<PAGE>
================================================================================
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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SANTA FE GAMING 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SANTA FE GAMING CORPORATION
4949 NORTH RANCHO DRIVE
LAS VEGAS, NEVADA 89130
January 26, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of your Company, which will be held at the Santa Fe Hotel & Casino, 4949 North
Rancho Drive, Las Vegas, Nevada 89130, on March 19, 1998, commencing at 10:00
a.m. (Pacific Standard Time). We hope that you will be able to attend the
Annual Meeting in person and look forward to seeing you.
At the Annual Meeting, stockholders will be asked to (i) elect one Director,
who will serve for a three-year term, (ii) elect independent auditors and
(iii) approve an amendment to the 1993 Key Employee Stock Option Plan.
You are requested to give your prompt attention to this matter, which is
more fully described in the accompanying proxy materials.
Whether or not you plan to attend the Annual Meeting in person, it is
important that your shares be represented and voted at the Annual Meeting.
Accordingly, after reading the enclosed Notice of Annual Meeting and Proxy
Statement, you are urged to sign, date and return the enclosed Proxy Card in
the envelope provided at your earliest convenience.
Sincerely,
/s/ Paul W. Lowden
Paul W. Lowden
Chairman of the Board
and President
<PAGE>
SANTA FE GAMING CORPORATION
4949 NORTH RANCHO DRIVE
LAS VEGAS, NEVADA 89130
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 19, 1998
The 1998 Annual Meeting of the Stockholders of Santa Fe Gaming Corporation,
a Nevada corporation (the "Company"), will be held at the Santa Fe Hotel &
Casino, 4949 North Rancho Drive, Las Vegas, Nevada 89130, on March 19, 1998,
commencing at 10:00 a.m. (Pacific Standard Time) for the following purposes:
1. To elect one Director to serve until the 2001 Annual Meeting of
Stockholders and until his successor is elected and qualified; and
2. To consider and act upon a proposal to ratify the selection of the
Company's independent auditors; and
3. To consider and act upon a proposal to increase the number of shares of
Common Stock authorized for issuance under the 1993 Key Employee Stock
Option Plan; and
4. To consider and act upon such other business as may properly come
before the Annual Meeting and at any adjournment or postponement thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has fixed the
time and date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and at any adjournment or postponement thereof
as of the close of business on January 20, 1998. Accordingly, only
stockholders of record on such date and at such time will be entitled to vote
at the Annual Meeting and any adjournment or postponement thereof,
notwithstanding any transfer of stock on the books of the Company thereafter.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING,
REGARDLESS OF THE NUMBER YOU HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE RETURN
ENVELOPE, WHICH REQUIRES NO POSTAGE IN THE UNITED STATES.
Stockholders who attend the Annual Meeting may vote in person even though
they have previously mailed their Proxy.
By Order of the Board of Directors
/s/ William J. Raggio
William J. Raggio
Secretary
Las Vegas, Nevada
January 26, 1998
<PAGE>
SANTA FE GAMING CORPORATION
4949 NORTH RANCHO DRIVE
LAS VEGAS, NEVADA 89130
(702) 658-4347
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 19, 1998
This Proxy Statement is first being mailed on or about January 28, 1998 to
stockholders of Santa Fe Gaming Corporation, a Nevada corporation (the
"Company"), of record as of the close of business on January 20, 1998.
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of the Company for use at the Company's 1998 Annual Meeting of
Stockholders to be held on March 19, 1998 (the "Annual Meeting"), and at any
adjournment or postponement thereof. It may be revoked at any time prior to
its use by (1) providing a written revocation to the Secretary of the Company
at its offices, (2) executing and delivering a later dated Proxy, or (3)
attending the Annual Meeting and voting in person. Shares represented by an
unrevoked Proxy will be voted as directed by the stockholder. If no direction
is given, such shares will be voted for the election of the nominees named
herein for election as Directors and in the discretion of the proxy holders
with respect to any other matters properly presented to the Annual Meeting and
at any adjournment or postponement thereof.
VOTING RIGHTS
Only common stockholders of record at the close of business on January 20,
1998 are entitled to notice of and to vote at the Annual Meeting. On that
date, there were outstanding 6,195,356 shares of the Company's common stock,
$.01 par value (the "Common Stock"). The presence, either in person or by
proxy, of persons entitled to vote 50% of the Company's outstanding Common
Stock is necessary to constitute a quorum for the transaction of business at
the Annual Meeting. Each share is entitled to one vote in connection with each
matter submitted for stockholder approval. Abstentions and any shares as to
which a broker or nominee has indicated that it does not have discretionary
authority to vote on a particular matter will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining whether approval of the
stockholders has been obtained with respect to any such matter and thus will
have the effect of a "No" vote in connection with each matter submitted for
stockholder approval.
Paul W. Lowden, Chairman of the Board and President of the Company, is the
beneficial owner of 3,395,346 shares of Common Stock, or approximately 53%, of
the outstanding Common Stock. Mr. Lowden intends to vote the Common Stock as
to which he is holder of record for the nominee for election as director named
in this Proxy Statement, for ratification of the selection of the Company's
independent auditors, Deloitte & Touche, LLP and for approval of amendment of
the 1993 Key Employee Stock Option Plan, and has been advised that the record
holders of shares of which he is the beneficial owner but not the record
holder intend to do the same.
PROPOSAL 1: ELECTION OF DIRECTORS
The authorized number of Directors of the Company is six, with Directors
being elected for staggered three year terms.
<PAGE>
Set forth below is information regarding the Directors of the Company:
<TABLE>
<CAPTION>
NOMINEE FOR ELECTION
AT 1998 ANNUAL TERM EXPIRES AT
MEETING ANNUAL MEETING
-------------------- ---------------
<S> <C>
Thomas K. Land 1998
<CAPTION>
OTHER DIRECTORS
---------------
<S> <C>
James W. Lewis 1999
Paul W. Lowden 1999
William J. Raggio 1999
Suzanne Lowden 2000
John W. Delaney 2000
</TABLE>
The Board has nominated Thomas K. Land to stand for election at the Annual
Meeting to serve as Director until the 2001 Annual Meeting of Stockholders and
until his successor is duly elected and qualified. The enclosed Proxy, unless
indicated to the contrary, will be voted for the Board's nominee.
The Company has been advised by the nominee named herein that such person is
willing to be named as such and is willing to serve as a Director if elected.
However, if the nominee should be unable to serve as a Director, the enclosed
Proxy may be voted for a substitute nominee selected by the Board of Directors
in its discretion. The affirmative vote of holders of a plurality of common
stock represented in person or by proxy and entitled to vote at the Annual
Meeting is required to approve the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEE LISTED
ABOVE.
DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of the current executive officers and directors and
the nominee for election to the Board of Directors of the Company:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY
---- -------------------------
<C> <S>
Paul W. Lowden Chairman of the Board, President and Chief
Executive Officer
Thomas K. Land* Director, Senior Vice President and Chief Financial
Officer
William J. Raggio Director, Executive Vice President, Secretary and
Corporate Counsel
Suzanne Lowden Director, Executive Vice President
Christopher W. Lowden Executive Vice President
James W. Lewis (1)(2) Director
John W. Delaney (1)(2) Director
</TABLE>
- --------
(1) Member of the Audit Committee of the Company.
(2) Member of the Compensation Committee of the Company.
* Nominee for election to the Board of Directors of the Company at the Annual
Meeting.
The age, present position with the Company, and principal occupation during
the past five years of each Director, executive officer and nominee named
above is set forth below:
PAUL W. LOWDEN
Paul Lowden is 54 years old and has served as President, Chairman of the
Board and Chief Executive Officer of the Company since its formation in
September 1993. Mr. Lowden held the same positions with the Company's
predecessor, Sahara Resorts, from 1982 through September 1993. Mr. Lowden is
married to Suzanne Lowden and is Christopher Lowden's father.
2
<PAGE>
THOMAS K. LAND
Thomas K. Land is 37 years old and joined the Company in February 1994 as
Senior Vice President and Corporate Controller, and was elected Chief
Financial Officer of the Company in July 1994. Mr. Land was appointed to the
Board of Directors in December 1995. Prior to joining the Company, Mr. Land
was the Chief Financial Officer of a construction company, where he was
employed from 1990 through February 1994. From 1985 to 1990, Mr. Land was the
Controller of a company engaged in the waste recycling industry. He is a
certified public accountant in the State of Pennsylvania.
WILLIAM J. RAGGIO
William J. Raggio is 71 years old and has served as a Director, Vice
President, Secretary and Corporate Counsel of the Company since its formation.
Previously, Mr. Raggio held the same positions with Sahara Resorts since 1982.
Mr. Raggio is a senior partner and a member of the executive committee of the
law firm of Jones Vargas of Reno, Nevada, general counsel to the Company.
Since 1972 he has been a Nevada State Senator. Mr. Raggio is also a director
of Sierra Health Services, Inc., a Nevada corporation.
SUZANNE LOWDEN
Suzanne Lowden is 45 years old and has served as a Director and Executive
Vice President of the Company since its formation, and had served as a
Director of Sahara Resorts since 1987. Mrs. Lowden was elected Vice President
of Sahara Resorts in July 1992. She is also a founding board member of
Commercial Bank of Nevada. Mrs. Lowden served as a Nevada State Senator from
November 1992 through 1996. She worked for the CBS affiliate in Las Vegas from
1977 to 1987 as an anchorwoman, reporter, writer and producer of television
news. Mrs. Lowden is married to Paul W. Lowden.
CHRISTOPHER W. LOWDEN
Christopher W. Lowden is 32 years old and has served as Executive Vice
President of Operations since September 1995. Mr. Lowden served as President
of Sahara Development Group from April 1991 through September 1995. From 1989
until August 1993 he was General Manager of the Company's hotel-casino in
Laughlin, Nevada, the Pioneer Hotel and Gambling Hall.
JAMES W. LEWIS
James W. Lewis is 70 years old and has served as a Director of the Company
since its formation. Mr. Lewis served as a Director of Sahara Resorts from
1983 to September 1993. Mr. Lewis became associated with the Corporate Finance
Department of Westamerica Investment Group on January 1, 1995. Previously, he
was a Managing Director of F.L. Bryant & Co., Inc. commencing July 1, 1992.
Previously, he was Senior Vice President, Corporate Finance, of Van Kasper &
Co. commencing January 1, 1991. From 1980 to 1990, Mr. Lewis served as a First
Vice President and Managing Director of Bateman Eichler, Hill Richards,
Incorporated.
JOHN W. DELANEY
John W. Delaney is 49 years old and has served as a director of the Company
since January 1997, when he was appointed to fill a vacancy on the Board of
Directors. He was elected to his current term in February 1997. Mr. Delaney is
currently President and Chief Executive Officer of Cityfed Mortgage Co., a
mortgage banking firm, where he has been employed since 1978.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended September 30, 1997 the Board of Directors held
seven meetings. Each Director attended all of the meetings of the Board and
all meetings of any committees of which he or she was a member.
The Board has standing Audit and Compensation Committees but does not have a
Nominating Committee. The Audit Committee held two meetings and the
Compensation Committee held one meeting during the last fiscal year.
Memberships in the various committees are determined by action of the full
Board. The function of the Audit and Compensation Committees and their
membership are described below.
The Audit Committee reviews the principal accounting policies of the
Company, approves the scope and proposed fees for the annual audit, reviews
the results of the annual audit directly with the Company's independent
auditors and recommends to the full Board which firm of accountants should be
selected as the Company's independent auditors. The Audit Committee is
composed of James W. Lewis and John W. Delaney, neither of whom is an officer
or employee of the Company.
The Compensation Committee establishes compensation for the officers of the
Company, administers the 1993 Key Employee Stock Option Plan (the "1993 Plan")
and the Subsidiary Plans (as defined under "Executive Compensation and Other
Information"), authorizes grants of options and sales of shares under the 1993
Plan and Subsidiary Plans and recommends to the full Board any modifications
of the 1993 Plan and Subsidiary Plans. See "EXECUTIVE COMPENSATION AND OTHER
INFORMATION" below for information regarding the 1993 Plan. The Compensation
Committee is composed of James W. Lewis and John W. Delaney.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities ("Reporting Persons"), to file reports of
ownership and changes in ownership and changes in ownership with the SEC and
with the American Stock Exchange. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all forms they file pursuant
to Section 16(a).
Based solely on its review of the copies of such reports received by it, and
written representations from certain Reporting Persons that no other reports
were required for those persons, the Company believes that, during the year
ended September 30, 1997, the Reporting Persons complied with all Section 16(a)
filing requirements applicable to them.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities to the Company and its affiliates
for the fiscal years ended September 30, 1997, 1996 and 1995 of those persons
who were, as of September 30, 1997, (i) the Chief Executive Officer and (ii)
each other executive officer whose total annual salary and bonus exceeded
$100,000 during the fiscal year ended September 30, 1997 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
AWARDS PAYOUTS
--------------------- -------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING
OTHER ANNUAL RESTRICTED OPTIONS LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION STOCK SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($)(3) ($)(1) AWARDS ($) (#) ($) ($)(2)
- ------------------ ------ -------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul W. Lowden 1997 $550,000 $200,000 -- $ 0 0 $ 0 $41,595
President, Chairman 1996 $503,269 $200,000 -- $ 0 0 $ 0 $16,958
of the Board and CEO 1995 $314,598 $ 0 -- $ 0 0 $ 0 $ 4,620
Thomas K. Land 1997 $138,704 $ 10,000 -- $ 0 0 $ 0 $ 2,250
Senior Vice President 1996 $130,000 $ 10,000 -- $ 0 0 $ 0 $ 2,469
and Chief Financial 1995 $112,365 $ 10,000 -- $ 0 0 $ 0 $ 300
Officer
</TABLE>
- --------
(1) The Company provides automobiles to its senior executives and provides
such persons complimentary privileges at the restaurants and bars of the
Company's hotel-casinos. It is impractical to ascertain the extent to
which such privileges are utilized for personal rather than business
purposes. However, after reasonable inquiry the Company believes the value
of any such personal benefits is less than 25% of the compensation for
each person reported above.
(2) "All Other Compensation" in fiscal 1997 consists of payments of life
insurance premiums by the Company in the amounts of $40,324 and $1,805 for
Messrs. Paul W. Lowden and Thomas K. Land, respectively, and Company
matching contributions to the Retirement Savings 401(k) Plan. "All Other
Compensation" in fiscal 1996 and 1995 consists of Company matching
contributions to the Retirement Savings 401(k) Plan.
(3) See "Certain Compensation Arrangements."
Certain Compensation Arrangements. The Compensation Committee has approved
compensation for fiscal year 1998 to Mr. Lowden of an annual salary of $550,000
and a bonus of approximately $200,000. Additionally, in fiscal year 1998, the
Compensation Committee approved a fee payable to Mr. Lowden in the amount of
$100,000 in connection with personal guarantees issued by Mr. Lowden for certain
Company financing arrangements. Furthermore, Mr. Lowden received a bonus in the
amount of approximately $600,000 in fiscal 1998 (the "Fiscal Year 1998 Bonus"),
pursuant to a compensation arrangement approved by the Compensation Committee in
connection with the sale of the Hacienda and Sahara in 1995. See "Compensation
Committee Report on Executive Compensation." In accordance with that
arrangement, to the extent that Mr. Lowden (or any entity wholly-owned by Mr.
Lowden) had any outstanding loans from, or receivables to, the Company at the
time the Fiscal Year 1998 Bonus was paid, such bonus was to be first satisfied
by an offset against any such indebtedness. In January 1998, the Company offset
a loan due from an entity wholly-owned by Mr. Lowden, in part with application
of the Fiscal Year 1998 Bonus and in part by the amounts due to Mr. Lowden for
the personal guarantees issued in connection with certain financing
transactions. See "Certain Transactions."
The Company and Thomas K. Land, Senior Vice President and Chief Financial
Officer, are parties to an employment agreement for a one year term commencing
on October 1, 1997 and terminating on September 30, 1998. Pursuant to the
agreement, Mr. Land is entitled to a minimum annual base salary of $175,000.
The agreement also provides that Mr. Land may participate in any employee
benefit plans, including bonus plans, of the Company.
5
<PAGE>
Compensation Committee. All compensation decisions with respect to executive
officers are made by the Compensation Committee of the Board. The Compensation
Committee consists of James W. Lewis and John W. Delaney.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its affiliates receive
$24,000 annually and $1,000 per Board meeting attended, $800 per Committee
meeting attended as a member and $900 per Committee meeting attended as
Chairman.
Additionally, upon first being elected to the Board of Directors, each non-
employee director receives options to purchase 12,500 shares of Common Stock
at an exercise price equal to the fair market value of the Common Stock on the
date of grant. Such options are fully vested at the date of grant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the responsibility of the Compensation Committee to establish and
review the Company's executive compensation plans, programs and policies,
monitor the performance and compensation of executive officers, and make
recommendations to the Board of Directors concerning matters of executive
compensation.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee recognizes that an executive compensation policy
should be designed to provide competitive levels of compensation that
integrate pay with the Company's annual and long-term goals, reward above-
average performance, recognize individual initiative and achievements, and
assist the Company in attracting and retaining qualified executives. Stock
options have occasionally been granted to certain executives to reinforce a
long-term orientation that directly aligns their interests with those of
stockholders. Performance criteria considered by the Committee reflect Company
strategies. The Committee reviews these criteria on a periodic basis to ensure
their continued alignment with Company strategies.
CHIEF EXECUTIVE OFFICER COMPENSATION
As the owner of approximately 53% of the Company, Paul W. Lowden, President,
Chief Executive Officer and Chairman of the Board, has both explicit and
implicit motivation to build stockholder value. Based on this controlling
ownership, the Compensation Committee has not believed that Mr. Lowden's
compensation package requires additional equity-based elements. Consequently,
Mr. Lowden's compensation package consists primarily of base salary and
bonuses. However, if in the future stock options are granted to key employees
of the Company or members of the Company's Board of Directors other than Mr.
Lowden, it may be necessary to grant a comparable number of options to Mr.
Lowden, and for Mr. Lowden to exercise a commensurate number of options upon
exercise of options granted to key employees or directors, to enable Mr.
Lowden to maintain ownership of at least 50% of the outstanding Common Stock.
If Mr. Lowden ceases to own more than 50% of the outstanding shares of Common
Stock, an event of default would occur under certain of Santa Fe Gaming's
long-term indebtedness, which would result in cross-defaults under
substantially all of Santa Fe Gaming's other long-term indebtedness. See also
"Certain Transactions."
In evaluating the performance of Mr. Lowden, the Compensation Committee has
considered performance measures that support Company strategies. In fiscal
1995, the gaming market on Las Vegas Boulevard (the "Strip") became
increasingly competitive, with several large organizations emerging as
dominant forces in the industry. In recognition of these trends, the Company's
strategy in fiscal years 1995 and 1996 focused on reducing its investment in
the Strip market, strengthening its balance sheet and positioning itself for
improved operations through expanded presence in the local market,
prospectively. As a result of this strategy, the Company sold the Hacienda
Resort Hotel and Casino (the "Hacienda") in August 1995 and the Sahara Hotel
6
<PAGE>
and Casino (the "Sahara") in October 1995 and retired approximately $136.8
million in indebtedness secured by those properties. Additionally, the Company
repurchased an additional $85.5 million of indebtedness in fiscal years 1995
and 1996 to improve its balance sheet. The Compensation Committee has
acknowledged the contributions of Mr. Lowden in negotiating the sale of the
Hacienda and the Sahara in late 1995. Based on Mr. Lowden's personal efforts
on behalf of the Company, these sales were consummated without the need to
involve financial intermediaries. The Compensation Committee also has
recognized Mr. Lowden's foresight in acquiring real estate on the Las Vegas
Strip and in Southeast Las Vegas, in anticipation of growing market
opportunities to provide the Company future growth potential. During fiscal
1997, under the direction of Mr. Lowden, the Company's operating income
improved to $5.1 million from $400,000 and cash flow generated from operations
increased to $22.5 million compared to $19.5 million in fiscal 1996. This
improvement occurred despite the difficulties of operating the Santa Fe Hotel
and Casino caused by road construction and the ongoing intensive competitive
environment at the Pioneer, in the Laughlin market. Furthermore, the
Compensation Committee acknowledges Mr. Lowden's continuing contributions to
the Company's efforts with respect to debt reduction and possible future
developments.
Based on these considerations and in light of the revision to the Company's
business strategies, the Compensation Committee approved Mr. Lowden's
compensation package for fiscal 1997, which provided for base salary of
$550,000. Additionally, in recognition of Mr. Lowden's efforts, the
Compensation Committee approved a bonus in the amount of $200,000 payable in
bi-weekly installments throughout fiscal 1997.
COMPENSATION COMMITTEE MEMBERS; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The members of the Compensation Committee are non-employee directors. The
Committee members are James W. Lewis and John W. Delaney. Neither Mr. Lewis
nor Mr. Delaney has been an officer of the Company or any of its subsidiaries,
has no relationship requiring disclosure under Item 404 of Regulation S-K nor
has an "interlocking" relationship with Company executives.
Compensation Committee:
James W. Lewis
John W. Delaney
7
<PAGE>
PERFORMANCE GRAPH
The graph below provides a comparison of the cumulative total stockholder
return of the Company and, prior to October 1, 1993, its predecessor, Sahara
Resorts, with the Standard & Poor's 500 Composite Stock Index and the Dow
Jones Entertainment & Leisure--Casinos Index. This graph assumes the
investment of $100 on September 30, 1992 in the Company and the two indexes
mentioned above with reinvestment of dividends. The returns of the Company and
each index have been weighted annually for their market capitalization on
September 30 of each year.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SANTA FE GAMING CORPORATION, THE S & P 500 INDEX
AND THE DOW JONES CASINOS INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
SANTA FE
Measurement Period GAMING S&P DOW JONES
(Fiscal Year Covered) CORPORATION 500 INDEX CASINOS INDEX
- --------------------- ----------- --------- -------------
<S> <C> <C> <C>
Measurement Pt- 9/30/92 $100 $100 $100
FYE 9/30/93 $150 $113 $196
FYE 9/30/94 $ 36 $117 $133
FYE 9/30/95 $ 23 $152 $191
FYE 9/30/96 $ 13 $183 $214
FYE 9/30/97 $ 6 $257 $219
</TABLE>
* $100 INVESTED ON 9/30/92 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
- --------
Fiscal 1992-1996
* Data is presented for Sahara Resorts, the Company's predecessor, for fiscal
years 1992-1993. Sahara Resorts and the Company are not directly comparable.
In addition, the Company declared a 25% stock dividend in the second quarter
of fiscal 1994.
8
<PAGE>
COMPENSATION PLANS
STOCK OPTION PLAN
The Company's 1993 Plan provides for the grant of options with respect to an
aggregate of 319,375 shares of the Common Stock to key employees as determined
by the Compensation Committee. See "Amendment to 1993 Key Employee Stock
Option Plan." During fiscal year 1997, Messrs. Paul W. Lowden, Thomas K. Land
and Christopher Lowden received options for 80,000, 12,500 and 13,500 shares
of the Common Stock, respectively, at an exercise price of $1.50 per share,
the fair market value of the Common Stock on the date of grant. No other stock
options were awarded to, and no stock options were exercised by, the Named
Executive Officers in the fiscal year ended September 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
----------------------- AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS/SARS PRICES
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE FOR OPTION TERM
OPTIONS FISCAL OR BASE EXPIRATION -----------------
GRANTED(1) YEAR(2) PRICE DATE 5% ($) 10% ($)
---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Lowden 80,000 54.5% $1.50 2/21/07 $195,467 $311,249
Thomas K. Land 12,500 8.5% $1.50 2/21/07 $ 30,542 $ 48,633
</TABLE>
- --------
(1) The options granted in 1997 have a term of 10 years. The options vest at a
rate of 33.3% on each anniversary of the date of grant. The exercise price
is $1.50.
(2) The total number of stock options granted in fiscal 1997 for the Company
was 146,750
1998 SUBSIDIARY STOCK OPTION PLANS
The Company and certain of its subsidiaries, Santa Fe Hotel Inc. ("SFHI"),
Sahara Las Vegas Corp. ("SLVC"), and Pioneer Hotel Inc. ("PHI") (collectively,
the "Subsidiaries"), have adopted various subsidiary stock option plans (the
"Subsidiary Plans"). The Subsidiary Plans provide for the grant of options by
each of the Subsidiaries with respect to an aggregate of up to 10% of the
outstanding shares of such Subsidiary's Common Stock to employees, non-employee
directors, consultants or affiliates of the Company or the Subsidiaries. The
purpose of the Subsidiary Plans is to enable the Subsidiaries, the Company and
any subsidiaries of the Company or Subsidiaries to attract, retain and motivate
their employees, non-employee directors, consultants and affiliates by providing
for or increasing the proprietary interest of such persons in the Subsidiaries.
Certain of the agreements under which the Company's long-term debt is issued
provide that if the Company ceases to own directly or indirectly, 100% of the
outstanding capital stock of specified Subsidiaries, an event of default will
occur or an offer to repurchase the debt must be made. As a result, the
Subsidiary Plans provide that options granted under the Subsidiary Plans may not
be exercised if the exercise would result in a default, or require an offer to
repurchase the outstanding debt, under any agreement with respect to long-term
debt of the Company or any of its Subsidiaries. As of January 21, 1998, no
options had been granted under any Subsidiary Plans.
SAVINGS PLAN
The Company has adopted a savings plan qualified under Section 401(k) of the
Internal Revenue Code (the "Savings Plan"). The Savings Plan covers
substantially all employees, including the Company's executive officers.
Employee contributions to the Savings Plan are discretionary. The Savings Plan
allows eligible employees to contribute, on a pretax basis, up to 6% of their
gross salary to the plan; the Company matches 25% of such employee
contributions made. Employees may also contribute, on a pretax basis, up to an
additional 9% of their gross salary, and, on a post-tax basis, up to an
additional 10% of their salary. Such contributions are not matched by the
Company. The matching expense in fiscal 1997 was $3,577 of which $1,271, $445,
and $1,861
9
<PAGE>
was contributed by the Company to the accounts of Messrs. Lowden, Land and all
other executive officers as a group, respectively, as matches for employee
contributions made.
CERTAIN TRANSACTIONS
The following is a description of certain transactions during the fiscal
year ended September 30, 1997 in which officers and Directors of the Company
and its affiliates or families had a direct or indirect interest.
Jones Vargas, a Nevada law firm of which William J. Raggio is a senior
partner and a member of the Executive Committee, is paid a retainer fee of
$120,000 per year. The Company paid Jones Vargas approximately $317,022,
including retainers, for its services during the fiscal year ended September
30, 1997.
In November 1993, Mr. Lowden and Bank of America (the "Bank") entered into a
personal loan agreement under which the principal balance of the loan is
amortized through quarterly principal payments through April 1998, with any
remaining principal balance due July 31, 1998. At January 20, 1998, the
principal balance of the loan was approximately $877,000. The loan is secured by
substantially all of the common stock of the Company owned by Mr. Lowden (the
"Pledged Shares"). Mr. Lowden's loan agreement provides that in the event the
market value of the Pledged Shares is less than three times the outstanding loan
balance, the bank, at its sole option, may require either an immediate reduction
in the outstanding balance or the pledging of additional collateral acceptable
to the bank such that the value of the pledged collateral is at least three
times the outstanding loan balance. Based on the recent trading price of the
Company's common stock, the market value or the Pledge Shares is less than three
times the outstanding loan balance. Mr. Lowden has advised the Company, that
pursuant to discussions between Mr. Lowden and the Bank, Mr. Lowden made an
additional principal payment of $50,000 and provided additional collateral to
the Bank. If an event of default were to occur under Mr. Lowden's personal loan
with the bank, and if the bank acquired the Pledged Shares upon foreclosure, Mr.
Lowden's ownership of the Company's outstanding common stock would be reduced to
below 50%. If Mr. Lowden ceases to own more than 50% of the outstanding shares
of the Company's common stock, an event of default would result under certain of
the Company's long-term indebtedness, which would result in cross-defaults under
substantially all of the Company's other long-term indebtedness.
In addition, in fiscal 1993 and 1992 Hacienda Hotel Inc.'s predecessor made
loans to LICO, a company wholly owned by Mr. Lowden providing entertainment
services to the Hacienda and the Sahara, in the aggregate amount of $476,000. As
of September 30, 1997, there was $686,000 outstanding under these loans,
including interest computed at an annual rate equal to the prime rate plus 2%.
Principal and interest were due on demand. The loans to LICO were approved by
the Boards of Directors of the predecessors to the Company and Hacienda Hotel
Inc., respectively, with Mr. Lowden abstaining from the vote. In January 1998,
pursuant to Mr. Lowden's compensation arrangement, the Company satisfied in full
the Fiscal Year 1998 Bonus in the amount of $600,000 to Mr. Lowden through an
offset against the loans to LICO. In addition, in fiscal 1997 the Company
satisfied in full the fee payable to Mr. Lowden for issuing personal guarantees
to support certain Company financing arrangements (see "Executive Compensation")
through an offset in January 1998 of the LICO loans. As of January 26, 1998, the
LICO loans had been satisfied in full through the offset of the Fiscal Year 1998
Bonus and the personal guarantee fee.
10
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
The following sets forth information regarding beneficial ownership of the
Common Stock and the exchangeable redeemable preferred stock of the Company
(the "Preferred Stock"), as of January 20, 1998, by (i) each person known to
be the beneficial owner of more than 5% of the outstanding Common Stock or
Preferred Stock; (ii) each Director of the Company; and (iii) all Directors
and officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON PREFERRED
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK(1) PERCENT STOCK(1) PERCENT
- ------------------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Paul W. Lowden 3,395,346(2) 53.40% 97,100(3) 1.1%
William J. Raggio 17,972(4) * 4,815(5) *
James W. Lewis 13,750(4) * -- --
Suzanne Lowden 15,970(6) * 5,685(7) *
Thomas K. Land 12,500(8) * -- --
Christopher W. Lowden 16,099(9) * 1,400 *
John W. Delaney 13,750(4) * -- --
All Directors and Officers as a group
(7 persons) 3,474,209 54.7% 105,839 1.1%
</TABLE>
- --------
* Less than 1%
(1) The address for Paul W. Lowden is c/o Santa Fe Gaming Corporation, P.O.
Box 4335, Las Vegas, Nevada 89127. The shares owned by each person, or by
the group, and the shares included in the total number of shares
outstanding have been adjusted, and the percentage owned (where such
percentage exceeds 1%) has been computed, in accordance with Rule 13d-
3(d)(1) under the Securities Exchange Act of 1934 (the "Exchange Act").
(2) Excludes 11,042 shares owned by Mr. Lowden's wife for herself and as
custodian for children, as to which Mr. Lowden disclaims beneficial
ownership, and includes 11,178 shares held jointly by Mr. Lowden and Mrs.
Lowden and 477,351 shares held by LICO, which is wholly owned by Mr.
Lowden.
(3) Excludes 2,162 shares owned by Mr. Lowden's wife for herself and as
custodian for a child, as to which Mr. Lowden disclaims beneficial
ownership, and includes 3,161 shares held jointly by Mr. Lowden and
Mrs. Lowden, and 92,041 shares held by LICO, which is wholly owned by Mr.
Lowden.
(4) Of such shares, 12,500 may be acquired upon the exercise of outstanding
stock options.
(5) Includes 16 shares held by Mr. Raggio's wife, as to which Mr. Raggio
disclaims beneficial ownership.
(6) Includes 4,521 shares held by Mrs. Lowden as custodian for a child and
11,178 shares held jointly by Mr. Lowden and Mrs. Lowden and excludes
shares beneficially owned by Mr. Lowden reflected in the table.
(7) Includes 1,262 shares held by Mrs. Lowden as custodian for a child and
3,161 shares held jointly by Mr. Lowden and Mrs. Lowden and excludes
shares beneficially owned by Mr. Lowden reflected in the table.
(8) Of such shares, 12,500 may be acquired upon the exercise of outstanding
stock options.
(9) Of such shares, 13,750 may be acquired upon the exercise of outstanding
stock options.
Mr. Lowden has entered into a financing arrangement with a bank pursuant to
which he has pledged as security the Pledged Shares. See "Certain
Transactions." If an event of default were to occur under the financing
arrangement and the lender acquired the Pledged Shares upon foreclosure, Mr.
Lowden would cease to own more than 50% of the outstanding shares of the
Common Stock, and an event of default would be triggered under certain of the
long-term indebtedness of the Company, which would result in cross-defaults
under substantially all of the Company's long-term indebtedness.
11
<PAGE>
PROPOSAL 2: RATIFICATION OF SELECTION OF AUDITORS
Subject to ratification by the stockholders at the Annual Meeting, the Board
of Directors of the Company has selected Deloitte & Touche LLP to audit the
consolidated financial statements of the Company and its subsidiaries for the
fiscal year ending September 30, 1998. Deloitte & Touche LLP has issued its
report, included in the Company's Annual Report on Form 10-K, on the financial
statements of the Company for the fiscal year ended September 30, 1997.
Deloitte & Touche LLP has served as the Company's independent auditors since
1982. Representatives of Deloitte & Touche LLP are expected to be present at
the Annual Meeting, will have the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
AUDITORS WITH RESPECT TO THE FISCAL YEAR ENDING SEPTEMBER 30, 1998.
PROPOSAL 3: APPROVAL OF AMENDMENT TO THE 1993 KEY
EMPLOYEE STOCK OPTION PLAN
In September 1993, the Board of Directors adopted, and Sahara Resorts, the
sole stockholder at that time subsequently approved, the Company's 1993 Key
Employee Stock Option Plan (the "1993 Plan") authorizing the issuance of
319,375 shares of the Company's Common Stock. In December 1997, the Board
approved an amendment to the 1993 Plan, subject to stockholder approval, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 300,160 to a total of 619,535 shares. The full
text of the proposed amendment is attached as Annex A to this Proxy Statement.
The Board of Directors believes that stock options are a key aspect of the
Company's ability to attract, retain and motivate key employees. The Board
increased the number of shares available for issuance under the 1993 Plan to
ensure that the Company is able to continue to grant stock options to key
employees at levels determined appropriate by the Compensation Committee.
The affirmative vote of the holders of the majority of the shares of Common
Stock represented in person or by proxy and entitled to vote at the Annual
Meeting is required to approve the 1993 Plan, as amended. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE 1993 PLAN, AS
AMENDED.
GENERAL
The purpose of the 1993 Plan is to enable the Company and its subsidiaries
to attract, retain and motivate their employees by providing for or increasing
the proprietary interest of such employees in the Company. Every employee of
the Company or any of its subsidiaries, including any director who is so
employed, is eligible to be considered for the grant of awards under the 1993
Plan. The 1993 Plan currently provides that the maximum number of shares of
Common Stock that may be issued pursuant to awards granted under the 1993 Plan
is 319,375, subject to certain adjustments to prevent dilution. The Company
proposes to increase the number of shares of Common Stock that may be issued
pursuant to awards under the 1993 Plan to provide for additional stock-based
incentives to attract, retain and motivate qualified employees. There are
182,625 shares available for grant under the 1993 Plan, which the Company
believes is not a sufficient number to permit it to attract and retain
qualified employees.
The 1993 Plan is administered solely by the Compensation Committee of the
Board of Directors (the "Committee"). Subject to the provisions of the 1993
Plan, the Committee has full and final authority to select the participants to
whom awards will be granted thereunder, to grant such awards, and to determine
the terms and conditions of such awards and the number of shares to be issued
pursuant thereto.
12
<PAGE>
AWARDS
The 1993 Plan authorizes the Committee to grant both incentive stock options
and non-qualified stock options. Awards granted under the 1993 Plan to an
employee may include a provision accelerating the receipt of benefits upon the
occurrence of specified events, such as a change of control of the Company, an
acquisition of a specified percentage of the voting power of the Company or a
dissolution, liquidation, merger, reclassification, sale of substantially all
of the property and assets of the Company or other significant corporate
transaction.
An award under the 1993 Plan may, at the option of the Committee, permit the
recipient to pay all or part of the purchase price of the shares or other
property issuable pursuant thereto, and/or to pay all or part of such
recipients' tax withholding obligations with respect to such issuance, by
delivering previously owned shares of capital stock of the Company or other
property or by reducing the amount of shares or other property otherwise
issuable pursuant to the award. If an option granted under the 1993 Plan
permits the recipient to pay for the shares issuable pursuant thereto with
previously owned shares, the recipient would be able to exercise the option in
successive transactions, starting with a relatively small number of shares
and, by a series of exercises using shares acquired from each such transaction
to pay the purchase price of the shares acquired in the following transaction,
to exercise an option for a larger number of shares with no more investment
than the original share or shares delivered.
PLAN DURATION
Awards may not be granted under the 1993 Plan after September 24, 2003.
AMENDMENTS
The Board of the Company may alter, amend, suspend, or terminate the 1993
Plan, provided that no such action shall deprive the optionee of any options
theretofore granted under the 1993 Plan, without the consent of such optionee,
of such option or of any rights of such person thereunder or with respect
thereto. Except as provided in the 1993 Plan, no such action of the Board,
unless and until such action is approved by the stockholders of the Company,
may (i) increase the maximum number of Common Shares that may be acquired upon
the exercise in full of options granted under the 1993 Plan in the aggregate;
(ii) alter the class of persons eligible to be considered for the grant of
options under the 1993 Plan; (iii) remove the administration of the 1993 Plan
from the Committee or render the members of the Committee eligible to receive
options, rights, or stock under the 1993 Plan while serving as such; (iv)
extend the duration of the 1993 Plan; or (v) materially increase the benefits
accruing to the optionees of options theretofore granted or that may
thereafter be granted under the 1993 Plan.
SECTION 16(B) OF THE EXCHANGE ACT
The acquisition and disposition of shares of Common Stock by officers,
directors and more than 10% stockholders of the Company ("Insiders") pursuant
to awards granted to them under the 1993 Plan may be subject to the provisions
of Section 16(b) of the Exchange Act, under which a purchase of shares of
Common Stock within six months before or after a sale of Common Stock could
result in recovery by the Company of all or a portion of any amount by which
the sale proceeds exceed the purchase price. Rule 16b-3 provides an exemption
from Section 16(b) liability for certain transactions pursuant to employee
benefit plans.
DETERMINATION OF FAIR MARKET VALUE
The "Fair Market Value" of a Common Share of other security on any day shall
be equal to the last sale price per Common Share or other security on such
day. In case no such sale takes place on such day, the Fair Market Value will
be the average of the closing bid and asked prices as reported in the
principal consolidated transaction reporting systems, the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or
furnished by a professional market maker making a market in the Common Shares
or such
13
<PAGE>
other securities selected by the Board. In all other cases, Fair Market Value
shall be the value determined in good faith by the Committee based upon an
independent appraisal of the Companies. For purposes of valuing Common Shares
subject to the Incentive Options, the Fair Market Value of a Common Share or
other security shall be determined without regard to any restriction other
than one that, by its terms, will never lapse.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the federal income tax treatment
which will generally apply to awards made under the 1993 Plan, based on
federal income tax laws in effect on the date hereof. The exact federal income
tax treatment of awards will depend on the specific nature of awards. Because
the following is only a brief summary of the general federal income tax rules,
recipients of awards should not rely thereon for individual tax advice, as
each taxpayer's situation and the consequences of any particular transaction
will vary depending upon the specific facts and circumstances involved. Each
taxpayer is advised to consult with his or her own tax advisor for particular
federal, as well as state and local, income and any other tax advice.
Incentive Options. Pursuant to the 1993 Plan, employees may be granted
options which are intended to qualify as incentive stock options ("Incentive
Options") under the provisions of Section 422 of the Internal Revenue Code
(the "Code"). Generally, the optionee is not taxed and the Company is not
entitled to a deduction on the grant or the exercise of an Incentive Option.
However, if the optionee sells the shares acquired upon the exercise of an
Incentive Option at any time within (a) one year after the date of transfer of
shares to the optionee pursuant to the exercise of such Incentive Option or
(b) two years after the date of grant of such Incentive Option, then the
optionee will recognize ordinary income in an amount equal to the excess, if
any, of the lesser of the sale price of the shares of Common Stock or the fair
market value of the shares of Common Stock on the date of exercise over the
exercise price of such Incentive Option. The Company will generally be
entitled to a tax deduction in an amount equal to the amount of ordinary
income recognized by such optionee.
The amount by which the fair market value of the shares of Common Stock
received upon exercise of an Incentive Option exceeds the exercise price will
be included as a positive adjustment in the calculation of an optionee's
"alternative minimum taxable income" ("AMTI") in the year of exercise. The
"alternative minimum tax" imposed on individual taxpayers is generally equal
to the amount by which 26% or 28% (depending on the recipient's AMTI) of the
individual's AMTI (reduced by certain exemption amounts) exceeds his or her
regular income tax liability for the year.
Nonqualified Options. The grant of an option or other similar right to
acquire stock which does not qualify for treatment as an Incentive Option (a
"Nonqualified Option"), is generally not a taxable event for the optionee.
Upon exercise of the option, the optionee will generally recognize ordinary
income in an amount equal to the excess of the fair market value of the stock
acquired upon exercise (determined as of the date of the exercise) over the
exercise price of such option, and the Company will generally be entitled to a
tax deduction equal to such amount. However, the Company's deduction
(including the deduction relating to ordinary income recognized by an
optionee) for compensation of certain corporate officers of other employees
may be limited to $1 million annually. In addition, there may be a risk of
immediate tax upon the grant of a so-called "deep discount option" with an
exercise price equal to only a small fraction of the option shares' current
fair market value. See "Special Rules for Awards Granted to Insiders," below.
Special Rules for Awards Granted to Insiders. If the grant of an option is
not approved by the Board or a committee of the Board that is composed solely
of two or more "non-employee directors" (as such item is defined under Rule
16b-3 of the Exchange Act), and if an optionee is a director, officer or
stockholder subject to Section 16 of the Exchange Act (an "Insider") and
exercises an option within six months of the date of grant, the timing of the
recognition of any ordinary income should be deferred until (and the amount of
ordinary income should be determined based on the fair market value (or sales
price in the case of a disposition) of the shares of Common Stock upon) the
earlier of the following two dates (i) six months after the date of grant or
(ii) a disposition of the shares of Common Stock, unless the Insider makes an
election under Section 83(b) of the Code (an "83(b) Election") within 30 days
after exercise to recognize ordinary income based on the value of
14
<PAGE>
the Common Stock on the date of exercise. In addition, special rules apply to
an Insider who exercises an option having an exercise price greater that the
fair market value of the underlying shares on the date of exercise. Insiders
should consult their tax advisors to determine the tax consequences to them of
exercising options granted to them pursuant to the 1993 Plan.
Miscellaneous Tax Issues. Generally, the Company will be required to make
arrangements for withholding applicable taxes with respect to any ordinary
income recognized by a participant in connection with awards made under the
1993 Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase shares of Common Stock. Interest disallowed
under this rule may be carried forward to and deducted in later years, subject
to the same limitations.
Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the 1993 Plan by delivering previously owned shares of
Common Stock or by reducing the amount of shares otherwise issuable pursuant
to the award. The surrender or withholding of such shares will in certain
circumstances result in the recognition of income with respect to such shares.
The terms of the agreements pursuant to which specific awards are made to
employees under the 1993 Plan may provide for accelerated vesting of an award
in connection with a change in ownership or control of the Company or its
assets. In that event and depending upon the individual circumstances of the
recipient, certain amounts with respect to such awards may constitute "excess
parachute payments" under the "golden parachute" provisions of the Code.
Pursuant to these provision, a recipient will be subject to a 20% excise tax
on any "excess parachute payments" and the Company will be denied any
deduction with respect to such payment. Recipients of awards should consult
their tax advisors as to whether accelerated vesting of an award in connection
with a change of ownership or control of the company would give rise to an
excess parachute payment.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended September 30,
1997, including the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997 without the exhibits thereto, has been mailed to
stockholders of record at the close of business on January 20, 1998. The
Company will provide a copy of the exhibits to its Annual Report on Form 10-K
for the fiscal year ended September 30, 1997 upon the written request of any
beneficial owner of the Company's securities as of the record date for the
Annual Meeting and reimbursement of the Company's reasonable expenses. Such
request should be addressed to Thomas K. Land, Senior Vice President and Chief
Financial Officer, 4949 North Rancho Drive, Las Vegas, Nevada 89130.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any eligible stockholder (as defined below) of the Company wishing to have a
proposal considered for inclusion in the Company's 1999 proxy solicitation
material must set forth such proposal in writing and file it with the
Secretary of the Company on or before September 30, 1998. The Board will
review any proposals from eligible stockholders which it receives by that date
and will determine whether any such proposals will be included in its 1999
proxy solicitation materials. Any eligible stockholder is one who is the
record or beneficial owner of at least 1% or $ 1,000 in market value of
securities entitled to be voted on the proposal at that annual meeting and has
held such securities for at least one year and who shall continue to own such
securities through the date on which the annual meeting is held.
15
<PAGE>
SOLICITATION OF PROXIES
The cost of this solicitation shall be borne by the Company. Proxies may be
solicited by mail, telephone, or telegraph, or personally by directors,
officers and regular employees of the Company, none of whom will receive any
special compensation for such services. The Company will reimburse persons
holding stock in their names or in the names of their nominees for reasonable
expenses of forwarding proxy materials to their principals.
OTHER BUSINESS
The Board does not know of any other business which will be presented for
consideration at the Annual Meeting. If any other business properly comes
before the Annual Meeting or at any adjournment or postponement thereof, the
proxy holders will vote in regard thereto according to their discretion
insofar as such proxies are not limited to the contrary.
By Order of the Board of Directors
/s/ William J. Raggio
William J. Raggio
Secretary
January 26, 1998
16
<PAGE>
ANNEX A
PROPOSED AMENDMENT TO 1993 KEY EMPLOYEE STOCK OPTION PLAN
3. COMMON SHARES SUBJECT TO PLAN
(a) The maximum number of Common Shares that may be issued upon the exercise
in full of options granted under this Plan is 619,535, subject to adjustment
as provided in Section 10 hereof. Such maximum number does not include the
number of Common Shares subject to the unexercised portion of any option
granted under this Plan that expires or is terminated.
(b) Subject to adjustment as provided in Section 10 hereof, the maximum
number of Common Shares with respect to which options may be granted under
this Plan during any calendar year to any Employee shall be 619,535.
17
<PAGE>
- --------------------------------------------------------------------------------
PROXY
SANTA FE GAMING CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 19, 1998
PROXY SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints Paul W. Lowden, William J. Raggio and
Thomas K. Land, as proxies, with full power of substitution to vote any and all
shares of Common Stock $.01 par value, Santa Fe Gaming Corporation which the
undersigned is entitled to vote at the annual meeting of stockholders of said
company to be held at 10:00 a.m. P.S.T. on March 19, 1998 at the Santa Fe Hotel
and Casino, 4949 N. Rancho Dr., Las Vegas, NV 89130, or any adjournment or
postponement thereof, as specified on the reverse side of this proxy card.
Holders of record as of January 20, 1998 will be entitled to vote at this annual
meeting.
(Please Sign and Date the Proxy on the Reverse Side)
================================================================================
A [X] Please mark your
votes as in this
example.
FOR WITHHOLD
(except as indicated to AUTHORITY
the contrary below) TO VOTE FOR Nominee:
1. Election of Director [ ] [ ] Thomas K. Land
Instructions: To withhold authority to vote
for any individual nominee, write that nominee's
name on the line provided below.
__________________________
FOR AGAINST ABSTAIN
2. Ratification of selection of
outside auditors, Deloitte &
Touche, LLP. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Approval of Amendment to 1993
Key Employee Stock Option Plan,
as described in the proxy
statement. [ ] [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE_________________ DATE__________SIGNATURE______________DATE___________
(SIGNATURE IF HELD JOINTLY)
NOTE: Sign exactly as name appears hereon. Give your full title if signing in
other than individual capacity. All joint owners should sign.
- --------------------------------------------------------------------------------
