<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ALLIANCE GAMING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
Dear Stockholder:
I am pleased to provide you with the enclosed proxy statement and Annual
Report for this year's Annual Meeting of Stockholders. As you will see from the
accompanying Annual Report, 1996 was a successful year for Alliance and a year
of dramatic change. We achieved our major strategic goal by acquiring Bally
Gaming International, Inc., the second largest gaming device manufacturer in
North America, thereby positioning the Company in a high-growth end of the
gaming industry. The merger has been successfully implemented and our financial
performance over the first half of fiscal 1997 has improved substantially, with
revenues increasing by 204%, cash flow increasing by 69% and net income
increasing by $14.2 million to $4.8 million as compared to the first half of
fiscal 1996.
Although we are having a great year, we intend to keep moving forward,
particularly in our efforts to deliver greater stockholder value. A key element
in these efforts is to provide stock-based incentive compensation arrangements
for those individuals who can play a meaningful role in continuing to improve
the Company's performance. Such a program could also be critical in our
recruitment of a new chief executive officer.
Adoption of the 1996 Long-Term Incentive Plan is on the agenda for
stockholder approval at the Annual Meeting. The Plan will provide for the
issuance of just 3,000,000 shares over its 10-year life, less than 10% of the
current amount of outstanding shares. All stock option awards must provide for
an exercise price at least equal to the fair market value of the stock on the
date of grant. The Plan prohibits the repricing of already granted options that
are "under water". Additionally, in line with the best current thinking on
executive compensation, the Plan provides that no more than 600,000 shares of
restricted stock may be awarded during the life of the Plan. Further, restricted
stock awards must have a minimum vesting period of three years and a continued
employment requirement.
Your Board strongly believes that this plan will add significant value to
Alliance Gaming stock and urges you to vote for Proposal No. 2 on the enclosed
proxy card.
Even if you can't attend in person, it is important that your shares be
represented at the Meeting. If you have any questions, or require any assistance
in voting your shares, please call the company assisting us in the solicitation
of proxies, Georgeson & Company Inc., toll free, 1-800-223-2064.
Yours sincerely,
LOGO
David Robbins
Chairman of the Board
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6601 SO. BERMUDA RD.
LAS VEGAS, NEVADA 89119
TEL: 702.270.7600
FAX: 702.263.5636
<PAGE> 3
ALLIANCE GAMING CORPORATION LOGO
6601 SOUTH BERMUDA ROAD
LAS VEGAS, NEVADA 89119
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 16, 1997
------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Alliance Gaming Corporation (the "Company") will be held at The
Flamingo Hilton Hotel, 3555 S. Las Vegas Boulevard, Las Vegas, Nevada, on April
16, 1997, at 10:00 a.m., local time, for the following purposes:
1. To elect two directors to serve until the expiration of their respective
terms and until their respective successors shall be elected and shall
qualify;
2. To approve the Company's 1996 Long-Term Incentive Plan; and
3. To consider such other matters as may properly be before the meeting.
The Board of Directors has fixed the close of business on March 3, 1997 as
the record date for the determination of the stockholders entitled to notice of,
and to vote at, the Meeting or any adjournment or postponement thereof.
We hope that you are able to attend the Meeting, but, in any event, please
sign, date and return promptly the enclosed proxy in the envelope so that your
shares may be voted at the Meeting.
By Order of the Board of Directors
/s/ DAVID D. JOHNSON
-------------------------------------
David D. Johnson
Senior Vice President, General Counsel
and Secretary
Las Vegas, Nevada
March 12, 1997
<PAGE> 4
ALLIANCE GAMING CORPORATION
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Alliance Gaming Corporation (the "Company") in connection with the Annual
Meeting of Stockholders of the Company (the "Meeting") to be held at 10:00 a.m.,
local time, at The Flamingo Hilton Hotel, 3555 S. Las Vegas Boulevard, Las
Vegas, Nevada, on April 16, 1997, and any adjournment or postponement thereof.
At the Meeting, stockholders will be asked to vote upon the following matters:
1. To elect two directors to serve until the expiration of their respective
terms and until their respective successors shall be elected and shall
qualify;
2. To approve the 1996 Long-Term Incentive Plan (the "1996 Plan"); and
3. To consider such other matters as may properly be before the meeting.
It is expected that this Proxy Statement and accompanying proxy card will
first be mailed to stockholders on or about March 12, 1997.
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others forwarding the
solicitation material to beneficial owners of shares of Common Stock. In
addition to the use of the mails, directors, officers, regular employees and
certain stockholders of the Company, none of whom will receive additional
compensation therefor, may solicit proxies on behalf of the Company personally,
by telephone or by facsimile transmission. The Company will also employ
Georgeson & Company Inc., 88 Pine Street, Wall Street Plaza, 30th Floor, New
York, New York 10005 (telephone: (212) 440-9800), to assist in soliciting
proxies for a fee of $12,000, plus out-of-pocket expenses.
The Company's executive offices are located at 6601 South Bermuda Road, Las
Vegas, Nevada 89119, telephone (702) 270-7600.
NUMBER OF SHARES OUTSTANDING AND VOTING
All shares represented by the accompanying proxy, if the proxy is properly
executed and returned, will be voted as specified by the stockholder. If no
contrary instructions are given, such shares will be voted to (i) elect the two
director nominees named herein for the terms stated herein, and (ii) authorize
and approve the 1996 Plan. Any stockholder has the power to revoke his or her
proxy at any time before it has been voted by filing with the Secretary of the
Company an instrument revoking it, by submitting a substitute proxy bearing a
later date or by voting in person at the Meeting.
Only stockholders of record of shares of Common Stock at the close of
business on March 3, 1997, the record date for the Meeting fixed by the Board of
Directors, are entitled to vote at the Meeting. On that date, there were
outstanding and entitled to vote at the Meeting 31,838,632 shares of Common
Stock, each of which is entitled to one vote at the Meeting.
A majority of the outstanding shares of Common Stock, represented in person
or by proxy, will constitute a quorum at the Meeting. Shares represented by
proxies that reflect abstentions or "broker non-votes" will be counted as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. However, proxies that reflect abstentions as to a particular
proposal will be treated as voted for purposes of
1
<PAGE> 5
determining the approval of that proposal and will have the same effect as a
vote against that proposal, while proxies that reflect broker non-votes will be
treated as unvoted for purposes of determining approval and will not be counted
as votes for or against that proposal. The affirmative vote of the holders of a
plurality of the votes cast by the holders of shares entitled to vote thereon
present in person or by proxy at the Meeting is required to elect each director.
The affirmative vote of the holders of a majority of the shares of Common Stock
voted at the Meeting is required to approve the 1996 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 3, 1997 with
respect to the beneficial ownership of the Common Stock, which constitutes the
Company's only outstanding class of voting securities, by (i) each person who,
to the knowledge of the Company, beneficially owned more than 5% of the Common
Stock, (ii) each director of the Company, (iii) the executive officers named in
the Summary Compensation Table below and (iv) all executive officers and
directors of the Company as a group. Except as indicated, beneficial ownership
includes the sole power to vote and to dispose of the securities in question. No
director or executive officer of the Company owned any other equity securities
of the Company.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
SHARES(1)(2) CLASS(1)(2)
---------- ------------
<S> <C> <C>
Alfred H. Wilms......................................... 7,034,082(3) 20.8%
FMR Corp. .............................................. 3,271,086(4) 10.3%
82 Devonshire Street
Boston, Massachusetts 02109
AXA Assurances I.A.R.D Mutuelle and..................... 1,716,878(5) 5.3%
AXA Assurances Vie Mutuelle
21, rue de Chateaudun
75009 Paris France
Alpha Assurances I.A.R.D Mutuelle and
Alpha Assurances Vie Mutuelle
100-101 Terrasse Boieldieu
92042 Paris La Defense France
AXA Courtage Assurance Mutuelle
26, rue Louis le Grand
75009 Paris France
AXA
23, avenue Matignon
75008 Paris France
The Equitable Companies Incorporated
787 Seventh Avenue
New York, New York 10019
Jacques Andre........................................... 35,500(6) *
Anthony L. DiCesare..................................... 391,300(7) 1.2%
Craig Fields............................................ 337,500(8) 1.0%
Joel Kirschbaum......................................... 1,016,800(9) 3.1%
David Robbins........................................... 140,000(10) *
David D. Johnson........................................ 133,333(11) *
Robert L. Miodunski..................................... 61,222(12) *
Robert L. Saxton........................................ 94,000(13) *
All executive officers and directors as a group......... 10,579,232(14) 29.4%
</TABLE>
- ---------------
* Less than 1%.
(1) Excludes the effect of the issuance of (i) 2,750,000 shares at $1.50 per
share subject to warrants originally issued to Kirkland-Ft. Worth
Investment Partners, L.P. ("KFW") and (ii) 1,250,000 shares at $1.50 per
share subject to warrants originally issued to Gaming Systems Advisors,
L.P.("GSA")
2
<PAGE> 6
pursuant to an agreement (the "GSA Advisory Agreement") and 2,500,000
shares at $1.50 per share subject to additional warrants originally issued
to GSA upon consummation of the merger with Bally Gaming International,
Inc. (the "Merger"), all of which become exercisable in equal one-third
tranches only when the Common Stock price reaches $11, $13 and $15,
respectively. Pursuant to an amendment to Schedule 13D filed on October 31,
1996, as part of a distribution of assets from KFW and GSA to Kirkland
Investment Corporation ("KIC") and GSA, Inc. ("GSI") on the one hand and to
Kirkland Investors, L.P. on the other hand, approximately 62% of such
warrants were distributed to Kirkland Investors, L.P. and are no longer
owned by Mr. Kirschbaum, KIC, KFW, GSI or GSA.
(2) A portion of the employee stock options referred to below have been
approved by the Board of Directors and are granted under the 1996 Plan
which will be voted on by stockholders at the Meeting.
(3) Includes 2,000,000 shares subject to warrants issued to Mr. Wilms at $2.50
per share. Mr. Wilms' mailing address is c/o the Company, 6601 South
Bermuda Road, Las Vegas, Nevada 89119.
(4) FMR Corp. filed an amended Schedule 13G indicating ownership as of December
31, 1996 of 3,271,086 shares.
(5) The Mutuelles AXA as a group, AXA and The Equitable Companies Incorporated
("AXA") filed an amended Schedule 13G indicating ownership as of December
31, 1996 of 1,716,878 shares held for investment purposes, 500,000 of which
may be acquired upon exercise of certain warrants at $8.25 per share by
Donaldson, Lufkin & Jenrette Securities Corporation, a subsidiary of The
Equitable Companies, Incorporated, a subsidiary of AXA.
(6) Includes 5,500 shares owned and 30,000 shares subject to options that are
currently exercisable or will become exercisable within 60 days or upon
stockholder approval.
(7) Includes 16,300 shares owned and 375,000 shares subject to options that are
currently exercisable or will become exercisable within 60 days or upon
stockholder approval, but excludes certain additional shares to which Mr.
DiCesare is entitled based upon information contained in the Schedule 13D
referred to in Note (9) below; Mr. DiCesare has certain rights to receive a
portion of the securities that KIC is entitled to receive upon dissolution
of KFW and that GSI is entitled to receive upon dissolution of GSA.
(8) Represents shares subject to options that are currently exercisable or will
become exercisable within 60 days, but excludes warrants exercisable at
$1.50 per share for 250,000 shares which become exercisable in equal
one-third tranches only when the Common Stock price reaches $11, $13 and
$15, respectively.
(9) Includes 466,800 shares owned and 550,000 shares subject to options that
are currently exercisable or will become exercisable within 60 days or upon
stockholder approval, but excludes the shares referred to in Note (1).
Based upon information contained in a Schedule 13D filed by Mr. Kirschbaum
on June 23, 1994, as amended from time to time and most recently on October
31, 1996. Of such shares owned, certain amounts have been or will be sold
or distributed to Mr. DiCesare and, possibly, certain other persons, as set
forth in the Schedule 13D.
(10) Includes 30,000 shares owned and 90,000 shares subject to options that are
currently exercisable or will become exercisable within 60 days or upon
stockholder approval; also includes 20,000 shares subject to options
granted to Mr. Robbins by KFW based upon information contained in the
Schedule 13D referred to in Note (9) above.
(11) Represents shares subject to options that are currently exercisable or will
become exercisable within 60 days.
(12) Includes 2,000 shares owned and 59,222 shares subject to options that are
currently exercisable or will become exercisable within 60 days.
(13) Represents shares subject to options that are currently exercisable or will
become exercisable within 60 days.
(14) Includes 4,090,726 shares subject to options that are currently exercisable
or will become exercisable within 60 days or upon stockholder approval.
3
<PAGE> 7
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
GENERAL
The Company's By-laws provide that the Board of Directors shall consist of
no fewer than three nor more than nine directors, with the exact number to be
fixed by the Board of Directors. The Company's By-laws provide that the Board of
Directors shall 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
has fixed the number of directors at seven, two of whom will be elected at the
Meeting. See "Stockholders Agreement". In view of the Company's pending search
for a chief executive officer, the Board of Directors has determined to leave
the seventh directorship vacant at this time. Directors are elected by a
plurality of the votes cast by the holders of shares entitled to vote thereon.
Anthony L. DiCesare and Joel Kirschbaum 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 Company in favor of their respective
election will be voted for Messrs. DiCesare and Kirschbaum. Although the Company
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 Board of Directors recommends a vote in favor of Messrs. DiCesare and
Kirschbaum.
The following table sets forth the names of, and certain information with
respect to, the two persons nominated by the Company at the Meeting and each
other director of the Company who will continue to serve as a director after the
Meeting.
<TABLE>
<CAPTION>
DIRECTOR TERM POSITION CURRENTLY HELD
NOMINEES FOR DIRECTOR AGE SINCE EXPIRES WITH THE COMPANY
--------------------------- ----- -------- ------- ---------------------------
<S> <C> <C> <C> <C>
Anthony L. DiCesare(2)(3) 34 1994 1999 Executive Vice President --
Development and Director
Joel Kirschbaum(3) 45 1994 1999 Director
CONTINUING DIRECTORS
---------------------------
Jacques Andre(1)(4) 59 1996 1998 Director
Dr. Craig Fields(2) 49 1994 1997 Vice Chairman of the Board
of Directors
David Robbins(1)(4) 37 1994 1998 Chairman of the Board of
Directors
Alfred H. Wilms(1)(2)(3)(4) 51 1983 1997 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Executive Committee
(3) Member of the Nominating Committee
(4) Member of the Compensation Committee
JACQUES P. ANDRE was appointed a director in August 1996. Mr. Andre has
been a partner with Ray & Berndtson, Inc., an international executive search
firm, from 1975 to the present. He also serves on its Board of Directors.
ANTHONY L. DICESARE was employed by KIC, which is the sole general partner
of KFW, from April 1991 to July 1994 and joined the Company as Executive Vice
President -- Development and as a director in July 1994.
DR. CRAIG FIELDS was appointed a director in October 1994 and became Vice
Chairman of the Board of Directors in March 1995. Dr. Fields was employed by the
U.S. Department of Defense Advanced Research Projects Agency ("ARPA") from 1974
to 1990. He joined the Microelectronics and Computer Technology
4
<PAGE> 8
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 the Company, Ensco, Inc. and Projectavision, Inc.
JOEL KIRSCHBAUM was appointed a director in July 1994 and served as
Chairman of the Board of Directors from July 1994 to March 1995. Mr. Kirschbaum
is the sole stockholder, director and officer of KIC. He has been engaged in
operating the businesses of KIC and KFW since January 1991 when KIC and KFW 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 KFW, 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 also a consultant to the Company.
DAVID ROBBINS was appointed a director in July 1994 and Chairman of the
Board of Directors in February 1997. Mr. Robbins is an attorney with Brock,
Fensterstock, Silverstein, McAuliffe & Wade, LLC and was an attorney with
O'Sullivan, Graev & Karabell, LLP from September 1995 to February 1997. From May
1993 to September 1995, Mr. Robbins was an attorney with Kramer, Levin,
Naftalis, Kamin & Frankel.
ALFRED H. WILMS has served as a director of the Company since November
1983. He served as chief executive officer of the Company from December 1984 to
July 1994 and as Chairman of the Board of Directors of the Company from August
1986 to July 1994. 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.
VOTE REQUIRED
The election of each director requires the vote of the holders a plurality
of the votes cast by the holders of shares entitled to vote thereon present in
person or by proxy at the Meeting. Pursuant to the Company's Articles of
Incorporation, votes for directors may not be cumulated. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE IN FAVOR OF MESSRS. DICESARE AND KIRSCHBAUM.
STOCKHOLDERS AGREEMENT
On July 14, 1994, as contemplated by the Stockholders Agreement dated as of
September 21, 1993 by and among the Company, KIC, GSA, KFW and Mr. Wilms (as
amended, the "Stockholders Agreement"), the Board of Directors was reconfigured
to consist of four persons designated by KIC (Messrs. DiCesare, Kirschbaum,
Robbins and another individual) and three persons designated by Mr. Wilms
(Messrs. Wilms and two others). The Stockholders Agreement and related
transactions are more fully described in the Company's 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 to consist of four persons designated by
KIC (currently Messrs. Andre, DiCesare, Kirschbaum and Robbins), one person
designated by Mr. Wilms (Mr. Wilms) and two new directors designated by a
majority of the Board of Directors. On October 20, 1994 Dr. Fields and Steve
Greathouse, the Company's former chief executive officer, were appointed to the
Board of Directors under this provision. As amended, the Stockholders Agreement
also provides that Mr. Wilms may designate two persons (the "Advisors") who will
be observers of, and advisors to, the Board of Directors and who will be
entitled to attend all of the Board of Directors' meetings and receive all
information furnished to members of the Board of Directors. Mr. Wilms and/or at
least one Advisor will be entitled to attend all meetings of the committees of
the Company's and its subsidiaries' boards of directors. In addition, pursuant
to the Stockholders Agreement, Mr. Wilms is contractually obligated until
September 21, 1997 to vote his shares of Common Stock in favor of and otherwise
to use his best efforts to elect four nominees of KIC to the Board of Directors,
including by voting for Messrs. DiCesare and Kirschbaum at the Meeting. See
"Certain Relationships and Related Transactions."
5
<PAGE> 9
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended June 30, 1996, the Board of Directors held 39
meetings. All directors attended at least 75 percent of the aggregate of all
meetings of the Board of Directors and of all committees on which such person
served during such period. In light of the large number of Board of Directors
meetings during the last fiscal year, which resulted from the pendency of the
Merger, the Board of Directors assumed many of the functions of its committees
during this 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 the Company. The Executive
Committee did not meet during the fiscal year ended June 30, 1996.
Audit Committee. The Audit Committee of the Board of Directors is presently
comprised of Messrs. Robbins (Chairman), Andre 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 the Company's financial statements for the then current
fiscal year; the policies and procedures of the Company and management in
maintaining the Company's books and records and furnishing information necessary
to the independent auditors; the adequacy and implementation of the Company's
internal controls, including the internal audit function and the adequacy and
competency of the related personnel; and such other matters relating to the
Company'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, 1996.
Nominating Committee. The Nominating Committee of the Board of Directors is
presently comprised of Messrs. Kirschbaum (Chairman), DiCesare and Wilms. This
Committee advises and makes recommendations to the Board of Directors on all
matters concerning the selection of candidates as nominees for election as
directors. The Committee did not meet during the fiscal year ended June 30,
1996. The Committee does not currently intend to consider nominations by
stockholders.
Compensation Committee. The Compensation Committee is presently comprised
of Messrs. Robbins (Chairman), Andre and Wilms. This Committee makes
recommendations concerning the compensation of the Company's executive officers.
The Compensation Committee met once during the fiscal year ended June 30, 1996
in executive session or in conjunction with the entire Board of Directors.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or to be paid by the
Company to the Company's chief executive officer who has since stepped down from
his positions with the Company and its four other most highly compensated
executive officers receiving over $100,000 per year for services rendered in all
capacities to the Company during the fiscal year ended June 30, 1996, and one
individual who met the criteria for disclosure but was not serving as an
executive officer at June 30, 1996 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
FISCAL ANNUAL COMPENSATION COMPENSATION
YEAR ------------------------------------- AWARDS
NAME AND ENDING OTHER ANNUAL ------------ ALL OTHER
PRINCIPAL POSITION JUNE 30 SALARY BONUS COMPENSATION(4) OPTIONS COMPENSATION(1)
- ------------------------------ ------- -------- ---------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Steve Greathouse(2) 1996 $400,000 $ 450,000 -- $12,349
Former Chairman of the Board 1995 338,462 1,312,500 500,000 4,638
of Directors, President
and chief executive officer
Anthony L. DiCesare 1996 $250,000 $ 375,000 -- $ 8,652
Executive Vice President -- 1995 170,347 -- -- 5,942
Development
David D. Johnson 1996 $200,000 $ 350,000 -- $ 6,277
Senior Vice President, 1995 38,462 50,000 200,000 1,486
General
Counsel and Secretary
Robert L. Miodunski 1996 $194,808 $ 70,000 36,000 $ 8,418
Senior Vice 1995 175,000 75,000 -- 4,816
President -- Route
Operations (Nevada) 1994 47,115 15,000 85,000 807
Robert L. Saxton 1996 $190,846 $ 80,000 -- $ 6,043
Senior Vice 1995 175,000 35,000 -- 5,988
President -- Casino
Operations 1994 123,077 15,000 110,000 5,723
John W. Alderfer(3) 1996 $255,569 -- -- $ 9,954
Former Senior Vice 1995 228,756 -- 150,000 19,127
President,
Treasurer and chief 1994 222,137 $ 50,000 -- 19,622
financial officer
</TABLE>
- ------------------------
As used in the tables provided under the caption "Executive Compensation,"
the character "--" is used to represent "zero."
(1) "All Other Compensation" for 1996 includes (i) contributions made by the
Company to the Company's Profit Sharing 401(k) Plan in amounts of $0,
$2,375, $0, $2,375, $0, and $2,375 on behalf of Mr. Greathouse, Mr.
DiCesare, Mr. Johnson, Mr. Miodunski, Mr. Saxton, and Mr. Alderfer,
respectively, and (ii) payments made in connection with health, life and
disability insurance programs in amounts of $12,349, $6,277, $6,277, $6,043,
$6,043 and $7,579 on behalf of Mr. Greathouse, Mr. DiCesare, Mr. Johnson,
Mr. Miodunski, Mr. Saxton, and Mr. Alderfer, respectively.
(2) Mr. Greathouse joined the Company as President and chief executive officer
in August 1994 and assumed the position of Chairman of the Board of
Directors in March 1995. Effective December 31, 1996, Mr. Greathouse stepped
down from his positions at the Company.
(3) In June 1996, Mr. Alderfer resigned from the Company.
(4) The aggregate amount of such compensation to be reported herein is less than
the lesser of $50,000 and 10 percent of the total annual salary and bonus
reported for each of the Named Executive Officers.
7
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES
INDIVIDUAL GRANTS OF STOCK
----------------------------------- PRICE APPRECIATION
% OF TOTAL FOR
GRANTED TO OPTION TERMS
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ----------------------------------------------------- -------- ------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert Miodunski(a).................................. 36,000 11.4% $ 5.50 8/31/01 $67,000 $153,000
</TABLE>
(a) The options granted have six-year terms and vest in equal increments over
three years beginning on August 28, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JUNE 30, 1996 JUNE 30, 1996
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steve Greathouse.......................... -- -- 250,000 250,000 -- $ 469,000(a)
David D. Johnson.......................... -- -- 66,667 133,333 -- --
Robert L. Miodunski....................... -- -- 28,333 92,667 -- --
Robert L. Saxton.......................... -- -- 70,000 68,000 -- --
John W. Alderfer.......................... -- -- 237,000(b) -- $ 103,125 --
</TABLE>
- ---------------
(a) Represents the value of 250,000 warrants with a strike price of $1.50, which
become exercisable in equal one-third tranches only when the Common Stock
price reaches $11, $13 and $15, respectively, and is computed as the
difference between the strike price and the closing price on the last day of
the fiscal year.
(b) Subsequent to June 30, 1996, Mr. Alderfer exercised 75,000 options, and the
remainder of his options have expired.
DIRECTORS' COMPENSATION
Directors of the Company who are also employees are not separately
compensated for their services as directors. Fee arrangements with other
directors of the Company are presently as follows: (i) Mr. Andre, $30,000 per
year for all services as a director and member of various committees; (ii) Dr.
Fields, $250,000 per year for all services as Vice Chairman of the Board of
Directors and Chairman of the Executive Committee; (iii) Mr. Kirschbaum,
$250,000 per year for all services as a consultant, director and member of the
Nominating Committee; (iv) Mr. Robbins, $35,000 per year for all services as a
director and member of various committees; and (v) Mr. Wilms, $150,000 per year
for all services as a director and member of various committees. As a result of
his election as Chairman of the Board of Directors in February 1997, Mr.
Robbins' compensation will be increased to $135,000 per year. Directors are also
reimbursed for their reasonable out-of-pocket expenses incurred on Company
business.
The Board of Directors granted Dr. Fields a bonus of $300,000 related to
the two-year period ended June 30, 1996 which was paid in the quarter ended
September 30, 1996. The Board of Directors granted Mr. Kirschbaum a bonus of
$575,000 related to the two-year period ended June 30, 1996 which was paid in
the quarter ended September 30, 1996.
Subject to the approval of the 1996 Plan by the stockholders, Mr. Andre and
Mr. Robbins received stock option grants on January 7, 1997 of 30,000 shares and
60,000 shares, respectively, with an exercise price of $4.00 per share. In
addition, in conjunction with his being elected Chairman of the Board of
Directors in February 1997, Mr. Robbins was granted an additional stock option
covering 30,000 shares with an exercise price of $4.375 per share. Under current
policy, so long as they remain directors, Mr. Andre and Mr. Robbins will receive
additional grants of 15,000 options on the respective anniversary dates of their
original election to
8
<PAGE> 12
the Board of Directors. As a result of the consummation of the Merger, Dr.
Fields was granted 150,000 stock options with an exercise price of $3.4375 per
share and a five-year term, effective June 18, 1996. In August 1996, the Board
of Directors granted Mr. DiCesare and Mr. Kirschbaum 375,000 and 550,000 stock
options, respectively, with an exercise price of $3.4375; a portion of these
options are subject to approval by the stockholders of the 1996 Plan. All the
foregoing options have or will have five-year terms, were or will be granted
with exercise prices at or above the market price on the date of grant and
vested or will vest on the date of grant. These options remain exercisable
regardless of whether the optionee remains an employee, director or paid
consultant of the Company at the time of exercise.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Effective December 31, 1996, Mr. Greathouse stepped down from his positions
at the Company. Mr. Greathouse was paid $440,000 in settlement of the Company's
obligations under his employment contract, and is serving as a consultant to the
Company for calendar year 1997 for a fee of $225,000. Mr. Greathouse will remain
eligible for certain life and health benefits through August 14, 1997. In
addition, Mr. Greathouse's options became fully vested and will remain
exercisable through August 29, 2001.
The Company is party to an employment agreement with Mr. DiCesare which
generally provides for a base salary of $250,000 per year through and including
July 14, 1997 and participation in the Company's compensation programs for
corporate officers. The Company has also granted to Mr. DiCesare an option to
acquire up to 375,000 shares of Common Stock as hereinbefore described.
The Company is party to an employment agreement with Mr. Johnson which
generally provides for a base salary of $200,000 per year through and including
March 21, 1998, participation in the Company's compensation programs for
corporate officers, grant of 200,000 stock options to vest over a three-year
period and severance benefits of one year's base salary if Mr. Johnson is
terminated prior to March 1998 without cause. Mr. Johnson's contract further
provides that, within 90 days of the occurrence of an event qualifying as a
change in control of the Company, he shall have a one-time right to terminate
the agreement, and the Company shall pay to him the base salary which would
otherwise be payable under the agreement for a period of 12 months, subject to
certain offsets.
The Company is party to an employment agreement with Mr. Miodunski which
generally provides for a base salary of $200,000 per year through and including
August 31, 1998, participation in the Company's compensation programs for
corporate officers, receipt of 121,000 stock options and severance benefits of
one year's base salary if Mr. Miodunski is terminated prior to March 1998
without cause.
Effective June 19, 1996, Mr. Alderfer resigned from the Company. Pursuant
to a settlement agreement related to Mr. Alderfer's employment contract with the
Company, the Company paid Mr. Alderfer $250,000 and agreed to pay an additional
$250,000 in equal installments for the twelve months beginning February 1997. In
addition, Mr. Alderfer will continue to be eligible for certain life, health and
disability benefits consistent with his benefits when employed by the Company
through June 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the year ended June 30, 1996, the Compensation Committee of the
Board of Directors of the Company met once. During such fiscal year, the entire
Board of Directors generally participated in deliberations concerning the
compensation of the Company's executive officers, except that Messrs. DiCesare,
Fields, Greathouse and Kirschbaum did not vote on such matters. Mr. Wilms served
as the Company's chief executive officer from December 1984 to July 1994. Other
than current positions disclosed in the previous tables, no other member of the
Board of Directors was an officer or employee of the Company or any subsidiary
during the fiscal year ended June 30, 1996 or is a former officer of the Company
or any subsidiary.
Since July 1, 1995, certain directors have been involved in certain
transactions in which the Company was a party and in which the amount involved
exceeded $60,000. See "Certain Relationships and Related Transactions."
9
<PAGE> 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1992, Mr. Wilms committed to provide a loan to the Company's
Louisiana subsidiary, Video Services, Inc. (the "VSI Loan"). As consideration
for Mr. Wilms' commitment, the Company issued to Mr. Wilms a warrant to purchase
200,000 shares of Common Stock at a purchase price of $2.50 per share and agreed
to issue an additional warrant to purchase 1.8 million shares of 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 for the Common Stock underlying the warrants. The
exercise price of the warrants was determined based on an analysis of, and a
fairness opinion with respect to, the transaction and on the price range of the
Common Stock during a period prior to announcement of the Company's expansion
into Louisiana. The VSI Loan required quarterly interest and principal payments
with an interest rate equal to 2% above the London Inter-Bank Offered Rate,
adjusted quarterly. The VSI Loan was held by a Belgian corporation owned by Mr.
Wilms and members of his family.
During fiscal years 1993 and 1994, a total of $6.5 million was funded under
the VSI Loan. All scheduled principal and interest payments on the VSI Loan were
made through September 1996, at which time the Board of Directors unanimously
approved (except that Mr. Wilms abstained from voting) the early repayment of
the remaining principal balance and accrued interest totaling $2.7 million. Such
payments were made in September 1996.
Pursuant to a letter agreement dated June 25, 1993 among GSA, the Company
and Mr. Wilms, the Company engaged GSA to assist it in, among other things,
identifying opportunities for strategic transactions and in structuring and
negotiating such transactions. In connection with its retention of GSA for
financial advisory services, the Company has issued to it warrants to purchase
1,250,000 shares of Common Stock with an exercise price of $1.50 per share which
become exercisable in equal one-third tranches only when the Common Stock price
reaches $11, $13 and $15, respectively. Upon consummation of the Merger, GSA
received additional warrants to purchase 2,500,000 shares of Common Stock on the
same terms. Joel Kirschbaum, a director of and consultant to the Company, is the
sole stockholder, director and officer of GSI, the sole general partner of GSA.
Mr. DiCesare, a director and Executive Vice President -- Development, has the
right to receive 20% of the issued warrants (which percentage may increase in
certain circumstances) to be distributed to GSI by GSA.
The Stockholders Agreement contains certain registration rights running in
favor of KIC, Mr. Wilms and certain of their respective affiliates and
transferees, including up to four demand registration rights each (and
additional demand rights for Mr. Wilms under certain circumstances), at the
expense of the Company, and provisions granting Mr. Wilms the right to
participate in certain offerings of securities by the Company and by KIC and its
transferees.
Jacques Andre, a director of the Company, is a partner with Ray &
Berndtson, Inc., an international executive search firm. The Company has hired
this firm to perform certain personnel searches. The Company has paid fees of
$250,000 and out-of-pocket expenses of $52,000 during fiscal year 1997 for the
searches currently being conducted by this firm. The final fee for the searches
will be based on a percentage of the first-year compensation paid to certain
personnel if and when hired.
David Robbins, a director of the Company appointed to the Board of
Directors in July 1994 who became Chairman of the Board of Directors in February
1997, was employed until July 1995 by the law firm of Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel, and until February 1997 with the firm of O'Sullivan
Graev & Karabell, LLP, both of which have represented the Company in various
matters. The Company paid fees to O'Sullivan Graev & Karabell totaling $112,000
for services during fiscal year 1996 and $16,215 for services during fiscal year
1997.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors Report on Executive Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement in any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
10
<PAGE> 14
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
The entire Board of Directors acts as the Company's Compensation Committee.
At various Board of Directors meetings during the fiscal year ended June 30,
1996, various Board of Directors members expressed their views as to executive
compensation and the Board of Directors articulated principles for compensation
of its senior executive officers, including the Company's Chief Executive
Officer, which are summarized below. The Board of Directors also retained a
compensation consultant to review and make recommendations concerning the
Company's compensation programs.
The Company's compensation formulas for senior executives during the fiscal
year ended June 30, 1996 were largely determined by pre-existing contractual
arrangements in place from previous fiscal periods. Effective December 31, 1996,
the Company's previous chief executive officer, Steve Greathouse, stepped down
from his positions at the Company and received a severance package that was
negotiated by the Board of Directors.
The Board of Directors' compensation determinations have been and continue
to be affected by various competitive factors including the requirement to
attract top-flight talent to the Company. The Company believes that it will
continue to be constrained by these competitive factors as there continues to be
demand from competing businesses to attract management talent of the type the
Company desires to recruit.
The Board believes as a general matter, but particularly with respect to
senior executive officers, that the most effective method of compensation, and
the method that most closely aligns management's interests with those of the
Company's stockholders, is long-term executive compensation tied to the creation
of stockholder value. The Board of Directors believes that this method of
compensation should constitute a significant portion of an executive's
compensation. Thus, it has been the Company's policy, where feasible and
consistent with competitive market conditions, to attempt to restrain base cash
compensation while providing incentives for management to increase stockholder
value. The Company hopes to achieve this goal through the use of (i) long-term
stock options (that will not result in value to the holder unless the price of
Common Stock has appreciated), and (ii) cash bonuses tied to performance
criteria (such as achievement of specific budgeted results or operational tasks
(including consummation of acquisitions such as the Merger), return on equity
and invested capital, achievement of satisfactory sales and margins targets and
similar measures) which the Board of Directors believes will result in increases
in stockholder value. In the past, stock option grants to management have had
exercise prices equal to or in excess of the share price at the time of grant;
pursuant to the 1996 Plan, all future option grants are required to be at prices
no lower than the closing price of the Common Stock on the date of grant. The
Board of Directors expects that the compensation philosophy outlined above has
the greatest probability of achieving satisfactory returns to stockholders.
Respectfully submitted,
Jacques Andre
Anthony L. DiCesare
Dr. Craig Fields
Joel Kirschbaum
David Robbins
Alfred H. Wilms
11
<PAGE> 15
COMMON STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on the Common Stock (no dividends have been paid thereon) for the five
fiscal years in the period ended June 30, 1996 and for the additional period
from then through January 31, 1997 with cumulative total return, assuming
reinvestment of dividends, of (i) the Nasdaq Stock Market (US) and (ii) an index
of peer companies that the Company believes are comparable to the Company in
terms of their lines of business. The presentation assumes $100 was invested on
June 30, 1991 (the last trading day prior to the end of the Company's 1991
fiscal year). The peer company group used in the graph below consists of Anchor
Gaming, Casino Data Systems, International Gaming and Technology, Jackpot
Enterprises, Inc., Video Lottery Technologies, Inc. and WMS Industries Inc. (the
"New Peer Group"). In prior years the company used as its peer group Jackpot
Enterprises, Inc., Video Lottery Technologies Inc. and WMS Industries Inc. (the
"Old Peer Group"). The Company believes that the New Peer Group better matches
the Company's current lines of business in light of the consummation of the
Merger.
COMPARISON OF 67 MONTH CUMULATIVE TOTAL RETURN
AMONG ALLIANCE GAMING CORPORATION, THE NASDAQ STOCK MARKET-US INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
<TABLE>
<CAPTION>
ALLIANCE
MEASUREMENT PERIOD GAMING NASDAQ STOCK
(FISCAL YEAR COVERED) CORPORATION NEW PEER GROUP OLD PEER GROUP MARKET-US
<S> <C> <C> <C> <C>
6/91 100 100 100 100
6/92 382 233 205 120
6/93 435 556 238 151
6/94 247 289 162 153
6/95 285 255 160 204
6/96 159 331 192 261
1/97 215 302 178 304
</TABLE>
COMPLIANCE WITH SECTION 16(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers and persons who own more
than ten percent of a registered class of the Company's equity securities
("Insiders") to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of the Common Stock. Insiders
are required by the Commission's regulations to furnish the Company with copies
of all Section 16(a) reports filed by such persons. To the Company's knowledge,
based on its review of the copies of such reports furnished to the Company
during the fiscal year ended June 30, 1996, all Section 16(a) filing
requirements applicable to Insiders were complied with, except that Messrs.
Robert Conover, president of Bally Systems, Hans Kloss, co-managing director of
the Bally Wulff entities, and Mr. Scott Schweinfurth, the Company's Senior Vice
President, Chief Financial Officer and Treasurer, filed Form 3s which did not
meet the filing deadline.
12
<PAGE> 16
PROPOSAL NO. 2:
ADOPTION OF 1996 LONG-TERM INCENTIVE PLAN
On January 28, 1997 the Board of Directors adopted the 1996 Plan and
designated certain awards previously granted to certain officers, directors and
other employees to be granted from the Plan, all subject to the requisite
approval of the 1996 Plan within one year by the Company's stockholders. If such
approval is not obtained, the 1996 Plan and all awards theretofore made
thereunder will be void and of no force or effect. Mr. Wilms voted against the
1996 Plan and has indicated that he will vote against it as a stockholder.
The Board of Directors recommends a vote FOR the proposal to approve the
adoption of the 1996 Plan.
Approval of the adoption of the 1996 Plan requires the affirmative vote of
a majority of the shares of Common Stock voted at the Meeting. Abstentions will
be counted as voted for purposes of this vote, and therefore will have the same
effect as a vote against the 1996 Plan. Broker non-votes, if any, will not be
counted as voting on this proposal.
DESCRIPTION OF THE 1996 PLAN
The following summary description of the 1996 Plan herein is qualified in
its entirety by reference to the full text of the 1996 Plan attached as Appendix
A to this Proxy Statement.
Purpose. The 1996 Plan is intended to encourage stock ownership by
directors, employees and designated paid consultants (as defined below) of the
Company and its subsidiaries in order to increase their proprietary interest in
the success of the Company, to induce new employee candidates to join the
Company and to encourage such individuals to remain in the employ of the
Company.
Administration. The 1996 Plan will be administered by the Board of
Directors or, if the Board of Directors so determines, by a Board of Directors
committee (the "Committee"). However, except as otherwise provided below, in the
case of awards to directors or officers subject to Section 16 of the Securities
Exchange Act of 1934, the Committee will have exclusive responsibility for and
authority to administer the 1996 Plan unless the Board of Directors expressly
determines otherwise. Subject to the foregoing and to the express provisions of
the 1996 Plan, the Board of Directors or the Committee, as applicable, will have
plenary authority in its sole discretion to make all determinations which it
deems necessary or advisable for the administration of the 1996 Plan. The
membership of the Committee must at all times consist of not less than two
members of the Board of Directors and must be constituted, if possible, to
permit the 1996 Plan to comply with Rule 16b-3 promulgated under the Exchange
Act or any successor rule ("Rule 16b-3"). At present, no committee is so
constituted. The Committee will have all of the powers and duties set forth in
the 1996 Plan, as well as such additional powers and duties as the Board of
Directors may delegate to it. However, the Board of Directors retains the right
(i) to determine whether the shares of Common Stock reserved for issuance upon
the exercise of options, stock appreciation rights or as restricted stock
awarded under the 1996 Plan shall be issued shares or unissued shares, (ii) to
appoint the members of the Committee, and (iii) to terminate or amend the 1996
Plan.
Number of Shares. The number of shares which may at any time be made
subject to options or stock appreciation rights, or which may be issued upon the
exercise of options or stock appreciation rights granted under the 1996 Plan or
made subject to grants of restricted stock thereunder, is limited to an
aggregate of 3,000,000 shares of the Common Stock. All grantees in the aggregate
may not receive in any fiscal year awards of options and/or stock appreciation
rights, in the aggregate, exceeding 2,500,000 underlying shares of Common Stock.
No individual grantee may receive in any fiscal year awards of options and/or
stock appreciation rights exceeding 1,500,000 underlying shares of Common Stock.
No more than 600,000 shares of Common Stock may be granted as awards of
restricted stock. The shares reserved for issuance pursuant to the 1996 Plan may
consist either of authorized but previously unissued shares of Common Stock, or
of issued
13
<PAGE> 17
shares of Common Stock which have been reacquired by the Company, as determined
from time to time by the Board of Directors. If any option or stock appreciation
right granted under the 1996 Plan expires, terminates or is canceled for any
reason without having been exercised in full, or any restricted stock awarded
thereunder is forfeited for any reason, the shares of Common Stock allocable to
the unexercised portion of such option or stock appreciation right or to the
forfeited portion of such restricted stock award may again be made subject to an
option, stock appreciation right or restricted stock award under the 1996 Plan.
Eligibility. Awards may be granted under the 1996 Plan to such directors,
employees and paid consultants of the Company or a subsidiary as designated by
the Board of Directors or the Committee. However, options that qualify as
incentive stock options pursuant to Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") ("Incentive Stock Options") may be awarded only to
regular full-time employees of the Company or a subsidiary (including, but not
limited to, employees who serve as officers or directors). As used in the 1996
Plan, "paid consultant" means an independent contractor retained to perform
continuing and substantial services for the Company or any of its subsidiaries,
and designated as a paid consultant by the Board of Directors or the Committee,
whose designation shall be conclusive.
Options. The 1996 Plan is intended to authorize the Board of Directors or
the Committee to grant, in its discretion, Incentive Stock Options or options
that do not so qualify ("Nonstatutory Stock Options"). The purchase price of
each share of Common Stock subject to a stock option must be a stated price not
less than the fair market value of such share of Common Stock on the date of
grant, determined in accordance with the 1996 Plan. However, if an employee, at
the time an Incentive Stock Option is granted to him, owns (or is deemed as a
result of ownership by certain relatives or related entities to own) stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company or of any of the subsidiaries, then the exercise price of
each share of Common Stock subject to such Incentive Stock Option must be at
least 110% of the fair market value of such share of Common Stock on the date of
grant. On and after the date of grant of any option, neither the Board of
Directors nor the Committee will have the authority to reduce the exercise price
thereof. In no event may a stock option be exercisable after the expiration of
10 years from the date of grant. However, an Incentive Stock Option granted to
any employee as to whom the exercise price of each share of Common Stock subject
thereto is required to be 110% of the fair market value of such share of Common
Stock on the date of grant may not be exercisable after the expiration of five
years from the date of grant.
The exercise price may be paid in cash or in shares of any class of issued
and outstanding stock of the Company held for more than six months by the option
holder, or partly in cash and partly in such shares of stock. If any portion of
the exercise price is paid in shares of stock of the Company, such shares shall
be valued at their fair market value, as determined in accordance with the 1996
Plan, as of the effective date of exercise of the Stock Option. The Board of
Directors or the Committee may also permit grantees (either on a selective or
group basis) to simultaneously exercise options and sell the shares of the
Common Stock thereby acquired pursuant to a "cashless exercise" arrangement or
program selected by and approved in all respects in advance by the Board of
Directors or the Committee.
Restricted Stock. The Board of Directors or the Committee may place such
restrictions as it deems appropriate on any shares of restricted stock awarded
under the 1996 Plan. The restricted stock will vest no more rapidly than in
equal installments over a period of three years from the date of grant of such
award, as the Board of Directors or Committee determines, subject to continued
service during any such period by the recipient as a director, employee or paid
consultant of the Company or any of its subsidiaries. Neither the Board of
Directors nor the Committee will have the authority to otherwise accelerate the
vesting of an award of restricted stock. Unless unvested shares are forfeited in
accordance with the terms of such agreement, the recipient thereof will have
full voting rights with respect to such shares as well as the right to receive
any and all distributions thereon.
Stock Appreciation Rights. A stock appreciation right is an award granted
with respect to a specified number of shares of Common Stock entitling the
grantee to receive an amount equal to the excess of (i) the fair market value of
a share of Common Stock on the date of exercise over (ii) the fair market value
of a share of Common Stock on the date of grant of the stock appreciation right
(the "Base Price") multiplied by the
14
<PAGE> 18
number of shares of Common Stock with respect to which the stock appreciation
right has been exercised. On and after the date of grant of any stock
appreciation right, neither the Board of Directors nor the Committee will have
the authority to reduce the Base Price thereof. A stock appreciation right may
be granted in addition to any other award under the 1996 Plan or in tandem with
or independent of any option. Upon exercise of a stock appreciation right,
payment may be made in cash, in restricted stock or in shares of unrestricted
Common Stock, or in any combination thereof, as the Board of Directors or the
Committee, in its sole discretion, determines and provides in the relevant award
agreement.
Termination of Employment. If an employee to whom an award has been granted
under the 1996 Plan retires from employment with the Company or any of its
subsidiaries as a result of "normal retirement" or terminates employment with
the Company after becoming "permanently disabled" (both as defined in or
pursuant to the 1996 Plan), any restrictions then applicable to such award will
lapse and it will thereafter be exercisable (in the case of options and stock
appreciation rights) or transferable (in the case of restricted stock), in whole
or in part, by the person to whom granted (or his duly appointed, qualified, and
acting personal representative) at any time within the remaining term of such
award. If a grantee dies, any stock option or stock appreciation right will be
exercisable by such grantee's estate or heir for its remaining term (but not
more than two years). If a person to whom restricted stock has been awarded
under the 1996 Plan dies prior to the lapse of all restrictions applicable to
such restricted stock, any unvested shares held by such person on the date of
his death will be forfeited. If a person to whom restricted stock has been
awarded under the 1996 Plan otherwise ceases to be either a director, employee
or paid consultant of the Company or a subsidiary, any unvested shares of
restricted stock held by such person shall be forfeited as of the last date such
person was either a director, employee or paid consultant of the Company or a
subsidiary, and if a person to whom an option or stock appreciation right has
been granted under the 1996 Plan otherwise ceases to be either a director,
employee or paid consultant of the Company or a subsidiary, such option or stock
appreciation right will continue to be exercisable or transferable to the same
extent that it was exercisable on the last day on which such person was either a
director, employee or paid consultant for a period of 60 days, whereupon such
option or stock appreciation right will terminate and will not thereafter be
exercisable. However, in the event of removal from office as a director,
termination of employment or termination of service as a paid consultant for
Cause (as defined below), any such option will terminate ten days thereafter or
after such other period as may be determined by the Board of Directors or the
Committee at the time of grant. For purposes of the 1996 Plan, "Cause" means (a)
the grantee being convicted of a felony, (b) the grantee willfully committing an
act of embezzlement or malfeasance which (i) is intended to materially enrich
himself at the expense of the Company or any of its subsidiaries or (ii) is
otherwise intended materially to harm the Company, or (c) the grantee being
rejected for an applicable license or approval by a gaming regulatory authority
having jurisdiction over the Company as a result of an explicit finding of lack
of suitability solely as a result of the grantee's commission of a crime or an
act of embezzlement or malfeasance. The foregoing provisions may be altered by
the Board of Directors or the Committee at the time of a particular award or
grant. In addition, except in cases of termination for Cause, the Board of
Directors or the Committee may determine to extend the period during which an
option or stock appreciation right is exercisable upon such termination (but not
longer than it otherwise would have been exercisable).
Adjustments. In the event of any change in the number of shares of the
outstanding Common Stock of the Company by reason of a stock split, stock
dividend, combination or reclassification of shares, recapitalization or similar
event, the Board of Directors or the Committee will adjust proportionally the
number and kind of shares subject to the 1996 Plan and the number, kind and per
share exercise price or Base Price (as the case may be) of shares then subject
to unexercised options or stock appreciation rights. In the event of any merger,
spin-off, split-off or other similar consolidation, reorganization or change
affecting any class of stock of the Company (a "Merger Event") subject to awards
made under the 1996 Plan, or any distribution (other than normal cash dividends)
to holders of such stock, fair and equitable provision and adjustment will be
made in good faith by the Board of Directors or the Committee in respect of all
unexercised options or stock appreciation rights to give proper effect to such
event and preserve the value, rights and benefits of such options or stock
appreciation rights. The Board of Directors or the Committee may, in the case of
any Merger Event pursuant to which the Company is not the surviving corporation
and pursuant to which the former holders of the Common Stock do not hold more
than a majority of the voting securities of the resulting entity
15
<PAGE> 19
immediately after such Merger Event, or in connection with any acquisition by
any person of more than 50% of the outstanding shares of the Common Stock,
provide that each option or stock appreciation right holder shall receive a cash
payment (in exchange for and in cancellation of such option or stock
appreciation right) equal to the difference (if positive) between the value of
the per share consideration received by the holders of the stock in such Merger
Event and the exercise price or Base Price of such option or stock appreciation
right, multiplied by the number of shares of Common Stock underlying such option
or stock appreciation right, and otherwise shall receive nothing. In addition,
in the event of any Merger Event pursuant to which all of the outstanding Common
Stock held by the stockholders of the Company is exchanged for any lawful
consideration, all unvested and unexercisable options or stock appreciation
rights outstanding on the date on which stockholder approval of such Merger
Event is obtained shall become fully vested and exercisable.
Amendment; Termination. The Board of Directors at any time may amend the
1996 Plan, subject to any required regulatory approval and subject to the
limitation that no amendment will be effective unless approved within 12 months
after the date of the adoption of such amendment by the affirmative vote of the
holders of a majority of the shares of the Company's voting stock if such
amendment would, but for such approval, prevent the issuance of Incentive Stock
Options under the 1996 Plan or cause the 1996 Plan to no longer comply with the
requirements of Section 162(m) of the Code. The Board of Directors at any time
may suspend or terminate the 1996 Plan. The 1996 Plan, unless sooner terminated,
will terminate on the 10th anniversary of its adoption by the Board of
Directors, but such termination will not affect any award theretofore granted.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief and general summary of certain federal income tax
consequences applicable to transactions under the 1996 Plan. Of course, the
consequences of transactions depend on a variety of factors, including an
employee's tax status.
Incentive Stock Options. An optionee will not realize any income upon the
grant of an Incentive Stock Option or, assuming requirements of the 1996 Plan
and the Code are met, upon exercise thereof. If the Common Stock is disposed of
by the optionee more than two years after the date of grant and more than one
year after exercise, any gain or loss realized upon such disposition will be a
long-term capital gain or loss, and the Company (or a subsidiary) will not be
entitled to any income tax deduction in respect of the option or its exercise.
If the Common Stock is disposed of by the optionee within such period in a
taxable transaction, the excess, if any, of the amount realized (up to the fair
market value of such shares on the exercise date) over the exercise price will
be compensation taxable to the optionee as ordinary income, and the Company will
generally be entitled to a deduction equal to the amount of ordinary income
realized by the optionee. If the amount realized upon the disqualifying
disposition exceeds the fair market value of the Common Stock on the exercise
date, the excess will be a short-term capital gain. If the exercise price
exceeds the amount realized upon such disqualifying disposition, the difference
will be a short-term capital loss.
Nonstatutory Stock Options. Upon the grant of a Nonstatutory Stock Option,
an optionee will not realize any income. Generally, at the time a Nonstatutory
Stock Option is exercised, the optionee will realize compensation taxable as
ordinary income, and the Company will generally be entitled to a deduction, in
an amount equal to the difference between the fair market value on the exercise
date of the Common Stock acquired pursuant to such exercise and the exercise
price. Upon a subsequent disposition of the Common Stock, the optionee will
realize either long-term or short-term capital gain or loss, depending upon the
holding period of the Common Stock.
Stock Appreciation Rights. Upon the grant of a stock appreciation right, an
optionee will not realize any income. Generally, at the time a stock
appreciation right is exercised, an optionee will realize compensation taxable
as ordinary income, and the Company will generally be entitled to a deduction,
in an amount equal to any cash received (before applicable withholding) plus the
fair market value on the exercise date of any Common Stock received.
Restricted Stock. An employee will not realize any income upon the award of
restricted stock. Generally, unless an employee has made an election under
Section 83(b) of the Code, at the time the terms and conditions (if any)
applicable to restricted stock are satisfied, an employee will realize
compensation taxable
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<PAGE> 20
as ordinary income, and the Company will generally be entitled to a deduction,
equal to the then fair market value of the Common Stock received by the
employee, together with accrued dividends, if any, and interest thereon, if any.
BENEFITS TO EXECUTIVE OFFICERS AND OTHER EMPLOYEES UNDER THE 1996 PLAN
The total amount of benefits or amounts to be received by executive
officers and other employees under the 1996 Plan is not determinable at this
time because the Board of Directors has awarded only a portion of the Common
Stock authorized for award under the 1996 Plan. As previously stated, the Board
of Directors made awards, effective August 29, 1996, October 3, 1996, January 7,
1997 and February 3, 1997, of stock options, all subject to requisite
stockholder approval of the 1996 Plan at the Meeting. The table below discloses
the number of shares of Common Stock underlying these awards granted under the
1996 Plan:
<TABLE>
<CAPTION>
NUMBER
NAME OR GROUP OF OPTIONS
----------------------- ----------
<S> <C>
Jacques Andre(1)............................................... 30,000
Anthony DiCesare(2)............................................ 120,000
Joel Kirschbaum(2)............................................. 176,000
David Robbins(3)............................................... 90,000
Mark Lerner(4)................................................. 50,000
Paul Lofgren(4)................................................ 45,000
Scott Schweinfurth(5).......................................... 38,400
All executive officers as a group.............................. 158,400
All non-executive-officer directors as a group................. 296,000
All non-executive-officer employees as a group................. 263,800
</TABLE>
- ---------------
(1) Options vested on January 7, 1997, expire on January 7, 2002 and have a
strike price of $4.00.
(2) Options vested on August 29, 1996, expire on August 29, 2001 and have a
strike price of $3.4375.
(3) 60,000 options vested on January 7, 1997, expire on January 7, 2002 and have
a strike price of $4.00, and 30,000 options vested on February 3, 1997,
expire on February 3, 2002 and have a strike price of $4.375.
(4) These options vest in equal increments over three years, have a strike price
of $3.75 and expire on October 3, 2006.
(5) Represents two awards each covering 19,200 shares. Under the first award,
4,800 options vested on August 29, 1996 and 4,800 will vest on each of the
next three anniversary dates thereafter. These options have a strike price
of $3.4375 and expire on August 29, 2006. Under the second award, 4,800
options vested on October 3, 1996 and 4,800 will vest on each of the next
three anniversary dates thereof. These options have a strike price of $3.75
and expire on October 3, 2006.
The closing market price of a share of the Common Stock on March 3, 1997 was
$3.9375.
VOTE REQUIRED
Stockholder approval of Proposal 2 requires the affirmative vote of the
holders of a majority of the outstanding shares of stock voted at the Meeting.
The COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
PROPOSAL 2.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's auditors for the fiscal year ended June 30, 1996 were KPMG
Peat Marwick LLP. A representative of KPMG Peat Marwick LLP will be present at
the Meeting, will have an opportunity to make a statement if he so desires and
is expected to be available to respond to appropriate questions.
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<PAGE> 21
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
In order for a stockholder proposal to be included in the Board of
Directors Proxy Statement for the 1997 Annual Meeting of Stockholders, such
proposal must be received at 6601 South Bermuda Road, Las Vegas Nevada 89119,
Attention: Secretary, no later than the close of business on November 11, 1997
and must otherwise comply with the applicable provisions of the Securities
Exchange Act of 1934.
OTHER MATTERS
The Board of Directors does not know of any other matter which will be
brought before the Meeting. However, if any other matter properly comes before
the Meeting, or any adjournment or postponement thereof, which may properly be
acted upon, the proxies solicited hereby will be voted on such matter in
accordance with the discretion of the proxy holders named therein. You are urged
to sign, date and return the enclosed proxy in the envelope provided. No further
postage is required if the envelope is mailed within the United States. If you
subsequently decide to attend the Meeting and wish to vote your shares, you may
do so. Your cooperation in giving this matter your prompt attention will be
appreciated.
By Order of the Board of Directors
/s/ DAVID D. JOHNSON
-------------------------------------
David D. Johnson
Senior Vice President, General Counsel
and Secretary
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<PAGE> 22
APPENDIX A
ALLIANCE GAMING CORPORATION
1996 LONG-TERM INCENTIVE PLAN
1. INTRODUCTION
This Long-Term Incentive Plan (the "Plan") is intended to encourage stock
ownership by directors, employees and designated paid consultants (as defined
below) of Alliance Gaming Corporation (the "Company"), a Nevada corporation, and
its subsidiaries (collectively, the "Subsidiaries" and individually, a
"Subsidiary"), in order to increase their proprietary interest in the success of
the Company and to encourage them to remain in the employ of the Company or a
Subsidiary. Options granted under the Plan may be either Incentive Stock Options
(as defined and provided for in Section 5(a) of the Plan) or Nonstatutory Stock
Options (as defined and provided for in Section 5(b) of the Plan); the term
"option" when used hereinafter shall refer to either Incentive Stock Options or
Nonstatutory Stock Options, or both. Restricted stock awarded under the Plan
shall be subject to such restrictions as shall be determined in each specific
case by the Board of Directors of the Company (the "Board") or by a duly
appointed committee of the Board (the "Committee"), as hereinafter provided.
Stock Appreciation Rights may be granted pursuant to Section 6A of the Plan. The
term "Award" when used hereinafter shall collectively refer to options, Stock
Appreciation Rights and restricted stock awarded under the Plan.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board or, if the Board so
determines, by the Committee, provided that except as otherwise provided below,
in the case of Awards to directors or officers subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall have
exclusive responsibility for and authority to administer the Plan unless the
Board expressly determines otherwise. Subject to the foregoing and to the
express provisions of the Plan, the Board or the Committee, as applicable, shall
have plenary authority, in its sole discretion:
(i) To determine the time or times at which, and the directors,
employees and consultants (as defined below) to whom options, Stock
Appreciation Rights and restricted stock shall be awarded under the Plan;
(ii) To determine, as the case may be, the base price of any Stock
Appreciation Right, the Incentive Stock Option Price or the Nonstatutory
Stock Option Price (both as defined herein) of, and the number of shares of
Stock (as defined herein) to be covered by, Stock Appreciation Rights and
options, as the case may be, granted under the Plan;
(iii) To determine the number of shares of Stock to be covered by
awards of restricted stock under the Plan;
(iv) To determine the time or times at which each option and/or Stock
Appreciation Right granted under the Plan may be exercised, including
whether such option or Stock Appreciation Right may be exercised in whole
or in installments;
(v) To establish the terms of the restrictions applicable to any
restricted stock awarded hereunder, and to determine the time or times at
which such restrictions shall lapse;
(vi) To interpret the Plan and to prescribe, amend and rescind rules
and regulations relating to it; and
(vii) To make all other determinations which the Board or Committee,
as applicable, shall deem necessary or advisable for the administration of
the Plan.
(b) The membership of the Committee shall at all times consist of not less
than two members of the Board and shall be constituted, if possible, to permit
the Plan to comply with Rule 16b-3 promulgated under the Exchange Act or any
successor rule ("Rule 16b-3"). The Committee shall have all of the powers and
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<PAGE> 23
duties set forth herein, as well as such additional powers and duties as the
Board may delegate to it; provided, however, that the Board expressly retains
the right (i) to determine whether the shares of Stock reserved for issuance
upon the exercise of options or as restricted stock awarded under the Plan shall
be issued shares or unissued shares, (ii) to appoint the members of the
Committee, and (iii) to terminate or amend the Plan. The Board may from time to
time appoint members of the Committee in substitution for or in addition to
members previously appointed, may fill vacancies in the Committee, however
caused, and may discharge the Committee. Duly authorized actions of the
Committee shall constitute actions of the Board for the purposes of the Plan and
the administration thereof.
3. STOCK
Except as provided in Section 10 of the Plan, the number of shares which
may at any time be made subject to options or Stock Appreciation Rights, or
which may be issued upon the exercise of options or Stock Appreciation Rights
granted under the Plan or made subject to grants of restricted stock hereunder,
shall be limited to an aggregate of 3,000,000 shares of the common stock, $.10
par value, of the Company (the "Stock"). The shares reserved for issuance
pursuant to the Plan may consist either of authorized but previously unissued
shares of Stock, or of issued shares of Stock which have been reacquired by the
Company, as determined from time to time by the Board. Except as otherwise
provided in Section 10 of the Plan, if any option or Stock Appreciation Right
granted under the Plan expires, terminates or is canceled for any reason without
having been exercised in full, or any restricted stock awarded hereunder is
forfeited for any reason, the shares of Stock allocable to the unexercised
portion of such option or Stock Appreciation Right or to the forfeited portion
of such restricted stock Award may again be made subject to an option or
restricted stock Award under the Plan. In the event of a change in the common
stock of the Company that is limited to a change in the designation thereof to
"Capital Stock" or other similar designation, or to a change in the par value
thereof, or from par value to no par value, without increase or decrease in the
number of issued shares, the shares resulting from any such change shall be
deemed to be the common stock for purposes of the Plan.
4. ELIGIBILITY
Awards may be granted under the Plan to such paid consultants, directors
and employees of the Company or a Subsidiary as shall be designated by the Board
or the Committee in accordance with Section 2 of the Plan, provided that
Incentive Stock Options, as defined below, may be awarded only to regular
full-time employees of the Company or a Subsidiary (including, but not limited
to, employees who serve as officers or directors). As used in the Plan, "paid
consultant" shall mean an independent contractor retained to perform continuing
and substantial services for the Company or any of its subsidiaries, and
designated as a paid consultant by the Board or the Committee, whose designation
shall be conclusive. Any person granted an Award under the Plan (a "Grantee")
shall remain eligible to receive one or more additional grants thereafter,
notwithstanding that options or Stock Appreciation Rights previously granted to
such person remain unexercised in whole or in part, or that the applicable
restrictions on any restricted stock issued to such person have not lapsed.
5. TERMS OF OPTIONS
The Plan is intended to authorize the Board or the Committee to grant, in
its discretion, options that qualify as incentive stock options pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (such
qualifying options being referred to herein as "Incentive Stock Options") or
options that do not so qualify (such nonqualifying options being referred to
herein as "Nonstatutory Stock Options"). Each option granted under the Plan
shall be evidenced by a written option agreement which shall be executed and
delivered as provided in Section 13 of the Plan and which shall specify whether
the option granted therein is an Incentive Stock Option or a Nonstatutory Stock
Option. On and after the date of grant of any option hereunder, neither the
Board nor the Committee shall have the authority to reduce the exercise price
thereof, except as provided in Section 10 of the Plan.
(a) Terms of Incentive Stock Options. Each stock option agreement
covering an Incentive Stock Option granted under the Plan and any amendment
thereof, other than an amendment to convert an
A-2
<PAGE> 24
Incentive Stock Option into a Nonstatutory Stock Option, shall conform to
the provisions of Section 5(a)(i)-(iii) below and may contain such other
terms and provisions consistent with the requirements of the Plan as the
Board or the Committee shall deem appropriate:
(i) Incentive Stock Option Price. The purchase price of each of the
shares of Stock subject to an Incentive Stock Option (the "Incentive
Stock Option Price") shall be a stated price which is not less than the
fair market value of such share of Stock, determined in accordance with
Section 8 of the Plan, or the par value of such share if greater, as of
the date such Incentive Stock Option is granted; provided, however, that
if an employee, at the time an Incentive Stock Option is granted to him,
owns stock representing more than 10% of the total combined voting power
of all classes of stock of the Company or of the parent corporation (as
defined in Section 425(e) of the Code), if any, of the Company or of any
of the Subsidiaries (or, under Section 425(d) of the Code, is deemed to
own stock representing more than 10% of the total combined voting power
of all such classes of stock, by reason of the ownership of such classes
of stock, directly or indirectly, by or for any brother, sister, spouse,
ancestor, or lineal descendent of such employee, or by or for any
corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), then the Incentive Stock Option
Price of each share of Stock subject to such Incentive Stock Option
shall be at least 110% of the fair market value of such share of Stock,
as determined in the manner stated above.
(ii) Term of Incentive Stock Options. Incentive Stock Options
granted under the Plan shall be exercisable for such periods as shall be
determined by the Board or the Committee at the time of grant of each
such Incentive Stock Option, but in no event shall an Incentive Stock
Option be exercisable after the expiration of 10 years from the date of
grant; provided, however, that an Incentive Stock Option granted to any
employee as to whom the Incentive Stock Option Price of each share of
Stock subject thereto is required to be 110% of the fair market value of
such share of Stock pursuant to Section 5(a)(i) above, shall not be
exercisable after the expiration of 5 years from the date of grant. Each
Incentive Stock Option granted under the Plan shall also be subject to
earlier termination as provided in the Plan.
(iii) Exercise of Incentive Stock Options.
(A) Subject to the provisions of Sections 5(a)(iii)(E) and 10 of
the Plan, Incentive Stock Options granted under the Plan may be
exercised in whole or in installments, to such extent, and at such
time or times during the terms thereof, as shall be determined by the
Board or the Committee at the time of grant of each such option.
(B) Incentive Stock Options granted under the Plan shall be
exercisable only by delivery to the Company of written notice of
exercise, which notice shall state the number of shares with respect
to which such Incentive Stock Option is exercised, the date of grant
of the Incentive Stock Option, the aggregate purchase price for the
shares with respect to which the Incentive Stock Option is exercised
and the effective date of such exercise, which date shall not be
earlier than the date the notice is received by the Company nor later
than the date upon which such Incentive Stock Option expires. The
written notice of exercise shall be sent together with the full
Incentive Stock Option Price of the shares purchased, which may be
paid in cash or in shares of any class of issued and outstanding
stock of the Company held for more than six months by the option
holder, whether preferred or common, or partly in cash and partly in
such shares of stock. If any portion of the Incentive Stock Option
Price is paid in shares of stock of the Company, such shares shall be
valued at their fair market value, as determined in accordance with
Section 8 of the Plan, as of the effective date of exercise of the
Incentive Stock Option.
(C) Except as provided to the contrary in Section 9 of the Plan,
an Incentive Stock Option granted hereunder shall remain outstanding
and shall be exercisable only so long as the person to whom such
Incentive Stock Option was granted remains an officer or employee of
the Company, the parent corporation, if any, of the Company, or any
of the Subsidiaries.
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<PAGE> 25
(D) All Incentive Stock Options granted under the Plan shall be
nontransferable, except by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of the
person to whom granted only by such person (or his duly appointed,
qualified, and acting personal representative).
(E) No Incentive Stock Option may be exercised as to fewer than
100 shares of Stock at any one time without the consent of the Board
or the Committee, unless the number of shares to be purchased upon
such exercise is the total number of shares at the time available for
purchase under such Incentive Stock Option.
(F) The Board or the Committee may also permit Grantees (either
on a selective or group basis) to simultaneously exercise options and
sell the shares of the Stock thereby acquired, pursuant to a
"cashless exercise" arrangement or program, selected by and approved
of in all respects in advance by the Board or the Committee. Payment
instruments shall be received by the Company subject to collection.
The proceeds received by the Company upon exercise of any option may
be used by the Company for general corporate purposes. Any portion of
an option that is exercised may not be exercised again.
(b) Terms of Nonstatutory Stock Options. Each stock option agreement
covering a Nonstatutory Stock Option granted under the Plan and any
amendment thereof shall conform to the provisions of Section 5(b)(i)-(iii)
below, and may contain such other terms and provisions consistent with the
requirements of the Plan as the Board or the Committee shall deem
appropriate:
(i) Nonstatutory Stock Option Price. The purchase price of each of
the shares of Stock subject to a Nonstatutory Stock Option (the
"Nonstatutory Stock Option Price") shall be a fixed price determined by
the Board or the Committee at the time of grant, which price shall not
be less than the greater of (A) the par value of such share, or (B) one
hundred percent (100%) of the fair market value of such share,
determined in accordance with Section 8 of the Plan, on the date of the
grant of such Nonstatutory Stock Option.
(ii) Term of Nonstatutory Stock Options. Nonstatutory Stock Options
granted under the Plan shall be exercisable for a period of ten years
unless otherwise determined by the Board or the Committee at the time of
grant. Each Nonstatutory Stock Option granted under the Plan shall also
be subject to earlier termination as provided in the Plan.
(iii) Exercise of Nonstatutory Stock Options.
(A) Subject to the provisions of Sections 5(b)(iii)(E) and 10 of
the Plan, Nonstatutory Stock Options granted under the Plan may be
exercised in whole or in installments to such extent, and at such
time or times during the terms thereof, as shall be determined by the
Board or the Committee at the time of grant of each such option.
(B) Nonstatutory Stock Options granted under the Plan shall be
exercisable only by delivery to the Company of written notice of
exercise, which notice shall state the number of shares with respect
to which such Nonstatutory Stock Option is exercised, the date of
grant of the Nonstatutory Stock Option, the aggregate purchase price
for the shares with respect to which the Nonstatutory Stock Option is
exercised and the effective date of such exercise, which date shall
not be earlier than the date the notice is received by the Company
nor later than the date upon which such Nonstatutory Stock Option
expires. The written notice of exercise shall be sent together with
the full Nonstatutory Stock Option Price of the shares purchased,
which may be paid in cash or in shares of any class of issued and
outstanding stock of the Company held for more than six months by the
option holder, whether preferred or common, or partly in cash and
partly in such shares of stock. If any portion of the Nonstatutory
Stock Option Price is paid in shares of stock of the Company, such
shares shall be valued at their fair market value, as determined in
accordance with Section 8 of the Plan, as of the effective date of
exercise of the Nonstatutory Stock Option.
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<PAGE> 26
(C) Except as provided to the contrary in Section 9 of the Plan,
a Nonstatutory Stock Option granted hereunder shall remain
outstanding and shall be exercisable only so long as the person to
whom such Nonstatutory Stock Option was granted remains either a
director, employee or paid consultant of the Company, the parent
corporation, if any, of the Company, or any of the Subsidiaries. A
person shall be deemed a paid consultant only so long as such person
continues to perform and be compensated for substantial services for
the Company, the parent corporation, if any, of the Company, or a
Subsidiary, as to which the determination of the Board or the
Committee, as applicable, shall be binding and conclusive.
(D) Unless the Board or Committee shall determine otherwise, all
Nonstatutory Stock Options granted under the Plan shall be
nontransferable, except by will or the laws of descent and
distribution.
(E) No Nonstatutory Stock Option may be exercised as to fewer
than 100 shares at any one time without the consent of the Board or
the Committee, unless the number of shares to be purchased upon such
exercise is the total number of shares at the time available for
purchase under such Nonstatutory Stock Option.
(F) The Board or the Committee may also permit Grantees (either
on a selective or group basis) to simultaneously exercise options and
sell the shares of the Stock thereby acquired, pursuant to a
"cashless exercise" arrangement or program, selected by and approved
of in all respects in advance by the Board or the Committee. Payment
instruments shall be received by the Company subject to collection.
The proceeds received by the Company upon exercise of any option may
be used by the Company for general corporate purposes. Any portion of
an option that is exercised may not be exercised again.
6. RESTRICTIONS APPLICABLE TO RESTRICTED STOCK.
The Board or the Committee may place such restrictions as it shall deem
appropriate on any shares of restricted stock awarded hereunder to an employee,
director or paid consultant; provided, however, that shares of restricted stock
awarded hereunder shall be subject to Section 11 of the Plan and the following
restrictions:
(i) Vesting -- Subject to the provisions of Section 9 herein, such
shares of Stock awarded to directors, employees or paid consultants shall
vest (i.e., become non-forfeitable) (A) in full with respect to all Stock
underlying such Award of restricted stock at the expiration of a period of
not less than three years from the date of grant of such Award, or (B)
proportionately in equal installments of the Stock underlying such Award of
restricted stock over a period of not less than three years from the date
of grant of such Award, as the Board or Committee shall determine, and, in
each such case, based upon continued service during any such period by the
recipient as a director, employee or paid consultant of the Company or any
of its Subsidiaries. Any shares of Stock remaining subject to forfeiture in
accordance with the vesting schedule related thereto are hereinafter
referred to as "Unvested Shares." Subject to Section 9 of the Plan, neither
the Board nor the Committee shall have the authority to otherwise
accelerate the vesting of an Award of restricted stock under this Section
6.
(ii) Delivery to Escrow -- Unless the Board or the Committee shall
determine otherwise, upon issuance of a certificate evidencing such shares
the recipient shall be required to deliver such certificate, endorsed in
blank or with a duly executed stock power attached, to the Secretary of the
Company, or such other person or entity as the Board or the Committee may
designate, to be held until any vesting restrictions applicable thereto
have lapsed or any Unvested Shares have been forfeited.
(iii) Legend -- Unless the Board or the Committee shall determine
otherwise, each certificate evidencing Unvested Shares issued hereunder
shall bear a legend to the effect that such shares are subject to potential
forfeiture and may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with the terms
of an agreement between the issuer and the registered owner.
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<PAGE> 27
6A. STOCK APPRECIATION RIGHTS.
(a) Terms and Conditions. The grant of Stock Appreciation Rights under the
Plan shall be subject to the terms and conditions set forth in this Section 6A
and any additional terms and conditions, not inconsistent with the express terms
and provisions of the Plan, as the Board or the Committee shall set forth in the
relevant Award agreement.
(b) Stock Appreciation Rights. A Stock Appreciation Right is an Award
granted with respect to a specified number of shares of Stock entitling the
Grantee to receive an amount equal to the excess of (i) the fair market value of
a share of Stock (as determined under Section 8 of the Plan) on the date of
exercise over (ii) the fair market value of a share of Stock on the date of
grant (as determined under Section 8 of the Plan) of the Stock Appreciation
Right (the "Base Price") multiplied by the number of shares of Stock with
respect to which the Stock Appreciation Right shall have been exercised. On and
after the date of grant of any Stock Appreciation Right hereunder, neither the
Board nor the Committee shall have the authority to reduce the Base Price
thereof, except as provided in Section 10 of the Plan.
(c) Grant. A Stock Appreciation Right may be granted in addition to any
other Award under the Plan or in tandem with or independent of any Nonstatutory
Stock Option or Incentive Stock Option.
(d) Date of Exercisability. Unless otherwise provided in the Grantee's
Award agreement in respect of any Stock Appreciation Right, a Stock Appreciation
Right may be exercised by the Grantee, in accordance with and subject to all of
the procedures established by the Board or the Committee, in whole or in part at
any time and from time to time during its specified term. Notwithstanding the
preceding sentence, in no event shall a Stock Appreciation Right be exercisable
prior to the exercisability of any Non-Qualified Stock Option or Incentive Stock
Option with which it is granted in tandem. The Board or the Committee may also
provide, as set forth in the relevant Award agreement, that some Stock
Appreciation Rights shall be automatically exercised on one or more dates
specified therein by the Board or the Committee.
(e) Form of Payment. Upon exercise of a Stock Appreciation Right, payment
may be made in cash, in restricted stock or in shares of unrestricted Stock, or
in any combination thereof, as the Board or the Committee, in its sole
discretion, shall determine and provide in the relevant Award agreement.
(f) Tandem Grant. The right of the Grantee to exercise a tandem Stock
Appreciation Right shall terminate to the extent such Grantee exercises the
Non-Qualified Stock Option or the Incentive Stock Option to which such Stock
Appreciation Right is related.
7. RIGHTS OF GRANTEES.
(a) Options. No holder of an option or Stock Appreciation Right shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to such option or Stock Appreciation
Right unless and until his option or Stock Appreciation Right shall have been
exercised pursuant to the terms thereof, the Company shall have issued and
delivered to the holder of the option or Stock Appreciation Right the shares of
Stock as to which he has exercised his option or Stock Appreciation Right, and
his name shall have been entered as a stockholder of record on the books of the
Company. Thereupon, such person shall have full voting and other ownership
rights with respect to such shares of Stock.
(b) Restricted Stock. Each recipient of a restricted stock award hereunder
shall be deemed to be the registered owner of any Unvested Shares subject to
such award, notwithstanding that such Shares may be subject to restrictions and
possible forfeiture under the terms of the agreement pursuant to which they were
received. Unless and until all or a portion of such Unvested Shares are
forfeited in accordance with the terms of such agreement, the recipient thereof
shall have full voting rights with respect to such shares as well as the right
to receive any and all distributions thereon.
8. DETERMINATION OF FAIR MARKET VALUE.
For the purposes of the Plan, the fair market value of a share of stock of
the Company shall be determined as follows: (i) if on the date as of which such
determination is made the class of stock being
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valued is admitted to trading on a national securities exchange or exchanges
including Nasdaq (as defined below) for which actual sale prices are regularly
reported, or actual sales prices are otherwise regularly published for such
stock, the fair market value of a share of such stock shall be deemed to be
equal to the closing sale price reported for such stock on the date as of which
such determination is made (or the next preceding trading date if the date of
determination is not a trading date), or (ii) if on the date as of which such
determination is made no such closing sales prices are reported, but quotations
for the class of stock being valued are regularly listed on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") or
another comparable system, the fair market value of a share of such stock shall
be deemed to be equal to the mean of the average of the closing bid and asked
prices for such stock quoted on such system on the date as of which such
determination is made (or the next preceding trading date if the date of
determination is not a trading date) or, (iii) if no such quotations or actual
sales prices are available, the fair market value of a share of such stock shall
be deemed to be the average of the closing bid and asked prices furnished by a
professional securities dealer making a market in such shares, as selected by
the Board, for the trading date as of which such determination is made (or the
next preceding trading date if the date of determination is not a trading date);
provided, however, that notwithstanding Sections (i) through (iii) above, the
Board or the Committee may determine the fair market value of a share of stock
of the Company on the basis of such factors as it shall deem appropriate if it
determines in good faith that the approach specified in those Sections does not
properly reflect the fair market value of such stock.
9. RETIREMENT, TERMINATION OF EMPLOYMENT OR DEATH OF HOLDERS OF OPTIONS, STOCK
APPRECIATION RIGHTS AND RESTRICTED STOCK.
(a) Retirement or Disability. If an employee to whom an Award has been
granted under the Plan retires from employment with the Company or any of its
Subsidiaries as a result of "normal retirement" (as defined below), or
terminates employment with the Company after becoming "permanently disabled" (as
defined in the Gaming and Technology, Inc. Profit Sharing 401(k) Plan as in
effect on the date of adoption of the Plan by the Board), any restrictions then
applicable to such Award shall lapse and it shall thereafter be exercisable (in
the case of options and Stock Appreciation Rights) or transferable (in the case
of restricted stock) in whole or in part, by the person to whom granted (or his
duly appointed, qualified, and acting personal representative) in the manner set
forth in Sections 5, 6 and 6A of the Plan, at any time within the remaining term
of such Award, unless otherwise determined by the Board or the Committee at the
time of grant. For purposes of the Plan, "normal retirement" shall mean a
termination of employment by the Grantee after the Grantee attains age
sixty-five (65).
(b) Other Termination of Service or Employment. Except as determined by the
Board or the Committee at the time of grant, or as otherwise provided in this
Section 9 or in a Grantee's employment agreement, (i) if a person to whom
restricted stock has been awarded under the Plan ceases to be either a director,
employee or paid consultant of the Company or a Subsidiary, any Unvested Shares
of restricted stock held by such person shall be forfeited as of the last date
such person was either a director, employee or paid consultant of the Company or
a Subsidiary, and (ii) if a person to whom an option or Stock Appreciation Right
has been granted under the Plan ceases to be either a director, employee or paid
consultant of the Company or a Subsidiary, such option or Stock Appreciation
Right shall continue to be exercisable or transferable to the same extent that
it was exercisable on the last day on which such person was either a director,
employee or paid consultant for a period of 60 days thereafter, whereupon such
option or Stock Appreciation Right shall terminate and shall not thereafter be
exercisable; provided, however, that in the event of termination of employment,
termination of service as a paid consultant, or removal from office as a
director for Cause (as defined below), any such option or Stock Appreciation
Right shall terminate ten days after such termination of employment, service or
removal from office rather than 60 days thereafter. No Award made under the Plan
shall be affected by any change of duties or position of the person to whom such
Award was made or by any temporary leave of absence granted to such person by
the Company or any of its Subsidiaries. For purposes of the Plan, "Cause" means
(a) the Grantee being convicted of a felony, (b) the Grantee willfully
committing an act of embezzlement or malfeasance which (x) is intended to
materially enrich himself at the expense of the Company or any of its
Subsidiaries or (y) is otherwise intended to materially harm the Company, or (c)
the Grantee being rejected for an applicable license or approval by a gaming
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<PAGE> 29
regulatory authority having jurisdiction over the Company as a result of an
explicit finding of lack of suitability solely as a result of the Grantee's
commission of a crime or an act of embezzlement or malfeasance.
(c) Death. Unless otherwise determined by the Board or the Committee at the
time of grant, (i) if a person to whom an option or Stock Appreciation Right has
been granted under the Plan dies prior to the expiration of the term of such
option or Stock Appreciation Right, such option or Stock Appreciation Right
shall be exercisable by the estate of the Grantee, or by a person who acquired
the right to exercise such option or Stock Appreciation Right by bequest or
inheritance from the Grantee, at any time within two years after the death of
such person and prior to the date upon which such option or Stock Appreciation
Right expires, to the extent and in the manner exercisable by the Grantee at the
date of his death; and (ii) if a person to whom restricted stock has been
awarded under the Plan dies prior to the lapse of all restrictions applicable to
such restricted stock, any Unvested Shares held by such person on the date of
his death shall be forfeited.
(d) Termination with Board Approval. If a Grantee ceases to be either a
director, employee or paid consultant of the Company or a Subsidiary for any
reason other than removal for Cause, and the Board or the Committee expressly
determines that for purposes of this Section 9(d), such termination of service
or employment is in the best interests of the Company, then notwithstanding
anything herein to the contrary, an option or Stock Appreciation Right awarded
to such Grantee hereunder shall be exercisable by such Grantee or by the estate
of such Grantee, by a person who acquired the right to exercise such option or
Stock Appreciation Right by bequest or inheritance from the Grantee or
otherwise, for such additional period following termination of service or
employment as shall be determined by the Board or the Committee but in no event
later than the date upon which such option or Stock Appreciation Right would
have expired absent such termination of service or employment. Any such extended
option or Stock Appreciation Right shall be exercisable only to the extent and
in the manner exercisable by such Grantee at the time of such termination of
service or employment.
10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in the number of shares of the outstanding Stock
of the Company by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, or similar event, the Board or the
Committee shall adjust proportionally the number and kind of shares subject to
the Plan, and the number, kind, and per share Stock Appreciation Right Base
Price, Incentive Stock Option Price or Nonstatutory Stock Option Price (as the
case may be) of shares then subject to unexercised options. Any such adjustment
shall be made without a change in the aggregate purchase price or aggregate Base
Price of the shares of the Stock subject to the unexercised portion of any
option or Stock Appreciation Right. In the event of any merger, spin-off,
split-off or other similar consolidation, reorganization or change affecting any
class of stock of the Company (a "Merger Event") subject to Awards made under
the Plan, or any distribution (other than normal cash dividends) to holders of
such stock, fair and equitable provision and adjustment shall be made in good
faith by the Board or the Committee, including (without limitation) adjustments
to avoid fractional shares, in respect of all unexercised options or Stock
Appreciation Rights to give proper effect to such event and preserve the value,
rights and benefits of such options or Stock Appreciation Rights; provided,
however, that the Board or the Committee may, in the case of any Merger Event
pursuant to which the Company is not the surviving corporation and pursuant to
which the former holders of the Stock do not hold, directly or indirectly, more
than a majority of the voting securities of the resulting entity immediately
after such Merger Event or in connection with any acquisition by any person of
more than fifty percent (50%) of the outstanding shares of the Stock, provide
that each option or Stock Appreciation Right holder shall receive a cash payment
(in exchange for and in cancellation of such option or Stock Appreciation Right)
equal to the difference (if greater than zero) between the value of the per
share consideration received by the holders of the Stock in such Merger Event or
such acquisition and the purchase price or Base Price of such option or Stock
Appreciation Right, multiplied by the number of shares of the Stock underlying
such option or Stock Appreciation Right (and if such difference is equal to or
less than zero, the Board or the Committee may provide that each such holder
receive no payment, nor other compensation, in exchange for and in cancellation
of any such option or Stock Appreciation Right). In addition, in the event of
any Merger Event pursuant to which all of the outstanding Stock held by the
shareholders of the Company
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<PAGE> 30
is exchanged for any lawful consideration, all unvested and unexercisable
options or Stock Appreciation Rights outstanding on the date on which
shareholder approval of such Merger Event is obtained shall become 100% vested
and exercisable.
11. MAXIMUM AWARDS.
The maximum annual and other amounts in this Section 11 are subject to
adjustment under Section 10 and are subject to the Plan maximum under Section 3.
All Grantees in the aggregate may not receive in any fiscal year Awards of
options and/or Stock Appreciation Rights, in the aggregate, exceeding 2,500,000
underlying shares of Stock. Each individual Grantee may not receive in any
fiscal year Awards of options and/or Stock Appreciation Rights exceeding
1,500,000 underlying shares of Stock. No more than 600,000 shares of Stock may
be granted under Section 6 of the Plan as Awards of restricted stock.
12. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective upon its adoption by the Board; provided,
however, that (i) the effectiveness of the Plan shall be subject to the approval
of the stockholders of the Company by the affirmative vote of the holders of a
majority of the shares of the Company's Voting Stock present in person or
represented by proxy at a duly held meeting at which a quorum is present (or by
such greater vote as may be required by applicable law, regulation or provision
of the certificate of incorporation or bylaws of the Company) within 12 months
before or after the adoption of the Plan by the Board; and (ii) the
effectiveness of Awards made under the Plan prior to the date such stockholder
approval is obtained shall also be subject to such stockholder approval of the
Plan.
13. MANNER OF GRANT.
Nothing contained in the Plan or in any resolution heretofore or, except as
provided in the Plan, hereafter adopted by the Board or any committee thereof or
by the stockholders of the Company with respect to the Plan shall constitute the
granting of an Award under the Plan. The granting of an Award under the Plan
shall be deemed to occur only upon the date on which the Board or the Committee
shall approve the grant of such Award. All Awards granted under the Plan shall
be evidenced by a written agreement, in such form as shall be determined by the
Board or the Committee, signed by a representative of the Board or the Committee
and the recipient thereof.
14. COMPLIANCE WITH LAW AND REGULATIONS.
The obligation of the Company to sell and deliver any shares of Stock under
the Plan shall be subject to all applicable laws, rules and regulations, and the
obtaining of all approvals by governmental agencies deemed necessary or
appropriate by the Board or the Committee. Except as otherwise provided in
Section 2 and Section 17 herein, the Board or the Committee may make such
changes in the Plan and include such terms in any Award agreement as may be
necessary or appropriate, in the opinion of counsel to the Company, to comply
with the rules and regulations of any governmental authority, or to obtain for
employees granted Incentive Stock Options the tax benefits under the applicable
provisions of the Code and the regulations thereunder.
15. TAX WITHHOLDING.
The company for whom services are performed (whether the Company or a
Subsidiary) by a director, employee or paid consultant granted an Award under
the Plan shall have the right to deduct or otherwise effect a withholding of any
amount required by federal or state laws to be withheld with respect to the
grant, vesting or exercise of any Award or the sale of stock acquired upon the
exercise of an Incentive Stock Option in order for such company to obtain a tax
deduction otherwise available as a consequence of such grant, vesting, exercise
or sale, as the case may be.
A-9
<PAGE> 31
16. NONEXCLUSIVITY OF THE PLAN.
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
having any impact on existing qualified or nonqualified retirement or bonus
plans of the Company or, except as otherwise expressly provided herein, as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options, stock appreciation rights or restricted stock
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
17. AMENDMENT.
The Board at any time, and from time to time, may amend the Plan, subject
to any required regulatory approval and subject to the limitation that, except
as provided in Section 10 hereof, no amendment shall be effective unless
approved within 12 months after the date of the adoption of such amendment by
the affirmative vote of the holders of a majority of the shares of the Company's
Voting Stock present in person or represented by proxy at a duly held meeting at
which a quorum is present (or by such greater vote as may be required by
applicable law, regulation or provision of the certificate of incorporation or
bylaws of the Company) if such amendment would, but for such approval, prevent
the issuance of Incentive Stock Options under the Plan or cause the Plan to no
longer comply with the requirements of Section 162(m) of the Code.
Except as provided in Section 10 hereof, rights and obligations under any
Awards granted before amendment of the Plan shall not be altered or impaired by
amendment of the Plan, except with the consent of the person to whom the Award
was granted.
18. TERMINATION OR SUSPENSION.
The Board at any time may suspend or terminate the Plan. The Plan, unless
sooner terminated, shall terminate on the 10th anniversary of its adoption by
the Board or its approval by the stockholders of the Company, whichever is
earlier, but such termination shall not affect any Award theretofore granted. No
Award may be granted under the Plan while the Plan is suspended or after it is
terminated. Except as otherwise expressly provided herein, no rights or
obligations under any Award granted while the Plan is in effect shall be altered
or impaired by suspension or termination of the Plan, except with the consent of
the person to whom the Award was granted. Any Award granted under the Plan may
be terminated by agreement between the holder thereof and the Company and, in
lieu of the terminated Award, a new Award may be granted.
19. CONTINUATION OF EMPLOYMENT.
Nothing contained in the Plan (or in any written Award agreement) shall
obligate the Company or any Subsidiary to continue for any period to elect any
individual as a director or to employ an employee or consultant to whom an Award
has been granted, or interfere with the right of the Company or any Subsidiary
to vary the terms of such person's service or employment or reduce such person's
compensation.
20. EXCULPATION AND INDEMNIFICATION.
To the fullest extent permitted by applicable law and regulation, the
Company shall indemnify and hold harmless the members of the Board and the
members of the Committee from and against any and all liabilities, costs, and
expenses incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities, and
obligations under the Plan, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct. or criminal
acts of such persons.
21. HEADINGS
Headings are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
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<PAGE> 32
22. GOVERNING LAW
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Nevada, without reference
to the principles of conflict of laws thereof.
23. UNFUNDED PLAN
The Plan shall be unfunded and the Company shall not be required to
segregate any assets in connection with any Awards under the Plan. Any liability
of the Company to any person with respect to any Award under the Plan or any
Award agreement shall be based solely upon the contractual obligations that may
be created as a result of the Plan or any such Award or agreement. No such
obligation of the Company shall be deemed to be secured by any pledge of,
encumbrance on, or other interest in, any property or asset of the Company or
any Subsidiary. Nothing contained in the Plan or any Award agreement shall be
construed as creating in respect of any Grantee (or beneficiary thereof or any
other person) any equity or other interest of any kind in any assets of the
Company or any Subsidiary or creating a trust of any kind or a fiduciary
relationship of any kind between the Company, any Subsidiary and/or any such
Grantee, any beneficiary thereof or any other person.
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<PAGE> 33
PROXY
ALLIANCE GAMING CORPORATION
6601 South Bermuda Road
Las Vegas, Nevada 89119
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints David D. Johnson, David Robbins and
Scott Schweinfurth as Proxies, each with the power to appoint his substitute,
and hereby authorize them to represent and to vote as designated on the reverse
side all the shares of common stock of Alliance Gaming Corporation held of
record by the undersigned on March 3, 1997 at the annual meeting of
stockholders to be held on April 16, 1997 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
(Continued and to be signed on reverse side)
<PAGE> 34
___
Please mark your
X votes as in this
___ example.
FOR all nominees WITHHOLD
listed at right AUTHORITY
(except as marked to to vote for all nominees
the contrary below) listed at right)
___ ___ Nominees:
1. ELECTION OF Anthony L. DiCesare
DIRECTORS. ___ ___ Joel Kirschbaum
(INSTRUCTION: To withhold authority to vote for any
individual, write that nominee's name in the space
provided below.)
___________________________________________________
FOR AGAINST ABSTAIN
___ ___ ___
2. PROPOSAL TO APPROVE THE 1996
LONG-TERM INCENTIVE PLAN. ___ ___ ___
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Signature ____________________ ___________________________ Dated _________1997
(Signature if held jointly)
NOTE: Please sign exactly as name appears herein. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
