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): January 16, 1997
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 5. Other Events
On January 16, 1997, the Registrant concluded a private
placement of its Series D 8% Cumulative Convertible Preferred
Stock, $.10 par value, at a price per share of $1,000. The
Registrant issued a total of 1,175 shares of Series D Preferred
Stock, with 650 shares issued on December 31, 1996, and 525 shares
issued on January 16, 1997.
The Registrant did not engage an underwriter in connection
with the issuance of the Series D Preferred Stock. The Series D
Preferred Stock was issued to a total of 12 "accredited investors,"
as defined in Rule 501 under the Securities Act of 1933, as
amended. The Registrant issued the Series D 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 each of the closings.
The Series D Preferred Stock was issued in accordance with the
provisions of Regulation D under the Securities Act of 1933, as
amended, in a private placement solely to accredited investors.
The Registrant is authorized to issue up to 5,000 shares of
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 Registrant's Board
of Directors, such dividends may be paid in shares of the Series D
Preferred Stock.
Holders of Series D Preferred Stock may convert all or any of
such shares to the Registrant'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 Registrant is
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") and to use its best efforts to cause the
Series D Registration Statement to become effective. 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. If the Series D
Registration Statement has not been declared effective within 120
days from December 31, 1996 (the "Initial Issuance Date"), the
Conversion Price shall be reduced by an amount between 3% and 20%
(resulting in the issuance of a larger number of Series D
Conversion Shares) based on the extent of such delay. No Series
D Conversion Shares may be sold before the earlier of March 13,
1997 or the date on which the Series D Registration Statement
becomes effective. 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 Conversion Shares after May 13, 1997.
If the Series D Registration Statement has not been declared
effective within 365 days of the Initial Issuance Date, a holder
of Series D Preferred Stock shall receive a preferential dividend
equal to 10% of the Stated Value on the 366th day after the Initial
Issuance Date and preferential dividends of either 3% or 10% of the
Stated Value of shares every 30 days thereafter until the 726th day
after the Initial Issuance Date.
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
Registrant has the right to redeem the shares of Series D Preferred
Stock if a holder of such shares exercises 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 Registrant is determined using a ratio based on the trading
price of the Registrant's Common Stock and the Stated Value.
The discussion at this Item 5 is qualified in its entirety by
reference to the Certificate of Designations, Voting Powers,
Preferences, Limitations, Restrictions, and Relative Rights of the
Series D Preferred Stock and the form of Regulation D Subscription
Agreement attached to this Form 8-K as exhibits.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
Exhibit 3.1, 4.1 -- Certificate of Designations of Series
D 8% Cumulative Convertible Preferred Stock ("Series D
Preferred Stock").
Exhibit 4.2 -- Form of Regulation D Subscription
Agreement with respect to the Series D Preferred Stock.
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: January 31, 1997
Certificate of Designations,
Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of
Series D 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 D 8% Cumulative Convertible Preferred Stock (the "Series
D Preferred Stock"). The number of shares of Series D Preferred
Stock shall be 5,000. Each share of Series D 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 D Preferred Stock shall be equal in
rank to the Class A Convertible Preferred Stock, Series B
Convertible Preferred Stock and Series C 8% Cumulative Convertible
Preferred Stock (the "Series C 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 D
Preferred Stock shall be entitled to receive preferential dividends
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 D 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 D 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.
In addition, in the event that a registration statement
filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering shares of Common Stock issuable upon
conversion of shares of Series D Preferred Stock shall not have
been declared effective (the "Effective Date") by the United States
Securities and Exchange Commission within three hundred sixty five
days after the first issuance of any shares of Series D Preferred
Stock (the "Initial Issuance Date"), until the date that such
Registration Statement shall have been declared effective, the
holders of outstanding shares of Series D Preferred Stock shall
receive a preferential dividend in cash, payable on the date noted
below 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 Junior Stock, on
the sum of the Stated Value per share in the amount and on the
dates as follows:
Day Beyond Initial Issuance Date Dividend Amount
366 10%
396 3%
426 3%
456 10%
486 3%
Every 30th day after the 486th
day until the 726th day 3%
By way of example and assuming all 5,000 shares of Series
B Preferred Stock are outstanding, if the Effective Date has not
occurred by the three hundred sixty sixth (366th) day after the
Initial Issuance Date, the Corporation shall pay to the holders of
the Series B Preferred Stock would receive in the aggregate
$500,000, which amount equals 10% of $5,000,000.
Notwithstanding the foregoing, if the holders of shares
of Series D Preferred Stock desire to distribute the shares of
Common Stock issuable upon conversion of the Series D Preferred
Stock by means of an underwriting and the Effective Date shall not
have occurred within three hundred sixty five (365) days of the
Initial Issuance Date as a result of delays caused solely by such
holders of the Series D Preferred Stock and such underwriters (an
Underwriter Delay"), then no such dividend shall be payable with
respect to the shares of Series D Preferred Stock held by the
holders requesting an underwritten offering.
(b) The dividends on the Series D 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 D 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 outstanding Series D 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 subsidiary of the Corporation to the
purchase, redemption or other acquisition of the Series D Preferred
Stock or any shares of any other class of stock ranking on a parity
with the Series D 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 D 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 D 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 D 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 D 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 D Preferred
Stock shall be insufficient to permit payment in full of the
amounts payable as aforesaid to the holders of Series D 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 D 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 corporation
or corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, shall be deemed to be a liquidation,
dissolution or winding-up of the Corporation for the purposes of
this paragraph 3. Holders of the Series D 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 D 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 D 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 D 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 Price provided in paragraph 4(c) below (the "Conversion
Price").
(b) The shares of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at the then
Conversion Price for such shares on December 31, 1998. Notice of
automatic conversion of Series D 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 D 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 (i) the day of conversion or (ii) the
date the Corporation or the holder, as the case may be, notifies
the other that it has elected its right to redeem, or cause the
redemption of, the Series D Preferred Stock; provided, however,
that in the event that the Effective Date shall not have occurred
within one hundred twenty (120) days from the date of the first
issuance of any shares of Series D Preferred Stock (the "Required
Effective Date"), the Conversion Price shall be reduced by an
amount determined as follows:
No. of Days Beyond Required Effective Date Reduction
0-30 3%
31-60 6%
61-90 8%
91-120 10%
121-150 12%
151-180 14%
181-210 16%
211-240 18%
241 and thereafter 20%
By way of example, if the Effective Date occurred on the
sixtieth (60th) day after the Required Effective Date, the
Conversion Price would be reduced by six percent (6%) and the
Conversion Price would then equal the lesser of (i) $7.05 (ninety-four
percent (94%) of $7.50) and (ii) seventy-four percent (74%) 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 D 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).
Notwithstanding the foregoing, if the Effective Date has
not occurred by the Required Effective Date as a result of
Underwriter Delay, the foregoing reduction to the Conversion Price
shall not apply with respect to the shares of Series D Preferred
Stock for which an underwriting for the shares of Common Stock
issuable upon conversion has been requested.
(d) The holder of any certificate for shares of Series
D 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 (the "Notice of Conversion") 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 D Preferred Stock which is
converted in part only, the holder of shares of Series D 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 D
Preferred Stock. Nothing herein shall be construed to give any
holder of shares of Series D 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 D 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 D 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 Price
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 D 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 D
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 D 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 D 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 Corpora-
tion 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
D Preferred Stock shall have terminated, as part of such
consolidation or merger, lawful provision shall be made so that
holders of Series D Preferred Stock shall thereafter have the right
to convert each share of Series D 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
D 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 D Preferred Stock shall thereafter have the right to
convert each share of the Series D Preferred Stock into the kind
and amount of shares of stock or other securities or cash or
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 D 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 D Preferred Stock and the Common Stock; and the
Corporation shall mail to each holder of record of Series D
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 C 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 C 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
D Preferred Stock and for the Common Stock and to the holders of
record of the Series D Preferred Stock.
(h) So long as any shares of Series D 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 D
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 D
Preferred Stock, but all transfer taxes that may be payable in
respect of any change of ownership of Series D 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 D
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 Stock.
In case any shares of Series D Preferred Stock shall be
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 D
Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be duly executed on its behalf by its Executive Vice
President and Chief Financial Officer this __ day of December,
1996.
FLORIDA GAMING CORPORATION
By:
FLORIDA GAMING CORPORATION
REGULATION D 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 D 8% Cumulative Convertible Preferred Stock (the
"Series D 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.
2. Escrow of Funds; Closing.
(a) Until the sale of a minimum of an aggregate of
450 shares of 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 31, 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 D Preferred Stock subscribed for with the final
Closing ("Final Closing") to occur within 10 days after
January 10, 1997 (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, as supplemented by Supplement No. 1
dated December 27, 1996 (together, 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 D
Preferred Stock and/or shares of Series C 8% Cumulative
Convertible Preferred Stock (the Series C 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 will not sell or otherwise
transfer the Shares or the shares of Common Stock issuable
upon conversion of the Shares without registration under the
Securities Act of 1933, as amended (the "Securities Act") or
an exemption therefrom and fully understands and agrees that
the undersigned must bear the economic risk of the
undersigned's purchase for an indefinite period of time
because, among other reasons, the Shares and the Conversion
Shares have not been registered under the Securities Act or
under the securities laws of certain states and, therefore,
cannot be resold, pledged, assigned or otherwise disposed of
unless the securities are subsequently registered under the
Securities Act and under the applicable securities laws of
such states or unless an exemption from such registration is
available in the opinion of counsel for the holder, which
counsel and opinion are reasonably satisfactory to counsel for
the Company. The undersigned is purchasing the Shares and the
Conversion 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. The undersigned
is aware that an exemption from the registration requirements
of the Securities Act pursuant to Rule 144 promulgated
thereunder is not presently available; that, except as
contemplated by section 6 hereof, the Company has no
obligation to make available an exemption from the
registration requirements pursuant to such Rule 144 or any
successor rule for resale of the Shares and the Conversion
Shares; and that even if an exemption under Rule 144 were
available, Rule 144 permits only routine sales of securities
in limited amounts in accordance with the terms and conditions
of such Rule 144.
(i) The undersigned agrees to the placement of a
legend on any certificate or other document evidencing the
Shares or the Conversion Shares stating that they have not
been registered under the Securities Act (and a stop transfer
order may be placed with respect thereto).
(j) 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; provided, however, that the undersigned may
maintain a short position with respect to the Conversion
Shares provided that such short position is covered by
conversion of the Shares within three (3) business days.
(k) 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.
(l) 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.<PAGE>
4. Accredited Investor Status. The undersigned further
represents and warrants as indicated below by the undersigned's
initials:
(a) Individual Investors: (Initial one or more of
the following three statements)
(i) ____ I certify that I am an accredited
investor because I have had individual income (exclusive
of any income earned by my spouse) of more than $200,000
in each of the most recent two years and I reasonably
expect to have an individual income in excess of $200,000
for the current year.
(ii) ____ I certify that I am an accredited
investor because I have had joint income with my spouse
in excess of $300,000 in each of the two most recent
years and I reasonably expect to have joint income with
my spouse in excess of $300,000 for the current year.
(iii) ____ I certify that I am an
accredited investor because I have an individual net
worth, or my spouse and I have a joint net worth, in
excess of $1,000,000.
(b) Partnerships, corporations, trusts or other
entities: (Initial one of the following statements)
(i) The undersigned hereby certifies that it
is an accredited investor because it is:
________ (A) an employee benefit plan whose total
assets exceed $5,000,000;
________ (B) an employee benefit plan whose
investment decisions are made by a
plan fiduciary which is either a
bank, savings and loan association
or an insurance company (as defined
in Section 3(a) of the Securities
Act) or an investment adviser
registered as such under the
Investment Advisers Acts of 1940;
________ (C) a self-directed employee benefit
plan, including an Individual
Retirement Account, with investment
decisions made solely by persons
that are accredited investors;
________ (D) an organization described in Section
501(c)(3) of the Internal Revenue
Code of 1986, as amended (the
"IRS"), not formed for the specific
purpose of acquiring the Shares with
total assets in excess of
$5,000,000;
________ (E) any corporation, partnership or
Massachusetts or similar business
trust, not formed for the specific
purpose of acquiring the Shares,
with total assets in excess of
$5,000,000; or
________ (F) a trust with total assets in excess
of $5,000,000, not formed for the
specific purpose of acquiring the
Shares, whose purchase is directed
by a person who has such knowledge
and experience in financial and
business matters that he is capable
of evaluating the merits and risks
of an investment in the Shares.
________ (ii) The undersigned hereby certifies that it
is an accredited investor because it is
an entity in which each of the equity
owners qualifies as an accredited
investor under items (a)(i), (ii) or
(iii) or item (b)(i) above.
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 D 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 November 26, 1996, 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 November 26, 1996, 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 D 8%
Cumulative Convertible 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 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) 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 in good faith
and pursuant to appropriate proceedings.
(j) 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.
(k) 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 shares of Common Stock upon
conversion of the 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.
(l) 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.
(m) 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. Registration.
(a) Definitions. The following definitions shall
apply with respect to a registration (a "Registration")
pursuant to this section 6:
(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 Common Stock of the Company issued upon conversion of
the shares of Series D Preferred Stock, including the
Conversion Shares issued and outstanding, 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) Within thirty (30) days after the Minimum
Amount Closing Date, the Company shall 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 the Minimum Amount Closing.
(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 6:
(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 6(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 this section (c),
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 6 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
(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) Lock-Up. Notwithstanding the effectiveness of
the Registration Statement covering the Registrable Shares,
the undersigned shall not, directly or indirectly, offer or
sell any Conversion Shares before the earlier of (i) March 13,
1997 (provided that such offer or sale is made in compliance
with an applicable exemption under the Securities Act,
including without limitation, Rule 144A in the event that the
Registration Statement has not then become effective) or (ii)
the date the Registration Statement becomes effective.
Thereafter, the undersigned shall not offer or sell more than
the following percentage of the Conversion Shares (based upon
the number of Shares initially owned by the undersigned)
during the following periods after the Final Closing:
Days after Final Closing Percentage of Conversion
Shares
March 13, 1997 - April 12, 1997 33%
April 13, 1997 - May 12, 1997 67%
May 13, 1997 and thereafter 100%
By way of example, if the undersigned were to subscribe for
3,000 shares of Series D Preferred Stock, during the period between
March 13, 1997 and April 12, 1997, the undersigned could sell such
number of shares of Common Stock as are issuable upon the
conversion of an aggregate of 1,000 shares of Series D Preferred
Stock; during the period between April 13, 1997 and May 12, 1997,
the undersigned could sell such number of shares of Common Stock as
are issuable upon the conversion of an aggregate of 2,000 shares of
Series D Preferred Stock; and on May 13, 1997 and thereafter, the
undersigned could sell all of the shares of Common Stock as are
issuable upon the conversion of an aggregate of 3,000 shares of
Series D Preferred Stock.
The foregoing agreement shall survive the transfer of the
Shares or the Conversion Shares.
(e) 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
6, 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
6, 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 (e) (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 6 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 (e) and shall also not relieve the Indemnifying
Party of such party's obligations under this section (e),
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 6 is unavailable to an
Indemnified Party or is insufficient to hold it harmless
as contemplated by this section 6, 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.
7. Right of Redemption.
(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 (i) any shares of Series
D Preferred Stock for which Notice of Conversion has been
given by the holder thereof at a Conversion Price below $5.00
or (ii) any or all of the shares of Series D Preferred Stock
if the Registration Statement covering the Registrable Shares
shall not have been declared effective by the Required
Effective Date (as defined in Section 4(c) of the Certificate
of Designation). In the case of clause (i) of this Section
7(a), if the Company elects to redeem some, but not all, of
the shares of Series D Preferred Stock pursuant to the terms
hereof, the Company shall redeem from among the shares of
Series D Preferred Stock submitted by the various holders
thereof for conversion on the applicable date, a pro-rata
amount from each such holder so submitting shares of Series D
Preferred Stock for conversion. In the case of clause (ii),
if the Company elects to redeem some, but not all, of the
shares of Series D Preferred Stock pursuant to the terms
hereof, the Company shall redeem such number of shares of
Series D Preferred Stock as it has elected to redeem from the
various holders thereof on a pro rata basis.
(b) In the event that the Company exercises its
right to redeem set forth in Section 7(a)(i), 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 the
undersigned, with a copy by overnight courier. In the event
that the Company exercises its right to redeem set forth in
Section 7(a)(ii), the Company shall effect each such
redemption by giving notice of its election to redeem by
overnight courier. Such notices shall be sent to the
undersigned at the address and/or facsimile number of the
undersigned appearing in the Company s stock transfer ledger.
Such redemption notice shall indicate whether the Company will
redeem all or part of the Shares 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.
(c) The redemption price per Share shall be
determined as follows:
(i) In the event that the Company exercises
its right to redeem set forth in Section 7(a)(i), the
redemption price per Share shall be equal to the Stated Value
of the Shares being redeemed, together with all accrued and
unpaid dividends thereon multiplied by a fraction, the
numerator of which is one (1) and the denominator of which is
the percentage set forth in clause (ii) of the definition of
the "Conversion Price", as defined in paragraph 4(c) of the
Certificate of Designation, as such percentage may be modified
from time to time in accordance with the terms of paragraph
4(c).
(ii) In the event that the Company exercises
its right to redeem set forth in Section 7(a)(ii), the
redemption price per Share shall be equal to the sum of the
Stated Value of each Share being redeemed and the greater of
(i) two-thirds (2/3) of the Return per Share and (ii) twenty
five percent (25%) of the Stated Value per Share. For
purposes of this Agreement, "Return Per Share" shall mean (A)
the product of (x) a fraction the numerator of which is the
Closing Mid Price and the denominator of which is the
Conversion Price and (y) the sum of the Stated Value per Share
and accrued and unpaid dividends thereon, if any minus (B) the
Stated Value per Share. For purposes of this Section 7(c),
the term Closing Mid Price" shall mean the average of the
mean between the closing bid and closing ask prices for the
Company s Common Stock as reported by NASDAQ for the five
trading days immediately preceding the day the Company
notifies the undersigned that it has elected its right to
redeem.
By way of example, assume the following:
The Registration Statement shall not have been
declared effective on the 181st day after the
Required Effective Date (as defined in the
Certificate of Designation).
Scenario 1.
The Closing Mid Price is $6.25
The Closing Bid Price (as defined in the
Certificate of Designation) is $6.00
The Conversion Price would be $3.84
= $6.00 x 64% [80% - 16% additional discount as a
result of the Registration Statement being
effective more than 181 days beyond the Required
Effective Date].
The Redemption Price would be $1,489.98
= $1,000 + [($6.25/$3.84 x ($1,000 + $65.97)) -
$1,000] x 2/3.
Scenario 2.
The Closing Mid Price is $12.50
The Closing Bid Price is $12.00
The Conversion Price would be $6.30
= $7.50 x 84% [the additional discount as a result
of the Registration Statement being effective more
than 181 days beyond the Required Effective Date].
The redemption price would be $1,743.35
= $1,000 + [($12.50/$6.30 x ($1,000 + $65.97)) -
$1,000] x 2/3.
(d) The redemption price shall be paid to the
undersigned within two (2) business days of the delivery of
the notice of such redemption to the undersigned; 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 undersigned
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.
8. Put Right.
(a) In the event that a Registration Statement is
declared effective under the Securities Act but shall not
cover the resale of all of the Registrable Shares in a
Registration Statement, with respect to those Conversion
Shares which are not covered by the Registration Statement
(the "Uncovered Conversion Shares") and which could
otherwise have been publicly sold in accordance with the
terms hereof from time to time, the undersigned shall have
the right to require the Company to redeem (the "Put
Right"), and the Company shall have the obligation to redeem
solely out of funds legally available therefor and otherwise
in accordance with the Company s Certificate of
Incorporation and Section 160 of the General Corporation Law
of the State of Delaware, such number of Shares which would
be convertible into Uncovered Conversion Shares as the
undersigned may request (the "Put Shares").
(b) In the event that the undersigned exercises
his or its Put Right, the undersigned shall so notify the
Company by facsimile, with a copy by overnight courier (the
"Put Notice"). The Put Notice shall indicate the number of
Put Shares to be redeemed. The applicable redemption price
per Put Share shall be determined in accordance with
paragraph 7(c)(i) hereof.
(c) The redemption price per Share shall be paid
to the undersigned within two (2) business days of the
delivery by the undersigned of the Put Shares or, in the
event the undersigned notifies the Company or its transfer
agent that such certificates have been lost, stolen or
destroyed, within two (2) business days after the
undersigned 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.
9. 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 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
Social Security
or Taxpayer
Identification No.
U.S. Citizen
__________Yes __________No
Residence or Business Address:
Street
City State Zip Code
Mailing Address (if different
from Residence or Business
Address):
Street
City State Zip Code
ACCEPTED AND AGREED TO:
FLORIDA GAMING CORPORATION
By:
Name:
Title:
Date: , 1996
