<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
Registration Statement No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
ALPHA HOSPITALITY CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 7011, 7993 13-3714474
- - - ---------------- -------------------------- ----------------------
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code)
organization)
12 East 49th Street
New York, New York 10017
(212) 750-3500
------------------
(Address, including zip code and telephone number,
including area code, of Registrant's principal
executive offices)
-------------------
Consulting Agreement dated August 26, 1997
------------------------------------------
(Full Title of the Plan)
JAMES A. CUTLER
Chief Financial Officer
ALPHA HOSPITALITY CORPORATION
12 East 49th Street
New York, New York 10017
(212) 750-3500
----------------------
(Name, address, including zip code and telephone number, including area
code, of agent for service)
Copies To:
-------------------------
JAY M. KAPLOWITZ, ESQ.
Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP
101 East 52nd Street
New York, New York 10022
(212) 752-9700
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box /x/
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum Amount of
Securities To Amount Being Offering Price Aggregate Registration
Be Registered Registered(1) Per Security(2) Offering Price Fee
- - - --------------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Common 36,000 $2.625 $94,500 $100
Stock, par
value $.01 per
share
</TABLE>
(1) Pursuant to Rule 416, the Registration Statement also relates to
an indeterminate number of additional shares of Common Stock
issuable in respect of stock splits, stock dividends and similar
transactions.
(2) The price is estimated in accordance with Rule 457(h)(i) under
the Securities Act of 1933, as amended, solely for the purpose of
calculating the registration fee. The closing price as reported
on the Nasdaq Stock Market on October 2, 1997 (within 5 days
prior to the filing of this Registration Statement).
(ii)
<PAGE>
EXPLANATORY NOTE
This Registration Statement on Form S-8 relates to the registration
of 36,000 shares of Common Stock issued pursuant to a consulting
agreement dated August 26, 1997 by and among the Company and Jay M.
Kaplowitz, Wesley C. Fredericks, Jr., Arthur S. Marcus and Fredric J.
Gruder (collectively, "Selling Stockholders"). A Prospectus has been
prepared in accordance with the requirements of Form S-3 pursuant to
General Instruction C of Form S-8 with regard to the resale of the
shares of Common Stock by the Selling Stockholders.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Pursuant to the Note to Part I of the Form S-8, the information
required by Part I is not filed with the Securities and Exchange
Commission.
The Company will provide without charge to each person to whom a
copy of a Section 10(a) Prospectus hereunder is delivered, upon the oral
or written request of such person, a copy of any document incorporated
in this Registration Statement by reference, except exhibits to such
documents. Requests for such information should be directed to Alpha
Hospitality Corporation, 12 East 49th Street, New York, New York 10017,
Attention: Corporate Secretary, telephone number (212) 750-3500.
(iii)
<PAGE>
PROSPECTUS
ALPHA HOSPITALITY CORPORATION
----------------
36,000 SHARES OF COMMON STOCK
Par Value, $.01 Per Share
----------------
This Prospectus relates to offers and sales of 36,000 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common
Stock"), of Alpha Hospitality Corporation, a Delaware corporation (the
"Company"), by certain selling stockholders (the "Selling
Stockholders"). The Shares have been issued to the Selling Stockholders
pursuant to a consulting agreement dated August 26, 1997 by and among
the Company and the Selling Stockholders. The Company's Common Stock is
traded over-the-counter through the Nasdaq Stock Market ("NASDAQ") under
the symbol "ALHY" and through the Boston Stock Exchange ("BSE") under
the symbol ("ALH"). The closing sale price of the Company's Common
Stock on October 2, 1997 as quoted on NASDAQ, was $2.625.
The Shares covered by this Prospectus may be offered and sold from
time to time directly by the Selling Stockholders or through brokers in
the over-the-counter market or otherwise at market prices prevailing at
the time of such sales or in one or more negotiated transactions at
prices acceptable to the Selling Stockholders. No specified brokers or
dealers have been designated by the Selling Stockholders and no
agreement has been entered into in respect of brokerage commissions or
for the exclusive or coordinated sale of any securities which may be
offered pursuant to this Prospectus. The net proceeds to the Selling
Stockholders will be the proceeds received by them upon such sales, less
brokerage commissions, if any. The Company will pay all expenses of
preparing and reproducing this Prospectus. The Company will not receive
any proceeds from the sale of the Shares.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED OR
INCORPORATED BY REFERENCE HEREIN AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY BE MADE. NEITHER THE
DELIVERY OF THIS PROSPECTUS NO ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THE INFORMATION HEREIN SINCE THE DATE
HEREOF. SEE "RISK FACTORS."
-----------------------------------------------
The date of this Prospectus is October 7, 1997
1
<PAGE>
TABLE OF CONTENTS
Page
Available Information................................................3
Incorporation of Certain Documents by Reference......................4
The Company..........................................................5
Management..........................................................18
Risk Factors........................................................20
Use of Proceeds.....................................................28
Selling Stockholders................................................29
Plan of Distribution................................................30
Indemnification of Officers and Directors...........................31
Legal Matters ......................................................31
Experts ............................................................31
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports and other information with the Commission.
Such reports, proxy statements, registration statements and other
information can be examined without charge at the public reference
section maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and, upon payment of the fees prescribed by the
Commission, copies may be obtained therefrom and at certain of the
Commission's Regional Offices located at 7 World Trade Center, New
York, New York 10048; 5757 Wilshire Boulevard, Los Angeles, California
90024; and 500 West Madison Street, Northeastern Atrium Center, Suite
1400, Chicago, Illinois 60661-2511.
The Company's Common Stock is quoted on The Nasdaq Stock Market
("NASDAQ"). Reports, proxy statements, information statements, and
other information concerning the Company can be inspected at the
office of the National Association of Securities Dealers, Inc.,
located at 1735 K Street, N.W., Washington, DC 20006.
This Prospectus is part of a registration statement on Form S-8
(the "Registration Statement") under the Securities Act of 1933 (the
"Securities Act") which the Company has filed with the Commission for
the registration of the securities offered by this Prospectus. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company, references is hereby
made to such Registration Statement, exhibits and schedules, which may
be obtained from the Commission's principal office in Washington,
D.C., upon payment of the fees prescribed by the Commission.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Alpha Hospitality Corporation
(the "Company") with the Commission are incorporated herein by
reference:
(1) The Company's Registration Statement on Form SB-2, as
amended (File No. 33-64236).
(2) Annual Report on Form 10-K for the year ended December 31,
1996.
(3) The Company's Registration Statement on Form S-1, declared
effective by the SEC on August 8, 1996 (File No. 333-3606).
(4) Post-Effective Amendment No. 1 to the Company's Registration
Statement on Form S-1, declared effective by the SEC on
January 31, 1997 (File No. 333-3606).
(5) Quarterly Report on Form 10-Q for the period ended March 31,
1997.
(6) Quarterly Report on Form 10-Q for the periods ended June 30,
1997.
In addition to the foregoing, all documents subsequently filed by
the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a
post-effective amendment indicating that all of the securities offered
hereunder have been sold or deregistering all securities then
remaining unsold, shall be deemed to be incorporated by reference in
this Registration Statement and to be part hereof from the date of
filing of such documents.
Any statement contained in a document incorporated by reference
in this Registration Statement shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent
that a statement contained herein or in any subsequently filed
document that is also incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement. All information
appearing in this Registration Statement is qualified in its entirety
by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference, except to
the extent set forth in the immediately preceding statement.
The Company will provide without charge to each person to whom a
copy of a this Prospectus is delivered, upon the oral or written
request of such person, a copy of any document incorporated in this
Registration Statement by reference, except exhibits to such
documents. Requests for such information should be directed to Alpha
Hospitality Corporation, 12 East 49th Street, New York, New York
10017, Attention: Corporate Secretary, telephone number (212)
750-3500.
4
<PAGE>
THE COMPANY
Alpha Hospitality Corporation (the "Company"), through its eight
subsidiaries, is engaged in (i) the ownership and operation of a
gaming vessel, the Bayou Caddy's Jubilee Casino (the "Jubilee
Casino"), located in Greenville, Mississippi, which is operated by the
Company's subsidiary Alpha Gulf Coast, Inc. ("Alpha Gulf"), and (ii)
the pursuit of gaming licenses for additional casinos in various
states (which is accomplished through the Company's subsidiaries Alpha
Missouri, Inc. ("Alpha Missouri"), Alpha Monticello, Inc. ("Alpha
Monticello"), Alpha Rising Sun, Inc. ("Alpha Rising Sun"), Jubilation
Lakeshore, Inc. ("Jubilation Lakeshore") and Alpha St. Regis, Inc.
("Alpha St. Regis")). From September 1993 through December 1996, the
Company, through its former subsidiary, Alpha Hotel Management
Company, Inc. (Alpha Hotel), provided management services to hotels
and motels owned by third-parties. Additionally, from December 1995
to July 16, 1996, the Company, through its subsidiary Jubilation
Lakeshore, formerly known as the Cotton Club of Greenville Inc. (the
"Cotton Club"), operated a second gaming vessel, the Jubilation
Casino.
The Company was incorporated in Delaware on March 19, 1993; Alpha
Gulf was incorporated in Delaware on May 4, 1993; Jubilation Lakeshore
was incorporated in Mississippi on December 8, 1992; Alpha Missouri
was incorporated in Delaware on March 17, 1995; Alpha Monticello was
incorporated in Delaware on May 30, 1996; Alpha Rising Sun was
incorporated in Delaware on August 6, 1993; Alpha St. Regis was
incorporated in Delaware on June 24, 1994; Alpha Entertainment, Inc.
was incorporated in Delaware in March 1997, and Alpha Greenville
Hotel, Inc. was incorporated on February 19, 1997. The Company's
principal executive offices are located at 12 East 49th Street, New
York, New York, 10017 and its telephone number is 212-750-3500.
Casino Operations
Current Operations
The Company currently operates the Jubilee Casino in Greenville,
Mississippi. In addition, from December 1995 through July 16, 1996,
the Company operated a casino located in Lakeshore, Mississippi.
Although management is satisfied with the results of operation of the
Jubilee Casino, the Jubilation Casino continued to operate at a
deficit. As a result, in July 1996, management began to implement its
plans to close the Jubilation Casino during August 1996. On July 16,
1996, operation of the Jubilation Casino was suspended in compliance
with a directive of the Mississippi Gaming Commission (the
"Mississippi Commission') which asserted that the working capital of
the Jubilation Casino was not sufficient. The Mississippi Commission
required that the Jubilation Casino's working capital be increased.
This working capital requirement was reviewed by Jubilation Lakeshore
in light of its previously announced plan to close the Jubilation
Casino during August 1996 and the costs which would be incurred to
reopen the Jubilation Casino. Based on this review, Jubilation
Lakeshore decided not to reopen the Jubilation Casino. See "The
Jubilation Casino."
The Jubilation Casino
Upon the October 1995 acquisition of the Cotton Club casino, this
casino was renamed the
5
<PAGE>
Jubilation Casino and relocated from Greenville to Lakeshore,
Mississippi, where it reopened on December 21, 1995. Management
believed that the smaller Jubilation Casino could adequately service
the existing Lakeshore market with substantially reduced cost of
operations. However, based upon the Jubilation Casino's limited
capacity, remote location and the increasing casino development in the
Biloxi and Gulfport markets (which have proven more attractive to
casino patrons), the Jubilation Casino was unable to overcome
operating deficits. As a result, in July 1996 management began to
implement its plans to close the Jubilation Casino during August 1996.
On July 16, 1996, operation of the Jubilation Casino was suspended in
compliance with a directive of the Mississippi Commission which
asserted that the working capital of the Jubilation Casino was not
sufficient. The Mississippi Commission required that the Jubilation
Casino's working capital be increased. This working capital
requirement was reviewed by Jubilation Lakeshore in light of its
previously announced plan to close the Jubilation Casino during August
1996 and the costs which would be incurred to reopen the Jubilation
Casino. Based on this review, Jubilation Lakeshore decided not to
reopen the Jubilation Casino.
In connection with the plan to close the Jubilation Casino,
management believes it has taken all appropriate action required by
federal law with respect to providing notice of such closing to its
employees. In connection with the closing of the Jubilation Casino,
management updated its assessment of the realizability of the
leasehold improvements and related assets of the Jubilation Casino.
Since this would have resulted in an impairment loss of approximately
$14,507,000 and stockholders' equity below the requirements for
continued listing of the Company's securities on NASDAQ, the Company
accepted proposals by Bryanston and BP to convert approximately
$19,165,000 and $1,222,000, respectively, of debt to 693,905 and
44,258 shares of Series B Preferred Stock.
The Jubilee Casino
The Jubilee Casino, located in Greenville, Mississippi, is owned
and operated by the Company's wholly-owned subsidiary Alpha Gulf. On
May 14, 1993, pursuant to an asset purchase agreement among Alpha
Gulf, B.C. of Mississippi, Inc. ("B.C.") (formerly known as Bayou
Caddy, Inc.), and certain shareholders of B.C., the Company acquired
B.C.'s leasehold interests under certain lease agreements and certain
other assets incidental to the development and ownership of the
Jubilee Casino. The Company proceeded with this acquisition because
it gave the Company the opportunity to enter the casino business in
Lakeshore, Mississippi, the original site of the Jubilee Casino.
Moreover, B.C. had already initiated the process of obtaining
requisite approvals for casino operation in Lakeshore, thereby
expediting the Company's ability to conduct casino operations in
Mississippi.
The Company initiated the Jubilee Casino's gaming operations on
January 12, 1994, subsequent to its construction on a marine vessel in
1993, which construction received the requisite approvals from the U.
S . Army Corps of Engineers and the Mississippi Department of Natural
Resources. Prior to the initiation of the Jubilee Casino's gaming
operations, the Company applied for and received the required license
renewals and approvals from the Mississippi Gaming Commission (the
"Mississippi Commission"). See "Business - Government Regulation -
Licensing Mississippi.
6
<PAGE>
Following the Cotton Club Acquisition, the Company transferred
the Jubilee Casino from Lakeshore to Greenville. The Jubilee Casino
reopened in Greenville on November 17, 1995. The movement of the
Jubilee Casino to Greenville increased the capacity at Greenville and
brought an upscale facility to the Greenville market. Management
believed that the relocation of the Jubilee Casino to Greenville was
an appropriate action designed to increase the return on the Company's
gaming assets in Mississippi.
The Jubilee Casino has 844 slot machines and 29 table games. In
addition to its gaming activities, the Jubilee Casino includes a 175
seat buffet, a 350 seat showroom, a 98 seat restaurant and parking to
accommodate 950 customer vehicles. In January 1996, the Company
completed renovation of its leased restaurant facility at Greenville
in order to give customers a dining alternative, offering fine dining
in an elegant setting. Management believes that the Jubilee Casino,
which offers an attractive casino environment and significant casino
capacity, will continue to at least capture its fair market share of
the Greenville gaming market.
Future Operations - Alpha Gulf
In April 1997, Alpha Gulf received approval from the Mississippi
Commission for its infrastructure investment requirement to build and
operate a hotel on property adjacent to its Greenville casino
location. Alpha Greenville Hotel, Inc., a newly formed, wholly-owned
subsidiary of the Company, entered into a long term lease with the
Board of Mississippi Levee Commissioners to lease property including
historical landmark buildings for the development of a forty-one key
single room and suite hotel. Management believes that this hotel will
add a new dimension to the Company's casino patron experience and will
be an added amenity to the Company's player development program. The
total cost of this project is $3.2 million. Although the permanent
source of financing this project has not been identified at this time,
Alpha Greenville Hotel has received interim financing from Bryanston
Group, Inc. ("Bryanston") to begin construction.
Development Activities
New York
In March 1994, the Company entered into a joint venture agreement
relating to the operation and development of a gaming facility located
on the reservation of the St. Regis Mohawk Tribe of Hogansburg, New
York (the "Tribe"). The Company does not intend to proceed with the
project at Hogansburg, New York since the Company and the Tribe are
exploring a more suitable arrangement relating to the development of a
casino in Sullivan County, New York, as discussed below.
On January 19, 1996, the Company, through its subsidiary, Alpha
St. Regis, entered into a memorandum of understanding with Catskill
Development, L. L. C. (" Catskill ") regarding the development and
management of a casino to be built adjacent to the Monticello Raceway
in Sullivan County, New York. This memorandum of understanding was
assigned to Alpha Monticello. The development and management of this
casino will be undertaken by Mohawk Management L.L.C., a company of
which the Company's subsidiary Alpha Monticello owns 50%. Alpha
Monticello will be responsible for the day-to-day operations of the
casino. It is
7
<PAGE>
intended that the casino will be owned by the Tribe and will be
located on land to be placed in trust for the benefit of the Tribe.
The Monticello Raceway is located 90 miles from New York City.
The casino project is subject to approval by the U.S. Department
of the Interior and its Bureau of Indian Affairs, the National Indian
Gaming Commission and the Governor of the State of New York. It is
contemplated that the Company will be required to contribute an amount
preliminarily estimated at $250,000 toward the design, architectural
and other costs of developing plans for the casino. Under the
memorandum of understanding, Catskill and the Company commit to enter
into a definitive agreement on the terms established in the
memorandum. Bryanston is a 25 % member of Catskill.
Catskill purchased the 225 acre Monticello Raceway in June 1996.
Catskill plans to continue Monticello's racing program and to explore
other development at the site in addition to the St. Regis Mohawk
Casino.
On August 2, 1996, Mohawk Management L. L. C. executed an
agreement with the Tribe for the management of the proposed casino.
The Tribe has submitted the agreement to the National Indian Gaming
Commission for its approval.
There can be no assurance that the project will receive all
requisite approvals.
Missouri
In February 1995, the City of Louisiana, Missouri, designated the
Company as the exclusive designee to enter into negotiations with the
city to develop a riverboat gaming facility at the city's Mississippi
River shoreline. The City of Louisiana is currently competing with
other cities in Missouri for the next gaming license to be granted in
the state. In the event that the state gaming authorities select
Louisiana, Missouri as the locality to receive the next gaming license
to be granted, the Company, as the city's exclusive designee, would be
the recipient of such license. Consequently, Alpha Missouri entered
into a lease agreement with the City of Louisiana relating to certain
city-owned riverfront property required for the project. Except for
certain preliminary payments to the city, the Company's obligation
under the lease are conditioned on the grant of a gaming license by
the Missouri gaming authorities.
Alpha Missouri has applications pending for site approval and a
gaming license with respect to the development of a riverboat gaming
facility in Louisiana, Missouri. Although existing law in Missouri
does not restrict the number of licenses the Missouri Gaming
Commission may issue, the Commission has effectively placed a
moratorium on any new licenses in the Louisiana market. The Company
believes that such restriction will remain in place until a market
assessment of the existing approved license can be made.
The City of Louisiana is located approximately 60 miles north of
metropolitan St. Louis and 70 miles from Springfield, Illinois, that
state's capital.
The Company anticipates that it will provide a gaming vessel with
a capacity of approximately 750 gaming positions. The project cost is
presently expected to be approximately
8
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$30 million.
Marketing
The Company concentrates its sales, marketing and promotional
activities for the Jubilee Casino in its principal target market
within a 50 mile radius of the casino. The target markets are reached
through a combination of billboards, radio, television, newspaper
advertising, and direct mail. Also, casino brochures are placed in
tourist information areas, local and regional hotels, restaurants and
bars.
The Company has developed an in-house mailing list in excess of
130,000 casino customers. These customers are made up of table game
players and "Slot Club" members. Table game customers are identified
through the casino's marketing representatives and their play is
monitored to evaluate whether the customer warrants complimentary
services provided by the casino. The award of complimentary services
is consistent with standard industry practices and is based upon a
customer's duration of play and average amount wagered. The "Slot
Club" is an operation which allows the casino's computerized tracking
system to identify customers, amount of play and other pertinent
characteristics. The "Slot Club" is an ongoing promotion where
members are issued cards and accumulate points based on the amount of
their play. Such points are redeemable for food, beverages or
merchandise. Tournaments for blackjack, craps and poker are held,
along with other special events and promotions.
The Company seeks to maintain and upgrade its gaming vessel so
that it is competitive in the industry, With the closing of the
Jubilation Casino the Company has discontinued its marketing
activities relating to the Jubilation Casino. See "Business - Current
Operations."
Competition
There are currently 19 casinos located on the Mississippi River.
In the Greenville market, the Company's Jubilee Casino competes with
the Las Vegas Casino and the Lighthouse Point Casino, which opened in
November 1996. The opening of the Lighthouse Point Casino resulted in
a decrease in the gaming revenues of the Jubilee Casino which is
expected to be corrected as the marketing programs of the new
Lighthouse Point Casino help to increase the total Greenville market.
Since the opening of the new casino, the Jubilee Casino's fair share
of the market, based on the number of player positions in the market,
has improved. The Company believes that the Jubilee Casino is
well-positioned to compete successfully with the two other casinos in
the Greenville market. Approximately 60 miles south of Jubilee Casino
is Vicksburg. Vicksburg has four casinos: the Isle of Capri, Harrahs
Vicksburg, Ameristar, and Rainbow Casino. Approximately 110 miles
south of Jubilee Casino is Natchez with the Lady Luck Natchez Casino.
Approximately 90 miles north of the Jubilee Casino is Coahoma County
with the Lady Luck Coahonia Casino. Tunica County is approximately
180 miles north of the Jubilee Casino and has ten casinos - Harrahs (2
casinos), Sams Town, Fitzgeralds, Sheraton, Hollywood Casino, Circus
Circus, Horseshoe Casino, Grand Casino and Ballys. Since casinos
within a 60 or 180 mile radius of the Jubilee Casino are not
considered by the Company to be within its competitive market, the
Company does not deem the casinos in Vicksburg, Coahoma County, or
Tunica County to be among its competitors.
9
<PAGE>
The Company has remained competitive in the markets affecting the
Jubilee Casino by keeping its gaming vessel well-maintained and by
offering superior accommodations, entertainment programs and special
events. In addition, the Company's advertising and marketing efforts
have focused on maintaining the Company's presence in its market.
Although the Jubilee Casino has remained competitive, the
Jubilation Casino, located on the Mississippi Gulf Coast, was unable
to compete satisfactory with the major casino developments in the
Biloxi and Gulfport markets. This resulted in management's decision
to close the Jubilation Casino during August 1996. See "Casino
Operations - Current Operations - The Jubilation Casino."
Seasonal Fluctuations
The results of the casinos' operations have been seasonal, with
the greatest activity occurring during the fair weather months of May
through September. Consequently, the Company's operating results
during the calendar quarters ending in December and March are not as
profitable as those quarters ending in June and September, and losses
result from time to time. The seasonal nature of the casinos'
operations increases the risk that natural disasters or the loss of
the casinos for any other reason during the May through September
period would have a material adverse effect on the Company's financial
condition and results of operations.
Government Regulation
General
The Company's ownership and operation of its properties are
subject to regulation by federal, state and local governmental and
regulatory authorities, including regulation relating to environmental
protection. While the Company has not been the subject of any
complaints or other formal or informal proceedings alleging any
violations of government regulations, no assurance can be given that
the Company is, or in the future will be, able to comply with, or
continue to comply with current or future governmental regulations in
every jurisdiction in which it conducts or will conduct its business
operations without substantial cost or interruption of its operations,
or that any present or future federal, state or local regulations may
not restrict the Company's present and possible future activities. In
the event that the Company is unable to comply with any such
requirements, the Company could be subject to sanctions, which could
have a materially adverse effect upon the Company's business. See
"Business - Government Regulation - General," and 'Business - Casino
Operations - Current Operations."
Licensing
The gaming industry is highly regulated by each of the states in
which gaming is legal. The regulations vary on a state by state
basis, but generally require the operator, each owner of a substantial
interest (usually 5 % or more) in the operator, members of the Board
of Directors, each officer and all key personnel found suitable, and
be approved, by the applicable governing body. The failure of any
present, or future, person required to be approved to be, and remain
qualified to hold a license could result in the loss of license.
10
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Mississippi
General
The ownership and operation of casino facilities in Mississippi
are subject to extensive state and local regulation, primarily the
licensing and regulatory control of the Mississippi Commission and the
Mississippi State Tax Commission (collectively, the "Mississippi
Authorities').
The laws, regulations and supervisory procedures of Mississippi
and the Mississippi Commission seek to (i) prevent unsavory or
unsuitable persons from having any direct or indirect involvement with
gaming at any time or in any capacity; (ii) establish and maintain
responsible accounting practices and procedures; (iii) maintain
effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing reliable record keeping
and making periodic reports to the Mississippi Authorities; (iv)
prevent cheating and fraudulent practices; (v) provide a source of
state and local revenues through taxation and licensing fees; and (vi)
ensure that gaming licensees, to the extent practicable, employ
Mississippi residents. The regulations are subject to amendment and
to extensive interpretation by the Mississippi Commission in view of
their recent adoption. Changes in Mississippi law or regulations may
limit or otherwise materially affect the types of gaming that may be
conducted and could have an adverse effect on the Company and the
Company's Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Mississippi Gulf
Coast or the Mississippi River, but only if the voters in such
counties have not voted to prohibit gaming in that county. The law
permits unlimited stakes gaming on permanently moored vessels on a
24-hour basis and does not restrict the percentage of space that may
be utilized for gaming. There are no limitations on the number of
gaming licenses that may be issued in Mississippi.
Registration and Licensing
The Company, a registered publicly-traded holding company under
the Mississippi Act, is required periodically to submit detailed
financial and operating reports to the Mississippi Authorities and to
furnish any other information that the Mississippi Authorities may
require. The Company and any subsidiary of the Company that operates
a casino in Mississippi (a "Gaming Subsidiary'), is subject to the
licensing and regulatory control of the Mississippi Commission. If
the Company is unable to continue to satisfy the registration
requirements of the Mississippi Act, the Company and its Gaming
Subsidiaries cannot own or operate gaming facilities in Mississippi.
Each Gaming Subsidiary must obtain gaming licenses from the
Mississippi Commission to operate casinos in Mississippi. A gaming
license is issued by the Mississippi Commission subject to certain
conditions, including continued compliance with all applicable state
laws and regulations and physical inspection of casinos prior to
opening.
Gaming licenses are not transferable, are initially issued for a
two-year period and are subject to periodic renewal. No person may
receive any percentage of profits from a gaming subsidiary of a
holding company without first obtaining licenses and approvals from
the Mississippi Commission.
11
<PAGE>
Licensing of Officers, Directors and Employees
Officers, directors and certain key employees of the Company and its
gaming subsidiaries must be found suitable or be licensed by the Mississippi
Commission, and employees associated with gaming must obtain work permits
that are subject to immediate suspension under certain circumstances. In
addition, any person having a material relationship or involvement with the
Company may be required to be found suitable or be licensed, in which case
those persons must pay the costs and fees associated with such investigation.
The Mississippi Commission may deny an application for a license for any
cause that it deems reasonable. Changes in licensed positions must be
reported to the Mississippi Commission. In addition to its authority to deny
an application for a license, the Mississippi Commission has jurisdiction to
disapprove a change in corporate officers. The Mississippi Commission has
the power to require any gaming subsidiary and the Company to suspend or
dismiss officers, directors and other key employees or sever relationships
with other persons who refuse to file appropriate applications or whom the
authorities find unsuitable to act in such capacities.
Investigation of Holders of Securities and Others
Mississippi law requires any person who acquires beneficial ownership of
more than 5 % of the Common Stock to report the acquisition to the
Mississippi Commission, and such person may be required to be found suitable.
Also, any person who becomes a beneficial owner of more than 10% of the
Common Stock, as reported in filings under the Exchange Act, must apply for a
finding of suitability by the Mississippi Commission and must pay the costs
and fees that the Mississippi Commission incurs in conducting the
investigation. The Mississippi Commission has generally exercised its
discretion to require a finding of suitability of any beneficial owner of
more than 5 % of a company's stock. If a stockholder who must be found
suitable is a corporation, partnership or trust, it must submit detailed
business and financial information, including a list of beneficial owners.
Representatives of the Mississippi Commission have indicated that
institutional investors may only be required to file summary information in
lieu of a suitability finding.
Any person who fails or refuses to apply for a finding of suitability or
a license within 30 days after being ordered to do so by the Mississippi
Commission may be found unsuitable. Any person found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the securities of
the Company beyond such time as the Mississippi Commission prescribes, may be
guilty of a misdemeanor. The Company is subject to disciplinary action if,
after receiving notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Company or its gaming subsidiaries, the
Company: (i) pays the unsuitable person any dividend or other distribution
upon the voting securities of the Company; (ii) recognizes the exercise,
directly or indirectly, of any voting rights conferred by securities held by
the unsuitable person; (iii) pays the unsuitable person any remuneration in
any form for services rendered or otherwise, except in certain limited and
specific circumstances; or (iv) fails to pursue all lawful efforts to require
the unsuitable person to divest himself of the securities, including, if
necessary, the immediate purchase of the securities for cash at a fair
market value.
The Company may be required to disclose to the Mississippi Commission
upon request the identities of the holders of any debt securities. In
addition, the Mississippi Commission under the Mississippi Act may, in its
discretion, (i) require disclosure of holders of debt securities of
12
<PAGE>
corporations registered with the Mississippi Commission, (ii) investigate
such holders, and (iii) require such holders to be found suitable to own such
debt securities. Although the Mississippi Commission generally does not
require the individual holders of obligations such as notes to be
investigated and found suitable, the Mississippi Commission retains the
discretion to do so for any reason, including but not limited to a default,
or where the holder of the debt instrument exercises a material influence
over the gaming operations of the entity in question. Any holder of debt
securities required to apply for a finding of suitability must pay all
investigative fees and costs of the Mississippi Commission in connection with
such an investigation.
Required Records
The Company must maintain a current stock ledger in Mississippi that the
Mississippi Commission may examine at any time. If any securities of the
Company are held in trust by an agent or by a nominee, the record holder may
be required to disclose the identity of the beneficial owner to the
Mississippi Commission. A failure to make such disclosure may be grounds for
finding the record holder unsuitable- The Company must also render maximum
assistance in determining the identity of the beneficial owner.
The Mississippi Act requires that the certificates representing
securities of a publicly-traded corporation (as defined in the Mississippi
Act) bear a legend to the general effect that such securities are subject to
the Mississippi Act and the regulations of the Mississippi Commission. The
Mississippi Commission has the power to impose additional restrictions on the
holders of the Company's securities at any time.
Approval of Corporate Matters and Foreign Gaming Operations
Substantially all loans, leases, sales of securities and similar
financing transactions by a gaming subsidiary must be reported to or approved
by the Mississippi Commission. Changes in control of the Company through
merger, consolidation, acquisition of assets, management or consulting
agreements or any form of takeover cannot occur without the prior approval of
the Mississippi Commission.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other takeover
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly-traded that are affiliated with those
licensees, may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of
corporate affairs. Approvals are, in some circumstances, required from the
Mississippi Commission before the Company may make exceptional repurchases of
voting securities above the current market price of its Common Stock
(commonly called "greenmail') or before a corporate acquisition opposed by
management may be consummated. Mississippi's gaming regulations will also
require prior approval by the Mississippi Commission if the Company adopts a
plan of recapitalization proposed by its Board of Directors opposing a tender
offer made directly to the stockholders for the purpose of acquiring
13
<PAGE>
control of the Company.
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission
may require determinations that, among other things, there are means for the
Mississippi Authorities to have access to information concerning the
out-of-state gaming operations of the Company and its affiliates.
Sanctions
If the Mississippi Commission were to decide that a gaming subsidiary had
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke the license of the gaming subsidiary. In
addition, the gaming subsidiary, the Company and the persons involved could
be subject to substantial fines for each separate violation. Because of such
violation, the Mississippi Commission could appoint a supervisor to operate
the casino facilities, and, under certain circumstances, earnings generated
during the supervisor's appointment (except the reasonable rental value of
the casino facilities) could be forfeited to the State of Mississippi.
Limitations, conditioning or suspension of any gaming license or the
appointment of a supervisor could (and revocation of any gaming license
would) materially adversely affect the Company's and the gaming subsidiary's
gaming operations.
On July 16, 1996, operation of the Jubilation Casino was suspended in
compliance with a directive of the Mississippi Commission which raised
certain issues with regard to the operation of the Jubilation Casino and
asserted that the working capital available to the Jubilation Casino was not
sufficient. The Mississippi Commission required that the Jubilation Casino's
working capital be increased. This working capital requirement was reviewed
by Jubilation Lakeshore in light of its previously announced plan to close
the Jubilation Casino during August 1996 and the costs which would be
incurred to reopen the Jubilation Casino. Based on this review, Jubilation
Lakeshore decided not to reopen the Jubilation Casino. The Company does not
believe that the issues raised by the Mississippi Commission regarding the
operation of the Jubilation Casino will adversely affect the license to
operate the Jubilee Casino since the Jubilee Casino is operating in
compliance with applicable regulations, including regulations relating to
issues raised by the Mississippi Commission regarding the operation of the
Jubilation Casino. There can be no assurance, however, that the issues
raised by the Mississippi Commission will not adversely affect the license,
or the renewal of the license, to operate the Jubilee Casino, or any future
licenses for which applications may be submitted in Mississippi.
Fees and Taxes
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties
and cities in which a gaming subsidiary's operations will be conducted.
Depending upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon (i) a
percentage of the gross gaming revenues received by the casino operation,
(ii) the number of slot machines operated by the casino or (iii) the number
of tables games operated by the casino. The license fee payable to the State
of Mississippi based upon "gaming receipts" (generally defined as gross
receipts less payouts to customers as winnings) and equals 4 % of gaming
receipts of $50,000 or less per
14
<PAGE>
month, 6% of gaming receipts over $50,000 and less than $134,000 per month,
and 8% of gaming receipts over $134,000. The foregoing license fees are
allowed as a credit against the Company's Mississippi income tax liability
for the year paid.
Missouri and New York
Missouri law and the Federal Indian Gaming Law (as it relates to the
Company's proposed operation in New York), each provide for a comprehensive,
detailed scheme for the control of gaming operations in the state and the
issuance of licenses for gaming, both to gaming facilities and to persons
involved in certain gaming related activities. With respect to the Company's
compact with the Tribe relating to the proposed casino to be built in
Sullivan County, New York, the State of New York has provided for regulation
of Indian gaming casinos through the New York State Racing and Wagering
Board. Each of the supervising governmental agencies is authorized to
promulgate rules and regulations applicable to the administration of gaming
related laws.
In connection with its proposed operations in Missouri, the Company has
commenced the application and approval process with the Missouri Gaming
Commission. The Company does not anticipate receiving a final determination
with respect to its license application within the next twelve months. In
connection with its proposed operations in New York, the required
documentation has been filed with the National Indian Gaming Commission.
Hotel Operations
As of December 31, 1996, to reduce the Company's debts to Bryanston, the
Company sold 100% of the stock of its subsidiary, Alpha Hotel Management
Company, Inc., to Bryanston Group, Inc. for consideration of $3,000,000.
Employees
In connection with its casino operations, as of June 30, 1997, the
Company employed approximately 571 employees, of which 510 are full-time
employees. Management considers its employment relations to be satisfactory.
In connection with the closing of the Jubilation Casino and pursuant to the
Workers Adjustment and Retraining Notification Act, the Company provided the
320 employees of the Jubilation Casino with notice of its plans to close the
Jubilation Casino within 60 days of the anticipated closing date, as required
under the act. Therefore, management believes it has taken all appropriate
action required by federal law with respect to providing notice of the
closing of the Jubilation Casino to the employees of the Jubilation Casino.
Properties
The Company maintains its executive office at leased premises located at
12 East 49th Street, New York, New York, 10017. This lease expires December
31, 2001.
15
<PAGE>
Casino Operations
<TABLE>
<CAPTION>
Location Principle Use Approximate Area Owned/Leased Expires
- - - -------- ------------- ---------------- ------------ -------
<S> <C> <C> <C> <C>
Hancock County Sign location, 3 acres Leased April 30, 2003
Waveland, MS warehousing and with option to
parking purchase
Hancock County Accounting office 1 acre Leased June 30, 1998
Waveland, MS with option to
extend 3 five
year terms and
right of first
refusal to purchase
Washington Customer parking 2.0 acres Owned --
County
Greenville, MS
Washington Mooring site of 1,000 Leased December 29, 1997
County casino vessel waterfront feet with option to
Greenville, MS extend 3 five
year terms
Washington Accounting offices 10,000 square Leased December 1, 1998
County and warehouse feet with option to
Greenville, MS extend two years
</TABLE>
The Company considers its property to be suitable and adequate for its
present needs.
Legal Proceedings
In January 1996, the Company was named as a defendant in an action
brought in the Circuit Court of Hinds County, Mississippi (Amos vs Alpha Gulf
Coast, Inc.; Batiste vs Alpha Gulf Coast, Inc.; Decree vs Alpha Gulf Coast,
Inc.; Johnston vs Alpha Gulf Coast, Inc.; Raine vs Alpha Gulf Coast, Inc.).
Based on the theory of "liquor liability' for the service of alcohol to a
customer, Plaintiffs alleged that on January 16, 1995, a vehicle operated by
Mr. Amos collided with a vehicle negligently operated by Mr. Raine, an
individual that was served alcoholic beverages by the Company. Plaintiffs
alleged that they suffered personal injuries and seek compensatory damages
aggregating $17.1 million and punitive damages aggregating $37.5 million.
The ultimate outcome of this litigation cannot presently be determined as
this case is presently in the early phases of
16
<PAGE>
discovery. Accordingly, no provision for liability to the Company that may
result upon adjudication has been made in the accompanying consolidated
financial statements. The Company believes that the risk referred to in this
paragraph is adequately covered by insurance.
In September 1996, the Company and Alpha Gulf were named as defendants in
an action brought in the Circuit Court of Hancock County, Mississippi
(Durward Dunn, Inc. vs. Alpha Hospitality Corporation; Durward Dunn, Inc.
vs. Alpha Gulf Coast, Inc.) for alleged failure to make payments pursuant to
a construction contract. Plaintiff seeks actual and compensatory damages of
approximately $1,200,000. The consolidated financial statements include a
provision for the liability of $928,000 for this contract at December 31,
1996. The ultimate outcome of this litigation cannot presently be determined
as this case is presently in the early phases of discovery. Accordingly, no
provision for liability to the Company, except as mentioned above, that may
result upon adjudication has been made in the accompanying consolidated
financial statements.
In December 1996, the Company, Jubilation Lakeshore and Alpha Gulf were
named as defendants in an action brought in the United States District Court
for the Southern District of New York (Bally Gaming, Inc. v. Alpha
Hospitality Corp., Jubilation Lakeshore, Inc. and Alpha Gulf Coast, Inc.) for
allegedly engaging in conduct which would impair the collateral held as
security for certain financial obligations. Such conduct includes the
failure to pay certain monetary obligations unrelated to the obligations
secured by the collateral. Plaintiffs seek specific performance of
particular actions defendants believe are necessary to protect the collateral
that secures the financial obligations, unspecified damages and attorney's
fees, among other things. The Company believes the action is without merit
and plans to move to dismiss this action.
17
<PAGE>
MANAGEMENT
Directors and Executive Officers
The Directors and Executive Officers of the Company are as follows:
Name Age Position
---- --- --------
Stanley S. Tollman 65 Chairman of the Board and
Co-Chief Executive Officer
Sanford Freedman 60 Vice President, Secretary and
Director
Thomas W. Aro 53 Vice President and Director
James A. Cutler 45 Treasurer and Chief Financial
Officer
Brett G. Tollman 34 Vice President
Patricia Cohen 43 Director
Matthew B. Walker 46 Director
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Directors do not receive remuneration for their services as such, but may be
reimbursed for expenses incurred in connection therewith, such as the cost of
travel to Board meetings. Officers serve at the pleasure of the Board of
Directors until their successors have been elected and have qualified.
Officers and directors serve subject to a finding of suitability by the
Mississippi Commission.
STANLEY S. TOLLMAN has served as Chairman of the Board of Directors and
Co-Chief Executive Officer of the Company since its formation. He has been
Chairman of the Tollman-Hundley Hotel Group since 1979 and serves as Chairman
of Bryanston Group, Inc., a hotel management company, and of Trafalgar Tours
International, a tour operator. He has also served as Chairman of the Board
of Directors of Buckhead America Corporation (a Georgia corporation).
SANFORD FREEDMAN served as a Director, Vice President and Secretary of
the Company from its formation until October 29, 1993 and was re-elected to
those positions on February 1, 1994. He has served as Executive Vice
President of the Tollman-Hundley Hotel Group since 1983, and serves as a
Director, Executive Vice President and Secretary of Bryanston Group, Inc.
THOMAS W. ARO has served as a Director of the Company since February 1,
1994 and a Vice President of the Company since its formation. Mr. Aro also
serves as Chairman of the Board of Directors and Chief Executive Officer of
the Company's subsidiary Alpha Gulf Coast,
18
<PAGE>
Inc. He has served as Executive Vice President of the Tollman-Hundley Hotel
Group since 1982, and Executive Vice President of the Bryanston Group, Inc.
BRETT G. TOLLMAN served as a Vice President of the Company from its
formation until October 29, 1993 and was re-elected to that position and was
elected a Director of the Company on February 1, 1994. Mr. Tollman also
serves as President of the Company's subsidiary, Alpha Hotel Management
Company, Inc. He has served as Executive Vice President of the
Tollman-Hundley Hotel Group since 1984 and is Executive Vice President of
Bryanston Group, Inc. He is also a Director of HMG Worldwide Corporation, a
publicly held corporation. Mr. Tollman is the son of Stanley S. Tollman, the
Chairman and Co-Chief Executive Officer of the Company.
PATRICIA COHEN was elected a Director of the Company on February 1, 1994.
She is a principal of Westfield and has been engaged for more than the past
five years as a private investor.
MATTHEW B. WALKER has served as a Director of the Company since December
1995. He is an independent businessman involved in international business
ventures including the Brazilian based Walker Marine Oil Supply Business,
which he has been a consultant to since 1988. Mr. Walker co-founded the
Splash Casino in Tunica, Mississippi in February 1993, where he remained
employed until October 1995. In February 1994, he co-founded the Cotton Club
Casino in Greenville, Mississippi, where he remained employed and a
shareholder of until October 1995. In addition, since 1972, Mr. Walker has
been involved in numerous real estate transactions in the capacity of
consultant, and has managed E.B. Walker & Son Lumber Company, a family-owned
lumber business based in Alabama, since such time.
JAMES A. CUTLER has served as Treasurer and Chief Financial Officer of
the Company since its formation. He also served as Secretary of the Company
from October 29, 1993 to February 1, 1994. He is Senior Vice President and
Treasurer of the Tollman-Hundley Hotel Group since 1984 and serves Executive
Vice President and Chief Financial Officer of Bryanston Group, Inc.
19
<PAGE>
RISK FACTORS
An investment in the securities offered hereby are highly speculative.
Each prospective investor should carefully consider the following risk
factors, as well as all other information set forth elsewhere in this
Prospectus.
1. History of Losses; Explanatory Paragraph in Independent Auditor's Report.
Since its inception, the Company has suffered significant losses from
operations. The Company had net losses of approximately $22,815,000 in the
fiscal year ended December 31, 1996, $17,993,000 in the fiscal year ended
December 31, 1995, and $9,901,000 in the fiscal year ended December 31, 1994.
As of December 31, 1996 the Company had an accumulated deficit of
approximately $55,414,000. As a result of the material uncertainties
relating to the Company's ability to continue as a going concern and fund its
operation, the Company's independent auditors have included an explanatory
paragraph in their report on the Company's consolidated financial statements
addressing such uncertainties.
2. Closing of the Jubilation Casino; Possible Inability to Meet Obligations
to Creditors.
On July 16, 1996, operation of the Jubilation Casino was suspended in
compliance with a directive of the Mississippi Commission which raised
certain issues with regard to the operation of the Jubilation Casino and
asserted that the working capital available to the Jubilation Casino was not
sufficient. On July 17, 1996, representatives of Jubilation Lakeshore met
with the Mississippi Commission. As a result of that meeting, the
non-working capital issues raised by the Mississippi Commission had been
resolved to the Mississippi Commission's satisfaction. However, the
Mississippi Commission required that the Jubilation Casinos working capital
be increased. The working capital requirement was reviewed by Jubilation
Lakeshore in light of its previously announced plan to close the Jubilation
Casino during August 1996 and the costs which would be incurred to reopen the
Jubilation Casino. Based on this review, Jubilation Lakeshore decided not to
reopen the Jubilation Casino. The Company has had preliminary discussions
with secured creditors of the Jubilation with regard to the liquidation of
its secured obligations. There can be no assurance that the Jubilation is
able to repay its obligations to its creditors. In the event that the
Jubilation is unable to repay its obligations to its creditors, the
Jubilation may file a voluntary petition under the Bankruptcy Code, or
creditors may initiate proceedings against the Jubilation thereby forcing the
Jubilation into bankruptcy. In either event, creditors may assert claims
against the Company seeking satisfaction of the Jubilation's debts. While
the Company is not liable for the Jubilation's debts, there can be no
assurance that creditors of the Jubilation will not assert claims against the
Company, or that the Company will be able to successfully defend against any
such claims. See "Business -- Casino Operations -- The Jubilation Casino."
3. Government Regulation.
General
The Company's ownership and operation of its properties are subject to
regulation by federal, state and local governmental and regulatory
authorities, including regulation relating to
20
<PAGE>
environmental protection. While the Company has not been the subject of any
complaints or other formal or informal proceedings alleging any violations of
government regulations, no assurance can be given that the Company is, or in
the future will be, able to comply with, or continue to comply with current
or future governmental regulations in every jurisdiction in which it conducts
or will conduct its business operations without substantial cost or
interruption of its operations, or that any present or future federal, state
or local regulations may not restrict the Company's present and possible
future activities. In the event that the Company is unable to comply with
any such requirements, the Company could be subject to sanctions, which could
have a materially adverse effect upon the Company's business. See "Business
- - - -- Government Regulation -- General," and "Business --Casino Operations --
Current Operations."
Licensing: Loss of Gaming License
The gaming industry is highly regulated by each of the states in which
gaming is legal. The regulations vary on a state by state basis, but
generally require the operator, each owner of a substantial interest (usually
5% or more) in the operator, members of the Board of Directors, each officer
and all key personnel found suitable, and be approved, by the applicable
governing body.
The failure of any present, or future, person required to be approved to
be, and remain qualified to hold a license could result in the loss of
license. In almost all instances, the governing body has broad discretion in
granting, renewing and revoking licenses. The loss or suspension of any
license would have a material adverse effect on the Company. The requirement
that the governmental body approve substantial shareholders, directors,
officers and key personnel could discourage, delay or prevent a change in
control of the Company.
The operations of the Jubilee Casino and the Jubilation Casino are
regulated by the Mississippi Commission. In October 1995, the Company's
original licenses to operate the Jubilee Casino and the Jubilation Casino
were renewed until December 1997. Each Mississippi gaming license has a term
of two years and is subject to renewal. In July 1996, the Company began to
implement its plans to close the Jubilation Casino during August 1996. On
July 16, 1996, operation of the Jubilation Casino was suspended in compliance
with a directive of the Mississippi Commission which raised certain issues
with regard to the operation of the Jubilation Casino and asserted that the
working capital available to the Jubilation Casino was not sufficient. On
July 17, 1996, representatives of Jubilation Lakeshore met with the
Mississippi Commission. As a result of that meeting, the non-working capital
issues raised by the Mississippi Commission have been resolved to the
Mississippi Commission's satisfaction. However, the Mississippi Commission
required that the Jubilation Casino's working capital be increased. This
working capital requirement was reviewed by Jubilation Lakeshore in light of
its previously announced plan to close the Jubilation Casino during August
1996 and the costs which would be incurred to reopen the Jubilation Casino.
Based on the review, Jubilation Lakeshore decided not to reopen the
Jubilation Casino. The Company's license to operate the Jubilation Casino
was withdrawn. The Company does not believe that the issues raised by the
Mississippi Commission regarding the operation of the Jubilation Casino will
adversely affect the license to operate the Jubilee Casino since the Jubilee
Casino is operating in compliance with applicable regulations, including
regulations relating to issues raised by the Mississippi Commission regarding
the operation of the Jubilation Casino. There can be no assurance, however,
that the issues raised by the Mississippi Commission will not adversely
affect the license, or the renewal of the license, to operate the
21
<PAGE>
Jubilee Casino, or any future licenses for which applications maybe submitted
in Mississippi or elsewhere. In the event the Mississippi Commission were to
revoke or fail to renew the Company's license to operate the Jubilee Casino,
the Company's operations and financial condition would be materially
adversely affected.
The Company recently withdrew its application in Colorado since the
Company does not intend to proceed with the acquisition for which such
license was required.
The Company applied for a gaming license in Missouri in the early part of
1995. At present the Company cannot predict when a final determination will
be made regarding its license application in Missouri since the Missouri
gaming authority (the "Missouri Commission") makes such determination at its
discretion and is not required to do so within a fixed period of time.
However, based upon discussions with the Missouri Commission, the Company
does not anticipate receiving a final determination with respect to its
license application within the next six months. The failure of the license
to be granted could have a material adverse effect on the Company's expansion
plans. See "Business -- Casino Operations -- Development Activities."
4. Defaults in Outstanding Indebtedness; Loan Covenants and Security
Interest.
The Company has incurred substantial indebtedness in connection with its
operations and the acquisition of its casino properties; a substantial
portion of this indebtedness in presently held by Bryantston, an affiliate of
the Company. Substantially all of the Company's assets utilized in
connection with its casino operations are pledged as security for these
loans. The various loan documents contain covenants and restrictions which
may limit or interfere with, the operation of the Company's business.
At June 30, 1997, the Company was in default of non-payment for (i) its
mortgage notes payable aggregating approximately $11,456,000 for non-payment,
(ii) the equipment notes relating to the Jubilation Casino aggregating
approximately $8,269,000 for the breach of several loan covenants, and (iii)
a loan payable to Bryanston of approximately $1,876,000 for non-payment. The
Company received a waiver of the defaults of the loan payable and the
$7,800,000 mortgage note payable to Bryanston through December 31, 1997.
In the event of a violation by the Company of any of the loan covenants,
or upon the occurrence of any other events of default set forth in the loan
documents, the lenders could exercise rights of foreclosure under the
agreements, which would have a materially adverse effect on the Company's
financial condition.
While no default or acceleration has been declared by any of the lenders,
no assurance can be given that a default will not be declared in the future.
Declaration of a default would allow the lender whose indebtedness was in
default to foreclose on any collateral for the loan and have a material
adverse effect on the Company's business and operations.
5. Intense Industry Competition; Mississippi Gaming Operations
The Company believes that its major market area is approximately 150
miles around the Jubilee Casino, based upon analysis of customer records
completed by marketing and operational
22
<PAGE>
employees at the site. Within the market area of the Jubilee Casino there
are presently 7 other casinos in operation and one additional casino in the
planning stage. The Company is unaware of any progress on the planning of
this additional casino. Two of the existing casinos are immediately adjacent
to the Company's casino. Substantially all of these competitors have
significantly greater financial, and other, resources than the Company and
more experience in the gaming industry. It is likely that the intense
competition in the Company's market area may limit the profitability of its
operations, or even render them unprofitable.
In addition, the Company experienced declining revenues during the year
ended December 31, 1995 with respect to the operation of the Jubilation
Casino. In management's opinion, this decline was due to the remote location
of the Jubilation Casino and the increasing casino development in the Biloxi
and Gulfport markets, which have proven more attractive to casino patrons.
Due to the current level of competition and the anticipated increase in the
competition around the Jubilation Casino, in July 1996, management began to
implement its plans to close the Jubilation Casino during August 1996.
Thereafter, on July 16, 1996 the Jubilation Casino was closed at the
direction of the Mississippi Commission. In view of the condition required
to reopen and the earlier decision to close the Jubilation Casino, the
Company determined not to reopen the Jubilation Casino. See"Business
- - - --Casino Operations."
6. Possible Insufficiency of Liability Insurance.
The Company maintains and intends to continue to maintain general
liability insurance in amounts which management believes will be sufficient
to cover casualty risks associated with the operation of its business,
including fire property damage, personal injury, liquor liability, etc. At
present, the Company is a defendant in one proceeding based upon the theory
of "liquor liability" for the service of alcohol to a customer. The Company
believes that its exposure in this proceeding is adequately covered by the
levels of insurance currently maintained. There can be no assurance,
however, that such insurance will be adequate to cover unanticipated
liabilities. See "Business -- Legal Proceedings."
7. Taxation of Gaming Operations.
The Company believes that the prospect of significant additional revenue
through taxation is one of the primary reasons why jurisdictions legalize
gaming. As a result, gaming operators are typically subject to significant
taxes and fees in addition to normal federal and state corporate income
taxes, and such taxes and fees are subject to increase at any time. Any
material increase in these taxes or fees would adversely affect the results
of operations of the Company. Presently, the Company pays approximately 12%
of gaming revenues in taxes and fees in Mississippi.
8. Seasonal Fluctuations.
The results of the casinos' operations have been seasonal, with the
greatest activity occurring during the months of May through September.
Consequently, the Company's operating results during the calendar quarters
ending in December and March are not as profitable as those quarters ending
in June and September, and losses result from time to time. The seasonal
nature of the casinos' operations increases the risk that natural disasters
or the loss of the casinos for any other reason during the May through
September period would have a material adverse effect on
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the Company's financial condition and results of operations.
9. Conflicts of Interest.
Mrs. Beatrice Tollman, the spouse of Mr. Stanley S. Tollman, the Chairman
of the Board, President and Chief Executive Officer of the Company, is one of
the principal owners of Bryanston. Certain conflicts of interest may arise
with regard to the negotiation of agreements and business opportunities
between the Company and Bryanston. Furthermore, Stanley S. Tollman is one of
the principal owners of the Tollman-Hundley Hotel Group (the "T-H Hotel
Group"), the constituent companies of which own or manage hotel properties
containing an aggregate of 5,593 rooms and which may be in direct competition
with hotels that receive Management Services from the Company. While Stanley
S. Tollman and the T-H Hotel Group have entered into agreements with the
Company pursuant to which each has agreed that any opportunity to provide
Management Services to hotel properties owned by third-parties will be
offered first to the Company for a period of five years commencing September
1, 1993 and the Company has established a policy that any agreements between
the Company and Bryanston or the T-H Hotel Group must be approved by a
majority of disinterested members of the Company's Board of Directors, there
can be no assurance that conflicts of interest will not arise among such
parties and the Company.
10. Dependence upon Key Personnel; Absence of Full-Time Management.
The success of the Company is largely dependent upon the personal efforts
of Mr. Stanley S. Tollman, its President and Chief Executive Officer. The
Company does not maintain and does not intend to obtain a key employee life
insurance policy on the life of Mr. Stanley S. Tollman. Although Mr. Stanley
S. Tollman is only required to devote approximately 20% of his business time
to the operations of the Company, the loss of the services of Mr. Stanley S.
Tollman would have a material adverse effect on the prospects of the Company.
In addition, although the casino operations are managed by full-time
personnel, the Company and its hotel management operations are managed by
individuals who also work for Bryanston." See "Management" and "Certain
Transactions -- Bryanston."
11. No Assurance of Public Market for Securities.
Although the Company's Common Stock is quoted on NASDAQ and listed on the
Boston Stock Exchange, there can be no assurance that the Company will be
able to maintain such quotation or listing, or that, if maintained, a
significant public market will be sustained. For continued listing on NASDAQ,
a company, among other things, must have at least $2,000,000 in net tangible
assets, and the listed security must have a minimum bid price of $1.00 per
share. The Boston Stock Exchange's maintenance criteria require the Company
to have total assets of at least $1,000,000 and total stockholders' equity of
at least $500,000. At June 30, 1997 (unaudited), the Company had
stockholders' equity of approximately $1,005,000 and assets of $41,002,000.
The Company has continued to operate at a loss through the date of this
Prospectus.
In the event the Common Stock were delisted from NASDAQ, trading, if any,
would be conducted on the Boston Stock Exchange and in the over-the-counter
market on the NASD's electronic bulletin board, in what are commonly referred
to as the "pink sheets." As a result, an investor may find it more difficult
to dispose of, or to obtain accurate quotations as to the price
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of, the Company's securities. In addition, the Common Stock would be subject
to Rules 15g1-15g6 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act") that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally, a person with assets in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 together with
his or her spouse). For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, these rules may affect the ability of broker-dealers to
sell the Company's securities and may affect the ability of purchasers in the
Offering to sell their securities in the secondary market.
The Commission has also adopted regulations that define a "penny stock"
to be any equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exception. For any transaction involving a penny stock, unless
exempt, the regulations require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commissions payable to both
the broker-dealer and the registered representative, current quotations for
the securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed
control over the market. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
While many NASDAQ-listed securities are covered by the definition of
penny stock, transactions in a NASDAQ-listed security are exempt from all but
the sole market-maker provision for (i) issuers who have $2,000,000 in
tangible assets ($5,000,000 if the issuer has not been in continuous
operation for three years), (ii) transactions in which the customer is an
institutional accredited investor, or (iii) transactions that are not
recommended by the broker-dealer. In addition, transactions in a NASDAQ
security directly with a NASDAQ market-maker for such security are subject
only to the sole market-maker disclosure, and the disclosure with respect to
commissions to be paid to the broker-dealer and the registered representative.
Finally, all NASDAQ securities would be exempt from the recently-adopted
regulations regarding penny stocks if NASDAQ raised its requirements for
continued listing so that any issuer with less than $2,000,000 in net
tangible assets or stockholders' equity would be subject to delisting. These
criteria are more stringent than the current NASDAQ maintenance requirements.
12. Shares Eligible for Future Sale May Adversely Affect the Market.
The Company has 25,000,000 shares of Common Stock authorized, of which
14,049,000 are issued and outstanding. In addition, 409,000 shares may be
issued upon the exercise of outstanding and currently exercisable options.
Of the 14,049,000 shares of Common Stock currently issued and
outstanding, 4,654,443 shares of Common Stock are "restricted securities," as
that term is defined under Rule 144 promulgated under the Securities Act, in
that such shares were issued and sold by the Company in transactions not
involving a public offering and are, as of November 5, 1995, eligible for
sale under Rule 144. In general, under Rule 144 as currently in effect,
subject to the satisfaction of
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certain other conditions, a person, including an affiliate of the Company,
after at least two years have elapsed from the sale by the Company or any
affiliate of the restricted securities, can (along with any person with whom
such individual is required to aggregate sales) sell, within any three-month
period, a number of shares of restricted securities that does not exceed the
greater of 1% of the total number of outstanding shares of the same class,
or, if the Common Stock is quoted on NASDAQ or a national securities
exchange, the average weekly trading volume during the four calendar weeks
preceding the sale. A person who has not been an affiliate of the Company
for at least three months, after at least three years have elapsed from the
sale by the Company or an affiliate of the restricted securities, is entitled
to sell such restricted shares under Rule 144 without regard to any of the
limitations described above. The 4,654,443 shares are eligible for sale
pursuant to Rule 144 by affiliates of the Company who are restricted as to
the number of securities they can sell during any three-month period.
Possible or actual sales of such Common Stock by stockholders of the Company
under Rule 144 may have a depressive effect upon the price of the Common
Stock, and could also render difficult the sales of Common Stock by
investors. See "Description of Securities."
13. Possible Adverse Effect of Issuance of Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares, par value $.01 per share, of "blank check" preferred stock
(the "Preferred Stock") with such designations, rights and preferences as
maybe determined from time to time by the Board of Directors. The Company
has outstanding 738,163 shares of Series B Preferred Stock which is
convertible into Common Stock and still has 261,837 shares of Preferred Stock
available for issuance. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue the remaining Preferred Stock, or any
Preferred Stock which becomes authorized but unissued after conversion into
Common Stock, with dividend, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders
of the Common Stock. The Preferred Stock could be utilized under certain
circumstances, as a method of discouraging, delaying or preventing a change
in control of the Company. There can be no assurance that additional shares
of Preferred Stock of the Company will not be issued at some time in the
future.
14. Other Possible Adverse Effects of Preferred Stock
The Company has 738,163 shares of Series B Preferred Stock outstanding.
These shares were issued to Bryanston and BP Group, Ltd. ("BP"), a
corporation wholly-owned by Ms. Patricia Cohen, a director of the Company in
connection with the conversion of indebtedness owed by the Company to them.
Each share of outstanding Series B Preferred Stock (i) entitles the holder to
one vote; (ii) has a liquidation value of $29 per share; (iii) has a cash
dividend rate of 10% of liquidation value, payable quarterly, which increases
to 13% of liquidation value if the cash dividend is not paid within 30 days
of the end of each fiscal year and in such event is payable in Common Stock
valued at the then market price, and (iv) is convertible into eight shares of
Common Stock. There are presently three debt instruments which prohibit the
payment of cash dividends. Therefore, the Company, until payment in full of
such indebtedness, will be required to pay a 13% Series B Preferred Stock
dividend in Common Stock.
The conversion of Series B Preferred Stock into Common Stock and/or the
issuance of
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Common Stock in payment of the Series B Preferred Stock dividend, may dilute
the value of the outstanding shares of Common Stock, may adversely affect the
Company's ability to obtain equity capital, and, if such Common Stock was
sold in the public market, when permitted by law, may adversely affect the
market price of the Common Stock.
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USE OF PROCEEDS
The Company will not receive any proceeds from the Selling Stockholders'
sale of shares of Common Stock.
28
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SELLING STOCKHOLDERS
The Selling Stockholders acquired the Shares in connection with the
Consulting Agreement.
The following table sets forth (a) the name of the Selling Stockholder,
(b) the number of shares of Common Stock beneficially owned by each of the
Selling Stockholders as of October 2, 1997; (c) the number of Shares being
offered by each Selling Stockholder, and (d) the number of Shares of Common
Stock outstanding to be beneficially owned by each Selling Stockholder
following this Offering, assuming the sale pursuant to this Offering or
otherwise of all of the Shares that are the subject of the Registration
Statement of which this Prospectus forms a part. There can be no assurance,
however, that the Selling Stockholders will sell any or all of the Shares
offered hereunder.
Selling Beneficial Shares Shares Owned
Stockholders Ownership Offered Hereby After Offering
- - - ------------ ---------- -------------- --------------
Jay Kaplowtiz 21,000 21,000 0
Wesley Fredericks 6,000 6,000 0
Arthur Marcus 6,000 6,000 0
Fredric Gruder 3,000 3,000 0
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PLAN OF DISTRIBUTION
The Shares offered hereby are being sold by the Selling Stockholders each
acting as a principal for its own account. The distribution of the Shares by
the Selling Stockholders may be effected from time to time in ordinary
brokerage transactions in the over-the-counter market at market prices
prevailing at the time of sale or in one or more negotiated transactions at
prices acceptable to the Selling Stockholders. The brokers or dealers
through or to whom the Shares may be sold may be deemed underwriters of the
Shares within the meaning of the Securities Act, in which event all brokerage
commissions or discounts and other compensation received by such brokers or
dealers may be deemed to be underwriting compensation. The Company will bear
all expenses of the offering, except that the Selling Stockholders will pay
any applicable brokerage fees or commissions and transfer taxes. In order to
comply with the securities laws of certain states, if applicable, the Shares
will be sold only through registered or licensed brokers or dealers. In
addition, in certain states, the Shares may not be sold unless they have been
registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and is complied with.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Delaware General Corporation Law permits Delaware corporations to
eliminate or limit the personal liability of a director to the corporation
for monetary damages arising from certain breaches of fiduciary duties as a
director. The Company's Certificate of Incorporation includes such a
provision eliminating the personal liability of directors to the Company and
its stockholders for monetary damages for breach of fiduciary duty as a
director, except (i) any breach of a director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
any transaction from which the director derived an improper personal benefit;
or (iv) for unlawful payments of dividneds or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation
Law. Directors are also not insulated from liability for claims arising
under the federal securities laws. The foregoing provisions of the Company's
Certificate of Incorporation may reduce the likelihood of derivative
litigation against directors for breaches of their fiduciary duties, even
though such an action, if successful, might otherwise have benefitted the
Company and its stockholders.
The Company's Certificate of Incorporation also provides that the Company
shall indemnify its directors, officers and agents to the fullest extent
permitted by the Delaware General Corporation Law. The Company does not have
directors' and officers' liability insurance but may secure such insurance in
the future. Furthermore, the Company may enter into indemnity agreements
with its directors and officers for the indemnification of and advancing of
expenses to such persons to the fullest extent permitted by law.
LEGAL MATTERS
Certain legal matters, including the legality of the issuance of the
Shares being offered hereby are being passed upon for the Company by Gersten,
Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street, New York,
New York 10022, special counsel to the Company. The Selling Stockholders are
each members of Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP.
EXPERTS
The financial statements included in this Prospectus have been audited by
Rothstein, Kass & Company, P.C., independent certified public accountants,
Roseland, New Jersey, to the extent and for the periods set forth in their
reports appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The following documents filed by Alpha Hospitality Corporation (the
"Company") with the Commission are incorporated herein by reference:
(1) The Company's Registration Statement on Form SB-2, as amended (File
No. 33-64236).
(2) Annual Report on Form 10-K for the year ended December 31, 1996.
(3) The Company's Registration Statement on Form S-1, declared effective
by the SEC on August 8, 1996 (File No. 333-3606).
(4) Post-Effective Amendment No. 1 to the Company's Registration Statement
on Form S-1, declared effective by the SEC on January 31, 1997 (File
No. 333-3606).
(5) Quarterly Report on Form 10-Q for the period ended March 31, 1997.
(6) Quarterly Report on Form 10-Q for the periods ended June 30, 1997.
In addition to the foregoing, all documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, prior to the filing of a post-effective amendment
indicating that all of the securities offered hereunder have been sold or
deregistering all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference in this
Registration Statement shall be deemed to be modified or superseded for
purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document that is also
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
All information appearing in this Registration Statement is qualified in its
entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except
to the extent set forth in the immediately preceding statement.
The Company will provide without charge to each person to whom a copy of
a Section 10(a) Prospectus hereunder is delivered, upon the oral or written
request of such person, a copy of any document incorporated in this
Registration Statement by reference, except exhibits to such documents.
Requests for such information should be directed to Alpha Hospitality
Corporation,
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12 East 49th Street, New York, New York 10017, Attention: Corporate
Secretary, telephone number (212) 750-3500.
Item 4. Description of Securities
The Common Stock of the Company is registered under Section 12 of the
Securities Exchange Act of 1934.
Item 5. Interests of Named Experts and Counsel
Certain legal matters, including the legality of the issuance of the
shares of Common Stock, are being passed upon for the Company by Gersten,
Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street, New York,
New York 10022, special counsel to the Company.
The financial statements included in this Prospectus have been audited by
Rothstein, Kass & Company, P.C., independent certified public accountants,
Roseland, New Jersey, to the extent and for the periods set forth in their
reports appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
Item 6. Indemnification of Directors and Officers
Article Sixth of the Company's Certificate of Incorporation contains the
following provision with respect to indemnification of directors and
officers:
A. A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the directors' duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
GCL (General Corporation Law of the State of Delaware), or (iv) for any
transaction from which the director derived an improper personal benefit.
If the GCL is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the GCL, as so amended. Any repeal or modification
of this Paragraph A by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
with respect to events occurring prior to the time of such repeal or
modification.
B. (1) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit, or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she or a person of whom
he or she is the legal representative is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request
of the Corporation, as a director, officer or employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director,
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officer, employee or agent or in any capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the GCL
as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (2) of this paragraph B
with respect to proceedings seeking to enforce rights to indemnification,
the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification
conferred in this Paragraph B shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition;
provided, however, that if the GCL requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity) in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan in advance of the final
disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such director or officer
to repay all amounts so advanced if it shall ultimately be determined
that such director or officer is not entitled to be indemnified under
this Paragraph B or otherwise.
(2) If a claim under paragraph (1) of this Paragraph B is not
paid in full by the Corporation within thirty days after a written claim
has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any
is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the GCL
for the Corporation to indemnify the claimant for the amount claimed but
the burden of proving such defense shall be on the Corporation. Neither
the failure of the Corporation (including its Board of Directors,
independent legal counsel or stockholders) to have made a determination
prior to the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the GCL, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel or stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable
standard of conduct.
(3) The right to indemnification and the payment of expenses
in defending any proceeding in advance of its final disposition conferred
in this Paragraph B
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shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the certificate of
incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
(4) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against
such expense, liability or loss under the GCL.
(5) The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and
rights to be paid by the Corporation for the expenses incurred in
defending any proceeding in advance of its final disposition, to any
agent of the Corporation to the fullest extent of the provisions of this
Paragraph B with respect to the indemnification and advancement of
expenses of directors, officers and employees of the Corporation.
Section 145 of the General Corporation Law of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer
of the Company provided said officers or directors acted in good faith.
The Certificate of Incorporation and By-laws of the Company provide that
the Company shall indemnify to the fullest extent permitted by Delaware law
any person whom it may indemnify thereunder, including directors, officers,
employees and agents of the Company. Such indemnification (other than as
ordered by a court) shall be made by the Company only upon a determination
that indemnification is proper in the circumstances because the individual
met the applicable standard of conduct. Advances for such indemnification
may be made pending such determination. Such determination shall be made by
a majority vote of a quorum consisting of disinterested directors, or by
independent legal counsel or by the stockholders. In addition, the
Certificate of Incorporation provides for the elimination, to the extent
permitted by Delaware law, of personal liability of directors to the Company
and its stockholders for monetary damages for breach of fiduciary duty as
directors.
The Company has also agreed to indemnify each director and executive
officer pursuant to an Indemnification Agreement with each such director and
executive officer from and against any and all expenses, losses, claims,
damages and liability incurred by such director or executive officer for or
as a result of action taken while such director or executive officer was
acting in his capacity as a director, officer, employee or agent of the
Company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In such event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling
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person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, or officer or controlling person in
connection with the securities being registered, the Company will, unless in
opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
5 Opinion of Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP
10.1 Consulting Agreement dated August 26, 1997 by and among the Company
and Jay M. Kaplowitz, Wesley C. Fredericks, Jr., Arthur S. Marcus and
Fredric J. Gruder.
24.1 Consent of Rothstein, Kass & Company, P.C.
24.2 Consent of Gersten, Savage, Kaplowitz, Fredericks & Curtin (included
in Exhibit 5).
Item 9. Undertakings
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to suit information in the registration
statement.
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provided, however, that paragraphs 9a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the small business
issuer pursuant to Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to any charter provision,
by-law contract arrangements statute, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of New York, State of New York on
the 3rd day of October, 1997.
ALPHA HOSPITALITY CORPORATION
By: /s/ Stanley S. Tollman
--------------------------
Stanley S. Tollman,
Co-Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Stanley S. Tollman, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same and all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- - - --------- ----- ----
/s/ Stanley S. Tollman
- - - ---------------------- Chairman of the Board October 2, 1997
Stanley S. Tollman and Co-Chief Executive
Officer (Principal Executive
Officer)
/s/ Sanford Freedman
- - - --------------------- Vice President, Secretary October 3, 1997
Sanford Freedman and Director
/s/ James A. Cutler
- - - ------------------- Treasurer and Chief Financial October 2, 1997
James A. Cutler Officer (Principal Financial
Officer and Principal Accounting
Officer
/s/ Brett G. Tollman
- - - ------------------- Vice President and Director October 2, 1997
Brett G. Tollman
/s/ Thomas W. Aro
- - - ------------------- Vice President and Director October 2, 1997
Thomas W. Aro
- - - ------------------- Director October __, 1997
Patricia Cohen
- - - ------------------- Director October __, 1997
Matthew B. Walker
II-7
<PAGE>
EXHIBIT INDEX
5 Opinion of Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP.
10.1 Consulting Agreement dated August 26, 1997 by and among the Company
and Jay M. Kaplowitz, Wesley C. Fredericks, Jr., Arthur S. Marcus and
Fredric J. Gruder.
24.1 Consent of Rothstein, Kass & Company, P.C.
24.2 Consent of Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP
(included in Exhibit 5)
II-8
<PAGE>
[Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP letterhead]
October 3, 1997
Alpha Hospitality Corporation
12 East 49th Street
New York, New York 10017
Gentlemen:
You have requested our opinion, as counsel for Alpha Hospitality Corporation,
a Delaware corporation (the "Company"), in connection with the registration
statement on Form S-8 (the "Registration Statement"), under the Securities
Act of 1933 (the "Act"), being filed by the Company with the Securities and
Exchange Commission.
The Registration Statement relates to an offering of 36,000 shares (the
Selling Security Holder Shares") of common stock (the "Offering"), par value
$.01 (the "Common Stock"), issued pursuant to a consulting agreement between
the Company and Messrs Jay Kaplowitz, Wesley Fredericks, Arthur Marcus and
Fredric Gruder.
We have examined such records and documents and made such examinations of law
as we have deemed relevant in connection with this opinion. It is our opinion
that the Selling Security Holder Shares have been fully paid, validly issued
and nonassessable.
No opinion is expressed herein as to any laws other than the laws of the
State of New York, of the United States and the corporate laws of the State
of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement. In so doing, we do not admit
that we are in the category of persons whose consent is required under
Section 7 of the Act of the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Gersten, Savage, Kaplowitz
------------------------------
Gersten, Savage, Kaplowitz
GERSTEN, SAVAGE, KAPLOWITZ
FREDERICKS & CURTIN, LLP
<PAGE>
CONSULTING AGREEMENT
August 26, 1997
Messrs. Jay Kaplowitz, Wesley Fredericks,
Arthur Marcus and Fredric Gruder
c/o Gersten, Savage, Kaplowitz, Fredericks & Curtin LLP
101 East 52nd Street, 9th Floor
New York, New York 10022
Dear Sirs:
This is to set forth the terms on which Jay Kaplowitz, Wesley
Fredericks, Arthur Marcus and Fredric Gruder (collectively, the "Consultants")
have rendered consulting services to Alpha Hospitality Corporation ("Alpha"), a
Delaware corporation, and Alpha's subsidiaries, which terms are as follows:
1. The Consultants have provided consultation from time to time to
Alpha's management and Board of Directors as they have from time to time
reasonably request with respect to Alpha's strategic planning with respect to
both financial and legal matters.
2. In consideration for such services rendered, upon the execution
of this consulting agreement, Alpha will pay the Consultants an aggregate of
36,000 shares of its common stock, to be issued as follows: 21,000 to Jay
Kaplowitz, 6,000 to Wesley Fredericks, 6,000 to Arthur Marcus and 3,000 to
Fredric Gruder.
3. Any notices or other communications under or with regard to this
Agreement must be in writing, and will be deemed given when delivered in person,
when sent by facsimile transmission (promptly confirmed in writing sent by
mail), or on the third business day after the date on which mailed, to the
following addresses:
If to the Consultant:
C/o Gersten, Savage, Kaplowitz, Frederics & Curtin, LLP
101 East 52nd Street, 9th Floor
New York, New York 10022
Facsimile No.: (212)752-9713
If to Alpha:
Alpha Hospitality Corporation.
12 East 49th Street, 24th Floor
New York, New York 10017
Attention: James A. Cutler
Facsimile No.: (201) 567-8536
<PAGE>
Kaplowitz, Fredericks, Marcus and Gruder
August 26, 1997
Page 2
4. Alpha agrees to cooperate Consultants with the prompt filing of a
registration statement on Form S-8 including the shares being issued hereunder.
5. This document contains the entire agreement between the
Consultants and Alpha regarding the consulting arrangement which is the subject
of this Agreement. This Agreement may be amended only by a document in writing
signed by the Consultants and by Alpha.
6. Neither this Agreement nor any right of either party under it may
be assigned without the consent of the other party.
7. This Agreement will be governed by, and construed under, the laws
of the State of New York governing contracts made and to be performed entirely
in the state.
Please execute a copy of this document, which, when executed by the
Consultants, will constitute a binding agreement between the Consultants and
Alpha.
Very truly yours,
ALPHA HOSPITALITY CORPORATION
---------------------------------
By: James A. Cutler
Title: Chief Financial Officer
AGREED TO AND ACCEPTED:
- - - -------------------- -----------------------------------
Jay Kaplowitz Wesley Fredericks
- - - -------------------- -----------------------------------
Arthur Marcus Fredric Gruder
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration of our report dated February
14, 1997, included in the Alpha Hospitality Corporation's Form 10-K for the
years ended December 31, 1996 and 1995 and to references to our Firm as
experts in this registration statement.
/s/ Rothstein, Kass & Company, P.C.
ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
September 30, 1997
