<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 6, 2000
------------------------
To Our Shareholders:
The Annual Meeting of Shareholders of The Sands Regent will be held at
10:00 a.m., on November 6, 2000, 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 approve the Company's Second 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 27,
2000, 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 28, 2000
<PAGE> 3
THE SANDS REGENT
345 NORTH ARLINGTON AVENUE
RENO, NEVADA 89501
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 6, 2000
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 6, 2000 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 (i) FOR the
election of the three nominees for election to the Board of Directors listed in
the proxy and (ii) FOR approval of the Second Amended and Restated Option Plan
for Executives and Key Employees of The Sands Regent. THIS PROXY STATEMENT AND
THE ACCOMPANYING FORM OF PROXY ARE BEING MAILED TO THE SHAREHOLDERS ON OR ABOUT
OCTOBER 6, 2000.
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.
For the election of the nominees to the Board of Directors, the three
nominees receiving the highest vote totals will be elected. Thus, abstentions
and broker non-votes will not affect the outcome of the election of the Board of
Directors. All other matters to be voted on will be decided by a majority of the
shares present or represented at the Meeting and entitled to vote.
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 (other than the election of directors) 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 (other than the election of directors) as to which the broker or nominee
has 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 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.
SOLICITATION EXPENSES
The cost of this solicitation will be borne by the Company. The Company's
officers, directors and other regular employees, without additional
compensation, may also solicit Proxies personally or by other appropriate means.
VOTING SECURITIES
Only shareholders of record at the close of business on September 27, 2000,
will be entitled to vote at the meeting. The outstanding voting securities of
the Company on that date were 4,497,722 shares of $0.10 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 27, 2000, all persons, other
than the nominees for director, continuing directors and Named Officers (as
defined on page 7), 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. Information concerning
stockholdings of nominees for director, continuing directors and Named Officers
is set forth on page 3. 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) 1,009,936 22.5%
c/o Doug Damon, CPA
5301 Longley Lane, Bldg. D-142
Reno, Nevada 89511
Stephen Feinberg 248,900(2) 5.5%
450 Park Avenue, 28th Floor
New York, New York 10022
</TABLE>
---------------
(1) Represents shares held by Ms. Lundgren and in various trusts for the benefit
of her children as to which Ms. Lundgren is the trustee. 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. 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. The Company has been advised that Sapphire Gaming, LLC has
requested a withdrawal of its gaming license application. Such action is
likely to ultimately result in the termination of the above stock sale
transaction.
(2) Based on a Schedule 13D/A filed May 18, 2000 and represents 62,800 shares
owned by Cerberus Partners, L.P., a Delaware limited partnership; and
103,400 shares owned by Cerberus International, Ltd., a corporation
organized under the laws of the Bahamas, all over which Mr. Feinberg
possesses sole voting and dispositive power, and 82,700 shares owned by
certain private investment funds for which Stephen Feinberg possesses
dispositive power.
2
<PAGE> 5
PROPOSAL NO. 2
ELECTION OF DIRECTORS
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. Messrs Jon N. Bengtson, Larry
Tuntland and David R. Wood have been nominated for election or re-election to
the Board of Directors for terms expiring in 2003. 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 such nominees 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE.
Information regarding the director nominees, the continuing directors and
executive officers, including their stock ownership, furnished in part by each
such person, follows.
<TABLE>
<CAPTION>
EXPIRATION SHARES PERCENT OF
DIRECTOR NOMINEES DIRECTOR OF NEW TERM BENEFICIALLY COMMON
NAME SINCE AS DIRECTOR OWNED(1) STOCK
----------------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Jon N. Bengtson(2) 8/84 2003 20,002 *
Larry Tuntland(2) 3/99 2003 17,500 *
David R. Wood(2)(3) 7/85 2003 130,626 3.0%
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION SHARES PERCENT OF
CONTINUING DIRECTORS DIRECTOR OF TERM BENEFICIALLY COMMON
NAME SINCE AS DIRECTOR OWNED(1) STOCK
-------------------- -------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Pete Cladianos, Jr.(3)(4)(5)(6) 8/84 2002 1,039,947 23.1%
Pete Cladianos III(3)(4)(5)(7) 11/85 2002 52,909 1.2%
Katherene Latham(3)(4)(5) 8/84 2002 1,002 *
Louis J. Phillips(2) 5/98 2001 17,500 *
Ferenc B. Szony(2)(3) 12/97 2001 150,000 3.2%
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION SHARES PERCENT OF
OTHER EXECUTIVE OFFICERS DIRECTOR OF TERM BENEFICIALLY COMMON
NAME SINCE AS DIRECTOR OWNED(1) STOCK
------------------------ -------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Patrick Bassney(2) -- -- 15,000 *
All Executive Officers and Directors
as a group (9 persons)(2) 1,444,486 29.7%
</TABLE>
---------------
* Less than 1%
(1) Held as of September 27, 2000 with sole voting and investment power unless
otherwise indicated. The shares beneficially owned includes options that are
exercisable within 60 days after September 27, 2000, but in determining
percentage ownership, these shares are considered outstanding only for each
individual owning such options.
(2) Includes 15,000, 17,500, 150,000, 17,500, 120,000 and 15,000 shares subject
to options which are presently exercisable or exercisable within 60 days by
Jon N. Bengtson, Louis J. Phillips, Ferenc B. Szony, Larry Tuntland, David
R. Wood and Patrick Bassney, respectively.
(3) This individual is also an Executive Officer of the Company.
3
<PAGE> 6
(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) 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. The Company has
been advised that Sapphire Gaming, LLC has requested a withdrawal of its
gaming license application. Such action is likely to ultimately result in
the termination of the above stock sale transaction.
(6) 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.
(7) Includes 16,909 shares held in a trust for the benefit of Bradley Cladianos,
son of Pete Cladianos III and 36,000 shares subject to options which are
presently exercisable.
DIRECTORS AND EXECUTIVE OFFICERS
The following are the biographies of Company Directors and Executive
Officers as of September 27, 2000.
JON N. BENGTSON (age 56) has served as a Director of the Company since
August 1984. Since January 1998, Mr. Bengtson has been the Chairman 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.
LARRY TUNTLAND (age 60) 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, 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 48) 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
PETE CLADIANOS, JR. (age 70) 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 46 years.
PETE CLADIANOS III (age 41) has been Secretary of the Company since 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 69) 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 44 years.
LOUIS J. PHILLIPS (age 63) has served as a Director of the Company since
May 1998. From January to June 2000, Mr. Phillips served as interim Chief
Executive Officer of Viejas Enterprises in San Diego County, California which
operated, among other things, a casino on Native American land. Since January
2000, Mr. Phillips has been on a leave of absence from the University of Nevada,
Reno where he has held the position of Mead Dixon Distinguished Professor of
Gaming Management since 1995. 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 45) 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.
PATRICK BASSNEY (age 38), has served as Vice President and General Manager
of Zante, Inc. dba the Sands Regency Casino/Hotel (wholly owned subsidiary of
the Company) since February 1998. Prior to joining the Company, Mr. Bassney
served as Vice President of Hotel Operations for Turning Stone Casino Resort in
Verona, New York from July 1994 to February 1998, Vice President of Casino
Services from December 1993 to July 1994 and Director of Casino Services from
June 1993 to December 1993. From July 1988 to June 1993, Mr. Bassney served in
various management positions with Fitzgeralds Casino/Hotel in both Reno and Las
Vegas, Nevada.
INFORMATION RELATING TO THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD
MEETINGS AND ATTENDANCE
The Board of Directors of the Company held five meetings during the fiscal
year ended June 30, 2000. 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 2000 or the portion of the year during which each served as
Director.
COMMITTEES
The Board of Directors of the Company has an Executive Committee, an Audit
Committee, a Compensation Committee and a Stock Option 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.
5
<PAGE> 8
Executive Committee. The Executive Committee may exercise all powers of
the Board of Directors to the extent permitted by law. The current members of
the Executive Committee are Pete Cladianos, Jr. and Katherene Latham. There were
no meetings held during fiscal 2000.
Audit Committee. In May 2000, The Board of Directors of the Company
adopted an Audit Committee Charter in accordance with Nasdaq Stock Market
requirements. The complete text of the Audit Committee Charter is set forth in
Appendix A to this Proxy Statement. This Charter specifies that the general
purpose of the Audit Committee is to provide assistance to the Company's Board
of Directors in fulfilling the Board's oversight responsibilities regarding the
continued adequacy of the Company's accounting system of internal controls, the
quality and integrity of the Company's financial reports and the independence
and performance of the Company's independent auditors.
The Audit Committee Charter requires that the Audit Committee consist of
three Board members who satisfy the "independence" requirements of the Nasdaq
Stock Market. Further, each Audit Committee member must be able to read and
understand fundamental financial statements and at least one Committee member
must have experience or a background in finance or accounting such that the
member is financially sophisticated.
The current members of the Audit Committee are Messrs. Bengtson, Phillips
and Tuntland, who, with the exception of Mr. Bengtson, satisfy the
"independence" requirements of the Nasdaq stock market and the other
requirements as specified in the Audit Committee Charter including the ability
to read and understand fundamental financial statements. Mr. Bengtson would be
considered "independent" except that he is a former employee of the Company
within the past 3 years which ends in January 2001. Thereafter, Mr. Bengtson
will meet the "independence" requirements of the Nasdaq Stock Market which will
be before June 14, 2001, the date on which all the Nasdaq Audit Committee
requirements, including the above, are required to be met by all Nasdaq listed
companies. The Board of Directors believes that, with Mr. Bengtson's background
and knowledge of the Company, and his experience and background in finance and
accounting, it is in the best interest of the Company and its shareholders to
retain Mr. Bengtson on the Audit Committee.
There were two Audit Committee meetings held during fiscal 2000.
Compensation Committee. The 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 current members
of the Compensation Committee are Pete Cladianos, Jr., Katherene Latham and
Larry Tuntland. There were no meetings held during fiscal 2000.
Stock Option Committee. The Stock Option Committee grants stock options
and administers the Company's stock option plan. The members of such Committee
are non-employee directors within the meaning of Rule 16b-3 and are presently
Jon N. Bengtson, Louis J. Phillips and Larry Tuntland. The Committee held no
meetings during fiscal 2000 but took action by written consent on three
occasions.
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 year ended June
30, 2000, Jon N. Bengtson, Louis J. Phillips and Larry Tuntland each earned
$10,600.
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 receives 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 first
anniversary of the grant date. On November 1, 1999, each of the Independent
Directors received the automatic stock grant to purchase 7,500 shares of the
Company's Common Stock at $1.69 per share.
6
<PAGE> 9
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,
2000, 1999 and 1998, of those persons who were, respectively, at June 30, 2000
(i) the Company's Chief Executive Officer and (ii) the other most highly
compensated executive officers of the Company whose annual salary and bonus for
the fiscal year ended June 30, 2000 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) COMPENSATION
------------------ ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Ferenc B. Szony(1) 2000 $306,846 $234,500 -0- $ -0-
President and Chief Executive 1999 250,961 155,000 100,000 -0-
Officer 1998 117,692 -0- 100,000 -0-
David R. Wood 2000 163,000 89,250 10,000 -0-
Executive Vice President, 1999 157,000 47,101 -0- -0-
Treasurer and Chief 1998 153,378 47,100 144,000(2) -0-
Financial Officer
Patrick Bassney(3) 2000 110,689 59,588 10,000 -0-
Vice President and General 1999 32,760 32,760 -0- -0-
Manager, Sands Regency 1998 34,731 10,499 30,000 11,273(4)
Casino/Hotel
</TABLE>
---------------
(1) Mr. Szony was named President and Chief Executive Officer in December 1997.
(2) 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 (the fair market value of the Company's stock on December 12,
1997). In connection with such repricing 144,000 shares previously granted
to Mr. Wood were repriced.
(3) Mr. Bassney was named Vice President and General Manager of The Sands
Regency Casino/Hotel in February 1998.
(4) Represents reimbursable moving expenses paid by the Company.
7
<PAGE> 10
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, 2000.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED OPTION TERM(2)
OPTIONS TO EMPLOYEES IN PER SHARE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR 2000 EXERCISE PRICE DATE 5% 10%
---- ---------- ---------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David R. Wood(3).............. 10,000 17% $1.66 1/7/10 $10,400 $26,500
Patrick Bassney(4)............ 10,000 17% $1.81 2/14/10 11,400 28,800
Ferenc B. Szony............... -0- -0- -0- -- -0- -0-
</TABLE>
---------------
(1) The options have a ten year term and the exercise price is equal to the fair
market value on the date of grant. On August 14, 2000, the Board deleted the
express right to reprice options under the plan.
(2) Assumes annual rates of stock price appreciation for illustrative purposes
only. Actual stock prices will vary and no assurance can be given that such
rates will be achieved.
(3) Options vest equally over two years commencing on the first anniversary date
of the grant of the options.
(4) Options vest equally over a four year period commencing on the first
anniversary date of the grant of the options.
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 2000 and, based upon
the fair market value of the Common Stock as of June 30, 2000, stock options
held as of the end of fiscal 2000. None of the Named Officers exercised any
options during fiscal 2000.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT JUNE 30, 2000(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ferenc B. Szony................ -0- -0- 150,000 50,000 $31,000 $31,000
David R. Wood.................. -0- -0- 120,000 34,000 -0- -0-
Patrick Bassney................ -0- -0- 15,000 25,000 -0- -0-
</TABLE>
---------------
(1) Market value of the underlying securities at fiscal year-end ($1.4375),
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, as amended on December 15, 1999, 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 paid a base salary of $335,000 per annum, to be increased
to $370,000 per annum on December 15, 2000 in the event that a change in control
of the Company does not occur by that date. 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 provides for bonuses up to 200% of the base bonus amount in
the event certain financial performance goals are achieved.
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.
8
<PAGE> 11
The Company has also entered into an agreement with Mr. David R. Wood,
dated January 9, 2000, pursuant to which Mr. Wood shall serve as Executive Vice
President and Chief Financial Officer of the Company. Under the terms of the
agreement, which is automatically renewed on each anniversary date for an
additional one year period without notice of nonrenewal to the contrary, Mr.
Wood is paid a base salary of $170,000 per annum. Mr. Wood is also eligible to
receive an annual base bonus of 30% of his base salary pursuant to the Company's
bonus program which provides for bonuses up to 200% of the base bonus amount in
the event certain financial performance goals are achieved. In addition, Mr.
Wood received incentive stock options to purchase 10,000 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.
The agreement with Mr. Wood also provides that if Mr. Wood's employment
with the Company is terminated by the Company for any reason other than for
Cause (as defined), compensation and benefits pursuant to the agreement shall
continue for 6 months after such termination.
The Audit Committee and Executive Compensation Reports that follow will not
be deemed to be incorporated by reference to any filing by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates same by reference.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's audited
financial statements with Company management and has discussed certain required
matters with the Company's independent auditors, Deloitte & Touche LLP, in
accordance with Statement on Auditing Standards No. 61.
Deloitte & Touche LLP also provided written documentation to the Audit
Committee, required by Independent Standards Board Standard No. 1, stating that
there are no known relationships between the Independent Auditors (and their
related entities) and the Company (and its related entities) that, in the
Independent Auditors' professional judgment, may reasonably be thought to impact
the independence of Deloitte & Touche LLP and further, that Deloitte & Touche
LLP is independent within the meaning of applicable federal securities laws.
Based on the review, discussions and communications above, the Audit
Committee recommended that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-K as of and for the fiscal
year ended June 30, 2000.
AUDIT COMMITTEE
Jon N. Bengtson
Louis J. Phillips
Larry Tuntland
9
<PAGE> 12
EXECUTIVE COMPENSATION REPORT
The Compensation Committee of the Board of Directors, 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.
In order to comply with the requirements of Rule 16b-3 of the Security
Exchange Act of 1934, as amended, a Stock Option Committee has been appointed
whose duties are to grant stock options and to administer the Company's Amended
and Restated Stock Option Plan for Executive and Key Employees of The Sands
Regent, which is proposed to be amended and restated as set forth in Proposal
No. 2. The Stock Option 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 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
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 Stock Option 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 Stock Option 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 (the "Code") and included a provision (Section
162(m) of the Code) 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 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 to maximize the Company's income tax deductions to the extent that so
qualifying
10
<PAGE> 13
the compensation is not inconsistent with the Company's fundamental compensation
policies. The Company is proposing amendments to the Amended and Restated Stock
Option Plan for Executive and Key Employees of The Sands Regent to permit the
Company, at its discretion, to grant options that qualify as performance-based
compensation under Section 162(m) of the Code. See Proposal No. 2.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During the fiscal year ended June 30, 2000, the compensation of the
Company's Chief Executive Officer, Ferenc B. Szony, was a base salary of
$335,000 pursuant to an employment agreement as amended on December 15, 1999.
Under such agreement, Mr. Szony is also 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 which may be increased by up to 200% by the Company
attaining certain higher levels of operating results. In fiscal 2000, Mr. Szony
earned a performance bonus of $234,500 based on the Company achieving specified
operational and financial results. During fiscal 2000, Mr. Szony was not granted
stock options.
<TABLE>
<CAPTION>
COMPENSATION STOCK
COMMITTEE OPTION COMMITTEE BOARD OF DIRECTORS
------------ ---------------- ------------------
<S> <C> <C>
Pete Cladianos, Jon N. Bengtson Jon N. Bengtson
Jr.
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>
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.
11
<PAGE> 14
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 (U.S.) INDEX
AND THE DOW JONES CASINOS INDEX
[GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK
THE SANDS REGENT MARKET (U.S.) DOW JONES CASINOS
---------------- ------------- -----------------
<S> <C> <C> <C>
6/95 100.00 100.00 100.00
6/96 98.33 128.39 109.20
6/97 61.46 156.15 79.12
6/98 39.33 205.58 74.21
6/99 44.25 295.78 76.82
6/00 28.28 437.84 87.91
</TABLE>
---------------
* $100 invested on June 30, 1995 in stock or index -- including reinvestment of
dividends. Fiscal year ending June 30.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 2000, or representations from certain reporting persons, the
Company believes that its Insiders complied with all Section 16(a) filing
requirements, except that: Messrs. Bassney and Tuntland each failed to timely
file a Form 3 due in 1998 and 1999, respectively; Mr. Bassney failed to timely
file a Form 4 for one exempt transaction in 1998; Messrs. Bengtson, Phillips and
Tuntland each failed to timely file a Form 4 for one exempt transaction, each,
in 1999; and Messrs. Wood and Bassney each failed to timely file a Form 4 for
one exempt transaction, each, in 2000.
12
<PAGE> 15
PROPOSAL NO. 2
SECOND AMENDED AND RESTATED STOCK OPTION
PLAN FOR EXECUTIVE AND KEY EMPLOYEES
THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE SECOND AMENDED AND RESTATED
STOCK OPTION PLAN FOR EXECUTIVE AND KEY EMPLOYEES
On August 14, 2000, the Board of Directors of the Company approved
amendments to, and the restatement of, the Amended and Restated Stock Option
Plan for Executive and Key Employees of The Sands Regent, as amended, which is
now known as the Second Amended and Restated Stock Option Plan for Executive and
Key Employees of The Sands Regent (the "Second Restated Plan"). The Second
Restated Plan includes the following amendments, which are subject to approval
by the stockholders at this Meeting:
- Authorization of an additional 300,000 shares for issuance under the
Second Restated Plan.
- Establishment of an annual option limit of 200,000 shares to any one
individual to ensure deductibility under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), of
compensation expense resulting from certain option grants.
- Extend the term of the Second Restated Plan until August 14, 2010.
The following is a summary of the material terms of the Second Restated
Plan, as proposed to be amended and restated. A full copy of the proposed Second
Restated Plan is attached hereto as Appendix B. You are encouraged to read the
Second Restated Plan in its entirety.
SUMMARY OF THE SECOND RESTATED PLAN
The Second Restated Plan authorizes the grant of incentive and
non-qualified stock options to our executives, key employees and directors who
are not employees of the Company ("Independent Directors").
SECURITIES AVAILABLE
Subject to shareholder approval of this Proposal, the aggregate number of
shares of common stock authorized and reserved for issuance under the Second
Restated Plan is 1,100,000 shares, representing an increase of 300,000 shares,
from 800,000 shares to 1,100,000 shares. As of the Record Date, only 5,864
shares were available for issuance. Assuming shareholder approval of this
Proposal, 305,864 shares would be available for future issuance under the Second
Restated Plan. Also available for future grant under the Second Restated Plan
are:
- shares subject to expired or canceled options; and
- shares delivered to the Company or withheld by the Company in
payment of the exercise price or tax withholding obligations upon
option exercise.
Also subject to shareholder approval of this Proposal, is the establishment
of an annual option limit for purposes of preserving the Company's deductibility
of compensation expense that may result from the exercise of certain options
granted on or after August 14, 2000. Pursuant to the annual option limit, the
maximum number of shares which may be subject to options granted to any
individual in any calendar year may not exceed 200,000 shares.
ADMINISTRATION; GRANT OF OPTIONS
The Stock Option Committee of the Board of Directors (the "Committee")
administers the Second Restated Plan as to options granted to employees. The
Committee is currently comprised of two or more directors, each a "non-employee
director" as defined by Rule 16b-3 under the Securities Exchange Act of 1934,
and an "outside director" under Section 162(m) of the Code. The Committee
determines:
- which executive or key employees are to be granted options;
- the number of shares subject to option grants and the exercise
price;
- whether such options are to be incentive stock options or
non-qualified stock option, and whether such options are to be
performance-based compensation under Section 162(m) of the Code;
13
<PAGE> 16
- the time in which the options may vest and be exercised; and
- the other terms and conditions of such Option, consistent with the
Second Restated Plan.
The Board of Directors administers the Second Restated Plan as to the
annual automatic grants of options to the Company's Independent Directors.
Each option, and its exercise price, term, vesting and other material terms
are evidenced by a written stock option agreement.
AUTOMATIC GRANT TO INDEPENDENT DIRECTORS
Commencing with the 1998 Annual Shareholder's Meeting, each Independent
Director automatically receives a non-qualified stock option to purchase 7,500
shares on the date of each Annual Meeting of Shareholders at which such person
continues as an Independent Director. Each person who is first appointed or
elected to the Board as an Independent Director may be granted a non-qualified
stock option for not more than 25,000 shares, as determined by the Board,
effective as of the date of such appointment or election.
EXERCISE PRICE
The Committee sets the per share exercise price for options granted to
employees at not less than 100% of the fair market value of our common stock on
the grant date. For purposes of the Second Restated Plan, fair market value of
our common stock is equal to the mean between the closing bid and asked prices
as reported by the Nasdaq National Market on such date. Incentive Stock Options
granted to individuals holding 10% or more to the voting power of the Company
("10% Owner") are priced at 110% of the fair market value of our common stock on
grant date. And, options granted to Independent Directors have a per share
exercise price equal to the fair market value of our common stock on the grant
date. On September 26, 2000, the closing price for our common stock as reported
on the Nasdaq Small Cap Market was $ 2.28.
VESTING OF OPTIONS
An option may be exercised when and to the extent it "vests." The Committee
determines the period during which the employee optionee's right to exercise the
option in whole or part vests. At any time after the grant of an option to an
employee, the Committee may accelerate the period during which an option vests.
Options granted to Independent Directors vest in full on the first anniversary
of the date of option grant. No portion of an option which is not vested when
the optionee's relationship with the Company is terminated shall thereafter
become vested.
TERM AND TERMINATION OF OPTIONS
The term of an option granted to an employee is set by the Committee,
provided, that non-qualified options must have a term not longer than 10 years
and one day from the grant date and incentive stock options must have a term not
longer than ten years from the grant date (or five years for options granted to
a 10% owner). The Committee also establishes the time period following
termination of employment during which the optionee may exercise vested options.
Vested options granted to Independent Directors are exercisable until the
earlier of (i) one year following the optionee's termination as a director for
any reason and (ii) ten years from the date of grant.
EXERCISE OF OPTIONS
An option may be exercised for any vested portion of the shares subject to
the option until the option expires or terminates. Only whole shares may be
purchased upon exercise.
An option may be exercised by delivering to the Company a written notice of
exercise, together with payment of the aggregate exercise price in the form of
cash or a check payable to the Company. The Committee (or the Board, in the case
of options granted to Independent Directors) may, however, in its discretion
allow payment through:
- the delivery of shares of Company common stock already owned for
more than six months;
- the surrender of shares of Company common stock which would
otherwise be issuable on exercise of the option;
14
<PAGE> 17
- use of an interest bearing full recourse promissory note upon such
terms as the Committee prescribes; or
- the delivery of a notice that the optionee has placed a market sell
order with a broker with respect to shares of common stock 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 option exercise price.
The Company must also receive payment of any applicable withholding tax,
which in the discretion of the Committee (or Board) may be in the same form as
used to pay the exercise price.
An optionee will not have any rights as a shareholder until the Company has
issued and delivered the shares of common stock following option exercise.
OPTIONS NOT TRANSFERABLE
An optionee cannot assign or transfer any option, except by will or the
laws of descent and distribution;
PLAN AMENDMENT AND TERMINATION
The Committee or the Board may not, without prior shareholder approval:
- increase the number of shares of stock that may be issued under the
Second Restated Plan;
- extend the expiration date of the Second Restated Plan;
- modify the 200,000 per person per year option limit; or
- amend the Second Restated Plan in a manner requiring shareholder
approval under any applicable law, rule or regulation.
All other amendments may be made by the Committee or the Board without
shareholder approval. The Second Restated Plan will be in effect until August
14, 2010.
ADJUSTMENT IN SECURITIES
If there is a dividend, recapitalization, reclassification, stock split,
merger, consolidation, split-up, spin-off, combination, consolidation,
dissolution or other similar corporate transaction that affects the common
stock, the Committee may appropriately adjust:
- the aggregate number of shares of common stock subject to the Second
Restated Plan;
- the annual option limit of 200,000 shares per person;
- the number of shares of common stock subject to outstanding options;
and
- the price per share of outstanding options.
In addition, if there is a merger of the Company, the sale of all or
substantially all of the Company's assets or 80% or more of the Company's voting
stock, or the dissolution or liquidation of the Company, the Committee (or the
Board in the case of options granted to Independent Directors) may provide in
the option agreement or in a resolution that the options may be exercisable as
to all shares covered by the option.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary under current law of the material
federal income tax consequences to participants in the Second Restated Plan. The
summary does not discuss all aspects of income taxation that may be relevant to
a particular optionee.
For federal income tax purposes, optionees granted non-qualified stock
options or incentive stock options will not have taxable income on the grant of
the option, nor will the Company be entitled to any deduction.
Generally, on exercise of non-qualified stock options the optionee will
recognize ordinary income, and the Company will be entitled to a deduction, in
an amount equal to the difference between the option exercise price and the fair
market value of the common stock on the date of exercise. The optionee's basis
for the stock for purposes of determining gain or loss on subsequent disposition
of such shares generally will be the fair
15
<PAGE> 18
market value of the common stock on the date of option exercise. Any subsequent
gain or loss will be generally taxable as a capital gain or loss.
Generally, on exercise of incentive stock options the optionee will not
have taxable income. However, the amount by which the fair market value of the
shares at the time of exercise exceeds the option price will be an "item of
adjustment" for purposes of the alternative minimum tax. Gain realized on the
sale of shares acquired through exercise of an incentive stock option is taxable
at capital gains rates, and no tax deduction is available to the Company, unless
the optionee disposes of the shares within (1) two years after the date of
option grant or (2) within one year of the date the shares were transferred to
the optionee. If the shares are sold or otherwise disposed of before the end of
the one-year and two-year periods specified above, the difference between the
option exercise price and the fair market value of the shares on the date of the
option's exercise will be taxed at ordinary income rates, and the Company will
be entitled to a deduction to the extent the optionee recognizes ordinary
income. If such a sale or disposition takes place in the year of option
exercise, the income recognized upon sale or disposition of the shares will not
be considered income of the optionee for alternative minimum tax purposes.
Otherwise, if the optionee sells or otherwise disposes the shares before the end
of the one-year and two-year periods specified above, the maximum amount that
will be included as alternative minimum tax income is the gain, if any,
recognized on the disposition of the shares.
VOTE AND RECOMMENDATION
Your Board of Directors and management believe that it is in the best
interest of the Company to approve the Second Restated Plan in order to attract
and retain qualified employees, remain competitive and to continue to meet
industry standards.
The favorable vote of a majority of the outstanding shares of the Company's
Common Stock present or represented at the Meeting is require to approve the
Proposal. Thus, abstentions on this proposal will be counted as votes against
this proposal, while broker non-votes on this proposal will not be counted as
votes for or against the proposal. A properly executed, unrevoked Proxy will be
voted FOR this proposal unless a vote against this proposal or abstention is
indicated on the Proxy.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2
APPROVING THE SECOND AMENDED AND RESTATED STOCK OPTION PLAN FOR EXECUTIVE AND
KEY EMPLOYEES OF THE SANDS REGENT.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as independent auditors of the Company for the
year ended June 30, 2000 and have been selected to serve as independent audits
for the year ending June 30, 2001. 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 May 26, 2001.
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 2001 Annual Meeting of Shareholders on November 5, 2001. 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 17, 2001 of any matter a shareholder intends to propose for a vote
at the 2001 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.
16
<PAGE> 19
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
THE SANDS REGENT
AUDIT COMMITTEE CHARTER
PURPOSE
The purpose of the Audit Committee (the "Committee") is to provide
assistance to the Board of Directors (the "Board") of The Sands Regent (the
"Company") in fulfilling the Board's oversight responsibilities regarding the
Company's accounting and system of internal controls, the quality and integrity
of the Company's financial reports and the independence and performance of the
Company's outside auditor. In so doing, the Committee should endeavor to
maintain free and open means of communication between the members of the
Committee, other members of the Committee, other members of the Board, the
outside auditor and the financial management of the Company.
In the exercise of its oversight responsibilities, it is not the duty of
the Committee to plan or conduct audits or to determine that the Company's
financial statements fairly present the Company's financial position and results
of operation and are in accordance with generally accepted accounting
principles. Instead, such duties remain the responsibility of management and the
outside auditor. Nothing contained in this charter is intended to alter or
impair the operation of the "business judgment rule" as interpreted by the
courts under the "Nevada Revised Statutes, General Corporation Law." Further,
nothing contained in this charter is intended to alter or impair the right of
the members of the Committee under the "Nevada Revised Statutes, General
Corporation Law" to rely, in discharging their responsibilities, on the records
of the Company and on other information presented to the Committee, Board or
Company by its officers or employees or by outside experts such at the outside
auditor.
MEMBERSHIP
The Committee shall consist of three members of the Board. The members
shall be appointed by action of the Board and shall serve at the discretion of
the Board. Each Committee member shall satisfy the "independence" requirements
of The Nasdaq Stock Market. Each Committee member must be able to read and
understand fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement or must be able to do so within
a reasonable period of time after his or her appointment to the Committee. At
least one Committee member must have past employment experience in finance or
accounting, requisite professional certification in accounting, or any other
comparable experience or background (including a current or past position as a
chief executive or financial officer or other senior officer with financial
oversight responsibilities) which results in the Committee member's financial
sophistication.
COMMITTEE ORGANIZATION AND PROCEDURES
1. The members of the Committee shall appoint a Chair of the Committee by
majority vote. The Chair (or in his or her absence, a member designated by the
Chair) shall preside at all meetings of the Committee.
2. The Committee shall have the authority to establish its own rules and
procedures consistent with the bylaws of the Company for notice and conduct of
its meetings, should the Committee, in its discretion, deem it desirable to do
so.
3. The Committee shall meet, in person and/or telephonically, at least four
times in each fiscal year, and more frequently as the Committee in its
discretion deems desirable.
4. The Committee may, in its discretion, include in its meetings members of
the Company's financial management, representatives of the outside auditor, the
senior internal audit manager and other financial personnel employed or retained
by the Company. The Committee may meet with the outside auditor or the senior
internal audit manager in separate executive sessions to discuss any matters
that the Committee believes should be addressed privately, without management's
presence. The Committee may likewise meet privately with management, as it deems
appropriate.
5. The Committee may, in its discretion, utilize the services of the
Company's regular corporate legal counsel with respect to legal matters or, at
its discretion, retain other legal counsel if it determines that such counsel is
necessary or appropriate under the circumstances.
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RESPONSIBILITIES
Outside Auditor
6. The outside auditor shall be ultimately accountable to the Committee and
the Board in connection with the audit of the Company's annual financial
statements and related services. In this regard, the Committee shall select and
periodically evaluate the performance of the outside auditor and, if necessary,
recommend that the Board replace the outside auditor.
7. The Committee shall approve the fees to be paid to the outside auditor
and any other terms of the engagement of the outside auditor.
8. The Committee shall receive from the outside auditor, at least annually,
a written statement delineating all relationships between the outside auditor
and the Company, consistent with Independence Standards Board Standard 1. The
Committee shall actively engage in a dialogue with the outside auditor with
respect to any disclosed relationships or services that, in the view of the
Committee, may impact the objectivity and independence of the outside auditor.
If the Committee determines that further inquiry is advisable, the Committee
shall recommend that the Board take any appropriate action in response to the
outside auditor's report to satisfy itself of the auditor's independence.
Annual Audit
9. The Committee shall meet with the outside auditor and management of the
Company in connection with each annual audit to discuss the scope of the audit
and the procedures to be followed.
10. The Committee shall review and discuss the audited financial statements
with the management of the Company.
11. The Committee shall discuss with the outside auditor the matters
required to be discussed by Statement on Auditing Standards No. 61 as then in
effect including, among others, (i) the methods used to account for any
significant unusual transactions reflected in the audited financial statements;
(ii) the effect of significant accounting policies in any controversial or
emerging areas for which there is a lack of authoritative guidance or a
consensus to be followed by the outside auditor; (iii) the process used by
management in formulating particularly sensitive accounting estimates and the
basis for the auditor's conclusions regarding the reasonableness of those
estimates; and (iv) any disagreements with management over the application of
accounting principles, the basis for management's accounting estimates or the
disclosures in the financial statements.
12. The Committee shall, based on the review and discussions in paragraphs
10 and 11 above, and based on the disclosures received from the outside auditor
regarding its independence and discussions with the auditor regarding such
independence in paragraph 8 above, recommend to the Board whether the audited
financial statements should be included in the Company's Annual Report on Form
10-K for the fiscal year subject to the audit.
Internal Controls
13. The Committee shall discuss with the outside auditor and the senior
internal audit manager, at least annually, the adequacy and effectiveness of the
accounting and financial controls of the Company, and consider any
recommendations for improvement of such internal control procedures.
14. The Committee shall discuss with the outside auditor and with
management any management letter provided by the outside auditor and any other
significant matters brought to the attention of the Committee by the outside
auditor as a result of its annual audit. The Committee should allow management
adequate time to consider any such matters raised by the outside auditor.
Internal Audit
15. The Committee shall discuss at least annually with the senior internal
audit manager the activities and organizational structure of the Company's
internal audit function and the qualifications of the primary personnel
performing such function.
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16. Management shall furnish to the Committee a copy of each audit report
prepared by the senior internal audit manager of the Company.
17. The Committee shall, at its discretion, meet with the senior internal
audit manager to discuss any reports prepared by him or her or any other matters
brought to the attention of the Committee by the senior internal auditor
manager.
18. The senior internal audit manager shall be granted unfettered access to
the Committee.
Other Responsibilities
19. The Committee shall review and reassess the Committee's charter at
least annually and submit any recommended changes to the Board for its
consideration.
20. The Committee shall provide the report for inclusion in the Company's
Annual Proxy Statement required by Item 306 of Regulation S-K of the Securities
and Exchange Commission.
21. The Committee, through its Chair, shall report periodically, as deemed
necessary or desirable by the Committee, but at least annually, to the full
Board regarding the Committee's actions and recommendations, if any.
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APPENDIX B
SECOND AMENDED AND RESTATED STOCK OPTION PLAN
FOR EXECUTIVE AND KEY EMPLOYEES
OF
THE SANDS REGENT
THE SANDS REGENT, a corporation organized under the laws of the State of
Nevada, by resolution of the Board of Directors of the Company (the "Board") on
August 14, 2000, adopted this Second Amended and Restated Stock Option Plan for
Executive and Key Employees of The Sands Regent (the "Plan"). This Plan was
originally adopted by the Board and approved by the shareholders of the Company
in January 1985. The Plan was amended in 1990 and was amended and restated on
September 16, 1992. This Second Amended and Restated Stock Option Plan
incorporates amendments to the Amended and Restated Stock Option Plan, as
adopted and effective on November 3, 1997, December 12, 1997, August 17, 1998
and August 14, 2000. The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its executive and
other key employees who have been or will be given responsibility for the
management or administration of the Company's business affairs, by
assisting them to become owners of the capital stock of the Company and
thus to benefit directly from its growth, development and financial
success.
(2) To enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees considered
essential to the long range success of the Company by providing and
offering them an opportunity to become owners of capital stock of the
Company under options, some of which are intended to qualify as "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan they shall have the
meaning specified below unless the context clearly indicates to the contrary.
SECTION 1.1 -- BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.2 -- CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.3 -- COMMITTEE
"Committee" shall mean the committee of the Board, appointed as provided in
Section 6.1.
SECTION 1.4 -- COMPANY
"Company" shall mean The Sands Regent or any successor corporation.
SECTION 1.5 -- DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.6 -- EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Subsidiary, whether
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.
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SECTION 1.7 -- INCENTIVE STOCK OPTION
"Incentive Stock Option" shall mean an Option qualifying under Section 422
of the Code and designated as such by the Committee.
SECTION 1.8 -- INDEPENDENT DIRECTOR
"Independent Director" shall mean a member of the Board who is not an
Employee of the Company.
SECTION 1.9 -- NON-QUALIFIED OPTION
"Non-Qualified Option" shall mean an Option which is not an Incentive Stock
Option and which is designated as a Non-Qualified Option by the Committee.
SECTION 1.10 -- OFFICER
"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Securities Exchange Act of 1934, as amended.
SECTION 1.11 -- OPTION
"Option" shall mean an option to purchase capital stock of the Company,
granted under the Plan. "Options" includes both Incentive Stock Options and
Non-Qualified Options.
SECTION 1.12 -- OPTION LIMIT
"Option Limit" shall mean Two Hundred Thousand (200,000) shares of Common
Stock, as adjusted pursuant to Section 2.3 and 4.6 of the Plan, the method of
counting such shares of Common Stock shall conform to any requirements
applicable to performance-based compensation under Section 162(m) of the Code or
the rules and regulations promulgated thereunder.
SECTION 1.13 -- OPTIONEE
"Optionee" shall mean an Employee or Independent Director to whom an Option
is granted under the Plan.
SECTION 1.14 -- PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.15 -- PLAN
The "Plan" shall mean this Second Amended and Restated Stock Option Plan
for Executive and Key Employees of The Sands Regent, as amended and/or restated
from time to time.
SECTION 1.16 -- PRONOUNS
The masculine pronoun shall include the feminine and neuter and the
singular shall include the plural, where the context so indicates.
SECTION 1.17 -- SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.18 -- SECTION 162(M) EMPLOYEE
"Section 162(m) Employee" shall mean any Employee designated by the Board
or Committee as a Employee whose compensation for the fiscal year in which the
Employee is so designated or a future fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code.
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SECTION 1.19 -- SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all such classes of stock in one of
the other corporations in such chain.
SECTION 1.20 -- TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company or a Subsidiary is terminated
for any reason, including but not by way of limitation, a termination by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous reemployment by the Company or a Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, whether a
Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, with respect to Incentive Stock Options, a
leave of absence shall constitute a Termination of Employment if, and to the
extent that, such leave of absence interrupts employment for the purposes of
Section 422(a)(2) of the Code and then applicable Regulations and Revenue
Rulings under said Section.
SECTION 1.21 -- 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.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 -- SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of the Company's
common stock, par value $.10 per share (the "Common Stock"). The aggregate
number of shares of Common Stock which have been or may be issued upon exercise
of Options granted under the Plan shall not exceed One Million One Hundred
Thousand (1,100,000) shares.
The maximum number of shares of Common Stock which may be subject to
Options granted under the Plan to any Section 162(m) Employee in any calendar
year shall not exceed the Option Limit. To the extent required by Section 162(m)
of the Code, shares subject to Options which are canceled continue to be counted
against the Option Limit.
SECTION 2.2 -- ADDITIONAL SHARES
If any Option expires or is cancelled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may again be optioned
hereunder subject to the limitations of Section 2.1. Shares of Common Stock
withheld or delivered in payment of the exercise price or tax withholding upon
exercise of Options granted under this Plan may again be optioned hereunder
subject to the limitations of Section 2.1.
SECTION 2.3 -- CHANGES IN COMPANY'S SHARES
In the event that the outstanding shares of Common Stock of the Company are
hereafter 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 shall
be made by the Committee in the number and kind of shares for the purchase of
which Options may be granted, including adjustments of the
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limitations in Section 2.1 on the maximum number and kind of shares which may be
issued on exercise of Options and adjustments to the Option Limit.
SECTION 2.4 -- 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 Shareholders 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 Shareholders 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 shareholders
following the 1998 Annual Meeting of Shareholders 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
Shareholders 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 2.4 (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 than 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
shareholders 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 2.4 (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).
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 -- ELIGIBILITY
Any executive or other key Employee of the Company or of any corporation
which is then a Subsidiary shall be eligible to be granted Options.
SECTION 3.2 -- QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the Code.
SECTION 3.3 -- GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute discretion:
(i) Determine which Employees are executive or key Employees and
select from among the executive or key Employees (including those to whom
Options have been previously granted under the Plan) such of them as in its
opinion should be granted Options; and
(ii) Subject to the Option Limit, determine the number of shares to be
subject to such Options granted to such selected executive or key
Employees; and
(iii) Determine the terms and conditions of such Options, consistent
with the Plan; and
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(iv) Subject to Section 3.2, determine whether such Options are to be
Incentive Stock Options or Non-Qualified Options and whether such Options
are to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
(v) Determine the terms and conditions of such Options, consistent
with the Plan.
(b) Upon the selection of an executive or key Employee to be granted an
Option, the Committee shall instruct the Secretary to issue such Option and may
impose such conditions on the grant of such Option as it deems appropriate.
(c) Notwithstanding the foregoing, Options may not be granted to executive
or key Employees who are then Directors or Officers unless such grants comply
with any applicable requirements of Rule 16b-3 and related applicable rules, as
amended from time to time, promulgated under Section 16 of the Securities
Exchange Act of 1934, as amended from time to time.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 -- OPTION AGREEMENT
Each Option shall be evidenced by a written Stock and Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the Company
and which shall contain such terms and conditions as the Committee shall
determine, consistent with the Plan. Stock Option Agreements evidencing Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to qualify such Options as "incentive stock
options" under Section 422 of the Code.
SECTION 4.2 -- OPTION PRICE
(a) The price of the shares subject to each Option shall be set by the
Committee; provided, however, that the price per share shall be not less than
100% of the fair market value of such shares on the date such Option is granted;
provided, further, that, in the case of an Incentive Stock Option, the price per
share shall not be less than 110% of the fair market value of such shares on the
date such Option is granted in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company, any Subsidiary or any
Parent Corporation.
(b) For the purpose of Section 4.2(a), the fair market value of a share of
the Company's stock on the date the option is granted shall be: (i) the closing
price of a share of the Company's stock on the principal exchange on which
shares of the Company's stock are then trading, if any, on such date, or, if
shares were not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if such stock is not traded on an exchange
but quoted on NASDAQ or a successor quotation system, (1) the last sales price
(if the stock is then listed as a National Market Issue under the NASDAQ
National Market System) or (2) the mean between the closing representative bid
and asked prices (in all other cases) for the stock on such date as reported by
NASDAQ or such successor quotation system; or (iii) if such stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor quotation
system, the mean between the closing bid and asked prices for the stock on such
date as determined in good faith by the Committee; or (iv) if the Company's
stock is not publicly traded, the fair market value established by the Committee
acting in good faith.
SECTION 4.3 -- COMMENCEMENT OF EXERCISABILITY
(a) 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.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and 7.3, Options
shall become exercisable at such times and in such installments (which may be
cumulative) as the Committee shall provide in the terms of each individual
Option; provided, however, that by a resolution adopted after an Option is
granted the
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Committee may, on such terms and conditions as it may determine to be
appropriate and subject to Sections 4.3(a), 4.3(c) and 7.3, accelerate the time
at which such Option or any portion thereof may be exercised.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
(d) Notwithstanding any other provision of this Plan, the aggregate fair
market value (determined at the time the Incentive Stock Option is granted) of
the shares of the Company's stock with respect to which "incentive stock
options" (within the meaning of Section 422 of the Code) are exercisable for the
first time by the Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.
SECTION 4.4 -- EXPIRATION OF OPTIONS
(a) No Incentive Stock Option may be exercised to any extent by anyone
after the first to occur of the following events:
(i) The expiration of ten years from the date the Option was granted;
or
(ii) In the case of an Optionee owning (within the meaning of Section
424(d) of the Code), at the time the Option was granted, more than 10% of
the total combined voting power of all classes of stock of the Company, any
Subsidiary or any Parent Corporation, the expiration of five years from the
date the Option was granted.
No Non-Qualified Option may be exercised to any extent by anyone after the
expiration of ten years and one day from the date the Option was granted.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; except that if the option is exercised after the
expiration of three (3) months from the date of Termination of Employment by
reason other than death or permanent disability (within the meaning of Section
22(e)(3) of the Code), the Option will not be considered an Incentive Stock
Option but rather will be taxed as a Non-Qualified Option.
Without limiting the generality of the foregoing, the Committee may provide
in the terms of individual Options that said Options expire immediately upon a
Termination of Employment for any reason.
SECTION 4.5 -- CONSIDERATION
In consideration of the granting of the Option, the Optionee shall agree,
in the written Stock Option Agreement to remain in the employ of the Company or
a Subsidiary for a period of at least one year after the Option is granted.
Nothing in this Plan or in any Stock Option Agreement hereunder shall confer
upon any Optionee any right to continue in the employ of the Company or any
Subsidiary or shall interfere with or restrict in any way the rights of the
Company and Subsidiaries, which are hereby expressly reserved, to discharge any
Optionee at any time for any reason whatsoever, with or without good cause.
SECTION 4.6 -- ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding shares of the stock subject to Options
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividends or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
or portions thereof then unexercised, shall be exercisable, to the end that
after such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in option price per share; provided, however,
that, in the case of Incentive Stock Options each such adjustment shall be made
in such manner as not to constitute a "modification" within the meaning of
Section 424(h)(3) of the Code.
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Any such adjustment made by the Committee shall be final and binding upon all
Optionees, the Company and all other interested persons.
SECTION 4.7 -- MERGER, CONSOLIDATION, EXCHANGE, ACQUISITION, LIQUIDATION OR
DISSOLUTION
In its absolute discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide by the terms of any Option that such
Option cannot be exercised after the merger or consolidation of the Company 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; and
if the Committee so provides, it may, in its absolute discretion and on such
terms and condition as it deems appropriate, also provide either by the terms of
such Option or by a resolution adopted prior to the occurrence of such merger,
consolidation, exchange, acquisition, liquidation or dissolution, that, for some
period of time prior to such event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section
4.3(a), Section 4.3(b), 4.3(d) and/or in any installment provisions of such
Option.
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.
(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.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 -- PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he may exercise an Option granted
to him, or any portion thereof. After the death of the Optionee, any exercisable
portion of an Option may, prior to the time when such portion becomes
unexercisable under Section 4.4 or Section 4.7, be exercised by his personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
SECTION 5.2 -- PARTIAL EXERCISE
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under Section 4.4 or
Section 4.7, such Option or portion thereof may be exercised in whole or in
part; provided, however, that the Company shall not be required to issue
fractional
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shares and the Committee may, by the terms of the Option, require any partial
exercise to be with respect to a specified minimum number of shares.
SECTION 5.3 -- MANNER OF EXERCISE
Any exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under Section 4.4 or Section 4.7.
(a) Notice in writing signed by the Optionee or other person then entitled
to exercise such option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by the
Committee; and
(b) Full payment (in cash or check) must be made 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; or
(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; or
(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; or
(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); or
(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.
(c) Such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars; and
(d) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option
or portion thereof.
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SECTION 5.4 -- CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed, if the Company's stock is then
publicly traded; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion,
determine to be necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(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); and
(e) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons
of administrative convenience.
SECTION 5.5 -- RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 -- COMMITTEE
The Committee shall be the Compensation Committee of the Board (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under the Plan) and shall consist solely of two or more Directors, appointed by
and holding office at the pleasure of the Board. As to Option grants intended to
qualify as performance-based compensation as described in Section 162(m)(4)(c)
of the Code, such Options shall be granted and administered by a committee
consisting solely of two or more Directors appointed by and holding office at
the pleasure of the Board, each of whom is an "outside director" for purposes of
Section 162(m) of the Code. Appointment of Committee members shall be effective
upon acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be filled
by the Board.
SECTION 6.2 -- DUTIES AND POWERS OF THE COMMITTEE AND THE BOARD
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have the
power to interpret the Plan and the Options and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock options"
within the meaning of Section 422 of the Code. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan, except with respect to matters which
under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the sole discretion of the
Committee. Notwithstanding the foregoing, the full
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<PAGE> 32
Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Options granted to Independent
Directors.
SECTION 6.3 -- MAJORITY RULE
The Committee shall act by a majority of its members in office and the
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 6.4 -- COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall not receive compensation for their services
as members but all expenses and liabilities they incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such person. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 -- OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Optionee or his 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 other legal or equitable proceedings
(including bankruptcy) and any attempted disposition thereof shall be null and
void and of no effect provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
SECTION 7.2 -- AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee or the
Board. However, without approval of the Company's shareholders given within 12
months before or after the action by the Board or the Committee, no action of
the Committee or Board may, except as provided in Section 2.3, (i) increase any
limit imposed in Section 2.1 on the maximum number of shares which may be issued
on exercise of Options, (ii) extend the limit imposed in this Section 7.2 on the
period during which Options may be granted, (iii) amend or modify the Option
Limit, or (iv) amend the Plan in any manner requiring shareholder approval under
any applicable law, rule or regulation. Neither the amendment, suspension nor
termination of the 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 Plan, and in no event may any Option be granted under this Plan after
August 14, 2010.
SECTION 7.3 -- APPROVAL OF PLAN BY SHAREHOLDERS
The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of any applicable law, rule or regulation.
Options may be granted prior to any shareholder approval which may be required
under any law or regulation; provided, however, that such options shall not be
exercisable prior to the time the Plan, as amended, is approved by the
shareholders; provided, further, that if such approval has not been obtained at
the end of said 12-month period, all Options granted pursuant to the terms of
the Plan amendment shall thereupon be cancelled and become null and void.
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<PAGE> 33
SECTION 7.4 -- EFFECT OF PLAN UPON OTHER OPTIONS AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company or any Subsidiary (a)
to establish any other forms of incentives or compensation for employees of the
Company or any Subsidiary or (b) to grant or assume options otherwise than under
this Plan in connection with any proper corporate purpose, including, but not by
way of limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
SECTION 7.5 -- TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of The Sands Regent on August 14, 2000, and was duly approved by the
shareholders of The Sands Regent on November 6, 2000.
Executed this day of , 2000.
------------------------------------
Secretary
Corporate Seal
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<PAGE> 34
REVOCABLE PROXY
THE SANDS REGENT
ANNUAL MEETING OF SHAREHOLDERS -- NOVEMBER 6, 2000
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 6, 2000, as follows:
1. ELECTION OF DIRECTORS:
Nominees: Jon N. Bengtson, Larry Tuntland and David R. Wood, 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 Company's Second 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> 35
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: , 2000
-------------------------
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.
