<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
Innovative Gaming Corporation of America
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which 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:
<PAGE> 2
INNOVATIVE GAMING CORPORATION OF AMERICA
4750 TURBO CIRCLE
RENO, NEVADA 89502
---------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 30, 1997
---------------------------------------------
TO THE SHAREHOLDERS OF INNOVATIVE GAMING CORPORATION OF AMERICA:
Please take notice that the Annual Meeting of Shareholders of Innovative
Gaming Corporation of America will be held, pursuant to due call by the Board of
Directors of the Company at the Airport Plaza Hotel, 1981 Terminal Way, Reno,
Nevada on Friday, May 30, 1997, at 10:00 a.m., or at any adjournment or
adjournments thereof, for the purpose of considering and taking appropriate
action with respect to the following:
1. To elect three directors.
2. To approve and adopt the Company's 1997 Directors' Stock Option
Plan.
3. To approve an amendment to the Company's 1992 Stock Option and
Compensation Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 250,000 shares.
4. To transact any other business as may properly come before the
meeting or any adjournments thereof.
Pursuant to due action of the Board of Directors, shareholders of record
on April 1, 1997, will be entitled to vote at the meeting or any adjournments
thereof.
A PROXY FOR THE MEETING IS ENCLOSED HEREWITH. YOU ARE REQUESTED TO FILL
IN AND SIGN THE PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Innovative Gaming Corporation of America
Scott Shackelton, Secretary
April 25, 1997
<PAGE> 3
INNOVATIVE GAMING CORPORATION OF AMERICA
4750 TURBO CIRCLE
RENO, NEVADA 89502
---------------------------------------------
PROXY STATEMENT
---------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 30, 1997
PROXIES AND VOTING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Innovative Gaming Corporation of America
(the "Company") to be used at the Annual Meeting of Shareholders of the Company
to be held May 30, 1997. The approximate date on which this Proxy Statement and
the accompanying proxy were first sent or given to shareholders was April 25,
1997. Each shareholder who signs and returns a proxy in the form enclosed with
this Proxy Statement may revoke the same at any time prior to its use by giving
notice of such revocation to the Company in writing, in open meeting or by
executing and delivering a new proxy to the Secretary of the Company. Unless so
revoked, the shares represented by each proxy will be voted at the meeting and
at any adjournments thereof. Presence at the meeting of a shareholder who has
signed a proxy does not alone revoke that proxy. Only shareholders of record at
the close of business on April 1, 1997 (the "Record Date") will be entitled to
vote at the meeting or any adjournments thereof.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Company has outstanding one class of voting securities, Common
Stock, $0.01 par value, of which 6,476,515 shares were outstanding as of the
close of business on the Record Date. Each share of Common Stock is entitled to
one vote on all matters put to a vote of shareholders.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 11, 1997, by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director, (iii) each executive officer named
in the Summary Compensation Table, and (iv) all executive officers and directors
as a group. Unless otherwise indicated, each of the following persons has sole
voting and investment power with respect to the shares of Common Stock set forth
opposite their respective names.
<PAGE> 4
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF CLASS
- ------------------------ ------ ----------------
<S> <C> <C>
Edward G. Stevenson(1) 133,333(2) 2.0
Lyle Berman(3) 33,000(4) *
Paul A. Bible(1) -- --
Scott H. Shackelton(1) 10,000(2) *
D. Bradly Olah(5) 1,000 *
Grand Casinos, Inc.(3) 1,127,500(6) 17.1
All executive officers
and directors as a
group (four persons) 176,333 2.7
</TABLE>
- -----------------------
* Less than 1%
1. The address of such person is 4750 Turbo Circle, Reno, Nevada 89502
2. Shares that such person has the right to acquire within 60 days.
3. The address of such person is 130 Cheshire Lane, Minnetonka, Minnesota
55305.
4. Does not include 1,025,000 shares of Common Stock and 102,500 shares of
Common Stock issuable upon exercise of a warrant (the "Warrant")
beneficially owned by Grand Casinos, Inc. ("Grand Casinos") of which
Mr. Berman disclaims beneficial ownership. Mr. Berman is Chairman of
the Board, Chief Executive Officer and a principle shareholder of Grand
Casinos.
5. The address of such person is 5950 County Road 101, Plymouth, Minnesota
55446. Mr. Olah resigned as President, Chief Executive Officer and
Director effective February 7, 1996.
6. Includes 102,500 shares that such person has the right to acquire
within 60 days.
2
<PAGE> 5
ELECTION OF DIRECTORS
Three directors are to be elected at the meeting, each director to hold
office until the next Annual Meeting of Shareholders, or until his successor is
elected and qualified. All of the persons listed below are now serving as
directors of the Company. All of the persons listed below have consented to
serve as a director, if elected. The Board of Directors proposes for election
the following nominees:
EDWARD G. STEVENSON, age 50, has been the President, Chief Executive
Officer and a director of the Company since February 1996. Prior to joining the
Company, Stevenson served as the President and Chief Operating Officer of Little
Six, Inc. d/b/a Mystic Lake Casino in Minneapolis, from January 1995 to March
1996. From 1988-1991 and from October 1992 to January 1995, Mr. Stevenson was
the President of CMS International/Summit Casinos of Reno, Nevada. From June
1991 to October 1992, Mr. Stevenson served as president of the Gaming Operations
Division for International Game Technology.
LYLE BERMAN, age 55, has served as a director of the Company since
December 1992 and as Chairman of the Board since December 1995. Mr. Berman has
been the Chief Executive Officer and the Chairman of the Board of Directors of
Grand Casinos since October 1991 and of Rainforest Cafe, Inc. since February
1994. Mr. Berman has been Chief Executive Officer of Stratosphere Corporation
since July 1994 and Chairman since July 1996. Stratosphere Corporation filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in January 1997. Mr.
Berman is also a director of G-III Apparel Group Ltd., New Horizon Kids Quest,
Inc. and Wilson's The Leather Investors, Inc.
PAUL A. BIBLE, age 56, has served as a director of the Company since
April 1997. Mr. Bible is President of the law firm Bible, Haney, Hoy, Trachok,
Wadhams, & Woloson, Reno, Nevada, and specializes in commercial and gaming law.
Mr. Bible was formerly chairman of the Nevada Gaming Commission from 1983 to
1987, Chairman of the State Bar of Nevada Gaming Law Section from 1989 to 1993,
Trustee of the International Association of Gaming Attorneys from 1989 to 1994,
and currently serves as Trustee of the University of Nevada, Reno, Foundation.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of
the outstanding shares of Common Stock of the Company present and entitled to
vote on the election of directors or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required for election to the Board of
each of the nominees named above. A shareholder who abstains with respect to the
election of directors is considered to be present and entitled to vote on the
election of directors at the meeting, and is in effect casting a negative vote,
but a shareholder (including a broker) who does not give authority to a Proxy to
vote, or withholds authority to vote, on the election of directors, shall not be
considered present and entitled to vote on the election of directors.
All shares represented by proxies will be voted for the election of the
foregoing nominees unless a contrary choice is specified. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which would have otherwise been voted for such nominee will be voted for
such substitute nominee as may be selected by the Board of Directors.
3
<PAGE> 6
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the most highly compensated officers other than the Chief Executive
Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term
---------------------------------------- Compensation
Other Annual Awards
Name and Salary Bonus(2) Compensation Options
Principal Position Year(1) ($) ($) ($) (#)
- ---------------------------- -------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Edward G. Stevenson(3) 1996 208,974 -0- 5,000 300,000
President and
Chief Executive Officer
D. Bradly Olah 1996 15,385 -0- 141,548(5) -0-
President and 1995 125,000 111,712 2,381 -0-
Chief Executive Officer(4) 1994 75,000 61,446 2,394 -0-
Scott H. Shackelton(6) 1996 76,284 -0- 3,325 60,000
Chief Financial Officer
</TABLE>
- ----------------
(1) In 1994, the Company changed its fiscal year end from July 31 to
December 31. The compensation for 1994 has been adjusted to reflect such
change.
(2) Bonuses were determined under the Company's Management Incentive Plan.
(3) Mr. Stevenson began his employment with the Company February 15, 1996.
(4) Mr. Olah resigned as Chief Executive Officer effective February 7, 1996.
(5) Includes severance paid to Mr. Olah pursuant to his December 1995
consulting and noncompetition agreement with the Company.
(6) Mr. Shackelton began his employment with the Company on June 10, 1996.
4
<PAGE> 7
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant
of stock options to the Company's executive officers named in the Summary
Compensation Table during the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS Realizable Value At
----------------------------------------------------------------------- Assumed Annual
Number of Percent of Rates of Stock Price
Securities Total Options Appreciation for
underlying Granted to Exercise Option Term(1)
Options Employees in or Base Price Expiration ------------------------
Name Granted Fiscal Year per Share Date 5% 10%
- ------------------- ---------------- ------------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Edward G. Stevenson 300,000 56.0% $7.50 February 2006 $1,415,013 $3,585,921
300,000 (2) 56.0% $4.75 February 2006 896,175 2,271,083
D. Bradly Olah --- --- --- --- --- ---
Scott H. Shackelton 60,000 (3) 11.2% $4.75 October 2006 179,235 454,217
</TABLE>
(1) Amounts for the executives shown in these columns have been derived by
multiplying the exercise price by the annual appreciation rate shown (compounded
for the term of the options), multiplying the result by the number of shares
covered by the options, and subtracting the aggregate exercise price of the
options. The dollar amounts set forth under this heading are the result of
calculations at the 5% and 10% rates set by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the Company's
stock price.
(2) Such options were granted in February 1996 and repriced in October 1996, at
the price equal to the fair market value of the Company's Common Stock on the
date of the repricing. Options to purchase 50,000 shares vested February 1996
and options to purchase 250,000 shares vest on a pro rata basis over a three
year period beginning the first anniversary of the date of grant.
(3) Such options were granted at a price equal to the fair market value of the
Company's Common Stock on the date of grant. Options become exercisable on a
pro-rata basis in six equal annual increments beginning on the date of grant.
5
<PAGE> 8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes information with respect to options held
by the executive officers named in the Summary Compensation Table, and the value
of the options held by such persons at the end of fiscal 1996.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
D. Bradly Olah 88,600 491,982 0/0 $0/0
Edward G. Stevenson --- --- 50,000/250,000 $56,250/281,250
Scott H. Shackelton --- --- 10,000/50,000 $11,250/56,250
</TABLE>
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of
Securities Market
Underlying Price of Exercise
Options/ Stock at Price at
SARs Time of Time of Length of Original
Repriced Repricing Repricing New Option Term
or or or Exercise Remaining at Date
Amended Amendment Amendment Price of Repricing or
Date (#) ($) ($) ($) Amendment
------- ---------- ---------- --------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Edward G. Stevenson 10/8/96 300,000 4.75 7.50 4.75 9 years/four mos.
Barry W. Fentz (1) 1/5/95 75,000 4.00 6.00 4.00 8 years/eight mos.
1/5/95 20,000 4.00 6.00 4.00 9 years/six mos.
</TABLE>
- ----------------
(1) Mr. Fentz resigned as Chief Operating Officer effective July 15, 1996.
6
<PAGE> 9
EMPLOYMENT AND CONSULTING AGREEMENTS
In December 1995, the Company and Mr. Olah entered into a consulting and
noncompetition agreement pursuant to which Mr. Olah would serve as a consultant
to the Company beginning on the date of his resignation through December 31,
1996. Mr. Olah resigned as Chief Executive Officer, President, Secretary and
director of the Company February 7, 1996. In connection with his services as a
consultant, Mr. Olah received $50,000 in compensation in addition to certain
other benefits provided to executive officers of the Company. In connection with
his agreement not to compete, Mr. Olah received an additional $100,000 in
compensation.
In February 1996, the Company entered into a three year employment
agreement with Edward G. Stevenson pursuant to which Mr. Stevenson serves the
Company as President and Chief Executive Officer. Pursuant to such agreement,
Mr. Stevenson receives an annual base salary of $250,000 and an annual bonus of
up to 25% of his base salary as determined by the Company's Board of Directors.
In addition, Mr. Stevenson will receive an annual bonus of up to 25% of his base
salary, the exact amount to be determined pursuant to a profit formula to be
determined by the Compensation Committee of the Company's Board of Directors.
Mr. Stevenson was also granted 300,000 options to purchase shares of the
Company's Common Stock at $7.50 per share. 50,000 of such options vested on
February 15, 1996 and the balance vest over three years on a pro-rata basis
beginning February 15, 1997. The exercise price of such stock options were
repriced in October 1996 to $4.75 per share. Upon termination "without cause,"
Mr. Stevenson is entitled to the greater of his base salary for 12 months or the
base salary for the balance of the remaining term of such employment agreement.
Mr. Stevenson has agreed not to compete with the Company while employed by the
Company and the period during which severance is paid, if any.
In June 1996, the Company entered into an employment agreement with
Scott H. Shackelton pursuant to which Mr. Shackelton serves the Company as Vice
President of Finance and Chief Financial Officer. The agreement has an initial
term of two years and provides for automatic renewal for successive one year
terms after June 10, 1998, unless employment has been terminated. Pursuant to
such agreement, Mr. Shackelton receives an annual base salary of $135,000 and
will receive an annual bonus or merit increase of up to 25% of his base salary,
the exact amount to be determined by the Company's Board of Directors. Mr.
Shackelton will also receive an additional bonus of up to 25% of his current
base salary each year, the exact amount to be determined pursuant to a profit
formula to be determined by the Compensation Committee of the Company's Board of
Directors. Mr. Shackelton was also granted 60,000 options to purchase shares of
the Company's Common Stock at $4.75 per share. Ten thousand (10,000) of such
options vested on August 21, 1996, and the balance of such options vest over
five years on a pro-rata basis beginning June 10, 1997. Upon termination
"without cause" Mr. Shackelton is entitled to the greater of his base salary for
twelve (12) months or the base salary for the remaining term of such employment
agreement. Mr. Shackelton has agreed not to compete with the Company while
employed by the Company and the period during which severance is paid, if any.
7
<PAGE> 10
DIRECTOR COMPENSATION
Directors received no fees for serving as directors in 1996. Beginning
in 1997, Directors who are not employees of the Company are paid $1,000 for each
Board meeting and $500 for each committee meeting they attend, provided that the
maximum paid to such director per day will be the greater amount due for any
single meeting in the case of multiple meetings attended. Mr. Paul A. Bible,
subject to shareholder approval, has been granted options to purchase 20,000
shares of the Company's Common Stock at an exercise price of $5.125, the fair
market price on the date of the grant, vesting in four equal installments over a
three-year period, with the first installment being on the date of grant, April
8, 1997. Directors who are employees of the Company are not paid fees or
additional remuneration for service as members of the Board or its Committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee presently consists of Messrs. Lyle
Berman and Paul A. Bible. Stanley M. Taube, who resigned as a Director of the
Company in April 1997, served on the Compensation Committee in fiscal 1996.
Messrs. Berman and Taube are directors and executive officers of Grand Casinos,
Inc.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally have
been made by the Compensation Committee of the Board of Directors. Each member
of the Compensation Committee is a non-employee director. All decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reviewed by the full Board of Directors. Pursuant to rules designed
to enhance disclosure of the Company's policies toward executive compensation,
set forth below is a report prepared by the Compensation Committee addressing
the compensation policies for the Company for the year ended December 31, 1996,
as they affected the Company's executive officers.
The Compensation Committee's executive compensation policies are
designed to provide competitive levels of compensation that integrate pay with
the Company's annual objectives and long-term goals, reward above-average
corporate performance, recognize individual achievements, and assist the Company
in attracting and retaining qualified executives. Executive compensation is set
at levels that the Compensation Committee believes to be consistent with others
in the Company's industry.
There are three elements in the Company's executive compensation
program, all determined by individual and corporate performance.
o Base salary compensation
o Annual incentive compensation
o Stock options
Total compensation opportunities are competitive with those offered by
employers of comparable size, growth and profitability in the Company's
industry.
Base salary compensation is determined by the potential impact the
individual has on the Company, the skills and experiences required by the job,
and the performance and potential of the incumbent in the job.
Annual incentive compensation for executives of the Company is based
primarily on corporate operating earnings and revenue growth and the Company's
positioning for
8
<PAGE> 11
future results, but also includes an overall assessment by the Compensation
Committee of executive management's performance, as well as market conditions.
Awards of stock grants under the Company's 1992 Stock Option and
Compensation Plan (the "Plan") are designed to promote the identity of long-term
interests between the Company's executives and its shareholders and assist in
the retention of executives. The Plan also permits the Committee to grant stock
options to key personnel. Options become exercisable based upon criteria
established by the Company.
The Compensation Committee surveys employee stock option programs of
companies with similar capitalization to the Company prior to recommending the
grant of options to executives. While the value realizable from exercisable
options is dependent upon the extent to which the Company's performance is
reflected in the market price of the Company's common stock at any particular
point in time, the decision as to whether such value will be realized in any
particular year is determined by each individual executive and not by the
Compensation Committee. Accordingly, when the Committee recommends that an
option be granted to an executive, that recommendation does not take into
account any gains realized that year by that executive as a result of his or her
individual decision to exercise an option granted in a previous year.
To date, no executive officer of the Company has received compensation
that exceeds $1 million per year.
In February 1996, the Company issued to Edward G. Stevenson, options to
purchase 300,000 shares of the Company's Common Stock exercisable at $7.50 per
share. In October 1996, the Company issued to Scott Shackelton options to
purchase 60,000 shares of the Company's Common Stock, exercisable at $4.75 per
share. In October 1996, the Compensation Committee, believing it is in the best
long-term interests of the Company's shareholders to provide incentives for key
employees, voted to reprice the exercise price of the stock options granted to
Edward G. Stevenson in February 1996 from $7.50 per share to $4.75 per share,
the fair market value on the date of repricing. The Compensation Committee
recognized that the per share market price declined significantly since these
options were issued in February and that repricing was appropriate.
LYLE BERMAN
STANLEY M. TAUBE
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include
in this Proxy Statement a line-graph presentation comparing cumulative,
five-year return to the Company's shareholders (based on appreciation of the
market price of the Company's Common Stock) on an indexed basis with (i) a broad
equity market index and (ii) an appropriate published industry or
line-of-business index, or peer group index constructed by the Company. The
following presentation compares the Company's Common Stock price in the period
from May 28, 1993 (the date of the Company's initial public offering) to
December 31, 1996, to the S&P 500 Stock Index and to a "peer group" index
created by the Company over the same period. The former "peer group" index
consisted of the common stock of: Bally Gaming International, Casino Data
Systems, GTECH Holdings Corp., International Game Technology, Mikohn Gaming
Corp., Video Lottery Technology and WMS Industries. The current "peer group"
consists of the common stock of the former peer group, except for GTECH Holdings
Corp. and Video Lottery Technology, which have been deleted and replaced by
Acres Gaming Inc. and Shuffle Master, Inc. The change of companies included in
the current peer group was made to more accurately provide a comparison of
performance with other companies which provide equipment to the gaming industry.
The Company believes that the companies deleted are predominantly involved in
the video lottery industry. The presentation assumes that the value of an
investment in each of the Company's Common Stock, the S&P 500 Index, and the
peer group index was $100 on May 28, 1993, and that any dividends paid were
reinvested in the same security.
[GRAPH HERE]
10
<PAGE> 13
TOTAL RETURN ANALYSIS
<TABLE>
<CAPTION>
5/28/93 7/30/93 7/29/94 12/30/94 12/29/95 12/31/96
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INNOVATIVE GAMING CORP. OF AMERICA $100.00 $87.72 $50.88 $27.63 $50.00 $41.23
PEER GROUP (NEW) $100.00 $88.07 $56.83 $52.03 $54.51 $66.34
S&P 500 $100.00 $99.89 $105.02 $106.62 $146.65 $180.29
PEER GROUP (OLD) $100.00 $88.77 $56.72 $57.07 $52.94 $68.19
</TABLE>
- -----------------
Source: Carl Thompson Associates www.ctaonline.com (303) 494-5472. Data from
Bloomberg Financial Markets
<PAGE> 14
CERTAIN TRANSACTIONS
In October 1994, Grand Casinos exchanged 1,025,000 shares of Common
Stock for 1,025,000 shares of Class B Non-Voting Common Stock and a warrant to
purchase 102,500 shares of Common Stock at an exercise price of $7.00 per share
(the "Warrant"). In March 1996, Grand Casinos converted 1,025,000 shares of
Class B Non-Voting Common Stock into 1,025,000 shares of the Company's Common
Stock. Lyle Berman, a director of the Company, is Chairman and Chief Executive
Officer, and a principal shareholder of Grand Casinos. Stanley M. Taube, who
resigned as a director of the Company in April 1997, is an executive officer,
director and a principal shareholder of Grand Casinos.
Mr. Berman may have conflicts of interest with respect to agreements
that the Company and Grand Casinos may enter into in the future, and with
respect to the sale of video gaming machines to casinos that compete with
casinos owned or managed by Grand Casinos.
PROPOSAL TO ADOPT THE
INNOVATIVE GAMING CORPORATION OF AMERICA
1997 DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Innovative Gaming Corporation of America 1997 Director Stock Option (the "1997
Director Plan"). The Board of Directors believes that the grant of stock options
is a desirable and useful means to strengthen further the non-employee
directors' linkage with shareholder interests.
The 1997 Director Plan provides that each director who is not an
employee of the Company or one of its subsidiaries (a "Non-Employee Director")
is entitled to receive a non-qualified stock option to purchase shares of the
Company's Common Stock at an option exercise price equal to the fair market
value of the shares on such grant date. The amount of shares granted pursuant to
the option and the vesting schedule of such option will be determined by the
Company's Board of Directors. Each option under the 1997 Director Plan will have
a ten-year term and will generally vest in equal annual installments as
determined by the Board of Directors.
The total number of shares of Common Stock that may be subject to
options issued pursuant to the 1997 Director Plan is 100,000. The number and the
terms of outstanding options are subject to automatic adjustment in the event of
reorganization, merger, consolidation, recapitalization, stock splits,
combination or exchange of shares, stock dividends or other similar events. The
1997 Director Plan will have a ten-year term and will be administered by the
Board of Directors.
The Company will receive no consideration upon the grant of options
under the 1997 Director Plan. The exercise price of an option must be paid in
full upon exercise. Payment may be made in cash, check or, in whole or in part,
in the Common Stock of the Company already owned by the person exercising the
option, valued at fair market value.
Under the 1997 Director Plan, Mr. Bible received, subject to shareholder
approval, a grant of options to purchase 20,000 shares of Common Stock at an
exercise price of $5.125, the fair market value of the Common Stock on the grant
date. This option has ten year term and becomes exercisable on a pro-rata basis
over a three year period in equal annual installments with the first installment
exercisable on April 8, 1997, the date of the grant. The options will not be
transferable except by will or the laws of
11
<PAGE> 15
descent and distribution and may be exercised during the option holder's
lifetime only by him.
Under current law, the federal income tax consequences to Non-Employee
Directors and the Company under the proposed 1997 Director Plan should generally
be as follows: A director to whom a non-qualified stock option is granted will
not recognize income at the time of grant of such option. When a director
exercises the stock option, the director will recognize ordinary compensation
income equal to the difference, if any, between the exercise price paid and the
fair market value, as of the date of option exercise, of the shares the director
receives. The tax basis of such shares to the director will equal the exercise
price paid plus the amount includeable in the director's gross income as
compensation, and the director's holding period for such shares will commence on
the day on which the director recognizes taxable income in respect of such
shares. Subject to applicable provisions of the Internal Revenue Code of 1986,
as amended, and regulations thereunder (the "Code"), the Company will generally
be entitled to a federal income tax deduction in respect of non-qualified stock
options in an amount equal to the ordinary compensation income recognized by the
director as described above.
The discussion set forth above does not purport to be a complete
analysis of the potential tax consequences relevant to recipients of options or
to the Company or to describe tax consequences based on particular
circumstances. It is based on federal income tax law and interpretational
authorities as of the date of this Proxy Statement, which are subject to change
at any time.
A complete copy of the 1997 Director Plan is set forth in Annex A to
this Proxy Statement, and the preceding discussion of the 1997 Director Plan is
qualified in its entirety by reference to it.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of
the outstanding shares of Common Stock of the Company present and entitled to
vote on the adoption and approval of the Director Plan or (b) a majority of the
voting power of the minimum number of shares entitled to vote that would
constitute a quorum for transaction of business at the meeting, is required for
adoption of the 1997 Director Plan. A shareholder who abstains with respect to
adoption of 1997 Director Plan is considered to be present and entitled to vote
on the Plan at the meeting, and is in effect casting a negative vote, but a
shareholder (including a broker) who does not give authority to a Proxy to vote,
or withholds authority to vote, on the adoption of the 1997 Director Plan shall
not be considered present and entitled to vote.
Unless instructed to the contrary, all proxies will be voted FOR the
approval and adoption of the 1997 Director Plan.
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PROPOSAL TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE UNDER
THE COMPANY'S 1992 STOCK OPTION AND COMPENSATION PLAN
On December 7, 1993, the Board of Directors of the Company unanimously
approved the 1992 Stock Option and Compensation Plan (the "Plan"). On November
14, 1994 and January 5, 1995, the Board of Directors and the Company's
shareholders, respectively, approved an amendment to the Plan to increase the
number of shares reserved for issuance by 200,000 shares. On March 4, 1996 and
May 28, 1996, the Board of Directors and the Company's Shareholders,
respectively, approved an amendment to the Plan to increase the number of shares
reserved for issuance by 445,000 shares. On April 11, 1997, the Board of
Directors approved an amendment to the Plan to increase the number of shares
reserved for issuance by 250,000 shares subject to approval by the Company's
shareholders. A complete text of the Plan is set forth as Annex B to this Proxy
Statement. The brief summary of the Plan which follows is qualified in its
entirety by reference to the complete text.
GENERAL
The purpose of the Plan is to increase shareholder value and to advance
the interests of the Company by furnishing a variety of economic incentives
("Incentives") designed to attract, retain and motivate employees of and
consultants to the Company.
The Plan provides that a committee (the "Committee") composed of at
least two members of the board of directors of the Company who have not received
Incentives under the Plan or any other plan of the Company for at least one year
may grant Incentives in the following forms: (a) stock options; (b) stock
appreciation rights; (c) stock awards; (d) restricted stock; (e) performance
shares; and (f) cash awards. Incentives may be granted to participants who are
employees of or consultants to the Company (including officers and directors of
the Company who are also employees of or consultants to the Company) selected
from time to time by the Committee.
The number of shares of Common Stock which may be issued under the Plan
if this amendment is approved may not exceed 1,350,000 shares, subject to
adjustment in the event of a merger, recapitalization or other corporate
restructuring. This represents approximately 20.8% of the outstanding shares of
Common Stock on April 10, 1997. On April 10, 1997, the closing sale price of the
Common Stock as reported by NASDAQ National Market was $ 5.375 per share.
STOCK OPTIONS
Under the Plan, the Committee may grant non-qualified and incentive
stock options to eligible employees to purchase shares of Common Stock from the
Company. The Plan confers on the Committee discretion, with respect to any such
stock option, to determine the number and purchase price of the shares subject
to the option, the term of each option and the time or times during its term
when the option becomes exercisable. The purchase price for incentive stock
options may not be less than the fair market value of the shares subject to the
option on the date of grant. The number of shares subject to an option will be
reduced proportionately to the extent that the optionee exercises a related SAR.
The term of a non-qualified option may not exceed 10 years and one day from the
date of grant and the term of an incentive stock option may not exceed 10 years
from the date of grant. Any option shall become immediately exercisable in the
event of specified changes in corporate ownership or control. The Committee may
accelerate the exercisability of any option or may determine to cancel stock
options in order to make a participant eligible for the grant of an option at a
lower price. The Committee may
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<PAGE> 17
approve the purchase by the Company of an unexercised stock option for the
difference between the exercise price and the fair market value of the shares
covered by such option.
The option price may be paid in cash, check, bank draft or by delivery
of shares of Common Stock valued at their fair market value at the time of
purchase or by withholding from the shares issuable upon exercise of the option
shares of Common Stock valued at their fair market value or as otherwise
authorized by the Committee.
In the event that an optionee ceases to be an employee of or consultant
to the Company for any reason, including death, any stock option or unexercised
portion thereof which was otherwise exercisable on the date of termination of
employment shall expire at the time or times established by the Committee.
STOCK APPRECIATION RIGHTS
A stock appreciation right or a "SAR" is a right to receive, without
payment to the Company, a number of shares, cash or any combination thereof, the
amount of which is determined pursuant to the formula described below. An SAR
may be granted with respect to any stock option granted under the Plan, or
alone, without reference to any stock option. An SAR granted with respect to any
stock option may be granted concurrently with the grant of such option or at
such later time as determined by the Committee and as to all or any portion of
the shares subject to the option.
The Plan confers on the Committee discretion to determine the number of
shares as to which an SAR will relate as well as the duration and exercisability
of an SAR. In the case of an SAR granted with respect to a stock option, the
number of shares of Common Stock to which the SAR pertains will be reduced in
the same proportion that the holder exercises the related option. The term of an
SAR may not exceed ten years and one day from the date of grant. Unless
otherwise provided by the Committee, an SAR will be exercisable for the same
time period as the stock option to which it relates is exercisable. Any SAR
shall become immediately exercisable in the event of specified changes in
corporate ownership or control. The Committee may accelerate the exercisability
of any SAR.
Upon exercise of an SAR, the holder is entitled to receive an amount
which is equal to the aggregate amount of the appreciation in the shares of
Common Stock as to which the SAR is exercised. For this purpose, the
"appreciation" in the shares consists of the amount by which the fair market
value of the shares of Common Stock on the exercise date exceeds (a) in the case
of an SAR related to a stock option, the purchase price of the shares under the
option or (b) in the case of an SAR granted alone, without reference to a
related stock option, an amount determined by the Committee at the time of
grant. The Committee may pay the amount of this appreciation to the holder of
the SAR by the delivery of Common Stock, cash, or any combination of Common
Stock and cash.
RESTRICTED STOCK
Restricted stock consists of the sale or transfer by the Company to an
eligible participant of one or more shares of Common Stock which are subject to
restrictions on their sale or other transfer by the employee. The price at which
restricted stock will be sold will be determined by the Committee, and it may
vary from time to time and among employees and may be less than the fair market
value of the shares at the date of sale. All shares of restricted stock will be
subject to such restrictions as the Committee may determine. Subject to these
restrictions and the other requirements of the Plan, a participant receiving
restricted stock shall have all of the rights of a shareholder as to those
shares.
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STOCK AWARD
Stock awards consist of the transfer by the Company to an eligible
participant of shares of Common Stock, without payment, as additional
compensation for services to the Company. The number of shares transferred
pursuant to any stock award will be determined by the Committee.
PERFORMANCE SHARES
Performance shares consist of the grant by the Company to an eligible
participant of a contingent right to receive cash or payment of shares of Common
Stock. The performance shares shall be paid in shares of Common Stock to the
extent performance objectives set forth in the grant are achieved. The number of
shares granted and the performance criteria will be determined by the Committee.
CASH AWARDS
A cash award consists of a monetary payment made by the Company to an
eligible participant as additional compensation for his services to the Company.
Payment may depend on the achievement of specified performance objectives. The
amount of any monetary payment constituting a cash award shall be determined by
the Committee.
NON-TRANSFERABILITY OF MOST INCENTIVES
No stock option, an SAR, performance share or restricted stock granted
under the Plan will be transferable by its holder, except in the event of the
holder's death, by will or the laws of descent and distribution. During an
employee's lifetime, an Incentive may be exercised only by him or her or by his
or her guardian or legal representative.
AMENDMENT OF THE PLAN
The Board of Directors may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance may, subject to adjustment in the
event of a merger, recapitalization, or other corporate restructuring, (a)
change or impair, without the consent of the recipient thereof, an Incentive
previously granted, (b) materially increase the maximum number of shares of
Common Stock which may be issued to all employees under the Plan, (c) materially
change or expand the types of Incentives that may be granted under the Plan, (d)
materially modify the requirements as to eligibility for participation in the
Plan, or (e) materially increase the benefits accruing to participants. Certain
Plan amendments require shareholder approval, including amendments which would
materially increase benefits accruing to participants, increase the number of
securities issuable under the Plan, or change the requirements for eligibility
under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth certain United States income tax
considerations in connection with the ownership of Common Stock. These tax
considerations are stated in general terms and are based on the Internal Revenue
Code of 1986, as amended, regulations thereunder and judicial and administrative
interpretations thereof. This discussion does not address state or local tax
considerations with respect to the ownership of Common Stock. Moreover, the tax
considerations relevant to ownership of the Common Stock may vary depending on a
holder's particular status.
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<PAGE> 19
Under existing Federal income tax provisions, a participant who receives
a stock option or performance shares or an SAR under the Plan or who purchases
or receives shares of restricted stock under the Plan which are subject to
restrictions which create a "substantial risk of forfeiture" (within the meaning
of section 83 of the Internal Revenue Code) will not normally realize any
income, nor will the Company normally receive any deduction for federal income
tax purposes in the year such Incentive is granted. A participant who receives a
stock award under the Plan consisting of shares of Common Stock will realize
ordinary income in the year of the award in an amount equal to the fair market
value of the shares of Common Stock covered by the award on the date it is made,
and the Company will be entitled to a deduction equal to the amount the
participant is required to treat as ordinary income. A participant who receives
a cash award will realize ordinary income in the year the award is paid equal to
the amount thereof, and the amount of the cash will be deductible by the
Company.
When a non-qualified stock option granted pursuant to the Plan is
exercised, the participant will realize ordinary income measured by the
difference between the aggregate purchase price of the shares of Common Stock as
to which the option is exercised and the aggregate fair market value of shares
of the Common Stock on the exercise date, and the Company will be entitled to a
deduction in the year the option is exercised equal to the amount the
participant is required to treat as ordinary income.
Options which qualify as incentive stock options are entitled to special
tax treatment. Under existing federal income tax law, if shares purchased
pursuant to the exercise of such an option are not disposed of by the optionee
within two years from the date of granting of the option or within one year
after the transfer of the shares to the optionee, whichever is longer, then (i)
no income will be recognized to the optionee upon the exercise of the option;
(ii) any gain or loss will be recognized to the optionee only upon ultimate
disposition of the shares and, assuming the shares constitute capital assets in
the optionee's hands, will be treated as long-term capital gain or loss; (iii)
the optionee's basis in the shares purchased will be equal to the amount of cash
paid for such shares; and (iv) the Company will not be entitled to a federal
income tax deduction in connection with the exercise of the option. The Company
understands that the difference between the option price and the fair market
value of the shares acquired upon exercise of an incentive stock option will be
treated as an "item of tax preference" for purposes of the alternative minimum
tax. In addition, incentive stock options exercised more than three months after
retirement are treated as non-qualified options.
The Company further understands that if the optionee disposes of the
shares acquired by exercise of an incentive stock option before the expiration
of the holding period described above, the optionee must treat as ordinary
income in the year of that disposition an amount equal to the difference between
the optionee's basis in the shares and the lesser of the fair market value of
the shares on the date of exercise or the selling price. In addition, the
Company will be entitled to a deduction equal to the amount the participant is
required to treat as ordinary income.
If the exercise price of an option is paid by surrender of previously
owned shares, the basis of the shares received in replacement of the previously
owned shares is carried over. If the option is a nonstatutory option, the gain
recognized on exercise is added to the basis. If the option is an incentive
stock option, the optionee will recognize gain if the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the applicable holding period. This gain will be added to the basis of
the shares received in replacement of the previously owned shares.
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<PAGE> 20
When a stock appreciation right granted pursuant to the Plan is
exercised, the participant will realize ordinary income in the year the right is
exercised equal to the value of the appreciation which he is entitled to receive
pursuant to the formula described above, and the Company will be entitled to a
deduction in the same year and in the same amount.
A participant who receives restricted stock or performance shares
subject to restrictions which create a "substantial risk of forfeiture" (within
the meaning of section 83 of the Internal Revenue Code) will normally realize
taxable income on the date the shares become transferable or no longer subject
to substantial risk of forfeiture or on the date of their earlier disposition.
The amount of such taxable income will be equal to the amount by which the fair
market value of the shares of Common Stock on the date such restrictions lapse
(or any earlier date on which the shares are disposed of) exceeds their purchase
price, if any. A participant may elect, however, to include in income in the
year of purchase or grant the excess of the fair market value of the shares of
Common Stock (without regard to any restrictions) on the date of purchase or
grant over its purchase price. The Company will be entitled to a deduction for
compensation paid in the same year and in the same amount as income is realized
by the employee.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of
the outstanding shares of Common Stock of the Company present and entitled to
vote on the proposed Plan amendment or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required to approve the proposal to
increase the number of shares of common stock reserved for issuance under the
Plan. A shareholder who abstains with respect to the proposed Plan amendment is
considered to be present and entitled to vote at the meeting, and is in effect
casting a negative vote, but a shareholder (including a broker) who does not
give authority to a Proxy to vote on the proposed Plan amendment shall not be
considered present and entitled to vote on the proposed amendment.
All shares represented by proxies will be voted FOR approval of the proposed
Plan amendment unless a contrary choice is specified.
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OTHER MATTERS
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held two meetings during 1996. The Company has a
Compensation Committee and an Audit Committee, but does not have a nominating
committee of the Board of Directors.
The Company's Compensation Committee, which consisted of Messrs. Lyle
Berman and Stanley M. Taube during 1996, did not meet during 1996, but did take
action pursuant to written actions during 1996. The Compensation Committee
administers the 1992 Stock Option and Compensation Plan. The Company's Audit
Committee, which consisted of Messrs. Berman and Taube during 1996, did not meet
during 1996, but did take action pursuant to written actions during 1996. In
April 1997, Mr. Taube resigned from the Board of Directors, the Compensation
Committee and the Audit Committee. In April 1997, Mr. Paul A. Bible was
appointed to the Board of Directors, the Compensation Committee and the Audit
Committee.
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee,
has selected Arthur Andersen LLP as independent public accountants for fiscal
1997. Arthur Andersen LLP has been the independent public accountants for the
Company since May 26, 1996. A representative of Arthur Andersen LLP is expected
to attend the meeting and to have an opportunity to make a statement and respond
to appropriate questions from shareholders.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and NASDAQ. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Company, or written representations that no Forms 5 were
required, the Company believes that during the year ended December 31, 1996 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
PROPOSALS OF SHAREHOLDERS
All proposals of shareholders intended to be presented at the 1998
Annual Meeting of Shareholders of the Company must be received by the Company at
its executive offices on or before December 25, 1997.
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the
proxy, Proxy Statement, Annual Report and other material which may be sent to
the shareholders in connection with this solicitation. Brokerage houses and
other custodians, nominees and fiduciaries may be requested to forward
soliciting material to the beneficial owners of stock, in which case they will
be reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail, but, in addition
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officers and regular employees of the Company may solicit proxies personally, by
telephone, by telegram or by special letter.
The Board of Directors does not intend to present to the meeting any
other matter not referred to above and does not presently know of any matters
that may be presented to the meeting by others. However, if other matters come
before the meeting, it is the intent of the persons named in the enclosed proxy
to vote the proxy in accordance with their best judgment.
By Order of the Board of Directors
Innovative Gaming Corporation of America
Scott H. Shackelton
Secretary
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ANNEX A
INNOVATIVE GAMING CORPORATION OF AMERICA
1997 DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of the Innovative Gaming Corporation of America
1997 Director Stock Option Plan (the "Plan") is to advance the interests of
Innovative Gaming Corporation of America (the "Company") and its shareholders by
encouraging share ownership by members of the Board of Directors of the Company
(the "Board") who are not employees of the Company or any of its subsidiaries,
in order to promote long-term shareholder value through continuing ownership of
the Company's common stock.
2. ADMINISTRATION. The plan shall be administered by the Board. The
Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreement embodying awards of nonqualified stock
options made under the Plan ("Options"). The Board shall, subject to the
provisions of the Plan, grant Options under the Plan and shall have the power to
construe the Plan, to determine all questions arising thereunder and to adopt
and amend such rules and regulations for the administration of the Plan as it
may deem desirable. Any decisions of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or any other officer of the Company to
execute and deliver documents on behalf of the Board. No member of the Board
shall be liable for anything done or omitted to be done by him or by any other
member of the Board in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute.
3. PARTICIPATION. Each member of the Board who is not an employee of the
Company or any of its subsidiaries (a "Non-Employee Director") shall be eligible
to receive an Option in accordance with Paragraph 5 below.
4. AWARDS UNDER THE PLAN.
(a) Awards under the Plan shall include only Options, which are rights to
purchase common stock of the Company having a par value of $0.01 per share (the
"Common Stock"). Such Options are subject to the terms, conditions and
restrictions specified in Paragraph 5 below.
(b) There may be issued under the Plan pursuant to the exercise of Options
an aggregate of not more than 100,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 6 below. If any Option is canceled,
terminates or expires unexercised, in whole or in part, any shares of Common
Stock that would otherwise have been issuable pursuant thereto will be available
for issuance under new Options.
(c) A Non-Employee Director to whom an Option is granted (and any person
succeeding to such a Non-Employee Director's rights pursuant to the Plan) shall
have no rights as a shareholder with respect to any Common Stock issuable
pursuant to any such Option until the date of the issuance of a stock
certificate to him for such shares. Except as provided in Paragraph 6 below, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other property)
for which the record date is prior to the date such stock certificate is issued.
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5. NONQUALIFIED STOCK OPTIONS. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions:
(a) The Option exercise price shall be the "Fair Market Value" (as herein
defined) of the Common Stock subject to such Option on the date the Option is
granted. Fair Market Value shall be the closing sales price of a share of Common
Stock on the date of grant as reported on the Nasdaq National Market or, if the
Nasdaq National Market is closed on that date, on the last preceding date on
which the Nasdaq National Market was open for trading, but in no event will such
Option exercise price be less than the par value of the Common Stock.
(b) The Board shall determine the number of shares of Common Stock subject
to each Option granted to Non-Employee Directors and, subject to Section 5(d)
hereof, the vesting schedule of each such Option. Notwithstanding the foregoing,
once such Options become outstanding, a Non-Employee Director will still be
entitled to the anti-dilution adjustments provided for in Section 6 hereof.
(c) The Option shall not be transferable by the optionee otherwise than by
will or the laws of descent and distribution, and shall be exercisable during
his lifetime only by him.
(d) Options shall not be exercisable:
(i) Except pursuant to the vesting schedule established by the Board
of Directors. Notwithstanding anything to the contrary herein, an Option shall
automatically become immediately exercisable in full; (i) upon the removal of
the Non-Employee Director from the Board without cause; or (ii) in the event of
a "change in control" of the Company, as defined in any existing agreements
between the Company and its senior officers;
(ii) unless payment in full is made for the shares of Common Stock
being acquired thereunder at the time of exercise, such payment shall be made in
United States dollars by cash or check, or in lieu thereof, by tendering to the
Company Common Stock owned by the person exercising the Option and having a Fair
Market Value equal to the cash exercise price applicable to such Option, or by a
combination of United States dollars and Common Stock as aforesaid; and
(iii) unless the person exercising the Option has been at all times
during the period beginning with the date of grant of the Option and ending on
the date of such exercise, a Non-Employee Director of the Company, except that
(A) if such person shall cease to be such a Non-Employee
Director for reasons other than death, while holding an Option that has not
expired and has not been fully exercised, such person may, at any time within
three years of the date he ceased to be a Non-Employee Director (but in no event
after the Option has expired under the provisions of subparagraph 5(d)(i)
above), exercise the Option with respect to any Common Stock as to which he
could have exercised on the date he ceased to be such a Non-Employee Director;
or
(B) if any person to whom an Option has been granted shall die
holding an Option that has not expired and has not been fully exercised, his
executors, administrators, heirs or distributees, as the case may be, may, at
any time within one year after the date of such death (but in no event after the
Option has expired under the
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provisions of subparagraph 5(d)(i) above), exercise the Option with respect to
any shares subject to the Option.
6. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Stock of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of a significant portion of its assets, any
distribution to shareholders other than a normal cash dividend, or other
extraordinary or unusual event, the number or kind of shares that may be issued
under the Plan pursuant to subparagraph 4(b) above, and the number or kind of
shares subject to, and the Option price per share under, all outstanding Options
shall be automatically adjusted so that the proportionate interest of the
participant shall be maintained as before the occurrence of such event; such
adjustment in outstanding Options shall be made without change in the total
Option exercise price applicable to the unexercised portion of such Options and
with a corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.
7. MISCELLANEOUS PROVISIONS.
(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Company.
(b) A participant's rights and interest under the Plan may not be assigned
or transferred, hypothecated or encumbered in whole or in part either directly
or by operation of law or otherwise (except in the event of a participant's
death, by will or the laws of descent and distribution), including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner, and no such right or interest of any participant in the
Plan shall be subject to any obligation or liability of such participant.
(c) Common Stock shall not be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities exchange and
other applicable laws and requirements.
(d) It shall be a condition to the obligation of the Company to issue Common
Stock upon exercise of an Option, that the participant (or any beneficiary or
person entitled to act under subparagraph 5(d)(iii)(B) above) pay to the
Company, upon its demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold federal, state, local or foreign
income or other taxes. If the amount requested is not paid, the Company may
refuse to issue such Common Stock.
(e) The expenses of the Plan shall be borne by the Company.
(f) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company or the Board.
(g) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Options hereunder or any Common
Stock issued
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pursuant hereto as may be required by Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, or any other applicable statute, rule or
regulation.
8. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and from
time to time by the Board as the Board shall deem advisable; provided, however,
that no amendment shall become effective without shareholder approval if such
shareholder approval is required by law, rule or regulation, and in no event
shall the Plan be amended more than once every six months, other than to comport
with changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act or the rules thereunder. No amendment of the Plan
shall materially and adversely affect any right of any participant with respect
to any Option theretofore granted without such participant's written consent.
9. TERMINATION. This Plan shall terminate upon the earlier of the following
dates or events to occur upon the adoption of a resolution of the Board
terminating the Plan or ten years from the date the Plan is initially approved
and adopted by the shareholders of the Company. No termination of the Plan shall
materially and adversely affect any of the rights or obligations of any person,
without his consent, under any Option theretofore granted under the Plan.
10. EFFECTIVE DATE OF PLAN. The Plan will become effective on the date that
it is approved by the affirmative vote of the holders of the greater of (a) a
majority of the outstanding shares of Common Stock of the Company present and
entitled to vote or (b) a majority of the voting power of the minimum number of
shares entitled to vote that would constitute a quorum for transaction of
business at the Company's 1997 Annual Meeting of Shareholders.
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ANNEX B
INNOVATIVE GAMING CORPORATION OF AMERICA
1992 STOCK OPTION AND
COMPENSATION PLAN, AS AMENDED
1. Purpose. The purpose of the 1992 Stock Option and Compensation Plan
(the "Plan") of Innovative Gaming Corporation of America (the "Company") is to
increase stockholder value and to advance the interests of the Company by
furnishing a variety of economic incentives ("Incentives") designed to attract,
retain and motivate employees and certain key consultants. Incentives may
consist of opportunities to purchase or receive shares of Common Stock, $0.01
par value, of the Company ("Common Stock"), monetary payments or both on terms
determined under this Plan.
2. Administration. The Plan shall be administered by the stock option
committee (the "Committee") of the board of directors of the Company. The
Committee shall consist of not less than two directors of the Company and shall
be appointed from time to time by the board of directors of the Company. Each
member of the Committee shall be a "disinterested person" within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934, and the regulations
promulgated thereunder (the "1934 Act"). The board of directors of the Company
may from time to time appoint members of the Committee in substitution for, or
in addition to, members previously appointed, and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such times and places as it shall deem
advisable. A majority of the Committee's members shall constitute a quorum. All
action of the Committee shall be taken by the majority of its members. Any
action may be taken by a written instrument signed by majority of the members
and actions so taken shall be fully effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable. The
Committee shall have complete authority to award Incentives under the Plan, to
interpret the Plan, and to make any other determination which it believes
necessary and advisable for the proper administration of the Plan. The
Committee's decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants.
3. Eligible Participants. Employees of or consultants to the Company or
its subsidiaries or affiliates (including officers and directors who are
employees of or consultants to the Company or its subsidiaries or affiliates),
shall become eligible to receive Incentives under the Plan when designated by
the Committee. Participants may be designated individually or by groups or
categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries or affiliates and
any performance objectives relating to such officers must be approved by the
Committee. Participation by others and any performance objectives relating to
others may be approved by groups or categories (for example, by pay grade) and
authority to designate participants who are not officers and to set or modify
such targets may be delegated.
4. Types of Incentives. Incentives under the Plan may be granted in any
one or a combination of the following forms: (a) incentive stock options and
non-statutory stock options (section 6); (b) stock appreciation rights ("SARs")
(section 7); (c) stock awards (section 8); (d) restricted stock (section 8); (e)
performance shares (section 9); and (f) cash awards (section 10).
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<PAGE> 28
5. Shares Subject to the Plan.
5.1. Number of Shares. Subject to adjustment as provided in
Section 11.6, the number of shares of Common Stock which may be issued under the
Plan shall not exceed 1,350,000 shares of Common Stock, subject to approval by
the shareholders of the Company at the next annual meeting of shareholders.
5.2. Cancellation. To the extent that cash in lieu of shares of
Common Stock is delivered upon the exercise of a SAR pursuant to Section 7.4,
the Company shall be deemed, for purposes of applying the limitation on the
number of shares, to have issued the greater of the number of shares of Common
Stock which it was entitled to issue upon such exercise or on the exercise of
any related option. In the event that a stock option or SAR granted hereunder
expires or is terminated or canceled unexercised as to any shares of Common
Stock, such shares may again be issued under the Plan either pursuant to stock
options, SARs or otherwise. In the event that shares of Common Stock are issued
as restricted stock or pursuant to a stock award and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance thereof,
such forfeited and reacquired shares may again be issued under the Plan, either
as restricted stock, pursuant to stock awards or otherwise. The Committee may
also determine to cancel, and agree to the cancellation of, stock options in
order to make a participant eligible for the grant of a stock option at a lower
price than the option to be canceled.
5.3. Type of Common Stock. Common Stock issued under the Plan in
connection with stock options, SARs, performance shares, restricted stock or
stock awards, may be authorized and unissued shares.
6. Stock Options. A stock option is a right to purchase shares of Common
Stock from the Company. Each stock option granted by the Committee under this
Plan shall be subject to the following terms and conditions:
6.1. Price. The option price per share shall be determined by the
Committee, subject to adjustment under Section 11.6.
6.2. Number. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to adjustment as provided
in Section 11.6. The number of shares of Common Stock subject to a stock option
shall be reduced in the same proportion that the holder thereof exercises a SAR
if any SAR is granted in conjunction with or related to the stock option.
6.3. Duration and Time for Exercise. Subject to earlier
termination as provided in Section 11.4, the term of each stock option shall be
determined by the Committee but shall not exceed ten years and one day from the
date of grant. Each stock option shall become exercisable at such time or times
during its term as shall be determined by the Committee at the time of grant.
The Committee may accelerate the exercisability of any stock option. Subject to
the foregoing and with the approval of the Committee, all or any part of the
shares of Common Stock with respect to which the right to purchase has accrued
may be purchased by the Company at the time of such accrual or at any time or
times thereafter during the term of the option.
6.4. Manner of Exercise. A stock option may be exercised, in
whole or in part, by giving written notice to the Company, specifying the number
of shares of Common Stock to be purchased and accompanied by the full purchase
price for such shares. The option price shall be payable in United States
dollars upon exercise of the option and may be paid by cash; uncertified or
certified check; bank draft; by delivery of
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<PAGE> 29
shares of Common Stock in payment of all or any part of the option price, which
shares shall be valued for this purpose at the Fair Market Value on the date
such option is exercised; by instructing the Company to withhold from the shares
of Common Stock issuable upon exercise of the stock option shares of Common
Stock in payment of all or any part of the option price, which shares shall be
valued for this purpose at the Fair Market Value or in such other manner as may
be authorized from time to time by the Committee. Prior to the issuance of
shares of Common Stock upon the exercise of a stock option, a participant shall
have no rights as a stockholder.
6.5. Incentive Stock Options. Notwithstanding anything in the
Plan to the contrary, the following additional provisions shall apply to the
grant of stock options which are intended to qualify as Incentive Stock Options
(as such term is defined in Section 422A of the Internal Revenue Code of 1986,
as amended):
(a) The aggregate Fair Market Value (determined as of the
time the option is granted) of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any participant
during any calendar year (under all of the Company's plans) shall not exceed
$100,000.
(b) Any Incentive Stock Option certificate authorized
under the Plan shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain all provisions
required in order to qualify the options as Incentive Stock Options.
(c) All Incentive Stock Options must be granted within ten
years from the earlier of the date on which this Plan was adopted by board of
directors or the date this Plan was approved by the stockholders.
(d) Unless sooner exercised, all Incentive Stock Options
shall expire no later than 10 years after the date of grant.
(e) The option price for Incentive Stock Options shall be
not less than the Fair Market Value of the Common Stock subject to the option on
the date of grant.
(f) No Incentive Stock Options shall be granted to any
participant who, at the time such option is granted, would own (within the
meaning of Section 422A of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the employer corporation or of
its parent or subsidiary corporation.
7. Stock Appreciation Rights. A SAR is a right to receive, without
payment to the Company, a number of shares of Common Stock, cash or any
combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 7.4. A SAR may be granted (a) with respect to any stock
option granted under this Plan, either concurrently with the grant of such stock
option or at such later time as determined by the Committee (as to all or any
portion of the shares of Common Stock subject to the stock option), or (b)
alone, without reference to any related stock option. Each SAR granted by the
Committee under this Plan shall be subject to the following terms and
conditions:
7.1. Number. Each SAR granted to any participant shall relate to
such number of shares of Common Stock as shall be determined by the Committee,
subject to adjustment as provided in Section 11.6. In the case of a SAR granted
with respect to a stock option, the number of shares of Common Stock to which
the SAR pertains shall be reduced in the same proportion that the holder of the
option exercises the related stock
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<PAGE> 30
option.
7.2. Duration. Subject to earlier termination as provided in
Section 11.4, the term of each SAR shall be determined by the Committee but
shall not exceed ten years and one day from the date of grant. Unless otherwise
provided by the Committee, each SAR shall become exercisable at such time or
times, to such extent and upon such conditions as the stock option, if any, to
which it relates is exercisable. The Committee may in its discretion accelerate
the exercisability of any SAR.
7.3. Exercise. A SAR may be exercised, in whole or in part, by
giving written notice to the Company, specifying the number of SARs which the
holder wishes to exercise. Upon receipt of such written notice, the Company
shall, within 90 days thereafter, deliver to the exercising holder certificates
for the shares of Common Stock or cash or both, as determined by the Committee,
to which the holder is entitled pursuant to Section 7.4.
7.4. Payment. Subject to the right of the Committee to deliver
cash in lieu of shares of Common Stock (which, as it pertains to officers and
directors of the Company, shall comply with all requirements of the 1934 Act),
the number of shares of Common Stock which shall be issuable upon the exercise
of a SAR shall be determined by dividing:
(a) the number of shares of Common Stock as to which the
SAR is exercised multiplied by the amount of the appreciation in such shares
(for this purpose, the "appreciation" shall be the amount by which the Fair
Market Value of the shares of Common Stock subject to the SAR on the exercise
date exceeds (1) in the case of a SAR related to a stock option, the purchase
price of the shares of Common Stock under the stock option or (2) in the case of
a SAR granted alone, without reference to a related stock option, an amount
which shall be determined by the Committee at the time of grant, subject to
adjustment under Section 11.6); by
(b) the Fair Market Value of a share of Common Stock on
the exercise date.
In lieu of issuing shares of Common Stock upon the exercise of a
SAR, the Committee may elect to pay the holder of the SAR cash equal to the Fair
Market Value on the exercise date of any or all of the shares which would
otherwise be issuable. No fractional shares of Common Stock shall be issued upon
the exercise of a SAR; instead, the holder of the SAR shall be entitled to
receive a cash adjustment equal to the same fraction of the Fair Market Value of
a share of Common Stock on the exercise date or to purchase the portion
necessary to make a whole share at its Fair Market Value on the date of
exercise.
8. Stock Awards and Restricted Stock. A stock award consists of the
transfer by the Company to a participant of shares of Common Stock, without
other payment therefor, as additional compensation for services to the Company.
A share of restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:
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<PAGE> 31
8.1. Number of Shares. The number of shares to be transferred or
sold by the Company to a participant pursuant to a stock award or as restricted
stock shall be determined by the Committee.
8.2. Sale Price. The Committee shall determine the price, if any,
at which shares of restricted stock shall be sold to a participant, which may
vary from time to time and among participants and which may be below the Fair
Market Value of such shares of Common Stock at the date of sale.
8.3. Restrictions. All shares of restricted stock transferred or
sold hereunder shall be subject to such restrictions as the Committee may
determine, including, without limitation any or all of the following:
(a) a prohibition against the sale, transfer, pledge or
other encumbrance of the shares of restricted stock, such prohibition to lapse
at such time or times as the Committee shall determine (whether in annual or
more frequent installments, at the time of the death, disability or retirement
of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of restricted
stock forfeit, or (in the case of shares sold to a participant) resell back to
the Company at his or her cost, all or a part of such shares in the event of
termination of his or her employment or consulting engagement during any period
in which such shares are subject to restrictions;
(c) such other conditions or restrictions as the Committee
may deem advisable.
8.4. Escrow. In order to enforce the restrictions imposed by the
Committee pursuant to Section 8.3, the participant receiving restricted stock
shall enter into an agreement with the Company setting forth the conditions of
the grant. Shares of restricted stock shall be registered in the name of the
participant and deposited, together with a stock power endorsed in blank, with
the Company. Each such certificate shall bear a legend in substantially the
following form:
The transferability of this certificate and the shares of
Common Stock represented by it are subject to the terms and conditions
(including conditions of forfeiture) contained in the 1992 Stock Option and
Compensation Plan of Innovative Gaming Corporation of America, Inc.(the
"Company"), and an agreement entered into between the registered owner and the
Company. A copy of the Plan and the agreement is on file in the office of the
secretary of the Company.
8.5. End of Restrictions. Subject to Section 11.5, at the end of
any time period during which the shares of restricted stock are subject to
forfeiture and restrictions on transfer, such shares will be delivered free of
all restrictions to the participant or to the participant's legal
representative, beneficiary or heir.
8.6. Stockholder. Subject to the terms and conditions of the
Plan, each participant receiving restricted stock shall have all the rights of a
stockholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including without
limitation, the right to vote such shares. Dividends paid in cash or property
other than Common Stock with respect to shares of restricted stock shall be paid
to the participant currently.
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<PAGE> 32
9. Performance Shares. A performance share consists of an award which
shall be paid in shares of Common Stock, as described below. The grant of
performance share shall be subject to such terms and conditions as the Committee
deems appropriate, including the following:
9.1. Performance Objectives. Each performance share will be
subject to performance objectives for the Company or one of its operating units
to be achieved by the end of a specified period. The number of performance
shares granted shall be determined by the Committee and may be subject to such
terms and conditions, as the Committee shall determine. If the performance
objectives are achieved, each participant will be paid in shares of Common Stock
or cash. If such objectives are not met, each grant of performance shares may
provide for lesser payments in accordance with formulas established in the
award.
9.2. Not Stockholder. The grant of performance shares to a
participant shall not create any rights in such participant as a stockholder of
the Company, until the payment of shares of Common Stock with respect to an
award.
9.3. No Adjustments. No adjustment shall be made in performance
shares granted on account of cash dividends which may be paid or other rights
which may be issued to the holders of Common Stock prior to the end of any
period for which performance objectives were established.
9.4. Expiration of Performance Share. If any participant's
employment or consulting engagement with the Company is terminated for any
reason other than normal retirement, death or disability prior to the
achievement of the participant's stated performance objectives, all the
participant's rights on the performance shares shall expire and terminate unless
otherwise determined by the Committee. In the event of termination by reason of
death, disability, or normal retirement, the Committee, in its own discretion
may determine what portions, if any, of the performance shares should be paid to
the participant.
10. Cash Awards. A cash award consists of a monetary payment made by the
Company to a participant as additional compensation for his or her services to
the Company. Payment of a cash award will normally depend on achievement of
performance objectives by the Company or by individuals. The amount of any
monetary payment constituting a cash award shall be determined by the Committee
in its sole discretion. Cash awards may be subject to other terms and
conditions, which may vary from time to time and among participants, as the
Committee determines to be appropriate.
11. General.
11.1. Effective Date. The Plan will become effective upon its
adoption by unanimous written action by all holders of shares of Common Stock.
Unless approved within one year after the date of the Plan's adoption by the
board of directors, the Plan shall not be effective for any purpose.
11.2. Duration. The Plan shall remain in effect until all
Incentives granted under the Plan have either been satisfied by the issuance of
shares of Common Stock or the payment of cash or been terminated under the terms
of the Plan and all restrictions imposed on shares of Common Stock in connection
with their issuance under the Plan have lapsed. No Incentives may be granted
under the Plan after the tenth anniversary of the date the Plan is approved by
the stockholders of the Company.
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<PAGE> 33
11.3. Non-transferability of Incentives. No stock option, SAR,
restricted stock or performance award may be transferred, pledged or assigned by
the holder thereof except, in the event of the holder's death, by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986, as amended, or Title I of
the Employee Retirement Income Security Act, or the rules thereunder, and the
Company shall not be required to recognize any attempted assignment of such
rights by any participant. During a participant's lifetime, an Incentive may be
exercised only by him or her or by his or her guardian or legal representative.
11.4. Effect of Termination or Death. In the event that a
participant ceases to be an employee of or consultant to the Company for any
reason, including death, any Incentives may be exercised or shall expire at such
times as may be determined by the Committee.
11.5. Additional Condition. Notwithstanding anything in this Plan
to the contrary: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the issuance
of any shares of Common Stock pursuant to any Incentive, require the recipient
of the Incentive, as a condition to the receipt thereof or to the receipt of
shares of Common Stock issued pursuant thereto, to deliver to the Company a
written representation of present intention to acquire the Incentive or the
shares of Common Stock issued pursuant thereto for his or her own account for
investment and not for distribution; and (b) if at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Incentive or the
shares of Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with the award of any Incentive,
the issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be awarded or such
shares of Common Stock shall not be issued or such restrictions shall not be
removed, as the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
11.6. Adjustment. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
shall be substituted for each of the shares of Common Stock then subject to the
Plan, including shares subject to restrictions, options, or achievement of
performance share objectives, the number and kind of shares of stock or other
securities to which the holders of the shares of Common Stock will be entitled
pursuant to the transaction. In the event of any recapitalization, stock
dividend, stock split, combination of shares or other change in the Common
Stock, the number of shares of Common Stock then subject to the Plan, including
shares subject to restrictions, options or achievements of performance shares,
shall be adjusted in proportion to the change in outstanding shares of Common
Stock. In the event of any such adjustments, the purchase price of any option,
the performance objectives of any Incentive, and the shares of Common Stock
issuable pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the Committee, to provide participants with
the same relative rights before and after such adjustment.
11.7. Incentive Plans and Agreements. Except in the case of stock
awards or cash awards, the terms of each Incentive shall be stated in a plan or
agreement approved by the Committee. The Committee may also determine to enter
into agreements with holders of options to reclassify or convert certain
outstanding options, within the terms of the Plan, as Incentive Stock Options or
as non-statutory stock options
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<PAGE> 34
and in order to eliminate SARs with respect to all or part of such options and
any other previously issued options.
11.8. Withholding.
(a) The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition of payment, any taxes
required by law to be withheld. At any time when a participant is required to
pay to the Company an amount required to be withheld under applicable income tax
laws in connection with a distribution of Common Stock or upon exercise of an
option or SAR, the participant may satisfy this obligation in whole or in part
by electing (the "Election") to have the Company withhold from the distribution
shares of Common Stock having a value up to the amount required to be withheld.
The value of the shares to be withheld shall be based on the Fair Market Value
of the Common Stock on the date that the amount of tax to be withheld shall be
determined ("Tax Date").
(b) Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or terminate the right to
make Elections, or may provide with respect to any Incentive that the right to
make Elections shall not apply to such Incentive. An Election is irrevocable.
(c) If a participant is an officer or director of the
Company within the meaning of Section 16 of the 1934 Act, then an Election must
comply with all of the requirements of the 1934 Act.
11.9. No Continued Employment, Engagement or Right to Corporate
Assets. No participant under the Plan shall have any right, because of his or
her participation, to continue in the employ of, or to continue his or her
consulting engagement for, the Company for any period of time or to any right to
continue his or her present or any other rate of compensation. Nothing contained
in the Plan shall be construed as giving an employee, a consultant, such
persons' beneficiaries or any other person any equity or interests of any kind
in the assets of the Company or creating a trust of any kind or a fiduciary
relationship of any kind between the Company and any such person.
11.10. Deferral Permitted. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any Incentive
shall be made as provided in the Incentive. Payment may be deferred at the
option of the participant if provided in the Incentive.
11.11. Amendment of the Plan. The Board may amend or discontinue
the Plan at any time. However, no such amendment or discontinuance shall,
subject to adjustment under Section 11.6, (a) change or impair, without the
consent of the recipient, an Incentive previously granted, (b) materially
increase the maximum number of shares of Common Stock which may be issued to all
participants under the Plan, (c) materially increase the benefits that may be
granted under the Plan, (d) materially modify the requirements as to eligibility
for participation in the Plan, or (e) materially increase the benefits accruing
to participants under the Plan.
11.12. Immediate Acceleration of Incentives. Notwithstanding any
provision in this Plan or in any Incentive to the contrary, (a) the restrictions
on all shares of restricted stock award shall lapse immediately, (b) all
outstanding options and SARs will become exercisable immediately, and (c) all
performance shares shall be deemed to be met and payment made immediately, if
subsequent to the date that the Plan is approved by the Board of Directors of
the Company, any of the following events occur
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<PAGE> 35
unless otherwise determined by the board of directors and a majority of the
Continuing Directors (as defined below):
(1) any person or group of persons becomes the beneficial
owner of 30% or more of any equity security of the Company entitled to vote for
the election of directors;
(2) a majority of the members of the board of directors of
the Company is replaced within the period of less than two years by directors
not nominated and approved by the board of directors; or
(3) the stockholders of the Company approve an agreement
to merge or consolidate with or into another corporation or an agreement to sell
or otherwise dispose of all or substantially all of the Company's assets
(including a plan of liquidation).
For purposes of this Section 11.12, beneficial ownership by a person or
group of persons shall be determined in accordance with Regulation 13D (or any
similar successor regulation) promulgated by the Securities and Exchange
Commission pursuant to the 1934 Act. Beneficial ownership of more than 30% of an
equity security may be established by any reasonable method, but shall be
presumed conclusively as to any person who files a Schedule 13D report with the
Securities and Exchange Commission reporting such ownership. If the restrictions
and forfeitability periods are eliminated by reason of provision (1), the
limitations of this Plan shall not become applicable again should the person
cease to own 30% or more of any equity security of the Company.
For purposes of this Section 11.12, "Continuing Directors" are directors
(a) who were in office prior to the time any of provisions (1), (2) or (3)
occurred or any person publicly announced an intention to acquire 20% or more of
any equity security of the Company, (b) directors in office for a period of more
than two years, and (c) directors nominated and approved by the Continuing
Directors.
11.13. Definition of Fair Market Value. Whenever "Fair Market
Value" of Common Stock shall be determined for purposes of this Plan, it shall
be determined by reference to the last sale price of a share of Common Stock on
the principal United States Securities Exchange registered under the 1934 Act on
which the Common Stock is listed (the "Exchange"), or, on the National
Association of Securities Dealers, Inc. Automatic Quotation System (including
the National Market System) ("NASDAQ") on the applicable date. If the Exchange
or NASDAQ is closed for trading on such date, or if the Common Stock does not
trade on such date, then the last sale price used shall be the one on the date
the Common Stock last traded on the Exchange or NASDAQ.
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INNOVATIVE GAMING CORPORATION OF AMERICA
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 30, 1997
The undersigned, a shareholder of Innovative Gaming Corporation of America,
hereby appoints Edward G. Stevenson and Scott Shackelton, and each of them, as
proxies, with full power of substitution, to vote on behalf of the undersigned
the number of shares which the undersigned is then entitled to vote, at the
Annual Meeting of Shareholders of Innovative Gaming Corporation of America to be
held at the Airport Plaza Hotel, 1981 Terminal Way, Reno, Nevada, on Friday, May
30, 1997, at 10:00 a.m., and at any and all adjournments thereof, with all the
powers which the undersigned would possess if personally present, upon:
(1) Election of Directors:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(except as marked to vote for all nominees
to the contrary listed below
below)
EDWARD G. STEVENSON, LYLE BERMAN, PAUL A. BIBLE
INSTRUCTION: To withhold authority to vote for any individual nominee write that
nominee's name on the space provided below.
-------------------------------------------------------------
(2) To approve and adopt the Company's 1997 Director's Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To approve an amendment to the Company's 1992 Stock Option and
Compensation Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 250,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Upon such other business as may properly come before the meeting or
any adjournments thereof.
(Continued, and TO BE COMPLETED AND SIGNED on the reverse side)
<PAGE> 37
(Continued from other side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES,
FOR THE AMENDMENT TO THE 1992 STOCK OPTION
AND COMPENSATION PLAN AND FOR APPROVAL OF THE 1997
DIRECTORS STOCK OPTION PLAN
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting of Shareholders.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. When properly
executed, this proxy will be voted on the proposals set forth herein as directed
by the shareholder, but if no direction is made in the space provided, this
proxy will be voted FOR the election of all nominees for director, FOR the
proposal to increase the number of shares reserved for issuance under the
Company's 1992 Stock Option and Compensation Plan and FOR approval of the
Company's 1997 Directors Stock Option Plan.
Dated _________________________, 1997
_________________________
_________________________
(Shareholder must sign exactly as the
name appears at left. When signed as a
corporate officer, executor,
administrator, trustee, guardian, etc.,
please give full title as such. Both
joint tenants must sign.)
