<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
THE SANDS REGENT
345 NORTH ARLINGTON AVENUE
RENO, NEVADA 89501
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 1, 1999
------------------------
To Our Shareholders:
The Annual Meeting of Shareholders of The Sands Regent will be held at
10:00 a.m., on November 1, 1999, at the Sands Regency Casino/Hotel, 345 North
Arlington Avenue, Reno, Nevada, for the following purposes:
1. To elect three (3) directors each to serve for a three-year term.
2. 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 22,
1999, 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 23, 1999
<PAGE> 3
THE SANDS REGENT
345 NORTH ARLINGTON AVENUE
RENO, NEVADA 89501
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 1, 1999
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 1, 1999 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 three nominees for election to the Board of Directors listed in
the proxy. THIS PROXY STATEMENT AND THE ACCOMPANYING FORM OF PROXY ARE BEING
MAILED TO THE SHAREHOLDERS ON OR ABOUT OCTOBER 4, 1999.
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).
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 22, 1999,
will be entitled to vote at the meeting. The outstanding voting securities of
the Company on that date were 4,495,722 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 22, 1999, 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) 704,678 15.0%
c/o Doug Damon, CPA
5301 Longley Lane, Bldg. D-142
Reno, Nevada 89511
Stephen Feinberg 382,800(2) 8.1%
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., President and Chief Executive
Officer. Ms. Lundgren, Ms. Latham and Messrs. Cladianos, Jr. and Cladianos
III have entered into an agreement to sell all of the shares beneficially
owned by them to Sapphire Gaming, LLC; such agreement is subject to certain
conditions including approval of such purchase by the Nevada Gaming
Authorities.
(2) 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.
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. 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
2
<PAGE> 5
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 and the Director Nominees were elected by
the shareholders except for Mr. Larry Tuntland who was 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>
Pete Cladianos, Jr.(3)(4)(5) 8/84 2002 1,039,997 22.1%
Pete Cladianos III(3)(4)(6) 11/85 2002 40,909 *
Katherene Latham(3)(4) 8/84 2002 306,260 6.5%
</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(7) 8/84 2000 12,502 *
Louis J. Phillips(8) 5/98 2001 10,000 *
Ferenc B. Szony(8) 12/97 2001 50,000 1.1%
Larry Tuntland 3/99 2000 -- *
David R. Wood(8) 7/85 2000 118,626 2.5%
All Officers and Directors
as a group (9 persons)(9) 1,585,744 33.7%
</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) 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.
(4) Ms. Latham and Messrs. Cladianos, Jr. and Cladianos III have entered into an
agreement to sell all of the shares beneficially owned by them to Sapphire
Gaming, LLC; such agreement is subject to certain conditions including
approval of such purchase by the Nevada Gaming Authorities.
(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 and 24,000 shares subject to options which are
presently exercisable.
(7) Includes 7,500 shares subject to options which are exercisable within sixty
days.
(8) Includes 10,000, 50,000 and 108,000 shares subject to options which are
presently exercisable by Louis J. Phillips, Ferenc B. Szony and David R.
Wood, respectively.
(9) Includes 7,500 shares subject to options which are presently exercisable by
Patrick Bassney, Vice President and General Manager, Sands Regency
Casino/Hotel.
3
<PAGE> 6
DIRECTOR BIOGRAPHIES
PETE CLADIANOS, JR. (age 69) 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 45 years.
PETE CLADIANOS III (age 40) became Secretary of the Company in August 1984
and served as Executive Vice President from January 1996 to November 1998. He
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 68) 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 43 years.
JON N. BENGTSON (age 55) 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 Sharegate, 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.
LOUIS J. PHILLIPS (age 62) has served as a Director of the Company since
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.
FERENC B. SZONY (age 44) 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.
LARRY TUNTLAND (age 59) was appointed to the Board of Directors in March
1999. Mr. Tuntland also serves, since 1997, on the Board of Media West-RNI, Inc.
(a subsidiary of Gannett Newspapers) and on the Advisory Board of Wells Fargo
Bank of Nevada/Norwest Bank of Nevada. Mr. Tuntland was originally appointed to
the Board of Norwest Bank of Nevada in 1997 prior to the merger with Wells Fargo
Bank. Mr. Tuntland retired as President of First Interstate Bank of Nevada, N.A.
in 1996 after 37 years with it and its predecessor companies. Prior to the
position as President in 1996, Mr. Tuntland was the Area President,
4
<PAGE> 7
Northern Nevada, from 1991 to 1995. Prior to 1991, Mr. Tuntland served in
numerous Managerial and Executive capacities including the Senior Executive
Officer for Southern Nevada and Executive Vice President of Commercial and
Business Banking.
DAVID R. WOOD (age 47) 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.
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, 1999. 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 1999 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 1999.
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, Phillips and
Tuntland, all independent Directors. There was one meeting held during fiscal
1999.
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., Katherene Latham and
Larry Tuntland. There were no meetings held during fiscal 1999.
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, Louis J. Phillips and Larry Tuntland. There were
no formal meetings held during fiscal 1999.
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"), 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
5
<PAGE> 8
year ended June 30, 1999, Louis J. Phillips and Jon N. Bengtson each earned
$10,300 and Larry Tuntland, who was appointed as an Independent Director in
March 1999, earned $3,500. Mr. Tuntland, upon appointment to the Board was also
granted a stock option to purchase 10,000 shares of the Company's Common Stock
at $1.13 per share which was the fair market value on the date of grant. Such
option to purchase Common Stock becomes fully vested in March 2000.
The Company's Amended and Restated Stock Option Plan for Executive and Key
Employees, provides for 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.
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,
1999, 1998 and 1997, of those persons who were, respectively, at June 30, 1999
(i) the Company's Chief Executive Officer and (ii) one of the other four most
highly compensated executive officers of the Company whose annual salary and
bonus for the fiscal year ended June 30, 1999 exceeded $100,000 (collectively,
the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND ---------------------------- OPTIONS GRANTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (SHARES)(1) COMPENSATION
------------------ ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Ferenc B. Szony(2) 1999 $250,961 $100,000 100,000 $ --
President and Chief Executive 1998 117,692 -- 100,000 --
Officer 1997 -- -- -- --
Pete Cladianos, Jr. 1999 110,192 67,500 -- --
Vice Chairman of the Board of 1998 244,064 -- -- --
Directors 1997 361,076 -- -- --
David R. Wood 1999 157,000 47,100 -- --
Executive Vice President, 1998 153,378 -- 144,000(3) --
Treasurer and Chief Financial 1997 155,643 -- -- --
Officer
Patrick Bassney 1999 106,292 10,499 -- --
Vice President and General 1998 34,731 -- 30,000 11,273(4)
Manager, Sands Regency 1997 -- -- -- --
Casino/Hotel
Pete Cladianos III 1999 64,657 37,680 -- --
Secretary 1998 122,702 -- 60,000(3) --
1997 124,514 -- -- --
</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) 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."
(4) Represents reimbursable moving expenses paid by the Company.
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, 1999.
<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 1999 EXERCISE PRICE DATE 5% 10%
---- ---------- ---------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ferenc B. Szony(2)......... 100,000 68% $.88 12/15/08 $ 55,000 $140,000
</TABLE>
- ---------------
(1) The options have a ten year term and are generally exercisable commencing 12
months after the grant date.
(2) Options to purchase 50,000 shares, each, vest on December 15, 1999 and 2000.
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 1999 and, based upon
the fair market value of the Common Stock as of June 30, 1999, stock options
held as of the end of fiscal 1999.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS FOR FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END AT JUNE 30, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ferenc B. Szony................ -- -- 50,000 150,000 $15,750 $140,250
David R. Wood.................. -- -- 108,000 36,000 34,020 11,340
Patrick Bassney................ -- -- 7,500 22,500 -- --
Pete Cladianos, III............ -- -- 24,000 36,000 7,560 11,340
</TABLE>
- ---------------
(1) Market value of the underlying securities at fiscal year-end, minus the
exercise price of "in-the-money" options.
EMPLOYMENT AND OTHER ARRANGEMENTS
Mr. Ferenc B. Szony entered into a two-year employment agreement on
December 15, 1998 pursuant to which Mr. Szony agreed to serve as President and
Chief Executive Officer of the Company. Under the terms of the agreement, which
is automatically renewable on each anniversary date for an additional one year
period without notice of nonrenewal to the contrary, Mr. Szony is to be paid a
base salary of $275,000 per annum, to be increased to $335,000 in the second
year. In addition, Mr. Szony received a signing bonus of $100,000 and 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 base bonus of 40% of his base salary pursuant to the
Company's bonus program which presently utilizes financial performance goals.
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 or for Termination/Change in Control (each, as defined), compensation and
benefits pursuant to the Agreement shall continue for the remaining term of the
Agreement. In the event of termination due to Total Disability (as defined), all
compensation and benefits shall continue for twelve months following such
termination.
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
7
<PAGE> 10
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 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.
Mr. Patrick Bassney entered into a two-year employment agreement on January
29, 1998 pursuant to which Mr. Bassney is to be paid a base salary of $105,000
per annum and receive incentive stock options to purchase 30,000 shares of
Common Stock, which vest equally over four years, in accordance with the
Company's Amended and Restated Stock Option Plan for Executive and Key Employees
of The Sands Regent. The agreement also provides that Mr. Bassney is to receive
six months compensation in the event his employment with the Company is
terminated in the first two years.
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., Katherene Latham
and Larry Tuntland, 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, Jon N. Bengtson and Larry Tuntland, shall be composed of
non-employee directors within the meaning of the aforementioned Rule 16b-3.
Compensation for the Chairman and Vice 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
8
<PAGE> 11
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 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 in general.
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, 1999, the compensation of the
Company's Chief Executive Officer, Ferenc B. Szony, was a base salary of
$275,000 pursuant to a two-year employment agreement entered into on December
15, 1998. Under such agreement, Mr. Szony also received a $100,000 signing bonus
and is eligible to receive an annual base bonus of 40% 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>
Pete Cladianos, Jr. Jon N. Bengtson Jon N. Bengtson
Louis J. Pete Cladianos, Jr.
Katherene Latham Phillips
Larry Tuntland Larry Tuntland Pete Cladianos III
Katherene Latham
Louis J. Phillips
Ferenc B. Szony
Larry Tuntland
David R. Wood
</TABLE>
9
<PAGE> 12
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, Phillips and Tuntland, are employees of the
Company. No member of the Board participates in the determination of his or her
own compensation.
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
THE SANDS REGENT MARKET (U.S.) DOW JONES CASINOS
---------------- ------------- -----------------
<S> <C> <C> <C>
6/94 100 100 100
6/95 44 133 167
6/96 43 171 218
6/97 27 208 158
6/98 17 274 144
6/99 20 393 147
</TABLE>
- ---------------
* $100 invested on June 30, 1994 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.
10
<PAGE> 13
Based solely on its review of copies of such forms received by it with
respect to fiscal 1999, or representations from certain reporting persons, the
Company believes that its Insiders complied with all Section 16(a) filing
requirements.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as auditors of the Company for the year ended
June 30, 1999. 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
If a shareholder proposes to present a proposal at the next Annual Meeting,
the proposal must be received by the Secretary of the Company by June 13, 2000.
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 2000 Annual Meeting of Shareholders on November 6, 2000. Pursuant to
Securities and Exchange Commission rules regarding shareholder proposals, which
became effective on June 29, 1998, if the Company has not received notice on or
before August 27, 2000 of any matter a shareholder intends to propose for a vote
at the 2000 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
11
<PAGE> 14
REVOCABLE PROXY
THE SANDS REGENT
ANNUAL MEETING OF SHAREHOLDERS -- NOVEMBER 1, 1999
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 1, 1999, as follows:
1. ELECTION OF DIRECTORS:
Nominees: Pete Cladianos, Jr., Pete Cladianos III and Katherene Latham, 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. 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> 15
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 AND FOR ITEM (2).
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: , 1999
-------------------------
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.
