SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by Registrant [x]
Filed by a Party Other than Registrant [ ]
Check the Appropriate Box:
[ x ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as submitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11(c) or
14a-12
Alpha Hospitality Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(l) 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 the 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 is
determined):
4) Proposed maximum aggregate value of transaction: $
5) Total fee paid: $
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing:
1) Amount Previously Paid: $_______________.
2) Form, Schedule or Registration Statement No.:______________
3) Filing Party:
4) Date Filed:
Copies of all communications to:
Edward Turney Savage, Esq.
Parker Duryee Rosoff & Haft, P.C.
529 Fifth Avenue
New York, New York 10017
<PAGE>
ALPHA HOSPITALITY CORPORATION
12 East 49th Street, 24th floor
New York, New York 10017
NOTICE OF MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 16, 1999
To the Stockholders of Alpha Hospitality Corporation:
Notice is hereby given that a combined Annual and Special
Meeting (the "Meeting")
of Stockholders of Alpha Hospitality Corporation (the "Company"), a
Delaware corporation,
will be held at The Grand Hyatt Hotel, East 42nd Street between Park
Avenue and Lexington
Avenue, New York, New York, on September 16, 1999, at 11:00 a.m.
(local time) for the
following purposes:
Proposal 1: To elect six members to the Board of Directors of the Company;
Proposal 2: To consider and vote on a proposal to amend the Company's
Certificate of Incorporation to (i) increase the number of
authorized shares of the Company's Common Stock from 25,000,000
shares to 75,000,000 shares and (ii) to increase the number of
authorized shares of the Company's "blank check"
Preferred Stock from 1,000,000 shares to 5,000,000 shares;
Proposal 3: To consider and vote upon a proposal to adopt the Company's 1998
Stock Option Plan;
Proposal 4: To consider and vote upon a proposal to amend the
Company's by-laws to permit the granting of compensation to
members of the Company's Board of Directors (or any committee
thereof) as determined by the Board of Directors,
without separate stockholder approval;
Proposal 5: To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to enable and authorize the Board of
Directors to adopt, amend or repeal by-laws of the Company;
Proposal 6: To consider and vote upon a proposal to allow the
Company's Chief Executive Officer, subject to certain conditions,
to convert up to $2,000,000 in accrued but unpaid salary into up
to 1,000,000 shares of the Company'S Common Stock at
a conversion rate of $2.00 per share, which per share price was
the current market price at the time the Board of Directors
adopted this proposal, subject to stockholder approval;
Proposal 7: Ratification of Rothstein, Kass & Company, P.C. as the
Company's independent certified public accountants; and
to transact any such other business as may properly come before the
Meeting or any postponement or adjournment thereof.
The Board of Directors of the Company has fixed July 28, 1999 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Meeting or any postponement or
adjournment thereof. Accordingly, only stockholders of record at the close
of business on the Record Date are entitled to notice of, and shall be
entitled to vote at, the Meeting or any postponement or adjournment thereof.
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE
MEETING. YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION
AT THE MEETING, PLEASE COMPLETE, SIGN AND PROMPTLY MAIL YOUR
PROXY IN THE RETURN ENVELOPE PROVIDED. YOUR FAILURE TO EXERCISE
YOUR VOTE WILL HAVE THE EFFECT OF A VOTE AGAINST THE PROPOSED
AMENDMENTS OF THE CERTIFICATE OF INCORPORATION. Submitting a proxy will
not prevent you from voting in person, should you so desire, but will
help to secure a quorum and will avoid added solicitation costs.
You may revoke your proxy at any time before it is voted at the Meeting.
By Order of the Board of Directors,
_____________________________ ___________________________
Stanley S. Tollman Thomas W. Aro
Chairman of the Board, President Secretary
and Chief Executive Officer
August __, 1999
<PAGE>
ALPHA HOSPITALITY CORPORATION
12 EAST 49TH STREET, 24th floor
NEW YORK, NEW YORK 10017
__________________
PROXY STATEMENT
__________________
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 11:00 a.m. AT THE GRAND HYATT HOTEL
EAST 42nd STREET BETWEEN PARK AVENUE AND LEXINGTON AVENUE
NEW YORK, NEW YORK
SEPTEMBER 16, 1999
This Proxy Statement is furnished in connection with the
solicitation by the Board
of Directors of Alpha Hospitality Corporation (the "Company") for
use at a combined Annual
and Special Meeting of Stockholders of the Company (the "Meeting")
to be held at 11:00 a.m.
at the Grand Hyatt Hotel, East 42nd Street between Park Avenue and
Lexington Avenue, New
York, New York, on September 16, 1999, and at all adjournments and
postponements thereof.
This Proxy Statement, with the accompanying Notice of Meeting and
form of proxy, are first
being sent to the stockholders on or about August _____, 1999.
A proxy card is enclosed. Whether or not you plan to attend the
Meeting in person,
please date, sign and return the enclosed proxy card as promptly as
possible in the postage
prepaid envelope provided to ensure that your shares will be voted at
the Meeting. Any
stockholder who returns a proxy has the power to revoke it at any time
prior to its effective
use by filing an instrument revoking it, or a duly executed proxy
bearing a later date, with the
Secretary of the Company, or by attending the Meeting and voting in
person. Unless
otherwise instructed, any such proxy, if not revoked, will be voted at
the Meeting "FOR"
each of the proposals set forth in this Proxy Statement and as
recommended by the
Company's Board of Directors (the "Board"), in its discretion, with
regard to all other matters
that may properly come before the Meeting. The Company does not
currently know of any
such other matters.
At the Record Date, there were outstanding 16,788,228 shares of
the Company's
Common Stock, 821,496 shares of the Company's Series B Preferred
Stock and 135,162
shares of the Company's Series C Preferred Stock. The presence,
either in person or
represented by proxy, of persons entitled to exercise a majority of all
votes entitled to be
exercised by all of the Company's outstanding capital stock (i.e., the
Common Stock, the
Series B Preferred Stock and the Series C Preferred Stock) is
necessary to constitute a quorum
for the transaction of business at the Meeting.
Each share of Common Stock issued and outstanding on the
Record Date is entitled
to one vote, each share of Series B Preferred Stock is entitled to eight
(8) votes, and each share
of Series C Preferred Stock is entitled to twenty-four (24) votes on any
matter presented for
consideration and action by the stockholders at the Meeting. A
quorum being present, a
majority of the votes cast are necessary to pass each of the proposals
to be made at the
Meeting other than the proposals to amend the Certificate of
Incorporation, which requires a
majority of all votes entitled to be exercised by all of the Company's
outstanding capital stock
(i.e., the Common Stock, the Series B Preferred Stock and the Series
C Preferred Stock), and
other than the election of directors, who are elected by a plurality of
the votes cast.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the
accompanying form of proxy, and the cost of soliciting proxies
relating to the Meeting, will
be borne by the Company. The Company intends to request banks and
brokers to solicit their
customers who beneficially own Common Stock listed of record in
names of nominees and
will reimburse such banks and brokers for their reasonable
out-of-pocket expenses for such
solicitations. To the extent solicitation of the holders of the
Company's outstanding shares of Preferred Stock (whether
<PAGE>
Series B or C) may be deemed necessary, the Company (through
its directors and officers) anticipates making such solicitation directly.
The solicitation of
proxies by mail may be supplemented by telephone, telegram and
personal solicitation by
officers, directors and other employees of the Company, but no
additional compensation will be paid to such individuals.
<PAGE>
THE MEETING
Time and Place of Special Meeting
The Meeting is scheduled to be held at 11:00 a.m., local time, on
the 16th of
September, 1999 at The Grand Hyatt Hotel, East 42nd Street between
Park Avenue and
Lexington Avenue, New York, New York.
Purpose of the Meeting
At the Meeting, the Company's stockholders will be asked (a) to
elect six members
to the Board for the ensuing year, (b) to consider and vote on a
proposal to amend the
Company's Certificate of Incorporation to (i) increase the number of
authorized shares of the
Company's Common Stock from 25,000,000 shares to 75,000,000
shares and (ii) increase the
number of authorized shares of the Company's "blank check"
Preferred Stock from 1,000,000
shares to 5,000,000 shares, (c) to consider and vote upon the adoption
of the Company's 1998
Stock Option Plan, (d) to consider and vote upon a proposal to amend
the Company's by-laws
to permit the granting of compensation to members of the Board (or
any committee thereof)
as determined by the Board, without separate stockholder approval, (e)
to consider and vote
upon a proposal to amend the Company's Certificate of Incorporation
to enable and authorize
the Board to adopt, amend or repeal by-laws of the Company, (f) to
consider and vote upon
a proposal to allow Stanley S. Tollman (the Company's Chief
Executive Officer and
Chairman of the Board), subject to certain conditions, to convert up to
$2,000,000 in accrued
but unpaid salary into up to 1,000,000 shares of the Company's
common stock at a
conversion rate of $2.00 per share (such price being the market price
of a share of Common
Stock on the date the Board adopted the proposal, subject to
stockholders approval), (g) to
ratify Rothstein, Kass & Company, P.C. as the Company's
independent certified public
accountants, and (h) to transact any such other business as may
properly come before the
Meeting or any postponement or adjournment thereof.
Voting and Solicitation of Proxies
All shares of Common Stock and Series B and Series C Preferred
Stock represented
at the Meeting by properly executed proxies received prior to the vote
at the Meeting, unless
previously revoked (as described immediately below), will be voted in
accordance with the
instructions thereon. Where a properly signed proxy is returned and
no instructions are given,
proxies will be voted FOR (i) the election of the nominees named
herein as members of the
Board, (ii) the proposed amendments to the Company's Certificate of
Incorporation, (iii) the
adoption of the Company's 1998 Stock Option Plan, (iv) the proposed
amendment to the
Company's by-laws, (v) the proposal to allow Stanley S. Tollman,
subject to certain
conditions, to convert unpaid salary into shares of Common Stock, and
(vi) the ratification of
Rothstein, Kass & Company, P.C. as the Company's independent
certified public accountants.
No matters other than those referred to above are presently scheduled
to be considered at the
Meeting. A broker who holds shares in street name will not be
entitled to vote on either of the
proposals to amend the Certificate of Incorporation without
instructions from the beneficial
owner of such shares. This inability to vote is referred to as a broker
non-vote. Stockholder
abstentions and broker non-votes will be counted for purposes of
determining the existence
of a quorum at the Meeting. However, because, under the General
Corporation Law of the
State of Delaware and the Company's Certificate of Incorporation and
by-laws, the proposals
to amend the Certificate of Incorporation, in order to be approved,
must be approved by vote
of holders of shares of the capital stock of the Company entitled to
exercise a majority of all
of the votes attendant or attributable to all of the Company's
outstanding Common Stock,
Series B Preferred Stock and Series C Preferred Stock, abstentions
and broker non-votes will
have the same effect as a vote against such proposals.
Any proxy may be revoked by the person giving it at any time
before it is voted. A
proxy may be revoked by filing with the Secretary of the Company
(12 East 49th Street, 24th
floor, New York, New York 10017) either (i) a written notice of
revocation bearing a date
later than the date of such proxy or (ii) a subsequent proxy relating to the
<PAGE>
same shares, or by
attending the Meeting and voting in person (although attendance at the
Meeting will not, in
and of itself, constitute revocation of a proxy).
Proxies are being solicited by and on behalf of the Company. The
Company will
solicit proxies by mail, and the directors, officers and employees of
the Company may also
solicit proxies by telephone, telegram or personal interview. Those
persons will receive no
additional compensation for these services but will be reimbursed for
reasonable out-of-pocket expenses. The Company will bear the costs
of preparing and mailing the proxy
materials to stockholders in connection with the Meeting.
Arrangements will be made to
furnish copies of the proxy materials to fiduciaries, custodians and
brokerage houses for
forwarding to beneficial owners of shares of Common Stock. Such
persons will be paid
reasonable out-of-pocket expenses.
Shares Entitled to Vote
The close of business on July 28, 1999 has been fixed as the record
date (the "Record
Date") for determining the stockholders entitled to notice of and to
vote at the Meeting. As
of the Record Date, there were 16,788,228 shares of Common Stock,
821,496 shares of Series
B Preferred Stock and 135,162 shares of Series C Preferred Stock of
the Company issued and
outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one
vote, each share of
Series B Preferred Stock entitles the holder thereof to eight (8) votes,
and each share of Series
C Preferred Stock entitles the holder thereof to twenty-four (24) votes.
Accordingly, a total
of 26,604,084 votes may be cast at the Meeting. The holders of shares
of Common Stock and
Preferred Stock (whether Series B or Series C) representing a majority
of all votes entitled to
be cast at the Meeting, present in person or represented by proxy at the
Meeting, shall
constitute a quorum. Abstentions and broker non-votes are counted as
present in determining
whether the quorum requirement is satisfied.
Vote Required
A quorum being present at the Meeting, the directors shall be
elected by a plurality
of the votes cast, and ratification or approval of the 1998 Stock Option
Plan, ratification or
approval of the proposed amendment of the Company's by-laws,
ratification or approval of
the proposal to allow Mr. Tollman to convert accrued but unpaid
salary into shares of
Common Stock and ratification of Rothstein, Kass & Company, P.C.
as the Company's
independent certified public accountants shall require the affirmative
vote of a majority of the
votes cast. A majority of all votes entitled to be exercised by all of the
Company's
outstanding capital stock (i.e., the Common Stock, the Series B
Preferred Stock and the Series
C Preferred Stock) will be necessary for the approval of the proposals
to amend the Certificate
of Incorporation. Abstentions and broker non-votes will be counted as
votes against such
proposal to amend the Certificate of Incorporation. A broker non-vote
occurs when a
nominee holding shares for a beneficial owner does not vote on a
proposal because the
nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
The Company's by-laws, as originally drafted, did not contemplate
the issuance of
shares of capital stock that were entitled to other than one vote per
share. Consequently, upon
the issuance of shares of Preferred Stock (which are entitled to 8 votes
per share with respect
to the Series B Preferred Stock and 24 votes per share with respect to
the Series C Preferred
Stock), certain provisions of the Company's by-laws (e.g., those
providing for the
establishment of a quorum and the vote necessary to approve various
actions), which spoke
in terms of holders of a prescribed number of shares (rather than
shares entitled to exercise
a prescribed number of votes), became no longer appropriate.
Consequently, by written
consent of stockholders entitled to exercise a majority of all votes
attendant or attributable to
all of the Company's outstanding capital stock, those provisions have
been revised, effective
July 21, 1999, to reflect that the determining factor relates to the
number of votes represented
by shares, rather than merely by the number of shares. A copy of such
written consent is attached hereto as Exhibit A.
<PAGE>
Shares Committed
The Company has been advised by various members of
management and the Board
and others who, in the aggregate, hold or otherwise have voting power
with respect to
6,246,685 shares of Common Stock (representing approximately 37%
of the shares of
Common Stock outstanding) that they intend to vote such shares in
favor of each of the
proposals to be presented for consideration and approval at the
Meeting, including the election
of each of the candidates nominated to serve on the Board. The
Company has also been
advised by each of Bryanston Group, Inc. ("Bryanston") and BP
Group Inc. ("BP") that it
intends to vote all of its shares of Preferred Stock in favor of each of
such proposals. If the
shares of Common Stock referred to above are voted, as management
has been advised they
will be, in favor of each of such proposals and if Bryanston (which, as
of the Record Date,
owned of record 777,238 shares of Series B Preferred Stock (or
approximately 94.6% of the
outstanding shares of Series B Preferred Stock), entitling it to exercise
6,217,904 votes, and
135,162 shares of Series C Preferred Stock (or 100% of the
outstanding shares of Series C
Preferred Stock), entitling it to exercise 3,243,888 votes, and BP
(which, as of the Record
Date, owned of record 44,258 shares of Series B Preferred Stock (or
approximately 5.4% of
the outstanding shares of Series B Preferred Stock), entitling it to
exercise 354,064 votes, vote
all of their respective shares of Preferred Stock in favor of each of
such proposals,
approximately 60% of the total votes eligible to be cast at the Meeting
will be voted in favor
of each of the proposals and, as a result, each of such proposals
(including the election of each
of the candidates nominated to serve on the Board) will be approved
notwithstanding the
manner in which votes are cast by holders of any other shares of the
Company's capital stock.
No Appraisal Rights
Under the General Corporation Law of the State of Delaware,
stockholders of the
Company do not have appraisal rights in connection with any of the
proposals upon which
a vote is scheduled to be taken at the Meeting.
<PAGE>
OWNERSHIP OF SECURITIES
Only stockholders of record at the close of business on July 28,
1999 (the "Record
Date"), the date fixed by the Board of Directors in accordance with the
Company's by-laws,
are entitled to notice of, and to vote at, the Meeting. As of such date,
there were issued and
outstanding 16,788,228 shares of Common Stock, 821,496 shares of
Series B Preferred Stock
and 135,162 shares of Series C Preferred Stock. The holders (present
in person or represented
by proxy at the Meeting) of outstanding shares of Common Stock and
Preferred Stock, taken
together, entitled to exercise a majority of votes with respect to all
outstanding shares of
capital stock, is necessary to constitute a quorum for the Meeting.
Each outstanding share of Common Stock is entitled to one vote on
all matters
properly coming before the Meeting. Each share of Series B Preferred
Stock is entitled to
eight (8) votes on all such matters, and each share of Series C
Preferred Stock is entitled to
twenty-four (24) votes on all such matters.
The following table sets forth certain information as of the Record
Date, with respect
to each beneficial owner of five percent (5%) or more of the
outstanding shares of any class
of stock, each officer of the Company, each director of the Company,
each individual
nominated to be elected a director and all officers and directors of the
Company as a group.
Unless otherwise indicated, the address of each such person or entity is
Alpha Hospitality
Corporation, 12 East 49th Street, 24th floor, New York, New York
10017.
<TABLE>
<CAPTION>
Title of Class Name and Address No. of Shares (1) Percent of Class
<S> <C> <C> <C>
Common Stock Stanley S. Tollman <F2> 0 0
$.01 par value Beatrice Tollman <F2> 1,815,890 10.8
Thomas W. Aro <F3> 189,500 1.1
Brett G. Tollman<F4> 1,719,875 10.1
James A. Cutler <F5><F6> 66,320 .4
Matthew B. Walker<F6> 404,237 2.4
Herbert F. Kozlov<F6> 0 0
Craig Kendziera<F7> 12,300 .07
Robert Steenhuisen<F8> 70,000 .4
Bryanston Group, Inc.<F9> 8,979,793 38.4
All Officers and Directors
as a group (8 persons)
<F2,F3-8> 2,462,232 14.3
Series B Bryanston Group, Inc.<F9> 777,238 94.6
Preferred
Stock BP Group, Ltd. <F10> 44,258 5.4
$29.00
liquidation 5111 Isleworth Country Club Dr.
value Windmere, FL 34786
Series C Bryanston Group, Inc.<F11> 135,162 100
Preferred
Stock
$72.00
liquidation
value
</TABLE>
_________________
<F1>
(1) Each person exercises sole voting and dispositive power with
respect to the shares reflected in the table, except for those shares of
Common Stock that are issuable upon the exercise of options or the conversion
of Preferred Stock, which shares of
Common Stock cannot be voted until the options are exercised or such Preferred
Stock is converted by the holders thereof. The table includes for
each separate beneficial owner,acquired upon exercise of options or conversion
of convertible securities that are presently exercisable or convertible or
become exercisable or convertible within 60 days.
<PAGE>
<F2>
(2) Stanley S. Tollman, the Chairman of the Board, Chief Executive
Officer and President of the Company, is the spouse of Beatrice Tollman.
Stanley S. Tollman disclaims beneficial ownership of the shares beneficially
owned by Beatrice Tollman. Does not include 250,000 shares of Common Stock
issuable upon the exercise of options granted to Mr. Tollman, which grant is
subject to stockholder approval as part of the 1998 Stock Option Plan. Does
not include the right of Mr.
Tollman to convert, under certain conditions, up to $2,000,000 of accrued but
unpaid salary into up to 1,000,000 shares of Common Stock at a
conversion rate of
$2 per share, which is subject to stockholder approval as Proposal 6 hereof.
<F3>
(3) Includes 160,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Aro and 7,500 shares of Common Stock issuable
upon the exercise of warrants purchased by Mr. Aro, all of which options and
warrants are currently
exercisable. Excludes 130,000 shares of Common Stock issuable
upon the exercise
of options granted to Mr. Aro, which grant is subject to stockholder
approval as part of the 1998 Stock Option Plan.
<F4>
(4) Includes 160,000 shares of Common Stock issuable upon the
exercise of options
granted to Brett G. Tollman, all of which options are currently
exercisable, and
1,000,000 shares held in the Tollman Family Trust, of which Brett
G. Tollman is the
sole Trustee. Brett G. Tollman is the son of Stanley S. Tollman
and Beatrice
Tollman. Each of Brett G. Tollman, Stanley S. Tollman and Beatrice Tollman
disclaims beneficial ownership of the shares beneficially owned by
any of the other
of them. Excludes 115,000 shares issuable upon the exercise of options
granted to Mr. Tollman, which grant is subject to stockholder approval as part
of the 1998 Stock Option Plan.
<F5>
(5) Includes 40,000 shares of Common Stock issuable upon the
exercise of options granted to Mr. Cutler, all of which options are currently
exercisable. Does not
include 4,000 shares owned by Mr. Cutler's children, of which shares he
disclaims beneficial ownership.
<F6>
(6) Does not include shares of Common Stock issuable upon the
exercise of options granted in 1998 and 1999 to the Company's non-employee
directors, Messrs.
Kozlov, Cutler and Walker, in consideration for their rendering of
service to the
Company. In May 1998 options were granted to Mr. Kozlov for up
to 40,000
shares, to Mr. Cutler for up to 55,000 shares, and to Mr. Walker for
up to 40,000 shares. In December 1998 the Board granted options to Mr.
Kozlov for up to 55,000
shares, to Mr. Walker for up to 40,000 shares and to Mr. Cutler for
up to 55,000
shares. In May 1999 the Board granted options to purchase 50,000
shares to each
of Messrs. Kozlov, Cutler and Walker bringing their respective
option totals to 145,000, 130,000 and 160,000. All of the aforementioned
options were granted by
the Board subject to approval by the stockholders of the Company's proposed 1998
Stock Option Plan, and will be rescinded if such Plan is not so approved.
<F7>
(7) Includes 12,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Kendziera, which are currently exercisable.
Excludes 58,000 shares
which are issuable upon the exercise, of options granted subject to stockholder
approval as part of the 1998 Stock Option Plan.
<F8>
(8) Includes 70,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Steenhuisen, all of which are immediately exercisable.
<F9>
(9) Includes: (i) 2,414,063 shares of Common Stock owned by Bryanston
Group, Inc. ("Bryanston"); (ii) 6,217,904 shares of Common Stock issuable
upon conversion of
777,238 shares of Series B Preferred Stock owned by Bryanston;
and (iii) 347,826 shares of Common Stock issuable upon the exercise of options
granted to Bryanston.
All of such options are currently exercisable for, and all of such
shares of Preferred Stock, are convertible into, shares of Common Stock.
Excludes 3,243,888 shares of
Common Stock, which would be issuable upon the conversion of 135,162 shares of
Series C Preferred Stock owned by Bryanston, since such
<PAGE>
shares of Series C Preferred Stock are not eligible to be converted
until after stockholder approval of
Proposal 2 and the subsequent filing of an appropriate amendment
to the Company's Certificate of Incorporation. As of January 31 1999, the
Company became obligated to issue to Bryanston approximately 1,900,000 and
255,000 additional shares of
Common Stock, with respect to, and in lieu of, the cash dividend
payable on Bryanston's shares of Series B Preferred Stock and Series C
Preferred Stock,
respectively, for the 1998 calendar year. None of such shares of
Common Stock is included in the table above as they have not yet been issued.
Bryanston is an affiliate of the Company, and Beatrice Tollman, Stanley S.
Tollman's spouse, is a 50% stockholder of Bryanston. Each of Bryanston and
Beatrice Tollman disclaims
beneficial ownership of the shares beneficially owned by the other of them.
<F10>
(10) Patricia Cohen, who was a Director of the Company during the
period February 1, 1994 to December 12, 1997, is the sole stockholder of BP.
As of January 30, 1999, the Company became obligated to issue to BP
approximately 110,000 additional
shares of Common Stock with respect to, and in lieu of, the cash
dividend payable
on BP's shares of Series B Preferred Stock for the 1998 calendar
year. None of such
shares of Common Stock is included in the table above as they have not yet been
issued.
<F11>
(11) In connection with the retirement of $9,731,664 of debt of the
Company held by Bryanston, the Company issued to Bryanston 135,162 shares of
Series C Preferred Stock.
The following table sets forth, with respect to each nominee for
Director and with
respect to Bryanston, the number of shares of Common Stock and
Preferred Stock purchased
or sold during the past two years and the dates such shares were
purchased or sold.
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------------------
<S> <C> <C> <C>
Date Shares Purchased Shares Sold
Thomas W. Aro 6/18/99 10,000
6/22/99 10,000
James A. Cutler: 2/09/99 2,000
2/10/99 8,000
2/11/99 10,000
2/26/99 10,000
5/17/99 10,000
6/25/99 10,000
Bryanston: 5/12/98<F1> 730,331
1/05/99<F2> 1,518,232
</TABLE>
<F1>
(1) Comprised of shares of Common Stock issued to Bryanston in lieu
of the cash dividend payable on and with respect to Bryanston's shares of
Series B Preferred Stock for 1996.
<F2>
(2) Comprised of shares of Common Stock issued to Bryanston in lieu
of the cash dividend payable on and with respect to Bryanston's shares of
Series B Preferred Stock for 1997.
<PAGE>
<TABLE>
<CAPTION>
Preferred Stock
------------------------------------------------------
<S> <C> <C> <C>
Date Shares Purchased Shares Sold
Bryanston 9/30/97<F1> 83,333 Series B -
6/30/98<F2> 135,162 Series C -
</TABLE>
___________________
<F1>
(1) In September 1997, Bryanston converted $2 million of
indebtedness owed to it by the Company into 83,333 shares of Series B
Preferred Stock.
<F2>
(2) In June 1998, Bryanston converted $9,731,664 of indebtedness
owed to it by the Company into 135,162 shares of Series C Preferred Stock.
No other nominee for Director has purchased or sold any shares of
stock in the
Company during the past two years, and except as noted in the above
table, during the last two
years, Bryanston has not purchased or sold any shares of Common
Stock or Preferred Stock.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Six (6) directors are to be elected at the Meeting to serve (subject
to their respective
earlier removal, death or resignation) until the next annual meeting of
stockholders and until
their respective successors are elected and qualified. Unless such
authority is withheld,
proxies will be voted for the election of the six (6) persons named
below, all of whom are now
serving as directors and each of whom has been designated as a
nominee. If, for any reason
not presently known, any person is not available to serve as director,
another person who may
be nominated will be voted for in the discretion of the proxies.
<TABLE>
<CAPTION>
Name Age Position With the Company
- -------------------- ----- ----------------------------------
<S> <C> <C>
Stanley S. Tollman. . . 68 Chairman of the Board and Chief Executive
Officer
Thomas W. Aro . . . 56 Vice President, Secretary, and Director
Brett G. Tollman. . . . 37 Vice President and Director
James A. Cutler . . . 47 Director
Matthew B. Walker . . . 48 Director
Herbert F. Kozlov . . . 46 Director
</TABLE>
Stanley S. Tollman has served as Chairman of the Board of
Directors and Chief or
Co-Chief Executive Officer of the Company since its formation.
Since March 1995, Mr.
Tollman has served as President. He served as Chairman of the
Tollman-Hundley Hotel
Group from 1979 to June 1996. He currently serves as Chairman of
Bryanston Group, Inc.
("Bryanston"), a hotel management company, and of Trafalgar Tours
International, a tour
operator. He has also served as Chairman of the Board of Directors of
Buckhead America
Corporation, which was formerly the franchisor of Days Inn Hotels.
The business addresses
of Bryanston and Trafalgar Tours International are, respectively, 1886
Route 52, Hopewell
Junction, New York and 5 Reid Street, Hamilton, Bermuda.
Thomas W. Aro has served as a Director of the Company since
February 1, 1994 and
as Executive Vice President of the Company since its formation. Mr.
Aro also serves as
President and Chief Operating Officer of the Company's subsidiaries
Alpha Gulf Coast, Inc.,
Alpha Monticello, Inc. and Alpha Florida Entertainment, Inc. He has
served as Executive
Vice President of Bryanston from 1989 through March 1996.
Brett G. Tollman has served as a Vice President of the Company
from its formation
until October 29, 1993, and was re-elected to that position and was
elected a Director of the
Company on February 1, 1994. He served as Executive Vice
President of the Tollman-Hundley Hotel Group from 1984 to June
1996. Mr. Tollman currently serves as president of
Tollman-Hundley Hotel Group. He also serves as Director and
President of Bryanston. Mr.
Tollman is the son of Stanley S. Tollman, the Chairman of the Board
and Chief Executive Officer of the Company.
James A. Cutler is the President and CEO of Truckee Resorts, Inc.,
a real estate
development company of which he is a co-founder. He previously
served as Treasurer and
Chief Financial Officer of the Company since its formation until his
resignation on March 6,
1998. He also served as Secretary of the Company from October 29,
1993 to February 1,
1994. Mr. Cutler was elected a Director of the Company on June 12,
1995. He served as
Senior Vice President and Treasurer of the Tollman-Hundley Hotel
Group until June 1997.
Matthew B. Walker has served as a Director of the Company since
December 1995.
He is an independent businessman involved in international business
ventures, including the
Brazilian based Walker Marine Oil Supply Business, to which he has
been a consultant since
1988. Mr. Walker co-founded the Splash Casino in Tunica,
<PAGE>
Mississippi, in February 1993,
where he remained employed until October 1995. In February 1994,
he co-founded the
Cotton Club Casino in Greenville, Mississippi, where he remained
employed and was a
stockholder until October 1995. In addition, since 1972, Mr. Walker
has been involved in
numerous real-estate transactions as a consultant and has managed
E.B. Walker & Son
Lumber Company, a family-owned lumber business in Alabama.
Herbert F. Kozlov has served as a Director of the Company since
his appointment
upon the resignation of Mr. Sanford Freedman in March 1998. Mr.
Kozlov is a member in
the law firm of Parker Duryee Rosoff & Haft, P.C., where he has been
a partner since 1989.
Mr. Kozlov is also a director of HMG Worldwide Corporation and
Worldwide Entertainment
& Sports Corp. Parker Duryee Rosoff & Haft provides legal services
to the Company and
receives fees for such services from the Company.
Each Director is elected for a period of one year at the Company's
annual meeting
of stockholders and (subject to earlier removal, death or resignation)
serves until his/her
successor is elected and qualified. Vacancies and newly created
directorships resulting from
any increase in the number of authorized directors may be filled by a
majority vote of
Directors then in office. Officers are elected by and serve at the
pleasure of the Board.
Committees and Meetings of the Board of Directors
The Board has four committees - the Executive Committee, the
Audit Committee,
the Compensation Committee and the Stock Option Committee. The
Executive Committee,
which is comprised of Stanley S. Tollman, Thomas W. Aro and Brett
G. Tollman, has the
same authority to act as the Board (with certain limitations prescribed
by the General
Corporation Law of the State of Delaware). The Audit Committee,
which is comprised of
Herbert F. Kozlov, James A. Cutler and Thomas W. Aro, is
responsible for reviewing, with
both the Company's independent certified public accountants and
management, the
Company's accounting and reporting principles, policies and practices,
as well as the
Company's accounting, financial and operating controls and staff. The
Compensation
Committee, which is comprised of Stanley S. Tollman, Matthew B.
Walker, Thomas W. Aro
and (as of 1999) Herbert F. Kozlov, is responsible for establishing and
reviewing the
appropriate compensation of directors and officers of the Company
and for reviewing
employee compensation plans. The Stock Option Committee, which
is comprised of Stanley
S. Tollman Matthew B. Walker and James A. Cutler, is responsible for
considering and
making grants and awards under, and administering, the Company's
1993 Stock Option Plan
and, if the 1998 Stock Option Plan is approved by the stockholders,
will also be responsible
for considering and making grants and awards under, and
administering, that Plan.
During the 1997 fiscal year, there were no formal meetings of any
of the Company's
committees other than the Executive Committee, and there was no
unanimous written consent
of any of the Company's committees. During 1997, the Executive
Committee held 3 meetings
(at which all three members of such Committee were present) and
advised the other members
of the Board of the matters discussed at such meetings. During the
1998 fiscal year there was
one formal meeting of each of the Company's committees. During
such fiscal year, there
were also five meetings of the Board, on February 28th, May 12th,
June 4th, September 15th
and December 10th at which all of the Directors were present, and
there were no unanimous
written consents of the Board.
Certain Proceedings Involving Management
Messrs. Stanley S. Tollman and Brett G. Tollman were limited
partners of six limited
partnerships, each of which was the owner of an individual hotel, that
filed Chapter 11
proceedings in 1991. Mr. Stanley S. Tollman was the stockholder of
the corporate general
partners of the limited partnerships. Messrs. Stanley S. Tollman, Brett
G. Tollman and James
A. Cutler were directors and/or officers of such corporate general
partners. Faced with the
threat of foreclosure, the six limited partnerships filed for protection
under the Bankruptcy
Code. With regard to five of the bankruptcy proceedings, the
Bankruptcy Court lifted the
bankruptcy stay and permitted foreclosure sales of the hotels. With
regard to the sixth hotel,
a Plan of Reorganization has been approved by the Bankruptcy Court,
which approval was
appealed by the lender to the U.S. District Court. The U.S. District
Court confirmed the decision below, and the
<PAGE>
lender further appealed to the Court of Appeals for the Fifth Circuit,
which affirmed the decision of the U.S. District Court. The Plan of
Reorganization has been implemented.
Kissimmee Lodge, Ltd. ("KLL"), a Florida limited partnership,
filed a Chapter 11
proceeding in the United States Bankruptcy Court for the Middle
District of Florida in June
1994. The proceeding was filed to prevent the imminent foreclosure
of the Days Suites hotel
owned by KLL. Messrs. Stanley S. Tollman and Brett G. Tollman
hold limited partnership
interests in KLL, and Mr. Stanley S. Tollman is a stockholder of the
corporate general partner
of KLL. Messrs. Stanley S. Tollman and James A. Cutler were
directors and/or officers of
such corporate general partner. A Plan of Reorganization for KLL
was confirmed by the
Bankruptcy Court and has been declared effective.
Emeryville Days Limited Partnership ("Emeryville"), a California
limited partnership, filed a Chapter 11 proceeding in the United States
Bankruptcy Court for the
Eastern District of California in May 1996. The proceeding was filed
to prevent the imminent
foreclosure of the Days Inn hotel owned by Emeryville. Messrs.
Stanley S. Tollman and Brett
G. Tollman hold limited partnership interests in Emeryville, and Mr.
Stanley S. Tollman is a
stockholder of the corporate general partner of Emeryville. Messrs.
Stanley S. Tollman and
James A. Cutler were directors and/or officers of such corporate
general partner. Subsequent
to the filing of this proceeding, the subject hotel property was sold,
and as a result, funds
became available to pay all creditors, other than the holder of the
second deed of trust, which
holder agreed to settle its claim for a reduced amount, which has been
paid. As a consequence
of the foregoing, this proceeding was dismissed.
T.H. Orlando, Ltd. ("Orlando") and T.H. Resorts Associates, Ltd.
("Resorts"), filed
a Chapter 11 proceeding in the United States Bankruptcy Court for the
Middle District of
Florida, Orlando Division in February 1997. The proceeding was
filed to prevent the
imminent foreclosure of three Days Inn hotels owned by Orlando and
Resorts. Mr. Stanley
S. Tollman holds a limited partnership interest in Orlando and Resorts
and is a stockholder of
the corporate general partners of Orlando and Resorts, and Messrs.
Stanley S. Tollman, Brett
G. Tollman and James A. Cutler were directors and/or officers of such
corporate general
partners. In August 1997, Orlando and Resorts agreed to a settlement
with its secured lender
resulting in the sale of the hotel properties and dismissal of that proceeding.
Certain Business Relationships
The Company recently consummated a transaction in which it
disposed of its
dormant Jubilation Casino vessel to Casino Ventures LLC
("Ventures"). Pursuant to such
transaction, that vessel was sold to Ventures in consideration for (a)
$150,000 cash, (b)
Venture's three-year promissory note in the principal amount of
$1,350,000 and (c) a 93%
interest in Ventures (which interest is subject to reduction to 35%
upon repayment of the
aforesaid promissory note and to a further reduction to 25% upon the
consummation of an
infusion of at least $2 million of new equity capital into Ventures).
Mr. Matthew B. Walker
(a Director and candidate to be elected to the Board) is anticipated to
have up to a 40% interest
in Ventures upon the reduction of the Company's interest as
contemplated above.
Stockholder Vote Required. A quorum being present, the election
of the Directors
will require the affirmative vote of the holders, present in person or
represented by proxy at
the Meeting, of shares entitled to cast a plurality of the votes cast at
the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE
BOARD OF DIRECTORS OF THE COMPANY OF EACH OF THE NOMINEES.
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE AMOUNT OF AUTHORIZED CAPITAL STOCK
At the Meeting, stockholders will be asked to approve or ratify an
amendment to the
Company's Certificate of Incorporation (the "Certificate") proposed by
resolution of the
Board which (i) would increase the number of authorized shares of
Common Stock by fifty
(50) million shares and (ii) would increase the number of authorized
shares of the Company's "blank check" Preferred Stock by four (4) million
shares.
The Company's authorized capital stock currently consists of
25,000,000 shares of
Common Stock and 1,000,000 shares of "blank check" Preferred
Stock, of which 821,496
shares have been designated, and issued, as Series B Preferred Stock
and 135,162 shares have
been designated, and issued, as Series C Preferred Stock. Pursuant to
the Certificate, the
Board is empowered to create and designate classes of Preferred Stock
for issuance, without
stockholder approval. As of June 30, 1998, the Company agreed to
newly designate and issue
the Series C Preferred Stock to Bryanston Group, Inc. ("Bryanston")
in consideration for the
forgiveness by Bryanston of $9,928,000 of the Company's debt which
Bryanston held. The
Certificate of Designation was filed with the Secretary of State of
Delaware on July 24, 1998,
establishing the Series C Preferred Stock and setting forth its rights
and designations.
As of the Record Date, there were issued and outstanding
16,788,228 shares of
Common Stock; however, as noted below, the Company does not have
sufficient shares of
Common Stock reserved for issuance to cover the conversion of all of
its outstanding
Preferred Stock and the exercise of all of its outstanding options and
warrants.
Each share of Series B Preferred Stock is convertible into 8 shares
of Common
Stock, making the entire Series B Preferred Stock, as issued and
outstanding as of the Record
Date, convertible into 6,571,968 shares of Common Stock. Bryanston,
as the holder of
777,238 shares of Series B Preferred Stock, has agreed not to convert
any of those shares into
Common Stock unless and until the Company has increased its
authorized shares of Common
Stock to permit such exercise. Each share of Series C Preferred Stock
is convertible (subject
to the condition described below) into 24 shares of Common Stock,
making the entire Series
C Preferred Stock, as issued and outstanding as of the Record Date,
convertible into 3,243,888
shares of Common Stock. The Series C Preferred Stock is so
convertible, however, only after
Proposal 2 as described herein is approved and an appropriate
amendment of the Certificate
is filed with the Secretary of State of Delaware. Additionally, there
are currently issued and
outstanding options and/or warrants that, upon exercise, would call for
the issuance of an
additional 2,186,500 shares of Common Stock. The Common Stock
has no preemptive or
other subscription rights.
In light of the foregoing, the Company does not have a sufficient
remaining number
of authorized but unissued shares of Common Stock to fulfill the need
for shares of Common
Stock that would arise should all of the Company's outstanding shares
of Preferred Stock
(both Series B and Series C) be converted and all of the Company's
outstanding options and
warrants be exercised. Additionally, there remain only 43,342 shares
of Preferred Stock that are authorized but unissued.
The additional shares of Common Stock proposed to be authorized
pursuant to this
Proposal would be available to the Company to fulfill its obligations
with respect to the
conversion of shares of its Preferred Stock and the exercise of its
options and warrants, as well
as provide it with the flexibility to meet future business developments
and capital
requirements, including, without limitation, financings and acquisition
opportunities and for
stock dividends or splits should the Board decide that it would be
desirable, in light of market
conditions then prevailing and in order to take advantage of propitious
market conditions, to
broaden the public ownership of, and to enhance the market for, the
Common Stock.
Additional shares would also be available for other purposes, which
include employee benefit
programs, at the discretion of the Board, without the delays and
expenses ordinarily attendant
upon obtaining further stockholder approval.
<PAGE>
To the extent required by Delaware law, stockholder approval will
be solicited in the
event shares of Common Stock are to be issued in connection with a
merger or acquisition.
Stockholder approval will also be solicited by the Company in
compliance with the Nasdaq
SmallCap Market listing requirements. In general, the additional
authorized shares may be
issued by the Board for such purposes without stockholder approval.
The issuance of such
shares would dilute the voting power, and, potentially, the liquidation
value, of the currently
outstanding shares.
The additional shares of Preferred Stock proposed to be authorized
by the proposed
amendment would also be available to provide the Board flexibility to
respond to future
business developments and capital requirements. The Board is
authorized to designate and
issue the Company's Preferred Stock in series, and, as with the Series
B and Series C
Preferred Stock previously issued and outstanding, the shares of each
series will have such
rights and preferences as are fixed by the Board in the resolution or
resolutions authorizing
that particular series. These rights and preference may include,
without limitation, liquidation
preferences, super voting rights, and preferential dividend rights and
terms of redemption.
The issuance of additional Preferred Stock, in addition to the shares of
Preferred Stock already
issued and outstanding, may therefore further dilute the voting powers
of holders of Common
Stock and, in many cases, the liquidation value of shares of Common
Stock. In addition, the
issuance of new Preferred Stock may be used as an anti-takeover
device without further action
on the part of the stockholders.
The proposed amendment to the Certificate would amend Article
Fourth thereof to
read in its entirety follows:
FOURTH: The total number of shares of stock that the
Corporation shall have the authority to issue is eighty million
(80,000,000), consisting of seventy-five million (75,000,000)
shares of Common Stock, each such share having a par value of
$.01, and five million (5,000,000) shares of Preferred Stock, each
such share having a par value of $.01. The Board of Directors is
expressly authorized to issue Preferred Stock without stockholder
approval, in one or more series, and to fix for each such series
such voting powers, full or limited, and such designations, preferences
and relative, participating, optional or special rights and such
qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions adopted by the Board
of Directors providing for the issue of such series and as may be
permitted by the Delaware General Corporation Law.
The Board has unanimously approved the foregoing proposed amendment and
unanimously recommends to the stockholders that the same be approved or
ratified by the stockholders.
Stockholder Vote Required. A quorum being present, the adoption
of the foregoing
proposed amendment to the Certificate will require the affirmative
vote of a majority of all of
the aggregate votes entitled to be exercised with respect to the
outstanding shares of Common
Stock and Series B and C Preferred Stock as of the Record Date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
<PAGE>
PROPOSAL 3
ADOPTION OF THE 1998 STOCK OPTION PLAN
On May 12, 1998, the Board, subject to approval or ratification by
the stockholders
of the Company, authorized the 1998 Stock Option Plan (the "Option
Plan") for the directors,
officers and employees of, and other advisors to, the Company. The
Option Plan
contemplates the grant of options for the issuance of up to 4,000,000
shares Common Stock.
Exhibit B to this Proxy Statement contains a copy of the Option
Plan and a sample
option agreement. The following summary of the principal features of
the Option Plan is
qualified in its entirety by reference to Exhibit B.
The Option Plan will be administered by the Board or a committee
thereof (the
"Committee"). In general, the Committee will select the persons to
whom options will be
granted and will determine, subject to the terms of the Option Plan,
the number, the exercise
period and other provisions of such options. Any option granted under
the Option Plan will
be exercisable in such installments as may be provided for in the grant.
Any options granted may be either an incentive stock option
("ISO") under the
Internal Revenue Code of 1986, as amended (the "Code"), or an option
not intended to qualify
as an ISO ("Non-ISO"). The Committee may determine the exercise
price, provided that, in
the case of ISOs, such price may not be less than 100% (110% in the
case of ISOs granted to
holders of 10% or more of the voting power of the Company's stock)
of the fair market value
(as defined in the Option Plan) of a share of Common Stock at the
date of grant. The
aggregate fair market value (determined at time of option grant) of
stock with respect to which
ISOs become exercisable for the first time in any year cannot exceed
$100,000.
Options issued under the Option Plan will be non-transferrable
(except by will or the
laws of descent and distribution in the event of death), shall have a
term of up to ten (10) years
and shall vest in accordance with the terms established for such
options by the Committee.
Upon the termination of an optionee's service as a director, officer or
employee of the
Company for reasons other than retirement, death or permanent or
total disability, the option
and optionee's rights thereunder will terminate in accordance with the
time established for
such termination by the Committee. In the event an optionee is
terminated due to death or
permanent or total disability, the Option Plan provides a one year
period from the date of
termination for such cause during which an optionee may execute the
options.
The Board adopted the Option Plan in the belief that it is in the best
interests of the
Company to encourage its directors (including non-employee
directors), officers and key
employees, and other key advisors to the Company, to have an
ownership interest in the
Company in order to align their interests more closely with those of
the other stockholders and
that the grant of options under the Option Plan can be appropriately
employed to attract and
retain qualified persons as directors, officers and employees of the
Company and other
advisories to the Company.
In May 1998, the Board granted, for fiscal year 1998, to each of
two of its three non-employee directors, Matthew B. Walker and
Herbert F. Kozlov, an option to purchase up to
40,000 shares of Common Stock at a per share purchase price of
$1.06, and granted to the
Company's third non-employee director, James A. Cutler, an option to
purchase up to 55,000
shares of Common Stock at a per share purchase price of $1.06. The
per share purchase price
of these grants was equal to the market price of a share of Common
Stock on the date such
options were granted. In addition, in December 1998, the Board
granted, for fiscal year 1999,
subject to stockholder approval, options to purchase up to 250,000
shares of Common Stock
to Stanley S. Tollman at $1.17 per share and options to purchase up to
55,000 shares of
Common Stock to Mr. Kozlov, up to 40,000 shares of Common Stock
to Mr. Walker and
options to purchase up to 55,000 shares of Common Stock to Mr.
Cutler, each at a per share
price of $1.06. In December 1998, the Board also issued an option to
purchase 55,000 shares
of Common Stock to Thomas W. Aro, and an option to purchase
40,000 shares of Common
Stock to Brett Tollman. Mr. Tollman and Mr. Aro are employee
directors of the Company.
On May 14, 1999 the Board authorized the grant of an option to
purchase up to 50,000 shares of Common Stock to Craig
<PAGE>
Kendziera, the Company's treasurer. In addition, on May 14, 1999
the Board issued options to purchase up to 239,000 shares of Common
Stock to 25 employees
of the Company's affiliates in consideration for services rendered to,
or on behalf of, the
Company. On May 27, 1999, the Committee granted options to
purchase up to 50,000 shares
of Common Stock each to Messrs. Kozlov, Cutler and Walker and
options to purchase 75,000
shares each to Messrs. Aro and Brett Tollman. Each of these options
is exercisable at $2.00
per share, which was the per share market price of a share of Common
Stock as of the date
of the grant of such options. All of the foregoing grants were made
subject to stockholder
approval of the Option Plan. Adoption of the 1998 Stock Option Plan
shall constitute ratification of the grant of these options.
No other options have been granted under the Option Plan, and,
provided that the
Option Plan is approved by the stockholders, the award of options
thereunder will be in the
discretion of the Committee, and thus it is impossible to accurately
determine what, if any,
issuances of options will be made under the Option Plan in the future.
It is currently the Committee's intention, however, that if the
Option Plan is
approved, to grant annually to each of the Company's directors an
option to purchase up to
25,000 shares of Common Stock, plus up to an additional 15,000
shares of Common Stock
for each Committee of the Board on which he or she serves for such
year.
Federal Income Tax Consequences. The following discussion of
the federal income
tax consequences of the Option Plan is intended to be a summary of
only applicable federal
income tax law. State and local tax consequences may differ.
Because the federal income tax
rules governing options are complex and subject to frequent change,
participants are advised
to consult their tax advisors prior to exercise of options or dispositions
of stock acquired pursuant to an option exercise.
Options that are granted under the Option Plan and that are
intended to qualify as
ISOs must comply with the requirements of Section 422 of the Code.
An optionee is not
taxed upon the grant or exercise of an ISO; however, the difference
between the fair market
value of the shares on the exercise date will be an item of adjustment
for purposes of the
alternative minimum tax. If an optionee holds the shares acquired
upon the exercise of an ISO
for at least two (2) years following the date of the grant of the option
and at least one year
following the exercise of the option, the optionee's gain, if any, by a
subsequent disposition
of such shares will be treated as long-term capital gain for federal
income tax purposes. The
measure of the gain is the difference between the proceeds received on
disposition and the
optionee's basis in the shares (which generally would equal the
exercise price). If the
optionee disposes of shares acquired pursuant to exercise of an ISO
before satisfying the
one-and-two year holding periods described above, the optionee will
recognize both ordinary
income and capital gain in the year of disposition. The amount of the
ordinary income will
be the lesser of (i) the amount realized on disposition less the
optionee's adjusted basis in the
shares (usually the option exercise price) or (ii) the difference between
the fair market value
of the shares on the exercise date and the option price. The balance of
the consideration
received on such disposition will be long-term capital gain if the
shares had been held for at
least one year following exercise of the incentive stock option. The
Company is not entitled
to an income tax deduction on the grant or the exercise of an ISO or
on the optionee's
disposition of the shares after satisfying the holding period
requirement described above. If
the holding periods are not satisfied, the Company will be entitled to
an income tax deduction
in the year the optionee disposes of the shares, in an amount equal to
the ordinary income recognized by the optionee.
In the case of a non-qualified option, an optionee is not taxed on
the grant of such
option. Upon exercise, however, the participant recognizes ordinary
income equal to the
difference between the option price and the fair market value of the
shares on the date of the
exercise. The Company is entitled to an income tax deduction in the
year of exercise in the
amount of the ordinary income recognized by the optionee. Any gain
on subsequent
disposition of the shares is long-term capital gain if the shares are held
for at least one year
following the exercise. The Company does not receive an income tax
deduction for this gain.
<PAGE>
The Board has unanimously approved the Option Plan and unanimously
recommends to the stockholders that the same be approved and ratified
by them.
Stockholder Vote Required. Adoption of the Option Plan requires
the affirmative vote (a quorum being present) of a majority of all votes
cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE OR
RATIFY THE ADOPTION OF THE 1998 STOCK OPTION PLAN.
<PAGE>
PROPOSAL 4
AMENDMENT OF THE COMPANY'S BY-LAWS TO PERMIT THE GRANTING OF COMPENSATION TO
MEMBERS OF THE BOARD OR ANY COMMITTEE THEREOF WITHOUT SEPARATE STOCKHOLDER
APPROVAL
At the Meeting, stockholders will be asked to approve or ratify an
amendment to the
Company's by-laws proposed by resolution of the Board, which would
permit the Board to grant compensation to members of the Board (or any committee
thereof) without separate approval by the stockholders.
Section 2.11 of the Company's by-laws as currently in effect
contemplates obtaining
stockholder approval with respect to any salary payable to any
member of the Board or any
committee thereof. More particularly, that Section provides that "[n]o
director shall receive
any stated salary for his services as a director or as a member of a
committee but shall receive
such sum, if any, as may from time to time be fixed by the action of
holders of record of
shares of the Corporation's capital stock representing a majority of the
total number of votes
that could be exercised with respect to the election of directors by the
holders of all of the
outstanding capital stock of the Corporation."
It is neither practical nor appropriate, and would be unnecessarily
costly, to require
the obtaining of stockholder approval with respect to the payment of
any salary or other
compensation to any director. The Board firmly believes that the
Company is best served if
the Company can recruit and retain highly qualified individuals to
serve on the Board and its
various committees. The Board believes that there is considerable
competition for highly
qualified individuals to serve as advisers on boards of directors, that
such individuals provide
significant value in so serving and frequently demand appropriate
compensation for such
services. Consequently, the Board believes that it would be in the best
interests of the
Company and its stockholders that the Company's by-laws be amended
so as to permit the
award or other grant of compensation to directors without the need for
obtaining separate
stockholder approval. Absent such amendment, each time the Board
intended to recruit any
member or otherwise proposed to provide compensation for serving on
the Board or any
committee thereof, the Company could be compelled to incur the
substantial expense of
preparing and disseminating appropriate proxy material. In all
likelihood, the mere expense
of doing so would far exceed the amount of any compensation the
Board might be proposing
for stockholder approval.
In light of the foregoing, the Board proposes that Section 2.11 of
the by-laws be amended to read in its entirety as follows:
Section 2.11. Compensation. Any individual who serves as a
director shall be entitled to receive such salary and other compensation
(including stock
options pursuant to a stock option or similar plan approved by the
stockholders
of the Corporation or otherwise) for his or her services as a
director or as a
member of any committee of the Board of Directors as may, from
time to time,
be determined by the Board of Directors (or any duly delegated
committee
thereof), without any separate consent or approval by the
stockholders of the Corporation.
Subject to stockholder approval of this Proposal, it is currently the
intention of the
Board to compensate each of its non-employee directors with an
annual payment of $6,000
for providing services to the Company in such capacity, as well as
provide an annual grant of
stock options, as described under Proposal 3 above.
The Board has unanimously approved the foregoing proposed
amendment and unanimously recommends to the stockholders that the same be
approved or ratified by them.
Stockholder Vote Required. A quorum being present, the adoption
of the foregoing
proposed amendment to the Company's by-laws will require the
affirmative vote of a majority of the votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S BY-LAWS.
<PAGE>
PROPOSAL 5
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO ENABLE
AND AUTHORIZE THE BOARD TO ADOPT, AMEND AND REPEAL BY-LAWS
At the Meeting, stockholders will be asked to approve or ratify an
amendment to the
Company's Certificate of Incorporation (the "Certificate") proposed by
resolution of the
Board, which would enable and authorize the Board to adopt, amend
and repeal by-laws of the Company.
In the past it has become necessary and appropriate for the
Company from time to
time to adopt, amend or repeal the Company's by-laws, and it is
anticipated that it will become
necessary and/or appropriate for the Company to continue to do so
from time to time in the
future. However, pursuant to the provisions of the Delaware General
Corporation Law, it is
generally required that any adoption, amendment or repeal of a
corporation's by-laws be
approved by such corporation's stockholders unless the right to do so
is delegated to such
corporation's board of directors as provided for in such corporation's
certificate of
incorporation. More particularly, Section 109(a) of the Delaware
General Corporation Law
provides, in pertinent part, that "[a]fter a corporation has received any
payment for any of its
stock, the power to adopt, amend or repeal bylaws shall be in the
stockholders entitled to vote
; provided, however, any corporation may, in its certificate of
incorporation, confer the
power to adopt, amend or repeal bylaws upon the directors."
It has been impractical and expensive in the past, and it is
anticipated that it will
continue to be impractical and expensive in the future, for the
Company to obtain the
necessary approval of the Company's stockholders in order to adopt,
amend or repeal any of
the Company's by-laws. Consequently, the Board believes that it is in
the best interests of the
Company and its stockholders that the Certificate be amended to
provide, and to delegate, to
the Board the right, power and authority to adopt, amend or repeal any
of the Company's by-laws. More particularly, it is proposed that the
Certificate be amended by adding as a new
Article Eleventh the following:
ELEVENTH: The Corporation's Board of Directors (by a
majority vote thereof) shall have the right, power and authority to adopt
any new by-law and/or amend or repeal any then-existing by-law; provided,
however, that the Corporation's Board of Directors may not amend or repeal any
by-law that, by its very terms, is not subject to amendment or repeal except
by or upon approval of the Corporation's stockholders or any class, series
or other group or portion thereof.
It is to be noted that, in order to protect against even the theoretical
abuse by the Board of the right proposed to be granted to it to adopt, amend or
repeal the Company's by-laws, such right would not extend to any
by-law that by its express terms is not subject to
amendment or repeal by the Board. Consequently, even if the
proposed amendment to the
Certificate were to be approved and become effective, the Company's
stockholders could still
override and supersede any action taken by the Board with respect to
the adoption, amendment or repeal of any by-law of the Company.
The Board has unanimously approved the foregoing proposed
amendment and unanimously recommends to the stockholders that the same be
approved or ratified by them.
Stockholder Vote Required. A quorum being present, the adoption
of the foregoing proposed amendment to the Certificate will require the
affirmative vote of a majority of all of
the aggregate votes entitled to be exercised with respect to the
outstanding shares of Common
Stock, Series B and C Preferred Stock as of the Record Date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
<PAGE>
PROPOSAL 6
PROPOSAL TO PERMIT STANLEY S. TOLLMAN
TO CONVERT ACCRUED AND UNPAID SALARY
INTO SHARES OF COMMON STOCK
At the Meeting, stockholders will be asked to approve or ratify a
proposal adopted
by the Board to allow Stanley S. Tollman, the Company's Chief
Executive Officer, to convert,
subject to certain conditions, up to an aggregate amount of $2,000,000
of accrued but unpaid
salary into shares of Common Stock at a conversion rate of $2.00 per
share (which was the
fair market value of a share of Common Stock on the date the Board
adopted its proposal).
Mr. Tollman's right to convert will depend upon his remaining in the
employ of the Company
and his continuing to defer the payment of the salary due him through
at least January 14,
2000. In the event that, if prior to such date he would otherwise be
entitled to exercise the
conversion right, (i) Mr. Tollman dies, becomes disabled, or is
involuntarily terminated from
his employment by the Company, (ii) the Company sells all or
substantially all of its business
and assets to an unaffiliated third party, (iii) there is a merger of the
Company with or into
another entity where the Company is not the surviving entity, or (iv)
there is a change in
control of the Company, Mr. Tollman shall have 20 days from the date
of such occurrence to
exercise the conversion right. Notwithstanding the foregoing, the
Board in its discretion and
without the consent of Mr. Tollman, may, by subsequent resolution,
extend the date through
which Mr. Tollman must continue to defer his salary in order to be
entitled to the proposed
conversion right. Upon Mr. Tollman's exercise of such right, the
Company shall endeavor
to file a registration statement by which to register the shares Mr.
Tollman receives as a result
of the conversion.
At its meeting in May 27, 1999, the Board of Directors
unanimously adopted the following resolutions:
RESOLVED, that, if Mr. Stanley Tollman shall continue, until
at least the Exercise Date (as defined below), to remain an employee
of the Corporation and to defer payment of the salary payable (whether
with respect to the period prior to this date or any period after this date
through the Exercise Date) to him under his employment agreement with
the Corporation, then he shall have the right to convert up to an
aggregate amount of $2,000,000 of such deferred salary into shares of the
Corporation's common stock at $2.00 per share, which right shall be
exercisable by written notice delivered to the Corporation at any
time or from time to time from the day following the Exercise Date until
(a) the first year anniversary of the Exercise Date or (b) if the Exercise
Date has occurred on account of any Triggering Event (as defined below),
the twentieth (20th) day following the Exercise Date, where "Exercise
Date" means (subject to the next following resolution) January 14, 2000
or, if earlier, the date of the occurrence of any Triggering Event, and
"Triggering Event" means any of (i) Mr. Tollman's death or disability, (ii) the
involuntary termination of his employment by the Corporation, (iii)
the sale by the Corporation of all or substantially all of its business and
assets, (iv) the merger of the Corporation with or into another entity where the
Corporation is not the surviving entity or (v) any change in control
of the Corporation; and it is further
RESOLVED, that the Board, in its discretion, and without the
consent or approval of Mr. Tollman, may, by any subsequent resolution
adopted by the Board, extend the date of the Exercise Date; and it
is further
RESOLVED, that, the grant of the foregoing right to convert
shall be subject to ratification or approval by the stockholders of the
Corporation; and it is further
<PAGE>
RESOLVED, that, if Mr. Tollman shall exercise the foregoing
right and thereby acquire shares of the Corporation's common stock, then
the Corporation shall take such actions as may be necessary to register such
shares.
Such resolutions were adopted by the Board in recognition of the
considerable sacrifices Mr. Tollman had made for the past five years in
continuing to serve as Chief
Executive Officer of the Company while continuing to defer payment
of the salary the
Company was obligated to pay him and as an incentive for Mr.
Tollman to continue to defer payment of such salary, as well as future
accruing salary.
Mr. Tollman entered into his Employment Agreement with the
Company on June 1,
1993. The original term of such Agreement was for three years with
provision for automatic
12-month renewals thereof unless either party advised the other on 90
days' written notice of
his or its intention not to extend the term of employment. The
Agreement has been renewed
through May 31, 2000. Mr. Tollman has forgone payment of his
$250,000 annual salary
under the agreement since January 1993, without interest, and an
aggregate of approximately
$1,400,000 of deferred salary has accrued thereunder.
The Board believes that it is in the best interests of the Company
and its stockholders
that Mr. Tollman continue to defer payment of the salary to which he
is entitled under the
terms of his Employment Agreement with the Company. If the
Company were to be required
to make full payment of all of Mr. Tollman's accrued but unpaid
salary, the same would have
a material and adverse effect upon the Company and its financial
condition.
The Board has unanimously approved the foregoing proposal and
unanimously recommends to the stockholders that the same be approved or ratified
by them.
Stockholder Vote Required. A quorum being present, the adoption
of the foregoing proposal will require the affirmative vote of a majority of
the votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL ALLOWING
STANLEY S. TOLLMAN TO CONVERT UP TO $2,000,000 OF ACCRUED BUT
UNPAID SALARY INTO SHARES OF COMMON STOCK AT $2.00 PER SHARE.
<PAGE>
PROPOSAL 7
RATIFICATION OF ROTHSTEIN KASS & COMPANY, P.C. AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board has unanimously approved and unanimously recommends that the
stockholders approve the appointment of Rothstein, Kass & Company,
P.C. as the Company's
independent certified public accountants for the ensuing year. A
member of Rothstein, Kass
& Company, P.C. will be available to answer questions and will have
the opportunity to make a statement if he or she so desires at the Meeting.
Stockholder Vote Required. Ratification of the appointment of
Rothstein, Kass &
Company, P.C. as the Company's independent certified public
accountants requires the
affirmative vote of the holders (present in person or represented by
proxy at the Meeting) of
shares entitled to cast a majority of votes cast at the Meeting (a
quorum being present).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF ROTHSTEIN, KASS & COMPANY, P.C. AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
EXECUTIVE COMPENSATION
Executive Officers
The Executive officers of the Company are:
Stanley S. Tollman - Chairman of the Board and Chief
Executive Officer
Thomas W. Aro - Vice President and Secretary
Brett G. Tollman - Vice President
Robert Steenhuisen - Chief Accounting Officer
Craig Kendziera - Treasurer
Information regarding the responsibilities, and the terms of the
positions held by Stanley Tollman, Thomas Aro and Brett Tollman are set
forth on pages 10-11 of this proxy
statement in the text of Proposal 1. Such information for Messrs.
Steenhuisen and Kendziera is as follows:
Robert Steenhuisen has served as Chief Accountant of the
Company since his appointment on May 12, 1998. He also serves as the Chief
Accountant of the Tollman-Hundley Hotel Group and a Director, Vice
President, Treasurer and Chief Accountant of Bryanston.
Craig Kendziera has served as Treasurer of the Company since his
appointment on May 12, 1998. He also serves as Corporate Controller of the
Tollman-Hundley Hotel Group
and a Director, Vice President, Secretary and Corporate Controller of Bryanston.
Summary Compensation Table
The following table sets forth all cash compensation for services
rendered in all
capacities to the Company and its subsidiaries for the fiscal years
ended December 31, 1998,
December 31, 1997 and December 31, 1996 paid to the Company's
Chief Executive Officer,
the four other most highly compensated executive officers (the
"Named Executive Officers")
<PAGE>
at the end of the above fiscal years whose total compensation exceeded
$100,000 per annum,
and up to two persons whose compensation exceeded $100,000 during
the above fiscal years,
although they were not executive officers at the end of such years.
<TABLE>
<CAPTION>
Name and Principal Position Year Salary<F1> Bonus Restricted Stock Awards Option/SARS All other Compensation
<S> <C> <C> <C> <C> <C> <C>
Stanley S. Tollman 1998 $250,000 --- --- 250,000 ---
Chairman of the Board 1997 $250,000 --- --- --- ---
of Directors, Chief 1996 $250,000 --- --- --- ---
Executive Officer and
President
Thomas W. Aro 1998 $130,000 --- --- 155,000 ---
Vice President 1997 --- --- --- --- ---
and Secretary 1996 --- --- --- --- ---
</TABLE>
<F1>
(1) No portions of the cash salaries to which Stanley S. Tollman was
entitled during the periods indicated have been paid; the expense and
liability have been accrued without interest.
Option/SAR Grants in Last Fiscal Year. During the last completed
fiscal year, the
Company granted options to its executive officers to purchase 565,000
shares of the Company's
Common Stock including 250,000 shares to Stanley S. Tollman
subject to stockholder approval
as part of the 1998 Stock Option Plan, 155,000 to Thomas W. Aro
55,000 of which are subject
to stockholder approval as part of the 1998 Stock Option Plan,
140,000 shares to Brett G.
Tollman 44,000 of which are subject to stockholder approval as part of
the 1998 Stock Option
Plan, 12,000 shares issued to Robert Steenhuisen, all of which are
immediately exercisable and
8,000 to Craig Kendziera subject to stockholder approval as part of the
1998 Stock Option Plan.
Compensation of Directors. Subject to the adoption of Proposal 3,
which would
provide for the adoption of the 1998 Stock Option Plan, the Board
intends annually to grant to
the Company's directors, for their services to the Company, stock
options under the Option Plan
to purchase up to 25,000 shares of Common Stock and an additional
15,000 shares for each
committee on which such director serves, each such option to have an
exercise price equal to the
then current market price. Adoption of the 1998 Stock Option Plan
shall also be deemed to
ratify the grant to the directors of the Company options to purchase an
aggregate of up to
680,000 shares of its Common Stock at an exercise price of $1.063,
and an option to purchase
up to 250,000 shares of Common Stock at a price of $1.17 per share
granted to Stanley S.
Tollman, all of which can be exercised any time up to 2008. The
amount granted represents
options to purchase an aggregate amount of 135,000, and 795,000
shares per year, respectively,
for the 1998 and 1999 years of service. Additionally, subject to the
adoption of Proposal 4
above, which would result in the amendment of the Company's
by-laws to permit the Board to
grant compensation to directors without separate stockholder approval,
the Board intends to
compensate its non-employee directors with an annual payment of
$6,000 and may grant other
compensation to the Company's directors in the future.
Employment Agreements. The Company and Mr. Stanley S.
Tollman entered into an
Employment Agreement dated June 1, 1993, whereby Mr. Tollman
agreed to serve as Chairman
of the Board and Co-Chief Executive Officer of the Company for a
term of three (3) years from
the date of that Agreement. Thereafter, such Agreement is
automatically renewable for
successive twelve (12) month periods, unless either party shall advise
the other on ninety (90)
days' written notice of his or its intention not to extend the term of the
employment. In the event
of a termination of his employment, under the terms of such
Agreement Mr. Tollman is to be
retained for two years to provide consulting services for $175,000 per
year. Such Agreement
has been renewed until May 31, 2000. Mr. Tollman's Employment
Agreement provides for a
salary in the amount of $250,000 per year, none of which has been
paid under such Agreement
since the date thereof. The unpaid salary accumulates, and the
Company does not pay any
interest or other penalty thereon. Such Agreement provides for Mr.
Tollman to devote no less
than 20% of his business time to the affairs of the Company and its
subsidiaries. Such
Agreement contains a non-disclosure provision pursuant to which Mr.
<PAGE>
Tollman agrees not to use
or disclose any information, knowledge or data relating to or
concerning the Company's
operations, sales, business or affairs to any individual or entity, other
than the Company or its
designees, except as required in connection with the business and
affairs of the Company.
BOARD COMPENSATION REPORT
Executive Compensation Policy
Cash Compensation. The Company's executive officers, other than
Stanley S. Tollman
and Thomas W. Aro, are not directly compensated by the Company
based upon the
Compensation Committee's determination that compensation is not
prudent at this time given
the Company's financial position. When, and if, the Company's
financial position improves,
the Compensation Committee would establish and review the
compensation of executive officers
and employee compensation plans. However, all of the Company's
executive officers
previously provided management, financial and administrative
services, through the Company's
subsidiary Alpha Hotel, on behalf of Bryanston. Bryanston directly
compensated the
Company's executive officers for such services, and pursuant to the
terms of an expense
reimbursement agreement between the Company and Bryanston (the
"Expense Reimbursement
Agreement"), the Company reimbursed Bryanston on a monthly basis
for direct payroll. The
Compensation Committee did not determine the compensation paid by
Bryanston to the
Company's executive officers for providing these services on behalf of
Bryanston, as such
compensation was solely determined by Bryanston. Subsequent to the
sale of Alpha Hotel to
Bryanston in December 1996, Bryanston has continued directly to
provide salaries and benefits
to the Company's executive officers without seeking reimbursement
therefor from the
Company.
Equity Compensation. The grant of stock options to executive
officers constitutes an
important element of long-term compensation for the executive
officers. The grant of stock
options increases management's equity ownership in the Company
with the goal of ensuring that
the interests of management remain closely aligned with those of the
Company's stockholders.
The Board believes that stock options in the Company provide a direct
link between executive
compensation and stockholders' value. By attaching vesting
requirements, stock options also
create an incentive for an executive officer to remain with the
Company for the long term.
Chief Executive Officer Compensation. The compensation of
Stanley S. Tollman, the
Chief Executive Officer, is set forth in an Employment Agreement
between the Company and
Mr. Tollman, which provides for a salary in the amount of $250,000
per year, none of which has
been paid under such Agreement. The unpaid salary accumulates, and
the Company does not
pay any interest or other penalty thereon. The terms of the
Employment Agreement were
determined based upon Mr. Tollman's ability to establish and retain a
strong management team
and to develop and implement the Company's business plans. The
Company also appraised its
financial position and reviewed compensation levels of Chief
Executive Officers at comparable
companies within the Company's industry. In December 1998, the
Company granted to Mr.
Tollman an option to purchase up to 250,000 shares of Common
Stock, subject to stockholder
approval or ratification.
In June 1999, the Board approved, subject to stockholder approval
or ratification, the
grant of a conditional right to Stanley S. Tollman to convert up to
$2,000,000 of accrued but
unpaid salary into up to 1,000,000 shares of the Common Stock, par
value $ .01. This proposed
transaction is the subject of Proposal 6 at the Meeting and is more
fully described in the text on
pages 20-21 of this proxy statement.
<PAGE>
MARKET PRICES AND DIVIDENDS
Market Prices
The Company's Common Stock is traded on both the Automated
Quotation System of
the National Association of Securities Dealers, Inc. ("NASDAQ") and
on the Boston Stock
Exchange under the symbols "ALHY" and "ALH," respectively. The
Company's Redeemable
Common Stock Purchase Warrants (the "Warrants") are traded on the
Boston Stock Exchange
under the symbol "ALHW." The Warrants were delisted from
NASDAQ in December 1998.
The following table sets forth the high and low sale prices for
Common Stock and
Warrants as reported by NASDAQ except with regard to the 1999
Quarters prices for the
Warrants which reflect such prices as reported by the Boston Stock
Exchange.
<TABLE>
<CAPTION>
Common Stock Warrants
High Low High Low
<S> <C> <C> <C> <C>
1999 Quarters:
Third (through July 23) $ 4.50 3.19 $1.5625 .8750
Second 5.00 1.75 2.0000<F1> .0150<F1>
First 2.75 1.19 ---<F2> ---<F2>
1998 Quarters:
Fourth $ 1.56 .50 ---<F2> ---<F2>
Third 2.06 .50 .1250 .0625
Second 2.50 1.50 .1875 .0625
First 2.00 1.63 .3750 .0625
1997 Quarters:
Fourth $ 4.25 2.00 .5990 .5470
Third 4.00 2.94 .6910 .5990
Second 4.81 2.37 .6920 .6160
First 3.30 1.69 .5630 .4740
</TABLE>
<F1>
1 As reported by the Boston Stock Exchange
<F2>
2 Not traded
As of August ___, 1999, 16,788,228 shares of Common Stock, 821,496
shares of Series B Preferred Stock and 135,162 shares of Series C Preferred
Stock were issued and
outstanding. The outstanding shares of Common Stock were held of
record by approximately
800 persons, including ownership by nominees who may hold for
multiple beneficial owners.
On August ____, 1999, the high and low sale prices for a share of
Common Stock were $_____ and $____, respectively.
Dividends
The Company has not, since its inception, declared or paid any
dividends on its shares
of Common Stock. Under Section 170(a) of the General Corporation
Law of Delaware (the
"GCL"), the Company is, and has been, proscribed from declaring or
paying any dividends upon
any shares of its capital stock except to the extent of (1) its surplus (as
defined under the GCL)
or (2) in the case of no such surplus, its net profits for the fiscal year in
<PAGE>
which the dividend is
declared and/or the preceding fiscal year. As the Company has no
surplus (as defined under the
GCL) or net profits, the Company is foreclosed from declaring or
paying any dividends even
if it had otherwise been inclined to do so.
The shares of Series B Preferred Stock (which were first issued in
June 1996) and the
shares of Series C Preferred Stock (which were first issued in June
1998) accrue cash dividends
at ten (10%) percent; provided that if the cash dividend for a fiscal
year is not paid within 30
days of the end of such year, the amount of the dividend shall increase
to thirteen (13%) percent
and shall be payable in shares of Common Stock valued at the market
price. Since shares of
Preferred Stock were first issued by the Company, the Company (for
reasons set forth above)
has been precluded from paying any cash dividends on the shares of
Preferred Stock.
Consequently, the Company issued to holders of shares of Series B
Preferred Stock an aggregate
of approximately 1,600,000 shares of Common Stock as the dividend
due thereon with respect
to 1997. It is anticipated that the Company will likewise issue an
additional approximately
2,000,000 shares of Common Stock with respect to the dividend
accrued on the outstanding
shares of Series B Preferred Stock and 254,555 shares of Common
Stock with respect to the
dividend accrued on the outstanding shares of Series C Preferred
Stock in 1998.
Corporate Performance Graph. The following graph shows a
comparison of
cumulative total stockholders' returns from December 31, 1994
through December 31, 1998 for
the Company, the Russell 2000 Index ("Russell") and the Dow Jones
Entertainment and Leisure
- -- Casino Index ("DJ Casino").
[GRAPH]
The graph assumes the investment of $100 in shares of Common
Stock on December
31, 1994 and the investment of $100 in Russell and DJ Casinos on
December 31, 1994, and that
all dividends were reinvested. No dividends have been declared or
paid on the Common Stock.
Section 16(a) Reporting. Under the securities laws of the United
States, the Company's
directors, its executive (and certain other) officers, and any persons
holding ten percent or more
of the Common Stock must report on their ownership of the Common
Stock and any changes
in that ownership to the Securities and Exchange Commission and to
the National Association
of Securities Dealers, Inc. Automated Quotation System. Specific due
dates for these reports
have been established. The Company is not aware of any
delinquencies by any of the foregoing
persons with regard to the timely filing of such reports for the year
ended December 31, 1998.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "SEC").
Proxy statements, reports and other information can be inspected and
copied at the public
reference facilities of the SEC at its principal office at Judiciary Plaza,
450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional offices at
Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, 13th
Floor, New York, New York 10048. Any interested party may obtain
copies of such material at
prescribed rates from the Public Reference Section of the SEC at its
principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
The SEC also maintains a
web site at http://www.sec.gov that contains reports, proxy and
information statements and other
information regarding registrants that file electronically with the SEC.
<PAGE>
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement and prior to the
date of the Meeting shall be
deemed to be incorporated by reference in this Proxy Statement and to
be a part hereof from the
respective dates of filing of such documents. Any statement contained
herein or in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained in any
subsequently filed document that also is or is deemed to be
incorporated by reference herein
modifies or supersedes such statement. Any such statement so
modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement.
The Company will provide, without charge, to each stockholder to
whom this Proxy
Statement is delivered and who so requests, a copy of any or all of the
information that has been
incorporated by reference in this Proxy Statement (exclusive of
exhibits to such information
unless such exhibits are specifically incorporated by reference into
such information). Any such
request should be made orally or in writing to Alpha Hospitality
Corporation, Secretary, 12 East
49th Street, 24th floor, New York, New York 10017, telephone (212)
750-3500. Within one
business day of receipt of such a request, the Company will provide,
by first class mail or other
equally prompt means, a copy of the information as requested.
STOCKHOLDER PROPOSALS
Stockholders' proposals intended to be presented at the Company's
2000 Annual
Meeting of Stockholders, pursuant to the provision of Rule 14a-8
promulgated under the
Exchange Act, must be received at the Company's offices not later
than February 14, 2000 for
inclusion in the Company's Proxy Statement and form of proxy
relating to that Meeting.
<PAGE>
ALPHA HOSPITALITY CORPORATION
12 East 49th Street
New York, New York 10017
_____________________
This Proxy is Solicited on Behalf of the Board of Directors
_____________________
The undersigned hereby appoints Stanley Tollman and Thomas W.
Aro as Proxies, each with the power to
appoint his substitute, and hereby authorizes them, and each of them
acting singly, to represent and vote, as designated
below, all the shares of Common Stock of Alpha Hospitality
Corporation ("Alpha") held of record by the undersigned
on July 28, 1999 at the combined Annual and Special Meeting of
Stockholders to be held on September 16, 1999,
or any adjournment thereof.
1. To elect the following individuals as members to the Board of
Directors of the Company:
Stanley S. Tollman FOR ABSTAIN AGAINST
Thomas W. Aro FOR ABSTAIN AGAINST
Brett G. Tollman FOR ABSTAIN AGAINST
James A. Cutler FOR ABSTAIN AGAINST
Matthew B. Walker FOR ABSTAIN AGAINST
Herbert F. Kozlov FOR ABSTAIN AGAINST
2. To consider and vote upon a proposal to amend Alpha's Certificate
of Incorporation to (a) increase the
number of authorized shares of Alpha's Common Stock from
25,000,000 shares to 75,000,000 shares
and (b) increase the number of authorized shares of the Company's
"blank check" Preferred Stock from
1,000,000 shares to 5,000,000 shares.
FOR ABSTAIN AGAINST
3. To consider and vote upon a proposal to adopt the 1998 Stock
Option Plan.
FOR ABSTAIN AGAINST
4. To consider and vote upon a proposal to amend the Company's
by-laws to permit the granting of
compensation to members of the Company's Board of Directors (or
any committee thereof) as
determined by the Board of Directors, without separate stockholder
approval.
FOR ABSTAIN AGAINST
5. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to enable
and authorize the Board of Directors to adopt, amend or repeal
by-laws of the Company.
FOR ABSTAIN AGAINST
6. To consider and vote upon a proposal to allow Stanley S. Tollman,
the Company's Chief Executive
Officer, to convert up to $2,000,000 in accrued but unpaid salary
into up to 1,000,000 shares of the
Company's Common Stock at a rate of $2.00 per share.
FOR ABSTAIN AGAINST
7. Ratification of Rothstein, Kass & Company, P.C. as the
Company's independent certified public
accountant.
FOR ABSTAIN AGAINST
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR Proposals 1, 2,
3, 4, 5, 6 and 7. A vote to
"ABSTAIN" will not be counted towards the requisite affirmative
vote to approve Proposals 2 and 5
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name 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 the President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized person.
---------------------------------
Signature
----------------------------------
Signature if held jointly
Dated:_________, 1999
<PAGE>
EXHIBIT A
ALPHA HOSPITALITY CORPORATION
WRITTEN CONSENT OF STOCKHOLDERS
The undersigned, being the record and beneficial holders
of the number of shares of capital stock of ALPHA
HOSPITALITY CORPORATION (the "Corporation"), a
Delaware corporation, immediately set forth after his, her or
its signature below, acting pursuant to and as contemplated
by Section 228(a) of the Delaware General Corporation Law
and Section 1.8 of the Corporation's By-Laws, hereby
consent to and adopt the following preambles and
resolutions and approve the matters set forth therein:
WHEREAS, as originally drafted, the By-Laws of the
Corporation contemplated a vote by stockholders holding
only common stock or other capital stock entitled to only
one vote per share and, accordingly, was written, with
respect to determining the existence of a quorum and, in
some instances regarding the vote of stockholders, in terms
of shares held by stockholders (rather than in terms of the
votes entitled to be cast by stockholders);
WHEREAS, the Corporation has issued, in the form of
shares of its Series B Preferred Stock and Series C Preferred
Stock, capital stock that is entitled to multiple votes
per share;
WHEREAS, as a consequence of the foregoing, the
By-Laws of the Corporation, as currently drafted, do not
provide for an appropriate means of determining the
presence of a quorum or, in some instances, for determining
whether a matter subject to stockholder vote or other
approval has received an appropriate vote; and
WHEREAS, it is therefore necessary and appropriate to
amend the Corporation's By-Laws to provide for an
appropriate means of determining the presence of a quorum
or for determining whether a matter subject to stockholder
vote or other approval has received an appropriate vote;
NOW THEREFORE, BE, AND IT HEREBY IS,
RESOLVED, that Section 1.2 of the By-Laws be, and it
hereby is, amended to read in its entirety as follows:
SECTION 1.2. Special Meetings. A special meeting
of stockholders may be called at any time by the Board of
Directors or the Chairman and shall be called by any of
them or by the Secretary upon the receipt of a written
request to do so that specifies the matter or matters,
appropriate for action at such meeting, proposed to be
presented and voted on at such meeting and that is signed by
the holders of record (determined as of the close of business
on the business day next preceding the date such request is
received) of shares of the Corporation's capital stock
representing a majority of the total number of votes that (as
of the date such request is received) could be exercised with
respect to the election of directors by the holders of all of
the issued and outstanding capital stock of the Corporation.
Any such meeting shall be held at such time and at such
place, within or without the State of Delaware, as shall
be determined by the body or person calling such meeting
and as shall be stated in the notice of such meeting.
; and it is further
RESOLVED, that Section 1.4 of the By-Laws be, and it
hereby is, amended to read in its entirety as follows:
Section 1.4. Quorum. Except as otherwise required
by Delaware law or the Certificate of Incorporation, the
holders of record (present in person or represented by proxy
at a meeting) of shares entitled to exercise a majority of all
votes entitled to be cast by the holders of all of the
Corporation's issued and outstanding capital stock with
respect to any matter to be acted on at the meeting of
stockholders shall constitute a quorum for the transaction of
business at such meeting, but in the absence of a quorum the
holders of record (present in person or represented by
proxy at the meeting) may vote to adjourn the meeting
from time to time until a quorum is obtained. At any such
adjourned meeting at which there is a quorum present or
represented by proxy any business may be transacted that
might have been transacted at the meeting as originally
called.
; and it is further
RESOLVED, that Section 2.3 of the By-Laws be, and it
hereby is, amended to read in its entirety as follows:
SECTION 2.3. Removal. Any one or more
directors may be removed with or without cause by the
affirmative vote or written consent of the holders of record
of shares of the Corporation's capital stock representing a
majority of the total number of votes that could be
exercised with respect to the election of directors by the
holders of all of the issued and outstanding capital stock of
the Corporation.
; and it is further
RESOLVED, that subsection (d) of Section 5.1 of the
By-Laws be, and it hereby is, amended to read in its entirety
as follows:
(d) Any indemnification under subsection (a) and
(b) of this Section (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case
upon a determination that the indemnification of the
director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in subsection (a) and/or (b), as
applicable, of this Section. Such determination shall be
made (1) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to the
relevant action, suit or proceeding and were otherwise
disinterested directors, (2) if no such quorum is obtainable,
by majority vote of all disinterested directors, (3) by
independent counsel in a written opinion or (4) by the
stockholders.
; and it is further
RESOLVED, this Written Consent may be signed in two
or more counterparts.
Dated: As of July 21, 1999
July __, 1999
_____________________________
BEATRICE TOLLMAN
1,815,890 shares of Common Stock
July __, 1999
_____________________________
BRETT G. TOLLMAN
559,875 shares of Common Stock
July __, 1999
_____________________________
THOMAS W. ARO
22,000 shares of Common Stock
July __, 1999
_____________________________
JAMES A. CUTLER
26,320 shares of Common Stock
July __, 1999
_____________________________
MATTHEW B. WALKER
404,237 shares of Common Stock
July __, 1999
TOLLMAN FAMILY TRUST
By:__________________________
Name: Brett G. Tollman
Title: Trustee
1,000,000 shares of Common Stock
July __, 1999
BRYANSTON GROUP, INC.
By:_______________________________
Name:
Title:
2,414,063 shares of Common Stock
777,238 shares of Series B Preferred Stock
135,162 shares of Series C Preferred Stock
July __, 1999
BP GROUP, LTD.
By:_______________________________
Name: Patricia Cohen
Title:
44,258 shares of Series B Preferred Stock
<PAGE>
EXHIBIT B
1998 STOCK OPTION PLAN
OF
ALPHA HOSPITALITY CORPORATION
Alpha Hospitality Corporation, a corporation organized under the
laws of the State of Delaware, hereby adopts this 1998 Stock Option
Plan. The purpose of this Plan is to further the growth, development
and financial success of the Company by providing additional
incentives to certain of its key Employees by assisting them to become
owners of the Company's common stock ("Common Stock"), par value
$.01 per share, and thus to benefit directly from its growth,
development and financial success.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall
have the respective meanings specified below unless the context clearly
indicates to the contrary. The masculine pronoun shall include the
feminine and neuter, and the singular shall include the plural, where
the context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.3 - Committee
"Committee" shall mean the Stock Option Committee of the
Board, appointed as provided in Section 6.1 hereof.
Section 1.4 - Company
"Company" shall mean Alpha Hospitality Corporation, a Delaware
corporation. In addition, "Company" shall mean any corporation
assuming, or issuing new employee stock options in substitution for,
Options outstanding under this Plan, in a transaction to which
Section 424(a) of the Code applies.
Section 1.5 - Director
"Director" shall mean a member of the Board.
Section 1.6 - Employee
"Employee" shall mean any employee (as defined in accordance
with the regulations and revenue rulings then applicable under Section
3401(c) of the Code) of the Company, or of any corporation which is
then a Parent Corporation or a Subsidiary, whether such employee
is so employed at the time this Plan is adopted or becomes so employed
subsequent to the adoption of this Plan. To the extent not included in
the foregoing, "Employee" shall also mean any officer, director,
employee or consultant of, or other advisor to, the Company or any
entity that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the
Company, as the Committee shall from time to time select in its sole
and absolute discretion.
<PAGE>
Section 1.7 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
Section 1.8 - Incentive Stock Option
"Incentive Stock Option" shall mean an Option that qualifies
under Section 422 of the Code and that is designated as an Incentive
Stock Option by the Committee.
Section 1.9 - Non-Qualified Option
"Non-Qualified Option" shall mean any Option that is not an
Incentive Stock Option and that is designated as a Non-Qualified
Option by the Committee.
Section 1.10 - Officer
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended
in the future.
Section 1.11 - Option
"Option" shall mean an option to purchase shares of Common
Stock, granted under this Plan. "Options" includes both Incentive
Stock Options and Non-Qualified Options.
Section 1.12 - Optionee
"Optionee" shall mean an Employee to whom an Option is granted
under this Plan.
Section 1.13 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken
chain of corporations ending with the Company if each of the
corporations other than the Company then owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
Section 1.14 - Plan
"Plan" shall mean this 1998 Stock Option Plan of Alpha
Hospitality Corporation.
Section 1.15 - Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended in the future.
Section 1.16 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.17 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as
amended.
<PAGE>
Section 1.18 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
Section 1.19 - Termination of Employment
"Termination of Employment" shall mean the time when an
Optionee ceases to be an Employee for any reason, with or without
cause, including, but not by way of limitation, by resignation,
discharge, death or retirement, but excluding any termination where
there is a simultaneous reemployment by the Company, a Parent
Corporation, a Subsidiary or any entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled
by, or is under common control with, the Company. The Committee,
in its sole and absolute discretion, and with respect to all Options
hereunder, shall determine all matters and questions relating to
Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment is for "cause"
and what actions constitute "cause," and all questions of whether any
particular leave of absence constitutes a Termination of Employment;
provided, however, that, with respect to Incentive Stock Options, a
leave of absence shall constitute a Termination of Employment if, and
to the extent that, such leave of absence interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options shall be shares of Common
Stock. The aggregate number of such shares that may be issued upon
exercise of Options shall be 4,000,000 shares. The shares to be issued
upon exercise of Options may be newly-issued shares or treasury
shares.
Section 2.2 - Unexercised Options
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which
such Option was not exercised prior to its expiration or cancellation
may again be optioned hereunder.
Section 2.3 - Changes in Company's Shares
In the event the outstanding shares of Common Stock are
hereafter changed into or exchanged for a different number or kind of
shares or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number
and kind of shares for the purchase of which Options may be granted,
including adjustments of the limitations in Section 2.1 hereof on the
maximum number and kind of shares that may be issued on exercise of
Options.
<PAGE>
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any key Employee shall be eligible to be granted Options, subject
to such rules and conditions as the Committee may establish from time
to time in its sole and absolute discretion.
Section 3.2 - Qualification of Incentive Stock Options
Subject to the provisions of Section 7.7 hereof, no Incentive Stock
Option shall be granted unless such Option, when granted, qualifies as
an "incentive stock option" under Section 422 of the Code.
Section 3.3 - Granting of Options
(a) Subject to the provisions hereof, the
Committee shall from time to time, in its sole and absolute discretion:
(i) determine which
Employees are key Employees and select from among the key
Employees (including those to whom Options have been previously
granted under this Plan or any other plan of the Company) such of
them as in its opinion should be granted Options; and
(ii) determine the number of
shares to be subject to such Options granted to such selected key
Employees, and determine whether such Options are to be
Incentive Stock Options or Non-Qualified Options; and
(iii) determine the terms and
conditions of such Options, consistent with this Plan.
(b) In selecting the key Employees to whom
Options shall be granted hereunder, the number of shares to be subject
to such Options and the terms and conditions of such Options, the
Committee shall have sole and absolute discretion and shall be free to
make non-uniform and selective determinations based upon such
factors as it deems relevant.
(c) Upon the selection of a key Employee to be
granted an Option, the Committee shall instruct the Secretary to issue
such Option and may impose such conditions on the grant of such
Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its sole and absolute
discretion and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee that
such Employee surrender for cancellation some or all of the
unexercised Options that have been previously granted to him. An
Option the grant of which is conditioned upon such surrender may have
an option price lower (or higher) than the option price of the
surrendered Option, may cover the same (or a lessor or greater) number
of shares as the surrendered Option, may contain such other terms as
the Committee deems appropriate and shall be exercisable in
accordance with its terms, without regard to the number of shares,
price, option period or any other term or condition of the surrendered
Option.
<PAGE>
ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized
Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
Stock Option Agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to qualify such
Options as "incentive stock options" under Section 422 of the Code.
Section 4.2 - Option Price
(a) The price of the shares subject to each Option
shall be not less than 100% of the fair market value of such shares on
the date such Option is granted; provided, however, that, in the case of
an Incentive Stock Option, the price per share shall not be less than
110% of the fair market value of such shares on the date such Option is
granted if such Option is granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company, any
Subsidiary or any Parent Corporation.
(b) For purposes of this Plan, the fair market
value of a share of the Company's Common Stock as of a given date
shall be: (i) the closing price of a share of Common Stock
on the principal exchange, if any, on which shares of Common Stock
are then trading on the day previous to such date or, if shares were not
traded on the day previous to such date, then on the next preceding
trading day during which a sale occurred; or (ii) if such Common Stock
is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the last sales price (if the Common Stock is then
listed as a National Market Issue under the NASD National Market
System) or (2) the mean between the closing representative bid and
asked prices (in all other cases) for the Common Stock, in each case, as
of the day previous to such date as reported by NASDAQ or such
successor quotation system; or (iii) if the Common Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and
asked prices for the Common Stock on the day previous to such date, as
determined in good faith by the Committee; or (iv) if the Common
Stock is not publicly traded, the fair market value established by the
Committee acting in good faith.
Section 4.3 - Commencement of Exercisability
(a) No Option may be exercised in whole or in
part during the six months after such Option is granted, except as
otherwise set forth herein.
(b) Each Option granted hereunder shall be
subject to such vesting schedule (which may be cumulative or
non-cumulative), conditions, restrictions and other provisions
as the Committee shall, in its sole and absolute discretion, deem
necessary or appropriate, which determinations may be non-uniform
and selective and based upon such factors as it deems relevant in its
sole and absolute discretion.
(c) Subject to the provisions hereof governing
Incentive Stock Options, the Committee shall have the right to
accelerate the vesting of any outstanding Option, or any portion
thereof, at any time and from time to time, and upon such terms and
conditions as it shall determine in its sole and absolute discretion.
(d) Notwithstanding any other provision of this
Plan, to the extent that the aggregate fair market value (determined at
the time the Incentive Stock Option is granted) of the shares of the
Company's stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code) are exercisable by any
Optionee for the first time by such Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the
Company, any Subsidiary and any Parent Corporation) exceeds
$100,000, such Options shall be treated as
<PAGE>
Non-Qualified Options. For purposes of this Section, Options shall be taken
into account in the order in which they were granted.
(e) Notwithstanding the provisions of paragraph
(a) above, the Committee shall have the right to issue Options
hereunder that are immediately exercisable on the date of grant;
provided, however, that in such event, the shares of Common Stock to
be issued thereunder shall be subject to such restrictions on transfer and
forfeiture as the Committee shall, in its sole and absolute discretion,
deem appropriate, which determinations may be non-uniform and
selective and based upon such factors as it deems appropriate in its sole
and absolute discretion.
Section 4.4 - Expiration of Options
No Option may be exercised to any extent by anyone after the first
to occur of the following events:
(a) the expiration of ten years from the date such
Option was granted;
(b) with respect to an Incentive Stock Option, in
the case of an Optionee owning (within the meaning of Section 424(d)
of the Code), at the time such Option was granted, more than 10% of
the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation, the expiration of
five years from the date such Option was granted;
(c) the date of the Optionee's Termination of
Employment for any reason, other than such Optionee's death or
disability (within the meaning of Section 22(e)(3) of the Code),
unless the Committee otherwise elects to permit the exercise of such
Option for a period of time thereafter; provided, however, that (a) such
period of time shall end no later than ten years from the date such
Option was granted, (b) with respect to any Incentive Stock Option,
such period of time shall not exceed three months from such
Termination of Employment and (c) the Committee may make such
elections in such manner as it deems appropriate, which may be
non-uniform and selective, and based upon such factors as it, in its sole
and absolute discretion, deems relevant; provided, however, that the
foregoing restrictions with respect to an Optionee's Termination of
Employment (as well as the restrictions set forth in clauses (iv)
and (vi) below with respect to an Optionee's Termination of
Employment) shall not apply to any Optionee who is merely a
consultant or other advisor to the Company or any entity that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company, as the
Committee shall from time to time select in its sole and absolute
discretion, rather than a director, officer or other employee of the
Company or any entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, the Company, as the Committee shall from time to time select in
its sole and absolute discretion;
(d) with respect to an Option held by an Optionee
who is disabled (within the meaning of Section 22(e)(3) of the Code),
the expiration of one year from the date of such Optionee's Termination
of Employment for any reason other than such Optionee's death
unless the Optionee dies within said one-year period;
(e) the expiration of one year from the date of the
Optionee's death with respect to all Options held by such Optionee; and
(f) with respect to all Options, and
notwithstanding any other provision contained herein, the date of the
Optionee's Termination of Employment in the event such
Termination is for "cause" (as contemplated by Section 1.19 above).
Section 4.5 - Consideration
In consideration of the granting of an Option, the Committee may
require that the Optionee agree to remain in the employ of the
Company, a Parent Corporation or a Subsidiary for a period of one or
more years after such Option is granted. Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any
right to continue in the employ of the Company, any Parent
Corporation or any Subsidiary or shall interfere with or restrict
<PAGE>
in any way the rights of the Company, any Parent Corporation or any
Subsidiary, all of which rights are hereby expressly reserved, to
discharged any Optionee at any time for any reason whatsoever, with or
without cause.
Section 4.6 - Adjustments in Outstanding Options
In the event the outstanding shares of the stock subject to Options
are changed into or exchanged for a different number and/or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares, the Committee shall
make an appropriate and equitable adjustment in the number and/or
kind of shares as to which all outstanding Options, or portions thereof
then unexercised, shall be exercisable, to the end that after such
event the Optionees' proportionate interests shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding
Option shall be made without change in the total price applicable to
such Option or the unexercised portion of such Option (except for any
change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment
in Option price per share; provided, however, that, in the case of
Incentive Stock Options, each such adjustment shall be made in such
manner as not to constitute a "modification" within the meaning of
Section 424(h)(3) of the Code. Any such adjustment made by the
Committee shall be final and binding upon all Optionees, the Company
and all other interested persons.
Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or
Dissolution
By its acceptance of each Option, each Optionee agrees that the
Board shall have the power and right to declare and determine, by a
duly adopted resolution of the Board, that each Option may not be
exercised after (i) the merger or consolidation of the Company with or
into another corporation (if the Company is not the surviving
corporation of such merger or consolidation), (ii) the acquisition by
another corporation or person of all or substantially all of the
Company's assets or 80% or more of the Company's then outstanding
voting stock or (iii) the liquidation or dissolution of the Company;
provided, that such resolution shall be adopted prior to the occurrence
of such merger, consolidation, acquisition, liquidation or dissolution.
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise any
Option (or any portion thereof) granted to him. After the death of the
Optionee, any exercisable portion of any Option granted to such
Optionee may, prior to the time when such portion becomes
unexercisable under this Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any
person empowered to do so under such Optionee's will or under the
then applicable laws of descent and distribution. Notwithstanding the
foregoing, the Committee may, in its sole and absolute discretion,
permit the transfer of any Non-Qualified Option, in whole or in part,
and the exercise thereof by any transferee thereof.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes
unexercisable under this Plan or the applicable Stock
Option Agreement, such Option or portion thereof may be exercised in
whole or in part; provided, however, that the Company shall not be
required to issue fractional shares and the Committee may require any
partial exercise to be with respect to a specified minimum number
of shares.
<PAGE>
Section 5.3 - Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under this Plan or the applicable Stock Option
Agreement:
(a) notice in writing signed by the Optionee or
other person then entitled to exercise such Option or portion, stating
that such Option or portion is exercised, such notice complying with all
applicable rules established by the Committee and/or contained in the
applicable Stock Option Agreement; and
(b) (i) full payment (in cash or
by check) for the shares with respect to which such Option or portion is
thereby exercised; or
(ii) with the consent of the
Committee, (A) shares of Common Stock owned by the Optionee duly
endorsed for transfer to the Company or (B) subject to the
requirements of Section 5.4 hereof, shares of Common Stock issuable
to the Optionee upon exercise of the Option, in each case, with a fair
market value (as determined under Section 4.2(b) hereof) on the date of
Option exercise equal to the aggregate Option price of the shares
with respect to which such Option or portion is thereby exercised; or
(iii) with the consent of the
Committee, a promissory note duly executed and delivered by the
Optionee in the principal amount of the exercise price thereof,
or any portion thereof, in each case upon such terms and conditions
(including without limitation, terms regarding rates of interest, payment
schedule, collateral or other security) as the Committee may establish
in its sole and absolute discretion; or
(iv) with the consent of the
Committee, any combination of the consideration provided in the
foregoing clauses (i), (ii) and (iii);
(c) payment to the Company (or other employer
corporation) of all amounts that it is required to withhold under federal,
state or local law in connection with the exercise of the Option;
provided, that, with the consent of the Committee, any combination of
the consideration provided in the foregoing clauses (i), (ii) and (iii) of
the preceding paragraph (b) may be used to make all or part of such
payment;
(d) such representations and documents as the
Committee, in its sole and absolute discretion, deems necessary or
advisable to effect compliance with all applicable provisions of the
Securities Act and any other federal or state securities laws or
regulations. The Committee may, in its sole and absolute discretion,
also take whatever additional actions it deems appropriate to effect
such compliance, including, without limitation, placing legends
on share certificates and issuing stop-transfer orders to transfer agents
and registrars; and
(e) in the event that any Option or portion thereof
shall be exercised pursuant to Section 5.1 hereof by any person or
persons other than the Optionee, appropriate proof of the right of such
person or persons to exercise such Option or portion thereof.
Section 5.4 - Certain Requirements
The Committee may, in its sole and absolute discretion, limit or
restrict the use of shares of Common Stock issuable to the Optionee
upon exercise of his Option to satisfy the Option price or the tax
withholding consequences of such exercise (i) to such periods
following the date of release of the quarterly or annual summary
statement of sales and earnings of the Company and/or to such other
periods as the Committee shall, in its sole and absolute discretion, deem
appropriate, (ii) to its receipt of an irrevocable written election by
the Optionee to use shares of Common Stock issuable to the Optionee
upon exercise of the Option to pay all or part of the Option price or the
withholding taxes (subject to the approval of the Committee) made at
least six months (or such other period as the Committee, in its sole
and absolute discretion, may determine) prior to the payment of such
Option price or withholding taxes or (iii) in accordance with
<PAGE>
such other rules and regulations as the Committee may, in its sole and absolute
discretion, determine to be necessary or appropriate
from time to time.
Section 5.5 - Conditions to Issuance of Stock Certificates
The shares of stock issuable and deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized
but unissued shares or issued shares that have then been reacquired by
the Company. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon
the exercise of any Option or portion thereof prior to the fulfillment of
all of the following conditions:
(a) the admission of such shares to listing on all
stock exchanges on which such class of stock is then listed; and
(b) the completion of any registration or other
qualification of such shares under any state or federal law or under the
rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body, that the Committee shall,
in its sole and absolute discretion, deem necessary or advisable; and
(c) the obtaining of any approval or other
clearance from any state or federal governmental agency that the
Committee shall, in its sole and absolute discretion, determine
to be necessary or advisable; and
(d) the payment to the Company (or other
employer corporation) of all amounts that it is required to withhold
under federal, state or local law in connection with the exercise
of the Option; and
(e) the lapse of such reasonable period of time
following the exercise of the Option as the Committee, in its sole and
absolute discretion, may establish from time to time for reasons of
administrative convenience.
Section 5.6 - Rights as Shareholders
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by
the Company to such holders.
Section 5.7 - Transfer Restrictions
If required at any time by the Committee, no shares acquired upon
exercise of any Option by any Officer may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have
elapsed from (but excluding) the date that such Option was
granted. The Committee, in its sole and absolute discretion, may
impose such other restrictions on the transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate.
Any such other restriction shall be set forth in the respective Stock
Option Agreement and may be referred to on the certificate or
certificates evidencing such shares. The Committee may require the
Employee to give the Company prompt notice of any disposition of
shares of stock that are or have been acquired by exercise of an
Incentive Stock Option within two years from the date of granting such
Option or one year after the transfer of such shares to such Employee.
The Committee may direct that the certificates evidencing
shares acquired by exercise of an Incentive Stock Option refer to such
requirement to give prompt notice of disposition.
<PAGE>
ARTICLE VI
ADMINISTRATION
Section 6.1 - Stock Option Committee
The Committee shall consist of two or more Directors, appointed
by and holding office at the pleasure of the Board. The Board may
limit the members of the Committee to directors who are both
"non-employee directors," as defined in Rule 16b-3, and "outside
directors," as defined in Section 162(m) of the Code. Subject to the
limitations set forth in the preceding sentence, the powers of the
Committee may, if so determined by resolution of the Board, be
exercised by the Compensation Committee of the Board. Appointment
of Committee members shall be effective upon acceptance of
appointment. Committee members may be removed by the Board at
any time and may resign at any time. Vacancies in the Committee shall
be filled by the Board. The Board reserves the right to serve as the
Committee if it so elects, and, in such event, the term "Committee"
shall mean the Board.
Section 6.2 - Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The
Committee shall have the power to interpret this Plan and the Options
and to adopt such rules for the administration, interpretation and
application of this Plan as are consistent therewith and to interpret,
amend or revoke any such rules. Any such interpretations and rules in
regard to Incentive Stock Options shall be consistent with the basic
purpose of this Plan to grant "incentive stock options" within the
meaning of Section 422 of the Code.
Section 6.3 - Majority Rule
The Committee shall act by a majority of its members in office.
The Committee may act either by vote at a meeting or by a
memorandum or other written instrument signed by a majority of the
Committee.
Section 6.4 - Compensation; Professional Assistance; Good Faith
Actions
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All
expenses and liabilities incurred by members of the Committee in
connection with the administration of this Plan shall be borne
by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the
Company and its Officers and Directors shall be entitled to rely upon
the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees,
the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or the
Options or for any failure to act, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation or any failure to make any
determination or to otherwise act. The Committee shall have the
unrestricted right to make non-uniform decisions and determinations in
all matters regarding this Plan and all Options issued hereunder.
ARTICLE VII
OTHER PROVISIONS
Section 7.1 - Options Not Transferable
No Option or interest or right therein or part thereof shall be liable
for, or available for the satisfaction of, the debts, contracts or
engagements of the Optionee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means, whether such disposition
be voluntary or involuntary or by operation of law or by judgment,
levy, attachment, garnishment or any other legal or equitable
<PAGE>
proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that
nothing in this Section 7.1 shall prevent transfers by will or by the
applicable laws of descent and distribution. Notwithstanding the
foregoing, the Committee may, in its sole and absolute discretion,
permit the holder of any Non-Qualified Option to transfer such Option,
or any portion thereof, to such holder's spouse, lineal descendent(s) or
trust established for the benefit thereof or any other person or entity.
Section 7.2 - Amendment, Suspension or Termination of this Plan
The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by
the Committee, including, without limitation, any amendment to
increase or decrease the number of shares as to which Options may be
granted, except as otherwise set forth herein hereunder, subject to any
requirements of stockholder approval set forth in Section 16b-3 or the
applicable provisions of the Code. Neither the amendment, suspension
nor termination of this Plan shall, without the consent of
the holder of any Option, impair any rights or obligations under such
Option (or the Stock Option Agreement applicable thereto) theretofore
granted, except as otherwise set forth herein (or in the applicable Stock
Option Agreement). Subject to any applicable provisions of
Section 16b-3 and the Code, the Committee and the holder of any
Option may at any time, by mutual consent, amend, modify or
otherwise waive any of the terms and provisions, including
the exercise price, of such holder's Option and Stock Option
Agreement. No Option may be granted during any period of
suspension nor after termination of this Plan, and in no event
may any Option be granted under this Plan after the first to occur of (a)
January 1, 2010 or (b) the expiration of ten years from the date this
Plan is approved by the Company's stockholders as contemplated under
Section 7.3 hereof.
Section 7.3 - Effective Date; Approval of Plan by Stockholders
This Plan will be effective at the time it is approved or ratified by
a majority vote of the Company's stockholders (present in person or
represented by proxy) at a duly called and held meeting thereof
(including any proper adjournment thereof), a quorum being present.
In the event this Plan is not so approved, this Plan shall not become
effective and shall be null and void, and any Options issued hereunder
shall be terminated.
Section 7.4 - Effect of Plan Upon Other Option and Compensation
Plans
Except as otherwise set forth herein, the adoption of this Plan
shall not affect any other compensation or incentive plans in effect for
the Company, any Parent Corporation or any Subsidiary. Nothing in
this Plan shall be construed to limit the right of the Company, any
Parent Corporation or any Subsidiary to (a) establish any other forms
of incentives or compensation for employees of the Company, any
Parent Corporation or any Subsidiary or (b) grant or assume options
otherwise than under this Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business, stock or
assets of any corporation, firm or association.
Section 7.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Plan or any
provision hereof.
Section 7.6 - Conformity to Securities Laws
This Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3.
Notwithstanding anything contained herein to the contrary, this Plan
shall be administered, and Options shall be granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, this Plan and
Options granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
<PAGE>
Section 7.7 - Incentive Stock Options
With respect to Incentive Stock Options, if this Plan does not
contain any provision now or hereafter required to be included herein
under Section 422 of the Code, such provision shall be deemed to be
incorporated herein with the same force and effect as if such provision
had been set out at length herein. Notwithstanding anything contained
herein to the contrary, to the extent any Option that is intended to
qualify as an Incentive Stock Option cannot so qualify, such Option, to
that extent, shall be deemed to be a Non-Qualified Option under the
Code for all purposes of this Plan.
Section 7.8 - Exclusion from Pension and Profit-Sharing Computation
By acceptance of an Option, the Optionee accepting same shall be
deemed to have agreed that the grant of such Option is special incentive
compensation that will not be taken into account, in any manner, as
salary, compensation or bonus in determining the amount of any
payment under any pension, retirement or other employee benefit plan
of the Company or any of its Subsidiaries, whether now existing or
hereafter arising. In addition, such Option will not affect the amount of
any life insurance coverage, if any, provided by the Company
on the life of the Optionee or that is payable to any beneficiary of such
Optionee under any life insurance plan covering employees of the
Company or any of its Subsidiaries.
