<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Century Casinos, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
CENTURY CASINOS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
Century Casinos, Inc. (the "Company"), a Delaware corporation, will be convened
at 8:00 a.m., Mountain Standard Time, on Tuesday, December 14, 1999, at
Womacks/Legends Casino, 200-220 East Bennett Avenue, Cripple Creek, Colorado,
for the following purposes:
1. To elect two Class II directors to the Board of Directors;
2. To consider and act upon a proposal to amend, at the election
of the Board of Directors (which election would be available
to the Board until June 30, 2000), Article FOURTH of the
Company's Certificate of Incorporation to effect a reverse
stock split of the Company's common stock on a ratio not to
exceed one for 20;
3. To consider and vote upon a proposal to increase the shares
reserved for issuance under the Employees' Equity Incentive
Plan from 3,500,000 to 4,500,000;
4. To consider and vote upon a proposal to amend Articles NINTH
and TENTH of the Certificate of Incorporation of the Company
to add two additional fair price provisions which, in certain
circumstances, may require payment of a higher price to
stockholders of the Company. The business combination fair
price and optional fair price redemption provisions are
designed to ensure fair treatment of all stockholders in the
event of certain significant transactions with any holder of
5% or more of the voting shares of the Company, as more fully
set forth in the Proxy Statement; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on November 5, 1999
will be entitled to vote at the meeting. These materials were mailed to
stockholders on or about November 10, 1999.
--------------------------
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. PLEASE FILL
IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE SO THAT
YOUR SHARES MAY BE VOTED AT THE MEETING. IF YOU ATTEND THE MEETING YOU CAN
REVOKE YOUR PROXY AND VOTE IN PERSON. YOUR VOTE IS IMPORTANT.
--------------------------
By Order of the Board of Directors
/s/ Erwin Haitzmann
Erwin Haitzmann
Chairman of the Board
Cripple Creek, Colorado
November 5, 1999
<PAGE> 3
CENTURY CASINOS, INC.
200 - 220 EAST BENNETT AVENUE
CRIPPLE CREEK, CO 80813
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 1999
IN GENERAL
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Century Casinos, Inc. (the "Company"),
to be used at the Annual Meeting of Stockholders (the "Meeting") to be held on
Tuesday, December 14, 1999, at Womacks/Legends Casino, 200-220 East Bennett
Avenue, Cripple Creek, Colorado, at 8:00 a.m., Mountain Standard Time, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
The enclosed material was mailed on or about November 10, 1999 to stockholders
of the Company.
The shares covered by the enclosed proxy, if received by the Board of
Directors prior to the Meeting, will be voted in favor of the election of the
nominees to the Board of Directors named in this proxy statement and for all the
other proposals set forth in the notice. A proxy may be revoked at any time
before it is exercised by giving written notice to the Assistant Secretary of
the Company at the above address or by a subsequently executed proxy.
Stockholders may vote their shares in person if they attend the Meeting, even if
they have executed and returned a proxy. If no instructions are indicated on the
proxy, the shares will be voted in favor of the proposals to be considered at
the Meeting. The matters to be brought before the Meeting are the election of
two Class II directors of the Board of Directors, to consider and act upon a
proposal to amend, at the election of the Board (which election would be
available to the Board until June 30, 2000), the Company's Certificate of
Incorporation to effect a one-for-20 reverse stock split, to consider a proposal
to increase shares reserved for issuance under the Employees' Equity Incentive
Plan from 3,500,000 to 4,500,000, to vote upon a proposal to add additional fair
price provisions to the Certificate of Incorporation of the Company, and the
transaction of such other business as may come before the Meeting.
Expenses in connection with the solicitation of proxies will be paid by
the Company. Proxies are being solicited by mail, and, in addition, directors,
officers and regular employees of the Company (who will not receive any
additional compensation) may solicit proxies personally, by telephone or by
special correspondence. The Company will reimburse brokerage firms and others
for their expenses in forwarding proxy materials to the beneficial owners of the
Company's common stock.
VOTING SECURITIES
Only stockholders of record at the close of business on November 5,
1999 will be entitled to vote at the Meeting. On that date, there were issued
and outstanding 14,573,985 shares of the Company's $.01 par value common stock,
the only class of voting securities of the Company. Each share of common stock
is entitled to one vote per share. Cumulative voting in the election of
directors is not permitted.
A majority of the number of the outstanding shares of common stock,
represented either in person or by proxy, will constitute a quorum for the
transaction of business at the Meeting. Of the votes cast at the Meeting, a vote
of the holders of a majority of the common stock present, either in person or by
proxy, is required to elect each director nominee and to adopt the proposal to
increase the number of shares reserved for issuance under the Employees' Equity
Incentive Plan. A majority vote of the outstanding
1
<PAGE> 4
common stock is required to effect the proposed reverse stock split. A vote of
80% of the outstanding common stock is required to effect the proposal to add
additional fair price provisions to the Certificate of Incorporation.
The following table sets forth information as of November 5, 1999,
concerning record common stock ownership by beneficial owners of five percent or
more of the Company's common stock and the officers and directors of the
Company. All of the named persons below, other than Thomas Graf and Lloyd I.
Miller, III, are officers or directors of the Company:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
- -------------- ---------------- -------------------- -----
<S> <C> <C> <C>
Common Stock, Erwin Haitzmann 1,613,669 (a) 10.4%
$.01 par value 200-220 East Bennett Avenue
Cripple Creek, Colorado 80813
Common Stock, Peter Hoetzinger 951,728 (b) 6.3%
$.01 par value 200-220 East Bennett Avenue
Cripple Creek, Colorado 80813
Common Stock, James D. Forbes 879,264 (c) 5.8%
$.01 par value 200-220 East Bennett Avenue
Cripple Creek, Colorado 80813
Common Stock, Robert S. Eichberg 20,000 (d) (e)
$.01 par value 1801 California Street, Suite 4650
Denver, Colorado 80202
Common Stock, Larry Hannappel 42,500 (f) (e)
$01 par value 200-220 East Bennett Avenue
Cripple Creek, Colorado 80813
Common Stock, Gottfried Schellmann 59,000 (g) (e)
$.01 par value Lerchengasse 2
2340 Moedling, Austria
Common Stock, All Officers and Directors as a 3,566,161 21.3%
$.01 par value Group (six persons)
Common Stock, Thomas Graf 2,511,000 17.2%
$.01 par value Liechtensteinstrasse 54
A-2344 Maria Enzersdorf
Austria
Common Stock, Lloyd I. Miller, III 1,807,675 12.4%
$.01 par value 4550 Gordon Drive
Naples, Florida 34102
</TABLE>
- ------------
(a) Includes: (i) an incentive stock option for 130,000 shares exercisable
at $1.50 per share; (ii) an incentive stock option for 50,000 shares
exercisable at $0.75 per share; and (iii) a nonstatutory stock option
for 820,000 shares exercisable at $1.50 per share.
2
<PAGE> 5
(b) Includes: (i) an incentive stock option for 130,000 shares exercisable
at $1.50 per share; (ii) an incentive stock option for 50,000 shares
exercisable at $0.75 per share; (iii) a nonstatutory stock option for
413,000 shares exercisable at $1.50 per share; and (iv) 100,000 shares
held by Mr. Hoetzinger's spouse.
(c) Includes: (i) an incentive stock option for 130,000 shares exercisable
at $1.50 per share; (ii) an incentive stock option for 50,000 shares
exercisable at $0.75 per share; and (iii) a nonstatutory stock option
for 328,000 shares exercisable at $1.50 per share.
(d) Includes an option for 10,000 shares exercisable at $0.938 per share.
(e) Less than 1%.
(f) Includes: (i) an incentive stock option for 22,500 shares exercisable
at $1.50 per share; (ii) an incentive stock option for 10,000 shares
exercisable at $0.75 per share; and (iii) a nonstatutory stock option
for 5,000 shares exercisable at $2.25 per share.
(g) Includes an option for 10,000 shares exercisable at $0.938 per share.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the Board of Directors and executive officers of
the Company, as of November 5, 1999, is as follows:
<TABLE>
<CAPTION>
Name Age Positions Held Officer or Director Since
---- --- -------------- -------------------------
<S> <C> <C> <C>
Erwin Haitzmann 46 Chairman of the Board and March 1994
Chief Executive Officer
Peter Hoetzinger 37 Vice Chairman of the Board March 1994
and Assistant Secretary
James D. Forbes 42 Assistant Treasurer and Director March 1994
Robert S. Eichberg 53 Director January 1997
Gottfried Schellmann 45 Director January 1997
</TABLE>
There is no family relationship between or among any of the
above-listed officers and directors.
ERWIN HAITZMANN holds a Doctorate degree in Social and Economic
Sciences from the University of Linz, Austria (1980), and has 24 years of casino
gaming experience ranging from dealer (commencing in 1975) through various
casino management positions. Mr. Haitzmann has been employed full-time by the
Company since May 1993.
PETER HOETZINGER received a Magister degree from the University of
Linz, Austria, in 1986. He thereafter was employed in several managerial
positions in the gaming industry with Austrian casino companies. Mr. Hoetzinger
has been employed full-time by the Company since May 1993.
3
<PAGE> 6
JAMES D. FORBES, from 1979 to 1993, was employed in several positions
in the gaming industry with British and Austrian casino companies. Mr. Forbes
has been employed full-time by the Company since February 1993.
ROBERT S. EICHBERG graduated from Bradley University in 1968 with a
B.S. Degree in Accounting and is a Certified Public Accountant. He was employed
by the public accounting firm of Deloitte & Touche LLP from 1974 to 1994, ending
his tenure there as Tax Partner. From 1994 to 1996 he served as Tax Partner for
the public accounting firm Price Bednar, before joining the public accounting
firm of Causey, Demgen & Moore, Inc. in September of 1996, where he has been
employed since, as shareholder and President.
GOTTFRIED SCHELLMANN graduated from University of Vienna with a law
degree and is a certified tax advisor in Austria. After having worked for
several firms, including KPMG Germany as tax and accounting manager, he formed
Schellmann & Partner in 1993, where he has been employed since, which
specializes in tax and accounting work for provinces and municipalities in
Austria. He is a member of the International Bar Association and currently acts
as its session chairman. He is also one of the main co-authors, together with
certain officers of the Austrian Ministry of Finance, of the Austrian corporate
tax code.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
During 1998, there were no formal meetings of the Board of Directors.
However, on several occasions during the year, the members of the Board of
Directors executed unanimous written consents in lieu of meetings. On January 1,
1998, the Board of Directors established an Audit Committee comprising Messrs.
Teufelberger, Eichberg and Schellmann. The Audit Committee assesses the
Company's system of internal controls and assists in considering the
recommendations and performance of the Company's independent accountants. The
Audit Committee held two meetings in 1998. The Board of Directors does not have
separate Compensation or Nominating Committees.
EXECUTIVE COMPENSATION
The table below sets forth executive compensation during 1996, 1997 and
1998 to the Chairman of the Board and Chief Executive Officer of the Company,
Erwin Haitzmann, and to all other executive officers who received greater than
$100,000 in compensation in 1996, 1997 and 1998.
4
<PAGE> 7
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Awards Payouts
------------------------- -------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options / LTIP Compen-
Salary Bonus sation (a) Awards SARs Payouts sation (b)
Year ($) ($) ($) ($) (#) ($) ($)
---- ------- ------- ---------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Erwin Haitzmann, 1998 150,000 200,000 59,700 -- -- -- --
Chairman of the Board 1997 130,671 54,632 1,715 -- -- -- --
and Chief Executive 1996 125,000 22,108 -- -- -- -- --
Officer
Peter Hoetzinger, 1998 150,000 200,000 15,402 -- -- -- --
Vice Chairman of the 1997 130,671 54,329 926 -- -- -- --
Board and Assistant 1996 125,000 21,809 -- -- -- -- --
Secretary
James D. Forbes, 1998 150,000 30,000 41,487 -- -- -- 1,724
Assistant Treasurer 1997 132,580 47,175 6,377 -- -- -- --
and Director 1996 125,000 13,189 -- -- -- -- --
Norbert Teufelberger,(c) 1998 150,000 140,000 7,859 -- -- -- 1,486
Chief Financial Officer, 1997 130,671 38,317 3,934 -- -- -- --
and Secretary 1996 125,000 5,765 -- -- -- -- --
</TABLE>
- ----------
(a) Amounts for 1998 include reimbursement for estimated income taxes,
associated with perquisites, of $26,721 for Mr. Haitzmann; $6,565 for
Mr. Hoetzinger; $11,151 for Mr. Forbes; and $837 for Mr.
Teufelberger.
(b) Consists solely of Company's matching contributions to the 401(k)
Savings and Retirement Plan.
(c) Mr. Teufelberger resigned from the Company effective September 30,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of stock options to purchase shares of common
stock of the Company to any of the named executive officers in 1998.
5
<PAGE> 8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the aggregate options held by certain
executive officers of the Company. No options were exercised by the specified
officers in 1998.
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Securities the-Money Options at
Shares Acquired Value Underlying Options December 31, 1998
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Erwin Haitzmann, -- -- 1,000,000 / None $1,550 / None (a)
Chairman of the
Board and Chief
Executive Officer
Peter Hoetzinger, -- -- 593,000 / None $1,550 / None (a)
Vice Chairman of the
Board and Assistant
Secretary
James D. Forbes, -- -- 508,000 / None $1,550 / None (a)
Assistant Treasurer
</TABLE>
- ----------
(a) Based on the average of the low ($0.781) and high ($0.781) bid prices
of the Company's Common Stock on the Nasdaq Stock Market as quoted on
December 31, 1998.
Directors who are full-time employees receive no compensation for their
services as directors. With the exception of Messrs. Eichberg and Schellmann,
all of the Company's directors are full-time employees.
Messrs. Eichberg and Schellmann, the outside directors of the Company,
receive $500 per Board or committee meeting attended, and the Company pays for
reasonable expenses incurred by the outside directors in conjunction with those
meetings. In addition, the outside directors receive $500 per gaming application
filed with gaming regulators to compensate them for their time spent. In
addition, as of the date of joining the Board of Directors, each of Messrs.
Eichberg and Schellmann received a warrant to purchase 10,000 share of common
stock with a five-year term exercisable at $0.938 per share.
6
<PAGE> 9
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who beneficially own
more than 10% of its outstanding common stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
Officers and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during the fiscal year ended December 31, 1998, all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10%
stockholders were complied with in a timely manner.
PROPOSAL I
ELECTION OF DIRECTORS
In the 1994 annual meeting, the stockholders approved a proposal to
divide the Board into three classes as nearly equal in number as possible.
Presently, the Board consists of five directors comprising the following: (i)
one Class I director, Mr. Eichberg, whose term will expire at the 2001 Annual
Meeting of Stockholders; (ii) two Class II directors, Messrs. Hoetzinger and
Forbes, both of whom are standing for re-election at the Meeting; and (iii) two
Class III directors, Messrs. Haitzmann and Schellmann, whose terms will expire
at the 2000 Annual Meeting. Each director who is elected at an Annual Meeting
will be elected for a three-year term expiring at the third Annual Meeting of
Stockholders after such director's election. Accordingly, under most
circumstances, directors of one Class only are elected at each year's Annual
Meeting of Stockholders. If elected, all nominees are expected to serve until
the expiration of their respective terms and until their successors are duly
elected and qualified.
At the Meeting, two Class II directors will be elected. The proxies
named on the enclosed proxy intend to vote for the election of the nominees for
Class II directors, Peter Hoetzinger and James D. Forbes. Proxies cannot be
voted for a greater number of directors than the number nominated.
Peter Hoetzinger, a nominee for a Class II director, is presently a
member of the Board of Directors, having served continuously as a director since
March 1994. He has indicated a willingness to serve; however, in the event he
should become unable to serve as a director, the proxy will be voted in
accordance with the best judgment of the persons acting under the proxy.
James D. Forbes, a nominee for a Class II director, is presently a
member of the Board of Directors, having served continuously as a director since
March 1994. He has indicated a willingness to serve; however, in the event he
should become unable to serve as a director, the proxy will be voted in
accordance with the best judgment of the persons acting under the proxy.
The information concerning Mr. Hoetzinger and Mr. Forbes, the nominees
for the Class II directors, is set forth above under "Information Concerning
Directors and Executive Officers."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE NOMINEES.
7
<PAGE> 10
PROPOSAL 2
REVERSE STOCK SPLIT
On October 22, 1999, the Board of Directors of the Company unanimously
approved and recommended to the stockholders a proposal to amend Article FOURTH
of the Company's Certificate of Incorporation to authorize, at the election of
the Board, a reverse stock split of the Company's common stock. While the exact
conversion rate is not yet known, the Board has recommended that the Company's
stockholders authorize a reverse stock split in a ratio not to exceed one for 20
(the "Split"). The Board of Directors will be authorized to determine whether,
when and the exact ratio for the Split, based upon various factors, and may
elect to effect the Split at any time until June 30, 2000. See "Reasons for the
Split" below. Assuming the one for 20 conversion rate, the proposal, if
approved, would result in the conversion of each share of the Company's common
stock into one-twentieth of a share of common stock (the "new common stock").
The rights and privileges of the holders of common stock will be substantially
unaffected by the Split. Likewise, each stockholder's proportional percentage
ownership interest and voting power in the Company will remain unchanged.
The Company presently is authorized under its Certificate of
Incorporation to issue 50,000,000 shares of common stock, of which 14,573,985
shares were issued and outstanding as of November 5, 1999, and 4,628,928 shares
were reserved for issuance upon exercise of options. The shares currently
outstanding, together with those currently reserved for issuance, represent
approximately 40% of the Company's authorized common stock. If the one for 20
Split is approved, the number of shares outstanding or reserved for issuance
would represent approximately 2% of the authorized shares. Consummation of the
Split will not change the number of shares of common stock authorized by the
Company's Certificate of Incorporation, or the per share par value of the common
stock, although, under Delaware law, the Certificate of Incorporation will
otherwise be amended to effect the Split. The Split will have the effect of
increasing the number of authorized shares available for issuance and increasing
the price at which the Company's common stock is currently traded on the Nasdaq
SmallCap Market.
There were approximately 120 stockholders of record of the Company as
of November 5, 1999. The approval of the Split will not result in any change in
the number of stockholders.
REASONS FOR THE SPLIT. The Board of Directors believes that the
proposal to give the Board authority to effect the Split, in a ratio not greater
than one for 20, is in the best interests of the Company and its stockholders.
The Board would like the discretion to determine to effect the Split at any time
up to June 30, 1999. The Board of Directors believes the Split may allow the
Company's common stock to become eligible to trade in the Nasdaq National
Market. The Board also views the Split as a step which may increase the market
price of the Company's common stock to a level that will permit the Company to
maintain its listing on the Nasdaq SmallCap Market. The Company's common stock
could be delisted from the Nasdaq SmallCap Market in the event the trading price
of the Company's stock decreased below $1.00 per share. A higher price could
also make the Company's common stock more attractive to a broader range of
investors. Many institutional investors have guidelines that preclude
investments in stocks that trade at relatively low prices. Moreover, certain
brokerage firms will not make margin loans or may charge higher transaction
costs with respect to securities that have a market price below a certain
minimum. In the event the Board determines to effect the Split, the Board of
Directors will set the exact ratio based upon factors including but not limited
to (i) Nasdaq listing requirements, (ii) the then current trading price of the
common stock, (iii) the asset values of the Company and (iv) the advice of the
Company's advisors. THERE CAN BE NO ASSURANCE, HOWEVER, THAT, ASSUMING THE SPLIT
IS APPROVED AND SUBSEQUENTLY EFFECTED, (i) THE MARKET PRICE THE COMMON STOCK
AFTER THE SPLIT WILL BE EQUAL TO OR EXCEED THE PRE-SPLIT MARKET PRICE MULTIPLIED
BY THE MULTIPLE SELECTED FOR THE SPLIT, (ii) THAT THE COMPANY'S EFFORTS TO
MAINTAIN THE LISTING OF ITS COMMON STOCK FOR TRADING ON NASDAQ SMALLCAP
8
<PAGE> 11
MARKET WILL BE SUCCESSFUL, OR (iii) THAT THE COMMON STOCK WILL BE MATERIALLY
MORE ATTRACTIVE TO INVESTORS.
IMPACT ON OPTIONS. As of November 5, 1999, the Company had a total of
4,628,928 shares of common stock reserved for issuance under various stock
options and warrants. If the Split is approved, the number of shares, and the
exercise prices therefor, will be adjusted appropriately to reflect the Split.
NO FRACTIONAL SHARES. If the Split is approved, the Company will not
issue fractional shares to stockholders whose holdings are not evenly divisible
by the multiple selected for the Split. Instead, it will issue a whole share of
new common stock for any shares for which a fractional share of new common stock
would otherwise have been issued.
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE SPLIT. The
description of federal income tax consequences is based on the Internal Revenue
Code of 1986, as amended (the "Code"), the applicable Treasury Regulations
promulgated thereunder, judicial authority and current administrative rulings
and practices as in effect on the date of this Proxy Statement. The discussion
is for general information only and does not discuss consequences that may apply
to special classes of taxpayers (e.g. nonresident aliens, broker-dealers or
insurance companies). Stockholders are urged to consult their own tax advisors
to determine the particular consequences to them.
The exchange of shares of common stock for shares of new common stock
will not result in recognition of gain or loss. The holding period of the shares
of new common stock will include the stockholder's holding period for the shares
of common stock exchanged therefor, provided that the shares of common stock
were held as a capital asset. The total basis of the shares of new common stock
will be the same as the total basis of the shares of common stock exchanged
therefor.
EXCHANGE OF CERTIFICATES. If the Split is effected, stockholders will
be required to exchange their stock certificates for new certificates
representing the shares of new common stock. The Company will furnish to each
stockholder of record on the effective date of the Split a transmittal form,
with instructions for obtaining new certificates. Stockholders will be furnished
the necessary materials and instructions to effect such exchange at the
appropriate time by the Company's transfer agent. STOCKHOLDERS SHOULD NOT SUBMIT
ANY CERTIFICATES UNTIL REQUESTED TO DO SO.
VOTE REQUIRED FOR APPROVAL OF REVERSE STOCK SPLIT. As required under
Delaware law, the affirmative vote of the holders of a majority of the
outstanding shares of common stock is required to approve an amendment to
Article FOURTH of the Company's Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO GIVE THE BOARD AUTHORITY, AT ITS DISCRETION, TO EFFECT A REVERSE
STOCK SPLIT OF THE COMPANY'S COMMON STOCK.
PROPOSAL 3
INCREASE SHARES RESERVED FOR ISSUANCE UNDER
THE EMPLOYEES' EQUITY INCENTIVE PLAN FROM
3,500,000 SHARES TO 4,500,000 SHARES
On April 29, 1994, the Board of Directors unanimously adopted the
Employees' Equity Incentive Plan (the "Plan"), which was thereafter approved by
stockholders on June 7, 1994. Certain Amendments to the Plan were adopted
unanimously by the Board in 1995 and approved by stockholders on November 22,
1995.
9
<PAGE> 12
In 1996 the stockholders approved an amendment under the Plan to increase shares
reserved for issuance under the Plan from 2,500,000 to 3,500,000.
The following discussion of the terms and conditions of the Plan is
qualified in its entirety by the complete text of the Plan, a copy of which is
on file at the offices of the Company. The purpose of the Plan is to provide key
employees of the Company with added incentives to continue in the long-term
service of the Company and to create in such employees a more direct interest in
the future success of the Company by relating compensation to increases in
stockholder value, so that the income of key employees is more closely aligned
with the income of the stockholders of the Company. The Plan is also designed to
attract key employees and to retain and motivate participating employees by
providing an opportunity for investment in the Company.
The Plan is administered by the Board of Directors. The Board in its
sole discretion, selects participants from the eligible employees to whom
option awards are granted, the amount of each option award and other terms and
conditions of each award as the Board may determine necessary or desirable and
consistent with the terms of the Plan.
In total, 3,500,000 shares of common stock were authorized for issuance
under the Plan. The Board is proposing that an additional 1,000,000 shares of
common stock be authorized for issuance under the Plan. At November 5, 1999,
options under the Plan were outstanding in respect of 2,907,500 shares to 20
employees and are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares Under Option Type of Option
----------------------------- --------------
<S> <C>
1,113,166 Incentive Stock Options
1,794,334 Nonstatutory Stock Options
</TABLE>
The option exercise prices of these options range from $.75 per share to $2.25
per share. For information concerning outstanding options to executive officers
and directors, see the table in the discussion below.
Any shares that are subject to an award under the Plan which are not
used will automatically become available for use under the Plan. If the Company
shall at any time (i) increase or decrease the number of its outstanding shares
of stock by means of a stock dividend or any other distribution payable upon
shares and stock, or through a stock split or like combination or
reclassification of the shares of the Company, or (ii) through like means change
in any way the rights and privileges of the shares, the numbers, rights and
privileges of options will be increased, decreased or changed in like manner as
if the optioned shares had been fully issued and outstanding.
In the event the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company or a
subsidiary is the continuing corporation and which does not result in any
reclassification or change of outstanding shares), or if all or substantially
all the assets or more than 50% of the outstanding voting stock of the Company
is acquired by another corporation (other than a sale or conveyance in which the
Company continues as a holding company of an entity or entities that conduct the
business conducted by the Company), or in the case of a reorganization or
liquidation of the Company (other than a reorganization or liquidation under the
United States Bankruptcy Code), the Board of Directors of the Company, will have
the power and discretion to prescribe the terms and conditions for exercise of,
or modification of, any outstanding option awards granted under the Plan.
Participants in the Plan are eligible employees who, in the judgment
of the Board, are performing, or during the term of their incentive arrangement
will perform, important services in the management, operation and development of
the Company, and who significantly contribute, or are expected to
10
<PAGE> 13
significantly contribute to the achievement of the long-term corporate economic
objectives of the Company. Participants may be granted from time to time one or
more awards under the Plan.
The Plan provides that participants may be granted one or more options.
The Board in its sole discretion will determine whether an option is to be
considered an incentive stock option as defined in the Internal Revenue Code of
1986 (the "Code") or a nonstatutory option as defined in the Code. The option
prices will be determined by the Board, but no incentive stock option prices
will be less than the fair market value of the stock on the date the option is
granted. Unless otherwise provided in the Plan, option periods must expire not
more than 10 years from the date an option is granted, and all options will be
vested one-third on the date of grant, another third on the first anniversary of
the date of grant, and the final third on the second anniversary of the date of
grant. If employment of an option holder is terminated within the option period
for cause, as determined by the Company, all options granted to such person will
be void for all purposes. The term "cause" means a gross violation, as
determined by the Company, of the Company's established policies and procedures.
If an option holder dies or becomes disabled during the option period while
still employed, his or her options may be exercised by those entitled to do so
and for up to 12 months following the option holder's death or disability. In
any such case, an option may be exercised only relating to the shares as to
which the option had become exercisable on or before the date of the option
holder's death or disability. If the employment of the option holder is
terminated within the option period for any reason other than cause, disability,
or the option holder's death, the option may be exercised by the option holder
within three months following the date of termination. No option granted under
the Plan will be transferable by the option holder except by will or pursuant to
the laws of descent and distribution. Each option shall be exercisable during
the option holder's lifetime only by him or her, or in the event of disability
or incapacity, by his or her guardian or legal representative. Options may be
exercised by payment in cash or by delivery of certificates representing the
number of shares owned by the option holder, the fair market value of which
equals the purchase price of the stock purchased pursuant to an option;
provided, however, that shares used for this purpose must have been held by the
option holder for a minimum period of time as may be established by the Board
but in no case shall redeemed shares have been held for less than six months.
The executive officers of the Company have been granted options under
the Plan as follows:
<TABLE>
<CAPTION>
Grantee Number of Shares Exercise Price Per Share
- ------- ---------------- ------------------------
<S> <C> <C>
Erwin Haitzmann 130,000 incentive stock options $1.50
183,333 incentive stock options .75
820,000 nonstatutory stock options 1.50
166,667 nonstatutory stock options .75
Peter Hoetzinger 130,000 incentive stock options 1.50
183,333 incentive stock options .75
413,000 nonstatutory stock options 1.50
66,667 nonstatutory stock options .75
James D. Forbes 130,000 incentive stock options 1.50
160,000 incentive stock options .75
328,000 nonstatutory stock options 1.50
Larry Hannappel 22,500 incentive stock options 1.50
10,000 incentive stock options .75
5,000 nonstatutory stock options 2.25
</TABLE>
The termination dates of the above options range from 2005 to 2009,
subject to earlier termination as provided in the Plan. All of the above
incentive stock options have been granted at an exercise price of 100% fair
market value of the stock the date of grant.
11
<PAGE> 14
In addition, the Board may grant stock appreciation rights, performance
shares or performance units relating to the Company's operations.
In the event of a change in control of the Company, the Plan provides
that the Board shall accelerate the exercise date of any outstanding options or
make all such options fully vested and exercisable, and, in its sole discretion
without obtaining stockholder approval the Board may take any or all the
following actions: (a) grant cash bonus awards to any option holder in an amount
necessary to pay the option price of all or any portion of the options then held
by such option holders; (b) pay cash to any or all option holders in exchange
for the cancellation of their outstanding options in an amount equal to the
difference between the option price of such options and the greater of the
tender offer price for the underlying stock or the fair market value of the
stock on the date of the cancellation of the options; (c) make any other
adjustments or amendments to the outstanding options; and (d) eliminate all
restrictions with respect to restrictive stock and deliver stock free of
restrictive legends to any participant in the Plan. For purposes of the Plan, a
"change in control" will be deemed to have occurred if: (a) any "person" or
"group" (within the meanings of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of more than 33 and 1/3% of the then outstanding voting
stock of the Company; or (b) at any time during any period of three consecutive
years (not including any period prior to the effective date of the Plan),
individuals who at the beginning of such period constitute the board (and any
new director whose election by the vote or whose nomination for election by the
Company's stockholders was approved by vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof; or (c) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger consolidation, or the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
Awards granted under the Plan will be subject to all conditions
required under Rule 16b-3 adopted under the Securities Exchange Act of 1934. The
Company may require any person to whom an option or award is granted as a
condition of option exercise to give written assurances satisfactory to the
Company that such person is acquiring the securities subject to the option for
his own account for investment and not with a present intention of selling or
otherwise distributing the same. The Plan will continue through April 29, 2004.
The Board believes that an increase in the number of shares reserved
for issuance under the Plan should be increased from 3,500,000 to 4,500,000 will
be beneficial to the Company because it will allow the Company to be in a
position to retain its executive officers and provide incentives for key
employees to remain with the Company. The Board believes that additional shares
reserved under the Plan can be of benefit to the Company in connection with its
growth strategy, as well as provide incentives for key employees which may be
retained in the event the Company consummates acquisitions of other gaming
operations in the future. As of October 25, 1999 the closing price of the common
stock as reported by Nasdaq SmallCap Market was $1.00 per share. The Board has
determined that stockholder approval of this proposal should be solicited.
12
<PAGE> 15
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ADOPTION OF
THE PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED UNDER THE EMPLOYEES'
EQUITY INCENTIVE PLAN FROM 3,500,000 TO 4,500,000 SHARES.
PROPOSAL 4
ADDITIONAL FAIR PRICE PROVISIONS
Under the Company's Certificate of Incorporation presently, in cases of
certain business combinations or optional redemptions of stock, involving
significant transactions of the Company with holders of 5% or more of the
Company's common stock, stockholders have the right to receive, in return for
their stock, a minimum fair price based on which one of five alternative
valuation methods results in the highest price. It is proposed that two more
alternative valuation methods be added to the five already in place, (a) as
sub-sections (E) and (F) to Section C(b)(i) of Article NINTH (regarding Business
Combinations), and (b) as sub-sections (v) and (vi) to Section E of Article
TENTH (regarding acquisition by an interested stockholder of more than 50% of
the Company's outstanding Voting Shares).
One of the additional alternatives would be a price of two and one-half
times the gross revenue per share for the last four fiscal quarters of the
Company. The other alternative would be a price of seven times the EBITDA
(earnings before interest, income taxes, depreciation and amortization) per
share for the last four fiscal quarters of the Company. In each case, the four
fiscal quarters must end at least 30 days before the consummation date of the
business combination or the commencement of the tender or exchange offer.
A general discussion of the fair price provisions and their purposes,
which the Board of Directors believes would be enhanced by the additional
minimum price methods, is attached as Exhibit A. Articles NINTH and TENTH, each
including the two additional alternative methods of computing the minimum fair
price, as they are proposed to be amended, are set forth in their entirety as
Exhibit B. This discussion of Proposal 1 is qualified by reference to Exhibits A
and B. Stockholders are urged to refer to these Exhibits for a further
understanding of the two proposed additional valuation methods and how they
relate to the other provisions in Articles NINTH and TENTH regarding possible
business combinations and other acquisitions of control of the Company by an
interested stockholder. For instance, as discussed in Exhibit A, although the
intent of the minimum price provisions is to help assure a fair price to
stockholders in certain circumstances in return for their stock, such as in a
case of a coercive, two-tier tender offer, such price may not necessarily be a
"fair price" in a generic sense in a particular set of circumstances.
The Board believes that the two additional, alternative methods for
calculating a minimum fair price are beneficial to the Company and the
stockholders. In case of an event that triggers the rights of the stockholders
to receive a minimum price for their stock under Article NINTH or TENTH, either
of the two additional methods could result in a higher per share price than any
of the five methods presently in the Certificate of Incorporation, and the
stockholders would be entitled to receive the highest such price. Furthermore,
with the possibility of a higher fair price calculation, the directors will have
more leverage in dealing with a hostile takeover attempt and more flexibility in
meeting their fiduciary obligations to the Company and the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE TWO
ADDITIONAL, ALTERNATIVE METHODS OF DETERMINING THE MINIMUM FAIR PRICE OF THE
STOCK UNDER ARTICLES NINTH AND TENTH OF THE CERTIFICATE OF INCORPORATION.
13
<PAGE> 16
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP is the Company's independent public accounting
firm. Deloitte & Touche LLP is expected to be the Company's independent auditor
for 1999. A representative of Deloitte & Touche LLP may be present at the
Meeting to be available to respond to questions.
STOCKHOLDER PROPOSALS
Any appropriate proposal submitted by a stockholder of the Company and
intended to be presented at the 2000 annual meeting of stockholders must be
received by the Company by March 1, 2000, to be included in the Company's proxy
statement and related proxy for such annual meeting. Such proposals should be
directed to the Secretary of the Company.
OTHER MATTERS
The Company knows of no other matters to be brought before the Meeting,
but if other matters come before the Meeting, it is the intention of the persons
named in the solicited proxy to vote such proxy in accordance with their
judgment.
No compensation will be paid to any person in connection with
solicitation of proxies. Brokers, banks, etc., will be reimbursed for
out-of-pocket and reasonable clerical expenses incurred in obtaining
instructions from beneficial owners of the Company's common stock. Special
solicitation of proxies may in certain instances be made personally or by
telephone by officers and employees of the Company and by employees of certain
banking and brokerage houses. All expenses, estimated to be normal in connection
with this solicitation, will be borne by the Company. Votes will be counted
manually. Abstentions will be noted, and will be counted as present for purposes
of a quorum. Broker non-votes will not be counted for purposes of a quorum.
ANNUAL REPORT ON FORM 10-KSB
A copy of the Annual Report on Form 10-KSB of the Company for the Year
Ended December 31, 1998, as amended without exhibits, accompanies this Proxy
Statement. No such part of the Form 10-KSB is incorporated herein by reference
and no part thereof is to be considered proxy soliciting material.
BY ORDER OF THE BOARD OF DIRECTORS
Cripple Creek, Colorado
November 10, 1999
14
<PAGE> 17
EXHIBIT A
BUSINESS COMBINATION FAIR PRICE AND OPTIONAL FAIR PRICE
REDEMPTION PROVISIONS IN THE CERTIFICATE OF INCORPORATION
General. The Business Combination Fair Price and Optional Fair Price
Redemption Provisions in the Certificate of Incorporation (the "Fair Price
Provisions") of the Surviving Corporation encompass provisions designed to
ensure fair treatment of all stockholders in the event of certain significant
transactions with any holder of 5% or more of the voting shares.
Any amendments to the Fair Price Provisions require approval by the
holders of at least 80% of the voting shares (the shares entitled to vote in the
election of directors) as a condition of merger and certain other business
combinations of the Company with, or proposed by or on behalf of, any interested
stockholder (essentially a holder of 5% or more of the Company's outstanding
voting shares), unless either:
o the transaction is approved by affirmative majority vote of
the continuing directors (any board member who is neither an
interested stockholder, an affiliate, associate, employee,
agent or nominee of an interested stockholder or relative of
any of the foregoing and a member of the board prior to the
time an interested stockholder became an interested
stockholder); or
o certain requirements are met concerning consideration, minimum
price and procedural safeguards.
The Optional Fair Price Redemption Provision further provides, unless
the continuing directors then determine such redemption would not be in the
Company's best interests, a 30 day fair price redemption option (at a redemption
price substantially similar to the minimum price which conditions any such
business combinations) to the remaining holders of the Company's voting shares
(other than the interested stockholder), should any interested stockholder
acquire 50% or more of the Company's voting shares. If a stockholder elects, the
Company will be required to redeem his or her shares at the redemption price.
The term "business combination" in the Fair Price Provision means:
o any merger or consolidation of the Company with an interested
stockholder or with any other person which, after such merger
or consolidation, would be an affiliate or associate of an
interested stockholder;
o any sale, lease, exchange transaction or series of proposed
transactions by or on behalf of an interested stockholder or
an affiliate thereof involving assets of the Company or any
subsidiary having an aggregate book value of $2,000,000 or
more;
o the issuance of securities by the Company to or proposed by or
on behalf of an interested stockholder;
o the adoption of a plan for liquidation or dissolution or
spin-off by or on behalf of an interested stockholder, or an
affiliate of the interested stockholder;
o any reclassification of securities or recapitalization of the
Company;
o any merger or consolidation of the Company with any
subsidiary; or
A-1
<PAGE> 18
o any other transaction which has the effect of increasing the
percentage of outstanding shares directly or indirectly owned
by the interested stockholder and all of its affiliates and
associates.
The Fair Price Provisions are designed to encourage fair treatment of
all stockholders in the event of a business combination or a 50% or more
acquisition of voting shares by any interested stockholder. However, as
discussed below, the Fair Price Provisions do not guarantee that stockholders
will receive a premium price, or even a fair price, for their shares in such a
transaction or following such a 50% acquisition.
The Fair Price Provisions are described in greater detail below. Such
descriptions are qualified in their entirety by reference to the complete texts
of Articles Ninth and Tenth to the Certificate of Incorporation (which include
definitions of certain of the capitalized terms used herein) of the Surviving
Corporation.
Business Combination Fair Price Provision. Under the Delaware General
Corporation Law unless otherwise provided in a certificate of incorporation,
mergers or exchanges of shares, the sale of substantially all of the assets of
a Delaware corporation not in the ordinary course of business, the adoption of a
plan of dissolution and certain reclassifications of securities and
recapitalizations involving amendments to the certificate of incorporation must
be approved by the holders of at least a majority of the outstanding voting
shares. Certain other transactions, such as the sale of less than substantially
all of the assets, certain mergers involving a wholly owned subsidiary and
recapitalizations and reclassifications not involving amendments to the
certificate of incorporation, do not require stockholder approval under Delaware
law. However, the Delaware General Corporation Law contains an "anti-takeover"
statute which provides that significant transactions with interested
stockholders must be approved by a two-thirds vote of voting stock. The Company
is governed by this section, as permitted by Delaware law.
The Business Combination Fair Price Provision requires approval by the
holders of at least 80% of the outstanding voting shares of the Surviving
Corporation as a condition of specified business combinations with, or proposed
by or on behalf of, an interested stockholder, except in cases where the
transaction is approved by affirmative vote of a majority of the continuing
directors, or certain forms of consideration, minimum price and procedural
requirements are satisfied. In the event that either requisite approval of the
continuing directors is given, or the form of consideration, minimum price and
procedural requirements are met, with respect to a particular business
combination, the normal requirements of the Delaware General Corporation Law as
discussed above would apply (assuming the Delaware "anti-takeover" law was not
used by a Delaware corporation), and either (i) approval by the holders of a
majority of the outstanding stock entitled to vote thereon or (ii) for certain
transactions as noted above, no stockholder vote would be required to approve
the business combination. Thus, depending upon the transaction, the Business
Combination Fair Price Provision may require approval by 80% of the Surviving
Corporation's outstanding voting shares for business combinations in cases in
which either only a majority vote or no vote is required under Delaware law.
Exceptions to Higher Vote Requirement. The affirmative vote of 80% of
the voting shares is not required for a business combination, if the transaction
is approved by affirmative majority vote of the continuing directors (provided
that the continuing directors constitute at least three members of the Board of
Directors at the time of such approval), or if all of the requirements set forth
in paragraphs (a), (b) and (c) below are satisfied with respect to each class of
voting stock.
(a) FORM OF CONSIDERATION REQUIREMENT. In a business
combination where the holders of shares of a particular class of voting stock
are to receive payment, the consideration to be
A-2
<PAGE> 19
received by holders of shares of such class must be either cash or the same form
of consideration paid by the interested stockholder in acquiring the largest
number of shares of such class.
(b) MINIMUM PRICE REQUIREMENT. In a business combination where
the holders of shares of common stock are to receive payment, such holders must
be entitled to receive, on or before the date of consummation of the business
combination ("Consummation Date"), consideration for their shares having an
aggregate fair market value at least equal to the highest of the following three
(or, with the two additional pricing methods as proposed in this Proxy
Statement, five) alternatives:
(i) the highest per share price (including commissions,
transfer taxes and soliciting dealers' fees) paid plus 30% by the
interested stockholder, or by any of its affiliates or associates, for
any shares of common stock within the two-year period immediately prior
to the first public announcement of the proposed business combination
(the "Announcement Date"), or the per share price paid by the
interested stockholder, or by any of its affiliates or associates, in
the transaction in which it became an interested stockholder, or the
highest sales price of such stock over the two years prior to the
Announcement Date whichever is higher;
(ii) the fair market value (the highest closing sale price
during the 30-day period immediately preceding the date in question on
the principal U.S. Securities Exchange on which the stock is listed or
if such stock is not listed on any exchange, the highest closing sale
price or bid quotation as the case may be with respect to a share of
stock during the 30-day period preceding the date in question, if no
such quotation is available, the fair market value on the date in
question of a share of stock is determined by majority of the
continuing directors) per share of common stock on the Announcement
Date or on the date such interested stockholder became an interested
stockholder, whichever is higher; or
(iii) the amount equal to 10 times the net pre-tax income per
share, determined in accordance with generally accepted accounting
principles, for the last four fiscal quarters ended at least 30 days
prior to the Consummation Date;
[ALSO, AS PROPOSED IN THIS PROXY STATEMENT, THE TWO ADDITIONAL,
ALTERNATIVE PRICING METHODS WOULD BE:]
(iv) the amount equal to two and one-half times the gross
revenue per share, determined in accordance with generally accepted
accounting principles, for the last four fiscal quarters ended at least
30 days prior to the Consummation Date; or
(v) the amount equal to seven times the EBITDA (earnings
before interest, income taxes, depreciation and amortization) per
share, determined in accordance with generally accepted accounting
principles, for the last four fiscal quarters ended at least 30 days
prior to the Consummation Date.
In the case of payments to holders of any class of voting stock other
than common stock, the consideration must be at least equal to the higher of (i)
the highest per share price determined with respect to such class in the same
manner as described above with respect to common stock plus 30%, or (ii) the
highest preferential amount per share, if any, to which the holders of shares of
such class of voting stock would be entitled as of the Consummation Date in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company.
The Business Combination Fair Price provision requires the interested
stockholder to meet the minimum price criteria with respect to each class of the
Company's voting stock, whether or not the
A-3
<PAGE> 20
interested stockholder beneficially owned shares of that class prior to
proposing the business combination. The Company currently has only one class of
stock, voting or otherwise -- common stock -- although the Company has the
ability to issue preferred stock.
(c) PROCEDURAL REQUIREMENTS. In addition to the form of
consideration and minimum price criteria discussed above, unless the business
combination is approved by an affirmative vote of a majority of the continuing
directors, certain procedural requirements must be met after the interested
stockholder becomes an interested stockholder and through the Consummation Date,
principally including the following:
(i) The Company shall not reduce the annual rate of dividends
paid on the common stock, unless such redemption is approved by a
majority of the continuing directors. This provision is designed to
prevent an interested stockholder from attempting to depress the market
price of the common stock prior to proposing a business combination by
reducing dividends payable on the common stock, thereby reducing the
consideration required to be paid pursuant to the minimum price
criteria.
(ii) The interested stockholder may not acquire any additional
shares of voting stock. This provision is intended to prevent an
interested stockholder from purchasing additional shares of voting
stock at prices which are lower than those set by the minimum price
criteria.
(iii) The interested stockholder, whether in connection with
the proposed business combination or otherwise, may not receive the
benefit of any loans or other financial assistance or tax advantages
provided by the Company (other than proportionately as a stockholder).
This provision is intended to deter an interested stockholder from
self-dealing or otherwise taking advantage of its equity position in
the Company by using the resources of the Company to finance the
proposed business combination or otherwise in a manner not
proportionately available to all stockholders.
(iv) A proxy or information statement complying with the
requirements of the proxy rules promulgated under the Securities
Exchange Act of 1934 and disclosing the terms and conditions of the
proposed business combination shall be mailed to all stockholders at
least 30 days prior to the Consummation Date. This provision is
intended to ensure that the stockholders are fully informed of the
terms and conditions of the proposed business combination, even if the
interested stockholder is not otherwise legally required to disclose
such information to stockholders.
If the form of consideration, minimum price and procedural requirements
are not met with respect to each class of voting stock, then the affirmative
vote of 80% of the voting shares will be required to approve the business
combination, unless the transaction is approved by affirmative vote of a
majority of the continuing directors.
Description of the Optional Fair Price Redemption Provision. If and
when an interested stockholder becomes the owner of more than 50% of the
Company's outstanding voting shares, pursuant to a tender or exchange offer or
other transaction not involving the direct issuance of voting shares by the
Company, the Optional Fair Price Redemption Provision provides that the
remaining stockholders (other than the interested stockholder and any affiliate
or associate thereof) shall have the option to have the Company redeem their
shares. However, the option shall not apply,
o if within 10 days following commencement of such tender or
exchange offer, a majority of the continuing directors
recommends that the Company's stockholders accept the offer;
or
A-4
<PAGE> 21
o if within 30 days of notice to the Company deemed credible by
the continuing directors that any interested stockholder has
so acquired more than 50% of the Company's outstanding voting
shares, the continuing directors determine the redemption
would not be in the Company's best interests.
The redemption may also be proportionately reduced as to the remaining
stockholders, if the continuing directors determine the redemption would
otherwise fail to meet the financial requirements of the Delaware General
Business Corporation Law (generally that thereafter the Company be able to pay
its debts in the ordinary course of business).
If the redemption option becomes applicable, for 30 days following
mailing of notice of the option to such remaining stockholders (given within 60
days after the Company receives such credible notice that an interested
stockholder has acquired more than 50% of the Company's outstanding voting
shares), each stockholder will have the option to have any or all of such
holders' voting shares redeemed by the Company for cash consideration equal to
the greatest of the following amounts:
(i) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) paid plus 30%
by the interested stockholder or by any affiliate or associate thereof
for any shares of such voting stock acquired within the two year period
immediately prior to the tender or exchange offer by or on behalf of
the interested stockholder or in the tender or exchange offer or other
transaction in which the interested stockholder became the owner of
more than 50% of the Company's outstanding voting shares;
(ii) the fair market value per share of such class of voting
stock (as defined under Business Combination Fair Price provision
above) immediately prior to commencement of the tender or exchange
offer or on the date the interested stockholder became the owner of
more than 50% of the Company's voting shares; or
(iii) the amount equal to 10 times the net pre-tax income per
share, determined in accordance with generally accepted accounting
principles, of such voting stock for the Company's last four fiscal
quarters ended at least 30 days prior to the commencement of the tender
or exchange offer;
[ALSO, AS PROPOSED IN THIS PROXY STATEMENT, THE TWO ADDITIONAL,
ALTERNATIVE PRICING METHODS WOULD BE:]
(iv) the amount equal to two and one-half times the gross
revenue per share, determined in accordance with generally accepted
accounting principles, for the last four fiscal quarters ended at least
30 days prior to the commencement of the tender or exchange offer; or
(v) the amount equal to seven times the EBITDA (earnings
before interest, income taxes, depreciation and amortization) per
share, determined in accordance with generally accepted accounting
principles, for the last four fiscal quarters ended at least 30 days
prior to the commencement of the tender or exchange offer.
In the case of voting stock other than common stock, the consideration
must be at least equal to the higher of (i) the highest per share price
determined with respect to such class in the same manner described above for
common stock plus 30%, or (ii) the highest preferential amount per share, if
any, to which the holders of such class would be entitled as of the commencement
of the tender or exchange offer in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company.
A-5
<PAGE> 22
Subject to deposit of their stock certificates with the Company's
redemption agent within such 30 day redemption option period, the redemption
will be affected at the end of such period, in accordance with any applicable
proration procedures, by payment of the redemption price in cash to the
remaining stockholders tendering their shares.
Determinations by the Continuing Directors. The proposed Business
Combination Fair Price and Optional Fair Price Redemption Provisions each
provide that the continuing directors will make all determinations necessary for
operation of the Fair Price Provisions by affirmative vote of a majority of all
continuing directors. Such determinations will include whether a person has
become an interested stockholder and whether the form of consideration, minimum
price and procedural requirements have been met. When evaluating any business
combination or other offer by or on behalf of an interested stockholder, in
determining what is in the best interests of the Company and its stockholders,
the Board of Directors (including the continuing directors) may give due
consideration to (i) all relevant factors, including without limitation, the
social, legal, environmental and economic effects on the Company's employees,
customers, suppliers and other affected persons, as well as such other factors
as the directors deem relevant; and (ii) the consideration offered, not only in
relation to the then current value of the Company's outstanding stock, but also
in relation to the then current value of the Company's business in a freely
negotiated transaction and in relation to the Board's estimate of the Company's
future value as an independent going concern.
Vote Required to Amend or Repeal. The Business Combination Fair Price
and Optional Fair Price Redemption Provisions each requires the affirmative vote
of 80% of the Company's outstanding voting shares in order to amend, alter or
repeal, or adopt any provision inconsistent with, each such provision.
Purposes and Effects of the Fair Price Provisions. It is a relatively
common practice in corporate changes of control for an offeror to acquire a
controlling equity interest in a company by paying cash in a first-step offer
and, thereafter, to acquire the remaining equity interest in the company in a
second-step merger. The offeror could either (i) pay for the balance of the
stock at a price per share which is lower than the price paid to acquire control
or (ii) pay for the stock with less desirable consideration (e.g., securities
rather than cash), or both. The terms of the second-step offer effectively are
determined unilaterally by the offeror.
The Company's Board of Directors believes that such two-tier pricing
approaches are fundamentally unfair, because they tend to cause concern on the
part of stockholders that if they do not act promptly to take advantage of the
initial offer they could be relegated to the status of minority stockholders in
a controlled company or be forced to accept a lower price or less favorable
consideration for their shares in a second-step merger or similar transaction.
The Board believes that the Fair Price Provisions discourage an interested
stockholder from utilizing two-tier pricing and similar tactics in an attempted
change of control, and will help assure that all the Company's stockholders are
treated similarly if certain types of business combinations are effected.
The Fair Price Provisions are designed primarily to protect the
stockholders who have not tendered or otherwise sold their shares to an offeror
who is attempting to acquire control of the Company, and to ensure that the
offeror treats such stockholders fairly, by requiring as a condition to avoiding
the 80% stockholder approval requirement that the offeror pay such stockholders
at least substantially the same price in either cash or the same form of
consideration as it paid to stockholders in the first-step transaction.
The Business Combination Fair Price Provision alone, however, will not
ensure that stockholders will receive substantially the same price in those
instances where no second-step business combination is proposed by the
interested stockholder, or where the interested stockholder acquires 50% or more
of the voting shares. In those instances, the Optional Fair Price Redemption
Provision is designed to ensure that
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the Company pay the remaining stockholders substantially the same price offered
by the interested stockholder in the first-step transaction, unless by
affirmative majority vote the continuing directors determine such redemption
would not be in the Company's best interests. However, in those other situations
where a majority of the continuing directors approve the second-step business
combination or the first-step offer and any stockholder approval required by
Delaware law is obtained, the Fair Price Provisions will not ensure that the
remaining stockholders will receive substantially the same price as that offered
by the interested stockholder in the first-step transaction.
In many situations, the Fair Price Provisions will require an
interested stockholder to pay the Company's stockholders in the second-step
merger or other business combination a higher price for their shares or
structure the transaction differently than would be the case absent the Fair
Price Provisions. Accordingly, the Board of Directors believes that, to the
extent a business combination is involved as part of a plan to acquire control
of the Company, adoption of the Fair Price Provisions will increase the
likelihood that an interested stockholder will negotiate in advance directly
with the Company, strengthen the hand of the Board in its negotiations with the
offeror for the benefit of all stockholders and assist the stockholders in
receiving a relatively higher price for their shares. The Board also believes
that the Fair Price Provisions will tend to discourage offers whose objective is
to seek control of the Company at a less than fair price.
In addition, while federal securities laws and regulations govern the
disclosures that must be made to minority stockholders in order to consummate a
business combination, they do not assure that the terms of a business
combination will be fair to the stockholders from a financial perspective.
Although the Delaware General Corporation Law provides stockholders with the
statutory right to dissent to certain corporate transactions, to have their
shares appraised and to receive the "fair value" of their shares in cash, the
statutory appraisal process may involve significant expense and protracted
litigation. The appraisal procedure may not be a useful alternative because
Delaware law may not recognize the impact of an interested stockholder's
controlling stock ownership on the market value of the shares in the hands of
the public or take into account any appreciation in the stock price due to
anticipation of a business combination. Further, under Delaware law, in the case
of many business combinations, including certain reclassifications or
recapitalizations of the outstanding shares of a corporation's stock where the
stock is publicly traded, the statutory right of dissent is not available at
all.
The Fair Price Provisions are intended to meet, at least in part, these
gaps in federal and state law, as well as to prevent certain of the potential
inequities of business combinations which involve two or more steps, by
requiring the interested stockholder either to obtain the approval of the
holders of at least 80% of the Company's voting shares or to meet the form of
consideration, minimum price and procedural requirements, in order to complete a
business combination which is not approved by affirmative majority vote of the
continuing directors.
It should be noted that while the Fair Price Provisions are designed to
encourage fair treatment of all stockholders in the event of a change of
control, the fair price criteria do not guarantee that stockholders will receive
a premium price, or even a fair price, for their shares in such a transaction.
Accordingly, the Fair Price Provisions do not prohibit opposition by the Board
to a change of control proposal which it believes is not in the best interests
of the Company and its stockholders, regardless of whether the proposed business
combination satisfies the requirements of the Fair Price Provisions.
The Fair Price Provisions are not designed to prevent or discourage all
tender offers for the Company's voting shares. The Fair Price Provisions will
not substantially impede an offer for at least 80% of the voting shares in which
each stockholder received substantially the same price and form of consideration
for each share as each other stockholder and will not impede an offer approved
by affirmative majority vote of the continuing directors.
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Because of the higher percentage requirements for stockholder approval
of a business combination and the possibility of having to pay a higher price to
other stockholders in such a business combination, it may become more costly for
a purchaser to acquire control of the Company. Therefore, the Fair Price
Provision may decrease the likelihood that a tender offer will be made, a result
that may adversely affect those stockholders who would desire to tender their
stock.
In certain cases, the minimum price requirements of the Fair Price
Provisions, while providing objective pricing criteria, would not necessarily be
indicative of value. In addition, an interested stockholder may by unable to
comply with all of the procedural requirements of the Business Combination Fair
Price Provision, because of its prior activities, including the purchase of
stock in a transaction occurring after the transaction in which the interested
stockholder became an interested stockholder. In these circumstances, unless the
interested stockholder is willing to purchase 80% of the voting shares as the
first step in a business combination (or otherwise is able to meet the 80%
voting share approval requirement), the interested stockholder will be forced
either to offer terms acceptable to a majority of the continuing directors or to
abandon the proposed business combination.
Another effect of the Fair Price Provisions is to give veto power to
the holders of a minority of the voting shares with respect to a business
combination which is not approved by affirmative vote of the continuing
directors, but which a majority of the Board of Directors and a majority of the
stockholders may believe to be desirable and beneficial (although compliance by
the interested stockholder with the minimum price, form of consideration and
procedural requirements would eliminate any such veto power).
In addition, since only the continuing directors will have the
authority to reduce to a simple majority or eliminate the stockholder vote
required for business combinations, the Fair Price Provisions may have the
effect of insulating current management of control. Conversely, if an interested
stockholder were to have replaced all of the Directors who were in office on the
date it became an interested stockholder with nominees of its choice, there
would be no continuing directors and, consequently, a business combination
consummated subsequent to such replacement would have to meet the 80% voting
share approval requirement, or all of the minimum price, form of consideration
and procedural requirements, of the Fair Price Provisions. At the present time
an interested stockholder could not acquire 80% of the Company's voting shares
without acquiring a substantial portion of the common stock owned by the
Company's officers and directors.
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<PAGE> 25
EXHIBIT B
NOTE: The following are Articles NINTH and TENTH in the Company's Certificate of
Incorporation, with the additional two pricing methods inserted, IN ITALICS, in
Section C(b)(i) of Article NINTH and in Section E of Article TENTH.
NINTH: A. In addition to any other affirmative vote required by law or
the Certificate of Incorporation and except as otherwise expressly provided in
Section C of this Article NINTH any Business Combination (as defined in Section
B(c) of Article NINTH hereof) shall require the affirmative vote of the holders
of least 80% of the voting power of all of the Voting Shares (as defined in
Section B(i) of this Article NINTH hereof) voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in any
agreement with any securities association or exchange or otherwise.
B. The following definitions shall apply with respect to this Article
NINTH:
(a) "affiliate" and "associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on May 1, 1994.
(b) "Beneficial Owner" and "beneficial ownership" shall have
the meanings ascribed to such terms in Rule 13d-3 and Rule 13d-5 of the General
Rules and Regulations under the Exchange Act, as in effect on May 1, 1994.
(c) "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or
any Subsidiary with (A) an Interested Stockholder or (B) any other Person
(whether or not itself an Interested Stockholder) which is, or after such merger
or consolidation would be, an affiliate or associate of an Interested
Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge,
security agreement, investment, loan, advance, guarantee, agreement to purchase,
agreement to pay, extension of credit, joint-venture participation or other
arrangement, transfer or other disposition in a transaction or a series of
transactions to or with, or proposed by or on behalf of, an Interested
Stockholder or an affiliate or associate of an Interested Stockholder, of or
involving any assets of the Corporation or any Subsidiary having an aggregate
book value as of the end of the Corporation's most recently ended fiscal quarter
of $2,000,000 or more;
(iii) the issuance, transfer or exchange by the
Corporation or any Subsidiary, in one transaction or a series of transactions,
of any securities of the Corporation or any Subsidiary to, or proposed by or on
behalf of, (A) an Interested Stockholder, or (B) any other Person (whether or
not itself an Interested Stockholder) which is, or after such issuance, transfer
or exchange would be, an affiliate or associate or an Interested Stockholder,
except pursuant to the exercise of warrants or rights to purchase securities
offered pro rata to all holders of the Voting Shares or pursuant to any other
method affording substantially proportionate treatment to the holders of the
Voting Shares.
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation, or any spin-off or split-up of
any kind of the Corporation or any Subsidiary, proposed by or on behalf of an
Interested Stockholder or an affiliate or associate of an Interested
Stockholder; or
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<PAGE> 26
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any Subsidiary or any other transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
which has the effect, directly, or indirectly, in one transaction or a series of
transactions, of increasing the percentage of the outstanding shares of (A) any
class of equity securities of the Corporation or any Subsidiary or (B) any class
of securities of the Corporation or any Subsidiary convertible into equity
securities of the Corporation or any Subsidiary, represented by securities of
such class which are directly or indirectly beneficially owned by an Interested
Stockholder and all of its affiliates and associates.
(d) "Continuing Director" shall mean:
(i) any member of the Board of Directors of the
Corporation who (A) is neither the Interested Stockholder involved in the
transaction as to which a vote of Continuing Directors is provided under this
Certificate of Incorporation nor an affiliate, associate, employee, agent, or
nominee of such Interested Stockholder, or a relative of any of the foregoing,
and (B) was a member of the Board of Directors of the Corporation prior to the
time that such Interested Stockholder became an Interested Stockholder; and
(ii) any successor of a Continuing Director described
in subsection (i) who (A) is not an affiliate or an associate of an Interested
Stockholder involved in the transactions as to which a vote of Continuing
Directors is provided under this Certificate of Incorporation, or of any of its
affiliates other than the Corporation or any Subsidiary, and (B) is recommended
or elected to succeed a Continuing Director by the affirmative vote of a
majority of Continuing Directors then on the Board of Directors of the
Corporation.
(e) "Fair Market Value" shall mean:
(i) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in question of a
share of such stock on the principal United States securities exchange
registered under the Exchange Act on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing sale price or bid
quotation, as the case may be, with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any similar interdealer
quotation system then in use, or, if no such quotation is available, the fair
market value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors; and
(ii) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined by a majority of the Continuing Directors.
(f) "Interested Stockholder" shall mean any Person (other than
the Corporation or any Subsidiary, any employee benefit plan maintained by the
Corporation or any Subsidiary or trustee of, or fiduciary with respect to, any
such plan when acting in such capacity) who or which:
(i) is, or was at any time within the two-year period
immediately prior to the date in question, the Beneficial Owner, directly or
indirectly, of 5% or more of the then outstanding Voting Shares; or
(ii) is an assignee of, or has otherwise succeeded
to, any Voting Shares of which an Interested Stockholder was the Beneficial
Owner, directly or indirectly, at any time within the two-year period
immediately prior to the date in question, if such assignment or succession
shall have occurred in
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the course of a transaction, or series of transactions, not involving a public
offering within the meaning of the Securities Act of 1933, as amended.
For the purpose of determining whether a Person is an Interested
Stockholder, the outstanding Voting Shares shall include unissued shares of
voting stock of the Corporation of which the Interested Stockholder is the
Beneficial Owner, but shall not include any other shares of voting stock of the
Corporation which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise, to any Person who is not the Interested Stockholder.
(g) "Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity, as
well as any syndicate or group deemed to be a person pursuant to Section
14(d)(2) of the Exchange Act, as in effect on May 1, 1994.
(h) "Subsidiary" shall mean any company of which the
Corporation owns, directly or indirectly, (i) a majority of the outstanding
shares of equity securities of such company or (ii) shares having a majority of
the voting power represented by all of the outstanding voting stock of such
company.
(i) "Voting Shares" shall mean the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors.
C. The provision of Section A hereof shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such other vote, if any, of the shareholders of the Corporation as is
required by the GCL or this Certificate of Incorporation, if the conditions
specified in either of the following paragraphs (a) and (b) are met:
(a) The Business Combination shall have been approved by the
vote of a majority of the Continuing Directors, provided that
the Continuing Directors constitute at least three members of
the Board of Directors at the time of such approval.
(b) All of the following conditions shall have been met:
(i) with respect to each share of each class of
outstanding voting stock of the Corporation
(including common stock), the holder thereof shall be
entitled to receive on or before the date of the
consummation of the Business Combination (the
"Consummation Date"), cash and consideration, in the
form specified in Section C(b)(ii) hereof, with an
aggregate Fair Market Value as of five days before
the Consummation Date at least equal to the highest
of the following:
(A) the highest per share price plus 30%
(including brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by
the Interested Stockholder to which the
Business Combination relates, or by an
affiliate or associate of such Interested
Stockholder, for any shares of such class of
voting stock acquired by it (1) within the
two-year period immediately prior to the
first public announcement of the proposal of
the Business Combination (the "Announcement
Date") or (2) in the transaction in which
such Interested Stockholder became an
Interested Stockholder, or (3) the highest
per share sales price (including brokerage
commissions, transfer taxes and soliciting
dealer's fees) of the voting stock within
the two-year period immediately prior to the
Announcement Date, whichever is higher;
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<PAGE> 28
(B) the Fair Market Value per share of such
class of voting stock of the Corporation on
the Announcement Date or on the date such
Interested Stockholder became an Interested
Stockholder, whichever is higher;
(C) the amount equal to the multiple of ten
times the net pre-tax income per share of
such voting stock of the Corporation for the
last four fiscal quarters of the Corporation
ended at least 30 days prior to the
Consummation Date determined in accordance
with generally accepted accounting
principles consistently applied with prior
periods by a majority of the Continuing
Directors; or
(D) in the case of securities other than
common stock, the highest preferential
amount per share, if any, to which the
holders of shares of such class of voting
stock of the Corporation are entitled as of
the Consummation Date in the event of any
voluntary or involuntary liquidation,
dissolution or winding up of the
Corporation.
[NOTE: THE FOLLOWING TWO SUB-SECTIONS (E) AND (F) ARE
PROPOSED IN THE PROXY STATEMENT TO WHICH THIS EXHIBIT
B IS ATTACHED.]
(E) the amount equal to the multiple of two
and one-half times the gross revenue per
share of such voting stock of the
Corporation for the last four fiscal
quarters of the Corporation ended at least
30 days prior to the Consummation Date
determined in accordance with generally
accepted accounting principles consistently
applied with prior periods by a majority of
the Continuing Directors; or
(F) the amount equal to the multiple of
seven times the EBITDA (earnings before
interest, income taxes, depreciation and
amortization) per share of such voting stock
of the Corporation for the last four fiscal
quarters of the Corporation ended at least
30 days prior to the Consummation Date
determined in accordance with generally
accepted accounting principles consistently
applied with prior periods by a majority of
the Continuing Directors.
(ii) The consideration to be received by holders of a
particular class of outstanding voting stock of the
Corporation (including common stock) as described in
Section A hereof shall be in cash or, if the
consideration previously paid by or on behalf of the
Interested Stockholder in connection with its
acquisition of beneficial ownership of shares of such
class of voting stock consisted, in whole or in part,
of consideration other than cash, then in the same
form as such consideration. If such payment for
shares of any class of voting stock of the
Corporation has been made in varying forms of
consideration, the form of consideration for such
class of voting stock shall be either cash or the
form used to acquire the beneficial ownership of the
largest number of shares of such class of voting
stock previously acquired by the Interested
Stockholder.
(iii) After such Interested Stockholder has become an
Interested Stockholder and through the Consummation
Date, unless approved by a majority of the Continuing
Directors, there shall have been: (A) no failure to
declare and pay at the regular date therefor any full
dividends (whether or not cumulative) on the
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outstanding preferred stock of the Corporation, if
any; (B) no reduction in the annual rate of dividends
paid on the common stock of the Corporation (except
as necessary to reflect any subdivision of the common
stock); (C) an increase in such annual rate of
dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares of the common stock; and
(D) no increase in the number of shares of voting
stock of the Corporation beneficially owned by such
Interested Stockholder except as part of the
transaction which results in such Interested
Stockholder becoming an Interested Stockholder. The
provisions of clauses (A) and (B) of this subsection
(iii) shall not apply if the Interested Stockholder
or an affiliate or associate of the Interested
Stockholder did not vote as a director of the
Corporation in a manner consistent with clauses (A)
and (B) of this subsection (iii) and the Interested
Stockholder, within 10 days after any act or failure
to act inconsistent with clauses (A) and (B) of this
subsection (iii), notified the Board of Directors of
the Corporation in writing that the Interested
Stockholder disapproved thereof and requested in good
faith that the Board of Directors rectify the act or
failure to act.
(iv) After such Interested Stockholder has become an
Interested Stockholder, neither such Interested
Stockholder nor any affiliate or associate thereof
shall have received the benefit, directly or
indirectly (except proportionately as a shareholder
of the Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by
the Corporation or any of its Subsidiaries, whether
in anticipation of or in connection with such
Business Combination or otherwise.
(v) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Exchange Act and the General
Rules and Regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations)
shall be mailed to the stockholders of the
Corporation at least 30 days prior to the
Consummation Date (whether or not such proxy or
information statement is required to be mailed
pursuant to the Exchange Act or such rules and
regulations or any subsequent provisions thereof).
D. A majority of Continuing Directors shall have the power and duty
to determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Article NINTH,
including, without limitation, (a) whether a Person is an Interested
Stockholder, (b) the number of Voting Shares beneficially owned by any Person or
whether a Person is a Beneficial Owner of securities, (c) whether a Person is an
affiliate or associate of another, (d) whether the requirements of Section Ninth
hereof have been met with respect to any Business Combination and (e) the Fair
Market Value of any assets, securities or other property. The determination of a
majority of the Continuing Directors on such matters shall be conclusive and
binding for all the purposes of this Article NINTH.
E. (A) Nothing contained in this Article NINTH shall be construed
to relieve an Interested Stockholder from any fiduciary
obligation imposed by law.
(B) The fact that any Business Combination complies with the
provisions of Article NINTH, Section C hereof shall not be
construed to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any member thereof,
to approve such Business Combination or recommend its adoption
or approval to the stockholders of the Corporation, nor shall
such compliance limit, prohibit or otherwise restrict in any
manner the Board of
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<PAGE> 30
Directors, or any member thereof, with respect to evaluations
of, or actions and responses taken with respect to, such
Business Combination.
F. The Board of Directors of the Corporation, when evaluating any offer
of another party to (a) make a tender or exchange offer for any equity security
of the Corporation, (b) merge or consolidate the Corporation with another
Corporation, (c) purchase or otherwise acquire all or substantially all of the
properties and assets of the Corporation or (d) have the Corporation enter into
any other Business Combination, may, in connection with the exercise of its
judgment in determining what is in the best interests of the Corporation and its
shareholders, give due consideration to (i) all relevant factors, including
without limitation the social, legal, environmental and economic effects on the
employees, customers, suppliers and other affected persons, firms and
corporations and on the communities and geographical areas in which the
Corporation and its Subsidiaries operate or are located and on any of the
businesses and properties of the Corporation or any of its Subsidiaries, as well
as such other factors as the directors deem relevant, and (ii) the consideration
being offered, not only in relation to the then current market price for the
Corporation's outstanding shares of capital stock, but also in relation to the
then current value of the Corporation in a freely negotiated transaction and in
relation to the Board of Directors' estimate of the future value of the
Corporation (including the unrealized value of its properties and assets) as an
independent going concern. The provisions of this Section F shall also apply to
consideration by the Continuing Directors of any of the foregoing.
G. This Article NINTH may be altered, amended or repealed, and any
provision inconsistent herewith may be adopted, only by the affirmative vote of
the holders of 80% of the voting power of the Corporation's issued and
outstanding Voting Shares, in addition to any other vote required by the GCL or
this Certificate of Incorporation.
TENTH: A. Capitalized terms used in this Article TENTH, unless
otherwise defined, shall have the meanings ascribed to them in Article NINTH of
this Certificate of Incorporation.
B. If an Interested Stockholder becomes the Beneficial Owner of more
than 50% of the Corporation's then-issued and outstanding Voting Shares,
pursuant to a tender or exchange offer and/or other transaction or series of
transactions not involving the direct issuance of Voting Shares by the
Corporation to the Interested Stockholder or to an affiliate or associate of the
Interested Stockholder, the remaining shareholders of the Corporation (i.e.,
other than the Interested Stockholder and any affiliate or associate of the
Interested Stockholder) shall have the option to have the Corporation redeem
their shares of the Corporation's voting stock (including common stock) as
provided in this Article TENTH. Provided, however, that the redemption option
provided by this Article TENTH shall not apply, (i) if within 10 days following
the commencement of such tender or exchange offer of any amendment thereto, the
Continuing Directors, by majority vote, recommend to the Corporation's
stockholders that such tender or exchange offer be accepted; or (ii) if within
30 days following receipt by the Corporation of credible notice that any
Interested Stockholder has so become the Beneficial Owner of more than 50% of
the Corporation's then issued and outstanding Voting Shares, the Continuing
Directors determine the redemption as otherwise provided in this Article TENTH
would not be in the best interests of the Corporation.
C. If the redemption option described in Section B becomes applicable,
each holder of shares of the Corporation's voting stock and each holder of
options, warrants or other securities of the Corporation convertible into voting
stock, other than the Interested Stockholder and the affiliates and associates
of the Interested Stockholder, shall have the option (simultaneously with the
exercise or conversion in the case of a holder of options, warrants or other
convertible securities of the corporation), for 30 days following the mailing of
the notice to holders provided for in Section D below, to have any or all of
such holders' shares of voting stock redeemed by the Corporation at the price
provided in Section E below. Such option shall
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attach to and be transferable with the Corporation's issued and outstanding
shares of voting stock and shall not be personal to the holder thereof.
D. If the redemption option described in Section B becomes applicable,
within 60 days following receipt by the Corporation of the aforesaid credible
notice that any Interested Stockholder has become the Beneficial Owner of more
than 50% of the Corporation's Voting Shares as provided in Section B, the
Corporation shall given written notice to the holders described in Section C, as
such holders exist on a record date not more than 10 days before the mailing of
such notice, advising them of the option to have their shares of the
Corporation's voting stock redeemed, the redemption price therefor determined
pursuant to Section E and the procedures for such redemption including any
applicable proration provisions. Such notice shall be by first class mail,
postage prepaid, to the addresses of such holders last shown on the
Corporation's records. If the Corporation fails to give notice, any holder may
serve written demand upon the Corporation to do so. If within 15 days of receipt
of written demand, the Corporation fails to give the required notice, such
holder at the expense and on behalf of the Corporation, may take reasonable
action to give or cause such notice to be given and for such purposes shall be
given reasonable access to the Corporation's records.
E. The redemption price for each share of each class of the
Corporation's voting stock redeemed pursuant to this Article TENTH shall be the
greatest of the following amounts:
(i) the highest per share price plus 30% (including brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder or by any affiliate or associate
of the Interested Stockholder for any shares of such class of
voting stock acquired by it (A) within the two-year period
immediately prior to the commencement of the tender or exchange
offer described in Section B or (B) in the tender or exchange
offer or other transaction or series of transactions in which
such Interested Stockholder became the Beneficial Owner of more
than 50% of the Corporation's then issued and outstanding Voting
Shares;
(ii) the Fair Market Value per share of such class of voting
stock of the Corporation immediately prior to the commencement
of the tender or exchange offer described in Section B or on the
date such Interested Stockholder became the Beneficial Owner of
more than 50% of the Corporation's then issued and outstanding
Voting Shares, whichever is higher;
(iii) the amount equal to the multiple of ten times the net
pre-tax income per share of such voting stock of the Corporation
for the last four fiscal quarters of the Corporation ended at
least 30 days prior to the commencement of the tender or
exchange offer described in Section B, determined in accordance
with generally accepted accounting principles consistently
applied with prior periods by a majority of the Continuing
Directors;
(iv) in the case of securities other than common stock, the
highest preferential amount per share, if any, to which the
holders of such class of voting stock of the Corporation are
entitled as of the commencement of the tender or exchange offer
described in Section B in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation; or
[NOTE: THE FOLLOWING TWO SUB-SECTIONS (v) AND (vi) ARE PROPOSED IN THE
PROXY STATEMENT TO WHICH THIS EXHIBIT B IS ATTACHED.]
(v) the amount equal to the multiple of two and one-half times
the gross revenue per share of such voting stock of the
Corporation for the last four fiscal quarters of the
B-7
<PAGE> 32
Corporation ended at least 30 days prior to the commencement of
the tender or exchange offer described in Section B, determined
in accordance with generally accepted accounting principles
consistently applied with prior periods by a majority of the
Continuing Directors; or
(vi) the amount equal to the multiple of seven times the EBITDA
(earnings before interest, income taxes, depreciation and
amortization) per share of such voting stock of the Corporation
for the last four fiscal quarters of the Corporation ended at
least 30 days prior to the commencement of the tender or
exchange offer described in Section B, determined in accordance
with generally accepted accounting principles consistently
applied with prior periods by a majority of the Continuing
Directors.
F. If shares of the Corporation's voting stock become subject to
redemption in accordance with this Article TENTH, the Continuing Directors shall
designate a redemption agent, which shall be a national bank or trust company
having combined capital and surplus of at least $25,000,000 and corporate trust
powers. For 30 days following the mailing of the notice to holders referred to
in Section D, such holders or their respective transferees may deposit with the
redemption agent for redemption of their certificates representing all or less
than all shares of the Corporation's voting stock held of record by them.
Redemption shall be deemed effected in accordance with any applicable proration
procedures at the close of business on the last day of such redemption option
period with respect to the shares represented by all certificates theretofore
deposited in proper form for redemption with the redemption agent. The
Corporation shall promptly from time to time deposit in trust with the
redemption agent cash in the amount equal to the redemption price of all the
shares of the Corporation's voting stock so deposited for redemption, subject to
reduction to the extent that proration is applicable. As soon as practicable
following the last day of such redemption option period, the redemption agent
shall issue and mail its checks payable to the order of the former holders
entitled to receive the redemption price for each share of the Corporation's
voting stock so redeemed. Fractional shares shall not be redeemed. In the event
of proration, the Corporation shall promptly cause certificates for each
holder's deposited shares of the Corporation's voting stock not so redeemed to
be reissued and mailed to such holder.
G. The powers and duties of the Continuing Directors and of the Board
of Directors pursuant to Sections D and F of Article NINTH of this Certificate
of Incorporation shall be equally applicable to the determinations and
evaluations by the Continuing Directors or by the Board of Directors or any
member thereof with respect to any tender or exchange offer or other transaction
by an Interested Stockholder, and to the best interests of the Corporation with
respect to the redemption option or other matter provided by this Article TENTH.
For purposes of such application any reference or implied reference in Sections
D or F to Article NINTH shall rather be understood to mean and refer to this
Article TENTH. The fact that any tender or exchange offer by an Interested
Stockholder shall be for any or all shares of the Corporation's voting stock, or
at a price equal to or above the redemption price which may thereafter become
applicable pursuant to Section E hereof, shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to recommend acceptance of such tender or exchange offer to the
stockholders of the Corporation, nor shall the public announcement or making of
such tender or exchange offer limit, prohibit or otherwise restrict in any
manner the Board of Directors, or any member thereof, with respect to
evaluations of, or actions and responses taken with respect to, such tender or
exchange offer or the redemption option. Nothing contained in this Article TENTH
shall be construed to relieve an Interested Stockholder from any fiduciary
obligation imposed by law.
H. This Article TENTH may be altered, amended or replaced, and any
provision inconsistent therewith may be adopted, only by the affirmative note of
the holders of 80% of the voting power of the Corporation's issued and
outstanding Voting Shares, in addition to any other vote required by the GCL or
this Certificate of Incorporation.
B-8
<PAGE> 33
PROXY PROXY
CENTURY CASINOS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Century Casinos, Inc. acknowledges
receipt of the Notice of Annual Meeting of Stockholders, to be held on Tuesday,
December 14, 1999, at Womacks/Legends Casino, 200-220 East Bennett Avenue,
Cripple Creek, Colorado, at 8:00 a.m. Mountain Standard Time, and hereby
appoints Erwin Haitzmann or Peter Hoetzinger, or either of them, each with the
power of substitution, as attorneys and proxies to vote all the shares of the
undersigned at said Annual Meeting and at all adjournments thereof, hereby
ratifying and confirming all that said attorneys and proxies may do or cause to
be done by virtue hereof. The above-named attorneys and proxies are instructed
to vote all of the undersigned's shares as follows:
To elect two Class II directors to the Board of Directors:
Peter Hoetzinger For [ ] Against [ ] Abstain [ ]
James D. Forbes For [ ] Against [ ] Abstain [ ]
(2) A proposal to permit the Board, at its election, to effect a reverse stock
split of the Company's common stock on a ratio not to exceed one for 20.
For [ ] Against [ ] Abstain [ ]
(3) A proposal to increase shares reserved for issuance under the Employees'
Equity Incentive Plan from 3,500,000 to 4,500,000.
For [ ] Against [ ] Abstain [ ]
(4) A proposal to amend Articles Ninth and Tenth of the Certificate of
Incorporation of the Company to add two additional fair price provisions which,
in certain circumstances, may require payment of a higher price to stockholders
of the Company.
For [ ] Against [ ] Abstain [ ]
(5) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
---------------------- Change to other side -----------------------
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 THROUGH 4.
SPACE FOR ADDRESS
Dated this _____________day of
_____________________, 1999
Signature ___________________
Signature ___________________
Please sign your name exactly as it appears on
your stock certificate. If shares are held jointly,
each holder should sign. Executors, trustees,
and other fiduciaries should so indicate when signing.
Please sign, date and return this proxy
Immediately.
Note: Securities dealers please state the number of
Shares voted by this proxy ____________.
