<PAGE>
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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)(S).240.14a-11(c) or (S)(S).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:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: _______________________
2) Form, Schedule or Registration Statement no.: _________________
3) Filing Party: _____________________
4) Date Filed: ____________________________
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COLONIAL DOWNS HOLDINGS, INC.
10515 Colonial Downs Parkway
New Kent, VA 23124
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held August 2, 2000
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 August 2, 2000 at 2:00 p.m., local time, at
Colonial Downs Racetrack, 10515 Colonial Downs Parkway, New Kent, Virginia for
the following purposes:
1. To elect three Class III directors, each for a term of three years and
until their respective successors are duly elected and qualified.
2. To amend the Articles of Incorporation of the Company to reflect a
change in name of the Company to Colonial Holdings, Inc.
3. To ratify the appointment of the accounting firm BDO Seidman, LLP as
independent auditors for the Company for the current year.
4. To transact such other business as may properly come before the Annual
Meeting or any postponement or adjournment thereof.
These items are fully discussed in the following pages, which are made part
of this Notice. Only shareholders of record at the close of business on June 26,
2000 are entitled to vote at the Annual Meeting. A list of shareholders entitled
to vote will be available for inspection at the offices of Colonial Downs, 10515
Colonial Downs Parkway, New Kent, VA 23124, for the 10 days prior to the Annual
Meeting.
Please sign and date the accompanying proxy card and return it promptly in
the enclosed postage-paid envelope whether or not you plan to attend the Annual
Meeting in person. Instructions are included with the proxy card. If you attend
the Annual Meeting, you may vote in person if you wish, even if you previously
have returned your proxy card. The proxy may be revoked at any time prior to its
exercise.
FOR THE BOARD OF DIRECTORS
Jeffrey P. Jacobs
Chairman and Chief Executive Officer
New Kent, Virginia
June 30, 2000
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COLONIAL DOWNS HOLDINGS, INC.
10515 Colonial Downs Parkway
New Kent, VA 23124
(804) 966-7223
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Colonial
Downs Holdings, Inc. (the "Company") for use in voting at the Annual Meeting of
Shareholders ("Annual Meeting") to be held August 2, 2000 at 2:00 p.m., local
time, at Colonial Downs Racetrack, 10515 Colonial Downs Parkway, New Kent,
Virginia, and at any adjournment or postponement thereof, for the purposes set
forth in the attached notice. The proxy solicitation materials were mailed to
shareholders on or about June 30, 2000.
No director has informed the Company that he intends to oppose any
action intended to be taken by the Company. If sufficient proxies are not
returned in response to this solicitation, supplementary solicitations may be
made by mail or by telephone or personal interview by directors, officers, and
regular employees of the Company, none of whom will receive additional
compensation for these services. 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. Costs of solicitation of proxies will
be borne by the Company, which will reimburse custodians, nominees, and
fiduciaries for reasonable out-of-pocket expenses incurred by them in forwarding
proxy materials to the beneficial owners of stock held by them.
Voting and Revocability of Proxies
When proxies are properly dated, executed and returned, the shares
they represent will be voted at the Annual Meeting in accordance with the
instructions of the stockholder. If no specific instructions are given, the
shares will be voted FOR the election of the nominees for directors set forth
herein, FOR the amendment to the Articles of Incorporation set forth herein, and
FOR ratification of the appointment of auditors. In addition, if other matters
come before the Annual Meeting, the persons named in the accompanying form of
proxy will vote in accordance with their best judgment with respect to such
matters. A stockholder giving a proxy has the power to revoke it at any time
prior to its exercise by voting in person at the Annual Meeting, by giving
written notice to the Secretary prior to the Annual Meeting or by giving a later
dated proxy.
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 Class A Common
Stock outstanding on the record date is entitled to one vote and each share of
Class B Common Stock outstanding on the record date is entitled to five votes on
all matters. With regard to the preceding exceptions, each share of Class A and
Class B Common Stock outstanding on the record date is entitled to one vote.
Therefore, in the instance of the proposal to amend the Articles of
Incorporation of the Company to change the Company's name, each share of Class B
Common Stock outstanding on the record date is entitled to one vote on that
specific matter. If a share is represented for any purpose at the meeting it is
deemed to be
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<PAGE>
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 for quorum purposes.
To obtain approval of the election of the nominees for directors, and
ratification of the appointment of auditors, the votes cast in favor of these
proposals must exceed the votes cast opposing the proposals. The proposal for
amendment to the Articles of Incorporation will be approved upon receiving the
vote of more than two-thirds of the shares entitled to vote on that proposal.
Record Date and Shares Outstanding
As of June 26, 2000, Colonial Downs had 5,025,239 shares of Class A
Common Stock and 2,242,500 shares of Class B Common Stock. Only shareholders of
record at the close of business on June 26, 2000 will be entitled to vote at the
Annual Meeting.
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<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 2001, the Class II directors'
terms expire in 2002, and the Class III directors' terms expire in 2000.
Three Class III 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 2003.
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, nominees to become directors, or executive officers of the Company.
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:
Name of Nominee Age Principal Occupation
--------------- --- --------------------
Jeffrey P. Jacobs 46 Mr. Jacobs serves as Chairman of the Board and
Chief Executive Officer 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 Black Hawk, 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 has been a director of
the Company since March 1997.
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Robert H. Hughes 59 Mr. Hughes served as Chief Financial Officer
of Jacobs Investments, Inc. from 1993 until
his retirement in May 1999. 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 (retired). Mr.
Hughes has been a director of the Company
since March 1997.
David C. Grunenwald 46 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 has been a
director of the Company since March 1997.
The Board of Directors recommends a vote FOR the proposed directors.
The following directors are continuing in office for terms expiring in 2001 or
2002, as indicated:
Name of Director Age Principal Occupation
---------------- --- --------------------
Arnold W. Stansley 67 Mr. Stansley is an owner and has been an
executive officer of Raceway Park, a
Standardbred racetrack in Toledo, Ohio, for
the last nine 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 has been a director of the
Company since March 1997 and his current
term expires in 2002
William J. Koslo, Jr. 40 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
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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 has been a director of the Company
since March 1997 and his current term
expires in 2002.
Stephen Peskoff 57 Mr. Peskoff has acted as a consultant to
Friedman, Billings, Ramsey & Co. for the
last five 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 and his current term expires in 2001
Patrick J. McKinley 45 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 and his current term
expires in 2001.
The executive officers, in addition to Mr. Jacobs, of the Company are
as follows:
Name of Officer Age Position with the Company
--------------- --- -------------------------
Ian M. Stewart 45 Mr. Stewart has served as President since
November 1998 and Chief Financial Officer
since June 1997. From January 1998 through
November 1998, Mr. Stewart served as Chief
Operating Officer of the Company. 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.
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Jerry M. Monahan 60 Mr. Monahan joined the Company in 1997 and
currently serves as Senior Vice President
responsible for market expansion and
government relations. Previously, he served
as Vice President - Racing Operations. 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.
MEETINGS OF THE BOARD OF DIRECTORS
AND INFORMATION ABOUT BOARD COMMITTEES
The Board of Directors held seven meetings during the fiscal year
ended December 31, 1999. Each director attended in excess of 75% of the
aggregate of the total number of all meetings of the Board, and the total number
of meetings of all committees of the Board on which he served.
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. The Audit Committee and the Stock Option
Committee each met once during 1999. The Compensation Committee did not meet.
The Company pays director's fees to each Director who is not an
employee of the Company. During the year ending December 31, 1999, 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 is 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. The shares of Class A Common Stock for payment of such fees for 1999
have been reserved for but not yet issued.
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
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Compensation Committee did not meet in 1999. The increase in Mr. Stewart's
salary from $120,000 to $150,000 was considered and approved by the Board of
Directors, consistent with the Company's compensation policies. 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 salary for Ian M. Stewart is set pursuant to
employment agreements and currently is $150,000 per year. Mr. Stewart's salary
was increased to reflect the additional time and effort Mr. Stewart devotes to
the challenges facing the Company, to reward him for the improvement in the
Company's financial performance, and to retain him in light of the competitive
labor market in which the Company operates. Additionally, Mr. Stewart's
employment agreement provides that he will receive six (6) months base salary in
the event the Company terminates his employment not "for cause." If Mr. Stewart
is terminated for cause or voluntarily leaves the Company, he is not entitled to
any severance benefit. Mr. Jacobs' salary is $120,000 per year. There is no
employment agreement currently in effect with respect to Mr. Jacobs' employment.
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 with the exception of
Mr. Stewart's 1998 award which vested in 1999. 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
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accounting policy changes affecting the Company's operating results, and to
review the Company's financial control procedures and personnel.
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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 10, 2000, 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.
Amount and Nature of Beneficial Ownership of Common Stock
<TABLE>
<CAPTION>
Voting Power
Percent of Common Outstanding as Percent of
Shares Owned Stock Common Stock
------------ -----
Name of Beneficial Owner Class A Class B Class A Class B All Outstanding (1)
------------------------ ------- ------- ------- ------- --- ---------------
<S> <C> <C> <C> <C> <C> <C>
CD Entertainment Ltd. (2)
1231 Main Avenue
Cleveland, OH 44113 1,539,739 (3) 2,767,500 (4) 28.8% 92.3% 49.8% 74.4%
Jeffrey P. Jacobs (5) 1,559,739 2,767,500 (4) 29.1% 92.3% 51.8% 74.5%
Arnold W. Stansley(6) 478,879 --- 8.5% --- 5.5% 2.3%
James M. Leadbetter(7)
110 Arco Drive
Toledo, Ohio 43607 216,581 225,000 3.8% 7.5% 5.1% 6.5%
Stephen Peskoff (8) 117,518 ---- 2.1% ---- 1.4% *
Ian M. Stewart (9) 30,000 ---- * ---- * *
David C. Grunenwald(9) 13,088 ---- * ---- * *
Robert H. Hughes(9) 13,088 ---- * ---- * *
Patrick J. McKinley(9) 13,150 ---- * ---- * *
William J. Koslo, Jr.(9) 12,935 ---- * ---- * *
All executive officers and directors
as a group (9 persons)(10) 2,548,397 2,767,500 45.1% 92.3% 61.5% 79.4%
</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.
(3) Includes 384,739 shares of Class A Common Stock issuable upon the
conversion of a Convertible Subordinated Promissory Note held by CD
Entertainment.
(4) Includes 757,500 shares of Class B Common Stock issuable upon conversion of
two Convertible Subordinated Notes held by CD Entertainment.
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(5) Represents the shares owned by CD Entertainment Ltd. and options for 20,000
shares held pursuant to the Stock Option Plan.
(6) Includes 25,000 shares that are subject to an option in favor of Stephen
Peskoff.
(7) Includes 25,000 shares that are subject to an option in favor of Stephen
Peskoff.
(8) Represents 2,518 shares owned, 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.
(9) Includes stock options granted.
(10) Includes (i) all shares owned directly or indirectly, (ii) all options
held, except those to purchase shares issued to another officer or
director. The address of all directors and employees is c/o Colonial
Downs, 10515 Colonial Downs Parkway, New Kent, Virginia 23124.
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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 1999 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-----------------------------------------------------------------------------------------------------------
Awards Payouts
-------------------------------------------------
Restricted Options/ LTIP All
Name and Other Stock SARs Payouts Other
Principal Year Salary Bonus Compensation Awards (#) (3) ($) Compensation
--------- ---- ------ ----- ------------ ------ ------- --- ------------
Position
--------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey P. 1999 $120,000 (1) (2) (1) (1) (1) (1)
Jacobs
Chief 1998 120,000 (1) (2) (1) (1) (1) (1)
Executive
Officer 1997 120,000 (1) (2) (1) 20,000 (1) (1)
Ian M. 1999 $135,584 (1) (2) (1) 10,000 (1) (1)
Stewart
President 1998 120,000 (1) (2) (1) 10,000 (1) (1)
1997 46,420 (1) (2) (1) 10,000 (1) (1)
</TABLE>
(1) No compensation of this type received.
(2) Other Annual Compensation for executive officers is not reported as it is
less than the required reporting threshold of the Securities and Exchange
Commission.
(3) Number of shares of Common Stock issuable upon exercise of options granted
during 1997, 1998 and 1999. The Company did not grant any Stock
Appreciation Rights during 1997, 1998 and 1999.
EMPLOYEE GRANTS OF STOCK OPTIONS IN 1999
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable Value
Securities Options At Assumed Annual Rates
Underlying Granted to Exercise Of Stock Price Appreciation
Option Employees in Price Per Expiration For Option Term (1)
Name Granted Fiscal Year Share Date 5% 10%
---- ------- ----------- ----- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Ian M. Stewart 10,000 66.66% $1.75 12/15/2008 $11,000 $27,900
All other 5,000 33.34% $1.00 12/15/2008 $ - $ 3,100
</TABLE>
(1) In accordance with Securities and Exchange Commission rules, these
columns show gains that might exist for the respective options, assuming that
the market price of Colonial Downs' Common Stock appreciates from the date of
grant over a period of 10 years at the annualized rates of 5% and 10%,
respectively. If the stock price does not increase above the exercise price at
the time of exercise, realized value to the individual employee from these
options will be zero.
NON-EMPLOYEE GRANTS OF STOCK OPTIONS IN 1999
None
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Repricing of Options
On December 15, 1998, the Stock Option Committee and the Board of Directors
of the Company approved the repricing of certain options held by directors,
consultants and employees pursuant to which option exercise prices were reduced
from $9.50 per share to $1.00 per share, which price was in excess of the $0.56
per share, fair market value per share of the Company's Class A Common Stock as
of December 15, 1998. All other terms of the options remained unchanged. The
repricing did not apply to options held by Mr. Jacobs.
On June 14, 1999, the Stock Option Committee and the Board of Directors of
the Company approved the repricing of 20,000 options held by Mr. Jacobs pursuant
to which the option exercise price was reduced from $10.45 per share to $1.7875
per share which price was $110% of the fair market value per share of the
Company's Class A Common Stock as of June 14, 1999.
The basis for the Board of Director's determination to approve the
repricing was that (i) the Company's interest in providing a compensation
incentive through the use of stock options would be adversely affected as to
employees, consultants and directors whose stock options had exercise prices
substantially in excess of the market price of the Company's Class A Common
Stock ("Underwater Options"); and (ii) employees holding Underwater Options were
seen to be vulnerable to being recruited by other employers who offer a more
attractive incentive compensation.
The table below sets forth information concerning repricings of stock options
held by any executive officer of the Company during the ten completed fiscal
years.
Ten-Year Option/SAR Repricings
<TABLE>
<CAPTION>
Number of
Securities
Underlying Market Price of Exercise Price at Length of Original
Options/SARs Stock at Time of Time of New Term Remaning at
Repriced or Repricing or Repricing or Exercise Date of Repricing or
Name Date Amended (#) Amendment ($) Amendment ($) Price ($) Amendment
----- ---- ----------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey P. Jacobs 6/14/99 20,000 $1.625 $10.45 1.7875 Until 3/21/2007
Ian M. Stewart 12/15/98 10,000 $ .56 $ 9.50 $ 1.00 Until 6/23/2002
</TABLE>
Exercise of Stock Options in 1999
There were no stock options exercised in 1999. There are no outstanding
stock appreciation rights.
14
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PROPOSAL 2
AMENDMENT TO ARTICLES OF INCORPORATION
The Company hereby desires to change its name from Colonial Downs Holdings,
Inc. to Colonial Holdings, Inc. The purpose for the name change is to reflect
that the Company is likely to consider investments of its capital in other
business lines in addition to pari-mutual wagering and Colonial Downs, L.P. The
new name will more accurately reflect the Company's more diverse and broader
holdings. Pursuant to Sections 13.1-707 and 13.1-710 of the Code of Virginia
of 1950, as amended, the shareholders of the Company must give their consent
to amend the Articles of Incorporation to reflect the name change of the
Company.
The Board of Directors recommends a vote FOR an amendment to the Articles
of Incorporation of the Company to reflect the new name of the Company as
Colonial Holdings, Inc. Unless a contrary choice is specified, proxies
solicited by the Board of Directors will be voted FOR the amendment to the
Articles of Incorporation.
15
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PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
BDO Seidman, LLP have been selected to be the Company's independent
auditors for 2000. BDO Seidman, LLP have been the Company's independent
auditors since 1997. In the event ratification of this selection of auditors is
not approved by a majority of the shares of Common Stock voting thereon,
management will review its future selection of auditors.
A representative of BDO Seidman, LLP is expected to be present at the
Annual Meeting and will have an opportunity to make a statement if he or she so
desires. The representative will also be available to respond to appropriate
questions from the shareholders.
The Board of Directors recommends a vote FOR ratification of the
appointment of BDO Seidman, LLP as independent auditors for the Company for
2000. Unless a contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR ratification of the appointment.
16
<PAGE>
Certain Relationships and Related Transactions
Premier One Development Company. 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 One Development Company ("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 extends through September 30, 1999 pursuant to
which Premier receives a fee of $226,000 per year for services provided. The
provisions of the agreement continued from September 30, 1999 to December 31,
1999.
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 $10,000 in 1999 under the agreement, the expected value of the contract may
be in excess of $60,000. Sportswear is wholly owned by the wife and daughter of
Mr. Arnold Stansley, a director.
Virginia Concessions, L.L.C. Virginia Concessions, L.L.C. has an agreement
with the Company to provide food and beverage concessions at the Company's
Racing Centers. Under the Agreement, the Company is responsible for the
management and administration of Virginia Concessions 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.
CD Entertainment Convertible Subordinated Promissory Notes. The Company is
maker of two convertible subordinated promissory notes, in the original
principal amounts of $5.5 million and $1 million, respectively, held by CD
Entertainment, Ltd., an entity that is an affiliate of Mr. Jeffrey P. Jacobs.
The $5.5 million note bears interest at a rate of 7.25% per annum, payable
quarterly. The $1 million note bears interest at a rate of 8.5 % annually,
payable at maturity. The $5.5 million note matures September 30, 2000, and the
$1 million note matures August 26, 2000. The outstanding principal balance and
accrued interest thereon is convertible into shares of Class A and Class B
Common Stock at $11.59 per share for the $5.5 million note, and $1.65 per share
for the $1 million note.
Diversified Opportunities Group Ltd. Pursuant to an agreement to provide
credit support to the Company, Diversified Opportunities Group Ltd.
("Diversified"), an affiliate of Mr. Jeffrey P. Jacobs, receives an annual fee
equal to 3% of the amount of any letters of credit or guarantees provided to the
Company (subject, in the case of a letter of credit, to a minimum annual fee of
$50,000). Diversified deferred the guarantee fees for 1998 until the opening of
two satellite wagering facilities in Northern Virginia. If such facilities are
not opened by 2007, the fee will be waived in its entirety. Costs incurred
under the agreement were $450,000 for 1999 and are recorded as an accrued
liability at December 31, 1999.
17
<PAGE>
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.
[GRAPH APPEARS HERE]
Penn National Gaming, Inc.
<TABLE>
<CAPTION>
03/18/97 12/31/97 12/31/98 12/31/99
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Colonial Downs Holdings, Inc. 100.0 36.8 5.3 8.6
NASDAQ Market Index 100.0 123.7 172.7 320.6
Peer Group 100.0 97.9 117.9 116.4
</TABLE>
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 March 18, 1997.
18
<PAGE>
OTHER MATTERS
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 NASDAQ SmallCap Market.
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 1999, other than a late
filing by Mr. Jeffrey P. Jacobs on Form 5.
Mailing of Materials; Other Business
The Company has mailed an Annual Report for the fiscal year ending December
31, 1999, to Shareholders and a proxy card together with this proxy statement to
all shareholders of record at the close of business on June 26, 2000. 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.
Shareholder Proposals
It is presently anticipated that the 2001 Annual Meeting of Shareholders
will be held on August 2, 2001. 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 1, 2001. 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, (e) the
dates upon which he acquired such shares, and (f) 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.
19
<PAGE>
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.
20
<PAGE>
Annex 1
AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
COLONIAL DOWNS HOLDINGS, INC.
(Changing corporate name to Colonial Holdings Inc.)
Pursuant to Section 13.1-710 of the Code of Virginia of 1950, as amended,
the Amendment to the Articles of Incorporation of Colonial Downs Holdings, Inc.,
a Virginia corporation (the "Corporation"), provides as follows:
1. Name. The name of the Corporation is Colonial Downs Holdings, Inc.
----
2. Amendment. The Articles of Incorporation of the Corporation are
---------
hereby amended by deleting Article I thereof in its entirety and in its place
substituting the following:
"A. Corporate Name. The name of the Corporation is Colonial
--------------
Holdings, Inc."
3. Action by Board of Directors and Shareholders. This amendment was
---------------------------------------------
proposed by the Board of Directors of the Company and submitted to the
shareholders for a vote at the annual meeting of the Company which took place on
August 2, 2000. At that time, there were 5,025,239 shares of Class A Common
Stock issued and outstanding and entitled to vote, of which ________ shares
voted for the amendment. Additionally, there were 2,242,500 shares of Class B
Common Stock issued and outstanding and entitled to vote, of which ________
shares voted for the Amendment. Therefore, the shareholders of the Corporation
have found that the above amendment was in the best interest of the Corporation
and approved and adopted the above amendment. Such action was in accordance
with the applicable provisions of the Virginia Stock Corporation Act.
4. Effective Time and Date. The effective time and date of the
-----------------------
Certificate of Amendment issued with respect to these Articles shall be 11:59
p.m. on August __, 2000.
Dated: August __, 2000
COLONIAL DOWNS HOLDINGS, INC.
a Virginia corporation
By: ___________________________
Ian M. Stewart, President
<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 August 2, 2000
and at any and all postponements and adjournments thereof, upon the following
matters:
1. For the election of Jeffrey P. Jacobs, Robert H. Hughes, and David C.
Grunenwald to serve as Class III Directors until the Annual Meeting of
Shareholders of the Company to be held in the year 2003 and until their
successors are elected and qualified:
_____For All Nominees _____ Against All Nominees _____ Abstain
(INSTRUCTIONS: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME BELOW):
Jeffrey P. Jacobs, Robert H. Hughes, and David C. Grunenwald
2. Amendment to the Articles of Incorporation of the Company to reflect
the name change of the Company to Colonial Holdings, Inc.
_____For _____ Against _____ Abstain
3. Ratification of appointment of BDO Seidman, LLP as the Company's
independent auditors for 2000.
_____For _____ Against _____ Abstain
4. 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, 2, and 3.
IF NO SPECIFICATION IS MADE, SUCH PROXY WILL BE VOTED "FOR" SUCH ITEM.
Dated ___________, 2000
__________________________________ Please sign exactly as name appears 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.
