EXHIBIT 4.1
STOCK OPTION AGREEMENT
THIS AGREEMENT (this "Agreement"), effective as of April 2, 1997 is made
and entered into by and between Anchor Gaming, a Nevada Company (the "Company"),
and the person whose name is set forth below as the Optionee on the signature
page of this Agreement (the "Optionee")
RECITALS:
A. Optionee has valuable expertise in the gaming industry and the Company
desires to provide an incentive to Optionee to remain with the Company and to
compensate Optionee for his service to the Company;
B. The Company has entered into that certain March 1997 Amendment to
Employment Agreement (the Employment Agreement of such Optionee as so amended is
referred to as the "Employment Agreement") with Optionee which provides for the
grant of an option (the "Option") to purchase shares of Common Stock, $.01 par
value, of the Company (the "Common Stock"), subject to certain conditions;
C. The parties hereto desire to evidence in writing the terms and
conditions of the Option.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
promises set forth herein, and other good and valuable consideration the receipt
and sufficiency of which are mutually acknowledged, the parties agree as
follows:
TERMS:
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the meanings indicated:
CHANGE OF CONTROL has the meaning given in the Employment Agreement.
DISABILITY. Any medically determinable physical or mental impairment that,
in the opinion of the Company's Board of Directors, based upon medical reports
and other evidence satisfactory to the Board of Directors, can reasonably be
expected to prevent the Optionee from performing substantially all of the
Optionee's customary duties of employment for a continuous period of not less
than 12 months.
PARACHUTE PAYMENT means any payment that counsel to the Company determines
is reasonably likely to constitute a "parachute payment" under Section 280G of
the Internal Revenue Code of 1986 as amended.
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VEST and derivative terms mean that the Optionee has the legally
enforceable right to exercise the Option in the sole discretion of the Optionee.
2. GRANT OF OPTION. The Company hereby grants to the Optionee, upon the
terms and subject to the conditions, limitations and restrictions set forth in
this Agreement, an Option to acquire the number of shares of Common Stock, at
the Purchase Price per share set forth on ATTACHMENT A to this Agreement,
effective as of the date of this Agreement (the "Award Date"). The Optionee
hereby accepts the Option from the Company.
3. VESTING. The shares of Common Stock subject to the Option shall vest
so long as the Employee is an employee of the Company as set forth on ATTACHMENT
A to this Agreement.
4. EXERCISE. In order to exercise the Option with respect to any vested
portion, the Optionee shall provide written notice (the "Exercise Notice") to
the Company at its principal executive office stating the number of shares in
respect of which the option is being exercised. The Exercise Notice must be
signed by the Optionee and must include his complete address and social security
number. If the person exercising the Option is a transferee of the Optionee by
will or under the laws of descent and distribution, the Exercise Notice must be
accompanied by appropriate proof of the right of such transferee to exercise
this Option. At the time of exercise, the Optionee shall pay to the Company the
Purchase Price per share set forth on ATTACHMENT A to this Agreement times the
number of vested shares as to which the Option is being exercised. The Optionee
shall make such payment (i) by certified check or (ii) if the Company so
permits, in its sole discretion, by the delivery of shares of Common Stock
having a Fair Market Value (defined below) on the date immediately preceding the
exercise date equal to the aggregate Purchase Price. If the Option is exercised
in full, the Optionee shall surrender this Agreement to the Company at the
Company's option for cancellation. If the Option is exercised in part, the
Optionee shall surrender this Agreement to the Company, at the Company's option,
so that the Company may make appropriate notation hereon or cancel this
Agreement and issue a new agreement representing the unexercised portion of the
Option. The Option may not be exercised for less than 100 shares at a time or
the remaining shares purchasable under the Option, if less than 100 shares.
"Fair Market Value" shall mean (i) Market or other exchange on which the Common
Stock is traded; or (ii) if there is no reported price information for the
Common Stock, the Fair Market Value as determined in good faith by the Board of
Directors.
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), the Option
may be exercised by a broker-dealer acting on behalf of the Optionee if (a) the
broker-dealer has received from the Optionee or the Company a fully and duly
endorsed agreement evidencing such option, together with instructions signed by
the Optionee requesting the Company to deliver the shares of Common Stock
subject to such option to the broker-dealer on behalf of the Optionee and
specifying the account into which such shares should be deposited, (b) adequate
provision has been made with respect to the payment of any withholding taxes due
upon such exercise, and (c) the broker-dealer and the Optionee have otherwise
complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220, or any
successor provision.
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The Option shall be exercisable during the lifetime of the Optionee only by
the Optionee. To the extent exercisable after the Optionee's death, the Option
shall be exercised only by the Optionee's representatives, executors, successors
or beneficiaries.
5. EXPIRATION OF OPTION. The Option shall expire, and shall not be
exercisable with respect to any vested portion as to which the Option has not
been exercised, on the first to occur of: (a) the tenth anniversary of the date
of this Agreement; or (b) one year after any termination of the Optionee's
employment with the Company following a Change of Control or, if shorter, the
remaining term of the Option. The Option shall expire, and not be exercisable,
with respect to any unvested portion, immediately upon the termination of the
Optionee's employment with the Company for any reason, including death.
6. PARACHUTE PAYMENT. Notwithstanding any provision of this Agreement to
the contrary, in no event will the Optionee be allowed to exercise any Option to
the extent that such exercise would result in any payment to or for the benefit
of the Optionee by the Company pursuant to this Agreement being a Parachute
Payment.
7. TAX WITHHOLDING. Any provision of this Agreement to the contrary
notwithstanding, the Company may take such steps as it deems necessary or
desirable for the withholding of any taxes that it is required by law or
regulation of any governmental authority, federal, state or local, domestic or
foreign, to withhold in connection with any of the shares of Common Stock
subject hereto, including requiring the Optionee to pay to the Company the
amount of such withholding tax before the Company issued any shares pursuant to
the exercise of the Option.
8. DILUTION. If the number of shares of Common Stock outstanding is
changed by reason of a stock dividend, stock split, recapitalization or
combination of shares, the number of shares of Common Stock then issuable upon
exercise of the Option and the Purchase Price per share will be appropriately
adjusted. In the event of any merger, consolidation, reorganization, or
recapitalization of the Company pursuant to which holders of the Common Stock
receive other securities (a "Reorganization Transaction"), then upon any
subsequent exercise of the Option, the Optionee will be entitled to receive, for
each share of Common Stock issuable upon exercise of the Option prior to such
Reorganization Transaction, the number and kind of securities received in
respect of one share of Common Stock as a result of such Reorganization
Transaction.
9. TRANSFER OF OPTION. The Optionee shall not, directly or indirectly,
sell, transfer, pledge, encumber or hypothecate or reduce his risk with respect
to ("Transfer") any unvested portion of the Option or the rights and privileges
pertaining thereto. In addition, the Optionee shall not, directly or
indirectly, transfer any vested portion of the Option or any shares of Common
Stock acquired upon exercise of the Option other than (i) with the prior written
consent of the Company, (ii) by will or the laws of descent and distribution,
(iii) with respect to shares of Common Stock acquired upon exercise of the
Option, pursuant to an effective registration statement filed under the Act, or
(iv) with respect to shares of Common Stock acquired upon exercise of the
Option, pursuant to an exemption from the registration requirements of the Act.
Any permitted transferee to whom the Optionee shall transfer the Option pursuant
to (i) or (ii) above shall agree to be bound by this Agreement. Neither the
Option nor the underlying shares of Common Stock is liable for or subject to, in
whole or in part, the debts, contracts, liabilities or torts of the Optionee,
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nor shall they be subject to garnishment, attachment, execution, levy or other
legal or equitable process.
10. CERTAIN LEGAL RESTRICTIONS. The Company shall not be obligated to
sell or issue any shares of Common Stock upon the exercise of the Option or
otherwise unless the issuance and delivery of such shares shall comply with all
relevant provisions of law and other legal requirements including, without
limitation, any applicable federal or state securities laws and the requirements
of any stock exchange upon which shares of the Common Stock may then be listed.
As a condition to the exercise of the Option or the sale by the Company of any
additional shares of Common Stock to the Optionee, the Company may require the
Optionee to make such representations and warranties as may be necessary to
assure the availability of an exemption from the registration requirements of
applicable gaming regulations or federal or state securities laws. The Company
shall not be liable for refusing to sell or issue any shares if the Company
cannot, using commercially reasonable efforts, obtain authority from the
appropriate regulatory bodies reasonably deemed by the Company to be necessary
to lawfully sell or issue such shares. The shares of Common Stock issued upon
the exercise of the Option may not be transferred except in accordance with
applicable federal or state securities laws. At the Company's option, the
certificate evidencing shares of Common Stock issued to the Optionee will bear
appropriate legends restricting transfer under gaming and other applicable law.
Any Common Stock issued pursuant to the exercise of Options granted
pursuant to this Agreement during the Optionee's service as an officer or
director of the Company under Rule 16b-3 shall not be transferred until at least
six months have elapsed from the date of grant of such Option to the date of a
disposition of the Common Stock underlying such Option.
11. MISCELLANEOUS.
(a) The Option is intended to be a non-qualified stock option under
applicable tax laws, and it is not to be characterized or treated as an
incentive stock option under the IRC.
(b) The granting of the Option shall impose no obligation upon the
Optionee to exercise the Option or any part thereof. Nothing contained in this
Agreement shall affect the right of the Company to terminate the Optionee at any
time, with or without Cause, or shall be deemed to create any rights to
employment on the part of the Optionee.
(c) The rights and obligations arising under this Agreement are not
intended to and do not affect the employment relationship that otherwise exists
between the Company and the Optionee, whether such employment relationship is at
will or defined by an employment contract. Moreover, this Agreement is not
intended to and does not amend any existing employment contract between the
Company and the Optionee; to the extent there is a conflict between this
Agreement and such an employment contract, the employment contract shall govern
and take priority.
(d) Neither the Optionee nor any person claiming under or through the
Optionee shall be or shall have any of the rights or privileges of a stockholder
of the Company in respect of any of the shares issuable upon the exercise of the
Option herein unless and until certificates
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representing such shares shall have been issued and delivered to the Optionee or
such Optionee's agent.
(e) Any notice to be given to the company under the terms of this
Agreement or any deliver of the Option to the Company shall be addressed to the
Company at its principal executive offices, and any notice to be given to the
Optionee shall be addressed to the Optionee at the address set forth beneath his
or her signature hereto, or at such other address for a party as such party may
hereafter designate in writing to the other. Any such notice shall be deemed to
have been duly given if mailed, postage prepaid, addressed as aforesaid.
(f) Subject to the limitations in this Agreement on the
transferability by the Optionee of the Option and any shares of Common Stock,
this Agreement shall be binding upon and inure to the benefit of the
representatives, executors, successors or beneficiaries of the parties hereto.
(g) THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND THE UNITED STATES, AS
APPLICABLE, WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
(h) If any provision of this Agreement is declared or found to be
illegal, unenforceable or void, in whole or in part, then the parties shall be
relieved of all obligations arising under such provision, but only to the extent
that it is illegal, unenforceable or void, it being the intent and agreement of
the parties that this Agreement shall be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same
objectives.
(i) All section titles and captions in this Agreement are for
convenience only, shall not be deemed part of this Agreement, and in no way
shall define, limit, extend or describe the scope or intent of any provisions of
this Agreement.
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(j) The parties shall execute all documents, provide all information,
and take or refrain from taking all actions as may be necessary or appropriate
to achieve the purposes of this Agreement.
(k) This Agreement, the Employment Agreement, and such written
agreements that are entered and delivered simultaneously with this Agreement,
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings
pertaining thereto.
(l) No failure by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
(m) This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart.
(n) No supplement, modification or amendment of this Agreement or
waiver of any provision of this Agreement shall be binding unless executed in
writing by all parties to this Agreement. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision of this Agreement (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
(o) In addition to all other rights or remedies available at law or
in equity, the Company shall be entitled to injunctive and other equitable
relief to prevent or enjoin any violation of the provisions of this Agreement.
(p) The Company agrees to use its good faith efforts to qualify this
Agreement under Rule 16b-3 under the Exchange Act; to keep a registration
Statement on Form S-8 effective with respect to the shares of Common Stock
covered by this Agreement, subject to a good faith determination by the Board of
Directors of the Company to suspend such effectiveness at any time and from time
to time; and to qualify the shares of Common Stock covered by this Agreement to
be qualified for trading on the Nasdaq-Registered Trademark- National Market.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY
ANCHOR GAMING
By: /s/ Xxxxxxx X. Xxxxxxx
Its: President & Chief Operating Officer
OPTIONEE:
By: /s/ Xxxxxxx Xxxxx
0000 Xxxxx Xxxxxx
Xxx Xxxxx, XX 00000
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ATTACHMENT A
1. The Option covers 200,000 shares of Common Stock with a Purchase Price
per share of $31.875.
2. Expiration Date: July 1, 2007 unless provided otherwise in the
Agreement.
3. Vesting Schedule:
(a) 75,000 shares will Vest in accordance with the terms of the Agreement
as set forth below:
VESTING DATE NUMBER OF SHARES VESTING
March 31, 1999 6,250
June 30, 1999 6,250
September 31, 1999 6,250
December 31, 1999 6,250
March 31, 2000 6,250
June 30, 2000 6,250
September 31, 2000 6,250
December 31, 2000 6,250
March 31, 2001 6,250
June 30, 2001 6,250
September 31, 2001 6,250
December 31, 2001 6,250
(b) An additional 125,000 shares of Common Stock will vest in
accordance with the terms of the Agreement as set forth below. At the end
of each calendar year beginning with 1997, the Board of Directors of the
Company will determine in a manner consistent with generally accepted
accounting principles consistently applied the earnings per share of the
Company for the previous 12-month period. The Board of Directors of the
Company will then determine the percentage growth in the Company's earnings
per from the previous calendar year in a manner consistent with generally
accepted accounting principles consistently applied. The number of
shares of Common Stock set forth below will vest as of December 31 for the
year for which the growth in earnings per share indicated below occurs:
CALENDAR YEAR GROWTH IN EARNINGS PER SHARE OVER TOTAL SHARES VESTING
PREVIOUS CALENDAR YEAR
1997 At least 10% but less than 12% 5,000
At least 12% but less than 14 % 10,000
At least 14% % but less than 16% 15,000
At least 16% but less than 18% 20,000
More than 18% 25,000
1998 At least 10% but less than 12% 5,000
At least 12% but less than 14% 10,000
At least 14% but less than 16% 15,000
At least 16% but less than 18% 20,000
More than 18% 25,000
1999 At least 10% but less than 12% 5,000
At least 12% but less than 14% 10,000
At least 14% but less than 16% 15,000
At least 16% but less than 18% 20,000
More than 18% 25,000
2000 At least 10% but less than 12% 5,000
At least 12% but less than 14% 10,000
At least 14% but less than 16% 15,000
At least 16% but less than 18% 20,000
More than 18% 25,000
2001 At least 10% but less than 12% 5,000
At least 12% but less than 14% 10,000
At least 14% but less than 16% 15,000
At least 16% but less than 18% 20,000
More than 18% 25,000
4. Notwithstanding the foregoing, all of the shares of Common Stock
as to which vesting has not occurred in accordance with the foregoing
provisions of this ATTACHMENT A will vest on June 30, 2005 if and only
if the Optionee has been an employee of the Company for the entire
period from the date of this Option until June 30, 2005. Without
limiting the foregoing, if the Optionee has ceased to be an employee
of the Company at any time during such period for any reason,
including, without limitation, for termination with or without cause,
by death or disability, or voluntary or involuntary, such vesting will
not occur.
