UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 20, 2004
REGENCY AFFILIATES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-7949 72-0888772
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
610 N.E. Jensen Beach Blvd.
Jensen Beach, Florida 34957
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (772) 334-8181
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ITEM 5. OTHER EVENTS AND REQUIRED FD DISCLOSURE
On January 20, 2004, a purported derivative and class action lawsuit was
filed by two individual shareholders of the Company in the New Castle County
Court of Chancery, Delaware, naming as defendants certain current and former
directors of the Company, Royalty Holdings LLC and certain of its affiliates,
Statesman Group, Inc. and, nominally, the Company. The complaint alleges, among
other things, breaches of fiduciary duties by the former director defendants and
Statesman Group, Inc. in connection with (i) the exercise by Statesman Group,
Inc. in 2001 of an option to acquire shares of common stock of the Company, (ii)
the 2001 sale of rock aggregate by the Company to Iron Mountain Resources, Inc.
and (iii) the October 2002 recapitalization of the Company. The complaint also
alleges breaches of fiduciary duties by the current director defendants in
connection with the payment by the Company in 2003 of accrued compensation owed
to William R. Ponsoldt, Sr. for periods prior to the October 2002
recapitalization of the Company. The complaint also alleges that Royalty
Holdings LLC and its affiliates knowingly participated in the breaches of
fiduciary duties by the former director defendants relating to the October 2002
recapitalization of the Company.
In addition to other damages, plaintiffs seek unspecified compensatory
and/or rescissory damages against all defendants, a declaration that all Company
stock issued to Statesman Group, Inc., William R. Ponsoldt, Sr., Royalty
Holdings LLC and any person affiliated with the foregoing is void, an order
rescinding any payments in any form made by the Company to William R. Ponsoldt,
Sr. or any of his affiliates or family members, an order rescinding the October
2002 recapitalization of the Company, and an order rescinding Statesman Group,
Inc.'s 2001 option exercise and rescinding the option itself. The Company, as a
nominal defendant, has not taken any position with respect to the merits of the
lawsuit. However, the Company understands that the other defendants in the
lawsuit believe that the claims raised by the plaintiffs are without merit, and
that such defendants intend to defend the claims vigorously.
The defendants in the lawsuit other than Statesman Group, Inc. are
entitled to be indemnified by the Company for damages, if any, and expenses,
including legal fees, they may incur as a result of the lawsuit, subject to
certain circumstances under which such indemnification is not available. In
addition, other than with respect to the claims against the current director
defendants in their capacities as such, the claims contained in the lawsuit are
not covered by insurance, as the Company's carrier has declined coverage on the
basis of the "insured vs. insured" exclusion since one of the named plaintiffs,
Donald D. Graham, was previously a director of the Company. The Company has
submitted a claim to its carrier with respect to the claims in the lawsuit
against the current director defendants. No assurance can be given as to the
position that the carrier will take with respect to such claims.
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REGENCY AFFILIATES, INC.
By: /s/ Laurence S. Levy
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Name: Laurence S. Levy
Title: President
Dated: January 29, 2004
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