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 Rule 14a-11(c) or Rule 14a-12
JACKPOT ENTERPRISES, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
5) Total fee paid:
______________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________
3) Filing Party:
______________________________________________
4) Date Filed:
______________________________________________
JACKPOT ENTERPRISES, INC.
1110 Palms Airport Drive
Las Vegas, Nevada 89119
Telephone Number: (702) 263-5555
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 12, 1996
To the Stockholders of Jackpot Enterprises, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Jackpot
Enterprises, Inc., a Nevada corporation ("Jackpot"), will be held at Treasure
Island at the Mirage, 3300 S. Las Vegas Boulevard, Las Vegas, Nevada 89109 on
December 12, 1996, at 9:00 a.m., local time, for the purpose of considering and
acting upon:
(1) the election of four directors of Jackpot to serve as the Board of
Directors until the next Annual Meeting of Stockholders and until
their successors are elected and qualified (the "Director Proposal");
(2) a proposal to ratify the appointment of Deloitte & Touche LLP as
Jackpot's independent auditors for the fiscal year ending June 30,
1997 (the "Auditor Proposal"); and
(3) such other business as may properly come before the Annual Meeting or
any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on October 15, 1996
as the record date for determining Stockholders entitled to notice of and to
vote at the Annual Meeting or any adjournment or adjournments thereof.
Stockholders will not be entitled to appraisal rights in connection with the
matters to be voted on at the Annual Meeting.
A proxy and postage prepaid return envelope are enclosed for your
convenience.
By Order of the Board of Directors,
ALVIN J. HICKS
Secretary
October 25, 1996
It is important that your shares be represented at the Annual Meeting.
Please complete, date, sign and mail the enclosed proxy card promptly in the
return envelope provided, regardless of whether you plan to attend the Annual
Meeting, so that your vote may be recorded. If you are present at the Annual
Meeting, you may withdraw your proxy and vote in person if you so desire.
JACKPOT ENTERPRISES, INC.
1110 Palms Airport Drive
Las Vegas, Nevada 89119
Telephone Number: (702) 263-5555
PROXY STATEMENT
This Proxy Statement (including the Notice of Annual Meeting of
Stockholders, "Proxy Statement") is furnished to the holders ("Stockholders")
of Common Stock, par value $.01 per share ("Common Stock"), of Jackpot
Enterprises, Inc., a Nevada corporation ("Jackpot" or the "Company"),
in connection with the solicitation of proxies by the Board of Directors for
use at the Annual Meeting of Stockholders of Jackpot to be held on
December 12, 1996 (including any adjournment or adjournments thereof,
the "Annual Meeting"). A copy of the Notice of Annual Meeting accompanies
this Proxy Statement. It is anticipated that the mailing of this Proxy
Statement and the accompanying Proxy Card will commence on or about
November 4, 1996.
The Board of Directors believes that a vote in favor of the Director
Proposal and approval of the Auditor Proposal (collectively, the "Proposals")
are in the best interests of the Company and its Stockholders.
The Board of Directors does not know of any matter that is expected to be
presented for consideration at the Annual Meeting other than the matters
described in this Proxy Statement. However, if other matters properly come
before the Annual Meeting, the persons named in the accompanying proxy intend
to vote thereon in accordance with their judgment.
All proxies received pursuant to this solicitation will be voted FOR the
Proposals, except as to matters where authority to vote is specifically
withheld and where another choice is specified as to the Proposal, in which
event, they will be voted in accordance with such specification. If no
instructions are given, the persons named in the proxy solicited by the
Board of Directors of Jackpot intend to vote FOR the Director Proposal and
FOR the Auditor Proposal.
INTRODUCTION
The Company
Jackpot has been actively engaged, through its subsidiaries, in the
gaming industry for over 30 years. Jackpot is one of the largest gaming
machine route operators in the State of Nevada, operating as of
June 30, 1996, 4,211 state-of-the-art video poker and other gaming machines
in 439 locations. Jackpot also operated, as of June 30, 1996, two casinos
with 183 gaming machines; however such operations will be disposed of as soon
as is practical, subject to market conditions.
Record Date; Stockholders Entitled to Vote; Quorum
Only Stockholders of record at the close of business on October 15, 1996,
the record date ("Record Date") for the Annual Meeting, will be entitled to
notice of and to vote at the Annual Meeting. As of the Record Date, Jackpot
had outstanding 9,356,995 shares of Common Stock. Shares of Common Stock are
the only securities of Jackpot entitled to vote at the Annual Meeting and
each share outstanding as of the Record Date will be entitled to one vote.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting.
Vote Required For Approval
Nevada law requires that each of the four nominees for director be elected
by the affirmative vote of a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting and that
the ratification of the appointment of the Company's independent auditors be
approved by the affirmative vote of a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting.
Revocability of Proxies
A Stockholder who dates, signs and returns the enclosed form of proxy may
revoke the proxy at any time before it is voted by submitting to the Secretary
of Jackpot a duly executed written revocation or a proxy bearing a later date.
Attendance at the Annual Meeting shall not have the effect of revoking a proxy
unless the Stockholder so attending shall, in writing, so notify the Secretary
of the Company at any time prior to the voting of the proxy.
Solicitation of Proxies
The cost of soliciting proxies will be borne by the Company. In addition
to the use of the mails, proxies may be solicited personally or by telephone by
directors, officers or employees of the Company, none of whom will receive any
compensation therefor in addition to their regular remuneration. The Company
will reimburse brokers and certain other persons holding stock in their names
or in the names of nominees for their expenses in sending proxy materials to
principals and obtaining their proxies, which are anticipated to total $10,000.
The Company has retained Beacon Hill Partners, Inc. ("Beacon") to aid in
the solicitation of proxies from brokers, banks, nominees and other
institutional owners and non-objecting beneficial owners and individual holders
of record, by personal interview, telephone, telegram or mail. The Company
will pay Beacon a fee of $1,500 and will reimburse Beacon for certain
expenses incurred by it.
Voting of Proxies
Proxies will be voted in accordance with the instructions indicated
thereon. A validly executed proxy which does not indicate instructions will be
voted FOR each of the Proposals. The Annual Meeting will be held for the
transaction of business described above and for the transaction of such other
business as may properly come before the Annual Meeting. Proxies will confer
discretionary authority with respect to any other matters which may properly be
brought before the Annual Meeting (which, as defined herein, includes any
adjournment or adjournments thereof). At the date of this Proxy Statement, the
only business which the Company's management intends to present, or knows that
others will present, is that described in this Proxy Statement. If other
matters properly come before the Annual Meeting, the persons holding proxies
solicited hereunder intend to vote such proxies in accordance with their
judgment on all such matters.
Tabulation of Votes
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
counted as present in determining whether the quorum requirement is satisfied.
Abstentions will be counted towards the tabulation of votes cast on the
Proposals and will have the same effect as negative votes. Broker non-votes
are not counted for any purpose in determining whether a matter has been
approved.
ELECTION OF DIRECTORS
At the meeting, four directors are to be elected, each to hold office
(subject to Jackpot's By-Laws) until the next Annual Meeting of Stockholders
and until his respective successor has been elected and qualified. If any
nominee listed in the table below should become unavailable for any reason,
which management does not anticipate, the proxy will be voted for any
substitute nominee or nominees who may be selected by the Board of Directors
prior to or at the Annual Meeting, or, if no substitute is selected by the
Board of Directors prior to or at the Annual Meeting, for a motion to reduce
the membership of the Board to the number of nominees available. The
information concerning the nominees and their security holdings has been
furnished by them to Jackpot.
The directors of Jackpot (none of whom has a family relationship with one
another, and each of whom is a nominee for election as a director at the Annual
Meeting) are as follows:
Name Age Position
________________________ ___ ______________________________________
Allan R. Tessler 60 Chairman of the Board
Don R. Kornstein 44 President, Chief Executive Officer and Director
David R. Markin 65 Director
Robert L. McDonald, Sr. 76 Director
Allan R. Tessler has served as Chairman of the Board since May 3, 1994 and
has been a director of Jackpot since 1980. Mr. Tessler served as Secretary of
Jackpot from 1980 through August 1993. He has been Chairman and Chief
Executive Officer of International Financial Group, Inc., an international
merchant banking firm, since 1987. He has been Co-Chairman and Co-Chief
Executive Officer of Data Broadcasting Corporation ("DBC"), a securities
market data supplier, since June 1992. During 1990, Mr. Tessler was
retained by Infotechnology, Inc. and Financial News Network, Inc., a
predecessor to DBC, to assist in the restructuring (under federal bankruptcy
laws) of such companies. From May 1988 through October 1993, Mr. Tessler
was Chairman of the Board and Chief Executive Officer of Ameriscribe
Corporation, a national provider of facilities management services.
Mr. Tessler has been Chairman of the Board of Enhance Financial Services, Inc.,
an insurance holding company, since 1986 and Chairman of the Board of
Great Dane Holdings Inc., a diversified holding company, since 1987. He is
also a director of The Limited, Inc. and Allis-Chalmers Corporation.
Don R. Kornstein has served as President, Chief Executive Officer and a
director of Jackpot since September 8, 1994. Prior to his appointment with
Jackpot, Mr. Kornstein was a Senior Managing Director of Bear, Stearns & Co.
Inc., a leading worldwide investment banking firm where he had been employed
since 1977. Mr. Kornstein was in such firm's Investment Banking Department and
was head of that firm's gaming industry group. Mr. Kornstein is also a
director of Riddell Sports, Inc., a manufacturer of athletic equipment.
David R. Markin has been a director of Jackpot since 1980. Mr. Markin has
been Chairman of the Board and President of Checker Motors Corporation, an
automobile parts manufacturer and taxicab fleet operator, since 1970, and
President and Chief Executive Officer of Great Dane Holdings Inc. since 1989.
Mr. Markin is also a director of Enhance Financial Services, Inc. and DBC.
Robert L. McDonald, Sr. has been a director of Jackpot since 1980. Mr.
McDonald is a senior partner in the law firm of McDonald Carano Wilson McCune
Bergin Frankovich & Hicks LLP, counsel to Jackpot. Mr. McDonald is a principal
stockholder, executive officer and a director of Little Bonanza, Inc., the
corporate operator of the Bonanza Casino located in Reno, Nevada.
These individuals will be placed in nomination for election to the Board
of Directors. The Board of Directors recommends a vote FOR the election of
each of the nominees for director. The shares represented by the proxy cards
returned will be voted FOR election of these nominees unless an instruction
to the contrary is indicated on the proxy card.
Committees of the Board of Directors and Meetings
In September 1987, the Board of Directors established the Audit Committee.
The Audit Committee consists of Messrs. Tessler and Markin, who reported to the
Board on one occasion during the fiscal year ended June 30, 1996. The Audit
Committee reviews and satisfies itself as to the adequacy of the structure of
Jackpot's financial organization and as to the proper implementation of the
financial and accounting policies of Jackpot. The Audit Committee reviews with
Jackpot's independent auditors the scope of the annual audit prior to its
commencement and the results of such audit before the release of the Annual
Report to Stockholders. More specifically, the Audit Committee (a) reviews
Jackpot's financial and accounting policies and procedures with emphasis on any
major changes during the year, (b) reviews the results of the audit for
significant items and inquiries as to whether the independent auditors are
completely satisfied with the audit results, discussing any recommendations and
comments the independent auditors may have, and (c) ascertains the degree of
cooperation of Jackpot's financial and accounting personnel with the
independent auditors.
In December 1985, the Board of Directors established the Compensation
Committee. The Compensation Committee, which consists of Messrs. Tessler,
Markin and McDonald, makes recommendations to the Board of Directors as to
salaries, bonuses, and other forms of compensation for officers and other key
employees.
The Board of Directors held four meetings during the fiscal year ended
June 30, 1996 and also acted by written consent one time. All of the directors
attended all such meetings. All of the members of the Audit Committee and the
Compensation Committee attended all of the meetings of such Committees. The
Board of Directors has no nominating committee.
DIRECTOR AND EXECUTIVE COMPENSATION
Executive Compensation. The following table sets forth certain
information concerning compensation, attributable to service for the three
fiscal years ended June 30, 1996, 1995 and 1994 to those persons who were (i)
the Chief Executive Officer during fiscal 1996 and (ii) the two most highly
paid executive officers whose total annual salary and bonus exceeded $100,000
for the fiscal year ended June 30, 1996 (collectively, the "Named Executives").
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
__________________________________ ________________________
AWARDS PAYOUTS
_________ ________
Stock
Name and Other Option
Principal Fiscal Annual Awards(in LTIP All other
Position Year Salary Bonus Compensation shares) Payout Compen-
(1) (2) (3) (4) sation
__________ ______ _______ _________ ___________ _________ ______ __________
<S> <C> <C> <C> <C> <C> <C> <C>
Don R.
Kornstein 1996 $675,000 $204,920 -- 27,500 -- $7,500(6)
President 1995 $528,750(5) $220,000(5) 727,500 $7,500(6)
and Chief 1994 -- -- -- -- -- --
Executive
Officer
George
Congdon(7) 1996 $105,000 $ 40,000 -- -- -- --
Senior 1995 $ 95,000 $ 30,000 -- 10,000 -- $1,408(8)
Vice 1994 $ 88,333 $ 16,500 -- 12,000 -- $1,152(8)
President-
Operations
Bob Torkar 1996 $105,000 $ 40,000 -- -- -- --
Senior Vice 1995 $ 96,600 $ 27,000 -- 10,000 -- $1,393(8)
President- 1994 $ 93,047 $ 20,000 -- 30,000 -- $1,387(8)
Finance,
Treasurer
and Chief
Accounting
Officer
</TABLE>
(1) Reflects the primary capacity served during fiscal 1996.
(2) Includes incentive compensation (see "Employment Agreements") and bonuses
determined at the discretion of the Board of Directors or the Compensation
Committee which were not pursuant to a predetermined plan or agreement.
(3) The Named Executives each received certain perquisites, the value of which
did not exceed the lesser of $50,000 or 10% of such Named Executive's
annual salary and bonus in the three years ended June 30, 1996.
(4) Represents the number of shares subject to Options granted during the
respective fiscal year.
(5) Mr. Kornstein was appointed President and Chief Executive Officer on
September 8, 1994.
(6) Amount represents premiums paid by the Company for term life insurance for
Mr. Kornstein.
(7) Mr. Congdon was appointed Senior Vice President - Operations on May 11,
1995.
(8) During fiscal 1996, Jackpot terminated a deferred profit sharing plan
which covered all eligible employees, including executive officers.
Under the deferred profit sharing plan, the annual contribution by the
Company, as determined by the Board of Directors, was allocated to all
eligible employees based on their annual compensation, as defined.
Option Grants. The following table summarizes pertinent information
concerning individual grants of Options, including the potential realizable
dollar value of grants of Options made during the fiscal year ended June 30,
1996, to each Named Executive, assuming that the market value of the underlying
security appreciates in value, from the date of grant to the end of the Option
term, at the assumed rates indicated in the following table.
<TABLE>
FISCAL 1996 OPTION GRANTS
Potential Realizable
Value At Assumed
Rates of Stock Price
Appreciation for
Individual Grants Option Term (1)
__________________________________________________________ ____________________
Percent of
Total
Options
Granted to Exercise
Options Employees (2) Price Expiration
Name Granted in Fiscal Year ($/Share)Date 5% ($) 10% ($)
__________ _______ _______________ ________ _________ ________ _________
<S> <C> <C> <C> <C> <C> <C>
Don R.
Kornstein 27,500(3) 25% $10.00 6/30/01 $72,050 $157,850
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at
annualized rates of 5% and 10%, respectively, which were established by
rules promulgated by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of
Jackpot's Common Stock price.
(2) Total Options granted include Options to purchase an aggregate of 110,000
shares of Common Stock granted to the Board of Directors (see "Director
Compensation").
(3) As a member of the Board of Directors, Mr. Kornstein was automatically
granted an Option to purchase 27,500 shares of Common Stock on June 30,
1996. Pursuant to the 1992 Incentive and Non-qualified Stock Option Plan,
the exercise price for each June 30 automatic grant will be the fair
market value of the Common Stock on the following September 30. On
September 30, 1996, the exercise price of such grant was vested at
$10.00 per share (see "Director Compensation").
Option Exercises and Fiscal Year-End Values. Shown below is
information with respect to the exercise of Options to purchase Common Stock
of Jackpot during the last fiscal year by each of the Named Executives and
the value of unexercised Options held by each of them as of the end of
fiscal 1996. None of the Named Executives exercised any Options during
fiscal 1996.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year-End (#) at Fiscal Year-End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
__________ ___________ ________ ______________________ _______________________
<S> <C> <C> <C> <C>
Don R.
Kornstein - - 260,833/494,167 $871,666/$1,708,960
George
Congdon - - 22,000/0 $ 42,500/0
Bob
Torkar - - 62,550/0 $ 65,600/0
</TABLE>
(1) Based on the closing price of $12.75 for Jackpot's Common Stock on the New
York Stock Exchange on June 30, 1996.
Pension Plan. On August 13, 1996, the Board of Directors approved the
termination of a retirement plan for certain executives and management
employees (the "Salary Continuation Plan"). In general, the Salary
Continuation Plan provides that a participant (i.e., an employee with an
annual salary in excess of $60,000, which amount may be increased annually
by the Board of Directors) retiring at age 65 will receive a monthly
retirement benefit equal to an amount determined by dividing the sum of
the participant's Future Service Benefit (as defined in the Salary
Continuation Plan) (i.e., the sum, for each year, of such percentage of
the participant's annual compensation as the Board of Directors may in
its sole discretion determine) and, if applicable, Past Service Benefit
(as defined in the Salary Continuation Plan) (i.e., an amount equal to 1% of
the participant's average annual compensation prior to October 1, 1990) by
12 for a total of 180 consecutive monthly payments.
Participants who retire after age 55 but before age 62 (with 120
months of consecutive service) receive a reduced benefit. The Salary
Continuation Plan also provides for pre-retirement survivors' benefits in a
monthly amount equal to either (i) the sum of the participant's Future
Service Benefit and, if applicable, Past Service Benefit as of the date of
death, divided by 12, or (ii) 1/12 of the participant's annual compensation
that would have been paid to the participant in the year of death had the
participant continued in the service of Jackpot for the remainder of such
year, for a number of months determined as follows:
Participant's Age at Death Number of Monthly Payments
__________________________ __________________________
Less than 40 36
40 but less than 50 24
50 and over 12
The amounts expended by Jackpot for the Salary Continuation Plan are on a
group basis and are actuarially determined. No specific amount is expended and
set aside by Jackpot for the account of any individual officer or employee
under the Salary Continuation Plan. The Board of Directors determined that
no percentage of the participant's annual compensation in fiscal 1996 would
be used in determining monthly retirement benefits. Messrs. Kornstein,
Congdon and Torkar did not earn any benefits under the Salary Continuation
Plan.
The following table illustrates the annual retirement income payable to an
employee under the Salary Continuation Plan assuming the Future Retirement
Benefits (as defined in the Salary Continuation Plan) are equal to 1% of a
participant's annual compensation, the payments are on a straight 180 month
annuity basis, the plan continues in its present form until the participant's
retirement and the age of retirement is 65. The benefits listed in the
following table are not subject to any deduction for Social Security benefits
or other offset amounts.
<TABLE>
PENSION PLAN TABLE
Years Of Service
Remuneration 10 15 20 25 30
____________ _______ _______ ________ ________ ________
<S> <C> <C> <C> <C> <C>
$100,000 $10,000 $15,000 $ 20,000 $ 25,000 $ 30,000
$125,000 $12,500 $18,750 $ 25,000 $ 31,250 $ 37,500
$150,000 $15,000 $22,500 $ 30,000 $ 37,500 $ 45,000
$200,000 $20,000 $30,000 $ 40,000 $ 50,000 $ 60,000
$250,000 $25,000 $37,500 $ 50,000 $ 62,500 $ 75,000
$300,000 $30,000 $45,000 $ 60,000 $ 75,000 $ 90,000
$350,000 $35,000 $52,500 $ 70,000 $ 87,500 $105,000
$400,000 $40,000 $60,000 $ 80,000 $100,000 $120,000
$600,000 $60,000 $90,000 $120,000 $150,000 $180,000
</TABLE>
Director Compensation. Directors who are not salaried employees of the
Company are presently entitled to receive director's fees of $32,000 per year.
In addition, a director who serves as a member of the Compensation Committee
and/or Audit Committee is entitled to receive $10,800 and $7,200, respectively,
per year. For the fiscal year ended June 30, 1996, Messrs. Tessler, Markin
and McDonald received aggregate fees of $50,000, $50,000 and $42,800,
respectively. Mr. Kornstein did not receive any fees for service on the
Board of Directors during fiscal 1996.
The 1992 Incentive and Non-qualified Stock Option Plan (the "1992 Plan")
provides that each individual who is a member of the Board of Directors on June
30 of any year, including any future director on any such date, will
automatically be granted a nonqualified Option to purchase 27,500 shares of
Common Stock on each such June 30. The exercise price for each June 30 grant
will be 100% of the fair market value of the Common Stock on the following
September 30. Each Option granted to a director will become exercisable after
September 30 of each year and expire five years from the date of grant. On
June 30, 1996 Options to purchase an aggregate of 110,000 shares of Common
Stock (27,500 each to Messrs. Tessler, Kornstein, Markin and McDonald) were
automatically granted pursuant to the terms of the 1992 Plan. The exercise
price of the June 30, 1996 Option grant was $10.00 per share.
Directors' Retirement Plan. On May 14, 1996, Jackpot terminated the
Jackpot Retirement Plan for Directors, as amended (the "Retirement Plan"). In
consideration for the termination of the Retirement Plan, Messrs. Tessler,
Markin and McDonald received a lump sum distribution of accrued benefits in an
aggregate amount of $1,485,000 ($495,000 each) in May 1996. Pursuant to the
terms of the Retirement Plan, the amount of each director's distribution was
equal to the aggregate of the annual base retainer paid to the respective
director for years of service on the Board, including service prior to the
implementation of the Retirement Plan on October 1, 1990, except for certain
years that the directors waived such benefit. Interest was added to the
accounts of each director quarterly, using the one-year Treasury bill rate.
The Board of Directors waived current service benefits that would have accrued
in fiscal 1996, other than the interest earned on accrued benefits.
Employment Agreements
Mr. Kornstein entered into an employment agreement with Jackpot,
effective September 8, 1994. The term of such agreement was initially for the
period through September 30, 1997. Commencing October 1, 1995, and on each
October 1, thereafter, the agreement is automatically extended for additional
one-year periods unless, not later than March 31, immediately preceding each
October 1, notice is given by either the Company or Mr. Kornstein. The
agreement currently expires on September 30, 1999. Mr. Kornstein received an
annual base salary of $675,000 for the first two years of the employment term.
Thereafter, Mr. Kornstein's minimum annual base salary is $725,000.
Mr. Kornstein's employment agreement also provides for an annual bonus
for each fiscal year equal to (i) 2% of all amounts up to the first $5 million
by which the Company's earnings before interest, taxes, depreciation,
amortization and certain other items, as defined ("EBITDA") for such fiscal
year exceeds $10 million, (ii) 4% of all amounts up to the first $5 million
by which EBITDA for such fiscal year exceeds $15 million, (iii) 5% of all
amounts up to the first $5 million by which EBITDA for such fiscal year exceeds
$20 million, (iv) 6% of all amounts up to the first $5 million by which EBITDA
for such fiscal year exceeds $25 million, plus (v) 7% of all amounts by which
EBITDA for such fiscal year exceeds $30 million. The Board of Directors may,
in its discretion, grant Mr. Kornstein additional bonuses. In addition,
the Company, at its cost, provides Mr. Kornstein term life insurance in the
amount of $5 million and disability insurance in the amount of $25,000 per
month.
As part of his employment agreement, Mr. Kornstein was granted an
Option under the 1992 Plan to acquire up to 700,000 shares of Common Stock
at $9.25 per share (the closing price on the effective date of his employment
agreement). The Option vests as to one-third of the shares on each of the
first three anniversaries of the effective date of the contract, subject to
earlier vesting upon the achievement of certain earnings tests, or a certain
stock price test, or upon a Change In Control (as defined below). The Option
remains exercisable for a period of 18 months following the termination of
Mr. Kornstein's contract under certain circumstances.
In the event Mr. Kornstein is disabled during the term of the agreement,
he will receive his full base salary for the first six months of such
disability. At the end of such six month period or upon his death, Mr.
Kornstein, or his beneficiary, would receive a lump sum payment equal to his
salary and pro rata bonus, as defined in the agreement, through such date and
one year's base salary that Mr. Kornstein would have earned during the
subsequent twelve month period and annual bonus determined pursuant to a
formula.
In the event of a termination of Mr. Kornstein's contract for Good
Reason (as defined below), or a Change In Control, Mr. Kornstein would
receive a lump sum amount equal to three years' base salary plus his bonus
for a three year period, pursuant to a formula, as well as three additional
years credits for pension benefit calculations and three years of welfare
benefit coverage to the extent not provided to Mr. Kornstein by a subsequent
employer and the right to exercise the Option to acquire up to 700,000 shares
of Common Stock for a period of eighteen months.
The employment agreement with Mr. Kornstein may be terminated by the
Board of Directors, at any time, for cause. Termination for "cause" under such
agreement is permitted upon (i) such employee's conviction of a felony, (ii)
the termination of such employee's gaming license, under certain circumstances,
or (iii) upon such employee's failure to perform his duties, in which case the
Company shall only pay such employee the amounts due him through the date of
termination. For purposes of his agreement, Mr. Kornstein shall have "Good
Reason" to terminate his employment (i) upon a failure by the Company to comply
with a material provision of the agreement, (ii) upon a diminution of Mr.
Kornstein's title or authority, or (iii) upon receipt by Mr. Kornstein of a
notice from the Company indicating that the contract term is not being
automatically extended.
For a period of time of up to one year after a Change In Control of
Jackpot, Mr. Kornstein has the option of terminating his contract. As defined
in the employment agreement, Change In Control occurs when (i) any person or
group of persons become the beneficial owner of 20% or more of the outstanding
securities of Jackpot, (ii) during any two consecutive years, the individuals
who constituted the Board of Directors of Jackpot at the beginning of such
period cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of the
period was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period, (iii) a
merger or consolidation other than (1) a merger or consolidation that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent 51% of the combined voting securities of the
Company, or (2) a recapitalization in which no person acquires 20% or more of
the Company's then outstanding securities, (iv) a liquidation of the Company
or a sale of all or substantially all of the Company's assets. If Mr.
Kornstein exercises his option in the event of a Change In Control,
he shall be entitled to be fully compensated for all amounts due to him under
his agreement as of the date of such termination. In addition, Mr. Kornstein
would receive any amount necessary to reimburse him for any excise tax imposed
under the Internal Revenue Code, including any tax payable by reason of such
reimbursement. Mr. Kornstein agreed that for a period of three years
following the termination of his employment, for any reason, he will not
compete with Jackpot or its subsidiaries.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of three non-employee directors.
Currently the members of the Compensation Committee are Messrs. Tessler, Markin
and McDonald. See "Certain Relationships and Related Transactions" for a
description of transactions and agreements in which members of the Compensation
Committee and their associates were involved. None of the executive officers
of Jackpot serves as a director of another corporation in a case where an
executive officer of such other corporation serves as a director of Jackpot.
Compensation Committee Report on Executive Compensation
The compensation of the Named Executives of the Company, as well as
other executive officers of the Company, is determined by the Compensation
Committee of the Board of Directors. The compensation of the executive
officers consists primarily of salary, bonuses and short- and long-term
incentives plans, whereby the Company has aligned the executive officers'
financial interests with the financial interests of the Stockholders of the
Company.
As determined by the Compensation Committee, an executive officer's
total compensation package is comprised of three components: (1) base
salary, (2) bonuses and (3) Options.
The base salary and certain bonus arrangements for the Named Executives,
with the exception of Mr. Kornstein, are not subject to an employment
agreement. In considering the terms and conditions of employment agreements,
the base salary for executive officers and for annual base salary increases
for those Named Executives with whom the Company has an employment agreement,
the Compensation Committee considers a number of factors including the
executive's level of responsibility, achievements, and present and future
value to the Company relative to comparable positions at other companies in
the gaming industry.
Mr. Kornstein was appointed Chief Executive Officer of Jackpot on
September 8, 1994. Prior to his appointment with Jackpot, Mr. Kornstein was a
Senior Managing Director of Bear, Stearns & Co. Inc., a leading worldwide
investment banking firm where he had been employed since 1977. Mr. Kornstein
was in such firm's Investment Banking Department and was head of that firm's
gaming industry group. Mr. Kornstein's compensation arrangements were
negotiated prior to his joining the Company and were incorporated into an
employment agreement, which was effective September 8, 1994. In agreeing to
the terms of Mr. Kornstein's employment agreement, the Compensation Committee
considered, among other factors, the depth of Mr. Kornstein's background and
experience, Mr. Kornstein's then present position and compensation, and the
compensation arrangements for chief executives of comparable companies. In
connection with the employment of Mr. Kornstein as President, Chief Executive
Officer and Director, Mr. Kornstein was granted an Option to purchase up to
700,000 shares of Common Stock. For the fiscal year ended June 30, 1996, Mr.
Kornstein received $675,000 as salary pursuant to the terms of his employment
contract. Mr. Kornstein's employment agreement provides for a bonus per fiscal
year based on various percentages of certain amounts by which earnings before
interest, taxes, depreciation, amortization and certain other items, as defined
in the agreement, exceeds certain levels for such fiscal year. Mr. Kornstein's
bonus under such formula was $204,920 for fiscal 1996. Mr. Kornstein was not
awarded any discretionary bonus for fiscal 1996.
In addition to base salary, executive officers are eligible to receive
annual bonuses, which may be determined based upon the Company's meeting of
specific economic targets, which may be set forth in such officer's employment
agreement, if any, and at the discretion of the Board of Directors. In
determining bonuses within its discretion, the Board acting upon the
recommendation of the Compensation Committee will consider the overall
operating performance of the Company during the period, as well as the
position and responsibility of the executive and the executive's service
and contributions to the Company during the year.
In addition to salary and bonus, executives are also granted Options
including Options under the 1992 Plan. Options are intended to assist in
encouraging executive officers as well as other key management employees to
acquire a proprietary interest in the Company through ownership of its Common
Stock. The Company views Options as yet another method to bring together the
interests of management and Stockholders on a long-term basis. Strong
financial performance by the Company over time can be expected to lead to
stock price appreciation, enabling the Company's executives to participate
in such appreciation, should it be realized.
In considering which employees, including executive officers, who are
to receive Option grants, as well as the number of Options to be granted, the
Compensation Committee considers such employee's position and responsibility,
the service, and accomplishments of such employee, the employee's present and
future value to the Company, as well as the anticipated length of the
employee's future service to the Company. In addition, pursuant to the
1992 Plan, directors, including directors who are also employees of the
Company, are eligible for an annual automatic grant of an Option to purchase
27,500 shares of Common Stock pursuant to the 1992 Plan. On June 30, 1996,
each director received one such grant relating to services provided in
fiscal 1996.
Additional information concerning the salary, bonus and stock Option
grants for the Named Executives can be found in the tables appearing elsewhere
in this Proxy Statement under the caption "Director and Executive Compensation."
In fulfilling its responsibilities, the Compensation Committee's goal is
to closely ally the interest of management and the Stockholders. The
Compensation Committee therefore believes that the short- and long-term
financial performance of the Company should be a key determinant of overall
executive compensation.
Allan R. Tessler
David R. Markin
Robert L. McDonald, Sr.
PERFORMANCE GRAPH
The graph below provides a comparison of the five year cumulative total
return (assuming reinvestment of dividends) of the Company's Common Stock with
the Standard & Poor's 500 Stock Index (the "S & P 500 Index"), the Dow Jones
Entertainment & Leisure - Casinos Index (the "Industry Group") and the 1995
Peer Group. This graph assumes the investment of $100 on June 30, 1991 in
each of the Company's Common Stock, the stocks comprising the S&P 500 Index,
the stocks comprising the Industry Group and the stocks comprising the 1995
Peer Group. The Company has elected, beginning in fiscal 1996, to utilize the
Industry Group in lieu of the 1995 Peer Group. Management believes the
comparison of the Company to the Industry Group is more meaningful since the
Industry Group includes six gaming companies, compared to the two that
currently comprise the 1995 Peer Group. The returns of each company in the
Industry Group and 1995 Peer Group have been weighted annually for their
market capitalization at the beginning of each indicated period. The
historical stock price performance of the Company's Common Stock shown on
the graph below is not necessarily indicative of future price performance.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
AMONG JACKPOT ENTERPRISES, INC., A 1995 PEER GROUP,
THE S & P 500 INDEX AND THE DOW JONES ENTERTAINMENT
& LEISURE-CASINOS INDEX
Measurement
Period 1995
July 1 - Jackpot Peer DJ Entertainment
June 30 Enterprises, Inc. Group S&P 500 Index & Leisure - Casinos
_________________ _____ _____________ ___________________
<S> <C> <C> <C> <C>
Measurement
Pt-6/30/91 $100 $100 $100 $100
FYE 6/30/92 $175 $382 $113 $115
FYE 6/30/93 $315 $435 $129 $217
FYE 6/30/94 $123 $247 $131 $170
FYE 6/30/95 $162 $397 $165 $284
FYE 6/30/96 $209 $892 $208 $370
</TABLE>
* $100 INVESTED ON 06/30/91 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
(1) The Industry Group consists of six gaming companies.
(2) The 1995 Peer Group consists of Alliance Gaming Corporation and Anchor
Gaming, Inc. Bally Gaming International, Inc., which was previously
included in the 1995 Peer Group, was acquired by Alliance Gaming
Corporation and has been excluded from the 1995 Peer Group. Such
corporation's final day of trading was June 18, 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of August 31, 1996, certain
information regarding the shares of Common Stock beneficially owned by (i)
each beneficial holder of more than five percent of the outstanding shares
of Common Stock ("Beneficial Holder"), (ii) each director, (iii) each
Named Executive, and (iv) all directors and executive officers of Jackpot
as a group.
<TABLE>
OWNERSHIP OF JACKPOT COMMON STOCK
______________________________________________________________________________
Amount and Nature
Name and Address of Beneficial of Beneficial
Holder and Name of Named Executive, Ownership of Percent
Director or Identity of Group Common Stock (2) of Class (2)
______________________________________________________________________________
<S> <C> <C>
Beneficial Holders:
Don R. Kornstein (1) 521,666 5.28%
David R. Markin (1) 526,792 5.46%
Named Executives other than Mr. Kornstein:
George Congdon 22,000 *
Bob Torkar 62,550 *
Directors other than Messrs. Kornstein and Markin:
Allan R. Tessler 459,070 4.76%
Robert L. McDonald, Sr. 407,691 4.23%
All directors and executive
officers as a group (6 persons) 1,999,769 18.47%
* less than one percent
</TABLE>
(1) Messrs. Kornstein and Markin have an address in care of the Company at
1110 Palms Airport Drive, Las Vegas, Nevada 89119.
(2) Includes shares of Common Stock which may be acquired upon the exercise
of vested Options held by the following: Mr. Tessler (288,844),
Mr. Kornstein (521,666), Mr. Markin (288,844), Mr. McDonald (286,644),
Mr. Congdon (22,000), Mr. Torkar (62,550) and all directors and
executive officers as a group (1,470,548). Does not include shares of
Common Stock which may be acquired upon the exercise of unvested Options
held by the following: Mr. Kornstein (233,334), Mr. Congdon (10,000),
Mr. Torkar (10,000) and all directors and executive officers as a group
(253,334).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert L. McDonald, Sr., a director of Jackpot, is a senior partner
in the law firm of McDonald Carano Wilson McCune Bergin Frankovich & Hicks LLP
("McDonald Carano"), counsel to Jackpot. In addition, A. J. Hicks, a partner
in McDonald Carano is the Secretary of Jackpot. For the fiscal year ended
June 30, 1996, the amount of fees paid by the Company to McDonald Carano did
not exceed 5% of the gross revenues of such firm for its fiscal year ending
during such period. The Company believes that the fees for the services
provided by McDonald Carano were at least as favorable to the Company as the
fees for such services from unaffiliated third parties.
APPOINTMENT OF INDEPENDENT AUDITORS
It is proposed that the Stockholders ratify the appointment by the
Board of Directors of Deloitte & Touche LLP as independent auditors for
Jackpot for fiscal 1997. Deloitte & Touche LLP has served as Jackpot's
independent auditors since June 21, 1991. Jackpot expects representatives
of Deloitte & Touche 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.
The Board of Directors of Jackpot recommends a vote FOR the Auditor
Proposal. Approval by the Stockholders of the appointment of independent
auditors is not required, but the Board deems it desirable to submit the matter
to the Stockholders for ratification. If the majority of Stockholders voting
at the meeting should not approve the selection of Deloitte & Touche LLP,
the selection of independent auditors will be reconsidered by the Board of
Directors.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders of Jackpot wishing to include proposals in the proxy
material in relation to the next Annual Meeting of Jackpot must submit such
proposals in writing so as to be received at the executive offices of
Jackpot on or before June 16, 1997. Such proposals must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to Stockholders' proposals.
By Order of the Board of Directors
ALVIN J. HICKS
Secretary
October 25, 1996
FORM OF PROXY - FRONT SIDE
PROXY JACKPOT ENTERPRISES, INC.
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Allan R. Tessler and David R. Markin, and each
of them, with the power of substitution, to represent and to vote on behalf
of the undersigned all of the shares of stock of Jackpot Enterprises, Inc.
("Jackpot") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders to be held at Treasure Island at the Mirage, 3300 S. Las Vegas
Boulevard, Las Vegas, Nevada 89109 on December 12, 1996 at 9:00 a.m. local
time, and at any adjournment or adjournments thereof, hereby revoking all
proxies heretofore given with respect to such shares, upon the following
proposals more fully described in the notice of the proxy statement for the
meeting (receipt whereof is hereby acknowledged).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS (1) and (2)
1. ELECTION OF DIRECTORS.
FOR the nominees listed below (except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below
Allan R. Tessler, Don R. Kornstein, David R. Markin and Robert L. McDonald, Sr.
(INSTRUCTION: To withhold authority to vote for one or more than one individual
nominee, write that nominee's name(s) in the space provided below.)
FORM OF PROXY - REVERSE SIDE
2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP as
Jackpot's independent auditors for the fiscal year ending June 30, 1997.
____ FOR ____ AGAINST ____ ABSTAIN
3. In their discretion upon such other matters as may properly come before
the meeting.
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 nominees named above and for the proposal. Please mark, sign,
date and return the proxy card promptly, using the enclosed envelope.
Please date and sign exactly as your name appears on this proxy. Joint owners
should each sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED Signature
DATED Signature if held jointly
