WMS INDUSTRIES INC /DE/, DEF 14A, 1996-12-11

WMS INDUSTRIES INC /DE/
DEF 14A, 1996-12-11
MISCELLANEOUS MANUFACTURING INDUSTRIES

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

WMS INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined.):

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount Previously Paid:

- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:

- --------------------------------------------------------------------------------
(3) Filing party:

- --------------------------------------------------------------------------------
(4) Date filed:

- --------------------------------------------------------------------------------
<PAGE> 2

WMS LOGO

WMS INDUSTRIES INC.
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

January 21, 1997

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

To the Stockholders of
WMS INDUSTRIES INC.

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of WMS
Industries Inc. (the "Company") will be held on Tuesday, January 21, 1997 at
11:30 A.M. Eastern Standard Time in The Penthouse on the 42nd Floor of The Hotel
Parker Meridien, 118 West 57th Street, New York, New York 10019 to consider and
act upon the following matters:

1. electing a board of nine directors;

2. amending the Company's stock option plans;

3. ratifying the appointment of Ernst & Young LLP as independent
auditors for the 1997 fiscal year; and

4. transacting such other business as may properly come before the
meeting or any adjournment or adjournments thereof.

The close of business on December 2, 1996 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting and any adjournments thereof. A list of the stockholders entitled to
vote at the meeting will be open to the examination of any stockholder of the
Company for any purpose germane to the meeting during ordinary business hours at
the offices of the Company for the ten-day period prior to the meeting.

YOU ARE EARNESTLY REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING, TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.

By Order of the Board of Directors,

BARBARA M. NORMAN
Secretary

Chicago, Illinois
December 11, 1996
<PAGE> 3

ANNUAL MEETING OF STOCKHOLDERS

WMS INDUSTRIES INC.
-------------------------

PROXY STATEMENT
-------------------------

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of WMS Industries Inc. (the "Company" or
"WMS") of proxies to be voted at the Annual Meeting of Stockholders to be held
in The Penthouse on the 42nd Floor of The Hotel Parker Meridien, 118 West 57th
Street, New York, New York 10019, on January 21, 1997 at 11:30 A.M. Eastern
Standard Time, and at any adjournment or adjournments thereof.

All proxies in the accompanying form which are properly executed and duly
returned will be voted in accordance with the instructions specified therein. If
no instructions are given, such proxies will be voted in accordance with the
recommendations of the Board as indicated in this Proxy Statement. A proxy may
be revoked at any time prior to its exercise by written notice to the Company,
by submission of another proxy bearing a later date or by voting in person at
the meeting. Such revocation will not affect a vote on any matters taken prior
thereto. The mere presence at the meeting of the person appointing a proxy will
not revoke the appointment.

The mailing address of the Company's principal executive offices is 3401
North California Avenue, Chicago, Illinois 60618. This Proxy Statement and the
accompanying proxy card are being mailed to stockholders on or about December
11, 1996.

Only holders of the Company's Common Stock, $.50 par value per share (the
"Common Stock"), of record at the close of business on December 2, 1996 (the
"Record Date") will be entitled to vote at the Annual Meeting or any adjournment
or adjournments of such meeting. There were 24,195,800 shares of Common Stock
outstanding on the Record Date (excluding 52,312 treasury shares); each such
share entitles the holder thereof to one vote.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of November 30, 1996
(except as otherwise footnoted) concerning persons which, to the knowledge of
WMS, beneficially own more than 5% of the outstanding shares of WMS Common
Stock:

<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF OUTSTANDING
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) COMMON STOCK
- ----------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
Sumner M. Redstone and
National Amusements, Inc..................... 5,929,100 shares(2) 24.5%
200 Elm Street
Dedham, MA 02026
FMR Corp....................................... 2,439,579 shares(3) 10.1%
82 Devonshire St.
Boston, MA 02109
The Capital Group Companies, Inc.
and Capital Research and
Management Company........................... 1,902,000 shares(4) 7.9%
333 South Hope St.
Los Angeles, CA 90071
State of Wisconsin Investment Board............ 1,329,200 shares(5) 5.5%
P.O. Box 7842
Madison, WI 53707
</TABLE>
<PAGE> 4

- -------------------------
(1) Pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as
amended, shares underlying options are deemed to be beneficially owned if
the holder of the option has the right to acquire beneficial ownership of
such shares within 60 days.

(2) The number of shares reported is based upon information contained in
Amendment No. 19, dated September 21, 1995, to the Schedule 13D filed with
the Securities and Exchange Commission by Sumner M. Redstone. Pursuant to
such Schedule, as amended, Mr. Redstone and National Amusements, Inc., a
Maryland corporation, reported beneficial ownership of and sole investment
power with respect to 3,033,800 and 2,895,300 shares, respectively, of the
Common Stock and shared voting power with respect to such shares pursuant to
a Proxy Agreement entered into with the Company, and Messrs. Louis J. and
Neil D. Nicastro (see "Voting Proxy Agreement" described below). Mr.
Redstone is the beneficial owner of 66 2/3% of the issued and outstanding
shares of the common stock of National Amusements, Inc.

(3) The number of shares reported is based upon information contained in a
Schedule 13G/A dated August 9, 1996 filed with the Securities and Exchange
Commission by FMR Corp. Pursuant to such Schedule, FMR Corp. reported that
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, as amended, is the beneficial owner of
2,439,579 shares or 10.1% of the Common Stock as a result of acting as
investment adviser to various investment companies registered under Section
8 of the Investment Company Act of 1940. FMR Corp. reported it has sole
power to dispose of or direct the disposition of all such shares but no
power to vote such shares.

(4) The number of shares reported is based upon information contained in a
Schedule 13G dated February 9, 1996 filed with the Securities and Exchange
Commission by The Capital Group Companies, Inc. ("CGC"). Pursuant to such
Schedule 13G and accompanying documentation, CGC reported that Capital
Research and Management Company, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, as amended, and Capital
Guardian Trust Company, a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, operating subsidiaries of CGC,
exercised as of December 31, 1995, investment discretion with respect to
1,300,000 and 602,000 shares, respectively, or a combined total of 7.9% of
the Company's Common Stock which was owned by various institutional
investors at that time.

(5) The number of shares reported is based upon information contained in a
Schedule 13G dated February 3, 1996 filed with the Securities and Exchange
Commission by the State of Wisconsin Investment Board ("SWIB"), a
governmental agency which manages public pension funds subject to provisions
comparable to ERISA. The SWIB reported it had sole voting and dispositive
power with respect to 1,329,200 shares of the Company's Common Stock.

(6) The number of shares reported as beneficially owned includes the 5,929,100
shares of Common Stock owned by Sumner M. Redstone and National Amusements,
Inc. for which the reporting person has shared voting power but no
dispositive power. Additionally, the number of shares reported as
beneficially owned includes 862,000 shares for which the reporting person
has sole voting and sole dispositive power, 800,000 of which may be acquired
pursuant to stock options, 500,000 of such options being Target Price
Options. For a discussion concerning the shared voting power with respect to
the 5,929,100 shares of Common Stock referred to above, see "Voting Proxy
Agreement" below.

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<PAGE> 5

(7) For purposes of calculating the percentage of shares of Common Stock owned,
shares issuable upon the exercise of options within 60 days have been deemed
to be outstanding.

(8) The number of shares reported as beneficially owned includes the 5,929,100
shares owned by Sumner M. Redstone and National Amusements, Inc. for which
the reporting person has shared voting power but no dispositive power.
Additionally, the number of shares reported as beneficially owned includes
500,000 shares for which the reporting person has sole voting and sole
dispositive power, all of which may be acquired pursuant to Target Price
Options. For a discussion concerning the shared voting power with respect to
the 5,929,100 shares of Common Stock referred to above, see "Voting Proxy
Agreement" below.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of November 30, 1996, certain
information concerning beneficial ownership of shares of WMS Common Stock by
each director of WMS, each executive officer of WMS and by all directors and
executive officers of WMS as a group:

<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF OUTSTANDING
BENEFICIAL COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP(1) STOCK(2)
-------------------------------------------------- ------------ -----------
<S> <C> <C>
Harold H. Bach, Jr................................ 77,000(3) **
George R. Baker*.................................. 50,800(4) **
William C. Bartholomay*........................... 68,800(4) **
Kenneth J. Fedesna*............................... 130,058(5) **
William E. McKenna*............................... 52,594(4) **
Norman J. Menell*................................. 52,216(4) **
Louis J. Nicastro*................................ 6,433,732(6) 25.8%
Neil D. Nicastro*................................. 6,791,100(7) 27.2%
Barbara M. Norman................................. 90,100(3) **
Harvey Reich*..................................... 51,190(4) **
Ira S. Sheinfeld*................................. 62,000(8) **
----------- -----
Directors and Executive Officers as a group
(11 persons).................................... 7,930,490(9)(10) 30.5%(10)
========== ========
</TABLE>

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

* Nominee for Director

** Less than 1%

(1) Pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as
amended, shares underlying options are deemed to be beneficially owned if
the holder of the option has the right to acquire beneficial ownership of
such shares within 60 days. Certain of such options as reported herein also
require that the Common Stock attain a market price of $35.00 per share
prior to exercise ("Target Price Options"). Except as otherwise indicated
in the following footnotes, each of the persons listed in the table owns
the shares of Common Stock opposite his or her name and has sole voting and
dispositive power with respect to such shares.

(2) For purposes of calculating the percentage of shares of Common Stock owned,
shares issuable upon the exercise of stock options within 60 days have been
deemed to be outstanding.

(3) Includes 75,000 shares of Common Stock which the reporting person has the
right to acquire upon the exercise of Target Price Options.

(4) Includes 50,000 shares of Common Stock which the reporting person has the
right to acquire upon the exercise of Target Price Options.

(5) Includes 130,000 shares of Common Stock which the reporting person has the
right to acquire upon the exercise of stock options, 100,000 of which are
Target Price Options.

(6) The number of shares reported as beneficially owned include the 5,929,100
shares of Common Stock owned by Sumner M. Redstone and National Amusements,
Inc. for which the reporting person has shared voting power but no
dispositive power. Additionally, the number of shares reported as
beneficially

3
<PAGE> 6

owned includes 500,000 shares for which the reporting person has sole
voting and sole dispositive power, all of which may be acquired pursuant to
Target Price Options. For a discussion concerning the shared voting power
with respect to the 5,929,100 shares of Common Stock referred to above, see
"Voting Proxy Agreement."

(7) The number of shares reported as beneficially owned include the 5,929,100
shares of Common Stock owned by Sumner M. Redstone and National Amusements,
Inc. for which the reporting person has shared voting power but no
dispositive power. Additionally, the number of shares reported as
beneficially owned includes 862,000 shares for which the reporting person
has sole voting and sole dispositive power, 800,000 of which may be
acquired pursuant to stock options, 500,000 of which are Target Price
Options. For a discussion concerning the shared voting power with respect
to the 5,929,100 shares of Common Stock referred to above, see "Voting
Proxy Agreement."

(8) Includes 62,000 shares of Common Stock which the reporting person has the
right to acquire upon the exercise of stock options, 50,000 of which are
Target Price Options.

(9) Includes 1,892,000 shares of Common Stock which directors and executive
officers have the right to acquire upon the exercise of stock options,
1,550,000 of which are Target Price Options. Additionally, includes the
5,929,100 shares of Common Stock owned by Sumner M. Redstone and National
Amusements, Inc. with respect to which Mr. Louis J. Nicastro and Mr. Neil
D. Nicastro both have shared voting power but no dispositive power. For a
discussion concerning the shared voting power with respect to the 5,929,100
shares of Common Stock referred to above, see "Voting Proxy Agreement."

(10) For purposes of this calculation, the 5,929,100 shares of Common Stock
owned by Sumner M. Redstone and National Amusements, Inc. with respect to
which Mr. Louis J. Nicastro and Mr. Neil D. Nicastro have shared voting
power but no dispositive power have only been counted once. For a
discussion concerning the shared voting power with respect to the 5,929,100
shares of Common Stock referred to above, see "Voting Proxy Agreement."

VOTING PROXY AGREEMENT

In order for the Company to be permitted to manufacture and sell slot
machines in Nevada, the Company and certain of its subsidiaries and Mr. Louis J.
Nicastro and Mr. Neil D. Nicastro were required to be registered, licensed or
found suitable and have been registered, licensed or found suitable by the
Nevada State Gaming Control Board and the Nevada Gaming Commission (the "Nevada
Gaming Authorities"), as applicable, as a registered corporation, as registered
holding companies, for licensure as a manufacturer and distributor of gaming
devices and as directors, officers and stockholders of such entities, as
applicable. Under applicable Nevada law and administrative procedure, as a
greater than 10% stockholder of the Company, Mr. Sumner M. Redstone ("SMR") was
required to apply and has an application pending with the Nevada Gaming
Authorities for a finding of suitability as a stockholder of the Company.
Pending completion of the processing of SMR's application, SMR and National
Amusements, Inc. ("NAI") have voluntarily granted to Mr. Louis J. Nicastro and,
if he is unable to perform his duties under the Proxy Agreement (as defined
herein), Mr. Neil D. Nicastro, individually, a voting proxy for all of the
shares of Common Stock which they own beneficially or of record.

On September 21, 1995, Mr. Louis J. Nicastro and Mr. Neil D. Nicastro
entered into a Voting Proxy Agreement (the "Proxy Agreement") with the Company,
SMR and NAI, pursuant to which Mr. Louis J. Nicastro and, if he is unable to
perform his duties under the Proxy Agreement, Mr. Neil D. Nicastro have been
appointed, individually, as proxy holder with full power of substitution during
and for the term of the voting proxy, to vote all shares of the Company's Common
Stock as the proxy of SMR and NAI at any annual, special or adjourned meeting of
the stockholders of the Company, including the right to execute consents,
certificates or other documents relating to the Company that the law of the
State of Delaware may permit or require on any and all matters which may be
presented to the stockholders of the Company. The term of the Proxy Agreement is
for 10 years commencing August 25, 1995, unless sooner terminated upon 30 days
written notice. The Proxy Agreement will be deemed terminated as to any subject
matter that will be presented for approval, consent or ratification to the
stockholders of the Company if the Company fails to give SMR and NAI 45 days'
notice of such subject matter. The Proxy Agreement will also terminate if SMR
and NAI are found suitable as stockholders of the Company by the Nevada Gaming
Authorities or are no longer

4
<PAGE> 7

subject to the provisions of Nevada gaming laws applicable to holders of more
than 10% of the Company's Common Stock. The Proxy Agreement is not applicable to
any shares of the Company's Common Stock sold or otherwise disposed of by SMR or
NAI to any person who is not an affiliate of SMR or NAI. SMR and NAI have agreed
to give notice of any sale or disposition to the Chairman of the Nevada State
Gaming Control Board within 10 days after such sale or disposition. The Proxy
Agreement was entered into to assure that the passive investment position of SMR
and NAI relative to the Company will not change without prior notification to
the Nevada Gaming Authorities.

Mr. Louis J. Nicastro and Mr. Neil D. Nicastro have advised WMS that they
plan to utilize the voting proxy with respect to the 5,929,100 shares of WMS
Common Stock beneficially owned by SMR and NAI to vote FOR Proposals 1, 2 and 3.

PROPOSAL 1 -- ELECTION OF DIRECTORS

Upon the recommendation of the Nominating Committee, nine directors,
constituting the entire Board, are to be elected to serve until the next Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualify. All of the nominees are at present directors of the Company. Mr.
Neil D. Nicastro is the son of Mr. Louis J. Nicastro. Should any of the nominees
be unable to serve or refuse to serve as a director (an event which the Board
does not anticipate), proxies solicited hereunder will be voted in favor of
those nominees who do remain as candidates and may be voted for substituted
nominees.

<TABLE>
<CAPTION>
POSITION WITH COMPANY AND DIRECTOR
NAME OF NOMINEE (AGE) PRINCIPAL OCCUPATION SINCE
- --------------------------------------- ------------------------------------- --------
<S> <C> <C>
Louis J. Nicastro (68)................. Chairman of the Board of Directors of 1974
the Company
Neil D. Nicastro (40).................. President, Chief Executive Officer, 1986
Chief Operating Officer and a
Director of the Company
Kenneth J. Fedesna (47)................ Vice President and General Manager of 1993
the Company's Coin-Op Amusement Game
Operations and a Director of the
Company
Norman J. Menell (65).................. Vice Chairman of the Board of 1980
Directors of the Company
George R. Baker (66)................... Director of the Company and Private 1983
Consultant
William C. Bartholomay (68)............ Director of the Company and President 1981
of Near North National Group
William E. McKenna (77)................ Director of the Company and General 1981
Partner of MCK Investment Company
Harvey Reich (67)...................... Director of the Company and Attorney, 1983
Of Counsel to the firm of Robinson
Brog Leinwand Greene Genovese &
Gluck, P.C.
Ira S. Sheinfeld (58).................. Director of the Company and Attorney, 1993
Member of the firm of Squadron,
Ellenoff, Plesent & Sheinfeld LLP
</TABLE>

LOUIS J. NICASTRO, Chairman of the Board of Directors of the Company. Mr.
Nicastro has served as Chairman of the Board of Directors of the Company since
its incorporation in 1974. He served as Co-Chief Executive Officer from 1994
until June 30, 1996, having served as Chief Executive Officer (1974-1994),
President (1985-1988 and 1990-1991) and Chief Operating Officer (1985-1986). Mr.
Nicastro also serves as

5
<PAGE> 8

a Director of Midway Games Inc., an 86.8% owned subsidiary of the Company the
common stock of which is traded on the New York Stock Exchange under the symbol
"MWY."

NEIL D. NICASTRO, Director, President, Chief Executive Officer and Chief
Operating Officer of the Company. Mr. Nicastro became a director of the Company
in 1986 and was elected President of the Company June 18, 1991, sole Chief
Executive Officer effective July 1, 1996 and Chief Operating Officer September
30, 1990. He served as Co-Chief Executive Officer (1994-1996), Treasurer
(1986-1994), Executive Vice President (1988-1991), Senior Vice President
(1987-1988), Vice President (1986-1987) and Director of Stockholder Relations
(1981-1986). Mr. Nicastro also serves as Chairman of the Board of Directors,
President, Chief Executive Officer and Chief Operating Officer of Midway Games
Inc.

KENNETH J. FEDESNA has served as Vice President and General Manager of
Williams Electronics Games, Inc., a subsidiary of the Company, for in excess of
five years. Mr. Fedesna also serves as Executive Vice President -- Coin-Op Video
and a Director of Midway Games Inc.

NORMAN J. MENELL became Vice Chairman of the Board of Directors effective
September 30, 1990. He served as President (1988-1990), Chief Operating Officer
(1986-1990) and Executive Vice President (1981-1988) of the Company. Mr. Menell
also serves as a Director of Midway Games Inc.

GEORGE R. BAKER is a private consultant. He was a general partner of
Barrington Limited Partners (private investment partnership) (1985-1986), a
special limited partner of Bear, Stearns & Co., Inc. (investment banking)
(1983-1985) and an Executive Vice President of Continental Bank N.A.
(1951-1982). Mr. Baker is a Director of The Midland Co., Reliance Group
Holdings, Inc., Reliance Insurance Co. and W. W. Grainger, Inc.

WILLIAM C. BARTHOLOMAY is President of Near North National Group, Chicago,
Illinois (insurance brokers) and Chairman of the Board of the Atlanta Braves
(National League Baseball). He has served as Vice Chairman of Turner
Broadcasting System, Inc., Atlanta, Georgia since April 1994 having also held
that office during the period 1976-1992 and having served as a Director
(1976-1994). He also served as Vice Chairman of the Board of Directors of Frank
B. Hall & Co. Inc. (1974-1990). Mr. Bartholomay also serves as a Director of
Midway Games Inc.

WILLIAM E. MCKENNA has served as a General Partner of MCK Investment
Company, Beverly Hills, California for in excess of five years. He also is a
Director of California Amplifier, Inc., Calprop Corporation, Drexler Technology
Corporation, Safeguard Health Enterprises, Inc. and Midway Games Inc.

HARVEY REICH has been a member of or of counsel to the law firm of Robinson
Brog Leinwand Greene Genovese & Gluck, P.C., New York, New York and its
predecessor firms for in excess of five years. Mr. Reich also serves as a
Director of Midway Games Inc.

IRA S. SHEINFELD has been a member of the law firm of Squadron, Ellenoff,
Plesent & Sheinfeld LLP, New York, New York, for in excess of five years. Mr.
Sheinfeld also serves as a Director of Midway Games Inc.

REQUIRED VOTE

The affirmative vote of a plurality of the shares of Common Stock present
in person or by proxy at the Annual Meeting is required to elect directors.

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

THESE INDIVIDUALS WILL BE PLACED IN NOMINATION FOR ELECTION TO THE BOARD OF
DIRECTORS. THE SHARES REPRESENTED BY SIGNED PROXY CARDS RETURNED WILL BE VOTED
"FOR" THE ELECTION OF THESE NOMINEES UNLESS AN INSTRUCTION TO THE CONTRARY IS
INDICATED ON THE PROXY CARD.
------------------------

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<PAGE> 9

THE BOARD OF DIRECTORS

The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, the Board has delegated
certain authority to several committees. The majority of the Board, six of the
nine directors, are outside directors who are neither officers nor employees of
the Company or its subsidiaries.

During the 1996 fiscal year, the Board of Directors of the Company held six
meetings. All other action taken by the Board was by the unanimous written
consent of the members after review of proposals presented to each member. Each
director attended more than 75% of the aggregate of meetings of the Board and
committees on which he served during the fiscal year.

DIRECTOR COMPENSATION

During the 1996 fiscal year, the Company paid a fee of $40,000 per annum to
each director who was not also an employee of the Company or its subsidiaries.
Each such director who served as the chairman of any committee of the Board of
Directors received a further fee of $5,000 per annum for his services in such
capacity and each member of the Company's Audit and Ethics Committee received an
additional fee of $5,000 per annum.

During the 1996 fiscal year, each non-employee director of the Company's
95%-owned subsidiary Posadas de Puerto Rico Associates, Incorporated (which
includes Messrs. Bartholomay, Menell and Reich) also received an annual fee of
$10,000 for services as a director and, for those non-employee directors who
serve as a member of the Audit, Ethics and Compensation Committee of such
subsidiary's Board of Directors (which includes Messrs. Bartholomay and Reich) a
further fee of $12,500 was paid. During the 1996 fiscal year, each non-employee
director of the Company's 62%-owned subsidiary Williams Hospitality Group Inc.
(which includes Messrs. Baker, McKenna and Menell) also received an annual fee
of $22,500 for services as a director.

The Company's 1991 and 1993 Stock Option Plans (the "Option Plans") provide
for the issuance of shares of Common Stock of the Company pursuant to stock
options which may be granted to non-employee directors of the Company at not
less than 100% of the fair market value of such shares on the date of grant.
Under the terms of the Option Plans, non-qualified stock options may be granted
to non-employee directors pursuant to the following formula -- upon the date of
adoption of the Option Plan by the Board of Directors and on each anniversary
thereof, each non-employee director of the Company is entitled to receive a non-
qualified option to purchase, at 100% of the fair market value of the Company's
Common Stock on such date, such shares of the Company's Common Stock as shall be
determined by multiplying (a) in the case of the 1991 Stock Option Plan, 4,000
times the number of years he or she has served on the Board of Directors
(subject to a maximum of 30,000 shares); and (b) in the case of the 1993 Stock
Option Plan, 10,000 times the number of years he or she has served on the Board
of Directors or as a consultant or adviser (subject to a maximum of 50,000
shares). Upon adoption of the 1991 Stock Option Plan, the following non-employee
directors became entitled to and each was granted non-qualified stock options to
purchase 30,000 shares of the Company's Common Stock at a purchase price per
share of $7.31 -- Messrs. Baker, Bartholomay, McKenna and Reich. Pursuant to the
terms of the 1991 Stock Option Plan, Mr. Sheinfeld became entitled to and was
granted on September 6, 1994 and September 6, 1995, non-qualified stock options
to purchase 4,000 and 8,000 shares, respectively, of the Company's Common Stock
at a purchase price per share of $19.125 and $23.375, respectively, and on
September 6, 1996, non-qualified stock options (which become exercisable March
7, 1997) to purchase 12,000 shares of the Company's Common Stock at a purchase
price per share of $23.875. Upon adoption of the 1993 Stock Option Plan, the
following non-employee directors became entitled to and each was granted
non-qualified stock options to purchase 50,000 shares of the Company's Common
Stock at a purchase price per share of $26.875 -- Messrs. Baker, Bartholomay,
McKenna, Menell, Reich and Sheinfeld. Options granted under the 1993 Stock
Option Plan require that the Company's Common Stock attain a market price of
$35.00 per share prior to exercise.

Directors also are entitled to participate at the Company's expense in a
medical reimbursement plan which is supplementary to the primary medical
insurance maintained by each such individual.

7
<PAGE> 10

COMMITTEES OF THE BOARD OF DIRECTORS

The Audit and Ethics Committee is currently composed of four members,
Messrs. McKenna (Chairman), Baker, Bartholomay and Sheinfeld. This Committee is
charged with meeting periodically with the independent auditors and Company
personnel with respect to the adequacy of internal accounting controls,
receiving and reviewing the recommendations of the independent auditors,
recommending the appointment of auditors and reviewing the scope of the audit
and the compensation of the independent auditors, reviewing consolidated
financial statements and, generally, reviewing the Company's accounting policies
and resolving potential conflicts of interest. During the 1996 fiscal year this
Committee held two meetings.

The Nominating Committee is currently composed of Messrs. L.J. Nicastro
(Chairman) and Bartholomay. This Committee is charged with making
recommendations with respect to the nomination of candidates for election to the
Board and does not accept recommendations from stockholders of the Company.
During the 1996 fiscal year this Committee held one meeting.

The Stock Option Committee is currently composed of Messrs. Reich
(Chairman) and McKenna. This Committee approves the selection of individuals for
participation in, and determines the timing, pricing and the amount of option
grants under the provisions of, the Company's Stock Option Plans other than
formula awards made to Non-Employee Directors of the Company. During the 1996
fiscal year this Committee held no meetings and took all action by the unanimous
written consent of the members.

The Compensation Committee is currently composed of Messrs. Bartholomay
(Chairman) and McKenna. This Committee is charged with making recommendations
regarding the compensation of senior management personnel. During the 1996
fiscal year this Committee held one meeting and took other action by the
unanimous written consent of the members. The Compensation Committee and Stock
Option Committee jointly report to stockholders on executive compensation items
as required by the Securities and Exchange Commission. Their Report is printed
at page 9 hereof.

Compensation Committee Interlocks and Insider Participation. During the
last fiscal year, Mr. William C. Bartholomay served as Chairman of the Company's
Compensation Committee and Mr. William E. McKenna served as the sole additional
member, neither of whom are employees or officers of the Company or any of its
subsidiaries or had any relationship requiring disclosure herein by the Company.

EXECUTIVE OFFICERS

The following individuals were elected to serve in the capacities set forth
until the 1997 Annual Meeting of the Board of Directors or until their
respective successors were duly elected and qualify.

<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------- --- ----------------------------------------
<S> <C> <C>
Louis J. Nicastro................ 68 Chairman of the Board of Directors and
Co-Chief Executive Officer
Neil D. Nicastro................. 40 President, Co-Chief Executive Officer
and Chief Operating Officer
Harold H. Bach, Jr............... 64 Vice President-Finance, Treasurer, Chief
Financial and Chief Accounting Officer
Barbara M. Norman................ 58 Vice President, Secretary and General
Counsel
</TABLE>

The principal occupation and employment of Messrs. L.J. and N.D. Nicastro
during the last five years is set forth on page 5 hereof. Mr. Louis J. Nicastro
and Mr. Neil D. Nicastro served as Co-Chief Executive Officers of the Company
until June 30, 1996. As of July 1, 1996, Mr. Neil D. Nicastro assumed the
position of sole Chief Executive Officer.

Mr. Bach served as Secretary of the Company from July 5, 1990 to June 15,
1992. He assumed the positions of Treasurer effective September 13, 1994 and
Vice President-Finance (Chief Financial and Chief Accounting Officer) effective
September 30, 1990. Prior to joining the Company, Mr. Bach was a partner in the
accounting firms of Ernst & Young (1989-1990) and Arthur Young & Company
(1967-1989). Mr. Bach also serves as Executive Vice President-Finance,
Treasurer, Chief Financial and Chief Accounting Officer and a Director of Midway
Games Inc.

8
<PAGE> 11

Ms. Norman was elected Vice President, Secretary and General Counsel of the
Company on June 15, 1992. Prior thereto she was associated with the law firm of
Whitman & Ransom, New York, New York (1990-1992) and served the Company as Vice
President, Secretary and General Counsel (1986-1990). Ms. Norman also serves as
Vice President, Secretary and General Counsel of Midway Games Inc.

EXECUTIVE COMPENSATION

To provide stockholders with an understanding of the Company's executive
compensation program, the following are presented below: (i) the Joint Report by
the Compensation and Stock Option Committees of the Board of Directors on 1996
Executive Compensation; (ii) the Summary Compensation Table; (iii) the Stock
Option Table; (iv) the Corporate Performance Graph; and (v) a description of
Employment Agreements.

JOINT REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES

The Compensation Committee is charged with making recommendations to the
Board of Directors regarding the compensation of senior management personnel. To
the extent stock options form a portion of a compensation package, the
Compensation Committee works together with the Stock Option Committee, which is
responsible for making recommendations regarding stock option grants and awards.

It is the policy of the Compensation and Stock Option Committees to provide
attractive compensation packages to senior management so as to motivate them to
devote their full energies to the success of the Company, to reward them for
their services and to align the interests of senior management with the
interests of stockholders. The Company's executive compensation packages are
comprised primarily of base salaries, annual contractual and discretionary cash
bonuses, stock options and retirement and other benefits. It is the philosophy
of the Compensation Committee that the Company be staffed leanly with a small
number of well compensated senior management personnel.

In general, the level of base salary is intended to provide appropriate
basic pay to senior management taking into account historical contributions to
the Company and each person's unique value and the recommendation of the Chief
Executive Officer. The amount of any discretionary bonus is subjective but is
generally based on the actual performance of the Company in the preceding fiscal
year, the special contribution of the executive to such performance and the
overall level of the executive's compensation including other elements of the
compensation package. The Company also has used stock options, which increase in
value only if the Company's Common Stock increases in value, and which terminate
a short time after an executive leaves the Company, as a means of long-term
incentive compensation.

The cash bonus paid to Mr. N.D. Nicastro for the fiscal year 1996 was
determined through a negotiated formula set forth in his employment agreement
which provided for bonus compensation equal to two percent of the pre-tax income
of the Company between the amounts of $10,000,000 and $50,000,000. (See
"Employment Agreements -- Employment Contracts" below for a description of Mr.
N.D. Nicastro's employment agreement.) Senior executives other than Mr. N.D.
Nicastro were granted discretionary bonuses for the 1996 fiscal year in the same
amounts they received for the 1995 fiscal year. The decision to pay such bonuses
was subjective but involved consideration of the efforts expended by such
executives as well as consideration of the financial performance of the Company.
For information with respect to options held by senior management at fiscal year
end, see "Aggregated Option Exercises in Last Fiscal Year and Fiscal-Year-End
Option Values" set forth below.

The base salary of Mr. L.J. Nicastro was paid pursuant to the terms of his
employment agreement. As described under "Employment Agreements -- Employment
Contracts" below, effective July 1, 1996, Mr. Nicastro relinquished his position
as Co-Chief Executive Officer of the Company and agreed to the early termination
and full settlement of his employment agreement. The amount of the settlement
was determined by the Compensation Committee after reviewing the terms of Mr.
Nicastro's contract, consideration of Mr. Nicastro's long-term contributions to
the Company and consideration of the recommendations of outside compensation
consultants retained by the Company.

The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act"), generally
provides that, for fiscal years commencing in 1994, compensation paid by
publicly-held corporations to the chief executive officer and the four most
highly paid senior executive officers in excess of one million dollars per year
per executive will be deductible by the Company only if paid pursuant to
qualifying performance-based compensation plans approved

9
<PAGE> 12

by stockholders of the Company. Compensation as defined by the Budget Act
includes, among other things, base salary, incentive compensation and gains on
stock option transactions. Since the ultimate value of an option cannot be
determined until it is exercised or until the stock underlying the option is
sold, executive compensation relating to options may, in a given year, exceed
one million dollars. It is the present policy of the Compensation Committee to
submit for stockholder approval stock option plans in which the chief executive
officer and the most highly paid senior executive officers of the Company may
participate. The Compensation Committee intends to consider, on a case by case
basis, how the Budget Act will affect contractual and discretionary cash
compensation. The Compensation Committee does not intend to request Mr. N.D.
Nicastro to submit his new employment agreement for stockholder approval. See
"Employment Agreements -- Employment Contracts." Depending on the performance of
the Company, payments to Mr. Nicastro under such agreement may exceed one
million dollars and such excess payments will not be deductible by the Company.

The Compensation Committee The Stock Option Committee
William C. Bartholomay, Chairman Harvey Reich, Chairman
William E. McKenna William E. McKenna

The foregoing Joint Report of the Compensation and Stock Option Committees
on executive compensation shall not be deemed to be incorporated by reference
into any filing of the Company under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates such information by reference.

SUMMARY COMPENSATION TABLE

The table below sets forth the cash compensation paid by the Company and
its subsidiaries for service in all capacities during the fiscal years ended
June 30, 1996, 1995 and 1994 to each of the Company's executive officers who
served during such periods and whose compensation exceeded $100,000.

LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------- ---- ------- ------- ------------ ------------ ------------
(A) (B) (C) (D) (E) (G) (I)
- ------------------------------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Louis J. Nicastro.............. 1996 832,500 -- 6,127(2) -- 629,971(3)
Chairman of the 1995 682,500 300,000 4,775(2) -- 409,784(3)
Board(1) 1994 682,500 600,000 4,173(2) 500,000 327,252(3)
Neil D. Nicastro............... 1996 532,500 267,600 -- -- 35,791(4)
President, CEO & 1995 532,500 489,100 -- -- 35,762(4)
COO(1) 1994 532,500 741,600 -- 800,000 35,742(4)
Harold H. Bach, Jr............. 1996 262,500 67,800 -- -- --
Vice President -- Finance, 1995 250,000 67,800 -- -- --
Treasurer, CFO/CAO 1994 250,000 100,000 -- 75,000 --
Barbara M. Norman.............. 1996 157,500 27,200 -- -- --
Vice President, 1995 150,000 27,200 -- -- --
Secretary & General Counsel 1994 150,000 40,000 -- 75,000 --
</TABLE>

- -------------------------
(1) Mr. Louis J. Nicastro and Mr. Neil D. Nicastro served as Co-Chief Executive
Officers of the Company until June 30, 1996. As of July 1, 1996, Mr. Neil D.
Nicastro assumed the position of sole Chief Executive Officer.

(2) Amount shown is for tax gross-up payments.

(3) Amount shown is the accrual for contractual retirement benefits for Mr.
Louis J. Nicastro. See "Employment Agreements -- Employment Contracts"
below.

(4) Amount shown includes for fiscal 1996, 1995 and 1994 insurance premiums of
$691, $662 and $642, respectively, and $35,100 each for fiscal 1996, 1995
and 1994 accrual for contractual retirement benefits.

10
<PAGE> 13

STOCK OPTION TABLE

OPTION GRANTS IN LAST FISCAL YEAR

No options were granted during fiscal year ended June 30, 1996 to the named
executives.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL-YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
(D) (E)
(B) NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES (C) UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS AT 6/30/96 (#) OPTIONS AT 6/30/96 ($)
(A) ON EXERCISE REALIZED EXERCISABLE(E) EXERCISABLE(E)
NAME (#) ($) UNEXERCISABLE(U)(1) UNEXERCISABLE(U)
- ----------------------------- -------------- -------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Louis J. Nicastro............ -- -- 500,000(U) --(U)
Neil D. Nicastro............. -- -- 300,000(E) 1,981,500(E)
500,000(U) --(U)
Harold H. Bach, Jr........... -- -- 75,000(U) --(U)
Barbara M. Norman............ -- -- 75,000(U) --(U)
</TABLE>

- -------------------------
(1) Notwithstanding that, as set forth in the footnotes to the tables under the
heading "Security Ownership of Certain Beneficial Owners and Management,"
Target Price Options are deemed to be beneficially owned pursuant to Rule
13d-3(d)(1) of the Securities Exchange Act of 1934, as amended, Target Price
Options are reported in the above table as "Unexercisable."

CORPORATE PERFORMANCE GRAPH

The following graph compares for the five years ended June 30, 1996 the
yearly percentage change in cumulative total stockholder return on the Company's
Common Stock with (1) the cumulative total return of the Standard and Poor's 500
Stock Index ("S & P 500") and (2) the cumulative total return of the Standard
and Poor's Leisure Time Index ("S&P Leisure"). The graph assumes an investment
of $100 on July 1, 1991 in the Company's Common Stock and $100 invested at that
time in each of the Indexes and the reinvestment of dividends where applicable.

<TABLE>
<CAPTION>
Measurement Period ..... S&P -
(Fiscal Year Covered) ..... WMS ..... S&P 500 Leisure
<S> <C> <C> <C>
1991 100 100 100
1992 306 113 108
1993 541 129 111
1994 358 131 146
1995 369 165 138
1996 464 208 182
</TABLE>

The foregoing table shall not be deemed to be incorporated by reference
into any filing of the Company under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates such information by reference.

11
<PAGE> 14

EMPLOYMENT AGREEMENTS

EMPLOYMENT CONTRACTS

Until June 30, 1996, Mr. Louis J. Nicastro was employed under the terms of
an Amended and Restated Employment Agreement dated October 27, 1994, which was
due to expire July 31, 1999, subject to automatic one-year extensions thereafter
unless notice was given six months prior to any termination date. The agreement
provided for salaried compensation at the rate of $832,500 per annum, or such
greater amount as may be determined by the Board of Directors. The agreement
also provided for full participation in all benefit plans available to senior
executives and for reimbursement of all medical and dental expenses incurred by
Mr. Nicastro and his spouse. Upon Mr. Nicastro's retirement date of July 31,
1999 ("Retirement Date"), or in the event Mr. Nicastro became disabled, the
Company was required to pay Mr. Nicastro until his death an annual benefit equal
to one-half of the aggregate annual base salary being paid to him at the time of
such occurrence, but in no event less than $416,250 per year payable in monthly
installments. Such benefit (to the extent not previously vested) vests ratably
during the period October 27, 1994 through July 31, 1999 (or such earlier date
as Mr. Nicastro's employment may terminate by reason of the Company's violation
of the agreement or the occurrence of a change-in-control of the Company). The
vested amount of such retirement or disability benefit was payable
notwithstanding Mr. Nicastro's termination of employment for any reason,
provided, he was not in material breach of the terms of the agreement and, upon
his death, was payable to his designee or estate. Upon Mr. Nicastro's death
whether during the term of his employment or after his Retirement Date, the
Company agreed to pay in monthly installments to his designee or estate for a
period of fifteen years thereafter, an annual benefit equal to one-half of the
amount of the annual base salary paid to him on his date of death if such death
occurs during his employment or the amount of his retirement benefit but no less
than $416,250 per annum.

In connection with the proposed spin-off of the Company's hotel and casino
operations, the Board of Directors of the Company requested Mr. Nicastro, and
Mr. Nicastro agreed, to become the Chairman of the Board and Chief Executive
Officer of the public hotel and casino corporation and to relinquish his
position as Co-Chief Executive Officer of the Company. Effective July 1, 1996,
Mr. Nicastro also agreed to the early termination and full settlement of his
employment agreement pursuant to which, in lieu of all future payments of base
salary, bonus, retirement and death benefits, Mr. Nicastro received a lump sum
payment of $9,125,000, with interest from July 1, 1996.

Mr. Neil D. Nicastro was employed until June 30, 1996 under the terms of a
Second Amended and Restated Employment Agreement dated October 12, 1993. The
employment agreement provided for salaried compensation at the rate of $532,500
per annum, or such greater amount as may have been determined by the Board of
Directors, plus bonus compensation of two percent of the pre-tax income of the
Company between the amounts of $10,000,000 and $50,000,000. The agreement would
have expired December 31, 2000, and was subject to automatic extensions in order
that the term of Mr. Nicastro's employment at no time would have been less than
three years. Upon Mr. Nicastro's retirement or death and for a period of five
years thereafter, the Company was required to pay to Mr. Nicastro or his
designee, or if no designation was made, to his estate, for a period equal to
the greater of the balance of the remaining term of the agreement or five years,
an annual benefit equal to one-half of the annual base salary being paid to him
on such retirement or death, but in no event less than $266,250 per year. Such
benefits were payable notwithstanding Mr. Nicastro's termination of employment
for any reason.

The employment agreement of Mr. Neil D. Nicastro provided for, among other
things, full participation in all benefit plans available to senior executives
and for reimbursement of all medical and dental expenses incurred by him or his
spouse and incurred by his children under the age of twenty-one. Additionally,
the Company provided Mr. Nicastro with $1,000,000 of life insurance coverage in
addition to the standard amount provided to Company employees. The agreement
further provided for full compensation during periods of illness or incapacity;
however, the Company could give 30 days' notice of termination if such illness
or incapacity disabled Mr. Nicastro from performing his duties for a period of
more than six months. Such termination notice became effective if full
performance was not resumed within 30 days of such notice and maintained for a
period of two months thereafter. The employment agreement was terminable at the
election

12
<PAGE> 15

of Mr. Nicastro upon the occurrence without his consent or acquiescence of any
one or more of the following events: (i) the placement of Mr. Nicastro in a
position of lesser stature or the assignment to Mr. Nicastro of duties,
performance requirements or working conditions significantly different from or
at variance with those presently in effect; (ii) the treatment of Mr. Nicastro
in a manner which was in derogation of his status as a senior executive; (iii)
the cessation of service of Mr. Nicastro as a member of the Board of Directors
of the Company; (iv) the discontinuance or reduction of amounts payable or
personal benefits available to Mr. Nicastro pursuant to such agreement; or (v)
the requirement that Mr. Nicastro work outside his agreed-upon metropolitan
area. In any such event, and in the event the Company was deemed to have
wrongfully terminated Mr. Nicastro's employment agreement under the terms
thereof, the Company was obligated (a) to make a lump sum payment to Mr.
Nicastro equal in amount to the sum of the aggregate base salary during the
remaining term of his employment agreement (but in no event less than three
times the highest base salary payable to him during the one-year period prior to
such event), the bonus (assuming all objectives for payment had been met) and
the retirement benefit (assuming the date of termination was his retirement
date) otherwise payable under the terms of the employment agreement and (b) to
purchase at the election of Mr. Nicastro all stock options held by him with
respect to the Company's Common Stock at a price equal to the spread between the
option price and the fair market price of such stock as defined in the
agreement. The employment agreement was also terminable at the election of Mr.
Nicastro if individuals constituting the Board of Directors, or successors
approved by such Board members, ceased for any reason to constitute at least a
majority of the Board. Upon such an event, the Company may have been required to
purchase the stock options held by Mr. Nicastro and make payments similar to
those described above.

Mr. Nicastro's employment agreement provided that the Company make
quarterly interest free advances against his annual bonus in amounts mutually
agreeable to Mr. Nicastro and the Company. During fiscal 1996, the Company made
advances against Mr. Nicastro's bonus which were in excess of his actual bonus
by $92,400. The Company treated the excess advances of Mr. Nicastro's bonus as
an interest free loan which Mr. Nicastro subsequently repaid.

The Company and Midway Games Inc. ("Midway") have each entered into
separate employment agreements (each a "New Agreement" and collectively, the
"New Agreements") with Mr. Nicastro effective as of July 1, 1996. Except as
discussed below, each of the New Agreements contains provisions similar to those
contained in Mr. Nicastro's Second Amended and Restated Employment Agreement
with the Company discussed above. Each of the New Agreements provides that Mr.
Nicastro will receive salaried compensation at the rate of $300,000 per annum,
or such greater amount as may be determined by the Board of Directors of the
Company or Midway, as applicable. Mr. Nicastro's New Agreement with Midway
provides for bonus compensation in an amount equal to two percent of the pre-tax
income of Midway multiplied by the percentage of Midway common stock outstanding
which is not owned by the Company, currently 13.2% ("Adjusted Midway Pre-Tax
Income"). Mr. Nicastro's New Agreement with the Company also provides for bonus
compensation in an amount equal to two percent of the pre-tax income of the
Company after deduction of the Adjusted Midway Pre-Tax Income. The portion of
Mr. Nicastro's bonus from the Company that is attributable to the pre-tax income
of Midway will be charged to Midway pursuant to the Manufacturing and Services
Agreement between the Company and Midway. Mr. Nicastro's New Agreement with
Midway provides that should the Company fail for any reason to provide the
medical, dental and other employee benefits to be provided to Mr. Nicastro under
the terms of his New Agreement with the Company, Midway will provide such
benefits to him at its expense. Each of the New Agreements provides that Mr.
Nicastro may divide his attention between the business of the Company and the
business of Midway as he shall consider appropriate.

The New Agreements will expire November 4, 2001, subject to automatic
extensions in order that the term of each of the New Agreements shall at no time
be less than three years. Upon retirement or death and for a period of seven
years thereafter, each of the Company and Midway is required to pay to Mr.
Nicastro or his designee, or if no designation is made, to his estate, for a
period equal to the greater of the balance of the remaining term of the
respective New Agreement or seven years, an annual benefit equal to one-half of
the annual base salary being paid to him on such retirement or death, as the
case may be, but in no event less than $150,000 per annum under such New
Agreement. Such benefits are payable under each of the New

13
<PAGE> 16

Agreements notwithstanding Mr. Nicastro's termination of employment with the
Company or Midway, as the case may be, for any reason.

RETIREMENT PLANS

Under the Company's noncontributory pension plan for salaried employees of
the Company and its wholly-owned subsidiaries, the amount of monthly benefits
payable upon attainment of normal retirement age (assumed to be 65) are computed
as follows: $50.00 plus $7.50 per year of credited service to a maximum of 30
years' credited service. Under this plan an employee's benefits vest after five
years of service. The estimated annual benefit payable upon retirement to each
officer listed in the Summary Compensation Table who is entitled to such
benefit, assuming continued employment and retirement at age 65, is as follows:
Mr. Louis J. Nicastro $1,786; Mr. Neil D. Nicastro $1,500; Mr. Harold H. Bach,
Jr. $690; and, for all executive officers as a group, $3,976. The plan was
amended effective September 1, 1990, to discontinue on that date the acceptance
of new participants in the plan and on December 31, 1991 to discontinue the
accrual of future benefits.

TREASURY SHARE BONUS PLAN

On April 19, 1993, the Board of Directors adopted a Treasury Share Bonus
Plan for key employees (the "Bonus Plan"). The shares of Common Stock allocated
to the Bonus Plan consist as of the close of the 1996 fiscal year of 52,312
shares of the Company's Common Stock. Awards are made at no direct cost to the
employees selected by management for awards and vest on dates selected in the
discretion of management. Unvested portions of awards are forfeited upon the
termination of employment by award recipients for any reason other than death,
in which event, shares representing the remaining portion of any award are to be
issued to the executor or administrator of the employee's estate. During the
1996 fiscal year, no additional shares were awarded under the Bonus Plan.

PROPOSAL 2 -- AMENDMENT OF STOCK OPTION PLANS

BACKGROUND OF PLANS

The Company currently has the following four stock option plans in effect:
the 1982 Employee Stock Option Plan approved by stockholders February 23, 1983;
the 1991 Stock Option Plan approved by stockholders January 23, 1992; the 1993
Stock Option Plan approved by stockholders January 24, 1994; and the 1994 Stock
Option Plan approved by stockholders January 24, 1995 (collectively the "Stock
Option Plans" or "Plans"). The Plans provide for the issuance of shares of
Common Stock pursuant to options which may be granted thereunder. Options
granted under the Plans may be in the form of options meeting the requirements
of Section 422 of the Internal Revenue Code, as amended ("incentive stock
options"), or options not meeting the requirements of such section
("non-qualified stock options").

The purpose of each of the Plans is to encourage key employees of the
Company and its subsidiaries and under certain of the Plans consultants and
advisers to the Company to acquire a proprietary interest in the Company and to
enable such individuals to realize benefits from an increase in the value of the
Common Stock, to provide such individuals with greater incentive and to
encourage their continued provision of services to the Company and, generally,
to promote the interests of the Company and all of its stockholders. On the date
hereof, the Company employs approximately 100 key employees and approximately
ten consultants and advisers who are eligible to receive options under the
Plans.

The Plans are administered by the Stock Option Committee, the present
members of which are Messrs. Reich and McKenna. All authority delegated to the
Stock Option Committee, other than decisions relating to participation and
decisions concerning the timing, the pricing and the amount of the grant, may
also be exercised by the Board of Directors of the Company. The Stock Option
Committee will determine from time to time the key employees of the Company or
its subsidiaries and consultants and advisers who will receive options under the
Plans, whether such options shall be incentive stock options, non-qualified
stock options or both (provided, however, each option granted to consultants and
advisers shall constitute a non-qualified stock option); the number of shares
issuable upon exercise of such options; the purchase price of the shares subject

14
<PAGE> 17

to each option, which may not be less than 100% of the fair market value of the
shares on the date the options are granted; the time or times when each option
may be exercised, provided that no option may be exercised until the expiration
of six months from the date of grant thereof; the duration of the options, which
may not exceed ten years; and the inclusion of Stock Appreciation Rights (as
described in the succeeding paragraph) which may not, except as hereinafter
provided, relate to more than 50% of the shares subject to any option.

Stock Appreciation Rights entitle the holder thereof to surrender
unexercised a then exercisable portion of an option and to receive from the
Company in exchange therefor a payment in cash equal to the excess, if any, of
the then fair market value of one share covered by such portion over the option
price per share specified in such option, multiplied by the number of shares
covered by the portion of the option so surrendered.

Under the Plans, no employee may be granted incentive stock options in any
calendar year (under all plans of the Company and its subsidiaries) covering
shares with an aggregate fair market value (at the time the option is granted)
in excess of $100,000 and no employee, consultant or adviser may receive an
option or options covering more than a fixed percentage of the total number of
shares of Common Stock subject to the Plans as fixed in each Plan. Upon exercise
of a stock option granted under the Plans, the full purchase price of the number
of shares purchased may be paid, at the optionee's election, in cash, by
delivery of shares of Common Stock having a market value equal to the aggregate
option price, or a combination of cash and shares of Common Stock. In order to
assist an optionee in the acquisition of shares of Common Stock pursuant to the
exercise of an option granted under the Plans, the Stock Option Committee may
authorize (i) the extension of a loan to the optionee by the Company, (ii) the
payment by the optionee of the purchase price of the Common Stock in
installments, or (iii) the guarantee by the Company of a loan obtained by the
optionee from a third party. Such loans, installment payments or guarantees may
be authorized without security and, in the case of incentive stock options, the
rate of interest may not be less than the higher of the prime rate of a
commercial bank of recognized standing or the rate of interest imputed under
Section 483 of the Internal Revenue Code, as amended.

No option under the Plans is transferable other than by will or the laws of
descent and distribution and each option is exercisable during an optionee's
lifetime only by him or her. Options granted under the Plans will terminate
forthwith upon the termination of an optionee's relationship with the Company or
a subsidiary for cause or without the written consent of the Company, except
that upon death, an optionee's estate may exercise such options to the extent
exercisable by the optionee at the time of death for a period of one year
following the date of death or up to the option's expiration date if earlier.
Upon termination of an optionee's relationship with the Company or a subsidiary
with the written consent of the Company, any option then exercisable shall
terminate three months after such date of termination or upon the option's
expiration date if earlier. The number of shares of Common Stock issuable under
the Plans are subject to adjustment in the case of stock splits, combinations,
stock dividends, reorganizations and similar events.

The Board of Directors has the right to modify, amend, suspend or terminate
any of the Plans in any respect and, with the consent of the optionee, may
change the terms and conditions of outstanding options, provided that without
stockholder approval no amendment may be made which would (i) materially
increase the benefits accruing to participants under the Plans, (ii) materially
increase the maximum number of shares of Common Stock which may be purchased
pursuant to the Plan, except as referred to above, or (iii) materially modify
the requirements as to eligibility for participation in the Plans. The right to
grant options under each Plan terminates ten years after adoption.

REASONS FOR AMENDMENT

On June 27, 1996, the Company announced restructuring initiatives intended
to, among other things, reduce regulatory burdens and risks, enhance stockholder
value by enabling investors to value the three distinct areas of the Company's
operations and to reduce expenses of the Company's pinball operations. The
restructuring initiatives include the proposed spin-off of 100% of the Company's
hotel and casino operations to the Company's stockholders, the initial public
offering of approximately 13.2% of Midway (which conducts the Company's video
games business) and the continuation by the Company of down-sized pinball and
novelty games operations.

15
<PAGE> 18

The spin-off, if concluded, will consist of a distribution to holders of
the Company's Common Stock of all of the shares of the Company's wholly-owned
subsidiary which will own, as of the date of the distribution, all of the
Company's hotel and casino operations. That company will then be a separate
public company. Due to the distribution of the hotel and casino operations to
the Company's stockholders without receipt of consideration by the Company, it
is expected that the value of the Company and the trading price of the Company's
Common Stock will be reduced.

The Company's Stock Option Plans provide for adjustments in outstanding
options in the event of stock splits, combinations, stock dividends,
reorganizations and certain other specified transactions or events. The
adjustment provisions do not now clearly permit adjustment of outstanding
options as a result of a spin-off even though the Board of Directors believes
that an adjustment would be fair and appropriate. There are also other forms of
corporate transactions or events which exist which are not enumerated in the
Plans so as to permit adjustments to be made to options under the Plans if they
were to occur. In view of the many forms in which a significant corporate
transaction may occur, the Board of Directors believes that the adjustment
provisions under the Plans may be inadequate. Accordingly, the Board of
Directors has amended, subject to stockholder approval, the Plans to provide for
adjustments in the event of significant corporate transactions, including the
spin-off, where the Company's Stock Option Committee deems such adjustment to be
appropriate.

Subject to appropriate amendments to the Plans, the Company's Board of
Directors has approved in principle adjustments to all outstanding options by
reason of the spin-off. While specific adjustments will depend on valuations to
be made by the Board of Directors at or about the date of the spin-off, it is
contemplated that an appropriate adjustment in the event of the spin-off would
be to decrease the exercise price and target price, if any, of existing options
and increase the number of shares which can be purchased upon exercise of each
option so that the aggregate exercise price of the options would be the same
both before and after the adjustment. To accomplish this result, the Board of
Directors has approved, subject to stockholder approval, the following
resolutions to amend each of the Plans in order to permit the adjustment of the
number of shares issuable under stock options outstanding under such Plans with
a commensurate increase in the number of shares issuable under each of the
Plans. The additional shares so authorized will only be available for adjustment
of existing options and not for the grant of new options.

PROPOSED AMENDMENT

"RESOLVED: That Section 3 of Article III of each of the 1982 Employee
Stock Option Plan, the 1991 Stock Option Plan, the 1993 Stock Option Plan
and the 1994 Stock Option Plan be deleted each in its entirety and the
following substituted in lieu thereof:

(a) New option rights may be substituted for the options granted
under the Plan or the Company's duties as to options outstanding under
the Plan may be assumed, by a corporation other than the Company, or by
a parent or subsidiary of the Company or such corporation in connection
with any merger, consolidation, acquisition, separation, reorganization,
liquidation or other similar corporate transaction in which the Company
is involved. Notwithstanding the foregoing or the provisions of this
Article III, in the event such corporation, or parent or subsidiary of
the Company or such corporation, does not substitute new option rights
for, and substantially equivalent to, the options granted hereunder, or
assume the options granted hereunder, the options granted hereunder
shall terminate and thereupon become null and void (i) upon dissolution
or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or
similar occurrence, where the Company will not be a surviving entity or
(iii) upon a transfer of substantially all of the assets of the Company
or more than 80% of the outstanding Common Stock in a single
transaction; provided, however, that each optionee shall have the right
immediately prior to or concurrently with such dissolution, liquidation,
merger, consolidation, acquisition, separation, reorganization or other
similar corporate transaction, to exercise any unexpired option granted
hereunder whether or not then exercisable.

(b) In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, shares, other
securities, or other property), recapitalization, stock split,

16
<PAGE> 19

reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of shares or other
securities of the Company, issuance of warrants or other rights to
purchase shares or other securities of the Company, or other corporate
transaction or event affects the shares issuable under stock options
granted under the Plan such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available
under the Plan, then, the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number of shares of Common Stock
or other securities of the Company (or number and kind of other
securities or property) with respect to which options may be granted and
any limitations set forth in the Plan, (ii) the number of shares of
Common Stock or other securities of the Company (or number and kind of
other securities or property) subject to outstanding options and (iii)
the grant or exercise or target price with respect to any option or, if
deemed appropriate, make provision for a cash payment to the holder of
an outstanding option including, if necessary, the termination of such
an option; provided, in each case, that with respect to Incentive Stock
Options no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422 of the Code.
Without limiting the generality of the foregoing, any such adjustment
shall be deemed to have prevented any dilution and enlargement of an
optionee's rights if such optionee receives in any such adjustment
rights which are substantially similar (after taking into account the
fact that the optionee has not paid the applicable exercise price) to
the rights the optionee would have received had he exercised his
outstanding options and become a stockholder of the Company immediately
prior to the event giving rise to such adjustment.

(c) Adjustments and elections under this Section 3 shall be made by
the Committee whose determination as to what adjustments, if any, shall
be made and the extent thereof shall be final, binding and conclusive.
Adjustments required under this Section 3 shall also be deemed to
increase by a like number the aggregate number of shares authorized for
purchase pursuant to options granted under the Plan as set forth in
Section 2 of this Article III."

REQUIRED VOTE

The affirmative vote of a majority of the shares of Common Stock present,
in person or by proxy, and entitled to vote at the Annual Meeting is required to
approve this proposal.
------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENTS TO THE STOCK OPTION PLANS. THE SHARES REPRESENTED BY SIGNED PROXY
CARDS RETURNED WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXIES A
CONTRARY CHOICE.
------------------------

PROPOSAL 3 -- APPOINTMENT OF INDEPENDENT AUDITORS

It is proposed that the stockholders ratify the appointment by the Board of
Directors of Ernst & Young LLP as independent auditors for the Company for the
1997 fiscal year. The Company expects representatives of Ernst & Young LLP to be
present at the Annual Meeting at which time they will respond to appropriate
questions submitted by stockholders and may make such statements as they may
desire.

Approval by the stockholders of the appointment of independent auditors is
not required but the Board deems it desirable to submit this matter to the
stockholders. If a majority of the stockholders voting at the meeting should not
approve the selection of Ernst & Young LLP, the selection of independent
auditors will be reconsidered by the Board of Directors.
------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY. THE
SHARES REPRESENTED BY SIGNED PROXY CARDS RETURNED WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.

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

17
<PAGE> 20

GENERAL

As of the date of this Proxy Statement, the Board does not intend to
present any other matters for action. However, if any other matters are properly
brought before the meeting, it is intended that the persons voting the
accompanying proxy will vote the shares represented thereby in accordance with
their best judgment.

STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

Stockholder proposals in respect of matters to be acted upon at the
Company's next Annual Meeting of Stockholders should be received by the Company
on or before August 15, 1997 in order that they may be considered for inclusion
in the Company's proxy materials.

OTHER MATTERS

THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1996, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES THERETO, TO EACH OF THE COMPANY'S STOCKHOLDERS OF
RECORD ON DECEMBER 2, 1996, AND EACH BENEFICIAL OWNER OF STOCK ON THAT DATE UPON
RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO THE COMPANY'S OFFICES, 3401
NORTH CALIFORNIA AVENUE, CHICAGO, ILLINOIS 60618, ATTENTION: TREASURER. IN THE
EVENT THAT EXHIBITS TO SUCH FORM 10-K ARE REQUESTED, A REASONABLE FEE WILL BE
CHARGED FOR REPRODUCTION OF SUCH EXHIBITS. REQUESTS FROM BENEFICIAL OWNERS OF
COMMON STOCK MUST SET FORTH A GOOD FAITH REPRESENTATION AS TO SUCH OWNERSHIP.

It is important that the accompanying proxy card be returned promptly.
Therefore, whether or not you plan to attend the meeting in person, you are
earnestly requested to mark, date, sign and return your proxy in the enclosed
envelope to which no postage need be affixed if mailed in the United States. The
proxy may be revoked at any time before it is exercised. If you attend the
meeting in person, you may withdraw the proxy and vote your own shares.

MANNER AND EXPENSES OF SOLICITATION

The solicitation of proxies in the accompanying form is made by the Board
and all costs thereof will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, some of the officers, directors and
other employees of the Company may also solicit proxies personally or by mail,
telephone or telegraph, but they will not receive additional compensation for
such services. The Company has retained the services of Corporate Investor
Communications, Inc., a professional proxy solicitation firm, to assist in the
solicitation of proxies at an approximate cost of $5,500. Brokerage firms,
custodians, banks, trustees, nominees or other fiduciaries holding shares of
Common Stock in their names will be required by the Company to forward proxy
material to their principals and will be reimbursed for their reasonable out of
pocket expenses in such connection.

Inspectors of election will be appointed to tabulate the number of shares
of Common Stock represented at the meeting in person or by proxy, to determine
whether or not a quorum is present and to count all votes cast at the meeting.
The inspectors of election will treat abstentions and broker non-votes as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. With respect to the tabulation of votes cast on a specific proposal
presented to the stockholders at the meeting, abstentions will be considered as
present and entitled to vote with respect to that specific proposal, whereas
broker non-votes will not be considered as present and entitled to vote with
respect to that specific proposal.

By Order of the Board of Directors,

BARBARA M. NORMAN
Secretary
Chicago, Illinois
December 11, 1996

18
<PAGE> 21
WMS INDUSTRIES INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
JANUARY 21, 1997

KNOW ALL MEN BY THESE PRESENTS that the undersigned stockholder of WMS
INDUSTRIES INC. (the "Company") does hereby constitute and appoint NEIL D.
NICASTRO, HAROLD H. BACH, JR. and BARBARA M. NORMAN (the "Proxies") and each of
them (each with full power of substitution of another) as attorneys, agents and
proxies, for and in the name, place and stead of the undersigned, and with all
the powers the undersigned would possess if personally present, to vote as
instructed on the reverse side hereof, all of the shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held on January 21, 1997 at 11:30 A.M. local
time at The Hotel Parker Meridien, 118 West 57th Street, New York, New York,
and at any adjournment or adjournments thereof, all as set forth in the Notice
of Annual Meeting and Proxy Statement.

In their discretion, the Proxies are authorized to vote upon such other
and further business as may properly come before the meeting.

THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN. IF NO SUCH INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1, 2 AND 3.

(Continued and to be signed on reverse side) WMS INDUSTRIES INC.
P.O. BOX 11129
NEW YORK, N.Y. 10203-0129
<PAGE> 22
1. Election of nine FOR all nominees WITHHOLD AUTHORITY *EXCEPTIONS
directors to the listed below to vote for all
Board of Directors nominees listed
as set forth in below.
Proposal 1 of the
Proxy Statement.

Nominees: G.R. BAKER, W.C. BARTHOLOMAY, K.J. FEDESNA, W.E. McKENNA, N.J.
MENELL, L.J. NICASTRO, N.D. NICASTRO, H. REICH, I.S. SHEINFELD
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)

* Exception ________________________________________________________________

2. Amendment of Stock Option Plans as set
forth in Proposal 2 of the Proxy Statement.

FOR ___ AGAINST ___ ABSTAIN ___

3. Ratification of the appointment of Ernst &
Young LLP as independent auditors for the
1997 fiscal year as set forth in Proposal 3
of the Proxy Statement.

FOR ___ AGAINST ___ ABSTAIN ___
CHANGE OF ADDRESS AND
I (we) will will not attend the Annual OR COMMENTS MARK HERE
Meeting in person.

IMPORTANT: Please sign exactly
as name or names appear
hereon, and when signing as
attorney, executor,
administrator, trustee or
guardian, give your full title
as such. If signatory is a
corporation, sign the full
corporate name by a duly
authorized officer. If shares
are held jointly each
stockholder named should sign.

Dated: ______________________

VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. X

PLEASE SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.