================================================================================
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
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 Rule 14a-11(c) or Rule 14a-12
BALLY TOTAL FITNESS HOLDING CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P., PARDUS CAPITAL
MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII,
JOSEPH R. THORNTON, CHARLES J. BURDICK, BARRY R. ELSON
AND DON R. KORNSTEIN
--------------------------------------------------------------------------------
(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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:____________
2) Aggregate number of securities to which transaction applies:_______________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):_______________________________
4) Proposed maximum aggregate value of transaction:___________________________
5) Total fee paid:____________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:____________________________________________________
2) Form, Schedule or Registration Statement No.:______________________________
3) Filing Party:
4) Date Filed:_______________________________________________
================================================================================
PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED DECEMBER [ ], 2005
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P., PARDUS CAPITAL
MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII, JOSEPH R. THORNTON,
CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN C/O PARDUS CAPITAL
MANAGEMENT L.P. 1001 AVENUE OF THE AMERICAS, SUITE 1100 NEW YORK, NY 10018
December [ ], 2005
Dear Fellow Stockholders:
Pardus European Special Opportunities Master Fund L.P. (the "Fund") is
the holder of an aggregate of 5,311,000 shares of common stock, par value $0.01
per share ("Common Stock"), of Bally Total Fitness Holding Corporation, a
Delaware corporation (the "Company" or "Bally"), representing approximately
[13.9%] of the issued and outstanding shares of Common Stock as of the Record
Date (hereinafter defined). The Fund does not believe that the current board of
directors of the Company is acting in the best interests of the Company's
stockholders and, therefore, the Fund and certain of its affiliates and
associates are seeking your support at the 2005 Annual Meeting of stockholders,
including any adjournments or postponements thereof and any special meeting that
may be called in lieu thereof (the "2005 Annual Meeting"), which is presently
scheduled to be held at 8:30 a.m. (local time) on January 26, 2005 at the
Renaissance Chicago O'Hare Hotel, 8500 West Bryn Mawr Avenue, Chicago, Illinois,
to take the following actions:
(1) To elect Charles J. Burdick, Barry R. Elson and Don R.
Kornstein to serve as Class III directors on the Bally board
of directors;
(2) To approve and adopt a binding resolution to repeal each
provision or amendment of the By-laws of the Company, if any,
adopted by the board of directors without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly
the last date of reported changes) and prior to the approval
and adoption of such resolution at the 2005 Annual Meeting;
(3) To vote against the adoption of the 2006 Omnibus Equity
Compensation Plan (as defined in the attached proxy
statement);
(4) To approve the ratification of KPMG LLP as the independent
auditor for the Company for the fiscal year ending December
31, 2005; and
(5) To vote on the Liberation Proposals (as defined in the
attached proxy statement), if such Proposals are properly
brought before the 2005 Annual Meeting, and such other matters
as may properly come before the 2005 Annual Meeting.
The attached proxy statement and the enclosed GREEN proxy card are
first being furnished to the stockholders of the company on or about [ ], 2005.
Messrs. Burdick, Elson and Kornstein are each committed to acting in
the best interest of the Company's stockholders and has each consented, if
elected, to serve as a director on Bally's board of directors. Moreover, Pardus
notes that the Company has nominated Messrs. Burdick and Elson for election at
the 2005 Annual Meeting and supports their candidacy. We believe that your voice
in the future of Bally can best be expressed through, among other things, the
election of Messrs. Burdick, Elson and Kornstein at the 2005 Annual Meeting.
ACCORDINGLY, THE FUND URGES YOU TO CAREFULLY CONSIDER THE INFORMATION CONTAINED
IN THE ATTACHED PROXY STATEMENT AND THEN SUPPORT THE FUND'S EFFORTS BY SIGNING,
DATING AND RETURNING THE ENCLOSED GREEN PROXY CARD TODAY TO VOTE (A) "FOR" THE
ELECTION OF CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN TO CLASS III
OF THE COMPANY'S BOARD OF DIRECTORS, (B) "FOR" THE APPROVAL AND ADOPTION OF THE
BY-LAW RESOLUTION TO REPEAL EACH PROVISION OR AMENDMENT OF THE BY-LAWS OF THE
COMPANY, IF ANY, ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE APPROVAL OF THE
COMPANY'S STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY THE LAST DATE OF
REPORTED CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF SUCH RESOLUTION AT
THE 2005 ANNUAL MEETING, (C) "AGAINST" THE ADOPTION OF THE 2006 OMNIBUS EQUITY
COMPENSATION PLAN, (D) FOR" THE RATIFICATION OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005, AND (E) "FOR"
GRANTING TO THE PROXY HOLDERS DISCRETION ON THE LIBERATION PROPOSALS, IF
PROPERLY BROUGHT BEFORE THE MEETING, AND ALL OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION ON THE RECORD DATE, ONLY IT CAN VOTE SUCH SHARES
AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE VOTE
YOUR SHARES ACCORDING TO THE ENCLOSED VOTING INSTRUCTION FORM OR CONTACT THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE ON YOUR
BEHALF THE GREEN PROXY CARD AS SOON AS POSSIBLE.
IMPORTANT
WE URGE YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY BALLY. IF YOU
HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BEFORE IT IS VOTED BY DELIVERING
A LATER-DATED GREEN PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE, OR BY
VOTING IN PERSON AT THE 2005 ANNUAL MEETING, OR BY DELIVERING TO THE CORPORATE
SECRETARY OF BALLY A WRITTEN NOTICE, BEARING A
DATE LATER THAN THE DATE OF THE PROXY, STATING THAT THE PROXY IS REVOKED. YOU
SHOULD SEND ANY NOTICE OF REVOCATION TO THE CORPORATE SECRETARY OF BALLY AT
BALLY'S EXECUTIVE OFFICES LOCATED AT 8700 WEST BRYN MAWR, CHICAGO, ILLINOIS
60631. SEE "QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION", "VOTING
PROCEDURES" AND "PROXY PROCEDURES" IN THE PROXY STATEMENT ATTACHED HERETO.
If you have any questions or require any assistance with your vote,
please contact:
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
Only holders of record of Bally's Common Stock as of the close of
business on December 20, 2005 (the "Record Date") are entitled to notice of, and
to attend and to vote at, the 2005 Annual Meeting. According to the proxy
statement of Bally filed with the Securities and Exchange Commission on December
[ ], 2005, as of the Record Date there were [ ] shares of Common Stock issued
and outstanding. Stockholders of record at the close of business on the Record
Date will be entitled to one vote at the 2005 Annual Meeting for each share of
Common Stock held on the Record Date.
SEND THE BALLY BOARD OF DIRECTORS A MESSAGE IT CAN'T IGNORE!
Thank you for your support.
PARDUS EUROPEAN SPECIAL
OPPORTUNITIES MASTER FUND L.P.
PARDUS CAPITAL MANAGEMENT L.P.
PARDUS CAPITAL MANAGEMENT LLC
MR. KARIM SAMII
MR. JOSEPH R. THORNTON
MR. CHARLES J. BURDICK
MR. BARRY R. ELSON
MR. DON R. KORNSTEIN
PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED DECEMBER [ ], 2005
PROXY STATEMENT
OF
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P., PARDUS CAPITAL
MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII, JOSEPH R. THORNTON,
CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN
-------------------------------
2005 ANNUAL MEETING OF STOCKHOLDERS
OF
BALLY TOTAL FITNESS HOLDING CORPORATION
-------------------------------
This proxy statement and the enclosed GREEN proxy card are being
furnished to you, the stockholders of Bally Total Fitness Holding Corporation, a
Delaware corporation (the "Company" or "Bally"), by Pardus European Special
Opportunities Master Fund L.P., a limited partnership formed under the laws of
the Cayman Islands and a stockholder of record of the Company (the "Fund"), and
certain of the Fund's affiliates and associates in connection with the
solicitation of proxies from the Company's stockholders to be used at the 2005
Annual Meeting of the stockholders, including any adjournments or postponements
thereof and any special meeting that may be called in lieu thereof (the "2005
Annual Meeting"). The 2005 Annual Meeting is scheduled to be held at 8:30 a.m.
(local time) on January 26, 2005 at the Renaissance Chicago O'Hare Hotel, 8500
West Bryn Mawr Avenue, Chicago, Illinois. The principal executive offices of the
Company are located at 8700 West Bryn Mawr Avenue, Chicago, Illinois 60631
(Telephone: 773-380-3000).
This proxy statement and the GREEN proxy card are first being furnished
to the Company's stockholders on or about [ ], 2005. Stockholders who are record
holders of common stock, par value $0.01 per share ("Common Stock"), of the
Company at the close of business on December 20, 2005 (the "Record Date") will
be entitled to vote at the 2005 Annual Meeting. According to the definitive
proxy statement of Bally filed with the Securities and Exchange Commission on
December [ ], 2005 ("Bally's Proxy Statement"), as of the Record Date there were
[ ] shares of Common Stock issued and outstanding and entitled to vote at the
2005 Annual Meeting.
This proxy statement and the enclosed GREEN proxy card are being
furnished to the Company's stockholders by the Fund and certain of its
affiliates and associates in connection with the solicitation of proxies for the
following:
(1) To vote "FOR" the election of Charles J. Burdick, Barry R.
Elson and Don R. Kornstein (the "Pardus Nominees") to serve as
Class III directors of the board of directors of the Company;
1
(2) To vote "FOR" the approval and adoption of a binding
resolution (the "Pardus Proposal") to repeal each provision or
amendment of the By-laws of the Company, if any, adopted by
the board of directors without the approval of the Company's
stockholders subsequent to May 25, 2005 (purportedly the last
date of reported changes) and prior to the approval and
adoption of such resolution at the 2005 Annual Meeting;
(3) To vote "AGAINST" the adoption of the 2006 Omnibus Equity
Compensation Plan;
(4) To vote "FOR" the approval of the ratification of KPMG LLP as
the independent auditor for the Company for the fiscal year
ending December 31, 2005; and
(5) To vote "FOR" granting to the proxy holders discretion to vote
on the Liberation Proposals (hereinafter defined), if such
Proposals are properly brought before the 2005 Annual Meeting,
and such other matters as may properly come before the 2005
Annual Meeting.
THIS SOLICITATION IS BEING MADE BY THE FUND AND CERTAIN OF ITS
AFFILIATES AND ASSOCIATES AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OR
MANAGEMENT OF THE COMPANY.
The Fund is the holder of 5,311,000 shares of the Company's Common
Stock, representing approximately [13.9]% of the shares of Common Stock issued
and outstanding as of the Record Date (based on information publicly disclosed
by the Company). The Fund intends to vote all of its shares of Common Stock (A)
"FOR" the election of the Pardus Nominees, (B) "FOR" the approval and adoption
of a binding resolution to repeal each provision or amendment of the By-laws of
the Company, if any, adopted by the board of directors without the approval of
the Company's stockholders subsequent to May 25, 2005 (purportedly the last date
of reported changes) and prior to the approval and adoption of such resolution
at the 2005 Annual Meeting, (C) "AGAINST" the adoption of the 2006 Omnibus
Equity Compensation Plan, (D) "FOR" the ratification of KPMG LLP as the
Company's independent auditor, and (E) "FOR" granting to the proxy holders
discretion to vote on the Liberation Proposals, if properly brought before the
2005 Annual Meeting, and such other matters as may properly come before the 2005
Annual Meeting. One thousand (1,000) of the Fund's shares of Common Stock are
owned of record by the Fund directly in its own name and one thousand (1,000) of
such shares are owned of record by the Fund in the name of Pardus Capital A/C
Pardus European Special Opportunities Master Fund L.P. Pardus Capital Management
L.P., a Delaware limited partnership ("PCM"), in its capacity as the investment
manager of the Fund, is the beneficial owner of all of the shares of Common
Stock held by the Fund. Pardus Capital Management LLC, a Delaware limited
liability company ("PCM LLC"), as the general partner of PCM, and Mr. Karim
Samii, as the sole member of PCM LLC, may be deemed to be the beneficial owners
of the shares of Common Stock held by the Fund; however, PCM LLC and Mr. Samii
disclaim beneficial ownership of such shares.
2
For purposes of this proxy statement, references to "Pardus" shall include the
Fund, PCM, PCM LLC, Mr. Samii and Mr. Joseph R. Thornton, a portfolio manager of
PCM.
The solicitation outlined in this proxy statement is being made by the
Fund and certain of its affiliates and associates. Pardus and the Pardus
Nominees will be considered participants in the solicitation under the federal
securities laws. Information concerning Pardus and the Pardus Nominees is
provided in this proxy statement under the headings "BACKGROUND OF THE PARDUS
NOMINEES", "OTHER INFORMATION ABOUT THE DIRECTOR NOMINEES AND PARDUS" and
"ADDITIONAL INFORMATION" and in Annex A to this proxy statement. All information
relating to any person other than Pardus is given only to the knowledge of
Pardus.
QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION
WHAT AM I BEING ASKED TO VOTE ON?
You are being asked to vote (A) to elect three independent Class III
directors to the board of directors of the Company as further described in this
proxy statement under the heading "PROPOSAL 1: ELECTION OF THE PARDUS NOMINEES
TO CLASS III OF THE BOARD OF DIRECTORS", (B) on the Pardus Proposal as further
described in this proxy statement under the heading "PROPOSAL 2: THE PROPOSAL TO
REPEAL CERTAIN PROVISIONS OF THE BALLY BY-LAWS", (C) on the 2006 Omnibus Equity
Compensation Plan as further described in this proxy statement under the heading
"PROPOSAL 3: THE 2006 OMNIBUS EQUITY COMPENSATION PLAN", (D) on a proposal to
ratify KPMG LLP as the Company's independent auditor as further described in
this proxy statement under the heading "PROPOSAL 4: THE RATIFICATION OF KPMG LLP
AS INDEPENDENT AUDITOR FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2005", and (E) to act upon the Liberation Proposals and such other matters as
may properly come before the 2005 Annual Meeting as further described in this
proxy statement under the heading "OTHER MATTERS."
WHAT IS THE RECOMMENDATION OF THE FUND AND CERTAIN OF ITS AFFILIATES AND
ASSOCIATES WHO ARE PARTICIPANTS IN THIS PROXY SOLICITATION?
The Fund and certain of its affiliates and associates who are
participants in this proxy solicitation recommend you vote on the GREEN proxy
card:
o "FOR" the election of each of the Pardus Nominees;
o "FOR" the approval and adoption of the Pardus Proposal;
o "AGAINST" the adoption of the 2006 Omnibus Equity Compensation Plan;
o "FOR" the ratification of KPMG LLP as the Company's independent
auditor; and
3
o "FOR" granting to the proxy holders discretion on the Liberation
Proposals, if properly brought before the meeting, and all other
matters as may properly come before the meeting.
WHAT DO I NEED TO DO NOW?
This proxy statement contains important information about Pardus and
the Pardus Nominees. We urge you to read this proxy statement carefully,
including its appendices. After carefully reading and considering the
information set forth herein, please vote your shares of Common Stock owned on
the Record Date, or provide proper voting instructions with respect to such
shares to your broker or other nominee as soon as possible so that your shares
will be represented at the 2005 Annual Meeting.
WHO CAN VOTE?
You are eligible to vote or to execute a proxy only if you owned shares
of Common Stock on December 20, 2005 (the Record Date). Even if you sell your
shares of Common Stock after the Record Date, you will retain the right to
execute a proxy in connection with such shares owned as of the Record Date for
the 2005 Annual Meeting. It is important that you grant a proxy regarding shares
you held on the Record Date, or vote those shares in person, even if you no
longer own those shares of Common Stock.
Based on information provided in Bally's Proxy Statement, at the close
of business on the Record Date, [ ] shares of the Company's Common Stock were
entitled to vote.
WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT?
o THE ELECTION OF DIRECTORS. If a quorum is present, the affirmative vote
of the holders of a majority of the shares represented in person or by
proxy at the 2005 Annual Meeting and entitled to vote generally in the
election of directors is required to elect each of the Pardus Nominees.
A properly executed proxy marked "WITHHOLD ALL" with respect to the
election of one or more of the Pardus Nominees will not be voted with
respect to the Pardus Nominees indicated, although it will be counted
for the purposes of determining whether there is a quorum.
o THE PARDUS PROPOSAL. If a quorum is present, the affirmative vote of
the holders of 75% of the shares represented in person or by proxy at
the 2005 Annual Meeting and entitled to vote generally in the election
of directors is required to approve and adopt the binding resolution to
repeal each provision or amendment of the By-laws of the Company, if
any, adopted by the board of directors of the Company without the
approval of the Company's stockholders subsequent to May 25, 2005
(purportedly the last date of reported changes) and prior to the
approval and adoption of such resolution at the 2005 Annual Meeting.
4
o APPROVAL OF NEW OMNIBUS EQUITY PLAN. The affirmative vote of the
holders of a majority of the shares represented in person or by proxy
at the 2005 Annual Meeting and entitled to vote will be required for
approval of the 2006 Omnibus Equity Compensation Plan. The rules of the
New York Stock Exchange ("NYSE") further require that at least a
majority of the votes of shares of Common Stock entitled to vote must
be cast with respect to the approval of the new equity plan. Pursuant
to the rules of the NYSE, a broker may not vote on the adoption of or a
material amendment to an equity compensation plan such as the 2006
Omnibus Equity Compensation Plan without an instruction from the
beneficial owner of the shares held by such broker. Such broker
non-votes will not be considered present for purposes of calculating a
majority and, therefore, will have no effect on the outcome of the
vote, except to the extent a broker non-vote is not counted as a vote
"cast" for purposes of the NYSE majority vote requirement.
o RATIFICATION OF AUDITORS. The affirmative vote of the holders of a
majority of the shares represented in person or by proxy at the 2005
Annual Meeting and entitled to vote will be required for the
ratification of KPMG as the Company's independent auditor.
o OTHER MATTERS. The affirmative vote of not less than 75% of the votes
entitled to be cast by the holders of all outstanding shares of the
Company's stock then entitled to vote is required to approve the
Liberation Proposals. For each other item which properly comes before
the meeting, if any, unless otherwise required by law, the Company's
Restated Certificate of Incorporation, the Company's By-laws or the
rules or regulations of any stock exchanges applicable to the Company
or its securities, the affirmative vote of the holders of a majority of
the shares represented in person or by proxy at the 2005 Annual Meeting
and entitled to vote on the item will be required for approval.
We urge you to complete, execute and return the enclosed GREEN proxy
card to assure the representation of your shares at the 2005 Annual Meeting. A
properly executed proxy marked "ABSTAIN" with respect to any matter will not be
voted with respect to such matter, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote with respect to such matter. If you hold your shares
in "street name" through a broker or other nominee, your broker or nominee will
not be permitted to exercise voting discretion with respect to any of the
contested matters to be acted upon. Thus, if you do not give your broker or
nominee specific instructions, or you do not vote your shares according to the
enclosed voting instruction form, your shares will not be voted on those
matters. Shares represented by such "broker non-votes" will, however, be counted
in determining whether there is a quorum.
WHAT IS A "QUORUM" AND WHY IS IT NECESSARY?
The presence at the 2005 Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock issued and outstanding on
December 20, 2005
5
(the Record Date) will constitute a quorum, permitting the meeting to conduct
its business. According to Bally's Proxy Statement, as of the Record Date [ ]
shares of Common Stock were issued and outstanding and entitled to vote at the
2005 Annual Meeting. Proxies received but marked "ABSTAIN" and broker non-votes
will be included in the calculation of the number of shares considered to be
present at the 2005 Annual Meeting for purposes of determining whether or not a
quorum is present.
HOW MANY VOTES DO I HAVE?
With respect to each matter to be considered at the 2005 Annual
Meeting, each stockholder of the Company will have one vote for each share of
Common Stock held by such stockholder on the Record Date.
HOW WILL MY SHARES BE VOTED?
If you give a proxy on the accompanying GREEN proxy card, your shares
will be voted as you direct. If you submit a GREEN proxy card without
instructions, the Fund's representatives listed on the GREEN proxy card will
vote your shares in accordance with the recommendation of the Fund on each of
the proposals described in this proxy statement. Submitting a GREEN proxy card
will also entitle the Fund's representatives listed on the proxy card to vote
your shares in accordance with their discretion on matters not described in this
proxy statement that may arise at the 2005 Annual Meeting. As of the date of
this proxy statement, the Fund does not know of any such additional matters
other than the stockholder proposals described in the preliminary proxy
statement on Schedule 14A filed by Liberation Investments, L.P., Liberation
Investments Ltd., Liberation Investment Group, LLC, Mr. Emanuel R. Pearlman and
Mr. Gregg E. Frankel (collectively "Liberation") on December 8, 2005.
Unless the proxy specifies otherwise, it will be presumed to relate to
all shares of Common Stock held of record on the Record Date by the person who
submitted it.
HOW DO I VOTE IN PERSON?
If you owned shares of the Company's Common Stock on the Record Date,
you may attend the 2005 Annual Meeting and vote in person. If you are not the
record holder of your shares, please refer to the discussion following the
question "What if I am not the record holder of my shares?" If you hold your
shares in the name of a bank, broker or other nominee, you will not be able to
vote in person at the 2005 Annual Meeting, unless you have previously specially
requested and obtained a "legal proxy" from your bank, broker or other nominee
and present it at the 2005 Annual Meeting. Registration will begin at 7:30 a.m.
Central Time on January 26, 2006. According to Bally's Proxy Statement, in order
to attend the 2005 Annual Meeting you must bring the entrance pass enclosed in
Bally's Proxy Statement.
HOW DO I VOTE BY PROXY?
You may vote before the 2005 Annual Meeting in one of the following
ways:
6
(1) Use the toll-free number, if any, shown on your proxy card;
(2) Visit the website, if any, shown on your proxy card to vote via the
Internet; or
(3) Complete, sign, date and return the enclosed GREEN proxy card in the
enclosed postage-paid envelope.
WHAT IF I AM NOT THE RECORD HOLDER OF MY SHARES?
If your shares are held in the name of a brokerage firm, bank nominee
or other institution (a "custodian"), only it can give a proxy with respect to
your shares. You may have received either a blank, executed proxy card from your
custodian (which you can complete and send directly to our proxy solicitor, D.F.
King & Co., Inc., 48 Wall Street, New York, NY 10005) or an instruction card
(which you can complete and return to the custodian to direct its voting of your
shares). If your custodian has not sent you either a blank, executed proxy card
or an instruction card, you may contact the custodian directly to provide it
with instructions. If you need assistance, please contact our proxy solicitor,
D.F. King & Co. Inc., toll-free at (888) 644-6071.
CAN I CHANGE MY VOTE?
You may change your proxy instructions at any time prior to the vote at
the 2005 Annual Meeting for shares held directly in your name. You may
accomplish this by completing and submitting a later-dated GREEN proxy card to
our proxy solicitor, D.F. King & Co., Inc. (48 Wall Street, New York, NY 10005),
or by attending the 2005 Annual Meeting and voting in person, or by delivering
to the Corporate Secretary of Bally a written notice, bearing a later date than
the date of your proxy instructions provided to Bally, stating that your proxy
provided to Bally is revoked. You should send any notice of revocation to the
Corporate Secretary of Bally at Bally's executive offices located at 8700 West
Bryn Mawr Avenue, Chicago, Illinois 60631. Attendance at the 2005 Annual Meeting
alone will not cause your previously-granted proxy to be revoked unless you vote
in person. For shares held in "street name," you may accomplish this by
submitting new voting instructions to your broker or nominee or contacting the
person responsible for your account and instructing that person to execute on
your behalf the GREEN proxy card as soon as possible.
WHAT DO I DO IF I RECEIVE A WHITE PROXY CARD FROM BALLY?
Proxies on the white proxy card are being solicited by the incumbent
management and board of directors of the Company. If you submit a proxy to us by
signing and returning the enclosed GREEN proxy card, do not sign or return the
white proxy card or follow any voting instructions provided by the incumbent
management and board of directors of the Company unless you intend to change
your vote, because only your latest-dated proxy will be counted at the 2005
Annual Meeting.
If you have already sent a white proxy card to the Company, you may
revoke it and provide your support in favor of the Fund's recommendations
outlined in this proxy statement by signing, dating and returning the enclosed
GREEN proxy card.
7
WHAT DO I DO IF I RECEIVE A [GOLD] PROXY CARD FROM LIBERATION?
Proxies on the [gold] proxy card are being solicited by Liberation. If
you submit a proxy to us by signing and returning the enclosed GREEN proxy card,
do not sign or return the [gold] proxy card or follow any voting instructions
provided by Liberation unless you intend to change your vote, because only your
latest-dated proxy will be counted at the 2005 Annual Meeting.
If you have already sent a [gold] proxy card to Liberation, you may
revoke it and provide your support in favor of the Fund's recommendations
outlined in this proxy statement by signing, dating and returning the enclosed
GREEN proxy card.
SHOULD I SUBMIT A PROXY IF I PLAN TO ATTEND THE 2005 ANNUAL MEETING?
Whether you plan to attend the 2005 Annual Meeting or not, we urge you
to complete and submit a GREEN proxy card. Returning the enclosed GREEN proxy
card completed will not affect your right to attend the 2005 Annual Meeting and
vote in person.
WHO CAN HELP ANSWER MY QUESTIONS?
If you would like additional copies of this document, or if you would
like to ask any additional questions, you should contact our proxy solicitor:
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
BACKGROUND TO THE SOLICITATION
The Fund has been an investor in the Company since July 11, 2005 and is
the holder of 5,311,000 shares of Common Stock, representing approximately
[13.9%] of the issued and outstanding Common Stock as of the Record Date. The
following is a chronology of events leading up to this proxy solicitation.
Since the Fund invested in the Company in July 2005 and throughout the
fall of 2005, representatives of Pardus on behalf of the Fund have communicated
with the Company's management and certain members of the Company's board of
directors regarding Pardus's belief that the board has failed to take sufficient
action and should be devoting more time and attention to the pursuit of sound
measures to enhance stockholder value. Pardus has expressed that such measures
are necessary to restore public
8
confidence and support in the Company's corporate governance and future
prospects. To this end, Pardus informally proposed several candidates with
broad, relevant turnaround experience for election to the board of directors to
both fill existing vacancies in the two classes of directors not up for election
at the 2005 Annual Meeting and for the board of directors to support for
election in the class of directors whose term expires at the 2005 Annual
Meeting. Each of the candidates proposed by Pardus was ultimately interviewed by
the Company's management and certain members of the Company's board of
directors. Pardus continued to have discussions in good faith with Company
representatives following these interviews in an effort to have highly qualified
independent candidates appointed and/or nominated by the Company's incumbent
directors for election at the 2005 Annual Meeting. Despite Pardus's efforts and
discussions with Company representatives, no agreement was reached between
Pardus and the Company before the Fund's formal nomination of the Pardus
Nominees with respect either to the appointment of Pardus's proposed candidates
to fill the existing vacancies on the board of directors or the board's
supporting Pardus's proposed candidates in the upcoming election of directors at
the 2005 Annual Meeting.
Upon hearing news items and speculation in the public marketplace about
the Company having entered into discussions with third parties to consummate a
strategic transaction, including, without limitation, a sale of all or part of
the assets or stock of the Company or some other strategic business combination
or capital restructuring transaction, Pardus became increasingly concerned that
the board of directors would authorize the Company to enter into a strategic
transaction either before, or shortly following, the Company's release of its
restated financial statements on November 30, 2005. In our opinion, this concern
was validated following the Company's engagement of J.P. Morgan Securities Inc.
on November 29, 2005, to advise the Company, together with The Blackstone Group,
in exploring strategic alternatives, including potential equity transactions or
the sale of businesses or assets. Pardus is still very concerned that the board
of directors may take decisive action without giving adequate consideration and
deference to a full, fair and open process designed to maximize stockholder
value.
On October 17, 2005, Pardus, on behalf of the Fund, sent a letter to
the board of directors of the Company advising of the Fund's intent to nominate
highly qualified independent candidates for election to the board of directors
of the Company at the 2005 Annual Meeting.
On October 18, 2005, the board of directors unilaterally adopted a
Stockholder Rights Plan with a 15% threshold trigger (the "Poison Pill"),
conveniently one day after Pardus expressed the Fund's intent to nominate a
slate of candidates for election to the board of directors at the 2005 Annual
Meeting.
On October 24, 2005, after having received a letter from the board of
directors dated October 18, 2005 responding to Pardus's October 17th letter and
addressing the process for nominating directors to the board and the adoption of
the Poison Pill, Pardus sent a follow-up letter on behalf of the Fund to the
Company's board of directors expressing the Fund's perception of, and
dissatisfaction with, the nomination process and
9
the board's sluggish actions and reluctance to interview the Fund's proposed
nominees as of the date such response letter was sent to the board on behalf of
the Fund.
On November 9, 2005, representatives of Pardus met by telephone
conference call with representatives of the Company, including Paul A. Toback,
Chief Executive Officer of the Company, and Marc D. Bassewitz, Senior Vice
President, Secretary and General Counsel of the Company, about the Company's
consideration of the candidates informally proposed by Pardus for election to
the board. As a result of the November 9, 2005 discussions, the Company agreed
to follow up with and interview each of the five candidates recommended by
Pardus for election to the Company's board of directors.
On November 15, 2005 and November 16, 2005, representatives of the
Company, including the incumbent members of the nominating committee of the
board of directors, interviewed the five candidates recommended by Pardus for
election to the Company's board of directors.
On November 17, 2005, after further discussions with respect to the
composition of the Company's board of directors between representatives of
Pardus, on the one hand, and representatives of the Company, on the other hand,
failed to result in a mutually acceptable agreement in an effort to avoid a
protracted proxy fight, the Fund delivered a formal notice of nomination for the
2005 Annual Meeting nominating Charles J. Burdick, Barry R. Elson and Don R.
Kornstein for election to the class of directors whose term expires at the 2005
Annual Meeting and to present a stockholder proposal for the approval and
adoption of a binding resolution to repeal each provision or amendment of the
By-laws of the Company, if any, adopted by the board of directors without the
approval of the Company's stockholders subsequent to May 25, 2005 (purportedly
the last date of reported changes) and prior to the approval and adoption of
such resolution at the 2005 Annual Meeting. The notice of nomination was
accompanied by a letter addressed to the board of directors of the Company
recommending that the board appoint two additional candidates proposed by the
Fund, David R. Van Valkenburg and Thomas J. Albani, to fill the existing
vacancies in the other classes of directors not up for election at the 2005
Annual Meeting. At the time the formal notice of nomination for the 2005 Annual
Meeting was submitted by the Fund, the Fund was cognizant of the potential
implications a successful nomination of four or more candidates could have on
the Company in light of the change of control provisions set forth in the
Company's credit facility and outstanding senior and subordinated indebtedness.
As a result, the Fund elected to nominate only three highly qualified
independent candidates, the Pardus Nominees, in the formal notice of nomination
for election to the class of directors whose term expires at the 2005 Annual
Meeting.
On December 5, 2005, the Company issued a press release announcing that
the board had appointed Adam Metz and Steven S. Rogers to fill two existing
vacancies on the board in the director classes not up for election at the 2005
Annual Meeting. The Company also announced its intention to nominate Messrs.
Burdick and Elson and Eric Langshur, an incumbent board member serving in the
class of directors up for election at the 2005 Annual Meeting, for election at
the 2005 Annual Meeting.
10
On December 6, 2005, the Company filed its preliminary proxy statement
in connection with the 2005 Annual Meeting with the Securities and Exchange
Commission. In Bally's Proxy Statement, the Company disclosed the board's
nomination of Messrs. Burdick, Elson and Langshur for election to the board.
While Pardus is pleased with the Company's decision to support Messrs. Burdick
and Elson for election to the board, Pardus believes that such action is only a
partial step in the right direction. Throughout the process of identifying and
considering qualified individuals with a broad array of noteworthy credentials
and relevant turnaround experience for service on Bally's board of directors, a
process to which Pardus committed significant time and resources, Pardus always
focused on a single goal - selecting a group of nominees who would each
represent the best interests of ALL stockholders. In this endeavor, Pardus tried
to assemble a slate of candidates that would garner significant and widespread
stockholder support, including Mr. Kornstein who Pardus believes to be truly
independent and who would serve in the best interests of all stockholders.
Pardus encourages the board and fellow stockholders not only to support Messrs.
Burdick and Elson for election to the board, but also to support and elect Mr.
Kornstein to the board in lieu of Mr. Langshur given the significant
contributions Mr. Kornstein has to offer the board, the Company and all
stockholders.
Each of the Pardus Nominees is committed to acting in the best interest
of the Company's stockholders and has consented, if elected, to serve as a
director on the Company's board. The Fund expects that each of the Pardus
Nominees, if elected, would, subject to his fiduciary duties to all of the
Company's stockholders, bring greater accountability and discipline to the
management of the Company, and restore investor confidence. Each of the Pardus
Nominees has broad, relevant turnaround experience and a vote in favor of each
of the Pardus Nominees will enable the stockholders of Bally to send a clear and
strong message to the board of directors that you agree with Pardus's belief
that change is necessary and Pardus's objective of implementing sound corporate
governance practices for the Company in an effort to maximize stockholder value.
Pardus believes that it is in the best interests of the Company and its
stockholders for the incumbent Class III director to be replaced as a member of
the board of directors of the Company. The reasons supporting this belief
include the following:
o Pardus believes that the incumbent members of the board of
directors of the Company, including the incumbent Class III
director, have not demonstrated a sufficient willingness to
challenge, oversee and direct the Company's management or to
hold management accountable for its actions and inactions.
o Pardus believes that the incumbent members of the board of
directors of the Company, including the incumbent Class III
director, do not fully understand and appreciate the urgency of
the issues facing the Company and the need for significant
changes in the manner in which the Company conducts its
business.
11
o Pardus believes that the current management and the incumbent
board have presided over significant value destruction for the
Company's stockholders. This incumbent team has made a series of
well-publicized missteps, culminating in the release on November
30, 2005 of restated financial statements dating back to fiscal
year 2000, as stockholders have suffered substantial losses.
Consider the Company's stock price as Paul Toback, the current
Chairman and Chief Executive Officer of the Company, has risen
through management's ranks:
o March 1998 - Mr. Toback is elevated to Senior Vice
President, Corporate Development. The stock closed at
$27.94 per share on March 1, 1998.
o June 2001 - Mr. Toback becomes Chief Operating Officer.
The stock closed at $24.61 per share on June 1, 2001.
o February 2002 - Mr. Toback is elevated to Executive Vice
President. The stock closed at $19.20 per share on
February 1, 2002.
o December 2002 - Mr. Toback is elected President and Chief
Executive Officer. The stock closed at $9.08 per share on
December 1, 2002.
o May 2003 - Mr. Toback assumes the Chairmanship of the
board of directors. The stock closed at $6.24 per share on
May 1, 2001.
o September 2, 2005 - On the business day BEFORE Pardus
filed its Schedule 13D, after more than SEVEN years of Mr.
Toback's involvement with the management of the Company,
the stock closed at $3.86 per share.
In percentage terms, this represents a stunning loss of more
than 86% of the value of the Common Stock as Mr. Toback assumed
ever more management responsibility.
o By contrast, since September 6, the day Pardus filed its
Schedule 13D with the United States Securities Exchange
Commission, Pardus has worked publicly and through private
discussions with Company management to encourage the Company to
take steps necessary to improve transparency, corporate
governance, and operational and financial performance through
December 1, 2005. In connection with this process, Pardus has
also taken steps to nominate three highly qualified independent
candidates for election to the Company's board of directors at
the 2005 Annual Meeting. Pardus believes that there is a direct
correlation between its actions and the Company's equity market
capital INCREASING to $7.72 per share as of December 1, 2005, a
100% return to stockholders since Pardus's original Schedule 13D
was filed.
o As described further in Bally's Proxy Statement, the Company has
engaged J.P. Morgan Securities Inc. and The Blackstone Group to
explore strategic alternatives in the interest of value creation
for stockholders. As the Company embarks upon this process,
certain executive officers of the Company, including Mr. Toback
and Carl J. Landek, the Company's two
12
most senior executives, have recently exercised Company options
and sold Common Stock totaling, in the aggregate, over 1.2
million shares. Pardus cannot imagine a worse beginning for any
sale process J.P. Morgan Securities Inc. and The Blackstone
Group have been engaged to undertake. Pardus believes Mr. Toback
and his management team should have exercised prudent judgment
and restraint to further this process. An investor learning that
Mr. Toback had sold well more than half his stock might well
ask, "why would the CEO sell now if he thinks the Company can
bring about a strategic transaction that will offer a premium to
stockholders as soon as early next year?" Pardus is concerned
that the reported stock sales may indicate that management has a
conflict of interest - for example, that management may not be
motivated to realize the highest achievable value for
stockholders because management is planning to be part of a
potential bidding group for the Company's assets.
o Pardus expects that, if elected to the Company's board, the
Pardus Nominees will work to further enhance stockholder value
on several fronts, including:
o Represent the current stockholder base in reviewing and
assisting the work of J.P. Morgan Securities Inc. and The
Blackstone Group to ensure that, if a sale of the Company
or its assets occurs, the process will be best designed to
result in the highest consideration for all stockholders.
o Review and oversee management's work and assist in
developing a business plan that will provide direction to
and challenge management to enhance the Company's value
for the benefit of all stockholders. Importantly, the
Pardus Nominees would seek to tie management's
compensation, including any equity plan, to the Company's
performance and return to stockholders.
o Provide specific guidance on a number of operational and
financial improvements, such as increasing customer
satisfaction and retention, improving product mix and
profitability, reducing sales force turnover and
correcting their compensation scheme to align it with
selling the Company's most profitable product mixes,
rationalizing the Company's real estate portfolio, and
determining the best course for returning the Company to
full financial health and prosperity, whether through
asset sales, debt and equity financings or other strategic
alternatives.
o Work to improve corporate governance on a range of issues.
For example, Pardus believes the stockholders would
benefit from separating the roles of CEO and Chairman, as
many leading public companies have done following the
implementation of Sarbanes-Oxley. Further, Pardus believes
that the process undertaken by J.P. Morgan Securities Inc.
and Blackstone should be led and directed by a board
committee comprised solely of independent directors and
not by members of the management team.
13
The Pardus Nominees will, if elected, constitute a minority of the
board of directors, at least until the next meeting of the Company's
stockholders for the election of directors or some other change in the
composition of the board. Accordingly, the Pardus Nominees, even if they act
together, will not be able to adopt any measures proposed by any particular
stockholder, including the Fund, without the support of at least some incumbent
members of the current board of directors. The Pardus Nominees should be
expected to articulate and raise their concerns about the Company's business
activities with all of the members of the board of directors of the Company. The
Fund may, depending on future events, seek to nominate additional directors to
the Company's board of directors in the future.
PROPOSAL 1: ELECTION OF THE PARDUS NOMINEES TO
CLASS III OF THE BOARD OF DIRECTORS
According to publicly available information, three Class III directors
are to be elected to the Company's board of directors at the 2005 Annual
Meeting. The Fund proposes that the Company's stockholders elect Charles J.
Burdick, Barry R. Elson, and Don R. Kornstein as the three Class III directors
of the Company at the 2005 Annual Meeting. Each of the Pardus Nominees, if
elected, would hold office for a term ending at the annual meeting (or special
meeting in lieu thereof) of stockholders for the year 2008 or until a successor
has been duly elected and qualified.
BACKGROUND OF THE PARDUS NOMINEES
The following table sets forth the name, age, present principal
occupation, business and residential address, and business experience for the
past five years and certain other information with respect to the Pardus
Nominees. This information has been furnished to the Fund by the Pardus
Nominees.
--------------------------------------------------------------------------------------------------------
NAME, AGE AND BUSINESS AND RESIDENTIAL ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
LAST FIVE YEARS; PUBLIC COMPANY DIRECTORSHIPS
--------------------------------------------------------------------------------------------------------
CHARLES J. BURDICK (Age 54) Charles J. Burdick is presently a member of the
PCM Advisory Board and a non executive director
Business Address: of Singer & Friedlander, a financial services
group providing its clients with banking, asset
Singer & Friedlander finance, treasury and investment management
21 New Street services. From January 2005 until summer of 2005
London EC2M 4HR he was the Chief Executive Officer of HIT
United Kingdom Entertainment Plc, the leading provider of
pre-school children's entertainment listed on the
Residential Address: London Stock Exchange with a market
capitalization of $1.0 billion. Mr. Burdick
27 Princes Gate Court stepped down from his position as CEO of HIT
London SW7 2QJ Entertainment after providing transition support
United Kingdom to the new management team following the
successful sale of HIT Entertainment in May 2005.
From 1996 until 2002, he was the Chief
14
--------------------------------------------------------------------------------------------------------
NAME, AGE AND BUSINESS AND RESIDENTIAL ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
LAST FIVE YEARS; PUBLIC COMPANY DIRECTORSHIPS
--------------------------------------------------------------------------------------------------------
Financial Officer and then from August 2002 until
July 2004 he was the Chief Executive Officer and
a director of Telewest Communications, the second
largest cable company in the United Kingdom. He
has held a series of financial positions with
Time Warner, US WEST, and MediaOne, specializing
in corporate finance, mergers and acquisitions,
and international treasury. Mr. Burdick received
his M.B.A. from UCLA and B.A. in Economics from
UC Santa Barbara.
BARRY R. ELSON (Age 64) Barry R. Elson is the Acting Chief Executive
Officer and a director of Telewest Global, Inc.,
Business Address: a provider of entertainment and communication
services. Mr. Elson became Chairman and a
c/o Telewest Global director of Telewest in November 2003 and then in
160 Great Portland Street February 2004 he resigned as Chairman, although
London W1 W5 QA not as a director, and was appointed as the
United Kingdom Acting Chief Executive Officer of Telewest
Communications and the Acting Chief Executive
Residential Address: Officer of Telewest Global, Inc. From July 2001
to October 2003, he was the President of Pilot
4245 Merriweather Woods Associates, a management consulting/coaching firm
Alpharetta, GA 30022 specializing in the broadband-telephony-video
industry for Wall Street clients. From November
2000 to June 2001, he was Chief Operating Officer
of Urban Media, a Silicon Valley venture capital
backed building centric CLEC start-up with
nationwide operations. From September 1997 to
November 2000, he was President of Conectiv
Enterprises and Corporate Executive Vice
President of Conectiv, a diversifying $4.2
billion energy company in the middle Atlantic
states. From February 1983 until September 1997,
he was a senior executive with Cox Communications
where he rose through a series of senior line
operating positions to be Executive Vice
President of Operations with company-wide $1.4
billion profit and loss responsibility. Mr. Elson
earned his M.B.A. with distinction from Cornell
University and earned his B.A. with honors from
Dartmouth College.
DON R. KORNSTEIN (Age 53) Don R. Kornstein has been a consultant for the
past five years specializing in strategic,
Business Address: financial and management advisory services.
Since 2002, Mr. Kornstein has been the founder
Alpine Advisors LLC and managing member of Alpine Advisors LLC which
825 Lakeshore Blvd. provides value enhancing strategic, management,
Incline Village, NV 89451 operational and financial consulting services to
a wide range of companies with varying needs.
Residential Address: From 2000 until 2001, in his
825 Lakeshore Blvd.
15
--------------------------------------------------------------------------------------------------------
NAME, AGE AND BUSINESS AND RESIDENTIAL ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
LAST FIVE YEARS; PUBLIC COMPANY DIRECTORSHIPS
--------------------------------------------------------------------------------------------------------
Incline Village, NV 89451 capacity as a consultant, Mr. Kornstein served as
the interim Chief Operating Officer to First
World Communications, Inc. where he was brought
in by Texas Pacific Group to restructure and
stabilize three telecom and internet businesses
in anticipation of a sale, which was successfully
completed within 12 months. From 1994 until 2000,
Mr. Kornstein served as the Chief Executive
Officer, President and a director of Jackpot
Enterprises, Inc., an NYSE listed company engaged
in the gaming industry through the operation of
over 5000 gaming devices in a variety of retail
establishments and casinos. From 1977 until 1994,
Mr. Kornstein was an investment banker with Bear,
Stearns & Co. Inc. At the time of his departure
in 1994 from Bear, Stearns & Co., Inc., he was a
Senior Managing Director, the Group Head of the
Gaming & Leisure Group and a member of the
Investment Banking Commitment Committee. From
2003 until 2005, Mr. Kornstein was a member of
the board of directors of Shuffle Master, Inc.
(NASDAQ) where he was a member of the Audit,
Compensation and Governance Committees. From 1995
until 2003 he was a member of the board of
directors of Varsity Brands, Inc. (AMEX) where he
served as the Chairman of the Compensation
Committee, past Chairman of the Audit Committee
and the Chairman of the Exploratory and
Negotiating Committee where he had primary
responsibility for successfully reviewing,
evaluating and negotiating strategic alternatives
on behalf of the board. Mr. Kornstein earned his
M.B.A. in finance and accounting from Columbia
University Graduate School of Business, attended
the Stanford Law School's Directors' College, and
earned his B.A. with honors in Economics from the
University of Pennsylvania.
None of the Pardus Nominees has carried on an occupation or employment,
during the past five years, with the Company or any corporation or organization
which is or was a parent, subsidiary or other affiliate of the Company, and none
of the Pardus Nominees has ever served on the board of directors of the Company.
No family relationships exist between any Pardus Nominee and any director or
executive officer of the Company.
Other than as set forth on Annex A, none of the Pardus Nominees owns
beneficially, directly or indirectly, or of record but not beneficially, any
securities of the
16
Company, or any parent or subsidiary of the Company, nor has any Pardus Nominee
purchased or sold any securities of the Company within the last two years.
WE STRONGLY URGE YOU TO VOTE "FOR" THE ELECTION OF CHARLES J. BURDICK, BARRY R.
ELSON, AND DON R. KORNSTEIN BY SIGNING, DATING AND RETURNING THE ENCLOSED GREEN
PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED TO YOU WITH THIS PROXY
STATEMENT. IF YOU HAVE SIGNED THE GREEN PROXY CARD AND NO MARKING IS MADE, YOU
WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE ALL THE SHARES REPRESENTED BY
THE GREEN PROXY CARD "FOR" THE ELECTION OF ALL NOMINEES NAMED ON THE GREEN PROXY
CARD.
OTHER INFORMATION ABOUT THE DIRECTOR NOMINEES AND PARDUS
The Pardus Nominees stand committed to pursuing and implementing
strategies for enhancing stockholder value and restoring public confidence and
support in the Company. However, there can be no assurance that the actions the
Pardus Nominees intend to take will be implemented if they are elected or that
the election of the Pardus Nominees will improve the Company's business or
prospects or otherwise enhance stockholder value. Your vote to elect the Pardus
Nominees does not constitute a vote in favor of any value-enhancing plans of
Pardus for the Company. Your vote to elect the Pardus Nominees will have the
legal effect of replacing one incumbent director and filling two vacancies on
the Company's board in the class of directors whose term expires at the 2005
Annual Meeting with the Pardus Nominees. Neither Pardus nor, to the knowledge of
Pardus, any other person on behalf of Pardus has made or undertaken any analysis
or reports as to whether stockholder value will be maximized as a result of the
solicitation described in this proxy statement or obtained reports from
consultants or other outside parties as to whether the proposals presented
herein would have an effect on stockholder value. There can be no assurance that
stockholder value will be maximized as a result of this solicitation or the
election of the Pardus Nominees.
According to the Company's public filings, if elected as a director of
the Company, each of the Pardus Nominees would receive an annual retainer of
$30,000 for board membership and an additional stipend for service on committees
of the board of directors of $1,000 per year for committee members, as well as
fees of $2,000 per board meeting and $1,000 for attendance at any committee
meeting. The chairman of a committee receives an additional annual stipend of
$7,500 and the chairman of the audit committee receives an additional annual
stipend of $25,000. In addition, pursuant to the Company's 1996 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), each non-employee director
of the Company is granted an option to purchase 5,000 shares of Common Stock
upon the commencement of service on the board of directors, with another option
to purchase 5,000 shares of Common Stock granted on the second anniversary
thereof. Additional grants of options may be made from time to time pursuant to
the Directors' Plan. Options under the Directors' Plan are generally granted
with an exercise price equal to the fair market value of the Common Stock at the
date of grant. Option grants under the Directors' Plan become exercisable in
three equal annual installments commencing one year from the date of grant and
have a 10-year term. The
17
Pardus Nominees, if elected, will be indemnified for service as directors of the
Company to the same extent indemnification is provided to the current directors
of the Company under the Company's Restated Certificate of Incorporation and
By-laws. In addition, subject to stockholder approval at the 2005 Annual Meeting
of an equity compensation plan, if elected as a director of the Company, each of
the Pardus Nominees would receive for fiscal years ending after December 31,
2005 an annual grant of $30,000 of equity compensation in the form of restricted
stock and/or options and a grant of $20,000 of restricted stock in 2006 and
2007. The Fund also believes that upon election, the Pardus Nominees will be
covered by the Company's officer and director liability insurance. The Fund
disclaims any responsibility for the accuracy of the foregoing information
extracted from the Company's public filings.
The Pardus Nominees will not receive any compensation from Pardus for
their service as nominees for election or as directors, if elected, of the
Company. The Fund has agreed to indemnify the Pardus Nominees against losses
incurred in connection with their service as nominees for election as directors
of the Company and in connection with the solicitation of proxies in respect
thereof. The Fund has also agreed to reimburse the Pardus Nominees for
out-of-pocket expenses incurred in their capacity as nominees, including,
without limitation, reimbursement for reasonable travel expenses. Each Pardus
Nominee has executed a written consent agreeing to be a nominee for election as
a director of the Company and to serve as a director if so elected.
Other than as set forth herein (including in Annex A hereto), none of
Pardus, the Pardus Nominees, or any of their respective associates, has any
arrangements or understandings with any person or persons with respect to any
future employment by the Company or its affiliates or with respect to any future
transactions to which the Company or any of its affiliates will or may be a
party.
Other than as described herein (including in Annex A hereto), there are
no arrangements or understandings between the Pardus Nominees and any other
party pursuant to which any such nominee was or is to be selected as a director
or nominee.
There are no material proceedings in which the Pardus Nominees or any
of their associates is a party adverse to the Company or any of its
subsidiaries, or material proceedings in which such nominee or any such
associate has a material interest adverse to the Company or any of its
subsidiaries.
None of the Pardus Nominees, their immediate family members, any
corporation or organization of which the Pardus Nominee is an executive officer
or partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, or any trust or other estate in which
any Pardus Nominee has a substantial beneficial interest or serves as a trustee
or in a similar capacity, has been indebted to the Company or its subsidiaries,
at any time since the beginning of the Company's last fiscal year, in an amount
in excess of $60,000.
18
Neither the Pardus Nominees nor any of their associates has received
any cash compensation, cash bonuses, deferred compensation, compensation
pursuant to plans, or other compensation, from, or in respect of, services
rendered on behalf of the Company.
During the last five years, the Pardus Nominees were not involved in
any of the events described in Item 401(f) of Regulation S-K and that are
material to an evaluation of the ability or integrity of any such nominee to
become a director of the Company.
None of the relationships regarding the Pardus Nominees described under
Item 404(b) of Regulation S-K exists or has existed during the Company's last
fiscal year.
The Fund does not expect that the Pardus Nominees will be unable to
stand for election, but, in the event that such persons are unable to serve or
for good cause will not serve, the shares represented by the enclosed GREEN
proxy card will be voted for substitute nominees. In addition, the Fund reserves
the right to nominate substitute persons if the Company makes or announces any
changes to its By-laws or takes or announces any other action that has, or if
consummated would have, the effect of disqualifying the Pardus Nominees. In any
such case, shares of Common Stock represented by the enclosed GREEN proxy card
will be voted for such substitute nominees. The Fund reserves the right to
nominate additional persons if the Company increases the size of the board of
directors above its existing size or increases the number of directors whose
terms expire at the 2005 Annual Meeting. Additional nominations made pursuant to
the preceding sentence are without prejudice to the position of the Fund that
any attempt to increase the size of the current board of directors or to
reconstitute or reconfigure the classes on which the current directors serve may
constitute an unlawful manipulation of the Company's corporate machinery.
YOU ARE URGED TO VOTE FOR THE ELECTION OF EACH OF THE PARDUS NOMINEES ON THE
ENCLOSED GREEN PROXY CARD.
PROPOSAL 2: THE PROPOSAL TO REPEAL CERTAIN PROVISIONS
OF THE BALLY BY-LAWS
The Fund and certain of its affiliates and associates are soliciting
proxies to take the following action at the 2005 Annual Meeting:
Proposal: To present a resolution for approval and adoption by
the stockholders of the Company to repeal each
provision or amendment of the By-Laws of the Company,
if any, adopted by the board of directors without the
approval of the Company's stockholders subsequent to
May 25, 2005 (purportedly the last date of the
reported changes) and prior to the adoption of the
resolution at the 2005 Annual Meeting. Based on
publicly available information, no amendments to the
By-laws after May 25, 2005 and prior to the date of
this proxy statement have been publicly
19
disclosed. The text of the resolution is set forth on
Annex B attached hereto.
Purpose: The proposal is being brought before the 2005 Annual
Meeting pursuant to Section 109 of the Delaware
General Corporation Law, which empowers stockholders
to adopt, amend or repeal bylaws. The Pardus Proposal
is intended to deter the current members of the board
of directors from amending the Company's By-laws in a
manner that would create obstacles to the election of
the Pardus Nominees who the Fund believes will act in
the best interests of all of the Company's
stockholders.
The adoption of this Proposal 2 could result in the repeal of certain
provisions of the Company's By-laws which may be in the best interest of Company
stockholders. In Pardus's view, however, such a possibility is unlikely because
Pardus believes that the Company's incumbent board of directors has failed to
act in the best interest of the Company's stockholders with respect to the
operation of the business. If the Company's incumbent board of directors adopts
any material amendments to the Company's By-laws that would be subject to repeal
under this Proposal 2 and such amendments are made available to Pardus or the
general public sufficiently in advance of the 2005 Annual Meeting, Pardus will
provide you with additional materials regarding such amendments.
According to Bally's Proxy Statement, the Company is recommending that
stockholders abstain with respect to the Pardus Proposal, because no provisions
of or amendments to the Company's By-laws have been adopted by the board of
directors without the approval of the Company's stockholders subsequent to May
25, 2005. Pardus urges you to vote "FOR" the Pardus Proposal rather than to
abstain, as the incumbent board of directors may amend the Company's By-laws at
any time prior to January 26, 2006, the date of the 2005 Annual Meeting.
The accompanying GREEN proxy card will be voted in accordance with your
instruction on such card. You may vote for or vote against, or abstain from
voting on, Proposal 2 described above by marking the proper box on the GREEN
proxy card.
YOU ARE URGED TO VOTE "FOR" THE APPROVAL AND ADOPTION OF THE RESOLUTION TO
REPEAL EACH PROVISION OR AMENDMENT OF THE BY-LAWS OF THE COMPANY, IF ANY,
ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE APPROVAL OF THE COMPANY'S
STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY THE LAST DATE OF REPORTED
CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF SUCH RESOLUTION AT THE 2005
ANNUAL MEETING ON THE ENCLOSED GREEN PROXY CARD.
PROPOSAL 3: THE 2006 OMNIBUS EQUITY COMPENSATION PLAN
According to Bally's Proxy Statement, the Company is soliciting proxies
with respect to a proposal for the stockholders to approve the Bally Total
Fitness Holding
20
Corporation 2006 Omnibus Equity Compensation Plan (the "Plan"). The board of
directors has unanimously approved the Plan and is submitting it for stockholder
approval at the 2005 Annual Meeting. According to Bally's Proxy Statement, under
the Plan the Company will be able to grant stock options, stock units, stock
awards, dividend equivalents and other stock-based awards and if approved,
2,500,000 shares of Common Stock or other securities of the Company will be
authorized for issuance under the Plan. Bally's Proxy Statement contains a
summary of the Plan and a copy of the Plan is attached thereto as Exhibit B. The
board's adoption of the Plan is conditioned upon stockholder approval. The
affirmative vote of the holders of a majority of the shares represented in
person or by proxy at the 2005 Annual Meeting and entitled to vote will be
required for approval of the Plan. The rules of the NYSE further require that at
least a majority of the votes of shares of Common Stock entitled to vote must be
cast with respect to the approval of the Plan. Please refer to Bally's Proxy
Statement for a detailed discussion of this proposal, including various
arguments in favor of and against the proposal to approve the Plan.
Pardus recommends that stockholders vote AGAINST the approval of the
Plan at the 2005 Annual Meeting. Pardus does not believe that the existing
management team, which has been more than generously compensated as described in
further detail in Bally's Proxy Statement, should receive any additional equity
or incentives as would be provided under the Plan until such time as management
proves it has earned such rewards. Certain executive officers of the Company,
including Mr. Toback, have recently exercised Company options and sold Common
Stock totaling, in the aggregate, over 1.2 million shares. Given these
significant insider sales, it seems apparent to Pardus that the management team
consists of SELLERS and not BUYERS of the Company's equity; demonstrating, in
Pardus's opinion, existing management's lack of confidence in the future
prosperity of Bally that they are currently entrusted to create. Therefore,
Pardus believes it would be a poor use of Company resources to further reward
these executives further with equity in the Company.
Furthermore, Pardus does not believe that the current management team
should be rewarded with additional compensation and incentives given the
destruction in value the stockholders have suffered under the incumbent
management team and in light of what Pardus believes to be overly-generous
compensation arrangements, considering the performance results. By way of
example, according to Bally's Proxy Statement Mr. Toback's total compensation
for serving as Chairman and CEO, including salary and bonus, increased from
$775,000 in 2003 to $975,000 in 2004. According to its report contained in
Bally's Proxy Statement, the Company's Compensation Committee, which is the
governing body responsible for authorizing Mr. Toback's compensation, considered
the actual performance of the Company as compared to the targeted performance
goals for the Company and Mr. Toback for 2004 in determining Mr. Toback's bonus
for 2004. Based on the Company's actual performance, the committee determined
that the Company's performance goals were not met for 2004. Despite this
shortfall Mr. Toback was nonetheless awarded a bonus of $400,000 (70% of his
base salary) in respect of a year in which, by the Compensation Committee's own
admission, the Company underperformed.
21
Finally, given that the Company's retention of J.P. Morgan Securities
Inc. and The Blackstone Group strongly indicates that a strategic sale or
re-capitalization will occur, we believe the board of directors' fiduciary
duties compel its members to maximize value for the stockholders in such an
event. If the Plan is approved, however, there is the potential for existing
stockholders to suffer dilution by up to 2,500,000 shares of Company stock that
will be placed in the hands of management (which would constitute [ ]% of the
current issued and outstanding stock).
YOU ARE URGED TO VOTE "AGAINST" THE 2006 OMNIBUS EQUITY COMPENSATION PLAN ON THE
ENCLOSED GREEN PROXY CARD.
PROPOSAL 4: THE RATIFICATION OF KPMG LLP AS INDEPENDENT
AUDITOR FOR THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2005
According to Bally's Proxy Statement, the Company is soliciting proxies
with respect to a proposal for the stockholders to ratify the appointment of
KPMG LLP as the Company's independent auditor for the fiscal year ending
December 31, 2005. The Company's board of directors unanimously recommended a
vote for this proposal. Please refer to Bally's Proxy Statement for a detailed
discussion of this proposal, including various arguments in favor of and against
such proposal.
YOU ARE URGED TO VOTE "FOR" THE RATIFICATION OF KPMG LLP AS INDEPENDENT AUDITOR
FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005 ON THE ENCLOSED
GREEN PROXY CARD.
OTHER MATTERS
Except for the matters discussed above and the stockholder proposals
described in the preliminary proxy statement on Schedule 14A filed by Liberation
on December 8, 2005, as further described in Bally's Proxy Statement (the
"Liberation Proposals"), the participants in the solicitation of proxies
described in this proxy statement know of no other matters to be presented at
the 2005 Annual Meeting. Please refer to Bally's Proxy Statement and the
definitive proxy statement of Liberation for a detailed discussion of the
Liberation Proposals, including various arguments in favor of and against the
Liberation Proposals. If the Liberation Proposals properly come before the 2005
Annual Meeting, the proxy holders will use their discretionary authority in
voting on the Liberation Proposals.
If any other matters should properly come before the 2005 Annual
Meeting, it is intended that the persons named on the enclosed GREEN proxy card
will vote those proxies on such other matters in accordance with such persons'
sole discretion. Except in respect of the Liberation Proposals, the participants
in the solicitation of proxies described in this proxy statement will not use
such discretionary authority to vote the proxies for any matters of which any of
the participants are aware a reasonable time before the 2005 Annual Meeting.
22
VOTING PROCEDURES
According to Bally's Proxy Statement, the voting procedures for the
2005 Annual Meeting are as follows:
The presence at the 2005 Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock issued and outstanding on
December 20, 2005 (the Record Date) will constitute a quorum, permitting the
meeting to conduct its business. Stockholders of record at the close of business
on the Record Date will be entitled to one vote at the 2005 Annual Meeting for
each share of Common Stock held on the Record Date. Abstentions and broker
non-votes are considered to be shares present for the purpose of determining
whether a quorum exists. A broker non-vote occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received voting instructions from the beneficial owner. If you hold your
shares in "street name" through a broker or other nominee, your broker or
nominee will not be permitted to exercise voting discretion with respect to any
of the contested matters to be acted upon. Thus, if you do not give your broker
or nominee specific instructions, or you do not vote your shares according to
the enclosed voting instruction form, your shares will not be voted on those
matters. A properly executed proxy marked "ABSTAIN" with respect to any matter
will not be voted with respect to such matter. Accordingly, an abstention will
have the effect of a negative vote with respect to such matter.
If a quorum is present, directors shall be elected by the affirmative
vote of the holders of a majority of the shares represented in person or by
proxy at the 2005 Annual Meeting and entitled to vote generally in the election
of directors. Votes may be cast in favor of or withheld with respect to each
Pardus Nominee.
If a quorum is present, the affirmative vote of the holders of 75% of
the shares represented in person or by proxy at the 2005 Annual Meeting and
entitled to vote generally in the election of directors is required to approve
and adopt the binding resolution to repeal each provision or amendment of the
By-laws of the Company, if any, adopted by the board of directors of the Company
without the approval of the Company's stockholders subsequent to May 25, 2005
(purportedly the last date of reported changes) and prior to the approval and
adoption of such resolution at the 2005 Annual Meeting.
If a quorum is present, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy at the 2005 Annual
Meeting and entitled to vote is required to approve the 2006 Omnibus Equity
Compensation Plan. The rules of the New York Stock Exchange ("NYSE") further
require that at least a majority of the votes of shares of Common Stock entitled
to vote must be cast with respect to the approval of the new equity plan.
Pursuant to the rules of the NYSE, a broker may not vote on the adoption of or a
material amendment to an equity compensation plan such as the 2006 Omnibus
Equity Compensation Plan without an instruction from the beneficial owner of the
shares held by such broker. Such broker non-votes will not be considered present
for purposes of calculating a majority and, therefore, will have no effect on
the outcome of
23
the vote, except to the extent a broker non-vote is not counted as a vote "cast"
for purposes of the NYSE majority vote requirement.
If a quorum is present, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy at the 2005 Annual
Meeting and entitled to vote is required for the ratification of KPMG as the
Company's independent auditor.
If a quorum is present and the Liberation Proposals properly come
before the 2005 Annual Meeting, the affirmative vote of not less than 75% of the
votes entitled to be cast by the holders of all outstanding shares of the
Company's stock then entitled to vote is required to approve the Liberation
Proposals. For each other item which properly comes before the meeting, if any,
unless otherwise required by law, the Company's Restated Certificate of
incorporation, the Company's By-laws or the rules or regulations of any stock
exchanges applicable to the Company or its securities, the affirmative vote of
the holders of a majority of the shares represented in person or by proxy at the
2005 Annual Meeting and entitled to vote on the item will be required for
approval.
For more details regarding such procedures and the related matters
please refer to Bally's Proxy Statement.
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE 2005 ANNUAL MEETING, YOU ARE URGED TO
COMPLETE THE ACCOMPANYING GREEN PROXY CARD AND RETURN IT IN THE ENCLOSED
SELF-ADDRESSED, PREPAID ENVELOPE. ALL VALID PROXIES RECEIVED PRIOR TO THE
MEETING WILL BE VOTED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED (A)
"FOR" THE ELECTION OF CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN TO
CLASS III OF THE COMPANY'S BOARD OF DIRECTORS, (B) "FOR" THE APPROVAL AND
ADOPTION OF THE BY-LAW RESOLUTION TO REPEAL EACH PROVISION OR AMENDMENT OF THE
BY-LAWS OF THE COMPANY, IF ANY, ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE
APPROVAL OF THE COMPANY'S STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY
THE LAST DATE OF REPORTED CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF
SUCH RESOLUTION AT THE 2005 ANNUAL MEETING, (C) "AGAINST" THE ADOPTION OF THE
2006 OMNIBUS EQUITY COMPENSATION PLAN, (D) "FOR" THE RATIFICATION OF KPMG LLP AS
THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005,
AND (E) "FOR" GRANTING TO THE PROXY HOLDERS DISCRETION ON THE LIBERATION
PROPOSALS, IF PROPERLY BROUGHT BEFORE THE MEETING, AND ALL OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
If you have any questions or require any additional information
concerning this proxy statement, please contact our proxy solicitor, D.F. King &
Co., Inc., at the address or telephone number set forth below.
24
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
PROXY PROCEDURES
IN ORDER FOR YOUR VIEWS TO BE REPRESENTED AT THE 2005 ANNUAL MEETING,
PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING GREEN PROXY CARD IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
The accompanying GREEN proxy card will be voted at the 2005 Annual
Meeting in accordance with your instructions on such card.
REVOCATION OF PROXIES
You may change your proxy instructions at any time prior to the vote at
the 2005 Annual Meeting for shares held directly in your name. You may
accomplish this by completing and submitting a later-dated GREEN proxy card to
our proxy solicitor, D.F. King & Co., Inc. (48 Wall Street, New York, NY 10005),
or by attending the 2005 Annual Meeting and voting in person, or by delivering
to the Corporate Secretary of Bally a written notice, bearing a later date than
the date of your proxy instructions provided to Bally, stating that your proxy
provided to Bally is revoked. You should send any notice of revocation to the
Corporate Secretary of Bally at Bally's executive offices located at 8700 West
Bryn Mawr Avenue, Chicago, Illinois 60631. Attendance at the 2005 Annual Meeting
alone will not cause your previously-granted proxy to be revoked unless you vote
in person. For more details regarding such procedures and the related matters,
please refer to Bally's Proxy Statement. If your shares are held in "street
name," you must either vote your shares according to the enclosed voting
instruction form or contact your broker or other nominee and follow the
directions provided to you in order to change your vote.
Only holders of record as of the close of business on the Record Date
will be entitled to vote. If you were a stockholder of the Company on the Record
Date, you will retain your voting rights at the 2005 Annual Meeting even if you
sell such shares after the Record Date. Accordingly, it is important that you
vote the shares held by you on the Record Date, or grant a proxy to vote such
shares on the accompanying GREEN proxy card, even if you sell such shares after
the Record Date.
25
DISSENTERS' RIGHT OF APPRAISAL
Stockholders do not have appraisal or similar rights of dissenters
under Delaware law with respect to the matters described in this proxy
statement.
SOLICITATION OF PROXIES
In connection with the solicitation of proxies by the Fund and certain
of its affiliates and associates for use at the 2005 Annual Meeting, proxies may
be solicited by mail, facsimile, telephone, telegraph, electronic mail, in
person and by advertisements. The Pardus Nominees may make solicitations of
proxies but will not receive compensation for acting as nominees. Solicitations
may be made by certain directors, officers, members and employees of the Fund,
PCM or PCM LLC, none of whom will receive additional compensation for such
solicitation.
None of the Pardus Nominees has individually retained any person to
provide proxy solicitation or advisory services in connection with the
solicitation. The Fund has retained D.F. King & Co., Inc. for solicitation and
advisory services in connection with the solicitation, for which D.F. King &
Co., Inc. has received a fee of $10,000 (creditable toward the final fee in an
amount not to exceed $105,000), together with reimbursement for its reasonable
out-of-pocket expenses, and will be indemnified against certain liabilities and
expenses. D.F. King & Co., Inc. will solicit proxies from individuals, brokers,
banks, bank nominees and other institutional holders. The Fund will request
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all solicitation materials to the beneficial owners of the shares of
Common Stock they hold of record. The Fund will reimburse these record holders
for their reasonable out-of-pocket expenses in so doing. It is anticipated that
D.F. King & Co., Inc. will employ approximately 50 persons to solicit the
Company's stockholders for the Annual Meeting.
The entire expense of soliciting proxies is being borne by the Fund.
The Fund does not currently intend to seek reimbursement of the costs of this
solicitation from the Company. The costs of this solicitation of proxies, and
other costs specifically related to this solicitation, are currently estimated
to be approximately $300,000. The Fund estimates that through the date hereof,
its total expenditures in connection with this solicitation are approximately
$[200,000].
ADDITIONAL INFORMATION
The information concerning the Company contained in this proxy
statement and the Annexes attached hereto has been taken from, or is based upon,
publicly available information. To date, the participants in the solicitation of
proxies described in this proxy statement have not had access to the books and
records of the Company. Although the participants in the solicitation of proxies
described in this proxy statement do not have any information that would
indicate that any information contained in this proxy statement concerning the
Company is inaccurate or incomplete, the participants do not take any
responsibility for the accuracy or completeness of such information.
26
Please refer to Bally's Proxy Statement and annual report for certain
information and disclosure required by applicable law. This information and
disclosure includes, among other things, securities of Bally held by Bally's
directors, nominees, management and 5% stockholders, certain biographical
information on the Company's directors and executive officers, information
concerning executive compensation, an analysis of cumulative total returns on an
investment in shares of Common Stock during the past five years and procedures
for submitting proposals for inclusion in the Company's proxy statement at the
next annual meeting. Information concerning the date by which proposals of
security holders intended to be presented at the next annual meeting of the
Company's stockholders must be received by the Company for inclusion in the
Company's proxy statement and form of proxy for that meeting is also contained
in Bally's Proxy Statement. This information is contained in Bally's public
filings and Bally stockholders should refer to Bally's Proxy Statement and
public filings in order to review this disclosure. The participants in the
solicitation of proxies described in this proxy statement take no responsibility
for the accuracy or completeness of such information.
December [ ], 2005
PARDUS EUROPEAN SPECIAL OPPORTUNITIES
MASTER FUND L.P.
PARDUS CAPITAL MANAGEMENT L.P.
PARDUS CAPITAL MANAGEMENT LLC
MR. KARIM SAMII
MR. JOSEPH R. THORNTON
MR. CHARLES J. BURDICK
MR. BARRY R. ELSON
MR. DON R. KORNSTEIN
27
ANNEX A
INFORMATION CONCERNING CERTAIN PARTICIPANTS
Pardus and the Pardus Nominees are deemed to be "participants" in the
solicitation of proxies from the Company's stockholders to vote in favor of the
election of the Pardus Nominees to serve in Class III on the Company's board of
directors and the approval of the Pardus Proposal described in this proxy
statement to repeal each provision or amendment of the By-laws of the Company,
if any, adopted by the board of directors without the approval of the Company's
stockholders subsequent to May 25, 2005 (purportedly the last date of reported
changes) and prior to the approval and adoption of such resolution at the 2005
Annual Meeting. The business address of each of the Fund, PCM, PCM LLC, Mr.
Karim Samii, and Mr. Joseph R. Thornton, and the record address of the Fund as
an owner of record of the Company, is 1001 Avenue of the Americas, Suite 1100,
New York, New York 10018.
PCM serves as the investment manager of the Fund and possesses sole
power to vote and direct the disposition of all shares of Common Stock held by
the Fund. PCM, through one or more funds and/or accounts managed by it and/or
its affiliates, is engaged in the investment in property of all kinds, including
but not limited to capital stock, depository receipts, investment companies,
mutual funds, subscriptions, warrants, bonds, notes, debentures, options and
other securities and instruments of various kind and nature. PCM LLC is the
general partner of PCM, and Mr. Karim Samii is the sole member of PCM LLC and
the President of PCM. Mr. Joseph R. Thornton is a portfolio manager of PCM.
The Pardus Nominees do not beneficially own any securities of the
Company and the Pardus Nominees do not have any personal ownership interest,
direct or indirect, in any securities of the Company. Charles J. Burdick
currently serves on the PCM Advisory Board which advises PCM and its affiliates
from time to time with respect to investment strategies, assessing business
viability, sourcing transactions and valuing potential investments. The PCM
Advisory Board members do not have any oversight responsibility or discretion
over the investments made by or on behalf of PCM and its affiliates and the PCM
Advisory Board members do not (except to the extent publicly disclosed by the
Fund) have any knowledge of the investments held by PCM and its affiliates from
time to time. Mr. Burdick does not receive and is not entitled to any
compensation or remuneration for serving on the PCM Advisory Board from the Fund
or any of its affiliates. The PCM Advisory Board members have the ability to
invest up to an aggregate of $10,000,000 in the Fund and certain of its
affiliates. Mr. Burdick does not have any investment interest in the Fund or any
of its affiliates.
The Pardus Nominees may be deemed to have an interest in their
nominations for election to the board of directors by virtue of compensation the
Pardus Nominees will receive from the Company as directors, if elected to the
board of directors.
Annex A-1
During the past ten years, neither any member of Pardus nor any Pardus
Nominee has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
The direct and indirect security holdings of Pardus are as follows: the
Fund is the direct holder of 5,311,000 shares of Common Stock (including 1,000
shares of Common Stock owned of record by Pardus directly in its own name and
1,000 shares of Common Stock owned of record by the Fund in the name of Pardus
Capital A/C Pardus European Special Opportunities Master Fund L.P.) and
$10,500,000 principal amount (the "Debt") of the Company's 9 7/8% Senior
Subordinated Notes due 2007 (the "Notes"); PCM, in its capacity as investment
manager of Pardus, has sole voting and dispositive power with respect to all of
the shares of Common Stock and Debt held by the Fund; PCM LLC, as the general
partner of PCM, and Mr. Karim Samii, as the sole member of PCM LLC, may be
deemed to be the beneficial owners of all of the shares of Common Stock and Debt
held by Fund; however, PCM LLC and Mr. Samii disclaim beneficial ownership of
the all such shares of Common Stock and Debt. PCM LLC, and in turn Mr. Samii,
may earn fees and incentive allocations on account of the Fund's investment in
the Common Stock. Mr. Thornton, in his capacity as a portfolio manager of PCM,
may also earn fees and incentive allocations on account of the Fund's investment
in the Common Stock. Except as set forth herein, no other person or entity of
Pardus owns of record any securities of the Company.
On November 3, 2005, PCM caused 1,000 shares of Common Stock owned by
the Fund to be registered in the name of Pardus Capital A/C Pardus European
Special Opportunities Master Fund L.P. as the record owner. On November 14,
2005, PCM caused an additional 1,000 shares owned by the Fund to be registered
directly in the name of the Fund as the record owner. The remainder of the
shares owned by the Fund are held in street name. Other than as set forth above
in this Annex A and in the attached proxy statement, neither Pardus nor any
Pardus Nominee is the record or beneficial owner of any securities of the
Company, or any parent or subsidiary of the Company. Other than as set forth
herein, neither Pardus nor any Pardus Nominee has effected any transactions in
any securities of the Company in the last two years. The Fund used its own
assets to purchase the shares of Common Stock (other than the shares of Common
Stock the Fund received as consideration from the Company in the consent
solicitation commenced by the Company on October 18, 2005, which expired at 5:00
p.m. on November 1, 2005) and Debt owned by the Fund. Such shares of Common
Stock and Debt held by the Fund were purchased through and are held in brokerage
custodian accounts which, from time to time in the ordinary course, may utilize
margin borrowing in connection with purchasing, borrowing, or holding of
securities, and such shares of Common Stock and Debt may thereby be, or in the
future become, subject to the terms and conditions of such margin debt and
terms, together with all other securities held therein. As of the date hereof,
no part of the purchase price or market value of any of the shares of Common
Stock or Debt held by the Fund is represented by funds borrowed or otherwise
obtained for the purpose of acquiring or holding such shares or Debt.
Neither any member of Pardus nor any Pardus Nominee is, or has been
within the past year, a party to any contract, arrangement or understanding with
any person with
Annex A-2
respect to any securities of the Company, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profit, or the giving or withholding
of proxies.
Except as set forth herein or in the proxy statement, no associate of
Pardus or of any Pardus Nominee owns beneficially, directly or indirectly, any
securities of the Company. Other than as set forth herein, the Pardus Nominees
do not possess beneficial ownership of any securities of the Company, directly
or indirectly.
Other than as set forth herein, none of Pardus, any Pardus Nominee or
any of their respective associates or immediate family members have had or will
have a direct or indirect material interest in any transaction or series of
similar transactions since the beginning of the Company's last fiscal year or
any currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party in which the
amount involved exceeds $60,000.
The Fund's transactions in securities of the Company during the past
two years are as follows:
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P.
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 07/11/05 Buy 10,000 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 3,800 $3.29
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 15,100 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 12,200 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 7,100 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 39,500 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 11,700 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 600 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 1,600 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 5,000 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 100 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 800 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 600 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 1,700 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 200 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 2,100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 1,400 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 5,000 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 6,500 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 13,000 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 200 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 1,000 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 800 $3.16
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 2,600 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 17,000 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 300 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 100 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 300 $3.52
-----------------------------------------------------------------------------------------------------------
Annex A-3
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 19,300 $3.50
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 800 $3.48
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 3,500 $3.47
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 700 $3.46
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,300 $3.45
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 100 $3.44
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 10,200 $3.43
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 38,900 $3.42
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 8,000 $3.41
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 4,200 $3.40
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,700 $3.39
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 700 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 5,800 $3.37
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,800 $3.36
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 500 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 800 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,300 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 200 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,800 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,800 $3.60
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 8,700 $3.59
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,200 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,000 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 3,900 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 5,000 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 3,800 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 3,000 $3.53
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 100 $3.52
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 1,000 $3.51
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 4,400 $3.50
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 100 $3.49
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 800 $3.69
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 700 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 1,000 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 700 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.63
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.60
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 6,400 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 2,400 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 2,100 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 500 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 1,200 $3.74
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 3,400 $3.73
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 2,900 $3.72
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 5,200 $3.71
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 1,400 $3.70
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 2,700 $3.69
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 1,700 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 2,600 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 9,500 $3.60
-----------------------------------------------------------------------------------------------------------
Annex A-4
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 4,200 $3.59
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 200 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 1,100 $3.70
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 1,600 $3.68
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 22,000 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 11,400 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 29,200 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 10,300 $3.64
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 2,900 $3.63
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 1,200 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 300 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 08/03/05 Buy 28,300 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 08/03/05 Buy 2,700 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 1,300 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 21,500 $3.60
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 1,600 $3.59
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 2,200 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 8,700 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 3,500 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 100 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 100 $3.50
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 7,000 $3.73
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 5,000 $3.72
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 2,700 $3.71
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,900 $3.70
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 13,300 $3.69
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 8,700 $3.68
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 19,900 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 7,900 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 14,100 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,300 $3.64
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,300 $3.63
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 2,800 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,400 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 200 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 100 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 400 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 700 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 4,900 $3.40
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 300 $3.39
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 10,100 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.36
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,100 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 600 $3.32
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 4,800 $3.30
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,900 $3.29
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 500 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,800 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 4,600 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,600 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.23
-----------------------------------------------------------------------------------------------------------
Annex A-5
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 3,300 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 7,000 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,000 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 900 $3.15
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 10,500 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.12
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,400 $3.00
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,100 $2.96
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 11,700 $2.95
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,500 $2.94
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,700 $2.90
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 4,000 $3.00
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 2,200 $2.99
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 2,300 $2.99
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 3,900 $2.97
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 300 $2.96
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 4,500 $2.95
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 1,100 $2.92
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 37,000 $3.15
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 98,300 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 13,700 $3.06
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 1,000 $3.04
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 400 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 7,000 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 13,500 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 30,700 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 14,700 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 1,600 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 200 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 2,000 $3.17
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 9,600 $3.15
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 1,600 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 2,800 $3.31
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 28,200 $3.30
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 40,000 $3.29
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 91,700 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 7,900 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 300 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 39,900 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 2,800 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 48,500 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 14,500 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 1,200 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 800 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 200 $3.17
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 1,600 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 1,500 $3.32
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 200 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 3,100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 200 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 600 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 1,600 $3.25
-----------------------------------------------------------------------------------------------------------
Annex A-6
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 1,300 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 5,900 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 600 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 2,000 $3.48
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 500 $3.47
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 800 $3.45
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 600 $3.39
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 8,200 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 21,100 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 2,400 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 1,600 $3.31
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 400 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 2,400 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 37,400 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 4,300 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 100 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 14,400 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 300 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 6,700 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 25,100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 4,400 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 177,100 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 200,000 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 15,000 $3.37
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 28,400 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 150,000 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 175,000 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 125,000 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 15,000 $3.37
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 28,400 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 150,000 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 175,000 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 125,000 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/26/05 Buy 163,700 $3.36
-----------------------------------------------------------------------------------------------------------
Common Stock 08/26/05 Buy 5,500 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/26/05 Buy 56,800 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/29/05 Buy 1,500 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/29/05 Buy 25,200 $3.32
-----------------------------------------------------------------------------------------------------------
Common Stock 08/30/05 Buy 88,700 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/30/05 Buy 48,800 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 15,300 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 53,600 $3.53
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 10,000 $3.44
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 3,600 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 3,500 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 180,700 $3.83
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 12,800 $3.81
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 6,600 $3.80
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 16,600 $3.79
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 12,700 $3.78
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 7,400 $3.77
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 22,300 $3.76
-----------------------------------------------------------------------------------------------------------
Annex A-7
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 900 $3.73
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 7,100 $3.72
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 5,500 $3.71
-----------------------------------------------------------------------------------------------------------
Common Stock 09/02/05 Buy 14,200 $3.88
-----------------------------------------------------------------------------------------------------------
Common Stock 09/02/05 Buy 3,500 $3.86
-----------------------------------------------------------------------------------------------------------
Common Stock 09/06/05 Buy 108,300 $3.83
-----------------------------------------------------------------------------------------------------------
Common Stock 09/06/05 Buy 1,075,000 $3.93
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 200,000 $4.61
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 10,000 $4.62
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 80,000 $4.63
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 20,000 $4.59
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 8,000 $4.68
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 8,000 $4.69
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 24,000 $4.73
-----------------------------------------------------------------------------------------------------------
Common Stock 09/20/05 Buy 25,000 $4.48
-----------------------------------------------------------------------------------------------------------
Common Stock 09/20/05 Buy 50,000 $4.51
-----------------------------------------------------------------------------------------------------------
Common Stock 09/20/05 Buy 155,000 $4.53
-----------------------------------------------------------------------------------------------------------
Common Stock 09/21/05 Buy 50,000 $4.43
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 68,800 $4.33
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 100,000 $4.28
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 25,000 $4.27
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 2,000 $4.30
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 6,200 $4.29
-----------------------------------------------------------------------------------------------------------
Common Stock 11/18/05 Buy(1) 87,692 See Footnote
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 2,500 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 100 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 1,000 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 10,000 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 600 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 10,800 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 11,308 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 14,000 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 25,000 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 900 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 100 $6.88
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 200 $6.89
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 8,800 $6.90
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 10,000 $7.01
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 5,000 $7.01
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.61
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,500 $6.57
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 1,000 $6.57
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,500 $6.60
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.57
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 5,000 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,500 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 1,300 $6.60
-----------------------------------------------------------------------------------------------------------
---------------------
(1) Shares received by the Fund as consideration the Fund elected to receive in
the consent solicitation commenced by the Company on October 18, 2005
(which expired at 5:00 p.m. on November 1, 2005).
Annex A -8
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.64
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 36,000 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 10,700 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 1,300 $6.66
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.72
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.67
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.70
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 20,000 $6.81
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 6,000 $6.83
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.83
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.90
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 3,000 $6.91
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 5,200 $6.90
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 900 $6.86
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 200 $6.87
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 100 $6.87
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 12,800 $6.85
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
DEBT TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/12/05 Buy 500,000 $89.50
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/14/05 Buy 500,000 $88.50
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/19/05 Buy 1,000,000 $89.25
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/27/05 Buy 1,000,000 $88.75
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/08/05 Buy 1,000,000 $87.25
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/09/05 Buy 750,000 $87.25
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/11/05 Buy 500,000 $87.75
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/18/05 Buy 4,250,000 $89.50
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 09/30/05 Buy 1,000,000 $90.75
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
Annex A-9
ANNEX B
RESOLUTION TO REPEAL CERTAIN PROVISIONS OF OR AMENDMENTS
TO THE COMPANY'S BY-LAWS
Following is the text of the resolution to be presented for adoption by
the stockholders of the Company at the 2005 Annual Meeting:
"RESOLVED, that each provision or amendment of the By-laws of Bally
Total Fitness Holding Corporation (the "Company"), if any, adopted by
the board of directors of the Company without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly the last
date of reported changes) and prior to the approval of this resolution
be, and they hereby are, repealed, effective as of the time this
resolution is approved and adopted by the Company's stockholders."
Annex B-1
IMPORTANT
Tell your board of directors what you think! Your vote is important. No
matter how many shares of Common Stock you own, please give the Fund and certain
of its affiliates and associates your proxy at the Annual Meeting to vote (A)
"FOR" the election of the Pardus Nominees, (B) "FOR" approval and adoption of
the proposed resolution to repeal each provision or amendment of the By-laws of
the Company, if any, adopted by the board of directors without the approval of
the Company's stockholders subsequent to May 25, 2005 (purportedly the last date
of reported changes) and prior to the approval and adoption of such resolution
at the 2005 Annual Meeting, (C) "AGAINST" the adoption of the 2006 Omnibus
Equity Compensation Plan, (D) "FOR" the ratification of KPMG LLP as the
Company's independent auditor for the fiscal year ending December 31, 2005, and
(E) "FOR" granting to the proxy holders discretion on the Liberation Proposals,
if properly brought before the meeting, and all other matters as may properly
come before the meeting, by taking three steps:
1. SIGNING the enclosed GREEN proxy card,
2. DATING the enclosed GREEN proxy card, and
3. MAILING the enclosed GREEN proxy card TODAY in the envelope
provided (no postage is required if mailed in the United
States).
If any of your shares are held in the name of a brokerage firm, bank,
bank nominee or other institution, only it can vote such shares of Common Stock
and only upon receipt of your specific instructions. Accordingly, please vote
your shares according to the enclosed voting instruction form or contact the
person responsible for your account and instruct that person to execute the
GREEN proxy card representing your shares. Pardus urges you to confirm in
writing your instructions to Pardus in care of the address provided below so
that Pardus will be aware of all instructions given and can attempt to ensure
that such instructions are followed.
If you have any questions or require any additional information
concerning our proxy statement or this proxy solicitation, please contact our
proxy solicitor, D.F. King & Co., Inc., at the address or telephone number set
forth below.
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
GREEN PROXY CARD
BALLY TOTAL FITNESS HOLDING CORPORATION
2005 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P.,
PARDUS CAPITAL MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT
LLC, KARIM SAMII, JOSEPH R. THORNTON, CHARLES J. BURDICK,
BARRY R. ELSON AND DON R. KORNSTEIN
The undersigned appoints and constitutes Karim Samii and Joseph R. Thornton, and
each of them, as proxies, with full power of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of Bally Total Fitness Holding
Corporation, a Delaware corporation (the "Company"), to be held at 8:30 a.m.
(local time) on January 26, 2005 at the Renaissance Chicago O'Hare Hotel, 8500
West Bryn Mawr Avenue, Chicago, Illinois, and at any adjournment, postponement
or any special meeting that may be called in lieu thereof (the "2005 Annual
Meeting"), hereby revoking any proxies previously given, to vote all shares of
common stock of the Company held or owned by the undersigned as directed below,
and in their discretion upon such other matters as may come before the meeting.
IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED (A) "FOR" THE ELECTION OF
CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN TO CLASS III OF THE
COMPANY'S BOARD OF DIRECTORS, (B) "FOR" THE APPROVAL AND ADOPTION OF THE BY-LAW
RESOLUTION TO REPEAL EACH PROVISION OR AMENDMENT OF THE BY-LAWS OF THE COMPANY,
IF ANY, ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE APPROVAL OF THE COMPANY'S
STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY THE LAST DATE OF REPORTED
CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF SUCH RESOLUTION AT THE 2005
ANNUAL MEETING, (C) "AGAINST" THE ADOPTION OF THE 2006 OMNIBUS EQUITY
COMPENSATION PLAN, (D) "FOR" THE RATIFICATION OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005, AND (E) "FOR"
GRANTING TO THE PROXY HOLDERS DISCRETION ON THE LIBERATION PROPOSALS, IF
PROPERLY BROUGHT BEFORE THE 2005 ANNUAL MEETING, AND ALL OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
SIGN, DATE AND MAIL YOUR PROXY TODAY
(Continued and to be signed on the reverse side)
Pardus European Special Opportunities Master Fund, L.P. and certain of its
affiliates and associates recommends a vote "FOR" the election of all of the
nominees listed in Proposal 1 below, "FOR" Proposal 2 below, "AGAINST" Proposal
3 below, "FOR" Proposal 4 below, and "FOR" granting the proxy holders discretion
on the Liberation Proposals, if properly brought before the 2005 Annual Meeting,
and on all other matters as may properly come before the meeting. (Please mark
each matter with an "X" in the appropriate box.)
Pardus European Special Opportunities Master Fund, L.P. (the "Fund") and certain
of its affiliates and associates recommends a vote "FOR ALL" with respect to the
election of all of the nominees listed in Proposal 1 below.
1. Election of Directors:
Nominees: Charles J. Burdick, Barry R. Elson and Don R. Kornstein
[ ] FOR ALL
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
[ ] FOR ALL EXCEPT NOMINEE WRITTEN BELOW
INSTRUCTION: To withhold authority to vote for any
individual nominee, mark the "FOR ALL EXCEPT' box and
write the name(s) of the nominee(s) you do not
support on the line below. Your shares will be voted
for the remaining nominee(s).
________________________________________________
The Fund recommends a vote "FOR" Proposal 2 below.
2. Proposal to repeal provisions in the Company's By-laws that were
adopted after May 25, 2005 (purportedly the last date of reported
changes) and prior to the approval and adoption of this Proposal 2 at
the 2005 Annual Meeting of stockholders:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Fund recommends a vote "AGAINST" Proposal 3 below.
3. Approval of the 2006 Omnibus Equity Compensation Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Fund recommends a vote "FOR" Proposal 4 below.
4. Ratification of the appointment of KPMG LLP as independent auditor for
the Company for the fiscal year ending December 31, 2005
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Fund recommends a vote "FOR" Proposal 5 below.
5. In their discretion on all other matters as may properly come before
the annual meeting, including any motion to adjourn or postpone the
meeting or other matters incidental to the conduct of the meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please be sure to sign and date this Proxy
DATED: _________________________________
______________________________________
(Signature)
______________________________________
(Signature, if held jointly)
______________________________________
(Title)
Please sign exactly as name appears on this Proxy. When shares are held jointly,
joint owners should each sign. Executors, administrators, trustees, etc., should
indicate the capacity in which signing.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY!