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): December 13, 1996
FLORIDA GAMING CORPORATION
(Exact name of registrant as specified in charter)
Delaware 0-9099 59-1670533
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
1750 South Kings Highway
Fort Pierce, Florida 34945-3099
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 464-7500
Not Applicable
(Former name or former address,
if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
Exhibit 3.1, 4.1 -- Certficate of Designations of Series C 8%
Cumulative Convertible Preferred Stock ("Series C Preferred
Stock").
Exhibit 4.2 -- Form of Regulation S Subscription Agreement
with respect to the Series C Preferred Stock.
Item 9. Sale of Equity Securities Pursuant to Regulation S.
(a) Securities Sold. On December 13, 1996, the Registrant
issued 550 shares of its Series C Preferred Stock, $.10
par value, at a price per share of $1,000.
(b) Underwriters and Other Purchasers. The Registrant did not
engage an underwriter in connection the issuance of the Series
C Preferred Stock. Orez Ltd. purchased 150 shares of the Series
C Preferred Stock and Selfridge Limited Partnership purchased
400 shares of the Series C Preferred Stock.
(c) Consideration. The Registrant issued the Series C
Preferred Stock for cash consideration. The Registrant
is obligated to pay First Capital Partners, Inc., a
finders fee in the amount of 8% of the gross proceeds,
plus warrants to purchase the Registrant's Common Stock
having a market value equal to 5% of the gross proceeds,
with an exercise price equal to the market price per
share of Common Stock at the closing.
(d) Exemption from Registration Claimed. The Series C
Preferred Stock was issued in accordance with the
provisions of Regulation S under the Securities Act of
1933, as amended, in an Offshore Transaction to non-U.S.
Persons, as such terms are defined in Regulation S.
(e) Terms of Conversion or Exercise. The Certificate of
Designations, Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of the Series C
Preferred Stock (the "Series C Certificate of
Designation") provides that the shares of Series C
Preferred Stock are convertible into shares of the
Registrant's Common Stock. Each holder of the Series C
Preferred Stock shall have the right, at anytime and from
time to time after 90 days from the date on which the
Series C Preferred Stock was issued, to convert some or
all such shares into shares of Common Stock. If not previously
converted, the shares of Series C Preferred Stock shall be
automatically converted into shares of Common Stock at the
then Conversion Rate for such shares on December 31, 1998.
The number of shares of Common Stock issuable upon
conversion of each share of Series C Preferred Stock
shall equal (i) the sum of (A) the Stated Value per share
and (B) accrued and unpaid dividends of such share, if
any, divided by (ii) the Conversion Price. The Stated
Value shall equal $1,000 (as adjusted for any stock
dividends, combinations or splits with respect to such
shares). The Conversion Price shall be equal to the
lesser of (i) $7.50 and (ii) eighty percent (80%) of the
average of the Closing Bid Price (as hereinafter defined)
for the five trading days immediately preceding the day
of conversion of the Series C Preferred Stock. The
Closing Bid Price shall mean the closing bid price of the
Registrant's Common Stock as reported by NASDAQ (or, if
not reported by NASDAQ, as reported by such other
exchange or market where traded). Under certain
circumstances, the Registrant has the right to redeem in
whole or in part for cash any shares of Series C Preferred
Stock for which the holder has requested conversion if the
Conversion Price is then below $5.00. The redemption price
per share shall be 125% of the Stated Value, together with
all accrued and unpaid dividends thereon.
In accordance with the terms of the Regulation S
Subscription Agreement, the purchasers of the Series C
Preferred Stock may not, directly or indirectly, offer or
sell any of the shares of Common Stock issued upon
conversion before the 91st day after the closing and
thereafter shall not offer or sell more than the
following percentage of the shares of Common Stock issued
upon conversion during the following periods after the
closing:
Days after Closing Percentage of
Common Shares
90-120 33%
121-150 67%
151 and thereafter 100%
The discussion at this Item 701(e) is qualified in its
entirety by reference to the Series C Certificate of
Designation and the form of Regulation S Subscription
Agreement attached to this Form 8-K as exhibits.
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 thereunto duly
authorized.
FLORIDA GAMING CORPORATION
By /s/ Timothy L. Hensley
Timothy L. Hensley
Executive Vice President,
Treasurer
and Chief Financial Officer
Date: December 30, 1996
Certificate of Designations,
Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of
Series C 8% Cumulative Convertible
Preferred Stock, $.10 Par Value
____________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
___________
Florida Gaming Corporation, a Delaware corporation (the
"Corporation"), does hereby certify that the following resolution
has been duly adopted by the Board of Directors of the
Corporation (the "Board"):
RESOLVED, that, pursuant to the authority expressly granted
to and vested in the Board by the provisions of the Certificate
of Incorporation (the "Certificate of Incorporation") of the
Corporation, there hereby is created a series of Preferred Stock,
$.10 par value, which series shall have the following
designations, powers, preferences, rights, qualifications,
limitations and restrictions (in addition to the designations,
powers, preferences, rights, qualifications, limitations and
restrictions set forth in the Certificate of Incorporation which
are applicable to the Preferred Stock).
1. Designation; Number of Shares.
The designation of said series of Preferred Stock shall
be Series C 8% Cumulative Convertible Preferred Stock (the
"Series C Preferred Stock"). The number of shares of Series C
Preferred Stock shall be 5,000. Each share of Series C Preferred
Stock shall have a stated value equal to $1,000 (as adjusted for
any stock dividends, combinations or splits with respect to such
shares) (the "Stated Value"). The Series C Preferred Stock shall
be equal in rank to the Class A Convertible Preferred Stock,
Series B Convertible Preferred Stock and Series D 8% Cumulative
Convertible Preferred Stock (the Series D Preferred Stock") with
respect to payment of dividends and the distribution of assets
upon liquidation of the Corporation.
2. Dividends.
(a) The holders of outstanding shares of Series C
Preferred Stock shall be entitled to receive preferential divi-
dends in cash, out of any funds of the Corporation legally
available at the time for declaration of dividends, before any
dividend or other distribution will be paid or declared and set
apart for payment on any shares of any Common Stock or other
class of stock junior to the Series C Preferred Stock (the Common
Stock and such junior stock being hereinafter collectively the
"Junior Stock") at the rate of 8% per annum on the Stated Value
per share, payable quarterly on the last day of a fiscal quarter
when, as and if declared commencing March 31, 1997; provided,
however, that dividend payments may be made, in the sole
discretion of the Board of Directors of the Corporation in
additional fully paid and nonassessable shares of Series C
Preferred Stock at a rate of $1,000 for each $1,000 of such
dividend not paid in cash and the issuance of such additional
shares shall constitute full payment of such dividend.
(b) The dividends on the Series C Preferred Stock at
the rates provided above shall be cumulative whether or not
earned, so that if at any time full cumulative dividends at the
rate aforesaid on all shares of the Series C Preferred Stock then
outstanding from the date from and after which dividends thereon
are cumulative to the end of the quarterly dividend period next
preceding such time shall not have been paid or declared and set
apart for payment, or if the full dividend on all such outstand-
ing Series C Preferred Stock for the then current dividend period
shall not have been paid or declared and set apart for payment,
the amount of the deficiency shall be paid or declared and set
apart for payment (but without interest thereon) before any sum
shall be set apart for or applied by the Corporation or a subsid-
iary of the Corporation to the purchase, redemption or other
acquisition of the Series C Preferred Stock or any shares of any
other class of stock ranking on a parity with the Series C
Preferred Stock ("Parity Stock") and before any dividend or other
distribution shall be paid or declared and set apart for payment
on any Junior Stock and before any sum shall be set aside for or
applied to the purchase, redemption or other acquisition of
Junior Stock.
(c) Dividends on all shares of the Series C Preferred
Stock shall begin to accrue and be cumulative from and after the
date of issuance thereof. A dividend period shall be deemed to
commence on the day following a quarterly dividend payment date
herein specified and to end on the next succeeding quarterly
dividend payment date herein specified.
3. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of
the Corporation, whether voluntary or involuntary, the holders of
the Series C Preferred Stock shall be entitled to receive, before
any payment or distribution shall be made on the Junior Stock,
out of the assets of the Corporation available for distribution
to stockholders, the Stated Value per share of Series C Preferred
Stock and all accrued and unpaid dividends to and including the
date of payment thereof. Upon the payment in full of all amounts
due to holders of the Series C Preferred Stock, the holders of
the Common Stock of the Corporation and any other class of Junior
Stock shall receive all remaining assets of the Corporation
legally available for distribution. If the assets of the
Corporation available for distribution to the holders of the
Series C Preferred Stock shall be insufficient to permit payment
in full of the amounts payable as aforesaid to the holders of
Series C Preferred Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such
assets of the Corporation shall be distributed, to the exclusion
of the holders of shares of Junior Stock, ratably among the
holders of the Series C Preferred Stock and any other stock of
equal ranking.
(b) Neither the purchase nor the redemption by the
Corporation of shares of any class of stock, nor the merger or
consolidation of the Corporation with or into any other corpora-
tion or corporations, nor the sale or transfer by the Corporation
of all or any part of its assets, shall be deemed to be a liqui-
dation, dissolution or winding-up of the Corporation for the
purposes of this paragraph 3. Holders of the Series C Preferred
Stock shall not be entitled, upon the liquidation, dissolution or
winding-up of the Corporation, to receive any amounts with
respect to such stock other than the amounts referred to in this
paragraph 3.
4. Conversion into Common Stock.
Shares of Series C Preferred Stock shall have the
following conversion rights and obligations:
(a) Subject to the further provisions of this
paragraph 4, each holder of shares of Series C Preferred Stock
shall have the right, at any time and from time to time after
ninety (90) days from the date on which a share of Series C
Preferred Stock was issued, to convert some or all such shares
into fully paid and non-assessable shares of Common Stock of the
Corporation (as defined in subparagraph 4(i) below) determined in
accordance with the Conversion Rate provided in paragraph 4(c)
below (the "Conversion Rate").
(b) The shares of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at the
then Conversion Rate for such shares on December 31, 1998.
Notice of automatic conversion of Series C Preferred Stock
pursuant to this paragraph 4(b) shall be given by mail or in such
other manner as may be prescribed by resolution of the Board not
more than thirty (30) days after the date of such anniversary.
(c) The number of shares of Common Stock issuable upon
conversion of each share of Series C Preferred Stock shall equal
(i) the sum of (A) the Stated Value per share and (B) accrued and
unpaid dividends on such share, if any, divided by (ii) the
Conversion Price. The "Conversion Price" shall be equal to the
lesser of (i) $7.50 and (ii) eighty percent (80%) of the average
of the Closing Bid Price (as hereinafter defined) for the five
trading days immediately preceding the day of conversion of the
Series C Preferred Stock. The "Closing Bid Price" shall mean the
closing bid price of the Corporation's Common Stock as reported
by NASDAQ (or, if not reported by NASDAQ, as reported by such
other exchange or market where traded).
(d) The holder of any certificate for shares of Series
C Preferred Stock desiring to convert any of such shares or whose
shares were automatically converted pursuant to the provisions of
this paragraph 4 shall surrender such certificate, at the
principal office of any transfer agent for said stock (the
"Transfer Agent"), with a written notice of such election to
convert (if such conversion is voluntary) such shares into Common
Stock duly filled out and executed, and if necessary under the
circumstances of such conversion, with such certificate properly
endorsed for, or accompanied by duly executed instruments of,
transfer (and such other transfer papers as said Transfer Agent
may reasonably require). The holder of the shares so surrendered
for conversion shall be entitled to receive within three (3)
business days of the Notice of Conversion (except as otherwise
provided herein) a certificate or certificates, which shall be
expressed to be fully paid and non-assessable, for the number of
shares of Common Stock to which such stockholder shall be
entitled upon such conversion, registered in the name of such
holder or in such other name or names as such stockholder in
writing may specify. In the case of any Series C Preferred Stock
which is converted in part only, the holder of shares of Series C
Preferred Stock shall upon delivery of the certificate or
certificates representing Common Stock also receive a new share
certificate representing the unconverted portion of the shares of
Series C Preferred Stock. Nothing herein shall be construed to
give any holder of shares of Series C Preferred Stock
surrendering the same for conversion the right to receive any
additional shares of Common Stock or other property which results
from an adjustment in conversion rights under the provisions of
subparagraph (f) of this paragraph 4 until holders of Common
Stock are entitled to receive the shares or other property giving
rise to the adjustment.
In the case of the exercise of the conversion rights
set forth in paragraph 4(a), the conversion privilege shall be
deemed to have been exercised, and the shares of Common Stock
issuable upon such conversion shall be deemed to have been
issued, upon the date of receipt by such Transfer Agent for
conversion of the certificate for such shares of Series C
Preferred Stock. The person or entity entitled to receive Common
Stock issuable upon such conversion shall on the date such
conversion privilege is deemed to have been exercised and
thereafter be treated for all purposes as the record holder of
such Common Stock and shall on the same date cease to be treated
for any purpose as the record holder of such shares of Series C
Preferred Stock so converted.
Notwithstanding the foregoing, if the stock transfer
books are closed on the date such shares are received by the
Transfer Agent, the conversion privilege shall be deemed to have
been exercised, and the person or entity shall be treated as a
record holder of shares of Common Stock, on the next succeeding
date on which the transfer books are open, but the Conversion
Rate shall be that in effect on the date such conversion
privilege was exercised. The Corporation shall not be required
to deliver certificates for shares of its Common Stock or new
certificates for unconverted shares of its Series C Preferred
Stock while the stock transfer books for such respective classes
of stock are duly closed for any purpose; but the right of
surrendering shares of Series C Preferred Stock for conversion
shall not be suspended during any period that the stock transfer
books of either of such classes of stock are closed.
Upon the conversion of any shares of Series C Preferred
Stock, no adjustment or payment shall be made with respect to
such converted shares on account of any dividend on shares of
such stock or on account of any dividend on the Common Stock,
except that the holder of such converted shares shall be entitled
to be paid any dividends declared on shares of Common Stock after
conversion thereof.
If the Corporation shall at any time be liquidated,
dissolved or wound-up, the conversion privilege shall terminate
at the close of business on the last business day next preceding
the effective date of such liquidation, dissolution or winding-up.
The Corporation shall not be required, in connection
with any conversion of Series C Preferred Stock, to issue a
fraction of a share of its Common Stock nor to deliver any stock
certificate representing a fraction thereof, but in lieu thereof
the Corporation may make a cash payment equal to such fraction
multiplied by the Closing Bid Price on the date the conversion
right was triggered.
(e) (i) In case of any consolidation or merger of the
Corporation with or into any other corporation (other than a
merger or consolidation in which the Corporation is the surviving
or continuing corporation and which does not result in any
reclassification, conversion or change of the outstanding shares
of Common Stock), then, unless the right to convert shares of
Series C Preferred Stock shall have terminated, as part of such
consolidation or merger, lawful provision shall be made so that
holders of Series C Preferred Stock shall thereafter have the
right to convert each share of Series C Preferred Stock into the
kind and amount of shares of stock and/or other securities or
property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock into which such shares of
Series C Preferred Stock might have been converted immediately
prior to such consolidation or merger. The foregoing provisions
of this paragraph 4(e) shall similarly apply to successive
consolidations and mergers.
(ii) In case of any sale or conveyance to another
person or entity of the property of the Corporation as an
entirety, or substantially as an entirety, in connection with
which shares or other securities or cash or other property shall
be issuable, distributable, payable or deliverable for
outstanding shares of Common Stock, then, unless the right to
convert such shares shall have terminated, lawful provision shall
be made so that the holders of Series C Preferred Stock shall
thereafter have the right to convert each share of the Series C
Preferred Stock into the kind and amount of shares of stock or
other securities or cash property that shall be issuable,
distributable, payable or deliverable upon such sale or
conveyance with respect to each share of Common Stock immediately
prior to such conveyance.
(f) Whenever the number of shares to be issued upon
conversion of the Series C Preferred Stock is required to be
adjusted as provided in this paragraph 4, the Corporation shall
forthwith compute the adjusted number of shares to be so issued
and prepare a certificate setting forth such adjusted conversion
amount and the facts upon which such adjustment is based, and
such certificate shall forthwith be filed with the Transfer Agent
for the Series C Preferred Stock and the Common Stock; and the
Corporation shall mail to each holder of record of Series C
Preferred Stock notice of such adjusted conversion price.
(g) In case at any time the Corporation shall propose:
(i) to pay any dividend or distribution payable
in shares upon its Common Stock or make any distribution
(other than cash dividends) to the holders of its Common
Stock, Class A Convertible Preferred Stock, Series B
Convertible Preferred Stock or Series D Preferred Stock
other than in accordance with the terms thereof; or
(ii) to offer for subscription to the holders of
its Common Stock, Class A Convertible Preferred Stock,
Series B Convertible Preferred Stock or Series D Preferred
Stock, other than in accordance with the terms thereof, any
additional shares of any class or any other rights; or
(iii) any capital reorganization or
reclassification of its shares, or the consolidation or
merger of the Corporation with another corporation; or
(iv) the voluntary dissolution, liquidation or
winding-up of the Corporation;
then, and in any one or more of said cases, the Corporation shall
cause at least fifteen (15) days prior notice of the date on
which (A) the books of the Corporation shall close, or a record
be taken for such stock dividend, distribution or subscription
rights, or (B) such capital reorganization, reclassification,
consolidation, merger, dissolution, liquidation or winding-up
shall take place, as the case may be, to be mailed to the
Transfer Agent for the Series C Preferred Stock and for the
Common Stock and to the holders of record of the Series C
Preferred Stock.
(h) So long as any shares of Series C Preferred Stock
shall remain outstanding and the holders thereof shall have the
right to convert the same in accordance with provisions of this
paragraph 4, the Corporation shall at all times reserve from the
authorized and unissued shares of its Common Stock a sufficient
number of shares to provide for such conversions.
(i) The term "Common Stock" as used in this paragraph
4 shall mean Common Stock of the Corporation as such stock is
constituted at the date of issuance thereof or as it may from
time to time be changed, or shares of stock of any class, other
securities and/or property into which the shares of Series C
Preferred Stock shall at any time become convertible pursuant to
the provisions of this paragraph 4.
(j) The Corporation shall pay the amount of any and
all issue taxes which may be imposed in respect of any issue or
delivery of stock upon the conversion of any shares of Series C
Preferred Stock, but all transfer taxes that may be payable in
respect of any change of ownership of Series C Preferred Stock,
or any rights represented thereby, or of stock receivable upon
conversion thereof, shall be paid by the person or persons
surrendering such stock for conversion.
5. Voting Rights.
Except as required by applicable law, shares of Series
C Preferred Stock shall not entitle their holders to any voting
rights, but such holders shall be entitled to a notice of any
stockholders' meeting in accordance with the By-laws of the
Corporation.
6. Status of Converted or Redeemed Stock.
In case any shares of Series C Preferred Stock shall be
redeemed or converted pursuant to paragraph 4 hereof, or
otherwise repurchased or reacquired, the shares so redeemed,
converted or reacquired shall resume the status of authorized but
unissued shares of Preferred Stock and shall no longer be
designated as Series C Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be duly executed on its behalf by its Chief
Executive Officer this 5th day of December, 1996.
FLORIDA GAMING CORPORATION
By /s/W. Bennett Collett
FLORIDA GAMING CORPORATION
REGULATION S SUBSCRIPTION AGREEMENT
Florida Gaming Corporation
1750 Kings Highway
Fort Pierce, Florida 34945-3099
Attn.: Mr. W. Bennett Collett
Gentlemen:
1. Application. The undersigned, intending to be
legally bound, hereby subscribes for __ shares (the "Shares")
of Series C 8% Cumulative Convertible Redeemable Preferred
Stock (the "Series C Preferred Stock") of Florida Gaming
Corporation, a Delaware corporation (the "Company"), at a
purchase price of $1,000 per Share. The undersigned
understands that this subscription may be accepted or rejected
in whole or in part by the Company in its sole discretion and
that this subscription is and shall be irrevocable unless the
Company for any reason rejects this subscription.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES ACT OF ANY STATE UNDER
ANY STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER REGULATION S ("REGULATION
S") PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED
STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH
OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
2. Escrow of Funds; Closing.
(a) Until the sale of a minimum of an aggregate of
1,000 shares of Series C Preferred Stock and/or shares of
Series D 8% Cumulative Convertible Preferred Stock (the
"Series D Preferred Stock") of the Company (the "Minimum
Amount"), subscription proceeds will be deposited in a non-interest
bearing escrow account (the "Escrow Account") with
Piper & Marbury L.L.P., as escrow agent (the "Escrow Agent"),
for the benefit of the undersigned. All such funds for
subscriptions will be held in the Escrow Account pursuant to
the terms of an Escrow Agreement among the Company, First
Capital Partners, Inc., as agent for the subscribers (the
"Agent"), and the Escrow Agent. By executing this
Subscription Agreement, the undersigned is agreeing to the
appointment of First Capital Partners, Inc. as its agent for
the Escrow Account. The Company will pay all fees related to
the establishment and maintenance of the Escrow Account.
Subject to the receipt of such subscriptions for the Minimum
Amount, the Company will either accept or reject this
Subscription Agreement in a timely fashion. The Company will
promptly return to subscribers incomplete, improperly
completed, improperly executed and rejected subscriptions.
(b) If subscriptions for at least the Minimum
Amount have been accepted prior to December 5, 1996 (the
"Minimum Amount Closing Date"), the funds therefor have been
collected by the Escrow Agent and all of the conditions set
forth elsewhere in this Agreement are fulfilled, a closing
shall be held on or before the Minimum Amount Closing Date
(the "Minimum Amount Closing"). Thereafter, additional
closings (together with the Minimum Amount Closing and the
Final Closing, "Closings") may from time to time be conducted
at times mutually agreeable with respect to additional shares
of Series C Preferred Stock and/or shares of Series D
Preferred Stock subscribed for with the final Closing ("Final
Closing") to occur within 10 days after December 31, 1996 (the
"Termination Date"). Notwithstanding the foregoing, if the
Minimum Amount has not been subscribed for and accepted as of
the Minimum Amount Closing Date, the Company may agree to
extend the Minimum Amount Closing Date to a date not later
than the Termination Date
(c) If subscriptions for the Minimum Amount have
not been received and accepted by the Company by the Minimum
Amount Closing Date or if such subscriptions have been
received and accepted by the Company by the Minimum Amount
Closing Date but all funds for the Minimum Amount have not
been collected by the Escrow Agent by such date, the offering
contemplated by this Subscription Agreement will be terminated
and the Escrow Agent will cause all monies received from
subscribers for the Shares to be promptly returned to such
subscribers without interest, penalty, expense or deduction.
3. Representations and Warranties of the Subscriber.
The undersigned represents and warrants to the Company as follows:
(a) The undersigned, in making the decision to
purchase the Shares subscribed for, has relied upon
independent investigations made by him or it and his or its
representatives, if any. The undersigned has relied solely on
the information contained in the Company's offering materials
dated November 26, 1996 (the "Memorandum") relating to the
offering of a minimum of an aggregate of 1,000 shares and a
maximum of an aggregate of 3,000 shares of Series C Preferred
Stock and/or shares of Series D Preferred Stock of the Company
(the "Offerings"), receipt of which is hereby acknowledged; no
oral representations have been made or oral information
furnished to the undersigned in connection with the purchase
of the Shares which were in any way inconsistent with the
Memorandum; and the undersigned and/or its advisors have had
a reasonable opportunity to ask questions of and receive
answers from the Company concerning the Shares.
(b) The undersigned has been supplied with or has
sufficient access to all information, including financial
statements and other financial information of the Company, and
has been afforded with an opportunity to ask questions of and
receive answers from an officer of the Company concerning
information to which a reasonable investor would attach
significance in making investment decisions, so that as a
reasonable investor the undersigned has been able to make the
undersigned's decision to purchase the Shares.
(c) The undersigned is not subscribing for the
Shares as a result of or subsequent to any advertisement,
article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting,
or any solicitation of a subscription by a person not
previously known to the undersigned in connection with
investments in securities generally.
(d) As applicable, the undersigned has reached the
age of majority in the state in which the undersigned resides,
has adequate means of providing for the undersigned's current
financial needs and contingencies, is able to bear the
substantial economic risks of an investment in the Shares and
the shares of Common Stock issuable upon conversion of the
Shares (the "Conversion Shares") for an indefinite period of
time, has no need for liquidity in such investment, has made
commitments to investments that are not readily marketable
which are reasonable in relation to the undersigned's net
worth and, at the present time, could afford a complete loss
of such investment.
(e) The undersigned has such knowledge and
experience in financial, tax and business matters so as to
enable him to utilize the information made available to the
undersigned in connection with the offering of the Shares to
evaluate the merits and risks of an investment in the Shares
and to make an informed investment decision with respect
thereto.
(f) The undersigned acknowledges that the purchase
of the Shares involves a high degree of risk and further
acknowledges that he or it can bear the economic risk of the
purchase of the Shares, including the total loss of his or its
investment. The undersigned is not relying on the Company
with respect to the tax and other economic considerations of
an investment in the Shares, and the undersigned has relied on
the advice of, or has consulted with, only the undersigned's
own advisor(s).
(g) The undersigned has full right and power to
perform pursuant to this Subscription Agreement and make an
investment in the Company and, if the undersigned is a
corporation, partnership, trust or other entity, is authorized
and otherwise duly qualified to purchase and hold the Shares
and to enter into this Subscription Agreement.
(h) The undersigned is purchasing the Shares for
the undersigned s own account, for investment and not with a
view to resale or distribution except in compliance with the
Securities Act.
(i) The undersigned understands that the Shares are
being offered and sold to him or it in reliance on specific
exemptions from the registration requirements of federal and
state securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the
undersigned set forth herein in order to determine the
applicability of such exemptions and the suitability of the
undersigned to acquire the Shares. The representations,
warranties and agreements contained herein are true and
correct as of the date hereof and may be relied upon by the
Company, and the undersigned will notify the Company
immediately of any adverse change in any such representations
and warranties which may occur prior to the acceptance of the
subscription and will promptly send the Company written
confirmation thereof. The representations, warranties and
agreements of the undersigned contained herein shall survive
the execution and delivery of this Subscription Agreement and
the purchase of the Shares.
4. Offshore Transaction. The undersigned further
represents and warrants as follows:
(a) Neither the undersigned nor any person or
entity for whom the undersigned is acting as fiduciary is a
United States person. A United States person means any one of
the following:
(i) any natural person resident in the United
States of America;
(ii) any partnership or corporation organized
or incorporated under the laws of the United States of
America;
(iii) any estate of which any executor or
administrator is a United States person;
(iv) any trust of which any trustee is a United
States person;
(v) any agency or branch of a foreign entity
located in the United States of America;
(vi) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a United
States person;
(vii) any discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated or (if an
individual) resident in the United States of America; and
(viii) any partnership or corporation if:
(A) organized or incorporated under the
laws of any foreign jurisdiction;
and
(B) formed by a United States person
principally for the purpose of
investing in securities not
registered under the Securities Act,
unless it is organized or
incorporated, and owned, by
accredited investors (as defined in
Rule 501(a) under the Securities
Act) who are not natural persons,
estates or trusts.
(b) At the time the buy order was originated, the
undersigned was outside the United States and is outside of
the United States as of the date of the execution and delivery
of this Subscription Agreement. No offer to purchase the
Shares was made in the United States.
(c) ALL OFFERS AND SALES OF THE SHARES PRIOR TO THE
EXPIRATION OF THE RESTRICTED PERIOD AS DEFINED IN RULE 902
SHALL ONLY BE MADE IN COMPLIANCE WITH THE SAFE HARBOR
CONTAINED IN REGULATION S, PURSUANT TO REGISTRATION OF
SECURITIES UNDER THE SECURITIES ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND ALL
OFFERS AND SALES AFTER THE RESTRICTED PERIOD SHALL BE MADE
ONLY PURSUANT TO SUCH A REGISTRATION OR TO SUCH EXEMPTION FROM
REGISTRATION.
(d) ALL OFFERING DOCUMENTS RECEIVED BY THE
UNDERSIGNED INCLUDE STATEMENTS TO THE EFFECT THAT THE SHARES
AND THE CONVERSION SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO UNITED STATES PERSONS OR FOR THE ACCOUNT OR
BENEFIT OF A UNITED STATES PERSON (OTHER THAN DISTRIBUTORS AS
DEFINED IN REGULATION S) DURING THE RESTRICTED PERIOD AS
DEFINED IN RULE 902 UNLESS THE SHARES OR THE CONVERSION SHARES
ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS IS AVAILABLE.
(e) IN THE VIEW OF THE SEC, THE STATUTORY BASIS FOR
THE EXEMPTION CLAIMED FOR THIS TRANSACTION WOULD NOT BE
PRESENT IF THE OFFERING OF SHARES, ALTHOUGH IN TECHNICAL
COMPLIANCE WITH REGULATION S, IS PART OF A PLAN OR SCHEME TO
EVADE THE REGISTRATION PROVISIONS OF THE SECURITIES ACT. THE
UNDERSIGNED IS ACQUIRING THE SHARES FOR INVESTMENT PURPOSES
AND HAS NO PRESENT INTENTION TO SELL THE SHARES IN THE UNITED
STATES OF AMERICA TO A UNITED STATES PERSON OR FOR THE ACCOUNT
OR BENEFIT OF A UNITED STATES PERSON.
(f) Neither the undersigned nor any of his or its
affiliates or agents will, directly or indirectly, maintain
any short position in the Conversion Shares or any other
securities of the Company for so long as any of the Shares
owned by the undersigned have not been converted into
Conversion Shares.
(g) The undersigned understands and acknowledges
that Florida law prohibits any person or entity from acquiring
a 5% or greater equity interest in a pari-mutuel operator and
exercising control with respect to those shares until such
person has received the approval of the Florida Department of
Business and Professional Regulation, Division of Pari-Mutuel
Wagering, and therefore that the acquisition of 5% or more of
the Company's Common Stock upon the conversion of Shares would
require such approval.
5. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the
undersigned as follows:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in the State of
Florida and in each other jurisdiction in which the failure to
so qualify would have a material adverse effect on the
business or properties of the Company and its subsidiaries.
The Company is not the subject of any pending or threatened
material investigation or administrative or legal proceeding
by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction or the SEC which have not been
disclosed in the reports referred to in Section 5(b) below.
(b) The Company has previously furnished to the
undersigned copies of the Company's (i) Annual Report on Form
10-KSB for the year ended December 31, 1995, (ii) Quarterly
Report on Form 10-KSB for the fiscal quarters ended March 31,
1996, June 30, 1996 and September 30, 1996, (iii) Current
Reports on Form 8-K dated February 13, 1996, October 9, 1996,
September 12, 1996 and November 25, 1996 and (iv) 1995 Annual
Report and Proxy Statement dated September 4, 1996 (the
Periodic Reports") made pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). All of such
Periodic Reports complied as to form with the provisions of
the Securities Act and the Exchange Act and none of such
reports contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which
they were made, not false or misleading. Since September 30,
1996, there have been no material adverse changes in the
Company's financial condition or business which have not been
disclosed to the undersigned in writing.
(c) All corporate action on the part of the
Company, its officers, directors and stockholders necessary
for the authorization, execution and delivery of this
Subscription Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Shares and the
Conversion Shares have been taken, and this Subscription
Agreement constitutes a valid and legally binding obligation
of the Company, enforceable in accordance with its terms,
except to the extent adjustments to the conversion price of
the shares of Series C Preferred Stock and other shares of the
Company s convertible preferred stock would result in the
issuance of a number of shares of Common Stock in excess of
the Company's authorized number of shares of Common Stock.
(d) As of the date of the Memorandum, the Company
is authorized to issue (i) 15,000,000 shares of Common Stock,
of which 4,304,491 shares are issued and outstanding on the
date hereof; (ii) 1,200,000 shares of Class A Redeemable
Preferred Stock, of which 34,435 shares are issued and
outstanding; and (iii) 500,000 shares of Series Preference
Stock, of which 5,000 shares have been designated Series B
Preferred Stock and of which 2,202.5 shares of Series B
Preferred Stock are issued and outstanding. As of the date of
the Memorandum, the Company has reserved for issuance
3,166,574 shares pursuant to the exercise of options and the
issuance of shares of Common Stock upon conversion of
preferred shares. Except for the foregoing and in connection
with the Offerings, there are no other convertible securities,
options, warrants, subscriptions, calls or other rights or
agreements, arrangements or commitments obligating the Company
to issue, transfer or sell any securities of the Company,
outstanding or authorized stock appreciation, phantom stock or
other similar rights with respect to the Company or any
commitments to issue any of the same. To the best of the
Company's knowledge, none of such issued and outstanding
shares of the Company's capital stock or options is the
subject of any voting trust agreement or other agreement
relating to the voting thereof or restricting in any way the
sale or transfer thereof.
(e) The Shares, when issued, sold and delivered in
accordance with the terms hereof for the consideration
expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the accuracy of the
representations of the undersigned in this Subscription
Agreement, will be issued in compliance with all applicable
United States federal and state securities laws. The
Conversion Shares when issued in accordance with the terms of
the Certificate Of Designations, Voting Powers, Preferences,
Limitations, Restrictions, and Relative Rights of Series C 8%
Cumulative Convertible Redeemable Preferred Stock (the
"Certificate of Designation"), shall be duly and validly
issued and outstanding, fully paid and nonassessable, and
based in part on the accuracy of the representations and
warranties of the undersigned and any transferee of the
Shares, will be issued in compliance with all applicable
United States federal and state securities laws.
(f) Except as limited by the provisions of the
Florida Department of Business and Professional Regulation,
Division of Pari-Mutuel Wagering with respect to the holding
of 5% or more of the Company's Common Stock, the execution and
delivery of this Subscription Agreement and the consummation
of the transactions contemplated hereby, including the
issuance of the Shares and the Conversion Shares, do not and
will not conflict with or result in a breach by the Company of
any of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation or By-Laws of the
Company, or any indenture, mortgage, deed of trust or other
material instrument to which the Company is a party or by
which it or any of its properties or assets are bound, or any
applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any
of its properties or assets.
(g) As of the date hereof, the conduct of the
business of the Company complies in all material respects with
all statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto. The Company has not
received notice of any alleged violation of any statute, law,
regulation, ordinance, rule, judgment, order or decree from
any governmental authority. The Company shall comply with all
applicable securities laws with respect to the sale of the
Shares and the Conversion Shares, including but not limited to
the filing of all reports required to be filed in connection
therewith with the SEC or any stock exchange or the NASDAQ
Stock Market or any other regulatory authority.
(h) Except as disclosed in the Company's Periodic
Reports, there is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign,
now pending or, to the knowledge of the Company, threatened,
against or affecting the Company, or any of its properties,
which could reasonably be expected to result in any material
adverse change in the business, financial condition or results
of operations of the Company, or which could reasonably be
expected to materially and adversely affect the properties or
assets of the Company.
(i) The Company is a "Reporting Company" as defined
in Rule 902(1) of Regulation S and it has a class of
securities registered under Section 12(g) of the Exchange Act
and has filed all the materials required to be filed as
reports pursuant to the Exchange Act for a period of at least
twelve (12) months preceding the date hereof (or for such
shorter period as the Company was required by law to file such
material).
(j) The Company has not, and to the best of the
Company's knowledge, neither the undersigned nor any
distributor, if any, participating in the offering of the
Shares nor any person acting for the Company or any such
distributor has conducted any "directed selling efforts" as
that term is defined in Rule 902 of Regulation S. Such
activities include, without limitation, the mailing of printed
material to investors residing in the United States, the
holding of promotional seminars in the United States, the
placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a
general circulation in the United States, which discuss the
offering of the Shares. Assuming the accuracy of the
representations and warranties of the undersigned, the
offering of the Shares is not part of a plan or scheme to
evade the registration provisions of the Securities Act.
(k) The Company has not taken, and will not take,
any action that will affect in any way the running of the
Restricted Period or the ability of undersigned to resell
freely the Conversion Shares in accordance with applicable
securities laws.
(l) The Company represents that it has not offered
the Shares to the undersigned in the United States.
(m) Each distributor participating in the offering
of the Shares, if any, has agreed in writing that all offers
and sales of the Shares or the shares of Common Stock issuable
upon conversion of the Shares prior to the expiration of a
period commencing on the date of the closing of the offering
of Shares and ending 40 days thereafter (the "Restricted
Period") shall only be made in compliance with the safe harbor
contained in Regulation S, pursuant to registration of the
Shares or the Conversion Shares under the Securities Act or
pursuant to an exemption from registration under the
Securities Act.
(n) There is no fact known to the Company (other
than general economic conditions known to the public
generally) that has not been disclosed in writing to the
undersigned that (i) could reasonably be expected to have a
material adverse effect on the business, financial condition
or results of operations of the Company, or which could
reasonably be expected to materially and adversely affect the
properties or assets of the Company or (ii) could reasonably
be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this
Subscription Agreement and the issuance of the Shares and the
Conversion Shares hereunder or pursuant hereto.
(o) The Company shall, until at least the second
anniversary of the Closing, maintain its corporate existence
in good standing, and shall pay all its taxes when due except
for taxes which the Company disputes in good faith and
pursuant to appropriate proceedings.
(p) For so long as any shares of Shares or
Conversion Shares held by the undersigned remain outstanding:
(i) the Company will reserve from its
authorized but unissued shares of Common Stock a
sufficient number of shares of Common Stock to permit the
issuance of all of the Conversion Shares; and
(ii) the Company will utilize its reasonable
best efforts, and take all steps within its control
necessary, to maintain the listing of its Common Stock on
the NASDAQ Stock Market or other national securities
exchange.
(q) The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Shares as
required by the laws and regulations of all appropriate
jurisdictions.
(r) The Company shall consult with its legal
counsel regarding its Exchange Act filing requirements
including, but not limited to, the obligation of the Company
to file Form 8-K in connection with the offering of the
Shares, and will timely make any and all necessary filings.
6. Restrictions.
(a) The transaction restriction in connection with
this offshore offer and sale restricts the undersigned from
offering and selling to United States persons or for the
account or benefit of a United States person during the
Restricted Period. Rule 902(m) and Rule 903(c)(2) govern the
Restricted Period.
(b) The undersigned understands that the offer and
sale of the Shares or the Conversion Shares is not being
registered under the Securities Act. The Company is relying
on the rules governing offers and sales made outside the
United States pursuant to Regulation S. Rules 901 through 903
of Regulation S govern this transaction.
(c) The Company's Transfer Agent will be instructed
to maintain stop transfer instructions for the Shares and the
Conversion Shares with respect to United States persons during
the Restricted Period. If, after the Restricted Period, the
holder of the Shares or the Conversion Shares delivers a
Notice of Conversion to the Company, then in accordance with
the Irrevocable Transfer Agent Instructions between the
Company and the Transfer Agent (the "Instructions"), subject
to the provisions of Section 8 hereof, the Transfer Agent
shall cause the transfer of the shares or the Conversion
Shares to the holder or his or its designees, and neither the
Transfer Agent nor the Company shall place or permit to remain
any restrictive legend or "stop transfer" order against such
shares except as contemplated hereby.
7. Registration.
(a) Definitions. The following definitions shall
apply with respect to a registration (a "Registration")
pursuant to this section 7:
(i) The term "Public Offering" shall mean an
underwritten public offering of equity securities of the
Company pursuant to an effective registration statement
under the Securities Act covering the offer and sale of
equity securities of such entity to the public.
(ii) The term "Registrable Shares" shall mean
the Conversion Shares and any shares of Common Stock
issued to holders of the Shares or Conversion Shares from
time to time. Registrable Shares shall cease to be
Registrable Shares when they may be sold under Rule
144(k) and all requisite steps have been taken to remove
any legends or restrictions on transfer with respect to
such Registrable Shares.
(iii) The term "Registration Statement"
shall mean any registration statement of the Company that
covers any of the Registrable Shares pursuant to the
provisions of this Agreement, including the prospectus
included therein, any amendment or supplement thereof,
including post-effective amendments, and all exhibits and
all material incorporated by reference in such
Registration Statement.
(b) Agreement to Register.
(i) If, at any time prior to the third
anniversary of the issuance of the Shares, Regulation S
is rescinded or modified so as to preclude the
undersigned from reselling in United States public
securities markets Registrable Shares received from the
Company following expiration of the Restricted Period, or
if, for any other reason, the Company refuses to issue
Registrable Shares bearing no restrictive legend to the
undersigned or without stop transfer instructions after
expiration of the Restricted Period and, in either case,
no other exemption for the sale of all of the Registrable
Shares without restriction is otherwise available, at the
request of the undersigned, the Company shall promptly
prepare and file with the SEC a Registration Statement
covering the resale of the Registrable Shares and use its
best efforts to cause such Registration Statement to
become effective within 90 days from such request.
(ii) If the holders of Registrable Shares
desire to distribute the Registrable Shares by means of
an underwriting they shall so advise the Company and
shall select an underwriter reasonably acceptable to the
Company. The Company and all holders of Registrable
Shares proposing to distribute their Registrable Shares
through such underwriter shall enter into an underwriting
agreement in customary form with the underwriter selected
for such underwriting by the Company. The Company shall
not be required to effect more than two underwritten
offerings of Registrable Shares. The Company shall pay
all expenses, other than underwriters' discounts and
commissions and fees and disbursements of experts and
counsel retained by the undersigned, relating to an
underwriting of the Registrable Shares covered by the
first request, and the holder(s) of the Registrable
Shares requesting an underwriting shall pay all
reasonable registration expenses arising from the second
such underwriting.
(c) Provisions Applicable to Registration. The
following provisions shall apply, as applicable, in connection
with the undersigned's Registrable Shares to be included in
the Registration Statement pursuant to this section 7:
(i) the undersigned, if reasonably requested
by the Company or by the underwriter with respect to any
Public Offering, shall agree not to sell, make any short
sale of, loan, grant any options for the purchase of, or
otherwise dispose of any Registrable Shares (other than
those included in the Registration) without the prior
written consent of the Company or such underwriters, as
the case may be, for such period of time (not to exceed
one hundred eighty (180) days), from the effective date
of such Registration Statement, or the commencement of
the offering, as applicable, as may be requested by the
underwriters, provided that all other holders of the
class of securities being registered pursuant to the
Registration shall make the same agreements as those made
by the undersigned under this section (c)(i);
(ii) the undersigned shall promptly provide the
Company with such non-confidential and non-proprietary
information as it shall reasonably request and that is
available to the undersigned in order to prepare the
Registration Statement;
(iii) subject to section (7)(b)(ii), all
reasonable and necessary expenses in connection with the
preparation of the Registration Statement, including,
without limitation, any and all legal, accounting and
filing fees, but not including fees and disbursements of
experts and counsel retained by the undersigned or
underwriting discounts and commissions to be paid by the
undersigned, shall be borne by the Company;
(iv) the Company shall use its best efforts to
effect such Registration permitting the sale of such
Registrable Shares in accordance with the intended method
or methods of distribution thereof, and pursuant thereto,
the Company shall as expeditiously as possible:
(1) prepare and file with the SEC a
Registration Statement relating to the applicable
Registration on any appropriate form under the
Securities Act, which form shall be available for
the sale of the Registrable Shares in accordance
with the intended method or methods of distribution
thereof and use its best efforts to cause such
Registration Statement to become effective and keep
such Registration Statement effective in accordance
with section (c)(iv)(2) below;
(2) prepare and file with the SEC such
amendments and post-effective amendments to the
Registration Statement as may be necessary to keep
the Registration effective until all such
Registrable Shares are sold; cause the prospectus
to be supplemented by any required prospectus
supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act
with respect to the disposition of all securities
covered by such Registration Statement during the
applicable period in accordance with the intended
method or methods of distribution by the sellers
thereof as set forth in such Registration Statement
or supplement to the prospectus; provided, however
that the Company may, from time to time, request
that the holders of the Registrable Shares
immediately discontinue the disposition of the
Registrable Shares if the Company determines, in
the good faith exercise of its reasonable business
judgment, that the offering and disposition of the
Registrable Shares could materially interfere with
bona fide financing, acquisition or other material
business plans of the Company or would require
disclosure of non-public information, the premature
disclosure of which could materially and adversely
affect the Company (it being acknowledged that the
Company is not required to disclose in such request
any such transaction, plan or non-public
information), so long as the Company promptly after
the disclosure of such transaction, plan or non-public
information complies with this section (c)(iv)(2);
(3) notify the undersigned and the
underwriter, if any, promptly, and (if requested by
any such person) confirm such advice in writing,
(A) when the prospectus or any prospectus
supplement or post-effective amendment has been
filed, and, with respect to the Registration
Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any
request by the SEC for amendments or supplements to
the Registration Statement or the prospectus or for
additional information, (C) of the issuance by the
SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of
any proceedings for that purpose, (D) of the
receipt by the Company of any notification with
respect to the suspension of the qualification of
the Registrable Shares for sale in any jurisdiction
or the initiation of any proceedings for such
purpose and (E) subject to the proviso below, of
the happening of any event as a result of which the
prospectus included in such Registration Statement,
as then in effect, includes an untrue statement of
a material fact or omits to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading in light of
the circumstances then existing and, subject to
section (c)(iv)(2) above, at the request of any
such person, prepare and furnish to such person a
reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers
of such shares, such prospectus shall not include
an untrue statement of a material fact or omit to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading in light of the circumstances then
existing; provided, however, the Company need not
disclose the event if it otherwise has not
disclosed such event to the public;
(4) if requested by the underwriter or
the undersigned, promptly incorporate in a
prospectus supplement or post-effective amendment
such information as the underwriter and the
undersigned agree should be included therein
relating to the plan of distribution with respect
to such Registrable Shares, including, without
limitation, the purchase price being paid therefor
by such underwriters and with respect to any other
terms of the underwritten offering of the
Registrable Shares to be sold in such offering; and
make all required filings of such prospectus
supplements or post-effective amendments as soon as
notified of the matters to be incorporated in such
prospectus supplements or post-effective
amendments;
(5) deliver to the undersigned and the
underwriters, if any, without charge, as many
copies of the prospectus (including each
preliminary prospectus) in conformity with the
requirement of the Securities Act and any
amendments or supplements thereto as such persons
may reasonably request and such other documents as
they may reasonably request to facilitate the prior
sale or other disposition of such Registrable
Shares;
(6) prior to any Public Offering of
Registrable Shares, register or qualify or
cooperate with the undersigned, or the
underwriters, if any, in connection with the
registration or qualification of such Registrable
Shares for offer and sale under the securities or
blue sky laws of such jurisdictions as the
undersigned or underwriters, if any, reasonably
requests in writing and do any and all other acts
or things necessary or advisable to enable the
disposition in such jurisdictions of the
Registrable Shares covered by the Registration
Statement; provided, however, that the Company
shall not be required to qualify to do business in
any jurisdiction where it is not then so qualified
or to take any action that would subject it to
general service of process in any such jurisdiction
where it is not then so subject or would subject
the Company to any tax in any such jurisdiction
where it is not then so subject; and
(7) with a view to making available the
benefits of certain rules and regulations of the
SEC which may at any time permit the sale of
Registrable Shares to the public without
registration, during such time as a public market
exists for its equity securities, the Company
agrees to:
a) make and keep public
information available, as those terms are
understood and defined in Rule 144 under the
Securities Act, at all times after the effective
date of the first registration under the Securities
Act filed by the Company for an offering of its
equity securities to the general public;
b) use its best efforts to file
with the SEC in a timely manner all reports and
other documents required of the Company under the
Securities Act and the Exchange Act (at any time
after it has become subject to such reporting
requirements); and
c) furnish to the undersigned
forthwith upon the undersigned's request a written
statement by the Company as to the Company's
compliance with the reporting requirements of said
Rule 144, and of the Securities Act and the
Exchange Act, a copy of the most recent annual or
quarterly report of the Company and such other
reports and documents of the Company as the
undersigned may reasonably request in availing
itself of any rule or regulation of the SEC
allowing a holder to sell any such securities
without registration;
(v) Notwithstanding the provisions of this
section 7 to the contrary, the Company:
(1) may require the undersigned to
furnish to the Company such information regarding
the distribution of such securities as the Company
may from time to time reasonably request in
writing, and the Company may limit such
registration rights to situations where a proposed
distribution of Registrable Shares is to be
effected forthwith upon the effectiveness of the
Registration Statement; and
(2) may require the undersigned to
covenant that the undersigned has not taken, and
will not take, directly or indirectly, any action
designed, or which might reasonably be expected, to
cause or result in, under the Exchange Act or
otherwise, or which has caused or resulted in,
stabilization or manipulation of the price of any
security of the Company to facilitate the sale or
resale of the Registrable Shares; and
(vi) the undersigned agrees by acquisition of
such Registrable Shares that, upon receipt of the request
referred to in the proviso of Section (c)(iv)(2) or of
any notice from the Company of the happening of any event
of the kind described in section (c)(iv)(3) hereof (other
than as provided in section (c)(iv)(3)(A) hereof), the
undersigned shall forthwith discontinue disposition of
Registrable Shares until it is advised in writing by the
Company that the use of the prospectus may be resumed,
and has received copies of any additional or supplemental
documents or filings that are incorporated by reference
in the prospectus, and, if so directed by the Company,
the undersigned shall deliver to the Company (at the
Company's expense) all copies other than permanent file
copies then in the undersigned's possession, of the
prospectus covering such Registrable Shares current prior
to the time of receipt of such notice.
(d) Indemnification.
(i) In the event of a Registration or
qualification of any Registrable Shares under the
Securities Act pursuant to the provisions of this section
7, the Company shall indemnify and hold harmless the
undersigned, the officers and directors of the
undersigned and each director or officer of any person or
entity who controls the undersigned, each underwriter of
such Registrable Shares and each other person or entity
who controls the undersigned or such underwriter within
the meaning of the Securities Act (collectively, the
"Subscriber Indemnitees"), from and against any and all
losses, claims, damages or liabilities, joint or several,
to which any of the Subscriber Indemnitees, joint or
several, may become subject under the Securities Act or
the applicable securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement
under which such Registrable Shares were registered or
qualified under the Securities Act, or any amendment or
supplement thereto, any preliminary prospectus or final
prospectus contained therein, or any supplement thereto,
or any document prepared and/or furnished to the
undersigned incident to the registration or qualification
on any Registrable Shares, or (y) the omission or alleged
omission to state in any Registration Statement a
material fact required to be stated therein or necessary
to make the statements therein not misleading or, with
respect to any prospectus, necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading, or (z) any
violation by the Company of the Securities Act or state
securities or "blue sky" laws applicable to the Company
and relating to action or inaction required of the
Company, in connection with such registration or
qualification under such state securities or "blue sky"
laws, and in each case shall reimburse the
SubscriberIndemnitees for any legal or other expenses
reasonably incurred by such Subscriber Indemnitees in
connection with investigating or defending any such loss,
claim, damage or liability (or action in respect
thereof); provided, however, that the Company shall not
be liable in any such case to the extent that any such
loss, claim, damage or liability (or action in respect
thereof) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement in
reliance upon and in conformity with information
furnished to the Company through an instrument duly
executed by such Subscriber Indemnitees; and provided
further, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or
liability (or action in respect thereof) arises out of or
is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in such
Registration Statement, which untrue statement or alleged
untrue statement or omission or alleged omission is
completely corrected in an amendment or supplement to the
Registration Statement and such Subscriber Indemnitee
thereafter fails to deliver or cause to be delivered such
Registration Statement as so amended or supplemented
prior to or concurrently with the sale of the Registrable
Shares to the person asserting such loss, claim, damage
or liability (or actions in respect thereof) or expense
after the Company has furnished the undersigned with the
same.
(ii) In the event of the Registration or
qualification of any Registrable Shares under the
Securities Act pursuant to the provisions of this section
7, the undersigned shall severally and not jointly
indemnify and hold harmless the Company, each person who
controls the Company within the meaning of the Securities
Act, each officer and director of the Company and any
other selling holder from and against any losses, claims,
damages or liabilities to which the Company, such
controlling person, any such officer or director or any
other selling holder may become subject under the
Securities Act or the applicable securities laws or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of
or are based upon (x) any untrue statement or alleged
untrue statement of any material fact contained in any
Registration Statement under which such Registrable
Shares were registered or qualified under the Securities
Act, or any amendment or supplement thereto, or (y) the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading, which untrue
statement or alleged untrue statement or omission or
alleged omission was made therein in reliance upon and in
conformity with written information furnished to the
Company through an instrument duly executed by the
undersigned specifically for use in preparation thereof,
and in each case shall reimburse the Company, such
controlling person, each such officer or director and any
other selling holder for any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage
or liability (or action in respect thereof).
(iii) Promptly after receipt by a person
entitled to indemnification under this section (d) (an
"Indemnified Party") of notice of the commencement of any
action or claim relating to any Registration Statement
filed under the provisions of this section 7 or as to
which indemnity may be sought hereunder, such Indemnified
Party shall, if a claim for indemnification hereunder in
respect thereof is to be made against any other party
hereto (an "Indemnifying Party"), give written notice to
such Indemnifying Party of the commencement of such
action or claim, but the omission so to notify the
Indemnifying Party will not relieve such person from any
liability that such person may have to any Indemnified
Party otherwise than pursuant to the provisions of this
section (d) and shall also not relieve the Indemnifying
Party of such party's obligations under this section (d),
except to the extent that the omission so to notify
results in the Indemnifying Party being damaged solely as
a result of the failure to give timely notice. In case
any such action is brought against an Indemnified Party,
and such party notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be
entitled (at such party's own expense) to participate in
and, to the extent that the Indemnifying Party may wish,
jointly with any other Indemnifying Party similarly
notified, to assume the defense, with counsel
satisfactory to such Indemnified Party, of such action
and/or to settle such action and, after notice from the
Indemnifying Party to such Indemnified Party of its
election so to assume the defense thereof, the
Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in
connection with the defense thereof, other than the
reasonable cost of investigation; provided, however, that
no Indemnifying Party and no Indemnified Party shall
enter into any settlement agreement that would impose any
liability on such other party or parties without the
prior ritten consent of such other party or parties,
unless such other party or parties are fully indemnified
to such party's satisfaction, as the case may be, against
any such liability.
(iv) If for any reason the indemnification
provided for in this section 7 is unavailable to an
Indemnified Party or is insufficient to hold it harmless
as contemplated by this section 7, then the Indemnifying
Party shall contribute to the amount paid or payable by
the Indemnified Party as a result of such loss, claim,
damage, liability or action in such proportion as is
appropriate to reflect not only the relative benefits
received by the Indemnified Party and the Indemnifying
Party, but also the relative fault of the Indemnified
Party and the Indemnifying Party, as well as any other
relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Lockup.
Notwithstanding the expiration of the Restricted
Period, the undersigned shall not, directly or indirectly,
offer or sell any of the Conversion Shares before the 91st day
after the Closing and thereafter shall not offer or sell more
than the following percentage of the Conversion Shares during
the following periods after the Closing:
Days after Closing Percentage of
Registrable Shares
90-120 33%
121-150 67%
151 and thereafter 100%
The foregoing agreement shall survive the transfer of the
Shares or the Conversion Shares.
9. Liquidated Damages for Late Conversion.
(a) Following the expiration of the Restricted
Period, subject to the provisions of section 10 hereof, the
Company agrees to issue and deposit in overnight mail, within
three (3) business days after the undersigned has fulfilled
all conditions and submitted to the Company and the Transfer
Agent all necessary documents duly executed and in proper form
required for conversion (the "Deadline"), to the undersigned
or any party receiving the Conversion Shares by transfer from
the undersigned (together with the undersigned, a "Holder"),
at the address of the Holder on the books of the Company, a
certificate or certificates for the number of Conversion
Shares to which the Holder shall be entitled without
restricted legend or stop transfer instructions except as
contemplated by Section 8 hereof. The Company understands
that a delay in the issuance of the Conversion Shares for more
than three (3) business days beyond the Deadline could result
in economic loss to the Holder. As compensation to the Holder
for such loss, the Company agrees to pay liquidated damages to
the Holder for late issuance of Conversion Shares in
accordance with the following schedule (where "No. Business
Days Late" is defined as the number of business days beyond
three business days past the Deadline):
No. Business Days Late Liquidated Damages
1 $2,500
2 $2,500
3 $2,500
4 $2,500
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
>10 $5,000 + $1,000 for each
Business Day Late beyond 10 days;
The Company shall pay the Holder any liquidated damages
incurred under this section 9 by check upon the earlier to
occur of (i) issuance of the Conversion Shares to the Holder
or (ii) each monthly anniversary of the receipt by the Company
of such Holder's Notice of Conversion. Nothing herein shall
limit the undersigned's right to pursue actual damages for the
Company's failure to issue and deliver Conversion Shares to
the undersigned in accordance with the terms of the
Certificate of Designation.
(b) Conversion Notice. The Company agrees that, in
addition to any other remedies which may be available to the
undersigned, including, but not limited to, remedies available
under section 9(a) of this Subscription Agreement, in the
event the Company fails for any reason to effect delivery to
the undersigned of certificates representing Conversion Shares
within three business days from the Deadline, the Holder will
be entitled to revoke the Notice of Conversion by delivering
a notice to such effect to the Company whereupon the Company
and the Holder shall each be restored to their respective
positions immediately prior to delivery of such Notice of
Conversion, except that the Company shall pay to the
undersigned the amount of Liquidated Damages in accordance
with section 9(b) through the date of the revocation of the
Notice of Conversion.
10. Right of First Refusal.
(a) Notwithstanding anything in this Subscription
Agreement or the Certificate of Designation to the contrary,
the Company shall have the right in its sole discretion to
redeem in whole or in part for cash any Shares for which
Notice of Conversion has been given by the holder thereof at
a Conversion Price (as defined in the Certificate of
Designation) below $5.00. If the Company elects to redeem
some, but not all, of the Shares submitted for conversion, the
Company shall redeem from among the Shares submitted by the
various holders thereof for conversion on the applicable date,
a pro-rata amount from each such holder so submitting Shares
for conversion.
(b) The Company shall effect each such redemption
by giving notice of its election to redeem, by facsimile
within one (1) business day following receipt of a Notice of
Conversion from a holder, with a copy by overnight, to the
holder of Shares to be converted at the address and facsimile
number of such holder appearing in the Company's stock
transfer ledger. Such redemption notice shall indicate
whether the Company will redeem all or part of the Shares
submitted for conversion and the applicable redemption price.
The Company shall not be entitled to send any notice of
redemption and begin the redemption procedure unless it has
the full amount of the redemption price in cash, available in
a demand or other immediately available account in a bank or
similar financial institution on the date the redemption
notice is sent to shareholders. Failure by the Company to
deliver the notice within one business day following receipt
of a Conversion Notice shall be deemed to be a waiver of the
Company's redemption right.
The redemption price per Share shall be equal to
125% of the Stated Value of the Shares being redeemed,
together with all accrued and unpaid dividends thereon. The
redemption price shall be paid to the holder of Shares
redeemed within two (2) business days of the delivery of the
notice of such redemption to such holder; provided, however,
that the Company shall not be obliged to deliver any portion
of such redemption price unless either the certificates
evidencing the Shares redeemed are delivered to the Company or
its transfer agent, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement or bond, if requested
by the Company, satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such
certificates.
11. Miscellaneous.
(a) This Subscription Agreement shall survive the
death or disability of the undersigned and shall be binding
upon the undersigned's heirs, executors, administrators,
successors and permitted assigns.
(b) This Subscription Agreement has been duly and
validly authorized, executed and delivered by the undersigned
and constitutes the valid, binding and enforceable agreement
of the undersigned. If this Subscription Agreement is being
completed on behalf of a corporation, partnership or trust, it
has been completed and executed by an authorized corporate
officer, general partner or trustee.
(c) This Subscription Agreement and the documents
referred to herein constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and
together supersede all prior discussions or agreements in
respect thereof.
(d) Within five (5) days after receipt of a written
request from the Company, the undersigned agrees to provide
such information, to execute and deliver such documents and to
take, or forbear from taking, such actions or provide such
further assurances as reasonably may be necessary to correct
any errors in documentation, to comply with any and all laws
to which the Company is subject.
(e) The Company shall be notified immediately of
any change in any of the information contained above occurring
prior to the undersigned's purchase of the Shares or at any
time thereafter for so long as the undersigned is a holder of
the Shares.
(f) This Subscription Agreement may be executed in
two or more counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute a
single document.
[signature page follows]
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement this ____ day of ___________, 1996.
Subscription
Amount:____________
(Signature of Subscriber)
Print or Type Name
Residence or Business Address:
Mailing Address (if different
from Residence or Business
Address):
ACCEPTED AND AGREED TO:
FLORIDA GAMING CORPORATION
By:
Name:
Title:
Date: , 1996
