<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
THE SANDS REGENT
- --------------------------------------------------------------------------------
(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] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
------------------------------------------------------------------------
<PAGE> 2
[LOGO OF THE SANDS REGENT]
345 NORTH ARLINGTON AVENUE
RENO, NEVADA 89501
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 2, 1998
------------------------
To Our Shareholders:
The Annual Meeting of Shareholders of The Sands Regent will be held at
10:00 a.m., on November 2, 1998, at the Sands Regency Hotel/Casino, 345 North
Arlington Avenue, Reno, Nevada, for the following purposes:
1. To elect two (2) directors each to serve for a three-year term.
2. To approve an amendment to the Company's Amended and Restated Stock
Option Plan for Executive and Key Employees of The Sands Regent.
3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on September 23,
1998, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting and any adjournments thereof.
All shareholders are cordially invited to attend the meeting in person.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE PROMPTLY SIGN, DATE AND MAIL
THE ENCLOSED PROXY CARD IN THE ENCLOSED RETURN ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. Returning your proxy card does not
deprive you of your right to attend the meeting and vote your shares in person.
By Order of the Board of Directors
PETE CLADIANOS III, Secretary
September 24, 1998
<PAGE> 3
[LOGO OF THE SANDS REGENT]
345 NORTH ARLINGTON AVENUE
RENO, NEVADA 89501
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 2, 1998
The accompanying Proxy is solicited by the Board of Directors of The Sands
Regent (the "Company") for use at the Annual Meeting of Shareholders to be held
at the Sands Regency Hotel/Casino, 345 North Arlington Avenue, Reno, Nevada, on
November 2, 1998 at 10:00 a.m. and at any and all adjournments or postponements
thereof. All shares represented by proxies will be voted in the manner
designated. If no designation is made on a proxy, it will be voted FOR the
election of the two nominees for election to the Board of Directors listed in
the proxy and for approval of the amendment to the Company's Amended and
Restated Stock Option Plan for Executives and Key Employees. THIS PROXY
STATEMENT AND THE ACCOMPANYING FORM OF PROXY ARE BEING MAILED TO THE
SHAREHOLDERS ON OR ABOUT OCTOBER 5, 1998.
Execution and delivery of the enclosed proxy will not affect the right of
any person to attend the meeting and vote in person. Any shareholder giving a
proxy has the power to revoke it at any time before it is voted by delivery of a
written instrument of revocation or a duly executed proxy bearing a later date
to the Secretary of The Sands Regent, 345 North Arlington Avenue, Reno, Nevada
89501. The presence of a shareholder at the meeting will not operate to revoke a
proxy, but the casting of a ballot by a shareholder who is present at the
meeting will revoke a proxy as to the matter on which the ballot is cast.
Votes cast by proxy or in person at the Annual Meeting will be counted by
persons appointed by the Company to act as election inspectors for the meeting.
The election inspectors will treat shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and for purposes of determining the outcome
of any matter submitted to the stockholders for a vote. Thus, abstentions have
the effect of a vote "against" the matters to which the abstention has been
cast.
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, for purposes of determining the outcome of any
matter as to which the broker or nominee has physically indicated on the proxy
that it does not have discretionary authority to vote, those shares will be
treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered entitled to vote for quorum purposes
and may be entitled to vote on other matters). Thus, "broker non-votes" do not
constitute a vote "for" or "against" any matter.
<PAGE> 4
Notwithstanding the above, for purposes of determining the outcome of any
matter as to which the broker or nominee who does not have discretion to vote
has delivered a proxy but has failed to physically indicate on the proxy the
lack of authority to vote, the shares will be treated as present and will be
voted in accordance with the instructions on the proxy card (i.e., as a vote FOR
the director nominees named herein and for the amendment to the Company's
Amended and Restated Stock Option Plan for Executives and Key Employees).
SOLICITATION EXPENSES
The cost of this solicitation will be borne by the Company. In addition to
the mails, the Company's officers, directors and other regular employees,
without additional compensation, may solicit Proxies personally or by other
appropriate means.
VOTING SECURITIES
Only shareholders of record at the close of business on September 23, 1998,
will be entitled to vote at the meeting. The outstanding voting securities of
the Company on that date were 4,498,722 shares of $0.05 par value Common Stock.
Each of the outstanding shares will be entitled to one vote.
PRINCIPAL SHAREHOLDERS
The following table sets forth as of September 23, 1998, all persons, other
than the nominees for director and continuing directors as set forth under
"Directors and Executive Officers" herein, known by the Company to own
"beneficially," as such term is defined in the Rules of the Securities and
Exchange Commission, more than 5% of the Company's outstanding shares of Common
Stock. Except to the extent indicated in the footnotes to the following table,
the person or entity listed has sole voting or dispositive power with respect to
the shares which are deemed beneficially owned by such person or entity.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------ --------
<S> <C> <C>
Deborah Lundgren(1) 688,678 15.3%
c/o Doug Damon, CPA
5301 Longley Lane, Bldg. D-142
Reno, Nevada 89511
Dimensional Fund Advisors, Inc. 273,648(2) 6.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Stephen Feinberg 382,800(3) 8.5%
450 Park Avenue, 28th Floor
New York, New York 10022
</TABLE>
- ---------------
(1) Ms. Lundgren is the daughter of Katherene Latham, Chairman of the Board of
Directors, and niece of Pete Cladianos, Jr., Vice Chairman of the Board of
Directors.
(2) Held with shared voting power as to 87,892 shares.
(3) 96,600 shares are owned by Cerberus Partners, L.P., a Delaware limited
partnership; 140,800 shares are owned by Cerberus International, Ltd., a
corporation organized under the laws of the Bahamas; and 18,300 shares are
owned by Ultra Cerberus Fund, Ltd., a corporation organized under the laws
of the Bahamas all over which Mr. Feinberg possesses sole voting and
dispositive power. 127,100 shares are owned by certain other private
investment funds for which Stephen Feinberg possesses dispositive power.
2
<PAGE> 5
\
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Articles of Incorporation allow for not less than three nor
more than nine directors. The number of directors is currently set at eight
members as provided by the Company's Bylaws. There is presently one vacancy. In
accordance with the Articles of Incorporation, members of the Board of Directors
have been divided into three classes with approximately the same number of
directors in each class. Each year one class of Directors shall be elected to
hold office until their respective successors have been duly elected and
qualified. All Directors elected shall serve until their successors shall have
been duly elected and qualified. The nominees securing the highest number of
votes, up to the number of directors elected, will be elected as directors. All
Proxies received by the Board of Directors will be voted for the election, as
directors, of the nominees listed below if no direction to the contrary is
given. In the event that any nominee is unable or declines to serve, an event
that is not anticipated, the Proxies will be voted for the election of any
nominee who may be designated by the Board of Directors.
All of the Continuing Directors were elected by the shareholders and the
Director Nominees were appointed by the Board of Directors. Information
regarding the nominees for election and the Continuing Directors and executive
officers, furnished in part by each such person, appears below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE.
DIRECTOR NOMINEES
<TABLE>
<CAPTION>
EXPIRATION SHARES PERCENT OF
DIRECTOR OF NEW TERM BENEFICIALLY COMMON
NAME(1) SINCE AS DIRECTOR OWNED(2) STOCK
- ------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Ferenc B. Szony 12/97 2001 -- *
Louis J. Phillips 5/98 2001 -- *
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
EXPIRATION SHARES PERCENT OF
DIRECTOR OF TERM BENEFICIALLY COMMON
NAME(1) SINCE AS DIRECTOR OWNED(2) STOCK
- ------- -------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Jon N. Bengtson(3) 8/84 2000 17,002 *
Pete Cladianos, Jr.(4)(5) 8/84 1999 1,058,175 23.4%
Pete Cladianos III(4)(6) 11/85 1999 16,909 *
Katherene Latham(4) 8/84 1999 321,560 7.1%
David R. Wood 7/85 2000 6,830 *
All Officers and Directors
as a group (7 persons) 1,420,476 31.5%
</TABLE>
- ---------------
* Less than 1%
(1) The address of the Director Nominees and Continuing Directors is c/o The
Sands Regent, 345 North Arlington Avenue, Reno, Nevada 89501.
(2) Held directly and with sole voting and investment power unless otherwise
indicated.
(3) Includes 12,000 shares subject to options which are presently exercisable.
(4) Pete Cladianos, Jr. and Katherene Latham are brother and sister. Pete
Cladianos III, Antonia Cladianos II and Leslie Cladianos are the son and
daughters of Pete Cladianos, Jr. and Allison Cladianos is the daughter of
Pete Cladianos III.
(5) Includes 386,286 shares held in trusts for the benefit of Pete Cladianos
III, 375,500 shares held in trusts for the benefit of Antonia Cladianos II,
254,596 shares held in trusts for the benefit of Leslie Cladianos and 23,565
shares held in a trust for the benefit of Allison Cladianos. Mr. Cladianos,
as trustee for such trusts, exercises sole voting and investment power.
(6) Includes 16,909 shares held in a trust for the benefit of Bradley Cladianos,
son of Pete Cladianos III.
3
<PAGE> 6
DIRECTOR BIOGRAPHIES
FERENC B. SZONY (age 43) was appointed President and Chief Executive
Officer and a Director of the Company in December 1997. Prior to December 1997,
Mr. Szony was affiliated with Hilton Hotels Corporation for sixteen years. From
November 1994 to March 1997 he served as President of the Reno Hilton Resort,
northern Nevada's largest hotel/casino, and from July 1992 to November 1994 as
President of the Flamingo Hilton, Reno. Mr. Szony served in various marketing
and management positions with Hilton in Nevada and California beginning in June
1981. From March 1997 to December 1997, Mr. Szony was an independent gaming
consultant.
LOUIS J. PHILLIPS (age 61) was appointed to the Board of Directors of the
Company in May 1998. Since 1995, Mr. Phillips has been the Mead Dixon
Distinguished Professor of Gaming Management at the University of Nevada, Reno.
Prior to such appointment, from 1993 to 1995, Mr. Phillips served as President
and Chief Operating Officer of Harrah's Nevada. From 1989 to 1993, Mr. Phillips
was Senior Vice President and General Manager of Harrah's Lake Tahoe and, from
1983 to 1988, was Senior Vice President of Human Resources at Harrah's corporate
level. From 1981 to 1983, Mr. Phillips also served as an executive management
consultant to Harrah's. Prior to 1981, Mr. Phillips was a member of a management
consulting group based in Washington D.C.
JON N. BENGTSON (age 54) has served as a Director of the Company since
August 1984. Since January 1998, Mr. Bengtson has been the President and Chief
Operating Officer of U-Tel, Inc., a telecommunications company, and since
January 1996, has served as Chairman of the Board of Directors of Radica Games,
Limited. From January 1996 to January 1998, Mr. Bengtson served as Executive
Vice President and Chief Operating Officer of the Company. From January 1993 to
January 1996, Mr. Bengtson held various positions with Radica Games, Limited,
including Executive Vice President, Chief Operating Officer and Chief Financial
Officer and served as President and Chief Executive Officer of Radica USA since
December 1994. Mr. Bengtson also served as Executive Vice President of the
Company from November 1991 to December 1994, Senior Vice President of the
Company from November 1985 to November 1991 and Vice President -- Finance and
Administration and Treasurer of the Company from May 1984 to July 1985. From
July 1985 to November 1985, Mr. Bengtson served as Executive Vice President and
a Director of Stride Micro, a computer hardware development/sales company. Prior
to May 1984, Mr. Bengtson served, for almost four years, in various corporate
officer capacities with International Game Technology and was a Director from
May 1981 to May 1984.
PETE CLADIANOS, JR. (age 68) has been Vice Chairman of the Board of
Directors since December 1997 and was previously President, Chief Executive
Officer and a Director of the Company or its predecessor since 1978. Mr.
Cladianos has been involved in the gaming and lodging industries in Reno for
over 44 years.
PETE CLADIANOS III (age 39) became an Executive Vice President of the
Company in January 1996, Secretary in August 1984, and was elected as a Director
in November of 1985. From February 1987 to January 1996, Mr. Cladianos served as
Vice President of the Company and was Treasurer from 1983 to 1984. Mr. Cladianos
joined the Company's predecessor in 1982 as an internal auditor, became outside
property manager in July 1983, and the cage and credit manager in September
1984.
KATHERENE LATHAM (age 67) has been Chairman of the Board of Directors of
the Company since August 1984. Ms. Latham also served as Executive Vice
President until November of 1991 and was Vice President of the Company's
predecessor in 1982 and from January to August of 1984, and has been a Director
of the Company or its predecessor since 1978. From 1978 to 1984, Ms. Latham was
Secretary of the Company's predecessor. Ms. Latham has been involved in the
gaming and lodging industries in Reno for over 42 years.
DAVID R. WOOD (age 46) has been Executive Vice President, Treasurer and
Chief Financial Officer of the Company since January 1996 and a Director since
joining the Company in 1985. From July 1985 to January 1996, Mr. Wood served as
Vice President -- Finance and Administration, Chief Financial Officer, and
Treasurer of the Company. Prior to joining the Company, Mr. Wood, a certified
public accountant, was in public accounting for over 9 years and was a partner
in a Nevada based public accounting firm. Mr. Wood specialized in hotel/casino
accounting and auditing while in public accounting and is an enrolled agent
before the Nevada Gaming Authorities.
4
<PAGE> 7
INFORMATION RELATING TO THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD
MEETINGS AND ATTENDANCE
The Board of Directors of the Company held four meetings during the fiscal
year ended June 30, 1998. Each Director attended at least 75% of the aggregate
number of meetings of the Board of Directors and all committees on which each
served during fiscal 1998 or the portion of the year during which each served as
Director.
COMMITTEES
The Board of Directors of the Company has, in addition to its Executive
Committee (whose present members are Pete Cladianos, Jr. and Katherene Latham),
which may exercise all powers of the Board of Directors to the extent permitted
by law, an Audit Committee, an Executive Compensation Committee and a Special
Stock Grant Committee. The Board does not have a nominating committee. The
general functions of such Board Committees, the identity of each committee
member and the number of committee meetings held by each committee during the
last fiscal year are set forth below. The Executive Committee held no formal
meetings during fiscal 1998.
Audit Committee. The Audit Committee meets with the Company's independent
auditors and makes recommendations to the Board of Directors concerning
acceptance of the reports of such auditors and reviews and make recommendations
to the Board concerning the accounting policies and procedures of the Company.
The current members of the Audit Committee are Messrs. Bengtson and Phillips,
both independent Directors. There was one meeting held during fiscal 1998.
Executive Compensation Committee. The Executive Compensation Committee
determines the compensation of all principal officers other than the Chairman of
the Board of Directors, the President and the Executive Vice Presidents. The
Committee also administers the Company's stock option plan and the deferred
compensation plan for the Company Directors. The current members of the
Executive Compensation Committee are Pete Cladianos, Jr. and Katherene Latham.
There were no meetings held during fiscal 1998.
Special Stock Grant Committee. A Special Stock Grant Committee, whose sole
duty shall be to consider and grant stock options to officers, has been
appointed in order to comply with the requirements of Rule 16b-3 of the Security
Exchange Act of 1934, as amended. The members of such Committee shall be
non-employee directors within the meaning of the aforementioned Rule 16b-3 and
are presently Jon N. Bengtson and Louis J. Phillips. There were no formal
meetings held during fiscal 1998.
COMPENSATION OF INDEPENDENT DIRECTORS
Directors who are officers or employees of the Company do not receive
compensation for their services as Directors. The Directors, who are not
employees of the Company ("Independent Directors"), are to receive as
compensation for services: (i) a $6,000 annual retainer; (ii) $1,000 for each
Board of Directors meeting attended; (iii) $300 for each Board committee meeting
attended on the same date as a Board meeting; and (iv) $500 for each Board
committee meeting attended on a date when there is no Board meeting. In the
fiscal year ended June 30, 1998, Louis J. Phillips, appointed in May 1998,
earned $2,500, Jon N. Bengtson earned $4,500 and the two former Independent
Directors, who tendered their resignations during the year, earned $6,300 and
$7,300, respectively. Mr. Phillips was also granted a stock option to purchase
10,000 shares of the Company's Common Stock at $2.12 per share which was the
fair market value on the date of grant. Such option to purchase Common Stock is
fully vested in May 1999.
Subject to the approval of shareholders at the November 2, 1998 Annual
Meeting, the Board of Directors has approved an amendment to the Company's
Amended and Restated Stock Option Plan for Executive and Key Employees, as more
fully described herein, to permit the grant of non-qualified stock options to
Independent Directors. Upon initial election or appointment as an Independent
Director, the Board may grant stock options to purchase up to 25,000 shares of
the Company's Common Stock. Thereafter, on the date of the Annual Meeting of
Shareholders, each Independent Director shall receive an automatic stock option
grant to purchase 7,500 shares of the Company's Common Stock with an exercise
price equal to fair market value on the date of grant. All options vest in full
on the anniversary date of each grant and are subject to other conditions and
restrictions as more fully set forth in the amendment included in the attached
Appendix A.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION OF NAMED OFFICERS
The following table sets forth information concerning the compensation for
services in all capacities to the Company, for the fiscal years ended June 30,
1998, 1997 and 1996, of those persons who were, respectively, at June 30, 1998
(i) the Company's Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company whose annual salary and bonus for
the fiscal year ended June 30, 1998 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND -------------------------- OPTIONS GRANTED
PRINCIPAL POSITION YEAR SALARY BONUS (SHARES)(1)
------------------ ---- -------- ------ ---------------
<S> <C> <C> <C> <C>
Ferenc B. Szony(2) 1998 $117,692 $ -- 100,000
President and Chief Executive Officer 1997 -- -- --
1996 -- -- --
Pete Cladianos, Jr. 1998 244,064 -- --
Vice Chairman of the Board of Directors 1997 361,076 -- --
1996 364,110 -- --
Jon N. Bengtson(3) 1998 109,577 -- --
Former Executive Vice President and 1997 183,399 -- --
Chief Operating Officer 1996 83,385 -- 60,000
David R. Wood 1998 153,378 -- 144,000(4)
Executive Vice President, 1997 155,643 -- --
Treasurer and Chief Financial Officer 1996 157,000 8,197 60,000
Pete Cladianos III 1998 122,702 -- 60,000(4)
Executive Vice President and Secretary 1997 124,514 -- --
1996 125,600 8,197 60,000
</TABLE>
- ---------------
(1) The Company has not issued stock appreciation rights or restricted stock
awards.
(2) Mr. Szony was named President and Chief Executive Officer in December 1997.
(3) Mr. Bengtson retired as Executive Vice President and Chief Operating Officer
in January 1998.
(4) On December 12, 1997, the Company repriced certain outstanding stock options
with original exercise prices ranging from $3.50 to $12.62 per share by
amending the terms of such options to provide for an exercise price of $1.81
per share. In connection with such repricing, each of Messrs. Wood and
Cladianos III had previously granted options for 144,000 and 60,000 shares,
respectively, repriced. See "Stock Options Repriced in Last Fiscal Year."
6
<PAGE> 9
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
the Named Officers pursuant to the Company's Amended and Restated Stock Option
Plan for Executive and Key Employees during the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PER SHARE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR 1998 EXERCISE PRICE DATE 5% 10%
---- ---------- ---------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ferenc B. Szony(2)......... 100,000 25% 1.81 12/12/07 $114,000 $288,000
David R. Wood(3)(4)........ 144,000 37% 1.81 12/12/07 164,000 415,000
Pete Cladianos III(3)(5)... 60,000 15% 1.81 12/12/07 68,000 173,000
</TABLE>
- ---------------
(1) The options have a ten year term and are generally exercisable commencing 12
months after the grant date. Includes options that were granted or repriced
during fiscal 1998.
(2) Options to purchase 50,000 shares, each, vest on December 12, 1998 and 1999.
(3) On December 12, 1997, the Company repriced certain outstanding stock
options. Pursuant to such repricing, the exercise price of options
previously granted to each of Messrs. Wood and Cladianos III for 144,000 and
60,000 shares, respectively, were repriced at $1.81. See "Stock Options
Repriced in Last Fiscal Year."
(4) Options to purchase 108,000 shares vest on December 12, 1998. Options to
purchase the remaining 36,000 shares vest in three equal, annual
installments commencing on December 12, 1999.
(5) Options to purchase 24,000 shares vest on December 12, 1998. Options to
purchase the remaining 36,000 shares vest in three equal, annual
installments commencing on December 12, 1999.
STOCK OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during fiscal 1998 and, based upon
the fair market value of the Common Stock as of June 30, 1998, stock options
held as of the end of fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS FOR FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END AT JUNE 30, 1998(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ferenc B. Szony................ -- -- -- 100,000 $ -- $6,300
David R. Wood.................. -- -- -- 144,000 -- 9,100
Pete Cladianos, III............ -- -- -- 60,000 -- 3,800
Jon N. Bengtson................ -- -- 12,000 -- -- --
</TABLE>
- ---------------
(1) Market value of the underlying securities at fiscal year-end, minus the
exercise price of "in-the-money" options.
STOCK OPTIONS REPRICED IN LAST FISCAL YEAR
The Company's Amended and Restated Stock Option Plan for Executive and Key
Employees of the Sands Regent was adopted to attract, retain and motivate
executive and key employees of the Company and to align the interests of these
executive and key employees with those of the shareholders of the Company.
The Special Stock Option Grant Committee (the "Committee") of the Board of
Directors determined that an imbalance existed between the exercise prices under
many of the outstanding stock options and the prevailing market price for the
Common Stock, thereby negating the effectiveness of the stock options to retain
and motivate executives and key employees. To restore that effectiveness and to
coincide with the grant of stock options to the newly appointed President and
Chief Executive Officer, the Committee repriced certain outstanding incentive
stock options with original exercise prices ranging from $3.50 to $12.63 per
share and
7
<PAGE> 10
covering 254,000 shares with repriced options having an exercise price of $1.81
per share (the fair market value on December 12, 1997, the date of the
repricing) and covering 254,000 shares (204,000 shares to the Named Officers).
At the time of repricing, options to purchase 108,000 shares of Common
Stock, with respect to the Named Officers, were fully vested. After repricing,
the options to purchase the 108,000 shares of Common Stock shall vest on the
first anniversary of the repricing. The remaining repriced options shall vest in
four equal annual installments, covering 24,000 shares each, commencing on the
first anniversary of the repricing. The following table sets forth stock option
repricing information with respect to the Named Officers:
<TABLE>
<CAPTION>
MARKET
NUMBER OF PRICE EXERCISE
SECURITIES OF STOCK AT PRICE LENGTH OF ORIGINAL
UNDERLYING TIME OF AT TIME OF OPTION TERM
OPTIONS REPRICING REPRICING REMAINING AT DATE
REPRICED OR OR OR NEW EXERCISE OF REPRICING
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE OR AMENDMENT
---- -------- ----------- ----------- ---------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
David R. Wood 12/12/97 24,000 $1.81 $12.63 $1.81 5 Years, 42 Days
12/12/97 60,000 1.81 6.25 1.81 2 Years, 267 Days
12/12/97 60,000 1.81 3.50 1.81 8 Years, 133 Days
Pete Cladianos, III 12/12/97 60,000 1.81 3.85 1.81 8 Years, 133 Days
</TABLE>
EMPLOYMENT AND OTHER ARRANGEMENTS
Mr. Ferenc B. Szony entered into a two-year employment agreement on
December 12, 1997 pursuant to which Mr. Szony agreed to serve as President and
Chief Executive Officer of the Company. Under the terms of the agreement, Mr.
Szony is to be paid a base salary of $225,000 per annum. In addition, Mr. Szony
received incentive stock options to purchase 100,000 shares of Common Stock,
which vest equally over two years, pursuant to the Company's Amended and
Restated Stock Option Plan for Executive and Key Employees of The Sands Regent.
Mr. Szony is also eligible to receive an annual bonus of up to 75% of his base
salary depending on the successful financial performance of the Company.
The agreement with Mr. Szony also provides that if Mr. Szony's employment
with the Company is terminated by the Company for any reason other than for
cause, disability or retirement (each, as defined) or by Mr. Szony for good
reason (as defined) within three years after a change in control (as defined) of
the Company. Mr. Szony shall be entitled to receive (a) a lump sum payment equal
to three times (x) the greater of (1) Mr. Szony's annual base compensation for
the 12-month period prior to the change in control or (2) Mr. Szony's annual
base compensation at the time of the termination and (y) any bonus paid during
the 12-month period immediately preceding the termination, and (b) life,
disability, accident and health insurance coverage substantially the same as Mr.
Szony received immediately prior to the change in control, but increased to the
extent that such benefits were increased following the change in control for 36
months (or such lesser number of months up to the date of Mr. Szony's retirement
or the date on which Mr. Szony obtains a new job of similar status). In
addition, upon such a termination, all options held by Mr. Szony shall be
immediately exercisable and all restrictions on transfer, if any, on securities
then held by Mr. Szony shall lapse. In the event that any payment or benefit
received pursuant to the agreement with Mr. Szony would not be deductible (in
whole or in part) by the Company as a result of the operation of Section 280G of
the Internal Revenue Code, the amount of any such payments or benefit shall be
reduced until no portion of the payment or benefit is not deductible as a result
of Section 280G.
The Company has also entered into an agreement with Mr. Wood which provides
that if Mr. Wood's employment with the Company is terminated by the Company for
any reason other than for cause, disability or retirement (each, as defined) or
by Mr. Wood for good reason (as defined) within three years after a change in
control (as defined) of the Company, Mr. Wood shall be entitled to receive (a) a
lump sum payment equal to three times (x) the greater of (1) Mr. Wood's annual
base compensation for the 12-month period prior to the change in control or (2)
Mr. Wood's annual base compensation at the time of the termination and (y) any
bonus paid during the 12-month period immediately preceding the termination, and
(b) life, disability, accident and health insurance coverage substantially the
same as Mr. Wood received immediately prior to the change in control but
increased to the extent the such benefits were increased following the change in
control for 36 months (or such lesser number of months up to the date of Mr.
Wood's
8
<PAGE> 11
retirement or the date on which Mr. Wood obtains a new job of similar status).
In addition, upon such a termination, all options held by Mr. Wood shall be
immediately exercisable and all restrictions on transfer, if any, on securities
then held by Mr. Wood shall lapse. In the event that any payment or benefit
received pursuant to the agreement with Mr. Wood would not be deductible (in
whole or part) by the Company as a result of the operation of Section 280G of
the Internal Revenue Code, the amount of any such payments or benefit shall be
reduced until no portion of the payment or benefit is not deductible as a result
of Section 280G.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Executive
Compensation Report and the Stock Price Performance Graph on Page 11 shall not
be incorporated by reference into any such filings.
EXECUTIVE COMPENSATION REPORT
The Executive Compensation Committee of the Board of Directors (the
"Committee"), whose present members are Pete Cladianos, Jr. and Katherene
Latham, is empowered, pursuant to the Company's By-laws, to determine the
compensation of all executive officers other than the Chairman of the Board, the
President and the Executive Vice Presidents. Such committee shall also
administer the Company's Amended and Restated Stock Option Plan for Executive
and Key Employees and the Company's Deferred Compensation Plan for Directors.
The Executive Compensation Committee may not grant stock options to officers.
In order to comply with the requirements of Rule 16b-3 of the Security
Exchange Act of 1934, as amended, a Special Stock Grant Committee (the "Special
Committee") has been appointed whose sole duty shall be to consider and to grant
stock options to officers. Such Special Committee, whose present members are
Louis J. Phillips and Jon N. Bengtson, shall be composed of non-employee
directors within the meaning of the aforementioned Rule 16b-3.
Compensation for the Chairman of the Board, the President and the Executive
Vice Presidents is reviewed and established, from time to time, by the Board of
Directors. It is a policy of the Board that such Executive Officers shall not
participate in any Board decision relative to such respective person's
compensation.
The Company's executive compensation policy and philosophy is multifaceted.
Such compensation program seeks to provide salaries that are competitive in the
marketplace and designed to attract and retain highly-qualified executives. In
addition, the program is designed to closely link certain compensation received
by individuals to the performance of the Company and, in certain instances, the
achievement of individual goals. Recognition is also given to an executive's
individual performance. The Company's executive compensation program
additionally establishes motivational incentives by providing the executive with
a financial interest in the success of the Company similar to the interests of
the Company's shareholders.
Consistent with the aforementioned policy and philosophy, the Company's
current compensation plan involves a combination of salary and bonuses to reward
short-term performance and grants of stock options to encourage and reward
longer-term performance. The key performance criterion in determining bonus
payments is the levels of income from operations attained by the Company.
Appropriate adjustments are considered, from time to time, to take into account
market conditions and other factors impacting the Company's performance. The
levels of supervisory or management responsibilities of the Company's executives
and individual performances are also given significant consideration.
The Company's primary long-term incentive program consists of stock options
that are intended to encourage achievement of long-term goals and objectives
consistent with results that benefit stockholders. These objectives include, but
are not limited to, operating profitability, earnings per share growth, return
on invested capital and return on shareholders' equity. Such stock option grants
are intended to provide executives and key employees with increased motivation
and incentive to exert their best efforts on behalf of the Company by enlarging
their personal stake in its success through the opportunity to acquire an
increased stock ownership in the Company and to benefit from appreciation in the
value of the Company's stock. In
9
<PAGE> 12
making such awards, the Special Committee takes into account such other factors
as it deems appropriate to a determination of the individual optionee's value to
the Company and his potential contribution to its long-term success. The
practice of the Special Committee has been to issue all stock options at
exercise prices of not less than the market value of the Company's Common Stock
on the date of grant, thus insuring that any value derived from such options
will depend on subsequent increases in share value realized by shareholders
generally.
The Revenue Reconciliation Act of 1993, enacted August 10, 1993, amended
the Internal Revenue Code of 1986 and included a provision which denies a
deduction to any publicly held corporation for compensation paid to any "covered
employee" (which are defined as the Chief Executive Officer and the Company's
other four most highly compensated officers, as of the end of a taxable year) to
the extent that the compensation exceeds $1 million in any taxable year of the
corporation beginning after 1993. Compensation which is payable pursuant to
written binding agreements entered into before February 18, 1993 and
compensation which constitutes "performance based compensation" is excludable in
applying the $1 million limit. Although the present compensation paid to any
"covered employee" by the Company is presently less than the $1 million limit,
it is the Company's policy to qualify future compensation paid to its top
executives for deductibility under the new law in order to maximize the
Company's income tax deductions to the extent that so qualifying the
compensation is not inconsistent with the Company's fundamental compensation
policies.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During the fiscal year ended June 30, 1998, the compensation of the
Company's Chief Executive Officer, Ferenc B. Szony, was a base salary of
$225,000 pursuant to a two-year employment agreement entered into on December
12, 1997. Under such agreement, Mr. Szony is also eligible to receive an annual
performance bonus of up to 75% of his base salary in the event the Company
attains certain levels of successful operating results. In addition, Mr. Szony
was granted incentive stock options to purchase 100,000 shares of the Company's
Common Stock. Such options vest equally over two years and are subject to the
terms and conditions of the Company's Amended and Restated Stock Option Plan for
Executive and Key Employees of The Sands Regent.
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION SPECIAL STOCK
COMMITTEE GRANT COMMITTEE BOARD OF DIRECTORS
- ---------------------- ---------------- ------------------
<S> <C> <C>
Katherene Latham Louis J. Phillips Katherene Latham
Pete Cladianos, Jr. Jon N. Bengtson Pete Cladianos, Jr.
Ferenc B. Szony
Louis J. Phillips
Pete Cladianos III
Jon N. Bengtson
David R. Wood
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors is responsible for the compensation policies of the
Company with respect to its current executive officers. All of the members of
the Board, except Messrs. Bengtson and Phillips, are employees of the Company.
No member of the Board participates in the determination of his or her own
compensation.
10
<PAGE> 13
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
shareholder return of the Company's Common Stock during the previous five years
in comparison to the cumulative total return on the NASDAQ Stock Market-U.S.
Index and the Dow Jones Casinos index. The comparisons are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE SANDS REGENT, THE NASDAQ STOCK MARKET -- US INDEX
AND THE DOW JONES CASINOS INDEX
<TABLE>
<CAPTION>
NASDAQ STOCK DOW JONES THE SANDS
MARKET (U.S.) CASINO REGENT
------------- --------- ---------
<S> <C> <C> <C>
JUN-93 100.00 100.00 100.00
JUN-94 78.30 100.96 73.15
JUN-95 131.14 134.77 32.26
JUN-96 170.71 173.03 31.72
JUN-97 123.81 210.38 19.82
JUN-98 112.87 277.69 12.69
</TABLE>
- ---------------
* $100 invested on June 30, 1993 in stock or index including reinvestment of
dividends. Fiscal year ending June 30.
COMPLIANCE WITH SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten (10)
percent of a registered class of the Company's equity securities (collectively,
"Insiders"), to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "Commission") and the
Nasdaq Stock Market. Insiders are required by regulation of the Commission to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with
respect to fiscal 1998, or written representations from certain reporting
persons, the Company believes that its Insiders complied with all Section 16(a)
filing requirements.
11
<PAGE> 14
APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED STOCK OPTION
PLAN FOR EXECUTIVE AND KEY EMPLOYEES OF THE SANDS REGENT
On August 17, 1998, the Board of Directors of the Company (the "Board")
unanimously authorized an amendment (the "Amendment") to the Amended and
Restated Stock Option Plan for Executive and Key Employees of the Sands Regent
(the "Option Plan"). Subject to shareholder approval, the Amendment provides
generally: (i) for the automatic grant of options to members of the Board who
are not employees of the Company ("Independent Directors") on an annual basis;
and (ii) for expanded means of paying the aggregate exercise price and any
applicable withholding taxes in connection with the exercise of options granted
under the Option Plan after the effective date of the Amendment. If the
Amendment is approved by the shareholders, the effective date of the Amendment
will be August 17, 1998.
The summary of the provisions of the Amendment and Option Plan that follows
is not intended to be complete, and reference should be made to the Amendment
and the Option Plan for complete statements of the terms and provisions. The
Amendment is set forth in Appendix A to this Proxy Statement. Due to its length,
the Option Plan is not included with the Proxy Statement. To obtain a copy of
the Option Plan, send a written request to the Company, 345 N. Arlington Avenue,
Reno, Nevada 89501, Attention: Investor Relations.
BACKGROUND, GENERAL NATURE AND PURPOSE OF THE OPTION PLAN
The Company's Option Plan was originally adopted by the Board and approved
by the Company's shareholders in January 1985. In 1992, the Board and
shareholders approved a restatement of the Option Plan that included an
amendment increasing the number of shares reserved for issuance under the Option
Plan from 300,000 to 500,000 and conforming certain provisions to the
requirements of Rule 16b-3 adopted under the Securities Exchange Act of 1934, as
amended ("Rule 16b-3"). In 1997, the Board and shareholders approved an
amendment to the Option Plan that increased the number of shares reserved for
issuance under the Option Plan from 500,000 to 800,000, extended the expiration
date of the Option Plan from September 16, 2002 to August 4, 2007 and conformed
certain provisions of the Option Plan to the revised requirements of Rule 16b-3.
The Company intends to restate the Option Plan to incorporate all of the
foregoing amendments.
The principal purpose of the Option Plan is to attract and retain the
services of experienced and capable persons who can make significant
contributions to the further growth and success of the Company and its
affiliates. The Option Plan authorizes the grant of incentive stock options and
non-qualified stock options to purchase shares of its Common Stock to officers
and key employees of the Company and the Company's subsidiaries. Incentive stock
options are designed to meet the requirement of the Internal Revenue Code of
1986, as amended (the "Code"). The Amendment would authorize the grant of
non-qualified options to independent directors of the Company.
The Option Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, and is not a qualified plan under
Section 401 (a) of the Internal Revenue Code of 1986, as amended. Proceeds
received by the Company from the sale of Common Stock pursuant to the Option
Plan will be used for general corporate purposes.
GENERAL DESCRIPTION OF THE AMENDMENT
The Amendment provides generally for the automatic grant to Independent
Directors of the Company of options to purchase 7,500 shares on the date of each
Annual Meeting of Shareholders on which such person continues as an Independent
Director of the Company, commencing with this 1998 Annual Meeting of
Shareholders. Independent Directors first appointed or elected to the Board
after the effective date of the Amendment (i.e., August 17, 1998) may be also
initially granted by the Board an option to purchase up to 25,000 shares. The
terms of the options to be granted to these directors are summarized below. The
Board adopted the automatic grant provisions in order to remain competitive for
the services of knowledgeable, experienced and skilled independent directors.
The Amendment also expands the means by which all optionees may pay the
exercise price and tax withholding obligations associated with the exercise of
options granted under the Option Plan after the effective date of the Amendment.
The expanded means for exercise are comparable to those found in the
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<PAGE> 15
stock option plans of many of the Company's competitors and other publicly held
companies. These expanded means for paying the exercise price and tax
withholding obligations are subject to prior approval of the committee
administering the Option Plan and include delivery of already owned shares of
the Company's stock, surrender to the Company of shares issuable upon exercise
of the option, proceeds from the sale by a broker of shares issuable upon
exercise, and the delivery to the Company of a full-recourse promissory note.
The Option Plan constitutes an important part of the Company's compensation
programs. In order to attract and retain the services of experienced and capable
persons who can make significant contributions to the further growth and success
of the Company, the Board believe that it is in the best interest of the Company
and its shareholders to approve the Amendment.
DESCRIPTION OF THE OPTION PLAN
Share Issuable under the Option Plan
A maximum of 800,000 shares of the Company's Common Stock, $0.05 par value,
are reserved for issuance under the Option Plan. The Plan provides for
appropriate adjustment in the number and kind of shares for which options may be
granted in the event of a stock split, stock dividend, reorganization or other
specified changes in the capitalization of the Company. Shares issued pursuant
to the Option Plan may be either previously authorized but unissued shares or
issued shares which have been reacquired by the Company. Any unexercised and
canceled or forfeited options may be reissued under the Option Plan at a future
date.
Administration
The Option Plan is generally administered by the Executive Compensation
Committee of the Board. Option grants to officers, and Option Plan
administration with respect to officers, however, must be done in a manner
complying with the requirements of Rule 16b-3. Thus, the Special Stock Grant
Committee of the Board, which complies with the requirements of Rule 16b-3,
currently determines option grants to, and administers the Option Plan with
respect to, officers. The Amendment provides that the Board will administer the
Option Plan as to options granted to the Independent Directors. The Executive
Compensation Committee, the Special Stock Grant Committee or the Board, as
applicable, (collectively referred to herein as the "Committee") is authorized
to interpret the Option Plan and related options, to adopt such rules for the
administration, interpretation and application of the Option Plan as are
consistent therewith and to interpret, amend or revoke any such rules. The costs
of administering the Option Plan are paid by the Company.
Eligibility and Participation
General. All officers and other key employees of the Company and the
Company's subsidiaries are eligible to receive options under the Option Plan.
The Committee determines which employees of the Company and of the Company's
subsidiaries are officers or key employees to whom options under the Option Plan
should be granted. All option grants to persons who are officers of the Company
must be made in conformity with the requirements of Rule 16b-3, and are thus
granted by the Special Stock Grant Committee.
As of the record date, there were 410,000 outstanding options under the
Option Plan, with a weighted average exercise price of $1.90 per share. As of
such date, the following groups held the following options:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
GROUP SHARES EXERCISE PRICE
- ----- --------- ----------------
<S> <C> <C>
Officer Group............................................... 316,000 $ 1.87
Non-Officer Key Employee Group.............................. 94,000 $ 1.95
</TABLE>
As of the record date, the closing price of the Company's Common Stock
reported by the NASDAQ Stock Market was $1.13.
The Committee determines the number of shares of the Company's Common Stock
subject to option grants and whether the options are to be incentive stock
options or non-qualified stock options. The Committee may impose certain
conditions or restrictions on the grant of any options as it deems appropriate,
including the right to require the surrender of existing options for
cancellation as a condition to the grant of
13
<PAGE> 16
new options, on the same or different terms. The expiration date, maximum number
of shares purchasable, the conditions to exercise and the other provisions of
the individual stock option agreements are established by the Committee, in
conformity with the Option Plan, at the time of grant.
Automatic Option Grants to Independent Directors. The Amendment, which is
subject to shareholder approval at this Meeting, provides for the automatic
grant of non-qualified stock options to Independent Directors. If approved by
the shareholders, each person who serves as an Independent Director on the date
of this Annual Meeting will automatically be granted an option to purchase 7,500
shares, effective as of the Annual Meeting date. Further, each such Independent
Director will receive an annual grant of an option to purchase 7,500 shares on
the date of each subsequent Annual Meeting of Shareholders at which such person
continues as an Independent Director. Any person who first becomes an
Independent Director after the effective date of the Amendment may be granted,
effective as of initial appointment or election to the Board, an initial option
to purchase up to 25,000 shares, as determined by the Board. Thereafter, such
person shall automatically be granted an option to purchase 7,500 shares on the
date of each Annual Meeting succeeding his or her initial appointment or
election and at which such person continues as an Independent Director;
provided, however, no annual grant shall be made as to any Annual Meeting date
that is less than six months following the initial option grant. The exercise
price for all options granted to Independent Directors is equal to the fair
market value of the Company's Common Stock on the date such option is granted.
Options Price
The exercise price of the shares subject to options granted by the
Committee under the Option Plan is set by the Committee; provided, that the
exercise price shall be not less than the fair market value of the Company's
Common Stock on the date such option is granted. Further, in the case of an
incentive stock option granted to an individual then owning more than 10% of the
total combined voting power of all classes of stock of the Company or any
subsidiary of the Company, the exercise price per share shall not be less than
110% of the fair market value of the Company's Common Stock on the date such
option is granted.
Exercise of Options
Vesting. Options granted under the Option Plan are exercisable at such
times and in such installments (which may be cumulative) as the Committee shall
provide in the terms of each stock option agreement. Except as the Committee may
otherwise provide, no option may be exercised in whole or in part during the
first year after such option is granted. In general, options granted by the
Committee become exercisable in cumulative installments of 25% to 20% of the
shares covered by the option per year for four to five years, as applicable.
Options granted to Independent Directors, however, are exercisable in full on
the first anniversary of the date of option grant. No portion of an option which
is unexercisable upon the termination of employment or directorship, as
applicable, shall thereafter become exercisable.
Payment of Exercise Price and Applicable Withholding Taxes. Upon exercise,
the exercise price and any applicable withholding taxes must be paid in full.
Prior to the Amendment, the only means for payment of these sums was by check or
in cash. The Amendment provides for expanded means of payment of these sums,
each subject to the prior approval of the Committee. If the Amendment is
approved by the shareholders, optionees may, with approval of the Committee, pay
the exercise price and any applicable withholding taxes by: (i) cash or check;
(ii) delivery of shares of the Company's Common Stock which have been owned by
the optionee for at least six months; (iii) the surrender of shares of the
Company's Common Stock issuable upon exercise of the option having a fair market
value equal on the date of exercise equal to the aggregate exercise price (and
applicable withholding taxes, if any); (iv) delivery of a full recourse
promissory note bearing interest and payable on such terms as prescribed by the
Committee; (v) delivery of a notice that the optionee has placed a market sell
order with a broker with respect to the stock issuable upon exercise of the
option and that the broker has been directed to pay to the Company a portion of
the proceeds from such stock sale in satisfaction of the aggregate exercise
price (and applicable withholding taxes, if any), or (vi) any combination of the
foregoing.
14
<PAGE> 17
Shareholder Rights. An optionee shall not have the rights and privileges of
a shareholder of the Company with respect to exercised options unless and until
certificates representing the shares issuable upon such exercise of options have
been issued by the Company to such person.
Expiration and Termination of Options
The term of a non-qualified option may not exceed ten years and one day
from the date of option grant and the term of an incentive stock option may not
exceed ten years from the date of option grant (or five years in the case of an
individual owning more than 10% of the total combined voting power of stock of
the Company or any subsidiary of the Company). If earlier than the expiration
date, incentive stock options and options granted to Independent Directors
terminate one year from the date of the employee's termination of employment or
termination of directorship, as applicable, for any reason. If an incentive
stock option is exercised after three months following the date of the
employee's termination by reason other than death or permanent disability, the
option will not be considered an incentive stock option but will be treated and
taxed as a non-qualified stock option. Subject to the foregoing, the Committee
establishes when each option expires and becomes unexercisable, and the
Committee may provide that an option terminates upon termination of employment.
Options are Not Transferable
No option or interest therein or part thereof shall be subject to or liable
for the debts, contracts or engagements of the holder of the option or his or
her successors in interest, or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means,
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any legal or equitable proceedings
(including bankruptcy), and any attempted disposition shall be null and void and
of no effect; provided, however, that nothing in the Option Plan prevents
transfers by will or by the applicable laws of descent and distribution. During
the lifetime of the optionee, the option may be exercised only by such optionee.
Amendment, Suspension or Termination of the Option Plan
No option may be granted under the Option Plan after August 4, 2007. The
Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board. However, without the
approval of the Company's shareholders given within 12 months before or after
the action of the Board or the Committee, no action of the Committee or Board
may, except to accommodate certain changes in the Company's Common Stock,
increase the maximum number of shares which may be issued on exercise of
options, modify the eligibility requirements, reduce the minimum option price
requirements or extend the limit on the period during which options may be
granted. Neither the amendment, suspension or termination of the Option Plan
shall, without the consent of the holder of the option, alter or impair any
rights or obligations under an option theretofore granted. No option may be
granted during any period of suspension nor after termination of the Option
Plan.
Merger, Consolidation, Acquisition, Liquidation or Dissolution
In its absolute discretion, on such terms as it deems appropriate, the
Committee may provide in the terms of any stock option agreement that such
option cannot be exercised after the merger or consolidation of the Company with
or into another corporation, the acquisition by another corporation of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock or the liquidation or dissolution of the Company. The
Committee may also provide that, for some period of time prior to any such
event, such option shall be exercisable as to all shares covered thereby.
Adjustments Upon Changes in Capitalization
In the event that the outstanding shares of the Company's Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares, appropriate adjustments may
be made by the Committee in the number and kind of shares for which options
shall be granted and/or exercised.
15
<PAGE> 18
FEDERAL INCOME TAX CONSEQUENCES
Non-Qualified Stock Options
In general, optionees who hold non-qualified stock options do not recognize
income as a result of the grant of non-qualified stock options, but recognize
compensation, taxable at ordinary income rates, upon the options' exercise to
the extent that the fair market value of the stock on the date of the exercise
of the non-qualified stock option exceeds the option exercise price paid. The
optionee's initial tax basis for shares acquired upon the exercise of a
non-qualified stock option will be the option exercise price paid plus the
amount of ordinary income recognized by the optionee.
The tax consequences resulting from the exercise of non-qualified stock
options through the surrender of already-owned shares of Common Stock are
uncertain. In published rulings, the Internal Revenue Service has taken the
position (i) that to the extent an equivalent number of shares is acquired upon
such exercise, the employee will recognize no gain and the employee's basis in
the shares acquired will equal the employee's basis in the surrendered shares
and (ii) that to the extent any additional shares are acquired upon such
exercise, the employee will recognize ordinary income in the amount of their
then fair market value taxable under the rules described above (as if no amount
had been paid for such shares) and the employee's basis in the additional shares
will equal such fair market value.
Incentive Stock Options
In general, optionees who hold incentive stock options will not be
considered to have received taxable income upon either the grant of an incentive
stock option or its exercise. Upon the sale or other taxable disposition of
shares of Common Stock acquired upon the exercise of an incentive stock option,
long-term capital gain will normally be recognized in the full amount of the
difference between the amount realized and the option exercise price if no
disposition of shares has taken place within either (i) two years after the date
of grant of the incentive stock option or (ii) one year after the date of
transfer of such shares of Common Stock to the optionee upon exercise. If shares
of Common Stock acquired upon the exercise of an incentive stock option are sold
or otherwise disposed of before the end of the one-year or two-year periods
referenced above, the difference between the incentive stock option exercise
price and the fair market value of the shares of Common Stock on the date of the
incentive stock option's exercise will be taxed as ordinary income; the balance
of the gain, if any, will be taxed as capital gain. If shares of Common Stock
acquired upon the exercise of an incentive stock option are disposed of before
the expiration of the one-year or two-year periods referenced above and the
amount realized is less than the fair market value of the shares at the date of
exercise, the optionee's ordinary income is limited to the excess (if any) of
the amount realized less the option exercise price paid.
The difference between the fair market value of Common Stock on the
exercise date and the exercise price of an incentive stock option is deemed to
be a "tax preference" under the alternative minimum tax rules of the Code. Since
the consequences of the application of these provisions to individual optionees
may vary depending on their particular circumstances, a optionee should consult
his or her personal tax advisor with respect to these provisions of the Code.
The tax consequences resulting from the exercise of an incentive stock
option through delivery of already-owned shares of Common Stock are uncertain.
In published rulings and proposed regulations, the Internal Revenue Service has
taken the position that generally the employee will recognize no income upon
such stock-for-stock exercise, even if such shares were acquired upon the
exercise of a non-qualified stock option or an incentive stock option. However,
if an optionee surrenders shares of Common Stock acquired upon the exercise of
an incentive stock option and such surrendered shares have not been held for the
required holding periods referenced above, the optionee may recognize ordinary
income under the rules described above. Thus, with respect to a stock-for-stock
exercise, (i) to the extent an equivalent number of shares is acquired by the
optionee upon the exercise of an incentive stock option, the optionee's basis in
such number of shares will be equal to the optionee's basis in the surrendered
shares increased by any ordinary income recognized by the optionee, and (ii) to
the extent any additional shares are acquired upon such exercise, the optionee's
basis in such additional shares shall be zero. Any sale or other disposition of
such acquired shares within the one-year or two-year periods referenced above
will be viewed as a disposition of the shares with the lowest basis first.
16
<PAGE> 19
VOTE AND RECOMMENDATION
The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock present or represented at the meeting is required to
approve the Amendment. Properly executed, unrevoked Proxies will be voted FOR
this proposal unless a vote against this proposal or abstention is specifically
indicated in the Proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as auditors of the Company for the year ended
June 30, 1998. The auditors will have a representative at the meeting who will
have an opportunity to make a statement and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholder proposals intended to be presented at the next Annual Meeting
must be received by June 7, 1999. Proposals should be addressed to the attention
of Pete Cladianos III, Secretary of The Sands Regent, 345 North Arlington
Avenue, Reno, Nevada, 89501, and should be sent Certified Mail -- Return Receipt
Requested. The Company expects to hold the 1999 Annual Meeting of Shareholders
on November 1, 1999. New Securities and Exchange Commission rules regarding
shareholder proposals became effective on June 29, 1998. Pursuant to these new
rules, if the Company has not received notice on or before August 21, 1999 of
any matter a shareholder intends to propose for a vote at the 1999 Annual
Meeting of Shareholders, then a proxy solicited by the Board of Directors may be
voted on such matter in the discretion of the proxy holder, without discussion
of the matter in the proxy statement soliciting such proxy and without such
matter appearing as a separate item on the proxy card.
OTHER MATTERS
The management knows of no other matters other than those described above
which will be presented for action at the meeting. If any other matters properly
come before the meeting, or any adjournments, the people voting the management
proxies will vote them in accordance with their best judgment.
By Order of the Board of Directors
PETE CLADIANOS III, Secretary
17
<PAGE> 20
APPENDIX A
THIRD AMENDMENT TO THE
AMENDED AND RESTATED STOCK OPTION
PLAN FOR EXECUTIVE AND KEY EMPLOYEES
OF
THE SANDS REGENT
This Third Amendment to the Amended and Restated Stock Option Plan for
Executive and Key Employees of the Sands Regent (the "Amendment") is adopted by
The Sands Regent, a Nevada corporation (the "Company), effective as of August
17, 1998, subject to receipt of required shareholder approval.
RECITALS
The Amended and Restated Stock Option Plan for Executive and Key Employees
of the Sands Regent (the "Restated Plan") was adopted by the Board of Directors
of the Company (the "Board") on September 16, 1992 and approved by the
shareholders of the Company on November 2, 1992.
On February 26, 1993, the Company effected a 100% stock dividend which,
pursuant to the terms of the Restated Plan, resulted in an automatic increase in
the number of shares the Company's Common Stock reserved for issuance under the
Restated Plan from 250,000 shares to 500,000 shares.
On August 4, 1997 the Board adopted, and on November 3, 1997 the
shareholders of the Company approved, an amendment to the Restated Plan as
follows: (i) increasing the number of shares of the Company's common stock
reserved for issuance under the Restated Plan from 500,000 shares to 800,000
shares, (ii) extending the expiration on the period during which options to
purchase Common Stock may be granted under the Restated Plan from September 16,
2002 to August 4, 2007 and (iii) deleting all reference to "Special Committee"
and instead provide that all option grants to Officers be in compliance with
Rule 16b-3 and related rules, as amended from time to time, promulgated under
the Securities Exchange Act of 1934, as amended.
On December 12, 1997, the Restated Plan was amended to permit repricing of
incentive stock options, in addition to the repricing of non-qualified options
then permitted under the Restated Plan.
The Board of Directors desires to amend the Restated Plan, subject to
shareholder approval, to provide for the automatic grant of options to
non-employee directors of the Company on the terms specified herein and to
provide for expanded means of exercising options granted under the Restated
Plan, including cashless exercises of options.
AMENDMENTS
The Restated Plan is amended as follows:
Section 1.11 of the Restated Plan entitled "Optionee" is hereby
amended and restated in its entirety to read as follows:
Section 1.11 -- Optionee
"Optionee" shall mean an Employee or Independent Director to whom
an Option is granted under the Plan.
Section 1.19 of the Restated Plan entitled "Independent Director" is
hereby added and reads in its entirety as follows:
Section 1.19 -- Independent Director
"Independent Director" shall mean a member of the Board who is not
an Employee of the Company.
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<PAGE> 21
Section 1.20 of the Restated Plan entitled "Termination of
Directorship" is hereby added and reads in its entirety as follows:
Section 1.20 -- Termination of Directorship
"Termination of Directorship" shall mean the time when an Optionee
who is an Independent Director ceases to be a member of the Board for
any reason, including but not by way of limitation, a termination by
resignation, failure to be re-elected, death, disability or retirement.
The Board, in its sole and absolute discretion, shall determine the
effect of all matters and question relating to Termination of
Directorship with respect to each Independent Director.
Section 2.5 of the Restated Plan entitled "Granting of Options to
Independent Directors" is hereby added and reads in its entirety as
follows:
Section 2.5 -- Granting of Options to Independent Directors
(a) During the term of the Plan, a person who continues as an
Independent Director at the 1998 Annual Meeting of Stockholders of the
Company automatically shall be granted (i) an Option to purchase seven
thousand five hundred (7,500) shares of Common Stock on the date of the
1998 Annual Meeting of Stockholders of the Company, and (ii) an Option
to purchase seven thousand five hundred (7,500) shares of Common Stock
on the date of each annual meeting of stockholders following the 1998
Annual Meeting of Stockholders at which such Independent Director is
re-elected to the Board or continues to serve on the Board; provided,
however, that there shall be no grant of Options to an Independent
Director pursuant to clause (i) if the date of the 1998 Annual Meeting
of Stockholders is less than six months following the date of an initial
grant of options to such Independent Director in connection with such
Independent Director's initial appointment or election to the Board.
(b) During the term of the Plan, a person who is initially elected
or appointed to the Board on or after the effective date of this Section
2.5 (i.e., August 17, 1998) and is at the time of such election or
appointment an Independent Director (i) may be granted, by the Board, an
Option to purchase not more that twenty-five thousand (25,000) shares of
Common Stock effective as of the date of such initial election or
appointment to the Board and (ii) automatically shall be granted an
Option to purchase seven thousand five hundred (7,500) shares of Common
Stock on the date of each annual meeting of stockholders following such
initial election or appointment to the Board at which the Independent
Director is re-elected to the Board or continues to serve on the Board;
provided, however, that there shall be no grant of Options to an
Independent Director pursuant to clause (ii) if the annual meeting date
referenced in clause (ii) is less than six months following the date of
an initial grant of Options to such Independent Director pursuant to
clause (i).
(c) A member of the Board who is an employee of the Company but
whose employment with the Company is terminated after the effective date
of this Section 2.5 (i.e., August 17, 1998) and who remains on the Board
as an Independent Director after such terminated employment will not
receive an initial Option grant pursuant to subparagraph (b)(i), but to
the extent that he or she is otherwise eligible, will receive, after
termination of employment with the Company, Options as described in
subparagraph (b)(ii).
Section 4.8 entitled "Terms of Options Granted to Independent
Directors" of the Restated Plan is hereby added and reads in its entirety
as follows:
Section 4.8 -- Terms of Options Granted to Independent Directors
Notwithstanding anything in the Plan to the contrary, the terms set
forth in this Section 4.8 shall apply to Options granted to Independent
Directors.
(a) Each Option granted to an Independent Director shall be a
Non-Qualified Option.
(b) The price per share of the shares subject to each Option
granted to an Independent Director shall equal 100% of the fair market
value of a share of Common Stock (as determined pursuant to the
provisions of Section 4.2(b)) on the date the Option is granted.
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<PAGE> 22
(c) Options granted to Independent Directors shall become
exercisable in full on the first anniversary of the date of Option
grant, without variation or acceleration hereunder except as provided in
Section 4.7. No portion of an Option which is unexercisable at
Termination of Directorship shall thereafter become exercisable.
(d) No Option granted to an Independent Director may be exercised
to any extent by anyone after the first to occur of the following
events:
(i) The expiration of one (1) year following the date of the
Optionee's death, permanent and total disability (within the meaning
of Section 22(e)(3) of the Code), retirement, resignation, failure to
be re-elected, discharge or termination; or
(ii) The expiration of ten (10) years from the date the Option
was granted.
(e) The Board shall administer the Plan, and assume all duties of
the Committee under the Plan, as to all Options granted to Independent
Directors.
Section 4.3 (b) of the Restated Plan is hereby amended and restated in
its entirety to read as follows:
(b) Full payment (in cash or check) for the shares with respect to
which such Option or portion thereof is exercised. The Committee (or the
Board, in the case of Options granted to Independent Directors),
however, may in its discretion:
(i) allow a delay in payment of not more than thirty (30) days
following the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of
shares of the Company's Common Stock which have been owned by
the Optionee for at least six months, duly endorsed for transfer to
the Company with a fair market value (as determined pursuant to the
provisions of Section 4.2(b))on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof;
(iii) allow payment, in whole or in part, through the surrender
of shares of the Company's Common Stock then issuable upon
exercise of the Option having a fair market value (as determined
pursuant to the provisions of Section 4.2(b)) on the date of Option
exercise equal to the aggregate exercise price of the Option or
exercised portion thereof;
(iv) allow payment, in whole or in part, through the delivery of
a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the
Code) and payable upon such terms as may be prescribed by the
Committee (or the Board, in the case of Options granted to
Independent Directors);
(v) allow payment, in whole or in part, through the delivery of
a notice that the Optionee has placed a market sell order with a
broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay
a sufficient portion of the net proceeds of the sale to the Company
in satisfaction of the aggregate exercise price of the Option or
exercised portion thereof; or
(vi) allow payment through any combination of the consideration
provided in the foregoing subparagraphs (i), (ii), (iii), (iv) and
(v).
In the case of a promissory note, the Committee (or the Board, in
the case of Options granted to Independent Directors) may also prescribe
the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note
or by a loan from the Company when or where such loan or other extension
of credit is prohibited by law.
A-3
<PAGE> 23
Section 5.4 (d) of the Restated Plan is hereby amended and restated in
its entirety to read as follows:
(d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local laws in connection with the
exercise of the Option, which in the discretion of the Committee (or the
Board, in the case of Options granted to Independent Directors) may be
in the form of consideration used by the Optionee to pay for such shares
under Section 5.3(b).
I hereby certify that the foregoing Third Amendment to the Amended and
Restated Stock Option Plan for Executive and Key Employees of The Sands Regent
was duly adopted by the Board of Directors of the Company as of August 17, 1998
and approved by the shareholders of the Company on November 2, 1998.
Executed this day of November 1998.
--------------------------------------
Pete Cladianos III
Executive Vice President and Secretary
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<PAGE> 24
REVOCABLE PROXY
THE SANDS REGENT
ANNUAL MEETING OF SHAREHOLDERS -- NOVEMBER 2, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Ferenc B. Szony and Katherene Latham, or
either of them, with full power of substitution, proxies of the undersigned to
vote all of the shares of capital stock of The Sands Regent that the undersigned
is entitled to vote at the Annual Meeting of Shareholders of The Sands Regent,
and at any adjournment thereof, upon the matters described in the Proxy
Statement, for the meeting to be held on November 2, 1998, as follows:
1. ELECTION OF DIRECTORS:
Nominees: Ferenc B. Szony and Louis J. Phillips, each for a three (3) year
term.
<TABLE>
<S> <C> <C> <C>
[ ] VOTE FOR all nominees listed above, except vote [ ] VOTE WITHHELD from all nominees.
withheld from the following nominees (if any):
</TABLE>
- --------------------------------------------------------------------------------
2. To approve the amendment to the Company's Amended and Restated Stock Option
Plan for Executive and Key Employees of The Sands Regent.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion on any other matter that may properly come before the
meeting or any adjournments thereof.
I DO [ ] DO NOT [ ] PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE> 25
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS GIVEN, WILL BE
VOTED FOR THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, FOR ITEM (2) AND
FOR ITEM (3).
Please check your mailing address as shown on this Revocable Proxy. If it is
inaccurate, please correct your address in the space provided below.
Dated: , 1998
-------------
-------------------------
Signature(s)
-------------------------
Signature(s)
Please date this
Revocable Proxy and sign
exactly as your name
appears on your stock
certificate. If signing
as a fiduciary, please
give your full title.
PLEASE MARK, SIGN, DATE, AND RETURN THIS REVOCABLE PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
