Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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:
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£
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Preliminary
Proxy Statement
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£
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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£
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Soliciting
Material Pursuant to §240.14a-12
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Nevada
Gold & Casinos, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
Title of each class of securities to which transaction
applies:
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2)
Aggregate number of securities to which transaction
applies:
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3)
Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
Proposed maximum aggregate value of transaction:
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5)
Total fee paid
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£
Fee paid previously with preliminary materials.
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£
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.
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1)
Amount Previously Paid:
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2)
Form, Schedule or Registration Statement No.:
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3)
Filing Party:
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4)
Date Filed:
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NEVADA
GOLD & CASINOS, INC.
50
Briar Hollow Lane, Suite 500 West
Houston,
Texas 77027
_________________
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL
14, 2009
__________________
To the
Shareholders:
The
Special Meeting of Shareholders of Nevada Gold & Casinos, Inc. will be held
at the Sheraton Suites Houston, 2400 West Loop South, Houston, Texas 77027 on
Tuesday, April 14, 2009, at 3:00 p.m. Central Time, for the following
purposes:
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1.
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To
approve the Nevada Gold & Casinos, Inc. 2009 Equity Incentive Plan;
and
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2.
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To
transact any other business that may properly come before the meeting or
any adjournment or postponement thereof.
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The Board
of Directors has approved the Nevada Gold & Casinos, Inc. 2009 Equity
Incentive Plan and unanimously recommends that you vote FOR approval of the 2009
Equity Incentive Plan. Shareholders of record at the close of
business on February 27, 2009 are
entitled to notice of and to vote at the meeting. A complete list of
such shareholders will be available for examination by any shareholder during
ordinary business hours at the Company’s executive offices, located at 50 Briar
Hollow Lane, Suite 500 West, Houston, Texas 77027, for a period of 10 days prior
to the meeting date.
All
shareholders are cordially invited to attend the Special Meeting. If
you attend the meeting in person, you may revoke your proxy and vote the shares
held in your name. However, if your shares are held of record by a
broker, bank or other nominee, and you wish to attend and vote in person at the
meeting, you must obtain from the record holder a proxy issued in your
name.
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By
Order of the Board of Directors,
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/s/
James J. Kohn
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James
J. Kohn
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Secretary
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March 3, 2009
PLEASE
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE SO THAT YOUR
SHARES
WILL BE VOTED WHETHER OR NOT YOU ARE ABLE TO ATTEND THE
SPECIAL
MEETING.
NEVADA
GOLD & CASINOS, INC.
50
Briar Hollow Lane
Suite
500 West
Houston,
Texas 77027
PROXY
STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 14, 2009
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
The
enclosed proxy is solicited on behalf of the Board of Directors of Nevada Gold
& Casinos, Inc., a Nevada corporation (the “Company” or “we” or “our”), for
use at the Special Meeting of Shareholders to be held on April 14, 2009, at 3:00
p.m. Central Time (the “Special Meeting”), or at any adjournment or postponement
thereof, for the purposes set forth in this Proxy Statement and in the
accompanying Notice of Special Meeting of Shareholders. The Special
Meeting will be held at the Sheraton Suites Houston, 2400 West Loop South,
Houston, Texas 77027. We intend to mail this Proxy Statement and
accompanying proxy card to shareholders on or before March 9, 2009.
Our
principal executive offices are located at 50 Briar Hollow Lane, Suite 500 West,
Houston, Texas 77027, and our telephone number is (713) 621-2245. Our internet
website address is www.nevadagold.com.
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting and Proxy
Statement are available at http://www.irconnect.com/uwn/pages/sec-filings.html.
Revocability
of Proxies
Any proxy
given pursuant to this solicitation may be revoked by the person giving it at
any time before its use by delivering to the Company’s Secretary, at the address
of the Company’s executive offices noted above, written notice of revocation or
a duly executed proxy bearing a later date or by attending the Special Meeting
and voting in person. Attendance at the Special Meeting will not, by itself,
revoke a proxy. Please note, however, that if your shares are held of record by
a broker, bank or other nominee and you wish to attend and vote in person at the
Special Meeting, you must obtain from the record holder a proxy issued in your
name.
Quorum
and Votes Required
Only
shareholders of record at the close of business on February 27, 2009 will be
entitled to notice of and to vote at the Special Meeting. At the
close of business on February 27, 2009, there were 12,939,130 shares of common
stock outstanding and entitled to vote. Each holder of record of
shares of common stock on that date will be entitled to one vote for each share
held on all matters to be voted upon at the Special Meeting.
Proxies
properly executed, duly returned to the Company and not revoked will be voted in
accordance with the specifications made. Where no specifications are given, such
proxies will be voted:
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(1)
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“FOR”
the 2009 Equity Incentive Plan (the “2009 Plan”); and
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(2)
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in
the discretion of the persons named in the proxy in connection with any
other business that may properly come before the meeting. It is not
expected that any matters other than those referred to in this Proxy
Statement will be brought before the Special Meeting.
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The 2009
Plan is intended to replace the 1999 Stock Option Plan of the Company which
expired in January, 2009. The presence, in person or by proxy, of the
holders of at least a majority of the total number of outstanding shares of the
common stock is necessary to constitute a quorum at the meeting. If you are the
beneficial owner of shares held in “street name” by a broker, your broker, as
the record holder of the shares, must vote those shares in accordance with your
instructions. In accordance with the rules of the NYSE Alternext US
(the “Exchange”), certain matters submitted to a vote of shareholders are
considered by the Exchange to be “routine” items upon which brokerage firms may
vote in their discretion on behalf of their customers if such customers have not
furnished voting instructions within a specified period prior to the
meeting. For those matters that the Exchange determines to be
“non-routine,” brokerage firms that have not received instructions from their
customers would not have discretion to vote. The adoption of the 2009
Plan is a non-routine matter. Abstentions and broker non-votes are
counted as present for the purpose of
determining
the presence or absence of a quorum for the transaction of business, but broker
non-votes are not counted as votes “for” or “against” the
proposals to be acted on at the meeting.
The
affirmative vote of a majority of the shares of common stock represented at the
meeting in person or by proxy and entitled to vote on the proposal will be
required for approval of Proposal 1, assuming that a quorum is present or
represented at the meeting. A properly executed proxy marked
“ABSTAIN,” although counted for purposes of determining whether there is a
quorum, will not be voted for purposes of Proposal 1. Accordingly, an
abstention will have the same effect as a vote cast against Proposal
1. A broker non vote will be counted for purposes of determining a
quorum but will not be counted as a vote for or against Proposal 1.
Solicitation
The cost
of soliciting proxies will be borne by the Company. In addition to
soliciting shareholders by mail and through its regular employees, the Company
will request that banks and brokers and other persons representing beneficial
owners of the shares forward the proxy solicitation material to such beneficial
owners and the Company may reimburse these parties for their reasonable
out-of-pocket costs. Directors and employees will not be paid any additional
compensation for soliciting proxies, but MacKenzie Partners, Inc., a third party
proxy solicitor, will be paid its customary fee, estimated to be about $6,500,
if it renders solicitation services.
AVAILABILITY
OF ANNUAL REPORT AND OTHER FINANCIAL INFORMATION
The
Company makes available, free of charge, through its website (www.nevadagold.com), its
proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) as soon as reasonably practicable after such
documents are electronically filed with or furnished to the Securities and
Exchange Commission (“SEC”). These reports can be found under “SEC Filings”
through the “Investor Relations” section of the Company’s
website. The Company will provide to any shareholder without charge,
upon the written request of that shareholder, a copy of this Notice of Special
Meeting and Proxy Statement, including a proxy card, and the Company’s Annual
Report on Form 10-K (without exhibits), including financial statements and the
financial statement schedules, for the fiscal year ended April 27,
2008. Such requests should be addressed to Investor Relations, Nevada
Gold & Casinos, Inc., 50 Briar Hollow Lane, Suite 500 West, Houston, Texas
77027. You can also obtain a copy of our Form 10-K and other periodic
filings from the SEC’s website at www.sec.gov.
INTERESTS
OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON/INTEREST OF DIRECTORS AND
EXECUTIVE OFFICERS IN THE 2009 PLAN PROPOSAL
Certain
of the executive officers, including the Named Executive Officers, and the
non-employee directors of the Company will be eligible to receive equity awards
under the 2009 Plan which shareholders are being asked to approve pursuant to
Proposal 1 below. A complete description of the 2009 Plan is set
forth in Proposal 1. The Board of Directors and the Company believe
it is in the best interests of the shareholders that equity awards be available
for use as incentive compensation to motivate current and future officers,
directors and key employees of the Company. The Company’s Amended and
Restated 1999 Stock Option Plan has expired. If the 2009 Plan is not
approved by shareholders, the Company is unable to grant options to its
officers, directors and key employees, including consultants.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE
OFFICERS
Shown
below is certain information as of February 20, 2009 with respect to beneficial
ownership, as that term is defined in Rule 13d-3 under the Exchange Act, of
shares of the Company’s common stock by: (a) the only persons or entities known
to the Company to be a beneficial owner of more than five percent of the
outstanding share of the Company’s common stock, (b) each director of the
Company, (c) the Named Executive Officers, as identified in the Summary
Compensation Table, and (d) all directors and executive officers of the Company
as a group.
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SHARES
BENEFICIALLY OWNED AS OF FEBRUARY 20, 2009
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NUMBER OF SHARES
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PERCENT OF CLASS
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Robert
B. Sturges
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293,333 |
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(2)
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2.3 |
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John
A. Arnesen
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1,000 |
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(3)
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* |
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William
G. Jayroe
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151,035 |
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(4)
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1.2 |
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Joseph
A. Juliano
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47,900 |
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(5)
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* |
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Francis
M. Ricci
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24,666 |
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(6)
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* |
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Wayne
H. White
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21,666 |
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(7)
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* |
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William
J. Sherlock
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43,333 |
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(8)
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* |
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Frank
Catania
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— |
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* |
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James
J. Kohn
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89,333 |
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(9)
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* |
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Ernest
E. East
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80,000 |
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(10)
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* |
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Donald
A. Brennan
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72,167 |
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(11)
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* |
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Wynnfield
Investment Funds
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450
Seventh Avenue, Suite 509
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New
York, NY 10123
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1,719,002 |
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(12)
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13.3 |
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Louise
H. Rogers
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2512
Alta Mira
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Tyler,
TX 75701
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941,288 |
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7.3 |
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Robert
C. Ide
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159
North Wolcott Street, Suite 304
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Casper,
WY 82601
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760,000 |
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5.9 |
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All
current directors and executive officers as a group (11
persons)
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824,433 |
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(13)
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6.4 |
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* Less
than one percent
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(1)
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Unless
otherwise indicated, the address for the persons listed is 50 Briar Hollow
Lane, Suite 500 West, Houston, Texas
77027.
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(2)
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Includes
options to purchase 233,333 shares of common stock held by Mr. Sturges
exercisable as of February, 20, 2009 or within 60 days
thereafter. See page 12 for Grants of Plan-Based Awards during
fiscal year 2008 and page 16 for Outstanding Equity Awards at Fiscal
Year-End.
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(3)
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Effective
March 1, 2008, Mr. Arnesen voluntarily resigned his position with the
Company.
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(4)
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Includes
(a) options to purchase 31,667 shares of common stock held by Mr. Jayroe
exercisable as of February 20, 2009 or within 60 days thereafter, (b)
3,334 shares of common stock owned by Christine Jayroe, (c) 3,334 shares
of common stock owned by Hunter Jayroe, (d) 3,334 shares of common stock
owned by Haley Jayroe and (d) 14,000 shares of common stock owned by The
Jayroe Foundation.
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(5)
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Includes
options to purchase 25,000 shares of common stock held by Mr. Juliano
exercisable as of February 20, 2009 or within 60 days
thereafter.
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(6)
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Includes
options to purchase 21,666 shares of common stock held by Mr. Ricci
exercisable as of February 20, 2009 or within 60 days
thereafter.
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(7)
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Includes
options to purchase 21,666 shares of common stock held by Mr. White
exercisable as of, February 20, 2009 or within 60 days
thereafter.
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(8)
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Includes
options to purchase 28,333 shares of common stock held by Mr. Sherlock
exercisable as of February 20, 2009 or within 60 days
thereafter.
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(9)
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Includes
options to purchase 89,333 shares of common stock held by Mr. Kohn
exercisable as of February 20, 2009 or within 60 days
thereafter. See page 12 for Grants of Plan-Based Awards during
fiscal year 2008 and page 16 for Outstanding Equity Awards at Fiscal
Year-End.
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(10)
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Includes
options to purchase 70,000 shares of common stock held by Mr. East
exercisable as of February 20, 2009 or within 60 days
thereafter. See page 12 for Grants of Plan-Based Awards during
fiscal year 2008 and page 16 for Outstanding Equity Awards at Fiscal
Year-End.
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(11)
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Includes
options to purchase 66,667 shares of common stock held by Mr. Brennan
exercisable as of February 20, 2009 or within 60 days
thereafter. See page 12 for Grants of Plan-Based Awards during
fiscal year 2008 and page 16 for Outstanding Equity Awards at Fiscal
Year-End.
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(12)
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Includes:
(i) 424,802 shares of common stock held by Wynnefield Partners Small Cap
Value, L.P. (“WPSCV”), (ii) 611,000 shares of common stock held by
Wynnefield Partners Small Cap Value, L.P. I (“WPSCVI”), (iii) 674,000
shares of common stock held by Wynnefield Small Cap Value Offshore Fund,
Ltd. (“WSCVOF”) and (iv) 9,200 shares of common stock held by Profit
Sharing and Money Purchase Plans, Inc. (the
“Plan”).
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Wynnefield
Capital Management, LLC (“WCM”), a New York limited liability company, is
the sole general partner of WPSCV and WPSCVI, private investment companies
organized as limited partnerships under the laws of the State of Delaware,
and, accordingly, may be deemed to be the indirect beneficial owner (as
that term is defined under Rule 13d-3 under the Exchange Act), and has the
sole power to direct the voting and disposition, of the shares of the
Company’s common stock that WPSCV and WPSCVI beneficially own. Messrs.
Nelson Obus and Joshua Landes are the co-managing members of WCM and,
accordingly, each of Messrs. Obus and Landes may be deemed to be the
indirect beneficial owner (as that term is defined under Rule 13d-3 under
the Exchange Act), and each of Messrs. Obus and Landes shares with the
other the power to direct the voting and disposition, of the shares of the
Company’s common stock that WCM may be deemed to beneficially
own.
Wynnefield
Capital, Inc. (“WCI”) is the sole investment manager of WSCVOF, a private
investment company organized under the laws of the Cayman Islands, and,
accordingly, may be deemed to be the indirect beneficial owner (as that
term is defined under Rule 13d-3 under the Exchange Act) of the shares of
the Company’s common stock that WSCVOF beneficially owns. Messrs. Obus and
Landes are executive officers of WCI and, accordingly, each of Messrs.
Obus and Landes may be deemed to be the indirect beneficial owner (as that
term is defined under Rule 13d-3 under the Exchange Act), and each of
Messrs. Obus and Landes, as executive officers of WCI, shares with the
other the power to direct the voting and disposition of the shares of the
Company’s common stock that WCI may be deemed to beneficially
own.
The
Plan is an employee profit sharing plan organized under the laws of the
State of Delaware. Mr. Obus is the portfolio manager for the Plan and,
accordingly, Mr. Obus may be deemed to be the indirect beneficial owner
(as that term is defined under Rule 13d-3 under the Exchange Act), and has
the sole power to direct the voting and disposition, of the shares of the
Company’s common stock that the Plan may be deemed to beneficially
own.
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(13)
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Includes
options to purchase 587,665 shares of common
stock.
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PROPOSAL
1
APPROVAL
OF THE 2009 EQUITY INCENTIVE PLAN
The Board
of Directors has adopted, subject to shareholder approval, and recommends the
approval of the Company’s proposed 2009 Equity Incentive Plan (“2009 Plan”)
under which options, stock appreciation rights and restricted stock grants may
be granted (each, an “Award”).
We
believe that our traditional policy of providing equity incentives to employees,
non-employee directors and consultants has been a material factor in our ability
to attract, retain and motivate managerial and professional personnel as well as
non-employee directors. The 2009 Plan is intended to replace the 1999
Stock Option Plan (the “1999 Plan”) which expired in January 2009. No
further grants may be made under the 1999 Plan, and therefore, the adoption of
the 2009 Plan is necessary to enable the Company to continue to use equity
awards as a part of its compensation program. We continue to believe
that equity incentive awards are an important aspect of our compensation
program, as stock ownership in the Company directly aligns the interests of our
personnel and
directors
with those of our shareholders, providing a significant incentive to build
shareholder wealth. The 2009 Plan is similar to the 1999 Plan in most
respects, and continues to provide for Awards which may be made subject to time
based or performance based vesting. The following description of the
2009 Plan is qualified in its entirety by reference to the 2009 Plan, a copy of
which is attached to this Proxy Statement as Appendix A and is incorporated by
reference herein.
Administration
The 2009
Plan shall be administered by the Compensation Committee of the
Board. Subject to the terms and conditions of the 2009 Plan, the
Compensation Committee is authorized to determine to whom among the eligible
persons Awards shall be granted, the number of Shares covered by or associated
with an Award, the terms of each Award, and whether any Option is intended to be
an ISO or a NSO. In addition the Compensation Committee has authority
to interpret and specify rules and regulations relating to the 2009
Plan.
Eligibility
All of
our and our subsidiaries’ employees and consultants, our non-employee directors,
as well as persons who have accepted offers of employment with the Company, are
eligible to participate in the 2009 Plan. Currently we have six non-employee
directors and 77 employees.
Shares
Available for Issuance
If the
2009 Plan is approved by our shareholders, the number of shares with respect to
which Awards may be granted under the 2009 Plan is 1,750,000
Shares. The following Shares may also be used for issuance of Awards
under the 2009 Plan: (i) Shares which are forfeited under a Stock Grant
issued under the 2009 Plan; and (ii) Shares which are allocable to the
unexercised portion of an Option issued under the 2009 Plan which has expired or
been terminated. Each Share associated with an Award will count as
one Share against the total number of shares available for issuance under the
2009 Plan, provided that each Share associated with a Tandem SAR and the
associated Option will only count as one Share against the total number of
shares available for issuance under the 2009 Plan.
Per-Person
Award Limitations
Under the
2009 Plan, the number of Shares with respect to which Awards may be granted to
any employee shall not exceed 250,000 during any calendar year.
Types
and Terms of Awards
The
Compensation Committee is authorized to grant the following types of awards
under the 2009 Plan: Stock Options (“Options”), including Incentive Stock
Options (“ISOs”) and Options not intended to qualify as ISOs (“NSOs”); Stock
Appreciation Rights (“SARs”); and Restricted Stock Grants (“Stock
Grants”).
Options. The
Compensation Committee is authorized to grant Options, including ISOs, which can
result in potentially favorable tax treatment to the option holder, and
NSOs. The exercise price of an Option is determined by the
Compensation Committee at the time of grant and may not be less than the fair
market value of the Shares on the date the Option is granted. The
term of Options granted to employees may not exceed ten years. The
exercise price of Options is payable in cash, in Shares or in a combination of
the two, as set forth in the individual Award agreement.
SARs. SARs grant
the holder a right to receive an amount payable in cash or stock equal to the
appreciation in price of our Shares over a specified time
period. SARs may be granted alone or in tandem with
Options. SARs will have a maximum term of ten years and an exercise
price of not less than the fair market value of a Share on the date of the SAR
grant. No dividends or dividend equivalents will be paid under
SARs.
Restricted Stock
Grants. Stock Grants are grants of restricted stock which vest
upon the satisfaction of conditions, which may be based on performance factors
or continued service for a specified period of time as determined by the
Compensation Committee and set forth in an individual Award
agreement. The individual Award agreement will also specify
appropriate consideration for the Stock Grant and a Stock Grant may be issued
for no cash or a minimal cash consideration as required by applicable
law.
General Limitations on
Post-Termination Exercisability of Awards. Generally, unless
otherwise provided in the Award Agreement, in the event of a termination of
service of an employee, director or consultant for any reason other than death,
Disability or Retirement (as such terms are defined in the 2009 Plan), Options
and SARs, to the extent exercisable, will remain exercisable for three months
from the termination date or until the expiration of the stated term of such
Option, whichever period is shorter. The 2009 Plan provides special
rules for vesting and exercisability of options and SARs upon a termination of
service as a result of death,
Disability
or Retirement as defined in the Plan. Unless otherwise provided by
the Compensation Committee, in the event of termination of service for any
reason other than death of an employee (in which case time-based conditions are
deemed satisfied), Stock Grants are forfeited on the date of termination of
service to the extent the conditions applicable to such Stock Grants have not
been satisfied. Additionally, the 2009 Plan provides for a Grantee to
forfeit all Awards in the event of a finding by the compensation Committee of
fraud, theft or a violation of confidentiality obligations to the Company or if
the Grantee engages in competition with the Company.
Other
Provisions
Change in Control or
Dissolution. If Awards remain outstanding under the 2009 Plan
following a Change in Control (as defined in the 2009 Plan), all unvested Awards
granted prior to the effective date of the Change in Control will vest in full
upon a Qualified Termination (as defined in the 2009 Plan) of the employment of
an employee or the termination of service to the Company by a non-employee
director or consultant within three years after the Change in
Control. If Awards do not remain outstanding following the Change in
Control and are not replaced with substitute awards of substantially the same
value and subject to substantially the same terms, including the vesting
schedule and provision for the immediate vesting upon a Qualified Termination of
an employee’s employment or the termination of service by the Company of a
non-employee director or consultant within three years after the date of grant
of the substitute award, all Awards which have not been replaced with such
substitute awards will immediately vest upon the effective date of the Change in
Control. Upon a dissolution of the Company, all outstanding Awards
will immediately vest. In addition, upon a Change in Control or a
dissolution, the Board of Directors may cancel any outstanding portion of an
Award in consideration for granting the right to receive a cash payment equal to
the per share consideration received by the shareholder in connection with such
event less the exercise price applicable to such Award. Any other
outstanding Awards, other than Stock Grants, not exercised or cancelled upon
such an event will be terminated.
Amendments, Adjustments &
Termination. The Board of Directors may modify, amend or
terminate the 2009 Plan, so long as that action does not impair any Grantee’s
rights under any outstanding Award without the consent of such affected
Grantee. The Board may not amend the 2009 Plan without the approval
of the shareholders, to the extent such approval is required under applicable
stock exchange and SEC rules. In the event of a change to our
capitalization, the Compensation Committee has authority to make adjustments, if
any, as it deems appropriate and pursuant to applicable laws requiring
shareholder approval. The 2009 Plan terminates on February 23, 2019 unless earlier
terminated by the Board. No Awards will be granted under the 2009
Plan after termination of the 2009 Plan; however, the term and exercise of
Awards granted before termination of the 2009 Plan may extend beyond the
termination date.
Federal
Income Tax Consequences
The
following is a general explanation of the U.S. federal income tax consequences
to Grantees under the 2009 Plan who are subject to tax in the United
States. The following is intended for the general information of
shareholders considering how to vote with respect to the 2009 Plan and not as
tax guidance to participants in the 2009 Plan. The following is not
intended to be complete and does not take into account federal employment taxes
or state, local or foreign tax implications. Tax laws are complex and
subject to change and may vary depending on individual circumstances and from
locality to locality. In addition, different tax rules may apply in
light of variations in transactions that are permitted under the 2009 Plan (such
as payment of the exercise price by surrender of previously owned
shares).
Incentive Stock Options
(“ISOs”). Subject to the limit with respect to the maximum
Award that may be granted to any individual in any calendar year and the maximum
number of ISOs that can be awarded under the 2009 Plan, an individual can
receive an unlimited number of ISOs during any calendar
year. However, the aggregate fair market value (determined at the
time of option grant) of shares with respect to which ISOs first become
exercisable by a Grantee during any calendar year (under all of the Company’s
Plans) cannot exceed $100,000. ISO tax treatment is denied by the
Internal Revenue Code of 1986, as amended (the “Code”) to any options in excess
of that dollar limit.
The
grant and exercise of an ISO will not result in income for the Grantee or an
income tax deduction for the Company. (However, the excess of fair
market value of the shares on the exercise date over the exercise price is an
item of tax preference, potentially subject to the alternative minimum
tax.) The sale or other taxable disposition of shares acquired upon
an ISO exercise will not result in ordinary income by the Grantee if the Grantee
(i) does not dispose of the shares within two years from the date of option
grant or within one year from the date of option exercise, and (ii) the Grantee
is an employee of the Company or one of its subsidiaries from the date of option
grant and through the date which is three months before the exercise date (the
“Holding Requirements”). If the Holding Requirements are met, gain
realized on the sale or other taxable disposition of the shares will be subject
to tax as long-term capital gain and the Company would not be entitled to any
income tax deduction.
If
the Grantee disposes of shares acquired upon the ISO exercise without
satisfaction of the Holding Requirements, the disposition will be a
“disqualifying disposition” and the Grantee will recognize at the time of such
disposition (i) ordinary income to the
extent of the difference between the exercise price and the lesser of (a) the
fair market value of the shares on the date of exercise or (b) the amount
realized on such disposition, and (ii) short-term or long-term capital gain
to the extent of any excess of the amount realized on the disposition over the
fair market value of the shares on the date of
exercise. Notwithstanding the foregoing, if the Grantee dies prior to
the option exercise but the Grantee was an employee of the Company or one of its
subsidiaries from the date of option grant and through the date which is three
months before the date of death, then the Holding Requirements will not apply to
a sale or other taxable disposition of the shares by the estate of the Grantee
or by a person who acquired the option from the Grantee by bequest or
inheritance. The Company generally will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by the Grantee at
the time such income is recognized.
Non-Incentive Stock Options
(“NSOs”). Subject to the limit with respect to the maximum
Award that may be granted to any individual in any calendar year, there is no
limit on the aggregate fair market value of stock covered by NSOs that may be
granted to a Grantee or on the aggregate fair market value of NSOs that first
become exercisable in any calendar year. Generally, the Grantee will
not recognize income and no income tax deduction will be allowed to the Company
upon the grant of an NSO. Upon the exercise of an NSO, the Grantee
will recognize ordinary income in an amount equal to the excess of the fair
market value of the shares at the time of option exercise over the exercise
price, and the Company generally will be entitled to an income tax deduction in
the same amount. The Company will be required to ensure that any
applicable withholding and payroll tax requirements are
satisfied. Any difference between the higher of such fair market
value or the option exercise price and the price at which the Grantee sells the
shares will be taxable as short-term or long-term capital gain or
loss.
Stock Appreciation Rights
(“SARs”). A Grantee should not be taxed at the time an SAR is
granted nor should the Company receive an income tax deduction with respect
thereto. Upon exercise of an SAR, the Grantee will recognize ordinary
income (treated as compensation) in an amount equal to the cash or the fair
market value of the shares received. The Company generally will be
entitled to a corresponding income tax deduction at the time that the Grantee
recognizes the ordinary income. The Company will be required to
ensure that any applicable withholding and payroll tax requirements are
satisfied.
Stock Grants. A
Grantee receiving a Stock Grant subject to time or performance-based vesting
conditions will not recognize any income at the time of grant in the absence of
a Section 83(b) election (described below). The Grantee generally
will recognize ordinary income at the time the vesting conditions expire, in an
amount equal to the excess of the fair market value of the shares on that date
over the amount (if any) paid by the Grantee for the shares. For
purposes of determining gain or loss on a sale of the shares, (i) the Grantee's
tax basis in the shares will be equal to the amount included in income upon the
expiration of the vesting conditions plus the amount (if any) paid for the
shares, and (ii) the Grantee's holding period for the shares will begin when the
vesting conditions expire. Any sale or other disposition of the
shares will result in long-term or short-term capital gain or
loss. With respect to a Stock Grant that is subject to time or
performance-based vesting conditions, a Grantee may be able to make an election
under Section 83(b) of the Code to be taxed at the time of the Stock
Grant. In that event the Grantee would recognize as ordinary income
the excess of the fair market value of the shares (determined without regard to
the vesting conditions) as of the date of grant over the amount (if any) paid by
the Grantee for the shares and the Grantee’s holding period would begin at the
time of the Award. The Company generally will be entitled to a
corresponding income tax deduction at the time ordinary income is recognized by
the Grantee. The Company will be required to ensure that any
applicable withholding and payroll tax requirements are satisfied.
Section 162(m)
Limit. Under Section 162(m) of the Code, the Company is not
entitled to an income tax deduction for compensation paid to any of the
Company’s five most highly compensated executive officers that is in excess of
$1 million per year, unless such compensation is “performance-based
compensation.” The 2009 Plan has been structured with the intent that
Awards granted under the 2009 Plan may meet the requirements for
performance-based compensation under Section 162(m) of the Code, including
compensation derived from the exercise of Options and SARs (if granted at a fair
market value exercise price) and other Awards that are granted, vest or become
exercisable upon the achievement of pre-established, objectively determinable
targets based on performance criteria. Awards which satisfy these
standards generally should be deductible as performance-based compensation and
should not be subject to the limitation on deductibility under Section 162(m) of
the Code.
Section
409A. Section 409A of the Code does not apply to ISOs, NSOs
and SARs that are issued at fair market value (provided there is no deferral of
income beyond the exercise or settlement date) or to Stock Grants.
THE
BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE 2009 EQUITY
INCENTIVE PLAN AS DESCRIBED IN PROPOSAL 1.
Compensation
Committee
The
Compensation Committee of the Board of Directors consists of four non-employee
directors: Messrs. White, Sherlock, Jayroe and Ricci, each of whom is
independent as defined in the listing standards of the Exchange. The
Compensation Committee reviews and approves salaries and incentive compensation,
including grants of equity awards, for the Company’s executive
officers.
Compensation
Committee Interlocks and Insider Participation
None of
the members of the Compensation Committee has been or is an officer or employee
of the Company. None of the Company’s executive officers serve on the
board of directors or compensation committee of a company that has an executive
officer that serves on the Company’s Board or Compensation
Committee. No member of the Company’s Board is an executive officer
of a company in which one of the Company’s executive officers serves as a member
of the board of directors or compensation committee of that
company.
The
following Compensation Committee Report does not constitute soliciting material
and shall not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent the Company specifically
incorporates this Compensation Committee report by reference
therein.
The
Compensation Committee has reviewed and discussed with management, among other
things, the section of this Proxy Statement captioned “Compensation Discussion
and Analysis.” Based on that review and discussion, the Compensation
Committee has recommended to our Board that the “Compensation Discussion and
Analysis” section be included in this Proxy Statement.
Compensation
Committee of the Board of Directors
Wayne H.
White, Chairman
William
G. Jayroe
Francis
M. Ricci
William
J. Sherlock
Compensation
Discussion and Analysis
Overview
and Philosophy
The key
objectives of the Company’s executive compensation program is to attract, retain
and motivate well-qualified executives, and motivate the highest quality of
management talent available, who will support the rapid growth and development
of our Company in a dynamic industry. Furthermore, the Company’s executive
compensation program is designed:
|
·
|
To
reflect, in large part, the value created for
shareholders;
|
|
·
|
To
offer fair and competitive annual base salaries consistent with similarly
situated companies of the same size in the gaming
industry;
|
|
·
|
To
reward executives for corporate and individual performance through annual
incentive and deferred compensation programs; and
|
|
·
|
To
encourage long-term performance through the use of long-term incentives,
such as stock options, that align the interests of employees and
shareholders. |
The
Compensation Committee of the Company’s Board of Directors administers all plans
and programs connected with compensation of the Company’s senior executives and
directors. The Company’s business plans and strategic objectives are generally
presented by the Company’s management at the annual Board of Directors’
meeting. The Board of Directors engages in an active discussion concerning
the financial and development targets, the appropriateness of the strategic
objectives, and the difficulty in achieving same. In establishing the
compensation plan, our Compensation Committee then utilizes the primary
objectives from the adopted business and development plans as the primary
targets for determining the executive officers’ annual incentives and long-term
incentive compensation.
The Chief
Executive Officer makes recommendations to the Compensation Committee for the
actual incentive compensation for all other executives based on actual
performance of the Company relative to the existing targets as well as on
individual performance,
and recommends the executives’ base salary levels for the coming year. The
Compensation Committee considers these recommendations generally at the end of
each fiscal year in determining its recommendations to the Board of Directors
which will determine the annual and long-term incentive compensation for each
executive as well as for the executive’s base salary level. The actual incentive
compensations awarded to each executive are ultimately subject to the discretion
of the Compensation Committee and the Board of Directors.
Information
concerning the Compensation Committee, its current members, and its charter is
provided under the caption “Compensation Committee.”
Elements
of Compensation
There are
three key elements in the Company’s executive compensation program, all
determined by individual and corporate performance:
|
·
|
Annual
base salaries;
|
|
·
|
Annual
incentive compensation; and
|
|
·
|
Long-term
incentive compensation.
|
Annual Base
Salaries
Annually,
the Compensation Committee establishes the base salaries to be paid to the
Company’s executive officers during the fiscal year, subject to the approval of
the Board of Directors. In setting base salaries, the Compensation Committee
takes into account several factors including, but not limited to, the
executive’s experience, responsibilities, management abilities and job
performance, as well as the performance of the Company as a whole, and current
market conditions and competitive salaries of executives with similarly situated
companies of the same size in the gaming industry. The Compensation
Committee intends the annual base salaries of our named executive officers (the
“NEOs”) to provide a minimum level of compensation for highly qualified
executives. The Compensation Committee believes that the annual base salaries of
our NEOs in total approximate the market median for salaries that peer group
companies pay to similar officers and that this positioning is appropriate to
support our objective of aligning pay with performance.
Annual Incentive
Compensation
The
Compensation Committee intends that annual bonuses paid to our NEOs will reward
them for the achievement of successful financial performance over a relatively
short period of time. In addition, the Compensation Committee believes that it
is important to recognize and reward NEOs for successfully supporting the
Company’s growth and development. Payment of annual bonuses to our NEOs is
discretionary. For the fiscal year ended April 27, 2008, each NEO was paid
$10,000 under the Company’s annual incentive compensation plan.
Long-Term Incentive
Compensation
The
Compensation Committee believes that employee stock ownership is a significant
incentive in building shareholder wealth and aligning the interests of employees
and shareholders. Stock options will only have value if the Company’s stock
price increases. All of the equity awards granted during the 2008 fiscal year
were granted under the 1999 Stock Option Plan (“1999 Plan”) which was adopted by
the Board and subsequently approved by shareholders at the 1999 Annual Meeting
of Shareholders and amended at the 2002 Annual Meeting of Shareholders and the
2004 Annual Meeting of Shareholders. The 1999 Plan authorizes the Compensation
Committee to award stock options, SARs and restricted stock awards to employees,
including executive officers and other key employees at exercise prices, vesting
schedules and on other terms established by the Compensation
Committee. During the 2008 fiscal year, only options were awarded
under the 1999 Plan.
The
Compensation Committee believes that unvested stock options represent a
significant tool to encourage retention of highly qualified executives. The
vesting period of stock options encourages our executives to focus on the
Company’s long-term development and creates greater likelihood that our
executives to remain with the Company rather than looking for other
opportunities.
The
Compensation Committee generally considers stock option grants at the time an
executive enters into an employment relationship with the Company while the
granting usually occurs on the executive’s date of hire, anniversary date or the
date of a regularly scheduled meeting of the Company’s Board of
Directors.
Subsequent
to the 2008 fiscal year end, in January 2009, the 1999 Plan expired by its
terms. Accordingly, no additional equity awards may be made under
that plan. On February 24, 2009, the Board of Directors approved the
2009 Equity Incentive Plan (the “2009 Plan”) and is requesting that the
shareholders approve the 2009 Plan at this meeting. If the 2009 Plan
is approved by the
shareholders,
the Compensation Committee intends that future awards will be granted under that
plan. A full description of the terms of the 2009 Plan is included in
Proposal 1 of this Proxy Statement under the heading, “Approval of the 2009
Equity Incentive Plan.”
Change
in Control Payments
The
employment agreements the Company has entered into with certain of our
executives provide that they will receive certain payments if the Company
undergoes a change in control. The Compensation Committee believes that the
prospect of such a change in control would likely result in the executives
facing personal uncertainties and distractions regarding the possible effects of
such occurrence. The objective of providing pre-defined change in control
benefits to our executives is to allow them to focus solely on the best
interests of our shareholders in the event of any possible, threatened or
pending change in control. These change in control benefits serve as an
important retention tool to ensure that personal interests or uncertainty
regarding job security do not dilute our executives complete focus on promoting
shareholder value during any transition period related to a change in control.
The details of such arrangements are discussed in detail in the “Employment
Agreements with Named Executive Officers, Termination of Employment and
Change-In-Control Arrangements” section provided
below.
All
Other Compensation
Other
compensation for our executives includes matching contributions to the Company’s
401(k) plan, premium payments for the medical benefits plan offered by the
Company and perquisites.
Policy
Concerning Tax Deductibility
Section
162(m) of the Internal Revenue Code of 1986, as amended, generally limits the
annual corporate federal tax deduction for compensation paid to executive
officers named in the proxy statement to $1,000,000, unless the compensation
qualifies as “performance based” and has been approved in advance by a vote of
its shareholders. With a view toward enabling the Compensation Committee to
structure equity awards to be fully deductible, the Company’s 1999 Plan and the
2009 Plan which is being submitted to shareholders for approval at this meeting
provide for awards which are intended to qualify under Section162(m) as
performance based awards. The Company is not currently compensating
any executive officers at levels that would cause this annual limitation on
corporate federal tax deductions to apply and has no current plans to do
so. Accordingly, other than the provisions in its equity incentive
plans, the Compensation Committee has not adopted a formal policy concerning the
application of the Section 162(m) limitation on tax deductions. If it appears
that any executive officer will likely be approaching the $1,000,000
compensation limitation in the near future, the Compensation Committee will
review whether such payments should be structured as to qualify as deductible
performance-based compensation.
Compensation
of Executive Officers and Other Matters
Summary
Compensation Table
The
following table provides information about compensation during our fiscal years
ended April 29, 2007 and April 27, 2008 of our
Principal Executive Officer, our Principal Financial Officer plus our three most
highly compensated executive officers as of the end of fiscal years 2007
and 2008 and Mr.
John Arnesen, who resigned as President of the Company effective March 1, 2008.
This group is referred to in this proxy statement as the Named Executive
Officers or NEOs.
|
NAME
AND
PRINCIPAL
POSITION
|
|
FISCAL YEAR ENDED APRIL 27,
2008 YEAR (1)
|
|
SALARY
$
|
|
|
BONUS
$
|
|
|
OPTION
AWARDS ($)
(2)
|
|
|
ALL
OTHER
COMPENSATION
$ (3) (4) (5)
(6)
|
|
|
TOTAL
PAY
$
|
|
|
Robert
B. Sturges
|
|
2008
|
|
|
360,192
|
|
|
|
10,000 |
|
|
|
184,687 |
|
|
|
36,004 |
|
|
|
590,883 |
|
|
CEO
|
|
2007
|
|
|
146,769
|
|
|
|
— |
|
|
|
112,167 |
|
|
|
152,148 |
|
|
|
411,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
Arnesen
|
|
2008
|
|
|
273,750
|
|
|
|
— |
|
|
|
66,845 |
|
|
|
18,406 |
|
|
|
359,001 |
|
Former
President and Chief Operating Officer
|
|
2007
|
|
|
319,000
|
|
|
|
— |
|
|
|
90,370 |
|
|
|
9,000 |
|
|
|
418,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
J. Kohn
|
|
2008
|
|
|
238,077
|
|
|
|
10,000
|
|
|
|
50,224 |
|
|
|
9,000 |
|
|
|
307,301 |
|
|
Executive
Vice President and CFO
|
|
2007
|
|
|
107,692
|
|
|
|
—
|
|
|
|
19,474 |
|
|
|
18,453 |
|
|
|
145,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ernest
E. East
|
|
2008
|
|
|
238,077 |
|
|
|
10,000 |
|
|
|
48,998 |
|
|
|
9,000 |
|
|
|
306,075 |
|
|
Sr.
Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald
A. Brennan
|
|
2008
|
|
|
165,467 |
|
|
|
10,000 |
|
|
|
22,437 |
|
|
|
21,108 |
|
|
|
219,012 |
|
|
VP
— Development
|
|
2007
|
|
|
151,358 |
|
|
|
— |
|
|
|
|
|
|
|
3,745 |
|
|
|
155,103 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Compensation
data for fiscal year 2008 includes the period April 30, 2007 through April
27, 2008. Compensation data for fiscal year 2007 includes the
period May 1, 2006 through April 29, 2007.
|
|
(2)
|
The
amounts in this column reflect the compensation costs recognized for
financial statement reporting purposes for the fiscal year 2008 ended
April 27, 2008 and fiscal year 2007 ended April 29, 2007, in accordance
with SFAS No. 123(R) of awards pursuant to the Company’s 1999 Plan.
Assumptions used in the calculation of this amount for fiscal year ended
April 27, 2008 are included in Footnote 10 to the Company’s audited
financial statements for the fiscal year end April 27, 2008, included in
the Company’s Form 10-K filed with the Securities and Exchange Commission
on July 28, 2008.
|
|
(3)
|
Consists
of car allowances for each Named Executive Officer and premiums paid with
respect to Mr. Brennan’s life insurance policy.
|
|
(4)
|
Mr.
Sturges’ other compensation includes $14,400 for his flight allowance for
himself and his spouse and $12,604 for Mr. Sturges’ housing in the
Company’s furnished corporate apartment in Houston pursuant to his
employment agreement. In fiscal year 2007, Mr. Sturges’ other compensation
included $132,740 of consulting fees prior to his employment as
CEO.
|
|
(5)
|
Mr.
Arnesen’s other compensation includes $10,791 for the Company’s matching
contributions to his 401(k) savings plan. Effective March 1, 2008, Mr.
Arnesen voluntarily terminated his employment with the Company, at which
time he forfeited all stock options granted to him during his employment
with the Company.
|
Grants
of Plan-Based Awards Table
The
following table sets forth all plan-based awards to our Named Executive Officers
during fiscal year ended April 27, 2008. The equity awards granted in the fiscal
year 2008 identified in the table below are also reported in the table
“Outstanding Equity Awards at Fiscal Year-End.”
|
Name
|
|
Grant
Date
|
|
All Other
Option Awards:
Number
of
Securities
Underlying
Options
(#)(1)
|
|
|
Exercise or
Base Price of
Option
Awards
($/Sh)
|
|
|
Grant
Date
Fair Value of
Stock
and
Option
Awards
($)(2)
|
|
|
Robert
B. Sturges
|
|
08/30/2007
01/23/2008
|
|
|
200,000
100,000
|
|
|
|
1.65
1.20
|
|
|
|
168,278
84,130
|
|
|
John
A. Arnesen (3)
|
|
08/30/2007
|
|
|
60,000 |
|
|
|
1.65 |
|
|
|
50,483 |
|
|
James
J. Kohn
|
|
08/30/2007
04/22/2008
|
|
|
60,000
70,000
|
|
|
|
1.65
1.14
|
|
|
|
50,483
58,891
|
|
|
Ernest
E. East
|
|
08/30/2007
|
|
|
60,000 |
|
|
|
1.65 |
|
|
|
50,483 |
|
|
Donald
A. Brennan
|
|
08/30/2007
|
|
|
40,000 |
|
|
|
1.65 |
|
|
|
33,656 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock
options granted to the Named Executive Officers were granted under the
Company’s 1999 Plan and vest over three years, with approximately 1/3 of
the shares subject to such option grant vesting on the grant date and on
each anniversary thereafter, with the exception of the 8/30/2007 option
grant to Mr. Sturges which vests over three years, 1/3 vesting on January
23, 2008, the date he waived his right to voluntarily terminate his
employment with the Company, and the balance on the first two
anniversaries thereafter.
|
|
(2)
|
For
a discussion of the assumptions and methodologies used to calculate the
amounts reported, please see the discussion of stock-based compensation
contained in Note 10 to the Company’s audited financial statements for the
fiscal year end April 27, 2008, included in the Company’s Form 10-K filed
with the Securities and Exchange Commission on July 28, 2008, which note
is incorporated herein by
reference.
|
|
(3)
|
Effective
March 1, 2008, Mr. Arnesen voluntarily terminated his employment with
the Company, at which time he forfeited all stock options granted to him
during his employment with the
Company.
|
Compensation
of the Chief Executive Officer
Mr.
Robert B. Sturges was elected to the position of Chief Executive Officer on
October 10, 2006. For the fiscal year ended April 29, 2007, Mr. Sturges’ base
salary was $350,000 which was increased to $400,000 pursuant to the Second
Amendment to Employment Agreement between Mr. Sturges and the Company entered
into on January 23, 2008. For the fiscal year 2008, Mr. Sturges was paid a
$10,000 bonus.
The
Compensation Committee established the annual base salary and other terms of Mr.
Sturges’ compensation based on Mr. Sturges’ past performance record, his status
in the gaming industry and his experience and leadership abilities. The
Compensation Committee concluded that Mr. Sturges’ compensation, including stock
option grants, significantly benefits the Company and its shareholders by
securing Mr. Sturges’ services for the future and thereby motivating him to
continue his focus on the long-term strategic growth and profitability of the
Company.
Employment
Agreements with Named Executive Officers, Termination of Employment and
Change-In-Control Arrangements
Robert
B. Sturges
Mr.
Robert B. Sturges has an employment agreement with the Company entered into on
November 27, 2006 and most recently amended on January 23, 2008. The
employment agreement continues until January 23, 2011 unless terminated earlier
as provided in the agreement. The base salary is $400,000 plus
housing in the Company’s furnished corporate apartment in Houston and a monthly
flight allowance of $1,200 for airline tickets during the term of the
agreement. In addition, Mr. Sturges receives a monthly auto allowance
of $750. Mr. Sturges is eligible for an annual performance bonus of
up to 50% of his annual salary for achieving reasonable goals related to
profitability established by the Board of Directors and/or the Compensation
Committee.
Either
party may terminate the agreement by giving 90 days prior written notice to the
other party. If Mr. Sturges’s employment is terminated by the Company “without
cause,” he will be entitled to receive 12 months salary, paid in monthly
installments, plus a pro-rated annual bonus. If Mr. Sturges’s employment is
terminated by the Company as a result of Mr. Sturges’s inability to perform his
position, Mr. Sturges is entitled to be paid his salary, accrued vacation, and
fringe benefits for one year and to the immediate vesting of any stock options
that would otherwise vest in accordance with their terms within one year after
such termination. In the event of a “change of control,” Mr. Sturges
is entitled to a lump sum amount equal to the unpaid balance of Mr. Sturges’
salary, a pro-rated performance bonus if one was otherwise due to him (at the
same rate as for the immediately preceding fiscal year), accrued vacation and
fringe benefits remaining during the term of his employment agreement and to the
immediate vesting of all outstanding stock options granted to him. If
Mr. Sturges terminates his employment for any other reason, Mr. Sturges shall be
entitled to be paid his salary for a period of six months plus a pro-rated
portion of his annual performance bonus.
On
October 12, 2006, Mr. Sturges was granted an option to purchase 100,000 shares
of common stock of the Company, at an exercise price of $4.87 per share, all of
which was vested as of the filing of this proxy statement. The options expire on
the tenth anniversary date of the grant and are subject to the terms and
conditions of the Company’s 1999 Plan. On August 30, 2007, Mr. Sturges was
granted a stock option to purchase 200,000 share of common stock of the Company
at an exercise price of $1.65 per share, which as of the filing of this proxy
statement, 133,332 shares have vested and 66,667 shares are scheduled to vest on
January 23, 2010. On January 23, 2008, a stock option to purchase
100,000 shares of common stock of the Company at an exercise price of $1.20 per
share was granted to Mr. Sturges, of which as of the filing of this proxy
statement, 66,666 shares have vested and 33,334 are
scheduled to vest on January 23, 2010. The options expire on the fifth
anniversary date of each grant and are subject to the terms and conditions of
the 1999 Plan.
James
J. Kohn
Mr. James
J. Kohn's employment agreement was effective October 23, 2006 and amended
effective April 23, 2008. The term of the agreement is through April 22, 2011
unless terminated earlier as provided in the agreement. Mr. Kohn’s base salary
is $275,000. Mr. Kohn also receives a monthly auto allowance of
$750.00. Mr. Kohn is entitled to an annual performance bonus of 25%
of his then current annual salary if the financial targets, and 25% of his then
current annual salary if the strategic targets, set by the Compensation
Committee for that fiscal year have been achieved. Mr. Kohn will also receive
certain benefits related to his relocation, including a tax equalization
allowance related to his relocation expenses.
If Mr.
Kohn’s employment is terminated by the Company “without cause,” Mr. Kohn is
entitled to (i) a lump sum payment equal to six-month’s of his salary
(including pro-rated performance bonus, accrued vacation and fringe benefits
remaining during the term of his employment agreement), plus (ii) commencing six
months following such termination and continuing until the end of the term of
his employment agreement (subject to certain limitations), a continuation of his
salary payments (at the rate last conferred
upon
him), (iii) a performance bonus (if one was otherwise due to him at the same
achievement rate as in the preceding fiscal year), and (iv) the immediate
vesting of all of his stock options. If Mr. Kohn’s employment is
terminated by the Company as a result of Mr. Kohn’s inability to perform his
position, Mr. Kohn is entitled to be paid his salary, accrued vacation, and
fringe benefits for one year and to the immediate vesting of any stock options
that would otherwise vest in accordance with their terms within one year after
the termination date. If the Company relocates its headquarters more
than one-hour driving distance, Mr. Kohn is entitled to terminate his employment
agreement and receive, payable in 12 equal monthly installments, an amount equal
to the unpaid balance of his salary, performance bonus, accrued vacation and
fringe benefits remaining during the term of his employment agreement. In the
event of a “change of control,” Mr. Kohn is entitled to payment of an amount
equal to the unpaid balance of his salary, performance bonus, accrued vacation
and fringe benefits for the remaining term of his employment agreement, which
will be payable to him over twelve equal installments, and to the immediate
vesting of all of his stock options. In the event of any of the
foregoing terminations of Mr. Kohn’s employment, he is entitled to be paid
reasonable relocation expenses to a new residence.
On
October 23, 2006, Mr. Kohn was granted options to purchase 26,000 shares of
common stock in the Company, at an exercise price of $3.79 per share. As of the
filing of this proxy statement these options had fully vested. On
August 30, 2007, Mr. Kohn was granted a stock option to purchase 60,000 shares
of common stock of the Company at an exercise price of $1.65 per share, of which
as of the filing of this proxy statement, 40,000 shares had vested and 20,000
are scheduled to vest on August 30, 2009. On April 22, 2008, a stock
option to purchase 70,000 shares of common stock of the Company at an exercise
price of $1.14 per share was granted to Mr. Kohn, of which 23,333 shares vested
immediately, 23,333 are scheduled to vest on April 22, 2009 and 23,334 are
scheduled to vest on April 22, 2010. The options expire on the fifth anniversary
of their grant dates and are subject to the terms and conditions of the 1999
Plan.
Ernest
E. East
Mr.
Ernest E. East has an employment agreement with the Company which was amended on
April 14, 2008. The term of the agreement is through January 8, 2011 unless
terminated earlier as provided in the agreement. Mr. East’s base salary is
$250,950. Mr. East also receives a monthly auto allowance of
$750.00. Mr. East is entitled to receive an annual performance bonus
of 25% of his then-current annual salary, if certain strategic and financial
goals set by the Compensation Committee for the fiscal year have been achieved
and 25% of his then-current annual salary if Mr. East significantly reduces
outside legal expenses and makes significant progress in disposing of the
Company’s non-core assets. Mr. East also received certain benefits related to
his relocation, including a $7,500 relocation payment and temporary housing for
a period of three months.
If Mr.
East’s employment is terminated by the Company “without cause,” Mr. East is
entitled to (i) a lump sum payment equal to six-month’s of his salary
(including pro-rated performance bonus, accrued vacation and fringe benefits
remaining during the term of his employment agreement), plus (ii) commencing six
months following such termination and continuing until the end of the term of
his employment agreement (subject to certain limitations), a continuation of his
salary payments (at the rate last conferred upon him), (iii) a performance bonus
(if one was otherwise due to him at the same percentage rate as in the preceding
fiscal year), and (iv) the immediate vesting of all of his stock
options. If Mr. East’s employment is terminated by the Company as a
result of Mr. East’s inability to perform his position, Mr. East is entitled to
be paid his salary, accrued vacation, and fringe benefits for one year and to
the immediate vesting of any stock options that would otherwise vest in
accordance with their terms within one year after the termination
date. If the Company relocates its headquarters more than one-hour
driving distance, Mr. East is entitled to terminate his employment agreement and
receive, payable in 12 equal monthly installments, an amount equal to the unpaid
balance of his salary, performance bonus, accrued vacation and fringe benefits
remaining during the term of his employment agreement. In the event of a “change
of control,” Mr. East is entitled to payment of an amount equal to the unpaid
balance of his salary, performance bonus, accrued vacation and fringe benefits
for the remaining term of his employment agreement, which will be payable to him
over twelve equal installments, and to the immediate vesting of all of his stock
options. In the event of any of the foregoing terminations of Mr.
East’s employment, he is entitled to be paid reasonable relocation expenses to a
new residence.
On
January 8, 2007, Mr. East was granted an option to purchase 30,000 shares of
common stock in the Company, at an exercise price of $3.24 per share. As of the
filing of this proxy statement all of these options had fully
vested. The options expire on the fifth anniversary date of the Mr.
East’s employment agreement and are subject to the terms and conditions of the
1999 Plan. On August 30, 2007, Mr. East was granted a stock option to purchase
60,000 shares of common stock of the Company at an exercise price of $1.65 per
share, of which 20,000 shares immediately vested, 20,000 vested on August 30,
2008 and 20,000 are scheduled to vest on August 30, 2009. The options expire on
the fifth anniversary date of the grant and are subject to the terms and
conditions of the 1999 Plan.
For each
of the abovementioned NEOs, if the Company terminates the NEO’s employment for
“cause,” his employment agreement provides for a payment of only salary,
vacation, and fringe benefits through the date of termination, and any unvested
stock
options
are forfeited. Finally, all employment agreements contain provisions protecting
the Company’s confidential information and precluding a NEO from competing with
the Company for a period of one year (or the balance of the employment term if
shorter) following the termination of his employment.
Table
Showing Benefits of a Termination without Cause or by Good Reason Other Than in
Connection with a Change in Control
The
following table sets forth the amounts payable under the employment agreements
of each of the current executive officers named in the Summary Compensation
Table in the event of a termination by the Company without cause or by the
employee for good reason other than in connection with a change in control. The
amounts in the table assume that the termination took place on April 27, 2008.
The closing price of the Company’s common stock on such date was
$1.14.
|
Name
|
|
Cash
Severance
($)
(a)
|
|
Value of Options and
Restricted Stock that Have
Accelerated
Vesting
($)
|
|
Value of Medical
Continuation
($)
(b)
|
|
Gross-Up
Amount
($)
|
|
Total
($)
|
|
Robert
B. Sturges
|
|
|
400,000
|
|
|
193,799
|
|
|
—
|
|
—
|
|
|
593,799
|
|
Ernest
E. East
|
|
|
673,077
|
|
|
133,508
|
|
|
13,637
|
|
—
|
|
|
820,222
|
|
James
J. Kohn
|
|
|
819,712
|
|
|
134,565
|
|
|
13,637
|
|
—
|
|
|
967,914
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
These
amounts include cash severance payments mandated by each executive
officer’s employment agreement including accrued vacation and auto
allowance. Mr. Sturges’ cash severance also includes flight
allowance. In the event of a termination without cause, Mr.
Sturges will receive 12 months salary paid in monthly installments. In the
event of termination without cause, Mr. East and Mr. Kohn each are
entitled to a lump sum amount equal to six months of their respective
salaries (plus prorated performance bonus, accrued vacation and fringe
benefits remaining during the term of his respective employment agreement)
and, beginning six months after the termination and continuing until the
end of the term of his respective employment agreement, each of them is
entitled to receive his then annual salary payable in accordance with the
Company’s general payroll practices.
|
|
(b)
|
These
amounts are estimates based on a blended rate for the executive officers,
which includes a base COBRA cost and incremental costs for the portion of
the insurance premiums that the Company pays. The estimated amounts are
given because of certain HIPAA privacy regulations and are expected to be
close to the true rate for the
individual.
|
Table
Showing Benefits of a Change in Control
The
following table sets forth the amounts payable under the employment agreements
of each of the current executive officers named in the Summary Compensation
Table in the event of a termination in connection with a change in control event
and, where applicable, a second triggering event. The amounts in the table
assume that the triggering event took place on April 27, 2008. The closing price
of the Company’s common stock on such date was $1.14.
|
Name
|
|
Cash
Severance
($)
(a)
|
|
Value of Options and
Restricted Stock that Have
Accelerated
Vesting
($)
|
|
Value of Medical
Continuation
($)
(b)
|
|
Gross-Up
Amount
($)
|
|
Total
($)
|
|
Robert
B. Sturges
|
|
|
1,084,615
|
|
|
478,301
|
|
|
—
|
|
|
—
|
|
|
1,562,916
|
|
James
J. Kohn
|
|
|
819,712
|
|
|
134,565
|
|
|
13,637
|
|
|
—
|
|
|
967,914
|
|
Ernest
E. East
|
|
|
673,077
|
|
|
133,508
|
|
|
13,637
|
|
|
—
|
|
|
820,222
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
These
amounts include cash severance payments mandated by each executive
officer’s employment agreement including accrued vacation and auto
allowance. Mr. Sturges’ cash severance also includes a flight
allowance.
|
|
(b)
|
These
amounts are estimates based on a blended rate for the executive officers,
which includes a base COBRA cost and incremental costs for the portion of
the premiums that the Company pays. The estimated amounts are given
because of certain HIPAA privacy regulations and are expected to be close
to the true rate for the
individual.
|
Outstanding
Equity Awards at Fiscal Year-End
The table
below presents information on the outstanding equity awards held by the Named
Executive Officers as of April 27, 2008.
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(a)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
Robert
B. Sturges
|
|
70,000
66,666
33,333
|
30,000
133,334
66,667
|
4.87
1.65
1.20
|
10/12/2016
08/30/2012
01/23/2013
|
|
Ernest
E. East
|
|
20,000
20,000
|
10,000
40,000
|
3.24
1.65
|
01/08/2012
08/30/2012
|
|
James
J. Kohn
|
|
16,000
20,000
23,333
|
10,000
40,000
46,667
|
3.79
1.65
1.14
|
10/23/2011
08/30/2012
04/22/2013
|
|
Donald
A. Brennan
|
|
30,000
10,000
13,333
|
—
—
26,667
|
14.19
11.40
1.65
|
02/26/2009
09/08/2009
08/30/2012
|
| |
|
|
|
|
|
|
(a)
|
The
option awards were granted pursuant to the 1999 Plan. During the fiscal
year ended April 27, 2008, no stock options were exercised by the Named
Executive Officers. Based on the exercise price of the options held as of
April 27, 2008 by the Named Executive Officers there were no “In-the-Money
Options” held by the Named Executive Officers on that date. The fair
market value of our common stock on April 27, 2008 was $1.14 per
share.
|
Director
Compensation
Director
Fees
The
Company’s independent directors receive an annual fee of $16,000 plus $1,000 for
each Board of Directors meeting attended for services they provide as directors
or members of Board committees. The independent Chairman of the Board of
Directors and the Chair of the Audit Committee receive an annual fee of $31,000
plus $1,000 for each Board of Directors meeting attended. As of the last quarter
of the fiscal year 2008, the annual chairmanship fees were increased by $1,000.
All directors are reimbursed for their reasonable expenses for attending Board
and Board committee meetings. During the fiscal year ended April 27, 2008, we
issued options under our 1999 Plan to purchase our common stock to six of our
directors.
Director
Summary Compensation Table
The table
below contains information about the compensation received by each of our
non-employee directors during the fiscal year ending April 27, 2008. Directors
who are employees received no extra pay for serving as a director.
|
Name
|
|
Fees
Earned
or
Paid
in
Cash
($)
(a)
|
|
Option
Awards
($) (b)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
William
G. Jayroe
|
|
|
17,000
|
|
|
10,137
|
|
—
|
|
|
27,137
|
|
Joseph
A. Juliano
|
|
|
27,750
|
|
|
7,603
|
|
—
|
|
|
35,353
|
|
Francis
M. Ricci
|
|
|
31,250
|
|
|
6,336
|
|
—
|
|
|
37,586
|
|
Wayne
H. White
|
|
|
17,000
|
|
|
6,336
|
|
—
|
|
|
23,336
|
|
William
J. Sherlock
|
|
|
13,000
|
|
|
1,267
|
|
—
|
|
|
14,267
|
|
Former
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Gallaway (c)
|
|
|
12,000
|
|
|
3,801
|
|
—
|
|
|
15,801
|
|
H.
Thomas Winn *
|
|
|
|
|
|
*
|
|
106,185
|
|
|
106,185
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes
annual fees, meeting fees and fees for committee chairmanships. Mr.
Juliano, the Chairman of the Company’s Board of Directors, received a
prorated annual chairmanship fee at the time of his election as the
Chairman in June 2007 and a prorated $1,000 increase in such fee as of the
last quarter of fiscal year 2008. Mr. Ricci, the Chair of the Audit
Committee, received a prorated $1,000 increase in the annual chairmanship
fee as of the last quarter of fiscal year 2008. Mr. Sherlock received a
prorated annual fee as of the time of his election to the Company’s Board
of Directors in October 2007.
|
|
(b)
|
The
amount reflected in the table is the amount of compensation recognized
during the fiscal year ended April 27, 2008 for financial reporting
purposes in accordance with SFAS 123(R), except that no forfeiture rate
assumption has been applied to the amounts in the table. On January 23,
2008, non-employee directors were granted the following options to
purchase the Company’s common stock under the 1999 Plan: Mr. Jayroe was
granted 40,000 options, Mr. Juliano was granted 30,000 options, Mr. White
was granted 25,000 options, Mr. Ricci was granted 25,000 options, Mr.
Gallaway was granted 15,000 options and Mr. Sherlock was granted 5,000. On
October, 15, 2007, Mr. Sherlock was also granted 25,000 options at the
time he was appointed to the Company’s Board of Directors. All grants to
directors were valued using the Black-Scholes Model with assumptions as
described in Footnote 10 to the Company’s Consolidated Financial
Statements, which are included in the Company’s 2008 Annual Report to
Shareholders.
|
|
(c)
|
Mr.
Gallaway’s options were forfeited following his resignation in March 2008.
Mr. Gallaway passed away in March 2008.
|
|
*
|
Mr.
Winn’s other compensation consisted of $102,308 in salary and $3,877 in
matching 401(K) contributions for fiscal year 2008. In addition to the
compensation referred to above and as disclosed in the Company’s Proxy
Statement for the 2008 Annual Meeting of Shareholders, Mr. Winn entered
into a Separation Agreement & Release with the Company on June 27,
2007. Under the agreement, he continued to receive compensation equal to
the base compensation to which he would have been entitled until December
31, 2008. In addition, the Company agreed to reimburse him for his
benefits under COBRA during the same period and the Company awarded him a
non-qualified stock option to purchase 200,000 shares of the Company’s
common stock at the closing price as of July 6, 2007 ($2.01). The option
vests at a rate of 25% per year for four years and expires five years from
the date of grant. On April 29, 2007, the Company recorded a severance
accrual of $775,683 regarding Mr. Winn. The accrual consisted of $199,587
for the option grant plus $576,096 other
compensation. Effective October 15, 2008, Mr. Winn’s term as a
director expired and he was not nominated to stand for
reelection.
|
As of
April 27, 2008, the below directors had outstanding option awards as
follows:
|
Name
of Director
|
Outstanding
Stock Options
Exercisable
(#)
|
Outstanding
Stock
Options
Unexercisable
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
William
G, Jayroe
|
15,000
5,000
13,334
|
—
—
26,666
|
10.59
11.40
1.20
|
09/24/2008
09/08/2009
01/23/2013
|
|
Joseph
A. Juliano
|
15,000
5,000
10,000
|
—
—
20,000
|
10.59
11.40
1.20
|
09/24/2008
09/08/2009
01/23/2013
|
|
Francis
M. Ricci
|
13,000
5,000
8,334
|
—
—
16,666
|
10.59
11.40
1.20
|
09/24/2008
09/02/2009
01/23/2013
|
|
Wayne
H. White
|
25,000
5,000
8,334
|
—
—
16,666
|
10.59
11.40
1.20
|
09/24/2008
09/08/2009
01/23/2013
|
|
William
J. Sherlock
|
25,000
1,667
|
—
3,333
|
1.35
1.20
|
10/15/2012
01/23/2013
|
|
H.
Thomas Winn *
|
115,000
30,000
—
|
—
—
200,000
|
10.59
11.40
2.01
|
09/24/2008
09/08/2009
07/06/2012
|
| |
|
|
|
|
|
*
|
Effective
October 15, 2008, Mr. Winn’s term as a director expired and he was not
nominated to stand for reelection.
|
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Proposals
of shareholders that are intended to be presented at our 2009 Annual Meeting of
Shareholders in the proxy materials for such meeting must comply with the
requirements of SEC Rule 14a-8 and must be received by our Secretary no later
than May 6, 2009, in order to be included in the proxy statement and proxy
materials relating to our 2009 Annual Meeting of Shareholders. A
shareholder proposal that will not be included in our proxy statement and proxy,
but that a shareholder intends to present in person at the meeting, must
generally be submitted to our Secretary not less than ninety (90) days prior to
the anniversary date of the 2009 Annual Meeting.
In order
for a shareholder proposal to be considered properly brought before the meeting
by a shareholder, such shareholder must, in addition to any applicable
requirements, have given timely notice and in proper form of such shareholder's
intent to bring such business before such meeting. To be timely, the
shareholder’s notice must be received by the Secretary of the Company at
the
principal
executive offices of the Company not less than 90 days prior to the anniversary
date of the immediately preceding annual meeting; providing however that in the
event the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the shareholder to be timely must be
so received not later than the close of business on the 10th day
following the day on which such notice of the day of the meeting was mailed or
such public disclosure made, whichever occurs first. To be in proper form, a
shareholder’s notice to the Secretary shall set forth the following: the name
and record address of the shareholder who intends to propose the business and
the number of shares of stock of the Company which are owned by such
shareholder; a representation that the shareholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to introduce the business specified in the
notice; a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting; and any material interest of the shareholder in such
business.
Shareholders
sharing an address with another shareholder may receive only one set of proxy
materials at that address unless they have provided contrary instructions. Any
such shareholder who wishes to receive a separate set of proxy materials now or
in the future may write or call the Company to request a separate copy of these
materials from:
Investor
Relations
50 Briar
Hollow Lane
Suite 500
West
Houston,
Texas 77027
(713)
621-2245
Similarly,
shareholders sharing an address with another shareholder who have received
multiple copies of the Company’s proxy materials may write or call the above
address and phone number to request delivery of a single copy of these
materials.
OTHER
MATTERS
The Board
of Directors knows of no other matters that will be prepared for consideration
at the Special Meeting. If any other matters are properly brought before the
Special Meeting, the persons named in the accompanying proxy intend to vote on
those matters in accordance with their best judgment.
By Order
of the Board of Directors
/s/ James
J. Kohn
JAMES J.
KOHN, Secretary
WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE, AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE
YOUR PROXY AT ANY TIME PRIOR TO THE SPECIAL MEETING. IF YOU
DECIDE TO ATTEND THE SPECIAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY
DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU
FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE SPECIAL MEETING.
APPENDIX
A
NEVADA
GOLD & CASINOS, INC.
2009
EQUITY INCENTIVE PLAN
(Adopted
February 24, 2009)
1. The Plan. This 2009
Equity Incentive Plan (the “Plan”) is intended to provide incentive to
individuals who have responsibility for the management and growth of Nevada Gold
& Casinos, Inc. (the “Company”) and its subsidiaries (including subsidiaries
which become such after the adoption of the Plan) to promote the success of the
Company’s business by aligning the financial interests of employees,
non-employee directors and consultants providing personal services to the
Company and its subsidiaries with long-term shareholder value.
2. Types of
Awards. The following types of awards (each, an “Award”) may
be granted: (a) options intended to qualify as incentive stock options (“ISOs”)
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”), (b) options not intended to qualify as ISOs (“NSOs” and
together with ISOs, “Options”), (c) stock appreciation rights (“SARs”) and (d)
restricted stock grants (“Stock Grants”).
3. Stock Subject to the
Plan. Subject to the provisions of Section 10 hereof, the
total number of shares of Common Stock, par value $.12 per share, of the Company
(the “Stock”) which may be issued pursuant to Awards issued under the Plan is
1,750,000. Shares of Stock issued under the Plan may be authorized
but unissued shares of Stock or Stock held as treasury stock. The
following shares of Stock may also be used for issuance of Awards under the
Plan: (i) shares of Stock which have been forfeited under a
Stock Grant; and (ii) shares of Stock which are allocable to the unexercised
portion of an Option issued under the Plan which has expired or been
terminated. Subject to the provisions of Section 10, no more than
1,500,000 shares of Stock may be issued upon the exercise of ISOs issued under
the Plan. Each share of Stock issuable upon exercise of an Option or
subject to a Stock Grant and each share of Stock as to which an SAR is
associated shall be counted as one share of Stock at the time of grant for
purposes of the limit set forth under this Section and the limit set forth under
Section 6(b). With respect to the combination of a Tandem SAR and an
Option, where the exercise of the Tandem SAR or the Option results in the
cancellation of the other, each share of Stock associated with a Tandem SAR and
the associated Option will only count as one share of Stock at the time of grant
for purposes of the limits set forth in this Section and in Section
6(b).
4. Administration. The
Plan shall be administered by the Compensation Committee of the Board of
Directors (the “Committee”) composed of no fewer than two (2) members of the
Board of Directors of the Company (the “Board”) each of whom meets the
definition of “outside director” under the provisions of Section 162(m) of the
Code and the definition of “non-employee director” under the provisions of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) or rules and
regulations promulgated thereunder. Except as otherwise provided
herein, the Committee shall have plenary authority in its discretion, among
other things, to determine to whom among the eligible persons Awards shall be
granted, the number of shares of Stock covered by or associated with an Award,
the terms of each Award, and whether any Option is intended to be an ISO or an
NSO. The Committee shall have plenary authority, subject to the
express provisions of the Plan, to interpret the Plan, to prescribe, amend and
rescind any rules and regulations relating to the Plan and to take such other
action in connection with the Plan as it deems necessary or
advisable. The interpretation, construction and administration by the
Committee of any provisions of the Plan or of any Award granted hereunder shall
be final and binding on recipients of Awards hereunder.
5. Eligibility. All
employees of the Company and its subsidiaries (including, except for purposes of
the last sentence of Section 6(a), persons who have accepted offers of
employment), consultants to the Company and its subsidiaries, and non-employee
directors of the Company shall be eligible for Awards under the
Plan. In making the determination as to employees, consultants and
directors to whom Awards shall be granted and as to the number of shares of
Stock to be covered by or associated with such Awards, the Committee shall take
into account the duties of the respective employees, consultants and directors,
their present and potential contributions to the success of the Company and such
other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan. The adoption of the Plan shall
not be deemed to give any employee, consultant or director any right to an
Award, except to the extent and upon such terms and conditions as may be
determined by the Committee. Neither the Plan nor any Award granted
hereunder is intended to or shall confer upon any Grantee any right with respect
to continuation of employment or retention by the Company or any of its
subsidiaries.
6. Certain Limits on
Awards.
(a) Limit on
ISOs. The aggregate Fair Market Value (determined as of the
date of the Option grant) of Stock with respect to which ISOs granted to an
employee (whether under the Plan or under any other stock option plan of the
Company or its subsidiaries) become exercisable for the first time in any
calendar year may not exceed $100,000 (or such other amount as the Internal
Revenue Service may decide from time to time for purposes of Section 422 of the
Code). If any grant of Options is made to a Grantee in excess of the limits
provided in the Code, the excess shall automatically be treated as an
NSO. Only employees of the Company or any of its subsidiaries shall
be eligible to receive the grant of an ISO.
(b) Limit on all
Awards. The number of shares of Stock with respect to which an
employee may be granted Awards under the Plan during any calendar year shall not
exceed 250,000, subject to the provisions of Section 10.
7. Terms and Conditions of
Options. The Committee may in its discretion grant Options,
which shall be subject to the following terms and conditions and such other
terms and conditions as the Committee may prescribe:
(a) Form of
Option. Each Option granted pursuant to the Plan shall be
evidenced by an agreement (the “Option Agreement”) which shall clearly identify
the status of the Option granted (i.e., whether an ISO or an
NSO) and which shall be in such form as the Committee shall from time to time
approve. The Option Agreement shall comply in all respects with the
terms and conditions of the Plan and may contain such additional provisions,
including, without limitation, restrictions upon the exercise of the Option as
the Committee shall deem advisable.
(b) Stated
Term. The term of each Option granted hereunder shall be for a
maximum of ten years from the date of granting thereof, or a maximum of five
years in the case of an ISO granted to a 10% Holder (as such term is defined in
Section 16), but may be for a lesser period or be subject to earlier
termination as provided by the Committee, the provisions of the Plan or the
Option Agreement.
(c) Option Exercise
Price. Each Option shall state a per share option exercise
price, which shall be not less than 100% of the Fair Market Value of a share of
Stock on the date of the Option grant, nor less than 110% of such Fair Market
Value in the case of an ISO granted to an individual who, at the time the Option
is granted, is a 10% Holder. The Fair Market Value of shares of Stock
shall be determined by the Committee based upon (i) the average of the high and
low prices of the Stock on the NYSE Alternext US on the date of the granting of
the Award, or (ii) such other measure of fair market value as may
reasonably be determined by the Board (but consistent with the rules under
Section 409A of the Code). “Fair Market Value” as used throughout the
Plan shall mean the fair market value as determined in accordance with this
Section.
(d) Exercise of
Options. An Option may be exercised from time to time as to
any part or all of the Stock as to which it is then exercisable in accordance
with its terms, provided, however, that an Option may not be exercised as to
fewer than 100 shares at any time (or for the remaining shares then
purchasable under the Option, if fewer than 100 shares). The Option
exercise price shall be paid in full at the time of the exercise thereof (i) in
cash, (ii) by shares of Stock (including by withholding shares of Stock
deliverable upon exercise of the Option) with a Fair Market Value equal to such
exercise price, or (iii) by a combination of cash and shares of Stock pursuant
to clause (ii) above, provided that the withholding of shares of Stock
deliverable upon exercise of the Option shall not be permitted with respect to
the exercise of any Option intended to qualify as an ISO. The holder
of an Option shall not have any rights as a stockholder with respect to the
Stock issuable upon exercise of an Option prior to the date of
exercise.
(e) Non-Transferability of
Options. Options shall not be transferable other than by will
or the laws of descent and distribution, and shall be exercisable during the
lifetime of the Grantee only by him or his legal representative. Any
attempt to transfer an Option other than as permitted above shall terminate the
Option and all rights of the Grantee to that Option.
(f) Cessation of
Service.
(i) Termination
Date. For purposes of the Plan, the phrase “cessation of
service” or any variation thereof shall mean (A) with respect to an employee,
such employee’s ceasing to be employed by the Company or any of its
subsidiaries, (B) with respect to a non-employee director, such director’s
ceasing to be a member of the Board, or (C) with respect to a consultant,
termination of the contractual relationship between such consultant and the
Company, in each instance for any reason, including
in the case of employees, as a result of Retirement or
Disability. The phrase “Termination Date” shall mean the date of any
cessation of service. With respect to employees, the Committee shall
determine on a case by case basis whether an authorized leave of absence or
absence on military or government service shall constitute a termination of the
employment of the employee.
(ii) Termination of Employee
Options.
(A) Death of the
Grantee. In the event of a Grantee’s death (A) while
providing services to the Company or any of its subsidiaries as an employee, or
(B) following a termination of employment due to Disability, unless otherwise
expressly provided in the Option Agreement, the Option shall become fully
exercisable by the Grantee’s estate upon such Grantee’s death and shall remain
exercisable for a period of twelve (12) months following the Grantee’s death
(or, if shorter, the remainder of the Option term as set forth in the Option
Agreement).
(B) Other Terminations of
Employment.
(1) Except
as set forth in clause (A) above or as otherwise determined by the Committee,
the number of shares of Stock which may be purchased upon the exercise of an
Option granted to an employee shall not exceed the number of shares of Stock as
to which such Option was exercisable pursuant to the Plan and the Option
Agreement as of the Termination Date.
(2) If
the Grantee’s cessation of employment occurred as a result of the Grantee’s
Disability or Retirement, unless otherwise expressly provided in the Option
Agreement, the Option shall remain exercisable for a period of twelve (12)
months following the Termination Date (or, if shorter, the remainder of the
Option term as set forth in the Option Agreement). Except as
otherwise set forth in this Section 7(f) or in the Option Agreement, an Option
granted to an employee shall remain exercisable for three (3) months (or, if
shorter, the remainder of the Option term as set forth in the Option Agreement)
following the Termination Date. For purposes of this clause (B)(2)
only, an employee who continues to provide services to the Company as a
non-employee director of the Company or as a consultant to the Company following
termination of his employment by the Company or its subsidiary shall be deemed
to continue to be an employee of the Company for the period of such provision of
services or consultancy.
(C) Certain Definitions used
herein. The term “Retirement” as used herein shall mean an
employee’s retirement in good standing under the Company’s established rules and
policies then in effect as determined by the Committee. The term “Disability” as
used herein shall have the meaning ascribed to “permanent and total disability”
as set forth in Section 22(e)(3) of the Code.
(iii) Termination of Consultant
Options. Except as otherwise expressly provided in the Option Agreement,
in the event of a cessation of service of a consultant, the number of shares of
Stock which may be purchased upon the exercise of an Option shall not exceed the
number of shares of Stock as to which such Option was exercisable pursuant to
the Plan and the Option Agreement as of the Termination Date. Except
as otherwise set forth in the Option Agreement, an Option granted to a
consultant shall remain exercisable for a period of three (3) months following
the Termination Date (or, if shorter, the remainder of the Option term as set
forth in the Option Agreement).
(iv) Termination of Non-Employee
Director Options. Unless otherwise expressly provided in the
Option Agreement, the number of shares of Stock which may be purchased upon the
exercise of an Option granted to a non-employee director shall not exceed the
number of shares of Stock as to which such Option was exercisable pursuant to
the Plan and the Option Agreement as of the Termination Date. An
Option exercisable in accordance with the previous sentence shall remain
exercisable for three (3) months (or, if shorter, the remainder of the Option
term as set forth in the Option Agreement) following the Termination
Date.
(v) Other
Limitations. Notwithstanding any other provisions of this
Plan, specifically including Sections 7(f) and 9(f), if the Committee finds by a
majority vote after full consideration of the facts that a Grantee, before or
after termination of his service with the Company or any of its subsidiaries for
any reason (a) committed or engaged in fraud, embezzlement, theft, commission of
a felony, or proven dishonesty in the course of his employment by the Company or
any of its subsidiaries, which conduct damaged the Company or any of its
subsidiaries, or disclosed trade secrets of the Company or any of its
subsidiaries,
or (b) participated, engaged in or had a material financial, or other interest,
whether as an employee, officer, director, consultant, contractor, stockholder,
owner, or otherwise, in any commercial endeavor in the United States which is
competitive with the business of the Company or any of its subsidiaries without
the written consent of the Company or such subsidiary, the Grantee shall forfeit
all outstanding Options and all outstanding Awards, including all exercised
Awards pursuant to which the Company has not yet delivered evidence of the
shares. Clause (b) shall not be deemed to have been violated solely by reason of
a Grantee’s ownership of stock or securities of any publicly owned corporation,
if that ownership does not result in effective control of the
corporation. In addition to the foregoing, the Committee may impose
such other limitations and restrictions on the exercise of an Award following
the Termination Date as it deems appropriate.
The
decision of the Committee as to the cause of an employee’s discharge, the damage
done to the Company or its subsidiary, and the extent of a Grantee’s competitive
activity shall be final. No decision of the Committee, however, shall affect the
finality of the discharge of the employee by the Company or its subsidiary in
any manner.
8. Terms and Conditions of Stock
Appreciation Rights. The Committee may in its discretion grant
a right to receive the appreciation in the Fair Market Value of shares of Stock
(a “Stock Appreciation Right” or “SAR”), which shall be subject to the following
terms and conditions and such other terms and conditions as the Committee may
prescribe:
(a) Form of
SAR. Each SAR granted pursuant to the Plan shall be evidenced
by an agreement (the “SAR Agreement”) which shall be in such form as the
Committee shall from time to time approve. SARs may be granted alone
(a “Freestanding SAR”) or in combination with an Option (a “Tandem
SAR”).
(b) Grant and Term of
SARs. The term of each Freestanding SAR shall be for a maximum
of ten years from the date of granting thereof, but may be for a lesser period
or be subject to earlier termination as provided by the Committee or the
provisions of the Plan or SAR Agreement. Any Tandem SAR must be
granted at the same time as the related Option is granted, and such Tandem SAR
or applicable portion thereof shall terminate and no longer be exercisable upon
the termination or exercise of the related Option, except that a Tandem SAR
granted with respect to less than the full number of shares of Stock covered by
the related Option shall not be reduced until the number of shares of Stock then
issuable upon exercise of the related Option is equal to or less than the number
of shares of Stock covered by the Tandem SAR.
(c) SAR Exercise
Price. Each SAR Agreement shall state a per share exercise
price, which shall be not less than 100% of the Fair Market Value of a share of
Stock on the date of the SAR grant.
(d) Exercise and Value of
SARs. An SAR may be exercised from time to time to the extent
it is then exercisable in accordance with its terms. Upon exercise of
a Freestanding SAR, the holder will be entitled to receive an amount in cash or
shares of Stock, as set forth in the SAR Agreement, equal to the excess of the
Fair Market Value of a share of Stock on the date of the exercise less the
exercise price, multiplied by the number of shares of Stock covered by such
Freestanding SAR. Upon the exercise of a Tandem SAR, the holder may
surrender any related Option or portion thereof which is then exercisable and
elect to receive in exchange therefor cash or shares of Stock, as set forth in
the SAR Agreement, in an amount equal to the excess of the Fair Market Value of
such share of Stock on the date of the exercise less the exercise price,
multiplied by the number of shares of Stock covered by the related Option or the
portion thereof which is so surrendered. Any Option related to a
Tandem SAR shall no longer be exercisable to the extent the related Tandem SAR
has been exercised. No fractional shares of Stock shall be issued
hereunder. The holder of an SAR shall not have any rights as a
stockholder with respect to the Stock covered by the SAR, unless and until
shares of Stock are issued to the Grantee upon the exercise of such
SAR.
(e) Payment of Stock
Appreciation Right. Payment of an SAR shall be in the form of
shares of Stock, cash or any combination of shares of Stock and cash. The form
of payment upon exercise of such a right shall be determined by the Committee
either at the time of grant of the SAR or at the time of exercise of the
SAR. All shares of Stock issued upon the exercise of an SAR shall be
valued at the Fair Market Value of such Stock at the time of the exercise of the
SAR.
(f) Transfer of
SARs. All SARs shall be subject to the same restrictions on
transfer as are applicable to Options pursuant to Section 7(e). Any
attempt to transfer an SAR other than as permitted under the Plan shall
terminate the SAR and all rights of the Grantee to that SAR.
(g) Termination of
Employment. Unless otherwise expressly provided in the SAR
Agreement, the terms and conditions relating to the treatment of Options
following cessation of service set forth in Section 7(f) shall apply to SARs,
and the holders of SARs shall have the same rights and be subject to the same
restrictions and limitations as Grantees pursuant to such Section.
(h) No Dividends or Dividend
Equivalents. Notwithstanding anything to the contrary herein,
no dividends or dividend equivalents will be payable with respect to outstanding
SARs.
9. Terms and Conditions of Stock
Grants. The Committee may in its discretion grant Stock
Grants, which shall be made subject to the following terms and conditions and
such other terms and conditions as the Committee may prescribe:
(a) Form of
Grant. Each Stock Grant shall be evidenced by an agreement
(the “Restricted Stock Agreement”) executed by the Company and the Grantee, in
such form as the Committee shall approve, which Agreement shall be subject to
the terms and conditions set forth in this Section 9 and shall contain such additional terms and
conditions not inconsistent with the Plan as the Committee shall
prescribe.
(b) Number of Shares Subject to
an Award; Consideration. The Restricted Stock Agreement shall
specify the number of shares of Stock subject to the Stock Grant. A
Stock Grant shall be issued for such consideration as the Committee may
determine appropriate and may be issued for no cash consideration or for such
minimum cash consideration as may be required by applicable law.
(c) Conditions. Each
Stock Grant shall be subject to such conditions as the Committee shall establish
(the “Conditions”), which may include, but not be limited to, conditions which
are based upon the continued service of the Grantee over a specified period of
time, or upon the attainment by the Company of one or more measures of the
Company’s operating performance, such as increases in cash flows, net profits,
Stock price, Company, segment or affiliate sales, market share, earnings per
share, return on assets, or return on stockholder equity or, except in the case
of persons who are “covered employees” within the meaning of Section 162(m) of
the Code, such other measures as may be determined by the Committee (the
“Performance Conditions”), or upon a combination of such
factors. Measures of operating performance may be based upon the
performance of the Company or upon the performance of a defined business unit or
function for which the Grantee has responsibility or over which the Grantee has
influence. The Grantee shall have a vested right to the Stock subject
to the Stock Grant to the extent that the Conditions applicable to such Stock
Grant have been satisfied. A Grantee shall forfeit all of his right,
title and interest in and to any Stock subject to a Stock Grant in the event
that (and to the extent that) such Conditions are not satisfied.
(d) Special rules relating to
Stock Grants subject to Performance Conditions.
(i) The
Committee may award Stock Grants to employees or consultants subject to
satisfaction of specified performance goals established by the Committee. The
terms and provisions relating to these performance-based awards are intended to
satisfy Section 162(m) of the Code and the regulations issued thereunder. The
designation of an employee or consultant eligible for a specific performance
based Stock Grant shall be made by the Committee in writing prior to the
beginning of the period for which the performance is measured (or within such
period as permitted by IRS regulations). The Committee shall establish the
maximum number of shares of Stock to be issued to a designated employee or
consultant if the performance goal or goals are met. Except with
respect to persons who are “covered employees” within the meaning of Section
162(m) of the Code, the Committee reserves the right to make downward
adjustments in the maximum amount of an Award if in its discretion unforeseen
events make such adjustment appropriate.
(ii) The
Committee must certify in writing that a performance goal has been satisfied
prior to the vesting of Stock under any Stock Grant subject to Performance
Conditions. If the Committee certifies the entitlement of an employee
or consultant to the Stock underlying such a Stock Grant, evidence thereof will
be delivered to such employee or consultant as soon as administratively
practicable, and subject to other applicable provisions of the Plan, including
but not limited to, all legal requirements and tax withholding.
(e) Limitations on
Transferability. As used herein, the term “Restricted Period”
means, with respect to any shares of Stock subject to a Stock Grant, the period
beginning on the Award Date and ending on the date on which the Conditions
applicable
to the Stock Grant have been met. During the Restricted Period, Stock
Grants shall not be transferable other than by will or the laws of descent and
distribution, and during the lifetime of the Grantee, the Grantee will not be
permitted to sell, transfer, exchange, pledge, assign or otherwise dispose of
any shares of Stock subject to the Stock Grant (except for shares of Stock as to
which the Grantee’s rights have vested). Any attempt to transfer a
Stock Grant other than as permitted under the Plan shall terminate the Stock
Grant and all rights of the Grantee to that Stock Grant.
(f) Cessation of
Service
(i) Death of Employee
Grantee. In the event of a Termination Date during the
Restricted Period as a result of an employee’s death, all remaining time-based
restrictions shall be accelerated and be deemed to have been satisfied as of the
Termination Date, and all stock underlying a Stock Grant subject to Performance
Conditions which have not been satisfied shall be forfeited and shall be retired
by the Company and resume the status of treasury shares as of the Termination
Date.
(ii) Other Cessations of
Service. Upon a cessation of service during the Restricted
Period for any reason other than as set forth in Section 9(f)(i) above, all
shares of Stock subject to a Stock Grant as to which the Conditions have not
lapsed or been satisfied or waived shall be forfeited by the Grantee and shall
be retired by the Company and shall resume the status of treasury shares as of
the Termination Date. In the event of a Grantee’s cessation of
service for any reason, including as a result of a Grantee’s death, the
Committee may, in its sole discretion when it finds that such an action would be
in the best interests of the Company, accelerate or waive in whole or in part
any or all time-based or continuous service Conditions or Performance Conditions
with respect to all or part of such Grantee’s Stock Grant, except as to any
Stock Grant that is intended to constitute “performance-based compensation”
under Section 162(m) of the Code, and provided the Committee may not exercise
such discretion in connection with a termination of service for gross
misconduct, including without limitation, violations of applicable Company
policies or legal or ethical standards.
(g) Rights as a
Stockholder. Except as otherwise provided herein or as the
Committee may otherwise determine, a Grantee of a Stock Grant shall have all of
the rights of a stockholder of the Company, including the right to vote the
shares subject to a Stock Grant and to receive dividends and other distributions
thereon, provided that distributions in the form of stock shall be subject to
all of the terms and conditions of the Plan and the Restricted Stock
Agreement.
10. Changes in Capitalization,
Dissolution and Change in Control.
(a) Changes in
Capitalization. In the event of a
change in the outstanding stock of the Company (including but not limited to
changes in either the number of shares or the value of shares) by reason of any
stock split, reverse stock split, dividend or other distribution (whether in the
form of shares, other securities or other property, but not including regular
cash dividends), extraordinary cash dividend, recapitalization, merger in which
the stockholders of the Company immediately prior to the merger continue to own
a majority of the voting securities of the successor entity immediately after
the merger, consolidation, split-up, spin-off, reorganization, combination,
repurchase or exchange of shares or other securities, or other similar corporate
transaction or event, if the Committee shall determine in its sole discretion
that, in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, such transaction or event
equitably requires an adjustment in the aggregate number and/or class of shares
of Stock available under the Plan (including for this purpose the number of
shares of Stock available for issuance under the Plan or limit under Section
6(b)) or in the number, class and/or price of shares of Stock subject to
outstanding Options and/or Awards), such adjustment shall be made by the
Committee and shall be conclusive and binding for all purposes under the
Plan. A participant holding an outstanding award has a legal right to
an adjustment that preserves without enlarging the value of such award, with the
terms and manner of such adjustment to be determined by the
Committee.
(b) Dissolution. Notwithstanding
any other provision of this Plan or any Award Agreement entered into pursuant to
the Plan, to the extent permitted by applicable law, upon a dissolution of the
Company: (i) all Options and SARs then outstanding under the Plan shall become
fully exercisable as of the effective date of the dissolution; and (ii) all
Conditions of all Stock Grants then outstanding shall be deemed satisfied as of
the effective date of the dissolution. In addition, the Board may in
its discretion cancel all or any portion of a Grantee’s then outstanding Options
and SARs, and in consideration of such cancellation, shall cause to be paid to
such Grantee pursuant to the plan of dissolution, an amount in cash equal to the
difference between the value of the consideration (as determined by the Board)
received by the stockholders of the Company for a share of Stock under the plan
of dissolution and any applicable exercise price. Options and SARs
not exercised or cancelled prior to or upon a dissolution shall be
terminated.
(c) Change in
Control.
(i) If
Awards granted to employees, consultants and non-employee directors pursuant to
the Plan continue to be outstanding following the effective date of a Change in
Control, then in the event of a Qualified Termination (as defined below) of a
Grantee’s employment with the Company or any of its subsidiaries or a
termination of service by the Company with respect to a non-employee director or
consultant during the three (3) year period following the Change in Control and
prior to the full vesting of an Award granted to such Grantee under the Plan
prior to the Change in Control, all outstanding unvested Awards granted to such
Grantee prior to the Change in Control shall immediately become fully vested and
exercisable to the extent permitted by law, notwithstanding any provisions of
the Plan or of the applicable Award Agreement to the contrary.
(ii) If
Awards issued pursuant to the Plan do not continue to be outstanding following
the effective date of a Change in Control, then to the extent Awards are not
substituted or replaced with Qualified Substitute Awards, (A) any Options and
SARs not so substituted or replaced shall become fully exercisable as of the
date of the Change in Control; and (B) the Conditions of any Stock Grants not so
substituted or replaced shall be deemed satisfied as of the effective date of
the Change in Control. In addition, the Board (constituted
immediately prior to the effectiveness of such Change in Control) may in its
discretion cancel all or any portion of a Grantee’s then outstanding Options and
SARs, and in consideration of such cancellation, shall cause to be paid to such
Grantee upon the effectiveness of such Change in Control, an amount in cash
equal to the difference between the value of the consideration (as determined by
the Board) received by the stockholders of the Company for a share of Stock in
the Change in Control and any applicable exercise price. Options and
SARs described in this clause (ii) that are not substituted or replaced with
Qualified Substitute Awards and are not exercised or cancelled prior to or upon
a Change in Control shall be terminated.
(iii) For
the purpose of this Section 10(c), the following terms shall have the following
meanings:
(A) A
“Change in Control” shall mean and include the following transactions or
situations:
(1) A
sale, transfer, or other disposition by the Company through a single transaction
or a series of transactions of securities of the Company representing thirty
(30%) percent or more of the combined voting power of the Company’s then
outstanding securities to any “Unrelated Person” or “Unrelated Persons” acting
in concert with one another. For purposes of this definition, the term “Person”
shall mean and include any individual, partnership, joint venture, association,
trust corporation, or other entity (including a “group” as referred to in
Section 13(d)(3) of the Exchange Act). For purposes of this definition, the term
“Unrelated Person” shall mean and include any Person other than the Company, a
wholly-owned subsidiary of the Company, or an employee benefit plan of the
Company; provided however, a sale to underwriters in connection with a public
offering of the Company’s securities pursuant to a firm commitment shall not be
a Change in Control;
(2) A
sale, transfer, or other disposition through a single transaction or a series of
transactions of all or substantially all of the assets of the Company to an
Unrelated Person or Unrelated Persons acting in concert with one
another;
(3) A
change in the ownership of the Company through a single transaction or a series
of transactions such that any Unrelated Person or Unrelated Persons acting in
concert with one another become the “Beneficial Owner,” directly or indirectly,
of securities of the Company representing at least thirty (30%) percent of the
combined voting power of the Company’s then outstanding securities. For purposes
of this definition, the term “Beneficial Owner” shall have the same meaning as
given to that term in Rule 13d-3 promulgated under the Exchange Act, provided
that any pledgee of voting securities is not deemed to be the Beneficial Owner
thereof prior to its acquisition of voting rights with respect to such
securities;
(4) Any
consolidation or merger of the Company with or into an Unrelated Person, unless
immediately after the consolidation or merger the holders of the common stock of
the Company immediately prior to the consolidation or merger are the beneficial
owners of securities of the surviving corporation representing at least fifty
(50%) percent of the combined voting power of the surviving corporation’s then
outstanding securities;
(5) During
any period of two years, individuals who, at the beginning of such period,
constituted the Board of the Company cease, for any reason, to constitute at
least a majority thereof, unless the election or nomination for election of each
new director was approved by the vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period;
or
(6) 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, or any successor regulation of similar importance,
regardless of whether the Company is subject to such reporting
requirement.
(B) A
“Qualified Termination” shall mean:
(1) A
termination by the Company of a Grantee’s employment with the Company or any of
its subsidiaries for any reason other than the Grantee’s death, Disability,
willful misconduct or activity deemed detrimental to the interests of the
Company, provided the Grantee executes a general release in favor of the
Company; or
(2) A
resignation by the Grantee from employment with the Company or any of its
subsidiaries with good reason, which includes (i) a substantial adverse change
in the nature or status of the Grantee’s responsibilities, (ii) a reduction in
the Grantee’s base salary and/or levels of entitlement or participation under
any incentive plan or employee benefit program without the substitution or
implementation of an alternative arrangement of substantially equal value, or
(iii) the Company requiring the Grantee to relocate to a work location more than
fifty (50) miles from his work location prior to the Change in
Control.
(3) A
“Qualified Substitute Award” shall mean an Award which has substantially the
same value and is subject to terms and conditions, including vesting, no less
favorable to the Grantee than the vesting and other terms and conditions for
which such Award was substituted, and which Award provides for immediate vesting
upon a Qualified Termination of the Grantee’s employment by the successor
employer or a cessation of service of a non-employee director or consultant
within the three (3) year period following the date of grant of such Qualified
Substitute Award.
(d) No Constraint on Corporate
Action. Nothing in the Plan shall be construed (i) to
limit or impair or otherwise affect the Company’s right or power to make
adjustments, reclassifications, reorganizations or changes to its capital or
business structure, or to merge or consolidate, dissolve or sell or transfer all
or any part of its business or assets, or (ii) except as provided in Section 13,
to limit the right or power of the Company or any subsidiary to take any action
which such entity deems to be necessary or appropriate.
(e) Limitation on Adjustments
under Section 162(m). Notwithstanding anything to the contrary
in this Section 10, no adjustments shall be made under this Section 10 with
respect to an Award to an employee covered under Section 162(m) of the Code to
the extent such adjustment would cause an Award intended to qualify as
“performance-based compensation” under that Section of the Code to fail to so
qualify.
11. Stockholder
Approval. The Plan is subject to the approval by the
affirmative vote of a majority of the shares of Stock present in person or
represented by proxy at a duly held meeting of the stockholders of the Company
within twelve months after the date of the adoption of the Plan by the Board
(the date of which approval is the “Effective Date”). No Award
granted under the Plan shall vest or be exercisable prior to the Effective
Date. If the Effective Date shall not occur on or before February 23,
2010, the Plan and all then outstanding Awards made hereunder shall
automatically terminate and be of no further force and effect.
12. Term of Plan. The
Plan, if approved by the Company’s stockholders, will be effective February 24,
2009. The Plan shall terminate on February 23, 2019 and no Awards
shall be granted after such date, provided that the Board may at any time
terminate the Plan prior thereto. Except as provided in Section 10,
the termination of the Plan shall not affect the rights of Grantees under Awards
previously granted to them and all Awards shall continue in full force and
effect after termination of the Plan, except as such Awards may lapse or be
terminated by the terms of the Plan or the Award Agreement.
13. Amendment of the
Plan. The Board shall have complete power and authority to
modify or amend the Plan (including the forms of Award Agreements) from time to
time in such respects as it shall deem advisable; provided, however, that the
Board shall not, without approval by the affirmative vote of a majority of the
shares of Stock present in person or represented by proxy at a duly held meeting
of the stockholders of the Company, (i) increase the maximum number of shares of
Stock which in the aggregate are subject to Awards or which may be granted
pursuant to Options under the Plan (except as provided by Section 10), (ii)
extend the term of the Plan or the period during which Awards may be granted or
exercised, (iii) reduce the Option or SAR exercise price below 100% (110%
in the case of an ISO granted to a 10% Holder) of the Fair Market Value of the
Stock issuable upon exercise of the Option or to which the SAR relates, as
applicable, at the time of the granting thereof, other than to change the manner
of determining the Fair Market Value thereof (consistent with the rules under
Section 409A of the Code), (iv) except as provided by Section
10, increase the maximum number of shares of Stock for which an employee may be
granted an Award during any calendar year under the Plan pursuant to Section
6(b), (v) materially increase the benefits accruing to participants under
the Plan, (vi) change the designation or class of employees eligible to receive
Awards under the Plan, or (vii) with respect to Options which are intended to
qualify as ISOs, amend the Plan in any respect which would cause such Options to
no longer qualify for ISO treatment pursuant to the Code. No
amendment of the Plan shall, without the consent of the Grantee, adversely
affect the rights of such Grantee under any outstanding Award
Agreement.
The
Plan is intended to comply with the requirements of Section 409A of the Code,
without triggering the imposition of any tax penalty thereunder. To
the extent necessary or advisable, the Board may amend the Plan or any Award
Agreement to delete any conflicting provision and to add such other provisions
as are required to fully comply with the applicable provisions of Section 409A
of the Code and any other legislative or regulatory requirements applicable to
the Plan.
14. Taxes. The Company
may make such provisions as it deems appropriate for the withholding of any
income, employment or other taxes which it determines is required in connection
with any Award made under the Plan, including requiring the Grantee to make a
cash payment to the Company equal to the Company’s withholding obligation or
deducting such amount from any payment of any kind otherwise due to the
Grantee. The Company may further require notification from the
Grantee upon any disposition of Stock acquired pursuant to the exercise of
Options granted hereunder.
15. Indemnification of the Committee and
the Board. With respect to administration of this Plan, the Company shall
indemnify each present and future member of the Committee and the Board against,
and each member of the Committee and the Board shall be entitled without further
act on his part to indemnity from the Company for, all expenses (including
attorney's fees, the amount of judgments, and the amount of approved settlements
made with a view to the curtailment of costs of litigation, other than amounts
paid to the Company itself) reasonably incurred by him in connection with or
arising out of any action, suit, or proceeding in which he may be involved by
reason of his being or having been a member of the Committee and/or the Board,
whether or not he continues to be a member of the Committee and/or the Board at
the time of incurring the expenses, including, without limitation, matters as to
which he shall be finally adjudged in any action, suit or proceeding to have
been found to have been negligent in the performance of his duty as a member of
the Committee or the Board. However, this indemnity shall not include any
expenses incurred by any member of the Committee and/or the Board in respect of
matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duty as a member of the Committee and/or the Board. In
addition, no right of indemnification under this Plan shall be available to or
enforceable by any member of the Committee and/or the Board unless, within 60
days after institution of any action, suit or proceeding, he shall have offered
the Company, in writing, the opportunity to handle and defend same at its own
expense. This right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each member of the Committee and the Board and
shall be in addition to all other rights to which a member of the Committee
and/or the Board may be entitled as a matter of law, contract, or
otherwise.
16. Code References and
Definitions. Whenever reference is made in the Plan to a
Section of the Code, the reference shall be to such section as it is now in
force or as it may hereafter be amended. The term “subsidiary” shall
have the meaning given to the term “subsidiary corporation” by Section 424(f) of
the Code. The terms “Incentive Stock Option” and “ISO” shall have the
meanings given to them by Section 422 of the Code. The term “10%
Holder” shall mean any person who, for purposes of Section 422 of the Code,
beneficially owns more than 10% of the total combined voting power of all
classes of stock of the Company or of any subsidiary of the
Company. The term “Grantee” means the holder of an Option, an SAR or
a Stock Grant granted hereunder. The term “Award Agreement” as used
herein means an Option Agreement, SAR Agreement or Restricted Stock
Agreement.
PROXY
NEVADA
GOLD & CASINOS, INC.
SPECIAL
MEETING OF SHAREHOLDERS
APRIL
14, 2009
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIAL:
The
Notice of Meeting and Proxy Statement are available at
http://www.irconnect.com/uwn/pages/sec-filings.html
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NEVADA GOLD &
CASINOS, INC.
The
undersigned shareholder of Nevada Gold & Casinos, Inc. (the “Company”)
hereby acknowledges receipt of the Notice of Special Meeting of Shareholders and
Proxy Statement and hereby appoints James J. Kohn or Ernest E. East, and each of
them, with full power of substitution, as Proxy or Proxies to vote as specified
in this Proxy all the shares of common stock of the Company of the undersigned
at the Special Meeting of Shareholders of the Company to be held at the Sheraton
Suites Houston, 2400 West Loop South, Houston, Texas 77027 on Tuesday, April 14,
2009 at 3:00 p.m. Central time, or at any adjournment or postponement
thereof. Either of such Proxies or substitutes shall have and may
exercise all of the powers of said Proxies hereunder. The undersigned
shareholder hereby revokes any Proxy or Proxies heretofore executed for such
matters.
THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER AS DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE APPROVAL OF THE 2009 EQUITY INCENTIVE PLAN AND IN THE DISCRETION OF THE
PROXIES AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL
MEETING. THE UNDERSIGNED SHAREHOLDER MAY REVOKE THIS PROXY AT ANY
TIME BEFORE IT IS VOTED BY DELIVERING TO THE SECRETARY OF THE COMPANY EITHER A
WRITTEN REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE,
OR BY APPEARING AT THE SPECIAL MEETING AND VOTING IN
PERSON. THIS
PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE IT WILL BE
VOTED “FOR” PROPOSAL 1. PLEASE MARK, SIGN, DATE AND RETURN THIS CARD
USING THE ENCLOSED RETURN ENVELOPE.
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For
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Against
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Abstain
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1.
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Approval
of the 2009 Equity Incentive Plan
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2.
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The
Proxies are authorized to vote upon such other business as may properly
come before the meeting.
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[Signature]
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[Signature
if jointly held]
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[Printed
Name]
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Please
date and sign exactly as your name(s) is (are) shown on the share certificate(s)
to which the Proxy applies. When shares are held by joint-tenants or otherwise
by more than one person, all should sign. When signing as an executor,
administrator, trustee, guardian, attorney-in fact, or other fiduciary, please
give full title as such. When signing as a corporation, please sign in full
corporate name by President or other authorized officer. When signing as a
partnership, please sign in partnership name by an authorized
person.