-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qm+WRI5nBr14xyGYpquy22HKS4wymduIQr2KyUVdJUhj1VIdalp2iCqPSsiqJnat BG7/ORmNU95n4tA47DNfTA== 0000906780-01-000004.txt : 20010416 0000906780-01-000004.hdr.sgml : 20010416 ACCESSION NUMBER: 0000906780-01-000004 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPHA HOSPITALITY CORP CENTRAL INDEX KEY: 0000906780 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING & DRINKING PLACES [5810] IRS NUMBER: 133714474 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 001-12522 FILM NUMBER: 1601851 BUSINESS ADDRESS: STREET 1: 12 E 49TH ST STREET 2: 24TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2127503500 MAIL ADDRESS: STREET 1: 12 EAST 49TH ST STREET 2: 24TH FL CITY: NEW YORK STATE: NY ZIP: 10017 PRE 14A 1 0001.txt SECURITIES AND EXCHANGE COMMISSION SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by Registrant [ x ] Filed by a Party Other than Registrant [ ] Check the Appropriate Box: [ x ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Exchange Act Rule 14a- 11(c) or 14a-12 Alpha Hospitality Corporation (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [ x ] No Fee Required. [ ] Fee computed on table below per Exchange Act Rules 14a- 6(i)(l) 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 the 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 is 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: Copies of all communications to: Herbert F. Kozlov, Esq. Parker Duryee Rosoff & Haft, P.C. 529 Fifth Avenue New York, New York 10017 ALPHA HOSPITALITY CORPORATION 12 East 49th Street, 24th floor New York, New York 10017 NOTICE OF MEETING OF STOCKHOLDERS TO BE HELD ON MAY 31, 2001 To the Stockholders of Alpha Hospitality Corporation: NOTICE IS HEREBY GIVEN that a combined Annual and Special Meeting (the "Meeting") of Stockholders of Alpha Hospitality Corporation (the "Company"), a Delaware corporation, will be held at the Ella Star Casino 10800 Collins Avenue, Miami Beach, Florida on May 31, 2001, at 9:00 a.m. (local time) for the following purposes: (1) To elect six members to the Board of Directors of the Company; (2) To consider and vote upon a proposal to amend the Certificate of Designations for the Company's Series B and Series C Preferred Stock to permit the Company to make payment of dividends accrued on the Company's Series C Preferred Stock in shares of the Company's Common Stock at the discretion of the Company's Board of Directors; (3) To consider and vote upon a proposal to approve the issuance of shares of Common Stock in payment of dividends accrued on the Company's Series C Preferred Stock for the years 1998, 1999 and 2000; (4) To consider and vote upon a proposal to amend the Company's Certificate of Incorporation to provide for a reverse 1-for-10 stock split of outstanding Common Stock, par value $.01 per share; (5) To ratify the appointment of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants; and (6) To transact any such other business as may properly come before the Meeting or any postponement or adjournment thereof. The Board of Directors of the Company has fixed April ___, 2001 as the record date (the "Record Date") for the determination of stockholders entitled to notice of, and to vote at, the Meeting or any postponement or adjournment thereof. Accordingly, only stockholders of record at the close of business on the Record Date are entitled to notice of, and shall be entitled to vote at, the Meeting or any postponement or adjournment thereof. You are requested to fill in, date and sign the enclosed proxy card(s), which are being solicited by the Company's Board of Directors. Submitting a proxy will not prevent you from voting in person, should you so desire, but will help to secure a quorum and will avoid added solicitation costs. You may revoke your proxy at any time before it is voted at the Meeting. ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, SIGN AND PROMPTLY MAIL YOUR PROXY IN THE RETURN ENVELOPE PROVIDED. YOUR FAILURE TO EXERCISE YOUR VOTE WILL HAVE THE EFFECT OF A VOTE AGAINST THE PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF DESIGNATIONS AND AGAINST THE PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION. By Order of the Board of Directors, ____________________________ ___________________________ Stanley S. Tollman Thomas W. Aro Chairman of the Board, President Vice President and Secretary and Chief Executive Officer April ___, 2001 ALPHA HOSPITALITY CORPORATION 12 EAST 49TH STREET, 24TH FLOOR NEW YORK, NEW YORK 10017 __________________ PROXY STATEMENT __________________ ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AT 9:00 A.M. AT THE ELLA STAR CASINO, 10800 COLLINS AVENUE MIAMI BEACH, FLORIDA MAY 31, 2001 This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Alpha Hospitality Corporation (the "Company") for use at a combined Annual and Special Meeting of Stockholders of the Company (the "Meeting") to be held at 9:00 a.m. at The Ella Star Casino, 10800 Collins Avenue, Miami Beach, Florida, on May 31, 2001 and at all adjournments and postponements thereof. This Proxy Statement, with the accompanying Notice of Meeting and form of proxy, are first being sent to stockholders on or about April___, 2001. A proxy card is enclosed. Whether or not you plan to attend the Meeting in person, please date, sign and return the enclosed proxy card as promptly as possible in the postage prepaid envelope provided to ensure that your shares will be voted at the Meeting. Any stockholder who returns a proxy has the power to revoke it at any time prior to its effective use by filing an instrument revoking it, or a duly executed proxy bearing a later date, with the Secretary of the Company, or by attending the Meeting and voting in person. Unless otherwise instructed, any such proxy, if not revoked, will be voted at the Meeting "FOR" each of the proposals set forth in this Proxy Statement and as recommended by the Company's Board of Directors (the "Board"), in its discretion, with regard to all other matters that may properly come before the Meeting, provided, however, that as discussed more fully below, the Board does not have discretion to vote shares in favor of the proposed amendment of the Company's Certificate of Designations or in favor of the proposed amendment of the Company's Certificate of Incorporation. The Company does not currently know of any matters that may properly come before the Meeting other than the proposals described in this proxy statement. The Board has set April , 2001 (the "Record Date") as the record date for determining stockholders who are entitled to receive notice of, and to vote at, the Meeting. At the Record Date, there were outstanding 24,140,759 shares of the Company's Common Stock, 821,496 shares of the Company's Series B Preferred Stock, 135,162shares of the Company's Series C Preferred Stock and 1,950 shares of the Company's Series D Preferred Stock. The Series D Preferred Stock has no voting rights. The presence, either in person or represented by proxy, of persons entitled to exercise a majority of all votes entitled to be exercised by all of the Company's outstanding capital stock (i.e., the Common Stock, the Series B Preferred Stock and the Series C Preferred Stock) is necessary to constitute a quorum for the transaction of business at the Meeting. Each share of Common Stock issued and outstanding on the Record Date is entitled to one vote, each share of Series B Preferred Stock is entitled to eight (8) votes, and each share of Series C Preferred Stock is entitled to twenty-four (24) votes on any matter presented for consideration and action by the stockholders at the Meeting. A quorum being present, either in person or by proxy, a plurality of the votes cast is necessary to elect each nominee on the Company's slate of directors. A majority of the votes cast is necessary to pass the proposals relating to ratification of prior issuances of Common Stock and of the appointment of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants. The proposal to amend the Company's Certificate of Incorporation requires a majority of all of the votes entitled to be cast by all of the Company's outstanding capital stock (i.e., the Common Stock, the Series B Preferred Stock and the Series C Preferred Stock). The proposal to amend the Certificate of Designations requires a majority of all of the votes entitled to be cast by all of the Company's outstanding capital stock, as well as a majority of the Series C Preferred Stock voting as a class. The cost of preparing, assembling, printing and mailing this Proxy Statement and the accompanying form of proxy, and the cost of soliciting proxies relating to the Meeting, will be borne by the Company. The Company intends to request banks and brokers to solicit their customers who beneficially own Common Stock listed of record in names of nominees and will reimburse such banks and brokers for their reasonable out-of-pocket expenses for such solicitations. If any solicitation of the holders of the Company's outstanding shares of Preferred Stock (whether Series B or C) is deemed necessary, the Company (through its directors and officers) anticipates making such solicitation directly. The solicitation of proxies by mail may be supplemented by telephone, telegram and personal solicitation by officers, directors and other employees of the Company, but no additional compensation will be paid to such individuals. THE MEETING Time and Place of Special Meeting The Meeting is scheduled to be held at 9:00 a.m. local time, on the 31st of May, 2001 at the Ella Star Casino, 10800 Collins Avenue, Miami Beach, Florida. Purpose of the Meeting At the Meeting, the Company's stockholders will be asked (1) to elect six members to the Company's Board of Directors (the "Board") for the ensuing year, (2) to consider and vote on a proposal to amend the Company's Certificate of Designations for its Series B and C Preferred Stock (the "Certificate of Designations") in a manner that will provide the Company with the option of issuing shares of Common Stock in payment of dividends accrued on the Series C Preferred Stock, (3) to consider and vote upon a proposal to approve the issuance of shares of Common Stock in payment of dividends accrued on the Company's Series C Preferred Stock for the years 1998, 1999 and 2000; (4) to consider and vote on a proposal to amend the Company's Certificate of Incorporation (the "Certificate of Incorporation") to provide for a reverse 1-for-10 stock split of the Company's outstanding Common Stock; (5) to ratify the appointment of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants; and (6) to transact such other business as may properly come before the Meeting or any postponement or adjournment thereof. Voting and Solicitation of Proxies All shares of Common Stock and Series B and Series C Preferred Stock represented at the Meeting by properly executed proxies received prior to the vote at the Meeting, unless previously revoked (as described immediately below), will be voted in accordance with the instructions thereon. Where a properly signed proxy is returned and no instructions are given, proxies will be voted FOR (i) the election of the nominees named herein as members of the Board, (ii) the approval of the issuances of shares of Common Stock in payment of accrued dividends on the Series C Preferred Stock for the years 1998, 1999 and 2000; and (iii) the ratification of the appointment of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants. No matters other than those referred to above are presently scheduled for consideration at the Meeting. A broker who holds shares in street name will not be entitled to vote on either the proposal to amend the Certificate of Designations or the proposal to amend the Certificate of Incorporation without instructions from the beneficial owner of such shares. This inability to vote is referred to as a broker non-vote. Stockholder abstentions and broker non-votes will be counted for purposes of determining the existence of a quorum at the Meeting. However, because, under the General Corporation Law of the State of Delaware and the Company's Certificate of Incorporation and by- laws, the proposal to amend the Certificate of Designations and the Certificate of Incorporation, in order to be approved, must be approved by vote of holders of shares of the capital stock of the Company entitled to exercise a majority of all of the votes attendant or attributable to all of the Company's outstanding Common Stock, Series B Preferred Stock and Series C Preferred Stock, abstentions and broker non-votes will have the same effect as a vote against these proposals. In addition, the majority vote of the Series C Preferred Stock, participating separately as a class, is required to pass the proposal to amend the Certificate of Designations. All of the shares of Series C Preferred Stock are held by one stockholder, who has indicated that it will vote in favor of that proposal. Any proxy may be revoked by the person giving it at any time before it is voted. A proxy may be revoked by filing with the Secretary of the Company (12 East 49th Street, 24th Floor, New York, New York 10017) either (i) a written notice of revocation bearing a date later than the date of such proxy or (ii) a subsequent proxy relating to the same shares, or by attending the Meeting and voting in person (although attendance at the Meeting will not, in and of itself, constitute revocation of a proxy). Proxies are being solicited by and on behalf of the Company. The Company will solicit proxies by mail, and the directors, officers and employees of the Company may also solicit proxies by telephone, telegram or personal interview. Those persons will receive no additional compensation for these services but will be reimbursed for reasonable out- of-pocket expenses. The Company will bear the costs of preparing and mailing the proxy materials to stockholders in connection with the Meeting. Arrangements will be made to furnish copies of the proxy materials to fiduciaries, custodians and brokerage houses for forwarding to beneficial owners of shares of Common Stock. Such persons will be paid their reasonable out-of-pocket expenses. Shares Entitled to Vote The close of business April , 2001 has been fixed as the record date (the "Record Date") for determining the stockholders entitled to notice of and to vote at the Meeting. As of the Record Date, there were 24,140,759 shares of Common Stock, 821,496 shares of Series B Preferred Stock and 135,162 shares of Series C Preferred Stock issued and outstanding and entitled to vote. Each share of Common Stock entitles the holder thereof to one vote, each share of Series B Preferred Stock entitles the holder thereof to eight (8) votes, and each share of Series C Preferred Stock entitles the holder thereof to twenty- four (24) votes. Accordingly, a total of 33,956,615 votes may be cast at the Meeting. The holders of shares of Common Stock and Preferred Stock (whether Series B or Series C) entitled to case a majority of all votes that could be cast by the holders of all of the outstanding shares of Common Stock and Preferred Stock, present in person or represented by proxy at the Meeting, shall constitute a quorum. For purposes of the proposal to amend the Certificate of Designations, there is an additional requirement of the presence (in person or by proxy) of the holders of a majority of Series C Preferred Stock to constitute a quorum. Abstentions and broker non- votes are counted as present in determining whether the quorum requirement is satisfied. Each share of outstanding Series B Preferred Stock: (i) entitles the holder to eight votes, (ii) has a liquidation value of $29.00 per share, (iii) has a cash dividend rate of 10% of liquidation value, which rate increases to 13% of liquidation value if the cash dividend is not paid within 30 days of the end of each fiscal year and in such event is payable in shares of Common Stock; and (iv) is convertible into eight shares of Common Stock. Each share of outstanding Series C Preferred Stock: (i) entitles the holder to 24 votes, (ii) has a liquidation value of $72.00 per share, (iii) has a cash dividend rate of 8% of liquidation value; and (iv) is convertible into 24 shares of Common Stock. Vote Required If a quorum is present at the Meeting, either in person or by proxy, the following votes are required to approve each respective proposal: Proposal 1: The affirmative vote of a plurality of the votes cast shall be sufficient to elect each nominee on the Company's slate of directors. Proposal 2: In order to be approved, the proposal to amend the Certificate of Designations must receive the affirmative vote of a majority of the votes entitled to be cast by all of the outstanding Common Stock, Series B Preferred Stock and Series C Preferred Stock and the affirmative vote by holders of a majority of the outstanding shares of Series C Preferred Stock voting as a class. Abstentions and broker non- votes will be counted as votes against such proposal to amend the Certificate of Designations. Proposal 3: The affirmative vote of a majority of the votes cast shall be sufficient to approve the issuance of shares of Common Stock as payment of accrued dividends on the Series C Preferred Stock for the years 1998, 1999 and 2000. Proposed 4: The affirmative vote of a majority of the outstanding votes entitled to be cast shall be sufficient to approve the proposed amendment to the Certificate of Incorporation to provide for a reverse 1-for-10 stock split of the outstanding Common Stock. Abstentions and broker non- votes will be counted as votes against such proposal to amend the Certificate of Incorporation. Proposal 5: The affirmative vote of a majority of the votes cast shall be sufficient to ratify the selection of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants. Shares Committed The Company has been advised by various members of management and the Board and others who, in the aggregate, hold or otherwise have voting power with respect to 11,518,999 shares of Common Stock (representing approximately 48% of the shares of Common Stock outstanding) that they intend to vote such shares in favor of each of the proposals to be presented for consideration and approval at the Meeting, including the election of each of the candidates nominated to serve on the Board. The Company has also been advised by each of Bryanston Group, Inc. ("Bryanston") and BP Group Inc. ("BP") that it intends to vote all of its shares of Preferred Stock in favor of each of such proposals. If the shares of Common Stock referred to above are voted, as management has been advised they will be, in favor of each of such proposals and if Bryanston (which, as of the Record Date, owned of record 777,238 shares of Series B Preferred Stock (or approximately 94.6% of the outstanding shares of Series B Preferred Stock), entitling it to exercise 6,217,904 votes, and 135,162 shares of Series C Preferred Stock (or 100% of the outstanding shares of Series C Preferred Stock, entitling it to exercise 3,243,888 votes), and BP (which, as of the Record Date, owned of record 44,258 shares of Series B Preferred Stock (or approximately 5.4% of the outstanding shares of Series B Preferred Stock, entitling it to exercise 354,064 votes), vote all of their respective shares of Preferred Stock in favor of each of such proposals, approximately 63% of the total votes eligible to be cast at the Meeting will be voted in favor of each of the proposals and all of the votes attendant to or exercisable by holders of the Series C Preferred Stock will be voted, as a class, in favor of the proposal to amend the Certificate of Designations. As a result, each of such proposals (including the election of each of the candidates nominated to serve on the Board) will be approved notwithstanding the manner in which votes are cast by holders of any other shares of the Company's capital stock. No Appraisal Rights Under the General Corporation Law of the State of Delaware, stockholders of the Company do not have appraisal rights in connection with any of the proposals upon which a vote is scheduled to be taken at the Meeting. OWNERSHIP OF SECURITIES Only stockholders of record at the close of business on the Record Date are entitled to notice of, and to vote at, the Meeting. As of such date, there were issued and outstanding 24,140,759 shares of Common Stock, 821,496 shares of Series B Preferred Stock and 135,162 shares of Series C Preferred Stock. The holders (present in person or represented by proxy at the Meeting) of outstanding shares of Common Stock and Preferred Stock entitled to exercise a majority of votes with respect to all outstanding shares of capital stock are necessary to constitute a quorum for the Meeting. Each outstanding share of Common Stock is entitled to one vote on all matters properly coming before the Meeting. Each share of Series B Preferred Stock is entitled to eight (8) votes on all such matters, and each share of Series C Preferred Stock is entitled to twenty-four (24) votes on all such matters. The following table sets forth certain information as of the Record Date, with respect to each beneficial owner of five percent (5%) or more of the outstanding shares of any class of stock, each officer of the Company, each director of the Company, each individual nominated to be elected a director and all officers and directors of the Company as a group. Unless otherwise indicated, the address of each such person or entity is c/o Alpha Hospitality Corporation, 12 East 49th Street, 24th floor, New York, New York 10017.
Title of Class Name and Address No. of Percent Percent Shares(1) of Class(2) of Vote (3) Common Stock Stanley Tollman(4)(5) 500,000 2.03 1.47 $.01 par value Beatrice Tollman(6) 1,815,890 7.00 5.35 Thomas W.Aro (7) 430,000 1.75 1.26 Brett G. Tollman (8) 1,949,875 7.47 5.74 James A. Cutler(9) 255,000 1.05 * Matthew B. Walker (10) 412,905 1.70 1.22 Herbert F. Kozlov (11) 200,000 0.82 * Craig Kendziera (12) 85,300 0.35 * Robert Steenhuisen (13) 85,000 0.35 * Bryanston Group, Inc. (14) 16,865,359 41.13 49.67 1886 Route 52 Hopewell Junction,N.Y. Societe Generale (15) 1,912,922 7.34 0.00 1221 Ave of the Americas New York, N.Y. All Officers and Director as a group (8 persons) (4,7-13) 3,918,080 13.96 11.53 Preferred Stock, Bryanston Group,Inc. 777,238 94.60 94.6 Series B, (11) $29.00 BP Group, Ltd. (16) 44,258 5.4 5.4 liquidation 5111 Islesworth Country value Club Dr. Windemere, Fl 34786 Preferred Stock, Bryanston Group,Inc. 135,162 100.0 100.0 Series C, $72.00 liquidation value Preferred Stock, Societe Generale 1,950 100.0 # Series D $1,000.00 liquidation value
* Indicates less than 1% # Has no voting rights (1) Each person exercises sole voting and dispositive power with respect to the shares reflected in the table, except for those shares of Common Stock that are issuable upon the exercise of options or the conversion of Preferred Stock, which shares of Common Stock cannot be voted until the options are exercised or such Preferred Stock is converted by the holder thereof. Includes shares of Common Stock that may be acquired upon exercise of options or conversion of convertible securities that are presently exercisable or convertible or become exercisable or convertible within 60 days. (2) Each beneficial owner's percentage of class ownership is determined by assuming that options, warrants and convertible securities that are held by such owner (but not those held by any other owner) and that are exercisable or convertible within 60 days from the date hereof have been exercised or converted. (3) As regards the vote attributable to shares of Common Stock, this number represents the vote, as a percentage of the total votes that may be cast by holders of both Common Stock and Preferred Stock, that may be cast by the holder of the relevant shares. For these purposes, no vote is attributable to any shares of Common Stock not issued and outstanding as of the Record Date (e.g., on account of outstanding options having not been exercised or convertible securities not having been converted); however, for purposes of determining this vote, consistent with the terms of the Series B and C Preferred Stock, 8 votes have been included for each outstanding share of Series B Preferred Stock and 24 votes for each share of Series C Preferred Stock. As regards the vote attributable to shares of Series B and C Preferred Stock, this number represents the percentage of the total votes attributable to such Series that may be cast. (4) Includes 500,000 shares of common stock issuable upon the exercise of options granted to Stanley S. Tollman, the Chairman of the Board, Chief Executive Officer and President of the Company. Does not include any shares of Common Stock issuable upon the exercise of the right granted to Mr. Tollman to convert up to $2,000,000 of deferred compensation into shares of Common Stock at $2.00 per share since he is not currently entitled to exercise such right. Each of Brett G. Tollman, Stanley S. Tollman and Beatrice Tollman disclaims beneficial ownership of the shares beneficially owned by either of the other of them. (5) Stanley S. Tollman is the spouse of Beatrice Tollman. Stanley S. Tollman disclaims beneficial ownership of the shares beneficially owned by Beatrice Tollman. Each of Brett G. Tollman, Stanley S. Tollman and Beatrice Tollman disclaims beneficial ownership of the shares beneficially owned by either of the other of them. (6) Beatrice Tollman is the spouse of Stanley S. Tollman, the Company's Chairman of the Board, Chief Executive Officer and President, and the mother of Brett G. Tollman, a director of the Company, and she is a 50% stockholder in Bryanston Group, Inc. ("Bryanston"). Ms. Tollman disclaims any beneficial ownership of any shares of the Company's capital stock owned beneficially or of record by Stanley S. Tollman, Brett G. Tollman or Bryanston. (7) Includes 420,000 shares of Common Stock issuable upon the exercise of options granted to Mr. Aro, all of which options are currently exercisable. (8) Includes 390,000 shares of Common Stock issuable upon the exercise of options granted to Brett G. Tollman, all of which options are currently exercisable, and 1,000,000 shares held in the Tollman Family Trust, of which Brett G. Tollman is the sole Trustee. Brett G. Tollman is the son of Stanley S. Tollman and Beatrice Tollman. Each of Brett G. Tollman, Stanley S. Tollman and Beatrice Tollman disclaims beneficial ownership of the shares beneficially owned by any of the other of them. (9) Includes 255,000 shares of Common Stock issuable upon the exercise of options granted to Mr. Cutler, all of which options are currently exercisable. Does not include 4,000 shares owned by Mr. Cutler's children, of which shares he disclaims beneficial ownership. (10) Includes 90,000 shares of Common Stock issuable upon the exercise of options granted to Mr. Walker, all of which options are currently exercisable. (11) Includes 200,000 shares of Common Shares issuable upon the exercise of options granted to Mr. Kozlov, all of which options are currently exercisable. (12) Includes 85,000 shares of Common Stock issuable upon the exercise of options granted to Mr. Kendziera, 52,500 of which options are currently exercisable with respect to 52,500 shares. (13) Includes 85,000 shares of Common Stock issuable upon the exercise of options granted to Mr. Steenhuisen, 52,500 of which options are currently exercisable with respect to 52,500 shares. (14) Includes: (i) 6,217,904 shares of Common Stock issuable upon conversion of 777,238 shares of Series B Preferred Stock owned by Bryanston; and (ii) 3,243,888 shares of Common Stock issuable upon conversion of 135,162 shares of Series C Preferred Stock owned by Bryanston. All of such shares of Preferred Stock are currently convertible into shares of Common Stock. Bryanston is an affiliate of the Company, and Beatrice Tollman, Stanley S. Tollman's spouse, is a 50% stockholder of Bryanston. Each of Bryanston and Beatrice Tollman disclaims beneficial ownership of the shares beneficially owned by the other of them. (15) Includes an additional 1,687,184 shares of Common Stock issuable to Societe Generale to reach the maximum issuable of 3,300,000 in connection with its remaining 1,950 shares of the Company's Series D Preferred Stock. (16) Patricia Cohen is the sole stockholder of BP. This table does not include 100,352 shares of Common Stock owned by Patricia Cohen, who was a Director of the Company during the period February 1, 1994 to December 12, 1997, and 354,064 shares of Common Stock issuable upon conversion of 44,258 shares of Series B Preferred Stock owned by BP. All of such shares of Preferred Stock are currently convertible into shares of Common Stock. PROPOSAL 1 ELECTION OF DIRECTORS Six (6) directors are to be elected at the Meeting to serve (subject to their respective earlier removal, death or resignation) until the next annual meeting of stockholders and until their respective successors are elected and qualified. Unless such authority is withheld, proxies will be voted for the election of the six (6) persons named below, all of whom are now serving as directors and each of whom has been designated as a nominee. If, for any reason not presently known, any person is not available to serve as director, another person who may be nominated will be voted for in the discretion of the proxies. Name Age Position With the Company Stanley S.Tollman 70 Chairman of the Board, Chief Executive Officer and President Thomas W. Aro 58 Vice President, Secretary, and Director Brett G. Tollman 39 Vice President and Director James A. Cutler 49 Director Matthew B. Walker 50 Director Herbert F. Kozlov 48 Director Stanley S. Tollman has served as Chairman of the Board of Directors and Chief or Co-Chief Executive Officer of the Company since its formation. Since March 1995, Mr. Tollman has also served as President. He served as Chairman of the Tollman- Hundley Hotel Group from 1979 to June 1996. He currently serves as Chairman of Bryanston, a hotel management company, and of Trafalgar Tours International, a tour operator. The business addresses of Bryanston and Trafalgar Tours International are, respectively, 1886 Route 52, Hopewell Junction, New York and 5 Reid Street, Hamilton, Bermuda. Thomas W. Aro has served as a Director of the Company since February 1, 1994, and as Vice President of the Company since its formation. Mr. Aro also serves in various positions with various of the Company's subsidiaries. He has served as Executive Vice President of the Tollman-Hundley Hotel Group since 1982 and served as Executive Vice President of Bryanston from 1989 through March 1996. Brett G. Tollman served as a Vice President of the Company from its formation until October 29, 1993, and was re-elected to that position and was selected a Director of the Company on February 1, 1994. He served as Executive Vice President of the Tollman-Hundley Hotel Group from 1984 to June 1996. Mr. Tollman currently serves as President of Tollman-Hundley Hotel Group. He also serves as Director and President of Bryanston. Mr. Tollman is the son of Stanley S. Tollman, the Chairman of the Board and Chief Executive Officer of the Company. James A. Cutler served as Treasurer and Chief Financial Officer of the Company from its formation until his resignation on March 6, 1998. He also served as Secretary of the Company from October 29, 1993 to February 1, 1994. Mr. Cutler was elected a Director of the Company on June 12, 1996. He served as Senior Vice President and Treasurer of the Tollman-Hundley Hotel Group until June 1997. He now serves as President and Chief Executive Officer of Truckee Resorts, Inc., a company that is engaged in the residential development business and has its principal business office at 1439 Lindsey Reno, Nevada. Matthew B. Walker has served as a Director of the Company since December 1995. He is an independent businessman involved in international business ventures, including the Brazilian-based Walker Marine Oil Supply Business, to which he has been a consultant since 1988. Mr. Walker co-founded the Splash Casino in Tunica, Mississippi, in February 1993, where he remained employed until October 1995. In February 1994, he co-founded the Cotton Club Casino in Greenville, Mississippi, where he remained employed and as a stockholder until October 1995. In addition, since 1972, Mr. Walker has been involved in numerous real-estate transactions as a consultant and has managed E.B. Walker & Son Lumber Company, a family-owned lumber business in Alabama. Herbert F. Kozlov has served as a Director of the Company since his appointment upon the resignation of Mr. Sanford Freedman in March of 1998. Mr. Kozlov is a partner is the law firm of Parker, Duryee Rosoff & Haft, PC where he has been a partner since 1989. Mr. Kozlov is also a director of HMG Worldwide Corporation and Magnum Sports & Entertainment, Inc. (previously named Worldwide Entertainment & Sports Corporation). Parker Duryee Rosoff & Haft, PC provides legal services to the Company and receives fees for such services from the Company. Each Director is elected for a period of one year at the Company's annual meeting of stockholders and (subject to earlier removal, death or resignation) serves until his/her successor is elected and qualified. Vacancies and newly created directorships resulting from any increase in the number of authorized directors may be filled by a majority vote of Directors then in office. Officers are elected by and serve at the pleasure of the Board. Committees and Meetings of the Board of Directors The Board has four committees - the Executive Committee, the Audit Committee, the Compensation Committee and the Stock Option Committee. The Executive Committee, which is comprised of Stanley S. Tollman, Thomas W. Aro and Brett G. Tollman, has the same authority to act as the Board (with certain limitations prescribed by the General Corporation Law of the State of Delaware). The Audit Committee, which is comprised of Herbert F. Kozlov, James A. Cutler and Matthew B. Walker, is responsible for reviewing, with both the Company's independent certified public accountants and management, the Company's accounting and reporting principles, policies and practices, as well as the Company's accounting, financial and operating controls and staff. The Board has adopted a written charter for the Audit Committee, which accompanies this proxy statement as Appendix 1. Each of Messrs. Kozlov, Cutler and Walker is independent from the Company, as independence is defined in Rule 4200(a)(15) of the National Association of Securities Dealers' ("NASD") listing standards. The Compensation Committee, which is comprised of Stanley S. Tollman, Matthew B. Walker, Thomas W. Aro and Herbert F. Kozlov, is responsible for establishing and reviewing the appropriate compensation of directors and officers of the Company and for reviewing employee compensation plans. The Stock Option Committee, which is comprised of Stanley S. Tollman, Matthew B. Walker and James A. Cutler, is responsible for considering and making grants and awards under, and administering, the Company's 1993 and 1998 Stock Option Plans During the 2000 fiscal year, there was one formal meeting of each of the Company's committees. During such fiscal year, there were also three meetings of the Board, (on May 12, June 6 and October 12), at which all of the Directors were present, and there were four unanimous written consents of the Board. During the 1999 fiscal year, there was one formal meeting of each of the Company's committees. During such fiscal year, there were also three meetings of the Board, (on May 5, September 16, December 12), at which all of the Directors were present, and there were two unanimous written consents of the Board. During the 1998 fiscal year, there was one formal meeting of each of the Company's committees. During such fiscal year, there were also five meetings of the Board, (on February 28th, May 12th, June 4th, September 15th and December 10th), at which all of the Directors were present, and there were no unanimous written consents of the Board. Certain Proceedings Involving Management Emeryville Days Limited Partnership ("Emeryville"), a California limited partnership, filed a Chapter 11 proceeding in the United States Bankruptcy Court for the Eastern District of California in May 1996. The proceeding was filed to prevent the imminent foreclosure of the Days Inn hotel owned by Emeryville. Messrs. Stanley S. Tollman and Brett G. Tollman hold limited partnership interests in Emeryville, and Mr. Stanley S. Tollman is a stockholder of the corporate general partner of Emeryville. Messrs. Stanley S. Tollman and James A. Cutler were directors and/or officers of such corporate general partner. Subsequent to the filing of this proceeding, the subject hotel property was sold, and as a result, funds became available to pay all creditors, other than the holder of the second deed of trust, which holder agreed to settle its claim for a reduced amount, which has been paid. As a consequence of the foregoing, this proceeding was dismissed. T.H. Orlando, Ltd. ("Orlando") and T.H. Resorts Associates, Ltd. ("Resorts"), filed a Chapter 11 proceeding in the United States Bankruptcy Court for the Middle District of Florida, Orlando Division in February 1997. The proceeding was filed to prevent the imminent foreclosure of three Days Inn hotels owned by Orlando and Resorts. Mr. Stanley S. Tollman holds a limited partnership interest in Orlando and Resorts a nd is a stockholder of the corporate general partners of Orlando and Resorts, and Messrs. Stanley S. Tollman, Brett G. Tollman and James A. Cutler were directors and/or officers of such corporate general partners. In August 1997, Orlando and Resorts agreed to a settlement with its secured lender resulting in the sale of the hotel properties and dismissal of that proceeding. Certain Business Relationships Bryanston Bryanston is an affiliate of the Company and Beatrice Tollman, Mr. Stanley S. Tollman's spouse, is a 50% stockholder of Bryanston. On June 26, 1996, Bryanston converted the amount due on a working capital loan (approximately $19,165,000) into shares of Series B Preferred Stock. The Company was charged a 5% transaction fee (approximately $958,000), which was also converted into shares of Series B Preferred Stock. The conversion was effective June 26, 1996, and the total of approximately $20,123,000 was converted into 693,905 shares of Series B Preferred Stock based on the fair market value of a share of Common Stock on the date of conversion ($3.625). Each share of outstanding Series B Preferred Stock: (i) entitles the holder to eight votes; (ii) has a liquidation value of $29.00 per share; (iii) has a cash dividend rate of 10% of the liquidation value, which rate increases to 13% of the liquidation value if the cash dividend is not paid within 30 days of the end of each fiscal year and in such event is payable in shares of Common Stock; and (iv) is convertible into eight shares of Common Stock. On September 30, 1997, the Company issued 83,333 shares of Series B Preferred Stock in settlement of $2,000,000 due to Bryanston. On December 17, 1997, the Company declared a 1996 dividend payable to Bryanston in approximately 730,000 shares of Common Stock, which were issued in April 1998. On May 12, 1998, the Company declared a 1997 dividend payable to Bryanston in approximately 1,519,000 shares of Common Stock, which were issued on January 5, 1999. During 2000, the Company declared and issued 426,000 and 1,831,000 additional shares of common stock in lieu of cash dividends payable with respect to Bryanston's shares of Series B Preferred Stock for the 1999 and 1998 calendar years, respectively. On April 4, 2001, the Company issued to Bryanston 2,996,101 additional shares of Common Stock in lieu of the cash dividend payable with respect to Bryanston's shares of Series B Preferred Stock for the 2000 calendar year. On June 30, 1998, the Company restructured its existing obligations to Bryanston by extinguishing its notes payable of $7,800,000, $1,399,000 and $432,000, plus accrued interest on the notes aggregating $3,098,000, in exchange for the issuance of Series C Preferred Stock, and a $3,000,000 mortgage note on the Company's idle gaming vessel located in Mobile, Alabama. The Series C Preferred Stock has voting rights of twenty- four votes per preferred share, is convertible into twenty-four shares of Common Stock and carries an annual dividend of $5.65 per share. In addition, the terms of the preferred shares include a provision allowing the Company the option of calling the preferred shares based upon the occurrence of certain capital events that realize a profit in excess of $5,000,000. Upon contribution of the idle gaming vessel in July 1999 to Casino Ventures, the $3,000,000 mortgage note was converted to a promissory note. Casino Ventures On July 8, 1999, the Company contributed its inactive vessel, the Jubilation Casino, to Casino Ventures LLC ("Casino Ventures"). Matthew Walker, a director of the Company, is a partner in Casino Ventures and serves as its General Manager. At the time of the contribution, the vessel (including its gaming equipment, furniture and other items) had a net book value of approximately $4,149,000. In exchange, the Company received $150,000 in cash, a promissory note in the principal amount of $1,350,000 and a membership interest in Casino Ventures. The promissory note accrues interest at an initial rate of 8.75% per annum, payable quarterly, with the principal balance due July 8, 2002. The initial interest rate of 8.75% is adjusted daily to prime plus one percent with a minimum rate of 8.75%. Upon repayment of the promissory note and certain other funding to the venture, the Company's membership interest in Casino Ventures will decrease from its current percentage of 93% to 15%. Mr. Walker advanced funds to Casino Ventures in 1999 and 2000, which were used for site and vessel improvements. As of December 31, 2000, the loan payable to Mr. Walker amounted to $804,000. That loan accrues interest at 8% and is payable in April 2002. In addition, $100,000 and $12,000 of the Casino Venture start-up costs in 2000 and 1999, respectively, were made to entities in which Mr. Walker has an ownership interest. The consolidated financial statements of the Company will include the accounts of Casino Ventures until such time as the Company's membership interest decreases therein to less that 50%. During the fiscal years ended December 31, 2000 and December 31, 1999, the Company capitalized $1,859,000 and $364,000, respectively, of costs related to the relocation and refurbishing of the vessel and improvements to its site in Tunica, Mississippi. An additional $268,000 and $100,000 of start-up costs were incurred during 2000 and 1999, respectively. During 1999, the vessel was used as collateral to obtain funding of $650,000 towards the aforementioned costs of Casino Ventures. BP Group Ms. Patricia Cohen, a director of the Company from February 1, 1994 to December 12, 1997, is the sole stockholder of BP. On June 26, 1996, BP converted the amount due on a BP loan (approximately $1,222,000) into shares of Series B Preferred Stock. The Company was charged a 5% transaction fee (approximately $61,000), which was also converted into shares of Series B Preferred Stock. The conversion was effective June 26, 1996, and the total of approximately $1,283,000 was converted into 44,258 shares of Series B Preferred Stock, based on the fair market value of a share of Common Stock on the date of conversion ($3.625). The terms of the shares of Series B Preferred Stock issued to BP are identical to those of the shares of Series B Preferred Stock issued to Bryanston in June 1996 and September 1997. On December 17, 1997, the Company declared a 1996 dividend payable to BP in approximately 47,000 shares of Common Stock, which were issued in April 1998. On May 12, 1998, the Company declared a 1997 dividend payable to BP on the Series B Preferred Stock in approximately 86,000 shares of the Common Stock, which were issued on January 5, 1999. In addition, during 2000, the Company declared and issued to BP approximately 24,000 and 111,000 additional shares of Common Stock in lieu of the cash dividend payable with respect to BP's shares of Series B Preferred Stock for the 1999 and 1998 calendar years, respectively. On April 4, 2001, the Company issued to BP 170,606 additional shares of Common Stock in lieu of the cash dividend payable with respect to BP's shares of Series B Preferred Stock for the 2000 calendar year. Other On September 15, 1998, $250,000 was advanced to Southern Classic, Inc. ("Southern") pursuant to a 9 1/4% promissory note maturing January 30, 1999. Southern defaulted on its payment in January 1999 and filed for bankruptcy in February 1999. Accordingly, a $250,000 reserve was recorded as of December 31, 1998. James Cutler, a member of the Board, formerly served as Southern's Chief Financial Officer. All current transactions between the Company and its officers, directors and principal stockholders or any affiliates thereof are, and in the future such transactions will be, on terms no less favorable to the Company than could be obtained from unaffiliated third parties. Stockholder Vote Required. If a quorum is present at the Meeting, either in person or by proxy, the affirmative vote of a plurality of the votes cast shall be sufficient to elect each nominee on the Company's slate of directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF DIRECTORS OF THE COMPANY OF EACH OF THE NOMINEES. PROPOSAL 2 AMENDMENT OF THE COMPANY'S CERTIFICATE OF DESIGNATIONS SETTING FORTH THE PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK At the Meeting, stockholders will be asked to approve an amendment to the Company's Certificate of Designations Setting Forth the Preferences, Rights and Limitations of Series B Preferred Stock and Series C Preferred Stock (the "Certificate of Designations") proposed by resolution of the Board, which amendment would provide for dividends payable to holders of Series C Preferred Stock to be paid in shares of Common Stock at the Company's discretion if cash dividends are not paid by a certain date. Exhibit A to this Proxy Statement contains a copy of the proposed amendment to the Certificate of Designations, which would amend Part B thereof to include a new Section 2.4 to read in its entirety follows: 2.4 Payment of Dividend in Shares of Common Stock. Notwithstanding the provisions of Section 2.3 hereof, commencing in the year 2002, any dividend payment that is not made by the Corporation on or before January 30 of the calendar year following the calendar year for which such dividend accrued shall, at the option of the Corporation's Board of Directors, be payable in the form of shares of Common Stock, in such number of shares as shall be determined by dividing (A) the product of (x) the amount of the unpaid dividend multiplied by (y) 1.3 by (B) the Fair Market Value of the Common Stock. For this purpose, "Fair Market Value" shall mean, with respect to the Common Stock, the average of the daily closing prices for the Common Stock of the Corporation for the twenty (20) consecutive trading days preceding the applicable January 30 date, with the closing price for each day being the closing price reported on the principal securities exchange upon which the Common Stock of the Corporation is traded or, if it is not so traded, then the average of the closing bid and asked prices as reported by the National Association of Securities Dealers Automated Quotation System or if not quoted thereon, in the interdealer market on the "Pink Sheets" of the National Quotation Bureau (excluding the highest and lowest bids on each day that there are four (4) or more market makers). The effect of this amendment might be to provide holders of Series C Preferred Stock with more or less value than they would have received had the dividend been issued in the form of a cash payment. The amendment would allow the Company to make a distribution to holders of Series C Preferred Stock even if the Company's cash reserves were low at the time a dividend is declared or the Company is otherwise precluded from paying any cash dividend. This proposal is being made because the Company has generally had very limited cash flow available for payment of dividends. In order to avoid the accrual of cash dividends on Series C Preferred Stock, the Board deems it to be in the best interests of the Company to provide for a means to discharge such an obligation by the issuance of shares of Common Stock in lieu of a cash dividend payment. For purposes of valuation, Common Stock granted as a dividend is effectively being discounted by approximately 23% of market value. The calculation is structured with this discount because the shares of Common Stock to be issued would, unless registered under the Securities Act of 1933, as amended (the "Securities Act"), be restricted and not subject to resale unless so registered or an exemption from registration were available. The Company believes such a discount is appropriate in light of the comparable illiquidity of a dividend paid in shares of Common Stock, as opposed to cash, particularly with respect to shares being issued to an affiliate of the Company, which, in order to comply with the exemption provided under Rule 144 promulgated under the Securities Act, would be required to hold the shares for a minimum of one year and, even after the passage of such year, could sell such shares only in compliance with certain volume limitations. Because the issuance of Common Stock in lieu of cash as payment of dividends would be at the Board's discretion, should there come a time where there is sufficient cash, the Company would not be required to issue shares of Common Stock in lieu of a dividend. The proposed amendment to the Certificate of Designations would also cause Section 2.4 of Part B thereof to be renumbered as Section 2.5. The Board has unanimously approved the foregoing proposed amendment to the Certificate of Designations and unanimously recommends to the stockholders that it be approved by them. Stockholder Vote Required. If a quorum is present at the Meeting, either in person or by proxy, the affirmative vote of both a majority of the outstanding votes entitled to be cast, whether by holders of Common Stock, Series B Preferred Stock or Series C Preferred Stock, and a majority of the outstanding votes entitled to be cast by the holders of Series C Preferred Stock, voting as a class, shall be sufficient to approve the proposed amendment to the Certificate of Designations. The sole holder of Series C Preferred Stock has indicated that it will vote in favor of the amendment. Abstentions and broker non-votes will have the same effect as a vote against such proposal to amend the Certificate of Designations. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE AMENDMENT TO THE CERTIFICATE OF DESIGNATIONS TO PROVIDE FOR THE ISSUANCE OF COMMON STOCK , AT THE COMPANY'S DISCRETION, IN PAYMENT OF ACCRUED DIVIDENDS ON SERIES C PREFERRED STOCK PROPOSAL 3 APPROVAL OF ISSUANCES OF SHARES OF THE COMPANY'S COMMON STOCK IN PAYMENT OF ACCRUED DIVIDENDS ON THE COMPANY'S SERIES C PREFERRED STOCK. The Board has approved, and unanimously recommends to the stockholders that they approve, the proposal to permit the Company to issue shares of Common Stock in lieu of cash dividends accrued on the Series C Preferred Stock for 1998, 1999 and 2000. Dividends have accrued, and remain unpaid, with respect to the Series C Preferred Stock for 1998, 1999 and 2000 in the amounts of $381,833, $763,665 and $763,665, respectively. At the Meeting, the stockholders are being asked, pursuant to a separate proposal, to approve an amendment to the Certificate of Designations that, if approved, would in the future permit the Company to pay the annual dividend accrued on the Series C Preferred Stock in shares of Common Stock in lieu of cash. The Board proposes that the Company be authorized to also pay unpaid dividends accrued on the Series C Preferred Stock for prior years as if such amendment had been in effect for such years. If such amendment had been in place for 1998, 1999 and 2000, the Company could have paid the dividends accrued on the Series C Preferred Stock with respect to those years by issuing, in lieu of the cash dividend accrued, respectively, 254,555, 111,079 and 780,844 shares of Common Stock. For such purposes, each share of Common Stock contemplated to be issued in lieu the cash dividend payable is being effectively valued at $1.50, $6.87 or $.98 for the dividends accrued for 1998, 1999 and 2000, respectively. If such issuance is approved, then the Company will be able to satisfy its obligations with respect to the accrued dividends for 1998, 1999 and 2000 by the issuance of an aggregate of 1,146,478 shares of Common Stock. The Board believes that such an issuance will be in the best interest of the Company and its stockholders inasmuch as such issuance would relieve the Company of its obligation to pay in cash the dividends accrued in an aggregate amount of $1,909,163 on the Series C Preferred Stock for 1998, 1999 and 2000 and would permit that obligation to be satisfied with the use of shares of Common Stock that, for such purpose, are being valued as a price higher than the current market price of a share of Common Stock. The Board unanimously recommends to the stockholders approval of this proposal. Stockholder Vote Required. If a quorum is present at the Meeting, either in person or by proxy, the affirmative vote of a majority of the votes cast shall be sufficient to approve the issuance of shares of Common Stock in payment of accrued dividends on the Series C Preferred Stock for the years 1998, 1999 and 2000. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ISSUANCE OF SHARES OF COMMON STOCK IN PAYMENT OF ACCRUED DIVIDENDS ON THE SERIES C PREFERRED STOCK. FOR 1998, 1999 AND 2000 PROPOSAL 4 AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A TEN FOR ONE REVERSE SPLIT OF THE COMPANY'S OUTSTANDING COMMON STOCK The Board has unanimously decided to submit to a vote of the stockholders a proposal to amend the Company's Certificate of Incorporation (the "Certificate of Incorporation") to reduce the number of the Company's issued and outstanding shares of Common Stock. This is to be achieved by undertaking a reverse stock split whereby every ten (10) shares of Common Stock outstanding on the close of business on ____________, 2001 (the "Existing Shares") shall be converted into one (1) share of the Company's new Common Stock (the "New Shares"), having terms identical in every respect of the Existing Shares (the transaction shall be referred to herein as the "Reverse Split"). Any fractional shares resulting from the Reverse Split will be rounded up to the nearest whole number. The Common Stock has been trading in a range from $0.75 per share to $6.625 per share since April 3, 2000. The Company's management believes that the Company's stock price will be an important factor in negotiations with businesses for future projects of the Company because the Company intends to use its Common Stock for some or all of the consideration in any such joint venture or acquisition. The Reverse Split will decrease the number of shares of Common Stock outstanding, but there can be no assurance that there will be a corresponding increase in the per-share price of the Common Stock. However, in conjunction with the execution of such a strategy, the Company's management believes that the Reverse Split will make the Company more attractive relative to any potential acquisitions. In addition, Nasdaq Marketplace Rule 4310(c)(4) requires that in order for the Common Stock to continue to be eligible for quotation on the Nasdaq Stock Market Inc., the Common Stock must have a minimum bid price per share of $1.00, as well as meeting certain other requirements. The Common Stock currently is trading in the $1.00 per share range and has recently traded below $1.00. Management believes that in order to maintain the Company's Nasdaq market listing, the implementation of the Reverse Split is in the best interests of the Company and its stockholders. A failure to meet the continued inclusion requirements of Nasdaq will result in the removal of the Common Stock from a Nasdaq listing. A delisting of the Common Stock may materially and adversely affect a holder's ability to dispose of, or to obtain accurate quotations as to the market value of, the Common Stock. In addition, any delisting may cause the Common Stock to be subject to "penny stock" regulations promulgated by the Securities and Exchange Commission. Under such regulations, broker-dealers are required to, among other things, comply with disclosure and special suitability determinations prior to the sale of shares of Common Stock. If the Common Stock becomes subject to these regulations, the market price of the Common Stock and the liquidity thereof could be materially and adversely affected. Stockholders should recognize that if the Reverse Split is effectuated, they will own 10% of the number of shares they presently own and that there can be no assurance that the market price of the Common Stock will, in fact, correspondingly increase by 10 times following consummation of the Reverse Split or, even if such price increases by 10 times, such post Reverse Split market price will be sustained. Also, the possibility does exist that liquidity could be materially and adversely affected by the reduced number of shares that would be outstanding after the Reverse Split. Consequently, there can be no assurance that the Reverse Split will achieve the desired results that have been outlined above. If the Reverse Split is approved by the Stockholders, it will occur at the close of business on , 2001. At the close of business on , 2001, the Company had 24,140,759 shares of Common Stock outstanding. The Reverse Split will reduce this number to 2,074,831 shares. Except as a result of the receipt by some stockholders of additional shares as a result of rounding up fractional shares, the Reverse Split, in itself, will not affect any stockholder's percentage holdings in the Company. If the Reverse Split is approved by the stockholders, each stockholder will, as soon as practicable after the Meeting, be notified that their shares of Existing Shares have been converted to a reduced number of New Shares pursuant to a Reverse Split, and stockholders will then be asked to exchange their certificates representing Existing Shares for new certificates evidencing New Shares. In order to effect the Reverse Split, the Certificate of Incorporation must be amended in the manner set forth on Exhibit B attached hereto. The only effect of such Amendment will be to cause the Reverse Split as described herein. A vote by a stockholder in favor of the Reverse Split will constitute a vote in favor of amending the Certificate of Incorporation in the manner set forth in such Exhibit B. The Board believes that maintenance of the Nasdaq listing is beneficial to the Company and its stockholders and recommends a vote for the proposed Reverse Split. The Board believes the proposed Reverse Split will create long-term benefit for the Company by increasing market interest in the Common Stock and increasing the nominal per-share value and per-share earnings of the Common Stock. Given the volatility of the Common Stock, the Board believes that the proposed Reverse Split will also help maintain a sufficient minimum bid price per share to ensure continued listing on the Nasdaq SmallCap Market. Stockholder Vote Required: The affirmative vote by the holders of stock (whether Common Stock, Series B Preferred Stock or Series C Preferred Stock) entitled to exercise a majority of all votes that could be cast is required in order to approve this proposed amendment of the Certificate of Incorporation. Shares that are withheld and broker non- votes will have the same effect as a vote against such amendment. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF A REVERSE TEN-FOR-ONE STOCK SPLIT OF THE COMPANY'S COMMON STOCK. PROPOSAL 5 RATIFICATION OF THE SELECTION OF ROTHSTEIN KASS & COMPANY, P.C. AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board has unanimously approved, and unanimously recommends that the stockholders approve and ratify the appointment of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants for the ensuing year. A member of Rothstein, Kass & Company, P.C. will be available at the Meeting to answer questions and will have the opportunity to make a statement if he or she so desires. Stockholder Vote Required. If a quorum is present at the Meeting, either in person or by proxy, the affirmative vote of a majority of the votes cast shall be sufficient to ratify the selection of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountants for the next year. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ROTHSTEIN, KASS & COMPANY, P.C. AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. EXECUTIVE COMPENSATION Executive Officers The executive officers of the Company are: Stanley S. Tollman Chairman of the Board, Chief Executive Officer and President Thomas W. Aro Vice President and Secretary Brett G. Tollman Vice President Robert Steenhuisen Chief Accounting Officer Craig Kendziera Treasurer Information regarding the responsibilities of, and the terms of the positions held by Stanley S. Tollman, Thomas W. Aro and Brett G. Tollman are set forth on page 10 of this proxy statement in the text of Proposal 1. Such information for Messrs. Steenhuisen and Kendziera is as follows: Craig Kendziera has served as Treasurer of the Company since his appointment on May 12, 1998. He also have served as the Corporate Controller of the Tollman-Hundley Hotel Group since June 1992 and a Director, Vice President, Treasurer and Corporate Controller of Bryanston since March 6, 1998. Robert Steenhuisen has served as Chief Accountant of the Company since his appointment on May 12, 1998. He also has served as the Chief Accountant for the Tollman-Hundley Hotel Group since May 1992 and as a Director, Vice President, Assistant Secretary and Chief Accountant of Bryanston since March 2, 1998. Summary Compensation Table The following table sets forth all cash compensation for services rendered in all capacities to the Company and its subsidiaries for the fiscal years ended December 31, 2000, 1999, 1998 and 1997, paid to the Company's Chief Executive Officer and one executive officer (collectively the "Named Executive Officers") whose total compensation exceeded $100,000 per annum. No other executive officers' compensation exceeded $100,000 during any of the above fiscal years.
Restricted Name and Principal Stock Options All Other Position Year Salary(1) Awards /SARS Compensation Stanley S. Tollman . . 2000 -- -- -- -- Chairman of the 1999 $250,000 -- 250,000 (2) -- Board of Directors, 1998 $250,000 -- 250,000 -- Chief Executive 1997 $250,000 -- -- -- Officer and President Thomas W. Aro . . . . 2000 $206,500 -- -- -- Vice President and 1999 $160,000 -- 205,000 -- Secretary 1998 $160,000 -- 155,000 -- 1997 $160,000 -- -- -- 1 No portions of the cash salaries to which Stanley S. Tollman was entitled during the periods indicated have been paid; rather, the expense and liability have been accrued without interest. Mr. Tollman has waived his right to receive any salary for the year 2000. 2 Does not include any value for the right granted to Mr. Tollman to convert up to $2,000,000 of deferred compensation into shares of Common Stock at $2.00 per share. Option/SAR Grants in Past Two Fiscal Years. During 1999, the Company granted options to certain executive officers to purchase an aggregate of 455,000 shares of Common Stock, including 250,000 shares to Stanely S. Tollman and 205,000 shares to Thomas W. Aro (which includes 55,000 shares as compensation to Mr. Aro for his services as a director). Except for the reissuance of stock options upon the cancellation of old options (as described below), no options or stock appreciation rights were granted to any executive officer of the Company in 2000. The following table sets forth certain information regarding stock options granted to the Named Executive Officers during the fiscal year ended December 31, 2000. No stock appreciation rights were granted to these individuals during such year.
Potential Realizable Value At Assumed Annual Rates Number of Percent of Of Stock Price Securities Total Options Exercise Appreciation For Underlying Granted to or Base Option Term (1) Options Employees in Price Expiration Granted Fiscal Year ($/Share) Date 5%($) 10%($) Thomas W. Aro . . . . 75,000(2) 0 $1.375 5/09 51,000 123,000 130,000(2) 0 $1.375 12/09 88,400 213,200
(1)Calculated by multiplying the exercise price by the annual appreciation rate shown (as prescribed by the SEC rules) and compounded for the term of the options, subtracting the exercise price per share and multiplying the gain per share by the number of shares covered by the options. These amounts are not intended to forecast possible future appreciation, if any, of the price of a share of Common Stock. The actual value realized upon exercise of the options will depend on the fair market value of Common Stock on the date of exercise. (2) The options are all exercisable in full commencing from the date of grant. The following table sets forth certain information regarding stock options granted to the Named Executive Officers during the fiscal year ended December 31, 1999. No stock appreciation rights were granted to these individuals during such year.
Potential Realizable Value At Assumed Annual Rates Number of Percent of Of Stock Price Securities Total Options Exercise Appreciation For Underlying Granted to or Base Option Term (1) Options Employees in Price Expiration Granted Fiscal Year ($/Share) Date 5%($) 10%($) Stanley S. Tollman . . 250,000(2)(3) 18.0 $4.25 12/09 668,201 1,693,351 Thomas W. Aro . . . 75,000(2) 5.4 $2.00 5/09 94,334 239,061 130,000(2) 9.4 $4.25 12/09 347,464 880,543
(1)Calculated by multiplying the exercise price by the annual appreciation rate shown (as prescribed by the SEC rules) and compounded for the term of the options, subtracting the exercise price per share and multiplying the gain per share by the number of shares covered by the options. These amounts are not intended to forecast possible future appreciation, if any, of the price of a share of Common Stock. The actual value realized upon exercise of the options will depend on the fair market value of Common Stock on the date of exercise. (2) The options are all exercisable in full commencing from the date of grant. (3) Does not include the right granted to Mr. Tollman to convert up to $2,000,000 of deferred compensation into shares of Common Stock at $2.00 per share. The following table sets forth certain information with respect to the exercise of stock options during fiscal 2000 by the Named Executive Officers and the number and value of unexercised options held by each of the Named Executive Officers as of December 31, 2000:
Number of Securities Value of Unexercised Shares Underlying Unexercised In-the-Money Options at Acquired Value Options at Fiscal Year End Fiscal Year End (1) On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable Stanley S. Tollman . - - 500,000(2) -- $ 0 -- Thomas W. Aro - - 420,000 -- $ 0 --
(1) None of the existing options were in-the-money at December 31, 2000. (2) Does not include the right granted to Mr. Tollman to convert up to $2,000,000 of deferred compensation into shares of Common Stock at $2.00 per share. The following table sets forth certain information with respect to the exercise of stock options during fiscal 1999 by the Named Executive Officers and the number and value of unexercised options held by each of the Named Executive Officers as of December 31, 1999:
Number of Securities Value of Unexercised Shares Underlying Unexercised In-the-Money Options at Acquired Value Options at Fiscal Year End Fiscal Year End (1) On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable Stanley S. Tollman . -- -- 500,000 -- $1,770,000(2) -- Thomas W. Aro . -- -- 420,000 -- $1,694,000 --
(1) Calculated by multiplying (a) the number of shares covered by the options by (b) the difference between the market price at December 31, 1999 of $6.25 and the respective exercise price. (2) Does not include the right granted to Mr. Tollman to convert up to $2,000,000 of deferred compensation into shares of Common Stock at $2.00 per share. In October 2000 and December 1998, the Company determined that the purposes of its stock option plans were not being adequately achieved with respect to those employees and consultants holding options that were exercisable at prices above current market value and that it was in the best interests of the Company and its stockholders that the Company retain and motivate such employees and consultants. Therefore, in order to provide such optionees the opportunity to exchange their above market value options for options exercisable at the current market value in 2000 and 1998, respectively, the Company cancelled all options that were outstanding under the Company's 1998 and 1993 stock option plans at that time and reissued the options at an exercise price of $1.375 and $1.063, respectively, such pricing being the closing NASDAQ bid prices on October 12, 2000 and December 12, 1998, respectively. The following table sets forth certain information with respect to all such cancellations and reissuances with respect to options held by any executive officer from March 19, 1993 (date of inception) through December 31, 2000:
Length of Number of market original securities Price of Exercise option term underlying stock at price at remaining Cancellation/ options time of time of New at date of reissuance cancelled/ cancelling/ cancelling/ exercise cancelling/ date reissued reissuing reissuing price reissuing Thomas W. Aro 12/12/98 60,000 $1.063 $3.25 $1.063 4.5 years 12/12/98 100,000 $1.063 $2.00 $1.063 9.5 years 10/12/00 75,000 $1.375 $2.00 $1.375 7.5 years 10/12/00 130,000 $1.375 $4.25 $1.375 9.0 years Brett G. Tollman 12/12/98 60,000 $1.063 $3.25 $1.063 4.5 years 12/12/98 100,000 $1.063 $2.00 $1.063 9.5 years 10/12/00 75,000 $1.375 $2.00 $1.375 7.5 years 10/12/00 115,000 $1.375 $4.25 $1.375 9.0 years Craig Kendziera 12/12/98 12,000 $1.063 $3.25 $1.063 4.5 years 12/12/98 8,000 $1.063 $2.00 $1.063 9.5 years 10/12/00 50,000 $1.375 $2.00 $1.375 7.5 years 10/12/00 15,000 $1.375 $4.25 $1.375 9.0 years Robert Steenhuisen 12/12/98 8,000 $1.063 $3.25 $1.063 4.5 years 12/12/98 12,000 $1.063 $2.00 $1.063 9.5 years 10/12/00 50,000 $1.375 $2.00 $1.375 7.5 years 10/12/00 15,000 $1.375 $4.25 $1.375 9.0 years
Compensation of Directors. On May 12, 1998, with stockholder approval granted in September 1999, the Board approved an annual compensation arrangement whereby each of the three outside directors will receive $6,000 per annum plus options to purchase up to 25,000 shares, and an additional 15,000 shares for each committee served upon, of Common Stock at an exercise price equal to the current market price at the date the option is granted. Accordingly, in 1999 and 1998 the Company granted to its outside directors options to purchase an aggregate amount of up to 150,000 and 285,000 shares, respectively, of Common Stock at an exercise price of $4.25 and $1.063, respectively, per share, which options can be exercised any time up to 2009 and 2008, respectively. The amount granted in 1999 was for services to be rendered in the year 2000. The amount granted in 1998 represents options to purchase aggregate amounts of up to 135,000 and 150,000 shares for the 1998 and 1999 years of service, respectively. As compensation to its employee directors, in December 1999 and 1998, the Company granted options to purchase an aggregate amount of up to 95,000 shares of Common Stock for each of the 2000, 1999 and 1998 years. Employment Agreements. The Company and Stanley S. Tollman entered into an Employment Agreement dated June 1, 1993, whereby Mr. Tollman agreed to serve as Chairman of the Board and Co- Chief Executive Officer of the Company for a term of three (3) years from the date of that Agreement. Thereafter, such Agreement is automatically renewable for successive twelve (12) month periods unless either party advises the other on at least ninety (90) days' written notice of his or its intention not to extend the term of the employment. In the event of a termination of his employment, under the terms of such Agreement Mr. Tollman is to be retained for two years to provide consulting services for $175,000 per year. Such Agreement has been renewed until June 1, 2001. Mr. Tollman's Employment Agreement provides for a salary in the amount of $250,000 per year, none of which has been paid under such Agreement since the date thereof. The unpaid salary accumulates, and the Company does not pay any interest or other penalty thereon. Such Agreement provides for Mr. Tollman to devote no less than 20% of his business time to the affairs of the Company and its subsidiaries. Such Agreement contains a non-disclosure provision pursuant to which Mr. Tollman has agreed not to use or disclose any information, knowledge or data relating to or concerning the Company's operations, sales, business or affairs to any individual or entity, other than the Company or its designees, except as required in connection with the business and affairs of the Company. Mr. Tollman waived his right to receive the $250,000 salary for the year 2000. As of December 31, 2000 and 1999, accrued salary payable to Mr. Tollman amounted to $1,529,167 and $1,529,167, respectively. On May 27, 1999, the Company, subject to approval by the Company's stockholders (which approval was obtained in September 1999), agreed to afford Mr. Tollman the right to convert up to $2,000,000 of deferred compensation payable into up to 1,000,000 shares of Common Stock at a price of $2.00 per share, the closing price on that day. Mr. Tollman's right to convert deferred compensation into Common Stock shall be exercisable only if he continues to defer his salary and he remains employed through and including April 2002; provided, however, that if his employment by the Company is terminated prior to such date on account of his death or other disability, he or his estate shall have the right for the period of 90 days after such termination to exercise such conversion right. During the year ended December 31, 1999, the Company recorded a noncash compensation charge of $3,251,000 reflecting an increase since the date such agreement was made in the market price of shares of Common Stock that could be acquired upon such conversion of deferred salary. The $3,251,000 charge was reversed in 2000 to reflect the decrease in the market price of Common Stock during that year. Directors' Report on Executive Compensation General. Decisions concerning executive officers' salaries for 2000 and 1999 were made by the full Board. Decisions concerning the grant of stock options to executive officers were made by the Stock Option Committee. The Company otherwise has no formal compensation policies applicable to executive officers. The Board's recommendations in each case were based on the subjective evaluation of each officer's contribution to the Company and the level of compensation necessary to adequately motivate and reward the officer. The composition and amount of each item of executive compensation for 2000 and 1999 did not bear a specific relationship to any particular measure of performance. Cash Compensation. Certain of the Company's executive officers are not compensated directly by the Company based upon the Compensation Committee's determination that compensation is not prudent at this time given the Company's financial position. When, and if, the Company's financial position improves, the Compensation Committee would establish and review the compensation of those executive officers not presently compensated directly by the Company and the overall employee compensation plan. Bryanston has, without seeking reimbursement therefor from the Company, provided salaries and benefits to those of the Company's executive officers not presently compensated directly by the Company. Equity Compensation. The grant of stock options to executive officers constitutes an important element of long-term compensation for the executive officers. The grant of stock options increases management's equity ownership in the Company with the goal of ensuring that the interest of management remains closely aligned with those of the Company's stockholders. The Board believes that stock options in the Company provide a direct link between executive compensation and stockholders' value. By attaching vesting requirements, stock options also create an incentive for an executive officer to remain with the Company for the long term. Chief Executive Officer Compensation. The compensation of Stanley S. Tollman, the Chief Executive Officer, is set forth in an Employment Agreement between the Company and Mr. Tollman, which provides for a salary in the amount of $250,000 per year, none of which has been paid under such Agreement. The unpaid salary accumulates, and the Company does not pay any interest or other penalty thereon. Mr. Tollman has waived his rights to receive the $250,000 salary for the year 2000. The terms of the Employment Agreement were determined based upon Mr. Tollman's ability to establish and retain a strong management team and to develop and implement the Company's business plans. In setting compensation for Mr. Tollman, the Company also considered its financial position and reviewed compensation levels of chief executive officers at comparable companies within the Company's industry. In both December 1999 and 1998, the Company granted to Mr. Tollman options to purchase 250,000 shares of Common Stock. Stanley S. Tollman Thomas W. Aro James A. Cutler Herbert F. Kozlov Brett A. Tollman Matthew D. Walker MARKET PRICES AND DIVIDENDS Market Prices The Common Stock is traded on the Automated Quotation System of the National Association of Securities Dealers, Inc. ("NASDAQ") under the symbols "ALHY", and on the Boston Stock Exchange under the symbol "ALH." The Company's Redeemable Common Stock Purchase Warrants (the "Warrants") are traded on the Boston Stock Exchange under the symbol "ALHW" and on the OTCBB under the symbol "ALHYW." The following table sets forth the high and low sale prices for Common Stock as reported by NASDAQ and of the Warrants as reported by NASDAQ and/or the OTCBB.
Common Stock Warrants High Low High Low 2000 Quarters: Fourth . . . . . . 3.125 .875 .75 .13 Third. . . . . . . 3.50 1.00 .6875 .30 Second . . . . . . 7.50 1.375 4.9375 .50 First. . . . . . . 9.75 3.375 5.4375 1.00 1999 Quarters: Fourth . . . . . $6.69 $2.50 $3.38 $1.25 Third. . . . . . . 4.44 3.00 2.38 .88 Second . . . . . . 5.00 1.50 .375 .0625 First. . . . . . . 2.81 1.19 .0625 .0625 1998 Quarters: Fourth . . . . . . 1.56 .50 .0625 .0625 Third . . . . . . 2.06 .50 .125 .0625 Second . . . . . . 2.50 1.50 .1875 .0625 First . . . . . . .3.00 1.63 .375 .0625
As of April ____, 2001, 24,140,759 shares of Common Stock and 960,695 shares of Preferred Stock were issued and outstanding. The outstanding shares of Common Stock were held of record by approximately 800 persons, including ownership by nominees who may hold for multiple beneficial owners. Dividends The Company has not, since its inception, declared or paid any cash dividends on its shares of Common Stock. Under Section 170(a) of the General Corporation Law of Delaware (the "GCL"), the Corporation is, and has been, proscribed from declaring or paying any dividends upon any shares of its capital stock except to the extent of (1) its surplus (as defined under the GCL) or (2) in the case of no such surplus, its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. As the Company has no surplus (as defined under the GCL) or net profits, the Company is foreclosed from declaring or paying any cash dividends even if it were otherwise inclined to do so. There can be no assurance that the Company will have any surplus (as defined in the GCL) or that the Company will achieve any net profits, nor can there any assurance that even if the Company were to have such a surplus or achieve net profits, the Company would not determine to retain all available funds to expand the Company's business or for other corporate purposes. Management has no current intent to declare or pay any cash dividends on the shares of Common Stock. Additionally, the Company has since its inception in 1993 generally been subject to loan covenants that have prohibited the declaration or payment of any cash dividends. Although proceeds from the pre- closing financing obtained in connection with the sale of the assets of its subsidiaries, Alpha Gulf Coast, Inc. and Greenville Hotel, Inc., in March 1998 were used to discharge loans pursuant to the terms of which the Company was prohibited from declaring or paying any cash dividends on its shares of capital stock, such prohibition was replaced with restrictive covenants with respect to such pre-closing financing that effectively reinstated such prohibition. Upon consummation of such sale, such pre-closing financing was assumed by Greenville Casino Partners, L.P., effectively relieving the Company from such prohibition. However, there can be no assurance that the Company will declare or pay any dividends on the shares of its capital stock or will not in the future obtain financing under terms that would prohibit the declaration or payment of any cash dividends on its capital stock. The Series B Preferred Stock has voting rights of eight votes per preferred share, is convertible to eight shares of Common Stock for each share of preferred stock and carries a dividend of $2.90 per share, payable quarterly, which increases to $3.77 per share if the cash dividend is not paid within 30 days of the end of each quarter. In the event the dividend is not paid at the end of the Company's fiscal year (December 31), the dividend will be payable in shares of Common Stock instead of cash. On December 17, 1997, the Company declared a dividend of $1,391,000 with respect to the outstanding shares of the Series B Preferred Stock for 1996, which was paid by the issuance of 777,000 shares of Common Stock in April 1998. On May 12, 1998, the Company declared a dividend of $2,861,000 with respect to the outstanding shares of Series B Preferred Stock for 1997, which was paid by the issuance of approximately 1,605,000 shares of Common Stock in January 1999. On May 12, 2000, the Company declared dividends on the Series B Preferred Stock for the 1999 and 1998 fiscal years amounting to 450,479 and 1,942,607, respectively, shares of Common Stock. These shares were issued in July 2000. On April 4, 2001, the Company issued 3,166,707 shares of Common Stock in payment for the $3,097,040 dividend accrued on the Series B Preferred Stock for the year 2000. On June 30, 1998, the Company issued 135,000 shares of Series C Preferred Stock in settlement of $9,729,000 of net obligations. The Series C Preferred Stock has voting rights of twenty-four votes per preferred share, is convertible into twenty-four shares of Common Stock and carries a dividend of $5.65 per share. In addition, the terms of the Series C Preferred Stock include a provision granting the Company the right to call such stock based upon the occurrence of certain capital events that realize a profit in excess of $5,000,000. As of December 31, 2000, dividends accrued on the outstanding Series C Preferred Stock amounted to approximately $382,000, $763,000 and $763,000 for 1998, 1999 and 2000, respectively. On February 8, 2000, the Company issued 4,000 shares of its 7% convertible Series D Preferred Stock (the "Series D Preferred Stock") for an aggregate price of $3,900,000, net of approximately $100,000 of closing costs. The Series D Preferred Stock is convertible into shares of Common Stock at a conversion price of the lesser of $6 per share or a price based upon the prevailing market price of Common Stock at the time of conversion, and accrues dividends at a rate of 7% per annum. In the event the Series D Preferred Stock is not converted into shares of Common Stock by February 8, 2005, there will be a mandatory redemption at that time, payable in shares of Common Stock at the same aforementioned conversion price. The dividends are payable in arrears on the earlier of the date of conversion of a share of Series D Preferred Stock or the date of redemption. At the Company's option, the dividends are payable in the form of cash or shares of Common Stock. The maximum aggregate total number of shares of Common Stock issuable relative to the conversions and payments of dividends on the Series D Preferred Stock is 3,300,000 shares. In the event such limitation prevents the conversion of any Series D Preferred Stock, the dividend rate will increase to 15% per annum and be payable in cash in arrears, semi- annually on June 30 and December 31. The Series D Preferred Stock contains no voting rights prior to its conversion into Common Stock. During 2000, 1,900 shares of Series D Preferred Stock were converted into approximately 1,387,000 shares of Common Stock, and during 2001, an additional 150 shares of Series D Preferred Stock have been converted into approximately 225,739 shares of Common Stock. Although the Company is not currently subject to loan covenants restricting its right to declare or pay cash dividends on shares of preferred stock, there can be no assurance that the Company will be able to do so or, even if able to do so, will elect to do so. Management anticipates that, even if the Company has sufficient surplus and/or net profits to declare and pay a cash dividend on shares of preferred stock, its decision whether to do so will depend upon its determination as to whether it is in the best interests of the Company to pay such dividend in cash or in shares of Common Stock. Corporate Performance Graph. The following graph shows a comparison of cumulative total stockholders' returns from December 31, 1993 through December 31, 2000 for the Company, the Russell 2000 Index ("Russell") and the Dow Jones Entertainment and Leisure -- Casino Index ("DJ Casino"). The graph assumes the investment of $100 in shares of Common Stock, securities represented by the Russell Index or DJ Casino Index on December 31, 1993 and that all dividends were reinvested. No dividends have been declared or paid on the Common Stock. NASDAQ ceased listing the Warrants in December 1998, since there ceased being at least two market makers for such securities. The Warrants continue to trade in the over-the-counter market in the "pink sheets" and on the Boston Stock Exchange. Section 16(a) Reporting. Under the securities laws of the United States, the Company's directors, its executive (and certain other) officers, and any persons holding ten percent (10%) or more of the Common Stock must report on their ownership of the Common Stock and any changes in that ownership to the Securities and Exchange Commission and to the National Association of Securities Dealers, Inc. Automated Quotation System. Specific due dates for these reports have been established. The Company is not aware of any delinquencies by any of the foregoing persons with regard to the timely filing of such reports for the years ended December 31, 2000 and 1999. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). Proxy statements, reports and other information can be inspected and copied at the public reference facilities of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New York 10048. Any interested party may obtain copies of such material at prescribed rates from the Public Reference Section of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street, N W., Room 1024, Washington, D.C. 20549. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement and prior to the date of the Meeting shall be deemed to be incorporated by reference in this Proxy Statement and to be a part hereof from the respective dates of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Proxy Statement to the extent that a statement contained in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Proxy Statement. The Company will provide, without charge, to each stockholder to whom this Proxy Statement is delivered and who so requests, a copy of any or all of the information that has been incorporated by reference in this Proxy Statement (exclusive of exhibits to such information unless such exhibits are specifically incorporated by reference into such information). Any such request should be made orally or in writing to Alpha Hospitality Corporation, Secretary, 12 East 49th Street, 24th floor, New York, New York 10017, telephone (212) 750-3500. Within one business day of receipt of such a request, the Company will provide, by first class mail or other equally prompt means, a copy of the information as requested. STOCKHOLDER PROPOSALS Stockholders' proposals intended to be presented at the Company's next Annual Meeting of Stockholders, pursuant to the provision of Rule 14a-8 promulgated under the Exchange Act, must be received at the Company's offices not later than March 15, 2002 for inclusion in the Company's Proxy Statement and form of proxy relating to that Meeting. ALPHA HOSPITALITY CORPORATION 12 East 49th Street New York, New York 10017 _________________ This Proxy is Solicited on Behalf of the Board of Directors _____________________ The undersigned hereby appoints Stanley Tollman and Thomas W. Aro as Proxies, each with the power to appoint his substitute, and hereby authorizes them, and each of them acting singly, to represent and vote, as designated below, all the shares of Common Stock of Alpha Hospitality Corporation (the "Company") held of record by the undersigned on April ____ , 2001 at the combined Annual and Special Meeting of Stockholders to be held on May 31, 2001, or any adjournment or postponement thereof. Please specify your vote by checking the box to the left of your choice for each respective proposal. 1. To elect the following individuals as members to the Board of Directors of the Company: Stanley S. Tollman FOR ABSTAIN AGAINST Thomas W. Aro FOR ABSTAIN AGAINST Brett G. Tollman FOR ABSTAIN AGAINST James A. Cutler FOR ABSTAIN AGAINST Matthew B. Walker FOR ABSTAIN AGAINST Herbert F. Kozlov FOR ABSTAIN AGAINST 2. To approve an amendment to the Company's Certificate of Designations for Series C Preferred Stock. FOR ABSTAIN AGAINST 3. To approve the issuance of shares of Common Stock in payment of the dividend accrued on the Series C Preferred Stock for the years 1998, 1999 and 2000. FOR ABSTAIN AGAINST 4. To approve an amendment to the Company's Certificate of Incorporation to provide for a reverse 1-for-10 stock split of the Company's outstanding Common Stock. FOR ABSTAIN AGAINST 5. To ratify the appointment of Rothstein, Kass & Company, P.C. as the Company's independent certified public accountant. FOR ABSTAIN AGAINST This proxy, when properly executed, will be voted in the manner directed by the undersigned stockholder. If no direction is made, this proxy will be voted FOR each of the 5 Proposals PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. 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 the President or other authorized officer. If a partnership, please sign in partnership name by authorized person. __________________________________________ Signature __________________________________________ Signature if held jointly Dated: , 2001 Exhibit A CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF DESIGNATION SETTING FORTH THE PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK OF ALPHA HOSPITALITY CORPORATION ALPHA HOSPITALITY CORPORATION (the "Corporation"), a Delaware corporation, certifies that, pursuant to the authority contained in Article FOURTH of its Certificate of Incorporation, and in accordance with the provisions of Section 151 of the General Corporation Law (the "GCL") of the State of Delaware, its Board of Directors has adopted the following preambles and resolutions, which the stockholders have approved at a duly called and held meeting, upon notice in accordance with Section 222 of the GCL, at which meeting the necessary number of votes as required by statute were cast in favor of the amendment, amending and clarifying the preferences, rights and limitations of the Corporation's existing Series C Preferred Stock, originally established by a Certificate of Designation Setting Forth the Preferences, Rights and Limitations of Series B Preferred Stock and Series C Preferred Stock of Alpha Hospitality Corporation (the "Certificate of Designation"), filed with the Secretary of State on July 24, 1998. WHEREAS, the Corporation desires to have the option to pay dividends for the Series C Preferred Stock with shares of Common Stock in lieu of cash; and WHEREAS, the Corporation deems it appropriate to amend the preferences and rights of the Series C Preferred Stock to include a provision whereby the Corporation can issue shares of Common Stock in lieu of the cash dividend accrued on its Series C Preferred Stock; and NOW THEREFORE, it is hereby RESOLVED, that Part B of the Certificate of Designation be amended to include a new Section 2.4, setting forth the terms and conditions for payment of dividends on Series C Preferred Stock in shares of Common Stock, effective upon the filing of an appropriate amendment to the Certificate of Designation with the Secretary of State, to read as set forth below, and the original Section 2.4 be renumbered to Section 2.5: 2.4 Payment of Dividend in Shares of Common Stock. Notwithstanding the provisions of Section 2.3 hereof, commencing in the year 2002, any dividend payment that is not made by the Corporation on or before January 30 of the calendar year following the calendar year for which such dividend accrued may, at the option of the Corporation's Board of Directors, be payable in the form of shares of Common Stock, in such number of shares as shall be determined by dividing (A) the product of (x) the amount of the unpaid dividend multiplied by (y) 1.3 by (B) the Fair Market Value of the Common Stock. For this purpose, "Fair Market Value" shall mean, with respect to the Common Stock, the average of the daily closing prices for the Common Stock of the Corporation for the twenty (20) consecutive trading days preceding the applicable January 30 date, with the closing price for each day being the closing price reported on the principal securities exchange upon which the Common Stock of the Corporation is traded or, if it is not so traded, then the average of the closing bid and asked prices as reported by the National Association of Securities Dealers Automated Quotation System or, if not quoted thereon, in the interdealer market on the "Pink Sheets" of the National Quotation Bureau (excluding the highest and lowest bids on each day that there are four (4) or more market makers). IN WITNESS WHEREOF, ALPHA HOSPITALITY CORPORATION has caused this Certificate of Amendment to the Certificate of Designation to be executed by its President and attested to by its Secretary this _____ day of ___________, 2001. ALPHA HOSPITALITY CORPORATION _________________________________ Stanley S. Tollman, Chairman and President ATTEST: Thomas W. Aro, Secretary Exhibit B CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF ALPHA HOSPITALITY CORPORATION Pursuant to Section 242 of the General Corporation Law of the State of Delaware ALPHA HOSPITALITY CORPORATION, (the "Corporation"), a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "DGCL"), does hereby certify as follows: FIRST: by unanimous written consent, the Board of Directors of the Corporation adopted resolutions setting forth a proposed amendment to the Corporation's Certificate of Incorporation, declaring such amendment to be advisable and calling a meeting of the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that at 5:30 E.S.T. on the date of the filing of this Certificate of Amendment to the Certificate of Incorporation, a reverse stock split (the "Reverse Stock Split") of the Corporation's common stock, (the "Old Common Stock") par value $.01 per share shall take place without any further action on the part of the holders thereof, whereby each ten (10) shares of Old Common Stock shall be combined into one validly issued share of new common stock (the "New Common Stock"), the par value of which shall remain unchanged. Fractional shares will be rounded up to the nearest whole number. SECOND: That thereafter, pursuant to resolution of the Board of Directors of the Corporation, an annual meeting of the stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the DGCL, at which meeting the necessary number of votes as required by statute was cast in favor of the amendment. THIRD: That this Amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of the Certificate of Incorporation on the ______ day of ____________, 2001 and affirms that the statements contained herein are true under the penalty of perjury. ALPHA HOSPITALITY CORPORATION By: _______________________________ Stanley S. Tollman Chairman and President ATTEST: By: ______________________________ Thomas W. Aro Secretary APPENDIX I ALPHA HOSPITALITY CORPORATION BOARD OF DIRECTORS AUDIT COMMITTEE CHARTER Organization This charter (the "Charter") governs the operations of the Audit Committee (the "Committee") of the Board of Directors of Alpha Hospitality Corporation (the "Company"). The Committee shall review and reassess the Charter at least annually and obtain the approval of any amendments to the Charter by the board of directors. The Committee shall be appointed by the board of directors and shall comprise at least three directors, each of whom are independent of management and the Company. Members of the Committee shall be considered independent if they have no relationship that may interfere with the exercise of their independence from management and the Company. All committee members shall be financially literate and at least one member shall have accounting or related financial management expertise. Statement of Policy The Committee shall provide assistance to the board of directors in fulfilling its oversight responsibility to the shareholders, potential shareholders, the investment community, and others relating to the Company's financial statements and the financial reporting process, the systems of internal accounting and financial controls, the internal audit function, the annual independent audit of the Company's financial statements, and the legal compliance and ethics programs as established by management and the board. In so doing, it is the responsibility of the Committee to maintain free and open communication between the Committee, independent auditors, the internal auditors and management of the Company. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Company and the power to retain outside counsel, or other experts for this purpose at the cost and expense of the Company. Responsibilities and Processes The primary responsibility of the Committee is to oversee the Company's financial reporting process on behalf of the board and report the results of their activities to the board. Management is responsible for preparing the Company's financial statements, and the independent auditors are responsible for auditing those financial statements. The Committee, in carrying out its responsibilities, believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. The Committee shall take appropriate actions to set the overall corporate "tone" for quality financial reporting, sound business risk practices, and ethical behavior. The following shall be the principal recurring processes of the Committee in carrying out its oversight responsibilities. The processes are set forth as a guide with the understanding that the committee may supplement them as appropriate. 1.The Committee shall have a clear understanding with management and the independent auditors that the independent auditors are ultimately accountable to the board and the Committee, as representatives of the Company's shareholders. The Committee shall have the ultimate authority and responsibility to evaluate and, where appropriate, recommend to the board of directors the replacement of the independent auditors. The Committee shall discuss with the auditors their independence from management and the Company and the matters included in the written disclosures required by the Independence Standards Board. Annually, the Committee shall review and recommend to the board of directors the selection of the Company's independent auditors, subject to shareholders' approval. 2.The Committee shall discuss with the internal auditors and the independent auditors the overall scope and plans for their respective audits including the adequacy of staffing and compensation. Also, the Committee shall discuss with management, the internal auditors, and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor and manage business risk, and legal and ethical complicance programs. Further, the Committee shall meet separately with the internal auditors and the independent auditors, with and without management present to discuss the results of the independent auditors' examinations. 3.The Committee shall review the interim financial statements with management and the independent auditors prior to the filing of the Company's Quarterly Report on Form 10-Q. Also, the committee shall discuss the results of the quarterly review and any other matters required to be communitcated to the Committee by the independent auditor under generally accepted auditing standards. The chair of the Committee may represent the entire Committee for the purposes of this review. 4.The Committee shall review with management and the independent auditors the financial statements to be included in the Company's Annual Report on Form 10-K (or the annual report to shareholders if distributed prior to the filing of Form 10-K), including their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. Also, the Committee shall discuss the results of the annual audit and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards. -----END PRIVACY-ENHANCED MESSAGE-----