SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
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 |_| ss.240.14a-11(c)
or |_| ss.240.14a-12
DUNES HOTELS AND CASINOS, INC.
(Name of Registrant as Specified In Its Charter)
-------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 0-11(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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Preliminary Copy
DUNES HOTELS AND CASINOS, INC.
4600 Northgate Boulevard, Suite 130
Sacramento, CA 95834
(916) 929-2295
To the Shareholders of Dunes Hotels and Casinos, Inc.:
You are cordially invited to attend the Annual Meeting (the "Meeting")
of the Shareholders of Dunes Hotels and Casinos, Inc. ("Dunes" or the
"Company"), which will be held on Friday, April 14, 2000, at 10:00 a.m. (Pacific
Time), at the Host Airport Hotel, 6945 Airport Boulevard, Sacramento, CA 95837.
The Proxy Statement contains important information concerning the
election of the Board of Directors of Dunes. The current Board of Directors has
nominated four directors for re-election. However, a company called General
Financial Services, Inc. and its subsidiary, GFS Acquisition Company, Inc.,
together beneficially own 3,853,422 shares of Common Stock which represents
approximately 75.64% of the outstanding shares of Common Stock of the Dunes.
General Financial Services and GFS Acquisition Company have indicated that they
will propose their own slate of Directors at the Meeting. As of the date of the
proxy statement, General Financial Services and GFS Acquisition Company have not
yet determined whom they intend to elect to the Board. Based upon General
Financial Services' and GFS Acquisition Company's ownership, if they elect a
slate of their directors, the election of their nominees is assured.
This Meeting is being held pursuant to a court order issued by the
United States District Court, District of Nevada. On January 6, 2000, the court
ruled, among other things, that the Company is required to hold an annual
meeting on or before April 14, 2000, and that General Financial Services may
vote 3,000,000 shares of Common Stock that are under dispute. For more
information regarding these events, please see the sections entitled "Change in
Control of Dunes" and "Legal Proceedings" in the accompanying proxy statement.
We hope you will be able to attend the Meeting, but, if you cannot do
so, it is important that your shares be represented. Accordingly, we urge you to
mark, sign, date, and return the enclosed proxy promptly. You may, of course,
revoke your proxy if you attend the meeting and choose to vote in person.
Sincerely,
Edward Pasquale
President
April 3, 2000
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Preliminary Copy
DUNES HOTELS AND CASINOS, INC.
4600 Northgate Boulevard, Suite 130
Sacramento, CA 95834
(916) 929-2295
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Friday, April 14, 2000
NOTICE IS HEREBY GIVEN that an Annual Meeting of the Shareholders of
Dunes Hotels and Casinos, Inc., a New York corporation ("Dunes" or the
"Company"), will be held on Friday, April 14, 2000, at 10:00 a.m. (Pacific
Time), at the Host Airport Hotel, 6945 Airport Boulevard, Sacramento, CA 95837
for the following purposes, all of which are more completely discussed in the
accompanying Proxy Statement:
1. The election of four directors to hold office until the next
Annual Meeting of Shareholders or until their successors are
elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
All of the above-matters are more fully described in the accompanying
Proxy Statement. Only shareholders of record at the close of business on March
17, 2000, are entitled to notice of and to vote at the Annual Meeting of the
Shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
Edward Pasquale, President
Sacramento, California
April 3, 2000
YOU ARE CORDIALLY INVITED TO ATTEND DUNES' ANNUAL MEETING OF SHAREHOLDERS. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN
IF YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF
YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY
GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE
EXERCISE THEREOF.
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PROXY STATEMENT OF
DUNES HOTELS AND CASINOS, INC.
4600 Northgate Boulevard, Suite 130
Sacramento, CA 95834
(916) 929-2295
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished to the shareholders of Dunes Hotels
and Casinos, Inc. ("Dunes" or the "Company") in connection with the solicitation
of proxies on behalf of Dunes' Board of Directors for use at Dunes' Annual
Meeting of the Shareholders (the "Meeting") to be held on Friday, April 14,
2000, at 10:00 a.m. (Pacific Time), at the Host Airport Hotel, 6945 Airport
Boulevard, Sacramento, CA 95837, and at any and all adjournments thereof. Only
shareholders of record on March 17, 2000, will be entitled to notice of and to
vote at the Meeting.
The proxy solicited hereby, if properly signed and returned to Dunes and
not revoked prior to its use, will be voted at the Meeting in accordance with
the instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" the five nominees for the Board of Directors,
and at the proxy holders' discretion, on such other matters, if any, which may
come before the Meeting (including any proposal to adjourn the Meeting). Because
General Financial Services, Inc. ("GFS") and its subsidiary, GFS Acquisition
Company, Inc., intend to nominate their own slate of directors, the proxy
holders shall have no discretionary authority with respect to the nomination and
election of directors by GFS and GFS Acquisition. Any shareholder giving a proxy
has the power to revoke it at any time before it is exercised by: (i) filing
with Dunes, written notice of its revocation addressed to Edward Pasquale,
President, Dunes Hotels and Casinos, Inc., 4600 Northgate Boulevard, Suite 130,
Sacramento, CA 95834; (ii) submitting a duly executed proxy bearing a later
date; or (iii) appearing at the Meeting and giving the Corporate Secretary
notice of his or her intention to vote in person.
This solicitation of proxies is being made by Dunes' Board of Directors.
Dunes will bear the entire cost of preparing, assembling, printing, and mailing
proxy materials furnished by the Board of Directors to shareholders. In addition
to the solicitation of proxies by use of the mail, some of the officers,
directors, and employees of Dunes may, without additional compensation, solicit
proxies by telephone or personal interview, the cost of which Dunes will also
bear. Dunes will reimburse banks, brokerage houses, and other custodians,
nominees, and fiduciaries for their reasonable expenses in forwarding these
proxy materials to shareholders whose stock in Dunes is held of record by such
entities. Dunes estimates that the costs and expenditures related to this
solicitation will be approximately $_______, of which $______ has been spent to
date. Dunes believes that these costs and expenses are representative of those
costs normally expended for a solicitation for an election of directors.
This Proxy Statement and form of proxy were first mailed to shareholders
on or about April 3, 2000. A copy of the Company's Annual Report on Form 10-KSB
is accompanying this proxy statement.
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RECORD DATE AND VOTING RIGHTS
Dunes is authorized to issue up to 25,000,000 shares of Common Stock, par
value of $.50 per share. As of March 27, 2000, 7,799,780 shares of Common Stock
were issued of which 5,094,340 shares were outstanding. Dunes is also authorized
to issue up to 10,750 shares of preferred stock, $.50 par value, of which 10,512
shares have been designated as Series B $7.50 Cumulative Preferred Stock, $.50
par value ("Series B Preferred Stock") are issued, and 9,610 shares of Series B
Preferred Stock are outstanding. Each share of Common Stock and each share of
Series B Preferred Stock is entitled to one vote on all matters submitted for
shareholder approval. The Common Stock and Series B Preferred Stock shall vote
together as a class. The record date for determination of shareholders entitled
to notice of and to vote at the Meeting is March 17, 2000.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Meeting in accordance with the directions
given. A majority of the outstanding shares of Common Stock and Series B
Preferred Stock, together as a class, must be represented at the Meeting to
constitute a quorum for the transaction of business. Regarding the election of
directors, shareholders may vote in favor of all nominees, or withhold their
votes as to all nominees, or withhold their votes as to specific nominees, by
following the instructions on the enclosed proxy card. If no specific
instructions are given, the shares represented by a signed proxy will be voted
FOR the election of the Board's nominees. Directors will be elected from
nominees receiving the plurality of affirmative votes cast by the holders of the
Common Stock and Series B Preferred Stock voting in person or by proxy at the
Meeting. Dunes' certificate of incorporation does not provide for cumulative
voting. Abstentions and broker non-votes will be voted for purposes of a quorum,
but will have no effect for the election of directors since directors will be
chosen from the five nominees receiving the plurality of affirmative votes.
A shareholder may choose to withhold from the proxyholders the authority to
vote for any of the nominees by marking the appropriate box on the proxy card
and striking out the names of the disfavored nominee as they appear on the proxy
card. In that event, the proxyholders will not cast any of the shareholder's
votes for nominees whose names have been crossed out, but they will retain the
authority to vote for the nominees whose names have not been struck out, and for
any other nominees who may be properly nominated at the Annual Meeting. Ballots
will be available at the Annual Meeting for persons desiring to vote in person.
CHANGE IN CONTROL OF DUNES
On June 3, 1999, GFS Acquisition Company, Inc., a subsidiary of General
Financial Services, Inc., a Kansas corporation ("GFS"), purchased from the
Federal Depository Insurance Corporation ("FDIC") for $1,126,496 any and all
rights and interests of the FDIC under an order issued on September 8, 1986 (the
"Judgment"), in the matter of Eureka Federal Savings and Loan Association v.
John B. Anderson, Edith Anderson, Maxim, Inc., Dunes Hotels and Casinos, Inc.
and Baby Grand Corp. in the District, Clark County, Nevada. Pursuant to the
terms of the Judgment, Mr. Anderson pledged 3,000,000 shares of Common Stock of
the Company to secure the Judgment. Mr. Anderson is in default under the
Judgment and related security agreements, and GFS Acquisition intends to
exercise its rights under the Judgment and related security agreements to
<PAGE>3
Preliminary Copy
acquire direct ownership to the 3,000,000 shares, which represents approximately
58.89% of the outstanding shares of the Company's Common Stock.
On July 6, 1999, the Company filed a Complaint in Interpleader in the
Superior Court of California for the County of Yolo against J.B.A. Investments,
Inc., GFS, GFS Acquisition, John B. Anderson, Edith Anderson, Cedar Development
Company and the FDIC to resolve conflict of claims concerning who has the power
to transfer and otherwise dispose of the 3,000,000 shares and by whom voting and
other rights connected with the 3,000,000 shares may be exercised. The
Interpleader Complaint, along with another case, was consolidated and
transferred to the United States District Court, District of Nevada. On January
6, 2000, the court ruled, among other things, that the Company is required to
hold an annual meeting on or before April 14, 2000, and that GFS may vote the
3,000,000 shares. As a result of the court's decision there has been a change of
control in the Company. Based on its Schedule 13D filed with the Securities and
Exchange Commission ("Commission"), GFS Acquisition and GFS together
beneficially own 3,853,422 shares of Common Stock which represent approximately
75.64% of the outstanding shares of Common Stock of the Company. GFS Acquisition
purchased shares of Common Stock from its working capital and funds borrowed by
GFS pursuant to business loan agreements between GFS and Commerce Bank N.A. and
Citizens Bank and Trust in the aggregate amount of up to $2,500,000. GFS then
subsequently contributed the funds to GFS Acquisition.
PROPOSAL ONE
ELECTION OF DIRECTORS
Four directors are to be elected at the Meeting, each to serve until the
next annual meeting and until his successor shall be elected and qualified or
until his earlier death, resignation, or removal. Prior to the Meeting, there
were seven directors. Mr. Brent Bowen decided that he will not seek re-election,
Mr. Wayne O. Pearson has decided to resign effective April 14, 2000, and Mr.
John B. Anderson did not indicate that he will seek re-election.
Pursuant to a Consent and Undertaking entered into with the Commission
on October 13, 1977, the Board of Directors must have at least three directors
satisfactory to the Commission (the "Independent Directors"). Messrs. Pearson,
Marincovich, and O'Leary represent these Independent Directors. As previously
disclosed, Mr. Pearson has decided to resign effective April 14, 2000. As
discussed below, in light of GFS's and GFS Acquisition's beneficial ownership in
the Company and their intent to elect their own slate of directors, the Board
has been unable to obtain a third Independent Director to replace Mr. Pearson.
If the four Board of Directors' nominees are elected, after the Meeting, the
Board, without further shareholder approval, will immediately seek another
Independent Director to serve as the third Independent Director subject to no
objection by the Commission. If another Independent Director is appointed, the
Board would be increased to five members. In order to be an Independent
Director, the proposed nominee must have no present or former affiliation with
the Company, or any control person thereof, or any officer or director thereof.
There are no family relationships between any of the directors and
executive officers of Dunes.
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Based on their Schedule 13D, GFS and GFS Acquisition are collectively
the beneficial owner of 3,853,422 shares of Common Stock representing
approximately 75.64% of the outstanding shares. GFS Acquisition and GFS have
indicated that they do not intend to solicit proxies generally in connection
with the Annual Meeting but will propose their own slate of Directors at the
Meeting. As of the date of the proxy statement, GFS Acquisition and GFS have not
yet determined who they intend to elect to the Board. Based upon GFS's and GFS
Acquisition's ownership, if they nominate and vote for their own slate of
directors, the election of their nominees is assured. See "Legal Proceedings."
Information About the Dunes Nominees for Director
The following table sets forth the name and business address of each of
the Dunes nominees for director of the Company. All of the Dunes nominees listed
and described below have expressed their willingness to serve. There are no
arrangements or understandings between any of the nominees or the Company
pursuant to which any of them are to be selected as a director or nominee. The
information contained herein has been furnished by the respective nominees. The
present principal occupation and business experience for at least the past five
years for each of the Boards' nominees for director is set forth in the
following table. However, if GFS Acquisition and GFS elect their own slate of
directors, it is unlikely that any of the Board's nominees will be re-elected.
Name Principal Occupation and Background For the Past Five Years
Edward Pasquale Edward Pasquale is and has been a director of the Company
since December 1984. He was a director and officer of
certain of the Company's subsidiaries from December 1984
until September 1988. On January 27, 1998, he was elected
president and a director of the Company's wholly-owned
subsidiaries, M&R Corporation, Continental California
Corporation, and M&R Investment Company, Inc. and M&R
Investment Company's wholly-owned subsidiaries Southlake
Acquisition Corp. and SHF Acquisition Corp. M&R Investment
Company provides office administrative services to, and SHF
Acquisition Corp. operates the real estate section and dryer
and storage facility for, the Company. M&R Corporation,
Continental California Corporation and Southlake Acquisition
Corp. are inactive. On December 11, 1997, Mr. Pasquale was
elected president of the Company. Mr. Pasquale has been a
member of the Company's Audit Committee since May 19, 1994.
He is presently, and has been since September 1983,
self-employed as a financial consultant, with emphasis in
litigation support services, bankruptcy proceedings, and
corporate reorganization. He is a Certified Public
Accountant, licensed to practice in the States of California
and Nevada. Mr. Pasquale is 56. His principal business
address is 31 Sycamore Creek, Irvine, California 92612.
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Name Principal Occupation and Background For the Past Five Years
Andrew Marincovich Andrew Marincovich is and has been since August 1978, a
director and member of the Audit Committee of the Company.
Since July 1983, he has been Chairman of the Audit
Committee. For at least the past five years, Mr. Marincovich
has been President and Executive Officer of Marincovich &
Company, a certified public accounting firm in Rancho Palos
Verdes, California. Mr. Marincovich is a Certified Public
Accountant, licensed to practice in California. He is 78.
Mr. Marincovich's principal business address is 28924 S.
Western Avenue, Suite 206, Rancho Palos Verdes, California
90275.
Donald O'Leary Donald J. O'Leary was elected to the Company's Board of
Directors and appointed to the Company's Audit Committee on
May 19, 1994. Mr. O'Leary is an attorney and is a member of
the California, Virginia and District of Columbia Bars. For
at least the past 5 years, he is in private practice in
California. Prior to entering private practice, Mr. O'Leary
was a trial attorney for the U.S. Department of Justice and
resident counsel for several large real estate companies.
Mr. O'Leary is 69. His principal business address is Cove
House, P. O. Box 9364, Palm Springs, California 92263.
Erik J. Tallstrom Erik J. Tallstrom is and has been a director of the Company
since December 1984. Prior to 1985, he was self-employed as
a certified public accountant, and was a financial
consultant to Mr. Anderson. From November 1985 to December
1996, he was a business partner with Mr. Anderson in several
real estate developments, including Rancho Murieta in
California. Currently, Mr. Tallstrom acts as a consultant to
various real estate companies and is a part owner of a tile
manufacturing company. Mr. Tallstrom is 52. His principal
business address is 3 Juniper Court, Woodland, California
95695.
Information About Dunes' Directors Who Have Decided Not to Seek Re-election
The following table sets forth information regarding Messrs. Anderson,
Bowen, and Pearson who are current directors but will not seek re-election.
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Name Principal Occupation and Background For the Past Five Years
John B. Anderson John B. Anderson is and has been a director of the Company
since May 1984 and until December 11, 1997, served as the
Company's chairman of the Board and president. On March 10,
1992, BGC (an Anderson entity) filed a voluntary petition
for relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the District of Nevada.
On November 10, 1992, the United States Bankruptcy Court
confirmed and approved BGC's plan of reorganization which
became effective December 1, 1992. On December 20, 1994, the
Chapter 11 case was closed. On April 6, 1992, Maxim
Development Co. (an Anderson entity) filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code
in the United States Bankruptcy Court for the Eastern
District of California, which bankruptcy was subsequently
dismissed on March 12, 1993. On June 4, 1998, BGC filed a
petition for relief under Chapter 7 of the Bankruptcy Code
in the United States Bankruptcy Court for the District of
Nevada. Mr. Anderson is 57.
Brent L. Bowen Brent L. Bowen is and has been a director and member of the
Audit Committee of the Company since December 1984. He has
also been a director of the Company's subsidiary Continental
California Corporation, and Vice President of M&R Investment
Company, Inc. and its subsidiaries Southlake Acquisition
Corp. and SHF Acquisition Corp., since December 1984. From
1984 until March 2000, Mr. Bowen was Secretary of the
Company and its wholly-owned and indirect subsidiaries M&R
Corporation, Continental California Corporation, M&R
Investment Company, Inc., Southlake Acquisition Corp. and
SHF Acquisition Corp. Mr. Bowen was an employee of M & R
Investments, the Company's subsidiary, from 1995 to 1998.
Mr. Bowen was employed by Anderson Farms from 1981 to 1995
as a business and financial analyst. Mr. Bowen has
experience in the hotel/casino, farming, real estate,
home-building, rice mill, commodities and banking
industries. Mr. Bowen retired from the Company as an
employee in 1998. He is 71. His principal business address
is 15361 Pear Valley Lane, Auburn, California 95603.
Wayne O. Pearson Wayne O. Pearson is and has been a director and a member of
the Audit Committee of the Company since August 1978. From
March 1975 to May 1993, he was a marketing analyst for R&R
Advertising Agency, Las Vegas, Nevada. Mr. Pearson has been
sole proprietor of Wayne Pearson Consulting, Las Vegas,
Nevada, a business and public opinion research company,
since January 1970. Mr. Pearson is 69.
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Committees of the Board; Meetings and Attendance
The Board has an Audit Committee currently consists of Messrs. Bowen,
Marincovich, O'Leary, Pasquale, and Pearson. The primary functions of the Audit
Committee are to review the scope and results of audits by the Company's
independent auditors, the Company's internal accounting controls, the non-audit
services performed by the independent accountants, and the cost of accounting
services.
In addition, pursuant to the Consent and Undertaking entered into with
the Commission, the Board of Directors must establish the Audit Committee, the
majority of which shall consist of the Independent Directors. In addition to the
duties discussed above, the Audit Committee shall (a) review any and all
proposed transaction of any kind or nature to which Dunes and any of its
subsidiaries is to be a party provided that such transaction is (i) in excess of
$20,000 in the aggregate per year and (ii) one or more of the following is to
have a direct or indirect interest in such transaction: (1) any director or
officer of Dunes; (2) any director or officer of any subsidiary or affiliate of
Dunes; (3) any security holder who to Dunes' knowledge directly or indirectly
owns or controls more than five percent of the outstanding shares of any class
of stock of Dunes; (4) any employee of or consultant to Dunes or any of its
subsidiaries or affiliates whose annual compensation from Dunes and its
subsidiaries and affiliates exceeds $75,000 in the aggregate; or (5) any
relative or spouse of any of the foregoing person or any relative or spouse who
has the same home as such person; and (b) review the aforesaid proposed
transaction for fairness and business purpose and shall by majority vote of the
Audit Committee approve such transaction.
The Board does not have a nominating committee or compensation
committee.
The Board met eight times during 1999, the Board and Audit Committee
jointly met seven times during 1999, and the Audit Committee met one time during
1999. Each director attended at least seventy-five percent of the meetings of
the Board and of the committees upon which he served.
Vote Required for the Election of Directors
Directors will be elected from the nominees receiving the plurality of
the votes of the shares of Common Stock and Series B Preferred Stock present and
voting together as a class at the Meeting. Each share of Common Stock and Series
B Preferred Stock which is represented, in person or by proxy, at the Meeting
will be accorded one vote on each of the four director seats up for election.
Cumulative voting is not allowed.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
ALL OF THE FOUR (4) ABOVE-LISTED NOMINEES.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Dunes'
directors, executive officers, and persons who own more than 10% of Dunes'
outstanding Common Stock to file reports of ownership and changes in ownership
with the SEC. Directors, executive officers, and shareholders of more the 10% of
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Dunes' Common Stock are required by SEC regulations to furnish Dunes with copies
of the Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to Dunes,
or written representations that such filings were not required, Dunes believes
that, during the calendar year 1999, its directors and officers were in
compliance with all applicable all Section 16(a) filing requirements.
Executive Officers
The name, age and description of the executive officers of Dunes and its
subsidiaries are listed below.
<TABLE>
<CAPTION>
Name Age Office and Background
---- --- ---------------------
<S> <C> <C>
Edward Pasquale 56 See "Election of Directors"
Chairman of the Board and President
Brent L. Bowen, Secretary 71 See "Directors Who Have Decided Not to
Seek Re-election"
Marvin P. Johnson, 60 Mr. Johnson has served as Chief Accounting
Principal Financial and Accounting Officer since September 1998. Prior to that
Officer time since July 1993, Mr. Johnson has served
as accountant/office manager of M&R
Investment Company, Inc., a subsidiary of
Dunes.
</TABLE>
Executive Compensation
Executive officers are appointed by, and serve at the discretion of, the
Board of Directors. The following table sets forth the compensation paid to
Edward Pasquale, President during the periods indicated. No executive officer of
the Company received compensation in excess of $100,000 for the year ended
December 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------- ------------------------------ ------------
Restricted Securities LTIP All Other
Name and Principal Other Annual Stock Underlying Payouts Compensa-
Position Year Salary Compensation ($) Award(s) ($) Options (#) ($) tion
- - -------------------------------------------------------------- ------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward Pasquale 1999 $ 0 $ 0 $ 0 0 $ 0 $62,568 (1)
President and CEO 1998 $ 0 $ 0 $ 0 0 $ 0 $36,862 (2)
1997 $ 0 $ 0 $ 0 0 $ 0 $ 2,500 (3)
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents director's fees of $15,000, audit committee fees of $12,000, and
consulting fees of $35,568.
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(2) Represents director's fees of $15,000, audit committee fees of $12,000, and
consulting fees of $9,862.
(3) Mr. Pasquale was elected president in December 1997. The amount represents
one-twelfth of his total compensation consisting of director's fees of
$15,000, audit committee fees of $12,000, and consulting fees of $3,000
The Company pays each director an annual fee of $15,000 pro rated
monthly. Director's fees due Mr. Anderson are retained by the Company and
applied against amounts due the Company from entities owned or controlled by Mr.
Anderson. The assignment of Mr. Anderson's directors fees will remain in effect
until changed by the Board of Directors, although Mr. Anderson has decided not
to seek re-election. In addition to their regular directors fees and audit
committee fees, Board members and audit committee members are paid $150 per hour
for special projects considered to be outside the scope of their duties as Board
and audit committee members. In addition, they receive a travel fee of $300 for
each meeting attended.
Messrs. Marincovich, Pearson, Bowen, Pasquale and O'Leary are all
members of the Company's Audit Committee. Audit Committee members receive
compensation of $1,000 per month plus a travel fee of $300 for each meeting
attended. For services rendered as Audit Committee members and consultants
during the fiscal year 1999, Messrs. Marincovich, Pearson, Pasquale, O'Leary and
Bowen were paid $14,400, $12,900, $47,568, $14,100, and $12,000, respectively.
The Company does not have a plan, pursuant to which cash or non-cash
compensation is paid or distributed, or is proposed to be paid or distributed in
the future. The Company does not have any pension or other benefit plans.
Further, the Company has no stock option plans and has not granted any stock
options to its officers or directors.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 17, 2000, the number and
percentage of shares of the Company's Common Stock which are beneficially owned,
directly or indirectly, by (a) each shareholder who owns more than 5% of the
outstanding shares; (b) each of the Company's directors; (c) the Company's named
executive officer; and (d) all of the Company's directors and executive officers
as a group. The shares "beneficially owned" are determined under the Commission
rules, and do not necessarily indicate ownership for any other purpose. In
general, beneficial ownership includes shares over which the indicated person
has sole or shared voting or investment power and shares which he/she has the
right to acquire within 60 days of March 17, 2000. Unless otherwise indicated,
the persons listed have sole voting and investment power over the shares
beneficially owned.
Name and Address of Amount and Nature of Percent of Common
Beneficial Owner Beneficial Ownership (1) Stock Outstanding
John B. Anderson(2) 3,000,000 58.89%
P.O. Box 1410
Davis, CA 95617
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GFS Acquisition Company, Inc.(3) 3,853,422 75.64%
8441 E. 32nd Street N.
Wichita, KS 67226
Edward Pasquale 0 0
Donald J. O'Leary 0 0
Erik J. Tallstrom 0 0
Wayne Pearson 0 0
Brent L. Bowen 2,000 *
Andrew P. Marincovich 200 *
All Directors and Officers
as a Group (7 Persons) 3,002,200 58.93%
* less than one percent.
(1) In furnishing this information, the Company is relying upon the contents of
statements filed with the Commission pursuant to Section 13(d) and Section
13(g) of the Exchange Act.
(2) Mr. Anderson, through various entities owned or controlled by him, claims
beneficial ownership of, and shared voting and shared investment power with
respect to the reported shares. On June 3, 1999, GFS Acquisition purchased
from the FDIC all rights and interests of the FDIC under the Judgment in
the matter of Eureka Federal Savings and Loan Association v. John B.
Anderson, Edith Anderson, Maxim, Inc., Dunes Hotels and Casinos Inc., and
Baby Grand Corp. in the District Court, Clark County, Nevada, Case No.
A245662. Pursuant to the terms of the Judgment, Mr. Anderson indirectly
pledged shares of J.B.A. Investments which owned 3,000,000 shares of Common
Stock to secure the Judgment. As disclosed in note (3), GFS Acquisition
claims ownership to these 3,000,000 shares. Pursuant to a court order
entered into on January 6, 2000, GFS has the right to vote the 3,000,000
shares. These 3,000,000 shares are subject to litigation.
Previously, 1,280,756 shares of Common Stock were held by Baby Grand
Corporation, a corporation controlled by Mr. Anderson. These 1,280,756 shares
were pledged to M & R Investment Corporation, a wholly-indirect subsidiary of
the Company, to secure a loan to Baby Grand Corporation from M & R Investment.
In 1998, Baby Grand Corporation filed for bankruptcy. In March 2000, M & R
Investment foreclosed upon the 1,280,756 shares and now has title to the shares.
The 3,000,000 shares of Common Stock do not include the 1,280,756 shares now
held by M & R Investment Corporation.
(3) Of the 3,853,422 shares of Common Stock, 3,000,000 shares are held in the
name of J.B.A. Investment, Inc., a corporation which was previously
controlled by Mr. Anderson and whose shares were pledged as security to the
FDIC. In June 1999, GFS Acquisition acquired an interest in the Judgment
from the FDIC together with the underlying security and part of a judgment
against Mr. Anderson and his affiliates. Included in part of that sale was
control over J.B.A. Investments which owned the 3,000,000 shares discussed
in note (2) above. As previously disclosed, the ownership of the 3,000,000
shares is under dispute. Pursuant to a court order entered into on January
6, 2000, GFS has the right to vote these 3,000,000 shares at the Meeting,
although ownership of such shares is still under dispute. GFS Acquisition
has indicated that at the Meeting it intends to nominate and vote for its
slate of directors. GFS Acquisition is wholly-owned by GFS. GFS is
wholly-owned by Mr. Steven K. Miller. GFS, by reason of its ownership of
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GFS Acquisition, and Mr. Miller, by reason of his ownership of GFS, may be
deemed to beneficially own shares owned by GFS Acquisition. See Legal
Proceedings.
The following table sets forth, as of March 17, 2000, the number and
percentage of shares of the Company's Series B preferred stock which are
beneficially owned, directly or indirectly, by each shareholder who owns more
than 5% of the outstanding shares. No director or officer has any beneficial
ownership in the Series B preferred stock. Unless otherwise indicated, the
person listed has sole voting and investment power over the preferred stock
beneficially owned.
Name and Address of Amount and Nature of Percent of Series B
Beneficial Owner Beneficial Ownership Stock Outstanding
USI Corp. 1,811 18.84%
1040 Lawrence Court
Wichita, KS 67206
Legal Proceedings
The Company filed on July 6, 1999, a Complaint in Interpleader in the
Superior Court of California for the County of Yolo (the Interpleader Action).
The Interpleader Action was filed against GFS, and its subsidiary, GFS
Acquisition, Inc., John B. Anderson (a director hereinafter "Anderson"), the
FDIC and others to resolve conflicting claims concerning who has the power to
transfer and otherwise dispose of 3,000,000 shares (hereinafter the "3,000,000
Shares") of the Company in the name of J.B.A. Investments and by whom voting and
other rights connected with the 3,000,000 Shares may be exercised. On July 26,
1999 the Interpleader Action was removed to the United States District Court for
the Eastern District of California and, on September 20, 1999, it was
transferred to the United States District Court for the District of Nevada (Case
No. CV-S-99-1470-PMP (RJJ)).
The 3,000,000 Shares at issue were first pledged pursuant to a
creditor-debtor agreement to Eureka Federal Savings and Loan Association
(Eureka) in consideration of Eureka's forbearance from executing a judgment in
the original principal amount of approximately $33,700,000 obtained against
Anderson and affiliates. The 3,000,000 Shares were then pledged to the FDIC as
successor and assignee of EurekaBank, formerly known as Eureka. On July 14,
1995, the FDIC filed suit (CV-S-95-00679-PMP (LRL)) against Anderson, Edith
Anderson (Anderson's wife), Cedar Development Co. (Cedar), J.A. Inc. (JA), and
J.B.A. Investments Inc. (JBA and, collectively with Anderson, his wife, Cedar
and JA, the Anderson Parties). Until December 11, 1997, Anderson was the
President and Chairman of the Board of the Company and Chairman of the Board of
various subsidiaries of the Company. Prior to the events described herein,
Anderson asserts, through his ownership of Cedar, the parent of Baby Grand Corp.
(BGC) and JBA, owned approximately 4,280,756 shares or 67.2% of the then
Company's outstanding common stock (the Common Stock). Of those shares (i)
3,000,000 Shares have been pledged as collateral in favor of entities of which
GFS Acquisition since June 1999 is a successor and/or assign, and (ii) 1,280,756
Shares (the BGC Pledged Shares) had been pledged as collateral in favor of a
subsidiary of the Company.
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In June 1999, the FDIC sold a portion of its loan, together with the
underlying security and a part of the judgment against Anderson Parties to GFS
Acquisition. Included in the sale was the pledged 3,000,000 Shares.
On June 3, 1999, GFS Acquisition filed a Schedule 13D with the
Commission which stated that GFS Acquisition intends to exercise its rights
under the judgment and security documents. Subsequently, GFS Acquisition
attempted to transfer the 3,000,000 Shares to itself but Mr. Anderson objected,
claiming, among other things, that there was no change in ownership of the
3,000,000 Shares.
On January 6, 2000, the United States District Court for the District of
Nevada issued a preliminary injunction in the Interpleader Action requiring the
Company to hold a meeting of the shareholders on or before April 14, 2000, at
which the Company is directed to permit GFS Acquisition to vote the 3,000,000
Shares and enjoining the Company from wasting corporate assets during the
pendency of the Interpleader Action.
In its amended answer and counterclaim in the Interpleader Action, GFS
Acquisition has asserted counterclaims against the Company for conversion of the
3,000,000 Shares and for injunctive relief. In connection with its
counterclaims, GFS Acquisition is seeking damages of an unspecified amount,
attorneys' fees, costs, and expenses, and other unspecified relief. Pursuant to
GFS Acquisition's Schedule 13D, GFS Acquisition does not intend to solicit
proxies generally. GFS, however, may solicit proxies from up to ten people
pursuant to Rule 14a-2(b)(2) under the Securities Exchange Act of 1934.
On March 23, 2000, GFS and GFS Acquisition served the Company with an
emergency motion for temporary restraining order and amendment of preliminary
injunction in the United States District Court for the District of Nevada (Case
No. CV-S-99-1470-PMP-(RJJ)) seeking the Company from (1) issuing new shares of
common or preferred stock; (2) continuing or completing a purported transaction
with USI; (3) doing anything that will hinder or effect GFS' majority voting
control of the Company; and (4) changing the status quo concerning ownership of
the Company as of January 6, 2000, except as to transactions previously approved
by GFS.
The March 23, 2000, emergency motion relates to a purported transaction
with USI Corp. On January 28, 2000, the Company entered into a non-binding
letter of intent with USI whereby the Company would acquire not less than 3,000
shares of Series B Preferred Stock of the Company valued at $275 per share,
based upon the liquidation value and accrued but unpaid dividends on such
shares, in exchange for shares of the Company's Common Stock valued at $.70 per
share. The entering into the transaction was subject to a number of conditions,
including entering into a definitive stock purchase agreement, an independent
third party appraiser confirming the value of the Series B Preferred Stock and
Common Stock and the overall transaction, and determination by the United States
District Court, District of Nevada (No. CV-5-99-1470-PMP (RJJ)), that the
proposed stock purchase agreement was not subject to the Court's order of
January 6, 2000. Subsequent to the January 28, 2000 letter intent, the Company
had further discussions with USI. The discussions included a revised proposal
whereby the Company would issue approximately 5.1 million shares of restricted
Common Stock in exchange for 3,000 shares of Series B Preferred Stock and
approximately $3.5 million in cash. The Common Stock would be valued at $.85 per
share. In addition, as part of the discussion, for a period of three years, USI
<PAGE>13
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would have the right to elect three members to the Dunes Board and USI would
vote for five members of the current Board.
If a definitive agreement is entered into, the agreement will have the
effect of changing in control of the Company from GFS Acquisition to USI since
USI would be the Company's largest shareholder. The Company believes that the
proposed transaction would be beneficial to the Company because it would provide
the Company with approximately $3.5 in additional cash, eliminate a liquidation
preference of the Series B Preferred Stock, eliminate accrued but unpaid
dividends on such Series B Preferred Stock, and possibly increase stockholder
value through implementation of a business plan. Although the Company and USI
had entered into subsequent discussions regarding the acquisition, no definitive
agreement has been entered into.
The hearing for the emergency motion was argued on March 28, 2000. The
court took the matter under submission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to fees for serving as directors to Dunes' Board of
Directors or as members of the Audit Committee, certain directors also have
provided consulting services to Dunes. During the past fiscal year Dunes has
entered into certain transactions with its directors or companies in which they
may have an interest. During the year ended December 31, 1999, no transaction
exceeded $60,000 except that Mr. Pasquale received fees of $62,568 consisting of
audit and director fees of $27,000 and consulting fees of $35,568. The
consulting fees primarily related to Mr. Pasquale's increased activity with the
Dunes as a result of its increased litigation activity.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors retained the firm of Piercy, Bowler, Taylor &
Kern as independent auditor for Dunes and its subsidiaries for the year 1999. It
is the intent of the current Board to retain Piercy, Bowler, Taylor & Kern as
independent auditors for the year 2000. A representative of Piercy, Bowler,
Taylor & Kern will be at the Meeting to respond to appropriate questions.
OTHER MATTERS AND ADDITIONAL INFORMATION
The Board of Directors of Dunes knows of no other matters that may or
are likely to be presented at the Meeting. However, in such event, the persons
named in the enclosed form of proxy will vote such proxy in accordance with
their best judgement in such matters pursuant to discretionary authority granted
in the proxy.
Shareholders should direct any requests for additional information to
Dunes Hotels and Casinos, Inc., 4600 Northgate Boulevard, Suite 130, Sacramento,
CA 95834.
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SHAREHOLDER PROPOSALS
Shareholder proposals to be included in Dunes' Proxy Statement and Proxy
for its 2001 Annual Meeting must meet the requirements of Rule 14a-8 promulgated
by the SEC and must be received by Dunes no later than November 17, 2000.
ALL SHAREHOLDERS ARE URGED TO EXECUTE THE ACCOMPANYING PROXY AND TO RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE. SHAREHOLDERS MAY REVOKE THE PROXY IF THEY
DESIRE AT ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
Edward Pasquale,
President
April 3, 2000
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Preliminary Copy
DUNES HOTELS AND CASINOS, INC.
4600 Northgate Boulevard, Suite 130, Sacramento, CA 95834
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward Pasquale as proxy with the power
to appoint his successor, and hereby authorizes him to represent and to vote, as
designated below, all the shares of Common Stock of DUNES HOTELS AND CASINOS,
INC. ("Dunes"), held of record by the undersigned on March 17, 2000, at the
Annual Meeting of Shareholders to be held on April 14, 2000, at 10:00 a.m.
(Pacific Time), at the Host Airport Hotel, 6945 Airport Boulevard, Sacramento,
CA 95837, and at any and all adjournments thereof.
1. Election of Directors.
FOR all nominees listed below _____ WITHOUT AUTHORITY ____ (except as
marked to the contrary below) (to vote for all Nominees below)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Edward Pasquale Andrew P. Marincovich
Donald J. O'Leary Erik J. Tallstrom
2. In his discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the four above-listed director nominees.
Please sign exactly as name appears on the share certificates. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
-------------------------- ----------------------------
Name (Print) Name (Print) (if held jointly)
Dated: ____________ -------------------------- ----------------------------
Signature Signature (if held jointly)
-------------------------- ----------------------------
-------------------------- ----------------------------
(Address) (Address)
I will ___ will not ___ attend the Meeting. Number of persons to attend: _____.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
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Preliminary Copy
DUNES HOTELS AND CASINOS, INC.
4600 Northgate Boulevard, Suite 130, Sacramento, CA 95834
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward Pasquale as proxy with the power
to appoint his successor, and hereby authorizes them to represent and to vote,
as designated below, all the shares of Series B $7.50 Preferred Stock of DUNES
HOTELS AND CASINOS, INC. ("Dunes"), held of record by the undersigned on March
17, 2000, at the Annual Meeting of Shareholders to be held on April 14, 2000, at
10:00 a.m. (Pacific Time), at the Host Airport Hotel, 6945 Airport Boulevard,
Sacramento, CA 95837, and at any and all adjournments thereof.
1. Election of Directors.
FOR all nominees listed below _____ WITHOUT AUTHORITY ____ (except as
marked to the contrary below) (to vote for all Nominees below)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Edward Pasquale Andrew P. Marincovich
Donald J. O'Leary Erik J. Tallstrom
2. In his discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the four above-listed director nominees.
Please sign exactly as name appears on the share certificates. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
-------------------------- ----------------------------
Name (Print) Name (Print) (if held jointly)
Dated: ____________ -------------------------- ----------------------------
Signature Signature (if held jointly)
-------------------------- ----------------------------
-------------------------- ----------------------------
(Address) (Address)
I will ___ will not ___ attend the Meeting. Number of persons to attend: _____.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
