ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and
entered into by and among FLORIDA GAMING CORPORATION, a Delaware
corporation ("Buyer"), FREEDOM FINANCIAL CORPORATION, an Indiana
corporation ("Freedom") and INTERSTATE CAPITAL CORPORATION, a
Kentucky corporation ("Seller").
WITNESSETH:
WHEREAS, Seller is a wholly-owned subsidiary of Freedom; and
WHEREAS, Seller is indebted to Freedom and Freedom is
indebted to Buyer; and
WHEREAS, Seller beneficially owns certain unimproved
properties and a residential real estate development called Xxxx
Club Estates, all of which are situated in Xxxxxx County,
Georgia, as more particularly described in Exhibits A and B,
which are attached hereto and incorporated herein (collectively
the "Properties"); and
WHEREAS, Freedom holds fee simple title to the Properties in
a constructive trust for the benefit of Seller; and
WHEREAS, Seller desires to sell and Buyer desires to
purchase the Properties, subject to the terms and conditions
herein set forth.
NOW THEREFORE, in consideration of the premises and the
mutual promises of the parties hereto, they hereby covenant and
agree as follows:
1. Sale. Seller agrees to sell and convey to Buyer and
Buyer agrees to purchase and take from Seller all of Seller's
right, title and interest in and to the Properties and all
improvements, furniture and fixtures located thereon. Freedom
agrees to transfer record fee simple title to the Properties to
the Buyer at the Closing (as hereinafter defined).
2. Purchase Price. As consideration for the sale, Buyer
agrees to pay Seller the sum of $6,526,265, payable as follows:
(i) $1,081,102 by Buyer's assumption of indebtedness on the
Properties owed by Freedom and/or Seller on first mortgage
promissory notes to PNC Bank, Kentucky, Inc., Louisville,
Kentucky and the First National Bank of Commerce, Commerce,
Georgia (collectively the "Banks"), copies of which are attached
hereto as Exhibits C and D, respectively, and incorporated herein
(the "First Mortgage Notes"), (ii) $2,237,000 by Buyer's issuance
of 2,237 shares of Preferred Stock (as hereinafter defined) and
(iii) $3,208,163 by the cancellation of indebtedness owed by
Freedom to Buyer on Freedom's secured credit line ("Freedom's
Credit Line"). Freedom agrees to simultaneously cancel a like
amount of indebtedness owed by Seller to Freedom.
3. Cancellation of Freedom's Credit Line. As additional
consideration for this Agreement, Buyer, Seller and Freedom agree
that on the Closing Date (as hereinafter defined), Freedom's
Credit Line shall be cancelled and thereafter neither Buyer,
Seller nor Freedom shall ever enter into any transaction or
otherwise cause or permit any monies to be loaned or advanced,
directly or indirectly, by Buyer or any downstream affiliate of
Buyer (collectively the "Gaming Group") to Seller, Freedom or any
upstream affiliate of Freedom (collectively the "Freedom Group")
which would result in any member of the Freedom Group being
indebted, directly or indirectly, to any member of the Gaming
Group.
3. Representations and Warranties by Freedom. Freedom
represents and warrants to Buyer as follows:
3.1 Subsidiaries. Freedom owns all of the issued and
outstanding shares of capital stock of Seller.
3.2 Corporate Organization, Etc. Freedom is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Indiana. Freedom has full
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and
approved by the Board of Directors of Freedom. This Agreement
will have been duly executed and delivered by, and constitute a
valid and binding obligation of, Freedom, enforceable against
Freedom in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally or by the principles governing the availability
of equitable remedies.
4. Representations and Warranties by Freedom and Seller.
Freedom and Seller jointly and severally represent and warrant to
Buyer, as follows:
4.1 Corporate Organization, Etc. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Kentucky. Seller has full
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and
approved by the Board of Directors and Stockholders of Seller.
This Agreement will have been duly executed and delivered by, and
constitute a valid and binding obligation of, Seller, enforceable
against Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the
availability of equitable remedies.
4.2 Title. Seller beneficially owns and Freedom owns
record simple title to the Properties free and clear of any and
all liens, encumbrances, stipulations, and restrictions, except
as disclosed on Exhibits A and B hereto.
4.3 No Violation. Consummation of the transactions
contemplated herein will not constitute or result in a breach or
default under any provision of any charter, bylaw, indenture,
mortgage, lease or agreement, or any order, judgment, decree, law
or regulation to which any property of Freedom or Seller is
subject or by which Freedom or Seller is bound.
4.4. Brokers. There are no brokerage commissions,
finder's fees or similar fees or commissions payable in
connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with Freedom or Seller or
any action taken by Freedom or Seller.
4.5 Condemnation Proceedings. Seller has received no
notice of, and to the best knowledge of Freedom and Seller there
are no pending or threatened condemnation of similar proceedings
of any nature whatsoever affecting the Properties or any portion
thereof, or that any such proceeding is contemplated.
4.6 No Violation of Laws. Neither Freedom nor Seller
has received any notice from any governmental unit or agency
indicating that the Properties or any portion thereof, or any
operation conducted therein, are in violation of any statute,
code, ordinance, or regulation, and, to the best knowledge of
Freedom and Seller no such violation exists.
4.7 Hazardous Materials. To the best knowledge of
Freedom and Seller, neither Freedom nor Seller nor any other
party has ever caused or permitted any Hazardous Material (as
hereinafter defined) to be placed, held, located, or disposed of
on, under, or at the Properties or any part thereof, and neither
the Properties nor any part thereof has even been used as a dump
or storage site (whether permanent or temporary) for any
Hazardous Material. As used herein, Hazardous Material means and
includes any hazardous, toxic, or dangerous waste, substance, or
material, defined as such in, or for the purposes of, the
Comprehensive Environmental Response, Compensation and Liability
Act (42 USC 9601 et seq., as amended) or any other "superfund" or
superlien" law, or any other federal, state, or local statute,
law, ordinance, code, rule, regulation, order, or decree
regulating, relating to, or imposing liability or standards of
conduct concerning any substance or material, as presently in
effect. The Properties do not contain any asbestos or radon, or
any other substance known or believed by generally accepted
authorities to be harmful or injurious to human health or safety.
Freedom and Seller jointly and severally agree to indemnify Buyer
and hold Buyer harmless from and against any and all loss,
liability, damage, injury, cost, or expense (including reasonable
attorney fees and expenses) any claims of any and every kind
whatsoever, paid, incurred, or suffered by, or asserted against
Buyer for, with respect to, or as a direct result of a breach of
this warranty, such indemnification being unlimited in duration.
4.8 Litigation. There is no action, suit, litigation,
or proceeding of any nature pending, or, to the best knowledge of
Freedom or Seller, threatened, against or affecting the
Properties, or any portion thereof, or which could result in the
obtaining of a lien or other interest in the Properties by any
third party, in any court or before any federal, state, county,
or municipal department, commission, board, bureau, agency or
other governmental instrumentality.
4.9 Zoning. To the best knowledge of Freedom and
Seller, the current use of the Properties fully complies with all
applicable laws, regulations, and ordinances, including without
limitation applicable zoning and land use laws, regulations and
ordinances.
4.10 Unpaid Claims. To the best knowledge of Freedom
and Seller, there are no unpaid claims of contractors,
materialmen, or laborers which could give rise to a lien against
the Properties.
4.11 No Default. Neither of the First Mortgage Notes
are in default, neither Seller nor Freedom has received any
notice of default with respect to either First Mortgage Note, and
neither Seller nor Freedom has performed or failed to perform any
act which could cause either of the First Mortgage Notes to
become in default.
5. Representations and Warranties by Seller. Seller
represents and warrants to Buyer, as follows:
5.1 Investment Experience. Seller is an "accredited
investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended (the "Act"). Seller is aware of Buyer's business
affairs and financial condition and has access to and has
acquired sufficient information about Buyer to reach an informed
and knowledgeable decision to acquire the Preferred Stock of
Buyer pursuant to this Agreement. Seller and its officers,
directors and stockholders have such business and financial
experience as is required to give it the capacity to protect its
own interests in connection with the acquisition of the Preferred
Stock.
5.2 Investment Intent. Seller is acquiring the
Preferred Stock for its own account as principal, for investment
purposes only, and not with a view to, or for, resale or
distribution within the meaning of the Act. Seller understands
that the Preferred Stock will not be registered under the Act or
registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of Seller's
investment intent as expressed herein. Seller has, in connection
with its decision to acquire the Preferred Stock, relied solely
upon the reports, schedules and other documents filed with the
Securities Exchange Commission by Buyer, the representations and
warranties contained herein and Seller's investigation of Buyer
and its business, assets, liabilities and prospects. Seller will
not, directly or indirectly, offer, sell, transfer or otherwise
dispose of the Preferred Stock in the absence of an effective
registration statement under the Act and any applicable state
securities law or the opinion of counsel acceptable to Buyer that
an exemption from registration is available.
5.3 SEC Reports. Seller has received copies of or has
access to all materials, reports and documents filed by Buyer
with the Securities and Exchange Commission after December 31,
1995 (collectively the "SEC Reports").
6. Representations and Warranties by Buyer. Buyer
represents and warrants to Seller and Freedom, as follows:
6.1 Subsidiaries. Buyer owns all of the issued and
outstanding common stock of Postal Acquisition Corporation, a
Delaware corporation, and Florida Gaming Centers, Inc., a Florida
Corporation. Florida Gaming Corporation, Postal Acquisition
Corporation and Florida Gaming Centers, Inc. are hereinafter
sometimes collectively referred to as the "Gaming Companies".
6.2 Corporate Organization and Good Standing. The
Gaming Companies are corporations duly organized, validly
existing and in good standing under the laws of their respective
states of incorporation. The Gaming Companies have full corporate
power and authority to own, use and lease their properties and to
conduct their business as such properties are owned, used or
leased and as such businesses are currently conducted. The Gaming
Companies are duly qualified to do business as foreign
corporations and are in good standing in each jurisdiction in
which they own or lease properties or where the conduct of their
businesses would require such qualification, except where the
failure to be so qualified would not have a material adverse
effect on the condition, financial or otherwise, or on the
earnings, business affairs or business prospects of the Gaming
Companies taken as a whole.
6.3 Corporate Power and Authority. Buyer has full
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and
approved by the Board of Directors of Buyer. This Agreement will
have been duly executed and delivered by, and constitute a valid
and binding obligation of, Buyer, enforceable against Buyer in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable
remedies.
6.4 Capitalization. At August 31, 1997, Buyer's
authorized capital stock consists of:
(a) 15,000,000 shares of $.10 par value common stock of
which 5,468,288 shares were issued and outstanding (excluding the
shares to be contributed by Florida Gaming Corporation to Postal
Acquisition Corporation pursuant to Section 1 above), of which
1,652,480 shares are owned of record by Freedom Financial
Corporation;
(b) 500,000 shares of $.10 par value Convertible
Preferred Stock, none of which are issued and outstanding;
(c) 500,000 shares of $.10 par value Series Preferred
Stock, of which 17,000 shares have been designated Class B, C, D
or E;
(d) 1,200,000 shares of $.10 par value Class A
Convertible Preferred Stock, of which 34,435 shares are issued
and outstanding;
(e) 5,000 shares of $.10 par value Class B Convertible
Preferred Stock, of which 545 shares are issued and outstanding;
(f) 5,000 shares of $.10 par value Class C Convertible
Preferred Stock, of which 345 shares are issued and outstanding;
(g) 5,000 shares of $.10 par value Class D Convertible
Preferred Stock, of which 100 shares are issued and outstanding;
and
(h) 2,000 shares of $.10 par value Class E Convertible
Preferred Stock, all of which are issued and outstanding.
At August 31, 1997, approximately 2,476,000 shares of $.10
par value common stock are reserved for issuance upon the
exercise of outstanding options, warrants and conversion rights,
including an option to purchase 905,000 shares previously granted
to Freedom Financial Corporation.
6.5 Financial Statements. Buyer's audited consolidated
financial statements included in its Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission and its
unaudited consolidated financial statements included in Buyer's
Quarterly Report on Form 10-QSB for the quarter ended June 30,
1997, fairly present the financial condition of Buyer as of such
dates and for the periods then ended, in conformity with
generally accepted accounting principles consistently applied for
the periods covered.
6.6 Absence of Undisclosed Liabilities. Except to the
extent reflected or reserved against in Buyer's balance sheets
dated December 31, 1996 and June 30, 1997, Buyer did not have at
such dates any liabilities or obligations (secured, unsecured,
contingent or otherwise) of a nature customarily reflected in a
corporate balance sheet prepared in accordance with generally
accepted accounting principles.
6.7 Absence of Material Changes. Except as heretofore
disclosed by Buyer to Seller, there has been no material adverse
change in the business, properties, or financial condition of the
Gaming Companies, taken as a whole, since June 30, 1997.
6.8 Litigation. Except as disclosed in the SEC Reports
there is no litigation, proceeding, or investigation pending or,
to the knowledge of Buyer, threatened against any of the Gaming
Companies which if successful might result in a material adverse
change in the business, properties, or financial condition of the
Gaming Companies, taken as a whole, or which questions the
validity or legality of this Agreement or of any action taken or
to be taken by Buyer in connection with this Agreement.
6.9 Contracts. Except as disclosed in the SEC Reports.
none of the Gaming Companies is a party to any material contract
not in the ordinary course of business which is to be performed
in whole or in part at or after the date of this Asset Purchase
Agreement.
6.10 Title. The Gaming Companies have good and
marketable title to all the real property and good and valid
title to all other property included in the balance sheet of
Gaming Corporation as of June 30, 1997, other than property
disposed of in the ordinary course of business after said date.
Except as disclosed in the SEC Reports, the properties of the
Gaming Companies are not subject to any mortgage, encumbrance or
lien of any kind except minor encumbrances which do not
materially interfere with the use of the property in the conduct
of the business of the Gaming Companies, taken as whole.
6.11 Tax Returns. Except as disclosed in the SEC
Reports, the Gaming Companies have (i) filed all tax returns
relating to their operations required to be filed by any
jurisdiction to which they are or have been subject, (ii) paid in
full all taxes due and all taxes claimed to be due by each such
jurisdiction, and any interest and penalties with respect
thereto, subject to audit by the taxing authority of such
jurisdiction, (iii) fully accrued on its books all taxes for any
period which are not yet due, and (iv) made timely payments of
the taxes required to be deducted and withheld from the wages
paid to its employees. All federal, state and local tax returns,
schedules, declarations and other tax related documents filed by
the Gaming Companies correctly reflect income, expense,
deductions, capitals and loss carryovers of the Gaming Companies
and the taxes due and are otherwise accurate and complete in all
material respects and have not been amended. The Gaming Companies
have not received any notice of deficiency or assessment or
proposed deficiency or assessment from any federal, state, local
or foreign taxing authority which has not been paid. There are no
agreements, consents or waivers by the Gaming Companies for the
extension of time for the assessment of any taxes or deficiencies
against the Gaming Companies or with respect to their operations
or assets, and no power of attorney granted by the Gaming
Companies with respect to any matter relating to taxes is
currently in force.
6.12 No Violation. Consummation of the transactions
contemplated herein will not constitute or result in a breach or
default under any provision of any charter, bylaw, indenture,
mortgage, lease or agreement, or any order, judgment, decree, law
or regulation to which any property of the Gaming Companies is
subject or by which any of the Gaming Companies are bound, except
for breaches or defaults which in the aggregate would not have a
materially adverse effect on Gaming Companies' properties,
business operations or financial condition, taken as whole.
6.13 Brokers. There are no brokerage commissions,
finder's fees or similar fees or commissions payable in
connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with Buyer or any action
taken by Buyer.
7. Conduct of Gaming Companies Pending Closing. Buyer
agrees that between the date of this Agreement and the Closing
(as hereinafter defined):
7.1 Articles of Incorporation and By-Laws. Except as
otherwise provided herein, none of the Gaming Companies will
change their respective Certificates or Articles of Incorporation
or By-Laws.
7.2 Capitalization. Except as otherwise provided
herein, none of the Gaming Companies will sell or issue any of
their capital stock nor pay any dividends or make any other
distributions with respect to their common stock.
7.3 Conduct of Business. Buyer will use its best
efforts to preserve and maintain the Gaming Companies' business
organizations, employee relationships and goodwill in tact and
will not enter into any material commitment except in the
ordinary course of business.
8. Conditions Precedent to Closing. The obligations of the
parties hereto to consummate this Agreement is subject to the
following conditions:
8.1 Representations and Warranties True. The
representations and warranties herein of all of the other parties
hereto shall be true and correct as of the Closing as though such
representations and warranties were made at and as of that date,
except as affected the transactions contemplated herein.
8.2 Title Opinion. Freedom and Seller shall have
delivered to Buyer title opinions with respect to the Properties
in the form attached hereto as Exhibit A and B and incorporated
herein.
8.3 Fairness Opinion. The Committee designated by the
Board of Directors of Buyer shall have received an opinion from
an investment banker of its own choosing that the Consideration
to be paid for the Properties is fair, from a financial point of
view, to the public stockholders of Buyer.
8.4 Regulatory Approvals. Buyer shall have received all
regulatory approvals and exemptions, if any, which it is legally
required to obtain before effecting the transactions contemplated
herein.
8.5 Lenders' Approvals. Seller and Freedom shall have
received written approval of the Banks for the transfer of the
Properties to Buyer and for Buyer's assumption of the First
Mortgage Notes.
8.6 Preferred Stock. Buyer shall have amended its
Certificate of Incorporation to authorize the issuance of 2,237
shares of a new Series F Convertible Preferred Stock ("Preferred
Stock"). The Preferred Stock shall not be entitled to vote; shall
have a par value of $.10 per share and a stated value of $1,000
per share; shall be entitled to cumulative dividends at the rate
of 8% of the stated value per share, shall be convertible in
whole or in part from time to time at the option of the holder
into shares of Buyer's $.10 par value common stock on the basis
of 296.6732 shares of Common Stock for one share of Preferred
Stock (adjusted for any stock dividends, combinations or splits)
and shall be entitled to a liquidation preference equal to the
stated value per share plus any unpaid cumulative dividends.
8.7 Corporate Approvals. This Agreement shall have been
approved by the Boards of Directors of Buyer and Freedom by the
Board of Directors and Stockholder of Seller.
8.8 Execution and Delivery of Agreement. This Agreement
shall have been executed on behalf of each of the parties hereto
and delivered to all of the other parties hereto.
9. Closing. The Closing (herein so called) shall take
place on such date and at such time as the parties hereto shall
mutually agree but not later than October 15, 1997 (the "Closing
Date"). At the Closing:
(a) Freedom shall convey the Properties to Buyer by general
warranty deed or deeds, free and clear of all liens and
encumbrances except as disclosed in Exhibits A and B hereto, and
except for governmental laws and regulations (including zoning
regulations affecting the Properties.
(c) Seller shall convey the Properties to Buyer by quitclaim
deed or deeds.
(c) Seller and Freedom shall assign to Buyer all of their
respective rights under the terms of any contracts, agreements or
leases with respect to the Properties.
(c) Buyer shall assume $1,081,102 of indebtedness on the
First Mortgage Notes.
(e) Buyer shall issue and deliver a stock certificate or
certificates to Seller representing an aggregate of 2,237 shares
of Preferred Stock.
(f) Buyer shall cancel $3,208,163 of the indebtedness owed
by Freedom to Buyer on Freedom's Credit Line.
(g) Buyer and Freedom shall cancel Freedom's Credit Line.
10. Termination. This Agreement may be terminated:
10.1 Mutual Consent. By the mutual consent in writing
of the Boards of Directors of Freedom, Seller and Buyer.
10.2 Unilaterally. By the Board of Directors of Buyer
(the "First Party") or by the Boards of Directors of Freedom and
Seller (the "Second Party"), upon written notice by either Party
to the other Party if the representations and warranties of the
other Party are not true and correct at any time prior to or at
the Closing or if the transactions contemplated herein have not
been effected before October 15, 1997.
10.3 Effect of Termination. In the event of a
termination of this Agreement, each party hereto shall pay the
costs and expenses incurred by it in connection herewith and no
party hereto (or any of its officers, directors and shareholders)
shall be liable to any other party for any costs, expenses,
damages or loss of anticipated profits hereunder.
11. Further Assurances. At any time, and from time to time,
after the Effective Date, each party shall execute such
additional instruments and take such action as may reasonably be
requested by the other parties hereto to confirm or perfect title
to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
12. Waiver. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed.
13. Expenses. Each party hereto shall pay all costs and
expenses incurred by it in connection with this Agreement and the
consummation of the transactions contemplated herein.
14. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if
delivered in person or sent by first class mail, certified or
registered, return receipt requested, to the Chairman, Chief
Executive Officer or President of the party to which the
communication is directed at such party's principal place of
business.
15. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject
matter hereof.
16. Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
17. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Delaware.
18. Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their successors
and assigns; provided, however, that any assignment by any party
of its rights under this Agreement without the written consent of
all of the other parties hereto shall be void.
19. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, Florida Gaming Corporation, Freedom
Financial Corporation and Interstate Capital Corporation have
caused this Agreement to be signed by their officers thereunto
duly authorized as of the 24th day of September, 1997.
FLORIDA GAMING FREEDOM FINANCIAL
CORPORATION CORPORATION
By: /s/Xxxxxxx X. Xxxxxxx By: /s/X. Xxxxxxx Xxxxxxx
Xxxxxxx X. Xxxxxxx X. Xxxxxxx Xxxxxxx
Executive Vice President Chairman and Chief
Executive Officer
INTERSTATE CAPITAL
CORPORATION
By: /s/X. Xxxxxxx Xxxxxxx
X. Xxxxxxx Xxxxxxx
Chairman and Chief
Executive Officer
