SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BALLY MANUFACTURING CORPORATION
- --------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BALLY MANUFACTURING CORPORATION
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2) Aggregate number of securities to which transactions applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
--------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / 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 No.:
3) Filing Party:
4) Date Filed:
<PAGE>
(BALLY LOGO)
PRELIMINARY COPY
Manufacturing Corporation
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 17, 1994
To Our Stockholders:
The Annual Meeting of Stockholders of Bally Manufacturing Corporation
(the "Company") will be held in the Blenheim Ballroom of Bally's Park Place
Casino Hotel, Park Place and the Boardwalk, Atlantic City, New Jersey 08401,
on May 17, 1994 at 9:00 a.m. (local time) to consider and act upon the
following matters which are more fully described in the accompanying Proxy
Statement:
1. The election of three directors of Class II for three-year
terms expiring in 1997;
2. The approval of an amendment to the Company's Restated
Certificate of Incorporation to change the Company's name from Bally
Manufacturing Corporation to Bally Entertainment Corporation;
3. The approval of the Company's 1993 Non-Employee Directors'
Stock Option Plan;
4. The approval of the Company's Employee Stock Purchase Plan;
5. The approval of an amendment to the Company's 1989 Incentive
Plan to (i) increase the number of shares reserved for issuance under
such plan and (ii) limit the number of options, stock appreciation rights
or options in tandem with stock appreciation rights that may be granted
during any one calendar year to certain executive officers of the
Company;
6. A stockholder proposal regarding the long-term compensation
awards portion of the compensation of executive officers; and
7. Such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record as of the close of business on March 24, 1994 will
be entitled to notice of and to vote at the meeting and any adjournment
thereof. The transfer books will not be closed.
The Board of Directors of the Company desires to have the maximum
representation at the meeting and respectfully requests that you date, execute
and mail promptly the enclosed proxy card in the enclosed postage-paid
envelope.
By Order of the Board of Directors,
CAROL STONE DE PAUL
Secretary
Chicago, Illinois
March 30, 1994
YOUR VOTE IS IMPORTANT!
PLEASE EXECUTE, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY IN THE RETURN ENVELOPE PROVIDED.
<PAGE>
(BALLY LOGO)
Manufacturing Corporation
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 1994
To Our Stockholders:
This Proxy Statement is furnished to stockholders of Bally Manufacturing
Corporation (the "Company") for use at the Annual Meeting of Stockholders on
May 17, 1994, or at any adjournment or adjournments thereof for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
enclosed proxy is solicited on behalf of the Board of Directors of the Company
and is subject to revocation at any time prior to the voting of the proxy by
notice in writing to the Secretary of the Company or the secretary of the
meeting or by appearing and voting in person at the meeting. Unless a
contrary choice is indicated, all duly executed proxies received by the
Company will be voted (i) for the election of the nominees for director, (ii)
for approval of the amendment to the Company's Restated Certificate of
Incorporation to change the Company's name, (iii) for approval of the
Company's 1993 Non-Employee Directors' Stock Option Plan, (iv) for approval
of the Company's Employee Stock Purchase Plan, (v) for approval of the
amendment to the Company's 1989 Incentive Plan, and (vi) against the
stockholder proposal. Proxies, ballots and voting tabulations that identify
stockholders will be kept confidential, except in a contested proxy
solicitation, where necessary to meet applicable legal requirements, pursuant
to requests by any gaming regulatory agency with jurisdiction over the Company
or at the express request of the stockholder. Chemical Bank has been
appointed as the independent inspector of election for the meeting. The
approximate date on which this Proxy Statement and the enclosed proxy card are
first being sent to stockholders is March 30, 1994.
VOTING SECURITIES
The total outstanding voting stock of the Company as of March 24, 1994
consisted of __________ shares of common stock, par value 66 2/3 cents
("Common Stock"). Each share of Common Stock is entitled to one vote per
share. The record of stockholders entitled to notice of and to vote at the
Annual Meeting of Stockholders was taken at the close of business on March 24,
1994. Shares of Common Stock cannot be voted at the Annual Meeting of
Stockholders unless the holder is present in person or by proxy. The
presence, in person or by proxy, of a majority of stockholders is necessary
to constitute a quorum at the Annual Meeting of Stockholders. Abstentions and
broker non-votes are counted only for purposes of determining whether a quorum
is present at the meeting. The affirmative vote of holders of a majority of
the shares of Common Stock represented in person or by proxy at the meeting
is required to elect directors.
<PAGE>
ELECTION OF DIRECTORS AND SECURITY OWNERSHIP
At the Annual Meeting of Stockholders, three directors of Class II are
to be elected for a three-year term expiring in 1997 or until their successors
have been duly elected and qualified. Set forth below are the names of, and
certain information with respect to, the persons nominated by the Board of
Directors for election as directors of Class II. It is intended that all duly
executed proxies in the accompanying form will be voted for the election of
such nominees (or such substitute nominees as provided below), unless such
authorization has been withheld.
Authority granted to the persons named in the proxy to vote for nominees
is limited to the three nominees proposed by the Board of Directors and named
below, and proxies cannot be voted for a greater number of persons than the
number of nominees named. The Board of Directors is not aware that any of the
nominees will be unavailable for service at the date of the meeting. If, for
any reason, any of the nominees shall become unavailable for election, an
event which is not presently anticipated, discretionary authority may be
exercised by the persons named in the proxy to vote for substitute nominees
proposed by the Board of Directors.
The directors of Class I were elected at the 1993 Annual Meeting of
Stockholders for a three-year term expiring in 1996. The directors of
Class III were elected at the 1992 Annual Meeting of Stockholders for a
three-year term expiring in 1995. Information regarding the nominees for
election and the continuing directors as well as information regarding
security ownership of certain named executive officers, furnished in part by
each such person, appears below:
<PAGE>
<TABLE>
NOMINEES
Class II
For a Term Expiring in 1997
<CAPTION>
Numbers
of Shares of
Common Stock
Has Beneficially
Served as Owned as
Name, Age, Principal Occupation Director of March 1, Percent of
and Additional Information Since 1994 (1)(2) Class (1)(2)
-------------------------------- --------- ------------- ------------
<S> <C> <C> <C>
George N. Aronoff, 60
Partner in the Cleveland law firm of
Benesch, Friedlander, Coplan & Aronoff
Mr. Aronoff is a Director of Specialty
Chemical Resources, Inc. (3) 1979 95,441 *
Patrick L. O'Malley, 83
Chairman of the Board of Directors of
Michigan Avenue National Bank and the
former President and Chief Executive
Officer and present Chairman Emeritus
of Canteen Company. Mr. O'Malley is a
Director of First Colonial Bankshares,
Inc. 1981 73,806 *
Rocco J. Marano, 66
Former Chairman and Chief Executive
Officer of Bell Communications
Research, Inc. Mr. Marano is Chairman
of the Board of Blue Cross Blue Shield
of New Jersey and a Director of First
Fidelity Bancorp. 1991 10,000 *
</TABLE>
<PAGE>
<TABLE>
CONTINUING DIRECTORS
Class I
Term Expiring in 1996
<CAPTION>
Numbers
of Shares of
Common Stock
Has Beneficially
Served as Owned as
Name, Age, Principal Occupation Director of March 1, Percent of
and Additional Information Since 1994 (1)(2) Class (1)(2)
-------------------------------- --------- ------------- ------------
<S> <C> <C> <C>
James M. Rochford, 72
Retired Vice President of the Company
and Retired Superintendent of Police,
City of Chicago, Illinois. 1981 31,000 *
Barrie K. Brunet, 69
Former Vice President of Bally's Grand,
Inc. and former President and Chief
Operating Officer of Bally's Reno
Casino Resort. Mr. Brunet is a Director
of Reno Air, Inc. (4) 1991 1,000 *
J. Kenneth Looloian, 71
Executive Vice President of Di Giorgio
Corporation, former partner in Arveron
Investments, L.P. and former Executive
Vice President of International Controls
Corporation. Mr. Looloian is a Director
of Bally's Casino Holdings, Inc., Bally's
Park Place, Inc., GNAC CORP. and
Science Management Corporation. 1992 10,000 *
</TABLE>
<PAGE>
<TABLE>
Class III
Term Expiring in 1995
<CAPTION>
Numbers
of Shares of
Common Stock
Has Beneficially
Served as Owned as
Name, Age, Principal Occupation Director of March 1, Percent of
and Additional Information Since 1994 (1)(2) Class (1)(2)
-------------------------------- --------- ------------- ------------
<S> <C> <C> <C>
Arthur M. Goldberg, 52
Chairman of the Board of Directors,
Chief Executive Officer and President of
the Company, Chairman of the Board of
Directors, President and Chief Executive
Officer of Bally's Casino Holdings, Inc.,
Chairman of the Board of Directors and
Chief Executive Officer of Bally's Park
Place, Inc., Chairman of the Board of
Directors and Chief Executive Officer of
GNAC CORP., Chairman of the Board,
President and Chief Executive Officer of
Bally's Grand, Inc. and a Director of
Bally's Health & Tennis Corporation.
Mr. Goldberg is also the Chairman,
President and Chief Executive Officer of
Di Giorgio Corporation, a food
distributor, and Managing Partner of
Arveron Investments L.P. Mr. Goldberg
is the former President and Chief
Executive Officer of International
Controls Corporation. Mr. Goldberg is
also a Director of First Fidelity
Bancorp.(4)(5) 1990 2,236,300 4.8%
Edwin M. Halkyard, 59
Distinguished lecturer in Management at
the University of South Carolina College
of Business Administration and former
Senior Vice President of Allied-Signal
Inc. Mr. Halkyard is a Director of
CityFed Financial Corp. 1990 13,852 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock
Beneficially
Security Ownership of Owned as of March 1, Percent of
Named Executive Officers 1994 (1)(2) Class (1)(2)
------------------------- -------------------- ------------
<S> <C> <C>
Lee S. Hillman
Executive Vice President, Chief Financial
Officer and Treasurer of the Company 41,667 *
Wallace R. Barr
Executive Vice President and
Chief Operating Officer of
Bally's Casino Holdings, Inc., President
and Chief Operating Officer of Bally's
Park Place, Inc., President and Chief
Operating Officer of GNAC CORP. and
President of Bally's Tunica, Inc. 36,834 *
Michael G. Lucci, Sr.
President and Chief
Operating Officer of
Bally's Health & Tennis Corporation 292,849 *
Robert G. Conover
Vice President, Management Information
Systems and Chief Information Officer
of the Company 8,168 *
All executive officers and directors as a
group, 17 people (6) 2,906,327 6.2%
<FN>
* Less than one percent
</TABLE>
(1) Includes the following numbers of shares of Common Stock that the
following persons have or had, within 60 days after March 1, 1994, the
right to acquire upon the exercise of options: Mr. Goldberg 1,500,000,
Mr. Hillman 36,667, Mr. Barr 25,834, Mr. Lucci 667 and Mr. Conover 7,668;
and all current executive officers and directors, including the
foregoing, as a group 1,623,000.
(2) Includes, in certain instances, shares of Common Stock held in the name
of the director's or executive officer's spouse, minor children, or
relatives sharing his home, and in the case of Mr. Goldberg, shares held
by Nugget Partners, L.P., a New Jersey limited partnership, whose sole
general partner is Mr. Goldberg, the reporting of which is required by
applicable rules of the Securities and Exchange Commission, but as to
which shares of Common Stock the director may have disclaimed beneficial
ownership. Also includes, in certain instances, shares of Common Stock
allocated to a director or executive officer through his participation
in the Company's 401(k) program and/or profit sharing plans.
(3) Mr. Aronoff also owned, as of March 1, 1994, $13,000 principal amount of
the Company's 6% Convertible Subordinated Debentures due 1998. No other
person named above owned any such debentures as of March 1, 1994.
(4) From November 1991 to August 20, 1993, Bally's Grand, Inc. ("Bally's
Grand") operated its business and managed its properties as a debtor-in-
possession under chapter 11 of title 11 of the United States Bankruptcy
Code. The chapter 11 plan of reorganization for Bally's Grand was
confirmed on September 15, 1992, and became effective August 20, 1993,
at which time Bally's Grand emerged from bankruptcy. Mr. Goldberg is a
director of Bally's Grand and Mr. Brunet is a former director of Bally's
Grand.
(5) Mr. Goldberg also owned, as of March 1, 1994, 679,726 shares of the
common stock of Bally's Grand. Mr. Goldberg has granted an irrevocable
proxy to vote these shares to a subsidiary of the Company. Nugget
Partners, L.P owned 82,785 shares, and had exercisable warrants to
purchase 24,684 shares, of common stock of Bally's Grand.
(6) Excludes Mr. Donahue L. Wildman, former Chairman of the Board, President
and Chief Executive Officer of Bally's Health & Tennis Corporation, who
resigned from all of his offices with the Company as of September 1,
1993. See "Transactions with Management -- Arrangements with Mr.
Wildman."
As of March 10, 1994, pursuant to information supplied by FMR Corp. to
the Company on March 11, 1994, FMR Corp., through its wholly owned
subsidiaries Fidelity Management & Research Company and Fidelity Management
Trust Company, beneficially owned 5,943,740 shares of Common Stock, 12.7% of
the Common Stock outstanding as of March 10, 1994. As of such date, FMR Corp.
had sole voting power with respect to 1,714,092 shares and sole dispositive
power with respect to 5,943,740 shares. The address of FMR Corp. is 82
Devonshire Street, Boston, Massachusetts 02109.
The Company is required to identify any director or officer who failed
to timely file with the Securities and Exchange Commission a required report
relating to ownership and changes in ownership of the Company's equity
securities. Based on material provided to the Company, it believes that
during 1993 all such filing requirements were complied with by its directors
and officers except for the failure to include outstanding options on a Form
4 for Robert Conover, and the incorrect number of shares being reported on
Forms 3 and 4 for Michael Lucci. These inaccuracies have been corrected.
INFORMATION RELATING TO THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held 10 meetings during 1993. Each incumbent
director attended at least 75% of the aggregate number of meetings of the
Board of Directors and all committees on which he served during 1993.
The Board of Directors has an Executive Committee, an Audit Committee,
a Nominating Committee and a Compensation and Stock Option Committee. The
general functions of such committees, the identity of each committee member
and the number of committee meetings held by each committee during the last
fiscal year are set forth below.
Executive Committee
The current members of the Executive Committee are Mr. Goldberg,
Chairman, and Messrs. Marano and Aronoff. The Executive Committee may
exercise all of the powers of the Board of Directors to the extent permitted
by law. The Executive Committee did not hold any meetings during 1993.
Audit Committee
The current members of the Audit Committee are Mr. O'Malley, Chairman,
and Messrs. Halkyard and Looloian. The general functions of the Audit
Committee include selecting the independent auditors (or recommending such
action to the Board of Directors), evaluating the performance of the
independent auditors and their fees for services, reviewing the scope of the
annual audit with the independent auditors and the results of the audit with
management and the independent auditors, consulting with management, internal
auditors and the independent auditors as to the systems of internal accounting
controls, and reviewing the nonaudit services performed by the independent
auditors and considering the effect, if any, on their independence. The Audit
Committee held three meetings during 1993.
Nominating Committee
The current members of the Nominating Committee are Mr. Marano, Chairman,
and Messrs. Goldberg, Rochford and Brunet. The general functions of the
Nominating Committee include recommending to the Board of Directors nominees
for election as directors, consideration of the performance of incumbent
directors in determining whether to nominate them for reelection and making
recommendations with respect to the organization and size of the Board of
Directors and its committees. The Nominating Committee did not hold any
meetings during 1993.
The Nominating Committee will consider nominees recommended by
stockholders. Such a recommendation will be considered if submitted in
writing addressed to the Company c/o "Chairman, Nominating Committee,"
accompanied by a description of the proposed nominee's qualifications and
other relevant biographical information, and a written indication of the
consent of the proposed nominee. Candidates for nomination as director are
considered on the basis of their broad business, financial and public service
experience, and should not represent any particular constituency, but rather
the stockholders generally. The nominees should be highly regarded for
capability and integrity within their fields or professions. In addition, the
activities or associations of the nominees should not constitute conflicts of
interest or legal impediments that might preclude service as a Company
director. Moreover, nominees must be able, and must have expressed a
willingness, to devote the time required to serve effectively as a director
and as a member of one or more committees of the Board of Directors.
Compensation and Stock Option Committee
The current members of the Compensation and Stock Option Committee (the
"Compensation Committee") are Mr. Halkyard, Chairman, and Messrs. O'Malley and
Marano. The general functions of the Compensation Committee include approval
(or recommendation to the Board of Directors) of the compensation arrangements
for senior management, directors and other key employees, review of benefit
plans in which officers and directors are eligible to participate, periodic
review of the equity compensation plans of the Company and the grants under
such plans, and oversight of management development to insure continuity of
senior management. The Compensation Committee held five meetings during 1993.
Compensation of Directors
Members of the Board of Directors who are also employees of the Company
do not receive any additional compensation for service on the Board of
Directors or any committees of the Board of Directors. In 1993, the members
of the Board of Directors who were not employees received an annual retainer
of $35,000 plus a $2,000 stipend for each meeting attended. Non-employee
directors received additional stipends for service on committees of the Board
of Directors of $500 per year for committee members and $2,500 per year for
committee chairmen, except the Chairmen of the Audit Committee and the
Compensation Committee, each of whom received annual stipends of $5,000.
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer, the four other most highly compensated executive
officers of the Company at the end of 1993, and Mr. Donahue L. Wildman who
ceased being an executive officer during 1993, for services rendered in all
capacities to the Company during the years indicated. Mr. Wildman resigned
all of his positions with the Company and its subsidiaries as of September 1,
1993. A description of the terms of Mr. Wildman's resignation and a
description of certain consulting fees to be paid to Mr. Wildman are included
below under the heading "Transactions with Management -- Arrangements with Mr.
Wildman."
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- --------------
Other Annual Securities All Other
Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) (1)(2)($) Options/SARs(#) (2)($)
- --------------------------- ---- --------- -------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Goldberg 1993 2,200,000 -- 642,284 (3) 450,000 4,179,713 (4)(5)
Chairman of the Board of 1992 2,200,000 -- 507,318 -- 1,033,498
Directors, Chief Executive 1991 950,000 2,000,000 1,300,000
Officer and President of
the Company
Lee S. Hillman 1993 350,000 250,000 -- 100,000 253,500 (5)(6)
Executive Vice President, 1992 350,000 200,000 -- 90,000 --
Chief Financial Officer 1991 (7) 188,942 100,000 10,000
and Treasurer of the Company
Wallace R. Barr 1993 (8) 704,565 ( ) -- 100,000 16,239 (9)
Executive Vice President and
Chief Operating Officer
of Bally's Casino Holdings,
Inc., President and Chief
Operating Officer of Bally's
Park Place, Inc., President
and Chief Operating Officer
of GNAC CORP. and President
of Bally's Tunica, Inc.
Michael G. Lucci, Sr. 1993 (10) 380,000 300,000 -- 77,000 --
President and
Chief Operating Officer
of Bally's Health
& Tennis Corporation
Robert G. Conover 1993 190,000 (11) 50,000 -- 20,000 (12) 14,229 (13)
Vice President, Management 1992 (14) 191,058 (11) 60,000 -- -- 10,259
Information Systems and
Chief Information Officer
of the Company
Donahue L. Wildman 1993 382,692 -- -- -- 20,460 (15)
Former Chairman of the Board, 1992 500,000 224,000 -- -- 20,460
President and Chief Executive 1991 500,000 250,000
Officer of Bally's Health and
Tennis Corporation
</TABLE>
<PAGE>
(1) Certain incidental personal benefits to executive officers of the
Company may result from expenses incurred by the Company in the interest
of attracting and retaining qualified personnel. This Proxy Statement
does not describe such incidental personal benefits made available to
executive officers during 1993, because the incremental cost to the
Company of such benefits is below the Securities and Exchange Commission
disclosure threshold.
(2) Pursuant to the transition rules of the Securities and Exchange
Commission, other annual compensation and all other compensation for
services prior to 1992 is excluded.
(3) Tax gross-up payments paid by the Company with respect to a retirement
annuity, an unfunded profit-sharing and savings plan and life insurance
supplied to Mr. Goldberg.
(4) This total includes (i) $597,463 paid by the Company for Mr. Goldberg's
retirement annuity; (ii) $3,800 paid by the Company for premiums on Mr.
Goldberg's split-dollar life insurance policy; (iii) $42,450 which is
the discount to the present value of a refund on the split-dollar life
insurance policy; and (iv) $1,000 matched by the Company for Mr.
Goldberg's participation in the Company's savings plan.
(5) On August 20, 1993, Mr. Goldberg and Mr. Hillman received awards of
280,000 and 20,000 shares, respectively, of the common stock of Bally's
Grand pursuant to the Bally's Grand, Inc. 1993 Incentive Stock Plan.
As of such date, the common stock had a fair market value of $12.625 per
share. On December 13, 1993, Mr. Goldberg and Mr. Hillman sold such
shares to a wholly owned subsidiary of the Company resulting in payments
to Messrs. Goldberg and Hillman of $3,535,000 and $252,500,
respectively, which such amounts are included in this total.
(6) This total includes $1,000 matched by Bally's Health & Tennis
Corporation for Mr. Hillman's participation in the Company's savings
plan.
(7) Mr. Hillman's employment as an executive officer of the Company
commenced on November 12, 1991.
(8) Mr. Barr's employment as an executive officer of the Company commenced
as of January 1, 1993.
(9) Represents matching contributions of $14,229 made by Bally's Park Place,
Inc. pursuant to the Bally's Park Place Profit-Sharing Plan and $2,010
for life insurance premiums paid by Bally's Park Place, Inc.
(10) Mr. Lucci's employment as an executive officer of the Company commenced
as of April 29, 1993.
(11) This amount represents approximately two-thirds (2/3) of Mr. Conover's
annual salary. The remaining approximately one-third (1/3) of his
salary is paid by the Company but the Company is reimbursed for that
amount by Bally Gaming International, Inc. ("BGII") pursuant to the
terms of an agreement between the Company and BGII. See "Employment
Agreements -- Mr. Conover."
(12) As of December 31, 1993, Mr. Conover also held 25,000 shares of
restricted common stock of BGII valued at $431,250 based on a $17.25
closing price per share of BGII common stock as reported by the National
Market System of NASDAQ. The restricted stock award occurred on October
25, 1991. The shares became fully vested on February 1, 1994.
(13) Contribution by Bally's Park Place, Inc. on behalf of Mr. Conover to the
Bally's Park Place, Inc. Profit Sharing Plan.
(14) Mr. Conover's employment as an executive officer of the Company
commenced on December 9, 1992.
(15) Life insurance premiums paid by the Company.
Employment Agreements
Mr. Goldberg
The Company and Mr. Goldberg entered into an employment agreement (the
"Goldberg Employment Agreement") dated as of November 1, 1990 for a three-year
term at an annual base salary of $700,000, plus bonuses, payable at the
discretion of the Compensation Committee. The Goldberg Employment Agreement
is guaranteed by Bally's Park Place, Inc. The Goldberg Employment Agreement
was amended, effective November 1, 1991, to, among other things, extend the
term for an additional year and to increase the base salary to $2,200,000.
The Goldberg Employment Agreement was further amended September 29, 1993, to,
among other things, extend the term of the Goldberg Employment Agreement
through October 31, 1997, with automatic annual extensions for additional one
year periods unless either party gives written notice to the other prior to
October 1 of any year fixing the remainder of the term at three years without
automatic extension. In addition, the Goldberg Employment Agreement calls for
the Company to contribute, each year during the term of Mr. Goldberg's
employment, amounts to provide Mr. Goldberg with annual retirement benefits,
if he is employed by the Company until age 62, equal to the excess, if any,
of (i) 50% of the average of his cash compensation for any of the three
highest years preceding the year in which he attains age 62, over (ii) the sum
of $258,189 and the retirement benefit payable to Mr. Goldberg under the
Company's other retirement or similar benefit programs in which Mr. Goldberg
participates, except the Company's 401(k) program ("the Supplemental
Retirement Benefit Arrangement"). The contributions under the Supplemental
Retirement Benefit Arrangement are to be paid (i) directly to Mr. Goldberg,
(ii) to the appropriate governmental taxing authority on Mr. Goldberg's
behalf, or (iii) to a supplemental retirement benefit trust, together with a
tax gross-up payment so that the net benefit received by Mr. Goldberg, after
payment of all taxes, is equal to the required contribution by the Company.
In 1993, the cost to the Company of the contributions and the tax gross-up was
approximately $597,463 and $487,509, respectively. Upon termination of
Mr. Goldberg's employment without cause, in addition to other payments, the
Company is required to make an additional contribution, which would equal
three times the contribution most recently made prior thereto, provided that
all retirement benefits from the Supplemental Retirement Benefit Arrangement
would not exceed the benefits described in the third preceding sentence.
Furthermore, in the event there is a change in control of the Company (as
defined in the Goldberg Employment Agreement) and within two years thereafter
Mr. Goldberg's employment is terminated by the Company or by him voluntarily
following a constructive termination without cause, Mr. Goldberg will be
entitled to a lump sum payment equal to the greater of (i) the sum of his base
salary for the remainder of his employment term, plus the average of the semi-
annual bonuses awarded to him prior to his termination multiplied by two times
the number of half-years remaining in his employment term, or (ii) three times
his base salary. In such event, he shall also be entitled to any bonuses
awarded but not yet paid, the value of his continued participation in certain
employee benefit plans of the Company (or continued participation in such
plans until the end of the employment term or the time Mr. Goldberg receives
equivalent coverage from a subsequent employer), certain retirement trust
contributions and payment by the Company of premiums on the split-dollar life
insurance as if Mr. Goldberg had been employed by the Company until age 62.
Mr. Goldberg would also be entitled to a tax gross-up payment with respect to
any payment made after a change of control subject to the excise tax. If a
change of control of Bally occurred on the date of this Proxy Statement,
Mr. Goldberg would be entitled to a payment of approximately $26,200,000 under
the Goldberg Employment Agreement.
Mr. Hillman
The Company, Bally's Health & Tennis Corporation ("BHTC") and
Mr. Hillman entered into an employment agreement effective as of November 12,
1991 for a term expiring April 14, 1994. The employment agreement was
amended, effective December 8, 1993, to, among other things, extend the term
of the employment agreement through April 14, 1997, with automatic annual
extensions for additional one year periods unless either party gives written
notice to the other on or prior to March 1 of any year fixing the remainder
of the term at three years without automatic extension. The agreement
provides for an annual base salary of $275,000, a fixed annual bonus of
$75,000, and a bonus payable at the discretion of the Compensation Committee.
In the event of a change of control of the Company or BHTC, as a result of
which Mr. Hillman is asked to leave the employ of either company, Mr. Hillman
is entitled to receive a lump sum payment of the full amount of his base
salary and annual bonus due to him for the remainder of the term of his
agreement. If a change of control of the Company or BHTC occurred as of the
date of this Proxy Statement and Mr. Hillman was asked to leave the employ of
either company, Mr. Hillman would be entitled to a payment of $1,065,000 under
his employment agreement.
Mr. Barr
The Company and Mr. Barr entered into an employment agreement effective
as of January 1, 1993 for a term expiring December 31, 1995. The agreement
provides for an annual base salary of $700,000. Mr. Barr also received
options to purchase 50,000 shares of the Company's common stock, subject to
vesting. In the event of an initial public offering of the common stock of
either Bally's Park Place, Inc. or GNAC CORP. during the term of the
employment agreement, Mr. Barr will receive stock options and/or stock awards
in amounts consistent with the highest grants of these types to other
employees of the Company and its subsidiaries, other than the Chairman of the
Board or President of the Company. Upon execution of the employment
agreement, Mr. Barr became fully vested in the Park Place Supplemental
Executive Retirement Plan (the "Park Place SERP"). In the event the
employment agreement is terminated prior to its expiration, except for cause,
or the Park Place SERP is modified to limit the credits Mr. Barr would have
received for additional years of service, Mr. Barr will be deemed to have an
additional three years of service and credit for compensation actually
received or the base salary under the employment agreement, whichever is
greater. In the event of a change in control of the Company, Mr. Barr may
terminate the agreement and receive a lump sum payment equal to six months of
his base salary. In the event of a change in control of the Company, a result
of which Mr. Barr is asked to leave the employ of the Company, Mr. Barr is
entitled to receive a lump sum payment equal to either twenty-four months base
salary or an amount equal to his base salary for the balance of the term of
his employment agreement, whichever amount is greater. If a change of control
of the Company occurred as of the date of this Proxy Statement, and Mr. Barr
was asked to leave the employ of the Company, Mr. Barr would be entitled to
a payment of $1,400,000 under his employment agreement.
Mr. Lucci
BHTC and Mr. Lucci entered into an employment agreement effective as of
January 1, 1992 for a term expiring December 31, 1994. The employment
agreement provides for annual base salary of $380,000. The employment
agreement provides for a performance bonus based on certain criteria, not to
exceed $600,000 for any year under the agreement. In addition, Mr. Lucci may
receive a discretionary bonus payment from BHTC if, in the opinion of the
Chairman of the Board and Chief Executive Officer of the Company, his
performance warrants such a payment. Mr. Lucci's agreement also provides for
participation in BHTC's other executive benefit plans. In the event of a
change in control of the Company, as a result of which Mr. Lucci is asked to
leave the employ of the Company, Mr. Lucci is entitled to receive a lump sum
payment equal to either 18 months base salary and bonus payments or an amount
equal to his base salary and bonus payments for the balance of the term of his
employment agreement, whichever amount is greater. If a change of control of
the Company occurred as of the date of this Proxy Statement, and Mr. Lucci was
asked to leave the employ of the Company, Mr. Lucci would be entitled to a
payment of $570,000 under his employment agreement.
Mr. Conover
The Company and Mr. Conover entered into an employment agreement
effective as of July 1, 1992 for a term expiring on December 31, 1994. The
agreement provides for an annual base salary of $285,000. Pursuant to an
agreement between the Company and BGII, BGII reimburses the Company for
approximately one-third (1/3) of Mr. Conover's annual salary. There is no
reimbursement by BGII for any bonuses or other compensation received by
Mr. Conover from the Company. Upon termination of Mr. Conover's employment
without cause, he will become fully vested in the Park Place SERP regardless
of his age. In the event of a change in control of the Company, Mr. Conover
may terminate the agreement and receive a lump sum payment equal to six months
of his base salary. In the event of a change in control of the Company, as
a result of which Mr. Conover is asked to leave the employ of the Company,
Mr. Conover is entitled to receive a lump sum payment equal to 15 months of
his base salary or an amount equal to his base salary for the remainder of the
term of his agreement, whichever is greater. If a change of control of the
Company occurred as of the date of this Proxy Statement and Mr. Conover was
asked to leave the employ of the Company, Mr. Conover would be entitled to a
payment of $356,250 under his employment agreement.
Park Place SERP
Bally's Park Place, Inc. ("Park Place") has established the Park Place
SERP which fixes a minimum level for retirement benefits based upon a
participant's years of service with Park Place (or the Company and its
subsidiaries) and compensation during the three years falling within the last
10 years of the participant's employment (or total employment if less than 10
years) in which compensation is highest ("Average Compensation").
Participants who are vested under the Park Place SERP are entitled to receive
an annual benefit equal to 3.33% of Average Compensation for each year of
service (subject to a maximum of 15 years of service to be credited to any
participant), but not more than 50% of the participant's Average Compensation.
A participant becomes vested under the Park Place SERP only if such
participant has at least seven years of service and has either retired after
attaining age 60 or both attained age 50 and participated in the Park Place
SERP for at least three years. Solely for purposes of determining vesting,
a participant who is disabled (as determined under the Park Place SERP) and
terminates employment after attaining age 50 is credited with years of service
and participation until the participant's death. The Park Place SERP annual
benefit is payable for the life of a vested participant and normally commences
after the participant has both terminated employment and attained age 60. A
reduced benefit is payable to a vested participant who is eligible for early
retirement (after attainment of at least age 55) or who is disabled and begins
to receive benefit payments at an earlier date. Upon the death of a vested
participant, a death benefit is payable to either the participant's surviving
spouse or the participant's beneficiaries. Depending on circumstances
described in the Park Place SERP, death benefits are to be paid in the form
of either a monthly payment equal to a percentage of the benefit payable to
the participant (either 50% to the surviving spouse for life or 100% to the
surviving spouse or the beneficiaries for a period not exceeding 10 years) or
a lump-sum cash payment equal to two times the participant's compensation in
such participant's last full calendar year of employment. Participation in
the Park Place SERP is limited to certain key executives designated by the
Park Place Board of Directors. Benefits payable under the Park Place SERP may
generally be cancelled in the event a participant is discharged for cause or
enters into competition with the gaming business of Park Place other than The
Grand in Atlantic City. The Park Place SERP is unfunded and is not qualified
under the Internal Revenue Code. Mr. Conover has credit for 14 years of
service under the Park Place SERP. Mr. Barr is fully vested pursuant to the
terms of his employment agreement.
An example of the benefits provided under the Park Place SERP (assuming
retirement at age 60) is set forth in the following table:
<TABLE>
<CAPTION>
Average Park Place SERP Table Annual Benefit
Compensation for the Following Years of Service
------------ ------------------------------------
7 10 15 or more
- -- ----------
<S> <C> <C> <C>
$ 100,000 . . . $ 23,310 $ 33,300 $ 50,000
250,000 . . . 58,275 83,250 125,000
500,000 . . . 116,550 166,500 250,000
750,000 . . . 174,825 249,750 375,000
1,000,000 . . . 233,100 333,000 500,000
1,250,000 . . . 291,375 416,250 625,000
</TABLE>
<PAGE>
Stock Option and SAR Grants
The following table sets forth the information noted for all grants of
stock options made to each of the executive officers named in the Summary
Compensation Table during 1993:
<TABLE>
OPTIONS/SAR(1) GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (2)
------------------------------------------ ------------------
Percent of
Total
Options/
Number of SARs
Securities Granted
Underlying to Exercise
Options/ Employees or Base
SARs in Fiscal Price Expiration
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
---- ----------- --------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Goldberg 450,000(3) 27.6 9.625 9/30/03 2,723,900 6,902,897
Lee S. Hillman 100,000(3) 6.1 9.625 6/2/03 605,311 1,533,977
Wallace R. Barr 50,000 3.1 6.750 3/16/03 212,252 537,888
50,000(3) 3.1 9.625 6/2/03 302,655 766,989
Michael G. Lucci, Sr. 2,000 0.1 6.750 3/16/03 8,490 35,016
75,000(3) 4.6 9.625 7/28/03 453,983 1,150,483
Robert G. Conover 10,000 0.6 6.750 3/16/03 42,457 107,578
10,000(3) 0.6 9.625 6/2/03 60,541 153,422
Donahue L. Wildman None
</TABLE>
(1) There were no SARs granted to any of the executive officers named in this
table in 1993.
(2) The potential realizable values represent future opportunity and have not
been reduced to present value in 1993 dollars. The dollar amounts
included in these columns are the result of calculations at assumed rates
set by the Securities and Exchange Commission for illustration purposes,
and these rates are not intended to be a forecast of the Common Stock
price and are not necessarily indicative of the values that may be
realized by the named executive officer. The potential realizable values
are based on arbitrarily assumed annualized rates of stock price
appreciation of five percent and ten percent over the full ten year term
of the options. For example, in order for the individuals named above
who received options with an exercise price of $9.625 per share to
realize the potential values set forth in the five percent and ten
percent columns in the table above, the price per share of the Company's
Common Stock would have to be approximately $15.68 and $24.97,
respectively.
(3) Grants subject to stockholder approval of the amendment to the Company's
1989 Incentive Plan.
<PAGE>
Stock Option and SAR Exercises
The following table sets forth the information noted for all exercises
of stock options and SARs by each of the executive officers named in the
Summary Compensation Table during 1993:
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Year-End(#)(1) Year-End ($)
Shares --------------- ----------------
Acquired on Value Exercisable(E)/ Exercisable(E)/
Name Exercise(#) Realized($) Unexercisable(U) Unexercisable(U)
---- ----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Arthur M. Goldberg None -- 1,520,000(E) (2)(3) 10,120,000(E) (2)(3)
450,000(U) 0(U)
Lee S. Hillman None -- 36,667(E) 135,835(E)
163,333(U) 225,415(U)
Wallace R. Barr None -- 9,167(E) 30,835(E)
103,333(U) 102,915(U)
Michael G. Lucci, Sr. None -- 0(E) 0(E)
77,000(U) 3,500(U)
Robert G. Conover None -- 27,668(E) (4) 137,923(E) (4)
33,332(U) (5) 86,452(U) (5)
Donahue L. Wildman None -- None --
</TABLE>
(1) Value is based on the closing price of: (a) a share of Common Stock as
of December 31, 1993 ($8.50) minus the exercise or base price, and/or (b)
a share of BGII common stock as of December 31, 1993 ($17.25) minus the
exercise price.
(2) Includes an award of options to purchase 500,000 shares of Common Stock
that can be deemed SARs at Mr. Goldberg's election. No other awards of
SARs were made to any of the other executive officers named in this
table.
(3) Includes options to purchase 20,000 shares of the common stock of BGII
awarded by the Company in 1991 and valued at $245,000.
(4) Includes options to purchase 23,334 shares of the common stock of BGII
valued at $122,504 awarded by BGII in 1991.
(5) Includes options to purchase 11,666 shares of the common stock of BGII
valued at $61,247 awarded by BGII in 1991.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
is composed of three non-employee directors. The Committee is responsible for
approval (or recommendation to the Board of Directors) of the compensation
arrangements for senior management, directors and other key employees; review
of benefit plans in which officers and directors are eligible to participate;
periodic review of the equity compensation plans of the Company and grants
under such plans; and oversight of management development to insure continuity
of senior management.
In October 1990, the Board of Directors commenced a significant
restructuring effort relating to the Company's financial condition and
operations. As part of the restructuring, the Committee sought to establish
executive compensation programs intended to attract and retain executives
capable of enhancing stockholder value through the restructuring and the
operation of the Company's core businesses. Because of the uncertainty then
surrounding the Company's future and the necessity of having dynamic and long-
term leadership to guide the Company through the restructuring and beyond, the
Committee determined that in order to attract and retain executives with these
qualities, it was necessary to offer executive officers significant base
salaries, multi-year contracts and, to provide further incentive for
increasing stockholder value, significant stock option awards. Further, given
the complex and ongoing nature of the restructuring, the Committee concluded
that creation of compensation arrangements linked to specific operating
results or more traditional criteria was inappropriate.
It was the Board of Director's view in October 1990, and it remains the
view of the Committee today, that the use of stock option awards aligns the
interests of the Company's executive officers with the long-term interests of
the Company's stockholders. The object of these awards is to provide
incentive to management to reinforce and advance the long-term interests of
the Company and its stockholders. Stock option awards provide rewards to
executives for the creation of incremental stockholder value and have the
potential of providing significant benefit to the executives without requiring
the Company to make significant cash payments. Stock options only produce
value to executives as the price of the Company's stock appreciates, thereby
directly linking the interests of executives with those of the stockholders.
During 1993, the Committee took several actions designed to retain the
Company's current executive officers and to reward them for their leadership
through the completion of the restructuring, the successful strides made in
the development of new gaming business opportunities, the refinancing of much
of the Company's debt and the strategic improvements made in the Company's
ongoing business operations. The Committee awarded bonuses to each of the
Company's named executive officers other than the Chief Executive Officer.
Although the Committee was prepared to award a bonus to the Chief Executive
Officer, he refused such award. In addition, the Committee granted stock
option awards to the Chief Executive Officer and each of the Company's other
named executive officers to increase management's incentive to improve the
Company's performance. In determining the size of stock option awards, the
Committee considered previous awards made to executive officers. In order to
ensure the continuity of the Company's senior management, the Committee
amended the employment agreements of the Chief Executive Officer and Chief
Financial Officer to provide for automatic annual extensions for additional
one-year periods after the agreements' scheduled expiration dates unless
either the executive or the Company gives written notice to the other party
fixing the remainder of the term at three years without automatic extension.
Neither of the amendments provided for increases in base salary. In fiscal
year 1993, the Committee did not apply any specific quantitative formula in
making compensation decisions, including bonuses and the grants of stock
options. However, the Committee did appreciate the importance of achievements
that may have been difficult to quantify, especially in the context of
carrying forward the gains from the restructuring, and accordingly recognized
qualitative factors such as, in order of significance, contributions of
executive officers to the achievement of the Company's strategic goals in a
volatile business environment, the implementation of policies and measures
that will benefit the Company's long-term performance and thus ultimately
benefit the Company's stockholders, and the managerial vision, decision-making
responsibilities, effectiveness and teamwork of individual executive officers.
The compensation of the Company's Chief Executive Officer has been
designed to reward him for his efforts in connection with the restructuring
and enhancing the long-term performance of the Company and ultimately
increasing stockholder value. The Chief Executive Officer's total
compensation package, comprised of his original base compensation and recent
stock option grants, has been approved by the Committee in order to compensate
him in his continuing efforts to improve the Company's performance and to
provide further incentive to increase the short- and long-term interests of
the Company and its stockholders.
In accordance with the confirmation of the plan of reorganization of
Bally's Grand, Bally's Grand established the Bally's Grand, Inc. 1993
Incentive Stock Plan (the "1993 Incentive Plan"), pursuant to which 600,000
shares of the common stock of Bally's Grand were made available for award to
its officers and directors actively involved in its management or operations.
A subsidiary of the Company (the "Manager") provides management services to
Bally's Grand pursuant to a management agreement. The Manager receives an
annual fee for providing the management services to Bally's Grand. In
addition, the Manager is responsible for the administration of the 1993
Incentive Plan including the determination of which individuals will
participate in the 1993 Incentive Plan. The board of directors of the Manager
decided to grant stock awards to the Company's Chief Executive Officer, Chief
Financial Officer and various other individuals who are officers and/or
directors of Bally's Grand. The Committee affirmed the grants made by the
Manager. The Committee authorized the grants to the Chief Executive Officer
and Chief Financial Officer in recognition of their combined efforts in
managing Bally's Grand and establishing the Company's investment in Bally's
Grand as a significant asset of the Company. In addition, by authorizing the
grants of the common stock of Bally's Grand, the Committee was able to provide
benefits to the executives without incurring any cash cost for the Company.
The Committee has commenced a review of the Company's compensation
program for its executive officers. It is the Committee's belief that as the
Company's restructuring has been completed, executive officer compensation may
be linked to performance-based criteria. The Committee is also considering
the use of performance-based compensation plans in order to comply with the
recently enacted Revenue Reconciliation Act of 1993 which generally disallows
a tax deduction to public companies for compensation over $1 million paid to
the corporation's Chief Executive Officer and the four other most highly
compensated executive officers in any taxable year. This provision will
generally be effective for the Company's tax year beginning January 1, 1994.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. One such requirement is that the
performance-based compensation plans adopted by a company be submitted to its
stockholders for approval. The Company currently intends to structure the
performance-based portion of the compensation of its executive officers in a
manner that complies with the new statute. It is expected that the
stockholders will be presented with proposals relating to performance-based
compensation plans at the Annual Meeting of Stockholders to be held in 1995.
The Committee believes that the cumulative total return to the Company's
stockholders of 183% since the date that the Company's present Chairman of the
Board and Chief Executive Officer became a member of the Board of Directors
demonstrates that the Company's compensation approach has been appropriate.
The cumulative total return to the Company's stockholders since October 12,
1990 is set forth in the graph below.
<PAGE>
Comparison of Cumulative Total Return
from October 12, 1990 to December 31, 1993*
Bally Manufacturing Corporation, S&P 500 Index and
Dow Jones Entertainment & Leisure Industry Group Index
(GRAPH FILED SEPARATELY UNDER COVER OF FORM S-E)
*Assumes $100 Invested on October 12, 1990 in Bally Common Stock, the
S&P 500 and the DJ Entertainment & Leisure Industry Group. Total return
assumes reinvestment of dividends.
Compensation Committee
E.M. Halkyard, Chairman
P.L. O'Malley
R.J. Marano
<PAGE>
PERFORMANCE GRAPH
Comparison of Five Year Cumulative Total Return*
Bally Manufacturing Corporation, S&P 500 Index and
Dow Jones Entertainment & Leisure Industry Group Index
(GRAPH FILED SEPARATELY UNDER COVER OF FORM S-E)
*Assumes $100 invested on January 1, 1989 in Bally Common Stock, the
S&P 500 and the DJ Entertainment & Leisure Industry Group. Total return
assumes reinvestment of dividends.
<PAGE>
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE COMPANY'S NAME
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Restated Certificate of Incorporation to change the
name of Bally Manufacturing Corporation to Bally Entertainment Corporation.
The name change is being made so that the Company's name will more accurately
describe its ongoing business activities (which do not include any
manufacturing operations) through the use of the broader descriptive term
"entertainment."
The Board of Directors has approved this proposed amendment to the
Company's Restated Certificate of Incorporation and is submitting the
following resolution for adoption by the Company's stockholders at the Annual
Meeting:
RESOLVED, that Article First of the Company's Restated
Certificate of Incorporation shall be amended by striking out
Article First in its entirety and inserting in lieu thereof the
following:
"FIRST: The name of the Corporation is Bally
Entertainment Corporation."
The affirmative vote of the holders of a majority of the Company's
outstanding shares of Common Stock is required for adoption of this proposed
amendment to the Company's Restated Certificate of Incorporation. If the
proposed amendment is adopted by the Company's stockholders, such amendment
will become effective on the date a certificate of amendment is filed with the
Secretary of State of the State of Delaware, the Company's state of
incorporation.
The Board of Directors recommends a vote FOR the proposal to amend the
Company's Restated Certificate of Incorporation to change the Company's name
from Bally Manufacturing Corporation to Bally Entertainment Corporation.
APPROVAL OF THE COMPANY'S 1993 NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN
On October 13, 1993, the Board of Directors of the Company adopted the
1993 Non-Employee Directors' Stock Option Plan (the "Directors' Plan"),
subject to approval by the stockholders of the Company.
The Directors' Plan is intended to encourage non-employee directors of
the Company to acquire or increase their ownership of Common Stock on
reasonable terms, and to foster a strong incentive to put forth maximum effort
for the continued success and growth of the Company and its subsidiaries. The
Directors' Plan provides for the granting of non-qualified stock options to
purchase an aggregate of 120,000 shares of the Common Stock to current and
future non-employee directors of the Company. As of October 13, 1993, the
non-employee directors eligible to receive stock options under the Directors'
Plan were George N. Aronoff, Barrie K. Brunet, Edwin M. Halkyard, J. Kenneth
Looloian, Rocco J. Marano, Patrick L. O'Malley, James M. Rochford and a former
director who is now deceased.
The complete text of the Directors' Plan is attached as Exhibit A to this
Proxy Statement. The following summary of the Directors' Plan does not
purport to be complete and is qualified in its entirety by reference to
Exhibit A.
Each of the directors identified above as being eligible to receive stock
options under the Directors' Plan was granted an option on October 13, 1993,
subject to stockholder approval of the Directors' Plan, to purchase 5,000
shares of Common Stock. On October 13, 1995, each such director who is still
a director on that date will be granted an option to purchase an additional
5,000 shares of Common Stock. Each director who joins the Board of Directors
after the Directors' Plan was originally adopted will be granted on the first
business day following the first day of his term, an option to purchase 5,000
shares of Common Stock. On the second anniversary of that date, such
director, if he is still a director on that date, will be granted an Option
to purchase an additional 5,000 shares of Common Stock. If the number of
shares available to grant under the Directors' Plan on a scheduled date of
grant is insufficient to make all the grants, then each eligible director will
receive an option to purchase a pro rata number of the available shares.
The option price per share for options granted on October 13, 1993 was
$9.50 (the fair market value of the Common Stock on such date) and the option
price per share for later grants will be the fair market value of the shares
of Common Stock on the date of grant. Under the Directors' Plan, fair market
value is generally the closing price of the Common Stock on the New York Stock
Exchange on the last business day prior to the date on which the value is to
be determined.
The options granted under the Directors' Plan will be exercisable for a
term of ten years from the date of grant, subject to earlier termination, and
may be exercised as follows: 1/3 after one year from the date of grant, 2/3
after two years from the date of grant and 100% after three years from the
date of grant.
In the event that a director ceases to be a member of the Board of
Directors (other than by reason of death or disability), an option may be
exercised by the director (to the extent the director was entitled to do so
at the time he ceased to be a member of the Board of Directors) at any time
within the later of (i) three months after he ceases to be a member of the
Board of Directors and (ii) nine months after the most recent grant of an
option to such director under the Directors' Plan, but not beyond the term of
the option. If the director dies or becomes disabled while he is a member of
the Board of Directors, an option may be exercised in full by a legatee of the
director under his will, or by him or his personal representative or
distributees, as the case may be, at any time within 12 months after his death
or disability, but not beyond the term of the option; provided, that in the
event of disability, an option may not be exercised prior to the six month
anniversary of the date the option was granted. If a director, following the
termination of his directorship, dies within the later of (i) three months
after he ceases to be a member of the Board of Directors and (ii) nine months
after the most recent grant of an option to such director under the Directors'
Plan, an option may be exercised (to the extent the director was entitled to
do so at the time he ceased to be a member of the Board of Directors) by a
legatee of the director under his will, or by his personal representative or
distributees, as the case may be, at any time within twelve months after his
death, but not beyond the term of the option.
Options granted under the Directors' Plan will be subject to adjustment
upon a recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend, or other similar event affecting the
Common Stock. Options will not be transferable other than by will or pursuant
to the laws of descent and distribution or pursuant to a qualified domestic
relations order, and will be exercisable during the lifetime of an option
holder only by such holder or his personal representative in the event of
disability.
Upon a "change in control" of the Company (as defined in the Directors'
Plan), each option granted under the Directors' Plan will terminate on the
later of (i) 90 days after the occurrence of the "change in control" and
(ii) seven months following the date of grant of each option, and an option
holder will have the right, commencing at least five days prior to the "change
in control" and subject to any other limitation on the exercise of the option
in effect on the date of exercise, to immediately exercise any options in
full, to the extent they previously have not been exercised.
The Directors' Plan will terminate October 13, 1998 and options may not
be granted under the Directors' Plan after that date although the terms of any
option may be amended in accordance with the Directors' Plan at any date prior
to the end of the term of that option. Any options outstanding at the time
of termination of the Directors' Plan will continue in full force and effect
according to the terms and conditions of the option and the Directors' Plan.
The Directors' Plan may be amended by the Board of Directors, provided
that stockholder approval will be necessary if required under Rule 16b-3
("Rule 16b-3") of the General Rules and Regulations of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and no amendment may impair any
of the rights of any holder of an option previously granted under the
Directors' Plan without the holder's consent, and provided that certain
provisions of the Directors' Plan may not be amended more than once every six
months.
The Directors' Plan will be administered by the Compensation Committee.
The principal terms of the option grants are fixed in the Directors' Plan.
Therefore, the Compensation Committee will have no discretion to select which
directors receive options, the number of shares of Common Stock included in
any grant, or the exercise price of options.
Federal Income Tax Consequences
The issuance of a non-qualified stock option under the Directors' Plan
will not result in any taxable income to the recipient director or a tax
deduction to the Company at the time it is granted. Generally, a director to
whom a non-qualified stock option has been granted will recognize ordinary
income on the first date following the date the director exercises the option
on which the shares of Common Stock first become transferable and are no
longer subject to a substantial risk of forfeiture. On that date, the
director will recognize income in an amount equal to the excess of the fair
market value of the shares of Common Stock on the date the shares of Common
Stock first become transferable or are no longer subject to forfeiture over
the option price. For tax purposes, the Common Stock is considered to be non-
transferable and subject to a substantial risk of forfeiture as long as the
sale of the shares could subject the director to suit under the "short swing
profit" rules pursuant to Section 16 ("Section 16") of the Exchange Act.
Alternatively, if the director so elects, he will recognize ordinary
income on the date of exercise in an amount equal to the excess of the fair
market value of the shares of Common Stock (without taking into account any
lapse restrictions) on the date of exercise over the option price.
The Company is entitled to a tax deduction corresponding to the amount
of income recognized by the director as a result of the exercise of an option
for the year in which the director recognizes such income for federal income
tax purposes.
Under the Section 16 regulations, a director may generally exercise an
option and sell the underlying stock immediately without subjecting himself
to suit under the "short swing profit" provisions as long as he has held the
option and/or the underlying Common Stock for an aggregate of six months. If
the director exercises a stock option within the first six months following
the date of grant, then (except in certain cases involving death or
incompetence), taxation will be deferred and the amount of income will be
measured six months following the date of grant (unless the director elects
to be taxed on the date of exercise) because the sale of the underlying Common
Stock before this date could subject the director to suit under the "short
swing profit" provisions.
New Plan Benefits
The table below sets forth the benefits that will be received by the non-
employee directors if the Directors' Plan is approved by the stockholders.
Only non-employee directors will receive stock options under the Directors'
Plan.
<TABLE>
1993 Non-Employee Directors' Stock Option Plan
----------------------------------------------
<CAPTION>
Name and Position Dollar Value ($) Number of Units
----------------- ---------------- ---------------
<S> <C> <C>
Non-employee directors as
a group (8 persons) (a) 40,000
<FN>
(a) All options granted under the Directors' Plan have been granted at the
exercise price of $9.50 per share (the fair market value of a share of
Common Stock on the date of grant). The actual value, if any, that a
non-employee director may realize will depend on the excess of the stock
price over the exercise price on the date the option is exercised. As
of March 1, 1994, the closing price of a share of Common Stock as
reported on the New York Stock Exchange Composite Transactions Tape was
$8.625.
</TABLE>
The affirmative vote of the holders of a majority of the votes entitled
to vote and present in person or by proxy at the Annual Meeting of
Stockholders is required for approval of the Directors' Plan.
The Board of Directors recommends a vote FOR approval of the Directors'
Plan.
APPROVAL OF THE COMPANY'S EMPLOYEE
STOCK PURCHASE PLAN
On December 8, 1993, the Board of Directors of the Company adopted,
subject to the approval of stockholders, the Company's Employee Stock Purchase
Plan (the "Stock Purchase Plan").
The Stock Purchase Plan is intended to encourage ownership of Common
Stock by eligible employees of the Company and its subsidiaries, to encourage
their continued employment with the Company and to provide them with
additional incentives to promote the success of the Company. Except as
discussed below, eligible employees are employees who have been employed by
the Company or any of its subsidiaries for at least 12 consecutive months as
of the commencement date of an offering under the Stock Purchase Plan and who
customarily work more than 20 hours per week and more than five months per
calendar year.
The complete text of the Stock Purchase Plan, which is intended to
qualify as an employee stock purchase plan under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), is attached as Exhibit B to
this Proxy Statement. The following summary of the Stock Purchase Plan does
not purport to be complete and is qualified in its entirety by reference to
Exhibit B.
The Stock Purchase Plan authorizes the Compensation Committee to grant
options to purchase Common Stock to eligible employees pursuant to one or more
offerings to be made under the Stock Purchase Plan. The Compensation
Committee administers the Stock Purchase Plan and, subject to the provisions
of the Stock Purchase Plan, has sole discretion to determine when offerings
will be made under the Stock Purchase Plan, the number of shares of Common
Stock to be made available in any offering, and the terms and conditions of
any offering. Unless the Compensation Committee determines otherwise, the
Stock Purchase Plan will be implemented by up to 20 consecutive six month
offerings. The first offering under the Stock Purchase Plan will commence on
July 1, 1994 and terminate on December 31, 1994. Thereafter, offerings shall
commence on each subsequent January 1 or July 1 and terminate on the following
June 30 and December 31, respectively, of such year until the Plan is
terminated or no additional shares of Common Stock are available for purchase
under the Stock Purchase Plan.
The Compensation Committee may exclude the employees of any specific
subsidiary from any offering made under the Stock Purchase Plan and may
determine not to include certain highly compensated employees from any
particular offering. In addition, no option may be granted to an employee
who, immediately after the option is granted, owns five percent or more of the
value or voting power of all classes of stock of the Company or its parent,
if any, or subsidiary corporations, after taking into account certain
attribution rules. Subject to these provisions, all eligible employees must
be given the right to participate in any offering made under the Stock
Purchase Plan. There are 200,000 shares of Common Stock reserved for issuance
under the Stock Purchase Plan.
Prior to any offering made under the Stock Purchase Plan, the Company
will grant to each eligible employee the right to become a participant in the
Stock Purchase Plan. Each person electing to participate in the Stock
Purchase Plan must execute and deliver to the Company a subscription agreement
which indicates the amount to be deducted from the participant's paycheck for
each payroll period during the period during which installment payments for
shares pursuant to options granted pursuant to an offering made under the
Stock Purchase Plan shall be made (the "Purchase Period"). An employee shall
thereafter be deemed to be a participant in the Stock Purchase Plan for each
subsequent offering until the employee withdraws from the Stock Purchase Plan.
Employees may elect to subscribe for options to purchase shares of Common
Stock for an aggregate purchase price up to ten percent of their eligible
compensation during the Purchase Period applicable to a particular offering.
No employee will be entitled to subscribe or receive options to purchase
shares of Common Stock with an aggregate fair market value of more than
$25,000 in any one calendar year (determined on the date the options are
granted).
On the date on which a particular offering begins, eligible employees who
have previously elected to participate in the Stock Purchase Plan will
automatically be granted, subject to certain limitations set forth in the
Stock Purchase Plan, an option to purchase the number of full shares of Common
Stock which his accumulated payroll deductions will purchase as of the date
such offering terminates. Unless the Compensation Committee determines to set
a higher price, the option price will equal the lesser of 85% of the fair
market value of the Common Stock on the date on which a particular offering
begins or 85% of the fair market value of the Common Stock on the date on
which such offering terminates. Under the Stock Purchase Plan, fair market
value is generally the closing price of the Common Stock on the New York Stock
Exchange on the last business day prior to the date the value is to be
determined. Payment of the exercise price of any option granted pursuant to
the Stock Purchase Plan shall be made in installments, through payroll
deductions, with no right of prepayment. These options, to the extent they
remain outstanding, will be automatically exercised as of the date on which
a particular offering terminates.
Subject to certain limitations set forth in the Stock Purchase Plan, an
employee is permitted, at any time prior to the end of the Purchase Period
applicable to such offering, to terminate or reduce his payroll deductions,
to reduce his options to purchase or to withdraw all or part of the amount in
his account, without interest. Upon the termination of the employee's
employment with the Company prior to the last day of the Purchase Period for
any reason other than death or retirement, the employee's only right will be
to receive the amount of cash then in his account, without interest.
The Stock Purchase Plan also contains provisions governing the rights and
privileges of employees or their representatives in the event of retirement,
lay-off, disability, death or other occurrences.
Options granted under the Stock Purchase Plan will be subject to
adjustment upon a recapitalization, stock split, stock dividend, merger,
reorganization, liquidation, extraordinary dividend or other similar event
affecting the Common Stock. Options will not be transferable, other than by
will or the laws of descent and distribution or, if permitted pursuant to the
Code and the regulations thereunder without affecting the option's
qualification under Code Section 423, pursuant to a qualified domestic
relations order, and an option may be exercised, during the lifetime of the
holder of the option, only by him, or his personal representative in the event
of disability.
Upon a "change in control" of the Company (as defined in the Stock
Purchase Plan), the Board of Directors may, in its sole discretion, determine
to terminate the Purchase Period of any offering made under the Stock Purchase
Plan as of the last day of the month during which such "change in control"
occurs.
The Stock Purchase Plan will terminate on June 30, 2004, and an option
shall not be granted under the plan after such date. Any options outstanding
at the time of termination of the Stock Purchase Plan will continue in full
force and effect according to the terms and conditions of the Stock Purchase
Plan.
The Stock Purchase Plan may be amended at any time and from time to time
by the Board of Directors, but no amendment without the approval of the
stockholders of the Company shall be made if stockholder approval under
Section 423 of the Code or Rule 16b-3 would be required.
Federal Income Tax Consequences
Under Section 423(a) of the Code, the transfer of a share of stock to an
employee pursuant to the Stock Purchase Plan will be entitled to the benefits
of Section 421(a) of the Code. Under that Section, an employee will not be
required to recognize income at the time the option is granted or at the time
the option is exercised. If, as currently contemplated by the Stock Purchase
Plan, the option price applicable to any offering made under the Stock
Purchase Plan is less than the fair market value of the Common Stock on the
date of grant, then, provided the holding periods described below are met,
upon the disposition of the shares of Common Stock by the employee (or in the
event of the death of the employee while owning such Common Stock whether or
not the holding period requirements are met), the employee will recognize
compensation income (taxed as ordinary income) in an amount equal to the
lesser of (i) the excess of the fair market value of the Common Stock at the
time of such disposition or death over the amount paid for the Common Stock
(i.e., the option price); or (ii) the excess of the fair market value of the
Common Stock on the date the option is granted over the option price
(determined as of the date the option is granted). The amount recognized as
ordinary compensation income will increase the employee's basis in such
shares. Any additional gain or any loss resulting from the disposition will
be taxed as long-term capital gain or loss. The Company will not be entitled
to any deduction with respect to the Stock Purchase Plan, except in connection
with a disqualifying disposition as discussed below.
In order for an employee to receive the favorable tax treatment provided
in Section 421(a) of the Code, Section 423(a) requires that the employee make
no disposition of the Common Stock within two years from the date the option
was granted nor within one year from the date the option was exercised and the
Common Stock transferred to him. If an employee disposes of Common Stock
acquired pursuant to the Stock Purchase Plan before the expiration of these
holding period requirements, the employee will recognize, at the time of the
disposition, ordinary compensation income in an amount equal to the excess of
the fair market value of the Common Stock on the date the Common Stock was
purchased (i.e., the date the option was exercised) over the option price.
Notwithstanding the foregoing, if the employee is subject to Section 16 at the
time of the disqualifying disposition, the acquisition date of the shares and
the time of recognition of income will be postponed, unless the employee
elects to be taxed immediately. In addition, the amount of income recognized
will be the difference between the option price and the fair market value of
such shares at the end of the postponement period (rather than at the date of
exercise). (See, "Approval of the Company's 1993 Non-Employee Directors'
Stock Option Plan--Federal Income Tax Consequences" above for a discussion of
when the sale of stock received pursuant to the exercise of a stock option
could subject an insider to suit for "short swing profit.") The amount
recognized as ordinary compensation income will increase the employee's tax
basis in such shares. Any gain or loss resulting from the disposition (i.e.,
the difference between the amount received by the employee and the employee's
basis in the transferred shares) will be taxed as capital gain or loss. At
the time of the disposition, the Company would be allowed a deduction equal
to the amount included in the employee's income as ordinary compensation
income.
The affirmative vote of the holders of a majority of the votes entitled
to vote and present in person or by proxy at the Annual Meeting of
Stockholders is required for approval of the Stock Purchase Plan.
The Board of Directors recommends a vote FOR approval of the Stock
Purchase Plan.
PROPOSED AMENDMENT TO THE COMPANY'S
1989 INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the 1989 Incentive Plan of Bally Manufacturing Corporation (the
"Incentive Plan") to increase the number of shares of Common Stock reserved
for use upon the exercise of awards to be granted from time to time under the
Incentive Plan to an aggregate of 6,022,000 shares. The current number of
shares of Common Stock reserved in connection with the Incentive Plan is
4,000,000.
The Board of Directors has also adopted, subject to stockholder approval,
an additional amendment which would limit the number of options, stock
appreciation rights ("SARs") or options in tandem with SARs that may be
granted during any one calendar year to the Company's chief executive officer
and certain other highly compensated executives of the Company. The amendment
states that no such executive officer may be granted options, SARs or options
in tandem with SARs to acquire more than 1,000,000 shares of Common Stock
during any one calendar year.
The amendment relating to the number of shares of Common Stock reserved
is proposed and was adopted by the Board of Directors in the belief that the
Incentive Plan is accomplishing its goal of providing additional incentive to
persons who can contribute significantly to the success of the business of the
Company and that the Company should be in a position to continue to make
grants. During 1993, the Company granted stock options pursuant to the
Incentive Plan, subject to stockholder approval of the amendment, as follows:
Mr. Goldberg, options to purchase 450,000 shares; Mr. Hillman, options to
purchase 100,000 shares; Mr. Barr, options to purchase 50,000 shares; Mr.
Lucci, options to purchase 75,000 shares; Mr. Conover, options to purchase
10,000 shares; all current executive officers as a group, options to purchase
711,500 shares; and all employees, including current officers who are not
executive officers, as a group, options to purchase 441,000 shares. The
Company anticipates making additional stock option grants or other awards in
the future, thus making it necessary to amend the Incentive Plan by increasing
the number of shares available under the Incentive Plan. The options granted
under the Incentive Plan subject to stockholder approval have not vested. As
of March 1, 1994, the closing price of a share of Common Stock as reported on
the New York Stock Exchange Composite Transactions Tape was $8.625.
For fiscal years of the Company commencing on or after January 1, 1994,
Section 162(m) of the Code will generally limit the Company's deduction for
compensation paid to each of its five highest paid executive officers to $1
million per year, except to the extent that the compensation is "performance
based compensation." Recently proposed Treasury regulations under
Section 162(m) provide that stock options issued pursuant to a plan may not
be treated as performance based compensation unless the plan is subject to
stockholder approval and contains, among other things, a limitation on the
number of shares that may be issued thereunder to a particular employee during
a specified period. Accordingly, the Plan has been amended, subject to
stockholder approval, to provide that neither the chief executive officer of
the Company nor any other employee whose total compensation for a particular
calendar year is required to be reported to the Company's stockholders
pursuant to the Exchange Act by reason of such employee being the chief
executive officer or being among the other four most highly compensated
officers for such calendar year may be issued options, SARs or options in
tandem with SARs to acquire more 1,000,000 shares of Common Stock under the
Incentive Plan in any one calendar year.
Description of the Incentive Plan
On March 9, 1989, the Board of Directors of the Company adopted the
Incentive Plan subject to approval by the Company's stockholders. The
stockholders of the Company approved the Incentive Plan on May 4, 1989 and
approved an amendment to the Incentive Plan on June 16, 1992.
The Incentive Plan is intended to encourage ownership of the Company's
Common Stock by officers and other key employees of the Company, to encourage
their continued employment with the Company and to provide them with
additional incentives to promote the success of the Company.
The complete text of the Incentive Plan is attached as Exhibit C to this
Proxy Statement. The following summary of the Incentive Plan does not purport
to be complete and is qualified in its entirety by reference to Exhibit C.
The Incentive Plan authorizes the grant to officers and key employees of
awards ("Awards") consisting of "incentive stock options," as that term is
defined under the provisions of Section 422 of the Code, non-qualified stock
options, SARs, stock depreciation rights ("SDRs") and restricted stock awards.
There are presently 4,000,000 shares of Common Stock available for granting
awards under the Incentive Plan. The Compensation Committee administers the
Incentive Plan and has sole discretion to determine those employees to whom
Awards will be granted, the number of Awards granted, the provisions
applicable to each Award and the time periods during which Awards may be
exercisable.
The Compensation Committee may grant incentive stock options, non-
qualified stock options, or a combination of the two. The exercise price of
each incentive stock option may not be less than the fair market value of the
Common Stock at the date of grant. Under the Incentive Plan, fair market
value is generally the closing price of the Common Stock on the New York Stock
Exchange on the last business day prior to the date on which the value is to
be determined. Unless the Compensation Committee determines otherwise, the
option price per share of any non-qualified stock option shall be the fair
market value of the shares of Common Stock on the date the option is granted.
The exercise price of each incentive stock option granted to any stockholder
possessing more than 10% of the combined voting power of all classes of
capital stock of the Company, or, if applicable, a parent or subsidiary of the
Company, on the date of grant must not be less than 110% of the fair market
value on that date, and no such option may be exercisable more than five years
after the date of grant.
Options granted will be exercisable for a term of not more than ten years
from the date of grant and no option granted in tandem with an SAR will
generally be exercisable during the first six months following the date of
grant. In addition, no employee may be granted an incentive stock option to
the extent the aggregate fair market value, as of the date of grant, of the
stock with respect to which incentive stock options are first exercisable by
such employee during any calendar year exceeds $100,000.
An SAR is a right granted to an employee to receive shares of Common
Stock or cash, or a combination thereof, in an amount equal to the excess of
(a) the fair market value of a share of Common Stock on the date the SAR is
exercised over (b) the fair market value of a share of Common Stock on the
date the SAR was granted or, if granted in tandem with an option, at the
discretion of the Compensation Committee, the option price of the shares
subject to the option. SARs may be granted in tandem with an option or on a
stand alone basis.
Each SAR granted in tandem with an option is exercisable only to the
extent the related option is exercisable. SARs granted on a stand alone basis
are exercisable for a term determined by the Compensation Committee. Those
SARs which are granted in tandem with incentive stock options are not
exercisable unless the fair market value of the shares of Common Stock on the
date of exercise exceeds the option price and in no event may the amounts paid
pursuant to the SAR exceed the difference between the fair market value of the
shares on the date of exercise and the option price.
Under the terms of the Incentive Plan, an SDR is a right granted to an
employee in conjunction with an option to receive a payment of shares of
Common Stock or cash, or a combination thereof, equal to the excess, if any,
of (a) the option price of a share of Common Stock acquired on exercise of the
related option, over (b) the greater of (i) the fair market value, as of the
date six months and one day after the option was exercised (or such other date
as the Compensation Committee, in its discretion, shall determine), of the
share of Common Stock acquired on such exercise, or (ii) if such share was
sold prior to such date, the gross sales proceeds from the sale of such share
of Common Stock. The Compensation Committee has discretion to determine the
terms of an SDR, including, but not limited to, the determination of whether
payment of the SDR will be made in cash, Common Stock, or a combination
thereof. To date, the Compensation Committee has granted no SDRs pursuant to
the Incentive Plan and has no present intention of making any such grants in
the future.
Restricted stock awards are rights granted by the Compensation Committee
to receive shares of Common Stock subject to forfeiture and other restrictions
determined by the Compensation Committee. Until the restrictions with respect
to any restricted stock award lapse, the shares will be held by the Company
and may not be sold or otherwise transferred by the employee. Except as
otherwise determined by the Compensation Committee, until the restrictions
lapse, the shares will be forfeited if the employee's employment is terminated
for any reason. Unless the Compensation Committee determines otherwise, one-
fifth of the shares subject to a restricted stock award shall vest on the
first anniversary of the date of grant, an additional one-fifth of the shares
subject to the restricted stock award shall vest on the second anniversary of
the date of grant and the balance of the shares subject to the restricted
stock award shall vest on the third anniversary of the date of grant.
The Company will make cash payments to an employee who receives an Award
of restricted stock in an amount equal to the aggregate amount of federal,
state and local income taxes which such employee would be required to pay as
a result of the receipt or vesting of shares of Common Stock pursuant to any
Award of restricted stock.
Awards granted under the Incentive Plan will be subject to adjustment
upon a recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend, or other similar event affecting the
Common Stock. An Award will not be transferable, other than by will or the
laws of descent and distribution and an Award may be exercised, during the
lifetime of the holder of the Award, only by the holder.
In the case of a "change in control" of the Company (as defined in the
Incentive Plan), each Award granted under the Incentive Plan will terminate
90 days after the occurrence of such "change in control," but, in the event
of any such termination (i) an option, SAR or SDR holder will generally have
the right, commencing at least five days prior to the "change in control" and
subject to any other limitation on the exercise of the option, SAR or SDR in
effect on the date of exercise, to immediately exercise any options, SARs or
SDRs in full to the extent they previously have not been exercised, and
(ii) restricted stock awards will vest and any required cash payment will be
made.
The Incentive Plan will terminate on March 9, 1999, and Awards shall not
be granted under the Incentive Plan after that date although the terms of any
Award may be amended in accordance with the Incentive Plan at any date prior
to the end of the term of such Award. Any Awards outstanding at the time of
termination of the Incentive Plan will continue in full force and effect
according to the terms and conditions of the Award and the Incentive Plan.
The Incentive Plan may be amended by the Board of Directors, provided
that stockholder approval will be necessary as required under Section 422 of
the Code or Rule 16b-3, and provided further that no amendment may impair any
rights of any holder of an Award previously granted under the Incentive Plan
without the holder's consent.
For fiscal years of the Company commencing on or after January 1, 1994,
Section 162(m) of the Code will generally limit to $1 million the Company's
federal income tax deduction for compensation paid in any year to its chief
executive officer and its four highest paid executive officers, to the extent
that such compensation is not "performance based". Under recently proposed
Treasury regulations, and subject to certain transition rules, a stock option
will, in general, qualify as "performance based" compensation if (i) it has
an exercise price of not less than the fair market value of the underlying
stock on the date of grant, (ii) it is granted under a plan that limits the
number of shares for which options may be granted to a participant, which plan
is approved by a majority of the stockholders entitled to vote thereon, and
(iii) it is granted by a compensation committee consisting solely of at least
two independent directors. Awards of restricted stock, however, will not
generally qualify as "performance based" compensation unless the vesting or
purchase of the restricted stock is contingent upon satisfying a separate
performance goal. If a stock option grant or restricted stock award to an
executive referred to above is not "performance based," the amount that would
otherwise be deductible by the Company in respect of such option grant or
award will be disallowed to the extent that the executive's aggregate non-
performance based compensation paid in the relevant year exceeds $1 million.
Federal Income Tax Consequences - Non-Qualified Stock Options
The issuance of a non-qualified stock option under the Incentive Plan
will not result in any taxable income to the recipient employee or a tax
deduction to the Company at the time of grant. Generally, an employee to whom
a non-qualified stock option has been granted will recognize ordinary income
at the time the employee exercises the option and receives shares of Common
Stock in an amount equal to the excess of the fair market value of such shares
on the date of exercise over the option price.
Notwithstanding the foregoing, upon the exercise of a non-qualified stock
option by a person subject to Section 16, the acquisition date of the shares
of Common Stock for federal income tax purposes and the time of recognition
of income will be postponed as long as the sale of the shares of Common Stock
could subject the person to suit under the "short swing profit" provisions of
Section 16, unless such person elects to be taxed on the date of exercise.
Furthermore, the amount of income recognized by the recipient employee will
be the excess of the fair market value of such shares of Common Stock at the
end of the postponement period (rather than at the date of exercise) over the
option price. (See "Approval of the Company's 1993 Non-Employee Directors'
Stock Option Plan -- Federal Income Tax Consequences" for a discussion of
options and Section 16).
The Company is entitled to a tax deduction corresponding to the amount
of income recognized by the employee as a result of the exercise of a non-
qualified stock option for the year in which the employee recognizes such
income for federal income tax purposes.
Federal Income Tax Consequences - Incentive Stock Options
Neither the receipt nor exercise of an incentive stock option is a
taxable event to the employee, and if the recipient employee does not dispose
of the shares of Common Stock acquired under an incentive stock option prior
to the expiration of the requisite holding periods described below, any gain
resulting from the sale of such shares will be long-term capital gain. In
such case, the Company would not be entitled to any tax deduction with respect
to the grant or exercise of the option. The difference between the fair
market value of the shares of the Common Stock on the date of exercise and the
option price is a tax preference item which may cause the employee to incur
an alternative minimum tax in the year of exercise. The minimum statutory
holding periods are two years from the date the option is granted and one year
from the date the employee receives his shares of Common Stock pursuant to the
exercise of the incentive stock option. The statutory holding period for
incentive stock options is waived in the event of the employee's death.
If the shares of Common Stock are disposed of before the end of either
of such statutory holding periods (a "disqualifying disposition"), the lesser
of (i) the difference between the option price and the fair market value of
such shares on the date of exercise, or (ii) the total amount of gain realized
on the sale must be reported by the employee as ordinary income and the
Company would be entitled to a tax deduction in that amount. The remaining
gain, if any, would be taxed to the employee as capital gain.
The Revenue Reconciliation Act of 1993 increased both (i) the rate
differential between ordinary income and capital gains for certain high income
taxpayers and (ii) the alternative minimum tax rate for individuals.
Notwithstanding the foregoing, if the employee is subject to Section 16
at the time of a disqualifying disposition, the acquisition date of the shares
and the time of recognition of income will be postponed as long as the sale
of shares could subject the employee to suit for "short swing profit", unless
he elects to be taxed immediately. In addition, the amount of income
recognized will be the lesser of (i) the difference between the option price
and the fair market value of such shares at the end of the postponement period
(rather than at the date of exercise), or (ii) the total amount of gain
realized on the sale. (See "Approval of the Company's 1993 Non-Employee
Directors' Stock Option Plan -- Federal Income Tax Consequences" for a
discussion of options and Section 16.)
Federal Income Tax Consequences - Restricted Stock Awards
Generally, an employee to whom a restricted stock award is made will
recognize ordinary income for federal income tax purposes in an amount equal
to the excess of the fair market value of the shares of Common Stock received
at the time the shares first become transferable or are no longer subject to
forfeiture over the purchase price, if any, paid by the employee for such
Common Stock, and such amount will then be deductible for federal income tax
purposes by the Company. For tax purposes, in addition to other restrictions,
the Common Stock is considered to be subject to a substantial risk of
forfeiture as long as the sale of the shares could subject the employee to
suit under the "short swing profit" provisions of Section 16. Alternatively,
if the recipient of a restricted stock or stock bonus award so elects, the
recipient will recognize ordinary income on the date of grant in an amount
equal to the excess of the fair market value of the shares of Common Stock
(without taking into account any lapse restrictions) on such date, over the
purchase price, if any, paid by the employee for such Common Stock, and such
amount will then be deductible by the Company. In the event of the forfeiture
of the Common Stock included in a restricted stock award, the employee will
not be entitled to any deduction except to the extent the employee paid for
such Common Stock. Upon a sale of the Common Stock included in the restricted
stock award, the employee will recognize capital gain or loss, as the case may
be, equal to the difference between the amount realized from such sale and the
employee's tax basis for such shares of Common Stock.
Under Section 16, the grant of restricted stock award pursuant to the
Incentive Plan will generally be exempt from the "short swing profit"
provisions only if the Common Stock is held at least six months prior to its
sale. Therefore, the taxation of a restricted stock award to a Section 16
person will generally be deferred for such six-month period unless the
Section 16 person elects to be taxed immediately. The vesting of restricted
stock is exempt for Section 16 purposes.
Federal Income Tax Consequences - SARs and SDRs.
A recipient employee will not recognize taxable income upon the grant of
an SAR or SDR, as the case may be. The employee will generally recognize
ordinary income for federal income tax purposes in an amount equal to the
amount of cash and/or the then fair market value of the shares of Common Stock
received upon exercise of the SAR or SDR, in the tax year in which payment is
made in respect of an SAR or SDR, and the Company will normally be entitled
to a tax deduction for an equivalent amount for the same year. However, if
a Section 16 person receives shares of Common Stock upon the exercise of an
SAR or SDR, the acquisition date of the shares of Common Stock for federal
income tax purposes, and the time and measurement of recognition of income,
will be postponed as long as a sale of the shares of Common Stock could
subject the employee to suit under the "short swing profit" provisions of
Section 16, unless the employee elects to be taxed on the date he receives the
shares of Common Stock. Generally, under the Section 16 regulations, the sale
of shares of Common stock within six months following exercise of an SAR or
SDR paid in shares of Common Stock will generally not subject the Section 16
person to a suit under the "short swing profit" provisions of Section 16
assuming the aggregate holding period of the SAR or SDR and any underlying
shares of Common Stock is at least six months. In the event taxation is
postponed, the amount of income recognized by the employee will be the fair
market value of such shares of Common Stock at the end of the postponement
period.
Federal Income Tax Consequences - Cash Gross-Up Payments
Any cash payment received in conjunction with an Award of restricted
stock under the Incentive Plan will be taxed to the employee as ordinary
income at the time he receives it, and the Company will be entitled, subject
to the limitations of Section 280G of the Code, to a corresponding tax
deduction at such time.
<PAGE>
New Plan Benefits
The table below sets forth, for each of the Executive Officers named in
the Summary Compensation Table and the groups identified below, information
regarding the benefits granted by the Board of Directors subject to approval
by the stockholders.
<TABLE>
The Incentive Plan
------------------
<CAPTION>
Name and Position Dollar Value ($) Number of Units
----------------- ---------------- ---------------
<S> <C> <C>
Arthur M. Goldberg
Chairman of the Board of Directors,
Chief Executive Officer and President
of the Company . . . . . . . . . . . . . . . (a) 450,000
Lee S. Hillman
Executive Vice President, Chief
Financial Officer and Treasurer
of the Company . . . . . . . . . . . . . . . (a) 100,000
Wallace R. Barr
Executive Vice President and Chief
Operating Officer of Bally's Casino
Holdings, Inc., President and Chief
Operating Officer of Bally's Park
Place, Inc., President and Chief
Operating Officer of GNAC CORP and
President of Bally's Tunica, Inc.. . . . . . (a) 50,000
Michael G. Lucci, Sr.
President and Chief Operating Officer
of Bally's Health & Tennis Corporation . . . (a) 75,000
Robert G. Conover
Vice President, Management Information
Systems and Chief Information Officer of
the Company. . . . . . . . . . . . . . . . . (a) 10,000
Executive Group. . . . . . . . . . . . . . . . (a) 711,500
Non-Executive Director Group . . . . . . . . . -- --
Non-Executive Officer
Employee Group . . . . . . . . . . . . . . . (a) 441,000
<FN>
(a) All options granted under the Incentive Plan, and subject to stockholder
approval, have been granted at the exercise price of $9.625 per share
(the fair market value of a share of Common Stock on the date of grant).
The actual value, if any, that a person may realize will depend on the
excess of the stock price over the exercise price on the date the option
is exercised. As of March 1, 1994, the closing price of a share of
Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape was $8.625.
</TABLE>
The affirmative vote of the holders of a majority of the votes entitled
to vote and present in person or by proxy at the Annual Meeting of
Stockholders is required for adoption of the amendment to the Incentive Plan.
The Board of Directors recommends a vote FOR ratification and approval
of the amendment to the Incentive Plan.
STOCKHOLDER PROPOSAL REGARDING THE LONG-TERM COMPENSATION
AWARDS PORTION OF THE COMPENSATION OF EXECUTIVE OFFICERS
An individual stockholder has notified the Company of his intention to
introduce the proposal set forth below for consideration and action by the
stockholders at the Annual Meeting. The name and address of the proponent and
the number of shares of Common Stock he holds will be furnished by the Company
to any person, orally or in writing as requested, promptly upon the receipt
of any oral or written request to Carol Stone DePaul, Secretary, Bally
Manufacturing Corporation, 8700 West Bryn Mawr Avenue, Chicago, Illinois
60631, telephone (312) 399-1300. The proposed resolution and statement of
reasons were provided by the proponent. The affirmative vote of the holders
of a majority of the votes entitled to vote and present in person or by proxy
at the Annual Meeting of Stockholders is required for approval of the
proposal.
"RESOLVED, that the shareholders recommend that the Board take
the necessary steps to revise the Long-Term Compensation Awards
portion of the Compensation of Executive Officers to provide that
such Long-Term Compensation may not exceed one-half of one percent
of the Company's net income for the year, and that it be eliminated
in any year in which the Company reduces or omits a dividend on its
Common Stock."
The statement made in support of this proposal is as follows:
"The summary compensation table of the annual report indicates
that members of senior management have up to five different
categories of compensation: salary, bonus, other annual
compensation, long-term compensation awards, and all other
compensation. At a time when shareholders have suffered under a
substantial subpar 5 year performance level of the total cumulative
return on investment, senior management continues to receive
extraordinarily high levels of compensation relative to shareholder
return. During the current period of financial sacrifice where the
shareholders are no longer receiving the small dividend paid for
many years, the Executive Officers should share in the financial
sacrifices necessary to rebuild the financial strength of the
Company."
"The resolution proposed is a part of at least one other large
corporation's Long-Term Incentive Plan (i.e., Con Edison)."
"If you AGREE, please mark your proxy FOR this resolution."
Board of Directors Response to Stockholder Proposal
Based upon its review of the foregoing proposal and statement of support,
it is the Company's belief that the proponent asserts that cash payments to
executive officers should be limited when the Company is not paying dividends.
The Company believes that the proposal, if adopted by the stockholders, would
not accomplish the proponent's intended purpose. While the proposal states
that executive officers receive five different categories of compensation, the
Company notes that the number and specific categories of compensation set
forth in the proxy statement are dictated by the rules of the Securities and
Exchange Commission and do not necessarily reflect the Company's view. The
long-term compensation category from the proxy statement for the Annual
Meeting of Stockholders held on May 5, 1993 upon which the proponent focuses,
as well as the long-term compensation category included in this proxy
statement, are comprised entirely of grants of options to purchase shares of
Common Stock and do not include any cash payments. It is the view of the
Compensation Committee that one of the best incentives executive officers can
be given to increase stockholder value is the award of stock options. This
is consistent with the Company's philosophy regarding compensation which is
set forth in the Compensation Committee's report which appears earlier in this
Proxy Statement. Such awards have the added benefit to the Company of not
requiring any cash payments. With respect to management's performance, refer
to the graph on page 12 which summarizes the Company's performance from
October 12, 1990, through December 31, 1993 (i.e., a 183% cumulative return
to stockholders).
For the reasons set forth above, the Board of Directors opposes the
foregoing stockholder proposal.
The Board of Directors recommends a vote AGAINST this proposal.
LEGAL PROCEEDINGS
Several purported derivative actions against the Company and certain of
its current and former directors, originally filed in December 1990 and
January 1991, have been consolidated under the caption In re: Bally
Manufacturing Corporation Shareholders Litigation in the Court of Chancery of
the State of Delaware, New Castle County. The consolidated complaint alleges,
among other things, breach of fiduciary duty, corporate mismanagement, and
waste of corporate assets in connection with certain actions including, among
other things, payment of compensation, certain acquisitions by the Company,
the dissemination of allegedly materially false and misleading information,
the proposed restructuring of the Company's debt, and a subsidiary's allegedly
discriminatory practices. The plaintiffs seek, among other things, (i)
injunctions against payment of certain termination compensation benefits and
implementation of the proposed restructuring plan, (ii) rescission of
consummated transactions and a declaration that the complained of transactions
are null and void, (iii) an accounting by individual defendants of damages to
the Company and benefits received by such defendants, (iv) the appointment of
a representative to negotiate on behalf of the stockholders in connection with
any proposed restructuring, and (v) costs and disbursements, including a
reasonable allowance for the fees and expenses of plaintiffs' attorneys,
accountants and experts.
TRANSACTIONS WITH MANAGEMENT
Arrangements with Mr. Gillman
The Company, Park Place and Mr. Richard Gillman, the former President and
Chief Operating Officer of the Company, entered into an employment agreement
(the "Gillman Employment Agreement") effective as of July l, 1991 for a
three-year term at an annual base salary of $2,200,000, plus bonuses, payable
at the discretion of the Compensation Committee. A previous employment
agreement among Mr. Gillman, Bally's Park Place, Inc. and Bally's Grand -
Atlantic City established Mr. Gillman's participation in a supplemental
executive retirement plan with terms similar to the Park Place SERP (the
"Gillman SERP"). Mr. Gillman was entitled to receive an annual benefit under
the Gillman SERP equal to 3.33% of Average Compensation for each year of
service up to 17 years of service, reduced by benefits payable after
retirement from the Park Place profit sharing plan (not including amounts
attributable to contributions made by Mr. Gillman or on his behalf through
salary reduction), Social Security and other retirement or contractual
compensation arrangements with the Company or its affiliates. Benefits under
the Gillman SERP were payable to Mr. Gillman on retirement commencing at any
time after age 55. Mr. Gillman would have been eligible to receive those
benefits if he had retired upon expiration of his prior employment agreement
on December 31, 1990. Instead, he agreed to enter into the Gillman Employment
Agreement and release all of his rights and those of his estate under the
Gillman SERP in exchange for Park Place agreeing to pay Mr. Gillman a
discounted value of the Gillman SERP benefits over a five-year period. In
accordance with that agreement, Mr. Gillman received a payment of $2 million
in 1991 and payments totalling $7 million in 1992, leaving approximately $18.6
million unpaid.
On January 8, 1993, the Company, Park Place and Mr. Gillman entered into
a Retirement and Separation Agreement (the "Retirement Agreement"). Pursuant
to the terms of the Retirement Agreement, Mr. Gillman agreed to retire and
resign from all of his positions of employment with the Company and its
subsidiaries including Park Place, to the termination of the Gillman
Employment Agreement and to a covenant not-to-compete. The Company and Park
Place agreed to pay $1 million in exchange for all other benefits and payments
(including salary and bonus) otherwise provided to Mr. Gillman under the
Gillman Employment Agreement and $13.5 million in lieu of the remaining
aforementioned $18.6 million due to Mr. Gillman under the Gillman Employment
Agreement. The Company also agreed to the immediate vesting of stock options
to purchase 666,666 shares of Common Stock previously granted to Mr. Gillman.
The Company also gave Mr. Gillman title to an automobile provided by the
Company and used by Mr. Gillman during his employment. In addition, the
Company agreed to provide Mr. Gillman with twelve months of medical and health
insurance benefits in lieu of "COBRA" entitlements. In connection with the
Retirement Agreement, the Company, Park Place and Mr. Gillman also executed
general releases from liability in respect of each other.
Arrangements with Mr. Wildman
Pursuant to the agreements by which all of the outstanding capital stock
of Health & Tennis Corporation of America ("HTCA") was acquired by BHTC, an
indirect wholly owned subsidiary of the Company, in April 1983, Mr. Wildman
entered into employment contracts with HTCA expiring December 31, 1987 (which
term was originally extended for three years through 1990 and later extended
through 1993). As of January 1, 1990, the employment agreement of Mr. Wildman
provided for him to receive an annual base salary of $500,000 for the years
1990 through 1993. Pursuant to such agreement, Mr. Wildman was to also
receive incentive compensation for each year equal to (i) $24,000 for each 1%
over 50% of the annual goal for pre-tax profit achieved by BHTC and (ii) an
additional $16,000 for each 1% over 50% of the annual goal for cash flow
achieved by BHTC. The annual goal for pre-tax profit (as defined in the
employment agreement) achieved was $120.2 million and $132.3 million, and the
annual goal for cash flow (as defined in the employment agreement) achieved
was $111.3 million and $122.4 million for 1992 and 1993, respectively.
Mr. Wildman's agreement also provided for participation in BHTC's other
executive benefit plans. Previously, Mr. Wildman agreed to receive a bonus
at the discretion of the Board of Directors of BHTC in lieu of his formula
incentive compensation for 1991.
As of September 30, 1993, BHTC and Mr. Wildman entered into a Consulting
Agreement (the "Consulting Agreement"). Pursuant to the terms of the
Consulting Agreement, Mr. Wildman and BHTC agreed that the Employment
Agreement dated April 6, 1983, as extended and amended, by and between HTCA
and Mr. Wildman had, as of October 1, 1993, been terminated with neither party
having any further obligations pursuant thereto. Pursuant to the terms of the
Consulting Agreement, Mr. Wildman resigned from his employment with BHTC and
all of its subsidiaries as of September 30, 1993 and agreed to a covenant not-
to-compete. BHTC agreed to engage Mr. Wildman as a consultant for a period
of one year, ending on September 30, 1994, however, the term may be extended
for additional one year periods, upon the same terms and conditions, by the
written agreement of Mr. Wildman and BHTC. For Mr. Wildman's services
pursuant to the Consulting Agreement, BHTC agreed to pay Mr. Wildman the sum
of $250,000 per year and agreed to continue to make the monthly lease payments
through February 1994 on the automobile previously provided by BHTC to Mr.
Wildman. Consulting fees paid to Mr. Wildman in 1993 totalled $68,269.
Other Transactions with Management
Mr. Wildman and Mr. Lucci have interests in real estate, or entities
owning real estate, that are leased to HTCA for fitness centers. Mr.
Wildman's interests range from approximately 17% to 50% in eight locations,
while Mr. Lucci has interests which range from approximately 17% to 25% in
four of the eight locations. Mr. Wildman's interests are held by Mr. Wildman
individually or by the Wildman Family Trust, of which Mr. Wildman is sole
trustee and in which he has a two-thirds beneficial interest. These
arrangements were created prior to the Company's acquisition of HTCA. The
Company believes that the terms of these leases are at least as favorable to
the Company as those which could be obtained from unrelated parties. In 1993,
payments by HTCA under these leases totalled approximately $1,616,000 of which
$1,079,000 was made under leases in which Mr. Lucci had an ownership interest.
In 1981, prior to the Company's acquisition of HTCA, Mr. Wildman acquired
12.5% of the outstanding stock of H.I. Holding Corp. ("Holding") which,
through subsidiaries, presently owns or controls fitness centers in various
locations in the United States. Certain HTCA subsidiaries operate, as of
December 31, 1993, 14 of these fitness centers under agreements with various
subsidiaries of Holding and pay fees and building rentals to these Holding
subsidiaries while retaining all revenue generated by these centers. The
aggregate amount of such rentals and fees paid by HTCA subsidiaries was
approximately $919,000 in 1993. The Company believes that the terms of these
agreements are at least as favorable to the Company as those which could be
obtained from unrelated parties.
In 1993, the Company reimbursed Di Giorgio Corporation approximately
$224,000 for certain indirect administrative expenses. The amount of the
reimbursement is intended to replace the portion of such expenses directly
benefiting the Company. Mr. Goldberg is the beneficial owner of approximately
50% of the voting securities of Di Giorgio Corporation. A partnership in
which Messrs. Goldberg, Lucci and Wildman are each 20% limited partners
purchased a facility in Texas from the Federal Deposit Insurance Company.
BHTC leases this facility for one of its fitness centers. The rent paid by
BHTC did not change as a result of this transfer and, until August 1993, was
approximately $58,000 per month. Pursuant to the lease for this facility, in
August 1993 the rent was increased to approximately $67,000 per month and is
subject to additional 15% increases at five and ten year intervals. During
1993, BHTC paid approximately $2,700,000 for goods and services from two
companies which employed a relative of Mr. Hillman. Based on BHTC's receipt
of competitive bids for similar items, BHTC believes that the terms of these
arrangements are at least as favorable to BHTC as those which could be
obtained from unrelated parties. During 1993, the law firm of Benesch,
Friedlander, Coplan & Aronoff rendered legal services to the Company and its
subsidiaries. Mr. Aronoff, a director of the Company, is a partner in this
law firm. The Company plans to retain this firm during the current year.
AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee,
has approved the selection of Ernst & Young as the Company's independent
auditors for 1994. Representatives of Ernst & Young, the Company's
independent auditors, will be present at the meeting with the opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER BUSINESS
In addition to the matters described above, there will be an address by
the Chairman of the Board of Directors and a general discussion period during
which stockholders will have an opportunity to ask questions.
Management knows of no other business to be presented for action at the
meeting. If other matters properly come before the meeting or any adjournment
thereof, the persons named as proxies will vote upon them in accordance with
their best judgment.
EXPENSE OF SOLICITATION
The cost of this solicitation will be borne by the Company. In addition
to the use of the mail, proxy solicitation may be made by telephone, telegraph
and personal interviews by regular employees of the Company. The Company has
retained MacKenzie Partners, Inc., 156 Fifth Avenue, New York, New York 10010,
to assist in the soliciting of proxies and will pay that firm a fee of $10,000
plus out-of-pocket expenses for such services. The Company will also
reimburse brokerage houses and others for forwarding proxy material to
beneficial owners of stock.
STOCKHOLDER PROPOSALS FOR THE 1994 ANNUAL MEETING
The date by which stockholder proposals for inclusion in the proxy
materials relating to the next Annual Meeting of Stockholders must be received
by the Company at its principal executive offices, Attention: Carol Stone
DePaul, Secretary, Bally Manufacturing Corporation, 8700 West Bryn Mawr
Avenue, Chicago, Illinois 60631, is November 30, 1994.
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report to stockholders for the year 1993,
which contains consolidated financial statements of the Company, was
previously sent or is being sent simultaneously to stockholders as of the
record date. The Company will provide to any stockholder as of the record
date who so requests in writing, copies of its Annual Report on Form 10-K,
and, if specifically requested, the financial statement schedules and exhibits
thereto. Requests for such copies should be directed to Carol Stone DePaul,
Secretary, Bally Manufacturing Corporation, 8700 West Bryn Mawr Avenue,
Chicago, Illinois 60631.
By Order of the Board of Directors,
CAROL STONE DE PAUL
Secretary
Chicago, Illinois
March 30, 1994
Please date and sign your
proxy card and return it promptly
using the enclosed return envelope.
<PAGE>
(BALLY LOGO)
Bally Manufacturing Corporation
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
<PAGE>
Bally Proxy Statement - Annual Meeting of Stockholders May 17, 1994
<PAGE>
EXHIBIT A
1993 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN OF
BALLY MANUFACTURING CORPORATION
1. Purpose of the Plan. This 1993 Non-Employee Directors' Stock
Option Plan of Bally Manufacturing Corporation adopted on this 13th day of
October, 1993, is intended to encourage directors of the Company who are
not officers or key employees of the Company or any of its subsidiaries to
acquire or increase their ownership of common stock of the Company. The
opportunity so provided is intended to foster in participants an incentive
to put forth maximum effort for the continued success and growth of the
Company and its subsidiaries, to aid in retaining individuals who put forth
such efforts, and to assist in attracting the best available individuals to
the Company in the future.
2. Definitions. When used herein, the following terms shall have
the meaning set forth below:
2.1 "Board" means the Board of Directors of Bally
Manufacturing Corporation.
2.2 "Change in Control" means a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act (as in effect on the date the Plan is adopted by the Board); provided,
that, without limitation, such a change in control shall be deemed to have
occurred if:
(a) any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or
more of the combined voting power of the Company's then outstanding
securities; or
(b) During any period of two (2) consecutive years (not
including any period prior to the date the Plan is adopted by the
Board) there shall cease to be a majority of the Board comprised of
Continuing Directors; or
(c)(i) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least eighty percent (80%) of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or
(ii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
2.3 "Code" means the Internal Revenue Code of 1986, as in
effect at the time of reference, or any successor revenue code which
may hereafter be adopted in lieu thereof, and any reference to any
specific provisions of the Code shall refer to the corresponding
provisions of the Code as it may hereafter be amended or replaced.
2.4 "Committee" means the Compensation and Stock Option
Committee of the Board or any other committee appointed by the Board
which is invested by the Board with responsibility for the
administration of the Plan.
2.5 "Company" means Bally Manufacturing Corporation.
2.6 "Continuing Directors" means individuals who at the
beginning of any period of two (2) consecutive years (not including
any period prior to the adoption of this Plan) constitute the Board
and any new director(s) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved.
2.7 "Directors" means directors who serve on the Board and
who are not officers or key employees of the Company or any of its
50% or more direct or indirect subsidiaries.
2.8 "Effective Date" means October 13, 1993.
2.9 "ERISA" means the Employee Retirement Income Security Act
of 1974, as in effect at the time of reference, or any successor law
which may hereafter be adopted in lieu thereof, and any reference to
any specific provisions of ERISA shall refer to the corresponding
provisions of ERISA as it may hereafter be amended or replaced.
2.10 "Exchange Act" means the Securities Exchange Act of 1934,
as in effect at the time of reference, or any successor law which may
hereafter be adopted in lieu thereof, and any reference to any
specific provisions of the Exchange Act shall refer to the
corresponding provisions of the Exchange Act as it may be amended or
replaced.
2.11 "Fair Market Value" means with respect to the Shares,
the closing price of the Shares on the last business day prior to the
date on which the value is to be determined on which transactions in
Shares occurred, as reported on the New York Stock Exchange Composite
Tape or such other source of quotation for, or reports of, trading
activity in Shares as the Committee may from time to time select.
2.12 "Initial Grant Date" means the first business day
following the date a Director joins the Board, but only if the
Director was not a Director on the Effective Date.
2.13 "Option" means the right to purchase the number of Shares
specified by the Plan at a price and for a term fixed by the Plan,
and subject to such other limitations and restrictions as the Plan
and the Committee imposes.
2.14 "Option Agreement" means a written agreement in such form
as may be, from time to time, hereafter approved by the Committee,
which shall be duly executed by the Company and the Director and
which shall set forth the terms and conditions of an Option under the
Plan.
2.15 "Plan" means the 1993 Non-Employee Directors' Stock
Option Plan of Bally Manufacturing Corporation.
2.16 "Regulation T" means Part 220, chapter II, title 12 of
the Code of Federal Regulations, issued by the Board of Governors of
the Federal Reserve System pursuant to the Exchange Act, as amended
from time to time.
2.17 "Shares" means shares of the Company's $.66 2/3 par value
common stock or, if by reason of the adjustment provisions contained
herein, any rights under an Option under the Plan pertain to any
other security, such other security.
2.18 "Successor" means the legal representative of the estate
of a deceased Director or the person or persons who shall acquire the
right to exercise or receive an Option by bequest or inheritance or
by reason of the death of the Director.
2.19 "Term" means the period during which a particular Option
may be exercised.
3. Stock Subject to the Plan. There will be reserved for use,
upon the exercise of Options to be granted from time to time under the
Plan, an aggregate of 120,000 Shares, which Shares may be, in whole or in
part, as the Board shall from time to time determine, authorized but
unissued Shares, or issued Shares which shall have been reacquired by the
Company. Any Shares subject to issuance upon exercise of Options but which
are not issued because of a surrender, lapse, expiration or termination of
any such Option prior to issuance of the Shares shall once again be
available for issuance in satisfaction of Options.
4. Administration of the Plan. Subject to the provisions of the
Plan, the Committee shall have full authority, in its discretion, to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and generally to interpret and determine any and all
matters whatsoever relating to the administration of the Plan and the
granting of Options hereunder. The Board may, from time to time, appoint
members to the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the
Committee. The Committee shall select one of its members as its chairman
and shall hold its meetings at such times and places as it shall deem
advisable. A majority of its members shall constitute a quorum. Any
action of the Committee may be taken by a written instrument signed by all
of the members, and any action so taken shall be fully as effective as if
it had been taken by a vote of a majority of the members at a meeting duly
called and held. The Committee shall make such rules and regulations for
the conduct of its business as it shall deem advisable and shall appoint a
Secretary who shall keep minutes of its meetings and records of all action
taken in writing without a meeting. No member of the Committee shall be
liable, in the absence of bad faith, for any act or omission with respect
to his service on the Committee.
5. Grant of Options.
5.1 Existing Directors. Each Director who is a Director on
the Effective Date shall be granted an Option on such date to
purchase 5,000 Shares without further action by the Board or the
Committee. On the second anniversary date of the Effective Date,
each such Director who is still a Director on such anniversary date
shall be granted an additional Option to purchase 5,000 Shares
without further action by the Board or the Committee.
5.2 Future Directors. Each Director who joins the Board after
the Effective Date shall be granted an Option on the Initial Grant
Date to purchase 5,000 Shares without further action by the Board or
the Committee. On the second anniversary of the Initial Grant Date,
if the Director is still a Director on such anniversary date, such
Director shall be granted an additional Option to purchase 5,000
Shares without further action by the Board or the Committee.
5.3 Limitations. If the number of Shares available to grant
under the Plan on a scheduled date of grant is insufficient to make
all automatic grants required to be made pursuant to the Plan on such
date, then each eligible Director shall receive an Option to purchase
a pro rata number of the remaining Shares available under the Plan;
provided further, however, that if such proration results in
fractional Shares, then such Option shall be rounded down to the
nearest number of whole Shares.
6. Basic Stock Option Provisions.
6.1 Option Price. The option price per share of any Option
granted under the Plan shall be the Fair Market Value of the Shares
covered by the Option on the date the Option is granted.
6.2 Terms of Options.
(a) Options granted hereunder shall be exercisable for
a Term of ten (10) years from the date of grant thereof, but
shall be subject to earlier termination as hereinafter
provided, and
(b) Except as otherwise provided in the Plan, prior to
its expiration or termination, any Option granted hereunder may
be exercised within the following time limitations:
(i) After one (1) year from the date of grant, it
may be exercised as to not more than one-third (1/3) of
the Shares originally subject to the Option.
(ii) After two (2) years from the date of grant,
it may be exercised as to not more than an aggregate of
two-thirds (2/3) of the Shares originally subject to the
Option.
(iii) After three (3) years from the date of grant,
it may be exercised as to any part or all of the Shares
originally subject to the Option.
6.3 Termination of Directorship. In the event a Director
ceases to be a member of the Board (other than by reason of death or
disability), then:
(a) an Option may be exercised by the Director (to the
extent that the Director was entitled to do so at the
termination of his directorship) at any time within the later
of (i) three (3) months after he ceases to be a member of the
Board, and (ii) nine (9) months after the most recent grant of
an Option to the Director pursuant to the Plan, but not beyond
the Term of the Option, and
(b) the portion of any Option that has not vested as of
the date the Director ceases to be a member of the Board shall
automatically terminate.
6.4 Death or Disability of Director. If a Director dies or
becomes disabled while he is a member of the Board, an Option may be
exercised in full, by his Successor in the event of death, or by him
or his personal representative, as the case may be, in the event of
disability, at any time within twelve (12) months after he ceases to
be a member of the Board on account of such death or disability, but
not beyond the Term of the Option; provided, however, in the event of
disability, the Option may not be exercised prior to the six month
anniversary of the date the Option was granted. If a Director,
following the termination of his directorship, shall die within the
later of (i) three (3) months after the date he ceases to be a member
of the Board, and (ii) nine (9) months after the most recent grant of
an Option to the Director pursuant to the Plan, an Option may be
exercised (to the extent the Director shall have been entitled to do
so at the time of his death), by his Successor, at any time within
twelve (12) months after his death, but not beyond the Term of the
Option.
7. Exercise of Rights Under Awards.
7.1 Notice of Exercise. A Director entitled to exercise an
Option may do so by delivery of a written notice to that effect
specifying the number of Shares with respect to which the Option is
being exercised and any other information the Committee may require.
The notice shall be accompanied by payment in full of the purchase
price of any Shares to be purchased, which payment shall be made in
cash or by certificates of Shares held for more than six (6) months,
duly endorsed in blank, equal in value to the purchase price of the
Shares to be purchased based on their Fair Market Value at the time
of exercise or a combination thereof. No Shares shall be issued upon
exercise of an Option until full payment has been made therefor. All
notices or requests provided for herein shall be delivered to the
Treasurer of the Company. No fractional Shares shall be issued.
7.2 Cashless Exercise Procedures. The Company, in its sole
discretion, may establish procedures whereby a Director, subject to
the requirements of Regulation T, federal income tax laws, and other
federal, state and local tax and securities laws, can exercise an
Option or a portion thereof without making a direct payment of the
option price to the Company. If the Company elects to establish a
cashless exercise program, a Director may utilize such program but
only in accordance with such administrative procedures and policies
as the Company deems appropriate and such procedures and policies
shall be binding on any Director wishing to utilize the cashless
exercise program.
8. Rights of Option Holder. The holder of an Option shall not
have any of the rights of a stockholder with respect to the Shares subject
to purchase or receipt under his Option, except to the extent that one or
more certificates for such Shares shall be issuable to the holder upon the
due exercise of the Option and the payment in full of the purchase price
therefor.
9. Nontransferability of Options. An Option shall not be
transferable, other than: (a) by will or the laws of descent and
distribution, and an Option may be exercised, during the lifetime of the
holder of the Option, only by the holder, or in the event of death, the
holder's Successor, or in the event of disability, the holder's personal
representative, or (b) pursuant to a qualified domestic relation order, as
defined in the Code or ERISA or the rules thereunder.
10. Adjustments Upon Changes in Capitalization. In the event of
changes in all of the outstanding Shares by reason of stock dividends,
stock splits, reclassifications, recapitalizations, mergers,
consolidations, combinations, or exchanges of shares, separations,
reorganizations or liquidations, or similar events, or in the event of
extraordinary cash or non-cash dividends being declared with respect to the
Shares, or similar transactions or events, the number and class of Shares
available under the Plan in the aggregate, the number and class of Shares
subject to Options theretofore granted, applicable purchase prices and all
other applicable provisions, shall, subject to the provisions of the Plan,
be equitably adjusted by the Committee (which adjustment may, but need not,
include payment to the holder of an Option, in cash or in shares, in an
amount equal to the difference between the price at which such Option may
be exercised and the then current fair market value of the Shares subject
to such Option as equitably determined by the Committee). The foregoing
adjustment and the manner of application of the foregoing provisions shall
be determined by the Committee, in its sole discretion. Any such
adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an Option.
11. Change in Control. Notwithstanding anything to the contrary
herein or in any Option Agreement, in the case of a Change in Control of
the Company, each Option granted under the Plan shall terminate on the
later of (i) ninety (90) days after the occurrence of such Change in
Control, and (ii) seven (7) months following the date of grant of each such
Option, and an Option holder shall have the right, commencing at least five
(5) days prior to such Change in Control and subject to any other
limitation on exercise of an Option in effect on the date of exercise, to
immediately exercise any Option in full, without regard to any vesting
limitations, to the extent it shall not have been previously exercised.
12. Forms of Options. An Option shall be granted hereunder on the
date or dates specified in the Plan. Whenever the Plan provides for the
receipt of an Option by a Director, the Secretary or the President of the
Company, or such other person as the Committee shall appoint, shall
forthwith send notice thereof to the Director, in such form as the
Committee shall approve, stating the number of Shares subject to the
Option, its Term, and the other terms and conditions thereof. The notice
shall be accompanied by a written Option Agreement, in such form as may
from time to time hereafter be approved by the Committee, which shall have
been duly executed by or on behalf of the Company. Execution by the
Director to whom such Option is granted of said Option Agreement in
accordance with the provisions set forth in this Plan shall be a condition
precedent to the exercise of any Option.
13. Taxes. The Company shall have the right to require a person
entitled to receive Shares pursuant to the exercise of an Option under the
Plan to pay the Company the amount of any taxes which the Company is or
will be required to withhold, if any, with respect to such Shares before
the certificate for such Shares is delivered pursuant to the Option.
14. Termination of the Plan. The Plan shall terminate five (5)
years from the Effective Date, and an Option shall not be granted under the
Plan after that date although the terms of any Option may be amended at any
date prior to the end of its Term in accordance with the Plan. Any Option
outstanding at the time of termination of the Plan shall continue in full
force and effect according to the terms and conditions of the Option and
this Plan.
15. Amendment of the Plan. The Plan may be amended at any time and
from time to time by the Board. Notwithstanding the foregoing, the Plan
may not be amended more than once every six (6) months to change the Plan
provisions listed in section (c)(2)(ii)(A) of Rule 16b-3 of the General
Rules and Regulations of the Exchange Act, other than to comport with
changes in the Code, ERISA or Rule 16b-3. Notwithstanding any
discretionary authority granted to the Committee in Section 4 of the Plan,
no amendment of the Plan or any Option granted under the Plan shall impair
any of the rights of any holder, without the holder's consent, under any
Option theretofore granted under the Plan.
16. Delivery of Shares on Exercise. Delivery of certificates for
Shares pursuant to an Option exercise may be postponed by the Company for
such period as may be required for it with reasonable diligence to comply
with any applicable requirements of any federal, state or local law or
regulation or any administrative or quasi-administrative requirement
applicable to the sale, issuance, distribution or delivery of such Shares.
The Committee may, in its sole discretion, require a Director to furnish
the Company with appropriate representations and a written investment
letter prior to the exercise of an Option or the delivery of any Shares
pursuant thereto.
17. Fees and Costs. The Company shall pay all original issue taxes
on the exercise of any Option granted under the Plan and all other fees and
expenses necessarily incurred by the Company in connection therewith.
18. Effectiveness of the Plan. The Plan shall become effective on
the Effective Date. The Plan shall thereafter be submitted to the
Company's stockholders for approval and unless the Plan is approved by the
Company's stockholders either (i) at a meeting duly held in accordance with
Delaware law within twelve (12) months after being approved by the Board,
or (ii) by a written consent in accordance with Delaware law within twelve
(12) months after being approved by the Board, the Plan and all Awards made
under it shall be void and of no force and effect.
19. Other Provisions. As used in the Plan, and in Option
Agreements and other documents prepared in implementation of the Plan,
references to the masculine pronoun shall be deemed to refer to the
feminine or neuter, and references in the singular or the plural shall
refer to the plural or the singular, as the identity of the person or
persons or entity or entities being referred to may require. The captions
used in the Plan and in such Option Agreements and other documents prepared
in implementation of the Plan are for convenience only and shall not affect
the meaning of any provision hereof or thereof.
20. Delaware Law to Govern. This Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
<PAGE>
EXHIBIT B
BALLY'S EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. This Employee Stock Purchase Plan of
Bally Manufacturing Corporation adopted on this 8th day of December, 1993,
is intended to encourage eligible employees of the Company and its
Subsidiaries to acquire or increase their ownership of common stock of the
Company on reasonable terms. The opportunity so provided is intended to
foster in participants a strong incentive to put forth maximum effort for
the continued success and growth of the Company and its Subsidiaries, to
aid in retaining individuals who put forth such efforts, and to assist in
attracting the best available individuals to the Company and its
Subsidiaries in the future. It is the Company's intention that this
Employee Stock Purchase Plan qualify as an "employee stock purchase plan"
under Section 423 of the Code. Accordingly, the provisions of the Plan
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. Definitions. When used herein, the following terms shall have
the meanings set forth below:
2.1 "Account" means the funds accumulated with respect to an
Employee as a result of deductions from his paycheck for the purpose
of purchasing Shares under the Plan. The funds allocated to an
Employee's Account shall remain the property of the Employee at all
times but may be commingled with the general funds of the Company.
2.2 "Board" means the Board of Directors of Bally
Manufacturing Corporation.
2.3 "Change in Control" means a change in control of the
Company of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act (as in effect on the date the Plan is adopted by the
Board); provided, that, without limitation, such a change in control
shall be deemed to have occurred if:
(a) any "person" (as defined in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty-
five percent (25%) or more of the combined voting power of the
Company's then outstanding securities; or
(b) During any period of two (2) consecutive years (not
including any period prior to the date the Plan is adopted by
the Board) there shall cease to be a majority of the Board
comprised of Continuing Directors; or
(c) (i) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent
(80%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation; or
(ii) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets.
2.4 "Code" means the Internal Revenue Code of 1986, as in
effect at the time of reference, or any successor revenue code which
may hereafter be adopted in lieu thereof, and reference to any
specific provisions of the Code shall refer to the corresponding
provisions of the Code as it may hereafter be amended or replaced.
2.5 "Committee" means the Compensation and Stock Option
Committee of the Board or any other committee appointed by the Board
which is invested by the Board with responsibility for the
administration of the Plan and whose members meet the requirements
for eligibility to serve as set forth in Rule 16b-3 and in the Plan.
2.6 "Company" means Bally Manufacturing Corporation.
2.7 "Continuing Directors" means individuals who at the
beginning of any period of two (2) consecutive years (not including
any period prior to the adoption of this Plan) constitute the Board
and any new director(s) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved.
2.8 "Eligible Compensation" means the regular compensation
(i.e., straight time earnings or draw) earned by an Employee during a
payroll period, before deductions or withholdings, but shall exclude,
unless the Committee determines otherwise, all other amounts,
including, but not limited to, (i) amounts paid as bonuses, for
overtime, as the reimbursement of expenses and other additional
compensation, (ii) all amounts contributed by the Company or any
Subsidiary under any profit-sharing, pension, retirement, group
insurance or other employee welfare benefit plan or trust whether now
in existence or hereinafter adopted and (iii) any income from stock
option exercises or other equity based compensation.
2.9 "Exchange Act" means the Securities Exchange Act of 1934,
as in effect at the time of reference, or any successor law which may
hereafter be adopted in lieu thereof, and any reference to any
specific provisions of the Exchange Act shall refer to the
corresponding provisions of the Exchange Act as it may hereafter be
amended or replaced.
2.10 "Employees" means persons employed by the Company or any
of its Subsidiaries; provided, however, that no person shall be
considered an Employee unless he (i) is customarily employed by the
Company or any of its Subsidiaries for more than twenty (20) hours
per week and more than five (5) months in a calendar year and (ii)
has been employed by the Company or any of its Subsidiaries for at
least twelve (12) consecutive months as of the Offering Commencement
Date of any such offering.
2.11 "Fair Market Value" means, with respect to the Shares,
the closing price of the Shares on the last business day prior to the
date on which the value is to be determined, as reported on the New
York Stock Exchange Composite Tape or such other source of quotation
for, or reports of, trading activity in Shares as the Committee may
from time to time select.
2.12 "Offering Commencement Date" means January 1 or July 1,
as the case may be, or any other date determined by the Committee, on
which a particular offering begins.
2.13 "Offering Termination Date" means the June 30 or
December 31, as the case may be, or any other date determined by the
Committee, on which a particular offering terminates.
2.14 "Option" means the right granted to an Employee to
purchase Shares pursuant to an offering made under the Plan and
pursuant to such Employee's election to purchase Shares in such
offering, at a price, and subject to such limitations and
restrictions as the Plan and the Committee may impose.
2.15 "Parent" means any corporation, other than the employer
corporation, in an unbroken chain of corporations ending with the
employer corporation if each of the corporations other than the
employer corporation owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
2.16 "Plan" means Bally's Employee Stock Purchase Plan.
2.17 "Purchase Period" means the period commencing on the
Offering Commencement Date and ending on the Offering Termination
Date during which installment payments for Shares purchased pursuant
to Options granted pursuant to an offering made under the Plan shall
be made.
2.18 "Rule 16b-3" means Rule 16b-3 of the General Rules and
Regulations of the Exchange Act, as in effect at the time of
reference, or any successor rules or regulations which may hereafter
be adopted in lieu thereof, and any reference to any specific
provisions of Rule 16b-3 shall refer to the corresponding provisions
of Rule 16b-3 as it may hereafter be amended or replaced.
2.19 "Shares" means shares of the Company's $.66 2/3 par value
common stock or, if by reason of the adjustment provisions contained
herein, any rights under the Plan pertain to any other security, such
other security.
2.20 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the employer corporation in an unbroken chain
of corporations beginning with the employer corporation if each of
the corporations other than the last corporation in the unbroken
chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
2.21 "Successor" means the legal representative of the estate
of a deceased Employee or the person or persons who shall acquire the
right to exercise or receive an Option by bequest or inheritance or
by reason of the death of the Employee.
3. Stock Subject to the Plan. There will be reserved for use,
upon the exercise of Options to be granted from time to time pursuant to
offerings made under the Plan, an aggregate of 200,000 Shares, which Shares
may be, in whole or in part, as the Board shall from time to time
determine, authorized but unissued Shares, or issued Shares which shall
have been reacquired by the Company. The number of Shares reserved under
the Plan may be issued pursuant to the exercise of Options granted pursuant
to one or more offerings made under the Plan. Any Shares subject to
issuance upon exercise of Options but which are not issued because of a
surrender, lapse, expiration or termination of any such Option prior to
issuance of the Shares shall once again be available for issuance in
satisfaction of Options.
4. Administration of the Plan. The Board shall appoint the
Committee to administer the Plan. Subject to the provisions of the Plan,
the Committee shall have full authority, in its discretion, to determine
when offerings will be made under the Plan, the number of Shares available
for purchase in any such offering, and the terms and conditions of any such
offering; to amend or cancel options (subject to Section 25 of the Plan);
to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan; and generally to interpret and determine
any and all matters whatsoever relating to the administration of the Plan.
All decisions, determinations and interpretations made by the Committee
shall be binding and conclusive on all participants in the Plan and on
their legal representatives, heirs and beneficiaries. The Board may from
time to time appoint members to the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however
caused, in the Committee. No member of the Committee shall be liable, in
the absence of bad faith, for any act or omission with respect to his
service on the Committee.
5. Offerings. Unless the Committee, in its discretion, determines
otherwise, the Plan will be implemented by up to twenty (20) consecutive
six (6) month offerings. The first offering under the Plan shall commence
on July 1, 1994 and terminate on December 31, 1994. Thereafter, offerings
shall commence on each subsequent January 1 and July 1 and terminate on the
following June 30 and December 31, respectively, of such year until the
Plan is terminated or no additional Shares are available for purchase under
the Plan.
6. Eligibility to Participate in Offerings. All Employees shall
be eligible to participate in the Plan; provided, however, that the
Committee may exclude the Employees of any specified Subsidiary from any
offering made under the Plan; and provided further, that the Committee may
determine that any offering of Shares made under the Plan will not be
extended to highly compensated Employees (within the meaning of Section
414(q) of the Code).
7. Participation. An eligible Employee may become a participant
in the Plan by completing, signing and filing a subscription agreement
("Subscription Agreement") which shall designate a whole percentage of his
Eligible Compensation, not to exceed ten percent (10%), to be withheld
during the Purchase Period of any offering in which he participates, and
any other necessary papers, including, but not limited to, any forms
required to establish a brokerage account at a brokerage firm designated by
the Committee in the Employee's name for the purpose of holding any Shares
purchased pursuant to the Plan, with such person as the Committee may
designate at least ten (10) days prior to the Offering Commencement Date of
the first offering in which he wishes to participate. After completing,
signing and filing a Subscription Agreement and any other necessary papers
in accordance with the preceding sentence, an Employee shall be deemed to
have become a participant in the Plan for each subsequent offering until
the Employee withdraws from the Plan in accordance with Section 14 hereof,
is deemed to have withdrawn from the Plan in accordance with Section 19
hereof, or otherwise gives written notice of his intent to withdraw to such
person as the Committee may designate. Except as otherwise provided in
Section 14, if an Employee desires to change the percentage of his Eligible
Compensation to be withheld and applied to the purchase of Shares, or if an
Employee who withdraws from the Plan desires to re-enter the Plan, he must
file a new Subscription Agreement in accordance with this Section 7 at
least ten (10) days prior to the Offering Commencement Date of the
particular offering to which such change or re-entry is intended to apply.
An Employee's re-entry into the Plan cannot become effective before the
beginning of the next offering following his withdrawal; provided, however,
if an Employee is subject to Section 16(b) of the Exchange Act, his re-
entry into the Plan must comply with the requirements of Rule 16b-3 for all
transactions under the Plan to be exempt from Section 16(b) of the Exchange
Act. Participation in one offering under the Plan shall neither limit nor
require participation in any other offering.
8. Grant of Options. Subject to the limitations set forth in
Sections 6 and 9 of the Plan, on the Offering Commencement Date of each
offering made under the Plan, each Employee who has previously elected to
participate in the Plan shall automatically be granted an Option for as
many full Shares as he will be able to purchase with the payroll deductions
credited to his Account during the Purchase Period of that offering. In
the event the total maximum number of Shares resulting from all elections
to purchase under any offering of Shares made under the Plan exceeds the
number of Shares offered, the Company reserves the right to reduce the
maximum number of Shares which Employees may purchase pursuant to their
elections to purchase, to allot the Shares available in such manner as it
shall determine (subject to the requirements of Section 423 of the Code),
but generally pro rata to subscriptions received, and to grant Options to
purchase only for such reduced number of Shares. Notice of any such
reduction shall be given to each participating Employee. In the event an
Employee's election to purchase Shares pursuant to an offering made under
the Plan is cancelled, in whole or in part, pursuant to the provisions of
the Plan, a proportionate portion of the Option granted to such Employee
shall automatically terminate.
9. Limitations of Number of Shares Which May be Purchased. The
following limitations shall apply with respect to the number of Shares
which may be purchased by each Employee who elects to participate in an
offering made under the Plan:
(a) No Employee may purchase, or elect to purchase, Shares
during any one offering pursuant to the Plan for an aggregate
purchase price in excess of ten percent (10%) of his Eligible
Compensation during the Purchase Period applicable to such offering.
(b) No Employee shall be granted an Option to purchase Shares
under the Plan if such Employee immediately after such Option is
granted, owns stock (within the meaning of Section 424(d) of the
Code, and including stock subject to purchase under any outstanding
options) possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or, if
applicable, any Subsidiary or, if applicable, a Parent.
(c) No Employee shall be granted an Option to purchase Shares
which permits his right to purchase stock under the Plan and all
other employee stock purchase plans of the Company and, if
applicable, a Subsidiary, and, if applicable, a Parent, to accrue (as
determined under Section 423(b)(8) of the Code) at a rate which
exceeds ($25,000) of fair market value of such stock (determined on
the date the Option to purchase is granted) for each calendar year in
which such Option is outstanding at any time.
10. Exercise Price. Unless the Committee, in its discretion,
determines to set a higher per Share exercise price, the per Share exercise
price for Shares subject to purchase under Options granted pursuant to an
offering made under the Plan shall be an amount equal to the lesser of
(a) eighty-five percent (85%) of the Fair Market Value of the Shares on the
Offering Commencement Date, and (b) eighty-five percent (85%) of the Fair
Market Value of the Shares on the Offering Termination Date.
11. Method of Payment. Payment of the exercise price of any Option
granted pursuant to the Plan shall be made in installments through payroll
deductions, with no right of prepayment. Each Employee electing to
participate in an offering of Shares made under the Plan shall authorize
the Company pursuant to Section 7 of the Plan to withhold a designated
amount from his regular weekly, bi-weekly, semimonthly or monthly pay for
each payroll period during the Purchase Period, which amount, expressed as
a percentage, may not exceed ten percent (10%) of his Eligible
Compensation. All such payroll deductions made for an Employee shall be
credited to his Account. An Employee may not make any separate cash
payments into his Account, nor may payment for Shares be made other than by
payroll deduction. No interest shall accrue on the amounts credited to an
Employee's Account pursuant to this Section 11.
12. Exercise of Options. As of the close of business on the
Offering Termination Date of any offering of Shares made under the Plan,
each outstanding Option shall automatically be exercised. Subject to the
limitations in Sections 6, 8 and 9 of the Plan, upon the exercise of an
Option, the aggregate amount of the payroll deductions credited to the
Account of each Employee as of that date will automatically be applied to
the exercise price for the purchase of that number of Shares, rounded to
the nearest whole share, equal to the Account balance divided by the
exercise price. A certificate representing the Shares so purchased shall
be delivered to the Employee or the Employee's Successor, or, in the
Committee's discretion, to a brokerage account established for the benefit
of the Employee or the Employee's Successor (which contains such terms and
conditions as the Committee may designate), as soon as reasonably
practicable after the exercise of the Option. Unless an Employee notifies
the Company in writing not to carry over the balance of his Account to the
next offering, the Company shall carry over the balance of his Account to
the next offering. Upon termination of the Plan, the balance of each
Employee's Account shall be returned to him.
13. Rights As Stockholder. An Employee will become a stockholder
of the Company with respect to Shares for which payment has been received
at the close of business on the Offering Termination Date. An Employee
will have no rights as a stockholder with respect to Shares under an
election to purchase Shares until he has become a stockholder as provided
above.
14. Cancellation of Election to Purchase. An Employee who has
elected to purchase Shares pursuant to any offering made under the Plan may
cancel his election in its entirety or may partially cancel his election
(as set forth in his Subscription Agreement) by reducing the percentage
amount which he has authorized the Company to withhold from his Eligible
Compensation for each payroll period during the Purchase Period. Any such
full or partial cancellation shall be effective upon the delivery by the
Employee of written notice of cancellation to such person as the Committee
may designate. Such notice of cancellation must be so delivered before the
close of business on the third to last business day of the Purchase Period.
If an Employee partially cancels his original election by reducing the
amount authorized to be withheld from his pay, he shall continue to make
installment payments at the reduced rate for the remainder of the Purchase
Period, and for any subsequent offering in which he participates unless he
files a new Subscription Agreement in accordance with Section 7 hereof.
An Employee's rights upon the full or partial cancellation of his
election to purchase Shares shall be limited to the following:
(a) He may receive in cash, as soon as practicable after
delivery of the notice of cancellation, the amount then credited to
his Account, except that, in the case of a partial cancellation, he
must retain in his Account an amount equal to the amount of his new
payroll deduction times the number of payroll periods in the Purchase
Period through the date of cancellation, or
(b) He may have the amount credited to his Account at the
time the cancellation becomes effective applied to the purchase of
the number of Shares such amount will then purchase. The purchase of
Shares will become effective at the close of business on the Offering
Termination Date.
In the case of a full cancellation, the Employee shall be deemed to
have withdrawn from the Plan. To re-enter the Plan, the Employee must file
a new Subscription Agreement in accordance with Section 7.
15. Leave of Absence or Layoff. An Employee purchasing Shares
under the Plan who is granted a leave of absence (including a military
leave) or is laid off during the Purchase Period may at that time elect to
suspend payments during the leave of absence, or, in the case of a layoff,
he may suspend payments for not more than ninety (90) days, but, in either
case, not beyond the last day of the Purchase Period. Any such suspension
shall be treated as a partial cancellation of his election to purchase
Shares.
If the Employee does not return to active service upon the expiration
of his leave of absence or within ninety (90) days from the date of his
layoff, his election to purchase shall be deemed to have been canceled at
that time, and the Employee's only right will be to receive in cash the
amount credited to his Account.
16. Effect of Failure to Make Payments When Due. If in any payroll
period an Employee who has filed an election to purchase Shares under the
Plan has no pay or his pay is insufficient (after other authorized
deductions) in any payroll period to permit deduction of his installment
payment, the amount of such deficiency shall be treated as a partial
cancellation of his election to purchase Shares.
17. Retirement. If an Employee who retires in a manner entitling
him to early, normal or late retirement benefits under the provisions of
any retirement plan of the Company or a Subsidiary in which the Employee
participates (or if no such plan then exists, at or after age sixty-five
(65)) has an election to purchase Shares in effect at the time of his
retirement, he may, within three (3) months after the date of his
retirement (but in no event later than the close of business on the third
to last business day of the Purchase Period), by delivering written notice
to such person as the Committee may designate, elect to:
(a) Receive in cash, as soon as practicable after delivery of
such notice, the amount then credited in his Account, or
(b) Have the amount credited to his Account at the time of
the termination of his employment by reason of retirement applied to
the purchase of the number of Shares such Account will then purchase,
such purchase to be effective as of the Offering Termination Date.
If no such notice is given within such period, the election will be
deemed canceled as of the date of retirement and the only right of the
Employee will be to receive in cash the amount credited to his Account.
18. Death. If an Employee, including a retired Employee, dies and
has an election to purchase Shares in effect at the time of his death, the
Employee's Successor may, within three (3) months from the date of death
(but in no event later than the close of business on the third to last
business day of the Purchase Period), by delivering written notice to such
person as the Committee may designate, elect to:
(a) Receive in cash, as soon as practicable after delivery of
such notice, the amount then credited in the Employee's Account, or
(b) Have the amount credited to the Employee's Account at the
time of the Employee's death applied to the purchase of the number of
Shares such Account will then purchase, such purchase to be effective
as of the Offering Termination Date.
If no such notice is given within such period, the election will be
deemed canceled as of the date of death, and the only right of such
Successor will be to receive in cash the amount credited to the Employee's
Account.
19. Termination of Employment Other Than For Retirement or Death.
If an Employee's employment is terminated for any reason other than
retirement or death prior to the end of the Purchase Period of any
offering, the Employee's rights under the Plan will terminate at such time.
A notice to withdraw from the Plan will be considered as having been
received from the Employee on the day his employment ceases, and the only
right of the Employee will be to receive the cash then credited to his
Account.
20. Nontransferability of Options. An Option, or an Employee's
right to any amounts held for his Account under the Plan, shall not be
transferable, other than (a) by will or the laws of descent and
distribution, and an Option may be exercised, during the lifetime of the
holder of the Option, only by the holder or in the event of death, the
holder's Successor or (b) if permitted pursuant to the Code and the
Regulations thereunder without affecting the Option's qualification under
Section 423 of the Code, pursuant to a qualified domestic relations order.
21. Adjustments Upon Changes in Capitalization. In the event of
changes in all of the outstanding Shares by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations or liquidations, or
similar events, or in the event of extraordinary cash or non-cash dividends
being declared with respect to the Shares, or similar transactions or
events, the number and class of Shares available under the Plan in the
aggregate, the number and class of Shares subject to Options theretofore
granted, applicable purchase prices and all other applicable provisions,
shall, subject to the provisions of the Plan, be equitably adjusted by the
Committee. The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional Share which might otherwise become subject to an Option.
22. Change in Control. Notwithstanding anything to the contrary
herein, in the case of a Change in Control of the Company, the Board may,
in its sole discretion, elect to terminate the Purchase Period of any
offering then in effect as of the last day of the month during which the
Change in Control occurs, with the effect that such day will be the
Offering Termination Date of such offering.
23. Taxes. The Employee, or his Successor, shall promptly notify
the Company of any disposition of Shares acquired pursuant to the exercise
of an Option under the Plan and the Company shall have the right to deduct
any taxes required by law to be withheld as a result of such disposition
from any amounts otherwise payable then or at any time thereafter to the
Employee. The Company shall also have the right to require a person
entitled to receive Shares pursuant to the exercise of an Option to pay the
Company the amount of any taxes which the Company is or will be required to
withhold with respect to the Shares before the certificate for such Shares
is delivered pursuant to the Option.
24. Termination of the Plan. The Plan shall terminate ten (10)
years from the date the Plan becomes effective, and an Option shall not be
granted under the Plan after that date although the terms of any Options
may be amended at any date prior to the end of its term in accordance with
the Plan. Any Options outstanding at the time of termination of the Plan
shall continue in full force and effect according to the terms and
conditions of the Option and this Plan.
25. Amendment of the Plan. The Plan may be amended at any time and
from time to time by the Board, but no amendment without the approval of
the stockholders of the Company shall be made if stockholder approval under
Section 423 of the Code or Rule 16b-3 would be required. Notwithstanding
the discretionary authority granted to the Committee in Section 4 of the
Plan, no amendment of the Plan or any Option granted under the Plan shall
impair any of the rights of any holder, without the holder's consent, under
any Option theretofore granted under the Plan.
26. Delivery of Shares on Exercise. Delivery of certificates for
Shares to or for the benefit of an Employee pursuant to the exercise of an
Option may be postponed by the Company such period as may be required for
it with reasonable diligence to comply with any applicable requirements of
any federal, state or local law or regulation or any administrative or
quasi-administrative requirement applicable to the sale, issuance,
distribution or delivery of such Shares. The Committee may, in its sole
discretion, require an Employee to furnish the Company with appropriate
representations and a written investment letter prior to the exercise of an
Option or the delivery of any Shares pursuant to the exercise of an Option.
27. Fees and Costs. The Company shall pay all original issue taxes
on the exercise of any Option granted under the Plan and all other fees and
expenses necessarily incurred by the Company in connection therewith.
28. No Contract of Employment. Neither the adoption of this Plan
nor the grant of any Option shall be deemed to obligate the Company or any
Subsidiary to continue the employment of any Employee.
29. Effectiveness of the Plan. The Plan shall become effective on
July 1, 1994. Notwithstanding the foregoing, unless the Plan is approved
by the Company's stockholders either (i) at a meeting duly held in
accordance with Delaware law within twelve (12) months after being adopted
by the Board, or (ii) by a written consent in accordance with Delaware law
within twelve (12) months after being adopted by the Board, the Plan and
all Options made under it shall be void and of no force and effect.
30. Other Provisions. As used in the Plan, and in other documents
prepared in implementation of the Plan, references to the masculine pronoun
shall be deemed to refer to the feminine or neuter, and references in the
singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to
may require. The captions used in the Plan and in such other documents
prepared in implementation of the Plan are for convenience only and shall
not affect the meaning of any provision hereof or thereof.
Adopted on December 8, 1993
<PAGE>
EXHIBIT C
1989 INCENTIVE PLAN
OF BALLY MANUFACTURING CORPORATION
1. Purpose of the Plan. This 1989 Incentive Plan of Bally
Manufacturing Corporation adopted on this ninth day of March, 1989, is
intended to encourage officers and key employees of the Company and its
Subsidiaries to acquire or increase their ownership of common stock of the
Company on reasonable terms, and to foster in participants a strong incentive
to put forth maximum effort for the continued success and growth of the
Company and its Subsidiaries, to aid in retaining individuals who put forth
such efforts, and to assist in attracting the best available individuals to
the Company and its Subsidiaries in the future.
2. Definitions. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Affiliate" means, with respect to any specified person or
entity, a person or entity that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the person or entity specified.
2.2 "Award" means an SAR, an Option, an Option granted in tandem
with either an SAR or SDR, or a Restricted Stock Award.
2.3 "Award Agreement" means a written agreement in such form as
may from time to time be hereafter approved by the Committee, which Award
Agreement shall set forth the terms and conditions of an Award under the
Plan, and be duly executed by the Company and the Employee.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Change in Control" means a change in control of the Company
of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act
(as in effect on the date the Plan is adopted by the Board), whether or
not the Company is then subject to such reporting requirement; provided,
that, without limitation, such a Change in Control shall be deemed to
have occurred if:
(a) any "person" (as defined in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's
then outstanding securities; or
(b) during any period of two (2) consecutive years (not
including any period prior to the adoption of this Plan) there
shall cease to be a majority of the Board comprised of Continuing
Directors; or
(c) (i) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
(ii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the
Company's assets.
Notwithstanding anything in this Section 2.5 to the contrary, an
event or occurrence (or a series of events or occurrences) which would
otherwise constitute a Change in Control under the foregoing shall not
constitute a Change in Control for purposes of this Plan if the Board,
by majority vote, determines that a Change in Control does not result
therefrom; but only if Continuing Directors constitute a majority of the
directors voting in favor of such determination. Further, an event or
occurrence (or a series of events or occurrences) which would not
otherwise constitute a Change in Control under the foregoing shall be
deemed to constitute a Change in Control for purposes of this Plan if the
Board, by majority vote, determines that a Change in Control does result
therefrom; but only if Continuing Directors constitute a majority of the
directors voting in favor of such determination. A determination by
directors under the provisions of this paragraph shall be made solely for
purposes of this Plan and shall not directly or indirectly affect any
determination or analysis of whether a change in control results for any
other purpose. Any determination made with respect to whether a change
in control results for purposes of any other plan or agreement of the
Company shall have no effect for purposes of this Plan.
2.6 "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and reference to any specific provisions of the Code
shall refer to the corresponding provisions of the Code as it may
hereafter be amended or replaced.
2.7 "Committee" means the Compensation and Stock Option Committee
of the Board or any other committee appointed by the Board whose members
meet the requirements for eligibility to serve set forth in Section 4 of
the Plan and which is invested by the Board with responsibility for the
administration of the Plan; provided, however, that only those members
of the Compensation and Stock Option Committee of the Board who
participate in decisions relative to Awards under this Plan shall be
deemed to be part of the "Committee" for purposes of this Plan.
2.8 "Company" means Bally Manufacturing Corporation.
2.9 "Continuing Directors" means individuals who at the beginning
of any period of two (2) consecutive years (not including any period
prior to the adoption of this Plan) constitute the Board and any new
director(s) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election
was previously so approved.
2.10 "Employees" means officers (including officers who are
members of the Board) and other key employees of the Company or any of
its Subsidiaries.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and reference to any specific provisions of
the Exchange Act shall refer to the corresponding provisions of the Act
as it may hereafter be amended or replaced.
2.12 "Fair Market Value" means, with respect to the Shares, the
closing price of the Shares on the last business day prior to the date
on which the value is to be determined on which transactions in Shares
occurred, as reported on the New York Stock Exchange Composite Tape or
such other source of quotation for, or reports of, trading activity in
Shares as the Committee may from time to time select.
2.13 "Incentive Stock Option" means an Option meeting the
requirements and containing the limitations and restrictions set forth
in Section 422A of the Code.
2.14 "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
2.15 "Option" means the right to purchase, at a price and for a
term fixed by the Committee in accordance with the Plan, and subject to
such other limitations and restrictions as the Plan and the Committee
impose, the number of Shares specified by the Committee.
2.16 "Parent" means any corporation, other than the employer
corporation, in an unbroken chain of corporations ending with the Company
if each of the corporations other than the employer corporation owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
2.17 "Plan" means the Company's 1989 Incentive Plan.
2.18 "Regulation T" means Part 220, Chapter 11, Title 12 of the
Code of Federal Regulations, issued by the Board of Governors of the
Federal Reserve System pursuant to the Exchange Act, as amended from time
to time, or any successor regulation which may hereafter be adopted in
lieu thereof.
2.19 "Restricted Stock Agreement" means an Award Agreement
executed in connection with a Restricted Stock Award.
2.20 "Restricted Stock Award" means the right to receive Shares,
but subject to forfeiture and/or other restrictions set forth in the
related Restricted Stock Agreement and the Plan, as well as the right to
receive the cash payments specified in Section 13.2 of the Plan in
connection with the Restricted Stock Award.
2.21 "Rule 16b-3" means Rule 16b-3 of the General Rules and
Regulations of the Exchange Act (or any successor rule or regulation).
2.22 "SAR" means a stock appreciation right, which is a right to
receive an amount in cash, or Shares, or a combination of cash and
Shares, as determined or approved by the Committee, no greater than the
excess, if any, of (i) the Fair Market Value of a Share on the date the
SAR is exercised, over (ii) the SAR Base Price.
2.23 "SAR Base Price" means the Fair Market Value of a Share on
the date an SAR was granted, or if the SAR was granted in tandem with an
Option (whether or not the Option was granted on a different date than
the SAR), in the Committee's discretion, the option price of a Share
subject to the Option.
2.24 "SDR" means a stock depreciation right, which is a right,
granted in conjunction with an Option to an Employee who is subject to
Section 16(b) of the Exchange Act, to receive in respect of a Share
acquired upon exercise of the Option or portion thereof, an amount in
cash, or Shares, or a combination of cash and Shares, as determined or
approved by the Committee, no greater than the excess, if any, of (i) the
option price at which the Share is acquired upon exercise of the Option
or portion thereof, over (ii) the greater of (A) the Fair Market Value
of the Share acquired upon exercise of the Option or portion thereof on
the SDR Payment Determination Date, or (B) if the Share acquired upon
exercise of the Option or portion thereof is sold prior to the SDR
Payment Determination Date, the gross sales proceeds from the sale of
such Share; provided, however, that the Committee shall have the
discretion to alter the terms of any SDRs issued pursuant to this Plan
to the extent it deems necessary, in its sole discretion, to comply with
any federal or state securities laws.
2.25 "SDR Payment Determination Date" means the date six (6)
months and one (1) day after the date the related Option or portion
thereof is exercised, or such other later date as the Committee, in its
discretion, may determine.
2.26 "Share" or "Shares" means a share or shares of the Company's
$.66 2/3 par value common stock or, if by reason of the adjustment
provisions contained herein any rights under an Award under the Plan
pertain to any other security, such other security.
2.27 "Subsidiary" or "Subsidiaries" means any corporation other
than the employer corporation in an unbroken chain of corporations
beginning with the employer corporation if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
2.28 "Successor" means the legal representative of the estate of
a deceased Employee or the person or persons who shall acquire the right
to exercise an Award by bequest or inheritance or by reason of the death
of the Employee.
2.29 "Term" means the period during which a particular Award may
be exercised.
2.30 "Window Period" means the period beginning on the third
business day following the date of release of the financial data
specified in paragraph (e)(1)(ii) of Rule 16b-3 and ending on the twelfth
business day following such date.
3. Stock Subject to the Plan. There will be reserved for use, upon
the exercise of Awards to be granted from time to time under the Plan, an
aggregate of Two Million Five Hundred Thousand (2,500,000) Shares, which
Shares may be in whole or in part, as the Board shall from time to time
determine, authorized but unissued Shares, or issued Shares which shall have
been reacquired by the Company. Any Shares subject to issuance upon exercise
of an Option or SAR, or payment of an SDR, but which are not issued because
of a surrender, lapse, expiration or termination of any such Option, SAR or
SDR prior to issuance of the Shares shall once again be available for issuance
in satisfaction of Awards. Similarly, any Shares issued pursuant to a
Restricted Stock Award which are subsequently forfeited pursuant to the terms
of the related Restricted Stock Agreement shall once again be available for
issuance in satisfaction of Awards.
4. Administration of the Plan. The Board shall appoint the Committee,
which shall consist of not less than three (3) disinterested members of the
Board as defined in Rule 16b-3. No member of the Board shall be eligible to
serve or continue to serve on the Committee if, at the time, or at any time
during the twelve months preceding commencement of his service, he is or was
eligible to receive an Award under the Plan or any award under any other
employee benefits plan of the Company or its Affiliates entitling him to
acquire stock, stock options, stock depreciation rights or stock appreciation
rights of the Company or any of its Affiliates (other than under the Bally
Manufacturing Corporation 1987 Non-Employee Director Restricted Stock Plan or
the 1989 Non-Employee Director Restricted Stock Plan of Bally Manufacturing
Corporation). Subject to the provisions of the Plan, the Committee shall have
full authority, in its discretion, to determine the Employees to whom Awards
shall be granted, the number of Shares, SDRs or SARs to be covered by each of
the Awards, and the terms (including restrictions) of any such Award; to amend
or cancel Awards (subject to Section 22 of the Plan); to accelerate the
vesting of Awards; to require the cancellation or surrender of any options,
stock depreciation rights, stock appreciation rights or restricted stock
awards (to the extent the restrictions have not yet lapsed) previously granted
under this Plan or any other plans of the Company as a condition to the
granting of an Award; to interpret the Plan; and to prescribe, amend, and
rescind rules and regulations relating to it, and generally to interpret and
determine any and all matters whatsoever relating to the administration of the
Plan and the granting of Awards hereunder. The Board may, from time to time,
appoint members to the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee shall select one of its members as its Chairman and shall hold
its meetings at such times and places as it shall deem advisable. A majority
of its members shall constitute a quorum. Any action of the Committee may be
taken by a written instrument signed by all of the members, and any action so
taken shall be fully as effective as if it had been taken by a vote of a
majority of the members at a meeting duly called and held. The Committee
shall make such rules and regulations for the conduct of its business as it
shall deem advisable and shall appoint a secretary who shall keep minutes of
its meetings and records of all action taken in writing without a meeting.
No member of the Committee shall be liable, in the absence of bad faith, for
any act or omission with respect to his service on the Committee.
5. Employees to Whom Awards May Be Granted. Awards may be granted in
each calendar year or portion thereof while the Plan is in effect to such of
the Employees as the Committee, in its discretion, shall determine. In
determining the Employees to whom Awards shall be granted, the number of
Shares to be granted or subject to purchase under such Awards and the number
of SARs or SDRs to be granted, the Committee shall take into account the
duties of the respective Employees, their present and potential contributions
to the success of the Company and its Subsidiaries, and such other factors as
the Committee shall deem relevant in connection with accomplishing the
purposes of the Plan. No Award shall be granted to any member of the
Committee so long as his membership on the Committee continues or to any
member of the Board who is not also an Employee.
6. Stock Options.
6.1 Types of Options. Options granted under this Plan may be (i)
Incentive Stock Options, (ii) Non-Qualified Stock Options, or (iii) a
combination of the foregoing. The Award Agreement shall designate
whether an Option is an Incentive Stock Option or a Non-Qualified Stock
Option. Any Option which is designated as a Non-Qualified Stock Option
shall not be treated by the Company or the Employee to whom the Option
is granted as an Incentive Stock Option for federal income tax purposes.
6.2 Option Price.
(a) Incentive Stock Option. The option price per share of
any Incentive Stock Option granted under the Plan shall not be less
than the Fair Market Value of the Shares covered by the Incentive
Stock Option on the date the Incentive Stock Option is granted.
Notwithstanding anything herein to the contrary, in the event an
Incentive Stock Option is granted to an Employee who, at the time
such Incentive Stock Option is granted, owns as defined in Section
425 of the Code, stock possessing more than ten percent (10%) of
the total combined voting power of all class of stock of:
(i) the Company; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, the Parent,
then the option price per Share of such Incentive Stock Option
shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares covered by the Incentive Stock Option
on the date the Incentive Stock Option is granted.
(b) Non-Qualified Stock Options. Unless otherwise
determined by the Committee, in its sole discretion, the option
price per Share of any Non-Qualified Stock Option granted under
this Plan shall not be less than the Fair Market Value of the
Shares covered by the Non-Qualified Stock Option on the date the
Non-Qualified Stock Option is granted.
6.3 Term of Options. Options granted hereunder shall be
exercisable for a Term of not more than ten (10) years from the date of
grant, but shall be subject to earlier termination as hereinafter
provided. Each Award Agreement issued hereunder shall specify the Term
of the Option, which Term shall be determined by the Committee in
accordance with its discretionary authority hereunder. No Option in
tandem with either an SAR or an SDR shall be exercisable during the first
six (6) months following the date of grant of the SAR or SDR, whichever
is applicable, except that this limitation shall not apply in the event
the death or disability of the Employee occurs prior to the expiration
of the six (6) month period.
Notwithstanding anything herein to the contrary, in the event an
Incentive Stock Option is granted to an Employee who, at the time such
Incentive Stock Option is granted, owns, as defined in Section 425 of the
Code, stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of:
(i) the Company; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, the Parent,
then such Incentive Stock Option shall not be exercisable more than five
(5) years from the date of grant, but shall be subject to earlier
termination as hereinafter provided.
7. Limit on Fair Market Value of Incentive Stock Options. In any
calendar year, no Employee may be granted an Incentive Stock Option hereunder
to the extent that the aggregate fair market value (such fair market value
being determined as of the date of grant of the option in question) of the
stock with respect to which incentive stock options first become exercisable
by the Employee during any calendar year (under all such plans of the
Employee's employer corporation, its Parent, if any, and its Subsidiaries, if
any) exceeds the sum of One Hundred Thousand Dollars ($100,000). For purposes
of the preceding sentence, options shall be taken into account in the order
in which they were granted. Any Option granted under the Plan which is
intended to be an Incentive Stock Option, but which exceeds the limitation set
forth in this Section 7, shall be a Non-Qualified Stock Option.
8. Stock Appreciation Rights.
8.1 Grant of SAR. The Committee, in its discretion, may grant
an Employee an SAR in tandem with an Option or may grant an Employee an
SAR on a stand alone basis. The Committee, in its discretion, may grant
an SAR in tandem with an Option either at the time the Option is granted
or at any time after the Option is granted, but no later than six (6)
months and one (1) day prior to the end of the Term of the Option, so
long as the grant of the SAR is made during the period in which grants
of SARs may be made under the Plan. The Committee, in its discretion,
may grant an SAR in tandem with an Option, which is exercisable either
in lieu of, or in addition to, exercise of the related Option.
8.2 Limitations on Exercise. Each SAR granted in tandem with an
Option shall be exercisable to the extent, and only to the extent, the
related Option is exercisable and shall be for such Term as the Committee
may determine (which Term, which is not to exceed ten (10) years, may
expire prior to the Term of the related Option). Each SAR granted on a
stand alone basis shall be exercisable to the extent, and for such Term,
as the Committee may determine. No SAR or any related Option shall be
exercisable during the first six (6) months following the date of grant
of the SAR, except that this limitation shall not apply in the event the
death or disability of the Employee occurs prior to the expiration of the
six (6) month period. If, and to the extent, an Employee who is subject
to Section 16(b) of the Exchange Act is to receive cash in exchange for
an SAR, the SAR and any related Option are exercisable only during a
Window Period. The SARs shall be subject to such other terms and
conditions, as the Committee, in its discretion, shall determine, which
are not otherwise inconsistent with the Plan. The terms and conditions
may include Committee approval of the exercise of the SAR, limitations
on the time within which and the extent to which such SAR shall be
exercisable, limitations, if any, on the amount of appreciation in value
which may be recognized with regard to such SAR, and specifications of
what portion, if any, of the amount payable to the Employee upon exercise
of an SAR shall be payable in cash and what portion, if any, shall be
payable in Shares. If, and to the extent that, Shares are issued in
satisfaction of amounts payable on exercise of an SAR, the Shares shall
be valued at their Fair Market Value on the date of exercise.
8.3 SARs in Tandem with Incentive Stock Options. With respect
to SARs granted in tandem with Incentive Stock Options, the following
shall apply:
(a) No SAR shall be exercisable unless the Fair Market
Value of the Shares on the date of exercise exceeds the option
price of the related Incentive Stock Option.
(b) In no event shall any amounts paid pursuant to the SAR
exceed the difference between the Fair Market Value of the Shares
on the date of exercise and the option price of the related
Incentive Stock Option.
8.4 Surrender of Option or SAR Granted in Tandem. If the Award
Agreement related to the grant of an SAR in tandem with an Option
provides that the SAR can only be exercised in lieu of the related
Option, then, upon exercise of such SAR, the related Option or portion
thereof with respect to which such SAR is exercised shall be deemed
surrendered and shall not thereafter be exercisable and, similarly, upon
exercise of the Option, the related SAR or portion thereof with respect
to which such Option is exercised shall be deemed surrendered and shall
not thereafter be exercisable. If the Award Agreement related to the
grant of an SAR in tandem with an Option provides that the SAR can be
exercised in addition to the related Option, then, upon exercise of such
SAR, the related Option or portion thereof with respect to which such SAR
is exercised shall not be deemed surrendered and shall continue to be
exercisable and, similarly, upon exercise of the Option, the related SAR
or portion thereof with respect to which such Option is exercised shall
not be deemed surrendered and shall continue to be exercisable.
9. Stock Depreciation Rights.
9.1 Grant of SDR. The Committee, in its discretion, may grant
an Employee who is subject to Section 16(b) of the Exchange Act an SDR
in tandem with an Option. The Committee, in its discretion, may grant
an SDR in tandem with an Option either at the time the Option is granted
or at any time after the Option is granted, but no later than six (6)
months and one (1) day before the SDR Payment Determination Date, so long
as the grant of the SDR is made during the period in which grants of SDRs
may be made under the Plan.
9.2 Limitations on Exercise. Each SDR granted in tandem with an
Option shall be for such Term as the Committee may determine (which Term
may expire prior to the Term of the related Option). If, and to the
extent, an Employee who is subject to Section 16(b) of the Exchange Act
is to receive cash in exchange for an SDR, either (i) the related Option
must be exercised during a Window Period, or (ii) the SDR Payment
Determination Date must be within a Window Period falling six (6) months
after the date the related Option was exercised or such other date at
which the Employee is not prohibited from selling shares under the
federal securities laws. No Option granted in tandem with an SDR shall
be exercisable during the first six (6) months following the date of
grant of the SDR, except that this limitation shall not apply in the
event the death or disability of the Employee occurs prior to the
expiration of the six (6) month period. No payment shall be made with
respect to an SDR if the related Option is exercised after the Employee
ceases to be subject to Section 16(b) of the Exchange Act or is otherwise
not prohibited from selling Shares under the federal securities laws.
The SDRs shall be subject to such other terms and conditions, as the
Committee, in its discretion, shall determine, which are not otherwise
inconsistent with the Plan. The terms and conditions may include
Committee approval of the payment of the SDR, limitations on the time
within which and the extent to which the Option granted in tandem with
such SDR shall be exercisable, additional limitations on the amount of
depreciation in value which may be recognized with regard to such SDR,
and specification of the time at which the SDR payment is made, and what
portion, if any, of the amount payable to the Employee with respect to
an SDR shall be payable in cash and what portion, if any, shall be
payable in Shares. If and to the extent that Shares are issued in
satisfaction of amounts payable with respect to an SDR, the Shares shall
be valued at their Fair Market Value on the date the amount of the SDR
payment is determined.
10. Exercise of Rights Under Option, SAR or SDR Awards.
10.1 Notice of Exercise. An Employee entitled to exercise an
Option, SAR or SDR may do so by delivery of a written notice to that
effect specifying the number of Shares with respect to which the Option,
SAR or SDR is being exercised and any other information the Committee may
prescribe. Except as provided in Section 10.2 below, the notice shall
be accompanied by payment in full of the purchase price of any Shares to
be purchased, which payment may be made in cash or, with the Committee's
approval (and subject to the requirements of Rule 16b-3), in Shares
(which Shares shall be owned by the Employee for more than six (6) months
at the time they are delivered) valued at Fair Market Value at the time
of exercise or, with the Committee's approval, a combination thereof.
No Shares shall be issued upon exercise of an Option until full payment
has been made therefor. The notice of exercise of an Option, SAR or SDR
shall be accompanied by the Employee's copy of the Award Agreement
evidencing the grant of the Option, SAR or SDR. An Employee exercising
an SAR or a Option granted in tandem with either an SAR or SDR may, if
the terms and conditions of the Award so provide, state in the notice of
exercise what percentage of the SAR or SDR the Employee desires to be
paid in Shares, in which event the Committee may honor the request so
made or satisfy the SAR or SDR in cash or Shares or some combination of
each, as the Committee may determine in its sole discretion. All notices
or requests provided for herein shall be delivered to the Treasurer of
the Company.
10.2 Cashless Exercise Procedures. The Company, in its sole
discretion, may establish procedures whereby an Employee, subject to the
requirements of Rule 16b-3, Regulation T, federal income tax laws, and
other federal, state and local tax and securities laws, can exercise an
Option or a portion thereof without making a direct payment of the option
price to the Company. If the Company so elects to establish a cashless
exercise program, the Company shall determine, in its sole discretion,
and from time to time, such administrative procedures and policies as it
deems appropriate and such procedures and policies shall be binding on
any Employee wishing to utilize the cashless exercise program.
11. Rights of Option, SAR and SDR Holders. The holder of an Option,
SAR or SDR shall not have any of the rights of a stockholder with respect to
the Shares subject to purchase or issuance under such Award, except to the
extent that one or more certificates for such Shares shall he delivered to the
holder upon due exercise of the Option, SAR or SDR.
12. Nontransferability of Options, SARs and SDRs. An Option, SAR or
SDR shall not be transferable, other than by will or the laws of descent and
distribution, and an Option, SAR or SDR may be exercised, during the lifetime
of the holder of the Option, SAR or SDR, only by such holder.
13. Restricted Stock Awards. Restricted Stock Awards granted under the
Plan shall be subject to such terms and conditions as the Committee may, in
its discretion, determine. Restricted Stock Awards issued under the Plan
shall be evidenced by Restricted Stock Agreements in such form as the
Committee may from time to time determine.
13.1 Receipt of Shares. Each Restricted Stock Agreement shall set
forth the number of Shares issuable under the Restricted Stock Award
evidenced thereby. Subject to the restrictions of Section 13.4 of the
Plan and as set forth in the related Restricted Stock Agreement, the
number of Shares granted under a Restricted Stock Award shall be issued
to the recipient Employee thereof on the date of grant of such Restricted
Stock Award or as soon as may be practicable thereafter.
13.2 Receipt of Cash Payments. Within ten (10) business days of
each lapse of restrictions on Shares issued under a Restricted Stock
Award as provided in Section 13.5 of the Plan and in the Restricted Stock
Agreement, the Company shall make a cash payment to the Employee covered
thereby equal to the aggregate of the amount of federal, state and local
taxes which such Employee would be required to pay to each such taxing
authority attributable to the realization of taxable income, if any, as
a result of receipt of Shares pursuant to the Plan; provided, however,
that the Committee may, in its discretion, make such payment within ten
(10) business days of the date of grant if the Employee makes an election
to be taxed immediately under Section 83(b) of the Code. In computing
the amount of such payment, it shall be assumed that every Employee
granted a Restricted Stock Award under the Plan is subject to tax by each
taxing authority at the highest marginal tax rate in the respective
taxing jurisdiction of such Employee (provided that the highest marginal
tax rate for federal income tax purposes shall be determined without
reference to Section 1(g) of the Code), taking into account the city and
state in which such Employee resides, but giving effect to the tax
benefit, if any, which such Employee may enjoy to the extent that any
such tax is deductible in determining the tax liability of any other
taxing jurisdiction. In addition to the foregoing, each cash payment due
to an Employee hereunder shall be increased by the aggregate of the
federal, state and local taxes for which such Employee may be liable
(computed on the same basis) on account of the cash payment to be made
hereunder, it being the intention of the Company that each Employee who
receives a grant of Shares under this Plan shall receive such Shares net
of all taxes imposed on such Employee on account of the receipt of Shares
under this Plan.
13.3 Rights of Recipient Employees. Shares received pursuant to
Restricted Stock Awards shall be duly issued or transferred to the
Employee, and a certificate or certificates for such Shares shall be
issued in the Employee's name. Subject to the restrictions in Section
13.4 of the Plan and as set forth in the related Restricted Stock
Agreement, the Employee shall thereupon be a stockholder with respect to
all the Shares represented by such certificate or certificates and shall
have all the rights of a stockholder with respect to such Shares,
including the right to vote such Shares and to receive dividends and
other distributions paid with respect to such Shares. In aid of such
restrictions, certificates for Shares awarded hereunder, together with
a suitably executed stock power signed by each recipient Employee, shall
be held by the Company in its control for the account of such Employee
(i) until the restrictions determined by the Committee, in its
discretion, and as set forth in the related Restricted Stock Agreement,
lapse pursuant to the Plan or the Restricted Stock Agreement, at which
time a certificate for the appropriate number of Shares (free of all
restrictions imposed by the Plan or the Restricted Stock Agreement) shall
be delivered to the Employee, or (ii) until such Shares are forfeited to
the Company and cancelled as provided by the Plan or the Restricted Stock
Agreement.
13.4 Restrictions. Except as otherwise determined by the
Committee, in its sole discretion, each Share issued pursuant to a
Restricted Stock Agreement shall be subject, in addition to any other
restrictions set forth in the related Restricted Stock Agreement, to the
following restrictions until such restrictions have lapsed pursuant to
Section 13.5 of the Plan:
(a) Disposition. The Shares awarded to an Employee and
held by the Company pursuant to Section 13.3 of the Plan, and the
right to vote such Shares or receive dividends on such Shares, may
not be sold, exchanged, transferred, pledged, hypothecated or
otherwise disposed of; provided, however, that such Shares may be
transferred upon the death of the Employee to such of his legal
representatives, heirs and legatees as may be entitled thereto by
will or the laws of intestacy.
(b) Forfeiture. The Shares awarded to an Employee shall
be forfeited to the Company without notice and without
consideration therefor immediately upon the termination of
Employee's employment with the Company, and all Subsidiaries of the
Company, for any reason.
13.5 Lapse of Restrictions. Except as otherwise determined by the
Committee in its sole discretion, the restrictions set forth in Section
13.4 of the Plan on Shares issued under a Restricted Stock Award shall
lapse, and certificates for the Shares held for the account of the
Employee in accordance with Section 13.3 of the Plan hereof shall be
appropriately distributed to Employee as follows:
(a) After one (1) year from the date of grant, the
restrictions shall lapse as to not more than twenty percent (20%)
of the Shares originally awarded.
(b) After two (2) years from the date of grant, the
restrictions shall lapse as to an aggregate of not more than forty
percent (40%) of the Shares originally awarded.
(c) After three (3) years from the date of grant, the
restrictions shall lapse as to all the Shares originally awarded.
14. Award Terms and Conditions. Each Award Agreement setting forth an
Award shall contain such other terms and conditions not inconsistent herewith
as shall be approved by the Board or by the Committee. The Committee shall
from time to time adopt policies and procedures applicable to Awards that will
govern the lapse or non-lapse of restrictions and the rights of grantees and
beneficiaries in the event of death, disability, or retirement of grantees or
upon the occurrence of any other event determined by the Committee, in its
sole discretion, to be appropriate. The Committee shall have authority to
define disability and retirement and other terms, and the Committee's policies
and procedures may differ with respect to Awards granted at different times.
A grantee's rights in the event of death, disability, or retirement or such
other events shall be set forth in the Award Agreement that evidences an Award
to the grantee.
15. Date of Grant. The date of grant of an Award granted hereunder
shall be the date on which the Committee acts in granting the Award.
16. Vesting of Award. The Committee may, in its sole discretion, grant
Awards which vest over time or based upon satisfaction of performance targets
established by the Committee.
17. Adjustments Upon Changes in Capitalization. In the event of
changes in all of the outstanding Shares by reason of stock dividends, stock
splits, recapitalizations, mergers, consolidations, combinations, or exchanges
of shares, separations, reorganizations or liquidations or similar events or
in the event of extraordinary cash or non-cash dividends being declared with
respect to outstanding Shares or other similar transactions, the number and
class of Shares available under the Plan in the aggregate, the number and
class of Shares subject to Awards theretofore granted, the number of SDRs or
SARs therefore granted, applicable purchase prices and all other applicable
provisions, shall, subject to the provisions of the Plan, be equitably
adjusted by the Committee, which adjustment may, but need not, include payment
to the holder of an Option or SAR, in cash or in Shares, in an amount equal
to the difference between the then current Fair Market Value of the Shares
subject to such Award, as equitably determined by the Committee, and the
option price or SAR Base Price of such Option or SAR, as the case may be. The
foregoing adjustment and the manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional Share which might
otherwise become subject to an Award.
18. Termination of Awards Upon Change in Control. Notwithstanding
anything to the contrary, in the case of a Change in Control, each Award
granted under the Plan shall terminate ninety (90) days after the occurrence
of such Change in Control, but, in the event of any such termination:
(a) the Award holder shall have the right, commencing at least
five (5) days prior to such Change in Control and subject to any other
limitation on the exercise of such Award in effect on the date of
exercise, (i) to immediately exercise any Options not in tandem with SARs
or SDRs in full, without regard to any vesting limitations, to the extent
they shall not have been theretofore exercised, and (ii) to exercise, at
any time after the sixth month anniversary of the date of grant of the
respective SAR or SDR (but subject to the restrictions of paragraph
(e)(3)(iii) of Rule 16b-3) any SARs or Options in tandem with SARs or
SDRs in full, without regard to any vesting limitations, to the extent
they shall not have been theretofore exercised, provided, however, that
no SAR or Option in tandem with an SAR or SDR shall terminate prior to
the end of the first Window Period following the occurrence of such
Change in Control; and
(b) all restrictions on Restricted Stock Awards shall immediately
lapse and certificates for the affected Shares and the cash payment
required by Section 13.2 of the Plan (if any payment is due) shall be
appropriately distributed.
Notwithstanding anything to the contrary in this Section 18, each Option,
SAR and Option granted in tandem with an SAR or SDR outstanding at the date
of the Change of Control, shall terminate, in all events, no later than one
hundred eighty (180) days after the occurrence of such Change in Control.
Further, nothing in this Section 18 shall prevent the holder of an Option
granted in tandem with an SDR from receiving payment of the SDR, so long as
the related Option is exercised within the time period permitted for such
exercise in this Section 18. The foregoing adjustment and the manner of
application of the foregoing provisions shall be determined by the Committee
in its sole discretion.
19. Form of Awards. Nothing contained in the Plan nor any resolution
adopted or to be adopted by the Board or the stockholders of the Company shall
constitute the granting of any Award. An Award shall be granted hereunder at
such date or dates as the Committee may determine, subject to the Plan.
Whenever the Committee determines to grant an Award, the Secretary or the
President of the Company, or such other person as the Committee appoints,
shall forthwith send notice thereof to the Employee, in such form as the
Committee approves, stating the number of Shares, SDRs and SARs subject to
Award, its Term, and the other provisions (including restrictions) and
conditions thereof provided by the terms of the Plan. The notice shall be
accompanied by a written Award Agreement (and, in the case of a Restricted
Stock Award, by a blank stock power for execution by the Employee as provided
in Section 13.3 of the Plan) which shall have been duly executed by or on
behalf of the Company. If the surrender of previously issued Awards is made
a condition of the grant, the notice shall set forth the pertinent details of
such condition. Execution of an Award Agreement by the recipient Employee in
accordance with the provisions of the Plan shall be a condition precedent to
the exercise of any Award.
20. Withholding for Taxes.
20.1 Company's Right to Payment for Taxes Required to be Withheld.
The Company shall have the right to require an Employee entitled to
receive Shares pursuant to the exercise of an Award under the Plan to pay
the Company the amount of any taxes which the Company is or will be
required to withhold with respect to such Shares before the certificate
for such Shares is delivered pursuant to the Award. The Company may
elect to deduct such taxes from any other amounts payable then or any
time thereafter in cash or Shares or otherwise to the Employee. If the
Employee disposes of Shares acquired pursuant to an Incentive Stock
Option in any transaction considered to be a disqualifying transaction
under Sections 421 and 422A of the Code, the Employee must give the
Company written notice of such transfer and the Company shall have the
right to deduct any taxes required by law to be withheld from any amounts
otherwise payable to the Employee.
20.2 Employee Election to Withhold Shares. An Employee who is
subject to Section 16(b) of the Exchange Act may satisfy his tax
liability with respect to the exercise of an Option or SAR, or payment
of an SDR, by having the Company withhold Shares otherwise issuable upon
exercise of the Option or SAR, or upon payment of the SDR, if such
Employee makes an irrevocable election, by way of a written statement in
a form acceptable to the Committee, at least six (6) months before the
date the Employee recognizes federal taxable income with respect to the
receipt of such Shares or during any Window Period.
21. Termination of Plan. The Plan shall terminate ten (10) years from
the date hereof, and an Award shall not be granted under the Plan after that
date although the terms of any Awards may be amended at any date prior to the
end of its Term in accordance with the Plan. Any Awards outstanding at the
time of termination of the Plan shall continue in full force and effect
according to the terms and conditions of the Award and this Plan.
22. Amendment of the Plan. The Plan may be amended at any time and
from time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if stockholder approval under
Section 422A of the Code or Rule 16b-3 would be required. Notwithstanding the
discretionary authority granted to the Committee in Section 4 of the Plan, no
amendment of the Plan or any Award granted under the Plan shall impair any of
the rights of any holder, without his consent, under any Award theretofore
granted under the Plan.
23. Delivery of Shares on Exercise. Delivery of certificates for
Shares pursuant to the grant or exercise of an Award may be postponed by the
Company for such period as may be required for it with reasonable diligence
to comply with any applicable requirements of any federal, state or local law
or regulation or any administrative or quasi-administrative requirement
(including stock exchange requirements) applicable to the sale, issuance,
distribution or delivery of such Shares. The Committee may, in its sole
discretion, require an Employee to furnish the Company with appropriate
representations and a written investment letter prior to the exercise of an
Award or the delivery of any Shares pursuant to an Award.
24. Fees and Costs. The Company shall pay all original issue taxes on
the exercise of any Award granted under the Plan and all other fees and
expenses necessarily incurred by the Company in connection therewith.
25. Effectiveness of the Plan. The Plan shall become effective when
approved by the Board. The Plan shall thereafter be submitted to the
Company's stockholders for approval and unless the Plan is approved by the
affirmative votes of the holders of shares having a majority of the voting
power of all shares represented at a meeting duly held in accordance with
Delaware law within twelve (12) months after being approved by the Board, the
Plan and all Awards made under it shall be void and of no force and effect.
26. Other Provisions. As used in the Plan, and in Awards and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in such Awards and other documents
prepared in implementation of the Plan are for convenience only and shall not
affect the meaning of any provision hereof or thereof.
<PAGE>
AMENDMENTS TO 1989 INCENTIVE PLAN OF BALLY MANUFACTURING CORPORATION
(the "Plan")
1. Section 3 of the Plan was amended on July 8, 1991 to increase the number
of shares reserved for issuance under the Plan from 2,500,000 to
4,000,000, and that said amendment was approved by the stockholders of
Bally Manufacturing Corporation on June 16, 1992.
2. Section 3 of the Plan was amended on June 3, 1993, subject to stockholder
approval, to increase the number of shares reserved for issuance under
the Plan from 4,000,000 to 4,398,000.
3. Section 3 of the Plan was amended on July 28, 1993, subject to
stockholder approval, to increase the number of shares reserved for
issuance under the Plan from 4,398,000 to 5,398,000.
4. Section 5 of the Plan was amended on September 30, 1993, subject to
stockholder approval, to read as follows:
"Moreover, during any one calendar year, neither the chief
executive officer of the Company (or an individual acting in such
capacity) nor any other Employee whose total compensation for such
calendar year is required to be reported to the Company's
stockholders pursuant to the Exchange Act by reason of such
Employee being among the four (4) highest compensated officers
(other than the chief executive officer) for such calendar year may
be granted Options, SAR's or Options in tandem with SAR's to
acquire more than 1,000,000 Shares."
5. Section 3 of the Plan was amended on February 15, 1994, subject to
stockholder approval, to increase the number of shares reserved for
issuance under the Plan from 5,398,000 to 6,022,000.
<PAGE>
PRELIMINARY COPY
PROXY
BALLY MANUFACTURING CORPORATION
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lee S. Hillman and Carol Stone DePaul,
or either of them, proxies of the undersigned with full power of
substitution, to vote all shares of the undersigned at the Annual Meeting
of Stockholders of Bally Manufacturing Corporation (the "Company") to be
held on May 17, 1994, at (9:00) a.m. (local time), in the Blenheim Ballroom
of Bally's Park Place Casino Hotel, Park Place and the Boardwalk, Atlantic
City, New Jersey 08401, or at any adjournment(s) thereof.
The Board of Directors unanimously recommends a vote FOR Proposals
Number (1), (2), (3), (4) and (5).
(1) Election of Class II Directors for three-year terms expiring in
1997.
_ _
|_| FOR the nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary to vote for the nominees listed
below) below
GEORGE N. ARONOFF, PATRICK L. O'MALLEY and ROCCO J. MARANO
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line below.)
___________________________________________________________________________
(2) Approval of an amendment to the Company's Restated Certificate
of Incorporation to change the Company's name from Bally Manufacturing
Corporation to Bally Entertainment Corporation.
_ _ _
|_| FOR APPROVAL |_| AGAINST APPROVAL |_| ABSTAIN
(3) Approval of the Company's 1993 Non-Employee Directors' Stock
Option Plan.
_ _ _
|_| FOR APPROVAL |_| AGAINST APPROVAL |_| ABSTAIN
(4) Approval of the Company's Employee Stock Purchase Plan.
_ _ _
|_| FOR APPROVAL |_| AGAINST APPROVAL |_| ABSTAIN
(5) Approval of an amendment to the Company's 1989 Incentive Plan to
(i) increase the number of shares reserved for issuance under such plan and
(ii) limit the number of options, stock appreciation rights or options in
tandem with stock appreciation rights that may be granted during any one
calendar year to certain executive officers of the Company.
_ _ _
|_| FOR APPROVAL |_| AGAINST APPROVAL |_| ABSTAIN
The Board of Directors unanimously recommends a vote AGAINST Proposal
Number (6).
(6) A stockholder proposal regarding the long-term compensation
awards portion of the compensation of executive officers.
_ _ _
|_| FOR APPROVAL |_| AGAINST APPROVAL |_| ABSTAIN
(7) In their discretion on all other matters that may properly come
before the meeting.
(Continued and to be signed and dated on reverse side)
<PAGE>
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL NUMBERS (1), (2), (3), (4) AND (5) AND AGAINST
PROPOSAL NUMBER (6).
PLEASE DATE, SIGN EXACTLY AS NAME APPEARS BELOW, AND RETURN THIS PROXY
IN THE ENCLOSED POSTPAID ENVELOPE.
Dated: , 1994
Signature
Signature if held jointly
(If signing as attorney,
administrator, executor, trustee,
guardian, etc., please add your
title as such.)
No additional postage need be
affixed to the enclosed envelope
if mailed in the United States.
Your prompt attention will be of
assistance.