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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 10549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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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 ss. 240.14a-11(c) or ss. 240.14a-12
ACRES GAMING INCORPORATED
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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ACRES GAMING INCORPORATED
7115 AMIGO STREET, SUITE 150
LAS VEGAS, NEVADA 89119
JANUARY 15, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Acres Gaming Incorporated (the "Company").
Place: Company Headquarters
7115 Amigo, Suite 150
Las Vegas, Nevada 89119
Date: Wednesday, February 21, 2001
Time: 3:00 p.m. local time
The Notice of the Annual Meeting and Proxy Statement accompany this letter.
The Proxy Statement describes the business to be transacted at the meeting and
provides other information concerning the Company.
The principal business to be transacted at the Annual Meeting will be
election of directors and ratification of the appointment of Arthur Andersen LLP
as the Company's independent public accountants for the fiscal year ending June
30, 2001. The Board of Directors recommends that stockholders vote for election
of the nominated directors and ratification of Arthur Andersen LLP as the
Company's independent public accountants.
We know that many of our stockholders will be unable to attend the Annual
Meeting. Proxies are therefore solicited so that each stockholder has an
opportunity to vote on all matters that are scheduled to come before the
meeting. Whether or not you plan to attend the Annual Meeting, we hope that you
will have your stock represented by marking, signing, dating and returning your
proxy card in the enclosed envelope as soon as possible. Your stock will be
voted in accordance with the instructions you have given in your proxy card. You
may, of course, attend the Annual Meeting and vote in person even if you have
previously returned your proxy card.
Sincerely,
Reed M. Alewel
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
IMPORTANT
A proxy card is enclosed herewith. All stockholders are urged to complete
and mail the proxy card promptly. The enclosed envelope for return of the proxy
card requires no postage. Any stockholder attending the Annual Meeting may
personally vote on all matters that are considered, in which event the signed
proxy will be revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED
<PAGE> 3
ACRES GAMING INCORPORATED
---------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 21, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Acres Gaming Incorporated, a Nevada corporation (the "Company"),
will be held on Wednesday, February 21, 2001 at 3:00 p.m. local time, at Company
Headquarters, 7115 Amigo Street, Suite 150, Las Vegas, Nevada 89119 for the
following purposes:
1. To elect five (5) directors to the Company's Board of Directors.
2. To ratify the appointment of Arthur Andersen LLP as independent
public accountants for the fiscal year ending June 30, 2001.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on December 29, 2000,
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM MAY
BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT
LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE
ANNUAL MEETING.
By Order of the Board of Directors
Reed M. Alewel
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
Las Vegas, Nevada
January 15, 2001
<PAGE> 4
ACRES GAMING INCORPORATED
7115 AMIGO STREET, SUITE 150
LAS VEGAS, NEVADA 89119
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, FEBRUARY 21, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished by the Board of Directors of Acres Gaming
Incorporated, a Nevada corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Company's
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 3:00 p.m.
local time, on Wednesday, February 21, 2001, at Company Headquarters, 7115 Amigo
Street, Suite 150, Las Vegas, Nevada 89119.
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about January 15, 2001.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of the Company's Common Stock and Series A
Convertible Preferred Stock at the close of business December 29, 2000, are
entitled to notice of and to vote at the Annual Meeting. On that date, 8,946,981
shares of the Company's Common Stock (the "Outstanding Shares") and 519,481
shares of Series A Convertible Preferred Stock (the "Preferred Stock") were
outstanding.
SOLICITATION OF PROXIES
The cost of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby has been or will be borne by the Company. In addition
to the use of the mails, proxies may be solicited by directors, officers and
other employees of the Company, without additional remuneration, in person or by
telephone or facsimile transmission. The Company will also request brokerage
firms, bank nominees, custodians, and fiduciaries to forward proxy materials to
the beneficial owners of the Common Stock as of the record date and will provide
reimbursement for the cost of forwarding the proxy materials in accordance with
customary practice. Your cooperation in promptly completing, signing, dating and
returning the enclosed proxy card will help avoid additional expense.
QUORUM AND VOTING
Each Outstanding Share entitles the holder thereof to one vote upon each
matter to be presented at the Annual Meeting. A quorum, consisting of a majority
of the Outstanding Shares, must be present in person or by proxy for the
transaction of business. If a quorum is present:
(i) each nominee for election to the Board of Directors to be voted on
by the Outstanding Shares will be elected by a plurality of the votes cast
by holders of the Outstanding Shares;
(ii) the appointment of Arthur Andersen LLP will be ratified if this
proposal receives the affirmative vote of a majority of the Outstanding
Shares represented at the meeting.
Abstentions and other non-votes are counted for purposes of determining
whether a quorum exists at the Annual Meeting, but have no effect on the
determination of whether a plurality exists with respect to a given nominee. An
abstention or other non-vote has the effect of a vote against a proposal.
Proxies will be received and tabulated by Wells Fargo Bank Minnesota, N.A., the
Company's transfer agent.
<PAGE> 5
REVOCABILITY OF PROXIES
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person giving it at any time before it is exercised. A proxy may
be revoked prior to its exercise by delivering to the Company's Secretary a
written notice of revocation or a duly executed proxy card bearing a later date,
or by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not constitute a revocation of a proxy.
Each proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated, the shares
will be voted "FOR" (i) election of each of the nominees to the Board of
Directors named in this Proxy Statement; and (ii) ratification of the
appointment of Arthur Andersen LLP as independent public accountants for the
fiscal year ending June 30, 2001. While the Board of Directors knows of no other
matters to be presented at the Annual Meeting or any adjournment thereof, all
proxies returned to the Company will be voted on any such matter in accordance
with the judgment of the proxy holders.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the direction of
its Board of Directors. The Company's Bylaws provide that the Board of Directors
shall consist of not less than one nor more than 15 members. The Board of
Directors consists of five members. Members of the Board of Directors are
elected for a term of one year or until their successors are elected.
The Board of Directors has nominated Floyd W. Glisson, Ronald G. Bennett,
Robert W. Brown, Roger B. Hammock and David R. Willensky to serve as directors
of the Company (the "Common Stock Nominees"). Unless authority is withheld, all
proxies received in response to this solicitation will be voted for the election
of each Common Stock Nominee. If any Common Stock Nominee becomes unable to
serve prior to the Annual Meeting, the proxies received in response to this
solicitation will be voted for a replacement nominee selected in accordance with
the judgment of the proxy holders.
International Game Technology ("IGT") is the owner of all of the 519,481
outstanding shares of the Preferred Stock. During fiscal 2000, the Company's
sales to IGT amounted to approximately $419,000 or 2 percent of the Company's
revenues. So long as there are 130,000 shares of Preferred Stock outstanding,
holders of Preferred Stock have the right to elect one director (the "Preferred
Stock Director"). IGT has not indicated it plans to nominate a Preferred Stock
Director. Holders of the Preferred Stock do not have voting rights with respect
to the election of other directors, or on any other matter scheduled to come
before the meeting.
Information about the Common Stock Nominees and other management personnel:
Floyd W. Glisson, age 53, became Chairman of the Board of Directors in
April 2000 and has served as the Chief Executive Officer since July 1998. Mr.
Glisson also served as President from July 1998 to April 2000. Mr. Glisson was
senior vice president, finance and administration and chief financial officer
for ConAgra Grocery Products Company, a unit of ConAgra, Inc., from April 1995
to July 1998. He has been a director of the Company since 1997.
Ronald G. Bennett, age 54, has been senior vice president and managing
director -- human resources of GATX Capital, a leasing company, since January
2000. Mr. Bennett was president of Calavo Growers, a fresh produce and processed
foods cooperative in California from 1997 to 1999. He also served as president
for Hunt-Wesson Foodservice Company, a subsidiary of ConAgra, Inc., from 1996 to
1997. Prior to 1996, Mr. Bennett was president of Knott's Berry Farm Foods, Inc.
He has been a director of the Company since 2000.
Robert W. Brown, age 45, has been a self-employed consultant as president
of Brown Financial Consulting, LLC in Corvallis, Oregon since July 1999. Mr.
Brown served as the Company's executive vice
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president, chief financial officer and treasurer from July 1993 to July 1999. He
has been a director of the Company since 2000.
Roger B. Hammock, age 54, is a self-employed consultant and has been the
president of San Pasqual Investors in Pasadena, California since April 1990. He
was the founder and chief executive officer of two firms involved in the
distribution and sale of technology related items.
David R. Willensky, age 50, has been the managing director of The Advisory
Group, a business strategy consulting firm based in Omaha, Nebraska, since he
founded that company in 1998. Mr. Willensky was senior vice president, corporate
planning and development for ConAgra, Inc. from 1994 to 1998. He also served as
Managing Director of California Strategic Investors, LLC, an acquisition
advisory firm, from 1991 to 1994. Prior to 1991, Mr. Willensky was a partner
with McKinsey & Company, Inc., a management consulting firm. He has been a
director of the Company since 2000.
Richard J. Schneider, age 43, became President in April 2000 and has served
as the Chief Operating Officer since July 1999. Mr. Schneider joined the Company
in December 1997 as the Vice President of Game Development and became a Vice
President and Chief Operating Officer in July 1999. From September 1995 to
December 1997, Mr. Schneider was the vice president of game engineering for
Casino Data Systems. Mr. Schneider is also on the Board of Directors of GAMMA, a
non-profit industry group.
Reed M. Alewel, age 36, became Senior Vice President in July 2000, became
Secretary in November 1999 and has served as Chief Financial Officer and
Treasurer since July 1999. Mr. Alewel joined the Company in October 1996 as
Controller and Assistant Secretary. Mr. Alewel was the manager of financial
planning and analysis for the American Italian Pasta Company, a food
manufacturing company, from May 1992 to October 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES.
BOARD ACTIONS AND COMPENSATION OF DIRECTORS
During the fiscal year ended June 30, 2000, the Board of Directors met 9
times. Each director attended a majority of the meetings of the Board of
Directors and committees on which he or she served during the time such person
was a director.
Non-employee directors receive an annual fee of $25,000 and $1,000 per
board meeting or committee meeting (other than committee meetings held in
connection with a board meeting or meetings conducted via conference calls) plus
expenses. Non-employee directors also receive options to purchase 7,500 shares
of the Company's Common Stock at a price equal to fair market value on the date
they are first elected to the board; 25 percent of those options vest
immediately; the balance over three years. In addition, non-employee directors
are granted options to purchase an additional 2,500 shares of Common Stock at
each annual meeting of stockholders after such director has served a full year.
Those options vest on the same basis as the initial option grants.
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MANAGEMENT INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth certain information for each of the fiscal
years ended June 30, 2000, 1999 and 1998 regarding compensation accrued or paid
to the Company's Chief Executive Officer and each Executive Officer who accrued
or was paid compensation in excess of $100,000 in the fiscal year ended June 30,
2000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- -------- ------- ------------
<S> <C> <C> <C> <C>
Floyd W. Glisson........................................ 2000 $300,000 $50,000 $ 9,539(1)
Chairman of the Board of Directors 1999 28,750 -- 40,531(1)
and Chief Executive Officer 1998 N/A N/A N/A
Richard J. Schneider.................................... 2000 171,667 -- --
President and Chief Operating Officer 1999 131,250 -- --
1998 1,500 -- --
Reed M. Alewel.......................................... 2000 120,000 -- 21,658(2)
Senior Vice President, Chief Financial 1999 89,947 -- 4,375(3)
Officer, Secretary and Treasurer 1998 86,198 -- 15,000(3)
John F. Acres........................................... 2000 39,018 -- 279,556(5)
Chairman of the Board of Directors(4) 1999 350,000 -- --
1998 300,000 -- --
</TABLE>
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(1) Mr. Glisson received reimbursement of certain expenses he incurred in
conjunction with his relocation to Las Vegas, Nevada.
(2) Mr. Alewel received reimbursement of certain expenses he incurred in
conjunction with his relocation to Las Vegas, Nevada.
(3) Mr. Alewel received reimbursement of certain expenses he incurred in
conjunction with his relocation to Corvallis, Oregon.
(4) In April 2000, Mr. Acres resigned as Chairman of the Board of Directors. Mr.
Acres was the Chief Executive Officer of the Company until July 1998.
(5) Mr. Acres received $38,333 under certain non-compete provisions of his
employment agreement and received $241,223 for consulting services provided
to the Company.
The following table sets forth certain information regarding options
granted during the fiscal year ended June 30, 2000, to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR OPTION
SECURITIES GRANTED TO EXERCISE TERM(4)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME OPTIONS FISCAL YEAR ($/SHARE) DATE(3) 5% 10%
---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Floyd W. Glisson............... 135,000(1) 24% $1.00 12/8/09 $219,901 $350,155
Richard J. Schneider........... 50,000(2) 9% 1.00 12/8/09 81,445 129,687
Reed M. Alewel................. 50,000(2) 9% 1.00 12/8/09 81,445 129,687
</TABLE>
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(1) Options vested upon grant.
(2) 12,500 options vested upon grant and 12,500 vested April 1, 2000. The
remaining options vest ratably on April 1, 2001 and 2002.
(3) The options expire ten years from the date of grant.
(4) Future value of current year grants assuming appreciation of 5% and 10% per
year over the ten-year option period. The actual value realized may be
greater than or less than the potential realizable values set forth in the
table.
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There were no exercises of stock options by the Named Executive Officers
during the fiscal year ended June 30, 2000. The following table sets forth the
number of securities underlying unexercised options and the value of unexercised
in-the-money options at fiscal year end.
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ---------------------------------------- ---------------------------------
<S> <C> <C>
Floyd W. Glisson................. 310,500/132,000 $101,250/$0
Richard J. Schneider............. 45,000/55,000 $18,750/$18,750
Reed M. Alewel................... 46,600/53,400 $18,750/$18,750
John F. Acres.................... 0/0 $0/$0
</TABLE>
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(1) The market price of the Company's Common Stock was $1.75 at June 30, 2000.
RETIREMENT SAVINGS PLAN
The Company maintains a profit sharing and savings plan (the "401(k) Plan")
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"), which allows employees to contribute up to 15 percent of their pre-tax
income to the 401(k) Plan. The 401(k) Plan includes a discretionary matching
contribution by the Company and provides that the Company may make an additional
discretionary contribution out of profits at the end of any year. The Company
has not made any discretionary matching contributions nor any additional
discretionary contributions under the 401(k) Plan.
STOCK OPTIONS
The Acres Gaming Incorporated 1993 Stock Option and Incentive Plan (the
"1993 Plan") was adopted by the Board of Directors of the Company and approved
by the stockholders in 1993. The 1993 Plan permits the granting of awards to
employees and consultants of the Company in the form of stock options and grants
of restricted stock. Stock options granted under the 1993 Plan may be "incentive
stock options" meeting the requirement of Section 422 of the Code or
non-qualified options which do not meet the requirements of Section 422. A total
of 1,750,000 shares of the Company's Common Stock has been reserved for issuance
pursuant to awards granted under the 1993 Plan. As of November 30, 2000, an
aggregate of 1,056,017 shares were subject to outstanding stock options, and
313,833 shares were available for grant. The exercise prices for currently
outstanding stock options range from $.94 to $15.00 per share. Options for
380,150 shares have been exercised under the 1993 Plan. No grants of restricted
stock have been made under the 1993 Plan.
The 1993 Plan is administered by the Compensation Committee of the Board of
Directors. The 1993 Plan gives broad powers to the Committee to administer and
interpret the 1993 Plan, including the authority to select the individuals to be
granted options and to prescribe the particular form and conditions of each
option granted. Options may be granted pursuant to the 1993 Plan through July
2003. The 1993 Plan may be terminated earlier by the Board of Directors in its
sole discretion.
In fiscal year 2000, the Company issued 185,000 non-qualified stock options
to certain management employees outside of the 1993 Plan. The options have an
exercise price of $1.00 which was the market price of the Company's Common Stock
on the grant date. The terms and conditions of these options were consistent
with the terms and conditions of non-qualified options issued under the 1993
Plan except 135,000 of these non-qualified options granted to Mr. Glisson vested
on grant date and will remain exercisable for the 10-year option term even if
Mr. Glisson's employment with the Company is terminated during such term.
EMPLOYMENT CONTRACTS
The Company entered into an employment agreement with Mr. John F. Acres
effective July 1, 1996, and amended on July 20, 1998 and again effective July 1,
1999 (the "Acres Employment Agreement"). The initial term of the Acres
Employment Agreement runs through June 30, 2001, subject to prior termination.
The
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Company or Mr. Acres may terminate the Acres Employment Agreement at any time.
Upon the appointment of Mr. Glisson as President and Chief Executive Officer in
fiscal 1999, Mr. Acres remained as Chairman of the Board and agreed to reduce
his Base Salary for the fiscal year ended June 30, 2000, to $50,000. In April
2000, Mr. Acres resigned as Chairman of the Board. He receives consulting fees
commensurate with the level of services Mr. Acres provides to the Company.
Consulting fees payable to Mr. Acres for fiscal year ending June 30, 2001 are
estimated to be less than $100,000.
The Acres Employment Agreement provides that upon termination, provided the
Company makes certain termination payments to Mr. Acres, Mr. Acres will not,
directly or indirectly, be connected in any manner with any business that
competes with the Company or solicit or entice or divert any customer or
supplier from the Company. The Company has elected to make such termination
payments and, if it continues to do so, such payments will amount to $225,000 in
fiscal year ending June 30, 2001.
The Company has entered into an employment arrangement with Floyd W.
Glisson pursuant to which Mr. Glisson received a base salary of $30,000 for the
fiscal year ended June 30, 1999, was awarded options to purchase 300,000 shares
of the Company's common stock that vest over a five-year period, and will
receive severance payments equal to six months' base salary upon an involuntary
termination of his employment with the Company. For the fiscal year ended June
30, 2000, Mr. Glisson's base salary was $300,000, plus a $50,000 bonus paid
ratably over the year. Currently Mr. Glisson's base salary is $350,000, plus a
bonus of up to $250,000 depending on the Company's performance as measured
against targets set by the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS AND COMPENSATION COMMITTEE INSIDER
PARTICIPATION
The Company has a standing Audit Committee and a Compensation Committee but
no Nominating Committee.
Audit Committee. In fiscal 2000, the Audit Committee initially consisted of
Donald J. Massaro, Chairman and Richard A. Carone. On March 10, 2000, Mr.
Massaro resigned from the Board of Directors and the Audit Committee. On March
24, 2000, Robert W. Brown was elected to the Audit Committee and became its
Chairman. Mr. Brown is not an independent director as required by Nasdaq rules
because he was Executive Vice President, Chief Financial Officer and Treasurer
of the Company from July 1993 to July 1999. The Board of Directors has
determined that Mr. Brown's membership on the Audit Committee is in the best
interests of the Company and its stockholders because of Mr. Brown's financial
expertise and industry experience as the Company's previous Chief Financial
Officer.
The Audit Committee reviews and makes recommendations to the Board
regarding services provided by the independent accountants, reviews with the
independent accountants the scope and results of their annual examination of the
Company's consolidated financial statements and any recommendations they may
have, and makes recommendations to the Board with respect to the engagement or
discharge of the independent accountants. The Audit Committee also reviews the
Company's procedures with respect to maintaining books and records, the adequacy
and implementation of internal auditing, accounting and financial controls, and
the Company's policies concerning financial reporting and business practices.
The Audit Committee: reviewed and discussed the audited financial statements
with management; discussed with the independent auditors the matters required to
be discussed under SAS 61; reviewed the written disclosures and the letter from
the independent accountants required by Independence Accounting Standards No. 1
and discussed with the independent accountants, the independent accountants
independence; and, based on such review and discussions, recommended that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended June 30, 2000. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is attached to the
Proxy Statement as Appendix 1.
Audit Committee Chairman
Robert W. Brown
Richard A. Carone
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Compensation Committee. In fiscal 2000, the Compensation Committee
initially consisted of Richard A. Carone, Chairman, and Donald J. Massaro. On
March 10, 2000, Mr. Massaro resigned from the Board of Directors and the
Compensation Committee. Ms. Jo Ann Acres was elected to the Compensation
Committee on April 24, 2000. In July 2000, Mr. Brown replaced Ms. Acres on the
Compensation Committee when she resigned from the Board of Directors and the
Compensation Committee. Ms. Acres is the spouse of John Acres, the former
Chairman of the Board of Directors. Mr. Brown is the former Executive Vice
President and Chief Financial Officer of the Company. The Compensation Committee
makes recommendations to the Board regarding officers' compensation, management
incentive compensation arrangements and administers the Company's Stock Option
and Incentive Plan.
REPORT ON EXECUTIVE COMPENSATION
The underlying objectives of the Company's compensation strategy are to
attract and retain the best possible executive talent, to motivate those
executives to achieve optimum operating performance for the Company, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions as well as overall
business results. There are three components to the Company's executive
compensation: base salary, long-term incentives in the form of stock options,
and incentive (bonus) payments.
Base Salary. Base salary for each executive officer, other than those for
Mr. Glisson, was subjectively determined by an assessment of his or her
sustained performance, advancement potential, experience, responsibility, scope
and complexity of the position, and current salary in relation to salary levels
for comparable positions in the industry, based on the Company's general
awareness of such salary levels. Mr. Glisson's compensation for the fiscal year
ended June 30, 2000, is based on his employment arrangement effective July 1,
1999, as amended.
Long-Term Incentives. Stock options have been granted to the Chairman and
other executive officers to encourage management of the Company from the
perspective of an owner with an equity interest in the Company. Vesting is used
to encourage key employees to continue in the employ of the Company.
Annual Incentives. Certain members of management may participate in an
annual incentive plan, the goals of which are determined annually by the
Company's Board of Directors. No payments under the annual incentive plan were
made in the fiscal year ended June 30, 2000.
Chief Executive Officer. Mr. Glisson's compensation is based on his
employment arrangement with the Company and has bonus provisions related to the
Company's performance. Mr. Glisson's compensation as set forth in his employment
arrangement is derived from the value of his industry expertise and the
compensation of comparable industry executives.
Compensation Committee Chairman
Richard A. Carone
Robert W. Brown
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PERFORMANCE GRAPH
The following graph compares total cumulative return to holders of the
Company's Common Stock with the cumulative total return of the Nasdaq US Stock
Market and a peer group index created by the Company for the five year period
ended June 30, 2000. The Company uses a peer group (the "Peer Group") which
consists of the following companies: Shuffle Master, Alliance Gaming
Corporation, Casino Data Systems, International Game Technology, Mikohn Gaming
Corporation, WMS Industries, Anchor Gaming and Innovative Gaming Corp. of
America.
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 6/30/95)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS 6/30/95 6/30/96 6/30/97 6/30/98 6/30/99 6/30/00
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACRES GAMING
INCORPORATED $100.00 $120.97 $112.91 $64.52 $25.81 $ 22.58
PEER GROUP $100.00 $192.30 $228.83 $319.46 $218.36 $286.72
NASDAQ COMPOSITE $100.00 $127.57 $155.73 $205.46 $292.32 $432.51
---------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested in the Company's Common Stock, the Nasdaq Stock
Market and the Peer Group, with all dividends reinvested. Stock price shown
above for the Common Stock is historical and not necessarily indicative of
future price performance.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers, directors and persons who
own more than 10 percent of the Common Stock of the Company file with the
Securities and Exchange Commission (the "SEC") initial reports of beneficial
ownership on Form 3 and reports of changes of beneficial ownership of Common
Stock and other equity securities of the Company on Form 4 and Form 5. Officers,
directors and holders of more than 10 percent of the Company's Common Stock are
required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. To the Company's knowledge, based solely on a
review of copies of such reports furnished to the Company and written
representation that no other reports are required, during the 2000 fiscal year
all Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with by such persons.
8
<PAGE> 12
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of the Company's Common Stock by each director of the
Company, by each Named Executive Officer, by all directors and executive
officers of the Company as a group, and by each stockholder who is known by the
Company to own more than 5 percent of the Company's Common Stock as of November
30, 2000.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING(2)
---------------- --------------------- --------------
<S> <C> <C>
Floyd W. Glisson.................................... 424,500(3) 4.6%
Ronald G. Bennett................................... 1,875(4) *
Robert W. Brown..................................... 153,750(5) 1.7%
Richard A. Carone................................... 25,625(6) *
Roger B. Hammock.................................... 10,700(7) *
David R. Willensky.................................. 22,775(8) *
Richard J. Schneider................................ 50,000(9) *
Reed M. Alewel...................................... 51,109(10) *
All directors and executive officers
as a group (8 persons)............................ 740,334(11) 7.7%
John F. and Jo Ann Acres............................ 1,965,154(12) 22.0%
IGT................................................. 2,236,745(13) 20.0%
</TABLE>
---------------
* Less than 1%.
(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person has
the right to acquire beneficial ownership of such security within 60 days,
including, but not limited to, any right to acquire such security through
the exercise of any option or warrant or through the conversion of a
security. Each person has sole voting and sole dispositive power with
respect to all outstanding shares, except as noted.
(2) Based on 8,946,981 shares outstanding at November 30, 2000. Any securities
not outstanding that are subject to options or warrants held by a person
shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such person, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
(3) Includes 81,000 shares owned jointly with Mr. Glisson's wife as trustees of
the Glisson Family Trust, with respect to which Mr. Glisson has shared
voting and shared dispositive powers and 343,500 shares subject to options
exercisable within 60 days of November 30, 2000.
(4) Includes 1,875 shares subject to options exercisable within 60 days of
November 30, 2000.
(5) Includes 2,000 shares Mr. Brown holds as trustee for the benefit of his
minor children, with respect to which he has sole voting and dispositive
powers. Includes 151,750 shares subject to options exercisable within 60
days of November 30, 2000.
(6) Includes 10,625 shares subject to options exercisable within 60 days of
November 30, 2000.
(7) Includes 4,000 shares owned jointly with Mr. Hammock's wife with respect to
which Mr. Hammock has shared voting and shared dispositive powers and 1,200
shares held as trustee for the benefit of his minor children.
(8) Includes 300 shares held by Mr. Willensky's wife with respect to which he
has no voting or dispositive powers and 1,875 shares subject to options
exercisable within 60 days of November 30, 2000.
(9) Includes 50,000 shares subject to options exercisable within 60 days of
November 30, 2000.
(10) Includes 2,000 shares owned jointly with Mr. Alewel's wife and 339 shares
held as trustee for the benefit of his minor children, with respect to
which Mr. Alewel has shared voting and shared dispositive powers. Also
includes 620 shares held by Mr. Alewel's wife with respect to which he has
no voting or dispositive powers. Includes 46,600 shares subject to options
exercisable within 60 days of November 30, 2000.
(11) Includes 606,225 shares subject to options exercisable within 60 days of
November 30, 2000.
(12) Includes 1,760,866 shares held by the John and Jo Ann Acres 1989 Living
Trust, a revocable trust established by Mr. Acres and Mrs. Acres, with
respect to which Mr. Acres and Mrs. Acres have shared voting and shared
dispositive powers. Also includes 204,288 shares beneficially owned by
their children who reside in their household, with respect to which Mr.
Acres and Mrs. Acres have no voting or dispositive powers.
(13) Shares issuable on conversion of Series A Convertible Preferred Stock owned
by IGT based on the conversion price in effect on November 30, 2000 subject
to ownership limitations contained in the Stock Purchase Agreement between
IGT and the Company pursuant to which IGT purchased 519,481 shares of
Series A Stock. The Stock Purchase Agreement restricts IGT's ownership of
9
<PAGE> 13
the Company's Common Stock. Without the consent of the Company, IGT may not
own more than 20% of the outstanding Common Stock, including, for purposes
of the calculation, the shares of Common Stock into which the Series A
Stock owned by IGT is convertible. The Company believes that this provision
operates to limit IGT's right to convert shares of Series A Stock as well
as limiting IGT's rights to purchase additional shares of Common Stock. IGT
has asserted that the agreement does not limit the number of shares into
which the Series A Stock may be converted. If there were no limit on IGT's
right to convert shares of Series A Stock into Common Stock, as of November
30, 2000, the Series A Stock could have been converted into 3,006,615
shares of Common Stock, or 25.2% of the then outstanding Common Stock.
PROPOSAL NO. 2 -- RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders ratify the
appointment of Arthur Andersen LLP as independent public accountants to examine
the financial statements of the Company for the fiscal year ending June 30,
2001. The firm of Arthur Andersen LLP has served as the Company's public
accountants since 1993. A representative of Arthur Andersen LLP will be present
at the Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions from
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY.
PROPOSALS OF SHAREHOLDERS
Any stockholder wishing to have a proposal considered for inclusion in the
proxy materials for the Company's 2001 Annual Meeting of Stockholders must set
forth such proposal in writing and file it with the Secretary of the Company no
later than a reasonable time before the Company begins to print and mail its
proxy materials for the Company's 2001 Annual Meeting of Stockholders. In
addition, if the Company receives notice of a shareholder proposal later than a
reasonable time before the Company mails its proxy materials for the Company's
2001 Annual Meeting of Stockholders, the persons named as proxies in the proxy
statement and accompanying proxy will have discretionary authority to vote on
that shareholder proposal.
OTHER BUSINESS
At the date of this Proxy Statement, management knows of no other business
that may properly come before the Annual Meeting. However, if any other matters
properly come before the meeting, the persons named in the enclosed form of
proxy will vote the proxies received in response to this solicitation in
accordance with their best judgment on such matters.
INCORPORATION BY REFERENCE
The Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report to Stockholders for the fiscal year ended June 30, 2000, transmitted with
the Proxy Statement, are hereby incorporated by reference. No other portions of
the Annual Report shall be deemed incorporated herein.
10
<PAGE> 14
FINANCIAL INFORMATION
THE COMPANY'S 2000 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THESE
MATERIALS. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED JUNE 30, 2000, MAY BE OBTAINED FROM THE COMPANY WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY. REQUESTS SHOULD BE DIRECTED TO THE CHIEF
FINANCIAL OFFICER, ACRES GAMING INCORPORATED, 7115 AMIGO STREET, SUITE 150, LAS
VEGAS, NEVADA 89119.
By Order of the Board of Directors
Reed M. Alewel
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
January 15, 2001
11
<PAGE> 15
APPENDIX 1
ACRES GAMING INCORPORATED
AUDIT COMMITTEE CHARTER
JUNE 14, 2000
I. GENERAL FUNCTIONS, AUTHORITY AND ROLE
The audit committee is a committee of the board of directors. Its primary
function shall be to assist the board in fulfilling its oversight
responsibilities by reviewing the financial information to be provided to the
stockholders and others, the systems of internal controls that management and
the board of directors have established, and the company's audit process.
The audit committee shall have the power to conduct or authorize
investigations into any matters within the committee's scope of
responsibilities. In connection with such investigations or otherwise in the
course of fulfilling its responsibilities under this charter, the audit
committee shall have the authority to retain special legal, accounting, or other
consultants to advise it, and may request any officer or employee of the
company, its outside legal counsel or outside auditor to attend a meeting of the
audit committee or to meet with any members of, or consultants to, the audit
committee.
The company's outside auditor shall be accountable to the board of
directors and to the audit committee, and the board of directors and audit
committee shall have the authority and responsibility to select, evaluate, and,
where appropriate, replace the outside auditor. In the course of fulfilling its
specific responsibilities hereunder, the audit committee shall strive to
maintain an open avenue of communication between the company's outside auditor
and the board of directors.
The responsibilities of a member of the audit committee shall be in
addition to such member's duties as a member of the board of directors.
While the audit committee shall have the responsibilities and powers set
forth in this charter, it shall not be the duty of the audit committee to plan
or conduct audits or to determine whether the company's financial statements are
complete, accurate, or in accordance with generally accepted accounting
principles. These are the responsibilities of management and the outside
auditor. Nor shall it be the duty of the audit committee to conduct
investigations, to resolve disagreements, if any, between management and the
outside auditor, or to assure compliance with laws and regulations or the
company's own policies or code of conduct.
II. MEMBERSHIP
The membership of the audit committee shall initially consist of at least
two members of the board of directors who shall serve at the pleasure of the
board of directors and after July 14, 2001, shall consist of at least three
members of the board of directors. The membership of the audit committee shall
meet the independence and financial literacy and experience requirements of The
Nasdaq Stock Market, Inc. or similar requirements of such other securities
exchange or quotation system as may from time to time apply to the company.
Audit committee members and the committee chair shall be designated by the
full board of directors upon the recommendation of the nominating committee.
III. RESPONSIBILITIES
The responsibilities of the audit committee shall be as follows:
A. General
1. Meet at least twice per year, or more frequently as circumstances or the
obligations of the audit committee require.
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<PAGE> 16
2. Report audit committee actions to the board of directors with such
recommendations as the committee may deem appropriate.
3. Annually review and reassess the adequacy of this charter and submit it
to the board of directors for approval.
4. Perform such functions as may be assigned by law, the company's
certificate of incorporation or bylaws, or the board of directors.
B. Outside Auditor
1. As necessary, consider with management and the outside auditor the
rationale for employing audit firms other than the principal outside auditor.
2. Recommend to the board of directors the outside auditor to be nominated,
approve the compensation of the outside auditor, and, as necessary, review and
approve the discharge of the outside auditor.
3. Take reasonable steps to confirm the independence of the outside
auditor, which shall include:
a. Ensuring receipt from the outside auditor a formal written
statement delineating all relationships between the outside auditor and the
company, consistent with Independence Standards Board Standard No. 1.
b. Discussing with the outside auditor any disclosed relationships or
services that may affect the objectivity and independence of the outside
auditor.
c. As necessary, taking, or recommending that the board of directors
take, appropriate action to oversee the independence of the outside
auditor.
C. Audit Process and Results
1. Consider, in consultation with the outside auditor, the audit scope and
plan of the internal auditors and the outside auditor.
2. Review with the outside auditor the coordination of the audit effort to
assure completeness of coverage, reduction of redundant efforts, and the
effective use of audit resources.
3. Consider and review with the outside auditor:
a. The adequacy of the company's internal controls including
computerized information system controls and security.
b. Any related significant findings and recommendations of the outside
auditor together with management's responses thereto.
c. The matters required to be discussed by Statement on Auditing
Standards No. 61, as the same may be modified and supplemented from time to
time.
4. Review and discuss with management and the outside auditor at the
completion of the annual examination:
a. The company's audited financial statements and related footnotes.
b. The outside auditor's audit of the financial statements and their
report thereon.
c. Any significant changes required in the outside auditor's audit
plan.
d. Any serious difficulties or disputes with management encountered
during the course of the audit.
e. Other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing standards.
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<PAGE> 17
5. Consider and review with management:
a. Significant findings during the year and management's responses
thereto.
b. Any difficulties encountered in the course of the outside auditor's
audits, including any restrictions on the scope of their work or access to
required information.
c. Any changes required in the planned scope of the audit plan.
6. Inquire of management and the outside auditor about significant risks or
exposures and assess the steps management has taken to minimize such risks to
the company.
7. Meet with the outside auditor and management in separate executive
sessions to discuss any matters that the committee or these groups believe
should be discussed privately with the audit committee.
D. Securities and Exchange Commission Filings
1. Review filings with the Securities and Exchange Commission and other
published documents containing the company's financial statements.
2. Review with management and the outside auditor: a) the interim financial
reports before they are filed with the Securities and Exchange Commission; b)
the draft of the quarterly earnings release before they are released to the
public; and c) the results of the auditor's interim or annual review before it
is filed with the Securities and Exchange Commission.
3. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the company's annual proxy statement.
E. Internal Controls and Legal Matters
1. Review the company's policies and procedures with respect to officers'
expense accounts and perquisites, including their use of corporate assets, and
consider the results of any review of these areas by the outside auditor.
2. Review legal and regulatory matters that may have a material impact on
the financial statements and review related company compliance policies.
-3-
<PAGE> 18
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 21, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Floyd W. Glisson and Richard J.
Schneider, and each of them, as Proxies, with full power of substitution, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Acres Gaming Incorporated held of record by the
undersigned on December 29, 2000, at the Annual Meeting of Stockholders to be
held on February 21, 2001 or at any adjournment thereof.
1. ELECTION OF DIRECTORS. Election of the following nominees to serve as
directors each for a one-year term or until his or her successor is duly
elected.
<TABLE>
<CAPTION>
<S> <C> <C>
(a) FLOYD W. GLISSON [ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
(b) RONALD G. BENNETT [ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
(c) ROBERT W. BROWN [ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
(d) ROGER B. HAMMOCK [ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
(e) DAVID R. WILLENSKY [ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
</TABLE>
--------------------------------------------------------------------------------
2. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS. Ratify the selection
of Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending June 30, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy, when properly
executed, will be voted in the manner directed herein by the undersigned. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" EACH NOMINEE IN ITEM 1 AND
"FOR" ITEM 2.
Please sign below exactly as your name appears
on your stock certificate. When shares are
held jointly, each person should sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. An authorized person should sign on
behalf of corporations, partnerships and
associations and give his or her title.
Dated: , 2001
----------------------------------
----------------------------------------------
Signature
----------------------------------------------
Signature if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL HELP SAVE
THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
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