INTERACTIVE ENTERTAINMENT LIMITED
Cedar House, 41 Cedar Street
Hamilton, HM12, Bermuda
August 30, 2000
To Our Shareholders:
You are cordially invited to attend the 2000 Annual General Meeting of
Shareholders of Interactive Entertainment Limited, a Bermuda exempted
company (the "Company"), which will be held at 10:00 a.m., Eastern Daylight
Time, on September 18, 2000, at 41 Cedar House, Hamilton, HM 12, Bermuda. (the
"Annual General Meeting").
At the Annual General Meeting, Shareholders will vote to: (i) change the name
of the Company to "Creator Capital Limited"; (ii) increase the Company's
authorized shares to 100,030,000 and its authorized share capital to
US$1,000,030.00, (iii) give the Board of Directors the discretion to effect
a consolidation of the Company's authorized share capital and outstanding
shares by up to 10 to 1 (which would decrease the authorized shares and
authorized share capital by the selected ratio), and, also in its discretion,
subsequently to increase the Company's authorized shares to 100,030,000 and
its authorized share capital to US$10,050,030.00; (iv) elect six persons
to the Board of Directors; (v) re-appoint Buckley Dodds as the Company's
auditor; (vi) receive and consider the report of the directors to the
shareholders and the financial statements of the Company, together with the
auditor's report thereon for the financial year ended December 31, 1999; and
(vii) transact such other business as may properly come before the Annual
General Meeting. Further information concerning the meeting and the nominees
for director can be found in the accompanying Notice and Proxy Statement.
I hope that you can attend the Annual General Meeting and assist the Board of
Directors by voting for the change of Company name; the increase of authorized
share capital; discretion to the Board to consolidate the Company's share
capital and thereafter increase the authorized share capital; the election
of directors; and the ratification of the appointment of the auditors. Whether
or not you plan to attend the Annual General Meeting, please be sure to date,
sign and return the proxy card in the enclosed, postage-paid envelope as
promptly as possible so that your shares may be represented at the meeting
and voted in accordance with your wishes. If you attend the meeting, you may
vote in person, even if you have previously submitted a proxy card.
Sincerely,
"Deborah Fortescue-Merrin"
Deborah Fortescue-Merrin
Chairman of the Board
INTERACTIVE ENTERTAINMENT LIMITED
Cedar House, 41 Cedar House
Hamilton HM 12, Bermuda
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON September 18, 2000
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Shareholders
("Annual General Meeting") of INTERACTIVE ENTERTAINMENT LIMITED, a Bermuda
exempted company (the "Company"), will be held at Cedar House, 41 Cedar
Street, Hamilton HM 12, Bermuda, on September 18, 2000, at 10:00 a.m.,
Eastern Daylight Time, for the following purposes:
1. To change the name of the Company to "Creator Capital Limited."
2. To increase the authorized share capital of the Company to
US$1,000,030.00, consisting of 100,000,000 common shares (par value US$0.01),
and 5,003,000 preference shares (par value US$0.01)
3. To grant discretion to the Board, to effect a consolidation of the
Company's common shares by up to 10 to 1, and thereafter to reduce the
authorized capital of the Company by decreasing the par value of the
Company's Common Stock from a maximum of $.10 per share to $.001 per share,
and thereafter to increase the authorized shares of the Company's Common
Stock to 100,000,000 common shares (par value US$0.001), and 5,003,000
preference shares (par value US$0.01).
4. To elect six persons to the Board of Directors;
5. To re-appoint Buckley Dodds as the Company's auditors;
6. To receive and consider the report of the directors to the shareholders
and the financial statements of the Company together with the auditor's
report thereon for the financial year ended December 31, 1999, and
7. To transact such other business as may properly come before the Annual
General Meeting.
This Notice and Proxy Statement and the enclosed form of proxy are being sent
only to shareholders of record and beneficial owners of whom the Company is
aware as of July 30, 2000. However, all shareholders of record on the date
of the meeting, are entitled to attend and to vote at the Annual General
Meeting. The Company's Form 10-K Annual Report for the year ended December
31, 1999, including audited financial statements, is included with this
mailing of the Proxy Statement and this Notice.
We hope you will be represented at the Annual General Meeting by signing,
dating and returning the enclosed proxy card in the accompanying envelope as
promptly as possible, whether or not you expect to be present in person.
Your vote is important -- as is the vote of every shareholder -- and the Board
appreciates the cooperation of shareholders in directing proxies to vote at the
meeting.
Your proxy may be revoked at any time by following the procedures set forth
in the accompanying Proxy Statement, and the giving of your proxy will not
affect your right to vote in person if you attend the Annual General Meeting.
By Order of the Board of Directors
Deborah Fortescue-Merrin
Chairman of the Board
DATED: August 30, 2000
INTERACTIVE ENTERTAINMENT LIMITED
Cedar House, 41 Cedar House
Hamilton HM12, Bermuda
PROXY STATEMENT
For the Annual General Meeting of Shareholders
September 18, 2000
This proxy statement is being furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of INTERACTIVE ENTERTAINMENT
LIMITED, a Bermuda exempted company ("the Company" or "IEL"), for use at the
Annual General Meeting of the Company to be held at Hamilton, Bermuda, on
September 18, 2000, at 10:00 a.m., Eastern Daylight Time, and at any
adjournments or postponements thereof (the "Annual General Meeting"). Unless
the context otherwise requires, references to the Company include IEL and its
subsidiaries. The proxy is revocable by (i) filing a written revocation with
the Secretary of the Company prior to the voting of such proxy, (ii) giving a
later dated proxy, or (iii) attending the Annual General Meeting and voting
in person. Shares represented by all properly executed proxies received
prior to the Annual General Meeting will be voted at the meeting in the
manner specified by the holders thereof. Proxies that do not contain voting
instructions will be voted (i) FOR the change of the name of the Company;
(ii) FOR the increase in authorized share capital described herein; (iii)
FOR the grant of discretion to the Board of Directors to effect a
consolidation of the Company's common shares, a subsequent reduction of the
par value of the Company's Common Stock and share capital, and a subsequent
increase in the authorized shares of Common Stock as described herein; (iv)
FOR the election of the nominees approved by the Board; (v) FOR the
re-appointment of Buckley Dodds as the Company's auditors; and (vi) if any
other matters properly come before the Annual General Meeting, in accordance
with the best judgment of persons designated as proxies.
The Board has established July 30, 2000, as the date used to determine those
record holders and beneficial owners of Common Stock to whom notice of the
Annual General Meeting will be sent (the "Record Date"). On the Record
Date, there were 50,000,000 shares of common stock, par value US$.01 per
share (the "Common Stock"), outstanding. The holders of the Common Stock
are entitled to one vote for each share of Common Stock held. All matters
presented at the Annual General Meeting require approval by a simple majority
of votes cast at the meeting. However, Proposals 2 and 3 (regarding the
Authorized Capital increase and the Share Consolidation) are special
resolutions requiring the vote of at least three-quarters of the votes cast
at the meeting. The presence, in person or by proxy, at the Annual General
Meeting of at least two shareholders entitled to vote is necessary to
constitute a quorum at the Annual General Meeting. This Notice, Proxy
Statement and enclosed form of proxy are first being mailed on or about
September 8, 2000.
PROPOSAL 1
CHANGE OF CORPORATE NAME
On July 20, 2000, the Board approved as a special resolution for shareholder
approval at the Annual Meeting of Shareholders, a change of the Company's
name from Interactive Entertainment Limited ("IEL"), to Creator Capital
Limited ("CCL"). It has become very apparent to management, through feedback
from Airline Industry sources, that the current perception of IEL in the
marketplace is not positive and thereby possibly hindering future growth. The
past history of IEL, its image and perception of failure, has become a
difficult obstacle to continually explain and overcome. It has been agreed
that a corporate makeover, including a name change will serve to allow IEL to
create a new and different image in the airline industry marketplace This
would erase any lingering misconceptions and perceptions, which are still
hampering the company's core business.
The proposed name "Creator Capital Limited" is similar to the original name of
IEL before being changed to Sky Games International Ltd., and then Interactive
Entertainment Ltd. Management is of the opinion that this name is more
appropriate in light of the fact that projects outside the scope of the
current core business are being reviewed for possible acquisition. The
reference to the "Creation of Capital" in the name lends itself to a company in
pursuit of businesses and/or technologies, which will, hopefully, provide
significant future revenues to the Company.
MANAGEMENT STRONGLY RECOMMENDS THE APPROVAL OF PROPOSAL 1 TO CHANGE THE NAME OF
THE COMPANY.
PROPOSAL 2
INCREASE IN AUTHORIZED SHARES
On July 20 2000, the Board approved a special resolution for approval by the
shareholders at the Annual Meeting of Shareholders. The special resolution
provides for the following: an increase in the share capital of the Company
from US$550,030, (consisting of 50,000,000 shares of common stock , US$0.01
par value each ["Common Stock"] and 5,003,000 shares of preference shares,
par value US$0.01 each ["Preference Shares"]), to US$1,250,030.00,
(consisting of 100,000,000 shares of Common Stock and 5,003,000 shares of
Preference Shares).
The Board believes that it is in the Company's best interest for the
Shareholders to approve this proposal, permitting the Company to authorize
additional Common Stock. The effect of the increase of authorized shares
would be to permit the Company to issue a maximum of an additional
50,000,000 shares of Common Stock. The Company is currently authorized to
issue 50,000,000 shares of Common Stock, all of which shares are already
outstanding. The Company has received conversion notices from holders of
its Class B Series A Preference Shares, and Class B Series B Preference
Shares to convert their preference shares into 39,944,188 common shares;
the Company has also received an indication of interest in conversion from
holders of Class B Series B Preference Shares to convert their shares into
480,000 common shares, for a total of 40,424,186 common shares ("the
"Unconverted Preference Shares"). The Company has not been able to honour
its conversion obligations due to the lack of authourized shares. Also, the
Company has currently outstanding options and would like to grant additional
options as incentives to key employees. If any outstanding options were to
be exercised, the Company would not be able to honour those obligations.
Advantages of Increasing the Authorized Share Capital:
The increase of the authorized shares would allow issuance of the Unconverted
Preference Shares. The Company's inability to issue Common Stock for the
Unconverted Preference Shares violates provisions of the agreements with
holders of the Preference Shares and could lead to litigation, and the right
of holders of Preference Shares to be refunded their initial investments in
the Company, plus interest. The Company's inability to issue Common Stock to
honour conversion notices from holders of the Class B Preference Shares gives
those holders the right to have their Preference Shares redeemed at 130% of
their issue price.
The increase in the authorized share capital would also permit the Company
to issue shares upon exercise of options. Management believes that it is
important that key employees have a strong incentive to help the Company
achieve its goals, and that the best way to accomplish this is through
compensation packages that include options. Management also believes it
would be difficult to attract or retain qualified personnel if options are
not available.
Disadvantages of Conversion of Preference Shares:
Conversion of the Preference Shares may have an adverse effect on the price of
the Company's Common Stock, or could result in substantial dilution to the
interests of the Common Stock holders because of the terms of conversion.
Specifically:
? The Class A Preference Shares are convertible at a discount from the market
price of the Common Stock as of the time of conversion. As a result, the lower
the average closing price for Common Stock at the time of conversion, the more
shares of Common Stock a holder of Class A Preference Shares will receive, and
the greater the risk of dilution to the holders of Common Stock. (The
conversion prices of all other Preference Shares have been established by
notice of conversion or by agreement.)
? To the extent Common Stock received upon conversion is sold, the price of
Common Stock may decrease due to the additional shares in the market. This
could allow a holder of Class A Preference Shares to convert the those shares
into even larger amounts of Common Stock, the sales of which would further
depress the price of the Common Stock.
? A perceived risk of dilution may cause shareholders, including the converted
Preference Shares holders, to sell their shares of Common Stock, which would
also contribute to the downward movement of the stock price of the Company's
Common Stock.
? Significant downward pressure on the trading price of the Company's Common
Stock could encourage the holders of Preference Shares and other shareholders
to engage in short sales, which would further contribute to the spiraling
stock price decline of the Company's Common Stock.
? The Class A Preference Shares do not have minimum conversion prices. This
means that, should the price of the Common Stock decline, there is no limit
to the number of shares of Common Stock that are issuable on conversion of
the Class A Preference Shares. It is possible that if the market price of
the Common Stock were to fall to near zero, even with an increase in the
authorized capital, there could be insufficient common shares authorized to
cover issuances related to the conversion rights of the Class A Preference
Shares.
? The proposed increase of authorized shares will not create sufficient shares
to honour a conversion notice from the holders of Class A Preference Shares,
assuming a conversion price based on a Common Stock price of approximately
$.40 or less.
Information regarding the Class A Preference Shares:
? As of June 30, 2000, 2,237 Class A Preference Shares were outstanding.
? No notice of conversion has been given with respect to the Class A
Preference Shares, nor has the Company received any indication that the holder
intends to convert.
? The Class A Preference Shares were issued in June, 1997 in exchange for a
promissory note due to B/E Aerospace ("BEA").
? The Class A Preference Shares are convertible at any time into a number of
shares of Common Stock, determined by dividing $1,000 per share of Class A
Preference Shares by a conversion price equal to 60% (after August 31, 1999)
of the average mean of the closing bid and ask prices of the Common Stock for
the 20 trading days prior to the conversion. At June 30, 2000, the 2,237
Class A Preference Shares would have been convertible at US$0.1939 into
11,536,874 Common shares. Please see the table below.
? The actual number of shares of Common Stock issuable upon conversion may be
higher or lower depending upon the market price of the Common Stock for the 20
days prior to conversion and is inversely proportional to the market price of
the Company's Common Stock for such period. That is, if the average share
price decreases, the number of shares of Common Stock issuable increases.
In addition BEA has the right to require the Company to issue additional
shares of Common Stock in the event the value of any conversions and any
related resales do not satisfy the original promissory note to BEA. Please
see the table below.
? Harrah's Interactive Investment Company, a Nevada Corporation ("HIIC"),
a shareholder of the Company, has a right to receive shares of Common Stock
upon the conversion of the Class A Preference Shares, based upon the number
of shares of Common Stock into which the Class A Preference Shares are
converted. If the Class A Preference Shares had been converted at June 30,
2000, HIIC would have received 922,473 shares of Common Stock. The shares
that HIIC would receive have been included in the Class A Preference Share
calculations in all tables.
? The Company is negotiating with BEA, the sole Class A holder, to amend the
conversion terms in such a manner to reduce the potential dilution to
shareholders of Common Stock.
The following table, provided for illustration purposes only, illustrates the
number of shares of Common Stock the Company would be required to issue
assuming full conversion of outstanding Class A Preference Shares at the
prices set forth in the table below.
Common Stock Issuable Upon Conversion of Class A Preference Shares at Various
Market Prices*
Common
Stock Price
At
June 30
$0.25
$0.50
$1.00
$2.00
$3.00
$4.00
Common
Shares
Issuable*
12,459,347
16,105,783
8,052,892
4,026,446
2,013,223
1,342,149
1,006,611
*Includes shares issuable to HIIC
Information regarding the Class B Series A Preference Shares:
? As of June 30, 2000, there were 2,075 Class B Series A Preference Shares
outstanding.
? As of March 31, 2000, a total of 1,955 Class B Series A Preference Shares had
been submitted for conversion into a total of 26,588,235 Common Shares.
? The remaining 120 Class B Series A Preference Shares are subject to an
agreement between the Company and two holders of the Class B Series A
Preference Shares which provides that the Floating Conversion Price shall be
fixed at US$0.25 per share, and therefore convertible into 480,000 common
shares. These shares have not been submitted for conversion, although the
Company has received indication that these shares will be converted if
Proposal 2 is approved. These shares have been included in the Class B Series
A Preference Share calculations in all tables.
Information regarding the Class B Series B Preference Shares:
? As of March 31, 2000, there were 262 Class B Series B Preference Shares
outstanding, all of which have been submitted for conversion into 9,863,529
shares of Common Stock.
Summary of Share Information
The following table summarizes:
? The numbers of authorized, issued and outstanding Common Shares and
Preference Shares, on both a pre and post authorized share increase basis
? The number of outstanding Common Shares, after conversion of Unconverted
Preference Shares, and assuming conversion of the Class B Series B shares as
to which the Company has received indication (but not formal notice) of
intent to convert
Type of Security
Shares
Currently
Authorized
Shares Authorized
(following Increase
in Authorized
Shares)
Shares Currently
Issued and
Outstanding
Common Stock
Issued Upon
Conversions and
Option/Warrant
Exercise
Shares Issued and
Outstanding following
Increase in Shares and
Conversions*
Common Shares
Options
Warrants
Preferred Shares
50,000,000
100,000,000
50,000,000
3,465,340
80,000
90,424,188
Class A
Class B
Series A
Series B
TOTALS
3,000
5,000,000
55,003,000
3,000
5,000,000
3,000
300
105,003,000
2,237
1,813
262
30,560,659
9,863,527
43,969,526
2,237
0
0
90,424,188
* Includes only Preference Shares for which notices to convert or intent to
give notice to convert have been received
Anti-Takeover Effects of Authorized Share Increase:
As a result of an increase in the authorized shares of the Company, there will
be an increase in the number of authorized shares that are unissued and
available for future issuance (the "Available Shares"). The Board of
Directors could issue the Available Shares for any proper corporate purpose,
including, among others, future financing transactions, without shareholder
approval. The increase in the authorized shares of the Company and the
creation of Available Shares may be construed as having an anti-takeover
effect. Although neither the Board nor management of the Company views the
increase of the authorized shares as an anti-takeover measure, the
Company could use the Available Shares to frustrate persons seeking to
effect a takeover or otherwise gain control of the Company by making it more
difficult, or discourage to varying degrees and in various circumstances, a
merger, tender offer, proxy contest or acquisition of control of a large
block of the Company's Common Stock without prior approval of the Board.
This proposal has not been made as the result of management's knowledge of any
specific effort to accumulate the Company's securities or to obtain control of
the Company by means of a merger, tender offer, or other transaction. This
proposal is not part of a plan by management to adopt a series of anti
-takeover measures. This proposal will have no effect on management's
tenure nor does it provide any particular benefit to management.
MANAGEMENT STRONGLY RECOMMENDS THE APPROVAL OF PROPOSAL 2 TO INCREASE THE
AUTHORIZED SHARE CAPITAL OF THE COMPANY
PROPOSAL 3
CONSOLIDATION OF SHARE CAPITAL, SUBSEQUENT REDUCTION OF SHARE CAPITAL
AND INCREASE OF AUTHORIZED SHARES
On July 20, 2000, the Board approved a special resolution for shareholder
approval at the Annual Meeting of Shareholders. The special resolution
provides for the grant of discretion to the Board to effect a consolidation
of the Company's Common Stock by up to 10 to 1 (the "Consolidation"), and
the discretion to thereafter reduce the share capital by a reduction in the
par value of the Common Stock (from a maximum of $.10 post-consolidation per
share value to $.001 per share value) and the discretion thereafter to
increase the authorized Common Stock of the Company to 100,000,000 Common
Shares, par value US$ 0.001 each.
The Consolidation
Whether or not Proposal 2 is adopted, management believes that the Company may
need a significant portion of its authorized but unissued share capital to
obtain an infusion of new capital in order to finance acquisitions or
significant projects. The Board needs the discretion and flexibility to
decide what percentage of the Company should be issued in connection with a
capital infusion or acquisition transaction.
If the Company simply increased its authorized share capital (as in Proposal 2),
it would incur significant increased costs to maintain its charter under Bermuda
law. To avoid the imposition of these increased costs and still create
sufficient authorized but unissued share capital, the Company's authorized
shares would be consolidated, which would have the same effect as a reverse
stock split, but would also (under Bermuda law) decrease the authorized
share capital of the Company. The Board would thereafter reduce the
authorized share capital of the Company by reducing the par value of the
Common Stock, and then increase the authorized shares of Common Stock in order
to have authorized but unissued shares available for the transaction then
pending. The Board would determine the size of the consolidation at the
time a transaction presented itself, taking into account the type of acquisition
to be made, and its funding requirements.
The Reduction in Par Value and the Increase in Share Capital
After determining the size of the consolidation necessary to effect a proposed
transaction, the Board would then have the discretion to reduce the par value
of the Common Stock and increase the newly-consolidated authorized shares
to a maximum of 100,030,000 shares. The increase in share capital would
provide the Company with flexibility in funding future capital needs by
making additional Common Stock available. The consolidation will increase the
par value of the Common Stock inversely to the proportion of the consolidation.
Assuming the maximum consolidation of 10 to 1, the par value would be increased
by a factor of 10, to $.10. In order to reduce the authorized share capital
so as to minimize corporate charter fees, the Board would then have the
discretion to reduce the par value of the Common Stock to $.001 per share.
The consolidation and share increase would make shares available for potential
investors in the Company without the burden and expense of a special meeting of
shareholders or having to wait for the next Annual Meeting of Shareholders.
The reduction in par value would mean that the consolidation and share
increase would not result in higher corporate maintenance costs for the
Company. The size of the par value reduction and share increase would be
determined by the Board in conjunction with the size of the consolidation,
at the time a transaction presented itself, taking into account the type of
acquisition to be made, and its funding requirements. If the stockholders at
the Annual General Meeting approve the consolidation, reduction in par value
and share Increase, then both the consolidation, par value reduction and
share Increase would become effective on a date or dates (the "Effective
Date(s)") selected by the Board, at its discretion. This discretion would
be exercised upon the embarkation of a new project, the infusion of new
capital or the completion of an acquisition which would require a financing
on or prior to the Company's next Annual General Meeting of Stockholders.
Treatment of Outstanding Shares after a Consolidation; Consolidation Procedures
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), would be reclassified as
and changed into a fraction of a share of the Company's Common Stock, par
value up to a maximum of US$.10 per share (the "New Common Stock"), with the
fraction determined by the Board at the time of the consolidation. For
example if the Board authorizes a consolidation from ten (10) to one (1),
then a share of the New Common Stock will be one-tenth of a share of the
Old Common Stock. Fractional shares of New Common Stock will not be issued.
Instead, all fractional shares will be canceled, and the Company will pay all
affected shareholders an amount of cash equal to the last sale price of the
shares on the trading day immediately before the Effective Date, as reported
on the NASD OTC Bulletin Board system (or other market on which the
Common Stock is then trading). If the Common Stock does not trade on such
day, the price shall be the average of the bid and ask price for the Common
Stock at such time. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock. These forms will
be used to forward certificates formerly representing shares of Old Common
Stock for surrender. These surrendered certificates would then be exchanged
for certificates representing whole shares of New Common Stock and cash in
lieu of any fractional shares.
PLEASE DO NOT SUBMIT ANY CERTIFICATES UNLESS AND UNTIL REQUESTED TO DO SO.
Tax Treatment
Consummation of the consolidation, par value reduction and share increase will
not have any significant federal tax consequences to stockholders. The
transaction should be treated as a reorganization under Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended, and the applicable Treasury
Regulations, judicial authority and current administrative rulings and
practices in effect on the date of this Proxy Statement. However, where the
Company purchases fractional shares of shareholders, that transaction will
have federal income tax consequences associated with the purchase and sale
of stock by an issuer.
Advantages of the Consolidation, Par Value Reduction and Share Increase
1. Increased Ability to Raise Capital and/or Make Acquisitions. The net effect
of Proposal 3 would be to reduce the percentage of ownership of the
shareholders of the Company in connection with the infusion of new capital or
the acquisition of a new project. (Shareholders might also be "cashed out"
of up to nine (9) shares as a result of fractional shares not being issued.
See the discussion below.) The Company believes that such transactions would
increase the marketability and liquidity of the Common Shares and allow the
Company to embark upon an investor relations programme with the goal of
relisting the Common Shares on the NASDAQ SmallCap Market. There can be no
assurance, however, that the marketability or liquidity of the Common Stock
would be increased or that the Common Shares will be eligible for relisting.
2. Potential for Relisting on the NASDAQ SmallCap Market. The minimum share
price for listing on the NASDAQ SmallCap Market is US$4.00 per share. To
maintain that listing, a company's shares must maintain a listing price of
at least $1.00 per share. The Company's Common Stock is currently listed
for trading on the NASD OTC Bulletin Board system under the symbol IELSF.
During the month of June 2000, the Company's stock traded from a low of
US$0.10 per share to a high of US$0.25 per share. On June 30, 2000, the
reported closing price of the Common Stock was US$0.188 per share. The
Board believes that a decrease in the number of shares of Common Stock
outstanding, without any material alteration of the proportionate economic
interest in the Company represented by individual shareholdings, or an
increase in the capital of the Company without an increase in the number of
shares outstanding, may assist to increase the trading price of the Company's
shares to US$4.00 per share. However, even if the consolidation and share
increase are consummated, no assurance can be given that the market price of
the Common Stock will rise in proportion to the number of outstanding shares
resulting from any consolidation, capital infusion or acquisition, or that
the market price would not thereafter subsequently decline to less than the
maintenance listing price of US$1.00 per share.
3. An Increase in the Company's Stock Price Would Increase Marketability of the
Stock. The Board believes that an increased price per share of the Common Stock
may increase the following of the stock among members of the investment
community, including those persons who may have an interest in making new
investments in the Company's common stock. This may improve the Company's
ability to raise capital, particularly from private investors. The Board
also believes that the current low per share price of the Common Stock limits
the effective marketability of the Common Stock. This is due to the
reluctance of many brokerage, financial and institutional investors to
recommend lower-priced stocks to their clients or to hold them in their own
portfolios. Certain policies and practices of the securities industry may
tend to discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices involve time-
consuming procedures that make the handling of lower-priced stocks
economically unattractive. Please see the discussion below with respect to
the "Penny-Stock" rules.
4. If Proposal 2 is Not Approved by the Shareholders, the Availability of
Authorized but UnIssued Stock May Result in the Issuance of Common Shares
Upon Conversion of Preference Shares. Please refer to Proposal 2 for a
discussion of the advantages of providing additional authorized shares
for Preference Share holders. PROPOSALS 2 AND 3 ARE INDEPENDENT OF ONE
ANOTHER. PLEASE REFER TO THE DISCUSSION BELOW WITH RESPECT TO THE
CONSEQUENCES IF ONLY ONE OR THE OTHER OR BOTH ARE APPROVED BY THE
SHAREHOLDERS.
Disadvantages of the Consolidation, Par Value Reduction and Share Increase
1. No Fractional Shares Will Be Issued. If the Board decides to effect a
consolidation of the Company's authorized share capital, each shareholder's
common shares could be reduced by up to nine (9) shares. (Since the most
the Board would have the discretion to consolidate the shares is from ten
(10) to one (1), the highest number of shares that would be "left over" and
therefore cashed out, would be nine (9). If the Board consolidated the shares
from five to one, the highest number of shares that would be "left over" would
be four (4).) Shareholders that own nine (9) or fewer shares of the Company's
common stock (depending upon the consolidation ratio) could be cashed out
completely, at a price substantially less than what was originally paid for
such shares. The Company does not believe that any shareholders would be
cashed out completely, or would suffer a significant reduction in their
percentage ownership as a result of a consolidation, even at the maximum of
10 to 1. The Company does not believe that the number of shareholders of the
Company would be reduced below 300 as a result of a consolidation.
2. The Consolidation May Increase the Number of Shareholders Who Own Odd Lots.
"Odd lots" are holdings of less than 100 shares. Shareholders who hold odd
lots typically will experience an increase in the cost of selling their
shares, as well as greater difficulty in effecting such sales.
3. Shareholders May Suffer Dilution in the Book Value of Their Shares or Their
Percentage Ownership of the Company. The consolidation and share increase will
only occur in connection with a financing or acquisition, which will result in
the issuance of additional shares. Issuance of additional shares will decrease
the then current shareholders' proportionate interest in the Company. If such
shares are issued at less than the book value of the Company, the then current
shareholders would also suffer dilution in the value of their shares.
4. If Proposal 2 is Not Approved by the Shareholders, the Availability of
Authorized but UnIssued Stock May Result in the Issuance of Common Shares
Upon Conversion of Preference Shares. Please refer to Proposal 2 for a
discussion of the disadvantages of providing additional authorized shares
for Preference Share holders. PROPOSALS 2 AND 3 ARE INDEPENDENT OF ONE
ANOTHER. PLEASE REFER TO THE DISCUSSION BELOW WITH RESPECT TO THE
CONSEQUENCES IF ONLY ONE OR THE OTHER OR BOTH ARE
APPROVED BY THE SHAREHOLDERS.
Other Considerations:
1. "Penny" Stock Regulation of Broker-Dealer Sales of Company Securities May
Apply to Sales of the Company's Securities. A penny stock means any equity
security other than a security (i) registered, or approved for registration
upon notice of issuance on a national securities exchange that makes
transaction reports available pursuant to 17 CFR 11Aa3-1 (ii) authorized or
approved for authorization upon notice of issuance, for quotation in
the NASDAQ system; (iii) that has a price of five dollars or more or . . . .
(iv) whose issuer has net tangible assets in excess of $2,000,000
demonstrated by financial statements dated less than fifteen months
previously that the broker or dealer has reviewed and has a reasonable basis
to believe are true and complete in relation to the date of the
transaction with the person. Rule 15g-9 under the Securities Exchange Act
of 1934 imposes additional sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and
institutional accredited investors (generally institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000
or annual income exceeding $200,000 or $300,000 jointly with their spouse).
For transactions covered by the rule, the broker-dealer must furnish to all
investors in penny stocks, a risk disclosure document required by Rule 15g-9
of the Securities Exchange Act of 1934, make a special suitability
determination of the purchaser and have received the purchaser's written
agreement to the transaction prior to the sale. In order to approve a
person's account for transactions in penny stock, the broker or dealer must
(i) obtain information concerning the person's financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on the information required by paragraph (i) that transactions in
penny stock are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably may
be expected to be capable of evaluating the rights of transactions in penny
stock; and (iii) deliver to the person a written statement setting forth the
paragraph (ii) in this section, stating in a highlighted format that it is
unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless
the broker or dealer has received, prior to the transaction, a written
agreement to the transaction from the person; and stating in a highlighted
format immediately preceding the customer signature line that the broker or
dealer is required to provide the person with the written statement and the
person should not sign and return the ritten statement to the broker or
dealer if it does not accurately reflect the person's financial situation,
investment experience and investment objectives and obtain from the person
a manually signed and dated copy of the written statement. Consequently, the
rule may affect the ability of broker-dealers to sell the Company's
securities and also may affect the ability of shareholders to sell their
shares in the market.
THE PENNY STOCK RULES MAY APPLY WHETHER OR NOT PROPOSAL 3 IS APPROVED OR IF
THE CONSOLIDATION IS EFFECTED.
2. Anti-Takeover Effects of Proposal 3.
As a result of an increase in the authorized shares of the Company, there will
be an increase in the number of authorized shares that are unissued and
available for future issuance (the "Available Shares"). The Board of
Directors could issue the Available Shares for any proper corporate purpose,
including, among others, future financing transactions, without shareholder
approval. The increase in the authorized capital of the Company and the
creation of Available Shares may be construed as having an anti-takeover
effect. Although neither the Board nor management of the Company views the
increase of the authorized capital as an anti-takeover measure, the
Company could use the Available Shares to frustrate persons seeking to
effect a takeover or otherwise gain control of the Company by making it
more difficult, or discourage to varying degrees and in various circumstances,
a merger, tender offer, proxy contest or acquisition of control of a large
block of the Company's Common Stock without prior approval of the Board.
This proposal has not been made as the result of management's knowledge of any
specific effort to accumulate the Company's securities or to obtain control of
the Company by means of a merger, tender offer, or other transaction. This
proposal is not part of a plan by management to adopt a series of anti-
takeover measures. This proposal will have no effect on management's tenure
nor does it provide any particular benefit to management.
Relationship of Proposal 2 and Proposal 3.
Although the Company recommends the approval of both Proposal 2 and Proposal 3,
the two Proposals are offered separately and are independent of one another.
If Proposal 2 is approved by the shareholders, and proposal 3 is not, if a
capital infusion, acquisition or similar opportunity presents itself, the
Board will determine at that time whether it is in the best interests of the
Company to seek shareholder approval through a special meeting of
shareholders, or wait until the next Annual Meeting of Shareholders, to
present a proposal which would enable the Company to capitalize on the
opportunity. As a result, the Company may incur added expense in connection
with a special meeting of shareholders, or it may not be able to take
advantage of opportunities in the time frame presented.
If Proposal 3 is approved by the shareholders, and Proposal 2 is not, the
Preference Shares will remain unconverted. If a consolidation and increase
of the authorized share capital of the Company is effected, the Company may
then be in a position to issue Common Stock for the Unconverted Preference
Shares, depending on the size of the consolidation and share increase. A
consolidation will also proportionately decrease the number of shares of
Common Stock that would be issued to holders of Preference Shares upon
conversion.
Summary of Effect of Approval of Both Proposal 2 and Proposal 3:
The following table summarizes, for illustration purposes only, what the
capitalization of the Company would be if the shareholders approve:
? the increase of the authorized capital as set forth in Proposal 2
? the shares of Common Stock that would be issued for Unconverted Preference
Shares and currently outstanding options and warrants and the percentage of
Common Stock such converted or exercised shares would represent
? the number of shares that would be outstanding after a consolidation of 10
to 1 (assuming conversion of the Unconverted Preference Shares and exercise
of options and warrants)
Name of Security
Authorized Shares
if Proposal 2
Approved
Common Shares
Issued and Outstanding
on a Fully-Converted
Basis(1)
Shares Outstanding
Following
Consolidation
Percent of
Common Stock
(fully- diluted)
Common
Shares
100,000,000
50,000,000
5,000,000
53.20%(2)
Preference
Shares:
Class A
Class B
3,000
5,000,000
40,424,186
2,237
4,002,418
42.58%
Options
3,465,340
346,534
3.69%
Warrants
80,000
8,000
0.53%
Total
105,003,000
93,969,526
9,399,189
100%
(1) Does not include Class A Preference Shares
(2) This number represents the percentage ownership of the current Common Stock
holders assuming conversion of the Unconverted Preference Shares and the
exercise of all options and warrants
(3) Assuming a consolidation of 10 to 1.
THE BOARD STONGLY RECOMMENDS APPROVAL OF PROPOSAL 3 TO GRANT OF DISCRETION TO
THE BOARD TO EFFECT THE CONSOLIDATION, PAR VALU REDUCTION AND SHARE INCREASE
PROPOSAL 4
ELECTION OF DIRECTORS
In accordance with the Company's Bye-Laws, six directors are to be elected at
this Annual General Meeting. The Board recommends the election to the Board
of the nominees whose names appear below. Directors of the Company are
elected at each annual general meeting and hold office until the next annual
general meeting or until their successors are nominated and elected. In the
absence of instructions to the contrary, the enclosed proxy will be voted FOR
the nominees listed below.
Pursuant to the ByeLaws of the Company, one director may be appointed by
Harrah's Interactive Investment Company, a Nevada Corporation ("HIIC", and
together with its affiliates, the "HIIC Entities"), pursuant to ByeLaw
54B. Bye-Law 54B provides that during such time as the HIIC Entities own
10% or more of the outstanding voting securities, or their equivalents, of
the Company, on a fully-diluted basis, the HIIC Entities will have the ability
to appoint a percentage of directors (rounded to the nearest 10%). This
percentage of directors has the same proportion to the size of the entire
Board as the number of such voting securities held by the HIIC Entities bears
to the total number of such securities, on a fully diluted basis. The HIIC
Entities will also be entitled to such proportionate representation on the
Executive, Compensation and Audit Committees of the Board. On the Record
Date, the HIIC Entities owned approximately 6,886,915 of the outstanding
voting securities, or their equivalents, of the Company. The HIIC Entities
have elected not to exercise their right to appoint a member to the Board for
the coming year.
With respect to the nominees for the six members of the Board to be elected by
the shareholders of the Company at the Annual General Meeting, the following
sets forth the name of each nominee and, for each, the period during which
the nominee has served as a director, information relating to the nominee's
age, principal occupation and business experience during the past five years,
any other directorships held by the nominee in publicly held companies and
certain other information. Information with respect to the ages of directors
is as of June 30, 2000, and information as to their ownership of shares of
Common Stock as of that date is provided under the caption "Security
Ownership By Directors, Officers and Five Persons (or More) Shareholders."
MR MICHAEL BARTLETT, age 57, is a nominee for director. Mr Bartlett is a
thirty-year veteran of the thumbed entertainment industry. During his
career, Mr. Bartlett has held the following senior positions: President &
CEO Expo 86 (Vancouver, Canada), Senior VP Planning & Development, Universal
Studios (Florida), Vice President & General Manager, Canada's Wonderland
(Toronto, Canada), President & CEO, Natural Maritime Authority (Norfolk,
Virginia), Vice President, Planning & Development Taft Broadcasting Theme
Park Division (Cincinnati, Ohio). Currently, Mr. Bartlett is the President
and CEO of Indico Technologies and Creative Entertainment Technologies, both
publicly traded companies.
ANTHONY P. CLEMENTS, age 53, has been a director of the Company since March of
1992. Mr. Clements is an investment banker with Yorkton Securities, based in
London, England. From 1994 to March 1998, he was an investment banker with T.
Hoare & Co. Mr. Clements also served as a director of the Company's operating
subsidiary from August 10, 1995 until its amalgamation with the Company on June
17, 1997. Prior to 1994, Mr. Clements was an investment banker for Rickets &
Co., also based in London. Mr. Clements has also managed the North American
portfolio of Postel Investment Management (pension fund managers for both the
Post Office and British Telecom) from 1973 until 1987, and has worked in
areas of corporate finance since 1987.
DEBORAH FORTESCUE-MERRIN, age 44, has been a director of the Company since
September 10, 1999, and she was previously a director of the Company from
October 1995 to October 1997. Mrs. Merrin is Vice-President of J. Perot
Financial Corp., a private investment management firm located in Vancouver,
British Colombia, Canada. Previous to joining J. Perot Financial, Mrs.
Merrin was a securities broker for twelve years, and worked in the area of
corporate finance from 1989-1992, specializing in special situations
concerning medical issues. Mrs. Merrin is the President and a Director of
North American Medical Services Inc. and she is also a director of Creative
Entertainment Technologies, Inc., and Indico Technologies, each publicly
traded companies. Mrs Merrin is also currently the President, and Chairman
of IEL.
MR B.J. (JACK) ILES, age 67, is a nominee for director. Mr Iles is a founding
partner of Smythe Ratcliffe, Chartered Accountants (the Western Canadian
Affiliate of Pannell Kerr Forster) exclusively engaged in matters of taxation,
which has been his vocation for forty years. Mr Iles has served with the
Canadian Federal Taxation Authorities and the Comptroller of the Treasury.
Mr Iles limits his practice to international and multi-national commercial
ventures, specializing in maximizing after-tax cash flow and income
retention. He has extensive experience in all areas of tax practice with
special emphasis on planning and structuring for startup enterprises. Mr
Iles' career has spanned three continents, innumerable countries, and tax
regimes. A seminar leader, lecturer, author of papers and articles,
Mr Iles is also a director and former director of several private and not-
for-profit companies and societies.
ANASTASIA KOSTOFF-MANN, age 52, has been a director since September 10, 1999,
and she was previously a director of the Company until September 1996. Ms
Mann has over 28 years experience in the hotel, sales and marketing, and
travel industry. She is the Founder and Chairman of the Corniche Group of
Companies, overseeing all aspects of travel and meeting management for
corporate accounts. She is a lifetime director and former President and
Chairman of the International Travel & Tourism Research Association (TTRA).
She currently serves a commissioner on the California Travel and Tourism
Commission where she also sits on the Executive Committee. Ms Mann is also
currently the Vice President of IEL.
STEPHEN ROSENBERG, age 55, has been a director since September 10, 1999. He
has been President of his own investment advisory firm located in Warner
Robins, Georgia, since January of 1989. From December 1985 through December
1988, Mr. Rosenberg was a broker with Dean Witter Reynolds. He has taught
graduate finance courses for Mercer University in Macon, Georgia, and is the
author of a number of financial books. Mr. Rosenberg has appeared on CNN,
CNBC and other radio and television programs as a financial expert and
estate planning authority. He hosts a weekly radio program and appears on
his local CBS affiliate. Mr. Rosenberg is also a Director of North American
Medical Services Inc., a publicly traded company.
The Company is not aware of any arrangements or understandings between any of
the individuals named above and any other person pursuant to which any of the
individuals named above were selected as a director and/or executive officer.
The Company is not aware of any family relationship among the officers and
directors of the Company or its subsidiaries. The only arrangement with
respect to members of the Board of which the Company is aware is the right
of the HIIC Entities to appoint directors to the Board pursuant to ByeLaw
54B of the Company's ByeLaws.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Meetings:
There were four meetings of the Board held during the fiscal year ended
December 31, 1999. Pursuant to the Company's current ByeLaws, the Board
consisted of six directors.
Compensation:
At the December 6, 1996 meeting of the Board, the Board adopted an option
plan covering 500,000 shares of Common Stock for members of the Board (the
"Director Option Plan"). Pursuant to the Director Option Plan, all
directors holding office at December 10th of each year automatically were
granted options for the purchase of 10,000 shares of Common Stock at the
trading price on such day. On October 17, 1997, the Board approved an amendment
to the Director Option Plan changing the grant date to the date of the first
meeting of the Board following the Company's Annual General Meeting of
Shareholders. Options granted pursuant to the Director Option Plan have a
ten-year term. On September 11, 1999, each of the then directors of the
Company were awarded options for the purchase of 10,000 shares, at an
exercise price of US$0.14 and an expiration date of September 11, 2009.
Under the Management Incentive Plan, adopted by the Company on June 17, 1997,
the directors were also granted options of 50,000 shares each, at an exercise
price of US$0.50, with an expiration date of September 11, 2009. These
specific options expire 180 days after a director ceases to serve the
Company in that capacity. All of the directors of the Company are
re-imbursed for out-of-pocket expenses. The directors of the Company receive
no other compensation.
Executive Committee
The Executive Committee of the Board currently consists of Ms Fortescue-
Merrin, Mr Tony Clements, and Mr Stephen Rosenberg. The principal functions
of the Executive Committee are to exercise the power of the Board in the
management of the business and affairs of the Company with certain
exceptions. The executive committee did not hold any meetings during the
fiscal year ended December 31, 1999.
Audit Committee
The Audit Committee of the Board currently consists of Ms Fortescue-Merrin,
Ms Eppie Canning, and Mr Stephen Rosenberg. The principal functions of the
Audit Committee are to make recommendations to the Board regarding; (i) its
independent auditors to be nominated for election by the shareholders; (ii)
to review the independence of such auditors; (iii) to approve the scope of
the annual audit activities of the independent auditors; (iv) to approve the
audit fee payable to the independent auditors; (v) and to review such audit
results. The audit committee did not hold any meetings during the fiscal
year ended December 31, 1999.
Compensation Committee
The Compensation Committee currently consists of Ms Mann, Mr Tony Clements,
and Mr Stephen Rosenberg. The Compensation Committee did not hold any meetings
during the fiscal year ended December 31, 1999. For information on the duties
and actions of the Compensation Committee, see "Report on Compensation."
SECURITY OWNERSHIP BY DIRECTORS, OFFICERS AND
FIVE PERCENT (OR MORE) SHAREHOLDERS
As of June 30, 2000, based on information supplied to the Company, IEL's
directors and executive officers as a group may be deemed to own beneficially
(including shares purchased upon exercise of stock options and warrants,
exercisable within 60 days) 1.19% of the outstanding shares of Common Stock.
To the knowledge of the directors and officers of the Company, the following
directors and officers of the Company and owners of five percent (or more)
of the outstanding Common Stock beneficially own the shares of Common Stock
set forth below.
Name
Amount and Nature Of Beneficial Ownership
Percent of Class (1)
Michael L Bartlett (director nominee)
Anthony P. Clements (2)
Deborah Fortescue-Merrin (3)
Jack Iles (director nominee)
Anastasia Kostoff-Mann (5)
Stephen Rosenberg (6)*
Directors and Officers as a Group
(7 individuals)
Harrah's Interactive Investment
Company (HIIC) (9)
NIL
190,000
220,000
NIL
110,000
76,500
596,500
6,886,915
*
*
*
*
*
*
1.19%
13.01%
*Less than 1%
(1) Percent of class is determined by dividing the number of shares
beneficially owned by the outstanding number of shares of the Company, and
increased by options and warrants for 2,922,761 shares, which are currently
exercisable.
(2) Includes options for 100,000 shares of Common Stock under the 1996 Stock
Program, options for 40,000 shares under the Directors Option Plan, and
options for 50,000 shares granted under the Management Incentive Plan.
(3) Does not include 376,471 shares of Common Stock held by a company
which Ms. Fortescue-Merrin's spouse controls. Does not include 3 Class B
Series A Convertible Preference Shares, which have been donated to a
charitable foundation of which both Mr & Mrs Merrin are directors. Does
not include 27 Class B Series A Convertible Preference Shares, which have
been donated to a charitable foundation of which both Mr & Mrs Merrin are
directors. Includes options for 150,000 shares of Common Stock under the
1996 Stock Program, options for 20,000 shares of Common Stock under the
Directors Option Plan, and options for 50,000 shares granted under the
Management Incentive Plan.
(4) Includes options to purchase 50,000 shares of Common Stock under the 1996
Stock Program, 10,000 shares under the Directors Option Plan, and options for
50,000 shares granted under the Management Incentive Plan.
(5) Does not include 38,200 shares held by Mr. Rosenberg's spouse.
Includes options for 10,000 shares under the Directors Option Plan and
options for 50,000 shares granted under the Management Incentive Plan.
(6) Harrah's Interactive Investment Company's address is 5100 West Sahara
Avenue, Suite 200, Las Vegas, Nevada, 89146.
EXECUTIVE COMPENSATION
The following table sets forth all compensation for services in all
capacities to the Company for the three most recently completed fiscal
years in respect of each of the individuals who served as the Chief
Executive Officer during the last completed fiscal year and those
individuals who were, as of December 31, 1999, the executive officers of the
Company whose individual total compensation for the most recently completed
financial year exceeded $100,000 (collectively, the "Named Executive
Officers") including any individual who would have qualified as a Named
Executive Officer but for the fact that individual was not serving as such
an Officer at the end of the most recently completed financial year:
SUMMARY COMPENSATION TABLE
Annual Compensation
Long Term Compensation
Awards .
Name and Principal
Position
Fiscal
Year Ended
Salary ($)
Bonus ($)
Other Annual
Compensation
($)
Restricted
Stock
Awards (#)
Securities
Underlying
Options (#)
Deborah Fortescue-Merrin
Chairman
Michael Irwin
Assistant Secretary
& Controller
12/31/99
12/31/99
12/31/98
12/31/97
NIL
NIL
96,596
49,193
NIL
NIL
NIL
NIL
NIL
78,946(1)
54,376(2)
70,103
NIL
NIL
NIL
NIL
60,000
166,666
200,000(2)
100,000
(1) Mr. Irwin was retained as a consultant from August 1995 through June 1997
and became an employee of the Company on July 1, 1997. Severance pay of
$45,000 is included for the year ending December 31, 1998. Mr. Irwin was
retained from November 14, 1998 to February 29, 2000 as a consultant and
received $9,376 for the year ending December 31, 1998. Consulting fees of
$ 78,946.00 are included for the year ending December 31, 1999 (2) 1998
option grants under the Management Incentive Plan include options granted
to replace options originally granted during 1997.
OPTION GRANTS IN THE LAST FISCAL YEAR
There were no option grants to employees during the year ending December 31,
1999.
Name
No of Securities
Underlying
Options Granted
(#)
Percent of Total
Options Granted to
Directors and
Officers in Fiscal
Year
Exercise or
Base Price
($/sh)
Expiration
Date
Potential Realizable Value
At Assumed Annual Rates
of Stock Price Appreciation
for Option Term
5%
10%
John Boushy
John Boushy
Eppie Canning
Eppie Canning
Tony Clements
Tony Clements
Deborah Merrin
Deborah Merrin
Anastasia Mann
Anastasia Mann
Stephen
Rosenberg
Stephen
Rosenberg
Michael Irwin
David Morgan
Dan Harris
10,000(1)
50,000(2)
10,000(1)
50,000(2)
10,000(1)
50,000(2)
10,000(1)
50,000(2)
10,000(1)
50,000(2)
10,000(1)
50,000(2)
166,666(2)
63,333(2)
75,000(2)
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
2.5%
xx
xx
$0.14000
$0.50000
$0.14000
$0.50000
$0.14000
$0.50000
$0.14000
$0.14000
$0.50000
$0.14000
$0.50000
$0.14000
$0.50000
$0.50000
$0.50000
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
9-10-09
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
*Less than 1%
(1) Option granted to each director of the Company pursuant to the Director
Option Plan on September 10, 1999.
(2) Options granted under the Management Incentive Plan
FISCAL YEAR-END OPTION VALUES
No options were exercised by the Named Executive Officers during the fiscal
year ended December 31, 1999. No options listed in this table were in-the-
money at the end of the fiscal year ended December 31, 1999.
Number of Securities Underlying Unexercised Options at Fiscal Year End (#)
Name
Exercisable
Unexercisable
Deborah Fortescue-Merrin(1)
Deborah Fortescue-Merrin(2) --
Deborah Fortescue-Merrin(3) --
Michael Irwin (3)
Michael Irwin (3)
150,000
20,000
50,000
33,334
166,666
NIL
NIL
NIL
NIL
NIL
(1) Options issued pursuant to the 1996 Stock Program.
(2) Options issued pursuant to Director Option Plan.
(3) Options issued pursuant to the Management Incentive Plan.
REPORT ON COMPENSATION
Mr Mike Irwin served as Assistant Secretary and Chief Accounting Officer of
the Company in the fiscal year 1999. He was compensated on a consulting
basis, and received US$ 78,946 during 1999. Mr Irwin was also granted an
option to purchase 166,666 shares at US$0.50 per share
The Members of the Board of Directors During The Fiscal Year Ended December
31, 1999.
Charles L. Atwood (resigned)
John M. Boushy
Eppie Canning
Anthony P. Clements
Brian Deeson (did not stand for re-election)
Quinten Dreesmann (resigned)
Deborah Fortescue-Merrin
Laurence S. Geller (resigned)
Phillip Gordon (resigned)
Anastasia Kostoff-Mann
Stephen Rosenberg
Amnon Shiboleth (resigned)
Gordon Stevenson (resigned)
Judy Wormser (resigned)
PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Shareholder Return on Common Shares
of the Corporation, and the CRSP Total Return Index for NASDAQ U.S. and
Foreign Stocks based on a $100 Investment assuming reinvestment of Dividends
Raw Data Base 100 for Graph
-------- ------------------
IEL NASDAQ IEL NASDAQ
------- ------ ------- ------
12/31/93 4.725 253.873 100 100
12/30/94 5.625 246.250 119 97
12/29/95 2.750 345.863 58 136
12/31/96 3.750 423.427 79 167
12/31/97 2.875 517.841 61 204
12/31/98 0.03125 715.138 1 282
12/31/99 0.03125 _______ 1 ___
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Redemption Agreement: As of April 30, 1997, pursuant to Redemption
Agreements (the "Redemption Agreements"), the Company issued to recipients
designated by Dr. Rex E. Fortescue, formerly a director of the Company, and
Anthony P. Clements, a director of the Company, 175,000 and 333,000 shares of
Common Stock, respectively. These shares were issued as consideration for
Messrs. Fortescue's and Clements' agreement to place into escrow 1,525,000
shares of Common Stock (of which 525,000 are registered in the name of Dr.
Fortescue and 1,000,000 are registered in the name of Mr. Clements, which
are held in an escrow pursuant to a performance earn-out provision, only if
such shares are released from the escrow for any reason whatsoever. Dr.
Fortescue is the father of Deborah Fortescue-Merrin, Chairman of the Board
and President of the Company.
Amalgamations: Pursuant to a Plan and Agreement of Merger and Amalgamation,
dated as of May 13, 1997 (the "Amalgamation Agreement"), the Company's then
wholly-owned subsidiary SGI Holding Corporation Limited, a Bermuda exempted
company ("SGIHC"), amalgamated with and into its 80% owned subsidiary, then
known as Interactive Entertainment Limited, a Bermuda exempted company
("Operating Sub"). The Amalgamation Agreement is between the Company,
Operating Sub, SGIHC and HIIC, the former owner of 20% of the outstanding
stock of Operating Sub. Pursuant to the Amalgamation Agreement, Operating
Sub amalgamated with and into SGIHC and thereafter SGIHC amalgamated with
and into the Company (the "Amalgamations"). As a result of the Amalgamation
of Operating Sub and SGIHC, the outstanding shares of Operating Sub common
stock held by HIIC were converted into 5,879,040 shares of Common Stock.
Pursuant to the Amalgamation Agreement, HIIC and its affiliates were
provided, through certain amendments to the Bye-Laws of the Company,
(approved at the Special General Meeting of Shareholders of the Company
held June 16, 1997), with the right to appoint persons (the "HIIC
Appointees") to the Board, and to specified committees in a number generally
proportionate to their share holdings. Additionally, the HIIC Entities, as
shareholders, and the HIIC Appointees were provided, pursuant to the
Amalgamation Agreement, with the right to approve specified significant
corporate actions by the Company for as long as the ownership of Common
Stock by the HIIC Entities is in excess of 20% (10% in some cases) of the
outstanding voting shares computed on a fully-diluted basis. The total
number of shares owned by HIIC is 6,886,915, currently representing 13.01%
of the outstanding common shares.
HIIC License Agreement: On June 17, 1997, in connection with the
Amalgamations, the Company also entered into a Software License Agreement
with HIIC (the "License Agreement"). The License Agreement is a fully-paid,
perpetual world-wide license to the HIIC Entities to use the Company's
gaming technology in non-competitive uses in traditional casino venues which
the HIIC Entities own, operate or manage. The License Agreement includes
source codes for the Company's gaming software, and neither party to the
License Agreement has any obligation to share or provide any improvements
or modifications with the other party.
HIIC Registration and Preemptive Rights: Also on June 17, 1997 and in
connection with the Amalgamations, the Company entered into a Registration
and Preemptive Rights Agreement with HIIC (the "Registration Rights
Agreement"). Under the Registration Rights Agreement, the HIIC Entities
have two demand registration rights to cause the Company to register the
Common Stock owned by the HIIC Entities. Each such offering is required to
be underwritten on a firm commitment basis by an underwriter chosen by the
Company. Pursuant to the Registration Rights Agreement, until the earlier
of when the HIIC Entities own less than 5% of the outstanding voting shares
of the Company on a fully-diluted basis, the HIIC Entities have customary
piggy-back rights to include their shares of Common Stock in registered
offerings by the Company. Pursuant to the Registration Rights Agreement, the
HIIC Entities have the right to purchase securities offered by the Company
for as long as the HIIC Entities own 20% or more of the outstanding Common
Stock on a fully-diluted basis at the same price and terms such securities are
otherwise being offered. The HIIC Entities also have the right for as long as
the HIIC Entities own 20% or more of the outstanding voting shares on a fully-
diluted basis to participate on a proportionate basis in any non-pro rata stock
repurchases or redemptions conducted by the Company. Additionally, at any time
that the HIIC Entities own less than 10% of the outstanding voting shares, on a
fully-diluted basis, the Company has the right to cause the HIIC Entities to
sell their voting shares pursuant to a registered sale, and the HIIC Entities
have the right to cause the Company to file a registration statement to sell
their voting shares in the event of any change in or conduct of the business
or proposed business of the Company or any of its subsidiaries or any other
action or inaction of the Company or any of its subsidiaries which would
jeopardize the HIIC Entities' gaming and related licenses or the if Company
does not redeem a "Disqualified Holder" (as defined in and pursuant to the
Company's Bye-Laws) of its securities, in each case at the Company's expense
without being subject to the limitations on demand rights set forth above.
PROPOSAL 5
APPOINTMENT OF AUDITOR
Unless otherwise instructed, the proxies given pursuant to this
solicitation will be voted FOR the appointment of Buckley Dodds as the
auditor of the Company, to hold office for the ensuing year, at a
remuneration to be negotiated by management, and approved by the Board.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
DEBORAH FORTESCUE-MERRIN, a Director of the Company was appointed the
Chairman of the Board and President at the Directors Meeting September 11,
1999
ANASTASIA KOSTOFF-MANN, a Director of the Company was appointed Vice-
President June 9, 2000
MICHAEL IRWIN served as Assistant Secretary and Chief Accounting Officer
until his resignation on February 29, 2000.
DAVID MORGAN has over 14 years experience in the information technology
(IT) industry. His expertise ranges from engineering and software
development to project management and leadership roles. Mr Morgan has
significant IT experience from several industries, including Internet
startups, entertainment, hospitality, retail and insurance. For the past
several years, Mr Morgan has focused primarily on the in-flight
entertainment business with Interactive Entertainment Ltd. He has also
held senior software development positions at Harrah's Entertainment Ltd.,
Promus Hotels and IBM.
DAN HARRIS has a wide-ranging career background in the IT industry. Mr
Harris is a seasoned developer with more than nine years experience in
software project management. His roles have included: line, programme and
project management; applications development; consulting; sales and
marketing. He has worked in both Asia and the United States.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Other than as indicated below, no director, officer or beneficial owner of
more than 10% of any class of equity securities has failed to file reports
required by Section 16(b) of the Exchange Act for the Company's fiscal year
ended December 31, 1999.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. Custodians and
fiduciaries will be supplied with proxy materials to forward to beneficial
owners of stock and normal handling charges will be paid for such forwarding
services.
SHARES SUBJECT TO IRREVOCABLE PROXY
AND AGREEMENT NOT TO VOTE SHARES
3,525,000 shares of Common Stock are subject to an irrevocable proxy and
an agreement not to vote, and will not be voted at the Annual General
Meeting or at any subsequent general meeting of the shareholders of the
Company. When the Company acquired the rights to its in-flight gaming
software from SGII on November 7, 1991, a portion of the consideration was
3,000,000 shares of Common Stock which, according to then applicable
requirements, were placed in escrow, to be released on the basis of one
share for each U.S.$1.78 of net cash flow generated from the assets over a
ten-year period (the "Performance Shares"). An additional 525,000 shares,
which were issued to Dr. Rex E. Fortescue, formerly a director of Sky Games,
are held in the escrow on the same terms and are also included as
Performance Shares. As part of certain agreements to allow the eventual
redemption and cancellation of the 3,525,000 Performance Shares only when
and if such Performance Shares should be released from the escrow, the
holders of the Performance Shares issued an irrevocable proxy to First
Tennessee Bank, and First Tennessee Bank entered into an agreement not to
vote the Performance Shares at any general meeting of shareholders of IEL or
otherwise. The irrevocable proxy and the agreement not to vote the
Performance Shares will terminate upon the cancellation of the Performance
Shares. Consequently, the 3,525,000 Performance Shares will not be voted at
the Annual General Meeting or at any subsequent general meeting of the
shareholders of the Company.
OTHER MATTERS
Management of the Company is not aware of any other matter to come before
the meeting other than as set forth in the notice of meeting. If any other
matter properly comes before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the shares represented thereby
in accordance with their best judgment on such matter.
SHAREHOLDER PROPOSALS
Proposals of shareholders to be presented at the 2001 Annual General
Meeting of Shareholders must be received by the Company no later than
December 20, 2000 in order to be considered for inclusion in the Company's
Proxy Statement and form of proxy relating to such meeting.
DATED: August 30, 2000.
Interactive Entertainment Limited
Proxy for Annual General Meeting of Shareholders on September 18, 2000
This Proxy is Solicited on Behalf of the Board of Directors of Interactive
Entertainment Limited
The undersigned hereby appoints Stephen James or Hiren Patel, or either of
them, with full power of substitution, the undersigned's true and lawful
attorneys and proxies to vote the shares of Common Stock of Interactive
Entertainment Limited which the undersigned is entitled to vote at the
Annual General Meeting of Shareholders to be held at Hamilton, Bermuda, on
September 18, 2000 at 10:00 a.m. Eastern Daylight Time, and all adjournments
or postponements thereof, with all the powers the undersigned would possess
if personally present, as indicated on this card for the proposals described
in the Notice and Proxy Statement for such meeting and in their discretion on
such other matters as may properly come before the meeting or any
adjournments or postponements thereof.
Unless otherwise instructed, this proxy will be voted for the nominees
listed in Proposal 4 and for approval of the matters set forth in Proposals
1, 2, 3 and 5.
Please mark, sign and mail this proxy promptly in the enclosed envelope.
1. Change of name to Creator Capital Limited. [_] FOR [_] AGAINST
approval approval
2. Increase of Authorized Capital : [_] FOR [_] AGAINST [_] ABSTAIN
approval approval
3. Consolidation and Increase in Capital [_] FOR [_] AGAINST [_] ABSTAIN
approval approval
4. Election of Director Nominees: Messrs. Bartlett, Clements, Iles,
Rosenberg, Fortescue-Merrin and Kostoff-Mann:
[_] FOR [_] WITHHELD [_] FOR,
exceptnominees from nominees vote withheld from the following nominees
5. FOR the appointment of Buckley Dodds as the Company's auditor:
[_] FOR [_] AGAINST [_] ABSTAIN
approval approval
Dated: _____________, 2000 No of Shares:
Signature:
Capacity/Title:
Please sign the exact name of the shareholder as it appears
hereon. If acting as administrator, trustee or in other
representative capacity, please sign name and title. Please
check mark, sign, date, and mail this proxy promptly in the
enclosed envelope.
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