<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Black Hawk Gaming & Development Company, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
2060 BROADWAY, SUITE 400
BOULDER, COLORADO 80302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 12, 1997
To the Shareholders of Black Hawk Gaming & Development Company, Inc.:
An annual meeting of shareholders of Black Hawk Gaming & Development
Company, Inc. (the "Company") will be held at the Boulderado Hotel, 2115 13th
Street, Boulder, Colorado, on Thursday, June 12, 1997, at 10:00 a.m. local time,
for the following purposes:
1. To elect seven Directors to serve for the ensuing year and/or until
their successors are elected and qualified;
2. To approve the appointment of Deloitte & Touche LLP as independent
auditors for 1997; and
3. The transaction of such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on May 2, 1997, as
the record date for the determination of shareholders entitled to vote at the
meeting. Only shareholders of record at the close of business on May 2, 1997,
will be entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person. To
ensure that you are represented at the meeting, please fill in, sign and return
the enclosed proxy card as promptly as possible. Your early attention to the
proxy statement will be greatly appreciated because it will reduce the cost your
Company incurs in obtaining voting instructions from its shareholders.
By Order of the Board of Directors
/s/ Frank B. Day
Frank B. Day, Secretary
May 12, 1997
<PAGE> 3
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
2060 BROADWAY, SUITE 400
BOULDER, COLORADO 80302
PROXY STATEMENT
JUNE 12, 1997 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Black Hawk Gaming & Development Company,
Inc. ("Black Hawk" or the "Company") for use at the annual meeting of
shareholders of Black Hawk to be held at the Boulderado Hotel, 2115 13th Street,
Boulder, Colorado, on Thursday, June 12, 1997, at 10:00 a.m. local time, and any
postponement or adjournment thereof.
This Proxy Statement and the enclosed proxy card are first being sent to
Black Hawk's shareholders on or about May 12, 1997.
MATTERS TO BE CONSIDERED.
The following matters will be acted on at the annual meeting:
1. Election of seven Directors to serve for the ensuing year and/or until
their successors are elected and qualified.
2. Approval of the appointment of Deloitte & Touche LLP as independent
auditors for 1997; and
3. Transaction of such other business as may properly come before the
meeting.
VOTING SECURITIES AND VOTING RIGHTS.
Only shareholders of record on May 2, 1997, or their proxies, will be
entitled to vote at the annual meeting of shareholders. On May 2, 1997, Black
Hawk had 2,672,043 shares of common stock outstanding.
A majority of the shares of Black Hawk common stock outstanding must be
represented at the annual meeting in person or by proxy to constitute a quorum
for the transaction of business. Each share of common stock is entitled to one
vote on all matters. In the election of directors, each share of common stock is
entitled to one vote for a nominee for each director position. Black Hawk does
not have cumulative voting. A shareholders' list will be available for
examination by shareholders at the annual meeting.
VOTING PROCEDURE.
The shares represented by each properly executed proxy returned to Black
Hawk will be voted at the meeting as indicated on the proxy. If no instructions
are given, the persons authorized by the proxy will vote in favor of election of
the nominees named in this Proxy Statement and for the approval of the
appointment of Deloitte & Touche LLP as independent auditors for 1997. Any
person giving a proxy has the right to revoke it at any time before it is
exercised (1) by filing with the Secretary of Black Hawk a duly signed
revocation or proxy bearing a later date or (2) by voting in person at the
meeting.
The Board of Directors is not aware of any matters other than those set
forth above which may come before the annual meeting. If any other matters are
properly presented to the meeting for action, unless contrary instructions are
given, the persons named in the enclosed form of proxy and acting thereunder
have the power to vote in accordance with their best judgment on such matters.
Election of the nominees as Directors and approval of the appointment of
independent auditors will require the affirmative vote of a majority of the
shares of Black Hawk common stock represented at the meeting.
<PAGE> 4
If a proxy is marked with instructions to withhold authority to vote for
one or more director nominees or to abstain from voting on any matter, those
shares will be treated as represented at the meeting and entitled to vote in
determining whether a quorum is present. In matters where approval is required
by a majority of shares outstanding or represented at the meeting, abstentions
from voting on a matter will have the effect of a vote against the matter.
SOLICITATION OF PROXIES.
The cost of solicitation of proxies will be borne by Black Hawk.
Solicitation of proxies may be made by officers, directors and employees of
Black Hawk in person, by telephone or by mail. In addition, brokers, banks and
other nominee holders will be reimbursed for expenses they incur in forwarding
proxy materials to and obtaining voting instructions from beneficial owners of
Black Hawk common stock.
DIRECTOR NOMINEES AND OTHER PRINCIPAL HOLDERS OF BLACK HAWK COMMON STOCK.
On May 2, 1997, there were approximately 200 record holders of Black Hawk
common stock; the Company estimates that its shares are beneficially owned by
approximately 1,600 additional persons.
The following table sets forth, as of May 2, 1997, the number and
percentage of shares of Black Hawk's common stock held of record by officers,
directors, individually and as a group and by holders of more than 5% of such
common stock:
BENEFICIALLY OWNED
<TABLE>
<CAPTION>
BENEFICIALLY OWNED
--------------------------------------------------------
NOTE
NAME SHARES OPTIONS(1) CONVERSIONS(2) PERCENTAGE(4)
---- ------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Robert D. Greenlee...................... 405,133 112,500 57,143 20.22%
2060 Broadway, Suite 400
Boulder, Colorado 80302
Jeffrey P. Jacobs....................... 190,476(3) 60,000 1,142,857(3) 35.96%
Diversified Opportunities Group Ltd.
c/o Jacobs Entertainment Ltd.
425 Lakeside Avenue
Cleveland, Ohio 44114
Stephen R. Roark........................ 1,700 137,500 28,571 5.85%
2060 Broadway, Suite 400
Boulder, Colorado 80302
Frank B. Day............................ 403,089 57,500 57,143 18.58%
2060 Broadway, Suite 400
Boulder, Colorado 80302
J. Patrick McDuff....................... -- 10,000 -- .37%
1375 Walnut
Boulder, Colorado 80302
Robert H. Hughes........................ -- 15,000 -- .56%
Diversified Opportunities Group Ltd.
c/o Jacobs Entertainment Ltd.
425 Lakeside Avenue
Cleveland, Ohio 44114
Martin S. Winick........................ -- 15,000 -- .56%
Mesirow Financial, Inc.
30050 Chagrin Boulevard
Pepper Pike, Ohio 44124
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
BENEFICIALLY OWNED
--------------------------------------------------------
NOTE
NAME SHARES OPTIONS(1) CONVERSIONS(2) PERCENTAGE(4)
---- ------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Officers and Directors as a group (seven
persons).............................. 1,000,398 407,500 1,285,714 61.67%
</TABLE>
- ---------------
(1) Represents shares underlying options.
(2) Represents shares which may be acquired on conversion at $5.25 per share of
certain promissory notes held by Messrs. Greenlee ($300,000), Jacobs
($6,000,000), Roark ($150,000) and Day ($300,000).
(3) These shares, and shares which may be acquired on conversion of certain
notes, are held by Diversified Opportunities Group, Ltd., an affiliate of
Mr. Jacobs, and are therefore deemed beneficially owned by him.
(4) All percentages are computed in accordance with Rule 13d-3 adopted under the
Securities Exchange Act of 1934.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of Black Hawk presently consists of seven members.
Seven Directors have been nominated by the Board for election at the annual
meeting. The persons authorized by the enclosed form of proxy will vote each
proxy received by them for the election of the seven nominees named below unless
contrary instructions are given. The term of office for all Directors will
commence on election and such persons will serve as Directors until their
successors are elected and qualified at the next annual meeting of shareholders
in 1998 or until their death or resignation. Each nominee has consented to be
named in this Proxy Statement and to serve if elected. It is not expected that
any nominee will become unable to serve as a Director prior to the annual
meeting.
THE BOARD OF DIRECTORS OF BLACK HAWK RECOMMENDS A VOTE FOR THE ELECTION OF
THE SEVEN NOMINEES NAMED BELOW. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THE NAMED NOMINEES UNLESS INSTRUCTIONS ARE GIVEN TO THE CONTRARY.
The following sets forth certain information with respect to each of the
directors and executive officers of Black Hawk:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
Robert D. Greenlee......................... 55 Co-Chairman of the Board and Treasurer
Jeffrey P. Jacobs.......................... 43 Co-Chairman of the Board and Chief
Executive Officer
Stephen R. Roark........................... 49 President, Chief Financial Officer and a
Director
Frank B. Day............................... 63 Vice President, Secretary and a Director
J. Patrick McDuff.......................... 48 A Director
Robert H. Hughes........................... 56 A Director
Martin S. Winick........................... 46 A Director
</TABLE>
ROBERT D. GREENLEE graduated from Iowa State University with a degree in
Radio & Television Broadcasting in 1963 and entered graduate school where he
obtained a Master's Degree in Journalism & Mass Communications in 1965. In 1970,
Mr. Greenlee and two partners who owned The Graphic Corporation, formed an
independent advertising agency which became known as Fultz, LaCasse & Greenlee.
The firm grew to be one of the largest agencies in the State of Iowa. In 1975,
Mr. Greenlee purchased an AM radio station in Boulder, Colorado, and in 1977
acquired a companion FM station. From 1975 through 1988 Mr. Greenlee was
President of Centennial Wireless, Inc., which operated the stations and
successfully competed in the Denver-Boulder radio market. The stations were sold
to a national group owner of stations in 1988. Mr. Greenlee was
3
<PAGE> 6
involved in other broadcast properties during this time through the present
having owned partial interest in other commercial broadcast stations.
Mr. Greenlee is President of Centennial Investment & Management Company,
Inc., a private investment and consulting firm located in Boulder, Colorado.
From September, 1991 to September 1995, Mr. Greenlee was President of Black
Hawk. Mr. Greenlee is active in local government activities and has served as an
elected member of the Boulder City Council since August 1982. He is past
Chairman of the six county Scientific and Cultural Facilities District. Mr.
Greenlee is also a director of Rock Bottom Restaurants, Inc., a publicly traded
company.
JEFFREY P. JACOBS, from 1995 to present, served as Chairman and Chief
Executive Officer of Jacobs Entertainment, Inc., a company based in Cleveland,
Ohio that has investments in other gaming companies and ventures, including
Black Hawk, Colonial Downs, Inc., a horse-racing track and the Holiday Inn
Boardwalk Hotel and Casino, Inc. in Las Vegas. From 1975 to present, he has also
served as President and Chief Executive Officer of Jacobs Investments, Inc., a
company engaged in the development, construction and operation of residential
and commercial real estate and entertainment projects in Ohio. Mr. Jacobs also
served in the Ohio House of Representatives from 1982 until 1986. He is also
Chairman and Chief Executive Officer of Colonial Downs, Inc. and a director of
Holiday Inn Boardwalk Hotel & Casino, Inc.
STEPHEN R. ROARK, has been employed as chief financial officer of Black
Hawk since August 1993. He was elected President of Black Hawk in September
1995. Prior to that time he has been an independent consultant in the Denver
area rendering financial and accounting assistance to companies in the public
marketplace. Mr. Roark has 20 years accounting experience having served as a
partner with a large local accounting firm and as a partner with a national
accounting firm. Mr. Roark was with Hanifen, Imhoff and Prudential Securities,
Inc. for three years and is a member of the American institute of Certified
Public Accountants and the Colorado Society of Certified Public Accountants. Mr.
Roark obtained his B.S.B.A. in Accounting from the University of Denver in 1973.
FRANK B. DAY, Chairman of the Board of Rock Bottom Restaurants, Inc., a
publicly traded company, has been employed since January 1980 as President of
Concept Restaurants, Inc., and Managing General Partner of the Hotel Boulderado
in Boulder, Colorado since August 1982. Concept Restaurants, Inc. owns or
operates over twenty full service restaurants in Colorado front range
communities. From 1959 to present, Mr. Day has owned and operated food service
and hospitality facilities in Illinois, Michigan, Wisconsin, and Colorado. He
attended Harvard University from 1950 to 1956 and received B.A. and M.B.A.
degrees. Mr. Day is also an active real estate investor and is active in many
civic and nonprofit organizations, having served as a director of the Boulder
Chamber of Commerce (September 1988 to September 1991) and Downtown Boulder,
Inc. (from June 1987 to June 1990).
J. PATRICK MCDUFF, has been President, Chief Executive Officer and director
of Vectra Bank of Boulder since July 1987. From 1972 through July 1987, Mr.
McDuff worked for IntraWest Bank of Boulder, ending his employment as Senior
Vice President and Senior Loan Officer. He attended the University of Arkansas
from 1966 to 1972 and received a B.S.B.A. degree in Finance and Commercial
Banking. Mr. McDuff is also active in many civic and non-profit organizations,
having served as a director of Boulder Center Y.M.C.A. (from January 1987 to
December 1992), Boulder Valley Rotary Club (from April 1985 to June 1988) and
Longs Peak Council of the Boy Scouts of America (from January 1991 to March
1993). Mr. McDuff serves as a director of Vectra Bank of Boulder, a wholly owned
subsidiary of Vectra Banking Corporation, a publicly traded company.
ROBERT H. HUGHES, has served as Chief Financial Officer of Jacobs
Investments, Inc. since 1993. Mr. Hughes was a partner in charge of the audit
department of the Cleveland office of the accounting firm of Deloitte & Touche
LLP until his retirement in 1991. Mr. Hughes is a certified public accountant.
MARTIN S. WINICK, has been in the investment banking/brokerage business
with Cowen & Co. (1981-1990); Dean Witter Reynolds (1990-1992); Rodman & Renshaw
(1992-1995); and Mesirow Financial (1995 to present) which is now part of
Ladenburg Thalmann & Co., Inc. Mr. Winick serves on the Board of Directors of
publicly traded Paul-Son Gaming Corp., a leading manufacturer of table games and
supplies.
4
<PAGE> 7
The Board of Directors has three committees whose members are as follows:
<TABLE>
<CAPTION>
EXECUTIVE AUDIT COMPENSATION
--------- ----- ------------
<S> <C> <C>
Jeffrey P. Jacobs Robert D. Greenlee Frank B. Day
Robert D. Greenlee Robert H. Hughes J. Patrick McDuff
Stephen R. Roark J. Patrick McDuff Martin S. Winick
</TABLE>
Black Hawk entered into three year employment agreements with Messrs.
Jacobs and Roark on November 12, 1996. Each agreement contains customary terms
and conditions and provides annual salaries of $150,000 and $125,000,
respectively, for Messrs. Jacobs and Roark. Mr. Jacobs is also entitled to
receive a bonus of 2.5% of Black Hawk's pre-tax net income exceeding $2,880,000
in any fiscal year during the term of his employment agreement.
Directors are elected at each annual meeting of Black Hawk's shareholders.
The next such meeting will be held in June 1998. Officers are appointed by the
directors and serve at the pleasure of the Board or until their death,
incapacity or resignation. All directors except Messrs. Jacobs and Roark receive
$1,000 and $500 per Board and Committee meeting attended, respectively.
Effective January 1, 1997, this compensation will be paid in the form of
restricted Common Stock of Black Hawk valued at the market price on the meeting
date.
There are no family relationships between or among any directors or
executive officers and except as set forth in their respective resumes, and,
except as set forth in the above resumes, none serve as a director of any
company required to file reports under the Securities Exchange Act of 1934 or
which is registered under the Investment Company Act of 1940.
EXECUTIVE COMPENSATION
The following sets forth compensation received by officers and directors
for the periods indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- -----------------------------------
AWARDS PAYOUTS
---------- ---------------------
SECURITIES
OTHER UNDER-
ANNUAL RESTRICTED LYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME OF SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
OFFICER/DIRECTOR YEAR(B) ($)(C) ($)(D) ($)(E) ($)(F) (#)(G) ($)(H) ($)(I)
---------------- ------- ------- ------ ------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert D. Greenlee 1994 75,000 -- -- -- 22,500(3) -- 6,500
1995 75,000 -- -- -- 50,000(3) -- 3,500
1996 75,000 -- -- -- 40,000 -- 6,500
Jeffrey P. Jacobs 1994 -- -- -- -- -- -- --
1995 -- -- -- -- -- -- --
1996 12,500(2) -- -- -- 60,000(1) -- --
Stephen R. Roark 1994 100,000 -- -- -- 52,500(3) -- 6,500
1995 112,500 25,000 -- -- 50,000(3) -- 4,000
1996 125,000 -- -- -- 35,000 -- 6,500
Frank B. Day 1994 27,872 -- -- -- 22,500(3) -- 5,500
1995 -- -- -- -- 15,000(3) -- 4,000
1996 -- -- -- -- 20,000 -- 6,500
</TABLE>
- ---------------
(1) Does not include options to purchase 90,000 shares which were granted to
certain designees of Mr. Jacobs who disclaims beneficial ownership in both
the options and underlying shares.
(2) One month's compensation.
(3) Repriced in 1996 and included in the number of securities underlying
options/SARs granted in 1996.
5
<PAGE> 8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- ALTERNATIVE TO
(F) AND (G)
PERCENT OF GRANT DATE
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS/ VALUE AT ASSUMED --------------
UNDERLYING SARS ANNUAL RATES OF STOCK
OPTIONS/ GRANTED TO PRICE APPRECIATION
SARS EMPLOYEES EXERCISE ON FOR OPTION TERM GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION ----------------------- PRESENT VALUE
NAME (A) (#)(B) YEAR(C) ($/SH)(D) DATE(E) 5% ($)(F) 10% ($)(G) $(H)
-------- ---------- ---------- ----------- ---------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Greenlee... 112,500(1) 18.5% 6.19 1999-2001 109,766 230,500 --
Jeffrey P. Jacobs.... 60,000 9.9% 5.63 2006 114,782 260,402 --
Stephen R. Roark..... 137,500(1) 22.6% 5.63 2004-2006 263,043 596,754 --
Frank B. Day......... 57,500(1) 9.5% 6.19 1999-2001 56,103 117,811 --
</TABLE>
- ---------------
(1) Includes options granted in 1996 and options which were repriced in 1996
(see table below).
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES ACQUIRED FY-END (#) AT FY-END ($)
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (A) (#)(B) REALIZED ($)(C) UNEXERCISABLE(D) UNEXERCISABLE(E)
-------- --------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Robert D. Greenlee............... -- -- -- --
Jeffrey P. Jacobs................ -- -- -- --
Stephen R. Roark................. -- -- -- --
Frank B. Day..................... -- -- -- --
</TABLE>
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES LENGTH OF ORIGINAL
UNDERLYING MARKET PRICE OF EXERCISE PRICE OPTION TERM
OPTIONS/ STOCK AT TIME OF AT TIME OF NEW REMAINING AT
SARS REPRICED REPRICING OR REPRICING OR EXERCISE DATE OF
OR AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
NAME(A) DATE(B) (#)(C) ($)(D) ($)(E) ($)(F) AMENDMENT(G)
------- ----------------- ------------- ---------------- -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Greenlee......... November 12, 1996 72,500 5.625 7.45 to 11.00 6.19 3 to 4 years
Stephen R. Roark........... November 12, 1996 102,500 5.625 6.75 to 10.00 5.625 8 to 9 years
Frank B. Day............... November 12, 1996 37,500 5.625 7.45 to 11.00 6.19 3 to 4 years
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to a Purchase Agreement described under Item 1 of Black
Hawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
which describes certain transactions between Black Hawk and Diversified
Opportunities Group Ltd. ("DOGL") an affiliate of Jeffrey P. Jacobs, Black
Hawk's Chief Executive Officer and Co-Chairman of its Board of Directors. In
general the Purchase Agreement provided: (i) that DOGL would purchase 190,476
shares of Black Hawk's Common Stock for $5.25 per share (a total of $1,000,000);
(ii) that DOGL would loan Black Hawk up to an additional $6,000,000 which loan
is convertible into 1,142,857 shares of Black Hawk's Common Stock (at $5.25 per
share); (iii) that Mr. Jacobs would become Co-Chairman of the Board, Chief
Executive Officer of Black Hawk and have the right to appoint three of Black
Hawk's seven member Board. The Purchase Agreement further provides that Mr.
Jacobs has the right to appoint five of Black Hawk's nine member Board when
Jacobs and his affiliates own 820,000 or more shares of Black Hawk's Common
Stock.
6
<PAGE> 9
The Purchase Agreement also requires that Messrs. Greenlee, Roark and Day,
officers and directors of Black Hawk, must loan $300,000, $150,000 and $300,000,
respectively, to Black Hawk when DOGL has funded the entire balance of its
notes, or $6,000,000. The notes of Messrs. Greenlee, Roark and Day are
convertible into shares of Black Hawk's Common Stock at $5.25 per share.
Reference is made to the "LLC Agreement" described under Item 1 of Black
Hawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
which describes certain transactions between Black Hawk and DOGL and BH
Entertainment Ltd. ("BH"), both affiliates of Jeffrey P. Jacobs. Among other
things, the LLC Agreement provides for the formation of Black Hawk/BH
Entertainment LLC (the "LLC"), a Colorado limited liability company owned 75% by
Black Hawk and 25% by BH and organized for the purpose of developing and
operating the Black Hawk/Jacobs Project a major hotel/casino complex. Black Hawk
is obligated to contribute land and cash valued at $15 million dollars for its
equity in the LLC and BH is obligated to contribute land and cash valued at $5
million dollars for its 25% interest. Black Hawk and BH will share a management
fee of 5% of adjusted gross proceeds from future gaming operations of the LLC
and will share profits and losses on a 75%-25% basis. An affiliate of Mr. Jacobs
received a $600,000 project development fee from the LLC in consideration for
various pre-development and development services. Finally, Mr. Jacobs and other
affiliates are to receive an annual credit enhancement fee of 2% of the amount
so guaranteed for guaranteeing the LLC's multi million dollar credit facility.
The LLC Agreement also provides that future gaming opportunities coming to the
attention of Black Hawk or Mr. Jacobs and his affiliates will be offered for
further joint ventures on a basis where Black Hawk can maintain a 51% interest
in any such future gaming ventures.
The agreements described above were negotiated at arm's length between
Black Hawk and Mr. Jacobs and his affiliates prior to Mr. Jacobs' affiliation
with Black Hawk and are deemed by management of Black Hawk to be fair and in the
best interest of Black Hawk and its shareholders.
In the third quarter of 1996, Black Hawk entered into an agreement with Mr.
Greenlee wherein Mr. Greenlee undertook to use his best efforts, in his sole
discretion, to acquire a gaming concession in Mexico. During the fourth quarter
of 1996, Black Hawk terminated its efforts to acquire a gaming concession in
Mexico. Black Hawk then entered into an agreement with Mr. Greenlee whereby
Black Hawk allowed Mr. Greenlee to continue to pursue this potential opportunity
at Mr. Greenlee's sole cost and expense. Although no consideration was paid by
Mr. Greenlee to Black Hawk with respect to the agreement, if Mr. Greenlee's
efforts prove successful, Black Hawk will have a right of first refusal to
negotiate an acquisition of all or a part of Mr. Greenlee's interest, negotiate
to act as a manager of any such concession, or both. There can be no assurance
that Mr. Greenlee's efforts will be successful.
In March 1997, Messrs. Jacobs and Greenlee posted personal letters of
credit in the approximate amount of $1,200,000 each in favor of the City of
Black Hawk, The letters of credit were required to guarantee performance of the
Black Hawk/Jacobs Project under the terms of a Subdivision Improvement Agreement
with the City of Black Hawk. The Black Hawk/Jacobs Project agreed to pay all
out-of-pocket transaction costs incurred by Messrs. Jacobs and Greenlee and to
pay additional consideration to be negotiated.
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has engaged the firm of Deloitte & Touche LLP as
independent auditors to audit and report to the shareholders on the financial
statements of Black Hawk for the years 1991 through 1996. Representatives of the
firm are expected to be present at the annual meeting and will have the
opportunity make a statement if they desire to do so and will be available to
respond to appropriate questions. Although shareholder approval of the
engagement of independent auditors is not required by law, the Board of
Directors desires to solicit shareholder's reaction. If the appointment of
Deloitte & Touche LLP is not approved by a majority of the shares represented at
the meeting, the Board of Directors will consider the appointment of other
independent auditors for 1997. Moreover, if satisfactory arrangement as to the
timing and costs of the 1997 audit cannot be made, the Board reserves the right
to engage another of the national accounting firms.
7
<PAGE> 10
Deloitte & Touche LLP has acted as the independent auditors of the Company
for the past six years. Deloitte & Touche LLP's report on the financial
statements of the Company for the past four years did not contain an adverse
opinion or a disclaimer of opinion and the reports were not qualified or
modified as to uncertainty, audit scope, or accounting principles except that
the opinion of Deloitte & Touche LLP with respect to the 1991 and 1992 financial
statements was qualified as to the ability of the Company to continue as a going
concern due to its deficiency in working capital. This was during the Company's
start-up and development period. During all six years, there were no
disagreements with Deloitte & Touche LLP on any matter of accounting principle
or practice, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Deloitte & Touche LLP, would have
caused Deloitte & Touche LLP to make a reference to the subject matter of the
disagreement in connection with its reports.
THE BOARD OF DIRECTORS OF BLACK HAWK RECOMMENDS A VOTE FOR THE APPROVAL OF
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE YEAR 1997
SUBJECT TO THE DISCUSSION ABOVE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
WILL BE VOTED FOR THIS PROPOSAL UNLESS A VOTE AGAINST THIS PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's Proxy Statement for the
1997 Annual Meeting, proposals of the shareholders must be received by the
Company no later than January 12, 1998. Such proposals should be directed to the
Secretary of the Company.
By Order of the
Board of Directors
By: /s/ FRANK B. DAY
------------------------------------
Frank B. Day, Secretary
Boulder, Colorado
May 12, 1997
8
<PAGE> 11
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PROXY PROXY
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
2060 Broadway, Suite 400
Boulder, Colorado 80302
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Black Hawk Gaming & Development Company, Inc.
acknowledges receipt of the notice of Annual Meeting of Shareholders, to be held
Thursday, June 12, 1997, at 10:00 a.m., at the Boulderado Hotel, 2115 13th
Street, Boulder, Colorado and hereby appoints Jeffrey P. Jacobs or Robert D.
Greenlee, or either of them, each with the power of substitution, as Attorneys
and Proxies to vote all the shares of the undersigned at the Annual Meeting and
at all adjournments thereof, hereby ratifying and confirming all that the
Attorneys and Proxies may do or cause to be done by virtue hereof. The
above-named Attorneys and Proxies are instructed to vote all of the
undersigned's shares as follows:
1. Election of Seven Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<TABLE>
<S> <C> <C>
[ ] Jeffrey P. Jacobs [ ] Stephen R. Roark [ ] Frank B. Day
[ ] Robert D. Greenlee [ ] J. Patrick McDuff [ ] Robert H. Hughes
[ ] Martin S. Winick
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK THE BOX NEXT TO THAT NOMINEE'S NAME.)
2. Approval of the appointment of Deloitte & Touche LLP as independent auditors
for 1997, subject to the discussion set forth in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Transaction of such other business as may properly come before the meeting.
(Continued on reverse side)
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<PAGE> 12
- --------------------------------------------------------------------------------
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 2 AND FOR THE NOMINEES LISTED ABOVE IN PROPOSAL 1.
DATED:
------------------------------, 1997
-----------------------------------
SIGNATURE
-----------------------------------
SIGNATURE IF HELD JOINTLY
Please sign your name exactly as it
appears below. When shares are held
by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY. NOTE: SECURITIES
DEALERS PLEASE STATE THE NUMBER OF SHARES VOTED BY THIS PROXY:
-------------
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