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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 1, 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 8
Index to Exhibits appears on page 5 herein
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Item 6. Resignations of Registrant's Directors.
On August 2, 1996, the California Jockey Club (the "Company") filed
preliminary proxy materials with respect to a possibly contested election of
directors. In connection with such materials, the Company indicated that James
P. Conn, James M. Harris, Brian M. Herrera and Kjell H. Qvale were nominated for
re-election to the Board of Directors of the Company (the "Board").
By letter dated August 1, 1996 and received by the Company on August
2, 1996, a copy of which is attached hereto as Exhibit 17.01 and incorporated
herein by reference, Marylin K. Gunderson informed the Company that she declines
to stand for re-election to the Company's Board for the next election year
because of her disagreements with certain Board actions. In such letter, Ms.
Gunderson indicates her belief that the Board's action of entering into a
contract for the sale of the Bay Meadows stable area without first providing for
stabling for horses to race at Bay Meadows has jeopardized the future racing
licenses for the Bay Meadows Operating Company ("BMOC"). She states her belief
that the Company did not receive full value for its real estate in the
negotiated sale of the stable area or training track acreage. Ms. Gunderson
indicates her wish not to run for re-election on a slate with current Board
director James P. Conn.
By letter dated August 2, 1996 and received by the Company on August 6,
1996, a copy of which is attached hereto as Exhibit 17.02 and incorporated
herein by reference, Richard E. Perazzo informed the Company that he declines to
stand for re-election to the Board for the next election year because of his
disagreements with certain Board actions. In such letter, Mr. Perazzo indicates
his disapproval of the Company's barn area transaction due to the lack of a
written financial analysis supporting its economic feasibility and proposed
price. Mr. Perazzo expresses concerns that the transaction may be treated as a
sale rather than a tax deferred exchange and that the consequences of such
treatment will include, among other things, adverse income tax consequences to
the Company or its stockholders, leaving the Company with significantly less
assets and market value and complicating BMOC's attempts at obtaining future
racing licenses. Mr. Perazzo states his concern with respect to the proposed
sale/exchange of the training track and the fact that the Board has never been
presented with a feasibility study thereof. Mr. Perazzo asserts that no meetings
of the Board's Audit Committee were held during 1995 and that none were held
during 1996 until after the filing of the 1996 Form 10-K. Mr. Perazzo asserts
that the Board was aware that filings with the Securities and Exchange
Commission were not being timely filed and possible accounting problems existed,
but chose to ignore the situation.
Each of Ms. Gunderson and Mr. Perazzo requested that the respective
letters be disclosed in accordance with Item 6(a) of Form 8-K.
The Board has not nominated either Ms. Gunderson or Mr. Perazzo for
re-election, and disagrees with the viewpoints relating to the transactions and
other matters expressed in each of the foregoing letters. As a result of these
land sales, the Board expects to diversify the Company's real estate portfolio
to significantly increase revenues, profits and stockholder value, as well as to
generate the additional funds for the barns and training facilities that Bay
Meadows needs.
In recent years, race track operators across the country have been
confronted with decreasing revenues resulting from a steady decline in daily
attendance. The Board believes, and BMOC management has confirmed, that the barn
and training facilities at Bay Meadows are in need of extensive and costly
replacement or repair. F. "Jack" Liebau, the President and Chief Executive
Officer of BMOC, estimated during BMOC's 1995 annual meeting of stockholders
that the cost of the replacement of these facilities would be $12 million to $15
million. As BMOC does not possess the funds necessary to replace these
facilities, the Company has entered into two separate agreements for the sale of
an aggregate of 73 acres of the 178 acres of land at Bay Meadows (including a
33-acre parcel where the barns are now situated). Gross proceeds to the Company
will be approximately $52 million. The Company believes that this amount
represents a fair price and that the transactions are in the best interests of
stockholders. Moreover, the Company has been advised by its legal counsel that
it would be a breach of the Company's obligations to terminate the agreement for
the sale of the parcel where the barns are situated. In addition, that agreement
allows the Company to effect the transaction as a tax deferred exchange and,
while there can be no assurance that a suitable exchange site allowing for such
treatment will be located, the Board presently intends to seek tax-deferred
treatment of the transaction.
With respect to the other matters raised in the foregoing letters, Mr.
Perazzo's assertion that no meetings of the Audit Committee were held until
after the most recent filing on Form 10-K is incorrect. The Audit Committee held
a meeting at which Mr. Perazzo was present immediately prior to the filing of
the Annual Report on Form 10-K for fiscal year ended December 31, 1995.
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Mr. Perazzo's letter fails to specifically identify any untimely filings
with the Securities and Exchange Commission or possible accounting problems. The
Board is not aware of any untimely filings made by the Company or of any ongoing
accounting problems.
The Board believes that Ms. Gunderson's statements concerning Mr. Conn
arise from a personal dispute resulting from the previous termination of her
son's employment with BMOC by Mr. Conn.
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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 8, 1996
CALIFORNIA JOCKEY CLUB
By: /s/ Kjell H. Qvale
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Name: Kjell H. Qvale
Title: Chairman of the Board and Secretary
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EXHIBIT INDEX
Exhibits.
17.01 Letter re Director Resignation dated August 1, 1996
by Marylin K. Gunderson.
17.02 Letter re Director Resignation dated August 2, 1996
by Richard E. Perazzo.
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Exhibit 17.01
Mr. Kjell Qvale
Chairman of the Board
California Jockey Club August 1, 1996
P.O. Box 1117
San Mateo, CA 94403
Dear Mr. Qvale,
This letter is submitted to inform the California Jockey Club Board of
Directors that I, herewith, decline to stand for reelection to this board for
the ensuing year, for the following reasons:
1.) I believe that the C.J.C. Board's action of entering into a contract
for the sale of the Bay Meadows stable area without, first, having
made provisions for suitable stabling for horses to race at Bay
Meadows, has jeapordized [sic] the future racing licenses for the Bay
Meadows Operating Company, which provides the company's principal
source of income and dividends for its shareholders.
2.) I do not agree that C.J.C. is getting full value for its real estate
in the negotiated sale of the stable area or training track acreage.
The land was never offered for sale on the open market to other
possible interested buyers, and thus, can't be definitely determined
to be in the best interest of its shareholders.
3. I do not wish to run for reelection on a slate with James P. Conn,
under whose influence and leadership the C.J.C. Board had taken the
above action besides the previous disasterous [sic] real estate
development contract with Prometheus (Bay Meadows Partners). In that
litigation, C.J.C. was sued for fraud, and then, settled out of
court, paying $2,100,000 (plus substantial legal fees) of
shareholders' money to the joint venture partner, Prometheus.
4.) these issues constitute disagreements with the California Jockey Club
on matters pertaining to its operations, policies and practices. I
request that this letter be disclosed to the public and be filed with
the Securities and Exchange Commission in a Current Report on Form
8-K as provided for in Item 6(a) of the instructions thereto, and
also be entered into the minutes of this meeting.
Very truly yours,
/s/ Marylin K. Gunderson
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Marylin K. Gunderson
Director
California Jockey Club
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Exhibit 17.02
[RICHARD E. PERAZZO LETTERHEAD]
August 2, 1996
Mr. Kjell Qvale, Chairman
California Jockey Club
c/o British Motors
901 Van Ness Avenue
San Francisco, CA 94109
Dear Mr. Chairman:
Pursuant to my telephone conversation with Jim Harris this morning, this
letter will confirm our discussion and serve as formal notification of my
decision to not stand for re-election to the C.J.C. board of directors.
During my six year tenure as a director of California Jockey Club I have always
acted in good faith and in the honest belief that actions taken by me were in
the best interest of the company. I have attempted to act on an informed basis,
however I have consistently expressed the feeling that neither I, nor the
shareholders were being adequately informed on important issues.
During the initial phases of the agreements with Franklin Fund affiliates
concerning the Bay Meadows barn area, I asked that the board of directors be
presented with a written financial analysis of the proposed transaction
supporting the economic feasibility of the transaction and the proposed sale
price. To my knowledge no analysis has ever been prepared. It was my
understanding that the transaction was to be structured as a tax deferred
exchange. When it appeared that a suitable exchange site could not be located, I
proposed that the agreements be terminated under provisions of the contract. A
majority of the board felt otherwise. If this transaction results in a sale,
rather than an exchange, significant income taxes will either be paid by the
company, or if distributed to shareholders, by the shareholders. California
Jockey Club will be left with significantly less assets and consequently less
market value. Any attempt to then relocate the barns either on or off Bay
Meadows property would result in either significant debt or the usage of
after-tax dollars. Further, it is my belief that these actions may complicate
Bay Meadows Operating Company's attempts at obtaining future racing licenses,
and consequently may have a negative effect on C.J.C's principal source of
income.
The proposed sale/exchange of the 40-acre training track is also troubling.
Again, the board of directors has never been presented with a feasibility study
indicating that the transaction is in the best interest of shareholders.
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On numerous occasions during 1995 and early 1996, as a member of the company's
audit committee, I requested an audit committee meeting. There were no meetings
held during 1995 and none in 1996, until well after the 1996 Form 10-K had been
filed. The board was certainly aware that S.E.C filings were not being timely
filed and possible accounting problems existed, but chose to ignore the
situation.
In addition, I believe that my standing for re-election in light of recent
actions by a dissident shareholder group may be construed as my condoning this
board's actions.
These issues constitute disagreements with California Jockey Club on matters
pertaining to its operations, policies and practices. I respectfully decline to
stand for re-election to the board of directors at the upcoming 1996 California
Jockey Club annual meeting and request that this letter be disclosed to the
public and be filed with the Securities and Exchange Commission in a Current
Report on Form 8-K, as provided for in Item 6(a) of the instructions thereto.
Sincerely,
/s/ Richard E. Perazzo
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Richard E. Perazzo
