UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
[X] 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 ss.240.1a-11(c) or ss.240.1a-12
WESTERN COUNTRY CLUBS, INC.
(Name of Registrant as Specified In Its Charter)
n/a
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
1) Title of each class of securities to which transaction applies:
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:
WESTERN COUNTRY CLUBS, INC.
1601 N.W. Expressway, Suite 1610
Oklahoma City, Oklahoma 73118
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March 31, 1999
To the Shareholders:
Western Country Clubs, Inc. (the "Company") will hold a Special Meeting of
Shareholders (the "Special Meeting") on Wednesday, March 31, 1999, at 3:30 p.m.,
CT, at 1601 N.W. Expressway, Suite 1910, Oklahoma City, Oklahoma. The
Shareholders will meet to consider:
(1) A series of amendments to the Company's Certificate of
Incorporation, as amended, to effect, at any time prior to
January 1, 2000, a reverse stock split of the Company's common
stock, par value $.01 per share (the "Common Stock"), whereby
each 1.5, 2, 2.5, 3, 3.5, 4, 4.5, and 5 shares would be combined,
converted and changed into one share of Common Stock, with the
effectiveness of one of such amendments and the abandonment of
the other amendments, or the abandonment of all amendments, to be
determined by the Board of Directors; and
(2) Transacting other business incident to the Special Meeting.
The record date for the Special Meeting is March 2, 1999. Only Shareholders
of record at the close of business on that date can vote at the Special Meeting.
We hope you will attend the Special Meeting. IF YOU DO NOT PLAN TO ATTEND,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY. TO ENCOURAGE THE USE OF PROXIES, WE
HAVE ENCLOSED A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE FOR YOUR USE.
Sincerely,
------------------
Secretary
December __, 1998
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
March 31, 1999
Western Country Clubs, Inc. ("Western", the "Company" or "We") furnishes
this Proxy Statement to inform its Shareholders about the upcoming Special
Meeting. To encourage your participation, Western's Board of Directors is
soliciting proxies to be used at the Special Meeting.
We are mailing this Proxy Statement and the accompanying proxy card to
Shareholders beginning March 8, 1999.
General Information
Who Votes. If you hold shares of Common Stock or Series A Preferred Stock
as of the Record Date, March 2, 1999, you may vote at the Special Meeting. Each
share is entitled to one vote. All shares vote together as a single class. On
March 2, 1999, the Company had outstanding 3,749,721 shares of Common Stock and
40,000 shares of Series A Preferred Stock.
How To Vote. We will vote your shares for you if you send us a signed proxy
before the Special Meeting. You can tell us to approve, disapprove, or abstain
from the Reverse Split Proposal. You can also tell us to approve, disapprove, or
abstain from transacting incidental business at the Special Meeting. We have
provided information about the Reverse Split Proposal in the following pages of
this proxy statement.
IF YOU DO NOT TELL US HOW YOU WANT TO VOTE, WE SHALL VOTE YOUR SHARES "FOR"
THE REVERSE SPLIT.
Canceling Your Proxy. You can cancel your proxy at any time before we vote
your shares in any of three ways:
(1) by giving the Secretary a written cancellation;
(2) by giving a later signed proxy; or
(3) by voting in person at the Special Meeting.
Counting the Necessary Votes. To be approved, the Reverse Split Proposal
must receive the affirmative vote of shareholders having a majority of the
outstanding shares of Common Stock and Series A Preferred Stock, voting together
as a single class. If any incidental business is transacted at the Special
Meeting, the incidental business must receive a majority of the votes that could
be cast at the Special Meeting.
The votes that could be cast are the votes actually cast plus abstentions.
Abstentions are counted as "shares present" at the Special Meeting for purposes
of determining whether a quorum exists and have the effect of a vote "against"
any proposal. Proxies submitted by brokers that do not indicate a vote (usually
because the brokers don't have discretionary voting authority and haven't
received instructions as to how to vote) are not considered "shares present" and
will not affect the outcome of the vote. These broker proxies are referred to as
"broker non-votes".
Incidental Business. Proxies customarily ask for authority to transact
other business that may come before the Special Meeting. Much of this business
is procedural, such as a vote on adjournment. Except for the election of
directors, we do not know of any substantive business to be presented or acted
upon at the Special Meeting. Under our Bylaws, no substantive business besides
that stated in the meeting notice may be transacted at any meeting of
Shareholders. If any matter is presented at the Special Meeting on which a vote
may properly be taken, the designated proxies will vote your shares as they
think best unless you otherwise direct.
OTHER INFORMATION ABOUT DIRECTORS, OFFICERS
AND CERTAIN SHAREHOLDERS
Beneficial Ownership Of Directors, Officers and Certain Shareholders
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 31, 1999, by (i) each
director of the Company, (ii) certain executive officers of the Company, (iii)
all directors and executive officers as a group, and (iv) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding shares
of the Company's Common Stock.
Name of Shareholders Beneficial Ownership (1)
Holding 5% or More, -------------------------------------------------
Director or Executive Officer Number of Shares Percent
----------------------------- ---------------------- ----------------------
Shane Investments, L.C. (2) 1,530,500 35.2
Joe Robert Love, Jr. (3) 1,530,500 35.2
James E. Blacketer (4) 1,808,000 37.6
Red River Concepts, Inc. 1,280,000 29.4
Joe R. Love (5) 1,630,000 34.7
Dominic W. Grimmett (6) 150,000 3.8
John R. Ritter (7) 125,000 3.3
John E. Adams (8) 25,000 *
All directors and officers 2,458,000 45.3
as a group (5 persons)(9)
- - --------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes
voting or investment power with respect to securities. In accordance
with SEC rules, shares which may be acquired upon exercise of options,
warrants, rights or conversion privileges that are currently
exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the holder. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons or entities named in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Reflects indirect beneficial ownership of (i) 680,000 shares owned
directly by Red River Concepts, Inc., a company owned 100% by Shane
Investments, L.C., (ii) 600,000 shares that Red River has an option to
acquire, and (iii) 250,500 shares owned directly.
(3) Reflects indirect beneficial ownership of shares owned directly by Red
River Concepts, Inc., a company owned 100% by Shane Investments, L.C.
Mr. Love is the manager and 100% owner of Shane Investments, L.C., is
an officer and director of Red River Concepts, Inc. and is the adult
son of Joe R.
Love, a director of the Company.
(4) Reflects (i) 63,000 shares owned indirectly, (ii) 1,280,000 shares
owned directly by Red River Concepts, Inc., a company of which Mr.
Blacketer serves as an officer and a director, (iii) 165,000 shares
covered by options under an employee plan, and (iv) 300,000 shares
issuable under a purchase agreement in exchange for a three-year note
with interest at 10% payable quarterly. Mr. Blacketer disclaims
beneficial ownership of 152,000 shares owned by two adult sons.
(5) Reflects (i) 1,280,000 shares owned directly by Red River Concepts,
Inc., a company of which Mr. Love serves a director, (ii) 150,000
shares covered by options granted under an employee plan in 1997 and
1998 to CCDC, Inc., a company owned by certain trusts for the benefit
of Mr. Love's adult sons, and (iii) 200,000 shares covered by a warrant
granted in 1998 to CCDC. Mr. Love disclaims beneficial ownership of the
warrants and options held by CCDC. He also disclaims beneficial
ownership of shares owned by Shane Investments, L.C., an entity
controlled by Joe Robert Love Jr., an adult son, and 122,500 shares
held by a trust for the benefit of another adult son.
(6) Includes options to purchase 125,000 shares held by Mr.
Grimmett.
(7) Includes options and warrants to purchase 90,000 shares held by Mr.
Ritter.
(8) Reflects options to purchase 25,000 shares held by Mr. Adams.
(9) Includes options, warrants and other rights to purchase 1,615,000
shares held directly or indirectly by executive officers and directors
of the Company. See notes 4 through 8 above.
The business address of Messrs. Blacketer and Grimmett is 1601 N.W.
Expressway, Suite 1610, Oklahoma City, Oklahoma 73118. The business
address of Messrs. Love and Adams is 1601 N.W. Expressway, Suite 1910,
Oklahoma City, Oklahoma 73118.
REVERSE SPLIT PROPOSAL
APPROVAL OF A SERIES OF AMENDMENTS TO THE COMPANY'S CERTIFICATE OF
INCORPORATION, AS AMENDED, TO EFFECT, AT ANY TIME PRIOR TO JANUARY 1, 2000,
REVERSE SPLITS OF THE COMPANY'S COMMON STOCK, WHEREBY EACH 1.5, 2, 2.5, 3, 3.5,
4, 4.5 AND 5 OUTSTANDING SHARES WOULD BE COMBINED, CONVERTED AND CHANGED INTO
ONE SHARE OF COMMON STOCK, WITH THE EFFECTIVENESS OF ONE OF THE AMENDMENTS AND
THE ABANDONMENT OF THE OTHER AMENDMENTS, OR THE ABANDONMENT OF ALL AMENDMENTS,
TO BE DETERMINED BY THE BOARD.
General
On January 25, 1999, the Board of Directors authorized a series of
amendments to the Company's Certificate of Incorporation, as amended
("Certificate of Incorporation"), to effect reverse stock splits of the
Company's Common Stock. The amendments would convert each 1.5, 2, 2.5, 3, 3.5,
4, 4.5, and 5 outstanding shares into one share of Common Stock (the "Reverse
Splits"). If approved by the shareholders, the Board will determine, prior to
January 1, 2000, whether to effect one of the amendments and abandon the other
amendments, or to abandon all of the amendments, in which case no reverse split
will occur.
By approving these amendments, the shareholders are authorizing the Board
in its discretion to effectuate the Reverse Split in any of the following
ratios: 1:1.5, 1:2, 1:2.5, 1:3, 1:3.5, 1:4, 1:4.5, and 1:5, or to abandon the
Reverse Splits. The Board believes that shareholder approval of a range of
reverse split ratios (as opposed to a specified exchange ratio) will provide the
Board with flexibility to achieve the purpose of the Reverse Splits. See "Reason
for the Reverse Splits" below.
The form of amendment to Company's Certificate of Incorporation is attached
to this Proxy Statement as Exhibit "A" (the "Amendment"). A Reverse Split would
become effective when the Amendment is filed with the office of the Secretary of
State of the State of Colorado (the "Effective Date"). Except with respect to
fractional shares, on the Effective Date, each share of Common Stock issued and
outstanding immediately prior thereto (the "Old Common Stock") will be
automatically and without any action on the part of the shareholders converted
into new shares of Common Stock (the "New Common Stock") in accordance with the
Reverse Split ratio determined by the Board within the limits set forth in this
Proposal, that is, .67 share, for the ratio 1:1.5, through and including .2
share, for the ratio 1:5.
Except as may result from the payment of cash for fractional shares, each
shareholder will hold the same percentage of Common Stock outstanding
immediately following a Reverse Split as each such shareholder did immediately
prior to such Reverse Split. Upon effectiveness, a Reverse Split will result in
a reduction of the number of shares of Common Stock issued and outstanding and a
corresponding increase in the number of authorized, but unissued shares of the
Company's Common Stock.
Reason for the Reverse Splits; Effects of Non-Approval of the Reverse Splits
The principal reason for the Reverse Splits is the desire to remain
eligible for listing on The Nasdaq SmallCap Market. Since July 22, 1998, the
Company's shares of Common Stock have intermittently traded below $1.00, which
is the minimum bid price for continued listing in the Nasdaq SmallCap Market. In
a letter dated August 28, 1998, Nasdaq informed the Company that it must remedy
the failure to meet the minimum bid price, unless the trading price of the
Common Stock increases. On February 4, 1999, the Company was afforded a Nasdaq
hearing regarding its continued listing and was given until April 15, 1999, to
comply with the minimum bid price requirements.
Failure to meet the minimum bid price requirement will result in a
delisting of the Common Stock from the Nasdaq SmallCap Market. Shares of
delisted companies are traded in the over-the-counter market on an electronic
bulletin board commonly referred to as the "pink sheets." It is generally
believed that "pink sheet stocks" are subject to more fluctuations in price and
are less liquid in trading than listed stocks.
The Board of Directors believes continued listing on Nasdaq is in the best
interests of the Company and the shareholders and proposes these Reverse Splits
to increase the market value per share of the Company's Common Stock (assuming a
proportionate change in stock price) to meet the $1.00 per share minimum bid
price. The Board of Directors believe that if the Company's Stock were traded on
the pink sheets, it would become more difficult to obtain accurate quotations as
to the price of the Common Stock, hindering trading of the shares. In addition,
willingness of brokers to trade the delisted shares may be adversely effected by
the fact delisted stocks are subject to "penny-stock" rules that impose
additional sales practice requirements on broker-dealers and because many
brokerage houses have policies and commission structures that tend to discourage
brokers from dealing in lower priced stocks.
The Board of Directors of the Company reserves the right, notwithstanding
shareholder approval and without further action by the shareholders, to decide
not to proceed with the Reverse Splits if at any time prior to its effectiveness
it determines, in its sole discretion, that the Reverse Splits is no longer in
the best interests of the Company and its shareholders.
Effects of the Reverse Splits on Ownership and Control
If effected, the Reverse Split would reduce the number of outstanding
shares of the Company's Common Stock and the number of shares issuable upon
exercise or conversion of options, warrants and convertible Preferred Stock, but
would have no effect on the number or par value of authorized shares of the
Company's Common Stock or Preferred Stock. As a result, the Reverse Split will
increase the number of authorized, but unissued and unreserved shares of Common
Stock. The percentage and number of authorized, but unissued and unreserved
shares would increase from 73.6% (currently) to between approximately 82.4% or
20,598,853 shares (if the ratio of 1:1.5 were effected) and 94.7% or 23,679,656
shares (if the ratio of 1:5 were effected).
Except for nominal reductions resulting from cash payments for fractional
shares, the Reverse Split will not reduce any shareholder's proportionate equity
interest in the Company in relation to the other shareholders or the rights,
preference, privileges or priorities of any shareholder. The Reverse Split will
increase the number of authorized, but unissued and unreserved shares of Common
Stock. This increase will subject a shareholder's percentage of ownership of the
New Common Stock to greater possible dilution than the shareholder would have
faced with the Old Common Stock.
The Board of Directors has determined that retaining 25,000,000 authorized
shares of Common Stock (rather than proportionately reducing the number of
authorized shares) is desirable to make shares readily available for future
issuances of stock to raise capital in private or public transactions, as well
as future possible merger or acquisition transactions, should opportunities
arise. Subject to Nasdaq listing requirements which may require shareholder
approval in certain instances, the Board of Directors may be able to issue
authorized, but unissued shares without shareholder approval. The Company has no
plans to issue additional shares of Common Stock, other than pursuant to
outstanding options, warrants and convertible Preferred Stock. As of December
31, 1998, 25,000,000 shares of Common Stock were authorized, 3,749,721 of which
were issued and outstanding. The Company has outstanding options, warrants,
convertible Preferred Stock and other rights to acquire Common Stock covering an
additional 2,852,000 shares.
Effects of the Reverse Splits on Market Price and Marketability
The Board of Directors expects the per share price of the Company's Common
Stock, upon effectiveness of the Reverse Split, to rise above the $1.00 minimum
price bid required by Nasdaq. There can be no assurance, however, that such an
increase in price will occur or, if it does occur, that it will equal or exceed
the direct arithmetical result of the Reverse Split as there are numerous
factors and contingencies which could affect the price. In addition, there can
be no assurance that the Common Stock will sustain any increased price level as
a result of the Reverse Split, or that the reduced number of shares outstanding
after the Reverse Split will not adversely affect the liquidity or market price
of the Common Stock. There can be no assurance that the Company will continue to
meet the listing requirements of Nasdaq following the Reverse Split.
A Reverse Split will result in some shareholders owning "odd lots" of less
than 100 shares of Common Stock received as a result of such Reverse Split.
Brokerage commissions and other costs of transactions in odd lots may be higher,
particularly on a per-share basis, than the cost of transactions in even
multiples of 100 shares ("round-lots").
Effects of the Reverse Splits on Record Holders
On February 1, 1999, there were 84 holders of record of the Company's
Common Stock, none of whom held less than five shares. Since any shareholder
holding five or more shares would continue to hold at least one share following
a Reverse Split, the Company expects that the number of record holders will not
change because of a Reverse Split.
Effects of the Reverse Splits on Dividends
The issuance of additional authorized, but unissued and unreserved shares
of Common Stock might be disadvantageous to current shareholders in that any
additional shares could potentially reduce per share dividends, if any.
Shareholders should consider, however, that the possible impact upon dividends
is likely to be minimal in view of the fact that the Company has never paid
dividends on Common Stock, has not adopted any policy with respect to the
payment of dividends on Common Stock, and does not intend to pay any cash
dividends on Common Stock in the foreseeable future. The Company instead intends
to utilize retained earnings, if any, for use in financing growth and additional
business opportunities.
Effects of the Reverse Splits on Takeovers
The issuance of additional shares of Common Stock available for issuance as
a result of a Reverse Split, while providing desirable flexibility in carrying
out corporate purposes, could potentially make it more difficult for a third
party to acquire, or discourage a third party from obtaining, a majority of the
outstanding Common Stock of the Company, thereby having an anti-takeover effect.
Although the Company's management does not view this proposal as a means of
doing so, the Company could potentially use the additionally authorized, but
unissued shares of Common Stock to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company by, for example, privately
placing shares with purchasers who would side with the Board in opposing a
hostile takeover bid. Shares of Common Stock could also be issued to a holder
that would thereafter have sufficient voting power to assure that any proposal
to amend or repeal the Bylaws or certain provisions of the Certificate of
Incorporation would not receive the requisite vote. Such uses of the Common
Stock could render more difficult, or discourage, an attempt to acquire control
of the Company, if such transaction were opposed by the Board. Although the
increase in the number of authorized, but unissued shares of Common Stock of the
Company could be construed as having such anti-takeover effects, neither the
Board nor the Company's management views this proposal in that perspective;
rather, as described above, the Company anticipates that the newly authorized
shares of Common Stock would be used for future capital raising activities.
Effects of the Reverse Splits on Registration and Voting
The Company's Common Stock is currently registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. A Reverse Split will not affect the registration of the Company's
Common Stock under the Exchange Act. After a Reverse Split, the Company's Common
Stock will continue to be reported on the Nasdaq SmallCap Market (assuming it
meets all applicable listing requirements) under the symbol "WCCI" (although
Nasdaq will add the letter "D" to the end of the trading symbol for a period of
20 trading days to indicate the Reverse Split has occurred).
Proportionate voting rights and other rights of the holders of Common Stock
will not be affected by a Reverse Split (other than as a result of the payment
of cash in lieu of fractional shares, as described below). Although a Reverse
Split will not affect the rights of shareholders or any shareholder's
proportionate equity interest in the Company (subject to the treatment of
fractional shares), a Reverse Split will increase the ability of the Board to
issue authorized and unissued shares without further shareholder action.
Effects of the Reverse Splits on Reserved Shares and Par Value
The Reverse Splits will reduce proportionately the number of shares and
increase the exercise price per share of Common Stock covered by outstanding
options and warrants. As of December 31, 1998, the aggregate number of shares of
Common Stock currently authorized for issuance under the employee stock option
plans is 677,000 at exercise prices ranging from $.75 to $2.00 (prior to giving
effect to any of the Reverse Splits). In addition to the outstanding options
under the Company's employee stock option plan, the Company also has outstanding
warrants to purchase up to 1,275,000 shares of the Company's Common Stock at
exercise prices ranging from $.75 to $6.30 (prior to giving effect to any of the
Reverse Splits).
Each share of the Company's Preferred Stock is convertible into ten shares
of Common Stock. This ratio will be proportionately reduced by the exchange
ratio of the Reverse Split, that is, a 1:5 Reverse Split would result in two
shares of Common Stock for each share of Preferred Stock, a 1:2 Reverse Split
would result in five shares, and so forth. The Company has also reserved for
issuance 900,000 shares under two purchase agreements at $.75 per share (prior
to giving effect to any of the Reverse Splits). The Reverse Splits will reduce
proportionately the number of shares and increase the purchase price per share
under these agreements.
The par value of the Company's Common Stock will remain at $0.01 per share
following the Effective Date of a Reverse Split, although the number of shares
of Common Stock issued and outstanding will be reduced. Accordingly, the
aggregate par value of the issued and outstanding Common Stock also will be
reduced. In addition, the number of authorized, but unissued shares of Common
Stock effectively will be increased by a Reverse Split.
Mechanics of the Reverse Split
If the Reverse Splits are approved by the shareholders, the Amendment will
be filed with the Colorado Secretary of State, and the Reverse Split will thus
be effected unless abandoned by the Board of Directors. Immediately upon the
filing of the Amendment, each share of Old Common Stock will, automatically and
without any further action by the shareholders, be converted into a lesser
number of shares of New Common Stock according the ratio in the Amendment (one
of 1.5, 2, 2.5, 3, 3.5, 4, 4.5, or 5 to one).
Promptly after the Effective Date, the Company will notify all shareholders
of record on the date of effectiveness where and by what means to surrender
their stock certificates in exchange for certificates representing the New
Common Stock. CERTIFICATES SHOULD NOT BE SENT TO THE COMPANY OR THE COMPANY'S
TRANSFER AGENT PRIOR TO RECEIPT OF A LETTER OF TRANSMITTAL.
No fractional shares will be issued in the Reverse Split. Rather, if a
shareholder, because of the Reverse Split, owns a fractional share of the New
Common Stock, the Company will pay an amount in cash equal to the trading price
of the fractional share as determined by the Nasdaq SmallCap Market listing
price of the share on the day before the Effective Date for the Reverse Split.
Until a shareholder forwards a completed letter of transmittal together
with certificates representing shares of Old Common Stock to the transfer agent
and receives a new certificate, such shareholder's Old Common Stock shall be
deemed equal to the number of whole shares of New Common Stock, and cash in lieu
of fractional shares, to which each shareholder is entitled as a result of the
Reverse Split.
Shareholders will not bear any service charges, brokerage commissions or
transfer taxes when exchanging their certificates of Old Common Stock for New
Common Stock. But if any certificates of New Common Stock are to be issued in a
name other than that in which the certificates of Old Common Stock are
registered, the Company may require that: (i) the shareholder pay any applicable
transfer taxes, (ii) the transfer complies with all applicable Federal and state
securities laws, and (iii) the surrendered certificate be properly endorsed and
otherwise be in the proper form for transfer.
Right To Dissent
Article 113 of the Colorado Business Corporation Act provides that a
shareholder is entitled to dissent and obtain payment of the fair value of such
shareholder's shares if a Reverse Split would leave the shareholder with less
than one whole share. Under the proposed Amendments, a shareholder would have
the right to dissent if the shareholder had fewer than five shares and the Board
opted to effected the 1:5 Reverse Split, fewer than four shares if a 1:4 Reverse
Split, fewer than three shares if a 1:3 Reverse Split, and so on (the
"Qualifying Shareholders"). The Qualifying Shareholders are essentially
shareholders who would have no shares following, and whose share position would
be "cashed out" by, the Reverse Split. Although the Company doubts that any of
its shareholders could be Qualifying Shareholders, if any such shareholders
exist, they have a statutory right to dissent. Shareholders other than
Qualifying Shareholders will not have a right to dissent.
The Company's Qualifying Shareholders will be entitled to the statutory
dissenter's right if the Reverse Splits are approved by the shareholders and the
Board causes a Reverse Split to become effective. Unless this Proxy Statement
fails to provide the shareholders with notice that they are or may be entitled
to assert a statutory dissenter's right, if a Qualifying Shareholder desires to
exercise his or her statutory dissenter's right, a Qualifying Shareholder must
(i) cause the Company to receive written notice, before the vote is taken, of
his or her intention to demand payment for the fractional share resulting from
the Reverse Split (a "Dissenter's Payment Demand"), and (ii) not vote any shares
held by such Qualifying Shareholder in favor of the proposed Reverse Split. If a
shareholder, at the beginning of the Special Meeting, does not object to the
holding of the meeting or the transacting of business at the meeting due to lack
of notice or defective notice, including withdrawing any previously delivered
proxy, any such possible objection regarding lack of notice or defective notice
is waived. If a Qualifying Shareholder does not demonstrate lack of notice or
defective notice with respect to the statutory dissenter's right or the Special
Meeting, does not provide a Dissenter's Payment Demand and does not either vote
against the Reverse Split or abstain from voting, the shareholder is not
entitled to demand payment as described above and such potential statutory
dissenter's right is waived. A vote against the Reverse Split is not statutorily
defined as being equivalent to a Dissenter's Payment Demand.
If the Reverse Splits are approved at the Special Meeting, the Company
shall give all Qualifying Shareholders who complied with clauses (i) and (ii)
above written notice of the approval of the Reverse Split within ten days after
the Effective Date. Such notice shall inform those Qualifying Shareholders how
they may receive payment as a dissenting shareholder. Such Qualifying
Shareholders will be given at least 30 days to deliver the appropriate payment
demand and stock certificate to the Company or its agent. Upon the later of (i)
the date of the Dissenter's Payment Demand or (ii) the Effective Date of the
Reverse Split, the Company shall pay the dissenting Qualifying Shareholder the
amount the Company estimates to be the fair value of the Qualifying Shareholder,
plus accrued interest (the "Company's Payment Offer"). If the Reverse Split has
not become effective within 60 days after the date set by the Company by which
payment demands and stock certificates must be received, the stock certificates
received by the Company or its agent shall be returned to each dissenting
Qualifying Shareholder. If the Reverse Split becomes effective after such sixty
days, the Company shall send a new dissenter's notice and the provisions of
Article 113 shall again be applicable.
A dissenting Qualifying Shareholder may reject the Company's Payment Offer,
or may give notice to the Company in writing of the shareholder's estimate of
the fair value and amount of interest owed to the shareholder by the Company, if
(i) the dissenting shareholder believes the amount paid by the Company in the
Company's Payment Offer is less than fair value or the interest calculation is
incorrect, (ii) the Company fails to make payment within 60 days of the date the
shareholder's payment demand was due, or (iii) the Company does not return the
deposited stock certificates as required if the Reverse Split does not become
effective. If the dissenting Qualifying Shareholder provides such notice, the
Company must pay the shareholder's demand or commence a court proceeding within
60 days of receiving such rejection or additional payment demand, as set forth
in Part 3 of Article 113. A dissenting Qualifying Shareholder waives his or her
right to require the Company to pay such demand or seek judicial review if the
Company does not receive this notice within 30 days after the Company made or
offered payment to the dissenting Qualifying Shareholder. If a shareholder
believes that he or she may be a Qualifying Shareholder and wishes to consider
exercising dissenter's rights, such shareholder may contact the Company
(Attention: James E. Blacketer, President) to obtain at no cost a copy of
Article 113 of the Colorado Business Corporation Act.
Certain Federal Income Tax Consequences of the Reverse Splits
The following is a summary of the material Federal income tax consequences
of the Reverse Split to shareholders of the Company. This summary is based on
the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
the Treasury Department Regulations (the "Regulations") issued pursuant thereto,
and published rulings and court decisions in effect as of the date hereof, all
of which are subject to change. This summary does not take into account possible
changes in such laws or interpretations, including amendments to the Code,
applicable statutes, Regulations and proposed Regulations or changes in judicial
or administrative rulings, some of which may have retroactive effect. No
assurance can be given that any such changes will not adversely affect the
discussion of this summary.
The Company believes that the Reverse Split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code and as a
stock-for-stock exchange under Section 1036(a) of the Code. As a result:
1. Neither the Company nor its shareholders will recognize any gain or loss
by exchanging Old Common Stock for New Common Stock in the Reverse Split, except
with respect to any cash received in lieu of fractional shares.
2. A shareholder's aggregate tax basis in his or her New Common Stock will
be the same as his or her aggregate tax basis in the Old Common Stock exchanged
therefor.
3. A shareholder's holding period of the New Common Stock will include the
period for which the shares of Old Common Stock were held, provided all such
Common Stock was held as a capital asset on the date of the exchange.
4. Each shareholder who receives cash, if any, in lieu of fractional share
of New Common Stock will recognize capital gain or loss equal to the difference
between the amount of cash received and the shareholder's tax basis allocable to
such fractional share.
This summary is provided for general information only and does not purport
to address all aspects of the possible Federal income tax consequences of the
Reverse Split and is not intended as tax advice to any person. In particular,
and without limiting the foregoing, this summary does not consider the Federal
income tax consequences to shareholders of the Company in light of their
individual investment circumstances or to holders subject to special treatment
under the Federal income tax laws (such as life insurance companies, regulated
investment companies and foreign taxpayers). In addition, this summary does not
address any consequence of the Reverse Split under any state, local or foreign
tax laws.
No ruling from the Internal Revenue Service or opinion of counsel has been
or will be obtained regarding the Federal income tax consequences to the
shareholders of the Company as a result of the Reverse Split. ACCORDINGLY,
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX
CONSEQUENCES OF THE REVERSE SPLIT, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. It is the responsibility of
each shareholder to obtain and rely on advice from his or her personal tax
advisor as to: (i) the effect on his or her personal tax situation of the
Reverse Split (including the application and effect of state, local and foreign
income and other tax laws); (ii) the effect of possible future legislation and
Regulations; and (iii) the reporting of information required in connection with
the Reverse Split on his or her own tax returns. It also will be the
responsibility of each shareholder to prepare and file all appropriate tax
returns.
Required Vote
To approve the Reverse Split Proposal, shareholders with a majority of the
outstanding shares of Common Stock and Series A Preferred Stock, voting together
as a single class, must vote "for" the Proposal. The Board will vote the proxies
it receives in favor of this Proposal unless shareholders specify otherwise.
AT THE SPECIAL MEETING, THE SHAREHOLDERS WILL BE REQUESTED TO CONSIDER AND
APPROVE A RESOLUTION AUTHORIZING A SERIES OF AMENDMENTS TO THE COMPANY'S
CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT, AT ANY TIME PRIOR TO
JANUARY 1, 2000, REVERSE SPLITS OF THE COMPANY'S COMMON STOCK, WHEREBY EACH 1.5,
2, 2.5, 3, 3.5, 4, 4.5 AND 5 OUTSTANDING SHARES WOULD BE CONVERTED INTO ONE
SHARE OF COMMON STOCK, WITH THE EFFECTIVENESS OF ONE OF THE AMENDMENTS AND THE
ABANDONMENT OF THE OTHER AMENDMENTS, OR THE ABANDONMENT OF ALL AMENDMENTS, TO BE
DETERMINED BY THE BOARD. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING
SHARES OF THE COMPANY'S COMMON STOCK AND SERIES A PREFERRED STOCK, VOTING
TOGETHER AS A SINGLE CLASS, WILL BE REQUIRED TO APPROVE ANY SUCH REVERSE SPLIT.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THIS PROPOSAL.
OTHER INFORMATION ABOUT THE SPECIAL MEETING
Other Matters Coming Before The Meeting
As of the date of this Proxy Statement, the Company knows of no business to
come before the Special Meeting other than that referred to above. The Company's
rules of conduct for the Special Meeting prohibit the introduction of
substantive matters not previously presented to the Shareholders in a proxy
statement. As to other business, such as procedural matters, that may come
before the meeting, the person or persons holding proxies will vote those
proxies in the manner they believe to be in the best interests of the Company
and its Shareholders.
Shareholder Proposals for the Next Special Meeting
Any Shareholder who wishes to present a proposal at the Company's 2000
Annual Meeting of Shareholders must deliver such proposal to the Secretary of
the Company by January 31, 2000, for inclusion in the Company's proxy, notice of
meeting, and proxy statement for the 2000 Annual Meeting.
Additional Information
The Company will bear the cost of soliciting proxies. Officers and regular
employees of the Company may solicit proxies by further mailings, personal
conversations, or by telephone, facsimile or other electronic transmission. They
will do so without compensation other than their regular compensation. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock.
By Order of the Board of
Directors
------------------
Secretary
March __, 1999
EXHIBIT A
FORM of AMENDMENT
to the
CERTIFICATE of INCORPORATION
Western Country Clubs, Inc., a corporation organized and existing under the
Colorado Business Corporation Act (the "Corporation"), does hereby certify:
FIRST: That the first numbered paragraph of Article FOURTH of the
Certificate of Incorporation, as amended, is hereby deleted and the following is
substituted in lieu thereof:
"FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 35,000,000, consisting of 25,000,000 shares of
common stock, par value $0.01 per share (the "Common Stock"), and 10,000,000
shares of preferred stock, par value $0.10 per shares (the "Preferred Stock").
Immediately upon the filing of this Amendment to the Certificate of
Incorporation (the "Effective Time"), [each one and one-half (1.5), two (2), two
and one half (2.5), three (3), three and one-half (3.5), four (4), four and one
half (4.5), or five (5)] shares of the Common Stock, issued and outstanding
immediately prior to the Effective Time (the "Old Common Stock"), shall
automatically, without further action on the part of the Corporation or any
holder of Old Common Stock, be combined, converted and changed into one (1)
fully paid and nonassessable share of Common Stock (the "New Common Stock" and
the "Reverse Split"), subject to the treatment of fractional share interests as
described below. The conversion of the Old Common Stock into New Common Stock
will be deemed to occur at the Effective Time regardless of when the
certificates representing such Old Common Stock are physically surrendered to
the Corporation in exchange for certificates representing New Common Stock.
After the Effective Time, certificates representing the Old Common Stock will,
until surrendered to the Corporation in exchange for New Common Stock, represent
the number of shares of New Common Stock into which such Old Common Stock shall
have been converted pursuant to this Amendment and the right to receive cash in
lieu of any fractional share interest. No certificates representing fractional
shares of New Common Stock shall be issued in connection with the Reverse Split.
Holders who otherwise would be entitled to receive fractional share interests of
New Common Stock shall be entitled to receive in lieu of fractional shares and
upon surrender to the Corporation's transfer agent of their certificates
representing Old Common Stock, duly endorsed, a cash payment in an amount equal
to the product calculated by multiplying (i) the closing sales price of the
Corporation's Common Stock on the Effective Date as reported on the Nasdaq
SmallCap Market or, if no such sales price exists, the mid-range between the
last bid and asked price on the Effective Date by (ii) the number of shares of
Old Common Stock held by such holder that would otherwise have been converted
into a fractional share interest. Upon surrender by a holder of Old Common Stock
of a certificate or certificates for Old Common Stock, duly endorsed, to the
Corporation's transfer agent, the Corporation shall, as soon as practicable
thereafter, issue and deliver to such holder of Old Common Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of New Common Stock to which such holder shall be entitled as
aforesaid together with cash in lieu of any fractional share interest."
SECOND: That said Amendment was duly adopted in accordance with the
provisions of Section [xx] of the Colorado Business Corporation Act.
Western COUNTRY CLUBS, INC. This Proxy Is Solicited on Behalf of the
1601 N.W. Expressway, Suite 1610 Board of Directors The undersigned hereby
Oklahoma City, Oklahoma 73118 appoints James E. Blacketer, Joe R. Love
and Dominic W. Grimmett as Proxies, each
with the power to appoint his substitute,
and hereby authorizes them to represent
and to vote, as designated below, all the
shares of common stock of Western Country
Clubs, Inc. held of record by the
undersigned on March 2, 1999, at the
Special Meeting of Shareholders to be held
on March 31, 1999, or any adjournment
thereof.
1. Approval of a series of amendments to the Company's Certificate of
Incorporation, as amended, to effect, at any time prior to January 1, 2000,
a reverse stock split of the Company's common stock, par value $.01 per
share (the "Common Stock"), whereby each 1.5, 2, 2.5, 3, 3.5, 4, 4.5, and 5
shares would be combined, converted and changed into one share of Common
Stock, with the effectiveness of one of such amendments and the abandonment
of the other amendments, or the abandonment of all amendments, to be
determined by the Board of Directors.
FOR AGAINST ABSTAIN
(over)
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 REVERSE STOCK SPLIT PROPOSAL.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED:____________________________, 1999
----------------------------------------
(Signature)
----------------------------------------
(Signature if held jointly)
Please mark, sign, date and return this
Proxy Card promptly using the enclosed
envelope.