<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CROWN CASINO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CROWN CASINO CORPORATION
4040 NORTH MACARTHUR BOULEVARD, SUITE 100
IRVING, TEXAS 75038
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 1, 1997
To the Holders of Common Stock of
Crown Casino Corporation
Notice is hereby given that the Annual Meeting of Stockholders of Crown
Casino Corporation, a Texas corporation (the "Company"), will be held in
accordance with its Bylaws at the Four Seasons Hotel and Resort, 4150 North
MacArthur Boulevard, Irving, Texas 75038, on Wednesday, October 1, 1997, at 9:30
a.m., local time, for the following purposes:
(1) To elect seven directors to serve for a term of one year and
until their successors have been elected and qualified;
(2) To amend the Company's Articles of Incorporation to change the
name of the Company to "Crown Group, Inc.;"
(3) To approve and adopt the Crown Casino Corporation 1997 Stock
Option Plan; and
(4) To conduct such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record as of the close of business on August 15,
1997, will be entitled to notice of and to vote at said meeting or any
adjournment thereof.
By Order of the Board of Directors.
Edward R. McMurphy
Chairman of the Board,
President and Chief Executive Officer
August 20, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU
ARE URGED TO COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING RETURN ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED BY THE SENDER
IF MAILED WITHIN THE UNITED STATES.
<PAGE> 3
CROWN CASINO CORPORATION
4040 NORTH MACARTHUR BOULEVARD, SUITE 100
IRVING, TEXAS 75038
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 1, 1997
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement, which is first being mailed to stockholders on or
about August 20, 1997, is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Crown Casino Corporation
(the "Company"), for use at the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held at the Four Seasons Hotel and Resort, 4150
North MacArthur Boulevard, Irving, Texas 75038, on Wednesday, October 1, 1997,
at 9:30 a.m., local time, and at any or all adjournments thereof. The address of
the principal executive offices of the Company is 4040 North MacArthur
Boulevard, Suite 100, Irving, Texas 75038 and the Company's telephone number at
such address is (972) 717-3423.
The total cost of this solicitation will be borne by the Company. In
addition to the U.S. mail, proxies may be solicited by officers and regular
employees of the Company, without remuneration, by personal interviews,
telephone and facsimile. It is anticipated that banks, brokerage houses and
other custodians, nominees and fiduciaries will forward soliciting material to
beneficial owners of stock entitled to vote at the Annual Meeting.
Any person giving a proxy pursuant to this Proxy Statement may revoke
it at any time before it is exercised at the Annual Meeting by notifying in
writing the Secretary of the Company, Mark D. Slusser, at the offices of the
Company, 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038, prior
to the Annual Meeting date. In addition, if the person executing the proxy is
present at the Annual Meeting, he may, but need not, revoke the proxy, by notice
of such revocation to the Secretary of the Annual Meeting, and vote his shares
in person. Proxies in the form enclosed, if duly signed and received in time for
voting, and not so revoked, will be voted at the Annual Meeting in accordance
with the instructions specified therein. Where no choice is specified, proxies
will be voted FOR the election of the nominees for director named herein and, on
any other matters presented for a vote, in accordance with the judgment of the
persons acting under the proxies. Abstentions and broker non-votes will not be
counted as votes either in favor of or against the matter with respect to which
the abstention or broker non-vote relates; however, with respect to any proposal
other than the election of directors, abstentions and broker non-votes would
have the effect of a vote against the proposal.
Only stockholders of record at the close of business on August 15, 1997
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. Each share of Common Stock issued and outstanding on such
record date is entitled to one vote. As of August 15, 1997, the Company had
outstanding 9,935,785 shares of Common Stock.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 31, 1997,
with respect to ownership of the outstanding Common Stock by (i) all persons
known to the Company to own beneficially more than five percent (5%) of the
outstanding Common Stock of the Company (whose address is shown), (ii) each
director and nominee for director of the Company, (iii) each of the executive
officers of the Company named in the Summary Compensation Table on page 5, and
(iv) all directors and executive officers as a group. Unless otherwise
indicated, each person possesses sole voting and investment power with respect
to the shares owned by him.
<TABLE>
<CAPTION>
Number of Shares Percent
Name Beneficially Owned of Class
---- ------------------ --------
<S> <C> <C>
Robert J. Kehl 964,167(1) 9.7%
Third St., Ice Harbor
Dubuque, Iowa 52004
Edward R. McMurphy 642,845(2) 6.2%
4040 N. MacArthur Blvd.
Suite 100
Irving, Texas 75038
Gerald L. Adams 560,000(3) 5.6%
1225 East 9th St.
Lockport, Illinois 60441
Tilman J. Falgout, III 564,000(4) 5.6%
4040 N. MacArthur Blvd.
Irving, Texas 75038
Gerard M. Jacobs 373,061(5) 3.7%
John David Simmons 44,650(6) *
David J. Douglas 59,500(7) *
Mark D. Slusser 65,000(8) *
All Directors and Executive 3,273,223(9) 30.5%
Officers as a Group (8 persons)
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes 956,667 shares issued in the name of Kehl River Boats, Inc., of
which Mr. Kehl is president and a principal shareholder. Also includes
7,500 shares subject to non-qualified stock options.
(2) Includes 367,143 shares subject to presently exercisable incentive stock
options.
(3) Includes 10,000 shares subject to non-qualified stock options.
(4) Includes 32,500 shares subject to non-qualified stock options, 115,000
shares subject to presently exercisable incentive stock options, and
400,000 shares held in a corporation controlled by Mr. Falgout.
(5) Includes 2,300 shares held by a corporation controlled by Mr. Jacobs,
110,000 shares owned by Mr. Jacobs' spouse, 127,981 shares subject to
presently exercisable stock purchase warrants, and 7,500 shares subject to
non-qualified stock options.
(6) Includes 42,500 shares subject to non-qualified stock options.
(7) Includes 37,500 shares subject to non-qualified stock options.
2
<PAGE> 5
(8) Includes 65,000 shares subject to presently exercisable incentive stock
options.
(9) Includes an aggregate of 812,624 shares subject to presently exercisable
stock options and/or warrants held by certain of the Company's directors
and executive officers, or corporations over which they have significant
influence, 402,300 shares held in corporations controlled by certain
directors, 956,667 shares issued in the name of Kehl River Boats, Inc. of
which a director is president and a principal shareholder, and 110,000
shares owned by a spouse of a director.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has set
the number of directors for the ensuing year at seven, all of whom are proposed
to be elected at the Annual Meeting. In the event any nominee is unable or
declines to serve as a director at the time of the meeting, the persons named as
proxies therein will have discretionary authority to vote the proxies for the
election of such person or persons as may be nominated in substitution by the
present Board of Directors. Management knows of no current circumstances which
would render any nominee named herein unable to accept nomination or election.
Directors shall be elected by a plurality of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.
Members of the Board of Directors are elected annually to serve until
the next annual meeting of stockholders and until their successors are elected
and qualified.
The following persons have been nominated for election to the Board of
Directors.
EDWARD R. MCMURPHY, age 46, has served as President of the Company
since July 1984, as Chief Executive Officer since January 1988 and as Chairman
of the Board of the Company since September 1993. He has been a director of the
Company since its inception in April 1983. Prior to and during his involvement
with the Company, Mr. McMurphy served as President of Marion Properties, Inc., a
real estate development company, from 1979 to June 1986.
TILMAN J. FALGOUT, III, age 48, has served as Executive Vice President
and General Counsel of the Company since March 1995 and as a director of the
Company since September 1992. From 1978 until June 1995, Mr. Falgout was a
partner in the law firm of Stumpf & Falgout, Houston, Texas.
JOHN DAVID SIMMONS, age 61, has served as a director of the Company
since August 1986. Since 1970, he has been President of Condomart, Inc., a
marketing consulting firm specializing in real estate marketing. Mr. Simmons is
also President of Simmons & Associates, Inc., a real estate development company,
and Management Resources Company, a management consulting firm.
DAVID J. DOUGLAS, age 33, has served as managing director of Triple S
Capital Corporation (investment banking firm) since February 1993. From July
1989 through January 1993, Mr. Douglas served as Vice President of Hatchett
Capital Group, Inc. (investment banking firm). From 1986 through 1988, Mr.
Douglas was employed by Paine Webber Incorporated, where he was promoted to
Associate in 1988. Mr. Douglas has served as a director of the Company since
September 1992.
GERALD L. ADAMS, age 62, has been an entrepreneur for the past 30
years, starting, developing and operating a number of businesses primarily
related to the shipping, trucking, and more recently, real estate industries.
Mr. Adams currently owns and operates several companies, including TriRiver
Dock, Inc. (stevedoring), Clover Ridge Estates, Inc. (residential construction),
Barge Terminal Trucking, Inc. (trucking) and Adams Enterprises, Inc. (trucking
and crane services). Mr. Adams has served as a director of the Company since
October 1993.
GERARD M. JACOBS, age 42, has been President, Chief Executive Officer
and a Director of Metal Management, Inc., a company specializing in scrap metal,
since January 1996 and has been the owner and President of Environmental Waste
Funding Corporation, a company specializing in landfill development and finance,
since
3
<PAGE> 6
1991. From 1988 to 1991, Mr. Jacobs specialized in landfill development and
finance as a sole proprietor. Mr. Jacobs is also a director and a substantial
stockholder of Casper & Associates, Inc., an engineering firm specializing in
fiber optic communications. From 1983 to 1988, Mr. Jacobs developed resource
recovery, landfill and hydroelectric projects for the investment banking firm of
Russell, Rea & Zappala, Inc., Pittsburgh, Pennsylvania. From 1978 to 1983, Mr.
Jacobs practiced securities, corporate and banking law with the law firms of
Reed, Smith, Shaw & McClay and Manion, Alder & Cohen, P.C., Pittsburgh,
Pennsylvania. Mr. Jacobs has been a director of the Company since September
1994.
ROBERT J. KEHL, age 62, has been an entrepreneur for the past 35 years,
starting, developing and operating businesses primarily in the riverboat
construction, gaming, riverboat touring and restaurant industries. Since 1993,
Mr. Kehl has served as president of Kehl River Boats, Inc., a riverboat
construction firm in Houma, Louisiana. Mr. Kehl currently has interests in
companies involved in gaming and riverboat construction or operation. Mr. Kehl
has been a director of the Company since September 1994.
COMMITTEES OF THE BOARD AND ATTENDANCE
The Board of Directors of the Company presently has the following
standing committees:
(A) the Audit Committee is currently comprised of Messrs. Douglas,
Kehl and Jacobs. The Audit Committee, which held one meeting
during the Company's last fiscal year, is authorized to
nominate the Company's independent auditors and to review with
the independent auditors the scope and results of the audit
engagement.
(B) the Compensation and Stock Option Committee, currently
comprised of Messrs. Adams, Douglas and Simmons. This
Committee, which held two meetings during the Company's last
fiscal year, recommends compensation levels for executive
officers of the Company, and is authorized to consider and
make grants of options pursuant to the Company's stock option
plans and to administer such plans.
During the Company's last fiscal year, the Board of Directors held six
meetings and took action two times by unanimous written consent. Each incumbent
director attended at least 75% of the aggregate number of meetings held by the
Board and by the Committees of the Board on which he served with the exception
of Mr. Jacobs, who attended four meetings held by the Board and one meeting held
by the Audit Committee.
The Company does not have a Directors Nominating Committee, such
function being reserved to the entire Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers, and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
stockholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company, during the fiscal
year ended April 30, 1997, all Section 16(a) filing requirements applicable to
its officers, directors and greater than 10% stockholders were complied with.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to or on behalf of the Company's Chief Executive Officer and any other
executive officer whose salary and bonus, if any, exceeded $100,000 (in fiscal
1997) (the "Named Executive Officers"), for the years ended April 30, 1997, 1996
and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------- ------------
Fiscal Other Annual
Name and Principal Position Year Salary Bonus Compensation Stock Options
--------------------------- ------ --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Edward R. McMurphy 1997 $ 312,500 $ 200,000 -- 25,000
Chairman of the Board, 1996 304,583 175,000 -- --
President and Chief 1995 162,500 70,000 -- 250,000
Executive Officer
Tilman J. Falgout, III(1) 1997 $ 231,250 $ 125,000 -- 20,000
Executive Vice President 1996 201,667 225,000(2) -- --
and General Counsel 1995 -- -- -- 125,000
Mark D. Slusser 1997 $ 156,250 $ 87,500 -- 15,000
Chief Financial Officer, 1996 148,542 87,500 -- --
Vice President Finance 1995 82,500 15,000 -- 50,000
and Secretary
</TABLE>
- -------------------------
(1) Mr. Falgout was employed by the Company on March 9, 1995.
(2) Includes a $100,000 payment intending to reimburse Mr. Falgout for his
losses and expenses incurred in resigning from a law firm in Houston, Texas
and relocating to Dallas, Texas.
SEVERANCE AGREEMENTS
In July 1996, the Board of Directors authorized the Company to enter
into severance agreements with each of Mr. McMurphy, Mr. Falgout and Mr.
Slusser, which agreements provide that in the event of a sale, merger,
consolidation, change in control, or liquidation of the Company, or similar
extraordinary corporate transaction causing a change in control, each such
officer shall be entitled to 2.99 times the annual compensation paid to the
executive as well as accelerated vesting of options under the Company's stock
option plans.
STOCK OPTION PLAN
In 1986 the Board of Directors adopted the Company's 1986 Incentive
Stock Option Plan ("1986 Plan") which expired in September 1996. During the
fiscal year ended April 30, 1997 the following options were granted under the
1986 Plan:
5
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(1)
- -----------------------------------------------------------------------------------------------------------------
Number of % Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year Per Share Date 5% 10%
- ---- ---------- ------------ --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward R. McMurphy 25,000 41.7% $ 2.8125 7-2-06 $ 44,219 $ 112,060
Tilman J. Falgout, III 20,000 33.3 2.8125 7-2-06 35,375 89,648
Mark D. Slusser 15,000 25.0 2.8125 7-2-06 26,531 67,236
</TABLE>
- -------------------------
(1) The dollar amounts under these columns represent the potential realizable
value of each option assuming that the market price of the Common Stock
appreciates in value from the date of grant at the 5% and 10% annual rates
prescribed by regulation and therefore are not intended to forecast
possible future appreciation, if any, of the price of the Common Stock.
(2) The options shown are immediately exercisable.
The following table provides certain information concerning each
exercise of stock options under the Company's stock option plans during the
fiscal year ended April 30, 1997, by the Named Executive Officers and the fiscal
year-end value of unexercised options held by such persons under the Company's
stock option plans:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Shares Options at Options at
Acquired Fiscal Year-End Fiscal Year-End
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---------------------- -------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
Edward R. McMurphy -- -- 342,143 / 100,000 223,226 / 0
Tilman J. Falgout, III -- -- 127,500 / 50,000 29,298 / 0
Mark D. Slusser -- -- 65,000 / 0 0 / 0
</TABLE>
- -------------------------
(1) The market value of the Company's Common Stock on April 30, 1997 was $2.125
per share, and options to purchase 194,643 shares held by the above
officers were in-the-money. The actual value, if any, an executive may
realize will depend upon the amount by which the market price of the
Company's Common Stock exceeds the exercise price when the options are
exercised.
6
<PAGE> 9
DIRECTOR COMPENSATION
Effective May 1, 1995, non-employee directors of the Company receive a
$20,000 annual retainer, $1,500 per Board meeting attended in person, and $500
per Committee meeting attended in person. Directors who are also employees of
the Company do not receive separate compensation for their services as a
director. In July 1997, the Board of Directors adopted the Company's 1997 Stock
Option Plan (the "Plan"), which is subject to stockholder approval at the 1997
Annual Meeting, pursuant to which options to purchase shares of the Company's
Common Stock may be granted to directors, officers and key employees of the
Company, including non-employee directors. Pursuant to the Plan, on July 9, 1997
each then non-employee director was granted an option to purchase 5,000 shares
of Common Stock, and on the first business day of July in each year thereafter,
each then non-employee director of the Company will be automatically granted an
option to purchase 2,500 shares of Common Stock, each at an exercise price equal
to the fair market value of such stock on the date of grant. Options granted
under the Plan are exercisable for a period of up to ten years. In the event
that a director ceases to be a director of the Company for any reason, options
granted to the director will expire upon the earlier to occur of (1) the tenth
anniversary of the date of grant of the option, or (2) ninety days following the
date on which such director ceased to be a director.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Report of the
Compensation and Stock Option Committee on Executive Compensation and the
Stockholder Return Performance Graph shall not be incorporated by reference into
any such filings.
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has a Compensation and Stock
Option Committee ("Compensation Committee") which recommends compensation levels
for the executive officers of the Company, including the Chief Executive
Officer, and is authorized to consider and make grants of options pursuant to
the Company's Incentive Stock Option Plan and Non-Qualified Stock Option Plan
and to administer such plans. The Compensation Committee held two meetings
during fiscal 1997. During fiscal 1996 the Company had three executive officers,
including Edward R. McMurphy, President and Chief Executive Officer; Tilman J.
Falgout, III, Executive Vice President and General Counsel; and Mark D. Slusser,
Chief Financial Officer, Vice President Finance and Secretary.
Effective September 1, 1995 Mr. McMurphy's salary was set at $350,000
per annum by the Board of Directors, upon recommendation of the Compensation
Committee. In determining such salary the Compensation Committee reviewed
compensation levels of other chief executive officers in the gaming industry and
considered Mr. McMurphy's recent performance. In particular the Compensation
Committee considered Mr. McMurphy's success at leading the Company's Louisiana
riverboat casino project in an unstable and highly competitive environment.
Effective August 1, 1996 the Board of Directors, upon recommendation of the
Compensation Committee, adjusted Mr. McMurphy's salary to $300,000 per annum as
part of a more complete compensation package that established an ongoing bonus
program (discussed below) which is tied to financial performance of the Company.
The Compensation Committee considers from time to time the payment of
bonuses to the executive officers in light of the performance of the Company and
the effort made by the executive officers to promote the Company's business. In
July 1996, the Board of Directors, with the approval of the Compensation
Committee, approved a bonus to the Named Executive Officers in connection with
their efforts and success in completing the sale of 50% of the Company's St.
Charles Gaming Company, Inc. subsidiary ("SCGC") in June 1995 and the sale of
the remaining 50% interest in SCGC in May 1996. The bonus was equal to the then
current annual salary for each of Mr. McMurphy ($350,000), Mr. Falgout
($250,000) and Mr. Slusser ($175,000). One-half of the bonus amount was paid for
the fiscal year ended April 30, 1996 and the other 50% was earned in May 1996 at
the time of the sale of the remaining 50% interest in SCGC.
7
<PAGE> 10
The Board of Directors further authorized and adopted an annual bonus
plan beginning with the fiscal year ending April 30, 1997 for the executive
officers of the Company. The aggregate bonus amount shall be equal to five
percent of the Company's consolidated earnings before income taxes (before the
bonus calculation), calculated in accordance with generally accepted accounting
principles. With respect to the fiscal year ending April 30, 1997, the
calculation of the bonus would not include the May 1996 gain from the sale of
the remaining 50% interest of SCGC and the related management bonus. For fiscal
1997, no bonus was paid pursuant to the above-referenced annual bonus plan;
however, a discretionary bonus of $25,000 was approved by the Board of Directors
and paid to Edward R. McMurphy.
In July 1996, the Board of Directors also authorized the Company to
enter into severance agreements with each of Mr. McMurphy, Mr. Falgout and Mr.
Slusser, which agreements provide that in the event of a sale, merger,
consolidation, change in control, or liquidation of the Company, or similar
extraordinary corporate transaction causing a change in control, each such
officer shall be entitled to 2.99 times the annual compensation paid to the
executive as well as accelerated vesting of options under the Company's stock
option plans.
The Compensation Committee believes that the foregoing agreements are
reasonable and competitive compensation packages necessary in order for the
Company to retain the management expertise it needs.
The Compensation Committee takes action from time to time, based upon
guidelines and recommendations provided by the Board of Directors, to provide
additional incentive compensation to the executive officers and other employees
through the award of stock options under the Company's existing stock option
plans. During fiscal 1997, the Compensation Committee made an award of stock
options to purchase shares of the Company's Common Stock to the executive
officers, as follows: Edward R. McMurphy (25,000 shares), Tilman J. Falgout, III
(20,000 shares), and Mark D. Slusser (15,000 shares).
The Company's future compensation policies will be developed in light
of the Company's financial position and results of operations and with the goal
of rewarding members of management for their contributions to the Company's
success.
DAVID J. DOUGLAS JOHN DAVID SIMMONS GERALD L. ADAMS
8
<PAGE> 11
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the fiscal year end
percentage change in the cumulative total stockholder return on the Company's
Common Stock against (i) the cumulative total return of the CRSP Total Return
Index for the NASDAQ Stock Market (U.S. companies) and (ii) a "peer group" index
created by the Company for the period of five fiscal years commencing on May 1,
1992 and ending on April 30, 1997. The "peer group" index consists of the Common
Stock of Grand Casinos, Inc., Argosy Gaming Company, Mirage Resorts,
Incorporated, Harrah's Entertainment, Inc., Players International, Inc., Casino
Magic Corp., President Riverboat Casinos, Inc., Circus Circus Enterprises, Inc.,
Showboat, Inc., and Rio Hotel & Casino, Inc. These corporations are involved in
various aspects of the gaming industry, which the Company believes is a more
appropriate comparative index. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 on May 1, 1992.
[GRAPH]
<TABLE>
<CAPTION>
CROWN CASINO Nasdaq Stock Self-Determined
CORPORATION Market Peer Group
------------ ------------ ---------------
<S> <C> <C> <C>
04/30/92 100.0 100.0 100.0
04/30/93 105.9 115.0 169.2
04/29/94 1,423.5 128.0 177.0
04/28/95 917.6 148.8 197.1
04/30/96 364.7 212.1 255.1
04/30/97 400.0 224.5 154.2
</TABLE>
The dollar value at April 30, 1997 of $100 invested in the Company's Common
Stock on May 1, 1992 was $______, compared to $______ for the peer group
described above, and $__________ for the CRSP Total Return Index for the Nasdaq
Stock Market (U.S. companies).
9
<PAGE> 12
CERTAIN TRANSACTIONS
On June 11, 1996, the Company entered into a definitive Asset Purchase
Agreement to acquire the assets and operations of Mississippi Belle II, Inc.
("MBII"), which owns a riverboat casino in Clinton, Iowa, for a purchase price
of $40 million. The principal shareholders of MBII are the adult children of
Robert J. Kehl, a director of the Company. In November 1996, the Agreement
expired and the Company decided not to attempt to extend the Agreement as part
of a broader decision to cease pursuing gaming opportunities in the United
States. Pursuant to the Agreement, the Company forfeited its deposit of
$500,000.
AGENDA ITEM TWO
PROPOSAL TO AMEND ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
On July 9, 1997, the Board of Directors of the Company unanimously
approved an amendment to Article I of the Company's Articles of Incorporation
(the "Articles of Incorporation") to change the name of the Company from "Crown
Casino Corporation" to "Crown Group, Inc." In connection therewith, the
following resolution will be introduced at the Annual Meeting:
RESOLVED, that Article I of the Articles of Incorporation, as
heretofore added to or amended by Certificates filed pursuant to law, is amended
to read in its entirety as follows:
The name of the Corporation is "Crown Group, Inc."
The Board of Directors recommend that stockholders approve the proposed
amendment to the Company's Articles of Incorporation because it considers the
proposal to be in the best long-term and short-term interests of the Company,
its stockholders and other constituencies. The proposed name change is intended
to reflect the Company's diversification into business operations other than the
gaming industry, such as the Company's recent entry into the specialty finance
industry with the formation of Concorde Acceptance Corporation. Through this
newly organized subsidiary, the Company will originate, purchase, service and
sell sub-prime mortgage loans which are secured primarily by first and second
liens on residential properties. Management of the Company continues to
investigate potential opportunities in businesses other than gaming, and may
continue to diversify its operations in the future. The Board of Directors
believes that it is appropriate for the Company to change its name in order to
reflect this diversification strategy.
The proposed amendment to the Articles of Incorporation to change the
Company's name will require the approval of a majority of the outstanding shares
of Common Stock of the Company entitled to notice of and to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR THE FOREGOING AMENDMENT TO THE ARTICLES OF INCORPORATION
TO CHANGE THE COMPANY'S NAME.
AGENDA ITEM THREE
PROPOSAL TO ADOPT THE CROWN CASINO CORPORATION 1997 STOCK OPTION PLAN
GENERAL
On July 9, 1997, the Board of Directors of the Company adopted a 1997
Stock Option Plan (the "1997 Plan") primarily for the benefit of eligible
officers, directors and key employees of the Company. The 1997 Plan provides for
the grant of both incentive and non-qualified stock options. The purpose of the
1997 Plan is to encourage and enable eligible directors, officers and key
employees of the Company and its subsidiaries to acquire proprietary interests
in the Company and its subsidiaries through the ownership of Common Stock of the
Company and to provide motivation for participating directors, officers and key
employees to remain in the employ of and to give greater effort on behalf of the
Company.
10
<PAGE> 13
The 1997 Plan provides for the grant of options to purchase up to an
aggregate of 1,000,000 shares of the Company's Common Stock. Under the terms of
the 1997 Plan, the Board of Directors or the Stock Option Committee of the Board
of Directors may grant options to purchase shares of Common Stock to officers,
directors and employees of the Company or of a subsidiary of the Company, and to
certain consultants and advisors to the Company. A copy of the 1997 Plan is
attached hereto as Exhibit A and incorporated herein by reference.
As of July 9, 1997, the Company had granted options to purchase shares
of Common Stock pursuant to the 1997 Plan as follows: (i) each Named Executive
Officer (Edward R. McMurphy: 25,000 shares; T.J. Falgout, III: 20,000 shares;
and Mark D. Slusser: 15,000 shares); (ii) all current executive officers as a
group: 60,000 shares; (iii) all current directors who are not executive officers
as a group: 25,000 shares; (iv) each nominee for election as a director: 5,000
shares each; and (v) all employees, including all current officers who are not
executive officers, as a group: no shares. See "Executive Compensation."
The Board of Directors recommends that shareholders vote FOR the
proposed amendment. The affirmative vote of a majority of the shares of the
Company's Common Stock represented in person or by proxy at the Annual Meeting
is necessary for the approval of the 1997 Plan.
DESCRIPTION OF 1997 PLAN
Effective Date. The effective date of the 1997 Plan is July 9,1997. The
1997 Plan shall remain in effect until all shares subject to or which may become
subject to the 1997 Plan shall have been purchased pursuant to options granted
under the 1997 Plan, provided that options under the 1997 Plan must be granted
within ten (10) years from the effective date.
Shares Subject to the 1997 Plan. The shares of the Company's Common
Stock available for issuance under the 1997 Plan may, at the election of the
Board of Directors, be either treasury shares or shares originally issued for
such purpose. The maximum number of shares which shall be reserved and made
available for sale under the 1997 Plan shall be 1,000,000 shares of Common
Stock. Any shares subject to an option which for any reason expires or is
terminated may again be subject to an option under the 1997 Plan.
Persons Eligible to Participate in the 1997 Plan. Under the 1997 Plan,
options may be granted only to officers, directors and key employees of the
Company or its subsidiaries, and certain consultants and advisors to the
Company.
Automatic Stock Option Grants. Pursuant to the 1997 Plan, on July 9,
1997 each then non-employee director of the Company was granted an option to
purchase 5,000 shares of Common Stock at an option exercise price equal to 100%
of the Market Price of the stock on that date ($2.8125). The 1997 Plan further
provides that on the first business day of July of each year thereafter during
the term of the 1997 Plan, each then non-employee director will be automatically
granted an option to purchase 2,500 shares of Common Stock at an option exercise
price equal to 100% of the Market Price of such stock on the date of grant.
By resolution of the Board of Directors on July 9, 1997, the Board of
Directors authorized the automatic grant of a stock option on the first business
day of July of each year commencing in 1998 to the following executive officers:
Edward R. McMurphy - 25,000 shares; T.J. Falgout, III - 20,000 shares; and Mark
D. Slusser - 15,000 shares. These options will also be awarded at an exercise
price equal to 100% of the Market Price of the Common Stock on the date of
grant. A similar number of options was granted to each of the foregoing
executive officers on the date of adoption of the 1997 Plan.
The following table indicates the number of stock options which will be
awarded annually to each of the following individuals and groups under the 1997
Plan to the extent that such awards are determinable. The number of shares
subject to options granted may be adjusted from time to time by action of the
Board of Directors or the Committee.
11
<PAGE> 14
NEW PLAN BENEFITS
1997 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Name and Position Dollar Value ($)(1) Number of Options
------------------------------- ------------------- -----------------
<S> <C> <C>
Edward R. McMurphy -- 25,000
Chief Executive Officer
and President
Tilman J. Falgout, III -- 20,000
Executive Vice President
and General Counsel
Mark D. Slusser -- 15,000
Chief Financial Officer,
Vice President Finance
and Secretary
Executive Group -- 60,000
Non-Executive Director Group(2) -- 25,000
Non-Executive Officer -- Not Presently Determinable
Employee Group
</TABLE>
- -------------------------
(1) Options automatically granted to the persons indicated in the table will be
granted at an exercise price equal to 100% of the Market Price on the date
of grant of the option.
(2) Estimated based upon the existing number of non-employee directors (five
persons).
Administration of the 1997 Plan. The 1997 Plan shall be administered by
the Board of Directors or by a committee comprised of no fewer than two (2)
members appointed by the Board of Directors of the Company from among its
members (the "Committee"). Each member of the Committee shall be a "Non-Employee
Director" as such term is defined under Rule 16b-3 under the Securities Exchange
Act of 1934, as amended. Subject to the provisions of the 1997 Plan, the Board
of Directors or the Committee has the authority to determine the employees to
whom options shall be granted and to determine exercise prices, vesting
requirements, the term of and the number of shares covered by each option.
Exercise Price, Terms of Exercise and Payment for Shares. Each option
granted under the 1997 Plan will be represented by an Option Agreement which
shall set forth the terms particular to that option, including the number of
shares covered by the option, the exercise price, the term of the option and any
vesting requirements.
The exercise price of options granted under the 1997 Plan will be
determined by the Committee, but in no event shall be less than 100% of the
Market Price of the Common Stock on the date of grant of the option in the case
of qualified incentive stock options, or less than 75% of the Market Price in
the case of non-qualified stock options. The term "Market Price" is defined in
the 1997 Plan to be the last trade or closing price for the Company's shares of
Common Stock in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation System (or other
national quotation service). If the Company's Common Stock is registered on a
national securities exchange, then Market Price shall mean the closing price of
the Company's Common Stock on such national securities exchange. If the
Company's Common Stock is not traded in the organized markets, then the price
shall be the fair market value of the Common Stock as determined in good faith
by the Board of Directors or the Committee. As of August 1, 1997, the Market
Price of the Company's Common Stock was $2.46875.
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<PAGE> 15
Options may be exercised in whole or in part by the optionee, but in no
event later than ten (10) years from the date of the grant. Any incentive stock
option granted under the 1997 Plan to an individual who owns more than 10% of
the total combined voting power of all classes of stock of the Company or a
subsidiary may not be purchased at a price less than 110% of the market price on
the day the option is granted, and no such option may be exercised more than
five (5) years from the date of grant. The purchase price for the shares shall
be paid in cash or shares of Common Stock of the Company (including surrendering
shares underlying the option being exercised), or a combination of both. Upon
payment, the Company will deliver stock certificates for such shares to the
optionee.
Termination of Service. In the event that a holder of an option granted
under the 1997 Plan ceases to be a director or employee of the Company or any
subsidiary of the Company for any reason other than his death or total and
permanent disability, any incentive stock option or unexercised portion thereof,
which is otherwise exercisable on the date of such termination, shall expire
three (3) months from the date of such termination. Any incentive stock options
which are not exercisable on the date of such termination shall immediately
terminate.
Upon the death or total and permanent disability of the holder of an
option, any incentive stock option or unexercised portion thereof which is
otherwise exercisable shall expire within one year of the date of such death or
disability. Any incentive stock options which were not exercisable on the date
of such death or disability shall become immediately exercisable for a period of
one year.
Options granted under the 1997 Plan are exercisable during the lifetime
of the optionee only by the optionee. All options granted under the 1997 Plan
are non-transferable except by will or under the laws of descent and
distribution.
Reorganization and Recapitalization. In case the Company is merged or
consolidated with another corporation and the Company is not the survivor, or in
case the Company is acquired by another corporation, or in case of a separation,
reorganization, recapitalization or liquidation of the Company, the Board of
Directors of the Company shall either make appropriate provision for the
protection of any outstanding options, including without limitation the
substitution of appropriate stock of the Company or of the merged, consolidated
or otherwise reorganized corporation which will be issuable in respect of the
shares of the Common Stock of the Company, or upon written notice to the
optionee, provide that the option must be exercised within 60 days or it will be
terminated.
In the event that dividends are payable in Common Stock of the Company
or in the event there are splits, subdivisions or combinations of shares of
Common Stock of the Company, the number of shares available under the 1997 Plan
will be increased or decreased proportionately, as the case may be, and the
number of shares deliverable upon the exercise thereafter of any option
theretofore granted will be increased or decreased proportionately, as the case
may be, as determined to be proper by the Board of Directors or the Committee.
Limitation on Number of Shares That May be Purchased. For incentive
stock options granted under the 1997 Plan, the aggregate fair market value
(determined at the time the option was granted) of the shares with respect to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
Amendment and Termination of the 1997 Plan. With respect to any shares
of stock at the time not subject to options, the Board of Directors may at any
time and from time to time, terminate, modify or amend the 1997 Plan in any
respect, except that no such modification or amendment shall be made absent the
approval of the shareholders of the Company to: (i) increase the maximum number
of shares for which options may be granted under the 1997 Plan; (ii) reduce the
option exercise price; (iii) extend the period during which options may be
granted or exercised; or (iv) change the class of employees eligible for the
grant of stock options.
With the consent of the affected optionee, the Board of Directors or
the Committee may amend outstanding option agreements in a manner consistent
with the 1997 Plan.
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<PAGE> 16
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. All incentive stock options granted or to be
granted under the 1997 Plan which are designated as incentive stock options are
intended to be incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Under the provisions of Section 422 of the Code, neither the holder of
an incentive stock option nor the Company will recognize income, gain, deduction
or loss upon the grant or exercise of an incentive stock option. An optionee
will be taxed only when the stock acquired upon exercise of his incentive stock
option is sold or otherwise disposed of in a taxable transaction. If at the time
of such sale or disposition the optionee has held the shares for the required
holding period (two years from the date the option was granted and one year from
the date of the transfer of the shares to the optionee), the optionee will
recognize long-term capital gain or loss, as the case may be, based upon the
difference between his exercise price and the net proceeds of the sale. However,
if the optionee disposes of the shares before the end of such holding period,
the optionee will recognize ordinary income on such disposition in an amount
equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the
date of exercise exceeded the option exercise price, with any
excess gain being capital gain, long-term or short-term,
depending on whether or not the shares had previously been
held for more than one year on the date of sale or other
taxable disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition of
ordinary income to the optionee will also result in a corresponding income tax
deduction for the Company.
The 1997 Plan permits an optionee to pay all or part of the purchase
price for shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's Common Stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
whole or in part by transferring to the Company shares of the Company's Common
Stock will recognize no gain or loss upon such exercise. The optionee's basis in
the shares so acquired will be equal to the optionee's cost basis in the shares
surrendered (plus, in the case of payment of the purchase price in a combination
of cash and surrendered shares, the amount of any cash paid).
Section 424(c)(3) of the Code provides that if "statutory option stock"
is transferred in connection with the exercise of an incentive stock option, and
if the holding period requirements under Section 422(a)(1) of the Code are not
met with respect to such statutory option stock before such transfer, then
ordinary income will be recognized as a result of the transfer of statutory
option stock. However, the incentive stock option stock acquired through the
exchange of statutory option stock will still qualify for favorable tax
treatment under Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of converting ordinary income into capital gain to the extent of the
excess of fair market value over option price at the time of exercise, and (2)
the deferral of recognition of gain until disposition of the stock acquired upon
the exercise of the option.
At present, the maximum tax rate on capital gains is 28%, while the
maximum tax rate on ordinary income is 39.6%. Thus, the conversion of ordinary
income into capital gain produces some tax benefit for certain taxpayers.
However, the benefit of income deferral generally provided by incentive stock
options is reduced for some taxpayers since the excess of the fair market value
of shares acquired through the exercise of an incentive stock option over the
exercise price is taken into account in computing an individual taxpayer's
alternative minimum taxable income. Thus, the exercise of an incentive stock
option could result in the imposition of an alternative minimum tax liability.
14
<PAGE> 17
In general, an option granted under the 1997 Plan which is designated
as an incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a non-qualified stock option.
Non-Qualified Stock Options. All options granted or to be granted under
the 1997 Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
A participant in the 1997 Plan will recognize taxable income upon the
grant of a non-qualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. In such a case, the
recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the option as of such date over the price, if
any, paid for such option. No income would then be recognized on the exercise of
the option, and when the shares obtained through the exercise of the option are
disposed of in a taxable transaction, the resulting gain or loss would be
capital gain or loss (assuming the shares are a capital asset in the hands of
the optionee). However, under the applicable Treasury Regulations, the
non-qualified stock options issued under the 1997 Plan will not have a readily
ascertainable fair market value unless at the time such options are granted
similar options of the Company are actively traded on an established market. The
Company presently has no such actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company is not
entitled to an income tax deduction with respect to the grant of a non-statutory
stock option or the sale of stock acquired pursuant thereto. The Company
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-statutory
stock option.
The 1997 Plan permits the Committee to allow an optionee to pay all or
part of the purchase price for shares acquired pursuant to an exercise of a
non-statutory option by transferring to the Company other shares of the
Company's Common Stock owned by the optionee. If an optionee exchanges
previously acquired Common Stock pursuant to the exercise of a non-qualified
stock option, the Internal Revenue Service has ruled that the optionee will not
be taxed on the unrealized appreciation of the shares surrendered in the
exchange. In other words, the optionee is not taxed on the difference between
his or her cost basis for the old shares and their fair market value on the date
of the exchange, even though the previously acquired shares are valued at the
current market price for purposes of paying all or part of the option price.
General. The 1997 Plan is not qualified under Section 401(a) of the
Code and is not subject to the provisions of the Employee Retirement Income
Security Act of 1974.
The preceding discussion is based upon federal tax laws and regulations
in effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of the Code, its legislative
history and related income tax regulations. Furthermore, the foregoing is only a
general discussion of the federal income tax consequences of the 1997 Plan and
does not purport to be a complete description of all federal income tax aspects
of the 1997 Plan. Option holders may also be subject to state and local taxes in
connection with the grant or exercise of options granted under the 1997 Plan and
the sale or other disposition of shares acquired upon exercise of the options.
Each employee receiving a grant of options should consult with his or her
personal tax advisor regarding federal, state and local consequences of
participating in the 1997 Plan.
15
<PAGE> 18
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. served as the Company's independent auditors
for the fiscal year ended April 30, 1997. The Company has not as yet executed an
engagement letter with Coopers & Lybrand L.L.P. with respect to auditing the
Company's financial statements for the fiscal year ending April 30, 1998, but
expects to do so in due course.
A representative of Coopers & Lybrand L.L.P. is expected to be present
at the Annual Meeting, will have an opportunity to make a statement, and will be
available to respond to appropriate questions which stockholders might have. The
Company knows of no direct or indirect material financial interest or
relationship that members of this firm have with the Company.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1997, as filed with the Securities and Exchange Commission, is
available to stockholders who make written request therefor to the Secretary of
the Company, Mark D. Slusser, at the offices of the Company, 4040 North
MacArthur Boulevard, Suite 100, Irving, Texas 75038. Copies of exhibits filed
with that report or referenced therein will be furnished to stockholders of
record upon request and payment of the Company's expenses in furnishing such
documents.
STOCKHOLDER PROPOSALS
Any proposal to be presented at next year's Annual Meeting must be
received at the principal executive offices of the Company not later than April
22, 1998, directed to the attention of the Secretary, for consideration for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting. Any such proposals must comply in all respects with the rules and
regulations of the Securities and Exchange Commission.
OTHER MATTERS
Management does not know of any matter to be brought before the meeting
other than those referred to above. If any other matter properly comes before
the meeting, the persons designated as proxies will vote on each such matter in
accordance with their best judgment.
By Order of the Board of Directors.
Edward R. McMurphy
Chairman of the Board,
President and Chief Executive Officer
August 20, 1997
16
<PAGE> 19
EXHIBIT A
CROWN CASINO CORPORATION
1997 STOCK OPTION PLAN
EFFECTIVE AS OF JULY 9, 1997
1. PURPOSE
The primary purpose of the Crown Casino Corporation Stock Option Plan
(the "Plan") is to encourage and enable eligible directors, officers and key
employees of Crown Casino Corporation (the "Company") and its subsidiaries to
acquire proprietary interests in the Company through the ownership of Common
Stock of the Company. The Company believes that directors, officers and key
employees who participate in the Plan will have a closer identification with the
Company by virtue of their ability as shareholders to participate in the
Company's growth and earnings. The Plan also is designed to provide motivation
for participating directors, officers and key employees to remain in the employ
of and to give greater effort on behalf of the Company. It is the intention of
the Company that the Plan provide for the award of "incentive stock options"
qualified under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations promulgated thereunder, as well as the award of
non-qualified stock options. Accordingly, the provisions of the Plan related to
incentive stock options shall be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 422 of the
Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the Company
and an Eligible Employee, Eligible Participant or Non-Employee Director pursuant
to the terms of this Plan.
(b) "Board of Directors" shall mean the Board of Directors of the
Company or the Executive Committee of such Board.
(c) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan, if any, as set forth in Section 5 of the Plan.
(d) "Company" shall mean Crown Casino Corporation, a Texas corporation.
(e) "Eligible Employee(s)" shall mean key employees regularly employed
by the Company or a Subsidiary (including officers, whether or not they are
directors) as the Board of Directors or the Committee shall select from time to
time.
(f) "Eligible Participant(s)" shall mean directors, officers, key
employees of the Company and its Subsidiaries, consultants, advisors and other
persons who may not otherwise be eligible to receive Qualified Incentive Options
pursuant to Section 8 of the Plan.
(g) "Market Price" shall mean the last trade/closing price of the
Company's Common Stock on the date in question, as quoted by the National
Association of Securities Dealers, Inc. SmallCap Market System (or other
over-the-counter nationally recognized quotation service). If the Company's
Common Stock is not traded on the Nasdaq SmallCap Market but is registered on a
national securities
A-1
<PAGE> 20
exchange or on the Nasdaq National Market System, "Market Price" shall mean the
closing sales price of the Company's Common Stock on such national securities
exchange or National Market System. If the Company's shares of Common Stock are
not traded on a national securities exchange or through any other nationally
recognized quotation service, then "Market Price" shall mean the fair market
value of the Company's Common Stock as determined by the Board of Directors or
the Committee, acting in good faith, under any method consistent with the Code,
or Treasury Regulations thereunder, as the Board of Directors or the Committee
shall in its discretion select and apply at the time of the grant of the option
concerned. Subject to the foregoing, the Board of Directors or the Committee, in
fixing the market price, shall have full authority and discretion and be fully
protected in doing so.
(h) For purposes of Section 10 herein, "Non-Employee Director(s)" shall
mean a director of the Company who is not a regular salaried employee of the
Company or one of its Subsidiaries.
(i) "Optionee" shall mean an Eligible Employee, Eligible Participant or
Non-Employee Director having a right to purchase Common Stock under an
Agreement.
(j) "Option(s)" shall mean the right or rights granted to Eligible
Employees, Eligible Participants or Non-Employee Directors to purchase Common
Stock under the Plan.
(k) "Option Value Per Share" shall mean, with respect to one share of
Common Stock purchasable pursuant to an Option, the excess of (i) the Market
Price of one share of Common Stock issuable upon exercise thereof, as determined
with respect to the date notice of exercise is given by an Optionee, over (ii)
the purchase price per share with respect to the Option.
(l) "Plan" shall mean this Crown Casino Corporation 1997 Stock Option
Plan.
(m) "Shares," "Stock," or "Common Stock" shall mean shares of the $.01
par value common stock of the Company.
(n) "Subsidiary" or "Subsidiaries" shall mean any corporation(s), if
the Company owns or controls, directly or indirectly, more than a majority of
the voting stock of such corporation(s).
(o) "Ten Percent Owner" shall mean an individual who, at the time an
Option is granted, owns directly or indirectly more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or a
Subsidiary.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date
the Plan is adopted by the Board of Directors or the date the Plan is approved
by the shareholders of the Company, whichever is earlier. The Plan must be
approved by the affirmative vote of not less than a majority of the shares
present and voting at a meeting at which a quorum is present, which shareholder
vote must be taken within twelve (12) months after the date the Plan is adopted
by the Board of Directors. Such shareholder vote shall not alter the Effective
Date of the Plan. In the event shareholder approval of the adoption of the Plan
is not obtained within the aforesaid twelve (12) month period, then any Options
granted in the intervening period shall be void.
A-2
<PAGE> 21
4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible
Employees, Eligible Participants and Non-Employee Directors under the Plan may
at the election of the Board of Directors be either treasury shares or Shares
originally issued for such purpose. The maximum number of Shares which shall be
reserved and made available for sale under the Plan shall be one million
(1,000,000); provided, however, that such Shares shall be subject to the
adjustments provided in Section 8(h). Any Shares subject to an Option which for
any reason expires or is terminated unexercised may again be subject to an
Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors or the
Committee. The Committee shall be comprised of not less than two (2) members
appointed by the Board of Directors of the Company from among its members, each
of whom qualifies as a "Non-Employee Director" as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant and interpret, construe and implement the provisions of the Plan.
The Board of Directors or the Committee shall also determine the price to be
paid for the Shares upon exercise of each Option, the period within which each
Option may be exercised, and the terms and conditions of each Option granted
pursuant to the Plan. The Board of Directors and Committee members shall be
reimbursed for out-of-pocket expenses reasonably incurred in the administration
of the Plan.
If the Plan is administered by the Board of Directors, a majority of
the members of the Board of Directors shall constitute a quorum, and the act of
a majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Board of Directors shall be the acts of the Board of Directors. If the Plan is
administered by the Committee, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members of the Committee shall be the acts of the Committee.
6. ELIGIBILITY
Options granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 9 may be granted to Eligible
Employees and to Eligible Participants. Options granted pursuant to Section 10
shall be granted only to Non-Employee Directors.
7. DURATION OF THE PLAN
The Plan shall remain in effect until all Shares subject to or which
may become subject to the Plan shall have been purchased pursuant to Options
granted under the Plan; provided that Options under the Plan must be granted
within ten (10) years from the Effective Date. The Plan shall expire on the
tenth anniversary of the Effective Date.
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8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under this Section 8 shall be
qualified incentive stock options under the provisions of Section 422 of the
Code and the regulations thereunder or corresponding provisions of subsequent
revenue laws and regulations in effect at the time such Options are granted.
Such Options shall be evidenced by stock option agreements in such form and not
inconsistent with this Plan as the Committee or the Board of Directors shall
approve from time to time, which Agreements shall contain in substance the
following terms and conditions:
(a) Price. The purchase price for shares purchased upon exercise will
be equal to 100% of the Market Price on the day the Option is granted; provided
that the purchase price of stock deliverable upon the exercise of a qualified
incentive stock option granted to a Ten Percent Owner under this Section 8 shall
be not less than one hundred ten percent (110%) of the Market Price on the day
the Option is granted, as determined by the Board of Directors or the Committee,
but in no case less than the par value of such stock.
(b) Number of Shares. The Agreement shall specify the number of Shares
which the Optionee may purchase under such Option, as determined by the Board of
Directors or the Committee.
(c) Exercise of Options. The shares subject to the Option may be
purchased in whole or in part by the Optionee in accordance with the terms of
the Agreement from time to time after shareholder approval of the Plan, as
determined by the Board of Directors or the Committee, but in no event later
than ten (10) years from the date of grant of the Option. Notwithstanding the
foregoing, Shares subject to an Option granted to a Ten Percent Owner under this
Section 8 shall be exercisable no later than five (5) years from the date of
grant of the Option.
(d) Medium and Time of Payment. Stock purchased pursuant to an
Agreement shall be paid for in full at the time of purchase. Payment of the
purchase price shall be in cash or, in lieu of payment of all or part of the
purchase price in cash, the Optionee may surrender to the Company either (i)
that portion of the Option having an aggregate Option Value Per Share equal to
the portion of the aggregate purchase price which will not be paid in cash, or
(ii) shares of the Common Stock of the Company valued at the Market Price on the
date of exercise of the Option in accordance with the terms of the Agreement.
Upon receipt of payment, the Company shall, without transfer or issue tax,
deliver to the Optionee (or other person entitled to exercise the Option) a
certificate or certificates for such Shares.
(e) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such Shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
(f) Nonassignability of Option. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) Effect of Termination of Employment or Death. In the event that an
Optionee during his or her lifetime ceases to be an employee of the Company or
of any Subsidiary of the Company for any reason (including retirement) other
than death or permanent and total disability, any Option or unexercised portion
thereof which was otherwise exercisable on the date of termination of employment
shall expire unless exercised within a period of three (3) months from the date
on which the Optionee
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ceased to be an employee, but in no event after the term provided in the
Optionee's Agreement. In the event that an Optionee ceases to be an employee of
the Company or of any Subsidiary of the Company for any reason (including
retirement) other than death or permanent and total disability prior to the time
that an Option or portion thereof becomes exercisable, such Option or portion
thereof which is not then exercisable shall terminate and be null and void.
Whether authorized leave of absence for military or government service shall
constitute termination of employment for the purpose of this Plan shall be
determined by the Board of Directors or the Committee, which determination shall
be final and conclusive.
In the event that an Optionee during his or her lifetime ceases to be
an employee of the Company or any Subsidiary of the Company by reason of death
or permanent and total disability, any Option or unexercised portion thereof
which was otherwise exercisable on the date such Optionee ceased employment
shall expire unless exercised within a period of one (1) year from the date on
which the Optionee ceased to be an employee, but in no event after the term
provided in the Optionee's Agreement. In the event that an Optionee during his
or her lifetime ceases to be an employee of the Company or any Subsidiary of the
Company by reason of death or permanent and total disability, any Option or
portion thereof which was not exercisable on the date such Optionee ceased
employment shall become immediately exercisable for a period of one (1) year
from the date on which the Optionee ceased to be an employee, but in no event
after the term provided in the Optionee's Agreement.
"Permanent and total disability" as used in this Plan shall be as
defined in Section 22(e)(3) of the Code.
In the event of the death of an Optionee, the Option shall be
exercisable by his or her personal representatives, heirs or legatees, as
provided herein.
(h) Recapitalization. In the event that dividends are payable in Common
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the number of Shares
available under the Plan shall be increased or decreased proportionately, as the
case may be, and the number and Option exercise price of Shares deliverable upon
the exercise thereafter of any Option theretofore granted shall be increased or
decreased proportionately, as the case may be, as determined to be proper and
appropriate by the Board of Directors or the Committee.
(i) Reorganization. In case the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, or in case
the property or stock of the Company is acquired by another corporation, or in
case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the Shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the Shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Optionee provide that the Option
(including, in the discretion of the Board of Directors, any portion of such
Option which is not then exercisable) must be exercised within sixty (60) days
of the date of such notice or it will be terminated. If any adjustment under
this Section 8(i) would create a fractional share of Stock or a right to acquire
a fractional share, such shall be disregarded and the number of shares of Stock
available under the Plan and the number of Shares covered under any Options
previously granted
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pursuant to the Plan shall be the next lower number of shares of Stock, rounding
all fractions downward. An adjustment made under this Section 8(i) by the Board
of Directors shall be conclusive and binding on all affected persons.
Except as otherwise expressly provided in this Plan, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or prices of shares of Common Stock subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(j) Annual Limitation. The aggregate fair market value (determined at
the time the Option is granted) of the shares with respect to which incentive
stock options are exercisable for the first time by an Optionee during any
calendar year (under all incentive stock option plans of the Company and its
Subsidiaries) shall not exceed $100,000. Any excess over such amount shall be
deemed to be related to and part of a non-qualified stock option granted
pursuant to Section 9.
(k) General Restriction. Each Option shall be subject to the
requirement that if at any time the Board of Directors shall determine, in its
reasonable discretion, that the listing, registration or qualification of the
Shares subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issue or purchase of Shares thereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Alternatively, such
Options shall be issued and exercisable only upon such terms and conditions and
with such restrictions as shall be necessary or appropriate to effect exemption
from such listing, registration, or other qualification requirement.
9. NON-QUALIFIED OPTIONS
The Board of Directors or the Committee may grant to Eligible Employees
or Eligible Participants Options under the Plan which are not qualified
incentive stock options under the provisions of Section 422 of the Code. Such
non-qualified options shall be evidenced by Agreements in such form and not
inconsistent with this Plan as the Board of Directors or the Committee shall
approve from time to time, which Agreements shall contain in substance the same
terms and conditions as set forth in Section 8 hereof with respect to qualified
incentive stock options; provided, however, that:
(i) the limitations set forth in Sections 8(a) and 8(c)
with respect to Ten Percent Owners shall not be applicable to non-qualified
options granted to any Ten Percent Owner;
(ii) the limitations set forth in Section 8(g) with
respect to termination of employment or death shall not be applicable to
non-qualified option grants, and any such limitations shall be determined on a
case by case basis by the Board of Directors or the Committee at the time of the
non-qualified option grant;
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(iii) the limitation set forth in Section 8(j) with respect
to the annual limitation of incentive stock options shall not be applicable to
non-qualified option grants; and
(iv) non-qualified options may be granted at a purchase
price equal to not less than 75% of the Market Price on the day the Option is
granted.
10. OPTIONS TO NON-EMPLOYEE DIRECTORS
This Section 10 of the Plan provides the following annual Option grants
to Non-Employee Directors:
(a) On July 9, 1997, each then Non-Employee Director of the Company
shall be granted an Option to purchase 5,000 shares of Common Stock at an option
exercise or purchase price equal to 100% of the Market Price of such Stock on
the date of grant. On the first business day of July of each year thereafter
during the term of this Plan, each then Non-Employee Director of the Company
shall be granted, without the necessity of action by the Board of Directors or
the Committee, an Option to purchase 2,500 shares of Common Stock at an option
exercise or purchase price equal to 100% of the Market Price of such Stock on
the date of grant.
(b) Options granted under this Section 10 shall be exercisable
commencing on the date of grant or, with respect to any Option granted prior to
stockholder approval of this Plan, upon the date of such stockholder approval,
and thereafter until the earlier to occur of the following: the close of
business on (i) the date which is the tenth anniversary of the date of grant;
(ii) the date which is the 90th day following the date upon which such
Non-Employee Director ceases to be a director of the Company for any reason
other than death or permanent and total disability; or (iii) the date which is
the first anniversary of the date on which such Non-Employee Director ceases to
be a director of the Company as a result of death or permanent and total
disability.
(c) In all other respects, Options granted to Non-Employee Directors
hereunder shall contain in substance the same terms and conditions as set forth
in Section 9 hereof with respect to non-qualified options. Non-Employee
Directors shall also be eligible to receive Options under Section 9 of the Plan.
11. AMENDMENT OF THE PLAN
The Plan may at any time or from time to time be terminated, modified
or amended by the affirmative vote of not less than a majority of the shares
present and voting thereon by the Company's shareholders at a meeting of the
shareholders at which a quorum is present. The Board of Directors may at any
time and from time to time modify or amend the Plan in any respect, except that
without shareholder approval the Board of Directors may not (1) increase the
maximum number of Shares for which Options may be granted under the Plan (other
than increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) change the class of persons eligible for qualified incentive
options. The termination or any modification or amendment of the Plan shall not,
without the written consent of an Optionee, affect his or her rights under an
Option or right previously granted to him or her. With the written consent of
the Optionee affected, the Board of Directors or the Committee may amend
outstanding option agreements in a manner not inconsistent with the Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding option agreements in such respects as it
shall deem necessary in order that incentive options granted hereunder shall
comply with the appropriate provisions of the Code and regulations thereunder
which are in effect from time to time respecting "Qualified Incentive Options."
The Company's Board of Directors may also suspend the granting of Options
pursuant to the Plan at any time and may terminate the Plan at any
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time; provided, however, no such suspension or termination shall modify or amend
any Option granted before such suspension or termination unless (1) the affected
participant consents in writing to such modification or amendment or (2) there
is a dissolution or liquidation of the Company.
12. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company and on all persons eligible or who
become eligible to participate in the Plan.
13. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options exercised hereunder will be used for general corporate
purposes.
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APPENDIX
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
CROWN CASINO CORPORATION
The undersigned stockholder(s) of Crown Casino Corporation, a Texas
corporation, hereby appoints Edward R. McMurphy and Mark D. Slusser, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1997 Annual Meeting of Stockholders of Crown Casino Corporation to be held on
Wednesday, October 1, 1997 at 9:30 a.m. local time at the Four Seasons Hotel and
Resort, 4150 North MacArthur Boulevard, Irving, Texas 75038, to vote the shares
of Common Stock which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth below:
(1) To elect seven directors for a term of one year and until their
successors are elected and qualified:
[ ] FOR all nominees listed below (except as indicated to the
contrary below)
[ ] AGAINST AUTHORITY to vote for all nominees
Edward R. McMurphy Tilman J. Falgout, III
John David Simmons Gerald L. Adams
David J. Douglas Gerard M. Jacobs
Robert J. Kehl
If you wish to withhold authority to vote for any individual
nominee(s), write the name(s) on the line below:
_______________________________________________________________________
(2) To approve an Amendment to the Company's Articles of Incorporation to
change the name of the Corporation from "Crown Casino Corporation" to
"Crown Group, Inc."
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) To approve the Crown Casino Corporation 1997 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) In their discretion, upon such other matter or matters which may
properly come before the meeting or any adjournment or adjournments
thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This proxy, when
properly executed, will be voted in accordance with directions given by the
undersigned stockholder. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR PROPOSALS
1, 2 AND 3 AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING.
Dated ________________________________, 1997
____________________________________________
Signature
____________________________________________
Signature
(This Proxy should be marked, dated, and
signed by the stockholder(s) exactly as his
or her name appears hereon, and returned
promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so
indicate. If shares are held by joint
tenants or as community property, both
should sign.)
