<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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
ANCHOR GAMING
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
ANCHOR GAMING
815 PILOT ROAD, SUITE G
LAS VEGAS, NEVADA 89119
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 23, 1998
------------------------
As a stockholder of Anchor Gaming, you are hereby given notice of and
invited to attend in person or by proxy the Annual Meeting of Stockholders of
the Company to be held at 815 Pilot Road, Suite G, Las Vegas, Nevada 89119, on
Monday, November 23, 1998, at 10:00 a.m. local time, for the following purposes:
1. To elect directors, each for a one-year term.
2. To approve an amendment to the Anchor Gaming 1995 Employee Stock Option
Plan to increase by 100,000 the number of shares of Common Stock as to
which options may be granted under the plan.
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on September 28, 1998
as the record date for the determination of stockholders entitled to notice of
and to vote at such meeting and any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING, TO ASSURE YOUR SHARES ARE REPRESENTED AT THE
MEETING, PLEASE DATE, EXECUTE, AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE FOR WHICH NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
By Order of the Board of Directors
[SIGNATURE]
Thomas J. Matthews
EXECUTIVE VICE PRESIDENT AND SECRETARY
Las Vegas, Nevada
October 23, 1998
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
<PAGE>
ANCHOR GAMING
815 PILOT ROAD, SUITE G
LAS VEGAS, NEVADA 89119
------------------------
PROXY STATEMENT
---------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 23, 1998
This Proxy Statement is furnished to stockholders of Anchor Gaming, for use
at the 1998 Annual Meeting of Stockholders to be held at the date, time, and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders, or at any adjournment of the Annual Meeting. The
enclosed proxy is solicited on behalf of the Board of Directors of the Company.
A stockholder executing the accompanying proxy has the right to revoke it at any
time prior to its being voted by notifying the Secretary of the Company at the
above address in writing, executing a subsequent proxy, or attending the meeting
and voting in person. Unless a contrary choice is indicated, all duly executed
proxies received by the Company will be voted in accordance with the
instructions set forth on the proxy card. The record date for stockholders
entitled to vote at the Annual Meeting is the close of business on September 28,
1998 (the "Record Date"). The approximate date on which this Proxy Statement and
the enclosed proxy are first being sent or given to stockholders is October 23,
1998.
VOTING PROCEDURES
The election of directors will be decided by a plurality of the votes cast.
All other matters will be determined by a majority of the votes cast. The
holders of a majority of all of the shares of stock entitled to vote at the
Annual Meeting, present in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. If a quorum is not present, the
Annual Meeting may be adjourned from time to time without further notice, if the
time and place of the adjourned meeting are announced at the meeting, until a
quorum is obtained. Shares as to which authority to vote has been withheld with
respect to the election of any nominee for director will not be counted as a
vote for such nominee. Abstentions and broker nonvotes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders to determine the total number of votes cast.
Abstentions are not counted as votes for or against any such proposals. Broker
nonvotes are not counted as votes cast for purposes of determining whether a
proposal has been approved.
Stockholders are urged to sign the enclosed proxy and return it promptly.
All shares represented by a signed proxy, if not previously revoked, will be
voted in accordance with the directions on such proxy. If no directions are
given to the contrary, the shares of common stock represented by such proxy will
be voted FOR the director nominees. The Company does not anticipate that any
matters other than those set forth in the accompanying notice will be presented
at the Annual Meeting. However, if other matters are properly presented at the
Annual Meeting, the proxies named in the accompanying proxy card will vote the
shares represented by such proxy card in accordance with their best judgment.
Only holders of record on the Record Date are entitled to notice of, and to
vote at, the Annual Meeting. The total outstanding capital stock of the Company
as of September 28, 1998 consisted of 12,423,532 shares of Common Stock. Each
share of Common Stock is entitled to one vote.
1
<PAGE>
MATTERS TO BE BROUGHT BEFORE THE MEETING
ELECTION OF DIRECTORS
The current number of members of the Board of Directors is six. Members of
the Board of Directors serve for a one-year term that expires at the 1999 Annual
Meeting or when a successor is elected and qualified. The election of directors
will be decided by a plurality of the votes cast.
The nominees for director are Stuart D. Beath, Michael B. Fulton, Stanley E.
Fulton, Glen J. Hettinger, Elizabeth F. Jones, and Michael D. Rumbolz. All of
the nominees are members of the present Board of Directors. The Board believes
that the nominees will be available and able to serve as directors. If any
nominee is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute as the Board may recommend, the Board
may reduce the number of directors to eliminate the vacancy, or the Board may
fill the vacancy at a later date after selecting an appropriate nominee.
Information with respect to the nominees is set forth in the section of this
Proxy Statement entitled "Management--Directors and Executive Officers."
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
AMENDMENT TO THE ANCHOR GAMING 1995 EMPLOYEE STOCK OPTION PLAN
PROPOSED AMENDMENT. The Board has approved, subject to the approval of the
stockholders of the Company, an amendment to the Anchor Gaming 1995 Employee
Stock Option Plan (the "Plan") to increase the number of shares of Common Stock,
as to which options may be granted under the Plan by 100,000 shares from the
existing limit of 1,125,000 shares to 1,225,000 shares.
The Board believes that the Plan is a significant part of the Company's
total compensation program. The objective of the Plan is to improve the ability
of the Company to attract and retain the most capable individuals to serve as
employees, executive officers and directors of the Company and to encourage a
sense of ownership among such individuals. The Board believes that a significant
portion of employee compensation should be dependent on value created for
stockholders.
As of October 13, 1998, options to purchase an aggregate of 1,069,000 shares
(having an aggregate market value as of October 13, 1998 of $50,243,000) have
been issued under the Plan to a total of 71 Plan participants. As a result,
absent approval of the proposed amendment to the Plan, only 56,000 shares remain
available for issuance upon exercise of new options that may be granted under
the Plan. The Board believes that, in order to continue the effectiveness of the
Plan in achieving its objectives, the number of shares as to which options may
be granted should be increased so that a greater number of new options may be
granted in the future. At this time, it is not determinable what future options
may be granted to any particular Plan participants as a result of the proposed
amendment to the Plan, but the Company anticipates that some portion of the
newly authorized options may be granted to existing directors and officers of
the Company.
SUMMARY OF THE PLAN. Pursuant to the Plan, the Stock Option Committee of
the Board may award non-qualified stock options to purchase shares of Common
Stock to certain of its employees and directors. Awards will be made in the sole
discretion of the Stock Option Committee based upon the Company's policies as
are in effect from time to time. All of the approximately 920 employees of the
Company and all non-employee directors (other than members of the Stock Option
Committee) are eligible to participate in the Plan. The purpose of option awards
is to provide incentive to the Company's employees to increase stockholder value
through ownership of shares of Common Stock. Options under the Plan must be
granted at an exercise price equal to fair market value on the date of the
grant. Plan options become exercisable in either quarterly or yearly
installments, generally over a period of five years from the date of grant if
the option holder remains with the Company; however some options may vest over a
shorter period or varying
2
<PAGE>
installments. The term of the options granted under the Plan is ten years from
the date of the grant. The Company grants options under the Plan as part of the
Plan participant's total compensation and therefore does not receive monetary
consideration for the grant of options, but only upon payment of the exercise
price.
FEDERAL INCOME TAX CONSEQUENCES. Under present law and regulations, there
are no tax consequences to the Company at the time an option agreement is
entered into and options are granted under the Plan, nor at the time when
options vest for any participant. At the time Common Stock is issued on the
exercise of an option, the Company is entitled to an ordinary compensation
deduction in an amount equal to the excess of the fair market value of the
Common Stock on the date of exercise over the option price with respect to such
amount, and will be obligated to withhold and remit to the Internal Revenue
Service the Company's and employee's share of federal employment taxes with
respect to such amount, as well as regular federal income tax withholding.
Options granted under the Plan are not subject to any provisions of the Employee
Retirement Security Act of 1974, as amended, or the qualification requirements
of Section 401(a) of the Internal Revenue Code.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE PROPOSED AMENDMENT TO THE PLAN
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 28, 1998, the beneficial
ownership of each current director, each nominee for director, each executive
officer included in the Summary Compensation Table, the directors and executive
officers as a group, and each stockholder known to management to own
beneficially more than 5% of the Common Stock
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER (1) OF COMMON STOCK CLASS
- ------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Stuart D. Beath (2).......................................... 12,000 *
FMR Corp. (3)................................................ 703,790 5.7%
Michael B. Fulton (4)........................................ 300,000 2.4%
Stanley E. Fulton (5)........................................ 5,130,544 41.3%
Glen J. Hettinger (6)........................................ 2,500 *
Elizabeth F. Jones (7)....................................... 300,000 2.4%
Thomas J. Matthews (8)....................................... 46,250 *
Joseph Murphy (9)............................................ 32,500 *
Michael D. Rumbolz (10)...................................... 122,500 1.0%
Geoffrey A. Sage (11)........................................ 5,000 *
All executive officers and directors as a group (9 persons)
(12)........................................................ 5,351,294 43.1%
</TABLE>
- ------------------------
* Less than 1%.
(1) Unless otherwise noted, and subject to community property laws, where
applicable, the persons in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them. The address for each listed person other than FMR Corp. is c/o Anchor
Gaming, 815 Pilot Road, Suite G, Las Vegas, NV 89119.
(2) Includes 1,000 shares with respect to which Mr. Beath shares voting and
dispositive power with his wife. Includes 11,000 shares that may be acquired
upon the exercise of options exercisable within the next 60 days.
(3) FMR Corp. is the holding company for an institutional investor, Fidelity
Management & Research Company. The information included herewith is based
upon publicly available information.
3
<PAGE>
FMR Corp's. address is 82 Devonshire Street, Boston, MA 02109-3614. Number
of shares held is as of September 10, 1998 as filed on Schedule 13G.
(4) Includes 300,000 shares as to which Mr. Fulton's father, Stanley E. Fulton,
exercises voting power pursuant to an irrevocable proxy.
(5) Includes 1,808,000 shares owned by Stanley E. Fulton's six children and an
unaffiliated third party for which Mr. Fulton exercises voting power
pursuant to irrevocable proxies.
(6) Includes 2,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(7) Includes 520 shares with respect to which Ms. Jones holds voting and
dispositive powers with her husband and minor children and 26,000 shares
with respect to which Ms. Jones holds voting and dispositive power with her
brother and a limited partnership. Includes 300,000 shares as to which Ms.
Jones' father, Stanley E. Fulton, exercises voting power pursuant to an
irrevocable proxy.
(8) Includes 33,750 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(9) Includes 2,500 shares with respect to which Mr. Murphy shares voting and
dispositive power with his wife. Includes 30,000 shares that may be acquired
upon the exercise of options exercisable within the next 60 days.
(10) Includes 122,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(11) Includes 5,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(12) Includes 204,750 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
4
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the current
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Stuart D. Beath............................ 39 Director
Michael B. Fulton.......................... 39 Director
Chairman of the Board, Chief Executive Officer and
acting Chief Financial Officer
Stanley E. Fulton.......................... 67
Glen J. Hettinger.......................... 41 Director
Elizabeth F. Jones......................... 42 Director
Thomas J. Matthews......................... 32 Executive Vice President and Secretary
Joseph Murphy.............................. 47 Vice President Casino Operations
Michael D. Rumbolz......................... 44 President, Chief Operating Officer and Director
Geoffrey A. Sage........................... 38 Corporate Controller
</TABLE>
STUART D. BEATH. Mr. Beath was elected as a director of the Company in
April 1994. Mr. Beath has been a private consultant since March 1997. Mr. Beath
served as First Vice President at Stifel, Nicolas & Company, Inc., an investment
bank, from April 1993 until March 1997. Prior to that time, Mr. Beath served in
the corporate finance department at A.G. - Edwards & Sons, Inc. for six years,
in various capacities, with the most recent being as an officer of the firm.
MICHAEL B. FULTON. Mr. Fulton was elected as a director of the Company in
August 1995. Mr. Fulton has served as President of Keytrust Human Resources, a
provider of outsourced human resources, since June 1997, and as President of
IllumiQuest, Inc., a developer of educational based entertainment products,
since January 1994. Prior to that time, Mr. Fulton served as Executive Vice
President and director of Anchor Coin, a subsidiary of the Company.
STANLEY E. FULTON. Mr. Fulton serves as Chairman of the Board, Chief
Executive Officer and acting Chief Financial Officer of the Company. Prior to
the Company's initial public offering in January 1994, Mr. Fulton also served as
President of the Company. Mr. Fulton has also served as Chairman of the Board,
President and Chief Executive Officer of Anchor Coin, a subsidiary of the
Company responsible for the Company's gaming machine route operations and
development of the Colorado Central Station Casino, since its inception in 1988.
Immediately prior to forming Anchor Coin, Mr. Fulton was Chairman of the Board
and President of Gaming and Technology, Inc., the predecessor of Alliance
Gaming, Inc.
GLEN J. HETTINGER. Mr. Hettinger was elected as a director of the Company
in August 1997. Mr. Hettinger is a partner at the law firm of Hughes & Luce,
L.L.P., Dallas, Texas, where he has practiced corporate and securities law since
1984.
ELIZABETH F. JONES. Ms. Jones was elected as a director of the Company in
April 1994. Since November 1988, Ms. Jones has been principally engaged as a
private investor. She is the daughter of the Chairman of the Board of the
Company.
THOMAS J. MATTHEWS. Since January 1994, Mr. Matthews has served as
Executive Vice President of the Company. In September 1994, he was elected
Secretary of the Company. Mr. Matthews served as President of Global
Distributors, Inc. from August 1992 to January 1994. Prior to that time, Mr.
Matthews
5
<PAGE>
was General Manager of Global Distributors, Inc. from 1990 until 1992, and was
Sales Director of Mikohn Gaming Corporation from 1987 until 1990.
JOSEPH MURPHY. Mr. Murphy has served as Vice President in charge of both
casino and route operations of the Company since February 1996. Prior to that
time, Mr. Murphy served as General Manager of Gaming Operations of the Company
since January 1994. Mr. Murphy managed the gaming operations of Global
Distributors from May 1993 until January 1994. From 1990 until 1993, Mr. Murphy
served as General Manager of International Game Technology, Inc.'s ("IGT")
gaming machine route operations, which operated more than 1,800 machines. Mr.
Murphy held similar positions with Sunset Coin from 1989 to 1990, United Gaming
from 1988 to 1989, and IGT from 1985 to 1988.
MICHAEL D. RUMBOLZ. Mr. Rumbolz was elected as a director of the Company in
August 1995. Mr. Rumbolz serves as the President and Chief Operating Officer of
the Company, positions he has held since August 1995. Prior to joining the
Company, Mr. Rumbolz was Director of Corporate Development for Circus Circus
Enterprises, Inc. from December 1992 to July 1995. During that time, Mr. Rumbolz
was also President of Windsor Casino Limited from January to September 1994 and
Canadian Gaming & Entertainment Corp from February to July 1995. Windsor Casino
Limited is the Circus Circus/Hilton/ Caesar's consortium which opened and
operates Windsor Casino. Mr. Rumbolz also held various positions in subsidiaries
of Circus Circus. Prior to that time, Mr. Rumbolz was Executive Vice President
of Anchor Coin and DD Stud, Inc., subsidiaries of the Company, responsible for
the its gaming machine route operations, development of the Colorado Central
Station Casino and distribution of the proprietary game Double Down Stud from
July 1992 to December 1992. Prior to that time Mr. Rumbolz was a senior
executive in the Trump organization from February 1989 to June 1992. Mr. Rumbolz
is a former Chairman and Board member of the State of Nevada Gaming Control
Board.
GEOFFREY A. SAGE. Mr. Sage, a certified public accountant, joined Anchor
Gaming in July 1989 and serves as Corporate Controller of the Company. Before
joining the Company, Mr. Sage was the Controller for Frontier Savings and Loan
Association in Las Vegas for one year. Prior to that time, Mr. Sage was a senior
auditor at Citibank (Nevada), N.A. for three and one-half years and an auditor
in the Las Vegas office of Laventhol & Horwath.
SECTION 16(a) BENEFICIAL OWNER REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors, and
greater than 10% stockholders are required by certain regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it and written representations of
its directors and executive officers, the Company provides the following
information: The Company believes that all officers, directors and greater than
10% beneficial owners have complied with all applicable filing requirements with
respect to the equity securities of the Company, except that Mr. Beath filed a
late report of Form 3 with respect to one transaction in April 1998.
MEETING ATTENDANCE AND COMMITTEES OF THE BOARD
The Board of Directors met seven times during fiscal year 1998 and each
director attended at least 75% of the Board and committee meetings that each was
required to attend. The Board of Directors has standing Nominating, Audit,
Compensation, and Stock Option committees. The current members of each of the
Board's committees are listed below.
NOMINATING COMMITTEE. The Nominating Committee consists of Stanley E.
Fulton (chairperson), Stuart D. Beath, Elizabeth F. Jones and Michael B. Fulton.
The Nominating Committee is responsible for nominating candidates for election
or appointment to the positions of chief executive officer and other key
6
<PAGE>
officer and management positions and directors. The Nominating Committee met
once during fiscal year 1998.
AUDIT COMMITTEE. The Audit Committee consists of Elizabeth F. Jones
(chairperson), Stuart D. Beath, and Glen J. Hettinger. The Audit Committee is
responsible for monitoring the Company's internal audit function and its
internal accounting controls, recommending to the Board of Directors the
selection of independent auditors, considering the range of audit and non-audit
fees, and monitoring and reviewing the activities of the independent auditors.
The Audit Committee met four times during fiscal year 1998.
COMPENSATION COMMITTEE. The Compensation Committee consists of Glen J.
Hettinger (chairperson), Michael D. Rumbolz, and Michael B. Fulton. The
Compensation Committee recommends salary amounts for the Company's chief
executive officer and other executive officers and makes the final determination
regarding bonus arrangements and awards of stock options to such persons. The
Compensation Committee also advises the Board of Directors regarding principles
and philosophy to be observed by the Company in compensating directors, officers
and employees. The Compensation Committee did not meet during fiscal year 1998.
STOCK OPTION COMMITTEE. The Stock Option Committee consists of Glen J.
Hettinger (chairperson), Michael B. Fulton, and Elizabeth F. Jones. The Stock
Option Committee is responsible, together with the whole Board, for determining
the recipients and amounts of stock options granted under the Anchor Gaming 1995
Employee Stock Option Plan (the "Plan") and (subject to the provisions of the
Plan) establishing the other terms of each option grant and otherwise
administering the Plan. The Plan was administered by the entire Board of
Directors during fiscal year 1998. The Stock Option Committee did not meet
during fiscal year 1998.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the last three fiscal years to the Company's chief executive
officer and each of the Company's four other most highly compensated executive
officers (based on total annual salary and bonus for the fiscal year ending June
30, 1998), at June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF
ANNUAL COMPENSATION SECURITIES
NAME AND ----------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS GRANTED COMPENSATION
- -------------------------------------------------- ---- ---------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Stanley E. Fulton 1998 $245,000 $100,000(1) -- --
Chairman of the Board, Chief Executive Officer 1997 245,000 -- (2) -- --
and acting Chief Financial Officer 1996 245,000 100,000(3) -- --
Michael D. Rumbolz 1998 360,000 100,000(1) -- 7,890(8)
President and Chief Operating Officer 1997 360,000 100,000(4) -- 7,890(8)
1996 334,462(5) 100,000(3) 250,000 --
Thomas J. Matthews 1998 198,462 410,400(6) -- --
Executive Vice President and Secretary 1997 150,000 150,000(7) 200,000 --
1996 150,000 140,000(3) -- --
Joseph Murphy 1998 198,462 273,600(6) -- --
Vice President 1997 150,000 150,000(7) 200,000 --
1996 150,000 140,000(3) -- --
Geoffrey A. Sage 1998 96,923 40,000(9) 25,000 --
Corporate Controller 1997 80,000 24,000(9) -- --
1996 80,000 20,000(9) 5,000 --
</TABLE>
- --------------------------
(1) These bonuses are payable in December 1998, but were accrued for the fiscal
year 1998, and are subject to continued employment with the Company.
(2) Mr. Fulton forfeited his bonus that was accrued for fiscal year 1997. No
bonus was paid to Mr. Fulton for fiscal year 1997.
(3) These bonuses were paid in December 1996, but were accrued for the fiscal
year 1996.
(4) These bonuses were paid in December 1997, but were accrued for the fiscal
year 1997.
(5) Mr. Rumbolz joined the Company in July 1995.
(6) These bonuses were paid in August 1998, but were accrued for the fiscal year
1998.
(7) These bonuses were paid in July 1997, but were accrued for the fiscal year
1997.
(8) Consists of insurance premiums paid by the Company as additional
compensation.
(9) Accrued and paid on a calendar year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options to
purchase Common Stock granted in the fiscal year ending June 30, 1998 to the
individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL STOCK
SECURITIES % OF TOTAL OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO EMPLOYEES PRICE EXPIRATION ------------------------
NAME (1) OPTIONS GRANTED IN 1998 $/SHARE (1) DATE 5% (2) 10% (2)
- --------------------------------- --------------- -------------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stanley E. Fulton................ 0 0 N/A N/A N/A N/A
Michael D. Rumbolz............... 0 0 N/A N/A N/A N/A
Thomas J. Matthews............... 0 0 N/A N/A N/A N/A
Joseph Murphy.................... 0 0 N/A N/A N/A N/A
Geoffrey A. Sage................. 25,000 20% $ 55.75 12/31/07 $ 876,522 $ 2,221,279
</TABLE>
- ------------------------
(1) The exercise price in each case is the fair market value of the Common Stock
on the date of the grant.
(2) Assumed annual compounded rates of stock price appreciation of 5% (63%) and
10% (159%) over the term of the options.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning options to
purchase Common Stock by the individuals named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT JUNE 30, 1998 JUNE 30, 1998 (1)
ON VALUE -------------------------- -------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ---------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanley E. Fulton....................... 0 $ 0 0 0 $ 0 $ 0
Michael D. Rumbolz...................... 40,000 2,239,140 110,000 100,000 5,032,500 4,575,000
Thomas J. Matthews...................... 37,500 2,617,578 30,000 182,500 1,372,500 8,349,375
Joseph Murphy........................... 17,500 1,154,693 27,500 180,000 1,258,125 8,235,000
Geoffrey A. Sage........................ 15,000 976,625 2,500 35,000 114,375 1,601,250
</TABLE>
- ------------------------
(1) The value is the amount by which the market value of the underlying stock at
June 30, 1998 ($77.625) exceeds the aggregate exercise prices of the
options.
COMPENSATION OF DIRECTORS
Directors who are not employees or otherwise affiliates of the Company
receive director's fees of $1,000 for each Board meeting attended and $500 for
each committee meeting attended, as well as an annual director's fee of $1,000.
Additionally, all directors are reimbursed for certain out of pocket expenses
incurred in connection with attending Board and committee meetings.
Upon appointment to the Board of Directors Stuart D. Beath and Glen J.
Hettinger received options to purchase 20,000 shares of Common Stock and 25,000
shares of Common Stock, respectively, exercisable at the fair market value of
the Common Stock on the dates of the grants.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
Concurrent with the Company's initial public offering, the Company entered
into a five-year employment agreement with Thomas J. Matthews and Joseph Murphy.
These agreements were amended in April 1997, providing for minimum annual
compensation of $200,000. In addition, Mr. Matthews' and Mr. Murphy's agreement
provided for a one time bonus of $150,000, which bonuses were paid on July 1,
1997. Effective fiscal year 1998, Mr. Matthews and Mr. Murphy will also receive
a performance bonus of 0.6% and 0.4%, respectively, of the consolidated net
income of the Company for the fiscal year then ended, payable for any given
fiscal year on the date of the Company's public announcement of its consolidated
net income for such fiscal year. Mr. Matthews and Mr. Murphy will also receive a
bonus upon a change of control (as defined in their employment agreements) equal
to 0.6% and 0.4%, respectively, of the consolidated net income of the Company
for the period beginning with the end of the last fiscal year of the Company and
ending on the date that a change in control transaction is consummated. The
obligation of the Company to pay Mr. Matthews and Mr. Murphy a performance bonus
for fiscal years including, and subsequent to, the fiscal year for which a
change in control bonus is earned will terminate upon payment of a change in
control bonus.
In addition, upon the occurrence of certain trigger events as defined in
their employment agreements (a "Trigger Event"), Mr. Matthews and Mr. Murphy
will receive a bonus equal to 0.5% of the amount by which the fair market value
(as determined by the Board of Directors of the Company) of the consideration
received by the Company or the shareholders of the Company, as the case may be,
in a transaction involving such Trigger Event exceeds the Base Amount as of the
date that the transaction constituting such Trigger Event is consummated. The
"Base Amount" means an amount equal to $500,000,000 times the factor 1.1(n)
where "n" is the number of full years from the date of the employment agreement
until the date of the Trigger Event, except that in the event that the Trigger
Event giving rise to such determination arises from the sale by the Company of
its proprietary games division substantially as an entirety, then the
9
<PAGE>
Base Amount will be calculated by taking the amount arrived at in the foregoing
calculation and multiplying it by a fraction the numerator of which is (x) the
net income of the portion of the proprietary games division that is so sold for
the twelve-month period prior to the consummation of such sale and the
denominator of which is (y) the consolidated net income of the Company for the
twelve-month period prior to the consummation of such sale.
In accordance with the terms of their employment agreements, Mr. Matthews
and Mr. Murphy have entered into stock option agreements with the Company,
pursuant to which Mr. Matthews and Mr. Murphy have received options to purchase
up to 200,000 shares of Common Stock at an exercise price of $31.875 per share.
The stock option agreements expire on July 1, 2007. Under the terms of the stock
option agreements, 6,250 shares will vest on March 31, June 30, September 30,
and December 31 of 1999, 2000, and 2001. An additional 125,000 shares will vest
if certain performance goals established by the Board of Directors are achieved.
Notwithstanding the foregoing, all of the shares of common stock as to which
vesting has not occurred in accordance with the previously described provisions
will vest on June 30, 2005, if and only if Mr. Matthews and Mr. Murphy have been
an employee of the Company for the entire period from the date of the stock
option agreements until June 30, 2005. Under the terms of Mr. Matthews' and Mr.
Murphy's employment agreements, during July of each year prior to the expiration
of the employment agreements, the Company has agreed to discuss the grant to Mr.
Matthews and Mr. Murphy of further options to purchase common stock.
In July 1995, the Company entered into a five-year agreement with Michael D.
Rumbolz providing for minimum annual compensation of $460,000. Each of the above
agreements provides that such officer can only be terminated for "cause" as
defined in the agreement, although the agreements with Mr. Matthews and Mr.
Murphy can be terminated by the Company at any time if the Company pays three
months' severance pay, and Mr. Rumbolz can be terminated at any time if the
Company pays one year's severance pay. The agreements contain restrictive
covenants regarding the treatment of the Company's proprietary information.
Pursuant to previously granted option agreements entered into between the
Company and each of Thomas J. Matthews, Joseph Murphy, and Geoffrey A. Sage,
each such officer's options under those agreements will vest and become
immediately exercisable if Stanley E. Fulton is not the chief executive officer
of the Company. Pursuant to an option agreement between the Company and Michael
D. Rumbolz, Mr. Rumbolz's options will vest and become immediately exercisable
upon a change in control as defined in the agreement, or on December 31, 1998,
in the event that Mr. Rumbolz is not appointed as the Chief Executive Officer of
the Company on or before such date.
In no event will the Company be required to make to any of the foregoing
executives any payment under such agreements that would result, in the opinion
of tax counsel, in an "excess parachute payment" within the meaning of section
280G of the Internal Revenue Code of 1986, and the imposition of an excise tax
under Section 4999 of the Internal Revenue Code of 1986.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS OF COMPENSATION COMMITTEE MEMBERS. Mr. Hettinger is a
director of the Company and a partner at Hughes & Luce, L.L.P., which has
rendered legal services to the Company in the past and is expected to continue
to do so in the future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. At June 30, 1997, the
Company had outstanding unsecured notes payable to Stanley E. Fulton in the
aggregate principal amount of $2,800,000 which bore interest at the rate of 8%.
These notes were paid in full during the fiscal year ended June 30, 1998.
In August 1996, the Company made certain payments to an entity controlled by
an employee of the Company. These funds were used to repay a debt of $500,000
owed by the employee and his affiliate to Stanley E. Fulton.
10
<PAGE>
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for recommending to the full Board
of Directors salary amounts for the Company's chief executive officer and other
executive officers, as well as making the final determination regarding bonus
arrangements and awards of stock options to such persons.
Management believes that the gaming industry is increasing in
competitiveness, making the attraction and retention of qualified executives
more important to the overall success of the business. Compensation to
executives is designed to attract and retain talent, as well as to motivate the
performance of executives. Compensation also rewards performance that
demonstrably meets the Company's strategic, financial and operating objectives.
In the last fiscal year, executive compensation comprised the following
elements:
BASE SALARY. The base salaries for the chief executive officer and the
other executive officers of the Company were determined by an evaluation of
the credentials of such officers as well as a review of publicly available
information concerning the base salaries of executives with similar
responsibilities in companies engaged in similar businesses, including, but
not limited to, the gaming and leisure industries. The responsibilities of
each executive officer as well as the subjective evaluation of such
officer's contribution to the business were also factors in the
determination of executive compensation.
ANNUAL INCENTIVE COMPENSATION. Year-end cash bonuses are designed to
motivate the chief executive officer and the other executive officers to
achieve specific annual financial goals. At the end of each fiscal year the
Compensation Committee will assess each executive's contributions to the
Company as well as the degree to which specific annual financial, strategic,
and operating objectives were met by the Company.
STOCK OPTIONS. The Board and the Stock Option Committee believe that a
significant portion of executive compensation should be dependent on value
created for stockholders. Additionally, the Board and the Compensation
Committee believe that part of retention of superior talent is to foster a
sense of ownership in the Company. In keeping with this philosophy, from
time to time the Committee will recommend that stock options be granted to
particular officers. In the last fiscal year, certain options were granted
at fair market value on the date of the grant. These options are exercisable
in varying periods over five years. In selecting recipients for option
grants and in determining the size of such grants, the Board considers
various factors such as the earnings levels of the Company and the
contributions of the individual recipient to the Company. In addition, stock
options were awarded just after the Company's initial public offering in
order to encourage management stability over the next several years.
Executives also receive benefits typically offered to executives by
companies engaged in businesses similar to the Company, such as life and health
insurance.
1998 COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary of Stanley E. Fulton remained the same during fiscal year
1998 as compared to fiscal year 1997. Mr. Fulton's compensation was based upon
analysis of (1) the level and value of the contribution that the Board of
Directors believes Mr. Fulton, as founder of the Company, has made and can make
in the future, (2) the prominence of Mr. Fulton in the Nevada business community
in general and the gaming community in particular, (3) the annual compensation
received by chief executive officers in similar businesses, (4) the annual base
salaries currently being paid to the other executive officers and (5) the fact
that Mr. Fulton maintains a substantial ownership position in the Company.
<TABLE>
<S> <C>
Stuart D. Beath Glen J. Hettinger
Michael B. Fulton Elizabeth F. Jones
Stanley E. Fulton Michael D. Rumbolz
</TABLE>
11
<PAGE>
COMPARISON OF SHAREHOLDER RETURN
The following graph compares the cumulative total return of the Common Stock
during the period commencing January 28, 1994, the date public trading of the
Common Stock began following the Company's initial public equity offering, to
June 30, 1998, with the S&P 500 Index and the Dow Jones Industry Group
CNO-Casinos (which include 39 companies). The S&P 500 Index includes 500 United
States companies in the industrial, transportation, utilities and financial
sectors and is weighted by market capitalization.
The graph depicts the results of investing $100 in the Common Stock of the
Company (at the closing price of $14 per share on January 28, 1994, the date of
the Company's initial public offering), the S&P 500 Index and the Dow Jones
Industry Group CNO-Casinos at their closing prices on January 28, 1994. The
graph assumes that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS ANCHOR GAMING CASINOS & GAMBLING S&P COMPOSITE
<S> <C> <C> <C>
1/28/94 $100.00 $100.00 $100.00
3/31/94 110.71 87.21 93.04
6/30/94 85.71 64.34 93.44
9/30/94 128.57 72.29 98.00
12/30/94 108.93 64.27 97.99
3/31/95 116.07 80.06 107.53
6/30/95 158.93 87.20 117.79
9/29/95 180.36 81.60 127.15
12/29/95 162.50 74.02 134.82
3/29/96 230.36 89.67 142.05
6/28/96 430.36 103.40 148.43
9/30/96 444.64 87.57 153.01
12/31/96 287.50 77.19 165.77
3/31/97 199.11 69.54 170.21
6/30/97 341.07 74.93 199.93
9/30/97 633.93 88.66 214.91
12/31/97 398.21 71.27 222.09
3/31/98 530.36 80.54 251.91
6/30/98 554.46 72.27 260.23
</TABLE>
The stock price performance depicted in the corporate performance graph is
not necessarily indicative of future price performance. The corporate
performance graph will not be deemed to be incorporated by reference in any
filing by the company under the Securities Act or the Exchange Act, except to
the extent that the Company specifically incorporates the graph by reference.
STOCKHOLDER PROPOSALS
A proper proposal submitted by a Company stockholder for presentation at the
Company's 1999 Annual Stockholders Meeting and/or for inclusion in the Company's
1999 proxy statement and received at the Company's executive office by June 26,
1999 will be eligible, subject to applicable laws, for presentation at the 1999
Annual Stockholders Meeting and/or to be included in the Company's Proxy
Statement and form of Proxy relating to such Annual Meeting.
Stockholders wanting to properly submit any business at the 1999 Annual
Meeting must give written notice to the secretary of the corporation at the
address set forth on the cover page of this proxy statement.
12
<PAGE>
Stockholders wanting to present proposals for action at the 1999 Annual
Meeting of Stockholders must give written notice, in accordance with Article II,
Section 9 of the Amended and Restated Bylaws of the Company, to the Secretary of
the Company at the address set forth on the cover page of this Proxy Statement
(i) not later than 60 days following the end of the Company's fiscal year 1999
or (ii) at the close of the business day on the fifth business day following the
day public disclosure was made of the date of the Annual Meeting. Stockholder
proposals must also be presented to the Annual Meeting in person by the
stockholder submitting such proposal or a representative who is qualified under
Nevada law to present the proposal on the stockholder's behalf. The chairman
presiding at any meeting of the stockholders may, in his sole discretion, refuse
to allow a stockholder or the stockholder's representative to present any
proposal that the Company would not be required to include in a proxy statement
pursuant to any rule promulgated by the Securities and Exchange Commission.
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company. The cost of soliciting proxies on the accompanying form will be paid by
the Company. Officers or employees of the Company may solicit proxies by mail,
telephone, or facsimile. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding proxy material to beneficial owners of shares of the
Common Stock.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent certified public accountants, has been
selected by the Board of Directors as the Company's independent auditor for the
fiscal year 1999. Representatives of Deloitte & Touche, who were also the
Company's independent auditors for the fiscal year 1998, are expected to be
present at the Annual Meeting. They will have the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action
at the meeting other than the matters set forth herein. Should any other matter
requiring a vote of stockholders arise, the proxies in the enclosed form confer
upon the person or persons entitled to vote the shares represented by such
proxies discretionary authority to vote in accordance with their best judgment
in the interest of the Company.
The Company will provide, without charge, to each person to whom a copy of
this Proxy Statement is delivered, upon the written or oral request of such
person and by first class mail or other equally prompt means within one business
day of receipt of such request, a copy of the annual report on Form 10-K of the
Company. Requests should be directed to Geoffrey A. Sage, Corporate Controller,
c/o Anchor Gaming, 815 Pilot Road, Suite G, Las Vegas, Nevada 89119.
By Order of the Board of Directors,
[SIGNATURE]
Thomas J. Matthews
EXECUTIVE VICE PRESIDENT AND SECRETARY
October 23, 1998
13
<PAGE>
ANCHOR GAMING
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT 10:00 A.M., MONDAY, NOVEMBER 23, 1998
815 PILOT ROAD, SUITE G
LAS VEGAS, NEVADA 89119
The undersigned stockholder of Anchor Gaming (the "Company") hereby
revokes any proxy or proxies previously granted and appoints Stanley E. Fulton
and Michael D. Rumbolz or either of them, as proxies, each with full powers of
substitution and resubstitution, to vote the shares of the undersigned at the
above-stated Annual Meeting and at any adjournments thereof:
- FOLD AND DETACH HERE -
<PAGE>
Please mark your votes as indicated in this example /X/
1. Election of Directors.
FOR all nominees listed below (except as provided to the contrary below) / /
WITHHOLD AUTHORITY to vote for all nominees below / /
Stuart D. Beath, Michael B. Fulton, Stanley E. Fulton, Glen J. Hettinger,
Elizabeth F. Jones, and Michael D. Rumbolz.
(INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Amendment to the Anchor Gaming 1995 Employee Stock Option Plan to increase
by 100,000 the number of shares of Common Stock as to which options may be
granted under the Plan.
3. On any other business that may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A CHOICE IS NOT
INDICATED WITH RESPECT TO ITEM (1) THIS PROXY WILL BE VOTED "FOR" EACH OF THE
NOMINEES LISTED. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY
MATTER REFERRED TO IN ITEMS (2) AND (3). THIS PROXY IS REVOCABLE AT ANY TIME
BEFORE IT IS EXERCISED.
RECEIPT HEREWITH OF THE COMPANY'S ANNUAL REPORT AND NOTICE OF MEETING AND PROXY
STATEMENT, DATED OCTOBER 23, 1998, IS HEREBY ACKNOWLEDGED.
PLEASE SIGN, DATE AND MAIL TODAY.
(Signature of Stockholder(s)) _______________________________ Dated______, 1997
(Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on
this card. When signing as attorney, trustee, executor, administrator, guardian
or corporate officer, please give your FULL title.)
- FOLD AND DETACH HERE -
