PROSPECTUS Filed Pursuant to Rule 424(b)(3)
Registration Statement File No. 333-10535
703,297 Shares
of
FLORIDA GAMING CORPORATION
Common Stock
This Prospectus relates to a possible offering of shares of
common stock, $.10 par value (the "Common Stock") of Florida Gaming
Corporation (the "Company") by and for the account of BOK DPC Asset
Holding Corporation (the "Selling Stockholder"). See "Selling
Stockholder and Plan of Distribution." The Company will not receive
any of the proceeds from any sale of the shares that may be offered
hereby. The Common Stock of the Company is traded on the NASDAQ
SmallCap Market under the symbol "BETS".
The Selling Stockholder has advised the Company that sales of
the Common Stock may be sold from time to time to purchasers
directly by the Selling Stockholder in negotiated transactions and
in the over-the-counter market on NASDAQ. The shares may be sold
by one or more of the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (c) ordinary brokerage transactions
in which the broker solicits purchasers. Alternatively, the Selling
Stockholder may from time to time offer the shares offered hereby
through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholder and/or the purchasers of
securities for whom they may act as agents. The shares offered
hereby may be sold from time to time in one or more transactions at
a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices.
The terms of any offering of the shares of Common Stock by the
Selling Stockholder, including the names of the underwriters, if
any, and the public offering price, underwriting discounts and
proceeds to the Selling Stockholder, will be set forth in an
accompanying Prospectus Supplement, to the extent required. The
Selling Stockholder and any agents or broker-dealers that
participate in the distribution of the shares of Common Stock may
be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and any commissions
received by them and any profit on the resale of the shares may be
deemed to be underwriting commissions or discounts under the
Securities Act.
The Company will pay all expenses of the Offering, but not
including the Selling Stockholder's legal fees, underwriting
discounts and commissions and fees. In addition, the Company has
agreed to indemnify the Selling Stockholder against certain
liabilities, including certain liabilities under the Securities Act.
See "Selling Stockholder and Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus also relates to such additional securities as
may be issued to the Selling Stockholder because of future stock
dividends, stock distributions, stock splits or similar capital
readjustments.
The date of this Prospectus is March 11, 1997.
IN CONNECTION WITH THIS OFFERING, AN UNDERWRITER MAY EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SHARES OF COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NASDAQ OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company has filed with the U.S. Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act, with respect to
the Common Stock offered hereby. This Prospectus does not include
all the information set forth in the Registration Statement and the
exhibits thereto, to which reference is made for further information
with respect to the Company.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations thereunder and in accordance therewith
files periodic reports, proxy and information statements, and other
information with the Commission (File No. 0-9099). The Registration
Statement and the exhibits thereto and all reports, proxy and
information statements, and other information filed by the Company
with the Commission may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the Commission's Web site
(http://www.sec.gov), and may also be inspected and copied at the
regional offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may
be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission pursuant to the Securities Act and the Exchange Act are
hereby incorporated by reference herein:
(1) The Company's Annual Report on Form 10-KSB for its fiscal
year ended December 31, 1995;
(2) The Company's Quarterly Reports on Form 10-QSB for the
quarterly periods ended March 31, 1996, June 30, 1996 and
September 30, 1996;
(3) The Company's Current Reports on Form 8-K dated February
13, 1996, September 12, 1996, October 9, 1996, November
25, 1996, December 13, 1996, December 31, 1996, as
amended, and January 16, 1997;
(4) The description of the shares of Common Stock contained
in the Company's Registration Statement on Form 10.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of
the offering of the shares of Common Stock hereunder shall be deemed
to be incorporated by reference herein and to be a part hereof from
the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated herein shall
be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed document that also is incorporated or
deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person to whom
this Prospectus is delivered, on the written or oral request of such
person, a copy of any and all of the documents incorporated by
reference in this Prospectus (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates). Written or oral
requests for such copies should be directed to Timothy L. Hensley
of Florida Gaming Corporation, 3500 N.W. 37th Avenue, Miami, Florida
33142. Telephone requests may be directed to Mr. Hensley at (305)
633-6400.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information
and financial statements appearing elsewhere in or incorporated by
reference into this Prospectus. Unless the context indicates
otherwise, all references in this Prospectus to the Company include
the Company and its subsidiaries and all references to the number
of shares of Common Stock (i) relate to the Company's Common Stock,
par value $.10 per share (the "Common Stock"), and (ii) assume that
outstanding stock options and conversion rights are not exercised.
The Offering
Common Stock offered by the
Selling Stockholder. . . . . . . 703,297 Shares
Total Outstanding Common
Stock(1) . . . . . . . . . . . . 4,435,960 Shares
Dividend Policy . . . . . . . . . The Company has not paid any
dividends on its Common Stock in
the past and does not expect to
pay any dividends on the Common
Stock in the foreseeable future.
NASDAQ Symbol . . . . . . . . . . BETS
Limitation on Total Ownership. . . The laws of the State of Florida
require that before any person
acquires more than five percent
of the equity securities of a
pari-mutuel operator such as the
Company (representing more than
221,798 shares of the Company's
presently issued Common Stock),
such person must receive the
approval of the Florida
Department of Business
Regulation.
(1) As of February 1, 1997. Excludes 2,183,250 Common
Stock issuable upon exercise of outstanding stock
options, 7,748 shares of Common Stock issuable upon
the conversion of Class A Preferred Stock, and
shares of Common Stock issuable upon the conversion
of Preferred Stock based on the market price of the
Common Stock immediately prior to conversion. See
"Description of Capital Stock -- Series Preferred
Stock."
THE COMPANY
The Company's principal executive offices are located at Fort
Pierce Jai-alai, 1750 South Kings Highway, Fort Pierce, Florida
34945. The Company's telephone number is (407) 464-7500. The
Company changed its name from Lexicon Corporation to Florida Gaming
Corporation on March 17, 1994. The Company was incorporated in
Delaware in 1976.
The Company currently owns and operates four jai-alai fronton
and inter-track pari-mutuel wagering facilities (each, a "Fronton,"
and collectively, the "Frontons") located in South and Central
Florida. See "Recent Developments." The Company's business at this
time consists primarily of its operations at the Frontons, which
include, among other things, live jai-alai, inter-track pari-mutuel
wagering ("ITW") on jai-alai, thoroughbred racing, harness racing,
and dog racing, and the sale of food and alcoholic beverages. The
Company's Fort Pierce, Tampa, and Ocala locations provide audio,
video, and wagering on inter-track and interstate simulcasting of
jai-alai, horse racing, and dog racing from around the State of
Florida as well as the rest of the country. The Miami location
offers more limited ITW simulcasting, but simulcasts its jai-alai
performances to other gaming facilities in Florida, Newport, Rhode
Island, and Mexico. ITW provides significant additional revenue as
well as a variety of entertainment for customers.
Since its inception and before its acquisition of the Fronton
located in Fort Pierce, the Company engaged in several other lines
of business, none of which are currently now in operation. On March
31, 1993, the Company sold 603,000 shares of Common Stock to Freedom
Financial Corporation ("Freedom") and present management assumed
control of the Company. After considering various business
alternatives, the Company entered into an agreement to acquire the
Fort Pierce Fronton in October 1993. On February 1, 1994, the
Company received approval from the Florida Department of Business
and Professional Regulation, Division of Pari-Mutuel Wagering (the
"DPMW") to transfer the pari-mutuel permit for the Fort Pierce
Fronton to the Company and completed the acquisition of the Fort
Pierce Fronton on February 2, 1994.
RISK FACTORS
Certain statements and information under the captions "The
Company," "Recent Developments," and elsewhere in this Prospectus
(including documents incorporated herein by reference, see
"Incorporation of Certain Documents by Reference"), constitute
forward-looking statements as that term is defined in the Securities
Act. Such forward-looking statements involve known and unknown
risks and other factors that may cause the actual results or
performance of the Company to be materially different from any
future results or performance expressed or implied by such forward-looking
statements. Such risks and factors include, but are not limited to,
those described below and elsewhere in this Prospectus.
In addition to reviewing the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995, the other
documents incorporated herein by reference and the other information
in this prospectus, the following factors should be considered
carefully in evaluating the Company and its business before
purchasing the Common Stock offered hereby:
Recent Operating Results
The Company had a net loss of $397,732 for the nine month
period ended September 30, 1996, compared to an operating loss of
$103,141 for the comparable 1995 period. The Company's operations
generally are subject to financial, economic, legal and other
factors, many of which are beyond its control.
Gaming Competition
The gaming industry is highly competitive. Other gaming
companies have substantially greater financial resources and larger
management staffs than the Company. Because of the growing
popularity and profitability of gaming activities, competition is
significantly increasing. The Company competes for customers with
other forms of legal wagering, including video poker gaming in non-casino
facilities, charitable gaming, pari-mutuel wagering and state lotteries.
Further expansion of gaming opportunities could also
significantly and adversely affect the Company's business. In
particular, the expansion of casino gaming in or near the geographic
areas from which the Company attracts or expects to attract a
significant number of its customers could have a material adverse
effect on the Company's business. The Company expects that it will
experience significant competition as the emerging casino industry
matures.
Potential Dilution and Market Impact From Outstanding Capital Stock
and Options
As of February 1, 1997, the Company had 4,435,960 shares of
Common Stock issued and outstanding. In addition, as of that date,
2,183,250 shares of Common Stock were issuable upon the exercise of
outstanding options, 7,748 shares of Common Stock were issuable upon
the conversion of outstanding shares of Class A preferred stock, and
additional shares of Common Stock were issuable upon the conversion of
outstanding shares of preferred stock at a conversion price based on the
market price of the Common Stock at conversion. The number of shares of
Common Stock issuable upon conversion of the Company's Series B, Series C
and Series D Preferred Stock increases as the market price of the
Common Stock decreases. See "Description of Capital Stock Series
Preferred Stock." The voting power of each holder of Common Stock
would be diluted by the issuance of additional shares of Common
Stock including issuances pursuant to the exercise of outstanding
options and the conversion of outstanding shares of preferred stock.
Moreover, the prevailing market price for the Common Stock may be
materially and adversely affected by (i) the issuance of a
substantial number of shares of Common Stock, including pursuant to
the exercise of outstanding options and the conversion of
outstanding shares of preferred stock, (ii) the addition of a
substantial number of shares of Common Stock, including the shares
offered hereby, into the market or (iii) the registration under the
Securities Act for the sale of a substantial number of shares of
Common Stock offered thereby.
Upon consummation of this offering, assuming that no stock
options and conversion rights are exercised, the Company will have
4,435,960 shares of Common Stock issued and outstanding. Of those
shares, the 703,297 shares sold in this offering will be freely
transferable without restriction or registration under the
Securities Act, unless held by persons deemed to be "affiliates" of
the Company (as that term is defined under the Securities Act). Of
the approximately 3,820,575 remaining shares of Common Stock to be
outstanding immediately following the offering, persons who may be
deemed "affiliates" of the Company or who acquired the shares in a
transaction exempt from registration under the Securities Act will
hold approximately 1,915,316 shares ("Restricted Shares"), which may
only be sold in the public market if such shares are registered
under the Securities Act or sold in accordance with Rule 144
promulgated under the Securities Act. Freedom, the holder of
1,349,480 Restricted Shares, has demand registration rights for its
shares and WJA Realty has certain piggyback registration rights with
respect to its 200,000 Restricted Shares.
Potentially Volatile Stock Price
The price of the Common Stock on the NASDAQ SmallCap Market in
the past years has shown significant volatility. During 1994 the
price of the Common Stock ranged between $2.00 and $17.25; during
1995 the price of the Common Stock ranged between $2.50 and $17.25;
and during 1996 the price of the Common Stock ranged between $2.50
and $10.00. Factors such as the Company's operating results or
other announcements by the Company or its competitors may have a
significant impact on the market price of the Company's securities.
The price of the Common Stock may be highly volatile and may decline
at an equal or greater rate than the rate at which it has risen over
the last three years.
Uncertainties in Integrating Operations and Achieving Cost Savings
The Company recently purchased three frontons. The success of
any business combination, including the acquisition of WJA's
frontons described in "Recent Developments," is in part dependent
on the ability following such transactions to consolidate
operations, integrate departments, systems and procedures and
thereby obtain business efficiencies, economies of scale and related
cost savings. The consolidation of operations, the integration of
departments, systems and procedures and the relocation of staff
present significant management challenges. There can be no assurance
that future consolidated results will improve as a result of the
acquisition of WJA's frontons, or as to the timing or extent to
which cost savings and efficiencies will be achieved.
Risks Associated with Acquisitions
There may be liabilities which the Company fails or is unable
to discover in the course of performing due diligence investigations
on any company or business it seeks to acquire or has acquired,
including liabilities arising from non-compliance with certain
federal, state or local laws by prior owners, and for which the
Company, as a successor owner, may be responsible. The Company has
sought to minimize its exposure to such liabilities by obtaining
indemnification from former owners, which may be supported by
deferring payment of a portion of the purchase price. However, there
is no assurance that such indemnifications, even if obtainable,
enforceable and collectible (as to which there also is no
assurance), will be sufficient in amount, scope or duration to fully
offset the possible liabilities arising from the acquisitions. The
success of the Company's aggressive development plans in the gaming
industry is dependent on a number of factors including, but not
limited to, economic conditions, competitive environment, adequate
capital, accurate site selection, construction schedules, and supply
of trained personnel. There can be no assurance that the Company
will be successful in the pari-mutuel gaming industry or in any
related industries which it enters.
Cost of Planned Expansion; Management of Growth
Since the change in management of the Company in March, 1993,
the Company has expanded its operations rapidly, and it plans to
continue to further expand its operations through participation in
other gaming ventures as opportunities arise. The Company's
operating results may be adversely affected if net revenues do not
increase sufficiently to compensate for the increase in operating
expenses caused by such an expansion. In addition, the Company's
planned expansion of operations may exceed the Company's present
management, technical, financial and other resources. To manage its
growth effectively, the Company must continue to increase its
management information systems and must attract, train and motivate
qualified managers and employees. There can be no assurance,
however, that the Company will successfully be able to achieve these
goals. If the Company is unable to manage growth effectively, its
operating results may be adversely affected.
Dependence on Key Personnel
The success of the Company is dependent, in part, on its key
management personnel. In particular, the Company is highly
dependent upon W. Bennett Collett, W. Bennett Collett, Jr., and
Timothy L. Hensley. The loss of their services could have a
material adverse effect on the Company. There is no assurance that
the Company will be able to hire qualified individuals to replace
any of these persons if necessary. The Company does not have any
employment contracts with its executives, nor does the Company have
any key man life insurance policies on their lives.
Control of the Company
As of February 1, 1997, W. Bennett Collett, Chairman and chief
executive officer of the Company, beneficially owned an aggregate
of 3,004,480 shares of the Company's Common Stock (including shares
beneficially owned by Freedom, with respect to which Mr. Collett
disclaims beneficial ownership), or an aggregate of approximately
49.33% of the issued and outstanding shares of the Company's Common
Stock (assuming the exercise of all options held by Freedom and Mr.
Collett). Mr. Collett is and will be able to exert considerable
influence over the election of the Company's directors and the
outcome of corporate actions requiring stockholder approval.
Possible Depressing Effect of Future Sales of the Company's Common
Stock
Future sales of shares of Common Stock, or the perception that
such sales could occur, could adversely affect the market price of
the Company's Common Stock. There can be no assurance as to when,
and how many of, shares of Common Stock will be sold and the effect
such sales may have on the market price of the Company's Common
Stock. Such securities may be subject to resale restrictions in
accordance with the Securities Act and the regulations promulgated
thereunder. As such restrictions lapse or if such shares are
registered for sale to the public, such securities may be sold to
the public. In the event of the issuance and subsequent resale of
a substantial number of shares of the Company's Common Stock, or a
perception that such sales could occur, there could be a material
adverse effect on the prevailing market price of the Company's
Common Stock.
Absence of Dividends on Common Stock
The Company has not paid any dividends on its Common Stock in
the past and does not anticipate paying dividends on its Common
Stock in the foreseeable future. In the event the Company is not
contractually prohibited from paying dividends, the holders of
Common Stock would be entitled to receive dividends only when and
as declared by the Board of Directors of the Company, subject to the
prior rights and preferences, if any, of holders of preferred stock.
Antitakeover Effects of Certain Instruments, Agreements of the
Company, and Laws
The Company's certificate of incorporation and bylaws, certain
contracts to which the Company is a party, the Delaware General
Corporation Law and Florida gaming laws contain provisions that
could delay or prevent a transaction that results in a change of
control of the Company or discourage a tender offer or other plan
to restructure the Company favored by a significant portion of the
Company's stockholders. For example, the Florida laws require that
before any person or entity acquires a 5% or greater equity interest
in the Company, such person or entity must receive the approval of
Florida gaming authorities.
Potential Conflicts of Interest and Related Party Transactions
Certain relationships among the Company, its management and
affiliates create various potential and actual conflicts of
interest. As of February 1, 1997, pursuant to a $2 million line of
credit, Freedom has borrowed approximately $1.8 million form the
Corporation. It is the Company's policy that all material
affiliated transactions and loans will be made or entered into on
terms that are no less favorable to the Company than those that can
be obtained from unaffiliated third parties. All future material
affiliated transactions and loans must be approved by a majority of
the independent directors who do not have an interest in the
transactions.
New Projects
Each of the Company's projects to finance, develop, and operate
gaming facilities will be subject to the many risks inherent in the
establishment of a new business enterprise, including unanticipated
design, construction, regulatory and operating problems, and the
significant risks commonly associated with implementing a marketing
strategy in new markets. There can be no assurance that any of
these projects will become operational within the estimated time
frames and projected budgets at the time the Company enters into a
particular agreement, or at all. The Company plans to reduce the
financial significance of individual projects by focusing on small-
to medium-sized projects that can be accomplished with a smaller
capital investment and will allow a significant portion of any
financing of any subsequent expansions to be paid from operating
funds whenever possible. In addition, the Company intends to
develop projects as joint ventures when possible, to reduce its
financial commitment to individual projects. There can be no
assurance that the significant expenditures required to develop a
gaming project will ultimately result in the establishment of
profitable operations.
To the extent the Company's future gaming projects become
operational, the Company will be required to add and train
personnel, expand its management information systems and control
expenses. If the Company does not successfully address the
Company's increased management needs or the Company otherwise is
unable to manage its growth effectively, the Company's operating
results could be materially adversely affected.
Governmental Regulation
The Company will need to secure regulatory approvals from state
and local authorities for each of its prospective gaming ventures.
No assurance can be given that any of these approvals will be
secured in a timely fashion or at all. The denial of regulatory
approvals would prohibit the opening of the new facilities and any
delay in securing such approvals could result in postponement of
their scheduled openings.
In addition to a variety of generally applicable state and
federal laws governing business operations, the Company's gaming
ventures are regulated by federal and state laws and regulations
applicable to the gaming industry generally and to the distribution
of gaming equipment. Because the regulatory environment is dynamic
and evolving, it is impossible to predict how certain provisions
will be ultimately interpreted or how they may affect the Company.
Changes in such laws or regulations could have a material adverse
impact on the Company's ability to finance, develop and operate
gaming ventures.
Construction Risks
The Company anticipates that its prospective gaming ventures
may often include the construction of additional facilities. The
Company's cost estimates and projected completion dates for
construction of facilities may change significantly as the projects
progress. In addition, the Company's development projects will
entail significant construction risks, including shortages of
materials or skilled labor, unforeseen environmental or engineering
problems, work stoppages, weather interferences and unanticipated
cost increases, any of which could have a material adverse effect
on the projects and could delay their scheduled openings.
RECENT DEVELOPMENTS
Acquisition of Frontons/Development of Cardrooms
Terms of the Acquisition Agreement
On September 12, 1996, the Company acquired notes (the "WJA
Notes") of WJA Realty Limited Partnership ("WJA"), with balances
aggregating about $20,000,000 from the Bank of Oklahoma, N.A.,
Tulsa, Oklahoma. The WJA Notes were secured by, among other
collateral, real estate and improvements consisting of three jai-alai
and ITW facilities located in Miami, Tampa and Ocala, Florida
(the "WJA Frontons"). Consideration for the WJA Notes was a
combination of $2,000,000 in cash, a $6,000,000 promissory note
bearing interest at the prime rate, 703,297 shares of the Company's
Common Stock and a $1,000,000 non-interest bearing note.
On November 25, 1996, the Company entered into an agreement
with WJA and Florida Gaming Centers, Inc., a wholly-owned subsidiary
of the Company (the "Subsidiary"), pursuant to which the Subsidiary
agreed to acquire the WJA Frontons. The acquisition was consummated
as of January 1, 1997. The WJA Frontons acquired have been combined
with the Fort Pierce Fronton into the Subsidiary.
The consideration for the acquisition included (i) the
cancellation of WJA Notes and related obligations acquired by the
Company from the Bank of Oklahoma, NA, (ii) the retention by WJA of
200,000 shares of the Company's common stock owned by WJA, and (iii)
a profit sharing arrangement described in more detail below. The
Company assumed all liabilities of WJA arising in the ordinary
course of the business, subject to certain limitations and
exceptions. The Company also assumed the principal amount
outstanding under a $500,000 promissory note owed to
Wheeler-Phoenix, Inc., with the terms amended to provide for
repayment of principal over a ten year period following the closing
in equal annual installments and an annual interest rate of 6%.
The profit sharing arrangement is based on the Subsidiary's net
profits, as defined, before income taxes. The Company will pay WJA
20% of the cumulative net profits of the Subsidiary for each of the
ten full calendar years 1997 through 2006, subject to a cumulative
$1,000,000 per year cap described below. The cumulative $1,000,000
cap is equal to the product of $1,000,000 multiplied by the number
of years in the ten-year period completed, minus the sum of all
amounts previously paid under the 20% profit sharing arrangement.
In addition, if the Subsidiary has net profits in any calendar year
during the ten-year period in excess of $5,000,000, but does not
receive a 20% payment on the entire amount because of the cumulative
$1,000,000 per year cap, the Subsidiary shall pay WJA 5% of the
portion of the net profits on which the 20% payment is not made.
No net profit payments will be due for any year after the ten year
period. If during the ten year period, the Subsidiary disposes of
any of its significant assets or operations, then WJA would be
entitled to receive an amount equal to ten percent of the
Subsidiary's gain, if any, on the disposition.
Two principals of WJA, Roger M. Wheeler, Jr. and Richard P.
Donovan, have entered into consulting arrangements with the
Subsidiary. Mr. Wheeler has entered into a ten-year consulting
agreement with the Subsidiary, with annual compensation of $100,000
during the first five years of the agreement and annual compensation
of $50,000 during the second five years of the agreement. Mr.
Donovan has entered into a five-year consulting agreement with the
Subsidiary, with annual compensation of $240,000, plus certain
benefits.
Jai-Alai Operations
Pursuant to the permit granted to it under Florida law, each
Fronton, in order to conduct ITW, must offer a "full schedule" of
jai-alai performances of at least 100 live evening and/or matinee
performances per year. In addition, the Fronton may offer ITW year-
round so long as a pari-mutuel facility in Florida is providing live
pari-mutuel activities at the same time. Each Fronton has received
a permit from the DPMW to conduct live jai-alai performances during
1997. The Miami and Tampa Frontons conduct live jai-alai year
round. Fort Pierce and Ocala operate four-month seasons. All of
the Frontons, with the exception of Miami, typically remain open for
ITW when live jai-alai performances are not being conducted.
In 1980, WJA and three other parimutuel permit holders formed
Summer Jai-Alai ("SJA"), a Florida general partnership, to conduct
parimutuel jai-alai operations at the Miami Fronton during the
summer months ("Summer Operations"). Following the acquisition of
the WJA Frontons, the Company is currently a party to the
partnership. Under the terms of the partnership agreement, certain
of the Company's costs and expenses will be allocated to Summer
Operations based upon specific formulas set forth in the agreement.
In addition, pursuant to a lease agreement which expires in 2004,
SJA rents the Miami Fronton for the time in which the summer jai-alai
season is conducted. The rental is based upon 1% of handle,
plus applicable Florida sales tax. The Company has a 21% interest
in SJA which is accounted for under the equity method.
Cardroom Development
Florida House Bill No. 337 (now known as section 849.086 of the
Florida Statutes) became effective June 1, 1996. This legislation
authorized card rooms at licensed pari-mutuel facilities starting
January 1, 1997. The card rooms will be administered and regulated
by the DPMW. Games will be limited to non-banked poker games. Card
room operation is also subject to approval by the county commission
in which the pari-mutuel facility is located. This same bill also
authorized full-card simulcasting of races from out of state tracks
such as Belmont, Meadowlands, Philadelphia Park and Monmouth. The
Frontons in Fort Pierce, Tampa, and Ocala are currently carrying
several of these signals. This legislation also reduced the pari-mutuel
tax on handle from 5% to 4.25% at the Tampa, Fort Pierce and
Ocala frontons. The pari-mutuel tax on the handle at Miami was also
reduced from 5% to 3.85%.
In late 1996 the county governments of Dade County and
Hillsborough County, Florida, passed legislation permitting poker
rooms to be operated by all pari-mutuel facilities located in Miami
and Tampa. As a result, the Company now plans to open poker rooms
in Miami (with 40 tables initially) and Tampa (with 30 tables
initially) during the second quarter of 1997. License applications
have been filed, and the Company is in the initial phases of
construction and employee training. As authorized by House Bill No.
337, the Miami and Tampa facilities will conduct low stakes ($10 per
hand) poker at these facilities two hours prior to, during and two
hours following live jai-alai performances. A rake of $0.25 per
player per hand is expected to be received by the pari-mutuel for
each hand dealt. State taxes amount to 10% of the rake, and 4% of
the rake must be paid to the jai-alai players.
Fronton Facilities
Set forth below is a brief description of the Frontons,
including the WJA Frontons now owned by the Company:
Size of Number
Number Building of Gaming
Location of Acres Sq. Ft. Seats*
Fort Pierce 137.00 80,000 2,150
Miami 25.50 165,000 4,389
Tampa 34.21 114,000 3,500
Ocala 47.98 63,000 1,774
______ _______ ______
Totals 244.69 422,000 11,813*
*These figures do not include up to approximately 1,200 future
gaming positions anticipated from the addition of up to 200 poker
tables in connection with the establishment of cardrooms.
The Company's Miami Fronton, near the Miami International
Airport, was built in 1925 and remodeled in 1982. In addition to
its jai-alai auditorium, the fronton has a restaurant overlooking
the court, a banquet room, one large television lounge and four
smaller television lounges. Parking facilities at the Miami Fronton
(including on-street parking) are large enough to park about 4,000
vehicles.
The Company's Tampa Fronton was built in 1953 and remodeled in
1985. In addition to its jai-alai auditorium, the Fronton has a
restaurant overlooking the court and parking for approximately 3,300
vehicles.
The Company's Ocala Fronton, completed in 1973, is situated
on a 47-acre site midway between Ocala and Gainesville in north-central
Florida. It has seating for 1,774 people, a total capacity for spectators
of approximately 3,800, and parking for approximately 1,100 vehicles.
Fort Pierce is a coastal community in St. Lucie County, about
110 miles north of Miami. The Fort Pierce Fronton, completed in
1974, is located approximately one-mile from the Florida Turnpike
exit and about 2 miles from an I-95 exit. The Turnpike is the
primary route between South Florida and Orlando. I-95 is the main
north-south highway that travels the entire Atlantic coast. The
Fort Pierce Fronton, sits on a 35-acre site and has parking for
approximately 2,000 vehicles.
In addition to the facilities and restaurants described, all
of the Frontons have mutuel windows, liquor bars and food stands.
In late 1994 and early 1995 the Company acquired four parcels
of land encompassing approximately 100 acres contiguous to the Fort
Pierce Fronton. This acquisition gave the Company approximately 134
acres with increase exposure to major thoroughfares and improved
access to I-95. The Company's uses for the additional property are
still being planned. The Company also owns approximately 11 acres
adjacent to the Ocala Fronton and a total of 18 acres in parcels
near the Miami Fronton; some of these holdings are available as
extra parking space.
After the acquisition of the WJA Frontons, the Company began
converting the television lounge and standing areas at the Miami and
Tampa Frontons into low-stakes cardrooms. The Company expects both
cardrooms to be open by April 1997. The 12,000 square foot cardroom
in Miami is expected to open with 40 tables; the 10,000 square foot
cardroom in Tampa is expected to open with 30 tables, and each will
have the capacity to hold almost twice as many tables.
Competition
The gaming industry is highly competitive. The Company
competes for customers with other forms of legal wagering, including
charitable gaming, pari-mutuel wagering and state lotteries. The
Company competes with other entertainment providers for its
customers. With the exception of only one fronton operated in
Dania, Florida (described further below), the Company does not
consider itself to be in direct competition with any other fronton
facility. Florida's pari-mutuel legislation does not permit the
construction of any jai-alai facility within a geographic radius of
50 miles or to any other jai-alai facility.
There are currently 41 permits issued by the State of Florida
to operate pari-mutuel facilities in the state; 33 of those permits
are now active. Of the 33 active permit holders, only ten are held
by jai-alai operators; others engage in horse racing, harness racing
and dog racing. Aside from the Company's Frontons, the only other
operating jai-alai frontons in Florida are in Dania and Orlando.
The Miami area offers a wide range of pari-mutuel and other
entertainment activities that compete with the Company for
spectators' leisure-time and wagering patronage. Within a 35-mile
radius of the Company's Miami fronton, there is another jai-alai
fronton whose season competes with the Miami Fronton, three horse
racing tracks that operate during part of the Miami fronton's
season (although not at the same time and not at night), and three
dog racing tracks, one of which operates during substantial portions
of the Miami Fronton's season. The Summer jai-alai operation
competes directly with two dog racing tracks (owned and operated by
two of the Company's partners in the summer jai-alai operation) and
another jai-alai fronton which operates during the summer season.
In addition to these pari-mutuel activities, the Company's Miami
fronton competes with numerous other sporting and entertainment
activities, including professional sports teams, especially numerous
Miami Beach night clubs, Indian Gaming facilities, cruise and
cruise/gaming ships, and gaming activities in the Bahamas, which are
readily accessible from the Miami area. The primary market for the
Miami Fronton includes approximately 3.5 million adults within 50
miles of the fronton.
The Tampa Fronton competes with dog racing (there are three
tracks located within a 55-mile radius that operate during the Tampa
Fronton's season, but only one at a time) and with a horse racing
track situated approximately 20 miles northwest of the Tampa Fronton
which operates for 74 days (but no evenings) during the winter
season. The Tampa Fronton also competes with other alternative
entertainment activities similar to those in Miami. The primary
market for the Tampa Fronton includes approximately 1.75 million
adults within 50 miles of the fronton.
The pari-mutuel operation closest to the Ocala Fronton is 75
miles away. The Ocala Fronton does, however, compete with the Ocala
Breeders Sales Company, which offers ITW wagering. There are not
substantial competing evening entertainment activities in Ocala.
The primary market for the Ocala Fronton includes approximately
350,000 adults within 30 miles of the facility.
The primary market area for the Fort Pierce Fronton includes
approximately 500,000 adults within 35 miles of the facility. The
major population centers in the vicinity of this fronton include
Fort Pierce, Port St. Lucie, and Vero Beach, Florida. The Company
does not consider itself to be in direct competition with any other
fronton or other pari-mutuel facility permitted to operate in
Florida in its market area at this time. The closest pari-mutuel
facilities are dog racing facilities in West Palm Beach,
approximately 50 miles south of the fronton, and in Melbourne,
approximately 53 miles north of the fronton. The Fort Pierce
fronton competes to a certain extent with the St. Lucie Civic Center
which features sporting events and entertainment activities.
Capital Raising Transactions
In December 1996 the Company issued and sold 550 shares of
Series C 8% Cumulative Convertible Preferred Stock in an offshore
transaction for $1,000 per share resulting in net proceeds to the
Company of $506,000. The shares of Series C Preferred Stock are
convertible into shares of the Company's Common Stock. See
"Description of Capital Stock Series Preferred Stock" and "Risk
Factors Potential Dilution and Market Impact From Outstanding
Capital Stock and Options."
In December 1996 and January 1997 the Company issued and sold
1,175 shares of Series D Preferred Stock in a private placement
transaction for $1,000 per share resulting in net proceeds to the
Company of $1,081,000. The shares of Series D Preferred Stock are
convertible into shares of the Company's Common Stock. See
"Description of Capital Stock Series Preferred Stock" and "Risk
Factors Potential Dilution and Market Impact From Outstanding
Capital Stock and Options."
USE OF PROCEEDS
This Prospectus related to shares being offered and sold for
the accounts of the Selling Stockholder. The Company will not
receive any of the proceeds of any sale by the Selling Stockholder
of the shares of Common Stock.
SELLING STOCKHOLDER AND PLAN OF DISTRIBUTION
The Selling Stockholder acquired the 703,297 shares of Common
Stock offered by this Prospectus in connection with the consummation
of the purchase of the WJA Notes. BOK DPC Asset Holding
Corporation, the Selling Stockholder, is a subsidiary of Bank of
Oklahoma, National Association. See "Recent Developments." As of
February 1, 1997, the Selling Stockholder owned 703,297 shares of
Common Stock, constituting 15.9% of the 4,435,960 issued and
outstanding shares of Common Stock.
The securities offered hereby may, upon compliance with
applicable "Blue Sky" law, be sold from time to time to purchasers
directly by the Selling Stockholder in negotiated transactions and
in the over-the-counter market on NASDAQ. The shares may be sold
by one or more of the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as
agent; and (b) ordinary brokerage transactions in which the broker
solicits purchasers. In addition, any securities covered by the
Prospectus which qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
Alternatively, the Selling Stockholder may from time to time
offer the securities offered hereby through underwriters, dealers
or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholder
and/or the purchasers of securities for whom they may act as agents.
In order to comply with the securities laws of certain states,
if required, the Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in
certain states the Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or any
exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to
the Common Stock for a period of nine business days prior to the
commencement of such distribution. In addition and without limiting
the foregoing, the Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of
shares of the Common Stock by the Selling Stockholder.
The Selling Stockholder and any underwriters, dealers or agents
that participate in the distribution of securities offered hereby
may be deemed to be underwriters, and any profit on the sale of such
securities by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities
Act. At the time a particular underwritten offer of securities is
made, to the extent required, a supplement to this Prospectus will
be distributed which will set forth the aggregate amount of
securities being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, and
discounts, commissions and other items constituting compensation
from the Selling Stockholder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers.
The securities offered hereby may be sold from time to time in
one or more transactions at a fixed offering price, which may be
changed or at varying prices determined at the time of sale or at
negotiated prices.
The Selling Stockholder will pay its legal fees and the
commissions and discounts of underwriters, dealers or agents, and
transfer taxes, if any, incurred in connection with the sale of the
shares.
The Company has agreed to indemnify the Selling Stockholder
against certain liabilities in connection with the Registration
Statement, of which this Prospectus is a part, including certain
liabilities under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of (i)
15,000,000 shares of Common Stock, par value $.10 per share; (ii)
500,000 shares of Convertible Preferred Stock, having a par value
of $.10 per share, no shares of which are currently outstanding;
(iii) 1,200,000 shares of Class A Convertible Preferred Stock,
having a par value of $.10 per share; and (iv) 500,000 shares of
Preferred Stock, having a par value of $.10 per share, issuable in
one or more series.
The following brief description of the Company's capital stock
does not purport to be complete and is subject in all respects to
(i) applicable Delaware law, and (ii) the provisions of the Com-
pany's Restated Certificate of Incorporation (the "Certificate") and
Bylaws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. See
"Additional Information."
Common Stock
The Company is authorized to issue 15,000,000 shares of Common
Stock. Each share is entitled to one vote on all matters submitted
to shareholders for a vote (including the election of directors).
The Common Stock does not provide for cumulative voting rights,
preemptive rights to purchase any additional shares, is not redeem-
able by the Company and, when issued, will be fully paid and
nonassessable. Holders of the Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors out of
earnings or surplus and are entitled to share ratably in any
distribution of the Company's assets, after payment of all debts and
other liabilities and subject to the preferential rights of the
holders of the Company's preferred stock to a payment upon
liquidation and dissolution of the Company. As of February 1, 1997,
the Company had issued and outstanding 4,435,960 shares of Common
Stock.
Class A Convertible Preferred Stock
The Company is authorized to issue 1,200,000 shares of Class
A Convertible Preferred Stock. The Class A Convertible Preferred
Stock bears annual dividends at the rate of $.90 per share payable
in cash, property or Common Stock, which are cumulative and have
priority over dividends on the Common Stock. As of February 1,
1997, the Company had issued and outstanding 34,435 shares of the
Class A Convertible Preferred Stock.
Series Preferred Stock
The Company is also authorized to issue 500,000 shares of
Convertible Preferred Stock, having a par value of $.10 per share,
and 500,000 shares of Preferred Stock, having a par value of $.10
per share, in one or more series. With regard to the issuance of
the Preferred Stock in one or more series, the Board of Directors
of the Company is authorized to establish, by resolution, the number
of shares to be included in each such series, and to fix the
designations, powers, preferences, and rights of the shares of each
such series, and any qualifications, limitations or restrictions
thereof, provided that no such shares of Preferred Stock shall have
powers, preferences or special rights that adversely affect the
holders of the Class A Convertible Preferred Stock. As of the date
of this Prospectus, the Board has authorized such shares in three
series.
Series B Convertible Preferred Stock. The Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock")
provides annual cumulative dividends at the rate of 8% of the
consideration paid for the stock. Such dividends are payable in
shares of the Company's Common Stock. The consideration to be
received by the Company upon initial issuance of each share of the
Series B Preferred Stock is $1,000. Holders of Series B shares may
generally convert all or any of such Series B shares to the
Company's Common Stock using a ratio based on the consideration paid
for the stock and 75% to 80% of the market value of the Common
Stock. Upon liquidation, the holders of Series B preferred shares
shall be entitled to be paid $1,000 per share plus 8% accrued
dividends before any distribution to holders of Common Stock. As of
February 1, 1997, the Company had issued and outstanding 1,465
shares of Series B Preferred Stock.
Series C 8% Cumulative Convertible Preferred Stock. The
Company is authorized to issue 5,000 shares of Series C 8%
Cumulative Convertible Preferred Stock, $.10 par value (the "Series
C Preferred Stock"), which provides annual dividends at the rate of
8% of the share's Stated Value. The Stated Value per share equals
$1,000 (as adjusted for any stock dividends, combination or split).
At the discretion of the Company's Board of Directors, such
dividends may be paid in shares of the Series C Preferred Stock.
As of February 1, 1997, the Company had issued and outstanding 550
shares of Series C Preferred Stock, all of which were issued on
December 13, 1996.
Holders of Series C Preferred Stock may convert all or any of
such shares to the Company's Common Stock (the "Series C Conversion
Shares") beginning 90 days after the issuance of the Series C
Preferred Stock. If not converted earlier by the holder, the Series
C Preferred Stock shall be converted automatically on December 31,
1998. In general, the number of Series C Conversion Shares issuable
on conversion of each share of Series C Preferred Stock shall equal
the consideration paid for such share together with accrued and
unpaid dividends on such share, if any, divided by the lesser of (i)
$7.50 or (ii) 80% of the closing bid price of the Common Stock on
the five trading days before conversion. A holder of Series C
Conversion Shares may not sell more than 33% of such shares between
90 and 120 days of his purchase of Series C Preferred Stock
converted into such shares and 67% of such shares between 121 and
150 days of his purchase; a holder may generally sell all of his
Series C Conversion Shares 151 days after his purchase.
All shares of Series C Preferred Stock have been sold pursuant
to offshore transactions exempt from registration pursuant to
Regulation S promulgated under the Securities Act. The Series C
Conversion Shares must be resold in transactions exempt under
Regulation S or another applicable exemption under the Securities
Act, or (if the exemption under Regulation S becomes unavailable at
any time before the third anniversary of the purchase of the Series
D Preferred Stock) pursuant to the registration of the Series C
Conversion Shares by the Company.
Upon liquidation, the holders of Series C Preferred Shares
shall be entitled to be paid $1,000 per share plus 8% accrued
dividends before any distribution to holders of Common Stock. The
Company has the right to redeem the shares of Series C Preferred
Stock if a holder of such shares exercise his right of conversion
at a time when the conversion price is below $5.00. The redemption
price to be paid by the Company is 125% of the Stated Value of such
shares together with all accrued and unpaid dividends thereon.
Series D 8% Cumulative Convertible Preferred Stock. The
Company is authorized to issue up to 5,000 shares of Series D 8%
Cumulative Convertible Preferred Stock (the "Series D Preferred
Stock"), which provides annual dividends at the rate of 8% of the
share's Stated Value. The Stated Value per share equals $1,000 (as
adjusted for any stock dividends, combination or split). At the
discretion of the Company's Board of Directors, such dividends may
be paid in shares of the Series D Preferred Stock. As of February
1, 1997, the Company had issued and outstanding 1,175 shares of
Series D Preferred Stock.
Holders of Series D Preferred Stock may convert all or any of
such shares to the Company's Common Stock beginning 90 days after
the issuance of the Series D Preferred Stock. If not converted
earlier by the holder, the Series D Preferred Stock shall be
converted automatically on December 31, 1998. The Company was
obligated to file a registration statement (the "Series D
Registration Statement") covering the shares of Common Stock
issuable on conversion of the Series D Preferred Stock (the "Series
D Conversion Shares"); the Series D Registration Statement was
declared effective on February 14, 1997. In general, the number of
Series D Conversion Shares issuable on conversion of each share of
Series D Preferred Stock shall equal the Stated Value together with
accrued and unpaid dividends on such share, if any, divided by the
Conversion Price, which is defined as the lesser of (i) $7.50 or
(ii) 80% of the closing bid price of the Common Stock on the five
trading days before conversion. Notwithstanding the effectiveness
of the Series D Registration Statement, generally a holder of Series
D Conversion Shares may not sell more than 33% of such shares
between March 13, 1997 and April 12, 1997, and 67% of such shares
between April 13, 1997 and May 22, 1997; a holder may generally sell
all of the Series D Conversion Shares after May 13, 1997.
Upon liquidation, the holders of Series D Preferred Shares
shall be entitled to be paid $1,000 per share plus 8% accrued
dividends before any distribution to holders of Common Stock. The
Company has the right to redeem the shares of Series D Preferred
Stock if a holder of such shares exercise his right of conversion
at a time when the Conversion Price is below $5.00 or if the Series
D Registration Statement has not become effective within 120 days
of the Initial Issuance Date. The redemption price to be paid by
the Company is determined using a ratio based on the trading price
of the Company's Common Stock and the Stated Value.
The Class A Convertible Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock
are all equal in rank with respect to the payment of dividends and
the distribution of assets upon liquidation of the Company.
Special Provisions of Delaware Law and the Company's Restated Certificate of
Incorporation
The Company is a Delaware corporation and is subject to Section 203 of
the Delaware General Corporation Law ("DGCL"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined) with a Delaware corporation for three
years following the date such person became an interested stockholder unless:
(i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock
plans that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer), or (iii) on or following the transaction in which such person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and approved at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
prior to the consummation or abandonment of and subsequent to the earlier of
the public announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or who were
recommended for election or elected to succeed such directors by a majority
of such directors.
The foregoing provisions could delay or frustrate a change in control of
the Company. The provisions could also discourage or make more difficult a
merger, tender offer or proxy contest, even if such event would be favorable
to the interests of stockholders.
Section 102(a)(7) of the DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of the directors' fiduciary
duty of care. The duty of care requires that, when acting on behalf of the
corporation, directors must exercise an informed business judgment based on
all material information reasonably available to them. Absent the
limitations now authorized by such legislation, directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care.
Although Section 102(a) does not change directors' duty of care, it enables
corporations to limit available relief to equitable remedies such as
injunction or rescission. The Certificate limits the liability of the
directors to the Company or its stockholders (in their capacity as directors
but not in their capacity as officers) to the fullest extent permitted by
Section 102(a). Specifically, directors of the Company will not be personally
liable for monetary damages for breach of a director's fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for unlawful payments of dividends or unlawful stock repurchase or
redemptions as provided in Section 174 of the DGCL; or (iv) for any
transaction from which the director derived an improper personal benefit.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby
will be passed upon for the Company and the Selling Stockholder by Brown,
Todd & Heyburn PLLC, Louisville, Kentucky.
EXPERTS
The audited financial statements of the Company at December 31, 1995 and
1994 and for each of the two years in the period ended December 31, 1995
incorporated by reference into this Prospectus and elsewhere in the
Registration Statement, to the extent and for the periods indicated in its
report, have been audited by King & Company, PSC, independent public
accountants, and are incorporated herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in, or incorporated
by reference in, this Prospectus, in connection with the offering covered by
this Prospectus. If given or made, such information or representations must
not be relied upon as having been authorized by the Company, the Selling
Stockholder or any selling agent. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction where, or to any person to whom, it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that
there has not been any change in the facts set forth in this Prospectus or
incorporated by reference herein or in the affairs of the Company since the
date hereof.
