SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Acres Gaming Incorporated
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(Name of Registrant as Specified In Its Charter)
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ACRES GAMING INCORPORATED
7115 AMIGO STREET, SUITE 150
LAS VEGAS, NEVADA 89119
OCTOBER 29, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Acres Gaming Incorporated (the "Company").
<Table>
Place: Company Headquarters
7115 Amigo, Suite 150
Las Vegas, Nevada 89119
Date: December 12, 2001
Time: 10:00 a.m. PDT
</Table>
The Notice of the Annual Meeting and Proxy Statement accompany this letter.
The Proxy Statement describes the business to be transacted at the meeting and
provides other information concerning the Company.
The principal business to be transacted at the Annual Meeting will be the
election of directors and ratification of the appointment of Arthur Andersen LLP
as the Company's independent public accountants for the fiscal year ending June
30, 2002. The Board of Directors recommends that stockholders vote for election
of the nominated directors and ratification of Arthur Andersen LLP as the
Company's independent public accountants.
We know that many of our stockholders will be unable to attend the Annual
Meeting. Proxies are therefore solicited so that each stockholder has an
opportunity to vote on all matters that are scheduled to come before the
meeting. Whether or not you plan to attend the Annual Meeting, we hope that you
will have your stock represented by marking, signing, dating and returning your
proxy card in the enclosed envelope as soon as possible. Your stock will be
voted in accordance with the instructions you have given in your proxy card. You
may, of course, attend the Annual Meeting and vote in person even if you have
previously returned your proxy card.
Sincerely,
Patrick W. Cavanaugh
Senior Vice President, Chief Financial
Officer
and Treasurer
IMPORTANT
A proxy card is enclosed herewith. All stockholders are urged to complete
and mail the proxy card promptly. The enclosed envelope for return of the proxy
card requires no postage. Any stockholder attending the Annual Meeting may
personally vote on all matters that are considered, in which event the signed
proxy will be revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED
ACRES GAMING INCORPORATED
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Acres Gaming Incorporated, a Nevada corporation (the "Company"),
will be held on Wednesday, December 12, 2001, at 10:00 a.m. local time, at
Company Headquarters, 7115 Amigo Street, Suite 150, Las Vegas, Nevada 89119, for
the following purposes:
1. To elect five (5) directors to the Company's Board of Directors.
2. To ratify the appointment of Arthur Andersen LLP as independent
public accountants for the fiscal year ending June 30, 2002.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on October 29, 2001,
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM MAY
BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT
LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE
ANNUAL MEETING.
By Order of the Board of Directors
Patrick W. Cavanaugh
Senior Vice President, Chief Financial
Officer
and Treasurer
Las Vegas, Nevada
October 29, 2001
ACRES GAMING INCORPORATED
7115 AMIGO STREET, SUITE 150
LAS VEGAS, NEVADA 89119
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 12, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished by the Board of Directors of Acres Gaming
Incorporated, a Nevada corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Company's
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 a.m.
local time, on Wednesday, December 12, 2001, at Company Headquarters, 7115 Amigo
Street, Suite 150, Las Vegas, Nevada 89119.
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about November 7, 2001.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of the Company's Common Stock and Series A
Convertible Preferred Stock at the close of business October 29, 2001, are
entitled to notice of and to vote at the Annual Meeting. On that date, 9,273,456
shares of the Company's Common Stock (the "Outstanding Shares") and 519,481
shares of Series A Convertible Preferred Stock (the "Preferred Stock") were
outstanding.
SOLICITATION OF PROXIES
The cost of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby has been or will be borne by the Company. In addition
to the use of the mails, proxies may be solicited by directors, officers and
other employees of the Company, without additional remuneration, in person or by
telephone or facsimile transmission. The Company will also request brokerage
firms, bank nominees, custodians, and fiduciaries to forward proxy materials to
the beneficial owners of the Common Stock as of the record date and will provide
reimbursement for the cost of forwarding the proxy materials in accordance with
customary practice. Your cooperation in promptly completing, signing, dating and
returning the enclosed proxy card will help avoid additional expense.
QUORUM AND VOTING
Each Outstanding Share entitles the holder thereof to one vote upon each
matter to be presented at the Annual Meeting. A quorum, consisting of a majority
of the Outstanding Shares, must be present in person or by proxy for the
transaction of business. If a quorum is present:
(i) each nominee for election to the Board of Directors to be voted on
by the Outstanding Shares will be elected by a plurality of the votes cast
by holders of the Outstanding Shares;
(ii) the appointment of Arthur Andersen LLP will be ratified if this
proposal receives the affirmative vote of a majority of the Outstanding
Shares represented at the meeting.
Abstentions and other non-votes are counted for purposes of determining
whether a quorum exists at the Annual Meeting, but have no effect on the
determination of whether a plurality exists with respect to a given nominee. An
abstention or other non-vote has the effect of a vote against a proposal.
Proxies will be received and tabulated by Wells Fargo Bank Minnesota, N.A., the
Company's transfer agent.
REVOCABILITY OF PROXIES
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person giving it at any time before it is exercised. A proxy may
be revoked prior to its exercise by delivering to the Company's Secretary a
written notice of revocation or a duly executed proxy card bearing a later date,
or by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not constitute a revocation of a proxy.
Each proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated, the shares
will be voted "FOR" (i) election of each of the nominees to the Board of
Directors named in this Proxy Statement; and (ii) ratification of the
appointment of Arthur Andersen LLP as independent public accountants for the
fiscal year ending June 30, 2002. While the Board of Directors knows of no other
matters to be presented at the Annual Meeting or any adjournment thereof, all
proxies returned to the Company will be voted on any such matter in accordance
with the judgment of the proxy holders.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the direction of
its Board of Directors. The Company's Bylaws provide that the Board of Directors
shall consist of not less than one nor more than 15 members. The Board of
Directors consists of five members. Members of the Board of Directors are
elected for a term of one year or until their successors are elected.
The Board of Directors has nominated Ronald G. Bennett, Robert W. Brown,
Floyd W. Glisson, Roger B. Hammock and David R. Willensky to serve as directors
of the Company (the "Common Stock Nominees"). Unless authority is withheld, all
proxies received in response to this solicitation will be voted for the election
of each Common Stock Nominee. If any Common Stock Nominee becomes unable to
serve prior to the Annual Meeting, the proxies received in response to this
solicitation will be voted for a replacement nominee selected in accordance with
the judgment of the proxy holders.
International Game Technology ("IGT") is the owner of all of the 519,481
outstanding shares of the Preferred Stock. During fiscal 2001, the Company's
sales to IGT amounted to approximately $9.3 million or 21.1 percent of the
Company's revenues. So long as there are 130,000 shares of Preferred Stock
outstanding, holders of Preferred Stock have the right to elect one director
(the "Preferred Stock Director"). IGT has not indicated it plans to nominate a
Preferred Stock Director. Holders of the Preferred Stock do not have voting
rights with respect to the election of other directors, or on any other matter
scheduled to come before the meeting.
Information about the Common Stock Nominees:
Floyd W. Glisson, age 54, became Chairman of the Board of Directors in
April 2000 and has served as the Chief Executive Officer since July 1998. Mr.
Glisson also served as President from July 1998 to April 2000. Mr. Glisson was
senior vice president, finance and administration and chief financial officer
for ConAgra Grocery Products Company, a unit of ConAgra, Inc., from April 1995
to July 1998. He has been a director of the Company since 1997.
Ronald G. Bennett, age 55, has served as an outside consultant to GATX
Capital, since November 2000. From January 2000 to November 2001, Mr. Bennett
was senior vice president and managing director -- human resources of GATX
Capital, a leasing company. Mr. Bennett was president of Calavo Growers, a fresh
produce and processed foods cooperative in California from 1997 to 1999. He also
served as president for Hunt-Wesson Foodservice Company, a subsidiary of
ConAgra, Inc., from 1996 to 1997. Prior to 1996, Mr. Bennett was president of
Knott's Berry Farm Foods, Inc. He has been a director of the Company since 2000.
2
Robert W. Brown, age 46, has been a self-employed consultant as president
of Brown Financial Consulting, LLC in Corvallis, Oregon since July 1999. Mr.
Brown served as the Company's executive vice president, chief financial officer
and treasurer from July 1993 to July 1999. He has been a director of the Company
since 2000.
Roger B. Hammock, age 55, is a self-employed consultant and has been the
president of San Pasqual Investors in Pasadena, California since April 1990. He
was the founder and chief executive officer of two firms involved in the
distribution and sale of technology related items. He has been a director of the
Company since 2000.
David R. Willensky, age 51, has been the managing director of The Advisory
Group, a business strategy consulting firm based in Omaha, Nebraska, since he
founded that company in 1998. Mr. Willensky was senior vice president, corporate
planning and development for ConAgra, Inc. from 1994 to 1998. He also served as
managing director of California Strategic Investors, LLC, an acquisition
advisory firm, from 1991 to 1994. Prior to 1991, Mr. Willensky was a partner
with McKinsey & Company, Inc., a management consulting firm. He has been a
director of the Company since 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES.
BOARD ACTIONS AND COMPENSATION OF DIRECTORS
During the fiscal year ended June 30, 2001, the Board of Directors met 9
times. Each director attended at least 75% of the meetings of the Board of
Directors and committees on which he served during the time he was a director.
Non-employee directors receive an annual fee of $25,000 and $1,000 per
board meeting or committee meeting (other than committee meetings held in
connection with a board meeting or meetings conducted via conference calls) plus
expenses. Non-employee directors who also serve on the Strategic Planning
Committee receive an additional annual fee of $25,000. On the date they are
first elected to the Board of Directors, each non-employee director also
receives options to purchase 7,500 shares of the Company's Common Stock at an
exercise price equal to fair market value on that date, of which 25% vest
immediately and the remainder vest over three years. In addition, each
non-employee director is granted options to purchase an additional 2,500 shares
of Common Stock at each Annual Meeting of Stockholders after such director has
served a full year. Those options vest on the same basis as the initial option
grants.
3
MANAGEMENT INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth certain information for each of the fiscal
years ended June 30, 2001, 2000 and 1999, regarding compensation accrued or paid
to the Company's Chief Executive Officer and each Executive Officer who accrued
or was paid compensation in excess of $100,000 in the fiscal year ended June 30,
2001 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
---------------------------- ------------
FISCAL RESTRICTED ALL OTHER
NAME AND PRINCIPLE POSITION YEAR SALARY BONUS STOCK COMPENSATION
--------------------------- ------ -------- -------- ------------ ------------
Floyd W. Glisson........................... 2001 $303,051 $250,000 $97,599 $ 9,539(1)
Chairman of the Board of Directors and 2000 300,000 50,000 -- 40,531(1)
Chief Executive Officer 1999 28,750 -- -- --
Richard J. Schneider....................... 2001 172,961 54,688 -- --
President and Chief Operating Officer 2000 171,667 -- -- --
1999 131,250 -- -- --
Reed M. Alewel............................. 2001 123,711 33,750 -- 21,658(2)
Senior Vice President, Chief Financial 2000 120,000 -- -- 4,375(3)
Officer, Secretary and Treasurer(4) 1999 89,947 -- -- --
</Table>
---------------
(1) Mr. Glisson received reimbursement of certain expenses he incurred in
conjunction with his relocation to Las Vegas, Nevada.
(2) Mr. Alewel received reimbursement of certain expenses he incurred in
conjunction with his relocation to Las Vegas, Nevada.
(3) Mr. Alewel received reimbursement of certain expenses he incurred in
conjunction with his relocation to Corvallis, Oregon.
(4) In May 2001 Mr. Alewel became Senior Vice President of Sales. Patrick W.
Cavanaugh became Chief Financial Officer in September 2001.
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of stock options to the Named Executive Officers
during the fiscal year ended June 30, 2001.
FISCAL YEAR-END OPTION VALUES
There were no exercises of stock options by the Named Executive Officers
during the fiscal year ended June 30, 2001. The following table sets forth the
number of securities underlying unexercised options and the value of unexercised
in-the-money options at fiscal year end.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- -------------------------------------- ---------------------------------
Floyd W. Glisson................... 142,500/0 $534,600/$0.00
Richard J. Schneider............... 67,500/32,500 $156,675/$54,950
Reed M. Alewel..................... 68,900/31,100 $154,202/$53,301
</Table>
---------------
(1) The market price of the Company's Common Stock was $4.96 at June 30, 2001.
RETIREMENT SAVINGS PLAN
The Company maintains a profit sharing and savings plan (the "401(k) Plan")
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"), which allows employees to contribute up to
4
15 percent of their pre-tax income to the 401(k) Plan. The 401(k) Plan includes
a discretionary matching contribution by the Company and provides that the
Company may make an additional discretionary contribution out of profits at the
end of any year. The Company has not made any discretionary matching
contributions nor any additional discretionary contributions under the 401(k)
Plan.
STOCK OPTIONS
The Acres Gaming Incorporated 1993 Stock Option and Incentive Plan (the
"1993 Plan") was adopted by the Board of Directors of the Company and approved
by the stockholders in 1993. The 1993 Plan permits the granting of awards to
employees and consultants of the Company in the form of stock options and grants
of restricted stock. Stock options granted under the 1993 Plan may be "incentive
stock options" meeting the requirement of Section 422 of the Code or
non-qualified options that do not meet the requirements of Section 422. A total
of 1,750,000 shares of the Company's Common Stock has been reserved for issuance
pursuant to awards granted under the 1993 Plan. As of September 30, 2001, an
aggregate of 842,850 shares were subject to outstanding stock options, and
500,775 shares were available for grant. The exercise prices for currently
outstanding stock options range from $.94 to $15.00 per share. Options for
406,375 shares have been exercised under the 1993 Plan. No grants of restricted
stock have been made under the 1993 Plan.
The 1993 Plan is administered by the Compensation Committee of the Board of
Directors. The 1993 Plan gives broad powers to the Committee to administer and
interpret the 1993 Plan, including the authority to select the individuals to be
granted options and to prescribe the particular form and conditions of each
option granted. Options may be granted pursuant to the 1993 Plan through July
2003. The 1993 Plan may be terminated earlier by the Board of Directors in its
sole discretion.
Mr. Glisson has surrendered options granted under the 1993 Plan to purchase
300,000 shares of common stock and was granted 300,000 shares of restricted
common stock.
EMPLOYMENT CONTRACTS
The Company entered into an employment agreement with Mr. John F. Acres
effective July 1, 1996, amended effective July 20, 1998, and amended effective
July 1, 1999 (the "Acres Employment Agreement"). The initial term of the Acres
Employment Agreement ran through June 30, 2001. Consulting fees paid to Mr.
Acres pursuant to the Acres Employment Agreement for the fiscal year ended June
30, 2001,were $64,219.
The Acres Employment Agreement provided that upon termination, if the
Company makes certain termination payments to Mr. Acres, Mr. Acres will not,
directly or indirectly, be connected in any manner with any business that
competes with the Company or solicit or entice or divert any customer or
supplier from the Company. The Company made termination payments of $102,083 to
Mr. Acres in the fiscal year ended June 30, 2001, pursuant to the Acres
Employment Agreement.
The Company entered into an employment agreement with Floyd W. Glisson
effective as of January 1, 2001 (the "Glisson Employment Agreement"), pursuant
to which Mr. Glisson received a base salary of $250,000 for the period from
January 1, 2001 to June 30, 2001, was granted a restricted stock award for
300,000 shares of the Company's common stock, (150,000 shares of which vest June
30, 2003 and the remainder of which vest on June 30, 2005), and received a bonus
of $250,000 for the fiscal year ended June 30, 2001. Pursuant to the Glisson
Employment Agreement, Mr. Glisson will receive severance payments equal to 1.6
times his annual base salary and his restricted stock will be subject to
accelerated vesting upon an involuntary termination of his employment with the
Company other than for cause. Currently, Mr. Glisson's annual compensation under
the Glisson Employment Agreement consists of a base salary of $275,000, and a
bonus of up to ninety percent of his annual base salary depending on the
Company's performance as measured against targets set by the Board of Directors.
5
COMMITTEES OF THE BOARD OF DIRECTORS AND COMPENSATION COMMITTEE INSIDER
PARTICIPATION
The Company has a standing Audit Committee and a Compensation Committee but
no Nominating Committee.
AUDIT COMMITTEE
In fiscal 2001, the Audit Committee initially consisted of Robert W. Brown,
Chairman and Richard A. Carone. Mr. Carone ceased being a director and a member
of the Audit Committee on February 21, 2001, and on March 10, 2001, Ronald G.
Bennett, Roger B. Hammock, and David R. Willensky were appointed to the Audit
Committee. Messrs. Bennett, Hammock and Willensky are independent directors as
defined by Nasdaq rules. Mr. Brown is not an independent director as defined by
Nasdaq rules because he was Executive Vice President, Chief Financial Officer
and Treasurer of the Company from July 1993 to July 1999. The Board of Directors
has determined that Mr. Brown's membership on the Audit Committee is in the best
interests of the Company and its stockholders because of Mr. Brown's financial
expertise and industry experience as the Company's previous Chief Financial
Officer.
AUDIT COMMITTEE REPORT
The Audit Committee recommends the independent auditor of the Company for
approval by the Board of Directors, reviews the planned scope and results of the
annual audit, confers with the independent auditor, reviews the auditor's
recommendations with respect to accounting, internal controls and other matters,
and makes other recommendations to the Board of Directors with respect to audit
and finance matters. All members of the Audit Committee are able to read and
understand financial statements and have experience in finance and accounting
that provide them with financial sophistication.
Duties and Responsibilities
The Audit Committee operates under a written charter approved by the Board
of Directors. Pursuant to authority delegated by the Board of Directors and the
written charter of the Audit Committee, the Audit Committee:
- monitors the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance;
- monitors the independence and performance of the Company's independent
auditors; and
- provides an avenue of communication among the independent auditors,
management and the Board of Directors.
In connection with these responsibilities, the Audit Committee met with
management and the independent accountants to review and discuss the Company's
audited financial statements. The Audit Committee also discussed with the
independent accountants the matters required by the Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The Audit Committee also
received written disclosures from the independent accountants required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and has discussed with its independent accountants that firm's
independence.
6
Fiscal 2001 Audit
Based on the reviews and discussions referred to above, the Audit Committee
recommended that the Board of Directors include the audited financial statements
in the Company's Annual Report on Form 10-K for the year ended June 30, 2001, to
be filed with the Securities and Exchange Commission.
Audit Committee Report submitted by:
Robert W. Brown, Chairman
Ronald G. Bennett
Roger B. Hammock
David R. Willensky
COMPENSATION COMMITTEE
In fiscal 2001, the Compensation Committee initially consisted of Richard
A. Carone, Chairman, and Robert W. Brown. Effective March 10, 2001, Ronald G.
Bennett (Chairman), Roger B. Hammock, and David R. Willensky comprised the
Compensation Committee. The Compensation Committee makes recommendations to the
Board regarding officers' compensation, management incentive compensation
arrangements and administers the Company's Stock Option and Incentive Plan.
REPORT ON EXECUTIVE COMPENSATION
The underlying objectives of the Company's compensation strategy are to
attract and retain the best possible executive talent, to motivate those
executives to achieve optimum operating performance for the Company, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions as well as overall
business results. There are three components to the Company's executive
compensation: base salary, long-term incentives in the form of stock options,
and incentive (bonus) payments.
Base Salary. Base salary for each executive officer, other than those for
Mr. Glisson, was subjectively determined by an assessment of his or her
sustained performance, advancement potential, experience, responsibility, scope
and complexity of the position, and current salary in relation to salary levels
for comparable positions in the industry, based on the Company's general
awareness of such salary levels. Mr. Glisson's compensation for the fiscal year
ended June 30, 2001, is based on his employment arrangement effective January 1,
2001. The Compensation Committee engaged the services of an independent
consulting firm to advise it on the Glisson Employment Agreement.
Long-Term Incentives. Stock options have been granted to the Chairman and
other executive officers to encourage management of the Company from the
perspective of an owner with an equity interest in the Company. Vesting is used
to encourage key employees to continue in the employ of the Company.
Annual Incentives. Certain members of management may participate in an
annual incentive plan, the goals of which are determined annually by the
Company's Board of Directors. Payments under the annual incentive plan
aggregated $442,098 with respect to the fiscal year ended June 30, 2001.
Chief Executive Officer. Mr. Glisson's compensation is based on his
employment agreement with the Company, which also includes bonus provisions
related to the Company's performance. Mr. Glisson's compensation as set forth in
his employment agreement is derived from the value of his industry expertise and
the compensation of comparable industry executives.
Compensation Committee Report
submitted by:
Ronald G. Bennett, Chairman
Roger B. Hammock
David R. Willensky
7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of non-employee directors of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
8
PERFORMANCE GRAPH
The following graph compares total cumulative return to holders of the
Company's Common Stock with the cumulative total return of the Nasdaq US Stock
Market and a peer group index created by the Company for the five year period
ended June 30, 2001. The Company uses a peer group (the "Peer Group") which
consists of the following companies: Shuffle Master, Alliance Gaming
Corporation, International Game Technology, Mikohn Gaming Corporation, WMS
Industries, Anchor Gaming and Innovative Gaming Corp. of America.
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 6/30/96)
(PERFORMANCE GRAPH)
<Table>
<Caption>
---------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS 6/28/1996 6/30/1997 6/30/1998 6/30/1999 6/30/2000 6/30/2001
---------------------------------------------------------------------------------------------
ACRES GAMING $100.00 $ 93.34 $ 53.34 $ 21.34 $ 18.67 $ 52.72
PEER GROUP $100.00 $119.00 $166.13 $113.55 $149.10 $459.73
NASDAQ COMPOSITE $100.00 $122.07 $161.06 $229.14 $339.04 $184.75
---------------------------------------------------------------------------------------------
</Table>
Assumes $100 invested in the Company's Common Stock, the Nasdaq Stock
Market and the Peer Group, with all dividends reinvested. Stock price shown
above for the Common Stock is historical and not necessarily indicative of
future price performance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers, directors and persons who
own more than 10 percent of the Common Stock of the Company file with the
Securities and Exchange Commission (the "SEC") initial reports of beneficial
ownership on Form 3 and reports of changes of beneficial ownership of Common
Stock and other equity securities of the Company on Form 4 and Form 5. Officers,
directors and holders of more than 10 percent of the Company's Common Stock are
required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. To the Company's knowledge, based solely on a
review of copies of such reports furnished to the Company and written
representation that no other reports are required, during the 2001 fiscal year
all Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with by such persons.
9
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of the Company's Common Stock by each director of the
Company, by each Named Executive Officer, by all directors and executive
officers of the Company as a group, and by each stockholder who is known by the
Company to own more than 5 percent of the Company's Common Stock as of September
30, 2001.
<Table>
<Caption>
NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING(2)
---------------- --------------------- --------------
DIRECTORS AND EXECUTIVE OFFICERS
Floyd W. Glisson.................................... 523,500(3) 5.6%
Ronald G. Bennett................................... 3,750(4) *
Robert W. Brown..................................... 168,250(5) 1.8%
Roger B. Hammock.................................... 12,575(6) *
David R. Willensky.................................. 24,650(7) *
Richard J. Schneider................................ 67,500(8) *
Reed M. Alewel...................................... 73,409(9) *
All directors and executive officers as a group (7
persons).......................................... 873,634(10) 9.0%
PRINCIPAL SHAREHOLDERS
John F. and Jo Ann Acres............................ 1,353,530(11) 14.6%
Corvallis, Oregon 97330
IGT................................................. 1,597,444(12) 14.7%
9295 Prototype Way
Reno, Nevada 89511
Delta Partners LLC.................................. 469,700(13) 5.1%
One Financial Center, Suite 1600
Boston, MA 02111
</Table>
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* Less than 1%.
(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person has
the right to acquire beneficial ownership of such security within 60 days,
including, but not limited to, any right to acquire such security through
the exercise of any option or warrant or through the conversion of a
security. Each person has sole voting and sole dispositive power with
respect to all outstanding shares, except as noted.
(2) Based on 9,273,206 shares outstanding at September 30, 2001. Any securities
not outstanding that are subject to options or warrants held by a person
shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such person, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
(3) Includes 81,000 shares owned jointly with Mr. Glisson's wife as trustees of
the Glisson Family Trust, with respect to which Mr. Glisson has shared
voting and shared dispositive powers 442,500 shares of restricted stock and
shares subject to options exercisable within 60 days of September 30, 2001.
(4) Includes 3,750 shares subject to options exercisable within 60 days of
September 30, 2001.
(5) Includes 2,000 shares Mr. Brown holds as trustee for the benefit of his
minor children, with respect to which he has sole voting and dispositive
powers. Includes 166,250 shares subject to options exercisable within 60
days of September 30, 2001.
(6) Includes 4,000 shares owned jointly with Mr. Hammock's wife with respect to
which Mr. Hammock has shared voting and shared dispositive powers and 700
shares held as trustee for the benefit of his children and 1,875 shares
subject to options exercisable within 60 days of September 30, 2001.
(7) Includes 300 shares held by Mr. Willensky's wife with respect to which he
has no voting or dispositive powers and 3,750 shares subject to options
exercisable within 60 days of September 30, 2001.
(8) Includes 67,500 shares subject to options exercisable within 60 days of
September 30, 2001.
(9) Includes 2,000 shares owned jointly with Mr. Alewel's wife and 339 shares
held as trustee for the benefit of his minor children, with respect to
which Mr. Alewel has shared voting and shared dispositive powers. Also
includes 620 shares held by Mr. Alewel's wife with respect to which he has
no voting or dispositive powers. Includes 68,900 shares subject to options
exercisable within 60 days of September 30, 2001.
(10) Includes 454,525 shares subject to options exercisable within 60 days of
September 30, 2001.
10
(11) Includes 1,251,386 shares held by the John and Jo Ann Acres 1989 Living
Trust, a revocable trust established by Mr. Acres and Mrs. Acres, with
respect to which Mr. Acres and Mrs. Acres have shared voting and shared
dispositive powers. Also includes 102,144 shares beneficially owned by
their children who reside in their household, with respect to which Mr.
Acres and Mrs. Acres have no voting or dispositive powers.
(12) Shares issuable on conversion of Series A Convertible Preferred Stock owned
by IGT based on the conversion price in effect on September 30, 2001,
subject to ownership limitations contained in the Stock Purchase Agreement
between IGT and the Company pursuant to which IGT purchased 519,481 shares
of Series A Stock. The Stock Purchase Agreement restricts IGT's ownership
of the Company's Common Stock. Without the consent of the Company, IGT may
not own more than 20% of the outstanding Common Stock, including, for
purposes of the calculation, the shares of Common Stock into which the
Series A Stock owned by IGT is convertible. The Company believes that this
provision operates to limit IGT's right to convert shares of Series A Stock
as well as limiting IGT's rights to purchase additional shares of Common
Stock. IGT has asserted that the agreement does not limit the number of
shares into which the Series A Stock may be converted.
(13) Based solely on a Schedule 13G, dated July 27, 2001, filed with the
Securities and Exchange Commission on August 10, 2001.
PROPOSAL NO. 2 -- RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders ratify the
appointment of Arthur Andersen LLP as independent public accountants to examine
the financial statements of the Company for the fiscal year ending June 30,
2002. The firm of Arthur Andersen LLP has served as the Company's public
accountants since 1993. A representative of Arthur Andersen LLP will be present
at the Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions from
stockholders.
The Audit Committee has determined that the provision of services rendered
by Arthur Andersen LLP for audit and all other fees is compatible with
maintaining Arthur Andersen LLP's independence.
AUDIT FEES
Arthur Andersen LLP's fees for professional services for (i) auditing the
Company's annual financial statements for the year ended June 30, 2001 and (ii)
reviewing the financial statements included in the Company's Quarterly Reports
on Form 10-Q for fiscal 2001 were approximately $65,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no services rendered by Arthur Andersen LLP for financial
information systems design or implementation for the year ended June 30, 2001.
ALL OTHER FEES
The aggregate fees for all other services rendered by Arthur Andersen LLP
for the year ended June 30, 2001 were approximately $76,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY.
PROPOSALS OF SHAREHOLDERS
Any stockholder wishing to have a proposal considered for inclusion in the
proxy materials for the Company's 2002 Annual Meeting of Stockholders must set
forth such proposal in writing and file it with the Secretary of the Company no
later than July 10, 2002. In addition, if the Company receives notice of a
shareholder proposal later than September 23, 2002, the persons named as proxies
in the proxy statement and accompanying proxy will have discretionary authority
to vote on that shareholder proposal.
11
OTHER BUSINESS
At the date of this Proxy Statement, management knows of no other business
that may properly come before the Annual Meeting. However, if any other matters
properly come before the meeting, the persons named in the enclosed form of
proxy will vote the proxies received in response to this solicitation in
accordance with their best judgment on such matters.
INCORPORATION BY REFERENCE
The Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report to Stockholders for the fiscal year ended June 30, 2001, transmitted with
the Proxy Statement, are hereby incorporated by reference. No other portions of
the Annual Report shall be deemed incorporated herein.
FINANCIAL INFORMATION
THE COMPANY'S 2001 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THESE
MATERIALS. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED JUNE 30, 2001, MAY BE OBTAINED FROM THE COMPANY WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY. REQUESTS SHOULD BE DIRECTED TO THE CHIEF
FINANCIAL OFFICER, ACRES GAMING INCORPORATED, 7115 AMIGO STREET, SUITE 150, LAS
VEGAS, NEVADA 89119.
By Order of the Board of Directors
Patrick W. Cavanaugh
Senior Vice President, Chief Financial
Officer
and Treasurer
October 29, 2001
12
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Floyd W. Glisson and Richard J.
Schneider, and each of them, as Proxies, with full power of substitution, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Acres Gaming Incorporated held of record by the
undersigned on October 29, 2001, at the Annual Meeting of Stockholders to be
held on December 12, 2001, or at any adjournment thereof.
1. ELECTION OF DIRECTORS. Election of the following nominees to serve as
directors each for a one-year term or until his or her successor is duly
elected.
(a) FLOYD W. GLISSON [ ] FOR nominee [ ] WITHHOLD AUTHORITY to
vote for nominee
(b) RONALD G. BENNETT [ ] FOR nominee [ ] WITHHOLD AUTHORITY to
vote for nominee
(c) ROBERT W. BROWN [ ] FOR nominee [ ] WITHHOLD AUTHORITY to
vote for nominee
(d) ROGER B. HAMMOCK [ ] FOR nominee [ ] WITHHOLD AUTHORITY to
vote for nominee
(e) DAVID R. WILLENSKY [ ] FOR nominee [ ] WITHHOLD AUTHORITY to
vote for nominee
--------------------------------------------------------------------------------
2. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS. Ratify the selection
of Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending June 30, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy, when properly
executed, will be voted in the manner directed herein by the undersigned. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" EACH NOMINEE IN ITEM 1 AND
"FOR" ITEM 2.
Please sign below exactly as your name appears
on your stock certificate. When shares are
held jointly, each person should sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. An authorized person should sign on
behalf of corporations, partnerships and
associations and give his or her title.
Dated: , 2001
---------------------------------
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Signature
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Signature if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL HELP SAVE
THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
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