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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Circus Circus Enterprises, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Circus Circus Enterprises, Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
CIRCUS CIRCUS ENTERPRISES, INC.
2880 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89109
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 21, 1996
----------------
To the Stockholders of
Circus Circus Enterprises, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Circus
Circus Enterprises, Inc. (the "Company"), a Nevada corporation, will be held at
10:00 A.M., PDT, on Friday, June 21, 1996, in the Banquet Room at Excalibur
Hotel and Casino, 3850 Las Vegas Boulevard South, Las Vegas, Nevada for the
following purposes:
1. To elect three Class II directors, each to serve until the Annual
Meeting of Stockholders in 1999 and until his successor is elected and
qualified;
2. To ratify the appointment by the Board of Directors of Arthur Andersen
LLP as independent auditors of the Company to examine and report on its
financial statements for the fiscal year ending January 31, 1997;
3. To vote on two stockholder proposals opposed by the Board of
Directors; and
4. To transact such other business as may properly be brought before the
meeting or any adjournment(s) thereof.
Only stockholders of record at the close of business on April 22, 1996 are
entitled to notice of, and to vote at, the meeting or any adjournment(s)
thereof.
Whether or not you plan to be present at the meeting, you are requested to
sign and return the enclosed proxy in the envelope provided so that your shares
will be represented. The giving of such proxy will not affect your right to
vote in person should you later decide to attend the meeting. Please date and
sign the enclosed proxy and return it promptly in the enclosed envelope which
requires no postage if mailed within the United States.
By Order of the Board of Directors,
/s/ Clyde T. Turner
Clyde T. Turner
Chairman of the Board
Las Vegas, Nevada
April 30, 1996
CIRCUS CIRCUS ENTERPRISES, INC.
2880 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89109
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 21, 1996
This Proxy Statement is furnished to stockholders of Circus Circus
Enterprises, Inc. (the "Company"), a Nevada corporation, in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Stockholders of the Company to be held in the
Banquet Room at Excalibur Hotel and Casino, 3850 Las Vegas Boulevard South, Las
Vegas, Nevada, on Friday, June 21, 1996, and at any and all adjournments
thereof, for the purpose of considering and acting upon the matters referred to
in the preceding Notice of Annual Meeting and more fully discussed below.
This Proxy Statement and the accompanying form of proxy were first mailed to
stockholders of the Company entitled to notice of, and to vote at, the meeting
on or about April 30, 1996.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock issued and outstanding is necessary to constitute a
quorum at the meeting. Shares represented at the meeting in person or by proxy
but not voted will nevertheless be counted for purposes of determining the
presence of a quorum. Accordingly, abstentions and broker non-votes (i.e.,
shares as to which a broker or nominee has indicated that it does not have
discretionary authority to vote) on a particular matter, including the election
of directors, will be treated as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but will be treated as not
voted for purposes of determining the decision of stockholders with respect to
such matter. Directors will be elected by a plurality of the votes cast. Only
votes cast for a nominee will be counted, except that the accompanying proxy
will be voted for the three nominees named therein in the absence of
instructions to the contrary. Ratification of the appointment of Arthur
Andersen LLP to examine and report on the Company's financial statements for
the fiscal year ending January 31, 1997 (Proposal 2), and the approval of each
of the stockholder proposals described on pages 26 through 29 (Proposals 3 and
4), requires the affirmative vote of a majority of the votes cast thereon,
assuming that a quorum (determined in the manner described above) is present or
represented at the meeting.
Proxies in the accompanying form which are properly executed, duly returned
to the Company and not revoked will be voted in accordance with the
instructions therein. IN THE ABSENCE OF INSTRUCTION TO THE CONTRARY, THE PROXY
WILL BE VOTED FOR THE ELECTION OF ALL OF THE NOMINEES NAMED IN THE PROXY, IN
FAVOR OF PROPOSAL 2, AND AGAINST PROPOSALS 3 AND 4. No matter is expected to be
considered at the meeting other than the proposals set forth in the
accompanying Notice of Annual Meeting, but if any other matters are properly
brought before the meeting for action, it is intended that the persons named in
the proxy and acting thereunder will vote in accordance with their discretion
on such matters. The presence at the meeting of a stockholder will not revoke
his proxy. However, a proxy may be revoked at any time before it is voted by
written notice to the Company, addressed to David R. Belding, Secretary, at the
principal offices of the Company or by giving written notice to the
Company at the meeting; however, a revocation shall not be effective until such
written notice has been received by the Company and a revocation shall not
affect a vote on any matter cast prior to such receipt.
RECORD DATE AND SHARES OUTSTANDING
The close of business on April 22, 1996 has been fixed as the record date for
the determination of stockholders entitled to receive notice of, and to vote
at, the meeting. The stock transfer books will not be closed. At the close of
business on the record date, there were issued and outstanding 103,346,423
shares of the Company's Common Stock. At the meeting, each stockholder entitled
to vote at the meeting will be entitled to cast one vote in person or by proxy
for each share of Common Stock held by such stockholder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of April 22, 1996 regarding
each person known to the Company to beneficially own more than five percent of
its Common Stock.
APPROXIMATE
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ------------------ -----------
Michael S. Ensign................................ 6,501,933(1) 6.29%
2880 Las Vegas Blvd. South
Las Vegas, Nevada 89109
William A. Richardson............................ 6,457,807(2) 6.25%
2880 Las Vegas Blvd. South
Las Vegas, Nevada 89109
FMR Corp......................................... 11,326,550(3) 10.96%
82 Devonshire Street
Boston, Massachusetts 02109-3614
- --------
(1) On April 22, 1996, all of these shares were owned by Mr. Ensign who had
sole voting and investment power with respect thereto.
(2) On April 22, 1996, all of these shares were owned by Mr. Richardson who had
sole voting and investment power with respect thereto.
(3) Reflects the number of shares beneficially owned as of April 22, 1996,
including 343,700 shares as to which FMR Corp. has sole voting power and
11,314,550 shares as to which it has sole dispositive power, according to
information provided to the Company by FMR Corp.
On the record date, Cede & Co., the nominee of The Depository Trust Company,
held of record 83,985,241 shares of the Company's Common Stock (approximately
81.3% of the Company's outstanding Common Stock), all of which were held for
the accounts of member firms of the New York Stock Exchange and various
institutions participating in the facilities of The Depository Trust Company.
Based on information available to the Company at April 22, 1996, except as
otherwise reflected in the preceding table, no firm held as much as five
percent of the Company's outstanding Common Stock for its own account as of
such date.
2
MANAGEMENT
The following table sets forth information as of April 22, 1996 with respect
to the beneficial ownership of the Company's Common Stock by each director,
each nominee for election as a director at the meeting, each executive officer
named in the Summary Compensation Table appearing on page 9 and all directors
and executive officers of the Company as a group.
APPROXIMATE
NUMBER OF SHARES PERCENTAGE
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------ -----------
Clyde T. Turner.................................. 1,600,267(1) 1.53%
Michael S. Ensign................................ 6,501,933(2) 6.29%
William A. Richardson............................ 6,457,807(3) 6.25%
Glenn W. Schaeffer............................... 588,295(4) (5)
Kurt D. Sullivan................................. 265,000(6) (5)
William N. Pennington............................ 1,400,000(7) 1.35%
Tony Coelho...................................... 21,750(8) (5)
Carl F. Dodge.................................... 47,150(9) (5)
Fred W. Smith.................................... 44,750(10) (5)
Arthur M. Smith.................................. 92,850(11) (5)
All directors and executive
officers as a group
(17 persons).................................... 20,955,286(12) 18.97%
- --------
(1) Includes 33,600 shares held in a living trust pursuant to which Mr. Turner
and his wife share voting and investment power. Also includes 1,566,667
shares which Mr. Turner is entitled to purchase pursuant to stock options
which are immediately exercisable or will become exercisable within 60
days of the record date.
(2) All of these shares are owned by Mr. Ensign who has sole voting and
investment power with respect thereto.
(3) All of these shares are owned by Mr. Richardson who has sole voting and
investment with respect thereto.
(4) Includes 324 shares owned by Mr. Schaeffer who has sole voting and
investment power with respect thereto. Also includes 180,000 shares which
Mr. Schaeffer is entitled to purchase pursuant to stock options which
become exercisable within 60 days of the record date and 407,971 shares
which Mr. Schaeffer is entitled to acquire upon the conversion of shares
of convertible preferred stock of a subsidiary of the Company.
(5) Less than 1%.
(6) Consists of 265,000 shares which Mr. Sullivan is entitled to purchase
pursuant to stock options which are immediately exercisable or will become
exercisable within 60 days of the record date.
(7) All of these shares are held by Mr. Pennington under a revocable living
trust pursuant to which he has sole voting and investment power.
(8) Includes 6,000 shares owned by Mr. Coelho who has sole voting and
investment power with respect thereto. Also includes 15,750 shares which
Mr. Coelho is entitled to purchase pursuant to stock options acquired as
formula awards which are immediately exercisable or will become
exercisable within 60 days of the record date.
3
(9) Includes 1,400 shares held in a family trust pursuant to which Mr. Dodge
has sole voting and investment power. Also includes 45,750 shares which
Mr. Dodge is entitled to purchase pursuant to stock options acquired as
formula awards which are immediately exercisable or will become
exercisable within 60 days of the record date.
(10) Includes 21,500 shares held under a revocable trust for which Mr. Smith
and his wife serve as co-trustees pursuant to which they share voting and
investment power with respect thereto. Also includes 23,250 shares Mr.
Smith is entitled to purchase pursuant to stock options acquired as
formula awards which are immediately exercisable or will become
exercisable within 60 days of the record date.
(11) Includes 9,600 shares owned jointly by Mr. Smith and his wife with whom
Mr. Smith shares voting and investment power with respect thereto. Also
includes 83,250 shares which Mr. Smith is entitled to purchase pursuant to
stock options acquired as formula awards which are immediately exercisable
or will become exercisable within 60 days of the record date.
(12) Includes information for the individuals serving as directors and
executive officers of the Company as of April 22, 1996. The number of
shares beneficially owned by such group on such date includes 2,653,172
shares which may be acquired pursuant to options which are immediately
exercisable or will become exercisable within 60 days of the record date
and 716,180 shares which may be acquired upon the conversion of shares of
convertible preferred stock of a subsidiary of the Company.
----------------
Based solely on (i) a review of certain reports furnished to the Company
pursuant to the Securities Exchange Act of 1934 and (ii) the written
representations of the Company's executive officers and directors, the Company
believes that all reports required to be filed pursuant to such Act with
respect to transactions in the Company's Common Stock during the fiscal year
ended January 31, 1996 were filed on a timely basis, except for one transaction
by Carl F. Dodge which was reported on a Form 4 that was not timely filed.
4
ELECTION OF DIRECTORS
In accordance with the Company's Bylaws, as amended, the Company's Board of
Directors is divided into three (3) classes consisting of three (3) Class I
directors, three (3) Class II directors and four (4) Class III directors. Each
of the current Class I directors was elected to his current term at the 1995
Annual Meeting of Stockholders. Each of the current Class II directors other
than William A. Richardson was elected to his current term at the 1993 Annual
Meeting of Stockholders. Each of the current Class III directors other than
Michael S. Ensign and Glenn W. Schaeffer was elected to his current term at the
1994 Annual Meeting of Stockholders. In connection with the Company's
acquisition of certain entities collectively referred to as the "Gold Strike
Entities," described under "Certain Transactions," Messrs. Richardson and
Ensign were elected by the Board of Directors in June 1995 to fill vacancies in
Classes II and III created by the Board for that purpose. In February 1996, Mr.
Schaeffer was elected by the Board of Directors to fill an additional vacancy
created by the Board's increase of Class III to four (4) positions. Each
individual elected by the Board of Directors to serve as a director was elected
to serve for the balance of the then current term of the class to which such
individual was elected.
At the meeting, three (3) Class II directors are to be elected, with each
member to serve a three (3) year term until the 1999 Annual Meeting of
Stockholders and until his successor is elected and shall have qualified. The
three nominees named below, all of whom are presently directors of the Company,
are management's nominees for election as Class II directors and, except as
indicated in the next paragraph, the proxies solicited by management will be
voted for such nominees.
Management has no reason to believe that any of its nominees will be unable
or unwilling to serve if elected to office and, to the knowledge of management,
each of its nominees intends to serve the entire term for which election is
sought. However, should any nominee of management become unable or unwilling to
accept nomination or election as a director of the Company, the proxies
solicited by management will be voted for the election in his stead of such
other person as management may recommend.
NOMINEES AND DIRECTORS
Information with respect to each nominee and each of the Company's directors
who will continue to serve in that capacity following the meeting is set forth
in the following table:
DIRECTOR
NOMINEE OR DIRECTOR SINCE
------------------- --------
CLASS I--DIRECTORS ELECTED TO SERVE UNTIL THE 1998 ANNUAL
MEETING OF STOCKHOLDERS:
William N. Pennington 1974
Mr. Pennington, 73, was President of the Company from 1979
until his retirement in August 1988. He joined the Company
at its inception in 1974 and served as Secretary-Treasurer
until he became President. Mr. Pennington is a member of
the Executive Committee of the Company's Board of Directors.
5
DIRECTOR
NOMINEE OR DIRECTOR SINCE
------------------- --------
Tony Coelho 1993
Mr. Coelho, 53, has been Chairman and the Chief Executive
Officer of Coelho Associates, an investment consulting and
brokerage firm, since September 1995, and Chairman and
Chief Executive Officer of ETC, an education, training and
communications subsidiary of Tele-Communications, Inc.,
since October 1995. From 1989 until September 1995, Mr.
Coelho was a Managing Director of Wertheim Schroder & Co.
Incorporated, an investment banking firm, and from 1990 to
September 1995 he also served as President and Chief
Executive Officer of Wertheim Schroder Investment Services,
Inc. From 1979 to 1989, Mr. Coelho was a member of the U.S.
House of Representatives from California and from 1986 to
1989 he served as House Majority Whip. He is a Director of
ICF Kaiser International, Inc., Service Corporation
International, Tanknology Environment, Inc., Specialty
Retail Group, Inc., Tele-Communications, Inc. and Crop
Growers Corp. Mr. Coelho is a member of the Audit and the
Compensation Committees of the Company's Board of
Directors.
Carl F. Dodge 1989
Mr. Dodge, 80, is an owner, and since 1987 has been Vice
President, of Dodge Bros., Inc., an agricultural
enterprise. Mr. Dodge, who served in the Nevada State
Senate for 22 years, is a past Chairman of the Nevada
Gaming Commission and of the Nevada Ethics Commission. Mr.
Dodge is a member of the Executive, the Audit, the
Directors' Nominating and Compliance Review Committees of
the Company's Board of Directors.
CLASS II--NOMINEES FOR ELECTION TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:
Clyde T. Turner 1993
Mr. Turner, 58, has been Chief Executive Officer of the
Company since February 24, 1994 and Chairman of the Board
of the Company since July 8, 1994. From February 19, 1993
until June 1, 1995 he also served as President of the
Company and from February 19, 1993 until March 22, 1994, he
served as the Company's Chief Financial Officer. Mr. Turner
is also a member of the Executive and the Directors'
Nominating Committees of the Company's Board of Directors.
Prior to joining the Company, Mr. Turner was Executive Vice
President, Chief Financial Officer and Treasurer of Mirage
Resorts, Incorporated (formerly Golden Nugget, Inc.) from
March 1979 to October 1992. Previously, he was a founding
and Managing Partner and Director of Nevada's first state-
wide accounting firm from December 1966 through February
1979 specializing in construction, banking and governmental
clients and was concurrently a member of the Nevada Gaming
Commission from 1970 to 1973, authoring a major revision to
the Commission's regulations governing the internal
controls and procedures of casinos. He also serves as a
Director and First Vice President of the Boys and Girls
Club of Las Vegas Foundation.
6
DIRECTOR
NOMINEE OR DIRECTOR SINCE
------------------- --------
William A. Richardson 1995
Mr. Richardson, 49, has been Executive Vice President and a mem-
ber of the Board of Directors of the Company since June 1, 1995.
For a period of more than five years prior to assuming his pres-
ent positions with the Company upon its acquisition of the Gold
Strike Entities described under "Certain Transactions", Mr. Rich-
ardson was involved in an executive capacity in the management
and operations of the Gold Strike Entities. Mr. Richardson is a
member of the Compliance Review Committee of the Company's Board
of Directors.
Fred W. Smith 1991
Mr. Smith, 62, has been Chairman of the Donald W. Reynolds Foun-
dation since September 1994 and was President and Chief Executive
Officer of Donrey Media Group from 1991 until September 1994.
Prior thereto, Mr. Smith was a Vice President and General Manager
of the Las Vegas Review Journal. He is a member of the Board of
Directors of TCA Cable TV Inc. and a member of the Board of
Trustees of the Nevada Development Authority. Mr. Smith is a mem-
ber of the Executive, the Directors' Nominating and the Compensa-
tion Committees of the Company's Board of Directors.
CLASS III--DIRECTORS ELECTED TO SERVE UNTIL THE 1997 ANNUAL MEETING OF
STOCKHOLDERS:
Michael S. Ensign 1995
Mr. Ensign, 58, has been Vice Chairman of the Board and Chief Op-
erating Officer of the Company since June 1, 1995. For a period
of more than five years prior to assuming his present positions
with the Company upon its acquisition of the Gold Strike Entities
described under "Certain Transactions", Mr. Ensign was involved
in an executive capacity in the management and operations of the
Gold Strike Entities. Previously, Mr. Ensign was employed by the
Company for a period of 10 years and held the position of Chief
Operating Officer at the time of his departure from the Company
in 1984 to devote his full time to the Gold Strike Entities. Mr.
Ensign is a member of the Executive and the Nominating Committees
of the Company's Board of Directors.
Glenn W. Schaeffer 1996
Mr. Schaeffer, 42, has been President, Chief Financial Officer
and Treasurer of the Company since June 1, 1995 and a member of
the Board of Directors since March 4, 1996. From 1993 until the
Company's acquisition of the Gold Strike Entities described under
"Certain Transactions", Mr. Schaeffer was involved in an execu-
tive capacity in the management and operation of the Gold Strike
Entities. Prior thereto, Mr. Schaeffer was President of the Com-
pany from June 1991 until February 1993 and Chief Financial Offi-
cer and a director of the Company from 1984 until February 1993.
Kurt D. Sullivan 1994
Mr. Sullivan, 44, has been a Senior Vice President--Operations of
the Company since June 1, 1995 and a member of the Board of Di-
rectors since February 24, 1994. From February 24, 1994 until he
assumed the position of Senior Vice President--Operations, Mr.
Sullivan was an Executive Vice President and Chief Operating Of-
ficer of the Company. Since joining the Company more than 15
years ago, Mr. Sullivan has held a number of positions including
those of casino shift manager, casino manager and general manager
at Circus Circus--Reno and general manager at Circus Circus--Las
Vegas over the period from November 1987 to November 1993. Mr.
Sullivan is a member of the Compliance Review Committee of the
Company's Board of Directors.
7
NOMINEE OR DIRECTOR DIRECTOR
------------------- SINCE
-----
Arthur M. Smith 1983
Mr. Smith, 74, was Chairman of the Board of First Interstate
Bank of Nevada for more than five years prior to his retire-
ment in 1984 and was associated with such bank for more than
40 years. He is a director of Nevada Power Co. He is also a
former director of Holiday Inns, Inc. Mr. Smith is a member
of the Executive, the Audit and the Compensation Committees
of the Company's Board of Directors.
EXECUTIVE OFFICERS OTHER THAN NOMINEES AND DIRECTORS
Tony Alamo, 54, has been a Senior Vice President--Operations of the Company
since June 1, 1995. Prior to assuming his current position with the Company,
Mr. Alamo was from January 1, 1995 involved in the management and operations of
the Gold Strike Entities. Previously, Mr. Alamo was the Executive Vice
President and Chief Operating Officer of MGM Grand Hotel, Casino and Theme Park
from July 1994 to December 1994 and its Senior Vice President and General
Manager from January 1992 to July 1994. From September 1990 to December 1991,
Mr. Alamo was the Senior Vice President and General Manager of the Desert Inn.
Mr. Alamo was with the Company from its inception in 1974 until 1988, where,
among other things, he served as General Manager of Circus Circus--Las Vegas
from 1984 to 1988.
Daniel N. Copp, 51, has been a Senior Vice President of the Company since
June 1, 1995 and, from April 1994 until he assumed his present position, Mr.
Copp was an Executive Vice President and Chief Financial Officer of the
Company. Mr. Copp was a financial communications consultant from September 1992
until he joined the Company. From 1978 until September 1992 he was employed by
Federal Express Corporation in various finance and communications capacities,
including the position of Managing Director-Public Relations from 1989 to
September 1992.
Gregg H. Solomon, 38, has been a Senior Vice President--Operations of the
Company since June 1, 1995. Prior to assuming his current position with the
Company, Mr. Solomon was for a period of more than five years involved in the
management and operations of the Gold Strike Entities, most recently as
Director of Operations for the Gold Strike Entities and General Manager of the
Gold Strike Hotel & Gambling Hall.
Mike Sloan, 51, has been a Vice President of the Company since June 1985 when
he joined the Company and has been General Counsel of the Company since
December 1985. From December 1985 until June 1, 1995, Mr. Sloan also served as
Secretary of the Company. Prior to joining the Company, Mr. Sloan was engaged
in the private practice of law in Las Vegas, Nevada, and served two terms in
the Nevada State Senate. Mr. Sloan is a past president of the International
Association of Gaming Attorneys and past chairman of the Gaming Law Committee
of the General Practice Section of the American Bar Association.
David R. Belding, 50, has been a Vice President and Secretary of the Company
since June 1, 1995. For a period of more than five years prior to assuming his
present positions with the Company, Mr. Belding was involved in an executive
capacity in the management and operation of the Gold Strike Entities and held
the positions of President of Gold Strike Investments, Inc. and General Counsel
for the Gold Strike Entities. During such period, Mr. Belding also served a
term as Chairman of the Nevada Resort Association.
Les Martin, 39, has been Corporate Controller of the Company since November
1994. He joined the Company in April 1984 and, until he assumed his present
position, was employed as Manager of Financial Reports. Mr. Martin is a
certified public accountant and, prior to joining the Company, was with the
certified public accounting firm of Fox & Company.
8
MANAGEMENT REMUNERATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated officers during the year ended January 31, 1996
(collectively the "named executive officers") for the fiscal years ended
January 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------------------- ----------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL COMPENSATION AWARD(S) SARS(#) LTIP COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) ($) (2) PAYOUTS($) ($)
--------- ---- --------- -------- ------------ ---------- ---------- ---------- ------------
Clyde T. Turner(3) 1996 800,000 920,240 0 0 2,000,000(4) 0 39,420(5)
Chairman of the Board 1995 802,120 0 0 0 1,500,000(6) 0 39,420
and Chief Executive 1994 755,311 0 0 0 600,000 0 39,101
Officer
Michael S. Ensign(7) 1996 416,666 479,292 0 0 0 0 2,367(8)
Vice Chairman of the 1995 -- -- -- -- -- -- --
Board and Chief 1994 -- -- -- -- -- -- --
Operating Officer
Glenn W. Schaeffer(9) 1996 400,000 460,120 0 0 900,000 0 102,900(10)
President, Chief 1995 -- -- -- -- -- -- --
Financial Officer and 1994 376,667 0 0 0 0 0 4,379
Treasurer
William A.
Richardson(11) 1996 416,666 479,292 0 0 0 0 2,167(12)
Executive Vice 1995 -- -- -- -- -- -- --
President 1994 -- -- -- -- -- -- --
Kurt D. Sullivan(13) 1996 466,666 266,304 0 0 0 0 17,032(14)
Senior Vice President- 1995 600,000 0 0 0 465,000(15) 0 14,782
Operations 1994 131,597 203,500 0 0 0 0 0
- --------
(1) During each of the years ended January 31, 1996, 1995 and 1994, certain of
the individuals named in column (a) received personal benefits not
reflected for such years in the respective amounts set forth for such
individual in columns (c), (d) and (e), the dollar value of which did not
for any of such individuals for any of such years exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for such
individual in columns (c) and (d) for such year.
(2) Options to purchase shares of Common Stock, adjusted to reflect a three-
for-two stock split effective July 9, 1993.
(3) Mr. Turner, the Company's Chairman of the Board and Chief Executive
Officer, joined the Company on February 19, 1993, and on that date was
elected to the positions of President and Chief Financial
9
Officer of the Company. On February 24, 1994, Mr. Turner assumed the
position as Chief Executive Officer of the Company and on March 22, 1994 he
relinquished the position of Chief Financial Officer. On July 8, 1994, Mr.
Turner was elected Chairman of the Board of the Company. On June 1, 1995, he
relinquished the position of President.
(4) Mr. Turner paid the Company a purchase price of $1 per share, or an
aggregate of $2,000,000, in consideration for the Company's grant of the
option to purchase these shares.
(5) Of this amount, $34,200 represents insurance premiums paid by the Company
with respect to life insurance for the benefit of Mr. Turner and $5,220
represents disability insurance premiums paid on his behalf.
(6) Includes both an original option for 450,000 shares and a replacement
option for the same number of shares which was issued in connection with a
repricing of options pursuant to which Mr. Turner surrendered the original
450,000-share option. Also includes a replacement option for 600,000
shares which was issued in connection with the aforementioned repricing of
options pursuant to which the option for 600,000 shares received by Mr.
Turner in fiscal 1994 was surrendered. As of January 31, 1995, after
giving effect to the options granted to Mr. Turner in fiscal 1994 and
fiscal 1995 and the related surrenders of options, Mr. Turner held options
to purchase an aggregate of 1,050,000 shares of the Company's Common
Stock.
(7) Mr. Ensign joined the Company and assumed the positions of Vice Chairman
of the Board and Chief Operating Officer on June 1, 1995.
(8) This amount represents compensation payable to Mr. Ensign accrued at Gold
Strike prior to the Company's acquisition of the Gold Strike Entities,
described under "Certain Transactions," and paid by the Company to Mr.
Ensign following the Company's acquisition of the Gold Strike Entities on
June 1, 1995.
(9) Mr. Schaeffer joined the Company and assumed the positions of President,
Chief Financial Officer and Treasurer on June 1, 1995.
(10) Of this amount, $100,000 represents compensation payable to Mr. Schaeffer
accrued at Gold Strike prior to the Company's acquisition of the Gold
Strike Entities, described under "Certain Transactions," and paid by the
Company to Mr. Schaeffer following the Company's acquisition of the Gold
Strike Entities on June 1, 1995. The balance, $2,900, represents insurance
premiums paid by the Company with respect to life insurance for the
benefit of Mr. Schaeffer.
(11) Mr. Richardson joined the Company and assumed the position of Executive
Vice President on June 1, 1995.
(12) This amount represents compensation payable to Mr. Richardson accrued at
Gold Strike prior to the Company's acquisition of the Gold Strike
Entities, described under "Certain Transactions," and paid by the Company
to Mr. Richardson following the Company's acquisition of the Gold Strike
Entities on June 1, 1995.
(13) Mr. Sullivan served as Executive Vice President and Chief Operating
Officer until June 1, 1995 when he relinquished those positions and
assumed the position of Senior Vice President.
(14) Of this amount, $11,483 represents insurance premiums paid by the Company
with respect to life insurance for the benefit of Mr. Sullivan and $5,549
represents disability insurance premiums paid by the Company on Mr.
Sullivan's behalf.
(15) Represents a net increase during the year of only 150,000 shares. The
balance of these shares are covered by options granted to Mr. Sullivan
upon his surrender for cancellation of other options to purchase an
aggregate of 315,000 shares.
10
OPTIONS GRANTED IN THE LAST FISCAL YEAR
The following table provides information related to options to purchase the
Company's Common Stock granted to the named executive officers during the
fiscal year ended January 31, 1996. The Company has never granted any stock
appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
- --------------------------------------------------------------------------- ---------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE(2) EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE(3) 5% ($) 10% ($)
---- ---------- ------------ -------- ---------- ---------- ----------
Clyde T. Turner......... 2,000,000(4) 53.3 27.875(5) 3/19/02 34,815,104 68,902,154
Michael S. Ensign....... 0 N/A N/A N/A N/A N/A
Glenn W. Schaeffer...... 500,000(6) 13.3 25.25(7) 3/19/05 14,163,920 29,518,504
200,000(8) 5.3 30.30(9) 3/19/05 4,655,568 10,797,402
200,000(10) 5.3 32.82(11) 3/19/05 4,150,568 10,292,402
William A. Richardson... 0 N/A N/A N/A N/A N/A
Kurt D. Sullivan........ 0 N/A N/A N/A N/A N/A
- --------
(1) Illustrates the value that might be realized upon the exercise of an option
immediately prior to the expiration of its term, assuming specified
compounded rates of appreciation in the value of the Company's Common Stock
over the term of the option. Assumed rates of appreciation are not
necessarily indicative of future stock performance.
(2) Options may be exercised with cash, other shares of the Company's Common
Stock or a combination of cash and such shares at the discretion of the
committee which administers the Company's stock option plans.
(3) Options are subject to termination prior to their stated expiration dates
in certain instances relating to termination of employment.
(4) Mr. Turner paid the Company a purchase price of $1 per share, or an
aggregate of $2,000,000, in consideration for the Company's grant of the
option to purchase these shares. Such option becomes exercisable as to
666,667 shares on June 1, 1996, as to an additional 666,667 shares on June
1, 1997 and as to an additional 666,666 shares on June 1, 1998.
(5) This exercise price represents 110% of the last reported sale price of the
Company's Common Stock on the New York Stock Exchange Composite Tape on the
date of grant.
(6) The option to purchase these shares becomes exercisable as to 100,000
shares on June 1, 1996, and as to an additional 100,000 shares on June 1 of
each of the four succeeding years.
(7) This exercise price represents the last reported sale price of the
Company's Common Stock on the New York Stock Exchange Composite Tape on the
date of grant.
11
(8) The option to purchase these shares becomes exercisable as to 40,000 shares
on June 1, 1996, and as to an additional 40,000 shares on June 1 of each of
the four succeeding years.
(9) This exercise price represents 120% of the last reported sale price of the
Company's Common Stock on the New York Stock Exchange Composite Tape on the
date of grant.
(10) The option to purchase these shares becomes exercisable as to 40,000
shares on June 1, 1996, and as to an additional 40,000 shares on June 1 of
each of the four succeeding years.
(11) This exercise price represents 130% of the last reported sale price of the
Company's Common Stock on the New York Stock Exchange Composite Tape on
the date of grant.
OPTION EXERCISES IN LAST FISCAL YEAR
The following table provides information related to options to purchase the
Company's Common Stock exercised by the named executive officers during the
fiscal year ended January 31, 1996 and the number and value of options to
purchase such Common Stock held as of the end of such fiscal year. The Company
does not have any outstanding stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
FY-END(#) SARS AT FY-END($)(2)
SHARES ACQUIRED ------------------------- -------------------------
NAME ON EXERCISE(#) VALUE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------------- ----------- ------------- ----------- -------------
Clyde T. Turner......... 0 N/A 750,000 2,300,000(3) 7,968,750 9,187,500(3)
Michael S. Ensign....... 0 N/A 0 0 N/A N/A
Glenn W. Schaeffer...... 0 N/A 0 900,000 N/A 3,627,500
William A. Richardson... 0 N/A 0 0 N/A N/A
Kurt D. Sullivan........ 0 N/A 215,000 100,000 2,284,375 1,062,500
- --------
(1) Represents, with respect to each share purchased, the market value of such
share on the date of purchase (based on the average of the reported high
and low sale prices for the Common Stock on the New York Stock Exchange on
the date of exercise), less the exercise price paid for such share.
(2) Represents, with respect to each share, the closing price for the Common
Stock on the New York Stock Exchange on January 31, 1996, less the exercise
price payable for such share (and, in the case of the option for which Mr.
Turner paid a purchase price as described in Note 3, less the purchase
price paid for such option).
(3) Includes 2,000,000 shares which may be acquired upon the exercise of an
option for which a $2,000,000 purchase price was previously paid.
COMPENSATION OF DIRECTORS
The directors of the Company who are not otherwise employees of the Company
receive compensation for their services as follows: (i) $20,000 per year; (ii)
$1,000 for each meeting of the Board of Directors attended; (iii) $500 ($750 in
the case of the committee chairman) for each meeting of a committee of the
Board attended on the same date as a Board meeting; and (iv) $1,000 ($1,500 in
the case of the committee chairman) for each meeting of a committee of the
Board attended on a date when there is no Board meeting. All of the Company's
directors are entitled to reimbursement of the out-of-pocket expenses incurred
in attending Board and committee meetings.
12
Pursuant to the Company's 1991 Stock Incentive Plan (the "1991 Plan"), each
director of the Company who is not an employee of the Company and has not
previously been an employee of the Company is entitled to receive annually on
the date of each annual meeting of stockholders during the term of the 1991
Plan following which he continued to serve as a director of the Company, as a
formula award, an option to purchase 7,500 shares of the Company's Common
Stock. Pursuant to the terms of the 1991 Plan, the original formula awards
granted in 1992 were multiplied times the number of years the optionee had
served as a director, resulting in original grants as follows: Arthur M.
Smith--67,500; Carl F. Dodge--30,000; and Fred W. Smith--7,500. The exercise
price per share for each option granted as a formula award is the average of
the Fair Market Values (as defined) for the fifth (5th) through the ninth (9th)
"business days" following the date of grant. For purposes of the preceding
sentence, "Fair Market Value" is defined in the 1991 Plan as the mean of the
high and low per share trading prices for the Common Stock as reported in The
Wall Street Journal for New York Stock Exchange Composite Transactions. A
formula award becomes exercisable when, and only if, the optionee continues to
serve as a director until the first annual meeting of the Company's
stockholders held following the year in which the award is granted. Unless
forfeited in accordance with the terms of the 1991 Plan, a formula award
becomes exercisable as to 40% of the shares subject thereto after one year, as
to 70% of the shares subject thereto after two years, and as to 100% of the
shares subject thereto after three years and, unless earlier exercised or
forfeited, remains exercisable for a period of ten years from the date of the
grant.
Effective January 1, 1995, the Company adopted a Retirement Plan for Outside
Directors (the "Directors' Retirement Plan"). The purpose of the Directors'
Retirement Plan is to provide directors of the Company who are not employees of
the Company with post-retirement benefit payments in recognition of their
service to the Company and to ensure that the overall compensation arrangements
for non-employee directors are adequate to attract and retain highly qualified
individuals to serve the Company. Pursuant to the Directors' Retirement Plan,
each director of the Company who is not an employee of the Company on the date
elected to its Board of Directors and is not otherwise receiving retirement
benefits from the Company will become eligible to receive retirement benefits
thereunder upon completion of at least five years of service as a director of
the Company if retirement occurs at or after age 72 or upon completion of at
least 10 years of service as a director of the Company if retirement occurs
prior to age 72. Each non-employee director of the Company eligible to
participate in the Directors' Retirement Plan will be entitled, following the
later of attainment of age 65 or actual retirement from the Company's Board of
Directors, to receive an annual retirement benefit equal to 100% of the amount
of compensation payable to such director for services rendered to the Company
as a member of its Board of Directors (excluding meeting fees, committee
chairman fees, travel expenses and any consulting fees), as in effect at the
time of such director's retirement. Benefits will be paid under the Directors'
Retirement Plan for the greater of five years or the number of years of service
on the Company's Board of Directors for each eligible director who served as a
director of the Company for less than 10 years at such director's date of
retirement. For each eligible director with more than 10 years of service as a
director of the Company, benefits under the Directors' Retirement Plan will be
paid for life. Benefits under the Directors' Retirement Plan will be paid to
the surviving spouse of any eligible director who dies after retirement from
the Company's Board of Directors, whether or not then receiving benefits
thereunder, for a period not to exceed 10 years up to the number of years of
such director's service on the Company's Board of Directors. The Company's
Board of Directors may terminate the Directors' Retirement Plan at any time.
Following any such termination, benefits thereunder will be paid, or will
continue to be paid, to any eligible director who retired from the Company's
Board of Directors prior to the date of termination.
13
EMPLOYMENT AGREEMENTS
In connection with its acquisition of the Gold Strike Entities (as defined),
described under "Certain Transactions", the Company entered into employment
agreements with certain of its executive officers, including Clyde T. Turner
and Kurt D. Sullivan, and certain of the Gold Strike executives, including
Michael S. Ensign, Glenn W. Schaeffer and William A. Richardson, who became
executive officers of the Company upon the consummation of the acquisition. In
addition to the employment agreements with the Company's named executive
officers, the Company also entered into employment agreements with two of its
other officers and with two other Gold Strike executive officers who became
executive officers of the Company upon the consummation of the acquisition.
Each such employment agreement provides for an initial base salary (in the
cases of Messrs. Turner, Ensign, Schaeffer and Richardson, with a mandatory
increase of 5% per year during the term of the agreement) plus any
discretionary increases as may be determined by the Board of Directors. In
addition, each such agreement provides for the employee's eligibility to
receive an annual bonus under the bonus plan described under "Executive
Officers Bonus Plan," below, established by the Company for its senior
executive officers to provide for the payment of bonus compensation based upon
financial or other performance criteria which is intended to conform to the
requirements that apply to "qualified performance based compensation" under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). Each agreement further provides that the targeted annual bonus
shall not be less than 100% of the employee's then current base salary.
Additionally, each agreement provides that upon the termination of employment
by the employee upon the occurrence of certain events, including a "Change in
Control" or for other "Good Reason" or by the Company without "Cause," as each
such term is defined in the agreement (each, a "Designated Termination") or the
Company's failure to consent to any automatic one-year extension of the
agreement (or any automatic three-year extension in the case of Mr. Turner's
agreement), the Company will be obligated to pay the employee's then-current
base salary and targeted bonus (plus any other amounts due to, or for the
benefit of, the employee) for the greater of the remainder of the agreement's
then-current term or a period of 12 months (or a period of 36 months in the
case of Mr. Turner's agreement) and all options to purchase the Company's
Common Stock held by the employee will become exercisable immediately.
Mr. Turner's employment agreement provides for his employment as the
Company's Chairman of the Board and Chief Executive Officer for an initial term
of three years which expires on May 31, 1998, with subsequent automatic three-
year renewal terms subject to early termination by either Mr. Turner or the
Company with six months' notice prior to renewal. The agreement also provides
for an initial base salary and an initial annual target bonus in the amount of
$800,000 each, increasing to $840,000 in the current year.
Mr. Ensign's employment agreement provides for his employment as the
Company's Vice Chairman of the Board and Chief Operating Officer for an initial
term of three years which expires on May 31, 1998, with subsequent one-year
renewal terms, subject to early termination by either Mr. Ensign or the Company
with six months' notice prior to renewal. The agreement also provides for an
initial base salary and an initial annual target bonus in the amount of
$625,000 each, increasing to $656,250 in the current year.
Mr. Schaeffer's employment agreement provides for his employment as the
Company's President, Chief Financial Officer and Treasurer for an initial term
of three years which expires on May 31, 1998, with subsequent one-year renewal
terms, subject to early termination by either Mr. Schaeffer or the Company with
six months' notice prior to renewal. The agreement also provides for an initial
base salary and an initial annual target bonus in the amount of $600,000 each,
increasing to $630,000 in the current year.
Mr. Richardson's employment agreement provides for his employment as the
Company's Executive Vice President for an initial term of three years which
expires on May 31, 1998, with subsequent one-year renewal
14
terms, subject to early termination by either Mr. Richardson or the Company
with six months' notice prior to renewal. The agreement also provides for an
initial base salary and an initial annual target bonus in the amount of
$625,000 each, increasing to $656,250 in the current year.
Mr. Sullivan's employment agreement provides for his employment as the
Company's Senior Vice President--Operations for an initial term of three years
which expires on May 31, 1998, with subsequent one-year renewal terms, subject
to early termination by either Mr. Sullivan or the Company with six months'
notice prior to renewal. The agreement also provides for an initial base salary
and an initial annual target bonus in the amount of $400,000 each, and the
guarantee of 50% of Mr. Sullivan's target bonus during the first year of the
agreement's term.
Tony Alamo is employed as a Senior Vice President--Operations of the Company
under an employment agreement with an initial term of three years which expires
on May 31, 1998, with subsequent one-year renewal terms, subject to early
termination by either Mr. Alamo or the Company with six months' notice prior to
renewal. Mr. Alamo's employment agreement provides for an initial base salary
and an initial annual target bonus in the amount of $400,000 each.
Gregg H. Solomon is employed as a Senior Vice President--Operations of the
Company under an employment agreement with an initial term of three years which
expires on May 31, 1998, with subsequent one-year renewal terms, subject to
early termination by either Mr. Solomon or the Company with six months' notice
prior to renewal. Mr. Solomon's employment agreement provides for an initial
base salary and an initial annual target bonus in the amount of $400,000 each.
Mike Sloan is employed by the Company as a Senior Vice President and General
Counsel under an employment agreement with an initial term of three years which
expires on May 31, 1998, with subsequent one-year renewal terms, subject to
early termination by either Mr. Sloan or the Company with six months' notice
prior to renewal. Mr. Sloan's employment agreement provides for an initial base
salary and an initial annual target bonus in the amount of $300,000 each.
Daniel N. Copp is employed as the Company's Senior Vice President--Corporate
Communications under an employment agreement with a current term expiring in
1998 which provides for a current base salary and annual target bonus in the
amount of $200,000 each. The Company and Mr. Copp have entered into a new
agreement pursuant to which Mr. Copp's current employment agreement will
terminate effective May 31, 1996 and he will assume the position of a
consultant to the Company at the same salary and bonus provided for in his
current agreement. The new agreement provides for a term of one year, subject
to Mr. Copp's right to terminate the agreement at an earlier date.
EXECUTIVE OFFICER BONUS PLAN
On March 19, 1995, the Board of Directors adopted an Executive Officer Bonus
Plan (the "Bonus Plan") which was approved by the Company's stockholders on
June 22, 1995. The Bonus Plan was adopted for the purpose of implementing the
bonus compensation provisions of the Company's employment agreements with its
officers, including the ones described under "Employment Agreements", above.
The Bonus Plan is a performance bonus plan which is designed to provide
certain senior executives with incentive compensation based upon the
achievement of previously established performance goals. The Bonus Plan is
intended to provide an incentive for superior work and to motivate
participating officers toward even
15
higher achievement and business results, to tie their goals and interests to
those of the Company and its stockholders and to enable the Company to attract
and retain highly qualified executive officers. Executive officers at the level
of vice president or above may be eligible to participate in the Bonus Plan.
Prior to, or at the time of, establishment of the performance objectives for a
performance period, which will generally be the Company's fiscal year, the
Committee designated under the Bonus Plan (initially the Compensation Committee
(the "Committee")) will designate the specific executive officers who will
participate in the Bonus Plan for such performance period. Messrs. Turner,
Ensign, Richardson and Schaeffer were designated to participate in the Bonus
Plan for the fiscal year of the Company ended January 31, 1996.
The Bonus Plan is designed to comply with Section 162(m) of the Internal
Revenue Code, which limits the tax deductibility by the Company of compensation
paid to certain officers named in the compensation tables of its proxy
statement to $1,000,000 in any fiscal year of the Company. At the beginning of
each performance period and subject to the requirements of Section 162(m), the
Committee will establish performance goals, specific performance objectives and
objectively determinable computation formulae or methods for determining each
participant's bonus under the Bonus Plan for such performance period. The
performance goals may include any one or more of the following corporate
business criteria: pre-tax income, operating income, cash flow, earnings per
share, return on equity, return on invested capital or assets, cost reductions
and savings, return on revenues, or productivity. In addition, to the extent
consistent with the goal of providing for deductibility under Section 162(m),
performance goals may include a participant's attainment of personal objectives
with respect to any of the foregoing performance goals or implementing policies
and plans, negotiating transactions and sales, developing long-term business
goals or exercising managerial responsibility.
At or after the end of each performance period, the Committee is required by
the terms of the Bonus Plan to certify in writing whether the previously
established performance goals and objectives have been satisfied in such
performance period. The actual bonus award for any participant for such
performance period shall then be determined based upon the previously
established computation formulae or methods. In no event will any bonus award
for any plan year exceed the lesser of 150% of the participant's annual base
salary as in effect at the beginning of the plan year or $1,500,000. The
Committee has no discretion to increase the amount of any participant's bonus
as so determined, but may reduce the amount of, or totally eliminate, such
bonus if the Committee determines, in its absolute and sole discretion, that
such a reduction or elimination is appropriate in order to reflect the
participant's performance or unanticipated factors. In no event will the
aggregate amount of all bonuses payable in any plan year under the Bonus Plan
exceed 10% of the Company's average annual income before taxes during the
preceding five fiscal years of the Company.
Approved awards under the Plan are payable in cash as soon as is practicable
after the end of each performance period and after the Committee has certified
in writing that the relevant performance goals were achieved. Awards that are
otherwise payable to a participant who is not employed by the Company as of the
last day of a performance period will be prorated or eliminated pursuant to
specified provisions of the Bonus Plan. A participant will recognize ordinary
taxable income upon receipt of payments under the Bonus Plan.
16
REPORT OF THE BOARD OF DIRECTORS AND THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
INTRODUCTION
Since the Board of Directors consolidated two predecessor committees in 1994,
the Company's policies and procedures relating to the compensation of its
executive officers and the respective levels and forms of their compensation,
including awards made pursuant to the Company's stock option and stock
incentive plans (collectively the "Plans"), have, except as indicated below,
been the responsibility of a Consolidated Compensation and Stock Option
Committee (the "Compensation Committee"). The current members of the
Compensation Committee are Tony Coelho, Chairman, Arthur M. Smith and Fred W.
Smith, each of whom was a member of the committee throughout the fiscal year
ended January 31, 1996. None of the Compensation Committee's current members,
who constitute the only persons who served on the committee during fiscal 1996,
has ever been an officer or employee of the Company. Each of the Compensation
Committee's current members is a "disinterested person" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934.
The employment agreements described under "Employment Agreements", above, and
the Bonus Plan described under "Executive Officer Bonus Plan", above (the
"Bonus Plan"), were approved by the Board of Directors on March 19, 1995 in
connection with the Board's approval of the Company's June 1995 acquisition of
the Gold Strike Entities, described under "Certain Transactions". At the time
of such approvals, the Board of Directors consisted of seven members, including
the aforementioned members of the Compensation Committee and Clyde T. Turner,
Kurt D. Sullivan, William N. Pennington and Carl F. Dodge. The only persons who
served on the Board of Directors during the fiscal year ended January 31, 1996
and participated in the aforementioned decisions while also serving as an
officer or employee of the Company were Clyde T. Turner and Kurt D. Sullivan.
Mr. Turner served as Chairman of the Board and Chief Executive Officer of the
Company for all of fiscal 1996 and also served as President of the Company
until June 1, 1995. From the beginning of fiscal 1996 until June 1, 1995, Mr.
Sullivan served as Executive Vice President and Chief Operating Officer of the
Company and for the balance of fiscal 1996 he served as a Senior Vice
President--Operations of the Company. William N. Pennington was an officer of
the Company until his retirement in 1988.
COMPENSATION POLICIES
The Company's current policies with respect to executive compensation are as
follows:
1. To establish compensation programs designed to attract and retain
highly-qualified executives.
2. To provide motivation to the Company's executives through compensation
that is correlated to the performance of the individual and to the
performance of the Company.
3. To compensate executives in a manner that rewards both current
performance and longer-term performance.
4. To provide executives with a financial interest in the success of the
Company similar to the interests of the Company's stockholders.
Consistent with the aforementioned policies, the Company's compensation of
its executive officers during the year ended January 31, 1996 involved a
combination of salary and cash bonuses to reward short-term performance. It
also involved grants of stock options to four individuals, including the
Company's Chief Executive Officer, to encourage and reward longer-term
performance. Such options were granted in
17
March 1995 pursuant to the Company's 1995 Special Stock Option Plan (the "1995
Plan"), subject to approval of the 1995 Plan by the Company's stockholders,
which was obtained on June 22, 1995. Although the only awards made pursuant to
the Plans during fiscal 1996 were stock options, under the terms of the
Company's 1991 Stock Incentive Plan, the Compensation Committee may include in
future awards grants of restricted stock or performance shares in combination
with or in addition to stock options.
The base salaries of the Company's executive officers with whom the Company
entered into the employment agreements described under "Employment Agreements",
above, including that of the Chief Executive Officer (discussed below), were
approved by the Board of Directors (and the base salaries of the Company's
other executive officers were fixed by the Compensation Committee) without
reference to any specific criteria, at levels intended to make such officers
dependent for an estimated 50% of their compensation on bonuses earned over the
year, assuming their receipt of bonuses approximating their target bonuses.
Bonus awards for fiscal 1996 to executive officers at the level of vice
president or above whose total cash compensation could exceed $1 million in
fiscal 1996 were made pursuant to the Bonus Plan, which was approved by the
Company's stockholders on June 22, 1995. Such bonuses were determined by the
adjustment of the target bonuses set forth in the respective officers'
employment agreements pursuant to a formula established by the Compensation
Committee based solely on a comparison of the Company's operating income for
the period from August 1, 1995 through January 31, 1996 (the "Performance
Period") with predetermined target levels of operating income established for
the Performance Period. Bonus awards to executives not covered by the Bonus
Plan are currently paid quarterly from a bonus pool to which the Company
allocates an amount for each of its properties equal to a predetermined
percentage of the amount by which such property's operating income for the
period exceeds a predetermined base amount. No other specific measure of
corporate performance is considered in determining the amount allocated to the
bonus pool. The aforementioned percentages and base amounts of operating income
are generally established prior to the applicable period, but are subject to
adjustment from time-to-time in such manner as the Compensation Committee
determines in its discretion to reflect market conditions and other factors
determined to have impacted the Company's performance. The allocation of bonus
payments among the Company's executives who participate in this bonus pool is
determined based on the Compensation Committee's subjective evaluation of such
executives' respective levels of supervisory or management responsibilities and
individual performances.
The Compensation Committee's awards under the Plans (which, in fiscal 1996,
consisted solely of stock options pursuant to the 1995 Plan) are intended to
provide executives with increased motivation and incentive to exert their best
efforts on behalf of the Company by enlarging their personal stake in the
Company's success through the opportunity to acquire an increased stock
ownership in the Company and to benefit from appreciation in the value of the
Company's stock. Awards made pursuant to the Plans in fiscal 1996 were based on
the Compensation Committee's subjective evaluation of the respective levels of
supervisory or management responsibilities of recipients of awards and their
potential contribution to the Company's long-term success. In arriving at its
decisions regarding awards pursuant to the Plans, the Compensation Committee
considers, among other factors, the respective numbers and terms of the options
already held by the Company's executive officers. The Company's past
performance was not a factor in the Compensation Committee's awards of stock
options during fiscal 1996. The practice of the Compensation Committee has been
to issue all stock options at exercise prices equal to (and, in the case of
certain of the options granted in fiscal 1996, above) the market value of the
Company's Common Stock on the date of the grant, thus linking
18
the value of such options to the subsequent performance of the Company's Common
Stock and thereby giving the holders of the options an interest in the
Company's performance similar to that of its stockholders.
POLICY REGARDING DEDUCTIBILITY OF COMPENSATION FOR TAX PURPOSES--COMPLIANCE
WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to a public company for compensation over $1 million
paid to its chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limitation if certain requirements are met. The
Compensation Committee's current policy is to structure the performance-based
portion of the compensation of the Company's executive officers (currently
consisting of stock option grants and cash bonuses) in a manner that complies
with Section 162(m) whenever, in the judgment of the Compensation Committee, to
do so would be consistent with the objectives of the compensation plan under
which the compensation would be payable. The options and bonuses awarded in
fiscal 1996 to the Company's executive officers were pursuant to plans approved
by the Company's stockholders which are intended to make the awards pursuant to
such plans fully deductible under Section 162(m).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Clyde T. Turner, the Company's Chief Executive Officer
who served in such capacity throughout the year ended January 31, 1996,
consisted of salary (as specified in his employment agreement), a cash bonus
(determined based on the target bonus specified in his employment agreement, as
adjusted in accordance with the Bonus Plan administered by the Compensation
Committee) and stock options awarded by the Compensation Committee. The base
salary and target bonus for fiscal 1996 specified in Mr. Turner's employment
agreement, were fixed by the Board of Directors on a subjective basis, taking
into account his management responsibilities, at levels intended to make Mr.
Turner dependent for an estimated 50% of his cash compensation for fiscal 1996
on the bonus earned under the Bonus Plan, assuming his receipt of a bonus for
the period approximating his target bonus. Such base salary and target bonus
bear no specific relationship to any particular measure of the Company's
performance. The bonus paid to Mr. Turner for fiscal 1996 was determined by
adjustment of the aforementioned target bonus pursuant to a formula established
by the Compensation Committee based solely on a comparison of the Company's
operating income for the Performance Period with predetermined target levels of
operating income established for the Performance Period. The Compensation
Committee believes that the measure of operating performance utilized in fiscal
1996 to determine the amount of bonuses under the Bonus Plan, including that of
Mr. Turner, is more appropriate than criteria based upon the market price of
the Company's Common Stock. This view is based on the Compensation Committee's
belief that while the performance of the Company's Common Stock over a longer
period is a meaningful measure of the Company's performance, over the period of
a single fiscal year, an officer's annual compensation should not be so closely
tied to the vagaries of the stock market. In order to provide an added long-
term incentive element to Mr. Turner's total compensation package, the
Compensation Committee, in March 1995, awarded Mr. Turner an option to purchase
2,000,000 shares of the Company's Common Stock. The option was granted at an
exercise price equal to 110% of market value on the date of the grant and with
a required purchase price for the option of $1 for each share covered by the
option, representing an aggregate purchase price for the option of $2,000,000.
The above-market exercise price and the purchase price required to acquire the
option were intended to link the value Mr. Turner can realize from the award to
the subsequent performance of the Company's Common Stock. In
19
order to further link the award to the long-term performance of the Common
Stock, the option, by its terms, becomes exercisable in three annual
installments, with the initial installment becoming exercisable on June 1,
1996, the first anniversary of the Company's acquisition of the Gold Strike
Entities described under "Certain Transactions". The terms of Mr. Turner's
option, including the number of shares which may be purchased pursuant thereto,
were determined by the Compensation Committee based on its subjective
evaluation of Mr. Turner's level of management responsibilities and his
potential contribution to the Company's long-term success, and did not bear a
specific relationship to any particular measure of the Company's performance.
COMPENSATION
COMMITTEE BOARD OF DIRECTORS
Tony Coelho, Chairman Clyde T. Turner, Chairman
Arthur M. Smith Tony Coelho
Fred W. Smith Carl F. Dodge
William N. Pennington
Arthur M. Smith
Fred W. Smith
Kurt D. Sullivan
20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Tony Coelho,
Chairman, Fred W. Smith and Arthur M. Smith, each of whom has served since
prior to the beginning of the last fiscal year. No other person has served on
the Compensation Committee since prior to the beginning of the last fiscal
year. None of the aforementioned members of the Compensation Committee is an
officer or other employee, or former officer, of the Company or any subsidiary
of the Company.
The Board of Directors, at the time it took the actions with respect to
executive compensation described under "Report of the Board of Directors and
the Compensation Committee on Executive Compensation", consisted of seven
members, including the aforementioned members of the Compensation Committee and
Clyde T. Turner, Kurt D. Sullivan, William N. Pennington and Carl F. Dodge. The
only persons who served on the Board of Directors during the fiscal year ended
January 31, 1996 and participated in the aforementioned decisions while also
serving as an officer or employee of the Company were Clyde T. Turner and Kurt
D. Sullivan. Mr. Turner served as Chairman of the Board and Chief Executive
Officer of the Company for all of fiscal 1996 and also served as President of
the Company until June 1, 1995. From the beginning of fiscal 1996 until June 1,
1995, Mr. Sullivan served as Executive Vice President and Chief Operating
Officer of the Company and for the balance of fiscal 1996 he served as a Senior
Vice President--Operations of the Company. William N. Pennington was an officer
of the Company until his retirement in 1988.
Effective January 1, 1994, the Company and Scores, Inc. entered into an
agreement pursuant to which Scores, Inc. subleases 50% of the aircraft hangar
space leased by the Company from an unaffiliated third party and for which the
Company paid in 1994 and 1995, and is obligated to pay in 1996, rent at a
monthly base rate of $8,894, $9,339 and $9,806, respectively, plus allocable
utility costs. The agreement, which is for a term of three years, requires
Scores, Inc. to pay the Company rent at the rate of $5,000 per month. Fred W.
Smith, a director of the Company, holds a one-third ownership interest in
Scores, Inc. The transaction was reviewed and approved by the Audit Committee
of the Company's Board of Directors, with Fred W. Smith, then a member of the
Audit Committee, abstaining.
During the fiscal year ended January 31, 1996, certain of the Company's
properties purchased an aggregate of $114,334 of bakery products from an entity
owned by Steve M. Pennington, the son of William N. Pennington. The
transactions were reviewed and ratified by the Audit Committee of the Company's
Board of Directors.
COMPARATIVE STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return (assuming reinvestment
of dividends) from January 31, 1991 to January 31, 1996, on the Company's
Common Stock with (i) the Standard & Poor's 500 Stock Index (the "S&P 500
Index"), (ii) the Dow Jones Industry Group (Casinos) (the "Industry Group") and
(iii) an industry peer group which is comprised of the following gaming
companies which were publicly-traded during such period: Aztar Corporation,
Elsinore Corp., Mirage Resorts, Incorporated, Santa Fe Gaming (formerly Sahara
Resorts), Sands Regent and Showboat Inc. (the "Original Peer Group"). The graph
assumes an investment of $100 on January 31, 1991 in each of the Company's
Common Stock, the stocks comprising the S&P 500 Index, the stocks comprising
the Industry Group and the stocks comprising the Original Peer Group.
21
The historical stock price performance of the Company's Common Stock shown
on the graph below is not necessarily indicative of future price performance.
The Company has elected, beginning this year, to utilize the Industry Group
in lieu of the Original Peer Group composed by the Company. Management
believes the comparison of the Company to the Industry Group is more
meaningful since the Industry Group includes 50 gaming companies, compared
with the six that currently comprise the Original Peer Group. In addition, the
Industry Group is utilized for comparison by a number of the other large
gaming companies. Thus, the Company's utilization of the Industry Group will
provide a comparison which is more consistent with the practices of other
large gaming companies.
The graph below shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement or any portion
hereof into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934 and shall not otherwise be deemed filed under
such Acts.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH APPEARS HERE]
1/31/91 1/31/92 1/31/93 1/31/94 1/31/95 1/31/96
- --------------------------------------------------------------------------------
Circus Circus $100 $141 $204 $206 $149 $177
- --------------------------------------------------------------------------------
S&P 500 100 123 136 153 154 214
- --------------------------------------------------------------------------------
Industry Group 100 143 232 317 215 254
- --------------------------------------------------------------------------------
Original Peer Group 100 134 201 254 209 333
- --------------------------------------------------------------------------------
Source: Media General Financial Services, Inc., Richmond, Virginia.
22
INFORMATION CONCERNING COMMITTEES OF THE BOARD OF DIRECTORS
Among the current committees of the Company's Board of Directors are an Audit
Committee, a Compensation Committee, a Directors' Nominating Committee and a
Compliance Review Committee. The Compensation Committee was created in 1994 as
a result of the consolidation of the Board's predecessor compensation and stock
option committees.
Presently, the members of the Audit Committee are Arthur M. Smith, Chairman,
Tony Coelho and Carl F. Dodge. The Audit Committee held five (5) meetings
during the fiscal year ended January 31, 1996. The Audit Committee reports
periodically to the Board of Directors concerning the functions of the
committee. The functions of the Audit Committee include (i) reviewing and
making recommendations to the Board of Directors with respect to the engagement
of an independent accounting firm to audit the Company's financial statements
for the then current fiscal year; (ii) instructing the certified public
accountants to expand the scope and extent of the annual audits of the Company
into areas of any concern to the Audit Committee, and, at its discretion,
directing other special investigations to insure the objectivity of the
financial reporting of the Company; (iii) reviewing the reports submitted by
the certified public accountants and reporting thereon to the Board of
Directors with such recommendations as the Audit Committee may deem
appropriate; (iv) meeting with such officers and department managers of the
Company as the Audit Committee deems necessary in order to determine the
adequacy of the Company's accounting principles and financial and operating
policies, controls and practices, its public financial reporting policies and
practices, and the results of the Company's annual audit; (v) meeting
periodically with members of the Company's internal audit department and
reviewing the reports of such department; (vi) conducting inquiries into any of
the foregoing, the underlying and related facts, including such matters as the
conduct of the Company's personnel, the integrity of the Company's records, the
adequacy of the procedures and the legal and financial consequences of such
facts; and (vii) retaining and deploying such professional assistance,
including outside counsel and auditors, as the Audit Committee deems necessary
or appropriate, in connection with the exercise of its powers.
Presently, the members of the Compensation Committee are Tony Coelho,
Chairman, Arthur M. Smith and Fred W. Smith. The Compensation Committee held a
total of five (5) meetings during the fiscal year ended January 31, 1996. The
Compensation Committee reports periodically to the Board of Directors
concerning the functions of the committee. The Compensation Committee's
functions include (i) reviewing on a periodic basis the compensation of the
Company's officers; (ii) recommending to the Board of Directors appropriate
levels of compensation, including retirement, medical and incentive programs,
for the Company's officers; and (iii) retaining such professional consultants
or other assistance as the committee deems necessary or appropriate in
connection with the performance of its duties. The Compensation Committee's
functions also include administration of the Company's stock option, stock
incentive and stock purchase warrant plans (collectively the "Plans"),
including the issuance of stock options or other awards pursuant to the Plans.
Presently, the members of the Directors' Nominating Committee are Fred W.
Smith, Chairman, Clyde T. Turner and Carl F. Dodge. The Directors' Nominating
Committee did not meet during the fiscal year ended January 31, 1996. The
function of this committee is to evaluate and present to the Board of
Directors, for its consideration, candidates to fill positions on the Board of
Directors. The Directors' Nominating Committee will consider individuals
recommended by stockholders. Any stockholder who wishes to recommend a
prospective nominee for the Board of Directors for the committee's
consideration may write
23
Mike Sloan, General Counsel, Circus Circus Enterprises, Inc., 2880 Las Vegas
Boulevard South, Las Vegas, Nevada 89109.
Presently, the members of the Compliance Review Committee are Carl F. Dodge,
Chairman, William A. Richardson and Kurt D. Sullivan. The Compliance Review
Committee held a total of two (2) meetings during the fiscal year ended January
31, 1996. The function of this committee is to assist the Board of Directors in
the implementation and administration of the Company's Gaming Compliance
Program which has been created for the purpose of (i) ensuring compliance with
gaming laws applicable to the business operations of the Company; (ii) advising
the Board of Directors of the Company of any gaming law compliance problems or
situations which may adversely affect the objectives of gaming control; and
(iii) performing due diligence in respect of proposed transactions and
associations.
The Board of Directors held a total of six (6) meetings during the fiscal
year ended January 31, 1996. During such fiscal year, each director attended
75% or more of the total number of meetings of the Board and the committees of
the Board on which he served that were held during the periods he served.
CERTAIN TRANSACTIONS
For information concerning transactions with entities in which Fred W. Smith
and a son of William N. Pennington own interests, see "Compensation Committee
Interlocks and Insider Participation."
On June 1, 1995, pursuant to an Agreement and Plan of Merger dated as of
March 19, 1995 (the "Merger Agreement") and an Exchange Agreement dated as of
March 19, 1995 (the "Exchange Agreement" and, together with the Merger
Agreement, the "Gold Strike Agreements"), the Company acquired from certain
entities and individuals (collectively the "Gold Strike Shareholders") a group
of affiliated entities (collectively the "Gold Strike Entities") which own the
Gold Strike Hotel & Gambling Hall and the Nevada Landing Hotel & Casino in
Jean, Nevada, the Railroad Pass Hotel & Casino in Henderson, Nevada, a 50%
interest in a joint venture partnership with an affiliate of Hyatt Development
Corporation which owns The Grand Victoria, a riverboat casino and land-based
entertainment complex in Elgin, Illinois (situated approximately 40 miles
northwest of downtown Chicago), a 50% interest in a joint venture partnership
with an affiliate of Mirage Resorts, Incorporated which is developing a 3,000-
room gaming resort near the south end of the Las Vegas Strip and certain other
assets (collectively the "Gold Strike Properties"). Pursuant to the Gold Strike
Agreements, the Company acquired the Gold Strike Entities (the "Acquisitions")
in exchange for its issuance of 16,291,551 shares of its Common Stock and the
issuance by a subsidiary of the Company of shares of the subsidiary's preferred
stock (the "Preferred Stock") which is convertible into an additional 793,156
shares of the Company's Common Stock, as well as the Company's payment of
approximately $12 million in cash and its assumption of approximately $165
million of debt. Of the consideration paid by the Company for the Gold Strike
Entities, the Gold Strike Shareholders who became directors and/or officers of
the Company upon the consummation of the acquisition received the following:
Michael S. Ensign (who became Vice Chairman of the Board and Chief Operating
Officer of the Company)--6,501,933 shares of the Company's Common Stock and
$4,795,193 in cash; Glenn W. Schaeffer (who became President, Chief Financial
Officer and Treasurer of the Company)--104,563 shares of Preferred Stock (which
is convertible into 407,971 shares of the Company's Common Stock) and $143,728
in cash; William A. Richardson (who became a Director and Executive Vice
President of the Company)--6,457,807 shares of the Company's Common Stock and
$4,762,650 in cash; Tony Alamo (who became a Senior Vice President--Operations
of the Company)--69,051 shares of Preferred Stock
24
(which is convertible into 269,415 shares of the Company's Common Stock) and
$94,915 in cash; David R. Belding (who became a Senior Vice President and
Secretary of the Company)--1,611,567 shares of the Company's Common Stock and
$1,188,535 in cash; Gregg Solomon (who became a Senior Vice President--
Operations of the Company)--9,943 shares of Preferred Stock (which is
convertible into 38,794 shares of the Company's Common Stock) and $13,668 in
cash; and Peter Simon (who became Senior Vice President--Development of the
Company)--1,482,241 shares of the Company's Common Stock and $1,093,157 in
cash. Upon consummation of the Acquisitions, certain of the Gold Strike
Shareholders, including Michael S. Ensign, Glenn W. Schaeffer, William A.
Richardson, David R. Belding, Tony Alamo, Peter A. Simon and Gregg H. Solomon,
entered into a five-year standstill agreement with the Company, and the Company
entered into a registration rights agreement providing for certain registration
rights with respect to the shares of the Company's Common Stock issued to the
Gold Strike Shareholders in the Acquisitions or upon the conversion of the
Preferred Stock.
Upon the consummation of the Acquisitions, the Board increased the number of
directors in Classes II and III from two (2) to three (3) and filled the
vacancies so created by the election of William A. Richardson and Michael S.
Ensign (who were designated by the Gold Strike Shareholders pursuant to the
Merger Agreement) as a Class II director and a Class III director,
respectively, in each case for the balance of the current term of such class.
Pursuant to the Merger Agreement, the Company also agreed to use its best
efforts to cause Messrs. Richardson and Ensign to be nominated to positions as
Class II and Class III directors, respectively, for the full terms of such
classes when they next stand for election in 1996 and 1997, respectively.
Pursuant to the terms of the Gold Strike Agreements, upon the closing of the
Acquisitions, the Company entered into employment agreements with certain of
its executive officers and certain of the Gold Strike executives who became
executive officers of the Company. For information concerning these employment
agreements, see "Management Remuneration--Employment Agreements". The Merger
Agreement also provided for the Company's recommendation to the Compensation
Committee of a grant to Clyde T. Turner, Glenn W. Schaeffer, Tony Alamo and
Gregg H. Solomon (the "Designated Optionees") of options to purchase 2,000,000,
900,000, 200,000 and 200,000 shares, respectively, of the Company's Common
Stock, subject to approval of the plan pursuant to which such options are
granted by the Company's stockholders (which was obtained on June 22, 1995) and
the closing of the Acquisitions (which occurred on June 1, 1995). For
additional information concerning the options granted to Messrs. Turner and
Schaeffer, see "Management Remuneration--Options Granted in the Last Fiscal
Year". Messrs. Alamo and Solomon each received an option which entitles him to
purchase 200,000 shares of the Company's Common Stock at a purchase price of
$25.25 per share (representing the fair market value of the Common Stock on the
date of the grant) which becomes exercisable as to 40,000 shares on June 1,
1996 and as to an additional 40,000 shares on June 1 of each of the next four
years. Unless earlier exercised or terminated, each such option expires on
March 19, 2005.
Circus Circus Casinos, Inc. ("CCC"), a wholly-owned subsidiary of the
Company, and Lakeview Company ("Lakeview"), a Nevada general partnership of
entities owned by Michael S. Ensign, William A. Richardson and David R.
Belding, have entered into a consulting agreement, dated as of June 1, 1995
(the "Consulting Agreement"), pursuant to which Lakeview is provided executive
level management services with respect to its Gold Strike Inn and Casino
located near Boulder City, Nevada (the "Lakeview Property"). For such services,
Lakeview is obligated to pay an annual consulting fee of $120,000, which is
intended to compensate the Company for the services rendered by its executive
officers and is subject to renegotiation if CCC determines that the executive
level of management services required pursuant to the Consulting Agreement
exceed contemplated levels. The Consulting Agreement also obligates Lakeview to
reimburse
25
CCC for compensation or other out-of-pocket expenses (other than the
compensation of executive officers of the Company and its subsidiaries)
associated with the services provided to the Lakeview Property pursuant to the
Consulting Agreement. The purpose of the Consulting Agreement is to compensate
the Company for any time devoted by Messrs. Ensign, Richardson or Belding to
the Lakeview Property, which they owned at the time of the Company's
acquisition of the Gold Strike Entities, described above, and retained because
of their intention to transfer this property to various members of their
respective families.
On March 5, 1995, the Company and William G. Bennett, the Company's former
Chairman of the Board and Chief Executive Officer, entered into a Settlement
Agreement (the "Settlement Agreement") for the purpose of settling a lawsuit
filed by the Company in the District Court, Clark County, Nevada (the "Court")
on January 17, 1995. The complaint had sought injunctive relief as well as
damages alleged to have been incurred as a result of Mr. Bennett's alleged
breach of his fiduciary duty to the Company by entering into an agreement (the
"Hacienda Agreement") to purchase the Hacienda Hotel & Casino, an alleged
corporate opportunity of the Company. Pursuant to the Settlement Agreement, Mr.
Bennett assigned to the Company all of his right, title and interest in the
Hacienda Agreement and resigned from his position as a director of the Company,
and an order of dismissal of the suit with prejudice was entered in the Court
on March 7, 1995. Pursuant to the Settlement Agreement, the Company also
deposited the sum of $5,000,000 with the escrow agent under the Hacienda
Agreement to permit the reimbursement of Mr. Bennett for his original down
payment of such amount. The Settlement Agreement included the Company's
disclaimer of any interest in purchasing any other property that Mr. Bennett
may subsequently acquire.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent auditors for the current fiscal year. Although not required by law
or otherwise, the selection is being submitted to the stockholders of the
Company as a matter of corporate policy for their approval. Arthur Andersen
LLP, an international firm of certified public accountants, has audited the
financial statements of the Company since 1980.
It is anticipated that a representative of Arthur Andersen LLP will be
present at the meeting and, if present, such representative will be given the
opportunity to make a statement if he desires to do so. It is also anticipated
that such representative will be available to respond to appropriate questions
from stockholders.
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL TO ELIMINATE CLASSIFIED BOARD OF DIRECTORS
The following stockholder proposal has been submitted to the Company for
action at the meeting by William Steiner, 4 Radcliff Drive, Great Neck, New
York 11024, the owner of 400 shares of the Company's Common Stock. The text of
the proposal is as follows:
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of directors previous elected."
26
STOCKHOLDER'S SUPPORTING STATEMENT
The election of directors is the primary avenue for stockholders to influence
corporate governance policies and to hold management accountable for it's
implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of
current management, which in turn limits management's accountability to
stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity
to register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
I am a founding member of the Investors Rights Association of America and I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE FOREGOING STOCKHOLDER
PROPOSAL
The election of directors by classes is a common practice that has been
adopted by many companies including approximately 293 of the 500 companies
comprising the Standard & Poor's 500 Stock Price Index. The practice of
electing directors by classes is also specifically permitted by the laws of
many states, including the State of Nevada.
The Board of Directors believes that the current division of the Company's
Board into three classes, with one class being elected each year for a three-
year term, provides the benefits of both continuity and stability in the
membership of the Board and its policies. At the same time, the Company's
directors are fully accountable to serve the stockholders' interests throughout
their terms of office, whether such terms are three years or one year.
Classification of the Board promotes greater continuity of experience since
it increases the likelihood that at all times at least a majority of the
Board's members will have experience and familiarity with the business affairs
and operations of the Company. This continuity of experience, in the opinion of
the Board, permits more effective long-term strategic planning which can
contribute to the creation of long-term value for the stockholders. The Board
also believes the ability to offer a new candidate for election to the Board
the prospect of serving for a three-year term, coupled with the opportunity to
benefit from the experience of the continuing directors, helps the Company to
attract prominent and well-qualified individuals who are able to commit the
time and resources to understand the Company and its operations. A classified
board also encourages unsolicited bidders for control of the Company to
initiate arm's-length discussions with the Board, which is in a position to
best represent the interests of all of the stockholders, and under such
circumstances affords the Board the opportunity to perform its fiduciary duty
to the stockholders in a more orderly manner.
27
At the same time, annual elections, pursuant to which approximately one-third
of the Board is elected each year, offer stockholders a regular opportunity to
renew and reinvigorate corporate decision-making while maintaining the basic
integrity of corporate policy year to year for the benefit of all who rely on
it.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL.
STOCKHOLDER PROPOSAL TO ELIMINATE NON-EMPLOYEE PENSION BENEFITS PLAN
The following stockholder proposal has been submitted to the Company for
action at the meeting by Kenneth Steiner, 14 Stoner Avenue, Suite 2-M, Great
Neck, New York 11021, the owner of 75 shares of the Company's Common Stock.
The text of the proposal is as follows:
"RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted pension
benefits and (ii) current non-employee directors voluntarily relinquish
their pension benefits."
STOCKHOLDER'S SUPPORTING STATEMENT
Aside from the usual reasons, presented in the past, regarding "double
dipping", that is outside (non-employee) directors who are in almost all cases
amply rewarded with their pension at their primary place of employment, and in
many instances serving as outside pensioned directors with other companies,
there are other more cogent reasons that render this policy as unacceptable.
Traditionally, pensions have been granted in both the private and public
sectors for long term service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside directors' service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
But more importantly, outside directors, although retained by corporate
management, namely the C.E.O., are in reality representatives of shareholders.
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grants
to outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interests. Thus, pensions become another device to enhance and entrench
management's controls over corporate policies while being accountable only to
themselves. As a founding member of the Investors Rights Association of
America I feel this practice perpetuates a culture of corporate management
"cronyism" that can easily be at odds with shareholder and company interest.
A final note in rebuttal to management's contention that many companies
offer their outside directors pensions, so they can attract and retain persons
of the highest quality. Since there are also companies that do not offer their
outside directors pensions, can management demonstrate that those companies
that offer pensions have a better performance record then their non-pensioned
peers? In addition, do we have any evidence of a significant improvement in
corporate profitability with the advent of pensions for outside directors?
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION.
28
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE FOREGOING STOCKHOLDER
PROPOSAL
The best interests of the Company and its stockholders are served by having
high caliber, talented and experienced individuals serve as outside directors.
To attract and retain these highly-sought-after individuals, the Board believes
the Company must provide a competitive total compensation package for its
outside directors.
The Company's Retirement Plan for Outside Directors, which is more fully
described under "Management Remuneration--Compensation of Directors," was
adopted to provide the non-employee directors of the Company who satisfy the
plan's minimum service and the eligibility requirements with post-retirement
payments in recognition of their service to the Company and to ensure that the
overall compensation arrangements for non-employee directors are adequate to
attract and retain highly qualified individuals to serve the Company.
Under the terms of the plan, the benefits must be earned! To be eligible to
receive benefits, a director must have completed at least five years of service
if retirement occurs at or after age 72 or at least 10 years of service as a
director if retirement occurs prior to age 72. The annual benefit payable to a
retired director is limited to the amount of the annual retainer (excluding any
meeting fees, committee chairman fees, travel expenses and any consulting fees)
payable to the Company's non-employee directors at the time of his retirement.
The benefit is payable for life to an eligible director who serves for a period
of ten years or longer, and, in the case of an eligible director with less than
ten years of service, the period the benefit is payable is limited to the
number of years he serves as a director of the Company.
The Board believes the plan not only assists the Company in attracting highly
qualified individuals to serve on the Board but provides an incentive to such
individuals to remain on the Board and provide the Company with the ongoing
benefit of their experience and knowledge of the Company's business and
recognizes the ever-increasing time commitment, diligence and risks associated
with service on the board of a publicly-owned corporation. For these reasons,
we unanimously recommend a vote against this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1997 Annual Meeting
of Stockholders must be received by the Secretary of the Company at its
principal executive offices by not later than December 31, 1996 to be
considered for inclusion in management's proxy statement and form of proxy for
that meeting.
OTHER MATTERS
As of the date hereof, management does not intend to present, nor has it been
informed that other persons intend to present, any matters for action at the
meeting, other than those specifically referred to herein. If, however, any
other matters should properly come before the meeting, it is the intention of
the persons named in the proxies to vote the shares represented thereby in
accordance with their best judgment on such matters.
The expenses of soliciting proxies in the form included with this proxy
statement and the cost of preparing, assembling and mailing material in
connection with such solicitation of proxies will be borne by
29
the Company. In addition to the use of the mail, the Company's directors,
executive officers and employees may solicit proxies personally or by telephone
or telegraph. Also, the Company has retained the firm of Hill and Knowlton,
Inc. to solicit proxies at an estimated cost of $7,500 plus out-of-pocket
expenses. The Company may reimburse brokerage firms and other custodians,
nominees or fiduciaries for their reasonable expenses in forwarding proxy
material to the beneficial owners of shares.
A form of proxy is enclosed for your use. Please date, sign and return the
proxy at your earliest convenience in the enclosed envelope, which requires no
postage if mailed in the United States. A prompt return of your proxy will be
appreciated.
By Order of the Board of Directors,
/s/ Clyde T. Turner
Clyde T. Turner
Chairman of the Board
Las Vegas, Nevada
April 30, 1996
30
- --------------------------------------------------------------------------------
PROXY
CIRCUS CIRCUS ENTERPRISES, INC.
Proxy Solicited on Behalf of the Board of Directors of the Company
The undersigned, a stockholder of Circus Circus Enterprises, Inc. (the
"Company"), a Nevada corporation, hereby appoints Clyde T. Turner and Mike
Sloan, and each of them, as the true and lawful attorneys and proxies of the
undersigned, with full power of substitution, for and in the name of the
undersigned, to vote and otherwise act on behalf of the undersigned at the
Annual Meeting of Stockholders of the Company to be held in the Banquet Room at
Excalibur Hotel and Casino, 3850 Las Vegas Boulevard South, Las Vegas, Nevada,
on Friday, June 21, 1996 at 10:00 A.M., PDT, or at any adjournment or
adjournments thereof, with respect to all shares of the Company's Common Stock
which the undersigned would be entitled to vote, with all powers the undersigned
would possess if personally present, on the following matters:
The election of three Class II Directors to serve until their respective
successors are elected and shall qualify. (Change of address-Comments)
Nominees: --------------------------------
Class II Clyde T. Turner, William A. --------------------------------
Richardson and Fred W. Smith
--------------------------------
--------------------------------
This proxy will be voted as specified on the reverse side. If no specification
is made, this proxy will be voted FOR all nominees for director named above,
FOR ratification of the appointment of Arthur Andersen LLP, AGAINST approval of
the stockholder proposal to eliminate the classified board of directors, and
AGAINST the stockholder proposal to eliminate pension benefits to non-employee
directors.
--------------
SEE REVERSE
SIDE
--------------
- -------------------------------------------------------------------------------
________________________________________________________________________________
[X] Please mark your votes as in this example 9616
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is given, this proxy will be
voted FOR all nominees listed on the reverse side, FOR Proposal 2 and AGAINST
Proposals 3 and 4.
________________________________________________________________________________
The Board of Directors recommends a vote FOR all nominees listed on the reverse
side and FOR Proposal 2.
________________________________________________________________________________
FOR WITHHELD
1. Election of Directors (see reverse side). [ ] [ ]
FOR, except vote withheld from the following nominee(s):
________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Arthur Andersen [ ] [ ] [ ]
LLP as independent auditors to examine and report
on the Company's financial statements for the
fiscal year ending January 31, 1997.
________________________________________________________________________________
The Board of Directors recommends a vote AGAINST Proposals 3 and 4.
________________________________________________________________________________
FOR AGAINST ABSTAIN
3. Stockholder proposal to eliminate the [ ] [ ] [ ]
classified board of directors.
4. Stockholder proposal to eliminate [ ] [ ] [ ]
pension benefits to non-employee
directors.
5. In the discretion of the proxies on any other matters that may properly come
before the meeting or any adjournment thereof.
[_] Change of Address/Comments on
reverse side
If more than one of the proxies listed
on the reverse side shall be present at
the meeting or any adjournment thereof,
the majority of said proxies so present
and voting shall exercise all of the
powers conferred hereby.
The undersigned hereby revokes any
proxy heretofore given to vote upon or
act with respect to such shares and
hereby ratifies and confirms all that the
proxies listed on the reverse side, or
any of them, may lawfully do by virtue
hereof.
SIGNATURE(S)____________________________________________ DATE____________
Please date this proxy and sign your name as it appears hereon. When there is
more than one owner, each should sign. When signing as an attorney,
administrator, executor, guardian or trustee, please add your title as such. If
executed by a corporation, give title as such.
________________________________________________________________________________