then outstanding securities; (ii) during any period of
two consecutive years or less (not including any period prior to the effective
date of such employment agreement) there shall cease to be majority of the
Board of Directors of BGII comprised of Continuing Directors (as defined
below); or (iii) the stockholders of BGII approve (A) a merger or
consolidation of BGII with any corporation, other than a merger or
consolidation that would result in the voting securities of BGII outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the combined voting power of the voting securities of
BGII or such surviving entity outstanding immediately after such merger or
consolidation, or (B) a plan of complete liquidation of BGII or an agreement
for the sale or disposition by BGII of all or substantially all of its assets.
An event or occurrence (or a series of events or occurrences) that would not
otherwise constitute a Change in Control under the foregoing shall constitute
a Change in Control for purposes of such employment agreement if the BGII
Board, by majority vote, determines that a Change in Control does result
therefrom, but only if Continuing Directors constitute a majority of the
directors voting in favor of such determination. "Continuing Directors" means
individuals who constitute the Board of Directors of BGII as of the effective
date of the employment agreement and any new director(s) whose election by
such Board of nomination for election by BGII's stockholders was approved by a
vote of at least two-thirds of the directors then in office who either were
directors as of the effective date of the employment agreement or whose
election or nomination for election was previously so approved.

Mr. Kloss has employment agreements with each of Automaten and Vertriebs,
both of which expire on December 31, 1998. The employment agreement with
Automaten provides for a 1995 base salary of DM 252,960 and an additional
salary equal to 5.3% of Automaten's income before income taxes. The employment
agreement with Vertriebs provides for a 1995 base salary of DM 126,473 and an
additional salary equal to 5.3% of Vertriebs' income before income taxes. In
May 1996 Mr. Kloss will be entitled to an increase in his Automaten and
Vertriebs base salaries equal to 4% of his 1995 base salaries. BGII also makes
certain payments (included in the Summary Compensation Table set forth above)
on insurance policies which entitle Mr. Kloss to receive, at age 65, either a
lump-sum payment or an annuity based on such amount. The face value of such
policies at December 31, 1995 is estimated to be DM 532,355. During fiscal
1995, the average currency translation rate was 1 DM per $.6987.

Pursuant to an Award Agreement with BGII, Mr. Kloss has been granted 200,000
Performance Units under the 1992 Plan. For a description of the terms of the
award, see the discussion of Performance Units under "Long-Term Incentive Plan
Awards" above. Although under the 1992 Plan, all outstanding Performance Units
would vest upon approval of the Merger by BGII stockholders, Mr. Kloss has
agreed to waive such rights and receive certain payments of cash and Alliance
Common Stock in connection with the termination of his Performance Unit award.
See "The Merger--Interests of Certain Persons in the Merger."

Mr. Kloss also received, effective May 14, 1993, a restricted stock award of
100,000 shares of BGII Common Stock under the 1991 Incentive Plan. The award
of stock shall vest ratably over the term of the employment agreement at the
rate of 20,000 shares for each full year of service thereunder, provided that
in the event of a change of control of BGII (as defined in the employment
agreement), all shares under the award immediately shall become vested in
full.

Mr. Kloss was also granted, effective May 14, 1993, 100,000 SPRs. Each SPR
consists of the right to receive from BGII an amount in cash equal to the
excess (if any) of (i) the fair market value of one share of BGII Common Stock
(a "Share") on the date the SPR is exercised over (ii) the fair market value
of one Share on May 14, 1993. The fair market value of one share of BGII
Common Stock on May 14, 1993 was $11.625. The award of SPRs shall vest ratably
over the term of the employment agreement such that 20,000 SPRs shall become
exercisable at the end of each full year of service thereunder, provided that
in the event of a change of control of BGII (as defined in the employment
agreement), all SPRs will become immediately vested in full and shall be
exercisable immediately. The term of the SPRs shall expire on May 14, 1999.
The SPRs are not transferable other than by will or the laws of descent and
distribution. The holder of a SPR shall not have any of the rights of a
stockholder with respect to BGII. The SPRs will be administered by the
Committee and will be subject to such other terms and conditions as such
committee, in its discretion, shall determine.

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<PAGE>

Neil Jenkins. Until December 31, 1992, Mr. Jenkins was employed by BEC and
received no compensation from BGII for his services to BGII during fiscal 1991
or 1992 (other than certain option grants). Mr. Jenkins entered into an
employment agreement with BGII which became effective as of January 1993 with
an initial term ending on December 31, 1995 (which was subsequently extended
to June 30, 1996). The employment agreement provides for a base annual salary
of $250,000, which may be increased by such amounts as may be determined by
the Committee. The employment agreement also provides for the payment of
annual bonus amounts to be determined by the Committee. BGII also makes
certain payments (included in the Summary Compensation Table set forth above)
on insurance policies for the benefit of Mr. Jenkins. The face value of such
policies as of December 31, 1995 is estimated at $479,787.

The employment agreement provides that the Board of Directors may terminate
Mr. Jenkins' employment in the event of Mr. Jenkins' disability (as defined in
the employment agreement). Upon such termination Mr. Jenkins will be entitled
to receive his base salary for a period of six months, offset by any payments
received under BGII's long-term disability plan and bonus amounts. In
addition, Mr. Jenkins will be entitled to receive any bonuses awarded for
prior periods and not yet paid, and bonus payments prorated for the number of
days for which he was employed during the half year in which the termination
occurred as well as long term disability payments. In such event, Mr. Jenkins
will be entitled to continue to participate in all benefit plans of BGII in
which he participated on the date of termination of employment until the
earlier to occur of the cessation of his disability, his death or the end of
the term of the agreement and Mr. Jenkins will also be entitled to receive
other benefits to which he is then entitled under the applicable plans and
programs of BGII. The term "total disability" as defined in Mr. Jenkins'
employment agreement means Mr. Jenkins' failure to substantially discharge his
duties under such agreement for at least six consecutive months due to his
physical or mental illness or disability.

In the event BGII substantially reduces Mr. Jenkins' duties or functions
from those that such an officer normally performs or that Mr. Jenkins has been
performing, BGII shall be deemed to have constructively terminated Mr.
Jenkins' employment without cause and Mr. Jenkins may elect to terminate his
services at that time. In such event, or in the event that BGII terminates Mr.
Jenkins' employment without cause (as defined in the employment agreement),
Mr. Jenkins shall receive from BGII, in installments consistent with prior
practice, (i) the full amount of his base salary that he would otherwise be
entitled to for the balance of the term of the employment agreement and (ii)
the amounts, if any, of bonus compensation payable to Mr. Jenkins but not paid
to Mr. Jenkins for any fiscal year ending prior to the date of such
termination. Mr. Jenkins will also be entitled to continue to participate in
all employee benefit plans in which he was participating on the date of
termination of his employment, including the continuation of all life,
disability, accident, and medical insurance benefits available to him on such
date, until the earlier of the end of the term of his employment agreement or
the date he receives equivalent coverage and benefits under the plans and
programs of a subsequent employer. Under Mr. Jenkins' employment agreement,
the term "without cause" means termination of his employment for reasons other
than (i) his intentional or grossly negligent refusal to perform such duties
as are consistent with his positions with BGII, (ii) his fraud, dishonesty, or
deliberate injury to BGII or its subsidiaries in the performance of his
duties, (iii) his failure to qualify (or remain qualified) for any suitability
or licensing requirement to which he may be subject by reason of his position
with BGII or its subsidiaries or (iv) any material breach of any provision of
his employment agreement.

If Mr. Jenkins voluntarily terminates, or is asked to terminate, his
employment with BGII within two years of a change of control of BGII (as
defined within the employment agreement), Mr. Jenkins will be entitled to
receive a lump sum payment equal to (a) the greater of (i) his base salary for
the remainder of the term of his employment agreement or (ii) his base salary
for a 24-month period and (b) an amount equal to his bonus compensation for
the year ending prior to the change of control. In such event, Mr. Jenkins
shall also be entitled to continue to participate in all benefit plans of BGII
in which he participated on the date of termination of employment until the
earlier of the end of the term of the employment agreement or the date Mr.
Jenkins receives equivalent coverage and benefits from a subsequent employer.
In addition, for a 36-month period after such termination, BGII will provide
Mr. Jenkins with life, disability, accident and health insurance benefits
substantially similar to those which were receivable by Mr. Jenkins
immediately prior to the date of such termination (subject to reduction to the
extent similar benefits are received by him during the period following such
termination). Under Mr. Jenkin's employment agreement, a "Change in Control"
means a change in control of the Company of a nature that would be required to
be reported in response to Item 6 (e) of Schedule

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14A of Regulation 14A promulgated under the Exchange Act, whether or not BGII
is then subject to such reporting requirements; provided that, without
limitation, such a Change in Control shall be deemed to have occurred if: (i)
any "person" (as defined in subsections 13 (d) and 14 (d) of the Exchange
Act), other than a person with which he is affiliated or of which he is a
part, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of BGII representing 25%
or more of the combined voting power of BGII's then outstanding securities;
(ii) during any period of two consecutive years or less (not including any
period prior to the effective date of such employment agreement) there shall
cease to be majority of the Board of Directors of BGII comprised of Continuing
Directors (as defined below); or (iii) the stockholders of BGII approve (A) a
merger or consolidation of BGII with any corporation, other than a merger or
consolidation that would result in the voting securities of BGII outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the combined voting power of the voting securities of
BGII or such surviving entity outstanding immediately after such merger or
consolidation, or (B) a plan of complete liquidation of BGII or an agreement
for the sale or disposition by BGII of all or substantially all of its assets.
An event or occurrence (or a series of events or occurrences) that would not
otherwise constitute a Change in Control under the foregoing shall constitute
a Change in Control for purposes of such employment agreement if the BGII
Board, by majority vote, determines that a Change in Control does result
therefrom, but only if Continuing Directors constitute a majority of the
directors voting in favor of such determination. "Continuing Directors" means
individuals who constitute the Board of Directors of BGII as of the effective
date of the employment agreement and any new director(s) whose election by
such Board of nomination for election by BGII's stockholders was approved by a
vote of at least two-thirds of the directors then in office who either were
directors as of the effective date of this employment agreement or whose
election or nomination for election was previously so approved.

Pursuant to an Award Agreement with BGII, Mr. Jenkins has been granted
40,000 Performance Units under the 1992 Plan. For a description of the terms
of the award, see the discussion of Performance Units under "Long-Term
Incentive Plan Awards" above. The employment of Mr. Jenkins by BGII will
terminate at the Effective Time and all of the Performance Units held by him
will become fully vested. Although under the 1992 Plan, the Performance Units
would vest upon approval of the Merger by BGII stockholders, Mr. Jenkins has
agreed to waive such rights and receive certain payments of cash and Alliance
Common Stock in connection with the termination of his employment agreement
and the satisfaction of his Performance Unit award. See "The Merger--Interests
of Certain Persons in the Merger".

Scott Schweinfurth. Mr. Schweinfurth entered into an employment agreement
with BGII dated March 24, 1995 with an initial term of thirty-six months. The
employment agreement provides for a base monthly salary of $14,166.67, which
may be increased by such amounts as may be determined in BGII's discretion.
The employment agreement also provides for the payment of annual bonus amounts
to be determined in BGII's discretion.

The employment agreement provides that the Board of Directors may terminate
Mr. Schweinfurth's employment upon thirty days notice in the event of Mr.
Schweinfurth's disability (as defined in the employment agreement). Upon such
termination Mr. Schweinfurth will be entitled to receive his base salary for
the thirty day notice period. The term "total disability" as defined in Mr.
Schweinfurth's employment agreement means Mr. Schweinfurth's failure to
substantially discharge his duties under such agreement for at least six
consecutive months or for noncontinuous periods aggregating 22 weeks in any 12
month period due to his illness or incapacity.

If Mr. Schweinfurth is asked to terminate his employment with BGII or if Mr.
Schweinfurth's duties are substantially changed within six months prior to or
two years following a change of control of BGII (as defined within the
employment agreement), Mr. Schweinfurth will be entitled to receive a lump sum
payment equal to the greater of (i) his base salary for the remainder of the
term of his employment agreement or (ii) his base salary for a 24-month
period. Under Mr. Schweinfurth's employment agreement, a "Change in Control"
means a change in control of the Company of a nature that would be required to
be reported in response to Item 6 (e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, whether or not BGII is then subject to
such reporting requirements. In addition a "Change of Control" shall be deemed
to have occurred upon an acquisition of 20% of the outstanding common stock of
BGII or more than 50% of BGII's assets.

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Robert Conover. Pursuant to an Award Agreement with BGII, Mr. Conover has
been granted 40,000 Performance Units under the 1992 Plan. For a description
of the terms of the award, see the discussion of Performance Units under
"Long-Term Incentive Plan Awards" above. Although under the 1992 Plan, all
outstanding Performance Units would vest upon approval of the Merger by BGII
stockholders, Mr. Conover has agreed to waive such rights and receive certain
payments of cash and Alliance Common Stock in connection with the termination
of his Performance Unit award. See "The Merger--Interests of Certain Persons
in the Merger".

BGII Plans. Under the 1991 Plan, upon a change in control of BGII (as
defined therein), (i) all options not in tandem with SARs shall become
immediately exercisable commencing at least five days prior to the change in
control, (ii) the vesting of SARs shall be accelerated, and (iii) all
restrictions on restricted stock awards shall immediately lapse. For purposes
of the 1991 Plan, "Change in Control" is defined as described under "BGII
Plans and Amendments--1991 Incentive Plan".

The Board of Directors has adopted Amendment No. 3 to the 1991 Plan which
provides that upon the Effective Time (a) all options outstanding under the
1991 Plan shall vest and remain exercisable until the earlier of (i) the
expiration of the original term of the option grant (without regard to Section
17 of the 1991 Plan or other change of control provisions within the
applicable award agreement), (ii) three years from the Effective Time or (iii)
except with respect to Messrs. Gillman, Kloss and Jenkins, the period ending
on the date on which the option holder's employment is terminated for cause or
voluntarily by such employee, (b) all provisions in the 1991 Plan and any
applicable award agreement which terminate or otherwise shorten the exercise
period during which an option would be exercisable by an optionee who is a
director of BGII as a result of such person ceasing to be a director, officer
or employee, as the case may be, of BGII shall be of no further force or
effect and (c) each outstanding option shall be exercisable, at the exercise
price of such option, for the Merger Consideration per share of BGII Common
Stock; provided however, that in the event the holder of such option (other
than Messrs. Gillman, Jenkins and Kloss) who is an employee of BGII
immediately prior to the Effective Time has delivered proper notice of
election to BGII prior to the Effective Time, each option held by such holder
shall be exercisable for that number of shares of Alliance Common Stock equal
to the number of shares of BGII Common Stock subject to such option at an
exercise price equal to the Alliance Average Trading Price. If approved by
stockholders, Amendment No. 3 would become effective upon the Effective Time.
See "BGII Plans and Amendments--1991 Incentive Plan".

Under the 1991 Directors Plan, upon a change in control (as defined
therein), all options shall become immediately exercisable, subject to any
other limitation on such exercise in effect on the date of exercise,
commencing at least five days prior to the change in control. For purposes of
the 1991 Directors Plan, "Change in Control" is defined as described in
connection with the 1991 Plan under "BGII Plans and Amendments--1991 Incentive
Plan."

The Board of Directors has adopted Amendment No. 3 to the 1991 Directors
Plan which provides that upon the Effective Time (a) all options outstanding
under the 1991 Directors Plan shall vest and remain exercisable until the
earlier of (i) the expiration of the original term of the option grant
(without regard to Section 13 of the 1991 Directors Plan or other change of
control provisions within the applicable award agreement) or (ii) three years
from the Effective Time, (b) all provisions in the 1991 Directors Plan and any
applicable award agreement which terminate or otherwise shorten the exercise
period during which an option would be exercisable by an optionee who is a
director of BGII as a result of such person ceasing to be a director, officer
or employee of BGII shall be of no further force or effect and (c) each
outstanding option shall be exercisable, at the exercise price of the option,
for the Merger Consideration per share of BGII Common Stock subject to the
option. If approved by stockholders, Amendment No. 3 would become effective
upon the Effective Time. See "BGII Plans and Amendments--1991 Directors Plan."

Under the 1992 Plan, following a change in control (as defined therein), if
a participant's employment with BGII is terminated prior to the end of any
performance period (as defined therein and generally meaning the

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period of time in which the subject award will vest upon the attainment of
specified performance goals), then all theretofore unvested awards of
restricted stock or Performance Units will vest. For purposes of the 1992
Plan, "Change in Control" is defined as described in connection with the 1991
Plan under "BGII Plans and Amendments--1991 Incentive Plan".

Under the 1994 Plan, upon a change in control (as defined therein), each
award granted under the 1994 Plan shall terminate 90 days after the occurrence
of such change in control, but, in the event of any such termination the award
holder shall have the right, commencing at least five days prior to such
change in control and subject to any other limitation on the exercise of such
award in effect on the date of exercise, to immediately exercise any options
in full, without regard to any vesting limitations, to the extent they shall
not have been theretofore exercised. For purposes of the 1994 Plan, "Change in
Control" is defined as described in connection with the 1991 Plan under "BGII
Plans and Amendments--1991 Incentive Plan".

The 1994 Plan provides that, notwithstanding the foregoing, at the Effective
Time (a) all options outstanding under the 1994 Plan shall vest and remain
exercisable until the earlier of (i) the expiration of the original term of
the option grant (without regard to Section 10 of the 1994 Plan or other
change of control provisions within the applicable award agreement) or (ii)
three years from the Effective Time and (b) all provisions in the 1994 Plan
and any applicable award agreement which terminate, or otherwise shorten the
period in which an option would be exercisable by an optionee who is a
director of BGII as a result of such person ceasing to be a director, officer
or employee of BGII shall be of no further force or effect and (c) each
outstanding option shall be exercisable, at the exercise price of the option,
for the Merger Consideration per share of BGII Common Stock subject to the
option.

Pursuant to Code Section 280G, "excess parachute payments" are not
deductible by a corporate payor, and in addition to income taxes, the
recipient is subject to a 20% nondeductible excise tax on such payments. An
excess parachute payment is a payment in the nature of compensation to certain
key personnel ("disqualified individuals") of a corporation which is
contingent on a change of ownership or effective control, and which exceeds
the portion of the base amount (i.e., the average compensation for the five-
year period prior to the change of control) allocable to the payment. The
above-described rules apply only if the present value of all payments of
compensation (including non-taxable fringe benefits) at the time of a change
of control (determined utilizing 120% of the applicable federal rate) is at
least equal to three times the base amount. When the vesting of non-qualified
stock options is accelerated as a result of a change of control, special rules
apply to determine the portion of such compensation which must be treated as
parachute payments. An excess parachute payment may be reduced by reasonable
compensation for services rendered before the change of control, or for
services to be rendered after the change of control.

A portion of compensation payable in connection with the Merger may be non-
deductible under Code Sections 162(m) and 280G. However, based on the factual
nature of the issues involved and the absence of legal authority, certainty of
treatment is not assured.

For a more detailed discussion of the foregoing plans, see "BGII Plans and
Amendments."

223
<PAGE>

REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE

The compensation of BGII's senior management and executive officers is
determined by the Compensation and Stock Option Committee of the BGII Board of
Directors (the "Committee"). The Committee also administers BGII's various
incentive plans, including its stock option and performance based plans
described in this Proxy Statement/Prospectus. Each member of the Committee is
a director who is not an employee of BGII or any of its affiliates and thereby
qualifies as a "disinterested director" within the meaning of Rule 16b-3 of
the Securities Exchange Act of 1934. The Committee submits the following
report to BGII's stockholders on the compensation policies applicable to
BGII's executive officers with respect to compensation reported for the year
ended December 31, 1995.

General Policies

The Committee strongly believes that BGII's compensation program is a
critical part of the effective management of its senior executives. BGII's
compensation programs are intended to enable BGII to attract, motivate, reward
and retain the management talent required to achieve aggressive corporate
objectives in a rapidly evolving and technology-based industry, and thereby
increase stockholder value. BGII's policy is to provide incentives to its
senior management designed to achieve BGII's long-term objectives as well as
its short-term objectives and to reward exceptional leadership, performance
and contributions to the development of BGII's business. In furtherance of
these objectives, the Committee has granted several key executives of BGII
additional compensation over their annual base salary in the form of annual
bonuses and stock options and stock rights based on BGII's performance. This
combination, including base compensation, is intended to foster in BGII's key
executives a strong incentive to put forth the maximum effort required for the
continued success and growth of BGII.

The Committee reviews with the Chief Executive Officer and the Chief
Operating Officer and approves, with any modifications it deems appropriate,
an annual plan for the Named Executive Officers (other than the Chief
Executive Officer). The salary plan is developed by BGII under the ultimate
direction of the Chief Executive Officer and is based on industry norms and
performance judgments as to past and expected future contributions of the
individual executive officers.

For purposes of determining compensation, the Committee evaluates each of
the individual executive's contributions towards certain financial goals
including sales growth, operating earnings, return on assets and cash flow as
well as strategic goals such as new product development and new business
initiatives in increasing market share. In determining compensation for 1995,
the Committee reviewed with the Chief Executive Officer and the Chief
Operating Officer, management's recommendations based on individual
performance, as well as its evaluation of the factors cited above. It should
be noted that the Committee has not yet established any specific defined or
formulaic standards which tie executive compensation with BGII performance. In
applying the appropriate factors to a particular executive officer, no factor
was given special priority and the same factors were applied to both the Chief
Executive Officer and the other principal executive officers.

In making its decisions on 1995 compensation, the Committee believes that
compensation paid in 1995 to BGII's Chief Executive Officer, Chief Operating
Officer and other executive officers were reasonable and reflective of BGII's
performance, in light of BGII's continued success in implementing its
turnaround strategy, the projected 1995 pre-tax results for BGII compared to
1994 including the impact of expenses related to the Alliance and WMS Merger
Agreements, the reductions in costs of goods sold in the United States in 1995
compared to 1994, the achievement of sales goals in the United States in 1995
and the prospects of meeting projected sales goals in 1996 as well as BGII's
expansion into new markets.

Under the Omnibus Budget Reconciliation Act of 1993, compensation paid to
certain executive officers of BGII in excess of $1,000,000 in 1995 and
subsequent years may be nondeductible for federal income tax purposes unless
the compensation qualifies as "performance-based" compensation or is otherwise
exempt under the law and the proposed Internal Revenue Service regulations, as
modified. This tax law and the regulations pertaining

224
<PAGE>

thereto are subject to substantial uncertainties and there can be no assurance
that all compensation paid under BGII's incentive plans will continue to be
deductible for federal income tax purposes. The Committee intends to take
actions required to preserve the tax deductibility of executive pay under
I.R.C. Section 162(m) and intends to consider tax deductibility in making
future awards to senior executives. However, the Committee may determine in
any year, in light of all applicable circumstances, that it would be in the
best interests of BGII for awards to be paid under such plans or otherwise in
a manner that would not satisfy the requirements of such tax law and
regulations for deductibility. As shown on the Summary Compensation Table of
this Proxy Statement/Prospectus, none of BGII's executive officers had
compensation in excess of $1,000,000 in 1995.

Executive Officers Compensation Program

The compensation package for executive officers of BGII consists of the
following basic elements:

Base Salary

The Committee establishes the base salaries which will be paid to BGII's
executive officers. In setting salaries, the Committee generally takes into
account a number of factors, including BGII's results of operations and other
BGII performance measures, competitive compensation data, comparisons of
salaries and responsibilities among BGII's executive officers, the extent to
which an individual may participate in the incentive compensation plans
maintained by BGII and its affiliates, and qualitative factors bearing on an
individual's experience, responsibilities, management and leadership abilities
and job performance. The Committee does not generally expressly assign greater
weight to any one or more such factors than to others.

Annual Bonuses

The annual bonus paid to executive officers of BGII is a critical element of
compensation designed to reward the achievement of short term corporate goals,
as well as individual productivity and performance. The bonuses actually paid
by BGII to the Named Executive Officers for 1995 are set forth in the "Summary
Compensation Table" above. At the end of each year, the performance of each
senior executive qualifying for a bonus is evaluated by the Committee. In
determining bonus awards for fiscal year 1995, the Committee reviewed with the
Chief Executive Officer and Chief Operating Officer, management's
recommendations based on individual performance as well as its evaluation of
factors substantially comparable to those considered in establishing the award
for Chief Executive Officer. BGII and its operating subsidiaries were
discussed and evaluated with respect to projected pre-tax earnings for 1995
compared to 1994 actuals, the performance, salaries and the bonus proposals
with respect to each of the key executives involved, as well as the relative
contribution of said executive with respect to the success of their respective
units.

Incentive Compensation Plans

The Committee also administers the terms of BGII's incentive compensation
plans in which the Named Executive Officers participate. In doing so, the
Committee considers BGII's results of operations and other BGII performance
measures and management's plans for BGII's growth and profitability and
achievement of strategic goals, determines the corporate performance criteria
to be used for the determination of incentive compensation awards, and
considered awards for participants under each incentive compensation plan. The
Committee then evaluates the performance, base salary and relative
contribution of the employee in determining grants under the plans.

Stock Options

Stock options are granted to key employees, including BGII's executive
officers, by the Committee under the 1991 Incentive Plan. The option grants
are designed to align the interests of the executives with those of the
stockholders. The size of each option grant is based on the respective
recipient's relative position with BGII, level of responsibility, performance
and contribution to BGII's strategic corporate objectives. Other than the
grant of 30,000 options to Scott Schweinfurth, the Chief Financial Officer, no
option grants were made to the Named Executive Officers or other employees
under the 1991 Plan during the fiscal year ending December 31, 1995.

225
<PAGE>

Long Term Incentive Plan Awards

BGII's long term incentive plan for executive officers consists of the 1992
Restricted Stock Performance Plan, the objective of which is to provide
continuing incentive to the executive officers of BGII to promote the long
term strategic goals of BGII and thereby maximize long-term shareholder value.
During fiscal year 1993, key executives were awarded Performance Units
pursuant to the 1992 Plan which remain in effect as an executive incentive. No
awards under the 1992 Plan were made during fiscal year 1994 or 1995. See
"BGII Executive Officers and Executive Compensation--Long-Term Incentive Plan
Awards" for a description of the Performance Units, the recipients and the
amount of Performance Units awarded to each recipient.

Compensation of the Chief Executive Officer

Employment Agreement

See "BGII Executive Officers and Executive Compensation--Employment
Contracts, Retirement Plans and Change in Control Arrangements" for a
description of the terms of BGII's Chief Executive Officer's employment
contract.

Base Salary

The base salary established for BGII's Chief Executive Officer, Richard
Gillman, reflects the Committee's policy to maintain a relative level of
stability and certainty with respect to Mr. Gillman's base salary from year to
year. In setting Mr. Gillman's base salary, the Committee sought to have his
base salary play a less central role in his overall compensation package by
reason of the grants of bonuses, options and Performance Units.

Bonus

No bonus was awarded to Mr. Gillman during the fiscal year 1995.

Incentive Compensation Plans

1992 Restricted Stock Performance Plan

Pursuant to an award agreement with BGII, Mr. Gillman has previously been
granted 200,000 Performance Units under the 1992 Plan. See "BGII Executive
Officers and Executive Compensation--Long-Term Incentive Plan Awards" for a
description of the terms of the award. In determining the award of Performance
Units to Mr. Gillman, the Committee took into consideration his position as
Chief Executive Officer of BGII and his anticipated contribution in promoting
the long-term strategic objectives of BGII and BGII's growth in terms of
technological and product development. No awards were made to Mr. Gillman
pursuant to this Plan during the period ending December 31, 1995.

1991 Incentive Plan

No awards were made to Mr. Gillman pursuant to the 1991 Plan during the
period ending December 31, 1995.

Respectfully submitted,

Lewis Katz, Chairman
Kenneth D. McPherson
Members of Compensation and Stock
Option Committee

226
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

The Committee currently is composed of directors McPherson and Katz, neither
of whom is otherwise affiliated with BGII. The general functions of the
Committee include approval (or recommendation to the Board of Directors) of
the compensation arrangements for senior management, directors and other key
employees, review of benefit plans in which officers and directors are
eligible to participate, and periodic review of the equity compensation plans
of BGII and the grants under such plans. During 1995, the Committee held 2
formal meetings and acted by written consent on one occassion.

Waters, McPherson, McNeill, P.C., a law firm of which Mr. McPherson, a
director of BGII, is Senior Lawyer and Chairman, provides legal services to
BGII, primarily relating to (i) litigation involving BGII's former distributor
in Louisiana (ii) the WMS and Alliance Merger Agreements; and (iii) overall
regulatory compliance for BGII. As of December 31, 1995, BGII was indebted to
the firm for approximately $480,000 for legal services rendered and
disbursements. During the year ended December 31, 1995, Waters, McPherson,
McNeill, P.C. fee bills paid amounted to approximately $1.5 million for legal
services provided to BGII. BGII has retained and plans to continue to retain
the firm in 1996.

227
<PAGE>

PERFORMANCE GRAPH

[GRAPH APPEARS HERE]

<TABLE>
COMPARISON OF 49 MONTH TOTAL RETURN*
AMONG BALLY GAMING INTERNATIONAL, INC. THE RUSSELL 2000 INDEX AND A PEER GROUP**

<CAPTION> BALLY GAMING
Measurement period INTERNATIONAL, INC. PEER GROUP** THE RUSSELL 2000
(Fiscal year Covered) INDEX Index INDEX
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
Measurement PT -
11/91 $ 100 $ 100 $ 100

FYE 12/91 $ 91 $ 117 $ 103
FYE 12/92 $ 95 $ 225 $ 122
FYE 12/93 $ 123 $ 230 $ 145
FYE 12/94 $ 76 $ 131 $ 143
FYE 12/95 $ 58 $ 112 $ 183
</TABLE>

* $100 invested on November 11, 1991 (the date on which the BGII Common Stock
was first publicly traded) in BGII Common Stock; $100 invested October 31,
1991 in the Russell 2000 Index and $100 invested on November 11, 1991 in a
Peer Group comprised of the companies indentified in the following footnote.
This 49-month period is used because it represents the period over which BGII
has been a public company. Total return includes reinvestment of dividends
(if applicable). Returns for BGII are not necessarily indicative of future
performance. Dates are for fiscal years ended on December 31 in each of the
years indicated.

** Peer Group includes WMS Industries, Inc., GTech Holdings Corporation, Video
Lottery Technologies, Inc. and International Game Technology. Each Peer Group
company is engaged in the manufacture and sale of gaming products. The
returns of each company forming part of the Peer Group are weighted based on
their stock market capitalization.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF BGII

Waters, McPherson, McNeill, P.C., a law firm of which Mr. McPherson, a
director of BGII, is Senior Lawyer and Chairman, provides legal services to
BGII, primarily relating to litigation involving BGII's former distributor in
Louisiana. As of December 31, 1995, BGII was indebted to the firm for
approximately $480,000 for legal services rendered and disbursements. During
the year ended December 31, 1995, Waters, McPherson, McNeill, P.C., fee bills
paid amounted to approximately $1.5 million for legal services provided to
BGII. BGII has retained and plans to continue to retain the firm in 1996.

Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, a law firm of
which Mr. Carella, a director of BGII, is Managing Partner, provided legal
services to BGII in 1995.

228
<PAGE>

LEGAL OPINIONS

The legality of the issuance of Alliance Common Stock offered hereby will be
passed upon for Alliance by Schreck, Jones, Bernhard, Woloson and Godfrey, Las
Vegas, Nevada. Certain tax matters have been passed upon for Alliance by
Milbank, Tweed, Hadley & McCloy, New York, New York.

EXPERTS

The consolidated financial statements of Alliance Gaming Corporation and
subsidiaries as of June 30, 1995 and 1994, and for each of the years in the
three-year period ended June 30, 1995 included herein have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP refers to a change in the method of accounting for
income taxes, effective July 1, 1993.

The consolidated balance sheets of BGII as of December 31, 1994 and 1995,
and the consolidated statements of operations, stockholders' equity and cash
flows, and the financial statement schedule, for each of the three years in
the period ended December 31, 1995 included herein have been included herein
in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing. As noted under "The Merger--Opinion of BGII Financial Advisor",
Coopers & Lybrand L.L.P. neither examined nor compiled nor had any other
involvement with the preparation of the accompanying prospective financial
information and accordingly does not express an opinion or any other form of
assurance with respect thereto, nor do they assume any responsibility for the
projections."

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Alliance expects representatives of KPMG Peat Marwick LLP to be present at
the Alliance Annual Meeting at which time they will respond to appropriate
questions submitted by stockholders of Alliance and may make such statements
as they may desire. BGII expects representatives of Coopers & Lybrand L.L.P.
to be present at the BGII Annual Meeting at which time they will respond to
appropriate questions submitted by stockholders of BGII and may make such
statements as they may desire.

229
<PAGE>

STOCKHOLDER PROPOSALS

Any Alliance stockholder who wishes to submit a proposal in respect of
matters to be acted upon at Alliance's next Annual Meeting of Stockholders is
required to submit the proposal to Alliance on or before November 11, 1996,
for inclusion, if appropriate, in Alliance's proxy statement and the form of
proxy relating to Alliance's next Annual Meeting.

If the Merger is not consummated, stockholder proposals intended to be
submitted at the next Annual Meeting of Stockholders of BGII must be received
by BGII not later than November 11, 1996 for inclusion, if appropriate, in
BGII's proxy statement and the form of proxy relating to BGII's next Annual
Meeting.

By order of the Board of Directors,
ALLIANCE GAMING CORPORATION

David Johnson
Secretary

By order of the Board of Directors,
BALLY GAMING INTERNATIONAL, INC.

Neil E. Jenkins
Secretary

230
<PAGE>

INDEX TO FINANCIAL STATEMENTS

ALLIANCE GAMING CORPORATION

<TABLE>
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report.............................................. F-1
Consolidated Balance Sheets as of June 30, 1994 and 1995.................. F-2
Consolidated Statements of Operations for the fiscal years ended June 30,
1993, 1994 and 1995...................................................... F-4
Consolidated Statements of Cash Flows for the fiscal years ended June 30,
1993, 1994 and 1995...................................................... F-5
Consolidated Statements of Stockholders' Equity for the fiscal years ended
June 30, 1993, 1994 and 1995............................................. F-6
Notes to Consolidated Financial Statements................................ F-7
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets as of June 30, 1995 and
December 31, 1995........................................................ F-22
Unaudited Condensed Consolidated Statements of Operations for the six
months ended
December 31, 1994 and 1995............................................... F-23
Unaudited Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1994 and 1995.................................. F-24
Notes to Unaudited Condensed Consolidated Financial Statements ........... F-25
</TABLE>

INDEX TO FINANCIAL STATEMENTS

BALLY GAMING INTERNATIONAL, INC.

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of independent accountants.................................... F-31
Consolidated balance sheets, December 31, 1995 and 1994.............. F-32
Consolidated statements of operations for the years ended December
31, 1995, 1994 and 1993............................................. F-33
Consolidated statements of stockholders' equity for the years ended
December 31, 1995, 1994 and 1993.................................... F-34
Consolidated statements of cash flows for the years ended December
31, 1995, 1994 and 1993............................................. F-35
Notes to consolidated financial statements........................... F-36-F-66
</TABLE>

231
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders Alliance Gaming Corporation

We have audited the consolidated balance sheets of Alliance Gaming
Corporation and subsidiaries as of June 30, 1995 and 1994 and the related
consolidated statements of operations, stockholders equity and cash flows for
each of the years in the three-year period ended June 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Alliance
Gaming Corporation and subsidiaries as of June 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1995, in conformity with generally accepted
accounting principles.

As discussed in Note 6 to the consolidated financial statements, effective
July 1, 1993 Alliance Gaming Corporation adopted the provisions of Financial
Accounting Standards Board's Statement of Financial Accounting Standard No.
109, Accounting for Income Taxes.

KPMG Peat Marwick LLP

Las Vegas, Nevada
September 1, 1995

F-1
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
A S S E T S 1994 1995
----------- -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 37,085 $ 13,734
Securities available for sale............................... 12,489 23,680
Receivables, net............................................ 5,924 3,316
Inventories................................................. 661 714
Prepaid expenses............................................ 4,420 4,148
Refundable income taxes..................................... 361 361
Other....................................................... 30 156
-------- --------
Total current assets....................................... 60,970 46,109
-------- --------
Property and equipment:
Land and improvements....................................... 3,229 17,296
Building and improvements................................... 4,286 8,822
Gaming equipment............................................ 30,395 36,396
Furniture, fixtures and equipment........................... 9,632 11,582
Leasehold improvements...................................... 5,222 5,372
Construction in progress.................................... 212 30
-------- --------
52,976 79,498
Less accumulated depreciation and amortization.............. 24,293 29,146
-------- --------
Property and equipment, net................................ 28,683 50,352
-------- --------
Other assets:
Receivables, net............................................ 4,609 5,309
Excess of costs over net assets of an acquired business, net
of accumulated amortization of $295 (1994) and $585 (1995). 3,789 3,842
Intangible assets, net of accumulated amortization of $4,145
(1994) and $5,516 (1995)................................... 13,527 12,405
Deferred tax assets......................................... 1,081 1,399
Investment in minority owned subsidiary..................... 2,000 1,585
Other....................................................... 4,757 5,347
-------- --------
Total other assets......................................... 29,763 29,887
-------- --------
$119,416 $126,348
======== ========
</TABLE>

(Continued)

See accompanying notes to consolidated financial statements.

F-2
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS--(CONTINUED)

JUNE 30, 1994 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
L I A B I L I T I E S A N D
S T O C K H O L D E R S' E Q U I T Y 1994 1995
------------------------------------ -------- --------
<S> <C> <C>
Current liabilities:
Current maturities of long term debt........................ $ 1,504 $ 3,995
Accounts payable............................................ 1,661 1,758
Accrued expenses, including related parties of $312 (1994)
and $931 (1995)............................................ 6,879 8,804
-------- --------
Total current liabilities.................................. 10,044 14,557
Long term debt, less current maturities...................... 89,222 97,402
Deferred tax liabilities..................................... 1,218 1,205
Other liabilities............................................ 3,587 2,556
-------- --------
Total liabilities.......................................... 104,071 115,720
-------- --------
Commitments and contingencies
Minority interest............................................ 246 643
Stockholders' equity:
Common stock, $.10 par value; authorized 175,000,000 shares;
issued 10,505,928 shares (1994) and 11,654,150 shares
(1995)..................................................... 1,051 1,165
Special stock, $0.10 par value; authorized 10,000,000
shares; issued 1,333,333 (1994 and 1995)................... 133 133
Paid-in capital............................................. 26,716 32,134
Unrealized loss on securities available for sale............ (421) (316)
Accumulated deficit......................................... (12,380) (23,131)
-------- --------
Total stockholders' equity................................. 15,099 9,985
-------- --------
$119,416 $126,348
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES:
Gaming
Routes.......................... $ 96,282 $ 102,830 $ 106,827
Casino and gaming arcades....... 12,526 15,679 21,287
Food and beverage sales.......... 4,184 4,480 3,847
Net equipment sales.............. 99 65 27
------------- ------------- -------------
113,091 123,054 131,988
------------- ------------- -------------
COSTS AND EXPENSES:
Cost of gaming:
Routes.......................... 72,614 76,332 79,875
Casino and taverns.............. 8,667 11,871 11,436
Cost of food and beverage........ 2,876 3,084 2,795
Cost of equipment sales.......... 49 20 12
Selling, general & administra-
tive............................ 12,667 13,555 14,633
Business development expenses.... 900 1,192 7,843
Corporate expenses............... 6,191 7,882 9,735
Bad debt expense................. 461 705 400
Loss on abandoned small casinos.. -- 3,713 --
Loss on abandoned taverns........ -- 2,638 --
Depreciation and amortization.... 8,718 9,530 9,520
------------- ------------- -------------
113,143 130,522 136,249
------------- ------------- -------------
Operating loss.................... (52) (7,468) (4,261)
Other income (expense):
Interest income.................. 998 2,084 2,798
Interest expense................. (5,046) (6,830) (8,133)
Minority share of income......... -- (506) (397)
Equity in income of affiliate.... -- -- 31
Other, net....................... 450 (167) (524)
------------- ------------- -------------
Loss before income taxes.......... (3,650) (12,887) (10,486)
Income tax expense................ -- (241) (265)
------------- ------------- -------------
Net loss.......................... $ (3,650) $ (13,128) $ (10,751)
============= ============= =============
Net loss per common share......... $ ( 0.38) $ (1.28) $ (0.95)
============= ============= =============
Weighted average common shares
outstanding...................... 9,696 10,251 11,300
============= ============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 1993, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $ (3,650) $(13,128) $ (10,751)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................. 8,718 9,530 9,520
Loss on abandoned casinos..................... -- 3,713 --
Loss on abandoned taverns..................... -- 2,638 --
Write-off of other assets..................... 149 1,817 2,796
Provision for losses on receivables........... 461 705 400
Amortization of debt discounts................ 265 292 297
Undistributed earnings of affiliate........... -- -- (31)
Non-cash stock compensation expense........... -- -- 1,313
Net change in operating assets and liabilities:
(Increase) decrease in:
Inventories................................... (233) 78 (40)
Prepaid expenses.............................. 1,475 (519) 381
Refundable income taxes....................... 766 (361) --
Other......................................... 305 254 (126)
Increase (decrease) in:
Accounts and slot contracts payable........... (2,378) 269 (447)
Accrued and deferred income taxes............. -- 137 (137)
Other liabilities, including minority
interest..................................... (153) 511 397
Accrued expenses.............................. 184 3,126 (2,615)
-------- -------- ---------
Net cash provided by operating activities.... 5,909 9,062 957
-------- -------- ---------
Cash flows from investing activities:
Additions to property and equipment............ (5,092) (5,385) (8,887)
Proceeds from sale of property and equipment... 257 1,466 351
Additions to receivables....................... (8,715) (18,801) (8,970)
Cash collections on receivables................ 7,925 17,541 10,315
Net cash provided by acquisition of business... -- -- 2,481
Acquisition of securities available for sale... -- (12,910) (11,086)
Acquisition of partnership interests........... -- (2,000) (1,585)
Additions to intangible assets................. (77) (5,179) (390)
Additions to other long-term assets............ (3,296) (2,031) (3,877)
-------- -------- ---------
Net cash used in investing activities........ (8,998) (27,299) (21,648)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from long-term debt, net of expenses.. 1,941 81,984 --
Issuance of common stock warrants.............. 559 116 --
Reduction of long-term debt.................... (2,167) (41,776) (3,125)
Issuance of special stock, net of costs........ -- 4,799 --
Issuance of common stock....................... 2,097 619 465
-------- -------- ---------
Net cash provided by (used in) financing
activities.................................. 2,430 45,742 (2,660)
-------- -------- ---------
Cash and cash equivalents:
(Decrease) increase for year................... (659) 27,505 (23,351)
Balance, beginning of year..................... 10,239 9,580 37,085
-------- -------- ---------
Balance, end of year......................... $ 9,580 $ 37,085 $ 13,734
======== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 30, 1993, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED
TOTAL COMMON STOCK SPECIAL STOCK EARNINGS UNREAL.
STOCKHOLDERS -------------- -------------- PAID-IN (ACCUM. LOSS ON
EQUITY SHARES DOLLARS SHARES DOLLARS CAPITAL DEFICIT) SECURITIES
------------ ------ ------- ------ ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1992. $ 23,661 9,409 $ 942 -- $ -- $18,320 $ 4,398 $ --
Net loss............... (3,650) -- -- -- -- -- (3,650) --
Common stock warrants
issued................ 559 -- -- -- -- 559 -- --
Shares issued upon
exercise of options... 2,096 591 59 -- -- 2,038 -- --
-------- ------ ------ ----- ---- ------- -------- -----
Balances, June 30, 1993. 22,666 10,000 1,001 -- -- 20,917 748 --
Net loss............... (13,128) -- -- -- -- -- (13,128) --
Shares issued for
acquisitions.......... 249 112 11 -- -- 238 -- --
Common stock warrants
issued................ 116 -- -- -- -- 116 -- --
Cost of private
placement............. (201) -- -- -- -- (201) -- --
Net change in
unrealized loss on
securities available
for sale.............. (421) -- -- -- -- -- -- (421)
Shares issued for
capital
infusion.............. 4,999 -- -- 1,333 133 4,866 -- --
Shares issued upon
exercise of options... 819 394 39 -- -- 780 -- --
-------- ------ ------ ----- ---- ------- -------- -----
Balances, June 30, 1994. 15,099 10,506 1,051 1,333 133 26,716 (12,380) (421)
Net loss............... (10,751) -- -- -- -- -- (10,751) --
Shares issued for
acquisitions.......... 3,754 712 71 -- -- 3,683 -- --
Compensatory stock
issued................ 1,313 250 25 -- -- 1,288 -- --
Net change in
unrealized loss on
securities available
for sale.............. 105 -- -- -- -- -- -- 105
Shares issued upon
exercise of options... 465 186 18 -- -- 447 -- --
-------- ------ ------ ----- ---- ------- -------- -----
Balances, June 30, 1995. $ 9,985 11,654 $1,165 1,333 $133 $32,134 $(23,131) $(316)
======== ====== ====== ===== ==== ======= ======== =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS

Description of business

Alliance Gaming Corporation and its subsidiaries (collectively, the
"Company") are presently engaged in gaming device route operations in Nevada
and in the greater New Orleans, Louisiana area; casino operations in Nevada
and Mississippi; and the design, manufacture and refurbishment of gaming
devices.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of
Alliance Gaming Corporation, its wholly-owned subsidiaries and indirect
subsidiaries and its partially owned, controlled subsidiaries. In the case of
Video Services, Inc. ("VSI"), the Company owns 490 shares of class B voting
stock, which constitutes 100% of the voting stock, of VSI. The Company is
entitled to receive 71% of dividends declared by VSI, if any, at such time
that such dividends are declared. In July 1994, the Company acquired a 45%
limited partnership interest in the Rainbow Casino-Vicksburg Partnership.
Accordingly, the Company accounted for its investment in this partnership
under the equity method until March 29, 1995 at which time the Company
increased its partnership interest and assumed the general partnership
position (see Note 11). Effective March 29, 1995, the results of operations of
the Rainbow Casino have been included in the accompanying consolidated
financial statements. All significant intercompany accounts and transactions
have been eliminated.

Revenue recognition

In accordance with industry practice, the Company recognizes gaming revenues
as the net win from route, casino and tavern operations, which is, for gaming
devices, the difference between coins and currency deposited into the devices
and payments to customers and, for other games, the difference between gaming
wins and losses. The Company recognizes total net win from gaming devices as
revenues for gaming routes which operate under revenue-sharing arrangements
and revenue-sharing payments as a cost of gaming routes. The Company
recognizes revenue from parts and equipment sales to outside purchasers when
the products are shipped.

Location rent expense

For financial statement purposes, the Company recognizes expenses for fixed
periodic rental payments (including scheduled increases) made in connection
with route operation space lease arrangements or sublease agreements on a
straight line basis over the term of the agreement including any extension
periods which are expected to be exercised. Contingent periodic rental
payments are expensed in the period incurred.

Cash and cash equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Such
investments of $29,799,000 (1994) and $5,238,000 (1995) are included in cash
and cash equivalents and are carried at cost, which approximates market value.

Securities available for sale

Effective January 1, 1994, the Company adopted Financial Accounting Standard
No. 115. For fiscal years beginning after December 15, 1993, Statement 115
requires that, except for debt securities classified as "held-to-

F-7
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995
maturity" securities, investments in debt and equity securities should be
reported at fair market value. The Company has designated certain securities
as being available for sale. Securities are designated as available for sale
at the time of their purchase. The Company determines which securities are
available for sale by evaluating whether such securities would be sold in
response to liquidity needs, asset/liability management and other factors.
Securities available for sale are recorded at market value with the resulting
unrealized gains and losses being recorded, net of tax, as a component of
stockholders' equity. Gains or losses on these securities are determined using
the specific identification method.

Inventories

Inventories are stated at the lower of cost or market and are determined by
the first-in, first out method.

Property and equipment

Property and equipment are stated at cost and are depreciated and amortized
over their estimated useful lives or lease terms, if less, using the straight
line method as follows:

<TABLE>
<S> <C>
Building and improvements...................................... 31-39 years
Gaming equipment............................................... 5-7 years
Furniture, fixtures and equipment.............................. 3-10 years
Leasehold improvements......................................... 5-20 years
</TABLE>

Excess of costs over net assets of an acquired business

Excess of costs over net assets of an acquired business is the excess of the
cost over the value of net tangible assets of an acquired business and is
generally amortized on the straight-line method over a period of 40 years. In
the case of the Company's majority-owned subsidiary, Native American
Investments, Inc., where the assets acquired are largely intangible, the
Company has elected a 10-year amortization period representing the estimated
life of the rights acquired, consisting principally of contracts to conduct
gaming operations on Indian lands.

At each balance sheet date, management evaluates the realizability of
goodwill based on expectations of non-discounted cash flows and operating
income for each subsidiary having a material goodwill balance. Based upon its
most recent analysis, management believes that no material impairment of
goodwill exists at June 30, 1995.

Intangible assets

Intangible assets consist primarily of costs associated with the acquisition
of location leases which are capitalized and amortized using the straight-line
method over the terms of the leases, ranging from one to 40 years, with an
average life of approximately 11 years. Intangible assets for fiscal 1995
includes approximately $4,547,000 of commissions, discounts and other
capitalized costs related to the issuance of the Company's 7.5% Convertible
Subordinated Debentures due 2003, net of approximately $957,000 of accumulated
amortization. At June 30, 1994, intangible assets includes $4,993,000 of such
costs, net of $405,000 of accumulated amortization. Such amounts are being
amortized over the term of the debentures.

The carrying value of intangible assets is periodically reviewed by
management and impairment losses are recognized when the expected non-
discounted future operating cash flows derived from such intangible assets are
less than their carrying value.

F-8
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

Other Assets

Other assets includes assets held for sale, long-term deposits and other
non-current assets. In fiscal 1993, the Company paid to certain property
owners a $2,500,000 refundable deposit to operate gaming devices at their
location. Additionally, other assets are presented net of valuation allowances
of $1,763,000 and $631,000 at June 30, 1994 and 1995, respectively.

Loss per share of common stock

Loss per share of common stock has been computed based on the weighted
average number of shares of common stock outstanding. Fully diluted earnings
per share is not presented because the effect would be anti-dilutive.

Income taxes

In February 1992, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 109 Accounting for Income Taxes. Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years which those
temporary differences are expected to be recovered or settled. Under Statement
109, the effect on deferred assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Effective
July 1, 1993, the Company adopted Statement 109. The Company previously used
the asset and liability method under Statement 96.

Reclassifications

Certain reclassifications have been made to prior year financial statements
to conform with the current year presentation.

2. RECEIVABLES

The Company's gaming route operations from time to time involve making loans
to location operators in order to participate in revenues over extended
periods of time. The loans, made for build-outs, tenant improvements and
initial operating expenses are generally secured by the personal guarantees of
the operators and the locations' assets. The majority of the loans are
interest bearing and are expected to be repaid over a period of time not to
exceed the life of the revenue sharing arrangement. The loans have varying
payment terms, with weekly payment amounts ranging from $200 to $1,440 and
monthly payment amounts ranging from $200 to $18,780. Interest rates on the
loans range from prime plus 1.50% to stated rates of 12% with various due
dates ranging from July 1995 to April 2007. The loans are expected to be
repaid from the locations' cash flows or proceeds from the sale of the
leaseholds.

F-9
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

Receivables at June 30 consist of the following:

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes receivable-location operators...................... $ 8,319 $ 7,760
Other receivables........................................ 2,214 865
------- -------
10,533 8,625
Less current amounts..................................... (5,924) (3,316)
------- -------
Long-term receivables, excluding current amounts......... $ 4,609 $ 5,309
======= =======
</TABLE>

Receivables are presented net of an allowance for doubtful accounts of
$1,389,000 and $1,659,000 as of June 30, 1994 and 1995, respectively. The
allowance is allocated between current and long-term receivables on a pro rata
basis related to notes receivable from location operators.

During fiscal 1994, the Company cancelled certain sublease agreements as a
result of defaults by payors in making payments and acquired title to the
assets and operating rights to the tavern locations in exchange for releases
of the customers' debt owed to the Company. During fiscal 1994, interest
income of approximately $48,000 was recognized on these receivables. Total
interest income of $130,000 would have been recognized if the receivables had
been current in accordance with their original terms. The total initial
investment in these tavern locations of approximately $2,011,000 includes the
net receivables of approximately $1,362,000 and other assets of $649,000. No
such transactions were completed in fiscal 1995. Management of the Company has
determined the fair value of the locations' assets from knowledge of sales of
comparable establishments and expertise acquired from operating its gaming
devices at similar locations. Due to the Company's decision to dispose of the
currently operated small independent tavern operations, certain reserves and
write downs were recognized in fiscal 1994 results of operations.

Management believes properly managing the disposal of these operations will
protect the Company's existing contractual arrangements from the tavern
locations as well as assure their continued operation while preserving the
Company's investment. Management cannot estimate when or how many of these
locations will be obtained and subsequently disposed.

3. LOSS ON ABANDONMENT OF SMALL CASINOS AND TAVERNS

In fiscal 1994, due to continuing losses from operations, negative cash
flows and incompatibility with the Company's long-term growth strategy, the
Company's Board of Directors resolved to 1) exit the downtown Las Vegas gaming
market and 2) dispose of the currently operated small independent taverns on
commercially reasonable terms as market conditions warrant.

As a result of the decision to exit the downtown Las Vegas gaming market,
the Company substantially reduced operations at both the Trolley Stop Casino
and Miss Lucy's Gambling Hall & Saloon. Included in the 1994 statements of
operations are total expenses of approximately $3,246,000 related to these
actions. The total charge included approximately $488,000 related to the
write-down of assets and approximately $2,758,000 representing primarily the
present value of the future lease payments net of estimated future sublease
income.

F-10
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

The decision to withdraw from the tavern business resulted in expenses of
approximately $2,638,000 being recognized in fiscal 1994. Approximately
$1,813,000 of the total amount was related to the write down of assets while
approximately $825,000 represented primarily the present value of the future
lease payments net of estimated future sublease income. The Company has
entered into an agreement to sell all of its tavern locations to an
unaffiliated third party. The sale is contingent upon, among other conditions,
approval by Nevada gaming authorities.

In addition to the items noted above, the Company's lease on the Mizpah
Hotel and Casino has a remaining term of approximately 7.5 years with an
option on the Company's behalf to terminate the lease arrangement with 120
days written notice at any time after December 31, 1995. The Company has
notified the landlord of the Mizpah of its intention to exercise the
termination clause of the lease at that time. As a result of this decision,
the Company recognized an expense of $467,500 in fiscal 1994.

4. DEBT

Long-term debt at June 30 consists of the following:

<TABLE>
<CAPTION>
1994 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
7.5% Convertible subordinated debentures due 2003,
unsecured................................................ $85,000 $ 85,000
Due to stockholder, net of discount of $983,709 (1994) and
$747,619 (1995), secured by the assets of VSI............ 4,390 3,309
Hospitality Franchise Systems, secured by the assets of
Rainbow
Vicksburg................................................ -- 9,065
Other, secured by related equipment....................... 1,336 4,023
------- --------
90,726 101,397
Less current maturities................................... 1,504 3,995
------- --------
Long-term debt, less current maturities................... $89,222 $ 97,402
======= ========
</TABLE>

Accrued interest of approximately $1,893,000 (1994) and $1,991,000 (1995) is
included in accrued expenses in the Consolidated Balance Sheets. Included in
these amounts are $30,343 (1994) and $27,813 (1995) due to affiliates of
Alfred H. Wilms, principal stockholder and member of the Board of Directors of
the Company, related to funding of VSI's gaming device route operations.

In September 1993, the Company completed the private placement of
$85,000,000 aggregate principal amount of its 7.5% Convertible Subordinated
Debentures due 2003. The debentures pay interest semi-annually on March 15 and
September 15. These debentures are convertible at any time into shares of the
Company's common stock at a conversion price of $10 per share (equivalent to a
conversion rate of 100 shares per $1,000 principal amount of debentures),
subject to adjustment. Upon certain defined events, including a change of
control, holders of the debentures have the right to require the Company to
redeem the debentures for cash at the rate of 101% of principal amount plus
accrued interest. The debentures are redeemable at predetermined redemption
prices, in whole or in part, at the option of the Company for cash at any time
on and after September 15, 1995 if the market price of the common stock
exceeds 250% of the conversion price for 20 out of any 30 consecutive trading
days or at any time on and after September 15, 1996.

F-11
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

In March 1992, Alfred H. Wilms, director and principal stockholder (and then
Chairman of the Board of Directors and Chief Executive Officer) of the
Company, committed to provide or cause others to provide a $6,500,000 five
year subordinated loan to VSI, the Company's controlled subsidiary which loan
has been funded in full and is secured by a subordinated interest in all of
VSI's present and future personal property. Until August 1993, the loan
required quarterly payments of interest. In August 1993, the loan agreement
was amended to extend the maturity of the loan to September 1, 1998 and to
require quarterly payments of principal and interest. Interest on the loan
accrues at the rate of 200 basis points above the 90-day London Inter Bank
Offered Rate, adjusted quarterly. At June 30, 1995 the interest rate for the
note was 8.2275%.

During 1995, Hospitality Franchise Systems, Inc. ("HFS") agreed to loan
$7,750,000 to the Company's majority controlled subsidiary RCVP in connection
with the construction of the Rainbow Casino. The loan amount was subsequently
increased to $10,000,000. The note bears interest at 7.5% per annum and
requires monthly payments of principal and interest over an 24 month period.
In exchange for funding this loan, HFS is also entitled to receive a monthly
royalty fee equal to 12% of the casino's gaming revenues. Included in the
consolidated results of operations for fiscal 1995 are approximately $810,000
of such royalties.

Maturities of long-term debt for each of the five years ending subsequent to
June 30, 1995 are as follows:

<TABLE>
<S> <C>
1996........................................................... $ 3,995,000
1997........................................................... 3,927,000
1998........................................................... 2,825,000
1999........................................................... 1,670,000
2000........................................................... 1,723,000
Thereafter..................................................... 87,257,000
</TABLE>

5. STOCKHOLDERS' EQUITY

The Company's Articles of Incorporation authorize the issuance of up to
10,000,000 shares of special stock, par value $.10 per share ("Special
Stock"). Special Stock consists of non-voting stock where no holder of the
Special Stock shall be entitled to vote at any meeting of stockholders or
otherwise, except as otherwise may be specifically provided by law or as
approved by the Board of Directors in certain limited circumstances at the
time of the stock issuance. The Special Stock may be issued from time to time
in one or more series, each series having such designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions as shall be stated and expressed in the resolution
providing for the issuance of Special Stock or any series thereof adopted by
the Board of Directors. The Board has designated an initial series of Special
Stock as "Non-voting Junior Convertible Special Stock" which consists of
1,333,333 shares (the "Initial Series"). The Company's Articles of
Incorporation provide that the Initial Series is intended to have the same
rights as the Common Stock except that the Initial Series has no voting rights
and a $.01 per share liquidation preference. At June 30, 1995, only the
Initial Series of Special Stock was outstanding. The Initial Series is
convertible on a share for share basis into shares of Common Stock of the
Company.

In 1984, the Company created an Employee Stock Option Plan (the "1984 Plan")
that provides for the issuance of up to 2,000,000 shares of common stock to
Company employees and directors. At June 30, 1995, there were incentive stock
options covering 207,000 shares and non-qualified stock options covering
10,000 shares outstanding under the 1984 Plan.

F-12
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

At June 30, 1994 there were incentive stock options covering 376,000 shares
and non-qualified stock options covering 15,000 shares outstanding under the
1984 Plan. Generally, options are granted at the fair market value of the
Company's Common Stock at the date of the grant and become exercisable over
five years.

In 1992, the Company created the 1991 Long Term Incentive Plan (the
"Incentive Plan") that, as amended, provides for the issuance of up to
3,000,000 shares of common stock to Company employees and directors. At June
30, 1995 there were incentive stock options covering 2,400,834 shares
outstanding under the Incentive Plan. At June 30, 1994 there were incentive
stock options covering 1,099,500 shares outstanding under the Incentive Plan.
Generally, options are granted at the fair market value of the Company's
Common Stock at the date of the grant and become exercisable over five years.

Transactions involving stock options are summarized as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Balance, June 30, 1992........................... 1,546,150 1.375- 8.750
Granted......................................... 300,000 5.875- 8.750
Exercised....................................... (590,700) 1.375- 4.875
Cancelled....................................... (3,600) 3.875
---------
Balance, June 30, 1993........................... 1,251,850 1.375- 8.750
Granted......................................... 690,500 6.500-10.125
Exercised....................................... (393,850) 1.625- 4.000
Cancelled....................................... (58,000) 2.125- 4.000
---------
Balance, June 30, 1994........................... 1,490,500 1.375-10.125
Granted......................................... 1,598,334 5.750- 8.000
Exercised....................................... (186,000) 1.375- 4.000
Cancelled....................................... (285,000) 3.500-10.000
---------
Balance, June 30, 1995........................... 2,617,834 1.625- 9.250
=========
Exercisable at June 30, 1995..................... 825,600 1.625- 9.250
=========
</TABLE>

Also at June 30, 1995, Mr. Wilms held warrants to purchase 2,000,000 shares
of Common Stock at $2.50 per share, subject to adjustment. These warrants were
issued in connection with the funding of the $6,500,000 five year subordinated
loan for VSI.

Upon closing of the private placement of the Company's 7.5% Convertible
Subordinated Debentures and the $5 million equity investment by Kirkland-Ft.
Worth Investment Partners, L.P. ("Kirkland") on September 21, 1993, the
Company issued warrants to purchase up to 2,750,000 shares of Common Stock at
$1.50 per share to Kirkland. These warrants are exercisable one year after the
grant date and only after the market price of the Common Stock reaches certain
predetermined levels. Under the same terms, the Company issued warrants to
purchase 1,250,000 and 30,000 shares of Common Stock to Gaming Systems
Advisors, L.P. ("GSA") and L.H. Friend, Weinress & Frankson, Inc. ("Friend"),
respectively. The Company also issued warrants to purchase 500,000 and 250,000
shares of Common Stock at $8.25 per share to the initial purchasers of the
Debentures,

F-13
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Oppenheimer &
Co., Inc. ("Oppenheimer"), respectively. Under the same general terms and
conditions, DLJ may earn warrants to purchase an additional 250,000 shares of
the Company's Common Stock. In fiscal 1995, in connection with the
commencement of their employment with the Company, Steve Greathouse, the
Company's Chairman of the Board, President and Chief Executive Officer and Dr.
Craig Fields, Vice Chairman of the Board were each granted warrants to
purchase 250,000 shares of common stock on the same terms as the Kirkland
warrants described above.

As of June 30, 1995, none of the warrants granted to Kirkland, GSA, Friend,
Greathouse or Fields are exercisable.

6. INCOME TAXES

The Company generally accounts for income taxes and files its income tax
returns on a consolidated basis. However, VSI, in which the Company holds 100%
of the voting interests, has previously filed its income tax returns on a
separate basis and was not consolidated for tax purposes. During the quarter
ended December 31, 1994, the Company determined that VSI can be consolidated
for tax purposes. As a result, the Company filed for and has received a refund
of estimated income taxes paid for fiscal year 1994.

Effective July 1, 1993, the Company adopted Financial Accounting Standard
No. 109 Accounting for Income Taxes, prospectively. Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.

F-14
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

The federal and state income tax effects of temporary differences that give
rise to significant portions of the deferred tax assets and liabilities at
June 30, 1995 and 1994 are presented below.

<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Net Operating Loss Carryforwards....................... $ 8,495 $ 12,470
Inventory Obsolescence Reserve......................... 578 179
Receivables, Bad Debt Allowance........................ 472 564
Organization and Start-up Costs........................ 267 172
Reserves for abandoned projects........................ 1,577 1,356
Other.................................................. 307 566
-------- --------
Total gross deferred tax assets......................... 11,696 15,307
Less: Valuation allowance............................... (10,615) (13,908)
-------- --------
Net deferred tax assets................................. $ 1,081 $ 1,399
-------- --------
Deferred tax liabilities:
Property and equipment, principally due to depreciation
differences........................................... 1,218 1,399
-------- --------
Total gross deferred tax liabilities (in 1995, $194 is
included in accrued expenses).......................... 1,218 1,399
-------- --------
Net deferred tax assets (liabilities)................... $ (137) $ --
======== ========
</TABLE>

The valuation allowance for deferred tax assets as of June 30, 1994 was
$10,615,000. The net change in the total valuation allowance for the twelve
months ended June 30, 1995 was an increase of $3,293,000.

At June 30, 1995, the Company has estimated net operating loss carryforwards
for federal income tax purposes of approximately $36,678,000 which are
available to offset future federal taxable income, if any, expiring in the
years 2007 through 2010.

A reconciliation of the Company's provision for income tax expense as
compared to the tax benefit calculated by applying the statutory federal tax
rate to the loss before income taxes follows.

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Statutory Rate........................................... $(4,202) $(3,565)
Meals, entertainment..................................... 3 27
State Income Taxes....................................... 33 67
Tax losses for which no current benefit is recognized.... 4,385 3,736
Alternative Minimum Tax.................................. 22 --
------- -------
$ 241 $ 265
======= =======
</TABLE>

F-15
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

The components of the Company's income tax expense for the year ended June
30, 1995 are:

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Federal--current........................................... $ 73 $ --
State--current............................................. 31 102
Federal--deferred.......................................... 118 163
State--deferred............................................ 19 --
------- -------
Total.................................................... $ 241 $ 265
======= =======
</TABLE>

7. STATEMENTS OF CASH FLOWS

The following supplemental information is related to the Consolidated
Statements of Cash Flows. In fiscal 1995, the Company reclassified
approximately $212,000 from receivables to intangible assets and reclassified
other assets of approximately $1,099,000 to property and equipment
($1,074,000) and receivables ($25,000). Additionally, numerous non-cash items
related to the Company's acquisition of the general partnership interest in
RCVP impacted the statement of cash flows. The most significant of these non-
cash items included non-cash additions to property, plant and equipment of
approximately $23,400,000 and additions to total debt of approximately
$13,839,000. See also Note 11.

In fiscal 1994, the Company reclassified approximately $1,445,000 of
accounts receivable to intangible assets ($1,393,000) and property and
equipment ($52,000) on a net basis.

Payments for interest expense in 1993, 1994 and 1995 were approximately
$4,408,000, $4,690,000 and $7,102,000 respectively.

8. INTERIM FINANCIAL INFORMATION (UNAUDITED)

Following is the unaudited quarterly results of the Company for the years
ended June 30, 1994 and 1995. This information is not covered by the
Independent Auditors' Report.

<TABLE>
<CAPTION>
PRIMARY
NET INCOME
TOTAL (LOSS) (LOSS) PER
REVENUES INCOME SHARE(1)
---------------- ----------------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
1994
First Quarter........ $ 28,419 $ (1,376) $ (.14)
Second Quarter....... 30,566 (1,221) (.12)
Third Quarter........ 31,807 847 .08
Fourth Quarter....... 32,262 (11,378) (1.09)
1995
First Quarter........ $ 30,824 $ (1,926) $ (.18)
Second Quarter....... 31,514 (3,090) (.28)
Third Quarter........ 31,439 (1,775) (.16)
Fourth Quarter....... 38,211 (3,960) (.34)
</TABLE>
- --------
(1) The sum of the income (loss) per share for the four quarters, which are
based on average shares outstanding during each quarter, does not equal
income (loss) per share for the year, which is based on average shares
outstanding during the year.

F-16
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

9. RELATED PARTY TRANSACTIONS

The Company sold products to Seeben N.V., a company in which Alfred H. Wilms
is the brother of a member of the company's board of directors. Sales to this
company were approximately $2,000 (1993), $6,000 (1994) and $0 (1995). No
accounts receivable were due from this company at June 30, 1994 or June 30,
1995. Sales prices and terms were similar to those of non-affiliated persons.

In March 1992, Alfred H. Wilms, a director and principal stockholder (and
then Chairman and Chief Executive Officer of the Company), committed to
provide or cause others to provide a $6,500,000 five year, unsecured,
subordinated loan to VSI, a majority-controlled subsidiary of the Company
engaged in the Company's Louisiana gaming device route operations. As
consideration for this commitment, the Company issued to Mr. Wilms five year
warrants to purchase 200,000 shares of Common Stock at $2.50 per share subject
to certain adjustments, and agreed to issue an additional warrant to purchase
1,800,000 shares of Common Stock at $2.50 per share subject to certain
adjustments upon complete funding of the loan. At June 30, 1993 approximately
$6,000,000 of the loan had been funded. The remaining $500,000 was funded in
October 1993 at which time the Company issued to Mr. Wilms the additional
warrant for 1,800,000 shares of common stock.

David Robbins, a director appointed to the Board in July 1994, as a designee
of Kirkland Investment Corporation ("KIC"), is employed by the law firm of
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel which has represented the
Company in various matters related to the Company's growth strategy and its
transactions with Kirkland and KIC. The Company paid fees of approximately
$1,046,000 and $493,000 to such firm in fiscal 1994 and fiscal 1995,
respectively.

In connection with the agreements with KIC (100% owned by Joel Kirschbaum)
and its affiliates and related transactions, the Company has paid to or on
behalf of Kirkland and its affiliates a total of approximately $346,000 in
fiscal 1994 and $597,000 in fiscal 1995 primarily for reimbursement of
expenses incurred on behalf of the Company.

In 1993 and 1994 the Company entered into employment agreements with certain
key employees. These agreements range from one to three years in length and
cover certain other terms of employment including compensation. As a condition
of his employment, in April 1995 the Company issued 250,000 shares of common
stock to Steve Greathouse, the Company's Chairman, President and Chief
Executive Officer and recognized a non-cash charge of $1,313,000 related to
this transaction.

10. COMMITMENTS AND CONTINGENCIES

The Company leases office space, equipment, warehouse and repair facilities,
gaming route locations, casino and other locations under non-cancelable
operating leases.

F-17
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

Future minimum rentals under non-cancelable operating leases at June 30,
1995 are:

<TABLE>
<CAPTION>
TOTAL NET
MINIMUM SUBLEASE MINIMUM
YEAR ENDED JUNE 30 RENTALS INCOME RENTALS
------------------ ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
1996.............................................. $ 8,828 $ 921 $ 7,907
1997.............................................. 6,462 842 5,620
1998.............................................. 6,173 809 5,364
1999.............................................. 5,623 758 4,865
2000.............................................. 3,737 598 3,139
Thereafter........................................ 34,349 2,757 31,592
------- ------ -------
$65,172 $6,685 $58,487
======= ====== =======
</TABLE>

Certain gaming route location leases provide only for contingent rentals
based upon a percentage of gaming revenue and are cancelable at any time by
either party.

Operating lease rental expense, including contingent lease rentals, for
years ended June 30 was as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Minimum rentals................................. $11,727 $13,743 $ 9,704
Contingent rentals.............................. 49,621 55,910 58,113
------- ------- -------
61,348 69,653 67,817
Sublease rental income.......................... (850) (1,004) (1,192)
------- ------- -------
$60,498 $68,649 $66,625
======= ======= =======
</TABLE>

These amounts are included in the cost of gaming revenues on the
accompanying Consolidated Statements of Operations.

In April, 1990, the Company entered into a ten year lease to operate a non-
restricted gaming location in Las Vegas, Nevada. The lease commencement date
was scheduled to begin no later than 90 days after the construction had been
finalized. In January, 1991, the Company received notice that the construction
was complete; however, upon review of the property, the Company did not
believe that construction had been completed. In August, 1992, the lessor
filed a suit against the Company seeking compensatory and exemplary damages
totalling $18,700,000. In fiscal 1992, the Company had accrued a $480,000
liability representing back rent owed to the lessor. In February, 1993 the
lawsuit was settled and the Company paid the lessor $425,000 in return for
resolution of all prior and current disputes regarding the lease terms. The
lease calls for monthly rentals of approximately $31,000 and provides for
annual increases based on certain indices. At June 30, 1992, the Company
sublet the property to a location operator in exchange for the right to
operate gaming devices at the property under a space lease arrangement for a
period of 10 years beginning December, 1992.

The Company and Casino Magic Corporation, through wholly owned subsidiaries,
are members in Kansas Gaming Partners, LLC ("KGP") and Kansas Financial
Partners, LLC ("KFP"), both Kansas limited liability companies. Under an
option agreement granted to KGP by Camptown Greyhound Racing, Inc.
("Camptown"),

F-18
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995
KGP has been granted the exclusive right to operate gaming devices and/or
casino-type gaming at Camptown's facility if and when such gaming is permitted
in Kansas. In September 1994, the Kansas Racing Commission approved a revised
financing proposal submitted by Camptown that would facilitate completion of
construction of a greyhound racing facility on the 320 acre site in Frontenac,
Kansas. Camptown has received a $3,205,000 loan commitment which has been
guaranteed by KFP. In December 1994, the Company invested $1,580,000 in KFP
for its portion of the loan guarantee which was made in the form of a
certificate of deposit. The Company owns 50% of the equity of KFP which is
accounted for under the equity method. The Company has not guaranteed the
obligations of KFP. Construction of Camptown's racing facility has been
completed and the facility opened for business in May 1995. Camptown's
obligation to begin to repay the loan guaranteed by KFP commenced in June 1995
with interest only payments. Principal repayment is scheduled to commence in
June 1996. There can be no assurance as to the successful completion or
operation of any part of this project.

The Company is also involved in various claims and legal actions arising in
the ordinary course of business. Management of the Company believes that the
ultimate outcome of these matters will not have a material adverse effect on
the Company's consolidated financial statements taken as a whole.

11. ACQUISITIONS

On July 16, 1994, the Rainbow Casino located in Vicksburg, Mississippi
permanently opened for business. Through a wholly-owned subsidiary, the
Company originally purchased a 45% limited partnership interest in RCVP, a
Mississippi limited partnership which owns the casino, all assets (including
the gaming equipment) associated with the casino and certain adjacent parcels
of land. As consideration for its 45% limited partnership interest, the
Company paid $2,000,000 in cash and issued 600,000 shares of its common stock
to RCC and its two sole shareholders. The 55% general partnership interest in
RCVP was held by RCC. In connection with the completion of the casino, the
Company funded a $3,250,000 advance to RCC on the same terms as RCC's
financing from Hospitality Franchise Systems, Inc. ("HFS") (other than the
fact that such advance is subordinate to payments due to HFS). On March 29,
1995, the Company consummated certain transactions whereby the Company
acquired from RCC the controlling general partnership interest in RCVP and
increased its partnership interest. In exchange for the assumption by National
Gaming Mississippi, Inc. ("NGM"), a subsidiary of National Gaming Corporation,
of approximately $1,140,000 of liabilities (plus a financing fee payable to
HFS) related to the completion of certain incomplete elements of the project
which survived the opening of the casino (for which RCC was to have been
responsible, but failed to satisfy), a related $652,000 cash payment by the
Company to NGM and commitments by the Company and NGM to fund additional
financing required to complete the project (i) a subsidiary of the Company
became the general partner and RCC became the limited partner and (ii) the
respective partnership interests were adjusted. As a result of these
transactions, RCVP assumed $1,304,000 of new debt of which 50% was payable to
the Company. Under the adjusted partnership interests, RCC is entitled to
receive 10% of the net available cash flows after debt service and other
items, as defined, (which amount shall increase to 20% of cash above
$35,000,000 (i.e., only on such incremental amount)), for a period of 15
years, such period being subject to one year extensions for each year in which
a minimum payment of $50,000 is not made. This transaction was accounted for
as an acquisition using the purchase method. Accordingly, the purchase price
was allocated to assets acquired based on their estimated fair values. This
treatment resulted in no cost in excess of net assets acquired (goodwill)
being recognized. The Rainbow Casino's results of operations have been
included in the consolidated results of operations since the date of
acquisition.

F-19
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995

The following summarized, unaudited pro forma results of operations for the
fiscal year ended June 30, 1995, assume the complete acquisition of RCVP
occurred on the date the casino permanently opened for business.

<TABLE>
<CAPTION>
1995
--------
<S> <C>
Revenues........................................................ $142,051
Net loss........................................................ (10,862)
Net loss per common share....................................... $ (0.96)
</TABLE>

12. RECENT DEVELOPMENTS (UNAUDITED)

On June 19, 1995, the Company publicly proposed a negotiated acquisition of
Bally Gaming International, Inc. ("BGII") for $12.50 per share of BGII common
stock. Prior to making this offer, the Company had acquired 500,000 shares of
BGII stock on the open market and at June 30, 1995 held 1,000,000 shares
(approximately 9.3% of BGII's total outstanding shares, based on BGII's most
recent public filings) which it acquired at an average cost of approximately
$10.41 per share. Under the proposed terms of the offer, approximately 60% of
BGII shares not held by the Company would be acquired for cash with the
remainder exchanged for shares of the Company's common stock. The offer was
contingent upon satisfactory due diligence, regulatory and stockholder
approval and reasonable financing. At the time the offer was made public, the
Company requested expedited due diligence, subject to a confidentiality
agreement. BGII had previously announced a planned merger with WMS Industries,
Inc. ("WMS") which included an exclusive period for WMS to negotiate the terms
of that proposed merger. WMS's exclusive negotiating period had expired
several weeks before the Company's proposal was made without announcement or
action on the part of BGII or WMS. On July 25, 1995, after being refused due
diligence access and the announcement by BGII that a definitive agreement had
been reached to merge with WMS, the Company announced its intent to make a
tender offer for BGII. The tender offer was on largely the same terms as the
originally proposed acquisition. On the same date, the Company announced it
had filed litigation in Delaware Chancery Court requesting that the court
require BGII to grant the Company due diligence access, enjoin BGII from
proceeding with the WMS merger (including a provision therein requiring the
sale of BGII's German operations) and declare the breakup fee provided for in
the WMS merger to be invalid. The Company indicated that it would increase the
price per share of BGII stock to $13.00 per share if the breakup fee was
declared invalid. The tender offer was conditioned upon the Company being
validly tendered a number of shares of BGII stock, which combined with its own
holdings of such stock, would give the Company a majority of BGII's
outstanding shares. The tender offer commenced on July 28, 1995. Subsequently,
the Company announced its intention to proceed with a consent solicitation to
elect a majority of independent directors to the BGII Board of Directors. On
August 14, 1995, the Company, BGII and WMS jointly announced an agreement
whereby the parties would hold in abeyance all activities related to pending
litigation until September 1, 1995, refrain from commencing new litigation
until that same date, BGII would schedule its annual shareholder meeting for
consideration of the proposed WMS merger and the election of directors on
October 30, 1995, and the Company would extend the expiration date of the
tender offer until September 12, 1995 and refrain from soliciting proxies
until September 1, 1995. On September 1, 1995, the Company disclosed that it
had obtained firm financing commitments to fund the tender offer and that such
commitments were not conditioned on due diligence of BGII. Accordingly, the
Company extended the expiration date of its tender offer to September 29,
1995. BGII and WMS filed lawsuits against the Company alleging numerous public
misrepresentations had been made by the Company with regards to the WMS-BGII
agreement, the Company's tender offer and the level of cooperation of BGII's
board of directors. Subsequent to filing its lawsuit against the Company, BGII
adopted a poison pill provision designed to discourage the Company's
acquisition efforts. In

F-20
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED JUNE 30, 1993, 1994 AND 1995
response to the poison pill adoption, the Company announced it had increased
its tender offer to $13.00 per share of BGII common stock and increased to
5,400,000 the number of BGII common shares being sought in the tender offer.

F-21
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30 DEC. 31
A S S E T S 1995 1995
----------- -------- --------
<S> <C> <C>
Current assets:
Cash, cash equivalents and securities available for sale...... $ 37,414 $ 29,468
Receivables, net.............................................. 3,316 3,110
Inventories................................................... 714 672
Prepaid expenses.............................................. 4,148 2,984
Other......................................................... 517 411
-------- --------
Total current assets......................................... 46,109 36,645
-------- --------
Property and equipment, net.................................... 50,352 50,870
Receivables, net............................................... 5,309 4,809
Excess of costs over net assets of an acquired business, net of
accumulated amortization of $585 and $694..................... 3,842 3,733
Intangible assets, net of accumulated amortization of $5,516
and $5,798.................................................... 12,405 11,638
Investment in minority owned subsidiary........................ 1,585 1,585
Other.......................................................... 6,746 7,592
-------- --------
Total assets............................................... $126,348 $116,872
======== ========
<CAPTION>
L I A B I L I T I E S A N D
S T O C K H O L D E R S' E Q U I T Y
------------------------------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt.......................... $ 3,995 $ 4,054
Accounts payable.............................................. 1,758 2,295
Accrued expenses, including due to related parties of $931 and
$23.......................................................... 8,610 10,187
-------- --------
Total current liabilities.................................... 14,363 16,536
Long-term debt, less current maturities........................ 97,402 96,052
Other liabilities.............................................. 3,955 4,082
-------- --------
Total liabilities............................................ 115,720 116,670
-------- --------
Minority interest.............................................. 643 919
Stockholders' equity (deficiency):
Common stock, $0.10 par value; authorized 175,000,000 shares;
issued and outstanding 11,654,150 and 12,987,483............. 1,165 1,298
Special stock, $0.10 par value; authorized 10,000,000 shares;
issued and outstanding 1,333,333 and 0....................... 133 --
Paid-in capital............................................... 32,134 32,134
Unrealized loss on securities available for sale, net......... (316) (1,587)
Accumulated deficit........................................... (23,131) (32,562)
-------- --------
Total stockholders' equity (deficiency)...................... 9,985 (717)
-------- --------
Total liabilities and stockholders' equity (deficiency).... $126,348 $116,872
======== ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-22
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
REVENUES:
Gaming
Routes..................................................... $52,511 $52,621
Casino and taverns......................................... 7,861 21,679
Food and beverage sales..................................... 1,950 1,923
Net equipment sales......................................... 16 6
------- -------
62,338 76,229
------- -------
COSTS AND EXPENSES:
Cost of gaming:
Routes..................................................... 39,214 40,361
Casinos and taverns........................................ 4,653 9,887
Cost of food and beverage................................... 1,414 1,426
Cost of equipment sales..................................... 9 1
Selling, general and administrative......................... 6,486 9,398
Business development expenses............................... 3,508 10,737
Corporate expenses.......................................... 4,302 3,037
Depreciation and amortization............................... 4,613 4,906
------- -------
64,199 79,753
------- -------
Operating loss............................................... (1,861) (3,524)
Other income (expense):
Interest income............................................. 1,504 818
Interest expense............................................ (3,915) (4,288)
Minority share of income.................................... (169) (276)
Other, net.................................................. (286) (1,373)
------- -------
Loss before income taxes..................................... (4,727) (8,643)
Income tax expense........................................... (290) (788)
------- -------
Net loss..................................................... $(5,017) $(9,431)
======= =======
Loss per share of common stock............................... $ (.45) $ (.79)
======= =======
Weighted average common shares outstanding................... 11,101 11,879
======= =======
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-23
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (5,017) $ (9,431)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................ 4,613 4,906
Loss on sale of property and equipment................... 560 240
Write off of other assets................................ 361 201
Provision for losses on receivables...................... 261 20
Amortization of debt discounts........................... 179 118
Equity in losses of affiliate............................ 405 --
Deferred income tax provision............................ -- 655
Net change in operating assets and liabilities:
Decrease in:
Inventories.............................................. 28 12
Prepaid expenses......................................... 1,577 1,163
Refundable income taxes.................................. -- 312
Other assets............................................. 615 143
Increase (decrease) in:
Accounts and slot contracts payable...................... 101 537
Accrued expenses......................................... (1,333) 1,577
Minority interests....................................... 168 276
Other liabilities........................................ (424) (223)
-------- --------
Net cash provided by operating activities: $ 2,094 $ 506
-------- --------
Cash flows from investing activities:
Additions to property and equipment....................... (2,905) (5,004)
Proceeds from sale of property and equipment.............. 265 2,218
Additions to receivables.................................. (12,303) (6,296)
Cash collections on receivables........................... 9,272 6,564
Investment in subsidiary.................................. (1,580) --
Proceeds from sale (purchase of) of securities available
for sale................................................. (133) 8,015
Additions to intangible assets............................ (162) (420)
Additions to other long-term assets....................... (1,959) (2,179)
-------- --------
Net cash provided by (used in) investing activities..... (9,505) 2,898
-------- --------
Cash flows from financing activities:
Reduction of long-term debt............................... (1,594) (2,091)
Proceeds from long-term debt.............................. -- 682
Issuance of stock......................................... 109 --
-------- --------
Net cash used in financing activities................... (1,485) (1,409)
-------- --------
Cash and cash equivalents:
(Decrease) increase for period............................ (8,896) 1,995
Balance, beginning of period.............................. 37,085 13,734
-------- --------
Balance, end of period.................................. $ 28,189 $ 15,729
======== ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-24
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995

1. ADJUSTMENTS FOR FAIR PRESENTATION

In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods presented.
The results of operations for an interim period are not necessarily indicative
of the results to be expected for a full year.

Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that the
accompanying condensed consolidated financial statements be read in
conjunction with the financial statements and notes in the Company's annual
report on Form 10-K. All intercompany accounts and transactions have been
eliminated in consolidation.

2. RECLASSIFICATIONS

Certain reclassifications have been made to prior period financial
statements to conform with current period presentations.

3. RECEIVABLES

The Company's gaming route operations from time to time involve making loans
to location operators in order to participate in revenues over extended
periods of time. These loans, generally made for buildouts, tenant
improvements and initial operating expenses, are generally guaranteed on a
full recourse basis by the location owner and are secured by the assets of the
location. The majority of the loans are interest bearing and are expected to
be repaid over a period of time not to exceed the life of the related revenue
sharing agreement. The loans have varying payment terms requiring either
weekly or monthly payments. Annual interest rates on the loans range from
prime plus 1.5% to stated rates of 12% with various maturity dates ranging
through 2007. The loans are expected to be repaid from the locations' cash
flows or proceeds from the sale of the leaseholds.

Receivables consist of the following:

<TABLE>
<CAPTION>
JUNE 30 DEC. 31
1995 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes receivable-location operators........................ $ 7,760 $ 7,764
Other receivables.......................................... 865 155
------- -------
8,625 7,919
Less current amounts....................................... (3,316) (3,110)
------- -------
Long-term receivables, excluding current amounts........... $ 5,309 $ 4,809
======= =======
</TABLE>

Receivables are presented net of an allowance for doubtful accounts of
approximately $1,659,000 and $1,435,000 as of June 30, 1995 and December 31,
1995, respectively. The allowance is allocated between current and long-term
receivables on a pro rata basis related to notes receivable from location
operators.

F-25
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995

4. DEBT

Long-term debt at June 30, 1995 and December 31, 1995 consists of the
following:

<TABLE>
<CAPTION>
JUNE 30 DEC 31
1995 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Convertible subordinated debentures due 2003, 7.5%........ 85,000 85,000
Due to stockholder due 1998, 200 basis points over the
London Inter Bank offer rate (current rate 7.97%), net of
discount of $747,619 and $629,573........................ 3,309 2,797
Hospitality Franchise Systems due 2001, 7.5%.............. 9,065 8,476
National Gaming Mississippi due 2002, 10.0% 631 1,224
Other debt................................................ 3,392 2,609
-------- --------
101,397 100,106
Less current maturities................................... 3,995 4,054
-------- --------
Long-term debt, less current maturities................... $ 97,402 $ 96,052
======== ========
</TABLE>

Accrued interest of approximately $1,991,000 (June 30) and $1,973,000
(December 31) is included in accrued expenses in the unaudited condensed
consolidated balance sheets. Amounts due to stockholder include amounts owed
to affiliates of Alfred H. Wilms, the Company's largest stockholder and a
member of the Board of Directors of the Company, relating to funding of the
Company's majority-controlled subsidiary, Video Services, Inc.'s ("VSI")
gaming device route operations.

5. INCOME TAXES

The Company accounts for income taxes in accordance with the provisions of
Financial Accounting Standard No. 109 Accounting for Income Taxes. Under the
asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

Due to losses and the lack of available carrybacks, the Company recognized
no federal income tax expense or benefit for the six month period ended
December 31, 1994 and 1995 other than the tax effects of changes in the
unrealized gains (losses) on securities available for sale. At December 31,
1995, the Company had estimated net operating loss carryforwards for federal
income tax purposes of approximately $35,000,000 which are available to offset
future federal taxable income, if any, expiring 2007 through 2009. The
deferred tax asset related to the net operating losses has been fully
reserved.

F-26
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995

6. INTANGIBLE ASSETS

Intangible Assets includes $4,272,000, net of $1,232,000 of accumulated
amortization, for costs related to the commissions, discounts and other
issuance costs of the Company's private placement of $85,000,000 aggregate
principal amount of 7.5% Convertible Subordinated Debentures due 2003. Such
costs are being amortized on a straight line basis over the term of the
debentures.

6. INVESTMENT IN MINORITY OWNED SUBSIDIARY

The Company and Casino Magic Corporation, through wholly owned subsidiaries,
are members in Kansas Gaming Partners, L.L.C. ("KGP") and Kansas Financial
Partners, L.L.C. ("KFP"), both Kansas limited liability companies. Under an
option agreement (the "option agreement") granted to KGP by Camptown Greyhound
Racing, Inc. ("Camptown") and The Racing Association of Kansas-Southeast
("TRAK Southeast"), KGP has been granted the exclusive right, which right
expires on September 13, 2013, to operate gaming devices and/or casino-type
gaming at Camptown's racing facility in Frontenac, Kansas if and when such
gaming is permitted in Kansas. In December 1994, Camptown received a
$3,205,000 loan from Boatmen's Bank which was guaranteed by KFP. The Company
and Casino Magic Corporation each invested $1,580,000 in KFP which was used to
purchase a certificate of deposit to collateralize its guaranty. Construction
of Camptown's racing facility has been completed and the facility opened for
business in May 1995. The racing facility was temporarily closed on November
5, 1995 due to poor financial results. Camptown filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in January 1996 and has stated an
intention to reopen for business following bankruptcy reorganization.
Boatmen's Bank demanded payment of the Camptown loan from KFP under the terms
of the guaranty. KFP paid the loan and Boatmen's Bank returned KFP's
certificate of deposit and KFP assumed Boatmen's Bank's position in the loan
to Camptown which is secured by a second mortgage on Camptown's greyhound
racing facility in Frontenac, Kansas. TRAK Southeast and Camptown continue to
be bound by the Option Agreement. KFP intends to vigorously pursue all of its
rights and remedies which may include, among other things, seeking authority
from the bankruptcy court to commence a foreclosure action. In the case of a
foreclosure action, KFP would be required to assume or pay the existing first
mortgage of approximately $2,000,000 if KFP becomes the purchaser at any such
sale. The Company intends to continue to monitor its investment in KFP. While
the Company is encouraged by the positive movement in Kansas towards
considering legislation that would legalize the operation of gaming devices at
pari-mutuel track locations, there can be no assurance as to Camptown's
ability to maintain its license at the location, or any successful completion
or operation of any part of this project.

7. CASH, CASH EQUIVALENTS AND SECURITIES AVAILABLE FOR SALE

For balance sheet presentation the following account balances have been
combined at December 31, 1995:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents..................................... $15,729
Securities available for sale................................. 13,739
-------
Total......................................................... $29,468
=======
</TABLE>

F-27
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995

As of December 31, 1995, unrealized losses for securities available for sale
was $1,587,000 net of the tax effect of $817,000 and is included as a
component of stockholder's equity.

8. INTANGIBLE ASSETS

Intangible Assets includes $4,272,000 net of $1,232,000 of accumulated
amortization, for costs related to the commissions, discounts and other
issuance costs of the Company's private placement of $85,000,000 aggregate
principal amount of 7.5% Convertible Subordinated Debentures due 2003. Such
costs are being amortized on a straight line basis over the term of the
debentures.

9. PROPOSED BGII MERGER TRANSACTION

On October 18, 1995, the Company and Bally Gaming International, Inc.
("BGII") entered into a definitive merger agreement ("Merger") under which
the outstanding shares of BGII common stock would each be exchanged for $13
in cash and shares of the Company's common stock.

On January 22, 1996, the parties reached an agreement to amend the terms of
the Merger. Under the amended agreement, each share of BGII common stock
outstanding (10,799,501 as of September 30, 1995 less the 1,000,000 shares
already owned by the Company) will receive $7.83 per share in cash, $3.57
per share in the Company's Series B Special Stock which is a Pay-in-Kind
(PIK) preferred stock, and $0.30 per share of the Company's common stock
totaling $11.70 per share of BGII common stock. The PIK preferred stock has
an eight-year maturity and has a dividend rate of 15% as follows: PIK at
15% for the first five years; 8% PIK and 7% cash for years six and seven;
and 15% cash in the eighth year of the term. All shares of Series B Special
Stock are mandatorily redeemable by the eighth anniversary of the date of
initial issuance. If the Company fails to redeem such shares by that date,
then the number of directors constituting the Company's Board will be
increased by two and the holders of the shares of Series B Special Stock
will have the right to elect no more than two directors total to the
Company's Board. The holders of Series B Special Stock will have no other
remedies upon such failure to redeem the outstanding shares of Series B
Special Stock by such date. Other than as described herein, the holders of
shares of Series B Special Stock have no other voting rights except as
stated by law. The Company intends to seek to have the Series B Special
Stock quoted on NASDAQ. The aggregate amount of cash is unchanged from the
previous agreement.

The transaction is subject to approval by shareholders, obtaining customary
regulatory approvals, the securing of $150,000,000 in permanent financing
by the Company including $15,000,000 through a registered public offering
of the Series B Special Stock, and certain other conditions. The Merger is
expected to occur in late April 1996.

10. LEGAL PROCEEDINGS

In June 1995, Bally Entertainment Corporation ("BEC") asserted that a
certain agreement between BEC and BGII (the "Noncompete Agreement")
prohibits the use of the trade name "Bally" if it is merged with a company
that is in the casino business within or without the United States and
operates such business prior to January 8, 1996. BGII believes such claim
is entirely without merit since the restriction referred to expires on
January 8, 1996 and in any event does not relate to the use of the "Bally"
trade name, which is covered by the License Agreement. The restriction in
the Noncompete Agreement will not have any impact on the combined company
after the Merger since the effective time of the Merger contemplates a
closing of the Merger after the restriction in the Noncompete Agreement
lapses. BEC has not reasserted this position since it was informed by BGII
in July 1995 that the restriction lapses on January 8, 1996. Consequently,
BGII believes BEC has determined not to contest with BGII's position.

F-28
<PAGE>

ALLIANCE GAMING CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

SIX MONTHS ENDED DECEMBER 31, 1994 AND 1995

10. LEGAL PROCEEDINGS (CONTINUED)

BEC has also asserted that its permission is required for use of the
"Bally" trade name by any entity other than BGII and that a merger between
BGII and another company would violate the terms of the License Agreement.
BGII has denied these claims and believes that the surviving company in a
merger will be permitted to use the "Bally" trade name in accordance with
the terms of such License Agreement. BGII believes that no breach of such
License Agreement is caused by the Merger and the use of the "Bally" trade
name by the surviving corporation. In a letter dated November 9, 1995, BEC
reasserted its position. On November 20, 1995 the Company, the Company's
Merger Subsidiary, and BGII commenced an action against BEC in Federal
District Court in Delaware seeking a declaratory judgment, among other
things, that the surviving company in the Merger will be permitted to use
the "Bally" trade name in accordance with the terms of the License
Agreement, and seeking injunctive relief (the "Alliance Action"). On
November 28, 1995, BEC commenced an action against BGII, Bally Gaming (a
BGII subsidiary), the Company, and the Company's Merger Subsidiary in
Federal District Court in New Jersey to enjoin the defendants from using
the "Bally" trade name (the "BEC Action"). The BEC Action alleges that
BGII's continued use of the trade name after the Merger will (1) constitute
a prohibited assignment of BGII's rights to use the trade name and (2)
exceed the scope of the license granted to BGII because BGII will be under
control of the Company. Also on November 28, 1995, BEC filed a motion to
dismiss, transfer to New Jersey, or stay the Alliance Action pending
resolution of the BEC Action. BGII, Bally Gaming, the Company, and the
Company's Merger Subsidiary intend to vigorously defend their position in
these actions. However, there can be no assurance that BEC will not be
successful in its action to prohibit the surviving corporation in the
Merger from using the "Bally" trade name. The loss of the "Bally" trade
name may have a material adverse effect on the gaming machine operations of
the surviving corporation in the Merger.

11. INITIAL SERIES SPECIAL STOCK

In September 1993, Kirkland-Ft. Worth Investment Partners, L.P.
("Kirkland") invested $5,000,000 in the Company in exchange for 1,333,333
shares of the Company's Non-Voting Junior Convertible Special Stock, which
are convertible on a share for share basis into shares of the Company's
Common Stock, and warrants to purchase up to 2,750,000 shares of common
stock subject to certain conditions. In December 1995, Kirkland elected to
convert the entire 1,333,333 shares of Special Stock into shares of the
Company's Common Stock.

F-29
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

F-30
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors Bally Gaming International, Inc.

We have audited the accompanying consolidated balance sheets of Bally Gaming
International, Inc. as of December 31, 1995 and 1994 and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bally Gaming
International, Inc. as of December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

Coopers & Lybrand L.L.P.

Las Vegas, Nevada
February 13, 1996

F-31
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1994 1995
------ -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 9,204 $ 5,526
Accounts and notes receivable, net of allowance for
doubtful accounts
of $12,282 and $16,281................................... 84,632 87,176
Inventories, net:
Raw materials and work-in-process........................ 21,082 16,066
Finished goods........................................... 28,377 35,525
-------- --------
49,459 51,591
Other current assets...................................... 5,074 3,983
-------- --------
Total current assets.................................... 148,369 148,276
Long-term notes receivable, net of allowance for doubtful
accounts of
$8,198 and $7,869......................................... 5,558 9,981
Property, plant and equipment, at cost:
Land...................................................... 1,357 1,357
Buildings and leasehold improvements...................... 19,262 19,871
Machinery and equipment................................... 26,636 30,328
Furniture, fixtures and equipment......................... 6,075 6,162
Less accumulated depreciation............................. (28,972) (34,474)
-------- --------
Property, plant and equipment, net...................... 24,358 23,244
Intangible assets, less accumulated amortization of $12,609
and $13,720............................................... 11,410 10,814
Other assets............................................... 2,547 2,001
-------- --------
$192,242 $194,316
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 19,272 $ 18,556
Accrued liabilities and other payables:
Compensation and benefit related liabilities............. 5,962 5,608
Other.................................................... 11,363 11,798
-------- --------
17,325 17,406
Current maturities of long-term debt...................... 16,000 14,957
-------- --------
Total current liabilities............................... 52,597 50,919
10 3/8% Senior Secured Notes due 1998, net of unamortized
discount of $458 and $344................................. 39,542 39,656
Other long-term debt, less current maturities.............. 14,220 15,331
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.01 par value; 5,000,000 shares
authorized, none issued.................................. -- --
Common stock; $.01 par value; 30,000,000 shares
authorized,
10,749,501 and 10,799,501 issued and outstanding......... 107 108
Additional paid-in-capital................................ 67,758 68,345
Retained earnings......................................... 5,235 1,842
Cumulative translation adjustments........................ 13,560 18,662
Unearned compensation..................................... (777) (547)
-------- --------
Total stockholders' equity.............................. 85,883 88,410
-------- --------
$192,242 $194,316
======== ========
</TABLE>

See accompanying notes.

F-32
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Revenues:
Sales............................................ $164,571 $231,318 $244,471
Other............................................ 4,136 4,874 4,841
-------- -------- --------
168,707 236,192 249,312
-------- -------- --------
Costs and expenses:
Cost of sales.................................... 121,710 157,059 163,131
Selling, general and administrative.............. 57,357 59,989 65,289
Provision for doubtful receivables............... 8,176 5,763 6,712
Unusual charges.................................. -- -- 5,816
-------- -------- --------
187,243 222,811 240,948
-------- -------- --------
Operating income (loss)........................... (18,536) 13,381 8,364
Interest expense.................................. 4,424 6,768 6,853
-------- -------- --------
Income (loss) before income taxes and extraordi-
nary gain........................................ (22,960) 6,613 1,511
Provision for income taxes........................ 4,242 2,820 4,904
-------- -------- --------
Income (loss) before extraordinary gain........... (27,202) 3,793 (3,393)
Extraordinary gain on early extinguishment of 3,759 -- --
debt............................................. -------- -------- --------
Net income (loss)................................. $(23,443) $ 3,793 $ (3,393)
======== ======== ========
Net income (loss) per common share:
Income (loss) before extraordinary gain.......... $ (2.54) $ 0.35 $ (0.31)
Extraordinary gain on early extinguishment of 0.35 -- --
debt............................................ -------- -------- --------
Net income (loss)................................ $ (2.19) $ 0.35 $ (0.31)
======== ======== ========
Weighted average number of common shares and com-
mon stock 10,685 10,727 10,776
equivalents outstanding.......................... ======== ======== ========
</TABLE>

See accompanying notes.

F-33
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
COMMON PAID-IN- RETAINED TRANSLATION UNEARNED STOCKHOLDERS'
STOCK CAPITAL EARNINGS ADJUSTMENTS COMPENSATION EQUITY
------ ---------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... $106 $65,757 $24,885 $11,662 $(1,133) $101,277
Net loss............... -- -- (23,443) -- -- (23,443)
Issuance of restricted
Company common stock
award................. 1 1,149 -- -- (1,150) --
Exercise of warrants... -- 30 -- -- -- 30
Amortization of un-
earned compensation... -- -- -- -- 951 951
Foreign currency trans-
lation
adjustment............ -- -- -- (4,536) -- (4,536)
Issuance of stock war-
rants................. -- 600 -- -- -- 600
---- ------- ------- ------- ------- --------
Balance at December 31,
1993................... 107 67,536 1,442 7,126 (1,332) 74,879
Net income............. -- -- 3,793 -- -- 3,793
Amortization of un-
earned compensation... -- -- -- -- 555 555
Foreign currency trans-
lation adjustment..... -- -- -- 6,434 -- 6,434
Issuance of Company
common stock
under compensation
agreement............. -- 222 -- -- -- 222
---- ------- ------- ------- ------- --------
Balance at December 31,
1994................... 107 67,758 5,235 13,560 (777) 85,883
---- ------- ------- ------- ------- --------
Net loss............... -- -- (3,393) -- -- (3,393)
Exercise of stock op-
tions................. 1 587 -- -- -- 588
Amortization of un-
earned compensation... -- -- -- -- 230 230
Foreign currency trans-
lation adjustment..... -- -- -- 5,102 -- 5,102
---- ------- ------- ------- ------- --------
Balance at December 31,
1995................... $108 $68,345 $ 1,842 $18,662 $ (547) $ 88,410
==== ======= ======= ======= ======= ========
<CAPTION>
SHARE AMOUNTS (IN COMMON STOCK
THOUSANDS) ISSUED
- ----------------- -------------
<S> <C>
Balance at December 31,
1992................... 10,623
Issuance of restricted
Company common stock
award................. 100
Exercise of warrants... 2
--------
Balance at December 31,
1993................... 10,725
Issuance of Company
common stock
under compensation
agreement............. 25
--------
Balance at December 31,
1994................... 10,750
Exercise of stock
options............... 50
--------
Balance at December 31,
1995................... 10,800
========
</TABLE>

See accompanying notes.

F-34
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
YEAR ENDED DECEMBER 31,
----------------------------
<CAPTION>
1993 1994 1995
--------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ (23,443) $ 3,793 $ (3,393)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Extraordinary gain on early extinguishment of
debt.......................................... (3,759) -- --
Depreciation and amortization.................. 8,103 8,271 8,953
Deferred income taxes.......................... 163 (296) (778)
Provision for doubtful receivables............. 8,176 5,763 6,712
Provision for writedown of building to be sold. -- -- 812
Provision for inventory valuation.............. 6,156 2,230 1,955
(Gain) loss on disposals of property, plant and
equipment..................................... 64 (83) 48
Changes in operating assets and liabilities:
Accounts and notes receivable................. (17,648) (15,823) (10,304)
Inventories................................... (15,077) (3,889) (2,167)
Other current assets.......................... (1,534) (713) 1,279
Accounts payable and accrued liabilities...... 9,717 2,730 578
Other, net...................................... (466) (759) 100
--------- ------- --------
Cash provided by (used in) operating (29,548) 1,224 3,795
activities................................... --------- ------- --------
Cash flows from investing activities:
Net assets of distribution business acquired.... (8,382) -- --
Purchases of property, plant and equipment...... (6,467) (9,537) (8,240)
Proceeds from disposals of property, plant and
equipment...................................... 1,091 1,749 1,757
Other........................................... 351 1,397 250
--------- ------- --------
Cash used in investing activities............. (13,407) (6,391) (6,233)
--------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of Senior Secured Notes
and Common Stock Warrants....................... 40,000 -- --
Net change in lines of credit.................... 28,711 21,423 359
Repayments of long-term debt..................... (29,761) (13,192) (2,908)
Exercise of stock warrants and stock options..... 30 -- 588
--------- ------- --------
Cash provided by financing activities......... 38,980 8,231 (1,961)
Effect of exchange rate changes on cash.......... (389) 704 721
--------- ------- --------
Increase (decrease) in cash and cash equivalents. (4,364) 3,768 (3,678)
Cash and cash equivalents, beginning of year..... 9,800 5,436 9,204
--------- ------- --------
Cash and cash equivalents, end of year........... $ 5,436 $ 9,204 $ 5,526
========= ======= ========
Supplemental cash flows information:
Operating activities include cash payments for
interest and income taxes as follows:
Interest paid.................................. $ 2,910 $ 5,972 $ 6,888
Income taxes paid, net of refunds.............. 6,454 4,020 1,801
Investing activities exclude the following non-
cash activities:
Exchange of income tax receivable for
intangible assets and equipment............... 1,969 -- --
Long-term note received from sale of assets.... -- 517 --
Financing activities exclude the following non-
cash activities:
Issuance of restricted stock awards............ 1,150 -- --
Issuance of Company common stock under
compensation agreement........................ -- 222 --
Issuance of note payable for license agreement. -- 1,465 --
</TABLE>

See accompanying notes.

F-35
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Bally Gaming International, Inc. (the "Company") was formed in August 1991
by Bally Entertainment Corporation ("BEC") to consolidate the gaming machine
manufacturing and distribution operations of BEC. These operations are
conducted in Germany under the name Bally Wulff ("Wulff") and in the United
States under the name Bally Gaming ("Gaming") and Bally Systems ("Systems").
Wulff designs, manufactures (through the Company's wholly-owned subsidiary
"Automaten") and distributes (through the Company's wholly-owned subsidiary
"Vertriebs") wall-mounted, coin-operated, armless gaming devices similar to
slot machines known as wall machines and also distributes recreational and
amusement machines manufactured by third parties. Gaming designs, manufactures
and distributes electronic slot machines and video gaming machines. Systems
designs, assembles and sells computerized monitoring systems for slot and
video gaming machines. In three transactions dated November 1991, July 1992
and September 1993, BEC divested substantially all its interests in the
Company.

Certain reclassifications have been made to prior years' financial
statements to conform with the 1995 presentation.

Hereafter, references to the Company are to the consolidated operations of
Wulff, Gaming and Systems including the predecessor operations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of the Company
and all subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.

Cash equivalents

Cash equivalents consist of highly liquid investments with original
maturities of three months or less which are readily convertible into cash.

Inventories

Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market. Cost elements included for work-in-process and
finished goods include raw materials, freight, direct labor and manufacturing
overhead.

Property, plant and equipment

Depreciation is provided by using the straight-line method over the
estimated economic lives of the related assets and the terms of the applicable
leases for leasehold improvements, which range from 3 to 30 years.

Significant replacements and improvements are capitalized; other maintenance
and repairs are expensed. The cost and accumulated depreciation of assets
retired or otherwise disposed of are eliminated from the accounts and any
resulting gain or loss is credited or charged to income as appropriate.

Intangible and other assets

Intangible assets include the cost in excess of net assets of acquired
businesses, which are being amortized using the straight-line method over
periods ranging up to 40 years from dates of acquisition.

F-36
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

In July 1992, the Company reached an agreement for an exclusive license
until December 31, 2005, subject to extension, of a patent relating to the use
of credit cards in gaming machines, and acquired 1% of the stock of Scotch
Twist, Inc., a private company which granted this license, in exchange for the
issuance of 100,001 shares of the Company's Common Stock. The licensing
agreement requires the Company to commit $1.2 million in research and
development costs related to the patent, plus any costs related to obtaining
required regulatory approvals and licenses. As of December 31, 1995
approximately $1 million has been spent relative to this commitment.

In July 1992 and again in March 1995, the Company and BEC amended a
trademark license agreement ("License Agreement") pursuant to which the
Company licensed the use of the name "Bally" for its use in the gaming machine
business worldwide. Prior to 1995, the trademark licensing rights were being
amortized using the straight-line method over a 20 year period. Pursuant to
the terms of the March 1995 amendment, the Company reduced the remaining
amortization period to five years effective March 31, 1995, resulting in an
increase in amortization expense of approximately $315,000 for the year ended
December 31, 1995.

In January 1993, as part of an amendment to an intercorporate agreement
between the Company and BEC, a long-term income tax receivable from BEC of
$1,971,000 was exchanged for certain assets owned by BEC but managed by the
Company, a reduction in the period from six years to three years of certain
non-competition restrictions previously imposed on the Company by BEC and the
settlement of certain other intercompany service arrangements with BEC. This
transaction resulted in an increase to intangible assets of approximately
$1,515,000 which is being amortized over a 6 year period.

In June 1994, the Company acquired a paid up license for use of a patent on
slot machines manufactured or sold during the life of the patent. The owner of
the patent had recently filed an infringement action against various casinos
in Atlantic City alleging infringement of a certain patent by these casino
companies. As a result of the agreement, the casino operator defendants will
be released from any claims relating to the past and future use of certain
gaming machines manufactured by the Company. The Company agreed to pay $2
million over a 5 year period, without interest, for the paid up license. The
asset is fully amortized as of December 31, 1995.

The carrying value of intangible assets is periodically reviewed by
management and impairment losses, if any, are recognized when the expected
non-discounted future operating cash flows derived from such intangible assets
is less than their carrying value. In 1995, Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121") was issued which will be
effective for the Company's year ended December 31, 1996. This statement
requires that long-lived assets and certain identifiable intangible assets to
be held and used be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of such assets may not be
recoverable. Management believes that if SFAS No. 121 had been early adopted
at December 31, 1995, it would not have had a material effect on the financial
position, results of operations or cash flows of the Company.

Income taxes

Taxes on income of Wulff are provided at the tax rates applicable to the tax
jurisdictions in Germany, as Wulff files separate foreign income tax returns.
German withholding taxes and related United States federal income taxes are
provided on Wulff earnings.

Revenue recognition

The Company sells products on normal credit terms (90 days or less), over
longer term installments of up to 36 months or more or through payments from
the net winnings of the machines until the purchase price is paid.

F-37
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Revenue from sales of gaming machines and recreational and amusement equipment
is normally recognized at the time products are shipped and title has passed
to the customer. Revenue from sales of software included in computerized
management systems is recognized at the time the systems are accepted by the
customer, which normally coincides with installation of the equipment. Revenue
from sales of hardware included in computerized management systems is
recognized at the time the product is shipped.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Foreign currency translation

The functional currency of Wulff is the Deutsche Mark. Assets and
liabilities of Wulff are translated at the rate of exchange at the end of the
period, and the statements of operations are translated at the average rate of
exchange for the period. Translation adjustments are reflected as a separate
component of stockholder's equity. Gains and losses on foreign currency
transactions are included in net income.

Research and development

The Company expenses product research and development costs as incurred.
Research and development costs for the years ended December 31, 1993, 1994 and
1995 were $7.8 million, $8.7 million and $9.2 million, respectively.

Stock-based employee compensation awards

The Company accounts for its stock-based employee compensation awards in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"). Under APB 25, because the exercise
price of the Company's employee stock options and stock performance rights
equals the market price on date of grant, no compensation expense is
recognized.

In 1995, Statement of Financial Accounting Standards No. 123, "Accounting
for Awards of Stock-Based Compensation to Employees" ("SFAS No. 123") was
issued which will be effective for the Company's year ended December 31, 1996.
SFAS No. 123 provides alternative accounting treatment to APB No. 25 with
respect to stock-based compensation and requires certain additional
disclosures, including disclosures if the Company elects not to adopt the
accounting requirements of SFAS No. 123. At this point, the Company does not
anticipate adopting the accounting requirements of SFAS No. 123 and therefore
in future years would expect to provide the required additional disclosures in
the footnotes to the consolidated financial statements.

Net income (loss) per common share

Net income (loss) per common share is computed by dividing net income (loss)
by the weighted average number of shares of common stock and common stock
equivalents outstanding totaling 10,685,054, 10,726,556 and 10,775,699 for the
years ended December 31, 1993, 1994 and 1995.

F-38
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

Common stock equivalents were not included in the computation of earnings
(loss) per common share as their effect would have been antidilutive or
immaterial.

MERGER AGREEMENT, TENDER OFFER AND RELATED LITIGATION

On October 17, 1995, the Board of Directors of the Company approved an
Agreement and Plan of Merger with Alliance Gaming Corporation ("Alliance")
which was subsequently amended as of January 23, 1996 ("Merger Agreement").
Pursuant to the Merger Agreement, the Company will merge with a subsidiary of
Alliance ("Alliance Merger Subsidiary") with the Company being the surviving
corporation and becoming a wholly-owned subsidiary of Alliance ("Alliance
Merger"). The Merger Agreement provides that the Company's stockholders will
have the right to receive, in exchange for each of their issued and
outstanding shares of the Company's common stock (i) an amount of cash
determined by dividing $76,700,000 by the number of shares of the Company's
common stock outstanding immediately prior to the effective time of the Merger
(other than shares which are held by the Company, Alliance or their respective
subsidiaries) ("Converted Shares"), (ii) a fraction of a share of common
stock, $.10 par value, of Alliance ("Alliance Common Stock") having a value
determined in accordance with the Merger Agreement of $.30 (the "Common Stock
Consideration") and (iii) that number of shares (or fractions thereof) of 15%
Non-Voting Junior Special Stock, Series B, $.10 par value, of Alliance (the
"Series B Special Stock") having a value determined in accordance with the
Merger Agreement equal to $11.40 less the cash consideration described in
clause (i) above. The obligations of Alliance and the Company to consummate
the Alliance Merger are subject to various conditions, including obtaining
requisite stockholder and regulatory approvals and Alliance's obtaining $150
million in financing on commercially reasonable terms, at least two-thirds of
which must be in the form of bank debt, other debt having a term of at least
four years or equity. In conjunction with the Merger Agreement, Alliance
terminated its unsolicited tender offer and consent solicitation and withdrew
its litigation against the Company and the Company withdrew its litigation
against Alliance.

BUSINESS SEGMENT

The business of the Company is conducted in one industry segment: the
design, manufacture and distribution of gaming machines, computerized
monitoring systems and recreational and amusement equipment. All of Wulff's
sales are to customers outside the United States while Gaming and Systems sell
to domestic and foreign customers. See "Commitments and Contingencies."

F-39
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

The Company has operations based in Germany and the United States. The table
below presents information as to the Company's operations by geographic
region.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Germany...................................... $112,601 $111,068 $130,655
United States................................ 60,533 131,228 129,140
Eliminations................................. (4,427) (6,104) (10,483)
-------- -------- --------
Consolidated................................. $168,707 $236,192 $249,312
======== ======== ========
Operating Income (Loss):
Germany...................................... $ 9,702 $ 9,232 $ 5,581
United States................................ (27,658) 4,184 2,982
Eliminations................................. (580) (35) (199)
-------- -------- --------
Consolidated................................. $(18,536) $ 13,381 $ 8,364
======== ======== ========
Identifiable Assets:
Germany...................................... $ 81,899 $ 97,537 $100,207
United States................................ 90,613 99,478 100,643
Eliminations................................. (1,682) (4,773) (6,534)
-------- -------- --------
Consolidated................................. $170,830 $192,242 $194,316
======== ======== ========
</TABLE>

Wulff's customers are a diverse group of operators of arcades, hotels,
restaurants and taverns, primarily in Germany. Gaming's and Systems' customers
are primarily casinos and gaming machine distributors in the United States and
abroad. Receivables of Wulff, Gaming and Systems are generally collateralized
by the related equipment. See "Concentration of Credit Risk."

Export sales (including sales to Wulff) from Gaming's and Systems'
operations for the years ended December 31, 1993, 1994 and 1995 were as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Europe............................................... $ 8,651 $10,889 $12,890
Far East............................................. 223 860 998
Latin America........................................ 2,030 4,015 5,392
Canada............................................... 1,589 3,254 6,185
Other................................................ -- 556 1,824
------- ------- -------
$12,493 $19,574 $27,289
======= ======= =======
</TABLE>

ACCOUNTS AND NOTES RECEIVABLE

The Company grants certain customers extended payment terms under contracts
of sale. These contracts are generally for terms of one to three years, with
interest at prevailing rates, and are generally collateralized by the related
equipment sold although the value of such equipment, if repossessed, may be
less than the receivable balance outstanding. See "Concentration of Credit
Risk."

F-40
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

The following table represents, at December 31, 1995, scheduled collections
of accounts and notes receivable (net of allowances for doubtful accounts) by
year:

LONG-TERM DEBT AND LINES OF CREDIT

Long-term debt and lines of credit consist of the following at December 31,
1994 and 1995:

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
10 3/8% Senior Secured Notes due 1998, net of
unamortized discount of $458 and $344................ $39,542 $39,656
Other long-term debt:
Wulff revolving lines of credit....................... 15,853 15,905
Bally Gaming, Inc. revolving line of credit........... 7,768 9,400
Notes payable, 5% to 12%.............................. 6,599 4,983
Less current maturities............................... (16,000) (14,957)
------- -------
$14,220 $15,331
======= =======
</TABLE>

In July 1993, the Company completed a private placement of $40 million
principal amount of 10 3/8% Senior Secured Notes due July 1998 and Common
Stock Purchase Warrants to purchase 1.2 million shares of Common Stock
exercisable at $12.50 per share after the Common Stock has traded at an
average of $20 per share for a twenty consecutive trading day period and under
certain other circumstances. The warrants became exercisable during November
1993. The Company allocated $600,000 of the $40 million gross proceeds to the
warrants and accordingly recorded the Senior Secured Notes at $39.4 million
with unamortized discount of $600,000 (the effective yield of the Senior
Secured Notes is 10.77%). The Company used $21.6 million of the gross proceeds
of $40 million from the sale of the notes and warrants to redeem all of its
outstanding 6% Senior Convertible Debentures due 2002. The Company realized an
extraordinary gain of approximately $3.8 million from the redemption of the
Convertible Debentures in 1993. The gain represents the difference between the
carrying amount of the debt retired and related deferred financing costs
($25.4 million) and the redemption price of $21.6 million. The Senior Secured
Notes are collateralized by a pledge of the outstanding capital stock of
Automaten and Vertriebs and a guarantee by Bally Gaming, Inc. The Notes are
subject to redemption, at the option of the Company, at a redemption price
equal to 103% and 101.5% of the principal amount of the Notes if redeemed
during the twelve month period beginning on the anniversary of the issue date
in the years 1996 and 1997, respectively.

During March 1993, Vertriebs obtained two bank lines of credit for the
purpose of financing the acquisition of assets acquired from an independent
distributor. The agreements provide for borrowings of DM2,250,000 and
DM16,000,000 (approximately $1,600,000 and $11,200,000) at December 31, 1995,
respectively. Availability of the DM2,250,000 line of credit is reduced by
DM250,000 per quarter and expires on March 31, 1998. Borrowings under this
line of credit bear interest at 6.95%. The working capital revolving credit
line of DM16,000,000 bears interest at a rate tied to an international
borrowing rate plus 1% (5.3% at December 31, 1995) and is due on demand. These
lines are collateralized by a pledge of the assets acquired. Approximately

F-41
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

$12,751,000 was outstanding under these lines at December 31, 1995. In May
1993, Vertriebs obtained a DM16,300,000 (approximately $11,400,000 at December
31, 1995) revolving line of credit for general working capital purposes. This
agreement bears interest at a rate tied to an international borrowing rate
plus 1% (4.8% at December 31, 1995) and is due on demand. This line is
collateralized by the receivables of Vertriebs. Approximately $3,144,000 was
outstanding under this line at December 31, 1995. Vertriebs and Automaten are
jointly and severally liable under these lines of credit.

In March 1993, Bally Gaming, Inc. obtained a bank revolving line of credit
which, as amended, provides for borrowings tied to a percentage of Bally
Gaming, Inc.'s eligible (as defined in the credit agreement) inventory and
accounts receivable with a maximum borrowing capacity of $15,000,000.
Borrowings under this agreement, which expires March 31, 1997, bear interest
at one and one-half percent above the bank's prime rate (10% at December 31,
1995). The Company must pay an annual facility fee of one-half of one percent
of the maximum borrowing capacity and a monthly unused line fee of one-quarter
of one percent of the difference between the maximum borrowing capacity and
the average daily outstanding balance during any month. This line of credit is
collateralized by property, plant and equipment and the eligible inventory and
accounts receivable. The agreement and subsequent amendments also contain
certain financial and other restrictive covenants, including the maintenance
by Bally Gaming, Inc. of specified levels of minimum net working capital,
working capital ratio, tangible net worth, net worth ratio, and minimum net
income after taxes, all as defined in the credit agreement. Eligible borrowing
capacity under this agreement at December 31, 1995 was approximately
$15,000,000. Approximately $9,400,000 was outstanding at December 31, 1995.

Aggregate annual maturities of long-term debt for the five years after
December 31, 1995 are $14.9 million, $11.5 million, $43.6 million, $.3 million
and none.

STOCK PLANS, AWARDS AND RIGHTS

1991 Incentive Plan

On November 6, 1991, the Company adopted the 1991 Incentive Plan of Bally
Gaming International, Inc. (the "Plan") for directors (employee directors that
are not members of the Compensation and Stock Option Committee of the Board of
Directors), officers, key employees and consultants (collectively
"Participants"). The Plan provides for the grant of stock options, stock
appreciation rights ("SARs") and restricted stock (collectively "Awards"). The
aggregate number of shares of common stock which may be delivered under the
Plan and the 1991 Non-Employee Directors' Option Plan described below may not
exceed 1,250,000 shares. No awards may be granted after November 6, 2001.

The Plan provides for granting incentive as well as nonqualified stock
options. Unless the Compensation and Stock Option Committee of the Board of
Directors, in its discretion, determines otherwise, nonqualified stock options
will be granted with an option price equal to the fair market value of the
shares of common stock at the date of grant. Incentive stock options must be
granted at not less than the fair market value of the shares of common stock
at the date of grant.

SARs are rights granted to Participants to receive shares of common stock
and/or cash in an amount equal to the excess of (i) the fair market value of
the shares of common stock on the date the SARs are exercised over (ii) the
fair market value of the shares of common stock on the date the SARs were
granted or, at the discretion of the Compensation and Stock Option Committee
of the Board of Directors, the date the option was granted, if granted in
tandem with an option granted on a different date.

F-42
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

Restricted stock awards are rights granted to an employee to receive shares
of common stock without payment but subject to forfeiture and other
restrictions as set forth in the Plan. Generally, the restricted stock
awarded, and the right to vote such stock or to receive dividends thereon, may
not be sold, exchanged or otherwise disposed of during the restricted period.
The Compensation and Stock Option Committee of the Board of Directors, in its
discretion, will determine the restrictions and the forfeiture provisions
applicable to restricted stock awards. The Plan provides that, at the
discretion of the Compensation and Stock Option Committee of the Board of
Directors, the Company may pay cash to Participants to insure that the
Participant will receive the common stock net of all taxes imposed on such
Participant related to the receipt of common stock and cash payments under the
Plan. During 1991, restricted stock awards for 72,500 shares of common stock
were granted

under the Plan to key employees effective January 1, 1992. These awards are
fully vested at December 31, 1995. In 1993, 100,000 shares of restricted
common stock were granted to an officer of the Company. This award vests
ratably over a five-year period. As of December 31, 1995, 40,000 shares of
this award were vested.

The Plan is administered by the Compensation and Stock Option Committee
which will determine the participants to whom awards will be granted, the
provisions applicable to each award and the time periods during which the
awards may be exercised. Each option and SAR granted under the Plan may be
exercisable for a term of not more than ten years after the date of grant.
Incentive stock options and SARs granted in tandem with incentive stock
options may only be exercised when the fair market value of common stock is
greater than the option price. Certain other restrictions apply in connection
with the timing of exercise. In the event of a change of control (as defined
in the Plan), the date on which all SARs and options outstanding under the
Plan may first be exercised is accelerated, and restrictions on restricted
stock awards lapse. Generally, all SARs and options terminate 90 days after a
change of control.

1991 Non-Employee Directors' Option Plan

The 1991 Non-Employee Directors' Option Plan of the Company (the "Directors'
Plan") was also adopted in November 1991. The Directors' Plan provides for the
granting of stock options at the Company's initial public offering price to
persons who, on the consummation of the Company's initial public offering,
were members of the Board of Directors and who are not employees of the
Company or its subsidiaries ("Non-Employee Directors"), and thereafter,
options are granted at fair market value to persons who become members of the
Board of Directors after the Company's initial public offering and who are not
employees of the Company or its subsidiaries at the time they become members
of the Board of Directors. Each of the Non-Employee Directors received, or
will receive, an option, for ten years, to purchase 25,000 shares of common
stock that vests over three years. Administration, the term of the Directors'
Plan and change of control features for the Directors' Plan are consistent
with the above described Plan.

F-43
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

At December 31, 1995, 35,000 shares were reserved for future grant under the
Plan and the Directors' Plan. A summary of shares granted, canceled and
exercisable (excluding restricted stock grants of 172,500) are as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding at December 31, 1992 845,000 $11.75 - $14.50
Granted......................................... 188,000 $12.38 - $12.75
Canceled........................................ (9,000) $14.50
---------
Outstanding at December 31, 1993 1,024,000 $11.75 - $14.50
Granted......................................... 58,000 $ 8.06 - $12.88
Canceled........................................ (53,000) $12.00 - $14.50
---------
Outstanding at December 31, 1994 1,029,000 $ 8.06 - $14.50
Granted......................................... 30,000 $ 7.88
Canceled........................................ (16,500) $12.00 - $14.50
Exercised....................................... (50,000) $11.75
---------
Outstanding at December 31, 1995................. 992,500 $ 7.88 - $14.50
========= ===============
Exercisable at December 31, 1995................. 871,320 $ 8.06 - $14.50
========= ===============
</TABLE>

1992 Restricted Stock Performance Plan

On November 3, 1992, the Company's Board of Directors adopted the Bally
Gaming International, Inc. 1992 Restricted Stock Performance Plan (the
"Performance Plan"). The purpose of the Performance Plan is to benefit the
Company through increased incentive on the part of key employees, officers,
directors and consultants of the Company and its subsidiaries by permitting
the Company to make awards of Restricted Stock and/or Performance Units
comprised of stock and cash to such persons based upon specific performance
objectives. Up to 600,000 shares of the Company's common stock have been
reserved under this plan. In February 1993, 200,000 Performance Units were
granted in connection with an employment agreement entered into by the Company
with its Chairman of the Board and Chief Executive Officer. In May 1993,
200,000 Performance Units were granted in connection with an employment
agreement entered into by the Company and Bally Gaming, Inc. with its new
President. In December 1993, an additional 120,000 Performance Units were
granted to other members of senior management of the Company, of which 40,000
units were canceled during the year ended December 31, 1994.

Under the terms of the award agreements as amended June 8, 1994, the
Performance Units will vest if either (i) the cumulative annual growth rate
for any three consecutive years during the Performance Period (as defined in
the Performance Plan) is at least 35% (the "EPS Growth Target") or (ii) the
fair market value of the Common Stock (as determined based on the market price
of the Common Stock) equals or exceeds $40 per share for at least twenty of
thirty consecutive trading days (the "Market Price Target") or (iii) under
certain circumstances following a change in control or (iv) the Company enters
into a business combination or (v) the Company obtains a capital infusion of
at least $30,000,000 provided however if (i) the Company's earnings per share
growth in any consecutive three years during the Performance Period (as
defined in the Performance Plan) is at least 85% of the EPS Growth Target, at
least 70% of the Performance Units will vest, or (ii) the Company's stock
price at any time in the Performance Period (as defined in the Performance
Plan) is at least 85% of the Market Price Target, at least 70% of the
Performance Units will vest. Each Performance Unit is equal in value to one
share of the Company's Common Stock, plus an additional amount in cash equal
to fifty percent (50%) of the value of

F-44
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
one share of Common Stock, based on the fair market value of the Common Stock
at the date the award vests. Payments are to be made in common stock and/or
cash as determined by the Compensation Committee. No accruals have been
recorded in the Company's financial statements as of December 31, 1995 as such
performance objectives have not yet begun to be met.

1994 Stock Option Plan for Non-Employee Directors

The 1994 Stock Option Plan for Non-Employee Directors (the "1994 Directors'
Plan") was adopted in April 1994 and provides for the granting of stock
options of the Company's Common Stock exercisable at fair market value to Non-
Employee Directors. Each of the Non-Employee Directors received an option, for
ten years, to purchase 25,000 shares of Common Stock that vests over three
years. The option price was $12.875. The 1994 Directors' Plan has change in
control features similar to those contained in the 1991 Directors' Plan.
250,000 shares of the Company's Common Stock were reserved for future issuance
under the 1994 Directors' Plan. At December 31, 1995, 125,000 shares had been
granted of which 33,333 shares were exercisable, 25,000 had been canceled and
none had previously been exercised.

Stock Performance Rights ("SPRs")

Stock Performance Rights ("SPRs") are rights granted to individuals to
receive cash in an amount equal to the excess of (i) the fair market value of
the shares of common stock on the date the SPRs are exercised over (ii) the
fair market value of the shares of common stock on the date the SPRs were
granted.

In 1993, 100,000 SPRs were granted to an officer of the Company at a fair
market value on date of grant of $11.625 in connection with the signing of a
five-year employment agreement. These SPRs vest ratably over the term of the
employment agreement and become exercisable at the end of each vesting period.
As of December 31, 1995, 40,000 of the SPRs were exercisable, and none had
been previously exercised.

Warrants

The Company issued warrants to the underwriters of the initial public
offering of the Company's common stock to purchase an aggregate of 300,000
shares of its common stock. The warrants are exercisable during a four-year
period ending November 11, 1996 at an exercise price of $15 per share. For the
year ended December 31, 1993, 2,000 warrants were exercised and no other
warrants have since been exercised.

In 1993, the Company issued warrants to purchase 1.2 million shares of its
common stock at $12.50 per share in connection with the private placement of
the Senior Secured Notes. These warrants are currently exercisable and expire
on July 29, 1998. At December 31, 1995 none of these warrants were exercised.
See "Long-term Debt and Lines of Credit."

Common Stock Reserved for Future Issuance

At December 31, 1995 shares of the Company's Common Stock were reserved for
future issuance as follows:

<TABLE>
<S> <C>
Warrants related to the 10 3/8% Senior Secured Notes............. 1,200,000
1991 Incentive Plan and Directors' Plan.......................... 1,200,000
1992 Restricted Stock Performance Plan........................... 600,000
1994 Stock Option Plan for Non-Employee Directors................ 250,000
Warrants to underwriters......................................... 298,000
---------
3,548,000
=========
</TABLE>

F-45
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

OTHER REVENUES

Other revenues for the years ended December 31, 1993, 1994 and 1995 were as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Interest............................................. $3,795 $3,538 $3,615
Currency transaction gain (loss)..................... (245) (30) (53)
Other................................................ 586 1,366 1,279
------ ------ ------
$4,136 $4,874 $4,841
====== ====== ======
</TABLE>

UNUSUAL CHARGES

During the year ended December 31, 1995, the Company incurred approximately
$4.0 million in legal, accounting, investment banking, public and investor
relations and printing costs in connection with a merger agreement with WMS
Industries, Inc., which has been terminated, Alliance's tender offer and
consent solicitation and the pending Alliance Merger. All of these costs have
been expensed as incurred. Such costs will continue to be incurred in 1996.

During the fourth quarter of 1995, Vertriebs recorded a non-recurring charge
of $.8 million to writedown to net realizable value a building to be sold. The
provision was based on a strategic decision to sell the building as Wulff's
other distribution offices adequately covered the geographic region that would
have been served by this facility.

During 1995, Wulff increased the amount of value added tax reserves by $1.0
million as a result of developments to date in an ongoing quadrennial audit of
Wulff's tax returns for the years 1988 through 1991. While no written claim or
assessment has been issued, the German tax authorities have orally proposed
preliminary adjustments which range from $1.4 million (which has been accrued)
to $5.0 million. The Company has accrued the liability as, based on current
developments, the Company's estimate of the ultimate outcome and its
experience in contesting these matters, it is probable that a liability has
been incurred and a range of costs can be reasonably estimated. As the scope
of the liability is better determined, there could be changes in the estimate
of the ultimate liability. Management believes that the preliminary proposed
adjustments are without merit and the ultimate results of the audit will not
have a material adverse effect on the Company's financial position, results of
operations or cash flows.

INCOME TAXES

Effective January 1, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes" which requires recognition of deferred tax
assets and liabilities for temporary differences and net operating loss
("NOL") and tax credit carryforwards. Under SFAS No. 109, deferred income
taxes are established based on enacted tax rates expected to be in effect when
temporary differences are scheduled to reverse and NOL and tax credit
carryforwards are expected to be utilized. The cumulative effect of the
adoption of SFAS No. 109 had an immaterial effect on net income for the year
ended December 31, 1993.

F-46
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The provision (credit) for foreign and domestic income taxes for the years
ended December 31, 1993, 1994 and 1995 was as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Federal:
Current................................................ $ 476 $ 220 $ 260
Deferred............................................... -- -- --
------ ------ ------
476 220 260
====== ====== ======
Foreign:
Current................................................ 3,603 2,896 4,586
Deferred............................................... 163 (296) 58
------ ------ ------
3,766 2,600 4,644
------ ------ ------
Total provisions for income taxes........................ $4,242 $2,820 $4,904
====== ====== ======
</TABLE>

The major components of the net deferred tax asset as of December 31, 1994,
and 1995 were as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER
31,
----------------
1994 1995
------- -------
<S> <C> <C>
Property, plant and equipment.............................. $ 1,075 $ 1,193
Other...................................................... 131 --
------- -------
Total deferred tax liabilities........................... 1,206 1,193
------- -------
Bad debt reserves.......................................... 4,933 5,876
Inventory reserves......................................... 5,527 4,736
Wulff corporate reorganization............................. 235 366
Net operating loss carryforwards........................... -- 391
Foreign tax credit carryforwards........................... 8,382 12,955
AMT tax credit carryforwards............................... 384 570
Intangibles................................................ 2,432 909
Accrued liabilities........................................ 1,201 562
Deferred compensation...................................... 696 476
Other...................................................... 31 500
------- -------
Total deferred tax assets................................ 23,821 27,341
------- -------
Valuation allowance........................................ (21,460) (24,667)
------- -------
Net deferred tax assets.................................. $ 1,155 $ 1,481
======= =======
</TABLE>

At December 31, 1994 and 1995, net deferred tax assets resulted from German
net operating loss carryforwards and, inventory and intangible assets book/tax
basis differences. At December 31, 1995 the Company has foreign tax credit
carryforwards of approximately $13.0 million and alternative minimum tax
("AMT") credit carryforwards of approximately $.6 million. Foreign tax credits
are available to offset future taxes due in the U.S. on future foreign taxable
income and expire between 1997 and 2001 unless utilized prior to such time.
AMT credits are available to be carried forward indefinitely and may be
utilized against regular U.S. corporate income tax to the extent it does not
exceed tax computed under AMT calculations.

F-47
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

The provision for income taxes at the Company's effective tax rate differed
from the provision for income taxes at the statutory rate as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------- ------ ------
<S> <C> <C> <C>
Taxes at federal statutory rate...................... $(7,806) $2,248 $ 529
Losses with no current tax benefit................... 11,528 -- --
Federal alternative minimum tax...................... 143 200 200
Foreign earnings at other than U.S. statutory rate... 238 (2) 3,529
Foreign withholding on dividends..................... 333 353 450
Other................................................ 34 21 196
Impact of SFAS 109 adoption.......................... (228) -- --
------- ------ ------
$ 4,242 $2,820 $4,904
======= ====== ======
</TABLE>

RELATED PARTY TRANSACTIONS

In connection with the Company's initial public offering, BEC granted
restricted stock awards for shares of the Company's common stock owned by BEC
to certain senior executives of the Company. These restricted stock awards
represent compensation from the Company equal to the fair market value of the
shares on the date of the awards and are recorded as unearned compensation and
a capital contribution in the accompanying financial statements. Unearned
compensation is charged to operations over the vesting periods of the awards.

In connection with the Company's initial public offering, the Company and
BEC entered into an intercorporate agreement which was amended in July 1992,
and again in January 1993, which provided, among other things, that BEC would
perform certain accounting, tax, treasury, legal, data processing, employee
benefits and other services which the Company reasonably requests, and that
the Company would reimburse BEC for the reasonable cost of all services
rendered, including salaries and expenses of BEC's employees while they are
rendering such services. Charges by BEC to the Company under the
intercorporate agreement for the years ended December 31, 1993, 1994 and 1995
were $295,000, $90,000 and none, respectively.

The Company participated in BEC's insurance program for general liability and
directors' and officers' liability coverage through June 1993. Under these
programs, insurance expenses were charged to the Company based on claims
experience and for reimbursements of premium payments made by BEC. Insurance
expense charged to the Company was $281,000, none, and none for the years
ended December 31, 1993, 1994 and 1995, respectively.

The Company had a long-term income tax receivable from BEC totaling
$1,971,000 at December 31, 1992. As part of an amendment to the intercorporate
agreement between the Company and BEC, which was entered into in January 1993,
the income tax receivable of $1,971,000 was exchanged for certain assets
previously owned by BEC but managed by the Company, a reduction in the period
from six years to three years of certain non-competition restrictions
previously imposed on the Company by BEC and settlement of certain other
intercompany service arrangements with BEC. This transaction resulted in an
increase to intangible assets of approximately $1,515,000 which is being
amortized over a six-year period.

Waters, McPherson, McNeill, P.C., a law firm of which Mr. McPherson, a
director of the Company, is Senior Lawyer and Chairman, provides legal
services to the Company, primarily relating to litigation involving the
Company's former distributor in Louisiana. As of December 31, 1994 and 1995,
the Company was indebted

F-48
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

to the firm for approximately $200,000 and $480,000, respectively, for legal
services rendered. During the years ended December 31, 1993, 1994 and 1995,
Waters, McPherson, McNeill, P.C. billed the Company approximately $1.0
million, $1.3 million and $1.5 million, respectively, for legal services
provided to the Company.

EMPLOYEE BENEFIT PLANS

Until February 28, 1994 the Company participated in BEC's defined
contribution plans which covered certain full-time employees and which were
considered part of the Company's overall retirement program. Effective March
1, 1994, the Company ceased its participation in BEC's defined contribution
plans and formed its own plan. This program consists of a savings plan to
which employees may contribute a percentage of their compensation. Employee
contributions to the savings plan, up to certain limits, may be matched by the
Company. The Company's contribution accrued for the savings plan for the years
ended December 31, 1993, 1994 and 1995 was approximately $91,000, $120,000 and
$140,000, respectively.

COMMITMENTS AND CONTINGENCIES

The Company is obligated under several patent agreements to pay royalties
ranging from approximately $50 to $200 per game depending on the components in
the gaming machines. Additionally, based on an amendment to the trademark
licensing agreement between the Company and BEC dated March 31, 1995, the
Company is obligated to pay a royalty on new machines sold of $25 to $30 per
machine beginning on March 31, 1995 with a minimum annual royalty payment of
$500,000 for the initial five-year term of the amended agreement, which is
subject to annual renewals thereafter. Royalty expense for the years ended
December 31, 1993, 1994 and 1995 was $1.1 million, $2.9 million and $3.0
million, respectively.

The Company leases certain facilities and equipment for production, selling
and administrative purposes under operating leases. Future minimum lease
payments at December 31, 1995 under operating leases that have initial or
remaining lease terms in excess of one year are as follows:

<TABLE>
<S> <C>
1996................................. $ 3,136
1997................................. 2,753
1998................................. 1,754
1999................................. 1,361
2000................................. 1,121
Thereafter........................... 1,844
-------
$11,969
=======
</TABLE>

Rent expense for the years ended December 31, 1993, 1994 and 1995 was $2.6
million, $2.7 million and $3.6 million, respectively.

The Company has entered into employment contracts with several of its
executives. These contracts are for periods ranging from one to five years and
require certain minimum annual payments. Future minimum annual payments under
these contracts are as follows:

F-49
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

In conjunction with sales by Gaming, with recourse to Gaming and/or the
Company, of certain trade receivables to third parties, Gaming and/or the
Company have guaranteed amounts due from various customers of approximately
$18.2 million at December 31, 1995. A charge was recognized as a result of
these sales of receivables which aggregated approximately $.5 million, $1.0
million and $.1 million during 1993, 1994 and 1995, respectively. It is
possible that one or more of Gaming's customers whose obligation has been
guaranteed by Gaming may be unable to make payments as such become due. In
this case Gaming may become responsible for repayment of at least a portion of
such amounts over the term of the receivables. At December 31, 1995, amounts
due from one customer under three contracts totaling $3.5 million were past
due and these amounts and subsequent installments have not been paid. In
general, under the terms of these contracts, the Company may be responsible
for monthly payments of the outstanding obligations. The third party holder of
these contracts has not yet asserted demands under these contracts although
such demands may be imminent. The Company intends to pursue a restructuring of
the contracts although no assurance can be given that such a restructuring
would be successfully negotiated. The outcome of this issue is not anticipated
to have a material effect on the financial position, results of operations or
cash flows of the Company. A provision for doubtful accounts of approximately
$3.5 million and $6.3 million on all receivables with recourse is included in
the Company's allowance for doubtful accounts at December 31, 1994 and 1995,
respectively.

On or about June 19, 1995, three purported class actions were filed in the
Chancery Court of Delaware by Company's stockholders against the Company and
its directors (the "Fiorella, Cignetti and Neuman Actions"). The Fiorella and
Neuman Actions, in identical complaints alleged that the Company's directors
had breached their fiduciary duties of good faith, fair dealing, loyalty and
candor by approving the Merger Agreement with WMS ("WMS Merger") instead of
the unsolicited tender offer transaction proposed by Alliance ("Alliance
Proposal"), by not properly exposing the Company for sale, and by failing to
take all reasonable steps to maximize stockholder value. These actions sought
injunctions to prevent the Company from proceeding with, consummating or
closing the WMS Merger, and to rescind it should it be consummated, as well as
compensatory damages. The Cignetti Action made similar allegations, and also
alleged that the Company had in place a shareholders' right plan, commonly
know as a "poison pill." The Cignetti Action sought an injunction requiring
the Company to negotiate with all bona fide parties or other potential
acquirees or to conduct an unencumbered market check in a manner designed to
maximize shareholder value, and preventing the Company from implementing any
unlawful barriers to the acquisition of the Company by any third party or
taking other actions that would lessen its attractiveness as an acquisition
candidate. The Cignetti Action also specifically requested an injunction
barring triggering of the Company's alleged "poison pill" until full
consideration was given to the Alliance Proposal (subsequently superseded by
the execution of the Merger Agreement with Alliance), and sought compensatory
damages.

Also on or about June 19, 1995, a purported class action was filed in the
Delaware Court of Chancery by a Company stockholder against the Company and
its directors and Alliance (the "Strougo Action"). The Strougo Action alleged
that the Alliance Proposal (subsequently superseded by the execution of the
Alliance Merger Agreement) to acquire the Company stock was at a grossly
unfair and inadequate price; that the Company's directors had breached their
fiduciary duties by failing seriously to consider potential purchasers for the
Company other than Alliance; and that the transaction proposed by Alliance was
wrongful, unfair and harmful to the Company's public stockholders. The Strougo
Action sought a declaration that defendants had breached their fiduciary
duties; an injunction preventing the consummation of the Alliance transaction
or requiring its rescission; an order requiring defendants to permit a
stockholders' committee to participate in any process undertaken in connection
with the sale of the Company; and compensatory damages.

On or about July 6, 1995, the plaintiffs in the Fiorella, Cignetti, Neuman
Actions and the Strougo Action (collectively, the "Stockholder Plaintiffs")
filed with the Court a motion to consolidate the four actions.

F-50
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

On or about July 27, 1995, certain of the Stockholder Plaintiffs filed an
amended complaint (the "Amended Fiorella Action") that adopted certain
allegations concerning self-dealing by the Company's directors in connection
with the WMS Merger; added a claim relating to the Company's alleged failure
to hold an annual meeting as required and added WMS as defendant. The Amended
Fiorella Action also alleged that the Company intended, in violation of
Delaware law, to sell Wulff without first seeking stockholder approval of the
sale. The action sought an order enjoining defendants from proceeding with,
consummating or closing the WMS Merger, or rescinding it if it closed;
preventing the sale of Wulff without prior stockholder approval; declaring
invalid the Company's agreement to pay WMS a fee if the WMS Merger is
terminated by the Company in certain circumstances; compelling an auction of
the Company and the provision of due diligence to Alliance; scheduling an
immediate meeting of the Company stockholders; and awarding compensatory
damages. The Company believes these lawsuits to be without merit and intends
to vigorously defend these actions.

On October 23, 1995, WMS instituted a suit in New York State Court against
the Company for the Company's failure to pay $4.8 million upon termination of
the WMS Merger. The Company believes this lawsuit to be without merit and
intends to vigorously defend this action. On November 22, 1995, the Company
answered the complaint and brought counterclaims against WMS alleging that WMS
repudiated and breached the WMS Merger by, among other things, failing to act
in good faith toward the consummation of the WMS Merger, advising the Company
that it would not perform as agreed but would impose new conditions on the WMS
Merger, acting in excess of its authority and undermining the ability of the
Company to perform the WMS Merger. On February 8, 1996 WMS moved for summary
judgement. The Company's response to that action is presently due on March 15,
1996. Pursuant to the Merger Agreement, Alliance has agreed to indemnify the
directors and officers of the Company in certain circumstances.

In June 1995, BEC asserted that a certain agreement between BEC and the
Company (the "Non-compete Agreement") prohibits the use by the Company of the
tradename "Bally" if it is merged with a company that is in the casino
business within or without the United States and operates such business prior
to January 8, 1999. The Company believes such a claim is entirely without
merit since the restriction referred to expired on January 8, 1996 and in any
event does not relate to the use of the "Bally" tradename, which is covered by
the License Agreement. The restriction in the Non-compete Agreement will not
have any impact on the combined company after the Merger since the effective
time of the Alliance Merger contemplates a closing of the Alliance Merger
after the restriction in the Non-compete Agreement lapses. BEC has not
reasserted this position since it was informed by the Company in July 1995
that the restriction lapses on January 8, 1996. Consequently, the Company
believes BEC has determined not to contest with the Company's position.

On February 16, 1996, the Company received notice from BEC alleging that the
Company has violated the License Agreement by, among other things, granting to
Marine Midland Business Loans, Inc. ("Marine Midland"), the lender which
provides Bally Gaming, Inc.'s revolving line of credit, a security interest in
general intangibles. In such notice, BEC also stated that as a result of the
foregoing, it was immediately terminating the License Agreement. The Company
does not believe that it has violated the terms of the License Agreement and
the Company will defend its position against BEC's claims.

BEC has also asserted that its permission is required for use of the "Bally"
tradename by any entity other than the Company and that a merger between the
Company and another company would violate the terms of the License Agreement.
The Company has denied these claims and believes that the surviving company in
the Alliance Merger will be permitted to use the "Bally" tradename in
accordance with the terms of such License Agreement. The Company believes that
no breach of such License Agreement is caused by the Alliance Merger and use
of the "Bally" tradename by the surviving corporation. In a letter dated
November 9, 1995, BEC

F-51
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

reasserted its position. On November 20, 1995, Alliance, the Alliance Merger
Subsidiary and the Company commenced an action against BEC in Federal District
Court in Delaware seeking a declaratory judgment, among other things, that the
surviving company in the Alliance Merger will be permitted to use the "Bally"
tradename in accordance with the terms of the License Agreement, and seeking
injunctive relief (the "Alliance Action"). On November 28, 1995, BEC commenced
an action against the Company, Bally Gaming, Inc., Alliance and the Alliance
Merger Subsidiary in Federal District Court in New Jersey to enjoin the
defendants from using the "Bally" tradename (the "BEC Action"). The BEC Action
alleges that the Company's continued use of the tradename after the Alliance
Merger will (1) constitute a prohibited assignment of the Company's rights to
use the tradename and (2) exceed the scope of the license granted to the
Company because the Company will be under the control of Alliance. Also on
November 28, 1995, BEC filed a motion to dismiss, transfer to New Jersey, or
stay the Alliance Action pending resolution of the BEC Action. On December 15,
1995 BEC filed a motion to dismiss, transfer to New Jersey or stay the
Alliance Action pending resolution of the BEC Action. On December 15, 1995,
BEC filed a motion for a preliminary injunction in the BEC Action. At a
hearing on January 17, 1996, the court declined to issue a preliminary
injunction, but held BEC's motion in abeyance pending the defendant's motion
to dismiss and for summary judgment, which defendants had filed on December
26, 1995. After a second hearing on February 20, 1996 the court stated it
would attempt to rule on both motions in fourteen days. The Company, Bally
Gaming Inc., Alliance and the Alliance Merger Subsidiary intend to vigorously
defend their position in these actions.

In 1994, after an intensive federal investigation of Gaming's former
distributor, eighteen individuals were indicted on charges of racketeering and
fraud against Gaming and the Louisiana regulatory system. Among those indicted
were the former distributor's stockholders, directors, employees and others
alleged to be associated with organized crime. Fifteen entered pleas of guilty
before trial and the remaining three were convicted in October 1995. Gaming
was never a subject or target of the federal investigation.

Prior to the conclusion of the federal case, the Company's activities with
regard to its former VLT distributor in Louisiana were the subject of
inquiries by gaming regulators and a report by the New Jersey Division of
Gaming Enforcement ("DGE") dated August 24, 1995. The New Jersey Casino
Control Commission ("CCC") has indicated that it may hold a hearing on the
matter, but no date has been set at this time. The New Jersey report makes no
specific recommendations for action by the CCC. The gaming authorities in
Ontario, Canada, who have investigated the matters, have issued a gaming
registration to the Company's subsidiary Bally Gaming, Inc. on February 8,
1996.

The DGE's report is similar in many respects to one prepared by the
President of the Louisiana Economic Development and Gaming Corporation
("LEDGC") in January 1995. Hearings on that report were held in January 1995
and on February 7, 1995 the Board of Directors of the LEDGC found all of the
allegations in its President's report to be without merit and granted a
license to the Company and has announced that it will continue to monitor the
Company's conduct in light of any further information disclosed as a result of
the trial of the eighteen defendants (all of whom have now plead, or been
found, guilty) and other regulatory proceedings. In November 1995, the
operator of the land based casino in New Orleans filed for bankruptcy
reorganization and ceased operations. That action resulted in the termination
of funding for the LEDGC regulatory operations and, shortly thereafter, the
Attorney General of Louisiana took control of the agency and effectively
closed its operations. LEDGC's President and employees were dismissed. The
foregoing occurred prior to the completion of review of the Company's pending
application.

The Company believes that the information contained in the DGE's report does
not differ in any material respect from the prior report to the LEDGC the
conclusions of which were found to be without merit in February 1995. An
adverse determination by a gaming regulator in any jurisdiction could result
in the loss of the

F-52
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Company's ability to do business in that jurisdiction. Further regulatory
scrutiny in other jurisdictions would be likely to follow. The Company would
appeal any adverse finding, as was the case when the Company successfully
appealed the LEDGC President's decision in January 1995.

On September 25, 1995, the Company was named as defendant in a class action
lawsuit filed in the United States District Court, District of Nevada, by
Larry Schreier on behalf of himself and all others similarly situated (the
"plaintiffs"). The plaintiffs filed suit against the Company and approximately
45 other defendants (each a "defendant," and collectively the "defendants").
Each defendant is involved in the gaming business as either a gaming machine
manufacturer, distributor, or casino operator. The class action lawsuit arises
out of alleged fraudulent marketing and operation of casino video poker
machines and electronic slot machines. The plaintiffs allege that the
defendants have engaged in a course of fraudulent and misleading conduct
intended to induce people in playing their gaming machines based on a false
belief concerning how those machines actually operate as well as the extent to
which there is actually an opportunity to win on any given play. The
plaintiffs allege that the defendants' actions constitute violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and give rise to
claims of common law fraud and unjust enrichment. The plaintiffs are seeking
monetary damages in excess of one billion dollars, and are asking that any
damage awards be trebled under applicable federal law. The Company believes
the plaintiffs' lawsuit to be without merit and intends to vigorously defend
these actions.

While the ultimate results of the matters described above are not presently
known, management does not expect that the results will have a material
adverse effect on the Company's results of operations, financial position or
cash flows.

The Company and its subsidiaries are from time to time also subject to
litigation incidental to the conduct of their business. The Company believes
that the results of such litigation and other pending legal proceedings will
not have a material adverse effect on the Company's financial position,
results of operations or cash flows.

CONCENTRATION OF CREDIT RISK

The financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts and notes
receivable and customer obligations guaranteed by the Company.

Product sales and the resulting receivables are concentrated in specific
legalized gaming regions. The Company also distributes its products through
third party distributors resulting in distributor receivables. At December 31,
1995 net accounts and notes receivable, including obligations of various
customers which are guaranteed by the Company, by region as a percentage to
total net receivables are as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
---------------------------
WULFF GAMING SYSTEMS TOTAL
----- ------ ------- -----
<S> <C> <C> <C> <C>
Germany....................................... 47.0% --% --% 47.0%
Mississippi Riverboats........................ -- 9.5 -- 9.5
Other Riverboat Casinos....................... -- 1.3 -- 1.3
Nevada........................................ -- 15.0 1.8 16.8
Atlantic City................................. -- 2.0 2.0 4.0
International................................. -- 8.0 1.6 9.6
Louisiana..................................... -- 1.6 .1 1.7
New Mexico Indian Casinos..................... -- 5.6 .2 5.8
Other Indian Casinos.......................... -- 1.8 .3 2.1
Others individually less than 5%.............. -- 2.2 -- 2.2
---- ---- --- -----
47.0% 47.0% 6.0% 100.0%
==== ==== === =====
</TABLE>

F-53
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

Gaming's receivables and customer obligations guaranteed by Gaming and/or
the Company, from riverboat casinos and casinos on Indian land generally
represent sales to recently opened casinos and, in many cases, new customers
to Gaming. Approximately 43% of the accounts and notes receivable and customer
obligations guaranteed by the Company at December 31, 1995 relate to these
emerging markets including approximately 25% to three customers operating in
Mississippi. Receivables and customer obligations guaranteed by the Company
from emerging market customers contain increased risk factors compared to
receivables at Wulff or other traditional markets for Gaming.

In early 1995, the Governor of the State of New Mexico signed compacts with
certain Indian tribes to permit casino gaming on tribal lands in New Mexico.
These compacts went through appropriate federal approval processes and a
number of casinos began operating. In July 1995 the Supreme Court of New
Mexico found that the Governor did not have proper authority to sign the
compacts. The Indian tribes have filed a lawsuit in federal court to seek
resolution to this issue. Gaming and Systems had sold product to the Indian
tribes prior to this ruling. At December 31, 1995, the Company has $5.5
million in accounts and notes receivable from an operator of two casinos for
two different Indian tribes including $2.1 million of trade receivables sold
to a third party with recourse to Gaming. This operator is currently four
months ahead on payments. No provision for doubtful accounts for this customer
has been included in the accompanying financial statements at December 31,
1995. Management believes the receivable is properly valued at December 31,
1995. As events change during 1996 management will reevaluate its estimate of
the realizability of the receivable.

CONSOLIDATING FINANCIAL STATEMENTS

The following consolidating financial statements are presented to provide
information regarding Bally Gaming, Inc., as guarantor of the Senior Secured
Notes, and Bally Wulff Automaten GmbH and Bally Wulff Vertriebs GmbH, because
substantially all of the common stock of these entities is pledged as
collateral for the Senior Secured Notes. The results herein are presented by
each legal entity rather than by business segment as presented elsewhere in
these financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations. Such business segment
information of Bally Gaming, Inc., Automaten and Vertriebs includes an
allocation of parent company revenues and expenses whereas the following
consolidating financial statements do not reflect these allocations to the
subsidiaries. The notes to consolidating financial statements should be read
in conjunction with the consolidated financial statements and notes thereto.

F-54
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY
BALLY BALLY BALLY CONSOLIDATING GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- -------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 1,362 $ 7,487 $ 355 $ -- $ -- $ 9,204
Accounts and notes
receivable, net of
allowance for doubtful
accounts of $19,
$5,659 and $6,604 for
Automaten, Vertriebs
and Gaming............ 2,813 46,342 38,773 2,903 (6,199) 84,632
Inventories, net:
Raw materials and
work-in-process....... 5,063 -- 16,019 -- -- 21,082
Finished goods......... 2,442 9,413 17,599 -- (1,077) 28,377
------- ------- -------- -------- --------- --------
7,505 9,413 33,618 -- (1,077) 49,459
Other current assets... 1,446 2,957 650 196 (175) 5,074
------- ------- -------- -------- --------- --------
Total current assets.. 13,126 66,199 73,396 3,099 (7,451) 148,369
Long-term notes
receivables, net of
allowance for doubtful
accounts of $35 and
$8,163 for Vertriebs
and Gaming............. -- 1,186 4,372 -- -- 5,558
Long-term receivables
from affiliate......... 23,314 -- -- 29,014 (52,328) --
Property, plant and
equipment, at cost:
Land................... -- 332 1,025 -- -- 1,357
Buildings and leasehold
improvements.......... 1,648 7,705 9,909 -- -- 19,262
Machinery and
equipment............. 11,174 7,072 8,390 -- -- 26,636
Furniture, fixtures and
equipment............. 828 2,181 5,335 -- (2,269) 6,075
Less accumulated (11,615) (5,978) (11,844) -- 465 (28,972)
depreciation.......... ------- ------- -------- -------- --------- --------
Property, plant and
equipment, net....... 2,035 11,312 12,815 -- (1,804) 24,358
Intangible assets, less
accumulated
amortization of $197,
$11,131, $69 and $1,212
for Automaten,
Vertriebs, Gaming and
Parent................. -- 5,773 181 5,456 -- 11,410
Investment in
subsidiaries........... -- -- -- 90,766 (90,766) --
Other assets............ 337 586 113 1,511 -- 2,547
------- ------- -------- -------- --------- --------
$38,812 $85,056 $ 90,877 $129,846 $(152,349) $192,242
======= ======= ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....... $ 411 $ 4,064 $ 18,880 $ 891 $ (4,974) $ 19,272
Accrued liabilities and
other payables:
Compensation and
benefit related
liabilities........... 2,287 612 2,433 630 -- 5,962
Interest............... -- -- -- 1,890 -- 1,890
Other.................. 1,461 4,065 4,495 186 (734) 9,473
------- ------- -------- -------- --------- --------
3,748 4,677 6,928 2,706 (734) 17,325
Current maturities of -- 13,756 1,350 894 -- 16,000
long-term debt........ ------- ------- -------- -------- --------- --------
Total current
liabilities.......... 4,159 22,497 27,158 4,491 (5,708) 52,597
Long-term payables to
affiliate.............. -- 26,741 29,014 -- (55,755) --
10 3/8% Senior Secured
Notes due 1998, net of
unamortized discount of
$458................... -- -- -- 39,542 -- 39,542
Other long-term debt,
less current
maturities............. -- 5,006 7,927 1,287 -- 14,220
Commitments and
contingencies
Stockholders' equity:
Preferred stock........ -- -- -- -- -- --
Common stock........... 2,638 15,142 -- 107 (17,780) 107
Additional paid-in-
capital............... 19,191 6,455 34,596 73,852 (66,336) 67,758
Retained earnings
(accumulated deficit). 6,199 1,433 (7,818) 11,550 (6,129) 5,235
Cumulative translation
adjustments........... 6,625 7,782 -- (206) (641) 13,560
Unearned compensation.. -- -- -- (777) -- (777)
------- ------- -------- -------- --------- --------
Total stockholders' 34,653 30,812 26,778 84,526 (90,886) 85,883
equity............... ------- ------- -------- -------- --------- --------
$38,812 $85,056 $ 90,877 $129,846 $(152,349) $192,242
======= ======= ======== ======== ========= ========
</TABLE>
See accompanying notes.

F-55
<PAGE>

BALLY GAMING INTERNATIONAL, INC. CONSOLIDATING BALANCE SHEET

DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY BALLY BALLY CONSOLIDATING BALLY GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
ASSETS --------- --------- ------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 1,353 $ 3,240 $ 933 $ -- $ -- $ 5,526
Accounts and notes
receivable, net of
allowance for doubtful
accounts of $19,
$7,201, and $9,061 for
Automaten, Vertriebs
and Gaming............ 1,804 51,110 38,948 4,772 (9,458) 87,176
Inventories, net:
Raw materials and
work-in-process....... 4,974 -- 11,092 -- -- 16,066
Finished goods........ 3,548 12,340 21,020 -- (1,383) 35,525
------- ------- ------- -------- --------- --------
8,522 12,340 32,112 -- (1,383) 51,591
Other current assets... 1,236 1,443 651 560 93 3,983
------- ------- ------- -------- --------- --------
Total current assets.. 12,915 68,133 72,644 5,332 (10,748) 148,276
Long-term notes
receivables, net of
allowance for doubtful
accounts of $48 and
$7,821 for Vertriebs
and Gaming............. -- 1,654 8,327 -- -- 9,981
Long-term receivables
from affiliate......... 23,208 -- -- 28,380 (51,588) --
Property, plant and
equipment, at cost:
Land................... -- 332 1,025 -- -- 1,357
Buildings and leasehold
improvements.......... 1,571 8,375 9,925 -- -- 19,871
Machinery and
equipment............. 11,913 9,617 8,798 -- -- 30,328
Furniture, fixtures and
equipment............. 812 2,520 5,909 -- (3,079) 6,162
Less accumulated (12,964) (8,787) (13,587) -- 864 (34,474)
depreciation.......... ------- ------- ------- -------- --------- --------
Property, plant and
equipment, net........ 1,332 12,057 12,070 -- (2,215) 23,244
Intangible assets, less
accumulated
amortization of
$11,527, $94 and $2,099
for Vertriebs, Gaming
and Parent............. -- 6,089 156 4,569 -- 10,814
Investment in
subsidiaries........... -- -- -- 90,766 (90,766) --
Other assets............ 332 561 113 497 498 2,001
------- ------- ------- -------- --------- --------
$37,787 $88,494 $93,310 $129,544 $(154,819) $194,316
======= ======= ======= ======== ========= ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable....... $ 557 $ 6,386 $19,342 $ 31 $ (7,760) $ 18,556
Accrued liabilities and
other payables:
Compensation and
benefit related
liabilities.......... 2,335 955 2,318 -- -- 5,608
Interest.............. -- -- -- 1,890 -- 1,890
Other................. 1,472 3,546 4,293 617 (20) 9,908
------- ------- ------- -------- --------- --------
3,807 4,501 6,611 2,507 (20) 17,406
Current maturities of -- 14,333 212 412 -- 14,957
long-term debt........ ------- ------- ------- -------- --------- --------
Total current
liabilities.......... 4,364 25,220 26,165 2,950 (7,780) 50,919
Long-term payables to
affiliate.............. -- 26,421 28,380 -- (54,801) --
10 3/8% Senior Secured
Notes due 1998, net of
unamortized discount of
$344................... -- -- -- 39,656 -- 39,656
Other long-term debt,
less current
maturities............. -- 4,721 9,435 1,175 -- 15,331
Commitments and
contingencies
Stockholders' equity:
Preferred stock ....... -- -- -- -- -- --
Common stock........... 2,638 15,142 -- 108 (17,780) 108
Additional paid-in-
capital............... 19,191 6,455 34,596 74,439 (66,336) 68,345
Retained
earnings(accumulated
deficit).............. 2,155 286 (5,273) 11,969 (7,295) 1,842
Cumulative translation
adjustments........... 9,439 10,249 7 (206) (827) 18,662
Unearned compensation.. -- -- -- (547) -- (547)
------- ------- ------- -------- --------- --------
Total stockholders' 33,423 32,132 29,330 85,763 (92,238) 88,410
equity............. ------- ------- ------- -------- --------- --------
$37,787 $88,494 $93,310 $129,544 $(154,819) $194,316
======= ======= ======= ======== ========= ========
</TABLE>

See accompanying notes.

F-56
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY BALLY BALLY CONSOLIDATING BALLY GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- -------- ------- ------------- --------------
Revenues:
<S> <C> <C> <C> <C> <C> <C>
Sales.................. $42,437 $100,287 $ 59,709 $ -- $(37,862) $164,571
Other.................. 1,497 3,083 807 1,479 (2,730) 4,136
------- -------- -------- ------- -------- --------
43,934 103,370 60,516 1,479 (40,592) 168,707
------- -------- -------- ------- -------- --------
Costs and expenses:
Cost of sales.......... 26,937 81,611 51,888 -- (38,726) 121,710
Selling, general and
administrative........ 6,737 19,608 24,498 6,531 (17) 57,357
Provision (credit) for
doubtful receivables.. (13) 326 7,363 500 -- 8,176
------- -------- -------- ------- -------- --------
33,661 101,545 83,749 7,031 (38,743) 187,243
------- -------- -------- ------- -------- --------
Operating income (loss). 10,273 1,825 (23,233) (5,552) (1,849) (18,536)
Interest expense........ 21 1,873 2,849 2,180 (2,499) 4,424
------- -------- -------- ------- -------- --------
Income (loss) before in-
come taxes and
extraordinary gain..... 10,252 (48) (26,082) (7,732) 650 (22,960)
Provision (benefit) for
income taxes........... 3,705 (557) 10 -- 1,084 4,242
------- -------- -------- ------- -------- --------
Income (loss) before ex-
traordinary gain....... 6,547 509 (26,092) (7,732) (434) (27,202)
Extraordinary gain on
early extinguishment of
debt................... -- -- 3,759 -- -- 3,759
------- -------- -------- ------- -------- --------
Net income (loss)....... $ 6,547 $ 509 $(22,333) $(7,732) $ (434) $(23,443)
======= ======== ======== ======= ======== ========
</TABLE>

See accompanying notes.

F-57
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY BALLY BALLY CONSOLIDATING BALLY GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- -------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Sales.................. $47,419 $ 99,218 $130,452 $ -- $(45,771) $231,318
Other.................. 1,189 3,578 776 2,856 (3,525) 4,874
------- -------- -------- ------- -------- --------
48,608 102,796 131,228 2,856 (49,296) 236,192
------- -------- -------- ------- -------- --------
Costs and expenses:
Cost of sales.......... 30,988 79,589 91,107 -- (44,625) 157,059
Selling, general and
administrative........ 6,656 19,408 28,135 5,862 (72) 59,989
Provision for doubtful
receivables........... 11 1,894 3,858 -- -- 5,763
------- -------- -------- ------- -------- --------
37,655 100,891 123,100 5,862 (44,697) 222,811
------- -------- -------- ------- -------- --------
Operating income (loss). 10,953 1,905 8,128 (3,006) (4,599) 13,381
Interest expense........ 2 1,648 3,871 4,486 (3,239) 6,768
------- -------- -------- ------- -------- --------
Income (loss) before in-
come taxes............. 10,951 257 4,257 (7,492) (1,360) 6,613
Provision (benefit) for
income taxes........... 3,885 (1,019) 1,685 (1,465) (266) 2,820
------- -------- -------- ------- -------- --------
Net income (loss)....... $ 7,066 $ 1,276 $ 2,572 $(6,027) $ (1,094) $ 3,793
======= ======== ======== ======= ======== ========
</TABLE>

See accompanying notes.

F-58
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY BALLY BALLY CONSOLIDATING BALLY GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- -------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Sales.................. $52,263 $117,618 $127,985 $ -- $(53,395) $244,471
Other.................. 889 3,477 1,155 2,911 (3,591) 4,841
------- -------- -------- ------- -------- --------
53,152 121,095 129,140 2,911 (56,986) 249,312
------- -------- -------- ------- -------- --------
Costs and expenses:
Cost of sales.......... 35,337 95,483 85,270 -- (52,959) 163,131
Selling, general and
administrative........ 7,433 22,492 30,365 5,044 (45) 65,289
Provision for doubtful
receivables........... -- 1,697 5,015 -- -- 6,712
Unusual charges........ 799 1,038 125 3,854 -- 5,816
------- -------- -------- ------- -------- --------
43,569 120,710 120,775 8,898 (53,004) 240,948
------- -------- -------- ------- -------- --------
Operating income........ 9,583 385 8,365 (5,987) (3,982) 8,364
Interest expense........ 1 1,398 4,155 4,613 (3,314) 6,853
------- -------- -------- ------- -------- --------
Income (loss) before in-
come taxes............. 9,582 (1,013) 4,210 (10,600) (668) 1,511
Provision (benefit) for
income taxes........... 3,987 134 1,665 (1,380) 498 4,904
------- -------- -------- ------- -------- --------
Net income (loss)....... $ 5,595 $ (1,147) $ 2,545 $(9,220) $ (1,166) $ (3,393)
======= ======== ======== ======= ======== ========
</TABLE>

See accompanying notes.

F-59
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY
BALLY BALLY BALLY CONSOLIDATING GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- -------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)...... $ 6,547 $ 509 $(22,333) $ (7,732) $ (434) $(23,443)
Adjustments to
reconcile net income
(loss) to cash
provided by (used in)
operating activities:
Extraordinary gain on
early extinguishment
of debt............... -- -- (3,759) -- -- (3,759)
Depreciation and
amortization.......... 1,609 2,466 2,221 1,557 250 8,103
Deferred income taxes.. -- 163 -- -- -- 163
Provision for doubtful
receivables........... (13) 326 7,363 500 -- 8,176
Provision for inventory
valuation reserves.... -- -- 6,156 -- -- 6,156
(Gain) loss on
disposals of property,
plant and equipment... (40) 15 89 -- -- 64
Changes in operating
assets and
liabilities:
Accounts and notes
receivable........... 6,842 (3,384) (15,213) (957) (4,936) (17,648)
Inventories........... (2,987) 3,411 (15,290) -- (211) (15,077)
Other current assets.. (824) 481 126 (423) (894) (1,534)
Accounts payable and
accrued liabilities.. (2,759) (5,814) 12,060 423 5,807 9,717
Other.................. -- -- -- -- (466) (466)
------- -------- -------- -------- ------ --------
Cash provided by (used
in) operating
activities........... 8,375 (1,827) (28,580) (6,632) (884) (29,548)
------- -------- -------- -------- ------ --------
Cash flows from
investing activities:
Net assets of
distribution business
acquired.............. -- (8,382) -- -- -- (8,382)
Purchases of property,
plant and equipment... (1,541) (3,298) (1,628) -- -- (6,467)
Proceeds from disposals
of property, plant and
equipment............. 57 585 449 -- -- 1,091
Other.................. -- -- 110 -- 241 351
------- -------- -------- -------- ------ --------
Cash provided by (used
in) investing
activities........... (1,484) (11,095) (1,069) -- 241 (13,407)
------- -------- -------- -------- ------ --------
Cash flows from
financing activities:
Proceeds from issuance
of Senior Secured
Notes.................. -- -- -- 40,000 -- 40,000
Net change in lines of
credit................. -- 20,825 5,667 2,219 -- 28,711
Repayments of long-term
debt................... -- (7,376) (415) (21,970) -- (29,761)
Change in payables
to/receivables from
affiliates............. -- -- 21,170 (21,813) 643 --
Exercise of stock
warrants............... -- -- -- 30 -- 30
Intercompany dividends.. (8,167) -- -- 8,167 -- --
------- -------- -------- -------- ------ --------
Cash provided by (used
in) financing
activities........... (8,167) 13,449 26,422 6,633 643 38,980
------- -------- -------- -------- ------ --------
Effect of exchange rate
changes on cash........ (69) (320) -- -- -- (389)
------- -------- -------- -------- ------ --------
Increase (decrease) in
cash and cash
equivalents............ (1,345) 207 (3,227) 1 -- (4,364)
Cash and cash
equivalents, beginning
of period.............. 1,844 4,400 3,556 -- -- 9,800
------- -------- -------- -------- ------ --------
Cash and cash
equivalents, end of
period................. $ 499 $ 4,607 $ 329 $ 1 $ -- $ 5,436
======= ======== ======== ======== ====== ========
Supplemental cash flows
information:
Operating activities
include cash payments
(receipts) for
interest and income
taxes as follows:
Interest paid.......... $ 22 $ 942 $ 327 $ 1,619 $ -- $ 2,910
Income taxes paid
(received)............ 5,732 1,077 -- (355) -- 6,454
Investing activities
exclude the following
non-cash activities:
Exchange of income tax
receivable for
intangible assets and
equipment............. -- -- 454 1,515 -- 1,969
Financing activities
exclude the following
non-cash activities:
Issuance of restricted
stock awards.......... -- -- -- 1,150 -- 1,150
</TABLE>

See accompanying notes.

F-60
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY
BALLY BALLY BALLY CONSOLIDATING GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- ------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)...... $ 7,066 $ 1,276 $ 2,572 $(6,027) $(1,094) $ 3,793
Adjustments to
reconcile net income
(loss) to cash
provided by (used in)
operating activities:
Depreciation and
amortization.......... 2,556 2,491 1,974 1,342 (92) 8,271
Deferred income taxes.. (415) (56) -- -- 175 (296)
Provision for doubtful
receivables........... 11 1,894 3,858 -- -- 5,763
Provision for
inventory valuation... -- -- 2,230 -- -- 2,230
(Gain) loss on
disposals of
property, plant and
equipment............. -- 6 (89) -- -- (83)
Changes in operating
assets and
liabilities:
Accounts and notes
receivable.......... (2,237) (3,099) (9,783) (644) (60) (15,823)
Inventories.......... 1,096 476 (5,573) -- 112 (3,889)
Other current assets. 286 (1,711) 139 572 1 (713)
Accounts payable and
accrued liabilities. 1,708 (342) 2,396 (912) (120) 2,730
Other.................. 450 (759) -- 183 (633) (759)
------- ------- ------- ------- ------- --------
Cash provided by
(used in) operating
activities........... 10,521 176 (2,276) (5,486) (1,711) 1,224
------- ------- ------- ------- ------- --------
Cash flows from
investing activities:
Purchases of property,
plant and equipment... (3,086) (4,363) (2,088) -- -- (9,537)
Proceeds from disposals
of property, plant and
equipment............. -- 1,414 335 -- -- 1,749
Other.................. -- -- 268 -- 1,129 1,397
------- ------- ------- ------- ------- --------
Cash provided by
(used in) investing
activities........... (3,086) (2,949) (1,485) -- 1,129 (6,391)
------- ------- ------- ------- ------- --------
Cash flows from
financing activities:
Net change in lines of
credit................ -- 16,192 4,419 812 -- 21,423
Repayments of long-term
debt.................. -- (11,675) (704) (813) -- (13,192)
Change in payables
to/receivables from
affiliates............ -- -- 72 (654) 582 --
Dividends to/from
affiliate............. (6,654) 514 -- 6,140 -- --
------- ------- ------- ------- ------- --------
Cash provided by
(used in) financing
activities........... (6,654) 5,031 3,787 5,485 582 8,231
Effect of exchange rate
changes on cash........ 82 622 -- -- -- 704
------- ------- ------- ------- ------- --------
Increase (decrease) in
cash and cash
equivalents............ 863 2,880 26 (1) -- 3,768
Cash and cash
equivalents, beginning
of year................ 499 4,607 329 1 -- 5,436
------- ------- ------- ------- ------- --------
Cash and cash
equivalents, end of
year................... $ 1,362 $ 7,487 $ 355 $ -- $ -- $ 9,204
======= ======= ======= ======= ======= ========
Supplemental cash flows
information:
Operating activities
include cash payments
(receipts) for
interest and income
taxes as follows:
Interest paid.......... $ 3 $ 981 $ 789 $ 4,199 $ -- $ 5,972
Income taxes paid
(received)............ 4,038 (105) 12 75 -- 4,020
Investing activities
exclude the following
non-cash activities:
Capital contribution
to affiliate.......... -- -- -- (5,492) -- (5,492)
Long-term note
received from sale of
assets................ -- -- 517 -- -- 517
Financing activities
exclude the following
non-cash activities:
Capital contribution
from affiliate........ 899 4,593 -- -- -- 5,492
Issuance of Company
common stock under
compensation
agreement............. -- -- -- 222 -- 222
Issuance of note
payable for license
agreement............. -- -- -- 1,465 -- 1,465
</TABLE>

See accompanying notes.

F-61
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALLY
BALLY BALLY BALLY CONSOLIDATING GAMING
WULFF WULFF GAMING, AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS INC. PARENT ADJUSTMENTS INC.
--------- --------- ------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)....... $5,595 $(1,147) $2,545 $(9,220) $(1,166) $(3,393)
Adjustments to reconcile
net income (loss) to
cash provided by (used
in) operating
activities:
Depreciation and
amortization........... 2,602 3,120 2,029 1,312 (110) 8,953
Deferred income taxes... -- 63 -- -- (841) (778)
Provision for doubtful
receivables............ -- 1,697 5,015 -- -- 6,712
Provision for inventory
valuation.............. -- -- 1,955 -- -- 1,955
Provision for writedown
of building to be
sold................... -- 812 -- -- -- 812
(Gain) loss on
disposals of property,
plant and equipment.... (17) 67 (2) -- -- 48
Changes in operating
assets and liabilities:
Accounts and notes
receivable............. 1,223 (2,855) (8,672) -- -- (10,304)
Inventories............. (393) (2,140) 142 -- 224 (2,167)
Other current assets.... (119) 1,763 (1) (364) -- 1,279
Accounts payable and
accrued liabilities.... 239 1,240 (1,235) (1,139) 1,473 578
Other, net.............. (1) (402) 7 819 (323) 100
------ ------- ------ ------- ------- -------
Cash provided by (used
in) operating
activities........... 9,129 2,218 1,783 (8,592) (743) 3,795
------ ------- ------ ------- ------- -------
Cash flows from
investing activities:
Purchases of property,
plant and equipment.... (1,694) (5,468) (1,078) -- -- (8,240)
Proceeds from disposals
of property, plant and
equipment.............. 24 1,728 5 -- -- 1,757
Other................... -- -- (10) -- 260 250
------ ------- ------ ------- ------- -------
Cash provided by (used
in) investing
activities........... (1,670) (3,740) (1,083) -- 260 (6,233)
------ ------- ------ ------- ------- -------
Cash flows from
financing activities:
Net change in lines of
credit................. -- (1,273) 1,632 -- -- 359
Repayments of long-term
debt................... -- (2) (2,287) (620) 1 (2,908)
Change in payables
to/receivables from
affiliates............. 2,058 (2,058) 533 (1,015) 482 --
Exercise of stock
options................ -- -- -- 588 -- 588
Dividends to/from
affiliates............. (9,639) -- -- 9,639 -- --
------ ------- ------ ------- ------- -------
Cash provided by (used
in) financing
activities........... (7,581) (3,333) (122) 8,592 483 (1,961)
Effect of exchange rate
changes on cash........ 113 608 -- -- -- 721
------ ------- ------ ------- ------- -------
Increase (decrease) in
cash and cash
equivalents............ (9) (4,247) 578 -- -- (3,678)
Cash and cash
equivalents, beginning
of period.............. 1,362 7,487 355 -- -- 9,204
------ ------- ------ ------- ------- -------
Cash and cash
equivalents, end of
period................. $1,353 $ 3,240 $ 933 $ -- $ -- $ 5,526
====== ======= ====== ======= ======= =======
Supplemental cash flows
information:
Operating activities
include cash payments
(receipts) for
interest and income
taxes as follows:
Interest paid.......... $ 1 $ 1,335 $1,178 $ 4,374 $ -- $ 6,888
Income taxes paid
(refunded), net....... 3,104 (1,694) 85 306 -- 1,801
</TABLE>

See accompanying notes.

F-62
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

These notes to consolidating financial statements should be read in
conjunction with the consolidated financial statements and notes thereto.

Certain reclassifications have been made to prior years' financial
statements to conform with the 1995 presentation.

Hereafter, references to the Company are to the subsidiaries of Bally Gaming
International, Inc.

RESEARCH AND DEVELOPMENT

The Company expenses product research and development costs as incurred.
Research and development costs for the years ended December 31, 1993, 1994 and
1995 were:

<TABLE>
<CAPTION>
BALLY GAMING
BALLY WULFF BALLY WULFF BALLY INTERNATIONAL,
AUTOMATEN VERTRIEBS GAMING, INC. INC.
----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
1993.................. $3,350 $ -- $4,440 $7,790
====== ===== ====== ======
1994.................. $3,546 $ -- $5,199 $8,745
====== ===== ====== ======
1995.................. $3,561 $ -- $5,639 $9,200
====== ===== ====== ======
</TABLE>

ACCOUNTS AND NOTES RECEIVABLE

The following table represents, at December 31, 1995, scheduled collections
of accounts and notes receivable (net of allowances for doubtful accounts) by
year:

<TABLE>
<CAPTION>
CONSOLIDATING BALLY GAMING
BALLY WULFF BALLY WULFF BALLY AND OTHER INTERNATIONAL,
AUTOMATEN VERTRIEBS GAMING, INC. PARENT ADJUSTMENTS INC.
----------- ----------- ------------ ------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1996.. $1,804 $51,110 $38,948 $4,772 $(9,458) $87,176
1997.. -- 1,464 6,786 -- -- 8,250
1998.. -- 190 1,541 -- -- 1,731
------ ------- ------- ------ ------- -------
$1,804 $52,764 $47,275 $4,772 $(9,458) $97,157
====== ======= ======= ====== ======= =======
</TABLE>

LONG-TERM DEBT

Aggregate annual maturities of long-term debt for the five years after
December 31, 1995 are:

<TABLE>
<CAPTION>
BALLY GAMING
BALLY WULFF BALLY INTERNATIONAL,
VERTRIEBS GAMING, INC. PARENT INC.
----------- ------------ ------- --------------
<S> <C> <C> <C> <C>
1996....................... $14,333 $ 212 $ 412 $14,957
1997....................... 1,572 9,435 456 11,463
1998....................... 3,149 -- 40,468 43,617
1999....................... -- -- 251 251
2000....................... -- -- -- --
------- ------ ------- -------
Total...................... $19,054 $9,647 $41,587 $70,288
======= ====== ======= =======
</TABLE>

F-63
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

OTHER REVENUES

Other revenues for the year ended December 31, 1994 were as follows:

<TABLE>
<CAPTION>
BALLY BALLY CONSOLIDATING
WULFF WULFF BALLY AND OTHER BALLY GAMING
AUTOMATEN VERTRIEBS GAMING, INC. PARENT ADJUSTMENTS INTERNATIONAL, INC.
--------- --------- ------------ ------ ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Interest................ $ 294 $2,932 $608 $2,943 $(3,239) $3,538
Currency transaction
gain (loss)............ 3 52 2 (87) -- (30)
Other................... 892 594 166 -- (286) 1,366
------ ------ ---- ------ ------- ------
$1,189 $3,578 $776 $2,856 $(3,525) $4,874
====== ====== ==== ====== ======= ======
</TABLE>

Other revenues for the year ended December 31, 1995 were as follows:

<TABLE>
<CAPTION>
BALLY BALLY CONSOLIDATING
WULFF WULFF BALLY AND OTHER BALLY GAMING
AUTOMATEN VERTRIEBS GAMING, INC. PARENT ADJUSTMENTS INTERNATIONAL, INC.
--------- --------- ------------ ------ ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Interest................ $362 $2,626 $ 962 $2,979 $(3,314) $3,615
Currency transaction
gain (loss)............ -- 62 (29) (68) (18) (53)
Other................... 527 789 222 -- (259) 1,279
---- ------ ------ ------ ------- ------
$889 $3,477 $1,155 $2,911 $(3,591) $4,841
==== ====== ====== ====== ======= ======
</TABLE>

UNUSUAL CHARGES

During the year ended December 31, 1995, Parent and Bally Gaming, Inc.
incurred approximately $3.9 million and $.1 million, respectively, in legal,
accounting, investment banking, public and investor relations and printing
costs in connection with the merger agreement with WMS Industries, Inc., which
has since been terminated, Alliance's tender offer and consent solicitation
and the pending Alliance Merger. All of these costs have been expensed as
incurred. Such costs will continue to be incurred in 1996.

F-64
<PAGE>

BALLY GAMING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

COMMITMENTS AND CONTINGENCIES

<TABLE>
<CAPTION>
BALLY GAMING
BALLY WULFF BALLY WULFF BALLY INTERNATIONAL,
AUTOMATEN VERTRIEBS GAMING, INC. INC.
----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
1996.................. $ 608 $1,610 $ 918 $3,136
1997.................. 608 1,505 640 2,753
1998.................. -- 1,157 597 1,754
1999.................. -- 878 483 1,361
2000.................. -- 680 441 1,121
Thereafter............ -- 767 1,077 1,844
------ ------ ------ -------
$1,216 $6,597 $4,156 $11,969
====== ====== ====== =======
</TABLE>

Rent expense for the years ended December 31, 1993, 1994 and 1995 was:

<TABLE>
<CAPTION>
BALLY GAMING
BALLY WULFF BALLY WULFF BALLY INTERNATIONAL,
AUTOMATEN VERTRIEBS GAMING, INC. PARENT INC.
----------- ----------- ------------ ------ --------------
<S> <C> <C> <C> <C> <C>
1993........... $680 $1,519 $ 405 $ -- $2,604
==== ====== ====== ==== ======
1994........... $621 $1,604 $ 487 $ -- $2,712
==== ====== ====== ==== ======
1995........... $615 $1,731 $1,221 $ 2 $3,569
==== ====== ====== ==== ======
</TABLE>

F-65
<PAGE>

BALLY GAMING INTERNATIONAL, INC.
SUPPLEMENTARY DATA
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
SEPTEMBER DECEMBER
MARCH 31, JUNE 30, 30, 31,
------------ ------------ ------------ ------------
1994 1995 1994 1995 1994 1995 1994 1995
----- ----- ----- ----- ----- ----- ----- -----
(IN MILLIONS, EXCEPT PER
CONSOLIDATED SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $61.7 $68.3 $58.9 $69.2 $49.3 $51.5 $66.3 $60.3
Gross profit.......... 19.4 24.8 17.6 23.9 16.3 17.7 25.8 19.8
Operating income
(loss)............... 4.0 6.7 2.7 4.6 1.2 (1.3) 5.5 (1.6)
Net income (loss)..... 1.3 2.8 1.6 1.1 (1.4) (3.8) 2.2 (3.5)
Net income (loss) per
share of common
stock................ $ .12 $ .27 $ .15 $ .10 $(.13) $(.35) $ .21 $(.33)
WULFF
Revenues.............. $29.1 $36.0 $21.4 $35.5 $26.4 $27.0 $34.2 $32.2
Gross profit.......... 10.0 12.4 5.6 11.9 8.9 9.3 14.5 8.9
Operating income
(loss)............... 2.5 3.8 (.4) 3.0 2.5 .8 4.6 (2.0)
Net income (loss)..... 1.1 1.4 (.1) 1.0 1.3 (.3) 3.0 (2.4)
GAMING
Revenues.............. $30.2 $28.0 $35.0 $33.0 $21.4 $24.0 $31.3 $23.4
Gross profit.......... 7.4 8.6 9.2 9.0 5.2 7.0 9.2 5.9
Operating income
(loss)............... 1.0 1.0 1.8 .6 (1.8) (1.6) .6 (2.2)
Net income (loss)..... (.3) (.6) .4 (.9) (3.2) (3.0) (1.1) (3.7)
SYSTEMS
Revenues.............. $ 3.0 $ 6.1 $ 4.3 $ 4.2 $ 2.8 $ 2.4 $ 3.3 $ 8.0
Gross profit.......... 2.0 3.9 2.8 3.0 2.2 1.5 2.1 5.0
Operating income...... .5 2.1 1.3 1.0 .5 (.5) .3 2.6
Net income............ .5 2.1 1.3 1.0 .5 (.5) .3 2.6
</TABLE>

F-66
<PAGE>

ANNEX I

AMENDED AND RESTATED

AGREEMENT AND PLAN OF MERGER

AMONG

ALLIANCE GAMING CORPORATION,

BGII ACQUISITION CORP.

AND

BALLY GAMING INTERNATIONAL, INC.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<C> <C>
1. The Merger............................................................. 1
1.1 The Merger......................................................... 1
1.2 Consummation of the Merger......................................... 1
1.3 Effective Time..................................................... 1
1.4 Effect of the Merger............................................... 2
1.5 Certificate of Incorporation; By-Laws.............................. 2
1.6 Directors and Officers............................................. 2
1.7 Further Actions.................................................... 2
2. Conversion and Exchange of Shares...................................... 2
2.1 Exchange of Shares................................................. 2
2.2 Exchange Procedures................................................ 5
2.3 Dividends and Distributions........................................ 6
2.4 No Fractional Shares............................................... 6
2.5 Adjustment of Amount of Company Stock Consideration................ 7
2.6 Transfers Following the Effective Time............................. 7
3. Representations and Warranties of Alliance............................. 7
4. Representations and Warranties of the Company.......................... 12
5. Conduct of Business Pending the Merger................................. 16
5.1 Conduct of Business by the Company Pending the Merger.............. 16
5.2 Conduct of Business by Alliance Pending the Merger................. 18
5.3 Notice of Breach................................................... 18
6. Additional Agreements.................................................. 19
6.1 Registration Statement; Proxy Statement; Auditors' Letters; Other
Matters........................................................... 19
6.2 Alternative Proposals.............................................. 20
6.3 Indemnification of Directors and Officers.......................... 20
6.4 Regulatory Compliance.............................................. 21
6.5 Registration Rights................................................ 21
6.6 Omitted............................................................ 21
6.7 Arrangements with Certain Officers of the Company.................. 21
7. Closing Conditions..................................................... 22
7.1 Conditions to Obligations of Each Party to Effect the Merger....... 22
7.1.1 Effectiveness of the Registration Statement................. 22
7.1.2 Stockholder Approval........................................ 22
7.1.3 No Order.................................................... 22
7.1.4 HSR Act..................................................... 22
7.1.5 Governmental Approvals...................................... 22
7.1.6 Financing................................................... 22
7.2 Additional Conditions to Obligations of Alliance................... 22
7.2.1 Representations and Warranties.............................. 22
7.2.2 Agreement and Covenants..................................... 22
7.2.3 Omitted..................................................... 22
7.2.4 Omitted..................................................... 22
7.2.5 Omitted..................................................... 23
7.2.6 Arrangements with Certain Officers of the Company........... 23
7.2.7 Omitted..................................................... 23
</TABLE>

I-i
<PAGE>

<TABLE>
<C> <C>
7.2.8 Omitted................................................... 23
7.2.9 No Material Adverse Change to the Company................. 23
7.2.10 Third Party Consents...................................... 23
7.2.11 Gaming Regulatory Approval................................ 23
7.3 Additional Conditions to Obligations of the Company............... 23
7.3.1 Representations and Warranties............................ 23
7.3.2 Agreements and Covenants.................................. 23
7.3.3 Public Offering of Series B Special Stock................. 23
7.3.4 Omitted................................................... 23
7.3.5 No Material Adverse Change to Alliance.................... 23
7.3.6 Third Party Consents...................................... 23
7.3.7 Gaming Regulatory Approval................................ 23
8. Termination; Effect of Termination..................................... 24
8.1 Right to Terminate................................................ 24
8.2 Certain Effects of Termination.................................... 24
9. Miscellaneous.......................................................... 25
9.1 Effectiveness of Representations, Warranties and Agreements....... 25
9.2 Entire Agreement.................................................. 25
9.3 Notices........................................................... 26
9.4 No Waiver......................................................... 26
9.5 Governing Law..................................................... 26
9.6 Expenses, Transfer Taxes; Certain Payments........................ 27
9.7 Assignment........................................................ 29
9.8 Binding Agreement................................................. 29
9.9 Headings.......................................................... 29
9.10 Counterparts...................................................... 29
9.11 Confidentiality................................................... 29
</TABLE>

I-ii
<PAGE>

DEFINED TERMS

<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Alliance.......................................... Page 1, first paragraph
Alliance Common................................... 2.1.2
Alliance Disclosure Schedule...................... 3
Alliance ERISA Affiliate.......................... 3.11.3
Alliance Plans.................................... 3.11.1
Alliance Fault Termination........................ 6.3
Alliance Special Stock............................ 3.6
Alliance Stockholders............................. Page 1, fourth WHEREAS clause
Alliance Subsidiaries............................. 3.1
Alliance Subsidiary............................... 3.1
Alliance's SEC Documents.......................... 3.7
Agreement......................................... Page 1, first paragraph
Alternative Proposal.............................. 6.2
Cash Consideration................................ 2.1.2
CERCLA............................................ 3.15.2
Certificate of Merger............................. 1.3
Certificates...................................... 2.2.2
Code.............................................. 2.2.6
Common Stock Consideration........................ 2.1.2
Company........................................... Page 1, first paragraph
Company Common.................................... 2.1
Company Disclosure Schedule....................... 4
Company ERISA Affiliate........................... 4.12.3
Company Option.................................... 2.1.3
Company Options................................... 2.1.3
Company Plans..................................... 4.12.1
Company Preferred................................. 4.6
Company's SEC Documents........................... 4.8
Company Stock Option Plans........................ 2.1.3
Company Stockholders.............................. Page 1, third WHEREAS clause
Company Subsidiaries.............................. 4.1
Company Subsidiary................................ 4.1
Company Warrant................................... 2.1.3
Company Warrants.................................. 2.1.3
Delaware Law...................................... Page 1, first WHEREAS clause
Dissenting Shares................................. 2.1.4
Effective Time.................................... 1.3
Environmental Laws................................ 3.15.2
Environmental Permits............................. 3.15.2
ERISA............................................. 3.11.1
Exchange Act...................................... 3.4
Exchange Agent.................................... 2.2.1
Exchange Fund..................................... 2.2.1
GAAP.............................................. 3.7
Gaming Regulatory Authorities..................... 3.4
Governmental Entity............................... 3.4
Hazardous Materials............................... 3.15.2
HSR Act........................................... 3.4
Indebtedness...................................... 5.1.3
Material Adverse Effect........................... 3.2, 4.2
</TABLE>

I-iii
<PAGE>

<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Material Contracts................................. 3.17, 4.18
Meeting............................................ 6.1.1
Merger Consideration............................... 2.1.2
Merger............................................. Page 1, first WHEREAS clause
Merger Subsidiary.................................. 1.1
NASDAQ............................................. 2.1.2
Proxy Statement-Prospectus......................... 6.1.1
Registration Statement............................. 3.4
Release............................................ 3.15.2
Return............................................. 3.10.1
Returns............................................ 3.10.1
SEC................................................ 3.4
Securities Act..................................... 3.4
Share Consideration................................ 2.1.2
Special Stock Consideration........................ 2.1.2
Surviving Corporation.............................. 1.1
Tax................................................ 3.10.1
Taxes.............................................. 3.10.1
Warrant Agreements................................. 2.1.3
WMS Agreement...................................... 4.5
</TABLE>

I-iv
<PAGE>

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

Amended and Restated Agreement and Plan of Merger (this "Agreement"), by and
between Alliance Gaming Corporation, a Nevada corporation ("Alliance"), BGII
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Alliance ("BAC"), and Bally Gaming International, Inc., a Delaware corporation
(the "Company").

WITNESSETH:

Whereas, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("Delaware Law"), BAC will be merged with and into the Company (the "Merger");
and

Whereas, Bally Gaming, Inc., a Nevada corporation and wholly-owned
subsidiary of the Company, will, as a result of the Merger, become a wholly-
owned subsidiary of the surviving corporation of the Merger; and

Whereas, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business
strategies of the Company and is fair to, and in the best interest of, the
Company and its stockholders (the "Company Stockholders") and has approved and
adopted this Agreement and has approved the Merger and the other transactions
contemplated hereby and recommended approval and adoption of this Agreement
and approval of the Merger by the Company Stockholders; and

Whereas, the Boards of Directors of Alliance and BAC have determined that
the Merger is consistent with and in furtherance of their long-term business
strategies and is fair to, and in the best interest of, Alliance and BAC and
their respective stockholders (the shareholders of Alliance being referred to
as the "Alliance Stockholders") and have approved and adopted this Agreement
and have approved the Merger and the other transactions contemplated hereby
and recommended approval and adoption of this Agreement and approval of the
Merger by the Alliance Stockholders; and

Whereas, contemporaneously herewith the parties have entered into an
agreement settling certain litigation between them and Alliance has terminated
its tender offer and consent solicitation relating to the Company;

Now, Therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:

1. THE MERGER.

1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Delaware Law, at the Effective Time (as
herein defined), BAC shall be merged with and into the Company, the separate
existence of BAC shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"); provided that
immediately after the Effective Time the Company's wholly-owned subsidiary,
Bally Gaming, Inc., shall continue in existence as a wholly-owned subsidiary
of the Surviving Corporation.

1.2 Consummation of the Merger. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Article 8 and subject to the satisfaction or waiver of the
conditions set forth in Article 7, the consummation of the Merger will take
place as promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article 7 (but not before January 9, 1996) at the
offices of Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York,
New York, unless another date, time and place is agreed to in writing by the
parties hereto.

1.3 Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article 7, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger (the

I-1
<PAGE>

"Certificate of Merger") with the Secretary of State of the State of Delaware
in such form as required by, and executed in accordance with the relevant
provisions of, Delaware Law (the date and time of such filing, or such later
date or time as set forth therein, being the "Effective Time").

1.4 Effect of the Merger. At and after the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of the Company and BAC shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company
and BAC shall become the debts, liabilities and duties of the Surviving
Corporation.

1.5 Certificate of Incorporation; By-Laws. At and after the Effective Time,
the Certificate of Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation.

1.6 Directors and Officers. At and after the Effective Time, the directors
and officers of BAC holding office immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation, until their
respective successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation.

1.7 Further Actions. At and after the Effective Time, the Surviving
Corporation shall take all action as shall be required in connection with the
Merger, including, but not limited to, the execution and delivery of any
further deeds, assignments, instruments or documentation as are necessary or
desirable to carry out the provisions of this Agreement.

2. CONVERSION AND EXCHANGE OF SHARES.

2.1 Exchange of Shares. As of the Effective Time, by virtue of the Merger
and without any action on the part of any holder of any shares of common
stock, par value $.01 per share, of the Company (the "Company Common"):

2.1.1 All shares of Company Common which are held by the Company or any
subsidiary of the Company, and any shares of Company Common owned by
Alliance or any Alliance Subsidiary (as hereinafter defined), including
without limitation BAC, shall be cancelled and retired and shall cease to
exist and no stock of Alliance or other consideration shall be delivered in
exchange therefor. Each share of common stock, $.01 par value, of BAC shall
become a share of the Surviving Corporation's common stock.

2.1.2 At the Effective Time, by virtue of the Merger and without any
action on the part of BAC, the Company or the holders of any shares of the
Company Common, each share of Company Common, issued and outstanding
immediately prior to the Effective Time (other than shares held by the
Company, Alliance or any of their respective subsidiaries) will be
converted into the right to receive (i) an amount of cash determined by
dividing $76,700,000 by the number of outstanding shares of Company Common
(other than those referred to in Section 2.1.1) (the "Cash Consideration"),
(ii) a fraction of a share of Alliance Common Stock, par value $.10 per
share ("Alliance Common"), equal to the quotient of $.30 and the Alliance
Average Trading Price (as hereinafter defined) (the "Common Stock
Consideration") and (iii) that number of shares (or fractions thereof) of
the 15% Non-Voting Junior Special Stock, Series B, $.10 par value, of
Alliance having the terms specified in the form of Certificate of
Designations, Preferences and Relative Participating, Optional and Other
Special Rights of Special Stock and Qualifications, Limitations and
Restrictions Thereof attached hereto as Annex I or having other terms not
less favorable to the holders thereof than those in Annex I (the "Series B
Special Stock") equal to $11.40 less the Cash Consideration, such shares to
be valued at the gross cash offering price at which shares of Series B
Special Stock are issued pursuant to a registered public offering in
satisfaction of the condition contained in Section 7.1.6 (the "Special
Stock Consideration", and together with the Common Stock Consideration, the
"Share Consideration", and the Share Consideration together with the Cash
Consideration, the "Merger

I-2
<PAGE>

Consideration"), with fractional shares of such Series B Special Stock
rounded to the nearest 1/1000 share. All shares of Company Common to be
converted into shares of Alliance Common and Series B Special Stock and the
right to receive cash pursuant to this Section 2.1.2 are hereinafter
referred to as the "Converted Shares". The Alliance Average Trading Price
shall mean the average daily closing price per share, rounded to three
decimal places, of Alliance Common as reported through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
National Market System for the ten consecutive trading days ending on (and
including) the third trading day prior to the Effective Time.

2.1.3 All (i) options (individually, a "Company Option" and collectively,
the "Company Options") outstanding at the Effective Time under the Company
1991 Incentive Plan, the Company 1991 Non-Employee Directors' Option Plan,
the Company 1992 Restricted Stock Performance Plan and the Company 1994
Stock Option Plan for Non-Employee Directors (all as amended through the
Effective Time and collectively, the "Company Stock Option Plans") and (ii)
warrants (individually, a "Company Warrant" and collectively, the "Company
Warrants") to purchase Company Common listed on the Company Disclosure
Schedule (as herein defined) hereto issued pursuant to warrant agreements
(the "Warrant Agreements") shall remain outstanding following the Effective
Time for the remainder of their terms and in accordance with the terms of
the respective Company Stock Option Plans and Warrant Agreements; provided,
however, that (i) all Company Options subject to the provisions of Company
Stock Option Plans which shorten the exercise period by reason of the
Merger and (ii) all Company Options held by directors of the Company
regardless of any provision in any Company Option held by such director or
the Company Stock Option Plan pursuant to which such Company Option was
granted which may shorten the exercisability thereof as a result of such
person ceasing to be a director, officer or employee of the Company shall
be amended (which amendment shall be submitted for approval of the Company
Stockholders, if necessary) to the extent necessary to permit such Company
Options to remain exercisable for the lesser of (A) the original full
option period, or (B) three years from the Effective Time of the Merger. At
the Effective Time (or such earlier time as may be required by the express
terms thereof), such Company Options and Company Warrants (as amended or
adjusted as a result of the Merger in accordance with the applicable
Company Stock Option Plan or Warrant Agreement) shall, by virtue of the
Merger and without any further action on the part of the Company or the
holder of any such Company Options and Company Warrants, become fully
vested and exercisable (to the extent not already fully vested and
exercisable) pursuant to (and only pursuant to) their terms and in
accordance with the terms of the respective Company Stock Option Plans and
Warrant Agreements and shall be assumed by Alliance. From and after the
Effective Time, each Company Option and Company Warrant and any other
options or warrants to acquire Company Common listed on the Company
Disclosure Schedule (which indicates which Company Options are in
categories (x) and (y) below) assumed by Alliance shall be exercisable for
the Merger Consideration per share of Company Common subject to any such
option or warrant at the option price or exercise price of such option or
warrant in effect immediately prior to the Effective Time, except that at
the election of any other person (other than Messrs. Gillman, Jenkins and
Kloss) who is an employee of the Company immediately prior to the Effective
Time (such election to be made in writing to the Company on or prior to the
Effective Time), any such Company Option held by him or her shall instead
be exercisable for a number of shares of Alliance Common equal to the
number of shares of Company Common subject thereto at an exercise price
equal to the Alliance Average Trading Price. From and after the date of
this Agreement, no additional options shall be granted and no additional
warrants shall be issued by the Company or the Company Subsidiaries (as
herein defined) under the Company Stock Option Plans, Warrant Agreements or
otherwise, except as set forth on the Company Disclosure Schedule.

2.1.4 (i) Notwithstanding any provision of this Agreement to the
contrary, each outstanding share of Company Common the holder of which has
not voted in favor of the Merger, has perfected such holder's right to any
appraisal of such holder's shares in accordance with the applicable
provisions of Delaware law

I-3
<PAGE>

and has not effectively withdrawn or lost such right to appraisal (a
"Dissenting Share"), shall not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 2.1.2, but the holder
thereof shall be entitled only to such rights as are granted by the
applicable provisions of Delaware law; provided, however, that any
Dissenting Share held by a person at the Effective Time who shall, after
the Effective Time, withdraw the demand for appraisal or lose the right of
appraisal, in either case pursuant to Delaware law, shall be deemed to be
converted into, as of the Effective Time, the right to receive the Merger
Consideration pursuant to Section 2.1.2.

(ii) the Company shall give Alliance (x) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to the applicable provisions of
Delaware law relating to the appraisal process received by the Company
and (y) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Delaware law. The Company will
not voluntarily make any payment with respect to any demands for
appraisal and will not, except with prior written consent of Alliance,
settle or offer to settle any such demands.

2.2 Exchange Procedures.

2.2.1 Immediately prior to the Effective Time, Alliance shall deposit with
an exchange agent (the "Exchange Agent") designated by Alliance, which shall
be reasonably satisfactory to the Company, in trust for the Company
Stockholders of record, immediately prior to the Effective Time, certificates
representing the aggregate number of shares of Alliance Common and Series B
Special Stock issuable pursuant to Section 2.1.2 hereof in exchange for
outstanding shares of Company Common immediately prior to the Effective Time.
At the Effective Time, Alliance shall deposit with the Exchange Agent
sufficient cash to make all cash payments to be made pursuant to Section 2.1.
All deposits with the Exchange Agent pursuant to this Section 2.2 together
with any dividends or distributions with respect to shares of Alliance Common
and Series B Special Stock as contemplated by Section 2.3 hereof, together
with earnings thereon, are referred to as the "Exchange Fund". The Exchange
Fund may be invested in short-term investment-grade debt instruments as
directed by Alliance and shall not be used for any purpose except as provided
in this Agreement. Any risk of loss with respect to the Exchange Fund shall be
borne by Alliance.

2.2.2 As soon as practicable after the Effective Time, Alliance shall cause
the Exchange Agent to mail to each Company Stockholder a letter of transmittal
and instructions for use in effecting the surrender of certificates
representing shares of Company Common outstanding immediately prior to the
Effective Time (the "Certificates") in appropriate and customary form with
such provisions as the Company (prior to the Merger) and Alliance may
reasonably specify. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly and properly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that amount of cash and that
number of whole shares of Alliance Common and Series B Special Stock which
such holder has a right to receive pursuant to the provisions of this Article
2, together with any dividends and other distributions payable as provided in
Section 2.3 hereof, but subject to the payment of cash in lieu of fractional
shares as provided in Section 2.4 hereof, and the Certificate so surrendered
shall be cancelled. Until surrendered as contemplated by this Section 2.2,
each certificate shall, at and after the Effective Time, be deemed to
represent only the right to receive, upon surrender of such Certificate, the
Merger Consideration with respect to the shares of Company Common represented
thereby, together with any dividends and other distributions payable as
provided in Section 2.3 hereof, but subject to the payment of cash in lieu of
fractional shares as provided in Section 2.4 hereof. Shares of Alliance Common
and Series B Special Stock issued in the Merger shall be issued as of and be
deemed to be outstanding as of the Effective Time. Alliance shall cause all
such shares of Alliance Common and Series B Special Stock issued pursuant to
the Merger to be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights.

2.2.3 If any certificate representing shares of Alliance Common or Series B
Special Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered or any payment in
lieu of fractional shares pursuant to Section 2.4 hereof is to be paid other
than to the registered holder of the

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<PAGE>

Certificate so surrendered, it shall be a condition of such exchange and/or
payment, as the case may be, that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange and/or payment, as the case may be, shall pay
any transfer or other taxes required by reason of the issuance of certificates
for such shares of Alliance Common or Series B Special Stock in a name other
than that of, and/or payment to a person other than, as the case may be, the
registered holder of the Certificate so surrendered.

2.2.4 In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and upon the posting by such
person of a bond in such amount as Alliance may reasonably direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in respect of such lost, stolen or
destroyed Certificate the Merger Consideration with respect to the shares of
Company Common represented thereby (subject to the payment of cash in lieu of
fractional shares in accordance with Section 2.4 hereof) and such person shall
be entitled to the dividend and other distribution rights provided in Section
2.3 hereof.

2.2.5 Any portion of the Exchange Fund which remains unclaimed by the
Company Stockholders for 45 days after the Effective Time shall be delivered
to Alliance, upon demand of Alliance, and the Company Stockholders shall
thereafter look only to Alliance for payment of their claims for the Merger
Consideration in respect of their shares of Company Common and cash in lieu of
fractional shares (and dividends or distributions with respect to Alliance
Common and Series B Special Stock as contemplated by Section 2.3 hereof). If
any Certificates shall not have been surrendered prior to two years after the
Effective Time (or immediately prior to such earlier date on which any payment
in respect hereof would otherwise escheat or become the property of any
governmental unit or agency), the payment in respect of such Certificates
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto. Neither the Company, BAC nor Alliance shall be
liable to any Company Stockholder for any such Merger Consideration or cash
properly delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.

2.2.6 Alliance or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of a Certificate surrendered for the Merger Consideration (and
dividends or distributions with respect to Alliance Common or Series B Special
Stock as contemplated by Section 2.3 hereof and cash in lieu of fractional
shares in accordance with Section 2.4 hereof) such amount as Alliance or the
Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of any state, local or foreign tax law. To the
extent that amounts are so deducted and withheld, such amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of such Certificate.

2.3 Dividends and Distributions. No dividends or other distributions
declared or made with respect to Alliance Common or Series B Special Stock
with a record date on or after the date of the Effective Time will be paid to
the holder of a Certificate entitled by reason of the Merger to receive
certificates representing Alliance Common and Series B Special Stock until
such holder surrenders such Certificate as provided in Section 2.2 hereof,
provided that there shall be paid forthwith by Alliance to the person in whose
name certificates representing shares of Alliance Common or Series B Special
Stock shall be issued pursuant to the terms of this Article 2 (i) at the time
of the surrender of such Certificate, the amount of any dividends and other
distributions theretofore paid with respect to that number of whole shares of
such Alliance Common or whole or fractional shares of Series B Special Stock
represented by such surrendered Certificate pursuant to the terms of this
Article 2, which dividends or other distributions had a record date on or
after the date of Effective Time and a payment date prior to such surrender
and (ii) at the appropriate payment date, the amount of dividends and other
distributions payable with respect to that number of whole shares of Alliance
Common or whole or fractional shares of Series B Special Stock represented by
such surrendered Certificate pursuant to the terms of Article 2, which
dividends or other distributions have a record date on or after the date of
Effective Time and a payment date subsequent to such surrender.

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<PAGE>

2.4 No Fractional Shares.

2.4.1 Notwithstanding anything herein to the contrary, no certificate or
scrip evidencing fractional shares of Alliance Common shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights as a stockholder
of Alliance. In lieu of any such fractional shares, each holder of Company
Common upon surrender of a Certificate for exchange pursuant to Section 2.2
hereof shall be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the per share closing price on the
NASDAQ of Alliance Common on the date of the Effective Time (or, if shares of
Alliance Common do not trade on NASDAQ on such date, the first date of trading
of Alliance Common on NASDAQ after the Effective Time) by (ii) the fractional
interest of Alliance Common to which such holder would otherwise be entitled
(after taking into account all shares of Company Common held of record by such
holder at the Effective Time), subject to the provisions of Section 2.2
hereof.

2.4.2 As soon as practicable after the determination of the amount of cash,
if any, to be paid to former holders of Company Common with respect to any
fractional share interests of Alliance Common, the Exchange Agent shall
promptly pay such amounts to such former holders of Company Common subject to
and in accordance with the terms of this Section 2.4. Alliance will make
available to the Exchange Agent the cash necessary for this purpose.

2.5 Adjustment of Amount of Common Stock Consideration. In the event of any
reclassification, stock split (including reverse stock split), stock dividend
or other general distribution of securities, cash or other property with
respect to Alliance Common (or if a record date with respect to any of the
foregoing should occur) on or after the date of this Agreement and on or prior
to the date of the Effective Time, appropriate and equitable adjustments, if
any, shall be made to the amount of shares constituting the Common Stock
Consideration and subject to the Company Options referred to in Section
2.1.3(y).

2.6 Transfers Following the Effective Time. The stock transfer books of the
Company shall be closed as of the Effective Time, and thereafter there shall
be no further registration of transfers of shares of Company Common that were
outstanding prior to the Effective Time.

3. REPRESENTATIONS AND WARRANTIES OF ALLIANCE. Alliance represents and
warrants to the Company that, except as set forth in the schedule delivered to
the Company concurrently with the execution of this Agreement, which schedule
shall identify exceptions and other information by specific Section references
(the "Alliance Disclosure Schedule"):

3.1 Each of BAC and Alliance is a corporation duly organized, validly
existing and in good standing under its jurisdiction of incorporation. The
Alliance Disclosure Schedule contains a list of the name and jurisdiction
of organization of each subsidiary of Alliance (each such corporation,
partnership or other entity being referred to herein individually as a
"Alliance Subsidiary" and collectively, as the "Alliance Subsidiaries") and
Alliance's ownership interest with respect thereto. Each Alliance
Subsidiary is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its place of incorporation. BAC has
no subsidiaries.

3.2 Alliance and each Alliance Subsidiary (i) has all requisite corporate
power and authority to own, lease and operate its properties and carry on
its business as now being conducted and (ii) is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its
business or the nature or location of its assets require such qualification
and where the failure to be so qualified and in good standing would have a
Material Adverse Effect on Alliance. For purposes of this Agreement,
"Material Adverse Effect" means, with respect to Alliance, a materially
adverse effect on the business, results of operation, financial condition,
properties or assets of Alliance and the Alliance Subsidiaries, taken as a
whole.

3.3 Each of BAC and Alliance has all necessary corporate power and
authority to enter into this Agreement and, subject to approval and
adoption of this Agreement by the holders of a majority of the total shares
of Alliance Common voting thereon, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Alliance and BAC and the performance by Alliance and BAC, subject to
approval and adoption of this Agreement by the Alliance Stockholders, of
their respective obligations hereunder have been duly authorized and
approved by all requisite corporate action and no other

I-6
<PAGE>

corporate proceedings on the part of Alliance or BAC are necessary to
authorize this Agreement or for Alliance or BAC to consummate the Merger.
This Agreement has been duly executed and delivered by duly authorized
officers of Alliance and BAC and constitutes a valid and binding obligation
of Alliance and BAC, enforceable against Alliance and BAC in accordance
with its terms.

3.4 No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission
or other governmental authority or instrumentality (each of the foregoing
being a "Governmental Entity"), is required prior to the Effective Time by
or with respect to Alliance or any Alliance Subsidiary in connection with
the execution and delivery of this Agreement by Alliance and BAC or the
consummation by Alliance and BAC of the transactions contemplated hereby,
except for (i) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to
do business, (ii) notices under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration
(or earlier termination) of all applicable waiting periods thereunder,
(iii) consents of foreign governments having jurisdiction (which consents
are listed on the Alliance Disclosure Schedule), (iv) the filing with the
Securities and Exchange Commission (the "SEC") of registration statements
which may be necessary in connection with the financing referred to in
Section 7.1.6 and a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), covering all shares of Alliance Common and Series B Special Stock to
be issued pursuant to this Agreement (including the offer and sale by
Alliance of the shares referred to in Section 6.5 hereof, as well as the
resale thereof), and the Proxy Statement-Prospectus (as herein defined)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(v) the filing of the Certificate of Designations of the Series B Special
Stock with the Secretary of State of the State of Nevada, (vi) the filings
necessary to obtain all state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this
Agreement, and (vii) the licensing, permitting, registration or other
approval of, or a written consent or no action letter from, each
governmental authority or agency with regulatory control or jurisdiction
over the conduct of lawful gaming or gambling (the "Gaming Regulatory
Authorities") within each municipality, state, commonwealth, Indian land,
or foreign nation or subdivision thereof, wherein Alliance or any Alliance
Subsidiary conducts business on the date hereof (as set forth on the
Alliance Disclosure Schedule) and as of the Effective Time.

3.5 Neither the execution and delivery of this Agreement by Alliance or
BAC, nor the consummation by Alliance or BAC of the transactions
contemplated hereby, will (i) conflict with or result in a breach of any of
the terms of provisions of Alliance's or BAC's respective Certificates of
Incorporation or By-Laws, (ii) violate any statute or administrative
regulation, or any order, writ, injunction, judgment or decree of any court
or governmental authority or any arbitration award to which Alliance or BAC
is a party or by which Alliance or BAC is bound, (iii) violate any terms or
conditions imposed on any license, permit, registration or other approval
of any Gaming Regulatory Authority, or (iv) violate, conflict with, breach,
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in the creation of any
lien or other encumbrance upon any of the properties or assets of Alliance
or any Alliance Subsidiary under, any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which Alliance or any Alliance Subsidiary is a party or to which they or
any of their respective properties or assets are subject, except in the
case of clauses (ii), (iii) or (iv) for violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens or other
encumbrances that do not and will not, individually or in the aggregate,
(x) have a Material Adverse Effect on Alliance or (y) materially impair the
ability of Alliance or BAC to perform its obligations under this Agreement.

3.6 As of the date hereof, the authorized capital stock of Alliance
consists of Alliance Common and Special Stock, par value $.50 per share
(the "Alliance Special Stock"). As of October 17, 1995, 175,000,000 shares
of Alliance Common Stock were authorized and 11,654,150 shares of Alliance
Common were issued and outstanding. As of October 17, 1995, 10,000,000
shares of Alliance Special Stock were authorized, 1,333,333 of which were
issued and outstanding. There are no other shares of capital stock of
Alliance, issued or outstanding. All of the issued and outstanding shares
of Alliance Common have been

I-7
<PAGE>

duly authorized, validly issued and are fully paid and nonassessable.
Except as set forth on the Alliance Disclosure Schedule, there are no
subscriptions, options, warrants, rights (including preemptive rights),
calls, convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of Alliance obligating Alliance to issue any securities of any
kind.

3.7 Alliance has timely filed (and has delivered to the Company a true
and complete copy of) each report, schedule, registration statement and
definitive proxy statement required to be filed by Alliance with the SEC
since June 30, 1995 (such documents are referred to herein as "Alliance's
SEC Documents"). As of their respective dates, Alliance's SEC Documents
comply in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder, and none of Alliance's SEC Documents, as
of their respective dates, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Alliance
included in Alliance's SEC Documents comply, as of their respective dates,
in all material respects with all applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) and fairly present in all material respects the consolidated
financial position of Alliance as at the dates thereof and the consolidated
results of its operations, cash flows and changes in financial position for
the periods indicated therein.

3.8 Except as disclosed in Alliance's SEC Documents filed prior to the
date of this Agreement, all of which have been furnished to the Company,
Alliance and the Alliance Subsidiaries do not have any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) other than liabilities or obligations (i) which were incurred
after June 30, 1995 in the ordinary course of business or (ii) which would
not, individually or in the aggregate, have a Material Adverse Effect on
Alliance.

3.9 Except as disclosed in Alliance's SEC Documents filed prior to the
date of this Agreement and furnished to the Company, and except that
Alliance has incurred obligations relating to its tender offer and consent
solicitation in respect of the Company, since June 30, 1995: (i) Alliance
has not suffered or, to Alliance's knowledge, been threatened with any
change (other than changes generally affecting the industries in which
Alliance or any Alliance Subsidiary operates or changes relating to the
transactions contemplated by this Agreement) which could have a Material
Adverse Effect on Alliance; and (ii) Alliance and the Alliance Subsidiaries
have operated only in the ordinary course of business consistent with past
practice.

3.10

3.10.1 As used in this Agreement, the term (i) "Taxes" means all federal,
state, local, foreign and other income, sales, use, ad valorem, transfer,
franchise, withholding, payroll, employment, gross receipts, property,
severance, duties, net worth, excise or other taxes, charges, levies or
like assessments of any kind, together with any interest, penalties and
additions with respect thereto, and the term "Tax" means any one of the
foregoing Taxes, and (ii) "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.

3.10.2 There have been properly completed and filed on a timely basis all
Returns required to be filed by Alliance or any Alliance Subsidiary in each
case where the failure to properly complete or file any Return would have a
Material Adverse Effect on Alliance. As of the time of filing, the
foregoing Returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status or other matters of
Alliance or, as applicable, an Alliance Subsidiary or any other information
required to be shown thereon, in each case where the failure to do so would
have a Material Adverse Effect on Alliance.

3.10.3 With respect to all amounts in respect of Taxes imposed upon
Alliance or any Alliance Subsidiary, or for which Alliance or any Alliance
Subsidiary is liable to taxing authorities, with respect to all taxable
periods or portions of periods ending on or before the date hereof, all
applicable Tax laws have

I-8
<PAGE>

been complied with where the failure to comply with such laws would have a
Material Adverse Effect on Alliance, and all amounts that are required to
have been paid by the Company to taxing authorities on or before the date
hereof have been paid where the failure to pay such amounts would have a
Material Adverse Effect on Alliance.

3.10.4 No issues have been raised or are currently pending by any tax
authority in connection with any of the Returns which, if resolved
adversely to Alliance and the Alliance Subsidiaries, would have a Material
Adverse Effect on Alliance. There are no material outstanding waivers of
the applicable statutes of limitation with respect to Tax liabilities of
Alliance or any Alliance Subsidiary.

3.10.5 Alliance has not agreed to make, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.

3.10.6 The unpaid Taxes of Alliance and the Alliance Subsidiaries do not
exceed the reserve for tax liability (excluding any reserve for deferred
Taxes) included in the financial statements included in the Form 10-K of
Alliance for the fiscal quarter ended June 30, 1995 by an amount which
would have a Material Adverse Effect on Alliance.

3.11

3.11.1 Alliance and the Alliance Subsidiaries maintain, administer or
contribute to only those employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not excluded from coverage under specific Titles or
Subtitles of ERISA), or deferred compensation, severance, vacation, sick
leave, stock purchase, stock option, stock-related plan, incentive,
insurance or similar contract, policy, arrangement or commitment, for the
benefit of employees or former employees of Alliance and the Alliance
Subsidiaries which are described in the Alliance Disclosure Schedule (the
"Alliance Plans").

3.11.2 All Alliance Plans comply with and are and have been operated in
accordance with each applicable provision of ERISA, the Code (including,
without limitation, the requirements of Code Section 401(a) to the extent
any Alliance Plan is intended to conform to that Section, subject to any
pending application to the Internal Revenue Service for a "determination
letter" to such effect), other federal statutes, state law (including,
without limitation, state insurance law) and the regulations and rules
promulgated pursuant thereto or in connection therewith, except in any case
where the failure to so comply or so be operated would not have a Material
Adverse Effect on Alliance.

3.11.3 Neither Alliance nor any trade or business, whether or not
incorporated, that together with Alliance would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "Alliance ERISA
Affiliate") has failed to make any contributions or to pay any amounts due
as required by the terms of any Alliance Plan or ERISA or any other
applicable law other than such failures which would not have a Material
Adverse Effect on Alliance. All contributions and payments with respect to
Alliance Plans that are required to be made by Alliance or any Alliance
ERISA Affiliate have been made or will be accrued on the financial
statements filed with, or incorporated by reference in, Alliance's SEC
Documents with respect to the periods covered therein.

3.11.4 Neither Alliance nor any Alliance ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation as a result of the
voluntary or involuntary termination of any pension plan subject to Title
IV of ERISA (other than liabilities paid in full); and neither Alliance nor
any Alliance ERISA Affiliate has made a complete or partial withdrawal from
a multiemployer plan, as such term is defined in Section 3(37) of ERISA,
resulting in withdrawal liability, as such term is defined in Section 4201
of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA) (other than
liabilities paid in full).

3.12 Except as set forth in the Alliance Disclosure Schedule, there is no
litigation or proceeding, in law or in equity, and there are no proceedings
or governmental investigations before any commission, authority, agency,
Gaming Regulatory Authority or other administrative authority, pending or,
to Alliance's knowledge, threatened against Alliance or any Alliance
Subsidiary with respect to or affecting Alliance's or any Alliance
Subsidiary's operations, business or financial condition, including, but
not limited to, any

I-9
<PAGE>

affecting its licenses, permits, registration or other gaming approvals
which have a reasonable probability of being decided adversely to Alliance
or any Alliance Subsidiary and which, if so decided adversely, would have a
Material Adverse Effect on Alliance.

3.13 Neither Alliance nor any Alliance Subsidiary is a party to, or bound
by, any judgment, writ, injunction, decree, order or arbitration award (or
agreement entered into in any administrative, judicial or arbitration
proceeding with any Governmental Entity) with respect to or affecting the
properties, assets, personnel or business activities of Alliance or any
Alliance Subsidiary, the enforcement or operation of which or compliance
with which would have a Material Adverse Effect on Alliance.

3.14 Except with respect to Environmental Laws (as defined and which are
addressed in Section 3.15 hereof), neither Alliance nor any Alliance
Subsidiary is in violation of, noncompliance with, or delinquent in respect
to, any judgment, writ, injunction, decree, order or arbitration award or
law, statute, or regulation of or agreement with, or any permit from, any
Governmental Entity to which the property, assets, personnel or business
activities of Alliance or any Alliance Subsidiary are subject, which
violation, noncompliance or delinquency would have a Material Adverse
Effect on Alliance.

3.15

3.15.1 Except for noncompliance or liabilities that would not have a
Material Adverse Effect on Alliance, Alliance, the Alliance Subsidiaries
and their respective assets and business are in compliance with, and not
otherwise subject to liability under, any Environmental Laws (as herein
defined) or any Environmental Permits (as herein defined). Every written
notice, citation, or complaint which Alliance or any Alliance Subsidiary
has received in the past five years of any alleged violation of, or
liability under, any Environmental Law or Environmental Permit has been
corrected where the failure to do so would have a Material Adverse Effect
on Alliance. Alliance and the Alliance Subsidiaries possess all
Environmental Permits which are required by them for the operation of their
business where the failure to do so would have a Material Adverse Effect on
Alliance.

3.15.2 For purposes of this Agreement (i) "Environmental Laws" means all
applicable federal, state, local and foreign statutes, regulations,
ordinances, rules, regulations, and all applicable court orders and decrees
and arbitration awards, which pertain to environmental matters or
contamination of any type whatsoever. "Environmental Laws" include without
limitation those relating to: manufacture, processing, use, distribution,
treatment, storage, disposal, generation or transportation of Hazardous
Materials (as herein defined); air, soil, surface or ground water or noise
pollution; Releases (as herein defined); protection of wildlife, endangered
species, wetlands or natural resources; above-ground and underground
storage tanks, vessels and related equipment and containers; health and
safety of employees and other persons; the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq., as
amended and reauthorized ("CERCLA"); and notification requirements relating
to the foregoing; (ii) "Environmental Permits" means licenses, permits,
registrations, governmental approvals, agreements and consents which are
required under or are issued pursuant to Environmental Laws; (iii)
"Hazardous Materials" means pollutants, contaminants, pesticides, petroleum
and petroleum products, radioactive substances, solid wastes or hazardous
or extremely hazardous, special, dangerous or toxic wastes, substances,
chemicals or materials within the meaning of any Environmental Law,
including, without limitation, any (x) "hazardous substance" as defined in
CERCLA, and (y) any "hazardous waste" as defined in the Resource
Conservation and Recovery Act, 42 U.S.C., 6902, et seq., as amended and
reauthorized; and (iv) "Release" means any spill, discharge, leak,
emission, escape, injection, dumping, or other release or threatened
release of any Hazardous Materials into the environment, whether or not
notification or reporting to any governmental agency was or is required,
including, without limitation, any release which is subject to CERCLA.

3.16 Each of Alliance and the Alliance Subsidiaries owns, licenses or
otherwise has the right to use all patents, copyrights, trademarks, trade
names and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted without any known conflict with
any rights of others.

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<PAGE>

3.17 Alliance has filed with the SEC, or disclosed on the Alliance
Disclosure Schedule a list of and made available to the Company, true and
complete copies of all written contracts, agreements, commitments,
arrangements, leases (including with respect to personal property), and
other instruments to which it or any Alliance Subsidiary is a party or by
which it or any Alliance Subsidiary is bound the loss, default, breach or
violation of which would have a Material Adverse Effect on Alliance
("Material Contracts") except for any contract, agreement, commitment,
arrangement, lease and other instrument which, subject to its terms or
otherwise, is required to be kept confidential. Except as set forth on the
Alliance Disclosure Schedule, neither Alliance nor any Alliance Subsidiary
is, or has received any notice or has any knowledge that any other party
is, in default in any material respect under any such Material Contract and
to Alliance's knowledge there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a
material default.

3.18 Omitted.

3.19 No broker, finder or investment banker (other than Donaldson, Lufkin
& Jenrette Securities Corporation and Gaming Systems Advisors Inc., whose
financial advisory fees will be paid by Alliance) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transaction contemplated hereby based upon any arrangements made by or on
behalf of Alliance.

3.20 Neither Alliance nor any "affiliate" or "associate" (as defined in
Section 203 of the Delaware Law) of Alliance is an "interested stockholder"
(as defined in Section 203 of the Delaware Law) of the Company.

3.21 As of the date hereof, in those jurisdictions where a license,
permit, registration or other approval is required, Alliance and each
Alliance Subsidiary is authorized to conduct its gaming business by virtue
of either (i) a valid license, permit, registration or other approval, in
good standing, or a written consent or no action letter, issued by the
Gaming Regulatory Authority within such jurisdiction; or (ii) a valid
temporary license, permit, registration or other approval granted by the
Gaming Regulatory Authority within such jurisdiction.

4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to Alliance and BAC that, except as set forth in the schedule
delivered to Alliance concurrently with the execution of this Agreement, which
schedule shall identify exceptions and other information by specific Section
references (the "Company Disclosure Schedule"):

4.1 The Company is a corporation duly organized, validly existing and in
good standing under Delaware Law. The Company Disclosure Schedule contains
a list of the name and jurisdiction of organization of each subsidiary of
the Company (each such corporation, partnership or other entity being
referred to herein individually as a "Company Subsidiary" and collectively
as the "Company Subsidiaries") and the Company's ownership interest with
respect thereto. Each Company Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its place of
incorporation.

4.2 The Company and each Company Subsidiary (i) has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted and (ii) is duly qualified
and in good standing in each jurisdiction in which the nature of its
business or the nature or location of its assets require such qualification
and where the failure to be so qualified and in good standing would have a
Material Adverse Effect on the Company. For purposes of this Agreement,
"Material Adverse Effect" means, with respect to the Company, a materially
adverse effect on the business, results of operation, financial condition,
properties or assets of the Company and the Company Subsidiaries, taken as
a whole.

4.3 The Company has all necessary corporate power and authority to enter
into this Agreement and, subject to approval and adoption of this Agreement
by the holders of a majority of the outstanding shares of Company Common,
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and, subject to approval and
adoption of this Agreement by the Company Stockholders, the performance by
the Company of its obligations hereunder have been duly authorized by

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<PAGE>

all requisite corporate action and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or for the
Company to consummate the Merger. This Agreement has been duly executed and
delivered by duly authorized officers of the Company and constitutes a
valid and binding obligation of the Company enforceable against it in
accordance with its terms.

4.4 No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required prior to
the Effective Time by or with respect to the Company or any Company
Subsidiary in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and the filing of
appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (ii) notices under the HSR
Act and the expiration (or earlier termination) of all applicable waiting
periods thereunder, (iii) consents of foreign governments having
jurisdiction (which consents are listed on the Company Disclosure
Schedule), (iv) the filing with the SEC of the Proxy Statement-Prospectus,
(v) the filings necessary to obtain all state securities law or "Blue Sky"
permits or approvals required to carry out the transactions contemplated by
this Agreement, (vi) the licensing, permitting, registration or other
approval of, or a written consent or no action letter from any Gaming
Regulatory Authorities within each municipality, state, commonwealth,
Indian land, or foreign nation or subdivision thereof, wherein the Company
or any Company Subsidiary conducts business on the date hereof (as set
forth on the Company Disclosure Schedule) and as of the Effective Time.

4.5 Neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated
hereby, will (i) conflict with or result in a breach of any of the terms or
provisions of the Company's Certificate of Incorporation or By-Laws, (ii)
violate any statute or administrative regulation, or any order, writ,
injunction, judgment or decree of any court or governmental authority or
any arbitration award to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary is bound, (iii)
violate the terms or conditions imposed on any license, permit,
registration or other approval of any Gaming Regulatory Authority, or (iv)
violate, conflict with, breach, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien or other encumbrance upon any of the
properties or assets of the Company or any Company Subsidiary under, any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which the Company or any Company
Subsidiary is a party or to which they or any of their respective
properties or assets are subject, except in the case of clauses (ii), (iii)
or (iv) for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or other encumbrances that do not and
will not, individually or in the aggregate, (x) have a Material Adverse
Effect on the Company or (y) materially impair the Company's ability to
perform its obligations under this Agreement. The Company has given notice
in the form previously furnished to Alliance to terminate the Agreement and
Plan of Merger between WMS Industries Inc. and the Company (the "WMS
Agreement").

4.6 As of the date hereof, the authorized capital stock of the Company
consists of Company Common and preferred stock, par value $.01 per share
(the "Company Preferred"). As of October 17, 1995, 30,000,000 shares of
Company Common were authorized, 10,799,501 shares of Company common were
issued and outstanding and no shares of Company Common were issued but not
outstanding and held in the treasury of the Company. As of October 17,
1995, 5,000,000 shares of Company Preferred were authorized, none of which
were issued and outstanding. There are no other shares of capital stock of
the Company authorized, issued or outstanding. All of the issued and
outstanding shares of Company Common had been validly issued and are fully
paid and nonassessable. Except as set forth on the Company Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, rights
(including preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company obligating the
Company to issue any securities of any kind.

4.7 All of the outstanding shares of capital stock of, and all other
ownership interests in, each Company Subsidiary (i) are validly issued,
fully paid and nonassessable and free of any preemptive rights

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<PAGE>

and (ii) other than as set forth on the Company Disclosure Schedule, are
owned of record and beneficially by the Company, a Company Subsidiary or a
nominee of the Company, free and clear of all liens, claims, pledges,
agreements, voting or other restrictions, charges or other encumbrances.
There are no outstanding subscriptions, options, warrants, rights
(including preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued or
unissued capital stock or other securities (other than investment
securities) of any Company Subsidiary obligating such Company Subsidiary to
issue any securities of any kind.

4.8 The Company has timely filed (and has delivered to Alliance a true
and complete copy of) each report, schedule, registration statement and
definitive proxy statement required to be filed by the Company with the SEC
since December 31, 1994 (such documents are referred to herein as the
"Company's SEC Documents"). As of their respective dates, the Company's SEC
Documents comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder, and none of the Company's SEC
Documents, as of their respective dates, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company's SEC Documents comply,
as of their respective dates, in all material respects with all applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present in all material respects the consolidated financial
position of the Company as at the dates thereof and the consolidated
results of its operations, cash flows and changes in financial position for
the periods indicated therein.

4.9 Except as disclosed in the Company's SEC Documents filed prior to the
date of this Agreement and furnished to Alliance, the Company and the
Company Subsidiaries do not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) other than
liabilities or obligations (i) which were incurred after June 30, 1995 in
the ordinary course of business or (ii) which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.

4.10 Except as disclosed in the Company's SEC Documents filed prior to
the date of this Agreement and furnished to Alliance, since June 30, 1995:
(i) the Company has not suffered or, to the Company's knowledge, been
threatened with any change (other than changes generally affecting the
industries in which the Company or any Company Subsidiary operates or
changes relating to the transactions contemplated by this Agreement) which
could have Material Adverse Effect on the Company; and (ii) the Company and
the Company Subsidiaries have operated only in the ordinary course of
business consistent with past practice.

4.11

4.11.1 There have been properly completed and filed on a timely basis all
Returns required to be filed by the Company and any Company Subsidiary in
each case where the failure to properly complete or file any Return would
have a Material Adverse Effect on the Company. As of the time of filing,
the foregoing Returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status or other matters of the
Company or, as applicable, a Company Subsidiary or any other information
required to be shown thereon, in each case where the failure to do so would
have a Material Adverse Effect on the Company.

4.11.2 With respect to all amounts in respect of Taxes imposed upon the
Company or any Company Subsidiary, or for which the Company or any Company
Subsidiary is liable to taxing authorities, with respect to all taxable
periods or portions of periods ending on or before the date hereof, all
applicable Tax laws have been complied with where the failure to comply
with such laws would have a Material Adverse Effect on the Company, and all
amounts that are required to have been paid by the Company to taxing
authorities on or before the date hereof have been paid where the failure
to pay such amounts would have a Material Adverse Effect on the Company.

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<PAGE>

4.11.3 No issues have been raised or are currently pending by any tax
authority in connection with any of the Returns which if decided adversely
to the Company or any Company Subsidiary would have a Material Adverse
Effect on the Company. There are no material outstanding waivers of the
applicable statutes of limitation with respect to Tax liabilities of the
Company or any Company Subsidiary.

4.11.4 The Company has not agreed to make, nor is it required to make,
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.

4.11.5 Neither the Company nor any Company Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.

4.11.6 The unpaid Taxes of the Company and the Company Subsidiaries do
not exceed the reserve for tax liability (excluding any reserve for
deferred Taxes) included in the financial statements included in the Form
10-Q of the Company for the fiscal quarter ended June 30, 1995 by an amount
that would have a Material Adverse Effect on the Company.

4.12

4.12.1 The Company and the Company Subsidiaries maintain, administer or
contribute to only those employee benefit plans (as defined in Section 3(3)
of ERISA, whether or not excluded from coverage under specific Titles or
Subtitles of ERISA), or deferred compensation, severance, vacation, sick
leave, fringe benefit, stock purchase, stock option, stock-related plan,
incentive, insurance or similar contract, policy, arrangement or
commitment, for the benefit of employees or former employees of the Company
and the Company Subsidiaries which are described in the Company Disclosure
Schedule (the "Company Plans").

4.12.2 All Company Plans comply with and are and have been operated in
accordance with each applicable provision of ERISA, the Code (including,
without limitation, the requirements of Code Section 401(a) to the extent
any Company Plan is intended to conform to that Section, subject to any
pending application to the Internal Revenue Service for a "determination
letter" to such effect), other federal statutes, state law (including,
without limitation, state insurance law) and the regulations and rules
promulgated pursuant thereto or in connection therewith, except in any case
where the failure to so comply or so be operated would not have a Material
Adverse Effect on the Company.

4.12.3 Neither the Company nor any trade or business, whether or not
incorporated, that together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (a "Company ERISA
Affiliate") has failed to make any contributions or to pay any amounts due
as required by the terms of any Company Plan or ERISA or any other
applicable law other than such failures which would not have a Material
Adverse Effect on the Company. All contributions and payments with respect
to Company Plans that are required to be made by the Company or any Company
ERISA Affiliate have been made or will be accrued on the financial
statements filed with, or incorporate by reference in, the Company's SEC
Documents with respect to the periods covered therein.

4.12.4 Neither the Company nor any Company ERISA Affiliate has incurred
any liability to the Pension Benefit Guaranty Corporation as a result of
the voluntary or involuntary termination of any pension plan subject to
Title IV of ERISA (other than liabilities paid in full); and neither the
Company nor any Company ERISA Affiliate has made a complete or partial
withdrawal from a multiemployer plan, as such term is defined in Section
3(37) of ERISA, resulting in withdrawal liability, as such term is defined
in Section 4201 of ERISA (without regard to subsequent reduction or waiver
of such liability under either Section 4207 or 4208 of ERISA) (other than
liabilities paid in full).

4.13 Except as set forth on the Company Disclosure Schedule, there is no
litigation or proceeding, in law or in equity, and there are no proceedings
or governmental investigations before any commission, authority, agency,
Gaming Regulatory Authority or other administrative authority, pending or,
to the Company's knowledge, threatened against the Company or any Company
Subsidiary with respect to or affecting the Company's or any Company
Subsidiary's operations, business or financial condition, including, but
not limited to, any affecting its licenses, permits, registration or other
gaming approvals which

I-14
<PAGE>

have a reasonable probability of being decided adversely to the Company or
any Company Subsidiary and which, if so decided adversely, would have a
Material Adverse Effect on the Company.

4.14 Neither the Company nor any Company Subsidiary is a party to, or
bound by, any judgment, writ, injunction, decree, order or arbitration
award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any Governmental Entity) with respect to or
affecting the properties, assets, personnel or business activities of the
Company or any Company Subsidiary, the enforcement or operation of which or
compliance with which would have a Material Adverse Effect on the Company.

4.15 Except with respect to Environmental laws (which are addressed in
Section 4.16 hereof), neither the Company nor any Company Subsidiary is in
violation of, noncompliance with, or delinquent in respect to, any
judgment, writ, injunction, decree, order or arbitration award or law,
statute, or regulation of or agreement with, or any permit from, any
Governmental Entity, to which the property, assets, personnel or business
activities of the Company or any Company Subsidiary are subject, which
violation, noncompliance or delinquency would have a Material Adverse
Effect on the Company.

4.16 The Company, the Company Subsidiaries and their respective assets
and business are in compliance in all material respects with, and not
otherwise subject to liability under, any Environmental Laws or any
Environmental Permits. Every written notice, citation or complaint which
the Company or any Company Subsidiary has received in the past five years
of any alleged violation of, or liability under, any Environmental Law or
Environmental Permit has been corrected in all material respects. The
Company and the Company Subsidiaries possess all Environmental Permits
which are required by them for the operation of their business where the
failure to do so would have a Material Adverse Effect on the Company.

4.17 Each of the Company and the Company Subsidiaries owns, licenses or
otherwise has the right to use all patents, copyrights, trademarks, trade
names and rights in respect of the foregoing adequate for the conduct of
its business substantially as now conducted without any known conflict with
any rights of others.

4.18 The Company has filed with the SEC or disclosed on the Company
Disclosure Schedule a list of and made available to Alliance (i) true and
complete copies of all written contracts, agreements, commitments,
arrangements, leases (including with respect to personal property), and
other instruments to which it or any Company Subsidiary is a party or by
which it or any Company Subsidiary is bound the loss, default, breach or
violation of which would have a Material Adverse Effect on the Company
("Material Contracts"). Except as set forth on the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is, or has
received any notice or has any knowledge that any other party is, in
default in any material respect under any such Material Contract and to the
Company's knowledge there has not occurred any event that with the lapse of
time or the giving of notice or both would constitute such a material
default.

4.19 Omitted.

4.20 No broker, finder or investment banker (other than Ladenburg,
Thalmann & Co. Inc., whose brokerage, finder's or other fee will be paid by
the Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of the Company. The Company has
provided a true and correct copy of its agreement with Ladenburg, Thalmann
& Co. Inc. to Alliance.

4.21 The Company has received the written opinion of Ladenburg, Thalmann
& Co. Inc. on the date of this Agreement that the consideration to be
received in the Merger by the Company Stockholders is fair, from a
financial point of view, to the Company Stockholders. The Company has
provided a true and correct copy of such opinion to Alliance.

4.22 Assuming the representation in Sections 3.20 is accurate, as of the
date hereof and at all times on or prior to the Effective Time, Section 203
of the Delaware Law is, and shall be, inapplicable to the Merger and the
transactions contemplated by this Agreement.

4.23 As of the date hereof, in those jurisdictions where a license,
permit, registration or other approval is required, the Company and each
Company Subsidiary is authorized to conduct its gaming

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<PAGE>

business by virtue of either (i) a valid license, permit, registration or
other approval, in good standing, or a written consent or no action letter,
issued by the Gaming Regulatory Authority within such jurisdiction; or (ii)
a valid temporary license, permit, registration or other approval granted
by the Gaming Regulatory Authority within such jurisdiction.

5. CONDUCT OF BUSINESS PENDING THE MERGER.

5.1 Conduct of Business by the Company Pending the Merger. Prior to the
Effective Time, unless Alliance shall otherwise agree in writing:

5.1.1 The Company shall, and shall cause the Company Subsidiaries to, use
their reasonable best efforts to carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, and shall, and shall cause the Company Subsidiaries
to, use their reasonable best efforts to preserve intact their present
business organizations, maintain their current licenses and permits, keep
available the services of their present officers and key employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and on-going
businesses shall be unimpaired at the Effective Time, except such
impairment as would not have a Material Adverse Effect on the Company. The
Company shall, and shall cause the Company Subsidiaries to use their
reasonable best efforts to, (i) maintain insurance coverages and its books,
accounts and records in the usual manner consistent with prior practices;
(ii) comply in all material respects with all laws, ordinances and
regulations of Governmental Entities applicable to the Company and the
Company Subsidiaries; (iii) maintain and keep its properties and equipment
in good repair, working order and condition, ordinary wear and tear
excepted; (iv) prepare the financial statements referred to in Section
5.1.5 hereof in accordance with GAAP consistently applied and consistent
with past practice, including without limitation, accounting for deferred
revenues in the usual manner; and (v) perform in all material respects its
obligations under all contracts and commitments to which it is a party or
by which it is bound;

5.1.2 Except as required or permitted by this Agreement, the Company
shall not and shall not propose to (i) sell or pledge or agree to sell or
pledge any capital stock owned by it in any Company Subsidiary, (ii) amend
its Certificate of Incorporation or By-Laws, or (other than an annual
meeting of stockholders held for the sole purpose of electing directors and
to consider such other matters not proposed by or on behalf of the Company
as may properly come before the meeting, if the Proxy Statement/Prospectus
has not been mailed on or prior to March 13, 1996 (and if such an annual
meeting is held and the Company is not in material breach hereunder (other
than any such breach which occurred prior to the date of this Amendment and
which was actually known to Alliance), Alliance will vote all shares of
Company Common beneficially owned by it in favor of the directors nominated
by the Company)) except as required by court order, hold any meeting of
stockholders or (other than in opposition to a solicitation by a third
party other than Alliance or BAC) solicit any stockholder action by written
consent, (iii) split, combine or reclassify its outstanding capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of
the Company, or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property or (iv) directly or
indirectly redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire any shares of Company capital stock;

5.1.3 The Company shall not, nor shall it permit any Company Subsidiary
to, (i) except as required or permitted by this Agreement, issue, deliver
or sell or agree to issue, deliver or sell any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class
or incur any liability in respect of (a) borrowed money, (b) capitalized
lease obligations, (c) deferred purchase price of property or services
(other than trade payables in the ordinary course) and (d) guarantees of
any of the foregoing ("Indebtedness") (other than pursuant to existing
lines of credit for use in the ordinary course of business and consistent
with past practices) or any option, rights or warrants to acquire, or
securities convertible into, shares of capital stock other than issuances
of Company Common disclosed in the Company Disclosure Schedule; (ii) except
as required or permitted by this Agreement, acquire, lease or dispose or
agree to acquire, lease or dispose of any capital assets or any other
assets other than in the ordinary course of business; (iii) incur
additional Indebtedness or encumber or grant a security interest in any
asset or enter

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<PAGE>

into any other transaction other than in each case in the ordinary course
of business; (iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, except that the Company may
create new wholly-owned Subsidiaries in the ordinary course of business; or
(v) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;

5.1.4 Except as disclosed in the Company Disclosure Schedule, the Company
shall not, nor shall it permit any Company Subsidiary to, except as
expressly permitted by this Agreement or required to comply with applicable
law or this Agreement or pursuant to the terms of existing agreements that
were not required to be included in the Company Disclosure Schedule, (i)
adopt, enter into, terminate or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other Company Plan, agreement, trust,
fund or other arrangement for the benefit or welfare of any director,
officer or current or former employee, (ii) increase in any manner the
compensation or fringe benefits of any director or officer or any employee
(except, with respect to employees, for normal increases in the ordinary
course of business that are consistent with past practice and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company and any Company Subsidiary relative to the level in
effect prior to such amendment), (iii) pay any benefit not provided under
any existing plan or arrangement, (iv) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Company
Plan (including, without limitation, the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units
or restricted stock, or the removal of existing restrictions in any benefit
plans or agreements or awards made thereunder), (v) take any action to fund
or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or Company Plan other
than in the ordinary course of business consistent with past practice or
(vi) adopt, enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing, provided, however,
that nothing contained herein shall prevent the Company or any Company
Subsidiary from paying any bonus to or increasing the compensation of any
employee in accordance with the terms of any employment agreement for such
employee that was provided to Alliance prior to the date hereof; and

5.1.5 Between the date hereof and the Effective Time, (i) the Company
shall provide to Alliance within 45 days after the end of each month such
financial statements as are customarily prepared by the Company on a
monthly basis and shall provide to Alliance, as promptly as practicable,
such summary financial information with respect to the Company as is
customarily provided to the Chairman and Chief Executive Officer and Chief
Financial Officer of the Company; (ii) the Company and each Company
Subsidiary shall consult with Alliance on a regular basis with respect to
all operating decisions which could be expected to result in a material
change in the business of the Company or any Company Subsidiary as
presently operated or which are not in the ordinary course of business;
(iii) subject to Section 9.11, the Company and each Company Subsidiary
shall permit representatives of Alliance and prospective providers of
financing to have full and unrestricted access to such information,
documents, facilities and personnel as they may from time to time request;
and (iv) the Company will provide reasonable cooperation in helping
Alliance to obtain permanent financing (in lieu of bridge financing) as
described in Section 7.1.6 (the Company recognizing that substituting such
financing may require the payment of certain fees and commissions which
shall be the responsibility of Alliance and the Alliance Subsidiaries
including after the Effective Time the Company).

5.2 Conduct of Business by Alliance Pending the Merger. Prior to the
Effective Time, unless the Company shall otherwise agree in writing except as
otherwise required by this Agreement:

5.2.1 Alliance shall, and shall cause the Alliance Subsidiaries to, use
their reasonable best efforts to preserve their relationships with
customers, suppliers and others having business dealings with them and
maintain their current licenses and permits to the end that their goodwill
and on-going businesses shall be unimpaired at the Effective Time, except
such impairment as would not have a Material Adverse effect on Alliance.
Alliance shall and shall cause the Alliance Subsidiaries to use their
reasonable best efforts to

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<PAGE>

(i) maintain insurance coverage and its books, accounts and records in the
usual manner consistent with prior practices; (ii) comply in all material
respects with all laws, ordinances and regulations of Governmental Entities
applicable to Alliance and the Alliance Subsidiaries; (iii) maintain and
keep its properties and equipment in good repair, working order and
condition, ordinary wear and tear expected; and (iv) perform in all
material respects its obligations under all contracts and commitments to
which it is a party or by which it is bound, in each case other than where
the failure to so maintain, comply or perform, either individually or in
the aggregate, would not result in a Material Adverse Effect on Alliance;

5.2.2 Alliance shall not amend any of the material terms or provisions of
the Alliance Common or Alliance Special Stock;

5.2.3 Alliance shall not take any action that would result in the failure
to maintain the trading of Alliance Common on NASDAQ; and

5.2.4 Alliance shall not declare or pay any dividend or distribution on
any outstanding shares of its capital stock.

5.2.5 Between the date hereof and the Effective Time, (i) Alliance shall
provide to the Company within 25 days after the end of each month such
financial statements as are customarily prepared by Alliance on a monthly
basis; (ii) Alliance and each Alliance Subsidiary shall promptly advise the
Company of developments which could be expected to result in a material
change in the business of Alliance or any Alliance Subsidiary as presently
operated; and (iii) subject to Alliance's contractual obligations to
maintain confidentiality of certain agreements to which Alliance or any
Alliance Subsidiary is a party, Alliance and each Alliance Subsidiary shall
permit representatives of the Company to have access to such information,
documents, facilities and personnel as the Company may from time to time
request.

5.3 Notice of Breach. Each party shall promptly give written notice to the
other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event which would cause or
constitute a breach of any of its representations, warranties or covenants
contained or referenced in this Agreement, and will use all reasonable efforts
to prevent or promptly remedy the same. Any such notification shall not be
deemed an amendment of the Company Disclosure Schedule or the Alliance
Disclosure Schedule.

6. ADDITIONAL AGREEMENTS.

6.1 Registration Statement; Proxy Statement; Auditors' Letters; Other
Matters.

6.1.1 As promptly as practicable after the execution of this Agreement,
Alliance and the Company shall cooperate and promptly prepare and file with
the SEC a joint proxy statement/prospectus (the "Proxy Statement-Prospectus")
with respect to the stockholder meetings (each, the "Meeting") in connection
with the Merger (which in the case of the Company shall also be its annual
meeting). The Company and Alliance shall each duly call, give notice of,
convene and hold the Meeting as soon as practicable after the date hereof and
shall each include in the Proxy Statement-Prospectus the recommendation of its
board of directors that its stockholders adopt this Agreement and shall use
its best efforts to obtain such adoption. At the Meeting, Alliance shall vote
its shares of Company Common in favor of adoption of this Agreement. At an
appropriate time mutually determined by Alliance and the Company prior to the
clearance of the Proxy Statement-Prospectus, Alliance and the Company shall
cooperate and promptly prepare and Alliance shall file with the SEC the
Registration Statement covering all shares of Alliance Common and Series B
Special Stock to be issued pursuant to this Agreement (including pursuant to
the outstanding Company Options or Company Warrants or any similar executive
compensation awards following the Merger and the offer and sale by Alliance of
the shares referred to in Section 6.5 hereof, as well as the resale thereof),
in which Registration Statement the Proxy Statement-Prospectus shall be
included as a prospectus with respect to such shares of Alliance Common and
Series B Special Stock. The respective parties shall cause the Proxy
Statement-Prospectus and the Registration Statement to comply as to form in
all material respects with the applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations thereunder. Alliance shall use
all reasonable efforts, and the Company will reasonably cooperate with
Alliance, to have the Registration Statement declared effective by the SEC as
promptly as practicable. Alliance shall use its best efforts to obtain, prior
to the effective date of the Registration Statement, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement and will pay all expenses incident
thereto. Alliance and the Company each agree

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<PAGE>

that the Proxy Statement-Prospectus and each amendment or supplement thereto
at the time it is filed or becomes effective shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company agrees
that the written information concerning the Company provided by it for
inclusion in the Proxy Statement-Prospectus and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the Meeting, or, in
the case of written information concerning the Company provided by the Company
for inclusion in the Registration Statement or any amendment or supplement
thereto, at the time it is filed or becomes effective, shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Alliance agrees
that the written information concerning Alliance provided by it for inclusion
in the Proxy Statement-Prospectus and each amendment or supplement thereto at
the time of mailing thereof and at the time of the meeting shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
as otherwise required by law, no amendment or supplement to the Proxy
Statement- Prospectus shall be made by Alliance or the Company without the
approval of the other party. Alliance shall advise the Company and the Company
shall advise Alliance, as applicable, promptly after it receives notice
thereof, of the time when the Registration Statement shall become effective or
any supplement or amendment has been filed, the issuance of any stop order,
the suspension of the qualification of the Alliance Common issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement-Prospectus or the
Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.

6.1.2 The Company shall use its reasonable best efforts to cause to be
delivered to Alliance a letter of Coopers & Lybrand L.L.P., the Company's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to the
Company, customary in form, scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.

6.1.3 Alliance shall use its reasonable best efforts to cause to be
delivered to the Company a letter of KPMG Peat Marwick, Alliance's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to Alliance,
customary in form, scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement.

6.1.4 The Company will provide reasonable cooperation in helping Alliance to
obtain permanent financing (in lieu of bridge financing) as described in
Section 7.1.6 (the Company recognizing that substituting such financing may
require the payment of certain fees and commissions which will be the
responsibility of Alliance and the Alliance Subsidiaries including after the
Effective Time the Company).

6.2 Alternative Proposals. Subject to the proviso of this Section 6.2, prior
to the Effective Time, the Company agrees that (i) neither it nor any of the
Company Subsidiaries shall, and it shall use reasonable efforts to cause its
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or
any of the Company Subsidiaries) not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of
the assets or any equity securities of, the Company or any Company Subsidiary
(any such proposal or offer being hereinafter referred to as an "Alternative
Proposal") or engage in any negotiations or enter into any agreement
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal,
(ii) it shall immediately cease and cause to be terminated any existing
activities, discussions or

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negotiations with any parties conducted heretofore with respect to any of the
foregoing, and it shall take the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this Section 6.2
and (iii) it shall notify Alliance as promptly as practicable if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, it; provided, however, that nothing contained in this Section
6.2 shall prohibit the Board of Directors of the Company from (a) after notice
to Alliance, furnishing information to, or entering into negotiations or
discussions with, any person or entity that makes an unsolicited bona fide
Alternative Proposal if the Board of Directors of the Company determines in
good faith, after consultation with counsel, that the failure to do so could
reasonably be deemed a breach of its fiduciary duties under applicable law,
(b) failing to make, withdrawing, modifying or changing the recommendation
referred to the Company Stockholders, the approval and adoption of this
Agreement if the Board of Directors of the Company determines in good faith,
after consultation with counsel, that making such recommendation, or the
failure to withdraw, modify or change such recommendation, could reasonably be
deemed a breach of its fiduciary duties under applicable law, (c) recommending
to the Company Stockholders an Alternative Proposal that the Board of
Directors of the Company determines in good faith, after consultation with its
financial advisor, is likely to be more favorable, from a financial point of
view, to the Company Stockholders, than the Merger or (d) to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Alternative Proposal.

6.3 Indemnification of Directors and Officers. The provisions of the
Certificate of Incorporation of the Surviving Corporation with respect to
indemnification on the date of this Agreement shall not be amended, repealed
or otherwise modified for a period of six years after the Effective Time in
any manner that would adversely affect the rights thereunder of individuals
who at the date hereof were directors or officers of the Company in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by law. Alliance will indemnify the directors
and officers of the Company to the maximum extent permitted by law against all
loss, cost and expense reasonably incurred by them as a result of the
termination of the WMS Agreement following the date of this Agreement until
its termination (and unless the termination occurs as a result of clauses (i)
or (ii) of Section 8.1.3, thereafter). Without limiting the obligations under
the two previous sentences, for a period of six years after the Effective
Time, (i) the Surviving Corporation will maintain in effect insurance
policies, covering the directors and officers of the Company at the date
hereof, for claims made within such six-year period with respect to directors'
and officers' liability for activities taken or not taken on or prior to the
Effective Time, such policies to be comparable in all material respects
(including dollar amount and scope of coverage) to the policies presently
maintained by the Company for such purpose and (ii) Alliance shall indemnify
such directors and officers against any loss, cost and liability reasonably
incurred by them arising out of the termination of the WMS Agreement.
Alliance's indemnity obligations herein are conditioned on the indemnitee's
giving Alliance the rights to defend and settle claims and its reasonable
cooperation with Alliance in the manner provided in Section 9.6.7, and on such
indemnitee's using commercially reasonable efforts to contest any liability
and to recover under applicable insurance policies (to which recovery Alliance
shall be subrogated).

6.4 Regulatory Compliance. The Company, BAC and Alliance will use their
respective best efforts to comply promptly with all requirements which federal
or state law may impose on them with respect to the Merger. The Company and
Alliance will take all such action as may be necessary under the federal
securities laws applicable to or necessary for, and will file and, if
appropriate, use their best efforts to have declared effective or approved,
all documents and notifications with the SEC and other governmental or
regulatory bodies which they deem necessary or appropriate for the
consummation of the Merger and the transactions contemplated hereby, and each
party shall give the other information reasonably requested by such other
party pertaining to it and its subsidiaries and affiliates to enable such
other party to take such actions. The Company, BAC and Alliance will take all
such action as may be necessary under gaming laws and regulations applicable
to or necessary for the consummation of the Merger and the transactions
contemplated hereby and will, as soon as practicable, file or cause to be
filed with all Governmental Entities having jurisdiction over the gaming
activities of the Company, Company Subsidiaries, Alliance and Alliance
Subsidiaries, on behalf of such entities or

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individuals as required, such applications, disclosure statements, documents
and other submissions for approval, qualification or consent as may be
required in connection therewith. No party hereto will intentionally take, or
omit to take, any action, which action or omission will have the effect of
delaying, impairing or impeding the receipt of any required consent,
authorization, order or approval or the making of any required filing or
registration. The Company and Alliance shall file in a timely manner all
reports and documents required to be so filed by or under the Exchange Act.

6.5 Registration Rights. Alliance shall use its reasonable best efforts to
cover in the Registration Statement resales by persons who immediately prior
to the Effective Time were directors or executive officers of the Company of
shares constituting the Share Consideration and other shares of Alliance
Common and Series B Special Stock issued to them in connection with the Merger
(including without limitation shares issued pursuant to severance or
termination agreements with Alliance). Alliance shall use its reasonable best
efforts to keep the Registration Statement effective for this purpose until
the third anniversary of the Effective Date or such earlier date as the shares
covered thereby may be freely sold by such persons under Rule 145 under the
Securities Act, subject to reasonable blackout periods to permit the Company
to accomplish its corporate objectives.

6.6 Omitted.

6.7 Arrangements with Certain Officers of the Company. Alliance shall be
bound by all employment agreements and related plans currently in effect for
officers, directors and employees of the Company, including provisions of
those agreements and plans relating to stock options, performance units, stock
payment rights, restricted stock and/or change of control. Prior to the
Effective Time, the Company may enter into amendments to such agreements and
plans with each of Richard Gillman, Hans Kloss and Neil Jenkins in form and
content reasonably satisfactory to Alliance and such individuals, as
previously agreed between them and Alliance.

7. CLOSING CONDITIONS.

7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:

7.1.1 Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose shall have been initiated or, to the knowledge of Alliance
or the Company, threatened by the SEC.

7.1.2 Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the Company Stockholders, and
shall have been approved and adopted by the requisite vote of the Alliance
Stockholders.

7.1.3 No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits consummation
of the Merger or any transaction contemplated by this Agreement; provided,
however, that the parties shall use their reasonable best efforts to cause
any such decree, judgment, injunction or other order to be vacated or
lifted.

7.1.4 HSR Act. The applicable waiting period under the HSR Act shall have
expired or been terminated.

7.1.5 Governmental Approvals. Other than the filing of the Certificate of
Merger in accordance with Delaware Law, all licenses, permits,
registrations, authorizations, consents, waivers, orders or other approvals
required to be obtained, and all filings, notices or declarations required
to be made, by Alliance or any Alliance Subsidiary, and the Company or any
Company Subsidiary, in order to consummate the Merger and the transactions
contemplated hereunder shall have been obtained from, and made with, all
required Governmental Entities, without any material condition thereto.

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7.1.6 Financing. Alliance shall have obtained $150,000,000 of financing
having terms that are commercially reasonable considering the combined
consolidated financial condition of Alliance and the Company to fund the
Cash Consideration, to refinance existing indebtedness of the Company and
its subsidiaries (including the extension or modification thereof) and to
provide working capital. The financing shall include a sale for cash
pursuant to a registered public offering of Series B Special Stock (which
shall not be sold as part of a unit with any other security) in which
Alliance receives gross proceeds, prior to payment of underwriter spreads
and expenses, of at least $15,000,000, and At least two-thirds of the
financing shall be in the form of bank debt, other indebtedness having a
term of at least four years and/or equity of any type (provided that any
preferred stock shall not be redeemable (other than at the option of
Alliance) for at least four years).

7.2 Additional Conditions to Obligations of Alliance. The obligations of
Alliance to effect the Merger and the transactions contemplated herein are
also subject to the following conditions:

7.2.1 Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct as of the Effective Time as though made on and as of the Effective
Time, except (i) for changes specifically permitted by this Agreement and
(ii) that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date.
Alliance shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company to the foregoing effect.

7.2.2 Agreement and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. Alliance shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company to
the foregoing effect.

7.2.3 Omitted.

7.2.4 Omitted.

7.2.5 Omitted.

7.2.6 Arrangements with Certain Officers of the Company. Alliance intends
to honor all employment agreements and related plans currently in effect
for officers, directors and employees of the Company, including provisions
of those agreements and plans relating to change of control. Prior to the
Effective Time, the Company shall have entered into amendments to the
employment agreements with each of Richard Gillman and Neil Jenkins in form
and content satisfactory to Alliance and such individuals.

7.2.7 Omitted.

7.2.8 Omitted.

7.2.9 No Material Adverse Change to the Company. From the date hereof
through and including the Effective Time, no event shall have occurred
which would have a Material Adverse Effect on the Company. Alliance shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company to the foregoing effect.

7.2.10 Third Party Consents. All third party consents shall have been
received which may be required to avoid the breach of any material
agreements to which the Company or any Company Subsidiary is a party,
including consents of lessors, in order to consummate the Merger and the
transactions contemplated hereby.

7.2.11 Gaming Regulatory Approval. All licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals required to be
obtained from, and all filings, notices or declarations required to be made
with, the Gaming Regulatory Authorities set forth on the Company Disclosure
Schedule in order to permit the Company and any Company Subsidiary to
conduct its business in the jurisdictions regulated by such Gaming
Regulatory Authorities after the Effective Time in the same manner as
conducted by it prior to the Effective Time shall have been obtained or
made.

7.3 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger and the other transactions contemplated in
this Agreement are also subject to the following conditions:

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7.3.1 Representations and Warranties. Each of the representations and
warranties of Alliance contained in this Agreement shall be true and
correct as of the Effective Time, as though made on and as of the Effective
Time, except (i) for changes specifically permitted by this Agreement and
(ii) that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date. The
Company shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of Alliance to the foregoing effect.

7.3.2 Agreements and Covenants. Alliance shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Alliance to the foregoing
effect.

7.3.3 Public Offering of Series B Special Stock. Alliance shall have used
reasonable commercial efforts to (i) complete the sale on reasonable
commercial terms, pursuant to a registered public offering, of at least
$25,000,000 liquidation value of Series B Special Stock at or prior to the
Effective Time and (ii) cause the Series B Special Stock to be listed on a
national securities exchange or quoted on the NASDAQ National Market System
as promptly as practicable, if the criteria for such listing or quotation
are satisfied.

7.3.4 Omitted.

7.3.5 No Material Adverse Change to Alliance. From the date hereof
through and including the Effective Time, no event shall have occurred
which would have a Material Adverse Effect on Alliance. The Company shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of Alliance to the foregoing effect.

7.3.6 Third Party Consents. All third party consents shall have been
received which may be required to avoid the breach of any material
agreements to which Alliance or any Alliance Subsidiary is a party,
including consents of lessors, in order to consummate the Merger and the
transactions contemplated hereby.

7.3.7 Gaming Regulatory Approval. All licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals required to be
obtained from, and all filings, notices or declarations required to be made
with, the Gaming Regulatory Authorities set forth on the Alliance
Disclosure Schedule in order to permit Alliance or any Alliance Subsidiary
to conduct its business in the jurisdictions regulated by such Gaming
Regulatory Authorities after the Effective time in the same manner as
conducted by it prior to the Effective Time shall have been obtained or
made.

8. TERMINATION; EFFECT OF TERMINATION.

8.1 Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transaction contemplated hereby may be terminated at
any time prior to the Effective Time by prompt notice given in accordance with
Section 9.3 (provided that no termination in connection with which payments
are due under Section 9.6 shall be effective until such payments have been
made):

8.1.1 by the mutual written consent of Alliance and the Company (with the
approval of their respective Boards of Directors);

8.1.2 by Alliance (with the approval of its Board of Directors) or the
Company (with the approval of its Board of Directors) if: (i) any
Governmental Entity whose approval is required for consummation of the
Merger has denied approval of the Merger and such denial has become final
and nonappealable; or (ii) the Effective Time shall not have occurred at or
before 11:59 p.m. New York time on May 3, 1996; provided, however, that the
right to terminate this Agreement under this Section 8.1.2 shall not be
available to any party whose failure to fulfill any of its obligations
under this Agreement has been the cause of or resulted in the occurrence of
any of the events in clauses (i) or (ii) above;

8.1.3 by Alliance (with the approval of its Board of Directors), by
giving written notice of such termination to the Company, if (i) there has
been a material breach of any material agreement of the Company herein,
such that in the reasonable opinion of Alliance, the condition to closing
in Section 7.2.2

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<PAGE>

could not be expected to be satisfied by the termination date contemplated
by Section 8.1.2 hereof, (ii) there has been a material breach of any
material representation or warranty of the Company herein, such that in the
reasonable opinion of Alliance, the condition to closing in Section 7.2.1
could not be expected to be satisfied by the termination date contemplated
by Section 8.1.2 hereof, or (iii) the Alliance Stockholders do not approve
and adopt this Agreement at the Meeting; or

8.1.4 by the Company (with the approval of its Board of Directors), by
giving written notice of such termination to Alliance, if (i) there has
been a material breach of any material agreement of Alliance herein, such
that in the reasonable opinion of the Company, the condition to closing in
Section 7.3.2 could not be expected to be satisfied by the termination date
contemplated by Section 8.1.2 hereof, (ii) there has been a material breach
of any material representation or warranty of Alliance herein, such that in
the reasonable opinion of the Company, the condition to closing in Section
7.3.1 could not be expected to be satisfied by the termination date
contemplated by Section 8.1.2 hereof, (iii) the Company's Stockholders do
not approve and adopt this Agreement at the Meeting, (iv) the Board of
Directors of the Company fails to make, withdraws, or modifies or changes
the recommendation referred to in Section 6.2 based on its good faith
determination, after consultation with counsel, that making such
recommendation, or the failure to withdraw, modify or change such
recommendation, could reasonably be deemed a breach of its fiduciary duties
under applicable law, (v) the Board of Directors of the Company recommends
to the Company Stockholders an Alternative Proposal that the Board of
Directors of the Company determines in good faith, after consultation with
its financial advisor, is likely to be more favorable, from a financial
point of view, to the Company Stockholders than the Merger or (vi) prior to
the Effective Time, Alliance engages in any merger, acquisition,
disposition or similar transaction with a third party which transaction
requires the approval of Alliance Stockholders.

8.2 Certain Effects of Termination. In the event of the termination of this
Agreement as provided in Section 8.1 hereof:

8.2.1 Except as provided in Sections 8.2.2, 8.2.3 and 9.6 hereof, this
Agreement shall forthwith become void, there shall be no liability on the
part of Alliance, BAC or the Company or any of their respective affiliates,
officers or directors and all rights and obligations of any party hereto
shall cease; provided, however, that nothing herein shall relieve any party
from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement, prior to
such termination; and

8.2.2 Each party, if so requested by the other party, will return
promptly every document furnished to it by or on behalf of the other party
in connection with the transaction contemplated hereby, whether so obtained
before or after the execution of this Agreement, and any copies thereof
(except for copies of documents publicly available) which may have been
made, and will use reasonable efforts to cause its representatives and any
representatives of financial institutions and investors and others to whom
such documents were furnished promptly to return such documents and any
copies thereof any of them may have made.

8.2.3 If this Agreement is terminated (a) by the Company pursuant to
clauses (i), (ii) or (vi) of Section 8.1.4 or by Alliance pursuant to
clause (iii) of Section 8.1.3, (b) by either party pursuant to clause (ii)
of Section 8.1.2 (other than as a result of the failure to satisfy Section
7.2.11 or 7.3.7) or (c) by Alliance pursuant to clauses (i) (but excluding
any such termination based upon the Company's breaches of Sections 5.1,
6.1, 6.2 or 6.4 hereof which breaches have a material adverse effect on the
likelihood that the Merger will be consummated or the value of the Company
to Alliance and which breaches occurred after January 19, 1996, or prior to
such date if Alliance had no actual knowledge thereof as of such date) or
(ii) (but excluding any such termination as a result of knowing breaches of
representations or warranties which breaches have a material adverse effect
on the likelihood that the Merger will be consummated or the value of the
Company to Alliance and which breaches occurred after January 19, 1996, or
prior to such date if Alliance had no actual knowledge thereof as of such
date) of Section 8.1.3, then, (i) in the case of a termination referred to
in clauses (a) or (b) of this Section 8.2.3, for a period of one year (or
in the case of

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termination pursuant to clause (ii) of Section 8.1.2 where the failure of
the Effective Time to occur results primarily from a failure to obtain
financing in accordance with Section 7.1.6 primarily attributable to the
Company other than as a result of its breach of Section 6.1.4, six months
(but in the case of a breach of Section 6.1.4 this Section 8.2.3 shall not
apply) after such termination and (ii) in the case of a termination
referred to in clause (c) of this Section 8.2.3, for a period of six months
after such termination, neither Alliance nor any of its affiliates or
associates (as such terms are defined in Rule 12b-2 under the Exchange Act)
will, nor will they assist or encourage others to, directly or indirectly,
(i) acquire or agree, offer, seek or propose to acquire beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of the Company
or any of its assets or businesses, any securities issued by it or any
options or rights to acquire such ownership, or (ii) seek or propose to
influence or control the management or policies of the Company or enter
into any discussions, negotiations, arrangements or understandings with any
person with respect to any of the foregoing (but nothing herein shall limit
Alliance's discretion with respect to the voting of its own stock);
provided, that these limitations shall not apply if any of the events
referred to in clauses (i) or (iii) of Section 9.6.3 shall occur, and
provided further that the Company will not enter into any agreement of the
type referred to in clause (ii) of Section 9.6.3 until 90 days after giving
Alliance notice thereof, during which period the Company shall give
Alliance the opportunity to enter into an agreement with the Company on the
terms described in such notice (provided that if the consideration payable
thereunder is other than cash, Alliance shall be permitted to pay any
consideration of equal value as determined in good faith by an investment
banker chosen by the parties, or if they are unable to agree, by a third
investment banker chosen by an investment banker appointed by each of the
Company and Alliance). Notwithstanding anything to the contrary contained
in this Section 8.2.3, in the event that, during any period following the
termination of this Agreement in which Alliance and its affiliates are
subject to any of the restrictions referred to in this Section 8.2.3, the
Company enters into an agreement concerning, or the Board of Directors of
the Company recommends to the Company Stockholders, an Alternative Proposal
pursuant to which shares constituting a majority of the Company Common will
be exchanged or purchased for consideration having a fair market value per
share less than $11.70, then any such restrictions to which Alliance and
its affiliates are subject shall immediately terminate.

This Section 8.2 shall survive any termination of this Agreement.

9. MISCELLANEOUS.

9.1 Effectiveness of Representations, Warranties and Agreements.

9.1.1 Except as set forth in Section 9.1.2, the representations, warranties
and agreements of each party hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any other
party hereto, any person controlling any such party or any of their officers
or directors, whether prior to or after the execution of this Agreement.

9.1.2 The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article 8 hereof; except that the agreements set forth in Articles
1, 2 and 9 and Section 6.3 hereof shall survive the Effective Time and those
set forth in Sections 6.3 and 8.2 and Article 9 hereof shall survive
termination.

9.2 Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof. The representations,
warranties, covenants and agreements set forth in this Agreement and in any
financial statements, schedules or exhibits delivered pursuant hereto
constitute all the representations, warranties, covenants and agreements of
the parties hereto and upon which the parties have relied and except as may be
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.

9.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be deemed to have been duly given or made

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for all purposes if sent by certified or registered mail, return receipt
requested and postage prepaid, hand delivered, overnight delivery service, or
sent by telephone facsimile as follows:

If to Alliance or BAC, at:

Alliance Gaming Corporation
4380 Boulder Highway
Las Vegas, Nevada 89121
Facsimile: (702) 435-7788
Attention: Steve Greathouse, Chairman, President and
Chief Executive Officer

With a copy to:

Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile: (212) 530-5219
Attention: Lawrence Lederman, Esq.

If to the Company, at:

Bally Gaming International, Inc.
6601 South Bermuda Road
Las Vegas, Nevada 89119
Facsimile: (702) 896-7990
Attention: Richard Gillman, Chief Executive Officer

With a copy to:

Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022-9998
Facsimile: (212) 758-9526
Attention: Martin Nussbaum, Esq.

or at such other address as any party may specify by notice given to other
party in accordance with this Section. The date of giving of any such notice
shall be three days following the posting of the mail, the date of hand
delivery, the business day following delivery to an overnight delivery service
or the date sent by telephone facsimile.

9.4 No Waiver. No waiver of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver in respect of any subsequent breach or
default, either of similar or different nature, unless expressly so stated in
writing.

9.5 Governing Law. Except to the extent that Delaware Law is mandatorily
applicable to the Merger and the rights of the Company Stockholders, this
Agreement shall be governed, interpreted and construed in accordance with the
laws of the State of New York applicable to contracts to be performed entirely
within that State. Should any clause, section or part of this Agreement be
held or declared to be void or illegal for any reason, all other clauses,
sections or parts of this Agreement which can be effected without such illegal
clause, section or part shall nevertheless continue in full force and effect.

9.6 Expenses, Transfer Taxes; Certain Payments.

9.6.1 Each party hereto shall bear all fees and expenses incurred by such
party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, financial advisors', attorneys', accountants' and other
professional fees and expenses, except that (i) the filing fee in connection
with

I-26
<PAGE>

the filing of the Registration Statement or the Proxy Statement-Prospectus
with the SEC and (ii) the expenses incurred in connection with the printing
and mailing of the Registration Statement and the Proxy Statement- Prospectus.

9.6.2 So long as Alliance shall have not breached its obligations hereunder,
if this Agreement is terminated by the Company pursuant to clauses (iv) or (v)
of Section 8.1.4, within two business days after such termination, the Company
shall pay Alliance a fee of Two Million Eight Hundred Thousand ($2,800,000)
Dollars, which amount shall be payable by wire transfer of same day funds.

9.6.3 So long as Alliance shall not have breached its obligations hereunder,
if this Agreement is terminated by the Company pursuant to clause (iii) of
Section 8.1.4 hereof and if any of the following shall have occurred or occur
within six months after such termination:

(i) any person (other than Alliance or any Alliance Subsidiary) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) a tender offer or exchange offer to purchase any shares of Company
Common such that, upon consummation of such offer, such person would own or
control 35% or more of the then outstanding Company Common and the Board of
Directors of the Company, within ten business days after such tender offer
or exchange offer is so commenced, either fails to recommend against
acceptance of such tender offer or exchange offer by the Company
Stockholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by the Company Stockholders; provided,
however, that with respect to a tender offer or exchange offer first
commenced within six months after termination of this Agreement by the
Company the fee provided for in this Section 9.6.3 shall not be payable
unless such tender offer or exchange offer is consummated, whether or not
such consummation is within such six-month period.

(ii) the Company or any Company Subsidiary shall have authorized,
recommend, proposed or publicly announced an intention to authorize,
recommend or propose, or entered into, an agreement with any person (other
than Alliance or any Alliance Subsidiary) to (A) effect a merger,
consolidation or similar transaction involving the Company or any Company
Subsidiary, (B) sell, lease or otherwise dispose of assets of the Company
or any Company Subsidiary representing 35% or more of the consolidated
assets of the Company and the Company Subsidiaries or (C) issue, sell or
otherwise dispose of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 35% or more of the voting power of the Company or any Company
Subsidiary; or

(iii) any person (other than Alliance, any Alliance Subsidiary, the
Company or any Company Subsidiary in a fiduciary capacity) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act) or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 35% or more of the then outstanding Company Common;

then, within two business days after such occurrence, the Company shall pay
Alliance a fee of Two Million Eight Hundred Thousand ($2,800,000) Dollars,
which amount shall be payable by wire transfer of same day funds.

9.6.4 Following any termination of this Agreement other than a termination
pursuant to clauses (i) or (ii) of Section 8.1.4, clause (iii) of section
8.1.3 or clause (ii) of Section 8.1.2 when the failure of the Effective Time
to occur results primarily from the non-occurrence of the condition
established in Section 7.1.6 and such non-occurrence is not attributable
primarily to the Company, within two business days after such termination and
thereafter from time to time as requested by Alliance, the Company shall
reimburse Alliance for its out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this Agreement and its prior
tender offer and consent solicitation with respect to the Company, including
without limitation fees and disbursements of counsel, financial advisors and
accountants, amounts previously paid under Sections 6.3 and 9.6.7 and
financing commitment fees and expenses, provided that such reimbursement shall
not exceed Two Million Dollars ($2,000,000) unless this Agreement is
terminated pursuant to clauses (iii), (iv) or (v) of Section

I-27
<PAGE>

8.1.4 and, in the case of termination pursuant to such clauses (iii) or (iv),
one of the events specified in such clauses (i), (ii) or (iii) of Section
9.6.3 occurs during the six-month period specified therein. If the Company
fails to promptly pay any amount due pursuant to Sections 9.6.2, 9.6.3 or
9.6.4 and, in order to obtain such payment, Alliance commences a suit which
results in a judgment against the Company for all or a substantial portion of
the amounts due thereunder, the Company shall pay to Alliance its costs and
expenses (including reasonable attorneys' fees) in connection with such suit.

9.6.5 So long as the Company shall not have breached its obligations
hereunder, if this Agreement is terminated by Alliance pursuant to clause
(iii) of Section 8.1.3 hereof and prior to such termination any person shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire beneficial ownership of, or
any "group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, more than 35% of the then outstanding Alliance Common, within
two business days after such termination, Alliance shall pay the Company a fee
of Two Million Eight Hundred Thousand ($2,800,000) Dollars, which amount shall
be payable by wire transfer of same day funds.

9.6.6 So long as the Company shall not have breached its obligations
hereunder, if this Agreement is terminated by Alliance pursuant to clause
(iii) of Section 8.1.3 hereof, within two business days after such termination
and thereafter from time to time as requested by the Company, Alliance shall
reimburse the Company for its out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this Agreement and the
Alliance tender offer, including without limitation fees and disbursements of
counsel, financial advisors and accountants. If Alliance fails to promptly pay
any amount due pursuant to Sections 9.6.5 or 9.6.6 and, in order to obtain
such payment, the Company commences suit which results in a judgment against
Alliance for all or a substantial portion of the amounts due thereunder,
Alliance shall pay to the Company its costs and expense (including reasonable
attorneys' fees) in connection with such suit.

9.6.7 Alliance shall indemnify the Company against any amount (not in excess
of $4,800,000) paid by the Company pursuant to Sections 9.6.2, 9.6.3 or 9.6.4
of the WMS Agreement. In the event any claim or demand in respect of which the
Company might seek indemnity under this Section 9.6.7 is asserted against or
sought to be collected from the Company (a "Claim"), the Company shall
promptly notify Alliance. Alliance shall defend, at its sole cost and expense,
such Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by Alliance to a final conclusion or will
be settled at the discretion of Alliance. If Alliance fails to so defend, then
the Company will have the right to defend at the sole cost and expense of
Alliance, by all appropriate proceedings which will vigorously and diligently
be prosecuted by the Company to a final conclusion or will be settled at the
Company's discretion with the consent of Alliance (not to be unreasonably
withheld). If it elects to defend, Alliance will have full control of such
defense and proceedings, including any settlement thereof; provided, however,
that if requested by Alliance, the Company will, at the sole cost and expense
of Alliance, cooperate with Alliance and its counsel in contesting any Claim
that Alliance elects to contest, or, if appropriate and related to the Claim
in question, in making any counterclaim against the person asserting the
Claim, or any cross-complaint against any person. If this Agreement is
terminated pursuant to clauses (iii), (iv) or (v) of Section 8.1.4 and (in the
case of termination pursuant to clauses (iii) or (iv) of Section 8.1.4) any of
the events referred to in clauses (i), (ii) or (iii) of Section 9.6.3 occurs
during the six-month period specified therein, Alliance's obligations
hereunder shall cease and the Company shall promptly reimburse all payments
previously made by Alliance under this Section 9.6.7.

9.7 Assignment. This Agreement shall not be assigned by operation of law or
otherwise.

9.8 Binding Agreement. This Agreement shall be binding upon and inure solely
to the benefit of the parties hereto, and nothing in this Agreement, express
or implied (other than Section 6.3), is intended to confer third-party
beneficiary rights on any other person.

9.9 Headings. The headings or captions under sections of this Agreement are
for convenience and reference only and do not in any way modify, interpret or
construe the intent of the parties or affect any of the provisions of this
Agreement.

I-28
<PAGE>

9.10 Counterparts. This Agreement may be executed in one or more
counterparts each of which when taken together shall constitute one agreement.

9.11 Confidentiality. Each party will hold, and will use its best efforts to
cause its representatives and prospective financing parties to which such
documents and information are furnished to hold, in strict confidence, unless
(i) compelled to disclose by judicial or administrative process or by other
requirements of applicable laws of governmental or regulatory authorities
(including, without limitation, in connection with obtaining the necessary
approvals of this Agreement or the transactions contemplated hereby of
governmental or regulatory authorities), or (ii) disclosed in an action or
proceeding brought by a party hereto in pursuit of its rights or in the
exercise of its remedies hereunder, all documents and information concerning
the other party and its subsidiaries furnished to it by such other party or
its representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information
can be shown to have been (x) previously known by the Company or Alliance, as
the case may be, or its representatives or prospective financing parties, (y)
in the public domain (either prior to or after the furnishing of such
documents or information hereunder) through no fault of the Company or
Alliance, as the case may be, and its representatives and prospective
financing parties or (z) later acquired by the Company or Alliance, as the
case may be, or its representatives or prospective financing parties from
another source if the recipient is not aware that such source is under an
obligation to the Company or Alliance, as the case may be, to keep such
documents and information confidential.

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed on the date and year first above written.

Alliance Gaming Corporation

/s/ Steve Greathouse
By:
Steve Greathouse,
Chairman, President and Chief
Executive Officer

BGII Acquisition Corp.

/s/ Steve Greathouse
By:
Steve Greathouse,
President

Bally Gaming International, Inc.

/s/ Richard Gillman
By:
Richard Gillman,
Chairman of the Board and Chief
Executive Officer

I-29
<PAGE>

ANNEX II

[LOGO]

January 19, 1996

Board of Directors

Bally Gaming International, Inc.

6601 South Bermuda Road

Las Vegas, NV 89119

Members of the Board:

You have engaged us pursuant to the engagement letter, dated as of February
2, 1995, and as amended through the date hereof, between Bally Gaming
International, Inc. (the "Company") and Ladenburg, Thalmann & Co. Inc.
("Ladenburg"). Reference is hereby made to (i) the Agreement and Plan of
Merger, dated as of October 18, 1995 (the "Alliance Merger Agreement") among
Alliance Gaming Corporation ("Alliance"), BGII Acquisition Corp. ("BAC") and
the Company, and (ii) a draft dated January 19, 1996 of the Amendment to the
Agreement and Plan of Merger (the "Amendment to the Alliance Merger
Agreement") among Alliance, BAC and the Company.

Specifically, you have requested our opinion as to the fairness, from a
financial point of view, to the holders of the common stock of the Company,
par value $.01 per share (the "Company Common") (such holders, the
"Stockholders") of the consideration to be received by the Stockholders
pursuant to the terms and subject to the conditions set forth in the Amendment
to the Alliance Merger Agreement. As more fully described in the Alliance
Merger Agreement and the Amendment to the Alliance Merger Agreement, (i) BAC
will be merged with and into the Company, and (ii) each outstanding share of
the Company Common, other than shares of Company Common which are held by the
Company, Alliance or any of their respective subsidiaries will, subject to the
terms of the Amendment to the Alliance Merger Agreement, be converted into the
right to receive the following: (i) an amount of cash determined by dividing
$76,700,000 by the number of outstanding shares of Company Common (other than
those referred to on Section 2.1.1) (the "Cash Consideration"), (ii) a
fraction of a share of Alliance Common Stock, par value $.10 per share
("Alliance Common"), determined by dividing (x) $0.30, by (y) the Alliance
Average Trading Price (as defined in the Amendment to the Alliance Merger
Agreement) (the "Common Stock Consideration"), and rounding the result three
decimal places, and (iii) that number of shares (or fractions thereof) of the
15% Non-Voting Junior Special Stock, Series B, $0.10 par value, of Alliance
having other terms specified in the form of Certificate of Designations,
Preferences and Relative Participating, Optional and Other Rights of Special
Stock and Qualifications, Limitations and Restrictions Thereof attached as
Annex I of the Amendment to the Alliance Merger Agreement or having other
terms not less favorable to the holders thereof than those in Annex I (the
"Series B Special Stock") equal to $11.40 less the cash consideration, such
shares to be valued at the offering price at which shares of Series B Special
Stock are issued pursuant to a registered public offering in satisfaction of
the condition contained in Section 7.1.6 (the "Special Stock Consideration",
and together with the Common Stock Consideration, the "Share Consideration",
and the Share Consideration with the Cash Consideration, the "Merger
Consideration"), with fractional shares of such Series B Special Stock rounded
to the nearest 1/1000 share.
<PAGE>

In arriving at our opinion, we among other things (i) reviewed the Alliance
Merger Agreement; (ii) reviewed the Amendment to the Alliance Merger
Agreement; (iii) held discussions with certain senior officers, directors and
other representatives and advisors of the Company and certain senior officers
and other representatives and advisors of Alliance concerning the businesses,
operations and prospects of the Company and Alliance; (iv) examined certain
publicly available business and financial information relating to the Company
and Alliance as well as certain financial forecasts and other data for the
Company and Alliance which were provided to us by the respective managements
of the Company and Alliance, including information relating to certain
strategic implications and operational benefits anticipated from transactions
contemplated by the Alliance Merger Agreement (the "Alliance Merger"); (v)
reviewed, among other things, current and historical market prices of the
Company Common and the Alliance Common, the respective companies' historical
and projected earnings, and the capitalization, cash position and financial
condition of the Company and Alliance; (vi) analyzed certain financial, stock
market and other publicly available information relating to the businesses of
other companies whose operations we considered comparable to those of the
Company and Alliance; (vii) evaluated the potential pro forma financial impact
of the Alliance Merger on Alliance and the relative contribution of the
Company and Alliance to selected pro forma financial data of the combined
company; and (viii) conducted such other examinations and considered such
other financial, economic and market criteria as we deemed necessary to arrive
at our opinion.

In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
publicly available information furnished to or otherwise reviewed by or
discussed with us. With respect to financial forecasts and other information
provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of the Company and Alliance that such forecasts and
other information were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
the Company and Alliance as to the future financial performance of the Company
and Alliance and the strategic implications and operational benefits
anticipated from the Alliance Merger. We also assumed, with your consent, that
the Alliance Merger will be treated as a taxable transaction for federal
income tax purposes. Our opinion, as set forth herein, relates to the relative
values of the Company and Alliance. We are not expressing any opinion as to
what the value of the Alliance Common actually will be when issued to the
Stockholders pursuant to the Alliance Merger or the price at which the
Alliance Common will trade subsequent to the Alliance Merger. We have not made
or been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or Alliance nor have we
made a complete physical inspection of all of the properties or assets of the
Company or Alliance. We were not requested to, and did not, solicit third
party indications of interest in acquiring all of the Company, and we were not
asked to consider, and our opinion does not address, the relative merits of
the Alliance Merger as compared to any alternative business strategies that
might exist for the Company or the effect of any other transaction in which
the Company might engage. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us, as of the date hereof.

Ladenburg has been engaged to render financial advisory services to the
Company in connection with the Alliance Merger and will receive a fee for our
services, a significant portion of which is contingent upon the consummation
of the Alliance Merger. We also will receive a fee upon the delivery of this
opinion. In the ordinary course of our business, we may actively trade the
securities of the Company and Alliance for our own account or for the account
of our customers and, accordingly, may at any time hold a long or short
position in such securities. We have provided investment banking services to
the Company in the past, and have received compensation for the rendering of
such services.

Our opinion may not be published or otherwise used or referred to, nor shall
any public reference to Ladenburg be made, other than in connection with and
as an exhibit to the Registration Statement on Form S-4, and all amendments
thereto, to be filed by the Company with the Securities and Exchange
Commission in connection with the Alliance merger, without our prior written
consent.

II-2
<PAGE>

Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Merger Consideration is
fair, from a financial point of view, to the Stockholders.

Very truly yours,

Ladenburg, Thalmann & Co. Inc.

II-3
<PAGE>

ANNEX III

AMENDMENT NO. 3 TO THE
1991 INCENTIVE PLAN
OF
BALLY GAMING INTERNATIONAL, INC.

The 1991 Incentive Plan of Bally Gaming International, Inc., as amended by
Amendments No. 1 and 2 thereto (the "Plan"), is hereby amended as follows:

1. Section 17 of the Plan is hereby amended and restated in its entirety to
read as follows:

17. Termination of Awards Upon Change in Control.

(a) Subject to subsection (b) below, in the case of a Change in Control,
each Award granted under the Plan shall terminate ninety (90) days after
the occurrence of such Change in Control, but, in the event of any such
termination:

(i) the Award holder shall have the right, commencing at least five
(5) days prior to such Change in Control and subject to any other
limitation on the exercise of such Award in effect on the date of
exercise, (i) to immediately exercise any Options not in tandem with
SARs in full, without regard to any vesting limitations, to the extent
they shall not have been theretofore exercised, and (ii) to exercise,
at any time after the sixth month anniversary of the date of grant of
the SAR (but subject to the restrictions of paragraph (e)(3)(iii) of
Rule 16b-3), any SARs or Options in tandem with SARs in full, without
regard to any vesting limitations, to the extent they shall not have
been theretofore exercised, provided, however, that no SAR or Option in
tandem with an SAR shall terminate prior to the end of the first Window
Period following the occurrence of such Change in Control; and

(ii) all restrictions on Restricted Stock Awards shall immediately
lapse and certificates for the affected Shares and the cash payment
required by Section 12.2 of the Plan (if any payment is due) shall be
appropriately distributed.

Subject to Subsection (b) below, each Option, SAR and Option granted in
tandem with an SAR outstanding at the date of the Change in Control, shall
terminate, in all events, no later than one hundred eighty (180) days after
the occurrence of such Change in Control. The foregoing adjustment and the
manner of application of the foregoing provisions shall be determined by
the Committee in its sole discretion.

(b) Notwithstanding anything to the contrary in this Section 17 or any
other provision of the Plan or award granted hereunder, in the case of a
Change in Control which arises as a result of the stockholder approval of
Agreement and Plan of Merger among Alliance Gaming Corporation
("Alliance"), BGII Acquisition Corp. and the Company, dated as of October
18, 1995, as amended (the "Merger Agreement"), the following equitable
adjustments shall be made: (i) each Award granted under the Plan shall vest
upon the Effective Time (as defined in the Merger Agreement) and remain
exercisable until the earlier of (A) the original full exercise period, (B)
three years from the Effective Time (as defined in the Merger Agreement) or
(C) except with respect to Messrs. Richard Gillman, Hans Kloss and Neil
Jenkins, in the event the option holder's employment is terminated for
cause or such employee voluntarily terminates his employment, on the date
of such termination and (ii) each outstanding option shall be exercisable,
at the exercise price of such option, for the Merger Consideration (as
defined in the Merger Agreement) per Share subject to the option or in the
event the holder of such option (other than Messrs. Gillman, Kloss and
Jenkins) who is an employee of BGII immediately prior to the Effective Time
has delivered proper notice of election to the Company prior to the
Effective Time, each option held by such holder shall be exercisable for
that number of shares of Alliance Common Stock (as defined in the Merger
Agreement) equal to the number of Shares subject to the option at an
exercise price equal to the Alliance Average Trading Price (as defined in
the Merger Agreement). Notice of an election referred to in the preceding
sentence shall be deemed proper only if such notice complies with the
requirements regarding form and timeliness of delivery as established by
the Committee.

III-1
<PAGE>

ANNEX IV

AMENDMENT NO. 3 TO THE
1991 NON-EMPLOYEE DIRECTORS' OPTION PLAN
OF
BALLY GAMING INTERNATIONAL, INC.

The 1991 Non-Employee Directors' Option Plan of Bally Gaming International,
Inc., as amended by Amendments No. 1 and 2 thereto (the "Plan"), is hereby
amended as follows:

1. Section 8 of the Plan is hereby amended and restated in its entirety to
read as follows:

8. Early Termination. An Award granted to a Participant under this Plan
shall terminate when the Participant ceases to be a Director, provided
however that the Award may be exercised by the Participant (to the extent
that he or she shall have been entitled to do so at the time he or she
ceased to be a Director) at any time within six (6) months after such
Participant ceased to be a Director, but not beyond the original term
thereof. The foregoing provision of this Section 8 shall not apply in the
event that the Participant ceases to be a Director upon or after the
Effective Time (as defined in the Agreement and Plan of Merger among
Alliance Gaming Corporation, BGII Acquisition Corp. and the Company, dated
as of October 18, 1995, as amended (the "Merger Agreement")).

2. Section 13 of the Plan is hereby amended and restated in its entirety to
read as follows:

13. Termination of Awards Upon Change in Control.

(a) Subject to subsection (b) below, notwithstanding anything to the
contrary, in the case of a Change in Control, each Award granted under
the Plan shall terminate ninety (90) days after the occurrence of such
Change in Control, but, in the event of any such termination the Award
holder shall have the right, commencing at least five (5) days prior to
such Change in Control and subject to any other limitation on the
exercise of such Award in effect on the date of exercise to immediately
exercise any Options in full, without regard to any vesting
limitations, to the extent they shall not have been theretofore
exercised; and

(b) Notwithstanding anything to the contrary in this Section 13, in
the case of a Change in Control which arises as a result of stockholder
approval of the Merger Agreement, each award granted under the Plan
shall vest upon the Effective Time and remain exercisable for the
lesser of (i) the original full exercise period or (ii) three years
from the Effective Time and each option subject to such award shall be
exercisable for the Merger Consideration (as defined in the Merger
Agreement) per Share subject to such option.

IV-1
<PAGE>

ANNEX V

BALLY GAMING INTERNATIONAL, INC.

1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS,
AS AMENDED

1. NAME.

The name of this plan is the Bally Gaming International, Inc. 1994 Stock
Option Plan for Non-Employee Directors.

2. PURPOSE.

The purpose of the Plan is to enable the Company to secure non-employee
persons of requisite experience and ability to serve on the Board, to motivate
Non-Employee Directors to exert their best efforts on behalf of the Company,
thus enhancing the value of the Company for the benefit of the Company's
stockholders.

3. DEFINITIONS.

For the purposes of the Plan, the following terms shall be defined as set
forth below:

(a) "Award" means a grant of options to a Participant pursuant to Section 8
of the Plan.

(b) "Award Agreement" means the written agreement between the Company and
the Participant that contains the terms and conditions pertaining to the grant
of options.

(d) "Change in Control" means a change in control of the Company of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act (as in effect on the date
the Plan is adopted by the Board), whether or not the Company is then subject
to such reporting requirement; provided, that, without limitation, such a
Change in Control shall be deemed to have occurred if:

(i) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) other than Bally is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing forty percent (40%) or more of the combined
voting power of the Company's then outstanding securities; or

(ii) if there shall cease to be a majority of the Board comprised of
Continuing Directors; or

(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least eighty percent (80%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or

(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets.

Notwithstanding anything in this Section 2(d) to the contrary, an event or
occurrence (or a series of events or occurrences) which would otherwise
constitute a Change in Control under the foregoing shall not constitute a
Change in Control for purposes of this Plan if the Board, by a majority vote,
determines that a Change in Control does not result therefrom; but only if
Continuing Directors constitute a majority of the directors voting in favor of
such determination. Further, an event or occurrence (or a series of events or
occurrences) which would not otherwise constitute a Change in Control under
the foregoing shall be deemed to constitute a Change in Control

V-1
<PAGE>

for purposes of this Plan if the Board, by majority vote, determines that a
Change in Control does result therefrom; but only if Continuing Directors
constitute a majority of the directors voting in favor of such determination.
A determination by directors under the provisions of this paragraph shall be
made solely for purposes of this Plan and shall not directly or indirectly
affect any determination or analysis of whether a Change in Control results
for any other purposes. Any determination made with respect to whether a
Change in Control results for purposes of any other plan or agreement of the
Company shall have no effect for purposes of this Plan.

(e) "Chairman" means the individual appointed by the Committee to serve as
the chairman of the Committee.

(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

(g) "Committee" means the Committee established pursuant to Section 4 of the
Plan.

(h) "Common Stock" means the $.01 par value Common Stock of the Company or
any security of the Company identified by the Committee as having been issued
in substitution or exchange therefor or in lieu thereof.

(i) "Company" means Bally Gaming International, Inc.

(j) "Continuing Directors" means individuals who at the beginning of any
period of two (2) consecutive years constitute the Board and any new
director(s) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds ( 2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
approved.

(k) "Directors" means the members of the Board.

(l) "Effective Date" means the date on which the Plan is approved by the
Board, as provided in Section 5(a) hereof.

(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.

(n) "Fair Market Value" means, with respect to the Shares, the closing price
for the Shares on the over-the-counter market on the last day prior to the
date on which the value is to be determined as reported by the National
Association of Securities Dealers' Automatic Quotation System ("NASDAQ"), or
if the Shares are traded on a national securities exchange or quoted on the
NASDAQ National Market System, the closing price on the last business day
prior to the date on which the value is to be determined (or if there was no
trading reported, the next preceding day on which there was trading reported).

(o) "Non-Employee Director" means an individual who: (i) is now, or
hereafter becomes, a member of the Board and (ii) is not an employee of the
Company on the date of the grant of an option.

(p) "NSO" means an option that does not meet the requirements of Section
422(b) of the Code, which provides the right to purchase a Share at a price
and for a Term fixed in accordance with the Plan, and subject to such other
limitations and restrictions imposed by the Plan.

(q) "Participant" means a Non-Employee Director who has been granted an NSO
under the Plan (or in event of the death or disability of a Non-Employee
Director, the estate or personal representative of the Non-Employee Director).

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<PAGE>

(r) "Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.

(s) "Plan" means this Bally Gaming International, Inc. 1994 Stock Option
Plan for Non-Employee Directors.

(t) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Exchange Act, or any successor or replacement rule or
regulation thereto. Accordingly, all references in the Plan to a specific
paragraph of Rule 16b-3 shall be deemed to be references to such paragraph or
to the applicable successor or replacement paragraph thereto.

(u) "Share" or "Shares" means a share or shares of Common Stock, adjusted in
accordance with Section 9(b) hereof, as applicable.

(v) "Term" means the period during which a particular Award may be
exercised.

4. ADMINISTRATION.

(a) Generally.

The Plan shall be administered by the Committee. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any NSO shall be within
the sole and absolute discretion of the Committee, may be made at any time,
and shall be final, conclusive and binding upon the Company, any Participant,
any holder or beneficiary of any NSO and any stockholder of the Company.

(b) Composition of the Committee.

The members of the Committee shall be appointed by the Board and shall
consist of no less than two members of the Board who are "disinterested
persons" as such term is used in Rule 16b-3. The Committee may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board.

The Committee shall hold meetings at such times and places as it may
determine. The Committee shall appoint one of its members as Chairman. Acts
approved by a majority of the members of the Committee present at a meeting at
which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.

(d) Powers of the Committee.

Subject to the terms of the Plan and applicable law, the Committee shall
have full power and authority to administer the Plan in its sole and absolute
discretion. To this end, the Committee is authorized to construe and interpret
the Plan and to make all other determinations necessary or advisable for the
administration of the Plan. Subject to the foregoing, any determination,
decision or action of the Committee in connection with the construction,
interpretation, administration, or application of the Plan shall be final,
conclusive and binding upon all Participants and any person claiming under or
through a Participant.

(e) Reliance and Indemnification of Committee Members.

The Committee may employ attorneys, consultants, accounts or other persons
and the Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
No member of the Committee or Committee shall be personally liable for any
action, determination or interpretation taken or made in good faith by the
Committee or the Committee with respect to the Plan, or NSO made thereunder,
and all members of the Committee and the Committee shall be fully indemnified
and protected by the Company in respect of any such action, determination or
interpretation.

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<PAGE>

(f) NSO Accounts.

The Committee shall maintain or cause to be maintained a journal or other
record in which a separate account for each Participant shall be established.
Whenever NSOs are granted to be exercised by a Participant, the Participant's
account shall reflect such grant or exercise and the Participant's account
shall be appropriately adjusted in the event of any change in capitalization
or transaction pursuant to Section 9 hereof.

5. TERM OF THE PLAN.

(a) Effective Date of the Plan.

The Plan was adopted by the Board on April 25, 1994 which is the Effective
Date of the Plan.

(b) Term of the Plan.

No NSO shall be granted pursuant to the Plan on or after the tenth (10th)
anniversary of the Effective Date, but NSOs theretofore granted may be
extended beyond that date and the Committee shall have the authority to amend,
alter, adjust, suspend, discontinue, or terminate any such NSO or to waive any
conditions or rights under any such NSO, and to amend the Plan, beyond that
date.

6. SHARES SUBJECT TO THE PLAN.

(a) Limitation on Number of Shares.

The maximum aggregate number of Shares which may be subject to NSOs granted
to Participants pursuant to the Plan shall be 250,000. The limitation on the
number of Shares which may be subject to NSOs under the Plan shall be subject
to adjustment as provided in Section 9 hereof. If any NSO granted under the
Plan expires or is terminated for any reason without having been exercised in
full, the Shares allocable to the unexercised portion of such NSO shall again
become available for grant pursuant to the Plan. At all times during the term
of the Plan, the Company shall reserve and keep available for issuance such
number of Shares as the Company is obligated to issue upon the exercise of all
then outstanding NSOs.

(b) Accounting for NSOs.

For purposes of this Section 6, the number of Shares covered by an NSO, or
to which an NSO relates, shall be counted on the date of grant of such NSO
against the aggregate number of Shares available for granting NSOs under the
Plan. Any Shares that are delivered by the Company pursuant to any NSO, and
any NSOs that are granted by, or become obligations of, the Company, through
the assumption by the Company, or in substitution for, outstanding options
previously granted by an acquired company shall be counted against the Shares
available for granting NSOs under the Plan.

7. SOURCE OF SHARES ISSUED UNDER THE PLAN.

Common Stock issued under the Plan may consist, in whole or in part, of
authorized and unissued Shares or treasury Shares, as determined in the sole
and absolute discretion of the Committee. No fractional Shares shall be issued
under the Plan.

8. NON-QUALIFIED STOCK OPTIONS.

(a) Grant of NSOs.

(i) Each person who was a Non-Employee Director on the date of the Plan's
adoption shall automatically be granted NSOs to purchase twenty-five
thousand (25,000) shares of Common Stock, subject to all the provisions of
the Plan.

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<PAGE>

(ii) Each person who is either elected or appointed a Non-Employee
Director shall automatically be granted NSOs to purchase twenty-five
thousand (25,000) shares of Common Stock, on the date of their appointment
or election, subject to the provisions of the Plan.

(b) Exercise Price.

The price at which each Share covered by an NSO may be purchased pursuant to
this Plan shall be the Fair Market Value of a Share on the date of the NSO
grant.

All NSOs granted pursuant to the Plan shall be evidenced by an Award
Agreement, approved as to form by the Committee, which shall be subject to the
following express terms and conditions and to the other terms and conditions
specified in this Section 8, and to such other terms and conditions as shall
be determined by the Committee in its sole and absolute discretion which are
not inconsistent with the Plan:

(i) after one year from the date of the Award, it may be exercised as to
not more than one-third of the NSOs granted under the Award;

(ii) after two years from the date of the Award, it may be exercised as
to not more than an aggregate of two-thirds (2/3) of the NSOs granted under
the Award;

(iii) after three years from the date of the Award, it may be exercised
as to any part or all of the NSOs granted under the Award;

(iv) the failure of a NSO to vest for any reason whatsoever shall cause
the NSO to expire and be of no further force or effect;

(v) unless terminated earlier pursuant to Section 8(e) hereof, the term
of each NSO shall in no event be more than ten (10) years from the date of
the grant;

(vi) NSOs shall not be transferable by the Participant otherwise than by
will or by the laws of descent and distribution and shall be exercised
during the lifetime of the Participant only by the Participant; provided,
however, that if so determined by the Committee, a Participant, in the
manner established by the Committee, may designate a beneficiary or
beneficiaries to exercise the rights of the Participant, and to receive any
property distributable, with respect to any NSO, upon the death or
permanent disability of the Participant;

(vii) except as provided in clause (iv) above, no NSO or interest therein
may be transferred, assigned, pledged or hypothecated by the holder during
the holder's lifetime whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.

(d) Exercise.

(i) Notice of Exercise. A Participant entitled to exercise a NSO may do
so by delivery of a written notice to that effect specifying the number of
Shares with respect to which the NSO is being exercised. Except as provided
in Section 8(d)(ii) below, the notice shall be accompanied by payment in
full of the purchase price of any Shares to be purchased, which payment may
be made in cash or, with the Committee's approval (and subject to the
requirements of Rule 16b-3), in Shares valued at Fair Market Value at the
time of exercise or with the Committee's approval, a combination thereof.
No Shares shall be issued upon exercise of a NSO until full payment has
been made therefor. All notices, payments or requests provided for herein
shall be delivered to the Treasurer of the Company.

(ii) Cashless Exercise Procedures. The Company, in its sole discretion,
may establish procedures whereby a Participant, subject to the requirements
of Rule 16b-3, Regulation T, federal income tax laws, and other federal,
state and local tax and securities laws, can exercise an NSO or a portion
thereof without making a direct payment of the option price to the Company.
If the Company so elects to establish a cashless exercise program, the
Company shall determine, in its sole discretion, and from time to time,
such

V-5
<PAGE>

administrative procedures and policies as it deems appropriate and such
procedures and policies shall be binding on any Participant wishing to
utilize the cashless exercise program.

(e) Termination of NSOs.

NSOs granted under the Plan shall be subject to the following events of
termination:

(i) in the event a participant is removed from the Board, all unexercised
NSOs held by such Participant on the date of such removal (whether or not
vested) will expire immediately, provided that the foregoing provision of
this subsection (i) shall not apply if such Participant is removed from the
Board upon or after the Effective Time (as defined in the Agreement and
Plan of Merger among Alliance Gaming Corporation, BGII Acquisition Corp.
and the Company, dated as of October 18, 1995, as amended (the "Merger
Agreement")); and

(ii) in the event a Participant is no longer a member of the Board, other
than by reason of removal, such removal is due to the Participant being
unable to perform his duties for the Company because of a disability (as
defined by the Board) all unexercised NSOs held by such Participant at the
time the Participant is no longer a member of the Board shall terminate,
provided, however, that the Award may be exercised by the Participant (to
the extent that he or she shall have been entitled to do so at the time he
or she ceased to be a Director) at any time within six (6) months after
such Participant ceased to be a Director, but not beyond the original term
thereof, provided that the foregoing provision of this subsection (ii)
shall not apply if such Participant ceases to be a member of the Board, for
any reason, upon or after the Effective Time.

(f) Share Certificates.

All certificates for Shares delivered under the Plan pursuant to any NSO or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other restrictions of the Securities and Exchange Commission,
any stock exchange upon which such Shares or other securities are then listed,
any applicable federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.

In the event of changes in all of the outstanding Shares by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations, or exchanges of shares, separations, reorganizations or
liquidations or similar events or in the event of extraordinary cash or
noncash dividends being declared with respect to outstanding Shares or other
similar transactions, the number and class of Shares available under the Plan
in the aggregate, the number and class of Shares subject to Awards theretofore
granted, applicable purchase prices and all other applicable provisions,
shall, subject to the provisions of the Plan, be equitably adjusted by the
Committee, which adjustment may, but need not, include payment to the holder
of an NSO, in cash or in Shares, in an amount equal to the difference between
the then current Fair Market Value of the Shares subject to such Award, as
equitably determined by the Committee, and the option price or of such NSO, as
the case may be. The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional Share which might otherwise become subject to an Award.

10. TERMINATION OF AWARDS UPON CHANGE IN CONTROL.

(a) Notwithstanding anything to the contrary other than Section 10(b)
hereof, in the case of a Change in Control, each Award granted under the Plan
shall terminate ninety (90) days after the occurrence of such Change in
Control, but, in the event of any such termination the Award holder shall have
the right, commencing at least five (5) days prior to the Change in Control
and subject to any other limitation on the exercise of such Award in effect on
the date of exercise to immediately exercise any NSOs in full, without regard
to any vesting limitations, to the extent they shall not have been theretofore
exercised.

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<PAGE>

(b) Notwithstanding anything to the contrary in this Section 10 or any other
provision of the Plan or award granted hereunder, in the case of a Change in
Control which arises as a result of stockholder approval of the Merger
Agreement, the following equitable adjustments shall be made to provide that
each award granted under the Plan shall vest upon the Effective Time and
remain exercisable for the lesser of (i) the original full exercise period or
(ii) three years from the Effective Time and each option subject to such award
shall be exercisable for the Merger Consideration (as defined in the Merger
Agreement) per Share subject to such option.

11. AMENDMENT AND TERMINATION.

(a) Modifications to the Plan.

The Committee, insofar as permitted by law, may from time to time, with
respect to any Shares at the time not subject to NSOs, suspend, discontinue or
terminate the Plan or revise, alter or amend the Plan in any respect
whatsoever.

(b) Rights of Participant.

No amendment, suspension or termination of the Plan that would adversely
affect the right of any Participant with respect to a NSO previously granted
under the Plan will be effective without the written consent of the affected
Participant.

The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any NSO in the manner and to the event it shall
deem desirable to carry the Plan into effect.

12. MISCELLANEOUS.

(a) Stockholders' Rights.

No Participant and no beneficiary or other person claiming under or through
such Participant shall acquire any rights as a stockholder of the Company by
virtue of such Participant's having been granted a NSO under the Plan. No
Participant and no beneficiary or other person claiming under or through such
Participant will have any right, title or interest in or to any Shares
allocated or reserved under the Plan or subject to any NSO except as to
Shares, if any, that have been issued or transferred to such Participant. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date of exercise.

(b) Other Compensation Arrangements.

Nothing contained in the Plan shall prevent the Committee from adopting
other compensation arrangements for Non-Employee Directors, subject to
stockholder approval if such approval is required. Such other arrangements may
be either generally applicable or applicable only in specific cases.

Proceeds realized from the exercise of NSOs under the Plan constitute
general funds of the Company.

(d) Withholding.

The Company shall be authorized to withhold from any NSO granted or any
payment due or transfer made under any NSO or under the Plan the amount of
withholding taxes due in respect of a NSO, its exercise, or any payment or
transfer under such NSO or under the Plan and to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes. Upon the exercise of an NSO, the Participant receiving
Shares pursuant thereto may be required to pay the Company the amount of any
such withholding taxes which is required to be withheld with respect to such
Shares.

V-7
<PAGE>

(e) Cost of the Plan.

The costs and expenses of administering the Plan shall be borne by the
Company.

(f) No Right to Continue as Director.

Nothing contained in the Plan or in any instrument executed pursuant to the
Plan will confer upon any Participant any right to continue as a member of the
Board or affect the right of the Company, the Committee or the stockholders of
the Company to terminate the directorship of any Participant at any time with
or without cause.

(g) Severability.

The provisions of the Plan shall be deemed severable and the validity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

(h) Binding Effect of Plan.

The Plan shall inure to the benefit of the Company, it successors and
assigns.

(i) Governing Law.

The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
internal laws of the State of Delaware, without regard to any principles of
conflicts of law, and applicable federal law.

(j) No Waiver of Breach.

No waiver by any Person at any time or any breach by another Person of, or
compliance with, any condition or provision of the Plan to be performed by
such other Person shall be deemed a waiver of the same, any similar or any
dissimilar provisions or conditions at the same or at any prior or subsequent
time.

(k) No Trust or Fund Created.

Neither the Plan nor any NSO shall create or be construed to create a trust
or separate fund of any kind or a fiduciary relationship between the Company
and a Participant or any other Person. To the extent that any Person acquires
a right to receive payments from the Company pursuant to an NSO, such right
shall be no greater than the right of any unsecured general creditor of the
Company.

(l) Headings.

The headings contained herein are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Plan.

V-8
<PAGE>

ANNEX VI
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251, 252, 254, 257, 258, 263 or 264 of this title:

(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of (S)251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of

VI-1
<PAGE>

incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to (S)228 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested, addressed
to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares.

(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the

VI-2
<PAGE>

surviving or resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so ordered by the Court,
shall give notice of the time and place fixed for the hearing of such petition
by registered or certified mail to the surviving or resulting corporation and
to the stockholders shown on the list at the addresses therein stated. Such
notice shall also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court deems advisable.
The forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under the section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation by a corporation of this State or of any
state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease.

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<PAGE>

Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.

VI-4
<PAGE>

ANNEX VII

CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF SPECIAL
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF

15% NON-VOTING JUNIOR
SPECIAL STOCK, SERIES B

ALLIANCE GAMING CORPORATION
A NEVADA CORPORATION,

PURSUANT TO SECTION 78.195 OF THE
NEVADA REVISED STATUTES

Alliance Gaming Corporation, a Nevada corporation (the "Corporation"),
certifies that, pursuant to the authority contained in Article IV of its
Amended Articles of Incorporation (the "Articles of Incorporation") and in
accordance with the provisions of Section 78.195 of the Nevada Revised
Statutes, the Board of Directors of the Corporation at a meeting duly called
and held on January , 1996, adopted the following resolution which resolution
remains in full force and effect on the date hereof:

Resolved, that the Articles of Incorporation have authorized 10,000,000
shares of special stock, par value $.10 per share, of which 10,000,000 remain
unissued; and

Further Resolved, that it is necessary to set forth the designation,
preferences and relative, participating, optional and other special rights and
qualifications, limitations and restrictions of shares of such non-voting
special stock; and

Further Resolved, that there is hereby established a series of authorized
special stock having a par value of $.10 per share, which series shall be
designated as "15% Non-Voting Junior Special Stock, Series B" (herein the
"Series B Special Stock"), shall consist of shares and shall have the
following voting powers, preferences and relative, participating, optional and
other special rights, and qualifications, limitations and restrictions thereof
as follows:

ARTICLE I

Certain Definitions

Unless the context otherwise requires, the terms defined in this Article I
shall have, for all purposes of this resolution, the meanings herein
specified:

Common Stock. The term "Common Stock" shall mean the common stock, par value
$.10 per share, of the Corporation.

Effective Time. The term "Effective Time" shall mean the effective time of
the consummation of the merger contemplated by the Amended and Restated
Agreement and Plan of Merger, dated January , 1996, among the Corporation,
BGII Acquisition Corporation and Bally Gaming International, Inc.

VII-1
<PAGE>

Initial Issue Date. The term "Initial Issue Date" shall mean the date that
shares of Series B Special Stock are first issued by the Corporation.

Junior Stock. The term "Junior Stock" shall mean the Common Stock and any
class or series of stock of the Corporation authorized after the Initial Issue
Date ranking junior to the Series B Special Stock in respect of the right to
receive dividends or in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the affairs of the
Corporation.

Liquidation Value. The term "Liquidation Value" shall mean $100.00 per share
of Series B Special Stock.

Person. The term "Person" shall mean an individual, partnership, joint
venture, corporation, trust or unincorporated organization, a government or
any department, agency or political subdivision thereof or other entity.

Senior Stock. The term "Senior Stock" shall mean any class or series of
stock of the Corporation authorized after the Initial Issue Date ranking
senior to the Series B Special Stock in respect of the right to receive
dividends or in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Corporation.

ARTICLE II

Dividends or Other Distributions of Property

2.1 General. The holders of the outstanding Series B Special Stock shall be
entitled to receive semi-annual dividends, as and when declared by the Board
of Directors out of funds legally available therefor. Each semi-annual
dividend shall be an amount per share equal to $7.50 and shall be payable in
cash, except that the Corporation may at its sole option pay such dividend
accruing through the first Dividend Payment Date (as defined below) occurring
next after the seventh anniversary of the Effective Time in whole or in part
in additional shares of Series B Special Stock (or fractions thereof) in an
amount equal to such dividend, valued at the Liquidation Value, provided that
after the first Dividend Payment Date (as defined below) occurring next after
the fifth anniversary of the Effective Time the portion of any such dividend
that may be so paid is limited to $4.00, valued at the Liquidation Value. Each
such dividend shall be payable on or about the first day of the first and
seventh months following the Initial Issuance Date in each year as fixed by
the Board of Directors beginning on the first day of the seventh month
following the Initial Issue Date or such other dates as are fixed by the Board
of Directors (each a "Dividend Payment Date"), to the holders of record of
Series B Special Stock at the close of business on the 15th day of the month
next preceding such Dividend Payment Date, as the case may be, as fixed by the
Board of Directors (each a "Record Date"). Such dividends shall be cumulative
and shall accrue on each share whether or not earned, from and after the
Dividend Payment Date coincident with or next preceding the issuance of such
share; provided, however, that dividends payable on the first Dividend Payment
Date shall so accrue from and after the date immediately succeeding the
Initial Issue Date. Dividends payable for any partial dividend period
(including the period from the Initial Issue Date to the first day of the
month next following the month in which the Initial Issue Date occurs) shall
be computed on the basis of the actual days elapsed in such period over a year
of 365 or 366 days. All calculations provided for in this Section 5.1 shall be
rounded to the nearest 1/1000 share and the nearest cent.

2.2 Limitations. Except as hereinafter provided in this Section 2.2, unless
all dividends on the outstanding shares of Series B Special Stock that shall
have accrued and be payable as of any date shall have been paid, or declared
and additional shares or funds, as appropriate, set apart for payment thereof,
or if a Redemption Default (as defined in Section 5.2) has occurred and is
continuing, no dividend or other distribution shall be paid to the holders of
Junior Stock and no shares of Junior Stock shall be purchased or redeemed by
the Corporation. Holders of shares of Series B Special Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of full cumulative dividends, as herein provided, on the Series B
Special

VII-2
<PAGE>

Stock. Any dividend that is not declared and paid (or set apart for payment)
on the requisite Dividend Payment Date shall accrue additional dividends at
the per annum rate of 15%, compounded on a semi-annual basis and payable on
succeeding Dividend Payment Dates.

ARTICLE III

Distributions Upon Liquidation, Dissolution or Winding Up

3.1 Preference on Liquidation, Etc. In the event of any voluntary or
involuntary liquidation, dissolution or other winding up of the affairs of the
Corporation, subject to the prior preferences and other rights of any Senior
Stock as to liquidation preferences, the holders of Series B Special Stock
shall be entitled to be paid out of the assets of the Corporation in cash or
property at its fair market value as determined, in good faith, by the Board
of Directors of the Corporation the Liquidation Value per share plus an amount
equal to all accrued and unpaid dividends and distributions thereon, to the
date of such payment prior to any payment to the holders of Junior Stock.
After payment in full of the Liquidation Value per share of the Series B
Special Stock and other preferential amounts provided for in this Section 3.1,
the holders of the Series B Special Stock as such shall have no right or claim
to any of the remaining assets of the Corporation. Except as provided in this
Section 3.1, holders of Series B Special Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation.

3.2 Liquidation Pro-Rata If Assets Inadequate. If, upon any such
liquidation, dissolution or other winding up of the affairs of the
Corporation, the assets of the Corporation shall be insufficient to permit the
payment in full of the Liquidation Value per share of Series B Special Stock,
then the assets of the Corporation remaining after the distributions to
holders of any Senior Stock of the full amounts to which they may be entitled
shall be ratably distributed among the holders of Series B Special Stock and
any other stock ranking on a parity with the Series B Special Stock with
respect to distributions upon liquidation, dissolution or winding up of the
affairs of the Corporation in proportion to the full amounts to which they
would otherwise be respectively entitled if all amounts thereon were paid in
full. Neither the consolidation or merger of the Corporation into or with
another corporation or corporations nor the sale, lease, transfer or
conveyance of all or substantially all of the assets of the Corporation to
another corporation or any other entity shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of this resolution.

ARTICLE IV

Voting Rights

4.1 Voting Rights of Holders of Series B Special Stock. The shares of Series
B Special Stock shall have no voting rights except as required by law or as
set forth below or in Section 5.2 hereof:

(a) If and whenever at any time or times dividends payable on shares of
Series B Special Stock shall have been in arrears and unpaid for three
consecutive Dividend Payment Dates, then the number of directors
constituting the Board of Directors of the Corporation shall be increased
by two and the holders of shares of Series B Special Stock shall have the
exclusive right, voting separately as a class, to elect two directors of
the Corporation.

(b) Such voting right may be exercised initially at a special meeting of
the holders of Series B Special Stock having such voting right, called as
hereinafter provided, or at any annual meeting of stockholders held for the
purpose of electing directors, and thereafter at each such annual meeting
until such time as all dividends accumulated on the shares of Series B
Special Stock shall have been paid or set apart for payment in full at
which time such voting right and the term of the directors elected pursuant
to Section 4.1(a) shall terminate.

VII-3
<PAGE>

(c) At any time when such voting right shall have vested in holders of
shares of Series B Special Stock described in Section 4.1(a), a proper
officer of the Corporation may call, and, upon the written request,
addressed to the Secretary of the Corporation, of the record holders of
shares representing 25% of the voting power of the shares then outstanding
of Series B Special Stock, shall call, a special meeting of the holders of
Series B Special Stock. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders of
the Corporation, or, if none, at a place designated by the Board of
Directors. Notwithstanding the provisions of this Section 4.1(c), no such
special meeting shall be called during a period within 60 days immediately
preceding the date fixed for the next annual meeting of stockholders.

(d) At any meeting held for the purpose of electing directors at which
the holders of Series B Special Stock shall have the right to elect
directors as provided herein, the presence in person or by proxy of the
holders of shares representing a majority of the then outstanding shares of
Series B Special Stock shall be required and shall be sufficient to
constitute a quorum of such class for the election of directors by the
holders of Series B Special Stock.

(e) Whatever directors are to be elected pursuant to paragraph (a) of
this Section 4.1 or Section 5.2 hereof, they shall be elected by a
plurality of the votes cast by the holders of Series B Special Stock
entitled to vote.

(f) Any directors elected pursuant to paragraph (a) of this Section 4.1
or Section 5.2 hereof may be removed at any time, with or without cause,
only by the majority vote of the holders of Series B Special Stock.

(g) Any director elected by holders of Series B Special Stock pursuant to
the voting right created under this Section 4.1 shall hold office until the
next annual meeting of stockholders (unless such term has previously
terminated pursuant to Section 4.1(b)) and any vacancy in respect of any
such director shall be filled only by vote of the remaining director so
elected, or if there be no such remaining director, by the holders of
Series B Special Stock entitled to elect such director or directors at a
special meeting called in accordance with the procedures set forth in
Section 4.1(c), or, if no such special meeting is called, at the next
annual meeting of stockholders. Upon any termination of such voting right,
subject to applicable law, the term of office of all directors elected by
holders of Series B Special Stock voting separately as a class pursuant to
this Section 4.1 shall terminate.

(h) In exercising the voting rights set forth in this Section 4.1, each
holder of Series B Special Stock shall be entitled to one vote for each
share of such stock held by such holder. The holders of Series B Special
Stock shall in no event be entitled to elect more than two directors in
total under the provisions of this Certificate. The voting rights granted
in this Certificate are subject to applicable regulatory approvals and
limitations.

ARTICLE V

Redemption

5.1 Optional Redemption. (a) The Corporation at any time and from time to
time may at its option redeem all, or any number less than all, of the
outstanding shares of Series B Special Stock. Any redemption of shares of
Series B Special Stock shall be effected at a price per share in cash equal to
the Liquidation Value per share plus an amount equal to all accrued and unpaid
dividends and distributions thereon to the date of redemption. Except as
provided in this subparagraph (a) or elsewhere in the Articles of
Incorporation, the Corporation shall have no right or obligation to redeem any
shares of Series B Special Stock.

(b)(i) Notice of any redemption of shares of Series B Special Stock pursuant
to this Section 5 shall be mailed not less than 30, but not more than 60, days
prior to the date fixed for redemption to each holder of

VII-4
<PAGE>

shares of Series B Special Stock to be redeemed, at such holder's address as
it appears on the transfer books of the Corporation. In order to facilitate
the redemption of shares of Series B Special Stock, the Board of Directors may
fix a record date for the determination of shares of Series B Special Stock to
be redeemed, not more than 60 days or less than 30 days prior to the date
fixed for such redemption.

(ii) Notice having been given pursuant to paragraph (b)(i) of this Section
5.1, from and after the date specified therein as the date of redemption,
unless default shall be made by the Corporation in providing for the payment
of the applicable redemption price, all dividends on the Series B Special
Stock thereby called for redemption shall cease to accrue and all rights of
the holders thereof as stockholders of the Corporation, except the right to
receive the applicable redemption price (but without interest) plus an amount
equal to all accrued and unpaid dividends and distributions thereon to the
date of redemption shall cease and terminate.

5.2 Mandatory Redemption. The Corporation shall redeem, at the redemption
price set forth in paragraph (a) of Section 5.1, all of the outstanding Series
B Special Stock by , 2004 [eight years after the Initial Issue Date]. If
the Corporation has not redeemed all of the outstanding Series B Special Stock
by that date (a "Redemption Default"), then the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two and the holders of the Series B Special Stock shall have the exclusive
right, voting separately as a class, to elect two directors of the Corporation
in accordance with the procedures set forth in paragraphs (c) through (h) of
Section 4.1 hereof. Such voting right may be exercised initially at a special
meeting of the holders of Series B Special Stock having such voting right,
called as hereinbefore provided, or at any annual meeting of stockholders held
for the purpose of electing directors, and thereafter at each such annual
meeting until such time as all shares of Series B Special Stock have been
redeemed by the Corporation at which time such voting right and the term of
the directors elected pursuant to this Section 5.2 shall terminate. The
holders of the Series B Special Stock shall have no rights or remedies with
respect to a Redemption Default except as provided in this Section 5.2 and in
Section 2.2 hereof.

ARTICLE VI

Miscellaneous

6.1 Exclusion of Other Rights. Except as may otherwise be required by law,
the shares of Series B Special Stock shall not have any powers, preferences
and relative, participating, optional or other special rights, other than
those specifically set forth in this Certificate and in the Articles of
Incorporation.

6.2 Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.

6.3 Severability of Provisions. If any voting powers, preferences and
relative, participating, optional and other special rights of the Series B
Special Stock and qualifications, limitations and restrictions thereof set
forth in this resolution is invalid, unlawful or incapable of being enforced
by reason of any rule of law or public policy, all other voting powers,
preferences and relative, participating, optional and other special rights of
the Series B Special Stock and qualifications, limitations and restrictions
thereof set forth in this resolution (as so amended) which can be given effect
without the invalid, unlawful or unenforceable voting powers, preferences and
relative, participating, optional and other special rights of the Series B
Special Stock and qualifications, limitations and restrictions thereof shall,
nevertheless, remain in full force and effect, and no voting powers,
preferences and relative, participating, optional or other special rights of
the Series B Special Stock and qualifications, limitations and restrictions
thereof herein set forth shall be deemed dependent upon any other such voting
powers, preferences and relative, participating, optional or other special
rights of the Series B Special Stock and qualifications, limitations and
restrictions thereof unless so expressed herein.

6.4 Fractional Shares. Fractional shares of Series B Special Stock shall
entitle the holder to receive dividends and distributions and to exercise
voting rights in proportion to the fractional holding.

VII-5
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article VI of the Company's Articles of Incorporation limits the liability
of the Company's directors and officers. It provides that a director or
officer of the Company will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director
or officer, except for liability (i) for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or (ii) for the
payment of dividends in violation of Section 78.300 of the Nevada General
Corporation Law. It also provides that any repeal or modification of the
foregoing provision of the stockholders of the Company will be prospective
only, and will not adversely affect any limitation on the personal liability
of a director or officer of the Company existing at the time of such repeal or
modification.

Section 78.300 of the Nevada General Corporation Law provides:

1. The directors of a corporation shall not make dividends or other
distributions to stockholders except as provided by such section.

2. In case of any willful or grossly negligent violation of the
provisions of such section, the directors under whose administration the
violation occurred, except those who caused their dissent to be entered
upon the minutes of the meeting of the directors at the time, or who not
then being present caused their dissent to be entered on learning of such
action, are jointly and severally liable, at any time within 3 years after
each violation, to the corporation, and, in the event of its dissolution or
insolvency, to its creditors at the time of the violation, or any of them,
to the lesser of the full amount of the dividend made or of any loss
sustained by the corporation by reason of the dividend or other
distribution to stockholders.

However, Section 78.751 of the Nevada General Corporation Law permits the
Registrant to indemnify its directors and officers as follows:

1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except any action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, has no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.

2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in

II-1
<PAGE>

settlement to the corporation, unless and only to the extent that the court
in which the action or suit was brought or other court of competent
jurisdiction determines, upon application, that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.

3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter herein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.

4. Any indemnification under subsections 1 and 2, unless offered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:

(a) By the stockholders;

(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;

(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent
legal counsel in a written opinion; or

(d) If a quorum of directors who were not parties to the act, suit or
proceeding so orders, by independent legal counsel in a written
opinion.

5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must
be paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of expenses to
which corporate personnel other than directors or officers may be entitled
under any contract or otherwise by law.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
2.1 --Amended and Restated Agreement and Plan of Merger among Alliance,
BGII Acquisition Corp. and BGII, dated as of October 18, 1995
(included as Annex I to the Joint Proxy Statement/Prospectus).
2.2 --Basic Agreement, dated as of October 29, 1993, among United Gaming,
Inc., The Rainbow Casino Corporation, John A. Barrett, Jr. and Leigh
Seippel, and exhibits thereto.(12)
2.3 --Letter Agreement, dated as of November 5, 1993, among United Gaming,
Inc., Capital Gaming International, Inc., I.G. Davis, Jr. and John E.
Dell, with exhibits thereto.(14)
2.4 --Asset Purchase Agreement between Plantation Investments, Inc. and
Richards-Schnack Development Corp. dated April 2, 1990.(1)
2.5 --First Amendment to Agreement of Purchase and Sale between Plantation
Investments, Inc. and Richards-Schnack Development Corp.(1)
2.6 --Bill of Sale between Plantation Investments, Inc. and Richards-
Schnack Development Corp.(1)
2.7 --Consolidation Agreement, dated March 29, 1995 among Alliance, United
Gaming Rainbow, Inc., RCC, RCVP, NGM, HFS, National Gaming
Corporation, Rainbow Development Corporation and Leigh Seippel and
John A. Barrett, Jr.(23)
3.1 --Restated Articles of Incorporation of the Registrant, as
amended.(16)
3.2 --Revised By-Laws of the Registrant.(20)
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
4.1 --Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Special Stock and
Qualifications, Limitations and Restrictions thereof of 15% Non-
Voting Junior Special Stock, Series B, $.10 par value, of Alliance
Gaming Corporation. (Included as Annex VII to the Joint Proxy
Statement/Prospectus).
4.2 --Common Stock Purchase Warrant issued to Alfred H. Wilms upon
execution of his loan commitment with Video Services, Inc.(6)
4.3 --Indenture, dated as of September 14, 1993, between United Gaming,
Inc. and NationsBank of Texas, N.A., as Trustee in respect of
Alliance's 7 1/2% Convertible Subordinated Debentures due 2003.(16)
4.4 --Form of 7 1/2% Convertible Subordinated Debenture due 2003 (included
in Exhibit 4.3, above).
4.5 --Registration Rights Agreement, dated as of September 21, 1993, by
and among United Gaming, Inc., Donaldson Lufkin & Jenrette Securities
Corporation, Oppenheimer & Co., Inc. and L.H. Friend, Weinress &
Frankson, Inc.(16)
5 --Opinion of Schreck, Jones, Bernhard, Woloson & Godfrey.
8 --Opinion of Milbank, Tweed, Hadley & McCloy.
10.1 --Loan and Warrant Agreement dated March 24, 1992 between United
Gaming, Inc., Video Services, Inc. and Alfred H. Wilms.(6)
10.2 --Lease, dated August 3, 1988, as amended April 6, 1989, from Walter
Schwartz to Alliance for Alliance's Corporate headquarters building
at 4380 Boulder Highway, Las Vegas, Nevada.(2)
10.3 --Employment Agreement between United Gaming, Inc. and Ira S.
Levine.(13)
10.4 --Amendment to Employment Agreement between United Gaming, Inc. and
Ira S. Levine.(21)
10.5 --Employment Agreement between United Gaming, Inc. and John W.
Alderfer.(13)
10.6 --Amendment to Employment Agreement between United Gaming, Inc. and
John W. Alderfer.(20)
10.7 --Letter Agreement dated June 25, 1993 among United Gaming, Inc. and
Kirkland-Ft. Worth Investment Partners, L.P., Kirkland Investment
Corporation and, as to certain provisions, Alfred H. Wilms, including
Exhibit A (Form of Securities Purchase Agreement), Exhibit B (Form of
Stockholders Agreement), Exhibit C (Form of Certificate of
Designations of Non-Voting Junior Convertible Special Stock), Exhibit
D (Form of Warrant Agreement), and Exhibit E (Form of press release)
thereto.(7)
10.8 --Advisory Agreement, dated June 25, 1993 among United Gaming, Inc.,
Gaming Systems Advisors, L.P. and, as to certain provisions, Mr.
Alfred H. Wilms, including Exhibit A (Form of Warrant Agreement) and
Exhibit B (Form of press release) thereto.(7)
10.9 --United Gaming, Inc. 1991 Long-Term Incentive Stock Option Plan(10)
10.10 --Gaming and Technology, Inc. 1984 Employee Stock Option Plan(11)
10.11 --Agreement, dated as of September 14, 1993, by and among United
Gaming, Inc., Kirkland-Ft. Worth Investment Partners, L.P., Kirkland
Investment Corporation, Gaming Systems Advisors, L.P. and Alfred H.
Wilms.(8)
10.12 --Warrant Agreement, dated as of September 21, 1993, by and between
United Gaming, Inc. and Kirkland-Ft. Worth Investment Partners, L.P.
relating to warrants to purchase 2.75 million shares of Common
Stock.(8)
10.13 --Warrant Agreement, dated as of September 21, 1993, by and between
United Gaming, Inc. and Gaming Systems Advisors, L.P. relating to
warrants to purchase 1.25 million shares of Common Stock.(8)
10.14 --Stockholders Agreement, dated as of September 21, 1993, by and among
United Gaming, Inc., Kirkland-Ft. Worth Investment Partners, L.P.,
Kirkland Investment Corporation, Gaming Systems Advisors, L.P. and
Alfred H. Wilms.(8)
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
10.15 --Amendment to Stockholders Agreement dated as of October 20,
1994.(16)
10.16 --Selling Stockholder Letter Agreement dated as of March 20, 1995.(22)
10.17 --Securities Purchase Agreement, dated as of September 21, 1993, by
and among United Gaming, Inc., Kirkland-Ft. Worth Investment
Partners, L.P. and Kirkland Investment Corporation.(8)
10.18 --Confidential Separation and Consulting Agreement with Carole A.
Carter (including mutual release) dated July 15, 1993.(9)
10.19 --Executive Severance Agreement with Shannon L. Bybee dated July 15,
1993.(9)
10.20 --Amendment to Executive Severance Agreement with Shannon L. Bybee
dated July 15, 1993.(20)
10.21 --Secured Promissory Note, dated as of October 29, 1993, from John A.
Barrett, Jr. and Leigh Seippel to United Gaming, Inc.(12)
10.22 --Escrow Agreement, dated as of October 29, 1993, among United Gaming,
Inc., The Rainbow Casino Corporation, John A. Barrett, Jr., Leigh
Seippel and Butler, Snow, O'Mara, Stevens & Cannada.(12)
10.23 --Pledge Agreement, dated as of October 29, 1993, among United Gaming,
Inc. (as secured party) and The Rainbow Casino Corporation, John A.
Barrett, Jr. and Leigh Seippel (as pledgors).(12)
10.24 --Management Agreement, dated as of October 29, 1993, among Rainbow
Casino-Vicksburg Partnership, L.P., The Rainbow Casino Corporation
and Mississippi Ventures, Inc., as manager.(12)
10.25 --Letter Agreement, dated as of December 10, 1993, among United
Gaming, Inc., Capital Gaming International, Inc. and I.G. Davis,
Jr.(15)
10.26 --Loan and Security Agreement, dated as of August 2, 1993, between
United Gaming, Inc., Alfred H. Wilms and Video Services, Inc.(16)
10.27 --Warrant Agreement, dated as of August 2, 1993, between United
Gaming, Inc. and Alfred H. Wilms.(16)
10.28 --Common Stock Purchase Warrant, dated as of September 21, 1993,
between United Gaming, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation.(16)
10.29 --Common Stock Purchase Warrant, dated as of September 21, 1993,
between United Gaming, Inc. and Oppenheimer & Co. Inc.(16)
10.30 --Common Stock Purchase Warrant, dated as of September 21, 1993,
between United Gaming, Inc. and L.H. Friend, Weinress & Frankson,
Inc.(16)
10.31 --Common Stock Purchase Warrant, dated as of September 21, 1993,
between United Gaming, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation.(16)
10.32 --Consulting Agreement, dated as of November 8, 1993, between David A.
Scheinman and United Gaming, Inc.(16)
10.33 --Letter Agreement, dated as of March 3, 1994, by and among United
Native American Gaming, Inc., USA Gaming of Native America, Inc., USA
Gaming, Inc. and others.(17)
10.34 --Letter Agreement, dated as of February 25, 1994, among United
Gaming, Inc., The Rainbow Casino Corporation, John A. Barrett, Jr.
and Leigh Seippel.(18)
10.35 --Letter Agreement, dated as of June 29, 1994, among United Gaming,
Inc., The Rainbow Casino Corporation, John A. Barrett, Jr. and Leigh
Seippel, consented to by HFS Gaming Corporation.(19)
10.36 --Letter Agreement, dated as of July 16, 1994, among United Gaming,
Inc., The Rainbow Casino Corporation, John A. Barrett, Jr. and Leigh
Seippel, consented to by HFS Gaming Corporation.(19)
10.37 --Second Amendment to Casino Financing Agreement, dated as of August
11, 1994, among United Gaming, Inc., United Gaming Rainbow, Inc.,
Rainbow Casino-Vicksburg Partnership, L.P., The Rainbow Casino
Corporation, John A. Barrett, Jr., Leigh Seippel and HFS Gaming
Corporation.(19)
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
10.38 --Partnership Agreement of Rainbow Casino-Vicksburg Partnership, L.P.,
dated as of July 8, 1994.(19)
10.39 --Second Amended and Restated Agreement of Limited Partnership, dated
March 29, 1995, between United Gaming Rainbow and RCC.(23)
10.40 --Promissory Note, dated as of July 16, 1994, from United Gaming
Rainbow, Inc. to The Rainbow Casino Corporation.(19)
10.41 --Pledge Agreement, dated as of July 16, 1994, from United Gaming
Rainbow, Inc. to The Rainbow Casino Corporation.(19)
10.42 --Promissory Note, dated as of July 16, 1994, from John A. Barrett,
Jr. and Leigh Seippel to United Gaming, Inc.(19)
10.43 --Escrow Agreement, dated as of August 11, 1994, among United Gaming
Rainbow, Inc., The Rainbow Casino Corporation, John A. Barrett, Jr.,
Leigh Seippel and Butler, Snow, O'Mara, Stevens & Cannada, together
with Agreement dated February 7, 1994, as amended July 11, 1994
between Rainbow Casino-Vicksburg Partnership, L.P. and the City of
Vicksburg, Mississippi.(19)
10.44 --Employment Agreement between United Gaming, Inc. and Johnann
McIlwain.(20)
10.45 --Settlement Agreement, dated December 4, 1994, by and among Alliance,
United Gaming of Iowa, Inc., GDREC and Joseph and Paula Zwack.(16)
10.46 --Employment Agreement, dated August 15, 1994, between Alliance and
Steve Greathouse.(22)
10.47 --Warrant Agreement, dated August 15, 1994, between Alliance and
Steven Greathouse.(22)
10.48 --Agreement, dated September 1, 1994, between Alliance and Craig
Fields.(22)
10.49 --Warrant Agreement, dated September 1, 1994, between Alliance and
Craig Fields.(22)
10.50 --Agreement, dated March 20, 1995, between Alliance and Joel
Kirschbaum.(22)
10.51 --Letter Agreement, dated March 29, 1995, among United Gaming Rainbow,
RCC, Leigh Seippel, John A. Barrett, Jr. and Butler, Snow, O'Mara,
Stevens & Cannada.(23)
10.52 --Class A Note Payable, dated March 29, 1995, issued by RCVP to United
Gaming Rainbow.(23)
10.53 --Class B Note Payable, dated March 29, 1995, issued by RCVP to United
Gaming Rainbow.(23)
10.54 --Class B Note Payable, dated March 29, 1995, issued by RCVP to
National Gaming Mississippi, Inc.(23)
10.55 --Release, dated March 29, 1995, by United Gaming Rainbow and Alliance
and their affiliates of RCC, Rainbow Development Corporation, John A.
Barrett, Jr. and Leigh Seippel and their affiliates (other than
RCVP).(23)
10.56 --Release, dated March 29, 1995, by RCC, Rainbow Development
Corporation, John A. Barrett, Jr. and Leigh Seippel and their
affiliates (other than RCVP) of United Gaming Rainbow and Alliance
and their affiliates.(23)
12.1 --Bally Gaming International, Inc. Computation of Ratio of Earnings to
Fixed Charges.
12.2 --Alliance Gaming Corporation Computation of Ratio of Earnings to
Fixed Charges.
23.1 --Consent of Schreck, Jones, Bernhard, Woloson & Godfrey (included in
Exhibit 5).
23.2 --Consent of Milbank, Tweed, Hadley & McCloy (included in Exhibit 8).
23.3 --Consent of KPMG Peat Marwick LLP.
23.4 --Consent of Coopers & Lybrand L.L.P.
24 --Power of Attorney (included on signature page).
99.1 --Consent of Nominee.
99.2 --Letter of Transmittal.
99.3 --Form of BGII Proxy Card.
99.4 --Form of Alliance Proxy Card.
</TABLE>
- --------
(1) Incorporated by reference to the Registrant's Form 8-K dated April 9, 1990
as amended.
(2) Incorporated by reference to the Registrant's Form 10-K for the year ended
June 30, 1989.

II-5
<PAGE>

(3) Incorporated by reference to the Registrant's Form 10-K for the year
ended June 30, 1990.
(4) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1990.
(5) Incorporated by reference to the Registrant's Form 10-K for the year
ended June 30, 1991.
(6) Incorporated by reference to the Registrant's Form 8-K dated March 31,
1992.
(7) Incorporated by reference to the Registrant's Form 8-K dated June 25,
1993.
(8) Incorporated by reference to the Registrant's Form 8-K dated September
21, 1993.
(9) Incorporated by reference to the Registrant's Form 10-Q dated September
30, 1993.
(10) Incorporated by reference to the Registrant's Form S-8 Reg. Nos. 33-45811
and 33-75308.
(11) Incorporated by reference to the Registrant's Form S-8 Reg. No. 2-98777.
(12) Incorporated by reference to the Registrant's Form 8-K dated October 29,
1993.
(13) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1993.
(14) Incorporated by reference to the Registrant's Form 8-K dated November 5,
1993.
(15) Incorporated by reference to the Registrant's Form 8-K dated December 10,
1993.
(16) Incorporated by reference to the Registrant's Form S-2 Reg. No. 33-72990
and subsequent amendments thereto.
(17) Incorporated by reference to the Registrant's Form 8-K dated March 7,
1994.
(18) Incorporated by reference to the Registrant's Form 8-K dated March 15,
1994.
(19) Incorporated by reference to the Registrant's Form 8-K dated August 11,
1994.
(20) Incorporated by reference to the Registrant's Form 10-K for the year
ended June 30, 1994.
(21) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1994.
(22) Incorporated by reference to the Registrant's Form S-3 Reg. No. 33-58233.
(23) Incorporated by reference to the Registrant's Form 8-K dated March 29,
1995.

ITEM 22. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act will be deemed to be part of this
Registration Statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions set forth in response to Item 15, or
otherwise, the Registrant 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 Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant 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 Act and will be governed by the final adjudication
of such issue.

II-6
<PAGE>

THE REGISTRANT AND EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY
AUTHORIZES JOHN W. ALDERFER, DAVID D. JOHNSON, AND STEVE GREATHOUSE (THE
"AGENTS") TO FILE ONE OR MORE AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS)
TO THE REGISTRATION STATEMENT, WHICH AMENDMENTS MAY MAKE SUCH CHANGES IN THE
REGISTRATION STATEMENT AS SUCH AGENT DEEMS APPROPRIATE AND THE REGISTRANT AND
EACH SUCH PERSON HEREBY APPOINTS EACH SUCH AGENT AS ATTORNEY-IN-FACT TO
EXECUTE IN THE NAME AND ON BEHALF OF THE REGISTRANT AND EACH SUCH PERSON,
INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ANY SUCH AMENDMENTS TO THE
REGISTRATION STATEMENT.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ALLIANCE GAMING
CORPORATION HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF NEW YORK, STATE OF NEW YORK, ON MARCH 6, 1996.

Alliance Gaming Corporation

/s/ John W. Alderfer
By: _________________________________
JOHN W. ALDERFER CHIEF FINANCIAL
OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND THE DATES INDICATED.

SIGNATURE TITLE DATE

Chairman of the
/s/ Steve Greathouse Board of Directors, March 4, 1996
- ------------------------------------- President and Chief
STEVE GREATHOUSE Executive Officer
(Principal
Executive Officer)

Senior Vice
/s/ John W. Alderfer President Treasurer March 6, 1996
- ------------------------------------- and Chief Financial
JOHN W. ALDERFER Officer (Principal
Financial and
Accounting Officer)

Director and
/s/ Anthony DiCesare Executive Vice March 6, 1996
- ------------------------------------- President
ANTHONY DICESARE

Director (Vice
/s/ Dr. Craig Fields Chairman of the March 5, 1996
- ------------------------------------- Board)
DR. CRAIG FIELDS

Director
/s/ Joel Kirschbaum March 6, 1996
- -------------------------------------
JOEL KIRSCHBAUM

Director
/s/ Alfred H. Wilms March 4, 1996
- -------------------------------------
ALFRED H. WILMS

Director
/s/ David Robbins March 6, 1996
- -------------------------------------
DAVID ROBBINS

II-7
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
2.1 --Amended and Restated Agreement and Plan of Merger
among Alliance, BGII Acquisition Corp. and BGII, dated
as of October 18, 1995 (included as Annex I to
the Joint Proxy Statement/Prospectus).
2.2 --Basic Agreement, dated as of October 29, 1993, among
United Gaming, Inc., The Rainbow Casino Corporation,
John A. Barrett, Jr. and Leigh Seippel, and exhibits
thereto.(12)
2.3 --Letter Agreement, dated as of November 5, 1993, among
United Gaming, Inc., Capital Gaming International,
Inc., I.G. Davis, Jr. and John E. Dell, with exhibits
thereto.(14)
2.4 --Asset Purchase Agreement between Plantation
Investments, Inc. and Richards-Schnack Development
Corp. dated April 2, 1990.(1)
2.5 --First Amendment to Agreement of Purchase and Sale
between Plantation Investments, Inc. and Richards-
Schnack Development Corp.(1)
2.6 --Bill of Sale between Plantation Investments, Inc. and
Richards-Schnack Development Corp.(1)
2.7 --Consolidation Agreement, dated March 29, 1995 among
Alliance, United Gaming Rainbow, Inc., RCC, RCVP, NGM,
HFS, National Gaming Corporation, Rainbow Development
Corporation and Leigh Seippel and John A. Barrett,
Jr.(23)
3.1 --Restated Articles of Incorporation of the Registrant,
as amended.(16)
3.2 --Revised By-Laws of the Registrant.(20)
4.1 --Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special
Rights of Special Stock and Qualifications,
Limitations and Restrictions thereof of 15% Non-Voting
Junior Special Stock, Series B, $.10 par value, of
Alliance Gaming Corporation. (Included as Annex VII to
the Joint Proxy Statement/Prospectus).
4.2 --Common Stock Purchase Warrant issued to Alfred H.
Wilms upon execution of his loan commitment with Video
Services, Inc.(6)
4.3 --Indenture, dated as of September 14, 1993, between
United Gaming, Inc. and NationsBank of Texas, N.A., as
Trustee in respect of Alliance's 7 1/2% Convertible
Subordinated Debentures due 2003.(16)
4.4 --Form of 7 1/2% Convertible Subordinated Debenture due
2003 (included in Exhibit 4.3, above).
4.5 --Registration Rights Agreement, dated as of September
21, 1993, by and among United Gaming, Inc., Donaldson
Lufkin & Jenrette Securities Corporation, Oppenheimer
& Co., Inc. and L.H. Friend, Weinress & Frankson,
Inc.(16)
5 --Opinion of Schreck, Jones, Bernhard, Woloson &
Godfrey.
8 --Opinion of Milbank, Tweed, Hadley & McCloy.
10.1 --Loan and Warrant Agreement dated March 24, 1992
between United Gaming, Inc., Video Services, Inc. and
Alfred H. Wilms.(6)
10.2 --Lease, dated August 3, 1988, as amended April 6,
1989, from Walter Schwartz to Alliance for Alliance's
Corporate headquarters building at 4380 Boulder
Highway, Las Vegas, Nevada.(2)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
10.3 --Employment Agreement between United Gaming, Inc. and
Ira S. Levine.(13)
10.4 --Amendment to Employment Agreement between United
Gaming, Inc. and Ira S. Levine.(21)
10.5 --Employment Agreement between United Gaming, Inc. and
John W. Alderfer.(13)
10.6 --Amendment to Employment Agreement between United
Gaming, Inc. and John W. Alderfer.(20)
10.7 --Letter Agreement dated June 25, 1993 among United
Gaming, Inc. and Kirkland-Ft. Worth Investment
Partners, L.P., Kirkland Investment Corporation and,
as to certain provisions, Alfred H. Wilms, including
Exhibit A (Form of Securities Purchase Agreement),
Exhibit B (Form of Stockholders Agreement), Exhibit C
(Form of Certificate of Designations of Non-Voting
Junior Convertible Special Stock), Exhibit D (Form of
Warrant Agreement), and Exhibit E (Form of press
release) thereto.(7)
10.8 --Advisory Agreement, dated June 25, 1993 among United
Gaming, Inc., Gaming Systems Advisors, L.P. and, as to
certain provisions, Mr. Alfred H. Wilms, including
Exhibit A (Form of Warrant Agreement) and Exhibit B
(Form of press release) thereto.(7)
10.9 --United Gaming, Inc. 1991 Long-Term Incentive Stock
Option Plan(10)
10.10 --Gaming and Technology, Inc. 1984 Employee Stock
Option Plan(11)
10.11 --Agreement, dated as of September 14, 1993, by and
among United Gaming, Inc., Kirkland-Ft. Worth
Investment Partners, L.P., Kirkland Investment
Corporation, Gaming Systems Advisors, L.P. and Alfred
H. Wilms.(8)
10.12 --Warrant Agreement, dated as of September 21, 1993, by
and between United Gaming, Inc. and Kirkland-Ft. Worth
Investment Partners, L.P. relating to warrants to
purchase 2.75 million shares of Common Stock.(8)
10.13 --Warrant Agreement, dated as of September 21, 1993, by
and between United Gaming, Inc. and Gaming Systems
Advisors, L.P. relating to warrants to purchase 1.25
million shares of Common Stock.(8)
10.14 --Stockholders Agreement, dated as of September 21,
1993, by and among United Gaming, Inc., Kirkland-Ft.
Worth Investment Partners, L.P., Kirkland Investment
Corporation, Gaming Systems Advisors, L.P. and Alfred
H. Wilms.(8)
10.15 --Amendment to Stockholders Agreement dated as of
October 20, 1994.(16)
10.16 --Selling Stockholder Letter Agreement dated as of
March 20, 1995.(22)
10.17 --Securities Purchase Agreement, dated as of September
21, 1993, by and among United Gaming, Inc., Kirkland-
Ft. Worth Investment Partners, L.P. and Kirkland
Investment Corporation.(8)
10.18 --Confidential Separation and Consulting Agreement with
Carole A. Carter (including mutual release) dated July
15, 1993.(9)
10.19 --Executive Severance Agreement with Shannon L. Bybee
dated July 15, 1993.(9)
10.20 --Amendment to Executive Severance Agreement with
Shannon L. Bybee dated July 15, 1993.(20)
10.21 --Secured Promissory Note, dated as of October 29,
1993, from John A. Barrett, Jr. and Leigh Seippel to
United Gaming, Inc.(12)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
10.22 --Escrow Agreement, dated as of October 29, 1993, among
United Gaming, Inc., The Rainbow Casino Corporation,
John A. Barrett, Jr., Leigh Seippel and Butler, Snow,
O'Mara, Stevens & Cannada.(12)
10.23 --Pledge Agreement, dated as of October 29, 1993, among
United Gaming, Inc. (as secured party) and The Rainbow
Casino Corporation, John A. Barrett, Jr. and Leigh
Seippel (as pledgors).(12)
10.24 --Management Agreement, dated as of October 29, 1993,
among Rainbow Casino-Vicksburg Partnership, L.P., The
Rainbow Casino Corporation and Mississippi Ventures,
Inc., as manager.(12)
10.25 --Letter Agreement, dated as of December 10, 1993,
among United Gaming, Inc., Capital Gaming
International, Inc. and I.G. Davis, Jr.(15)
10.26 --Loan and Security Agreement, dated as of August 2,
1993, between United Gaming, Inc., Alfred H. Wilms and
Video Services, Inc.(16)
10.27 --Warrant Agreement, dated as of August 2, 1993,
between United Gaming, Inc. and Alfred H. Wilms.(16)
10.28 --Common Stock Purchase Warrant, dated as of September
21, 1993, between United Gaming, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation.(16)
10.29 --Common Stock Purchase Warrant, dated as of September
21, 1993, between United Gaming, Inc. and Oppenheimer
& Co. Inc.(16)
10.30 --Common Stock Purchase Warrant, dated as of September
21, 1993, between United Gaming, Inc. and L.H. Friend,
Weinress & Frankson, Inc.(16)
10.31 --Common Stock Purchase Warrant, dated as of September
21, 1993, between United Gaming, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation.(16)
10.32 --Consulting Agreement, dated as of November 8, 1993,
between David A. Scheinman and United Gaming, Inc.(16)
10.33 --Letter Agreement, dated as of March 3, 1994, by and
among United Native American Gaming, Inc., USA Gaming
of Native America, Inc., USA Gaming, Inc. and
others.(17)
10.34 --Letter Agreement, dated as of February 25, 1994,
among United Gaming, Inc., The Rainbow Casino
Corporation, John A. Barrett, Jr. and Leigh
Seippel.(18)
10.35 --Letter Agreement, dated as of June 29, 1994, among
United Gaming, Inc., The Rainbow Casino Corporation,
John A. Barrett, Jr. and Leigh Seippel, consented to
by HFS Gaming Corporation.(19)
10.36 --Letter Agreement, dated as of July 16, 1994, among
United Gaming, Inc., The Rainbow Casino Corporation,
John A. Barrett, Jr. and Leigh Seippel, consented to
by HFS Gaming Corporation.(19)
10.37 --Second Amendment to Casino Financing Agreement, dated
as of August 11, 1994, among United Gaming, Inc.,
United Gaming Rainbow, Inc., Rainbow Casino-Vicksburg
Partnership, L.P., The Rainbow Casino Corporation,
John A. Barrett, Jr., Leigh Seippel and HFS Gaming
Corporation.(19)
10.38 --Partnership Agreement of Rainbow Casino-Vicksburg
Partnership, L.P., dated as of July 8, 1994.(19)
10.39 --Second Amended and Restated Agreement of Limited
Partnership, dated March 29, 1995, between United
Gaming Rainbow and RCC.(23)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
10.40 --Promissory Note, dated as of July 16, 1994, from
United Gaming Rainbow, Inc. to The Rainbow Casino
Corporation.(19)
10.41 --Pledge Agreement, dated as of July 16, 1994, from
United Gaming Rainbow, Inc. to The Rainbow Casino
Corporation.(19)
10.42 --Promissory Note, dated as of July 16, 1994, from John
A. Barrett, Jr. and Leigh Seippel to United Gaming,
Inc.(19)
10.43 --Escrow Agreement, dated as of August 11, 1994, among
United Gaming Rainbow, Inc., The Rainbow Casino
Corporation, John A. Barrett, Jr., Leigh Seippel and
Butler, Snow, O'Mara, Stevens & Cannada, together with
Agreement dated February 7, 1994, as amended July 11,
1994 between Rainbow Casino-Vicksburg Partnership,
L.P. and the City of Vicksburg, Mississippi.(19)
10.44 --Employment Agreement between United Gaming, Inc. and
Johnann McIlwain.(20)
10.45 --Settlement Agreement, dated December 4, 1994, by and
among Alliance, United Gaming of Iowa, Inc., GDREC and
Joseph and Paula Zwack.(16)
10.46 --Employment Agreement, dated August 15, 1994, between
Alliance and Steve Greathouse.(22)
10.47 --Warrant Agreement, dated August 15, 1994, between
Alliance and Steven Greathouse.(22)
10.48 --Agreement, dated September 1, 1994, between Alliance
and Craig Fields.(22)
10.49 --Warrant Agreement, dated September 1, 1994, between
Alliance and Craig Fields.(22)
10.50 --Agreement, dated March 20, 1995, between Alliance and
Joel Kirschbaum.(22)
10.51 --Letter Agreement, dated March 29, 1995, among United
Gaming Rainbow, RCC, Leigh Seippel, John A. Barrett,
Jr. and Butler, Snow, O'Mara, Stevens & Cannada.(23)
10.52 --Class A Note Payable, dated March 29, 1995, issued by
RCVP to United Gaming Rainbow.(23)
10.53 --Class B Note Payable, dated March 29, 1995, issued by
RCVP to United Gaming Rainbow.(23)
10.54 --Class B Note Payable, dated March 29, 1995, issued by
RCVP to National Gaming Mississippi, Inc.(23)
10.55 --Release, dated March 29, 1995, by United Gaming
Rainbow and Alliance and their affiliates of RCC,
Rainbow Development Corporation, John A. Barrett, Jr.
and Leigh Seippel and their affiliates (other than
RCVP).(23)
10.56 --Release, dated March 29, 1995, by RCC, Rainbow
Development Corporation, John A. Barrett, Jr. and
Leigh Seippel and their affiliates (other than RCVP)
of United Gaming Rainbow and Alliance and their
affiliates.(23)
12.1 --Bally Gaming International, Inc. Computation of Ratio
of Earnings to Fixed Charges.
12.2 --Alliance Gaming Corporation Computation of Ratio of
Earnings to Fixed Charges.
23.1 --Consent of Schreck, Jones, Bernhard, Woloson &
Godfrey (included in Exhibit 5).
23.2 --Consent of Milbank, Tweed, Hadley & McCloy (included
in Exhibit 8).
23.3 --Consent of KPMG Peat Marwick LLP.
23.4 --Consent of Coopers & Lybrand L.L.P.
24 --Power of Attorney (included on signature page).
99.1 --Consent of Nominee.
99.2 --Letter of Transmittal.
99.3 --Form of BGII Proxy Card.
99.4 --Form of Alliance Proxy Card.
</TABLE>
- --------
(1) Incorporated by reference to the Registrant's Form 8-K dated April 9, 1990
as amended.
(2) Incorporated by reference to the Registrant's Form 10-K for the year ended
June 30, 1989.
<PAGE>

(3) Incorporated by reference to the Registrant's Form 10-K for the year ended
June 30, 1990.
(4) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1990.
(5) Incorporated by reference to the Registrant's Form 10-K for the year ended
June 30, 1991.
(6) Incorporated by reference to the Registrant's Form 8-K dated March 31,
1992.
(7) Incorporated by reference to the Registrant's Form 8-K dated June 25,
1993.
(8) Incorporated by reference to the Registrant's Form 8-K dated September 21,
1993.
(9) Incorporated by reference to the Registrant's Form 10-Q dated September
30, 1993.
(10) Incorporated by reference to the Registrant's Form S-8 Reg. Nos. 33-45811
and 33-75308.
(11) Incorporated by reference to the Registrant's Form S-8 Reg. No. 2-98777.
(12) Incorporated by reference to the Registrant's Form 8-K dated October 29,
1993.
(13) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1993.
(14) Incorporated by reference to the Registrant's Form 8-K dated November 5,
1993.
(15) Incorporated by reference to the Registrant's Form 8-K dated December 10,
1993.
(16) Incorporated by reference to the Registrant's Form S-2 Reg. No. 33-72990
and subsequent amendments thereto.
(17) Incorporated by reference to the Registrant's Form 8-K dated March 7,
1994.
(18) Incorporated by reference to the Registrant's Form 8-K dated March 15,
1994.
(19) Incorporated by reference to the Registrant's Form 8-K dated August 11,
1994.
(20) Incorporated by reference to the Registrant's Form 10-K for the year ended
June 30, 1994.
(21) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1994.
(22) Incorporated by reference to the Registrant's Form S-3 Reg. No. 33-58233.
(23) Incorporated by reference to the Registrant's Form 8-K dated March 29,
1995.

<PAGE>

EXHIBIT 5

March 7, 1996

Alliance Gaming Corporation
4380 Boulder Highway
Las Vegas, Nevada 89121

Re: Alliance Gaming Corporation
Registration Statement on S-4
-----------------------------

Dear Ladies and Gentlemen:

We refer to the Registration Statement (the "Registration Statement") of
Alliance Gaming Corporation, a Nevada corporation ("Alliance"), on Form S-4,
about to be filed by Alliance with the Securities and Exchange Commission in
order to register under the Securities Act of 1933, as amended (the "Act"),
certain shares of Common Stock of Alliance, $0.10 par value (the "Alliance
Common Stock") and 15% Non-Voting Junior Special Stock, Series B, $0.10 par
value, of Alliance (the "Alliance Series B Special Stock" and, together with the
Alliance Common Stock, the "Shares") issuable upon consummation of the merger of
Bally Gaming International, Inc., a Delaware corporation ("BGII"), with a
wholly-owned subsidiary of Alliance (the "Merger Subsidiary") to holders of
BGII Common Stock, $0.01 par value.

In rendering the opinions hereinafter expressed, we have made such legal
and factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction as being true
reproductions of originals, of all such records, agreements and other
instruments, certificates of public officials, certificates of officers and
representatives of Alliance, and such other documents as we have deemed
necessary, as a basis for the opinions expressed below.

Without limiting the generality of the foregoing, in our examination, we
have assumed without independent verification, (i) the genuineness of all
signatures, (ii) that each of the parties thereto has duly and validly executed
and delivered each instrument, document, and agreement to which such party is a
signatory, and such party's obligations set forth therein are its legal, valid,
and binding obligations, enforceable in accordance with their respective
terms, (iii) that each natural person executing any such instrument, document,
or agreement is legally competent to do so, (iv) that all documents submitted
<PAGE>

Alliance Gaming Corporation
March 7, 1996
Page 2

to us as originals are authentic, all documents submitted to us as certified,
conformed, photostatic or facsimile copies conform to the original document, and
all public records reviewed are accurate and complete, and (v) the accuracy and
completeness of all corporate records made available to us by Alliance. As to
various questions of fact material to such opinions, we have, when relevant
facts were not independently established, relied upon certificates of officers
of Alliance and other appropriate persons.

Based upon the foregoing, and having regard to legal considerations we
deem relevant, we are of the opinion that, when the Shares have been registered
under the Act, and issued in accordance with the terms of the Agreement and Plan
of Merger dated October 18, 1995, among Alliance, the Merger Subsidiary and
BGII, as amended, the Shares will be legally issued, fully paid and
nonassessable.

We are qualified to practice law in the State of Nevada. The opinions
set forth herein are expressly limited to the laws of the State of Nevada and we
do not purport to be experts on, or to express any opinion herein concerning, or
to assume any responsibility as to the applicability to or the effect on any of
the matters covered herein of, any laws other than the laws of the State of
Nevada. We express no opinion concerning, and we assume no responsibility as to
laws or judicial decisions related to, or any orders, consents or other
authorizations or approvals as may be required by, any federal law, including
any federal securities law, or any state securities or blue sky laws.

We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement.

Yours very truly,

SCHRECK, JONES, BERNHARD,
WOLOSON & GODFREY

<PAGE>

EXHIBIT 8

March 6, 1996

Alliance Gaming Corporation
4380 Boulder Highway
Law Vegas, NV 89121

RE: FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

Dear Mesdames and Gentlemen:

You have requested our opinion on certain federal income tax
consequences of the merger of BGII Acquisition Corp. ("BAC"), a Delaware
corporation and wholly-owned subsidiary of Alliance Gaming Corporation, a Nevada
Corporation ("Alliance"), into Bally Gaming International, Inc., a Delaware
Corporation ("BGII") pursuant to the Agreement and Plan of Merger, dated as of
October 18, 1995 (as subsequently amended and restated, the "Merger Agreement")
among Alliance, BAC and BGII.

In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants and
representations contained in originals or copies, certified or otherwise
identified to our satisfaction, of the Merger Agreement, the Joint Proxy
Statement-Prospectus filed as part of Alliance's Form S-4 Registration Statement
(the "Joint Proxy Statement-Prospectus"), and such other documents as we have
deemed necessary or appropriate. Our opinion is conditioned on, among other
things, the accuracy of
<PAGE>

the facts, information, covenants and representations set forth in the documents
referred to above.

In our examination we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents. We also have assumed the
transactions related to the Merger or contemplated by the Merger Agreement will
be consummated in accordance with the Merger Agreement and as described in the
Joint Proxy Statement-Prospectus.

In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and other authorities as we have
considered relevant. We caution that statutes, regulations, judicial decisions
and administrative interpretations are subject to change at any time and, in
some circumstances, with retroactive effect. A change in the authorities upon
which our opinion is based could affect its conclusions, and we have not been
engaged to, and do not, assume any responsibility to update or revise this
opinion to reflect any such change in authorities.

OPINION

Based on the foregoing, our opinion is as set forth in the following
paragraphs 1 through 3.

(1) In the Merger, holders of BGII Common Stock generally will
recognize capital gain or loss equal to the difference between (x) the tax basis
for the shares of BGII Common Stock surrendered and (y) the sum of (i) the cash
received, including cash received in lieu of fractional shares plus (ii) the
fair market value of the shares of Alliance Common Stock received plus (iii) the
fair market value of the shares of Series B Special Stock received./1/ The fair
market value of each share of Alliance Common Stock or Series B Special Stock
received by a holder of BGII Common Stock will equal the mean between the
highest and lowest quoted selling prices of the Alliance Common Stock or Series
B Special Stock on the date of the Effective

- ---------------------------
/1/ Code Section 1001.
<PAGE>

Time./2/ Holders must determine gain or loss separately for each block of
shares of BGII Common Stock (i.e., shares of BGII Common Stock acquired at the
same cost in a single transaction) exchanged pursuant to the Merger./3/ The
capital gain or loss will be long-term if, as of the Effective Time, the shares
had been held by a holder of BGII Common Stock for more than one year/4/ and
will be short-term if, as of the Effective Time, the shares had been held by a
holder of BGII Common Stock for one year or less./5/ Short-term capital gain is
currently subject to a maximum marginal federal income tax rate of 39.6%./6/
For individuals, long-term capital gain is currently subject to a maximum
marginal federal income tax rate of 28%./7/ The current maximum long-term
capital gain rate for corporations is 35%./8/ Legislation passed by the
Congress and vetoed by the President would, if eventually enacted, reduce the
individual long-term capital gain rate to a maximum of 19.8%./9/ The proposed
effective date of the pending legislation precedes the expected Effective
Time./10/

(2) Any shares of Alliance Common Stock or Series B Special Stock
received by a holder of shares of BGII Common Stock in exchange for shares of
BGII Common Stock will have a tax basis equal to the fair market value of each
share of Alliance Common Stock or share or fraction thereof of Series B Special
Stock at the Effective Time./11/ The holders of shares of BGII Common Stock will
commence a new holding period on the day after the Effective Time for any share
of Alliance Common Stock or share or

- -------------------
/2/ Securities Co., 25 B.T.A. 446, Dec. 741, acq. XI-1 C.B. 6, rev'd on another
issue, 64 F.2d 330 (2d Cir. 1933).
/3/ Treas. Reg. (Section) 1.1012(c); Rev. Rul. 61-97, 1961-1 C.B. 394.
/4/ Code (Sections) 1222(3)-(4).
/5/ Code (Sections) 1222(1)-(2).
/6/ Code (Section) 1.
/7/ Code (Section) 1(h).
/8/ Code (Section) 11.
/9/ H.R. 2491, Balanced Budget Bill of 1995, (Section) 11021.
/10/ Id.
/11/ Code Section 1012.
<PAGE>

Time for any share of Alliance Common Stock or share or fraction thereof of
Series B Special Stock received in the Merger./12/

(3) Holders of shares of Series B Special Stock will recognize
ordinary income upon the payment of a dividend (to the extent of Alliance's
current or accumulated earnings and profits) of additional shares of Series B
Special Stock equal to the fair market value of such additional shares./13/ The
fair market value of each share of Series B Special Stock paid as a dividend
will equal the mean between the highest and lowest quoted selling prices of the
Series B Special Stock on the date of payment./14/ A distribution in excess of
Alliance's current and accumulated earnings and profits will be a tax free
return of capital to the extent of a holder's tax basis in the Series B Special
Stock,/15/ and thereafter, capital gain income./16/ The capital gain will be
long-term if, as of the date of payment, the shares had been held by a holder of
the Series B Special Stock for more than one year/17/ and will be short-term if,
as of the date of payment, the shares had been held by a holder of Series B
Special Stock for one year or less./18/

The foregoing opinion may not be applicable to, and does not address,
certain classes of taxpayers, including insurance companies, securities dealers,
financial institutions, foreign persons, persons who acquired shares of BGII
Common Stock pursuant to the exercise of employee stock options or rights or
otherwise as compensation and persons in special situations such as those who
hold BGII Common Stock as part of a hedging or conversion transaction or
straddle.

Except as expressly set forth above, we express no opinion to any
party as to the tax consequences, whether federal, state, local or foreign, of
the Merger or of any transactions related to the Merger or contemplated by the
Merger Agreement or

- -----------------------
/12/ H.M. Hooper, 26 B.T.A. 758, Dec. 7689; Rev. Rul. 66-7,
1966-1 C.B. 188.
/13/ Code (Sections) 301, 305(b)(4).
/14/ Securities Co., 25 B.T.A. 446, Dec. 741, acq. XI-1 C.B. 6, rev'd on
another issue, 64 F.2d 330 (2d Cir. 1933).
/15/ Code (Section) 301(c)(2).
/16/ Code (Section) 301(c)(3).
/17/ Code (Section) 1222(3).
/18/ Code (Section) 1222(1).
<PAGE>

the Joint Proxy Statement-Prospectus. This opinion is solely for the benefit of
you, your stockholders, and BGII stockholders and is not to be used, circulated,
quoted or otherwise referred to for any purpose without our express prior
written permission. We hereby consent to the inclusion of this opinion in
Alliance's Form S-4 Registration Statement and to the reference to this opinion
therein.

Very truly yours,

Milbank, Tweed, Hadley & McCloy

<PAGE>

EXHIBIT 12.1

BALLY GAMING INTERNATIONAL, INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1991 1992 1993 1994 1995
------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings:
Net income (loss)................ $ 5,004 $ 5,254 $ (23,443) $ 3,793 $(3,393)
Extraordinary item............... -- -- (3,759) -- --
Income taxes..................... 5,784 6,725 4,242 2,820 4,904
Imputed interest on rents........ 357 357 357 357 357
Interest and debt discount amor- 1,602 1,951 4,424 6,768 6,853
tization........................ ------- ------- --------- ------- -------
Earnings (loss) as defined for $12,747 $14,287 $ (18,179) $13,738 $ 8,721
ratio......................... ======= ======= ========= ======= =======
Fixed Charges:
Imputed interest on rents........ $ 357 $ 357 $ 357 $ 357 $ 357
Interest and debt discount amor- 1,602 1,951 4,424 6,768 6,853
tization........................ ------- ------- --------- ------- -------
Fixed charges as defined for $ 1,959 $ 2,308 $ 4,781 $ 7,125 $ 7,210
ratio......................... ======= ======= ========= ======= =======
Ratio of earnings to fixed charges. 6.51 6.19 -- 1.93 1.21
======= ======= ========= ======= =======
Amount by which earnings were (in- -- -- $ (22,960) -- --
adequate) to cover fixed charges.. ======= ======= ========= ======= =======
</TABLE>

<PAGE>

EXHIBIT 12.2

ALLIANCE GAMING CORPORATION

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA COMBINED FINANCIAL INFORMATION
-----------------------------------------
SIX MONTH TWELVE-MONTH SIX MONTH
PERIODS ENDED YEAR ENDED PERIOD ENDED PERIODS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, DECEMBER 31,
---------------------------------------------- ---------------- ---------- ------------ -----------------
1991 1992 1993 1994 1995 1994 1995 1995 1995 1994 1995
-------- ------- ------- -------- -------- ------- ------- ---------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net (loss)........ $(15,816) $(4,680) $(3,650) $(13,128) $(10,752) $(5,016) $(9,431) $ (3,381) $ (6,730) $(4,145) $ (7,494)
Income taxes...... (5,958) 241 265 290 787 2,555 2,642 1,202 1,289
Imputed interest
on rents......... 16,485 16,647 19,966 21,700 21,843 10,945 10,721 22,734 22,515 11,105 10,886
Interest and debt
discount 4,663 4,505 5,046 6,830 8,133 3,915 4,288 15,223 15,359 7,436 7,572
amortization..... -------- ------- ------- -------- -------- ------- ------- -------- -------- ------- --------
Earnings (loss)
as defined for $ (626) $16,472 $21,362 $ 15,643 $ 19,489 $10,134 $ 6,365 $ 37,131 $ 33,786 $15,598 $ 12,253
ratio.......... ======== ======= ======= ======== ======== ======= ======= ======== ======== ======= ========
Fixed Charges:
Imputed interest
on rents......... $ 16,485 $16,647 $19,966 $ 21,700 $ 21,843 $10,945 $10,721 $ 22,734 $ 22,515 $11,105 $ 10,886
Interest and debt
discount 4,663 4,505 5,046 6,830 8,133 3,915 4,288 15,223 15,359 7,436 7,572
amortization..... -------- ------- ------- -------- -------- ------- ------- -------- -------- ------- --------
Fixed charges as
defined for $ 21,148 $21,152 $25,012 $ 28,530 $ 29,976 $14,860 $15,009 $ 37,957 $ 37,874 $18,541 $ 18,458
ratio.......... ======== ======= ======= ======== ======== ======= ======= ======== ======== ======= ========
Ratio of earnings (0.03) 0.78 0.85 0.55 0.65 0.68 0.42 .98 .89 .84 0.66
to fixed charges.. ======== ======= ======= ======== ======== ======= ======= ======== ======== ======= ========
Amount by which
earnings were
(inadequate) to
cover fixed $(21,774) $(4,680) $(3,650) $(12,887) $(10,487) $(4,726) $(8,644) $ (826) $ (4,088) $(2,943) $ (6,205)
charges........... ======== ======= ======= ======== ======== ======= ======= -------- -------- ------- --------
Pro forma fixed
charge for Series
B Special Stock -- -- -- -- -- -- -- (11,674) (11,674) (5,837) (5,837)
dividend.......... -------- ------- ------- -------- -------- ------- ------- -------- -------- ------- --------
Amount by which pro
forma earnings
were (inadequate)
to cover fixed
charges and Series
B Special Stock -- -- -- -- -- -- -- $(12,500) $(15,762) $(8,780) $(12,042)
dividend.......... ======== ======= ======= ======== ======== ======= ======= ======== ======== ======= ========
</TABLE>

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors

Alliance Gaming Corp.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the registration statement.

KPMG Peat Marwick LLP

Las Vegas, Nevada

March 7, 1996

<PAGE>

EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-4 of
our report, dated February 13, 1996, on our audits of the consolidated
financial statements and financial statement schedule of Bally Gaming
International, Inc. We also consent to the reference to our firm under the
caption "Experts." As noted under the captions "The Merger--Opinion of BGII
Financial Advisor" and "Experts," Coopers & Lybrand L.L.P. neither examined
nor compiled nor had any other involvement with the preparation of the
accompanying prospective financial information included in this registration
statement and, accordingly, we do not express an opinion or any other form of
assurance with respect thereto, nor do we assume any responsibility for such
prospective financial information.

Coopers & Lybrand L.L.P.

Las Vegas, Nevada

March 6, 1996

<PAGE>

EXHIBIT 99.1

CONSENT OF NOMINEE

The undersigned hereby consents to being named as a nominee for election as
a director of Alliance Gaming Corporation (the "Company"), in the proxy
statement/prospectus and other materials prepared by or on behalf of the
Company in connection with its solicitation of proxies from stockholders of
the Company to be voted at the 1996 annual meeting of stockholders of the
Company and any adjournment thereof, and further consents to serve as a
director of the Company, if elected.

/s/ Christopher Baj
-------------------------------
Christopher Baj

Dated: March 6, 1996

<PAGE>

EXHIBIT NO. 99.2

In order to receive the Merger Consideration (as defined below) pursuant to
the terms of the Agreement and Plan of Merger described below, a properly
completed and duly executed copy of this Letter of Transmittal, together with
the certificates representing your shares of common stock of Bally Gaming
International, Inc. ("BGII"), must be delivered to the Exchange Agent at the
address set forth below. Delivery of this Letter of Transmittal and/or such
certificates to an address other than as shown below will not constitute a
valid delivery and will not transfer title or risk of loss, which will remain
with you. An addressed envelope is enclosed for your convenience.

----------------

LETTER OF TRANSMITTAL

TO ACCOMPANY CERTIFICATES REPRESENTING
SHARES OF COMMON STOCK OF

BALLY GAMING INTERNATIONAL, INC.

CONVERTED AND EXCHANGED IN THE MERGER

OF BGII ACQUISITION CORP.

WITH AND INTO

BALLY GAMING INTERNATIONAL, INC.

EFFECTIVE APRIL [ ], 1996

----------------

EXCHANGE AGENT:

AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NEW YORK 10005

----------------
<PAGE>

The Instructions accompanying this Letter of Transmittal constitute part of
the terms and conditions hereof and should be read carefully before this
Letter of Transmittal is completed.

DESCRIPTION OF BGII SHARES SURRENDERED

Please Print Name and Address of Registered Holder(s):

Please List Stock Certificate(s) Enclosed: (Attach additional list if
necessary)

<TABLE>
<CAPTION>
NUMBER OF BGII
SHARES
CERTIFICATE NUMBER(S) REPRESENTED
--------------------- --------------
<S> <C>
Total BGII Shares.............
Surrendered...................
</TABLE>

Gentlemen:

The undersigned hereby surrenders to American Stock Transfer & Trust
Company, as exchange agent (the "Exchange Agent"), the stock certificate(s)
described above, representing shares of the common stock, par value of $.01
per share (the "BGII Shares"), of Bally Gaming International, Inc., a Delaware
corporation ("BGII"), which have been converted into the right to receive (i)
a cash payment of $ (the "Cash Consideration"), (ii) shares of the
common stock, $.10 par value (the "Alliance Common Shares"), of Alliance
Gaming Corporation, a Nevada corporation ("Alliance") and (iii) shares of
the 15% Non-Voting Junior Special Stock, Series B, $.10 par value, of Alliance
(the "Alliance Special Shares") for each BGII share (the "Merger
Consideration"), pursuant to the terms and subject to the conditions set forth
in the Agreement and Plan of Merger, dated October 18, 1995, as amended, by
and among Alliance, BGII Acquisition Corp. ("BAC") and BGII (the "Merger
Agreement"). Pursuant to the Merger Agreement, BAC was merged with and into
BGII, effective April , 1996.

The undersigned hereby represents and warrant(s) that (1) the undersigned
has/have received a copy of the Joint Proxy Statement/Prospectus, dated March
11, 1996, (2) the undersigned is/are the exclusive owner(s) or the duly
authorized representatives of the exclusive owner(s) of such shares, is/are
entitled to exercise all rights evidenced thereby and has/have full power and
authority to transfer such shares and to surrender them to the Exchange Agent
in accordance with the terms hereof and (3) such shares are free and clear of
all liens, restrictions, charges, pledges and other encumbrances and are not
subject to any adverse claim. The undersigned will upon request exercise and
deliver any additional documents determined by the Exchange Agent or Alliance
to be necessary or desirable to complete the surrender of such shares.

All authority herein conferred or agreed to be conferred shall be binding
upon the successors, assigns, heirs, executors, administrators and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned.

The undersigned understands that the Cash Consideration will not be paid to
holders of BGII Shares, no certificate representing Alliance Common Shares or
Alliance Special Shares, and no dividend or distribution payable to holders of
Alliance Common Shares or Alliance Special Shares will be issued until a duly
executed and properly completed copy of this Letter of Transmittal and the
accompanying certificates representing surrendered BGII Shares have been
received by the Exchange Agent.

The undersigned understands that certificates will not be issued
representing fractional Alliance Common Shares. Instead, any BGII stockholder
otherwise entitled to receive a fractional share of Alliance Common Shares
will be paid an amount of cash equal to such fraction multiplied by $
[closing price of Alliance Common Shares at Effective Time]. The undersigned
also understands that no interest will be paid on amounts due for BGII Shares.
<PAGE>

Unless otherwise indicated below under "Special Exchange and Payment
Instructions," please issue the check for the payment of the Cash
Consideration and the cash in lieu of fractional Alliance Common Shares and
issue the certificates for Alliance Common Shares and Alliance Special Shares
in the name(s) of the record holder(s) set forth above. Unless otherwise
indicated below under "Special Delivery Instructions," please mail the checks
for the payment of the Cash Consideration and the cash in lieu of fractional
shares and certificates for Alliance Common Shares and Alliance Special Shares
to the record holder(s) at the address set forth above.

SPECIAL EXCHANGE AND PAYMENT INSTRUCTIONS

To be completed ONLY if certificates for Alliance Common Shares and Alliance
Special Shares and the checks for payment of the Cash Consideration and the
cash in lieu of fractional shares are to be issued in the name of someone
OTHER than the record holder(s) listed above (see Instruction 7 on Page 7
hereof).

PLEASE ISSUE AS FOLLOWS:

Name __________________________________________________________________________
(Please print)

Address _______________________________________________________________________
(Zip Code)

Tax ID or Social Security Number ______________________________________________

SPECIAL DELIVERY INSTRUCTIONS

To be completed ONLY if certificates for Alliance Common Shares and the
checks for the payment of the Cash Consideration and the cash in lieu of
fractional shares are to be sent to someone OTHER than the record holder(s) or
to an address other than that shown above for such record holder(s).

PLEASE DELIVER AS FOLLOWS:

Name __________________________________________________________________________
(Please Print)

Address _______________________________________________________________________
(Zip Code)

Tax ID or Social Security Number ______________________________________________

SIGNATURE(S)

SIGN HERE: __________________________ Date: _______________________________

_____________________________ Telephone Number: ___________________

_____________________________
Signature(s) of Shareholder(s)
<PAGE>

(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
STOCK CERTIFICATE(S) OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S)
BY CERTIFICATES AND DOCUMENTS TRANSMITTED. IF SIGNED BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE PRINT THE
FOLLOWING INFORMATION AND SEE INSTRUCTION 7.)

Name(s) of Securities Dealers, Inc. Capacity ____________________________

_____________________________________

_____________________________________
(Authorized Signature)

_____________________________________
(Title of Officer Signing Guarantee)

INSTRUCTIONS FOR SURRENDERING CERTIFICATES

(FORMING PART OF THE TERMS AND CONDITIONS
OF THE LETTER OF TRANSMITTAL)

1. The Merger; Payment. The merger of BAC with and into BGII was effective
April , 1996. Pursuant to the terms and conditions of the Merger Agreement,
each BGII Share was automatically converted on that date into the right to
receive the Merger Consideration. Upon receipt of the Letter of Transmittal
and surrendered BGII Share certificates, the Exchange Agent will determine the
amount of the cash payment you will receive as the Cash Consideration, and the
exact amount of Alliance Common Shares and Alliance Special Shares which
you will receive for your BGII Shares, based on a conversion ratio of
Alliance Common Shares and Alliance Special Shares for each BGII share, in
accordance with the terms of the Merger Agreement. No fractional shares of
Alliance Common Shares will be issued. In lieu thereof, you will receive a
check for the cash payment for any fraction of a share otherwise issuable. No
interest will be paid on amounts due for BGII Shares.

2. Execution and Delivery. Stock certificates for all BGII Shares
surrendered, together with the properly completed and duly executed Letter of
Transmittal or facsimile thereof and any other documents required in
connection with the Letter of Transmittal should be mailed or delivered to the
Exchange Agent at the appropriate address described herein. Each certificate
for BGII Shares surrendered hereunder should be listed separately, with the
certificate numbers in numerical order, in the space marked "Certificates
Enclosed" on page 2 of the Letter of Transmittal.

3. Conditions. Payment by check for the Cash Consideration and cash in lieu
of fractional shares, and issuance of Alliance Common Shares and Alliance
Special Shares in exchange for BGII Shares surrendered and accepted pursuant
to the Letter of Transmittal will be made only upon receipt by the Exchange
Agent of the stock certificates representing your BGII Shares, a properly
completed and duly executed Letter of Transmittal and any other required
documents.

4. Method of Delivery. The method of delivery of the Letter of Transmittal,
the stock certificates and other required documents are at the option and risk
of the shareholder. The delivery will be deemed made only when physically
received by the Exchange Agent. If delivery is by mail, it is suggested that
certified or registered mail with return receipt requested, properly insured,
be used.

5. No Conditional Surrenders. No alternative, irregular or conditional
surrender will be accepted.
<PAGE>

6. Inadequate Space. If the space provided in the Letter of Transmittal is
inadequate, the certificate numbers and number of shares or any additional
special instructions should be set forth on a separately signed schedule to be
attached hereto.

7. Signatures, Stock Powers and Endorsement; Guarantee of Signatures. If the
Letter of Transmittal is signed by the registered holder(s) of the
certificates tendered hereby, the signatures must correspond with the name(s)
as written on the face of the certificates, without alteration, enlargement or
any difference whatsoever.

If any shares tendered hereby are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.

When this Letter of Transmittal is signed by the registered holder(s) of the
certificate(s), no endorsements of the certificate(s) or separate stock powers
are required. If, however, the check for payment of the Cash Consideration,
the certificates for Alliance Common Shares, Alliance Special Shares and/or
the check for payment of cash in lieu of fractional shares are to be issued to
a person or persons other than the registered holder(s), the endorsement of
the certificate(s) transmitted hereby or separate stock powers are required,
and the signature thereon must be guaranteed by a commercial bank or trust
company in the United States, a member of a national securities exchange or a
member of the National Association of Securities Dealers, Inc. (an "Eligible
Institution").

If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s). Signatures on such certificate(s) or stock powers must be
guaranteed by an Eligible Institution (unless the certificate(s) or stock
powers are signed by an Eligible Institution).

If the Letter of Transmittal, any stock certificates or any stock power(s)
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such person(s) should so indicate when signing and
must submit proper evidence satisfactory to Alliance of their authority to so
act.

8. Mutilated, Lost, Stolen or Destroyed Certificates. Any shareholder whose
stock certificates have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent for further instructions.

9. Form W-9. A shareholder who surrenders stock certificate(s) hereunder is
required to provide the Exchange Agent with a correct Taxpayer identification
Number ("TIN") on Form W-9, which is provided herewith, and to certify that
the shareholder is not subject to backup withholding. Failure to provide the
information on the form may subject the surrendering shareholder to backup
withholding as described below.

10. Stock Transfer Taxes. If the check for payment of the Cash
Consideration, certificate(s) for Alliance Common Shares, Alliance Special
Shares and/or the check for payment of cash in lieu of fractional shares are
to be registered or issued in the name of any person(s) other than registered
holder(s) of the certificates surrendered hereby, or if certificates
surrendered hereby are registered in the name of any person(s) other than the
person(s) signing the Letter of Transmittal, or if for any other reason a
stock transfer tax is imputed, the amount of any such stock transfer tax,
whether imputed on the registered holder(s) or any other person(s), will be
payable to the Exchange Agent by the shareholder surrendering such
certificates. if satisfactory evidence of payment of such tax or exemption
therefrom is not submitted herewith, the amount of such stock transfer tax
will be deducted from any cash payable to the shareholder surrendering
certificates or, if such amount is not sufficient, the balance due will be
billed to such shareholder.

Except as provided in this Instruction 10, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) listed in the Letter
of Transmittal.
<PAGE>

11. Compliance and Waiver. All questions as to the validity, form and
acceptance of the certificate(s) surrendered will be determined by the
Exchange Agent and Alliance, whose determination shall be final and binding.
Alliance reserves the right to waive any irregularities or defects in the
surrender of any certificate(s) and its interpretation of the terms and
conditions of this Letter of Transmittal (including these instructions) with
respect to such irregularities or defects shall be final and binding. A
surrender will not be deemed to have been made until all irregularities or
defects have been cured or waived.

12. Request for Assistance or Additional Copies. Questions and requests for
additional assistance or copies should be submitted to American Stock Transfer
& Trust Company, the Exchange Agent, at or by mail at the appropriate
address set forth on Page 1 of this Letter of Transmittal.
<PAGE>

IMPORTANT TAX INFORMATION

Under Federal income tax laws, a shareholder whose certificates for BGII
Shares are surrendered is required to provide the Exchange Agent (as payer)
with his or her correct TIN on Form W-9 provided herewith. If such shareholder
is an individual, the TIN is his or her social security number. If the
Exchange Agent is not provided with the correct TIN, the shareholder may be
subject to a penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such a shareholder with respect to payments of the
Cash Consideration, the cash in lieu of fractional shares and dividend
payments with respect to Alliance Common Shares or Alliance Special Shares may
be subject to backup withholding.

Exempt shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. (In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement signed under penalty of
perjury, attesting to that individuals exempt status.) You should consult your
personal tax advisor for additional instructions.

If backup withholding applies, the Exchange Agent is currently required to
withhold 31 percent of any such payments made to the shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained by
such persons.

PURPOSE OF FORM W-9. To prevent backup withholding on payments that are made
to a shareholder with respect to BGII Shares converted pursuant to the Merger
Agreement, the shareholder is required to notify the Exchange Agent of his or
her correct TIN by completing the Form W-9 provided herewith certifying that
the TIN provided on such form is correct (or that such shareholder is awaiting
a TIN). The Form W-9 attached hereto includes instructions to ensure proper
completion of the form. Shareholders with any questions should consult their
personal tax advisor for additional assistance.

WHAT NUMBER TO GIVE THE EXCHANGE AGENT. Shareholders are required to give
the Exchange Agent the social security number or employer identification
number of the record owner of the shares. If the shares are in more than one
name or are not in the name of the actual owner, you should refer to the
guidelines on Page 2 of Form W-9 attached.
<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.

Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.

- ---------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, any one of the
individuals(1)
3. Husband and wife The actual owner of the account or,
(joint account) if joint funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult, or if the minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or incompetent
guardian or committee for a person(3)
designated ward, minor, or
incompetent person
7. A. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
B. So-called trust account The actual owner(4)
that is not a legal or valid trust
under State law
</TABLE>
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
--------------------------------------
<S> <C> <C>
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district,
or prison) that receives
agricultural program payments
</TABLE>

- ---------------------------------- ---------------------------------------

(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.

NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

OBTAINING A NUMBER

If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING

Payees specifically exempted from backup withholding on ALL payments include
the following:

. A corporation.

. A financial institution.

. An organization exempt from tax under section 501(a), or an individual
retirement plan.

. The United States or any agency or instrumentality thereof.

. A state, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.

. A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.

. An international organization or any agency or instrumentality thereof.

. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.

. A real estate investment trust.

. A common trust fund operated by a bank under section 584(a).

. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a) (1).

. An entity registered at all times under the Investment Company Act of
1940.

. A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:

. Payments to nonresident aliens subject to withholding under section
1441.

. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.

. Payments of patronage dividends where the amount received is not paid in
money.

. Payments made by certain foreign organizations.

Payments of interest not generally subject to backup withholding include the
following:

. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.

. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).

. Payments described in section 6049(b)(5) to nonresident aliens.

. Payments on tax-free covenant bonds under section 1451.

. Payments made by certain foreign organizations.

. Payments made to a nominee.
<PAGE>

EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE
PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE
OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.

Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.

PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may
also apply.

PENALTIES

(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.

(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.

(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.

(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an underpayment attributable to
that failure.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.

<PAGE>

EXHIBIT 99.3

CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY.
PRELIMINARY PROXY MATERIAL

BALLY GAMING INTERNATIONAL, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
APRIL 2, 1996

KNOW ALL MEN BY THESE PRESENTS that the undersigned stockholder of BALLY
GAMING INTERNATIONAL, INC. the ("Company") does hereby constitute and appoint
RICHARD GILLMAN and NEIL E. JENKINS (the "Proxies") and each of them (each with
full power of substitution of another) as attorneys, agents and proxies, for
and in the name, place and stead of the undersigned, and with all the powers
the undersigned would possess if personally present, to vote as instructed on
the reverse side hereof, all of the shares of Common Stock of the Company which
the undersigned is entitled to vote at the Annual Meeting of Stockholders of
the Company to be held on April 2, 1996 at 9 A.M. local time at the Alexis Park
Resort located at 375 East Harmon Avenue, Las Vegas, Nevada, and at any
adjournment or adjournments thereof, all as set forth in the Notice of Annual
Meeting and Proxy Statement/Prospectus.

In their discretion, the Proxies are authorized to vote upon such other and
further business as may properly come before the meeting.

THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN. IF NO SUCH INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.

(Continued and to be signed on reserve side)
<PAGE>

- -------------------------------------------------------------------------------

[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.

FOR WITHHELD
1. Election of [ ] [ ]
Directors.

For, except vote withheld for the following nominee(s):

To elect the following directors to hold office until the earlier of (i) the
effective time of the Merger (as defined in the Agreement) or (ii) the next
Annual Meeting of Stockholders and until their successors are duly elected and
qualified: Richard Gillman, Hans Kloss, Neil E. Jenkins, Charles C. Carella,
James J. Florio, Lewis Katz and Kenneth D. McPherson. In the event authority to
vote for a certain nominee or nominees is to be withheld, indicate on the line
below the name(s) of such nominee(s):

- --------------------------------------------------------------------------------

2. To approve the Agreement and Plan of Merger, dated as of October 17, 1995,
as amended and restated, by and among the Company, BGII Acquisition Corp.
and Alliance Gaming Corporation ("Alliance"), as amended and restated (the
"Agreement") including the merger of the Company with a subsidiary of
Alliance pursuant to the terms of such Agreement and Plan of Merger and the
approval of the 1994 Stock Option Plan for Non-Employee Directors, as
amended, and Amendments No. 3 to each of the 1991 Incentive Plan and the
1991 Non-Employee Directors' Plan.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

I (we) will [ ] will not [ ]

attend the Annual Meeting in person

PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0061

SIGNATURE(S): __________________ DATE: ______________

IMPORTANT: Please sign exactly as name or names appear hereon, and when signing
as attorney, guarantor, administrator, trustee or guardian, give your
full title as such. If signatory is a corporation, sign the full
corporate name by a duly authorized officer. If shares are held
jointly each shareholder named should sign.

- --------------------------------------------------------------------------------

<PAGE>

EXHIBIT 99.4

PROXY PROXY

ALLIANCE GAMING CORPORATION

4380 BOULDER HIGHWAY, LAS VEGAS, NEVADA 89121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Steve Greathouse and John W. Alderfer as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated below, all the shares of Common
Stock, par value $.10 per share (the "Common Stock") of Alliance Gaming
Corporation (the "Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held at Sam's Town Hotel & Gambling Hall
Conference Center, 5111 Boulder Highway, Las Vegas NV 89121 on Tuesday, April
2, 1996 at 2:00 p.m., local time and any adjournment or adjournments thereof,
with all the powers the undersigned would possess if personally present, upon
the matters noted below:

(Continued and to be signed on reserve side)

<PAGE>

- --------------------------------------------------------------------------------
1. Adoption of the Agreement and Plan of Merger dated as of October 18, 1995,
as amended (the "Merger Agreement") among the Company, BGII Acquisition
Corp., its wholly-owned subsidiary (the "Merger Subsidiary"), and Bally
Gaming International, Inc. ("BGII"), pursuant to which, among other things,
(i) the Merger Subsidiary will be merged with and into BGII, with BGII
surviving as a wholly-owned subsidiary of the Company, and (ii) the
stockholders of BGII will receive cash, shares of 15% Non-Voting Junior
Special Stock, Series B, $.10 par value ("Series B Special Stock") and
shares of Common Stock in exchange for their BGII shares.

FOR [X] AGAINST [X] ABSTAIN [X]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.

2. Election of the following nominees as Directors for the three year term
expiring in 1998: Christopher Baj and David Robbins.

WITHHOLD FOR THE FOLLOWING ONLY (WRITE THE NAME OF THE NOMINEE(S) IN THE SPACE
BELOW)

FOR [X] WITHHOLD AUTHORITY [X]_________________________________

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES

Please sign exactly
as name appears below.

When shares are held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign
in full corporate name by
the President or
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.

___________________________
Signature

___________________________
Signature if held jointly

Dated: _____________ , 1996

Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.

- --------------------------------------------------------------------------------