<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MIKOHN GAMING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
MIKOHN GAMING CORPORATION
1045 PALMS AIRPORT DRIVE
LAS VEGAS, NEVADA 89119
April 10, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
your Company, which will be held in a marked meeting room on the second floor
of the Monte Carlo Resort and Casino, 3770 Las Vegas Blvd. South, Las Vegas,
Nevada, on Tuesday, May 12, 1998 at 10:00 a.m. Pacific Daylight Time. We hope
that you will be able to attend the Annual Meeting in person and we look
forward to seeing you.
At the Annual Meeting, stockholders will (i) elect seven members of the
Board of Directors to serve one, two and three year terms and until their
successors are elected and qualified and (ii) act upon the other matters
enumerated in the Notice of Annual Meeting and discussed in the Proxy
Statement that accompany this letter. Please give your prompt attention to
these matters.
Irrespective of whether you plan to attend in person, it is important that
your shares be represented. Accordingly, after reviewing the enclosed Notice
of Annual Meeting and Proxy Statement, please complete, sign, date and return
the enclosed Proxy in the postage paid envelope at your earliest convenience.
Sincerely,
/s/ David J. Thompson
David J. Thompson
Chairman of the Board and
Chief Executive Officer
<PAGE>
MIKOHN GAMING CORPORATION
1045 PALMS AIRPORT DRIVE
P. O. BOX 98686
LAS VEGAS, NEVADA 89193-8686
(702) 896-3890
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1998
The 1998 Annual Meeting of the Stockholders of Mikohn Gaming Corporation, a
Nevada corporation (the "Company"), will be held in a marked meeting room on the
second floor of the Monte Carlo Resort and Casino, 3770 Las Vegas Blvd. South,
Las Vegas, Nevada on Tuesday, May 12, 1998, commencing at 10:00 a.m. Pacific
Daylight Time to consider the following matters:
1. Electing seven directors to serve one, two and three year terms, pursuant
to an amendment to the Bylaws of the Company, and until their successors
are elected and qualified;
2. Approving the appointment of Deloitte & Touche LLP as the Company's
independent accountants for 1998 and
3. Acting upon such other business as may properly come before the Annual
Meeting and any adjournment or postponement of the meeting.
Only stockholders of record on the books of the Company at the close of
business on March 13, 1998, are entitled to vote at the Annual Meeting and any
adjournment or postponement of the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING,
REGARDLESS OF THE NUMBER YOU HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE,
WHICH REQUIRES NO POSTAGE IN THE UNITED STATES.
You may attend the Annual Meeting and vote your shares in person even though
the Company has received your proxy. However, if you have sent the Company your
proxy and your shares are held in the name of your stockbroker or other nominee,
you must get a new proxy signed by your nominee if you decide to attend the
meeting and vote in person.
By Order of the Board of Directors
/s/ Charles H. McCrea, Jr.
Charles H. McCrea, Jr.
Secretary
Las Vegas, Nevada
April 10, 1998
<PAGE>
MIKOHN GAMING CORPORATION
1045 PALMS AIRPORT DRIVE
P. O. BOX 98686
LAS VEGAS, NEVADA 89193-8686
(702) 896-3890
--------------------
PROXY STATEMENT
APRIL 10, 1998
--------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1998
This Proxy Statement and accompanying Proxy were mailed on or about April 10,
1998, to all holders of record of the $.10 par value common stock ("Common
Stock") of Mikohn Gaming Corporation, a Nevada corporation (the "Company"), as
of the close of business on March 13, 1998.
The enclosed Proxy is solicited by and on behalf of the Board of Directors
(the "Board") of the Company, for use at the Company's 1998 Annual Meeting of
Stockholders (the "Annual Meeting") and at any and all adjournments or
postponements. You may revoke your Proxy at any time prior to its use by (i)
providing a written revocation to the Secretary of the Company, (ii) executing
and delivering a later dated Proxy or (iii) attending the Annual Meeting and
informing the Company officials that you wish to vote in person. A stockholder
who holds shares in street name and who decides to vote his shares in person at
the Annual Meeting must obtain from his broker or other nominee a proxy
identifying him as the person authorized to vote the shares. Shares represented
by an unrevoked Proxy will be voted as instructed by the stockholder. IN THE
ABSENCE OF ANY CONTRARY INSTRUCTIONS, SUCH SHARES WILL BE VOTED (i) FOR THE
ELECTION OF THE NOMINEES FOR DIRECTORS NAMED HEREIN, TO ONE, TWO OR THREE YEAR
TERMS AS PROVIDED IN THE AMENDED BYLAWS AND, AS EXPLAINED IN GREATER DETAIL
BELOW UNDER "ELECTION OF DIRECTORS", (ii) FOR THE CONTINUED RETENTION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS AND (iii) IN THE DISCRETION OF
THE PROXY HOLDERS WITH RESPECT TO ANY OTHER MATTERS PROPERLY PRESENTED TO THE
ANNUAL MEETING.
Only holders of record of the Company's Common Stock at the close of business
on the record date, March 13, 1998, are entitled to notice of and to vote at the
Annual Meeting. On the record date there were outstanding 10,326,767 shares of
Common Stock not including 19,113 treasury shares which can be neither voted nor
counted for any other purpose at the Annual Meeting. The presence, either in
person or by proxy, of persons entitled to vote a majority of the Company's
outstanding Common Stock is necessary to constitute a quorum for the transaction
of business at the Annual Meeting. Each share is entitled to one vote in
connection with each matter submitted for stockholder approval, and a majority
of a quorum is sufficient to approve or disapprove any item on the agenda. All
shares represented at the Annual Meeting are counted for the purpose of
ascertaining the presence of a quorum, irrespective of whether the record holder
of any shares or its nominee abstains from voting on all matters or on any
particular matter. It follows that shares represented at the Annual Meeting and
not voted in effect are voted "against" each matter as to which they are not
voted.
The Directors and executive officers of the Company, who among them own
beneficially and/or have voting power with respect to approximately 56.1 percent
of the Company's outstanding Common Stock (see "PRINCIPAL STOCKHOLDERS" below),
intend to vote their shares in favor of all actions proposed in the Proxy
Statement.
1
<PAGE>
ELECTION OF DIRECTORS
The Board is comprised of seven directors, all of whom were elected at the
1997 Annual Meeting. At a meeting of the Board held on February 10, 1998, the
Board, by unanimous vote and as authorized by Nevada law, amended the Bylaws of
the Company to establish three classes of directors, each class equal in number
as nearly as possible. Directors ultimately will serve three year terms
staggered so that the directors in only one class stand for election each year,
however, at the Annual Meeting in 1998, all directors will stand for election.
The Board's nominees, by the classes to which they are assigned and the terms
for which the directors in each class are standing for election, are as follows:
Class 1 - Richard H. Irvine and John K. Campbell. Nominal terms expire at
------- the 1999 annual meeting and every three years thereafter.
Class 2 - Terrance W. Oliver and Douglas M. Todoroff. Nominal terms expire
------- at the 2000 annual meeting and every three years thereafter.
Class 3 - David J. Thompson, Dennis A. Garcia and Bruce E. Peterson.
------- Nominal terms expire at the 2001 annual meeting and every three
years thereafter.
Except in cases of death, disability or resignation, directors serve until the
end of their nominal terms and until their respective successors are elected and
qualified, whichever is later.
The Board recommends a vote for each director nominated. Should a vacancy
occur for any reason (none is anticipated), the persons named as proxies will
vote for a substitute nominee designated by the Board.
Following is a list of the current Directors and executive officers of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David J. Thompson 54 Chairman of the Board and Chief Executive Officer
John K. Campbell (1) 68 Director and Chairman of Audit Committee
Richard H. Irvine 56 Director, President and Chief Operating Officer
Dennis A. Garcia 52 Director, Executive Vice President-Proprietary Games
Terrance W. Oliver 48 Director
Bruce E. Peterson 50 Director
Douglas M. Todoroff (1) 51 Director and Chairman of Compensation Committee
Charles H. McCrea, Jr. 48 Executive Vice President, General Counsel and Secretary
Donald W. Stevens 57 Executive Vice President, Chief Financial Officer and Treasurer
</TABLE>
(1) Member of the Audit and Compensation Committees
Mr. Thompson has been Chief Executive Officer of the Company since 1988, and
was appointed Chairman of the Board of the Company in September 1993. Mr.
Thompson also served as Chief Financial Officer of the Company from 1988 to
September 1993, and from August 1995 to June 1996. From 1977 to 1988, Mr.
Thompson was in private practice as a certified public accountant in Reno and
Las Vegas, Nevada, serving a number of clients involved in the gaming industry.
From 1973 to 1976, Mr. Thompson served as a consultant to various gaming
industry clients in Las Vegas and Reno. He was an executive with Harrah's from
1969 to 1973.
Mr. Irvine was a non-employee Director of the Company from December 1993 to
July 1995. He was a member of the Audit and Compensation Committees of the
Board until he was employed as President and Chief Operating Officer effective
July 1, 1995. From July 1993 to July 1995, he served as senior vice president
of
2
<PAGE>
marketing/entertainment for Boomtown, Inc.; from 1991 to July 1993, as vice
president of marketing for Walt Disney Attractions; from 1989 to 1991 as
executive vice president of Unicorn/Sovaminco, a U.S./Soviet joint venture and
from 1985 to 1989, as executive vice president of International Game Technology.
Mr. Garcia has been a Director since December 1993, and was Vice President-
Sales, Casino Signs Division of the Company, from November 1993 to March 1996.
From March 1996 to May 1996, Mr. Garcia served as Executive Vice President-
Sales. Since May 1996, Mr. Garcia has served as Executive Vice President-
Proprietary Games. From 1985 until joining the Company in 1993, Mr. Garcia was
president and director of sales of Casino Signs North, Inc. ("CSN"), and from
1990, until joining the Company he also was president of A&D Sign
Manufacturing, Inc. ("A&D"). Both CSN and A&D served as distributors of the
Company's products and were merged into the Company in November 1993. Mr. Garcia
was a founder of both CSN and A&D and served as a director of both corporations
from their inception.
Mr. Peterson has been a Director since December 1993, and was Vice President-
Production from November 1993 (Executive Vice President since March 1996), until
his retirement as an officer effective December 31, 1996. Prior to joining the
Company, Mr. Peterson was president and a director of Peterson Sign Art, Inc.
("PSA") and a general partner of PSA's predecessor since 1979. PSA was a
distributor of the Company's products and was merged into the Company in
November 1993.
Mr. Oliver has been a Director of the Company since 1988, and served as
Chairman of the Board of Directors of the Company from 1988 to September 1993.
From 1986 to 1995, he was a director and president of The Nevada Club, Inc., a
casino in Reno, Nevada. That company was rolled-up effective February 25, 1995,
as part of Fitzgerald's Gaming Corporation, in which he now serves as a director
and served as executive vice-president and chief operating officer until his
retirement in June 1996. In November 1996, the Company retained Mr. Oliver as a
consultant to assist it in the promotion of its SafeJack(TM) system because of
his extensive experience in casino management and pays him $1,000 for each day
in which he works as a consultant, plus reasonable expenses.
Mr. Campbell has served as a Director of the Company since December 1993.
From 1986 until February 1995, Mr. Campbell served as a director of Sahara
Gaming Corporation (formerly Sahara Resorts) and of various Sahara subsidiary
corporations. He is president of Sportco Sporting Goods, Inc., a retail
sporting goods store. Mr. Campbell was self-employed as a consultant from 1986
to 1989 and was vice president/finance and treasurer of the MGM Grand Hotel from
1972 until 1986.
Mr. Todoroff has served as a Director of the Company since December 1993. He
has been president of Mercier Management Company since November 1993, was senior
vice president-manager of commercial lending with Bank of America Nevada from
1992 to 1993 and was executive vice president and senior credit officer of its
predecessor, Valley Bank of Nevada, from 1981 to 1992.
Mr. McCrea has served the Company as Vice President-Secretary and General
Counsel since May, 1994 (Executive Vice President since March 1996). For more
than ten years prior to his employment by the Company, he was a partner in
Lionel, Sawyer & Collins, a Nevada law firm with offices in Las Vegas and Reno.
He is admitted to practice law in Nevada and California.
Mr. Stevens has been Executive Vice President, Chief Financial Officer and
Treasurer since June 10, 1996. From 1981 to June 1996, Mr. Stevens was the
owner and president of Orange Torpedo Trips Inc., Grants Pass, Oregon. From 1971
to 1981, he held several positions with Harrah's, and was serving as Treasurer
and Controller at the time he resigned to establish his excursion business.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company's Board of Directors held six meetings in 1997. Except for one
meeting which only six Directors attended, all meetings were attended by all
Directors. Other business was handled from time to time by unanimous written
consent of the Directors.
The Board has an Audit Committee and a Compensation Committee. There is no
nominating committee. Committee members are appointed by the full Board. Both
the Audit Committee and the Compensation Committee are comprised of Directors
Campbell and Todoroff, both of whom are outside directors.
The Audit Committee, chaired by Director Campbell, is charged with reviewing
the audited financial statements of the Company and making recommendations to
the full Board on matters concerning the Company's audits, the selection of the
Company's independent public accountant and such other matters relating to the
Company's financial affairs and accounting as the Audit Committee may in its
discretion choose to address. The Audit Committee met once during 1997 and all
members attended.
The Compensation Committee, chaired by Director Todoroff, is responsible for
monitoring the performance of the Company's executive officers, passing upon
salaries, bonuses and other compensation for the Company's executive officers,
and administering the Company's Stock Option Plan. The Compensation Committee
met three times in 1997 and all members attended.
Each director who is not an employee of the Company receives a fee of $2,000
for each Board and Board committee meeting attended and is reimbursed for his
reasonable expenses. In addition, each such director receives each year,
immediately following the Annual Meeting, a ten year option (vesting as to one-
third of the optioned shares, cumulatively, on each of the first three
anniversaries) to purchase at 100% of the fair market value at the date of grant
5,000 shares of Company Common Stock plus 1,000 shares for each year he has
served as a director. Directors who are not full time employees of the Company
receive a monthly fee of $1,000 and the right to participate in the Company's
executive medical plan. Directors who are employees of the Company do not
receive additional compensation for their services as directors.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth for the fiscal years ended
December 31, 1997, 1996 and 1995 information regarding compensation paid to the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards /
Number of
Annual Compensation Shares All Other
-------------------------------- Underlying Compensation
Name and Principal Position Year Salary ($)(1) Bonus($)(1) Option (2) ($)(3)
- --------------------------- ----- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
David J. Thompson 1997 $377,796 $156,767 (4) 80,000 $2,200
Chairman and CEO 1996 335,846 1,616
1995 313,112 464,948 (4) 1,503
Richard H. Irvine 1997 320,682 67,100 (4) 60,000 2,192
President and COO 1996 285,116 20,000 2,375
1995 116,946 260,000 (5) 250,000
Dennis A. Garcia 1997 263,336 40,000 1,317
Executive Vice President- 1996 242,216 20,000 1,148
Proprietary Games 1995 232,196 28,852 (4) 1,098
Charles H. McCrea, Jr. 1997 267,310 5,000 60,000 2,186
Executive Vice-President 1996 235,667 20,000 1,118
General Counsel and Secretary 1995 211,937 54,772 61,000 (6) 1,000
Seamus McGill (8) 1997 217,199 80,000 2,201
1996 193,140 25,000 80,000 (7)
1995 24,923
</TABLE>
(1) The amounts in the Salary and Bonus columns include gross compensation
earned for each named executive for each year shown. The amounts in the
Salary column (i) exclude the bonuses shown in the Bonus column, (ii)
include certain Company paid personal benefits such as automobile
allowances, memberships and dues in various organizations and family medical
expenses (but in no case did the amount paid to or on behalf of any named
executive officer in respect of such personal benefits exceed the lesser of
$50,000 or 10 percent of compensation for any year shown) and (iii) include
the Company matching contributions under the Employees' Investment Plan.
(2) No stock appreciation rights (SARs) ever have been granted by the Company.
All stock options granted to the named executive officers were granted at
exercise prices not lower than the fair market value of the shares on the
dates the grants were made. Except as set forth below in Note (8), none of
the executive officers named
5
<PAGE>
exercised any stock options in 1997.
(3) Amounts in the All Other Compensation column represent the employer
contributions under the Company's 401(k) plan, which amounts are not
included in the Salary column.
(4) The 1994 bonuses of Messrs. Thompson and Irvine, although paid to them in
1995 pursuant to their employment contracts, were based on the Company's
1994 results and accrued in that year. Likewise, their 1996 bonuses were
based on the Company's 1996 results and accrued in that year and paid in
1997. Starting in 1997, the Company accrued and paid bonuses on a quarterly
basis, and for 1997, the Company paid bonuses for the first three quarters
of 1997.
(5) Signing bonus paid pursuant to Mr. Irvine's employment contract.
(6) Pursuant to an exchange offer made to all employees who were granted options
under the Stock Option Plan, Mr. McCrea exchanged (i) a ten year Incentive
Stock Option dated May 1, 1994 to purchase 70,000 shares of Common Stock at
$12.75 per share for a ten year Incentive Stock Option dated November 16,
1995, to purchase 52,500 shares at $4.25 per share, and (ii) a ten year
Incentive Stock Option dated December 9, 1994 to purchase 10,000 shares of
Common Stock at $9.25 per share for a ten year Incentive Stock Option dated
November 16, 1995 to purchase 8,500 shares at $4.25 per share.
(7) An amendment to Mr. McGill's 1995 employment agreement entered into in 1996
cancelled an option granted in 1995 to purchase 30,000 shares of Common
Stock at $4.50 per share and provided for the grant of an option to purchase
60,000 shares at $4.25 per share. In September, 1996, Mr. McGill exercised
an Incentive Stock Option to purchase 8,000 shares at $3.75 per share.
(8) Mr. McGill resigned on February 26, 1998. On March 26, 1998, he exercised
two options, one to purchase 12,000 shares at $3.75 per share and one to
purchase 38,000 shares at $4.25 per share. He retains an option expiring in
2006 to purchase 22,000 shares at $4.25 per share, and two options, at
exercise prices of $4.25 and $4.50 per share, respectively, covering 40,000
shares each and expiring in 2007.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
In July 1993, the Company and Mr. Thompson entered into an amendment to his
1988 employment agreement extending it through December 31, 1999 and providing
for a base salary of $335,000 for 1997. His base salary increases by $20,000
each succeeding fiscal year. The employment agreement originally provided that
Mr. Thompson receive a bonus equal to 5% of net pretax income (but in no case
greater than $1 million) for each fiscal year, multiplied by a fraction the
numerator of which is 9,802,611 and the denominator of which is the weighted
average number of shares of Common Stock and common stock equivalents
outstanding (as reported by the basic formula) for such fiscal year, as
reflected in the Company's audited financial statements. However, since 1996,
Mr. Thompson has received, and for the remaining years under his employment
contract Mr. Thompson will receive, a bonus based on 3.5% of net pretax income
rather than 5%; he relinquished 1.5% to be awarded to Mr. Irvine as a
performance based incentive bonus (see paragraph immediately following) without
adversely impacting earnings otherwise available to stockholders. In the event
that Mr. Irvine's employment agreement is terminated for any reason, the
percentage of net pretax income Mr. Thompson will be entitled to receive for any
years remaining under his employment agreement will again be based on 5% of net
pretax income. In the event of termination of Mr. Thompson's employment without
"good cause" (as defined in his employment agreement), he will be entitled to a
lump-sum termination payment equal to any unpaid base salary through the end of
the term of the agreement plus $1,000,000.
In July 1995, the Company entered into a five year employment agreement with
Mr. Irvine, naming him President
6
<PAGE>
and Chief Operating Officer of the Company. The agreement as amended provides
for (i) an annual base salary of $260,000 per year (prorated for 1995,
increasing by $17,628 each 12 months commencing July 1, 1996 and totaling
$295,257 in 1997), (ii) a signing bonus of $260,000 (paid in 1995) and (iii) an
opportunity to receive an annual bonus (in no case to exceed $1 million) equal
to 1.5% of the Company's net pretax income during its prior fiscal year
determined according to the same formula used in calculating Mr. Thompson's
bonus. The agreement also obligated the Company to issue to Mr. Irvine a ten
year option (assuming continued employment with the Company) to purchase up to
250,000 shares of Common Stock at a price of $5.25 per share (renegotiated to
$4.25 per share, corresponding to the fair market value of the stock on November
13, 1995, the date the option was issued). In the event Mr. Irvine's employment
is terminated without "good cause" (as defined in his employment agreement), he
will be entitled to a lump sum termination payment equal to any unpaid base
salary through the end of the term of the agreement plus $500,000. See also
Footnote (4) to the Summary Compensation Table.
In November 1993, the Company entered into employment agreement with Mr.
Garcia extending through December 31, 1999, and providing for a base salary of
$240,000 in 1997. Since June 1, 1996, Mr. Garcia has served as Executive Vice
President-Proprietary Games. Mr. Garcia will be eligible to receive a
performance bonus in each of the years 1998 and 1999 if pre-tax income from
proprietary games reaches certain budgeted levels in those years. No bonus will
be paid unless the proprietary games budget is achieved. In either year in
which the budget is achieved, a graduated bonus will be earned ranging from
1.75% of net income from proprietary games at the first level in excess of
budget to a maximum of 5% of all pre-tax net income from proprietary games in
excess of 166.67% of budget.
On May 1, 1994, the Company entered into a four year employment agreement with
Mr. McCrea, Executive Vice President-General Counsel and Secretary of the
Company, which provided for an annual base salary of $235,000 in 1997,
increasing by $20,000 on January 1 of each year of the term of the agreement.
The Company is obligated to review Mr. McCrea's base salary annually (but is not
obligated to increase it beyond the requirements of Mr. McCrea's employment
agreement) and to consider cash bonuses. In the event that Mr. McCrea is
terminated without "good cause" (as defined in his employment agreement), he
will be entitled to a lump-sum termination payment equal to his base salary for
the most recent calendar year, and his stock option rights will remain in full
force and effect. The employment agreement also provides for, and Mr. McCrea was
granted, options to purchase 70,000 shares of Common Stock (which, together with
other options covering 10,000 shares, were subsequently exchanged for options
covering 61,000 shares at a lower exercise price, as disclosed at Footnote (6)
to the Summary Compensation Table). On August 15, 1997, Mr. McCrea's employment
agreement was amended to extend its term to December 31, 2000, and to grant him
options to purchase 20,000 additional shares of Common Stock.
The employment agreements with Messrs. Irvine and McCrea provide for automatic
renewals for additional one-year periods after their initial terms unless either
party gives notice of termination.
Any termination of employment without good cause of Mr. Thompson must be
approved by a five-sevenths vote of the Board. The employment agreements with
Messrs. Thompson, Irvine and McCrea provide that such agreements will not be
terminated by any merger, consolidation, asset sale, dissolution or change in
ownership of the Company. Each of these officers has agreed not to compete with
the Company for a period of two years following the termination of his
employment relationship with the Company. The employment agreement with Mr.
Thompson also provides for the continuation of salary payments for six months
following termination of employment owing to disability and payments thereafter
of $100,000 annually through December 31, 1999.
7
<PAGE>
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS IN 1997
The table below sets forth the grants of stock options under the Plan to the
executive officers named in the Summary Compensation Table during the fiscal
year ended December 31, 1997. No stock appreciation rights (SARs) ever have
been granted by the Company. The amounts shown for the named executive officers
as potential realizable values are based on arbitrarily assumed annualized rates
of stock price appreciation of five percent and ten percent over the per share
exercise price of the options during the full terms of the options. No gain to
the optionees is possible without an increase in the stock price that will
benefit all stockholders in proportion to their holdings. These potential
realizable values are based solely on arbitrarily assumed rates of appreciation
required by applicable Securities and Exchange Commission regulations. Actual
gains, if any, are dependent on the future performance of the Common Stock.
There can be no assurance that the potentially realizable values shown in this
table will be achieved. Moreover, because the appreciation base in each case is
the exercise price, the potentially realizable values are not comparable. The
higher the exercise price, the higher is the extrapolated realizable value and
the lower is the likelihood that such value will be realized.
OPTION / SAR GRANTS IN FISCAL 1997
INDIVIDUAL GRANTS
<TABLE>
<CAPTION> POTENTIAL
REALIZABLE VALUE
(NET OF COST) AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SHARES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR(1) $/SHARE(2) DATE 5% 10%
---- ---------- -------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
David J. Thompson 80,000 6.6% 4.250 2/10/07 213,824 541,872
Richard H. Irvine 60,000 5.0% 4.250 2/10/07 160,368 406,404
Dennis A. Garcia 40,000 3.3% 4.250 2/10/07 106,912 270,936
Charles H. McCrea, Jr. 40,000 3.3% 4.250 2/10/07 106,912 270,936
20,000 1.7% 4.375 8/05/07 55,028 139,452
Seamus McGill(3) 40,000 3.3% 4.250 2/10/07 106,912 270,936
40,000 3.3% 4.250 8/11/07 113,201 286,872
</TABLE>
(1) Options granted under the Plan in 1997 totaled 1,211,000.
(2) The exercise price in each case is the fair market value of the Common Stock
on the date of the grant.
(3) See Footnote (8) to summary Compensation Table.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION AND STOCK OPTIONS
INTRODUCTION
It is the responsibility of the Compensation Committee to establish and review
the Company's executive compensation plans, programs and policies, to administer
the Company's Stock Option Plan, to monitor the performance and compensation of
executive officers and to make recommendations to the Board with respect to
executive compensation. The Compensation Committee, established in January
1994, is composed of Directors Campbell and Todoroff, both of whom are outside
directors and neither of whom ever has served as an officer or employee of the
Company. The Compensation Committee held five formal meetings during 1997 and
handled additional matters by unanimous written consent.
COMPENSATION POLICIES
The Compensation Committee has adopted certain principles and policies
regarding compensation for executive officers and other key employees. The
Company strives to offer competitive compensation opportunities for all
employees based on each individual's contribution and personal performance. The
Compensation Committee recognizes that a successful executive compensation
policy must provide competitive levels of compensation that integrate pay with
personal and Company performance, reward excellence, recognize individual
initiative and achievement and assist the Company in attracting and retaining
qualified executives. The Compensation Committee believes that an executive
compensation program should include three primary elements: annual base salary,
annual incentive compensation and, particularly in the case of executive
officers who are not large stockholders, long-term incentive compensation.
CERTAIN AGREEMENTS
The compensation arrangements for each of the executive officers named in the
Summary Compensation Table of the Proxy Statement are subject to employment
agreements. Employment agreements covering the services of Mr. Thompson were
entered into prior to, and disclosed in connection with, the Company's initial
public offering in November 1993, and antedated the creation of the Compensation
Committee. Details of individual employment agreements between the Company and
each of its executive officers are set forth in the Proxy Statement under
EXECUTIVE COMPENSATION AND OTHER INFORMATION, sub-caption "Employment Agreements
and Change in Control Arrangements".
The principal role of the Compensation Committee in connection with
discretionary incentive compensation payable to all executive officers under
their respective employment agreements generally is to monitor performance and
measure it against the terms of their agreements and the Company's performance.
The Compensation Committee is satisfied that the Company's employment agreements
with its CEO and other executive officers provide them with base compensation
that is not excessive plus ample incentive to achieve, to their and the
Company's mutual benefit.
The Compensation Committee has not yet established a policy with respect to
qualifying compensation paid to the Company's executive officers for
deductibility under Section 162(m) of the Internal Revenue Code of 1986, as
amended because there has been no need for such a policy and no immediate need
is seen. The Company has advised the Compensation Committee that it believes
all compensation payable under the existing employment agreements with executive
officers will qualify for deduction under such Section.
Compensation Committee of the
Board of Directors
Douglas M. Todoroff, Chairman
John K. Campbell, Member
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PERFORMANCE GRAPH AND TABLE
The graph and table below provides a comparison of the Company's cumulative
total stockholder return (which in the Company's case includes only the price of
the Common Stock because the Company has paid no dividends) with (i) Standard &
Poor's 500 Composite Stock Index and (ii) the industry manufacturing peer group
used in the Company's 1997 Proxy Statement. The dates on which comparisons are
made are November 18, 1993 (immediately following the Company's initial public
offering), December 31, 1993, December 31, 1994, December 31, 1995, December 31,
1996 and December 31, 1997. The peer group includes companies that management
selected because it believes they are comparable to the Company in the lines of
business they are engaged in and because they include the Company's principal
competitors.*
This graph and table assume the investment of $100 on November 18, 1993, in
(i) the Company's Common Stock and (ii) collectively, the common stocks of the
companies comprising the peer group, with reinvestment of any dividends. The
comparisons in the graph and table are based on historical data covering the
performance of the Company's Common Stock over a relatively brief time. They
are not intended to forecast, and management believes they are not indicative
of, the future performance of the Company's Common Stock.
[PERFORMANCE GRAPH APPEARS HERE]
** All returns reflect reinvestment of dividends
<TABLE>
<CAPTION>
Index Index Index Index Index Index
at at at at at at
11/18/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mikohn Gaming Corp. $100 $ 92 $ 52 $ 23 $ 32 $ 43
S&P 500 Index 100 100 102 140 173 231
Peer Group 100 88 50 43 66 77
</TABLE>
* The companies included in the peer group in addition to the Company are Acres
Gaming Inc.; Alliance Gaming Corporation; Autotote Corporation; Casino Data
Systems; GTECH Holdings Corp.; International Game Technology; Paul-Son Gaming
Corp.; Sodak Gaming Inc.; Video Lottery Technologies and WMS Industries Inc.
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CERTAIN TRANSACTIONS
On November 16, 1995, the Board authorized a loan of up to $300,000 to
Chairman and CEO David J. Thompson (extended until January 17, 1999), at a rate
of interest equal to prime (as reported by The Wall Street Journal). Mr.
Thompson borrowed $300,000 pursuant to this authorization and secured it by a
pledge of 150,000 shares of the Company's Common Stock. Mr. Thompson repaid the
loan in full together with interest on February 25, 1998. On October 29, 1997,
the Board authorized a loan in the amount of $122,500 to Mr. Thompson at a rate
of 6.37% secured by 20,000 shares of the Company's Common Stock.
On October 29, 1997, the Board, believing that the Company's Common Stock
appeared undervalued and in order to emphasize the Board's and senior
management's confidence in the future of the Company, adopted resolutions (i)
encouraging each director and senior officer to purchase up to 20,000 shares of
authorized but unissued restricted Common Stock from the Company at the closing
price on October 30,1997 (which turned out to be $5.687 per share) and (ii)
authorizing each such person to borrow the price of the shares purchased from
the Company. Each purchaser gave the Company a promissory note in principal
amount equal to the purchase price, maturing October 20, 2002 (or at termination
of employment by the Company, whichever first occurs), bearing interest at the
rate of 6.37% per annum payable annually in arrears on each anniversary date,
and secured by a pledge of the shares so purchased. The program increases the
Company's common equity, has no impact upon its cash flow and places all risk of
loss upon the participating directors and officers. All of the Company's
directors except Mr. Campbell and all of its senior officers except Mr. Thompson
are participating in the program. Each participating director and officer has
borrowed $113,740, representing the aggregate purchase price of 20,000 shares of
Common Stock at $5.687 per share.
Transactions among the Company and its affiliates involving in excess of
$250,000, other than transactions entered into in the ordinary course of
business on terms generally made available to third party customers, are
reviewed by the Board and passed upon by a majority of disinterested directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 10, 1998, by (i) each person
who is known by the Company to own beneficially more than five percent of the
Company's outstanding Common Stock, (ii) each of the Company's directors and
(iii) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Beneficial
Ownership
of
Common Stock
----------------------
Name of Beneficial Owner (1) Number Percent
- ------------------------ ---------- ---------
<S> <C> <C>
David J. Thompson (2) 1,540,250 14.9
Dennis A. Garcia (3) 1,613,250 15.6
Bruce E. Peterson (4) 1,618,250 15.7
Terrance W. Oliver (5) 665,348 6.4
John K. Campbell (6) 24,333 0.2
Richard H. Irvine (7) 168,000 1.6
Douglas M. Todoroff (8) 33,000 0.3
All directors and executive officers as a group (9 persons) (9) 5,789,831 56.1
</TABLE>
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(1) The mailing address of each person named in this table is c/o Mikohn Gaming
Corporation, 1045 Palms Airport Drive, P. O. Box 98686, Las Vegas, Nevada
89193-8686.
(2) Total includes 26,000 shares that Mr. Thompson has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options and 50,000 shares held in trusts for the benefit of Mr.
Thompson's children and stepchildren. Mr. Thompson disclaims beneficial
ownership of shares held in children's trusts.
(3) Total includes 34,000 shares that Mr. Garcia has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options.
(4) Total includes 30,000 shares that Mr. Peterson has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options.
(5) Total includes 4,998 shares that Mr. Oliver has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options and 100,000 shares held in trusts for the benefit of Mr.
Oliver's children. Mr. Oliver disclaims beneficial ownership of shares held
in children's trusts. The remaining 560,350 shares beneficially owned by
Mr. Oliver are held of record by the Oliver Special Trust, of which Mr.
Oliver is sole trustee and beneficiary.
(6) Total includes 16,333 shares that Mr. Campbell has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options.
(7) Total includes 138,000 shares that Mr. Irvine has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options.
(8) Total includes 13,000 shares that Mr. Todoroff has the right to purchase
within 60 days (regardless of exercise price) through exercise of vested
stock options.
(9) Includes 336,731 shares that the directors and three executive officers who
are not directors have the right to purchase within 60 days (regardless of
exercise price) through exercise of stock options.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS (ITEM 3 ON PROXY)
The Board has appointed Deloitte & Touche LLP to serve as independent
accountants for the Company for the fiscal year ending December 31, 1998.
The firm of Deloitte & Touche LLP has served as independent accountants for
the Company since 1990. The Board, although it is not required to do so, is
submitting its appointment of Deloitte & Touche LLP for ratification at the
Annual Meeting in order to solicit the views of stockholders concerning the
appointment. The Board recommends that the Company's stockholders vote for the
ratification of the appointment of Deloitte & Touche LLP to audit the financial
statements of the Company for the fiscal year ending December 31, 1998. If the
appointment is not ratified, the Board will reconsider.
A representative of Deloitte & Touche LLP will be present at the Annual
Meeting, will be given the opportunity to make a statement, if so inclined, and
will be available to respond to appropriate questions.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31, 1997,
which includes the Company's annual report on Form 10-K to the Securities and
Exchange Commission (without exhibits), is being mailed
12
<PAGE>
contemporaneously with this Proxy Statement to stockholders of record at the
close of business on March 13, 1998. The Company will provide a copy of the
exhibits to its annual report on Form 10-K for the fiscal year ended December
31, 1997, upon receipt of a written request from any beneficial owner of the
Company's securities as of March 13, 1998, and reimbursement of the Company's
reasonable expenses. Such request should be addressed to Charles H. McCrea, Jr.,
Executive Vice President, Mikohn Gaming Corporation, 1045 Palms Airport Drive,
P. O. Box 98686, Las Vegas, Nevada 89193-8686.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any eligible stockholder (as defined below) of the Company who wishes to have
a proposal considered for inclusion in the Company's 1999 proxy solicitation
material must set forth such proposal in writing and file it with the Secretary
of the Company on or before February 25, 1999. The Board will review any
proposals from eligible stockholders which it receives by that date and will
determine whether any such proposals will be included in its 1999 proxy
solicitation materials. An eligible stockholder is one who is the record or
beneficial owner of at least 1% or $1,000 in market value of securities entitled
to be voted on the proposal at the 1999 Annual Meeting, who has held such
securities for at least one year and who continues to own such securities
through the date on which the 1999 Annual Meeting is held.
SOLICITATION OF PROXIES
The cost of this solicitation will be borne by the Company. Proxies may be
solicited by mail, telephone, telegraph, or personally by directors, officers
and regular employees of the Company, none of whom will receive any special
compensation for such services. The Company will reimburse persons holding
stock in their names or in the names of their nominees for reasonable expenses
incurred in forwarding proxy materials to their principals.
OTHER BUSINESS
The Board does not know of any other business which will be presented for
consideration at the Annual Meeting. If any other business properly comes before
the Annual Meeting or at any adjournment or postponement thereof, the proxy
holders will vote according to their discretion insofar as such proxies are not
limited to the contrary.
By Order of the Board of Directors
/s/ Charles H. McCrea, Jr.
Charles H. McCrea, Jr.
Secretary
Las Vegas, Nevada
April 10, 1998
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MIKOHN GAMING CORPORATION
PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1998
The undersigned constitutes and appoints DAVID J. THOMPSON, RICHARD H. IRVINE
and CHARLES H. McCREA, JR. Proxy, First Alternate Proxy and Second Alternate
Proxy, respectively, of the undersigned to represent the undersigned and to vote
all shares of Common Stock, $.10 par value, of Mikohn Gaming Corporation (the
"Company") that the undersigned would be entitled to vote if personally present
at the Annual Meeting of Stockholders of the Company to be held at 10:00 a.m.
(Pacific Daylight Time) on Tuesday, May 12, 1998, at the Monte Carlo Hotel &
Casino, Las Vegas, Nevada, and at any adjournment or postponement thereof. If
the Proxy is unable to act, the authority conferred hereby shall devolve on the
First Alternate Proxy, and if he also is unable to act, on the Second Alternate
Proxy. All proxies will be voted as instructed, and in the absence of
instruction on any particular matter, FOR the nominees to the Board of
Directors, FOR the continued retention of Deloitte & Touche LLP as independent
accountants and in the discretion of the acting proxy as to any other matter
properly before the meeting.
1. ELECTION OF DIRECTORS
[_] FOR the Board of Directors nominees who [_] AGAINST all nominees
are listed below for election as directors listed below
Nominees: David J. Thompson, Dennis A. Garcia, Bruce E. Peterson, Terrance
W. Oliver, John K. Campbell, Richard H. Irvine and Douglas M. Todoroff.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY CANDIDATE, CROSS OUT
THAT CANDIDATE'S NAME ABOVE.
2. RETENTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS.
[_] FOR [_] AGAINST
3. IN THE DISCRETION OF THE PROXY HOLDERS, WITH RESPECT TO ANY OTHER MATTER
THAT MAY PROPERLY COME BEFORE THE 1998 ANNUAL MEETING AND ANY ADJOURNMENT
OR POSTPONEMENT THEREOF. THE BOARD OF DIRECTORS IS NOT AWARE OF ANY OTHER
MATTERS THAT MAY PROPERLY BE CONSIDERED AT THE MEETING.
[_] VOTE [_] DO NOT VOTE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MIKOHN GAMING CORPORATION.
Dated:____________________________________
____________________________________
Signature
____________________________________
Signature
PLEASE DATE AND SIGN EXACTLY AS YOUR
NAME OR NAMES APPEAR HEREON. IF THERE
IS MORE THAN ONE REGISTERED OWNER, ALL
SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS,
ATTORNEYS AND CORPORATE OFFICERS
SHOULD INDICATE THEIR FIDUCIARY
CAPACITY OR FULL TITLE WHEN SIGNING.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
