<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Bally Entertainment Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Carol S. DePaul, Secretary
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
BALLY ENTERTAINMENT CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1995
To Our Stockholders:
The Annual Meeting of Stockholders of Bally Entertainment Corporation (the
"Company") will be held in the Pacific Ballroom of Bally's Las Vegas, 3645 Las
Vegas Boulevard South, Las Vegas, Nevada 89109, on May 16, 1995 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 two directors of Class III for three-year terms
expiring in 1998;
2. The approval of an amendment to the Company's 1989 Incentive Plan
to (i) eliminate the ability to issue stock appreciation rights or stock
depreciation rights; and (ii) increase the number of shares reserved for
issuance under such plan;
3. The approval of an amendment to the Company's Employee Stock
Purchase Plan to increase the number of shares reserved for issuance under
such plan; and
4. 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 23, 1995 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
April 7, 1995
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
PLEASE EXECUTE, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY IN THE RETURN ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
<PAGE> 3
BALLY ENTERTAINMENT CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631
----------------------------------
PROXY STATEMENT
----------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1995
To Our Stockholders:
This Proxy Statement is furnished to stockholders of Bally Entertainment
Corporation (the "Company") for use at the Annual Meeting of Stockholders on May
16, 1995, 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:
1. for the election of the nominees for director;
2. for approval of an amendment to the Company's 1989 Incentive Plan
to (i) eliminate the ability to issue stock appreciation rights or stock
depreciation rights; and (ii) increase the number of shares reserved for
issuance under such plan;
3. for approval of an amendment to the Company's Employee Stock
Purchase Plan to increase the number of shares reserved for issuance under
such plan; and
4. such other business as may properly come before the meeting or any
adjournment thereof.
Proxies, ballots and voting tabulations that identify stockholders will be
kept confidential, except in a contested proxy solicitation, when 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
April 12, 1995.
VOTING SECURITIES
The total outstanding voting stock of the Company as of March 23, 1995
consisted of 46,980,604 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 23, 1995. Shares of
Common Stock cannot be voted at the
1
<PAGE> 4
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. 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.
ELECTION OF DIRECTORS AND SECURITY OWNERSHIP
At the Annual Meeting of Stockholders, two directors of Class III are to be
elected for a three-year term expiring in 1998 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 III. 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 two 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 II
were elected at the 1994 Annual Meeting of Stockholders for a three-year term
expiring in 1997. 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:
<TABLE>
NOMINEES
CLASS III
FOR A TERM EXPIRING IN 1998
<CAPTION>
NUMBER OF SHARES
OF
COMMON STOCK
BENEFICIALLY OWNED
HAS SERVED AS AS
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR OF MARCH 31, 1995 PERCENT OF
AND ADDITIONAL INFORMATION SINCE (1)(2) CLASS (1)(2)
- --------------------------------------------- ------------- ------------------ ------------
<S> <C> <C> <C>
Arthur M. Goldberg, 53 1990 2,386,300 4.9%
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 also a
Director of First Fidelity Bancorp. (3)(4)
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF
COMMON STOCK
BENEFICIALLY OWNED
HAS SERVED AS AS
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR OF MARCH 31, 1995 PERCENT OF
AND ADDITIONAL INFORMATION SINCE (1)(2) CLASS (1)(2)
- --------------------------------------------- ------------- ------------------ ------------
<S> <C> <C> <C>
Edwin M. Halkyard, 60 1990 15,519 *
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.
</TABLE>
<TABLE>
CONTINUING DIRECTORS
CLASS II
TERM EXPIRING IN 1997
<CAPTION>
NUMBER OF SHARES
OF
COMMON STOCK
BENEFICIALLY OWNED
HAS SERVED AS AS
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR OF MARCH 31, 1995 PERCENT OF
AND ADDITIONAL INFORMATION SINCE (1)(2) CLASS (1)(2)
- --------------------------------------------- ------------- ------------------ ------------
<S> <C> <C> <C>
George N. Aronoff, 61 1979 97,108 *
Partner in the Cleveland law firm of Benesch,
Friedlander, Coplan & Aronoff. Mr. Aronoff is
a Director of Specialty Chemical Resources,
Inc.(5)
Patrick L. O'Malley, 84 1981 75,473 *
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.
Rocco J. Marano, 67 1991 11,667 *
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.
</TABLE>
<TABLE>
CLASS I
TERM EXPIRING IN 1996
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY OWNED
HAS SERVED AS AS
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR OF MARCH 31, 1995 PERCENT OF
AND ADDITIONAL INFORMATION SINCE (1)(2) CLASS (1)(2)
- --------------------------------------------- ------------- ------------------ ------------
<S> <C> <C> <C>
James M. Rochford, 73 1981 32,667 *
Retired Vice President of the Company and
Retired Superintendent of Police,
City of Chicago, Illinois.
Barrie K. Brunet, 70 1991 2,667 *
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)
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY OWNED
HAS SERVED AS AS
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR OF MARCH 31, 1995 PERCENT OF
AND ADDITIONAL INFORMATION SINCE (1)(2) CLASS (1)(2)
- --------------------------------------------- ------------- ------------------ ------------
<S> <C> <C> <C>
J. Kenneth Looloian, 72 1992 11,667 *
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.
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF
COMMON STOCK
BENEFICIALLY OWNED
AS
SECURITY OWNERSHIP OF OF MARCH 31, 1995 PERCENT OF
NAMED EXECUTIVE OFFICERS (1)(2) CLASS (1)(2)
- --------------------------------------------- ------------------ ------------
<S> <C> <C>
Lee S. Hillman 113,334 *
Executive Vice President, Chief Financial
Officer and Treasurer of the Company.
Wallace R. Barr 78,302 *
President and Chief Operating Officer of
Bally's Park Place, Inc., and GNAC, CORP.
Michael G. Lucci, Sr. 353,983 *
President and Chief Operating Officer of
Bally's Health & Tennis Corporation.
Darrell A. Luery 20,000 *
Senior Vice President and Chief Operating
Officer of Bally's Grand, Inc.
All executive officers and directors as a 3,314,194 6.8%
group, 18 people.
<FN>
- ---------------
* Less than one percent
(1) Includes the following numbers of shares of Common Stock that the following
persons have or had, within 60 days after March 31, 1995, the right to
acquire upon the exercise of options: Mr. Goldberg 1,650,000, Mr. Hillman
103,334, Mr. Barr 62,501, Mr. Lucci 25,000 and Mr. Luery 20,000; and all
current executive officers and directors, including the foregoing, as a
group 1,981,174.
(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 or executive officer 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) 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. Mr.
4
<PAGE> 7
Luery has been Senior Vice President of Bally's Grand since 1989 and Chief
Operating Officer since 1992.
(4) Mr. Goldberg also owned, as of March 31, 1995, 1,685,994 shares of Series A
Cumulative Exchangeable Preferred Stock, par value $1.00 per share ("Casino
Preferred") of Bally's Casino, Inc., a subsidiary of the Company. The shares
of Casino Preferred are exchangeable for Common Stock at the rate of 1.12
shares of Casino Preferred for each share of Common Stock. See "Transactions
with Management."
(5) Mr. Aronoff also owned, as of March 31, 1995, $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 31, 1995.
</TABLE>
As of March 15, 1995, pursuant to information supplied by FMR Corp. to the
Company on April 5, 1995, FMR Corp., through its wholly owned subsidiaries
Fidelity Management & Research Company and Fidelity Management Trust Company,
beneficially owned 3,167,514 shares of Common Stock, or approximately 6.6% of
the Common Stock outstanding as of March 23, 1995. As of such date, FMR Corp.
had sole voting power with respect to 1,905,240 shares and sole dispositive
power with respect to 3,167,514 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
1994 all such filing requirements were complied with by its directors and
officers except for the incorrect number of shares being reported on Form 4 for
Michael Lucci and on Form 4 for Wallace Barr and a late filing of a Form 3 for
Darrell Luery upon his becoming an executive officer of the Company. These
inaccuracies have been corrected.
INFORMATION RELATING TO THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held seven meetings during 1994. 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 1994.
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. Looloian, 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 held one meeting during 1994.
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
four meetings during 1994.
5
<PAGE> 8
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 1994.
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
"Committee") are Mr. Halkyard, Chairman, and Messrs. O'Malley and Marano. The
general functions of the 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 ensure continuity of senior management. The
Committee held four meetings during 1994.
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 1994, 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 Committee, each of whom
received annual stipends of $5,000.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and the four other most highly compensated executive
officers of the Company at the end of 1994, for services rendered in all
capacities to the Company during the years indicated.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
BONUS COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($) ($)(1) SARS(#) ($)
- -------------------------------------------- ---- --------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Goldberg 1994 2,200,000 -- 583,708(2) 150,000 746,577(3)
Chairman of the Board of Directors, 1993 2,200,000 -- 642,284 450,000 4,179,713
Chief Executive Officer 1992 2,200,000 -- 507,318 -- 1,033,498
and President of the Company
Lee S. Hillman 1994 350,000 300,000 -- 75,000 7,346(4)
Executive Vice President, 1993 350,000 250,000 -- 100,000 252,500
Chief Financial Officer 1992 350,000 200,000 -- 90,000 --
and Treasurer of the Company
Wallace R. Barr 1994 700,000 450,000 -- 75,000 41,567(6)
President and Chief Operating Officer of 1993(5) 704,565 290,000 -- 100,000 16,239
Bally's Park Place, Inc., and GNAC, CORP.
Michael G. Lucci, Sr. 1994 500,000 -- -- 75,000 17,308(8)
President and Chief Operating 1993(7) 380,000 300,000 -- 75,000 --
Officer of Bally's Health & Tennis
Corporation
Darrell A. Luery 1994(9) 540,000 270,000 -- 75,000 39,351(10)
Senior Vice President and Chief Operating
Officer of Bally's Grand, Inc.
<FN>
- ---------------
(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 1994, because the incremental cost to the Company of such
benefits is below the Securities and Exchange Commission disclosure
threshold.
(2) This total includes (i) $580,260 tax gross-up payment with respect to Mr.
Goldberg's retirement annuity; and (ii) $3,448 tax gross-up payment with
respect to Mr. Goldberg's life insurance.
(3) This total includes (i) $701,290 paid by the Company for Mr. Goldberg's
retirement annuity; (ii) $4,167 paid by the Company for premiums on Mr.
Goldberg's split-dollar life insurance policy; (iii) $40,120 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 one of the Company's savings plans.
(4) This amount represents amounts matched by the Company for Mr. Hillman's
participation in the Company's savings plans.
(5) Mr. Barr's employment as an executive officer of the Company commenced as
of January 1, 1993.
(6) This amount represents (i) amount matched by Bally's Park Place, Inc. for
Mr. Barr's participation in one of the Company's savings plans of $24,231;
(ii) amount matched by Bally's Park Place, Inc. for Mr. Barr's
participation in its profit sharing plan of $14,290; and (iii) $3,046 for
life insurance premiums paid by Bally's Park Place, Inc.
(7) Mr. Lucci's employment as an executive officer of the Company commenced as
of April 29, 1993.
7
<PAGE> 10
(8) This amount represents amount matched by Bally's Health & Tennis
Corporation for Mr. Lucci's participation in one of the Company's savings
plans.
(9) Mr. Luery's employment as an executive officer of the Company commenced as
of December 30, 1994.
(10) This amount represents amounts matched by Bally's Grand, Inc. for Mr.
Luery's participation in the Company's savings plans.
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Goldberg
The Company and Mr. Goldberg entered into an employment agreement
guaranteed by Bally's Park Place, Inc. (the "Goldberg Employment Agreement")
dated as of November 1, 1990 for a three-year term. The Goldberg Employment
Agreement has been amended, among other things, to increase the base salary to
$2,200,000 and 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. 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. 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
second 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 in control subject to the excise tax.
If a change in control of the Company were to have occurred on April 1, 1995 Mr.
Goldberg would be entitled to a payment of approximately $11,100,000 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. The
employment agreement was amended, among other things, to 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
8
<PAGE> 11
payable at the discretion of the Committee. In the event of a change in 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 in control of the Company or
BHTC were to have occurred on April 1, 1995 and Mr. Hillman were asked to leave
the employ of either company, Mr. Hillman would be entitled to a payment of
$715,000 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, as 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 24 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 in control of the Company
were to have occurred on April 1, 1995 and Mr. Barr were 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
Mr. Lucci and BHTC entered into an employment agreement effective as of
January 1, 1994. The agreement provides for a three year term except that the
agreement also provides for the termination of the agreement when the Company
adopts a comprehensive compensation policy covering its most highly compensated
employees. The agreement provides for a base salary of $500,000 and for bonuses
based on a combination of pre-tax cash flow and profitability. In the event of a
change in control as a result of which Mr. Lucci is asked to leave the employ of
BHTC, Mr. Lucci is entitled to receive a lump sum equal to his base salary for
24 months and the greater of (i) the average of total cash bonuses paid for the
prior two years or (ii) total cash bonuses for the prior year. If a change in
control were to have occurred on April 1, 1995 and Mr. Lucci were asked to leave
the employ of BHTC, Mr. Lucci would be entitled to a payment of $1,150,000 under
his employment agreement.
Mr. Luery
Mr. Luery and Bally's Grand, Inc. entered into an employment agreement
dated August 31, 1992, that was subsequently amended, for a term expiring
December 31, 1995. The agreement provides for the payment of an annual base
salary, subject to periodic review by the Board of Directors of Bally's Grand,
Inc. (or the Company in certain circumstances), plus bonuses, payable at the
discretion of the Board of Directors of Bally's Grand, Inc. (or the Company in
certain circumstances). Mr. Luery's annual base salary is $540,000. Mr. Luery
also received a restricted stock award of 73,000 shares of Bally's Grand, Inc.
common stock. In the event that Mr. Luery voluntarily terminates the agreement
or his employment is terminated by Bally's Grand, Inc. for "cause" (as defined
in the agreement), Mr. Luery is subject to certain noncompetition covenants and
will be for a period of one year following the termination of his employment in
certain circumstances. In the event of a change in control (as defined in the
agreement) of Bally's Grand, Inc. and within two years
9
<PAGE> 12
thereafter Mr. Luery is asked to leave the employ of Bally's Grand, Inc., or
absent cause, Mr. Luery elects to terminate his employment because he has been
constructively terminated, Mr. Luery will be entitled to receive a lump sum
payment equal to the full amount of his then current base salary for the
remainder of the term of his agreement or 24 months, whichever is greater, and
will be entitled to continue his participation in the employee benefit plans of
Bally's Grand, Inc. and receive insurance coverage for certain periods. If a
change in control of Bally's Grand, Inc. were to have occurred on April 1, 1995,
and Mr. Luery were asked to leave the employ of Bally's Grand, Inc., Mr. Luery
would be entitled to payment of approximately $1,080,000 under his 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 attained both 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 through The Grand in Atlantic City. The Park Place SERP is unfunded
and is not qualified under the Internal Revenue Code. Mr. Barr is fully vested
pursuant to 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>
PARK PLACE SERP TABLE
ANNUAL BENEFIT FOR THE FOLLOWING
YEARS OF SERVICE
AVERAGE ------------------------------------
COMPENSATION 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
1,500,000 349,650 499,500 750,000
</TABLE>
10
<PAGE> 13
RETIREMENT SAVINGS PLAN
On September 7, 1994 the Company adopted the Bally Entertainment
Corporation Management Retirement Savings Plan (the "Savings Plan"). The Savings
Plan is a deferred compensation plan designed to permit a select group of
management or highly compensated employees to enhance the security of themselves
and their beneficiaries following retirement or other termination of their
employment. The Savings Plan is intended to be an "employee pension benefit
plan" under the Employee Retirement Income Security Act of 1974, as amended, and
is unfunded and maintained by the Company. The Savings Plan is not intended to
be qualified under the Internal Revenue Code of 1986, as amended. The Board, in
its sole discretion, designates those members of management or highly
compensated employees who are eligible to participate in the Savings Plan.
Currently, over 200 employees are eligible to participate in the Savings Plan.
The Company and its subsidiaries provide a matching contribution as
follows: 100% of the first 10% of eligible compensation the participant defers,
50% of the second 10% of eligible compensation the participant defers and 0%
thereafter. Matching contributions are credited to a participant's matching
account and become vested as follows: after one but less than two Years of
Deferral they become 33 1/3% vested, after two but less than three Years of
Deferral they become 66 2/3% vested, and after more than three Years of Deferral
they become fully vested. For this purpose, a "Year of Deferral" is credited
with respect to a matching contribution made during a calendar year for each
completed calendar year commencing after the calendar year during which the
matching contribution was made. A participant generally may elect to receive his
benefits under the Savings Plan in a lump sum or in installments over a period
of no more than 10 years. As soon as possible (but not later than five business
days) after a change in control of the Company, as defined in the Savings Plan,
all of the participants' accounts will become 100% vested.
For 1994, the Company and its subsidiaries contributed cash of $682,027 to
the accounts of all participants in the Savings Plan, of which $119,726 was
allocated to the accounts of all executive officers as a group. Amounts
allocated to the executives named in the summary compensation table were as
follows: Mr. Hillman $6,346, Mr. Barr $24,231, Mr. Lucci $17,308 and Mr. Luery
$34,269.
STOCK OPTION AND SAR GRANTS
The following table sets forth the information noted for all grants of
stock options made to each of the executive officers named in the Summary
Compensation Table during 1994:
<TABLE>
OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE EXPIRATION ----------------------
NAME GRANTED(#)(3)(4) FISCAL YEAR PRICE($/SH) DATE 5% ($) 10% ($)
- ------------------------ ------------ ------------ ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Goldberg 150,000 7.7 6.75 11/9/04 636,756 1,613,664
Lee S. Hillman 75,000 3.8 6.75 11/9/04 318,378 806,832
Wallace R. Barr 75,000 3.8 6.75 11/9/04 318,378 806,832
Michael G. Lucci, Sr. 75,000 3.8 6.75 11/9/04 318,378 806,832
Darrell A. Luery 75,000 3.8 6.75 11/9/04 318,378 806,832
<FN>
- ---------------
(1) There were no SARs granted to any of the executive officers named in this
table in 1994.
(2) The potential realizable values represent future opportunity and have not
been reduced to present value in 1994 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. 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
11
<PAGE> 14
annualized rates of stock price appreciation of five percent and 10 percent
over the full 10-year term of the options. For example, in order for the
individuals named above who received options with an exercise price of $6.75
per share to realize the potential values set forth in the five percent and
10 percent columns in the table above, the price per share of the Company's
Common Stock would have to be approximately $11.00 and $17.51, respectively.
(3) One-third of the options granted may be exercised on the first anniversary
of the date of grant, two-thirds after two years from the date of grant and
100% after three years from the date of grant. Each grant was made on the
date which is 10 years prior to the date of expiration set forth in the
table.
(4) Includes grants of 35,000 shares to Mr. Goldberg and 20,000 shares each to
Mr. Hillman, Mr. Barr, Mr. Lucci and Mr. Luery subject to stockholder
approval of the amendment to the Company's 1989 Incentive Plan.
</TABLE>
STOCK OPTION AND SAR EXERCISES
The following table sets forth the information noted for all exercises of
stock options and SARs by each of the executive officers named in the Summary
Compensation Table during 1994:
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
YEAR-END(#) YEAR-END($)(1)
SHARES ---------------- ----------------
ACQUIRED ON VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- ------------------------ ----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Arthur M. Goldberg -- -- 1,650,000(E)(2) 6,312,500(E)(2)
450,000(U) 0(U)
Lee S. Hillman -- -- 103,334(E) 90,000(E)
171,666(U) 33,750(U)
Wallace R. Barr -- -- 45,834(E) 22,500(E)
141,666(U) 0(U)
Michael G. Lucci, Sr. -- -- 25,000(E) 0(E)
125,000(U) 0(U)
Darrell A. Luery -- -- 20,000(E) 22,500(E)
95,000(U) 0(U)
<FN>
- ---------------
(1) Value is based on the closing price of a share of Common Stock as of
December 31, 1994 ($6.125) minus the exercise or base 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.
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option 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 ensure
continuity of senior management.
12
<PAGE> 15
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.
The Company's prime strategic goals for 1994 were strengthening its
existing gaming operations and positioning the Company for growth in both mature
and newer markets and cutting costs and increasing sales at the Company's health
clubs. In its compensation decisions during 1994, the Committee considered the
importance of qualitative achievements in the context of the goal of
strengthening the gaming business and positioning it for growth in both mature
and newer markets. The Committee recognized qualitative factors such as
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 Committee believes that the Company achieved its goals
with regard to the gaming business but only achieved some of its goals with
respect to the health clubs.
During 1994, the Committee took several actions designed to retain the
Company's current executive officers (including the adoption of the Savings Plan
which also was designed to help retain other management personnel) and to reward
them for strengthening the gaming business and positioning it for growth in both
mature and newer markets. The Committee awarded bonuses to three of the five
named executive officers who were critical components in the Company's gaming
business. 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, among
other things, previous awards made to executive officers and the stock option
guidelines reviewed by the Committee in 1994. These guidelines, which do not
limit the discretion of the Committee, provide for annual grants at levels based
on position, cash compensation and internal and external competitive practices.
The Chief Executive Officer, under these guidelines, would receive grants of
400,000 to 500,000 options per year and the other key executives would receive
grants between 75,000 and 125,000 options per year. The grant made to Mr.
Goldberg in 1994 was below the guidelines. The Committee has reviewed a number
of proposed incentive-based plans. The Committee believes that those plans which
provide the appropriate incentive to management to maximize the long-term
interests of stockholders do not meet the requirements of Section 162(m) of the
Code in the Company's circumstances. Furthermore, the Committee believes that
the Company will lose only a de minimis cash tax benefit as a result of not
complying with Section 162(m) of the Code because the Company does not expect to
be required to pay any significant federal income taxes for the next two to
three years. Consequently, the Committee expects to adopt a performance based
incentive plan for 1995 which does not meet the
13
<PAGE> 16
requirements of Section 162(m) of the Code but which provides the proper
incentive to management to maximize long-term stockholder value.
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. The
Company's performance, both short- and long-term, and ultimately the short- and
long-term interests of the Company and its stockholders, are tied to the
Company's earnings, earnings potential, cash flows and stock values.
The Committee believes that the cumulative total returns to the Company's
stockholders of 104% (measured as of December 31, 1994) and 183% (measured as of
March 31, 1995) 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.
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN
FROM OCTOBER 12, 1990 TO MARCH 31, 1995*
BALLY ENTERTAINMENT CORPORATION, S&P 500 INDEX AND
DOW JONES ENTERTAINMENT & LEISURE INDUSTRY GROUP INDEX
<CAPTION>
DJ-
Measurement Period Entertainment
(Fiscal Year Covered) BALLY S&P 500 & Leisure
- ----------------------------- ------------- ------------- --------------
<S> <C> <C> <C>
10/12/90 100.0 100.0 100.0
12/31/90 70.8 111.1 116.7
12/31/91 175.0 144.4 145.1
12/31/92 262.5 155.0 181.0
12/31/93 283.3 170.1 227.6
12/31/94 204.2 171.8 207.6
3/31/95 283.3 189.4 238.8
<FN>
* Assumes $100 invested on October 12, 1990 in Company Common Stock, the S&P 500
and the DJ Entertainment & Leisure Industry Group. Total return assumes
reinvestment of dividends.
</TABLE>
COMPENSATION COMMITTEE
E.M. HALKYARD, CHAIRMAN
P.L. O'MALLEY
R.J. MARANO
14
<PAGE> 17
<TABLE>
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
BALLY ENTERTAINMENT CORPORATION, S&P 500 INDEX AND
DOW JONES ENTERTAINMENT & LEISURE INDUSTRY GROUP INDEX
<CAPTION>
DJ-
Measurement Period Entertainment
(Fiscal Year Covered) BALLY S&P 500 & Leisure
- ----------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
12/31/89 100.0 100.0 100.0
12/31/90 15.5 96.9 88.8
12/31/91 38.4 125.9 110.4
12/31/92 57.6 135.0 137.7
12/31/93 62.1 148.1 173.2
12/31/94 44.8 149.5 157.9
<FN>
* Assumes $100 invested on January 1, 1990 in Company Common Stock, the S&P 500
and the DJ Entertainment & Leisure Industry Group. Total return assumes
reinvestment of dividends.
</TABLE>
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 Entertainment Corporation (the
"Incentive Plan") which would prohibit the grant of stock appreciation rights
("SARs") and stock depreciation rights ("SDRs") after March 15, 1995. The Board
of Directors has also adopted, subject to stockholder approval, an amendment 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 8,000,000 shares. The current number of shares of Common Stock
reserved in connection with the Incentive Plan is 6,022,000.
The amendment relating to the prohibition of granting SARs and SDRs is
proposed and was adopted by the Board of Directors in the belief that the
granting of SARs and SDRs is inconsistent with the Company's compensation
practices. Indeed, no SARs have been granted since December 31, 1990 and no SDRs
have ever been granted.
The amendment increasing 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.
As of March 31, 1995, the Company has granted stock options to purchase 955,100
shares pursuant to the Incentive Plan, subject to stockholder approval of the
amendment. (See "Proposed Amendment to the Company's 1989 Incentive Plan -- New
Plan Benefits".) 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 31, 1995, the closing price of a share of Common Stock
as reported on the New York Stock Exchange Composite Transactions Tape was
$8.50.
15
<PAGE> 18
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 amendments to the Incentive Plan on June 16, 1992 and May 17, 1994.
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 A 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 A.
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 Internal Revenue Code of
1986, as amended (the "Code"), non-qualified stock options, SARs, stock
depreciation rights ("SDRs") and restricted stock awards. 6,022,000 shares of
Common Stock have been reserved for the exercise of awards under the Incentive
Plan. The 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 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 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 10 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
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 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
Committee, in its discretion, shall determine), of the share of Common Stock
16
<PAGE> 19
acquired on such exercise, or (ii) if such share were sold prior to such date,
the gross sales proceeds from the sale of such share of Common Stock. The
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 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 Committee to receive
shares of Common Stock subject to forfeiture and other restrictions determined
by the 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
Committee, until the restrictions lapse, the shares will be forfeited if the
employee's employment is terminated for any reason. Unless the 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. The terms of the Incentive Plan and the composition of
the Committee are intended to comply with these regulations relating to stock
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<PAGE> 20
options. 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 of the Securities Exchange Act of 1934,
as amended ("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.
Generally, under the Section 16 regulations, a person subject to Section 16
(a "Section 16 person") may exercise an option and sell the underlying stock
immediately without being subject to suit under the "short swing profit"
provisions as long as such person has held the option and/or the underlying
stock for an aggregate of six months. Generally, if the Section 16 person
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 generally be measured six months
following the date of grant (unless the person elects to be taxed on the date of
exercise) because the sale of the underlying stock before this date would
subject the Section 16 person to suit under the "short swing profit" provisions.
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.
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<PAGE> 21
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 "Federal Income Tax Consequences -- Non-Qualified Stock Options" 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 a
substantial risk of 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 a 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.
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<PAGE> 22
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 Sections 280G and 162(m) of the Code, to a corresponding tax
deduction at such time.
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) 535,000
Lee S. Hillman
Executive Vice President, Chief Financial Officer and
Treasurer of the Company................................ (a) 20,000
Wallace R. Barr
President and Chief Operating Officer of Bally's Park
Place, Inc., and GNAC, CORP............................. (a) 20,000
Michael G. Lucci, Sr.
President and Chief Operating Officer of Bally's Health
& Tennis Corporation.................................... (a) 20,000
Darrell A. Luery
Senior Vice President and Chief Operating Officer of
Bally's Grand, Inc...................................... (a) 20,000
Executive Officers as a Group............................. (a) 645,000
Non-Executive Officer
Employee Group.......................................... (a) 306,100
<FN>
- ---------------
(a) All options granted under the Incentive Plan, and subject to stockholder
approval, have been granted at the exercise price of $6.75 per share (the
fair market value of a share of Common Stock on the date of grant) except
for an option to purchase 500,000 shares which were granted to Mr. Goldberg
during 1995 at the exercise price of $7.50 per share (the fair market value
of a share of Common Stock on the date of that 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 31,
1995, the closing price of a share of Common Stock as reported on the New
York Stock Exchange Composite Transactions Tape was $8.50.
</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 amendments to the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION AND APPROVAL OF
THE AMENDMENTS TO THE INCENTIVE PLAN.
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<PAGE> 23
PROPOSED AMENDMENT TO THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Employee Stock Purchase Plan (the "Stock Purchase
Plan") to increase the number of shares of Common Stock reserved for use under
the Stock Purchase Plan to an aggregate of 550,000 shares. The current number of
shares of Common Stock reserved in connection with the Stock Purchase Plan is
200,000. The Board of Directors of the Company believes this increase is
mandated by the overwhelming response of the employees of the Company to the
Stock Purchase Plan.
DESCRIPTION OF THE STOCK PURCHASE PLAN
On December 8, 1993, the Board of Directors of the Company adopted, subject
to the approval of stockholders, the Stock Purchase Plan. On May 17, 1994, the
stockholders of the Company approved 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 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 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 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 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 commenced on July 1, 1994 and terminated on December 31, 1994. After that,
offerings 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 Stock
Purchase Plan is terminated or no additional shares of Common Stock are
available for purchase under the Stock Purchase Plan.
The 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 presently 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
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<PAGE> 24
Stock Purchase Plan. Employees may elect to subscribe for options to purchase
shares of Common Stock for an aggregate purchase price up to 10 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, options to purchase the number of full shares of Common Stock
which their accumulated payroll deductions will purchase as of the date such
offering terminates. Unless the 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 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
Section 423 of the Code, 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 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 any
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
22
<PAGE> 25
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 "Proposed Amendment to the Company's 1989 Incentive 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 to amend the Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE STOCK PURCHASE PLAN.
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 Entertainment
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.
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<PAGE> 26
TRANSACTIONS WITH MANAGEMENT
Mr. Lucci has interests in real estate, or entities owning real estate,
that are leased to BHTC for fitness centers. Mr. Lucci's interests range from
approximately 17% to 25% in four locations. These arrangements were created
prior to the Company's acquisition of the business of BHTC. 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 1994, payments by BHTC under
these leases totalled approximately $1,145,000 of which $249,000 constituted Mr.
Lucci's proportionate share.
In 1994, the Company reimbursed Di Giorgio Corporation approximately
$189,000 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 and Lucci are each 20% limited partners purchased a facility in
Texas from the Federal Deposit Insurance Corporation. BHTC leases this facility
for one of its fitness centers. The rent did not change as a result of this
transfer pursuant to the lease for this facility. Rent is approximately $67,000
per month and is subject to additional 15% increases at five and ten-year
intervals. The proportionate share of the 1994 rent payments for each of Messrs.
Goldberg and Lucci was approximately $160,000. During 1994, BHTC paid
approximately $1,100,000 for goods and services from a company 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 1994, 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. On February 9, 1993, the Company loaned Mr. Luery
$125,000, a portion of which ($75,000) was interest free. Mr. Luery repaid the
interest-bearing portion in 1993 and repaid the non-interest bearing portion in
December 1994.
On December 30, 1994, the Company, its subsidiary, Bally's Casino, Inc.,
and Mr. Goldberg entered into an agreement whereby Mr. Goldberg transferred
752,676 shares of common stock of Bally's Grand, Inc. (a subsidiary of the
Company that operates Bally's Las Vegas casino resort) for 1,685,994 shares of
Casino Preferred. The shares of Casino Preferred are exchangeable for shares of
Common Stock at the rate of 1.12 shares of Casino Preferred for each share of
Common Stock. The Casino Preferred has a dividend rate of 5.625%, is mandatorily
redeemable at the end of seven years or, at Mr. Goldberg's option, after three
years or upon the occurrence of certain extraordinary corporate events, and is
optionally redeemable by the Company after three years. Upon exchange of the
Casino Preferred for Common Stock, Mr. Goldberg would be entitled to all special
dividends and distributions that the Company has made to its stockholders since
December 30, 1994. Bally's Casino's redemption obligations are guaranteed up to
$10 million by Bally's Park Place, Inc., a subsidiary of the Company.
AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
approved the selection of Ernst & Young LLP as the Company's independent
auditors for 1995. Representatives of Ernst & Young LLP, 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.
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<PAGE> 27
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 Common Stock.
STOCKHOLDER PROPOSALS FOR THE 1996 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 Entertainment Corporation, 8700 West Bryn Mawr Avenue,
Chicago, Illinois 60631, is December 9, 1995.
ANNUAL REPORT
A copy of the Company's Annual Report to stockholders for the year 1994,
which contains consolidated financial statements of the Company, was previously
sent 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 Entertainment Corporation, 8700
West Bryn Mawr Avenue, Chicago, Illinois 60631.
By Order of the Board of Directors,
CAROL STONE DE PAUL
Secretary
Chicago, Illinois
April 7, 1995
PLEASE DATE AND SIGN YOUR
PROXY CARD AND RETURN IT PROMPTLY
USING THE ENCLOSED RETURN ENVELOPE.
25
<PAGE> 28
BALLY
BALLY ENTERTAINMENT CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631
<PAGE> 29
EXHIBIT A
1989 INCENTIVE PLAN
OF BALLY ENTERTAINMENT CORPORATION
1. PURPOSE OF THE PLAN. This 1989 Incentive Plan of Bally Entertainment
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
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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 Entertainment 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.
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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
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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 Entertainment
Corporation 1987 Non-Employee Director Restricted Stock Plan or the 1989
Non-Employee Director Restricted Stock Plan of Bally Entertainment 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
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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.
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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
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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 an 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 be 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.
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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.
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(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
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(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
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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.
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AMENDMENTS TO 1989 INCENTIVE PLAN OF
BALLY ENTERTAINMENT 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 the Company 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.
6. Section 3 of the Plan was amended on March 15, 1995, subject to stockholder
approval, to increase the number of shares reserved for issuance under the
Plan from 6,022,000 to 8,000,000.
7. Section 8.5 of the Plan was amended on March 15, 1995, subject to stockholder
approval, to read as follows:
8.5 No further grants. Notwithstanding anything in this Plan to the
contrary, no SAR, either in tandem with an Option or on a stand-alone
basis, may be granted after March 15, 1995.
8. Section 9.3 of the Plan was amended on March 15, 1995, subject to stockholder
approval, to read as follows:
9.3 No further grants. Notwithstanding anything in this Plan to the
contrary, no SDR may be granted after March 15, 1995.
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EXHIBIT B
BALLY'S EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN. This Employee Stock Purchase Plan of Bally
Entertainment 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 Entertainment
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.
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2.6 "Company" means Bally Entertainment 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.
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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
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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
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<PAGE> 45
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
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<PAGE> 46
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
B-6
<PAGE> 47
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.
B-7
<PAGE> 48
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
AMENDMENTS TO BALLY'S EMPLOYEE
STOCK PURCHASE PLAN
1. Section 3 of the Plan was amended on March 15, 1995, subject to stockholder
approval, to increase the number of shares available under the Plan from
200,000 to 550,000.
B-8
<PAGE> 49
BALLY ENTERTAINMENT CORPORATION
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631
P
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lee S. Hillman and Carol Stone
R 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 Entertainment Corporation
(the "Company") to be held on May 16, 1995, at 9:00 a.m.
O (local time), in the Pacific Ballroom of Bally's Las Vegas,
3645 Las Vegas Boulevard South, Las Vegas, Nevada 89109, or at
any adjournment(s) thereof.
X THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSALS NUMBER (1), (2) AND (3).
PLEASE DATE, SIGN EXACTLY AS NAME APPEARS ON THE REVERSE,
Y AND RETURN THIS PROXY IN THE ENCLOSED POSTPAID ENVELOPE.
COMMENTS/ADDRESS CHANGE: PLEASE MARK
COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
<PAGE> 50
<TABLE>
<S> <C> <C>
/X/ PLEASE MARK
EACH VOTE
------------------- LIKE THIS
COMMON
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 PROPOSALS NUMBER (1), (2) AND (3).
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD
ALL FOR ALL FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of Class / / / / 2. Approval of an / / / / / / 3. Approval of an / / / / / /
III Directors for amendment to the amendment to the
three-year terms Company's 1989 Company's
expiring in 1998. Incentive Plan Employee Stock
ARTHUR M. GOLDBERG to (i) eliminate Purchase Plan to
EDWIN M. HALKYARD the ability to increase the
issue stock number of shares
(INSTRUCTION: TO WITHHOLD appreciation reserved for
AUTHORITY TO VOTE FOR ANY rights or stock issuance under
INDIVIDUAL NOMINEE, WRITE depreciation rights; such plan.
THAT NOMINEE'S NAME ON THE and (ii) increase
LINE BELOW.) the number of shares 4. In their discretion on all other
reserved for issuance matters that may properly come
---------------------------- under such plan. before the meeeting.
COMMENTS/ADDRESS CHANGE
Please mark this box if you have / /
written comments/address change
on the reverse side.
Signature(s)__________________________________________________________________ Date ________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
</TABLE>
