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SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
BLACKHAWK GAMING & DEVELOPMENT COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Samuel E. Wing
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
17301 WEST COLFAX AVENUE, SUITE 170
GOLDEN, COLORADO 80401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 2, 1998
To the Shareholders of Black Hawk Gaming & Development Company, Inc.:
An annual meeting of shareholders of Black Hawk Gaming & Development
Company, Inc. (the "Company") will be held at The Lodge Casino at Black Hawk,
240 Main Street, Black Hawk, Colorado, on Thursday, July 2, 1998, at 10:00 a.m.
local time, for the following purposes:
1. To amend the Company's Articles of Incorporation to provide for
staggered terms for the Company's Board of Directors;
2. To elect seven Directors to serve until their successors are
elected and qualified;
3. To approve the appointment of Deloitte & Touche LLP as independent
auditors for 1998; and
4. The transaction of such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on May 29, 1998, as
the record date for the determination of shareholders entitled to vote at the
meeting. Only shareholders of record at the close of business on May 29, 1998,
will be entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person. To
ensure that you are represented at the meeting, please fill in, sign and return
the enclosed proxy card as promptly as possible. Your early attention to the
proxy statement will be greatly appreciated because it will reduce the cost your
Company incurs in obtaining voting instructions from its shareholders.
By Order of the Board of Directors
/s/ STANLEY POLITANO
------------------------------------
Stanley Politano,
Secretary
June 5, 1998
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BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
17301 WEST COLFAX, SUITE 170
GOLDEN, COLORADO 80401
PROXY STATEMENT
JULY 2, 1998 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Black Hawk Gaming & Development Company,
Inc. ("Black Hawk" or the "Company") for use at the annual meeting of
shareholders of Black Hawk to be held at The Lodge Casino at Black Hawk, 240
Main Street, Black Hawk, Colorado, on Thursday, July 2, 1998, at 10:00 a.m.
local time, and any postponement or adjournment thereof.
This Proxy Statement and the enclosed proxy card are first being sent to
Black Hawk's shareholders on or about June 5, 1998.
MATTERS TO BE CONSIDERED.
The following matters will be acted on at the annual meeting:
1. To amend the Company's Articles of Incorporation to provide for
staggered terms for the Company's Board of Directors;
2. Election of seven Directors to serve until their successors are
elected and qualified;
3. Approval of the appointment of Deloitte & Touche LLP as independent
auditors for 1998; and
4. Transaction of such other business as may properly come before the
meeting.
VOTING SECURITIES AND VOTING RIGHTS.
Only shareholders of record on May 29, 1998, or their proxies, will be
entitled to vote at the annual meeting of shareholders. On May 29, 1998, Black
Hawk had 3,947,496 shares of common stock outstanding.
A majority of the shares of Black Hawk common stock outstanding must be
represented at the annual meeting in person or by proxy to constitute a quorum
for the transaction of business. Each share of common stock is entitled to one
vote on all matters. In the election of directors, each share of common stock is
entitled to one vote for a nominee for each director position. Black Hawk does
not have cumulative voting. A shareholders' list will be available for
examination by shareholders at the annual meeting.
VOTING PROCEDURE.
The shares represented by each properly executed proxy returned to Black
Hawk will be voted at the meeting as indicated on the proxy. If no instructions
are given, the persons authorized by the proxy will vote in favor of: (i) the
proposal to amend the Company's Articles of Incorporation to provide for
staggered terms of its Board of Directors; (ii) election of the nominees named
in this Proxy Statement for the terms described; and (iii) for the approval of
the appointment of Deloitte & Touche LLP as independent auditors for 1998. Any
person giving a proxy has the right to revoke it at any time before it is
exercised (1) by filing with the Secretary of Black Hawk a duly signed
revocation or proxy bearing a later date or (2) by voting in person at the
meeting.
The Board of Directors is not aware of any matters other than those set
forth above which may come before the annual meeting. If any other matters are
properly presented to the meeting for action, unless contrary instructions are
given, the persons named in the enclosed form of proxy and acting thereunder
have the power to vote in accordance with their best judgment on such matters.
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Election of the nominees as Directors and approval of the appointment of
independent auditors will require the affirmative vote of a majority of the
shares of Black Hawk common stock represented at the meeting. The proposal to
provide for staggered terms of its Board of Directors will require the
affirmative vote of a majority of the Company's issued and outstanding Common
Stock.
If a proxy is marked with instructions to abstain from voting on any
matter, those shares will be treated as represented at the annual meeting and
entitled to vote in determining whether a quorum is present. In matters where
approval is required by a majority of shares outstanding or represented at the
annual meeting, abstentions from voting on a matter will have the effect of a
vote against the matter.
SOLICITATION OF PROXIES.
The cost of solicitation of proxies will be borne by Black Hawk.
Solicitation of proxies may be made by officers, directors and employees of
Black Hawk in person, by telephone or by mail. In addition, brokers, banks and
other nominee holders will be reimbursed for expenses they incur in forwarding
proxy materials to and obtaining voting instructions from beneficial owners of
Black Hawk common stock.
DIRECTOR NOMINEES AND OTHER PRINCIPAL HOLDERS OF BLACK HAWK COMMON STOCK.
On May 29, 1998, there were approximately 200 record holders of Black Hawk
common stock; the Company estimates that its shares are beneficially owned by
approximately 1,600 additional persons.
The following table sets forth, as of May 29, 1998, the number and
percentage of shares of Black Hawk's common stock held of record by officers,
directors, individually and as a group and by holders of more than 5% of such
common stock:
BENEFICIALLY OWNED PERCENTAGE OF
------------------------ COMMON STOCK
NAME SHARES OPTIONS(1) BENEFICIALLY OWNED(3)
---- --------- ---------- ---------------------
Jeffrey P. Jacobs.......................... 1,333,333(2) 25,000 34.4
Diversified Opportunities Group Ltd. c/o
Jacobs Entertainment Ltd.
425 Lakeside Avenue
Cleveland, Ohio 44114
Stephen R. Roark........................... 28,571 114,167 3.6
17301 West Colfax Avenue, #170
Golden, Colorado 80401
Frank B. Day............................... 460,670 44,167 12.8
248 Centennial Parkway, Suite 100
Louisville, Colorado 80302
J. Patrick McDuff.......................... 480 11,083 *
1375 Walnut
Boulder, Colorado 80302
Robert H. Hughes........................... 476 5,000 *
Diversified Opportunities Group Ltd.
c/o Jacobs Entertainment Ltd.
425 Lakeside Avenue
Cleveland, Ohio 44114
Martin S. Winick........................... 449 5,000 *
Ladenberg, Thalmann & Co., Inc.
30050 Chagrin Boulevard
Pepper Pike, Ohio 44124
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BENEFICIALLY OWNED PERCENTAGE OF
------------------------ COMMON STOCK
NAME SHARES OPTIONS(1) BENEFICIALLY OWNED(3)
---- --------- ---------- ---------------------
Timothy Knudsen............................ -- 333 *
213 Vista Circle
North Olmstead, Ohio 44070
Robert D. Greenlee......................... 462,672 85,833 13.9
2060 Broadway, Suite 400
Boulder, Colorado 80302
Officers and Directors as a group (six
persons)................................. 1,823,979 204,750 51.4
- ---------------
* less than 1%
(1) Represents shares underlying options which are exercisable within 60 days.
(2) These shares are held by Diversified Opportunities Group, Ltd., an affiliate
of Mr. Jacobs, and are therefore deemed beneficially owned by him.
(3) All percentages are computed in accordance with Rule 13d-3 adopted under the
Securities Exchange Act of 1934.
Section 16(a) Beneficial Ownership Reporting Compliance. Based on a review
of the record, Black Hawk believes that certain reports on Forms 3 and 4 may not
have been timely filed by certain of its officers (including former officers)
and directors. These persons and the apparent number of reports are as follows:
Robert D. Greenlee (4); Frank B. Day (4); Stephen R. Roark (5); Stanley Politano
(5); Patrick J. McDuff (3); Robert H. Hughes (2); and Martin S. Winick (2). Most
of the delinquencies resulted from the failure to file Form 4's upon the grant
of stock options. There have been no sales of Black Hawk's securities by any of
its officers and directors during the relevant reporting periods. As of January
25, 1998 all such persons had filed a Form 5 reporting all required
transactions. Black Hawk has instituted a cooperative procedure with its
officers and directors to ensure future compliance with Section 16(a).
PROPOSAL NO. 1
STAGGERED TERMS FOR DIRECTORS
General. The Board of Directors has unanimously adopted a resolution to
submit to shareholders of Black Hawk a proposal to amend the Articles of
Incorporation of Black Hawk to provide that the Board be staggered or classified
into three classes, as nearly equal in number as possible, with each director,
after a transitional period, serving for three years, and with one class being
elected each year. The proposal also provides that Directors may be removed from
office with cause only by the affirmative vote of a majority of Black Hawk's
voting stock, and without cause only by the affirmative vote of 80% of Black
Hawk's voting stock. The proposal provides further that any provision which
would alter, amend or repeal the Board classification provision, or is
inconsistent therewith, may be adopted only by the affirmative vote of 80% of
Black Hawk's outstanding voting stock. If the proposal is adopted by
shareholders, Black Hawk's Articles of Incorporation will have been amended and
the seven directors will serve, if elected, the staggered terms described below.
If the proposal is not adopted, the seven directors named below, if elected,
will serve until the next annual meeting of shareholders and until their
successors are elected and qualified.
The proposal to stagger the Board of Directors' terms will have significant
effects on the ability of shareholders of Black Hawk to change the composition
of the Board of Directors. Accordingly, shareholders should read carefully the
following sections of this Proxy Statement, which describe this proposal and its
purpose and effects, and the full text of the proposed amendment to Black Hawk's
Articles of Incorporation set forth in Exhibit A hereto.
The directors of Black Hawk are currently elected to the Board each year
for a term of one year. The number of directors (three or more) to constitute
the Board is also determined annually. Black Hawk's Articles of Incorporation
provide that the business and affairs of Black Hawk will be managed under the
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direction of a Board consisting of not more than nine directors, the exact
number to be fixed from time to time by resolution adopted by the affirmative
vote of a majority of the entire Board. The Board has presently chosen seven
nominees to be elected at the 1998 annual meeting. The proposed amendment also
provides that the directors will be classified into three classes, as nearly
equal in number as possible.
If Proposal No. 1 is adopted by shareholders, two directors will be elected
and classified to serve for terms expiring at the 1999 annual meeting of
shareholders, two directors will be elected and classified to serve for terms
expiring at the 2000 annual meeting of shareholders and three directors will be
elected and classified for a term expiring at the 2001 annual meeting of
shareholders, respectively, or, in all cases, until their respective successors
are elected and qualified. At each annual meeting of shareholders, the
successors to the class of directors whose term expires at that meeting will be
elected to a term expiring at the annual meeting of shareholders held in the
third year following the year of that election.
The classification of directors will have the effect of making it more
difficult to change the composition of Black Hawk's Board of Directors. At least
two annual meetings of shareholders instead of one, or a special meeting of
shareholders called for the purpose of removal of at least a majority of the
directors, will be required to effect a change in control of the Board.
The Articles of Incorporation do not provide for cumulative voting in the
election of directors. Accordingly, absent the staggered Board proposal, the
entire Board could be changed by a majority vote of the shareholders at any
annual meeting. Classification of the Board will apply to every election of
directors, whether or not a change in control of Black Hawk has occurred or the
holders of a majority of the voting stock desire to change the whole Board.
Removal of Directors and Filling of Vacancies on the Board. Under the
Colorado Business Corporation Act, unless the Articles of Incorporation or
bylaws provide otherwise, directors can be removed by the shareholders with or
without cause, and the vote required for removal is the same proportion of the
voting power of the shares sufficient to elect them. Currently, therefore, any
one or all of Black Hawk's directors could be removed by the affirmative vote of
a majority of the shares of Black Hawk's Common Stock voting at a meeting called
for that purpose.
The staggered Board proposal provides that a director can be removed by the
shareholders with cause by the affirmative vote of a majority of the then issued
and outstanding voting stock, and without cause, only by the affirmative vote of
the holders of 80% of such voting stock. Current ownership is such that removal
would be unlikely without concurrence of a substantial majority of Black Hawk's
present officers and directors.
Increased Stockholder Vote for Alteration or Repeal of the Board
Classification. Under the Colorado Business Corporation Act, the affirmative
vote of the holders of a majority of Black Hawk's voting stock present in person
or by proxy at a meeting of shareholders called for such purpose, is required
for adoption of an amendment to its Articles of Incorporation, unless the
Articles provide for a greater vote. The Board classification proposal requires
that 80% of Black Hawk's outstanding voting stock be affirmatively voted in
favor of any provision which would alter, amend or repeal such provision or
which is inconsistent therewith.
Purposes and Effects of the Board Classification. The Board of Directors
believes that a staggered or classified Board will facilitate continuity and
stability of leadership and policy by assuring that experienced personnel
familiar with Black Hawk and its business will be on the Board at all times. The
proposal is also intended to prevent precipitous changes in the composition of
the Board and the manner of its selection and, thereby, to moderate those
changes in Black Hawk's policies, business strategies and operations which the
Board does not deem to be in the best interests of Black Hawk and its
shareholders.
Although Black Hawk knows of no events which would be likely to result in
such a change, the Board has determined that the use of certain disruptive and
potentially unfair tactics in attempts to gain control of corporations make
adoption of the proposal a prudent measure for the protection of Black Hawk's
shareholders. The proposal is designed to make it more time-consuming to change
majority control of the Board and, thus, to reduce Black Hawk's vulnerability to
an unsolicited proposal to do so.
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The Board has observed a trend over the last decade toward the accumulation
of substantial stock positions in public companies by third parties as a prelude
to proposing a change of control or a restructuring or sale of all or part of a
corporation or other similar extraordinary corporate action. Such actions are
often undertaken by the third party without advance notice to, or consultation
with, management. In many cases, the purchaser seeks representation on the
corporation's board of directors in order to increase the likelihood that its
proposal will be implemented by the corporation. If the corporation resists the
efforts of the purchaser to obtain representation on the corporation's board of
directors, the purchaser may commence a proxy contest to have its nominees
elected to the board of directors in place of certain directors or the entire
board of directors. In some cases, the purchaser may not truly be interested in
gaining control of the corporation, but uses the threat of a proxy fight or a
bid to gain control of the corporation as a means of obtaining for itself a
special benefit which might not be available to all of the corporation's
shareholders. Black Hawk's Board believes that the imminent threat of removal of
the directors and management in such situations would severely curtail their
ability to negotiate effectively with such purchasers and adequately represent
the interests of Black Hawk's shareholders. The proposal is intended to
encourage persons seeking to acquire control of Black Hawk to initiate such an
acquisition through arm's-length negotiations with management and the Board, who
would then be in a position to negotiate a transaction which is fair to all of
Black Hawk's shareholders.
The proposal will limit the ability of a stockholder to gain control of the
Board through electing directors at annual meetings, increasing the size of the
Board or removing directors. The classification provisions would apply to every
election of directors, whether or not a change in the Board would be beneficial
to Black Hawk and its shareholders and whether or not a majority of the
shareholders believes that such a change would be desirable. A staggered or
classified Board also makes it more difficult for shareholders to change the
majority of directors even when the only reason for such change may be the
performance of the current directors. The proposal would not, however, delay a
change in control of Black Hawk, if, after a successful tender offer for a
majority of the voting shares of Black Hawk, the incumbent directors resigned or
reached an accommodation with the majority stockholder.
The requirement of an increased shareholder vote to alter, amend or repeal
the Board classification provision will give minority shareholders (including
Black Hawk's current officers and directors as a group) a veto power over any
amendments or change and would prevent a majority shareholder with less than 80%
of the voting shares from avoiding the requirements of the Board classification
by amending or repealing it.
The proposal could have the effect of delaying an attempted business
combination. It may tend to discourage or make more difficult a proxy contest,
the assumption of control of Black Hawk by a holder of a substantial block of
Black Hawk's Common Stock or the removal of the incumbent directors.
In addition, the proposal may affect the ability of shareholders to change
the composition of the Board and to benefit from transactions which are opposed
by the incumbent directors. Moreover, since the proposal is designed to
discourage accumulations of large blocks of Black Hawk's Common Stock by
purchasers whose objective is to assume control of the Board quickly, its
adoption could tend to reduce the temporary fluctuations in the market price of
Black Hawk's Common Stock that could be caused by such accumulations. As a
result, shareholders could be deprived of certain opportunities to sell their
shares at temporarily higher market prices.
ALTHOUGH CHANGES OF CONTROL OF THE BOARD OR CHANGES IN THE MANAGEMENT OF
BLACK HAWK WITHOUT PRIOR CONSULTATION WITH INCUMBENT MANAGEMENT MAY NOT
NECESSARILY BE DETRIMENTAL, AND COULD BE BENEFICIAL TO BLACK HAWK AND ITS
SHAREHOLDERS, THE BOARD HAS DETERMINED THAT THE BENEFITS OF PROTECTING ITS
ABILITY TO NEGOTIATE WITH THE PROPONENT OF AN UNSOLICITED BID TO CHANGE CONTROL
OF BLACK HAWK OUTWEIGH THE DISADVANTAGES OF DISCOURAGING SUCH A PROPOSAL AND
THEREFORE UNANIMOUSLY RECOMMEND A VOTE FOR THE PROPOSAL.
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PROPOSAL NO. 2
ELECTION OF DIRECTORS
The Board of Directors of Black Hawk presently consists of seven members.
Seven directors have been nominated by the Board for election at the annual
meeting. The persons authorized by the enclosed form of proxy will vote each
proxy received by them for the election of the seven nominees named below unless
contrary instructions are given.
If Proposal No. 1 is adopted by shareholders, the term of office of each
director will be as follows:
ONE YEAR TWO YEARS THREE YEARS
-------- --------- -----------
J. Patrick McDuff Frank B. Day Jeffrey P. Jacobs
Timothy Knudsen Martin S. Winick Stephen R. Roark
Robert H. Hughes
If Proposal No. 1 is not adopted by shareholders, the term of office for
all directors will commence on their election and such persons will serve as
directors until their successors are elected and qualified at the next annual
meeting of shareholders in 1999 or until their death or resignation. Each
nominee has consented to be named in this Proxy Statement and to serve if
elected. It is not expected that any nominee will become unable to serve as a
Director prior to the annual meeting.
THE BOARD OF DIRECTORS OF BLACK HAWK RECOMMENDS A VOTE FOR THE ELECTION OF
THE SEVEN NOMINEES NAMED BELOW. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THE NAMED NOMINEES UNLESS INSTRUCTIONS ARE GIVEN TO THE CONTRARY.
The following sets forth certain information with respect to each of the
nominees, directors and executive officers of Black Hawk:
NAME AGE POSITION(S) HELD
---- --- ----------------
Jeffrey P. Jacobs.............. 44 Chairman of the Board and Chief Executive Officer
Stephen R. Roark............... 50 President, Chief Financial Officer and a Director
Frank B. Day................... 64 Vice President and a Director
J. Patrick McDuff.............. 49 A Director
Robert H. Hughes............... 57 A Director
Martin S. Winick............... 47 A Director
Timothy Knudsen................ 44 A Director
JEFFREY P. JACOBS, from 1995 to present, served as Chairman and Chief
Executive Officer of Jacobs Entertainment, Inc., a company based in Cleveland,
Ohio that has investments in gaming companies and ventures, including the
Company and Colonial Downs Holdings, Inc., which operates a horse-racing track
and satellite wagering facilities. From 1975 to present, he has also served as
President and Chief Executive Officer of Jacobs Investments, Inc., a company
engaged in the development, construction and operation of residential and
commercial real estate and entertainment projects in Ohio. Mr. Jacobs also
served in the Ohio House of Representatives from 1982 until 1986. He is also
Chairman and Chief Executive Officer of Colonial Downs Holdings, Inc. which is a
reporting company under the Securities Exchange Act of 1934. Mr. Jacobs became
Chief Executive Officer and Co-Chairman of Black Hawk on November 12, 1996 and
became Chairman on December 31, 1997.
STEPHEN R. ROARK, has been employed as chief financial officer of Black
Hawk since August 1993. Mr. Roark became a director of Black Hawk in 1994. He
was elected President of the Company in September 1995. Prior to that time he
has been an independent consultant in the Denver area rendering financial and
accounting assistance to companies in the public marketplace. Mr. Roark has 20
years accounting experience having served as a partner with a large local
accounting firm and as a partner with a national accounting firm. Mr. Roark was
with Hanifen, Imhoff and Prudential Securities, Inc. for three years and is a
member of the American Institute of Certified Public Accountants and the
Colorado Society of
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Certified Public Accountants. Mr. Roark obtained his B.S.B.A. in Accounting from
the University of Denver in 1973.
FRANK B. DAY, Chairman of the Board, Chief Executive Officer and President
of Rock Bottom Restaurants, Inc., a publicly traded company, has been employed
since January 1980 as President of Concept Restaurants, Inc., and Managing
General Partner of the Hotel Boulderado in Boulder, Colorado since August 1982.
Concept Restaurants, Inc. owns or operates twelve full service restaurants in
Colorado front range communities. From 1959 to present, Mr. Day has owned and
operated food service and hospitality facilities in Illinois, Michigan,
Wisconsin, and Colorado. He attended Harvard University from 1950 to 1956 and
received B.A. and M.B.A. degrees. Mr. Day is also an active real estate investor
and is active in many civic and nonprofit organizations, having served as a
director of the Boulder Chamber of Commerce (September 1988 to September 1991)
and Downtown Boulder, Inc. (from June 1987 to June 1990). Mr. Day has been
Secretary and a director of Black Hawk since 1992.
J. PATRICK MCDUFF, has been the Northern Region President for Vectra Bank
since October 1996. Prior to assuming those duties he was President, Chief
Executive Officer and director of one of Vectra's subsidiary banks from July
1987 through October 1996. From 1972 through July 1987, Mr. McDuff worked for
IntraWest Bank of Boulder, ending his employment as Senior Vice President and
Senior Loan Officer. He attended the University of Arkansas from 1966 to 1972
and received a B.S.B.A. degree in Finance and Commercial Banking. Mr. McDuff is
also active in many civic and non-profit organizations, having served as a
director of Boulder Center Y.M.C.A. (from January 1987 to December 1992),
Boulder Valley Rotary Club (from April 1985 to June 1988) and Longs Peak Council
of the Boy Scouts of America (from January 1991 to March 1993). Mr. McDuff's
employer, Vectra Bank, is a wholly owned subsidiary of Zions Bancorporation, a
reporting company under the Securities Exchange Act of 1934. Mr. McDuff became a
director of Black Hawk in 1994.
ROBERT H. HUGHES, has served as Chief Financial Officer of Jacobs
Investments, Inc. since 1993. Mr. Hughes was a partner in charge of the audit
department of the Cleveland office of the accounting firm of Deloitte & Touche
LLP until his retirement in 1991. Mr. Hughes is a certified public accountant.
Mr. Hughes serves as a member of the Board of Directors of Colonial Downs
Holdings, Inc., a reporting company under the Securities Exchange Act of 1934.
Mr. Hughes has been a director of Black Hawk since November 12, 1996.
MARTIN S. WINICK, has been in the investment banking/brokerage business
with Cowen & Co. (1981-1990); Dean Witter Reynolds (1990-1992); Rodman & Renshaw
(1992-1995); and Mesirow Financial (1995 to 1996) and Ladenberg, Thalmann & Co.,
Inc. (1997 to present). Mr. Winick serves on the Board of Directors of Paul-Son
Gaming Corp., a leading manufacturer of table games and supplies which is a
reporting company under the Securities Exchange Act of 1934. Mr. Winick has been
a director of Black Hawk since November 12, 1996.
TIMOTHY KNUDSEN, has been associated with Knudsen, Gardner & Howe, a
Cleveland, Ohio based marketing communications agency for 21 years. He was
elected President of the agency in 1984. Mr. Knudsen holds a B.S. degree in
Marketing from Dyke Business College and has studied toward an advanced degree
at Cleveland State University. Mr. Knudsen was elected as a director of Black
Hawk in February, 1998.
The Board of Directors has two committees whose members are as follows:
AUDIT COMPENSATION
----- ------------
Martin S. Winick Frank B. Day
Robert H. Hughes Timothy Knudsen
J. Patrick McDuff Martin S. Winick
Compensation Committee Interlocks. In calendar year 1995, Messrs. Day and
Roark and a former director comprised Black Hawk's compensation committee. These
three persons served as such until November 12, 1996 when the committee was
reconstituted. From that date until February, 1998, the committee was comprised
of Messrs. Day, McDuff and Winick. In February, 1998, Mr. Knudsen replaced
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Mr. McDuff. During the term of both committees, members thereof participated and
were granted stock options, as described herein, by action of the full Board of
Directors. Also, during the last three fiscal years, Black Hawk has engaged in
various transactions with the members of its compensation committee or entities
with which they are affiliated. Black Hawk believes that these transactions have
been on terms no less favorable to Black Hawk that could have been obtained from
unaffiliated third parties.
Other Matters. Black Hawk entered into three year employment agreements
with Messrs. Jacobs and Roark on November 12, 1996. Each agreement contains
customary terms and conditions and provides minimum base annual salaries of
$150,000 and $125,000, respectively, for Messrs. Jacobs and Roark. Mr. Jacobs is
also entitled to receive a bonus of 2.5% of Black Hawk's pre-tax net income
exceeding $2,880,000 in any fiscal year during the term of his employment
agreement.
Directors are elected at each annual meeting of Black Hawk's shareholders.
Officers are appointed by the directors and serve at the pleasure of the Board
or until their death, incapacity or resignation. All directors except Messrs.
Jacobs and Roark receive $1,000 and $500 per Board and Committee meeting
attended, respectively. Effective January 1, 1997, one-half of this compensation
has been paid in the form of restricted Common Stock of Black Hawk valued at the
market price on the meeting date and one-half in cash.
There are no family relationships between or among any directors or
executive officers and, except as set forth in the above resumes, none serve as
a director of any company required to file reports under the Securities Exchange
Act of 1934 or which is registered under the Investment Company Act of 1940.
EXECUTIVE COMPENSATION.
The following table sets forth information regarding the compensation paid
by Black Hawk for services rendered in all capacities to Black Hawk during 1995,
1996 and 1997 with respect to (i) the Chief Executive Officer, (ii) the former
Chief Executive Officer, and (iii) the other named executive officers of Black
Hawk whose total annual compensation for 1997 exceeded $100,000:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------------------
--------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
NAME OF OFFICER/DIRECTOR (B) ($)(C) ($)(D) ($)(E) ($)(F) SARS(#)(G) ($)(H) ($)(I)
- ------------------------ ---- ------- ------ ------------ ---------- ----------- ------- ------------
Jeffrey P. Jacobs............ 1995 -- -- -- -- -- -- --
Chief Executive Officer 1996 12,500(2) -- -- -- 60,000(1) -- --
1997 150,000 -- -- -- -- -- --
Stephen R. Roark............. 1995 112,500 25,000 -- -- 50,000(3) -- 4,000
President 1996 125,000 -- -- -- 35,000 -- 6,500
1997 130,000 -- -- -- 15,000 -- --
Robert D. Greenlee........... 1995 75,000 -- -- -- 50,000(3) -- 3,500
former Chief Executive 1996 75,000 -- -- -- 40,000 -- 6,500
Officer 1997 -- -- -- -- -- -- 5,500
- ---------------
(1) Does not include options to purchase 85,000 shares which were granted to
certain designees of Mr. Jacobs who disclaims beneficial ownership in both
the options and underlying shares.
(2) One month's compensation.
(3) Repriced in 1996 and included in the number of securities underlying
options/SARs granted in 1996.
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The following table contains information concerning the grants of options
made during 1997 to the Executive Officers named above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/ ANNUAL RATES OF
SECURITIES SARS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS/ EMPLOYEES EXERCISE OR OPTION TERM ALTERNATIVE TO
SARS IN FISCAL BASE PRICE EXPIRATION -------------------- (F) AND (G)
NAME GRANTED (#) YEAR ($/SH) DATE 5%($) 10%($) GRANT DATE
(A) (B) (C) (D) (E) (F) (G) VALUE
---- ----------- ---------- ----------- ---------- -------- --------- --------------
Stephen R. Roark......... 15,000 43 5.82 9/1/07 54,600 138,900
No options were exercised by the Executive Officers during 1997. The
following table provides information regarding unexercised stock options held by
the Executive Officers named above as of December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
SHARES ---------------------- ----------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
---- ------------ ------------ ---------------------- ----------------------
Jeffrey P. Jacobs......... -- -- 25,000/50,000 21,750/43,500
Stephen R. Roark.......... -- -- 114,167/38,333 99,325/30,650
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In March 1997, and in February 1998, Messrs. Jacobs and Greenlee (a former
officer and director) each posted personal letters of credit in the approximate
amount of $1,200,000, in favor of the City of Black Hawk (the 1997 letters of
credit). The 1997 letters of credit were required by the City to guarantee
performance of certain City improvements related to the Black Hawk/Jacobs
Entertainment LLC ("LLC") project (The Lodge Casino) under the terms of a
Subdivision Improvement Agreement with the City. The LLC agreed to pay all
out-of-pocket transaction costs incurred by Messrs. Jacobs and Greenlee, a
facility fee in the approximate amount of one-quarter of one percent of the
amount so guaranteed and to pay additional consideration to be negotiated. In
1997, Black Hawk reimbursed Messrs. Jacobs and Greenlee $18,298 and $12,000,
respectively, which represented the fee charged by their individual banks
issuing the 1997 letters of credit. In addition, during 1997 Messrs. Jacobs and
Greenlee each received a facility fee of $6,018 for posting the 1997 letters of
credit. The 1997 letters of credit expired in February 1998 and were required to
be renewed by the City for an additional six month term (the 1998 letters of
credit). In February 1998 Black Hawk paid the renewal fee on behalf of Messrs.
Jacobs and Greenlee totaling $9,372 and $6,017, respectively, and will later
negotiate the payment of an additional facility fee and/or other possible
consideration.
On December 31, 1997 Messrs. Greenlee, Day and Roark and an affiliate of
Mr. Jacobs converted promissory notes into Common Stock of Black Hawk pursuant
to an agreement dated November 12, 1996
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which agreement has been described in reports filed under the Securities
Exchange Act of 1934 (" '34 Act reports"). The following tabulates information
as to such notes and their conversions:
INTEREST PAID ON NUMBER OF SHARES OF
NOTES DURING 1997 COMMON STOCK RECEIVED
NAME AMOUNT OF NOTE PRIOR TO CONVERSION UPON CONVERSION
---- -------------- ------------------- ---------------------
Robert D. Greenlee.............. $ 300,000 $ 8,926 57,143
Frank B. Day.................... 300,000 8,926 57,143
Stephen R. Roark................ 150,000 4,488 28,571
Jacobs' Affiliate............... 6,000,000 360,293 1,142,857
Black Hawk's periodic '34 Act reports described certain transactions
between Black Hawk and Diversified Opportunities Group, Ltd. ("DOGL") and BH
Entertainment Ltd. ("BH"), both affiliates of Jeffrey P. Jacobs, which include
the formation of the LLC, a Colorado limited liability company owned 75% by
Black Hawk, 24% by BH and 1% by DOGL and organized for the purpose of developing
and operating The Lodge Casino. Black Hawk and BH will share a management fee of
5% of adjusted gross gaming proceeds for the gaming operations of the LLC in the
ratio of 60% to Black Hawk and 40% to BH during the first year and 50%-50%
thereafter, and will share profits and losses on a 75%-25% basis. An affiliate
of Mr. Jacobs received a $600,000 project development fee from the LLC in
consideration for various pre-development and development services. Of the total
fee, $250,000 was paid in 1997 and $350,000 was paid prior to 1997. Finally, Mr.
Jacobs and other affiliates receive an annual credit enhancement fee of 2% of
the amount so guaranteed for personally guaranteeing the LLC's multi million
dollar credit facility. Fees of $36,625 were charged by Mr. Jacobs' affiliates
in 1997 in this regard, of which $18,312 was paid in the first quarter of 1998
with the balance to be paid over a two year period. The LLC Agreement also
provides that future gaming opportunities coming to the attention of Black Hawk
or Mr. Jacobs and his affiliates will be offered for further joint ventures on a
basis where Black Hawk can maintain a 51% interest in any such future gaming
ventures.
In order to assist Black Hawk in its efforts to research, develop, perform
due diligence and possibly acquire new gaming opportunities, it has entered into
a one year agreement with Premier One Development Company, Inc. ("Premier")
effective October 1, 1997. Premier is an affiliate of Jeffrey P. Jacobs and it
employs several people to perform the services set forth above. The annual cost
to the Company for these services is $225,000 of which $56,250 had been paid
through December 31, 1997.
During 1997, Black Hawk was retained by a Colorado casino (whose sole
shareholder, Frank B. Day, is an officer, director and shareholder of Black
Hawk) to provide consulting services on a month to month basis, at a rate of
$5,000 per month. Through December 31, 1997, Black Hawk had provided 3 months of
consulting services. The contract was terminated as of that date.
Mr. Martin S. Winick, a director of Black Hawk, received a fee of $50,000
from a former employer which received a fee from Black Hawk in connection with
investment banking services rendered to Black Hawk in an effort to obtain
financing for The Lodge Casino.
The agreements described above were negotiated at arm's length between
Black Hawk and Mr. Jacobs and his affiliates and other officers and directors
and are deemed by manage ment of Black Hawk to be fair and in the best interests
of Black Hawk and its shareholders.
PROPOSAL NO. 3
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has engaged the firm of Deloitte & Touche LLP as
independent auditors to audit and report to the shareholders on the financial
statements of Black Hawk for the years 1991 through 1997. During all seven
years, there were no disagreements with Deloitte & Touche LLP on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of Deloitte &
Touche LLP, would have caused Deloitte & Touche LLP to make a reference to the
subject matter of the disagreement in connection with its reports.
Representatives of the firm are expected
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to be present at the annual meeting and will have the opportunity make a
statement if they desire to do so and will be available to respond to
appropriate questions. Although shareholder approval of the engagement of
independent auditors is not required by law, the Board of Directors desires to
solicit shareholderIs reactions. If the appointment of Deloitte & Touche LLP is
not approved by a majority of the shares represented at the meeting, the Board
of Directors will consider the appointment of other independent auditors for
1998. Moreover, if satisfactory arrangement as to the timing and costs of the
1998 audit cannot be made, the Board reserves the right to engage another of the
national accounting firms.
THE BOARD OF DIRECTORS OF BLACK HAWK RECOMMENDS A VOTE FOR THE APPROVAL OF
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE YEAR 1998
SUBJECT TO THE DISCUSSION ABOVE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
WILL BE VOTED FOR THIS PROPOSAL UNLESS A VOTE AGAINST THIS PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
SHAREHOLDER PROPOSALS
To be considered for inclusion in Black Hawk's Proxy Statement for the 1999
annual meeting, proposals of shareholders must be received by Black Hawk no
later than February 5, 1999. Such proposals should be directed to the Secretary
of Black Hawk.
By Order of the Board of Directors
By: /s/ STANLEY POLITANO
----------------------------------
Stanley Politano,
Secretary
Golden, Colorado
June 5, 1998
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EXHIBIT A
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
Pursuant to the provisions of the Colorado Business Corporation Act
("CBCA"), the Corporation adopts the following Articles of Amendment to the
Articles of Incorporation:
FIRST: The name of the Corporation is Black Hawk Gaming & Development
Company,Inc.
SECOND: The following amendment to the Articles of Incorporation, as
amended, was adopted by the stockholders of the Corporation on July 2,
1998, in the manner prescribed by the CBCA. The number of shares voted for
the amendment was sufficient for approval.
THIRD: Article Seventh of the Corporation's Articles of Incorporation
is deleted hereby and the following Article Seventh substituted therefor:
"SEVENTH: Staggered Board. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors
consisting of not fewer than three nor more than nine directors, the
exact number to be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors.
Whenever used in these Articles of Incorporation, the phrase "entire
Board of Directors" shall mean that number of directors fixed by the
most recent resolution adopted pursuant to the preceding sentence prior
to the date as of which a determination of the number of directors then
constituting the entire Board of Directors shall be relevant for any
purpose under these Articles of Incorporation. The Directors shall be
classified, with respect to the term for which thy severally hold
office, into three classes, each class to be as nearly equal in number
as possible, the first class to hold office initially for a term
expiring at the annual meeting of the stockholders to be held in 1999,
the second class to hold office initially for a term expiring at the
annual meeting of shareholders to be held in 2000, and the third class
to hold office initially for a term expiring at the annual meeting of
stockholders to be held in 2001, with the members of each class to hold
office until their successors are elected and qualified. At each annual
meeting of stockholders of the Corporation, the successors to the class
of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
Any vacancy occurring in the Board of Directors and any newly
created directorship resulting from any increase in the number of
directors shall be filled solely by the affirmative vote of a majority
of the remaining directors then in office, even though less than a
quorum of the Board of Directors. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any
incumbent director.
Any director may be removed from office with cause only by the
affirmative vote of the holders of a majority of the then issued and
outstanding voting stock of the Corporation and may be removed from
office without cause only by the affirmative vote of the holders of 80%
of the then issued and outstanding voting stock of the Corporation.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of preferred stock or of any other class or
series of shares issued by the Corporation shall have the right, voting
separately by class or series, to elect directors under specified
circumstances, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of
these Articles of Incorporation applicable thereto, and such directors
so elected shall not be classified pursuant to this Article Seventh
unless expressly provided by such terms.
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This Article Seventh may be altered, amended or repealed, and any
provision inconsistent herewith may be adopted, only the affirmative
vote of the holders of 80% of the voting power of the shares of the
Corporation's voting stock, in addition to any other vote required by
the CBCA or these Articles of Incorporation."
Dated: July 2, 1998 BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC.
By:
---------------------------------
Stephen R. Roark, President
Attest:
-----------------------------
Stanley Politano, Secretary
STATE OF COLORADO )
) ss.
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this 2nd day of July
1998, by Stephen R. Roark and Stanley Politano, President and Secretary,
respectively, of Black Hawk Gaming & Development Company, Inc., a Colorado
corporation, on behalf of the Corporation and verified by each person on behalf
of the Corporation, under penalties of perjury, that the foregoing instrument is
the Corporation's deed and act and that the facts stated therein are true.
Witness my hand and official seal.
My commission expires:
------------------------------------
Notary Public
(S E A L)
2
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PROXY BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. PROXY
17301 WEST COLFAX AVENUE, SUITE 170
GOLDEN, COLORADO 80401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Black Hawk Gaming & Development Company, Inc.
acknowledges receipt of the notice of the annual meeting of shareholders, to be
held Thursday, July 2, 1998, at 10:00 a.m., at The Lodge Casino at Black Hawk,
240 Main Street, Black Hawk, Colorado and hereby appoints Jeffrey P. Jacobs or
Stephen R. Roark, or either of them, each with the power of substitution, as
attorneys and proxies to vote all the shares of the undersigned at the annual
meeting and at all adjournments thereof, hereby ratifying and confirming all
that the attorneys and proxies may do or cause to be done by virtue hereof. The
above-named attorneys and proxies are instructed to vote all of the
undersigned's shares as follows:
1. Approval of amendment to the Company's Articles of Incorporation to provide
for staggered terms for the Company's Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Election of Seven Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] Jeffrey P. [ ] Robert H. [ ] Martin S. [ ] Timothy
Jacobs Hughes Winick Knudsen
[ ] Stephen R. [ ] Frank B. Day [ ] J. Patrick
Roark McDuff
(INSTRUCTION: To withhold authority to vote for any INDIVIDUAL NOMINEE, mark the
box next to that nominee's name.)
(NOTE: If Proposal No. 1 above is approved, Messrs. Jacobs, Roark and Hughes
will be elected for three year terms, Messrs. Day and Winick for two year terms
and Messrs. McDuff and Knudsen to one year terms.
3. Approval of the appointment of Deloitte & Touche LLP as independent auditors
for 1998, subject to the discussion set forth in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Transaction of such other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL 1 AND FOR THE NOMINEES LISTED ABOVE IN PROPOSAL 2.
Dated:______________________________________, 1998
----------------------------
Signature
----------------------------
Signature if held jointly
Please sign your name exactly as it appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY. NOTE: SECURITIES
DEALERS PLEASE STATE THE NUMBER OF SHARES VOTED BY THIS PROXY:
------------------