<PAGE>
SANTA FE GAMING CORPORATION
4949 NORTH RANCHO DRIVE
LAS VEGAS, NEVADA 89130
March 31, 2000
Dear Common or Preferred Stockholder:
We are pleased to invite you to attend the 2000 annual meeting of
Stockholders of your Company. The meeting will be held at the Pioneer Hotel and
Gambling Hall, 2200 Casino Drive, Laughlin, Nevada 89029 on May 8, 2000 at
10:00 a.m. (Pacific Time). We hope that you will be able to attend the annual
meeting in person and we look forward to seeing you.
The agenda for the annual meeting is described in the accompanying notice of
annual meeting and proxy statement. At the annual meeting, the common
stockholders will be asked to:
- elect two directors, who will serve for three-year terms;
- approve an amendment to our 1993 stock incentive plan to increase the
number of shares of common stock authorized for issuance; and
- ratify the Company's selection of our public accountants.
The preferred stockholders will be asked to elect two special directors.
We encourage you to attend the meeting in person. Whether or not you plan to
attend, your vote is important, regardless of the number of shares that you own.
Accordingly, after reading the enclosed notice of annual meeting and proxy
statement, please sign and date the enclosed common stock proxy card (white
card) or preferred stock proxy card (blue card) and return it to us in the
provided envelope.
Sincerely,
/s/ PAUL W. LOWDEN
Paul W. Lowden
Chairman of the Board and President
Santa Fe Gaming Corporation
<PAGE>
SANTA FE GAMING CORPORATION
4949 NORTH RANCHO DRIVE
LAS VEGAS, NEVADA 89130
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 8, 2000
------------------------
The 2000 annual meeting of the Stockholders of Santa Fe Gaming Corporation,
a Nevada corporation, will be held at Pioneer Hotel and Gambling Hall, 2200
Casino Drive, Laughlin, Nevada 89029, on May 8, 2000, commencing at 10:00 a.m.
(Pacific Time) for the following purposes:
For common stockholders:
1. To elect two directors, who will serve until the 2003 annual meeting of
Stockholders and until their successors are elected and qualified;
2. To consider and act upon a proposal to amend our 1993 stock incentive
plan to increase the number of shares of common stock authorized for
issuance under the plan by 619,535.
3. To consider and act upon a proposal to ratify the selection of the
Company's public accountants; 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.
For holders of exchangeable redeemable preferred stock:
1. To elect two special directors, as described herein.
Pursuant to our By-Laws, 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 March 24, 2000. Accordingly, only stockholders of record on that
date and at that time will be entitled to vote at the annual meeting and at any
adjournment or postponement thereof, notwithstanding any transfer of stock on
the books of the Company after the record date.
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 COMMON STOCK PROXY CARD OR
PREFERRED STOCK PROXY CARD 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 proxies.
By Order of the Board of Directors
/s/ THOMAS K. LAND
Thomas K. Land
Secretary
Las Vegas, Nevada
March 31, 2000
<PAGE>
SANTA FE GAMING CORPORATION
4949 NORTH RANCHO DRIVE
LAS VEGAS, NEVADA 89130
(702) 658-4340
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
May 8, 2000
This proxy statement is first being mailed on or about April 8, 2000 to
holders of common stock, $.01 par value, and holders of the exchangeable
redeemable preferred stock, $.01 par value, of Santa Fe Gaining Corporation, a
Nevada corporation, of record as of the close of business on March 24, 2000.
The enclosed proxy for holders of common stock (white) and proxy for holders
of preferred stock (blue) are solicited on behalf of our Board of Directors for
use at the 2000 annual meeting of Stockholders to be held on May 8, 2000, at
10:00 a.m. (Pacific Time) at the Pioneer Hotel and Gambling Hall, 2200 Casino
Drive, Laughlin, Nevada 89029 and at any adjournment or postponement of the
annual meeting. A stockholder may revoke its proxy at any time prior to its use
by:
- providing written revocation to the Secretary of the Company at its
offices,
- executing and delivering a later-dated proxy,
- 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 with respect to a common stock proxy,
shares of common stock will be voted for:
- the election of the nominees named in this proxy statement for election by
the common stockholders as directors,
- approval of the amendment to our 1993 stock incentive plan to increase the
number of shares of common stock authorized for issuance under the plan,
- ratification of the selection of Deloitte & Touche LLP as our auditors,
and
- in the discretion of the proxy holders with respect to any other matters
properly presented to the common stockholders to the annual meeting and at
any adjournment or postponement.
If no direction is given with respect to a preferred stock proxy, shares of
preferred stock will be voted for the election of the nominees named in this
proxy statement for election by preferred stockholders as for special directors.
VOTING RIGHTS
Only stockholders of record at the close of business on March 24, 2000 are
entitled to notice of and to vote at the annual meeting. On that date, 6,195,356
shares of common stock and 8,856,651 shares of preferred stock were outstanding.
The presence, either in person or by proxy, of persons entitled to vote 50%
of the outstanding common stock is necessary to constitute a quorum for the
transaction of business by the common
1
<PAGE>
stockholders at the annual meeting. Paul W. Lowden, Chairman of the Board and
President of the Company, beneficially holds approximately 69.02% of the common
stock and has advised the Company that his shares will be present and voted at
the annual meeting.
The presence, either in person or by proxy, of persons entitled to vote 50%
of the outstanding preferred stock is necessary to constitute a quorum for the
transaction of business by the preferred stockholders at the annual meeting. If
there is not a sufficient number of shares of preferred stock represented at the
annual meeting for a quorum, the Company may adjourn the annual meeting with
respect to the business to be conducted by preferred stockholders in order to
permit further solicitation of preferred stock proxies.
Each share of common stock or preferred stock is entitled to one vote in
connection with each matter submitted for approval by the common stockholders or
preferred stockholders, as applicable. 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 is the beneficial owner of 4,524,275 shares of common stock,
or approximately 69.02% of the outstanding common stock. Mr. Lowden intends to
vote the common stock of which he is the record holder for the nominees for
election as directors by common stockholders named in this proxy statement, for
approval of the amendment to the stock incentive plan and for ratification of
the selection of Deloitte & Touche LLP as the Company's public accountants.
Mr. Lowden has also been advised that the record holders of shares of common
stock that he beneficially owns intend to do the same. Mr. Lowden is also the
beneficial owner of 674,500 shares of preferred stock, or approximately 7.62% of
the outstanding preferred stock. Mr. Lowden intends to abstain from voting the
preferred stock of which he is the record holder for the nominees for election
as special directors named in this proxy statement and has been advised that the
record holders of shares of preferred stock of which he is the beneficial owner
intend to do the same.
COMMON STOCKHOLDERS' AGENDA
PROPOSAL 1: ELECTION OF DIRECTORS
The authorized number of directors of the Company is seven, of whom five are
elected by the common stockholders and two are elected by the preferred
stockholders in accordance with the certificate of designation of the preferred
stock. The directors are divided into three classes. The Board has nominated
Suzanne Lowden and John W. Delaney to stand for election by the common
stockholders at the annual meeting. The enclosed common stock proxy (white),
unless indicated to the contrary, will be voted for the Board's nominees.
2
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The table below provides information regarding the directors of the Company.
Mrs. Lowden and Messrs. Delaney, Land, Lewis and Lowden are directors elected by
the common stockholders and Mr. Siris is a special director elected by the
preferred stockholders. For additional information regarding the directors, see
"Directors and Executive Officers."
<TABLE>
<CAPTION>
NOMINEE FOR ELECTION BY
COMMON STOCKHOLDERS AT FOR TERM TO EXPIRE AT THE
THE ANNUAL MEETING ANNUAL MEETING
----------------------- -------------------------
<S> <C>
Suzanne Lowden......................................... 2003
John W. Delaney........................................ 2003
</TABLE>
<TABLE>
<CAPTION>
TERM EXPIRES AT THE
OTHER DIRECTORS ANNUAL MEETING
- --------------- -------------------
<S> <C>
Thomas K. Land......................................... 2001
James W. Lewis......................................... 2002
Paul W. Lowden......................................... 2002
Peter J. Siris......................................... 2000
</TABLE>
The Company has been advised by Mrs. Lowden and Mr. Delaney that they are
willing to be named as nominees and are willing to serve as directors if
elected. However, if either should be unable to serve as a director, the proxy
holders may vote the enclosed common stock proxy a substitute nominee selected
by the Board 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 elect the common stock directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT COMMON STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED ABOVE.
PROPOSAL 2: APPROVAL OF AMENDMENT TO THE 1993 KEY
EMPLOYEE STOCK OPTION PLAN
The Company's 1993 Key Employee Stock Option Plan authorizes the issuance of
up to 619,535 shares of the common stock under the plan. There are outstanding
options with respect to 582,035 shares of common stock under the plan, leaving
only 37,500 shares of common stock available for future awards.
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 of
Directors has approved an amendment to the plan, subject to stockholder
approval, to increase the aggregate number of shares of common stock authorized
for issuance under the plan by 619,535 to a total of 1,239,070, to ensure that
the Company is able to continue to grant stock options to key employees at
levels determined appropriate by the compensation committee of the Board.
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 amendment to the plan. The full text of the
proposed amendment is attached as Annex A to this proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT COMMON STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO INCREASE THE NUMBER SHARES OF COMMON STOCK
AUTHORIZED FOR ISSUANCE UNDER THE 1993 KEY EMPLOYEE STOCK OPTION PLAN.
GENERAL
The purpose of the 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 the 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 plan.
3
<PAGE>
The plan is administered solely by the compensation committee of the Board
of Directors. Subject to the provisions of the plan, the compensation 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.
AWARDS
The plan authorizes the compensation committee to grant both incentive stock
options and non-qualified stock options. Awards granted under the 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 plan may, at the option of the compensation 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 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 plan after September 24, 2003.
AMENDMENTS
The Board may alter, amend, suspend, or terminate the plan, provided that no
such action may deprive an optionee of any outstanding options, without the
consent of the optionee, of any rights of the optionee under the option or with
respect to the option. Except as provided in the plan, no such action of the
Board, unless approved by the stockholders of the Company, may:
- increase the maximum number of shares of common stock that may be acquired
upon the exercise in full of options granted under the plan in the
aggregate;
- alter the class of persons eligible to be considered for the grant of
options under the plan;
- remove the administration of the plan from the compensation committee or
render the members of the Committee eligible to receive options, rights,
or stock under the plan while serving as such;
- extend the duration of the plan; or
- materially increase the benefits accruing to the optionees of options
theretofore granted or that may thereafter be granted under the plan.
SECTION 16(b) OF THE EXCHANGE ACT
The acquisition and disposition of shares of common stock by officers,
directors and greater than 10% stockholders of the Company pursuant to awards
granted to them under the 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
4
<PAGE>
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 share of common stock 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
other securities selected by the Board. In all other cases, fair market value
shall be the value determined in good faith by the compensation committee based
upon an independent appraisal of the Company. 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 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. The following
is only a brief summary of the federal income tax rules applicable to awards and
should not be relied upon 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.
INCENTIVE OPTIONS. Pursuant to the plan, employees may be granted options
which are intended to qualify as incentive stock 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 AMT1) 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, 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. 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.
5
<PAGE>
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 166-3
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 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 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
plan.
The terms of the agreements pursuant to which specific awards are made to
employees under the 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.
Section 162(m) of the Code imposes a $1,000,000 limit on the amount of
compensation that may be deducted by the Company in any year with respect to the
Chief Executive Officer of the Company and its other four most highly
compensated employees, including deductions attributable to awards under the
plan. While the Company does not anticipate such limit applying, the $1,000,000
deduction limit will apply if the deduction attributable to an award plus the
deduction attributable to other compensation received in the same year exceeds
$1,000,000.
PROPOSAL 3: RATIFICATION OF SELECTION OF PUBLIC ACCOUNTANTS
Subject to ratification by the common stockholders at the annual meeting,
the Board of Directors has selected Deloitte & Touche LLP to audit the
consolidated financial statements of the Company and its subsidiaries for the
fiscal year ending September 30, 2000. Deloitte & Touche LLP has issued its
report, included in the Company's annual report on Form 10-K, as amended, on the
financial statements of the Company for the fiscal year ended September 30,
1999. Deloitte & Touche LLP has served as the Company's public accountants 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 COMMON STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2000.
6
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PREFERRED STOCKHOLDERS' AGENDA
The sole item of business of preferred stockholders will be the election of
two special directors. If for any reason any other matters are properly
presented for action by the preferred stockholders, the preferred stock proxies
solicited with this proxy statement confer discretionary authority to vote on
the other matters.
ELECTION OF SPECIAL DIRECTORS
The Company has accrued, but not paid, dividends payable on the preferred
stock since October 1996. Pursuant to the certificate of designation of the
preferred stock, because at least one full dividend payment has been accrued but
not paid for two years, the authorized number of directors of the Company has
been increased by two to seven and the preferred stockholders are entitled, as a
separate class, to elect two special directors to the Board in addition to the
directors elected by the common stockholders. The preferred stockholders' right
to elect two special directors will continue until all dividend arrearages have
been paid. At that time, the terms of the special directors will terminate and
the authorized number of directors on the Board will be reduced by two.
At the 1999 annual meeting held in May 1999, the preferred stockholders
elected Mr. Peter J. Siris to Class I, to serve until the 2000 annual meeting,
and Mr. John M. Bradham to Class II, to serve until the 2001 annual meeting. As
previously disclosed, Mr. Bradham resigned as a special director in
December 1999. As a result, at the 2000 annual meeting, the preferred
stockholders will elect two directors: one to Class I, to serve until the 2003
annual meeting and until the director's successor has been elected and has
qualified, and a second to fill the vacancy in Class II created by
Mr. Bradham's resignation to serve until the 2001 annual meeting and until the
director's successor has been elected and has qualified.
The Company sent a letter dated January 21, 2000 to the record holders of
the preferred stock advising them of the right of preferred stockholders to
elect two special directors at the annual meeting and indicating that preferred
stockholders who wished to submit potential candidates for consideration as
nominees to stand for election as special directors should provide information
with respect to the proposed candidates to the Company. We received and
considered written nominations only with respect to the two persons named in
this proxy statement as nominees of the preferred stockholders, Mr. Howard E.
Foster and Mr. David H. Lesser. Mr. Lesser is nominated to stand for election to
Class II to fill the vacancy created by Mr. Bradham's resignation to serve until
the 2001 annual meeting and until his successor has been elected and has
qualified.
<TABLE>
<CAPTION>
PREFERRED STOCKHOLDERS NOMINEE'S
FOR ELECTION BY FOR TERM TO EXPIRE
PREFERRED STOCKHOLDERS AT THE AT THE
ANNUAL MEETING ANNUAL MEETING
-------------------------------- ------------------
<S> <C>
David H. Lesser........................................ 2001
Howard E. Foster....................................... 2003
</TABLE>
Mr. Lesser has advised the Company that he is soliciting consents from a
limited number of preferred stockholders to elect him prior to the annual
meeting to fill the vacancy on the Board of Directors created by Mr. Bradham's
resignation. If Mr. Lesser submits valid consents sufficient to elect him to
fill that vacancy prior to the annual meeting, preferred stockholders will be
asked at the annual meeting to vote only for a director to fill the Class I
special director position currently held by Mr. Siris, to serve until the 2003
annual meeting of stockholders and until the director's successor is elected and
has qualified.
The enclosed preferred stock proxy (blue), unless indicated to the contrary,
will be voted for the nominees for election as special directors. The nominees
for election as special directors have advised us that they are willing to be
named as a nominee to serve as special directors if elected. However, if either
should be unable to serve as a director, the proxy holders may vote the enclosed
preferred stock proxy for a substitute nominee selected by the Board in its
discretion. The affirmative vote of holders of a plurality of
7
<PAGE>
preferred stock represented in person or by proxy and entitled to vote at the
annual meeting is required to elect the special directors.
The age and principal occupation during the past five years of each of the
nominees of the preferred stockholders for special director was provided to the
Company by the nominees and is described below. The information is derived
solely from information submitted to us by the nominees in connection with their
nomination.
HOWARD E. FOSTER
Howard E. Foster is 55 years old. Since 1980, Mr. Foster has been the
President of Howard Foster and Company, an investment advisor firm specializing
in small capitalization stocks, turnaround situations and financially distressed
companies. Prior to that time, Mr. Foster served as chief financial officer of
two publicly-held companies, Associated Products and Bio-Rad Laboratories, and
previously worked in the audit, tax and management consulting divisions of
Arthur Andersen & Co. Mr. Foster has served on the boards of directors of
Bio-Rad Laboratories, Barringer Technologies and Nevada National Bancorporation,
where he served as a director elected by preferred stockholders of Nevada
National Bancorporation.
DAVID H. LESSER
Mr. Lesser is President of Hudson Bay Partners, a discretionary investment
firm formed in 1996 to make opportunistic investments in real estate companies
and real estate intensive operating businesses. Prior to forming Hudson Bay
Partners, Mr. Lesser was Senior Vice President of Crescent Real Estate
Equities, Ltd, and prior to that Mr. Lesser was a Director of the Investment
Banking Division of Merrill Lynch & Co. with a focus on real estate. Mr. Lesser
is a director of Keystone Property Trust. Mr. Lesser and his affiliates own
3,451,942 shares of preferred stock, or 38.98% of the outstanding preferred
stock.
*********
The Company is the plaintiff in an action entitled SANTA FE GAMING
CORPORATION V. HUDSON BAY PARTNERS, ET.AL.CV-S-99-00298-JBR (LRL). The action
was instituted on March 11, 1999 in the United States District court for the
District of Nevada. The defendants are Mr. Lesser and Hudson Bay Partners. The
complaint includes causes of action for violation of Section 13(d) of the
Securities Exchange Act of 1934, breach of contract, fraud, violation of
Nevada's Uniform Trade Secrets Act and intentional interference with prospective
economic advantage. The Company alleges that Mr. Lesser and Hudson Bay Partners
failed to comply with the requirements of Section 13(d) in connection with their
purchases of the Company's preferred stock and that Mr. Lesser and Hudson Bay
Partners wrongfully obtained and used confidential and proprietary information
of the Company.
The Company seeks all appropriate injunctive relief in connection with the
Section 13(d) claim, specific performance and consequential and compensatory and
punitive damages in connection with its fraud and intentional interference with
prospective economic advantage claims, and injunction relief and punitive
damages in connection with its claim under Nevada's Uniform trade Secrets Act,
as well as any other appropriate relief. On April 30, 1999, the court denied the
Company's motion for preliminary injunction with respect to the Section 13(d)
claim.
On or about June 18, 1999, Hudson Bay Partners filed a counterclaim against
the Company in which it alleges that the Company is in default on its guarantee
of the 13 1/2% first mortgage bonds issued by the Company's subsidiary, Pioneer
Finance Corp., and seeks to recover the amounts it claims are past due. The
Company has denied the allegations made by Hudson Bay Partners in all material
respects. On or about July 19, 1999, Hudson Bay Partners filed a motion for
summary judgment on its counterclaim and request to have that judgment entered,
which the Company has opposed. No hearing date has been set on the motion.
8
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of the current executive officers and directors and
the nominees for election to the Board:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY
- ---- -------------------------
<S> <C>
Paul W. Lowden(1)................. Chairman of the Board, President and Chief Executive Officer
Thomas K. Land(1)................. Director, Secretary, Treasurer, Senior Vice President and Chief
Financial Officer
Suzanne Lowden.................... Director, Executive Vice President
Christopher W. Lowden............. Executive Vice President
James W. Lewis(2)(3).............. Director
John W. Delaney(1)(2)(3).......... Director
Peter J. Siris.................... Preferred stock special director
Howard E. Foster.................. Preferred stockholder nominee for election as special director
David H. Lesser................... Preferred stockholder nominee for election as special director
</TABLE>
- ------------------------
(1) Member of the Executive Committee of the Board.
(2) Member of the Audit Committee of the Board.
(3) Member of the Compensation Committee of the Board.
The age, present position with the Company, and principal occupation during
the past five years of each director and executive officer named above is set
forth below:
PAUL W. LOWDEN
Paul Lowden is 56 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.
THOMAS K. LAND
Thomas K. Land is 39 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.
SUZANNE LOWDEN
Suzanne Lowden is 47 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 34 years old and has served as Executive Vice
President of Operations since September 1995 and Executive Vice President since
February, 1996. 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. Mr. Lowden is the son of Paul W. Lowden.
9
<PAGE>
JAMES W. LEWIS
James W. Lewis is 72 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 51 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.
PETER J. SIRIS
Peter J. Siris is 55 years old. He has been a director of the Company since
May 1999 and serves as a Special Director elected by holders of the Company's
Exchangeable Redeemable Preferred Stock. Mr. Siris has indicated to the Company
that he is not standing for re-election. Mr. Siris has been President of the
Siris Group, an investment and management consulting firm since 1966 and is
Managing Director of Guerilla Capital Management. Mr. Siris covered retail and
real estate companies with ABN-Amro, as a Senior Vice President in 1996, and UBS
Securities, as a Managing Director from 1990 to 1995. He also served as Senior
Vice President of Warnaco, Inc. in 1995. Currently, Mr. Siris is a director of
Crown American Realty Trust and E-Save Networks.
For information regarding Messrs. Foster and Lesser, see "Preferred
Stockholders' Agenda."
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended September 30, 1999, the Board of Directors held
eight meetings. Each director attended at least seven 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 one meeting and the compensation
committee held three meetings during the last fiscal year The Board also has an
executive committee. The executive committee held two meetings and also took
action by unanimous written consent on one occasion during the last fiscal year.
Memberships in the various committees are determined by action of the full
Board. The function of the executive, audit and compensation committees and
their membership are described below.
The executive committee is authorized to exercise, to the fullest extent
permitted by Nevada law and the Bylaws of the Company, all of the authority of
the Board of Directors. The executive committee is composed of Paul W. Lowden
(Chairman), Thomas K. Land and John W. Delaney.
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 executive
officers of the Company, administers the 1993 Key Employee Stock Option Plan
(the "1993 Plan") and the Subsidiary Plans (as defined under "Executive
Compensation"), 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
10
<PAGE>
Subsidiary Plans. The compensation committee is composed of James W. Lewis and
John W. Delaney, neither of whom is an officer or employee of the Company.
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, 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.
POLICY WITH RESPECT TO DIRECTORS
The Company requires all members of the Board of Directors to comply with
all policies applicable to Board members prior to attending a person's first
meeting of the Board. These policies require that each director file an
application with the Nevada gaming authorities, and acknowledge that he or she
will comply with all Board policies and execute confidentiality agreements and
disclosure and compliance statements. Until an individual complies with these
requirements, he or she will not be entitled to participate in Board meetings or
to receive director compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended, 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, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
People who are subject to the reporting obligations of Section 16(a) are
required by SEC regulations to furnish the Company with copies of all forms they
file pursuant to Section 16(a).
Based solely on our review of the copies of the reports we received and
written representations from the Company's executive officers, directors and
holders of 10% of the common stock, that no other reports were required for
them, the Company believes that, during fiscal year 1999, the Company's
executive officers, directors and 10% common stockholders complied with all
Section 16(a) filing requirements applicable to them.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation eliminate liability of its directors
and officers for breaches of fiduciary duties as directors and officers, except
to the extent otherwise required by the Nevada Revised Statutes and where the
breach involves intentional misconduct, fraud or a knowing violation of the law.
Section 78.751 of Chapter 78 of the Nevada Revised Statutes and the
Company's Bylaws contain provisions for indemnification of officers and
directors of the Company and, in certain cases, employees and other persons. The
Bylaws require the Company to indemnify such persons to the fullest extent
legally permissible under the general corporation law of Nevada. Each such
person will be indemnified in any proceeding if such person acted in good faith
and in a manner which such person reasonably believed to be in, or not opposed
to, the best interests of the Company, and, with respect to any criminal action
or proceeding, had no cause to believe his conduct was unlawful. Indemnification
would cover expenses, including attorneys' fees, judgments, fines and amounts
paid or to be paid in settlement.
The Company's Bylaws also provide that the Board may cause the Company to
purchase and maintain insurance on behalf of any present or past director or
officer insuring against any liability asserted against such person incurred in
the capacity of director or officer or arising out of such status, whether or
not the Company would have the power to indemnify such person. The Company
maintains directors' and officers' liability insurance.
11
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
The following table provides information regarding beneficial ownership of
the common stock and the preferred stock as of March 8, 2000 by persons known to
us (i) to be beneficial owners of more than 5% of the outstanding common stock
or preferred stock; (ii) each director of the Company and nominees for election
as a special director; and (iii) all directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
OWNER COMMON STOCK PERCENT PREFERRED STOCK PERCENT
- ----- ------------ -------- --------------- --------
<S> <C> <C> <C> <C>
Paul W. Lowden(1)................................. 4,524,275(2) 69.02% 674,500(3) 7.62%
James W. Lewis.................................... 13,750(4) * -- (6) --
Suzanne Lowden.................................... 4,792(5) * 2,524(6) *
Thomas K. Land.................................... 69,175(7) 1.10% 1,000 *
Christopher W. Lowden............................. 83,456(7) 1.33% 1,400 *
John W. Delaney................................... 13,750(4) * -- --
Peter J. Siris.................................... 12,500(8) * 140,300 1.58%
Hudson Bay Partners(9)............................ 53,600 * 3,451,942 38.98%
David H. Lesser(9)................................ 53,600 * 3,451,942 38.98%
Howard E. Foster.................................. -- -- 150,126 1.70%
All Directors and Officers as a group (7
persons)........................................ 4,721,698 72.18% 819,724 9.26%
</TABLE>
- ------------------------
(1) The address for Paul W. Lowden is c/o Santa Fe Gaming Corporation, P.O. Box
270850, 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)(l) under the
Securities Exchange Act of 1934, as amended.
(2) Includes 477,351 shares held by LICO, which is wholly owned by Mr. Lowden.
(3) Includes 92,041 shares held by LICO, which is wholly owned by Mr. Lowden.
(4) Of these shares, 12,500 may be acquired upon the exercise of outstanding
stock options.
(5) 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.
(6) Includes 1,262 shares held by Mrs. Lowden as custodian for a child and
excludes shares beneficially owned by Mr. Lowden reflected in the table.
(7) Of such shares, 68,175 may be acquired upon the exercise of outstanding
stock options.
(8) All shares may be acquired upon the exercise of outstanding stock options.
Upon being first elected to the Company's Board of Directors, non-employee
directors receive 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.
(9) Mr. Lesser is President of Hudson Bay Partners. This information is derived
from a letter received from Mr. Lesser in which he represented he and Hudson
Bay Partners own 3,451,942 shares. The address for Hudson Bay Partners is
237 Park Avenue, Suite 900, New York, NY 10017.
12
<PAGE>
EXECUTIVE COMPENSATION
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, 1999, 1998 and 1997 of those persons
who were, as of September 30, 1999, (i) the Chief Executive Officer and
(ii) the other executive officer whose total annual salary and bonus exceeded
$100,000 during the fiscal year ended September 30, 1999 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
FISCAL SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(3) ($)(1) ($)(2)
- --------------------------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul W. Lowden........................... 1999 $550,000 $375,000 $0 $46,462
President, Chairman.................... 1998 $550,000 $550,000 $0 $42,494
of the Board and CEO................... 1997 $550,000 $200,000 $0 $41,924
Thomas K. Land........................... 1999 $184,693 $ 15,000 $0 $ 3,835
Senior Vice President.................. 1998 $174,676 $ 15,000 $0 $ 3,785
and Chief Financial Officer............ 1997 $138,704 $ 10,000 $0 $ 2,313
</TABLE>
- ------------------------
(1) The Company provides automobiles to its 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 1999, 1998 and 1997 consists of payments
of life insurance premiums by the Company in the amounts of $44,298, $39,937
and $40,653 for Paul W. Lowden and $2,113, $1,867 and $1,868 for Thomas K.
Land, respectively, and Company matching contributions to the Retirement
Savings 401(k) Plan.
(3) Included in fiscal year 1999 and 1998 for Paul W. Lowden are $175,000 and
$350,000, respectively, related to the Fiscal Year 1998 Bonus and Personal
Guarantee Fee. See "Compensation Arrangements with Mr. Lowden."
COMPENSATION ARRANGEMENTS WITH MR. LOWDEN. The compensation committee
approved Mr. Lowden's compensation package for fiscal year 1999, which provided
for an annual base salary of $550,000 and a bonus in the amount of $200,000
payable in bi-weekly installments throughout fiscal year 1999.
As previously disclosed, the compensation committee approved payment in
fiscal year 1998 of a $600,000 bonus (the "Fiscal Year 1998 Bonus") to
Mr. Lowden in connection with the sales by the Company of the Hacienda Resort
Hotel and Casino and the Sahara Hotel and Casino in September and October, 1995,
respectively. Additionally, in fiscal year 1998 Mr. Lowden was entitled to a fee
(the "Personal Guarantee Fee") from the Company of $100,000 for personal
guarantees issued by Mr. Lowden for certain Company financing arrangements. In
January 1998, the Fiscal Year 1998 Bonus and the Personal Guarantee Fee were
satisfied through an offset against a loan owed by LICO, a Nevada corporation
wholly owned by Mr. Lowden, to the Company which had an outstanding balance of
approximately $700,000 at the date of satisfaction. In December 1998, at the
request of Mr. Lowden, the Company's payment of $350,000 of bonus and fee
obligations satisfied through the offset of the LICO loan was rescinded, and
LICO's obligation to pay to the Company $350,000, together with interest on the
obligation from
13
<PAGE>
January 1998, was reinstated. In February 1999, the Company satisfied its
obligation to pay the remaining $350,000 to Mr. Lowden by the February 1999
offset of the outstanding $350,000 obligation of LICO to the Company. In
December 1999, at the request of Mr. Lowden, the Company's payment of $175,000
of bonus and fee obligations satisfied through the offset of the LICO loan was
rescinded, and LICO's obligation to pay to the Company $175,000, together with
interest on the obligation from January 1993, was reinstated. The Company
satisfied its obligation to pay the remaining $175,000 to Mr. Lowden by the
offset of the outstanding $175,000 obligation of LICO to the Company in
January 2000.
In January 2000, the Company paid $50,000 each to Messrs. Paul W. Lowden,
Christopher W. Lowden and David G. Lowden in consideration for each of them
individually having entered into a fifteen year non-compete agreement in
November 1999 in connection with the sale of the Company's real property in
Henderson, Nevada and other agreements.
EMPLOYMENT AGREEMENT WITH MR. LAND. The Company and Thomas K. Land are
parties to an employment agreement dated as of September 30, 1999, which has a
term of one year, subject to earlier termination in accordance with its terms
and to automatic renewal if the Company does not provide to Mr. Land a notice
that it intends not to renew the agreement. Pursuant to the agreement, Mr. Land
is entitled to receive a minimum annual base salary of $185,000. The agreement
also provides that Mr. Land may participate in any employee benefit plans,
including bonus plans, of the Company. Upon the occurrence of certain events,
including the transfer of substantially all of the assets of the Company or of
Santa Fe Hotel Inc. or the failure by Mr. Paul W. Lowden to own at least 50% of
the outstanding common stock, the agreement will terminate and Mr. Land will be
entitled to receive a lump sum payment in an amount equal to one-half of his
annual base salary plus other benefits that would have been otherwise payable
under the employment agreement.
Pursuant to Mr. Land's employment agreement in effect prior to October 1,
1999, as a result of certain events related to the Company's subsidiary, Pioneer
Finance Corp., and its 13 1/2% First Mortgage Bonds due December 1, 1998,
Mr. Land received a payment of $92,500 in January 2000.
STOCK OPTION PLAN
The Company's 1993 Key Employee Stock Option plan provides for the grant of
options with respect to an aggregate of 619,375 shares of the common stock to
key employees as determined by the compensation committee. No stock options were
awarded to, and no stock options were exercised by, the Named Executive Officers
in the fiscal year ended September 30, 1999. As of September 30, 1999, there
were 584,535 options outstanding.
1998 SUBSIDIARY STOCK OPTION PLANS
The Company and certain of its subsidiaries, Santa Fe Hotel Inc., Sahara Las
Vegas Corp., and Pioneer Hotel Inc. have adopted various subsidiary stock option
plans. The subsidiary plans provide for the grant of options by each of these
subsidiaries with respect to an aggregate of up to 10% of the outstanding shares
of the 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 other
subsidiaries of the Company to attract, retain and motivate their employees,
non-employee directors, consultants and affiliates by providing for or
increasing the proprietary interest of those 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 September 30, 1999, no
options had been granted under any Subsidiary Plans.
14
<PAGE>
SAVINGS PLAN
The Company has adopted a savings plan qualified under Section 401(k) of the
Internal Revenue Code. 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 pre-tax basis, up to 6% of their gross salary to the plan. The
Company matches 25% of the employee contributions made. Employees may also
contribute, on a pre-tax 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
1999 was $113,000 of which $2,164, $1,722, and $5,747 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.
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 concerning matters of executive compensation. This
report is provided by the compensation committee of the Board to assist
stockholders in understanding the objectives and procedures in establishing the
compensation of the Company's chief executive officer and other executive
officers.
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
base salary and annual bonus with the Company's annual and long-term goals,
reward exceptional performance, recognize individual initiative and
achievements, and assist the Company in attracting and retaining qualified
executives The compensation committee believes that in order to align the
financial interest of the Company's executives with that of its stockholders, a
portion of its executives' compensation should be tied to the achievement of
long-term performance criteria. 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. The Company
has granted stock options in the past to certain executives to similarly align
their performance with Company strategies. The Company also maintains certain
executive benefits that are considered necessary to offer fully competitive
opportunities to its executives. A description of these programs are included
under the Executive Compensation section of this proxy statement.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation committee established Mr. Lowden's annual base salary and
annual incentive based upon a review of compensation of similar casino and
gaming companies together with an evaluation of the Company's results for fiscal
year 1998. Mr. Lowden's base salary and annual bonus were not increased in
fiscal year 1999.
In evaluating the performance of Mr. Lowden, the compensation committee has
considered performance measures that support Company strategies. The Company's
strategy has focused on reducing its investment in real estate on the Las Vegas
Strip, strengthening its balance sheet and positioning itself for improved
operations.
During fiscal year 1999, under the direction of Mr. Lowden, the Company's
revenues grew 11.3% to $125.6 million from $112.8 million in fiscal year 1998
and cash flow generated from operations increased 14.2% in fiscal year 1999 to
$30.9 million, compared to $27.1 million in fiscal year 1998. This improvement
occurred despite operating difficulties caused by the ongoing intensive
competitive environment in the Laughlin market and in the locals market in Las
Vegas, Nevada. Furthermore, the compensation committee acknowledges
Mr. Lowden's continuing contributions to the Company's efforts with respect to
debt
15
<PAGE>
reduction and restructuring. Based on these considerations the compensation
committee approved Mr. Lowden's compensation package for fiscal year 1999.
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
16
<PAGE>
PERFORMANCE GRAPH
The graph below provides a comparison of the cumulative total stockholder
return of the Company with the Standard & Poor's 500 Composite Stock Index and
the Dow Jones Casino Index. This graph assumes the investment of $100 on
September 30, 1994 in the Company and the two indices 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SANTA FE S & P 500 DOW JONES
GAMING CASINOS
CORPORATION
<S> <C> <C> <C>
9/94 $100.00 $100.00 $100.00
9/95 $64.44 $129.74 $143.78
9/96 $34.44 $156.13 $161.42
9/97 $16.67 $219.28 $165.02
9/98 $11.11 $239.12 $86.26
9/99 $13.33 $305.61 $136.11
</TABLE>
*$100 INVESTED ON 9/30/94 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The following is a description of certain transactions during fiscal year
1999 in which officers and directors of the Company and its affiliates or
families had a direct or indirect interest
In January 1998, the loans to LICO were satisfied through an offset against
Mr. Lowden's Fiscal Year 1993 Bonus and the Personal Guarantee Fee. In
December 1998, at the request of Mr. Lowden, the Company's payment of $350,000
of bonus and fee obligations satisfied through the offset of the LICO loan was
rescinded, and LICO's obligation to pay to the Company $350,000, together with
interest on the obligation from January 1998, was reinstated. In February 1999,
the Company satisfied its obligation to pay the remaining $350,000 to
Mr. Lowden by the February 1999 offset of the outstanding $350,000 obligation of
LICO to the Company. In December 1999, at the request of Mr. Lowden, the
Company's payment of $175,000 of bonus and fee obligations satisfied through the
offset of the LICO loan was rescinded, and LICO's obligation to pay to the
Company $175,000, together with interest on the obligation from January 1993,
was reinstated. The Company satisfied its obligation to pay the remaining
$175,000 to Mr. Lowden by the offset of the outstanding $175,000 obligation of
LICO to the Company in January 2000.
17
<PAGE>
ANNUAL REPORT
We have mailed our annual report for fiscal year 1999, including our annual
report on Form 10-K for fiscal year 1999, without exhibits, to stockholders of
record at the close of business on March 24, 2000 The annual report on
Form 10-K included in the annual report to shareholders does not include the
Form 10K/A filed in January 2000, which was filed for the purpose of including
certain of the information included in this Proxy Statement under "Directors and
Officers", "Beneficial Ownership of Shares" and "Executive Compensation". We
will provide a copy of our annual report on Form 10-K, including exhibits, upon
the written request of any beneficial owner of our common or preferred stock as
of the record date for the annual meeting and upon reimbursement of our
reasonable expenses. Any request should be addressed to Chief Financial Officer,
Santa Fe Gaming Corporation, 4949 North Rancho Drive, Las Vegas, Nevada 89130.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any eligible stockholder (as defined below) of the Company wishing to have a
proposal considered for inclusion in the Company's proxy solicitation material
for the 2001 annual meeting must set forth such proposal in writing and file it
with the Secretary of the Company on or before December 9, 2000. 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 proxy
solicitation materials for the 2001 annual meeting. 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 2001 annual meeting is held.
SOLICITATION OF PROXIES
The Company will bear the cost of this solicitation. 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 to the other business according to their discretion
insofar as such proxies are not limited to the contrary.
By Order of the Board of Directors
/s/ THOMAS K. LAND
Thomas K. Land
SECRETARY
April 8, 2000
18
<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 1,239,070, 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 400,000.
19
<PAGE>
COMMON STOCK PROXY
SANTA FE GAMING CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2000
COMMON STOCK PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SANTA FE GAMING CORPORATION
The undersigned hereby appoints Paul W. Lowden and Thomas K. Land, and
each of them, as proxies, with full power of substitution to vote any and all
shares of common stock, $.0l par value, of Santa Fe Gaming Corporation (the
"Company") which the undersigned is entitled to vote at the annual meeting of
stockholders of the Company to be held at 10:00 a.m. Pacific Time on Monday,
May 8, 2000 at the Pioneer Hotel and Gambling Hall, 2200 Casino Drive,
Laughlin, Nevada, or any adjournment or postponement thereof, as specified on
the reverse side of this proxy card. Holders of common stock of record as of
March 24, 2000 will be entitled to vote with respect to matters presented to
holders of common stock at this annual meeting.
(PLEASE SIGN AND DATE THE PROXY ON THE REVERSE SIDE)
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<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD
AUTHORITY
FOR TO VOTE FOR
1. ELECTION OF DIRECTORS / / / /
NOMINEES: SUZANNE LOWDEN
JOHN W. DELANEY
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
- --------------------------------------------------------
2. APPROVAL OF AMENDMENT TO 1993 STOCK INCENTIVE PLAN TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
UNDER THE PLAN.
FOR ABSTAIN AGAINST
/ / / / / /
3. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS,
DELOITTE & TOUCHE L.L.P.
FOR ABSTAIN AGAINST
/ / / / / /
IF THE INSTRUCTIONS DON'T PROVIDE OTHERWISE, SHARES OF COMMON STOCK
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Date: , 2000
- ------------------------- -------------------------- -----------
Signature (title, if any) 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.
<PAGE>
PREFERRED STOCK PROXY
SANTA FE GAMING CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2000
PREFERRED STOCK PROXY SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF SANTA FE GAMING CORPORATION
The undersigned hereby appoints Paul W. Lowden and Thomas K. Land, and
each of them, as proxies, with full power of substitution to vote any and all
shares of Exchangeable Redeemable Preferred Stock, $.01 par value), of Santa
Fe Gaming Corporation (the "Company") which the undersigned is entitled to
vote at the annual meeting of stockholders of the Company to be held at 10:00
a.m. Pacific Time on Monday, May 8, 2000 at Pioneer Hotel and Gambling Hall,
2200 Casino Drive, Laughlin, Nevada, or any adjournment or postponement
thereof, as specified on the reverse side of this proxy card. Holders of
preferred stock of record as of March 24, 2000 will be entitled to vote with
respect to matters presented to holders of preferred stock at this annual
meeting.
(PLEASE SIGN AND DATE THE PROXY ON THE REVERSE SIDE)
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<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD
AUTHORITY
FOR TO VOTE FOR
1. ELECTION OF DIRECTORS / / / /
NOMINEES:
Howard E. Foster
David H. Lesser
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
- --------------------------------------------------------
IF THE INSTRUCTIONS DON'T PROVIDE OTHERWISE, SHARES OF PREFERRED STOCK
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED IN
PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- ------------------------- ---------------------------- Date:________,2000
Signature (title, if any) 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.
