SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-ll(c) or ss.240.14a-12
COLONIAL DOWNS HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
COLONIAL DOWNS HOLDINGS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-ll(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing
1) Amount previously paid: -----------------------------------
2) Form, Schedule or Registration Statement no:---------------
3) Filing Party:----------------------------------------------
4) Date Filed:------------------------------------------------
<PAGE>
COLONIAL DOWNS HOLDINGS, INC.
10515 Colonial Downs Parkway
New Kent, VA 23124
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held June 5, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Colonial Downs Holdings, Inc., (the "Company"), a Virginia
corporation, will be held on June 5, 1998 at 4:00 p.m., local time, at Colonial
Downs Racetrack, 10515 Colonial Downs Parkway, New Kent, Virginia for the
following purposes:
1. To elect two Class I directors for a term of three years and until
their successors are duly elected and qualified.
2. To consider and transact such other business as may properly come
before the Annual Meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice of Annual Meeting.
Only shareholders of record at the close of business on May 4, 1998 are
entitled to notice of and to vote at the Annual Meeting and any postponement or
adjournment thereof.
All shareholders ("Shareholders") are cordially invited to attend the
Annual Meeting in person. Any shareholder attending the Annual Meeting may vote
in person even if such shareholder previously signed and returned a proxy.
FOR THE BOARD OF DIRECTORS
Jeffrey P. Jacobs
Chief Executive Officer and
President
New Kent, Virginia
May 6, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
PROVIDED FOR THAT PURPOSE TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE
NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY, IF YOU DESIRE, REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE>
COLONIAL DOWNS HOLDINGS, INC.
10515 Colonial Downs Parkway
New Kent, VA 23124
(804) 966-7223
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 5, 1998
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
General
This Proxy Statement and the enclosed Proxy are first being furnished
to the shareholders of Colonial Downs Holdings, Inc. (the "Company") in
connection with the solicitation of proxies for use at the Company's Annual
Meeting of Shareholders ("Annual Meeting") to be held June 5, 1998 at 4:00 p.m.,
local time, at Colonial Downs Racetrack, and at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. This Proxy Statement and enclosed Proxy were first mailed to
shareholders on May 6, 1998. This solicitation is being made on behalf of the
Board of Directors of the Company. The Company's principal executive offices are
located at 10515 Colonial Downs Parkway, New Kent, Virginia 23124, telephone
number 804-996-7223.
Other than the matters listed on the attached Notice of the 1998 Annual
Meeting of Shareholders, the Board of Directors knows of no matters to be
presented for consideration at the meeting. Execution of the proxy, however,
confers on the designated proxy holders' discretionary authority to vote the
shares represented thereby in accordance with their best business judgment on
such business, if any, that may properly come before the Annual Meeting or any
adjournments thereof.
Record Date and Shares Outstanding
The Board of Directors has fixed the close of business on May 4, 1998,
as the record date ("Record Date") for the determination of shareholders of the
Company entitled to notice of, and to vote at, the Annual Meeting. As of the
record date, 5,000,000 shares of the Company's Class A Common Stock and
2,250,000 shares of the Company's Class B Common Stock (collectively, the
"Common Stock") were issued and outstanding and entitled to vote at the Annual
Meeting.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person. If you are
the beneficial owner of shares of Common Stock which are not registered in your
name, you will need appropriate documentation from the holder of record of your
shares to vote personally at the Annual Meeting.
<PAGE>
Voting and Solicitation
The presence, in person or by proxy, of shareholders entitled to cast
at least a majority of the votes which all shareholders are entitled to cast is
necessary for a quorum to be present at the Annual Meeting. If a share is
represented for any purpose at the meeting it is deemed to be present for quorum
purposes and for all other matters as well. Abstentions and shares held of
record by a broker or its nominee ("Broker Shares") that are voted on any matter
are included in determining the number of votes present or represented at the
meeting. Broker Shares that are not voted on any matter at the meeting will not
be included in determining whether a quorum is present at such meeting. With the
exception of a vote regarding (i) a merger, (ii) a sale of substantially all of
the assets of the Company, or (iii) an amendment to the Articles of
Incorporation or Bylaws of the Company, each share of the Company's Class A
Common Stock outstanding is entitled to one vote and each share of the Class B
Common Stock outstanding is entitled to five votes on each such matter. With
regard to the preceding exceptions, each share of Common Stock outstanding is
entitled to one vote per share.
Proxies given in the form enclosed, unless previously revoked, will be
voted at the Annual Meeting in accordance with the instructions contained
therein, and if no choice is specified, will be voted in favor of the proposals
set forth in the notice of meeting. Assuming a quorum is present, the
affirmative vote of the holders of a plurality of the shares of Common Stock
cast is required for the election of directors. The affirmative vote of the
holders of a majority of the votes cast at the Annual Meeting is generally
required, with certain exceptions, for the approval of any other matters which
may properly come before the Annual Meeting or any postponement or adjournment
thereof. For purposes of determining the number of votes cast, only those cast
"for" or "against" are counted. Abstentions and broker non-votes are counted
only for purposes of determining whether a quorum under Virginia law is present
at the Annual Meeting.
It is expected that the solicitation of proxies will be conducted
primarily by mail. If sufficient proxies are not returned in response to this
solicitation, supplementary solicitations may be made personally or by
telephone, telegraph, or telecopy. The cost of this solicitation will be borne
by the Company. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. The Company reserves
the right to retain an outside proxy solicitation firm to assist in the
solicitation of proxies, but at this time does not have plans to do so. Proxies
may also be solicited by certain of the Company's directors, officers and
employees, without additional compensation, personally or by telephone,
telegram, or telecopy.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Information about Nominees and Other Directors
The Company's Board of Directors presently consists of seven directors.
There are two Class I director's, two Class II directors and three Class III
directors. Each director's term is for a period of three years, staggered such
that only one class of directors is voted upon at each annual meeting. The Class
I directors' terms expire in 1998, the Class II directors' terms expire in 1999,
and the Class III directors' terms expire in 2000.
Two Class I directors will be elected at the Annual Meeting to hold
office, subject to the provisions of the Company's Bylaws, until their
respective successors are duly elected and qualified at the annual meeting of
shareholders of the Company to be held in 2001.
Unless otherwise instructed on the proxy, the shares represented by
proxies will be voted for the election as directors of all of the nominees named
below. Each of the nominees has consented to being named as a nominee in the
Proxy Statement and has agreed that, if elected, he will serve on the Board of
Directors for his three-year term and until his successor has been elected. If
any nominee becomes unavailable for any reason, the shares represented by
proxies may be voted for a substitute nominee designated by the Board of
Directors. The Company is not aware of any family relationship among any of the
directors, executive officers or nominees to become directors or executive
officers of the Company, other than Mr. Arnold Stansley, a director, is the
father of Mr. Brett Lee Stansley, Vice President of Administration.
The following table sets forth the name, age, principal occupation, and
respective service dates of each person who has been nominated to be a director
of the Company:
<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupation
- --------------- --- --------------------
<S> <C>
Stephen Peskoff 55 Mr. Peskoff has acted as a consultant to Friedman, Billings,
Ramsey & Co. for the last three years and served as President
of Underhill Investment Corp. since 1976. Mr. Peskoff was
active in the thoroughbred horse industry from 1978 to 1992
during which time he won two Eclipse Awards (1983 and 1991) and
was the breeder of the 1991 horse of the year (Black Tie
Affair). Mr. Peskoff has been a director of the Company since
March 1997.
Patrick J. McKinley 44 Mr. McKinley has served as Executive Vice President of Jacobs
Investment, Inc. for more than twenty years and is responsible
for such company's day-to-day operations. Mr. McKinley has
over twenty years' experience in restaurant operations and
real estate development and management. Mr. McKinley has been
a director of the Company since March 1997.
</TABLE>
<PAGE>
The Board of Directors recommends a vote FOR the proposed directors.
The following directors have served as directors of the Company since
March 1997 and are continuing in office for terms expiring in 1999 or 2000, as
indicated:
<TABLE>
<CAPTION>
Name of Director Age Principal Occupation
- ---------------- --- --------------------
<S> <C>
Jeffrey P. Jacobs 44 Mr. Jacobs serves as Chairman of the Board, Chief Executive
Officer and President of the Company. From 1995 to the
present, he has served as Chairman and Chief Executive Officer
of Jacobs Entertainment Ltd., a company based in Cleveland,
Ohio that has investments in other gaming companies and
ventures, including Black Hawk Gaming & Development Company,
Inc. based in Boulder, Colorado. From 1975 to present, he also
has served as President and CEO of Jacobs Investments, Inc., a
company engaged in the development, construction and operation
of residential and commercial real estate and entertainment
projects in Ohio. Mr. Jacobs also served in the Ohio House of
Representatives from 1982 until 1986. Mr. Jacobs' term as a
director of the Company expires in 2000.
Arnold W. Stansley 65 Mr. Stansley is an owner and has been an executive officer of
Raceway Park, a standardbred racetrack in Toledo, Ohio, for the
last eight years. From 1993 to 1997, he served as President of
Stansley Management Corp., Colonial Downs, L.P.'s managing
general partner prior to the reorganization of the Company in
connection with its initial public offering of stock. He also
served as President of Stansley Racing prior to the
reorganization, from 1994 to 1997. Mr. Stansley is the father
of Brett Lee Stansley. Mr. Stansley's term as a director of
the Company expires in 1999.
William J. Koslo, Jr. 38 Mr. Koslo joined CIBC Oppenheimer Corp., an investment banking
subsidiary of the Canadian Imperial Bank of Commerce, as a
director in September 1996. From 1993 to 1996, Mr. Koslo was
an associate director of the investment bank Rodman & Renshaw,
Inc. In 1992 and 1993, he was a vice president with
Creditanstalt--Bankverein, a commercial bank then affiliated
with Rodman & Renshaw, Inc. Mr. Koslo's term as a director of
the Company expires in 1999.
Robert H. Hughes 56 Mr. Hughes has served as Chief Financial Officer of Jacobs
Investments, Inc. since 1993. Mr. Hughes is a director of
Black Hawk Gaming and Development Co., Inc. Mr. Hughes was a
partner in charge of the audit department of the Cleveland
office of the accounting firm of Deloitte & Touche LLP until
his retirement in 1991. Mr. Hughes is a certified public
accountant. Mr. Hughes' term as a director of the Company
expires in 2000.
David C. Grunenwald 44 Mr. Grunenwald has served as Vice President of Development and
Leasing for Jacobs Investments, Inc. since 1988 and directs
such company's development, construction, and leasing
operations. Prior to joining Jacobs Investments, Inc., Mr.
Grunenwald worked for Weston, Inc. (1987-88) in syndication and
property management and Touche Ross & Company from 1981 to 1987
as a tax consultant. Mr. Grunenwald's term as a director
expires in 2000.
</TABLE>
<PAGE>
The executive officers, in addition to Mr. Jacobs, of the Company are
as follows:
<TABLE>
<CAPTION>
Name of Officer Age Position with the Company
- --------------- --- -------------------------
<S> <C>
Ian M. Stewart 43 Mr. Stewart has served as Chief Operating Officer since
December 1997 and Chief Financial Officer since June 1997.
Prior to that time, Mr. Stewart was CFO for Barber Martin &
Associates from March 1997 to June 1997. From October 1994 to
March 1997, Mr. Stewart served as a consultant and a temporary
CFO for several Virginia based businesses. From December 1989
to September 1994, Mr. Stewart was Vice President and CFO of
Hat Brands, Inc. Mr. Stewart is a certified public accountant.
Gil D. Short 52 Mr. Short has served as Vice President - General Manager since
March 1997. Prior to that, Mr. Short served as General Manager
for the Company. From 1991 to 1994, Mr. Short was Director of
Operations for Trinity Meadows Thoroughbred Racetrack.
Jerry M. Monahan 58 Mr. Monahan has served as Vice President - Racing Operations
since March 1997. Prior to that time, Mr. Monahan was Vice
President and General Manager of the Lexington Trots Breeder
Association. Prior to that, Mr. Monahan was Vice President and
General Manager of Buffalo Raceway.
Brett Lee Stansley 34 Mr. Stansley has served as Vice President - Administration
since March 1997. Prior to that time, Mr. Stansley served as
Vice President of Stansley Management Corporation. From
December 1987 to November 1994, Mr. Stansley was a Trading
Advisor for Merrill Lynch.
Cary L. Polk 33 Mr. Polk has served as Controller since January 1998. Prior to
that time, Mr. Polk was Manager of Accounting and Reporting
with Cadmus Communications Corporation from August 1997 to
January 1998. From June 1992 to August 1997, Mr. Polk was
first a Financial Reporting Accountant and then an Accounting
Supervisor for Ethyl Corporation. Mr. Polk is a certified
public accountant.
</TABLE>
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
AND INFORMATION ABOUT BOARD COMMITTEES
General
The Board of Directors held three meetings during the fiscal year ended
December 31, 1997. Each director attended at least 75% of all meetings of the
Board.
The Company has three standing Committees: The Audit Committee,
the Compensation Committee and the Stock Option Committee. The Audit
Committee consists of William J. Koslo, Jr., Stephen Peskoff and Robert H.
Hughes. Jeffrey P. Jacobs, Stephen Peskoff, and William J. Koslo, Jr.
are the members of the Compensation Committee. Jeffrey P. Jacobs, William
J. Koslo, Jr. and Patrick J. McKinley are members of the Stock Option
Committee. The Audit Committee reviews financial matters and the Company's
auditors' reports. The Compensation Committee reviews compensation and
benefits for the Company's executives. The Stock Option Committee administers
the grant of stock options to executive officers under the Company's 1997
Stock Option Plan. The Company does not have a nominating committee. No
meetings of the committees where held in 1997.
The Company pays director's fees to each Director who is not an
employee of the Company. During the year ending December 31, 1997, each
non-employee Director received a per meeting fee of $1,000 for each Board of
Directors meeting attended in person, and $500 for each Board of Directors
meeting attended by phone. Additionally, Directors receive $500 for each meeting
of a Committee which he attends. The compensation for attending Board of
Directors and Committee meetings are paid in the form of shares of Class A
Common Stock. The amount of shares per meeting is determined by using the
average closing price of Class A Common Stock for the two trading days preceding
the meeting, the day of the meeting, and the two trading days following the
meeting.
<PAGE>
Compensation Committee
The Company's executive officer compensation program is administered
and reviewed by the Compensation Committee of the Board of Directors (the
"Compensation Committee"). The Compensation Committee has determined that
compensation of executive officers should include a mixture of short and long
range compensation plans which attract, motivate and retain competent executive
personnel, increase executive ownership interests in the Company and encourage
increases in the Company's productivity and profitability. As such, the
Company's policy is that executive compensation should be directly and
materially related to the short-term and long-term operating performance and
objectives of the Company. To achieve these ends, executive compensation,
including base salary and stock option grants, is to a significant extent
dependent upon the Company's financial performance and the return on its Common
Stock. However, to ensure that the Company is strategically and competitively
positioned for the future, the Compensation Committee may attribute significant
weight to other factors in determining executive compensation, such as
maintaining competitiveness implementing capital improvements, expanding markets
and achieving other long-range business and operating objectives. The base
salaries for Jeffrey P. Jacobs, Ian M. Stewart, Jerry M. Monahan, Gilbert D.
Short, Brett Lee Stansley and Cary L. Polk are set pursuant to employment
agreements and currently are $120,000, $120,000, $75,000, $75,000, $75,000 and
$63,000 per year, respectively.
Stock Option Committee
Stock options are granted under the provisions of the Company's 1997
Stock Option Plan (the "Plan"). Stock options are granted to reinforce the
importance of improving shareholder value over the long-term and to encourage
and facilitate director and executive stock ownership. Under the Plan, stock
options are either incentive stock options or non-qualified stock options. Stock
options are granted at not less than 100% of the fair market value of the stock
on the date of grant to ensure that executives can only be rewarded for
appreciation in the price of the Common Stock where the Company's shareholders
are similarly benefited. The stock options which have already been issued vest
at a rate of twenty percent (20%) per year for five years. For future grants,
the Stock Option Committee will establish levels of participation for the stock
option program based upon each director's, executive officer's or other
employee's position in the Company. The number of options to be granted will be
contingent on the individual and the Company's performance, tenure and future
potential.
Audit Committee
The principal functions of the Audit Committee are to recommend
engagement of the Company's auditors, to consult with the Company's auditors
concerning the scope of the audit, to review with the auditors the results of
the examination, to review and approve any material accounting policy changes
affecting the Company's operating results, and to review the Company's financial
control procedures and personnel.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 31, 1998, by (i)
each person known to the Company to own beneficially more than five percent of
the Company's outstanding Common Stock, (ii) each director, (iii) the chief
executive officer and each of the four other most highly compensated executive
officers of the Company whose salaries and bonuses were in excess of $100,000,
and (iv) all of the executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Voting Power
Percent of Common as Percent
Stock Outstanding of Common
Shares Owned Stock
Name of Beneficial Owner Class A Class B Class A Class B All Outstanding (1)
- ------------------------ ------- ------- ------- ------- --- ----------------
<S> <C>
CD Entertainment Ltd. (2) 300,000(3) 1,974,547(4) 6.0% 72.5% 29.5% 54.8%
1231 Main Avenue
Cleveland, OH 44113
Jeffrey P. Jacobs (5) 320,000 1,974,547(4) 6.4% 72.8% 29.6% 54.9%
Arnold W. Stansley(6) 490,225.33 510,000 9.8% 18.8% 12.9% 16.4%
James M. Leadbetter(7) 216,581 225,000 4.3% 8.3% 5.7% 7.2%
110 Arco Drive
Toledo, Ohio 43607
Stephen Peskoff (8) 115,251.39 -- 2.3% -- 1.5% *
David C. Grunenwald(9) 10,306.33 -- * -- * *
Robert H. Hughes(9) 10,306.38 -- * -- * *
Patrick J. McKinley(9) 251.39 -- * -- * *
William J. Koslo, Jr.(9) 540.25 * * *
Wellington Management Co.(10) 495,000 -- 9.9% -- 6.3% 2.7%
75 State Street
Boston, MA 02109
Friedman, Billings, Ramsey and 819,898 -- 16.4% -- 10.4% 4.4%
Company(11)
1001 19th Street, N.
Arlington, VA 22209
All executive officers and
directors as a group
(12 persons)(12) 627,881.02 2,484,547 12.2% 91.6% 39.7% 69.9%
</TABLE>
* Represents less than 1%.
(1) Except for votes on (i) a merger, (ii) a sale of substantially all of
the assets of the Company, (iii) an amendment to the Articles of
Incorporation or Bylaws of the Company, in which case the voting power
of the Company's officers and directors will be equal to their total
respective percentage ownership of Common Stock outstanding, as set
forth herein.
(2) CD Entertainment Ltd. is beneficially owned by Jeffrey P. Jacobs, and
Gary L. Bryenton and Jeffrey P. Jacobs as Trustees under the
Opportunities Trust Agreement dated February 1, 1996.
<PAGE>
(3) Represents 300,000 shares of Class A Common Stock which may be acquired
upon the exercise of options issued by Messrs. Arnold W. Stansley and
James M. Leadbetter to CD Entertainment Ltd.
(4) Includes 474,547 shares of Class B Common Stock issuable upon
conversion of the Convertible Subordinated Note held by CD
Entertainment.
(5) Represents the shares owned by CD Entertainment Ltd. and options for
20,000 shares held pursuant to the Stock Option Plan.
(6) Includes 210,000 shares that are subject to an option in favor of CD
Entertainment Ltd from Mr. Arnold W. Stansley. Includes 306.33 shares
accrued but not yet issued as compensation for attending Board of
Directors meetings in 1997.
(7) Includes 90,000 shares that are subject to an option in favor of CD
Entertainment Ltd. from Mr. James M. Leadbetter.
(8) Represents 15,000 shares owned by Underhill Investment Corp., an
affiliate of Mr. Peskoff, options for 50,000 shares granted under the
Stock Option Plan, options for 25,000 shares from Mr. Arnold W.
Stansley, options for 25,000 shares from Mr. Leadbetter and 251.39
shares accrued but not yet issued as compensation for attending Board
of Directors meetings in 1997.
(9) Includes options granted to directors as well as shares accrued but not
yet issued to directors as compensation for attending Board of
Directors meetings in 1997.
(10)Based on Schedule 13G filed by Wellington Management Co., LLP to
reflect ownership of shares on December 31, 1997.
(11)Based on Schedule 13G/A filed by Friedman Billings Ramsey Group, Inc.
to reflect ownership of shares on December 31, 1997.
(12)Includes (i) all shares owned directly or indirectly, (ii) all options
held, except those to purchase shares issued to another officer or
director, and (iii) shares accrued but not yet issued as compensation
for attending Board of Directors meetings in 1997. The address of all
directors and employees is c/o Colonial Downs, 10515 Colonial Downs
Parkway, New Kent, Virginia 23124.
Executive Compensation
The following table sets forth a summary of all compensation paid or
accrued by the Company for services rendered for the last three fiscal years to
the Company's Chief Executive Officer and each executive officer whose aggregate
cash compensation in 1997 exceeded $100,000:
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Restricted Securities
Name and Principal Stock Awards Underlying All Other Compensation
Position Year Salary Bonus Options
- -------- ---- ------ ----- ------------ ---------- ----------------------
<S> <C>
Jeffrey P. Jacobs 1997 $120,000 ----- ----- 20,000 -----
Chief Executive 1996 ----- ----- ----- ----- -----
Officer 1995 ----- ----- ----- ----- -----
O.J. Peterson, III 1997 $200,000 ----- ----- 60,000 -----
President 1996 ----- ----- ----- ----- -----
1995 ----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
EMPLOYEE GRANTS OF STOCK OPTIONS IN 1997
Potential
Number of % of Total Realizable Potential
Securities Options Value at Realizable
Underlying Granted to Exercise Annual Value at
Option Employees in Prices Per Expiration Rate of Annual Rate of
Name Granted Fiscal Year Share Date 5% 10%
---- ------- ----------- ---------- ---------- ---------- --------------
<S> <C>
Jeffrey P. Jacobs 20,000 14.29% $10.45 03/21/2007 $109,489.98 $283,811.07
Brett Lee Stansley 10,000 07.14% $ 9.50 03/21/2007 $ 59,744.99 $151,405.53
Gil D. Short 10,000 07.14% $ 9.50 03/21/2007 $ 59,744.99 $151,405.53
Michael D. Salmon 10,000 07.14% $ 9.50 03/21/2007 $ 59,744.99 $151,405.53
Ian M. Stewart 10,000 07.14% $ 9.50 06/23/2007 $ 59,744.99 $151,405.53
Hugh Mellon 10,000 07.14% $ 9.50 03/21/2007* $ 59,744.99 $151,405.53
Rick Calloway 10,000 07.14% $ 9.50 03/21/2007* $ 59,744.99 $151,405.53
O. J Peterson, III 60,000 42.87% $ 9.975 03/21/2007* $301,469.93 $581,732.01
</TABLE>
* Mr. Mellon, Mr. Calloway, and Mr. Peterson left the Company before
any options vested. The Company agreed to grant Mr. Peterson 30,000 vested
options with an exercise price of $10.50 per share in 1998. Options vest 20% on
each anniversary of their grant.
<TABLE>
<CAPTION>
NON-EMPLOYEE GRANTS OF STOCK OPTIONS IN 1997
% of Total
Number of Options Potential Potential
Securities Granted to Realizable Realizable
Underlying Non-Employees Exercise Value at Value at
Option in Fiscal Prices Expiration Annual Rate of Annual Rate of
Name Granted Year Per Share Date 5% 10%
---- ------- ------------- ---------- ---- -------------- --------------
<S> <C>
David C. Grunewald 10,000 10.87% $9.50 03/21/2007 $ 59,744.99 $151,405.53
Robert H. Hughes 10,000 10.87% $9.50 03/21/2007 $ 59,744.99 $151,405.53
Jiang He 10,000 10.87% $9.50 03/21/2007 $ 59,744.99 $151,405.53
Anthony Weigard 2,000 02.17% $9.50 03/21/2007 $ 11,948.99 $ 30,281.06
Stephen Peskoff 50,000 54.38% $9.50 03/21/2007 $ 298,824.95 $757,027.65
Roger E. Stone 10,000 10.87% $9.50 03/21/2007 $ 59,744.99 $151,405.53
</TABLE>
<PAGE>
EXERCISE OF STOCK OPTIONS IN 1997
No executive or officer of the Company exercised any stock options
during 1997. With the exception of Mr. O.J. Peterson's options, no options
became vested until March 21, 1998. There are no outstanding stock
appreciation rights.
Certain Transactions
Premier Development, Inc. At the September 2, 1997 Board of Directors
meeting, the independent directors of the Board were asked to review and approve
a transaction involving Premier Development Inc. ("Premier"). Mr. Jacobs, Mr.
Hughes and Mr. Grunenwald are affiliated with Premier. Premier audits,
researches, pre-develops, and assists in the acquisition of new opportunities
for the Company. The Company's independent members of the Board of Directors
approved the entering of a two-year agreement with Premier which commenced on
October 1, 1997 and will extend through September 30, 1999 pursuant to which
Premier will receive a fee of $226,000 per year for services provided.
Norglass, Inc. The Company's subsidiary, Colonial Downs, L.P. (the
"Partnership"), is engaged in a contract dispute under the Construction
Agreement, dated February 10, 1997 (the "Construction Contract"), between the
Partnership and Norglass, Inc. ("Norglass"). James Leadbetter, a beneficial
shareholder of more than 5% of the Company, is also the beneficial shareholder
of more than 5% of Norglass' stock. Pursuant to the terms of the Construction
Contract, the Partnership is proceeding before the American Arbitration
Association ("AAA") against Norglass, the general contractor engaged to manage
the construction of Colonial Downs' racetrack. In the proceeding, the
Partnership challenges the validity of Norglass' mechanic's liens for
approximately $11.8 million (subsequently reduced to $6.5 million) and asserts a
damage claim against Norglass in an amount of not less than $4.4 million. The
Partnership is vigorously pursuing its claims against Norglass and is vigorously
defending against claims for payment by Norglass under the Construction
Contract.
Colonial Gifts & Sportswear. The Company has entered into an agreement
with Colonial Gifts & Sportswear, Inc., a Virginia corporation ("Sportswear"),
for the sale of gifts and apparel. Pursuant to the agreement, the Company
provides space at the racetrack and racing centers to Sportswear in exchange for
a royalty based on Sportswear's gross sales. Although the Company received less
than $60,000 in 1997 under the agreement, the expected value of the contract may
be in excess of $60,000 in 1998. Sportswear is wholly owned by the wife and
daughter of Mr. Arnold Stansley, a director.
Virginia Concessions, L.L.C. The Company has entered into an
agreement with Virginia Concessions, L.L.C. for Virginia Concessions,
L.L.C. to provide food service at Colonial Downs racetrack and at the Company's
racing centers. Under the Agreement, Virginia Concessions, L.L.C. pays a
portion of its gross sales to the Company as rent. For 1997, the Company
received approximately $146,500 from Virginia Concessions under the
Agreement. Such agreement is expected to be in excess of $60,000 for 1998.
Additionally, the Company entered into a management agreement effective as
of January 1, 1998, pursuant to which it will oversee the management and
administration of food and beverage service at the racetrack and racing
centers in exchange for all earnings (or losses) from food and beverage
sales. Virginia Concessions, L.L.C. is beneficially wholly owned by
Mr. Jeffrey P. Jacobs.
<PAGE>
Friedman, Billings, Ramsey and Company. Mr. Peskoff is a director of
the Company. Friedman, Billings, Ramsey and Company is the beneficial
shareholder of more than 5% of the Company's stock. Mr. Peskoff is also a
consultant for Friedman, Billings, Ramsey and Company. Friedman,
Billings, Ramsey and Company were the lead underwriters for the Company in its
initial public offering in March of 1997.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers and directors and persons who own more than ten percent of
the Company's Common Stock file reports of ownership and changes in ownership of
the Company's Common Stock and any other equity securities of the Company with
the Securities and Exchange Commission (SEC) and the NASD. Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of Forms 3, 4 and 5 furnished
to the Company, or written representations from certain reporting persons that
no such forms were required to be filed by such persons, the Company believes
that all its executive officers, directors and greater than 10% shareholders
complied with all filing requirements applicable to them during 1997 with the
exception of a late filing by Gil D. Short on Form 5.
COMPANY STOCK PRICE PERFORMANCE
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total shareholder return
for the Company's Common Stock since the Company's shares began trading on March
18, 1997 to the cumulative total returns of (i) the NASDAQ Market Index and (ii)
a Peer Group Index comprised of the following gaming and horse racing companies:
Churchill Downs, Inc., Dover Downs, Inc., and Penn National Gaming, Inc.
<PAGE>
PERFORMANCE GRAPH PLOT POINTS
03/18/97 12/31/97
-------- --------
Colonial Downs Holdings, Inc. 100.0 37.33
Nasdaq Market Index 100.0 123.71
Peer Group 100.0 113.28
Notes:
A. The initial price determination for Colonial Downs Holdings, Inc. was
determined using the closing price of Colonial Downs on March 18, 1997, its
first day of trading.
B. The index level was set to 100.0 on 3/18/97.
OTHER MATTERS
The Company has mailed a 1997 Annual Report to Shareholders and a proxy
card together with this proxy statement to all shareholders of record at the
close of business on May 4, 1998. The only business to come before the meeting
of which management is aware is set forth in this proxy statement. If any other
business does properly come before the Meeting or any postponement or
adjournment thereof, the proxy holders will vote in regard thereto according to
their discretion insofar as such proxies are not limited to the contrary.
The Board of Directors has not yet selected a firm of independent
certified public accountants to audit the books, records and accounts of
Colonial Downs Holdings, Inc., and its subsidiaries for 1998.
<PAGE>
SHAREHOLDER PROPOSALS
It is presently anticipated that the 1999 Annual Meeting of
Shareholders will be held on May 7, 1999. In order for shareholder proposals to
be included in the proxy material for that meeting, such proposals must be
received by the Secretary of the Company prior to March 8, 1999. A shareholder
must state: (a) a description of the business to be brought, (b) the name and
address of the shareholder, (c) a representation that the shareholder is
entitled to vote at the upcoming meeting, (d) the class and number of shares of
the Company's stock owned both directly and indirectly by the shareholder, and
(e) any material interest in the matter addressed in the proposal.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
SHAREHOLDERS ARE URGED TO DATE, SIGN, AND RETURN THE ACCOMPANYING FORM OF PROXY
IN THE ENCLOSED ENVELOPE.
FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE UPON WRITTEN REQUEST OF ANY
SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT
EXHIBITS), INCLUDING FINANCIAL STATEMENTS, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO THE COMPANY AT
10515 COLONIAL DOWNS PARKWAY, NEW KENT, VA 23124 ATTENTION: CORPORATE SECRETARY.
<PAGE>
COLONIAL DOWNS HOLDINGS, INC.
The undersigned hereby appoints Jeffrey P. Jacobs and Ian M. Stewart,
and each of them, the attorneys and proxies of the undersigned, with full power
of substitution, to vote on behalf of the undersigned all of the shares of
Common Stock of Colonial Downs Holdings, Inc., which the undersigned is entitled
to vote at the Annual Meeting of Shareholders thereof to be held on June 5, 1998
and at any and all postponements and adjournments thereof, upon the following
matters:
1. For the election of Stephen Peskoff and Patrick J. McKinley to serve
as Class I Directors until the Annual Meeting of Shareholders of the Company to
be held in the year 2001 and until their successors are elected and qualified:
_______For Both Nominees ______ Against Both Nominees ______ Abstain
(INSTRUCTIONS: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME BELOW):
Stephen Peskoff and Patrick J. McKinley
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting including matters
incident to its conduct.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM NO. 1.
IF NO SPECIFICATION IS MADE, SUCH PROXY WILL BE VOTED "FOR" SUCH ITEM.
Dated _____________, 1998
---------------------- Please sign exactly as name appear on
Signature stock certificate. If stock is jointly
owned, both parties must sign.
----------------------
Signature
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PLEASE DATE, SIGN
AND RETURN THIS PROXY PROMPTLY.
