EXHIBIT
4.1


 


ALLIANCE GAMING CORPORATION

AMENDED AND RESTATED

2001 LONG TERM INCENTIVE PLAN


 


The 2001 Long Term Incentive Plan was
originally established by the Board of Directors (the “Board”) of Alliance
Gaming Corporation (the “Company”) and was approved by shareholders of the
Company on December 11, 2001.  The
Board amended and restated the Plan (as defined below) in its entirety
effective as of June 30, 2004.  The
Plan will continue in effect until terminated by the Board in accordance with
the terms of the Plan.


 


1.                                      Purpose of the Plan


 


The Alliance Gaming Corporation Amended and Restated 2001 Long-Term
Incentive Plan (the “Plan”) is intended to encourage stock ownership by
directors, employees and designated paid consultants of the Company and its subsidiaries
(collectively, the “Subsidiaries” and individually, a “Subsidiary”), in order
to increase their proprietary interest in the success of the Company and to
encourage them to remain in the employ of the Company or a Subsidiary.


 


Options granted under the Plan may be either Incentive Stock Options or
Nonstatutory Stock Options; the term “option” when used hereinafter refers to
either Incentive Stock Options or Nonstatutory Stock Options, or both.  Restricted stock and restricted stock units
awarded under the Plan are subject to restrictions as determined in each
specific case by the Board or by a duly appointed committee of the Board (the “Committee”).  Stock Appreciation Rights may be granted
under the Plan.  The term “Award” when
used hereinafter collectively refers to options, Stock Appreciation Rights,
restricted stock and restricted stock units awarded under the Plan.


 


2.                                      Administration


 


Administration of the Plan.  The Plan is administered by the Board or, if
the Board so determines, by the Committee, provided that except as otherwise
provided below, in the case of Awards to directors or officers subject to Section 16
of the Securities Exchange Act of 1934 (the “Exchange Act”), the Committee has
exclusive responsibility for and authority to administer the Plan unless the
Board expressly determines otherwise. 
The membership of the Committee consists of not less than two members of
the Board and will be constituted, if possible, to permit the Plan to comply
with Rule 16b-3 promulgated under the Exchange Act or any successor rule (“Rule 16b-3”)
and with the requirements of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the “Code”).  Duly
authorized actions of the Committee constitute actions of the Board for the
purposes of the Plan and its administration. 
The Board or the Committee, as applicable, has authority in its sole
discretion:


 


to determine the time or times at which, and the
directors, employees and consultants to whom options, Stock Appreciation
Rights, restricted stock and restricted stock units are awarded under the Plan;


 


to determine the base price of any Stock
Appreciation Right, the Incentive Stock Option Price or the Nonstatutory Stock
Option Price (both as defined below) of, and the number of shares of Stock (as
defined below) to be covered by, Stock Appreciation Rights and options granted
under the Plan;


 





















 


to determine the number of shares of Stock to be
covered by awards of restricted stock and restricted stock units under the
Plan;


 


to determine the time or times at which each option
and/or Stock Appreciation Right granted under the Plan may be exercised,
including whether the option or Stock Appreciation Right may be exercised in
whole or in installments;


 


to establish the terms of the restrictions
applicable to any restricted stock and/or restricted stock units awarded, and
to determine the time or times at which restrictions lapse;


 


to interpret the Plan and to prescribe, amend and
rescind rules and regulations relating to it; and


 


to make all other determinations which the Board or
Committee, as applicable, deem necessary or advisable for the administration of
the Plan.


 


Reserved Authority of the Board.  The Committee has all the powers and duties
set forth above, as well as any additional powers and duties that the Board may
delegate to it; provided, however, that the Board expressly retains the right
(i) to determine whether the shares of Stock reserved for issuance upon
the exercise of options or restricted stock units or as restricted stock
awarded under the Plan shall be issued shares or unissued shares, (ii) to
appoint the members of the Committee, and (iii) to terminate or amend the
Plan.  The Board may from time to time
appoint members of the Committee in substitution for or in addition to members
previously appointed, may fill vacancies in the Committee, and may discharge
the Committee.


 


3.                                      Common Stock Subject
to the Plan


 


Limitation on Number of Shares.  The number of shares which may at any time be
made subject to options or Stock Appreciation Rights, or which may be issued
upon the exercise of options or Stock Appreciation Rights granted under the
Plan or made subject to grants of restricted stock or restricted stock units,
is limited to an aggregate of 7,500,000 shares of the common stock, $.10 par value,
of the Company (the “Stock”).  The shares
reserved for issuance pursuant to the Plan may consist either of authorized but
previously unissued shares of Stock, or of issued shares of Stock which have
been reacquired by the Company, as determined from time to time by the
Board.  If any option or Stock
Appreciation Right granted under the Plan expires, terminates or is canceled
for any reason without having been exercised in full, or any restricted stock
or restricted stock unit Award is forfeited for any reason, the shares of Stock
allocable to the unexercised portion of the option or Stock Appreciation Right
or to the forfeited portion of the restricted stock or restricted stock unit
Award may again be made subject to an option or Award under the Plan.


 


Adjustments of Number of Shares.  In the event of a change in the common stock
of the Company that is limited to a change in the designation thereof to “Capital
Stock” or other similar designation, or to a change in the par value thereof,
or from par value to no par value, without increase or decrease in the number
of issued shares, the shares resulting from any such change are deemed to be
the common stock for purposes of the Plan.


 


4.                                      Eligibility


 


Awards may be granted under the Plan to paid consultants, directors and
employees of the Company or a Subsidiary designated by the Board or the
Committee, provided that Incentive Stock Options may be awarded only to regular
full-time employees of the Company or a Subsidiary (including employees who
serve as officers or directors).  As used
in the Plan, “paid consultant” means a natural person who is an independent
contractor retained to perform continuing and substantial services for the


 





















 


Company or any subsidiary, and designated as
a paid consultant by the Board or the Committee, except that no individual
shall be designated a “paid consultant” for purposes of this Plan if such
individual is engaged in promoting or maintaining a market in the securities of
the Company, or in any other capacity that would result in the Form S-8
registration statement being ineffective as to any Awards made to such
individual.  Any person granted an Award
under the Plan (a “Grantee”) remains eligible to receive one or more additional
grants thereafter, notwithstanding that options or Stock Appreciation Rights
previously granted to such person remain unexercised in whole or in part, or
that the applicable restrictions on any restricted stock or restricted stock
units issued to such person have not lapsed.


 


5.                                      Stock Options


 


In General.  The Plan authorizes the Board or the
Committee to grant options that qualify as incentive stock options pursuant to Section 422
of the Code (“Incentive Stock Options”), or options that do not so qualify (“Nonstatutory
Stock Options”).  Each option granted
under the Plan is evidenced by a written and executed option agreement which
will specify whether the option granted therein is an Incentive Stock Option or
a Nonstatutory Stock Option.


 


Incentive Stock Options.  Each stock option agreement covering an
Incentive Stock Option granted under the Plan and any amendment thereof, other
than an amendment to convert an Incentive Stock Option into a Nonstatutory
Stock Option, will conform to the following provisions and may contain other
terms and provisions consistent with the requirements of the Plan as the Board
or the Committee deem appropriate:


 


Option Price.  The purchase price of each of the shares of
Stock subject to an Incentive Stock Option (the “Incentive Stock Option Price”)
will be a stated price which is not less than the fair market value of such
share of Stock, determined in accordance with Section 10 below, or the par
value of such share if greater, as of the date such Incentive Stock Option is
granted; provided, however, that if an employee, at the time an Incentive Stock
Option is granted to him or her, owns stock representing more than 10% of the
total combined voting power of all classes of stock of the Company or of the
parent corporation (as defined in Section 424(e) of the Code), if
any, of the Company or of any of the Subsidiaries (or, under Section 424(d) of
the Code, is deemed to own stock representing more than 10% of the total
combined voting power of all such classes of stock, by reason of the ownership
of such classes of stock, directly or indirectly, by or for any brother,
sister, spouse, ancestor, or lineal descendent of such employee, or by or for
any corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), then the Incentive Stock Option Price of
each share of Stock subject to such Incentive Stock Option will be at least
110% of the fair market value of such share of Stock, as determined in
accordance with Section 10 below.


 


Term.  Incentive Stock Options granted under the
Plan will be exercisable for the periods determined by the Board or the
Committee at the time of grant of each Incentive Stock Option, but in no event
is an Incentive Stock Option exercisable after the expiration of ten years from
the date of grant; provided, however, that an Incentive Stock Option granted to
any employee as to whom the Incentive Stock Option Price of each share of Stock
subject thereto is required to be 110% of the fair market value of the share of
Stock pursuant to the preceding paragraph will not be exercisable after the
expiration of five years from the date of grant.  Each Incentive Stock Option granted under the
Plan is also subject to earlier termination as provided in the Plan.


 


Exercise.  Generally under the Plan, Incentive Stock
Options may be exercised in whole or in installments, to the extent, and at the
time or times during the terms thereof, as determined by the Board or the
Committee at the time of grant of each option.


 





















 


Incentive Stock Options granted under the Plan are exercisable only by
delivery to the Company of written notice of exercise, which states the number
of shares with respect to which such Incentive Stock Option is exercised, the
date of grant of the Incentive Stock Option, the aggregate purchase price for
the shares with respect to which the Incentive Stock Option is exercised and
the effective date of such exercise, which date may not be earlier than the
date the notice is received by the Company nor later than the date upon which
the Incentive Stock Option expires.  The
written notice of exercise must be sent together with the full Incentive Stock
Option Price of the shares purchased, which may be paid in cash or in shares of
any class of issued and outstanding stock of the Company held for more than six
months by the option holder, whether preferred or common, or partly in cash and
partly in such shares of stock.  If any
portion of the Incentive Stock Option Price is paid in shares of stock of the
Company, the shares will be valued at their fair market value, as determined in
accordance with Section 10 below, as of the effective date of exercise of
the Incentive Stock Option.  The delivery
of shares of stock upon exercise of an Incentive Stock Option shall be subject
to such restrictions as the Board or the Committee may determine to be
appropriate, including, without limitation, a requirement that such shares be
held by an agent designated by the Company until sold or otherwise disposed of
by the option holder, to assure that the Company is advised of any disposition of
such shares by the option holder within two years of the date of grant of the
Incentive Stock Option or within one year after the date of exercise of the
Incentive Stock Option.


 


In general, an Incentive Stock Option granted under the Plan remains
outstanding and is exercisable only so long as the person to whom the Incentive
Stock Option was granted remains an officer or employee of the Company, the
parent corporation, if any, of the Company, or any of the Subsidiaries.  All Incentive Stock Options granted under the
Plan are nontransferable, except by will or the laws of descent and
distribution, and are exercisable during the lifetime of the person to whom
granted only by such person (or his duly appointed, qualified, and acting
personal representative).


 


No Incentive Stock Option may be exercised as to fewer than 100 shares
of Stock at any one time without the consent of the Board or the Committee,
unless the number of shares to be purchased upon the exercise is the total
number of shares at the time available for purchase under the Incentive Stock
Option.


 


The Board or the Committee may also permit Grantees (either on a
selective or group basis) to simultaneously exercise options and sell the
shares of the Stock thereby acquired, pursuant to a “cashless exercise”
arrangement or program, selected by and approved of in all respects in advance
by the Board or the Committee.  Payment
instruments shall be received by the Company subject to collection.  The proceeds received by the Company upon
exercise of any option may be used by the Company for general corporate
purposes.  Any portion of an option that
is exercised may not be exercised again.


 


Nonstatutory Stock Options.  Each stock option agreement covering a
Nonstatutory Stock Option granted under the Plan and any amendment thereof will
conform to the following provisions and may contain other terms and provisions
consistent with the requirements of the Plan as the Board or the Committee deem
appropriate:


 


Option Price.  The purchase price of each of the shares of
Stock subject to a Nonstatutory Stock Option (the “Nonstatutory Stock Option
Price”) will be a fixed price determined by the Board or the Committee at the
time of grant, which will not be less than the greater of the par value of such
share, or one hundred percent (100%) of the fair market value of such share,
determined in accordance with Section 10 below, on the date of the grant
of the Nonstatutory Stock Option.


 


Term.  Nonstatutory Stock Options granted under the
Plan are exercisable for a period of ten years unless otherwise determined by
the Board or the Committee at the time of grant.  Each Nonstatutory Stock Option granted under
the Plan will also be subject to earlier termination as provided in the Plan.


 





















 


Exercise.  Generally, under the Plan, Nonstatutory Stock
Options may be exercised in whole or in installments to the extent, and at the
time or times during the terms thereof, as determined by the Board or the
Committee at the time of grant of each option.


 


Nonstatutory Stock Options granted under the Plan are exercisable only
by delivery to the Company of written notice of exercise, which states the
number of shares with respect to which such Nonstatutory Stock Option is
exercised, the date of grant of the Nonstatutory Stock Option, the aggregate
purchase price for the shares with respect to which the Nonstatutory Stock
Option is exercised and the effective date of such exercise, which date may not
be earlier than the date the notice is received by the Company nor later than
the date upon which the Nonstatutory Stock Option expires.  The written notice of exercise must be sent
together with the full Nonstatutory Stock Option Price of the shares purchased,
which may be paid in cash or in shares of any class of issued and outstanding
stock of the Company held for more than six months by the option holder,
whether preferred or common, or partly in cash and partly in such shares of
stock.  If any portion of the
Nonstatutory Stock Option Price is paid in shares of stock of the Company, the
shares will be valued at their fair market value, as determined in accordance
with Section 10 below, as of the effective date of exercise of the
Nonstatutory Stock Option.


 


In general, a Nonstatutory Stock Option granted under the Plan remains
outstanding and is exercisable only so long as the person to whom the
Nonstatutory Stock Option was granted remains either a director, employee or
paid consultant of the Company, the parent corporation, if any, of the Company,
or any of the Subsidiaries.  A person is
deemed to be a paid consultant only so long as he or she continues to perform
and be compensated for substantial services for the Company, the parent
corporation, if any, of the Company, or a Subsidiary, as to which the
determination of the Board or the Committee, as applicable, will be binding and
conclusive.  Unless the Board or
Committee determines otherwise, all Nonstatutory Stock Options granted under
the Plan will be nontransferable, except by will or the laws of descent and
distribution.


 


No Nonstatutory Stock Option may be exercised as to fewer than 100
shares at any one time without the consent of the Board or the Committee,
unless the number of shares to be purchased upon the exercise is the total
number of shares at the time available for purchase under the Nonstatutory
Stock Option.


 


The Board or the Committee may also permit Grantees (either on a
selective or group basis) to simultaneously exercise options and sell the
shares of the Stock thereby acquired, pursuant to a “cashless exercise”
arrangement or program, selected by and approved of in all respects in advance
by the Board or the Committee.  Payment
instruments shall be received by the Company subject to collection.  The proceeds received by the Company upon
exercise of any option may be used by the Company for general corporate
purposes.  Any portion of an option that
is exercised may not be exercised again.


 


The exercise or Option Price of any outstanding Incentive Stock Option
or Nonstatutory Stock Option may not be adjusted or amended by the Board or
Committee (other than in accordance with Section 12 below), whether by
amendment, cancellation, replacement grants, or any other means.  As used herein, “replacement grants” means
any grant of Incentive Stock Options, Nonstatutory Stock Options or Stock
Appreciation Rights reasonably related to any prior or potential cancellation
of any outstanding options or stock appreciation rights for new options or new
stock appreciation rights in tandem with previously granted options or stock
appreciation rights that will operate to cancel the previously granted options
or stock appreciation rights upon exercise of the new options or new stock
appreciation rights.


 





















 


6.                                      Restrictions
Applicable to Restricted Stock


 


The Board or the Committee may place any restrictions it deems
appropriate on any shares of restricted stock awarded under the Plan to an
employee, director or paid consultant; provided, however, that shares of
restricted stock awarded under the Plan are subject to certain restrictions
including the following:


 


Vesting.  In general, shares of Stock awarded to
directors, employees or paid consultants will vest (a) in full with
respect to all Stock underlying the Award of restricted stock at the expiration
of a period of not less than three years from the date of grant of the Award,
or (b) proportionately in equal installments of the Stock underlying the
Award of restricted stock over a period of not less than three years from the
date of grant of the Award, as the Board or the Committee determines, and, in
each such case, based upon continued service during any such period by the
recipient as a director, employee or paid consultant of the Company or any of
its Subsidiaries.  Any shares of Stock
remaining subject to forfeiture in accordance with the related vesting schedule are
hereinafter referred to as “Unvested Shares.” Subject to Sections 11 and
12 below, neither the Board nor the Committee have the authority to otherwise
accelerate the vesting of an Award of restricted stock.


 


Delivery to Escrow.  Unless the Board or the Committee determines
otherwise, upon issuance of a certificate evidencing such shares the recipient
will be required to deliver the certificate, endorsed in blank or with a duly
executed stock power attached, to the Secretary of the Company, or such other
person or entity as the Board or the Committee may designate, to be held until
any vesting restrictions applicable thereto have lapsed or any Unvested Shares
have been forfeited.


 


Legend.  Unless the Board or the Committee determines
otherwise, each certificate evidencing Unvested Shares issued under the Plan
will bear a legend to the effect that such shares are subject to potential
forfeiture and may not be sold, exchanged, transferred, pledged, hypothecated
or otherwise disposed of except in accordance with the terms of an agreement
between the issuer and the registered owner.


 


7.                                      Restricted Stock
Units


 


The Committee may at any time and from time to time grant restricted
stock units under the Plan in such amounts as it determines.  Each restricted stock unit shall entitle the
Grantee to receive from the Company at the end of the vesting period applicable
to such unit one share of Stock, unless the Grantee elects in a timely fashion
prior to the end of the vesting period to defer the receipt of the shares of
Stock subject to the Award of restricted stock units.  Each grant of restricted stock units shall be
evidenced by an Award Agreement which shall specify the applicable restrictions
on such units including the following:


 


Vesting.  In general, restricted stock units awarded to
directors, employees or paid consultants will vest (a) in full with
respect to all Stock underlying the Award of restricted stock units at the
expiration of a period of not less than three years from the date of grant of
the Award, or (b) proportionately in equal installments of the Stock
underlying the Award of restricted stock units over a period of not less than
three years from the date of grant of the Award, as the Board or the Committee
determines, and, in each such case, based upon continued service during any
such period by the recipient as a director, employee or paid consultant of the
Company or any of its Subsidiaries.  Any
shares of Stock remaining subject to forfeiture in accordance with the related
vesting schedule are hereinafter referred to as “Unvested Shares.”  Subject to Sections 11 and 12 below,
neither the Board nor the Committee have the authority to otherwise accelerate
the vesting of an Award of restricted stock units.


 





















 


8.                                      Stock Appreciation
Rights


 


The grant of Stock Appreciation Rights under the Plan is subject to the
following terms and conditions and any additional terms and conditions, not
inconsistent with the express terms and provisions of the Plan, as the Board or
the Committee sets forth in the relevant Award agreement:


 


Stock Appreciation Rights.  A Stock Appreciation Right is an Award
granted with respect to a specified number of shares of Stock entitling the
Grantee to receive an amount equal to the excess of (a) the fair market value
of a share of Stock on the date of exercise over (b) the fair market value
of a share of Stock on the date of grant of the Stock Appreciation Right (the “Base
Price”) multiplied by the number of shares of Stock with respect to which the
Stock Appreciation Right has been exercised. 
Fair market value is determined in accordance with Section 10
below.


 


Grant.  A Stock Appreciation Right may be granted in
addition to any other Award under the Plan or in tandem with or independent of
any Nonstatutory Stock Option or Incentive Stock Option.


 


Date of Exercisability.  Unless otherwise provided in the Grantee’s
Award agreement in respect of any Stock Appreciation Right, a Stock
Appreciation Right may be exercised by the Grantee, in accordance with and
subject to all of the procedures established by the Board or the Committee, in
whole or in part at any time and from time to time during its specified
term.  Notwithstanding the preceding
sentence, in no event is a Stock Appreciation Right exercisable prior to the exercisability
of any Non-Qualified Stock Option or Incentive Stock Option with which it is
granted in tandem.  The Board or the
Committee may also provide, as set forth in the relevant Award agreement, that
some Stock Appreciation Rights will be automatically exercised on one or more
dates specified by the Board or the Committee.


 


Form of Payment.  Upon exercise of a Stock Appreciation Right,
payment may be made in cash, in restricted stock or in shares of unrestricted
Stock, or in any combination thereof, as the Board or the Committee, in its
sole discretion, determines and provides in the relevant Award agreement.


 


Tandem Grant.  The right of the Grantee to exercise a tandem
Stock Appreciation Right terminates to the extent the Grantee exercises the
Non-Qualified Stock Option or the Incentive Stock Option to which the Stock
Appreciation Right is related.


 


The Base Price of any outstanding Stock Appreciation Right may not be
adjusted or amended by the Board or the Committee (other than in accordance
with Section 12 below), whether by amendment, cancellation, replacement
grants, or any other means.


 


9.                                      Rights of Grantees


 


Options.  No holder of an option or Stock Appreciation
Right will be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Stock subject to such option or Stock
Appreciation Right unless and until his or her option or Stock Appreciation
Right has been exercised pursuant to the terms thereof, the Company has issued
and delivered to the holder of the option or Stock Appreciation Right the
shares of Stock as to which the holder has exercised his or her option or Stock
Appreciation Right, and the holder’s name has been entered as a stockholder of
record on the books of the Company. 
Thereupon, such person shall have full voting and other ownership rights
with respect to such shares of Stock.


 


Restricted Stock.  Each recipient of a restricted stock award is
deemed to be the registered owner of any Unvested Shares subject to such award,
notwithstanding that such shares may be subject to restrictions and possible
forfeiture under the terms of the agreement pursuant to which they were
received.  Unless and until all or a
portion of the Unvested Shares are forfeited in accordance with the


 





















 


terms of such agreement, the recipient
thereof will have full voting rights with respect to such shares as well as the
right to receive any and all distributions thereon.


 


Restricted Stock Units.  No holder of a restricted stock unit will be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to such restricted stock unit unless
and until the Company has issued and delivered to the holder of the restricted
stock unit the shares of Stock as to which the Award of restricted stock units
has vested, and the holder’s name has been entered as a stockholder of record
on the books of the Company.  Thereupon,
such person shall have full voting and other ownership rights with respect to
such shares of Stock.


 


10.                               Determination of
Fair Market Value


 


For the purposes of the Plan, the fair market value of a share of stock
of the Company is determined as follows:


 


(a)                                  if on the date
as of which a determination is made the class of stock being valued is admitted
to trading on a national securities exchange or exchanges, including without
limitation the National Association of Securities Dealers Automated Quotation
System (“Nasdaq”), for which actual sale prices are regularly reported, or
actual sales prices are otherwise regularly published for such stock, the fair
market value of a share of the stock is deemed to be equal to the closing sale
price reported for the stock on the date as of which the determination is made
(or the next preceding trading date if the date of determination is not a
trading date); or


 


(b)                                 if on the date
as of which a determination is made no such closing sales prices are reported,
but quotations for the class of stock being valued are regularly listed on the
Nasdaq or another comparable system, the fair market value of a share of the
stock is deemed to be equal to the mean of the average of the closing bid and
asked prices for the stock quoted on such system on the date as of which the
determination is made (or the next preceding trading date if the date of
determination is not a trading date); or


 


(c)                                  if no such
quotations or actual sales prices are available, the fair market value of a
share of the stock will be deemed to be the average of the closing bid and
asked prices furnished by a professional securities dealer making a market in
such shares, as selected by the Board, for the trading date as of which the
determination is made (or the next preceding trading date if the date of
determination is not a trading date).


 


Notwithstanding (a) - (c) above, the Board or the Committee may
determine the fair market value of a share of stock of the Company on the basis
of such factors as it deems appropriate if it determines in good faith that the
approach specified above does not properly reflect the fair market value of
such stock.


 


11.                               Retirement,
Termination of Employment or Death of Holders of Options, Stock Appreciation
Rights and Restricted Stock


 


Retirement or Disability.  If a Grantee retires from employment with the
Company or any of its Subsidiaries as a result of normal retirement (that is,
termination of employment by the Grantee after he or she attains age sixty-five
(65)), or terminates employment with the Company after becoming “permanently
disabled” (as defined in the Gaming and Technology, Inc.  Profit Sharing 401(k) Plan as in effect on
the date of adoption of the Plan by the Board), any restrictions then
applicable to his or her Award will lapse and it will thereafter be exercisable
(in the case of options and Stock Appreciation


 





















 


Rights) or vested and transferable (in the
case of restricted stock and restricted stock units) in whole or in part, by
the person to whom granted (or his or her duly appointed, qualified, and acting
personal representative) in the manner set forth in Sections 5, 6, 7 and 8
above, at any time within the remaining term of the Award, unless otherwise
determined by the Board or the Committee at the time of grant.


 


Other Termination of Service or Employment.  Except as determined by the Board or the
Committee at the time of grant, or as otherwise provided herein or in a Grantee’s
employment agreement, (a) if a person to whom restricted stock has been
awarded under the Plan ceases to be either a director, employee or paid
consultant of the Company or a Subsidiary, any Unvested Shares of restricted
stock held by the person are forfeited as of the last date he or she was either
a director, employee or paid consultant of the Company or a Subsidiary,
(b) if a person to whom restricted stock units have been awarded under the
Plan ceases to be either a director, employee or paid consultant of the Company
or a Subsidiary, the unvested portion, if any, of such restricted stock units
held by the person are forfeited as of the last date he or she was either a
director, employee or paid consultant of the Company or a Subsidiary, and
(c) if a person to whom an option or Stock Appreciation Right has been
granted under the Plan ceases to be either a director, employee or paid
consultant of the Company or a Subsidiary, such option or Stock Appreciation
Right will continue to be exercisable or transferable to the same extent that
it was exercisable on the last day on which he or she was either a director,
employee or paid consultant for a period of 60 days thereafter, whereupon such
option or Stock Appreciation Right will terminate and not be exercisable
thereafter; provided, however, that in the event of termination of employment,
termination of service as a paid consultant, or removal from office as a
director for Cause (as defined below), any such option or Stock Appreciation
Right will terminate ten days after such termination of employment, service or
removal from office rather than 60 days thereafter.  Notwithstanding the immediately preceding
sentence, the term during which an option or Stock Appreciation Right may be
exercised shall not in any event extend beyond the remaining term of such Award
as specified in connection with the grant thereof.  No Award made under the Plan will be affected
by any change of duties or position of the person to whom the Award was made or
by any temporary leave of absence granted to the person by the Company or any
of its Subsidiaries.  For purposes of the
Plan, “Cause” means (i) the Grantee being convicted of a felony,
(ii) the Grantee willfully committing an act of embezzlement or
malfeasance which is intended to materially enrich himself or herself at the
expense of the Company or any of its Subsidiaries or is otherwise intended to
materially harm the Company, or (iii) the Grantee being rejected for an applicable
license or approval by a gaming regulatory authority having jurisdiction over
the Company as a result of an explicit finding of lack of suitability solely as
a result of the Grantee’s commission of a crime or an act of embezzlement or
malfeasance.


 


Death.  Unless otherwise determined by the Board or
the Committee at the time of grant, (a) if a person to whom an option or
Stock Appreciation Right has been granted under the Plan dies prior to the
expiration of the term of the option or Stock Appreciation Right, the option or
Stock Appreciation Right is exercisable by the estate of the Grantee, or by a
person who acquired the right to exercise such option or Stock Appreciation
Right by bequest or inheritance from the Grantee, at any time within two years after
the death of the person and prior to the date upon which such option or Stock
Appreciation Right expires as specified in connection with the grant thereof,
to the extent and in the manner exercisable by the Grantee at the date of his
or her death; (b) if a person to whom restricted stock has been awarded
under the Plan dies prior to the lapse of all restrictions applicable to such
restricted stock, any Unvested Shares held by such person on the date of his or
her death will be forfeited; and (c) if a person to whom restricted stock
units have been awarded under the Plan dies prior to the lapse of all
restrictions applicable to such restricted stock units, the unvested portion of
such restricted stock units held by the person on the date of his or her death
will be forfeited.


 


Termination with Board Approval.  If a Grantee ceases to be either a director,
employee or paid consultant of the Company or a Subsidiary for any reason other
than removal for Cause, and the Board or the Committee expressly determines
that such termination of service or employment is in the best


 





















 


interests of the Company, then an option or
Stock Appreciation Right awarded to the Grantee under the Plan will be
exercisable by the Grantee or by the estate of the Grantee, by a person who
acquired the right to exercise such option or Stock Appreciation Right by
bequest or inheritance from the Grantee or otherwise, for an additional period
following termination of service or employment as determined by the Board or
the Committee but in no event later than the date upon which such option or
Stock Appreciation Right would have expired absent such termination of service
or employment.  Any such extended option
or Stock Appreciation Right will be exercisable only to the extent and in the
manner exercisable by the Grantee at the time of such termination of service or
employment.


 


Incentive Stock Options.  Notwithstanding anything herein to the
contrary or the provisions of any employment agreement, no Incentive Stock
Option shall be exercisable after the date that is (a) in the case of the
Grantee’s termination of employment for any reason other than death or
disability, three months following such termination of employment, or
(b) in the case of the Grantee’s termination of employment due to death or
Total and Permanent Disability (as defined in Code section 22(e)(3)),
twelve months following such termination of employment.


 


12.                               Adjustments


 


Changes in Capitalization.  In the event of any change in the number of
shares of the outstanding Stock of the Company by reason of a stock split,
stock dividend, combination or reclassification of shares, recapitalization, or
similar event, the Board or the Committee will adjust proportionally
(a) the number and kind of shares subject to the Plan, (b) the number
and kind of shares then subject to unexercised options and Stock Appreciation
Rights and outstanding Awards of restricted stock and restricted stock units
and (c) the per share Incentive Stock Option Price, Nonstatutory Stock
Option Price or Base Price (as the case may be) of unexercised options and
Stock Appreciation Rights.  Any such
adjustment will be made without a change in the aggregate purchase price or
aggregate Base Price of the shares of the Stock subject to the unexercised
portion of any option or Stock Appreciation Right.


 


Merger Event.  In the event of any merger, spin-off,
split-off or other similar consolidation, reorganization or change affecting
any class of stock of the Company (a “Merger Event”) subject to Awards made
under the Plan, or any distribution (other than normal cash dividends) to
holders of the stock, fair and equitable adjustment will be made in good faith
by the Board or the Committee, including (without limitation) adjustments to
avoid fractional shares, in respect of (a) all unexercised options or
Stock Appreciation Rights and (b) all then outstanding Awards of
restricted stock or restricted stock units to give proper effect to such event
and preserve the value, rights and benefits of such options, Stock Appreciation
Rights, restricted stock or restricted stock units; provided, however, that the
Board or the Committee may, in the case of any Merger Event pursuant to which
the Company is not the surviving corporation and pursuant to which the former
holders of the Stock do not hold, directly or indirectly, more than a majority
of the voting securities of the resulting entity immediately after the Merger
Event or in connection with any acquisition by any person of more than fifty
percent (50%) of the outstanding shares of the Stock, provide that each option
or Stock Appreciation Right holder will receive a cash payment (in exchange for
and in cancellation of such option or Stock Appreciation Right) equal to the
difference (if greater than zero) between the value of the per share
consideration received by the holders of the Stock in the Merger Event or the
acquisition and the purchase price or Base Price of such option or Stock
Appreciation Right, multiplied by the number of shares of the Stock underlying
such option or Stock Appreciation Right (and if the difference is equal to or
less than zero, the Committee may provide that each such holder will receive no
payment, nor any other compensation, in exchange for and in cancellation of any
such option or Stock Appreciation Right).  In addition, in the event of any Merger Event
pursuant to which all of the outstanding Stock held by the shareholders of the
Company is exchanged for any lawful consideration, all unvested and
unexercisable options or Stock Appreciation Rights outstanding on the date on
which shareholder approval of the Merger Event is obtained will become 100%
vested and exercisable, and all restrictions then applicable to Awards of
restricted stock


 





















 


and restricted stock units outstanding on the
date on which shareholder approval of the Merger Event is obtained will lapse
and such Awards will thereafter be fully vested and transferable.


 


13.                               Maximum Awards


 


The following maximum annual and other amounts are subject to
adjustment under Section 12 above and are subject to the Plan maximum
under Section 3 above.  Each
individual Grantee may not receive in any fiscal year Awards of options and/or
Stock Appreciation Rights exceeding 600,000 underlying shares of Stock.  No more than 600,000 shares of Stock may be
granted as Awards of restricted stock or restricted stock units.  Notwithstanding the foregoing, to the extent
that the aggregate fair market value of stock (determined at the time of grant
of the option) for which Incentive Stock Options first become exercisable by a Grantee
during a calendar year (under all option plans of the Company) exceeds
$100,000, such Options shall be treated as Options that are not Incentive Stock
Options.


 


14.                               Manner of Grant


 


Nothing contained in the Plan or in any resolution adopted by the Board
or any committee thereof or by the stockholders of the Company with respect to
the Plan, except as provided in the Plan, will constitute the granting of an
Award under the Plan.  The granting of an
Award under the Plan is deemed to occur only upon the date on which the Board
or the Committee approves the grant of the Award.  Each Award granted under the Plan shall be
evidenced by a written agreement, in the form determined by the Board or the
Committee, signed by a representative of the Board or the Committee and the
recipient thereof.


 


15.                               Compliance with Laws
and Regulations


 


The obligation of the Company to sell and deliver any shares of Stock
under the Plan is subject to all applicable laws, rules and regulations, and
the obtaining of all approvals by governmental agencies deemed necessary or
appropriate by the Board or the Committee. 
In general, the Board or the Committee may make such changes in the Plan
and include such terms in any Award agreement as may be necessary or
appropriate, in the opinion of counsel to the Company, to comply with the rules
and regulations of any governmental authority, or to obtain for employees
granted Incentive Stock Options the tax benefits under the applicable
provisions of the Code and the regulations thereunder.


 


16.                               Tax Withholding


 


The Company or Subsidiary for which services are performed by a
director, employee or paid consultant granted an Award under the Plan has the
right to deduct or otherwise effect a withholding of any tax (including,
without limitation, any FICA (employment) tax required to be withheld under
Chapter 21 of the Code, any income tax required to be withheld under
Chapter 24 of the Code, and any similar tax imposed under state, local, or
foreign law) required by federal, state, local or foreign laws to be withheld
or otherwise deducted and paid with respect to the grant, vesting or exercise
of any Award or the sale of stock acquired upon the exercise of an Incentive
Stock Option; or, in lieu of such withholding, to require that the Grantee or person
holding such Award pay to the Company or such Subsidiary in cash (or, at the
sole discretion of the Board or the Committee, in the form of shares of Stock)
the amount of any taxes required to be withheld or otherwise deducted and paid
by the Company or its Subsidiary in connection with the grant, vesting or
exercise of any Award or the sale of shares acquired upon the exercise of an
Incentive Stock Option.  The Company may
condition any delivery of stock certificates or other evidence of ownership of shares
of Stock on payment of the tax amounts referred to in this Section 16.


 





















 


17.                               Nonexclusivity of
the Plan


 


Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval has any impact on existing
qualified or nonqualified retirement, bonus or option plans of the Company or
creates any limitations on the power of the Board to adopt any other incentive
arrangements that it may deem desirable, including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock or
restricted stock units otherwise than under the Plan, and such arrangements may
be either applicable generally or only in specific cases.


 


18.                               Amendment


 


The Board at any time, and from time to time, may amend the Plan,
subject to any required regulatory approval and subject to the limitation that,
except as provided above in Section 12, no amendment is effective unless
approved within 12 months after the date of the adoption of such amendment by the
affirmative vote of the holders of a majority of the shares of the Company’s
Voting Stock present in person or represented by proxy at a duly held meeting
at which a quorum is present (or by such greater vote as may be required by
applicable law, regulation or provision of the certificate of incorporation or
bylaws of the Company) if the amendment would, but for such approval, prevent
the issuance of Incentive Stock Options under the Plan or cause the Plan to no
longer comply with the requirements of Section 162(m) of the Code.


 


Except as provided in Section 12 above, rights and obligations
under any Awards granted before amendment of the Plan may not be altered or
impaired by amendment of the Plan in any manner having a significant adverse
effect on a Grantee, except with the consent of the Grantee thereof.


 


19.                               Termination or
Suspension


 


The Board at any time may suspend or terminate the Plan.  The Plan, unless sooner terminated, will
terminate on the 10th anniversary of its adoption by the Board or its approval
by the stockholders of the Company, whichever is earlier, but such termination
will not affect any Award theretofore granted. 
No Award may be granted under the Plan while the Plan is suspended or
after it is terminated.  In general, no
rights or obligations under any Award granted while the Plan is in effect will
be altered or impaired by suspension or termination of the Plan, except with
the consent of the person to whom the Award was granted.  Any Award granted under the Plan may be
terminated by agreement between the holder thereof and the Company and, in lieu
of the terminated Award, a new Award may be granted.


 


20.                               Miscellaneous


 


Nothing contained in the Plan (or in any written Award agreement)
obligates the Company or any Subsidiary to continue for any period to elect any
individual as a director or to employ an employee or consultant to whom an
Award has been granted, or interfere with the right of the Company or any
Subsidiary to vary the terms of the person’s service or employment or reduce
the person’s compensation.


 


21.                               Exculpation and
Indemnification


 


To the fullest extent permitted by applicable law and regulation, the
Company will indemnify and hold harmless the members of the Board and the
members of the Committee from and against any and all liabilities, costs, and
expenses incurred by them as a result of any act, or omission to act, in
connection with the performance of their duties, responsibilities, and
obligations under the Plan, other than such liabilities, costs and expenses as may
result from the gross negligence, bad faith, willful misconduct, or criminal
acts of such persons.


 





















 


22.                               Governing Law


 


The Plan and all actions taken thereunder are governed by and construed
in accordance with the laws of the State of Nevada, without reference to the
principles of conflict of laws thereof.


 


23.                               Unfunded Plan


 


The Plan is unfunded and the Company is not required to segregate any
assets in connection with any Awards under the Plan.  Any liability of the Company to any person
with respect to any Award under the Plan or any Award agreement is based solely
upon the contractual obligations that may be created as a result of the Plan or
any such Award or agreement.  No such
obligation of the Company will be deemed to be secured by any pledge of,
encumbrance on, or other interest in, any property or asset of the Company or
any Subsidiary.  Nothing contained in the
Plan or any Award agreement will be construed as creating in respect of any
Grantee (or beneficiary thereof or any other person) any equity or other
interest of any kind in any assets of the Company or any Subsidiary or creating
a trust of any kind or a fiduciary relationship of any kind between the
Company, any Subsidiary and/or any such Grantee, any beneficiary thereof or any
other person.


 





















 


PLAN
COMMITTEE


 


Information with respect to the administration of the Plan by the
Committee is set forth above in Section 2. 
Members of the Board will act in the capacity as managers of the Plan
and not as trustees thereof.  Additional
information about the Committee may be obtained by calling the office of the
Secretary of the Company at (702) 270-7600, or by writing the Company’s
Secretary at Alliance Gaming Corporation, 6601 South Bermuda Road, Las Vegas,
Nevada 89119-3605.


 


CERTAIN
FEDERAL INCOME TAX CONSEQUENCES


 


The following is a general summary of certain federal income tax
consequences applicable to the Plan.  The
summary does not reflect any provisions of the income tax laws of any state,
local or foreign taxing jurisdiction. 
Because the tax consequences of events and transactions under the Plan
depend upon various factors, including a Grantee’s own tax status, each person
who receives a grant or award under the Plan should consult his or her own tax
advisor with respect thereto.


 


Stock Options and Stock Appreciation Rights


 


1.                                      Incentive Stock Options


 


Upon the grant of an Incentive Stock Option, a Grantee will not
recognize any income.  No income will be
recognized by a Grantee upon the exercise of an Incentive Stock Option if the
requirements of the Plan and the Code are met, including, without limitation,
the requirement that the Grantee remain an employee of the Company (or a
Subsidiary) during the period beginning on the date of the grant of the option
and ending on the day three months (one year if the Grantee becomes disabled)
before the date the option is exercised.


 


The federal income tax consequences of a subsequent disposition of
shares of Common Stock acquired upon the exercise of an Incentive Stock Option
will depend upon when the disposition occurs and the type of disposition.


 


If such shares are disposed of by the Grantee more than two years after
the date of grant of the Incentive Stock Option, and more than one year after
such shares are transferred to the Grantee, gain or loss realized upon such
disposition will, in general, be characterized as long-term capital gain or
loss, and the Company (or the Subsidiary) will not be entitled to any income
tax deduction in respect of the option or its exercise.


 


If such shares are disposed of by the Grantee within two years after
the date of grant of the Incentive Stock Option, or within one year after such
shares are transferred to the Grantee (a “disqualifying disposition”) and the
disqualifying disposition is a sale or exchange with respect to which a loss
(if sustained) would be recognized to the Grantee, the excess, if any, of the
amount realized (up to the fair market value of such shares on the exercise
date) over the option price will be compensation taxable to the Grantee as ordinary
income in the year of disposition, and the Company (or the Subsidiary) may be
entitled to a deduction (subject to the provisions of Section 162(m) of
the Code discussed below under “Additional Information,” and other applicable
Code provisions) equal to the amount of ordinary income recognized by the
Grantee.  If the amount realized by the
Grantee upon such disqualifying disposition exceeds the fair market value of
such shares on the exercise date, the excess will, in general, be characterized
as capital gain.  If the option price
exceeds the amount realized upon such disqualifying disposition, the difference
will, in general, be characterized as a capital loss.


 





















 


If the disqualifying disposition is not a sale or exchange with respect
to which a loss, if sustained, would be recognized (for example, a gift or a
sale to a related person), the excess, if any, of the fair market value of such
shares on the exercise date over the option price will be compensation taxable
as ordinary income, and the Company (or the Subsidiary) may be entitled to a
deduction (subject to the provisions of Section 162(m) of the Code
discussed below under “Additional Information,” and other applicable Code
provisions) equal to the amount of ordinary income recognized by the Grantee.


 


If a Grantee has not remained an employee of the Company (or a
Subsidiary) during the period beginning on the date of the grant of an
Incentive Stock Option and ending on the day three months (one year if the
Grantee becomes disabled) before the date the option is exercised, the exercise
of such option will be treated as the exercise of a Nonstatutory Stock Option
with the tax consequences described below.


 


2.                                      Nonstatutory Stock Options


 


Upon the grant of a Nonstatutory Stock Option, a Grantee will not
recognize any income.  At the time a
Nonstatutory Stock Option is exercised, the Grantee will recognize compensation
taxable as ordinary income, and the Company (or the Subsidiary) may be entitled
to a deduction (subject to the provisions of Section 162(m) of the Code
discussed below under “Additional Information,” and other applicable Code
provisions), in an amount equal to the difference between the fair market value
on the exercise date of the shares of Common Stock acquired pursuant to such
exercise and the option price.  Upon a
subsequent disposition of such shares, the Grantee will, in general, realize
long-term or short-term capital gain or loss, depending upon the holding period
of such shares.  For purposes of
determining the amount of such gain or loss, the Grantee’s initial tax basis in
such shares will be the sum of the option price and the amount of ordinary
income recognized upon exercise.


 


3.                                      Effect of Share for Share
Exercise


 


If a Grantee elects to tender shares of Common Stock in partial or full
payment of the option price for shares to be acquired upon the exercise of a
Nonstatutory Stock Option, the Grantee will not recognize any gain or loss on
such tendered shares.  The number of
shares of Common Stock received by the Grantee upon any such exercise that are
equal in number to the number of tendered shares would retain the tax basis of
the tendered shares and the holding period for the shares received would
include the holding period of the tendered shares.  The Grantee will recognize compensation
taxable as ordinary income, and the Company (or the Subsidiary) may be entitled
to a deduction (subject to the provisions of Section 162(m) of the Code
discussed below under “Additional Information,” and other applicable Code
provisions), in an amount equal to the fair market value of the number of
shares received by the Grantee upon such exercise that is in excess of the
number of tendered shares, less any cash paid by the Grantee.  The fair market value of such excess number
of shares would then become the tax basis for those shares and the holding
period of such shares will begin on the day after the date of purchase of the
shares pursuant to the exercise of the Nonstatutory Stock Option.  If the tendered shares were previously
acquired upon the exercise of an Incentive Stock Option, a published ruling of
the Internal Revenue Service indicates that the shares of Common Stock received
by the Grantee upon the exercise of the Nonstatutory Stock Option that are
equal in number to the number of tendered shares will be treated as shares of
Common Stock acquired upon the exercise of such Incentive Stock Option.


 


Except as discussed in the following paragraph, if a Grantee elects to
tender shares of Common Stock in partial or full payment of the option price
for shares to be acquired upon the exercise of an Incentive Stock Option, the
Grantee will not recognize any gain or loss on such tendered shares.  No income will be recognized by the Grantee
in respect of the shares received by the Grantee upon the exercise of the
Incentive Stock Option if, as previously stated, the requirements of the Plan
and the Code are met.  The Internal
Revenue Service has not yet issued final regulations with respect to the
determination of the basis and the holding period of the shares acquired upon
such an exercise.


 





















 


Regulations proposed by the Internal Revenue
Service provide that for all shares of Common Stock acquired upon such an
exercise, the requisite two year and one year holding periods for stock
acquired upon exercise of an Incentive Stock Option (described above) must be
satisfied, regardless of the holding period applicable to the tendered
shares.  However, the tax basis (and
holding period for all other federal income tax purposes) of the tendered
shares will carry over to the same number of shares acquired upon the
exercise.  The number of shares acquired
which is in excess of the number of tendered shares will have a tax basis of
zero and a holding period that begins as of the date such shares are
transferred.  Any subsequent
disqualifying disposition will be deemed first to have been a disposition of
the shares with a tax basis of zero and then to have been a disposition of the
shares with a carry-over tax basis.  For
purposes of determining the amount of compensation taxable to the Grantee upon
a subsequent disqualifying disposition, the option price of the shares with a
tax basis of zero will be deemed to be zero, and the option price of the shares
with a carry-over basis will be deemed to be the fair market value of the
shares on the exercise date.


 


If a Grantee elects to tender shares of Common Stock that were
previously acquired upon the exercise of an Incentive Stock Option in partial
or full payment of the option price for shares to be acquired upon the exercise
of another Incentive Stock Option, and such exercise occurs within two years of
the date of grant of such Incentive Stock Option, or within one year after such
tendered shares were transferred to the Grantee, the tender of such shares will
be a taxable disqualifying disposition with the tax consequences described
above regarding the disposition within two years of the date of grant of an
Incentive Stock Option, or within one year after shares were acquired upon the
exercise of Incentive Stock Options.  The
shares of Common Stock acquired upon such exercise will be treated as shares of
Common Stock acquired upon the exercise of an Incentive Stock Option and the
holding period of such shares for all purposes will begin on the day after the
date of purchase of the shares pursuant to the exercise of the Incentive Stock
Option.


 


4.                                      Stock Appreciation Rights


 


Upon the grant of a Stock Appreciation Right, a Grantee will not
recognize any income.  At the time a
Stock Appreciation Right is exercised, a Grantee will recognize compensation
taxable as ordinary income, and the Company (or the Subsidiary) may be entitled
to a deduction (subject to the provisions of Section 162(m) of the Code
discussed below under “Additional Information,” and other applicable Code provisions),
in an amount equal to any cash received (before applicable withholding) plus
the fair market value on the exercise date of any shares of Common Stock
received.  The Grantee’s tax basis in any
such shares received upon the exercise of a Stock Appreciation Right will be
the fair market value of such shares on the exercise date.


 


5.                                      Restricted Stock


 


A Grantee will not recognize any income upon an Award of restricted
stock unless an election under Section 83(b) of the Code is made by
the Grantee with respect to such Award. 
If the Grantee has not made an election under Section 83(b) of
the Code in respect of any shares of restricted stock, any dividend equivalents
or dividends received by the Grantee with respect to shares of restricted stock
prior to the date the Grantee recognizes income with respect to such award (as
described below) must be treated by the Grantee as compensation taxable as
ordinary income, and the Company (or the Subsidiary) may be entitled to a
deduction (subject to the provisions of Section 162(m) of the Code
discussed below under “Additional Information,” and other applicable Code
provisions), in an amount equal to the amount of ordinary income recognized by
the Grantee.  After the terms and
conditions applicable to shares of restricted stock are satisfied, or if the
Grantee has made an election under Section 83(b) of the Code in
respect of any shares of restricted stock, any dividends received by the
Grantee in respect of such shares will be treated as a dividend taxable as ordinary
income, and the Company (or the Subsidiary) will not be entitled to a deduction
in respect of any such dividend payment.


 





















 


At the time the terms and conditions applicable to a share of
restricted stock are satisfied, or at the time the Award is made if a Section 83(b) election
is made by the Grantee with respect to such Award, a Grantee will recognize
compensation taxable as ordinary income, and the Company (or the Subsidiary)
may be entitled to a deduction (subject to the provisions of Section 162(m)
of the Code discussed below under “Additional Information,” and other
applicable Code provisions), in an amount equal to the then fair market value
of the shares of unrestricted Common Stock received by the Grantee.  The Grantee’s tax basis for any such shares
of Common Stock will be the fair market value of such shares on the date such
terms and conditions are satisfied or, if a Section 83(b) election is
made with respect to such Award, the fair market value of such shares on the
date of the Award.


 


5.                                      Restricted Stock Units


 


A Grantee will not recognize any income upon an Award of restricted
stock units.  At the time the terms and
conditions applicable to the Award of restricted stock units are satisfied, or,
if later, the time the shares subject to the Award of restricted stock units
are issued to the Grantee, a Grantee will recognize compensation taxable as
ordinary income, and the Company (or the Subsidiary) may be entitled to a
deduction (subject to the provisions of Section 162(m) of the Code discussed
below under “Additional Information,” and other applicable Code provisions), in
an amount equal to the then fair market value of the shares of unrestricted
Common Stock received by the Grantee. 
The Grantee’s tax basis for any such shares of Common Stock will be the
fair market value of such shares on the date such terms and conditions are
satisfied or, if later, the date the shares subject to the Award of restricted
stock units are issued to the Grantee.


 


Additional Information


 


Section 55 of the Code imposes an alternative minimum tax if a
taxpayer’s “tentative minimum tax” exceeds his or her regular tax for the
taxable year in question.  The “tentative
minimum tax” is computed by reference to a person’s “alternative minimum
taxable income.” A person’s alternative minimum taxable income consists of his
or her regular taxable income (with certain adjustments described in
Sections 56 and 58 of the Code) increased by the tax preference items
described in Section 57 of the Code.


 


Upon the exercise of an Incentive Stock Option, one of the adjustments
described in Section 56 of the Code is to include in a person’s
alternative minimum taxable income for any year an amount equal to the amount
of income the person would have recognized if the option had not been an
Incentive Stock Option, with such inclusion occurring in the year in which such
income would have been recognized.  As a
result, unless the shares of Common Stock acquired upon the exercise of an
Incentive Stock Option are disposed of (in a sale or exchange with respect to
which a loss (if sustained) would be recognized) in the same year in which the
above-described adjustment to the Grantee’s alternative minimum taxable income
is made, a Grantee may incur alternative minimum tax as a result of the exercise
of an Incentive Stock Option under the Plan.


 


If a Grantee incurs alternative minimum tax attributable to certain
items of tax preference or certain adjustments (including the adjustment
described above resulting from the exercise of an Incentive Stock Option), the
Grantee will, in general, receive a credit for such tax against the Grantee’s
regular income tax liability (but not any alternative minimum tax liability) in
future years.  In addition, the basis of
shares acquired as a result of the exercise of an Incentive Stock Option, for
purposes of the alternative minimum tax, will include the amount of the
adjustment described above resulting from the exercise of the Incentive Stock
Option.


 


A Grantee’s compensation income with respect to an Award under the Plan
will be subject to withholding for federal income tax and FICA (employment) tax
purposes.  If a Grantee, to the extent


 





















 


permitted by the terms of an Award and the
Plan, uses shares of Common Stock to satisfy the federal income and FICA tax
withholding obligation and any similar withholding obligation for state, local
or foreign tax obligations, the Grantee will realize, in general, a capital
gain or loss, short-term or long-term, depending on the tax basis and holding
period for such shares of common stock.


 


Certain compensation payments or other benefits received under the Plan
or otherwise by a “disqualified individual” (as defined in Section 280G(c) of
the Code), generally in connection with a change in the ownership or control of
the Company or in the ownership of a substantial portion of its assets, may
cause or result in “excess parachute payments” (as defined in Section 280G(b)(1) of
the Code).  Section 4999 of the Code
generally imposes a 20% excise tax on the amount of any such “excess parachute
payment” received by such a “disqualified individual” and any such “excess
parachute payments” will not be deductible by the Company (or any Subsidiary).


 


Under Section 162(m) of the Code, the amount of compensation paid
to the chief executive officer and the four other most highly paid executive
officers of the Company for which a deduction may be claimed by the Company
(including Subsidiaries) for a taxable year is limited to $1,000,000 per
person, except that certain compensation, including compensation which is based
solely on the achievement of one or more performance goals will be excluded for
purposes of calculating the amount of compensation subject to this $1,000,000
limitation, if the applicable requirements of Section 162(m) are
satisfied.  The ability of the Company to
claim a deduction for compensation paid to any other executive officer or
employee of the Company (including Subsidiaries) is not affected by this
provision.


 


The Company has structured and intends to administer the Plan in a
manner such that it is anticipated that any compensation for which the Company
may claim a deduction in connection with the exercise of Nonstatutory Stock
Options and related Stock Appreciation Rights and the non-qualifying
disposition by a Grantee of shares acquired upon exercise of Incentive Stock
Options will be excluded from compensation, under the performance-related
exclusion in Section 162(m) of the Code, in determining whether the
limitation on deductions for compensation imposed by Section 162(m) is
applicable.


 


Employee Retirement Income Security Act of 1974


 


The Plan is not regarded as an “employee benefit plan” under Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and,
therefore, is not subject to the provisions of ERISA.