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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 13, 1996
CALIFORNIA JOCKEY CLUB
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 001-09319 94-0358820
- ------------- --------------------- -----------------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
2600 South Delaware Street, San Mateo, California, 94403
_______________________________________________________________________
(Address of principal executive offices) (Zip Code)
(415) 573-4514
_______________________________________________________________________
(Registrant's telephone number, including area code)
_______________________________________________________________________
(former name or former address, if changed since last report)
Total Pages 14
Index to Exhibits appears on page 6 herein
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Item 5. Other Events.
Legal Proceedings:
On August 13, 1996, the California Jockey Club ("CJC") filed a
lawsuit against Bay Meadows Operating Company ("BMOC"), certain of BMOC's
officers, the California Jockey Club Shareholders Committee and its nominees in
the U.S. District Court for the Northern District of California in San
Francisco. A copy of the press release issued by CJC on August 14, 1996
describing the lawsuit is filed as Exhibit 99.01 to this Report and is
incorporated herein by reference.
Agreement with Hudson Bay Partners, L.P.:
On August 18, 1996, CJC entered into a Formation Agreement with
Hudson Bay Partners, L.P. ("Hudson Bay") relating to a proposed reorganization
and a $300,000,000 financing transaction (the "Reorganization") with Hudson Bay.
The Formation Agreement contemplates that BMOC will become a party to the
transaction once it executes the Formation Agreement. A copy of the press
release issued by CJC on August 19, 1996 describing the Reorganization is filed
as Exhibit 99.02 to this Report and is incorporated herein by reference.
The Reorganization will involve a number of related transactions that
will occur simultaneously on the date of the consummation of the Reorganization
(the "Closing Date") pursuant to the terms of the Formation Agreement. Such
transactions include (i) the contribution by CJC to a newly formed limited
partnership (the "Realty Partnership") of all of its assets and liabilities in
exchange for an approximate 27.8% interest as a general partner in the Realty
Partnership, (ii) the contribution by BMOC to a newly formed limited partnership
(the "Operating Partnership") of all of its assets and liabilities in exchange
for an approximate 27.8% interest as a general partner in the Operating
Partnership, (iii) the commitment by Hudson Bay, to be drawn on from time to
time as requested by CJC and BMOC as general partners of, and on behalf of, the
Realty Partnership and the Operating Partnership but in any event such
commitment to be fully paid by the end of the third year following the Closing
Date, of an aggregate amount of $300,000,000 in cash which will be exchanged for
15,000,000 limited partnership units in each of the Realty Partnership and the
Operating Partnership (at a price per pair of limited partnership units of
$20.00) representing the remaining approximate 72.2% interest in the Realty
Partnership and Operating Partnership (such limited partnership units to be
issued as contributions are made), (iv) the issuance by the Realty Partnership
and the Operating Partnership to Hudson Bay of a warrant to acquire up to
5,000,000 additional limited partnership units in the Realty Partnership and the
Operating Partnership at a price per pair of limited partnership units of $25.69
and (v) the issuance by CJC and BMOC to certain members of management to be
appointed after the Closing Date of options to acquire up to 576,300 shares of
common stock of CJC and BMOC (such shares of CJC and BMOC being referred to
herein as "Paired Shares"). Of these options, Mr. David H. Lesser, an affiliate
of Hudson Bay, would receive options to acquire 288,150 Paired Shares at a price
per Paired Share of $17.125 and options for the remaining Paired Shares would be
granted to others to be named later at an exercise price equal to fair market
value on the date of grant.
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The limited partnership units of the Realty Partnership and the
Operating Partnership to be held by Hudson Bay will (subject to the ownership
limitation provisions of CJC and BMOC which are designed to preserve the status
of CJC as a REIT for tax purposes) be exchangeable, together but not separately,
for, at the option of CJC and BMOC, either cash, Paired Shares of CJC and BMOC
representing up to approximately 72.2% of the Paired Shares after such exchange,
or a combination of cash and such Paired Shares.
Prior to the Closing Date, CJC shall cause the Board of Directors of
CJC to consist of five directors, and Hudson Bay will be entitled to designate
three individuals to be nominated in the Proxy Statement by the Board of
Directors of CJC (the "Hudson Bay CJC Nominees"), such nominees to take office
effective upon their election at the meeting of stockholders of CJC referred to
below. BMOC shall cause the Board of Directors of BMOC to consist of five
directors, and Hudson Bay will be entitled to designate three individuals to be
nominated in the Proxy Statement by the Board of Directors of BMOC (the "Hudson
Bay BMOC Nominees"), such nominees to take office effective upon their election
at the meeting of stockholders of BMOC referred to below. CJC and BMOC shall
also cause their respective by-laws to be amended to provide that so long as
Hudson Bay has not completed its payment of $300,000,000 of capital
contributions (i) the Board of Directors of CJC and BMOC, respectively, may not
have more or less than five members unless such expansion or contraction is
approved by a majority of the Board of Directors and by the directors who are
not Hudson Bay Nominees (the "Non-Hudson Directors") acting as a committee (the
"Non-Hudson Committee"), (ii) in connection with any election of Directors, the
Board of Directors shall use its commercially reasonable best efforts to
nominate each Non-Hudson Director (or successor designated pursuant to clause
(iv) below) for election as a director to the Board of Directors, (iii) the
Non-Hudson Directors may not be removed by the Board of Directors, (iv) the
Board of Directors shall use its commercially reasonable best efforts to
nominate and appoint as a successor to any Non-Hudson Director who retires or
resigns from the Board of Directors the person designated by such Non-Hudson
Director, so long as such person is approved by the Board of Directors, which
approval shall not be unreasonably withheld or delayed, (v) the timing and
amounts of drawings of the above-described capital contributions to the Realty
Partnership and the Operating Partnership may be determined either by a majority
of the entire Board of Directors or by the Non-Hudson Committee, (vi) every
committee and subcommittee of the Board of Directors shall include as a member
at least one Non-Hudson Director, (vii) the Non-Hudson Committee shall have
exclusive decision-making authority for the Board of Directors in respect of
either of the following actions: (a) make any decision or take, or omit to
take, any action, on CJC's or BMOC's behalf, as the case may be, with respect to
any transaction involving or relating to in any way Hudson Bay or any of its
affiliates or associates; and (b) make any decision or take, or omit to take,
any action, on CJC's or BMOC's behalf, as the case may be, with respect to any
agreements between Hudson Bay or any of its affiliates or associates, on the one
hand, and CJC or BMOC, as the case may be, or any of its affiliates or
associates, on the other hand, and the foregoing amendments to the by-laws may
not be amended without the consent of the Non-Hudson Committee. During the time
prior to the completion of the $300,000,000 capital contribution, the Board of
Directors of each of CJC and BMOC would also be required to use its commercially
reasonable best efforts to nominate for election in connection with each
election of directors three individuals identified by Hudson Bay. Hudson Bay
also agreed that it would not transfer beneficial ownership, or enter into any
agreement to transfer beneficial ownership, of any of its shares of capital
stock of CJC or BMOC, as the case
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may be, for a period of two years starting as of the Closing Date unless Hudson
Bay receives the approval of a majority of the Board of Directors and of the
Non-Hudson Committee.
Consummation of the Reorganization is subject to, among other things,
approval of the Reorganization and certain related matters by the stockholders
of CJC and the stockholders of BMOC and any required approval by horse racing
authorities in California. Hudson Bay's obligations are conditioned, among
other things, on the receipt of financing necessary for Hudson Bay to meet its
obligations under the Formation Agreement described below and completion of a
due diligence review of CJC and BMOC (each of which conditions expires on the
45th day after BMOC executes the Formation Agreement). CJC's obligations are
conditioned, among other things, on being reasonably satisfied of the
availability of funds from Hudson Bay. If BMOC does not execute the Formation
Agreement by September 17, 1996, then Hudson Bay may elect to terminate the
transaction thereafter. A proxy statement seeking approval of the
Reorganization and related matters will be prepared and will be sent to
stockholders of CJC and stockholders of BMOC for a meeting expected to be held
within 90 days after BMOC executes the Formation Agreement. The Reorganization
is expected to be consummated promptly after the meeting of stockholders.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 22, 1996
CALIFORNIA JOCKEY CLUB
By: /s/ Kjell H. Qvale
-------------------------------------------
Name: Kjell H. Qvale
Title: Chairman of the Board and Secretary
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EXHIBIT INDEX
Exhibits.
99.01 Press Release dated August 14, 1996 issued by California Jockey Club.
99.02 Press Release dated August 19, 1996 issued by California Jockey Club.
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EXHIBIT 99.01
NEWS RELEASE
[SITRICK AND COMPANY LOGO]
Contact: Sitrick and Company
Michael Sitrick
Donna K.H. Walters
(310) 788-2850
Anne George
(212) 755-2850
FOR IMMEDIATE RELEASE
CALIFORNIA JOCKEY CLUB FILES LAWSUIT AGAINST
BAY MEADOWS OPERATING COMPANY, DISSIDENT GROUP, AND OTHERS;
CHARGES VIOLATIONS OF SECURITIES LAWS
SAN MATEO, CALIF. - AUGUST 14, 1996 - The California Jockey Club
(AMEX:CJC) today said it filed a lawsuit charging Bay Meadows Operating Company
(BMOC), two of BMOC's directors, and a group of California Jockey Club
dissident shareholders with violations of the Securities Exchange Act.
The complaint was filed late Tuesday in the U.S. District Court for the
Northern District of California in San Francisco.
Named as defendants are BMOC; John C. Harris, its chairman and a member
of the dissident group; F. Jack Liebau, its president; and nine other members
of the dissident group calling itself California Jockey Club Shareholders
Committee. Those members are: David Gjerdrum, Barton D. Heller, Jerrylee
Vanderhurst, Ronald J. Volkman, Ashton Cloniger, F. Scott Gross, Doris Johnson,
Noble Threewitt and Frank Wipfli.
- more -
2029 Century Park East, Suite 1750
Los Angeles, CA 90067
(310) 788-2850 Fax: (310) 788-2855
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According to the lawsuit, the defendants' "failure to make required
filings with the Securities and Exchange Commission (SEC) and disclosures to
the investing public" violated SEC rules and regulations. These actions, the
lawsuit states, were taken by the defendants "in connection with their
concerted efforts to effect a change in control of CJC by electing five of
their number as the five directors of CJC."
By bringing the suit, CJC seeks to "compel defendants to make the
required filings and disclosures ... and to enjoin defendants from
participating in further unlawful solicitations of proxies, from voting their
existing shares and proxies, and from delivering any proxies obtained by them
to CJC."
CJC is a real estate investment trust that owns approximately 178 acres
of land in San Mateo, where the Bay Meadows Racecourse is situated. BMOC leases
substantially all of that land from CJC and operates the racecourse. Shares of
the two companies are traded on a paired basis.
The Board of Directors of CJC has nominated four current directors,
Kjell H. Qvale, James Harris, James Conn and Brian Herrera, for re-election to
the Board. According to a letter mailed to stockholders August 13 with CJC's
proxy materials, these nominees have pledged to continue to pursue a course of
action, initiated by the current Board, that provides CJC with "the opportunity
for additional earnings and increased dividends and [to] generate funds to
supply Bay Meadows' stable needs, and thereby support continuance of live
racing at Bay Meadows."
- more -
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The letter, which was signed by Mr. Qvale, further states that "critical
to this plan is the sale of two parcels for an aggregate of approximately 73
acres of the total 178 acres owned by CJC at Bay Meadows...[for] $52 million."
On the other hand, the dissident group, according to proxy materials
filed with the SEC, seeks to "explore the broad options that CJC may presently
have to declare void, rescind and/or modify the real estate sales contracts." To
this end, the dissident group has sought proxies of CJC stockholders in its bid
to oust the current Board of Directors.
Also, BMOC has filed preliminary materials with the SEC calling for a
special meeting of its (and CJC's) stockholders one-half hour before, and in the
same location as, CJC's annual meeting, scheduled for 10 a.m., August 30, 1996
at the Bay Meadows Racecourse.
CJC says in the complaint that the BMOC special meeting was called
"without any proper corporate purpose of BMOC, without making required
disclosures, and by disseminating false and misleading proxy materials." This,
the CJC lawsuit contends, is a "too-clever-by-half artifice" designed to
influence CJC's stockholders and is "false and misleading in the extreme."
By their actions, the lawsuit states, BMOC's directors "have been doing
everything in their power to prevent CJC from going forward with the
transactions."
Mr. Liebau and Mr. John Harris -- who is one of the dissident group's
nominees to the CJC board -- have "acted in concert with the [dissident]
Committee and its other members, in their collective efforts to benefit and
entrench [John] Harris and Liebau at the expense of CJC and its stockholders by
duping the CJC stockholders into electing the dissident slate," the lawsuit
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contends. "In doing so, defendants are pursuing their personal interests, which
are not only unrelated to the welfare of the stockholders of BMOC, but
detrimental to that welfare."
The lawsuit states that the dissident group, including Liebau and John
Harris, have acquired 5.57% of the outstanding CJC common stock but that,
contrary to securities regulations, "no report of such aggregate ownership has
been made to CJC, the SEC, or the American Stock Exchange (the exchange on
which CJC's shares are traded)."
Also, the dissident group only belatedly disclosed "the membership of
defendant [John} Harris...", and its "proxy materials are false and
misleading...in failing to disclose adequately the multiple roles, and conflicts
of interest, faced by defendant [John] Harris, in his capacities as chairman of
the board of directors of BMOC, a member of the [dissident] Committee, a
nominee on the dissident slate, and as the sole shareholder of a business which
is a supplier to BMOC."
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EXHIBIT 99.02
NEWS RELEASE
[SITRICK AND COMPANY LOGO]
Contact: Sitrick and Company
Michael Sitrick
Donna K.H. Walters
(310) 788-2850
Anne George
(212) 755-2850
FOR IMMEDIATE RELEASE
CALIFORNIA JOCKEY CLUB REACHES AGREEMENT FOR HUDSON BAY PARTNERS
TO INVEST $300 MILLION, AT EFFECTIVE PRICE OF $20 PER SHARE,
FOR INTERESTS CONVERTIBLE INTO 72% OF CAL JOCKEY/BAY MEADOWS STOCK
SAN MATEO, CA -- AUGUST 19, 1996 -- The California Jockey Club (AMEX:CJ)
today announced that it has entered into an agreement for Hudson Bay Partners
L.P. to invest $300 million into two new limited partnerships, in exchange for
15 million of the new limited partnership units, which are convertible into 72
percent of California Jockey Club/ Bay Meadows Operating Company (CJC/BMOC)
stock, at an effective price of $20 per share. The $300 million investment will
be made over a period of not more than three years.
The CJC Board received a "fairness opinion" dated August 18, 1996 on the
transaction from Montgomery Securities -- financial advisor to CJC and BMOC.
The transaction calls for CJC and BMOC to contribute all of their assets to
new limited partnerships, of which CJC and BMOC will be the respective general
partners, in exchange for partnership units on a share-for-unit basis. Hudson
Bay will contribute its $300 million of cash to the same limited partnerships in
exchange for limited partnership
1
2029 Century Park East, Suite 1750
Los Angeles, CA 90067
(310) 788-2850 Fax: (310) 788-2855
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units. The transaction is subject to a number of conditions, including due
diligence, financing and the approval of the BMOC Board and the stockholders of
both CJC and BMOC. Hudson Bay will be entitled to receive a $2.9 million
termination fee in the event that the CJC Board of Directors receives a higher,
unsolicited offer and accepts that offer, pursuant to the exercise of its
fiduciary responsibilities.
As part of the transaction, Hudson Bay Partners will have the right to
nominate a majority of the members of the CJC and BMOC Boards of Directors.
However, certain Board actions will require the approval of the non-Hudson Bay
directors. David H. Lesser, President of Hudson Bay Partners, will become a
Director and senior officer of CJC after the transaction is completed. Hudson
Bay will receive seven-year warrants for an additional 5 million units at an
exercise price of $25.69 per paired unit, a premium of approximately 50 percent
over the price at which the stock closed on May 31, 1996, when terms of the
transaction were initially proposed by Hudson Bay. Mr. Lesser and other members
of management will receive stock options as part of an overall incentive plan.
Hudson Bay Partners currently holds just less than five percent of the
outstanding stock of CJC and BMOC.
Kjell H. Qvale, chairman of the CJC Board of Directors, said, "Hudson Bay's
proposed investment is being made at a premium of approximately 13 percent over
the market price of CJC and BMOC stock, as of the close of trading Friday,
August 16, 1996, and a premium of approximately 26 percent over the average
closing price of the stock over the 12 months ended August 16, 1996. It
positions the companies for growth into the 21st Century by raising substantial
capital to diversify CJC's and BMOC's assets and expand the companies' business
plans."
Mr. Qvale continued, "This transaction is equally exciting for both CJC and
BMOC. I believe that the BMOC Board should find that this transaction is in the
best interest of
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BMOC and its stockholders and should approve it -- and then recommend its
stockholders approve it, as well."
Mr. Qvale said that current plans are to use the cash to purchase other
real estate assets. "The intention is to diversify our investments and create
higher liquidity for the stock over the long-term." He said that the cash also
may be used to support the companies' racing interests.
Mr. Lesser said the agreement, reached after discussions over a period of
several months with both companies, will provide access to "a substantial amount
of capital the companies would otherwise find difficult to raise. The
substantial infusion of new equity capital will enable the development of CJC
and BMOC into a major owner and operator of real estate and will give existing
stockholders a significant stake in this development. The transaction is
intended to broaden the portfolio of the company, attract institutional
investors and ultimately lead to a more liquid stock. Not only does the
transaction bring additional capital to the companies, but Hudson Bay will
provide additional expertise in acquisitions, financings and new perspective to
the Boards which should help accelerate the companies' growth.
"I invested in CJC and BMOC some time ago," Mr. Lesser continued, "and I
remain committed to horse racing activities and their potential expansion.
Additionally, I expect the companies to use the new capital to acquire other
assets which will benefit from the paired share structure. I firmly believe this
transaction will result in significantly greater long-term value for the
stockholders of both companies than maintaining the status quo."
Mr. Qvale said the transaction is an additional step in the current CJC
Board's plan to enhance stockholder value.
"We have said for some time that, in our view, the only way for stockholder
value to be enhanced is for us to diversify our portfolio. Bay Meadows' average
on-track daily attendance has continued to decline. We have been searching for
activities that have the
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potential for producing additional earnings and increasing the liquidity of our
stock," he stated.
California Jockey Club is a real estate investment trust that leases
substantially all of its property in San Mateo to BMOC, which operates the Bay
Meadows Racetrack in San Mateo, California.
Hudson Bay Partners was formed by David H. Lesser as an investment fund to
make strategic investments in real estate and real estate-related securities.
Prior to forming Hudson Bay, Mr. Lesser was a Senior Vice President of Crescent
Real Estate Equities, Ltd. Crescent was formed as the successor to the real
estate interests of Richard E. Rainwater, who owns more than 20 percent of
Crescent's equity and serves as its chairman. Crescent is the beneficial owner
of a significant economic interest in Hudson Bay Partners through the ownership
of debt and non-voting common stock in the fund's limited partner. Prior to
joining Crescent, Mr. Lesser was a Director in the Real Estate Investment
Banking Department at Merrill Lynch & Co.
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