SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 15, 1997
PENN NATIONAL GAMING, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-24206 23-2234473
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No)
825 Berkshire Blvd. Wyomissing, PA 19610
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 610-373-2400
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Item 2.Acquisition or Disposition of Assets
General
On January 15, 1997, pursuant to an Amended and Restated Option Agreement
dated as of February 17, 1995 (the "Option Agreement"), PNGI Charles Town Gaming
Limited Liability Company ("PNGI LLC") acquired substantially all of the assets
(the "Acquired Assets"), subject to certain of the liabilities, of Charles Town
Races, Inc. ("CTR") and of Charles Town Racing Limited Partnership ("Racing")
(the "Acquisition"). The Acquired Assets include approximately 250 acres of real
property and improvements thereon, including the Charles Town Races thoroughbred
horse racing track, in Charles Town, West Virginia (all of such real property
and improvements, the "Track") and related assets. PNGI LLC is 80% owned by Penn
National Gaming of West Virginia, Inc. ("PNGI/WVA"), an indirect, wholly-owned
subsidiary of Penn National Gaming, Inc. (the "Company"), and 20% owned by
Bryant Development Company ("BDC"), pursuant to the terms of an Amended and
Restated Operating Agreement of PNGI LLC dated as of December 31, 1996, among
PNGI LLC, PNGI/WVA and BDC (the "Operating Agreement").
Pursuant to a letter dated January 14, 1997 from Peter M. Carlino,
Chairman and Chief Executive Officer of the Company, on behalf of the Company,
PNGI/WVA and PNGI LLC, to James A. Reeder, President of BDC (the "January 14th
Letter"), the parties confirmed an agreement to amend the Operating Agreement to
provide PNGI/WVA with an 89% ownership interest and BDC with an 11% ownership
interest in PNGI LLC, and to eliminate BDC's obligation to fund any initial
portion of the funding of PNGI LLC up to $40,000,000. The January 14 Letter
further provides that the initial funding of PNGI LLC up to $40,000,000 will be
treated, as between the members of PNGI LLC, as a loan from PNGI/WVA or the
Company to PNGI LLC, regardless of form. The proposed changes in the ownership
of PNGI LLC are subject to review by the applicable West Virginia racing and
lottery regulatory authorities.
The Company provided 100% of the purchase price for the Acquisition, and
anticipates that it will provide 100% of the cost of refurbishing the Track as
described below.
Basic Terms of the Acquisition.
The Acquired Assets consist principally of approximately 250 acres of real
property in Charles Town, West Virginia and improvements thereon, including the
Charles Town Races thoroughbred racetrack, a right of first refusal to acquire
an additional 250 acres adjacent to the racetrack, and related facilities and
personal property used in connection with the conduct of thoroughbred horse
racing at the Track. CTR and Racing also assigned to PNGI LLC certain agreements
related to the operations of the racetrack to the extent such agreements are
valid and legally binding, and PNGI LLC assumed certain executory obligations
under those particular contracts, to the extent such obligations are valid and
legally binding, and PNGI LLC further repaid a loan obligation of CTR to One
Valley Bank, Inc. in the amount of approximately $168,000, using proceeds from
an approximately $168,000, thirty-day loan from Racing to PNGI LLC.
PNGI/WVA also agreed to indemnify Racing for any claim by GTECH
Corporation ("GTECH") or by AmTote International, Inc. ("AmTote") that Racing
may have failed to fulfill certain obligations under a certain contract among
AmTote International, Inc., CTR and Racing, certain portions of which contract
were allegedly assigned to GTECH, and the Company guaranteed such
indemnification obligations. Certain litigation among CTR, Racing, the Company
and GTECH relating to the foregoing is described on pages 14
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and 57 of the Company's Amendment No. 1 dated January 21, 1997 to Registration
Statement Number 333-18861 on Form S-3 (the "Registration Statement"), and is
incorporated herein by reference.
The purchase price for the Acquired Assets was approximately $16,500,000
(subject to reduction of up to approximately $500,000 based upon the resolution
of certain disputed items, for which amounts have been placed in escrow), plus
an estimated $2,000,000 in acquisition related fees and expenses. The purchase
price for the Acquired Assets was paid at the closing by wire transfer of funds.
At the closing, CTR repaid to PNGI LLC $1,155,000 previously loaned to CTR by
PNGI LLC. The funds for the purchase price for the Acquired Assets were provided
by the Company, which borrowed such funds pursuant to its credit facility under
the Credit Agreement (described below).
Prior to the Acquisition, CTR and Racing conducted live thoroughbred horse
racing, pari-mutuel wagering on live races run at the Track, and pari-mutuel
wagering on races import simulcast from other tracks. On November 11, 1996, the
Track was closed for the racing season, and currently remains closed.
PNGI LLC expects to refurbish the Track as an entertainment complex that
will feature live racing, dining, simulcast wagering and, upon the completion of
the interior refurbishment, initially 400 video lottery gaming machines ("Gaming
Machines"). The estimated cost of the refurbishment, exclusive of the cost of
the purchase or lease of the Gaming Machines, is expected to be approximately
$16,000,000. The Company expects the Track to open for live racing and on-site
pari-mutuel wagering on or about April 1, 1996, and for Gaming Machines in
mid-1997, in each case subject to all required regulatory approvals. PNGI LLC
has been granted a conditional license to conduct thoroughbred racing and
simulcast wagering at the Track, and has applied for but not yet received at
this time a license to operate Gaming Machines at the Track.
The voters of Jefferson County, West Virginia passed a local referendum on
November 5, 1996 to permit Gaming Machines to be operated at the Track. The West
Virginia legislation which permits such Gaming Machine operations expires on
June 30, 1997. No Gaming Machines may be operated at the Track if an appropriate
license is not granted or, if it is granted, the enabling legislation is not
extended. GTECH has claimed an exclusive right to install and operate PNGI LLC's
video lottery system at the Track, as described above and at pages 14 and 57 of
the Registration Statement.
Showboat Operating Company ("Showboat"), which was the original optionee
under the Option Agreement (which was subsequently assigned to BDC and by BDC to
PNGI LLC), has retained a right of first refusal to operate any casino at the
Track in return for a management fee (to be negotiated at the time, based on
rates payable for similar properties). Showboat has also retained a right of
first refusal to purchase or lease the site of any casino at the Track proposed
to be leased or sold and to purchase any interest proposed to be sold in any
such casino (on the same terms offered by a third party or otherwise negotiated
with PNGI LLC). The rights retained by Showboat extend for a period of five
years from the date PNGI LLC exercised its option to purchase the Track, and
expire thereafter unless legislation to permit casino gaming at the Track has
been adopted prior to the end of the five year period. If such legislation has
been adopted prior to such time, then the rights of Showboat continue for a
reasonable time (not less than 24 months) to permit completion of negotiations.
Financing for the Acquisition. On January 15, 1997, the Company borrowed
$16,500,000 in term loans from a syndicate of banks for which Bankers Trust
Company serves as agent, pursuant to the terms of a Credit Agreement dated as of
November 27, 1996 among the Company, Bankers Trust Company as Agent, CoreStates
Bank, N.A. as Co-Agent, and certain banks party to the Credit Agreement, and
which provides for a $75,000,000 credit facility (the "Credit Agreement").
Advances under the credit facility established by the Credit Agreement are
secured by substantially all of the assets of the Company and its subsidiaries
other than the assets of PNGI LLC. PNGI/WVA has pledged its equity interest in
PNGI LLC to the banks party to the Credit Agreement as security for the advances
under the Credit Agreement, and has
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agreed not to permit PNGI LLC to grant a security interest in or otherwise
encumber any of the assets of PNGI LLC.
Failure by PNGI LLC to obtain from the West Virginia Lottery Commission,
by June 1, 1997, a license to install and operate Gaming Machines at the Track,
or to retain such license or a license from the West Virginia Racing Commission
to conduct thoroughbred horse racing at the Track, constitute events of default
under the Credit Agreement.
The Credit Agreement was previously filed with the Securities and Exchange
Commission as Exhibit 10.1 to the Company's Report on Form 8-K dated December
12, 1996, and is incorporated herein by reference. The Credit Agreement was
amended by a certain First Amendment and Consent dated as of January 7, 1997
among the parties to the Credit Agreement (the "First Amendment"). The First
Amendment is attached hereto as Exhibit 2.6.
Tax and AccountingThe Company intends to account for the acquisition of
the Acquired Assets as a purchase for financial reporting purposes.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements.
To be filed on Form 8-K/A as soon as practicable, but not later than
60 days after this Form 8-K must be filed.
(b) Pro Forma Financial Information (unaudited).
To be filed on Form 8-K/A as soon as practicable, but not later than 60
days after this Form 8-K must be filed.
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(c) Exhibits.
Exhibit No. Description
2.1 Amended and Restated Option Agreemendated as of
February 17, 1995 among Charles Town Races, Inc., Charles
Town Racing Limited Partnership, and PNGI Charles Town
Gaming Limited Liability Company. (^)
2.2 Transfer, Assignment and Assumption Agreement and Bill of
Sale dated January 15, 1997 among Charles Town Races,Inc.,
Charles Town Racing Limited Partnership, and PNGI Charles
Town Gaming Limited Liability Company. (^)
2.3 Closing Agreement dated January 15, 1997 among
Charles Town Races, Inc., Charles Town Racing
Limited Partnership, and PNGI Charles Town Gaming
Limited Liability Company.
(^)
2.4 Amended and Restated Operating Agreement dated as of
December 31, 1996 among Penn National Gaming of West
Virginia, Inc., Bryant Development Company and PNGI
Charles Town Gaming Limited Liability Company. (^)
2.5 Letter dated January 14,1997 from Peter M.Carlino to James
A. Reeder
2.6 First Amendment and Consent dated as of
January 7, 1997 among the Company, Bankers Trust
Company as Agent, CoreStates Bank, N.A. as
Co-Agent, and certain banks party to the Credit
Agreement dated as of November 27, 1996.
(^) The Company will upon request provide the Commission with copies of
any schedule or exhibits to this agreement.
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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: January 30, 1997
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EXHIBIT INDEX
Exhibit No. Description
2.1 Amended and Restated Option Agreemendated as of
February 17, 1995 among Charles Town Races, Inc., Charles
Town Racing Limited Partnership, and PNGI Charles Town
Gaming Limited Liability Company. (^)
2.2 Transfer, Assignment and Assumption Agreement and Bill of
Sale dated January 15, 1997 among Charles Town Races,Inc.,
Charles Town Racing Limited Partnership, and PNGI Charles
Town Gaming Limited Liability Company. (^)
2.3 Closing Agreement dated January 15, 1997 among
Charles Town Races, Inc., Charles Town Racing
Limited Partnership, and PNGI Charles Town Gaming
Limited Liability Company.
(^)
2.4 Amended and Restated Operating Agreement dated as of
December 31, 1996 among Penn National Gaming of West
Virginia, Inc., Bryant Development Company and PNGI
Charles Town Gaming Limited Liability Company. (^)
2.5 Letter dated January 14,1997 from Peter M.Carlino to James
A. Reeder
2.6 First Amendment and Consent dated as of
January 7, 1997 among the Company, Bankers Trust
Company as Agent, CoreStates Bank, N.A. as
Co-Agent, and certain banks party to the Credit
Agreement dated as of November 27, 1996.
(^) The Company will upon request provide the Commission with copies of
any schedule or exhibits to this agreement.
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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:
I. 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
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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 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.
II. 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. 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
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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");
III. Method of Exercise. The Option may be exercised
by delivery of 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). EXTENSION
IV. 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.
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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 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
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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 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
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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 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.
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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.
V. 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:
1. 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.
2. 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.
Environmental site assessments.
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4. Litigation files, plans and
specifications, and statement of receivables and
payables.
5. Engineering surveys and reports.
6. Building material design surveys for
asbestos-containing materials.
Title reports and surveys.
Service Contracts.
9. Leases.
10. Such other records as PCTG may
reasonably request.
11. Promptly after execution of this Agreement, Optionor
shall order and pay for and deliver to PCTG a preliminary title
report for the real estate portion of the Property, it being
understood and agreed that PCTG shall be responsible for the payment
of premium on any title insurance purchased.
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:
1. To inspect the structural condition of the Property
and all major components thereof, includ ing, without limitation,
heating, air conditioning, roof, elevators, utility systems,
appliances, and con duct such geological and soil tests and
engineering studies as Showboat shall require.
2. To inspect the personal property
inventory of the Property.
To commission a survey by a licensed asbestos removal
contractor regarding the cost of removal or encapsulation of
asbestos from the Property (if applicable).
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4. To commission a survey by a licensed
contractor regarding the cost of installation of a
sprinkler system in the Property (if applicable).
5. 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 caused by the
failure of Optionor to convey title to the Property as provided herein,
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.
VI. 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.
VII. 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 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
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information shall not be disclosed to Martin & Seibert,
L.C. unless such disclosure is required by law.
VIII. 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.
IX. 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.
X. 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:
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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.
XI. 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 Optionor on demand, together with
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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).
XII. 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 in addition to any other remedy available at law or in
equity, 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 or in equity. The parties acknowledge that the
representations made in Section 4 hereof are 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.
XIII. Time. Time is of the essence.
XIV. Governing Law. The law of West Virginia shall
govern this Agreement.
XV. Assignment. This Agreement is binding upon the
parties, their successors and assigns.
XVI. Final Agreement. This Agreement is the final
understanding of the parties and all prior or
contemporaneous negotiations are merged herein. This
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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.
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 J. Bork (SEAL)
WILLIAM BORK
Its: President
CHARLES TOWN RACING LIMITED PARTNERSHIP
By: D.K.W. INC., its general partner
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By: /s/ D. Keith Wagner(SEAL)
D. KEITH WAGNER
Its: President
CHARLES TOWN RACES, INC.
By: /s/ Roger Ramey (SEAL)
ROGER RAMEY
Its: President
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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 Gissinger
Name printed or typed
My commission expires: April 14, 2003
STATE OF West Viriginia )
)
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 Viriginia
Charlotte L Burner
Name printed or typed
My commission expires:November 27, 2001
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STATE OF West Virginia )
)
COUNTY OF Berkeley )
Before me, a notary public in and for the above juris diction,
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
16
TRANSFER, ASSIGNMENT AND ASSUMPTION AGREEMENT
AND BILL OF SALE
THIS TRANSFER, ASSIGNMENT AND ASSUMPTION AGREEMENT AND BILL OF SALE
("Agreement") made this 15th day of January, 1997 by and between Charles
Town Racing Limited Partnership, a West Virginia limited partnership
("Racing"), Charles Town Races, Inc., a West Virginia corporation ("CTR"
and together with Racing, collectively, "Optionor"), and PNGI Charles Town
Gaming Limited Liability Company, a West Virginia limited liability
company ("PCTG").
BACKGROUND
Optionor and PCTG are parties to that certain Amended and Restated
Option Agreement dated as of February 17, 1995 (the "Option Agreement"),
pursuant to which Optionor agreed to transfer certain assets to PCTG and
PCTG agreed to assume certain liabilities of Optionor, all as more
specifically set forth therein. This Agreement is entered into in
connection with the closing of the transactions contemplated by the Option
Agreement.
All initially capitalized terms used in this Agreement (including in
the Exhibits hereto) but not defined herein shall have the meanings
ascribed to them in the Option Agreement or, if not defined therein, in
the Definitions Appendix attached to this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements contained herein and in the Option Agreement, and
intending to be legally bound, hereby agree as follows:
1. Transfer. Optionor hereby sells, assigns, transfers,
conveys and delivers to PCTG, free and clear of all Security Interests,
the Property (as defined in the Option Agreement but not including any
real property which is being transferred pursuant to a deed of even date
herewith) including, but not limited to all personalty and other assets,
tangible or intangible, and rights relating or pertaining to, or used or
held for use in connection with the Optionor's business or the operation
of the Property and Service Contracts, tradenames (including but not
limited to "Charles Town Race Track" and "Shenandoah Downs"), equipment
(including but not limited to trucks,
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tractors, tote boards, starting gates, and the like) relating thereto, and
the Rights of First Refusal including without limitation those assets
listed on Schedule 1A attached hereto (the "Acquired Assets"), and
excluding only those assets listed on Schedule 1B attached hereto (the
"Excluded Assets"). Each Optionor is transferring that part of the
Property as is owned by it as indicated on Schedule 1A attached hereto.
2. Assignment. Optionor hereby assigns,
transfers, conveys and delivers to PCTG all of
Optionor's rights and interests under the Service
Contracts and other agreements pertaining to the
Business set forth on Schedule 2 attached hereto (the
"Assigned Contracts").
3. Assumption of Liabilities. PCTG hereby agrees to assume,
discharge, pay and perform, as applicable, in accordance with and subject
to their respective terms, to the extent such are legally binding
agreements, and provided that PCTG has been assigned all legal and
equitable rights, remedies, defenses, claims, counterclaims or rights of
set-off, Optionor, or either of them has, had or might have in relation
thereto, only those specific obligations of Optionor set forth on Schedule
3 attached hereto (the "Assumed Liabilities").
4. Cooperation by Optionor. Upon PCTG's request, Optionor and
their partners, officers, representatives and successors shall perform all
acts reasonably necessary to ensure the full and complete enjoyment by
PCTG and its successors and assigns of all right, title and interest in
and to the Acquired Assets and the Assigned Contracts, including without
limitation, the execution and delivery of such further assignments, bills
of sale, certificates, applications, instruments and other documents as
may reasonably be requested by PCTG.
5. Use of Facilities by Optionor. For a period of ninety (90)
days following the date hereof, PCTG shall permit Optionor to utilize
certain office space at Charles Town Race Track for administrative
purposes, as PCTG and Optionor may agree.
6. Bill of Sale; Covenants. This Agreement is
intended also to and does constitute a Bill of Sale to
the Acquired Assets. Each Optionor covenants to PCTG
that each Optionor is the lawful owner of that portion
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<PAGE>
of the Acquired Assets and the Assigned Contracts owned by it and has the
right to transfer such Acquired Assets and such Assigned Contracts to
PCTG, free and clear of all Liens, Security Interests, claims, charges and
encumbrances thereon or related thereto.
7. "Bringdown" and Survival of Representations, Warranties and
Covenants of Optionor. Optionor hereby represents, warrants and covenants
to PCTG that, only to the extent set forth in Paragraph 4 of the Option
Agreement and except as set forth in Schedule 7, the representations and
warranties made by Optionor in the Option Agreement, attached hereto, are
true and correct as of the date hereof; that the representations and
warranties of Optionor in this Agreement and the Option Agreement or in
any related agreement (including in each case any schedules or exhibits
hereto or thereto) do not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements or
information contained herein or therein not misleading; and Optionor
further represents, warrants and agrees that the representations and
warranties of Optionor in the Option Agreement and in this Agreement shall
survive recordation of the deed related to the Property and the closing of
the transactions contemplated by the Option Agreement and this Agreement.
8. Payment of Obligations. Racing and CTR hereby covenant and
agree that they shall pay, perform or discharge their respective accounts
payable and other liabilities and obligations in a commercially reasonable
manner as soon as practicable following the date hereof but saving to each
of them any right or remedy they may have to contest any such liability or
obligation, including but not limited to its obligations to One Valley
Bank, Inc. and those certain liabilities and obligations listed on
Schedule 8 attached hereto.
9. Disbursements. PCTG and Optionor agree that
PCTG shall disburse the purchase price for the Property
as set forth on Schedule 9 attached hereto, including a
holdback/escrow for certain items as described on
Schedule 9.
10. Consents. Optionor covenants that it has
obtained such consents as are required to transfer to
PCTG the Acquired Assets and to assign the Assigned
Contracts as set forth above; however, to the extent
any such consents have not been obtained, Optionor
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<PAGE>
covenants and agrees to obtain such consents as may be necessary to
transfer to PCTG the Acquired Assets and to assign to PCTG the Assigned
Contracts, or to take any other actions necessary or desirable to
otherwise provide to PCTG the economic benefit of such assets and
agreements, as if such assets and agreements had been transferred to PCTG.
11. No Third Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any person
other than the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Transfer,
Assignment and Assumption Agreement and Bill of Sale to be executed by
their respective duly authorized officers as of the date first above
written.
PNGI CHARLES TOWN GAMING
LIMITED LIABILITY
COMPANY
BY: /s/ William J. Bork
WILLIAM J. BORK, President
CHARLES TOWN RACING LIMITED
PARTNERSHIP
By: D.K.W. Inc. authorized
General Partner
BY: /s/ D. Keith Wagner
D. KEITH WAGNER, President
AND
By: G&G Associates, Inc.,
authorized General Partner
By: /s/ George S. Yeatras
GEORGE S. YEATRAS, President
4
<PAGE>
CHARLES TOWN RACES, INC.
By: /s/ Roger R. Ramey
ROGER R. RAMEY, President
5
<PAGE>
DEFINITIONS APPENDIX
"Intellectual Property" means all trademarks (including the names
"Charles Town Race Track" and "Shenandoah Downs" and any other names used
by Optionor, and all derivations thereof), tradenames, trademark
applications, registration and renewals, logos and corporate names
(together with any derivations, modifications or adaptations thereof, and
all goodwill associated therewith), patents (and applications), copyrights
(and applications and registrations), confidential information and similar
proprietary information.
"Liability" means any liability, obligation or commitment of any
nature (whether known or unknown, disclosed or undisclosed, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), including any liability
or obligation for Taxes.
"Lien" means any interest in property securing an obligation owed
to, or a claim, right or interest of, any Person, whether created by
agreement, statute, common law or judicial or governmental authority,
action or proceeding, including, but not limited to, any Security
Interest, lien, encumbrance, mortgage, assignment, pledge, conditional
sale, lease, consignment or bailment.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, a limited liability partnership, an unincorporated
organization, or a governmental entity (or any department, agency, or
political subdivision thereof) or any similar entity.
"Premises" means the approximately 250 acre property on which the
Charles Town Race Track and Shenandoah Downs are located and on which the
Business is conducted, and which is owned by Racing and leased to CTR.
"Rights of First Refusal" means CTR's rights of first
refusal with respect to approximately 250 acres of land
adjoining or adjacent to the Premises, pursuant to (i)
Right of First Refusal dated December 24th, 1990
between Joseph R. Shaeffer, III, Susan Shaeffer, Ronald
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<PAGE>
Shaeffer, Jane Shaeffer, Joseph Robert Shaeffer, Eleanor B. Burns and
Catherine B. Halbert, as Grantors, and Charles Town Races, Inc. as
Grantee, and recorded in the Jefferson County Clerk's Office in Deed Book
675 beginning at page 547, and (ii) Right of First Refusal dated December
28th, 1990 between John K. Dorsey, Guardian ad Litem for Kristin Ann
Shaeffer, and Kristin Ann Shaeffer, an infant, as Grantor, and Charles
Town Races, Inc. as Grantee, and recorded in the Jefferson County Clerk's
Office in Deed Book 675 beginning at page 556.
"Security Interest" means any mortgage, pledge, Lien, encumbrance,
charge, Tax, or other security interest or claim of any kind.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alter-native or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
7
CLOSING AGREEMENT
THIS CLOSING AGREEMENT dated January 15, 1997 by and among PNGI
Charles Town Gaming Limited Liability Company, a West Virginia limited
liability company ("PCTG"), Charles Town Races, Inc., a West Virginia
corporation ("CTR"), and Charles Town Racing Limited Partnership, a West
Virginia limited partnership ("Racing"). CTR and Racing are sometimes
referred to collectively as "Optionor."
BACKGROUND
A closing (the "Closing") is being conducted simultaneously with the
execution and delivery of this Closing Agreement, under the terms of an
Amended and Restated Option Agreement dated as of February 17, 1995 among
PCTG and Optionor (the "Option Agreement").
In connection with the Closing, Racing is delivering to PCTG a Deed
for the real property portion of the Property, and Optionor and PCTG are
entering into a Transfer, Assignment and Assumption Agreement and Bill
of Sale (the "Transfer Agreement").
The Option Agreement, the Deed, the Transfer Agreement, and the
other agreements, instruments and documents entered into in connection
with the transactions contemplated by the Option Agreement (the
"Acquisition") are sometimes called the "Acquisition Agreements".
At the Closing, PCTG and Optionor determined it to be in their
respective best interests to clarify certain issues relating to the
Acquisition and the Acquisition Agreements, and, to induce Optionor and
PCTG to consummate the Closing, the parties have entered into this Closing
Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the above
recitals and the mutual undertakings contained herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, agree as follows:
1. Definitions. Initially capitalized terms used but not defined in
this Closing Agreement shall have the respective meanings ascribed to such
terms in the Option Agreement or, where applicable, another Acquisition
Agreement, except where the context clearly requires otherwise.
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2. Application.The terms and provisions of this Closing Agreement
shall apply as to the particular items set forth herein, notwithstanding
anything to the contrary contained or implied in any of the Acquisition
Agreements. The Acquisition Agreements shall remain in full force and
effect, however, except to the extent specifically modified by the terms
of this Closing Agreement.
3. Purchase Price Reduction Amount.
(a) Paragraph 1(ii) of the Option Agreement provides that the
purchase price (the "Purchase Price") for the Property shall be reduced
by, among other things, $1.60 for each $1 borrowed by Optionor under the
Line. Optionor and PCTG agree that Optionor has borrowed $936,400.29 under
the Line, and that such amount (plus any accrued but unpaid interest) is
being repaid by Optionor to PCTG upon the Closing. Optionor and PCTG
further agree that PCTG has made a payment in the amount of $219,469.41 on
behalf of Optionor for real property taxes (the "Tax Payment"), and that
such amount (plus any accrued but unpaid interest) is also being repaid by
Optionor to PCTG upon the Closing.
(b) PCTG and Optionor disagree as to whether the Tax Payment
constitutes an additional borrowing under the Line of Credit, and
therefore whether the $1.60:$1 reduction multiple applies to the Tax
Payment. The difference of $219,469.41 multiplied by the reduction
multiple of $1.60:$1 equals $351,151.06 (the "Purchase Price Reduction
Amount").
(c) Optionor and PCTG agree that upon the Closing, an amount
of the Purchase Price equal to the Purchase Price Reduction Amount shall
be placed in escrow as provided in paragraph 6 of this Closing Agreement.
(d) The dispute relating to the Purchase Price Reduction
Amount shall be resolved in accordance with paragraph 7 below, and the
Purchase Price Reduction Amount shall be paid to PCTG or returned to
Racing as determined under paragraph 7 of this Closing Agreement.
4. Environmental Indemnification.
(a) GeoSystems Consultants, Inc. conducted a
Phase II Environmental Site Assessment of the real
property constituting a portion of the Property, and
issued a report thereon dated January 3, 1997 (the
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<PAGE>
"Report"). The Report includes estimated costs for the
remediation or other clean-up ("Remediation") of
various items, in an aggregate amount of approximately
$400,000.
(b) Optionor may be required by operation of law or pursuant
to any breach of the representation set forth in Section 4(e) of the
Option Agreement, if any, to pay for certain of the Remediation.
(C) Optionor and PCTG agree that upon the Closing, an amount of
the Purchase Price equal to $200,000 (the "Environmental Indemnification
Amount") shall be placed in escrow as provided in paragraph 6 of this
Closing Agreement, and shall be paid to PCTG or returned to Racing as
determined under paragraph 7 of this Closing Agreement.
5. Operating Expenses Liabilities Amount.
(a) Optionor hereby represents and warrants to PCTG that upon
the Closing, Optionor shall pay, perform and discharge those certain
liabilities of Optionor in an aggregate amount of approximately
$10,829,370.47, as set forth on Schedule 5(a) to this Closing Agreement
(the "Closing Date Payments"). Optionor may pay certain of the Closing
Date Payments by directing PCTG to make such payments to Optionor's
creditors on behalf of Optionor, from the Purchase Price. Optionor may
also direct all or a portion of the amount of the Closing Date Payments
shall be paid from the Purchase Price to the Escrow Fund (as hereinafter
defined), accompanied by payment instructions, and shall be paid to
creditors of Optionor as determined under paragraph 7 of this Closing
Agreement.
(b) (i) Optionor and PCTG agree that upon Closing, an amount
of the Purchase Price equal to $1,040,000, as set forth on Schedule 5(b)
(the "Known Liabilities Amount") shall be placed by Racing in escrow as
provided in paragraph 6 of this Closing Agreement, and shall be paid to
creditors of Optionor or returned to Optionor as determined under
paragraph 7 of this Closing Agreement. Optionor hereby represents and
warrants to PCTG that Optionor shall pay, perform or discharge the
liabilities and obligations set forth on Schedule 5(b) in a commercially
reasonable manner as soon as practicable after the date hereof but saving
to each of them any right or remedy they may have to contest any such
liability or obligation.
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(ii) Optionor and PCTG acknowledge that a portion of the
Known Liabilities Amount includes an amount which is for the payment of
the expenses, liabilities and obligations incurred or to be incurred by
Optionor as set forth in that certain Agreed Order dated November 7, 1996
in Jefferson County Civil Action No. 95-C-121, WVA 340 Limited Partnership
v. Charles Town Races, Inc. and Charles Town Racing Limited Partnership,
recorded in the Jefferson County Clerk's Office in Deed Book 850 at page
89 (the "Agreed Order"). As a result of the Agreed Order, Optionor is
required to make certain improvements to the Premises for the management
of storm water runoff (the "Work"). PCTG hereby grants Optionor and its
agents performing the Work reasonable rights of ingress and egress as
reasonably necessary to properly perform the Work.
(iii) Optionor hereby represents and warrants to PCTG
that Optionor shall cause the Work to be properly and timely completed and
that Optionor shall otherwise comply with the Agreed Order, and Optionor
hereby indemnifies, defends and holds harmless PCTG from and against any
and all losses, costs, damages, expenses, claims and attorney's fees,
including but not limited to costs of investigation, suffered or incurred
by PCTG in connection with or arising from the Agreed Order and the Work
or out of the failure of Optionor to comply with its obligations in
connection therewith, including any losses, costs, damages, expenses,
claims and attorney's fees incurred by PCTG by reason of any acts or
omissions of Optionor or Optionor's direct or indirect agents performing
the Work.
(c) Optionor and PCTG agree that upon Closing, an amount of
the Purchase Price equal to $250,000 to be used for payment of
obligations, liabilities and expenses of Optionor identified by Optionor
or PCTG subsequent to the date hereof and which either PCTG would be
obligated to pay to a third party if not paid by Optionor or which
Optionor would owe to PCTG under any of the Acquisition Agreements(the
"Operating Expense Liabilities Amount") shall be placed in escrow as
provided in paragraph 6 of this Closing Agreement. The Operating Expense
Liabilities Amount shall be applied towards payment of the operating
expense liabilities of Optionor existing as of the Closing Date or arising
thereafter, with any balance returned to Racing, as determined under
paragraph 7 of this Closing Agreement. Optionor and PCTG acknowledge and
agree that $29,933.70 of the $250,000.00 is being held in escrow pursuant
to condition (3) of PCTG's license
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dated December 12, 1996 from the West Virginia Racing
Commission.
6. Escrow.
(a) At the Closing, a portion of the Purchase Price equal to
the aggregate of the Purchase Price Reduction Amount, the Environmental
Indemnification Amount, the Operating Expense Liabilities Amount, the
Known Liabilities Amount, and any amounts for Closing Date Payments under
the last sentence of paragraph 5(a) (collectively, the "Escrow Fund")
shall each be paid by Racing into an escrow account (the "Account") at One
Valley Bank - East, Martinsburg, West Virginia. The Account shall be
entitled "Joint Escrow Account of Charles Town Racing Limited Partnership
and PNGI Charles Town Gaming Limited Liability Company, Michael B. Keller,
Esq. and Robert P. Krauss, Esq. joint Escrow Agents." The Account shall be
a money market or similar interest bearing account as the Escrow Agents
may in their discretion determine. The interest earned on the Escrow Fund
shall become part of the Escrow Fund and shall be paid to Racing upon
termination of the escrow, except that PCTG shall be paid interest on any
amounts PCTG receives from the Purchase Price Reduction Amount, the
Environmental Indemnification Amount and any sums awarded to PCTG from the
Operating Expense Liabilities Amount.
(b) Optionor and PCTG hereby appoint Michael
Keller, Esq. and Robert P. Krauss, Esq. as joint escrow
agents (the "Escrow Agents") and the Escrow Agents by
their respective signatures on the execution page of
this Closing Agreement, accept such appointment, and
agree to receive, deposit and deliver the Escrow Fund
subject to the terms contained herein.
(c) The Escrow Agents' duties and responsibilities shall be
limited to those expressly set forth in the escrow provisions of this
Closing Agreement. The Escrow Agents shall have no responsibility or
obligation of any kind in connection with this Closing Agreement and the
Escrow Fund except to disburse such funds either: (I) in accordance with
the joint instructions of Optionor and PCTG, or (ii) in accordance with
the final determination of the Arbitrator (as defined below) or a court
order enforcing the determination of the Arbitrator. The Escrow Agents
shall not be required to deliver the Escrow Fund or any part thereof or
take any action with respect to any matters that might arise in connection
5
<PAGE>
therewith, other than to receive, deposit and deliver the Escrow Fund as
herein provided.
(d) The Escrow Agents shall not be charged with notice or
knowledge of any fact or information not herein set out. The Escrow Agents
shall not be required in any way to determine the validity, sufficiency,
accuracy or genuineness, whether in form or in substance, of the Escrow
Fund or of any instrument, document, certificate, statement or notice
referred to in this Closing Agreement or contemplated hereby, or of any
endorsement or lack of endorsement thereon, or of any description therein.
It shall be sufficient if any writing purporting to be such instrument,
document, certificate, statement or notice is delivered to the Escrow
Agents and purports on its face to be correct in form and signed or
otherwise executed by the party or parties required to sign or execute the
same under this Closing Agreement. The Escrow Agents shall not be required
in any way to determine the identity or authority of any person executing
the same or the genuineness of any such signature.
(e) Should any controversy arise between or among Optionor and
PCTG or any other person, firm or entity with respect to the escrow
provisions of this Closing Agreement, the Escrow Fund, or any part
thereof, or the right of any party or other person to receive the Escrow
Fund or any part thereof, or should the escrow provisions of this Closing
Agreement terminate, or if the Escrow Agents should be in doubt or
disagreement as to what action to take, (I) the Escrow Agents shall have
the right, but not the obligation, either to withhold delivery of the
Escrow Fund or portion thereof until the controversy is resolved in
writing to the satisfaction of the Escrow Agents, the conflicting demands
are withdrawn, or the doubt is resolved in writing to the satisfaction of
Escrow Agents, or (ii) either Escrow Agent may institute a bill of
interpleader in any court of competent jurisdiction to determine the
rights of the parties hereto. The right of either Escrow Agent to
institute such a bill of interpleader shall not, however, be deemed to
modify the manner in which the Escrow Agents are entitled to make
disbursements of the Escrow Fund as herein set forth other than to tender
the Escrow Fund into the registry of such court. Should a bill of
interpleader be instituted, or should either Escrow Agent be threatened
with litigation or become involved in litigation in any manner whatsoever
on account of the
6
<PAGE>
escrow provisions of this Closing Agreement or the Escrow Fund, or any
portion thereof, then, as between themselves and the Escrow Agents,
Optionor and PCTG hereby bind and obligate themselves, their successors
and assigns, to pay to the Escrow Agents the respective attorney's fees
and any and all other disbursements, expenses, losses, costs and damages
of each Escrow Agent in connection with or resulting from such threatened
or actual litigation, as provided in subparagraphs (h), (i) and (j) below.
(f) In the event of any disagreement or conflicting instructions
resulting in adverse claims or demands being made upon the Escrow Agents
in connection herewith, or in the event that the Escrow Agents (or either
of them), in good faith, are in doubt as to what action should be taken
hereunder, either may, at his option, refuse to comply with any claims or
demands on him, or refuse to take any other action hereunder, so long as
such disagreement continues or such doubt exists, and in any such event,
the Escrow Agents shall not be or become liable in any way or to any party
for their failure or refusal to act until all differences shall have been
adjusted and all doubt resolved in writing to the satisfaction of the
Escrow Agents.
(g) Without in any way limiting any other provision of the escrow
provisions of this Closing Agreement, it is expressly understood and
agreed that Escrow Agent shall be under no duty or obligation to give any
notice, or to do or to omit the doing of any action or anything with
respect to the Escrow Fund, except to receive, deposit and deliver the
Escrow Fund in accordance with the escrow provisions of this Closing
Agreement. The Escrow Agents shall not be liable for any error in
judgment, any act or omission, any mistake of law or fact, or for anything
either may do or refrain from doing in connection herewith, except for his
own willful misconduct or gross negligence. All actions to be taken by the
Escrow Agents hereunder shall be taken only upon the agreement of both
Escrow Agents, except for actions specifically stated herein which may be
taken by one or either Escrow Agent.
(h) Optionor and PCTG jointly and severally hereby agree to
indemnify the Escrow Agents against, and hold each harmless from, any and
all losses, costs, damages, expenses, claims and attorney's fees,
including but not limited to costs of investigation, suffered or incurred
by any Escrow Agent in connection with or arising from or out of this
Closing Agreement, except such acts or
7
<PAGE>
omissions as may result from the willful misconduct or gross negligence of
such Escrow Agent.
(i) Each of the Escrow Agents may consult with his counsel or other
counsel satisfactory to him concerning any question relating to his duties
or responsibilities hereunder or otherwise in connection herewith and
shall not be liable for any action taken, suffered or omitted by the
Escrow Agent in good faith upon the advice of such counsel. All of the
Escrow Agents' rights hereunder are cumulative of any other rights either
may have by law or otherwise.
(j) Robert P. Krauss, Esq. in his capacity as Escrow
Agent shall be entitled to reimbursement from PCTG, and
Michael B. Keller, Esq. in his capacity as Escrow Agent
shall be entitled to reimbursement from Optionor, for
all reasonable fees and expenses of legal counsel or
other costs incurred by such Escrow Agent in connection
with the operation, administration and enforcement of
the escrow provisions of this Closing Agreement and
such Escrow Agent's rights or obligations hereunder.
(k) The Escrow Agents (or either of them) may resign
upon ten (10) days' prior written notice to each of
Optionor and PCTG. If Robert P. Krauss, Esq. or his
successor shall resign, PCTG shall appoint a successor
Escrow Agent and, if Michael B. Keller, Esq. or his
successor shall resign, Optionor shall appoint a
successor Escrow Agent.
(l) Upon disbursement of the Escrow Fund as provided herein, the
escrow provisions of this Closing Agreement shall terminate; provided,
that the provisions hereof respecting indemnification of the Escrow Agents
and payment of costs incurred by the Escrow Agents shall remain in full
force and effect for so long as the Escrow Agents may have any liability
or incur any costs in connection herewith.
(m) Optionor and PCTG hereby agree that Michael B. Keller, Esq.
through Bowles Rice McDavid Graff & Love represent Optionor as general
counsel, and that Robert P. Krauss, Esq. through Mesirov Gelman Jaffe
Cramer & Jamieson represent PCTG as general counsel, and agree that
neither Escrow Agent, nor their respective firms, shall be deemed to have
a conflict representing their respective client against the client of the
other, whether in connection with this Agreement or the transactions or
agreements contemplated hereby or entered into in connection herewith, or
otherwise,
8
<PAGE>
solely by reason of the Escrow Agents respective roles
as Escrow Agents hereunder.
7. Dispute Resolution.
(a) As to the Purchase Price Reduction Amount, Optionor and
PCTG shall attempt to mutually resolve the dispute by good faith
negotiations during the period of forty-five (45) days following the
Closing. If Optionor and PCTG agree on a resolution, they shall jointly
instruct the Escrow Agents as to the resolution, and shall instruct the
Escrow Agents to pay the Purchase Price Reduction Amount in accordance
with the resolution, and the Escrow Agents shall make the payments as so
instructed. If Optionor and PCTG are unable to reach an agreement by good
faith negotiations within such 45 day period, unless the Optionor and PCTG
agree to extend the period of good faith negotiations, either PCTG or
Optionor, or both jointly, may instruct the Escrow Agent that no
resolution has been reached. In such case, the dispute will be submitted
to binding arbitration as set forth in subparagraph (d) below.
(b) As to the Environmental Indemnification Amount, Optionor
and PCTG shall attempt to mutually resolve the dispute by good faith
negotiations for a period of one year following the Closing, and shall
instruct the Escrow Agents as to the results of such negotiations. If the
results determined how the Environmental Indemnification Amount should be
distributed between Optionor and PCTG, the Escrow Agents shall make the
payments in the manner instructed by the parties. If the parties are
unable to reach an agreement as to the distribution of all or a portion of
the Environmental Indemnification Amount during such one year period, the
dispute will be submitted to binding arbitration as set forth in
subparagraph (d) below.
(c) (i) As to the Closing Date Payments, to the extent amounts
therefore have been paid into the Escrow Fund as permitted under
subparagraph 5(a) above, the Escrow Agents are hereby instructed by
Optionor and PCTG to make the Closing Date Payments for those liabilities
for which amounts have been deposited into the Escrow Fund, solely as
instructed by Optionor from time to time, consistent with the terms and
provisions hereof.
(ii) As to the Known Liabilities Amount, the
Escrow Agents are hereby instructed by Optionor and
9
<PAGE>
PCTG to make the payments for the liabilities set forth on Schedule 5(b),
solely as instructed by Optionor, consistent with the terms and provisions
hereof. If, after the known liabilities set forth on Schedule 5(b) have
been paid, discharged and performed, there remains a balance of the Known
Liabilities Amount, such balance shall be returned to Racing, as described
on Schedule 5(b).
(iii) As to the Operating Expense Liabilities Amount, to
the extent additional operating liabilities of Optionor are determined and
agreed to by Optionor, Optionor shall instruct the Escrow Agents to make
payment of such additional liabilities, and the Escrow Agents shall make
such payments. One half of the balance (unpaid amount) of the Operating
Expense Liabilities Amount (less the amount of any disputes as to payment
of Operating Expense Liabilities, including as to additional operating
expense liabilities as to which Optionor does not agree) shall be returned
to Racing 120 days after the Closing. The balance, likewise less the
amount of any disputes as to payment of Operating Expense Liabilities,
including as to additional operating expense liabilities as to which
Optionor does not agree, shall be returned to Racing 180 days after the
Closing. Any disputes as to Operating Expense Liabilities Amounts shall
upon such 180 day period be submitted to arbitration as provided in
subparagraph (d) below, and any such disputed amounts shall be retained by
the Escrow Agents pending the results of the arbitration.
(d) (i) Optionor and PCTG agree that any controversy, claim or
dispute arising out of or relating to the items set forth in this Closing
Agreement or any of the other Acquisition Agreements, or otherwise related
to or arising from or in connection with the transactions contemplated
hereby or thereby, including, but not limited to, the breach, validity or
termination of this subparagraph (d) (a "Dispute"), shall be finally
settled by arbitration before a single arbitrator (the "Arbitrator") to be
held in the city of Martinsburg, West Virginia, or such other place as
Optionor and PCTG shall mutually agree, in accordance with the then
governing Commercial Arbitration Rules of the American Arbitration
Association then in effect ("Rules").
(ii) If the parties do not agree upon an arbitrator
within 15 days after a party's receipt of a demand for arbitration then,
upon the written request
10
<PAGE>
of Optionor or PCTG, the arbitrator shall be appointed in accordance with
Rule 13 of the Rules. The arbitration and this subparagraph (d) shall be
governed by the Federal Arbitration Act, 9 U.S.C. section 1 et seq. The
decision of the Arbitrator shall be final and conclusive on the parties
unless determined by a court of competent jurisdiction that the decision
of the Arbitrator was capricious, arbitrary, or so grossly erroneous as to
imply bad faith. Judgment may be entered on the Arbitrator's award in any
court having jurisdiction. Except as set forth above in this paragraph or
to enforce any award of the Arbitrator, no suit in law or equity based on
any arbitrable dispute or controversy hereunder shall be instituted by any
Optionor or PCTG.
8. Water Pollution Control Permit. In connection with the Closing,
Optionor is required to transfer to PCTG the water control permit for the
waste water treatment plant, West Virginia National Pollutant Discharge
Elimination System Permit No. WV0088757 (the "Permit"). Optionor and PCTG
acknowledge and understand that the process to transfer the Permit may not
be completed until 30-60 days after the Closing, and agree as follows:
(a) Optionor agrees that it shall use its best efforts to
cause the Permit to be transferred and assigned to PCTG, and PCTG shall
fully cooperate with Optionor and otherwise use its best efforts to
likewise cause the Permit to be transferred to PCTG.
(b) From and after the date hereof, PCTG will be responsible
to operate the waste water treatment plant in compliance with the Permit
(which has been extended to March 3, 1997 pursuant to a letter dated
January 3, 1997 to Optionor from the West Virginia Division of
Environmental Protection) and applicable law, and Optionor will have no
further responsibility vis-a-vis PCTG for operation of the waste water
treatment plant including compliance with the Permit. Optionor
acknowledges and agrees that Optionor is responsible for the operation of
the waste water treatment plant in compliance with the Permit and
applicable law up to the date hereof.
(c) If any permits, licenses or authorities (including the
Permit) held by Optionor with respect to the Property and the operations
conducted with respect thereto, cannot be transferred to PCTG on the date
hereof or, if not transferable, if PCTG cannot obtain
11
<PAGE>
new permits, licenses or authorities (including a permit to discharge from
the waste water treatment plant) with respect thereto on or before the
date hereof, then Optionor will cooperate with PCTG so as to permit the
continued conduct and operation of the business or Property (including
discharge from and operation of the waste water treatment plant) after the
date hereof, including, without limitation, to the extent permitted by
law, continuing to conduct and operate the business and Property of
Optionor under their permits, licenses and authorities for the account of
PCTG, or permitting PCTG to conduct and operate the business under
Optionor's permits, licenses and authorities, for up to sixty (60) days
after closing, in a manner similar to the manner in which the same are
currently conducted and operated by Optionor. If continued operation under
Optionor's permits, licenses or authorities occurs pursuant hereto, then
PCTG will reimburse Optionor for Optionor's out-of-pocket costs in
connection therewith, if any, and the indemnification provisions of
subparagraph (d) below shall apply to such operation, except to the extent
any Losses (as defined in subparagraph (d) below) are a result of or
caused by the gross negligence or willful misconduct of Optionor or its
employees or agents.
(d) Optionor and PCTG agree to indemnify the other against,
and hold the other harmless from, any and all losses, costs, damages,
expenses, claims and attorney's fees, including but not limited to costs
of investigation ("Losses"), suffered or incurred by the other in
connection with or arising from or out of the breach of or failure of the
other to comply with the provisions of this paragraph 8.
12
<PAGE>
9. Indemnification for Assumed Liabilities.
(a) PCTG hereby agrees to indemnify Optionor against, and hold
Optionor harmless from, any and all losses, costs, damages, expenses,
claims and attorney's fees, including but not limited to costs of
investigation, suffered or incurred by Optionor in connection with or
arising from or out of the failure of PCTG to pay, perform or discharge
the Assumed Liabilities (as defined in the Transfer Agreement), including
the obligations under the Assigned Contracts (as defined in the Transfer
Agreement) to the extent such agreements are legally binding on Optionor
or either of them and provided PCTG has been assigned all legal and
equitable rights, remedies, defenses, claims, counterclaims or rights of
set-off, Optionor or either of them has, had or might have in connection
therewith.
(b) Notwithstanding any provision of this paragraph 9 to the
contrary, and without enlarging the obligations of PCTG to any third
party, PCTG hereby agrees to indemnify (as set forth in subparagraph (a)
above) Racing for any claim by GTECH Corporation or AmTote International,
Inc. ("AmTote") that Racing failed to fulfill its obligations under
Section/Clause 7 of the Amendment Agreement dated January 1, 1995 among
Optionor and AmTote, regardless of whether such agreement or the "Binding
Agreement" dated October 20, 1994 by and between AmTote and CTR is legally
binding.
(c) Penn National Gaming, Inc., of which PCTG is an affiliate,
by its signature on the execution page of this Closing Agreement, hereby
guarantees the performance by PCTG, to provide indemnification to Racing
as set forth in subparagraph (b) above.
10. Notice. Any notice or communications required or permitted
hereunder shall be provided to the parties (including the Escrow Agents)
in the manner and at the respective addresses set forth in the Option
Agreement (any notice to the Escrow Agents shall be delivered to both
Escrow Agents in each case).
11. SeverabilityIf one or more of the provisions hereof shall for
any reason be held to be invalid, illegal or unenforceable in any respect
under applicable law, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and this Closing Agreement
shall be construed as if such invalid, illegal or unenforceable provision
had never been contained herein.
13
<PAGE>
12. No Third Party Beneficiaries. This Closing
Agreement shall not confer any rights or remedies upon
any person other than the parties hereto and their
respective successors and permitted assigns.
14
<PAGE>
13. Governing Law. This Closing Agreement shall be
governed by the internal laws of the State of West
Virginia.
IN WITNESS WHEREOF, the undersigned have executed this Closing
Agreement as of the date first above written.
PNGI Charles Town Gaming
Limited Liability Company
By: /s/ William J. Bork
William J. Bork, President
Charles Town Races, Inc.
By: /s/ Roger R. Ramey
Roger R. Ramey, President
Charles Town Racing Limited
Partnership
By: D.K.W. Inc., authorized
General Partner
By: /s/ D. Keith Wagner
D. Keith Wagner, President
and
By: G&G Associates, Inc.,
authorized General Partner
By: /s/ George S. Yeatras
George S. Yeatras,
President
Acknowledged and Agreed as to Paragraphs 6 and 7:
The Escrow Agent
/s/ Robert P. Krauss
Robert P. Krauss, Esq.
/s/ Michael B. Keller
Michael B. Keller, Esq.
15
<PAGE>
Acknowledged and Agreed as to Paragraph 9(c)
Penn National Gaming, Inc.
By: /s William J. Bork
William J. Bork, President
16
Amended and Restated
Operating Agreement
of
PNGI CHARLES TOWN GAMING
LIMITED LIABILITY COMPANY
December 31, 1996
1
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
FORMATION
1.1. Organization.................................(1)
1.2. Agreement, Effect of Inconsistencies
with
Act .........................................(1)
1.3. Name.........................................(1)
1.4. Effective Date...............................(2)
1.5. Registered Agent and Office..................(2)
1.6. Principal Office.............................(2)
1.7. Term.........................................(2)
ARTICLE II.
DEFINITIONS
ARTICLE III.
NATURE OF BUSINESS
3.1. Purpose......................................(2)
ARTICLE IV.
POWERS
4.1. Powers.......................................(3)
ARTICLE V.
ACCOUNTING AND RECORDS
5.1. Records to be Maintained.....................(3)
5.2. Reports to Members...........................(3)
ARTICLE VI.
MEMBERS
6.1. Member Eligibility...........................(4)
6.2. Members......................................(4)
(i)
<PAGE>
(ii)
<PAGE>
ARTICLE VII.
RIGHTS AND DUTIES OF MEMBERS
7.1. Voting Rights................................(4)
7.2. Management Rights..................................(4)
7.3. Liability of Members.........................(5)
7.4. Indemnification..............................(5)
7.5. Representations and Warranties...............(5)
7.6. Conflicts of Interest........................(5)
7.7. Miscellaneous Obligations....................(6)
7.8. Members' Rights and Liabilities..............(6)
ARTICLE VIII.
MANAGING MEMBER
8.1. Managing Member..............................(7)
8.2. Authority of Members to Bind the Company
..................................................(7)
8.3. Compensation of Managing Member..............(7)
8.4. Bank Accounts................................(7)
ARTICLE IX.
CONTRIBUTIONS AND CAPITAL ACCOUNTS
9.1. Initial Contributions........................(8)
9.2. Additional Contributions.....................(8)
9.4. Enforcement of Commitments...................(8)
9.5. Maintenance of Capital Accounts..............(9)
9.6. Distribution of Assets.......................(9)
9.7. Compliance with Section 704(b) of the
Code..............................................(10)
ARTICLE X.
ALLOCATIONS AND DISTRIBUTIONS
10.1. Allocations of Net Profits and Net
Losses
from Operations.............................(10)
10.2. Company Minimum Gain Chargeback...................(10)
10.3. Member Minimum Gain Chargeback....................(10)
10.4. Qualified Income Offset...........................(11)
10.5. Interim Distributions.............................(11)
(iii)
<PAGE>
10.6. Limitations on Distributions......................(12)
(iv)
<PAGE>
ARTICLE XI.
TAXES
11.1. Elections.........................................(12)
11.2. Taxes of Taxing Jurisdictions.....................(12)
11.3. Tax Matters ......................................(12)
11.4. Accrual Method of Accounting......................(13)
ARTICLE XII.
DISPOSITION OF MEMBERSHIP INTERESTS
ARTICLE XIII.
DISSOCIATION OF A MEMBER
13.1. Dissociation......................................(13)
13.2. Purchase of Dissociated Member's Membership
Interest....................................(14)
13.3. Purchase Price of Dissociated Member's
Membership Interest.........................(14)
ARTICLE XIV.
ADMISSION OF ADDITIONAL MEMBERS
ARTICLE XV.
DISSOLUTION AND WINDING UP
15.1. Dissolution.......................................(15)
15.2. Effect of Dissolution.............................(15)
15.3. Distribution of Assets on Dissolution.............(15)
15.6. Winding Up and Certificate of
Dissolution.......................................(16)
ARTICLE XVI.
AMENDMENT
16.1. Operating Agreement May Be Modified...............(17)
16.2. Amendment or Modification of Operating
Agreement...................................(17)
(v)
<PAGE>
ARTICLE XVII.
MISCELLANEOUS PROVISIONS
17.1. Entire Agreement..................................(17)
17.2. No Partnership Intended for Nontax
Purposes..........................................(17)
17.3. Rights of Creditors and Third Parties
under
Operating Agreement.........................(18)
17.4. Arbitration.......................................(18)
17.5. Governing Law.....................................(18)
EXHIBIT A
APPENDIX I
DEFINITIONS
Act ..................................................(21)
Additional Member.......................................(21)
Articles................................................(21)
Bankrupt Member.........................................(21)
BDC ..................................................(21)
Business Day............................................(21)
Capital Account.........................................(21)
Capital Contribution....................................(21)
Code ..................................................(21)
Commission..............................................(21)
Commitment..............................................(21)
Company.................................................(21)
Company Liability.......................................(21)
Company Minimum Gain....................................(21)
Company Nonrecourse Liability...........................(22)
Company Property........................................(22)
Contributing Member.....................................(22)
Contribution............................................(22)
Default Interest Rate...................................(22)
Delinquent Member.......................................(22)
Distribution............................................(22)
Disposition (Dispose)...................................(22)
Dissociation............................................(23)
Dissociated Member......................................(23)
Initial Capital Contribution............................(23)
(vi)
<PAGE>
Initial Members.........................................(23)
License.................................................(23)
Licensed Activities.....................................(23)
Majority of the Members.................................(23)
Managing Member.........................................(23)
Member..................................................(23)
Member Minimum Gain.....................................(23)
Member Nonrecourse Liability............................(24)
Membership Interest.....................................(24)
Money ..................................................(24)
Net Losses..............................................(24)
Net Profits.............................................(24)
Nonrecourse Liabilities.................................(24)
Notice..................................................(24)
Offsettable Decrease....................................(24)
Operating Agreement.....................................(25)
Percentage Interest.....................................(25)
Percentage Majority of the Members......................(25)
Percentage Majority of the Remaining Members............(25)
PNGI/West Virginia......................................(25)
Proceeding..............................................(25)
Property................................................(25)
Person..................................................(25)
Regulations.............................................(25)
Related Person..........................................(25)
Remaining Members.......................................(25)
Removal.................................................(25)
Resignation.............................................(25)
Rules ..................................................(26)
Statutes................................................(26)
Taxable Year............................................(26)
Taxing Jurisdiction.....................................(26)
Withdrawal..............................................(26)
(vii)
<PAGE>
This Amended and Restated Operating Agreement (the "Operating
Agreement") of PNGI Charles Town Gaming Limited Liability Company, a
limited liability company organized pursuant to the Act, is entered into
as of this 31st day of December, 1996 and shall be effective as of the
Effective Date, by and among the Company and the Members.
For and in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Members executing the Operating
Agreement hereby agree to the following terms and conditions of the
Operating Agreement, as it may from time to time be amended according to
its terms.
ARTICLE I
FORMATION
1.1. Organization - The Members confirm that they have organized the
Company on March 22, 1996 as a West Virginia limited liability company
pursuant to the provisions of the Act.
1.2. Agreement, Effect of Inconsistencies with Act -
It is the express intention of the Members that the
Operating Agreement shall be the sole source of agreement of the parties
with respect to the subject matter hereof, and, except to the extent a
provision of the Operating Agreement expressly incorporates federal income
tax rules by reference to sections of the Code or Regulations or is
expressly prohibited or ineffective under the Act, the Operating Agreement
shall govern, even when inconsistent with, or different than, the
provisions of the Act or any other law or rule.
To the extent any provision of the Operating Agreement
is prohibited or ineffective under the Act, the Operating Agreement shall
be considered amended to the smallest degree possible in order to make
such provision effective under the Act, consistent with the intent of the
parties. In the event the Act is subsequently amended or interpreted in
such a way to make any such provision of the Operating Agreement that was
formerly invalid valid, such provision shall be considered to be valid
from the effective date of such amendment or interpretation.
(1)
<PAGE>
1.3. Name - The name of the Company is PNGI Charles Town Gaming
Limited Liability Company, and all business of the Company shall be
conducted under that name or under any other name, but in any case, only
to the extent permitted by applicable law.
1.4. Effective Date - The Operating Agreement became
effective on March 22, 1996, the "Effective Date".
1.5. Registered Agent and Office - The registered agent for the
service of process and the registered office shall be that Person and
location reflected in the Articles as filed in the office of the Secretary
of State of West Virginia. The Managing Member may, from time to time,
change the registered agent or office through appropriate filings with the
Secretary of State of West Virginia. In the event the registered agent
ceases to act as such for any reason or the registered office shall
change, the Managing Member shall promptly designate a replacement
registered agent or file a notice of change of address as the case may be.
If the Managing Member shall fail to designate a replacement registered
agent or change of address of the registered office, any Member may
designate a replacement registered agent or file a notice of change of
address.
1.6. Principal Office - The Principal Office of the
Company shall be located at:
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, Pennsylvania 19610
1.7. Term - The period of duration of the Company shall expire on
December 31, 2045, or when the Company is dissolved in accordance with
Article XV hereof.
ARTICLE II
DEFINITIONS
2.1. Definitions - For purposes of the Operating Agreement, unless
the context clearly indicates otherwise, the terms set forth on Appendix I
attached hereto shall have the meanings set forth in such Appendix.
ARTICLE III
(2)
<PAGE>
NATURE OF BUSINESS
3.1. Purpose - The purpose of the Company shall be to transact any
lawful business that a limited liability company, corporation, general
partnership, limited partnership or other business entity may conduct
under the laws of the State of West Virginia, including but not limited to
the conducting of Licensed Activities, auto racing, casino or riverboat
gambling, or other gaming or wagering or other entertainment and hotel
activities, and all forms of communications and publications pertaining to
the foregoing, and the Company shall have the authority to do all things
necessary or convenient to accomplish its purpose and operate such
business.
ARTICLE IV
POWERS
4.1. Powers - The Company may exercise the powers and privileges
conferred upon limited liability companies by the laws of the State of
West Virginia only in furtherance of and subject to its Company purpose
and subject further to the following limitations:
4.1.1 The Company shall do nothing which if done
by a Member would violate the Statutes or the Rules; and
4.1.2 The Company, and if applicable to a Member then such
Member, shall at all times comply with the Statutes and the Rules,
including that the Company and if required each Member shall be, and
the Company or Member shall cause each employee of the Company or
shareholder, partner, other equity owner, officer, director or
employee of such Member who is required under the Statutes or the
Rules, to be a Licensed Person.
ARTICLE V
ACCOUNTING AND RECORDS
5.1. Records to be Maintained - The Managing Member shall maintain
such business and financial records at the Principal Office as it deems
necessary or appropriate, including but not limited to a current list of
the full name and last known business address of each Member, former
Member and other holder of a Membership Interest. All of
(3)
<PAGE>
such records shall be available for inspection by a Member, or that
Member's authorized representative during normal business hours upon
reasonable notice to the Managing Member.
5.2. Reports to Members -
5.2.1.The Managing Member shall provide, for their
confidential use, financial reports at least quarterly, and, if
otherwise available, monthly, to the Members promptly after the same
become available.
5.2.2.The Managing Member shall provide all Members with those
information returns required by the Code and the tax laws of any
state in which a Member resides.
5.2.3.The Managing Member shall promptly notify the other
Member of the occurrence of any event which reasonably would be expected
to have a material effect on the business or results of operations of the
Company.
ARTICLE VI
MEMBERS
6.1. Member Eligibility - All Members, and, to the extent
applicable, their respective equity owners, officers, directors and
employees, shall be Licensed Persons if required by the Statute or the
Rules, and shall otherwise meet any applicable requirements of the
Statutes and the Rules.
6.2. Members - The names and addresses of the Members and the
designation of the Managing Member as of the date hereof are as set forth
on Exhibit A attached hereto.
ARTICLE VII
RIGHTS AND DUTIES OF MEMBERS
7.1. Voting Rights -
7.1.1.Except with respect to actions governed by
Section 7.1.2. below, all policy decisions on behalf of the
Company, and any other matters which pursuant to this
Operating Agreement require a determination or vote by the
(4)
<PAGE>
Members, shall be made by a Percentage Majority of the Members.
7.1.2.Notwithstanding anything herein to the contrary, the
unanimous vote of the Members, with each Member having one vote, shall be
required to approve the following matters: any decision by the Company
concerning the sale of substantially all the assets of the Company; the
termination, dissolution or liquidation of the Company; the merger or
consolidation of the Company with or into any other person; Capital
Contributions, Member Loans or Member Guarantees in excess of those
identified in Section 9.2 below; issuance of additional equity in the
Company where each existing Member has not been offered the opportunity to
purchase equity on the same terms and conditions as the same is offered to
non Members; incurrence by the Company of loans, or guarantees of loans
aggregating more than $5,000,000 (but not including any loans or
guarantees referred to in Section 9.2 below); admission of additional
Members (other than permitted transferees of Members as set forth in
Section 12.1 below); an amendment to the Operating Agreement which would
materially prejudice the rights or increase the obligations or liabilities
of any Member as compared with the pre-existing rights, obligations or
liabilities of Members; the election and qualification of the Managing
Member's successor (except that the lender holding a pledge of or security
interest in the Managing Member's Membership Interest may serve as or
designate the Managing Member should such lender foreclose on such pledge
or security interest); or the establishment of reserves in excess of those
provided for in Section 10.5.(d) below. Where unanimous consent is
required under this Section 7.1.2., neither Member shall unreasonably
withhold its consent.
7.2. Management Rights -
7.2.1.No Member other than the Managing Member shall have any
authority to take any actions with respect to the business or affairs of
the Company, to execute or deliver any instrument or document binding upon
the Company, or to obligate the Company in any way.
7.2.2.The officers of the Company shall be as follows and
shall serve in said offices until the Members vote to remove or replace
one or more of them:
Chairman - Peter M. Carlino
President - William J. Bork
(5)
<PAGE>
Secretary - Robert S. Ippolito
Treasurer - Robert S. Ippolito
7.3. Liability of Members - No Member shall be liable as such for
the liabilities of the Company. The failure of the Company to observe any
formalities or requirements relating to the exercise of its powers or
management of its business or affairs under the Operating Agreement or the
Act shall not be grounds for imposing personal liability on the Members
for liabilities of the Company.
7.4. Indemnification - The Company shall indemnify the Company's
current and former Members, officers, employees and agents for all costs,
losses, liabilities, and damages paid or incurred by any of them arising
out of or in connection with the business of the Company, to the fullest
extent provided for in Section 31-1A-4(12) of the Act or such additional
indemnification as allowed by any other laws of the State of West
Virginia.
7.5. Representations and Warranties - Each Member hereby represents
and warrants to the Company and the other Member that: (a) such Member has
all necessary power and authority to execute and deliver the Operating
Agreement and to perform its obligations hereunder; (b) the Member is
acquiring its interest in the Company for the Member's own account as an
investment and without an intent to distribute the interest; and (c) the
Member acknowledges that the Membership Interests have not been registered
under the Securities Act of 1933 or any state securities laws, and may not
be resold or transferred by the Member without appropriate registration or
the availability of an exemption from such requirements.
7.6. Conflicts of Interest -
7.6.1.A Member, including the Managing Member, does not
violate a duty or obligation to the Company merely because the Member's
conduct furthers the Member's own interest. A Member or an affiliate of a
Member may lend money to and transact other business with the Company, so
long as the terms and provisions of any such transaction are substantially
similar to those which would be available to the Company, in an
arms-length transaction, with a person who is not an affiliate. The rights
and obligations of a Member who directly or indirectly lends money to or
transacts business with the Company are the same as those of a person who
is not a Member, subject to other applicable law. No transaction with the
Company shall be void or
(6)
<PAGE>
voidable or shall be rescinded solely because a Member has a direct or
indirect interest in the transaction if either the transaction is fair to
the Company or the other Member, knowing the material facts of the
transaction and the Member's interest, authorize, approve, or ratify the
transaction.
7.6.2.For purposes of the Operating Agreement, the conduct by
Penn National Gaming, Inc. (the ultimate parent of PNGI/West Virginia) or
its subsidiaries or affiliates of horse racing and wagering (including
simulcast wagering and off-track wagering), auto racing, casino or
riverboat gambling, video lottery games, or other entertainment, hotel or
gaming or wagering activities, and all forms of communications and
publications pertaining to the foregoing, and the management of such
activities as they currently or may hereafter exist shall not be deemed a
conflict or potential conflict of interest. The Members acknowledge and
agree that PNGI/West Virginia has specifically relied upon this provision
as an inducement to enter into the Operating Agreement. Notwithstanding
anything herein to the contrary, Penn National Gaming, Inc. or any of its
majority owned subsidiaries or affiliates shall not own or operate any
pari-mutuel wagering or video lottery wagering facility located in West
Virginia within 25 miles of Charles Town Races, West Virginia.
7.7. Miscellaneous Obligations -
7.7.1.Each Member shall maintain that Member's License and the
license of each Member's equity owners, officers, directors and
employees if necessary under the Statutes or the Rules. Each Member
shall at all times comply and shall cause the Member's officers,
directors and employees to comply with the Statutes and the Rules.
7.7.2.It shall be the duty of each Member to act at all times
consistently with and in compliance with all and each of the
provisions of the Operating Agreement and with all policies, rules
and decisions of the Company adopted in accordance with any of the
provisions of the Operating Agreement.
7.8. Members' Rights and Liabilities - The Members shall have the
same rights and liabilities as shareholders of corporations organized
under the laws of the State of West Virginia, and the Managing Member
shall have the same rights and liabilities as a director of a corporation
so organized.
(7)
<PAGE>
ARTICLE VIII
MANAGING MEMBER
8.1. Managing Member - The sole initial Managing
Member shall be PNGI/West Virginia. The Managing Member
shall serve until the earliest of:
8.1.1.The Dissociation of such Managing Member;
or
8.1.2.The Resignation of such Managing Member; or
8.1.3.The Withdrawal of such Managing Member; or
8.1.4.The election and qualification of the Managing Member's
successor by the vote of the Members as provided in
Section 7.1.2 hereof.
8.2. Authority of Members to Bind the Company - All
actions with respect to the business of the Company shall be
taken as directed by the Managing Member, who may exercise,
without limitation, (except as specifically provided herein
or in the Act) all of the powers of the Company set forth in
Section 31-1A-4 of the Act and who shall have, without
limitation, all powers of a Manager set forth in Sections
31-1A-20 and 21 of the Act. Only the Managing Member and
agents of the Company authorized by the Managing Member
shall have the authority to bind the Company. No Member who
is not either a Managing Member or otherwise authorized as
an agent shall take any action to bind the Company, and each
Member shall indemnify the Company for any costs or damages
incurred by the Company as a result of the unauthorized
action of such Member.
8.3. Compensation of Managing Member - BDC shall pay $65,000
annually to the Managing Member for all expenses by it incurred in
managing the Company. Such amount shall be paid by BDC within 20 days
after an invoice therefor is received by BDC or if not so paid, the same
shall be paid by the Company and charged to the Capital Account of BDC.
8.4. Bank Accounts - All funds of the Company shall be deposited in
such account or accounts to be maintained in such bank or banks as shall
be selected from time to time by the Managing Member. Withdrawals from any
such bank account or accounts shall be made in the Company's name upon the
(8)
<PAGE>
signature or signatures which the Managing Member shall from time to time
designate. Funds in such account or accounts shall not be commingled with
the funds of any Member.
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
9.1. Initial Contributions - Each Member has made their respective
Initial Capital Contributions and shall have the respective Membership and
Percentage Interests set forth on Exhibit A attached hereto. No interest
shall accrue on any Capital Contribution and no Member shall have the
right to withdraw or be repaid any Capital Contribution except as provided
in the Operating Agreement.
9.2. Additional Contributions - In addition to the Initial Capital
Contributions, the Managing Member may determine from time to time that
additional Capital Contributions, Member Loans or Member Guarantees are
required up to an aggregate of $40,000,000 as Capital Contributions,
Member Loans and Member Guarantees and, as limited by Section 7.1.2.
hereof, amounts in excess thereof if the consent required by Section
7.1.2. above is obtained in accordance with the provisions thereof. Upon
making such a determination, the Managing Member shall give Notice to the
other Member in writing at least ten Business Days prior to the date on
which such additional Capital Contributions, Member Loans or Member
Guarantees are due. Such Notice shall set forth the amount of additional
Capital Contributions, Member Loans or Member Guarantees, the purpose of
the same, and the date by which the Members shall make the additional
Capital Contributions, Member Loans or Member Guarantees. Each Member
shall be required to contribute a share of such additional Capital
Contribution, Member Loan or Member Guarantee in proportion to the
Member's Membership Interest. In the event any one Member does not make
its additional Capital Contribution, Member Loan or Member Guarantee, the
other Member shall be given the opportunity to make the Capital
Contribution, Member Loan or Member Guarantee in addition to the rights of
a Contributing Member as set forth in Section 9.4. below.
9.3. Contributions of Additional Members -
Intentionally omitted.
9.4. Enforcement of Commitments - In the event a
Member (a Delinquent Member) fails to perform the Delinquent
(9)
<PAGE>
Member's Commitment, the Contributing Member shall give the Delinquent
Member a Notice of the failure to meet the Commitment. If the Delinquent
Member fails to perform the Commitment (including any costs associated
with the failure to comply with the Commitment and interest on such
obligation at the Default Interest Rate) within ten Business Days of the
giving of Notice, the Contributing Member may take such action, including
but not limited to enforcing the Commitment in the court of appropriate
jurisdiction in the state in which the Principal Office is located or the
state of the Delinquent Member's address as reflected in the Operating
Agreement. Each Member expressly agrees to the jurisdiction of such courts
but only for the enforcement of Commitments. As an alternative, the
Contributing Member may elect to provide all or a portion of the
Commitment. The Contributing Member shall be entitled to treat the amounts
provided pursuant to this section as a demand loan from the Contributing
Member to the Delinquent Member bearing interest at the Default Interest
Rate and secured by the Delinquent Member's Membership Interest in the
Company. Until such Contributing Member is fully repaid, such Contributing
Member shall be entitled to all Distributions to which the Delinquent
Member would have been entitled. Notwithstanding the foregoing, no
Commitment or other obligation to make an additional Capital Contribution,
Member Loan or Member Guarantee may be enforced by a creditor of the
Company or other Person other than the Company unless the Contributing
Member expressly consents to such enforcement or to the assignment of the
obligation to such creditor.
9.5. Maintenance of Capital Accounts - The Company shall establish
and maintain Capital Accounts for each Member. Each Member's Capital
Account shall be increased by (A) the amount of any Money actually
contributed by the Member to the capital of the Company, (B) the fair
market value of any Property or "in-kind" services contributed, as
determined by the Company and the contributing Member at arm's length at
the time of contribution (net of liabilities assumed by the Company or
subject to which the Company takes such Property, within the meaning of
Section 752 of the Code), and (C) the Member's share of Net Profits and of
any separately allocated items of income or gain (including any gain and
income from unrealized income with respect to accounts receivable
allocated to the Member to reflect the difference between the book value
and tax basis of assets contributed by the Member). Each Member's Capital
Account shall be decreased by (x) the amount of any Money distributed to
the Member by the Company, (y) the fair
(10)
<PAGE>
market value of any Property distributed to the Member, as determined by
the Company and the contributing Member at arm's length at the time of
contribution (net of liabilities of the Company assumed by the Member or
subject to which the Member takes such Property within the meaning of
Section 752 of the Code), and (z) the Member's share of Net Losses and of
any separately allocated items of deduction or loss (including any loss or
deduction allocated to the Member to reflect the difference between the
book value and tax basis of assets contributed by the Member).
9.6. Distribution of Assets - If the Company at any time distributes
any of its assets in-kind to any Member, the Capital Account of each
Member shall be adjusted to account for that Member's allocable share (as
determined under Article X below) of the Net Profits or Net Losses that
would have been realized by the Company had it sold the assets that were
distributed at their respective fair market values immediately prior to
their distribution.
9.7. Compliance with Section 704(b) of the Code - The provisions of
this Article IX as they relate to the maintenance of Capital Accounts are
intended, and shall be construed, and, if necessary, modified to cause the
allocations of profits, losses, income, gain and credit pursuant to
Article X hereof to have substantial economic effect under the Regulations
promulgated under Section 704(b) of the Code, in light of the
distributions made pursuant to Articles X and XV hereof and the Capital
Contributions made pursuant to this Article IX.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
10.1. Allocations of Net Profits and Net Losses from Operations -
Except as may be required by section 704(c) of the Code, and Sections
10.2, 10.3, and 10.4 of this Article X, net profits, net losses, and other
items of income, gain, loss, deduction and credit shall be apportioned
among the Members in proportion to their Percentage Interests (which shall
be in proportion to their Membership Interests).
10.2. Company Minimum Gain Chargeback - If there is a net decrease
in Company Minimum Gain for a Taxable Year, each Member must be allocated
items of income and gain for that Taxable Year equal to that Member's
share of the net decrease in Company Minimum Gain. A Member's share of the
(11)
<PAGE>
net decrease in Company Minimum Gain is the amount of the total net
decrease multiplied by the Member's percentage share of the Company
Minimum Gain at the end of the immediately preceding Taxable Year. A
Member's share of any decrease in Company Minimum Gain resulting from a
revaluation of Company Property equals the increase in the Member's
Capital Account attributable to the revaluation to the extent the
reduction in minimum gain is caused by the revaluation. A Member is not
subject to the Company Minimum Gain Chargeback Requirement to the extent
the Member's share of the net decrease in Company Minimum Gain is caused
by a guarantee, refinancing, or other change in the debt instrument
causing it to become partially or wholly a Recourse Liability or a Member
Nonrecourse Liability, and the Member bears the economic risk of loss
(within the meaning of section 1.752-2 of the regulations) for the newly
guaranteed, refinanced, or otherwise changed liability.
10.3. Member Minimum Gain Chargeback - If during a Taxable Year
there is a net decrease in Member Minimum Gain, any Member with a share of
that Member Minimum Gain (as determined under section 1.704-2(i)(5)of the
Regulations) as of the beginning of that Taxable Year must be allocated
items of income and gain for that Taxable Year (and, if necessary, for
succeeding Taxable Years) equal to that Member's share of the net decrease
in the Company Minimum Gain. A Member's share of the net decrease in
Member Minimum Gain is determined in a manner consistent with the
provisions of paragraph (g)(2) of section 1.704-2 of the Regulations. A
Member is not subject to this Member Minimum Gain Chargeback, however, to
the extent the net decrease in Member Minimum Gain arises because the
liability ceases to be Member Nonrecourse Liability due to a conversion,
refinancing, or other change in the debt instrument that causes it to
become partially or wholly a Company Nonrecourse Liability. The amount
that would otherwise be subject to the Member Minimum Gain Chargeback is
added to the Member's share of Company Minimum Gain. In addition, rules
consistent with those applicable to Company Minimum Gain shall be applied
to determine the shares of Member Minimum Gain and Member Minimum Gain
Chargeback to the extent provided under the Regulations issued pursuant to
section 704(b) of the Code.
10.4. Qualified Income Offset - In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will
be allocated items of income and gain (consisting of a portion of each
item of partnership income and gain for such year) in an amount and
(12)
<PAGE>
manner sufficient to offset such Offsettable Decrease as
quickly as possible.
10.5. Interim Distributions - The Company shall carry on its books a
drawing account for each Member. On the Business Days nearest the 15th and
last day of each month, and at such other times as may be determined by
the Managing Member, in accordance with the Company's cash flow and
financial projections, each Member shall be paid such amounts as may be
determined by the Managing Member, which shall thereupon be charged to
that Member's drawing account. Such distributions shall be in cash and/or
Property which shall distributed proportionately to the Members in
accordance with their Membership Interests. All interim distributions
which, when made, exceed the recipient Member's basis in that Member's
Membership Interest shall be considered advances or drawings against the
Member's distributive share of net income. To the extent it is determined
at the end of the Taxable Year of the Company that the recipient Member
has been allocated net income that is less than the total of such advances
or drawings for such year, the recipient Member shall, at the request of
the Managing Member, be obligated to promptly restore any such advances or
drawings to the Company. Notwithstanding the foregoing sentence, the
Member will not be required to restore such advances or drawings to the
extent that, on the last day of the Taxable Year, the recipient Member's
basis in the Member's Membership Interest in the Company has increased
from the time of such advance or drawing. The Members intend that, if
possible, sufficient Money be distributed to permit the Members to pay any
local, state and Federal tax liabilities owed by the Members with respect
to income in respect of their Membership Interests. In addition, the
Company shall distribute all available cash after providing for (a) debt
service, (b) scheduled capital expenditures, (c) reserves for debt
service, and (d) reserves for additional capital improvements and working
capital requirements which shall not, in the case of this clause (d),
exceed 10% of the gross annualized revenues of the Company, without the
unanimous consent of the Members, provided that, if the $40 million limit
set forth in Section 9.2 hereof has previously been reached, no additional
reserves may be established pursuant to his clause (d) (and the 10% gross
annualized revenue provision in this clause (d) shall be inapplicable)
without the unanimous consent of the Members, which consent shall not be
unreasonably withheld.
(13)
<PAGE>
10.6. Limitations on Distributions - No distribution shall be
declared and paid which would be in violation of Section 31-1A-29 of the
Act.
ARTICLE XI
TAXES
11.1. Elections - The Managing Member may make any tax elections for
the Company allowed under the Code or the tax laws of any state or other
jurisdiction having taxing jurisdiction over the Company.
11.2. Taxes of Taxing Jurisdictions - To the extent that the laws of
any Taxing Jurisdiction requires, each Member (or such Members as may be
required by the Taxing Jurisdiction) will submit an agreement indicating
that the Member will make timely income tax payments to the Taxing
Jurisdiction and that the Member accepts personal jurisdiction of the
Taxing Jurisdiction with regard to the collection of income taxes
attributable to the Member's income, and interest, and penalties assessed
on such income. If the Member fails to provide such agreement, the Company
may withhold and pay over to such Taxing Jurisdiction the amount of tax,
penalty and interest determined under the laws of the Taxing Jurisdiction
with respect to such income. Any such payments with respect to the income
of a Member shall be treated as a distribution for purposes of Article X
hereof.
The Managing Member may, where permitted by the rules of
any Taxing Jurisdiction, file a composite, combined or aggregate tax
return reflecting the income of the Company and pay the tax, interest and
penalties of some or all of the Members on such income to the Taxing
Jurisdiction, in which case the Company shall inform the Members of the
amount of such tax interest and penalties so paid.
11.3. Tax Matters - The Managing Member shall be designated the "tax
matters partner" of the Company pursuant to Section 6231(a)(7) of the
Code. The Managing Member shall also be the notice partner within the
meaning of
Section 6223 of the Code.
11.4. Accrual Method of Accounting - The records of the
Company shall be maintained on an accrual method of
accounting.
(14)
<PAGE>
ARTICLE XII
DISPOSITION OF MEMBERSHIP INTERESTS
12.1. Disposition of Membership Interests - No Member shall have the
right, without the prior written consent of the other Member, to transfer
all or any part of a Membership Interest, including the Member's interest
in any of the Company's Property, except that: (i) other Members of the
Company may succeed to the rights of some of them in accordance with the
terms of the Operating Agreement or by operation of law; (ii) a Member may
pledge or grant a security interest in its Membership Interest so long as
the pledgee or secured party (or the pledgee's or secured party's
transferee) agrees in writing to be bound by the terms and provisions
hereof in the place and stead of the debtor Member in the event of a
foreclosure on such pledge or security interest, and, in such event, such
a foreclosing creditor (or the creditors transferee) shall have and may
exercise all of the rights of the Member whose obligation is being
foreclosed, subject to the terms and provisions hereof; or (iii) Members
may transfer their Membership Interest to the equity owners of a Member or
to a trust or estate for the benefit of the heirs or beneficiaries of such
equity owners or to another entity controlled by such equity owners or
such trust or estate, provided that such transferee agrees in writing to
be bound by the terms and provisions hereof in the place and stead of the
transferring Member. No collateral assignment by a Member of that Member's
Membership Interest shall cause such Member to cease to be a Member
pursuant to the provisions of Section 31-1A-34(b) of the Act. The Members
hereby unanimously consent, pursuant to Section 31-1A-34(c)(1) of the Act,
to the admission as a Member of an assignee of a Member's Membership
Interest pursuant to this Section 12.1.
ARTICLE XIII
DISSOCIATION OF A MEMBER
13.1. Dissociation - A Person shall cease to be a
Member upon the happening of any of the following events:
13.1.1. the Withdrawal of a Member;
13.1.2. the Member's ceasing to be eligible to be a
Member of the Company;
(15)
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13.1.3. the Member's becoming a Bankrupt Member;
13.1.4. in the case of a Member that is a
corporation, the filing of a certificate of dissolution, or
its equivalent, for the corporation or the revocation of its
charter.
13.1.5. in the event that a Member, or its equity owners,
officers, directors or employees fail, if required by either
Commission, to become a Licensed Person on or before April 1, 1997,
or such person ceases to be a Licensed Person and the failure of
which could cause the Company to lose a License.
13.2. Purchase of Dissociated Member's Membership Interest - Upon
the Dissociation of a Member, the Disassociated Member's Membership
Interest shall be purchased by the Company or the other Member (or an
affiliate of such Member) (collectively referred to in Sections 13.2 and
13.3 hereof as a "Purchaser") for a purchase price equal to the aggregate
fair market value of the Member's Membership Interest determined according
to the provisions of section 13.3 hereof. The purchase price of such
interest shall be paid by the Purchaser to the Member in cash within 60
days of determination of the aggregate fair market value or, at the
Purchaser's option, provided the Purchaser can adequately secure such
obligation to the reasonable satisfaction of the Dissociated Member, such
debt may be evidenced by a promissory note bearing interest payable
quarterly at the Prime Rate, which shall be due and payable upon the
earlier of (A) expiration of five years or (B) the sale or other
disposition of all a substantially of the Property or the business of the
Company.
13.3. Purchase Price of Dissociated Member's Membership
Interest -
13.3.1. The fair market value of a Member's Interest to be
purchased by the Purchaser pursuant to section 13.2 hereof shall be
determined by agreement between the Dissociated Member and the
Purchaser, which agreement is subject to approval by the other
Member. For this purpose, the fair market value of the Dissociated
Member's Membership Interest shall be computed as the amount which
could reasonably be expected to be realized by such Member upon the
sale of the business conducted by the Company (or, if the Company is
not conducting its business as contemplated in Article III hereof,
then upon the sale of the Company Property), in the ordinary course
of business at the time of
(16)
<PAGE>
the Dissociation, subject to any discounts (not to exceed 5%) which
may apply by virtue of a Member owning a minority interest in the
Company where the fair market value is determined in contemplation
of a sale of the business conducted by the Company rather than a
sale of the Company Property, and the distribution of such amounts
as if the Company were wound up and its assets distributed as
provided in Section 15.3 (subject to Section 15.4) hereof.
13.3.2. If the Dissociated Member and the Purchaser cannot
agree upon the fair market value of such Membership Interest within
30 days, the fair market value thereof shall be determined by
appraisal, the Purchaser and the Dissociated Member each to choose
one appraiser. If the fair market values as determined by each
appraiser are within ten (10%) of each other, the fair market value
shall be the average of the two appraisals. If the fair market
values determined by each appraiser are not within ten percent of
each other, and the Purchaser and the Dissociated Member are still
unable to agree on the fair market value, the two appraisers shall
choose a third appraiser, and the third appraiser shall choose the
fair market value of one of such original appraisers as the most
accurate. Each such appraiser shall be required to have substantial
experience appraising the type of business predominately conducted
by the Company at the time of Dissociation. The decision of the
third appraiser as to the fair market value of such Membership
Interest in accordance with this Section 13.3. shall be final and
binding and may be enforced by legal proceedings. The Dissociated
Member and the Purchaser shall each compensate the appraiser
appointed by it and the compensation of the third appraiser, if such
third appraiser is engaged, shall be borne equally by such parties.
ARTICLE XIV
ADMISSION OF ADDITIONAL MEMBERS
14.1. Admission of Additional Members - The Members by
unanimous consent may admit Additional Members.
ARTICLE XV
DISSOLUTION AND WINDING UP
15.1. Dissolution - The Company shall be dissolved and
its affairs wound up, upon the unanimous written consent of
the Members, the expiration of the term set forth in Section
(17)
<PAGE>
1.7, or as otherwise provided by Section 31-1A-35 of the
Act.
15.2. Effect of Dissolution - Upon dissolution, the Company shall
cease carrying on as distinguished from the winding up of the Company
business, but the Company shall not be terminated, but shall continue
until the winding up of the affairs of the Company is completed and the
Certificate of Dissolution has been issued by the Secretary of State.
15.3. Distribution of Assets on Dissolution - Upon the
winding up of the Company, the Company Property shall be
distributed as follows:
15.3.1. to secured creditors to the extent of their
security, including Members who are secured creditors for
reasons other than unpaid Distributions;
15.3.2. to general unsecured creditors, including
Members who are creditors for reasons other than unpaid
Distributions, to the extent permitted by law, in
satisfaction of Company Liabilities;
15.3.3. to Members who are creditors as a result of
unpaid Distributions; provided, however, that if such
Distributions were made within one year of the Dissolution
then such Member will be at parity with other general
unsecured creditors;
15.3.4. to Members in the amount of their
respective positive Capital Account balances taking into
account all Capital Account adjustments for the Company's
taxable year in which the liquidation occurs;
15.3.5. to Members in proportion to their
respective Percentage Interests.
15.4. Capital Account Deficits - If, after any such distribution
upon dissolution, any Member has a deficit balance in his Capital Account,
each such Member then shall make a Capital Contribution to the Company by
the end of the taxable year (or, if later, within 90 days after the date
of such liquidation), in accordance with the provisions of Treasury
Regulation 1.704-1(b)(2)(ii)(b)(2), as amended from time to time. The
amount of the Capital Contribution shall be equal to the lessor of: (i)
the amount of such deficit balance or (ii) such Member's shares
(determined pro rata in proportion to the deficit balances in the Capital
Accounts
(18)
<PAGE>
of all Members then having deficit Capital Account balances) of the sum of
the amounts required to satisfy any then unsatisfied recourse liabilities
of the Company plus the sum of the positive Capital Account balances. All
such Capital Contributions shall be applied first in satisfaction of such
recourse liabilities, if any, and the excess of such contributions, if
any, shall be distributed to the Members with positive Capital Account
balances, in proportion to such positive Capital Account balances.
15.5. Payment of Liquidation Proceeds - Liquidation proceeds shall
be paid within 60 days of the end of the Company's taxable year or, if
later, within 90 days after the date of liquidation. Such distributions
shall be in cash and/or Property which shall be distributed
proportionately to the Members in accordance with their Membership
Interests.
15.6. Winding Up and Certificate of Dissolution - The winding up of
the Company shall be completed when all debts, liabilities, and
obligations of the Company have been paid and discharged or reasonably
adequate provision therefor has been made, and all of the remaining
property and assets of the Company have been distributed to the Members.
Upon the completion of winding up of the Company, a Certificate of
Dissolution shall be delivered to the Secretary of State of West Virginia
for filing. The Certificate of Dissolution shall set forth the information
required by the Act.
ARTICLE XVI
AMENDMENT
16.1. Operating Agreement May Be Modified - The Operating Agreement
may be modified or amended as provided in this Article XVI (as the same
may from time to time be amended). No Member or Managing Member shall have
any vested rights in the Operating Agreement which may not be modified
through an amendment to the Operating Agreement.
16.2. Amendment or Modification of Operating Agreement - The
Operating Agreement may be amended or modified from time to time only by a
vote of or written instrument signed by the Members as provided in Section
7.1. hereof. Notwithstanding the foregoing, no amendment or modification
to the Operating Agreement which adversely affects a Member's right to
allocations or distributions as provided for herein shall be effective
against any such Member which
(19)
<PAGE>
did not vote in favor of, consent to or ratify such
amendment or modification.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1. Entire Agreement - The Operating Agreement sets forth the
entire understanding between the parties hereto with respect to the
subject matter hereof, and supersedes and is instead of the original
Operating Agreement between the parties hereto dated February, 1996 and
any and all other prior or contemporaneous agreements or understandings,
written or oral, between or among such parties with respect to such
subject matter. All of the terms and provisions of the Operating Agreement
shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and permitted assigns of the parties hereto.
17.2. No Partnership Intended for Nontax Purposes - The Members have
formed the Company under the Act, and expressly do not intend hereby to
form a partnership under either the West Virginia Partnership Act nor the
West Virginia Uniform Limited Partnership Act. The Members do not intend
to be partners one to another, or partners as to any third party. To the
extent any Member, by word or action, represents to another person that
any other Member is a partner or that the Company is a partnership, the
Member making such wrongful representation shall be liable to any other
Member who is incurs personal liability by reason of such wrongful
representation.
17.3. Rights of Creditors and Third Parties under Operating
Agreement - The Operating Agreement is entered into among the Company and
the Members for the exclusive benefit of the Company, its Members, and
their successors and permitted assignees. The Operating Agreement is
expressly not intended for the benefit of any creditor of the Company or
any other Person, except as specifically provided herein. Except and only
to the extent provided herein or by applicable statute, no such creditor
or third party shall have any rights under the Operating Agreement or any
agreement between the Company and any Member with respect to any Capital
Contribution or otherwise.
17.4. Arbitration - The Members agree that any
controversy, claim or dispute arising out of or relating to
(20)
<PAGE>
the Operating Agreement, including, but not limited to, the breach,
validity or termination thereof (a "Dispute"), shall be finally settled by
arbitration before a single arbitrator to be held in the city of
Wilmington, Delaware in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect ("Rules"). If the
parties do not agree upon an arbitrator within 15 days after a Member's
receipt of a demand for arbitration then, upon the written request of
either Member, the arbitrator shall be appointed in accordance with Rule
13 of the Rules. The arbitration and this Section 17.4. shall be governed
by the Federal Arbitration Act, 9 U.S.C. section 1 et seq. Judgment may be
entered on the Arbitrator's award in any court having jurisdiction.
17.5. Governing Law - The Operating Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of West Virginia applicable to agreements made and to be performed
entirely within such State without reference to that states "conflict of
laws" laws.
IN WITNESS WHEREOF, we have hereunto set out hand and seals on the
date set forth beside our names.
PNGI CHARLES TOWN GAMING LIMITED
LIABILITY COMPANY
By: Penn National Gaming of West
Virginia, Inc., Managing Member
BY: /s/ William J. Bork
WILLIAM J. BORK, President
PENN NATIONAL GAMING OF
WEST VIRGINIA, INC.
BY: /s/ William J. Bork
WILLIAM J. BORK, President
Date: December 31, 1996
BRYANT DEVELOPMENT COMPANY
(21)
<PAGE>
BY: /s/ James A. Reeder
JAMES A. REEDER, President
Date: December 31, 1996
(22)
<PAGE>
EXHIBIT A
Initial CapiPercentage Membership
Member Contribution Interest Interest
Penn National Gaming $8,000 80% 80%
of West Virginia, Inc.
Bryant Development Company $2,000 20% 20%
Managing Member
Penn National Gaming of West Virginia, Inc., or any direct or indirect
subsidiary of Penn National Gaming, Inc., shall be the sole Managing
Member.
Members
Penn National Gaming of West Virginia, Inc., a West Virginia corporation
and an indirect wholly-owned subsidiary of Penn National Gaming, Inc.,
with an address at:
Peter M. Carlino, Chairman
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, Pennsylvania 19610
All notices with a copy to:
Robert P. Krauss, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, Pennsylvania 19103-7598
Bryant Development Company, a Virginia corporation with an address at:
James A. Reeder, President
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, D.C. 20037
All notices with a copy to:
Nancy A. Lieberman, Esquire
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, New York 10022
(23)
<PAGE>
APPENDIX I
DEFINITIONS
Act - The West Virginia Limited Liability Company Act and all
amendments to the Act.
Additional Member - A Member other than an Initial Member who has
acquired a Membership Interest from the Company.
Articles - The Articles of Organization of the Company as properly
adopted and amended from time to time by the Members and filed with the
Secretary of State.
Bankrupt Member - A Member who: (1) has become the subject of an Order
for Relief under the United States Bankruptcy Code, (2) has initiated,
either in an original Proceeding or by way of answer in any state
insolvency or receivership proceeding, an action for liquidation
arrangement, composition, readjustment, dissolution, or similar relief.
BDC - Bryant Development Company, a Virginia corporation.
Business Day - Any day other than Saturday, Sunday or any legal
holiday observed in West Virginia.
Capital Account - The account maintained for a Member determined in
accordance with Article IX of the Operating Agreement.
Capital Contribution - Any Contribution or contribution of services
made by or on behalf of a new or exiting Member as consideration for a
Membership Interest.
Code - The Internal Revenue Code of 1986 as amended from time to time.
Commission - The West Virginia Horse Racing Commission or any successor
thereto and the West Virginia Lottery Commission (which collectively are
referred to as the "Commissions").
Commitment - The obligation of a Member to make a Capital
Contribution, Member Loan or Member Guarantee in the future.
Company - PNGI Charles Town Limited Liability Company, a limited
liability company formed under the laws of the State of West Virginia, and
any successor limited liability company.
Company Liability - Any enforceable debt or obligation for which the
Company is liable or which is secured by any Company Property.
(24)
<PAGE>
Company Minimum Gain - An amount determined by first computing for
each Company Nonrecourse Liability any gain the Company would realize if
it disposed of the Company Property subject to that liability for no
consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum
Gain includes such minimum gain arising from a conversion, refinancing, or
other change to a debt instrument, only to the extent a Member is
allocated a share of that minimum gain. For any Taxable Year, the net
increase or decrease in Company Minimum Gain is determined by comparing
the Company Minimum Gain on the last day of the immediately preceding
Taxable Year with the Minimum Gain on the last day of the current Taxable
Year. Notwithstanding any provision to the contrary contained herein,
Company Minimum Gain and increases and decreases in Company Minimum Gain
are intended to be computed in accordance with section 704 of the Code and
the Regulations issued thereunder, as the same may be issued and
interpreted from time to time. A Member's share of Company Minimum Gain at
the end of any Taxable Year equals: the sum of Nonrecourse Deductions
allocated to that Member (and to that Member's predecessors in interest)
up to that time and the distributions made to that Member (and to that
Member's predecessors in interest) up to that time of proceeds of a
nonrecourse liability allocable to an increase in Company Minimum Gain
minus the sum of that Member's (and that Member's predecessors' in
interest) aggregate share of the net decreases in Company Minimum Gain
plus their aggregate share of decreases resulting from revaluations of
Company Property subject to one or more Company Nonrecourse Liabilities.
Company Nonrecourse Liability - A Company Liability to the extent that
no Member or Related Person bears the economic risk of loss (as defined in
section 1.752-2 of the Regulations) with respect to the liability.
Company Property - Any Property owned by the Company.
Contributing Member - Members making Contributions, loans to the
Company or a guarantee of Company debt as a result of the failure of a
Delinquent Member to make the contributions required by the Commitment as
described in Article IX of the Operating Agreement.
Contribution - Any contribution of Property made by or on behalf of a
new or existing Member as consideration for a Membership Interest.
Default Interest Rate - The higher of the legal rate or the
then-current prime rate quoted by the largest commercial bank in the
jurisdiction of the Principal Office plus three percent.
Delinquent Member - A Member who has failed to perform that Member's
Commitment.
Distribution - A transfer of Property to a member on account of a
Membership Interest as described in Article X of the Operating Agreement.
(25)
<PAGE>
Disposition (Dispose) - Any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other transfer, absolute or as
security or encumbrance (including dispositions by operation of law).
Dissociation - Any action which causes a Person to cease to be Member
as described in Article XIII of the Operating Agreement.
Dissociated Member - A Person who has ceased to be Member as a result
of Dissociation in Article XIII the Operating Agreement. In the case of a
Dissociation by death or incompetence, "Dissociated Member" shall include
the personal representative, executor, or other legal representative of
the Dissociated Member.
Initial Capital Contribution - The Capital Contribution agreed to be
made by the Initial Members as described in Article IX as Exhibit "A" of
the Operating Agreement.
Initial Members - BDC and PNGI/West Virginia.
License - Any permit or license or other authorization required to
conduct or participate in or otherwise be associated with any Licensed
Activity. Any Person who obtains such a permit or license shall be a
"Licensed Person."
Licensed Activities - The conduct of horse or dog racing and
pari-mutuel wagering in connection therewith, the conduct of video lottery
games or any other lawful wagering or gaming activity under current or
future West Virginia law, and all activities necessary, customary,
convenient, or incident to the foregoing.
Majority of the Members - A majority by number of the Members entitled
to vote on, consent to, or approve a particular matter.
Managing Member - A Member selected to manage the affairs of the
Company under Article VIII of the Operating Agreement.
Member - BDC and PNGI/West Virginia, and collectively the "Members".
Member Guarantee - Guarantees by a Member of a loan to the Company.
Member Loan - A loan from a Member to the Company or a loan incurred
by a Member for the benefit of the Company and the Company receives the
proceeds thereof (after payment or provision for fees and expenses
relating thereto).
Member Minimum Gain - An amount determined by first computing for each
Member Nonrecourse Liability any gain the Company would realize if it
disposed of the Company Property subject to that liability for no
consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Member Minimum
Gain
(26)
<PAGE>
includes such minimum gain arising from a conversion, refinancing, or
other change to a debt instrument, only to the extent a Member is
allocated a share of that minimum gain. For any Taxable Year, the net
increase or decrease in Member Minimum Gain is determined by comparing the
Member Minimum Gain on the last day of the immediately preceding Taxable
Year with the Minimum Gain on the last day of the current Taxable Year.
Notwithstanding any provision to the contrary contained herein, Member
Minimum Gain and increases and decreases in Member Minimum Gain are
intended to be computed in accordance with section 704 of the Code the
Regulations issued thereunder, as the same may be issued and interpreted
from time to time.
Member Nonrecourse Liability - Any Company Liability to the extent the
liability is nonrecourse under state law, and on which a Member or Related
Person bears the economic risk of loss under section 1.752-2 of the Code
because, for example, the Member or Related Person is the creditor or a
guarantor.
Membership Interest - The interest of a Member determined by such
Member's Capital Account relative to the Capital Accounts of all Members.
Money - Cash or other legal tender of the United States, or any
obligation that is immediately reducible to legal tender without delay or
discount. Money shall be considered to have a fair market value equal to
its face amount.
Net Losses - The losses and deductions of the Company determined in
accordance with generally accepted accounting principles consistently
applied from year to year employed under the method of accounting adopted
by the Company and as reported separately or in the aggregate, as
appropriate, on the tax return of the Company filed for federal income tax
purposes.
Net Profits - The income and gains of the Company determined in
accordance with generally accepted accounting principles consistently
applied from year to year employed under the method of accounting adopted
by the Company and as reported separately or in the aggregate, as
appropriate, on the tax return of the Company filed for federal income tax
purposes.
Nonrecourse Liabilities - Nonrecourse liabilities include Company
Nonrecourse Liabilities and Member Nonrecourse Liabilities.
Notice - Notice shall be in writing. Notice to the Company shall be
considered given one Business Day after being mailed by an overnight
courier service which provides a receipt for delivery addressed to the
Managing Member in care of the Company at the address of the Principal
Office. Notice to a Member shall be considered given one Business Day
after being mailed by an overnight courier service which provides a
receipt for delivery addressed to the Member at the address reflected in
the Operating Agreement or, if the Member has given the Company a Notice
of a different address, the address set forth in such Notice.
(27)
<PAGE>
Offsettable Decrease - Any allocation that unexpectedly causes or
increases a deficit in the Member's Capital Account as of the end of the
taxable year to which the allocation relates attributable to depletion
allowances under section 1.704(b)(2)(iv)(k) of the Regulations,
allocations of loss and deductions under section 704(e)(2) or 706 of the
Code or under section 1.751-1 of the Regulations, or distributions that,
as of the end of the year are reasonably expected to be made to the extent
they exceed the offsetting increases to such Member's Capital Account that
reasonably are expected to occur during or (prior to) the taxable years in
which the such distributions are expected to be made (other than increases
pursuant to a Minimum Gain Chargeback).
Operating Agreement - This operating agreement including all
amendments adopted in accordance with the Operating Agreement and the Act.
Percentage Interest - The rights of a Member in Distributions
(liquidating or otherwise) and allocations of the profits, losses, gains,
deductions, and credits of the Company.
Percentage Majority of the Members - A majority by Percentage Interest
of the Members entitled to vote on, consent to, or approve a particular
matter.
Percentage Majority of the Remaining Members - A majority by
Percentage Interest of all the Remaining Members.
PNGI/West Virginia - Penn National Gaming of West Virginia, Inc., a
West Virginia corporation and an indirect wholly-owned subsidiary of Penn
National Gaming, Inc., a publicly-held Pennsylvania corporation.
Proceeding - Any judicial or administrative trial, hearing or other
activity, civil, criminal or investigative, the result of which may be
that a court, arbitrator, or governmental agency may enter a judgment,
order, decree, or other determination which, if not appealed and reversed,
would be binding upon the Company, a Member or other Person subject to the
jurisdiction of such court, arbitrator, or governmental agency.
Property - Any property real or personal, tangible or intangible,
including money and any legal or equitable interest in such property, but
excluding services and promises to perform services in the future.
Person - An individual, trust, estate, or any incorporated or
unincorporated organization permitted to be a member of a limited
liability company under the laws of West Virginia.
Regulations - Except where the context indicates otherwise, the
permanent, temporary, proposed, or proposed and temporary regulations of
Department of the Treasury under the Code as such regulations may be
lawfully changed from time to time.
(28)
<PAGE>
Related Person - A person having a relationship to a Member that is
described in section 1.752-4(b) of the Regulations.
Removal - The act of the Remaining Members by which the Managing
Member is Removed as the Managing Member but continues to be a Member.
Resignation - The act of a Managing Member by which such Member ceases
to be a Managing Member but continues to be a Member.
Rules - The Rules promulgated by the Commission under the Statutes and
as amended from time to time.
Statutes - Article 23 [Horse and Dog Racing] of Chapter 19
[Agriculture] of the West Virginia Code (including the amendments set
forth in the 1996 Simulcast Facility and Telecommunications Bill if and
when approved and adopted as provided under West Virginia law) and Article
22A [Racetrack Video Lottery] of Chapter 19 [Agriculture] of the West
Virginia Code, and any other statute which governs any gaming or wagering
activities conducted by the Company as such exist as of the date of the
Operating Agreement or may hereafter be amended, or any successor rule or
statute of similar purpose.
Taxable Year - The taxable year of the Company as determined pursuant
to section 706 of the Code.
Taxing Jurisdiction - Any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's
share of the income or gain attributable to the Company.
Withdrawal- The act of a Member by which such Member voluntarily cease
(29)
January 14, 1997
Mr. James A. Reeder
President
Bryant Development Corporation
2550 M Street, NW
Washington, DC 20037
Dear Jim:
I am writing on behalf of PNGI Charles Town Limited Liability Company
("LLC"), Penn National Gaming of West Virginia, Inc. ("PWV") and Penn
National Gaming, Inc. ("PNGI" and collectively with LLC and PWV are
referred to as "Penn National"). PWV and Bryant Development Corporation
("BDC") are parties to an Operating Agreement pertaining to PNGI Charles
Town Gaming Limited Liability Company dated February, 1996. Penn National
and BDC have agreed to an Amended and Restated Operating Agreement to be
entered into as of December 31, 1996, effective March 22, 1996. The
parties have further agreed to further amend the Amended and Restated
Operating Agreement consistent with the attached "Term Sheet".
Penn National has requested BDC to execute and deliver the Amended and
Restated Operating Agreement and certain other documents in connection
with the closing of the purchase by LLC of Charles Town Races. BDC has
required, as a condition to executing such documents that Penn National
assure BDC that the Amended and Restated Operating Agreement will be
further amended in a manner consistent with the attached Term Sheet.
In order to induce BDC to execute and deliver the Amended and Restated
Operating Agreement and the other documents which are necessary in
connection with the consummation of the purchase of Charles Town Races by
LLC, the undersigned, intending to be legally bound hereby, on behalf of
each of the entities comprising Penn National agrees that:
1. Penn National will take no action under the Amended and Restated
Operating Agreement to pursue any of their rights or remedies under the
Amended and Restated Operating Agreement which are inconsistent with the
terms and provisions of the Term Sheet.
<PAGE>
Mr. James A. Reeder
January 14, 1996
Page 2
2. Penn National has instructed its counsel to work with the counsel
of BDC to prepare for signature as soon as practicable a First Amendment
to Amended and Restated Operating Agreement consistent with the Term
Sheet.
3. Penn National will file with the West Virginia Racing Commission
and the West Virginia Lottery Commission all documents necessary to
reflect the changes set forth on the Term Sheet.
4. Penn National acknowledges that the foregoing is a material
inducement to your executing and delivering the Amended and Restated
Operating Agreement and the other documents necessary in connection with
the closing of the purchase of Charles Town Races by LLC and that, but for
such inducement, BDC would not execute such documents.
Please acknowledge your agreement with the foregoing by signing a copy
of this letter and returning it to me.
Sincerely,
/s/ Peter M Carlino
PETER M. CARLINO
on behalf of PNGI Charles Town
Limited Liability Company, Penn
National Gaming of West Virginia,
Inc. And Penn National Gaming, Inc.
/smm
Read, Approved and Agreed to this 15 day of January, 1997.
BRYANT DEVELOPMENT CORPORATION
By: /s/ James A. Reeder
James A. Reeder, President
TERM SHEET
TO FIRST AMENDMENT
TO AMENDED AND RESTATED OPERATING AGREEMENT
1. BDC Interest - to be reduced from 20% to 11% (the "Agreed
Percentage"). BDC to receive the Agreed Percentage of all net income and
the Agreed Percentage of the net proceeds of a transaction (regardless of
form) pursuant to which the LLC is sold.
2. BDC Responsibility - No responsibility to fund any portion of
the initial funding of the LLC (up to $40 million).
3. $250,000 Obligation to Showboat - To be paid by the LLC.
4. $250,000 Obligation to BDC - To be paid in accordance with
current note.
5. Treatment of Initial Funding (up to $40 million) - To be treated as
a "loan" to the LLC regardless of form. All principal and interest
payments (not to exceed the actual rate charged to Penn National by
Bankers Trust or, if the loan is pre-paid, the Prime Rate in effect from
time to time) will be made by the LLC (directly to the provider of the
funds or indirectly as distributions to PNGI).
6. Preemptive Rights - BDC Shareholders to have the right to maintain
their Agreed Percentage Interest in the event of the sale of additional
equity in the LLC.
7. Miscellaneous - Existing Operating Agreement to be reviewed for
necessary changes to reflect "investment status" of the BDC Shareholders.
8. New Ownership - The "BDC" interest, at the election of the BDC
Shareholders may be held by the individual BDC Shareholders so that no
person will own more than 5% of the LLC. Accordingly, none of the BDC
Shareholders will be required to submit to the jurisdiction of the West
Virginia Racing or Lottery Commission (e.g., no finger prints, financial
request or background checks).
9. PNGI will agree to be bound by the Arbitration Provisions of the
Amended and Restated Operating Agreement with respect to any dispute
arising thereunder.
10. All fees and expenses charged to BDC shall be based on its Agreed
Percentage Interest and the $65,000 fee referred to in Paragraph 8.3 of
the Amended and Restated Operating Agreement shall be reduced by a
fraction, the numerator of which is the Agreed Percentage Interest and the
dominator of which is 20.
(1)
<PAGE>
FIRST AMENDMENT AND CONSENT
FIRST AMENDMENT AND CONSENT (this "Amendment"), dated as of
January 7, 1997, among Penn National Gaming, Inc. (the "Borrower"), the
lenders party to the Credit Agreement referred to below (the "Banks"),
CoreStates Bank, N.A., as Co-Agent (the "Co-Agent"), and Bankers Trust
Company, as Agent (the "Agent"). All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings provided such
terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, the Co-Agent and the Agent are
parties to a Credit Agreement, dated as of November 27, 1996 (the "Credit
Agreement");
WHEREAS, the Borrower has requested certain amendments and/or
modifications to the Credit Agreement in connection with the Charles Town
Acquisition; and
WHEREAS, subject to the terms and conditions of this Amendment,
the Banks are willing to grant such amendments and/or modifications;
NOW, THEREFORE, it is agreed:
I Consents, Agreements and Amendments
1. On and after the First Amendment Effective Date (as defined
in Section II(1) below), Section 4.02(c) of the Credit Agreement shall be
amended by (i) inserting the following proviso at the end of the first
sentence thereof:
"; provided, however, from and after the consummation of the
Charles Town Acquisition, the first $6,000,000 of cash proceeds
received by the Borrower from the initial sale or issuance of
its equity which results in net cash proceeds to the Borrower of
at least $25,000,000 shall not be required to be applied as
provided above in this Section 4.02(c) so long as (i) the
Applicable Equity Issuance Percentage at such time is 100% and
(ii) no Default or Event of Default then exists, provided,
further, that such $6,000,000 number shall be reduced on a
dollar-for-dollar basis for each dollar of equity contribution
that Bryant Development makes to the Charles Town Joint Venture
after the Initial Borrowing Date";
and (ii) inserting the following new sentence at the end thereof:
(2)
<PAGE>
"In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on which
Bryant Development makes any capital contribution to the Charles
Town Joint Venture following the initial sale or issuance by the
Borrower of its equity which results in net cash proceeds to the
Borrower of at least $25,000,000 and in which the Borrower is
permitted to retain any portion of such net cash proceeds
pursuant to the proviso of the immediately preceding sentence,
an amount equal to 100% of each such capital contribution (up to
an aggregate amount for all such capital contributions not to
exceed the amount of such net cash proceeds permitted to be so
retained by the Borrower) shall be applied as a mandatory
repayment of principal of outstanding Tranche B Term Loans
(and/or, if the Total Tranche B Term Loan Commitment has not yet
been terminated, as a mandatory reduction to the Total Tranche B
Term Loan Commitment) in accordance with the requirements of
Sections 4.02(h) and (i)."
2. On and after the First Amendment Effective Date,
Section 4.02(i) of the Credit Agreement shall be
amended by inserting the following proviso at the
end of the first sentence thereof:
", provided, however, that any amount required to be applied
pursuant to the second sentence of Section 4.02(c) shall only be
applied to the Tranche B Term Loans and/or the Total Tranche B
Term Loan Commitment".
3. Notwithstanding anything to the contrary contained in
Sections 6.06 and 6.07(b) of the Credit Agreement, the Banks hereby waive
the requirement that the Charles Town Joint Venture shall have obtained a
license to conduct video lottery at the Charles Town Race Track from the
West Virginia Lottery Commission at the time of the consummation of the
Charles Town Acquisition.
4. On and after the First Amendment Effective Date, Section 6.08
of the Credit Agreement shall be amended by inserting the following text
immediately following the words "On the Initial Tranche B Term Loan
Borrowing Date" appearing therein:
"and except as disclosed on Annex A to the First
Amendment, dated as of January 7, 1997, to this Agreement
solely with respect to the Charles Town Acquisition".
5. Notwithstanding anything to the contrary contained in
Sections 6.09 and 9.12 of the Credit Agreement or in the definition of
"Subsidiary Guarantor" appearing in Section 12.01 of the Credit Agreement,
the Banks hereby waive the requirement that the Charles Town Joint Venture
enter into the Subsidiaries Guaranty or any Security Document at the time
of the consummation of the Charles Town Acquisition or at any time
thereafter so long as the Charles Town Joint Venture is a non-Wholly-Owned
Subsidiary of the Borrower, it being understood and agreed, however, at
such time (if any) as the Charles Town Joint Venture becomes a
Wholly-Owned Subsidiary of the Borrower the Charles Town Joint Venture
shall execute and deliver a counterpart of the Subsidiaries Guaranty, the
Security Agreement and the Pledge Agreement and shall take all such other
actions, and execute and deliver such Mortgages, Additional Security
Documents, opinions, surveys, mortgage policies and financing statements
as the Collateral Agent or the Required Banks may reasonably require in
connection therewith.
(3)
<PAGE>
6. Notwithstanding anything to the contrary contained in Section
6.12 of the Credit Agreement, the Banks hereby waive the requirement that
Bryant Development be able to (i) provide $3,300,000 to the Charles Town
Joint Venture to fund a like amount of the purchase price for the Charles
Town Acquisition or (ii) fund up to $3,200,000 of the Capital Expenditures
permitted under Section 10.08(d) of the Credit Agreement.
7. On and after the First Amendment Effective Date, Section 8.06
of the Credit Agreement shall be amended by inserting the following
parenthetical immediately after the word "Document" appearing in clause
(i) thereof:
"(except as disclosed on Annex A to the First Amendment,
dated as of January 7, 1997, to this Agreement solely with
respect to the Charles Town Acquisition)".
8. On and after the First Amendment Effective Date, Section
8.22(b) of the Credit Agreement shall be amended by inserting after the
phrase "Charles Town Acquisition" appearing in clause (b) contained
therein the following parenthetical.
"(or, with respect to any license to conduct video lottery at
the Charles Town Race Track issued by the West Virginia Lottery
Commission, at any time after June 1, 1997)".
9. On and after the First Amendment Effective Date, Section
10.01(ix) of the Credit Agreement shall be deleted in its entirety and the
following new Section 10.01(ix) shall be inserted in lieu thereof:
"(ix) on or after the consummation of the Charles Town
Acquisition, Liens placed upon video lottery terminals used at the
Charles Town Race Track (the "Charles Town Video Lottery Terminals")
at the time of the acquisition of such video lottery terminals by the
Charles Town Joint Venture or within 90 days thereafter to secure
Indebtedness incurred to pay all or at least 85% of the purchase price
thereof or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of any such video lottery terminals or
extensions, renewals or replacements of any such video lottery
terminals for the same or a lesser amount, provided that (w) the
aggregate outstanding principal amount of all Indebtedness secured by
Liens permitted by this clause (ix) shall not at any time exceed
$11,000,000, (x) the only recourse in respect of such Indebtedness
shall be against the Charles Town Video Lottery Terminals so financed
and not against the Charles Town Joint Venture, the Borrower or any
other Subsidiary of the Borrower, (y) in all events, the Lien
encumbering the Charles Town Video Lottery Terminals so acquired does
not encumber any other asset of the Charles Town Joint Venture or any
assets of the Borrower or any other Subsidiary of the Borrower and (z)
prior to the entering into of any such financing arrangements, the
documentation with respect thereto shall have been delivered to the
Banks and shall be in form and substance reasonably satisfactory to
the Required Banks;".
10. On and after the First Amendment Effective Date, Section
10.02(ii) of the Credit Agreement shall be amended by deleting the first
parenthetical appearing therein and inserting the following new
parenthetical in lieu thereof:
"(other than the capital stock of any Subsidiary Guarantor, the
equity interest in the Charles Town Joint Venture, any Mortgaged
Property or the Charles Town Race Track)".
(4)
<PAGE>
11. On and after the First Amendment Effective Date, Section
10.03(ii) of the Credit Agreement shall be amended by inserting the
following proviso at the end thereof, but immediately before the semicolon
appearing therein:
", provided, however, until such time as Bryant Development
shall have fully contributed its 20% share of the purchase price
for the Charles Town Acquisition and for the Capital
Expenditures pursuant to Section 10.08(d), the Charles Town
Joint Venture may not pay any Dividends to Bryant Development
pursuant to this Section 10.03(ii)".
12. On and after the First Amendment Effective Date, Section
10.04 of the Credit Agreement shall be amended by (i) deleting the period
appearing at the end of clause (vii) thereof and inserting ";and" in lieu
thereof, (ii) inserting the following new clause (viii) immediately
following clause (vii) thereof:
"(viii) a guaranty by the Borrower of the Charles Town Joint
Venture's indemnity obligations to Charles Town Races and the Charles
Town Racing Limited Partnership in respect of the litigation set forth
on Annex A to this First Amendment, dated as of January 7, 1997, to
the Agreement."
and (iii) inserting the following new sentence at the end thereof:
"Notwithstanding anything to the contrary contained in this
Section 10.04 or in Section 10.01, the only Indebtedness that the
Charles Town Joint Venture shall be permitted to incur is under clause
(i) above, clause (ii) above (but no refinancings thereof) and clause
(v) above (but only in respect of Liens permitted under Section
10.01(ix))."
13. On and after the First Amendment Effective Date, Section
10.05(viii) of the Credit Agreement shall be amended by (i) deleting the
word "and" appearing at the end of clause (i) thereof and inserting a
comma in lieu thereof and (ii) inserting the following new clause (iii) at
the end thereof:
"and (iii) in an amount not to exceed $6,400,000 to fund its
working capital requirements so long as no Default or Event of
Default then exists".
14. Notwithstanding anything to the contrary contained in
Section 10.05(viii) of the Credit Agreement, in the event that Bryant
Development is unable to fund its 20% share of the purchase price for the
Charles Town Acquisition and of the Capital Expenditures pursuant to
Section 10.08(d) of the Credit Agreement, as the case may be, the Borrower
and its Subsidiaries may make cash equity contributions to the Charles
Town Joint Venture to fund the total purchase price for the Charles Town
Acquisition and to make Capital Expenditures pursuant to Section 10.08(d).
15. Notwithstanding anything to the contrary contained in
Section 10.08(d) of the Credit Agreement, the Banks hereby agree that the
Charles Town Joint Venture may make Capital Expenditures pursuant to such
Section 10.08(d) even if Bryant Development cannot fund its proportionate
share of such Capital Expenditures as required under such Section
10.08(d).
(5)
<PAGE>
16. On and after the First Amendment Effective Date, Section
10.08(e) of the Credit Agreement shall be amended by deleting the words
"the Borrower or any of its Subsidiaries, the Borrower and its
Subsidiaries" appearing therein and inserting the words "the Charles Town
Joint Venture, the Charles Town Joint Venture" in lieu thereof.
17. On and after the First Amendment Effective Date, Section 11
of the Credit Agreement shall be amended by (i) inserting the word "or" at
the end of Section 11.13 and (ii) inserting the following Section 11.14
immediately after such Section 11.13:
"11.14 Video Lottery Licenses. The Borrower or one of its
Subsidiaries does not obtain a license from the West Virginia
Lottery Commission to operate at least 400 video lottery
terminals at the Charles Town Race Track by June 1, 1997".
18. On and after the First Amendment Effective Date, the
definition of "Applicable Equity Insurance Percentage" appearing in
Section 12.01 of the Credit Agreement shall be amended by inserting the
phrase "plus the Total Tranche B Term Loan Commitment" immediately after
the phrase "Term Loans" each place such phrase appears in said definition.
19. From and after the consummation of the Charles Town
Acquisition, the term "Collateral" in the Security Agreement and in the
Pledge Agreement shall include all of Penn National Gaming of West
Virginia, Inc.'s right, title and interest in and to (i) the equity
interest of the Charles Town Joint Venture, (ii) the Amended and Restated
Operating Agreement, dated as of December 31, 1996, by and among the
Charles Town Joint Venture, Penn National Gaming of West Virginia, Inc.
and Bryant Development (as in effect from time to time), including, but
not limited to, all rights to receive distributions and other payments
thereunder and all voting and other consensual rights with respect thereto
and (iii) all proceeds and products of the foregoing.
II. Miscellaneous Provisions
20. This Amendment shall become effective on the date (the
"First Amendment Effective Date") when each of the following conditions
all have been satisfied:
20.0.0.1. the Borrower and the Required Banks shall have signed
a counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by way of facsimile transmission)
the same to the Agent at its Notice Office; and
20.0.0.2. the Joint Venture Agreement for the Charles Town
Joint Venture shall have been amended substantially in the form
of Exhibit A hereto, with such changes thereto as may be satisfactory to
the Agent.
21. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(6)
<PAGE>
21.0.0.1. no Default or Event of Default exists on the First
Amendment Effective Date, both before and after giving effect to this
Amendment; and
21.0.0.2. on the First Amendment Effective Date, both before
and after giving effect to this Amendment, all representations and
warranties contained in the Credit Agreement and in the other Credit
Documents are true and correct in all material respects as though
such representations and warranties were made on the First Amendment
Effective Date.
22. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of
which counterparts when executed and delivered shall be an original, but
all of which shall together constitute one and the same instrument. A
complete set of counterparts shall be delivered to the Borrower and the
Agent.
23. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
24. From and after the First Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as modified hereby.
25. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document (including, but not
limited to, a waiver or modification of any other condition precedent to
the incurrence of Tranche B Term Loans or to the consummation of the
Charles Town Acquisition).
* * *
(7)
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the
date first above written.
PENN NATIONAL GAMING, INC.
By /s/ William J Bork
Title:President
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Timothy J. Morris
Title: Vice-President
CORESTATES BANK, N.A.,
Individually and as Co-Agent
By /s/ Jeff Wasmuth
Title: Vice President
SUMMIT BANK
By /s/ Donald McCarty
Title: Regional Vice-President
(8)
<PAGE>
SUMITOMO BANK, LIMITED
By /s/ Wade Bell
Title: Vice-President
By /s/ Micheal J. Fox
Title: Vice-President & Manager