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] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
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 17, 1997
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 Bally's,
Las Vegas, 3645 Las Vegas Blvd. South, Las Vegas, Nevada 89109 on December 17,
1997, 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, 1998 (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
27, 1997 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,
/s/ Alvin J. Hicks
ALVIN J. HICKS
Secretary
October 27, 1997
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
_____________________________________________________________________________
General
This Proxy Statement, including the Notice of Annual Meeting of
Stockholders,(the "Proxy Statement") is furnished to the holders("Stockholders")
of Common Stock, par value $.01 per share (the"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 17, 1997,
including any adjournment or adjournments thereof, (the "Annual Meeting"). A
copy of the Notice of Annual Meeting of Stockholders accompanies this Proxy
Statement. It is anticipated that the mailing of this Proxy Statement and the
accompanying Proxy Card will commence on or about October 27, 1997.
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.
Record Date; Stockholders Entitled to Vote; Quorum
Only Stockholders of record at the close of business on October 27, 1997,
the record date (the "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 9,082,035 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 Stockholders 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 Company will bear the cost of soliciting proxies in the accompanying
form. 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 $1,750 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. 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 Annual 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 a 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:
<TABLE>
Name Age Position
_______________________ ___ __________________________________
<S> <C> <C>
Allan R. Tessler 61 Chairman of the Board
Don R. Kornstein 45 President, Chief Executive Officer
and Director
David R. Markin 66 Director
Robert L. McDonald, Sr. 77 Director
</TABLE>
Allan R. Tessler has served as Chairman of the Board since May 1994 and has
been a director of Jackpot since 1980. Mr. Tessler also 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, a securities market data
supplier, since June 1992. 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 was Chairman of the Board of Great Dane Holdings Inc.,
a diversified holding company, from 1987 through December 1996. 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 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, Chief Executive Officer and President of Checker
Motors Corporation, an automobile parts manufacturer and taxicab fleet operator
since 1970. Mr. Markin was President and Chief Executive Officer of Great Dane
Holdings Inc. from 1989 through December 1996. Mr. Markin is also a director of
Enhance Financial Services, Inc. and Data Broadcasting Corporation.
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
The Board of Directors held four meetings during the fiscal year ended
June 30, 1997. All directors attended the meetings of the Board of Directors
and of the Committees of the Board of Directors on which they served during
fiscal 1997. The Board of Directors has an Audit Committee and a Compensation
Committee. All of the members of the Audit Committee and the Compensation
Committee attended all of the meetings of such Committees held during fiscal
1997. The Board of Directors does not have a Nominating Committee. Such
matters are discussed by the Board as a whole.
The Audit Committee, which consists of Messrs. Tessler and Markin, held two
meetings during fiscal 1997. 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.
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.
During fiscal 1997, the Compensation Committee held one meeting.
DIRECTOR AND EXECUTIVE COMPENSATION
Executive Compensation. The following table sets forth certain information
concerning compensation for those persons who were (i) the Chief Executive
Officer, and (ii) the other most highly paid executive officers whose total
annual salary and bonus exceeded $100,000 (collectively, the "Named Executives")
for service provided for the fiscal years ended June 30, 1997, 1996 and 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
____________________________
Annual Compensation AWARDS PAYOUTS
__________________________________ __________ _______
Stock
Name and Other Option All Other
Principal Fiscal Annual Awards (in LTIP Compen-
Position Year Salary Bonus Compensation shares) Payout sation
(1) (2) (3) (4)
_________ ______ ________ ________ ____________ __________ _______ _________
<S> <C> <C> <C> <C> <C> <C> <C>
Don R. 1997 $715,695 $169,000 - 27,500 - $7,500(6)
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
Executive
Officer
George 1997 $115,000 $ 75,000 - 10,000 - -
Congdon(7) 1996 $105,000 $ 40,000 - - - -
Senior 1995 $ 95,000 $ 30,000 - 10,000 - $1,408(8)
Vice
President-
Operations
Bob Torkar 1997 $115,000 $ 75,000 - 10,000 - -
Senior 1996 $105,000 $ 40,000 - - - -
Vice 1995 $ 96,600 $ 27,000 - 10,000 - $1,393(8)
President-
Finance,
Treasurer
and Chief
Accounting
Officer
</TABLE>
(1) Reflects the primary capacity served during fiscal 1997.
(2) Includes incentive compensation based on a predetermined formula
(see "Employment Agreements") and bonuses, which were not pursuant to
a predetermined plan or agreement.
(3) The Named Executives each received certain perquisites, the aggregate value
of which did not exceed, as to any Named Executive in any of the last
three fiscal years, the lesser of $50,000 or 10% of such Named Executive's
annual salary and bonus.
(4) Represents the number of shares subject to options granted during
the respective fiscal year.
(5) Mr. Kornstein was appointed President and Chief Executive Officer of
Jackpot on September 8, 1994.
(6) Amount represents the annual premium paid by Jackpot for term life
insurance for the benefit of Mr. Kornstein.
(7) Mr. Congdon was appointed Senior Vice President - Operations of Jackpot on
May 11, 1995.
(8) Represents the amount earned under a deferred profit sharing plan. Under
such plan, the annual contribution by the Company, as approved by the Board
of Directors, was allocated to all eligible employees, including
executive officers, based on their annual compensation, as defined. Such
plan was terminated during fiscal 1996.
Option Grants. The following table summarizes information concerning
individual grants of options, including the potential realizable dollar value
of grants of options made during the fiscal year ended June 30, 1997, to each
Named Executive, assuming that the market value of the underlying security
appreciates in value, from the date of grant to the end of the option term, at
the assumed rates indicated in the following table.
<TABLE>
FISCAL 1997 OPTION GRANTS
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (1)
___________________________________________________________ ____________________
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise
Options Employees (2) Price Expiration
Name Granted (#) in Fiscal Year ($/Share) Date 5%($) 10%($)
_________ ___________ ______________ _________ __________ _______ ________
<S> <C> <C> <C> <C> <C> <C>
Don R.
Kornstein 27,500 (3) 21% $11.50 6/30/02 $82,500 $181,500
George
Congdon 10,000 (4) 8% $11.00 8/13/01 $30,400 $ 67,200
Bob
Torkar 10,000 (4) 8% $11.00 8/13/01 $30,400 $ 67,200
</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 on June 30, 1997, Mr. Kornstein was
automatically granted an option to purchase 27,500 shares of Common Stock
on such date. 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, 1997, the exercise price of such grant was vested at
$11.50 per share (see "Director Compensation").
(4) Such options became exercisable on August 13, 1997.
Option Exercises and Fiscal Year-End Values. The following table
summarizes information with respect to the exercise of options to purchase
Common Stock of Jackpot during the last fiscal year by each of the Named
Executives and the value of unexercised options held by each of them as of
the end of fiscal 1997. None of the Named Executives exercised any options
during fiscal 1997.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END OPTION VALUES
Number of Shares
Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year-End (#) at Fiscal Year-End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
__________ ___________ ________ ______________________ _______________________
<S> <C> <C> <C> <C>
Don R.
Kornstein - - 521,666/260,834 $1,046,665/$495,835
George
Congdon - - 22,000/ 10,000 $ 28,750/$ 3,750
Bob
Torkar - - 51,000/ 10,000 $ 28,750/$ 3,750
</TABLE>
(1) Based on the closing price of $11.375 for Jackpot's Common Stock on the New
York Stock Exchange on June 30, 1997.
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
provided that participants (i.e., an employee with an annual salary in excess of
$60,000 retiring at age 65) would 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. For participants
who retire after age 55, but before age 62, the monthly retirement benefit is
reduced. The Salary Continuation Plan also provided 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:
<TABLE>
Participant's Age at Death Number of Monthly Payments
__________________________ __________________________
<S> <C>
Less than 40 36
40 but less than 50 24
50 and over 12
</TABLE>
The amounts expended by Jackpot for the Salary Continuation Plan were on a
group basis and were actuarially determined. No specific amount was expended or
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 1997 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 receive annual fees of $32,000. 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, 1997, 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 1997.
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, 1997 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 at an exercise price of $11.50 per share pursuant to the
terms of the 1992 Plan.
Employment Agreements
Jackpot has an employment agreement (the "Agreement") with Mr. Kornstein,
which became effective on September 8, 1994, and currently expires on September
30, 2000. The Agreement is automatically extended for additional one year
periods on each October 1 unless, not later than March 31, immediately preceding
each October 1, notice is given by either the Company or Mr. Kornstein. From
September 19, 1994 through September 7, 1996, Mr. Kornstein's annual base salary
was $675,000. Presently, Mr. Kornstein's annual base salary, which became
effective September 8, 1996, is $725,000.
The Agreement provides for an annual bonus for each fiscal year equal to
(i) 2% of the amount up to the first $5 million by which the Company's earnings
before interest, taxes, depreciation, amortization and certain other items, as
defined in the Agreement ("EBITDA") for such fiscal year exceeds $10 million,
(ii) 4% of the amount up to the first $5 million by which EBITDA for such fiscal
year exceeds $15 million, (iii) 5% of the amount up to the first $5 million by
which EBITDA for such fiscal year exceeds $20 million, (iv) 6% of the amount up
to the first $5 million by which EBITDA for such fiscal year exceeds $25
million, plus (v) 7% of the amount by which EBITDA for such fiscal year exceeds
$30 million. The Board of Directors may, in its discretion, grant Mr. Kornstein
additional bonuses. To date, no such additional bonuses have been granted to
Mr. Kornstein. In addition, the Company, at its cost, provides term life
and disability insurance to Mr. Kornstein in the amount of $5 million and
$25,000 per month, respectively.
As part of the Agreement, Mr. Kornstein was granted an option under the
1992 Plan to acquire 700,000 shares of Common Stock at $9.25 per share (the
closing price on the effective date of the Agreement). The option, which
expires on September 8, 2004, vested as to one-third of the shares on September
8, 1995, 1996 and 1997, respectively. Under certain circumstances, such option
is exercisable for a period of 18 months following the termination of the
Agreement, but in no event beyond the expiration of the term of such option.
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, will receive a payment for accrued salary,
if any, and a pro rata bonus, as defined in the Agreement, through such
date. In addition, Mr. Kornstein or his beneficiary will receive a lump
sum payment equal to the sum of (i) Mr. Kornstein's base salary, which
would have been in effect for the twelve months following the date of
disability or death, and (ii) the average bonus, as defined in the
Agreement, for the prior three fiscal years.
The Agreement with Mr. Kornstein may be terminated by the Board of
Directors, at any time, for cause. Termination for "cause" under the 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 willful and continued failure to substantially
perform his duties, in which case the Company shall only pay such employee the
amounts due him through the date of termination.
In the event of a termination of the Agreement by the Company without
cause, for "Good Reason", or a "Change in Control", Mr. Kornstein would receive
a lump sum amount equal to his base salary, which would have been in effect for
the three year period commencing on the date of termination, 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.
Assuming such termination occurred on or about October 27, 1997, such lump sum
payment would be approximately $2.8 million. 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.
For purposes of the 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 the Agreement. As defined
in the Agreement, change in control occurs when (i) any person or group of
persons become the beneficial owner of 20% or more of the outstanding voting
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, and (iv) a liquidation of the Company
or a sale of all or substantially all of the Company's assets.
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 the Agreement. In agreeing to
the terms of the 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. Pursuant to the terms of the
Agreement, Mr. Kornstein's base salary and bonus were $715,695 and $169,000,
respectively, for fiscal 1997. Mr. Kornstein was not awarded any discretionary
bonus for fiscal 1997. For additional information concerning the Agreement, see
"Employment Agreements".
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, executive officers may be granted options
to purchase Common Stock. 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 fiscal 1997, Messrs. Congdon
and Torkar each were granted an option to purchase 10,000 shares of Common
Stock at the market price on the date of grant, which was $11.00 per share.
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. On June 30,
1997, each director received one such grant relating to services provided
in fiscal 1997. For additional information concerning the salary, bonus
and stock option grants for the Named Executives, see "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") and
the Dow Jones Casinos Index (the "Industry Group"). The industry group
consists of six gaming companies. This graph assumes the investment of
$100 on June 30, 1992 in each of the Company's Common Stock, the stocks
comprising the S&P 500 Index and the stocks comprising the Industry Group.
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., THE S & P 500 INDEX
AND THE DOW JONES CASINOS INDEX
Measurement
Period
July 1 Jackpot Dow Jones
June 30 Enterprises, Inc. S & P 500 Index Casinos Index
_________________ _______________ _____________
<S> <C> <C> <C>
Measurement
Pt-6/30/92 $100 $100 $100
FYE 6/30/93 $180 $114 $189
FYE 6/30/94 $ 70 $115 $148
FYE 6/30/95 $ 92 $145 $247
FYE 6/30/96 $120 $183 $322
FYE 6/30/97 $108 $247 $233
</TABLE>
* $100 INVESTED ON 6/30/92 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of October 1, 1997, 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 of Beneficial Holder, of Beneficial
Director, Named Executive Ownership of Percent
or Identity of Group Common Stock (2) of Class (2)
________________________________________________________________________________
<S> <C> <C>
Beneficial Holders:
__________________
Don R. Kornstein (1) 782,500 7.93%
David R. Markin (1) 471,979 5.07%
Directors other than Messrs.
Kornstein and Markin:
____________________________
Allan R. Tessler 404,257 4.34%
Robert L. McDonald, Sr. 352,878 3.79%
Named Executives other than
Mr. Kornstein:
___________________________
George Congdon 42,000 *
Bob Torkar 71,000 *
All directors and executive
officers as a group (6 persons) 2,124,614 19.91%
________________________________________________________________________________
*less than one percent
(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(231,094), Mr.
Kornstein (782,500), Mr. Markin (231,094), Mr. McDonald (228,894),
Mr. Congdon (42,000), Mr. Torkar (71,000)and all directors and executive
officers as a group (1,586,582). Excludes shares of Common Stock which
may be acquired upon the exercise of unvested options held by the
following: Mr. Congdon (20,000), Mr. Torkar (20,000) and all directors
and executive officers as a group (40,000). The nature of the beneficial
ownership for all the shares is sole voting and investment power.
</TABLE>
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,
1997, the amount of fees paid by the Company to McDonald Carano, based on
representation provided by McDonald Carano to the Company, did not exceed 5% of
the gross revenues of such firm for its last full fiscal year. 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.
During fiscal 1997, Jackpot purchased 55,174 shares of its Common Stock
from American Country Insurance Company for approximately $545,000 (the market
price on the date of purchase). Mr. Tessler and Mr. Markin, directors of
Jackpot, were directors and indirect beneficial owners of an aggregate of more
than 51% of the common stock of such insurance company at the time of such
purchase.
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
the fiscal year ending June 30, 1998. 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
for 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 30,
1998. 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
/s/ Alvin J. Hicks
ALVIN J. HICKS
Secretary
October 27, 1997
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 each with the full authority to act without the other, with the power of
substitution, as proxies and attorneys-in-fact, 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 Bally's, Las Vegas, 3645 Las Vegas Blvd. South,
Las Vegas, Nevada 89109 on December 17, 1997 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, 1998.
____ 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 and as the proxies deem
advisable on any other matters as may properly come before the meeting. 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
