<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:
<TABLE>
<S> <C>
[ ] Preliminary Information Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
[x] Definitive Information Statement
</TABLE>
FAIR GROUNDS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] 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 transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 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, May 20, 1997, 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, CPAs (a professional
corporation) to serve as independent accountants to audit the financial
statements of the Company for the fiscal year ending October 31, 1997; 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 17,
1997 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
April 30, 1997
<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, May 20, 1997, 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 1996 Annual
Report to Shareholders are being first sent or given to shareholders on or
about April 30, 1997.
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, CPAs (a professional corporation) to
serve as independent accountants to audit the financial statements of the
Company for the fiscal year ending October 31, 1997.
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 17, 1997 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 17,
1997, the Company had outstanding 468,580 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 purpose of determining whether the requisite vote has been
obtained with respect to any matter voted upon at the meeting.
<PAGE> 4
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, except
Wayne E. Thomas, who was elected by the Board of Directors in August 1996. 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 69 1991
Private Investor; Director of Planned Giving of
Audubon Institute, Inc., which owns and operates
the Audubon Zoo and the Aquarium of the Americas.
RICHARD KATCHER 78 1994
Practicing Attorney with Baker and Hostetler, Cleveland,
Ohio.
BRYAN G. KRANTZ 36 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
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE SINCE
- ------- --- --------
<S> <C> <C>
Corporation, which operates certain off-track betting facilities
in Louisiana.
MARIE G. KRANTZ 61 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 56 1991
Athletic Director, University of New Orleans.
CHARMAINE R. MOREL 62 1987
Assistant to the Financial Manager, Fennelly & Bayley, Inc.,
d/b/a Mike's on the Avenue, a restaurant in New Orleans;
Secretary/Treasurer of Victory Management Group, a company
providing management services, from January 1993 to December
1995.
WAYNE E. THOMAS 49 1996
Self-employed insurance agent.
</TABLE>
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four meetings during the
fiscal year ended October 31, 1996. 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 in such fiscal year during the
time he or she served as a director or as a member of such committee.
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, 1996. The Compensation
Committee, which is currently comprised of Richard Katcher and Charmaine R.
Morel, 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,
1996.
The Company pays each director (including directors who are employees
of the Company) a retainer of $3,600 annually, payable quarterly.
3
<PAGE> 6
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table sets forth certain information regarding the
beneficial ownership of common shares of the Company, as of April 1, 1997, 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP CLASS(A)
- ---------------- ----------------- ----------
<S> <C> <C>
Katherine F. Duncan 480 *
Richard Katcher 400 *
Bryan G. Krantz 342,204 (b)(d) 73.0%
Marie G. Krantz 340,584 (c)(d) 72.7%
Ronald J. Maestri 480 *
Charmaine R. Morel 480 *
Wayne E. Thomas 400 (e) *
All Directors and Executive
Officers as a Group 344,824 (f) 73.6%
</TABLE>
- ---------------------------
* Less than 1% of Class.
(a) The percentage of class beneficially owned has been computed on the
basis of 468,580 common shares outstanding on April 1, 1997.
4
<PAGE> 7
(b) 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 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; however, 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. 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; 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 ten years at the written request of such grantors.
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) Mr. Thomas purchased 400 common shares in April 1997.
(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.
5
<PAGE> 8
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 then 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 Voting Trust Agreement described herein, 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.
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 and amended and restated in 1997 (as
so amended and restated, the "Loan Agreement"). 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
6
<PAGE> 9
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, 1996, October 31, 1995 and October 31,
1994 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, 1996.
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 1996 $ 75,000 $ 0 -- $3,600(2)
President and 1995 75,000 0 -- 3,600
General Manager 1994 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 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 Company's Stock Option Plan. The
7
<PAGE> 10
Compensation Committee is currently composed of two directors who have never
served as officers of the Company.
The policies of the Compensation Committee 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.
Salaries for executive officers are generally reviewed on an annual
basis and may be increased based 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 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 in 1996 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, should remain at $75,000 each for fiscal 1996, 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 1996 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
Company's 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 1996 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
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<PAGE> 11
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 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 in 1996 that the adoption of more specific compensation policies or
criteria, or any attempt to relate them to corporate performance, would be
further deferred.
Members of the Compensation Committee: Richard Katcher
Charmaine R. Morel
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, 1991 in each of (i) Fair Grounds Corporation, (ii) a group of
stocks consisting of all domestic companies whose stocks are listed on The
Nasdaq Stock Market and (iii) a group of stocks consisting of non-financial
industry stocks listed on The Nasdaq Stock Market. 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.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fair Grounds Corp. 100 121.67 80.67 80.67 168.17 134.17
CRSP NASDAQ 100 112.76 145.29 146.07 196.74 232.22
CRSP Non-Financial 100 106.38 137.28 136.22 182.60 211.44
</TABLE>
9
<PAGE> 12
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, 1996: Richard Katcher, Charmaine R. Morel and (until his
resignation from the Board of Directors in August 1996) Donald L. Peltier. The
Trust, of which Mr. Katcher is trustee, is a party to a Pledge Agreement
entered into in connection with the financing obtained by the Company under the
Loan Agreement. See "Beneficial Ownership of Common Shares."
CERTAIN TRANSACTIONS
The Company is a party to a Management Agreement (the "Management
Agreement") with Finish Line Management Corporation ("Finish Line"). The
Management Agreement provides that Finish Line is to operate former Jefferson
Downs tele-track facilities in Terrebonne, St. Tammany and Jefferson Parishes,
Louisiana 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, 1996, Finish Line paid the
Company $88,835 under the Management Agreement, host track fees of $363,275 and
purse supplements of $4,337,179. As of October 31, 1996, the Company had
accounts payable to Finish Line in the aggregate amount of $88,227.
The Company, Jefferson Downs and Finish Line are parties to an
agreement with Video Services, Inc. ("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, which
option has been exercised. 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 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 installed by VSI
pursuant to such agreement remain the property of VSI. As of October 31, 1996,
there were a total of 234 devices in operation at all of the Company's
facilities (excluding the tele-tracks operated for the Company by Finish Line)
and 419 devices in operation at facilities managed by Finish Line. In fiscal
1996, the Company received gross video poker revenue of $1,955,551, including
amounts to be paid as purse supplements of $821,973. In addition, such
agreement provides that the Company,
10
<PAGE> 13
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, 1996 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, 1996
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.
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 1996 fiscal year, the Company made advances to Continental of
$341,000. As of October 31, 1996, the Company was due $64,800 from
Continental. The Company is continuing to utilize Continental's services
during the current fiscal year.
As described elsewhere herein, the Company and FNBC are parties to the
Loan Agreement, and the Company's indebtedness thereunder has been guaranteed
by Finish Line. In addition, Marie G. Krantz has granted FNBC a security
interest in certain investment securities held by her, and Finish Line and
Jefferson Downs have 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 has pledged to
FNBC all of the common shares of the Company owned by such shareholder.
In connection with payment by the Company during 1996 of the remaining
principal balance of a mortgage loan due to Louie J. Roussel, III, Marie G.
Krantz made a short-term loan of $1 million to the Company in October 1996.
The loan bore interest at the rate of 8.25%, and was repaid in full together
with all accrued interest, in January 1997. Total interest paid to Marie G.
Krantz under such short-term loan was approximately $15,000.
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.
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RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Rebowe & Company, CPAs
(a professional corporation) to audit the financial statements of the Company
for the fiscal year ending October 31, 1997, 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.
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, 1997.
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSALS TO BE PRESENTED AT ANNUAL MEETINGS
The Company's Bylaws provide that a shareholder who desires to propose
any business at an annual 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) 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
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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.
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
April 30, 1997
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