FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of the earliest event reported) February 2, 1995
International Thoroughbred Breeders, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-9624 22-2332039
P.O. Box 1232, Cherry Hill, New Jersey 08034
(Address of principal executive offices)
Registrant's telephone number, including area code (609) 488-3838
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
Item 2. Acquisition of Assets
On February 2, 1995 (as of January 1, 1995), the Registrant acquired
Freehold Raceway in Freehold, New Jersey through the purchase from Kenneth R.
Fischer (the "Seller") of all of the outstanding capital stock of Freehold
Racing Association, Inc. ("FRA"), Atlantic City Harness, Inc. ("ACH") and
Circa 1850, Inc. ("Circa"), the three corporations which own and operate
Freehold Raceway. The purchase price for the stock of the three corporations
aggregated $17,825,000 consisting of cash payments of $5,325,000 paid by the
Registrant at the closing from working capital, and the delivery of the
Registrant's eight-year promissory note (the "ITB Note") in the principal
amount of $12,500,000. Principal under the ITB Note is payable to the Seller
annually, on January 31 of each year commencing January 31, 1996, based upon a
20-year principal amortization schedule during the first five years and upon a
10-year amortization schedule during the next three years. Interest on the
outstanding balance at an annual rate (adjusted annually) of the lesser of 80%
of the prime rate or 6%, is payable with each payment of principal. Any
outstanding principal balance under the ITB Note is due and payable on
December 31, 2003 together with all accrued interest. At the Closing, the
Seller and the Registrant each advanced the sum of $2,584,549 to FRA and FRA
utilized the funds to retire approximately $5,170,000 of outstanding long-term
debt owed pursuant to an Economic Development Authority Bond issue. In
consideration therefor, FRA delivered an 11-year promissory note
(the "FRA-Seller Note") to the Seller in the principal
amount of $2,584,549, payable in
consecutive equal monthly installments of principal in the amount of $18,750
commencing as of February 1, 1995 together with interest on the outstanding
balance at an annual rate (adjusted annually) at 80% of the prime rate. Any
outstanding principal balance under the FRA-Seller Note is due and payable on
June 1, 2006 together with all accrued interest. At the same time, FRA
delivered an 11-year promissory note (the "FRA-ITB Note") to the Registrant,
payable to the Registrant and containing payment terms identical to those of
the FRA-Seller Note.
As collateral for the ITB Note, the Registrant caused FRA to grant a
first mortgage on the Freehold Raceway property to the Seller. In addition,
the Registrant granted the Seller a security interest in the purchased stock
of the three corporations pursuant to a Pledge and Escrow Agreement. The
mortgage lien and the security interest in the stock will be retained by the
Seller until payment in full of the ITB Note. In addition, as collateral for
the FRA-Seller Note, the Registrant caused FRA to grant a second mortgage on
the Freehold Raceway property to be retained by the Seller until payment in
full of the FRA-Seller Note. As further collateral to insure payment of the
ITB Note and the FRA-Seller Note, the Registrant's principal stockholder,
Robert E. Brennan, granted the Seller a security interest in 2,000,000 shares
of the Registrant's Common Stock of which he is the record owner, pursuant to
a Pledge and Security Agreement. The pledge of the Registrant's Common Stock
by Mr. Brennan will terminate on January 31, 1998 provided that at such date,
no default exists under the terms of the ITB Note and/or the FRA-Seller Note.
(The Registrant also caused FRA to grant it a third mortgage on the Freehold
Raceway property to insure payment of the FRA-ITB Note.)
Freehold Raceway is situated on approximately 51 acres in Freehold, New
Jersey. Daytime harness racing is conducted at the raceway which has been
allocated 209 pari-mutuel racing dates in calendar year 1995 by the New Jersey
Racing Commission. Additionally, the track hosts full-card simulcast betting
on thoroughbred and harness racing from numerous tracks throughout the
country. The principal assets acquired include a grandstand, an
administration building, a 1 / 2 mile oval racetrack, receiving barns,
machinery and equipment and parking facilities. In determining the purchase
price, the Registrant's management took into account the value of the physical
assets being acquired, the results of operations at the raceway, the number of
approved racing dates and other factors.
Item 7. Financial Statements and Exhibits
(a) and (b) Pro Forma Financial Statements and Financial Statements.
(a) Pro-Forma Financial Information of the Registrant and its
subsidiaries and Freehold Racing Association and Atlantic City Harness, Inc.
(b) Financial Statements of Freehold Racing Association and Atlantic
City Harness, Inc.
(c) Exhibits
4.3 ( 95) The Registrant's $12,500,000 Promissory Note dated
January 31, 1995 payable to the Seller.
10.1 ( 95) Stock Purchase Agreement made as of January 1, 1995 for
the acquisition by the Registrant of all of the outstanding capital stock of
FRA, ACH and Circa.
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)
The following pro forma condensed combined balance sheet as of September
30, 1994 and condensed combined statement of operations for the year ended
June 30, 1994 and the three months ended September 30, 1994 give effect to
International Thoroughbred Breeders, Inc. (the "Company") acquiring all of the
outstanding stock of Freehold Racing Association, Inc. ("FRA"), Atlantic City
Harness, Inc., ("ACH") and Circa 1850, Inc., ("Circa"). The effective date of
acquisition is February 2, 1995. The pro forma financial statements do not
give effect to combining Circa, Inc. as this company would have an
insignificant and immaterial effect on the financial statements as a whole.
The pro forma information is based on the historical financial
statements of the Company, FRA and ACH, giving effect to the transactions
under the purchase method of accounting and the assumptions and adjustments in
the accompanying notes to the pro forma financial statements.
The pro forma balance sheet gives effect to the transactions as if they
occurred on the balance sheet date. The pro forma statements of operations
for the year ended June 30, 1994 and the three months ended September 30, 1994
give effect to these transactions as if they had occurred at the beginning of
the periods presented. The historical statement of operations of the Company
will reflect the effects of these transactions from date of acquisition
onward.
The pro forma combined statements have been prepared by the Company's
managements based upon the historical financial statements of the Company, FRA
and ACH. These pro forma statements may not be indicative of the results that
actually would have occurred if the combination had been in effect on the date
indicated or which may be obtained in the future.
The most recent fiscal year end of the acquired entity differs from the
Company's most recent fiscal year end by more than 93 days. The acquired
entities income statements have been updated to adjust for this difference.
The adjustment is listed in note (a) of the pro forma financial information.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED
BALANCE SHEETS
AS OF SEPTEMBER 30, 1994
ASSETS
(UNAUDITED)
<TABLE>
Freehold Race
September 30,
ITB (From Combining
September 30, 1 Schedule A)
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ 2,290,348 $ 1,881,551
Short-Term Investments 15,425,103 805,419
TOTAL CASH AND CASH EQUIVALENTS 17,715,451 2,686,970
Restricted Cash and Investments 2,587,375 0
Accounts Receivable - Net 1,058,672 311,525
Prepaid Expenses 686,739 152,106
Accrued Interest Receivable 5,972 0
Other Current Assets 8,916 7,649
TOTAL CURRENT ASSETS 22,063,125 3,158,250
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 52,196,047 12,277,573
Equipment 1,888,681 1,047,278
Livestock 62,895 0
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - AT COST 54,147,623 13,324,851
LESS: Accumulated Depreciation 810,295 2,019,584
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 53,337,328 11,305,267
OTHER ASSETS:
Deposits and Other Assets 446,374 35,425
Goodwill - Net 0 2,537,130
TOTAL OTHER ASSETS 446,374 2,572,555
TOTAL ASSETS $ 75,846,827 $ 17,036,072
Pro Forma
Pro Forma Combined
Adjustments September 30,
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ $ 4,171,899
Short-Term Investments (1) (7,983,853) 8,246,669
TOTAL CASH AND CASH EQUIVALENTS (7,983,853) 12,418,568
Restricted Cash and Investments 2,587,375
Accounts Receivable - Net 1,370,197
Prepaid Expenses 838,845
Accrued Interest Receivable 5,972
Other Current Assets 16,565
TOTAL CURRENT ASSETS (7,983,853) 17,237,522
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings (1) 9,043,148 73,516,768
Equipment (1) 72,731 3,008,690
Livestock 62,895
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - AT COST 9,115,879 76,588,353
LESS: Accumulated Depreciation (1) (2,019,584) 810,295
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 11,135,463 75,778,058
OTHER ASSETS:
Deposits and Other Assets (1) (100,000) 381,799
Goodwill - Net (1) 1,905,971 4,443,101
TOTAL OTHER ASSETS 1,805,971 4,824,900
TOTAL ASSETS $ 4,957,581 $ 97,840,480
See Notes to Pro Forma Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED
BALANCE SHEETS
AS OF SEPTEMBER 30, 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
Freehold Race
September 30,
ITB (From Combini
September 30, 1 Schedule A)
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expe$ 4,752,467 $ 4,198,358
Notes & Mortgages Payable - Current 15,000 1,191,399
TOTAL CURRENT LIABILITIES 4,767,467 5,389,757
DEFERRED INCOME 1,224,766 0
LONG-TERM LIABILITIES:
Notes Payable - Long-Term Portion 0 1,856,847
E.D.A. Loan Payable - Long-Term Porti 0 4,800,000
TOTAL LONG-TERM LIABILITIES 0 6,656,847
DUE TO/FROM AFFILIATES 0
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Preferred Stock $10.00 Par Value, Aut 0 0
Series A Convertible Preferred Stock 36,244,575 0
Common Stock 19,102,639 25,400
Capital in Excess of Par (June 30, 1993
reflects quasi-reorganization) 11,960,175 3,014,939
Retained Earnings (Subsiquent to June 30, 1993,
date of quasi-reorganization, total deficit
eliminated $102,729,936) 2,547,205 1,949,129
TOTAL SHAREHOLDERS' EQUITY 69,854,594 4,989,468
TOTAL LIABILITIES & SHAREHOLDERS'$ 75,846,827 $ 17,036,072
See Notes to Pro Forma Financial Statements.
Pro Forma
Pro Forma Combined
Adjustments September 30,
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expe$ $ 8,950,825
Notes & Mortgages Payable - Current(1) (337,500) 1,718,899
(1) 225,000
(1) 625,000
TOTAL CURRENT LIABILITIES 512,500 10,669,724
DEFERRED INCOME 1,224,766
LONG-TERM LIABILITIES:
Notes Payable - Long-Term Portion 1,856,847
E.D.A. Loan Payable - Long-Term Por(1) (4,800,000) 14,234,549
(1) 2,359,549
(1) 11,875,000
TOTAL LONG-TERM LIABILITIES 9,434,549 16,091,396
DUE TO/FROM AFFILIATES 0
COMMITMENTS AND CONTINGENCIES 0
SHAREHOLDERS' EQUITY:
Preferred Stock $10.00 Par Value,
Authorized 500,000
Series A Convertible Preferred Stock
$100.00 Par Val 36,244,575
Common Stock (1) (25,400) 19,102,639
Capital in Excess of Par
(June 30, 1993
reflects quasi-reorganization) (1) (3,014,939) 11,960,175
Retained Earnings (Subsiquent to
June 30, 1993,
date of quasi-reorganization,
total deficit
eliminated $102,729,936) (1) (1,949,129) 2,547,205
TOTAL SHAREHOLDERS' EQUITY (4,989,468) 69,854,594
TOTAL LIABILITIES & SHAREHOLDERS'$ 4,957,581 $ 97,840,480
</TABLE>
See Notes to Pro Forma Financial Statements.
COMBINED FREEHOLD RACETRACK
PRO FORMA COMBINED CONDENSED
BALANCE SHEETS
COMBINING SCHEDULE A
ASSETS
<TABLE>
September 30, September 30,
1994 1994
FREEHOLD ATLANTIC CITY
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ 1,501,680 $ 379,871
Short-Term Investments 800,000 5,419
TOTAL CASH AND CASH EQUIVALENTS 2,301,680 385,290
Accounts Receivable - Net (237,653) 549,178
Prepaid Expenses 152,068 38
Other Current Assets 6,156 1,493
TOTAL CURRENT ASSETS 2,222,251 935,999
LAND, BUILDINGS AND EQUIPMENT :
Land and Buildings 12,277,573 0
Equipment 1,047,278 0
TOTAL LAND, BUILDINGS AND EQUIPMENT 13,324,851 0
LESS: Accumulated Depreciation 2,019,584 0
TOTAL LAND, BUILDINGS AND EQUIPMENT 11,305,267 0
OTHER ASSETS:
Deposits and Other Assets 25,425 10,000
Goodwill - Net 0 2,537,130
TOTAL OTHER ASSETS 25,425 2,547,130
TOTAL ASSETS $ 13,552,943 $ 3,483,129
See Notes to Pro Forma Financial Statements.
COMBINED
Freehold Raceway
September 30, 1994
<CAPTION>
CURRENT ASSETS:
<S> <C>
Cash $ 1,881,551
Short-Term Investments 805,419
TOTAL CASH AND CASH EQUIVALENTS 2,686,970
Accounts Receivable - Net 311,525
Prepaid Expenses 152,106
Other Current Assets 7,649
TOTAL CURRENT ASSETS 3,158,250
LAND, BUILDINGS AND EQUIPMENT :
Land and Buildings 12,277,573
Equipment 1,047,278
TOTAL LAND, BUILDINGS AND EQUIPMENT 13,324,851
LESS: Accumulated Depreciation 2,019,584
TOTAL LAND, BUILDINGS AND EQUIPMENT 11,305,267
OTHER ASSETS:
Deposits and Other Assets 35,425
Goodwill - Net 2,537,130
TOTAL OTHER ASSETS 2,572,555
TOTAL ASSETS $ 17,036,072
See Notes to Pro Forma Financial Statements.
</TABLE>
COMBINED FREEHOLD RACETRACK
PRO FORMA COMBINED CONDENSED
BALANCE SHEETS
COMBINING SCHEDULE A
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
September 30, September 30,
1994 1994
FREEHOLD ATLANTIC CITY
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expen$ 3,763,830 $ 434,528
Notes & Mortgages Payable - Current 1,191,399 0
TOTAL CURRENT LIABILITIES 4,955,229 434,528
LONG-TERM LIABILITIES:
Notes Payable - Long Term Portion 1,856,847 0
E.D.A. Mortgage Payable - Long Term 4,800,000 0
TOTAL LONG TERM LIABILITIES 6,656,847 0
SHAREHOLDERS' EQUITY:
Common Stock 25,100 300
Additional Paid-In Capital 215,239 2,799,700
Retained Earnings (Deficit) 1,700,528 248,601
TOTAL SHAREHOLDERS' EQUITY 1,940,867 3,048,601
TOTAL LIABILITIES & SHAREHOLDERS' EQU$ 13,552,943 $ 3,483,129
See Notes to Pro Forma Financial Statements.
COMBINED
Freehold Raceway
September 30, 1994
<CAPTION>
CURRENT LIABILITIES:
<S> <C>
Accounts Payable and Accrued Expen$ 4,198,358
Notes & Mortgages Payable - Current 1,191,399
TOTAL CURRENT LIABILITIES 5,389,757
LONG-TERM LIABILITIES:
Notes Payable - Long Term Portion 1,856,847
E.D.A. Mortgage Payable - Long Term 4,800,000
TOTAL LONG TERM LIABILITIES 6,656,847
SHAREHOLDERS' EQUITY:
Common Stock 25,400
Additional Paid-In Capital 3,014,939
Retained Earnings (Deficit) 1,949,129
TOTAL SHAREHOLDERS' EQUITY 4,989,468
TOTAL LIABILITIES & SHAREHOLDERS' EQU$ 17,036,072
See Notes to Pro Forma Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
<TABLE>
Freehold Raceway
(UNAUDITED) For the Twelve
ITB Months Ended
For the Twelve December 31, 199
Months Ended (From Combining
June 30, 1994 Schedule B)
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 37,334,236 $ 33,634,347
Investment Income 3,343,274 3,613
TOTAL REVENUES 40,677,510 33,637,960
EXPENSES:
Cost of Revenues 10,416,610 10,943,432
Operating Expenses 22,088,521 16,706,048
Depreciation & Amortization 544,344 624,403
Rent - Operating Track Lease
Related Party 0 1,591,884
General & Administrative Expense 5,127,440 1,455,974
Interest Expense 0 0
TOTAL EXPENSES 38,176,915 31,321,741
INCOME FROM OPERATIONS 2,500,596 2,316,219
INTEREST EXPENSE 0 414,341
INCOME BEFORE TAXES 2,500,596 1,901,878
LESS: Income Tax Expense 0 114,000
NET INCOME $ 2,500,596 $ 1,787,878 $
NET INCOME PER SHARE $ 0.26
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,547,900
See Notes to Pro Forma Financial Statements.
Pro Forma
Combined
For the Twelve
Pro Forma Months Ended
Adjustments June 30, 1994
REVENUES:
<S> <C> <C> <C>
Revenue from Operations (a) 1,067,262 $ 70,074,588
(3) (1,591,884)
(4) (369,373)
Investment Income (a) 427 3,347,314
TOTAL REVENUES (893,568) 73,421,902
EXPENSES:
Cost of Revenues (a) (920,229) 20,439,813
Operating Expenses (a) 822,460 39,247,656
(4) (369,373)
Depreciation & Amortization (a) 23,399 1,287,878
(2) 95,732
Rent - Operating Track Lease
Related Party (3) (1,591,884) 0
General & Administrative Exp(a) 601,684 7,185,098
Interest Expense (a) (5,290) 872,304
(5) 125,846
(6) 751,748
TOTAL EXPENSES (465,907) 69,032,748
INCOME FROM OPERATIONS (427,661) 4,389,154
INTEREST EXPENSE (5) (414,341) 0
INCOME BEFORE TAXES (13,320) 4,389,154
LESS: Income Tax Expense (7) (108,428) 0
(a) (5,572)
NET INCOME 95,108 $ 4,389,154
NET INCOME PER SHARE $ 0.46
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,547,900
</TABLE>
See Notes to Pro Forma Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
<TABLE>
Freehold Raceway
(UNAUDITED) For the Twelve
ITB Months Ended
For the Twelve December 31, 199
Months Ended (From Combining
June 30, 1994 Schedule B)
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 37,334,236 $ 33,634,347
Investment Income 3,343,274 3,613
TOTAL REVENUES 40,677,510 33,637,960
EXPENSES:
Cost of Revenues 10,416,610 10,943,432
Operating Expenses 22,088,521 16,706,048
Depreciation & Amortization 544,344 624,403
Rent - Operating Track Lease - R 0 1,591,884
General & Administrative Expense 5,127,440 1,455,974
Interest Expense 0 0
TOTAL EXPENSES 38,176,915 31,321,741
INCOME FROM OPERATIONS 2,500,596 2,316,219
INTEREST EXPENSE 0 414,341
INCOME BEFORE TAXES 2,500,596 1,901,878
LESS: Income Tax Expense 0 114,000
NET INCOME $ 2,500,596 $ 1,787,878
NET INCOME PER SHARE $ 0.26
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,547,900
See Notes to Pro Forma Financial Statements.
Pro Forma
Combined
For the Twelve
Pro Forma Months Ended
Adjustments June 30, 1994
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations (a) 1,067,262 $ 70,074,588
(3) (1,591,884)
(4) (369,373)
Investment Income (a) 427 3,347,314
TOTAL REVENUES (893,568) 73,421,902
EXPENSES:
Cost of Revenues (a) (920,229) 20,439,813
Operating Expenses (a) 822,460 39,247,656
(4) (369,373)
Depreciation & Amortization (a) 23,399 1,287,878
(2) 95,732
Rent - Operating Track Lease(3) (1,591,884) 0
General & Administrative Exp(a) 601,684 7,185,098
Interest Expense (a) (5,290) 872,304
(5) 125,846
(6) 751,748
TOTAL EXPENSES (465,907) 69,032,748
INCOME FROM OPERATIONS (427,661) 4,389,154
INTEREST EXPENSE (5) (414,341) 0
INCOME BEFORE TAXES (13,320) 4,389,154
LESS: Income Tax Expense (7) (108,428) 0
(a) (5,572)
NET INCOME 95,108 $ 4,389,154
NET INCOME PER SHARE $ 0.46
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,547,900
See Notes to Pro Forma Financial Statements.
</TABLE>
COMBINED FREEHOLD RACETRACK
PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
COMBINING SCHEDULE B
(UNAUDITED)
<TABLE>
Twelve Months Ended
December 31, 1993
Freehold Atlantic City
<CAPTION>
<S> <C> <C>
OPERATING REVENUES:
Pari-mutuel Commissions
and Breakage - Live $ 6,953,375 $ 6,807,701
Pari-mutuel Commissions and
Breakage - Simulcasting 8,903,054 7,159,050
Admissions, Parking and Prog 460,052 718,305
Concessions 268,184 237,433
Other 2,071,199 59,607
TOTAL OPERATING REVENUES 18,655,864 14,982,096
OPERATING EXPENSES:
Purses 5,324,890 5,723,733
Payroll and Related Expenses 4,372,821 3,619,403
Rent - Simulcasting 1,571,359 1,334,161
Rent - Operating Track Lease 0 1,591,884
Equipment Rental 379,706 122,428
Depreciation & Amortization 554,403 70,000
Other 4,350,220 2,306,733
TOTAL OPERATING EXPENSES 16,553,399 14,768,342
INCOME FROM OPERATIONS BEFORE
INTEREST AND INCOME TAXES 2,102,465 213,754
Interest Expense 414,341 0
INCOME FROM BEFORE TAXES 1,688,124 213,754
Less: Income Tax Expense 88,000 26,000
NET INCOME $ 1,600,124 $ 187,754
See Notes to Pro Forma Financial Statements.
Combined
Freehold Raceway
For the Twelve
Months Ended
December 31, 1993
<CAPTION>
<S> <C>
OPERATING REVENUES:
Pari-mutuel Commissions
and Breakage - Live $ 13,761,076
Pari-mutuel Commissions and
Breakage - Simulcasting 16,062,104
Admissions, Parking and Prog 1,178,357
Concessions 505,617
Other 2,130,806
TOTAL OPERATING REVENUES 33,637,960
OPERATING EXPENSES:
Purses 11,048,623
Payroll and Related Expenses 7,992,224
Rent - Simulcasting 2,905,520
Rent - Operating Track Lease 1,591,884
Equipment Rental 502,134
Depreciation & Amortization 624,403
Other 6,656,953
TOTAL OPERATING EXPENSES 31,321,741
INCOME FROM OPERATIONS BEFORE
INTEREST AND INCOME TAXES 2,316,219
Interest Expense 414,341
INCOME FROM BEFORE TAXES 1,901,878
Less: Income Tax Expense 114,000
NET INCOME $ 1,787,878
See Notes to Pro Forma Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
<TABLE>
Freehold Raceway
(UNAUDITED) For the Nine
ITB Months Ended
For the Three September 30, 1994
Months Ended (From Combining
September 30, 1 Schedule C)
<CAPTION>
<S> <C> <C>
REVENUES:
Revenue from Operations $ 7,094,007 $ 25,338,959
Investment Income 492,207 2,050
TOTAL REVENUES 7,586,214 25,341,009
EXPENSES:
Cost of Revenues 1,278,377 6,654,601
Operating Expenses 4,632,253 12,826,972
Depreciation & Amortization 142,330 484,543
Rent - Operating Track
Lease - Related Party 2,142,000
General & Administrative Expenses 1,486,644 1,079,749
Interest Expense 0 349,869
TOTAL EXPENSES 7,539,604 23,537,734
INCOME BEFORE TAXES 46,610 1,803,275
LESS: Income Tax Expense 0 35,809
NET INCOME $ 46,610 $ 1,767,466
NET INCOME PER SHARE $ 0.00
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,551,301
See Notes to Pro Forma Financial Statements.
Pro Forma
Combined
For the Three
Pro Forma Months Ended
Adjustments September 30, 1994
<CAPTION>
<S> <C> <C>
REVENUES: $ (a) (18,237,359)$ 11,853,553
Revenue from Operations (3) (2,142,000)
(4) (200,054)
(a) (1,220) 493,037
Investment Income
(20,580,633) 12,346,590
TOTAL REVENUES
EXPENSES: (a) (4,698,314) 3,234,664
Cost of Revenues (a) (8,804,934) 8,654,291
Operating Expenses (4) (200,054) (200,054)
(a) (316,399) 328,063
Depreciation & Amortization (2) 17,589
Rent - Operating Track (3) (2,142,000) 0
Lease - Related Party (a) (2,750,053) (183,660)
General & Administrative Expenses (a) (248,950) 241,818
Interest Expense (5) (81,584)
(6) 222,483
(19,002,215) 12,075,123
TOTAL EXPENSES
(1,578,418) 271,467
INCOME BEFORE TAXES (a) (28,628) 0
LESS: Income Tax Expense (7) (7,181)
$ (1,549,790)$ 271,467
NET INCOME
$ 0.03
NET INCOME PER SHARE
WEIGHTED AVERAGE NUMBER 9,551,301
OF SHARES OUTSTANDING
See Notes to Pro Forma Financial Statements.
</TABLE>
COMBINED FREEHOLD RACETRACK
PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
COMBINING SCHEDULE C
<TABLE>
(UNAUDITED)
Nine Months Ended
September 30, 1994
FREEHOLD ATLANTIC CITY
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 10,068,980 $ 15,269,979
Investment Income 1,976 74
TOTAL REVENUES 10,070,956 15,270,053
EXPENSES:
Cost of Revenues 1,959,167 4,695,434
Operating Expenses 5,019,128 7,807,844
Depreciation & Amortization 432,046 52,497
General & Administrative Expenses 724,684 2,497,065
Interest Expense 349,869 0
TOTAL EXPENSES 8,484,894 15,052,840
INCOME FROM CONTINUING OPERATIONS BEFORE
TAX PROVISION 1,586,062 217,213
LESS:Income Tax Expense 31,550 4,259
NET INCOME(LOSS) $ 1,554,512 $ 212,954
See Notes to Pro Forma Financial Statements.
COMBINED
Freehold Raceway
For the Nine
Months Ended
September 30, 1994
<CAPTION>
REVENUES:
<S> <C>
Revenue from Operations $ 25,338,959
Investment Income 2,050
TOTAL REVENUES 25,341,009
EXPENSES:
Cost of Revenues 6,654,601
Operating Expenses 12,826,972
Depreciation & Amortization 484,543
General & Administrative Expenses 3,221,749
Interest Expense 349,869
TOTAL EXPENSES 23,537,734
INCOME FROM CONTINUING OPERATIONS BEFORE
TAX PROVISION 1,803,275
LESS:Income Tax Expense 35,809
NET INCOME(LOSS) $ 1,767,466
See Notes to Pro Forma Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(a) Adjustment to update Freehold income statements for the periods
ending June 30, 1994 and September 30, 1994. June: Adjustment to include
Freehold revenue and expenses for the period 1/1/94 to 6/30/94 and elimination
of Freehold revenue and expenses for the period 1/1/93 to 6/30/93. September:
Elimination of Freehold revenue and expenses for the period 1/1/94 to 6/30/94.
(1) Pro Forma entries reflecting the purchase of Freehold Raceway.
The following pro forma adjustments reflect International
Thoroughbred Breeders, Inc.'s ("ITB") purchase of Freehold Racing Association
and Atlantic City Harness, Inc. Pro forma adjustments include estimated
direct costs of acquisition.
<TABLE>
<S> <C>
Cash $ 7,983,853
Deposits 100,000
Short-term notes payable 850,000
Long-term notes payable 14,234,549
Retirement of Debt (5,137,500)
Investment in Freehold Racing Association $18,030,902
</TABLE>
Adjustments reflecting the purchase of Freehold Raceway.
The following pro forma adjustments are made to reflect estimated
fair value adjustments at September 30, 1994 and to eliminate ITB's investment
in FRA and ACH.
<TABLE>
<S> <C>
FRA and ACH net assets - as reported $4,989,468
Fair value adjustments:
Increase in carrying amount of Land & Buildings 9,043,148
Increase in carrying amount of Equipment 72,731
Accumulated Depreciation (Bldgs. & Equip.) 2,019,584
Goodwill - net purchase price over the
fair value of the acquired assets 1,905,971
Investment in Freehold Racing Association $18,030,902
</TABLE>
The following entries are a result of the combination:
(2) To record ITB's additional depreciation & amortization expense for
the twelve months ending June 30, 1994 and the three months ending September
30, 1994.
(3) To eliminate Freehold inter-company rent income and rent expense
for the twelve months ending June 30, 1994 and the three months ending
September 30, 1994.
(4) To eliminate Freehold & ITB inter-company Income/Expense for the
twelve months ending June 30, 1994 and the three months ending September 30,
1994.
(5) To eliminate Freehold EDA Loan Interest for the twelve months
ending June 30, 1994 and the three months ending September 30, 1994.
(6) Adjustment to include ITB Loan interest for the twelve month
period ending June 30, 1994 and the three month period ending September 30,
1994.
(7) To eliminate Freehold State Income Tax Expense for the periods
ending June 30, 1994 and September 30, 1994.
<PAGE>
ATLANTIC CITY HARNESS, INC.
Financial Statements
For the Year Ended December 31, 1993
and
Independent Auditor's Report
Henry F. Malarkey & Co., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
2351 Hylan Boulevard
Staten Island, NY 10306
Telephone (718) 987-4444
Telefax (718) 987-9865
Victor J. Morone, CPA New York Office
Addison R. Trismen, CPA 15 Maiden Lane
Anthony J. Santo, CPA New York, NY 10038
(212) 732-2130
Reply to Staten Island Office
Independent Auditor's Report
To the Board of Directors and Stockholders
of Atlantic City Harness, Inc.
We have audited the accompanying balance sheets of Atlantic City
Harness, Inc. (a New Jersey corporation) as of December 31, 1993 and 1992 and
the related statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Atlantic City
Harness, Inc. as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
/s/ Henry F. Malarkey & Co., P.C.
Certified Public Accountants
April 29, 1994
Member American Institute of Certified Public Accountants and New York State
Society of Certified Public Accountants.
<TABLE>
ATLANTIC CITY HARNESS, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1993 AND 1992
ASSETS
December 31,
1993 1992
<CAPTION>
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 57,572 $ 22,901
Accounts Receivable 86,271 0
$ 143,843 $ 22,901
Excess of cost over carrying
value of assets; net of
accumulated amortization of
$210,000 and $140,000, respectively 2,589,627 2,659,627
Due From Circa 1850, Inc. 388,988 388,988
Deposits and Other Assets 10,000 10,000
TOTAL ASSETS $ 3,132,458 $ 3,081,516
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1993 1992
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expe$ 239,739 $ 143,989
Loan Payable to Officer 0 110,000
Due to Freehold Racing
Association - Related Party 32,108 79,532
Due to Shareholder 0 100,100
Taxes Payable 24,962 0
$ 296,809 $ 433,621
SHAREHOLDER'S EQUITY:
Common Stock $ 300 $ 300
Additional Paid-in Capital 2,799,700 2,799,700
Retained Earnings (deficit) 35,649 (152,105)
$ 2,835,649 $ 2,647,895
TOTAL LIABILITIES & SHAREHOLDER'S E$ 3,132,458 $ 3,081,516
ATLANTIC CITY HARNESS, INC.
See accompanying notes
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
December 31
1993 1992
<CAPTION>
<S> <C> <C>
OPERATING REVENUES:
Pari-mutuel Commissions and
and Breakage - Live $ 6,807,701 $ 8,095,822
Pari-mutuel Commissions and
Breakage - Simulcasting 7,159,050 6,831,965
Admissions, Parking and Programs 718,305 788,937
Concessions 237,433 250,451
Other 59,607 95,650
$ 14,982,096 $ 16,062,825
OPERATING EXPENSES:
Purses $ 5,723,733 $ 7,063,166
Payroll and Related Expenses 3,619,403 3,390,852
Rent - Simulcasting 1,334,161 1,359,744
Rent - Operating Track Lease 1,591,884 1,399,051
Equipment Rental 122,428 416,038
Depreciation & Amortization 70,000 70,000
Other 2,306,733 2,438,607
$ 14,768,342 $ 16,137,458
INCOME (LOSS) FROM OPERATIONS BEFORE
INTEREST AND INCOME TAXES $ 213,754 $ (74,633)
Interest Expense 0 0
INCOME (LOSS) FROM BEFORE TAXES $ 213,754 $ (74,633)
Less: Income Tax Expense 26,000 750
NET INCOME (LOSS) $ 187,754 $ (75,383)
Retained earnings (deficiency) -
beginning of year (152,105) (76,722)
Retained earnings (deficiency) -
end of year $ 35,649 $ (152,105)
See accompanying notes
1991
<CAPTION>
<S> <C>
OPERATING REVENUES:
Pari-mutuel Commissions and
and Breakage - Live $ 7,866,741
Pari-mutuel Commissions and
Breakage - Simulcasting 5,780,331
Admissions, Parking and Programs 719,394
Concessions 273,777
Other 120,053
$ 14,760,296
OPERATING EXPENSES:
Purses $ 6,154,079
Payroll and Related Expenses 3,446,006
Rent - Simulcasting 1,199,709
Rent - Operating Track Lease 932,198
Equipment Rental 422,041
Depreciation & Amortization 70,373
Other 2,612,612
$ 14,837,018
INCOME (LOSS) FROM OPERATIONS BEFORE
INTEREST AND INCOME TAXES $ (76,722)
Interest Expense 0
INCOME (LOSS) FROM BEFORE TAXES $ (76,722)
Less: Income Tax Expense 0
NET INCOME (LOSS) $ (76,722)
Retained earnings (deficiency) -
beginning of year 0
Retained earnings (deficiency) -
end of year (76,722)
See accompanying notes
</TABLE>
<TABLE>
ATLANTIC CITY HARNESS, INC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Years Ended December 31
1993 1992
<CAPTION>
<S> <C> <C>
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 187,754 $ (75,383)
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 70,000 70,000
(Increase) Decrease in Accounts R (86,271) 41,307
(Increase) Decrease in due from Freehold
Racing Association (47,424) 0
(Increase) Decrease in Prepaid Ex 0 2,403
and Accrued Expenses 95,750 136,334
Increase (Decrease) in Taxes Paya 24,962 0
TOTAL ADJUSTMENTS 57,017 250,044
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ 244,771 $ 174,661
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from CIRCA 1850, Inc. 0 (388,988)
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES 0 (388,988)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Loan from (110,000) 110,000
Increase (Decrease) in Loan from (100,100) 100,100
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (210,100) 210,100
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 34,671 (4,227)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 22,901 27,128
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 57,572 $ 22,901
Supplementary disclosure of cash flow information:
Cash paid during the year:
Income tax paid dur$ 1,000 $ 750
See accompanying notes.
Years Ended December 31
1991
<CAPTION>
<S> <C>
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (76,722)
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 70,373
(Increase) Decrease in Accounts R 88,163
(Increase) Decrease in due from Freehold
Racing Association 0
(Increase) Decrease in Prepaid Ex 7,240
and Accrued Expenses (111,548)
Increase (Decrease) in Taxes Paya 0
TOTAL ADJUSTMENTS 54,228
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ (22,494)
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from CIRCA 1850, Inc. 0
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES 0
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Loan from 0
Increase (Decrease) in Loan from 0
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 0
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (22,494)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 49,622
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 27,128
Supplementary disclosure of cash flow information:
Cash paid during the year:
Income tax paid dur$ 25
See accompanying notes.
</TABLE>
1. Organization and Operations:
Atlantic City Harness, Inc., an S Corporation was incorporated on
December 16, 1986 under the laws of the State of New Jersey and began business
on December 26, 1986 as the successor to Atlantic City Raceway, a limited
partnership.
On December 21, 1990, Kenneth R. Fischer, also acquiring a 100%
ownership interest in Freehold Racing Association, purchased 100% of the
capital stock of Atlantic City Harness, Inc. The transaction was recorded
under the purchase method of accounting. The Company retained its S
Corporation status and its permit to conduct harness racing in New Jersey.
The Company continues to operate under an agreement with Freehold Racing
Association (FRA) which allows the company to conduct a daytime harness meet
at Freehold Raceway through 1997. Freehold Racing Association shares in the
net income from these meets.
The 1993 racing meet was conducted for 111 days, ending May 31, 1993.
The 1993 meet consisted of live racing and simulcasting of these races to
Garden State Park Racetrack, Meadowlands Racetrack and Atlantic City Race
Course and other locations out of state. In addition thoroughbred and harness
racing was simulcast from Meadowlands Racetrack,, Garden State Park Racetrack
and other out of state tracks.
The 1992 racing meet was conducted for 109 days, ending May 25. The
1992 meet consisted of live racing and simulcasting of these races to Garden
State Park Racetrack and Meadowlands Racetrack. In addition night harness
racing was simulcast from the Meadowlands Racetrack.
2. Summary of Significant Accounting Policies:
Excess of Cost Over Carrying Value of Assets
The excess of cost over carrying value of assets represents the excess
of cost of acquiring the Company over the fair value of net tangible assets as
the date of acquisition. This amount is being amortized over a 40 year period
on a straight-line basis. Amortized expense amounted to $70,000 for 1993 and
1992.
3. Common Stock:
The Company has both voting and non-voting no par common stock.
Authorized shares of the voting and non-voting stock are 500 and 4,500 shares,
respectively. At December 31, 1993 issued and outstanding shares of the
voting and non-voting stock was 500 and 3,500 shares, respectively.
4. Income Taxes:
The Company has elected to be treated as an S Corporation in accordance
with Subsection 1361 of the Internal Revenue Code. Under such section, the
Company's shareholder is responsible for the payment of Federal income taxes
on the Company's taxable income. For State income tax purposes, the Company
is taxed as a C Corporation and the financial statements reflect a provision
for State income taxes for the years ended December 31, 1993 and 1992.
Effective January 1, 1994, the corporation has elected to be treated as an S
Corporation for New Jersey Corporation Tax purposes.
5. Related Party Transactions:
The Company is related to Freehold Racing Association (FRA), 100% owned
by Kenneth R. Fischer. The Company rents the racetrack for its meet from FRA.
Total rental fees for 1993 and 1992 amounted to $1,591,884 and $1,399,051,
respectively. Payroll and related expenses represent the cost of salaries and
related benefits of utilizing FRA employees during the company's meet.
Certain direct operating expenses are paid directly by the company. Certain
other common expenses are shared by the company and FRA. At December 31, 1993
and 1992 the Company owed FRA $32,108 and $79,532, respectively.
6. Subsequent Events:
On March 21,1994 an option was granted to International Thoroughbred
Breeders, Inc. to acquire Atlantic City Harness, Inc. and Freehold Racing
Association by sole shareholder, Kenneth R.Fischer. The options expire
December 31, 1994.
<PAGE>
FREEHOLD RACING ASSOCIATION
Financial Statements
For the Year Ended December 31, 1993
and
Independent Auditor's Report
Henry F. Malarkey & Co., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
2351 Hylan Boulevard
Staten Island, NY 10306
Telephone (718) 987-4444
Telefax (718) 987-9865
Victor J. Morone, CPA New York Office
Addison R. Trismen, CPA 15 Maiden Lane
Anthony J. Santo, CPA New York, NY 10038
(212) 732-2130
Reply to Staten Island Office
Independent Auditor's Report
To the Board of Directors and Stockholders
of Freehold Racing Association
We have audited the accompanying balance sheets of Freehold Racing
Association (a New Jersey corporation) as of December 31, 1993 and 1992 and
the related statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Freehold Racing
Association as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
/s/ Henry F. Malarkey & Co., P.C.
Certified Public Accountants
April 29, 1994
Member American Institute of Certified Public Accountants and New York State
Society of Certified Public Accountants.
<TABLE>
FREEHOLD RACING ASSOCIATION
BALANCE SHEET
AS OF DECEMBER 31, 1993 AND 1992
ASSETS
December 31,
1993 1992
<CAPTION>
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 1,697,903 $ 347,700
Accounts Receivable 793,246 342,511
Other Current Assets 49,619 0
2,540,768 690,211
Racing facilities and equipment, net of
$1,552,969 and $1,004,566 accumulated
depreciation, 11,168,052 11,727,281
Due From Circa 1850, Inc. 83,982 119,982
Due From Atlantic City Harness, Inc. - 32,108 79,532
Deposits and Other Assets 124,202 30,150
TOTAL ASSETS 13,949,112 12,647,156
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1993 1992
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expense 3,007,761 2,222,162
Loan Payable to Bank 2,600,000 2,875,000
Note Payable - Deyfree Holdings, Inc 100,000 368,429
Bonds Payable - Current Maturities 450,000 450,000
Loan Payable to Shareholder 300,000 0
Taxes Payable 170,207 140,941
6,627,968 6,056,532
LONG TERM LIABILITIES:
Note Payable - Deyfree Holdings, Inc 100,000 0
Bonds Payable - Net of Current Matur 5,175,000 5,625,000
Loan - Shareholder 0 550,000
Equipment Loan 30,396 0
Other Non-current Liabilities 30,000 30,000
5,335,396 6,205,000
SHAREHOLDER'S EQUITY:
Common Stock 25,000 25,000
Additional Paid-in Capital 215,239 215,239
Retained Earnings (deficit) 1,745,509 145,385
1,985,748 385,624
TOTAL LIABILITIES & SHAREHOLDER'S EQ$ 13,949,112 $ 12,647,156
See accompanying notes
</TABLE>
<TABLE>
FREEHOLD RACING ASSOCIATION
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
December 31
1993 1992
<CAPTION>
<S> <C> <C>
OPERATING REVENUES:
Pari-mutuel Commissions and
Breakage - Live $ 6,953,375 $ 8,211,717
Pari-mutuel Commissions and
Breakage - Simulcasting 8,903,054 6,551,032
Admissions, Parking and Programs 460,052 756,401
Concessions 268,184 297,071
Other 2,071,199 1,697,065
18,655,864 17,513,286
OPERATING EXPENSES:
Purses 5,324,890 6,365,267
Payroll and Related Expenses 4,372,821 4,300,957
Rent - Simulcasting 1,571,359 1,096,350
Equipment Rental 379,706 298,177
Depreciation & Amortization 554,403 525,962
Other 4,350,220 4,069,870
16,553,399 16,656,583
INCOME (LOSS) FROM OPERATIONS BEFORE
INTEREST AND INCOME TAXES 2,102,465 856,703
Interest Expense 414,341 558,558
INCOME (LOSS) BEFORE TAXES 1,688,124 298,145
Less: Income Tax Expense 88,000 25
NET INCOME (LOSS) 1,600,124 298,120
Retained earnings (deficiency) - begin 145,385 (152,735)
Retained earnings (deficiency) - end$ 1,745,509 $ 145,385
See accompanying notes
1991
<CAPTION>
<S> <C>
OPERATING REVENUES:
Pari-mutuel Commissions and
Breakage - Live $ 8,120,367
Pari-mutuel Commissions and
Breakage - Simulcasting 5,969,700
Admissions, Parking and Programs 702,989
Concessions 319,537
Other 1,037,112
16,149,705
OPERATING EXPENSES:
Purses 6,189,284
Payroll and Related Expenses 3,771,723
Rent - Simulcasting 1,009,712
Equipment Rental 511,049
Depreciation & Amortization 469,085
Other 3,603,128
15,553,981
INCOME (LOSS) FROM OPERATIONS BEFORE
INTEREST AND INCOME TAXES 595,724
Interest Expense 752,400
INCOME (LOSS) BEFORE TAXES (156,676)
Less: Income Tax Expense 25
NET INCOME (LOSS) (156,701)
Retained earnings (deficiency) - begin 3,966
Retained earnings (deficiency) - end$ (152,735)
See accompanying notes
</TABLE>
<TABLE>
FREEHOLD RACING ASSOCIATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Years Ended December 31
1993 1992
<CAPTION>
<S> <C> <C>
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 1,600,124 $ 298,120
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 564,403 531,962
(Increase) Decrease in Accounts (475,480) (222,568)
(Increase) in Other Current As (41,502) 0
(Increase) Decrease in Inventor 0 (17)
(Increase) Decrease in Prepaid Expenses
and Accrued Expenses 745,599 609,992
Increase (Decrease) in Taxes Pa 69,266 0
(Increase) Decrease in Deposit 0 0
TOTAL ADJUSTMENTS 862,286 919,369
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ 2,462,410 $ 1,217,489
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in Fixed A 826 (268,129)
(Increase) Decrease in Note Re 0 726
(Increase) Decrease in Organiz 0 0
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITI 826 (267,403)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Loan fro (250,000) (100,000)
Increase (Decrease) in Bank Loa (275,000) (263,000)
Increase (Decrease) in Bonds Pa (450,000) (450,000)
Increase (Decrease) in Note Pay (168,429) 0
Increase (Decrease) in Note Pay 0 0
Increase (Decrease) in Equipmen 30,396 0
Notes Payable - Equipment 0 0
NET CASH PROVIDED (used) (1,113,033) (813,000)
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 1,350,203 137,086
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 347,700 210,614
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 1,697,903 $ 347,700
Supplementary disclosure of cash flow information:
Cash paid during the year:
Interest paid dur$ 417,303 $ 558,558
Income tax paid dur 1,000 25
See accompanying notes.
Years Ended December 31
1991
<CAPTION>
<S> <C>
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (156,701)
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 475,065
(Increase) Decrease in Accounts 604,532
(Increase) in Other Current As 0
(Increase) Decrease in Inventor (3,187)
(Increase) Decrease in Prepaid Expenses
and Accrued Expenses 928,083
Increase (Decrease) in Taxes Pa 0
(Increase) Decrease in Deposit (2,150)
TOTAL ADJUSTMENTS 2,002,343
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ 1,845,642
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in Fixed A (548,579)
(Increase) Decrease in Note Re (82,969)
(Increase) Decrease in Organiz (30,000)
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITI (661,548)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Loan fro 300,000
Increase (Decrease) in Bank Loa 125,000
Increase (Decrease) in Bonds Pa (450,000)
Increase (Decrease) in Note Pay 0
Increase (Decrease) in Note Pay (652,571)
Increase (Decrease) in Equipmen 0
Notes Payable - Equipment (31,144)
NET CASH PROVIDED (USE (708,715)
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 475,379
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR (264,765)
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 210,614
Supplementary disclosure of cash flow information:
Cash paid during the year:
Interest paid dur$ 769,971
Income tax paid dur 25
See accompanying notes.
</TABLE>
FREEHOLD RACING ASSOCIATION
Notes to Financial Statements
December 31, 1993
1. Organization
Freehold Racing Association (Company) was organized for the purpose of
owning and operating Freehold Racetrack, located in Freehold, New Jersey. The
company is wholly-owned by Kenneth R. Fischer.
On December 21, 1990 Kenneth R. Fischer, through his 100% owned holding
company, K.F. Investments, Inc., acquired under the purchase method, the
Racing facilities and equipment of predecessor Freehold Racing Association for
the cost of $11,795.833.
On December 31, 1990 all assets and liabilities of K.F. Investments,
Inc. were merged into Freehold Racing Association under a plan of downstream
merger.
On December 21, 1990, Atlantic City Harness, Inc. was also purchased by
Kenneth R. Fischer.
The 1993 racing meet was conducted for 114 days, ending December 31,
1993. The 1993 meet consisted of live racing and simulcasting of these races
to Garden State Park Racetrack, Meadowlands Racetrack, Atlantic City Casino
Race Books and other locations out of state. The 1992 racing meet was
conducted for 112 days, ending December 31, 1992.
In addition thoroughbred and harness racing was simulcast from the
Meadowlands Racetrack, Garden State Park Racetrack and Atlantic City Race
Course and other out of state tracks.
The Company has an agreement with Atlantic City Harness, Inc. which
provides that they shall conduct a daytime harness meet at Freehold Racetrack
each year through 1997, and also provides for the sharing of net income from
these meets.
2. Summary of Significant Accounting Policies
Racing Facilities and Equipment
Racing facilities and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets.
3. Racing Facilities and Equipment
Racing facilities and equipment are comprised of the following at
December 31, 1993 and 1992:
<TABLE>
1993 1992
Cost Accum Dep Cost Accum Dep
<CAPTION>
<S> <C> <C> <C> <C>
Land $1,166,583 0 $ 1,166,583 0
Grandstand 8,646,875 831,048 8,646,875 556,510
Other real estate 115,000 12,718 115,000 8,536
Landscaping & roadways 1,847,991 375,655 1,850,293 236,432
Machinery and Equipment 944,572 333,548 782,052 203,088
Construction in progress 171,044
Total 12,721,021 1,552,969 12,731,847 1,004,566
Less
accumulated depreciation 1,552,969 1,004,566
Total $11,168,052 $11,727,281
</TABLE>
Depreciation expense charged to operations amounted to $525,962 in 1993.
4. Bonds Payable
Bonds payable consist of the following as of December 31,1993 and 1992:
<TABLE>
1993 1992
<CAPTION>
<S> <C> <C>
1984 Bond $5,625,000 $6,075,000
Less current maturities (450,000) (450,000)
Total $5,175,000 $5,625,000
</TABLE>
Permanent financing for the acquisition of equipment, furnishings and
fixtures, and reconstruction of the grandstand and related facilities was
obtained through the issuance of a $9,000,000 1984 Economic Development
Authority Bond by the New Jersey Economic Development Authority (1984 Bond).
The 1984 Bond bears interest on the outstanding principal at 80% of the
prime interest rate (the prime rate was 6% at December 31, 1993 and 1992).
Monthly installments of $37,500 plus interest are payable through June 1,
2006, at which time, all remaining unpaid principal and accrued interest is
due.
The 1984 Bond is collateralized by a first mortgage on the project and
two second mortgages.
While the 1984 bond is not the debt of the Company, a promissory note
and mortgage agreement obligates the Company to payments equal to the debt
service requirement of the Bond.
Aggregate principal payments due after December 31, 1993 are as follows:
<TABLE>
<S> <C>
1994 $ 450,000
1995 450,000
1996 450,000
1997 450,000
1998 450,000
Thereafter 2,925,000
Total $5,175,000
</TABLE>
5. Commitments
The Company has various noncancellable lease agreements, including an
agreement for the use of pari-mutuel totalisator equipment and services for
racing seasons up to June 1, 2000. Under the agreement, there is a daily
charge based on a percentage of betting handle on track.
6. Pension Plan
Union employees are covered by various union defined contribution and
defined benefit pension plans. The total contribution under the plans for the
period ended December 31, 1993 and 1992, amounted to $213,003 and $270,483,
respectively. Actuarial information for Freehold Racing Association, alone,
is not determinable.
The remaining eligible employees are covered by a currently funded
defined contribution plan. The total contributions charged to operations for
the plan amounted to $48,928 and $49,203 in 1993 and 1992, respectively.
7. Note Payable Deyfree Holdings, Inc.
The note of Deyfree Holdings, Inc. previously payable December 21, 1992
was renegotiated and now totals $200,000 payable April 15, 1994 and April 15,
1995.
8. Loans Payable to Bank Is As Follows:
Demand loan due secured by Kenneth R. Fischer, totals $2,600,000.
9. Environment Liability
The Company has entered into several agreements to undertake the closure
and remediation of environment damage at a landfill site. In turn, the
Company's former owners have agreed to bear the costs associated with the
closing and remediation.
10. Related Party Transactions
Atlantic City Harness, Inc., (ACH) is owned 100% by Kenneth R. Fischer.
At December 31, 1993 and 1992 the company was owed $32,108 and $79,532,
respectively from ACH.
11. Income Tax
Effective January 1, 1991, the Company received Internal Revenue Service
approval to file as an S Corporation under section 1361 of the Internal
Revenue Code. The shareholder, under such section, is responsible for the
payment of Federal Income Tax on the Company's taxable income. For State
Income Tax purposes the Company is taxed as a C Corporation and the financial
statements reflect a provision for state tax for the periods ended December
31, 1993 and 1992. Effective January 1, 1994, the Company also elected to be
taxed as an S Corporation in New Jersey.
12. Contingencies
On March 1, 1994 Freehold Racing Association and various other
Defendants were served with an action for breach of contract in the U.S.
District Court of New Jersey by a former vendor. The Civil Action consists of
a complaint and jury demand for liquidated damages, treble liquidated damages
and tolling of the Statute of Limitation for invoking "RICO" against parties
set forth to satisfy any judgment. In managements opinion, the suit is
without merit. The Company and various defendants are contesting the action.
On September 30, 1993 a complaint was brought against the Company by a
former employee through the New Jersey Division of Civil Rights contending
that she was terminated based on age discrimination. The Company is
contesting the action.
13. Subsequent Events
In April, 1994 the Company distributed $950,000 to shareholder, Kenneth
R. Fischer, which will be charged to retained earnings in 1994. The
distribution was for Federal and State taxes incurred by the shareholder
because of the pass-through income required to be reported on his personal
income tax returns. There were no distributions to shareholder, Kenneth R.
Fischer, in the years ended December 31, 1991 through 1993.
On March 21, 1994 an option was granted to International Thoroughbred
Breeders, Inc. to acquire FRA and ACH by, sole shareholder, Kenneth R.
Fischer. The option expires December 31, 1994.
ATLANTIC CITY HARNESS, INC.
Financial Statements
For the Nine Months Ended September 30, 1994
Information as of and for the periods ended September 30, 1994 and 1993 is
Unaudited
ATLANTIC CITY HARNESS, INC.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND DECEMBER 31,1993
(UNAUDITED)
ASSETS
<TABLE>
September 30, December 31,
1994 1993
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ 379,871 $ 52,327
Short-Term Investments 5,419 5,246
TOTAL CASH AND CASH EQUIVALENTS 385,290 57,573
Accounts Receivable - Net 549,178 475,059
Prepaid Expenses 38 38
Other Current Assets 1,493 0
TOTAL CURRENT ASSETS 935,999 532,670
OTHER ASSETS:
Deposits and Other Assets 10,000 10,000
Goodwill - Net 2,537,130 2,589,627
TOTAL OTHER ASSETS 2,547,130 2,599,627
TOTAL ASSETS $ 3,483,129 $ 3,132,297
See Notes to Pro Forma Financial Statements.
</TABLE>
ATLANTIC CITY HARNESS, INC.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND DECEMBER 31,1993
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
September 30, December 31,
1994 1993
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expenses $ 434,528 $ 296,650
TOTAL CURRENT LIABILITIES 434,528 296,650
SHAREHOLDERS' EQUITY:
Common Stock 300 300
Additional Paid-In Capital 2,799,700 2,799,700
Retained Earnings (Deficit) 248,601 35,647
TOTAL SHAREHOLDERS' EQUITY 3,048,601 2,835,647
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 3,483,129 $ 3,132,297
See Notes to Pro Forma Financial Statements.
</TABLE>
ATLANTIC CITY HARNESS, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
Nine Months End Nine Months
September 30, September 30,
1994 1993
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 15,269,979 $ 14,958,979
Investment Income 74 87
TOTAL REVENUES 15,270,053 14,959,066
EXPENSES:
Cost of Revenues 4,695,434 5,618,544
Operating Expenses 7,807,844 7,199,101
Depreciation & Amortization 52,497 52,499
General & Administrative Expenses 2,497,065 1,938,177
TOTAL EXPENSES 15,052,840 14,808,321
INCOME FROM CONTINUING OPERATIONS BEFORE
TAX PROVISION 217,213 150,745
LESS:Income Tax Expense 4,259 8,533
NET INCOME(LOSS) $ 212,954 $ 142,212
See Notes to Pro Forma Financial Statements.
</TABLE>
ATLANTIC CITY HARNESS, INC.
Notes to Financial Statement
September 30, 1994
1. Organization and Operations:
Atlantic City Harness, Inc., an S Corporation was incorporated on
December 16, 1986 under the laws of the State of New Jersey and began business
on December 26, 1986 as the successor to Atlantic City Raceway, a limited
partnership.
On December 21, 1990, Kenneth R. Fischer, also acquiring a 100%
ownership interest in Freehold Racing Association, purchased 100% of the
capital stock of Atlantic City Harness, Inc. The transaction was recorded
under the purchase method of accounting. The Company retained its S
Corporation status and its permit to conduct harness racing in New Jersey.
The Company continues to operate under an agreement with Freehold Racing
Association (FRA) which allows the company to conduct a daytime harness meet
at Freehold Raceway through 1997. Freehold Racing Association shares in the
net income from these meets.
The 1994 racing meet was conducted for 98 days, ending May 30, 1994.
The 1994 meet consisted of live racing and simulcasting of these races to
Garden State Park Racetrack, Meadowlands Racetrack and other out of state
tracks.
2. Summary of Significant Accounting Policies:
Excess of Cost Over Carrying Value of Assets
The excess of cost over carrying value of assets represents the excess
of cost of acquiring the Company over the fair value of net tangible assets as
the date of acquisition. This amount is being amortized over a 40 year period
on a straight-line basis. Amortized expense amounted to $70,000 for 1993.
3. Common Stock:
The Company has both voting and non-voting no par common stock.
Authorized shares of the voting and non-voting stock are 500 and 4,500 shares,
respectively. At September 30, 1994 issued and outstanding shares of the
voting and non-voting stock was 500 and 3,500 shares, respectively.
4. Income Taxes:
The Company has elected to be treated as an S Corporation in accordance
with Subsection 1361 of the Internal Revenue Code. Under such section, the
Company's shareholder is responsible for the payment of Federal income taxes
on the Company's taxable income. For State income tax purposes, the Company
is taxed as a C Corporation and the financial statements reflect a provision
for State income taxes for the year ended December 31, 1993. Effective
January 1, 1994, the corporation has elected to be treated as an S Corporation
for New Jersey Corporation Tax purposes.
5. Related Party Transactions:
The Company is related to Freehold Racing Association (FRA), 100% owned
by Kenneth R. Fischer. The Company rents the racetrack for its meet from FRA.
Total rental fees for 1994 amounted to $2,142,000. Payroll and related
expenses represent the cost of salaries and related benefits of utilizing FRA
employees during the company's meet. Certain direct operating expenses are
paid directly by the company. Certain other common expenses are shared by the
company and FRA. At September 30, 1994 the Company was owed from FRA $40,874.
6. Unaudited Interim Statements
The financial statements for the three months ended September 30, 1994
and 1993 are unaudited; however, in the opinion of management all adjustments
[consisting solely of normal recurring adjustments] necessary to a fair
presentation of the financial statements for these interim periods have been
made. The result for interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.
7. Subsequent Events
On March 21,1994 an option was granted to International Thoroughbred
Breeders, Inc. to acquire Atlantic City Harness, Inc., and Freehold Racing
Association by sole shareholder, Kenneth R.Fischer. The options expire
December 31, 1994.
FREEHOLD RACING ASSOCIATION
Financial Statements
For the Nine Months Ended September 30, 1994
Information as of and for the periods ended September 30, 1994 and 1993 is
Unaudited
FREEHOLD RACING ASSOCIATION, INC
BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
ASSETS
<TABLE>
September 30, December 31,
1994 1993
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ 1,501,680 $ 1,197,903
Short-Term Investments 800,000 500,000
TOTAL CASH AND CASH EQUIVALENTS 2,301,680 1,697,903
Accounts Receivable - Net (237,653) 991,872
Prepaid Expenses 152,068 43,540
Other Current Assets 6,156 6,156
TOTAL CURRENT ASSETS 2,222,251 2,739,471
LAND, BUILDINGS AND EQUIPMENT :
Land and Buildings 12,277,573 11,776,449
Equipment 1,047,278 944,572
TOTAL LAND, BUILDINGS AND EQUIPMENT -
- COST 13,324,851 12,721,021
LESS: Accumulated Depreciation 2,019,584 1,552,969
TOTAL LAND, BUILDINGS AND EQUIPMENT -
- NET 11,305,267 11,168,052
DEPOSITS AND OTHER ASSETS 25,425 41,750
TOTAL ASSETS $ 13,552,943 $ 13,949,273
See Notes to Pro Forma Financial Statements.
</TABLE>
FREEHOLD RACING ASSOCIATION, INC
BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
September 30, December 31,
1994 1993
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expen $ 3,763,830 $ 3,178,131
Notes & Mortgages Payable-Current 1,191,399 3,450,000
TOTAL CURRENT LIABILITIES 4,955,229 6,628,131
LONG-TERM LIABILITIES:
Notes Payable - Long Term Portion 1,856,847 5,335,396
E.D.A. Mortgage Payable-Long Term 4,800,000 0
TOTAL LONG TERM LIABILITIES 6,656,847 5,335,396
SHAREHOLDERS' EQUITY:
Common Stock 25,100 25,000
Additional Paid-In Capital 215,239 215,239
Retained Earnings (Deficit) 1,700,528 1,745,507
TOTAL SHAREHOLDERS' EQUITY 1,940,867 1,985,746
TOTAL LIABILITIES & SHAREHOLDERS' EQU $ 13,552,943 $ 13,949,273
</TABLE>
See Notes to Pro Forma Financial Statements.
FREEHOLD RACING ASSOCIATION, INC
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
Nine Months End Nine Months
September 30, September 30,
1994 1993
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 10,068,980 $ 8,895,857
Investment Income 1,976 759
TOTAL REVENUES $ 10,070,956 $ 8,896,616
EXPENSES:
Cost of Revenues $ 1,959,167 $ 2,018,695
Operating Expenses 5,019,128 4,617,147
Depreciation & Amortization 432,046 387,000
General & Administrative Expenses 724,684 496,429
Interest Expense 349,869 343,438
TOTAL EXPENSES $ 8,484,894 $ 7,862,709
INCOME FROM CONTINUING OPERATIONS BEFORE
TAX PROVISION 1,586,062 1,033,907
LESS:Income Tax Expense 31,550 58,523
NET INCOME(LOSS) $ 1,554,512 $ 975,384
See Notes to Pro Forma Financial Statements.
</TABLE>
FREEHOLD RACING ASSOCIATION
Notes to Financial Statements
September 30, 1994
1. Organization
Freehold Racing Association (Company) was organized for the purpose of
owning and operating Freehold Racetrack, located in Freehold, New Jersey. The
company is wholly-owned by Kenneth R. Fischer.
On December 21, 1990 Kenneth R. Fischer, through his 100% owned holding
company, K.F. Investments, Inc., acquired under the purchase method, the
Racing facilities and equipment of predecessor Freehold Racing Association for
the cost of $11,795.833.
On December 31, 1990 all assets and liabilities of K.F. Investments,
Inc. were merged into Freehold Racing Association under a plan of downstream
merger.
On December 21, 1990, Atlantic City Harness, Inc. was also purchased by
Kenneth R. Fischer.
The 1994 racing meet was conducted for 38 days, ending September 30,
1994. The 1994 meet consisted of live racing and simulcasting of these races
to Garden State Park Racetrack, Meadowlands Racetrack, Atlantic City Casino
Race Books and other locations out of state.
In addition thoroughbred and harness racing was simulcast from the
Meadowlands Racetrack, Garden State Park Racetrack and Atlantic City Race
Course and other out of state tracks.
The Company has an agreement with Atlantic City Harness, Inc. which
provides that they shall conduct a daytime harness meet at Freehold Racetrack
each year through 1997, and also provides for the sharing of net income from
these meets.
2. Summary of Significant Accounting Policies
Racing Facilities and Equipment
Racing facilities and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets.
3. Racing Facilities and Equipment
Racing facilities and equipment are comprised of the following at
September 30, 1994:
<TABLE>
<S> <C>
Land $ 1,166,583
Grandstand 8,646,875
Other real estate 115,000
Landscaping & roadways 1,847,991
Machinery and Equipment 1,047,278
Total 12,823,727
Less accumulated depreciation 1,981,369
Total $10,842,358
</TABLE>
Depreciation expense charged to operations amounted to $428,400 in 1994.
4. Bonds Payable
Bonds payable consist of the following as of September 30,1994:
<TABLE>
<S> <C>
1984 Bond $5,250,000
Less current maturities (450,000)
Total $4,800,000
</TABLE>
Permanent financing for the acquisition of equipment, furnishings and
fixtures, and reconstruction of the grandstand and related facilities was
obtained through the issuance of a $9,000,000 1984 Economic Development
Authority Bond by the New Jersey Economic Development Authority (1984 Bond).
The 1984 Bond bears interest on the outstanding principal at 80% of the
prime interest rate (the prime rate was 7.75% at September 30, 1994). Monthly
installments of $37,500 plus interest are payable through June 1, 2006, at
which time, all remaining unpaid principal and accrued interest is due.
The 1984 Bond is collateralized by a first mortgage on the project and
two second mortgages.
While the 1984 bond is not the debt of the Company, a promissory note
and mortgage agreement obligates the Company to payments equal to the debt
service requirement of the Bond.
Aggregate principal payments due after September 30, 1994 are as
follows:
<TABLE>
<S> <C>
1994 $ 75,000
1995 450,000
1996 450,000
1997 450,000
1998 450,000
Thereafter 2,925,000
Total $4,800,000
</TABLE>
5. Commitments
The Company has various noncancellable lease agreements, including an
agreement for the use of pari-mutuel totalisator equipment and services for
racing seasons up to June 1, 2000. Under the agreement, there is a daily
charge based on a percentage of betting handle on track.
6. Pension Plan
Union employees are covered by various union defined contribution and
defined benefit pension plans. The total contribution under the plans for the
period ended September 30, 1994, amounted to $96,207 respectively. Actuarial
information for Freehold Racing Association, alone, is not determinable.
The remaining eligible employees are covered by a currently funded
defined contribution plan. The total contributions charged to operations for
the plan amounted to $37,494 in 1994, respectively.
7. Note Payable Deyfree Holdings, Inc.
The note of Deyfree Holdings, Inc. previously payable December 21, 1992
was renegotiated and now totals $100,000 payable April 15, 1995.
8. Loans Payable to Bank Is As Follows:
Installment demand loan due secured by Kenneth R. Fischer, totals
$2,285,000.
9. Environment Liability
The Company has entered into several agreements to undertake the closure
and remediation of environment damage at a landfill site. In turn, the
Company's former owners have agreed to bear the costs associated with the
closing and remediation.
10. Related Party Transactions
Atlantic City Harness, Inc., (ACH) is owned 100% by Kenneth R. Fischer.
At September 30, 1994 the company owes $40,874 to ACH.
11. Income Tax
Effective January 1, 1991, the Company received Internal Revenue Service
approval to file as an S Corporation under section 1361 of the Internal
Revenue Coda. The shareholder, under such section, is responsible for the
payment of Federal Income Tax on the Company's taxable income. For State
Income Tax purposes the Company is taxed as a C Corporation and the financial
statements reflect a provision for state tax for the period ended December 31,
1993. Effective January 1, 1994, the Company also elected to be taxed as an S
Corporation in New Jersey.
12. Contingencies
On March 1, 1994 Freehold Racing Association and various other
Defendants were served with an action for breach of contract in the U.S.
District Court of New Jersey by a former vendor. The Civil Action consisted
of a complaint and jury demand for liquidated damages, treble liquidated
damages and tolling of the Statute of Limitation for invoking "RICO" against
parties set forth to satisfy any judgment. In managements opinion, the suit
was without merit. The Company and various defendants were contesting the
action. On July 27, 1994, the U.S. District Court of New Jersey dismissed the
complaint.
On September 30, 1993 a complaint was brought against the Company by a
former employee through the New Jersey Division of Civil Rights contending
that she was terminated based on age discrimination. The Company is
contesting the action.
13. Unaudited Interim Statements
The financial statements for the three months ended September 30, 1994
and 1993 are unaudited; however, in the opinion of management all adjustments
[consisting solely of normal recurring adjustments] necessary to a fair
presentation of the financial statements for these interim periods have been
made. The result for interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.
14. Subsequent Events
As of September 30, 1994 the Company distributed $1,600,000 to
shareholder, Kenneth R. Fischer, which will be charged to retained earnings in
1994. The distribution was for Federal and State taxes incurred by the
shareholder because of the pass-through income required to be reported on his
personal income tax returns. There were no distributions to shareholder,
Kenneth R. Fischer, in the years ended December 31, 1991 through 1993.
On March 21, 1994 an option was granted to International Thoroughbred
Breeders, Inc. to acquire FRA and ACH by, sole shareholder, Kenneth R.
Fischer. The option expires December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed onits behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By /s/ Arthur Winkler
Arthur Winkler, President and Director
By /s/ William H. Warner
William H. Warner, Treasurer, Principal
Financial Officer and Accounting Officer
Dated: February 9, 1995
PROMISSORY NOTE
$12,500,000.00
Trenton, New Jersey
January 31, 1995
FOR VALUE RECEIVED, the undersigned, INTERNATIONAL THOROUGHBRED
BREEDERS, INC. ("Borrower"), a Delaware corporation, with an office at Route
70 and Haddonfield Road, Cherry Hill, New Jersey 08802, promises to pay to
the order of KENNETH R. FISCHER ("Lender"), residing at 157 Oval Road, Essex
Fells, New Jersey 07021, the sum of TWELVE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($12,500,000.00) together with interest as hereinafter provided.
1. Maturity Date. The maturity date of the Promissory Note shall be
January 1, 2003 at which time the entire remaining principal together with any
accrued interest shall be due and payable.
2. Payment of Principal.
A. During each of the next five (5) years commencing
January 2, 1996 and on each January 31 thereafter to and including January 2,
2000, the payment of principal due hereunder shall be paid based upon a twenty
(20) year principal amortization payout;
B. During each of the next three (3) years, commencing
January 2, 2001, the payment of principal due hereunder shall be paid based
upon a ten (10) year principal amortization payout; and
C. On December 31, 2003, the entire balance of principal
together with any accrued interest shall be immediately due and payable.
3. Payment of Interest and Interest Rate. The Borrower shall,
concurrently with the payments of principal, pay Lender annual interest
commencing on the date hereof, computed on the basis of a 360 day year, for
the actual number of days elapsed, on the unpaid balance existing at the time
of each annual payment, at the rate of eighty percent (80%) of the prime rate
appearing and as published in The Wall Street Journal on each and every
anniversary of the date hereof, not to exceed six percent (6%) per annum. In
the event that the date upon which an installment is due and payable ("Payment
Date") should fall on a day other than a Business Day, as hereafter defined,
such Payment Date shall be on the next succeeding Business Day. For purposes
of this Note, the term "Business Day" shall mean a day of the year on which
banks are not required or authorized to close in New Jersey.
4. Security for the Note. To secure the payment hereof of Borrower
to Lender, Borrower caused Freehold Racing Association, Inc. ("FRA") (the
"Mortgagor") to deliver to Lender a certain mortgage dated the date hereof (
the "Mortgage") which granted to Lender a security interest in and lien on the
real property, buildings and improvements described on Exhibit A attached
hereto and made a part hereof. All the terms and conditions of the Mortgage
are incorporated herein as though fully set forth and Borrower acknowledges
the reading and execution of said Mortgage.
5. Default and Events of Default. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
A. Failure of Borrower to make payment under this Note or
any installment hereof within ten (10) days after written notice of default by
Lender;
B. Sale by ITB of all or substantially all of the assets
of FRA or ACH or all or substantially all of the stock of FRA or ACH to other
than a corporation (including successor corporations to which such assets or
stock are sold) owned or controlled by ITB;
C. If FRA or ACH shall cease to conduct harness racing at
Freehold Raceway; and
D. An Event of Default under the Mortgage.
Upon an Event of Default, Lender may, at his option:
(1) Declare all loans and sums owing Lender from Borrower
under this Note to be forthwith due and payable;
(2) If this Note is referred to an attorney for
collection, collect reasonable attorney's fees; and
(3) Exercise any and all remedies provided for in the
Mortgage.
6. Setoff by Borrower. Borrower may, at its option, set off any and
all amounts owing hereunder against any and all obligations of Lender to
indemnify Borrower in accordance with Paragraph 11 of the Stock Purchase
Agreement.
7. Prepayment. Borrower shall have the right to make prepayment of
this Note, in whole or in part, without premium or penalty. All such
prepayments shall be applied against the payments due in their order of
maturity.
8. Nonassignability. This Note shall be binding upon and shall inure
to the benefit of the parties hereto, their respective successors and assigns,
provided, however, that Lender shall not have any right to assign any or all
of its rights hereunder.
9. Miscellaneous.
9.1 Anything herein contained to the contrary
notwithstanding, the undersigned does not agree and shall not be obligated to
pay interest hereunder at a rate which is in excess of the maximum rate
permitted by law. If by the terms of this Note, the undersigned is at any
time required to pay interest at a rate in excess of such maximum rate, the
rate of interest under this Note shall be deemed to be immediately reduced to
such maximum rate and the portion of all prior interest payments in excess of
such maximum rate shall be applied to and shall be deemed to have been
payments in reduction of the outstanding principal balance.
9.2 This Note may not be changed or terminated orally, but
only by an agreement in writing signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought.
9.3 The captions preceding the text of the sections of
this Note are used solely for the convenience of reference and shall not
affect the meaning or construction of this Note.
9.4 This Note shall be governed and construed in
accordance with the laws of the State of New Jersey.
ATTEST:/s/ Christopher C. Castens, Esq. INTERNATIONAL THOROUGHBRED
Secretary BREEDERS, INC.
By:/s/ Arthur Winkler
Name: Arthur Winkler
Title: President and Director
STOCK PURCHASE AGREEMENT
BETWEEN
INTERNATIONAL THOROUGHBRED BREEDERS, INC., Purchaser
and
KENNETH R. FISCHER. Seller
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), made as of the 31st day of
January, 1995 by and between INTERNATIONAL THOROUGHBRED BREEDERS, INC., a
Delaware corporation, having an address at Route 70 and Haddonfield Road,
Cherry Hill, New Jersey 08034 (the "Purchaser") and KENNETH R. FISCHER,
residing at 157 Oval Road, Essex Fells, New Jersey 07021 (the "Seller").
WITNESSETH:
WHEREAS, Freehold Racing Association ("FRA"), Atlantic City Harness,
Inc. ("ACH") and Circa 1850, Inc. ("Circa") own certain assets used to conduct
standardbred race track meets with pari-mutuel wagering (the "Business") at
Freehold Raceway in The Borough of Freehold and Township of Freehold, New
Jersey, pursuant to a license(s) (the "Racing License") granted by the New
Jersey Racing Commission (the "Racing Authority"); and
WHEREAS, Kenneth R. Fischer is the owner of one hundred (100%) percent
of the shares of stock of FRA, ACH and Circa (100% of the stock of FRA, ACH
and Circa being referred to hereinafter as the "Stock"); and
WHEREAS, Purchaser and Seller have executed a certain Option Agreement,
dated March 21, 1994, granting Purchaser the right to purchase the Stock in
accord with this Agreement (the "Option"); and
WHEREAS, Purchaser has, pursuant to written notice given to Seller,
dated December 13, 1994, exercised its rights under the Option (the "Option
Election") as supplemented pursuant to a letter agreement, dated December 23,
1994 (the "December Letter"), between its respective attorneys, which letter
agreement has been consented to by the Seller and Purchaser in all respects;
and
WHEREAS, the Seller desires to sell the Stock as set forth in this
Agreement to the Purchaser and the Purchaser desires to purchase such Stock
from the Seller, upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Sale and Purchase of the Stock.
(a) Sale and Purchase. At the Closing on the Closing Date (as
such terms are defined in Paragraph 5), the Seller shall sell, assign,
transfer, convey and deliver to the Purchaser, and the Purchaser shall
purchase and acquire from the Seller, the Stock, all on and subject to the
terms, covenants and conditions set forth in this Agreement.
(b) At the Closing, ACH, FRA and/or Circa shall own the Assets
as herein defined.
Definition of the "Assets". Subject to the terms and
conditions of this Agreement, the term "Assets" shall mean all assets owned by
any of the Subject Companies on the date hereof or acquired before the Closing
subject to decreases in or dispositions of Assets permitted by this Agreement,
which are used in or relate to the Business as of the Closing Date:
(i) the Land set forth on Schedule 1(b)(i) attached hereto
and made a part hereof, together with all buildings, improvements and fixtures
appurtenant thereto, including, without limitation, all right, title and
interest, if any, of, in and to (1) any strips or gores of land adjacent to
the Real Property which adjoin the property of others; (2) all easements,
rights of way or use and privileges, on or existing for the benefit of, or
appurtenant to, the Real Property, (3) any land lying in the bed of any street
or road or avenue opened or proposed in front of or adjoining the Real
Property, to the center line thereof (collectively, the "Real Property").
(ii) all equipment, machinery, furniture, supplies,
computers and computer software, office furnishings and other tangible
personal property, together with all warranties and guaranties in connection
therewith as set forth on Schedule 1(b)(ii) (collectively, sometimes
hereinafter referred to as the "Personal Property") owned by any of the
Subject Companies and which is not specifically excluded from this transaction
as set forth on Schedule 1(b)(ii) attached hereto and made a part hereof;
(iii) all rights and interests of any of the Subject
Companies under those licenses and leases in and to the equipment, computers
and computer software, machinery and furniture set forth on Schedule
1(b)(iii) attached hereto and made a part hereof (the "Leases"), and all
prepayments (with respect to the period after the Closing) and deposits (with
respect to the period after the Closing) thereunder;
(iv) all purchase orders, contracts, leases, licenses,
rights and agreements all, set forth on Schedule 1(b)(iv) attached hereto and
made a part hereof (it being understood and agreed that to the extent that any
Subject Company enters into any lease, contract or other agreement as
permitted under this Agreement between the date hereof and the Closing, such
lease(s), contracts(s) or agreements(s) shall be included as part of the
Assets hereunder and included as part of Schedule 1(b)(iv)), subject, however,
to the last paragraph of this Paragraph 1(b);
(v) the vehicles set forth on Schedule 1(b)(v) attached
hereto and made a part hereof; and
(vi) the logos, trade names, trademarks, service marks and
other common law and statutory property rights, if any, used in connection
with the Business, as set forth on Schedule 1(b)(vi) attached hereto and made
a part hereof, including, but not limited to, all of any Subject Company's
right, title and interest, if any, in the names "FRA Raceway", "Freehold
Raceway", "Freehold Race Track", and "Atlantic City Harness", used alone or in
any combination with other words, and all goodwill associated therewith and
any derivatives thereof (such property and rights, however, to be sold and
assigned without representation or warranty by Seller);
(vii) to the extent assignable by the Seller to the
Purchaser, all governmental licenses, permits and authorizations of the Seller
applicable to the Business, Assets and the Real Property as set forth on
Schedule 1(b)(vii) attached hereto;
(viii) all engineering and technical data, specifications and
drawings relating to the Business or the Assets, all operating business data,
records and information of the Business, all marketing information,
advertising circulars and advertising data, vendor and supplier list, price
list, and warranty repair records of the Business, including, as to all of the
foregoing, to the extent in the possession of FRA and ACH, originals and
copies thereof and tapes, disks and transcribed information of any type,
whether expressed in ordinary or machine language;
PROVIDED, HOWEVER, that there shall be excluded from
the Assets and from this sale any executory contract which is not assignable
without the consent of any person other than the Seller or the Purchaser, if
such consent to the assignment thereof to the Purchaser shall not have been
obtained prior to the Closing (an "Excluded Contract"). With respect to any
Excluded Contract, the parties shall cooperate with each other, upon written
request, (i) in endeavoring to obtain the requisite third-party consent to the
assignment thereof to the Purchaser, without either party being obligated,
however, to make any payment to any such third-party which is not otherwise
due in order to obtain such consent, and (ii) if any such requisite consent
cannot be obtained, in endeavoring to obtain for the Purchaser an arrangement
which the Purchaser reasonably shall desire designed to provide for the
Purchaser the benefits thereof in some other manner (provided that the Seller
shall not be required to make any payment to any such third-party, or incur
any liability or obligation, in connection therewith).
2. Obligations and Liabilities of FRA and ACH.
Purchaser acknowledges that it is buying a going business and that
as of the Closing Date and at the time of the purchase and sale of the Stock,
the Subject Companies shall have and be subject to such liabilities as may
exist as of that date. Promissory Note dated December 31, 1984 in favor of the
New Jersey Economic Development Authority (the "EDA Note") secured by a
mortgage of even date encumbering the Real Property, the outstanding principal
balance of which on the date hereof is estimated to be $5,175,000.00, shall be
satisfied and discharged of record as provided for in Paragraph 4 hereof. A
true and correct copy of the EDA Note and Mortgage, and all underlying loan
documents in connection therewith, are identified on Schedule 2, copies of
which have been delivered to Purchaser. <PAGE>
3. Consideration and Terms of
Payment.
(a) Purchase Price for Stock. The Purchaser agrees to pay, and
the Seller agrees to accept, as full consideration for the Stock, SEVENTEEN
MILLION EIGHT HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($17,825,000.00) (the
"Purchase Price"). The Purchase Price shall be paid in the manner provided in
Paragraph 3(b). The parties hereto shall use their reasonable best efforts to
agree upon the allocation of the Purchase Price among the shares of Stock for
those Subject Companies, prior to the Closing; provided, however, that the
inability to reach an agreement with respect to such allocation shall have no
effect upon the respective rights, duties and obligations of the parties
hereto.
(b) Terms of Payment. The Purchase Price shall be paid by the
Purchaser to the Seller as follows:
(i) Purchaser has deposited, on December 23, 1994 pursuant
to the December Letter, with Connell, Foley & Geiser, attorneys for the
Seller, the sum of ONE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS
($1,150,000.00) (the "Down Payment") by wire transfer of same day federal
funds for deposit into the escrow account. At Closing, the Down Payment shall
be released from escrow together with any interest thereon and paid to Seller
in accordance with the terms hereof.
(ii) at Closing, the delivery by Purchaser to Seller of a
Note in the amount of TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($12,500,000.00) (the "ITB Note"), said note to be in the form attached hereto
as Schedule 3(b)(ii)(A), and secured by a first mortgage on the Real
Property, said Mortgage to be in the form attached hereto as Schedule
3(b)(ii)(B), and a pledge of the Stock of the Subject Companies being
purchased hereunder, said Pledge Agreement to be in the form attached hereto
as Schedule 3(b)(ii)(C). The ITB Note shall provide as follows:
(a) the maturity date of the ITB Note shall be eight
(8) years from the date of execution at which time the entire remaining
principal together with any accrued interest shall be immediately due and
payable;
(b) during the first five (5) years the payments of
principal as required by the ITB Note shall be made based upon a twenty (20)
year principal amortization payout; and
(c) during the final three (3) years the payments of
principal as required by the ITB Note shall be based upon a ten (10) year
principal amortization payout; and
(d) interest compounded annually on the outstanding
principal amount at the rate of 80% of prime rate as published in the Wall
Street Journal as it exists on such anniversary day of ITB Note not to exceed
6% per annum payable on December 31, 1995 and on December 31st of each year
thereafter until December 31, 2003.
(e) in the event Seller fails to advance the funds
it is obligated to advance pursuant to Paragraph 4 of this Agreement,
Purchaser may advance such funds on Seller's behalf and offset such amounts
against amounts due and owing from Purchaser to Seller under the ITB Note.
ITB Note shall further provide that the entire
principal balance thereof together with accrued interest shall become
immediately due and payable in the event that Purchaser shall thereafter sell
all or substantially all of the assets of FRA and ACH, or all or substantially
all of the Stock of FRA or ACH other than to a corporation (including
successor corporations to which such assets or stock are sold) owned or
controlled by Purchaser, or if FRA and ACH shall cease to conduct harness
racing at Freehold Raceway. This restriction shall apply to all successor
corporations which own the assets or Stock of FRA and/or ACH.
(iii) at Closing, the balance of the Purchase Price (the
"Balance") by wire transfer of same day federal funds by Purchaser to an
account designated by Seller.
4. Other Covenants.
On December 31, 1984, the New Jersey Economic Development
Authority issued its 9,000,000 principal amount of Economic Development Bond
(Freehold Racing Association 1984 Project) in order to provide funds from
which to make a mortgage loan to Freehold Racing Association, which Bond was
purchased and is currently held by Midlantic Bank N.A. Prior to the purchase
of stock in the Subject Corporation by Seller, a Modification Agreement was
created by and among FRA and others dated as of December 21, 1990. Midlantic
Bank N.A. by letter dated January 13, 1995, a copy of which is attached hereto
as Schedule 4, has given notice that it objects to the transaction
contemplated by this Agreement and has reserved all of its rights and remedies
under the Bond transaction documents and under applicable law, including, but
not limited to, its right to declare a default and to request that the New
Jersey Economic Development Authority enforce the remedies provided under the
Bond Agreement.
At Closing Purchaser and Seller will each advance to FRA fifty
percent (50%) of the amount necessary in order to satisfy the EDA Note. FRA
shall execute and deliver a Promissory Note (the "FRA Note"), in the form
attached hereto as Schedule 4A, together with a second mortgage on the Real
Property securing the FRA Note. Said Mortgage shall be in the form attached
hereto as Schedule 4B.
As security for the performance by Purchaser of its obligations
under this Agreement, Robert E. Brennan (the "Pledgor"), as principal
shareholder of Purchaser, hereby agrees, subject to any pre-existing proxy(s),
to pledge certificates of stock representing 2,000,000 shares of stock in
Purchaser and to deliver the shares together with duly executed stock powers
to Thomas D. Ruane, Esq., as Escrow Agent, to be held as security for the
performance by Purchaser of the following obligations:
(a) payment by Purchaser of the ITB Note executed and delivered
by Purchaser pursuant to Paragraph 3(b)(ii) hereof; and
(b) payment by Purchaser of the FRA Note executed and delivered
by FRA pursuant to this Paragraph;
This pledge shall remain in full force and effect until January
31, 1998 provided that on such date no default exists under the terms of the
ITB Note and/or the FRA Note. Said Pledge Agreement shall be in the form
attached hereto as Exhibit 4C.
5. Closing and the Closing Date.
(a) The closing of the purchase and sale hereunder (the
"Closing") shall be held at the offices of counsel to the Purchaser, Sterns &
Weinroth, P.O. Box 1298, 50 West State Street, Suite 1400, Trenton, New Jersey
08607 on or before January 31, 1995 (the "Closing Date").
(b) The Closing hereunder shall be deemed effective as of
January 1, 1995.
6. Representations and Warranties of the Purchaser.
As a material inducement to the Seller to enter into this
Agreement and to consummate the transactions contemplated herein, the
Purchaser represents and warrants to the Seller as of the Effective Date
hereof and as of the Closing Date.
(a) Organization. The Purchaser has all requisite power to own,
operate and lease its properties and to carry on the Business and its business
as it is now being conducted and is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) Authorization. The Purchaser has full power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by the Board of
Directors of the Purchaser and no other corporate proceedings are necessary to
authorize this Agreement or the consummation of the transactions contemplated
herein. This Agreement constitutes the valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, moratorium and
other laws affecting the rights of creditors generally and to equitable
principles.
(c) No Violation. The execution, delivery and performance of
this Agreement by the Purchaser will not (except as it may otherwise determine
in its due diligence review) require the consent, waiver, approval, license or
authorization of any person or public authority other than (i) the Racing
Authority and (ii) the parties to the Leases, and the Executory Contracts,
where applicable.
(d) Litigation. There are no claims, actions, proceedings or
investigations pending or, to the best knowledge of the Purchaser, threatened
against or relating to the Purchaser or any of its principals, partners,
shareholders, directors, employees or properties before any court or
governmental or regulatory authority or body which may prevent Purchaser
executing and performing this Agreement.
(e) No Impediment. Purchaser knows of no fact or set of facts
which would hinder its ability to obtain a license from the Racing Authority
enabling Purchaser to conduct the Business.
(f) No Other Representations and Warranties. The Purchaser has
not relied on any representations or warranties made by the Seller except
those specifically set forth in this Agreement under Paragraph 7.
7. Representations and Warranties of the Seller.
As a material inducement to the Purchaser to enter into this
Agreement and to consummate the transactions contemplated herein, the Seller,
to the best of his knowledge, represents and warrants to the Purchaser, as of
the Closing Date, as follows:
(a) Corporate Organization. Each of the Subject Companies are
corporations duly organized, validly existing and in good standing under the
laws of the State of New Jersey, with all requisite corporate power and
authority to own, operate and lease its properties and to carry on the
Business and its business as it is now being conducted.
(b) Authorization. The Seller has full power and authority to
enter into this Agreement and to carry out its obligations hereunder. This
Agreement shall constitute the valid and binding obligation of the Seller,
enforceable against him in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, moratorium and
other laws affecting the rights of creditors generally and to equitable
principles.
(c) No Violation. Seller and the Subject Companies are in
complete compliance with their permits, if any, issued by the Racing
Authority, all of which are in full force and effect. True copies of such
permits are attached hereto as Schedule 7(c). The execution, delivery and
performance of this Agreement by the Seller and consummation of the
transactions contemplated herein do not require the consent, waiver, approval,
license or authorization of any person or public authority other than (i) the
Racing Authority and (ii) the parties to the Leases and the Executory
Contracts where applicable; and will not, with or without the giving of notice
or the passage of time, conflict with, violate, result in a breach of any
obligation under, or constitute a default under any provision of any charter,
deed of trust, by-law, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree, law, ordinance or regulation, applicable
to the Seller or the Assets or any restriction which will result in the
creation of any lien, charge or encumbrance upon any of the Assets.
(d) Administrative Consent Orders. The Seller and the Subject
Companies have not received any notice not heretofore complied with or
withdrawn, that the Seller or any of the Subject Companies are in violation of
any applicable law, statute, order, rule or regulation promulgated or judgment
entered by any federal, state or local, court or governmental authority
relating to or affecting ownership of the Assets or operation of the Business,
the violation of which would have a material adverse effect on the Assets, the
Business or any Subject Company.
(e) Title to the Real Property. Schedule 1(b)(i) attached
hereto and made a part hereof identifies all Real Property owned by any of the
Subject Companies. The Real Property, on the Closing Date, shall be free and
clear of all mortgages (except the EDA Mortgage which will be paid off at
Closing), liens, security interests, charges and encumbrances, except for the
Permitted Exceptions as hereinafter defined. For the purposes hereof, the
term "Permitted Exceptions" shall mean (i) taxes levied on the Real Property
and not yet due and payable; (ii) restrictions, covenants, agreements,
easements and other matters of record affecting the Real Property as of the
Closing Date hereof and as of the date Purchaser's preliminary title report is
prepared; (iii) the state of facts as would be disclosed by a current,
accurate survey and inspection of the Real Property; (iv) those restrictions
which are set forth on Schedule 7(e) attached hereto and made a part hereof;
and (v) encumbrances resulting from Purchaser's acts.
(f) Personal Property. Schedule 7(f) attached hereto and made a
part hereof identifies all Personal Property with a book value or replacement
cost in excess of $1,000 owned or leased by any of the Subject Companies.
Except for certain property leased or licensed to FRA and ACH pursuant to the
Leases, the obligations for which will be assumed by Purchaser, ACH and FRA
have title to all personal property owned by them. On the Closing Date, all
such personal property (other than that identified on said Schedules) shall be
free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of every kind or
character, other than as permitted by this Agreement.
(g) Contracts, Leases, Agreements and Other Commitments. FRA
and ACH is not a party to a contract, lease, agreement or other commitment
material to the operation of the Business except as set forth on the Schedules
attached hereto. FRA and ACH has not received any written notice not
heretofore complied with or dismissed, that it is in material breach or
default in the performance of any of its obligations under any of the
Executory Contracts, Leases, agreements or other commitments identified in
said Schedules; and, to the best knowledge of FRA and ACH, without
investigation, all other parties thereto are not in material default
thereunder and no event has occurred or failed to occur whereby any of the
other parties thereto have been or will be released therefrom or will be
entitled to refuse to perform thereunder. Except as disclosed in Schedules
1(b)(iii) and 1(b)(iv), there are no other written or oral leases, tenancies,
licenses or other occupancy agreements or arrangements with respect to the
Real Property or any portion thereof.
(h) Labor. Except as listed on Schedule 7(h) attached hereto
and made a part hereof, FRA and ACH is not a party to any collective
bargaining agreement with respect to any of its employees nor are any
employees of FRA and ACH with respect to the Business covered by any
collective bargaining agreements not listed on Schedule 7(h). True and
correct copies of all such collective bargaining agreements have been
delivered to the Purchaser by FRA and ACH. Except as may be listed on
Schedules 1(b)(iv) and 7(h), and except pursuant to the Plans listed on
Schedule 13 attached hereto, and except pursuant to the insurance policies
listed on Schedule 7(l) attached hereto, the Seller is not a contributor or
party to any employment agreements, pension plans, group life insurance,
hospitalization insurance or other plans or arrangements providing for
benefits for employees. A list of all employees of FRA and ACH employed in
the Business as of the date hereof, including the name and rate of salary and
amount of accrued vacation, compensatory and other leave time of each such
employee has been delivered to Purchaser. All contributions which have become
due and payable prior to the date hereof by FRA and ACH to any Plan (as
described in Paragraph 13) have been fully paid.
(i) Litigation. Except as otherwise listed on Schedule 7(i)
attached hereto, there are no claims, actions, proceedings or investigations
which have been commenced, or, to the best knowledge of FRA and ACH,
threatened against or relating to the Business or any of the Assets or the
Stock before any court or governmental or regulatory authority or body or
arbitrator which are not adequately covered by insurance and which, if decided
adversely, would be likely to have a material adverse effect on the Assets or
the Stock or the Business or FRA and ACH. Neither FRA and ACH nor any of the
Assets is subject to any order, judgment, injunction or decree which
materially adversely affects the Assets or the Stock, the liabilities assumed
hereunder, or the transactions contemplated hereby.
(j) Compliance with Laws and Regulations. FRA and ACH have not
received any notice of a pending condemnation which would, if adversely
decided, or notice of a violation of any applicable law, rule, statute,
ordinance or regulation which remains uncured and would, materially adversely
affect the Assets or the Stock, the contracts and liabilities to be assumed
hereunder or the transactions contemplated hereby.
(k) Condition of Assets. All of the Assets are "AS IS" as of
the Closing Date hereof, subject to the Permitted Exceptions, and subject to
ordinary use, ordinary breakage and ordinary wear and tear and damage or
deterioration due to the elements. ANY AND ALL WARRANTIES, EXPRESS OR
IMPLIED, AS TO PHYSICAL CONDITION, OR OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED.
(l) Financial Information. Set forth on Schedule 7(l) attached
hereto are listings of audited financial statements of FRA and ACH for the
fiscal years ended 12/31/91, 12/31/92 and 12/31/93, inclusive, unaudited
financial information with respect to FRA and ACH for subsequent monthly
periods through the month of September 30, 1994, copies of which have been
provided to the Purchaser, and a statement of the number of racing days, total
attendance, and total amount handled in pari-mutuel wagering at FRA's and
ACH's meets at FRA Raceway for the period January 1, 1990 through December 31,
1994. The audited financial statements and unaudited financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis for the periods and dates involved (except as
may be indicated in the notes thereto) and fairly present the financial
information relating to the Business for such periods (subject, in the case of
un-audited financial statements, to normal year-end adjustments and the
absence of notes to such statements).
(m) Insurance. Set forth on Schedule 7(m) is a list of
insurance policies maintained by or on behalf of FRA, ACH and Circa on the
Assets. Summaries of such policies have been previously supplied to
Purchaser.
(n) No Other Representations or Warranties. Not withstanding
anything to the contrary contained herein, but for the representations and
warranties of the Seller expressly contained in this Paragraph 7, the Seller
makes no other representations or warranties, expressed or implied, in
connection with the Assets, Stock and Business and the transactions
contemplated herein.
(o) Environmental Matters. To the best of the Seller's
knowledge: (i) it has made available to the Purchaser copies (to the extent in
the Seller's possession) of all test results, studies and reports in its
possession and completed, regarding any Hazardous Materials generated at the
Real Property and disposed of by the Seller off-site, or regarding the
condition of the soil, water or ground water at the Real Property, all of
which with the exception of the routine reports made in the regular course of
the Business; and (ii) except as disclosed in Schedule 7(o) attached hereto,
the Seller is not aware of Hazardous Materials or any present or former
on-site land-fills, settling ponds, disposal facilities or
underground tanks at,on or under the Real Property.
To the best of Seller's knowledge, each of the Subject
Companies is, and at all times has been, in compliance with all Environmental
Laws (as hereinafter defined). To the best of Seller's knowledge there has
been non complaint, order, directive, claim citation or notice by any
governmental authority or any other person or entity with respect to any
alleged violations of any Environmental Law or the occurrence of a Hazardous
Discharge at, about or from the Real Property or by reason of any business
thereon conducted ("Environmental Claim"). Neither Seller nor any of the
Subject Companies has any knowledge of an existing or potential Environmental
Claim or violation of any Environmental Law, nor has any of the Subject
Companies received any notification or has any knowledge of alleged, actual or
potential responsibility for, or any inquiry or investigation regarding, any
disposal, releasse or threatened release at any location of any Hazardous
Materials generated or transported by any of such companies; and there has
been no release of Hazardous Materials by any of the Subject Companies on,
upon or into the Real Property, and, to the best knowledge of Seller, there
has been no such release on, upon or into any real property in the vicinity of
any of the Real Property that, through soil or groundwater contamination, has
come to be located on the Real Property. No environmental lien has attached
to any of the Real Property.
For purposes of this Paragraph 7(p), "Environmental Laws"
shall mean all federal, state, district and local laws, all rules and
regulations promulgated thereunder, and all orders, judgments, notices,
permits or demand letters issued, promulgated or entered pursuant thereto,
relating to (i) releases, discharges, emissions or disposals to air, water,
land or groundwater, (ii) to the withdrawal or use of groundwater, (iii) to
the use, handing or disposal or polychlorinated bipheyls (PCBs), asbestos or
urea formaldehyde, (iv) to the treatment, storage, disposal or management of
hazardous substances (including, without limitation, petroleum, its
derivatives, by-products or other hydrocarbons), and any other solid, liquid
or gaseous substance, exposure to which is prohibited, limited or regulated,
or may or could pose a hazard to the health and safety of the occupants of the
Real Property or the property adjacent to or surrounding the Real Property,
(v) to the exposure of persons to toxic, hazardous, or other controlled,
prohibited or regulated substances, (vi) to the transportation, storage,
disposal, management or release of gaseous or liquid substances, including
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended,
the Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the
Atomic Energy Act of 1954, as amended, the Occupation Safety and Health Act,
as amended, ISRA, and all analogous laws promulgated or issued by any state or
other governmental authority.
(p) Employment Practices. Except as set forth on Schedule 7(p),
no employees of FRA or ACH are represented by any labor organization, and no
labor organization or group of employees has made a demand for recognition,
has filed a petition seeking a representation proceeding or given FRA or ACH
notice of any intention to hold an election of a collective bargaining
representative. Although FRA and ACH has begun negotiations regarding
expiring contracts with certain of their unions, there is no strike, work
stoppage or labor disturbance existing or, to the best of the Seller's
knowledge, threatened which involved any employees of the Seller.
(q) Non-Foreign Person Status. The Seller is not a "foreign
person" within the meaning of Sections 1445 and 7701 of the Internal Revenue
Code of 1986, as amended.
(r) Further Real Property Restrictions. Except as otherwise set
forth in this Agreement or as may be disclosed in the Purchaser's title
report, or as may otherwise be required by any applicable law, rule,
regulation, ordinance or statute, the Seller has no knowledge of, and is not a
signatory to, any private restrictions or agreements that affect the uses to
which the Real Property may be put, including, without limitation, size of
buildings, limitations on use or restrictions in regard to heights of
buildings, agreements to submit architectural plans to an association,
community organization or other group, provisions requiring improvements or
provisions requiring the joining with others in group actions.
(s) Capitalization. The authorized and outstanding capital
stock of FRA, ACH and Circa is as set forth on Schedule 7(s). All of the
outstanding shares of capital stock of FRA, ACH and Circa are owned of record
by Seller and no other person has or shares any direct or indirect interest or
right with respect to any of said shares. All outstanding shares of capital
stock of each of FRA, ACH and Circa have been duly authorized and validly
issued and are fully paid and nonassessable. There are no preemptive rights
on the part of any holder of any class of securities or FRA, ACH and Circa and
no options, warrants, conversion or other rights, agreements or commitments of
any kind obligating Seller, FRA, ACH or Circa, contingently or otherwise, to
issue or sell any shares of any class of FRA's, ACH's or Circa's capital stock
or any securities convertible into or exchangeable for any such shares, and no
authorization therefor has been given by Seller or any Subject Company.
(t) Subsidiaries. Neither FRA, ACH or Circa owns, directly or
indirectly, any shares of capital stock or other equity interest in any
corporation, partnership, association or other entity or business enterprise,
nor does FRA, ACH or Circa have any obligation or commitment to acquire all or
part of, contribute to the capital of, guarantee the obligations of, make
loans to or share the losses of any entity or enterprise.
(u) Authority for Agreement. Seller has all necessary capacity,
power and authority to execute and deliver this Agreement and to carry out his
obligations hereunder and thereunder. This Agreement constitutes the valid
and legally binding obligations of Seller and enforceable against him in
accordance with its respective terms. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default under any provision
of the charter or bylaws of FRA, ACH or Circa or any mortgage, indenture,
lease, agreement, bond or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to FRA, ACH, Circa or Seller or any of their properties
except for violations or defaults which may be cured by obtaining waivers or
consents. Such execution, delivery and consummation will not accelerate the
maturity of or otherwise modify the term of any indebtedness now existing or
proposed to be incurred, or result in the creation of any lien, charge,
encumbrance or security interest upon any of the assets or property of FRA or
ACH. Other than the approval of the Racing Commission which has been
obtained, no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority is required to be made
by Seller, FRA, ACH or Circa in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby by
the Seller.
(v) Taxes. For each of its taxable years beginning on or after
January 1, 1991, FRA and ACH for federal and state purposes, have been
"Subchapter S corporations" within the meaning of the Internal Revenue Code of
1986, as amended (the "Code"). Except as set forth in Schedule 7(v), each of
FRA and ACH has timely filed or will timely file all federal, state, local and
foreign income tax returns and other material tax reports relating to the
operations of FRA and ACH required under applicable law to be filed by FRA and
ACH and due on or before the Closing Date in respect of any fiscal period
ended before the Closing Date. Such returns and reports do or will reflect
accurately in all material respects all liability for taxes of FRA and ACH for
the periods covered thereby. Except as set forth on Schedule 7(v), all
federal state, local, foreign and other taxes, assessments and other
governmental charges upon FRA and ACH or upon any of their respective
properties, assets, income, receipts, payrolls, transactions, capital, net
worth or franchises reflected on such tax returns and reports which are due
and payable have been paid, other than those currently payable without penalty
or interest or which are being contested in good faith by proper procedures
and for which appropriate reserves have been established in accordance with
GAAP. Each of FRA and ACH has duly and properly withheld amounts and paid all
taxes, including Federal and state employee income taxes, social security or
similar taxes, payroll taxes, withholding taxes, unemployment taxes, and
employment taxes or every nature whatsoever, including any interest penalty or
addition thereto, whether disputed of not, required to be withheld and paid by
FRA and ACH with respect to any person and has filed all required federal,
foreign, state and local and other returns and reports with respect to any
person in compliant in all material respects with the tax withholding
provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
all other applicable federal, foreign, state or local laws. Except as set
forth on Schedule 7(v), no deficiencies for any taxes or assessments have been
assessed against FRA and ACH which remain unpaid and to Seller's knowledge
there are no issues currently pending before the Internal Revenue Service or
any other taxing authority in connection with any taxes. No income tax
returns for FRA and ACH have been audited by the Internal Revenue Service. No
income tax returns for FRA and ACH have been audited by the New Jersey
Department or Taxation. Neither FRA nor ACH has granted any waiver of any
statute of limitation with respect to, or any extension of a period for the
assessment of, any federal, state or local tax. The amounts set up as
provisions for taxes on balance sheets contained in ACH Financial Statements
and FRA Financial Statements are sufficient for the payment of all accrued and
unpaid taxes for which the FRA and ACH is liable for the periods through the
respective dates of such balance sheets and for all fiscal periods prior
thereto.
(w) Hiring of Employees. The Purchaser immediately prior to or
upon the Closing shall cause ACH and FRA to retain at least fifty-one (51%)
percent of the present employees of ACH and FRA, it being understood and
agreed that in no event shall fifty (50) or more employees of the Business as
of the Closing Date be involuntarily terminated (unless for cause) by the
Purchaser within ninety (90) days after the Closing Date. This obligation
shall survive the Closing hereunder.
8. Management of ACH and FRA.
From the date of the Option Agreement until the Closing Date
Seller and the management of the Subject Companies have conducted the Business
in such a manner as the Seller and management in its sole judgment determined,
consistent with reasonable business judgment and prior practices. Seller and
Purchaser have discussed changes in bank indebtedness between the date of the
Option Agreement and the Closing Date and Purchaser has satisfied itself that
such indebtedness has been incurred consistent with the provisions of the
Option Agreement.
Seller and Purchaser agree that FRA and ACH have distributed or
will prior to Closing distribute cash to Seller in an amount equal to 100% of
the estimated income tax liability of Seller on the taxable income of each
corporation as of 12/31/93 and 12/31/94. For this purpose the tax liability
shall be computed at applicable rates for a joint return claiming a standard
deduction for the applicable tax year. Seller has advised Purchaser that
after taking into account distributions made to him during 1994 (including the
distribution made 12/1/94 and 12/28/94) that there remains a liability of
approximately $190,000 based on estimated profit figures for November and
December. Seller and Purchaser agree to the extent that these monies are not
distributed by December 31, 1994 that FRA shall distribute the balance, if
any, in installments on or before January 15, 1995 and April 15, 1995.
Purchaser agrees to cause FRA to complete its tax return and furnish to Seller
the required information necessary to reflect income from FRA, ACH and/or
Circa 1850, on his individual tax return and to distribute to him the balance
of the distribution in such installments as Seller shall request.
9. Conditions Precedent.
(a) Conditions to the Obligation of the Seller to Sell the
Stock.
The obligation of the Seller to sell the Stock shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in writing by the Seller:
(i) The Purchaser shall have delivered all items to be
delivered by it at or prior to the Closing and shall have performed in all
material respects its obligations under this Agreement required to be
performed by it on or prior to the Closing Date pursuant to the terms hereof.
(ii) The representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
at and as of Closing Date as if made at and as of such time. The Purchaser
shall furnish the Seller with a bring-down certificate executed on its behalf
by an authorized officer, dated the Closing Date, to such effect.
(iii) The Seller shall have received an opinion of the
Purchaser's counsel, in form and substance reasonably satisfactory to the
Seller's counsel, dated the Closing Date, with respect to the matters which
are the subject of Paragraphs 6(a) through (d), which opinion may rely on
inquiries of appropriate officers of the Purchaser or on certificates of other
third parties as to matters of fact set forth or assumed therein and shall be
limited to the legal aspects of each such representation, and may be limited
to the knowledge of such counsel as to factual matters which are the subject
of Paragraphs 6(c) and (d).
(b) Conditions to the Obligation of the Purchaser to Purchase
the Stock.
The obligation of the Purchaser to purchase the Stock shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions, any or all of which may be waived by the Purchaser:
(i) The Seller shall have delivered all items to be
delivered by it at or prior to the Closing and shall have performed in all
material respects all of its obligations under this Agreement required to be
performed by it on or prior to the Closing Date pursuant to the terms hereof.
(ii) The representations and warranties of the Seller
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date as if made at and as of such time. The Seller
shall furnish the Purchaser with a bring-down certificate executed on its
behalf by an authorized officer, dated the Closing Date, to such effect.
(iii) The Seller shall have delivered to the Purchaser the
resignation of each officer and each member of the Board of Directors of each
of the Subject Companies. In addition, each of the Subject Companies shall
have held a special meeting of its Board of Directors to appoint the designees
named by the Purchaser to serve on the Board of Directors and/or as officers
of such Subject Company simultaneously with the Closing contemplated
hereunder.
(iv) The Purchaser shall have received an opinion of the
Seller's counsel, in form and substance reasonably satisfactory to the
Purchaser's counsel, dated the Closing Date, with respect to the matters which
are the subject of Paragraphs 7(a), (b), (c) and (i), which opinion may rely
on inquiries to appropriate officers of the Seller or on certificates of other
third parties as to matters of fact set forth or assumed therein and shall be
limited to the legal aspects of each such representation, and may be limited
to the knowledge of such counsel as to factual matters which are the subject
of Paragraphs 7(c) and (i).
(v) Subject only to the provisions of Paragraph 8, no
change shall have occurred in the Stock, Assets or the Business which is
materially adverse.
(vi) Purchaser shall have received a rundown of a title
commitment issued by a recognized title insurance company at Purchaser's
expense reflecting no additional exception from those reflected on the
preliminary title report received by Purchaser prior to exercise of its
option.
(vii) Purchaser shall have received all required licenses
and permits to operate a racetrack and the Business.
(viii) No Subject Company shall have admitted in writing its
inability to pay its debts generally as they become due, filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of any insolvency act, made an assignment for the benefit of its
creditors, consented to the appointment of a receiver for itself for the whole
or any substantial part of its property, or had a petition in bankruptcy filed
against it, been adjudicated a bankrupt, or filed a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any other
jurisdiction.
(ix) All consents, approvals and waivers from third parties
and governmental authorities and any other parties necessary to permit the
consummation of the transactions contemplated hereby shall have been obtained.
(x) Purchaser shall have received from the Seller either
(at Seller's option): (a) a non-applicability letter, (b) a de minimis
quantity exemption; or (c) a no further action letter, from the Industrial
Site Evaluation Element, or its successor, of NJDEP, or its successor (the
"ISRA Determination"). If Seller shall not have obtained such
non-applicability letter, exemption or approval (depending on that for which
Seller has made application) not later than the Closing Date, then Seller
shall deliver an opinion of Seller's counsel that, in such counsel's opinion,
ISRA is not applicable to the transaction contemplated by this Agreement and
Seller agrees to diligently pursue and obtain at his own expense a
non-applicability letter, a negative declaration or no further action letter.
10. Deliveries at Closing.
(a) Deliveries by the Seller. On the Closing Date, the Seller
shall obtain and deliver or cause to be delivered to the Purchaser the
following:
(i) Stock certificates duly endorsed in blank for transfer
to Purchaser representing all of the issued and outstanding shares of ACH, FRA
and Circa.
(ii) The bring-down certificate described in Paragraph
9(b)(ii).
(iii) A certified copy of the resolutions of the Board of
Directors and stockholder of ACH, FRA and Circa, if required, authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein.
(iv) The opinion of the Seller's counsel referred to in
Paragraph 9(b)(iv), in form and substance reasonably acceptable to the
Purchaser's counsel.
(v) An affidavit from the Seller, certifying that (1) he
is not a "foreign person" as that term is used and defined in Sections 1445
and 7701 of the Internal Revenue Code of 1986, as amended; (2) he is a United
States tax resident; and (3) he understands that such certification is made
under penalty or perjury. Such certification shall also set forth the
taxpayer identification number of the affiant.
(vi) A good standing certificate of FRA, ACH and Circa as
issued by the state of incorporation of the Seller.
(vii) The ISRA Determination or opinion of counsel referred
to in Paragraph 9(b)(x).
(viii) Copies of the Certificates of Incorporation and by-laws
of the Subject Companies, certified by an officer of each Subject
Company.
(ix) The corporate minutes books and stock transfer ledgers
of the Subject Companies.
(b) Deliveries by the Purchaser. (a) On the Closing Date, the
Purchaser shall obtain and deliver or cause to be delivered to the Seller the
following:
(i) The Purchase Price, in the manner and form provided in
Paragraph 3(b) hereof.
(ii) Pledge Agreement delivered pursuant to Paragraph
3(b)(ii)(c).
(iii) Mortgage to be delivered pursuant to Paragraph
3(b)(ii)(b).
(iv) Pledge Agreement and the collateral pledged thereunder
as provided for in Paragraph 4.
(v) FRA Note and Mortgage delivered pursuant to Paragraph
4.
(vi) Certified copies of the resolutions of the Purchaser's
Board of Directors authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein and therein.
(vii) The opinion of the Purchaser's counsel referred to in
Paragraph 9(a)(iii), in form and substance reasonably acceptable to the
Seller's counsel.
(viii)The bring-down certificate described in Paragraph
9(a)(ii).
(ix) An incumbency certificate to the Seller setting forth
those officers authorized to execute and deliver the documents referred to
herein, including, without limitation, the Agreement, together with the actual
signatures of such officers set forth opposite their respective names and
offices contained within such incumbency certificate.
11. Indemnifications.
(a) Indemnification by the Seller. The Seller hereby
indemnifies and holds the Purchaser harmless against and in respect of:
(i) any and all loss, liability or damage incurred or
sustained by the Purchaser in connection with any breach by the Seller of the
Seller's representations, warranties and covenants contained herein or in
certificates or other documents delivered hereunder or pursuant hereto.
(ii) all reasonable costs and expenses (including
reasonable attorneys' fees) incurred by the Purchaser in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of
the matters set forth in Paragraph 11(a)(i).
(iii) any and all loss, liability or damage incurred or
sustained by the Seller in connection with any breach by the Purchaser of its
representations, warranties and covenants contained herein or in
certifications or other documents delivered hereunder or pursuant hereto,
including any loss, liability or damage for which Seller is entitled to
indemnification from any third party, including, without limitation, any loss,
liability, or damage relating to (i) any proposed penalty assessments made by
the Internal Revenue Service against any of the Subject Companies for any tax
year, or portion thereof, prior to the Closing Date; (ii) any audits conducted
by the Internal Revenue Service and/or the New Jersey Division of Taxation
relating to tax returns filed, or omitted to be filed, by any of the Subject
Companies for any tax year, or portion thereof, prior to the Closing Date; and
(iii) U.S. vs. Action Corporation, et al., U.S. District Court for the
District of New Jersey, Civil Action #89-3652. In the event of a finding of
any liability arising from any New Jersey Division of Taxation audit or other
action for any period prior to the date of this Agreement, Purchaser and
Seller will share said liability, equally, provided, however, that Purchaser's
liability shall not exceed the amount of $25,000. All remaining liability
shall be the complete responsibility and obligation of Seller. In the event
of any adjustment at the corporate level that results in a refund due to the
Seller, such refund shall be the sole entitlement of Seller.
(b) Indemnification by the Purchaser. The Purchaser hereby
indemnifies and holds the Seller harmless against and in respect of:
(i) any and all loss, liability or damage incurred or
sustained by the Seller by reason of any debt, liability, obligation,
commitment or contract of FRA, ACH or Circa; and
(ii) all reasonable costs and expenses (including
reasonable attorneys' fees) incurred by the Seller in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of
the matters set forth in Paragraphs 11(b)(i) and (ii).
(c) Notices, Defense, Etc. Promptly upon receipt by either
Seller or Purchaser of notice of any claim or the commencement of any action
(a "Proceed-ing"), for which indemnity may be sought hereunder, the
indemnified party shall give notice to the indemnifying party of the claim or
the commencement of such action, attaching to such notice a copy of the claim
or judicial pleading received. Failure to so notify the indemnifying party
shall relieve it from its indemnification obligation with respect to such
claim; provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have to the indemnified
party otherwise than under this Paragraph 11.
(d) Third-Party Claims. Following notice by the indemnified
party to the indemnifying party , pursuant to subparagraph (c), the
indemnifying party shall have thirty (30) days within which to notify the
indemnified party that it intends to contest or defend such Proceeding, in
which case the indemnifying party shall be entitled to conduct such defense
through reputable counsel of its choosing; provided, however, that during such
thirty (30)-day period the indemnified party may take any reasonable steps to
preserve the rights of the indemnifying party or the indemnified party. If
the indemnifying party timely gives such notice to the indemnified party, such
contest or defense may be conducted by the indemnifying party, through
reputable counsel as aforesaid, in the name and on behalf of the indemnified
party. The cost and expenses of such contest or defense conducted by the
indemnifying party shall be borne by the indemnifying party. The indemnified
party shall have the right to participate, at its expense, in the Proceeding
and to be represented by its counsel, but the indemnifying party shall have
full authority to determine all actions to be taken with respect to such
defense, after consultation with counsel for the indemnified party.
If the indemnifying party fails to give timely notice of the
assumption of the defense or does not conduct the defense, the indemnifying
party shall no longer be entitled to conduct such defense and shall be bound
by the result obtained with respect thereto by the indemnified party, and the
indemnified party shall have no obligation to contest such Proceeding and may
agree to any compromise or settlement thereof. The costs and expenses of such
contest conducted by the indemnified party shall be included within the scope
of any indemnification provided for in this Paragraph 11.
The indemnifying party may not agree to settle or compromise
any Proceeding unless (i) the indemnified party gives its prior written
consent thereto which shall not be unreasonably withheld, or (ii) the remedy
sought against the indemnified party is solely monetary damages and the terms
of such compromise or settlement provide that the indemnified party shall have
no responsibility for discharge of the amount agreed upon, and such compromise
or settlement discharges all rights against the indemnified party with respect
to such proceeding. The indemnifying party shall not be liable for any
settlement of a Proceeding effected by the indemnified party without the
consent of the indemnifying party except as set forth in the preceding
subparagraph.
Each party shall cooperate with the other party and its
counsel in contesting any Proceeding in accordance with this Paragraph 11,
including asserting claims against any other parties involved in a Proceeding.
(e) Limitations of Liability and/or Claims. Notwithstanding
anything to the contrary contained herein, no action or proceeding seeking
damages or other relief for breach of any representation or warranty set forth
in this Agreement, any covenant to be performed prior to the Closing hereunder
or any indemnification obligation with respect to any such covenant,
representation or warranty, shall be commenced after the expiration of one (1)
year from the Closing Date with respect to any claim based thereon which shall
not have been previously asserted, by written notice given under Paragraph
11(c); provided, however, that this Paragraph 11(e) shall not apply with
respect to claims, actions or proceedings based upon or arising out of (i) the
Purchaser's failure to pay or perform any liability or obligation assumed by
it at the Closing hereunder, (ii) the Purchaser's breach of its obligations
under Paragraph 11 hereof, (iii) any matter described in clause (ii) of
Paragraph 11(b), as the case may be, and, with respect thereto, clause (ii) of
Paragraphs 11(a) or clause (iii) of Paragraph 11(b), as the case may be, (vi)
any covenant or agreement to be performed by either party at or after the
Closing. Seller's indemnification obligation based upon any failure by the
Seller to do so, in no event shall the Seller's liability hereunder or in
respect of the transactions contemplated hereby, whether based on indemnity,
breach of contract or otherwise, exceed, in the aggregate, an amount equal to
the Purchase Price less the amount of all mortgages and other liens against
the Real Property as of the date hereof, and the Seller shall not be liable
for any lost profits or other consequential damages.
(f) Survivability. This Paragraph 11 shall survive the Closing
hereunder and/or any termination of this Agreement.
12. Additional Covenants.
(a) Obligation with Respect to Employees. Not later than the
date hereof the Purchaser shall deliver to the Seller a schedule of (i) those
employees it intends to cause ACH and FRA to retain as of the Closing Date,
and (ii) those employees of ACH and FRA who will not be retained after the
Closing (it being understood and agreed that the Purchaser shall offer to hire
the services of at least fifty-one (51%) percent of the employees of ACH and
FRA, it being understood and agreed that in no event shall fifty (50) or more
employees of the Business as of the Closing Date be involuntarily terminated
(unless for cause) by the Purchaser within ninety (90) days from the Closing).
(b) Further Assurances. Each of the parties hereto shall use
its good faith efforts to do all acts necessary or advisable to facilitate
meeting the conditions precedent set forth in Paragraph 9; provided, however,
that no party hereunder shall be required to incur any substantial expense,
liability or obligation not otherwise contemplated in this Agreement.
(c) Material Agreements. After the Exercise Date the Seller
shall not enter into any new agreement or modify any existing written
agreement if to do so would result in a material change, binding upon the
Purchaser after the Closing, in the nature or cost of equipment or services
which are presently used in the Business without the prior written consent of
the Purchaser, which consent shall not be unreasonably withheld or delayed.
(d) Seller's Access to Documents. From and after the Closing,
the Seller and its designated representatives, shall have the right, during
normal business hours, upon reasonable prior written notice to the Purchaser,
to review, inspect and copy all written records, agreements, purchase orders,
receipts, invoices and other documents pertaining to ACH, FRA and Circa, their
Assets or Business which are delivered by the Seller to the Purchaser at or
subsequent to the Closing. The Purchaser shall cooperate with the Seller and
its designated representatives in connection with any such review, inspection
and copying. The Purchaser shall maintain and preserve all such records,
agreements, purchase orders, receipts, invoices and other documents for at
least seven (7) years from the Closing Date.
13. Multi-employer Pension Plans.
With respect to the multi-employer plans, within the meaning of
Section 4001(a)(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), listed on Schedule 13 annexed hereto (the "Plans"), the
parties agree pursuant to Section 4204 of ERISA as follows:
(a) Purchaser's Contribution Obligation. The Purchaser shall or
shall cause the Subject Companies to contribute, pursuant to an obligation to
contribute, to each of the Plans for substantially the same number of
contribution base units within the meaning of Section 4001(a)(11) of ERISA for
which Seller had an obligation to contribute with respect to the Business
regarding each of such Plans.
(b) Maintenance of Bond or Escrow. Unless exempted by the
Pension Benefit Guaranty Corporation, the Purchaser shall or shall cause the
Subject Companies to provide to each Plan for a period of five (5) plan years
commencing with the first plan year beginning after the Closing a bond issued
by a corporate surety company that is an acceptable surety within the meaning
of section 4204(a)(1)(B) of ERISA, or an amount held in escrow by a bank or
similar financial institution satisfactory to each respective Plan and to the
Seller, in an amount equal to the greater of:
(i) the average annual contribution required to be made by
the Seller with respect to the Business to such Plan for the three (3) plan
years preceding the plan year in which the Closing occurs; or
(ii) the annual contribution that the Seller was required
to make with respect to the Business to such Plan for the last plan year
before the plan year in which the Closing occurs, with respect to each such
Plan; payment on the aforesaid bonds or escrows shall be made to a Plan if the
Purchaser or the Subject Companies withdraws therefrom, or fails to make a
contribution thereto when due, at any time during the first five (5) plan
years beginning after the Closing. Notwithstanding the foregoing, if any such
Plan is in reorganization, within the meaning of Section 4241 of ERISA, in the
plan year in which the Closing occurs, the bond or escrow to be furnished by
the Purchaser shall be in an amount equal to two hundred percent (200%) of the
amount described in (i) or (ii), whichever is applicable.
(c) Seller's Liability. If the Purchaser or the Subject
Companies withdraw from any Plan in a complete withdrawal or a partial
withdrawal with respect to the Business before the last day of the fifth (5th)
plan year of a Plan commencing after the Closing, and fails to pay the
Purchaser's or the Subject Companies' withdrawal liability to such Plan
thereby arising, then Seller shall be secondarily liable to such Plan for any
withdrawal liability which Seller would have had to the affected Plan or Plans
but for the provisions of section 4204(a) of ERISA with respect to Seller's
operation of the Business during Seller's ownership thereof.
(d) The Plans. The Plans shall include those set forth in
Schedule 13 attached hereto and made a part hereof, unless the Seller notifies
the Purchaser of the exclusion therefrom of any such plan or plans.
14. Maintenance of Insurance; Condemnation, Loss, Damage or
Destruction. ACH, FRA and Circa shall maintain their fire and extended
coverage insurance policies on the grandstand building and on the
"Backstretch," which includes barns and remote buildings. There has been no
condemnation, loss, damage or destruction of the Assets which could reasonably
be expected to cause a material interruption in the Business.
15. Brokers and Finders.
The Purchaser and the Seller each represents and warrants to the
other that no broker, finder, investment banker or other person is entitled to
any brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby. Purchaser and Seller
hereby indemnify and hold each other harmless from its breach of this
representation.
16. Miscellaneous.
(a) Amendment. This Agreement and the Schedules hereto may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
(b) Waiver.
(i) At any time prior to the Closing Date, the parties
may, by mutual written agreement: (A) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (B) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (C) waive compliance with any of
the agreements or conditions contained herein. Any agreement of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed by such party.
(ii) Except as otherwise expressly set forth in this
Agreement, neither the failure nor any delay on the part of either party to
exercise any right, remedy, power or privilege (collectively, a "Right") under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any Right preclude any other or further exercise of the
same or of any other Right, nor shall any waiver of any Right with respect to
any occurrence be construed as a waiver of such Right with respect to any
other occurrence.
(iii) Anything in this Agreement to the contrary
notwithstanding, in the event that an occurrence, condition or fact which
would constitute a material breach of a representation or warranty on the part
of the Seller hereunder is discovered by the Seller prior to Closing and the
Seller gives the Purchaser prompt written notice thereof prior to Closing, or
in the event that the Purchaser otherwise learns of such breach, prior to
Closing, then the Purchaser may elect not to close. If the Purchaser elects
to close hereunder, the Purchaser shall be deemed to have waived any and all
rights it may have with respect to such breach. If the Purchaser elects not
to close by reason of such occurrence, condition or fact, then the Purchaser
is free to pursue whatever rights it may have and the Down payment shall be
refunded to Purchaser.
(c) Survival of Representations, Warranties, Covenants and
Agreements.
Except as to matters waived by a party pursuant to this
Agreement, all representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Closing Date and the transfer of the Assets hereunder, for a
period of one (1) year.
(d) Removal of Property; Office Space. Within ten (10) days
following the Closing, the Seller shall remove any of its personal property
which does not constitute a part of the Assets located at the Real Property
which excluded Assets are set forth in section 2 of Schedule 1(b)(ii) attached
hereto and made a part hereof. Seller and its agents shall have reasonable
access to the Real Property in order to remove such property after the
Closing.
(e) Expenses. Whether or not the purchase and sale of the Stock
pursuant to this Agreement is effected, all legal and other costs and expenses
incurred in connection with the negotiation, preparation and execution of this
Agreement shall be paid by the party incurring such expenses. However, legal
and other costs and expenses incurred by a party in asserting any rights
arising from this Agreement against the other party by legal action may be
recovered by the enforcing party.
(f) Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally or sent by registered or certified
mail (postage prepaid, return receipt requested), express courier, or
telecopier (with confirmation of receipt) to the parties at the following
addresses:
(i) if to the Seller:
Mr. Kenneth R. Fischer
157 Oval Road
Essex Fells, New Jersey 07021
With a copy to:
Connell, Foley & Geiser
85 Livingston Avenue
Roseland, New Jersey 07068
Attn: John B. Murray, Esq.
Telephone No.: (201) 535-0500
Telecopier No.: (201) 535-9217
(ii) if to the Purchaser:
International Thoroughbred Breeders, Inc.
Route 70 and Haddonfield Road
Cherry Hill, New Jersey 08034
Attention: Arthur Winkler, President
Telephone No.: (609) 488-3604
Telecopier No.: (609) 488-7585
With a copy to:
Sterns & Weinroth
A Professional Corporation
50 West State Street, Suite 1400
P.O. Box 1298
Trenton, New Jersey 08607-1298
Attn: Bruce R. Volpe, Esq.
Telephone No.: (609) 392-2100
Telecopier No.: (609) 392-7956
(iii) under any Pledge Agreement:
To Escrow Agent as provided for in such Agreement with
a copy to Seller and Purchaser as above provided.
or at such other addresses as shall be furnished by the parties by
like notice, which shall be deemed to have been given or made as of the date
so delivered, if delivered by hand, express courier or telecopier, or mailed,
if delivered by mail.
(g) Headings. The headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(h) Publicity. So long as this Agreement is in effect, neither
Seller nor Purchaser shall issue or cause the publication of any press release
or other announcement with respect to this Agreement or the transactions
contemplated herein without the prior written consent of the other, which
consent shall not be withheld or delayed where such release or announcement is
required by law.
(i) Entire Agreement. This Agreement (including the Schedules,
documents and instruments referred to herein) constitutes the entire agreement
between the Seller and Purchaser and supersedes all other prior agreements and
understandings, both written and oral, between Seller and Purchaser with
respect to the subject matter hereof.
(j) Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, personal
representatives, administrators, successors and assigns. The Purchaser, but
not the Seller, may assign its rights and obligations under the Agreement
without the consent of the Seller but only to a wholly owned subsidiary or
affiliate controlled by Purchaser. Upon any such assignment by Purchaser,
Purchaser shall not be relieved of any and all obligations and liability under
this Agreement and shall guarantee the obligation of the Assignee under this
Agreement.
(k) Governing Law. This Agreement shall be governed in all
respects by the laws of the State of New Jersey.
(l) Severability. If any provision of this Agreement or the
application thereof shall for any reason be invalid or unenforceable, such
provision shall be limited only to the extent necessary in the circumstances
to make such provision valid and enforceable and its partial or total
invalidity or unenforceability shall in any event not affect the remaining
provisions of this Agreement which shall continue in full force and effect.
(m) Taxes. Each party shall be responsible for its own Federal,
State or local income taxes due with respect to gain or loss on the transfer
of the Stock, and the parties hereto shall make all required payments and
filings in connection therewith within the time periods required by law or as
may be mutually agreed upon, in writing, between the parties hereto.
(n) Number of Days. In computing the number of days for
purposes of this Agreement, except as otherwise set forth in this Agreement
all days shall be counted, including Saturdays, Sundays and holidays (all days
other than Saturdays, Sundays and holidays shall be deemed "Business Days");
provided, however, that if the final day of any time period falls on a
Saturday, Sunday or holiday, then the final day shall be deemed to be the next
Business Day. As used in this subparagraph (n), "holiday" shall mean a day on
which national banks located in New Jersey are scheduled to be closed.
(o) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument; provided,
that all counterparts are counter-executed by one of the parties which
counter-execution may be on a facsimile transmitted copy of a counterpart.
17. Purchaser's Default.
If the Seller shall be prepared to close title in accordance with
this Agreement, and if the Purchaser shall fail or refuse to close title as
required by the terms of this Agreement, or if the Purchaser otherwise is in
default hereunder so that the Seller has the right to refuse to close title,
then the Seller's sole and exclusive remedy shall be to keep and retain the
Down Payment, and all interest thereon, as and for liquidated damages.
18. Seller's Default.
If prior to the Closing the Seller fails to comply with its
obligations under this Agreement, then, the Purchaser shall have the right,
as a result thereof, not to close title and if Purchaser shall not be in
default under this Agreement, the sole and exclusive remedy of the Purchaser
shall be to terminate this Agreement and receive a return of the Down Payment
and interest thereon provided however that if all conditions precedent to the
obligations of the parties to close have been satisfied or waived and Seller
nevertheless wilfully refuses to close Purchaser shall have the right to
either: (1) obtain specific performance of Seller's obligations hereunder or
(ii) terminate this Agreement and receive a return of the Down Payment and
interest thereon.
19. No Representation Implied.
The Purchaser has neither relied upon nor been induced by any
representations or warranties of Seller not expressly set forth in this
Agreement. Purchaser has relied (and shall rely) solely upon such
representations and warranties of Seller as are expressly set forth in this
Agreement, and on such investigations, examinations, and inspections as the
Purchaser has chosen to make or shall be entitled to make in accordance with
this Agreement. The Seller shall not be bound by any representations,
warranties or statements made by any broker or other person, or set forth in
any brochure, set-up offering statement or summary, except those
representations and warranties of Purchaser expressly set forth in this
Agreement.<PAGE>
20. Construction.
The Purchaser and Seller acknowledge that each and its counsel
have reviewed and revised this Agreement and that the normal rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement
or any amendments or schedules thereto.
IN WITNESS WHEREOF, the Purchaser and the Seller have duly
executed and delivered this Agreement as of the date set forth above.
PURCHASER:
INTERNATIONAL THOROUGHBRED BREEDERS,
INC.
By:/s/ Arthur Winkler
Name:Arthur Winkler
Title:President and Director
SELLER:
By:/s/ Kenneth R. Fischer
Name: Kenneth R. Fischer
