<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):
---------------------------------------------------------------------
(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
[ALLIANCE GAMING CORPORATION LOGO]
Dear Stockholder:
I am pleased to provide you with the enclosed proxy statement and Form
10-K for this year's Annual Meeting of Stockholders.
Two of the members of the Board of Directors, Mr. DiCesare and Mr.
Kirschbaum, have been nominated for re-election. Your Board recommends a vote in
favor of Mr. DiCesare and Mr. Kirschbaum.
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, Innisfree M&A Incorporated, toll free, 1-888-750-5834.
Yours sincerely,
/s/ DAVID JOHNSON
David Johnson
Senior Vice President, General Counsel,
and Secretary
------------------
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 Rd
Las Vegas, Nevada 89119
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 4, 2000
--------------------------
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 Alexis Park
Resort and Spa, 375 East Harmon Avenue, Las Vegas, Nevada, on January 4, 2000,
at 9:00 a.m., Pacific 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, and
2. To consider such other matters that may properly be before the
Meeting.
The Board of Directors has fixed the close of business on December 8,
1999, 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 JOHNSON
David Johnson
Senior Vice President, General Counsel, and Secretary
Las Vegas, Nevada
December 8, 1999
<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 9:00
a.m., Pacific time, at the Alexis Park Resort and Spa, 375 East Harmon Avenue,
Las Vegas, Nevada, on January 4, 2000, and any adjournment or postponement
thereof. At the Meeting, stockholders will be asked to vote on 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, and
2. To consider such other matters that 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 December 8, 1999.
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, 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 has also employed Innisfree M&A
Incorporated, 501 Madison Avenue, 20th Floor, New York, New York 10022
(telephone: 1-888-750-5834), to assist in soliciting proxies for a fee of
$6,500, 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, the shares will be voted to elect the two
director nominees named herein for the terms stated herein. 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 December 8, 1999, 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 10,252,380 shares of Common
Stock, each of which is entitled to one vote.
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. 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.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 30,
1999 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 Named
Executive Officers (as determined under "Executive Compensation" below) of the
Company as listed in the compensation table, and (iv) all executive officers and
directors of the Company as a group. Except as indicated below, beneficial
ownership includes the sole power to vote and to dispose of the securities in
question. Except as indicated below, no director or executive officer of the
Company beneficially owned any other equity securities of the Company.
<TABLE>
<CAPTION>
Amount of Percent of
Name Shares (1) Class (1)
---- ---------- ---------
<S> <C> <C>
Alfred H. Wilms 2,009,737 (2) 19.6%
FMR Corp. 697,098 (3) 6.8%
82 Devonshire Street
Boston, MA 02109
Jacques Andre 26,309 (4) *
Anthony DiCesare 151,674 (5) 1.5%
Joel Kirschbaum 409,506 (6) 3.9%
David Robbins 66,500 (7) *
Morris Goldstein 82,274 (8) *
Robert Miodunski 64,591 (9) *
David Johnson 65,246 (10) *
Scott Schweinfurth 60,963 (11) *
Robert Saxton 50,652 (12) *
All executive officers and directors as a group 1,005,166 (13) 9.2%
</TABLE>
- ----------
*Less than 1%.
(1) Excludes the effect of the issuance of up to 714,286 shares subject to
warrants originally issued to Gaming Systems Advisors, L.P. ("GSA") upon
consummation of the acquisition of Bally Gaming International, Inc.
pursuant to an agreement between the Company and GSA ("the GSA Advisory
Agreement"). Such warrants have an exercise price of $5.25 per share and
become exercisable in equal one-third tranches only when the Common Stock
price reaches $38.50, $45.50 and $52.50, respectively for a designated
period of time. Pursuant to information provided by Mr. Kirschbaum, as part
of a distribution of assets from Kirkland - Ft. Worth Investment Partners,
L.P. ("KFW") and GSA to Kirkland Investment Corporation ("KIC") and GSA,
Inc. ("GSI"), general partner of KFW and GSA, respectively, on the one
hand, and to Kirkland Investors, L.P. on the other hand, approximately
81,429 and 190,000 of such warrants were distributed to Mr. DiCesare and
Mr. Kirschbaum, respectively. As a result, Mr. DiCesare and Mr. Kirschbaum
disclaim beneficial ownership of any other of these warrants.
(2) Mr. Wilms' mailing address is 2, St. Jansvliet, bus 6-2000 Antwerp,
Belgium.
(3) Information provided by a representative of FMR Corp.
(4) Includes 4,285 shares owned and 22,024 shares subject to options that are
currently exercisable or will become exercisable within 60 days.
(5) Includes 44,532 shares owned and 107,142 shares subject to options that are
currently exercisable or will become exercisable within 60 days, but
excludes certain additional shares underlying the warrants referred to in
Note (1) above. Also excludes 18,835 shares placed in a trust, a trustee of
which is Mr. DiCesare's wife. Mr. DiCesare disclaims any beneficial
ownership of these shares.
(6) Includes 252,364 shares owned and 157,142 shares subject to options that
are currently exercisable or will become exercisable within 60 days, but
excludes certain additional shares underlying the warrants referred to in
Note (1) above. This disclosure is based upon information provided by Mr.
Kirschbaum. Mr. Kirschbaum has advised that of such shares, certain amounts
are subject to options held by other persons.
2
<PAGE> 6
(7) Includes 18,285 shares owned and 40,787 shares subject to options that are
currently exercisable or will become exercisable within 60 days; also
includes 7,428 shares subject to options granted to Mr. Robbins by KFW or
KIC, based upon information provided by Mr. Kirschbaum.
(8) Includes 28,702 shares owned and 53,572 shares subject to options that are
currently exercisable or will become exercisable within 60 days.
(9) Includes 1,142 shares owned and 63,449 shares subject to options that are
currently exercisable or will become exercisable within 60 days.
(10) Represents shares subject to options that are currently exercisable or will
become exercisable within 60 days.
(11) Includes 5,143 shares owned and 55,820 shares subject to options that are
currently exercisable or will become exercisable within 60 days.
(12) Represents shares subject to options that are currently exercisable or will
become exercisable within 60 days.
(13) Includes 643,000 shares subject to options that are currently exercisable
or will become exercisable within 60 days.
3
<PAGE> 7
ELECTION OF DIRECTORS
GENERAL
The Company's bylaws provide that the Board of Directors shall consist
of no fewer than three and not more than nine directors, with the exact number
to be fixed by the Board of Directors. The Company's bylaws 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 four, two of whom will be elected
at the Meeting.
Anthony 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 election will be
voted for Messrs. DiCesare and Kirschbaum. Although the Company does not
anticipate that any 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 Board of Directors and each other
director of the Company who will continue to serve as a director after the
Meeting.
<TABLE>
<CAPTION>
DIRECTOR TERM
NOMINEES FOR DIRECTOR AGE SINCE EXPIRES PRINCIPAL OCCUPATION
--------------------- --- ----- ------- --------------------
<S> <C> <C> <C> <C>
Anthony DiCesare (2)(3) 37 1994 2002 Private Investor
Joel Kirschbaum (2)(3) 48 1994 2002 President - Kirkland Investment Corporation
DIRECTOR TERM
CONTINUING DIRECTORS AGE SINCE EXPIRES PRINCIPAL OCCUPATION
-------------------- --- ----- ------- --------------------
Jacques Andre (1)(2)(4) 62 1996 2001 Partner - Ray & Berndtson, Inc., an
executive search firm
David Robbins (1)(2)(3)(4) 40 1994(a) 2000 Attorney and Private Investor
</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
(a) Member of the Board of Directors since 1994, except for the months from
September 1997 to December 1997.
ANTHONY DICESARE was employed by KIC, which was the sole general
partner of KFW, an investment partnership, from April 1991 to July 1994. Mr.
DiCesare served as Executive Vice President-Development of the Company from July
1994 to June 1997. While he is currently a New York-based employee of the
Company, his principal occupation since June 1997 has been as a private
investor.
JOEL KIRSCHBAUM was appointed a director in July 1994 and served as
Chairman of the Board of Directors of the Company 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 of GSI and GSA since June 1993. Prior to that
time, he worked at Goldman, Sachs & Co. for thirteen 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. While Mr. Kirschbaum is
currently a New York-based employee of the Company, his principal occupation is
as President of KIC.
JACQUES 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.
4
<PAGE> 8
DAVID ROBBINS served as a director from July 1994 to September 1997 and
as Chairman of the Board of Directors of the Company from February 1997 to
September 1997. In December 1997 he was again elected to the Board of Directors
and since that time has served as Chairman of the Board. Mr. Robbins has been a
practicing attorney since 1984; he was formerly an attorney with Kramer, Levin,
Naftalis, Kamin & Frankel from May 1993 to September 1995, with O'Sullivan,
Graev & Karabell, LLP from September 1995 to February 1997, and since February
1997 he has been a member of Brock Silverstein, LLC. Mr. Robbins is also a
private investor and managing member of a private investment fund.
VOTE REQUIRED
The election of each director requires 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. 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.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended June 30, 1999, the Board of Directors held
seven meetings. Each director 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. Since the last stockholders meeting, three
directors have resigned: Morton Topfer in May 1999, and Michael Hirschfeld and
Morris Goldstein in November 1999.
Executive Committee. The Executive Committee of the Board of Directors
is presently comprised of all the Board members. 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
separately from the Board of Directors during the fiscal year ended June 30,
1999.
Audit Committee. The Audit Committee of the Board of Directors is
presently comprised of Messrs. Andre and Robbins (Chairman). 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 Audit Committee may in its
discretion deem desirable or appropriate. The Audit Committee met four times
during the fiscal year ended June 30, 1999.
Nominating Committee. The Nominating Committee of the Board of
Directors is presently comprised of Messrs. DiCesare, Kirschbaum (Chairman) and
Robbins. 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 Nominating Committee met once during the fiscal year
ended June 30, 1999. The Nominating Committee will in the future consider
nominees recommended by stockholders. Stockholders should submit the names of
proposed nominees in writing to the Nominating Committee in care of Secretary,
6601 South Bermuda Rd., Las Vegas, Nevada 89119, along with appropriate
background information.
Compensation Committee. The Compensation Committee of the Board of
Directors is presently comprised of Messrs. Andre and Robbins (Chairman). This
Committee makes recommendations concerning the compensation of the Company's
executive officers including its CEO. The Compensation Committee met five times
during the fiscal year ended June 30, 1999.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or to be paid by the
Company to the Company's chief executive officer and its four other most highly
compensated executive officers receiving over $100,000 per year (the "Named
Executive Officers") for services rendered in all capacities to the Company
during the fiscal year ended June 30, 1999:
SUMMARY COMPENSATION TABLE *
<TABLE>
<CAPTION>
Fiscal Annual Compensation Long-term
Year ------------------------------------- Compensation
Name and Ended Other Annual Awards All Other
Principal Position June 30, Salary Bonus Compensation(2) Options(3) Compensation(4)
------------------ -------- -------- --------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Morris Goldstein (1) 1999 $460,600 $162,800 $ -- -- $ 3,000
President and 1998 450,000 -- -- -- 90,000(5)
Chief Executive Officer 1997 17,300 -- -- 142,828 --
David Johnson 1999 $255,300 $ 64,400 $ -- 2,857 $ 2,300
Senior Vice President, General Counsel 1998 250,000 -- -- 7,972 2,000
and Secretary 1997 250,000 185,000 -- 57,143 5,400
Scott Schweinfurth 1999 $255,300 $ 70,000 $ -- 2,857 $ 1,800
Senior Vice President, Treasurer 1998 250,000 -- 53,200 29,143 1,700
and Chief Financial Officer 1997 235,000 400,000 -- 34,286 4,300
Robert Saxton 1999 $240,300 $118,600 $ -- 2,857 $ 3,000
Senior Vice President- Casino Group 1998 225,000 -- -- 8,572 --
1997 211,700 86,000 -- 39,429 --
Robert Miodunski (1) 1999 $240,300 $ 92,000 $ -- 2,857 $ 3,000
Senior Vice President - 1998 225,000 55,000 -- 12,989 1,800
Route Group (Nevada) 1997 212,500 96,800 -- 34,572 1,700
</TABLE>
- --------
* As used in the tables provided under the caption "Executive Compensation,"
the character " -- " is used to represent "zero."
(1) Mr. Goldstein joined the Company in June 1997 as President and Chief
Executive Officer and resigned in November 1999. Upon Mr. Goldstein's
resignation, Mr. Miodunski was appointed Chief Operating Officer of the
Company.
(2) Excludes personal benefits in amounts less than the lesser of $50,000 or 10
percent of the total annual salary and bonus reported for the Named
Executive Officer.
(3) Share amounts have been restated to reflect the one-for-three-and-one-half
reverse stock split effective February 1, 1999.
(4) "All Other Compensation" for fiscal year 1999 represents contributions made
by the Company to the Company's Profit Sharing 401(k) Plan.
(5) Represents payments made for relocation costs.
6
<PAGE> 10
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table reflects options granted to Named Executive Officers during
the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
Potential Realizable
Value at
Individual Grants Assumed Annual Rates
---------------------------------------------------------- of Stock
% of Total Price Appreciation for
Granted Option Term
Options to Employees in Exercise Expiration -----------
Name Granted(a) Fiscal Year Price Date 5% 10%
---- ---------- ------------------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
David Johnson 10,829 (b) 4.73% $9.4063 9/14/03 $28,000 $62,000
Scott Schweinfurth 14,550 (c) 6.36% 9.4063 9/14/03 38,000 84,000
Robert Saxton 14,550 (d) 6.36% 9.4063 9/14/03 38,000 84,000
Robert Miodunski 8,703 (e) 3.80% 9.4063 9/14/03 23,000 50,000
</TABLE>
- ------------
(a) Includes 7,972 options, 11,693 options, 11,693 options, and 5,846 options
granted to Messrs. Johnson, Schweinfurth, Saxton and Miodunski,
respectively, in September 1998 in lieu of cash bonuses for fiscal year
1998.
(b) Options vest: 5,379 on grant date; 2,723 on first anniversary thereof; and
2,727 on second anniversary thereof.
(c) Options vest: 5,996 on grant date; 4,270 on first anniversary thereof; and
4,284 on second anniversary thereof.
(d) Options vest: 5,803 on grant date; 4,850 on first anniversary thereof; and
3,897 on second anniversary thereof.
(e) Options vest: 2,956 on grant date; 2,871 on first anniversary thereof; and
2,876 on second anniversary thereof.
AGGREGATE FISCAL YEAR-END OPTION/SAR VALUES
The following table reflects outstanding options held by Named Executive
Officers at June 30, 1999:
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
June 30, 1999 June 30, 1999 (a)
---------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Morris Goldstein 53,572 89,287 $0 $0
David Johnson 62,522 5,449 0 0
Scott Schweinfurth 37,833 28,453 0 0
Robert Saxton 41,990 15,417 0 0
Robert Miodunski 40,387 11,459 0 0
</TABLE>
- ---------
(a) Represents the amount by which the market value of the underlying stock at
June 30, 1999 ($3.75 per share) exceeds the aggregate exercise prices of
the options.
7
<PAGE> 11
DIRECTORS' COMPENSATION
Arrangements with Directors: Directors of the Company who are also
employees are generally not separately compensated for their services as
directors unless circumstances otherwise warrant. Compensation arrangements for
other directors of the Company are as follows: (i) Chairman of the Board:
$135,000 per year for services as Chairman of the Board and member of various
committees, and (ii) other directors: $30,000 per year for services as a
director and member of various committees. In addition, all non-employee
directors receive option grants of 8,572 shares upon appointment to the Board of
Directors and 4,286 shares on each anniversary date of their original
appointment to the Board of Directors. All of these options are granted at fair
market value on the grant date, vest immediately and have a five-year term.
Directors are also reimbursed for their reasonable out-of-pocket expenses
incurred on Company business. Nonetheless, the Company may grant directors (both
employee and non-employee) additional cash compensation and options as time
commitments, responsibilities and other circumstances may warrant.
Other Arrangements. Effective July 1, 1997, the Company entered into
employment agreements (the "Agreements") with Mr. DiCesare and Mr. Kirschbaum
(each an "Employee" and collectively the "Employees") pursuant to which each
Employee will be a New York-based employee and will work on major strategic
transactions involving the Company or its affiliates, including mergers,
acquisitions, divestitures, joint ventures, the negotiation of strategic
alliances or relationships and financings and refinancings. The Employees are
not expected to be involved in the day-to-day operations of the Company, are not
expected to devote full-time to the business of the Company, and may engage in
outside activities, although they may not directly compete with the Company.
Under the Agreements, which have an initial term extending through July 1, 2002
(the "Term") and may be terminated thereafter by either party on notice, each
Employee receives a base salary, currently $154,200 (with inflation increases
each year), and annual performance bonuses (each a "Bonus") based upon annual
performance goals determined by the Board of Directors and the Employee (which
goals will generally relate without limitation to transactions of the type
mentioned above involving the Company (and/or one or more of its affiliates))
and a target Bonus amount (and/or an appropriate minimum amount). More than one
Bonus may be paid with respect to each employment year. If the Board of
Directors and the Employee cannot agree upon reasonable annual performance goals
and minimum and/or target Bonuses with respect to such goals for any year, the
performance goals and Bonus amounts set forth in clauses (i) and (ii) of the
next paragraph will be the goals and Bonus for such year. If a goal is only
partially achieved within a year, the Board of Directors will determine what
amount, if any, will be paid to the Employee with respect to such goal. If a
goal is achieved, the Bonuses will be payable regardless of the level of the
Employee's involvement in the transaction. Upon termination of any Employee's
Agreement for any reason (including for "cause"), the Company may be required to
pay Bonuses to such Employee following such termination upon achievement of
performance goals within specified periods ending up to twenty-one months after
the Term. In addition, if the Company terminates an Employee without "cause," or
an Employee leaves the Company's employ for "good reason" (as these terms are
defined in the Agreements), the Employee will be entitled to receive for each
remaining year of the Term an amount equal to the highest aggregate Bonuses paid
in any previous year as well as the base salary and other compensation provided
for by the Agreements.
The performance goals for each Employee for fiscal year 1999 were: (i)
the closing of a "significant merger" with a value of at least $60 million and
(ii) the closing of a "significant financing" with a value of at least $50
million. On the achievement of the performance goal set forth in clause (i),
each Employee was to receive a minimum Bonus of $200,000. Upon the achievement
of the performance goal set forth in clause (ii), each Employee was to receive a
minimum Bonus of at least $125,000. No bonuses were paid in respect to any
clause for the fiscal year 1999. In addition to the Bonuses, the Agreements
provide that the Board of Directors, in its sole discretion, may grant further
discretionary bonuses and stock options to the Employees. No discretionary
bonuses or stock options were paid or granted during fiscal year 1999.
Pursuant to the Agreements, each Employee may elect to restructure his
relationship with the Company into that of a financial consultant or independent
advisor, with compensation arrangements reflecting the nature of such
relationship and the services to be provided in amounts reasonably consistent
with the compensation and Bonuses payable over the term of the Agreement as
contemplated therein, as determined reasonably and in good faith by the Board of
Directors, but calculated and payable in a manner customary for financial
consultant or independent advisor arrangements. If the Employee makes such
election, the Company and the Employee will negotiate in good faith to establish
a restructured agreement with respect to the services to be provided.
8
<PAGE> 12
Until September 21, 1999, Mr. DiCesare and Mr. Kirschbaum had the
option to pay approximately $0.2 million and $0.9 million, respectively, in cash
or forgo cash Bonuses of an equal amount in order to extend a portion of
warrants held of approximately 89,900 and 310,000, respectively. Mr. Kirschbaum
and Mr. DiCesare did not make the required payments and, accordingly, their
warrants expired unexercised on September 21, 1999.
In addition, effective July 1, 1997, the Company agreed to pay KIC
during the term of the Agreements a current amount of $982,000 (subject to
annual inflation increases) annually plus the cost of reasonable employee
benefits to its support staff and reasonable out-of-pocket expenses incurred by
KIC and its officers and employees to the extent such out-of-pocket expenses
were related directly to the Company's business or potential business (the "KIC
Agreement"). The Company will have the right to terminate the KIC Agreement on
twelve months' notice if Mr. Kirschbaum's employment under his Agreement is
terminated for any reason other than by the Company without "cause" or by the
Employee "for good reason" (as such terms are defined in the Agreements).
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The Company was party to an employment agreement with Mr. Goldstein
that generally provided for a base salary of $465,000 per year, participation in
the Company's compensation programs for corporate officers, participation in the
Company's cash bonus program at amounts determined by the Board of Directors,
receipt of 71,429 stock options to vest 25% on date of grant with the balance
over a three-year period and 71,429 stock options to vest 25% on date of grant
with the balance over a three-year period but which become exercisable in equal
portions only when the common stock reaches prices of $38.50, $45.50, and
$52.50, and severance benefits of one year's base salary if Mr. Goldstein is
terminated prior to June 2000 without cause. Mr. Goldstein resigned voluntarily
from the Company effective November 3, 1999. As per the terms of his employment
agreement, Mr. Goldstein received no termination benefits as a result of his
voluntary resignation. In accordance with the Company's stock option plans, he
may exercise his vested options within sixty days of the date of his
resignation.
On November 4, 1999, Mr. Miodunski was appointed Chief Operating
Officer of the Company and President of Bally Gaming and Systems. Mr. Miodunski
also retained his existing positions including President of United Coin Machine
Co. In connection with Mr. Miodunski's new responsibilities, on November 4,
1999, the Company entered into an amended and restated employment agreement with
Mr. Miodunski that generally provides for a base salary of $325,000 per year
through and including December 31, 2001, a signing bonus of $100,000 payable on
execution of the amended and restated agreement, options to acquire 52,000
shares of the Company's common stock at an exercise price of $6.4375 (market
price on date of grant), which vest (i) 17,334 shares on the grant date, (ii)
17,333 shares on October 31, 2000, and (iii) 17,333 shares on October 31, 2001,
participation in the Company's compensation programs for corporate officers, and
participation in the Company's cash bonus program at amounts determined by the
Board of Directors. In addition, if Mr. Miodunski is terminated prior to
December 31, 2001 without cause, Mr. Miodunski is entitled to receive severance
benefits of twelve months' salary continuation from the date of termination,
offset by any compensation received from other employment during that period,
and accelerated vesting of certain prior option grants.
The Company was party to an employment agreement with Mr. Schweinfurth
which has since expired, and that generally provided for a base salary of
$250,000 per year through and including June 30, 1999, participation in the
Company's compensation programs for corporate officers, participation in the
Company's cash bonus program at amounts determined by the Board of Directors,
and severance benefits of one year's base salary had Mr. Schweinfurth been
terminated prior to June 30, 1999 without cause.
9
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the fiscal year ended June 30, 1999, the Compensation Committee
of the Board of Directors of the Company met five times. The Compensation
Committee is currently comprised of Messrs. Andre and Robbins. Other than
current positions previously described elsewhere herein, no other member of the
Company's Board of Directors was an officer or employee of the Company or any
subsidiary during the fiscal year ended June 30, 1999, or is a former officer of
the Company or any subsidiary.
The Company has hired Ray & Berndtson, Inc., an international executive
search firm, of which Mr. Andre is a partner, to perform certain personnel
searches. The Company paid a total of $609,000 during fiscal year 1999 for nine
searches 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.
The Company paid fees to Milbank, Tweed, Hadley & McCloy, LLP, a law
firm in which Mr. Hirschfeld is a partner, for services rendered during fiscal
year 1999.
The Company paid a total of $273,000 to Dell Computer Corporation, a
company of which Mr. Topfer is the Vice-Chairman, for the purchase or lease of
computer equipment during fiscal year 1999.
The Company paid fees to Brock Silverstein, LLC, a law firm in which
Mr. Robbins is a member, for services during fiscal year 1999.
Since July 1, 1998 certain directors have been involved in transactions
in which Alliance was a party and in which the amount involved exceeded $60,000.
See "Directors' Compensation" and "Certain Relationships and Related
Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a stockholders agreement dated as of September 21, 1993, as
amended on October 20, 1994, by and among the Company, KIC, GSA, KFW, and the
Company's largest shareholder, Mr. Alfred Wilms (as amended, the "Stockholders
Agreement"), KIC is required to vote all of its shares of Common Stock to cause
Mr. Wilms to be elected a director of the Company if so nominated by the Board
of Directors for so long as Mr. Wilms owns shares of Common Stock of the
Company. The Stockholders Agreement contains certain registration rights running
in favor of KFW, KIC, GSA and certain of their respective affiliates and
transferees and Mr. Wilms, including up to four demand registration rights each
(and additional demand rights for Mr. Wilms under certain circumstances), at the
Company's expense, and provisions granting Mr. Wilms the right to participate in
certain offerings of securities by the Company and by KIC and its transferees.
Mr. Alfred Wilms served as a consultant to the Company and received
consulting fees and expense reimbursements that totaled $208,000 during the
fiscal year ended June 30, 1999.
See also "Directors' Compensation" and "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions."
10
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
At the June 1998 Board of Directors meeting, the Board authorized the
creation of the Compensation Committee which consisted of Messrs. Robbins,
Topfer, and Hirschfeld. Mr. Topfer participated until his resignation in May
1999, and Mr. Hirschfeld participated throughout fiscal year 1999. David Robbins
was elected Chairman of the Compensation Committee. In December 1999, Mr. Andre
joined the Compensation Committee. A charter for the Compensation Committee was
adopted by the Board of Directors in 1998. This charter provides for the
following duties to be carried out by this Committee:
- Review and approve executive compensation philosophy
- Approve all executive compensation plans and structures
- Approve annual and long term incentive performance metrics; determine
and approve pay-outs
- Approve compensation for the Company's management executive committee
(consisting of eight members of senior management) as well as the
three Senior Vice Presidents in Bally Gaming and Systems
- Approve plan payouts to the members of management executive committee
that are outside of approved parameters
- Review key appointments and promotions
- Recommend approval for all management incentive plans, including
stock options, to the Board of Directors and approve new
change-in-control or special retention plans
- Approve bonus criteria, incentives, including stock options, and
pay-outs for employee-directors
The Company's compensation formulas for certain executives during the
fiscal year ended June 30, 1999, were largely determined by pre-existing
contractual arrangements in place from the previous fiscal periods. The
Compensation Committee 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 compensation tied to the
creation of stockholder value. The Compensation Committee 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
the Company's Common Stock has appreciated), and (ii) cash bonuses tied to
performance criteria (such as achievement of specific strategic, operational or
financial tasks or targets, like cash return on total assets and revenue growth,
both in relation to operating income) 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 Long-Term Incentive 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, and grants cannot be repriced in the
future. The Board of Directors believes that the compensation philosophy
outlined above has the greatest probability of achieving significant returns to
stockholders.
The Board of Directors' compensation determinations have been and
continue to be affected by various competitive factors including the
requirements 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.
Respectfully submitted,
David Robbins, Chairman
Jacques Andre
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on its Common Stock (no dividends have been paid thereon) for the five
fiscal years in the period ended June 30, 1999 with cumulative total return,
assuming reinvestment of dividends, of (i) the Nasdaq Stock Market (U.S.) 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, 1994 (the last trading day prior to the end of the
Company's 1994 fiscal year). The company peer group used in the graph below
consists of Anchor Gaming, Casino Data Systems, International Gaming and
Technology, Jackpot Enterprises, Powerhouse Technologies, and WMS Industries.
COMPARISON OF 60 MONTH CUMULATIVE RETURN
[see attached]
table to be inserted at financial printer, see attached copy of peer group table
obtained from Research Inc.
12
<PAGE> 16
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 10 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
Company's 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, 1999, all
Section 16(a) filing requirements applicable to Insiders were complied with,
except that Mr. Alfred Wilms filed a Form 4 that did not meet the filing
deadline.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's auditors for the fiscal year ended June 30, 1999 were
KPMG LLP. A representative of KPMG 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.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order for a stockholder proposal to be included in the Board of
Directors' Proxy Statement for the 2000 Annual Meeting of Stockholders, such
proposal must be received at 6601 South Bermuda Road, Las Vegas, Nevada 89119,
Attention: Corporate Secretary, no later than the close of business on August
10, 2000 and must otherwise comply with the applicable provisions of the
Exchange Act.
The persons designated by the Company to vote proxies given by
stockholders in connection with the 2000 Annual Meeting of Stockholders may
exercise discretionary voting authority granted in such proxies on any matter
not disclosed in the Company's 2000 proxy statement with respect to which the
Company has received written notice no later than November 5, 2000.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
brought before the Meeting. However, if any other matter properly comes before
the Meeting, or any adjournment or postponement thereof, that 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 JOHNSON
David Johnson
Senior Vice President, General Counsel, and Secretary
13
<PAGE> 17
ALLIANCE GAMING CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- JANUARY 4, 2000
(THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY)
The undersigned stockholder of Alliance Gaming Corporation hereby appoints
David Johnson, Paul Lofgren and Scott Schweinfurth, each with full power of
substitution, proxy to vote all shares of stock which the undersigned could
vote if personally present at the Annual Meeting of Stockholders of Alliance
Gaming Corporation to be held at the Alexis Park Resort and Spa, 375 East
Harmon Avenue, Las Vegas, Nevada, on January 4, 2000, at 9:00 a.m. (local
time), 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 THE ELECTION AS DIRECTORS OF THE NOMINEES REFERRED TO HEREIN.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE> 18
Please Detach and Mail in the Envelope Provided
Please mark your
A [X] votes as in this
example.
<TABLE>
<S> <C> <C> <C> <C>
FOR WITHHOLD
all nominees listed at AUTHORITY
right (except as marked to vote for all
to the contrary) nominees at right.
1. ELECTION OF
DIRECTORS [ ] [ ] NOMINEES: Anthony DiCesare 2. IN THEIR DISCRETION UPON SUCH OTHER
(for terms as Joel Kirschbaum MATTERS AS MAY PROPERLY COME BEFORE
described in the Proxy Statement) THE MEETING
Instruction: To withhold authority to vote for an UNLESS OTHERWISE SPECIFIED, THIS PROXY
individual nominee, write the nominee's name WILL BE VOTED FOR THE ELECTION OF THE
in the space provided below. PERSONS NOMINATED BY THE BOARD OF
DIRECTORS AS DIRECTORS.
- --------------------------------------------------
Signature of Stockholder Dated , 1999
--------------------------------- ------------------------------------ ---------------------
(SIGNATURE OF HELD JOINTLY)
NOTE: Please date and sign exactly as your name appears hereon. If shares are held jointly, each stockholder should sign. Executors,
administrators, trustees, etc. should use full title and, if more than one, all should sign. If the stockholder is a
corporation, please sign full corporate name by an authorized officer.
</TABLE>
