SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
COLORADO GAMING & ENTERTAINMENT CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
N/A
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(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):
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/ / 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,
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COLORADO GAMING & ENTERTAINMENT CO.
12596 WEST BAYAUD AVENUE, SUITE 450
LAKEWOOD, COLORADO 80228
APRIL 30, 1997
Dear Shareholder:
You are cordially invited to attend the Company's 1997 Annual Meeting on
June 9, 1997.
The meeting will begin promptly at 12:00 noon at 12596 West Bayaud
Avenue, Suite 450, Lakewood, CO 80228.
The official Notice of Meeting, proxy statement and form of proxy are
included with this letter, along with the Company's 1996 Annual Report. The
proposals listed in the Notice of Meeting are described in detail in the
proxy statement.
The vote of every stockholder is important. Mailing your completed
proxy will not prevent you from voting in person at the meeting if you wish
to do so.
The Board of Directors recommends that stockholders vote FOR proposals 1
and 2.
PLEASE SIGN, DATE AND PROMPTLY MAIL YOUR PROXY. YOUR COOPERATION WILL
BE GREATLY APPRECIATED.
Your Board of Directors and management look forward to greeting those
stockholders who are able to attend.
Sincerely,
/s/ STEPHEN J. SZAPOR, JR.
-------------------------------------
Stephen J. Szapor, Jr.
President and Chief Executive Officer
COLORADO GAMING & ENTERTAINMENT CO.
12596 WEST BAYAUD AVENUE, SUITE 450
LAKEWOOD, COLORADO 80228
APRIL 30, 1997
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Colorado Gaming & Entertainment Co.
(the "Company") will be held at 12596 West Bayaud Avenue, Suite 450, Lakewood,
CO 80228 on Monday, June 9, 1997 at 12:00 noon, for the following purposes:
1. To elect five directors to serve until the 1998 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified;
2. To vote on the ratification of the appointment by the Audit Committee
of Arthur Andersen LLP as independent auditors of the Company for
1997; and
3. To transact such other business as may properly come before the
meeting.
Holders of record of common stock, $.01 par value per share, at the close
of business on April 21, 1997 are entitled to notice of, and to vote at, the
meeting or any adjournment thereof. A list of such holders will be available
for examination by any such holder for any purpose germane to the meeting,
during normal business hours, at the Company's offices at 12596 West Bayaud
Avenue, Suite 450, Lakewood, Colorado for a period of ten days prior to the
meeting.
By order of the Board of Directors,
/s/ ALAN L. MAYER
-----------------------------------
Alan L. Mayer
Secretary
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY TO THE COMPANY
IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
COLORADO GAMING & ENTERTAINMENT CO.
12596 WEST BAYAUD AVENUE, SUITE 450
LAKEWOOD, COLORADO 80228
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 1997
GENERAL
The enclosed Proxy is solicited on behalf of the management of Colorado
Gaming & Entertainment Co., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on Monday, June 9, 1997 at
12:00 noon (Lakewood, Colorado time) or at any adjournment thereof. The Annual
Meeting will be held at 12596 West Bayaud Avenue, Suite 450, Lakewood, CO
80225. The Company's telephone number is (303) 716-5600. Only stockholders of
record at the close of business on April 21, 1997 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting. There were 5,138,888
shares of common stock, $.01 par value per share ("Common Stock"), outstanding
and entitled to vote on the Record Date. These proxy solicitation materials
were first mailed or delivered on or about April 30, 1997 to stockholders listed
in the stockholder records of the Company as of the Record Date. The Company is
mailing its Annual Report for the fiscal year ended December 31, 1996, together
with this proxy statement.
A majority of the outstanding shares of the Company's Common Stock
represented in person or by proxy shall constitute a quorum for the transaction
of business at the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. An officer of the Company or
other person designated by the Board of Directors will be authorized to tabulate
votes.
VOTING AND SOLICITATION
Each outstanding share of Common Stock shall be entitled to one vote on
each matter submitted to a vote at the Annual Meeting. The Company will bear
the entire cost of preparation and solicitation of proxies. In addition to the
use of the mails, proxies may be solicited personally, by telephone or by
facsimile, and the Company may reimburse brokerage firms and other persons
holding shares of the Company's Common Stock in their names or in those of their
nominees, for their reasonable expenses in forwarding proxy soliciting materials
to the beneficial owners.
The Board of Directors expects all nominees named below to be available for
election. In the event any nominee is not available, the proxy holders may vote
for a substitute. The Company knows of no specific matter to be brought before
the meeting that is not referred to in the Notice of Meeting or this proxy
statement. However, if proposals of stockholders that are not included in this
proxy statement are presented at the meeting, the proxies will be voted in the
discretion of the proxy holders. Regulations of the Securities and Exchange
Commission (the "SEC") permit the proxies solicited pursuant to this proxy
statement to confer discretionary authority with respect to matters of which the
Company did not know a reasonable time before the Annual Meeting. Accordingly,
the proxy holders may use their discretionary authority to vote with respect to
any such matter pursuant to the proxy solicited hereby.
Nominees for director receiving the vote of the holders of a plurality of
the shares of the Company's Common Stock present in person or represented by
proxy and entitled to vote at the meeting will be elected. Votes may be cast
for or withheld from each nominee. Votes that are withheld will have no effect
on the outcome of the election because directors will be elected by a plurality
of votes cast. Approval of the proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent auditors requires the affirmative vote
of a majority of the shares present in person or by proxy and entitled to vote
at the meeting. Abstentions may be specified on this and any other proposal
submitted to a shareholder vote other than the election of directors.
Abstentions will be counted as present for purposes of determining the existence
of a quorum and entitled to vote on the proposal on which the abstention is
noted. Thus, abstentions on the Company's proposal to ratify the appointment by
the Audit Committee of Arthur Anderson LLP as the Company's independent auditors
for 1997 and any such other proposal will have the effect of a vote against such
proposal. Broker non-votes are counted as shares present in the determination
of whether the shares of Common Stock represented at the meeting constitute a
quorum. Broker non-votes are counted as present, but are deemed not entitled to
vote on proposals for which brokers do not have discretionary authority and,
therefore, have no effect.
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING
ELECTION OF DIRECTORS
The Board of Directors is composed of five members, each serving for a term
of one year. Each director will serve on the Board until the 1998 Annual
Meeting of shareholders and until his successor is duly elected and qualified.
If for any reason any of these nominees becomes unable or is unwilling to serve
at the time of the 1997 Annual Meeting, the persons named in the enclosed proxy
card will have discretionary authority to vote for a substitute nominee or
nominees. It is not anticipated that any nominee will be unavailable for
election.
The following sets forth certain information as to each nominee for
election at the Annual Meeting, including his age, present principal occupation,
other business experience during the last five years or more, directorships in
other publicly held companies, if any, membership in committees of the Board of
Directors and period of service as a director of the Company:
STEPHEN J. SZAPOR, JR., 37, has served as President and Chief Executive
Officer of the Company since August 1995 and as a director since June 7, 1996.
Mr. Szapor served as Executive Vice President and Chief Financial Officer from
March 1995 until August 1995. From July 1994 until joining the Company, he
served as the Chief Operating Officer and a member of the board of directors of
Sahara Gaming Corporation, and from June 1993 until July 1994, he was the
Executive Vice President/Chief Financial Officer of Sahara Gaming Corporation.
From October 1986 until June 1993, Mr. Szapor held several executive positions
with Hollywood Casino Corporation including Assistant to the President and Vice
President - Strategic Planning. Mr. Szapor has also held financial and
accounting positions with Merrill Lynch & Co. and Arthur Andersen LLP. He holds
a key license from the Gaming Commission and is a Certified Public Accountant.
Mr. Szapor's employment agreement with the Company provides that he shall serve
as President and Chief Executive Officer and as a director during the term of
his employment.
FRANKLIN S. WIMER, 60, has served as a director of the Company since July
16, 1996. Mr. Wimer is a founder of and has been the President of UniRock
Management Corporation, a Denver, Colorado investment banking firm, since
January 1988. Prior to forming UniRock Management Corporation, Mr. Wimer held
executive positions with a number of financial institutions. Mr. Wimer holds a
key license from the Gaming Commission. He serves on the Board's Compensation
and Audit Committees. Mr. Wimer is a director of Hexcel Corporation.
2
STEVE LEONARD, 42, has served as a director of the Company since October 4,
1996. Mr. Leonard has been President of Pacifica Holding Company, a Denver-
based commercial real estate firm, since 1990. Prior to establishing Pacifica
Holding Company in 1990, Mr. Leonard held various executive positions in the
real estate and real estate development industry. Mr. Leonard holds a key
license from the Gaming Commission. He serves on the Board's Compensation and
Audit Committees.
PHILIP J. DIBERARDINO, 54, has served as a director of the Company since
October 9, 1996. Mr. DiBerardino has been Senior Vice President of Commerce
Bank in New Jersey since September 1993. From October 1990 to September 1993,
Mr. DiBerardino was President and Chairman of Coastal Bank in New Jersey. Prior
to October 1990, he served as Deputy Commissioner of the New Jersey Department
of Banking. Prior to his service at the New Jersey Department of Banking,
Mr. DiBerardino held various executive positions in the banking industry.
Mr. DiBerardino holds a key license from the Gaming Commission. He serves on
the Board's Compensation and Audit Committees.
MARK VAN HARTESVELT, 45, has served as a director of the Company since
January 3, 1997. Mr. Van Hartesvelt has been President of the Village at
Breckenridge Resort, a Breckenridge, Colorado resort, since 1994. From 1989 to
1994, he was Senior Vice President of Sales and Marketing of Doubletree Hotels
Corporation. Prior to 1989, Mr. Van Hartesvelt served in a number of senior
executive positions in the gaming industry. Mr. Van Hartesvelt holds a key
license from the Gaming Commission. He serves on the Board's Audit Committee.
Mr. Van Hartesvelt also is a director of Breckenridge Resort Chambers.
The business and affairs of the Company are managed under the direction of
the Board of Directors. The Board has responsibility for establishing broad
corporate policies and for the overall performance of the Company rather than
day-to-day operating details. Members of the Board of Directors are kept
informed of the Company's business by various reports and documents sent to them
periodically, as well as by reports presented at meetings of the Board and its
committees by officers and employees of the Company.
The Board of Directors met twice in 1996. The average attendance at the
aggregate number of Board and committee meetings was 100% in 1996 and no
director attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and the committees on which he served.
COMMITTEES OF THE BOARD
The committee memberships of each nominee and continuing director are set
forth in their biographical information above.
The Audit Committee, which is composed entirely of directors who are not
officers or employees of the Company, reviews the Company's accounting
functions, operations and management and the adequacy and effectiveness of the
internal controls and internal auditing methods and procedures of the Company.
The Audit Committee recommends to the Board the appointment of the independent
auditors for the Company, subject to ratification by the stockholders at the
Annual Meeting. In connection with its duties, the Audit Committee periodically
meets privately with the independent public accountants. The Audit Committee
met twice in 1996.
The Compensation Committee, which is composed entirely of directors who are
not officers or employees of the Company, reviews and acts with respect to
pension, compensation and other employee benefit plans and approves the salary
and compensation of officers of the Company. This committee met twice in 1996.
The Board of Directors has no nominating committee.
3
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company receive no
compensation for service as members of the Board. Directors who are not
employees receive an annual retainer of $20,000 paid quarterly, and participate
in the Company's non-employee director component of the Company's Management
Incentive and Non-Employee Director Stock Plan (the "Stock Plan"). Under the
Stock Plan, each non-employee director is eligible for an award of 2,315
restricted shares of Common Stock upon qualification as a director and
thereafter upon reelection, subject to the maximum number of shares of Common
Stock that may be issued to non-employee directors under the Stock Plan. Common
Stock granted to non-employee directors are restricted and shall be forfeited if
the director is not serving as such on the date of the first Annual Meeting of
the Company following the date of the award.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF EACH OF THE NOMINEES FOR DIRECTOR.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The second proposal is ratification of the appointment by the Audit
Committee of Arthur Andersen LLP as the Company's independent auditors for 1997.
Representatives of Arthur Andersen LLP will be present at the meeting, will be
available to respond to appropriate questions and may make a statement if they
so desire. If the stockholders do not ratify this appointment by the
affirmative vote of a majority of the shares present in person or represented by
proxy at the meeting and entitled to vote, other independent public accountants
may be considered by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR 1997.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information concerning compensation paid to
the Company's Chief Executive Officer, the three other executive officers
serving as such at year-end 1996 for services rendered by such persons in all
positions with the Company, and one person who served as an executive officer
during the year but whose employment with the Company terminated prior to year-
end.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------------
AWARDS
----------
Restricted Shares
Name and Principal Stock Underlying All Other
Position Year Salary Bonus(1) Awards Options/SAR Compensation(3)
- -------- ---- ------ -------- ------ ----------- ---------------
Stephen J. Szapor, Jr. 1996 $300,000 $236,386 $243,054(2) 0 $4,327
President and 1995 211,728 5,000 0 0 0
Chief Executive Officer 1994 N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
4
Alan L. Mayer 1996 127,696 125,354 0 0 3,192
Senior Vice President, Chief 1995 111,926 15,000 0 0 2,798
Legal Officer and Secretary 1994 106,384 30,000 0 40,000(4) 2,144
Richard Rabin 1996 115,231 117,354 0 0 577
Senior Vice President 1995 N/A N/A N/A N/A N/A
of Operations 1994 N/A N/A N/A N/A N/A
Robert J. Stephens 1996 70,769 68,816 0 0 1,192
Vice President 1995 54,438 0 N/A N/A 1,357
of Finance 1994 27,052 3,500 N/A N/A 222
Christopher B. Hemmeter 1996 387,293(5) 0 0 0 0
Vice President 1995 351,182 100,000 0 0 0
1994 336,709 100,000 0 0 0
1 Amounts for 1996 reflect bonuses awarded for services rendered in 1995 and
1996 during the Company's reorganization which resulted in the Company's
emergence from bankruptcy on June 7, 1996 (the "Reorganization") plus bonuses
earned in 1996 and to be paid in 1997 pursuant to the Company's Management Cash
Bonus Plan.
2 At December 31, 1996, Mr. Szapor held 138,888 shares of restricted stock
valued at approximately $624,996 ($4.50 per share) on such date. All such
shares were fully vested.
3 Amounts reported reflect Company contributions for the benefit of the named
executives to the Company's 401(k) defined contribution plan.
4 Cancelled in connection with the Reorganization.
5 The amount reported reflects $179,349 in salary for Mr. Hemmeter's service
as an executive officer during 1996 and $207,944 paid pursuant to a Consulting
Agreement between Mr. Hemmeter and the Company following termination of his
employment with the Company. Mr. Hemmeter served as Chief Executive Officer of
the Company from December 15, 1993 to August 10, 1995. He served as Vice
President of the Company from August 10, 1995 to June 7, 1996, when his
employment terminated.
The Company has no outstanding stock options, stock appreciation rights or
similar underlying securities nor any option or long-term performance incentive
plan.
EMPLOYMENT AGREEMENTS
The Company is a party to the following employment agreements with
executive officers named in the Summary Compensation Table above:
STEPHEN J. SZAPOR, JR. The Company's employment agreement with
Stephen J. Szapor, Jr., provides that Mr. Szapor will serve as President, Chief
Executive Officer and as a director of the Company. Pursuant to this agreement,
Mr. Szapor earns an initial annual salary of $300,000, subject to increase based
on annual reviews. As additional compensation, on June 7, 1996, the effective
date of the Reorganization (the "Effective Date"), Mr. Szapor received a bonus
of $100,000 and 138,888 shares of Common Stock, representing 2.5% of the capital
stock of the Company (determined on a fully diluted basis), and is entitled to
participate in the Stock Plan. In addition, he is entitled to 30% of the bonus
pools, if any, under the Company's Cash Bonus Plan. Mr. Szapor's employment
agreement is for an initial term of three years and renews thereafter for
successive one-year terms unless terminated by either party. The employment
agreement with Mr. Szapor provides for payment to Mr. Szapor equal to the
greater of $500,000 or his base salary for the then remaining period of his
employment agreement in the event of the termination of Mr. Szapor's employment
by the Company without cause or by Mr. Szapor for good reason as defined in the
employment agreement.
5
OTHER EMPLOYMENT AGREEMENTS. The Company's employment agreement with
Alan L. Mayer provides that he will serve as the Company's Senior Vice
President, Chief Legal Officer and Secretary. The Company's employment
agreement with Richard Rabin provides that he will serve as the Company's Senior
Vice President of Operations. Under their respective employment agreements,
Mr. Mayer and Mr. Rabin each earn an annual salary of $130,000, subject to
increase based on annual reviews. Messrs. Mayer's and Rabin's employment
agreements are each for an initial term of three years, and renew thereafter for
successive one-year terms unless terminated by each of the respective parties.
These employment agreements also provide that in the event of termination by the
Company without cause or by the respective employee for good reason (as defined
in the respective employment agreements), the employee will receive a payment
equal to his base salary then in effect for the then remaining period of his
employment agreement. Also, Mr. Mayer and Mr. Rabin are entitled to participate
in the Stock Plan and Cash Bonus Plan pursuant to their respective employment
agreements.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee"), composed of independent, non-
employee directors, establishes the executive compensation philosophy and
approves and administers the compensation programs for executive officers.
The Company's current compensation program initially was established
through negotiations with the creditors' committee in connection with the
Reorganization. It is intended to enable the Company to attract, motivate,
reward and retain the management talent required to achieve corporate objectives
in a highly competitive industry, and thereby increase stockholder value. In
addition, the executive compensation programs were designed to compensate those
executives who helped guide the Company through the bankruptcy process and who
the Company and the creditors' committee believed were the most appropriate
people to lead the Company after the Reorganization.
The Company's policy is to provide compensation incentives to its senior
management to achieve corporate objectives. The components of the Company's
executive compensation program are base salary, cash bonus potential under the
Company's Cash Bonus Plan (the "Cash Bonus Plan"), and restricted Common Stock
potential under the Company's Management and Non-Employee Stock Plan (the "Stock
Plan").
In general, base salaries for executive officers are determined by a
subjective assessment of the executive officer's responsibilities and position
with the Company and the performance of the executive officer. Base salaries
will be reviewed annually and from time to time by the Compensation Committee
and are adjusted appropriately. Minimum base salaries and other terms of
employment for Messrs. Szapor, Mayer and Rabin are governed by their respective
employment agreements entered into in connection with the Reorganization.
Under the Stock Plan, executive officers are eligible to earn specified
grants of shares of the Common Stock if certain goals based on performance
criteria as determined by the Compensation Committee are achieved. Shares
awarded to eligible executives will be restricted and subject to forfeiture if
certain, predetermined annual performance goals are not obtained. One-third of
awarded shares will vest and become non-forfeitable for each year in which such
performance goals are achieved. For the period from June 7, 1996 through May
31, 1997, executive officers may be compensated under the Stock Plan if the
Company achieved earnings before interest, taxes, depreciation and amortization
of not less than $12,006,893. For the period from June 1, 1997 through May 31,
1998, the performance criteria has not yet been determined. The Stock Plan
provides that the Company's executive officers are eligible for awards of Common
Stock as follows, based on the fully diluted number of shares of Common Stock
outstanding: Mr. Szapor--2.50%, Mr. Mayer--1.25%, Mr. Rabin--1.25%, Mr.
Stephens--.50%, and other employees (as determined by the Committee)--1.50%.
6
The Company also established the Cash Bonus Plan in connection with the
Reorganization which allows participating senior management employees to share a
bonus pool equal to 15% of the increase in earnings before interest, taxes,
depreciation and amortization for each plan period, commencing with the period
beginning on the Effective Date and ending on December 31, 1996 and each six
months thereafter over the same period in the immediately preceding calendar
year, adjusted for certain factors. Mr. Szapor's employment agreement provides
that he will receive 30% of the bonus pools, if any. The other plan
participants will share the remaining 70% of any bonus pools as determined by
the Compensation Committee. Awards for the period ending December 31, 1996 are
reflected above in the Summary Compensation Table.
Stephen J. Szapor, Jr., has been President and Chief Executive Officer of
the Company since August 1995. His current compensation structure is governed
principally by his employment agreement described above. The terms of this
arrangement were determined primarily through negotiations between Mr. Szapor
and the creditor's committee, and is supported by the Committee. The Committee
believes Mr. Szapor's compensation arrangement is fair and appropriate in light
of Mr. Szapor's leadership and management through the reorganization process
and his potential for successfully steering the Company's post-Reorganization
operations. Mr. Szapor's compensation consists of base salary and potential
awards of a cash bonus and restricted stock under the Cash Bonus Plan and the
Stock Plan, as described above. In addition, on the date of the Reorganization,
Mr. Szapor received a cash bonus of $100,000 and a grant of 138,888 shares of
Common Stock primarily for his extraordinary efforts during the Reorganization
and as a partial inducement to commit to remaining with the Company under a
three-year employment agreement.
Section 162(m) of the Internal Revenue Code limits the deduction for
federal income tax purposes of certain compensation paid by any publicly held
corporation to it chief executive officer and its four other highest compensated
officers to $1 million for each such executive (the "$1 million cap"). The $1
million cap does not apply to "performance-based" compensation plans as defined
under Section 162(m) of the Code. The Company believes that the Cash Bonus Plan
and the Stock Plan qualify as "performance-based" plans that are not subject to
the $1 million cap. The other compensation currently paid to the Company's
executive officers (base salary) is not expected to exceed the $1 million cap.
The Committee's current policy regarding Section 162(m) is to maximize
deductibility of executive compensation.
The Committee believes that the design and administration of the executive
compensation programs align the interests of the stockholders of the Company and
the executive officers. The Committee believes these programs provide
competitive compensation opportunities that are realized based on the Company's
performance. The Committee intends to continue to emphasize performance-based
compensation programs that it believes will contribute to making the Company a
strong and thriving entity.
COMPENSATION COMMITTEE:
Franklin S. Wimer
Steve Leonard
Philip J. DiBerardino
PERFORMANCE GRAPH
The Common Stock became registered under the Securities Act of 1934, as
amended, on June 7, 1996, the effective date of the Reorganization. The Common
Stock has traded on the Nasdaq electronic bulletin board since October 1996
under the symbol "CGME." The Company estimates that the Common Stock is
beneficially owned by fewer than 50 persons. No established trading market
exists for the Common Stock. There is only limited, sporadic and infrequent
trades of shares of the Common
7
Stock on the Nasdaq electronic bulletin board. Accordingly, the Company does
not believe that comparison of the Common Stock trading history with the
performance of any broad market indices or of a "peer" group of more widely
held and traded companies engaged in the gaming industry or otherwise is
meaningful, and believes, in fact, that such comparison would be misleading.
Based on information supplied to Nasdaq by the reporting brokers and
information supplied to the Company by certain market makers, NadaqTrading
Market Services and such brokers reported the folowing range of high and low
sales prices for each quarter during the Company's 1996 fiscal year since the
Common Stock became registered under the Securities Exchange Act of 1934, as
amended, on the Effective Date:
Quarter Ended High Low
------------- ----- -----
June 30, 1996 $3.50 $2.50
September 30, 1996 $4.25 $3.50
December 31, 1996 $5.00 $4.00
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each of Stephen J. Szapor, Jr., Alan L. Mayer, Richard Rabin, Robert J.
Stephens, Franklin S. Wimer, Steve Leonard, Philip J. DiBerardino and Mark Van
Hartesvelt filed one late report on Form 3. There were no known failures to
file a required form.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth beneficial ownership of the Common Stock as
of April 15, 1997, by (i) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock, (ii) each director (all
of whom are currently nominees for director), (iii) each executive officer
named in the Summary Compensation Table below, and (iv) all executive officers
and directors as a group. All ownership is sole and direct unless otherwise
indicated. Information regarding holdings of persons other than officers and
directors of the Company has been compiled from publicly filed information and
from other sources the Company believes to be reliable. However, the Company
has not independently verified such information and makes no representations as
to its accuracy. Beneficial ownership is determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Under such rules,
more than one person or entity may be deemed to beneficially own the same
securities. As of April 25, 1997, there were 5,138,888 shares of Common Stock
issued and outstanding.
NUMBER OF
SHARES BENEFICIALLY
NAME AND ADDRESS OWNED PERCENT
- ---------------- ------------------- -------
Grace Brothers, Ltd(1) 490,607 9.6%
1560 Sherman Avenue
Suite 900
Evanston, IL 60201
Keystone Investment Management Company(2) 1,207,395 23.5
200 Berkeley Street
Boston, MA 02116
8
Mackey-Shields Financial Corporation(3) 414,243 8.1
9 West 57th Street
New York, NY 10019
PaineWebber Incorporated,
Mitchell Hutchins Asset Management, Inc.(4) 1,082,628 21.07
1285 Avenue of the Americas
New York, NY 10019
Putnam Advisory Funds 296,834 5.8
One Post Office Square
Boston, MA 01209
Gary N. Siegler, Peter M. Collery(5) 606,433 11.8
712 Fifth Avenue
New York, NY 10019
Stephen J. Szapor, Jr. 138,888 2.7
Alan L. Mayer 0 0
Richard Rabin 0 0
Robert Stephens 0 0
Franklin S. Wimer 0 0
Steve Leonard 0 0
Mark Van Hartesvelt 0 0
Philip J. DiBerardino 0 0
All directors and officers as a group (8 persons) 138,888 2.7
_____________
(1) Based on Schedule 13G filed February 6, 1997.
(2) Based on information contained in a Schedule 13D filed June 18, 1996.
According to such Schedule 13D, Keystone Investment Management Company
("KIMCO") serves as investment adviser to, and has discretionary investment
authority over the shares of Common Stock held by, the following funds:
Keystone Small Company Growth Fund (494,015 shares), Keystone High Income
Bond Fund (477,839 shares), Keystone America Strategic Income Fund(195,843
shares), and Keystone Fixed Income Advisers, Inc. (39,698 shares), and the
shares of Common Stock reported as beneficially owned by KIMCO include the
shares held by such entities. On January 10, 1997, First Union Corporation
filed a Schedule 13G reporting that it acquired Keystone Investments, Inc.,
the parent of KIMCO, on December 11, 1996 and that it beneficiall owns
1,097,083 shares of Common Stock as a parent holding company.
(3) Mackay-Shields Financial Corporation serves as investment adviser to The
Mainstay Funds which holds, on behalf of its High Yield Corporate Bond Fund
Series, 368,128 shares of Common Stock and to two other holders that hold
in the aggregate 46,115 shares of Common Stock.
(4) Based on a Schedule 13G filed August 15, 1996 (the "PW Schedule 13G").
According to the PW Schedule 13G, PaineWebber Incorporated ("PWI"),
Mitchell Hutchins Asset Management Inc. ("MHAM") and PaineWebber Managed
Investments Trust ("PWMIT") each disclaim beneficial ownership of the
securities of the Company reported on the PW Schedule 13G, and the filing
of the PW Schedule 13G shall not be construed as an admission that these
companies are the beneficial owners of any of the Company's securities.
MHAM is a wholly-owned subsidiary of PWI. PWI is a parent holding company
as that term is defined by Rule 13d-1(b)(1)(ii)(G) of the Securities
Exchange Act of 1934 (the "Act"). PWI and MHAM are broker-dealers
registered under Section 15 of the Act, and investment advisers registered
under Section 203 of the Investment Advisers Act of 1940. PWMIT, which is
an investment company registered under Section 8 of the Investment Company
Act, is advised by MHAM, and reported holdings of 768,570 shares of Common
Stock in the PW Schedule 13G. The PW Schedule 13G states that various
persons have the right to receive, or the power to direct the receipt of,
dividends or
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proceeds from the sale of the reported shares of Common Stock. Based
on information previously provided to the Company, the Company understands
that the shares of Common Stock reported in the PW Schedule 13G are held
in the following funds or trusts: PaineWebber Strategic Income Trust--
102,958 shares, Managed High Yield Fund, Inc.--105,643, PaineWebber
High Income Trust--768,570, All-American Term Trust Inc.--77,681, others--
27,776.
(5) Based on a Schedule 13D filed September 12, 1996 (the "SC Schedule 13D").
the SC Schedule 13D states that Mr. Siegler is a controlling stockholder,
the president and a director of SC Fundamental Inc. ("SC") and SC
Fundamental Value BVI, Inc. ("BVI Inc.") and that Mr. Collery is a
controlling stockholder, vice president, and a director of SC and BVI Inc.
SC is the general partner of SC Fundamental Value Fund, L.P. ("Fund"),
which, according to the SC Schedule 13D, holds 416,311 shares of Common
Stock. BVI Inc. is the managing general partner of the investment manager
of SC Fundamental Value BVI, Ltd. ("BVI Ltd."), which, according to the SC
Schedule 13D, holds 190,122 shares of Common Stock. The shares of Common
Stock reported as beneficially owned by Messrs. Siegler and Collery
consist of the shares reported held by Fund and BVI Ltd. According to the
SC Schedule 13D, Messrs. Siegler and Collery are in a position to directly
and indirectly determine the investment and voting decisions made by SC and
BVI Inc., and, consequently, Fund and BVI Ltd.
* Less than 1%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the Effective Date, the Company entered into certain transactions
in which Christopher B. Hemmeter, who formerly served as Chief Executive Officer
and in other executive officer positions and was the controlling stockholder of
the Company, and Mark M. Hemmeter, formerly an executive officer of the Company,
had, or may be deemed to have had, direct or indirect material interests, as
described below. Messrs. Christopher B. Hemmeter and Mark M. Hemmeter ceased
serving as executive officers and as employees of the Company on the Effective
Date.
On April 21, 1995, the Company borrowed $1 million from Resort Income
Investors ("RII"). On May 15, 1995, the Company borrowed $2 million from RII on
a secured basis and used $1 million of this loan to repay the April 21, 1995
loan from RII. At that time, Christopher B. Hemmeter beneficially owned
approximately 1.7% of RII's outstanding equity securities and Mark M. Hemmeter
beneficially owned less than 1% of RII's outstanding equity securities. This
loan was satisfied pursuant to the First Amended Joint Plan of Reorganization of
the Company, BWBH, Inc., BWCC, Inc. and Millsite 27, Inc. (the "Plan of
Reorganization"), which was confirmed on April 8, 1996 and became effective on
June 7, 1996, the Effective Date. Currently, both Christopher B. Hemmeter and
Mark M. Hemmeter each own less than 1% of the outstanding equity securities of
RII.
Prior to 1996, the Company made outstanding advances to the following:
10
LARGEST AGGREGATE AMOUNT OF AMOUNT
INDEBTEDNESS OUTSTANDING OUTSTANDING AS OF
NAME AT ANY TIME DURING 1996 DECEMBER 31, 1996
- ---- --------------------------- -----------------
(IN THOUSANDS) (IN THOUSANDS)
Canadian Pavilion Limited Partnership.......... $1,573 $1,573
Outlaws Casino, Ltd. .......................... 1,072 1,072
RCH Investments, NV............................ 259 259
Hemmeter Partners.............................. 335 335
Grand Palais Casino, Inc. ..................... 587 587
Officers....................................... 867 867
Other.......................................... 78 78
------ ------
$4,771 $4,771
------ ------
------ ------
Canadian Pavilion Limited Partnership ("CPLP"), Outlaws Casino, Ltd.
("Outlaws"), RCH Investments, NV ("RCH") and Hemmeter Partners are majority
owned by Christopher B. Hemmeter and Mark M. Hemmeter. The advances to CPLP,
Outlaws, RCH and Hemmeter Partners accrue interest at 14% per annum, with
interest payable quarterly, and are due on demand. Grand Palais Casino, Inc.
("GPCI") is a wholly owned subsidiary of Grand Palais Enterprises, Inc.
("GPEI"), of which certain stockholders were also majority stockholders of the
Company prior to the Effective Date. Such advances, as well as the advances to
officers and others, accrue interest at 14% per annum, and were due on demand.
The Company has fully reserved the amounts of these advances because of
uncertainty as to their collectability.
In September 1994, Christopher B. Hemmeter was advanced funds totaling
$275,000, accruing interest at prime plus 2%, and due on demand. In January
1995, an additional $373,000 was advanced to Mr. Hemmeter on an interest free
basis, of which $110,000 has been repaid. The amount of Mr. Hemmeter's advances
that remained unpaid totaled $641,900 as of April 15, 1997.
In 1994, the Company established a reserve of $1 million for the portion of
the affiliate advances described above that the Company believed may not be
collectible. This reserve was not allocated to any particular affiliate
advances. In 1995, due to the deteriorating financial condition of Christopher
B. Hemmeter and the affiliate companies listed in the above table who received
those advances and possible defenses that they could raise, the Company provided
a reserve for the remainder of the amounts owed the Company by these individuals
and affiliates.
The affiliate advances described above are fully reserved and the Company
has ceased accruing interest thereon. The Company is assessing its strategy in
terms of pursing collection of these advances. The Company has agreed not to
exercise any rights of set-off that the Company may have in respect of the
payments which the company will make to Christopher B. Hemmeter under his
consulting agreement with the Company, and the Company, as a result of the Plan
or Reorganization, does not have any obligations to the other obligor which
would give it set-off rights.
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OTHER MATTERS
Stockholders wishing to submit a nomination or proposal should review the
Amended and Restated Certificate of Incorporation requirements regarding
nominations and proposals by the stockholders and should communicate with the
Secretary, Colorado Gaming & Entertainment Co., 12596 West Bayaud Avenue, Suite
450, Lakewood, Colorado 80228 for further information.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
In accordance with rules promulgated by the Securities and Exchange
Commission, any stockholder who wishes to submit a proposal for inclusion in the
proxy materials to be distributed by the Company in connection with the 1998
Annual Meeting of Stockholders must do so no later than December 30, 1997. Any
such proposal should be submitted in writing to the Secretary of the Company at
its principal executive offices. The stockholder notice must include the
stockholder's name and address as it appears on the Company's records and the
number of shares of the Company's Common Stock beneficially owned by such
stockholder on the record date for the meeting. In addition, (i) for proposals
other than nominations for the election of directors, such notice must include a
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, and any material interest
of the stockholder in such business, and (ii) for proposals relating to
stockholder nominations for the election of directors, such notice must also
include, with respect to each person nominated, the information required by
Regulation 14A under the Securities Exchange Act of 1934.
By Order of the Board of Directors,
/s/ ALAN L. MAYER
-----------------------------------
Alan L. Mayer
Secretary
DATED: April 30, 1997
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COLORADO GAMING & ENTERTAINMENT CO.
12596 WEST BAYAUD AVENUE, SUITE 450
LAKEWOOD, COLORADO 80228
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen J. Szapor, Jr. and Alan L. Mayer,
and each of them, the proxy and attorney-in-fact for the undersigned, with
full power of substitution in each, to represent the undersigned and to
vote on behalf of the undersigned at the Annual Meeting of Stockholders of
Colorado Gaming & Entertainment Co. to be held on June 9, 1997, at 12596
West Bayaud Avenue, Suite 450, Lakewood, CO 80228 at 12:00 noon, and at
any adjournment or postponement of such meeting, all Common Stock of
Colorado Gaming & Entertainment Co. standing in the name of the undersigned
or which the undersigned may be entitled to vote as follows:
You are encouraged to specify your voting choices by marking the appropriate
boxes, but you need not mark any boxes if you wish to vote in accordance with
the Board of Directors' recommendation. The Proxy Committee cannot vote your
shares unless you sign and return this card.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BELOW BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2 BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2 BELOW.
1. Election of Directors
Election of the following nominees to serve until the 1998 Annual Meeting
of Stockholders and until their successors are duly elected and qualified:
Stephen J. Szapor, Jr.
Steve Leonard
Franklin S. Wimer
Philip DiBerardino
Mark Van Hartesvelt
FOR WITHHOLD AUTHORITY
/ / / /
To withhold authority with respect to any particular nominee(s), write each
such nominee's name in the space provided below: _________________________.
2. Proposal to ratify the appointment of Arthur Andersen LLP as independent
auditors for 1997.
FOR AGAINST ABSTAIN
/ / / / / /
(TO BE COMPLETED AND SIGNED ON THE OTHER SIDE)
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3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
The submission of this proxy if properly executed revokes all prior
proxies given by the undersigned.
Dated:______________________, 1997
Please sign exactly as your name appears on this card. Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name and indicate authorized
officer's name and title. If a partnership, please sign in
partnership name and indicate authorized person's name and title.
---------------------------------
Signature
---------------------------------
Signature (if held jointly)
I PLAN TO ATTEND THE ANNUAL MEETING: [ ] YES [ ] NO
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PLEASE SIGN AND RETURN
THIS PROXY PROMPTLY USING
THE ENCLOSED POSTAGE-PAID,
PRE-ADDRESSED ENVELOPE TO:
COLORADO GAMING & ENTERTAINMENT CO.
ATTN: ALAN J. MAYER
12596 WEST BAYAUD AVENUE, SUITE 450
LAKEWOOD, COLORADO 80228
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