FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-24206
Penn National Gaming, Inc.
(Exact name of registrant in its charter)
Pennsylvania 23-2234473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Penn National Gaming, Inc.
825 Berkshire Blvd. Suite 203
Wyomissing, PA 19610
610-373-2400
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding Shares as of November 13, 1996
Common Stock par value .01 per share 6,665,145
<PAGE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. - Financial Statements
Consolidated Balance Sheets -
September 30, 1996 (unaudited) and December 31, 1995 3 - 4
Consolidated Statements of Income Nine Months Ended
September 30, 1996 and 1995 (unaudited) 5
Consolidated Statements of Income Three Months Ended
September 30, 1996 and 1995 (unaudited) 6
Consolidated Statement of Shareholders= Equity -
Nine months ended September 30, 1996 (unaudited) 7
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996
and 1995 (unaudited) 8
Notes to Consolidated Financial Statement 9 - 11
Item 2 - Managements Discussion and Analysis of Financial
Condition and Results of Operations 12 - 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 17
Item 6 - Exhibits and Reports on Form 8 - K 17
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
September 30, December 31,
1996 1995
-------------- --------------
(Unaudited)
<S> <C> <C>
Assets
Current
Cash $5,602 $7,514
Accounts and notes receivable 1,968 1,618
Prepaid expenses and other current assets 1,332 600
Deferred income taxes 62 104
------- -------
Total current assets 8,964 9,836
------- -------
Property, plant and equipment, at cost
Land and improvements 4,225 3,336
Building and improvements 8,740 8,651
Furniture, fixtures and equipment 5,660 4,696
Transportation equipment 322 309
Leasehold improvements 6,388 4,363
Leased equipment under capitalized lease 824 824
Construction in progress 1,059 255
------- -------
27,218 22,434
Less Accumulated depreciation and amortization 7,589 6,728
------- -------
Net property and equipment 19,629 15,706
------- -------
Other assets
Excess of cost over fair market value of net
assets acquired (net of accumulated amortization) 1,848 1,898
Prepaid Acquisition Costs 3,001 -
Miscellaneous 291 92
------- -------
Total other assets 5,140 1,990
------- -------
$33,733 $27,532
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
September 30, December 31,
1996 1995
------------- --------------
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current
Maturities of long-term debt and
captial lease obligation $222 $250
Accounts payable 1,868 1,395
Purses due horsemen 1,329 1,293
Uncashed pari-mutuel tickets 617 704
Accrued expenses 618 702
Customer deposits 515 315
Taxes, other than income taxes 328 246
Income Taxes 473 797
------- -------
Total current liabilities 5,970 5,702
------- -------
Long term liabilities
Long-term debt and capital lease obligations,
net of current maturities 80 140
Deferred income taxes 989 888
------- -------
Total long-term liabilities 1,069 1,028
------- -------
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued - -
Common stock, $.01 par value, 10,000,000 shares
authorized; 6,665,145 and 6,472,500 issued and
outstanding 46 43
Additional paid in capital 14,304 12,821
Retained Earnings 12,344 7,938
------- -------
Total Shareholders' Equity 26,694 20,802
------- -------
$33,733 $27,532
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
------- --------
<S> <C> <C>
Revenues
Pari-mutuel revenues
Penn National races $14,495 $16,578
Import simulcasting 23,596 20,412
Export simulcasting 2,479 1,447
Admissions, programs and other racing revenues 3,403 2,978
Concession Revenues 2,501 2,478
------ ------
Total revenues 46,474 43,893
------ ------
Operating expenses
Purses, stakes and trophies 9,744 9,329
Direct salaries, payroll taxes and employee benefits 6,211 5,823
Simulcast expenses 6,920 6,905
Pari-mutuel taxes 3,954 3,773
Other direct meeting expenses 6,932 6,249
Off-track wagering concessions expenses 1,766 1,689
Other operating expenses 3,710 3,750
------ ------
Total operating expenses 39,237 37,518
------ ------
Income from operations 7,237 6,375
------ ------
Other income (expenses)
Interest (expense) (44) (55)
Interest income 229 201
Other - 4
------ ------
Total other income 185 150
------ ------
Income before income taxes 7,422 6,525
Taxes on income 3,016 2,680
------ ------
Net Income $4,406 $3,845
====== ======
Earnings per share $0.64 $0.59
====== ======
Weighted average number of common shares outstanding 6,877 6,522
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<CAPTION>
Three Months Ended
September 30,
1996 1995
-------- --------
<S> <C> <C>
Revenues
Pari-mutuel revenues
Penn National races $4,823 $5,611
Import simulcasting 8,087 7,269
Export simulcasting 704 445
Admissions, programs and other racing revenues 1,356 1,187
Concession Revenues 900 918
------ ------
Total revenues 15,870 15,430
------ ------
Operating expenses
Purses, stakes and trophies 3,296 3,209
Direct salaries, payroll taxes and employee benefits 2,244 2,037
Simulcast expenses 2,240 2,364
Pari-mutuel taxes 1,323 1,335
Other direct meeting expenses 2,454 2,105
Off-track wagering concessions expenses 721 630
Other operating expenses 1,224 1,429
------ ------
Total operating expenses 13,502 13,109
------ ------
Income from operations 2,368 2,321
------ ------
Other income (expenses)
Interest (expense) (7) (25)
Interest income 76 62
Other - 4
------ ------
Total other income 69 41
------ ------
Income before income taxes 2,437 2,362
Taxes on income 992 963
------ ------
Net Income $1,445 $1,399
====== ======
Earnings per share $0.21 $0.21
====== ======
Weighted average number of common shares outstanding 6,997 6,522
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
Additional
Common Stock Paid-In Retained
Shares Amounts Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, at
January 1, 1996 6,472,500 $ 43 $ 12,821 $ 7,938 $ 20,802
Issuance of common stock 192,645 3 1,483 - 1,486
Net income for the nine months
ended September 30, 1996
(unaudited) - - - 4,406 4,406
-------- ------- -------- -------- --------
Balance at
September 30, 1996
(unaudited) 6,665,145 $ 46 $ 14,304 $ 12,344 $ 26,694
========= ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(IN THOUSANDS)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net Income $4,406 $3,845
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 911 648
Deferred income taxes 144 (2)
Decrease (Increase) in
Accounts and notes receivable (350) 16
Prepaid expenses (732) (263)
Miscellaneous other assets (197) (29)
Increase (decrease) in
Accounts payable 473 182
Purses due horsemen 36 701
Uncashed pari-mutuel tickets (88) 14
Accrued expenses (85) (539)
Customer deposits 200 205
Taxes other than income payable 81 132
Income taxes payable (324) 234
------ ------
Net cash provided by operating activities 4,475 5,144
------ ------
Cash flows from investing activities
Expenditures for property and equipment (4,784) (3,690)
Prepaid acquisition costs (3,001) -
------ ------
Net cash (used) by investing activities (7,785) (3,690)
Cash flows from financing activities
Proceeds of sale common stock 1,486 -
Principal payments on long-term debt and
capital lease obligations (88) (91)
------ ------
Net cash provided by (used) in financing activities 1,398 (91)
------ ------
Net increase in cash (1,912) 1,363
Cash, at beginning of period 7,514 5,502
------ ------
Cash, at end of period $5,602 $6,865
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of Penn
National Gaming, Inc. and its wholly-owned subsidiaries, Mountainview
Thoroughbred Racing Association, Pennsylvania National Turf Club, Inc., Penn
National Speedway, Inc., Sterling Aviation, Inc., Penn National Holding Company,
Penn National Gaming of West Virginia, Inc., and PNGI Charles Town Gaming
Limited Liability Company (collectively, the "Company").
The financial information has been prepared in accordance with the
Company's customary accounting practices and, except for the Balance Sheet
at December 31, 1995, has not been audited. All significant intercompany
balances and transactions have been eliminated. In the opinion of management,
the information presented reflects all adjustments necessary for a fair
statement of interim results. All such adjustments are of a normal and recurring
nature. The foregoing interim results are not necessarily indicative of the
results of operations for the full year ending December 31, 1996.
<TABLE>
2. Wagering Information (In Thousands):
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Pari-mutuel wagering in Pennsylvania
on Penn National races $23,095 $26,863 $69,200 $79,235
Pari-mutuel wagering on simulcasting
Import simulcasting from other
Pennsylvania racetracks 6,255 6,860 17,704 22,018
Import simulcasting from out of
Pennsylvania racetracks 35,189 30,998 105,191 84,646
Export simulcasting to out of
Pennsylvania wagering facilities 24,440 14,913 84,228 48,327
------ ------- ------ ------
65,884 52,771 207,123 154,991
------ ------- ------- -------
Total pari-mutuel wagering $88,979 $79,634 $276,323 $234,226
======= ======= ======== ========
</TABLE>
<PAGE>
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Commitments
The Company has a $4,200,000 credit facility with a commercial bank. The
facility provides for a working capital line of credit in the amount of
$2,500,000 at various interest rates and a letter of credit facility for
$1,700,000. The credit facility is unsecured and contains typical financial
covenants such as tangible net worth, debt to tangible net worth and debt
coverage ratio. At September 30, 1996, the Company was contingently obligated
under the letter of credit facility with face amounts aggregating $1,436,000.
The $1,436,000 consists of $1,336,000 relating to the horsemen's account
balances and $100,000 for Pennsylvania pari-mutuel taxes. All letters of credit
expire December 31, 1996.
In February 1996, the Company entered into an agreement to purchase land
for its proposed Williamsport OTW facility. The agreement provides for a
purchase price of $555,000 and is subject to numerous contingencies including
approval form the Pennsylvania State Horse Racing Commission. On May 22, 1996
the Company received Phase I approval from the Pennsylvania State Horse Racing
Commission for the Williamsport OTW facility.
On February 26, 1996, the Company entered into a joint venture agreement
with Bryant Development Company, the holder of an option to purchase the Charles
Town Race Track in Jefferson County, West Virginia for a purchase price of $18
million. In connection with the joint venture agreement, Bryant assigned the
option to the joint venture. The Company holds an 80% interest in the joint
venture with Bryant Development holding the remainder. In November 1996 the
joint venture entered into an amended and restated option agreement with respect
to the Charles Town Race track subject to substantially the same economic terms
and conditions as the original option. On November 5, 1996, the voters of
Jefferson County, West Virginia approved a referendum permitting
installation of video lottery terminals at the Charles Town Race Track, and
thereafter, the joint venture exercised its option to purchase Charles Town
Race Track. The Company intends to fund its 80% interest in the joint venture
operations through additional borrowing and the Company's available working
capital.
In March 1996, the Company took an assignment of an agreement to purchase
land for its proposed Downingtown OTW facility. The agreement provides for a
purchase price of $1,696,000, is subject to numerous contingencies including
approval from the Pennsylvania State Horse Racing Commission, and expired by its
terms on July 31, 1996. The Company submitted an application to the Pennsylvania
State Horse Racing Commission for approval of the Downingtown OTW facility, but
such application has not yet been approved. On July 31, 1996, Penn National
extended its right to purchase the property for another six months.
<PAGE>
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On September 13, 1996, the Company entered into a definite agreement to
acquire the assets of Pocono Downs, Inc., the owner of the Pocono Downs
standardbred horse racing facility and two off-track wagering (OTW) facilities
for $47 million. The company intends to finance the acquisition with cash on
hand and bank debt. Settlement for the acquisition is expected to occur on or
before November 30, 1996.
On September 24, 1996, the Company entered into a second agreement to
purchase land for its proposed Downingtown OTW facility. The agreement provides
for a purchase price of $1,400,000 and is subject to numerous contingencies
including approval from the Pennsylvania State Horse Racing Commission. As of
November 13, 1996, the Company has not amended its Downingtown application for
this new proposed location.
4. Supplemental Disclosures of Cash Flow Information
Cash paid during the nine months ended September 30, 1996 and 1995 for
interest was $44,000 and $55,000 respectively.
Cash paid during the nine months ended September 30, 1996 and 1995 for
income taxes was $3,196,000 and $2,475,000 respectively.
5. Notes Receivable
On May 13, 1996, the Company loaned $400,000 to a unrelated company in
Downingtown. The note bears at a rate of 10% per annum and matures on May 13,
1997.
Effective June 4, 1996, the joint venture entered into a Loan and Security
Agreement with Charles Town Races, Inc. The Loan and Security Agreement provides
for a working capital line of credit in the amount of $1,250,000 and will reduce
the purchase price under the option by $1.60 for each dollar borrowed. As of
November 13, 1996, Charles Town Races, Inc. borrowed $1,155,000 of the available
credit.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Three months ended September 30, 1996 compared to three months ended September
30, 1995
Total revenue increased by approximately $440,000 or 2.9% from $15.4
million for the three months ended September 30, 1995 to $15.9 million for the
three months ended September 30, 1996. The increase was attributable to an
increase in import and export simulcasting revenues, offset in part by a
decrease in pari-mutuel revenues on Penn National races, and to the opening of
the Lancaster OTW facility on July 11, 1996. The increase in export simulcasting
revenues of $259,000 or 58% from $445,000 to $704,000 resulted from the
Company's races being broadcast to additional out-of-state locations. The
decrease in pari-mutuel revenues on Penn National races was due to increased
import simulcasting revenue from wagering on other race tracks at Penn National
facilities. For the quarter, Penn National scheduled and ran 52 live race days
in 1996 and 1995.
Total operating expenses increased by approximately $393,000 or 3.1%from
$13.1 million for the three months ended September 30, 1995 to $13.5 million for
the three months ended September 30, 1996. The increase in operating expenses
resulted from an increase in purses, stakes and trophies, pari-mutuel taxes, and
simulcast expenses resulting from an increase in revenue from import
simulcasting and three months of operating expenses for the Lancaster OTW
facility.
Income from operations increased by approximately $47,000 or 2.0% from
$2.32 million to $2.37 million due to the factors described above.
Net income from operations increased by approximately $46,000 or 3.3% from
$1,399,000 for the three months ended September 30, 1995 to $1,445,000 for the
three months ended September 30, 1996. Income tax expense increased from
$963,000 to $992,000 due to the increase in income for the period.
Three months ended September 30, 1995 compared to three months ended September
30, 1994.
Total revenues increased by approximately $2.4 million or 18.8% from $13.0
million to $15.4 million in the three months ended September 30, 1995. The
increase was attributable to an increase in import and export simulcasting
revenue, admissions, programs and other racing revenues and concession revenues,
offset by a decrease in pari-mutuel revenues on Penn National races. The
increase in import simulcasting revenues, admissions, programs and other racing
revenues was mainly attributable to the opening of the York OTW facility in
March 1995. The increase in export simulcasting resulted from the Company's
<PAGE>
races being broadcast to additional out-of-state locations. The decrease in
pari-mutuel revenues on Penn National races was a result of the Company
scheduling less race days in the three months ended September 30, 1995,
partially offset by the opening of the York OTW facility.
Total operating expenses increased by approximately $1.8 million or 16.0%
from $11.3 million to $13.1 million in the three months, ended September 30,
1995. The increase was primarily due to the opening of the York OTW facility in
March 1995, and an increase in corporate overhead due to a number of factors
including the following, expansion of the Company's Wyomissing office, certain
expenses relating to the Company being public and payment of severance
compensation to the Company's former president. This was offset by a decrease in
simulcast expenses because of a decrease in wagering on Penn National races at
other Pennsylvania race tracks.
Income from operations increased by approximately $631,000 or 37.3% from
$1.7 million to $2.3 million in the three months ended September 30, 1995,
reflecting the factors described above.
Net income increased by $414,000 or 42% from $985,000 to $1.4 million for
the three months ended September 30, 1995 due to the factors described above.
Nine months ended September 30, 1996 compared to nine months ended September 30,
1995
Total revenue increased by approximately $2.6 million or 5.9% from $43.9
million for the nine months ended September 30, 1995 to $46.5 million for the
nine months ended September 30, 1996. The increase was attributable to an
increase in import and export simulcasting revenues, offset in part by a
decrease in pari-mutuel revenues on Penn National races. Revenues also increased
due to the opening of the Lancaster OTW facility on July 11, 1996. The increase
in export simulcasting revenues of $1.0 million or 71.2% from $1.5 million to
$2.5 million resulted from the Company's races being broadcast to additional
out-of-state locations. The decrease in pari-mutuel revenues on Penn National
races was due to increased import simulcasting revenue from wagering on other
race tracks at Penn National facilities. For the nine month period in 1996, Penn
National was scheduled to run 165 live race days but canceled 11 days in the
first quarter due to weather. In the comparable period in 1995, Penn National
ran 154 live race days.
Total operating expenses increased by approximately $1.7 million or 4.9%
from $37.5 million for the nine months ended September 30, 1995 to $39.2 million
for the nine months ended September 30, 1996. The increase in operating expenses
resulted from an increase in purses, stakes and trophies, pari-mutuel taxes, and
simulcast expenses resulting from an increase in revenue from import
simulcasting, nine months of operating expenses for the York OTW facility in
1996 compared to six months of expenses in 1995, and three months of operating
expenses for the new Lancaster OTW facility.
Income from operations increased by approximately $0.9 million or 13.5%
from $6.4 million to $7.2 million due to the factors described above.
Net income from operations increased by approximately $561,000 or 14.6%
from $3,845,000 for the nine months ended September 30, 1995 to $4,406,000 for
the nine months ended September 30, 1996. Income tax expense increased from
$2,680,000 to $3,016,000 due to the increase in income for the period.
<PAGE>
Nine months ended September 30, 1995, compared to nine months ended September
30, 1994.
Total revenues increased by approximately $10.3 million or 30.6% from
$33.6 million to $43.9 million in the nine months ended September 30, 1995. The
increase was attributable to an increase in import and export simulcasting
revenues, admissions, programs and other racing revenues, and concession
revenues. The increase in revenues primarily resulted from the opening of the
Chambersburg and York OTW facilities in April, 1994 and March, 1995,
respectively, and an increase of approximately $589,000 or 68.6% from $858,000
to $1.5 million in export simulcasting revenues due to the Company's races being
broadcast to additional out-of-state locations. This was offset by a decrease in
pari-mutuel revenues on Penn National's races due to a decrease in number of
live race days in 1995.
Total operating expenses increased by approximately $6.9 million or 22.6%
from $30.6 million to $37.5 million in the nine months ended September 30, 1995.
The increase, which was in substantially all categories of operating expenses
was caused primarily by the opening of the Chambersburg and York OTW facilities
in April, 1994 and March, 1995, respectively and an increase in corporate
overhead due to a number of factors including the following, expansion of the
Company's Wyomissing office, certain expenses relating to the Company being
public and payment of severance compensation to the Company's former president.
The decrease in management fees was a result of the management fees being
discontinued when the Company completed the May, 1994 initial public offering.
Income from operations increased by approximately $3.4 million or 112.9%
from $3.0 million to $6.4 million in the nine months ended September 30, 1995,
reflecting the factors described above.
Net income increased by approximately $2.1 million or 119.3% from $1.7
million to $3.8 million in the nine months ended September 30,1995 due to the
factors described above. Income tax expenses increased from $755,000 to $2.7
million which was attributable to the increase in income for the period.
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations and borrowing from banks and
related parties. During the nine months ended September 30, 1996, the Company's
cash position decreased by approximately $1.9 million from $7.5 million at
December 31, 1995 to $5.6 million as a result of expenditures for improvements
and equipment at the race track, construction of the Lancaster OTW facility, the
start of construction for the Williamsport OTW facility, and prepaid acquisition
costs.
Net cash provided from operating activities totaled approximately $4.5
million for the nine months ended September 30, 1996 of which $5.3 million came
from net income and non-cash expenses.
<PAGE>
Cash flows used in investing activities totaled approximately $7.8
million. Capital expenditures totaled $4.8 million for improvements and
equipment at the race track, the construction of the Lancaster OTW facility, and
the start of construction for the Williamsport facility. Prepaid acquisition
costs totaled $1.9 million for Charles Town Race Track and $1.1 million for
Pocono Downs.
Cash flows from financing activities totaled approximately $1,486,000 from
the exercise of warrants and the issuance of 192,645 shares of common stock.
The Company has a $4,200,000 credit facility with a commercial bank. The
facility provides for a working capital line of credit in the amount of
$2,500,000 at various interest rates and a letter of credit facility for
$1,700,000. The credit facility is unsecured and contains typical financial
covenants such as tangible net worth, debt to tangible net worth and debt
coverage ratio. At September 30, 1996, the Company was contingently obligated
under the letter of credit facility with face amounts aggregating $1,436,000.
The $1,436,000 consists of $1,336,000 relating to the horsemen's account
balances and $100,000 for Pennsylvania pari-mutuel taxes. All letters of credit
expire December 31, 1996.
On February 26, 1996, construction began on the Lancaster OTW facility.
The construction costs totaled approximately $2.4 million and were funded from
the Company's cash reserves. The Lancaster OTW facility opened July 11,1996.
On February 26, 1996, the Company entered into a joint venture agreement
with Bryant Development Company, the holder of an option to purchase the Charles
Town Race Track in Jefferson County, West Virginia for a purchase price of $18
million. In connection wi
<PAGE>
h the joint venture agreement, Bryant assigned the
option to the joint venture. The Company holds an 80% interest in the joint
venture with Bryant Development holding the remainder. In November 1996 the
joint venture entered into an amended and restated option agreement with respect
to the track subject to substantially the same economic terms and conditions. On
November 5, 1996, the voters of Jefferson County, West Virginia approved a
referendum permitting installation of video lottery terminals at the Charles
Town Race Track, and thereafter, the joint venture exercised its option to
purchase Charles Town Race Track. The Company intends to fund its 80% interest
in the joint venture operations through additional borrowing and the Company's
available working capital.
Effective June 4, 1996, the joint venture entered into a Loan and Security
Agreement with Charles Town Races, Inc. The Loan and Security Agreement provides
for a working capital line of credit in the amount of $1,250,000 and will reduce
the purchase price under the option by $1.60 for each dollar borrowed. As of
November 13, 1996, Charles Town Races, Inc. borrowed $1,155,000 of the available
credit.
<PAGE>
On May 13, 1996, the Company loaned $400,000 to a unrelated company in
Downingtown. The note bears at a rate of 10% per annum and matures on May 13,
1997.
On September 13, 1996, the Company entered into a definite agreement to
acquire the assets of Pocono Downs, Inc., the owner of the Pocono Downs
standardbred horse racing facility and two off-track wagering (OTW) facilities
for $47 million. The company intends to finance the acquisition with cash on
hand and bank debt. Settlement for the acquisition is expected to occur on or
before November 30, 1996.
On October 24, 1996, the Company received a loan commitment from a
commercial bank for $75 million to finance the Pocono Downs acquisition and the
Company's share of the option exercise price for the purchase and subsequent
renovation of Charles Town Race Track. The loan contemplated by the commitment
will be structured as follows: ( i ) an amortizing $47.0 million term loan for
the purchase of Pocono Downs, ( ii ) an amortizing $23.0 million term loan for
the purchase and renovation of Charles Town Race Track, and ( iii ) a $5.0
million working capital revolver which includes a letter of credit facility of
$3.0 million. The commitment provides for various interest rates and will
contain numerous financial and other covenants.
The Company believes that the cash on hand, cash generated from
operations, and the above credit facilities will be sufficient to fund its
anticipated future cash requirements.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.53 Agreement dated September 24, 1996 between the Company and Fred
V. Schubert to purchase land for the Company's Downingtown OTW..
10.54 Purchase Agreement dated September 13, 1996 between the Company and
the Estate of Joseph B. Banks for the purchase of Pocono Downs Race
Track and two OTW facilities.
10.55 Loan Commitment Letter dated October 15, 1996 between the
Company and Bankers Trust Company.
10.56 Amended and Restated option agreement dated as of February 17,
1995 between PNGI Charles Town Gaming Limited Liability Company
(The Joint Venture) and Charles Town Racing Limited Partnership
and Charles Town Races, Inc..
(b) Current reports on Form 8-K
None
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Penn National Gaming, Inc.
By: /s/ Robert S. Ippolito
Robert S. Ippolito Chief Financial Officer ,Secretary/Treasurer
Date: November 13, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Nos. Description of
Exhibits Page No.
10.53 Agreement dated September 24, 1996 between the Company
and Fred V. Schubert to purchase land for the Company's
Downingtown OTW.
10.54 Purchase Agreement dated September 13, 1996 between
the Company and the Estate of Joseph B. Banks for the
purchase of Pocono Downs Race Track and two related
OTW facilities.
10.55 Loan Commitment Letter dated October 15, 1996 between
the Company and Bankers Trust Company.
10.56 Amended and Restated option agreement dated as of
February 17, 1995 between the PNGI Charles Town
Gaming Limited Liability Company (The joint venture)
and Charles Town Racing Limited Partnership and
Charles Town Races, Inc.
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (the "Agreement") is made this 24_day of September,
1996 by PENN NATIONAL GAMING, INC., a Pennsylvania corporation (the "Buyer"),
FRED V. SCHUBERT (the "Seller"), and MARC B. KAPLIN, ESQUIRE and RONALD M.
AGULNICK, ESQUIRE (hereinafter collectively referred to as the "Escrow Agents").
BACKGROUND
A. The Seller is the owner of that certain lot or parcel of ground
containing approximately 5.0094 acres, located at the intersection of Route 100
and Village Avenue in the Township of Uwchlan (the "Township"), Chester County,
Pennsylvania, as depicted as Lot No. 2 ("Premises") on the Record Plan -2- Lot
Subdivision for Fred V. Schubert dated October 20, 1992, last revised December
31, 1992, and prepared by Medveczky Associates ("Subdivision Plan"), a copy of
which has been supplied to the Buyer. The Premises is more fully described on
Exhibit "A" attached hereto and made a part hereof. The Premises presently
contains a building known as the "Cadwalader House."
B. Uwchlan Partnership (the "Partnership") is the owner of that certain
lot or piece of ground located to the south of the Premises and depicted on the
Plan as "Parcel C" containing 1.2020 acres (the "Partnership Property"). The
Partnership Property is more particularly described on Exhibit "B", attached
hereto and made a part hereof. The Partnership Property is presently used as a
parking lot and contains approximately eighty (80) parking spaces. As depicted
on the Plan, 29 parking spaces located adjacent the Partnership Property are
reserved for use by the restaurant and hotel buildings that are located on Lot
#1 (hereinafter defined) ("Reserved Spaces").
C. The Seller is also the owner of
<PAGE>
Lot #1 which is also depicted on the Plan ("Lot #1") and on which there is
constructed a restaurant building occupied by "Hoss's" Restaurant and a Hampton
Inn. Lot #1 contains 5.5196 acres of land, more or less, comprised of a lot
containing 5.3122 acres, more or less, and a lot containing .2074 acres, more or
less, as shown as "Parcel B" on the Subdivision Plan. Lot #1 is subject to a
long term ground lease in which the Partnership is the Lessee. The Seller is a
limited partner in the Partnership. The Reserved Spaces are included in the
premises leased to the Partnership and are also included in the property
encumbered by a mortgage granted by the Seller.
D. The Buyer is in the business of operating restaurant and off-track
wagering facilities, and desires to develop on the Premises a building
containing a restaurant, off-track wagering facility, and needed parking spaces
(the "Facility"). In order to properly operate the Facility, the Buyer requires
the exclusive right to at least 330 parking spaces. The Buyer's architect has
estimated that approximately 250 parking spaces can be constructed on the
Premises in connection with the construction of the Building and the
preservation of the Cadwalader House. Accordingly, the Buyer requires the right
to either purchase or enter into a long term lease for the exclusive right to
use at least 80 of the parking spaces on the Partnership Property. Furthermore,
the Buyer requires that the Seller use its best efforts to obtain permission
from the Partnership and the Seller's lender to cause the location of the
Reserved Spaces be changed from the northern end of Parcel C to the southern end
(such relocation of the Reserved Spaces hereinafter referred to as the "Reserved
Spaces Relocation".
E. The Seller believes that he will be able to cause the Partnership to
sell or enter into a long term lease with the Buyer which will allow the Buyer
to acquire the exclusive right to use at least 80 parking spaces on Parcel C in
connection with the Facility (the sale or lease of Parcel C is hereafter
referred to as the "Parcel C Acquisition Right"). In addition, the Seller has
<PAGE>
agreed to use its best efforts to obtain the appropriate consents necessary to
complete the Reserved Spaces Relocation so that the 80 or more parking spaces on
Parcel C acquired by the Buyer are located adjacent to the Premises.
F. The Seller desires to sell the Premises to the Buyer and the Buyer
desires to purchase the Premises from the Seller upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. SALE OF PREMISES. Subject to the terms and conditions of this
Agreement, the Seller hereby agrees to sell, transfer and convey to the Buyer
and the Buyer agrees to purchase from the Seller the Premises together with all
rights and appurtenances pertaining thereto (the "Appurtenances"), including but
not limited to:
A. All right, title and interest, if any, of the Seller in and
to any land in the bed of any street, road or avenue, open or proposed, in
front of or adjoining the Premises;
B. All right, title and interest, if any, of the Seller in and
to any rights-of-way or rights of ingress or egress on or to any land,
street, road, avenue or driveway, open or proposed, in, on, across, in front
of, abutting or adjoining any part of the Premises;
C. All right, title and interest, if any, of the Seller in and
to any easements adjacent to or serving the Premises;
D. Any reversionary rights attributable to the Seller with
respect to the Premises; and
E. Any Approvals and Permits (hereinafter defined) for the
development of the Premises which have previously been obtained by the Seller
from any public agencies, and all surveys, reports, studies or analyses of the
Premises in the Seller's possession.
<PAGE>
(Hereinafter, the term "Premises" shall be deemed to include all of the
Appurtenances pertaining thereto.)
2. PURCHASE PRICE. The Buyer shall pay in exchange for the Premises and
the Parcel C Acquisition Right the sum of One Million Four Hundred Thousand
Dollars ($1,400,000.00). It shall be the Seller's obligation to pay to the
Partnership the compensation, if any, which the Partnership requires to convey
the Parcel C Acquisition Rights to the Buyer.
3. MANNER OF PAYMENT OF PURCHASE PRICE. The Purchase Price shall be
paid in the following manner:
A. Deposit.
(1) Deposit. On the date hereof, the Buyer shall deliver to
the Escrow Agents the Buyer's plain check, subject to prompt collection, in the
amount of Fifty Thousand Dollars ($50,000.00) (the "Deposit").
(2) Application of Deposit. The Deposit shall be held by the
Escrow Agents in an interest-bearing money market account until consummation or
termination of this Agreement. If the Closing is completed hereunder, on the
Closing Date the Escrow Agents shall pay the Deposit and all interest accrued
thereon to the Seller, which sum shall be credited to the Buyer against that
portion of the Purchase Price. If the Buyer, without the right to do so,
defaults in the Buyer's obligations hereunder by failing to complete the Closing
(except in the event of a default by the Seller or lawful termination of this
Agreement by the Buyer), the Escrow Agents shall pay to the Seller the Deposit
together with all interest accrued thereon as liquidated damages, in accordance
with the provisions of Paragraph 17A below. If the Buyer terminates this
Agreement as a consequence of the Seller's default, the Escrow Agents shall
return the Deposit, together with all interest accrued thereon, to the Buyer.
<PAGE>
B. Payment of Balance of Purchase Price. At the Closing, the Buyer
shall pay to the Seller the Purchase Price (subject to adjustments and
apportionments set forth in this Agreement and less the Deposit and all interest
accrued thereon) by certified check, bank check, title insurance company check
or wire transfer of immediately available federal funds.
4. INVESTIGATION PERIOD.
A. Investigation. The Buyer shall have a period commencing on the
Agreement Date and expiring at 11:59 P.M. sixty (60) days thereafter (such
period being referred to herein as the "Investigation Period") to inspect the
Premises as more particularly described in this Paragraph 4. During the
Investigation Period, the Buyer may inspect and/or cause one or more surveyors,
attorneys, engineers, architects, environmental consultants and/or other experts
of the Buyer's choice to inspect, examine, survey, appraise and otherwise do
that which, in the opinion of the Buyer, is necessary for the Buyer to satisfy
itself with regard to the physical condition of the Premises, the suitability of
the Premises for the development of the Facility, and all other aspects of the
Premises (the "Investigation"). If at any time prior to the expiration of the
Investigation Period the Buyer determines that it is not satisfied for any
reason, in its sole discretion, with the results of the Investigation, or the
status of any other condition of or relating to the Premises, whether known or
unknown on the Agreement Date, and notifies the Seller in writing of its
election to terminate this Agreement, this Agreement shall, without any further
action by the Buyer or the Seller, become null and void, and all of the parties
to this Agreement shall be released from any and all further obligation or
liability hereunder, except as expressly provided herein.
B. Cooperation by Seller. The Seller shall cooperate fully with the
Buyer with respect to the Investigation and shall not act in any manner to
hinder, obstruct, delay or prevent the same. The Seller shall promptly deliver
to the Buyer within five (5) days after the Agreement Date copies of all
<PAGE>
Approvals and Permits, environmental reports, evaluations, surveys, analyses,
plans, engineering data, review letters, investigations and documents in the
Seller's possession or performed for the Seller with regard to the development
of the Premises, and all notes and correspondence related thereto, together with
all written consents necessary for the Buyer to make use of the same.
5. TITLE.
A. Title Report. Within ten (10) days after the Agreement Date, the
Buyer shall cause a search of title to the Premises to be made by any title
insurance company selected by Buyer (the "Title Company"), and upon receipt of
the title report (the "Title Report"), the Buyer shall furnish to the Seller and
the Seller's attorney, Ronald M. Agulnick, a copy thereof together with copies
of any matters which are listed as exceptions on the Title Report. Within ten
(10) days of delivery of the Title Report to the Seller, the Buyer shall notify
the Seller in writing of any conditions, defects, liens, encumbrances or other
items appearing as exceptions in the Title Report which are unsatisfactory to
the Buyer (hereinafter referred to as "Title Objections"). Within five (5)
business days after the receipt by the Seller of the Buyer's list of Title
Objections, the Seller shall notify the Buyer in writing of those Title
Objections, if any, that the Seller is unwilling or unable to remove (the
"Objection Notice"). The Buyer shall then have the right to either (1) waive
such Title Objections that the Seller is unwilling or unable to remove or (2)
terminate this Agreement by giving written notice thereof to the Seller within
fifteen (15) days after receipt of the Objection Notice, in which event the
Escrow Agents shall refund the Deposit, together with all interest accrued
thereon, to the Buyer, this Agreement shall be null and void, and neither of the
parties shall have any further obligations or liability under this Agreement.
The title agreed upon is hereinafter referred to as the "Certified Title".
<PAGE>
B. Status of Title. At Closing, title will be transferred by the
Seller to the Buyer by special warranty deed. Title will be consistent with
Certified Title and shall be insurable by the Title Company at its regular rates
for regular risks pursuant to the standard stipulations of an ALTA policy of
owner's title insurance. The Seller shall furnish title affidavits reasonably
acceptable to the Seller in order to remove standard title objections. Permitted
Exceptions as used herein shall mean any exceptions originally appearing in the
Title Report which are not objected to in writing by the Buyer to the Seller or
which are objected to, but such objection is thereafter waived.
C. Inability to Convey Title. If the Seller is unable to
convey title at Closing in accordance with the requirements of this
Agreement, the Buyer shall have the option:
(1) Of taking such title to the Premises as Seller is able to
convey, with abatement of the Purchase Price in the amount (fixed or
ascertainable) of any liens or encumbrances on the Premises; or
(2) Of terminating Buyer's obligations under this Agreement,
in which event the Escrow Agents shall refund the Deposit, together with all
interest accrued thereon, to the Buyer, and this Agreement shall be null and
void and neither party shall have any further obligations hereunder.
(3) Notwithstanding the foregoing, if title to the Premises is
not as described in Paragraph 5.B. herein by reason of any willful act or
omission of the Seller subsequent to the Agreement Date, such act or omission
shall constitute a breach by the Seller and the Buyer shall be entitled to
pursue all remedies available to Buyer at law or in equity, including the right
to specific performance.
6. PARCEL C ACQUISITION RIGHT. The Buyer's obligation to perform its
obligations under this Agreement shall be contingent upon the Seller delivering
<PAGE>
to the Buyer within thirty (30) days after the Agreement Date an Agreement of
Sale or long term lease for Parcel C which is satisfactory to the Buyer in the
Buyer's sole discretion which gives the Buyer the exclusive right to acquire or
lease a portion of Parcel C for use as a parking area for at least eighty (80)
cars at a cost of $1.00 to the Buyer. If the Seller does not deliver the said
Agreement to the Buyer within the said thirty (30) day period, or if the said
Agreement is not satisfactory to the Buyer in its sole discretion, Buyer shall
have the right to terminate this Agreement by giving written notice thereof to
the Seller and the Escrow Agents, in which event the Deposit, together with all
interest which has accrued thereon, shall be returned to the Buyer and this
Agreement shall become null and void. The Seller shall use its best efforts to
cause the Reserved Spaces Relocation.
7. APPROVALS AND PERMITS. The Buyer's obligation to complete the purchase
of the Premises from the Seller in accordance with this Agreement shall be
contingent upon the satisfaction of each of the following conditions with regard
to the Approvals and Permits (hereinafter defined) (any of which may be waived
in whole or in part in writing by the Buyer) on or before the Closing Date:
_._.A. Preliminary Opinion. A Preliminary Opinion of the
Township Zoning Officer issued pursuant to Section 916.2 of the Pennsylvania
Municipalities Planning Code ("MPC") to the effect that the construction of
the Building and the use thereof for the Facility is a permitted use under
the Uwchlan Township Zoning Ordinance.
B. Variances, Waivers and Special Exceptions. The Buyer shall have
obtained prior to the Closing Date all final and unappealable variances,
approvals of conditional uses, special exceptions, and/or waivers required to
<PAGE>
lawfully construct the Project on the Premises. If the Buyer is unable, using
diligent efforts, to obtain any such variance, waiver, approval of conditional
use or special exception, the Buyer may either purchase the Premises despite not
having obtained such variance, waiver, approval of conditional use or special
exception or terminate this Agreement.
C. Subdivision and Land Development Approval. The Buyer shall have
obtained from the Township prior to the Closing Date final and unappealable
approval of a final land development plan or a final land development and
subdivision plan for the Project. The Buyer shall use diligent efforts to obtain
such approval.
D. Building Permits. The Buyer shall have obtained prior to the
Closing Date the right to obtain final and unappealable building permits from
the Township necessary to permit the construction of the Facility, upon the
submission of properly prepared building plans, payment of all necessary fees
and submission of a development agreement to the Township in the form
customarily required by the Township, and the financial security required by
such development agreement(s).
E. Sewer Allocation and Connection Permits. The Buyer shall have
obtained prior to the Closing Date (1) a final and unappealable allocation of
sewage treatment and sewage conveyance capacity in the sewage treatment and
sewage conveyance systems maintained by the Downingtown Area Sewer Authority
(the "Sewer Authority"), sufficient to provide sanitary sewer service to the
Facility (the "Allocation"); (2) such connection permits that are required to
permit connection of the Building and the Cadwalader House to the Sewer
Authority's sewer system; and (3) a binding and enforceable agreement giving the
Buyer the irrevocable right to connect the Building and Cadwalader House to the
said sewage collection and treatment system and obligating the operator(s) of
the sewage treatment plant and sewage collection system to accept, transport and
treat the effluent generated by the Building and the Cadwalader House. The
<PAGE>
construction of the sewer collection lines of the size, specifications and
locations which will be depicted on the plans prepared by the Buyer shall be
acceptable to all governing authorities having jurisdiction without the
necessity of constructing any pumping or lift station to transport sewage from
the Premises to the lines of the Sewer Authority. The Buyer shall reserve the
Allocation and enter into an agreement for the furnishing of sewer capacity with
the Sewer Authority as soon as possible. In the event that this Agreement is
terminated for any reason, Seller shall immediately purchase the Allocation from
Buyer for a purchase price equal to the Buyer's cost for reserving such
Allocation.
F. Planning Module Approval and Water Quality Management Permit. The
Buyer shall have obtained prior to the Closing Date final and unappealable
"planning module for land development" approval, the final and unappealable
issuance of a water quality management permit (if required), and all other
required permits and approvals issued by the Pennsylvania Department of
Environmental Protection ("DEP"):
(1) Permitting the construction and installation of sewer
collection lines in the Premises and the connection of each of the Buildings
to such lines;
(2) Permitting the connection of the said sewer
collection lines to the Sewer Authority's sewage collection system; and
(3) Planning module approval permitting the treatment of the
effluent generated by the Building and Cadwalader House and collected by the
said sewer lines by the Sewer Authority's sewage treatment plant.
G. Water Service. The Buyer shall have obtained prior to the
Closing Date:
(1) A binding agreement from the Philadelphia Suburban Water
Company (the "Water Supplier"), that provides for:
(a) The installation of water lines to the Building
and Cadwalader House; and
<PAGE>
(b) Adequate fire protection and domestic water
service to the Building and Cadwalader House.
H. Transportation Permits. The Buyer shall have obtained prior to
the Closing Date from the Pennsylvania Department of Transportation (hereinafter
referred to as "PennDOT"), Chester County (the "County") and/or the Township all
required final and unappealable highway occupancy permits (if needed) and other
approvals and permits required to permit the construction of street openings,
curb cuts, driveways and/or traffic signals (if applicable) from the Premises to
adjacent public streets.
I. Wetlands. The Buyer shall have obtained prior to the Closing Date
from DEP, the United States Army Corps of Engineers (the "Army Corps"), the
United States Environmental Protection Agency (the "EPA") and all other federal
and state agencies having jurisdiction over wetlands, all required final and
unappealable approvals, permits and/or waivers, if any, to permit construction
of the Project within any portion of the Premises determined to be within the
jurisdiction of the DEP, EPA, Army Corps and other such federal and state
agencies pursuant to the River and Harbor Act of 1899 (33 U.S.C. Sections 401
and 403), the Clean Water Act (33 U.S.C. Section 1344), the Marine Protection,
Research, and Sanctuaries Act of 1972 (33 U.S. Section 1413), the Pennsylvania
Dam Safety and Encroachments Act (32 P.S. Section 693.1 et seq.), the
Pennsylvania Clean Streams Law, (35 P.S. Section 691.1 et seq.), and any other
laws or regulations pertaining to construction on or near wetlands, waters of
the United States or waters of the Commonwealth of Pennsylvania.
J. SCS Approval. The Buyer shall have obtained prior to the Closing
Date from the Chester County Soil Conservation Service (the "CCSCS") all
required final and unappealable permits and approvals.
<PAGE>
K. Stream Encroachment, Earth Disturbance, NPDES and Other
Environmental Approvals and Permits. The Buyer shall have obtained prior to the
Closing Date all final and unappealable environmental permits, approvals, and/or
waivers including, but not limited to, earth disturbance permits, NPDES permits,
grading permits, stream encroachment permits and approvals with regard to dams
and waterways, from all divisions of DEP having jurisdiction over any aspect of
the development of the Premises.
L. Electric Service. The Buyer shall have obtained, prior to the
Closing Date, written confirmation that electric service is readily available to
serve the Premises at the standard costs and rates of the electric company
serving that portion of the Township in which the Premises are located.
M. Historical. The Buyer shall have obtained prior to the
Closing Date final and unappealable permits, approvals and/or waivers from
the Pennsylvania Museum and Historical Commission confirming that no area of
the Premises contains items of historical or archaeological significance, or
such final and unappealable permits, approvals and/or waivers which are
required from the Pennsylvania Museum and Historical Commission to permit the
construction of the Facility even though areas of the Premises may be
determined to contain items of historical significance.
N. Horse Racing Commission Approval. The Buyer shall have
obtained prior to the Closing Date final and appealable approvals and permits
from the Pennsylvania State Horse Racing Commission to operate an off-track
wagering facility at the Premises.
O. Other Approvals and Permits. The Buyer shall have obtained prior
to the Closing Date all other final and unappealable permits, approvals and
agreements required to be obtained in order to develop the Premises in
accordance with the Buyer's subdivision, land development and building plans for
the Premises.
<PAGE>
(The approvals, permits, variances, waivers, special exceptions and
agreements referred to in Subparagraphs A through N above are herein referred to
as the "Approvals and Permits").
P. Easements. The Buyer shall have the ability to connect the water
and sewer systems to be installed in the Premises to the public water and sewer
systems without easements or rights-of-way other than those which can and will
be furnished by the Sewer Authority or Water Supplier without additional charge
or cost to Buyer. If any easement or right-of-way is required which will cross
or burden the lands of an adjoining property owner to obtain water or sewer
service, the Seller shall, if requested by the Buyer, cooperate with the Buyer
in obtaining such easement or right-of-way. (All easements and rights-of-way
referred to in this Paragraph 6.P. are collectively referred to herein as the
"Easements.") If any Easement is obtained by the Seller during the period of
this Agreement, such Easement shall be in a form approved by the Buyer, which
approval will not be unreasonably withheld.
Q. Cooperation of Seller and Buyer. The Seller shall cooperate with
the Buyer to obtain the Approvals and Permits and Easements and will not act in
any manner to hinder, obstruct, delay or prevent the same. The Seller shall join
with the Buyer as a petitioner or applicant whenever required on any
applications to obtain the Approvals and Permits provided that the Seller shall
not be obligated to incur any costs or expenses in connection therewith.
R. Right to Terminate. If the Buyer is not able to obtain all of the
Approvals and Permits prior to the Closing, or if the Buyer is not able to
obtain all required Easements, the Buyer may terminate this Agreement and the
Escrow Agents shall return the Deposit, together with all interest accrued
thereon, to the Buyer and all parties shall be released from all liabilities and
obligations hereunder, except Buyer's obligation to sell and Seller's obligation
to buy the Allocation.
<PAGE>
8. FINAL AND UNAPPEALABLE. For the purpose of this
Agreement, the Approvals and Permits shall not be deemed final and unappealable,
unless and until the period of time for the taking of an appeal from the grant
of an Approval or Permit has expired without an appeal of any kind having been
filed, or if an appeal has been filed, it has been dismissed.
9. CLOSING. Closing on the sale of the Premises to the Buyer(herein
referred to as "Closing") shall be held at such place as Buyer shall designate
on or before twelve (12) months after the date hereof (herein referred to as the
"Closing Date"). The Buyer shall give the Seller twenty (20) days' advance
written notice of the Closing Date.
10. POSSESSION. Possession of the Premises shall be given on the
Closing Date by special warranty deed executed and delivered by the Seller
conveying fee simple title to the Premises subject only to the Permitted
Exceptions.
11. TENDER WAIVED. Formal tender of an executed deed and purchase
money is hereby waived.
12. APPORTIONMENTS. At Closing, the following apportionments shall
be made:
A. Real Estate Taxes. Real estate taxes shall be apportioned
on a per diem basis on the basis of the fiscal or calendar year of each
taxing authority.
B. Water, Sewer and Other Utility Charges. Any water, sewer
or other utility charges assessed against or incurred because of the Premises
shall be apportioned on a per diem basis.
C. Real Estate Transfer Taxes. All real estate transfer taxes
imposed by any governmental body or bodies shall be borne equally by the
Buyer and the Seller.
D. Preferential Assessment. The Seller shall be solely
responsible for any roll-back taxes in connection with the placement of the
Premises into a preferential assessment under Act 319 or Act 515 or
otherwise. The Seller shall discharge such obligation at Closing.
<PAGE>
13 REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of Seller. In order to
induce the Buyer to enter into this Agreement and purchase the Premises, and
with full knowledge that the Buyer is relying thereon, the Seller hereby
warrants and represents to the Buyer as follows:
(1) Power to Perform. The Seller has full power and authority
to enter into and fulfill his obligations under this Agreement and to consummate
the sale of the Premises, and the execution, delivery and performance of this
Agreement by the Seller constitutes a valid and binding obligation of the Seller
in accordance with its terms. No consent, waiver or approval by any other party
is required in connection with the execution and delivery by the Seller of this
Agreement or the performance by the Seller of the obligations to be performed by
him under this Agreement or any instrument contemplated hereby, except
confirmation of the understanding with the Partnership regarding Parcel C and
the Reserved Spaces, and the release of the lien of Meridian Bank on Parcel C.
Neither the entering into of this Agreement nor the completion of such sale will
constitute a violation or breach by the Seller of any contract or other
instrument to which the Seller is a party or to which the Seller is subject or
by which any of the Seller's assets or properties may be affected, or of any
judgment, order, writ, injunction or decree issued against or imposed upon the
Seller, nor will the said sale result in a violation of any applicable law,
order, rule, or regulation of any governmental authority.
(2) Title to Premises and Partnership Property. The Seller is
the sole owner of the Premises and the Premises is not subject to any lease or
to any other estate or to any outstanding option or agreement of sale. The
Partnership is the sole owner of the Partnership Property.
<PAGE>
(3) Contracts. There will not be at Closing, any contracts,
written or oral, to which the Seller is a party and which affect the Premises.
(4) Condemnation. There are no condemnation proceedings
pending with regard to the Premises, and the Seller does not know of any
proposed condemnation proceeding with regard to any portion of the Premises.
(5) Notices. The Seller has not received any written notices
of uncorrected violations of any applicable ordinances, regulations, or other
laws with respect to the Premises (the "Violation Notices"). If any Violation
Notices are issued after the Agreement Date and prior to Closing, the Seller
shall pay the cost of complying with such Violation Notices, regardless of the
cost of compliance.
(6) Assessments. There are not now, nor will there at Closing
be, any assessments for public improvements against the Premises which are
unpaid by the Seller, nor is the Premises subject to or affected by any special
assessments, whether or not presently a lien thereon. Any assessments or special
assessments levied between the Agreement Date and the Closing Date shall be paid
by the Seller prior to or at the time of Closing.
(7) Water, Sewer and Tax Bills. On the Closing Date, all
taxes and all water and sewer charges due in connection with the Premises
will have been paid.
(8) Zoning. The present zoning classification of the Premises
is "PC-2", and the prensent zoning classification of Parcel C is "PC".
(9) Environmental Matters. To the best of the Seller's
actual knowledge,
(a) The Premises does not contain and there has
been no application, use, treatment, production, generation, discharge,
disposal, release or storage on, from or onto the Premises, or any lot or
property adjacent thereto, of any Toxic Waste, Hazardous Waste, Industrial Waste
<PAGE>
or Hazardous Substance as defined by the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. '6901 et seq.; the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), 42 U.S.C. '9601 et seq., as amended
by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"); the
Pennsylvania Hazardous Sites Clean-Up Act, 35 P.S. 6020.101 et seq.; the
Pennsylvania Solid Waste Management Act, 35 P.S. '6018.101 et seq.; the
Pennsylvania Clean Streams Law, 35 P.S. '691.1 et. seq.; any implementing
regulations thereunder, or any other applicable federal, state or local
statutes, regulations, ordinances or rules.
(b) There are no underground tanks on the Premises.
(c) No petroleum as defined by RCRA, 42 U.S.C.
'6991 (8), its implementing regulations or any applicable state or local
statutes, regulation ordinances or rules has been released from or onto the
Premises.
(d) There is not located on or under the premises
polychlorinated biphenyls or asbestos.
(10) Contributions. No commitments have been made to any
governmental authority, utility company, association, or any other organization
or group of individuals relating to the Premises which would impose an
obligation upon Buyer to make any contribution or dedication of land, or to
construct, install or maintain any improvements of a public or private nature on
or off the Premises. The Buyer, however, shall be responsible for all utility
tap-in, connection and reservation fees established by the providers of such
utilities.
(11) Continuing Representations. The foregoing
representations by Seller shall be continuing representations and warranties
of the Seller which shall remain in effect until completion of the Closing
but not thereafter.
<PAGE>
B. Covenants of Seller. The Seller hereby covenants that the
Seller will:
(1) Maintenance of Premises. Prior to the Closing Date,
maintain the Premises in compliance with all applicable zoning ordinances and
any other acts, ordinances or regulations affecting the use and improvement
thereof. If the Seller fails to discharge his maintenance obligations as set
forth in this Paragraph 13.B.(1), the Buyer shall have the right to perform such
maintenance and to charge the Seller the cost of such maintenance.
(2) Alterations to Premises. Prior to the Closing Date, not
make or permit to be made any alterations, improvements, or additions to the
Premises without the prior written consent of the Buyer, which consent shall not
be unreasonably withheld or delayed.
(3) Satisfaction of Liens. Not permit any liens, easements,
encumbrances or other clouds on the title to the Premises to be created after
the date hereof (hereinafter referred to as "Title Imperfections"). If the
Seller creates or permits any Title Imperfections to be created in violation
hereof, the Seller shall satisfy such Title Imperfections by the payment of
money, either by such payment or by depositing in escrow with the Title Company
sufficient funds as will cause the Title Company to insure the Buyer against any
loss which is caused to the Buyer due to the existence of such liens or
encumbrances.
(4) Inspection and Tests. Permit the Buyer and the Buyer's
agents and employees to inspect the Premises from time to time. Commencing with
the Agreement Date, the Buyer and Buyer's agents and employees shall have the
right to enter upon the Premises to conduct or cause to be conducted upon the
Premises ground tests, soil analysis, topographical surveys, engineering studies
and other physical examination of the Premises as the Buyer may deem necessary.
The Buyer shall hold the Seller harmless and shall indemnify and defend the
Seller against any and all claims, including costs, fees, expenses and
<PAGE>
reasonable attorneys' fees, for or in respect of injuries (including death) or
damage of any kind to the person or property of Seller, Buyer or of any other
person whomsoever caused by or in connection with Buyer's entry onto the
Premises and/or such tests or related activities. If, however, any such injury,
death or damage is caused by the act (negligent or otherwise) of the Seller or
any employee or representative of the Seller, the Seller shall be liable
therefor.
(5) Leases. Not enter into any lease for the Premises or any
part thereof which is not terminable on or before the Closing Date, without
obtaining the prior written approval of the Buyer.
C. Representations and Warranties of Buyer. In order to induce the
Seller to enter into this Agreement, the Buyer hereby warrants and represents to
the Seller that (1) the Buyer has the full power and authority to enter into and
fulfill its obligations under this Agreement, and (2) the execution of this
Agreement by the Buyer constitutes the valid and binding obligation of the Buyer
in accordance with its terms.
14. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
A. Conditions Precedent. The obligation of the Buyer to
purchase the Premises from the Seller in accordance with this Agreement is
subject to satisfaction of each of the following conditions (the "Conditions
Precedent"), any of which may be waived in whole or in part by the Buyer on
or prior to the Closing Date:
(1) Seller's Representations and Warranties. Each of the
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all respects on the Closing Date, as though made on such
date.
<PAGE>
(2) Compliance with Covenants. The Seller shall have performed
and complied with all of the terms, conditions and covenants required by this
Agreement to be performed and complied with prior to or on the Closing Date.
(3) Title Policy. A title policy or unconditional
commitment therefor meeting the requirements of Paragraph 5.B. hereof shall
have been issued by the Title Company to the Buyer.
(4) Approvals and Permits. All of the Approvals and Permits
shall have been obtained, shall be in full force and effect and shall be final,
unappealable and unrevoked, and no federal, state or local agency of any kind
shall have taken any action, the effect of which is to prevent, delay or impair
the lawful construction of the Facility upon and the use of the Premises.
(5) Easements. The Buyer and/or Seller shall have obtained all
required Easements without any cost to Buyer, except that any Easements to
obtain water or sewer service shall be obtained at the Buyer's cost.
(6) Environmental Condition. On the Closing Date no Toxic
Waste, Hazardous Waste or Hazardous Substance, as defined in Paragraph 12.A.(9)
above will be located on, under, or adjacent to the Properties.
(7) Contemporaneously with the Closing on the Purchase of the
Premises the Buyer shall have either completed the purchase of the Partnership
Property or extend a lease for the Partnership Property. If the Buyer acquires
the right to lease the Partnership Property, such lease shall be for a term of
not less than ninety-nine (99) years, at an annual gross rental not to exceed
One Dollar ($1.00) per year, plus all real estate taxes assessed upon the leased
premises, and the Lease shall grant the Buyer the exclusive right to use the
Partnership Property.
<PAGE>
B. Buyer's Rights If Conditions Precedent Are Not Satisfied. If, on
the Closing Date, all of the Conditions Precedent to the Buyer's obligation to
consummate the purchase of the Premises which are set forth in this Agreement
have not been satisfied, the Buyer shall elect to either (1) waive such of those
conditions as are unsatisfied; or (2) terminate this Agreement. If the Buyer
terminates this Agreement because the Conditions Precedent have not been
satisfied, the Deposit and all accrued interest shall be returned to the Buyer
and the parties hereto shall be released from all liabilities and obligations
under this Agreement, other than the Buyer's obligation to sell and the Seller's
obligation to buy the Allocation.
Notwithstanding the foregoing, if, on the Closing Date, all of the
Conditions Precedent to the Buyer's obligations to consummate the purchase of
the Premises which are set forth in this Agreement have not been satisfied
because the Seller has intentionally breached any of the Seller's
representations, warranties or covenants, all Deposit and all interest accrued
thereon shall be returned to the Buyer and the Buyer shall have all rights and
remedies set forth in Paragraph 18.B. herein.
15. RECORDING. This Agreement may not be recorded by either party
hereto.
16. CONDEMNATION. If, prior to Closing, all or any part of the Premises is
taken by eminent domain proceedings or a notice of any eminent domain proceeding
with respect to the Premises or any part thereof is received by the Seller, the
Seller shall immediately give notice thereof to Buyer and Buyer shall have the
right, exercisable in writing within thirty (30) days of receipt of such notice
to either:
A. Complete the purchase of the Premises hereunder in
accordance with this Agreement; or
<PAGE>
B. Terminate this Agreement, in which event the Deposit, together
with all interest accrued thereon, shall be returned to the Buyer and this
Agreement shall be null and void.
Failure to deliver such written notice shall be deemed an election
by Buyer to complete the purchase of the Premises. If the Buyer elects (or is
deemed to have elected) to complete the purchase of the Premises, the purchase
shall be completed in accordance with this Agreement, except that at Closing the
Seller shall assign, transfer, and pay to Buyer all rights that the Seller has
to any of the proceeds of such eminent domain proceedings and all proceeds from
such proceedings theretofore received by the Seller.
17. REAL ESTATE BROKERS. The Seller and Buyer respectively warrant to each
other that no finders, real estate brokers or other persons entitled to claim a
fee or commission have interested either of them in this transaction and that
they have not had any dealings with any person which may entitle that person to
a fee or commission. The Seller and Buyer hereby agree to indemnify and hold the
other harmless against any losses, costs or expenses (including attorney's fees)
arising out of any claim of any broker or finder in conjunction with this
transaction, the obligation for which was incurred by the breaching party. The
terms of this Paragraph 16 shall survive the Closing Date.
18. DEFAULT.
B. By Buyer. If, after all of the Conditions Precedent to the
Buyer's obligations are satisfied, the Buyer, without justification, fails to
complete the Closing and the Seller is not in default hereunder, then as the
Seller's sole and exclusive remedy, the Escrow Agents shall pay the Deposit and
all interest accrued thereon to the Seller as liquidated damages and not a
penalty, such being agreed between Buyer and Seller to be a necessary condition
to this Agreement to compensate the Seller for expenses and expenditures
<PAGE>
incurred and made in connection therewith, the damages sustained as a result of
withdrawing the Premises from the market, and otherwise for the Buyer's
non-compliance with this Agreement. Thereupon, this Agreement shall become null
and void and of no further force and both parties shall be released of further
liability and obligations hereunder, and the Seller shall have no further
remedy, either at law or in equity. The Buyer shall reimburse the Seller for any
legal fees incurred by the Seller in obtaining the Deposit in the event the
Buyer is unsuccessful in a challenge to the Seller's right to receive the
Deposit. Notwithstanding the foregoing, if a court of competent jurisdiction
renders a final, unappealable decision that the Buyer has wrongfully encumbered
the Seller's title to the Premises, the Seller shall be entitled to
consequential damages as a result of such wrongful action of the Buyer.
C. By Seller. If the Seller defaults hereunder, the Buyer
shall be entitled to pursue all rights and remedies which are available at
law, and the equitable remedy of specific performance.
19. 1445 CERTIFICATION. The Seller acknowledges that Section 1445 of the
Internal Revenue Code provides that a transferee of a United States real
property interest must withhold tax if the transferor is a foreign person. To
inform the Buyer that withholding of tax is not required upon the disposition of
a United States real property interest by the Seller, the Seller shall deliver
on the Closing Date a sworn certification to the effect that the Seller is not a
non-resident alien for Federal Income Tax purposes, in a form reasonably
satisfactory to the Buyer.
20. ESCROW AGENTS. The Buyer and the Seller have requested that the
Deposit be held in escrow by the Escrow Agents. Notwithstanding anything herein
to the contrary, the Escrow Agents shall not release the Deposit unless directed
to do so by written notice signed by the Buyer and the Seller, or by a final and
unappealable order of a court of competent jurisdiction. The Escrow Agents are
merely responsible for the safe-keeping of the Deposit and shall not be required
<PAGE>
to determine any questions of fact or law. The Escrow Agents shall be protected
in acting in good faith upon instruments or documents believed to have been
signed by a proper person or persons, not only as to their due execution and the
validity and effectiveness of their provisions, but also as to the truth and
acceptability of any information contained therein. The Escrow Agents shall not
have any duties except those which are expressly set forth herein. The Escrow
Agents shall not be bound by any notice of, or demand with respect to, any
waiver, modification, or amendment of this Agreement unless in writing, signed
by all of the parties to this Agreement and if the duties or responsibilities of
the Escrow Agents are affected, unless the Escrow Agents shall have given their
prior written consent thereto. The Escrow Agents shall not be entitled to a fee
for their services as Escrow Agents, nor shall they have any liability to the
Buyer or the Seller for anything done or omitted to be done by them in good
faith, their liability being limited solely to gross negligence or willful
misconduct. The Seller acknowledges that, separate and distinct from his duties
as Escrow Agent, Marc B. Kaplin is acting as counsel to Buyer. The Seller
expressly consents to the foregoing and waives any right to hereafter claim that
the same in any way constitutes a conflict of interest. Furthermore, if any
dispute arises after the date of this Agreement, Marc B. Kaplin shall not be
precluded in any manner from continuing to represent Buyer in any matter
regarding this Agreement. The Buyer acknowledges that, separate and distinct
from his duties as Escrow Agent, Ronald M. Agulnick is acting as counsel to the
Seller. The Buyer expressly consents to the foregoing and waive any right to
hereafter claim that the same in any way constitutes a conflict of interest.
Furthermore, if any dispute arises after the date of this Agreement, Ronald M.
Agulnick shall not be precluded in any manner from continuing to represent the
Seller in any matter regarding this Agreement.
<PAGE>
21. GENERAL PROVISIONS.
A. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
B. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior negotiations, understandings
and agreements of any nature whatsoever with respect to the subject matter
hereof. No amendment, waiver or discharge of any provision of this Agreement
shall be effective against either party unless that party shall have consented
thereto in writing.
C. Governing Law. This Agreement shall be governed,
interpreted, and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
D. Notices. All notices or other communications required or
permitted to be given under the terms of this Agreement shall be in writing,
sent by Certified Mail, postage prepaid, return receipt requested, or by
private carrier guaranteeing next day service, addressed as follows:
(1) If to the Seller, addressed as follows:
Fred V. Schubert
114 Schubert Drive
Downingtown, PA 19335
With a copy to:
Ronald M. Agulnick, Esquire
Crawford, Wilson, Ryan & Agulnick, P.C.
220 West Gay Street
West Chester, PA 19380
(2) If to Buyer, addressed as follows:
Penn National Gaming, Inc.
Suite 203
825 Berkshire Boulevard
Wyomissing, PA 19610
<PAGE>
With a copy to:
Marc B. Kaplin, Esquire
Lesser & Kaplin, P.C.
350 Sentry Parkway, Building 640
Blue Bell, PA 19422
or to such other address or addresses and to the attention of such other person
or persons as any of the parties hereto may notify the others in accordance with
the provisions of this Agreement.
E. Captions. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or
extend the scope or intent of this Agreement or any
provision hereof.
F. Merger of Representations, Warranties and Covenants. All
representations, warranties and covenants made by the Seller and the Buyer in
this Agreement and all obligations of the Seller and the Buyer not discharged at
Closing arising out of, or in connection with, this Agreement shall merge with
the deed to the Premises and shall not survive the Closing Date.
G. Time is of the Essence. Time is of the essence of this
Agreement and all of its terms and conditions.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
SELLER:
/s/ Fred V. Schubert
FRED V. SCHUBERT
BUYER:
PENN NATIONAL GAMING, INC.
(CORPORATE SEAL) By: /s/ Peter M. Carlino
Name/Title: Chairman
Attest: /s/ Susan M. Montgomery
Name/Title: Assistant to Chairman
ESCROW AGENTS:
/s/ Marc B. Kaplin
MARC B. KAPLIN, ESQUIRE
/s/ Ronald M. Agulnick
RONALD M. AGULNICK, ESQUIRE
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made and entered into on the
13th day of September, 1996 by and between the Estate of Joseph B. Banks
("Seller") and Penn National Gaming, Inc., a Pennsylvania corporation ("Buyer").
Virginia H. Banks ("Mrs. Banks") joins in this Agreement solely for the purpose
and subject to the conditions set forth in the Joinder hereto.
The Plains Company, a Pennsylvania corporation (the "Company"), through
its subsidiary, Pocono Downs, Inc., a Pennsylvania corporation ("Pocono Downs"),
conducts harness racing with pari-mutuel wagering at Pocono Downs Racetrack in
Wilkes-Barre, Pennsylvania and operates off-track wagering facilities located in
Lehigh County, Pennsylvania and Erie, Pennsylvania.
The Lehigh County off-track wagering facility is owned by Lehigh Off-Track
Wagering, L.P., a Pennsylvania limited partnership ("Lehigh"). The Erie
off-track wagering facility is owned by Peach Street Ltd. Partnership, a
Pennsylvania limited partnership ("Peach Street"; and together with Lehigh, the
"Partnerships").
Seller owns all of the issued and outstanding shares of capital stock (the
"Shares") of the Company and all of the limited partnership interests (the
"Interests") in the Partnerships. The Company indirectly owns all of the general
partnership interests in the Partnerships.
Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, the Shares and the Interests in accordance with the provisions of this
Agreement.
References in this Agreement to "Section A" refer to a section in Appendix
A hereto.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Purchase Price Deposit; Sale and Purchase of Shares and Interests. (a)
Contemporaneously herewith, Buyer has deposited $1,000,000 (the "Deposit") with
the escrow agent (the "Deposit Escrow Agent") designated in the escrow agreement
(the "Deposit Escrow Agreement") in substantially the form of Exhibit A hereto
entered into concurrently with the execution hereof among Buyer, Seller and the
Deposit Escrow Agent, to be released and delivered as provided in the Deposit
Escrow Agreement and in Section 2(b) hereof.
(b) Subject to the terms and conditions of this Agreement and on the basis
of and in reliance upon the representations, warranties, covenants and
agreements set forth herein, on the Closing Date (as defined in Section 2(a)
hereof) Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of
the Shares and the Interests in exchange for a cash purchase price of
$47,000,000, subject to adjustment after the Closing pursuant to Sections 3 and
4 hereof. The sum of $47,000,000 shall be payable by Buyer as follows:
(i) $44,000,000 shall be paid to Seller at the Closing in the
manner provided in Sections 2(b) and 2(c) hereof; and
(ii) $3,000,000 shall be deposited at the Closing with the escrow
agent (the "Closing Escrow Agent") designated in the escrow agreement (the
"Closing Escrow Agreement") in substantially the form of Exhibit B hereto
to be entered into at the Closing among Buyer, Seller and the Closing
Escrow Agent, in the manner provided in Sections 2(b) and 2(c) hereof, and
shall be held and disbursed by the Closing Escrow Agent in accordance with
the Closing Escrow Agreement.
<PAGE>
2. Closing. (a) The closing (the "Closing") of the sale and purchase of
Shares and the Interests described in Section 1 hereof shall take place at the
offices of Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia,
Pennsylvania, commencing at 10:00 a.m., local time, no later than November 30,
1996, or at such other place, time or date as may be agreed upon in writing by
the parties hereto. The date of the Closing is sometimes herein referred to as
the "Closing Date". The parties acknowledge that if the Closing has not occurred
by 6:00 p.m. Philadelphia local time on November 30, 1996, this Agreement shall
terminate, Seller may be entitled to the Deposit (as provided in the Deposit
Escrow Agreement) and the parties shall have no further obligation to each other
except as provided in Section 11.2 hereof; provided, however, the if the
parties, in their sole and unfettered discretion, so agree in writing, the
period for closing shall be extended until 6:00 p.m. Philadelphia local time on
December 15, 1996, upon payment by Buyer to Seller in cash of a non-refundable
extension fee of $1,000,000 (which shall be in addition to, and not in lieu of,
the delivery of the Deposit). In no event shall the Closing Date be extended
beyond the close of business on November 30, 1996, or December 15, 1996, as
applicable.
(b) At the Closing, the Deposit, and all investment earnings thereon,
shall be deposited with the Closing Escrow Agent (in partial satisfaction of
Buyer's payment obligations under Section 1(b) and 2(c) hereof).
(c) At the Closing, Seller shall assign, transfer and deliver to Buyer
(or, without relieving Buyer of its obligations hereunder, to one or more
wholly-owned direct or indirect subsidiaries of Buyer designated in writing at
least five days prior to the Closing) (i) the certificates for the Shares (duly
endorsed or with separate duly signed stock transfer powers attached thereto)
and (ii) the Interests, in both cases free and clear of all pledges, liens,
encumbrances, claims and other charges thereon of every kind (provided that
Buyer acknowledges that ownership of the Shares and the Interests will be
subject to securities laws and laws applicable to "licensed corporations" (as
defined in the Pennsylvania Race Horse Industry Reform Act (the "Pennsylvania
Act")) and owners of "race tracks" or "non primary locations" (as defined in the
Pennsylvania Act)), in exchange for the delivery by Buyer (by wire transfer of
immediately available funds to such accounts at such banks as Seller shall
direct in writing delivered to Buyer no less than three business days prior to
the Closing) to (i) Seller, the amount to be paid to it pursuant to Section
1(b)(i) hereof, and (ii) the Closing Escrow Agent, the amount to be held by the
Closing Escrow Agent under the Closing Escrow Agreement pursuant to Section
1(b)(ii) hereof.
(d) At the Closing, Seller shall make available to Buyer the written
resignations of all the directors and officers of the Company and its
Subsidiaries (as defined in Section A.1.6 hereof) effective as of the Closing,
and shall cause to be made available to the successor directors and officers of
the Company (the "post-Closing Company directors and officers") all minute
books, stock record books, books of account, corporate seals, leases, contracts,
agreements, securities, bank, checking and money market accounts, other
investments, deposits, customer and subscriber lists, files and other documents,
instruments and papers belonging to the Company and its Subsidiaries and shall
cause possession and control of all of the assets and properties of every kind
and nature, tangible and intangible, of the Company and its Subsidiaries and of
all other things and matters pertaining to the operation of the business of the
Company and its Subsidiaries to be made available to the post-Closing Company
directors and officers. At the Closing, Seller shall also deliver to Buyer, and
Buyer shall deliver to Seller, the certificates, opinions and other instruments
and documents referred to in Sections 8 and 9 hereof, respectively.
Anything in this Section 2(d) or elsewhere in this Agreement to the
contrary notwithstanding, effective as of the Closing Buyer hereby waives, and
<PAGE>
at Closing shall cause Company and the Subsidiaries to waive (by delivery of a
waiver in the form attached hereto as Exhibit M), any right that Buyer, Company
or the Subsidiaries may have to any notes, work product or communications within
the attorney-client privilege (collectively, the "Attorney Materials") to or
from Seller prepared or received (i) by Drinker Biddle & Reath or, (ii) after
June 14, 1996, by Chariton & Keiser in the course of their representation of
Seller in the transactions contemplated by this Agreement to the extent such
right would arise as a result of Drinker Biddle & Reath or Chariton & Keiser
also having been engaged by or receiving payments from the Company or any of the
Subsidiaries; provided that such waivers shall be null and void and of no effect
with respect to Attorney Materials that are not protected by the attorney-client
privilege if it is asserted.
(e) The purchase price payable under Section 1(b)(i) and 1(b)(ii) shall be
allocated between the Shares and the Interests as set forth on Exhibit C hereto.
Buyer and Seller each agree to report the sale and purchase of the Shares and
the Interests for all federal, state, local, foreign and other tax purposes in a
manner consistent with such allocation.
(f) (i) Immediately prior to the Closing, Seller shall cause the Company
to redeem a portion of the Shares (the "Redeemed Shares") in exchange for
any remaining interests in the 400 Acres (as defined in Section 7.11
below). The number of Redeemed Shares, if any, shall equal the product of
(A) the total number of Shares multiplied by (B) the fraction that equals
the ratio of (x) the fair market value, if any, of any remaining interest
of the Company or its Subsidiaries in the 400 Acres to (y) the fair market
value of the Shares immediately before the redemption. Such number shall
be determined by Seller. At the Seller's discretion, the remaining
interest in the 400 Acres, if any, shall either be transferred directly to
Seller (or its designee) or shall first be contributed to a corporation or
other legal entity, 100% of the interests in which are then transferred to
Seller (or its designee).
(ii) To the extent any provision of this Agreement (including
without limitation the Appendix, the Schedules and Exhibits hereto) refers
to Seller transferring the Shares to Buyer, or suggests that the Shares
transferred to Buyer represent all of the Shares of the Company, such
provision shall be deemed modified so as not to include the Redeemed
Shares.
(iii) Upon any such redemption and/or conveyance of the 400 Acres,
the party taking title to the 400 Acres shall release Buyer, the Company,
Pocono Downs and the other Subsidiaries, and each of their affiliates
(collectively, the "400 Acre Indemnitees"), from, and shall reimburse,
defend, indemnify and hold harmless each 400 Acre Indemnitee from, against
and in respect of, any Claims (as hereinafter defined) suffered,
sustained, incurred or paid by such 400 Acre Indemnitee in connection
with, resulting from or arising out of the 400 Acres (including without
limitation all improvements located thereon) or the ownership or
conveyance thereof (including without limitation any Claims which involve
an Environmental Claim (as defined in Section 10.2 hereof) or which
otherwise relate to or involve a claim, liability or obligation which
arises out of or is based upon, any Environmental Law (as defined in
Section 10.2 hereof) whether such liability or obligation relates to or
arises out of any activity occurring, condition existing, omission to act
or other matter with respect to the 400 Acres existing before or after the
Closing). The foregoing indemnification covenant shall also include
procedures substantially similar to those set forth in Sections 10.7 and
10.8 hereof. Such conveyance of the 400 Acres shall be by special warranty
deed and without any other warranty or representation, covenant or
liability of any kind. Such conveyance of the 400 Acres shall be in
accordance with all applicable laws, regulations, rules and ordinances and
all necessary permits, approvals and authorizations shall be obtained in
connection with such conveyance.
<PAGE>
3. Post-Closing Adjustment to Purchase Price. (a) As soon as reasonably
practical following (but not more than 120 days after) the Closing Date, Buyer
shall prepare and deliver to Seller a consolidated balance sheet of the Company
and its Subsidiaries as of the Closing Date (the "Closing Financial
Statements"). The Closing Financial Statements shall be prepared in accordance
with generally accepted accounting principles using the same methods and
criteria employed by Pocono Downs in connection with its preparation of the
Audited Financials (as defined in Section A.1.7 hereof), to the extent such
methods and criteria are consistent with generally accepted accounting
principles. All expenses incurred in connection with the preparation of the
Closing Financial Statements shall be the responsibility of Buyer.
(b) The Closing Financial Statements shall become final and binding upon
the parties unless within 20 days following their submittal to Seller, Seller
notifies Buyer of its objection thereto. If Seller so notifies Buyer of its
objection to the Closing Financial Statements, Seller and Buyer shall negotiate
in good faith to resolve any differences. If within 30 days following the
receipt of such notice by Buyer any of such differences have not been resolved,
they shall be resolved by the Philadelphia, Pennsylvania office of a nationally
recognized accounting firm mutually acceptable to the parties, and such firm's
opinion thereon and the resulting Closing Financial Statements shall be final,
binding and not subject to any appeal. The fees and expenses of such accounting
firm in connection with any such resolution shall be paid one-half by Seller and
one-half by Buyer.
(c) Within ten days following the final determination of the Closing
Financial Statements, an adjustment to the Purchase Price shall be made and paid
as follows: (i) if the sum of the balance sheet entries thereon representing the
following items with adjustments to such items as specified below:
cash
marketable securities
the tax credit identified on Exhibit D hereto
prepaid corporate and real estate taxes
net accounts receivable (excluding all receivables from Seller,
receivables
from employees and funds retention receivables from
Philadelphia Park)
employee receivables (to the extent collectible) food and beverage
inventory miscellaneous inventory (which shall have a stipulated
value of $50,000)
prepaid insurance
security deposits
deferred finance charges (to the extent the related debt is not
repaid)
interest receivable
prepaid expenses
(the foregoing collectively, "Current Assets") as of the Closing Date is less
than the sum of the balance sheet entries thereon representing the following
items with adjustments to such items are specified below:
accounts payable indebtedness for money borrowed capitalized leases
underpaid purses payroll & sales taxes payable accrued expenses
<PAGE>
income taxes payable deferred income taxes other current liabilities
50% of 1996 capital stock taxes Fan club reserve (which shall have a
stipulated value of $50,000)
(the foregoing collectively, "Debts") then Seller shall pay, or cause to be paid
to Buyer, in cash, the amount of the difference between such Current Assets and
the Debts, and (ii) if the sum of Current Assets as of the Closing Date is
greater than the sum of Debts, then Buyer shall pay to Seller, in cash, the
amount of such difference.
(d) Nothing in this Section 3 shall preclude any party from exercising, or
shall adversely affect or otherwise limit in any respect the exercise of, any
right or remedy available to it hereunder for any misrepresentation or breach of
warranty hereunder, but neither Buyer nor Seller shall have any right to dispute
the Closing Financial Statements or any portion thereof once they have been
finally determined in accordance with Section 3(b) hereof.
4. Special Payment for New Activity. In addition to the Purchase
Price, if:
(a) During the period beginning on the date hereof and ending on the fifth
anniversary of the Closing Date, the Commonwealth of Pennsylvania (whether
through legislation or otherwise) permits additional forms of wagering
(including but not limited to the operation of slot machines or riverboat or
other gambling facilities), other than pari-mutuel wagering, in which facilities
licensed or regulated by the Harness or Horse Racing Commissions (or any
successor to all or a portion of the functions thereof) are permitted to
participate, and
(b) At any time that it is legally permissible for Buyer to offer any one
or more of such forms of wagering anywhere in any of the following counties in
Pennsylvania: Erie, Warren, McKean, Potter, Tioga, Bradford, Susquehanna, Wayne,
Pike, Monroe, Northampton, Lehigh, Carbon, Schuykill, Luzerne, Lackawanna,
Wyoming, Sullivan, Columbia, Northumberland, Union, Montour, Clinton, Centre,
Cameron, Clearfield, Elk, Jefferson, Clarion, Forest, Venango, Mercer or
Crawford, Buyer offers any one or more of such forms of wagering anywhere in
Pennsylvania,
then Buyer shall pay to Seller in cash the sum of $10 million as follows: $2
million shall be due and payable upon commencement of the first new wagering
activity (the "New Activity Date"), and an additional $2 million shall be due
upon each of the first, second, third and fourth anniversaries of the New
Activity Date. The full amount of the special payment shall be made whether or
not Buyer continues to engage in the activity and shall be made whether or not
Buyer shall have transferred its interests in the Company or its Subsidiaries to
a new party before or after such new wagering activity is offered in such area.
Such special payment shall be treated as part of the purchase price for the
Shares.
For purposes of this Section 4, Buyer shall be deemed to have offered or
be legally permitted to offer an additional form of wagering other than
pari-mutuel wagering if the form of wagering is offered or legally permitted to
be offered by Buyer, by any successor or assign of Buyer or any affiliate of
Buyer or by any person which has an ownership interest in Buyer or an affiliate
of Buyer or from which Buyer or any of its affiliates receives payments or other
benefits directly or indirectly in respect of any such form of wagering. The
special payment shall not be subject to set-off, withholding or offset for any
matters or claims whatsoever.
<PAGE>
5. Representations and Warranties of Seller. Seller represents and
warrants to Buyer as set forth in Section A.1 of Appendix A hereto, which
Section is incorporated in this Section 5 by reference and is a part of this
Agreement.
6. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as set forth in Section A.2 of Appendix A hereto, which Section is
incorporated in this Section 6 by reference and is a part of this Agreement.
7. Covenants.
7.1 Covenants Pending Closing.1 Covenants Pending ClosingCovenants Pending
Closing. Seller acknowledges that Buyer is agreeing to the covenants set forth
in this Section 7.1 in reliance upon the continuation of Herb A. Grayek, Jr. as
the person having chief executive and operating responsibility similar to that
being exercised at the date of this Agreement for the Company and its
Subsidiaries. In the event that Mr. Grayek no longer performs such role, Seller
shall agree to such modifications of this Section 7.1 as Buyer shall reasonably
request. Subject to the foregoing, Seller represents and warrants to Buyer and
agrees that, except as may be approved in writing by an executive officer of
Buyer, between the date hereof and the Closing Date:
(a) the Company and its Subsidiaries will conduct and operate their
businesses in a manner consistent with past practices and, to the extent
consistent with such operation, use their reasonable good faith efforts to (i)
preserve intact their current business organizations, (ii) keep available the
services of their present employees, (iii) continue normal purchasing, rental,
leasing, financing, marketing, advertising, promotional and maintenance
expenditures and (iv) preserve any beneficial business relationships with all
persons having business dealings with them, it being understood and acknowledged
that Seller is uncertain as to the effect of the prospective sale of the Shares
and Interests on the foregoing, and by way of illustration and not by way of
limitation, Seller may (but need not) initiate or continue efforts to acquire
any desired nonprimary site, develop or establish uplink facilities, alone or in
conjunction with others, enter into agreements to accept or allow wagers with
respect to activities within and outside of the Commonwealth of Pennsylvania and
do all things that Company and its Subsidiaries would have done in the ordinary
course of their business had this Agreement not been executed;
(b) the Company and its Subsidiaries will, at their own expense, maintain
in a manner consistent with past practices (i) all of the material properties
used or useful in their businesses in current operating condition and repair,
ordinary wear and tear excepted and (ii) all insurance covering their business,
employees and assets in full force and effect until 12:01 A.M. on the first day
following the Closing Date with responsible companies, comparable in amount,
scope and coverage to that in effect on the date hereof;
(c) the Company and its Subsidiaries will (i) use their reasonable good
faith efforts consistent with past practices to duly comply with all laws,
ordinances, codes, rules and regulations applicable to them if the failure to do
so would have a material adverse effect upon the Company and its Subsidiaries
taken as a whole, (ii) use their reasonable best efforts to perform all of their
material obligations and liabilities without default, (iii) maintain their
corporate existence in good standing in their jurisdictions of incorporation or
organization and their due qualification in good standing in all jurisdictions
in which they are so qualified and (iv) maintain all of their books and records
in the usual, regular and ordinary manner on a basis consistent with past
practices, it being understood and agreed by the parties hereto that the
responsibility for complying with the provisions of the Pennsylvania Race Horse
Industry Reform Act and regulations of the Pennsylvania Racing Commissions
applicable to the transaction contemplated hereunder is exclusively that of
Buyer and not of Seller or, prior to the Closing, the Company or any of its
Subsidiaries;
<PAGE>
(d) the Company and its Subsidiaries will give to Buyer and its counsel,
accountants, investment bankers and other representatives access during normal
business hours to the premises of the business, personnel, counsel, accounts and
other representatives of the Company and its Subsidiaries and furnish to Buyer
and such representatives all such additional documents and information with
respect to the businesses of the Company and its Subsidiaries as Buyer may from
time to time reasonably request and as, in the case of documents and
information, may be readily accessible to the Company;
(e) Seller shall use its reasonable best efforts to satisfy the conditions
set forth in Sections 8.4, 8.5, 8.7 (except to the extent relating to Buyer's
election pursuant to such Section to continue any indebtedness), 8.9 and 8.10
hereof, and Seller shall cooperate with Buyer in its efforts to obtain any
required third party consents to the consummation of the transactions
contemplated by this Agreement; Seller and its Subsidiaries shall execute
customary affidavits and documentation required by Buyer's title insurance
company in connection with the issuance of Owner's Title Policies (as
hereinafter defined) insuring title in the form required by Sections 12(b) and
12(c) hereto;
(f) neither the Company nor any Subsidiary will (i) make any change
adverse to Buyer in its organizational documents or its authorized, issued or
outstanding capital stock or partnership interests, (ii) grant any options or
other rights to acquire, whether directly or contingently, any of its capital
stock or partnership interests or (iii) except as may be provided herein, sell,
rent, lease or otherwise dispose of any of their assets, except in the ordinary
course of business consistent with past practices;
(g) other than in the ordinary course of business (as more fully set forth
and illustrated in Section 7.1(a) hereof), neither Seller, the Company nor any
Subsidiary will (i) make any capital expenditures or commitments for capital
expenditures, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, (iii) enter into any employment contract, increase the rate of
compensation payable or to become payable by it to any officer or any other
executive employee or make any general increase in the compensation or rate of
compensation payable or to become payable to hourly employees or salaried
employees except in the ordinary course of business or as required by existing
contracts or (iv) accrue or pay to any of its officers or employees any bonus,
profit-sharing, retirement pay, insurance, death benefit, fringe benefit or
other compensation, except as disclosed herein or in the Schedules hereto;
(h) neither the Company nor any Subsidiary will modify, terminate or renew
any agreement, contract or commitment or waive, release or dispose of any right
or claim of value accruing to it, except in a manner consistent with past
practices;
(i) other than in the ordinary course of business, neither Seller, the
Company nor any Subsidiary will enter into any transaction or take any action or
fail to take any action which is intended to result in any of the
representations and warranties contained in this Agreement being untrue and
incorrect in any material respect;
(j) neither the Company nor any Subsidiary will take any other action or
suffer or permit any other action to occur (other than actions taken in the
ordinary course of business, as more fully set forth and illustrated in Section
7.1(a) hereof) which could reasonably be expected to have a material adverse
<PAGE>
effect on the business, management, operations, results of operations, assets,
liabilities, properties, prospects or condition (financial or otherwise) of the
Company or any Subsidiary;
(k) neither Seller nor any affiliate of Seller will undertake any
transaction that would require a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") with respect to the transaction
contemplated by this Agreement and will not make any such filing;
(l) neither Seller, the Company nor any Subsidiary will agree or
commit to do any of the foregoing;
(m) notwithstanding any other provision hereof, between the date hereof
and the Closing Date the Company and its Subsidiaries shall be entitled to pay
dividends and make other distributions and make other transfers (including
without limitation through redemption) to equity holders of cash, cash
equivalents, marketable securities and Pocono Downs= funds retention receivable
from Philadelphia Park without prior notice to or approval of Buyer; and
(n) Seller shall use its reasonable good faith efforts to cause the
Company and its Subsidiaries to comply with all matters referred to in this
Section 7.1, with the same effect as if the covenants in this Section 7.1 were
made by them.
7.2 No Solicitation, Etc. Prior to Closing:
(a) Seller shall not, and shall not permit the Company or any Subsidiary
to, directly or through another person, make, solicit, initiate, negotiate or
encourage submission of proposals or offers from any persons relating to any
liquidation, dissolution, recapitalization, merger, consolidation or acquisition
or purchase of all or substantially all of the assets of, or equity interest in,
the Company or any Subsidiary or any other similar transaction or business
combination. Seller shall, and shall cause the Company and its Subsidiaries to,
immediately cease and cause to be terminated all contracts, negotiations and
communications with third parties with respect to the foregoing, if any,
existing on the date hereof. Seller shall request the financial and other
advisors and representatives of Seller and the Company and its Subsidiaries to
comply with each of the covenants contained in this Section 7.2; and
(b) Seller shall not, and shall not permit the Company or any Subsidiary
to, directly or indirectly, participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist, any effort or attempt by any other person
to do or seek any of the activities referred to in Section 7.2(a) hereof.
7.3 Update Schedules. Prior to the Closing, Seller shall endeavor in good
faith to disclose to Buyer in writing any information set forth in the Schedules
hereto which no longer obtains and any information of the nature of that set
forth in the Schedules which arises after the date hereof and which would have
been required to be included in the Schedules if such information had obtained
on the date hereof. Such disclosure shall not limit or affect any of Buyer's
rights hereunder for or with respect to any misrepresentation or breach of
warranty by Seller or Seller's failure to fulfill any covenant, agreement or
condition contained in this Agreement, provided that if such disclosure is based
principally on information or events which arise or occur after the date hereof,
such information or events may serve as a basis for the condition specified in
Section 8.8(b) hereof not being satisfied, but may not serve as the basis for a
claim of misrepresentation or breach of warranty, under any provision of this
Agreement, with respect to representations and warranties made herein by Seller
on the date hereof.
<PAGE>
7.4 Covenants of Buyer Pending Closing.
(a) Seller and Buyer agree that the information contained in this
Agreement (including the Exhibits, Appendix and Schedules hereto) or provided to
either of them in connection with the investigation, negotiation, consummation
and carrying to fruition of the transactions contemplated hereby is confidential
in nature and, except as may be required by subpoena, civil investigation,
demand or other similar process or as required for transferring the Shares and
the Interests, each agrees not to disclose to any person (excluding its
directors, employees, lenders, potential lenders, the escrow agent under the
Deposit Escrow Agreement and the Closing Escrow Agreement and/or consultants and
representatives, in each case who agree to keep such information confidential,
all on a need-to-know basis) any such confidential information or the fact that
discussions or negotiations have taken place among the parties to this
Agreement, any of the terms or conditions of this Agreement or any discussions
or negotiations of transactions (including the identity of any party to this
Agreement) or information furnished in connection therewith, without the prior
written consent of the party which furnished such information. Each party agrees
that if it discloses such information to its affiliates, directors, employees,
lenders or potential lenders, counsel and/or consultants and representatives,
such party shall be responsible for any breach of this Section 7.4(a) by such
person. No information will be deemed confidential and subject to this Section
7.4(a) if it is developed independently by a party or becomes or was generally
available to the public other than as a result of a breach by a party of its
obligations hereunder or under that certain letter agreement dated June 14,
1996, by Buyer, accepted by Seller, but information provided to or filed with
the Pennsylvania State Harness Racing Commission (the "Commission") or any other
government agency shall not be deemed to be available to the public by virtue of
such filing or submission or accessibility to review. If Closing does not occur,
Buyer shall not disclose or use confidential information provided by or on
behalf of Seller, including confidential information relevant to the Company and
the Subsidiaries, and Seller shall not disclose or use confidential information
provided by or on behalf of Buyer. If Closing does occur, Seller shall not
disclose or use confidential information provided by or on behalf of Buyer,
including confidential information relevant to the Company and the Subsidiaries
on or after the Closing, and Buyer shall not disclose or use confidential
information provided by or on behalf of Seller that is not relevant to the
Company and its Subsidiaries on or after the Closing. The provisions of this
Section 7.4(a) will survive the Closing or the termination of this Agreement for
a period of two years after such termination or Closing, as the case may be.
(b) Buyer will exercise its reasonable best efforts to obtain the
financing contemplated in Section 8.6 hereof and, upon request, will advise
Seller of the status of such financing and give Seller copies of any commitment
letter or term sheet or similar document. Buyer shall not engage in a public
offering of securities prior to Closing hereunder if any confidential
information of Seller would be disclosed in connection therewith.
(c) Buyer will, and after Closing will cause the Company and all
Subsidiaries to, comply in all material respects with the Pennsylvania Race
Horse Industry Reform Act and all regulations thereunder applicable to Buyer,
the Company or any Subsidiary in respect of this transaction.
(d) Before Closing, neither Buyer nor any affiliate of Buyer will
undertake any transaction that would require a filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with
respect to the transaction contemplated by this Agreement or will make any such
filing.
(e) Neither Buyer nor any person or entity affiliated with Buyer will
object to the settlement of the Estate of Joseph B. Banks.
<PAGE>
(f) Buyer shall use its reasonable best efforts to cause the guarantees
listed in Exhibit F hereto to be terminated, including without limitation the
offer of its guarantee in lieu thereof.
7.5 Continuation of Charitable Obligation. After the Closing, Buyer
shall cause Pocono Downs to continue through 1998 the annual fundraising
activities previously provided by it on behalf of St. Joseph Center in
Scranton, Pennsylvania.
7.6 Remediation. After the Closing, Seller shall promptly reimburse
Buyer (or at Buyer's election, the Company) for reasonable out-of-pocket
expenses incurred after the Closing to
(a) investigate and remediate soil, groundwater or any other media in or
related to the seven (7) areas identified at the bottom of Page 2 of the Phase
II Environmental Assessment Report prepared by GeoSystems Consultants, Inc.
dated August 22, 1996 (a copy of which is attached hereto as Exhibit G) to a
background cleanup level consistent with Pennsylvania's Act 2 Land Recycling and
Environmental Remediation Standards Act; provided (1) Seller's reimbursement
obligation shall apply only to investigation and remediation work completed
before June 30, 1997; (2) Buyer shall select the lowest and most qualified bid
received from at least three (3) reputable environmental remediation contractors
solicited by Buyer to perform the remediation work; and (3) Buyer provides
Seller with the results of all remediation work in or related to the seven (7)
specific areas, including without limitation any test results and reports, and
itemized costs and supporting documentation for the out-of-pocket expenses; and
(b) investigate, remediate or otherwise implement the proper closure of
the Eastside Landfill, Plains Township, Luzerne County, Wilkes Barre,
Pennsylvania; provided (1) the Eastside Landfill Authority, City of Wilkes
Barre, Township of Plains, Hanover Township and Borough of Ashley fail to abide
by the Settlement Agreement as approved by Order of the Chief Judge, U.S.D.C.
Middle District of Pennsylvania, Civil Action 82-1612, dated June 30, 1986; (2)
Seller's reimbursement obligation shall apply only to work in connection with
Eastside Landfill completed before March 31, 1999; (3) Buyer is required to
incur out-of-pocket expenses as a result of a written order or directive from
either the PA Department of Environmental Protection and/or the U.S.
Environmental Protection Agency; (4) Buyer provides Seller with the itemized
cost and supporting documentation for the out-of-pocket expenses related to the
Eastside Landfill, and (5) Buyer agrees to reimburse Seller for any
out-of-pocket expenses reimbursed by the Seller to the Buyer which Buyer later
recovers from a third-party;
and further, the reimbursement obligation of Seller pursuant to this Section 7.6
is limited to a maximum of $250,000 , regardless of (i) the status or total cost
of any remediation work, (ii) the results of any tests performed, (iii) the
extent of any remediation work required to satisfy Buyer (or the Company) or any
federal, state or local authority, and (iv) whether the remediation meets the
cleanup standards of Pennsylvania's Act 2 Land Recycling and Environmental
Remediation Standards Act and any other federal, state or local law or
regulation. Nothing in this Section 7.6 shall change or alter Buyer's indemnity
to Seller pursuant to Section 10.2.
7.7 Preparation of Final Tax Returns. Within 60 days after Closing, Seller
shall cause its independent accountants, Robert Rossi & Co., to prepare, certify
and distribute to Buyer all Tax Returns (as defined in Section A.1.13 hereof),
for the Company and its Subsidiaries for all taxable periods of the Company and
its Subsidiaries ending on, immediately before, or with the Closing. Buyer shall
cause such Tax Returns to be timely filed, provided that such Tax Returns are
<PAGE>
consistent with the manner in which prior Tax Returns were prepared by Robert
Rossi & Co. for the Company and its Subsidiaries, and further provided that
Buyer does not reasonably believe that filing such Tax Returns will expose Buyer
to criminal prosecution in the event of an audit. The parties shall work
together in good faith to resolve any disputes regarding the filing of the Tax
Returns described in this Section 7.7.
The Federal income tax return of each Partnership for the taxable year
beginning January 1, 1996 shall contain an election under section 754 of the
Internal Revenue Code.
No amendment to any Tax Return described in this Section 7.7, or to any
Tax Return for the Company or its Subsidiaries for any prior periods, shall be
made, nor shall any waiver or extension of the statute of limitations with
respect to any such Tax Return be granted or agreed to, without the prior
written consent of Seller.
7.8 Settlement of Estate. If in connection with the settlement of the
Estate of Joseph B. Banks, a formal Account is filed with the Orphans Court, any
obligations of the Seller which continue, including obligations to Buyer under
this Agreement, will be reflected in the Account as obligations of the
distributees of the Estate, and, if the Estate is settled by way of a Family
Settlement Agreement, the Family Settlement Agreement will also reflect any such
obligations as obligations of the distributees of the Estate. Further, to the
extent that the Seller assigns its rights under this Agreement, or any portion
of the purchase price, to the Trustees of the Trust dated March 5, 1985
established by Joseph B. Banks, as amended, such assignment will also reflect
that the assignment is taken subject to any continuing obligations under this
Agreement.
7.9 Severance Payments. Buyer acknowledges that the Company is a party to
two employment agreements, each of which has a three year term commencing June
1, 1996 (as such agreements are in effect on this date, such agreements are
referred to in this Section collectively as the "Employment Agreements" or
individually as an "Employment Agreement"), with each of Dale Rapson and Arthur
E. Manuel (each is a "Specified Employee" and together they are the "Specified
Employees"). Buyer further acknowledges and agrees that the Company (and not
Seller) is and will be required to pay the amounts payable to the Specified
Employees under such Employment Agreements at least through May 31, 1999 unless
the employment of a Specified Employee is terminated under and in such a manner
that, consistent with such Employment Agreements and applicable law, would not
require such payments through May 31, 1999 to be made. In the event that, under
the terms of an Employment Agreement, a Specified Employee is entitled to
payments after May 31, 1999 as a result of his termination (which payments may
relate to a termination at any time after May 31, 1997), Seller agrees to be
responsible (and shall reimburse the Company) for such payments for a period of
not greater than two (2) years in accordance with the terms specified for such
payments in the Employment Agreements, but without giving effect to any
discretionary increase in salary made by the Company for the benefit of a
Specified Employee. Notwithstanding the foregoing, in the event the employment
of a Specified Employee is continued after May 31, 1999 but is thereafter
terminated in a manner which requires a termination payment, the obligation of
Seller referred to in this paragraph to reimburse the Company for up to two (2)
years of termination payments shall be reduced pro rata based on the number of
days between June 1, 1999 and the date on which the Specified Employee first
becomes entitled to the termination payment (for example, if the employment is
continued for one month beyond May 31, 1999 and is then terminated in a manner
that would require termination payments under an Employment Agreement to be
made, Seller will be responsible for 23 months of termination payments). The
Company shall not modify the Employment Agreements prior to Closing in a manner
that would affect the obligations of the Company or the Seller under this
Section 7.9 after the Closing.
<PAGE>
7.10 Kalmanowicz Property. Upon receipt after Closing by Buyer, the
Company or any Subsidiary of indemnification or reimbursement for costs and
expenses in respect of the Kalmanowicz litigation referred to in item (7) of
Schedule A.1.14 (the AKalmanowicz Litigation@), Buyer shall pay or cause to be
paid to Seller its pro rata share of such reimbursed or indemnified amount based
on the costs and expenses incurred by Pocono Downs or its affiliates in
connection with such litigation prior to Closing and the total costs and
expenses expended by Pocono Downs or its affiliates prior to and after the
Closing. After the Closing, Seller shall not have any responsibility for any
liability or obligation in connection with matters covered by the Kalmanowicz
litigation.
7.11 400 Acres. Nothing contained in the Agreement shall preclude the
Company or any Subsidiary from (A) selling, transferring, distributing, or
otherwise disposing of the approximately 400 acres of land described and
outlined in Exhibit N hereto (the "400 Acres") and (B) distributing the net
proceeds, if any, of such disposition to Seller (or its designee).
8. Conditions Precedent to Buyer's Obligations. The obligations of
Buyer under this Agreement to purchase the Shares and the Interests are
subject to the fulfillment or satisfaction, prior to or at the Closing, of
each of the following conditions precedent:
8.1 Representations and Warranties; Performance of Obligations. All of the
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties as are by their terms qualified by materiality, which shall be true
and correct in all respects taking into account the materiality qualifications
therein) on and as of the Closing Date (subject to the proviso in the last
sentence of Section 7.3) with the same effect as though such representations and
warranties had been made on and as of such date (or, if expressly made as of any
other date, as of such other date); all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by
Seller on or before the Closing Date shall have been duly complied with,
performed or satisfied in all material respects; and Buyer shall have received a
certificate dated the Closing Date and signed on behalf of Seller to the
foregoing effects.
8.2 Legal Matters. No claim, action, suit, arbitration, investigation or
other proceeding shall be pending which (a), if reasonably likely to be decided
adversely to Seller, the Company or any Subsidiary, would be reasonably likely
to have a material adverse effect on the business, operations, results of
operations, assets, liabilities, properties or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole or (b) seeks to
restrain the transactions contemplated hereby; and no temporary restraining
order, preliminary or permanent injunction or other order issued by any court or
other governmental or regulatory official, body or authority restraining or
prohibiting the consummation of the transactions contemplated hereby shall be in
effect.
8.3 Third Party Consents. All consents and approvals from, and all filings
and registrations with, all courts, governmental agencies and bodies and other
third parties listed on Exhibit E hereto, shall have been obtained and made on
terms and conditions, if any, not materially adverse to Buyer or the Company and
its Subsidiaries taken as a whole.
8.4 Closing Escrow Agreement. Seller and the Closing Escrow Agent
shall have executed and delivered the Closing Escrow Agreement.
8.5 Termination of Certain Agreements. Each of the Agreements listed on
Exhibit H hereto shall have been terminated and the Company and its Subsidiaries
shall have no further liabilities or obligations in connection therewith.
<PAGE>
8.6 Financing. Buyer shall have available at the Closing debt
financing, on terms reasonably satisfactory to Buyer.
8.7 Indebtedness Repaid. All indebtedness for money borrowed of the
Company and its Subsidiaries (except inter-company indebtedness), except for
such indebtedness as Buyer may elect (by notice given to Seller on or before
October 31, 1996) to have continued, shall have been paid in full, and all
liabilities and obligations of the Company and its Subsidiaries in connection
therewith, and all security therefor, shall have been fully terminated and
released, except for liabilities or obligations which by the terms of the
documents evidencing such indebtedness survive such repayment. Notwithstanding
anything herein to the contrary, Buyer may not continue indebtedness of the
Company or Pocono Downs owing to PNC Bank unless the guarantees referred to on
Exhibit F are terminated with the effect set forth in Section 9.5 hereof.
8.8 Material Adverse Changes. (a) Between the date hereof and the Closing
Date, there shall not have been any material adverse change in the business or
financial condition of the Company and its Subsidiaries, taken as a whole,
except for changes generally affecting the racing or gaming industry in the
Commonwealth of Pennsylvania.
(b) The updated Schedules delivered pursuant to Section 7.3 do not
disclose information that is materially adverse to the business or financial
condition of the Company and its Subsidiaries taken as a whole, except for
changes generally affecting the racing or gaming industry in the Commonwealth of
Pennsylvania.
(c) No circumstances shall have arisen in connection with which Buyer,
upon consummation of the Closing, would have a Claim or Claims under Section
10.1(a)(iv) aggregating more than $250,000, unless Seller agrees to be fully
responsible for such Claim.
8.9 Release. Effective as of the Closing Seller shall have delivered,
or shall have caused to be delivered (as the case may be), to Buyer written
releases from Seller, Mrs. Banks, each of the beneficiaries of the Estate of
Joseph B. Banks, Mr. Herb A. Grayek, Jr. and Jerry B. Chariton, and, to the
extent the persons hereinafter described are willing to provide such release
upon request of Seller (Seller being under no obligation but to make such
request), from those other persons who have served as an officer or director
of the Company or any Subsidiary immediately prior to the Closing (all such
persons signing releases are collectively, "Seller Releasors") pursuant to
which each Seller Releasor shall fully and forever remise, release, acquit
and discharge the Buyer, the Company and its Subsidiaries of and from any and
all claims, demands, agreements, contracts, covenants, promises, actions,
suits, causes of action, obligations, controversies, debts, costs, expenses,
accounts, damages, judgments, losses and liabilities of whatever kind or
nature, at law or in equity or otherwise, whether known or unknown, which
against either the Company or any Subsidiary it, he or she may have had, now
has or can, shall or may now or in the future have, for or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the
Closing Date, except for (a) claims for any accrued but unpaid salary or fees
due any Seller Releasor or an affiliate thereof (all of which shall be
reflected as Debts on the Closing Financial Statements), (b) any amounts due
to any Seller Releasor pursuant to the written indemnity of the Company
delivered pursuant to Section 9.6(b) hereof, or (c) obligations of Buyer
under this Agreement and after the Closing Date, obligations of the Company
and the Subsidiaries to Seller under this Agreement.
8.10 Opinion of Counsel to Seller and Mrs. Banks. Buyer shall have
received the written opinions dated the Closing Date of Drinker Biddle & Reath
and Chariton and Keiser, counsel for Seller and Mrs. Banks, substantially in the
forms attached hereto as Exhibit I-1 and I-2, respectively.
<PAGE>
9. Conditions Precedent to Seller's Obligations. The obligations of
Seller under this Agreement to sell the Shares and the Interests are subject
to the fulfillment or satisfaction, prior to or at the Closing, of each of
the following conditions precedent:
9.1 Representations and Warranties; Performance of Obligations. All of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties as are by their terms qualified by materiality, which shall be true
and correct in all respects taking into account the materiality qualification
therein) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (or, if
expressly made as of any other date, as of such other date); all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by Buyer on or before the Closing Date shall have been
duly complied with, performed or satisfied in all material respects; and Seller
shall have received a certificate dated the Closing Date and signed by the
Chairman and Chief Executive Officer, President or any Vice President of Buyer
to the foregoing effects.
9.2 Legal Matters. No claim, action, suit, arbitration, investigation or
other proceeding shall be pending or shall have been brought which seeks to
restrain the transactions contemplated hereby; and no temporary restraining
order, preliminary or permanent injunction or other order issued by any court or
other governmental or regulatory official, body or authority restraining or
prohibiting the consummation of the transactions contemplated hereby shall be in
effect.
9.3 Third Party Consents. All consents and approvals from, and all filings
and registrations with, all courts, governmental agencies and bodies and other
third parties listed on Exhibit E hereto, shall have been obtained and made.
9.4 Closing Escrow Agreement. Buyer and the Escrow Agent shall have
executed and delivered the Closing Escrow Agreement.
9.5 Termination of Guarantees. Those guarantees of Seller listed on
Exhibit F hereto, that relate on the Closing Date to indebtedness for money
borrowed of the Company and its Subsidiaries which Buyer has elected (pursuant
to Section 8.7 hereof) to continue, shall have been terminated and Seller shall
have no further liabilities or obligations in connection therewith.
9.6 Release and Indemnity. (a) Effective as of the Closing Buyer shall and
shall have caused the Company and its Subsidiaries to deliver to each Seller
Releasor written releases from the Buyer, the Company and its Subsidiaries
pursuant to which the Buyer, the Company and each of its Subsidiaries shall
fully and forever remise, release, acquit and discharge such Seller Releasor of
and from any and all claims, demands, agreements, contracts, covenants,
promises, actions, suits, causes of action, obligations, controversies, debts,
costs, expenses, accounts, damages, judgments, losses and liabilities of
whatever kind or nature, at law or in equity or otherwise, whether known or
unknown, which against such Seller Releasor either the Buyer, the Company or any
Subsidiary may have had, now has or can, shall or may now or in the future have,
for or by reason of any matter, cause or thing whatsoever from the beginning of
the world to the Closing Date, except for obligations of Seller and Mrs. Banks
under this Agreement.
(b) Buyer shall have caused the Company and its Subsidiaries to confirm
their written agreement, in substantially the form attached as Exhibit J hereto,
(which may be entered into at Seller's direction prior to Closing) to indemnify
each person who is or was a director or officer of the Company or any
<PAGE>
Subsidiary, or is or was serving while a director or officer of the Company or
any Subsidiary at the request of the Company or such Subsidiary as a director,
officer, employee, agent, fiduciary or other representative of another
corporation for profit or not-for-profit, partnership, joint venture, trust,
employee benefit plan or other enterprise.
9.7 Opinion of Buyer's Counsel. Seller shall have received the written
opinions dated the Closing Date of Morgan, Lewis & Bockius LLP and Mesirov
Gelman Jaffe Cramer & Jamieson, counsel for Buyer, substantially in the form
attached hereto as Exhibit K-1 and Exhibit K-2, respectively.
9.8 Waiver. Seller shall have received the waiver referred to in
Section 2(d) executed by the Company and the Subsidiaries.
10. Indemnification.
10.1 Indemnification by Seller. From and after the Closing, Seller and
Mrs. Banks (subject to the Joinder hereto), jointly and severally, shall
reimburse, defend, indemnify and hold harmless Buyer from, against and in
respect of:
(a) any and all liabilities, losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, deficiencies, costs and
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and expenses) (collectively, "Claims") suffered, sustained, incurred or paid by
Buyer or any of its affiliates (including without limitation after the Closing
the Company and its Subsidiaries) in connection with, resulting from or arising
out of:
(i) subject to the proviso in the last sentence of Section 7.3, any
breach of any representation or warranty of Seller in this Agreement or
any certificate or other writing prepared in connection with the
transactions contemplated by this Agreement and delivered by or on behalf
of Seller, the Company or any Subsidiary in connection therewith;
(ii) any nonfulfillment of any covenant or agreement on the part
of Seller set forth in this Agreement or on the part of Mrs. Banks set
forth in the Joinder hereto;
(iii) any liability or obligations of which any of the persons
listed on Exhibit L hereto (after the inquiry referred to therein) has
actual knowledge on the date hereof (including without limitation
liabilities and obligations disclosed in the Schedules hereto on the date
hereof), relating to or arising out of the business, operations or assets
of the Company or any Subsidiary prior to or at the Closing and with
respect to the period prior to and ending with the Closing, including
without limitation any such liability or obligation to any former
shareholder of the Company or any Subsidiary, except that Buyer shall not
be entitled to indemnification under this Section 10.1(a)(iii) for
liabilities or obligations resulting from or arising out of the
Kalmanowicz Litigation;
(iv) any liability or obligation, of which any of the persons listed
on Exhibit L hereto (after the inquiry referred to therein) acquire actual
knowledge between the date hereof and the Closing (including without
limitation liabilities and obligations disclosed in any amendment to the
Schedules hereto between the date hereof and the Closing), relating to or
arising out of the business, operations or assets of the Company or any
Subsidiary prior to or at the Closing and with respect to the period prior
to and ending with the Closing, including without limitation any such
liability or obligation to any former shareholder of the Company or any
Subsidiary;
<PAGE>
(v) any liability or obligation relating to or arising out of the
business, operations or assets of the Company or any Subsidiary at or
prior to the Closing and with respect to the period prior to and ending
with the Closing, including without limitation any such liability or
obligation to any former shareholder of the Company or any Subsidiary,
except for liabilities and obligations subject to Sections 10.1(a)(iii)
and 10.1(a)(iv) hereof, provided that no Claim Notice (as hereinafter
defined) may be given in respect of a claim for indemnification under this
Section 10.1(a)(v) after March 31, 1999;
(vi) any liability of the Company or any Subsidiary for any Taxes of
the Company or any Subsidiary (including without limitation Taxes with
respect to the Tax Returns described in Section 7.7 hereof, but excluding
1996 capital stock taxes) with respect to any period or portion thereof
ending on, immediately before or with the Closing (or for any period
beginning before and ending after the Closing Date, to the extent
allocable to the portion of such period beginning before and ending on the
Closing), except to the extent such Taxes are accrued for on the final
Closing Financial Statements or are attributable to elections under
applicable Tax Laws or transactions entered into by the Company or a
Subsidiary after the Closing or by the Buyer, provided that no Claim
Notice may be given in respect of a claim for indemnification under this
Section 10.1(a)(vi) commencing 30 days after the applicable statute of
limitations in respect of the Taxes for which indemnification is sought
has expired, unless an extension or waiver of such statute of limitations
has been agreed to by Seller; or
(vii) the real property or properties (including without limitation
all improvements located thereon) comprising the 400 Acres, or the
ownership or conveyance thereof, (including without limitation any Claims
which involve an Environmental Claim or which otherwise relate to or
involve a claim, liability or obligation which arises out of or is based
upon, any Environmental Law whether such liability or obligation relates
to or arises out of any activity occurring, condition existing, omission
to act or other matter with respect to such real property or properties
existing before or after the Closing); and
(b) any and all actions, suits, claims, proceedings, investigations, costs
and other expenses (including without limitation reasonable attorneys' fees and
expenses) incident to the enforcement of this Section 10.1.
10.2 Indemnification by Buyer. Except as set forth in Section 7.6 hereof,
from and after the Closing, Buyer shall reimburse, defend, indemnify and hold
harmless Seller (and, solely with respect to Section 10.2(a)(iv) hereof, Mrs.
Banks) from, against and in respect of:
(a) any and all Claims suffered, sustained, incurred or paid by Seller in
connection with, resulting from or arising out of:
(i) any breach of any representation or warranty of Buyer in this
Agreement or any certificate or other writing delivered by or on behalf of
Buyer in connection herewith;
(ii) any nonfulfillment of any covenant or agreement on the part
of Buyer set forth in this Agreement;
(iii) the operation of the Company and its Subsidiaries after the
Closing (except to the extent that any such Claims relate to a pre-Closing
agreement, commitment, action, other circumstance or condition or other
matter for which Buyer is entitled to indemnification from Seller and Mrs.
Banks under Section 10.1 hereof);
<PAGE>
(iv) any liability or obligation which relates to, or which involves
an Environmental Claim or otherwise relates to or involves a claim,
liability or obligation which arises out of or is based upon, any
Environmental Law whether such liability or obligation relates to or
arises out of any activity occurring, condition existing, omission to act
or other matter existing before or after the Closing; provided that this
Section 10.2(a)(iv) shall not apply to any matter that is the subject of
Section 10.1(a)(vii) hereof); and
(b) any and all actions, suits, claims, proceedings, investigations, costs
and other expenses (including without limitation reasonable attorneys' fees and
expenses) incident to the enforcement of this Section 10.2.
As used in this Agreement:
"Environmental Claims" means any and all administrative or judicial actions,
suits, orders, claims, liens, notices, investigations, violations or
proceedings related to any applicable Environmental Law or any
Environmental Permit brought, issued or asserted by a governmental
authority or third party for compliance, damages, penalties, removal,
response, remedial or other action pursuant to any applicable
Environmental Law or for personal injury or property damage resulting from
a Hazardous Material at, to or from any facility or property of the
Company or any Subsidiary or any facility or property at which the Company
or any Subsidiary disposed or arranged for the disposal or treatment (with
a transporter or otherwise) of Hazardous Materials, including without
limitation past, present or future employees of the Company or any
Subsidiary seeking damages for exposure to Hazardous Materials;
(ii) "Environmental Laws" means all federal, state and local laws,
statutes, ordinances, codes, rules and regulations related to protection
of the environment, natural resources, safety or health or the handling,
use, recycle, generation, treatment, storage, transportation or disposal
of Hazardous Materials, and any common law cause of action relating to the
environment, natural resources, safety, health or the management of or
exposure to Hazardous Materials including without limitation,
Comprehensive Environmental Response, Compensation, and Liability act of
1980, as amended (42 U.S.C. "6901 et seq.) Hazardous Materials
Transportation Act, as amended, 49 U.S.C. "1801, et seq.), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. "9601, et seq., the
Clean Water Act, as amended, (33 U.S.C. "1251, et seq.), the Clean Air
Act, as amended, 42 U.S.C. "7401, et seq.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. "136, et seq.), the Toxic
Substances Control Act (15 U.S.C. "2601, et seq.), the Surface Mining
Control and Reclamation Act of 1977, (30 U.S.C. "1201, et seq.), Emergency
Planning and Community Right to Know Act of 1986, (42 U.S.C. "11001, et
seq.), the Occupational Safety and Health Act, as amended, (29 U.S.C.
"651, et seq.), Pennsylvania Solid Waste Management Act of July 7, 1980,
(35 P.S. "6018.101-6018.1003), the Low Level Radioactive Waste Disposal
Act of February 9, 1988 (35 P.S. "7110.1 et seq.), the Infectious and
Chemotherapeutic Waste Act of July 13, 1988, (35 P.S. "6019.1 et seq.),
Municipal Waste Planning, Recycling and Waste Reduction Act of July 28,
1988, (53 P.S. "4000.100 et seq.), the Hazardous Sites Cleanup Act of
October 18, 1988, (35 P.S. "6020.101 et seq.), the Clean Streams Law of
June 22, 1937, (35 P.S. "691.1-691.1001) the Air Pollution Control Act of
January 8, 1960, (35 P.S. "4001-40159), the Surface Mining Conservation &
Reclamation Act of May 31, 1945, (52 P.S. "1396.1-1396.31), the Noncoal
Surface Mining Conservation & Reclamation Act, (52 P.S. "3301-3326), and
the Dam Safety and Encroachments Act of November 26, 1978, (32 P.S.
"693.1-693.27);
<PAGE>
(iii) "Environmental Permit" means all permits, licenses, approvals,
authorizations or consents required by any governmental authority under
any applicable Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a governmental
authority under any applicable Environmental Law; and
(iv) "Hazardous Material" means any hazardous, toxic or radioactive
substance, material or waste which is regulated as of the Closing Date or
thereafter by any state or local governmental authority or the United
States of America, including without limitation any material or substance
that is defined or designated a "hazardous substance", "hazardous waste",
"regulated substance", or "solid waste" under Environmental Laws or
petroleum, petroleum products or wastes, asbestos, or polychlorinated
biphenyls or otherwise regulated under Environmental Laws.
10.3 Limitations on Liability. (a) Except as otherwise provided in Section
10.5(b) hereof and except that this limitation shall not apply to any
indemnification claim arising under or with respect to any of Sections A.1.1,
A.1.2, A.1.3, A.1.5, A.1.6(a) (the first sentence only), (b) and (c), A.1.8 and
11.4(a) hereof, neither Seller nor Mrs. Banks shall be liable to Buyer under
Section 10.1 hereof for any breach of any representation or warranty or for any
claim under Section 10.1(a)(v) until and only to the extent that the amount for
which it or she would otherwise (but for this provision) be liable to Buyer for
all such breaches exceeds in the aggregate $350,000 (the "Deductible").
(b) Except as otherwise provided in Section 10.5 hereof and except that
this limitation shall not apply to any indemnification claim arising under or
with respect to any of Sections A.2.2, A.2.3, A.2.7 and 11.4(b) hereof, Buyer
shall not be liable to Seller under Section 10.2 hereof for any breach of any
representation or warranty until and only to the extent that the amount for
which it would otherwise (but for this provision) be liable to Seller for all
such breaches exceeds in the aggregate the Deductible.
(c) It is specifically acknowledged and agreed by Buyer that except for
Seller's obligations under Sections 7.6 and 10.1 hereto and the representations
set forth in Section A.1.22 hereto, Seller shall have no liability or obligation
of any kind with respect to Environmental Claims or Environmental Laws including
without limitation with respect to the Eastside Landfill, Plains Township,
Luzerne County, Wilkes Barre, Pennsylvania.
10.4 Survival of Representations and Warranties; Closing Date
Representations. The representations and warranties of Seller or Buyer in this
Agreement or in any certificate or other writing prepared in connection with the
transactions contemplated by this Agreement shall survive the Closing until
March 31, 1998 and shall thereafter terminate and be of no further force or
effect and no indemnification claim can be made in respect of such
representations or warranties after such termination, except that (a) all
representations and warranties relating to Taxes and Tax Returns (as defined in
Section A.1.13 hereof) shall survive the Closing for the period of the
applicable statutes of limitation plus any extensions or waivers thereof agreed
to by Seller and shall thereafter terminate, (b) all representations and
warranties set forth in Sections A.1.1, A.1.2, A.1.3, A.1.5, A.1.6(a) (the first
sentence only), (b) and (c), A.2.2, A.2.3, A.2.4 and 11.4 hereof shall survive
the Closing for six years and shall thereafter terminate and be of no further
force or effect and no indemnification claim can be made in respect of such
representations or warranties after such termination, (c) the representations
and warranties set forth in Section A.1.22 and A.2.7 shall survive the Closing
until March 31, 1999 and shall thereafter terminate, and (d) any representation
or warranty as to which a Claim Notice shall have been given in accordance with
Section 10.7 (including a contingent claim, subject to the limitation on
contingent claims in Section 10.7(c)) during the survival period shall continue
<PAGE>
in effect with respect to the claim, until such claim shall have been finally
resolved or settled. The parties hereto acknowledge that the representations and
warranties set forth herein are made as of the date hereof and, if Closing
occurs, are made once again as of the date thereof by delivery of the
certificates referred to in Sections 8.1 and 9.1 hereof (as set forth in such
Sections).
10.5 Exclusive Remedy; Exceptions to Limitations. (a) After Closing, the
indemnification provided under this Section 10 shall be the exclusive remedy of
the parties hereto for any breach or non-compliance with any of the terms of
this Agreement, except to the extent otherwise provided in the Closing Escrow
Agreement.
(b) To the extent otherwise applicable to Claims, the Deductible and the
caps on indemnification described in Section 10.9 shall not apply to Claims
originating prior to March 31, 1999 (and for which the initial Claim Notice with
respect to the matter has been delivered prior to March 31, 1999) in respect of
which there has been a willful misrepresentation, willful breach of warranty or
willful failure to fulfill any agreement or covenant set forth herein by the
Indemnifying Party (as herein defined) in respect of such Claim. For purposes of
this Agreement, "willful" means (i) with respect to a representation or
warranty, making such representation or warranty knowing it to be false and
intending it to be a misrepresentation or breach of warranty under this
Agreement, and (ii) with respect to an agreement or covenant, knowingly failing
to fulfill an agreement or covenant with the intent to breach an agreement or
covenant under this Agreement. The knowledge which is a prerequisite for a
finding of willfulness, as defined above, shall in respect to Seller, the
Company, the Subsidiaries and Mrs. Banks refer solely to the actual personal
knowledge of Mrs. Banks after due inquiry of Jerry B. Chariton and Herbert A.
Grayek, Jr. (with Mrs. Banks being entitled to rely on certifications by Messrs.
Chariton and Grayek in response to such inquiry).
10.6 Payment of Indemnification Obligations. In the event that Seller (or
Mrs. Banks) or Buyer is required to make any payment under this Section 10, such
party shall promptly pay Buyer or Seller, as the case may be, the amount of such
indemnity obligation. Seller's and Mrs. Banks' indemnification obligations shall
be paid, in the first instance, out of funds held under the Closing Escrow
Agreement until such funds are exhausted. If there should be a dispute as to the
amount of such indemnity obligation, Seller (or Mrs. Banks) or Buyer, as the
case may be, shall nevertheless pay when due such portion, if any, of the
obligation as shall not be subject to dispute. Disputed amounts shall be paid
when and as resolved by agreement or by a final and unappealable decision of a
court of competent jurisdiction.
10.7 Indemnification Procedure. All claims for indemnification under
Sections 10.1 and 10.2 hereof shall be asserted and resolved as follows:
(a) In the event that any Claim for which a party (the "Indemnifying
Party") may be liable to the other party (the "Indemnified Party") hereunder is
asserted against an Indemnified Party by a third party, the Indemnified Party
shall with reasonable promptness notify the Indemnifying Party of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such Claim) (the "Claim Notice"). The Indemnifying Party
shall have 30 days from the receipt of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (i) whether or not the Indemnifying Party disputes
the Indemnifying Party's liability to the Indemnified Party hereunder with
respect to such Claim and (ii) whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to defend against such
Claim. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party against such Claim, the Indemnifying Party shall have the
right to defend by appropriate proceedings, which proceedings shall be promptly
<PAGE>
settled or prosecuted by the Indemnifying Party to a final conclusion. The
Indemnifying Party may not settle any Claim without the consent of the
Indemnified Party, which consent may not be unreasonably withheld. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at the Indemnified Party's sole
cost and expense. If the Indemnifying Party elects not to defend the Indemnified
Party against such Claim, whether by not giving the Indemnified Party timely
notice as provided above or otherwise, then the Indemnified Party, without
waiving any rights against the Indemnifying Party, may settle or defend against
any such Claim in the Indemnified Party's sole discretion and, if it is
ultimately determined that the Indemnifying Party is responsible therefor under
this Section 10, then the Indemnified Party shall be entitled to recover from
the Indemnifying Party the amount of any settlement or judgment and all
indemnifiable costs and expenses of the Indemnified Party with respect thereto.
If the Indemnifying Party has defended or settled any such Claim and it is
ultimately determined that the Indemnifying Party is not responsible therefor
under this Section 10, the Indemnified Party shall promptly pay to the
Indemnifying Party the amount of the judgment or settlement paid by the
Indemnifying Party.
(b) In the event the Indemnified Party should have an indemnification
claim against the Indemnifying Party hereunder which does not involve a Claim
being asserted against or sought to be collected by a third party, the
Indemnified Party shall with reasonable promptness send a Claim Notice with
respect to such claim to the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within the Notice Period that the Indemnifying
Party disputes such indemnification claim, the amount of such indemnification
claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder.
(c) Nothing herein shall be deemed to prevent the Indemnified Party from
making an indemnification claim hereunder for contingent Claims provided the
Claim Notice sets forth the specific basis for any such contingent Claim to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such an indemnification claim may be made, and the Indemnified Party sets
forth with reasonable detail the basis for such belief, provided that if no such
indemnification claim is in fact made within one year after the contingent Claim
relating thereto is made such Claim shall not be qualified for indemnification
hereunder. The Indemnified Party's failure to give reasonably prompt notice to
the Indemnifying Party of any actual, threatened or contingent Claim which may
give rise to a right of indemnification hereunder shall not relieve the
Indemnifying Party of any liability which the Indemnifying Party may have to the
Indemnified Party unless the failure to give such notice materially and
adversely prejudiced the Indemnifying Party. The procedures set forth in
Sections 10.7(a) and (b) hereof shall not apply to Claims of an Indemnified
Party which are covered by the applicable Deductible, provided that the
procedures set forth in Section 10.7(a) shall apply to any Claim where the
estimated amount thereof approximates $150,000 or more.
(d) In connection with any indemnification claim, the Indemnified Party
shall give the Indemnifying Party reasonable access to the books, records and
assets of the Indemnified Party which relate to the act, omission or occurrence
giving rise to such Claim and the right, upon prior notice during normal
business hours, to interview any appropriate personnel of the Indemnified Party
with respect thereto and Indemnified Party otherwise shall cooperate with
Indemnifying Party (and with its insurance company, if applicable) in defending
a third party claim.
10.8 Mitigation. In computing the amount to be paid pursuant to this
Article 10, the indemnification shall be for the net amount of a loss after
giving effect to anything which directly mitigates the loss and after taking
into account insurance proceeds or any other recovery resulting from the loss.
If, after the payment of any indemnification hereunder, the amount of a loss
<PAGE>
shall be reduced beyond the amount that an indemnification obligation has
previously been reduced pursuant to the preceding sentence, then the amount of
such additional reduction in loss (less any expenses incurred in connection with
such reduction) shall promptly be repaid to the party that made the payment to
which the reduction relates.
10.9 Caps on Indemnification. (a) Except as otherwise provided in Section
10.5(b) hereof, the aggregate amount of indemnification payments from Seller
(and Mrs. Banks) under Sections 10.1(a)(i) (except as otherwise provided below
in Section 10.9(c)), 10.1(a)(ii), 10.1(a)(iii) and 10.1(a)(vi) hereof (and
related provisions of this Section 10), or from Buyer under Section 10.2(a)(i)
(except that no cap shall apply to a breach of a representation or warranty
under Section A.2.7), 10.2(a)(ii) or 10.2(a)(iii) (except in the case of (a)(ii)
or (a)(iii) to the extent relating to an indemnification obligation under
Section 10.2(a)(iv) as to which there is no cap) hereof, (whether in the form of
cash payments from the Indemnifying Party, payments from funds held under the
Closing Escrow Agreement or offsets against sums due to the Indemnifying Party)
shall not exceed $8,000,000 less, in the case of Seller (and Mrs. Banks), any
payments made by Seller (or Mrs. Banks) under Section 10.1(a)(iv), to the extent
such amount exceeds $250,000 in the aggregate, and Section 10.1(a)(v).
(b) Except as otherwise provided in Section 10.5 hereof, the aggregate
amount of indemnification payments from Seller (and Mrs. Banks) under Section
10.1(a)(iv) hereof and related provisions of this Section 10 (whether in the
form of cash payments from the Indemnifying Party, payments from funds held
under the Closing Escrow Agreement or offsets against sums due to the
Indemnifying Party) shall not exceed an amount equal to $1,000,000 less any
payments (up to an aggregate of $1,000,000) made by Seller (or Mrs. Banks) under
Section 10.1(a)(v).
(c) Except as otherwise provided in Section 10.5 hereof, the aggregate
amount of indemnification payments from Seller (and Mrs. Banks) under Section
10.1(a)(v) hereof or in respect of a misrepresentation under Section A.1.10 (or
under A.1.27, solely to the extent of a liability or obligation that also gives
rise to a claim for misrepresentation under Section A.1.10) and related
provisions of this Section 10 (whether in the form of cash payments from the
Indemnifying Party, payments from funds held under the Closing Escrow Agreement
or offsets against sums due to the Indemnifying Party) shall not exceed an
amount equal to $2,000,000 less any payments made by Seller (or Mrs. Banks)
under Section 10.1(a)(iv) to the extent such payments exceed $250,000 in the
aggregate.
(d) There is no limit on the aggregate amount of indemnification payments
from Seller (and Mrs. Banks) under Section 10.1(a)(vii) hereof.
11. Miscellaneous.
11.1 Termination. This Agreement shall terminate with the effect herein
provided automatically and without any notice or action whatever if the Closing
shall not have occurred on or before 6:00 p.m. Philadelphia local time on
November 30, 1996 or, if applicable under Section 2(a) hereof, December 15,
1996. This Agreement may be terminated.
(a) by mutual consent of Buyer and Seller; or
(b) by Seller, on the one hand, or by Buyer, on the other hand, if there
is or has been a material breach or material default on the part of the other
party (i) of any of the representations and warranties contained herein or (ii)
in the due and timely performance of any of the covenants or agreements
<PAGE>
contained herein which continues for more than five business days after notice
of such material breach or material default.
11.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 11.1 hereof, this Agreement shall forthwith become
void (except for this Section 11.2 and Sections 7.4(a), 11.4 and 11.11 hereof
and the Deposit Escrow Agreement), and there shall be no liability or obligation
on the part of any party hereto (except, to the extent relevant, with respect to
such excluded sections). Notwithstanding the foregoing:
(a) if such termination is by Seller under Section 11.1(b) hereof, then
Seller shall be entitled to the Deposit and, in addition, Buyer shall be liable
to Seller for (i) reasonable expenses incurred by Seller in connection with this
Agreement and the transactions contemplated hereby, (ii) other monetary damages
in accordance with applicable law and (iii) all Seller's reasonable costs and
other expenses (including without limitation attorneys' fees and expenses)
incident to the enforcement of this Section 11.2(a); and
(b) if such termination is by Buyer under Section 11.1(b) hereof, then
Seller shall be liable to Buyer for (i) reasonable expenses incurred by Buyer in
connection with this Agreement and the transactions contemplated hereby, (ii)
other monetary damages in accordance with applicable law and (iii) all Buyer's
reasonable costs and other expenses (including without limitation attorneys'
fees and expenses) incident to the enforcement of this Section 11.2(b) .
11.3 Expenses; Sales and Transfer Taxes. (a) Buyer shall pay its expenses
incidental to the preparation hereof and, through the Closing, the carrying out
of the provisions hereof and the consummation of the transactions contemplated
hereby. The Company may pay Seller's expenses incidental to the preparation
hereof and, through the Closing, the carrying out of the provisions hereof and
the consummation of the transactions contemplated hereby, but, if it does so,
any amounts owing in respect thereof at the time of the Closing shall be fully
reflected in the Closing Financial Statements. The parties hereto shall pay
their own expenses incidental to the carrying out of the provisions hereof after
the Closing and, except as provided in Section 10.2 hereof, no such expenses of
Seller, including without limitation Seller's legal fees and expenses, shall be
<PAGE>
paid by or out of any of the assets or properties of Buyer, the Company or any
Subsidiary.
(b) Seller and Buyer each shall pay one-half of all documentary, stamp,
sales, transfer, excise and other taxes incurred in connection with this
Agreement and the transactions contemplated hereby, and shall equally share the
cost of and jointly participate in the preparation and filing of all necessary
tax returns and other documentation with respect to all such documentary, stamp,
sales, transfer, excise and other taxes, provided that if Seller's payment
obligation under the foregoing clause in respect of real estate transfer taxes
would otherwise exceed $140,000, Seller's payment obligation in respect of such
taxes shall be capped at $140,000 and Buyer shall pay the balance of all such
real estate transfer taxes.
11.4 No Brokers' or Finders' Fees. (a) Seller represents and warrants to
Buyer that all negotiations relative to this Agreement have been carried on by
it directly without the intervention of any person who may be entitled to any
brokerage or finder's fee or other commission in respect hereof or the
consummation of the transactions contemplated hereby, except for a person whose
fees and expenses are the sole responsibility of Seller, and Seller agrees to
indemnify and hold harmless Buyer against any and all Claims which may be
asserted against or incurred or paid by it or any of its affiliates (including
without limitation after the Closing the Company and its Subsidiaries) as a
result of any dealings, arrangements or agreements of Seller, the Company or any
Subsidiary with any such person.
(b) Buyer represents and warrants to Seller that all negotiations relative
to this Agreement have been carried on by Buyer directly without the
intervention of any person who may be entitled to any brokerage or finder's fee
or other commission in respect hereof or the consummation of the transactions
contemplated hereby, and Buyer agrees to indemnify and hold harmless Seller
against any and all Claims which may be asserted against or incurred or paid by
Seller, any legal representative of Seller or other person making payment on
behalf of Seller as a result of Buyer's or any of its affiliates' dealings,
arrangements or agreements with any such person.
11.5 Contents of Agreement; Parties in Interest; Etc. This Agreement sets
forth the entire understanding of the parties hereto and Mrs. Banks with respect
to the transactions contemplated hereby. It shall not be amended or modified
except by a written instrument duly executed by the parties hereto and Mrs.
Banks. Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral and
including without limitation the letter dated June 14, 1996 (as amended), are
superseded by this Agreement.
11.6 Assignment and Binding Effect. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the beneficiaries, successors and assigns of the parties hereto
and Mrs. Banks. Prior to the Closing, Buyer may not assign any of its rights or
obligations hereunder to any person or entity, except that Buyer (without
relieving Buyer of its obligations hereunder) may assign its right to receive
the Shares and Interests to one or more wholly-owned direct or indirect
subsidiaries of Buyer designated in writing at least five (5) days prior to
Closing. After the Closing, either party may assign any of its rights and
obligations hereunder, provided that no such assignment of obligations shall
relieve the assigning party of any of its obligations hereunder.
11.7 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
11.8 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt and promptly confirmed by certified mail
or recognized overnight courier service), by registered or certified mail,
postage prepaid, or by recognized overnight courier service, as follows:
<PAGE>
If to Buyer, to: If to Seller or Mrs. Banks, to:
Penn National Gaming, Inc. Mrs. Virginia H. Banks
825 Berkshire Boulevard, Suite c/o Chariton & Keiser
203 138 South Main Street
Wyomissing, PA 19620 P.O. Box 220
Attention: Peter M. Carlino Wilkes-Barre, PA 18703
Chairman and Chief Executive Attention: Jerry B. Chariton,
Officer Esq.
Telefax: 610-376-2842 Telefax: 717-824-3580
with a required copy to:
with a required copy to:
Drinker Biddle & Reath
Morgan, Lewis & Bockius LLP 1345 Chestnut Street
2000 One Logan Square Philadelphia, PA 19107
Philadelphia, PA 19103 Attention: Howard A. Blum, Esq.
Attention: Stephen M. Goodman, Telefax: 215-988-2757
Esq.
Telefax: 215-963-5299
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered or telefaxed, five
business days after the date mailed, one business day after dispatch by
recognized overnight courier service or, if given by any other means, shall be
deemed given only when actually received by the addressee.
11.9 No Public Announcements. Prior to the Closing (or if there shall not
be a Closing), neither Buyer, Seller nor any of their respective affiliates
shall issue or cause the publication of any press release or other public
announcement with respect to this Agreement or any of the transactions
contemplated hereby without the prior consultation of the other party, except as
may be required by law or by any listing agreement with a national securities
exchange. Without the prior written consent of Seller, no such release or
announcement of Buyer shall contain any information regarding Seller, the
Company or any Subsidiary treated as confidential in Section 7.4(a) hereof
except the names of the Seller and the Company, the purchase price and the
nature, location and names of the principal facilities of the Company and its
Subsidiaries. Buyer recognizes that Seller has an interest in maintaining its
relationships with employees, horsemen, trainers, financial institutions and the
communities in which the Company or its Subsidiaries operate, and nothing in
this Section 11.9 or elsewhere herein shall restrict Seller in the manner or
content of its communications with such persons concerning the transactions
contemplated herein and matters related hereto.
11.10 Specific Performance. Each party hereto acknowledges that the other
party will be irreparably harmed and that there will be no adequate remedy at
law for any violation by the other party of certain covenants and agreements
contained in this Agreement. Accordingly, if all conditions set forth in
Sections 8 and 9 hereof have been timely satisfied (or in the case of Section 8,
waived by Buyer), and Seller refuses to consummate Closing, Buyer may be
entitled, in addition to any other remedies which shall be available upon such
breach, to seek injunctive relief to restrain such breach of, or to compel
Seller to perform, and otherwise to specific performance of, Seller's obligation
to consummate Closing; and Seller shall be entitled to seek injunctive remedies
and/or remedies at law to prevent or redress any breach of Section 7.4(a)
hereof. Otherwise, in the event Closing shall not have occurred and this
<PAGE>
Agreement is terminated, remedies shall be limited to the enforcement of
obligations, if any, expressly set forth (or referred to) in Section 11.2 hereof
or in the Deposit Escrow Agreement. Remedies following Closing shall be
restricted as set forth in Section 10.
11.11 Pennsylvania Law to Govern. This Agreement shall be governed by
and interpreted and enforced in accordance with the laws of the Commonwealth
of Pennsylvania.
11.12 No Benefit to Others; Persons Having Knowledge. The representations,
warranties, covenants and agreements contained in this Agreement are for the
sole benefit of the parties hereto and their beneficiaries (including without
limitation with respect to Seller, Mrs. Banks), successors and assigns, and they
shall not be construed as conferring any rights on any other persons. It is
hereby acknowledged and agreed by Buyer that no reference herein to the
knowledge of the persons identified on Exhibit L hereto, or to any
certifications delivered to Mrs. Banks by any such person, shall give rise to
any liability on the part of such person to Buyer (other than as specifically
set forth herein with respect to Seller, or as specifically set forth in the
Joinder with respect to Mrs. Banks), in respect of any representation, warranty
or other matter hereunder or any certification referred to herein, and Buyer
agrees not to bring an action against any such person to the contrary.
11.13 Headings; Gender; "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation hereof.
Words used herein, regardless of the number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires. Any
reference to a "person" herein shall include an individual, firm, corporation,
partnership, trust, estate, governmental authority or body, association,
unincorporated organization or any other entity.
11.14 Further Assurances. At any time and from time to time after the
Closing, the parties agree to cooperate with each other, to execute and deliver
such other documents, instruments of transfer or assignment, files, books and
records and do all such further acts and things as may be reasonably required to
carry out the intent of the parties hereunder with respect to the transfer of
the Shares and the Interests.
11.16 Exhibits; Appendix; Schedules. The Exhibits hereto, the Joinder
hereto, Appendix A hereto and the Schedules referred to herein and therein are
intended to be and hereby are specifically made a part of this Agreement.
11.17 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstance in any other jurisdiction or to other persons or
circumstances in any jurisdiction, shall not be affected thereby, and to this
end the provisions of this Agreement shall be severable.
11.18 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
12. Title Matters. (a) Buyer may order a title commitment or commitments
with respect to the Real Property (the "Title Commitment") from a title company
which will insure fee simple title to the Real Property at Closing (the "Title
<PAGE>
Company") through an ALTA Owners Form of title insurance policy in the form that
is customary in Pennsylvania (the "Owners Title Policy"). Buyer may also order
surveys for the Real Property ("Surveys") and shall be given access thereto for
the preparation of the Surveys.
(b) Subject to paragraph (c), in the event the Title Commitments or the
Surveys identify any matter which is unacceptable to Buyer, Buyer shall have the
right to terminate this Agreement prior to the thirtieth day after the execution
hereof ("Title Review Period") by written notice to Seller ("Termination
Notice"), in which event the Deposit shall be paid to Buyer and, thereafter, the
parties shall have no further rights or obligations hereunder except for
obligations which expressly survive the termination of this Agreement. In the
event Buyer does not deliver the Termination Notice before the expiration of the
Title Review Period, Buyer shall take title to the Real Property subject to the
Permitted Exceptions (as defined in paragraph (c)) and, the matters identified
in the Title Commitments and the Surveys without any reduction of or credit
against the purchase price for the Shares and the Interests. Between the
expiration of the Title Review Period and Closing, Buyer shall not cause or
permit any change in title to the Real Property.
(c) Title to the Real Property at Closing shall be good and marketable
(except to the extent of the Kalmanowicz Litigation regarding the Real Property
which has been disclosed to Buyer), and further shall be subject to (i)
applicable zoning and building ordinances and governmental land use regulations,
(ii) the lien of taxes not yet due and payable, (iii) any encumbrances or
restrictions which do not materially interfere with the use of the respective
parcel of Real Property as it is currently being used, and (iv) reservation of
subsurface rights (the foregoing exceptions described in clauses (i) through
(iv) are, collectively, the APermitted Exceptions@). Buyer shall not be entitled
to terminate this Agreement because of any Permitted Exception. At Closing
Seller shall discharge all liens and encumbrances affecting the Real Property
which can be discharged by the payment of money other than liens and
encumbrances relating to indebtedness that Buyer has elected to have continued
under Section 8.7 hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Purchase
Agreement on the date first written.
ESTATE OF JOSEPH B. BANKS
By /s/ Virginia H. Banks
As its Executrix
PENN NATIONAL GAMING, INC.
Attest:
/s/ Robert S. Ippolito By /s/ Peter M. Carlino
Name: Robert S. Ippolito As its Chairman and Chief
Title: Secretary/ Treasurer
<PAGE>
JOINDER OF VIRGINIA H. BANKS
To induce Buyer to enter into this Purchase Agreement, the undersigned, a
beneficiary of Seller, intending to be legally bound, hereby joins in this
Purchase Agreement for the sole purpose of confirming her indemnity obligations
under Sections 10 and acknowledging and agreeing to Sections 11.5, 11.6, 11.8
and 11.11 of the Purchase Agreement; provided, however, that, notwithstanding
any provision in the Purchase Agreement to the contrary, no indemnity claim may
be asserted or enforced against the undersigned unless (i) the amount due from
Seller or the undersigned under Section 10 shall have been established under
Section 10, by agreement of the parties or by a final and unappealable
determination of a court of competent jurisdiction, (ii) the amount deposited in
escrow pursuant to the Closing Escrow Agreement shall have been exhausted or
shall be insufficient to satisfy such claim in full and (iii) Seller shall not
have made payment in full immediately upon demand.
Witness:
/s/ Jennifer H. Banks /s/ Virginia H. Banks
- ------------------------ ------------------------
VIRGINIA H. BANKS
AGREED AND ACCEPTED:
ESTATE OF JOSEPH B. BANKS
By /s/ Virginia H. Banks
As its Executrix
PENN NATIONAL GAMING, INC.
Attest:
By /s/ Peter M. Carlino /s/ Robert S. Ippolito
As its Chairman and Chief Executive Officer Name:Robert S. Ippolito
Title:Secretary/Treasurer
<PAGE>
Appendix A
Representations and Warranties
Terms used in this Appendix A but not defined herein shall have the
meanings ascribed thereto in the forepart of this Agreement.
A.1 Representations and Warranties of Seller. For purposes of this Section
A.1, references that limit representations and warranties to "the knowledge of
the Company, the Subsidiaries and Seller" and all equivalent phrases shall be
deemed to refer solely to the actual knowledge of the persons listed on Exhibit
L hereto (after the inquiry referred to therein). Subject to the foregoing,
Seller represents and warrants to Buyer as follows:
A.1.1 Share and Interest Ownership; Authority. Joseph H. Banks is the
lawful owner of record of, and Seller owns beneficially and will as of the
Closing own of record, all of the issued and outstanding shares of capital stock
of the Company (previously defined as the "Shares") and all of the outstanding
limited partnership interests of the Partnerships (previously defined as the
"Interests"), in each case (except as set forth on Schedule A.1.1 hereto and
except that ownership of the Shares and the Interests is subject to securities
laws and laws applicable to "licensed corporations" (as defined in the
Pennsylvania Act) and owners of "race tracks" or "non primary locations" (as
defined in the Pennsylvania Act)) free and clear of all pledges, liens,
encumbrances, claims and other charges and restrictions thereon of every kind,
including without limitation any agreements, subscriptions, options, warrants,
calls, commitments or rights (contingent or otherwise) of any character granting
to any person any interest in or right to acquire from Seller at any time, or
upon the happening of any stated event, any Shares or Interests. Each of Seller
and Mrs. Banks has full right, power and authority to execute, deliver and
perform this Agreement and the Joinder, as applicable. This Agreement and the
Joinder, as applicable, has been duly executed and delivered by each of Seller
and Mrs. Banks. This Agreement constitutes the legal, valid and binding
obligation of each of Seller and Mrs. Banks enforceable against it and her in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
affecting the enforcement of creditors' rights in general, and except that the
enforceability of this Agreement is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Notwithstanding the foregoing, no representation or warranty
is made that the execution, delivery or performance of this Agreement by Seller
complies with, or is permitted by, the Pennsylvania Race Horse Industry Reform
Act or the regulations promulgated thereunder or any Federal laws pertaining
primarily to the harness and horse racing industry ("Federal Laws").
A.1.2 Validity of Contemplated Transactions; Etc. The execution, delivery
and, except as set forth on Schedule A.1.2 hereto, performance hereof and of the
Joinder, as applicable, by each of Seller and Mrs. Banks, will not contravene or
violate (a) any law, rule or regulation to which Seller or Mrs. Banks is subject
or (b) any judgment, order, writ, injunction or decree of any court, arbitrator
or governmental or regulatory official, body or authority which is applicable to
Seller or Mrs. Banks; nor, except as set forth on Schedule A.1.2 hereto, will
such execution, delivery or performance violate, be in conflict with or result
in the breach (with or without the giving of notice or lapse of time, or both)
of any term, condition or provision of, or require the consent of any other
party to, any contract, commitment, agreement, lease, license, permit,
authorization, document or other understanding, oral or written, to or by which
Seller or Mrs. Banks is a party or otherwise bound or affected. Except as set
forth on Schedule A.1.2 hereto, no authorization, approval or consent of, and no
registration or filing with, any governmental or regulatory official, body or
authority is required in connection with the execution, delivery and performance
<PAGE>
hereof or of the Joinder, as applicable, by Seller or Mrs. Banks (it being
understood that no representation or warranty is made regarding any
authorization, approval, consent, registration or filing that may be required
under the Pennsylvania Race Horse Industry Reform Act or the regulations
promulgated thereunder).
A.1.3 No Claims Against the Company or any Subsidiary. Except as set forth
on Schedule A.1.3 hereto, Seller has no claim, either accrued, absolute,
contingent or otherwise and whether known or unknown, fixed or unfixed, choate
or inchoate, liquidated or unliquidated, secured or unsecured, against the
Company or any Subsidiary for any reason.
A.1.4 Corporate Existence. The Company is a corporation duly organized and
validly existing under the laws of the Commonwealth of Pennsylvania, and it has
all requisite corporate power and authority and all necessary licenses, permits
and authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith. The Company is not, and is not required to be, qualified as a foreign
corporation authorized to do business in any other jurisdiction.
A.1.5 Capitalization. (a) The total authorized capital stock of the
Company consists of (i) 100 shares of Class A common stock, par value $1.00 per
share, of which ten of such shares are issued and outstanding, and (ii) 300,000
shares of Class B common stock, par value $1.00 per share, of which 30,000 of
such shares are issued and outstanding, (all such issued and outstanding shares
have been previously defined as the "Shares"). All of the Shares have been duly
authorized and validly issued, are fully paid and non-assessable, were not
issued in violation of the terms of any agreement or other understanding binding
upon the Company and were issued in compliance with all applicable charter
documents of the Company and all applicable federal, state and foreign
securities laws, rules and regulations. No preemptive rights with respect to the
issuance of the Shares or any other capital shares of the Company have been
violated.
(b) There are no outstanding subscriptions, options, warrants, convertible
securities, calls, commitments, agreements or rights (contingent or otherwise)
of any character to purchase or otherwise acquire from the Company or Seller any
shares of, or any securities convertible into, the capital stock of the Company.
A.1.6 Subsidiaries; No Interest in Other Entities. (a) Pocono Downs, Mill
Creek Land, Inc., Northeast Concessions, Inc., Audio Video Concepts, Inc.,
Backside, Inc., The Downs Off-Track Wagering, Inc. and the Partnerships
(collectively, the "Subsidiaries") are the only direct or indirect subsidiaries
of the Company. Each of the Subsidiaries is a corporation or limited
partnership, as the case may be, duly organized and validly existing under the
laws of the Commonwealth of Pennsylvania, and each has all requisite corporate
or partnership power and authority and all necessary licenses, permits and
authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith. No Subsidiary is, or is required to be, qualified as a foreign
corporation or partnership authorized to do business in any other jurisdiction.
(b) The authorized, issued and outstanding capital stock or partnership
interests (as the case may be) of each Subsidiary are listed on Schedule A.1.6
hereto. All of such issued and outstanding shares of capital stock and
partnership interests have been duly authorized and validly issued, are in the
case of capital stock fully paid and non-assessable, were not issued in
violation of the terms of any agreement or other understanding binding upon any
Subsidiary and were issued in compliance with all applicable charter documents
of the Subsidiaries and all applicable federal, state and foreign securities
laws, rules and regulations. There are no outstanding subscriptions, options,
<PAGE>
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire from
any Subsidiary any shares or partnership interests of, or any securities
convertible into, the capital stock or partnership interests of any Subsidiary.
No preemptive rights with respect to the issuance of the capital shares or
partnership interests of any Subsidiary have been violated.
(c) (i) The Company is the lawful owner of record and beneficially of all
of the issued and outstanding shares of capital stock of Pocono Downs; (ii)
Pocono Downs is the lawful owner of record and beneficially of (A) all of the
issued and outstanding shares of capital stock of Mill Creek Land, Inc.,
Northeast Concessions, Inc., Audio Video Concepts, Inc., Backside, Inc. and The
Downs Off-Track Wagering, Inc. ("The Downs") and (B) all of the outstanding
general partnership interests of Peach Street; and (iii) The Downs is the lawful
owner of record and beneficially of all of the outstanding general partnership
interests of Lehigh; in each case (except as set forth on Schedule A.1.6 hereto)
free and clear of all pledges, liens, encumbrances, claims and other charges and
restrictions thereon of every kind (except that such ownership is subject to
securities laws and laws applicable to "licensed corporations" (as defined in
the Pennsylvania Act) and owners of "race tracks" or "non-primary locations" (as
defined in the Pennsylvania Act)), including without limitation any agreements,
subscriptions, options, warrants, calls, commitments or rights (contingent or
otherwise) of any character granting to any person any interest in or right to
acquire from the Company, Pocono Downs or The Downs at any time, or upon the
happening of any stated event, any shares of capital stock or any partnership
interest of any Subsidiary.
(d) Neither the Company nor any Subsidiary owns any shares of any
corporation other than as set forth in Section A.1.6(c) hereof and for passive
investments in publicly traded corporations and neither the Company nor any
Subsidiary has any other ownership or other investment interest, either of
record, beneficially or equitably, in any association, partnership, joint
venture or legal entity, except for bank, checking and money market accounts and
other cash equivalent investments and marketable securities of publicly traded
corporations.
A.1.7 Financial Statements. (a) Seller has delivered (or, with respect to
the Unaudited Financials, will deliver in accordance with Schedule A.1.7 hereto)
to Buyer prior to the date hereof (i) the consolidated balance sheets of Pocono
Downs and the other Subsidiaries as of December 31, 1995, 1994 and 1993 and the
related consolidated statements of income, retained earnings and cash flows for
the 12-month periods then ended, reported on without qualification by Robert
Rossi & Co., independent certified public accountants (the "Audited
Financials"), and (ii) the unaudited consolidated balance sheet of the Company
and its Subsidiaries as of June 30, 1996 (the "June Balance Sheet") and the
related consolidated statement of income for the six-month period then ended
(the "Unaudited Financials"; and together with the Audited Financials, the
"Company Financials"). The Company Financials (including without limitation all
notes thereto), correct and complete copies of all of which are attached hereto
(or will be attached hereto when delivered) as Schedule A.1.7, are in accordance
with the books and records of the Company and its Subsidiaries and present
fairly the consolidated financial position and assets and liabilities of the
Company and its Subsidiaries as of their respective dates and the results of
their consolidated operations for the periods then ended, in conformity with
generally accepted accounting principles applied on a consistent basis except,
in the case of the Unaudited Financials, for the omission of footnote
information, statements of retained earnings and cash flows, and normal year-end
audit adjustments which in the aggregate will not be material in terms of their
overall impact on the Company's financial statements. Notwithstanding the
foregoing, no representation or warranty is made regarding the Company's policy
regarding the accrual of capital stock taxes.
<PAGE>
(b) The accounting books and records maintained by the Company and its
Subsidiaries, and upon which the Company Financials are based, accurately
reflect all of their material items of income and expense, assets and
liabilities. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles.
A.1.8 Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries are valid and genuine, arise out of bona fide sales and deliveries
of goods, performance of services or other business transactions, are not
subject to valid defenses, set-offs or counterclaims other than normal returns
and allowances and were generated only in the ordinary course of business. All
accounts receivable reflected on the Closing Balance Sheet, less (a) an
allowance for doubtful accounts equal to five percent of such accounts
receivable and (b) employee receivables not deemed to be collectible for
purposes of the Closing Financial Statements, are collectible in full within 180
days after the Closing Date with customary collection effort.
A.1.9 Inventory and Equipment. All inventory and equipment of the Company
and its Subsidiaries reflected on the June Balance Sheet, and all inventory and
equipment owned by the Company or any Subsidiary as of the date hereof, (a)
consisted and consists of items of a quality and quantity useable in the
ordinary course of their businesses consistent with past practice, subject to
normal wear and tear and routine maintenance, (b) was and is valued in
conformity with generally accepted accounting principles applied on a consistent
basis and (c) conformed and conforms in all material respects to all applicable
laws, ordinances, codes, rules and regulations relating thereto and to the
construction, use, operation and maintenance thereof. Such inventory and
equipment has been maintained in accordance with the regular business practices
of the Company and its Subsidiaries.
A.1.10 Absence of Undisclosed Liabilities. (a) Except as set
forth in Schedule A.1.10 hereto, neither the Company nor any
Subsidiary is liable for or subject to any liability except for:
(i) those liabilities reflected on the June Balance
Sheet and not heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred, consistent with its past
practice, in the ordinary course of its business and either not required
to be shown on the June Balance Sheet or arising since June 30, 1996,
which liabilities in the aggregate are, taken as a whole, of a character
and magnitude consistent with its past practice.
For purposes of this Section A.1.10 only, the term "liabilities" shall mean all
items required to be reflected as liabilities on a balance sheet prepared in
accordance with generally accepted accounting principles.
(b) Except as provided in Section A.1.21 hereof, the Company and its
Subsidiaries do not provide or maintain, and are not required under applicable
law to provide or maintain, for their employees, themselves or any other person
any pension, retirement, profit-sharing or other plan or policy for the benefit
of employees, themselves or any other person which is required to comply with,
<PAGE>
and the Company and its Subsidiaries have no liabilities with respect to
themselves or any other person under, the federal Employees Retirement Income
Security Act of 1974, as amended ("ERISA"). Furthermore, on the Closing Date
neither the Company nor either Partnership will have any liability for any
dividends or distributions to any shareholder or partner, except as may be fully
reflected on the Closing Financial Statements.
A.1.11 Existing Condition. Except as disclosed on Schedule A.1.10 or
A.1.11 hereto, since June 30, 1996, the Company and its Subsidiaries have not:
(a) sold, assigned or transferred any of their material assets or
properties except in the ordinary course of their businesses consistent with
past practice;
(b) created, incurred, assumed or guaranteed any indebtedness for money
borrowed or incurred any other liabilities exceeding $100,000 in the aggregate
except for current liabilities incurred consistent with past practice and for
borrowings and reborrowings under existing credit arrangements;
(c) suffered any damage, destruction or loss materially and
adversely affecting their businesses, operations, assets or
properties;
(d) suffered any material adverse change in their businesses, operations,
assets, properties or condition (financial or otherwise) other than changes
generally affecting the racing industry in the Commonwealth of Pennsylvania or
nationally;
(e) made any capital expenditure or capital addition or betterment except
for such as may be involved in the ordinary repair, maintenance and replacement
of their assets or are otherwise consistent with past practice;
(f) other than in the ordinary course of business consistent with past
practice, increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or loan to,
any of their directors, officers or employees, or to Seller, or made any
increase in, or any addition to, other benefits to which any of their directors,
officers or employees or Seller may be entitled; or
(g) entered into any material transaction other than in the ordinary
course of their businesses consistent with past practice.
Except as disclosed on Schedule A.1.11 or A.1.21 hereto, since December 31,
1995, the Company and its Subsidiaries have not made or suffered any material
amendment to or termination of any material contract or commitment to which they
or any of them is or was a party or by which they or any of their properties are
or were bound.
A.1.12 Assets and Properties. (a) Schedule A.1.12 hereto identifies each
parcel of real property owned, leased or subleased by the Company or any
Subsidiary or in which the Company or any Subsidiary has any real estate
interest and lists each lease agreement under which the Company or any
Subsidiary has any direct or indirect leasehold interest in any real property
(collectively, "Real Property"). Schedule A.1.12 hereto also contains a list of
all inventory and equipment owned by the Company or any Subsidiary as of June
30, 1996, and will include (in accordance with Schedule A.1.12 hereto) in each
case the book and tax basis thereof. The Company and its Subsidiaries are in
possession of all of their owned Real Property. The Company and its Subsidiaries
own outright all and have good and marketable title to all personal owned
properties and assets, including without limitation all of the properties and
assets reflected on the June Balance Sheet and those acquired since June 30,
<PAGE>
1996 (except in each case for properties and assets sold or otherwise disposed
of since June 30, 1996 in the ordinary course of their businesses consistent
with past practice), free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions and other encumbrances and defects of
title of any nature whatsoever, except liens for current taxes not yet due and
payable or being contested in good faith by appropriate proceedings (and which
have been fully accrued for) and items disclosed on Schedule A.1.12 hereto. All
leases, subleases, licenses, permits and authorizations in any manner related to
the Real Property, assets, properties or business of the Company and its
Subsidiaries and all other instruments, documents and agreements pursuant to
which the Company or any Subsidiary has obtained the right to use any real or
personal property are valid and effective in accordance with their respective
terms, and there is not under any of such leases, subleases, licenses, permits,
authorizations, instruments, documents or agreements any existing default or
event which with the giving of notice or lapse of time, or both, would
constitute a default.
(b) Except as disclosed on Schedule A.1.12 hereto, all facilities,
buildings, vehicles, equipment, furniture and fixtures, leasehold improvements
and other material items of tangible personal property owned or used by the
Company or any Subsidiary are in operating condition and repair, subject to
normal wear and tear and routine maintenance, are useable in the regular and
ordinary course of their businesses and conform to all applicable laws,
ordinances, codes, rules and regulations relating thereto and to the
construction, use, operation and maintenance thereof.
(c) Located on the Real Property is all machinery, equipment, appliances
and fixtures necessary or useful for the proper supply of heat, ventilation, air
conditioning, electricity, water service, fire protection, gas and lighting
service to the buildings used to operate the Real Property, all of which will be
conveyed with the Real Property.
(d) Except as disclosed on Schedule A.1.12 hereto, since January 1, 1991,
no notice has been received by Seller, the Company or any Subsidiary from the
holder of any mortgage or from any insurance company that has issued a policy
with respect to the Real Property or by any Board of Fire Underwriters, or other
body exercising similar functions, claiming any defects or deficiencies with
respect to the Real Property, or requesting performance of any demolition,
repairs, alterations or other work to the Real Property.
(e) Except as disclosed on Schedule A.1.12 hereto, no public or private
nuisance condition currently exists, or to the knowledge of Seller, the Company
or any Subsidiary has existed, on or with respect to the Real Property.
(f) The Real Property has connection to sanitary sewer, storm sewer,
water, electricity, gas, telephone and all other necessary utilities and
services, and to the knowledge of Seller, the Company and any Subsidiaries there
are no circumstances or conditions which exist which would result in termination
of such connections.
(g) There is, to the knowledge of the Company, any Subsidiary or Seller,
no present, or threatened, ban, moratorium or other limitation of any kind on
new connections or additional flows to the sewage treatment plant serving or to
serve the Real Property or the conveyance facilities leading to such sewage
treatment plant.
(h) Except as set forth on Schedule A.1.12 hereto, no work has been or
will be performed at, and no materials have been or will be furnished to, the
Real Property which might give rise to any mechanics', materialmen's or other
lien against the Real Property.
<PAGE>
A.1.13 Taxes and Tax Returns and Reports. With respect to the Company and
its Subsidiaries (each referred to in this Section A.1.13 as a "Company"), (a)
all reports, returns, statements (including without limitation estimated
reports, returns or statements), and other similar filings required to be filed
on or before the Closing Date by any Company (the "Tax Returns") with respect to
any Taxes (as defined in this Section A.1.13) have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns correctly reflect the
liability of each Company for Taxes for the periods, properties or events
covered thereby, (b) all Taxes (other than with respect to subsurface coal
rights) payable with respect to the Tax Returns will have been paid in full
prior to the Closing Date, or an adequate accrual in accordance with generally
accepted accounting principles will be provided with respect thereto on the
Closing Balance Sheet, (c) no deficiency in respect of any Taxes which has been
assessed against any Company remains unpaid and neither the Company, any
Subsidiary nor Seller has knowledge of any unassessed Tax deficiencies or of any
audits (other than routine annual audits by the Pennsylvania Department of
Revenue) or investigations pending or threatened against any Company with
respect to any Taxes, (d) except as set forth in Schedule A.1.21 hereto, there
is in effect no extension for the filing of any Tax Return and no Company has
extended or waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax, (e) to the
knowledge of Seller and each Company, no claim has ever been made by any Tax
authority in a jurisdiction in which any Company does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction, (f) there are no liens
for Taxes upon any asset of any Company except for liens for current Taxes not
yet due, (g) no issues have been raised in any examination by any Tax authority
with respect to any Company which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined, (h) except for the obligations established by this
Agreement, no Company is a party to any Tax allocation or sharing agreement or
otherwise under any obligation to indemnify any person with respect to any
Taxes, (i) other than for the interests held in the Partnerships, no Company is
a holder of any equity interests in any joint venture, partnership or other
arrangement that is treated as a partnership for federal income tax purposes,
(j) there are no accounting method changes or proposed accounting method changes
of any Company that could give rise to an adjustment under section 481 of the
Code, for periods after the Closing Date, (k) there are no requests for rulings
in respect of any Tax pending between any Company and any Taxing authority, (l)
since the date of its ownership by Seller (or the Company, as the case may be),
no Company has been a member of any affiliated group other than the affiliated
group of which the Company is the common parent, (m) each Company has timely
made all deposits required by law to be made with respect to employees'
withholding and other employment taxes and (n) each Partnership is and was
appropriately treated, for all periods (or partial periods) prior to or
including the Closing Date, as a partnership for federal income tax purposes,
and not as association taxable as a corporation.
For purposes of this Agreement, "Taxes" means any taxes, duties,
assessments, fees, levies or similar governmental charges, together with any
interest, penalties and additions to tax, imposed by any taxing authority,
wherever located (i.e. whether federal, state, local, municipal or foreign),
including without limitation all net income, gross income, gross receipts, net
receipts, sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment, excise, severance,
property, windfall profits, value added, ad valorem, occupation or any other
similar governmental charge or imposition.
A.1.14 Legal Proceedings; Etc. Except as disclosed on Schedule A.1.14
hereto, there are no disputes, claims, actions, suits or proceedings (including
without limitation local zoning or building ordinance proceedings), arbitrations
or investigations, either administrative or judicial, pending, or to the
knowledge of the Company, any Subsidiary or Seller threatened, by or against the
Company or any Subsidiary or their assets or businesses, before or by any court
or governmental or regulatory official, body or authority, or before an
arbitrator of any kind. Except as disclosed on Schedule A.1.14 hereto, neither
the Company, any Subsidiary nor Seller has any knowledge of any condition or
state of facts or the occurrence of any event that the Company, any Subsidiary
or Seller believes is likely to form the basis of any dispute, claim, action,
suit, proceeding or arbitration against the Company or any Subsidiary. Except as
disclosed on Schedule A.1.14 hereto, neither the Company nor any Subsidiary is a
party to the provisions of any judgment, order, writ, injunction or decree of
any court, arbitrator or governmental or regulatory official, body or authority.
A.1.15 Compliance with Law. Except as disclosed on Schedule A.1.15 hereto,
the Company and its Subsidiaries have complied in all material respects with
each, and are not in violation in any material respect of any, law, rule or
regulation to which they or their businesses are, or their operations, assets or
properties are, subject and have not failed to obtain or adhere to the
requirements of any license, permit or other authorization necessary to the
ownership of their assets and properties or to the conduct of their businesses.
Without limiting the generality of the foregoing, except as disclosed on
Schedule A.1.15 or A.1.20 hereto (a) neither Seller, the Company nor any
Subsidiary, or any director, officer, employee or agent of or any consultant to
the Company or any Subsidiary, or any other person authorized to act on behalf
of the Company or any Subsidiary, has unlawfully offered, paid or agreed to pay,
directly or indirectly, any money or anything of value to or for the benefit of
any individual who is or was an official or employee or candidate for office of
the government of any country or any political subdivision, agency or
instrumentality thereof or any employee or agent of any customer or supplier of
the Company or any Subsidiary and (b) the Company and each Subsidiary is
compliance with all applicable federal, state and local laws respecting
employment and employment practices, including without limitation laws relating
to employment discrimination and sexual harassment. Notwithstanding the
foregoing, no representation or warranty is made regarding compliance with or
violations of Environmental Laws.
A.1.16 Validity of Contemplated Transactions; Etc. The execution, delivery
and, except as set forth on Schedule A.1.16 hereto, performance hereof or of the
Joinder, as applicable, by each of Seller and Mrs. Banks will not contravene or
violate (a) any law, rule or regulation to which the Company or any Subsidiary
is subject (it being understood that no representation or warranty is made that
the execution, delivery or performance of this Agreement by Seller complies
with, or is permitted by, the Pennsylvania Race Horse Industry Reform Act or the
<PAGE>
regulations promulgated thereunder), (b) any judgment, order, writ, injunction
or decree of any court, arbitrator or governmental or regulatory official, body
or authority which is applicable to the Company or any Subsidiary or (c) the
charter documents of the Company or any Subsidiary; nor, except as set forth on
Schedule A.1.16 hereto, will such execution, delivery or performance violate, be
in conflict with or result in the breach (with or without the giving of notice
or lapse of time, or both) of any term, condition or provision of, or require
the consent of any other party to, any material contract, commitment, agreement,
lease, license, permit, authorization, document or other understanding, oral or
written, to or by which the Company or any Subsidiary is a party or otherwise
bound or by which any of the assets or properties of the Company or any
Subsidiary may be bound or give any party with rights thereunder the right to
terminate, modify, accelerate, renegotiate or otherwise change any of the
existing rights or obligations of the Company or any Subsidiary thereunder.
A.1.17 Insurance. Schedule A.1.17 hereto contains a true and complete list
of the insurance coverage in effect with respect to the Company and its
Subsidiaries and their businesses and properties, together with a description of
each insurance claim in excess of $25,000 made by the Company or any Subsidiary
during the past two years. The Company and its Subsidiaries have at all times
during the past two years maintained insurance coverage substantially similar to
the insurance coverage currently in effect. There has been no material default
under any such coverage, nor has there been any failure to give any notice or
present any claim under any such coverage in a timely fashion or in the manner
or detail required by the policy or binder. There are no outstanding unpaid
premiums other than premiums accrued but not yet payable in the ordinary course
of business of the Company and its Subsidiaries, and there are no provisions in
any insurance coverage of the Company or any Subsidiary for retroactive or
retrospective premium adjustments. No notice of cancellation or nonrenewal with
respect to, or disallowance of any claim under, any such coverage has been
received by the Company or any Subsidiary. Except as disclosed on Schedule
A.1.17 hereto, there are no outstanding performance bonds or other surety
arrangements covering or issued for the benefit of either the Company or any
Subsidiary or their businesses or as to which the Company or any Subsidiary has
or may incur any liability.
A.1.18 Contracts and Commitments. Except as listed and described on
Schedule A.1.10 or A.1.18 hereto or, in the case of benefit plans and
arrangements, Schedule A.1.21 hereto, neither the Company nor any Subsidiary is
a party to or otherwise bound or affected by any written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director or officer; or any agreement, contract or commitment with
any employee or consultant or for the employment of any person, including
without limitation any consultant, that is not terminable by the Company or any
Subsidiary upon 30 days (or less) prior notice or without any severance or other
termination payment;
(b) agreement, contract, commitment or arrangement with any
labor union or other representative of employees;
(c) agreement, contract or commitment for the purchase of, or payment for,
supplies or products, or for the performance of services by a third party,
involving in any one case supplies, products or services having a value of
$25,000 or more;
(d) agreement, contract or commitment to sell or supply products or to
perform services, involving in any one case products or services having a value
of $25,000 or more;
(e) agreement, contract or commitment (i) providing for payments based
upon the revenues or profits of the Company, any Subsidiary or any other entity
or (ii) continuing over a period of more than six months from the date hereof or
exceeding $25,000 in value;
(f) representative or sales agency agreement, contract or
commitment;
(g) (i) capital or (ii) operating lease under which it is either lessor or
lessee of real property or any material personal property;
(h) note, debenture, bond, conditional sale agreement, equipment trust
agreement, letter of credit agreement, loan agreement or other agreement or
contract, commitment or arrangement for the borrowing or lending of money
(including without limitation loans to or from officers, directors, Seller or
any member of any of their immediate families or beneficiaries, as the case may
be), agreement, contract, commitment or arrangement for a line of credit or
guarantee, pledge or undertaking in any manner whatsoever of the indebtedness of
any other person;
(i) agreement, contract or commitment with any governmental agency,
commission, department or other governmental body or for any political or
charitable contribution;
<PAGE>
(j) agreement, contract or commitment for any capital
expenditure in excess of $25,000;
(k) agreement, contract or commitment limiting or restraining it from
engaging or competing in any lines of business with any person, nor to the
knowledge of the Company, any Subsidiary or Seller is any officer or employee of
the Company or any Subsidiary subject to any such agreement;
(l) material license, franchise, distributorship or other similar
agreement, contract or commitment, including without limitation those which
relate in whole or in part to any patent, trademark, trade name, service mark or
copyright or to any ideas, technical assistance or other know-how of or used by
the Company or any Subsidiary; or
(m) material agreement, contract or commitment not made in the
ordinary course of its business.
Except as may be disclosed on Schedule A.1.18 hereto, each of the
agreements, contracts, commitments, arrangements, leases and other instruments,
documents and undertakings listed on Schedule A.1.18 hereto is, as to the
Company or the Subsidiary party thereto and, to the knowledge of the Company,
the Subsidiaries and Seller, the other parties thereto, valid and enforceable in
accordance with its terms (except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws); the Company or
the Subsidiary party thereto, as the case may be, (and to the knowledge of the
Company, the Subsidiaries and Seller the other parties thereto) are not in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; and to the knowledge of the
Company, the Subsidiaries and Seller no event has occurred which with or without
the giving of notice or lapse of time, or both, would constitute a material
default thereunder.
A.1.19 Additional Information. Schedule A.1.19 hereto contains (or will,
with respect to item (j), contain in accordance with Schedule A.1.19 hereto), to
the extent not described in some other Schedule hereto, accurate lists and, in
respect of items not fully set forth in a document previously provided to Buyer
or its representatives, summary descriptions of the following:
(a) all vehicles, equipment, furniture and fixtures, leasehold
improvements and other material items of personal property owned or leased by
the Company or any Subsidiary, specifying which are owned and which are leased;
(b) all real property and interests in real property owned, leased or
otherwise held by the Company or any Subsidiary specifying which are owned and
which are leased and, with respect to leased real property, specifying the
identity of the lessor and the agreement under which it is leased;
(c) the names of all directors of the Company and its
Subsidiaries;
(d) (i) the names and current weekly salaries of all employees of the
Company together with a statement of the full amount of any bonuses, profit
sharing or other remuneration paid to each such person and to any director
during the current or the last fiscal year or payable to each such person in the
future and the basis therefor and (ii) as of June 29, 1996, the names and the
current salaries of all other employees of the Company and its Subsidiaries;
(e) the names and addresses of each bank and other financial institution
or fund in which the Company or any Subsidiary maintains an account (whether
<PAGE>
checking, savings, money market or otherwise), lock box or safe deposit box, and
the account numbers and names of persons having signing authority or other
access with respect thereto;
(f) a listing of all cash equivalent items held by the Company
and its Subsidiaries;
(g) all material licenses, permits and governmental
authorizations of the Company and its Subsidiaries;
(h) the names of all persons authorized to borrow money or
incur or guarantee indebtedness on behalf of the Company or any
Subsidiary;
(i) the names of all persons holding powers of attorney
executed by the Company or any Subsidiary and a summary statement of
the terms thereof; and
(j) a listing of all accounts payable of the Company or any Subsidiary as
of the date of this Agreement in excess of $5,000 individually.
A.1.20 Labor Matters; Owners and Trainers. Except as set forth on Schedule
A.1.20 hereto, (a) there are no labor controversies or disputes pending, or to
the knowledge of the Company, any Subsidiary or Seller threatened, against the
Company or any Subsidiary, and neither Seller, the Company nor any Subsidiary
has knowledge of any facts that would be likely to give rise to such a
controversy or dispute other than issues that customarily arise as a result of
change of ownership of a business; (b) there is no union representing the
interests of any employees of the Company or any Subsidiary; (c) to the
knowledge of the Company, the Subsidiaries and Seller there are no employees of
the Company or any subsidiary seeking union representation; (d) to the knowledge
of the Company, the Subsidiaries and Seller there is no union seeking to
represent such employees; and (e) within the past five years, neither the
Company nor any Subsidiary has committed any unfair labor practice, as defined
in the National Labor Relations Act, as amended. The relations of the Company
and its Subsidiaries with their employees, and with owners and trainers who have
participated in racing at Pocono Downs within the past 12 months, are
satisfactory, and neither Seller, the Company nor any Subsidiary has knowledge
of any facts that would be likely to affect adversely such relations other than
issues that customarily arise as a result of change of ownership of a business.
A.1.21 Benefit Plans and Arrangements. (a) Schedule A.1.21 hereto lists
all employee benefit plans (within the meaning of section 3(3) of ERISA), and
other funds, policies, arrangements, practices, customs and understandings or
programs, whether or not they are or are intended to be (i) covered or qualified
under the Code, ERISA or any other applicable law, (ii) written or oral, (iii)
funded or unfunded or (iv) generally available to any or all employees (or
former employees) of the Company and/or one of its Subsidiaries (and/or their
beneficiaries or dependents), which were or are established, contributed to or
maintained by the Company and/or one or more of its Subsidiaries since 1993,
including without limitation welfare, fringe benefit, pension, profit sharing,
retirement, stock purchase, stock option, stock bonus, disability or wage
continuation, sick pay or vacation pay, supplemental unemployment, severance or
deferred compensation plans (the "Plans").
(b) With respect to any such Plans, the Company has made (or as of the
Closing Date will make) all contributions thereto which it has accrued on its
financial statements and other books and records as a liability and except as
disclosed on Schedule A.1.21, the Company has delivered or made available to
Buyer true, accurate and complete copies of (i) all documents governing such
Plans contributed to or maintained by the Company and/or one or more of its
Subsidiaries, and all amendments thereto, (ii) all reports filed, with respect
to the period beginning on January 1, 1988 and ending on the Closing Date, by
<PAGE>
the Company or officials of each Plan described in clause (i) of this Section
A.1.21(b) with respect to such Plans with the United States Department of Labor,
the Internal Revenue Service (the "IRS") and any other federal or state
regulatory agency, (iii) all summary plan descriptions, notices and other
reporting and disclosure material furnished to participants in any of such Plans
described in clause (i) of this Section A.1.21(b), (iv) all actuarial,
accounting and financial reports, if any, prepared with respect to any of such
Plans described in clause (i) of this Section A.1.21(b) and (v) all currently
effective IRS ruling or determination letters on any of such Plans described in
clause (i) of this Section A.1.21(b).
(c) Except as disclosed on Schedule A.1.21, the Plans and provisions
thereof, the trusts created thereby, and the operation of the Plans are (and at
all times have been) in material compliance with and conform (and at all times
have conformed) to the applicable provisions of the Code, ERISA, other
applicable statutes and governmental rules and regulations.
(d) Except as disclosed on Schedule A.1.21, there is no action, claim or
demand of any kind (other than routine claims for benefits) which has been
brought or, to the knowledge of the Company, any Subsidiary or Seller
threatened, against any Plan or the assets thereof, or against any fiduciary of
any such Plan.
(e) Except as disclosed on Schedule A.1.21, no Plan is, and neither the
Company nor any Benefits Affiliate has, and no event has occurred that could
result in, any liability, actual or contingent, with respect to any Plan, or any
other employee benefit plan that the Company or any Benefits Affiliate has
maintained or contributed to since 1985, that is (i) a defined benefit pension
plan subject to Title IV of ERISA, (ii) a multiemployer pension plan, as that
term is defined in sections 4001(a)(3) and 3(37) of ERISA or (iii) a plan
providing life, health or medical benefits to retired employees (other than as
required by sections 601-608 of ERISA). For purposes of this Section A.1.21
only, the term "Benefits Affiliate" shall include (i) any corporation which is a
member of a controlled group of corporations (as defined in section 414(b) of
the Code) which includes the Company or any Subsidiary, (ii) any trade or
business (whether or not incorporated) which is under common control (as defined
in section 414(c) of Code) with the Company or any Subsidiary, (iii) any
organization (whether or not incorporated) which is a member of an affiliated
service group (as defined in section 414(m) of the Code) which includes the
Company or any Subsidiary and (iv) any other entity required to be aggregated
with the Company or any Subsidiary pursuant to the regulations issued under
section 414(o) of the Code.
(f) With respect to any Plan that is an employee welfare benefit plan
(within the meaning of section 3(1) of ERISA, except any such Plan that is a
multiemployer plan within the meaning of Section 3(37) of ERISA) (a "Welfare
Plan"), (i) each Welfare Plan for which contributions are claimed as deductions
under any provision of the Code is in material compliance with all applicable
requirements pertaining to such deductions and (ii) any Plan that is a group
health plan (within the meaning of section 5000(b)(1) of the Code) complies, and
in each and every case has complied, with all of the requirements of ERISA and
section 4980B of the Code.
(g) Except as disclosed on Schedule A.1.21, Seller has not made any
commitment regarding the continuation of any Plan maintained by the Company or
any Subsidiary after the Closing Date and Buyer will be free, in its sole
discretion, to cause the Company or any Subsidiary to amend, cancel, terminate
or otherwise modify in any and all respects any such Plan, except with respect
to any Benefit Affiliate not acquired by the Buyer.
<PAGE>
(h) Except as disclosed on Schedule A.1.21, the consummation of the sale
and purchase of the Shares effectuated by this Agreement shall not impose upon
the Company any obligation with respect to the payment of any severance
benefits, parachute payments or any other similar type of payment to any
employee or any other person.
A.1.22 Environmental Matters. (a) Except as disclosed on
Schedule A.1.22 hereto, Mrs. Banks, Herbert A. Grayek, Jr. and Jerry
B. Chariton have no actual knowledge that the Company or any
Subsidiary has received any written notice or complaint from the
Pennsylvania Department of Environmental Protection or the U.S.
Environmental Protection Agency related to environmental conditions
or claims.
(b) As far as Mrs. Banks, Herbert A. Grayek, Jr. and Jerry B. Chariton
actually know, the Company and the Subsidiaries have disclosed to or otherwise
made available for inspection by Buyer all written reports and material
correspondence received within three (3) years prior to the date hereof from any
environmental consultant or environmental contracting firm identifying or
discussing actual or potential environmental conditions. It shall not constitute
a misrepresentation under this Section A.1.22(b) if any report or correspondence
not disclosed or otherwise made available to Buyer as aforesaid does not
materially affect the information that is set forth in reports or correspondence
disclosed or made available. In any litigation regarding this Section A.1.22, if
Seller is the prevailing party it shall be entitled to reimbursement by Buyer
for its reasonable costs and expenses (including without limitation reasonable
attorneys' fees) of the dispute.
(c) Anything in this Section A.1.22 to the contrary notwithstanding, it
shall not constitute a misrepresentation under this Section A.1.22 if any
written notice or complaint of the kind required to be disclosed pursuant to
Section A.1.22(a), or any written reports or material correspondence otherwise
required to be disclosed or made available pursuant to Section A.1.22(b), with
respect to the Eastside Landfill (referred to in Section 7.6(b)), has not been
scheduled, disclosed or otherwise made available unless Mrs. Banks, Herbert A.
Grayek and Jerry B. Chariton actually knew that such information existed and was
required to be scheduled, disclosed or otherwise made available in accordance
with this Section A.1.22 and they intentionally failed to do so with the intent
of misleading Buyer into signing this Agreement and Buyer would not have signed
this Agreement if it knew the information set forth in such written notice or
complaint or written report or material correspondence.
A.1.23 No Intellectual Property Violations. Except as disclosed on
Schedule A.1.14 or A.1.23 hereto, the business of the Company and its
Subsidiaries (a) as presently conducted does not utilize any patent, trademark,
trade name, service mark or copyright, and (b) as formerly and presently
conducted did not and does not conflict with or infringe upon any patent,
trademark, trade name, service mark, trade secret, copyright or proprietary
right owned or claimed by another.
A.1.24 No Third Party Options. There are no existing agreements, options,
commitments or rights with, to or in any third person to acquire any of the
assets or properties of the Company or any Subsidiary or any interest therein,
except for those contracts entered into in the ordinary course of business
consistent with past practice for the sale of such assets and properties.
A.1.25 Schedules; Delivery of Documents; Corporate Records. Except as
disclosed on Schedule A.1.25 hereto and except for documents specifically
identified as "incomplete" on any Schedule hereto, Seller has delivered or made
available to Buyer the originals or true and complete copies of all documents,
including without limitation all amendments, supplements or modifications
thereof or waivers currently in effect thereunder, referred to on the Schedules
hereto and has also delivered to Buyer copies of the Articles of Incorporation
and Limited Partnership Agreements, and all amendments thereto, and the By-Laws,
<PAGE>
as amended, of the Company and its Subsidiaries. The minute and stock and
partnership record books of the Company and its Subsidiaries, which have been
made available to Buyer for its inspection, contain complete and correct copies
of all charter documents and the records of all meetings and consents in lieu of
meeting of the Boards of Directors (and any committees thereof) and voting
shareholders and partners of the Company and its Subsidiaries since January 1,
1984.
A.1.26 HSR Act Compliance. On the date hereof, and based upon the HSR Act
as in effect and interpreted on the date hereof, Seller's "ultimate parent
entity", together with all entities which it controls (as determined under the
HSR Act) do not have "total assets" or "annual sales" equal to or in excess of
$100,000,000 (as such quoted terms are defined under the HSR Act).
A.1.27 Completeness of Disclosure. No representation or warranty by Seller
contained in this Agreement, and no representation, warranty or statement
contained in any certificate delivered pursuant to this Agreement, this Appendix
or any Schedule or Exhibit contains any statement of a material fact known to
the Company, any Subsidiary or Seller to be untrue or omits to state any
material fact known to the Company, any Subsidiary or Seller to be necessary to
make any statement herein or therein not misleading.
A.2 Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as follows:
A.2.1 Corporate Existence. Buyer is a corporation duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania.
A.2.2 Corporate Power and Authorization. Buyer has the full power to
execute, deliver and perform this Agreement. The execution, delivery and
performance hereof by Buyer have been duly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of Buyer and is
enforceable against Buyer in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting the enforcement of creditors' rights in general, and except
that the enforceability of this Agreement is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law). Notwithstanding the foregoing, except as set forth in
Section A.2.7 hereof no representation or warranty is made that the execution,
delivery or performance of this Agreement by Buyer complies with, or is
permitted by, the Pennsylvania Race Horse Industry Reform Act or the regulations
promulgated thereunder.
A.2.3 Validity of Contemplated Transactions; Etc. The execution and
delivery and, except as set forth on Schedule A.2.3 hereto, the performance
hereof by Buyer will not contravene or violate (a) any law, rule or regulation
to which Buyer is subject, (b) any judgment, order, writ, injunction or decree
of any court, arbitrator or governmental or regulatory official, body or
authority to which Buyer is subject or (c) the Articles of Incorporation or
By-Laws of Buyer; nor will such execution, delivery or performance violate, be
in conflict with or result in the breach (with or without the giving of notice
or lapse of time, or both) of any term, condition or provision of, or require
the consent of any other party to, any contract, commitment or agreement, oral
or written, to or by which Buyer is a party or otherwise bound or by which any
of Buyer's assets or properties may be bound. No authorization, approval or
consent of, and no registration or filing with, any governmental or regulatory
official, body or authority is required in connection with the execution,
delivery and performance hereof by Buyer. Notwithstanding the foregoing, except
as set forth in Section A.2.7 hereof no representation or warranty is made that
<PAGE>
the execution, delivery or performance of this Agreement by Buyer complies with,
or is permitted by, or does not require any authorization, approval, consent,
registration or filing under, the Pennsylvania Race Horse Industry Reform Act or
the regulations promulgated thereunder.
A.2.4 No Knowledge of Breach. Except as may be set forth in one or more
letters from Buyer to Seller delivered prior to the date hereof, Buyer does not
know as of the date hereof of any breach of warranty or any misrepresentation by
Seller hereunder. Apart from representations of Seller contained in this
Agreement, Seller and representatives of Seller have made no further or
additional representations or warranties.
A.2.5 HSR Act Compliance. On the date hereof, and based upon the HSR Act
as in effect and interpreted on the date hereof, Buyer's "ultimate parent
entity", together with all entities which it controls (as determined under the
HSR Act) do not have "total assets" or "annual sales" equal to or in excess of
$100,000,000 (as such quoted terms are defined under the HSR Act).
A.2.6 Investment Only. Buyer is acquiring the Shares and the Interests for
its own account and not with the intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws. Buyer acknowledges that the Shares and
Interests are not registered under the Securities Act of 1933, and must be held
indefinitely unless they are subsequently so registered or unless an exemption
from registration is available.
A.2.7 Regulatory Matters. (a) There is no provision of the Pennsylvania
Act, the rules and regulations of the Commission thereunder (the "Regulations")
or any Federal laws pertaining primarily to the harness and horse racing
industry ("Federal Laws") which requires any filing with, notice to or approval
of the Commission or any federal agency whose primary responsibility is over the
harness or horse racing industry prior to the consummation of the transactions
contemplated by this Agreement.
(b) There is nothing in the Pennsylvania Act, Regulations or Federal Laws
that would permit any Pennsylvania or federal agency to require Seller or Mrs.
Banks to disgorge any part of the purchase price for the Shares and the
Interests by virtue of the transactions contemplated by this Agreement (other
than the payment of taxes) or to obtain damages or penalties solely in
consequence thereof.
(c) Except for filing a post-Closing affidavit pursuant to section 204 of
the Pennsylvania Act and Section 185.52 of the Regulations, Seller and Mrs.
Banks do not have to file any application or document or take any other action
under the Pennsylvania Act, the Regulations or Federal Laws arising out of the
transactions
<PAGE>
BANKERS TRUST COMPANY
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK 10006
October 15, 1996
Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Boulevard
Suite 203
Wyomissing, Pennsylvania 19610
Attention: Peter Carlino
Chairman of the Board and
Chief Executive Officer
re Commitment Letter
Gentlemen:
You have advised Bankers Trust Company ("BTCo") that (i) Penn
National Gaming, Inc. (the "Borrower") intends to acquire 100% of the equity of
The Plains Company (such company, the "Plains Company", and such acquisition,
the "Plains Company Acquisition") and (ii) the Borrower, through its 80%
interest in PNGI Charles Town LLP, a joint venture with Bryant Development, also
intends to acquire the Charles Town Race Track (the "Charles Town Race Track")
in Jefferson County, West Virginia (the "Charles Town Acquisition", and together
with the Plains Company Acquisition, the "Acquisitions") in negotiated
transactions structured to the satisfaction of BTCo.
We understand that the sources of funds needed (a) to effect the
Acquisitions, (b) to make improvements to the Charles Town Race Track, (c) to
provide a working capital facility for the Borrower after giving effect to the
Acquisitions and (d) to pay all fees and expenses incurred in connection with
<PAGE>
the foregoing shall be provided solely through the incurrence of the Senior
Secured Financing described below. It is also our understanding that the Senior
Secured Financing is the only funding required to be incurred to consummate the
Acquisitions.
We understand that the senior bank financing (the "Senior Secured
Financing") required by you to effect the foregoing transactions will consist of
(i) a $47 million term loan facility (the "A Term Loan Facility"), (ii) a $23
million second term loan facility (the "B Term Loan Facility", and together with
the A Term Loan Facility, the "Term Loan Facilities") and (iii) a $5 million
revolving credit facility (the "Revolving Facility", and together with the Term
Loan Facility, the "Credit Facilities"), with a $2 million sublimit for standby
letters of credit for periods of up to 12 months. We also understand that (x)
the proceeds under the A Term Loan Facility shall be used solely for the Plains
Company Acquisition, (y) the proceeds under the B Term Loan Facility shall be
used solely for the Charles Town Acquisition and the making of improvements to
the Charles Town Race Track and (z) that the Revolving Facility shall be used
solely for the Borrower's working capital and general corporate purposes. A
summary of certain of the terms and conditions of the Credit Facilities are set
forth on Exhibit A hereto (the "Term Sheet").
BTCo is pleased to confirm that it is willing to commit to provide,
on the terms and conditions set forth herein and in the Term Sheet, up to $50
million of the Senior Secured Financing and to use its best efforts to arrange,
as agent, a syndicate of lending institutions (each a "Lender", and
collectively, the "Lenders") to provide the remainder of the Senior Secured
Financing. BTCO shall act as sole agent with respect to the Senior Secured
Financing.
BTCo reserves the right, prior to or after the execution of the
definitive credit documentation for the Senior Secured Financing, to syndicate
all or part of its commitments for the Senior Secured Financing to one or more
Lenders pursuant to a syndication to be managed by BTCo. BTCo will commence
syndication efforts for the Senior Secured Financing promptly after your
execution and delivery of this letter, and you agree to actively assist BTCo in
achieving a syndication that is satisfactory to BTCo. Such syndication will be
accomplished by a variety of means, including direct contact during the
syndication between senior management and advisors of the Borrower and the
Plains Company and the proposed syndicate members. To assist BTCo in its
syndication efforts, you hereby agree, both before and after the closing of the
Senior Secured Financing, (i) to provide and cause your advisors to provide BTCo
and the other syndicate members upon request with all reasonable information
deemed necessary by us to complete syndication, including but not limited to,
information and evaluations prepared by the Borrower, the Plains Company and the
owners of the Charles Town Race Track and their respective advisors or on their
behalf relating to the transactions contemplated hereby and (ii) to assist BTCo
upon request in the preparation of an Information Memorandum to be used in
connection with the syndication of the Senior Secured Financing, including
making available officers of each the Borrower and the Plains Company from time
to time to attend and make presentations regarding the business and prospects of
<PAGE>
the Borrower, the Plains Company and the Charles Town Race Track, at a meeting
or meetings of Lenders or prospective Lenders.
As you are aware, we have not had the opportunity to complete our
business or financial due diligence analysis and review or perform our legal due
diligence analysis and review with respect to the Acquisitions, the Plains
Company, the Charles Town Race Track and their subsidiaries. BTCo's willingness
to participate in the Senior Secured Financing described in this letter is
therefore subject to the completion of such analysis and review and its
satisfaction with the results thereof, and to the satisfaction of the conditions
precedent contained in the Term Sheet. Furthermore, if BTCo discovers
information not previously known to it which BTCo reasonably believes is
materially negative information with respect to the Acquisitions or the
condition (financial or otherwise), business, operations, assets, liabilities or
prospects of the Borrower, the Plains Company or the Charles Town Race Track,
BTCo may, in its sole discretion, suggest alternative financing amounts or
structures that assure adequate protection for it or decline to provide or
participate in the proposed financing.
You hereby agree to pay all costs and expenses (including the
reasonable fees and expenses of White & Case as counsel to BTCo and BTCo's
out-of-pocket expenses) arising in connection with the preparation, execution
and delivery of this letter and the definitive financing agreements (and BTCo's
due diligence and syndication efforts in connection therewith). In addition, you
hereby agree to indemnify and hold harmless each of the Lenders (including in
any event BTCo) and each director, officer, employee and affiliate thereof (each
of the foregoing entities an "indemnified person") in connection with any
losses, claims, damages, liabilities or other expenses to which such indemnified
persons may become subject, insofar as such losses, claims, damages, liabilities
(or actions or other proceedings commenced or threatened in respect thereof) or
other expenses arise out of or in any way relate to or result from the
Acquisitions or this letter or the extension of the Senior Secured Financing
contemplated by this letter, or in any way arise from any use or intended use of
this letter or the proceeds of any of the Senior Secured Financing contemplated
by this letter, and you agree to reimburse each indemnified person for any legal
or other expenses incurred in connection with investigating, defending or
participating in any such loss, claim, damage, liability or action or other
proceeding (whether or not such indemnified person is a party to any action or
proceeding out of which any such expenses arise), provided that you shall have
no obligation hereunder to indemnify any indemnified person for any loss, claim,
damage, liability or expense to the extent that same resulted primarily from the
gross negligence or willful misconduct of such indemnified person. This letter
is furnished for your benefit, and may not be relied upon by any other person or
entity. Neither BTCo nor any other Lender shall be responsible or liable to you
or any other person for consequential damages which may be alleged as a result
of this letter. You also hereby agree to pay to BTCo the fees set forth in the
separate fee letter (the "Fee Letter") dated the date hereof with respect to the
Senior Secured Financing, with such fees to be payable in accordance with the
terms of the Fee Letter.
<PAGE>
BTCo reserves the right to employ the services of its affiliates,
including BT Securities Corporation ("BTSC"), in providing the services
contemplated by this letter and to allocate, in whole or in part, to such
affiliates (including BTSC) certain fees payable to BTCo in such manner as BTCo
and its respective affiliates may agree in its sole discretion. You acknowledge
that BTCo may share with any of its affiliates (including BTSC), and such
affiliates may share with BTCo, any information relating to the Acquisitions or
the Borrower, the Plains Company, the Charles Town Race Track and their
respective subsidiaries and affiliates, including any information as to the
credit worthiness of any such entities.
You are not authorized to show or circulate this letter to any other
person or entity (other than your legal and financial advisors in connection
with your evaluation hereof) until such time as you have accepted this letter as
provided in the succeeding paragraph. If this letter is not accepted by you as
provided in the succeeding paragraph, you are to immediately return this letter
(and any copies hereof) to the undersigned. This letter may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which counterparts shall be an original, but all of which
shall together constitute one and the same instrument.
If you are in agreement with the foregoing, please sign and return
to BTCo the enclosed copy of this letter, together with a copy of the Fee
Letter. This offer shall terminate at 5:30 P.M., New York time, on October 16,
1996 unless a signed copy of this letter, together with a signed copy of the Fee
Letter, has been delivered to BTCo (including by way of facsimile transmission)
by such time.
THIS LETTER AND THE FEE LETTER SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
CONTEMPLATED BY THIS LETTER AND/OR THE FEE LETTER IS HEREBY WAIVED. YOU HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE
COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO
THIS LETTER AND/OR THE FEE LETTER OR ANY MATTERS CONTEMPLATED HEREBY OR THEREBY.
Very truly yours,
BANKERS TRUST COMPANY
By /s/ Calli S. Hayes
Title: Vice President
<PAGE>
Agreed to and Accepted this
15 day of October, 1996
PENN NATIONAL GAMING, INC.
By /s/ Peter M. Carlino
Title:Chairman
<PAGE>
EXHIBIT A
SUMMARY OF CERTAIN TERMS
OF THE CREDIT FACILITIES1/
I. Description of Credit Facilities
A. Term Loan Facilities
Facilities: $47 million term loan facility (the "A Term Loan
Facility").
$23 million second term loan facility (the "B Term Loan
Facility").
Use of Proceeds: All loans under the A Term Loan Facility (the "A
Term Loans") shall be utilized (x) to pay the
purchase price for the Plains Company Acquisition
and (y) to pay the fees and expenses incurred in
connection therewith. All loans under the B Term
Loan Facility (the "B Term Loans", and together
with the A Term Loans, the "Term Loans") shall be
utilized (x) to pay the purchase price for the
Charles Town Acquisition, (y) to make improvements
to the Charles Town Race Track and (z) to pay the
fees and expenses incurred therewith.
Maturity: The final maturity date for each of the Term Loan
Facilities shall be the fifth anniversary of the
closing date for the Plains Company Acquisition
(the "Initial Closing Date").
Commencing on December 31, 1997, the A Term Loan Facility and
the B Term Loan Facility will amortize on a quarterly basis
with payments thereunder to be split proportionately between
the A Term Loan Facility and the B Term Loan Facility, in
annual aggregate amounts for the Term Loan Facilities as
specified below:
<TABLE>
<CAPTION>
Year Amount
<S> <C> <C>
1997 $2,000,000
1998 $8,000,000
1999 $20,000,000
<PAGE>
<FN>
1/ Unless otherwise defined herein, capitalized terms used herein and defined in
the letter to which this Exhibit A is attached (the "Commitment Letter"), are
used herein as therein defined.
2/ Adjusted Consolidated EBITDA is defined as consolidated EBITDA less capital
expenditures.
</FN>
2000 $20,000,000
2001 $20,000,000
</TABLE>
In the event that less than the full amount of the Term Loan
Facilities are utilized, the amortization payments set forth
above will be reduced on a pro rata basis.
Availability: A Term Loans may only be incurred on the closing
date of the Plains Company Acquisition. Any portion of
the A Term Loan Facility not utilized on such closing
date will be cancelled.
B Term Loans may only be incurred on and after the closing
date for the Charles Town Acquisition. B Term Loans may be
drawn in one draw or a series of draws, provided that any
portion of the B Term Loan Facility that has not been drawn by
June 30, 1997 will be cancelled.
No amount of the Term Loans once repaid may be reborrowed.
B. Revolving Facility
Facility: $5 million revolving credit facility (the "Revolving
Facility"), with a $2 million sublimit for standby
letters of credit (the "Letters of Credit") for periods
of up to 12 months.
Use of
Proceeds: The loans under the Revolving Facility (the "Revolving Loans",
and together with the Term Loans, the "Loans") shall be used
for the working capital and general corporate purposes of the
Borrower and its subsidiaries. The Letters of Credit may be
used to support obligations to the horsemen for racing
purposes and to guarantee payment for pari-mutual taxes.
Availability: Up to $3 million of the Revolving Facility will be
available on and after the Initial Closing Date. The
remaining $2 million of the Revolving Facility will be
available only after the conditions precedent to the
initial borrowing to the B Term Loan Facility have been
met. Revolving Loans may be borrowed, repaid and
reborrowed on and after the Initial Closing Date and
prior to the maturity of the Revolving Facility.
Maturity: The fifth anniversary of the Initial Closing Date. All
Revolving Loans shall be required to be repaid (and all
<PAGE>
Letters of Credit terminated) as a bullet on such date,
provided that to the extent mandatory repayments are
required as set forth below after all outstandings under
the Term Loan Facilities have been repaid in full, such
mandatory repayments will apply to reduce the commitments
under the Revolving Facility (and will require
prepayments of Revolving Loans (and/or cash
collateralizations of Letters of Credit) to the extent in
excess of such commitments as so reduced).
II. General Terms Applicable to the Credit Facilities
Borrower: Penn National Gaming, Inc. (the "Borrower")
Agent: BTCo (the "Agent").
Lenders: A syndicate of lenders arranged and agented by BTCo (the
"Lenders").
Guarantees: All obligations under the Senior Secured Financing shall be
unconditionally guaranteed (the "Guaranty") by each of the
Borrower's direct and indirect subsidiaries, including any
subsidiaries created or purchased subsequent to the Initial
Closing Date (the "Guarantors"), subject to customary
exceptions for transactions of this type.
Security: All amounts owing by the Borrower and the Guarantors
under the Senior Secured Financing will be secured by (i)
a first priority perfected pledge of (x) all notes owned
by the Borrower and the Guarantors and (y) all capital
stock owned by the Borrower and the Guarantors and (ii) a
first priority perfected security interest in all other
assets owned by the Borrower and the Guarantors,
including, without limitation, receivables, securities,
inventory, equipment, real estate, leasehold interests,
contracts, patents, copyrights and trademarks, subject to
such exceptions, if any, as are acceptable to BTCo.
All documentation evidencing the security required pursuant to
the immediately preceding paragraph shall be in form and
<PAGE>
substance satisfactory to BTCo, and shall effectively create
first priority security interests in the property purported to
be covered thereby, with such exceptions as are acceptable to
BTCo in its sole discretion.
Interest Rates: At the Borrower's option, Loans may be maintained
from time to time as (x) Base Rate Loans, which shall
bear interest at the Base Rate in effect from time to
time plus the Applicable Margin (as defined below) or (y)
Reserve Adjusted Eurodollar Loans, which shall bear
interest at the Eurodollar Rate (as determined by the
Agent, and adjusted for maximum reserves) for the
respective interest period plus the Applicable Margin,
provided that no Reserve Adjusted Eurodollar Loans may be
incurred prior to the earlier of (i) the 90th day
following the Initial Closing Date or (ii) that date upon
which BTCo determines in its sole discretion that the
primary syndication has been completed.
"Base Rate" shall mean the highest of (x) 1/2 of 1% in excess
of the federal reserve reported certificate of deposit rate,
(y) the rate that BTCo announces from time to time as its
prime lending rate and (z) 1/2 of 1 % in excess of the federal
funds rate.
"Applicable Margin" shall mean a percentage per annum based on
the Leverage Ratio as set forth in the following table
(provided that at any time that a default or an event of
default exists, the Applicable Margin shall be 2% in the case
of the Base Rate and 3% in the case of the Eurodollar Rate
Margin:
<TABLE>
<CAPTION>
Base Rate Eurodollar
Leverage Ratio Margin Rate Margin
<S> <C> <C> <C>
>4:1 2% 3%
>3:1 #4:1 1.75% 2.75%
>2.5:1 #3.1 1.50% 2.50%
>2:1 #2.5:1 1% 2%
>1.5:1 #2:1 .75% 1.75%
#1.5:1 .50% 1.50%
</TABLE>
<PAGE>
Interest periods of 1, 2, 3 and 6 months shall be available in
the case of Reserve Adjusted Eurodollar Loans.
The Credit Agreement shall include customary protective
provisions for such matters as defaulting banks, capital
adequacy, increased costs, funding losses, illegality and
withholding taxes.
Interest in respect of Base Rate Loans shall be payable
quarterly in arrears on the last business day of each quarter.
Interest in respect of Reserve Adjusted Eurodollar Loans shall
be payable in arrears at the end of the applicable interest
period and every three months in the case of interest periods
in excess of three months. Interest will also be payable at
the time of repayment of Loans and at maturity. All interest
and commitment commission and other fee calculations shall be
based on a 360-day year and actual days elapsed.
Overdue principal and, to the extent permitted by law, overdue
interest and all other overdue amounts shall bear interest at
a rate per annum equal to the greater of (i) the rate which is
2% in excess of the rate otherwise applicable to the Base Rate
Loans from time to time and (ii) the rate which is 2% in
excess of the rate then borne by such borrowings. Such
interest shall be payable on demand.
Agent/Lender Fees: The Agent and the Lenders shall receive such fees as
have been separately agreed upon with the Agent.
Commitment Fees: A commitment fee on the unutilized commitments under the
Senior Secured Financing, as in effect from time to time,
commencing on the Initial Closing Date and continuing to
and including the termination of the Senior Secured
Financing, payable quarterly in arrears and upon the
termination of the Senior Secured Financing. The
commitment fee shall be a percentage per annum based on
the Leverage Ratio as follows:
<TABLE>
<CAPTION>
Leverage Ratio Commitment Fee
<S> <C> <C>
$2:1 .50%
Less than 2:1 .375%
</TABLE>
<PAGE>
Letter of
Credit Fees: A letter of credit fee equal to 2 of the Applicable
Margin as in effect from time to time for Revolving Loans
maintained as Reserve Adjusted Eurodollar Loans (but in
no event less than 1%) to be shared proportionately by
the Lenders in accordance with their participation in the
respective Letter of Credit, and a facing fee of 1/8 of
1% per annum to be paid to the issuer of the Letter of
Credit for its own account, in each case calculated on
the aggregate stated amount of all Letters of Credit for
the stated duration thereof. In addition, the issuer of
a Letter of Credit will be paid its customary
administrative charges in connection with each Letter of
Credit issued by it.
Voluntary
Prepayments: Permitted in whole or in part with prior notice but without
premium or penalty, in aggregate principal amount of at least
$500,000 and, if greater, in an integral multiple of $100,000;
provided that Reserve Adjusted Eurodollar Loans may only be
voluntarily repaid on the last day of an interest period
applicable thereto.
Voluntary prepayments of Term Loans shall be (x) allocated
ratably between the A Term Loans and the B Term Loans and (y)
applied to reduce the remaining installments of the A Term
Loans and the B Term Loans on a pro rata basis (based upon the
amount of each remaining installment).
Mandatory
Prepayments: Mandatory repayments of Term Loans (and after all
Term Loans have been repaid, mandatory reductions to the
Revolving Facility commitments) shall be required in an
amount equal to (i) 100% of the net cash proceeds from
any issuance or incurrence of funded debt by the Borrower
or any of its direct or indirect subsidiaries (other than
pursuant to customary exceptions to be negotiated), (ii)
a percentage of the net cash proceeds from any issuance
of equity by the Borrower or any of its direct or
indirect subsidiaries (other than pursuant to customary
exceptions to be negotiated) equal to (A) 100% until such
time as the outstanding Term Loans and Revolving Facility
<PAGE>
have been reduced to $50 million or less, (B) and
thereafter 50% until such time as both (1) the
outstanding Term Loans and Revolving Facility have been
reduced to $25 million or less and (2) and the ratio of
Adjusted Consolidated Debt to Adjusted Consolidated
EBITDA is equal to or less than 2.0:1.0, (C) and
thereafter 0%, (iii) 75% of the net sale proceeds from
asset sales (in excess of a $3 million aggregate basket)
by the Borrower or any of its direct or indirect
subsidiaries, subject to customary exceptions to be
agreed upon, (iv) 75% of annual excess cash flow (to be
defined) of the Borrower, paid annually based on
financial statements delivered at the end of each fiscal
year (from and after the fiscal year ended December 31,
1997) and (v) 100% of certain insurance proceeds, with
certain reinvestment rights to the agreed upon.
Mandatory repayments of the Term Loans (i) shall be applied
pro rata to the A Term Loan Facility and the B Term Loan
Facility and (ii) shall be applied to reduce the scheduled
amortizations of each Term Loan Facility on a pro rata basis
(based upon the amount of each remaining installment). In
addition, Revolving Loans shall be required to be prepaid (and
Letters of Credit cash collateralized) if at any time the
aggregate principal amount thereof exceeds the total Revolving
Facility commitments, such prepayment (and/or cash
collateralization) to be in an amount equal to such excess.
Assignments and
Participations: The Borrower may not assign its rights or
obligations under the Credit Facilities without the prior
written consent of the Lenders. Any Lender may assign,
and may sell participations in, its rights and
obligations under the Credit Facilities, subject (x) in
the case of participations, to customary restrictions on
the voting rights of the participants and (y) in the case
of assignments, to such limitations as may be established
by BTCo, including without limitation, a minimum
assignment amount of $5 million (except in the case of an
assignment to another Lender or in the case of the
assignment of a Lender's entire position). The Credit
Facilities shall provide for a mechanism which will allow
each assignee to become a direct signatory to the Credit
Facilities and will relieve the assigning Lender of its
obligations with respect to the assigned portion of its
commitment.
<PAGE>
Documentation: The Lenders' commitments will be subject to the
negotiation, execution and delivery of definitive
financing agreements (and related security documentation,
guaranties, etc.) consistent with the terms of this
letter, in each case prepared by White & Case, counsel to
the Agent, and satisfactory to the Agent and the Required
Lenders (including without limitation as to the terms,
conditions, representations, covenants and events of
default contained therein). All documentation shall be
governed by New York law.
Commitment
Termination: The commitments of BTCo under the Commitment Letter shall
terminate on December 15, 1996 unless a definitive Credit
Agreement has been executed and delivered, the Plains Company
Acquisition has been consummated, and the initial borrowing
under the Credit Agreement has occurred.
Conditions
Precedent: In addition to conditions precedent typical for these types of
facilities and any other conditions appropriate in the context
of the proposed transaction, the following conditions, without
limitation, shall apply:
A. A Term Loan Facility and $3 Million of Revolving Facility
(i) The structure and all terms of, and the
documentation for, the Plains Company Acquisition
shall be satisfactory in form and substance to the
Agent and the Required Lenders, and such
documentation shall be in full force. All
conditions precedent to the consummation of the
Plains Company Acquisition as set forth in the
documentation relating thereto shall have been
satisfied, and not waived except with the consent
of the Agent and the Required Lenders, to the
satisfaction of the Agent and the Required Lenders.
The Plains Company Acquisition shall have been
consummated in accordance with the documentation
therefor and all applicable laws.
<PAGE>
(ii) The corporate, capital and ownership structure of the
Borrower and its subsidiaries shall be satisfactory to
the Agent and the Required Lenders.
(iii) All necessary governmental (domestic and foreign) and
third party approvals and/ or consents in connection
with the Plains Company Acquisition and the transactions
contemplated by the Credit Facilities and the continuing
operations of the business of the Borrower and its
Subsidiaries or otherwise referred to herein shall have
been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action
being taken by any competent authority which restrains,
prevents, or imposes materially adverse conditions upon,
the consummation of the Plains Company Acquisition or
the transactions contemplated by the Credit Facilities
or otherwise referred to herein. Additionally, there
shall not exist any judgment, order, injunction or other
restraint prohibiting or imposing materially adverse
conditions upon the Plains Company Acquisition or the
transactions contemplated by the Credit Facilities.
(iv) The Borrower and its subsidiaries (including the Plains
Company and its subsidiaries) shall have all licenses,
including. without limitation, gaming and alcohol
licenses, necessary to for the operation of its
businesses.
(v) The Agent, for the benefit of the Lenders, shall
have been granted a perfected security interest in
all assets of the Borrower and its subsidiaries to
the extent and of the priority described above
under the heading "Security"; and the Agent shall
have received satisfactory assurances that title
insurance policies, in amounts and in form and
substance satisfactory to the Agent, will be
available to insure the interest of the Lenders in
such of the real property securing the Credit
Facilities as may be designated by the Agent in its
discretion. The Guarantees required under the
heading "Guarantees" above shall be in full force
and effect, with all the foregoing to be pursuant
to documentation satisfactory to the Agent.
<PAGE>
(vi) Since December 31, 1995, nothing shall have
occurred (and neither BTCo nor the Lenders shall
have become aware of any facts or conditions not
previously known, whether as a result of their due
diligence investigations or otherwise) which BTCo
or the Required Lenders shall determine has had, or
could have, a material adverse effect on the rights
or remedies of the Lenders or the Agent, or on the
ability of the Borrower or any Guarantor to perform
its respective obligations to the Lenders or which
could have a materially adverse effect on the
Plains Company Acquisition or the business,
operations, property, assets, condition (financial
or otherwise) or prospects of the Borrower, the
Plains Company or any of their respective
subsidiaries.
(vii) No litigation by any entity (private or governmental)
shall be pending or threatened with respect to the
Credit Facilities, the Plains Company Acquisition or any
documentation executed in connection therewith, or which
the Agent or the Required Lenders shall determine could
have a materially adverse effect on the Plains Company
Acquisition or on the business, property, assets,
condition (financial or otherwise) or prospects of the
Borrower, the Plains Company or any of their respective
subsidiaries.
(viii)The Lenders shall have received customary legal opinions
from counsel, and covering matters, acceptable to the
Agent and the Required Lenders.
(ix) All Loans and other financing pursuant to the Borrower
shall be in full compliance with all applicable
requirements of the margin regulations.
(x) The Agent and the Lenders shall have received (and
be satisfied with) (i) audited financial statements
of the Borrower and its subsidiaries for the fiscal
years ended December 31, 1993, 1994 and 1995, (ii)
<PAGE>
unaudited financial statements of the Borrower and
its subsidiaries for the nine-month period ended
September 30, 1996 and for any monthly period
thereafter ended prior to the Initial Closing
Date), (iii) audited financial statements of all of
the operating subsidiaries of the Plains Company
for the fiscal years ended December 31, 1994 and
1995, prepared by Robert Rossi & Co., together with
a review of the audit procedures, work papers and
other matters relating to such audit in scope and
substance satisfactory to BTCo, performed by BDO
Seidman, LLP, (iv) unaudited financial statements
of the Plains Company and its Subsidiaries for the
nine-month period ended September 30, 1996 and for
any monthly period thereafter ended prior to the
Initial Closing Date, (v) quarterly financial
statements of all of the operating subsidiaries of
the Plains Company and its Subsidiaries for the
period from July 1, 1995 through June 30, 1996,
(vi) a pro forma balance sheet of the Borrower and
--- -----
its subsidiaries as of the Initial Closing Date after
giving effect to the Plains Company Acquisition and the
financings contemplated hereby, (vii) a financial review
in scope and substance satisfactory to BTCo verifying
the absence of assets (other than the capital stock of
subsidiaries) and liabilities (including tax, ERISA,
contingent or otherwise) of the Plains Company,
performed by BDO Seidman, LLP and (viii) final projected
financial statements (including balance sheets and
statements of operations, stockholders' equity and cash
flows) of the Borrower and its subsidiaries for the
five-year period after the Initial Closing Date,
presented with and without giving effect to the
acquisition of the Charles Town Race Track. The
financial statements referred to above shall be prepared
in accordance with GAAP.
(xi) The Lenders shall have received a solvency opinion
from an independent valuation firm, in form and
substance acceptable to the Agent and the Required
Lenders, setting forth the conclusions that, after
giving effect to the Plains Company Acquisition and
the incurrence of all the financings contemplated
herein, each of the Borrower on a standalone basis,
and the Borrower and its subsidiaries taken as a
<PAGE>
whole, are not insolvent and will not be rendered
insolvent by the indebtedness incurred in
connection therewith, and will not be left with
unreasonably small capital with which to engage in
their businesses and will not have incurred debts
beyond their ability to pay such debts as they
mature.
(xii) The Lenders shall have received environmental and
hazardous substance analyses in scope, and in form and
substance, acceptable to the Agent and the Required
Lenders.
(xiii)To the extent required by law, the Agent shall have
received real estate appraisals, which appraisals shall
comply with applicable law and shall otherwise be in
form and substance satisfactory to the Agent and the
Required Lenders.
(xiv) The Agent shall have successfully completed its
syndication of the remaining $25 million of the Senior
Secured Financing.
(xv) There shall have been no material adverse change
after the date hereof to the syndication market for
credit facilities similar in nature to the Credit
Facilities contemplated herein and there shall not
have occurred and be continuing a material
disruption of or material adverse change in
financial, banking or capital markets that would
have an adverse effect on the syndication, in each
case as determined by the Agent in its sole
discretion. The Borrower, the Plains Company and
their subsidiaries shall have fully cooperated in
the syndication efforts, including without
limitation by promptly providing the Agent with all
information deemed necessary by them to
successfully complete the syndication.
(xvi) The Agent and the Lenders shall have (i) received all
the information necessary to conduct their continuing
due diligence analysis and review and (ii) completed
such due diligence analysis and review and shall be
satisfied with the results thereof, in each case with
<PAGE>
respect to the Borrower, the Plains Company and their
respective subsidiaries and the Plains Company
Acquisition.
(xvii)All costs, fees, expenses (including, without
limitation, legal fees and expenses) and other
compensation contemplated hereby payable to the Lenders
or the Agent shall have been paid to the extent due.
(xviii) The Borrower and the Plains Company and their
respective subsidiaries shall have no other
indebtedness outstanding.
B. B Term Loan Facility and Remaining
$2 Million of the Revolving Facility
The conditions precedent to the initial borrowing of B Term
Loans will be similar in nature to the conditions precedent to
the initial borrowing of A Term Loans except that references
will be to the Charles Town Acquisition, and such conditions
will in any event include the consummation of the Plains
Company Acquisition and the passing of a referendum in West
Virginia permitting the installation of video lottery
terminals at the Charles Town Race Track.
C. Conditions To all Loans
The conditions to all borrowings will include absence of
material adverse change, absence of material litigation,
absence of default or unmatured default under the Credit
Facilities, continued accuracy of representations and
warranties and receipt of such documentation (including
without limitation opinions of counsel) as shall be required
by the Agent.
Covenants: Those typical for these types of facilities (containing
certain exceptions to be negotiated and as are acceptable to
BTCo in its sole discretion) and any additional covenants
appropriate in the context of the proposed transaction.
Although the covenants have not yet been specifically
determined, we anticipate that the covenants shall in any
event include:
<PAGE>
(i) Minimum Consolidated Net Worth.
(ii) Minimum ratio of Adjusted Consolidated EBITDA2/ to
Consolidated Cash Interest Expense.
The ratio is calculated on a rolling four quarter basis.
The ratio will be calculated giving pro forma effect to
any proposed borrowing of indebtedness.
(iii) Maximum ratio of Consolidated Indebtedness to
Adjusted Consolidated EBITDA.
Adjusted Consolidated EBITDA is calculated on a rolling
four quarter basis. The ratio will be calculated giving
pro forma effect to any proposed borrowing of
Indebtedness.
(iv) Restrictions on other debt.
(v) Restrictions against mergers, acquisitions, joint
ventures, partnerships and acquisitions and
dispositions of assets.
(vi) Restrictions on sale-leaseback transactions and
lease payments.
(vii) No cash dividends.
(viii) Restrictions on voluntary prepayments of
other debt and amendments thereto.
(ix) Restrictions on transactions with affiliates and
formation of subsidiaries.
(x) Restrictions on investments.
<PAGE>
(xi) Absence of liens, with customary exceptions to be
negotiated.
(xii) Adequate insurance coverage.
(xiii) ERISA covenants.
(xiv) The obtaining of interest rate protection in
amounts and for periods to be determined.
(xv) Restrictions on capital expenditures to be
negotiated.
(xvi) Restrictions on material amendments of organization
documents.
(xvii) Maintenance of properties.
Representations
and Warranties: The Credit Facilities and related documentation
shall contain representations and warranties typical for these
types of facilities, as well as any additional ones
appropriate in the context of the proposed transaction.
Although the representations and warranties have not yet been
specifically determined, we anticipate that the
representations and warranties shall in any event include:
(i) Due organization and authorization.
(ii) Enforceability.
(iii) Financial condition.
(iv) Absence of material adverse change.
(v) Good title to all properties.
(vi) Absence of material litigation.
(vii) Payment of taxes.
<PAGE>
(viii) Compliance with all material agreements.
(ix) Compliance with all laws, rules and regulations.
(x) ERISA.
(xi) Environmental.
(xii) Perfection and priority of liens securing the
Credit Facilities.
(xiii) Full disclosure of all material information.
Events of
Default: Those typical for these types of facilities and any
additional ones appropriate in the context of the
proposed transaction, including without limitation:
(i) Failure to make payments when due.
(ii) Defaults under other agreements or instruments of
indebtedness in excess of specified amounts.
(iii) Noncompliance with covenants.
(iv) Breaches of representations and warranties.
(v) Bankruptcy.
(vi) Judgments in excess of specified amounts.
(vii) Invalidity of guaranties.
(viii) Impairment of security interest in collateral.
(ix) Change of control of the Borrower.
Required
<PAGE>
Lenders: Lenders holding a majority of the aggregate commitments
and/or outstanding Term Loans pursuant to the Credit
Facilities.
<PAGE>
AMENDED AND RESTATED
OPTION AGREEMENT
THIS AMENDED AND RESTATED OPTION AGREEMENT (the "Agreement"), is
made and entered into as of February 17, 1995, by and between CHARLES TOWN
RACING LIMITED PARTNERSHIP, a West Virginia limited partnership ("Racing"),
CHARLES TOWN RACES, INC., a West Virginia corporation ("CTR", Racing and CTR are
herein collectively referred to as "Optionor"), and PNGI CHARLES TOWN GAMING
LIMITED LIABILITY COMPANY, a West Virginia limited liability company ("PCTG").
WHEREAS, Racing is the owner of the fee simple interest, and CTR
is the owner of the tenancy interest, in approximately two hundred fifty (250)
acres of real property and improvements thereon located in Jefferson County,
West Virginia, known as the Charles Town Race Track and Shenandoah Downs and a
right of first refusal on approximately two hundred fifty acres of adjacent
property, described in Annex 1 attached hereto, together with certain tangible
and intangible personalty more particularly described below (collectively the
"Property") and CTR leases such Property from Racing;
WHEREAS, PCTG is interested in acquiring the Property for the
purpose of continuing thoroughbred horse racing and legally operating video
lottery terminals thereon;
WHEREAS, on or about February 17, 1995, Optionor granted to a
third party an option to purchase the Property, which option was subsequently
assigned to Bryant Development Company ("BDC"), and further assigned by BDC to
PCTG; and
WHEREAS, Optionor and PCTG desire to amend and restate the option
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
1. Grant of Option. Subject to and under the terms, covenants and
conditions hereinafter set forth, Optionor hereby grants to PCTG the exclusive
right and sole option (the "Option") to purchase Optionor's entire fee and
leasehold interest in the real estate constituting the Property and all
personalty relating to the operation of the Property and service contracts,
trade names (including but not limited to "Charles Town Race Track" and
"Shenandoah Downs"), equipment (including but not limited to trucks, tractors,
tote boards, starting gates, grandstands, and the like) relating thereto, and a
<PAGE>
right of first refusal on approximately two hundred fifty acres of adjacent
property except for certain apartment buildings owned by Racing in Berkeley
County, West Virginia, the Property's general manager's automobile and house on
Belvedere Avenue in Charles Town, and any cash on hand or in any bank accounts,
for the purchase price of Eighteen Million Dollars ($18,000,000). Said purchase
price shall be reduced, dollar for dollar, by (i) any sales proceeds received as
a result of any transfer of a portion of the Property permitted by Section 4(c)
below, (ii) $1.60 for each $1 borrowed by Optionor under that certain line of
credit (the "Line") under those certain loan documents (the "Loan Documents")
between Optionor and PCTG (it being understood that only the receipt of funds by
Optionor upon its request under the Line, and not the mere execution of the
Line, will reduce the purchase price, and it being further understood that the
reduction in the purchase price shall not in any manner affect Optionor's
obligation to repay such indebtedness pursuant to the terms and provisions of
the Loan Documents; (iii) all amounts of principal and interest outstanding
under the Line as of the Closing Date; and (iv) any payments made pursuant to
Section 11 below. Subject to the terms hereof, this Option is irrevocable and
coupled with an interest.
2. Registered Holder; Extension; Termination. Optionor
acknowledges and agrees that (a) PCTG is the sole holder of the Option; and (b)
that the prior holders of this Option and PCTG have, prior to the date hereof,
made aggregate payments to Optionor in the sum of Seven Hundred Fifty Thousand
Dollars ($750,000) and the Option Period has been extended until December 31,
1996 (the "Extension Date"); and (c) upon the recording of this Agreement in
accordance with Section 6 hereof, PCTG will be the sole record holder of the
Option. The Agreement contained in subsections (a) and (c) are based solely upon
Optionors review of that certain Second Assignment of Option dated as of March
29, 1996 by and between BDC and PCTG and its assumption that said assignment is
valid, binding and enforceable. Such payments are non-refundable unless Optionor
fails to convey title to the Property in the condition it is in as of the date
hereof, less and except any monetary encumbrances, liens, accrued taxes, and the
like or Optionor is otherwise in breach of this Agreement. This Option shall
terminate at 11:59 P.M. Eastern Standard Time on the Extension Date, unless the
November 5, 1996 referendum fails (or if the question of permitting video
lottery games in Jefferson County, West Virginia is not placed on the ballot
for the referendum), in which case the Option shall remain outstanding and may
be exercisable at any time during which the Line is outstanding or PCTG has any
obligation to make loans to Optionor under the Loan Documents, whether by
extension, default or otherwise, notwithstanding anything to the contrary
contained or implied in this Agreement or in any other agreement between or
among the parties hereto (the date the Option terminates is referred to herein
as the "Termination Date");
3. Method of Exercise. The Option may be exercised by delivery of
<PAGE>
written notice to Optionor at any time from the date hereof to the Termination
Date (the "Option Period") and fixing a date not more than sixty (60) days in
advance for the closing of title to the Property and the other items set forth
in Section 8 below. In the event the Option is exercised, Optionor shall sell
and PCTG shall purchase the Property and the parties will otherwise consummate
the transactions contemplated hereby on the terms and conditions set forth
herein and in the Related Agreements (as defined in Section 8 below).
4. Representations, Warranties and Covenants of
Optionor. Optionor hereby represents, warrants and covenants to PCTG
to the best of Optionor's actual knowledge and belief as provided
herein. "Optionor's actual knowledge" means the actual knowledge of D.
Keith Wagner, Chief Operating Officer of CTR, as of the date hereof.
(a) Good Title; Acreage. Optionor is seized of fee simple
title to the real estate portion of the Property, and is the sole owner of and
has authority to convey and transfer all Property, rights, and benefits which
are the subject matter of this Agreement, subject only to the exceptions set
forth in Schedule 4(a) hereto (the "Permitted Exceptions"). The Property
includes approximately two hundred fifty (250) acres of land, more or less Any
liens either on real estate or personalty or other monetary title exceptions
shall be paid by Optionor at closing.
(b) Litigation; Compliance with Laws. Optionor has no
knowledge, nor has Optionor received any notice, of any actual or pending
litigation or proceeding by any organization, person, individual or governmental
agency against Optionor with respect to the Property, or any part thereof, nor
does Optionor know of any basis for any such action; and Optionor has no
knowledge, nor has Optionor received any notice, of any violations of law,
municipal or county ordinances, or other legal requirements with respect to the
Property, or any part thereof, or with respect to the use, occupancy or
construction thereof, nor does Racing know of any basis for such violations.
Optionor has no knowledge of any proceeding to change such currently applicable
laws and regulations.
(c) No Other Transfers. Other than the Permitted Exceptions,
or documents executed with the prior written consent of PCTG, Optionor has not
executed and will not execute any document or instrument granting, conveying
assigning, or otherwise transferring, or in which Optionor has agreed to grant,
convey, assign, or otherwise transfer, all or any part of Optionor's interest in
<PAGE>
the Property. PCTG hereby consents to the sale of approximately 100,000 square
feet of land situated at State Route 17 and US Route 340. Notwithstanding the
foregoing, after providing PCTG with prior written notice, Optionor may encumber
the Property with additional deeds of trust and UCC liens subject to the
restrictions set forth in Section 11 below and may execute options on the
Property to third parties provided the same are expressly subordinate to this
Agreement
(d) Condemnation. There is no pending or threatened
condemnation proceeding with respect to all or any portion of the Property by
any governmental authority having the power of eminent domain, nor is there any
contemplated sale of all or any portion of the Property proposed to be made in
lieu of any such pending or threatened condemnation or eminent domain
proceeding. In the event of a condemnation, PCTG shall have the option of
terminating this Agreement or proceeding to closing with an assignment of any
condemnation proceeds or claims therefor.
(e) Environmental. No portion of the Property contains any
hazardous substance or hazardous waste, as said terms are used in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. subsections 9601 et seq., the Resources Conservation and
Recovery Act, as amended, 42 U.S.C. subsections 6901 et seq., or any West
Virginia environmental protection statute.
(f) Solvency. Neither Optionor nor any of Optionor's general
partners has (i) made a general assignment for the benefit of creditors, (ii)
filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by any of its or their creditors; (iii) suffered the
appointment of a receiver to take possession of all or substantially all, of its
or their assets; or (iv) suffered the attachment or other judicial seizure of
all, or substantially all, of its or their assets; or (v) admitted in writing
its inability to pay its debts as they come due; (vi) made an offer of
settlement, extension or composition to its creditors generally.
(g) Leases. There are no written leases with respect to the
Property except (i) the unrecorded year-to-year lease (the "Lease") between
Racing and CTR dated January 1, 1992, amended January 1, 1993, and no subleases
or agreements with respect thereto (except collateral assignments in favor of
One Valley Bank, Inc.); and (ii) Concert Rental and Exclusive Option with IMP,
Inc. dated May 17, 1993, as amended July 27, 1994, and which terminates on
December 31, 1999 (the "IMP Agreement"). Optionor shall not execute any other
<PAGE>
leases or amend or extend the above leases without the consent of PCTG, except
for (i) annual renewals of the Leases; or (ii) after prior written notice to
PCTG, extension of the IMP Agreement in each case for not more than twelve
months. The Lease shall be terminated as of the closing of the transfer of the
Property to PCTG, and PCTG shall have no liability (whether for lease payments
accrued prior to the date of such termination or otherwise), in connection with
the Lease.
(h) Service Contracts. There are no operating
contracts with respect to the Property ("Service Contracts") with
affiliates of Optionor.
(i) Insurance. Optionor has and will maintain such casualty
insurance policy as may be required by the Optionor's institutional lender, and,
from the date hereof through closing, PCTG will be an additional insured, loss
payee and notice party thereunder (provided PCTG will bear any cost associated
with it being included in such coverage). In the event of a casualty to the
Property, PCTG shall have the option of terminating this Agreement or proceeding
to closing with an assignment of insurance proceeds or claims therefor.
(j) Taxes. Optionor shall pay all real estate taxes and
other taxes accrued with respect to the Property through the date of closing
upon the sooner of (i) closing, or (ii) such times pending closing as may be
necessary to avoid a loss of title to the Property.
(k) Authorization; Consent. Optionor is properly organized
and in good standing in the State of West Virginia, and has the full corporate
or partnership (as applicable) authority to enter into and perform its
respective obligations under this Agreement and the transactions contemplated
hereby. Optionor has taken all corporate and/or partnership actions necessary to
authorize execution and performance of this Agreement and the Related
Agreements, and the persons executing this Agreement and the Related Agreements
on its behalf have full authorization to do so. All necessary consents from
third parties, including but not limited to Optionor's lenders, have been
obtained. Neither the execution and the delivery of this Agreement nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Optionor is subject, or any provision of the charter or bylaws or
of the Certificate of Limited Partnership or the Partnership Agreement of
Optionor (as applicable), or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
consent under any agreement, contract, lease, license, instrument, or other
<PAGE>
arrangement to which Optionor is a party or by which Optionor is bound or to
which any of Optionor's assets is subject, and which is to be assigned to PCTG
hereunder or under any Related Agreement; or (iii) result in the imposition of
any Lien upon any of Optionor's assets.
(l) Operating License. Optionor will take all commercially
reasonable actions necessary or appropriate to operate the Property as Charles
Town Race Track pending closing, and to maintain in good standing all licenses
and permits necessary for same.
Optionor shall take no actions inconsistent with the
foregoing pending closing of the transaction contemplated by this Agreement, and
will promptly notify PCTG of any fact which renders the above inaccurate. All
representations and warranties herein shall be true and correct as of the date
of closing, and shall survive recordation of the deed to the Property and the
closing of the transactions contemplated by this Agreement. The representations
and warranties contained in this Agreement (including any Schedules hereto) and
in the Related Agreements (including any schedules thereto) do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained herein or therein not
misleading.
5. Inspection Rights.
(a) The physical condition of the Property shall be "as is,
where is." Optionor's only obligations with respect to same shall be to provide
routine maintenance and repairs as may be necessary for continued operation.
During the Option Period, PCTG and PCTG's experts, engineers and consultants
shall have the right and opportunity to conduct reasonable studies of the
Property, including, but not limited to, review of the records possessed by
Optionor relating to the use, occupancy, operation, and physical condition of
the Property. Within three (3) business days from the commencement of the Option
Period, Optionor shall either deliver to PCTG, or make available to PCTG or
PCTG's experts, engineers and consultants during normal business hours, at the
Property, documents relating to the Property, including but not limited to the
following to the extent the same are in the custody or control of Optionor:
(i) Current tenant roll, existing leases and rental
agreements, side letters, occupancy agreements, licenses or other
agreements affecting the use and occupancy of the Property,
existing mortgages and trust deeds, and insurance policies.
<PAGE>
(ii) Accounting records, property tax bills, and
copies of tax returns filed for the previous two calendar years
and the current year to date, actual utility bills and other
original bills or invoices for goods and services rendered to the
Property.
(iii) Environmental site assessments.
(iv) Litigation files, plans and
specifications, and statement of receivables and payables.
(v) Engineering surveys and reports.
(vi) Building material design surveys for
asbestos-containing materials.
(vii) Title reports and surveys.
(viii) Service Contracts.
(ix) Leases.
(x) Such other records as PCTG may
reasonably request.
(xi) Promptly after execution of this Agreement,
Optionor shall, at the request of PCTG order and deliver to PCTG
an owner's title insurance commitment from Lawyers Title Insurance
Corporation on current ALTA form for the real estate portion of
the Property. Optionor shall pay for the cost of its attorneys
certifying title to Lawyers Title Corporation and PCTG shall pay
for the premiums for issuance of any final policy and any
cancellation fee if such final policy is not purchased prior to
the expiration of the commitment.
The information provided by Optionor to PCTG in connection with the foregoing
shall not intentionally contain any untrue statement of a material fact or
intentionally omit to state any material fact or other relevant information
necessary in order to make the information provided not misleading or
incomplete.
(b) During the Option Period, PCTG and PCTG's experts,
engineers and consultants shall have the opportunity with the prior written
consent of Optionor not to be unreasonably withheld:
(i) To inspect the structural condition of the
Property and all major components thereof, including, without
limitation, heating, air conditioning, roof, elevators, utility
systems, appliances, and conduct such geological and soil tests
and engineering studies as Showboat shall require.
<PAGE>
(ii) To inspect the personal property
inventory of the Property.
(iii) To commission a survey by a licensed asbestos
removal contractor regarding the cost of removal or encapsulation
of asbestos from the Property (if applicable).
(iv) To commission a survey by a licensed contractor
regarding the cost of installation of a sprinkler system in the
Property (if applicable).
(v) To inspect such other aspects of the physical
elements of the Property, and make all such other inquiries of
third parties, including governmental authorities, as PCTG and
PCTG's experts, engineers and Consultants deem necessary or
appropriate with respect to the Property.
(c) PCTG may terminate this Agreement on the basis of its
findings during the Option Period by giving notice of such termination to
Optionor prior to the expiration of the Option Period or any permitted extension
thereof. In the event of such termination not, Optionor may retain any
consideration paid by PCTG hereunder and the parties shall have no further
obligation to each other except for obligations hereunder which expressly
survive such termination.
(d) PCTG hereby indemnifies and holds Optionor harmless from
and against any and all loss, cost, damage, liability or expense (including
reasonable attorneys' fees) arising from the activities of PCTG, its agents,
employees, contractors and consultants, at or with respect to the Property
during the Option Period. The terms of this indemnification shall survive
expiration or termination of this Agreement.
6. Recordation. PCTG may, at its expense, record a memorandum of
this Agreement in the land records of Jefferson County, West Virginia in a form
reasonably acceptable to Optionor. In the event the Option is not exercised or
closing fails to occur as provided herein, PCTG shall execute an appropriate
release to remove said memorandum from such land records.
7. Disclosure. Neither PCTG nor Optionor shall disclose to third
parties (other than their respective counsel, accountants, lenders and other
professionals working on the acquisition) any proprietary or otherwise
confidential information disclosed by the other pursuant to this Agreement and
the transactions contemplated hereby. PCTG shall advise Optionor of the groups
<PAGE>
that shall have access to the due diligence information, and Optionor shall not
unreasonably withhold its consent to such groups having access to such
information. The parties agree that such information shall not be disclosed to
Martin & Seibert, L.C. unless such disclosure is required by law.
8. Closing. At Closing, taxes (which shall be
re-prorated when actual tax bills are available), rents, operating
costs and the like shall be pro-rated, and Optionor shall deliver or
take the following actions:
(a) A special warranty deed and bill of sale for the
Property; cancel the Lease; assign all Service Contracts which shall be assumed
if not Cancelable; execute a mechanic's lien affidavit in favor of the PCTG or
its title insurer;
(b) An operating transition agreement in form and
substance agreed to by the parties hereto;
(c) Optionor shall deliver a certificate
recertifying all representations set forth in Section 4 hereof; and
(d) Optionor shall do all things and execute and deliver all
documents reasonably necessary to consummate the transaction contemplated by
this Agreement, but limited solely to Optionor's obligations set forth herein.
Transfer stamps shall be shared equally. Each party shall bear its own
attorney's fees.
9. No Liabilities Transferred. Except as otherwise expressly
provided herein or in any Related Agreement, Optionor shall not transfer, and
PCTG shall not assume, any obligations or liabilities with respect to the
Property or otherwise with respect to Optionor or Optionor's business.
10. Notices. All notices, demands, requests, consents, approvals,
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement ("Notices") shall be in writing, and shall
be deemed to have been given (i) when delivered personally, (ii) by telecopy
(provided that a confirmation copy is sent by the means set forth in (iii) or
(iv) below within twenty-four (24) hours), or (iii) one (1) business day after
being sent by confirmed air courier, or (iv) three (3) business days after being
mailed by United States registered or certified mail, return receipt requested,
postage prepaid. All Notices shall be addressed as follows:
<PAGE>
To PCTG: William Bork, President
Penn National Gaming, Inc.
c/o Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, PA 19610
Telecopy Number: (610) 376-2842
Copy to: Robert P. Krauss, Esquire
Mesirov Gelman Jaffe Cramer
& Jamieson
1735 Market Street
Philadelphia, PA 19103-7598
Telecopy Number: (215) 994-1111
To Racing: D. Keith Wagner, President
Charles Town Races
Post Office Box 551
Charles Town, West Virginia 25414
Telecopy Number: (304) 725-6979
Copy to: Michael Keller, Esquire
Bowles Rice McDavid Graff & Love
105 West Burke Street
P.O. Box 1419
Martinsburg, West Virginia 25401
Telecopy Number: (304) 267-3822
or to such other address as such party shall have specified most recently by
like Notice. Any Notices given or delivered by other means shall not be
effective.
11. Deeds of Trust. Optionor represents and warrants to PCTG that
the only deeds of trust affecting the Property as of the date hereof are those
of record in favor of One Valley Bank, Inc. and PCTG (the "Existing Deeds of
Trust"). Optionor covenants to give PCTG prompt notice of any event of default
or notice of default with respect to the Existing Deeds of Trust. Optionor
irrevocably authorizes PCTG to contact any lender with respect to the Existing
Deeds of Trust (or subsequent lenders provided below) from time to time, either
in PCTG's own name or as Optionor's attorney-in-fact, (i) as to whether Optionor
is in default thereunder, and (ii) to cure any such default if PCTG so chooses.
The costs of any such cure, together with incidental expenses including but not
limited to reasonable attorneys fees (the "Cure Costs") shall, at PCTG's sole
option, (i) be credited, dollar for dollar, against the purchase price set forth
in Section 1 hereof in the event PCTG exercises the Option or (ii) be repaid by
<PAGE>
Optionor on demand, together with interest thereon at the lesser of (X) the
prime rate as reported in the Wall Street Journal from time to time plus 4% and
(Y) the maximum rate of interest allowed by law. Optionor shall execute such
letters to such lenders in confirmation of this section, and such documents as
may be necessary to create a security interest in and to the Property in favor
of PCTG to adequately secure monies paid pursuant to this provision as PCTG may
request. Said security instrument shall be executed promptly upon request
following such payment. Optionor shall not suffer any liens on the Property
other than Permitted Exceptions except that Optionor may encumber the Property
with additional deeds of trust provided that (i) PCTG receives prior written
notice of such deeds of trust, and (ii) the total deeds of trust on the
Property, including any Existing Deeds of Trust, at any one time shall not
exceed Ten Million Dollars ($10,000,000).
12. Remedies. In the event Optionor fails to perform its
obligations hereunder, including failure to convey the Property at closing, PCTG
shall be entitled to maintain an action for specific performance to compel such
transfer and/or maintain an action for money damages. In the event a
representation or warranty in Section 4 hereof is false when made or
re-certified and the misrepresentation was made willfully and intentionally for
the purpose of fraudulently obtaining the Option money, then, Optionor shall
be liable for all consideration paid for the Option or any extension thereof
together with such other money damages as may be available at law. The
parties acknowledge that the representations made in Section 4 hereof were
made by D. Keith Wagner in his capacity as an officer of CTR only, and he
shall not be named as a party in any lawsuit hereunder unless he is a general
partner of Racing and it is necessary to name him in order to maintain an
action against Racing.
13. Time. Time is of the essence.
14. Governing Law. The law of West Virginia shall
govern this Agreement.
15. Assignment. This Agreement is binding upon the
parties, their successors and assigns.
16. Final Agreement. This Agreement is the final understanding of
the parties and all prior or contemporaneous negotiations are merged herein.
This Agreement may not be modified except in writing signed by all parties. This
Agreement is not intended to and shall not modify, amend or supersede the Loan
Documents entered into in connection with a certain line of credit previously
entered into between Optionor and PCTG, or that certain Cooperation Agreement
previously entered into between Optionor and PCTG.
<PAGE>
17. Severability. In the event that a court of competent
jurisdiction determines that one or more provisions of this Agreement are not
enforceable, such provision or provisions shall be deemed to be severed from
this Agreement and the remaining terms hereof shall be accorded full force and
effect.
18. Press Releases and Public Announcements. Neither PCTG nor
Optionor shall issue any press release or make any public announcement relating
to the subject matter of this Agreement without the prior written approval of
the other; provided however, Penn National Gaming, Inc. may make any public
disclosure it deems appropriate in connection with its status as a public
company or that it believes is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case Penn
National Gaming, Inc. will use its best efforts to advise Optionor prior to
making the disclosure and to provide Optionor the opportunity to comment upon
the disclosure).
WITNESS the hand and seal of the parties as of the date and year
first above written.
PNGI CHARLES TOWN GAMING LIMITED
LIABILITY COMPANY
By: PENN NATIONAL GAMING OF WEST
VIRGINIA, its Managing Member
By:/s/ William Bork(SEAL)
WILLIAM BORK
Its: President
CHARLES TOWN RACING LIMITED PARTNERSHIP
By: D.K.W. INC., its general partner
By: /s/ D. Keith Wagner(SEAL)
D. KEITH WAGNER
Its: President
CHARLES TOWN RACES, INC.
By: /s/ Rodger Ramey (SEAL)
ROGER RAMEY
Its: President
<PAGE>
STATE OF West Virginia )
)
COUNTY OF Berkeley )
Before me, a notary public in and for the above jurisdiction,
appeared D. KEITH WAGNER, President of D.K.W. Inc., known to me to a general
partner of Charles Town Racing Limited Partnership, a West Virginia limited
partnership, and acknowledged that he executed the within instrument as his act
and deed and the act and deed of said partnership.
(SEAL) /s/ Deborah Grissinger
------------------------------------
Notary Public in and for
the State of West Virginia
Deborah Grissinger
Name printed or typed
My commission expires:April 14, 2003
STATE OF West Virginia )
)
COUNTY OF Jefferson )
Before me, a notary public in and for the above jurisdiction,
appeared ROGER RAMEY, known to me to be the President of Charles Town Races,
Inc., a West Virginia corporation, and acknowledged that he executed the within
instrument as his act and deed and the act and deed of said corporation.
(SEAL) /s/ Charlotte L. Burner
------------------------------------
Notary Public in and for
the State of West Virginia
Charlotte L. Burner
Name printed or typed
My commission expires:November 1, 2001
<PAGE>
STATE OF West Virginia )
)
COUNTY OF Berkeley )
Before me, a notary public in and for the above jurisdiction,
appeared WILLIAM BORK, known to me to be the President of Penn National Gaming
of West Virginia, Inc., Managing Member of PNGI Charles Town Gaming Limited
Liability Company, a West Virginia limited liability company, and acknowledged
that he executed the within instrument as his act and deed and the act and deed
of said company.
(SEAL) /s/ Deborah Grissinger
------------------------------------
Notary Public in and for
the State of West Virginia
Deborah Grissinger
Name printed or typed
My commission expires:April 14, 2003
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<CASH> 5,605
<SECURITIES> 0
<RECEIVABLES> 1,968
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,964
<PP&E> 27,218
<DEPRECIATION> 7,589
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0
0
<COMMON> 46
<OTHER-SE> 26,648
<TOTAL-LIABILITY-AND-EQUITY> 33,733
<SALES> 46,474
<TOTAL-REVENUES> 46,474
<CGS> 35,527
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<OTHER-EXPENSES> 3,710
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<INCOME-TAX> 3,016
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