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): April 4, 1997
FLORIDA GAMING CORPORATION
(Exact name of registrant as specified in charter)
Delaware 0-9099 59-1670533
(State or other (Commission (IRS Employer
jurisdiction or File Number) Identification No.)
incorporation)
1750 South Kings Highway
Fort Pierce, Florida 34945-3099
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 464-7500
Not Applicable
(Former name or former address
if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
Exhibit 3.1, 4.1 -- Certificate of Designation of Series E 8%
Cumulative Convertible Preferred Stock ("Series E Preferred
Stock").
Exhibit 4.2 -- Form of Regulation S Subscription Agreement
with respect to the Series E Preferred Stock.
Item 9. Sale of Equity Securities Pursuant to Regulation S.
(a) Securities Sold. On April 4, 1997, the Registrant
issued 2,000 shares of its Series E Preferred Stock, $.10
par value, at a price per share of $1,000.
(b) Underwriters and Other Purchasers. The Registrant did not
engage an underwriter in connection the issuance of the
Series E Preferred Stock. A non-U.S. Person, (as such
term is defined in Regulation S ("Regulation S") under
the Securities Act of 1933, as amended ("Securities
Act")), purchased 200 shares of the Series E Preferred
Stock. A second non-U.S. Person purchased 1,800 shares
of the Series E Preferred Stock. Both purchasers were
"accredited investors" as defined in Rule 501(a) in
Regulation D under the Securities Act.
(c) Consideration. The Registrant issued the Series E
Preferred Stock for cash consideration. The Registrant
is obligated to pay NWT Interfin, Ltd. a finders fee in
the amount of $100,000, plus five-year warrants to
purchase 13,333 shares of the Registrant's common stock
("Common Stock"), with an exercise price equal to
$5.6375.
(d) Exemption from Registration Claimed. The Series E
Preferred Stock was issued in accordance with the
provisions of Regulation S in an Offshore Transaction to
non-U.S. Persons.
(e) Terms of Conversion or Exercise.
(i) The Certificate of Designations, Voting
Powers, Preferences, Limitations,
Restrictions, and Relative Rights of the
Series E Preferred Stock (the "Series E
Certificate of Designation") provides that the
shares of Series E Preferred Stock are
convertible into shares of Common Stock. Each
holder of shares of Series E Preferred Stock
has the right at any time and from time to
time, at its option, to convert (i) 25% of
such shares into fully paid and non-assessable
shares of Common Stock, as determined in
accordance with the Conversion Rate (as
described in paragraph (iv) below), 120 days
from April 4, 1997; (ii) an additional 25%
(50% cumulatively) of such shares into fully
paid and non-assessable shares of Common
Stock, as determined in accordance with the
Conversion Rate, 150 days from April 4, 1997;
(iii) an additional 25% (75% cumulatively) of
such shares into fully paid and non-assessable
shares of Common Stock, as determined in
accordance with the Conversion Rate, 180 days
from April 4, 1997; and (iv) an additional 25%
(100% cumulatively) of such shares into fully
paid and non-assessable shares of Common
Stock, as determined in accordance with the
Conversion Rate, 210 days from April 4, 1997.
(ii) All shares of Series E Preferred Stock shall
automatically be converted into shares of
Common Stock at the Conversion Rate on April
4, 1999.
(iii) If, after April 4, 1998, the twenty (20) day
average closing bid price of Registrant's
Common Stock is less than or equal to $7.50
per share, the Registrant has the right, for a
period of ten (10) days following April 4,
1998, to redeem all, but not part, of the
outstanding shares of Series E Preferred
Stock. The redemption price will equal $1,150
per share, plus accrued dividends.
(iv) The number of shares of Common Stock issuable
upon conversion of each share of Series E
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
Stated Value shall equal $1,000 (as adjusted
for any stock dividends, combinations or
splits with respect to such shares). The
"Conversion Price" shall be equal to the
lesser of (i) $7.50 and (ii) eighty percent
(80%) of the average of the Closing Bid Price
(as hereinafter defined) for the five trading
days immediately preceding the day of
conversion of the Series E Preferred Stock.
The "Closing Bid Price" shall mean the closing
bid price of the Registrant's Common Stock as
reported by NASDAQ (or, if not reported by
NASDAQ, as reported by such other exchange or
market where traded).
The discussion at this Item 701(e) is qualified in its
entirety by reference to the Series E Certificate of
Designation and the form of Regulation S Subscription
Agreement attached to this Form 8-K as exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FLORIDA GAMING CORPORATION
By: /s/ Timothy L. Hensley
Timothy L. Hensley
Executive Vice President,
Treasurer And Chief Financial Officer
Date: April 8, 1997
Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of
Series E 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 E 8% Cumulative Convertible Preferred Stock (the "Series
E Preferred Stock"). The number of shares of Series E Preferred
Stock shall be 2,000. Each share of Series E 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 E Preferred Stock shall be equal in
rank to the Class A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C 8% Cumulative Convertible
Preferred Stock (the "Series C Preferred Stock") and Series D 8%
Cumulative Convertible Preferred Stock (the Series D Preferred
Stock") with respect to payment of dividends and the distribution
of assets upon liquidation of the Corporation.
2. Dividends.
(a) The holders of outstanding shares of Series E
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 E 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 upon
conversion of the Series E Preferred Stock into Common Stock as
provided in paragraph 4; 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 Common Stock, valued at the Conversion Price. The issuance of
such additional shares shall constitute full payment of such
dividend.
(b) The dividends on the Series E Preferred Stock at the
rates provided above shall be cumulative whether or not earned, so
that if the full dividend on all such outstanding Series E
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 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 E Preferred
Stock shall begin to accrue and be cumulative from and after the
date of issuance thereof.
3. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of
the Corporation, whether voluntary or involuntary, the holders of
the Series E 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 E 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 E 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 E Preferred
Stock shall be insufficient to permit payment in full of the
amounts payable as aforesaid to the holders of Series E 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 E 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 E 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 E 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 E Preferred Stock shall have the
right at any time and from time to time, at its option, to convert
(i) 25% of such shares into fully paid and non-assessable shares of
Common Stock of the Corporation, as determined in accordance with
the Conversion Rate provided in paragraph 4(c) below (the
"Conversion Rate"), 120 days from the date on which a share of
Series E Preferred Stock was issued; (ii) an additional 25% (50%
cumulatively) of such shares into fully paid and non-assessable
shares of Common Stock of the Corporation, as determined in
accordance with the Conversion Rate, 150 days from the date on
which a share of Series E Preferred Stock was issued; (iii) an
additional 25% (75% cumulatively) of such shares into fully paid
and non-assessable shares of Common Stock of the Corporation, as
determined in accordance with the Conversion Rate, 180 days from
the date on which a share of Series E Preferred Stock was issued;
and (iv) an additional 25% (100% cumulatively) of such shares into
fully paid and non-assessable shares of Common Stock of the
Corporation, as determined in accordance with the Conversion Rate,
210 days from the date on which a share of Series E Preferred Stock
was issued.
(b) The shares of Series E Preferred Stock shall
automatically be converted into shares of Common Stock at the then
Conversion Rate for such shares two years from the date on which a
shares of Series E Preferred Stock was issued. Notice of automatic
conversion of Series E 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 E Preferred Stock shall equal
(i) the sum of (A) the Stated Value per share and (B) accrued and
unpaid dividends on such share, if any, divided by (ii) the
Conversion Price. The "Conversion Price" shall be equal to the
lesser of (i) $7.50 and (ii) eighty percent (80%) of the average of
the Closing Bid Price (as hereinafter defined) for the five trading
days immediately preceding the day of conversion of the Series E
Preferred Stock. The "Closing Bid Price" shall mean the closing
bid price of the Corporation's Common Stock as reported by NASDAQ
(or, if not reported by NASDAQ, as reported by such other exchange
or market where traded).
(d) The holder of any certificate for shares of Series
E 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
designated office of the Corporation or the transfer agent for said
stock (the "Transfer Agent"), with a written notice of such
election to convert (if such conversion is voluntary) such shares
into Common Stock duly filled out and executed, and if necessary
under the circumstances of such conversion, with such certificate
properly endorsed for, or accompanied by duly executed instruments
of, transfer (and such other transfer papers as the Corporation or
the Transfer Agent may reasonably require). The holder of the
shares so surrendered for conversion shall be entitled to receive
within five (5) business days of the delivery of the Notice of
Conversion and all related conversion instruments (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 E Preferred Stock
which is converted in part only, the holder of shares of Series E
Preferred Stock shall upon delivery of the certificate or certifi-
cates representing Common Stock also receive a new share certifi-
cate representing the unconverted portion of the shares of Series
E Preferred Stock. Nothing herein shall be construed to give any
holder of shares of Series E 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 the Corporation or the Transfer Agent for
conversion of the certificate for such shares of Series E 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 E Preferred Stock so
converted.
Notwithstanding the foregoing, if the stock transfer
books are closed on the date such shares are received by the
Transfer Agent, the conversion privilege shall be deemed to have
been exercised, and the person or entity shall be treated as a
record holder of shares of Common Stock, on the next succeeding
date on which the transfer books are open, but the Conversion Rate
shall be that in effect on the date such conversion privilege was
exercised. The Corporation shall not be required to deliver
certificates for shares of its Common Stock or new certificates for
unconverted shares of its Series E 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 E
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 E 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 E 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
E Preferred Stock shall have terminated, as part of such
consolidation or merger, lawful provision shall be made so that
holders of Series E Preferred Stock shall thereafter have the right
to convert each share of Series E 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
E 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 E Preferred Stock shall thereafter have the right to
convert each share of the Series E Preferred Stock into the kind
and amount of shares of stock or other securities or cash property
that shall be issuable, distributable, payable or deliverable upon
such sale or conveyance with respect to each share of Common Stock
immediately prior to such conveyance.
(f) Whenever the number of shares to be issued upon
conversion of the Series E 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 E Preferred Stock and the Common Stock; and the
Corporation shall mail to each holder of record of Series E
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, Series C Preferred Stock, or Series D Preferred Stock
other than in accordance with the terms thereof; or
(ii) to offer for subscription to the holders of its
Common Stock, Class A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Preferred Stock, or
Series D Preferred Stock, other than in accordance with the
terms thereof, any additional shares of any class or any other
rights; or
(iii) any capital reorganization or reclassification
of its shares, or the consolidation or merger of the
Corporation with another corporation; or
(iv) the voluntary dissolution, liquidation or
winding-up of the Corporation;
then, and in any one or more of said cases, the Corporation shall
cause at least fifteen (15) days prior notice of the date on which
(A) the books of the Corporation shall close, or a record be taken
for such stock dividend, distribution or subscription rights, or
(B) such capital reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding-up shall take place, as
the case may be, to be mailed to the Transfer Agent for the Series
E Preferred Stock and for the Common Stock and to the holders of
record of the Series E Preferred Stock.
(h) So long as any shares of Series E 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 E
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 E
Preferred Stock, but all transfer taxes that may be payable in
respect of any change of ownership of Series E 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 E
Preferred Stock shall not entitle their holders to any voting
rights, but such holders shall be entitled to a notice of any
stockholders' meeting in accordance with the By-laws of the
Corporation.
6. Status of Converted or Redeemed Stock.
In case any shares of Series E Preferred Stock shall be
redeemed or converted pursuant to paragraph 4 hereof, or otherwise
repurchased or reacquired, the shares so redeemed, converted or
reacquired shall resume the status of authorized but unissued
shares of Preferred Stock and shall no longer be designated as
Series E Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be duly executed on its behalf by its Chief
Executive Officer this 31 day of March, 1997.
FLORIDA GAMING CORPORATION
By:/s/ W. Bennett Collett
W. Bennett Collett
Chairman and CEO
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
FOR CONVERTIBLE PREFERRED SHARES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE SECURITIES ACT) OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S OF THE
SECURITIES ACT) EXCEPT PURSUANT TO REGISTRATION UNDER OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
This Offshore Securities Subscription Agreement ("Agreement") is
executed in reliance upon the exemption from registration afforded by
Regulation S ("Regulation S") as promulgated by the Securities and
Exchange Commission ("SEC") under the Securities Act.
This Agreement has been executed by the undersigned in
connection with the offshore offering of up to 2,000 shares of the
Series E 8% Cumulative Convertible Preferred Stock (the "Shares") of
FLORIDA GAMING CORPORATION
1750 South Kings Highway
Ft. Pierce, FL 34945-3099
a corporation organized under the laws of Delaware, United States of
America ( the "Issuer" or "Company"). The Issuer's common stock, par
value $.01 per share ("Common Stock") is listed on the Nasdaq Small
Cap Market under the symbol "BETS."
The Undersigned Purchaser:
NAME:_____________________________________
ADDRESS:__________________________________
__________________________________________
, a non "U.S. person" (the "Purchaser") hereby represents and
warrants to, and agrees with, Issuer as follows:
1. The Offering.
a. The undersigned hereby subscribes for ___________ Shares,
at a subscription price of US$ 1,000 per Share, payable in U.S.
Dollars, for a total consideration of US$____________ (the
"Subscription Proceeds"). As provided in the Corporation's
Certificate of Designation (the "Certificate") relating to the
Shares, the Shares (i) are convertible into shares of Common Stock
upon the terms set forth in the Certificate and at such times set
forth in Section 7 of this Agreement, and (ii) shall pay an 8.0%
cumulative dividend payable, at the Corporation's option, in cash or
shares of Common Stock upon conversion.
b. Form of Payment. Purchaser shall pay the total
Subscription Proceeds hereunder by delivering good funds by wire
transfer in United States Dollars on or before April ___, 1997 into
the escrow account as follows:
First Union Bank of Connecticut
Stamford Executive Office
300 Main Street, P.O. Box 700
Stamford, CT 06904-0700
ABA # 021101108
Swift # FUNBUS33INT
Account: 20000-2072298-4
Account Name: Joseph B. LaRocco, Esquire - Trustee Account
2. Subscriber Representations; Access to Information; Independent
Investigation.
a. Offshore Transaction. Purchaser represents and warrants to
Issuer as follows:
(i) Neither Purchaser nor any person or entity for whom
Purchaser is acting as fiduciary is a U.S. person. A U.S.
person means any one of the following:
(1) any natural person resident in the United States
of America;
(2) any partnership or corporation organized or
incorporated under the laws of the United States;
(3) any estate of which any executor or
administrator is a U.S. person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of a foreign entity located
in the United States;
(6) any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person;
(7) any discretionary account or similar account
(other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated, or (if an individual)
residing in the United States; and
(8) any partnership or corporation if:
(A) organized or incorporated under the laws of
any foreign jurisdiction; and
(B) formed by a U.S. person, principally for
the purpose of investing in securities not registered
under the Securities Act, unless it is organized or
incorporated, and owned, by accredited investors (as
defined in Rule 501(a) under the Securities Act) who
are not natural persons, estates or trusts.
(ii) At the time the buy order was originated, Purchaser
was outside the United States and is outside the United States
as of the date of the execution and delivery of this Agreement.
No offer to purchase the Shares was made to a person in the
United States.
(iii) Purchaser is purchasing the Shares for its own
account or for the account of beneficiaries for whom Purchaser
has full investment discretion with respect to the Shares and
whom Purchaser has full authority to bind so that each such
beneficiary is bound hereby as if such beneficiary were a direct
purchaser hereunder and all representations, warranties and
agreements herein were made directly by such beneficiary.
Purchaser is not purchasing the Shares on behalf of any U.S.
person and the sale has not been prearranged with a purchaser in
the United States.
(iv) Each distributor participating in the offering of the
Shares, if any, has agreed in writing, a copy of which has been
delivered to Issuer with this Agreement, that all offers and
sales of the Shares prior to the expiration of a period
commencing on the date of the Closing of the last purchase and
sale of the Shares offered by the Issuer and ending 40 days
thereafter (the "Restricted Period") shall only be made (A) in
compliance with the safe harbor contained in Regulation S; (B)
pursuant to registration of Shares under the Securities Act; or
(C) pursuant to an exemption from registration.
(v) Purchaser represents and warrants and hereby agrees
that all offers and sales of the Shares shall only be made (A)
in compliance with the safe harbor contained in Regulation S;
(B) pursuant to registration of Shares under the Securities Act;
or (C) pursuant to an exemption from registration.
(vi) Purchaser understands and acknowledges that the Shares
have not been registered under the Securities Act and may not be
offered or sold in the United States or to U.S. persons or for
the account or benefit of a U.S. person (other than distributors
as defined in Regulation S) unless the Shares are registered
under the Securities Act or unless an exemption from the
registration requirements is available.
(vii) Purchaser acknowledges that the purchase of the
Shares involves a high degree of risk and further acknowledges
that it can bear the economic risk of the purchase of the
Shares, including the total loss of its investment. Purchaser
acknowledges that it has obtained the advice of competent legal
counsel in its domicile jurisdiction that Purchaser is qualified
under the laws of its domicile to purchase the securities
offered hereunder and that the offer and sale of said securities
will not violate the laws of its domicile jurisdiction.
(viii) Purchaser understands that the Shares are being
offered and sold to it in reliance on the rules promulgated
under Regulation S and that the Issuer is relying upon the truth
and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth
herein in order to determine the applicability of such rules and
the legality of Purchaser to acquire the Shares.
(ix) Purchaser is sufficiently experienced in financial,
tax and business matters so as to enable Purchaser to utilize
the information made available to Purchaser in connection with
the offering of Shares to evaluate the merits and risks of its
investments, and to make an informed decision relating thereto.
(x) Purchaser is not relying on the Company with respect
to the tax and other economic considerations of an investment in
the Shares, and in evaluating its investment, Purchaser has
consulted with its own investment and/or legal and/or tax
advisors.
(xi) Purchaser understands that in the view of the SEC the
statutory basis for the exemption claimed for this transaction
would not be present if the offering of Shares, although in
technical compliance with Regulation S, is part of a plan or
scheme to evade the registration provision of the Securities
Act. Purchaser is acquiring the Shares for investment purposes
and has no present intention to sell the Shares in the United
States, to a U.S. person or for the account or benefit of a
U.S. person. Purchaser hereby confirms that the purpose of
including the Purchaser Representation Letter (see Exhibit "B"
attached hereto) to facilitate the transfer of the certificates
representing the Shares into street name, is to enable Purchaser
to comply with the requirements of certain offshore portfolio
management regulations and the security requirements of offshore
lenders for margin loans.
(xii) Purchaser is neither an underwriter of, nor a
dealer in, the Shares. Purchaser is not participating, pursuant
to a contractual agreement, in the distribution of the Shares.
(xiii) Purchaser represents and warrants that neither
it nor any of its affiliates or agents will, directly or
indirectly, maintain any short position in Shares, Common Stock
or any other securities of the Issuer for so long as any of the
Shares owned by Purchaser have not been converted into Common
Stock; provided, however, that Purchaser may maintain a short
position with respect to the Shares provided that such short
position is covered by conversion of the Shares within three (3)
business days.
(xiv) Purchaser represents and warrants that it is an
"accredited investor" as that term is defined in Regulation D of
the Securities Act.
(xv) Purchaser represents and warrants that it is
purchasing its Shares with investment intent and presently has
no intent to sell, dispose of or otherwise transfer the Shares.
(xvi) Purchaser 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 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 Purchaser in connection with
investments in securities generally.
(xvii) As applicable, Purchaser has reached the age of
majority under the laws of domicile jurisdiction, has adequate
means of providing for Purchaser'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 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 Purchaser's net worth and, at the
present time, could afford a complete loss of such investment.
(xviii) Purchaser has full right and power to perform
pursuant to this Agreement and make an investment in the
Company.
If Purchaser is purchasing the Shares subscribed for hereby in
representative or fiduciary capacity, the representations and
warranties in this Agreement shall be deemed to have been made on
behalf of the person or persons for whom Purchaser is so purchasing.
The foregoing representations and warranties are true and
accurate as of the date hereof, shall be true and accurate as of the
date of the acceptance by the Issuer of Purchaser's subscription, and
shall survive thereafter. If Purchaser has knowledge, prior to the
acceptance of this Agreement by the Issuer, that any such
representations and warranties shall not be true and accurate in any
respect, Purchaser, prior to such acceptance, will give written
notice of such fact to the Issuer specifying which representations
and warranties are not true and accurate and the reasons therefor.
The representations, warranties and agreements of Purchaser contained
herein shall survive the execution and delivery of this Agreement and
the purchase of the Shares.
b. Current Public Information. Purchaser acknowledges that
Purchaser has acquired and carefully reviewed the Issuer's
preliminary draft of Form 10-K for its fiscal year ended December 31,
1996, and all of the Company's filings with the SEC for the 1996
fiscal year (the "SEC Reports"). Except as set forth in this
Agreement and the SEC Reports, no written or oral representations or
warranties have been made to Purchaser by the Issuer or any agent,
employee or affiliate of the Issuer, and in entering into this
transaction Purchaser is not relying upon any information, other than
that provided pursuant to this Agreement and the SEC Reports and the
results of independent investigation by Purchaser.
c. Independent Investigation; Access. Purchaser acknowledges
that Purchaser, in making the decision to purchase the Shares
subscribed for, has relied upon independent investigations made by it
and its Purchaser representative, if any, and Purchaser and such
representatives, if any, have, prior to any sale to Purchaser, had an
opportunity to ask questions of, and to receive answers from Issuer
or any person acting on its behalf concerning the terms and
conditions of this offering. Purchaser and its advisors, if any,
have been furnished with access to all publicly available materials
relating to the business, finances and operations of the Issuer and
materials relating to the offer and sale of the Shares which have
been requested. Purchaser has been supplied with or has sufficient
access to all information, including the audited financials for the
Company for the years ended December 31, 1996 and 1995, and has been
afforded with an opportunity to ask questions of the Company.
Purchaser and its advisors, if any, have received complete and
satisfactory answers to any such inquiries.
d. No Government Recommendations or Approval. Purchaser
understands that no federal or state agency has made or will make any
finding or determination relating to the fairness for public
investment in the Shares, or has passed or made, or will pass on or
make, any recommendation or endorsement of the Shares.
e. Entity Purchases. If Purchaser is a partnership,
corporation or trust, the person executing this Agreement on its
behalf represents and warrants that:
(i) He or she has made due inquiry to determine the
truthfulness of the representations and warranties made pursuant
to this Agreement;
(ii) He or she is duly authorized (if Purchaser is a trust,
by the trust agreement) to make this investment and to enter
into and execute this Agreement on behalf of such entity.
f. Limits on Amount of Conversion and Ownership.
(i) Other than the mandatory conversion provisions
contained in this Agreement, in no event shall Purchaser be
entitled to convert that amount of Shares in excess of that
amount upon conversion of which the sum of (1) the number of
shares of Common Stock beneficially owned by Purchaser and its
affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the
unconverted portion of the Shares), and (2) the number of shares
of Common Stock issuable upon the conversion of the Shares with
respect to which the determination of this proviso is being
made, would result in beneficial ownership by Purchaser and its
affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of this provision to the immediately
preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and Regulation 13 D-G
thereunder, except as otherwise provided in clause (1) of such
provision.
(ii) Purchaser 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 Common Stock
upon the conversion of Shares would require such approval.
Purchaser shall not be entitled to convert Shares in
contravention of the restrictions of Florida law relating to the
ownership of an equity interest in a pari-mutuel operator.
3. Issuer Representations.
Issuer represents and warrants to Purchaser as follows:
a. Reporting Company Status. Issuer is a "Reporting Issuer" as
defined by Rule 902 of Regulation S. Issuer has registered its
Common Stock pursuant to Section 12 of the Exchange Act. Issuer has
filed all material required to be filed pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange Act
for a period of at least twelve (12) months immediately preceding the
offer or sale of the Shares (or for such shorter period that Issuer
has been required to file such material).
b. Offshore Transaction. Issuer has not offered Shares to any
person in the United States or to any U.S. person or for the account
or benefit of any U.S. person.
c. No Directed Selling Efforts. In regard to this
transaction, Issuer, has not conducted any "directed selling efforts"
as that term is defined in Rule 902 of Regulation S nor has Issuer
conducted any general solicitation relating to the offer and sale of
Shares to U.S. persons residing within the United States or
elsewhere.
d. Shares. The Shares and shares of Common Stock issuable
upon conversion of the Shares, when issued and delivered will be duly
and validly authorized and issued, fully paid and non-assessable and
will not subject the holders thereof to any liability by reason of
being such holders. Except in the event of a change in Regulation S,
in which case Purchaser shall have the rights set forth in Section 13
of this Agreement, the stock certificates representing Common Stock
issued upon conversion of the Shares shall be unlegended and there
shall be no stop transfer instructions issued in relation to such
Common Stock.
e. Authority to Enter Agreement. This Agreement, when acknowl-
edged by the signature of an officer of the Issuer, has been duly
authorized, validly executed and delivered on behalf of the Issuer
and is a valid and binding agreement of the Issuer in accordance with
its terms.
f. Non-contravention. The execution and delivery of this
Agreement, the consummation of the issuance of the Shares and the
transactions contemplated hereunder do not and will not conflict with
or result in a breach by the Issuer of any of the terms or provisions
of, or constitute a default under, the certificate of incorporation
or by-laws of the Issuer (or any equivalent documents thereto) or any
indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Issuer is a party or by which it or any of
its properties or assets are bound, or any existing applicable law,
rule, or regulation or any applicable decrees, judgment, or order of
any court, federal or state regulatory body, administrative agency or
other governmental body having jurisdictions over the Issuer or any
of its properties or assets.
g. Prior Shares Issued Under Regulation S and Regulation D.
Since December 1995, the Company has raised approximately $5,250,000
in Regulation S offerings. Currently, $1,162,500 remains
unconverted. The Company has raised approximately $1,175,000 in
Regulation D offerings in the past twelve months of which $1,175,000
remains unconverted. There are 15 million authorized shares of
Common Stock of which approximately 4,588,524 shares of Common Stock
are issued and outstanding.
h. Securities Law Compliance. Based upon the representations
and warranties of Purchaser in Section 2 and of all other Purchasers
executing similar agreements in connection with this offering, with
respect to the Company's actions, to the best of the Company's
knowledge, (i) the offer and the sale of Shares has been made so as
to conform in all respects with the requirements of Regulation S and
with the requirements of all other published rules and regulations of
the SEC currently in effect relating to offerings to non-residents of
the United States of the type contemplated herein; and (ii) neither
the offer, sale or delivery of the Shares under the terms of this
Agreement will violate Section 5 of the Securities Act, as presently
in effect.
i. Filings. Issuer undertakes and agrees pursuant to the sale
of its securities under Regulation S to make all necessary filings in
connection with the sale of its securities as required by the laws
and regulations of the United States, including, Form 8-K and
mandatory NASDAQ notification, if any. Issuer further agrees, with
respect to the filing of Form 8-K, that it will only identify
Purchaser as an "accredited investor" as that term is defined in
Regulation D and will not disclose Purchaser's name in Form 8-K or
otherwise unless such disclosure is required by law.
j. Use of Proceeds. Issuer represents that the net
proceeds of this offering shall be used primarily for working
capital.
k. Concerning the Securities. The issuance, sale and
delivery of the Shares have been duly authorized by all required
corporate action on the part of Issuer, and when issued, sold and
delivered in accordance with the terms hereof and thereof for the
consideration expressed herein and therein, will be duly and validly
issued, fully paid and non-assessable. A sufficient number of shares
of Common Stock issuable upon conversion of the Shares has been duly
and validly reserved for issuance and upon issuance in accordance
with the terms of the Shares, shall be duly and validly issued, fully
paid, and non-assessable and will not subject the holders thereof, if
such persons are non-U.S. persons, to personal liability by reason of
being such holders. There are no pre-emptive rights of any of Issuer
with respect to any shares of Issuer's capital stock.
l. Threatened or Pending Litigation. The Company is not aware
of any threatened or pending litigation other than those matters
disclosed in its preliminary draft of its Form 10-K for its fiscal
year ended December 31, 1996.
m. True Statements. Neither this Agreement nor any of the
SEC Reports contain any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements
contained herein or therein not misleading in light of the
circumstances under which such statements are made. There exists no
fact or circumstances which, to the knowledge of the Company,
materially and adversely affects the business, properties, assets, or
conditions, financial or otherwise, of the Company, which has not
been set forth in this Agreement or disclosed in the SEC Reports.
4. Restricted Period; Conversion.
Rule 903 (c) under Regulation S (as currently in effect)
restricts Purchaser from offering and selling the Shares or the
shares of Common Stock into which the Shares may be converted
to U.S. persons or for the account or benefit of a U.S. person during
a forty (40) day Restricted Period.
5. Reliance on Representations.
Purchaser understands that the offer and sale of the Shares is
not being registered under the Securities Act. Issuer is relying on
the rules governing offers and sales made outside the United States
pursuant to Regulation S. This offering and sale of the Shares is
being conducted in accordance with the terms and conditions of Rules
901 through 903 of Regulation S as currently in effect.
6. Transfer Agent Instructions.
a. Legends on Certificate. Purchaser may transfer the Shares
to persons other than U.S. persons in accordance with Regulation S
prior to the expiration of the 40 day Restricted Period.
Accordingly, Purchaser acknowledges that the Company will place a
stop transfer order with respect to certificates representing the
Shares and that such certificates will bear the following legends:
"The securities represented by this certificate
have not been registered with the Securities and
Exchange Commission (the "SEC") under the United
States Securities Act of 1933, as amended (the
"Securities Act"), or the securities act of any
state under any states securities law. They
have been issued pursuant to an exemption from
registration under Regulation S ("Regulation S")
promulgated under the Securities Act. The
securities may not be offered, sold or otherwise
transferred in the United States or to U.S.
Persons (as such term is defined in Regulation
S) unless the securities are registered under
the Securities Act and applicable state
securities laws, or such offers, sales and
transfers are made pursuant to available
exemptions from the registration requirements of
those laws.
The transfer of shares of Common Stock issuable
upon conversion of the shares represented by
this certificate is limited by an Offshore
Securities Subscription Agreement for
Convertible Preferred Shares.
The Corporation will provide each stockholder on
request and without charge a copy of the
certificate of designations setting forth the
powers, designations, preferences and relative
rights of the Series E 8% Cumulative Convertible
Preferred Stock."
b. Purchaser Representation Letter. Issuer agrees to accept
a Purchaser's Representation Letter from Purchaser in the form of
Exhibit "B" attached, as sole and sufficient evidence that Purchaser
has complied with applicable securities laws and upon receipt of such
a letter shall promptly transfer, or instruct the transfer agent, for
the Shares, if any, to transfer the Shares into "Street Name", if so
requested by Purchaser, as expeditiously as practical after receipt
of the certificates and the Purchaser Representation Letter.
c. Transfer Agent Instructions. Issuer shall issue, or
instruct the transfer agent for the Shares, if any, to issue one or
more share certificates representing Shares, in the names of
qualified purchasers to be specified prior to the Closing (as
defined in Section 8). All of the Shares so issued will be issued
pursuant to Regulation S. Issuer warrants further that the Shares
shall be freely transferable on the books and records of Issuer
subject to compliance with Regulation S and other applicable
securities laws and the terms of this Agreement.
7. Conversion Procedures.
a. The number of shares of the Company's Common Stock,
issuable upon conversion of the Shares held by a Purchaser under the
terms of this Agreement shall equal the Subscription Proceeds plus
the amount of the accrued dividends through the Conversion Date, (as
that term is defined below) divided by the lesser of: (i) $7.50 per
share or (ii) 80% of the average closing bid price for the five (5)
days prior to, but not including, the day of conversion. Purchaser
is entitled, at its option to convert 25% of the Shares into shares
of Common Stock, 120 days after the Closing Date (as defined in
Section 8). Purchaser is entitled, at its option, to convert an
additional 25% (50% cumulatively) of the Shares into shares of
Common Stock anytime 150 days after the Closing Date. Purchaser is
entitled, at its option, to convert an additional 25% (75%
cumulatively) of the Shares into shares of Common Stock anytime 180
days after the Closing Date. Purchaser is entitled, at its option,
to convert an additional 25% (100% cumulatively) of the Shares into
shares of Common Stock anytime 210 days after the Closing Date.
Such conversion shall be effectuated by sending a facsimile and an
original of the signed Notice of Conversion to the Company at the
address set forth therein or such address as the Company may later
designate in written notice to Purchaser and a facsimile and original
of the signed Purchaser Representation Letter, see Exhibits "A" and
"B" attached hereto, which evidences Purchaser's intention to convert
the Shares or a specified portion thereof, and accompanied by proper
assignment, if applicable. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded down or up, as the case may be, to
the nearest whole share. The date on which the Notice of Conversion
is effective (the "Conversion Date") shall be deemed to be the date
on which Purchaser has delivered to the Company the original stock
certificates representing the Shares to be converted, a facsimile of
the signed Notice of Conversion and a facsimile of the signed
Purchaser Representation Letter, as long as the originals are
received and all other documents (in proper form) required to issue
and deliver Common Stock in accordance with Purchaser's instruction
(together, the "Original Documents") are received within 3 business
days thereafter. If the Original Documents are not received by the
Company within three business days from the Conversion Date, then the
Conversion Date shall be the date on which the Original Documents are
actually received by the Company. If after 10 business days after
the Conversion Date the Company has failed to honor a Conversion
Notice for any reason, then in such event, Purchaser shall have the
right to demand and receive from the Company the balance of
Subscription Proceeds paid, based on the number of Shares left
unconverted, plus interest based on the 8.0% cumulative dividend.
b. Within five (5) business days after the Conversion Date the
Company shall issue and deposit in overnight mail to Purchaser or any
party receiving the certificate for the number of shares of Common
Stock issuable upon the conversion by transfer from Purchaser
(together with Purchaser, a "Holder") at the address of the Holder on
the books of the Company. The stock certificate representing shares
of Common Stock issuable upon the conversion shall not bear a
restrictive legend, nor shall the shares be subject to any stop
order, except in the event of a change in Regulation S, in which case
Purchaser shall have the rights set forth in Section 13 of this
Agreement. It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Common
Stock as provided herein, including the delivery of an opinion letter
to the transfer agent, if so required. The person in whose name the
certificate of Common Stock is to be registered shall be treated as
a shareholder of record on and after the Conversion Date. No payment
or adjustment shall be made for accrued and unpaid dividends on the
Shares until the Shares are converted. Upon surrender of any Shares
that are to be converted in part, the Company shall issue to
Purchaser new Shares equal to the number of unconverted Shares, if
so requested by Purchaser. In the event the Company does not make
delivery of the Common Stock, as instructed by Purchaser, within 5
business days after the Conversion Date, then in such event the
Company shall pay to Purchaser an amount, in cash in accordance with
the following schedule, wherein "No. Business Days Late" is defined
as the number of business days beyond the 5 business days delivery
period.
Late Payment for Each
$10,000 of Subscription
No. Business Days Late Proceeds Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Late Beyond 10 Days
To the extent that the failure of the Company to issue the
Common Stock pursuant to this Section 7(b) is due to the
unavailability of authorized but unissued shares of Common Stock, the
provisions of this Section 7(b) shall not apply but instead the
provisions of Section 7(c) shall apply.
The Company shall pay any payments incurred under this Section
7(b) in immediately available funds within three (3) business days
from the date of delivery of stock certificates representing the
applicable Common Stock. Nothing herein shall limit a Purchaser's
right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to Purchaser within 6 business days after
the Conversion Date.
The Company recognizes the right of Purchaser to assign any
portion of the Shares to another non-U.S. Person during the 40 day
Restricted Period and to assign any portion of the Shares to another
non-U.S. Person or U.S. person or entity after the 40 day Restricted
Period.
c. If, at any time Purchaser submits a Notice of Conversion
and the Company does not have sufficient authorized but unissued
shares of Common Stock available to effect, in full, a conversion of
the Shares (a "Conversion Default", the date of such default being
referred to herein as the "Conversion Default Date"), the Company
shall issue to Purchaser all of the shares of Common Stock which are
available, and the Notice of Conversion as to any Shares requested
to be converted but not converted (the "Unconverted Shares") shall
become null and void. The Company shall provide notice of such
Conversion Default ("Notice of Conversion Default") to all existing
Purchasers of outstanding Shares, by facsimile, within one (1)
business day of such default (with the original delivered by
overnight or two day courier). No Purchaser may submit a Notice of
Conversion after receipt of a Notice of Conversion Default until
the date additional shares of Common Stock are authorized by the
Company.
The Company agrees to pay to all Purchasers of outstanding
Shares payments for a Conversion Default ("Conversion Default
Payments") in the amount of (N/365) x (.20) x the initial
Subscription Proceeds of the outstanding Shares held by each
Purchaser where N = the number of days from the Conversion Default
Date to the date (the "Authorization Date") that the Company
authorizes a sufficient number of shares of Common Stock to effect
conversion of all remaining Shares. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Shares that
additional shares of Common Stock have been authorized, the
authorization date of the additional shares of Common Stock and the
amount of Purchaser's accrued Conversion Default Payments. The
accrued Conversion Default shall be paid in cash or shall be
convertible into Common Stock at the Conversion Rate, at Purchaser's
option, payable as follows: (i) in the event Purchaser elects to
take such payment in cash, cash payments shall be made to such
Purchaser of outstanding Shares by the fifth day of the following
calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, Purchaser may convert such payment amount into
Common Stock at the Conversion Rate at anytime after the 5th day of
the calendar month following the month in which the Authorization
Notice was received, until the expiration of the mandatory 24 month
conversion period.
Nothing herein shall limit Purchaser's right to pursue actual
damages for the Company's failure to maintain a sufficient number of
authorized shares of Common Stock.
d. Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to Purchaser
at a rate in excess of the maximum rate permitted by governing law.
In the event that the rate of interest required to be paid exceeds
the maximum rate permitted by governing law, the rate of interest
required to be paid thereunder shall be automatically reduced to the
maximum rate permitted under the governing law and such excess shall
be returned with reasonable promptness by Purchaser to the Company.
8. Closing Date and Escrow Agent.
The date of the issuance of the Shares in the name of Purchaser
(the "Closing Date") shall be the date the funds were wired to the
Issuer by the Escrow Agent. The Closing ("Closing") shall be
effected through delivery of funds and certificates to the Escrow
Agent. Purchaser shall forthwith deliver the necessary funds as
indicated in Section 1 to the Escrow Agent. Share certificates
("Certificates") will be delivered at the instructions of the Issuer
to the Escrow Agent: Joseph B. LaRocco, Esquire, 1055 Washington
Boulevard, 8th Floor, Stamford, Connecticut 06901. Purchaser and
Issuer agree that the Escrow Agent, in his capacity as Escrow Agent,
has no liability as a result of any fraudulent or unlawful conduct of
any party other than the Escrow Agent and agree to hold the Escrow
Agent harmless except in circumstances involving gross negligence or
willful misconduct by the Escrow Agent. In the event the
Certificates are not received by the Escrow Agent from the Issuer
within Five (5) Business Days of the date of receipt of both the
executed original of this Agreement and the escrowed funds, the
Escrow Agent shall return the escrowed funds without interest to
Purchaser by wire transfer pursuant to written instructions.
9. Conditions to the Company's Obligation to Sell.
Issuer reserves the right to reject this Agreement prior to
signing by Issuer. Purchaser understands that Issuer's obligation to
sell the Shares subscribed for hereunder is conditioned upon:
a. The receipt and acceptance by Issuer of this Agreement for
all the Shares as evidenced by execution of this Agreement by an
officer of the Issuer. Purchaser understands this Agreement is
irrevocable after acceptance by Issuer; and
b. Delivery into the Escrow Agent by Purchaser of good U.S.
funds as payment in full for the purchase of the Shares and all fees.
10. Conditions to Purchaser's Obligation to Purchase.
Issuer understands that Purchaser's obligation to purchase the
Shares subscribed for hereunder is conditioned upon the following:
a. execution and delivery of this Agreement by the Issuer; and
b. delivery of Shares by Issuer to the Escrow Agent.
11. Redemption.
If, after one (1) year following the Closing Date, the twenty
(20) day average closing bid price is less than or equal to $7.50 per
share, then in such event, the Issuer shall have the right, for a
period of ten (10) days following the one year anniversary of the
Closing Date to redeem all, but not part, of the outstanding Shares.
The redemption price shall equal $1,150 per Share, plus accrued
dividends. Issuer must have cash or confirmed credit facilities
available to effect the redemption and the redemption must take place
within twenty (20) days of notice to Purchaser. Redemption shall be
effected by Purchaser delivering the remaining Shares left
unconverted to the Escrow Agent and the Issuer wiring said funds to
cover the redemption to the Escrow Agent.
12. Governing Law.
This Agreement shall be governed by and construed under the laws
of the State of Delaware without regard to its choice of law
principles.
13. Change in Regulation S.
a. If, during the twenty-four month period following the
issuance of the Shares, there is any change in Regulation S that
would restrict Purchaser's ability to resell Common Stock issued upon
the conversion of Shares ("Registrable Securities") into the United
States public securities markets after the Restricted Period,
Purchaser shall have the right to request that the Company register
its Registrable Securities under the Securities Act upon the terms
and conditions set forth in this Section 13. All expenses incurred
in connection with any registration or compliance pursuant to this
Agreement, including without limitation, all registration and filing
fees, printing expenses, fees and disbursement of counsel for the
Company, and expenses of any special audits incidental to or required
by such registration, shall be borne by the Company; provided,
however, that the Company shall not be required to pay fees of legal
counsel of Purchaser, or underwriters' fees, discounts, or
commissions relating to the Registrable Securities. Purchaser shall
provide the Company all information concerning Purchaser required to
be included in the registration statement or that the Company may
reasonably request in connection with any registration pursuant to
this Section 13.
b. Upon the written demand of holders of 20% of the
Registrable Securities then outstanding or subject to issuance upon
the conversion of then outstanding Shares, the Company shall prepare
and file a registration statement under the Securities Act covering
the Registrable Securities for which registration is requested by any
of the Purchasers ("Demand Registration"), which shall take effect
not later than 120 days after the date such demand is delivered to
the Company. Upon receipt of the written demand for registration,
the Company shall notify all remaining Purchasers, who shall notify
the Company by fax or otherwise in writing, not later than 10 days
after the date notice is first sent by the Company, of any
Registrable Securities such Purchasers wish to include in the
registration. The Company shall not be obligated to effect more than
one registration pursuant to this Section 13(b).
c. If the Purchasers initiating the registration request
hereunder ("Initiating Purchaser") intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, the Initiating Purchaser shall so advise the Company as
a part of their request made pursuant to this Section 13 and the
Company shall include such information in the written notice referred
to in subsection 13(a). In such event, the right of any Purchaser to
include its Registrable Securities in such registration shall be
conditioned upon such Purchaser's participation in such underwriting
and the inclusion of such Purchaser's Registrable Securities in the
underwriting. All Purchasers proposing to distribute their
securities through such underwriting shall, together with the
Company, enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Purchasers, and reasonably
acceptable to the Company; provided that no Purchaser shall be
required to make any representations other than with respect to its
ownership of Registered Securities and its intended method of
distribution.
d. The Company is not obligated to effect a Demand
Registration under this Section 13 if in the written opinion of
counsel to the Company reasonably acceptable to the Initiating
Purchaser (and satisfactory to the Company's transfer agent to permit
the transfer) that registration under the Securities Act is not
required for the immediate public transfer of all Registrable
Securities pursuant to Rule 144 or other applicable provisions.
e. If the Company is not eligible to effect a registration at
the time of a Demand Registration under the terms of Section 13(b) of
this Agreement, then the Company shall pay to all Purchasers of
outstanding Shares a penalty equal to the amount of the Conversion
Default Penalty ("Conversion Default Penalty") set forth in Section
7(b) of this Agreement for each day beyond 120 days of the receipt of
a request for a Demand Registration until such registration is
complete. If, on the date (the "Conversion Eligibility Date") that
Shares become eligible for conversion into Common Stock, the Common
Stock is not listed on OTC-Bulletin Board, NASDAQ Small Cap or
National Market, or a national stock exchange, then the Company shall
pay to all Purchasers of outstanding Shares that are eligible for
immediate conversion a penalty equal to the amount of the Conversion
Default Penalty for each day beyond the Conversion Eligibility Date
until such listing is complete.
f. If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration
effected by the Company for shareholders other than Purchaser) any
of its Common Stock under the Securities Act in connection with the
public offering of such securities (other than a registration
relating solely to the sale of securities to participants in a
Company stock plan or a registration on Form S-4 or any successor or
similar form for registration of securities issuable upon a
reclassification, upon a business combination involving an exchange
of securities or upon an exchange offer for securities of the Issuer
or another entity), the Company shall, at such time, promptly give
each Purchaser written notice of such registration. Upon the written
request of each Purchaser given by fax within ten (10) days after
mailing of such notice by the Company, which request shall state the
intended method of disposition of such shares by such Purchaser, the
Company shall cause to be registered under the Securities Act all of
the Registrable Securities that each such Purchaser has requested to
be registered (a "Piggyback Registration").
g. If the Company has to file a registration statement,
pursuant to any of the provisions of this Section 13, then the
Company shall upon said filing use its best efforts to promptly
respond to any SEC comments issued with respect to the registration
statement. Upon satisfaction of all SEC requirements the Company
will act to have the registration statement declared effective within
15 business days after the date upon which the SEC has no further
comments. In the event the Company does not have the registration
statement declared effective within 15 business days of the date the
Company has satisfied all SEC requirements and after the SEC has no
further comments (other than at the direction of one or more
Purchasers), then in such event the Company shall pay cash liquidated
damages to Purchaser in an amount equal to 2% of the Subscription
Proceeds of the then outstanding shares per 30 day period until the
registration statement is declared effective.
14. Right of First Refusal.
The Company hereby covenants and agrees that for a period of six
months following the Closing Date, it shall not seek any further
financing pursuant to Regulation S or Regulation D. Purchaser is
hereby given a pro-rata right of first refusal on any Regulation S or
Regulation D offering involving the Company for the period beginning
six (6) months following the Closing Date and ending twelve (12)
months following the Closing Date. Purchaser shall have 5 business
days from the date the Company sends a facsimile and an original copy
of the subscription agreement to Purchaser in which to accept by
signing the subscription agreement and faxing it to the Company.
After Purchaser receives a fax copy of the subscription agreement
signed by the Company, Purchaser shall have three business days in
which to wire the funds pursuant to the terms of the subscription
agreement.
15. Entire Agreement.
This Agreement constitutes the entire agreement among the
parties hereof with respect to the subject matter hereof and
supersedes any and all prior or contemporaneous representations,
warranties, agreements and understandings in connection therewith.
This Agreement may be amended only in writing executed by all
parties hereto.
16. Independent Counsel. Purchaser acknowledges that it has been
advised to consult with its own attorneys and financial advisors
regarding this Agreement.
17. Arbitration. The parties shall resolve any dispute
arising hereunder before a panel of three arbitrators selected
pursuant to and run in accordance with the Commercial Arbitration
rules of the American Arbitration Association, as such rules may be
modified or as otherwise agreed by the parties in controversy The
arbitration shall be held in New York, New York. Each party shall
bear its own attorney's fees and costs of such arbitration.
Disputes under this Agreement as well as all of the terms and
conditions of this Agreement shall be governed in accordance with
and by the laws of the State of Delaware.
18. Full Name and Address of Purchaser for Registration Purposes:
NAME:_____________________________________________________________
ADDRESS:__________________________________________________________
__________________________________________________________________
__________________________________________________________________
TELE.NO.__________________________________________________________
FAX NO.____________________________________________________________
COMPANY
NAME:____________________________________________________________
19. Delivery Instructions: (If different from Registration Name):
NAME:______________________________________________________________
ADDRESS:___________________________________________________________
___________________________________________________________________
TELE. NO.__________________________________________________________
FAX NO.____________________________________________________________
CONTACT
NAME:____________________________________________________________
SPECIAL
INSTRUCTIONS:_____________________________________________________
__________________________________________________________________
20. Issuer's Acceptance Based Upon Purchaser Representations.
Issuer is accepting this subscription based upon and in
reliance upon the representations and warranties of Purchaser
contained herein, including without limitation, those contained in
section 2 and this Agreement would not be accepted by Issuer in the
absence of such representations and warranties.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Offshore Securities Subscription Agreement
was duly executed as of the _______ day of April, 1997.
COMPANY
Name:______________________________________________________________
Purchaser
By:_____________________________________
Official Signatory of Purchaser
Name (Printed):____________________________________________________
Title:_____________________________________________________________
Country of
Execution:_________________________________________________________
Accepted this ___ day of the month of _________________________,
1997.
FLORIDA GAMING CORPORATION
By:_________________________________________
Bennett Collett, Its CEO, duly authorized
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Preferred Shares.)
Florida Gaming Corporation
Attention: Mr. Timothy L. Hensley
Miami Jai-Alai
3500 N. W. 37th Avenue
Miami, Florida 33142
Telephone (305) 633-6400
Facsimile (305) 634-7013
The undersigned hereby irrevocably elects, as of
______________, 199_ to convert ________ Series E 8% Cumulative
Convertible Preferred Shares of Florida Gaming Corporation (the
Company") represented by stock certificates No.(s) _______ into
shares of Common Stock of the Company according to the conditions
set forth in the Subscription Agreement dated _____________, 199_.
If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and in delivering herewith such
certificates and furnish stock powers and other transfer documents
as reasonably required by the Company or its transfer agent with
medallion guarantees. No fee will be charged to the undersigned
for any conversion, except for transfer taxes, if any.
The undersigned represents that: (i) it is familiar with and
understands the terms, conditions and requirements contained in
Regulation S ("Regulation S") promulgated under the Securities Act
of 1933, as amended (the "Act") as it is currently in effect; (ii)
it is not a "U.S. person" or "distributor" as defined in Regulation
S; (iii) it purchased the Shares being converted and is acquiring
the Common Stock referenced herein, for its own account and not for
the account or benefit of any U.S. Person; (iv) it is not and has
not been an executive officer or director of the Company or an
"affiliate" of the Company (as such term is defined in the Act),
nor has any person affiliated with the undersigned had such status
with the Company; (v) neither it nor any of its affiliates or
agents will, directly or indirectly, maintain any short position in
Shares, Common Stock or any other securities of the Issuer for so
long as any of the Shares owned by Purchaser have not been
converted into Common Stock; provided, however, that the
undersigned may maintain a short position with respect to the
Shares provided that such short position is covered by conversion
of the Shares within three (3) business days; (vi) it has no prior
understanding with respect to the sale of the Common Stock to any
third party; (vii) it has not engaged in any "directed selling
efforts" (as such term is defined in Regulation S) with respect to
the Common Stock issuable upon the conversion of the Shares; (viii)
it purchased the Shares with investment intent; and (ix) it
received the offer to purchase the Shares outside the United States
and at the time the Agreement pursuant to which the Shares was
executed was, and upon execution of this Notice of Conversion is,
outside the United States.
Date of Conversion*_________________________________________
Applicable Conversion Price_________________________________
Signature___________________________________________________
[Name]
Address for delivery of the Common Stock____________________
____________________________________________________________
____________________________________________________________
Phone______________________ Fax___________________________
Please call at ________________ if you need to confirm this
facsimile Notice of Conversion.
___________________________
PURCHASER NAME
BY:________________________
TITLE:_____________________
DATE:______________________
EXHIBIT B
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned__________________, has purchased on
_______________, 1997, ______________ Series E 8% Cumulative
Convertible Preferred Shares (the "Shares") of
_______________________________________ (the "Company"). In
connection with such purchase, the undersigned, has executed and
delivered a subscription agreement ("Subscription Agreement") of your
design. As the forty (40) day transaction restriction period has
expired, the undersigned hereby requests that the Shares be
transferred into "Street Name" of __________________________.
The undersigned represents and warrants as follows:
(1) The offer to purchase the Shares was made to it outside of the
United States and the undersigned was, at the time the Subscription
Agreement was executed and delivered, and is now, outside the United
States;
(2) It is not a U.S. Person (as such term is defined in Section
902(a) of Regulation S promulgated under the United States Securities
Act of 1933, as amended, (the "Securities Act"); and it has purchased
the Shares for its own account and not for the account or benefit of
any U.S. person;
(3) All offers and sales by the undersigned of the Shares shall be
made pursuant to an effective registration statement under the
Securities Act or pursuant to and exemption from, or in a transaction
not subject to the registration requirements of, the Securities Act;
(4) It is familiar with and understands the terms, conditions and
requirements contained in Regulation S and definitions of U.S.
persons contained in Regulation S;
(5) The undersigned has not engaged in any "directed selling
efforts" (as such term is defined in Regulation S) with respect to
the Shares or the Common Stock of the Company ("Common Stock") that
is issuable upon conversion; and
(6) The undersigned purchased its Shares with investment intent and
at the time of the purchase of said Shares had no interest to sell,
dispose of or otherwise transfer the Shares. The purpose for this
request is to facilitate the management of the undersigned's
investment accounts.
(7) Neither it nor any of its affiliates or agents will, directly or
indirectly, maintain any short position in Shares, Common Stock or
any other securities of the Company for as long as any of the Shares
owned by Purchaser have not been converted into Common Stock;
provided, however, that the undersigned may maintain a short position
with respect to the Shares provided that such short position is
covered by conversion of the Shares within three (3) business days.
(8) Limits on Amount of Conversion and Ownership. Other than the
Mandatory Conversion provisions contained in the Subscription
Agreement which are not limited by the following, in no other event
shall Purchaser be entitled to convert that amount of Shares in
excess of that amount upon conversion of which the sum of (1) the
number of shares of Common Stock beneficially owned by Purchaser and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion
of the Shares), and (2) the number of shares of Common Stock issuable
upon the conversion of the Shares with respect to which the
determination of this proviso is being made, would result in
beneficial ownership by Purchaser and its affiliates of more than
4.9% of the outstanding shares of Common Stock of the Company. For
purposes of this provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13 D-G thereunder, except as otherwise provided in clause
(1) of such provision.
Dated this ___ day of the month of ___________________, 199 .
By:
_______________________________ ______________________
Official Signature of Purchaser Title
