S-3 1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on March 24, 1995 Registration No. 33- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 _______________ ALLIANCE GAMING CORPORATION (Exact name of registrant as specified in its charter) Nevada 88-0104066 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification Number) 4380 Boulder Highway Las Vegas, Nevada 89121 (702) 435-4200 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) John W. Alderfer Chief Financial Officer 4380 Boulder Highway Las Vegas, Nevada 89121 (702) 435-4200 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copy to: Howard A. Sobel, Esq. Kramer, Levin, Naftalis, Nessen, Kamin & Frankel 919 Third Avenue New York, New York 10022 (212) 715-9100 _______________ Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend reinvestment plans, please check the following box. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. _______________ CALCULATION OF REGISTRATION FEE Title of Proposed Each Class of Proposed Maximum Securities Amount Maximum Aggregate Amount of to be to be Offering Price Offering Registration Registered Registered Per Share(1) Price(1) Fee Common Stock, par value $0.10 per share 250,000 $5.8125 $1,453,125 $502.00 (1) Estimated solely for the purpose of calculating the registration fee. The proposed Maximum Aggregate Offering Price was calculated pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low price per share of Common Stock reported on the Nasdaq National Market on March 23, 1995. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine. Subject to Completion, PROSPECTUS Preliminary Prospectus dated March 24, 1995 250,000 Shares ALLIANCE GAMING CORPORATION COMMON STOCK (Par Value $.10 per Share) _______________ All of the shares of Common Stock, par value $.10 per share (the "Common Stock"), of Alliance Gaming Corporation (formerly United Gaming, Inc.), a Nevada corporation (the "Company"), offered hereby (the "Shares") are being offered by Steve Greathouse, the Chairman of the Board, President and Chief Executive Officer of the Company (the "Selling Stockholder"), as described more fully herein. The Company will not receive any of the proceeds from the sale of the Shares offered hereby. See "Use of Proceeds," "Selling Stockholder" and "Plan of Distribution." The Common Stock is traded on the Nasdaq National Market under the symbol "ALLY." On March 23, 1995, the last reported sale price of the Common Stock on the Nasdaq National Market was $57/8 per share. _______________ Prospective investors should carefully consider the factors set forth under the caption "Risk Factors." _______________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL BOARD HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY _______________ This Prospectus relates to the public offering of up to 250,000 shares of Common Stock, which will be issued as of the date of effectiveness of the Registration Statement of which this Prospectus is a part. The Selling Stockholder, directly, through agents designated from time to time, or through dealers or underwriters also to be designated, may sell the Shares from time to time on terms to be determined at the time of sale. To the extent required, the specific shares to be sold, public offering price, the names of any such agent, dealer or underwriter and any applicable commission or discount with respect to a particular offer will be set forth in an accompanying Prospectus Supplement. See "Selling Stockholder" and "Plan of Distribution." The date of this Prospectus is March , 1995 AVAILABLE INFORMATION The Company is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company may be inspected and copied at the public reference facilities of the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New York Regional Office of the Commission, Seven World Trade Center, Suite 1300, New York, New York 10048, and at the Chicago Regional Office of the Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such material may also be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports and other information may also be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company has filed with the Commission a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the registration of the Common Stock offered hereby. This Prospectus omits certain of the information contained in the Registration Statement in accordance with the rules and regulations of the Commission. Reference is hereby made to the Registration Statement and related exhibits for further information with respect to the Company and the Common Stock. Statements contained herein concerning the provisions of any contract or document are not necessarily complete and, in each instance, where a copy of such document has been filed as an exhibit to the Registration Statement or otherwise has been filed with the Commission, reference is made to the copy of the applicable document so filed. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by the Company with the Commission, are incorporated herein by reference: (i) the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994 and Amendment No. 1 and No. 2 thereto on Form 10-K/A; (ii) the Company's Current Reports on Form 8-K dated June 25, 1993, September 21, 1993, July 14, 1994 and August 11, 1994 and its Information Statement dated June 24, 1994; (iii) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30, 1994 and December 31, 1994; (iv) the Company's Proxy Statement dated November 15, 1994 related to the Annual Meeting of Stockholders held on December 15, 1994; and (v) the Company's Form 10-C dated December 20, 1994. In addition, each document filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to termination of the offering of the Shares shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date such document is filed with the Commission. Any statement contained herein, or any document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein, or in any subsequently filed document that also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of the Registration Statement or this Prospectus. All information appearing in this Prospectus is qualified in its entirety by the information and financial statements (including notes thereto) appearing in the documents incorporated herein by reference. This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents (other than exhibits thereto) are available without charge, upon written or oral request by any person to whom this Prospectus has been delivered, from John W. Alderfer, Chief Financial Officer, Alliance Gaming Corporation, 4380 Boulder Highway, Las Vegas, Nevada 89121, telephone number (702) 435-4200. PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere, or incorporated by reference, in this Prospectus. The Company Alliance Gaming Corporation (formerly United Gaming, Inc.), a Nevada corporation (the "Company"), is a diversified gaming company which (at February 28, 1995) operated approximately 6,777 gaming devices (primarily video poker devices and slot machines). The Company is the largest private gaming device route operator in Nevada and one of the largest in the United States. In its Nevada gaming device route operations, the Company selects, owns, installs, manages and services gaming devices (approximately 5,223 as of February 28, 1995) in third-party owned local establishments such as taverns, restaurants, supermarkets, drug stores and convenience stores (approximately 540 locations as of February 28, 1995). Also in Nevada, the Company owns and operates one full service casino and leases and operates one small casino, one casino-hotel and three taverns which collectively have approximately 790 gaming devices and 9 table games. As described in the Company's Form 10-K for the fiscal year ended June 30, 1994, the Company is presently in the process of closing or selling certain of these operations and has recently entered into certain agreements in respect thereof. During the fiscal year ended June 30, 1992, the Company expanded its gaming device route operations to Louisiana, where it is the operator of approximately 764 video poker devices at the only racetrack and associated off-track betting parlors ("OTBs") in the greater Long Bow Orleans area. In August 1994, the Company completed its acquisition of a 45% interest in the Rainbow Casino - Vicksburg Partnership, L.P. ("RCVP"). RCVP owns a dockside casino in Vicksburg, Mississippi which contains approximately 573 gaming devices and 28 table games. Additionally, the Company manages the casino. The Company also designs and manufactures gaming devices which are used only in its Nevada operations. The Company's strategy is to build its gaming business in existing markets, such as Nevada and Louisiana, as well as in emerging markets nationally. The Company intends to use its diversified gaming expertise, strengthened executive management, business partners and investment community relationships to pursue new casino operations as well as dockside, riverboat and Native American operations and the design, supply and management of gaming devices. In August 1994, the Company hired Mr. Steve Greathouse as President and Chief Executive Officer. Mr. Greathouse, who has held various positions in the gaming industry since 1974, most recently served as the President of the Harrah's Casino Hotels Division of The Promus Companies, Inc. Mr. Greathouse was appointed to the Company's Board of Directors in October 1994 and was appointed Chairman of the Board in March 1995. With regard to certain additional developments concerning the Company, see "Recent Developments." The Company was incorporated in Nevada in 1968 and is a holding company which conducts its gaming operations through directly and indirectly owned subsidiaries. On December 15, 1994, stockholders approved the change of the Company's name from "United Gaming, Inc." to "Alliance Gaming Corporation." All of the Company's significant subsidiaries are, directly or indirectly, wholly-owned, except for (i) Kansas Financial Partners, LLC and Kansas Gaming Partners, LLC, each a Kansas limited liability company (each 50% owned); (ii) Native American Investments, Inc., a Delaware corporation (90% owned); (iii) RCVP, a Mississippi limited partnership (45% limited partnership interest, as well as certain non-voting special limited partnership interests); and (iv) Video Services, Inc. (49% owned, but the Company controls 100% of the voting rights and 71% of the rights to receive dividends). See "Recent Developments." The term "Company" as used herein refers to Alliance Gaming Corporation and its subsidiaries unless the context otherwise requires. The Company's principal executive offices are located at 4380 Boulder Highway, Las Vegas, Nevada 89121; telephone (702) 435-4200. The Offering Common Stock Offered by the Selling Stockholder. . . . . . . . . . . . . . . . 250,000 shares Shares of the Common Stock Outstanding. . . 11,629,650 shares (1) Nasdaq National Market Common Stock Symbol. . . . . . . . . .ALLY _________ (1) Includes the 250,000 shares of Common Stock to be issued in this Offering. Excludes up to (i) 8,500,000 shares of Common Stock issuable upon conversion of the Company's Convertible Debentures (as defined herein); (ii) 5,000,000 shares of Common Stock issuable under the Company's 1991 Stock Option Plan and the Company's 1984 Stock Option Plan, of which options covering 2,852,334 shares were outstanding and options covering 978,100 shares were exercisable as of March 22, 1995; (iii) 2,000,000 shares of Common Stock issuable upon exercise of warrants held by Alfred H. Wilms, a principal stockholder and a director of the Company; (iv) 2,750,000 shares of Common Stock issuable upon exercise of the Investment Warrants (as defined herein) held by Kirkland-Ft. Worth Investments Partners, L.P. ("Kirkland"); (v) 1,250,000 shares of Common Stock issuable upon exercise of the Incentive Warrants (as defined below) held by Gaming Systems Advisors, L.P. ("GSA") and up to 2,500,000 shares of Common Stock issuable upon exercise of additional Incentive Warrants held by GSA; (vi) 780,000 shares of Common Stock issuable upon exercise of the Institutional Warrants (as defined herein) held by the initial purchasers of the Company's Convertible Debentures and up to 250,000 shares of Common Stock potentially issuable upon exercise of additional Institutional Warrants which may be issued in the future; (vii) up to 168,889 shares of Common Stock issuable in connection with the acquisition of Native American Investments, Inc.; (viii) 250,000 shares of Common Stock issuable upon exercise of warrants (having economic terms identical to the Incentive Warrants) of Mr. Greathouse; and (ix) 250,000 shares of Common Stock issuable upon exercise of warrants (having economic terms identical to the Incentive Warrants) held by Dr. Craig Fields, Vice Chairman of the Board of Directors of the Company. See "Risk Factors Effect of Outstanding Warrants, Options, and Convertible Debentures," "Recent Developments" and Executive Compensation incorporated by reference to this Prospectus. RISK FACTORS In addition to the other information contained or incorporated by reference in this Prospectus, prospective investors should consider carefully the following factors before purchasing any of the Shares offered hereby. Operating History - Recent Losses The Company incurred net losses of approximately $4,680,000, $3,650,000 and $13,128,000 during the fiscal years ended June 30, 1992, 1993 and 1994, respectively, and approximately $5,017,000 during the six months ended December 31, 1994. There can be no assurance that the Company will operate profitably in the future. See Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes thereto, incorporated by reference in this Prospectus. Uncertainty of Change in Operating Strategy The Company is actively seeking to expand its operations into jurisdictions that have recently legalized or are anticipated to legalize gaming in the future. Certain recently implemented changes in management and business strategy are intended to improve the results of operations from the Company's existing business. The prospects for substantial improvement in operating performance and profitability, however, will be dependent, in large part, on the development of new gaming opportunities. There can be no assurance that the Company will be able successfully to identify or acquire such new gaming opportunities or operate profitably in the future. The Company's ability to expand to additional jurisdictions will be dependent upon a number of factors, including negotiating acceptable terms; securing required state and local licenses, permits and approvals, which in some jurisdictions are limited in number for gaming operations; securing adequate financing on acceptable terms; identifying and securing suitable locations, which management expects will be limited; and addressing political factors. Most of these factors are beyond the control of the Company. The Company has experienced and expects to continue to experience significant competition in its search for suitable new gaming opportunities. In addition, in order to develop new growth opportunities, the Company will be required to add, train, and retain additional management and other personnel. As a result, there can be no assurance that the Company will be able to expand to additional locations or, if any such expansion occurs, that it will be successful. In addition, the Company's existing and future operations are dependent in large part on certain key members of management, including its Chairman of the Board, President and Chief Executive Officer, Steve Greathouse, who joined the Company in August 1994, and other members of management who have joined the Company during the past 12 months, including Dr. Fields and Messrs. Kirschbaum and DiCesare. The ability to retain qualified management personnel could have a material adverse effect on the Company's results of operations. Leverage and Debt Service; Need for Additional Financing As of December 31, 1994, the Company had outstanding long-term debt of approximately $88.1 million and a long-term debt to equity ratio of 6.33 to 1. The Company has substantial annual fixed debt service requirements attributable to the $85 million aggregate principal amount of 7 1/2% Convertible Subordinated Debentures due 2003 of the Company issued in September 1993 (the "Convertible Debentures") and other operating expenses. During the fiscal years ended June 30, 1992, 1993 and 1994 and the six months ended December 31, 1994, earnings before income taxes, interest on indebtedness, imputed interest on capital lease obligations and that portion of rent expense estimated to represent interest were inadequate to cover fixed charges, which include interest on indebtedness and imputed interest on capital lease obligations, by $4,680,000, $3,650,000, $12,887,000 and $4,727,000, respectively. See Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes thereto, incorporated by reference in this Prospectus. At December 31, 1994, the Company had cash and cash equivalents and securities available for sale of approximately $40.8 million, of which approximately $7 million is generally required to fund ongoing gaming operations in the ordinary course. It remains a part of the Company's business strategy to seek complementary gaming opportunities, including opportunities in less mature markets to which its route and casino experience may be applicable. As part of its business activities, the Company is regularly involved in the identification, investiga- tion and development of such opportunities. Accordingly, in order to support such activities, the Company may in the future elect to issue additional debt or equity securities if and when appropriate opportunities become available on terms satisfactory to it. Due to the Company's operating results over the past three fiscal years and leverage and coverage ratios, there can be no assurance that additional funds would be available, or available on terms satisfactory to the Company. Any such additional financing would result in dilution to existing equity holders. See Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources, incorporated by reference in this Prospectus. Competition The gaming industry is highly competitive and many of the Company's competitors have more experience, are larger and have significantly greater financial and other resources than the Company. The recent and continuing expansion of legalized casino gaming and gaming devices to new jurisdictions throughout the United States has created dynamic industry and market conditions that will affect and likely intensify the competitive conditions faced by the Company, particularly in jurisdictions in which gaming licenses are limited. The Company believes that competition for existing and future gaming, gaming systems and related opportunities, sites and acquisitions will continue to be intense. There can be no assurance that the Company will be successful in maintaining or expanding its existing gaming activities or in expanding its activities into or making investments in other projects, areas or jurisdictions. Maturity of Nevada Gaming Device Route Business The competition for obtaining and renewing gaming device routes in Nevada is high and continues to intensify. Such competition has, over time, reduced the Company's profit margins for such operations. In addition, such competition has required the Company to provide substantial financial incentives and incur financial obligations to retain or obtain certain gaming device route locations. Such incentives include long-term lease commitments, guarantees of leases in favor of owners of local establishments, substantial advance deposits, payments of lease rentals in advance and loans for building and tenant-improvement costs. Historically, substantial losses have been incurred in connection with such transactions. Notwithstanding the change in its business strategy to one emphasizing profitability rather than market share, to some extent the future success of the Company's gaming device route business will continue to be dependent on its ability and willingness to provide such financial inducements. Although the Company has historically generated sufficient new gaming device route contracts to offset the loss of old gaming device route contracts, as a result of increased competition, the increased sophistication and bargaining power of customers and other factors, there can be no assurance that the Company will be able to obtain new gaming device route contracts or renew or extend its current space leases or revenue-sharing arrangements upon their expiration or termination, or that, if renewed or extended, the terms will be as favorable to the Company. See "-- Uncertainty of Change in Operating Strategy." Gaming Taxes The Company believes that the prospect of significant tax revenue is one of the primary reasons that many jurisdictions have legalized various forms of gaming. As a result, gaming operators are typically subject to significant taxes and fees in addition to corporate income taxes, and such taxes and fees are subject to increase at any time. Any material increase in these taxes or fees, which could occur prospectively or retroactively, would adversely affect the Company. The Company pays and expects to continue to pay substantial taxes and fees in Nevada, Louisiana and Mississippi and expects to pay substantial taxes and fees in any other jurisdiction in which it conducts gaming operations. Control by Principal Stockholders Alfred H. Wilms, the Company's principal stockholder, holds approximately 43.3% of the Company's outstanding shares of Common Stock (47.0% assuming the exercise of warrants held by Mr. Wilms and the conversion of the Company's outstanding shares of Non- Voting Junior Convertible Special Stock (the "Convertible Special Stock")) as of March 22, 1995. Pursuant to the terms of the Stockholders Agreement, dated as of September 21, 1993, as amended, among the Company, Mr. Wilms, Kirkland, Kirkland Investment Corporation ("KIC") and GSA (the "Stockholders Agreement"), Mr. Wilms is obligated to vote his shares of Common Stock in favor of the four designees of KIC to the Company's seven-member Board of Directors. On July 14, 1994, as contemplated by the Stockholders Agreement, the Company's Board of Directors was reconfigured to consist of four persons designated by KIC (initially Messrs. Kirschbaum, DiCesare, Gottlieb and Robbins) and three persons designated by Mr. Wilms (initially Messrs. Wilms and Sosin and Dr. Scheinman). On October 20, 1994, the Stockholders Agreement was amended to reconfigure the Board of Directors to consist of four persons designated by KIC (initially,Messrs. Kirschbaum, DiCesare, Gottlieb and Robbins), one person designated by Mr. Wilms (Mr. Wilms) and two new directors designated by a majority of the Board of Directors. Accordingly, on October 20, 1994, Mr. Greathouse and Dr. Fields were appointed to the Board to fill vacancies created upon the resignation of Dr. Scheinman and Mr. Sosin. As amended, the Stockholders Agreement also provides that Mr. Wilms may designate two persons (initially Dr. Scheinman and Mr. Sosin) (the "Advisors") who shall be observers of, and advisors to, the Board of Directors and who will be entitled to attend all of the Company's Board of Directors' meetings and receive all information furnished to members of the Board. Mr. Wilms and/or at least one Advisor will be entitled to attend all meetings of the committees of the Company and its subsidiaries. See "Recent Developments -- Recent Transactions -- Certain Additional Appointments." The October 20, 1994 amendment to the Stockholders Agreement also provides that the voting agreements between Mr. Wilms on the one hand, and KIC on the other hand, will terminate upon the earlier of (i) September 21, 1997 and (ii) the date that both (a) KIC and its permitted transferees and (b) Mr. Wilms and his permitted transferees each own in the aggregate Company securities representing less than 5% of the Company's fully diluted Common Stock (with outstanding Convertible Special Stock and underlying warrant shares counted as Common Stock); provided, that, in the event the average closing price of a share of Common Stock (as traded on the Nasdaq National Market System or other principal exchange or trading market on which the Common Stock is then traded or listed) for any thirty consecutive trading day period during the 15-month period prior to the earlier of the dates described in clauses (i) and (ii) above shall not have equaled or exceeded $15 (as appropriately adjusted to give effect to stock splits, recapitalizations, mergers, reorganizations or similar transactions) then, in no event as soon as practicable after September 21, 1997, KIC and its permitted transferees will use their best efforts to cause the Board of Directors to be in a ratio of four designees of KIC to three designees of Mr. Wilms (rather than as described above). The Stockholders Agreement, as amended, and related transactions are more fully described in the Company's Forms 8-K dated June 25, 1993, September 21, 1993 and July 14, 1994 and in its Information Statement dated June 29, 1994. Importance of Louisiana Contract; Competition in Louisiana Market Since the Company currently operates in Louisiana under a single 10-year operating agreement with Fairgrounds Corporation, Jefferson Downs Corporation and Finish Line Management Corp. expiring in May 2002, subject to extension under certain circumstances, the loss of such agreement for any reason would have a material adverse effect on the Company. The Company has no reason to believe that the agreement will be prematurely terminated. From time to time, legislators and other politicians recommend or introduce measures to limit or repeal the Louisiana Video Draw Poker Devices Control Law and the Rules and Regulations promulgated thereunder by the Department of Public Safety and Corrections, Office of State Police, Gaming Enforcement Section, Video Gaming Division (the "Louisiana Act"). See "-- Regulatory Matters -- Louisiana." Although the Company has no reason to believe such measures will be successful, the repeal of such Act would have a material adverse effect on the Company. In addition, there can also be no assurance that the Company's Louisiana operations will not be materially adversely affected by other competitive gaming activities in and around the New Orleans area. Among other things, the Company is facing significantly increased competition from docked riverboats which, under Louisiana law, are not limited in the number of gaming devices (including slot machines) offered or the jackpots paid. In contrast, the Company's OTB parlors are only permitted to offer video poker devices and are subject to limits on jackpots. Docked riverboats have had a significant adverse impact on those Company OTB parlors located near such riverboats, and this trend is expected to continue. See "-- Regulatory Matters -- Louisiana." Uncertainty of the Emerging Video Gaming Market Certain jurisdictions in the United States and Canada have approved various forms of video gaming operations. The Company cannot predict if or when additional jurisdictions, if any, will approve video gaming, which approval is not within the control of the Company. In addition, there is no assurance that if additional jurisdictions approve video gaming that such approvals will result in business opportunities for private operators such as the Company or that the Company will be successful in exploiting such opportunities. Regulatory Matters -- Nevada The ownership and operation of casino gaming facilities, the operation of gaming device routes and the manufacture and distribution of gaming devices in Nevada are subject to the Nevada Gaming Control Act (the "Nevada Act") and to licensing and regulatory control by the Nevada State Gaming Control Board (the "Nevada Board"), the Nevada Gaming Commission (the "Nevada Commission") and various local, city and county regulatory agencies (collectively, the "Nevada Gaming Authorities"). The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, a publicly traded corporation registered with the Nevada Commission (a "Registered Corporation"), such as the Company, or which holds a license in order to determine whether such individual is suitable or should be licensed as a business associate of a Registered Corporation or a gaming licensee. No person may become a controlling stockholder of the Company without the prior approval of the Nevada Commission, although any beneficial owner of the Company's voting securities, regardless of the number of shares owned, may be required to file applications, be investigated, and have his suitability determined if the Nevada Commission has reason to believe that such ownership may be inconsistent with the declared policies of the State of Nevada. The Nevada Act provides that persons who acquire beneficial ownership of more than 5% of the voting securities of a Registered Corporation must report the acquisition to the Nevada Commission. The Nevada Act also requires that beneficial owners of more than 10% of the voting securities of a Registered Corporation must apply to the Nevada Commission for a finding of suitability within 30 days after the Nevada Board Chairman mails the written notice requiring such filing. An "institutional investor" (as such term is defined in the Nevada Commission's regulations) which acquires beneficial ownership of more than 10%, but not more than 15%, of the Company's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only (as determined in accordance with the provisions of the Nevada Commission's regulations). The Nevada Commission may, in its discretion, apply the rules and regulations of the Commission in determining whether, and to what extent, the beneficial owner of equity securities, such as the Common Stock or Convertible Debentures, is the beneficial owner of voting securities for purposes of determining whether a holder must apply for a finding of suitability. Further, the Nevada Commission may, in its discretion, require the holder of any security of a Registered Corporation, such as the Company, including the Common Stock or Convertible Debentures, to file applications, be investigated and be found suitable to own a security of the Registered Corporation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Historically, the costs incurred by the Company in connection with investigations have varied widely depending upon, among other things, the complexity of the financial history of the person being investigated, the position of the proposed licensee and the nature and scope of the investigatory activity which the regulatory authority elects to undertake. The Company incurred investigative costs aggregating approximately $255,000 in the fiscal year ended June 30, 1994 (of which approximately $135,000 related to the licensing of KIC in respect of the investment by Kirkland in the Company and the change in composition of the Company's Board of Directors contemplated by the Stockholders Agreement). Amounts incurred by other proposed investors in gaming companies, such as the Company, could be materially greater or less than such amount. Additionally, the Company maintains with the Nevada Board a revolving fund of $15,000 to cover minor investigations incurred in the ordinary course of conducting its Nevada gaming operations. Theoretically, there is no limit to the amount of investigative fees which can be charged to the Company or a proposed investor by gaming authorities. The Company will continue to incur licensing and investigative costs in the future. The Nevada Act prohibits the Company from making a public offering of its securities without the approval of the Nevada Commission if the securities or any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Nevada, or to retire or extend obligations incurred for one or more such purposes. On February 23, 1995, the Nevada Commission granted the Company prior approval to make public equity offerings for a period of one year, limited to the registration and sale of common stock, from time to time, upon the exercise of certain designated securities and warrants subject to certain conditions ("Shelf Approval"). However, the Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board and must be reviewed annually. The Shelf Approval, or any approval of a public offering, if granted, does not constitute a finding, recommendation or approval by the Nevada Commission or by the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. The Nevada Commission has also imposed a requirement on the Company that it must receive the prior administrative approval of the Nevada Board Chairman for any offer for the sale of an equity security in a private transaction. The loss or restriction of the Company's gaming licenses in Nevada would have a material adverse effect on its business and could require the Company to cease gaming operations in Nevada. Mandatory Disposition Pursuant to Gaming Laws If a holder or a beneficial holder of Convertible Debentures or Common Stock is required by the Nevada Commission to be found suitable, the holder shall apply for a finding of suitability within 30 days after being ordered to do so by the Nevada Board Chairman or the Nevada Commission's request. The applicant for a finding of suitability must pay all costs of the investigation for such finding of suitability. If a holder or a beneficial owner is required to be found suitable and is not found suitable by the Nevada Commission, (i) the holder shall, upon request of the Company, dispose of his Convertible Debentures and Common Stock within 30 days or within that time prescribed by the Nevada Commission, whichever is earlier, or (ii) the Company may, at its option, redeem the holder's Convertible Debentures in cash at the lesser of (w) the principal amount thereof or (x) the price at which the Convertible Debentures were acquired by the holder, together with, in either case, accrued interest to the date of the finding of unsuitability by the Nevada Commission and repurchase the holder's Common Stock at the lesser of (y) the market price thereof on the date of the finding of unsuitability or (z) the price at which such Common Stock was acquired by the holder. Such mandatory disposition could be required at a time when market conditions are not favorable to the affected holders or at a time or at costs which are otherwise unfavorable to such holders. Regulatory Matters -- Louisiana The manufacture, distribution, servicing and operation of video draw poker gaming devices ("Devices") in Louisiana is subject to the Louisiana Act. Licensing and regulatory control is provided by the Video Gaming Division of the Gaming Enforcement Section of the Office of State Police within the Department of Public Safety and Corrections (the "Division"). The laws and regulations of the Division are based upon a primary consideration of maintaining the health, welfare and safety of the general public and upon a policy which is concerned with protecting the video gaming industry from elements of organized crime, illegal gambling activities and other harmful elements, and protection of the public from illegal and unscrupulous gaming to ensure the fair play of video gaming Devices. Two of the Company's indirect operating subsidiaries involved with its gaming operations in Louisiana have each been granted a license as a Device owner by the Division. Another indirect subsidiary of the Company has been granted a license as a distributor of Devices by the Division. These gaming subsidiaries are licensees under the terms of the Louisiana Act (collectively, the "Louisiana Licensees" and individually, a "Louisiana Licensee"). The licenses held by the Louisiana Licensees expire at midnight on June 30 of each year and must be renewed annually through payment of certain fees. All license fees must be paid on or before May 15 in each year licenses are renewable. The Division may deny, impose a condition or fine, suspend or revoke any license, renewal or application for a license for violation of any rules and regulations of the Division or any violations of the Louisiana Act. Fines for violations of gaming laws or regulations may be levied against the licensees and the persons involved. In addition, the licensees could be subject to separate fines for each violation of the gaming laws. The Louisiana Act states that a license issued by the Division is a pure and absolute privilege. The issuance, condition, denial, suspension or revocation of a license is at the discretion of the Division in accordance with the provisions of the Louisiana Act. A license is not property or a protected interest under the constitution of either the United States or the State of Louisiana. Suspension or revocation of any of the licenses of the Louisiana Licensees could have a material adverse effect on the business of the Company. The Division has the authority to conduct overt and covert investigations of any person, entity, applicant or participant involved directly or indirectly in the video gaming industry in Louisiana. This investigation may extend beyond the information provided in the formal application, including information with regard to the licensee's immediate family and relatives and their affiliations with certain groups, organizations, corporations, firms or other business entities. The investigation may also extend to every person who has or controls more than a 5% ownership, income or profit interest in an entity which applies for a license in accordance with the Louisiana Act, or who is a key employee or who has the ability to exercise significant influence over the licensee. All persons or entities investigated must meet all suitability requirements and qualifications for a licensee. The Division may deny an application for licensing for any cause which it may deem reasonable. The applicant for licensing must pay a filing fee which also covers the cost of investigation. In order for a corporation to be licensed by the Division, it must be demonstrated that a majority of the stock of the corporation is owned by persons who have been domiciled in Louisiana for a period of at least two years prior to the date of the application. Devices must meet strict specifications established by the Division. The number of Devices is limited depending on the type of location at which the Devices are located. Fees payable to the Division include an application fee, which is non-refundable, an annual fee, based upon a percentage of the net revenues from the operation of each Device, a Device owner's fee, a Device operations fee, a license establishment fee and a Device owner's franchise fee. All fees are payable in either quarterly or annual installments depending on the fee being paid. The loss or restriction of the Company's gaming licenses in Louisiana would have a material adverse effect on its business and could require the Company to cease gaming operations in Louisiana. Any expansion of the Company's Louisiana gaming operations (other than the addition of video poker devices in existing locations) could subject the Company to additional regulation in Louisiana. Regulatory Matters -- Mississippi The ownership and operation of gaming devices in Mississippi is subject to extensive state and local laws and regulations, including the Mississippi Gaming Control Act (the "Mississippi Act") and the regulations (the "Mississippi Regulations") promulgated thereunder. The Mississippi Gaming Commission (the "Mississippi Commission") oversees licensing and regulatory compliance. Gaming in Mississippi can be legally conducted only on vessels of a certain minimum size in navigable waters of the Mississippi River or in waters of the State of Mississippi which Lie adjacent and to the south (principally in the Gulf of Mexico) of the counties of Hancock, Harrison and Jackson, and only in counties in Mississippi in which the registered voters have not voted to prohibit such activities. The underlying policy of the Mississippi Act is to ensure that gaming operations in Mississippi are conducted (i) honestly and competitively, (ii) free of criminal and corruptive influences and (iii) in a manner which protects the rights of the creditors of gaming operations. The Mississippi Act requires that a person (including any corporation or other entity) must be licensed to conduct gaming activities in Mississippi. A license will be issued only for a specified location which has been approved as a gaming site by the Mississippi Commission. The Company, through its interest in RCVP, obtained a license on June 30, 1994 that is valid for two years. The Company must apply for renewal of such license, which renewal cannot be assured. The Mississippi Act also requires that certain officers or directors of a gaming licensee, any person that owns more than 10% of a licensee, or any other person who exercises a significant influence over the licensee, either directly or indirectly, must be found suitable by the Mississippi Commission. In addition, any employee of the licensee which is directly involved in gaming, must obtain a work permit from the Mississippi Commission. The Mississippi Commission will not issue a license or make a finding of suitability unless it is satisfied, only after an extensive investigation paid for by the applicant, that the persons associated with the gaming licensee or applicant for a license are of good character, honesty and integrity, with no relevant or material criminal record. In addition, the Mississippi Commission will not issue a license unless it is satisfied that the licensee is adequately financed or has a reasonable plan to finance its proposed operations from acceptable sources, and that persons associated with the applicant have sufficient business probity, competence and experience to engage in the proposed gaming enterprise. The Mississippi Commission has the power to deny, limit, condition, revoke and suspend any license, finding of suitability or registration, or fine any person, as it deems reasonable and in the public interest, subject to any opportunity for a hearing. Under the Mississippi Regulations, a gaming licensee cannot be publicly held, although an affiliated corporation, such as the Company, may be publicly held so long as the Company registers with and obtains the approval of the Mississippi Commission. In addition, approval of any subsequent public offerings of the securities of the Company must be obtained from the Mississippi Commission if any part of the proceeds from that offering are intended to be used to pay for or reduce debt used to pay for the construction, acquisition or operation of any gaming facility in Mississippi. Under the Mississippi Regulations, a person is prohibited from acquiring control of a licensee without the prior approval of the Mississippi Commission. Any person who, directly or indirectly, or in association with others, acquires beneficial ownership of more than 5% of any licensee must notify the Mississippi Commission of this acquisition. The Mississippi Commission may require that a person be found suitable if that person holds less than a 10% ownership position and must require that a person be found suitable if that person owns more than 10% of a licensee. Furthermore, regardless of the amount of ownership, any person who acquires beneficial ownership may be required to be found suitable if the Mississippi Commission has reason to believe that the acquisition of such ownership would be inconsistent with the declared policy of Mississippi. Any person who is required to be found suitable must apply for a finding of suitability from the Mississippi Commission within 30 days after being requested to do so, and must deposit with the State Tax Commission a sum of money which is adequate to pay the anticipated investigatory costs associated with such finding. Any person who is found not to be suitable by the Mississippi Commission shall not be permitted to have any direct or indirect ownership in the licensee. Any person who is required to apply for a finding of suitability and fails to do so, or who fails to dispose of his or her interest in the licensee if found unsuitable, is guilty of a misdemeanor. If a finding of suitability with respect to any person is not applied for where required, or if it is denied or revoked by the Mississippi Commission, the licensee is not permitted to pay such person for services rendered, or to employ or enter into any contract with such person. The laws and regulations permitting and governing Mississippi casino gaming were adopted during 1990 and 1991, and the first casinos opened in August 1992. Consequently, the interpretation and application of Mississippi law and regulations may evolve over time, and any such changes may have an adverse effect on Mississippi licensees. The loss or restriction of the Company's gaming license in Mississippi could have a material adverse effect on its business and could require the Company to cease gaming operations in Mississippi. Regulatory Matters -- Additional Jurisdictions The Company, in the ordinary course of its business, routinely considers business opportunities to expand its gaming operations into additional jurisdictions. Any such expansion would subject the Company and, possibly, some or all of its officers, directors, employees and securityholders, to regulatory requirements in addition to those with which such parties are presently obligated to comply. As the Company seeks to establish gaming operations in additional jurisdictions, the Company expects to continue to incur significant development costs, including costs related to efforts to obtain gaming licenses and other regulatory approvals in such jurisdictions. Shares Eligible for Future Sale The sale of a substantial number of shares of Common Stock in the public market could materially adversely affect the market price of Common Stock. Persons holding a substantial number of shares of Common Stock and options and warrants to purchase additional shares of Common Stock have rights, subject to certain conditions, to require the Company to file registration statements covering the shares they own or may acquire through option or warrant exercises. These persons and others also have rights, subject to certain limitations, to "piggyback" registrations if the Company files a registration statement. The Company filed a registration statement in December 1994 which covered 600,000 shares of Common Stock of certain selling stockholders in connection with the acquisition of the Company's interest in the RCVP. See "-- Effect of Outstanding Warrants, Options and Convertible Debentures." Effect of Outstanding Warrants, Options and Convertible Debentures Giving effect to the warrants issued to Kirkland, GSA and certain other investors in connection with the September 1993 investment by Kirkland (the "Kirkland Investment"), the warrants issued to Mr. Wilms in connection with the completion of the funding of a $6,500,000 loan to Video Services, Inc., a Louisiana corporation ("VSI") (the outstanding principal balance of which as of March 22, 1995 was approximately $4,365,000), and a majority controlled subsidiary of the Company (the "Wilms Warrants"), the warrants issued to the initial purchasers in connection with the Convertible Debenture offering and the warrants issued to Mr. Greathouse and Dr. Fields in connection with their employment contracts, the Company has outstanding warrants covering 7,280,000 shares of Common Stock. Of such warrants, warrants which cover 2,750,000 shares of Common Stock were issued to Kirkland and certain other investors on September 21, 1993 in connection with the Kirkland Investment (the "Investment Warrants"), warrants which cover 1,250,000 shares of Common Stock were issued to GSA in connection with advisory services (the "Incentive Warrants"), warrants which cover 780,000 shares of Common Stock were issued to the initial purchasers in connection with the Convertible Debenture offering on September 21, 1993 (the "Initial Institutional Warrants") and warrants which cover 250,000 shares of Common Stock were issued to each of Mr. Greathouse and Dr. Fields in connection with their employment contracts (all of which are vested in the case of Mr. Greathouse and of which, as discussed below in the case of Dr. Fields, 62,500 are vested immediately and the remainder of which will vest ratably in annual increments during the term of his three year engagement agreement). Certain additional warrants (the exact number of which has not been finally determined) are issuable to GSA in respect of certain consummated transactions and may be issuable in the future in the event that certain other transactions are consummated. As of March 22, 1995, options covering 2,852,334 shares of Common Stock had been granted and were outstanding pursuant to the Company's 1984 Stock Option Plan and the Company's 1991 Stock Option Plan, of which options covering approximately 978,100 of such shares of Common Stock were currently exercisable at prices ranging from $1.375 to $8.75 per share. See Note 5 of Notes to the Company's June 30, 1994 Consolidated Financial Statements, incorporated by reference in this Prospectus. The Wilms Warrants, which cover 2,000,000 shares of Common Stock, are exercisable at a price of $2.50 per share. The Investment Warrants and the Incentive Warrants will be exercisable, at a price of $1.50 per share, only in the event that the price of the Common Stock has traded for 15 consecutive trading days at an average price equal to, or in excess of, $11.00, $13.00 and $15.00 as to one-third of such Investment Warrants and Investment Warrants, respectively. The Stockholders Agreement provides that the Wilms Warrants and the Common Stock owned by Mr. Wilms (together, the "Wilms Securities"), on the one hand, and the Investment Warrants and Incentive Warrants, on the other hand, entitle the holders thereof to four demand registrations and unlimited "piggyback" registrations for offerings by the Company for its own account, subject to customary exceptions, at the Company's expense. Of such demand registrations, holders of the Wilms Securities (i) may elect to participate in two registrations demanded by holders of the Investment Warrants and the Incentive Warrants and (ii) have certain priority rights relative to such other holders with respect to "piggyback" registration rights. In connection with the employment of Mr. Greathouse by the Company, Mr. Greathouse received 250,000 shares of restricted Common Stock, 250,000 warrants on economic terms identical to the Incentive Warrants and 250,000 options exercisable at $5.75 per share under the 1991 Stock Option Plan. One-third of the warrants are exercisable and the options vest and become exercisable on each anniversary of August 15, 1994 (the initial date of Mr. Greathouse's employment). In connection with his engagement agreement to acts Vice Chairman of the Board of Directors, Dr. Fields received 250,000 warrants on economic terms identical to the Incentive Warrants and 250,000 options exercisable at $5.75 per share under the 1991 Stock Option Plan. One-fourth of such warrants and options vested and became exercisable on September 1, 1994 and one-fourth will vest and become exercisable on each of August 31, 1995, 1996 and 1997. See Executive Compensation incorporated by reference in this Prospectus. On September 21, 1993, after receipt of the administrative approval of the Chairman of the Nevada Board, the Company issued the Initial Institutional Warrants to the initial purchasers in connection with the Convertible Debenture offering and may issue warrants which cover up to an additional 250,000 shares of Common Stock (the "Additional Institutional Warrants," and together with the Initial Institutional Warrants, the "Institutional Warrants") to one of such initial purchasers in connection with future advisory services to be provided to the Company by such initial purchaser. The Initial Institutional Warrants vested upon the issuance thereof and became exercisable on September 21, 1994. The Additional Institutional Warrants, if issued, will vest and become exercisable only after the Common Stock has traded at an average price equal to, or in excess of, $13.00 for 15 consecutive trading days after the issuance thereof, subject to adjustment under certain circumstances. All of the Institutional Warrants will remain exercisable, to the extent vested, for five years after first becoming exercisable, but in no event longer than six years from the date of issuance. The exercise price of the Institutional Warrants is $8.25 per share. The holders of the Institutional Warrants are entitled to one demand registration and unlimited "piggyback" registrations, whether or not the proposed registration is for the Company's account, subject to customary exceptions, at the Company's expense. The Company has outstanding $85 million principal amount of the Convertible Debentures which are convertible at any time, or from time to time, into Common Stock at a conversion price of $10 per share (i.e., for an aggregate of up to 8,500,000 shares of Common Stock), subject to adjustment under certain circumstances. Holders of the options, warrants and Convertible Debentures described above are likely to exercise or convert them at times when the Company could raise additional capital by issuing Common Stock for greater consideration than could be obtained by the exercise of the options and warrants or conversion of the Convertible Debentures, thereby affecting the terms on which the Company could obtain additional capital or its ability to do so. See Management's Discussion and Analysis of Financial Condition and Results of Operations, incorporated by reference in this Prospectus. RECENT DEVELOPMENTS Recent Transactions Kirkland Transaction. On June 25, 1993, the Company and Mr. Alfred H. Wilms, the principal stockholder and a director of the Company (and then Chairman of the Board and Chief Executive Officer), entered into agreements with Kirkland, KIC (the general partner of Kirkland) and GSA, an affiliate of Kirkland. Pursuant to these agreements, (i) KIC and certain of its affiliates agreed, among other things, not to make investments in certain gaming opportunities without first having offered them to the Company on the same terms and conditions; and (ii) GSA agreed to assist the Company in identifying potential investors, in negotiating and obtaining financing, and in identifying opportunities for acquisitions, dispositions, joint ventures and other similar transactions. These agreements contained provisions involving stock purchase rights involving the issuance of shares of the Company's Convertible Special Stock and certain warrants. In addition, these agreements provided that if at least $20 million in capital infusion to the Company was achieved, KIC, in its individual capacity, would acquire the right, subject to the receipt of required regulatory and other approvals, to nominate a majority of the seven members of the Company's Board of Directors with the other members nominated by Mr. Wilms. On September 21, 1993, the Company completed the private placement of $85 million aggregate principal amount of the Convertible Debentures. Concurrent with the closing of this issuance, Kirkland invested $5,000,000 in the Company in exchange for 1,333,333 shares of the Company's Convertible Special Stock and Investment Warrants to acquire 2,750,000 shares of Common Stock, and KIC delivered notice to the Company of its intent to exercise it right to control the Company's Board of Directors. On June 23, 1994, KIC received the required regulatory approvals from the Nevada Commission and in July 1994 exercised its right to take control of the Board of Directors. For a further discussion concerning the changes in the Board of Directors as a result of these transactions and certain subsequent changes to the Board of Directors, see "Risk Factors -- Control by Principal Stockholders." Certain Additional Appointments. In August 1994, the Company hired Mr. Steve Greathouse as President and Chief Executive Officer. Mr. Greathouse, who has held various positions in the gaming industry since 1974, most recently served as the President of the Harrah's Casino Hotels Division of The Promus Companies, Inc. Mr. Greathouse was appointed to the Company's Board of Directors in October 1994. Consistent with the continuing development and implementation of the business strategy of the Company, Mr. Greathouse succeeded Mr. Kirschbaum as Chairman of the Board in March 1995. Mr. Kirschbaum will continue to serve as a Director and remains actively involved in the business of the Company, particularly in its development efforts. In conjunction with such actions, Dr. Fields has replaced Mr. Greathouse as Chairman of the Executive Committee of the Board. In March 1995, David Johnson joined the Company as Secretary, Senior Vice President and General Counsel. He also serves as Secretary of each of the subsidiaries of the Company. Mr. Johnson has approximately 17 years of experience in legal and regulatory matters. He was formerly a senior partner in the Nevada law firm, Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered. In addition, Alfred H. Wilms was elected a director of each of the subsidiaries of the Company. Native American Investments, Inc. On March 7, 1994, the Company acquired 90% of the common stock and all of the shares of a newly established class of preferred stock of USA Gaming of Native America, Inc., which subsequently changed its name to Native American Investments, Inc. ("NAI"). As consideration for the common stock and as its initial contribution to NAI, the Company agreed, through a subsidiary and subject to certain conditions, to issue 224,444 shares of Common Stock of the Company and pay $960,000 in cash. As of March 22, 1995, 168,333 of such shares had been issued and delivered. The Company also agreed, upon adoption of a non-qualified stock bonus plan by NAI, to fund such plan with up to 168,889 shares of the Company's common stock at the discretion of the Company. NAI has contracts to develop Class II and Class III gaming opportunities with several Indian tribes in California and Oklahoma. All of the contracts presently held by NAI are in the development and non-operational stages and are subject to negotiations resulting in satisfactory compacts with the states in which the projects are located and approval of the contracts by the National Indian Gaming Commission (the "NIGC"). Therefore, the Company has realized no revenues through its ownership of NAI. Subsequent to initial approval, gaming contracts entered into with Indian tribes are subject to periodic review by the NIGC as well as the gaming commission of the tribe party to the contract. Such reviews typically occur annually, but may be undertaken at any time. Each of NAI's gaming contracts, if initially approved, will be subject to such periodic review and, therefore, will be subject to revocation by gaming authorities from time to time prior to the date such contract expires by its terms. Such contracts may additionally be restricted by, or obligations may be imposed under, the tribal-state compact under which such contract is operated. Moreover, any contract with an Indian tribe relating to land is subject to approval by the Bureau of Indian Affairs of the United States Department of Interior. All Indian tribes, including the Indian tribes with which NAI has contracted, possess sovereign immunity from contract suit unless a tribe unequivocally expresses a clear waiver from such immunity. The gaming contracts NAI has entered into with Indian tribes provide for such waivers. The Governor of California has to date refused to negotiate a compact (other than compacts for pari-mutuel wagering on horse racing) covering Indian gaming in California and is currently engaged in related litigation with certain Indian tribes. In Rumsey Indian Rancheria vs. Wilson the Ninth Circuit Court of Appeals ruled in November 1994 that, with the possible exception of "slot machines" in the form of video lottery terminals, the State of California has no obligation to negotiate with the plaintiff tribes on the gaming activities at issue in that litigation. That court remanded the case back to the trial court to make certain determinations in respect of "slot machines" under California law. Given the requirement that the trial court make additional determinations and the likely prospect of further appeals in this case, the Company cannot predict if or when the State of California will enter into any compact covering Class III gaming in California. There can be no assurance as to the successful completion or operation of any part of the NAI's contracts. Greater Dubuque Riverboat Entertainment Company. On June 2, 1994, the Company, as plaintiff (along with its subsidiary, United Gaming of Iowa, Inc.) filed a lawsuit in the United States District Court, Northern District of Iowa, alleging, among other things, a breach of fiduciary duty by defendants Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability company organized to operate a riverboat casino in Dubuque, Iowa ("GDREC"), and Joseph P. Zwack. The defendants in that lawsuit filed a counterclaim alleging, among other things, that the Company tortiously interfered with the business of GDREC and sought unspecified compensatory and exemplary damages and costs of the action. In December 1994, the parities to such litigation entered into a Settlement Agreement pursuant to which such litigation will be dismissed with prejudice without any payment by any party thereto. Also in connection with such settlement, GDREC permitted the Company to conduct a due diligence investigation of its business. At the conclusion of such investigation, the Company had the option, in its sole and unfettered discretion, either to elect to proceed with an offer to acquire GDREC as set forth in the settlement or, alternatively, not to proceed and cease all efforts to acquire, in any manner, any interest in GDREC, certain related parties or the Dubuque, Iowa riverboat license. On December 16, 1994, the Company advised GDREC that it elected not to proceed with such offer. Camptown Greyhound Racing, Inc. In September 1994, Kansas Gaming Partners, LLC and Kansas Financial Partners, LLC (the "Kansas Partners"), each Kansas limited liability companies, whose members include wholly owned subsidiaries of the Company and Casino Magic Corporation, announced that the Kansas Racing Commission approved a financing proposal submitted by Camptown Greyhound Racing, Inc. ("Camptown") that would facilitate the completion of construction of a greyhound racing facility located near Frontenac, Kansas. In November 1994, Camptown closed a $3,205,000 loan commitment which is guaranteed by the Kansas Partners. Additionally, Camptown has entered into an option agreement with the Kansas Partners whereby the Kansas Partners have been granted the exclusive right to operate casino-type gaming at Camptown's facility if and when such gaming is enacted in Kansas. In the event casino gaming is enacted in Kansas, it is presently contemplated that the Kansas Partners will construct a casino, hotel, recreational vehicle park, theme park and restaurants on the 320-acre site. A referendum to amend the Kansas constitution to permit casino gaming exclusively at three existing pari-mutuel facilities (including Camptown) could be put to the voters of Kansas following action by the Kansas State Legislature which could come as early as Spring 1995. There can be no assurance as to the successful completion or operation of any part of this project. Pine Hills Joint Venture. In July 1994, the Company executed a joint venture agreement with Lone Star Casino Corporation (the "Joint Venture") to develop the Pine Hills Casino resort site ("Pine Hills") in Bay St. Louis, Mississippi. Pine Hills is anticipated to consist of 60,000 square feet of gaming, restaurant and back office facilities, and an 18-hole golf course and clubhouse. The Company has agreed, upon certain conditions described below, to make initial advances of up to $1,900,000 to defray certain preliminary expenses to be incurred in connection with the project in accordance with an approved budget. The Company's obligation to make the initial advance payments was contingent upon, among other things, obtaining the landlord's consent to Lone Star's assignment of the ground lease for the project site to the Joint Venture and related financing, the completion of definitive joint venture documents and the satisfactory completion of the Company's due diligence. In addition, the Company agreed, upon certain conditions, to make an equity investment of up to $15,000,000 (including the initial $1,900,000 contribution) for a 50% equity interest in the Joint Venture, plus the separate right to receive management fees and royalties aggregating 10% of the Joint Venture's gross revenues, as defined. The Company's obligation to make its $15,000,000 equity investment was contingent upon, among other things, obtaining the landlord's consent to Lone Star's assignment of the ground lease for the project site to the Joint Venture and related financing, obtaining satisfactory debt financing for the project, the receipt of all necessary governmental approvals, the satisfactory resolution of certain litigation relating to the project site currently pending in the Mississippi Supreme Court, as well as the satisfactory completion of the Company's due diligence. Certain of the conditions to the funding of the $1,900,000 and $15,000,000 amounts referenced above have not been met and the Company has advised Lone Star that, accordingly, the Company has no further obligations in respect thereof. The Company is continuing discussions with the parties to determine whether an agreement can be reached regarding an acceptable transaction. There can be no assurance as to whether such an agreement can be reached or, if so, as to the future successful completion or operation of this project. Annual Meeting of Stockholders. At the Company's 1994 Annual Meeting of Stockholders, (i) all present directors were re-elected as nominated and (ii) stockholders approved a proposal to change the Company's name from "United Gaming, Inc." to "Alliance Gaming Corporation." USE OF PROCEEDS All of the shares of Common Stock offered hereby are being offered by the Selling Stockholder. The Company will not receive any of the proceeds from the sale of the shares. SELLING STOCKHOLDER As of the effective date of the Registration Statement of which this Prospectus is a part, the Selling Stockholder will own 250,000 shares of Common Stock (2.1% of the Common Stock outstanding). Assuming that the Selling Stockholder sells all 250,000 Shares offered hereby, he will no longer own beneficially any shares of Common Stock. The Selling Stockholder was engaged by the Company to act as President and Chief Executive Officer in August 1994. He was appointed to the Company's Board of Directors in October 1994 and was appointed Chairman of the Board in March 1995. In connection with the issuance of the 250,000 shares of Common Stock to the Selling Stockholder, the Company agreed to file and cause to be declared effective the Registration Statement of which this Prospectus is a part. The Company has also agreed to maintain the Registration Statement effective until the latter to occur of (i) the first anniversary of the date the Selling Stockholder ceases to be an employee of the Company and (ii) the date on which the Selling Stockholder may sell, freely and without restriction, his shares unregistered in compliance with federal securities laws. DESCRIPTION OF CAPITAL STOCK The Company's Articles of Incorporation, as amended, authorize the issuance of 185,000,000 shares of capital stock, of which 175,000,000 shares are designated as Common Stock, par value $0.10 per share, and 10,000,000 shares are designated as Special Stock, par value $0.10 per share. As of March 22, 1995, 11,629,650 shares of Common Stock were issued and outstanding and 1,333,333 shares of Convertible Special Stock were issued and outstanding. Common Stock Holders of Common Stock are entitled to cast one vote per share on all matters on which the Company's stockholders are entitled to vote. The number of votes required to take any action by the Company's stockholders are as provided in the Nevada General Corporation law. Holders of Common Stock are not entitled to cumulate their votes. Holders of Common Stock are entitled to receive dividends when and as declared by the Company's Board of Directors out of funds legally available for the payment thereof. The Company's Articles of Incorporation provide that once the subscription price or par value of any share of Common Stock has been paid in, such share shall be non-assessable and shall not be subject to assessment to pay the debts of the Company. Subject to any preferential rights which may be granted to holders of certain series of Special Stock, holders of Common Stock are entitled to share ratably in all assets of the Company that are legally available for distribution to its stockholders in the event of its liquidation or dissolution. Holders of Common Stock have no preemptive rights nor are there any subscription, redemption or conversion privileges associated with the Common Stock. Special Stock The Articles of Incorporation provide that the Special Stock may be issued from time to time upon such terms and conditions and for such consideration as may be provided by the Company's Board of Directors. The Special Stock may be issued in one or more series, each series having such designations, rights, preferences and privileges as may be determined by the Board of Directors of the Company at the time of issuance. The Board has designated an initial series of Special Stock as "Non-Voting Junior Convertible Special Stock," which series consists of 1,333,333 shares of Convertible Special Stock. All of the shares of Convertible Stock were issued to Kirkland on September 21, 1993. The Company's Articles of Incorporation provide that the shares of Convertible Special Stock are intended to have the same rights as the Common Stock and, subject to regulatory compliance, are convertible on a share-for-share basis into shares of Common Stock, except that the shares of Convertible Special Stock have no voting rights and have a $.01 per share liquidation preference. Provisions Applicable to Certain Holders The Nevada General Corporation Law contains a control share provision with respect to the acquisition of more than 20% of the voting shares of a Nevada corporation. The Company, however, has opted out of this provision in accordance with Nevada law by adopting an amendment to its By-laws to such effect. PLAN OF DISTRIBUTION Any or all of the shares of Common Stock may be offered and sold to purchasers directly by or on behalf of the Selling Stockholder from time to time in the over-the-counter market, in privately negotiated transactions, in the Nasdaq National Market or otherwise at prices prevailing in such market or exchange or as may be negotiated at the time of sale. The shares of Common Stock may also be publicly offered through agents, underwriters or dealers. In such event, the Selling Stockholder may enter into agreements with respect to any such offering. Such underwriters, dealers or agents may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Stockholder and/or the purchasers of shares of Common Stock. The Selling Stockholder and any such underwriters, dealers or agents that participate in the distribution of shares of Common Stock may be deemed to be underwriters, and any profit on the sale of the shares of Common Stock by them and any discounts, commissions or concessions received by them may be deemed to be underwriting discounts and commissions, under the Securities Act. Any such underwriters, dealers and agents may engage in transactions with, and perform services for, the Company and affiliates of the Company. At the time a particular offer of Shares is made, to the extent required, a Prospectus Supplement will be distributed which will set forth the aggregate number of Shares being offered and the terms of the offering, including the name or names of any underwriters, dealers or agents, any discounts, concessions or commissions and other items constituting compensation from the Selling Stockholder and any discounts, commissions, or concessions allowed or reallowed or paid to dealers. LEGAL MATTERS The validity of the shares of Common Stock offered hereby has been passed upon for the Company by Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered, Las Vegas, Nevada. EXPERTS The consolidated financial statements and schedules of Alliance Gaming Corporation (formerly United Gaming, Inc.), and its subsidiaries as of June 30, 1994 and 1993, and for each of the years in the three-year period ended June 30, 1994, have been incorporated by reference herein and in the Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein upon the authority of said firm as experts in accounting and auditing. No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Prospectus and, 250,000 SHARES if given or made, such information or representations in connection with this offering must be relied upon as having been authorized by the Company or by the Selling Stockholder. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so ALLIANCE GAMING or to any person to whom it is unlawful CORPORATION to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that the information COMMON STOCK contained herein is correct as of any (Par Value $.10 share time subsequent to the date per Share) of this Prospectus. TABLE OF CONTENTS Page Available Information . . . . . . 2 Incorporation of Certain Documents by Reference. . . . . . 2 Prospectus Summary. . . . . . . . 3 PROSPECTUS Risk Factors. . . . . . . . . . . 5 Recent Developments . . . . . . .14 Use of Proceeds . . . . . . . . .17 Selling Stockholder . . . . . . .17 Description of Capital Stock. . .17 Plan of Distribution. . . . . . .18 Legal Matters . . . . . . . . . .18 Experts . . . . . . . . . . . . .18 March , 1995 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the fees and expenses in connection with the issuance and distribution of the securities being registered hereunder. Except for the SEC registration fee, all amounts are estimates. SEC Registration Fee . . . . . . . . . . . . . . . . . . $ 502 NASD Filing Fee. . . . . . . . . . . . . . . . . . . . . - Printing and Engraving Expenses. . . . . . . . . . . . . 5,000 Legal Fees and Expenses. . . . . . . . . . . . . . . . .15,000 Accounting Fees and Expenses . . . . . . . . . . . . . . 3,000 Registrar and Transfer Agent Fees and Expenses . . . . . 1,000 Blue Sky Fees and Expenses . . . . . . . . . . . . . . . 3,000 Miscellaneous Expenses . . . . . . . . . . . . . . . . . 2,498 Total. . . . . . . . . . . . . . . . . . . . .$30,000 All of the costs identified above will be paid by the Company. Item 15. Indemnification of Directors and Officers. Article VI of the Company's Articles of Incorporation limits the liability of the Company's directors and officers. It provides that a director or officer of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except for liability (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (ii) for the payment of dividends in violation of Section 78.300 of the Nevada General Corporation Law. It also provides that any repeal or modification of the foregoing provision of the stockholders of the Company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Company existing at the time of such repeal or modification. Section 78.300 of the Nevada General Corporation Law provides: 1. The directors of a corporation shall not make dividends or other distributions to stockholders except as provided by such section. 2. In case of any willful or grossly negligent violation of the provisions of such section, the directors under whose administration the violation occurred, except those who caused their dissent to be entered upon the minutes of the meeting of the directors at the time, or who not then being present caused their dissent to be entered on learning of such action, are jointly and severally liable, at any time within 3 years after each violation, to the corporation, and, in the event of its dissolution or insolvency, to its creditors at the time of the violation, or any of them, to the lesser of the full amount of the dividend made or of any loss sustained by the corporation by reason of the dividend or other distribution to stockholders. However, Section 78.751 of the Nevada General Corporation Law permits the Registrant to indemnify its directors and officers as follows: 1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines, upon application, that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter herein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. 4. Any indemnification under subsections 1 and 2, unless offered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (d) If a quorum of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion. 5. The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. Item 16. Exhibits and Financial Statement Schedules. Exhibit No. Description of Exhibit 4.1 Form of Employment Agreement, dated as of August 15, 1994, by and between the Company and Steve Greathouse. 4.2 Form of Warrant Agreement, dated as of August 15, 1994, by and between the Company and Steve Greathouse and Warrant Certificates issued pursuant thereto. 4.3 Form of Agreement, dated as of September 1, 1994, by and between the Company and Craig Fields. 4.4 Form of Warrant Agreement, dated as of September 1, 1994, by and between the Company and Craig Fields and form of Warrant Certificates issued pursuant thereto. 4.5 Form of Amendment Agreement, dated as of October 20, 1994, by and among the Company, Kirkland Investment Corporation, Gaming System Advisors, L.P., Kirkland-Ft. Worth Investment Partners, L.P. and Alfred H. Wilms. 4.6 Form of Agreement, dated as of March 20, 1995, by and form of between the Company and Joel Kirschbaum. 4.7 Form of Selling Stockholder Letter Agreement dated March 20, 1995. 5.1 Opinion of Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered. 23.1 Consent of Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered (included in Exhibit 5.1). 23.2 Consent of KPMG Peat Marwick LLP. 24.1 Power of Attorney (included on Page II-5). Item 17. Undertakings. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer of controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes: (1) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby further undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized in the City of Las Vegas, State of Nevada, as of the 24th day of March, 1995. ALLIANCE GAMING CORPORATION By: /s/ STEVEN GREATHOUSE Steven Greathouse Chairman, President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Robbins and John W. Alderfer, and each of them, with full power to act without the other, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement, and any and all amendments thereto (including post-effective amendments) and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated: Signatures Title Date /s/ STEVEN GREATHOUSE Chairman of the Board of March 24, 1995 Steven Greathouse Directors, President and Chief Executive Officer (Principal Executive Officer) /s/ JOHN W. ALDERFER Senior Vice President, March 24, 1995 John W. Alderfer Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ JOEL KIRSCHBAUM Director March 24, 1995 Joel Kirschbaum /s/ ANTHONY L. DICESARE Director March 24, 1995 Anthony L. DiCesare /s/ CRAIG FIELDS Director March 24, 1995 Craig Fields Director March 24, 1995 Jay R. Gottlieb /s/ DAVID ROBBINS Director March 24, 1995 David Robbins /s/ ALFRED H. WILMS Director March 24, 1995 Alfred H. Wilms EXHIBIT INDEX Sequential Exhibit No. Description of Exhibit Page No. 4.1 Form of Employment Agreement, dated as of August 15, 1994, by and between the Company and Steven Greathouse. 4.2 Form of Warrant Agreement, dated as of August 15, 1994, by and between the Company and Steven Greathouse and form of Warrant Certificates issued pursuant thereto. 4.3 Form of Agreement, dated as of September 1, 1994, by and between the Company and Craig Fields. 4.4 Form of Warrant Agreement, dated as of September 1, 1994, by and between the Company and Craig Fields and form of Warrant Certificates issued pursuant thereto. 4.5 Form of Amendment Agreement, dated as of October 20, 1994, by and among the Company, Kirkland Investment Corporation, Gaming Systems Advisors, L.P., Kirkland-Ft. Worth Investment Partners, L.P. and Alfred H. Wilms. 4.6 Form of Agreement, dated as of March 20, 1995, by and between the Company and Joel Kirschbaum. 4.7 Form of Selling Stockholder Letter Agreement dated March 20, 1995. 5.1 Opinion of Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered. 23.1 Consent of Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered (included in Exhibit 5.1). 23.2 Consent of KPMG Peat Marwick LLP. 24.1 Power of Attorney (included on Page II-5). EX-1 2 EXHIBITS Exhibit 4.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of August 15, 1994 by and between Alliance Gaming Corporation, a Nevada corporation (the "Company"), and Steven Greathouse, an individual (the "Executive"). R E C I T A L S : A. The Company considers it important and in its best interest and the best interest of its stockholders to foster the employment of key management personnel, and desires to retain the services of the Executive, on the terms and subject to the conditions provided in this Agreement. B. The Executive desires to accept employment by the Company and to render services to the Company, on the terms and subject to the conditions provided in this Agreement. A G R E E M E N T : The parties hereto agree as follows: 1. Employment. The Company hereby agrees to employ and retain the Executive, and the Executive agrees to be employed and retained by the Company, to render services to the Company for the period, at the rate of compensation and upon the other terms and conditions set forth in this Agreement. 2. Term. The term of the Executive's employment under this Agreement (the "Term") shall commence on the date hereof and shall continue through and including August 14, 1997, unless earlier terminated as provided in this Agreement (the date of any termination of this Agreement or the expiration of the Term, as provided herein, the "Termination Date"). 3. Position and Duties. (a) Position. The Executive shall serve as President and Chief Executive Officer of the Company. During his employment hereunder, the Executive shall report directly to the board of directors of the Company (the "Board"). The Executive shall, if so elected by the stockholders of the Company, also serve on the Board from time to time, for successive periods of such election(s) and for such period as shall be agreed to by the Executive, subject, in each case, to the continued election thereto by the Company's stockholders. In the event that the Executive's employment by the Company shall be terminated, for any reason, the Executive shall be deemed to have immediately resigned from the Board, such resignation being effective on the Termination Date. (b) Duties. In accordance with the by-laws of the Company, during the Term, the Executive shall have and exercise the full power and authority of President and Chief Executive Officer, including without limitation, that of hiring, retaining and discharging personnel, subject to the full and customary approval, oversight and supervision of the Board. During the Term, the Executive shall perform the duties contemplated by such title and such other duties, consistent with his experience and abilities, as may be assigned to the Executive by the Board. The Executive shall devote his full time and efforts to the business and affairs of the Company, use his best efforts to further the interests of the Company and at all times conduct himself in a manner which reflects credit upon the Company. It is contemplated that the Executive shall render services to the Company from the Company's principal place of business; however, the parties acknowledge and agree that the Executive may be required to travel extensively during the Term in fulfilling his duties hereunder. 4. Compensation and Reimbursement of Expenses. (a) Salary. For purposes of this Agreement, each consecutive 12-month period during the Term ending on each August 14th during the Term shall be referred to as an "Employment Year." For services rendered by the Executive under this Agreement, the Company shall pay to the Executive as compensation during each Employment Year during the Term, a base salary (the "Base Salary") at an annual rate of $400,000 per year (prorated for any partial Employment Years). Increases in the Base Salary shall be considered by the Board no less frequently than annually, commencing at the end of the first Employment Year hereunder and will be based upon criteria applicable to other senior executives of the Company; it being understood, however, that the award of any such increase shall be in the sole discretion of the Board (with the Executive not voting on such determination). The Base Salary shall be payable in equal bi-weekly installments, commencing with the end of the pay period which next follows the commencement of the Term, and shall be subject to customary payroll deductions (i.e., for social security, federal, state and local taxes and other amounts customarily withheld from the salaries of employees of the Company). (b) Bonus. The Executive shall be eligible to receive from the Company, within 120 days of the end of each Employment Year, a cash bonus in respect of such Employment Year (the "Annual Bonus"), which shall be based upon all relevant criteria, including without limitation, (i) the performance of the Company during such Employment Year based upon customary financial and other criteria, such as but not limited to, return on the Company's consolidated stockholders' equity and total capital (i.e., stockholders' equity and total debt), performance of the Company's Common Stock, par value $.10 per share (the "Common Stock"), and the Company's absolute and relative amounts of consolidated cash flow, operating income and net income, and the comparison of such results with the Company's budgets and projections therefor, and (ii) the performance of the Executive in rendering services to the Company. It is contemplated but not certain that the Annual Bonus shall be between 50% and 100% of the Base Salary for each applicable Employment Year; it being understood, however, that the Company shall not be obligated to pay to the Executive any Annual Bonus and the payment, if any, and amount thereof shall be solely within the discretion of the Board (with the Executive not voting on such determination). It is also contemplated that the Compensation Committee of the Board shall formulate specific criteria and performance targets for the determination of the Annual Bonus, if any. The Annual Bonus shall be subject to customary payroll deductions (i.e., for social security, federal, state and local taxes and other amounts customarily withheld from the salaries of employees of the Company). (c) Stock, Warrants and Options. (1) Effective as of commencement of the Executive's employment with the Company, which the parties acknowledge is August 15, 1994 (the "Initial Employment Date"), in order to induce the Executive to accept employment with the Company, the Company shall issue to the Executive, in certificate form, 250,000 shares of restricted Common Stock (the "Employment Stock"). The Executive shall not sell, transfer, hypothecate, assign or otherwise transfer the Employment Stock (except by operation of law in the event of the Executive's death) prior to January 1, 1995. The Employee acknowledges that such Employment Stock has not been registered for sale under the Securities Act of 1933 (the "Securities Act") or applicable state "blue sky" laws and that such Employment Stock may be sold only pursuant to such registration or applicable exemptions therefrom. The Executive confirms that he is an accredited investor (as defined under the Securities Act) and has been afforded the opportunity to ask questions of and receive information from management and other representatives of the Company in connection with the receipt of the Employment Stock and the Incentive Warrants (as defined below). The Executive agrees that in connection with his receipt and ownership of the Employment Stock and, as applicable, any other securities of the Company issued or delivered to the Executive in connection with his employment by the Company, he shall file in a timely manner any and all applicable forms or filings required under the Securities Act or the Securities Exchange Act of 1934, including without limitation, Forms 3, 4 and/or 5. The Company shall use its commercially reasonable efforts to cause to be registered under the Securities Act the Employment Stock on such form of registration statement for a shelf registration that the Company may designate as soon as practicable after March 1, 1995, so long as the Executive shall have furnished such affidavits and instruments in connection therewith relating to the Executive and his ownership of the Employment Stock and other relevant matters that shall be customary and reasonably requested by the Company. Other than as set forth above in this clause (1), the Executive shall be free to transfer or dispose of the Employment Stock. (2) Effective as of the Initial Employment Date, in order to induce the Executive to accept employment with the Company, the Company shall issue to the Executive warrants to acquire 250,000 shares of common stock of the Company (the "Incentive Warrants") pursuant to a warrant agreement and warrant in the form attached hereto as Exhibit A. The Executive acknowledges that neither such Incentive Warrants nor the Common Stock underlying them have been registered for sale under the Securities Act or applicable state "blue sky" laws and that such Incentive Warrants may be sold only pursuant to such registration or applicable exemptions therefrom. (3) Effective as of the Initial Employment Date, in order to induce the Executive to accept employment with the Company, the Company shall issue to the Executive options (pursuant to the Company's 1991 Incentive Stock Option Plan (the "Plan")) to acquire 250,000 shares of Common Stock of the Company (the "Employment Options"). The Employment Options shall (A) have an exercise price of $5 3/4 per share, (B) expire on August 14, 1999 and (C) vest and become exercisable at the end of each Employment Year as follows: August 14, 1995 - 84,000 shares August 14, 1996 - 83,000 shares August 14, 1997 - 83,000 shares Prior to each such applicable date, such Employment Options shall not be vested or exercisable. (d) Reimbursement of Expenses. Consistent with established policies of the Company as in effect from time to time, the Company shall pay to or reimburse the Executive for all reasonable and actual out-of-pocket expenses, including without limitation, travel, hotel and similar expenses, incurred by the Executive from time to time in performing his obligations under this Agreement. 5. Benefits. (a) Benefit Plans. The payments provided in Section 4 above are in addition to any benefits to which the Executive may be, or may become, entitled under any of the Company's employee benefit plans or programs for which key executives are or shall become eligible, including without limitation, retirement, life, health and disability benefits. In addition, the Executive shall be eligible to receive during the Term benefits and emoluments which are consistent with the benefits and emoluments provided to all senior officers or executives of the Company. (b) Vacation. The Executive shall be entitled to three weeks annual paid vacation time. The Executive's entitlement to such vacation time for each Employment Year shall vest and accrue on the first day of each such Employment Year. In the event any of such vacation days are not used by the Executive in any Employment Year, the Executive shall have the right to accumulate and carry forward such number of days from year to year as shall be consistent with the Company's policy therefor for senior executives, as in effect from time to time. The Executive shall also be entitled to reasonable periods of sick leave with compensation and all paid holidays given by the Company to its senior executive officers. (c) Club Membership. During the Employment Term, the Company shall pay the cost of membership for the Executive and his family in the Las Vegas Country Club. (d) No Reduction. There shall be no material reduction or diminution of the benefits provided in this Section 5 during the Term unless (i) the Executive shall have provided his consent to such reduction or diminution, (ii) an equitable arrangement (embodied in an ongoing substitute or alternative benefit or plan) has been made with respect to such benefit or plan or (iii) such reduction is part of a program of across-the-board benefit reductions similarly affecting the senior executive officers of the Company. 6. Benefits Payable Upon Disability. (a) Disability Benefits. During any period of Disability (as defined below) occurring during the Term, the Company shall continue to pay to the Executive the Base Salary as provided herein and continue to extend to him the benefits described in Sections 4 and 5 hereof; it being understood that if disability benefits are provided under any disability insurance or similar policy maintained by the Company (or maintained by the Executive, the cost of which is reimbursed or paid by the Company), payments under such policy shall be considered as payments by the Company and shall offset any Base Salary payable to the Executive under this Agreement. As used in this Agreement, "Disability" shall mean the inability (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination) of the Executive to render services to the Company, as provided herein, as a result of physical or mental infirmity or disability. (b) Services During Disability. During the Term, notwithstanding any Disability, the Executive shall, to the extent that he is physically and mentally able to do so, furnish information, assistance and services to the Company, and, upon the reasonable request in writing on behalf of the Board (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination), from time to time, he shall make himself available to the Company to undertake reasonable assignments and fulfill his duties hereunder, consistent with his current position with the Company and his physical and mental health. 7. Termination. This Agreement shall be terminated in accordance with the provisions of this Section 7, in which case the provision of Section 8 below shall be applicable. (a) Upon Expiration of the Term. This Agreement shall terminate in accordance with Section 2 above. (b) By The Company. In addition to the provisions of Section 7(a) above, this Agreement is subject to earlier termination by the Company, as follows: (i) Death of Executive. If the Executive dies, this Agreement shall terminate, the Termination Date being the date of the Executive's death. (ii) Disability. If the Executive has been absent from service to the Company, as required in this Agreement, for a period of 90 days or more as a result of Disability during any consecutive 180-day period during the Term, the Company shall terminate this Agreement (such Disability being determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination), the Termination Date being 15 days after notice thereof is provided to the Executive. (iii) Termination by Company for Cause. The Company shall have the right to terminate the Executive's employment under this Agreement for Cause (as defined below), such termination to be effective immediately upon notice thereof from the Company to the Executive. For purposes of this Agreement, "Cause" shall mean the Executive's (A) conviction of any misdemeanor involving moral turpitude, or any felony, (B) misappropriation or embezzlement from the Company, (C) denial or rejection of any gaming license or permit or commission of any act which could reasonably be expected to result in such denial or rejection, (D) any breach during the Term of Sections 10 or 11 below or (E) the persistent failure or refusal after notice to comply with the Executive's duties or obligations hereunder. (iv) Termination by the Company Without Cause. The Company shall have the right to terminate the Executive's employment hereunder for any other reason not set forth in clauses (i), (ii) or (iii) of this Section 7(b), the Termination Date being 15 days after notice from the Company to the Executive. (c) By The Executive. In addition to the provisions of Section 7(a) above, this Agreement is subject to earlier termination by the Executive, as follows: (i) Termination by the Executive for Just Cause. The Executive shall have the right to terminate his employment under this Agreement upon the occurrence of a material breach of this Agreement by the Company, which the parties agree shall be limited to (A) a reduction by the Company in the Base Salary below the minimum Base Salary specified in Section 4(a) above or the failure of the Company to pay to the Executive any portion of the Base Salary within 30 days of the time that any such amount is due and payable hereunder or (B) the assignment to the Executive of duties and responsibilities that are materially inconsistent with those of a president and chief executive officer of the Company, in each case, in the cases of clauses (A) and (B), which has not been cured by the Company after 30 days' written notice from the Executive to the Company; provided, that in the case of three such material breaches (and notice thereof), the Executive shall thereafter have the right to terminate this Agreement immediately upon notice to the Company in the case of a subsequent material breach. In the event that the Executive elects to terminate this Agreement as a result of the events described in clauses (A) or (B) above, the Executive shall exercise such right within 10 days after the lapsing of the 30-day period referred to above in this clause (i) (assuming that the Company shall have failed to cure such material breach within such period), or, as applicable, within 10 days of any additional material breach giving rise to an immediate right of termination; thereafter, such right to terminate shall no longer be exercisable. The Termination Date shall be a date specified by the Executive, which shall be between 30 and 45 days after the date of such default notice by the Executive. (ii) Termination by Executive upon Change in Key Participant. The Executive shall have the right to terminate his employment under this Agreement: (A) if any Key Participant (as defined below) sells in whole (but not in part) to any unaffiliated third party (an affiliated third party being any family member or trust for the benefit of such family member) or otherwise liquidates his investment in the Company (in whole but not in part) and the Executive reasonably and in good faith determines that such sale or liquidation materially impairs the ability of the Company successfully to achieve its growth strategy as stated in the Company's Prospectus dated March 21, 1994, or (B) if there shall have occurred a material breach or default of Section 3.4 of the Stockholders Agreement among the Company and certain other parties dated September 21, 1993 by any of the Key Participants. For purposes of this clause (ii), "Key Participants" means the stockholders of Kirkland Investment Corporation, a Delaware corporation, the limited partners in Kirkland-Ft. Worth Investment Partners, L.P., a Delaware limited partnership, such limited partners' general partners, and any person controlling such persons, each as of September 14, 1993. In the event that the Executive elects to terminate this Agreement as a result of the events described in clauses (A) or (B) above, the Executive shall provide 30 days' notice thereof to the Company, during which time the event or circumstance giving rise to such right of termination may be cured. In the event that the Executive elects to terminate this Agreement as a result of the events described in clauses (A) or (B) above, the Executive shall exercise such right within 10 days after the lapsing of the 30-day period referred to above in this clause (ii)(assuming that such event or circumstance shall not have been cured) upon written notice to the Company (the date of such notice, the "Section 7(c)(ii) Notice Date"); thereafter, such right to terminate shall no longer be exercisable. The Termination Date shall be a date specified by the Executive, which shall be between 30 and 45 days after the Section 7(c)(ii) Notice Date; thereafter, such right to terminate shall no longer be exercisable. (iii) Termination by the Executive Without Just Cause. The Executive shall have the right to terminate the Executive's employment under this Agreement for any other reason not set forth in clauses (i) or (ii) of this Section 7(c), the Termination Date being 15 days after notice thereof from the Executive to the Company. 8. Effect of Termination. The following provisions shall be applicable in the event of the termination of this Agreement as provided in Section 7 above. (a) Expiration of Term. Upon termination of this Agreement as provided in Section 7(a) above, this Agreement shall terminate and be of no further force and effect, except as provided in Sections 11, 12 and 13(b) below, which shall survive such termination, and no additional payments, liabilities or obligations shall be due and owing from either party to the other. (b) Death. Upon the termination of this Agreement as provided in Section 7(b)(i) above, the Company shall pay to the Executive's estate (i) an amount equal to the sum of (A) $1,850,000, payable within 180 days after the Termination Date (but not earlier than any recovery of insurance proceeds in respect thereof, as provided below), and (B) any Annual Bonus for the Employment Year in which the Termination Date occurs that the Board determines would otherwise have been payable had the Executive not died, which Annual Bonus shall be reduced by prorating it through the Termination Date, payable, in the case of this clause (B), at the time such payment would otherwise be due and payable hereunder, and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payment would otherwise be due and payable thereunder, and neither party shall have any further liability or obligation to the other, except as provided in Section 12 below, which shall survive the Termination Date. Notwithstanding the provisions of clause (i) above, the Company shall have the right to provide for either or both of the payments described therein by purchasing life insurance on the Executive's life itself or reimbursing to the Executive the cost of the premiums in respect of such life insurance which shall be purchased directly by the Executive; in the event that either or both of such insurance coverages is obtained, such payments shall be made solely from such insurance coverages and not from the Company and shall constitute the Executive's estate's or heirs' sole remedy in respect of such payments. An amount equal to 50% of any unvested Employment Options as of the Termination Date shall vest and become exercisable by virtue of any termination under Section 7(b)(i) and, notwithstanding the provisions of the Company's Stock Option Plan pursuant to which the Employment Options may have been granted, the Executive's estate shall have a period of two years from the Termination Date to exercise the Employment Options. (c) Disability. Upon the termination of this Agreement as provided in Section 7(b)(ii) above, the Company shall pay to the Executive (i) an amount equal to 60% of the Executive's Base Salary in effect in the year in which the Termination Date occurs, but not in excess of the rate of $180,000 per year, from the Termination Date until such time as the Executive shall attain the age of 65, and (ii) any Annual Bonus for the Employment Year in which the Termination Date occurs that the Board determines would otherwise have been payable had the Executive not become Disabled, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, payable at the times such payments would otherwise be due and payable hereunder; provided, in the case of clauses (i) and (ii) above, that the Executive continues to comply with his covenants in Sections 10 (during the Term had such termination under Section 7(b)(ii) above not occurred) and 11 below, as provided therein, and (iii) expense reimbursement amounts accrued through the Termination Date, at the time such payment would otherwise be due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein. Notwithstanding the provisions of clauses (i) and (ii) above, the Company shall have the right to provide for either or both of such payments by either purchasing disability insurance itself in respect of the Executive or reimbursing to the Executive the cost of the premiums in respect of such disability insurance which shall be purchased directly by the Executive; in the event that either or both of such insurance coverages is obtained, such payments shall be made solely from such insurance coverages and not from the Company and shall constitute the Executive's sole remedy in respect of such payments. An amount equal to 50% of any unvested Employment Options as of the Termination Date shall vest and become exercisable by virtue of any termination under Section 7(b)(ii) and, notwithstanding the provisions of the Company's Stock Option Plan pursuant to which the Employment Options may have been granted, the Executive shall have a period of two years from the Termination Date to exercise such options. (d) Termination by the Company For Cause. Upon the termination of this Agreement as provided in Section 7(b)(iii) above, the Company shall pay to the Executive (i) the accrued and unpaid Base Salary, if any, through the Termination Date and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein, with the provisions of such Section 10 surviving for the shorter of (A) 12 months from the Termination Date and (B) the remainder of the Term had such termination not occurred. No unvested Employment Options shall vest or become exercisable by virtue of any termination under Section 7(b)(iii) and any and all rights thereto then possessed by the Executive shall be terminated and of no further force and effect. (e) Termination by the Company Without Cause. Upon termination of this Agreement as provided in Section 7(b)(iv) above, the Company shall pay to the Executive (i) the Base Salary which would otherwise be payable hereunder in respect of the remainder of the Term; provided, that the Executive continues to comply with the covenants in Section 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, in each case, in the case of clauses (i) and (ii) above, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein; it being understood that the covenants in Section 10 below shall be of no further force and effect following the Termination Date. All unvested Employment Options, if any, shall vest and become exercisable (in accordance with the Plan) by virtue of any termination under Section 7(b)(iv). (f) Termination by the Executive for Just Cause. Upon termination of this Agreement as provided in Section 7(c)(i) above, the Company shall pay to the Executive (i) the Base Salary which would otherwise be payable hereunder in respect of the remainder of the Term; provided, that the Executive continues to comply with the covenants in Section 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, in each case, in the case of clause (i) and (ii) above, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein; it being understood that the covenants in Section 10 below shall be of no further force and effect following the Termination Date. All unvested Employment Options, if any, shall vest and become exercisable (in accordance with the Plan) by virtue of any termination under Section 7(c)(i). (g) Termination by the Executive upon Change in Key Participant. Upon termination of this Agreement as provided in Section 7(c)(ii) above, the Executive shall (x) not be bound by the provisions of Section 10 below, which shall be of no further force and effect, and (y) immediately have the one-time right (exercisable for a period of 10 days following the Termination Date, upon written notice to the Company) to convert or cause to be exchanged, without restriction, any outstanding and unexercised Incentive Warrants (whether or not vested) to vested Employment Options; and the Company shall pay to the Executive (i) an amount equal to the sum of (A) 100% of the Base Salary which would otherwise be payable hereunder in respect of the shorter of (I) the six-month period following the Section 7(c)(ii) Notice Date and (II) the remainder of the Term had such termination not occurred and (B) any Annual Bonus for the Employment Year in which the Termination Date occurs that the Board determines would otherwise have been payable had such termination not occurred, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, in the case of clauses (A) and (B) above, payable at the times such payments are otherwise due and payable hereunder; provided, in each case, that the Executive continues to comply with the covenants in Section 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payment is otherwise due and payable thereunder, and neither party shall have any obligation or liability to the other, except that the provisions of Sections 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein, and the covenants in Section 10 below shall be of no further force and effect following the Termination Date. All unvested Employee Options, if any, shall vest and become exercisable (in accordance with the Plan and as set forth above) by virtue of any termination under Section 7(c)(ii). (h) Termination by the Executive Without Just Cause. Upon the termination of this Agreement as provided in Section 7(c)(iii) above, the Company shall pay to the Executive (i) the accrued and unpaid Base Salary, if any, through the Termination Date, (ii) expense reimbursement amounts accrued through the Termination Date and (iii) Base Salary at a rate of $201,000 per calendar year during the period that the provisions of Section 10 shall be in effect, as provided below, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein, with the provisions of such Section 10 surviving for the shorter of (A) 12 months from the Termination Date and (B) the remainder of the Term had such termination not occurred. During such period that the provisions of Section 10 are in effect, the Executive shall continue to be eligible to receive the benefits provided in Section 5 above. No unvested Employment Options shall vest or become exercisable by virtue of any termination under Section 7(c)(iii) and any and all rights thereto then possessed by the Executive shall be terminated and of no further force and effect. 9. Federal Income Tax and Other Withholdings. The Company shall withhold from any benefits payable pursuant to this Agreement such Federal, State, City or other taxes and other amounts as may be required to be withheld pursuant to any applicable law or governmental regulations or ruling and shall timely pay over to the appropriate governmental or other authorities the amount withheld, together with any additional amounts required to be paid by the Company in respect thereof. 10. Non-Competition. The Executive covenants and agrees that he will not at any time during his employment with the Company and, to the extent set forth in the applicable subsections of Section 8 above, for a period of up to 12 months after the Termination Date, directly or indirectly, whether as employee, owner, partner, agent, director, officer, consultant, advisor, stockholder (except as the beneficial owner of not more than 5% of the outstanding shares of a corporation, any of the capital stock of which is listed on any national or regional securities exchange or quoted in the daily listing of over-the-counter market securities and, in each case, in which the Executive does not undertake any management or operational or advisory role) or in any other capacity, for his own account or for the benefit of any person or entity, establish, engage or be connected with or in any manner any person or entity which is at the time engaged in a business which is then in competition with the business of the Company (or any of its subsidiaries or affiliates); it being understood that for purposes of this Section 10, participation in the business of owning, managing, operating or financing casino or similar gaming in the United States shall be deemed to be business in which the Company is engaged. 11. Confidential Information and Non-Disparagement. (a) In accordance with NRS 600A.010 et seq. (the so-called Uniform Trade Secrets Act), the Executive shall hold in a fiduciary capacity for the benefit of the Company and its stockholders all secret, confidential or proprietary information, knowledge or data relating to the Company (and any of its subsidiaries or affiliates), which shall have been obtained by the Executive during or by reason of his employment by the Company. During and after the end of the Term, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to any person or entity other than the Company (or such applicable subsidiaries or affiliates) and those designated by them which would result in any misappropriation under and as defined in such Act, except that, while employed by the Company, in furtherance of the business and for the benefit of the Company, the Executive may provide confidential information as appropriate to attorneys, accountants, financial institutions or other persons or entities engaged in business with the Company from time to time. (b) Each of the parties agrees that from and after any termination or expiration of the Term, neither shall, publicly or privately, disparage or make any statements (written or oral) that could impugn the integrity, acumen (business or otherwise), ethics or business practices, of the other, except, in each case, to the extent (but solely to the extent) necessary (i) in any judicial or arbitral action to enforce the provisions of this Agreement or (ii) in connection with any judicial or administrative proceeding to the extent required by applicable law. 12. Indemnification and Liability Insurance. (a) Indemnification. The Company shall indemnify and hold the Executive harmless, to the fullest extent legally permitted by Section 78.751 of the Nevada Corporation Code (as amended and in effect from time to time) against any and all expenses, liabilities and losses (including without limitation, reasonable attorneys' fees and disbursements of counsel reasonably satisfactory to the Company), incurred or suffered by him in connection with his service as a director or officer of the Company during the Term, in each case, except to the extent of the Executive's negligence or willful misconduct. (b) Insurance. The Company shall maintain, for the benefit of the Executive, a directors' and officers' liability insurance policy insuring the Executive's service as a director and/or officer of the Company (or any subsidiary of the Company) during the Term in accordance with its customary practices as in effect from time to time during the Term. The parties acknowledge and agree that such policy may cover other officers and directors of the Company in addition to the Executive. 13. General Provisions. (a) Assignment. Neither this Agreement nor any right or interest hereunder shall be assignable by the Executive or the Company without the prior written consent of the other; provided, that (i) in the event of the Executive's Death during the Term, the Executive's estate and his heirs, executors, administrators, legatees and distributees shall have the rights and obligations set forth herein, as provided herein, and (ii) nothing contained in this Agreement shall limit or restrict the Company's ability to merge or consolidate or effect any similar transaction with any other entity, irrespective of whether the Company is the surviving entity (including a split up, spin off or similar type transaction); provided, that one or more of such surviving entities shall continue to be bound by the provisions hereof binding upon the Company. (b) Material Inducements. The provisions of Sections 10 and 11 above are material inducements to the Company entering into and performing this Agreement; accordingly, in the event of any breach of the provisions of Sections 10 or 11(a) by the Executive, in addition to all other remedies at law or in equity possessed by the Company, (i) the Company shall have the right to terminate and not pay any amounts payable to the Executive hereunder, (ii) all Incentive Warrants and Employment Options that are unexercised shall be immediately forfeited and returned to the Company and (iii) the Executive shall immediately account to the Company and return to the Company an amount in cash equal to all profits or benefits obtained or realized by the Executive by virtue of the ownership or disposition of the Incentive Warrants and Employment Options. (c) Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, the Executive and the Company and their respective heirs, executors, administrators, legatees and distributees, successors and permitted assigns. (d) Amendment of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (e) Severability. If, for any reason, any provision of this Agreement is determined to be invalid or unenforceable, such invalidity or lack of enforceability shall not affect any other provision of this Agreement not so determined to be invalid or unenforceable, and each such other provision shall, to the full extent consistent with applicable law, continue in full force and effect, irrespective of such invalid or unenforceable provision. (f) Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto respecting the Executive's employment by the Company, and supersedes any prior employment agreement between the Company and the Executive. (g) Notices. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) when delivered, if sent by telecopy or by hand, (ii) one business day after sending, if sent by reputable overnight courier service, such as Federal Express, or (iii) three business days after being mailed, if sent by United States certified or registered mail, return receipt requested, postage prepaid. Notices shall be sent by one of the methods described above; provided, that any notice sent by telecopy shall also be sent by any other method permitted above. Notices shall be sent, if to the Executive, to 7140 Darby Avenue, Las Vegas, Nevada 89117, with a copy to Morris Brignone & Pickering, 300 S. Fourth Street, Las Vegas, Nevada 90101; Attention: Andrew S. Brignone, Esq.; and if to the Company, to Alliance Gaming Corporation, 4380 Boulder Highway, Las Vegas, Nevada 89121, directed to the attention of the Board with copies to the Chairman and the Assistant Secretary of the Company; or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (h) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. (i) Arbitration. In the event of a dispute or controversy arising under or in connection with this Agreement (except, at the option of the Company, Sections 10 and 11 above, which may be adjudicated in a federal or state court sitting in Las Vegas, Nevada), the Executive shall give the Company or the Company shall give the Executive, as applicable, a written demand for relief. If the dispute or controversy is not resolved, it shall be settled exclusively by arbitration, conducted in Las Vegas, Nevada, in accordance with the rules of the American Arbitration Association (or if the such association does not then conduct business in such city, another arbitral panel reasonably satisfactory to each party) then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction over the parties hereto. (j) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. (k) Headings. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. (l) Governing Law. This Agreement has been executed and delivered in the State of Nevada, and its validity, interpretation, performance, and enforcement shall be governed by the laws of such State, without regard to principles of conflicts of laws. (m) Board Approval. This Agreement is subject to the approval of the Board and shall be and become effective only upon the approval thereof by the Board; prior to such time it shall not have any force and effect. [The remainder of this page is left blank.] IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has signed this Agreement, all as of the date first set forth above. Alliance Gaming Corporation By:___________________________ Name: Title: ______________________________ Steven Greathouse Exhibit 4.2 WARRANT AGREEMENT This WARRANT AGREEMENT (this "Agreement") is dated as of August 15, 1994 by and between ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"), and STEVE GREATHOUSE, an individual (together with any successors or other holders of the Warrants (as defined below) issued hereunder, the "Holder"). RECITALS A. The Company proposes to issue to Holder common stock purchase Warrants, as hereinafter defined, to purchase up to an aggregate of 250,000 shares of common stock, par value $.10 per share (the "Common Stock"), of the Company (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"), pursuant to an Employment Agreement, dated as of August 15, 1994 relating to the initial Holder's employment by the Company (the "Employment Agreement"). B. The Warrants to be issued hereunder are to be issued in three separate series, each such series to be exercisable upon the attainment of certain market prices for the Common Stock and the occurrence of other specified events, as more fully set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Warrant Certificates. The Company shall deliver to the initial Holder on the date hereof in accordance with the provisions of the Employment Agreement (i) Warrants to purchase up to 84,000 shares of Common Stock (the "Series A Warrants") evidenced by a certificate substantially in the form attached hereto as "Warrant Certificate A," (ii) Warrants to purchase up to 83,000 shares of Common Stock (the "Series B Warrants") evidenced by a certificate substantially in the form attached hereto as "Warrant Certificate B," and (iii) Warrants to purchase up to 83,000 shares of Common Stock (the "Series C Warrants") evidenced by a certificate substantially in the form attached hereto as "Warrant Certificate C", and together with Warrant Certificate A and Warrant Certificate B, the "Warrant Certificates". The Series A Warrants, Series B Warrants and Series C Warrants are herein collectively referred to as the "Warrants." One third of each of the Series A Warrants, the Series B Warrants and the Series C Warrants shall vest on each anniversary of the date of initial employment of the initial Holder under the Employment Agreement, as set forth in Section 4(c)(3) thereof. Prior to each applicable vesting date, no unvested Warrants shall be exercisable. SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or a Vice President and by its Secretary or an Assistant Secretary under its corporate seal. Each such signature upon any Warrant Certificate may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates, and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of such person shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been delivered by the Company, such Warrant Certificates nevertheless may be issued as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. SECTION 3. Registration. The Warrant Certificates to be delivered pursuant to this Agreement shall be in registered form only. The Company shall number and register the Warrant Certificates in a register as they are issued. The Company may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and shall not be affected by any notice to the contrary and shall not be bound to recognize any equitable or other claim to or in the Warrant Certificates on the part of any other person. SECTION 4. Registration of Transfers and Exchanges. Subject to Section 6 hereof, the Company shall from time to time register the transfer in whole or in part of any outstanding Warrant Certificates in a Warrant register to be maintained by the Company upon surrender thereof to the Company at the office designated for such purpose (the address of which is set forth in Section 13 hereof) accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Company, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. In all cases of transfer by an attorney, the original power of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited with the Company. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, and may be required to be deposited with the Company in its discretion. Upon any such registration of transfer, a new Warrant Certificate of the appropriate series shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled and disposed of by the Company. Each Holder, by its acceptance thereof, agrees that prior to any proposed transfer of any Warrant as permitted by the foregoing paragraph, if such transfer is not made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Act"), or pursuant to Rule 144 under the Act, or pursuant to an opinion of counsel, reasonably satisfactory in form and substance to the Company, that such Warrant or Warrant Shares may be sold without registration under the Act, the Holder will deliver to the Company: (a) an investment representation from the proposed transferee substantially to the effect that such securities are being acquired in good faith for investment for the transferee's own account and not with a view to a distribution or resale of any of such securities in violation of any applicable securities laws; (b) an agreement by such transferee to the impression of the restrictive legends set forth below on the Warrant or the Warrant Shares, as the case may be; (c) an agreement by such transferee that the Company may place a notation in the stock books of the Company or a "stop transfer order" with any transfer agent or registrar with respect to the Warrant Shares; and (d) an agreement by such transferee to be bound by the provisions of this Warrant Agreement, including, without limitation, this Section 4 relating to the transfer of such Warrant or Warrant Shares. Subject to the foregoing provisions, a Holder shall have the right to make estate planning transfers of all or any part of his or her ownership interest in the Warrants. The term "estate planning transfer" means a transfer of all or any part of an ownership interest to a trust whose beneficiary or beneficiaries are a Holder, and/or the spouse of a Holder, and/or the descendants of a Holder. This Agreement will bind the transferee of any estate planning transfer to the exact terms and conditions of this Agreement. The Warrants are subject to the terms and conditions of the Agreement. The Holders agree that each certificate representing Warrants or Warrant Shares will bear a legend reading substantially as follows until such Warrants or Warrant Shares have been sold pursuant to an effective registration statement or Rule 144 under the Act or an opinion of counsel reasonably satisfactory to the Company: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SAID ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS." Warrant Certificates may be exchanged at the option of the Holder(s), when surrendered to the Company at the office designated for such purpose (the address of which is set forth in Section 13 hereof) for another Warrant Certificate or other Warrant Certificates of like tenor and series and representing in the aggregate a like number of Warrants. Warrant Certificates surrendered for exchange shall be cancelled by the Company. SECTION 5. Warrants; Exercise of Warrants. (a) General. Subject to the terms of this Agreement, none of the Warrants may be exercised unless and until (x) each of the "Initial Conditions" set forth in Section 5(b) hereof have occurred, (y) in respect of the series of Warrants to be exercised, the related "Series Condition" set forth in Section 5(c)(i), (ii) or (iii) hereof (as the case may be) has occurred, and (z) the Warrants are exercised on or after one year from the date of issue but on or prior to 5:00 p.m. New York City time on September 21, 2000 (the "Expiration Date"). In respect of any particular Warrant issued hereunder, the Initial Conditions and the Series Conditions are herein collectively referred to as the "Exercise Conditions." (b) Initial Conditions. No Warrants shall be exercisable unless and until with respect to any Holder, either (i) no gaming license, finding of suitability or similar approval is required in respect of such Holder from the State of Nevada (or any applicable agency or political subdivision thereof) or any other jurisdiction in or from which the denial of a gaming license, finding of suitability or similar approval could materially adversely affect the Company's business, which jurisdiction has indicated, generally (by statute, regulation or otherwise) or as a matter of specific application to the Company or the Holder, that issuance of such license, findings of suitability or similar approval is required for exercise of the Warrants, or (ii) the Licensing Date has occurred with respect to such Holder relative to its acquisition of the shares of Common Stock to be issued upon the exercise of such Warrants. For purposes of this clause (b), the term "Licensing Date" shall have the meaning provided in the Company's Certificate of Designations, Preferences and Relative, Participating, Optional and other Special Rights of Special Stock. (c) Series Conditions. In addition to the satisfaction of the Initial Conditions, no Warrants of a given Series may be exercised unless: (i) in respect of the Series A Warrants, the average "Quoted Price" (as defined below) of the Common Stock for 15 consecutive trading days commencing on or after August 15, 1995 must have been equal to or greater than $11.00 per share; (ii) in respect of the Series B Warrants, the average Quoted Price of the Common Stock for 15 consecutive trading days commencing on or after August 15, 1995 must have been equal to or greater than $13.00 per share; (iii) in respect of the Series C Warrants, the average Quoted Price of the Common Stock for 15 consecutive trading days commencing on or after August 15, 1995 must have been equal to or greater than $15.00 per share; in each case, on at least one occasion during the term of the Warrants, irrespective of whether any of the Warrants are then vested or exercisable. If the Series Conditions are satisfied with respect to any Series of Warrants, at any time, the Warrants in such Series shall, subject to satisfaction of the Initial Conditions, thereafter be exercisable for the remainder of the term thereof irrespective of whether or not the Series Conditions thereafter are satisfied. The prices referred to above in clauses (i), (ii) and (iii) are referred to herein as the "Vesting Prices." (d) Expiration. Each Warrant not exercised prior to 5:00 p.m., New York City time, on the Expiration Date shall become void and all rights and obligations thereunder and all rights and obligations in respect thereof under this Agreement shall cease as of such time. (e) Exercise; Delivery of Warrant Shares. A Warrant may be exercised in whole or in part from time to time upon surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 13 hereof) of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed and upon payment to the Company of the exercise price (the "Exercise Price") which is set forth in the form of Warrant Certificates attached hereto as Exhibits A, B and C, as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised, as adjusted as herein provided. The Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender and exercise and payment of the purchase price as provided above, and the person entitled to receive Warrant Shares issuable upon such exercise shall be treated for such purpose as the holder of such shares of record as of the close of business on such date. Payment of the aggregate Exercise Price shall be made in cash or by certified or official bank check to the order of the Company. Subject to the provisions of Section 6 hereof, upon such surrender of Warrants, payment of the Exercise Price and the delivery of all related documentation, the Company shall issue and cause to be delivered within five business days to or upon the written order of the holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 11 hereof; provided, however, that if any consolidation, merger, sale, lease, transfer or conveyance of assets is proposed to be effected by the Company as described in subsection (i) of Section 10 hereof, or a tender offer or an exchange offer for shares of Common Stock of the Company shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than two business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence together with cash as provided in Section 11 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate of the same tenor evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section and of Section 2 hereof. (f) Miscellaneous. All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled and disposed of by the Company. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders during normal business hours at its office. SECTION 6. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any registration or transfer involved in the issue or delivery of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates or certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall, as soon as practicable upon receiving notice of such event, issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and series and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also reasonably satisfactory to it or, in the case of any such mutilation, upon surrender and cancellation of such Warrant Certificate. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable requests and pay such other reasonable charges as the Company may prescribe. SECTION 8. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights contained herein will be irrevocably authorized and directed for so long as any Warrants are outstanding to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 12 hereof. Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants in accordance with this Agreement will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof created by or claiming through the Company. SECTION 9. Obtaining Stock Exchange Listings. The Company will from time to time take all action, if any, which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants in accordance with this Agreement, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 10. Adjustment of Exercise Price, Vesting Prices and Number of Warrant Shares Issuable. Whether or not the Exercise Conditions have been met and whether or not the Warrants have been issued, or are exercisable or exercised, the Exercise Price, Vesting Prices and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time until the exercise thereof upon the occurrence of the events enumerated in this Section 10. In the event any adjustment of the Exercise Price is required by this Section 10, a similar and proportional adjustment shall be made in the Vesting Prices. Such adjustment shall be made successively whenever any event described or referred to below shall occur. For purposes of this Section 10, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company. (a) Adjustment for Changes in Capital Stock, etc. If the Company: (i) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (ii) subdivides its outstanding shares of Common Stock into a greater number of shares; (iii) combines its outstanding shares of Common Stock into a smaller number of shares; or (iv) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock or preferred stock, then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted so that the Holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action, and the Vesting Prices shall be proportionately adjusted. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder upon exercise of any Warrant may receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company shall, in good faith, determine the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price and the Vesting Prices, as applicable, of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section. (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to the holders of its Common Stock generally entitling them for a period expiring within 60 days after the record date mentioned below to purchase shares of Common Stock at a price per share less than the current market price per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: O + N x P _______ E' = E x M _______ O + N where: E' = the adjusted Exercise Price. E = the then current Exercise Price (as it may have been previously adjusted under this Section 10). O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the "Current Market Price" (as defined below) per share of Common Stock on the record date. and the Vesting Prices shall be proportionately adjusted. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Price and the Vesting Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If the Company distributes to the holders of its Common Stock generally any of its assets (including but not limited to "ordinary" dividends payable out of consolidated earnings or earned surplus of the Company during the first three years from the date hereof, as set forth below), debt securities, preferred stock, or any rights, options or warrants to purchase assets, debt securities, preferred stock, Common Stock, or other securities of the Company (other than those rights, options and warrants covered Section 10(b)), the Exercise Price shall be adjusted in accordance with the formula: E' = E x M - F _____ M where: E' = the adjusted Exercise Price. E = the then current Exercise Price (as it may have been previously adjusted under this Section 10). M = the Current Market Price (as defined below) per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the assets or securities applicable to one share of Common Stock and distributed to the holders of Common Stock generally. The fair market value shall be determined in good faith by the disinterested members of the Board of Directors of the Company (the "Board of Directors" or the "Board"), or, if such Board members so elect, by a nationally recognized investment banking or appraisal firm selected by the disinterested members of the Board of Directors. and the Vesting Prices shall be proportionately adjusted. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection (c) does not apply to (i) any distributions referred to in subsection 10(a), (ii) any rights, options or warrants referred to in subsection 10(b), or (iii) the payment of "ordinary" dividends payable out of consolidated earnings or earned surplus of the Company effected more than three years after the date of this Agreement. "Ordinary" dividends refers to dividends made, or which the Company when made intended to make, on a periodic and recurring basis. (d) Purchase of Common Stock by the Company. If the Company at any time while this Warrant is outstanding shall, directly or indirectly through a subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of its Common Stock at a price per share (the "Benchmark Price") greater than the Quoted Price on the date such purchase, redemption or other acquisition is effected, then the Exercise Price and Vesting Prices upon each such purchase, redemption or acquisition shall be adjusted to that price determined by multiplying such Exercise Price and Vesting Prices by a fraction: (i) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such purchase, redemption or acquisition minus the number of shares of Common Stock which the aggregate consideration for the total number of such shares of Common Stock so purchased, redeemed or acquired would otherwise have purchased at the Benchmark Price; and (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such purchase, redemption or acquisition. For purposes of this subsection (d), a purchase, redemption or acquisition of a Common Stock equivalent shall be deemed to be a purchase of the underlying Common Stock, and the computation herein required shall be made on the basis of the full exercise, conversion or exchange of such Common Stock equivalent pursuant to the terms thereof on the date as of which such computation is required hereby to be made. Notwithstanding the foregoing, however, for purposes of this subsection (d), the purchase, payment, redemption or acquisition of any such Common Stock equivalent of the Company at the lesser of (i) the fair market value of such securities or (ii) the purchase or redemption price set forth in the instrument governing such securities shall not be deemed to be a purchase of the underlying Common Stock (and, accordingly, no adjustment shall be made in the terms of exercise of any Warrant), but any purchase, payment, redemption or acquisition at a price in excess of the lesser of the fair market value or the purchase or redemption price contained therein shall be deemed to be a purchase of the underlying Common Stock for purposes of this subsection (d), unless such purchase, payment, redemption or acquisition at such price is mandatory under the terms of such instrument. For purposes of the immediately prior sentence, the fair market value of any securities shall be determined in good faith by the disinterested members of the Board of Directors or, if such Board members so elect, by a nationally recognized investment banking or appraisal firm selected by the disinterested members of the Board. (e) Current Market Price. In subsections (b), (c) and (d) of this Section 10 the "Current Market Price" per share of Common Stock on any date is the average of the Quoted Prices of the Common Stock for 10 consecutive trading days commencing five trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by the NASDAQ National Market System, or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of such quotations on one or more such trading days, the Board of Directors shall determine the Quoted Price for such trading days on the basis of such quotations as it in good faith considers appropriate. (f) When De Minimis Adjustment May Be Deferred or No Adjustment Required. No adjustment in the Exercise Price or Vesting Prices need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price or Vesting Prices. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 10 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. No adjustment need be made for the issuance or exercise of rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest in the event that no adjustment need be made in respect of the underlying dividend. No adjustment need be made for a change in the par value of the Common Stock (including a change from par value to no par value or from no par value to par value). To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (g) Notice of Adjustment. Whenever the Exercise Price or Vesting Prices are adjusted, the Company shall provide the notices required by Section 12 hereof. (h) Notice of Certain Transactions. If: (i) the Company takes any action that would require an adjustment in the Exercise Price and Vesting Prices pursuant to subsections (a), (b), (c) or (d) of this Section 10; (ii) the Company takes any action that would require a supplemental Warrant Agreement pursuant to subsection (i) of this Section 10; or (iii) there is a liquidation, dissolution or winding up of the Company; the Company shall mail to Warrant holders a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of the transaction. (i) Reorganization of Company. If the Company consolidates or merges with or into, or sells, leases, transfers or conveys all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger, if other than the Company, or the person to which such sale, lease, transfer or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 10. The successor Company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this subsection (i) applies, subsections (a), (b), (c) and (d) of this Section 10 do not apply. (j) Company Determination Final. Any good faith determination that the Company, the Board of Directors or an investment banking or appraisal firm, as the case may be, makes pursuant to this Section 10 shall be conclusive. (k) When Issuance or Payment May Be Deferred. In any case in which this Section 10 shall require that an adjustment in the Exercise Price and the Vesting Prices be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date but prior to the occurrence of such event the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the applicable Exercise Price and Vesting Prices and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 11; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (l) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price and Vesting Prices pursuant to this Section 10, each Warrant outstanding prior to the making of the adjustment in the Exercise Price and Vesting Prices shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth of a share) obtained from the following formula: N' = N x E __ E' where: N = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price (as the same may previously have been adjusted pursuant to this Section 10). E' = the adjusted Exercise Price. E = the Exercise Price (as the same may previously have been adjusted pursuant to this Section 10). If the Company shall be in default under any of its agreements to issue Warrant Shares hereunder and/or if applicable law prevents the issuance of any such shares at the Exercise Price adjusted in accordance herewith, the adjustment of shares provided in the foregoing sentence shall nonetheless be made and the Holder of this Warrant shall be entitled to purchase such greater number of shares at the price at which this Warrant may be exercised when such shares are issued. (m) Form of Warrants. Irrespective of any adjustments in the Exercise Price or Vesting Prices or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement, it being understood that all adjustments required by this Agreement shall have been assumed to have been made. (n) Adjustments Not Duplicative: Adjustments Successive. The adjustments provided for by this Section 10 are not intended to be duplicative, it being the intention of the parties that only one of the foregoing adjustment provisions, if any, shall apply to any particular transaction or event. In the event an unforeseen transaction or event occurs which could be construed to implicate more than one of such adjustment provisions, the Board of Directors shall determine in good faith the single adjustment provision contained in this Section 10 which it considers most appropriate in respect of the particular transaction or event, which provision shall govern the adjustment, if any, to be made in the Exercise Price, Vesting Prices and/or number of Warrant Shares issuable. Any series of adjustments described in Section 10 shall be made successively. SECTION 11. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Quoted Price on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. SECTION 12. Notices to Warrant Holders. Upon any adjustment of the Exercise Price or Vesting Prices pursuant to Section 10, the Company shall promptly thereafter (i) cause to be filed with the Company a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Exercise Price and Vesting Prices after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at its address appearing on the Warrant register written notice of such adjustments by first class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 12. In case: (a) the Company shall authorize the issuance to the holders of shares of Common Stock generally of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) the Company shall authorize the distribution to the holders of shares of Common Stock generally of evidences of its indebtedness or assets (other than cash dividends payable out of consolidated earnings or earned surplus or dividends payable in shares of Common Stock or distributions referred to in subsection (a) of Section 10 hereof); or (c) the Company shall be party to any consolidation or merger, dissolution, distribution or winding up or tender or exchange offer for which approval of any stockholders of the Company is required, or the sale, lease, transfer or conveyance of the properties and assets of the Company substantially as an entirety, or (any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) the Company proposes to take any action (other than actions of the character described in Section 10(a)) which would require an adjustment of the Exercise Price and Vesting Prices pursuant to Section 10; then the Company, in accordance with Section 13, shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 15 days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for cash, securities or other property, if any, deliverable upon such reclassification, consolidation, merger, sale, lease, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 12 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. SECTION 13. Notices to Company and Warrant Holders. Any notice or demand authorized by this Agreement to be given or made by the registered holder of any Warrant Certificate to or on the Company shall be given or made in writing by hand delivery, registered or certified first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery at the address expressly designated by the Company as its office for purposes of this Agreement (until the Warrant holders are otherwise notified in accordance with this Section by the Company), as follows: Alliance Gaming Corporation 4380 Boulder Highway Las Vegas, Nevada 89121 Attention: Chairman Telecopy number: 702/454-0478 Any notice pursuant to this Agreement to be given by the Company to the registered holder(s) of any Warrant Certificate shall be given in writing by hand delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery at the address appearing on the Warrant register of the Company (until the Company is otherwise notified in accordance with this Section 13 by such holder). All such notices and demands shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; four business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged by addressee, if by telecopier transmission; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. SECTION 14. No Rights as Stockholders. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders' or transferees thereof (in their respective capacity as holders or transferees of Warrants) the right to vote for or to consent to, or to receive notice as stockholders in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. SECTION 15. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant Certificates. In addition, the Company may from time to time supplement or amend this Agreement with the consent of both (i) the holders of not less than a majority of the Warrants and (ii) the Holder originally named herein, if then a Holder; provided, however, that no such amendment or supplement shall amend any of the Exercise Conditions or change the Exercise Price or number of Warrant Shares issuable upon exercise of Warrants (other than in accordance with Section 10) without the consent of each holder of Warrants adversely affected thereby. SECTION 16. Successors. All the covenants and provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns and transferees of each of the parties, including without limitation and without the need for an express assignment, transferees of the Warrants. SECTION 17. Termination. This Agreement shall terminate at 5:00 p.m., New York City time on the Expiration Date. Notwithstanding the foregoing, this Agreement will terminate on any earlier date if all Warrants have been exercised. SECTION 18. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be construed, interpreted and the rights of the parties determined in accordance with the internal laws of the State of Nevada, without regard to the conflict of law principles thereof. SECTION 19. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the registered holders of the Warrant Certificates. SECTION 20. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 21. HSR Act. Promptly after receipt of notice from any holder of Warrants of its intention to exercise any Warrants, the Company shall make all filings required to be made by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), in connection with such exercise. The applicable waiting period, including any extension thereof, under the HSR Act shall have expired or been terminated prior to the issuance of any Warrant Shares upon exercise of Warrants. SECTION 22. No Obligation to Exercise. Nothing contained herein shall be construed to obligate any Holder to exercise any Warrant issued pursuant to this Agreement. SECTION 23. Board Approval. This Agreement and the Warrants are subject to the approval of the Board and shall be and become effective only upon the approval thereof by the Board; prior to such time they shall not have any force and effect. (Signature page(s) follow) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. ALLIANCE GAMING CORPORATION By: ______________________________ Name: Title: Attest: ____________________ Secretary ______________________________ Steve Greathouse Witness: _________________________ EXHIBIT A [Form of Warrant Certificate A/B/C] [Face] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. SG- _____ Warrants Warrant Certificate SERIES [A][B][C] ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that STEVE GREATHOUSE or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be August 14, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its Chairman and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 15, 1994 ALLIANCE GAMING CORPORATION By___________________________ Name: Title: [SEAL] [Form of Warrant Certificate A/B/C] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of August 15, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _____ shares of Common Stock and herewith tenders payment for such shares to the order of United Gaming, Inc. in the amount of $_________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of _________________, whose address is _________________ and that such shares be delivered to ________________________ whose address is ______________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of ____________, whose address is _______________, and that such Warrant Certificate be delivered to ______________, whose address is ______________. Signature: _______________________ Date: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. SG-001 84,000 Warrants Warrant Certificate SERIES A ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that STEVE GREATHOUSE, or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be August 14, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its Chairman and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 15, 1994 ALLIANCE GAMING CORPORATION By ______________________ Name: Title: [SEAL] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of August 15, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _________ shares of Common Stock and herewith tenders payment for such shares to the order of Alliance Gaming Corporation in the amount of $__________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ___________________, whose address is ________________________ and that such shares be delivered to ________________ whose address is ______________________. If such number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of __________________, whose address is ________________, and that such Warrant Certificate be delivered to _____________, whose address is _____________________. Signature: Date: ___________________ THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. SG-002 83,000 Warrants Warrant Certificate SERIES B ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that STEVE GREATHOUSE, or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be August 15, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its Chairman and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 15, 1994 ALLIANCE GAMING CORPORATION By____________________________ Name: Title: [SEAL] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of August 15, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive ____________ shares of Common Stock and herewith tenders payment for such shares to the order of Alliance Gaming Corporation in the amount of $_________ in accordance with the terms hereof. The under- signed requests that a certificate for such shares be registered in the name of __________________, whose address is ____________ __________________ and that such shares be delivered to ______________________ whose address is _______________. If such number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _______________________, whose address is ___________________, and that such Warrant Certificate be delivered to __________________________, whose address is ___________________. Signature: Date: ___________________ THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. SG-003 83,000 Warrants Warrant Certificate SERIES C ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that STEVE GREATHOUSE, or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be August 14, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its Chairman and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 15, 1994 ALLIANCE GAMING CORPORATION By ________________________ Name: Title: [SEAL] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of August 15, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive ___________ shares of Common Stock and herewith tenders payment for such shares to the order of Alliance Gaming Corporation in the amount of $____________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of __________________, whose address is ______________________ and that such shares be delivered to ___________________ whose address is ____________________. If such number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _____________________, whose address is __________________, and that such Warrant Certificate be delivered to ________________, whose address is _____________________. Signature: Date: ___________________ Exhibit 4.3 AGREEMENT AGREEMENT dated as of September 1, 1994 by and between Alliance Gaming Corporation, a Nevada corporation (the "Company"), and Craig Fields, an individual (the "Executive"). R E C I T A L S : A. The Company considers it important and in its best interest and the best interest of its stockholders to foster the retention and engagement of key senior personnel, including in respect of service on the Company's Board of Directors (the "Board"), and the Company desires to retain the services of the Executive in such capacity, on the terms and subject to the conditions provided in this Agreement. B. The Executive desires to accept such engagement by the Company and to render services to the Company, on the terms and subject to the conditions provided in this Agreement. A G R E E M E N T : The parties hereto agree as follows: 1. Engagement. The Company hereby agrees to retain the services of the Executive, and the Executive agrees to be retained by the Company, to render services to the Company for the period, at the rate of compensation and upon the other terms and conditions set forth in this Agreement. 2. Term. The term of the Executive's engagement under this Agreement (the "Term") shall commence on the date hereof and shall continue through and including August 31, 1997, unless earlier terminated as provided in this Agreement (the date of any termination of this Agreement or the expiration of the Term, as provided herein, the "Termination Date"). 3. Position and Duties. (a) Position. Subject to the remainder of this Section 3(a), the Executive shall serve as a Vice Chairman of the Board. During his engagement hereunder, the Executive shall report directly to the Board. The Executive shall, if so elected by the stockholders of the Company, serve on the Board from time to time, for successive periods of such election(s) and for such period as shall be agreed to by the Executive, subject, in each case, to the continued election thereto by the Company's stockholders. In the event that this Agreement is terminated, for any reason, except as otherwise agreed to in writing by the Company, the Executive shall be deemed to have immediately resigned from the Board, such resignation being effective on the Termination Date. In the event that the Executive shall fail to be elected to the Board or shall otherwise resign from or be removed from the Board during the Term, as a result of action by the stockholders of the Company (at a regular or special meeting thereof), including their failure to so elect the Executive, or otherwise, then, notwithstanding any such event (but subject to the remainder of this Agreement, including without limitation, Sections 7 and 8 below), (i) the Executive shall nonetheless continue to render the services to the Company otherwise provided in this Agreement to be rendered by the Executive, (ii) the Company shall otherwise continue to furnish the compensation and other remunerations to the Executive otherwise provided in this Agreement to be furnished, and (iii) the parties shall, if appropriate, reasonably agree to an amendment or modification to this Agreement appropriately to reflect such state of affairs. (b) Duties. During the Term, the Executive shall, subject to supervision by the Board, have the authority and power to perform such duties as are consistent with those of Vice Chairman of the Board. During the Term, the Executive shall perform the duties contemplated by such title and such other duties, consistent with his experience and abilities, as may be assigned to the Executive by the Board. The Executive shall devote substantially full time and efforts to the business and affairs of the Company, use his best efforts to further the interests of the Company and at all times conduct himself in a manner which reflects credit upon the Company. It is contemplated that the Executive shall render services to the Company from an office established by the Executive on behalf of the Company or the cost of which is paid for or reimbursed by the Company (and reasonably approved by the Company) in Washington, D.C.; however, the parties acknowledge and agree that the Executive may be required to travel extensively during the Term in fulfilling his duties hereunder (including numerous trips to New York City and Las Vegas, Nevada). 4. Compensation and Reimbursement of Expenses. (a) Compensation. For purposes of this Agreement, each consecutive 12-month period during the Term ending on each August 31st during the Term shall be referred to as an "Engagement Year." For services rendered by the Executive under this Agreement, the Company shall pay to the Executive as compensation during each Engagement Year during the Term, a base amount of compensation (the "Base Compensation") at an annual rate of $250,000 per year (prorated for any partial Engagement Years). The Base Compensation shall be payable in equal bi- weekly installments, commencing with the end of the pay period which next follows the commencement of the Term, and shall be subject to customary payroll deductions (i.e., for social security, federal, state and local taxes and other amounts customarily withheld from the compensation of members of the Board and/or employees of the Company). (b) Bonus. The Executive shall be eligible to receive from the Company, within 120 days of the end of each Engagement Year, a cash bonus in respect of such Engagement Year (the "Annual Bonus"), which shall be based upon all relevant criteria, including without limitation, (i) the performance of the Company and/or the operations of the Company for which the Executive is primarily or exclusively responsible, during such Engagement Year, based upon customary financial and other criteria, such as but not limited to, return on the Company's consolidated stockholders' equity and total capital (i.e., stockholders' equity and total debt), performance of the Company's Common Stock, par value $.10 per share (the "Common Stock"), and the Company's and such operations' absolute and relative amounts of consolidated cash flow, operating income and net income, and the comparison of such results with the Company's and such operations' budgets and projections therefor and (ii) the performance of the Executive in rendering services to the Company; it being understood that the Company shall not be obligated to pay to the Executive any Annual Bonus and the payment, if any, and amount thereof shall be solely within the discretion of the Board (with the Executive not voting on such determination). It is also contemplated that the Compensation Committee of the Board shall formulate specific criteria and performance targets for the determination of the Annual Bonus, if any. The Annual Bonus shall be subject to customary payroll deductions (i.e., for social security, federal, state and local taxes and other amounts customarily withheld from the compensation of members of the Board and/or employees of the Company). (c) Warrants and Options. (1) Effective as of the date hereof, the Company shall issue to the Executive warrants to acquire 250,000 shares of Common Stock pursuant to a warrant agreement and warrant in the form attached hereto as Exhibit A (the "Incentive Warrants"). Such warrant agreement and warrant are substantially identical to the warrant agreement and warrant in respect of the warrants issued to Kirkland-Ft. Worth Investment Advisors, L.P. ("KFW") on September 21, 1993, except for provisions thereof such as the number of shares of Common Stock covered thereby, the identity of the holder thereof, the date and expiration date thereof of other technical or transaction-specific terms. The Incentive Warrants shall vest and become exercisable as follows: As of the date hereof - 62,500 warrants On August 31, 1995 - 62,500 warrants On August 31, 1996 - 62,500 warrants On August 31, 1997 - 62,500 warrants Prior to each such applicable date, except as specifically set forth in this Agreement, the Incentive Warrants shall not be vested or exercisable. (2)(A) Effective as of the date hereof, the Company shall issue to the Executive options (pursuant to the Company's 1991 Incentive Stock Option Plan (the "Plan")) to acquire 250,000 shares of Common Stock of the Company (the "Engagement Options"). The Engagement Options shall (1) have an exercise price of $5 3/4 per share, (2) expire on August 31, 1999 or as otherwise provided in the Plan and (3) vest and become exercisable as follows: As of the date hereof - 62,500 shares On August 31, 1995 - 62,500 shares On August 31, 1996 - 62,500 shares On August 31, 1997 - 62,500 shares Prior to each such applicable date, except as specifically set forth in this Agreement, such Engagement Options shall not be vested or exercisable. (B) For purposes of this Agreement, a "Strategic Transaction" means any transaction which (i) is a "Special Strategic" transaction (as defined in the advisory letter agreement dated June 25, 1993 among the Company, Gaming Systems Advisors, L.P. ("GSA") and Alfred H. Wilms) in respect of which GSA has received incremental warrants over and above the warrants otherwise issuable for a strategic transaction (as defined in such agreement) and (ii) involves a company or other entity (other than the Company or its subsidiaries or affiliates) in the electronic gaming systems business. In the event that prior to the Termination Date a Strategic Transaction shall have occurred, the Company shall issue to the Executive, within 30 days of the consummation of such Strategic Transaction, additional Engagement Options to purchase an additional 150,000 shares of Common Stock. The exercise price of such Engagement Options shall be equal to the average of the closing prices of a share of Common Stock (on the principal exchange or trading market on which the Common Stock is then listed or quoted) for the five consecutive trading days (starting at the latest date and preceding to an earlier date) preceding the day which is two business days prior to the day that the pendency or consummation of, or intention to consummate, such Strategic Transaction is first announced to the public. Such Engagement Options shall be vested and exercisable upon issuance. This subsection (B) shall apply only to the first Strategic Transaction consummated during the Term. (3) The Executive acknowledges that the Incentive Warrants (and any Common Stock underlying the Incentive Warrants) have not been registered for sale under the Securities Act of 1933 (the "Securities Act") or applicable state "blue sky" laws and that such Incentive Warrants and Common Stock may be sold only pursuant to such registration or applicable exemptions therefrom. The Executive confirms that he is an accredited investor (as defined under the Securities Act) and has been afforded the opportunity to ask questions of and receive information from management and other representatives of the Company in connection with the receipt of the Incentive Warrants and such Common Stock. The Executive agrees that in connection with his receipt and ownership of the Incentive Warrants and, as applicable, any other securities of the Company issued or delivered to the Executive in connection with his engagement by the Company, (A) he shall vote such stock and other securities at all regular or special meetings of the stockholders of the Company for the election of directors in the manner directed by and required of Kirkland Investment Corporation ("KIC"), pursuant to the Stockholders Agreement dated as of September 21, 1993, as amended October 20, 1994, among the Company, KIC, KFW, GSA and Alfred H. Wilms (the "Stockholders Agreement") for as long as the Stockholders Agreement is in effect, and (B) he shall file in a timely manner any and all applicable forms or filings required under the Securities Act or the Securities Exchange Act of 1934, including without limitation, a Schedule 13D (and any required amendments thereto) and/or Forms 3, 4 and/or 5. (d) Reimbursement of Expenses. Consistent with established policies of the Company as in effect from time to time, the Company shall pay to or reimburse the Executive for all reasonable and actual out-of-pocket expenses, including without limitation, travel, hotel and similar expenses, incurred by the Executive from time to time in performing his obligations under this Agreement. 5. Benefits. (a) Benefit Plans. The payments provided in Section 4 above are in addition to any benefits to which the Executive may be, or may become, entitled under any of the Company's benefit plans or programs for which members of the Board are or shall become eligible. In addition, the Executive shall be eligible to receive during the Term benefits and emoluments which are consistent with the benefits and emoluments provided to all members of the Board or senior executives of the Company. (b) Vacation. The Executive shall be entitled to reasonable periods of vacation and sick leave consistent with his role as the Vice Chairman of the Board. (c) No Reduction. There shall be no material reduc- tion or diminution of the benefits provided in this Section 5 during the Term unless (i) the Executive shall have provided his consent to such reduction or diminution, (ii) an equitable arrangement (embodied in an ongoing substitute or alternative benefit or plan) has been made with respect to such benefit or plan or (iii) such reduction is part of a program of across-the- board benefit reductions similarly affecting the senior executive officers of the Company or members of the Board. 6. Benefits Payable Upon Disability. (a) Disability Benefits. During any period of Disability (as defined below) occurring during the Term, the Company shall continue to pay to the Executive the Base Compensation as provided herein and continue to extend to him the benefits described in Sections 4 and 5 hereof; it being understood that if disability benefits are provided under any disability insurance or similar policy maintained by the Company (or maintained by the Executive, the cost of which is reimbursed or paid by the Company), payments under such policy shall be considered as payments by the Company and shall offset any Base Compensation payable to the Executive under this Agreement. As used in this Agreement, "Disability" shall mean the inability (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination) of the Executive to render services to the Company, as provided herein, as a result of physical or mental infirmity or disability. (b) Services During Disability. During the Term, notwithstanding any Disability, the Executive shall, to the extent that he is physically and mentally able to do so, furnish information, assistance and services to the Company, and, upon the reasonable request in writing on behalf of the Board (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination), from time to time, he shall make himself available to the Company to undertake reasonable assignments and fulfill his duties hereunder, consistent with his current position with the Company and his physical and mental health. 7. Termination. This Agreement shall be terminated in accordance with the provisions of this Section 7, in which case the provision of Section 8 below shall be applicable. (a) Upon Expiration of the Term. This Agreement shall terminate in accordance with Section 2 above. (b) By The Company. In addition to the provisions of Section 7(a) above, this Agreement is subject to earlier termination by the Company (which right may be exercised, as applicable, by the Company, or the Chairman of the Board (in such capacity), acting individually), as follows: (i) Death of Executive. If the Executive dies, this Agreement shall terminate, the Termination Date being the date of the Executive's death. (ii) Disability. If the Executive has been absent from service to the Company, as required in this Agreement, for a period of 90 days or more as a result of Disability during any consecutive 180-day period during the Term, the Company shall have the right to terminate this Agreement (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination), the Termination Date being 15 days after notice thereof is provided to the Executive. (iii) Termination by Company for Cause. The Company shall have the right to terminate the Executive's engagement under this Agreement for Cause (as defined below), the Termination Date to be immediately upon notice thereof from the Company to the Executive. For purposes of this Agreement, "Cause" shall mean the Executive's (A) conviction of any misdemeanor involving moral turpitude or any felony, (B) misappropriation or embezzlement from the Company, (C) denial or rejection of any gaming license or permit issued by the State of Nevada (or any applicable agency or political subdivision) or any other jurisdiction in or from which the denial of a gaming license or permit could materially adversely affect the Company's business, or commission of any act which could reasonably be expected to result in such denial or rejection, (D) any breach during the Term of Sections 10 or 11 below or (E) the persistent refusal, after written notice, to undertake the Executive's duties or obligations hereunder in the Executive's capacity as Vice Chairman of the Board. (iv) Termination by the Company Without Cause. The Company shall have the right to terminate the Executive's engagement hereunder for any other reason not set forth in clauses (i), (ii) or (iii) of this Section 7(b), the Termination Date being 15 days after notice from the Company to the Executive. (c) By The Executive. In addition to the provisions of Section 7(a) above, this Agreement is subject to earlier termination by the Executive, as follows: (i) Termination by the Executive for Just Cause. The Executive shall have the right to terminate his engagement under this Agreement upon the occurrence of a material breach of this Agreement by the Company, which the parties agree shall be limited to (A) a reduction by the Company in the Base Compensation below the minimum Base Compensation specified in Section 4(a) above or the failure of the Company to pay to the Executive any portion of the Base Compensation within 30 days of the time that any such amount is due and payable hereunder or (B) the assignment to the Executive of duties and responsibilities that are materially inconsistent with those of a Vice Chairman of the Board, in each case, in the cases of clauses (A) and (B), which has not been cured by the Company after 30 days' written notice from the Executive to the Company; provided, that in the case of three such defaults (and notice thereof), the Executive shall have thereafter have the right during the remainder of the Term to terminate this Agreement upon five days' written notice to the Company following the first of any such subsequent defaults hereunder (provided such subsequent default is not cured within such five-day period) and, if the Company thereafter again shall default in its obligations hereunder, the Executive shall have the right to terminate this Agreement immediately upon written notice to the Company. In the event that the Executive elects to terminate this Agreement as a result of the events described in clauses (A) or (B) above, the Executive shall exercise such right within 10 days after the lapsing of the 30-day or, if applicable, five-day period referred to above in this clause (i) (assuming, in each case, that the Company shall have failed to cure such material breach within such period) or, if applicable, within five days of the event giving rise to a right of immediate termination, as referred to above in this clause (i); thereafter, such right to terminate shall no longer be exercisable. The Termination Date shall be a date specified by the Executive, which shall be between 30 and 45 days after the date of such default notice by the Executive. (ii) Termination by the Executive Without Just Cause. The Executive shall have the right to terminate the Executive's engagement under this Agreement for any other reason not set forth in clause (i) of this Section 7(c), the Termination Date being 15 days after notice thereof from the Executive to the Company. 8. Effect of Termination. The following provisions shall be applicable in the event of the termination of this Agreement as provided in Section 7 above. (a) Expiration of Term. Upon termination of this Agreement as provided in Section 7(a) above, this Agreement shall terminate and be of no further force and effect, except as provided in Sections 11, 12 and 13(b) below, which shall survive such termination, and no additional payments, liabilities or obligations shall be due and owing from either party to the other. (b) Death. Upon the termination of this Agreement as provided in Section 7(b)(i) above, the Company shall pay to the Executive's estate (i) an amount equal to the sum of (A) six months' of the Base Compensation in effect on the Termination Date and (B) any Annual Bonus for the Engagement Year in which the Termination Date occurs that the Board determines would otherwise have been payable had the Executive not died, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, in the case of clauses (A) and (B) above, payable, at the time such payments would otherwise be due and payable hereunder, and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payment would otherwise be due and payable thereunder, and neither party shall have any further liability or obligation to the other, except as provided in Section 12 below, which shall survive the Termination Date. Any unvested Incentive Warrants and Engagement Options otherwise provided in this Agreement to vest and become exercisable within the 364-day period following the Termination Date shall vest and become exercisable on the Termination Date by virtue of any termination under Section 7(b)(i) above. Notwithstanding the provisions of clauses (A) and (B) above, the Company shall have the right to provide for either or both of such payments by either purchasing life insurance on the Executive's life itself or reimbursing to the Executive the cost of the premiums in respect of such life insurance which shall be purchased directly by the Executive; in the event that either of such insurance coverages is obtained, the applicable payments under such clauses (A) and (B) above shall be made solely from such insurance coverages and not from the Company and shall constitute the Executive's estate's or heirs' sole remedy in respect of such payments. (c) Disability. Upon the termination of this Agreement as provided in Section 7(b)(ii) above, the Company shall pay to the Executive (i) an amount equal to the sum of (A) six months of Base Compensation in effect on the Termination Date and (B) any Annual Bonus for the Engagement Year in which the Termination Date occurs that the Board determines would otherwise have been payable had the Executive not become Disabled, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, in the case of clauses (A) and (B) above, payable at the times such payments would otherwise be due and payable hereunder; provided, in the case of clauses (A) and (B) above, that the Executive continues to comply with his covenants in Sections 10 (during the period that any such payments are provided to be made) and 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payments would otherwise be due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided above and therein. Any unvested Incentive Warrants and Engagement Options otherwise provided in this Agreement to vest and become exercisable within the 364-day period following the Termination Date shall vest and become exercisable on the Termination Date by virtue of any termination under Section 7(b)(ii) above. Notwithstanding the provisions of clauses (A) and (B) above, the Company shall have the right to provide for either or both of such payments by either purchasing disability insurance itself in respect of the Executive or reimbursing to the Executive the cost of the premiums in respect of such disability insurance which shall be purchased directly by the Executive; in the event that either of such insurance coverages is obtained, the applicable payments under such clauses (A) and (B) above shall be made solely from such insurance coverages and not from the Company and shall constitute the Executive's sole remedy in respect of such payments. (d) Termination by the Company For Cause. Upon the termination of this Agreement as provided in Section 7(b)(iii) above, the Company shall pay to the Executive (i) the accrued and unpaid Base Compensation, if any, through the Termination Date and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein. No unvested Incentive Warrants or Engagement Options shall vest or become exercisable by virtue of any termination under Section 7(b)(iii) above and any and all rights thereto then possessed by the Executive shall be terminated and of no further force and effect. (e) Termination by the Company Without Cause. Upon termination of this Agreement as provided in Section 7(b)(iv) above, the Company shall pay to the Executive (i) an amount equal to the aggregate of (A) the Base Compensation which would otherwise be payable hereunder in respect of the shorter of (1) the remainder of the Term and (2) the 12 months following the Termination Date, in each case, had such termination not occurred (provided, that if the Executive commences full-time employment with another entity within the applicable period described in clauses (1) or (2) above, then, in each such case, from and after the date of commencement of such other employment, (x) if the aggregate compensation payable to the Executive in respect of such other employment is at a rate which exceeds the Base Compensation, no additional compensation shall be payable to the Executive under this clause (A) and (y) if the aggregate compensation payable to the Executive in respect of such other employment is at a rate which is less than the Base Compensation, the Company shall be obligated to pay to the Executive (for the applicable period described in clauses (1) or (2) above) the difference between the Base Compensation and the such other compensation), and (B) any Annual Bonus which would be otherwise payable in the year in which the Termination Date occurs that the Board determines would otherwise have been payable had such termination not occurred, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, in the case of clauses (A) and (B) above, payable at the times such payments are otherwise due and payable hereunder; provided, that the Executive continues to comply with the covenants in Section 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, in such case, at the time such payment is otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other (including under Section 10 below), except that the provisions of Sections 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein. Any unvested Incentive Warrants and Engagement Options otherwise provided in this Agreement to vest and become exercisable within the 364-day period following the Termination Date shall vest and become exercisable on the Termination Date by virtue of any termination under Section 7(b)(iv) above. (f) Termination by the Executive for Just Cause. Upon termination of this Agreement as provided in Section 7(c)(i) above, the Company shall pay to the Executive (i) an amount equal to the aggregate of (A) the Base Compensation which would otherwise be payable hereunder in respect of the shorter of (1) the remainder of the Term and (2) the 12 months following the Termination Date, in each case, had such termination not occurred (provided, that if the Executive commences full-time employment with another entity within the applicable period described in clauses (1) or (2) above, then, in each such case, from and after the date of commencement of such other employment, (x) if the aggregate compensation payable to the Executive in respect of such other employment is at a rate which exceeds the Base Compensation, no additional compensation shall be payable to the Executive under this clause (A) and (y) if the aggregate compensation payable to the Executive in respect of such other employment is at a rate which is less than the Base Compensation, the Company shall be obligated to pay to the Executive (for the applicable period described in clauses (1) or (2) above) the difference between the Base Compensation and the such other compensation), and (B) any Annual Bonus which would be otherwise payable in the year in which the Termination Date occurs that the Board determines would otherwise have been payable had such termination not occurred, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, in the case of clauses (A) and (B) above, payable at the times such payments are otherwise due and payable hereunder; provided, that the Executive continues to comply with the covenants in Section 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, in each case, at the time such payment is otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other (including under Section 10 below), except that the provisions of Sections 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein. Any unvested Incentive Warrants and Engagement Options otherwise provided in this Agreement to vest and become exercisable within the 364-day period following the Termination Date shall vest and become exercisable on the Termination Date by virtue of any termination under Section 7(c)(i) above. (g) Termination by the Executive Without Just Cause. Upon the termination of this Agreement as provided in Section 7(c)(ii) above, the Company shall pay to the Executive (i) the accrued and unpaid Base Compensation, if any, through the Termination Date and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein. No unvested Engagement Options shall vest or become exercisable by virtue of any termination under Section 7(c)(ii) above and any and all rights thereto then possessed by the Executive shall be terminated and of no further force and effect. 9. Federal Income Tax and Other Withholdings. The Company shall withhold from any benefits payable pursuant to this Agreement such Federal, State, City or other taxes and other amounts as may be required to be withheld pursuant to any applicable law or governmental regulations or ruling and shall timely pay over to the appropriate governmental or other authorities the amount withheld, together with any additional amounts required to be paid by the Company in respect thereof. 10. Non-Competition. (a) The Executive covenants and agrees that he will not at any time during his engagement by the Company and, to the extent provided for in the applicable subsections of Section 8 above, for a period of 12 months thereafter, directly or indirectly, whether as employee, owner, partner, agent, director, officer, consultant, stockholder (except as the beneficial owner of not more than 5% of the outstanding shares of a corporation, any of the capital stock of which is listed on any national or regional securities exchange or quoted in the daily listing of over-the-counter market securities and, in each case, in which the Executive does not undertake any management or operational or advisory role) or in any other capacity, for his own account or for the benefit of any person or entity, establish, engage or be connected with or in any manner any person or entity which is at the time engaged in a business which is on the date hereof or on any applicable Termination Date in competition with the business of the Company (or any of its subsidiaries or affiliates). (b) In addition to the provisions in Section 10(a) above, the following provisions shall be applicable: During the Term, the Executive shall be permitted to continue to serve on boards of directors or advisory boards of other corporations on which he presently serves. In addition, the Executive shall be permitted in the future to serve on additional boards of directors or advisory boards of other companies, in each case, with the consent of the Company, which shall not be unreasonably withheld; such consent principally focusing on whether such other service limits in a material respect the Executives' time commitment to the Company or presents a conflict of interest with the Company. Other than as set forth above, the Executive shall not be permitted to serve on boards of directors or advisory board of other entities. 11. Confidential Information and Non-Disparagement. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company and its stockholders all secret, confidential or proprietary information, knowledge or data relating to the Company (and any of its subsidiaries or affiliates), which shall have been obtained by the Executive during or by reason of his engagement by the Company, in accordance with the principles of NRS 600A.010 et seq. (the so- called Uniform Trade Secrets Act). During and after the end of the Term, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to any person or entity other than the Company (or such applicable subsidiaries or affiliates) and those designated by them which would result in any misappropriation under and as defined in such Act, except that, during his engagement hereunder, in furtherance of the business and for the benefit of the Company, the Executive may provide confidential information as appropriate to attorneys, accountants, financial institutions or other persons or entities engaged in business with the Company from time to time. (b) Each of the parties agrees that from and after any termination or expiration of the Term, neither shall, publicly or privately, disparage or make any statements (written or oral) that could impugn the integrity, acumen (business or otherwise), ethics or business practices, of the other, except, in each case, to the extent (but solely to the extent) necessary in any judicial or arbitral action to enforce the provisions of this Agreement. 12. Indemnification and Liability Insurance. (a) Indemnification. The Company shall indemnify and hold the Executive harmless, to the fullest extent legally permitted by Section 78.751 of the Nevada Corporation Code (as amended and in effect from time to time) against any and all expenses, liabilities and losses (including without limitation, reasonable attorneys' fees and disbursements of counsel reasonably satisfactory to the Company), incurred or suffered by him in connection with his service as a member of the Board during the Term, in each case, except to the extent of the Executive's negligence or willful misconduct. (b) Insurance. The Company shall maintain, for the benefit of the Executive, a directors' and officers' liability insurance policy insuring the Executive's service as a member of the Board during the Term in accordance with its customary practices as in effect from time to time during the Term. The parties acknowledge and agree that such policy may cover other directors and officers of the Company in addition to the Executive. 13. General Provisions. (a) Assignment. Neither this Agreement nor any right or interest hereunder shall be assignable by the Executive or the Company without the prior written consent of the other; provided, that (i) in the event of the Executive's Death during the Term, the Executive's estate and his heir, executors, administrators, legatees and distributees shall have the rights and obligations set forth herein, as provided herein, and (ii) nothing contained in this Agreement shall limit or restrict the Company's ability to merge or consolidate or effect any similar transaction with any other entity, irrespective of whether the Company is the surviving entity; provided, that such surviving entity shall continue to be bound by the provisions hereof binding upon the Company. (b) Material Inducements. The provisions of Sections 10 and 11 above are material inducements to the Company entering into and performing this Agreement; accordingly, in the event of any breach of such provisions by the Executive, in addition to all other remedies at law or in equity possessed by the Company, (i) the Company shall have the right to terminate and not pay any amounts payable to the Executive hereunder, (ii) all Incentive Warrants and Engagement Options that are unexercised shall be immediately forfeited and returned to the Company and (iii) the Executive shall immediately account to the Company and return to the Company an amount in cash equal to all profits or benefits obtained or realized by the Executive by virtue of the ownership or disposition of the Incentive Warrants and Engagement Options. (c) Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, the Executive and the Company and their respective heirs, executors, administrators, legatees and distributees, successors and permitted assigns. (d) Amendment of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (e) Severability. If, for any reason, any provision of this Agreement is determined to be invalid or unenforceable, such invalidity or lack of enforceability shall not affect any other provision of this Agreement not so determined to be invalid or unenforceable, and each such other provision shall, to the full extent consistent with applicable law, continue in full force and effect, irrespective of such invalid or unenforceable provision. (f) Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto respecting the Executive's engagement by the Company, and super- sedes any prior agreement between the Company and the Executive relating to such matters. (g) Notices. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) when delivered, if sent by telecopy or by hand, (ii) one business day after sending, if sent by reputable overnight courier service, such as Federal Express, or (iii) three business days after being mailed, if sent by United States certified or registered mail, return receipt requested, postage prepaid. Notices shall be sent by one of the methods described above; provided, that any notice sent by telecopy shall also be sent by any other method permitted above. Notices shall be sent, if to the Executive, to 2737 Devonshire Place, Washington, D.C. 20008; telecopy no. (202) 667-2840; and if to the Company, to Alliance Gaming Corporation, 4380 Boulder Highway, Las Vegas, Nevada 89121; telecopy no. (702) 454-0478, directed to the attention of the Board with copies to the Chairman and the Secretary of the Company; or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (h) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. (i) Arbitration. In the event of a dispute or con- troversy arising under or in connection with this Agreement (except, at the option of the Company, Sections 10 and 11 above), the Executive shall give the Company or the Company shall give the Executive, as applicable, a written demand for relief. If the dispute or controversy is not resolved, it shall be settled exclusively by arbitration, conducted in Las Vegas, Nevada, in accordance with the rules of the American Arbitration Association (or if the such association does not then conduct business in such city, another arbitral panel reasonably satisfactory to each party) then in effect. Judgment shall be entered on the arbitrator's award in any court having jurisdiction over the parties hereto. (j) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. (k) Headings. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. (l) Governing Law. This Agreement has been executed and delivered in the State of Nevada, and its validity, inter- pretation, performance, and enforcement shall be governed by the laws of such State, without regard to principles of conflicts of laws. (m) Board Approval. This Agreement is subject to the approval of the Board and shall be and become effective only upon the approval thereof by the Board; prior to such time it shall not have any force and effect. [The remainder of this page is left blank.] IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has signed this Agreement, all as of the date first set forth above. Alliance Gaming Corporation By:___________________________ Name: Title: ___________________________ Craig Fields Exhibit 4.4 WARRANT AGREEMENT This WARRANT AGREEMENT (this "Agreement") is dated as of September 1, 1994 by and between ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"), and CRAIG FIELDS, an individual (together with any successors or other holders of the Warrants (as defined below) issued hereunder, the "Holder"). RECITALS A. The Company proposes to issue to Holder common stock purchase Warrants, as hereinafter defined, to purchase up to an aggregate of 250,000 shares of common stock, par value $.10 per share (the "Common Stock"), of the Company (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"), pursuant to an Agreement, dated as of September 1, 1994 relating to the initial Holder's engagement by the Company (the "Engagement Agreement"). B. The Warrants to be issued hereunder are to be issued in three separate series, each such series to be exercisable upon the attainment of certain market prices for the Common Stock and the occurrence of other specified events, as more fully set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Warrant Certificates. The Company shall deliver to the initial Holder on the date hereof in accordance with the provisions of the Engagement Agreement (i) Warrants to purchase up to 83,334 shares of Common Stock (the "Series A Warrants") evidenced by a certificate substantially in the form attached hereto as "Warrant Certificate A," (ii) Warrants to purchase up to 83,333 shares of Common Stock (the "Series B Warrants") evidenced by a certificate substantially in the form attached hereto as "Warrant Certificate B," and (iii) Warrants to purchase up to 83,333 shares of Common Stock (the "Series C Warrants") evidenced by a certificate substantially in the form attached hereto as "Warrant Certificate C", and together with Warrant Certificate A and Warrant Certificate B, the "Warrant Certificates". The Series A Warrants, Series B Warrants and Series C Warrants are herein collectively referred to as the "Warrants." Twenty-five percent of each of the Series A Warrants, the Series B Warrants and the Series C Warrants shall vest on the date of the initial Holder's initial engagement by the Company, as provided in the Engagement Agreement (which the parties agree is September 1, 1994), and 25% of each of the Series A Warrants, the Series B Warrants and the Series C Warrants shall vest on each of the first, second and third anniversary of the date of the initial Holder's initial engagement by the Company under the Engagement Agreement, as set forth in Section 4(c)(2)(A) thereof. Prior to each applicable vesting date, as set forth above, no unvested Warrants shall be exercisable and, prior to each such applicable vesting date, unvested Warrants are subject to return to the Company as provided in the Engagement Agreement. SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or a Vice President and by its Secretary or an Assistant Secretary under its corporate seal. Each such signature upon any Warrant Certificate may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates, and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of such person shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been delivered by the Company, such Warrant Certificates nevertheless may be issued as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. SECTION 3. Registration. The Warrant Certificates to be delivered pursuant to this Agreement shall be in registered form only. The Company shall number and register the Warrant Certificates in a register as they are issued. The Company may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and shall not be affected by any notice to the contrary and shall not be bound to recognize any equitable or other claim to or in the Warrant Certificates on the part of any other person. SECTION 4. Registration of Transfers and Exchanges. Subject to Section 6 hereof, the Company shall from time to time register the transfer in whole or in part of any outstanding Warrant Certificates in a Warrant register to be maintained by the Company upon surrender thereof to the Company at the office designated for such purpose (the address of which is set forth in Section 13 hereof) accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Company, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. In all cases of transfer by an attorney, the original power of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited with the Company. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, and may be required to be deposited with the Company in its discretion. Upon any such registration of transfer, a new Warrant Certificate of the appropriate series shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled and disposed of by the Company. Each Holder, by its acceptance thereof, agrees that prior to any proposed transfer of any Warrant as permitted by the foregoing paragraph, if such transfer is not made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Act"), or pursuant to Rule 144 under the Act, or pursuant to an opinion of counsel, reasonably satisfactory in form and substance to the Company, that such Warrant or Warrant Shares may be sold without registration under the Act, the Holder will deliver to the Company: (a) an investment representation from the proposed transferee substantially to the effect that such securities are being acquired in good faith for investment for the transferee's own account and not with a view to a distribution or resale of any of such securities in violation of any applicable securities laws; (b) an agreement by such transferee to the impression of the restrictive legends set forth below on the Warrant or the Warrant Shares, as the case may be; (c) an agreement by such transferee that the Company may place a notation in the stock books of the Company or a "stop transfer order" with any transfer agent or registrar with respect to the Warrant Shares; and (d) an agreement by such transferee to be bound by the provisions of this Warrant Agreement, including, without limitation, this Section 4 relating to the transfer of such Warrant or Warrant Shares. The Warrants are subject to the terms and conditions of the Agreement. The Holders agree that each certificate representing Warrants or Warrant Shares will bear a legend reading substantially as follows until such Warrants or Warrant Shares have been sold pursuant to an effective registration statement or Rule 144 under the Act or an opinion of counsel reasonably satisfactory to the Company: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SAID ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS." Warrant Certificates may be exchanged at the option of the Holder(s), when surrendered to the Company at the office designated for such purpose (the address of which is set forth in Section 13 hereof) for another Warrant Certificate or other Warrant Certificates of like tenor and series and representing in the aggregate a like number of Warrants. Warrant Certificates surrendered for exchange shall be cancelled by the Company. SECTION 5. Warrants; Exercise of Warrants. (a) General. Subject to the terms of this Agreement, none of the Warrants may be exercised unless and until (x) each of the "Initial Conditions" set forth in Section 5(b) hereof have occurred, (y) in respect of the series of Warrants to be exercised, the related "Series Condition" set forth in Section 5(c)(i), (ii) or (iii) hereof (as the case may be) has occurred, and (z) the Warrants are exercised on or after one year from the date of issue but on or prior to 5:00 p.m. New York City time on September 21, 2000 (the "Expiration Date"). In respect of any particular Warrant issued hereunder, the Initial Conditions and the Series Conditions are herein collectively referred to as the "Exercise Conditions." (b) Initial Conditions. No Warrants shall be exercisable unless and until with respect to any Holder, either (i) no gaming license, finding of suitability or similar approval is required in respect of such Holder from the State of Nevada (or any applicable agency or political subdivision thereof) or any other jurisdiction in or from which the denial of a gaming license, finding of suitability or similar approval could materially adversely affect the Company's business, which jurisdiction has indicated, generally (by statute, regulation or otherwise) or as a matter of specific application to the Company or the Holder, that issuance of such license, findings of suitability or similar approval is required for exercise of the Warrants, or (ii) the Licensing Date has occurred with respect to such Holder relative to its acquisition of the shares of Common Stock to be issued upon the exercise of such Warrants. For purposes of this clause (b), the term "Licensing Date" shall have the meaning provided in the Company's Certificate of Designations, Preferences and Relative, Participating, Optional and other Special Rights of Special Stock. (c) Series Conditions. In addition to the satisfaction of the Initial Conditions, no Warrants of a given Series may be exercised unless: (i) in respect of the Series A Warrants, the average "Quoted Price" (as defined below) of the Common Stock for 15 consecutive trading days commencing on or after September 1, 1995 must have been equal to or greater than $11.00 per share; (ii) in respect of the Series B Warrants, the average Quoted Price of the Common Stock for 15 consecutive trading days commencing on or after September 1, 1995 must have been equal to or greater than $13.00 per share; (iii) in respect of the Series C Warrants, the average Quoted Price of the Common Stock for 15 consecutive trading days commencing on or after September 1, 1995 must have been equal to or greater than $15.00 per share; in each case, on at least one occasion during the term of the Warrants. If the Series Conditions are satisfied with respect to any Series of Warrants, at any time, the Warrants in such Series shall, subject to satisfaction of the Initial Conditions, thereafter be exercisable for the remainder of the term thereof irrespective of whether or not the Series Conditions thereafter are satisfied. The prices referred to above in clauses (i), (ii) and (iii) are referred to herein as the "Vesting Prices." (d) Expiration. Each Warrant not exercised prior to 5:00 p.m., New York City time, on the Expiration Date shall become void and all rights and obligations thereunder and all rights and obligations in respect thereof under this Agreement shall cease as of such time. (e) Exercise; Delivery of Warrant Shares. A Warrant may be exercised in whole or in part from time to time upon surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 13 hereof) of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed and upon payment to the Company of the exercise price (the "Exercise Price") which is set forth in the form of Warrant Certificates attached hereto as Exhibits A, B and C, as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised, as adjusted as herein provided. The Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender and exercise and payment of the purchase price as provided above, and the person entitled to receive Warrant Shares issuable upon such exercise shall be treated for such purpose as the holder of such shares of record as of the close of business on such date. Payment of the aggregate Exercise Price shall be made in cash or by certified or official bank check to the order of the Company. Subject to the provisions of Section 6 hereof, upon such surrender of Warrants, payment of the Exercise Price and the delivery of all related documentation, the Company shall issue and cause to be delivered within five business days to or upon the written order of the holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 11 hereof; provided, however, that if any consolidation, merger, sale, lease, transfer or conveyance of assets is proposed to be effected by the Company as described in subsection (i) of Section 10 hereof, or a tender offer or an exchange offer for shares of Common Stock of the Company shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than two business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence together with cash as provided in Section 11 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate of the same tenor evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section and of Section 2 hereof. (f) Miscellaneous. All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled and disposed of by the Company. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders during normal business hours at its office. SECTION 6. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any registration or transfer involved in the issue or delivery of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates or certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall, as soon as practicable upon receiving notice of such event, issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and series and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also reasonably satisfactory to it or, in the case of any such mutilation, upon surrender and cancellation of such Warrant Certificate. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable requests and pay such other reasonable charges as the Company may prescribe. SECTION 8. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights contained herein will be irrevocably authorized and directed for so long as any Warrants are outstanding to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 12 hereof. Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants in accordance with this Agreement will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof created by or claiming through the Company. SECTION 9. Obtaining Stock Exchange Listings. The Company will from time to time take all action, if any, which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants in accordance with this Agreement, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 10. Adjustment of Exercise Price, Vesting Prices and Number of Warrant Shares Issuable. Whether or not the Exercise Conditions have been met and whether or not the Warrants have been issued, or are exercisable or exercised, the Exercise Price, Vesting Prices and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time until the exercise thereof upon the occurrence of the events enumerated in this Section 10. In the event any adjustment of the Exercise Price is required by this Section 10, a similar and proportional adjustment shall be made in the Vesting Prices. Such adjustment shall be made successively whenever any event described or referred to below shall occur. For purposes of this Section 10, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company. (a) Adjustment for Changes in Capital Stock, etc. If the Company: (i) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (ii) subdivides its outstanding shares of Common Stock into a greater number of shares; (iii) combines its outstanding shares of Common Stock into a smaller number of shares; or (iv) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock or preferred stock, then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted so that the Holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action, and the Vesting Prices shall be proportionately adjusted. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder upon exercise of any Warrant may receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company shall, in good faith, determine the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price and the Vesting Prices, as applicable, of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section. (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to the holders of its Common Stock generally entitling them for a period expiring within 60 days after the record date mentioned below to purchase shares of Common Stock at a price per share less than the current market price per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: O + N x P _____ E' = E x M _____ O + N where: E' = the adjusted Exercise Price. E = the then current Exercise Price (as it may have been previously adjusted under this Section 10). O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the "Current Market Price" (as defined below) per share of Common Stock on the record date. and the Vesting Prices shall be proportionately adjusted. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Price and the Vesting Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If the Company distributes to the holders of its Common Stock generally any of its assets (including but not limited to "ordinary" dividends payable out of consolidated earnings or earned surplus of the Company during the first three years from the date hereof, as set forth below), debt securities, preferred stock, or any rights, options or warrants to purchase assets, debt securities, preferred stock, Common Stock, or other securities of the Company (other than those rights, options and warrants covered Section 10(b)), the Exercise Price shall be adjusted in accordance with the formula: E' = E x M - F _____ M where: E' = the adjusted Exercise Price. E = the then current Exercise Price (as it may have been previously adjusted under this Section 10). M = the Current Market Price (as defined below) per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the assets or securities applicable to one share of Common Stock and distributed to the holders of Common Stock generally. The fair market value shall be determined in good faith by the disinterested members of the Board of Directors of the Company (the "Board of Directors" or the "Board"), or, if such Board members so elect, by a nationally recognized investment banking or appraisal firm selected by the disinterested members of the Board of Directors. and the Vesting Prices shall be proportionately adjusted. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection (c) does not apply to (i) any distributions referred to in subsection 10(a), (ii) any rights, options or warrants referred to in subsection 10(b), or (iii) the payment of "ordinary" dividends payable out of consolidated earnings or earned surplus of the Company effected more than three years after the date of this Agreement. "Ordinary" dividends refers to dividends made, or which the Company when made intended to make, on a periodic and recurring basis. (d) Purchase of Common Stock by the Company. If the Company at any time while this Warrant is outstanding shall, directly or indirectly through a subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of its Common Stock at a price per share (the "Benchmark Price") greater than the Quoted Price on the date such purchase, redemption or other acquisition is effected, then the Exercise Price and Vesting Prices upon each such purchase, redemption or acquisition shall be adjusted to that price determined by multiplying such Exercise Price and Vesting Prices by a fraction: (i) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such purchase, redemption or acquisition minus the number of shares of Common Stock which the aggregate consideration for the total number of such shares of Common Stock so purchased, redeemed or acquired would otherwise have purchased at the Benchmark Price; and (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such purchase, redemption or acquisition. For purposes of this subsection (d), a purchase, redemption or acquisition of a Common Stock equivalent shall be deemed to be a purchase of the underlying Common Stock, and the computation herein required shall be made on the basis of the full exercise, conversion or exchange of such Common Stock equivalent pursuant to the terms thereof on the date as of which such computation is required hereby to be made. Notwithstanding the foregoing, however, for purposes of this subsection (d), the purchase, payment, redemption or acquisition of any such Common Stock equivalent of the Company at the lesser of (i) the fair market value of such securities or (ii) the purchase or redemption price set forth in the instrument governing such securities shall not be deemed to be a purchase of the underlying Common Stock (and, accordingly, no adjustment shall be made in the terms of exercise of any Warrant), but any purchase, payment, redemption or acquisition at a price in excess of the lesser of the fair market value or the purchase or redemption price contained therein shall be deemed to be a purchase of the underlying Common Stock for purposes of this subsection (d), unless such purchase, payment, redemption or acquisition at such price is mandatory under the terms of such instrument. For purposes of the immediately prior sentence, the fair market value of any securities shall be determined in good faith by the disinterested members of the Board of Directors or, if such Board members so elect, by a nationally recognized investment banking or appraisal firm selected by the disinterested members of the Board. (e) Current Market Price. In subsections (b), (c) and (d) of this Section 10 the "Current Market Price" per share of Common Stock on any date is the average of the Quoted Prices of the Common Stock for 10 consecutive trading days commencing five trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by the NASDAQ National Market System, or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of such quotations on one or more such trading days, the Board of Directors shall determine the Quoted Price for such trading days on the basis of such quotations as it in good faith considers appropriate. (f) When De Minimis Adjustment May Be Deferred or No Adjustment Required. No adjustment in the Exercise Price or Vesting Prices need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price or Vesting Prices. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 10 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. No adjustment need be made for the issuance or exercise of rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest in the event that no adjustment need be made in respect of the underlying dividend. No adjustment need be made for a change in the par value of the Common Stock (including a change from par value to no par value or from no par value to par value). To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (g) Notice of Adjustment. Whenever the Exercise Price or Vesting Prices are adjusted, the Company shall provide the notices required by Section 12 hereof. (h) Notice of Certain Transactions. If: (i) the Company takes any action that would require an adjustment in the Exercise Price and Vesting Prices pursuant to subsections (a), (b), (c) or (d) of this Section 10; (ii) the Company takes any action that would require a supplemental Warrant Agreement pursuant to subsection (i) of this Section 10; or (iii) there is a liquidation, dissolution or winding up of the Company; the Company shall mail to Warrant holders a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of the transaction. (i) Reorganization of Company. If the Company consolidates or merges with or into, or sells, leases, transfers or conveys all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger, if other than the Company, or the person to which such sale, lease, transfer or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 10. The successor Company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this subsection (i) applies, subsections (a), (b), (c) and (d) of this Section 10 do not apply. (j) Company Determination Final. Any good faith determination that the Company, the Board of Directors or an investment banking or appraisal firm, as the case may be, makes pursuant to this Section 10 shall be conclusive. (k) When Issuance or Payment May Be Deferred. In any case in which this Section 10 shall require that an adjustment in the Exercise Price and the Vesting Prices be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date but prior to the occurrence of such event the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the applicable Exercise Price and Vesting Prices and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 11; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (l) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price and Vesting Prices pursuant to this Section 10, each Warrant outstanding prior to the making of the adjustment in the Exercise Price and Vesting Prices shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth of a share) obtained from the following formula: N' = N x E _ E' where: N = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price (as the same may previously have been adjusted pursuant to this Section 10). E' = the adjusted Exercise Price. E = the Exercise Price (as the same may previously have been adjusted pursuant to this Section 10). If the Company shall be in default under any of its agreements to issue Warrant Shares hereunder and/or if applicable law prevents the issuance of any such shares at the Exercise Price adjusted in accordance herewith, the adjustment of shares provided in the foregoing sentence shall nonetheless be made and the Holder of this Warrant shall be entitled to purchase such greater number of shares at the price at which this Warrant may be exercised when such shares are issued. (m) Form of Warrants. Irrespective of any adjustments in the Exercise Price or Vesting Prices or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement, it being understood that all adjustments required by this Agreement shall have been assumed to have been made. (n) Adjustments Not Duplicative: Adjustments Successive. The adjustments provided for by this Section 10 are not intended to be duplicative, it being the intention of the parties that only one of the foregoing adjustment provisions, if any, shall apply to any particular transaction or event. In the event an unforeseen transaction or event occurs which could be construed to implicate more than one of such adjustment provisions, the Board of Directors shall determine in good faith the single adjustment provision contained in this Section 10 which it considers most appropriate in respect of the particular transaction or event, which provision shall govern the adjustment, if any, to be made in the Exercise Price, Vesting Prices and/or number of Warrant Shares issuable. Any series of adjustments described in Section 10 shall be made successively. SECTION 11. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Quoted Price on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. SECTION 12. Notices to Warrant Holders. Upon any adjustment of the Exercise Price or Vesting Prices pursuant to Section 10, the Company shall promptly thereafter (i) cause to be filed with the Company a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Exercise Price and Vesting Prices after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at its address appearing on the Warrant register written notice of such adjustments by first class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 12. In case: (a) the Company shall authorize the issuance to the holders of shares of Common Stock generally of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) the Company shall authorize the distribution to the holders of shares of Common Stock generally of evidences of its indebtedness or assets (other than cash dividends payable out of consolidated earnings or earned surplus or dividends payable in shares of Common Stock or distributions referred to in subsection (a) of Section 10 hereof); or (c) the Company shall be party to any consolidation or merger, dissolution, distribution or winding up or tender or exchange offer for which approval of any stockholders of the Company is required, or the sale, lease, transfer or conveyance of the properties and assets of the Company substantially as an entirety, or (any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) the Company proposes to take any action (other than actions of the character described in Section 10(a)) which would require an adjustment of the Exercise Price and Vesting Prices pursuant to Section 10; then the Company, in accordance with Section 13, shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 15 days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for cash, securities or other property, if any, deliverable upon such reclassification, consolidation, merger, sale, lease, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 12 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. SECTION 13. Notices to Company and Warrant Holders. Any notice or demand authorized by this Agreement to be given or made by the registered holder of any Warrant Certificate to or on the Company shall be given or made in writing by hand delivery, registered or certified first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery at the address expressly designated by the Company as its office for purposes of this Agreement (until the Warrant holders are otherwise notified in accordance with this Section by the Company), as follows: Alliance Gaming Corporation 4380 Boulder Highway Las Vegas, Nevada 89121 Attention: Chairman Telecopy number: 702/454-0478 Any notice pursuant to this Agreement to be given by the Company to the registered holder(s) of any Warrant Certificate shall be given in writing by hand delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery at the address appearing on the Warrant register of the Company (until the Company is otherwise notified in accordance with this Section 13 by such holder). All such notices and demands shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; four business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged by addressee, if by telecopier transmission; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. SECTION 14. No Rights as Stockholders. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders' or transferees thereof (in their respective capacity as holders or transferees of Warrants) the right to vote for or to consent to, or to receive notice as stockholders in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. SECTION 15. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant Certificates. In addition, the Company may from time to time supplement or amend this Agreement with the consent of both (i) the holders of not less than a majority of the Warrants and (ii) the Holder originally named herein, if then a Holder; provided, however, that no such amendment or supplement shall amend any of the Exercise Conditions or change the Exercise Price or number of Warrant Shares issuable upon exercise of Warrants (other than in accordance with Section 10) without the consent of each holder of Warrants adversely affected thereby. SECTION 16. Successors. All the covenants and provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns and transferees of each of the parties, including without limitation and without the need for an express assignment, transferees of the Warrants. SECTION 17. Termination. This Agreement shall terminate at 5:00 p.m., New York City time on the Expiration Date. Notwithstanding the foregoing, this Agreement will terminate on any earlier date if all Warrants have been exercised. SECTION 18. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be construed, interpreted and the rights of the parties determined in accordance with the internal laws of the State of Nevada, without regard to the conflict of law principles thereof. SECTION 19. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the registered holders of the Warrant Certificates. SECTION 20. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 21. HSR Act. Promptly after receipt of notice from any holder of Warrants of its intention to exercise any Warrants, the Company shall make all filings required to be made by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), in connection with such exercise. The applicable waiting period, including any extension thereof, under the HSR Act shall have expired or been terminated prior to the issuance of any Warrant Shares upon exercise of Warrants. SECTION 22. No Obligation to Exercise. Nothing contained herein shall be construed to obligate any Holder to exercise any Warrant issued pursuant to this Agreement. SECTION 23. Board Approval. This Agreement and the Warrants are subject to the approval of the Board and shall be and become effective only upon the approval thereof by the Board; prior to such time they shall not have any force and effect. (Signature page(s) follow) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. ALLIANCE GAMING CORPORATION By: _____________________________ Name: Title: Attest: ______________________ Secretary _________________________ Craig Fields Witness: _________________________ EXHIBIT A [Form of Warrant Certificate A/B/C] [Face] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. CF- _____ Warrants Warrant Certificate SERIES [A][B][C] ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that CRAIG FIELDS or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be September 1, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: September 1, 1994 ALLIANCE GAMING CORPORATION By _________________________ Name: Title: [SEAL] [Form of Warrant Certificate A/B/C] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of September 1, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment for such shares to the order of United Gaming, Inc. in the amount of $ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ___________________, whose address is _________________ and that such shares be delivered to ______ whose address is _________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of __________, whose address is ____________________, and that such Warrant Certificate be delivered to _____________________, whose address is _______________________________. Signature: ________________________ Date: ___________________ THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. CF-001 83,334 Warrants Warrant Certificate SERIES A ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that CRAIG FIELDS, or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be September 1, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant shall vest and be exercisable solely in accordance with the provisions of the Warrant Agreement and the Engagement Agreement referred to therein. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: September 1, 1994 ALLIANCE GAMING CORPORATION By _________________________ Name: Title: [SEAL] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of September 1, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _____________ shares of Common Stock and herewith tenders payment for such shares to the order of Alliance Gaming Corporation in the amount of $________________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of __________________________, whose address is ______________________ and that such shares be delivered to _____________________________ whose address is _________________ _________________________. If such number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _______________________, whose address is ____________________________________, and that such Warrant Certificate be delivered to _______________________, whose address is _____________________________. Signature: Date: ___________________ THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. CF-002 83,333 Warrants Warrant Certificate SERIES B ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that CRAIG FIELDS, or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be September 1, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant shall vest and be exercisable solely in accordance with the provisions of the Warrant Agreement and the Engagement Agreement referred to therein. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: September 1, 1994 ALLIANCE GAMING CORPORATION By ___________________________ Name: Title: [SEAL] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of September 1, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive ____________ shares of Common Stock and herewith tenders payment for such shares to the order of Alliance Gaming Corporation in the amount of $_______________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ___________________________, whose address is __________________________, and that such shares be delivered to _______________________________, whose address is ___________________________________. If such number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of ________________________, whose address is ______________________________, and that such Warrant Certificate be delivered to __________________________, whose address is __________________________. Signature: Date: ___________________ THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. No. CF-003 83,333 Warrants Warrant Certificate SERIES C ALLIANCE GAMING CORPORATION This Warrant Certificate certifies that CRAIG FIELDS, or registered assigns, is the registered holder of Warrants ("Warrants") to purchase Common Stock, par value $.10 per share (the "Common Stock"), of ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"). Upon the terms and subject to the conditions contained in that certain Warrant Agreement referred to on the reverse side hereof including, without limitation, Section 5 thereof, each Warrant entitles the holder upon exercise to receive from the Company at any time after the occurrence of the "Exercise Conditions" (as such term is defined in the Warrant Agreement) one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. Subject to the terms and conditions of the Warrant Agreement, no Warrant may be exercised prior to the date which is one year after issue and upon the satisfaction of certain specified Exercise Conditions, or after 5:00 p.m., New York City time, on the "Expiration Date" (as defined in the Warrant Agreement) and to the extent not exercised by such time such Warrants shall become void. As more fully described in the Warrant Agreement, the Expiration Date shall be September 1, 2000. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and in the Warrant Agreement and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant shall vest and be exercisable solely in accordance with the provisions of the Warrant Agreement and the Engagement Agreement referred to therein. This Warrant Certificate shall not be valid unless countersigned by the Company. IN WITNESS WHEREOF, ALLIANCE GAMING CORPORATION has caused this Warrant Certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: September 1, 1994 ALLIANCE GAMING CORPORATION By _________________________ Name: Title: [SEAL] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the Expiration Date (as defined in the Warrant Agreement) entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to the Warrant Agreement, dated as of September 1, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Upon the terms and subject to the conditions contained in the Warrant Agreement including, without limitation, Section 5 thereof, Warrants may be exercised, in whole or in part at any time and from time to time after the relevant Exercise Conditions are satisfied. As more fully described in the Warrant Agreement, the Exercise Conditions will generally be deemed satisfied (and thus the Warrants represented by this certificate exercisable), upon the terms and conditions set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them upon the occurrence of the Exercise Conditions by surrendering this Warrant Certificate, with the form of election to purchase set forth herein properly completed and executed, together with payment of the Exercise Price in cash or by certified or official bank check at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price, Vesting Prices and number of Warrant Shares issuable may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the Vesting Prices and the number of shares of Common Stock issuable upon the exercise of each Warrant shall also be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and series evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and series and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder or transferee hereof to the right to vote for or to consent to, or to receive notice as stockholder in respect of the meetings of stockholders for, the election of directors of the Company or any other matter, or any rights whatsoever of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive ____________ shares of Common Stock and herewith tenders payment for such shares to the order of Alliance Gaming Corporation in the amount of $________________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ________________________, whose address is ___________________________ and that such shares be delivered to _________________________ whose address is __________________. If such number of shares is less than all of the shares of Common Stock purchasable hereunder after giving effect to any delivery of Warrants in payment of the Exercise Price, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _________________________, whose address is ___________________, and that such Warrant Certificate be delivered to ______________, whose address is ___________________________. Signature: Date: ___________________ Exhibit 4.5 Amendment Agreement Amendment Agreement dated as of October 20, 1994 to Stockholders Agreement dated as of September 21, 1993 among United Gaming, Inc., a Nevada corporation (the "Company"), Kirkland Investment Corporation, a Delaware corporation ("KIC"), Gaming Systems Advisors, L.P., a Delaware limited partnership ("GSA"), Kirkland-Ft. Worth Investment Partners, L.P., a Delaware limited partnership ("KFW"), and Alfred H. Wilms, an individual. R E C I T A L : The parties hereto are parties to a Stockholders Agreement dated as of September 21, 1993 (the "Stockholders Agreement"). The Stockholders Agreement provides in substance for, among other things, the taking of all actions (including the voting of all shares of Common Stock, par value $.10 per share, of the Company, possessed by Mr. Wilms and KIC and certain transferees thereof) to cause the Board of Directors of the Company to be constituted as provided in Section 2.1 thereof. Given the Company's desire to attract qualified and experienced new personnel and in light of the contemplated events involving the Company's future business, the parties desire to amend the Stockholders Agreement, as provided herein, to attempt to effect certain changes to the composition of the Company's Board of Directors. A G R E E M E N T : The parties agree as follows: 1. Capitalized terms not defined in this Agreement shall have the meanings ascribed to them in the Stockholders Agreement. 2. (a) Section 2.1 of the Stockholders Agreement is hereby amended to read in its entirety as follows: 2.1 Board of Directors. From and after the date hereof and subject to the following provisions, KIC and Mr. Wilms and each of their respective Permitted Transferees shall use its best efforts (including without limitation, voting all of their shares of Common Stock and taking every other action within their control) to cause the Board of Directors of the Company to consist of seven members, designated as set forth below: (a) Designation of Directors. KIC shall designate four directors, Mr. Wilms shall designate one director and the remaining two directors (the "New Directors") shall, subject to Section 2.3 below, be designated by a majority of the Board of Directors then holding office (it being understood that the New Directors shall initially be, from and after October 20, 1994, Craig Fields and Steve Greathouse). The director designated by Mr. Wilms shall be in the class which shall have an initial term of three years from the date of the annual meeting next following the Licensing Date) and the New Directors shall fill the unexpired terms of resigning directors. In addition, KIC shall designate the classes of directors of which KIC's designees and the New Directors shall serve, which designation, in the case of the New Directors, shall be reasonably satisfactory to Mr. Wilms. In addition, during such time that the covenants in this clause (a) are otherwise in effect, (i) Mr. Wilms shall have the right to designate two persons (who shall initially be, from and after October 20, 1994, David Scheinman and Sidney Sosin) (the "Advisors") who shall be observers of and advisors to the Company's Board of Directors, who shall be entitled to attend all of the Company's Board of Directors' meetings and receive all information furnished to members of the Company's Board of Directors, (ii) Mr. Wilms and/or at least one Advisor shall be entitled to attend all meetings of committees of the Company's and its subsidiaries' Board of Directors, and (iii) Mr. Wilms and the Advisors shall be reimbursed for their reasonable expenses in attending all such meetings. (b) Committees of the Board of Directors and Subsidiaries. The rights to designate directors provided in Section 2.1(a) above shall also apply to any committees of the Board of Directors and to any board of directors and committees of such board of any Subsidiary of the Company as provided in the last sentence thereof; thus Mr. Wilms and/or at least one Advisor shall have the right to attend each such meeting of the Board of Directors of the Company, each board of directors of any subsidiary of the Company or any committee of the foregoing. (b) Section 2.3 of the Stockholders Agreement is amended by adding the following sentence to the end of such section: "Notwithstanding the foregoing, in the event that there shall occur any vacancy in either or both of the directorships held by the New Directors, such vacancies shall be filled by the remaining members of the board of directors upon the majority vote thereof subject to the reasonable prior approval of KIC and Mr. Wilms." (c) Section 2.6 of the Stockholders Agreement is amended to read as follows: "The covenants and agreements contained in this Article II shall terminate upon the earlier of (i) September 21, 1997 and (ii) the date that both (1) KIC and its Permitted Transferees and (2) Mr. Wilms and his Permitted Transferees each own in the aggregate Securities representing less than 5% of the Fully Diluted Common Stock of the Company (with outstanding Convertible Stock and underlying Warrant Shares being counted as Common Stock); provided, that in the event that the average closing price of a share of Common Stock (as traded on the NASDAQ National Market System or other principal exchange or trading market on which the Common Stock is then traded or listed) for any 30 consecutive trading day period within the 15-month period prior to the earlier of the dates described in clauses (i) and (ii) above shall not have equaled or exceeded $15 (as appropriately adjusted to give effect to stock splits, recapitalizations, mergers, reorganizations or similar transactions) then, in such event, as soon as practicable after September 21, 1997, KIC and its Permitted Transferees shall use their best efforts (including causing certain of their prior designees to resign as directors, if appropriate) so as initially to result in the Board of Directors of the Company from and after September 21, 1997 being comprised of such number of directors designated by KIC and such number of directors designated by Mr. Wilms as will be in the ratio of four to three (i.e., four KIC designees and three Wilms designees, or eight KIC designees and six Wilms designees, etc.), it being understood that the foregoing shall not require KIC or Mr. Wilms or any of their respective Permitted Transferees to vote for a particular designee at any regular or special meeting of stockholders after September 21, 1997. Subject to the provisions of Section 2.1(a) and notwithstanding the foregoing, prior to the fifteenth anniversary of this Agreement, KIC shall vote all of its shares of Common Stock to cause Mr. Wilms to be elected a director of the Company for so long as Mr. Wilms owns shares of Common Stock; provided, however, that Mr. Wilms shall have the right, at any time or from time to time, to terminate this provision and, if he so elects, all parties hereto will cooperate in the event Mr. Wilms determines to cease being a director of the Company and cease receiving confidential or otherwise non-public Company information." 3. Each of the provisions of Article VIII of the Stockholders Agreement shall apply to this Agreement with the same force and effect as originally applicable to the Stockholders Agreement, except that references to the restrictive legend in Section 8.1 thereof shall be deemed to refer to the "Stockholders Agreement (as amended by an Amendment Agreement dated as of October 20, 1994)". 4. Other than as amended hereby, the Stockholders Agreement shall remain in full force and effect as originally stated. In witness whereof, the parties have executed this Amendment Agreement as of the date first set forth above. United Gaming, Inc. By: ___________________________ Name: Title: Kirkland Investment Corporation By: ___________________________ Gaming Systems Advisors, L.P. By: GSA, Inc., its general partner By: __________________________ Kirkland-Ft. Worth Investment Partners, L.P. By: Kirkland Investment Corporation, its general partner By: _________________________ ____________________________ Alfred H. Wilms Exhibit 4.6 AGREEMENT AGREEMENT dated as of March 20, 1995 by and between Alliance Gaming Corporation, a Nevada corporation (the "Company"), and Joel Kirschbaum, an individual (the "Executive"). R E C I T A L S : A. The Company considers it important and in its best interest and the best interest of its stockholders to foster the retention and engagement of key senior personnel, including in respect of service on the Company's Board of Directors (the "Board"), and the Company desires to retain the services of the Executive in such capacity, on the terms and subject to the conditions provided in this Agreement. B. The Executive desires to accept such engagement by the Company and to render services to the Company, on the terms and subject to the conditions provided in this Agreement. A G R E E M E N T : The parties hereto agree as follows: 1. Engagement. The Company hereby agrees to retain the services of the Executive, and the Executive agrees to be retained by the Company, to render services to the Company for the period, at the rate of compensation and upon the other terms and conditions set forth in this Agreement. 2. Term. The term of the Executive's engagement under this Agreement (the "Term") shall commence on the date hereof and shall continue through and including July 14, 1997, unless earlier terminated specifically as provided in this Agreement (the date of any termination of this Agreement or the expiration of the Term, as provided herein, the "Termination Date"). 3. Position and Duties. (a) Position. Subject to the remainder of this Section 3(a), the Executive shall serve as a member of the Board and as a senior consultant to the Company. During his engagement hereunder, the Executive shall report directly to the Board. The Executive shall, if so elected by the stockholders of the Company (and subject to existing stockholders' agreements of the Company), serve on the Board from time to time, for successive periods of such election(s) and for such period as shall be agreed to by the Executive, subject, in each case, to the continued election thereto by the Company's stockholders. It is contemplated that, to the extent requested by the Company, the Executive shall devote a substantial portion of his business time to the fulfillment of his duties hereunder, as contemplated by Section 3(b) below. In the event that the Executive shall fail to be elected to the Board or shall otherwise resign from or be removed from the Board during the Term, as a result of action by the stockholders of the Company (at a regular or special meeting thereof), including their failure to so elect the Executive, or otherwise, then, notwithstanding any such event (but subject to the remainder of this Agreement, including without limitation, Sections 7 and 8 below), (i) the Executive shall nonetheless continue to render the services to the Company otherwise provided in this Agreement to be rendered by the Executive, (ii) the Company shall otherwise continue to furnish the compensation and other remunerations to the Executive otherwise provided in this Agreement to be furnished, and (iii) the parties shall, if appropriate, reasonably agree to an amendment or modification to this Agreement appropriately to reflect such state of affairs. (b) Duties. During the Term, the Executive shall, subject to supervision by the Board, have the authority and power to perform such duties as are consistent with those of a member of the Board and a senior consultant to the Company. During the Term, the Executive shall perform the duties contemplated by such title and such other duties, consistent with his experience and abilities, as may be properly assigned to the Executive by the Board. The Executive shall use his best efforts to further the interests of the Company and at all times conduct himself in a manner which reflects credit upon the Company. It is contemplated that the Executive shall render services to the Company from an office established by the Executive on behalf of the Company or the cost of which is paid for or reimbursed by the Company (and reasonably approved by the Company) in New York, New York; however, the parties acknowledge and agree that the Executive may be required to travel extensively during the Term in fulfilling his duties hereunder (including numerous trips to Las Vegas, Nevada). 4. Compensation and Reimbursement of Expenses. (a) Compensation. For purposes of this Agreement, each consecutive 12-month period during the Term ending on each March 31st during the Term shall be referred to as an "Engagement Year." For services rendered by the Executive under this Agreement, the Company shall pay to the Executive as compensation during each Engagement Year during the Term, a base amount of compensation (the "Base Compensation") at an annual rate of $250,000 per year (prorated for any partial Engagement Years). Increases in the Base Salary shall be considered by the Board no less frequently than annually, commencing at the end of the first Employment Year hereunder and will be based upon criteria applicable to other senior executives of the Company; it being understood, however, that the award of any such increase shall be in the sole discretion of the Board (with the Executive not voting on such determination). The Base Compensation shall be payable in equal bi-weekly installments, commencing with the end of the pay period which next follows the commencement of the Term, and shall be subject to customary payroll deductions (i.e., for social security, federal, state and local taxes and other amounts customarily withheld from the compensation of members of the Board and/or employees of the Company). (b) Bonus. The Executive shall be eligible to receive from the Company, within 120 days of the end of each Engagement Year, a cash bonus in respect of such Engagement Year (the "Annual Bonus"), which shall be based upon all relevant criteria, including without limitation, (i) the performance of the Company and/or the operations of the Company for which the Executive is primarily or exclusively responsible, during such Engagement Year, based upon customary financial and other criteria, such as but not limited to, return on the Company's consolidated stockholders' equity and total capital (i.e., stockholders' equity and total debt), performance of the Company's Common Stock, par value $.10 per share (the "Common Stock"), and the Company's and such operations' absolute and relative amounts of consolidated cash flow, operating income and net income, and the comparison of such results with the Company's and such operations' budgets and projections therefor and (ii) the performance of the Executive in rendering services to the Company; it being understood that the Company shall not be obligated to pay to the Executive any Annual Bonus and the payment, if any, and amount thereof shall be solely within the discretion of the Board (with the Executive not voting on such determination). It is also contemplated that the Compensation Committee of the Board shall formulate specific criteria and performance targets for the determination of the Annual Bonus, if any. The Annual Bonus shall be subject to customary payroll deductions (i.e., for social security, federal, state and local taxes and other amounts customarily withheld from the compensation of members of the Board and/or employees of the Company). (c) Options. The Executive shall be eligible to receive from time to time employee and/or directors' stock options in accordance with the customary practices of the Company; it being understood that it is the contemplation of the Company and the Executive that the Executive shall receive employee and/or directors' stock options in amounts and on terms and conditions that are consistent with those granted to other senior executives and board members of the Company from time to time. (d) Reimbursement of Expenses. Consistent with established policies of the Company as in effect from time to time, the Company shall pay to or reimburse the Executive for all reasonable and actual out-of-pocket expenses, including without limitation, travel, hotel and similar expenses, incurred by the Executive from time to time in performing his obligations under this Agreement. 5. Benefits. (a) Benefit Plans. The payments provided in Section 4 above are in addition to any benefits to which the Executive may be, or may become, entitled under any of the Company's benefit plans or programs for which members of the Board or senior executive officers of the Company are or shall become eligible. In addition, the Executive shall be eligible to receive during the Term benefits and emoluments which are consistent with the benefits and emoluments provided to all members of the Board or senior executive officers of the Company. (b) Vacation. The Executive shall be entitled to reasonable periods of vacation and sick leave consistent with his role as a member of the Board or senior executive officers of the Company. (c) No Reduction. There shall be no material reduc- tion or diminution of the benefits provided in this Section 5 during the Term unless (i) the Executive shall have provided his consent to such reduction or diminution, (ii) an equitable arrangement (embodied in an ongoing substitute or alternative benefit or plan) has been made with respect to such benefit or plan or (iii) such reduction is part of a program of across-the- board benefit reductions similarly affecting the senior executive officers of the Company or members of the Board. 6. Benefits Payable Upon Disability. (a) Disability Benefits. During any period of Disability (as defined below) occurring during the Term, the Company shall continue to pay to the Executive the Base Compensation as provided herein and continue to extend to him the benefits described in Sections 4 and 5 hereof; it being understood that if disability benefits are provided under any disability insurance or similar policy maintained by the Company (or maintained by the Executive, the cost of which is reimbursed or paid by the Company), payments under such policy shall be considered as payments by the Company and shall offset any Base Compensation payable to the Executive under this Agreement. As used in this Agreement, "Disability" shall mean the inability (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination) of the Executive to render services to the Company, as provided herein, as a result of physical or mental infirmity or disability. (b) Services During Disability. During the Term, notwithstanding any Disability, the Executive shall, to the extent that he is physically and mentally able to do so, furnish information, assistance and services to the Company, and, upon the reasonable request in writing on behalf of the Board (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination), from time to time, he shall make himself available to the Company to undertake reasonable assignments and fulfill his duties hereunder, consistent with his current position with the Company and his physical and mental health. 7. Termination. This Agreement shall be terminated in accordance with the provisions of this Section 7, in which case the provision of Section 8 below shall be applicable. (a) Upon Expiration of the Term. This Agreement shall terminate in accordance with Section 2 above. (b) By the Company. In addition to the provisions of Section 7(a) above, this Agreement is subject to earlier termination by the Company, as follows: (i) Death of Executive. If the Executive dies, this Agreement shall terminate, the Termination Date being the date of the Executive's death. (ii) Disability. If the Executive has been absent from service to the Company, as required in this Agreement, for a period of 90 days or more as a result of Disability during any consecutive 180-day period during the Term, the Company shall have the right to terminate this Agreement (as determined by a majority of the remaining members of the Board (other than the Executive) voting for such determination), the Termination Date being 15 days after notice thereof is provided to the Executive. (iii) Termination by the Company for Cause. The Company shall have the right to terminate the Executive's engagement under this Agreement for Cause (as defined below), the Termination Date to be immediately upon notice thereof from the Company to the Executive. For purposes of this Agreement, "Cause" shall mean the Executive's (A) conviction of any misdemeanor involving moral turpitude or any felony, (B) misappropriation or embezzlement from the Company, (C) denial or rejection of any gaming license or permit issued by the State of Nevada (or any applicable agency or political subdivision) or any other jurisdiction in or from which the denial of a gaming license or permit could materially adversely affect the Company's business, or commission of any act which could reasonably be expected to result in such denial or rejection, (D) any breach during the Term of Sections 10 or 11 below or (E) the persistent refusal, after written notice, to undertake the Executive's duties or obligations hereunder. (iv) No Termination by the Company Without Cause. The Company shall not have the right to terminate the Executive's engagement hereunder for any reason not specifically set forth in clauses (i), (ii) or (iii) of this Section 7(b). (c) By The Executive. In addition to the provisions of Section 7(a) above, this Agreement is subject to earlier termination by the Executive, as follows: (i) Termination by the Executive for Just Cause. The Executive shall have the right to terminate his employment under this Agreement upon the occurrence of a material breach of this Agreement by the Company, which the parties agree shall be limited to (A) a reduction by the Company in the Base Salary below the minimum Base Salary specified in Section 4(a) above or the failure of the Company to pay to the Executive any portion of the Base Salary within 30 days of the time that any such amount is due and payable hereunder or (B) the assignment to the Executive of duties and responsibilities that are materially inconsistent with those of a member of the Board and senior consultant to the Company, in each case, in the cases of clauses (A) and (B), which has not been cured by the Company after 30 days' written notice from the Executive to the Company; provided, that in the case of three such material breaches (and notice thereof), the Executive shall thereafter have the right to terminate this Agreement immediately upon notice to the Company in the case of a subsequent material breach. In the event that the Executive elects to terminate this Agreement as a result of the events described in clauses (A) or (B) above, the Executive shall exercise such right within 10 days after the lapsing of the 30-day period referred to above in this clause (i) (assuming that the Company shall have failed to cure such material breach within such period), or, as applicable, within 10 days of any additional material breach giving rise to an immediate right of termination; thereafter, such right to terminate shall no longer be exercisable. The Termination Date shall be a date specified by the Executive, which shall be between 30 and 45 days after the date of the applicable notice giving rise to a termination, by the Executive to the Company. (ii) Termination by the Executive Without Just Cause. The Executive shall have the right to terminate the Executive's employment under this Agreement for any other reason not set forth in clause (i) of this Section 7(c), the Termination Date being 15 days after notice thereof from the Executive to the Company. 8. Effect of Termination. The following provisions shall be applicable in the event of the termination of this Agreement as provided in Section 7 above. (a) Expiration of Term. Upon termination of this Agreement as provided in Section 7(a) above, this Agreement shall terminate and be of no further force and effect, except as provided in Sections 11, 12 and 13(b) below, which shall survive such termination, and no additional payments, liabilities or obligations shall be due and owing from either party to the other. (b) Death. Upon the termination of this Agreement as provided in Section 7(b)(i) above, the Company shall pay to the Executive's estate (i) an amount equal to the sum of (A) the compensation otherwise payable to the Executive hereunder for the six-month period following the Termination Date, payable within 180 days after the Termination Date (but not earlier than any recovery of insurance proceeds in respect thereof, as provided below), and (B) any Annual Bonus for the Employment Year in which the Termination Date occurs that the Board determines would otherwise have been payable had the Executive not died, which Annual Bonus shall be reduced by prorating it through the Termination Date, payable, in the case of this clause (B), at the time such payment would otherwise be due and payable hereunder, and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payment would otherwise be due and payable thereunder, and neither party shall have any further liability or obligation to the other, except as provided in Section 12 below, which shall survive the Termination Date. Notwithstanding the provisions of clause (i) above, the Company shall have the right to provide for either or both of the payments described therein by purchasing life insurance on the Executive's life itself or reimbursing to the Executive the cost of the premiums in respect of such life insurance which shall be purchased directly by the Executive; in the event that either or both of such insurance coverages is obtained, such payments shall be made solely from such insurance coverages and not from the Company and shall constitute the Executive's estate's or heirs' sole remedy in respect of such payments. In the event that the Executive shall own any employee or directors' stock options as of the Termination Date, an amount equal to 50% of any such options which are unvested as of the Termination Date shall vest and become exercisable by virtue of any termination under Section 7(b)(i) and, notwithstanding the provisions of the Company's Stock Option Plan pursuant to which such options may have been granted, the Executive's estate shall have a period of two years from the Termination Date to exercise such options. (c) Disability. Upon the termination of this Agreement as provided in Section 7(b)(ii) above, the Company shall pay to the Executive (i) an amount equal to the compensation otherwise payable to the Executive hereunder for the six-month period following the Termination Date, and (ii) any Annual Bonus for the Employment Year in which the Termination Date occurs that the Board determines would otherwise have been payable had the Executive not become Disabled, which Annual Bonus shall be reduced by prorating it through the Termination Date, in each case, payable at the times such payments would otherwise be due and payable hereunder; provided, in the case of clauses (i) and (ii) above, that the Executive continues to comply with his covenants in Sections 10 (during the shorter of (A) 12 months from the Termination Date and (B) the remainder of the Term had such termination under Section 7(b)(ii) above not occurred) and 11 below, as provided therein, and (iii) expense reimbursement amounts accrued through the Termination Date, at the time such payment would otherwise be due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein, with the provisions of such Section 10 surviving for the shorter of (A) 12 months from the Termination Date and (B) the remainder of the Term had such termination not occurred. Notwithstanding the provisions of clauses (i) and (ii) above, the Company shall have the right to provide for either or both of such payments by either purchasing disability insurance itself in respect of the Executive or reimbursing to the Executive the cost of the premiums in respect of such disability insurance which shall be purchased directly by the Executive; in the event that either or both of such insurance coverages is obtained, such payments shall be made solely from such insurance coverages and not from the Company and shall constitute the Executive's sole remedy in respect of such payments. In the event that the Executive shall own any employee or directors' stock options as of the Termination Date, an amount equal to 50% of any such options which are unvested as of the Termination Date shall vest and become exercisable by virtue of any termination under Section 7(b)(ii) and, notwithstanding the provisions of the Company's Stock Option Plan pursuant to which such options may have been granted, the Executive shall have a period of two years from the Termination Date to exercise such options. (d) Termination by the Company For Cause. Upon the termination of this Agreement as provided in Section 7(b)(iii) above, the Company shall pay to the Executive (i) the accrued and unpaid Base Salary, if any, through the Termination Date and (ii) expense reimbursement amounts accrued through the Termination Date, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein, with the provisions of such Section 10 surviving for the shorter of (A) 12 months from the Termination Date and (B) the remainder of the Term had such termination not occurred. No unvested employee or directors' stock options shall vest or become exercisable by virtue of any termination under Section 7(b)(iii) and any and all rights thereto then possessed by the Executive shall be terminated and of no further force and effect. (e) Termination by the Executive for Just Cause. Upon termination of this Agreement as provided in Section 7(c)(i) above, the Company shall pay to the Executive (i) the Base Salary which would otherwise be payable hereunder in respect of the remainder of the Term; provided, that the Executive continues to comply with the covenants in Section 11 below, as provided therein, and (ii) expense reimbursement amounts accrued through the Termination Date, in each case, in the case of clause (i) and (ii) above, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein; it being understood that the covenants in Section 10 below shall be of no further force and effect following the Termination Date. All unvested employee and directors' stock options, if any, shall vest and become exercisable (in accordance with the Plan) by virtue of any termination under Section 7(c)(i). (f) Termination by the Executive Without Just Cause. Upon the termination of this Agreement as provided in Section 7(c)(ii) above, the Company shall pay to the Executive (i) the accrued and unpaid Base Salary, if any, through the Termination Date, (ii) expense reimbursement amounts accrued through the Termination Date and (iii) Base Salary at a rate of 50% of the Base Salary otherwise in effect on the Termination Date per calendar year during the period that the provisions of Section 10 shall be in effect, as provided below, at the time such payments are otherwise due and payable thereunder, and neither party shall have any further liability or obligation to the other, except that the provisions of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date, to the extent provided therein, with the provisions of such Section 10 surviving for the shorter of (A) 12 months from the Termination Date and (B) the remainder of the Term had such termination not occurred. During such period that the provisions of Section 10 are in effect, the Executive shall continue to be eligible to receive the benefits provided in Section 5 above. No unvested employee or directors' options shall vest or become exercisable by virtue of any termination under Section 7(c)(ii) above and any and all rights thereto to such unvested options then possessed by the Executive shall be terminated and of no further force and effect. 9. Federal Income Tax and Other Withholdings. The Company shall withhold from any benefits payable pursuant to this Agreement such federal, state, city or other taxes and other amounts as may be required to be withheld pursuant to any applicable law or governmental regulations or ruling and shall timely pay over to the appropriate governmental or other authorities the amount withheld, together with any additional amounts required to be paid by the Company in respect thereof. 10. Non-Competition. The Executive covenants and agrees that he will not at any time during the Term and, to the extent provided for in the applicable subsections of Section 8 above, up to a period of 12 months thereafter as provided in such subsections in Section 8 above, directly or indirectly, whether as employee, owner, partner, agent, director, officer, consultant, stockholder (except as the beneficial owner of not more than 5% of the outstanding shares of a corporation, any of the capital stock of which is listed on any national or regional securities exchange or quoted in the daily listing of over-the- counter market securities and, in each case, in which the Executive does not undertake any management or operational or advisory role) or in any other capacity, for his own account or for the benefit of any person or entity, establish, engage or be connected with or in any manner any person or entity which is at the time engaged in a business which is on the date hereof or on any applicable Termination Date in competition with the business of the Company (or any of its subsidiaries or affiliates). 11. Confidential Information and Non-Disparagement. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company and its stockholders all secret, confidential or proprietary information, knowledge or data relating to the Company (and any of its subsidiaries or affiliates), which shall have been obtained by the Executive during or by reason of his engagement by the Company, in accordance with the principles of NRS 600A.010 et seq. (the so- called Uniform Trade Secrets Act). During and after the end of the Term, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to any person or entity other than the Company (or such applicable subsidiaries or affiliates) and those designated by them which would result in any misappropriation under and as defined in such Act, except that, during his engagement hereunder, in furtherance of the business and for the benefit of the Company, the Executive may provide confidential information as appropriate to attorneys, accountants, financial institutions or other persons or entities engaged in business with the Company from time to time. (b) Each of the parties agrees that from and after any termination or expiration of the Term, neither shall, publicly or privately, disparage or make any statements (written or oral) that could impugn the integrity, acumen (business or otherwise), ethics or business practices, of the other, except, in each case, to the extent (but solely to the extent) necessary in any judicial or arbitral action to enforce the provisions of this Agreement. 12. Indemnification and Liability Insurance. (a) Indemnification. The Company shall indemnify and hold the Executive harmless, to the fullest extent legally permitted by Section 78.751 of the Nevada Corporation Code (as amended and in effect from time to time) against any and all expenses, liabilities and losses (including without limitation, reasonable attorneys' fees and disbursements of counsel reasonably satisfactory to the Company), incurred or suffered by him in connection with his service as a member of the Board during the Term, in each case, except to the extent of the Executive's negligence or willful misconduct. (b) Insurance. The Company shall maintain, for the benefit of the Executive, a directors' and officers' liability insurance policy insuring the Executive's service as a member of the Board during the Term in accordance with its customary practices as in effect from time to time during the Term. The parties acknowledge and agree that such policy may cover other directors and officers of the Company in addition to the Executive. 13. General Provisions. (a) Assignment. Neither this Agreement nor any right or interest hereunder shall be assignable by the Executive or the Company without the prior written consent of the other; provided, that (i) in the event of the Executive's Death during the Term, the Executive's estate and his heir, executors, administrators, legatees and distributees shall have the rights and obligations set forth herein, as provided herein, and (ii) nothing contained in this Agreement shall limit or restrict the Company's ability to merge or consolidate or effect any similar transaction with any other entity, irrespective of whether the Company is the surviving entity; provided, that such surviving entity shall continue to be bound by the provisions hereof binding upon the Company. (b) Material Inducements. The provisions of Sections 10 and 11 above are material inducements to the Company entering into and performing this Agreement; accordingly, in the event of any breach of such provisions by the Executive, in addition to all other remedies at law or in equity possessed by the Company, the Company shall have the right to terminate and not pay any amounts payable to the Executive hereunder. (c) Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, the Executive and the Company and their respective heirs, executors, administrators, legatees and distributees, successors and permitted assigns. (d) Amendment of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (e) Severability. If, for any reason, any provision of this Agreement is determined to be invalid or unenforceable, such invalidity or lack of enforceability shall not affect any other provision of this Agreement not so determined to be invalid or unenforceable, and each such other provision shall, to the full extent consistent with applicable law, continue in full force and effect, irrespective of such invalid or unenforceable provision. (f) Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto respecting the Executive's engagement by the Company, and super- sedes any prior agreement between the Company and the Executive relating to the retention of the Executive as a senior consultant to the Company. Nothing contained in this Agreement shall affect in any manner whatsoever any of the agreements or instruments executed on or prior to the date hereof among the Executive or any of his affiliates on the one hand (including without limitation, Kirkland-Ft. Worth Investment Partners, L.P., Kirkland Investment Corporation, Gaming Systems Advisors, L.P. or GSA, Inc.), and the Company or any other party, on the other hand. (g) Notices. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) when delivered, if sent by telecopy or by hand, (ii) one business day after sending, if sent by reputable overnight courier service, such as Federal Express, or (iii) three business days after being mailed, if sent by United States certified or registered mail, return receipt requested, postage prepaid. Notices shall be sent by one of the methods described above; provided, that any notice sent by telecopy shall also be sent by any other method permitted above. Notices shall be sent, if to the Executive, to 25 Grace Court, Brooklyn, New York 11201; telecopy no. (718) 596-3038; and if to the Company, to Alliance Gaming Corporation, 4380 Boulder Highway, Las Vegas, Nevada 89121; telecopy no. (702) 454-0478, directed to the attention of the Board with copies to the Chairman and the Secretary of the Company; or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (h) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. (i) Arbitration. In the event of a dispute or con- troversy arising under or in connection with this Agreement (except, at the option of the Company, Sections 10 and 11 above), the Executive shall give the Company or the Company shall give the Executive, as applicable, a written demand for relief. If the dispute or controversy is not resolved, it shall be settled exclusively by arbitration, conducted in Las Vegas, Nevada, in accordance with the rules of the American Arbitration Association (or if such association does not then conduct business in such city, another arbitral panel reasonably satisfactory to each party) then in effect. Judgment shall be entered on the arbitrator's award in any court having jurisdiction over the parties hereto. (j) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. (k) Headings. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. (l) Governing Law. This Agreement has been executed and delivered in the State of Nevada, and its validity, inter- pretation, performance, and enforcement shall be governed by the laws of such State, without regard to principles of conflicts of laws. [The remainder of this page is left blank.] IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has signed this Agreement, all as of the date first set forth above. Alliance Gaming Corporation By: __________________________ Name: Title: _________________________ Joel Kirschbaum Exhibit 4.7 ALLIANCE GAMING CORPORATION 4380 BOULDER HIGHWAY LAS VEGAS, NEVADA 89121 March 20, 1995 Mr. Steven Greathouse c/o Alliance Gaming Corporation 4380 Boulder Highway Las Vegas, Nevada 89121 Dear Mr. Greathouse: Alliance Gaming Corporation (formerly United Gaming, Inc.), a Nevada corporation (the "Company"), has advised you that it intends to file a Registration Statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement will cover the offer and sale of outstanding restricted shares of Common Stock of the Company, $.10 par value (the "Common Stock") owned by you (in the capacity as owner of such shares of Common Stock, the "Selling Stockholder"). In connection therewith, this letter (the "Agreement") sets forth the agreement and understanding of the Company and the Selling Stockholder. 1. Registration Statement. The Registration Statement will cover the 250,000 shares of restricted Common Stock held by the Selling Stockholder (the "Shares"). Subject to Section 3 hereof, the Company will cause the Registration Statement to be declared and to remain effective until the latter to occur of (i) the first anniversary of the date the Selling Stockholder ceases to be an employee of the Company and (ii) the date on which the Selling Shareholder may sell, freely and without restriction, his Shares unregistered in compliance with federal securities laws. 2. Plan of Distribution; Notification of Sales. The Selling Stockholder has carefully reviewed the information to be included under the caption "Plan of Distribution" in the Prospectus (the "Prospectus") included in the Registration Statement and agrees that (i) it accurately sets forth the contemplated manner in which the Shares will be distributed and (ii) the Selling Stockholder will refrain from any transactions relating to the offer or sale of all or any of the Shares not described therein unless prior written advice of such fact has been provided to the Company and an appropriate supplement to the Prospectus or Post-Effective Amendment, if required, has been filed with the SEC, the appropriate state regulatory authorities and, if required, NASDAQ (or such other exchange or listing or quotation service on which the Common Stock is then traded, listed or quoted). As required by the Securities Act and the rules and regulations thereunder, the Selling Stockholder will take all action necessary to cause a current Prospectus to be delivered in connection with any sale of Shares under the Registration Statement. In order to ensure the continued accuracy of the information under the caption "Plan of Distribution" in the Prospectus, the Selling Stockholder agrees to notify the Company in writing of any sales made pursuant to the Registration Statement, including the selling price, type of transaction and the name of and compensation received by any participating broker, dealer or underwriter. 3. Termination or Suspension of Registration Statement. The Selling Stockholder recognizes and acknowledges that, from time to time, events will occur which require that the Prospectus be updated or otherwise amended to ensure that it not misstate a material fact or omit to state a material fact necessary to make the statements contained therein not misleading. In addition to developments in the Company's business, such an updating may also be required on an annual basis. In order to ensure that no offers or sales of Shares are made under the Registration Statement at such times, the Selling Stockholder agrees that, upon delivery of notice by the Company to the Selling Stockholder that the effectiveness of the Registration Statement has been terminated or suspended, the Selling Stockholder shall immediately discontinue any further offers or sales of Common Stock under the Registration Statement until notified otherwise in writing by the Company that offers and sales under the Registration Statement may be resumed. If necessary, the Company will also provide the Selling Stockholder with an updated Prospectus to be delivered in connection with such offers and sales. 4. 1934 Act. The Selling Stockholder acknowledges that he will be subject to the applicable provisions of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder, including without limitation, Rules 10b-6 and 10b-7, which generally regulate the circumstances under and means by which an individual participating in the distribution of securities may purchase, solicit or induce the solicitation of purchase of such securities while such distribution is taking place, and agree to comply therewith. 5. Legend. The Company may place a legend on the stock certificate or certificates representing shares of Common Stock or other securities held by the Selling Stockholder reflecting the foregoing restrictions and may issue a stop-transfer order to the Company's transfer agent in order to prevent any transfer in violation of such restrictions. 6. State Securities Law. The Company will use commercially reasonable efforts and will cooperate with the Selling Stockholder to qualify the Common Stock for offering and sale under the laws of such jurisdictions as the Selling Stockholder designates and will use such efforts to comply with such laws so as to permit the sales of Common Stock in each such jurisdiction; provided, however, that the Company will not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise subject. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Common Stock has been qualified as above provided. The Company will also supply the Selling Stockholder with such information as is necessary for the determination of the legality of the Common Stock for investment under the laws of such jurisdiction as the Selling Stockholder may request. 7. Representations and Warranties. The Selling Stockholder hereby represents and warrants that he has full power and authority to enter into this Agreement, and that, upon request, the Selling Stockholder will execute any additional documents necessary or desirable in connection with the enforcement hereof. All authority herein conferred or agreed to be conferred shall survive the death, incapacity or dissolution of the Selling Stockholder and any obligations of the Selling Stockholder shall be binding upon the heirs, personal representatives, successors and assigns of the Selling Stockholder. 8. Costs. The Company will pay and bear all costs and expenses incident to the preparation, printing and filing of the Registration Statement, as originally filed and as amended, and the Prospectus and any supplements thereto, and the costs of furnishing copies thereof to the Selling Stockholder in such quantities as the Selling Stockholder may reasonably request from time to time. The Selling Stockholder will pay and bear all costs and expenses incident to the delivery of the shares of Common Stock to be sold by him, including any transfer taxes payable upon the sale of such shares to the purchaser thereof and any commissions or discounts payable to any underwriters, dealers or agents with respect to any particular offer of shares of Common Stock. 9. Indemnification. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the full extent permitted by applicable law, the Selling Stockholder from and against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in the Registration Statement or any amendments thereto, the Prospectus or any supplement to the Prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by the Selling Stockholder expressly for use therein; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Prospectus if (i) it is determined that it was the responsibility of the Selling Stockholder to provide the person asserting such loss, claim, damage, liability or expense with a current copy of the Prospectus and the Selling Stockholder failed to deliver or cause to be delivered a copy of the Prospectus to such person after the Company had furnished the Selling Stockholder with a sufficient number of copies of the same and (ii) the Prospectus corrected in a timely manner such untrue statement or omission. The foregoing indemnity shall be in addition to any liability the Company may otherwise have, shall remain in full force and effect regardless of any investigation made by or on behalf of the Selling Stockholder. (b) Indemnification by the Selling Stockholder. The Selling Stockholder agrees to indemnify and hold harmless, to the full extent permitted by law, the Company, its directors, officers, employees and agents and each person who controls the Company (within the meaning of the Securities Act and the Exchange Act) from and against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by the Selling Stockholder to the Company specifically for inclusion in such Registration Statement or Prospectus and has not been corrected in a subsequent writing prior to or concurrently with the sale of the Shares to the person asserting such loss, claim, damage, liability or expense. For all purposes contemplated hereby, the Company acknowledges that the name of the Selling Stockholder and the number of Shares to be registered constitute the only information furnished in writing by the Selling Stockholder to the Company and the Selling Stockholder confirms that such information is correct. This indemnity shall be in addition to any liability the Selling Stockholder may otherwise have, shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such officer, director or controlling person and shall survive termination of this Agreement and the transfer of Shares by the Selling Stockholder. (c) Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is prejudiced by reasons of such delay or failure; provided, further, however, that any person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed in writing to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such person, or (c) in the reasonable judgment of any such person, based upon advice of its counsel, a conflict of interest may exist between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person). If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld); provided, that an indemnifying party shall not be required to consent to any settlement involving the imposition of equitable remedies or involving the imposition of any material obligations on such indemnifying party other than financial obligations for which such indemnified party will be indemnified hereunder. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Whenever the indemnified party or the indemnifying party received a firm offer to settle a claim for which indemnification is sought hereunder, it shall promptly notify the other of such offer. If the indemnifying party refuses to accept such offer within 20 business days after receipt of such offer (or of notice thereof), such claim shall continue to be contested and, if such claim is within the scope of the indemnifying party's indemnity contained herein, the indemnified party shall be indemnified pursuant to the terms hereof. If the indemnifying party notifies the indemnified party in writing that the indemnifying party desires to accept such offer, but the indemnified party refuses to accept such offer within 20 business days after receipt of such notice, the indemnified party may continue to contest such claim and, in such event, the total maximum liability of the indemnifying party to indemnify or otherwise reimburse the indemnified party hereunder with respect to such claim shall be limited to and shall not exceed the amount of such offer, plus reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees and disbursements) to the date of notice that the indemnifying party desires to accept such offer; provided, that this sentence shall not apply to any settlement of any claim involving the imposition of equitable remedies or to any settlement imposing any material obligations on such indemnified party other than financial obligations for which such indemnified party will be indemnified hereunder. (d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by the preceding paragraphs (a) and (b), then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as it appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as an other relevant equitable considerations. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 10. Counterparts. This Agreement may be executed in one or more counterparts and when a counterpart has been executed by each party, all such counterparts taken together shall constitute one and the same agreement. 11. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada, without regard to conflict of laws. If the foregoing accurately sets forth our understanding, please so indicate by signing the original of this letter and returning it to the Company. Very truly yours, ALLIANCE GAMING CORPORATION By: __________________________ John W. Alderfer Senior Vice President, Treasurer and Chief Financial Officer Accepted and agreed as of the 20th day of March, 1995: ______________________________ Steven Greathouse Exhibit 5.1 Law Offices Schreck, Jones, Bernhard, Woloson & Godfrey Chartered 600 East Charleston Boulevard Las Vegas, Nevada 89104 Telephone: (702) 382-2101 Telecopier: (702) 382-8135 Frank A. Schreck Sean T. McGowan Leslie Terry Jones Dawn M. Cica Peter C. Bernhard F. Edward Mulholland II Kenneth A. Woloson Todd L. Bice John A. Godfrey James J. Pisanelli David D. Johnson -- James R. Chamberlain Of Counsel Michelle L. Morgando Howard W. Cannon Lance C. Earl Thomas R. Canham March 24, 1995 Alliance Gaming Corporation 4380 Boulder Highway Las Vegas, Nevada 89121 Re: Alliance Gaming Corporation Common Stock, Par Value $.10 Dear Ladies and Gentlemen: This opinion is rendered in connection with the filing by Alliance Gaming Corporation, a Nevada corporation (the "Company"), of a registration statement on Form S-3 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission on March 24, 1995, and any amendments thereto, under the Securities Act of 1933, as amended, with respect to the sale of up to 250,000 shares of the Company's Common Stock, $0.10 par value (the "Shares"), being offered by a certain stockholder of the Company (the "Selling Stockholder"). We have acted as counsel to the Company in connection with the issuance of the Shares. In our capacity as such counsel, we are familiar with the proceedings taken and to be taken by the Company in connection with the Shares. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals (or copies certified or otherwise identified to our satisfaction as being true reproductions of originals) of such documents, corporate records and other instruments, and have obtained from officers of the Company and agents thereof such certificates and other representations and assurances, as we have deemed necessary and appropriate for purposes of this opinion. Without limiting the generality of the foregoing, in rendering this opinion, we have, with your permission, assumed without independent verification (i) the genuineness of all signatures, (ii) each of the parties thereto has duly and validly executed and delivered each instrument, document, and agreement to which such party is a signatory, and such party's obligations set forth therein are its legal, valid, and binding obligations, enforceable in accordance with their respective terms, (iii) that each natural person executing any such instrument, document, or agreement is legally competent to do so, (iv) there are no oral or written modifications of or amendments to the documents, and there has been no waiver of any of the provisions of the documents, by actions or conduct of the parties or otherwise, (v) all documents submitted to us as originals are authentic, all documents submitted to us as certified or photostatic copies conform to the original document, all signatures on all documents submitted to us for examination are genuine, and all public records reviewed are accurate and complete, and (vi) the accuracy and completeness of all corporate records made available to us by the Company. We are qualified to practice law in the State of Nevada and we do not purport to be experts on, or to express any opinion herein concerning, any law other than the laws of the State of Nevada. We assume no responsibility regarding the applicability, or the effect thereon, of the laws of any other jurisdiction. We express no opinion herein concerning any federal law, including any federal securities law, or any state securities law. Based upon the foregoing, we are of the opinion that the Shares have been and, upon the effectiveness of the Registration Statement, will be duly authorized, validly issued, fully paid and nonassessable. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters" of the prospectus included therein. Yours very truly, /s/ SCHRECK, JONES, BERNHARD, WOLOSON & GODFREY Exhibit 23.2 Independent Auditors' Consent The Board of Directors and Shareholders Alliance Gaming Corporation We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG PEAT MARWICK LLP Las Vegas, Nevada March 24, 1995