SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
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[X] Preliminary Information Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[_] Definitive Information Statement
ALPHA HOSPITALITY CORPORATION
(Name of Registrant As Specified In Charter)
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[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[_] Fee computed on table below per Exchange Act Rules 14c-5(g)
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PRELIMINARY COPY
ALPHA HOSPITALITY CORPORATION
707 Skokie Boulevard
Suite 600
Northbrook, IL 60062
INFORMATION STATEMENT AND NOTICE
OF ACTION TAKEN WITHOUT A MEETING OF STOCKHOLDERS
This Information Statement and Notice of Action Taken
Without a Meeting of Stockholders is being mailed on or about
January __, 2003 to the stockholders of record of Alpha
Hospitality Corporation ("Alpha") at the close of business on
January __, 2003 to provide information with respect an action
taken by written consent of the holders of a majority of the
outstanding shares of Alpha's common stock, $0.01 par value per
share ("Common Stock").
As set forth in greater detail herein, the written consent
approves (i) the transfer of the voting power of 2,326,857 shares
of Common Stock from The Bryanston Group, Inc. and its
affiliates, Alpha's largest stockholder (together, "Bryanston"),
to Robert A. Berman, Alpha's Chairman of the Board and Chief
Executive Officer and (ii) the granting by Bryanston to Alpha of
a three year option to reacquire up to2,326,857 shares of Common
Stock at a price of $2.12 per share (appropriately adjusted for
any subsequent stock split, dividend, combination, or other
recapitalization) (together, the "Recapitalization").
Consummation of the Recapitalization will result in a change in
voting control and substantially change the ownership and capital
structure of Alpha.
You are being provided with this Information Statement
pursuant to Section 14(c) of the Securities Exchange Act of 1934,
as amended, and Regulation 14C and Schedule 14C thereunder. The
Recapitalization will not be consummated or become effective
until at least 20 days after the mailing of this Information
Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
BACKGROUND FOR ACTIONS TAKEN
The following is a summary of the reasons for the
Recapitalization and its material terms. This discussion of the
Recapitalization is qualified in its entirety by reference to the
full text of the Recapitalization Agreement between Alpha and
Bryanston, a copy of which is attached hereto as Exhibit A.
In October 1995, Catskill Development, LLC ("Catskill"), a
New York limited liability company, was formed to pursue the
development of a raceway property in Monticello, New York (the
"Raceway"). Alpha Monticello, Inc., a wholly owned subsidiary of
Alpha, is a non-voting member of Catskill. Catskill's business
plan envisioned the development of a Native American casino and
three distinct lines of business: a) casino activities; b) real
estate related activities; and c) gaming operations related to
Monticello Raceway (the "Raceway"), including
pari-mutuel and
potential future video lottery terminals ("VLTs"). Catskill's
plan is to enter into a contract with a federally recognized
Native American Tribe to sell to it a parcel of land on the
Raceway site and to work with such tribe to secure the necessary
state and federal approvals for the construction and operation of
a casino. On June 3, 1996, Catskill acquired the Raceway and its
surrounding properties for $10,000,000, and then set aside 29.31
acres of surrounding property for the development of a Native
American casino.
Alpha, by holding an interest in Catskill, is subject to
regulation by various governmental agencies that regulate and
license gaming activities. As part of such regulation, Alpha and
its affiliates are generally required to be licensed or otherwise
approved in each jurisdiction in which they operate, and are in
turn subject to a determination of suitability with respect to
their officers, directors and significant investors. For example,
the New York Racing & Wagering Board upon a determination that it
is inconsistent with the public interest, convenience or
necessity or with the best interests of racing generally that any
person continue to be a stockholder (of record or beneficially)
in any entity that is licensed to engage in racing activities or
that owns 25% or more of such licensed entity, may direct such
stockholder to dispose of its interest in such entity. In the
event that an officer, director, investor or creditor of a
regulated entity or an affiliated entity were found to be
unsuitable, the entity's license or other approval to conduct
gaming activities could be revoked or conditioned upon, as the
case may be, such officer or director resigning, the divestiture
or termination of such investor's interests or the satisfaction
of such creditor's indebtedness.
In April 2002, each of Monty Hundley, Stanley Tollman and
Brett Tollman was indicted by a federal grand jury on various
counts of tax fraud and bank fraud. As each of these individuals
is an affiliate of Bryanston, Bryanston's continued status as a
stockholder of Alpha and a member of Catskill, places Catskill's
current gaming licenses in jeopardy and could undermine its
ability to obtain new licenses and find a suitable Native
American partner with which to develop a casino. As a result of
these factors, in December 2002, Alpha entered into an agreement
with Bryanston whereby in exchange for debt and/or shares of a
newly created series of preferred stock, Alpha (i) acquired
Bryanston's membership interest in Catskill, (ii) for the
purchase price of $2.12 per share, obtained the ability to retire
substantially all of Bryanston's equity interest in Alpha (the
"Option"), (iii) obtained, through its Chief Executive Officer,
voting control over 2,326,857 shares of Common Stock held by
Bryanston (the "Proxy") and (iv) satisfied its outstanding
indebtedness to Bryanston. However, pursuant to the terms of this
agreement, the Option and the Proxy (collectively, the
"Recapitalization") shall not become effective until stockholder
approval for such transactions has been obtained.
In addition to ensuring compliance with all gaming
regulations, the Company carried out the Recapitalization in
order to maintain its Nasdaq listing. On November 19, 2003 the
Company received a letter from Nasdaq stating it had fallen below
the minimum stockholders' equity requirement of $2,500,000 as of
the Company's fiscal quarter ended September 30, 2002. As a
result of the Recapitalization, on January 10, 2003, the Company
received an extension from Nasdaq until January 17, 2003 to file
with the SEC a public document demonstrating compliance with the
minimum stockholder equity requirement. On January __, 2003, the
Company filed a Current Report on Form 8-K demonstrating
compliance.
STOCKHOLDER APPROVAL AND CHANGE OF CONTROL
Alpha has received the written consent of a majority of its
stockholders approving the Recapitalization in lieu of a special
stockholders meeting. The individuals signing such consent
represent, under Delaware law, a sufficient number of shares to
take the action without notice or a meeting of the stockholders.
On or after the twentieth day following the mailing of this
report to stockholders, this consent will become effective to
approve the Recapitalization. Under Delaware law, there is no
procedure whereby a stockholder not a party to the written
consent may vote against the Recapitalization.
The transfer by Bryanston of its voting power to Alpha'
Chief Executive Officer pursuant to the Proxy will result in a
change in control of Alpha. Moreover, in the event that Alpha
exercises the Option, a further change in control will occur
under which no individual stockholder or group of stockholders
would be left with a controlling interest in Alpha. No assurance
can be given that such Option exercise or change in control will
occur.
RIGHTS OF DISSENTING STOCKHOLDERS
Alpha stockholders are not entitled to any appraisal or
similar rights and under Delaware law in connection with the
approval and ratification of the Recapitalization.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the record date, Alpha's authorized capitalization
consisted of 75,000,000 shares of Common Stock and 5,000,000
shares of preferred stock. As of the record date, there were
4,956,183 shares of common stock outstanding, all of which were
fully paid, non-assessable and 44,258 shares of Series B entitled
to vote, all of which were fully paid, non-assessable and
entitled to vote and 1,730,696 shares of Series E preferred stock
outstanding, all of which were fully paid, non-assessable but not
entitled to vote, except as may be required by law. Each share of
Common Stock entitles its holder to one vote on each matter
submitted to stockholders for a vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
the beneficial ownership of Alpha's shares of Common Stock as of
January __, 2003 by all those known by Alpha to be beneficial
owners of more than 5% of its Common Stock, each director, each
executive officer and all directors and executive officers of
Alpha as a group. Unless otherwise noted in the footnotes to the
table, the persons named in the table have sole voting and
investment power with respect to all shares of common stock
indicated as being beneficially owned by them. Unless otherwise
indicated, the address of each stockholder, director and
executive officer listed below is c/o Alpha Hospitality
Corporation, 707 Skokie Boulevard, Suite 600, Northbrook,
Illinois 60062.
Title of Class Name and Address No. of Percent
Shares(1) of Class(2)
Common Stock Robert A. Berman (3) 3,064,347 60.67%
$.01 par value Scott A. Kaniewski (4) 670,890 13.28
Thomas W. Aro (5) 46,200 *
Paul deBary (6) 61,932 1.25
Thomas P. Puccio (7) 15,000 *
Philip Berman (8) (11) 575,874 11.62
William H. Hopson (10) 15,000 *
Watertone Holdings,
LP (9) (11) 575,874 11.62
c/o Scott Kaniewski
2412 Central Park
Avenue
Evanston, IL
New York Gaming LLC (11) 575,874 11.62
c/o Scott Kaniewski
2412 Central Park
Avenue
Evanston, IL
BKB, LLC (11) 575,874 11.62
c/o Scott Kaniewski
2412 Central Park Ave
Evanston, IL
Bryanston Group,
Inc. (13) 2,326,857 11.62
1886 Route 52
Hopewell Junction,
N.Y.
All Current Officers
and Directors as a
group without
duplicating shared
beneficial interest
(6 persons)
(3,4,5,6,7,10) 3,280,563 62.64
* less than 1%
(1) Except as noted below, 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.
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 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) Consists of 600 shares owned by Robert Berman, 95,016
shares issuable upon the exercise of a currently exercisable
option, 575,874 shares owned by New York Gaming, LLC (with
respect to which Robert Berman has shared voting and
disposition rights), 2,326,857 shares owned by Bryanston
and 66,000 shares owned by Beatrice Tollman (with respect to
such shares owned by Bryanston and Beatrice Tollman, Robert
Berman has exclusive voting rights for a three year period
under the Bryanston Recapitalization Agreement dated
December 10, 2002. Robert
Berman disclaims beneficial
ownership of any of the shares owned by Bryanston and
Beatrice Tollman for any purpose other than voting.
(4) Consists of 575,874 shares owned by New York Gaming, LLC
(with respect to which Mr. Kaniewski has shared voting and
disposition rights) and 95,016 shares issuable upon the
exercise of a currently exercisable option.
(5) Includes 46,000 shares of common stock issuable upon the
exercise of options granted to Mr. Aro, all of which options
are currently exercisable.
(6) Includes 16,932 shares beneficially owned through New
York Gaming, LLC and 15,000
shares of common stock issuable upon the exercise of options
granted, all of which options are currently exercisable.
(7) Consists of 15,000 shares of common stock issuable upon the exercise of
options granted, all of
which options are currently exercisable.
(8) Consists of 575,874 shares owned by New York Gaming, LLC
(with respect to which Philip Berman has shared voting and
disposition rights).
(9) Consists of 575,874 shares owned by New York Gaming, LLC
(of which Watertone Holdings, LP is the manager).
(10) Consists of 15,000 shares of common stock issuable upon
the exercise of options granted, all of which options are
currently exercisable.
(11) Watertone is the manager of New York Gaming LLC, which
owns 575,874 shares, and BKB, LLC is the general partner in
Watertone. Robert A. Berman, Scott A. Kaniewski and Philip
Berman have shared power to direct BKB, LLC (as the general
partner in Watertone) to exercise the vote attendant to such
shares owned by New York Gaming LLC.
(12) Consists of 575,874 shares owned by New York Gaming,
LLC (of which Watertone Holdings, LP is the manager and of
which BKB, LLC is the general partner).
(13) Robert Berman has exclusive voting rights for Bryanston
shares for a three year period under the Bryanston
Recapitalization Agreement dated December 10, 2002. Robert
Berman disclaims beneficial ownership of any of the
Bryanston Shares for any purpose other than voting.