<PAGE> 1
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
/ / Preliminary Information Statement / / Confidential, for Use of
the Commission Only (as
permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
FAIR GROUNDS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
FAIR GROUNDS CORPORATION
1751 GENTILLY BOULEVARD
NEW ORLEANS, LOUISIANA 70119
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Fair Grounds Corporation:
Please take notice that the annual meeting of shareholders of Fair
Grounds Corporation (the "Company") will be held on Tuesday, June 4, 1996, at
2:00 p.m., Central Time, at the Fair Grounds Race Course, 1751 Gentilly
Boulevard, New Orleans, Louisiana, for the following purposes:
1. To elect seven directors;
2. To consider and vote upon a proposal to ratify the action of the
Board of Directors in selecting Rebowe & Company to serve as independent
accountants to audit the financial statements of the Company for the fiscal
year ending October 31, 1996; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 11,
1996 as the record date for the determination of shareholders entitled to
notice of and to vote at the annual meeting and at any adjournment thereof. A
list of such shareholders will be available for inspection at the time and
place of the meeting.
All shareholders are cordially invited to attend the meeting at which
sandwiches and refreshments will be served.
By Order of the Board of Directors
JoAn B. Stewart
Secretary
May 15, 1996
<PAGE> 3
FAIR GROUNDS CORPORATION
1751 Gentilly Boulevard
New Orleans, Louisiana 70119
INFORMATION STATEMENT
This Information Statement is furnished to the shareholders of Fair
Grounds Corporation (the "Company") in connection with the annual meeting of
shareholders which is to be held on Tuesday, June 4, 1996, at 2:00 p.m.,
Central Time, at the Fair Grounds Race Course, 1751 Gentilly Boulevard, New
Orleans, Louisiana. This Information Statement and the Company's 1995 Annual
Report to Shareholders are being first sent or given to shareholders on or
about May 15, 1996.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the annual meeting, the Company's shareholders will consider and
vote upon (i) the election of seven directors to serve until the next annual
meeting of shareholders and until their respective successors are duly elected
and qualified and (ii) a proposal to ratify the action of the Board of
Directors in selecting Rebowe & Company to serve as independent accountants to
audit the financial statements of the Company for the fiscal year ending
October 31, 1996.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
VOTING SECURITIES AND VOTING RIGHTS; RECORD DATE
Common shares, without par value, are the only voting securities of
the Company. Holders of record of common shares outstanding at the close of
business on April 11, 1996 will be entitled to one vote for each common share
held of record on such date upon each matter presented to the shareholders to
be voted upon at the annual meeting. At the close of business on April 11,
1996, the Company had outstanding 468,180 common shares. The presence, in
person or by proxy, of a majority of the common shares of the Company
outstanding on the record date will constitute a quorum for the transaction of
business at the annual meeting. Pursuant to the Company's Bylaws the
affirmative vote of the holders of a majority of the common shares which are
present in person or by proxy at the annual meeting is required to elect
directors and to ratify the selection of auditors. Ballots, together with any
proxies sent to the Company, which are marked to "withhold authority" for the
election of any one or more nominees for election as directors and ballots,
together with any proxies sent to the Company, which are marked "abstain" with
respect to the ratification of the Company's selection of independent
accountants will be counted for the purpose of determining the number of common
shares represented at the meeting, and will have the same effect as a negative
vote for the
<PAGE> 4
purpose of determining whether the requisite vote has been obtained with
respect to any matter voted upon at the meeting.
ELECTION OF DIRECTORS
Directors of the Company are elected annually to serve until the next
annual meeting of shareholders and until their respective successors are
elected and qualified. The number of directors has been fixed at seven and the
Board of Directors has nominated the persons listed below for election as
directors at the annual meeting. Common shares of the Company represented at
the annual meeting may only be voted for seven nominees. Each of the nominees
for election as a director currently is serving as a member of the Board of
Directors of the Company and previously was elected by the shareholders. If
any of the nominees, each of whom has indicated his or her willingness to serve
as a director if elected, is unable or declines to serve, a replacement nominee
will be designated at the annual meeting or, in lieu thereof, the Board of
Directors may reduce the number of persons to be elected as directors at the
annual meeting. The Articles of Incorporation of the Company provide that
directors must have actual ownership or all legal or constructive control of at
least 400 common shares of the Company.
The following table shows each nominee for election as a director of
the Company, his or her age, present positions and offices with the Company,
principal occupation and the name and principal business of the corporation or
other organization in which such occupation has been carried on, the year he or
she first became a director of the Company and directorships in certain other
corporations, based upon information furnished to the Company by each nominee
or otherwise available to the Company. Unless otherwise indicated, each
nominee for election as a director of the Company has engaged in the
occupations stated below for at least the last five years. No family
relationships exist between or among any nominee, director or executive officer
of the Company, except that Bryan G. Krantz is the son of Marie G. Krantz.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE SINCE
- ------- --- --------
<S> <C> <C>
KATHERINE F. DUNCAN 68 1991
Private Investor; Director of Planned Giving of
Audubon Institute, Inc., which owns and operates
the Audubon Zoo and the Aquarium of the Americas,
since July 1991; Vice President and Secretary of
Foster Company, a company engaged in the sale and
rental of decorative awnings and special-event
tents, prior to July 1991.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE SINCE
- ------- --- --------
<S> <C> <C>
RICHARD KATCHER 77 1994
Practicing Attorney with Baker and Hostetler, Cleveland,
Ohio.
BRYAN G. KRANTZ 35 1990
President and General Manager of the Company; Vice President
of Jefferson Downs Corporation, a company which owns a horse
racing track that was used until 1992 to conduct live horse
racing in Louisiana; President of Finish Line Management
Corporation, which operates certain off-track betting facilities
in Louisiana.
MARIE G. KRANTZ 60 1990
Chairman of the Board of Directors and Treasurer of the
Company; President of Jefferson Downs Corporation; Secretary-
Treasurer of Finish Line Management Corporation.
RONALD J. MAESTRI 55 1991
Athletic Director, University of New Orleans.
CHARMAINE R. MOREL 61 1987
Assistant to the Financial Manager, Fennelly & Bayley, Inc.,
d/b/a Mike's on the Avenue, a restaurant in New Orleans, since
October 1991; Secretary of Victory Management Group, a company
providing management services, from January 1993 to December
1995; Secretary-Treasurer of Empire Land Corporation, a
corporation engaged in oil and gas production, prior to
October 1991.
DONALD L. PELTIER 69 1977
Practicing attorney with Peltier, Morvant & Cavell (or its pre-
decessor); Chairman of the Board of ArgentBank (or its pre-
decessor), a banking institution.
</TABLE>
3
<PAGE> 6
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four meetings during the
fiscal year ended October 31, 1995. Each incumbent director attended at least
75% of the aggregate of the meetings of the Board of Directors and the meetings
of all committees on which he or she served held during such fiscal year.
The Board of Directors has two standing committees, the Executive
Committee and the Compensation Committee. The Executive Committee, which is
currently comprised of Marie G. Krantz, Bryan G. Krantz and Ronald J. Maestri,
did not meet during the fiscal year ended October 31, 1995. The Compensation
Committee, which is currently comprised of Richard Katcher, Charmaine R. Morel
and Donald L. Peltier, reviews executive compensation, makes recommendations to
the Board of Directors concerning the same, and administers the Fair Grounds
Corporation Stock Option Plan, including the selection of key employees to
participate therein and the determination of options to be granted thereunder.
The Compensation Committee met one time during the fiscal year ended October
31, 1995.
The Company pays each director (including directors who are employees
of the Company) a retainer of $3,600 annually, payable quarterly.
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers and holders of more
than 10% of the common shares of the Company to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of common shares of the Company. Based upon a review
of these filings and written representations from the applicable reporting
persons, the Company believes that its directors and executive officers
complied with all applicable Section 16(a) filing requirements during the
fiscal year ended October 31, 1995.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table sets forth certain information regarding the
beneficial ownership of common shares of the Company, as of May 1, 1996, of (i)
each person who, to the knowledge of the Company, owns beneficially more than
5% of the outstanding common shares of the Company, (ii) each director and
nominee for election as a director, (iii) each of the current executive
officers of the Company listed in the summary compensation table below and (iv)
all directors and executive officers of the Company as a group. The
information set forth in the following table is based upon statements filed by
such persons with the Commission and information otherwise available to the
Company. Unless otherwise indicated, each person has sole voting and
investment power of the common shares of the Company beneficially owned by him
or her.
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP CLASS(A)
- ---------------- -------------------- -----
<S> <C> <C>
Katherine F. Duncan 480 *
Richard Katcher 0 (b)(d) -
Bryan G. Krantz 342,204 (b)(d) 73.1%
Marie G. Krantz 340,584 (c)(d) 72.7%
Ronald J. Maestri 480 *
Charmaine R. Morel 480 *
Donald L. Peltier 2,513 (e) *
All Directors and Executive
Officers as a Group 346,537 (f) 74.0%
</TABLE>
- --------------------
* Less than 1% of Class.
(a) The percentage of class beneficially owned has been computed on the
basis of 468,180 common shares outstanding on May 1, 1996.
(b) In April 1996, Richard Katcher, Trustee u/t/a/ between John G. Masoni
and John G. Masoni, Trustee, pursuant to a restatement of his Trust
Agreement dated April 19, 1991, as modified (the "Trust"), transferred
the 339,604 common shares of the Company previously owned by the Trust
to Bryan G. Krantz for the consideration described below. Bryan G.
Krantz has reported to the Commission that he is the beneficial owner
of 340,104 common shares held by Marie G. Krantz as Voting Trustee
under the Voting Trust Agreement described below, constituting 72.6%
of the common shares outstanding; 2,000 common shares held jointly by
him and his wife, constituting less than 1% of the common shares
outstanding; and 100 shares held by Jefferson Downs Corporation
("Jefferson Downs"), constituting less than 1% of the common shares
outstanding. Bryan G. Krantz has the sole power to dispose or direct
the disposition of the 340,104 common shares held by Marie G. Krantz
as Voting Trustee, and shares with his wife the power to vote or
direct the vote and to dispose or direct the disposition of the 2,000
common shares held jointly with her. He may be deemed to share with
Marie G. Krantz the power to vote or direct the vote and the power to
dispose or direct the disposition of the 100 common shares held by
Jefferson Downs. Mr. Krantz's address is 1751 Gentilly Boulevard,
New Orleans, Louisiana 70119.
(c) Marie G. Krantz has reported to the Commission that she is the
beneficial owner of 380 common shares held directly by her,
constituting less than 1% of the common shares outstanding; and of 100
common shares held by Jefferson Downs, constituting less than 1% of
the common shares outstanding; and that she may be deemed to be the
beneficial owner of the 340,104 common shares held by her as Voting
Trustee under the Voting Trust Agreement described below, constituting
72.6% of the common shares outstanding. In such capacity as Voting
Trustee, Ms. Krantz has the sole power to vote or direct the vote of
the 340,104 common shares held by her as Voting Trustee. She also has
the sole power to vote or direct the vote and the sole power to
dispose or direct the disposition of the 380 common shares held by her
directly. She may be deemed to share with Bryan G. Krantz the power
to vote or direct the vote and the power to dispose or direct the
disposition of the 100 common shares held by Jefferson Downs. The
Voting Trust Agreement, to which Bryan G. Krantz, Richard Katcher and
Marie G. Krantz are parties, provides that
5
<PAGE> 8
title to the 340,104 common shares is vested in Marie G. Krantz as
Voting Trustee during the term of the Voting Trust Agreement, and that
in such capacity she may exercise all rights of a holder of common
shares of the Company, including the right to vote such common shares.
Bryan G. Krantz is not entitled during the term of the Voting Trust
Agreement to vote the common shares subject to the Voting Trust
Agreement or to take any other action that holders of common shares
are entitled to take in their capacities as shareholders; however, he
does have the right to receive any and all dividends and distributions
made by the Company to the holders of common shares. The Voting Trust
Agreement is for an initial term of 15 years, is irrevocable during
its term, and is to survive the death of the grantors under the Voting
Trust Agreement. It may be extended for an additional 10 years at the
written request of such grantors. The common shares which are subject
to the Voting Trust Agreement may not be transferred, sold, assigned
or otherwise disposed of by Marie G. Krantz during the term of the
Voting Trust Agreement, other than in connection with any corporate
event or action which affects common shares other than the common
shares subject to the Voting Trust Agreement. Ms. Krantz's address is
1751 Gentilly Boulevard, New Orleans, Louisiana 70119.
(d) Bryan G. Krantz and Marie G. Krantz, who together are the beneficial
owners of an aggregate of 342,584 common shares, constituting
approximately 73.2% of the common shares outstanding, have reported to
the Commission that they constitute a "group" within the meaning of
section 13(d)(3) of the Exchange Act. By virtue of their beneficial
ownership of common shares of the Company and the matters set forth in
filings made by them under Section 13(d) of the Exchange Act, Marie G.
Krantz and Bryan G. Krantz may be deemed to be controlling persons of
the Company.
(e) Includes 679 common shares held directly by Mr. Peltier and 1,834
common shares of the Company held by members of Mr. Peltier's family
who have given Mr. Peltier powers of attorney to vote and dispose of
such common shares.
(f) See notes (b) - (e) above. The number of common shares shown as
beneficially owned includes any directors qualifying shares held by
each director and nominee for election as a director.
CHANGE IN CONTROL; PLEDGE OF COMMON SHARES
In April 1996, Richard Katcher, Trustee u/t/a/ between John G. Masoni
and John G. Masoni, Trustee, pursuant to a restatement of his Trust Agreement
dated April 19, 1991, as modified (the "Trust"), transferred the 339,604 common
shares of the Company previously owned by the Trust to Bryan G. Krantz for an
aggregate consideration of $9,984,358. Such purchase price was evidenced by a
promissory note (the "Note") in the principal amount of $9,984,358, bearing
interest at the rate of 5.76% per annum. Interest accrues on the Note until
the first to occur of (i) the expiration of three years from the date of the
Note or (ii) the death of Helen Masoni, whereupon such accrued interest is due
and payable. Thereafter, interest is due and payable quarterly. The principal
balance of the Note is due and payable in full nine years from the date of the
Note. The Note may not be prepaid in whole or in part.
The Note is a nonrecourse obligation, but is secured by a Stock Pledge
Agreement executed by Bryan G. Krantz and Marie G. Krantz, in her capacity as
Voting Trustee under the Agreement described below, in favor of the Trust.
Accordingly, in the event of a default on the Note, the Trust is limited to
foreclosure of the common shares which are the subject of such Stock Pledge
Agreement, although such rights are subordinate to the security interest of the
First National Bank of Commerce, as described below.
6
<PAGE> 9
Simultaneously with the transfer of such common shares from the Trust
to Bryan G. Krantz, as described above, Bryan G. Krantz and the Trust entered
into an Amendment to Voting Trust Agreement with Marie G. Krantz as Voting
Trustee, pursuant to which the parties, among other things, (i) agreed to the
cancellation of a voting trust certificate previously issued to the Trust and
the issuance of a new voting trust certificate to Bryan G. Krantz relating to
the 339,604 common shares acquired from the Trust; (ii) confirmed that such
common shares remain subject to the terms and conditions of the Voting Trust
established pursuant to the Voting Trust Agreement; and (iii) confirmed that
the common shares transferred to Bryan G. Krantz by the Trust remain subject to
the pledge agreement described below in favor of the First National Bank of
Commerce.
All of the 342,584 common shares of the Company owned in the aggregate
by Marie Krantz, Bryan Krantz, Vickie Krantz and Jefferson Downs are subject to
pledge agreements (the "Pledge Agreements") in favor of the First National Bank
of Commerce ("FNBC"), as security for the Company's obligations under a Loan
Agreement entered into with FNBC in 1995. Pursuant to the Pledge Agreements,
each such shareholder has granted to FNBC a security interest in all common
shares of the Company owned by such shareholder, and in any additional common
shares which may be received. So long as the Company's indebtedness under the
Loan Agreement remains outstanding, the common shares subject to the Pledge
Agreements may not be sold, transferred or disposed of in any way. Unless and
until an event of default occurs, each shareholder is entitled to exercise all
voting rights and receive all dividends with respect to such shares. In the
event of a default, including a default under any other guaranty or security
agreement entered into in connection with the Loan Agreement, FNBC will be
entitled, among other things, to transfer all or part of the pledged shares
into its name, exercise all voting rights and sell all or any part of such
shares. Any such sale of all or a substantial portion of the common shares
subject to the Pledge Agreements would result in a change of control of the
Company.
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for services in all capacities to the Company
for the fiscal years ended October 31, 1995, October 31, 1994 and October 31,
1993 of the chief executive officer of the Company. No executive officer of
the Company received salary and bonus totalling more than $100,000 for the
fiscal year ended October 31, 1995.
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
Other
Annual All Other
Name and Compen- Compen-
Principal Position Year Salary Bonus sation(1) sation
- ------------------ ---- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
BRYAN G. KRANTZ 1995 $ 75,000 $ 0 -- $3,600(2)
President and 1994 75,000 0 -- 3,600
General Manager 1993 75,000 0 -- 3,600
</TABLE>
____________________________________
(1) For each of the fiscal years listed, Mr. Krantz did not receive
perquisites or other personal benefits in excess of the amounts
required to be disclosed under the revised rules on executive
compensation disclosure adopted by the Commission; accordingly, such
amounts are omitted from this column.
(2) Consists of the annual retainer paid to Mr. Krantz as a director of
the Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Board of Directors of the Company has designated a Compensation
Committee (the "Compensation Committee") to review and make recommendations
regarding the compensation for executive officers of the Company and to
administer the Stock Option Plan. The Compensation Committee is currently
composed of three directors who have never served as officers of the Company.
The Compensation Committee, which first began functioning in fiscal
1993, has continued certain annual and long-term compensation policies earlier
developed by the Board of Directors which are intended to motivate, retain and
attract management and to enhance the profitability of the Company and, thus,
shareholder value. The Compensation Committee believes that the components of
compensation for the Company's executive officers should be annual salaries
and, where appropriate, bonuses and stock options.
Annual salaries for executive officers of the Company have
historically been set at levels intended to be comparable to those which are
paid to persons serving in similar capacities at racing facilities throughout
the United States. Salaries have generally been reviewed on an annual basis
and may be increased based upon an increase in such comparative pay levels or
upon the determination that the individual's performance and contribution to
the Company merit such an increase. No objective, performance-based criteria
have been established for use in determining executive compensation. The
Compensation Committee has noted, however, that since the Company is in a
highly competitive industry and continues to operate in a difficult
8
<PAGE> 11
competitive environment in Louisiana, any review of, and decisions with respect
to, executive compensation must be made in light of other Company policies
which are designed to control costs and improve operating performance.
In light of the uncertainties resulting from the December 17, 1993
fire and the difficult competitive environment in Louisiana, the Compensation
Committee concluded that the annual salaries of Marie G. Krantz, the Chairman
of the Board, and Bryan G. Krantz, the Company's President and Chief Executive
Officer, in fiscal 1995 should remain at $75,000 each, which was the level to
which these executive officers voluntarily reduced their annual salaries in
fiscal 1993, and Ms. Krantz and Mr. Krantz agreed that their annual salaries
should continue at that reduced level.
The Compensation Committee recognizes that bonuses can be an important
component of executive compensation and can be granted based on corporate and
individual performance. While the Compensation Committee may propose the
implementation of a formal bonus program at some time in the future, it
concluded that no such proposal would be made in fiscal 1995 in view of the
above-stated uncertainties and difficulties. The Compensation Committee has
also confirmed that in the future it may recommend the payment of bonuses to
officers on the basis of corporate or individual performance, in the absence of
a formal bonus program and without necessarily having established
performance-based criteria.
Long-term incentive compensation has been available through the Stock
Option Plan, the purpose of which is to provide an incentive and inducement to
key employees of the Company to remain in the Company's employment and to
participate in the ownership and successful operation of the Company's
business. No specific performance criteria have been followed in making option
grants; rather, eligibility for grants has been determined on a case-by-case
basis in light of overall performance and contribution to the Company. No
options were granted during the 1995 fiscal year. The Compensation Committee
continues to believe, however, that in the future grants of stock options can
be used to (i) encourage and facilitate personal stock ownership by key
executives; (ii) strengthen the personal commitment of such officers to the
Company; and (iii) provide a direct link between the interests of the officers
and those of the Company's other shareholders.
In its meeting in fiscal 1995 the Compensation Committee discussed
further the implementation of more specific compensation policies. However, in
view of the difficulties caused by the fire and the uncertainties resulting
therefrom and because of the continued difficult competitive environment in the
Louisiana gaming industry, the Compensation Committee concluded that the
adoption of more specific compensation policies or criteria, or any attempt to
relate them to corporate performance, would be further deferred.
<TABLE>
<S> <C>
Members of the Compensation Committee: Richard Katcher
Charmaine R. Morel
Donald L. Peltier
</TABLE>
9
<PAGE> 12
PERFORMANCE OF COMMON SHARES
The following compares the cumulative total shareholder return on
investment (the change in year-end stock price plus reinvestment of dividends)
for each of the last five fiscal years, assuming that $100 was invested on
October 31, 1990 in each of (i) Fair Grounds Corporation, (ii) a group of
stocks consisting of all domestic companies whose stocks are listed on Nasdaq
and (iii) a group of stocks consisting of non-financial industry stocks listed
on Nasdaq. The Total Return Index for the Nasdaq Stock Market and the Total
Return Index for Nasdaq Non-Financial Stocks were prepared by the Center for
Research in Securities Prices at the University of Chicago.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
CRSP TOTAL CRSP TOTAL
RETURN INDEX RETURN INDEX
FOR NASDAQ FOR NASDAQ
MEASUREMENT PERIOD FAIR GROUNDS (U.S. COM- NON-FINAN-
(FISCAL YEAR COVERED) CORPORATION PANIES) CIAL STOCKS
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 89.92 169.19 168.55
1992 111.59 190.78 179.28
1993 70.59 245.82 231.36
1994 70.59 247.14 229.58
1995 158.09 332.87 303.99
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors served on the Compensation
Committee of the Board of Directors of the Company during the fiscal year ended
October 31, 1995: Richard Katcher, Charmaine R. Morel and Donald L. Peltier.
During the fiscal year ended October 31, 1995 the Trust of which Mr. Katcher
serves as trustee was the beneficial owner of 339,604 common shares of the
Company, constituting approximately 72.5% of the common shares issued and
outstanding, which shares were transferred to Bryan G. Krantz in April 1996 and
continue to be held by Marie G. Krantz as Voting Trustee. In connection with
the financing described herein, the Trust entered into a Pledge Agreement in
1995 pursuant to which it pledged and
10
<PAGE> 13
granted to FNBC a security interest in the common shares of the Company
beneficially owned by the Trust. See "Beneficial Ownership of Common Shares."
CERTAIN TRANSACTIONS
During 1992 Jefferson Downs, a corporation owned by Marie G. Krantz
and Bryan G. Krantz, did not renew its license application with the Louisiana
Racing Commission for live racing and, accordingly, did not conduct live racing
in 1993. In August 1992, Jefferson Downs assigned to the Company all of its
right, title and interest in and to the leases on its tele-track facilities in
Terrebone, St. Tammany and Jefferson Parishes, Louisiana. Such assignment was
effective on May 27, 1993, the date the Louisiana Racing Commission approved
the transfer to the Company of all licenses necessary for the operation of such
tele-tracks.
During 1992 the Company entered into a Management Agreement (the
"Management Agreement") with Finish Line Management Corporation ("Finish
Line"), an affiliate. The Management Agreement provides that Finish Line is to
operate the former Jefferson Downs tele-track facilities described above for a
period of ten years, commencing November 1, 1992, with the option granted to
Finish Line to extend the term of the Management Agreement for two additional
five-year periods. The Management Agreement provides that Finish Line is to
have the exclusive responsibility for the direction, supervision, management
and operation of such facilities, is to collect all monies from such operation
and is to pay all expenses in connection therewith. The Company is to receive
0.1% of the gross pari-mutuel handle at such facilities, and Finish Line is to
receive monthly compensation equal to the difference between the gross receipts
collected at such facilities less all expenses (including the payment to the
Company described above) paid by Finish Line. In addition, Finish Line is to
indemnify the Company for, among other things, all obligations under the leases
assigned by Jefferson Downs to the Company. During the fiscal year ended
October 31, 1995, Finish Line paid the Company $67,593 under the Management
Agreement, host track fees of $520,267 and purse supplements of $2,448,955. As
of October 31, 1995, the Company had accounts receivable from Finish Line in
the aggregate amount of $237,632.
The Company, Jefferson Downs and Finish Line are parties to an
agreement with VSI, whereby VSI has the exclusive right and license to install,
maintain and operate video draw poker devices at the Fair Grounds Race Course
and Jefferson Downs Race Course and at the tele-tracks operated by the Company,
Jefferson Downs and Finish Line. Such agreement was entered into in November
1992 for an initial term of five years, with an option by VSI to extend the
term for an additional five years. The agreement provides that the Company is
to receive a percentage of the revenues from the operation of the devices
installed at the Company's facilities. Such percentage is to be calculated on
the basis of the average amount collected daily from each device during each
month, after the payment of prizes, taxes and fees. The devices which have
been installed and are to be installed by VSI pursuant to such agreement remain
the property of VSI. As of October 31, 1995, there were a total of 250 devices
in operation at all of the Company's facilities (excluding the tele-tracks
operated for the Company by Finish Line) and 449 devices in operation at
facilities managed by Finish Line. In fiscal 1995, the Company
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received gross revenue of $1,132,127, including amounts to be paid as purse
supplements of $433,443. In addition, such agreement provides that the
Company, Jefferson Downs and Finish Line are entitled to receive an annual
promotional allowance from VSI in the aggregate amount of $270,000, which for
the fiscal year ended October 31, 1995 was paid in full to the Company. The
agreement also provides for advances annually from VSI against future revenues
of up to $1 million in the aggregate to the Company, Jefferson Downs and Finish
Line. The Company received all of such advance during the year ended October
31, 1995 and has also received such an advance during the current fiscal year.
The Company anticipates that it will continue to receive revenues pursuant to
the agreement with VSI.
The Company and Marie and Bryan Krantz are also shareholders in
Southern Video Services, Inc. ("SVS"), a Louisiana corporation which is an
affiliate of VSI. SVS was organized for the purpose of operating video poker
devices in authorized locations in Louisiana other than the facilities covered
by the agreement with VSI, as described above. Each of the Company and Marie
and Bryan Krantz as a group owns shares of nonvoting common stock of SVS,
constituting approximately 17% of the total common stock of SVS outstanding.
VSI and Louisiana Ventures, Inc., which is also a shareholder of SVS, are
affiliates of United Gaming, Inc., which owns and operates coin-operated gaming
devices in Nevada and Louisiana. SVS is not actively engaged in any business
in Louisiana.
Marie Krantz is a director, the President and the owner of 66 2/3% of
the outstanding common stock, and Bryan Krantz is a director, Vice President
and the owner of 33 1/3% of the outstanding common stock, of Jefferson Downs.
Marie Krantz is a director, executive officer and the owner of 66 2/3% of the
outstanding common stock, and Bryan Krantz is a director, executive officer and
the owner of 33 1/3% of the outstanding common stock, of Finish Line. By
virtue of such positions and ownership and their positions with and
relationship with such entities, the Company, Finish Line and Jefferson Downs
may be deemed to be affiliates.
Marie Krantz and Bryan Krantz each own 50% of the outstanding common
stock of Continental Advertising, Inc. ("Continental"), an advertising agency
which provided advertising services to the Company during the last fiscal year.
During the 1995 fiscal year, the Company made advances to Continental of
$462,321 for advertising services. As of October 31, 1995, the Company was due
$28,575 from Continental. The Company expects to continue to utilize
Continental's services during the current fiscal year.
The Company and FNBC are parties to a Loan Agreement pursuant to which
the Company borrowed funds during the fiscal year ended October 31, 1995 in the
aggregate principal amount of $9,493,050. During 1995 the Company's
indebtedness thereunder was guaranteed by Marie Krantz (with respect to an
aggregate principal amount of $5.4 million) and Finish Line. The guaranties
provide that in the event of a default by the Company each such guarantor
agrees, in the event of a default by the Company under the Loan Agreement, to
pay the aggregate principal amount of the indebtedness, plus interest, costs
and attorney's fees, subject to the aggregate limitation in the case of Ms.
Krantz's guaranty. In addition, Marie Krantz granted FNBC a security interest
in certain investment securities held by her and a
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mortgage of all the real property formerly constituting the Jefferson Downs
Race Course, and Finish Line and Jefferson Downs granted to FNBC a security
interest in substantially all of the property, furniture, fixtures and
equipment owned by each such corporation. Also in connection with the Loan
Agreement, each of Marie Krantz, Bryan Krantz, Vickie Krantz, Richard Katcher
and Jefferson Downs pledged to FNBC all of the common shares of the Company
owned by such shareholder. See "Beneficial Ownership of Common Shares."
From time to time, persons who are officers, directors or principal
shareholders of the Company own or have interests in horses racing at the
Company's race track. Such races are conducted under the rules and regulations
of the Louisiana Racing Commission, and no officer, director or principal
shareholder receives any extra or special benefits not shared by all others so
racing.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Rebowe & Company to
audit the financial statements of the Company for the fiscal year ending
October 31, 1996, and, in accordance with the Board of Directors' policy of
seeking annual shareholder ratification of the selection of auditors, requests
that such selection be ratified. Rebowe & Company or its predecessor has
audited the Company's financial statements for the past several fiscal years;
however, due to the destruction of records at the Fair Grounds Race Course as a
result of the fire on December 17, 1993, the financial statements for the
fiscal year ended October 31, 1993 were not audited.
A representative of Rebowe & Company will be present at the annual
meeting, will have an opportunity to make a statement if he so desires and will
be available to answer appropriate questions from shareholders.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE SELECTION OF REBOWE & COMPANY TO AUDIT THE FINANCIAL STATEMENTS OF
THE COMPANY FOR THE FISCAL YEAR ENDING OCTOBER 31, 1996.
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSALS TO BE PRESENTED AT MEETINGS
The Company's Bylaws provide that a shareholder who desires to propose
any business at a meeting of shareholders must give the Company written notice,
which must be received by the Company not later than ten days following the
date on which the Company first gives written
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or printed notice to shareholders of such meeting, or, if the meeting is
adjourned and the Company is required by Louisiana law to give notice of the
adjourned meeting date, within five days after the date on which the Company
first gives written or printed notice to shareholders of such adjourned
meeting, setting forth (a) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting; (b) the name and address of the shareholder who intends to propose
such business; (c) a representation that the shareholder is a holder of record
of shares of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at such meeting to propose such business; and (d) any
material interest of the shareholder in such business. The Chairman of the
meeting may refuse to transact any business presented at any meeting without
compliance with the foregoing procedure. The ten-day period referred to above
will expire ten days after the date on which the accompanying notice of annual
meeting of shareholders is first mailed to shareholders of the Company.
SHAREHOLDER NOMINATIONS FOR DIRECTORS
The Company's Bylaws provide that a shareholder who desires to
nominate directors at a meeting of shareholders must give the Company written
notice, which must be received by the Company not later than ten days following
the date on which the Company first gives written or printed notice to
shareholders of such meeting, or, if the meeting is adjourned and the Company
is required by Louisiana law to give notice of the adjourned meeting date,
within five days after the date on which the Company first gives written or
printed notice to shareholders of such adjourned meeting, setting forth (a) the
name and address of the shareholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of shares of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would have
been required to be included in an information statement filed pursuant to the
rules of the Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a director of the Company if so elected.
The Chairman of the meeting may refuse to acknowledge the nomination of any
person if a shareholder has failed to comply with the foregoing procedure. The
ten-day period referred to above will expire ten days after the date on which
the accompanying notice of annual meeting of shareholders is first mailed to
shareholders of the Company.
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OTHER MATTERS
The Board of Directors does not intend to bring any business before
the annual meeting other than that stated herein and is not aware of any other
matters that may be presented for action at the meeting.
By Order of the Board of Directors
JoAn B. Stewart
Secretary
May 15, 1996
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