FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-24206
Penn National Gaming, Inc.
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2234473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Penn National Gaming, Inc.
825 Berkshire, Blvd., Suite 200
Wyomissing, PA 19610
(Address of principal executive offices) (Zip code)
610-373-2400
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
<PAGE>
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding as of August 10, 1999
Common Stock Par value $.01 per share 14,869,021
THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS
INCLUDED IN THIS REPORT LOCATED ELSEWHERE HEREIN REGARDING THE COMPANY'S
OPERATIONS, FINANCIAL POSITION AND BUSINESS STRATEGY, MAY CONSTITUTE
FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY", "WILL", "EXPECT", "INTEND",
"ESTIMATE", "ANTICIPATE", "BELIEVE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR
VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE COMPANY BELIEVES THAT
THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE AT
THIS TIME, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIOUNARY STATEMENTS") ARE
DISCLOSED IN THIS REPORT AND IN OTHER MATERIALS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
2
<PAGE>
Penn National Gaming, Inc. And Subsidiaries
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements
Consolidated Balance Sheets -
June 30, 1999 (unaudited) and December 31, 1998 4-5
Consolidated Statements of Income -
Six Months Ended June 30, 1999
and 1998 (unaudited) 6
Consolidated Statements of Income -
Three Months Ended June 30, 1999 and
1998 (unaudited) 7
Consolidated Statement of Shareholders' Equity -
Six Months Ended June 30, 1999 (unaudited) 8
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 1999
and 1998 (unaudited) 9-10
Notes to Consolidated Financial Statements 11-18
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 19-22
Item 3 - Changes in information about Market Risk 23
- -------------------------------------------------
PART II - OTHER INFORMATION 23
Item 1 - Legal Proceedings 23
- --------------------------
Item 6 - Exhibits and Reports on Form 8-K 24
- -----------------------------------------
Signature Page 25
Exhibit Index 26
3
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PENN NATIONAL GAMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited)
---------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 10,484 $ 6,826
Accounts receivable 5,995 3,840
Prepaid expenses and other current assets 2,081 2,131
Deferred income taxes 332 458
Prepaid income tax 114 859
--------------------------------------
Total current assets 19,006 14,114
--------------------------------------
Property, plant and equipment, at cost
Land and improvements 27,500 26,969
Building and improvements 68,433 66,918
Furniture, fixtures and equipment 30,286 29,772
Transportation equipment 603 527
Leasehold improvements 9,767 9,579
Leased equipment under capitalized lease 824 824
Construction in progress 1,601 1,847
--------------------------------------
139,014 136,436
Less accumulated depreciation and amortization 19,235 15,684
--------------------------------------
Net property, plant and equipment 119,779 120,752
--------------------------------------
Other assets
Note receivable 11,250 -
Excess of cost over fair market value of net assets acquired
(net of accumulated amortization of $2,308 and $2,002,
respectively) 21,885 22,442
Deferred financing costs 2,700 2,403
Miscellaneous 1,107 1,087
--------------------------------------
Total other assets 36,942 25,932
--------------------------------------
$ 175,727 $ 160,798
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PENN NATIONAL GAMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December31,
1999 1998
(Unaudited)
---------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt and
capital lease obligations $ 5,158 $ 168
Accounts payable 6,575 6,217
Purses due horsemen 3,478 887
Uncashed pari-mutuel tickets 1,094 1,597
Accrued expenses 1,362 1,063
Accrued interest 413 468
Accrued salaries & wages 752 752
Customer deposits 719 548
Taxes, other than income taxes 965 503
----------------------------------
Total current liabilities 20,516 12,203
----------------------------------
Long Term Liabilities
Long-term debt and capital lease obligations,
net of current maturities 81,272 78,088
Deferred income taxes 11,917 11,471
----------------------------------
Total long-term liabilities 93,189 89,559
----------------------------------
Commitments and contingencies
Shareholders' equity
Preferred stock,$.01 par value, authorized 1,000,000 shares;
issued none - -
Common stock,$.01 par value, authorized 20,000,000 shares;
issued 15,286,021 and 15,164,080, respectively 154 152
Treasury stock, 424,700 shares at cost (2,379) (2,379)
Additional paid in capital 38,447 38,025
Retained earnings 25,800 23,238
----------------------------------
Total shareholders' equity 62,022 59,036
----------------------------------
$ 175,727 $ 160,798
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PENN NATIONAL GAMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---------------------------
<S> <C> <C>
Revenues
Pari-mutuel revenues
Live races $ 8,283 $ 12,928
Import simulcasting 35,050 34,114
Export simulcasting 1,358 2,828
Gaming revenue 24,913 16,160
Admissions, programs and other racing revenue 2,984 2,956
Concessions revenues 5,584 4,427
----------------------------
Total revenues 78,172 73,413
----------------------------
Operating expenses
Purses, stakes, and trophies 14,098 13,946
Direct salaries, payroll taxes and employee benefits 8,720 9,263
Simulcast expenses 6,071 6,896
Pari-mutuel taxes 4,103 4,589
Lottery taxes and administration 9,904 6,302
Other direct meeting expenses 10,613 11,564
Concessions expenses 4,968 3,453
Other operating expenses 6,435 5,021
Horsemen's action expenses 1,250 -
Depreciation and amortization 4,145 2,841
----------------------------
Total operating expenses 70,307 63,875
----------------------------
Income from operations 7,865 9,538
----------------------------
Other income (expenses)
Interest (expense) (4,333) (4,243)
Interest income 605 451
Other (7) 30
----------------------------
Total other (expenses) (3,735) (3,762)
----------------------------
Income before taxes 4,130 5,776
Taxes on income 1,568 2,099
----------------------------
Net Income $ 2,562 $ 3,677
============================
Basic earnings per share on net income $ 0.17 $ 0.24
----------------------------
Diluted earnings per share on net income $ 0.17 $ 0.24
----------------------------
Weighted average number of basic common shares outstanding 14,784 15,154
----------------------------
Weighted average number of diluted common shares outstanding 15,135 15,558
----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
PENN NATIONAL GAMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1999 1998
--------------------------------
<S> <C> <C>
Revenues
Pari-mutuel revenues
Live races $ 5,868 $ 7,623
Import simulcasting 19,749 17,763
Export simulcasting 847 1,502
Gaming revenue 13,616 9,004
Admissions, programs and other racing revenue 1,865 1,694
Concessions revenues 3,438 2,472
---------------------------------
Total revenues 45,383 40,058
---------------------------------
Operating expenses
Purses, stakes, and trophies 8,388 7,639
Direct salaries, payroll taxes and employee benefits 5,005 4,904
Simulcast expenses 3,685 3,795
Pari-mutuel taxes 2,434 2,476
Lottery taxes and administration 5,415 3,371
Other direct meeting expenses 6,021 6,122
Concessions expenses 2,945 1,948
Other operating expenses 3,360 2,625
Depreciation and amortization 2,130 1,422
--------------------------------
Total operating expenses 39,383 34,302
--------------------------------
Income from operations 6,000 5,756
--------------------------------
Other income (expenses)
Interest (expense) (2,208) (2,134)
Interest income 396 250
Other (7) 30
--------------------------------
Total other (expenses) (1,819) (1,854)
--------------------------------
Income before taxes 4,181 3,902
Taxes on income 1,641 1,435
--------------------------------
Net income $ 2,540 2,467
================================
Basic earnings per share on net income $ 0.17 $ 0.16
--------------------------------
Diluted earnings per share on net income $ 0.17 $ 0.16
--------------------------------
Weighted average number of basic common shares outstanding 14,822 15,156
--------------------------------
Weighted average number of diluted common shares outstanding 15,183 15,542
--------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Treasury Paid-In Retained
Shares Amounts Stock Capital Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, at January 1, 1999 15,164,080 $ 152 $ (2,379) $ 38,025 $ 23,238 $ 59,036
Issuance of common stock 121,941 2 422 424
Net income for the six months
ended June 30, 1999 - - - - 2,562 2,562
--------------------------------------------------------------------------------------
Balance, at June 30, 1999 15,286,021 $ 154 $ (2,379) $ 38,447 $ 25,800 $ 62,022
======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,562 $ 3,677
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 4,145 2,841
Net deferred income tax assets and liabilities 572 222
Decrease (Increase) in
Accounts receivable (2,155) (1,803)
Prepaid expenses 50 (668)
Prepaid income taxes 745 2,123
Miscellaneous other assets (25) (213)
Increase (decrease) in
Accounts payable 358 (312)
Purses due horsemen 2,591 1,423
Uncashed pari-mutuel tickets (503) (554)
Accrued expenses 299 (579)
Accrued interest (55) 8
Accrued salaries & wages - 138
Customers deposits 171 233
Taxes other than income payable 462 157
------------- ------------
Net cash provided by operating activities 9,217 6,693
------------- ------------
Cash flows from investing activities
Expenditures for property and equipment (2,578) (4,932)
Notes receivable (11,250) -
Other 251 -
------------- ------------
Net cash (used in) investing activities (13,577) (4,932)
------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
-------------------------------
<S> <C> <C>
Cash flows from financing activities
Proceeds from sale of common stock 424 18
Proceeds from long term debt 11,500 -
Principal payments on long-term debt and capital lease obligations (3,326) (34)
Increase in unamortized financing cost (580) (107)
------------- -----------
Net cash provided by (used) in financing activities 8,018 (123)
------------- -----------
Net increase in cash 3,658 1,638
Cash and cash equivalents, at beginning of period 6,826 21,854
------------- -----------
Cash and cash equivalents, at end of period $ 10,484 $ 23,492
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE>
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Financial Statement Presentation
The accompanying consolidated financial statements are unaudited and
include the accounts of Penn National Gaming, Inc., (Penn) and its wholly and
majority owned subsidiaries, (collectively the "Company"). All significant
intercompany transactions and balances have been eliminated. Certain prior year
amounts have been reclassified to conform to current year presentation.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) have been made which are necessary to present fairly the
financial position of the Company as of June 30, 1999 and the results of its
operations for the three and six month periods ended June 30, 1999 and 1998. The
results of operations experienced for the six month period ended June 30, 1999
are not necessarily indicative of the results to be experienced for the fiscal
year ended December 31, 1999.
The statements and related notes herein have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. The accompanying notes
should therefore be read in conjunction with the Company's December 31, 1998
annual financial
statements.
<TABLE>
<CAPTION>
2. Wagering Information (in thousands)
Three months ended June 30, 1999
Penn Pocono Charles
National Downs Town Total
<S> <C> <C> <C> <C>
Pari-mutuel wagering in-state on
Company's live races $ 11,291 $ 7,197 $ 8,346 $ 26,834
-----------------------------------------------------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 49,421 34,831 12,962 97,214
Export simulcasting to out of
state wagering facilities 20,228 6,348 2,042 28,618
-----------------------------------------------------
69,649 41,179 15,004 125,832
-----------------------------------------------------
Total pari-mutuel wagering $ 80,940 $48,376 $ 23,350 $ 152,666
=====================================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Three months ended June 30, 1998
Penn Pocono Charles
National Downs Town Total
<S> <C> <C> <C> <C>
Pari-mutuel wagering in-state on
Company's live races $ 21,605 $ 7,410 $ 5,524 $ 34,539
-----------------------------------------------------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 43,735 35,040 10,917 89,692
Export simulcasting to out of
state wagering facilities 42,964 7,188 - 50,152
-----------------------------------------------------
86,699 42,228 10,917 139,844
-----------------------------------------------------
Total pari-mutuel wagering $ 108,304 $ 49,638 $ 16,441 $ 174,383
=====================================================
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999
Penn Pocono Charles
National Downs Town Total
<S> <C> <C> <C> <C>
Pari-mutuel wagering in-state on
Company's live races $ 17,970 $ 7,197 $ 13,389 $ 38,556
----------------------------------------------------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 77,026 69,995 25,561 172,582
Export simulcasting to out of
state wagering facilities 37,382 6,348 2,042 45,772
----------------------------------------------------
114,408 76,343 27,603 218,354
----------------------------------------------------
Total pari-mutuel wagering $132,378 $83,540 $ 40,992 $256,910
====================================================
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Six months ended June 30, 1998
Penn Pocono Charles
National Downs Town Total
<S> <C> <C> <C> <C>
Pari-mutuel wagering in-state on
Company's live races $ 41,215 $ 8,325 $ 9,642 $ 59,182
---------------------------------------------------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 86,580 66,105 21,070 173,755
Export simulcasting to out of
state wagering facilities 86,584 7,763 - 94,347
---------------------------------------------------
173,164 73,868 21,070 268,102
---------------------------------------------------
Total pari-mutuel wagering $ 214,379 $ 82,193 $ 30,712 $ 327,284
===================================================
</TABLE>
3. Commitments
The Company submitted an application to the Tennessee State Racing
Commission (the "Tennessee Commission") in October 1997 for an initial license
for the development and operation of a harness track and Off-Track Wagering
Facilities ("OTW") at a site in the city of Memphis (the "Tennessee Development
Project"). A land use plan for the construction of a 5/8-mile harness track,
clubhouse and grandstand area was approved in October 1997 by the Land Use
Hearing Board for the City of Memphis and County of Shelby. Tennessee Downs,
Inc. ("Tennessee Downs") was determined to be financially suitable by the
Tennessee Commission and a public comment hearing before the Tennessee
Commission was held in November 1997. In December 1997, the Company received the
necessary zoning and land development approvals from the Memphis City Council.
In April 1998, the Tennessee Commission granted a license to the Company, which
would expire on the earlier of: (i) December 31, 2000 or (ii) the expiration of
Tennessee Commission's term on June 30, 1998, if such term was not extended by
the Tennessee State Legislature. The Tennessee State Legislature voted against
extending the life of the Tennessee Commission, allowing the Tennessee
Commission's term to expire on June 30, 1998. The Tennessee Commission held a
meeting on May 29, 1998 at which it rejected the Company's request: (i) to grant
the Company an extended timeframe for the effectiveness of its racing license;
(ii) to operate a temporary simulcast facility. On July 28, 1998, the Company
filed for a preliminary injunction and a declaratory ruling on the legal status
of racing in Memphis. On November 23, 1998, the court ruled that the Tennessee
Racing Control Act had not been repealed and cannot be repealed by implication
by dissolving the Tennessee Commission. It is the opinion of the court that
because the Tennessee Racing Control Act is still in force, horse-racing and
pari-mutuel betting is a legal unregulated activity in Tennessee. This opinion
has been appealed by the Tennessee Attorney General and a hearing was held
before the Court of Appeals on June 21, 1999. On July 30, 1999, the Court of
Appeals in Tennessee dissolved the injunction. The court reversed the lower
court ruling on the basis of jurisdiction. Tennessee Downs intends to take a
direct appeal to the Supreme Court of the State of Tennessee so that it may
continue its efforts to develop and operate a harness track in Tennessee. Costs
incurred as of June 30, 1999 regarding the Tennessee license amounted to
$534,135 and are presented in prepaid expenses and other current assets.
13
<PAGE>
On July 14, 1998, the Company entered into a lease agreement for an OTW
facility in East Stroudsburg. The lease is for approximately 14,000 square feet
at the Eagle's Glen Shopping Plaza located in East Stroudsburg, Pennsylvania.
The initial term of the lease is for ten years with two additional five-year
renewal options available. On November 6, 1998, the Company submitted its
application for approval by the Pennsylvania Harness Racing Commission. The
Pennsylvania Harness Racing Commission approved the application on February 23,
1999. The Company was denied building and zoning permits by the zoning office of
the Borough of East Stroudsburg and filed suit on November 13, 1998 to obtain
the permits. On May 17, 1999, the Court of Common Pleas of Monroe County granted
a peremptory judgment in favor of the Company that directed the Borough of East
Stroudsburg and its zoning officer to issue the required building and zoning
permits to construct the OTW facility. The Company expects to start construction
on the $2 million facility in August 1999 with a projected opening date in the
first quarter of 2000.
On March 23, 1999, the Company entered into a new four-year, nine-month
purse agreement with the Horsemen's Benevolent and Protection Association, which
represents the horsemen at the Company's Penn National Race Course facility in
Grantville, Pennsylvania. The agreement ended a strike by the horsemen which
began on February 16, and caused the Company to close Penn National Race Course
and its six affiliated OTWs. The initial term of the agreement ends on January
1, 2004 and automatically renews for another two year period, without change,
unless notice is given by either party at least ninety days prior to the end of
the initial term.
On April 9, 1999, the State of West Virginia passed legislation
approving the use of coin-out and reel spinning slot machines at the four
racetracks in West Virginia. The Company plans to convert certain machines at
Charles Town to coin-out as well as replace a number of lesser-performing
machines with reel spinning models. On April 27, 1999, the Company placed an
additional thirty-six (36) machines in operation for a total machine base of
935. During the remainder of 1999, the Company plans to add, subject to
regulatory approval, 565 more machines to bring the total machine base to 1,500.
On May 10, 1999, the Company commenced a consent solicitation (the
"Consent Solicitation") from the holders of its 10.625% Senior Notes due 2004,
Series B (the Notes) to amend the Indenture pursuant to which the Notes were
issued to permit the Company to make certain investments in a joint venture with
Greenwood New Jersey, Inc., that will operate Freehold Raceway in Freehold, New
Jersey and Garden State Track in Cherry Hill, New Jersey (the "Joint Venture").
The Consent Solicitation originally expired at 5:00 p.m., New York City time, on
May 19, 1999 but was extended by the Company until July 30, 1999, by which time
holders of more than a majority of the Company's had delivered consents. The
Company and the Trustee under the Indenture relating to the Notes have executed
and delivered a Supplemental Indenture containing the amendments described in
the Company's Consent Solicitation. The amendments became effective on July 30,
1999 when the Company acquired the Joint Venture. The consent fee payable to
holders who delivered consents (and did not validly revoke such consents) prior
to the expiration date is $32.50 per $1,000 principal amount of Notes as to
which a consent was given. Pursuant to the terms and conditions of the Consent
Solicitation, the Company made all consent payments contemporaneously with the
closing of the Joint Venture transaction.
On June 1, 1999, the Company amended its employment agreement with its
Chairman which became effective June 1, 1999 and as amended, shall continue
thereafter from year to year. The agreement provides for an annual base salary
of $380,000, and prohibits the employee from competing with the Company during
its term and for one year, thereafter. The agreement also provides for a death
benefit payment by the Company equal to the amount of employee's annual salary
in effect at the time of his death, for a period of two years following the date
of employee's death.
14
<PAGE>
On June 1, 1999, the Company amended its employment agreement with its
Chief Financial Officer which became effective on June 1, 1999, and as amended,
shall continue from year to year unless terminated by the Company upon 90 days
written notice. The agreement provides for an annual base salary of $150,000,
and prohibits the employee from competing with the Company during its term and
for one year thereafter. The agreement also provides for a death benefit payment
by the Company equal to the amount of the employee's annual salary in effect at
the time of his death for a period of one year following the date of employees
death.
On June 30, 1999, all the race tracks in West Virginia (the "Tracks"),
entered into a hardware and software purchase agreement (the "Agreement") with
International Game Technology (IGT), for the purchase of a new video lottery
central control computer system. The aggregate cost of the new system is $5.5
million of which PNGI Charles Town Gaming LLC is obligated to pay $1.4 million.
On July 22, 1999, the Company submitted a check in the amount of $257,000 as the
initial deposit and issued a letter of credit in the amount of $1,156,000 to
secure the remaining payments due. In addition, the Tracks agreed to
collectively acquire from IGT at least one thousand video lottery terminals by
September 30, 1999. (Charles Town is to acquire 400 new terminals) The Agreement
also requires each track to pay to IGT the sum of $7.50 per terminal, per day
for each video lottery terminal offering progressive games operated through the
IGT central system. Installation of the new central system should be completed
by December 31, 1999.
At June 30, 1999, the Company was contingently obligated under letters of
credit with face amounts aggregating $2,031,000. These amounts consisted of
$1,776,000 relating to horsemen's account balances, $100,000 for Pennsylvania
pari-mutuel taxes, and $155,000 for purses.
4. Supplemental Disclosures of Cash Flow Information
Cash paid during the six months ended June 30, 1999 and 1998 for
interest was $4,307,204 and $4,230,000, respectively.
Cash paid during the three months ended June 30, 1999 and 1998 for
income taxes was $206,000 and $1,476,000, respectively.
15
<PAGE>
5. Subsidiary Guarantors
Summarized financial information as of June 30, 1999 and 1998
for the three and six months ended June 30, 1999 and 1998 for Penn
National Gaming, Inc. ("Parent"), the Subsidiary Guarantors and
Subsidiary Nonguarantors is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Subsidiary
Parent Susbsidiary Non- Elimin- Consoli-
Company Guarantors Guarantors ations dated
- --------------------------------------------------------------------------------------------------------------------------
As of June 30,1999
Consolidated Balance Sheet (In Thousands)
<S> <C> <C> <C> <C> <C>
Current assets $ 6,699 $ 6,164 $ 7,685 $ (1,542 ) $ 19,006
Net property plant and equipment 13,051 61,720 45,008 - 119,779
Other assets 111,679 156,936 1,539 (233,212 ) 36,942
- --------------------------------------------------------------------------------------------------------------------------
Total $ 131,429 $ 224,820 $ 54,232 $ (234,754 ) $ 175,727
- --------------------------------------------------------------------------------------------------------------------------
Current liabilities 8,259 15,416 $9,216 (12,375 ) 20,516
Long-term liabilities 84,633 78,342 47,553 (117,339 ) 93,189
Shareholders'equity (deficiency) 38,537 131,062 (2,537 ) (105,040 ) 62,022
- --------------------------------------------------------------------------------------------------------------------------
Total $ 131,429 $ 224,820 $ 54,232 $ (234,754 ) $ 175,727
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1999
Consolidated Statement of Income (In Thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 4,515 $ 22,173 $ 20,205 $ (1,510 ) $ 45,383
Total operating expenses 2,141 21,291 17,461 (1,510 ) 39,383
- --------------------------------------------------------------------------------------------------------------------------
Income from operations 2,374 882 2,744 - 6,000
Other income (expenses) (1,464 ) 749 (1,104 ) - (1,819 )
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes 910 1,631 1,640 - 4,181
Taxes on income 376 609 656 - 1,641
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 534 $ 1,022 $ 984 $ - $ 2,540
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999
Consolidated Statement of Income (In Thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 2,038 $ 42,199 $ 36,570 $ (2,635 ) $ 78,172
Total operating expenses (2,012 ) 42,642 32,312 (2,635 ) 70,307
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 4,050 (443 ) 4,258 - 7,865
Other income (expenses) (2,969 ) 1,504 (2,270 ) (3,735 )
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,081 1,061 1,988 - 4,130
Taxes on income 465 285 818 1,568
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 616 $ 776 $ 1,170 $ - $ 2,562
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999
Consolidated Statement of Cash Flow (In Thousands)
<S> <C> <C> <C> <C> <C>
Net Cash Flows from Operating $ 6,000 $ 239 $ 2,978 $ - $ 9,217
Activities
Net Cash Flows from Investing (11,736 ) (745 ) (1,096 ) - (13,577 )
Activities
Net Cash Flows from Financing 8,527 (509 ) - - 8,018
Activities
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 2,791 (1,015 ) 1,882 - 3,658
Cash and cash equivalents at 2,001 1,705 3,120 - 6,826
January 1, 1999
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June
30,1999 $ 4,792 $ 690 $ 5,002 $ - $ 10,484
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Subsidiary
Parent Susbsidiary Non- Elimin- Consoli-
Company Guarantors Guarantors ations dated
- --------------------------------------------------------------------------------------------------------------------------
As of December 31, 1998
Consolidated Balance Sheet (In Thousands)
<S> <C> <C> <C> <C> <C>
Current assets $ 3,558 $ 6,944 $ 4,204 $ (592 ) $ 14,114
Net property plant and equipment 13,576 62,598 44,578 - 120,752
Other assets 102,400 153,818 1,779 (232,065 ) 25,932
- --------------------------------------------------------------------------------------------------------------------------
Total $ 119,534 $ 223,360 50,561 (232,657 ) 160,798
- --------------------------------------------------------------------------------------------------------------------------
Current liabilities 1,000 13,961 7,520 (10,278 ) 12,203
Long-term liabilities 81,037 78,527 47,334 (117,339 ) 89,559
Shareholders'equity (deficiency) 37,497 130,872 (4,293 ) ( 105,040 ) 59,036
- --------------------------------------------------------------------------------------------------------------------------
Total $ 119,534 $ 223,360 $ 50,561 $ (232,657 ) $ 160,798
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1998
Consolidated Statement of Income (In Thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 27,057 $ 13,697 $ (696 ) $ 40,058
Total operating expenses (1,765 ) 24,674 12,089 (696 ) 34,302
- --------------------------------------------------------------------------------------------------------------------------
Income from operations 1,765 2,383 1,608 - 5,756
Other income (expenses) (1,390 ) 700 (1,164 ) - (1,854 )
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes 375 3,083 444 - 3,902
Taxes on income 94 1,341 - - 1,435
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 281 $ 1,742 $ 444 $ - $ 2,467
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1998
Consolidated Statement of Income (In Thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 2 $ 49,889 $ 24,667 $ (1,145 ) $ 73,413
Total operating expenses (3,243 ) 45,460 22,803 (1,145 ) 63,875
- --------------------------------------------------------------------------------------------------------------------------
Income from operations 3,245 4,429 1,864 - 9,538
Other income (expenses) (2,777 ) 1,345 (2,330 ) (3,762 )
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes 468 5,774 (466 ) - 5,776
Taxes on income 26 2,073 - 2,099
- --------------------------------------------------------------------------------------------------------------------------
Net income (Loss) $ 442 $ 3,701 $ (466 )$ - $ 3,677
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1998
Consolidated Statement of Cash Flow (In Thousands)
<S> <C> <C> <C> <C> <C>
Net Cash Flows from Operating $ 3,945 $ (12,596 ) $ 565 $ 14,779 $ 6,693
Activities
Net Cash Flows from Investing (6,812 ) 7,168 2,844 (8,132 ) (4,932 )
Activities
Net Cash Flows from Financing 154 6,370 - (6,647 ) (123 )
Activities
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (2,713 ) 942 3,409 - 1,638
Cash and cash equivalents at
January 1, 1998 3,015 17,895 944 - 21,854
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June
30, 1999 $ 302 $ 18,837 $ 4,353 $ - $ 23,492
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
6. Year 2000 Compliance
The "Year 2000 issue" is typically the result of software and hardware
being written using two digits rather than four to define the applicable year.
If the Company's software and hardware with date-sensitive functions are not
Year 2000 compliant, these systems may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
interruptions in pari-mutuel wagering or the inability to operate the Company's
video lottery machines.
The Company, has been and is currently conducting a review of all
systems and contacting all software suppliers to determine major areas of
exposure to Year 2000 issues. The Company believes that, with minor
modifications and testing of its systems, the Year 2000 issue will not pose a
significant operations problem. The Company is using its internal resources to
reprogram or replace and test its software for Year 2000 modifications. If the
Company is unable to make the required modifications to existing software or
convert to new software in a timely manner, the Year 2000 issue could have a
material adverse impact on the Company's operations.
The Company has initiated formal communication with significant
suppliers and third party vendors to determine the extent to which the Company's
operations are vulnerable to those third parties failure to remediate their own
Year 2000 hardware and software issues. All of these parties state that they
intend to be Year 2000 compliant by 2000. In the event that any of the Company's
significant suppliers are unable to become Year 2000 compliant, the Company's
business or operations could be adversely affected. There can be no assurance
that the systems of other companies on which the Company relies will be
compliant by the year 2000 and would not have an adverse effect on operations.
The Company does not expect the total cost associated with required
modifications to become Year 2000 compliant to be material to its financial
position.
The Company has not yet fully developed a comprehensive contingency
plan addressing situations that may result if the Company is unable to achieve
Year 2000 readiness of its critical operations. Contingency plan development is
in process and the Company expects to finalize its plan during the remainder of
1999. There can be no assurance that the Company will be able to develop a
contingency plan that will adequately address issues that may arise in the year
2000.
7. Subsequent Events
On July 9, 1999, the Company entered into an agreement with American
Digital Communications, Inc. ("TrackPower") to serve as the exclusive
pari-mutuel wagering hub operator for TrackPower. TrackPower provides
direct-to-home digital satellite transmissions of horse racing to its subscriber
base. The initial term of the contract is for five years with an additional five
year option available. The agreement is subject to approval by the Pennsylvania
Horse Racing Commission. In connection with the agreement the Company received
Warrants to purchase 5,000,000 shares of common stock of TrackPower at prices
ranging from $1.58 per share to $2.58 per share. The Warrants vest at 20% per
year and expire on April 30, 2004.
On July 29, 1999, after receiving the necessary approvals from the New
Jersey Racing Commission and the consent from the holders of its 10.625% Senior
Notes due 2004, Series B, the Company completed its investment in the 50%/50%
Joint Venture, Pennwood, Inc., with Greenwood New Jersey, Inc., (a wholly-owned
subsidiary of Greenwood Racing, Inc. the owner of Philadelphia Park Race Track).
18
<PAGE>
Pursuant to the Joint Venture Agreement, the Company agreed to guarantee
severally: (i) up to 50% of the obligations of the Joint Venture under its Put
Option Agreement ($17.5 million) with Credit Suisse First Boston Mortgage
Capital LLC ("CSFB"); (ii) up to 50% of the Joint Venture obligation for the
seven year lease at Garden State Park; (iii) up to 50% to International
Thoroughbred Breeders, Inc. for the contingent purchase price notes ($10.0
million) relating to the operating, if passed by the New Jersey legislature, by
the Joint Venture of OTW's and a telephone wagering accounts in New Jersey. In
conjunction with the closing, the Company entered into a Debt Service
Maintenance Agreement with Commerce Bank, N.A. for the funding of a $23.0
million credit facility to the Joint Venture. The Joint Venture Agreement
provides for a limited obligation of the Company of $11.5 million subject to
limitations provided for in the Company's 10.625% Senior Notes Indenture. A Form
8-K will be filed regarding this event.
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
Results of Operations
Three months ended June 30, 1999 compared to three months ended June 30, 1998
Total revenue increased by approximately $5.3 million or 13.3% from
$40.1 million for the three months ended June 30, 1998 to $45.4 million for the
three months ended June 30, 1999. Revenues decreased by $1.6 million or 9.9% at
Penn National Race Course and its OTW facilities due to the strike by The
Horsemen's Benevolent Protective Association (Horsemen) that resulted in the
closure of the facilities from February 16 to March 24, 1999. Penn National Race
Course re-opened for live racing on a limited basis on April 23 and resumed a
full live racing schedule the week of June 26, 1999. For the second quarter,
Penn National Race Course ran 32 live race days in 1999 compared to 52 live race
days in 1998. Charles Town Races had increased revenues of $6.5 million or 47.5%
for the quarter. Video lottery machine revenue increased by $4.6 million due to
an increase in the average number of machines in play of 700 in 1998 compared to
915 in 1999 and an increase in the average win per machine of $141 in 1998
compared to $164 in 1999. Racing revenue increased by $1.3 million due to the
improved quality of the live race card, a stronger full-card simulcast program,
and the start of export simulcasting the Charles Town live race program to
tracks across the country beginning on June 5, 1999. Concession revenues
increased by $.6 million due to the increased attendance at the Charles Town
facility. At Pocono Downs and its OTW facilities revenues increased by $121,000
or 1.2%.
Total operating expenses increased by approximately $5.1 million or 14.8%
from $34.3 million for the three months ended June 30, 1998 to $39.4 million for
the three months ended June 30, 1999. Expenses decreased by $.4 million or 3.4%
at Penn National Race Course and its OTW facilities due to the Horsemen's strike
that resulted in 20 fewer live race days for the second quarter in 1999 compared
to the second quarter in 1998. Charles Town Races had increased expenses of $5.2
million or 45.2% due to an increase in direct costs associated with additional
wagering on horse racing and video lottery machine play, an increase in the
number of video lottery machines and export simulcast expenses. Pocono Downs and
its OTW facilities had a $.1 million net decrease in expenses. Corporate
expenses increased by approximately $.5 million due to the consolidation of the
marketing and information technology departments at the corporate level and the
development of an OTW facility management department. Depreciation and
amortization expense increased by $.7 million due to the purchase of the video
lottery machines from GTECH in November 1998.
Income from operations increased by approximately $200,000 or 3.4% from
$5.8 million for the three months ended June 30, 1998 to $6.0 million for the
three months ended June 30, 1999 due to the factors described above.
Net income increased by approximately $73,000 or 2.9% from $2,467,000
for the three months ended June 30, 1998 to $2,540,000 for the three months
ended June 30, 1999 due to the factors described above. Income tax expense
increased by approximately $206,000 or 14.4% from $1,435,000 for the three
months ended June 30, 1998 to $1,641,000 for the three months ended June 30,
1999 due to the increase in income for the quarter.
19
<PAGE>
Six months ended June 30, 1999 compared to six months ended June 30, 1998
Total revenue increased by approximately $4.8 million or 6.5% from
$73.4 million for the six months ended June 30, 1998 to $78.1 million for the
six months ended June 30, 1999. Revenues decreased by $8.8 million or 27.4% at
Penn National Race Course and its OTW facilities due to the Horsemen's strike
that resulted in the closure of the facilities from February 16 to March 24,
1999. Penn National Race Course re-opened for live racing on a limited basis on
April 23 and resumed a full live racing schedule the week of June 26, 1999. For
the six-month period, Penn National Race Course ran 50 live race days in 1999
compared to 102 live race days in 1998. Charles Town Races had increased
revenues of $11.9 million or 48.2% for the period. Video lottery machine revenue
increased by $8.8 million due to an increase in the average number of machines
in play of 632 in 1998 to 876 in 1999 and an increase in the average win per
machine of $141 in 1998 compared to $157 in 1999. Racing revenue increased by
$2.1 million due to the improved quality of the live race card, a stronger
full-card simulcast program, and the start of export simulcasting the Charles
Town live race program to tracks across the country beginning June 5, 1999.
Concession revenues increased by $1.0 million due to the increased attendance at
the Charles Town facility. At Pocono Downs and its OTW facilities revenues
increased by $1.1 million or 6.3%. The increase resulted from a full period of
operations for the Carbondale ($1.0 million) and Hazleton OTW's ($ .7 million)
that offset the decrease in revenues at the Pocono Downs racetrack ($.6 million)
due to the close proximity of these three facilities.
Total operating expenses increased by approximately $6.4 million or
10.0% from $63.9 million for the six months ended June 30, 1998 to $70.3 million
for the six months ended June 30, 1999. Expenses decreased by $4.4 million or
17.4% at Penn National Race Course and its OTW facilities due to the closing of
the facilities from February 16 to March 24, 1999 and the loss of 52 live races
in 1999 compared to 1998. Included in the operating expenses were $1.3 million
in shutdown related expenses. Charles Town Races had increased expenses of $9.4
million or 43.2% due to an increase in direct costs associated with additional
wagering on horse racing and video lottery machine play, additional video
lottery machines and export simulcast expenses. Pocono Downs and its OTW
facilities had a $.5 million net increase in expenses due to a full period of
operations at the Carbondale and Hazleton OTW facilities that was offset by a
decrease in expenses at the Pocono Downs racetrack. Corporate expenses increased
by approximately $1.0 million due to the consolidation of the marketing and
information technology departments at the corporate level and the development of
an OTW facility management department. Depreciation and amortization expense
increased by $1.3 million due to the purchase of the video lottery machines from
GTECH in November 1998.
Income from operations decreased by approximately $1.7 million or 17.7%
from $9.6 million for the six months ended June 30, 1998 to $7.9 million for the
six months ended June 30, 1999 due to the factors described above
Net income decreased by approximately $1.1 million or 30.3% from $3.7
million for the six months ended June 30, 1998 to $2.6 million for the six
months ended June 30, 1999 due to the factors described above. Income tax
expense decreased by approximately $.5 million or 25.3% from $2.1 million for
the six months ended June 30, 1998 to $1.6 million for the six months ended June
30, 1999 due to the decrease in income for the period.
20
<PAGE>
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations, borrowings from banks and
proceeds from the issuance of equity securities.
Net cash provided by operating activities for the six months ended June 30,
1999 ($9.2 million) consisted of net income and non-cash expenses ($7.3
million), an increase in purses due Horsemen ($2.6 million), an increase in
accounts payable ($.4 million) and an increase in other working capital ($1
million), offset by an increase in account receivables ($2.2 million). The
increase in accounts receivable was due to an increase in the amount due from
the West Virginia Lottery for VLT revenues and administration fee refund
($707,000), tourism grants receivable ($142,000), escrow settlement ($400,000)
other receivable at Charles Town ($251,000), and increased settlement
receivables for Pocono Downs and Charles Town ($700,000) due to live racing and
export simulcasting.
Cash flows used in investing activities ($13.8 million) consisted of a
note receivable ($11.2 million) from FR Park Racing, LP, a New Jersey limited
partnership and a part of the New Jersey Joint Venture agreement and $2.6
million in capital expenditures.
Cash flows provided by financing activities ($8.1 million) consisted of
principal payments on long-term debt ($3.3 million), borrowings under the credit
facility ($11.5 million) for the New Jersey Joint Venture and debt repayment,
proceeds from the exercise of stock options and warrants ($.4 million) and an
increase in financing costs ($.5 million) for amending the credit facility.
The Company is subject to possible liabilities arising from the
environmental condition at the landfill adjacent to Pocono Downs. Specifically,
the Company may incur expenses in connection with the landfill in the future,
which expenses may not be reimbursed by the four municipalities, which are
parties to the settlement agreement. The Company is unable to estimate the
amount, if any, that it may be required to expend.
In the first quarter of 1999, the Company incurred approximately $1.3
million in expenses associated with the actions by the Horsemen on February 16,
1999 that resulted in the closing of Penn National Race Course and its six OTW
facilities in Reading, Chambersburg, York, Lancaster, Williamsport and
Johnstown, from February 16, 1999 through March 24, 1999.
21
<PAGE>
During the remainder of 1999 the Company anticipates spending
approximately $22.0 million on capital expenditures at its racetracks and OTW
facilities. The Company plans to spend approximately $1.0 million at Pocono
Downs, Penn National Race Course and the OTW facilities for building
improvements and equipment. The Company will also spend approximately $2.0
million on leasehold improvements, furniture and fixtures and equipment for the
new OTW facility in East Stroudsburg, Pennsylvania that is scheduled to open in
the first quarter of 2000. At Charles Town, the Company has applied to the West
Virginia Lottery Commission for approval to increase the number of gaming
machines to 1,500. If approved, the Company plans to spend approximately $19.0
million on an outdoor paddock and jockey room ($1.0 million), renovations for a
new slot machine area ($4.3 million), new gaming machines ($5.7 million,
conversion of existing machines to coin drop ($2.5 million), player tracking
($1.1 million), a new central system for the West Virginia Lottery Commission
($1.4 million) and other improvements ($2.5 million). If the State of Tennessee
reinstates the Tennessee Commission and the Company's racing license or if the
racing industry is regulated under another government agency, the Company
anticipates expending an additional $9.0 million to complete the first phase of
its Tennessee Development Project.
The Company entered into its Credit Facility with Bankers Trust Company, as
Agent in 1996. This Credit Facility was amended and restated on January 28, 1999
with First Union National Bank replacing Bankers Trust Company, as Agent. The
amended Credit Facility provides for, subject to certain terms and conditions, a
$20.0 million revolving credit facility, a $5.0 million term loan due in one
year, a $3.0 million sublimit for standby letters of credit and has a four-year
term for its closing. The Credit Facility, under certain circumstances, requires
the Company to make mandatory prepayments and commitment reductions and to
comply with certain covenants, including financial ratios and maintenance tests.
In addition, the Company may make optional prepayments and commitment reductions
pursuant to the terms of the Credit Facility. Borrowings under the Credit
Facility is secured by the assets of the Company and contains certain financial
ratios and maintenance tests. On June 30, 1999, the Company was in compliance
with all applicable ratios. On July 22, 1999 the Company entered into Amendment
No. 1 to the Credit Facility which increased the sublimit for the standby letter
of credit from $3.0 million to $3.5 million.
On July 29, 1999 the Company entered into Amendment No. 2 to the Credit
Facility which provided for the consent of the Banks, which are a party to the
Credit Facility, to permit the Company to enter into a Debt Service Maintenance
Agreement for the benefit of Commerce Bank, N.A. The Debt Service Maintenance
Agreement supports the extension of credit to the Joint Venture by Commerce
Bank, N.A. In addition , the Company entered into a Subordination and
Intercreditor Agreement with FR Park Racing, L.P. and Commerce Bank, N.A.
The Company currently estimates that the cash generated from operations
and available borrowings under the Credit Facility will be sufficient to finance
its current operations, planned capital expenditure requirements, and the costs
associated with first phase of the Tennessee Development Project. There can be
no assurance, however, that the Company will not be required to seek additional
capital, in addition to that available from the foregoing sources. The Company
may, from time to time, seek additional funding through public or private
financing, including equity financing. There can be no assurance that adequate
funding will be available as needed or, if available, on terms acceptable to the
Company.
22
<PAGE>
Item 3. Changes in Information About Market Risk
All of the Company's debt obligations at June 30, 1999 were fixed rate
obligations, and management, therefore, does not believe that the Company has
any material risk from its debt obligations.
Part II. Other Information
Item 1. Legal Proceedings
In December 1997, Amtote international, Inc. ("Amtote"), filed an action
against the Company and the Charles Town Joint Venture in the United States
District Court for the Northern District of West Virginia. In its complaint,
Amtote (i) states that the Company and the Charles Town Joint Venture allegedly
breached certain contracts with Amtote and its affiliates when it entered into a
wagering services contract with a third party (the "Third Party Wagering
Services Contract"), and not with Amtote, effective January 1, 1998, (ii) sought
preliminary and injunctive relief through a temporary restraining order seeking
to prevent Charles Town Joint Venture from (a) entering into a wagering services
contract with a party other than Amtote and (b) having a third party provide
such wagering services, (iii) seeks declaratory relief that through September
2004 and (iv) seeks unspecified compensatory damages, legal fees and costs
associated with the action and other legal and equitable relief as the Court
deems just and appropriate. On December 24, 1997, a temporary restraining order
was issued, which prescribes performance under the Third Party Wagering
Contract. On January 14, 1998, a hearing was held to rule on whether a
preliminary injunction should be issued or whether the temporary restraining
order should be lifted. On February 20, 1998, the temporary restraining order
was lifted by the court. The Company is pursuing legal remedies in order to
terminate Amtote and proceed under the Third Party Wagering Services Contract.
This matter was tried before the State Court of West Virginia on June 17, 1999
and a decision is still pending. The Company believes that its action, and any
resolution thereof, will not have any material adverse impact upon its financial
condition, results, or the operations of either the Charles Town Joint Venture
or the Company.
23
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C> <C>
10.89 Amendment to Employment Agreement dated
June 1, 1999, between the Company and Peter M. Carlino.
10.90 Amendment to Employment Agreement dated
June 1, 1999, between the Company and Robert S. Ippolito.
10.91 Second Amendment to Joint Venture Agreement dated as of
July 29, 1999, between the Company and Greenwood
Racing, Inc.
10.92 Shareholder's Agreement dated July 29, 1999,
between Penn National Holding Company and
Greenwood Racing, Inc.
10.93 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between FR Park Racing, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc.
10.94 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between FR Park Services, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc.
10.95 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between GS Park Racing, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc.
10.96 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between GS Park Services, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc.
10.97 Amendment No. 1 to Second Amended and Restated
Credit Agreement dated July 29, 1999, between the
Company and First Union National Bank.
10.98 Amendment No. 2 to Second Amended and Restated
Credit Agreement dated July 29, 1999, between the
Company and First Union National Bank.
10.99 Agreement dated July 9, 1999, between the
Company and American Digital Communications,
Inc. (Portions of this Exhibit have been omitted
pursuant to a request for confidential treatment).
10.01a Subordination and Intercreditor Agreement dated
July 29, 1999, between the Company, FR Park Racing, L.P. and
Commerce Bank, N.A.
10.02a Debt Service Maintenance Agreement dated
July 29, 1999, between the Company and
Commerce Bank, N.A.
10.03a First Supplemental Indenture dated May 19,
1999, between the Company and State Street
Bank and Trust Company, Trustee.
</TABLE>
(b) Reports on Form 8-K
None
24
<PAGE>
SIGNATURES
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.
08/12/99 By: /s/Robert S. Ippolito
Date Robert S. Ippolito, Chief Financial Officer
25
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Nos. Description of Exhibits Page No.
<S> <C> <C>
10.89 Amendment to Employment Agreement dated
June 1, 1999, between the Company and Peter M. Carlino. 27
10.90 Amendment to Employment Agreement dated
June 1, 1999, between the Company and Robert S. Ippolito. 28
10.91 Second Amendment to Joint Venture Agreement dated as
of July 29, 1999, between the Company and Greenwood
Racing, Inc. 29-33
10.92 Shareholder's Agreement dated July 29, 1999 between Penn
National Holding Company and Greenwood Racing, Inc. 34-52
10.93 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between FR Park Racing, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc. 53-71
10.94 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between FR Park Services, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc. 72-89
10.95 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between GS Park Racing, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc. 90-106
10.96 Amended and Restated Limited Partnership Agreement
dated July 29, 1999, between GS Park Services, L.P.,
Pennwood Racing, Inc. and Penn National GSFR, Inc. 107-123
10.97 Amendment No. 1 to Second Amended and Restated
Credit Agreement dated July 29, 1999, between the
Company and First Union National Bank. 124-132
10.98 Amendment No. 2 to Second Amended and Restated
Credit Agreement dated July 29, 1999, between the
Company and First Union National Bank. 133-139
10.99 Agreement dated July 9, 1999, between the Company
and American Digital Communications, Inc.
(Portions of this Exhibit have been omitted pursuant
to a request for confidential treatment). 140-157
10.01a Subordination and Intercreditor Agreement dated
July 29, 1999, between the Company, FR Park Racing
and Commerce Bank N.A.. 158-170
10.02a Debt Service Maintenance Agreement dated July
29, 1999, between the Company and Commerce Bank N.A. 171-179
10.03a First Supplemental Indenture dated May 19, 1999, between
the Company and State Street Bank and Trust Company, Trustee. 180-187
</TABLE>
26
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment"), effective as of the 1st
day of June, 1999, by and between PENN NATIONAL GAMING, INC., a Pennsylvania
corporation, with its principal offices at 825 Berkshire Boulevard, Suite 200,
Wyomissing, Pennsylvania 19160 (the "Company") and Peter M. Carlino, individual
residing at 3 Open Hearth Drive, Reading, Pennsylvania 19607 (the "Employee").
B A C K G R O U N D
Company and Employee are parties to an Employment Agreement dated as of April
12, 1994 (the "Employment Agreement") and desire to amend the Employment
Agreement as set forth in this Amendment. In consideration of their mutual
promises and covenants set forth herein, and intending to be legally bound
hereby, Company and Employee agree as follows:
1. Paragraphs 2, 3 and 10 of the Employment Agreement be and the same is
hereby amended and restated in its entirety as follows:
2. Term. The term of this Agreement shall continue from year to year or sooner
terminated in accordance with the provisions of Paragraph 11 of this Agreement.
3. Compensation. For all services rendered by Employee under this Agreement,
Company agrees to pay Employee a salary at the annual rate of $380,000 ("Annual
Salary"), payable in weekly installments, plus such additional compensation and
bonuses as may be awarded from time to time to Employee by the Board of
Directors of Company.
10. Death. In the event of the death of the Employee during the term of this
Agreement, this Agreement shall terminate effective as of the date of the
Employee's death, and the Company shall not have any further obligation or
liability hereunder except that the Company shall pay to Employee's designated
beneficiary or, if none, his estate (i) the portion, if any, of the Employee's
Annual Salary, and any reimbursements, for the period up to the end of the month
of Employee's date of death which remains unpaid, and (ii) the amount of
Employee's Annual Salary in effect at the time of his death, for a period of
twenty four months following the date of Employee's death in equal bi-weekly
installments, which death benefit shall be in addition to any life insurance
carried or paid for by Company on the life of Employee.
2. The Employment Agreement, except as amended hereby, shall continue in full
force and effect in accordance with the terms and provisions thereof.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as of the
date first above written.
PENN NATIONAL GAMING, INC.
BY: /s/ William J. Bork
WILLIAM J. BORK,
President and COO
/s/ Peter M. Carlino
PETER M. CARLINO
27
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment"), effective as of the 1st
day of June, 1999, by and between PENN NATIONAL GAMING, INC., a Pennsylvania
corporation, with its principal offices at 825 Berkshire Boulevard, Suite 200,
Wyomissing, Pennsylvania 19160 (the "Company") and Robert Ippolito, an
individual residing at 1858 Fox Run Terrace, Warrington, Pennsylvania 18976 (the
"Employee").
B A C K G R O U N D
Company and Employee are parties to an Employment Agreement dated as of April
12, 1994 (the "Employment Agreement") and desire to amend the Employment
Agreement as set forth in this Amendment. In consideration of their mutual
promises and covenants set forth herein, and intending to be legally bound
hereby, Company and Employee agree as follows:
1. Paragraphs 2, 3 and 10 of the Employment Agreement be and the same is hereby
amended and restated in their entirety as follows:
2. Term. The term of this Agreement shall commence on June 1, 1999 and shall
terminate on May 31, 2000 and shall continue thereafter from year to year unless
terminated by Company upon ninety (90) days written notice to Employee or sooner
terminated in accordance with the provisions of Paragraph 11 of this Agreement.
3. Compensation: For all services rendered by Employee under this Agreement,
Company agrees to pay Employee a salary at the annual rate of $150,000 ("Annual
Salary"), payable in bi-weekly installments, plus such additional compensation
and bonuses as may be awarded from time to time to Employee by the Chairman or
the Board of Directors of Company.
10. Death. In the event of the death of the Employee during the term of this
Agreement, this Agreement shall terminate effective as of the date of the
Employee's death, and the Company shall not have any further obligation or
liability hereunder except that the Company shall pay to Employee's designated
beneficiary or, if none, his estate (i) the portion, if any, of the Employee's
Annual Salary, and any reimbursements, for the period up to the end of the month
of Employee's date of death which remains unpaid, and (ii) the amount of
Employee's Annual Salary in effect at the time of his death, payable in 26 equal
bi-weekly installments following the date of Employee's death, which death
benefit shall be in addition to any life insurance carried or paid for by
Company on the life of Employee.
2. The Employment Agreement, except as amended hereby, shall continue in full
force and effect in accordance with the terms and provisions thereof.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as of the
date first above written.
PENN NATIONAL GAMING, INC.
BY: /s/ Peter M. Carlino
PETER M. CARLINO,
Chairman and CEO
/s/ Robert S. Ippolito
ROBERT S. IPPOLITO
28
SECOND AMENDMENT TO JOINT VENTURE AGREEMENT
RELATING TO NEW JERSEY ASSETS
This Second Amendment to Joint Venture Agreement (the ASecond
Amendment@) is made and entered into as of the _29 day of July, 1999, by,
between and among Greenwood New Jersey, Inc., (AGNJ@) Greenwood Racing Inc. as
successor in interest to Greenwood New Jersey, Inc. (AGRI@) (GNJ and GRI are
collectively referred to as "Greenwood") and Penn National Gaming, Inc.
("Penn"), the parties to a Joint Venture Agreement dated October 30, 1998, as
previously modified by a letter from Penn to Greenwood dated November 2, 1998
and as amended by the First Amendment to Joint Venture Agreement dated January
28, 1999 and as may be further amended or modified (the "Joint Venture
Agreement"). Certain defined terms used herein are based on the definitions of
the Asset Purchase Agreement of July 2, 1998.
The parties desire to enter into this Second Amendment to Joint Venture
Agreement, and agree as follows:
1. Subsequent Closing. Penn's admission to the Joint Venture Entities (as
defined in the First Amendment to Joint Venture Agreement) is conditioned upon
and is taking place simultaneously with the closing and funding of the Loan, as
defined below (the "Commerce Bank Closing"), which shall occur simultaneously
with the execution of this Second Amendment. In lieu of further investments as
provided in the First Amendment to Joint Venture Agreement, pursuant to which
the parties had agreed that Penn would invest an additional eleven million seven
hundred fifty thousand dollars ($11,750,000) and Greenwood would invest an
additional eleven million two hundred fifty thousand ($11,250,000) in the Joint
Venture Entities, two of the Joint Venture Entities, GS Park Racing, L.P. and FR
Park Racing, L.P. (collectively, the "Borrowers"), are simultaneously borrowing
twenty three million dollars ($23,000,000) (the "Loan") from Commerce Bank,
N.A., a national banking association (the "Lender"). A portion of the proceeds
of the Loan will be used to repay principal and any accrued interest on such
principal to certain affiliates of Greenwood which loaned nineteen million
dollars ($19,000,000) to the Joint Venture Entities in May and June 1999, with
the balance of the Loan to be used by the Joint Venture for working capital.
2. Distribution of Profits. The amount of one million four hundred fifty
thousand dollars ($1,450,000), representing an advance against the net profit of
the Joint Venture Entities for the period from January 28, 1999 through 11:59 PM
EST on the Closing Date (the "First Period"), shall be distributed at the
Commerce Bank Closing to those affiliates of Greenwood Racing Inc. which are the
partners in the Joint Venture Entities prior to the admission of the Penn
affiliates as partners in the Joint Venture Entities (the "Distribution"). All
net profit of the Joint Venture Entities shall be allocated to the Greenwood
affiliates for the First Period. The actual net profit for the First Period
shall be determined by generally accepted accounting principles not later than
forty-five (45) days after the date hereof, and an adjustment in the
Distribution to reflect such actual net profit shall be made within five (5)
days of such determination. It is currently estimated that the net profit
through the date hereof is approximately two million dollars ($2,000,000).
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3. Capitalization. At the Initial Closing, the parties to the Joint Venture
Agreement or their affiliates lent unequal amounts to the Joint Venture
Entities. The amount lent by Penn was eleven million two hundred fifty thousand
dollars ($11,250,00) and the amount lent by Greenwood affiliates was eleven
million five hundred dollars ($11,500,000). These loans are hereinafter referred
to as the "Penn Loan" and the "Greenwood Loan", respectively. The Greenwood loan
has been assigned to Rock Ltd. and Vectura Establishment. At the Commerce Bank
Closing, FR Park Racing, L.P. will reduce the principal balance of the Greenwood
Loan by two hundred fifty thousand dollars ($250,000) by payment of such amount
to equalize the principal amount of the loans. Attached hereto as Exhibit "A"
and made a part hereof, is a schedule showing the agreed upon equity and debt
structure of the Joint Venture Entities following the admission of Penn as an
owner. At the Commerce Bank Closing, the parties to the Joint Venture Agreement
or their affiliates will make aggregate equity contributions of five hundred
thousand ($500,000) to the Joint Venture Entities as set forth on Exhibit A.
4. Credit Enhancement.
(1) Pursuant to the Joint Venture Agreement, the costs, obligations,
responsibilities, liabilities and risks involved with this Joint Venture are to
be borne equally by the parties. Nothing in the First Amendment to Joint Venture
Agreement, this Second Amendment or the Joint Venture Documents is intended to
modify this provision.
(2) In consideration of the fact that the DMSA and the Greenwood Guaranties
are unequal in their nature due to a limitation on Penn's performance under the
DMSA as may be required by the Indenture dated December 12, 1997 relating to
Penn's $80 Million Senior Notes ("Indenture"), on the date hereof, and as a
condition precedent to Penn's admission as an owner, Penn will pay to Greenwood
the sum of four hundred thousand dollars ($400,000) as a credit enhancement fee.
Thereafter, on July 30, 2000 and each quarterly anniversary thereof, Penn will
pay to Greenwood an additional credit enhancement fee in the amount of one-half
of one percent (0.5%) of the outstanding principal balance of the Loan, plus the
amount of any Loan repayments by Greenwood or an affiliate of Greenwood under
the Greenwood Guaranties, reduced by the amount of any required compensating
balances, calculated as of each quarterly date on which each payment is being
made; provided, however, that the credit enhancement fee payments will cease
upon the first of the following to occur: (i) the obligation under the Greenwood
Guaranties is no longer in existence; (ii) the obligations of Penn under the
DMSA are equal in dollar amount and in all other material respects to the
obligation of the Greenwood Guaranties, and not limited by the Indenture or any
provision of Penn's loan from First Union, or any other contractual obligation
of Penn; or (iii) Penn has, from its own assets, paid to the holder of the Loan,
an amount equal to one-half of the balance of the Loan in accordance with the
DMSA, or otherwise, and the Loan balance has been reduced by such amount.
5. Purchase of Commerce Bank Obligation.
(1) Until one or more of the conditions to the elimination of the credit
enhancement fee set forth in Paragraph 4(b) has occurred, Penn acknowledges that
any member of the Greenwood Group, following a default by borrowers under the
Loan, or if Greenwood has a reasonable basis for concluding that a default under
the Loan is likely to occur in the near term, may purchase from the Lender the
obligations of the Joint Venture Entities to the Lender, and that Greenwood or
its affiliates may exercise all rights of the Lender, without consultation with
Penn, and in doing so will not breach any duty or obligation owed to Penn or its
affiliates.
(1)
(2) If one or more of the conditions to the elimination of the credit
enhancement fee set forth in Paragraph 4(b) has occurred, either Penn or
Greenwood (or an affiliate of Greenwood) may
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purchase the Loan or an interest in the Loan if the purchasing party gives
the other joint venture party (including Greenwood affiliates by notice to
Greenwood, in the case of Greenwood), the option to acquire an equal interest in
the Loan.
(3) Both GRI and Penn, under their respective Subordination and Intercreditor
Agreements with Commerce Bank, have rights to acquire Freehold Raceway and/or
the Garden State Assets from Commerce Bank under certain circumstances. The
right is first offered to GRI and the parties agree that any offer submitted to
Commerce Bank shall be submitted as a joint offer on behalf of the Joint Venture
to Commerce Bank, unless either Penn or GRI determine that it does not desire to
participate in such joint offer. If Penn determines that it does not agree to
participate in the joint offer, GRI may exercise its rights and may make an
offer for itself. If GRI determines that it does not agree to participate in the
joint offer, Penn may exercise its rights and may make an offer for itself. In
the event that after the submission of the joint offer, either party fails to
perform its obligation as a purchaser, the non-breaching party may proceed to
purchase Freehold Raceway and/or the Garden State Assets for itself.
6. Structure of Joint Venture. The parties to the Joint Venture Agreement hereby
acknowledge and agree that the Joint Venture will be structured in accordance
with the chart attached hereto as Exhibit "B" and made a part hereof.
7. Future Capital Requirements of the Joint Venture. The parties to the Joint
Venture Agreement acknowledge that additional capital may be required in
connection with the operations of the Joint Venture, including, but not limited
to, the development of off-track wagering facilities and telephone wagering
networks, if permitted by New Jersey legislation ("Development"). An Amendment
to the Indenture of Penn dated May 19, 1999 obtained by Penn (the "Amended
Indenture") permits Penn to invest up to four million dollars ($4,000,000) for
Development (the "Restricted Funds"). In addition, pursuant to a formula in the
Indenture, Penn may have funds available under its "Restricted Payments" basket
for investment without restrictions (the "Restricted Payments Basket"). In
connection with future capital requirements, the parties agree as follows:
(1) Penn presently has available not less than two million dollars ($2,000,000)
of its Restricted Payments Basket which it agrees to restrict for a possible
equity investment in or to fund capital requirements of the Joint Venture
Entities (the "Unrestricted Funds"), in addition to the Restricted Funds
presently available under the Amended Indenture. At all time from the date
hereof and until the earlier of (i) Development is complete following
authorizing legislation, or (ii) efforts to obtain authorizing legislation is
abandoned by the Joint Venture (the "Development Period"), Penn will have
available both the Restricted Funds or the otherwise Unrestricted Funds for
Development purposes. During the Development Period, Penn will refrain from
making any investment or other use of the funds that would diminish either the
level of Unrestricted Funds or Restricted Funds, except to the extent that such
Restricted Funds or Unrestricted Funds are diminished by Penn's investment in
the Joint Venture, subsequent to the investment by Penn through the time of the
Commerce Bank Closing ("Subsequent Investment"). Any Subsequent Investment must
first be made from Unrestricted Funds until two million dollars ($2,000,000) has
been invested from Unrestricted Funds, after which Subsequent Investment will be
made from Restricted Funds.
(2) Penn's Chief Financial Officer shall within forty-five (45) days after the
end of each of Penn's fiscal quarters during the Development Period certify to
Greenwood the amount of Unrestricted Funds and Restricted Funds available for
Development. At any time that the aggregate Unrestricted Funds and Restricted
Funds available for Development do not equal at least six million dollars
($6,000,000), less Penn's Subsequent Investment, upon Greenwood's written notice
to Penn of
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not less than fifteen (15) days, the voting rights of Greenwood and Penn in
Pennwood Racing, Inc.
shall be automatically immediately modified to provide Greenwood with sixty
percent (60%) of the voting rights and Penn with forty percent (40%) of the
voting rights; and the composition of Pennwood Racing, Inc.=s Board of Directors
will be changed to four (4) representatives of Greenwood and three (3)
representatives of Penn. The voting rights of Greenwood and Penn shall be
restored to a 50-50 relationship and the Board composition to Pennwood restored
to an even representation on the fifteenth (15th) day following the date that
the aggregate Unrestricted Funds and Restricted Funds available for Development
equal at least six million dollars ($6,000,000) diminished only by Penn=s
Subsequent Investment, and Penn=s Chief Financial Officer certifies that fact in
writing to Greenwood.
(3) Each year, prior to November 30, Hal Handel, Bill Bork, Tony Ricci, Robert
Ippolito, and in each case, their successors in office in the event they are no
longer serving as officers of Greenwood or Penn, shall in good faith, develop a
business plan for the Joint Venture Entities for the year which will commence on
the subsequent January 1. The Business Plan will include a good faith estimate
of capital which will be required from the Joint Venture partners, if any,
during the year for which the Business Plan is developed. The parties agree to
use their best efforts to have available the capital required for effecting the
Business Plan.
8. Additional Conditions. In order for the Joint Venture to be reinstated and
Penn admitted to ownership in the Joint Venture Entities concurrently with the
execution hereof, the following additional conditions precedent must be
satisfied, as determined by Greenwood in its reasonable opinion:
(1) Penn has received the approval of its noteholders and of all other persons,
parties or entities whose approval would be required, to perform its obligations
pursuant to the following documents, or in the case of subparagraph (iii) below,
does not require any such approvals:
(1) The Contingent Guaranty, executed by Penn
for the benefit of International
Thoroughbred Breeders, Inc., dated January
28, 1999 (the "Contingent Guaranty");
(2) The Trigger Guaranty by, between and among
Greenwood, Penn and Credit Suisse First
Boston Mortgage Capital LLC ("CSFB"), dated
January 28, 1999 (the "Trigger Guaranty");
and
(3) The Joint Venture documents identified on
Schedule I to Exhibit "C" attached hereto.
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(2) All conditions to the effectiveness of the Contingent Guaranty as set forth
in Section 1 of the Contingent Guaranty have been satisfied.
(3) All conditions to the effectiveness of the Trigger Guaranty as set forth in
Section 20 of the Trigger Guaranty have been satisfied.
(4) Morgan, Lewis & Bockius, LLP shall have delivered its opinion to Greenwood,
in the form attached hereto as Exhibit "C". -----------
9. Scope of the Joint Venture. Paragraph 5 of the Joint Venture Agreement dated
October 30, 1998 is hereby amended and restated so as to read in its entirety:
"The joint venture provided for in this Joint Venture Agreement relates to the
ownership and operation of (a) Freehold Raceway, (b) Garden State Race Track,
and (c) OTB Facilities and phone betting operations to be operated in New Jersey
to the extent such OTB Facilities and phone betting operations are permitted by
New Jersey legislation to be conducted as a result of the holding of licenses to
conduct racing at Freehold Raceway and Garden State Race Track. However, each
party conducts other related businesses outside of New Jersey, including
competing businesses, and this Agreement shall not apply to any such other
activities; nor shall it prevent the parties from individually engaging in
additional activities both within and outside of New Jersey which are not
related to the ownership and operation of Freehold Raceway and Garden State Race
Track, including without limitation, the ownership and operation of one or more
additional racetracks in New Jersey, or OTB Facilities not operated as a result
of the holding of licenses to conduct racing at Freehold Raceway or Garden State
Race Track.@
In all other respects, the Joint Venture Agreement is hereby ratified
and affirmed.
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Joint Venture Agreement as of the date first above written.
GREENWOOD NEW JERSEY, INC.
By: /s/ Harold G.
Handel
Harold G. Handel, President
GREENWOOD RACING INC.
By: /s/ Harold G. Handel
Harold G. Handel, President
PENN NATIONAL GAMING, INC.
By: /s/ Robert S.
Ippolito
Robert S. Ippolito, Secretary and Treasurer
33
SHAREHOLDERS= AGREEMENT
THIS SHAREHOLDERS= AGREEMENT, made and entered into this _29_ day of
July, 1999, by, between and among those entities listed on Exhibit AA@ attached
hereto (individually a AParty@, collectively the AParties@).
BACKGROUND
A. Pennwood Racing, Inc., a Delaware corporation (APennwood@), is
authorized to issue 1,000 shares of common stock, $1.00 par
value per share of which 100 shares are issued and outstanding
and are owned as follows:
Shares of
Shareholder Stock
Greenwood Racing, Inc. ("Greenwood") 50
Penn National Holding Company ("Penn Holding") 50
Total 100
B. Pennwood is the sole general partner of the Limited
Partnerships (hereinafter defined) and owns a one tenth
percent (.1%) general partnership interest in each Limited
Partnership.
C. Penn National GSFR, Inc. ("Penn GSFR"), a wholly owned
subsidiary of Penn Holding, owns a forty-nine and ninety-five
hundredths percent (49.95%) limited partnership interest in
each of the following Limited Partnerships: (i) GS Park
Racing, L.P., a New Jersey limited partnership, and (ii) FR
Park Racing, L.P., a New Jersey limited partnership.
D. Pennsylvania National Turf Club, Inc. ("Pennsylvania Turf
Club") owns a forty-nine and ninety-five hundredths percent
(49.95%) limited partnership interest in each of the following
Limited Partnerships: (i) GS Park Services, L.P., a New Jersey
limited partnership, and (ii) FR Park Services, L.P., a New
Jersey limited partnership.
E. Keystone Turf Club, Inc. (AKeystone@) and Bensalem Racing
Association, Inc. (ABensalem@) are the sole general partners
of Benstone Partners, a Pennsylvania general partnership
(ABenstone@). Benstone owns a forty-nine and ninety-five
hundredths percent (49.95%) limited partnership interest in
each of the following Limited Partnerships: (i) GS Park
Services, L.P., a New Jersey limited partnership, and (ii) FR
Park Services, L.P., a New Jersey limited partnership.
F. Greenwood Limited Partner, Inc. (AGLPI@), a wholly owned
subsidiary of Greenwood, owns a forty-nine and ninety-five
hundredths percent (49.95%) limited partnership interest in
each of the following Limited Partnerships: (i) GS Park
Racing, L.P., a New Jersey limited partnership and (ii) FR
Park Racing, L.P., a New Jersey limited partnership.
NOW, THEREFORE, the parties hereto, in consideration of the agreements
and covenants hereinafter set forth, and intending to be legally bound, hereby
agree as follows:
DEFINITIONS.
For the purposes of this Agreement, the following definitions shall
apply:
AAffiliate@ means any entity owned or controlled, directly or
indirectly, by any Person, or any entity controlling, controlled by, or under
common control with any Person, directly or
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indirectly. As used in this definition, Acontrol@ means the possession,
directly or indirectly, or the power to direct or cause the direction of the
management and policies of an entity, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Shareholders= Agreement as may be amended or
modified from time to time.
ABusiness@ means the ownership and operation of (a) Freehold Raceway,
(b) Garden State Race Track, and (c) OTB Facilities and phone betting operations
to be operated in New Jersey to the extent such OTB Facilities and phone betting
operations are permitted by New Jersey legislation to be conducted by the
operators of or affiliates of the operators of Freehold Raceway and Garden State
Race Track.
"Code" means the Internal Revenue Code of 1986, as amended.
AConsent of Shareholders@ means the affirmative vote of all of the
Pennwood Shareholders.
AFair Market Value@ means the value for the Interests as determined in
accordance with Exhibit AB@ attached hereto.
AFreehold Raceway@ means that certain real property and improvements
located in Monmouth County, New Jersey known as Freehold Raceway.
AGarden State Race Track@ means that certain real property and
improvements located in Camden County, New Jersey known as Garden State Race
Track.
AGreenwood Director@ means any Director appointed by Greenwood to the
Pennwood Board.
AGreenwood Group@ means the following entities: Greenwood, GLPI, and
Benstone.
AGreenwood Interests@ means any right, title or interest (including the
right to vote and any rights in profits, losses, dividends or distributions)
owned or held, directly or indirectly by any member of the Greenwood Group in
the following: (a) Pennwood and (b) the Limited Partnerships.
AGroup@ means the Greenwood Group or the Penn National Group, as the
case may be.
"Indebtedness" means (a) all indebtedness, liabilities, and
obligations, now existing or hereafter arising, for money borrowed by Pennwood
or the Limited Partnerships, or any of their subsidiaries, whether or not
evidenced by any note, indenture, or agreement, (b) all indebtedness of others
for money borrowed with respect to which Pennwood or the Limited Partnerships,
or any of their subsidiaries have become liable by way of a guarantee or
indemnity, (c) indebtedness under all accounts payable created by Pennwood or
the Limited Partnerships, and (d) indebtedness incurred under capitalized
leases.
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AIndemnified Capacity@ means any and all past, present and future
service by an Indemnified Representative.
AIndemnified Representative@ means any and all Directors, Shareholders,
officers, agents, employees, counsel and managers of Pennwood or the Limited
Partnerships and any other person designated as an indemnified representative by
the Pennwood Board (which may, but need not, include any person serving at the
request of the Pennwood Board as a member, manager, officer, employee, agent,
fiduciary or trustee of another limited liability company, corporation,
partnership, joint venture, trust, employee benefit plan or other entity or
enterprise).
AInterests@ means collectively the Limited Partnership Interests and
the Pennwood Stock.
AJoint Venture Agreement@ means that certain Joint Venture Agreement
Relating to New Jersey Assets dated October 30, 1998 as modified by letter from
Penn to Greenwood dated November 2, 1998 and as amended by the First Amendment
to Joint Venture Agreement dated January 28, 1999 and by the Second Amendment to
Joint Venture Agreement dated July 29, 1999.
1.18 ALiability@ means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to an employee
benefit plan, or cost or expense of any nature (including, without limitation,
attorneys= fees and disbursements).
1.19 "Lender" means any person or entity as to which the Limited
Partnerships, Pennwood or any of their subsidiaries owes an Indebtedness.
1.20 ALimited Partnerships@ means the following New Jersey limited
partnerships: (a) GS Park Services, L.P.; (b) FR Park Services, L.P.; (c) GS
Park Racing, L.P., and (d) FR Park Racing, L.P.
1.21 ALimited Partnership Agreements@ means certain Amended and
Restated Limited Partnership Agreements as to the Limited Partnerships each
dated July 29, 1999, as same may be amended, modified or replaced from time to
time.
1.22 ALimited Partnership Interests@ means any right, title or interest
in and to any Limited Partnership and shall include all benefits, rights in
profits, losses, dividends and distributions.
1.23 "Notice" means written notice in accordance with Section 12.2.
1.24 "Offered Interests" means the Interests subject to an offer.
1.25 "Offering Group" shall have the meaning ascribed to such term in
Section 5.2. Following acceptance of such an offer, the Offering Group is
collectively referred to in this Agreement as the "Seller".
1.26 AOTB Facilities@ means the off-track betting and phone betting
operations to be operated in New Jersey to the extent such OTB Facilities and
phone betting operations are permitted by New Jersey legislation to be conducted
as a result of the holding of licenses to conduct racing at Freehold Raceway and
Garden State Race Track
1.27 APenn Director@ means any Director appointed by the Penn National
Group to the Pennwood Board.
1.28 "Penn National Group" means the following entities: Penn Holding,
Penn GSFR, Pennsylvania Turf Club and Penn National Gaming, Inc.
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1.29 APenn National Interests@ means any right, title or interest
(including the right to vote and any rights in profits, losses or distributions)
owned or held, directly or indirectly, by the Penn National Group in the
following: (a) Pennwood and (b) the Limited Partnerships.
1.30 APennwood@ means Pennwood Racing, Inc., a Delaware corporation.
1.31 "Pennwood Board" or ABoard@ means the Board of Directors of Pennwood.
1.32 APennwood Shareholders@ or AShareholders@ means Penn Holding,
Greenwood and any other Person who becomes a shareholder of Pennwood pursuant to
the terms of this Agreement.
1.33 "Pennwood Stock" means shares of Pennwood=s Common Stock, $1.00
par value per share, including any right to vote and to receive distributions of
dividends.
1.34 APerson@ means any person, firm, corporation, partnership,
company, limited liability company, association, trust, estate, custodian,
nominee, joint venture, foreign business organization or other individual or
other entity.
1.35 "Pro Rata" means the ratio of the number of shares of Pennwood
Stock owned by a shareholder to the total number of shares of Pennwood Stock
issued and outstanding.
1.36 "Purchaser" means a Party that purchases any Interest from another party
pursuant to the terms of this Agreement.
1.37 "Remaining Group" shall have the meaning ascribed to such term in
Section 5.2.
1.38 "Seller" means the Offering Group that has agreed to sell its
Interest.
1.39 "Transfer" means any sale, assignment, gift, donation, bequest,
pledge, disposition, encumbrance, alienation or other disposition or transfer,
whether voluntary or involuntary.
1.40 "Year" means a calendar year.
INTERESTS SUBJECT TO AGREEMENT.
Pennwood Stock.
All Pennwood Stock now owned or hereafter acquired by Pennwood
Shareholders, and all Pennwood Stock, if any, which may hereafter be issued by
Pennwood, shall be issued, held and transferred under and subject to the terms
and provisions of this Agreement. Except with respect to stock splits, stock
dividends and similar issuances of stock which are made Pro Rata among all then
existing Pennwood Shareholders, no additional Pennwood Stock may be issued by
Pennwood without the Consent of the Shareholders. Except as otherwise provided
herein, the Pennwood Shareholders shall not Transfer any Pennwood Stock and if
any Pennwood Shareholder attempts to do so, no effect shall be given thereto by
Pennwood.
Any transferee who acquires Pennwood Stock from a Pennwood
Shareholder pursuant to this Agreement shall, immediately upon such acquisition,
become bound by the
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terms of this Agreement, and the Transfer of the Pennwood Stock shall not be
made on the books of Pennwood until a copy of this Agreement has been executed
by such transferee. Failure or refusal to sign this Agreement shall not relieve
such transferee from any obligations hereunder.
Limited Partnership Interests.
All Limited Partnership Interests owned or hereafter acquired
by any of the Parties, shall be issued, held or transferred under and subject to
the terms and provisions of this Agreement and the Limited Partnership
Agreements. Except as otherwise provided herein or in the Limited Partnership
Agreement, the Greenwood Group and the Penn National Group shall not Transfer
any Limited Partnership Interest and in the event any attempt to do so, no
effect shall be given hereto.
Any transferee who acquires any Limited Partnership Interest
from a Party pursuant to this Agreement or the applicable Limited Partnership
Agreements shall, immediately upon such acquisition, become bound by the terms
of this Agreement and the Limited Partnership Agreements, and the Transfer of
any Limited Partnership Interests shall not be made on the books of any Limited
Partnership until a copy of this Agreement and the applicable Limited
Partnership Agreement(s) has been executed by such transferee. Failure or
refusal to sign this Agreement or the applicable Limited Partnership Agreement
shall not relieve such transferee from any obligations hereunder.
LEGEND ON STOCK CERTIFICATES. All certificates representing Pennwood Stock now
outstanding and owned or hereafter owned by the Pennwood Shareholders or
hereafter to be issued and delivered by Pennwood shall have the following legend
endorsed thereon:
"The shares of stock represented by this certificate are held
under and subject to the provisions of a certain Shareholders=
Agreement dated July 29, 1999, a copy of which is on file in
the office of the Secretary of the Corporation (Pennwood), and
all transfers thereof are subject to the terms and conditions
of said Shareholders= Agreement."
FAIR MARKET VALUE. The Parties agree that the Fair Market Value of the Interests
shall be determined in accordance with the provisions of Exhibit AB@.
REGULATORY COMPLIANCE.
Compliance. The Parties acknowledge and have advised their affiliates
that ownership of any Interests may require licensing of the Parties and their
affiliates by various regulatory commissions, including the New Jersey Racing
Commission and other state commissions in the State of New Jersey or elsewhere
(collectively, ARegulatory Authorities@) or may require the Parties and their
affiliates to comply with and to consent to conditions, restrictions or
limitations imposed by various Regulatory Authorities upon Pennwood, the Limited
Partnerships and/or related third parties. The Parties (on behalf of themselves
and their affiliates) therefore agree to cooperate in good faith and use their
best efforts to take such actions as may be reasonably requested by any
Regulatory Authorities in connection with such licensing and to comply with all
such conditions, restrictions or limitations.
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Compliance Failure. In the event that any member of a Group or their affiliates
cannot be licensed or fail or refuse to comply with such conditions,
restrictions or limitations of any of the Regulatory Authorities which threatens
Pennwood or the Limited Partnerships license(s) or ability to conduct
pari-mutuel wagering at their locations in New Jersey, or in the event that such
conditions, restrictions or limitations require that any member of a Group or
their affiliates dispose of any Interests, each member of such Group (AOffering
Group@) shall, if requested by the remaining group (ARemaining Group@), promptly
either (a) transfer all Interests to a transferee who can be so licensed or can
and will comply with such conditions, restrictions and limitations (subject to
the right of the other Group to consent to any such transfer in its sole and
absolute discretion) or (b) if transfer under Section 5.2(a) has not occurred on
or before 60 days after the Notice by the Remaining Group to Offering Group,
than the Remaining Group giving such Notice shall have a right to purchase the
Interests of the Offering Group at the Fair Market Value and subject to the
terms contained in Section 6 of this Agreement.
TERMS OF SALE AND CLOSING.
Payment of Sale Price.Payment of Sale Price.Payment of Sale
Price.Payment of Sale Price.Payment of Sale Price.Payment of Sale Price.Payment
of Sale Price.Payment of Sale Price.Payment of Sale Price. Payment of the Sale
Price owed with respect to the purchase of any Interest offered or deemed
offered, or otherwise purchased, under the terms of this Agreement shall be made
in cash at settlement.
Repayment of Loans and Advances.Repayment of Loans and
Advances.Repayment of Loans and Advances.Repayment of Loans and
Advances.Repayment of Loans and Advances.Repayment of Loans and
Advances.Repayment of Loans and Advances.Repayment of Loans and
Advances.Repayment of Loans and Advances. If any Party=s Interest is purchased
under the terms of this Agreement, then, at the settlement:
All loans or advances between the Seller and Pennwood or the
Limited Partnerships shall become due and payable in full. If Pennwood or the
Limited Partnerships owe money to the Seller, then the net amount of such loans
or advances shall be payable in full to the Seller at the settlement. If the
Seller owes money to either Pennwood or the Limited Partnership, then the net
amount of such loans or advances shall be payable in full to Pennwood or the
Limited Partnerships at the settlement, which sum shall be paid by the Seller
from the proceeds received from the sale of such Interests at settlement.
Pennwood shall, and the Pennwood Shareholders shall cause
Pennwood and any Limited Partnership to, with respect to any obligation of
Pennwood or the Limited Partnerships to any Lender as to which any member the
Offering Group has guaranteed payment, acted as surety or co-maker, or has
pledged collateral: (i) use its best efforts to obtain a complete release of the
members of the Offering Group and of the pledged collateral, if any; or (ii) if
and only if Pennwood or the Limited Partnerships are unable to obtain a complete
release of all of the members of the Offering Group and of the pledged
collateral, agree to indemnify and hold the members of such Offering Group
harmless from and against any and all losses that may result or be incurred as a
result of such guarantee, surety or pledge.
Settlement; Mutual Releases.Settlement; Mutual Releases.Settlement;
Mutual Releases.Settlement; Mutual Releases.Settlement; Mutual
Releases.Settlement; Mutual Releases.Settlement; Mutual Releases.Settlement;
Mutual Releases.Settlement; Mutual Releases.
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All settlements on the purchase of any shares of Interests hereunder shall take
place at the principal executive offices of Pennwood or at such other place as
may be mutually acceptable to the parties thereto, within sixty (60) days after
the date on which the option to purchase such stock is exercised or deemed to be
exercised, as the case may be.
At any such settlement: (i) the Seller shall execute general
releases in favor of Pennwood, the Limited Partnerships and the Purchaser(s)
regarding any and all claims, liabilities, damages, debts and demands
whatsoever, known and unknown, foreseen and unforseen, which the Seller has or
might have against the Pennwood, the Limited Partnerships or the Purchaser(s)
with respect to this Agreement or any actions taken by (or any inaction of)
Pennwood, the Limited Partnerships or the Purchaser(s) prior to the date of
settlement; and (ii) Pennwood, the Limited Partnerships and the Purchaser(s)
shall execute general releases in favor of the Seller regarding any and all
claims, liabilities, damages, debts and demands whatsoever, known and unknown,
foreseen and unforseen, which Pennwood, the Limited Partnerships or the
Purchaser(s) have or might have against the Seller with respect to this
Agreement or any actions taken by (or any inaction of) the Seller prior to the
date of settlement.
In addition, at any such settlement, the Seller shall deliver
a certificate or such other documents to each Purchaser in which the Seller
shall represent and warrant to such Purchaser the Seller has sole, good, valid
and marketable title to the Interests being purchased at such settlement, free
and clear of any and all liens, mortgages, pledges, prior assignments,
encumbrances, claims, charges, restrictions or security interests of any kind or
character.
GOVERNANCE.
General. From and after the execution of this Agreement, each Pennwood
Shareholder shall vote its Pennwood Stock, at any regular or special meeting of
shareholders of Pennwood, or in any written consent executed in lieu of such a
meeting of stockholders, and shall take all other actions necessary to give
effect to the agreements contained in this Agreement and the Limited Partnership
Agreements and the Joint Venture Agreement and to ensure that the articles of
incorporation of Pennwood, the by-laws of Pennwood and the Certificates of
Formation of the Limited Partnerships (collectively the ACharter Documents@) do
not at any time hereafter conflict in any respect with the provisions of this
Agreement, the Limited Partnership Agreements or the Joint Venture Agreement.
Further, each Pennwood Shareholder shall use its best efforts to cause the
Pennwood Board to adopt, either at a meeting of the Pennwood Board or by
unanimous written consent of the Pennwood Board, all the resolutions necessary
to effectuate the provisions of this Agreement, the Limited Partnership
Agreement and the Joint Venture Agreement. Each Shareholder shall use its best
efforts to cause the Pennwood Board to cause the Secretary of Pennwood, or if
there be no Secretary, such other officer of Pennwood as the Pennwood Board may
appoint to fulfill the duties of Secretary, to not record any vote or consent
contrary to the terms of this Section 7.1.
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Election of Directors.
Election.
(i) Except as provided in subsection 7.2(a)(ii), there shall be six (6)
Directors three (3) of whom shall be appointed by each Pennwood Shareholder. The
names of the initial Director representatives of each Pennwood Shareholder are
set forth on Exhibit AC@ opposite the name of such Pennwood Shareholder. Each
Pennwood Shareholder shall have the right, by written notice to Pennwood and the
other Pennwood Shareholders, to designate and appoint any Director to replace
any Director previously appointed by it in the event of the latter's death,
resignation, retirement or removal from office or for any other reason
whatsoever. Each Director shall hold office until he dies, resigns, retires or
is removed from office by the Shareholder that appointed him.
(ii) In the event that the voting rights of the Pennwood Shareholders are
modified to provide the Greenwood Group with sixty percent (60%) of the voting
rights of Pennwood and the Penn National Group with forty percent (40%) of the
voting rights of Pennwood as provided in the Joint Venture Agreement, Greenwood
shall appoint four (4) of the six (6) Pennwood Directors and Penn shall appoint
two (2) of the six (6) Pennwood Directors.
Quorum.
(i) A presence of two (2) Greenwood Directors and two (2) Penn Directors
shall be necessary to constitute a quorum for the transaction of business and
the acts of the two (2) Greenwood Directors and the two (2) Penn Directors of
the Directors present and voting at a meeting at which a quorum is present shall
be the acts of the Pennwood Board.
(ii) In the event that the voting rights of the Pennwood Shareholders are
modified to provide the Greenwood Group with sixty percent (60%) of the voting
rights of Pennwood and the Penn National Group with forty percent (40%) of the
voting rights of Pennwood pursuant to the Joint Venture Agreement, the presence
of four (4) Directors shall be necessary to constitute a quorum for the
transaction of business, and in such event, the acts of a majority Directors at
the meeting at which a quorum is present shall be the acts of the Pennwood
Board.
Unanimous Consent. Notwithstanding any other provision of this
Agreement to the contrary, actions or decisions with respect to any of the
following matters shall require the unanimous approval of all of the Directors:
adoption each year of a line-by-line annual operating
and capital budget ("Budget") of Pennwood and the
Limited Partnerships with respect to the next
succeeding year;
calls for additional capital contributions in excess of the amounts provided for
in a Budget;
(i) except for distributions as provided for in
Paragraph 2 of the Second Amendment to the Joint
Venture Agreement, making distributions or dividends;
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other Pennwood or the Limited Partnerships, except as contemplated increase or
reduction of reserves for either Pennwood or the Limited Partnerships, except as
contemplated by the Budget;
transactions between the Pennwood, any Limited
Partnership and either a Pennwood Shareholder or
Affiliate of a Pennwood Shareholder, except for
transactions provided for in a Budget;
(ii) the change or reorganization of Pennwood or any of Limited Partnerships
into any other legal form; any capital expenditures by the Pennwood or any of
Limited Partnerships in excess of $250,000 not provided for in any Budget;
entering into any contract or materially modifying
any contract or commitment in excess of $250,000, or
incurring any obligation or commitment in excess of
$250,000, except as provided for in any Budget which
has been approved by the Directors;
sale or other disposition of any assets of Pennwood or any Limited Partnership
having a value in excess of $250,000;
the borrowing or lending of money by Pennwood or any
Limited Partnership, except for short-term
indebtedness for working capital of up to $1,000,000,
("Permitted Debt"), the mortgaging or encumbering of
assets of the Pennwood or any Limited Partnership
other than to secure Permitted Debt, or the
assumption by the Pennwood or any Limited Partnership
of liability for the obligations of others;
admission of additional or substituted Shareholders to the Pennwood (except as
otherwise provided herein); admission of additional or substituted partners to
any Limited Partnership, (except as otherwise provided herein);
Pennwood's or any Limited Partnership=s entry into any business other than the
Business;
Amendment of the Limited Partnership Agreements;
the voluntary Bankruptcy or entering into receivership of the Pennwood or any
Limited Partnership;
(iii) election or removal of any officers of Pennwood;
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(xvii) the filing or settlement of any material
litigation or administrative proceeding in or before
any court or governmental authority;
(xviii) change in name of Pennwood.
(d) In the event that the voting rights of the Pennwood Shareholders
are modified to provide the Greenwood Group with sixty percent (60%) of the
voting rights of Pennwood and the Penn National Group with forty percent (40%)
of the voting rights of Pennwood pursuant to the Joint Venture Agreement, and
for so long as such condition continues, (i) only the items (v), (vi), (xi),
(xii), (xiv), (xv), (xvi) and (xviii) of paragraph 7.2(c) shall require the
unanimous approval of all the Directors and (ii) all other items not specified
in this paragraph 7.2(d)(i) shall only require the majority approval of the
Directors.
Dispute Resolution. If the Directors are unable to reach an agreement
on any of the matters described in Section 7.2(c), either Pennwood Shareholder
may elect, by written notice to the other Shareholder, to seek to resolve such
disagreement by means of the procedure set forth in Section 7.2(e) or may elect
to submit the matter to a vote of the Pennwood Shareholders. Within five days
after any written notice of a disagreement or dispute is given, Penn Holding
shall present the facts and circumstances of such matter to the Chief Executive
Officer of Penn National Gaming, Inc. Penn Holding and Greenwood shall present
the facts and circumstances of such matter to the Chief Executive Officer of
Greenwood, and within five days after any such notice is given, such Chief
Executive Officers shall confer, together with such of their advisors as they
may respectively select, in order to attempt, in good faith, to formulate a
mutually acceptable resolution of such matter, to determine a procedure by which
such resolution shall be determined or to agree upon any mutually acceptable
alternative course of action. If the Chief Executive Officers are unable to
reach agreement, the contemplated action shall not occur and Pennwood shall
proceed in accordance with the Budget.
OFFICERS.
Officers. The officers of Pennwood shall include a President, one or
more Vice Presidents (and in the case of each such Vice President, with such
descriptive title, if any, as the Pennwood Board shall deem appropriate), a
Secretary and a Treasurer. Any two or more offices may be held by the same
person. The compensation of all officers shall be fixed from time to time by the
Pennwood Board. The initial officers shall be as listed on Exhibit AC@, attached
hereto.
Term of Office; Removal; Filling of Vacancies. Each officer of Pennwood
shall hold office until his successor is chosen and qualified in his stead or
until his earlier death, resignation, retirement, disqualification or removal
from office. Designation of an officer shall not of itself create contract
rights. If the office of any officer becomes vacant for any reason, the vacancy
may be filled by the Pennwood Board.
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DIVIDENDS AND DISTRIBUTIONS.
Limitations on Distributions. The Company shall not make a distribution
or dividend to a Shareholder to the extent that at the time of the distribution,
after giving effect to the distribution, all liabilities of Pennwood exceed the
fair value of the assets of Pennwood.
Amounts of Tax Paid or Withheld.Amounts of Tax Paid or Withheld.Amounts
of Tax Paid or Withheld.Amounts of Tax Paid or Withheld.Amounts of Tax Paid or
Withheld.Amounts of Tax Paid or Withheld.Amounts of Tax Paid or Withheld.Amounts
of Tax Paid or Withheld.Amounts of Tax Paid or Withheld. All amounts paid or
withheld pursuant to the Code or any provision of any state or local tax law
with respect to any Shareholder shall be treated as amounts distributed to the
Shareholder pursuant to this Section for all purposes under this Agreement.
Distribution in Kind.Distribution in Kind.Distribution in
Kind.Distribution in Kind.Distribution in Kind.Distribution in Kind.Distribution
in Kind.Distribution in Kind.Distribution in Kind. No Shareholder, regardless of
the nature of its capital contribution, shall have a right to demand and receive
any distribution in any form other than cash.
INDEMNIFICATION.
Indemnification by Pennwood.
Pennwood shall indemnify an Indemnified Representative against
any Liability incurred in connection with any Proceeding in which the
Indemnified Representative may be involved as a party or otherwise by reason of
the fact that such person is or was serving in an Indemnified Capacity,
including, without limitation, liabilities resulting from any actual or alleged
breach or neglect of duty, error, misstatement or misleading statement,
negligence, gross negligence or act giving rise to strict or products liability.
If an Indemnified Representative is entitled to
indemnification in respect of a portion, but not all, of any Liabilities to
which such person may be subject, Pennwood shall indemnify such Indemnified
Representative to the maximum extent for such portion of the Liabilities.
The termination of a proceeding by settlement shall not create
a presumption that the Indemnified Representative is not entitled to
indemnification.
To the extent that an Indemnified Representative of Pennwood
has been successful on the merits or otherwise in defense of any proceeding or
in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by such person in connection therewith.
Proceedings Initiated by Indemnified Representatives.Proceedings
Initiated by Indemnified Representatives.Proceedings Initiated by Indemnified
Representatives.Proceedings Initiated by Indemnified Representatives.Proceedings
Initiated by Indemnified Representatives.Proceedings Initiated by Indemnified
Representatives.Proceedings Initiated by Indemnified Representatives.Proceedings
Initiated by Indemnified Representatives.Proceedings Initiated by Indemnified
Representatives. Notwithstanding any other provision of this Section, Pennwood
shall not indemnify under this Section an Indemnified Representative for any
liability incurred in a proceeding initiated (which shall not be deemed to
include counterclaims or affirmative defenses) or participated in as an
intervenor or amicus curiae by the person seeking indemnification unless such
initiation of or participation in the proceeding is authorized, either
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<PAGE>
before or after its commencement, by the unanimous vote of the Pennwood
Directors. This Section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending the rights of an Indemnified
Representative granted by or pursuant to this Section.
Advancing Expenses.Advancing Expenses.Advancing Expenses.Advancing
Expenses.Advancing Expenses.Advancing Expenses.Advancing Expenses.Advancing
Expenses.Advancing Expenses. Pennwood shall pay the expenses (including
attorneys' fees and disbursements) incurred in good faith by an Indemnified
Representative in advance of the final disposition of a proceeding described in
Section 10.1 or the initiation of or participation in which is authorized
pursuant to Section 10.2 upon receipt of an undertaking by or on behalf of the
Indemnified Representative to repay the amount if it is ultimately determined
that such person is not entitled to be indemnified by Pennwood pursuant to this
Section. The financial ability of an Indemnified Representative to repay an
advance shall not be a prerequisite to the making of such advance.
Securing of Indemnification Obligations.Securing of Indemnification
Obligations.Securing of Indemnification Obligations.Securing of Indemnification
Obligations.Securing of Indemnification Obligations.Securing of Indemnification
Obligations.Securing of Indemnification Obligations.Securing of Indemnification
Obligations.Securing of Indemnification Obligations. To further effect, satisfy
or secure the indemnification obligations provided in this Section or otherwise,
Pennwood may maintain insurance, obtain a letter of credit, act as self-insurer,
create a reserve, trust, escrow, cash collateral or other fund or account, enter
into indemnification agreements, pledge or grant a security interest in any
assets or properties of Pennwood, or use any other mechanism or arrangement
whatsoever in such amounts, at such costs, and upon such other terms and
conditions as the Pennwood Directors shall deem appropriate.
Payment of Indemnification.Payment of Indemnification.Payment of
Indemnification.Payment of Indemnification.Payment of Indemnification.Payment of
Indemnification.Payment of Indemnification.Payment of Indemnification.Payment of
Indemnification. An Indemnified Representative shall be entitled to
indemnification within thirty (30) days after a written request for
indemnification has been delivered to the secretary of Pennwood. The
indemnification pursuant to this Section shall be made only from the assets of
Pennwood and the Limited Partnerships.
Contribution.Contribution.Contribution.Contribution.Contribution.Contribution..
If the indemnification provided for in this Section or otherwise is unavailable
for any reason in respect of any liability or portion thereof, Pennwood shall
contribute to the liabilities to which the indemnified representative may be
subject in such proportion as is appropriate to reflect the intent of this
Section or otherwise.
Contract Rights; Amendment or Repeal.Contract Rights; Amendment or
Repeal.Contract Rights; Amendment or Repeal.Contract Rights; Amendment or
Repeal.Contract Rights; Amendment or Repeal.Contract Rights; Amendment or
Repeal.Contract Rights; Amendment or Repeal.Contract Rights; Amendment or
Repeal.Contract Rights; Amendment or Repeal. All rights under this Section shall
be deemed a contract between Pennwood and the Indemnified Representative
pursuant to which Pennwood and each Indemnified Representative intend to be
legally bound. Any repeal, amendment or modification hereof shall be prospective
only and shall not affect any rights or obligations then existing.
Scope of Section.Scope of Section.Scope of Section.Scope of
Section.Scope of Section.Scope of Section.Scope of Section.Scope of
Section.Scope of Section. The rights granted by this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification,
contribution or advancement of expenses may be entitled under any statute,
agreement, or otherwise, both as to action in an indemnified capacity and as to
action in any other capacity. The indemnification, contribution and advancement
of expenses provided by or granted pursuant to this Section shall continue as to
a person who has ceased to be an indemnified representative in respect of
matters arising prior to such time, and shall inure to the benefit of the heirs,
executors, administrators and personal representatives of such a person.
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Reliance on Provisions.Reliance on Provisions.Reliance on
Provisions.Reliance on Provisions.Reliance on Provisions.Reliance on
Provisions.Reliance on Provisions.Reliance on Provisions.Reliance on Provisions.
Each person who shall act as an indemnified representative of Pennwood shall be
deemed to be doing so in reliance upon the rights of indemnification,
contribution and advancement of expenses provided by this Section.
OTHER INTERESTS OF THE PARTIES. The Parties, the Directors, the Officers and
their Affiliates, may engage in any business or possess any interest in other
businesses of every nature and description, independently or with others,
including owning and operating pari-mutuel racetracks or participation in any
other gaming business activity. No Party shall have any rights in such
independent ventures including, without limitation, any rights to the income or
profits thereof by virtue of having become a shareholder in Pennwood or a
Partner in the Limited Partnerships. Each Party conducts other related
businesses outside of New Jersey, including competing businesses, and this
Agreement shall not apply to any such other activities; nor shall it prevent the
parties from individually engaging in additional activities both within and
outside of New Jersey which are not related to the ownership and operation of
Freehold Raceway and Garden State Race Track, including without limitation, the
ownership and operation of one or more additional racetracks in New Jersey, or
OTB Facilities not operated as a result of the holding of licenses to conduct
racing at Freehold Raceway or Garden State Race Track.
MISCELLANEOUS.
Arbitration. Any controversy or claim or dispute arising out of or
relating to this Agreement, or the failure or refusal to perform the whole or
any part thereof, shall be settled by arbitration in Wilmington, Delaware, in
accordance with the rules then obtaining, of the American Arbitration
Association. The parties, and each of them, hereby submit themselves to the
jurisdiction of the courts of the State of Delaware in any proceeding for the
enforcement of this Agreement to arbitrate and for the enforcement of the award
rendered by the arbitrators, and agree that judgment upon such award may be
entered in any court, in or out of the State of Delaware, having jurisdiction
thereof.
Notices. All notices, writing, offers, acceptances, refusals, payments
or agreements given or required to be given hereunder shall be made in writing
and sent by registered or certified mail, return receipt requested, or delivered
in person at the addresses listed on Exhibit AA@.
Severability. All provisions of this Agreement are distinct and
severable and if any clause shall be held to be invalid, illegal or against
public policy, the validity or the legality of the remainder of this Agreement
shall not be affected thereby.
Construction. This Agreement shall be construed and enforced in accordance with
the laws of the State of Delaware. Headings. Any headings preceding the text of
the several sections hereof are inserted solely for convenience of reference and
shall not constitute a part of this Agreement, nor shall they in any way affect
its meaning, construction or interpretation.
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Joint Venture
Entire Agreement, Modification. This Agreement, the Joint Venture
Agreement and the Limited Partnership Agreements express the entire and final
understanding of the parties and supersede all prior agreements with reference
to the subject matter hereof. This Agreement may not be altered or modified
except by a writing duly signed by all of the parties hereto.
Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, personal representatives,
successors and assigns.
Conflicting Documents. In the event any provision of this Agreement
conflicts in any way with any provision of the Joint Venture Agreement, the
provisions of the Joint Venture Agreement shall control.
Other. Each party to this Agreement agrees to perform any and all
further acts, and to execute and deliver any and all documents and instruments
that may be reasonably necessary and appropriate to carry out the terms and
conditions of this Agreement. As required by the context, the singular shall be
construed to include the plural and vice versa, and the use of any gender shall
be construed to include all genders. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof signed by less than all, but together signed by all of the
parties hereto.
[REMAINDER OF PAGE LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have hereunto set their hands and
seals, and Pennwood has caused this Agreement to be executed by a duly
authorized officer of Pennwood, attested, and the corporate seal to be hereunto
affixed the day and year first above written.
ATTEST: GREENWOOD RACING, INC.
By:_/s/Anthony D. Ricci By:_/s/ Harold G. Handel
Anthony D. Ricci, Secretary Harold G. Handel, Chief Executive Officer
BENSTONE PARTNERS
By its sole general partners
BENSALEM RACING ASSOCIATION, INC.
By:/s/Anthony D. Ricci By:_/s/Harold G. Handel______________
Anthony D. Ricci, Secretary Harold G. Handel, Chief Executive Officer
KEYSTONE TURF CLUB, INC.
By:_/s/Anthony D. Ricci______ By:_/s/Harold G. Handel_______________
Anthony D. Ricci, Secretary Harold G. Handel, Chief Executive Officer
GREENWOOD LIMITED PARTNER, INC.
By:_/s/Francis E. McDonnell By: /s/Harold G. Handel
Francis E. McDonnell, Secretary Harold G. Handel, President
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PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito By: /s/ William J. Bork
William J. Bork, President
PENN NATIONAL HOLDING COMPANY
By:_/s/John Limongelli_______ By:__/s/Robert S. Ippolito______
PENN NATIONAL GSFR, INC.
By:_/s/John Limongelli________ By:_/s/Robert S. Ippolito_______
PENNSYLVANIA NATIONAL TURF CLUB, INC.
By:_/s/John Limongelli_______ By:_/s/Robert S. Ippolito_________
PENNWOOD RACING, INC.
By: /s/ Francis E. McDonnell By: /s/ Harold G. Handel
Francis E. McDonnell, Secretary Harold G. Handel, President
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EXHIBIT A
PARTIES TO THE SHAREHOLDERS= AGREEMENT
1. Greenwood Racing, Inc., a Delaware corporation (AGreenwood@).
3001 Street Road
Bensalem, PA 19020
Attention: Harold G. Handel
2. Pennwood Racing, Inc., a Delaware corporation (APennwood@).
c/o Greenwood Racing, Inc.
3001 Street Road
Bensalem, PA 19020
Attention: Harold G. Handel
3. Greenwood Limited Partner, Inc., a Delaware corporation (AGLPI@).
c/o Greenwood Racing, Inc.
3001 Street Road
Bensalem, PA 19020
Attention: Harold G. Handel
4. Benstone Partners, a Pennsylvania general partnership (ABenstone@).
c/o Greenwood Racing, Inc.
3001 Street Road
Bensalem, PA 19020
Attention: Harold G. Handel
5. Penn National Gaming, Inc., a Pennsylvania corporation (APNG@)
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
6. Penn National Holding Company, a Delaware corporation (Penn Holding@).
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
7. Penn National GSFR, Inc., a Delaware corporation (APenn GSFR@).
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
8. Pennsylvania National Turf Club, Inc., a Pennsylvania
corporation (APennsylvania Turf Club@).
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
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EXHIBIT B
FAIR MARKET VALUE
This is Exhibit AB@ to the Shareholders= Agreement executed as of July
29, 1999 by and among the parties listed on Exhibit AA@ to the Shareholders=
Agreement (as may be amended AShareholders= Agreement@). The provisions of this
Exhibit AB@ are an integral part of the Shareholders= Agreement.
Definitions.
Capitalized terms shall have the meaning assigned to such term
in the Shareholders= Agreement.
Determination of Fair Market Value of Interests.
The Fair Market Value shall be determined by such appraisers or
investment bankers (AAppraiser@) as agreed to by the Greenwood Racing, Inc. and
Penn National Holding Company. If such Parties cannot agree with respect to such
Fair Market Value or cannot agree with respect to the selection of an
Appraiser(s), the determination of fair market value shall be made by
Appraisers, one of whom shall be selected by Greenwood Racing, Inc., the second
of whom shall be selected by Penn National Holding Company, and the third of
whom shall be selected by the other two Appraisers. If the three Appraisers thus
selected cannot agree with respect to any item subject to valuation, the
determination of the third Appraiser shall be used.
All costs and fees of the valuation referenced herein shall be paid by Pennwood.
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EXHIBIT C
DIRECTORS AND OFFICERS
1. Greenwood Directors:
Harold G. Handel
Francis E. McDonnell, Esq.
Anthony D. Ricci
2. Penn National Directors:
William J. Bork
Peter M. Carlino
Joseph A. Lashinger, Jr., Esq.
3. Officers:
President: Harold G. Handel
Vice President: William J. Bork
Chief Financial Officer: Anthony D. Ricci
Secretary/Treasurer: Robert S. Ippolito
52
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
FR PARK RACING, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF FR PARK
RACING, L.P. ("Agreement") is made as of July _29, 1999 by, between and among
PENNWOOD RACING, INC., a Delaware corporation whose address appears on Schedule
"A" attached hereto, as the general partner (the "General Partner"), and the
undersigned limited partners whose names and addresses appear on Schedule "A"
attached hereto as the limited partners (collectively referred to hereinafter as
the "Limited Partners"). This Agreement shall constitute the Limited Partnership
Agreement of FR PARK RACING, L.P. (the "Partnership"). The General Partner and
the Limited Partners are hereinafter individually referred to as "Partner" and
collectively referred to as the "Partners."
WHEREAS, Penn National GSFR, Inc. is being admitted as a Partner as of the date
hereof; and
WHEREAS, this Agreement replaces, amends and restates the Limited
Partnership Agreement entered into as of January 1, 1999.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, and intending to be legally bound hereby, the
Partners hereby agree as follows:
FORMATION, NAME, PLACE OF BUSINESS,
PURPOSES AND TERM OF PARTNERSHIP
Formation. The Partnership has been formed as a limited partnership pursuant to
the relevant provisions of the Act in the State of New Jersey.
SECTION .1 Name and Office. The name of the Partnership shall continue
to be "FR PARK RACING, L.P.", and its business shall continue to be conducted in
such name. The principal office and place of business of the Partnership shall
continue to be located at Route 70 & Haddonfield Road, Cherry Hill, New Jersey
08034, or at such other place as the General Partner may, from time to time,
determine. The address of the registered office and the name and address of the
registered agent for service of process shall continue to be Corporation Service
Company, 830 Bear Tavern Road, West Trenton, New Jersey 08628.
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Purposes, Business and Objectives.
The primary purpose of the Partnership is the ownership and
operation of (a) Freehold Raceway, (b) Garden State Race Track, and (c) OTB
Facilities. The Partnership shall possess and may exercise all the powers and
privileges now or hereafter granted by the Act or by any other law, together
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business,
purposes or activities of the Partnership, including, without limitation:
To enter into and perform contracts of any kind
necessary to, in connection with, or incidental to,
the accomplishment of the purposes of the
Partnership;
To acquire, construct, operate, maintain, improve,
manage, buy, own, sell, convey, assign, mortgage,
refinance, rent or lease any property, real or
personal, in fee or under lease, or any rights
therein or appurtenant thereto, necessary or
appropriate for the operation of the Partnership;
To borrow money from any source, including, but not
limited to, any Partner or their affiliates, and to
make, issue or execute any notes, drafts, loan
agreements, guaranties or other evidences of
indebtedness and to secure the same by mortgage,
pledge, assignment or other lien in all or any part
of the property of the Partnership;
To negotiate for and conclude an agreement or
agreements for the sale, exchange or other
disposition of all or any part of the Partnership's
property;
To hire and compensate employees, agents, independent contractors, attorneys and
accountants;
To carry on any other activities necessary to, in connection with, or incidental
to the foregoing, and
To form and establish any subsidiaries, partnerships,
or limited liability companies to be owned in whole
or in part by the Partnership, and to conduct
business through such subsidiaries, partnerships or
limited liability companies.
The Partnership shall not engage in any other business without
the prior consent of the General Partner.
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CAPITAL
Capital of the Partnership. The capital of the Partnership is the
aggregate amount of cash and the agreed fair market value of property
contributed or deemed contributed by the Partners to the Partnership as set
forth in Schedule "A" attached hereto and made a part hereof. The capital
described on Schedule "A" represents the agreed upon fair market value of the
Partners' interest in the capital of the Partnership as of the date hereof.
General Provisions.
Schedule AA@ shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the Percentage Interest of
any Partner arising from the transfer of any part of a Partnership Interest to
or by such Partner and any changes in the amounts contributed or agreed to be
contributed by any Partner. Notwithstanding the foregoing, no Partner shall be
permitted to withdraw or be admitted unless such admission or withdrawal is in
accordance with the terms of the Shareholders= Agreement.
A Capital Account shall be established for each Partner, and
shall be increased by: (1) the amount of money contributed by the Partner to the
Partnership; (2) the fair market value of property contributed by the Partner to
the Partnership (net of liabilities that the Partnership is considered to assume
or take subject to under Code Section 752); and (3) allocations to the Partner
of Partnership Profits (or items thereof). The Capital Account for each Partner
shall be decreased by: (1) the amount of money distributed to the Partner by the
Partnership; (2) the fair market value of property distributed to the Partner by
the Partnership (net of liabilities that such Partner is considered to assume or
take subject to under Code Section 752); and (3) allocations to the Partner of
Partnership Losses (or items thereof). In all events, the Capital Account of
each Partner will be determined and maintained throughout the term of the
Partnership in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).
The General Partner, in its discretion, may elect to have the
Capital Accounts of the Partners adjusted to reflect a revaluation of
Partnership assets on the Partnership's books (the "Revaluation Adjustment") in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f).
Any Partner, including any additional or substitute Partner,
who acquires any interest in the Partnership or whose Partnership Interest is
increased by means of the transfer to him of all or part of the Partnership
Interest of another Partner, shall have a Capital Account which has been
appropriately established or adjusted to reflect such acquisition or transfer.
Any Partner who shall acquire any Partnership Interest by means of the transfer
to him of all or any part of the Partnership Interest of any other Partner
shall, with respect to the Percentage Interest so transferred, be deemed to be a
Partner of the same class as the transferor.
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The Partnership may, at the discretion of the General Partner
and as provided in the Shareholders= Agreement, borrow for Partnership purposes
at any time and from any source. No Limited Partner shall be liable for any
indebtedness of the Partnership or be required to contribute any capital or to
lend any funds to the Partnership other than its Capital Contribution. If the
allocation of Losses or distributions required or permitted under this Agreement
result in the reduction of a Limited Partner's Capital Account, such reduction
need not be restored. The General Partner shall have no personal liability for
the repayment of the Capital Contribution of any Limited Partner.
No interest shall be paid on or with respect to the Capital
Contribution or the Capital Account of any Partner.
No Partner shall have the right to withdraw or reduce its
Capital Contribution.
RIGHTS, POWERS AND DUTIES OF PARTNERS
SECTION .1 Conduct of Partnership Business. The General Partner shall
use its best efforts to carry out the purposes, business and objectives of the
Partnership. Except as otherwise provided herein, all decisions with respect to
the management of the Partnership's business shall be made by the General
Partner as provided in the Shareholders= Agreement. The General Partner shall
have general responsibility for all aspects of the Partnership's business and
operations and which hereby is designated as the "tax matters partner" of the
Partnership within the meaning of Code Section 6231(a)(7).
Powers of the General Partner. Except as limited by the terms of the
Shareholders= Agreement, the General Partner shall have the necessary powers to
carry out the purposes, business and objectives of the Partnership, including,
without limitation, the right to cause a Refinancing or Sale of Assets to occur
without the approval of the other Partners, and, except as otherwise provided
herein or by the laws of the State of New Jersey, shall possess and enjoy all of
the rights and powers of a partner of a partnership without limited partners.
Except as limited by the terms of the Shareholders= Agreement, the General
Partner shall have the right and power to execute and deliver, on the
Partnership's behalf, evidences of indebtedness and documents granting security
for the payment thereof (with or without warrant of attorney to confess judgment
against the Partnership or its property). Without limiting the generality of the
foregoing, except as limited by the terms of the Shareholders= Agreement, the
General Partner shall have the power and authority and is specifically
authorized to grant a warrant of attorney to confess judgment against the
Partnership. The General Partner shall not permit the funds of the Partnership
to be commingled with those of any other entity.
Authority of the General Partner to Deal with Affiliates. Except as limited by
the terms of the Shareholders= Agreement, the General Partner may,
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on behalf of the Partnership, perform, or agree, contract or arrange
with any of its Affiliates for the performance of services for the Partnership
with compensation to be paid for such services as if it or such Affiliate were
an independent contractor, at such rates and terms that independent contractors
would impose.
Duties and Obligations of the General Partner.
The General Partner shall take any and all actions which may
be reasonably necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State of New
Jersey.
The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any Federal,
state or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership.
The General Partner shall, from time to time, submit to any
appropriate state securities administrator or any other state agency such
documents, papers, information and reports as are required to be filed with or
submitted to such state securities administrator or any other state agency with
respect to the Partnership.
The General Partner shall, from time to time, prepare and file
all certificates (or amendments thereto) and other similar documents required by
law to be filed and recorded with respect to the Partnership for any reason, in
such office or offices as are required under the any applicable laws. The
General Partner shall do any and all other acts and things (including making
publications or periodic filings of this Agreement, any certificates or
amendments thereto or other similar documents) which may now or hereafter be
required or deemed by the General Partner to be necessary.
Limited Partners. Except as otherwise expressly provided elsewhere
herein, the Limited Partners shall not participate in the management of the
Partnership, have any control over the Partnership's business or assets or have
any right or authority to act for or obligate the Partnership.
Other Interests of Partners. The Partners, as well as Affiliates of the
Partners, may engage in any business or possess any interest in other businesses
of every nature and description, independently or with others, including owning
and operating pari-mutuel racetracks or participation in any other gaming
business activity. Neither the Partnership nor the Partners shall have any
rights in such independent ventures including, without limitation, any rights to
the income or profits thereof by virtue of having become Partners in the
Partnership. Each Partner conducts other related businesses outside of New
Jersey, including competing businesses, and this Agreement shall not apply to
any such other activities; nor shall it prevent the Partners from individually
engaging in additional activities both within and outside of New Jersey, other
than the ownership and operation of Freehold Raceway and Garden State Race Track
and OTB Facilities (as defined herein),
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including without limitation, the ownership and operation of one or
more additional racetracks, off-track betting or phone betting operations in New
Jersey or elsewhere, other than OTB Facilities.
Title to Property and Partition. All property of the Partnership,
whether tangible or intangible, real, personal or mixed, shall be owned by the
Partnership as an entity and no Partner shall have any ownership interest in
such property in its individual name or right, and each Partner=s Partnership
Interest shall be personal property for all purposes. No Partner, nor any
successor-in-interest to any Partner, shall have the right, while this Agreement
remains in effect, to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have any of
the property of the Partnership partitioned, and each of the Partners, on behalf
of itself and its successors, representatives and assigns, hereby irrevocably
waives any such right.
ALLOCATIONS
SECTION .1 Profits and Losses. Any Profits or Losses shall be allocated
among all of the Partners in accordance with, and in proportion to, their
respective Percentage Interests.
Allocation Upon Admission. Upon the admission of the Partners to the
Partnership, Profit and Loss during the month of admission shall be allocated
using the "monthly convention" (i.e., Partners admitted in a month are treated
as admitted on the first day of that month). If that method is determined to be
invalid for tax purposes, the allocation of Profit and Loss in such month shall
be made under any other permissible method which may be selected by the General
Partner taking into account its judgment of the best interests of the Limited
Partners as a class.
Tax Allocations: Code Section 704(c). Except as otherwise provided
herein, allocations of Profits and Losses for tax purposes shall be made in the
same manner as the allocations for book purposes described in Section 4.1 of
this Agreement. However, in accordance with Code Section 704(c) and the
Regulations thereunder, items of income, gain, loss and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the basis of the property and its fair market value at the
time the property was contributed to the Partnership.
Allocations to Reflect Capital Account Adjustments. Notwithstanding any
other provision hereof, in the event of a Revaluation Adjustment to the
Partners' Capital Accounts pursuant to Section 2.2(c) hereof, items of
depreciation, income, gain, loss or deduction with respect to the assets held by
the Partnership at the time of such Revaluation Adjustment shall be computed and
allocated for tax purposes in a manner which takes into account the variation
between the adjusted tax basis and the book value of such assets in a manner
consistent with Section 704(c) of the Code and Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
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DISTRIBUTIONS
Distributions. Except as provided in Section 7.3 regarding liquidating
distributions, Net Cash Flow, as determined by the General Partner in accordance
with the terms of the Shareholders= Agreement, shall be distributed to the
Partners no less frequently than annually in accordance with their respective
Percentage Interests.
Distribution of Proceeds from a Sale or Refinancing or Dissolution of
the Partnership. In the event of a sale of a portion of Partnership property
which does not cause the dissolution of the Partnership or a financing of
Partnership property, the General Partner may, in its sole and absolute
discretion, distribute all or a portion of the net cash proceeds therefrom to
the Partners in accordance with the Partners= Percentage Interest.
Limitation Upon Distributions. No distribution shall be declared and
paid unless, after the distribution is made, the assets of the Partnership
(valued at fair market value) are in excess of all liabilities of the
Partnership.
Reserves. The General Partner shall have the right to establish,
maintain and expend reserves for working capital, future investments, debt
service and such other purposes as they may deem necessary or advisable
(?Reserves").
CERTAIN CHANGES OF GENERAL PARTNER
Withdrawal of General Partner. The General Partner may not voluntarily
withdraw from the Partnership without the written consent or approval of the
Limited Partners. The Limited Partners shall not have the right to remove the
General Partner.
Changes of General Partner Generally. Any substitute general partner
shall, immediately upon admission as a general partner, become the owner of the
Partnership Interest of the general partner whose place it is taking.
TERMINATION, DISSOLUTION AND WINDING UP
No Termination. Except as otherwise provided herein or in the Shareholders=
Agreement, the Partnership shall not be terminated by the death, substitution,
admission or withdrawal of any Partner.
Termination.
The Partnership shall be terminated and dissolved and its affairs wound up upon
the first of the following to occur:
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A Sale of Assets;
The withdrawal, dissolution or Bankruptcy of the
General Partner, unless, within sixty (60) days of
such event, Limited Partners owning sixty-seven
percent (67%) of the Percentage Interests owned by
all Partners elect a substitute general partner to
continue the Partnership's business and such
substitute general partner agrees in writing to
accept such election; or
The determination of Limited Partners owning
sixty-seven percent (67%) or more of the Percentage
Interests owned by all Limited Partners, with or
without the General Partner's consent, that the
Partnership should be dissolved.
Notwithstanding anything herein to the contrary, upon a Sale
of Assets at a gain, where all or any portion of the consideration payable to
the Partnership is to be received by the Partnership more than ninety (90) days
after the date on which such Sale of Assets occurs, the Partnership shall
continue solely for purposes of collecting the deferred payments and making
distributions to the Partners.
SECTION .2 Dissolution and Winding Up. Upon the Partnership's
termination, the following steps shall be taken in the following order of
priority:
The Capital Account of each Partner shall be determined.
Profit or Loss to the date of termination, including realized gain or loss
(whether or not recognized for tax purposes) from a sale or other disposition,
the taking by eminent domain or the damage and destruction of all or
substantially all of the Partnership's assets, shall be allocated as set forth
in Article IV above and credited or charged to the Partners' Capital Accounts.
The Partnership shall be dissolved and its affairs shall be
wound up. All debts and obligations of the Partnership shall be paid, discharged
or provided for by setting up appropriate Reserves.
The assets of the Partnership not required to pay, discharge
or provide for the Partnership's debts and obligations shall be distributed
among all Partners having positive Capital Accounts in the same proportion as
the positive Capital Account of each such Partner bears to the sum of all such
Partners' positive Capital Accounts.
PARTNERSHIP INTERESTS OF LIMITED PARTNERS
Additional Limited Partners. No Person shall be admitted to the
Partnership as a Limited Partner except upon a sale, transfer, assignment,
pledge, mortgage, hypothecation, grant of a security interest, or other
disposition by a Limited Partner of all or a portion of his Partnership Interest
(each a "Disposition") in accordance with this Article VIII or in accordance
with the terms of the Shareholders= Agreement, as herein defined.
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Assignment.
Except as provided in the Shareholders= Agreement, no
Partnership Interest of a Limited Partner or any portion thereof, or any
Percentage Interest of a Limited Partner in the Partnership, may be sold,
assigned, transferred, pledged, mortgaged, hypothecated, made subject to a
security interest or otherwise disposed of to any Person without the prior
written consent of the General Partner, which consent may be withheld in its
sole discretion. The Partners hereby acknowledge and agree that, notwithstanding
any general fiduciary duty that the General Partner may have as general partner
or otherwise, the General Partner, in its sole discretion, may withhold consent
to such sale, assignment, transfer, pledge, mortgage, hypothecation, grant of a
security interest or other disposition without any liability or accountability
to any Person. Any actual or attempted sale, assignment, transfer, pledge,
mortgage, hypothecation, grant of a security interest or other disposition by
any Limited Partner in violation of this Section 8.2(a) shall be null and void
and of no force or effect whatsoever. Each Limited Partner hereby acknowledges
the reasonableness of the restrictions imposed by this Section 8.2(a) in view of
the Partnership purposes and the relationship of the Partners. Accordingly, the
restrictions in this Section 8.2(a) shall be specifically enforceable. Neither
the Partnership nor any Partner shall be bound by: (i) any attempted disposition
or pledge, mortgage, hypothecation or grant of security interest which has not
been approved by the General Partner as required hereby; or (ii) a disposition,
pledge, mortgage, hypothecation or creation of a security interest which has
been consented to in writing by the General Partner until a counterpart of the
instrument accomplishing the same, executed and acknowledged by the parties
thereto, is delivered to the General Partner and the terms of Section 8.3 hereof
have been satisfied with respect to dispositions which result in the admission
of new Limited Partners.
Substitution and Addition of Limited Partners.
No Person shall have the right to be admitted to the
Partnership as a Limited Partner unless all of the following conditions are
satisfied:
A fully executed and acknowledged written instrument
effectuating a Disposition has been filed with the
General Partner setting forth the intention of the
Limited Partner making the Disposition
("Transferor"), that his buyer, transferee or
assignee (each a "Transferee") become a Limited
Partner;
The Transferor and Transferee execute and acknowledge
such other instruments as the General Partner may
deem necessary or desirable to effect such admission,
including the written acceptance and adoption by the
Transferee of the provisions of this Agreement to
which the Transferor is a party, and the assumption
by the Transferee of all obligations of the
Transferor under this Agreement;
The Transferee has paid all reasonable expenses
incurred by the Partnership (including its legal
fees) in connection with its admission to the
Partnership, including but not limited to the cost of
the preparation, filing and publishing of any
amendment to the Certificate and any amendments of
filings under fictitious name registration statutes
or registration statutes lawfully required to qualify
the Partnership to do business in foreign
jurisdictions; and
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The General Partner has consented in writing to the
Transferee's admission to the Partnership as a
Limited Partner pursuant to Section 8.2 above or per
the Limited Partnership Interests in accordance with
section 2.2 of the Shareholders' Agreement.
Once the above conditions have been satisfied, the Transferee
shall become a Limited Partner on the first day of the next following calendar
month. Upon admission of a Limited Partner pursuant to the provisions of this
Article, the Partnership shall make all further distributions on account of the
Partnership Interests or Percentage Interests in the Partnership so assigned or
issued to such a Limited Partner for such time as the Partnership Interests or
Percentage Interests are designated on its books in accordance with the above
provisions. Any Transferee so admitted to the Partnership as a Limited Partner
shall be subject to all provisions of this Agreement to which his Transferor was
a party as if originally a party hereto and thereto.
FISCAL MATTERS
Books and Records. The General Partner shall maintain full and accurate
books of the Partnership at the Partnership's principal place of business,
showing all receipts and expenditures, assets and liabilities, profits and
losses, and all other records necessary for recording the Partnership's business
and affairs, including those sufficient to record the allocations and
distributions. The books of the Partnership shall be kept on an accrual method
of accounting. During regular business hours and upon reasonable notice, each
Partner and his duly authorized representatives shall have access to and may
inspect and copy any of such books and records.
Fiscal Year. The fiscal year of the Partnership shall be the calendar year.
Reports.
Within ninety (90) days after the end of each fiscal year of
the Partnership, the General Partner shall furnish each Limited Partner with
such information as is necessary for the preparation of such Partner's income
tax returns.
Within one hundred twenty (120) days after the end of each
fiscal year of the Partnership, the General Partner shall furnish each Limited
Partner with an unaudited statement showing the income and expenses of the
Partnership for such fiscal year and the balance sheet of the Partnership as of
the end of such year, prepared by an independent certified public accountant
selected by the General Partner.
Bank Accounts. All funds of the Partnership shall be deposited in its
name in such checking and savings accounts or time deposits or certificates of
deposit as shall be designated by the General Partner from time to time.
Withdrawals therefrom shall be made upon such signature(s) as the General
Partner may designate.
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Accounting Decision. All decisions with respect to accounting matters
shall be made by the General Partner. The Partners agree that, for financial and
accounting purposes, the Partnership may elect to treat certain items
differently from the manner in which such items are treated for tax purposes.
For tax purposes, Capital Accounts shall be determined in accordance with tax
accounting principles in the same manner as the Partnership prepares its Federal
income tax return.
Income Tax Elections. Except as specifically provided to the contrary herein,
all decisions as to income tax matters shall be made by the General Partner.
The General Partner shall elect to claim the maximum deduction
allowed with respect to each item of cost recovery property of the Partnership.
The General Partner may, at any time, make or petition to
revoke (as the case may be) the election referred to in Code Section 754 or the
corresponding provision of any subsequent revenue act. Each Partner agrees in
the event of such an election to supply the Partnership with the information
necessary to give effect thereto.
Meetings. The General Partner shall not be required to call any annual
meetings of the Limited Partners. However, upon the request of Limited Partners
owning at least twenty-five percent (25%) of the Percentage Interests, the
General Partner shall promptly call an informational meeting of the Partners.
Documents. The General Partner shall not have an obligation to deliver
copies of any filed Partnership certificates or amendments thereof to any
Limited Partner unless otherwise specifically requested by such Limited Partner.
COMPENSATION FOR SERVICES
Compensation of the General Partner. Except as otherwise provided
herein, the General Partner (in its capacity as General Partner) shall receive
no compensation for its services to the Partnership. The General Partner shall
be entitled to be reimbursed for reasonable out-of-pocket expenses incurred in
connection with the business of the Partnership upon presentation of receipts or
other satisfactory evidence in support thereof.
GENERAL PROVISIONS
Notices. Except as otherwise provided in this Agreement, all notices,
consents, waivers, directions, requests, or other instruments or communications
provided for under this Agreement shall be in writing, signed by the party
giving the same and shall be deemed properly given only if sent by registered or
certified United States mail, postage prepaid, addressed: (a) in the case of the
Partnership or the General Partner, as the case may be, to the Partnership at
its principal place of business set forth in
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Schedule AA@, and (b) in the case of any Limited Partner, to such
Limited Partner at its address set forth in Schedule "A". Each Partner may, by
notice to the Partnership, specify any other address for the receipt of such
instruments or communications. Any notice so given shall be effective on the
date on which it is mailed. In any case where the consent of a Limited Partner
shall be required, such consent shall be deemed to have been given upon the
failure of such Limited Partner to send notice withholding his consent within
thirty (30) days following the effective time of notice requesting such consent.
A copy of all notices and other communications given hereunder by any Limited
Partner shall be sent to the General Partner.
Indemnification and Limitation on Liability of the General Partner and
its Affiliates. The Partnership shall indemnify, defend and hold harmless the
General Partner and its officers, directors, employees and agents against any
claim, demand or liability (including without limitation, court costs and
attorneys' fees) incurred by it in connection with the business of the
Partnership, provided that the acts or omissions from which the claim, demand or
liability arises were performed or committed in the good faith belief that the
General Partner, through its officers, directors, employees or agents, was
acting within the scope of its authority and that it was not grossly negligent
or guilty of intentional misconduct. Neither the Partnership nor any Limited
Partner shall have any claim against the General Partner or its officers,
directors, employees or agents by reason of any act or omission of the General
Partner, or its officers, directors, employees or agents or by reason of any
disallowance by any taxing authority of any deduction or credit taken on any
Partnership tax return, provided that such act or omission of the General
Partner, through its officers, directors, employees or agents, was performed in
the good faith belief that it was acting within the scope of its authority, and
that it was not grossly negligent or guilty of intentional misconduct. The
General Partner may obtain, at the Partnership's expense, liability insurance
for the Partnership and the General Partner (and its officers, directors,
employees and agents), insuring against any of their acts, whether or not such
acts would be covered by the foregoing indemnification. The General Partner
shall not be liable for omitting to do any act which the General Partner is not
specifically required to do under this Agreement, and shall have no obligation
or liabilities, express or implied, to the Partnership or the other Partners,
except as specifically set forth in this Agreement.
Power of Attorney. Each Limited Partner irrevocably constitutes and
appoints the General Partner his true and lawful agent and attorney-in-fact, in
his name, place and stead, to make, execute, acknowledge and file:
this Agreement as required by the relevant provisions of the
Act and all amendments to this Agreement as required by the Act, including
amendments required for the admission or substitution of a Partner;
any cancellation of this Agreement as required by the relevant provisions of the
Act upon the termination of the Partnership;
any instruments or papers required to continue the business of the Partnership;
all such other instruments, documents and certificates which
may from time to time be required by the laws of the State of New Jersey, the
United States of America or any other jurisdiction in which the Partnership
shall determine to do business (or any political subdivision or agency thereof)
to effectuate, implement, continue and defend the valid and subsisting existence
of the Partnership;
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any and all amendments to Schedule "A" of this Agreement
necessary to admit or substitute a Limited Partner in accordance with Article
VIII above or to reflect a return of all or part of a Partner's Capital
Contribution; and
any business certificate, fictitious name certificate,
certificate of limited partnership, amendment thereto or other instrument or
document of any kind necessary to accomplish the business, purposes and
objectives of the Partnership in accordance with this Agreement.
It is expressly intended by the Limited Partners that the
foregoing power of attorney is coupled with an interest and that the power of
attorney shall survive any transfer or assignment by any Limited Partner of all
or any part of his Partnership Interest.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
Amendment of Partnership Agreement.
This Agreement may be amended with the consent of the General
Partner and with the consent of the Limited Partners owning at least sixty-seven
(67%) of the Partnership Interests owned by all Limited Partners (other than
Partnership Interest owned by the General Partner and/or any of its Affiliates,
if any of them also is a Limited Partner), provided, however, that no amendment
which has not been consented to by all the Limited Partners shall:
commit any Limited Partner to make additional contributions to the capital of
the Partnership in addition
to the Capital Contributions required herein;
subject any Limited Partner to personal liability; or
alter the rights of the Limited Partners with respect
to the allocations and distributions set forth in
this Agreement.
In addition, amendments may be made to this Agreement from
time to time by the General Partner, without the consent of any of the Limited
Partners: (1) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to add any
other provisions with respect to matters or questions arising under this
Agreement which will not be inconsistent with the existing provisions of this
Agreement; (2) to add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General Partner
herein; or (3) to delete from or add to any provision hereof required to be so
deleted or added by a state "Blue Sky" commission, which addition or deletion is
deemed by such commission to be for the benefit or protection of the Limited
Partners; provided, however, that no amendment shall be adopted pursuant to this
Section unless the adoption thereof: (i) is for the benefit of or not adverse to
the interests of the Limited Partners; (ii) does not affect the distributions
and allocations among the Limited Partners or between the Limited Partners as a
class and the General Partner; and (iii) does not affect the limited liability
of the Limited Partners or the status of the Partnership as a partnership for
Federal income tax purposes.
65
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Limitation of Responsibility and Liability. No Partner, or any of its
Affiliates, shareholders, directors, officers, employees, or agents, will be
liable or responsible for the debts or obligations of any of the other Partners
or the Partnership.
Singular and Plural/Gender. Wherever from the context of this Agreement
it appears appropriate, each term stated in either the singular or the plural
shall include the singular or the plural, and pronouns stated in either the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter.
Severability. Invalidation or a holding of unenforceability of any
provision of this Agreement shall in no way affect any other provision hereof,
which other provisions shall remain in full force and effect.
Integration. This Agreement embodies the entire agreement and
understanding among the Partners relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
Applicable Law. This Agreement and the rights of the Partners shall be governed
by and construed and enforced in accordance with the laws of the State of New
Jersey.
Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Partners and their respective heirs, personal representatives,
successors and permitted assigns.
Headings. The descriptive headings of the Articles and Sections hereof are
inserted for convenience only and shall not affect the interpretation or meaning
thereof.
DEFINED TERMS
Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms used in this Agreement shall have the meanings
specified below:
AAct@ means the Revised Uniform Limited Partnership
Act as adopted in the State of New Jersey, as amended
from time to time.
"Affiliate" means (a) any Person directly or indirectly controlling, controlled
by or under common control with another Person, (b) any Person owning or
controlling ten percent (10%) or more of the outstanding voting securities of
such other Person, (c) any officer, director, partner or trustee of such Person,
and (d) if such other Person is an officer, director, partner or trustee of a
Person, the Person for which such Person acts in any such capacity.
"Bankruptcy" means, with respect to any Person, such Person making an assignment
for the benefit of creditors, becoming a party or subject to any liquidation or
dissolution action or proceeding with respect to such Person, the institution of
any bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors with respect to such Person, or a receiver,
liquidator, custodian or trustee being appointed for such Person or a
substantial part of such Person=s assets and, if any of the same occur
66
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involuntarily, the same is not dismissed, stayed or discharged within sixty
(60) days; or the entry of an order for relief against such Person under Title
II of the United States Code entitled "Bankruptcy"; or such Person taking any
action to effect, or which indicates its or his acquiescence in, any of the
foregoing. "Capital Account" means the amount of a Partner's Capital
Contribution adjusted for profits, losses and distributions as provided for in
Section 2.2 hereof. "Capital Contribution" means the cash and the agreed fair
market value of property contributed or deemed contributed by a Partner to the
Partnership. "Code" means the Internal Revenue Code of 1986, as amended, and the
corresponding provisions of any future Internal Revenue law. "Finance" or
"Refinancing" means entering into any loan or modifying the terms of any loan
including, without limitation, any which is secured by a mortgage, deed of trust
or other similar lien on the property of the Partnership. AFreehold Raceway@
means that certain real property and improvements located in Monmouth County,
New Jersey known as Freehold Raceway.
AGarden State Race Track@ means that certain real
property and improvements located in Camden County, New
Jersey known as Garden State Race Track.
ANet Cash Flow@ means, for any period, the excess, if any, of (a) the sum of (1)
the gross receipts of the
Partnership (as determined in accordance with the cash receipts and
disbursements method of accounting) during such period, but without regard to
any amounts received by the Partnership as a result of a Sale of Assets and any
amounts released during such period by the General Partner from any Reserves
maintained by the Partnership, over (b) the sum of (1) all expenditures of the
Partnership (as determined under the aforesaid method of accounting) during such
period, (2) all amounts applied during such period in payment of interest or
principal on any borrowing of the Partnership, and (3) any amount added during
such period by the General Partner to Reserves for working capital,
contingencies, replacements, expansions, acquisitions, or other expenditures of
the Partnership. Net Cash Flow and releases or additions to the Reserves shall
be made or determined by the General Partner in its sole discretion.
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AOTB Facilities@ means the off-track betting facilities and phone betting
operations to be operated in New Jersey to the extent such off-track betting
facilities and phone betting operations are permitted by New Jersey legislation
to be conducted as a result of the holding of licenses to conduct racing at
Freehold Raceway and Garden State Race Track.
"Partnership Interest" means, in the case of any Partner, such Partner's Capital
Account, interest in the Profits and Losses and distributions of the
Partnership, voting rights and all other rights which a party to this Agreement
acquires hereby or by operation of law.
"Percentage Interest" means the percentage interest of each Partner as set forth
on Schedule "A", as amended from time to time.
"Person" means any natural person, partnership, corporation, trust, limited
liability company, association or other legal entity.
AProfits@ and ALosses@ means, for any period, the amounts equal to the
corresponding items of income, gain, deductions, credits and losses in the
aggregate or separately stated, as appropriate, for such period, all determined
in accordance with generally accepted accounting principles consistently
applied.
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AReserves@ shall have the meaning set forth in
Section 5.4 of this Agreement.
"Sale of Assets" means the sale or other disposition of all or substantially all
of the Partnership's assets. For purposes of this definition, the phrase "other
disposition" includes a taking of all or substantially all of a property by
eminent domain or the damage or destruction of all or substantially all of such
property.
AShareholders= Agreement@ means that Shareholders= Agreement made and entered as
of the _29_ day of July, 1999, by, between, and among Greenwood Racing, Inc.,
Pennwood Racing, Inc., Greenwood Limited Partner, Inc., Benstone Partners, Penn
National Holding Company, Penn National GSFR, Inc., and Pennsylvania National
Turf Club, Inc., as same may be amended from time to time.
ATreasury Regulation@ means the regulations promulgated by the Internal Revenue
Service, in accordance with
the Internal Revenue Code of 1986, as amended, and the corresponding provisions
of any future Internal Revenue law.
69
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
ATTEST: GENERAL PARTNER:
PENNWOOD RACING, INC.
/s/ Francis E. McDonnell By: /s/ Harold G. Handel
Francis E. McDonnell, Secretary Harold G. Handel, President
LIMITED PARTNER(S):
GREENWOOD LIMITED PARTNER, INC.
/s/Francis E. McDonnell By: /s/Harold G. Handel
Francis E. McDonnell, Secretary Harold G. Handel, President
PENN NATIONAL GSFR, INC.
_/s/John Limongelli_ By: _/s/Robert S. Ippolito_______
Name: John Limongelli Name: Robert S. Ippolito
Title: Secretary/ Treasurer
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SCHEDULE "A"
TO
LIMITED PARTNERSHIP AGREEMENT
OF
FR PARK RACING, L.P.
Capital Percentage
Contribution Interest
GENERAL PARTNER:
Pennwood Racing, Inc. $1.00 .1%
c/o Greenwood Racing, Inc.
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
LIMITED PARTNER(S):
Greenwood Limited Partner, Inc. $499.50 49.95%
c/o Greenwood Racing, Inc.
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
Penn National GSFR, Inc. $499.50 49.95%
825 Berkshire Blvd.
Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
71
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
FR PARK SERVICES, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF FR PARK
SERVICES, L.P. ("Agreement") is made as of July _29, 1999 by, between and among
PENNWOOD RACING, INC., a Delaware corporation whose address appears on Schedule
"A" attached hereto, as the general partner (the "General Partner"), and the
undersigned limited partners whose names and addresses appear on Schedule "A"
attached hereto as the limited partners (collectively referred to hereinafter as
the "Limited Partners"). This Agreement shall constitute the Limited Partnership
Agreement of FR PARK SERVICES, L.P. (the "Partnership"). The General Partner and
the Limited Partners are hereinafter individually referred to as "Partner" and
collectively referred to as the "Partners."
WHEREAS, Pennsylvania National Turf Club, Inc. is being admitted as a Partner as
of the date hereof; and
WHEREAS, this Agreement replaces, amends and restates the Limited
Partnership Agreement entered as of January 1, 1999.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, and intending to be legally bound hereby, the
Partners hereby agree as follows:
FORMATION, NAME, PLACE OF BUSINESS,
PURPOSES AND TERM OF PARTNERSHIP
Formation. The Partnership has been formed as a limited partnership pursuant to
the relevant provisions of the Act in the State of New Jersey.
SECTION .3 Name and Office. The name of the Partnership shall continue
to be "FR PARK SERVICES, L.P.", and its business shall continue to be conducted
in such name. The principal office and place of business of the Partnership
shall continue to be located at Route 70 & Haddonfield Road, Cherry Hill, New
Jersey 08034, or at such other place as the General Partner may, from time to
time, determine. The address of the registered office and the name and address
of the registered agent for service of process shall continue to be Corporation
Service Company, 830 Bear Tavern Road, West Trenton, New Jersey 08628.
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Purposes. Business and Objectives.
The purpose of the Partnership is to provide employment and
personnel services in connection with the ownership and operation of Freehold
Raceway. The Partnership shall possess and may exercise all the powers and
privileges now or hereafter granted by the Act or by any other law, together
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business,
purposes or activities of the Partnership, including, without limitation:
To enter into and perform contracts of any kind
necessary to, in connection with, or incidental to,
the accomplishment of the purposes of the
Partnership;
To acquire, construct, operate, maintain, improve,
manage, buy, own, sell, convey, assign, mortgage,
refinance, rent or lease any property, real or
personal, in fee or under lease, or any rights
therein or appurtenant thereto, necessary or
appropriate for the operation of the Partnership;
To borrow money from any source, including, but not
limited to, any Partner or their affiliates, and to
make, issue or execute any notes, drafts, loan
agreements, guaranties or other evidences of
indebtedness and to secure the same by mortgage,
pledge, assignment or other lien in all or any part
of the property of the Partnership;
To negotiate for and conclude an agreement or
agreements for the sale, exchange or other
disposition of all or any part of the Partnership's
property;
To hire and compensate employees, agents, independent contractors, attorneys and
accountants;
To carry on any other activities necessary to, in connection with, or incidental
to the foregoing, and
To form and establish any subsidiaries, partnerships,
or limited liability companies to be owned in whole
or in part by the Partnership, and to conduct
business through such subsidiaries, partnerships or
limited liability companies.
The Partnership shall not engage in any other business without
the prior consent of the General Partner.
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<PAGE>
CAPITAL
Capital of the Partnership. The capital of the Partnership is the
aggregate amount of cash and the agreed fair market value of property
contributed or deemed contributed by the Partners to the Partnership as set
forth in Schedule "A" attached hereto and made a part hereof. The capital
described on Schedule "A" represents the agreed upon fair market value of the
Partners' interest in the capital of the Partnership as of the date hereof.
General Provisions.
Schedule AA@ shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the Percentage Interest of
any Partner arising from the transfer of any part of a Partnership Interest to
or by such Partner and any changes in the amounts contributed or agreed to be
contributed by any Partner. Notwithstanding the foregoing, no Partner shall be
permitted to withdraw or be admitted unless such admission or withdrawal is in
accordance with the terms of the Shareholders= Agreement.
A Capital Account shall be established for each Partner, and
shall be increased by: (1) the amount of money contributed by the Partner to the
Partnership; (2) the fair market value of property contributed by the Partner to
the Partnership (net of liabilities that the Partnership is considered to assume
or take subject to under Code Section 752); and (3) allocations to the Partner
of Partnership Profits (or items thereof). The Capital Account for each Partner
shall be decreased by: (1) the amount of money distributed to the Partner by the
Partnership; (2) the fair market value of property distributed to the Partner by
the Partnership (net of liabilities that such Partner is considered to assume or
take subject to under Code Section 752); and (3) allocations to the Partner of
Partnership Losses (or items thereof). In all events, the Capital Account of
each Partner will be determined and maintained throughout the term of the
Partnership in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).
The General Partner, in its discretion, may elect to have the
Capital Accounts of the Partners adjusted to reflect a revaluation of
Partnership assets on the Partnership's books (the "Revaluation Adjustment") in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f).
Any Partner, including any additional or substitute Partner,
who acquires any interest in the Partnership or whose Partnership Interest is
increased by means of the transfer to him of all or part of the Partnership
Interest of another Partner, shall have a Capital Account which has been
appropriately established or adjusted to reflect such acquisition or transfer.
Any Partner who shall acquire any Partnership Interest by means of the transfer
to him of all or any part of the Partnership Interest of any other Partner
shall, with respect to the Percentage Interest so transferred, be deemed to be a
Partner of the same class as the transferor.
<PAGE>
The Partnership may, at the discretion of the General Partner
and as provided in the Shareholders= Agreement, borrow for Partnership purposes
at any time and from any source. No Limited Partner shall be liable for any
indebtedness of the Partnership or be required to contribute any capital or
74
to lend any funds to the Partnership other than its Capital
Contribution. If the allocation of Losses or distributions required or permitted
under this Agreement result in the reduction of a Limited Partner's Capital
Account, such reduction need not be restored. The General Partner shall have no
personal liability for the repayment of the Capital Contribution of any Limited
Partner.
No interest shall be paid on or with respect to the Capital
Contribution or the Capital Account of any Partner.
No Partner shall have the right to withdraw or reduce its
Capital Contribution.
RIGHTS, POWERS AND DUTIES OF PARTNERS
SECTION .1 Conduct of Partnership Business. The General Partner shall
use its best efforts to carry out the purposes, business and objectives of the
Partnership. Except as otherwise provided herein, all decisions with respect to
the management of the Partnership's business shall be made by the General
Partner as provided in the Shareholders= Agreement. The General Partner shall
have general responsibility for all aspects of the Partnership's business and
operations and which hereby is designated as the "tax matters partner" of the
Partnership within the meaning of Code Section 6231(a)(7).
Powers of the General Partner. Except as limited by the terms of the
Shareholders= Agreement, the General Partner shall have the necessary powers to
carry out the purposes, business and objectives of the Partnership, including,
without limitation, the right to cause a Refinancing or Sale of Assets to occur
without the approval of the other Partners, and, except as otherwise provided
herein or by the laws of the State of New Jersey, shall possess and enjoy all of
the rights and powers of a partner of a partnership without limited partners.
Except as limited by the terms of the Shareholders= Agreement, the General
Partner shall have the right and power to execute and deliver, on the
Partnership's behalf, evidences of indebtedness and documents granting security
for the payment thereof (with or without warrant of attorney to confess judgment
against the Partnership or its property). Without limiting the generality of the
foregoing, except as limited by the terms of the Shareholders= Agreement, the
General Partner shall have the power and authority and is specifically
authorized to grant a warrant of attorney to confess judgment against the
Partnership. The General Partner shall not permit the funds of the Partnership
to be commingled with those of any other entity.
Authority of the General Partner to Deal with Affiliates. Except as
limited by the terms of the Shareholders= Agreement, the General Partner may, on
behalf of the Partnership, perform, or agree, contract or arrange with any of
its Affiliates for the performance of services for the Partnership with
compensation to be paid for such services as if it or such Affiliate were an
independent contractor, at such rates and terms that independent contractors
would impose.
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<PAGE>
Duties and Obligations of the General Partner.
The General Partner shall take any and all actions which may
be reasonably necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State of New
Jersey.
The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any Federal,
state or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership.
The General Partner shall, from time to time, submit to any
appropriate state securities administrator or any other state agency such
documents, papers, information and reports as are required to be filed with or
submitted to such state securities administrator or any other state agency with
respect to the Partnership.
The General Partner shall, from time to time, prepare and file
all certificates (or amendments thereto) and other similar documents required by
law to be filed and recorded with respect to the Partnership for any reason, in
such office or offices as are required under the any applicable laws. The
General Partner shall do any and all other acts and things (including making
publications or periodic filings of this Agreement, any certificates or
amendments thereto or other similar documents) which may now or hereafter be
required or deemed by the General Partner to be necessary.
Limited Partners. Except as otherwise expressly provided elsewhere
herein, the Limited Partners shall not participate in the management of the
Partnership, have any control over the Partnership's business or assets or have
any right or authority to act for or obligate the Partnership.
Other Interests of Partners. The Partners, as well as Affiliates of the
Partners, may engage in any business or possess any interest in other businesses
of every nature and description, independently or with others, including owning
and operating pari-mutuel racetracks or participation in any other gaming
business activity. Neither the Partnership nor the Partners shall have any
rights in such independent ventures including, without limitation, any rights to
the income or profits thereof by virtue of having become Partners in the
Partnership. Each Partner conducts other related businesses outside of New
Jersey, including competing businesses, and this Agreement shall not apply to
any such other activities; nor shall it prevent the Partners from individually
engaging in additional activities both within and outside of New Jersey, other
than the ownership and operation of Freehold Raceway and Garden State Race Track
and OTB Facilities (as defined herein), including without limitation, the
ownership and operation of one or more additional racetracks, off-track betting
or phone betting operations in New Jersey or elsewhere, other than OTB
Facilities.
Title to Property and Partition. All property of the Partnership, whether
tangible or intangible, real, personal or mixed, shall be owned by the
Partnership as an entity and no Partner shall have any ownership interest in
such property in its individual name or right, and each Partner=s Partnership
Interest shall be personal property for all purposes. No 76 Partner, nor any
successor-in-interest to any Partner, shall have the right, while this Agreement
remains in effect, to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have any of
the property of the Partnership partitioned, and each of the Partners, on behalf
of itself and its successors, representatives and assigns, hereby irrevocably
waives any such right.
ALLOCATIONS
SECTION .1 Profits and Losses. Any Profits or Losses shall be allocated
among all of the Partners in accordance with, and in proportion to, their
respective Percentage Interests.
Allocation Upon Admission. Upon the admission of the Partners to the
Partnership, Profit and Loss during the month of admission shall be allocated
using the "monthly convention" (i.e., Partners admitted in a month are treated
as admitted on the first day of that month). If that method is determined to be
invalid for tax purposes, the allocation of Profit and Loss in such month shall
be made under any other permissible method which may be selected by the General
Partner taking into account its judgment of the best interests of the Limited
Partners as a class.
Tax Allocations: Code Section 704(c). Except as otherwise provided
herein, allocations of Profits and Losses for tax purposes shall be made in the
same manner as the allocations for book purposes described in Section 4.1 of
this Agreement. However, in accordance with Code Section 704(c) and the
Regulations thereunder, items of income, gain, loss and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the basis of the property and its fair market value at the
time the property was contributed to the Partnership.
Allocations to Reflect Capital Account Adjustments. Notwithstanding any
other provision hereof, in the event of a Revaluation Adjustment to the
Partners' Capital Accounts pursuant to Section 2.2(c) hereof, items of
depreciation, income, gain, loss or deduction with respect to the assets held by
the Partnership at the time of such Revaluation Adjustment shall be computed and
allocated for tax purposes in a manner which takes into account the variation
between the adjusted tax basis and the book value of such assets in a manner
consistent with Section 704(c) of the Code and Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
DISTRIBUTIONS
Distributions. Except as provided in Section 7.3 regarding liquidating
distributions, Net Cash Flow, as determined by the General Partner in accordance
with the terms of the Shareholders= Agreement, shall be distributed to the
Partners no less frequently than annually in accordance with their respective
Percentage Interests.
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Distribution of Proceeds from a Sale or Refinancing or Dissolution of
the Partnership. In the event of a sale of a portion of Partnership property
which does not cause the dissolution of the Partnership or a financing of
Partnership property, the General Partner may, in its sole and absolute
discretion, distribute all or a portion of the net cash proceeds therefrom to
the Partners in accordance with the Partners= Percentage Interest.
Limitation Upon Distributions. No distribution shall be declared and
paid unless, after the distribution is made, the assets of the Partnership
(valued at fair market value) are in excess of all liabilities of the
Partnership.
Reserves. The General Partners shall have the right to establish,
maintain and expend reserves for working capital, future investments, debt
service and such other purposes as they may deem necessary or advisable
(?Reserves").
CERTAIN CHANGES OF GENERAL PARTNER
Withdrawal of General Partner. The General Partner may not voluntarily
withdraw from the Partnership without the written consent or approval of the
Limited Partners. The Limited Partners shall not have the right to remove the
General Partner.
Changes of General Partner Generally. Any substitute general partner
shall, immediately upon admission as a general partner, become the owner of the
Partnership Interest of the general partner whose place it is taking.
TERMINATION, DISSOLUTION AND WINDING UP
No Termination. Except as otherwise provided herein or in the Shareholders=
Agreement, the Partnership shall not be terminated by the death, substitution,
admission or withdrawal of any Partner.
Termination.
The Partnership shall be terminated and dissolved and its
affairs wound up upon the first of the following to occur:
A Sale of Assets;
The withdrawal, dissolution or Bankruptcy of the
General Partner, unless, within sixty (60) days of
such event, Limited Partners owning sixty-seven
percent (67%) of the Percentage Interests owned by
all Partners elect a substitute general partner to
continue the Partnership's business and such
substitute general partner agrees in writing to
accept such election; or
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The determination of Limited Partners owning
sixty-seven percent (67%) or more of the Percentage
Interests owned by all Limited Partners, with or
without the General Partner's consent, that the
Partnership should be dissolved.
Notwithstanding anything herein to the contrary, upon a Sale
of Assets at a gain, where all or any portion of the consideration payable to
the Partnership is to be received by the Partnership more than ninety (90) days
after the date on which such Sale of Assets occurs, the Partnership shall
continue solely for purposes of collecting the deferred payments and making
distributions to the Partners.
SECTION .2 Dissolution and Winding Up. Upon the Partnership's
termination, the following steps shall be taken in the following order of
priority:
The Capital Account of each Partner shall be determined.
Profit or Loss to the date of termination, including realized gain or loss
(whether or not recognized for tax purposes) from a sale or other disposition,
the taking by eminent domain or the damage and destruction of all or
substantially all of the Partnership's assets, shall be allocated as set forth
in Article IV above and credited or charged to the Partners' Capital Accounts.
The Partnership shall be dissolved and its affairs shall be
wound up. All debts and obligations of the Partnership shall be paid, discharged
or provided for by setting up appropriate Reserves.
<PAGE>
The assets of the Partnership not required to pay, discharge
or provide for the Partnership's debts and obligations shall be distributed
among all Partners having positive Capital Accounts in the same proportion as
the positive Capital Account of each such Partner bears to the sum of all such
Partners' positive Capital Accounts.
PARTNERSHIP INTERESTS OF LIMITED PARTNERS
Additional Limited Partners. No Person shall be admitted to the
Partnership as a Limited Partner except upon a sale, transfer, assignment,
pledge, mortgage, hypothecation, or grant of a security interest or other
disposition by a Limited Partner of all or a portion of his Partnership Interest
(each a "Disposition") in accordance with this Article VIII or in accordance
with the terms of the Shareholders= Agreement, as herein defined.
Assignment.
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Except as provided in the Shareholders= Agreement, no
Partnership Interest of a Limited Partner or any portion thereof, or any
Percentage Interest of a Limited Partner in the Partnership, may be sold,
assigned, transferred, pledged, mortgaged, hypothecated, made subject to a
security interest or otherwise disposed of to any Person without the prior
written consent of the General Partner, which consent may be withheld in its
sole discretion. The Partners hereby acknowledge and agree that, notwithstanding
any general fiduciary duty that the General Partner may have as general partner
or otherwise, the General Partner, in its sole discretion, may withhold consent
to such sale, assignment, transfer, pledge, mortgage, hypothecation, grant of a
security interest or other disposition without any liability or accountability
to any Person. Any actual or attempted sale, assignment, transfer, pledge,
mortgage, hypothecation, grant of a security interest or other disposition by
any Limited Partner in violation of this Section 8.2(a) shall be null and void
and of no force or effect whatsoever. Each Limited Partner hereby acknowledges
the reasonableness of the restrictions imposed by this Section 8.2(a) in view of
the Partnership purposes and the relationship of the Partners. Accordingly, the
restrictions in this Section 8.2(a) shall be specifically enforceable. Neither
the Partnership nor any Partner shall be bound by: (i) any attempted disposition
or pledge, mortgage, hypothecation or grant of security interest which has not
been approved by the General Partner as required hereby; or (ii) a disposition,
pledge, mortgage, hypothecation or creation of a security interest which has
been consented to in writing by the General Partner until a counterpart of the
instrument accomplishing the same, executed and acknowledged by the parties
thereto, is delivered to the General Partner and the terms of Section 8.3 hereof
have been satisfied with respect to dispositions which result in the admission
of new Limited Partners.
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Substitution and Addition of Limited Partners.
No Person shall have the right to be admitted to the
Partnership as a Limited Partner unless all of the following conditions are
satisfied:
A fully executed and acknowledged written instrument
effectuating a Disposition has been filed with the
General Partner setting forth the intention of the
Limited Partner making the Disposition
("Transferor"), that his buyer, transferee or
assignee (each a "Transferee") become a Limited
Partner;
The Transferor and Transferee execute and acknowledge
such other instruments as the General Partner may
deem necessary or desirable to effect such admission,
including the written acceptance and adoption by the
Transferee of the provisions of this Agreement to
which the Transferor is a party, and the assumption
by the Transferee of all obligations of the
Transferor under this Agreement;
The Transferee has paid all reasonable expenses
incurred by the Partnership (including its legal
fees) in connection with its admission to the
Partnership, including but not limited to the cost of
the preparation, filing and publishing of any
amendment to the Certificate and any amendments of
filings under fictitious name registration statutes
or registration statutes lawfully required to qualify
the Partnership to do business in foreign
jurisdictions; and
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The General Partner has consented in writing to the
Transferee's admission to the Partnership as a
Limited Partner pursuant to Section 8.2 above or per
the Limited Partnership Interests in accordance with
section 2.2 of the Shareholders' Agreement.
Once the above conditions have been satisfied, the Transferee
shall become a Limited Partner on the first day of the next following calendar
month. Upon admission of a Limited Partner pursuant to the provisions of this
Article, the Partnership shall make all further distributions on account of the
Partnership Interests or Percentage Interests in the Partnership so assigned or
issued to such a Limited Partner for such time as the Partnership Interests or
Percentage Interests are designated on its books in accordance with the above
provisions. Any Transferee so admitted to the Partnership as a Limited Partner
shall be subject to all provisions of this Agreement to which his Transferor was
a party as if originally a party hereto and thereto.
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FISCAL MATTERS
Books and Records. The General Partner shall maintain full and accurate
books of the Partnership at the Partnership's principal place of business,
showing all receipts and expenditures, assets and liabilities, profits and
losses, and all other records necessary for recording the Partnership's business
and affairs, including those sufficient to record the allocations and
distributions. The books of the Partnership shall be kept on an accrual method
of accounting. During regular business hours and upon reasonable notice, each
Partner and his duly authorized representatives shall have access to and may
inspect and copy any of such books and records.
Fiscal Year. The fiscal year of the Partnership shall be the calendar year.
Reports.
Within ninety (90) days after the end of each fiscal year of
the Partnership, the General Partner shall furnish each Limited Partner with
such information as is necessary for the preparation of such Partner's income
tax returns.
Within one hundred twenty (120) days after the end of each
fiscal year of the Partnership, the General Partner shall furnish each Limited
Partner with an unaudited statement showing the income and expenses of the
Partnership for such fiscal year and the balance sheet of the Partnership as of
the end of such year, prepared by an independent certified public accountant
selected by the General Partner.
Bank Accounts. All funds of the Partnership shall be deposited in its
name in such checking and savings accounts or time deposits or certificates of
deposit as shall be designated by the General Partner from time to time.
Withdrawals therefrom shall be made upon such signature(s) as the General
Partner may designate.
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Accounting Decision. All decisions with respect to accounting matters
shall be made by the General Partner. The Partners agree that, for financial and
accounting purposes, the Partnership may elect to treat certain items
differently from the manner in which such items are treated for tax purposes.
For tax purposes, Capital Accounts shall be determined in accordance with tax
accounting principles in the same manner as the Partnership prepares its Federal
income tax return.
Income Tax Elections. Except as specifically provided to the contrary herein,
all decisions as to income tax matters shall be made by the General Partner.
The General Partner shall elect to claim the maximum deduction
allowed with respect to each item of cost recovery property of the Partnership.
The General Partner may, at any time, make or petition to
revoke (as the case may be) the election referred to in Code Section 754 or the
corresponding provision of any subsequent revenue act. Each Partner agrees in
the event of such an election to supply the Partnership with the information
necessary to give effect thereto.
Meetings. The General Partner shall not be required to call any annual
meetings of the Limited Partners. However, upon the request of Limited Partners
owning at least twenty-five (25%) of the Percentage Interests, the General
Partner shall promptly call an informational meeting of the Partners.
Documents. The General Partner shall not have an obligation to deliver
copies of any filed Partnership certificates or amendments thereof to any
Limited Partner unless otherwise specifically requested by such Limited Partner.
COMPENSATION FOR SERVICES
Compensation of the General Partner. Except as otherwise provided
herein, the General Partner (in its capacity as General Partner) shall receive
no compensation for its services to the Partnership. The General Partner shall
be entitled to be reimbursed for reasonable out-of-pocket expenses incurred in
connection with the business of the Partnership upon presentation of receipts or
other satisfactory evidence in support thereof.
GENERAL PROVISIONS
Notices. Except as otherwise provided in this Agreement, all notices,
consents, waivers, directions, requests, or other instruments or communications
provided for under this Agreement shall be in writing, signed by the party
giving the same and shall be deemed properly given only if sent by registered or
certified United States mail, return receipt requested, postage prepaid,
addressed: (a) in the case of the Partnership or the General Partner, as the
case may be, to the Partnership at its principal place of business set forth in
Schedule AA@, and (b) in the case of any Limited
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Partner, to such Limited Partner at its address set forth in Schedule
"A". Each Partner may, by notice to the Partnership, specify any other address
for the receipt of such instruments or communications. Any notice so given shall
be effective on the date on which it is mailed. In any case where the consent of
a Limited Partner shall be required, such consent shall be deemed to have been
given upon the failure of such Limited Partner to send notice withholding his
consent within thirty (30) days following the effective time of notice
requesting such consent. A copy of all notices and other communications given
hereunder by any Limited Partner shall be sent to the General Partner.
Indemnification and Limitation on Liability of the General Partner and
its Affiliates. The Partnership shall indemnify, defend and hold harmless the
General Partner and its officers, directors, employees and agents against any
claim, demand or liability (including without limitation, court costs and
attorneys' fees) incurred by it in connection with the business of the
Partnership, provided that the acts or omissions from which the claim, demand or
liability arises were performed or committed in the good faith belief that the
General Partner, through its officers, directors, employees or agents, was
acting within the scope of its authority and that it was not grossly negligent
or guilty of intentional misconduct. Neither the Partnership nor any Limited
Partner shall have any claim against the General Partner or its officers,
directors, employees or agents by reason of any act or omission of the General
Partner, or its officers, directors, employees or agents or by reason of any
disallowance by any taxing authority of any deduction or credit taken on any
Partnership tax return, provided that such act or omission of the General
Partner, through its officers, directors, employees or agents, was performed in
the good faith belief that it was acting within the scope of its authority, and
that it was not grossly negligent or guilty of intentional misconduct. The
General Partner may obtain, at the Partnership's expense, liability insurance
for the Partnership and the General Partner (and its officers, directors,
employees and agents), insuring against any of their acts, whether or not such
acts would be covered by the foregoing indemnification. The General Partner
shall not be liable for omitting to do any act which the General Partner is not
specifically required to do under this Agreement, and shall have no obligation
or liabilities, express or implied, to the Partnership or the other Partners,
except as specifically set forth in this Agreement.
Power of Attorney. Each Limited Partner irrevocably constitutes and
appoints the General Partner his true and lawful agent and attorney-in-fact, in
his name, place and stead, to make, execute, acknowledge and file:
this Agreement as required by the relevant provisions of the
Act and all amendments to this Agreement as required by the Act, including
amendments required for the admission or substitution of a Partner;
any cancellation of this Agreement as required by the relevant provisions of the
Act upon the termination of the Partnership;
any instruments or papers required to continue the business of the Partnership;
all such other instruments, documents and certificates which
may from time to time be required by the laws of the State of New Jersey, the
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United States of America or any other jurisdiction in which
the Partnership shall determine to do business (or any political subdivision or
agency thereof) to effectuate, implement, continue and defend the valid and
subsisting existence of the Partnership;
any and all amendments to Schedule "A" of this Agreement
necessary to admit or substitute a Limited Partner in accordance with Article
VIII above or to reflect a return of all or part of a Partner's Capital
Contribution; and
any business certificate, fictitious name certificate,
certificate of limited partnership, amendment thereto or other instrument or
document of any kind necessary to accomplish the business, purposes and
objectives of the Partnership in accordance with this Agreement.
It is expressly intended by the Limited Partners that the
foregoing power of attorney is coupled with an interest and that the power of
attorney shall survive any transfer or assignment by any Limited Partner of all
or any part of his Partnership Interest.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
Amendment of Partnership Agreement.
This Agreement may be amended with the consent of the General
Partner and with the consent of the Limited Partners owning at least sixty-seven
(67%) of the Partnership Interests owned by all Limited Partners (other than
Partnership Interest owned by the General Partner and/or any of its Affiliates,
if any of them also is a Limited Partner), provided, however, that no amendment
which has not been consented to by all the Limited Partners shall:
commit any Limited Partner to make additional contributions to the capital
of the Partnership in addition to the Capital Contributions required herein;
subject any Limited Partner to personal liability; or
alter the rights of the Limited Partners with respect
to the allocations and distributions set forth in
this Agreement.
In addition, amendments may be made to this Agreement from
time to time by the General Partner, without the consent of any of the Limited
Partners: (1) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to add any
other provisions with respect to matters or questions arising under this
Agreement which will not be inconsistent with the existing provisions of this
Agreement; (2) to add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General Partner
herein; or (3) to delete from or add to any provision hereof required to be so
deleted or added by a state "Blue Sky" commission, which addition or deletion is
deemed by such commission to be for the benefit or protection of the Limited
Partners; provided, however, that no amendment shall be adopted pursuant to this
Section unless the adoption thereof: (i) is for the benefit
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of or not adverse to the interests of the Limited Partners;
(ii) does not affect the distributions and allocations among the Limited
Partners or between the Limited Partners as a class and the General Partner; and
(iii) does not affect the limited liability of the Limited Partners or the
status of the Partnership as a partnership for Federal income tax purposes.
Limitation of Responsibility and Liability. No Partner, or any of its
Affiliates, shareholders, directors, officers, employees, or agents, will be
liable or responsible for the debts or obligations of any of the other Partners
or the Partnership.
Singular and Plural/Gender. Wherever from the context of this Agreement
it appears appropriate, each term stated in either the singular or the plural
shall include the singular or the plural, and pronouns stated in either the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter.
Severability. Invalidation or a holding of unenforceability of any
provision of this Agreement shall in no way affect any other provision hereof,
which other provisions shall remain in full force and effect.
Integration. This Agreement embodies the entire agreement and
understanding among the Partners relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
Applicable Law. This Agreement and the rights of the Partners shall be
governed by and construed and enforced in accordance with the laws of the State
of New Jersey.
Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Partners and their respective heirs, personal representatives,
successors and permitted assigns.
Headings. The descriptive headings of the Articles and Sections hereof are
inserted for convenience only and shall not affect the interpretation or meaning
thereof.
DEFINED TERMS
Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms used in this Agreement shall have the meanings
specified below:
AAct@ means the Revised Uniform Limited Partnership
Act as adopted in the State of New Jersey, as amended
from time to time.
"Affiliate" means (a) any Person directly or indirectly controlling,
controlled by or under common control
with another Person, (b) any Person owning or controlling ten percent (10%) or
more of the outstanding voting securities of such other Person, (c) any officer,
director, partner or trustee of such Person, and (d) if such other Person is an
officer, director, partner or trustee of a Person, the Person for which such
Person acts in any such capacity.
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"Bankruptcy" means, with respect to any Person, such Person making an
assignment for the benefit of creditors, becoming a party or subject to any
liquidation or dissolution action or proceeding with respect to such Person, the
institution of any bankruptcy, reorganization, insolvency or other proceeding
for the relief of financially distressed debtors with respect to such Person, or
a receiver, liquidator, custodian or trustee being appointed for such Person or
a substantial part of such Person=s assets and, if any of the same occur
involuntarily, the same is not dismissed, stayed or discharged within sixty (60)
days; or the entry of an order for relief against such Person under Title II of
the United States Code entitled "Bankruptcy"; or such Person taking any action
to effect, or which indicates its or his acquiescence in, any of the foregoing.
"Capital Account" means the amount of a Partner's Capital Contribution
adjusted for profits, losses and distributions as provided for in Section 2.2
hereof.
"Capital Contribution" means the cash and the agreed fair market value of
property contributed or deemed contributed by a Partner to the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended, and the
corresponding provisions of any future Internal Revenue law.
"Finance" or "Refinancing" means entering into any loan or modifying the
terms of any loan including, without limitation, any which is secured by a
mortgage, deed of trust or other similar lien on the property of the
Partnership.
AFreehold Raceway@ means that certain real property
and improvements located in Monmouth County, New Jersey
known as Freehold Raceway.
AGarden State Race Track@ means that certain real
property and improvements located in Camden County, New
Jersey known as Garden State Race Track.
ANet Cash Flow@ means, for any period, the excess, if any, of (a) the sum
of (1) the gross receipts of the Partnership (as determined in accordance with
the cash receipts and disbursements method of accounting) during such period,
but without regard to any amounts received by the Partnership as a result of a
Sale of Assets and any amounts released during such period by the General
Partner from any Reserves maintained by the Partnership, over (b) the sum of (1)
all expenditures of the Partnership (as determined under the aforesaid method of
accounting) during such period, (2) all amounts applied during such period in
payment of interest or principal on any borrowing of the Partnership, and (3)
any amount added during such period by the General Partner to Reserves for
working capital, contingencies, replacements, expansions, acquisitions, or other
expenditures of the Partnership. Net Cash Flow and releases or additions to the
Reserves shall be made or determined by the General Partner in its sole
discretion.
AOTB Facilities@ means the off-track betting facilities and phone betting
operations to be operated in New Jersey to the extent such off-track betting
facilities and phone betting operations are permitted by New Jersey legislation
to be conducted as a result of the holding of licenses to conduct racing at
Freehold Raceway and Garden State Race Track.
"Partnership Interest" means, in the case of any Partner, such Partner's
Capital Account, interest in the Profits and Losses and distributions of the
Partnership, voting rights and all
other rights which a party to this Agreement acquires hereby or by operation of
law.
"Percentage Interest" means the percentage interest of each Partner as set
forth on Schedule "A", as amended from time to time.
"Person" means any natural person, partnership, corporation, trust, limited
liability company, association
or other legal entity.
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AProfits@ and ALosses@ means, for any period, the amounts equal to the
corresponding items of income, gain, deductions, credits and losses in the
aggregate or separately stated, as appropriate, for such period, all determined
in accordance with generally accepted accounting principles consistently
applied.
AReserves@ shall have the meaning set forth in
Section 5.4 of this Agreement.
"Sale of Assets" means the sale or other disposition of all or
substantially all of the Partnership's assets. For purposes of this definition,
the phrase "other disposition" includes a taking of all or substantially all of
a property by eminent domain or the damage or destruction of all or
substantially all of such property.
AShareholders= Agreement@ means that Shareholders= Agreement made and
entered as of the __29 day of July, 1999, by, between, and among Greenwood
Racing, Inc., Pennwood Racing, Inc., Greenwood Limited Partner, Inc., Benstone
Partners, Penn National Holding Company, Penn National GSFR, Inc., and
Pennsylvania National Turf Club, Inc., as same may be amended from time to time.
ATreasury Regulation@ means the regulations promulgated by the Internal
Revenue Service, in accordance with the Internal Revenue Code of 1986, as
amended, and the corresponding provisions of any future Internal Revenue law.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ATTEST: GENERAL PARTNER:
PENNWOOD RACING, INC.
/s/Francis E. MCDonell_______ By:_/s/Harold G. Handel______
Francis E. McDonnell, Secretary Harold G. Handel, President
LIMITED PARTNER(S):
BENSTONE PARTNERS, a
Pennsylvania general partnership, by
its sole general partners
By: BENSALEM RACING ASSOCIATION, INC.
/s/Anthony D. Ricci By: /s/Harold G. Handel
Anthony D. Ricci Harold G. Handel
Secretary Chief Executive Officer
By: KEYSTONE TURF CLUB, INC.
/s/Anthony D. Ricci By: /s/Harold G. Handel
Anthony D. Ricci Harold G. Handel
Secretary Chief Executive Officer
PENNSYLVANIA NATIONAL TURF CLUB, INC.
_/s/John Limongelli___________ By: _/s/Robert S. Ippolito_______
Name: Name: Robert S. Ippolito
Title: Title: Secretary/Treaurer
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SCHEDULE "A"
TO
LIMITED PARTNERSHIP AGREEMENT
OF
FR PARK SERVICES, L.P.
Capital Percentage
Contribution Interest
GENERAL PARTNER:
Pennwood Racing, Inc. 1.00 .1%
c/o Greenwood Racing, Inc.
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
LIMITED PARTNER(S):
Benstone Partners
c/o Bensalem Racing Association, Inc. 499.50 49.95%
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
Pennsylvania National Turf Club, 499.50 49.95%
825 Berkshire Blvd.
Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
89
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
GS PARK RACING, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GS PARK
RACING, L.P. ("Agreement") is made as of July 29, 1999 by, between and among
PENNWOOD RACING, INC., a Delaware corporation whose address appears on Schedule
"A" attached hereto, as the general partner (the "General Partner"), and the
undersigned limited partners whose names and addresses appear on Schedule "A"
attached hereto as the limited partners (collectively referred to hereinafter as
the "Limited Partners"). This Agreement shall constitute the Limited Partnership
Agreement of GS PARK RACING, L.P. (the "Partnership"). The General Partner and
the Limited Partners are hereinafter individually referred to as "Partner" and
collectively referred to as the "Partners."
WHEREAS, Penn National GSFR, Inc. is being admitted as a Partner as of the date
hereof; and
WHEREAS, this Agreement replaces, amends and restates the Limited
Partnership Agreement entered into as of January 1, 1999.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, and intending to be legally bound hereby, the
Partners hereby agree as follows:
FORMATION, NAME, PLACE OF BUSINESS,
PURPOSES AND TERM OF PARTNERSHIP
Formation. The Partnership has been formed as a limited partnership pursuant to
the relevant provisions of the Act in the State of New Jersey.
SECTION .3 Name and Office. The name of the Partnership shall continue
to be "GS PARK RACING, L.P.", and its business shall continue to be conducted in
such name. The principal office and place of business of the Partnership shall
continue to be located at Route 70 & Haddonfield Road, Cherry Hill, New Jersey
08034, or at such other place as the General Partner may, from time to time,
determine. The address of the registered office and the name and address of the
registered agent for service of process shall continue to be Corporation Service
Company, 830 Bear Tavern Road, West Trenton, New Jersey 08628.
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Purposes, Business and Objectives.
The primary purpose of the Partnership is the ownership and
operation of (a) Freehold Raceway, (b) Garden State Race Track, and (c) OTB
Facilities. The Partnership shall possess and may exercise all the powers and
privileges now or hereafter granted by the Act or by any other law, together
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business,
purposes or activities of the Partnership, including, without limitation:
To enter into and perform contracts of any kind
necessary to, in connection with, or incidental to,
the accomplishment of the purposes of the
Partnership;
To acquire, construct, operate, maintain, improve,
manage, buy, own, sell, convey, assign, mortgage,
refinance, rent or lease any property, real or
personal, in fee or under lease, or any rights
therein or appurtenant thereto, necessary or
appropriate for the operation of the Partnership;
To borrow money from any source, including, but not
limited to, any Partner or their affiliates, and to
make, issue or execute any notes, drafts, loan
agreements, guaranties or other evidences of
indebtedness and to secure the same by mortgage,
pledge, assignment or other lien in all or any part
of the property of the Partnership;
To negotiate for and conclude an agreement or
agreements for the sale, exchange or other
disposition of all or any part of the Partnership's
property;
To hire and compensate employees, agents, independent contractors, attorneys and
accountants;
To carry on any other activities necessary to, in connection with, or incidental
to the foregoing, and
To form and establish any subsidiaries, partnerships,
or limited liability companies to be owned in whole
or in part by the Partnership, and to conduct
business through such subsidiaries, partnerships or
limited liability companies.
The Partnership shall not engage in any other business without
the prior consent of the General Partner.
CAPITAL
Capital of the Partnership. The capital of the Partnership is the
aggregate amount of cash and the agreed fair market value of property
contributed or deemed contributed by the Partners to the Partnership as set
forth in Schedule "A" attached hereto and made a part hereof. The capital
described on Schedule "A" represents the agreed upon fair market value of the
Partners' interest in the capital of the Partnership as of the date hereof.
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General Provisions.
Schedule AA@ shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the Percentage Interest of
any Partner arising from the transfer of any part of a Partnership Interest to
or by such Partner and any changes in the amounts contributed or agreed to be
contributed by any Partner. Notwithstanding the foregoing, no Partner shall be
permitted to withdraw or be admitted unless such admission or withdrawal is in
accordance with the terms of the Shareholders= Agreement.
A Capital Account shall be established for each Partner, and
shall be increased by: (1) the amount of money contributed by the Partner to the
Partnership; (2) the fair market value of property contributed by the Partner to
the Partnership (net of liabilities that the Partnership is considered to assume
or take subject to under Code Section 752); and (3) allocations to the Partner
of Partnership Profits (or items thereof). The Capital Account for each Partner
shall be decreased by: (1) the amount of money distributed to the Partner by the
Partnership; (2) the fair market value of property distributed to the Partner by
the Partnership (net of liabilities that such Partner is considered to assume or
take subject to under Code Section 752); and (3) allocations to the Partner of
Partnership Losses (or items thereof). In all events, the Capital Account of
each Partner will be determined and maintained throughout the term of the
Partnership in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).
The General Partner, in its discretion, may elect to have the
Capital Accounts of the Partners adjusted to reflect a revaluation of
Partnership assets on the Partnership's books (the "Revaluation Adjustment") in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f).
Any Partner, including any additional or substitute Partner,
who acquires any interest in the Partnership or whose Partnership Interest is
increased by means of the transfer to him of all or part of the Partnership
Interest of another Partner, shall have a Capital Account which has been
appropriately established or adjusted to reflect such acquisition or transfer.
Any Partner who shall acquire any Partnership Interest by means of the transfer
to him of all or any part of the Partnership Interest of any other Partner
shall, with respect to the Percentage Interest so transferred, be deemed to be a
Partner of the same class as the transferor.
The Partnership may, at the discretion of the General Partner
and as provided in the Shareholders= Agreement, borrow for Partnership purposes
at any time and from any source. No Limited Partner shall be liable for any
indebtedness of the Partnership or be required to contribute any capital or to
lend any funds to the Partnership other than its Capital Contribution. If the
allocation of Losses or distributions required or permitted under this Agreement
result in the reduction of a Limited Partner's Capital Account, such reduction
need not be restored. The General Partner shall have no personal liability for
the repayment of the Capital Contribution of any Limited Partner.
No interest shall be paid on or with respect to the Capital Contribution or the
Capital Account of any Partner.
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No Partner shall have the right to withdraw or reduce its
Capital Contribution.
RIGHTS, POWERS AND DUTIES OF PARTNERS
SECTION .1 Conduct of Partnership Business. The General Partner shall
use its best efforts to carry out the purposes, business and objectives of the
Partnership. Except as otherwise provided herein, all decisions with respect to
the management of the Partnership's business shall be made by the General
Partner as provided in the Shareholders= Agreement. The General Partner shall
have general responsibility for all aspects of the Partnership's business and
operations and which hereby is designated as the "tax matters partner" of the
Partnership within the meaning of Code Section 6231(a)(7).
Powers of the General Partner. Except as limited by the terms of the
Shareholders= Agreement, the General Partner shall have the necessary powers to
carry out the purposes, business and objectives of the Partnership, including,
without limitation, the right to cause a Refinancing or Sale of Assets to occur
without the approval of the other Partners, and, except as otherwise provided
herein or by the laws of the State of New Jersey, shall possess and enjoy all of
t powers of a partner of a partnership without limited partners. Except as
limited by the terms of the Shareholders= he rights and Agreement, the General
Partner shall have the right and power to execute and deliver, on the
Partnership's behalf, evidences of indebtedness and documents granting security
for the payment thereof (with or without warrant of attorney to confess judgment
against the Partnership or its property). Without limiting the generality of the
foregoing, except as limited by the terms of the Shareholders= Agreement, the
General Partner shall have the power and authority and is specifically
authorized to grant a warrant of attorney to confess judgment against the
Partnership. The General Partner shall not permit the funds of the Partnership
to be commingled with those of any other entity.
Authority of the General Partner to Deal with Affiliates. Except as
limited by the terms of the Shareholders= Agreement, the General Partner may, on
behalf of the Partnership, perform, or agree, contract or arrange with any of
its Affiliates for the performance of services for the Partnership with
compensation to be paid for such services as if it or such Affiliate were an
independent contractor, at such rates and terms that independent contractors
would impose.
Duties and Obligations of the General Partner.
The General Partner shall take any and all actions which may
be reasonably necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State of New
Jersey.
The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any Federal,
state or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership.
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The General Partner shall, from time to time, submit
to any appropriate state securities administrator or
any other state agency such documents, papers, information
and reports as are required to be filed with or
submitted to such state securities administrator or
any other state agency with respect to the
Partnership.
The General Partner shall, from time to time, prepare and file
all certificates (or amendments thereto) and other similar documents required by
law to be filed and recorded with respect to the Partnership for any reason, in
such office or offices as are required under the any applicable laws. The
General Partner shall do any and all other acts and things (including making
publications or periodic filings of this Agreement, any certificates or
amendments thereto or other similar documents) which may now or hereafter be
required or deemed by the General Partner to be necessary.
Limited Partners. Except as otherwise expressly provided elsewhere
herein, the Limited Partners shall not participate in the management of the
Partnership, have any control over the Partnership's business or assets or have
any right or authority to act for or obligate the Partnership.
Other Interests of Partners. The Partners, as well as Affiliates of the
Partners, may engage in any business or possess any interest in other businesses
of every nature and description, independently or with others, including owning
and operating pari-mutuel racetracks or participation in any other gaming
business activity. Neither the Partnership nor the Partners shall have any
rights in such independent ventures including, without limitation, any rights to
the income or profits thereof by virtue of having become Partners in the
Partnership. Each Partner conducts other related businesses outside of New
Jersey, including competing businesses, and this Agreement shall not apply to
any such other activities; nor shall it prevent the Partners from individually
engaging in additional activities both within and outside of New Jersey, other
than the ownership and operation of Freehold Raceway and Garden State Race Track
and OTB Facilities (as defined herein), including without limitation, the
ownership and operation of one or more additional racetracks, off-track betting
or phone betting operations in New Jersey or elsewhere, other than OTB
Facilities.
Title to Property and Partition. All property of the Partnership,
whether tangible or intangible, real, personal or mixed, shall be owned by the
Partnership as an entity and no Partner shall have any ownership interest in
such property in its individual name or right, and each Partner=s Partnership
Interest shall be personal property for all purposes. No Partner, nor any
successor-in-interest to any Partner, shall have the right, while this Agreement
remains in effect, to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have any of
the property of the Partnership partitioned, and each of the Partners, on behalf
of itself and its successors, representatives and assigns, hereby irrevocably
waives any such right.
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ALLOCATIONS
SECTION .1 Profits and Losses. Any Profits or Losses shall be allocated
among all of the Partners in accordance with, and in proportion to, their
respective Percentage Interests.
Allocation Upon Admission. Upon the admission of the Partners to the
Partnership, Profit and Loss during the month of admission shall be allocated
using the "monthly convention" (i.e., Partners admitted in a month are treated
as admitted on the first day of that month). If that method is determined to be
invalid for tax purposes, the allocation of Profit and Loss in such month shall
be made under any other permissible method which may be selected by the General
Partner taking into account its judgment of the best interests of the Limited
Partners as a class.
Tax Allocations: Code Section 704(c). Except as otherwise provided
herein, allocations of Profits and Losses for tax purposes shall be made in the
same manner as the allocations for book purposes described in Section 4.1 of
this Agreement. However, in accordance with Code Section 704(c) and the
Regulations thereunder, items of income, gain, loss and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the basis of the property and its fair market value at the
time the property was contributed to the Partnership.
Allocations to Reflect Capital Account Adjustments. Notwithstanding any
other provision hereof, in the event of a Revaluation Adjustment to the
Partners' Capital Accounts pursuant to Section 2.2(c) hereof, items of
depreciation, income, gain, loss or deduction with respect to the assets held by
the Partnership at the time of such Revaluation Adjustment shall be computed and
allocated for tax purposes in a manner which takes into account the variation
between the adjusted tax basis and the book value of such assets in a manner
consistent with Section 704(c) of the Code and Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
DISTRIBUTIONS
Distributions. Except as provided in Section 7.3 regarding liquidating
distributions, Net Cash Flow, as determined by the General Partner in accordance
with the terms of the Shareholders= Agreement, shall be distributed to the
Partners no less frequently than annually in accordance with their respective
Percentage Interests.
Distribution of Proceeds from a Sale or Refinancing or Dissolution of
the Partnership. In the event of a sale of a portion of Partnership property
which does not cause the dissolution of the Partnership or a financing of
Partnership property, the General Partner may, in its sole and absolute
discretion, distribute all or a portion of the net cash proceeds therefrom to
the Partners in accordance with the Partners= Percentage Interest.
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Limitation Upon Distributions. No distribution shall be declared and
paid unless, after the distribution is made, the assets of the Partnership
(valued at fair market value) are in excess of all liabilities of the
Partnership.
Reserves. The General Partners shall have the right to establish,
maintain and expend reserves for working capital, future investments, debt
service and such other purposes as they may deem necessary or advisable
(?Reserves").
CERTAIN CHANGES OF GENERAL PARTNER
Withdrawal of General Partner. The General Partner may not voluntarily
withdraw from the Partnership without the written consent or approval of the
Limited Partners. The Limited Partners shall not have the right to remove the
General Partner.
Changes of General Partner Generally. Any substitute general partner
shall, immediately upon admission as a general partner, become the owner of the
Partnership Interest of the general partner whose place it is taking.
TERMINATION, DISSOLUTION AND WINDING UP
No Termination. Except as otherwise provided herein or in the Shareholders=
Agreement, the Partnership shall not be
terminated by the death, substitution, admission or withdrawal of any Partner.
Termination.
The Partnership shall be terminated and dissolved and its
affairs wound up upon the first of the following to occur:
A Sale of Assets;
The withdrawal, dissolution or Bankruptcy of the
General Partner, unless, within sixty (60) days of
such event, Limited Partners owning sixty-seven
percent (67%) of the Percentage Interests owned by
all Partners elect a substitute general partner to
continue the Partnership's business and such
substitute general partner agrees in writing to
accept such election; or
The determination of Limited Partners owning
sixty-seven percent (67%) or more of the Percentage
Interests owned by all Limited Partners, with or
without the General Partner's consent, that the
Partnership should be dissolved.
Notwithstanding anything herein to the contrary, upon a Sale
of Assets at a gain, where all or any portion of the consideration payable to
the Partnership is to be received by the Partnership more than ninety (90) days
after the date on which such Sale of Assets occurs, the Partnership shall
continue solely for purposes of collecting the deferred payments and making
distributions to the Partners.
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SECTION .2 Dissolution and Winding Up. Upon the Partnership's
termination, the following steps shall be taken in the following order of
priority:
The Capital Account of each Partner shall be determined.
Profit or Loss to the date of termination, including realized gain or loss
(whether or not recognized for tax purposes) from a sale or other disposition,
the taking by eminent domain or the damage and destruction of all or
substantially all of the Partnership's assets, shall be allocated as set forth
in Article IV above and credited or charged to the Partners' Capital Accounts.
The Partnership shall be dissolved and its affairs shall be
wound up. All debts and obligations of the Partnership shall be paid, discharged
or provided for by setting up appropriate Reserves.
The assets of the Partnership not required to pay, discharge
or provide for the Partnership's debts and obligations shall be distributed
among all Partners having positive Capital Accounts in the same proportion as
the positive Capital Account of each such Partner bears to the sum of all such
Partners' positive Capital Accounts.
PARTNERSHIP INTERESTS OF LIMITED PARTNERS
Additional Limited Partners. No Person shall be admitted to the
Partnership as a Limited Partner except upon a sale, transfer, assignment,
pledge, mortgage, hypothecation or grant of a security interest or other
disposition by a Limited Partner of all or a portion of his Partnership Interest
(each a "Disposition") in accordance with this Article VIII or in accordance
with the terms of the Shareholders= Agreement, as herein defined.
Assignment.
Except as provided in the Shareholders= Agreement, no Partnership Interest
of a Limited Partner or any portion thereof, or any Percentage Interest of a
Limited Partner in the Partnership, may be sold, assigned, transferred, pledged,
mortgaged, hypothecated, made subject to a security interest or otherwise
disposed of to any Person without the prior written consent of the General
Partner, which consent may be withheld in its sole discretion. The Partners
hereby acknowledge and agree that, notwithstanding any general fiduciary duty
that the General Partner may have as general partner or otherwise, the General
Partner, in its sole discretion, may withhold consent to such sale, assignment,
transfer, pledge, mortgage, hypothecation, grant of a security interest or other
disposition without any liability or accountability to any Person. Any actual or
attempted sale, assignment, transfer, pledge, mortgage, hypothecation, grant of
a security interest or other disposition by any Limited Partner in violation of
this Section 8.2(a) shall be null and void and of no force or effect whatsoever.
Each Limited Partner hereby acknowledges the reasonableness of the restrictions
imposed by this Section 8.2(a) in view of the Partnership purposes and the
relationship of the Partners. Accordingly, the restrictions in this Section
8.2(a) shall be specifically enforceable.
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Neither the Partnership nor any Partner shall be bound by: (i)
any attempted disposition or pledge, mortgage, hypothecation or grant of
security interest which has not been approved by the General Partner as required
hereby; or (ii) a disposition, pledge, mortgage, hypothecation or creation of a
security interest which has been consented to in writing by the General Partner
until a counterpart of the instrument accomplishing the same, executed and
acknowledged by the parties thereto, is delivered to the General Partner and the
terms of Section 8.3 hereof have been satisfied with respect to dispositions
which result in the admission of new Limited Partners.
Substitution and Addition of Limited Partners.
No Person shall have the right to be admitted to the
Partnership as a Limited Partner unless all of the following conditions are
satisfied:
A fully executed and acknowledged written instrument
effectuating a Disposition has been filed with the
General Partner setting forth the intention of the
Limited Partner making the Disposition
("Transferor"), that his buyer, transferee or
assignee (each a "Transferee") become a Limited
Partner;
The Transferor and Transferee execute and acknowledge
such other instruments as the General Partner may
deem necessary or desirable to effect such admission,
including the written acceptance and adoption by the
Transferee of the provisions of this Agreement to
which the Transferor is a party, and the assumption
by the Transferee of all obligations of the
Transferor under this Agreement;
The Transferee has paid all reasonable expenses
incurred by the Partnership (including its legal
fees) in connection with its admission to the
Partnership, including but not limited to the cost of
the preparation, filing and publishing of any
amendment to the Certificate and any amendments of
filings under fictitious name registration statutes
or registration statutes lawfully required to qualify
the Partnership to do business in foreign
jurisdictions; and
The General Partner has consented in writing to the
Transferee's admission to the Partnership as a
Limited Partner pursuant to Section 8.2 above or per
the Limited Partnership Interests in accordance with
section 2.2 of the Shareholders' Agreement.
Once the above conditions have been satisfied, the Transferee
shall become a Limited Partner on the first day of the next following calendar
month. Upon admission of a Limited Partner pursuant to the provisions of this
Article, the Partnership shall make all further distributions on account of the
Partnership Interests or Percentage Interests in the Partnership so assigned or
issued to such a Limited Partner for such time as the Partnership Interests or
Percentage Interests are designated on its books in accordance with the above
provisions. Any Transferee so admitted to the Partnership as a Limited Partner
shall be subject to all provisions of this Agreement to which his Transferor was
a party as if originally a party hereto and thereto.
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FISCAL MATTERS
Books and Records. The General Partner shall maintain full and accurate
books of the Partnership at the Partnership's principal place of business,
showing all receipts and expenditures, assets and liabilities, profits and
losses, and all other records necessary for recording the Partnership's business
and affairs, including those sufficient to record the allocations and
distributions. The books of the Partnership shall be kept on an accrual method
of accounting. During regular business hours and upon reasonable notice, each
Partner and his duly authorized representatives shall have access to and may
inspect and copy any of such books and records.
Fiscal Year. The fiscal year of the Partnership shall be the calendar year.
Reports.
Within ninety (90) days after the end of each fiscal year of
the Partnership, the General Partner shall furnish each Limited Partner with
such information as is necessary for the preparation of such Partner's income
tax returns.
Within one hundred twenty (120) days after the end of each
fiscal year of the Partnership, the General Partner shall furnish each Limited
Partner with an unaudited statement showing the income and expenses of the
Partnership for such fiscal year and the balance sheet of the Partnership as of
the end of such year, prepared by an independent certified public accountant
selected by the General Partner.
Bank Accounts. All funds of the Partnership shall be deposited in its
name in such checking and savings accounts or time deposits or certificates of
deposit as shall be designated by the General Partner from time to time.
Withdrawals therefrom shall be made upon such signature(s) as the General
Partner may designate.
Accounting Decision. All decisions with respect to accounting matters
shall be made by the General Partner. The Partners agree that, for financial and
accounting purposes, the Partnership may elect to treat certain items
differently from the manner in which such items are treated for tax purposes.
For tax purposes, Capital Accounts shall be determined in accordance with tax
accounting principles in the same manner as the Partnership prepares its Federal
income tax return.
Income Tax Elections. Except as specifically provided to the contrary herein,
all decisions as to income tax matters shall be made by the General Partner.
The General Partner shall elect to claim the maximum deduction
allowed with respect to each item of cost recovery property of the Partnership.
The General Partner may, at any time, make or petition to
revoke (as the case may be) the election referred to in Code Section 754 or the
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corresponding provision of any subsequent revenue act. Each
Partner agrees in the event of such an election to supply the Partnership with
the information necessary to give effect thereto.
Meetings. The General Partner shall not be required to call any annual
meetings of the Limited Partners. However, upon the request of Limited Partners
owning at least twenty-five percent (25%) of the Percentage Interests, the
General Partner shall promptly call an informational meeting of the Partners.
Documents. The General Partner shall not have an obligation to deliver
copies of any filed Partnership certificates or amendments thereof to any
Limited Partner unless otherwise specifically requested by such Limited Partner.
COMPENSATION FOR SERVICES
Compensation of the General Partner. Except as otherwise provided
herein, the General Partner (in its capacity as General Partner) shall receive
no compensation for its services to the Partnership. The General Partner shall
be entitled to be reimbursed for reasonable out-of-pocket expenses incurred in
connection with the business of the Partnership upon presentation of receipts or
other satisfactory evidence in support thereof.
GENERAL PROVISIONS
Notices. Except as otherwise provided in this Agreement, all notices,
consents, waivers, directions, requests, or other instruments or communications
provided for under this Agreement shall be in writing, signed by the party
giving the same and shall be deemed properly given only if sent by registered or
certified United States mail, return receipt requested, postage prepaid,
addressed: (a) in the case of the Partnership or the General Partner, as the
case may be, to the Partnership at its principal place of business set forth in
Schedule AA@, and (b) in the case of any Limited Partner, to such Limited
Partner at its address set forth in Schedule "A". Each Partner may, by notice to
the Partnership, specify any other address for the receipt of such instruments
or communications. Any notice so given shall be effective on the date on which
it is mailed. In any case where the consent of a Limited Partner shall be
required, such consent shall be deemed to have been given upon the failure of
such Limited Partner to send notice withholding his consent within thirty (30)
days following the effective time of notice requesting such consent. A copy of
all notices and other communications given hereunder by any Limited Partner
shall be sent to the General Partner.
Indemnification and Limitation on Liability of the General Partner and
its Affiliates. The Partnership shall indemnify, defend and hold harmless the
General Partner and its officers, directors, employees and agents against any
claim, demand or liability (including without limitation, court costs and
attorneys' fees) incurred by it in connection with the business of the
Partnership, provided that the acts or omissions from which the claim, demand or
liability arises were performed or committed in the good faith belief that the
General Partner, through its officers, directors, employees or agents, was
acting within the scope of its authority and that it was not grossly negligent
or guilty of intentional misconduct. Neither the Partnership nor
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any Limited Partner shall have any claim against the General Partner or
its officers, directors, employees or agents by reason of any act or omission of
the General Partner, or its officers, directors, employees or agents or by
reason of any disallowance by any taxing authority of any deduction or credit
taken on any Partnership tax return, provided that such act or omission of the
General Partner, through its officers, directors, employees or agents, was
performed in the good faith belief that it was acting within the scope of its
authority, and that it was not grossly negligent or guilty of intentional
misconduct. The General Partner may obtain, at the Partnership's expense,
liability insurance for the Partnership and the General Partner (and its
officers, directors, employees and agents), insuring against any of their acts,
whether or not such acts would be covered by the foregoing indemnification. The
General Partner shall not be liable for omitting to do any act which the General
Partner is not specifically required to do under this Agreement, and shall have
no obligation or liabilities, express or implied, to the Partnership or the
other Partners, except as specifically set forth in this Agreement.
Power of Attorney. Each Limited Partner irrevocably constitutes and
appoints the General Partner his true and lawful agent and attorney-in-fact, in
his name, place and stead, to make, execute, acknowledge and file:
this Agreement as required by the relevant provisions of the
Act and all amendments to this Agreement as required by the Act, including
amendments required for the admission or substitution of a Partner;
any cancellation of this Agreement as required by the relevant provisions of the
Act upon the termination of the
Partnership;
any instruments or papers required to continue the business of the
Partnership;
all such other instruments, documents and certificates which
may from time to time be required by the laws of the State of New Jersey, the
United States of America or any other jurisdiction in which the Partnership
shall determine to do business (or any political subdivision or agency thereof)
to effectuate, implement, continue and defend the valid and subsisting existence
of the Partnership;
any and all amendments to Schedule "A" of this Agreement
necessary to admit or substitute a Limited Partner in accordance with Article
VIII above or to reflect a return of all or part of a Partner's Capital
Contribution; and
any business certificate, fictitious name certificate,
certificate of limited partnership, amendment thereto or other instrument or
document of any kind necessary to accomplish the business, purposes and
objectives of the Partnership in accordance with this Agreement.
It is expressly intended by the Limited Partners that the
foregoing power of attorney is coupled with an interest and that the power of
attorney shall survive any transfer or assignment by any Limited Partner of all
or any part of his Partnership Interest.
Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which
taken together shall constitute one and the same instrument.
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Amendment of Partnership Agreement.
This Agreement may be amended with the consent of the General
Partner and with the consent of the Limited Partners owning at least sixty-seven
percent (67%) of the Partnership Interests owned by all Limited Partners (other
than Partnership Interest owned by the General Partner and/or any of its
Affiliates, if any of them also is a Limited Partner), provided, however, that
no amendment which has not been consented to by all the Limited Partners shall:
commit any Limited Partner to make additional contributions to the capital
of the Partnership in addition to the Capital Contributions required herein;
subject any Limited Partner to personal liability; or
alter the rights of the Limited Partners with respect
to the allocations and distributions set forth in
this Agreement.
In addition, amendments may be made to this Agreement from
time to time by the General Partner, without the consent of any of the Limited
Partners: (1) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to add any
other provisions with respect to matters or questions arising under this
Agreement which will not be inconsistent with the existing provisions of this
Agreement; (2) to add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General Partner
herein; or (3) to delete from or add to any provision hereof required to be so
deleted or added by a state "Blue Sky" commission, which addition or deletion is
deemed by such commission to be for the benefit or protection of the Limited
Partners; provided, however, that no amendment shall be adopted pursuant to this
Section unless the adoption thereof: (i) is for the benefit of or not adverse to
the interests of the Limited Partners; (ii) does not affect the distributions
and allocations among the Limited Partners or between the Limited Partners as a
class and the General Partner; and (iii) does not affect the limited liability
of the Limited Partners or the status of the Partnership as a partnership for
Federal income tax purposes.
Limitation of Responsibility and Liability. No Partner, or any of its
Affiliates, shareholders, directors, officers, employees, or agents, will be
liable or responsible for the debts or obligations of any of the other Partners
or the Partnership.
Singular and Plural/Gender. Wherever from the context of this Agreement
it appears appropriate, each term stated in either the singular or the plural
shall include the singular or the plural, and pronouns stated in either the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter.
Severability. Invalidation or a holding of unenforceability of any
provision of this Agreement shall in no way affect any other provision hereof,
which other provisions shall remain in full force and effect.
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Integration. This Agreement embodies the entire agreement and
understanding among the Partners relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
Applicable Law. This Agreement and the rights of the Partners shall be
governed by and construed and enforced in accordance with the laws of the State
of New Jersey.
Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Partners and their respective heirs, personal representatives,
successors and permitted assigns.
Headings. The descriptive headings of the Articles and Sections hereof are
inserted for convenience only and shall not
affect the interpretation or meaning thereof.
DEFINED TERMS
Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms used in this Agreement shall have the meanings
specified below:
AAct@ means the Revised Uniform Limited Partnership
Act as adopted in the State of New Jersey, as amended
from time to time.
"Affiliate" means (a) any Person directly or indirectly controlling,
controlled by or under common control with another Person, (b) any Person owning
or controlling ten percent (10%) or more of the outstanding voting securities of
such other Person, (c) any officer, director, partner or trustee of such Person,
and (d) if such other Person is an officer, director, partner or trustee of a
Person, the Person for which such Person acts in any such capacity.
"Bankruptcy" means, with respect to any Person, such Person making an
assignment for the benefit of creditors, becoming a party or subject to any
liquidation or dissolution action or proceeding with respect to such Person, the
institution of any bankruptcy, reorganization, insolvency or other proceeding
for the relief of financially distressed debtors with respect to such Person, or
a receiver, liquidator, custodian or trustee being appointed for such Person or
a substantial part of such Person=s assets and, if any of the same occur
involuntarily, the same is not dismissed, stayed or discharged within sixty (60)
days; or the entry of an order for relief against such Person under Title II of
the United States Code entitled "Bankruptcy"; or such Person taking any action
to effect, or which indicates its or his acquiescence in, any of the foregoing.
"Capital Account" means the amount of a Partner's Capital Contribution
adjusted for profits, losses and distributions as provided for in Section 2.2
hereof.
"Capital Contribution" means the cash and the agreed fair market value of
property contributed or deemed
contributed by a Partner to the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended, and the
corresponding provisions of any future Internal Revenue law.
"Finance" or "Refinancing" means entering into any loan or modifying the
terms of any loan including,
without limitation, any which is secured by a mortgage, deed of trust or other
similar lien on the property of the Partnership.
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AFreehold Raceway@ means that certain real property
and improvements located in Monmouth County, New Jersey
known as Freehold Raceway.
AGarden State Race Track@ means that certain real
property and improvements located in Camden County, New
Jersey known as Garden State Race Track.
ANet Cash Flow@ means, for any period, the excess, if any, of (a) the sum
of (1) the gross receipts of the Partnership (as determined in accordance with
the cash receipts and disbursements method of accounting) during such period,
but without regard to any amounts received by the Partnership as a result of a
Sale of Assets and any amounts released during such period by the General
Partner from any Reserves maintained by the Partnership, over (b) the sum of (1)
all expenditures of the Partnership (as determined under the aforesaid method of
accounting) during such period, (2) all amounts applied during such period in
payment of interest or principal on any borrowing of the Partnership, and (3)
any amount added during such period by the General Partner to Reserves for
working capital, contingencies, replacements, expansions, acquisitions, or other
expenditures of the Partnership. Net Cash Flow and releases or additions to the
Reserves shall be made or determined by the General Partner in its sole
discretion.
AOTB Facilities@ means the off-track betting facilities and phone betting
operations to be operated in New Jersey to the extent such off-track betting
facilities and phone betting operations are permitted by New Jersey legislation
to be conducted as a result of the holding of licenses to conduct racing at
Freehold Raceway and Garden State Race Track.
"Partnership Interest" means, in the case of any Partner, such Partner's
Capital Account, interest in the
Profits and Losses and distributions of the Partnership, voting rights and all
other rights which a party to this Agreement acquires hereby or by operation of
law.
"Percentage Interest" means the percentage interest of each Partner as set
forth on Schedule "A", as amended from time to time.
"Person" means any natural person, partnership, corporation, trust, limited
liability company, association or other legal entity.
AProfits@ and ALosses@ means, for any period, the amounts equal to the
corresponding items of income, gain, deductions, credits and losses in the
aggregate or separately stated, as appropriate, for such period, all determined
in accordance with generally accepted accounting principles consistently
applied.
AReserves@ shall have the meaning set forth in
Section 5.4 of this Agreement.
"Sale of Assets" means the sale or other disposition of all or
substantially all of the Partnership's assets. For purposes of this definition,
the phrase "other disposition" includes a taking of all or substantially all of
a property by eminent domain or the damage or destruction of all or
substantially all of such property.
AShareholders= Agreement@ means that Shareholders= Agreement made and
entered as of the ____ day of July, 1999, by, between, and among Greenwood
Racing, Inc., Pennwood Racing, Inc., Greenwood Limited Partner, Inc., Benstone
Partners, Penn National Holding Company, Penn National GSFR, Inc., and
Pennsylvania National Turf Club, Inc., as same may be amended from time to time.
ATreasury Regulation@ means the regulations promulgated by the Internal
Revenue Service, in accordance with the Internal Revenue Code of 1986, as
amended, and the corresponding provisions of any future Internal Revenue law.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ATTEST: GENERAL PARTNER:
PENNWOOD RACING, INC.
_/s/Francis E. McDonnell By:_/s/Harold G. Handel______
Francis E. McDonnell, Secretary Harold G. Handel, President
LIMITED PARTNER(S):
GREENWOOD LIMITED PARTNER, INC.
/s/Francis E. McDonnell By: /s/Harold G. Handel
Francis E. McDonnell, Secretary Harold G. Handel, President
PENN NATIONAL GSFR, INC.
/s/John Limongelli By: _/s/Robert S. Ippolito_
Name: John Limongelli Name: Robert S. Ippolito
Title: Secretary/Treasurer
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SCHEDULE "A"
TO
LIMITED PARTNERSHIP AGREEMENT
OF
GS PARK RACING, L.P.
Capital Percentage
Contribution Interest
GENERAL PARTNER:
Pennwood Racing, Inc. $1.00 .1%
c/o Greenwood Racing, Inc.
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
LIMITED PARTNER(S):
Greenwood Limited Partner, Inc. $499.50 49.95%
c/o Greenwood Racing, Inc.
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
Penn National GSFR, Inc. $499.50 49.95%
825 Berkshire Blvd.
Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
106
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
GS PARK SERVICES, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GS PARK
SERVICES, L.P. ("Agreement") is made as of July _29, 1999 by, between and among
PENNWOOD RACING, INC., a Delaware corporation whose address appears on Schedule
"A" attached hereto, as the general partner (the "General Partner"), and the
undersigned limited partners whose names and addresses appear on Schedule "A"
attached hereto as the limited partners (collectively referred to hereinafter as
the "Limited Partners"). This Agreement shall constitute the Limited Partnership
Agreement of GS PARK SERVICES, L.P. (the "Partnership"). The General Partner and
the Limited Partners are hereinafter individually referred to as "Partner" and
collectively referred to as the "Partners."
WHEREAS, Pennsylvania National Turf Club, Inc. is being admitted as a
Partner as of the date hereof; and
WHEREAS, this Agreement replaces, amends and restates the Limited
Partnership Agreement entered into as of January 1, 1999.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, and intending to be legally bound hereby, the
Partners hereby agree as follows:
FORMATION, NAME, PLACE OF BUSINESS,
PURPOSES AND TERM OF PARTNERSHIP
Formation. The Partnership has been formed as a limited partnership
pursuant to the relevant provisions of the Act in the State of New Jersey.
SECTION .3 Name and Office. The name of the Partnership shall continue
to be "GS PARK SERVICES, L.P.", and its business shall continue to be conducted
in such name. The principal office and place of business of the Partnership
shall continue to be located at Route 70 & Haddonfield Road, Cherry Hill, New
Jersey 08034, or at such other place as the General Partner may, from time to
time, determine. The address of the registered office and the name and address
of the registered agent for service of process shall continue to be Corporation
Service Company, 830 Bear Tavern Road, West Trenton, New Jersey 08628.
Purposes, Business and Objectives.
The primary purpose of the Partnership is to provide
employment and personnel services in connection with the ownership and operation
of Garden State Race Track. The Partnership shall possess and may exercise all
the powers and privileges now or hereafter granted by the Act or by any other
law, together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion or attainment
of the business, purposes or activities of the Partnership, including, without
limitation:
To enter into and perform contracts of any kind
necessary to, in connection with, or incidental to,
the accomplishment of the purposes of the
Partnership;
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To acquire, construct, operate, maintain, improve,
manage, buy, own, sell, convey, assign, mortgage,
refinance, rent or lease any property, real or
personal, in fee or under lease, or any rights
therein or appurtenant thereto, necessary or
appropriate for the operation of the Partnership;
To borrow money from any source, including, but not
limited to, any Partner or their affiliates, and to
make, issue or execute any notes, drafts, loan
agreements, guaranties or other evidences of
indebtedness and to secure the same by mortgage,
pledge, assignment or other lien in all or any part
of the property of the Partnership;
To negotiate for and conclude an agreement or
agreements for the sale, exchange or other
disposition of all or any part of the Partnership's
property;
To hire and compensate employees, agents, independent contractors,
attorneys and accountants;
To carry on any other activities necessary to, in connection with, or
incidental to the foregoing, and
To form and establish any subsidiaries, partnerships,
or limited liability companies to be owned in whole
or in part by the Partnership, and to conduct
business through such subsidiaries, partnerships or
limited liability companies.
The Partnership shall not engage in any other business without
the prior consent of the General Partner.
CAPITAL
Capital of the Partnership. The capital of the Partnership is the
aggregate amount of cash and the agreed fair market value of property
contributed or deemed contributed by the Partners to the Partnership as set
forth in Schedule "A" attached hereto and made a part hereof. The capital
described on Schedule "A" represents the agreed upon fair market value of the
Partners' interest in the capital of the Partnership as of the date hereof.
General Provisions.
Schedule AA@ shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the Percentage Interest of
any Partner arising from the transfer of any part of a Partnership Interest to
or by such Partner and any changes in the amounts contributed or agreed to be
contributed by any Partner. Notwithstanding the foregoing, no Partner shall be
permitted to withdraw or be admitted unless such admission or withdrawal is in
accordance with the terms of the Shareholders= Agreement.
A Capital Account shall be established for each Partner, and
shall be increased by: (1) the amount of money contributed by the Partner to the
Partnership; (2) the fair market value of property contributed by the Partner to
the Partnership (net of liabilities that the Partnership is considered to assume
or take subject to under Code Section 752); and (3) allocations to the Partner
of Partnership Profits (or items thereof). The Capital Account for each Partner
shall be decreased by: (1) the amount of money distributed to the Partner by the
Partnership; (2) the fair market
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value of property distributed to the Partner by the Partnership (net of
liabilities that such Partner is considered to assume or take subject to under
Code Section 752); and (3) allocations to the Partner of Partnership Losses (or
items thereof). In all events, the Capital Account of each Partner will be
determined and maintained throughout the term of the Partnership in accordance
with Treasury Regulation Section 1.704-1(b)(2)(iv).
The General Partner, in its discretion, may elect to have the
Capital Accounts of the Partners adjusted to reflect a revaluation of
Partnership assets on the Partnership's books (the "Revaluation Adjustment") in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f).
Any Partner, including any additional or substitute Partner,
who acquires any interest in the Partnership or whose Partnership Interest is
increased by means of the transfer to him of all or part of the Partnership
Interest of another Partner, shall have a Capital Account which has been
appropriately established or adjusted to reflect such acquisition or transfer.
Any Partner who shall acquire any Partnership Interest by means of the transfer
to him of all or any part of the Partnership Interest of any other Partner
shall, with respect to the Percentage Interest so transferred, be deemed to be a
Partner of the same class as the transferor.
The Partnership may, at the discretion of the General Partner
and as provided in the Shareholders= Agreement, borrow for Partnership purposes
at any time and from any source. No Limited Partner shall be liable for any
indebtedness of the Partnership or be required to contribute any capital or to
lend any funds to the Partnership other than its Capital Contribution. If the
allocation of Losses or distributions required or permitted under this Agreement
result in the reduction of a Limited Partner's Capital Account, such reduction
need not be restored. The General Partner shall have no personal liability for
the repayment of the Capital Contribution of any Limited Partner.
No interest shall be paid on or with respect to the Capital
Contribution or the Capital Account of any Partner.
No Partner shall have the right to withdraw or reduce its
Capital Contribution.
RIGHTS, POWERS AND DUTIES OF PARTNERS
SECTION .1 Conduct of Partnership Business. The General Partner shall
use its best efforts to carry out the purposes, business and objectives of the
Partnership. Except as otherwise provided herein, all decisions with respect to
the management of the Partnership's business shall be made by the General
Partner as provided in the Shareholders= Agreement. The General Partner shall
have general responsibility for all aspects of the Partnership's business and
operations and which hereby is designated as the "tax matters partner" of the
Partnership within the meaning of Code Section 6231(a)(7).
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Powers of the General Partner. Except as limited by the terms of the
Shareholders= Agreement, the General Partner shall have the necessary powers to
carry out the purposes, business and objectives of the Partnership, including,
without limitation, the right to cause a Refinancing or Sale of Assets to occur
without the approval of the other Partners, and, except as otherwise provided
herein or by the laws of the State of New Jersey, shall possess and enjoy all of
the rights and powers of a partner of a partnership without limited partners.
Except as limited by the terms of the Shareholders= Agreement, the General
Partner shall have the right and power to execute and deliver, on the
Partnership's behalf, evidences of indebtedness and documents granting security
for the payment thereof (with or without warrant of attorney to confess judgment
against the Partnership or its property). Without limiting the generality of the
foregoing, except as limited by the terms of the Shareholders= Agreement, the
General Partner shall have the power and authority and is specifically
authorized to grant a warrant of attorney to confess judgment against the
Partnership. The General Partner shall not permit the funds of the Partnership
to be commingled with those of any other entity.
Authority of the General Partner to Deal with Affiliates. Except as
limited by the terms of the Shareholders= Agreement, the General Partner may, on
behalf of the Partnership, perform, or agree, contract or arrange with any of
its Affiliates for the performance of services for the Partnership with
compensation to be paid for such services as if it or such Affiliate were an
independent contractor, at such rates and terms that independent contractors
would impose.
Duties and Obligations of the General Partner.
The General Partner shall take any and all actions which may
be reasonably necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State of New
Jersey.
The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any Federal,
state or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership.
The General Partner shall, from time to time, submit to any
appropriate state securities administrator or any other state agency such
documents, papers, information and reports as are required to be filed with or
submitted to such state securities administrator or any other state agency with
respect to the Partnership.
The General Partner shall, from time to time, prepare and file
all certificates (or amendments thereto) and other similar documents required by
law to be filed and recorded with respect to the Partnership for any reason, in
such office or offices as are required under the any applicable laws. The
General Partner shall do any and all other acts and things (including making
publications or periodic filings of this Agreement, any certificates or
amendments thereto or other similar documents) which may now or hereafter be
required or deemed by the General Partner to be necessary.
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Limited Partners. Except as otherwise expressly provided elsewhere
herein, the Limited Partners shall not participate in the management of the
Partnership, have any control over the Partnership's business or assets or have
any right or authority to act for or obligate the Partnership.
Other Interests of Partners. The Partners, as well as Affiliates of the
Partners, may engage in any business or possess any interest in other businesses
of every nature and description, independently or with others, including owning
and operating pari-mutuel racetracks or participation in any other gaming
business activity. Neither the Partnership nor the Partners shall have any
rights in such independent ventures including, without limitation, any rights to
the income or profits thereof by virtue of having become Partners in the
Partnership. Each Partner conducts other related businesses outside of New
Jersey, including competing businesses, and this Agreement shall not apply to
any such other activities; nor shall it prevent the Partners from individually
engaging in additional activities both within and outside of New Jersey, other
than the ownership and operation of Freehold Raceway and Garden State Race Track
and OTB Facilities (as defined herein), including without limitation, the
ownership and operation of one or more additional racetracks, off-track betting
or phone betting operations in New Jersey or elsewhere, other than OTB
Facilities.
Title to Property and Partition. All property of the Partnership,
whether tangible or intangible, real, personal or mixed, shall be owned by the
Partnership as an entity and no Partner shall have any ownership interest in
such property in its individual name or right, and each Partner=s Partnership
Interest shall be personal property for all purposes. No Partner, nor any
successor-in-interest to any Partner, shall have the right, while this Agreement
remains in effect, to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have any of
the property of the Partnership partitioned, and each of the Partners, on behalf
of itself and its successors, representatives and assigns, hereby irrevocably
waives any such right.
ALLOCATIONS
SECTION .1 Profits and Losses. Any Profits or Losses shall be allocated
among all of the Partners in accordance with, and in proportion to, their
respective Percentage Interests.
Allocation Upon Admission. Upon the admission of the Partners to the
Partnership, Profit and Loss during the month of admission shall be allocated
using the "monthly convention" (i.e., Partners admitted in a month are treated
as admitted on the first day of that month). If that method is determined to be
invalid for tax purposes, the allocation of Profit and Loss in such month shall
be made under any other permissible method which may be selected by the General
Partner taking into account its judgment of the best interests of the Limited
Partners as a class.
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Tax Allocations: Code Section 704(c). Except as otherwise provided
herein, allocations of Profits and Losses for tax purposes shall be made in the
same manner as the allocations for book purposes described in Section 4.1 of
this Agreement. However, in accordance with Code Section 704(c) and the
Regulations thereunder, items of income, gain, loss and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the basis of the property and its fair market value at the
time the property was contributed to the Partnership.
Allocations to Reflect Capital Account Adjustments. Notwithstanding any
other provision hereof, in the event of a Revaluation Adjustment to the
Partners' Capital Accounts pursuant to Section 2.2(c) hereof, items of
depreciation, income, gain, loss or deduction with respect to the assets held by
the Partnership at the time of such Revaluation Adjustment shall be computed and
allocated for tax purposes in a manner which takes into account the variation
between the adjusted tax basis and the book value of such assets in a manner
consistent with Section 704(c) of the Code and Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
DISTRIBUTIONS
Distributions. Except as provided in Section 7.3 regarding liquidating
distributions, Net Cash Flow, as determined by the General Partner in accordance
with the terms of the Shareholders= Agreement, shall be distributed to the
Partners no less frequently than annually in accordance with their respective
Percentage Interests.
Distribution of Proceeds from a Sale or Refinancing or Dissolution of
the Partnership. In the event of a sale of a portion of Partnership property
which does not cause the dissolution of the Partnership or a financing of
Partnership property, the General Partner may, in its sole and absolute
discretion, distribute all or a portion of the net cash proceeds therefrom to
the Partners in accordance with the Partners= Percentage Interest.
Limitation Upon Distributions. No distribution shall be declared and
paid unless, after the distribution is made, the assets of the Partnership
(valued at fair market value) are in excess of all liabilities of the
Partnership.
Reserves. The General Partners shall have the right to establish,
maintain and expend reserves for working capital, future investments, debt
service and such other purposes as they may deem necessary or advisable
(?Reserves").
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CERTAIN CHANGES OF GENERAL PARTNER
Withdrawal of General Partner. The General Partner may not voluntarily
withdraw from the Partnership without the written consent or approval of the
Limited Partners. The Limited Partners shall not have the right to remove the
General Partner.
Changes of General Partner Generally. Any substitute general partner
shall, immediately upon admission as a general partner, become the owner of the
Partnership Interest of the general partner whose place it is taking.
TERMINATION, DISSOLUTION AND WINDING UP
No Termination. Except as otherwise provided herein or in the Shareholders=
Agreement, the Partnership shall not be terminated by the death, substitution,
admission or withdrawal of any Partner.
Termination.
The Partnership shall be terminated and dissolved and its
affairs wound up upon the first of the following to occur:
A Sale of Assets;
The withdrawal, dissolution or Bankruptcy of the
General Partner, unless, within sixty (60) days of
such event, Limited Partners owning sixty-seven
percent (67%) of the Percentage Interests owned by
all Partners elect a substitute general partner to
continue the Partnership's business and such
substitute general partner agrees in writing to
accept such election; or
The determination of Limited Partners owning
sixty-seven percent (67%) or more of the Percentage
Interests owned by all Limited Partners, with or
without the General Partner's consent, that the
Partnership should be dissolved.
Notwithstanding anything herein to the contrary, upon a Sale
of Assets at a gain, where all or any portion of the consideration payable to
the Partnership is to be received by the Partnership more than ninety (90) days
after the date on which such Sale of Assets occurs, the Partnership shall
continue solely for purposes of collecting the deferred payments and making
distributions to the Partners.
SECTION .2 Dissolution and Winding Up. Upon the Partnership's
termination, the following steps shall be taken in the following order of
priority:
The Capital Account of each Partner shall be determined.
Profit or Loss to the date of termination, including realized gain or loss
(whether or not recognized for tax purposes) from a sale or other disposition,
the taking by eminent domain or the damage and destruction of all or
substantially all of the Partnership's assets, shall be allocated as set forth
in Article IV above and credited or charged to the Partners' Capital Accounts.
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The Partnership shall be dissolved and its affairs shall be
wound up. All debts and obligations of the Partnership shall be paid, discharged
or provided for by setting up appropriate Reserves.
The assets of the Partnership not required to pay, discharge
or provide for the Partnership's debts and obligations shall be distributed
among all Partners having positive Capital Accounts in the same proportion as
the positive Capital Account of each such Partner bears to the sum of all such
Partners' positive Capital Accounts.
PARTNERSHIP INTERESTS OF LIMITED PARTNERS
Additional Limited Partners. No Person shall be admitted to the
Partnership as a Limited Partner except upon a sale, transfer, assignment,
pledge, mortgage, hypothecation or grant of a security interest or other
disposition by a Limited Partner of all or a portion of his Partnership Interest
(each a "Disposition") in accordance with this Article VIII or in accordance
with the terms of the Shareholders= Agreement, as herein defined.
Assignment.
Except as provided in the Shareholders= Agreement, no
Partnership Interest of a Limited Partner or any portion thereof, or any
Percentage Interest of a Limited Partner in the Partnership, may be sold,
assigned, transferred, pledged, mortgaged, hypothecated, made subject to a
security interest or otherwise disposed of to any Person without the prior
written consent of the General Partner, which consent may be withheld in its
sole discretion. The Partners hereby acknowledge and agree that, notwithstanding
any general fiduciary duty that the General Partner may have as general partner
or otherwise, the General Partner, in its sole discretion, may withhold consent
to such sale, assignment, transfer, pledge, mortgage, hypothecation, grant of a
security interest or other disposition without any liability or accountability
to any Person. Any actual or attempted sale, assignment, transfer, pledge,
mortgage, hypothecation, grant of a security interest or other disposition by
any Limited Partner in violation of this Section 8.2(a) shall be null and void
and of no force or effect whatsoever. Each Limited Partner hereby acknowledges
the reasonableness of the restrictions imposed by this Section 8.2(a) in view of
the Partnership purposes and the relationship of the Partners. Accordingly, the
restrictions in this Section 8.2(a) shall be specifically enforceable. Neither
the Partnership nor any Partner shall be bound by: (i) any attempted disposition
or pledge, mortgage, hypothecation or grant of security interest which has not
been approved by the General Partner as required hereby; or (ii) a disposition,
pledge, mortgage, hypothecation or creation of a security interest which has
been consented to in writing by the General Partner until a counterpart of the
instrument accomplishing the same, executed and acknowledged by the parties
thereto, is delivered to the General Partner and the terms of Section 8.3 hereof
have been satisfied with respect to dispositions which result in the admission
of new Limited Partners.
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Substitution and Addition of Limited Partners.
No Person shall have the right to be admitted to the
Partnership as a Limited Partner unless all of the following conditions are
satisfied:
A fully executed and acknowledged written instrument
effectuating a Disposition has been filed with the
General Partner setting forth the intention of the
Limited Partner making the Disposition
("Transferor"), that his buyer, transferee or
assignee (each a "Transferee") become a Limited
Partner;
The Transferor and Transferee execute and acknowledge
such other instruments as the General Partner may
deem necessary or desirable to effect such admission,
including the written acceptance and adoption by the
Transferee of the provisions of this Agreement to
which the Transferor is a party, and the assumption
by the Transferee of all obligations of the
Transferor under this Agreement;
The Transferee has paid all reasonable expenses
incurred by the Partnership (including its legal
fees) in connection with its admission to the
Partnership, including but not limited to the cost of
the preparation, filing and publishing of any
amendment to the Certificate and any amendments of
filings under fictitious name registration statutes
or registration statutes lawfully required to qualify
the Partnership to do business in foreign
jurisdictions; and
The General Partner has consented in writing to the
Transferee's admission to the Partnership as a
Limited Partner pursuant to Section 8.2 above or per
the Limited Partnership Interests in accordance with
section 2.2 of the Shareholders' Agreement.
Once the above conditions have been satisfied, the Transferee
shall become a Limited Partner on the first day of the next following calendar
month. Upon admission of a Limited Partner pursuant to the provisions of this
Article, the Partnership shall make all further distributions on account of the
Partnership Interests or Percentage Interests in the Partnership so assigned or
issued to such a Limited Partner for such time as the Partnership Interests or
Percentage Interests are designated on its books in accordance with the above
provisions. Any Transferee so admitted to the Partnership as a Limited Partner
shall be subject to all provisions of this Agreement to which his Transferor was
a party as if originally a party hereto and thereto.
FISCAL MATTERS
Books and Records. The General Partner shall maintain full and accurate
books of the Partnership at the Partnership's principal place of business,
showing all receipts and expenditures, assets and liabilities, profits and
losses, and all other records necessary for recording the Partnership's business
and affairs, including those sufficient to record the allocations and
distributions. The books of the Partnership shall be kept on an accrual method
of accounting. During regular business hours and upon reasonable notice, each
Partner and his duly authorized representatives shall have access to and may
inspect and copy any of such books and records.
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Fiscal Year. The fiscal year of the Partnership shall be the calendar
year.
Reports.
Within ninety (90) days after the end of each fiscal year of
the Partnership, the General Partner shall furnish each Limited Partner with
such information as is necessary for the preparation of such Partner's income
tax returns.
Within one hundred twenty (120) days after the end of each
fiscal year of the Partnership, the General Partner shall furnish each Limited
Partner with an unaudited statement showing the income and expenses of the
Partnership for such fiscal year and the balance sheet of the Partnership as of
the end of such year, prepared by an independent certified public accountant
selected by the General Partner.
Bank Accounts. All funds of the Partnership shall be deposited in its
name in such checking and savings accounts or time deposits or certificates of
deposit as shall be designated by the General Partner from time to time.
Withdrawals therefrom shall be made upon such signature(s) as the General
Partner may designate.
Accounting Decision. All decisions with respect to accounting matters
shall be made by the General Partner. The Partners agree that, for financial and
accounting purposes, the Partnership may elect to treat certain items
differently from the manner in which such items are treated for tax purposes.
For tax purposes, Capital Accounts shall be determined in accordance with tax
accounting principles in the same manner as the Partnership prepares its Federal
income tax return.
Income Tax Elections. Except as specifically provided to the contrary
herein, all decisions as to income tax matters shall be made by the General
Partner.
The General Partner shall elect to claim the maximum deduction
allowed with respect to each item of cost recovery property of the Partnership.
The General Partner may, at any time, make or petition to
revoke (as the case may be) the election referred to in Code Section 754 or the
corresponding provision of any subsequent revenue act. Each Partner agrees in
the event of such an election to supply the Partnership with the information
necessary to give effect thereto.
Meetings. The General Partner shall not be required to call any annual
meetings of the Limited Partners. However, upon the request of Limited Partners
owning at least twenty-five percent (25%) of the Percentage Interests, the
General Partner shall promptly call an informational meeting of the Partners.
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Documents. The General Partner shall not have an obligation to deliver
copies of any filed Partnership certificates or amendments thereof to any
Limited Partner unless otherwise specifically requested by such Limited Partner.
COMPENSATION FOR SERVICES
Compensation of the General Partner. Except as otherwise provided
herein, the General Partner (in its capacity as General Partner) shall receive
no compensation for its services to the Partnership. The General Partner shall
be entitled to be reimbursed for reasonable out-of-pocket expenses incurred in
connection with the business of the Partnership upon presentation of receipts or
other satisfactory evidence in support thereof.
GENERAL PROVISIONS
SECTION 11.1 Notices. Except as otherwise provided in this Agreement,
all notices, consents, waivers, directions, requests, or other instruments or
communications provided for under this Agreement shall be in writing, signed by
the party giving the same and shall be deemed properly given only if sent by
registered or certified United States mail, return receipt requested, postage
prepaid, addressed: (a) in the case of the Partnership or the General Partner,
as the case may be, to the Partnership at its principal place of business set
forth in Schedule AA@, and (b) in the case of any Limited Partner, to such
Limited Partner at its address set forth in Schedule "A". Each Partner may, by
notice to the Partnership, specify any other address for the receipt of such
instruments or communications. Any notice so given shall be effective on the
date on which it is mailed. In any case where the consent of a Limited Partner
shall be required, such consent shall be deemed to have been given upon the
failure of such Limited Partner to send notice withholding his consent within
thirty (30) days following the effective time of notice requesting such consent.
A copy of all notices and other communications given hereunder by any Limited
Partner shall be sent to the General Partner.
SECTION 11.2 Indemnification and Limitation on Liability of the General
Partner and its Affiliates. The Partnership shall indemnify, defend and hold
harmless the General Partner and its officers, directors, employees and agents
against any claim, demand or liability (including without limitation, court
costs and attorneys' fees) incurred by it in connection with the business of the
Partnership, provided that the acts or omissions from which the claim, demand or
liability arises were performed or committed in the good faith belief that the
General Partner, through its officers, directors, employees or agents, was
acting within the scope of its authority and that it was not grossly negligent
or guilty of intentional misconduct. Neither the Partnership nor any Limited
Partner shall have any claim against the General Partner or its officers,
directors, employees or agents by reason of any act or omission of the General
Partner, or its officers, directors, employees or agents or by reason of any
disallowance by any taxing authority of any deduction or credit taken on any
Partnership tax return, provided that such act or omission of the General
Partner, through its officers, directors, employees or agents, was performed in
the good faith belief that it was acting within the scope of its authority, and
that it was not grossly negligent or guilty of intentional misconduct. The
General Partner may obtain, at the Partnership's expense, liability insurance
for the Partnership and the General Partner (and its officers, directors,
employees and agents), insuring against any of their acts, whether or not such
acts would be covered by the foregoing indemnification. The General Partner
shall not be liable for omitting to do any act which the General Partner is not
specifically required to do under this Agreement, and shall have no obligation
or liabilities, express or implied, to the Partnership or the other Partners,
except as specifically set forth in this Agreement.
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SECTION 11.3 Power of Attorney. Each Limited Partner irrevocably
constitutes and appoints the General Partner his true and lawful agent and
attorney-in-fact, in his name, place and stead, to make, execute, acknowledge
and file:
this Agreement as required by the relevant provisions of the
Act and all amendments to this Agreement as required by the Act, including
amendments required for the admission or substitution of a Partner;
any cancellation of this Agreement as required by the relevant provisions
of the Act upon the termination of the Partnership;
any instruments or papers required to continue the business of the
Partnership;
all such other instruments, documents and certificates which
may from time to time be required by the laws of the State of New Jersey, the
United States of America or any other jurisdiction in which the Partnership
shall determine to do business (or any political subdivision or agency thereof)
to effectuate, implement, continue and defend the valid and subsisting existence
of the Partnership;
any and all amendments to Schedule "A" of this Agreement
necessary to admit or substitute a Limited Partner in accordance with Article
VIII above or to reflect a return of all or part of a Partner's Capital
Contribution; and
any business certificate, fictitious name certificate,
certificate of limited partnership, amendment thereto or other instrument or
document of any kind necessary to accomplish the business, purposes and
objectives of the Partnership in accordance with this Agreement.
It is expressly intended by the Limited Partners that the
foregoing power of attorney is coupled with an interest and that the power of
attorney shall survive any transfer or assignment by any Limited Partner of all
or any part of his Partnership Interest.
SECTION 11.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same instrument.
SECTION 11.5 Amendment of Partnership Agreement.
(a) This Agreement may be amended with the consent of the
General Partner and with the consent of the Limited Partners owning at least
sixty-seven percent (67%) of the Partnership Interests owned by all Limited
Partners (other than Partnership Interest owned by the General Partner and/or
any of its Affiliates, if any of them also is a Limited Partner), provided,
however, that no amendment which has not been consented to by all the Limited
Partners shall:
commit any Limited Partner to make additional contributions to the capital
of the Partnership in addition to the Capital Contributions required herein;
subject any Limited Partner to personal liability; or
alter the rights of the Limited Partners with respect
to the allocations and distributions set forth in
this Agreement.
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(b) In addition, amendments may be made to this Agreement from
time to time by the General Partner, without the consent of any of the Limited
Partners: (1) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to add any
other provisions with respect to matters or questions arising under this
Agreement which will not be inconsistent with the existing provisions of this
Agreement; (2) to add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General Partner
herein; or (3) to delete from or add to any provision hereof required to be so
deleted or added by a state "Blue Sky" commission, which addition or deletion is
deemed by such commission to be for the benefit or protection of the Limited
Partners; provided, however, that no amendment shall be adopted pursuant to this
Section unless the adoption thereof: (i) is for the benefit of or not adverse to
the interests of the Limited Partners; (ii) does not affect the distributions
and allocations among the Limited Partners or between the Limited Partners as a
class and the General Partner; and (iii) does not affect the limited liability
of the Limited Partners or the status of the Partnership as a partnership for
Federal income tax purposes.
SECTION 11.6 Limitation of Responsibility and Liability. No Partner, or
any of its Affiliates, shareholders, directors, officers, employees, or agents,
will be liable or responsible for the debts or obligations of any of the other
Partners or the Partnership.
SECTION 11.7 Singular and Plural/Gender. Wherever from the context of
this Agreement it appears appropriate, each term stated in either the singular
or the plural shall include the singular or the plural, and pronouns stated in
either the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter.
SECTION 11.8 Severability. Invalidation or a holding of
unenforceability of any provision of this Agreement shall in no way affect any
other provision hereof, which other provisions shall remain in full force and
effect.
SECTION 11.9 Integration. This Agreement embodies the entire agreement
and understanding among the Partners relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
SECTION 11.10 Applicable Law. This Agreement and the rights of the
Partners shall be governed by and construed and enforced in accordance with the
laws of the State of New Jersey.
SECTION 11.11 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Partners and their respective heirs, personal
representatives, successors and permitted assigns.
SECTION 11.12 Headings. The descriptive headings of the Articles and
Sections hereof are inserted for convenience only and shall not affect the
interpretation or meaning thereof.
DEFINED TERMS
SECTION 12.1 Defined Terms. In addition to the terms defined elsewhere
in this Agreement, the following terms used in this Agreement shall have the
meanings specified below:
AAct@ means the Revised Uniform Limited Partnership
Act as adopted in the State of New Jersey, as amended
from time to time.
119
<PAGE>
"Affiliate" means (a) any Person directly or indirectly controlling,
controlled by or under common control with another Person, (b) any Person owning
or controlling ten percent (10%) or more of the outstanding voting securities of
such other Person, (c) any officer, director, partner or trustee of such Person,
and (d) if such other Person is an officer, director, partner or trustee of a
Person, the Person for which such Person acts in any such capacity.
"Bankruptcy" means, with respect to any Person, such Person making an
assignment for the benefit of creditors, becoming a party or subject to any
liquidation or dissolution action or proceeding with respect to such Person, the
institution of any bankruptcy, reorganization, insolvency or other proceeding
for the relief of financially distressed debtors with respect to such Person, or
a receiver, liquidator, custodian or trustee being appointed for such Person or
a substantial part of such Person=s assets and, if any of the same occur
involuntarily, the same is not dismissed, stayed or discharged within sixty (60)
days; or the entry of an order for relief against such Person under Title II of
the United States Code entitled "Bankruptcy"; or such Person taking any action
to effect, or which indicates its or his acquiescence in, any of the foregoing.
"Capital Account" means the amount of a Partner's Capital Contribution
adjusted for profits, losses and distributions as provided for in Section 2.2
hereof.
"Capital Contribution" means the cash and the agreed fair market value of
property contributed or deemed
contributed by a Partner to the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended, and the
corresponding provisions of any future Internal Revenue law.
"Finance" or "Refinancing" means entering into any loan or modifying the
terms of any loan including, without limitation, any which is secured by a
mortgage, deed of trust or other similar lien on the property of the
Partnership.
AFreehold Raceway@ means that certain real property
and improvements located in Monmouth County, New Jersey
known as Freehold Raceway.
AGarden State Race Track@ means that certain real
property and improvements located in Camden County, New
Jersey known as Garden State Race Track.
ANet Cash Flow@ means, for any period, the excess, if any, of (a) the sum
of (1) the gross receipts of the Partnership (as determined in accordance with
the cash receipts and disbursements method of accounting) during such period,
but without regard to any amounts received by the Partnership as a result of a
Sale of Assets and any amounts released during such period by the General
Partner from any Reserves maintained by the Partnership, over (b) the sum of (1)
all expenditures of the Partnership (as determined under the aforesaid method of
accounting) during such period, (2) all amounts applied during such period in
payment of interest or principal on any borrowing of the Partnership, and (3)
any amount added during such period by the General Partner to Reserves for
working capital, contingencies, replacements, expansions, acquisitions, or other
expenditures of the Partnership. Net Cash Flow and releases or additions to the
Reserves shall be made or determined by the General Partner in its sole
discretion.
AOTB Facilities@ means the off-track betting and phone betting operations
to be operated in New Jersey to the extent such off-track betting facilities and
phone betting operations are permitted by New Jersey legislation to be conducted
as a result of the holding of licenses to conduct racing at Freehold Raceway and
Garden State Race Track.
120
<PAGE>
"Partnership Interest" means, in the case of any Partner, such Partner's
Capital Account, interest in the Profits and Losses and distributions of the
Partnership, voting rights and all other rights which a party to this Agreement
acquires hereby or by operation of law.
"Percentage Interest" means the percentage interest of each Partner as set
forth on Schedule "A", as amended from time to time.
"Person" means any natural person, partnership, corporation, trust, limited
liability company, association or other legal entity.
AProfits@ and ALosses@ means, for any period, the amounts equal to the
corresponding items of income, gain, deductions, credits and losses in the
aggregate or separately stated, as appropriate, for such period, all determined
in accordance with generally accepted accounting principles consistently
applied.
AReserves@ shall have the meaning set forth in
Section 5.4 of this Agreement.
"Sale of Assets" means the sale or other disposition of all or
substantially all of the Partnership's
assets. For purposes of this definition, the phrase "other disposition" includes
a taking of all or substantially all of a property by eminent domain or the
damage or destruction of all or substantially all of such property.
AShareholders= Agreement@ means that Shareholders= Agreement made and
entered as of the _29 day of July, 1999, by, between, and among Greenwood
Racing, Inc., Pennwood Racing, Inc., Greenwood Limited Partner, Inc., Benstone
Partners, Penn National Holding Company, Penn National GSFR, Inc., and
Pennsylvania National Turf Club, Inc., as same may be amended from time to time.
ATreasury Regulation@ means the regulations promulgated by the Internal
Revenue Service, in accordance with the Internal Revenue Code of 1986, as
amended, and the corresponding provisions of any future Internal Revenue law.
121
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ATTEST: GENERAL PARTNER:
PENNWOOD RACING, INC.
/s/ Francis E. McDonnell_____ By:_/s/Harold G. Handel______
Francis E. McDonnell, Secretary Harold G. Handel, President
LIMITED PARTNER(S):
GREENWOOD LIMITED PARTNER, INC.
/s/Francis E. McDonnell By: /s/Harold G. Handel
Francis E. McDonnell, Secretary Harold G. Handel, President
PENNSYLVANIA NATIONAL TURF CLUB, INC.
/s/John Limongelli __________ By: /s/Robert S. Ippolito___
Name: John Limongelli Name: Robert S. Ippolito
Title: Secretary/Treasurer
122
<PAGE>
SCHEDULE "A"
TO
LIMITED PARTNERSHIP AGREEMENT
OF
GS PARK SERVICES, L.P.
Capital Percentage
Contribution Interest
GENERAL PARTNER:
Pennwood Racing, Inc. $1.00 .1%
c/o Greenwood Racing, Inc.
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
LIMITED PARTNER(S):
Greenwood Limited Partner, Inc. $499.50 49.95%
3001 Street Road
P.O. Box 1000
Bensalem, PA 19020-8512
Attention: Harold G. Handel
Pennsylvania National Turf Club, Inc. $499.50 49.95%
825 Berkshire Blvd.
Suite 200
Wyomissing, PA 19610
Attention: Joseph A. Lashinger, Jr.
123
AMENDMENT NO. 1 TO SECOND
AMENDED AND RESTATED CREDIT AGREEMENT AND
JOINDER OF SUBSIDIARY GUARANTOR
THIS AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT AND JOINDER OF SUBSIDIARY GUARANTOR (this "Amendment No. 1") is made
this __ day of July, 1999 by and among PENN NATIONAL GAMING, INC., a
Pennsylvania corporation ("Borrower"); FIRST UNION NATIONAL BANK, a national
banking association (for itself and in its capacity as agent hereunder,
"Agent"); the banks signatory to this Amendment No. 1 (together with the Agent,
each individually a "Bank" and individually and collectively, the "Banks") and
PENN NATIONAL GSFR, INC., a Delaware corporation.
BACKGROUND
Borrower and Banks entered into a Second Amended and Restated
Credit Agreement dated January 28, 1999 (as amended hereby and as may be further
amended from time to time, the "Credit Agreement") for the purposes of providing
a revolving credit facility, for the financing of a loan from Borrower to FR
Park Racing L.P., the refinancing of certain existing indebtedness of Borrower,
the issuance of letters of credit for the benefit of Borrower, and for the
working capital needs and general corporate purposes of the Borrower.
Borrower and Banks have agreed to add a newly-created
Subsidiary of Borrower as a Subsidiary Guarantor and to make certain amendments
to the Credit Agreement as set forth herein and subject to the terms and
conditions hereof.
In consideration of the foregoing and the promises and the agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows: i. Definitions (1) General Rule. Unless otherwise
defined herein, terms used herein which are defined in the Credit Agreement
shall have the meanings assigned to them in the Credit Agreement. (1) Additional
Definitions. The following definitions are hereby added to Section 10.01 of the
Credit Agreement to read in -------------------------------- their entirety as
follows: "Amendment No. 1" means the Amendment No. 1 to Second Amended and
Restated Credit Agreement and Joinder of Subsidiary Guarantor by and among
Borrowers and Banks dated July __, 1999. "Amendment No. 1 Effective Date" means
the date on which the conditions set forth in Paragraph 7 of Amendment No. 1
have been satisfied.
124
<PAGE>
i. Amendment to Section 2.02 of the Credit Agreement (Maximum Letter of
Credit Outstandings). Section 2.02 of the
- --------------------------------------------------------------------------------
Credit Agreement is hereby amended and restated to read in its entirety as
follows:
2.02 Maximum Letter of Credit Outstandings; Final
Maturities. Notwithstanding anything to the contrary contained
in this Agreement, (i) no Letter of Credit shall be issued the
Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the respective
Letter of Credit) at such time would exceed either (x)
$3,500,000 or (y) when added to the aggregate principal amount
of all Loans then outstanding, an amount equal to the Total
Commitment at such time and (ii) each Letter of Credit shall
by its terms terminate on or before the earlier of (x) the
date which occurs 12 months after the date of the issuance
thereof (although any such Letter of Credit may be extendible
for successive periods of up to 12 months, but not beyond the
third Business Day prior to the Final Maturity Date, on terms
acceptable to the Issuing Bank) and (y) three Business Days
prior to the Final Maturity Date.
i. Amendment to Section 3.01(b) of the Credit Agreement
(Fees). Section 3.01(b) of the Credit Agreement is
hereby amended and restated to read in its entirety
as follows:
(b) The Borrower agrees to pay to the Agent for
distribution to each Bank (based on each such Bank's
respective Percentage) a fee in respect of each Letter of
Credit issued hereunder (the "Letter of Credit Fee") for the
period from and including the date of issuance of such Letter
of Credit to and including the date of termination or
expiration of such Letter of Credit, computed at a rate per
annum equal to one-half of the Eurodollar Spread on the daily
Stated Amount of such Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears on
each Quarterly Payment Date and on the first day after the
termination of the Total Commitment upon which no Letters of
Credit remain outstanding.
i. Amendment to Section 7.06(b) of the Credit Agreement (Compliance with
Environmental Laws). Section 7.06(b) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
(b) Borrower shall deliver to Agent on or before
August 31, 1999 a copy of a Phase I environmental report with
respect to the Williamsport, Pennsylvania and Chambersburg,
Pennsylvania
125
<PAGE>
properties and each Additional Mortgaged Property in form and
substance satisfactory to Required Banks and prepared by a
qualified environmental professional acceptable to Required
Banks, together with any additional environmental assessments
of such properties deemed necessary by Required Banks by a
qualified environmental professional acceptable to Required
Banks, and Borrower shall and shall cause its Subsidiaries to
take such reasonable actions as may be recommended in any
Phase I or other environmental assessment to Required Banks'
reasonable satisfaction. Required Banks reserve the right at
any time or from time to time to request that Borrower or its
Subsidiaries take any such reasonable actions as may be
recommended in any Phase I or other environmental assessment.
i. Joinder of New Subsidiary Guarantor. Penn National GSFR, Inc., a Delaware
corporation ("GSFR"), is a newly-formed indirect subsidiary of Borrower. GSFR is
hereby made a Subsidiary Guarantor under the Subsidiary Guaranty, and in
furtherance thereof:
(1) GSFR hereby expressly agrees that it shall be bound by all terms and
conditions of the Subsidiary Guaranty, including without limitation the
representations, warranties and covenants in Sections 11 and 12 thereof, and
shall be liable, jointly and severally with all other Subsidiary Guarantors, for
all Guaranteed Obligations (as defined in the Subsidiary Guaranty).
(1) GSFR hereby expressly agrees that it shall be bound by all terms and
conditions of the Security Agreement, including without limitation the
representations, warranties and covenants set forth in Articles II, III, IV, V
and VI thereof. GSFR hereby grants to Agent, for the benefit of Banks, a
security interest in all the Collateral (as defined in the Security Agreement)
owned by GSFR and any part thereof as security for the payment of all
Obligations (as defined in the Security Agreement).
(1) GSFR hereby expressly agrees that it shall be bound by all the terms and
conditions of the Pledge Agreement, including without limitation the
representations, warranties and covenants set forth in Section 16 thereof. GSFR
hereby pledges to Agent, for the benefit of Banks, a security interest in all
the Collateral (as defined in the Pledge Agreement) owned by GSFR and any part
thereof as security for the payment of all Obligations (as defined in the Pledge
Agreement). Penn National Holding Company, as evidenced by its signature below,
hereby acknowledges and agrees that the shares it owns of GSFR constitute
Collateral (as defined in the Pledge Agreement) and are pledged to Agent, for
the benefit of Banks, thereunder and hereunder. (1) GSFR hereby expressly agrees
that it shall be bound by all the terms and conditions of the Contribution and
Indemnification Agreement, as if it were a Credit Party (as defined in the
Contribution and Indemnification Agreement) and original signatory thereto.
126
<PAGE>
(1) Schedule V and Schedule VI to the Credit Agreement, Schedule 2 to the
Security Agreement and Annexes A and B to the Pledge Agreement are hereby
amended and restated in their entirety as set forth on Exhibit A attached hereto
to reflect changes since January 28, 1999.
i. Representations and Warranties. Borrowers hereby represent and warrant
to Banks as follows:
(1) Representations. The representations and warranties set forth in Section 6
of the Credit Agreement are true and correct in all material respects as of
the date hereof, including as applied to GSFR as a Subsidiary; there is no
Event of Default or Default under the Credit Agreement, as amended hereby; and
there has been no material adverse change in the financial condition or
business of Borrower or any Subsidiary from the date on which Borrower last
delivered financial statements to Banks.
(1) Power and Authority. Borrower and each Subsidiary (including GSFR) has the
power and authority under the laws of each of their states of incorporation or
formation and under their articles or certificates of incorporation and bylaws
or other formation documents or other formation documents to enter into and
perform this Amendment No. 1 and the other documents and agreements required
hereunder (collectively, the "Amendment Documents"); all actions (corporate or
otherwise) necessary or appropriate for the execution and performance by
Borrower and each Subsidiary (including GSFR) of the Amendment Documents have
been taken; and the Amendment Documents and the Credit Agreement, as amended,
each constitute the valid and binding obligations of Borrower and each
Subsidiary (including GSFR), enforceable in accordance with their respective
terms.
(1) No Violations of Law or Agreements. The making and performance of the
Amendment Documents by Borrower and each Subsidiary
- ------------------------------------------- (including GSFR) will not (i)
violate any provisions of any law or regulation, federal, state or local, or the
articles or certificates of incorporation or bylaws or other formation documents
of any Borrower or Subsidiary (including GSFR) or (ii) result in any breach or
violation of, or constitute a default or require the obtaining of any consent
under, any agreement or instrument by which any Borrower or Subsidiary
(including GSFR) or its property may be bound.
i. Conditions to Effectiveness of Amendment. This Amendment No. 1 shall be
effective upon Agent's receipt of the following documents, each in form and
substance satisfactory to Agent:
127
<PAGE>
(1) Amendment No. 1. This Amendment No. 1 duly executed by Borrower, Agent,
Banks, and GSFR.
- ------------------------
(1) Opinion of Counsel to GSFR. An opinion letter from counsel to GSFR in
form and substance satisfactory to Agent. --------------------------
(1) Certificate of Good Standing. A certificate of good standing dated as
of a recent date for GSFR in the jurisdiction ---------------------------- of
its formation.
(1) Secretary's Certificate. A certificate from the secretary of GSFR
attaching: (1) the articles of incorporation ----------------------- and bylaws
of GSFR; (2) resolutions from the board of directors of GSFR authorizing the
execution by GSFR of this Amendment No. 1; and (3) an incumbency certificate.
(1) UCC-1 Financing Statements. Executed UCC-1 financing statement to be
filed against GSFR in those jurisdictions -------------------------- required by
Agent.
(1) Pledged Intercompany Notes. Delivery to Agent of pledged intercompany
notes from or for the benefit of GSFR. --------------------------
Stock Certificate. Delivery to Agent of the stock
certificate(s) of GSFR.
(1) Lien Searches against GSFR. As soon as available, lien searches
agreement GSFR in such locations as Agent shall --------------------------
reasonably request. (1) Other Documents. Such additional documents as Agent may
reasonably request. --------------- i. Affirmations. Borrower hereby: (i)
affirms all the provisions of the Credit Agreement, Security Agreement, Pledge
Agreement and Contribution and Indemnification Agreement, as amended by this
Amendment No. 1, and (ii) agrees that the terms and conditions of the Credit
Agreement, Security Agreement, Pledge Agreement and Contribution and
Indemnification Agreement shall continue in full force and effect as
supplemented and amended hereby.
128
<PAGE>
i. Miscellaneous. (1) Borrower agrees to pay or reimburse Agent for all
reasonable fees and expenses (including without limitation reasonable fees and
expenses of counsel) incurred by Agent in connection with the preparation,
execution and delivery of this Amendment No. 1. (1) This Amendment No. 1 shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. (1) All terms and provisions of this Amendment No. 1 shall be for
the benefit of and be binding upon and enforceable by the respective successors
and assigns of the parties hereto. (1) This Amendment No. 1 may be executed in
any number of counterparts with the same effect as if all the signatures on such
counterparts appeared on one document and each such counterpart shall be deemed
an original. (1) Except as expressly set forth herein, neither the execution,
delivery and performance of this Amendment No. 1, nor anything contained herein
shall be construed as or shall operate as a consent to or waiver of any
provision of, or any right, power or remedy of Banks under the Credit Agreement
and the agreements and documents executed in connection therewith.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 1 the day and year first above written.
PENN NATIONAL GAMING, INC.
By: /s/Robert S. Ippolito__
Name: Robert S. Ippolito
Title: Chief Financial Officer, Secretary/Treaurer
PENN NATIONAL GSFR, INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito_
Name: Robert S. Ippolito
Title: Secretary/Treasurer
[EXECUTIONS CONTINUED]
129
<PAGE>
FIRST UNION NATIONAL BANK, as Agent
By: Lynn Eagleson______________
Name: Lynn Eagleson
Title: Vice President
SUMMIT BANK
By: _/s/Mary Balciar__________
Name: Mary Balciar
Title: Vice Prsident
Accepted and Agreed:
MOUNTAINVIEW THOROUGHBRED
RACING ASSOCIATION, as a Subsidiary
Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PENNSYLVANIA NATIONAL TURF
CLUB, INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary/Treasurer
[EXECUTIONS CONTINUED]
130
<PAGE>
PENN NATIONAL SPEEDWAY,
INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary
STERLING AVIATION, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PENN NATIONAL HOLDING
COMPANY, as a Subsidiary
Guarantor
By: _/s/Robert S. Ippolito___
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PENN NATIONAL GAMING OF WEST
VIRGINIA, INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito__
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PNGI POCONO, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito _
Name: Robert S. Ippolito
Title: Secretary/Treasurer
[EXECUTIONS CONTINUED]
131
<PAGE>
TENNESSEE DOWNS, INC.,
as a Subsidiary Guarantor
By: /s/Robert S. Ippolito___
Name: Robert S. Ippolito
Title: Secretary
THE DOWNS RACING, INC.,
as a Subsidiary Guarantor
By: _/s/Joseph A. Lashinger
Name: Joseph A. Lashinger
Title: President
NORTHEAST CONCESSIONS, INC.,
as a Subsidiary Guarantor
By: /s/ Robert S. Ippolito_
Name: Robert S. Ippolito
Title: Vice President
BACKSIDE, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito_
Name: Robert S. Ippolito
Title: Assistant Secretary
MILL CREEK LAND, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito_
Name: Robert S. Ippolito
Title: Assistant Secretary
WILKES BARRE DOWNS, INC.,
as a Subsidiary Guarantor
By: _/s/Robert E. Abraham__
Name: Robert E. Abraham
Title: President
132
AMENDMENT NO. 2 TO AND CONSENT UNDER
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO AND CONSENT UNDER SECOND AMENDED AND
RESTATED CREDIT AGREEMENT (this "Amendment No. 2") is made this 29th day of
July, 1999 by and among PENN NATIONAL GAMING, INC., a Pennsylvania corporation
("Borrower"); FIRST UNION NATIONAL BANK, a national banking association (for
itself and in its capacity as agent hereunder, "Agent"); and the banks signatory
to this Amendment No. 2 (together with the Agent, each individually a "Bank" and
individually and collectively, the "Banks").
BACKGROUND
Borrower and Banks entered into a Second Amended and Restated
Credit Agreement dated January 28, 1999, as amended by Amendment No. 1 to Second
Amended and Restated Credit Agreement and Joinder of Subsidiary Guarantor dated
July 29, 1999 (as amended hereby and as may be further amended from time to
time, the "Credit Agreement") for the purposes of providing a revolving credit
facility, for the financing of a loan from Borrower to FR Park Racing L.P., the
refinancing of certain existing indebtedness of Borrower, the issuance of
letters of credit for the benefit of Borrower, and for the working capital needs
and general corporate purposes of the Borrower.
Borrower and Banks have agreed to make certain amendments to
the Credit Agreement as set forth herein and subject to the terms and conditions
hereof, and Banks have agreed to permit Borrower to enter into a Debt Service
Maintenance Agreement, for the benefit of Commerce Bank, N.A., to support the
extension of credit to FR Park Racing, L.P. and GS Park Racing, L.P. by Commerce
Bank, N.A.
In consideration of the foregoing and the promises and the agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows: Definitions
(1) General Rule. Unless otherwise defined
herein, terms used herein which are defined
in the Credit Agreement shall have the
meanings assigned to them in the Credit
Agreement.
(1) Additional Definitions. The following definitions are hereby added to
Section 1 of the Credit Agreement to read in their
- -------------------------------- entirety as follows: "Amendment No. 2" means
the Amendment No. 2 to and Consent under Second Amended and Restated Credit
Agreement by and among Borrowers and Banks dated July 29, 1999. "Amendment No. 2
Effective Date" means the date on which the conditions set forth in Paragraph 5
of Amendment No. 2 have been satisfied.
133
<PAGE>
"Debt Service Maintenance Agreement" means the Debt Service
Maintenance Agreement dated July 29, 1999 by Borrower in favor
of Commerce Bank, N.A., in the form annexed hereto.
i. Amendment to Section 8.05(x) of the Credit Agreement
(Advances, Investments and Loans). Section 8.05(x) of
the Credit Agreement is hereby amended and restated
to read in its entirety as follows:
(x)In the absence of a Default or an Event of Default and if
such payment shall not create a Default or an Event of
Default, on and after the date of the Transaction Conversion,
Borrower or a wholly-owned Subsidiary may: (i) maintain and
guaranty loans or investments in an aggregate amount no
greater than $23,000,000 in the New Jersey Joint Venture,
which such loans, guaranties and investments shall include the
$11,250,000 loan made in January, 1999, an equity contribution
of $250,000 made on the date of Amendment No. 2 and the
$11,500,000 loan support to Commerce Bank, N.A. pursuant to
the Debt Service Maintenance Agreement; it being agreed that,
so long as there is no Default or Event of Default in
existence and so long as no Default or Event of Default would
be caused thereby, Borrower and its Subsidiaries may make
payments under the Debt Service Maintenance Agreement in an
aggregate principal amount not exceeding $11,500,000, plus
costs and expenses as provided in the Debt Service Maintenance
Agreement; (ii) expend up to $1,150,000 per annum under
Borrower's several guaranty of one-half (1/2) of tenant's
obligations pursuant to that certain Lease Agreement dated
January 28, 1999 between Garden State Race Track, Inc., as
landlord and GS Park Racing, L.P., as tenant, for premises
known as the Garden State Race Track located in Camden, New
Jersey; (iii) expend up to $8,750,000 in connection with the
exercise of the Put (upon the exercise of the Put, the
guaranty referred to in Section 2(x)(ii) is terminated and of
no further force or effect); (iv) expend up to $5,000,000
under Borrower's Contingent Guaranty of the Contingent Notes
(as defined in the New Jersey Joint Venture Agreement); and
(v) expend up to $1,250,000 on transaction expenses related to
the New Jersey Joint Venture.
i. Debt Service Maintenance Agreement.
The Borrower's execution of the Debt Service Maintenance
Agreement is prohibited by Section 8.16 of the Credit
Agreement. Nonetheless, Banks hereby consent to Borrower's
execution of the Debt Service Maintenance Agreement.
(1) Borrower hereby covenants and agrees that it will not agree to any
amendment or modification from the terms of the Debt Service
Maintenance Agreement on the date hereof without the consent of the
Agent, such consent not to be unreasonably withheld or delayed.
i. Representations and Warranties. Borrowers hereby represent and warrant
to Banks as follows:
(1) Representations. The representations and warranties set forth in Section 6
of the Credit Agreement are true and correct in all material respects as
of the date hereof; there is no Event of Default or Default under the
Credit Agreement, as amended hereby; and there has been no material
adverse change in the financial condition or business of Borrower or any
Subsidiary from the date on which Borrower last delivered financial
statements to Banks.
134
<PAGE>
(1) Power and Authority. Borrower and each Subsidiary has the power and
authority under the laws of each of their states of ----------------------------
incorporation or formation and under their articles or certificates of
incorporation and bylaws or other formation documents or other formation
documents to enter into and perform this Amendment No. 2 and the other documents
and agreements required hereunder (collectively, the "Amendment Documents"); all
actions (corporate or otherwise) necessary or appropriate for the execution and
performance by Borrower and each Subsidiary of the Amendment Documents have been
taken; and the Amendment Documents and the Credit Agreement, as amended, each
constitute the valid and binding obligations of Borrower and each Subsidiary,
enforceable in accordance with their respective terms.
(1) No Violations of Law or Agreements. The making and performance of the
Amendment Documents by Borrower and each Subsidiary
- ------------------------------------------- will not (i) violate any provisions
of any law or regulation, federal, state or local, or the articles or
certificates of incorporation or bylaws or other formation documents of any
Borrower or Subsidiary or (ii) result in any breach or violation of, or
constitute a default or require the obtaining of any consent under, any
agreement or instrument by which any Borrower or Subsidiary or its property may
be bound. i. Conditions to Effectiveness of Amendment. This Amendment No. 2
shall be effective upon Agent's receipt of the following documents, each in form
and substance satisfactory to Agent: (1) Amendment No. 2. This Amendment No. 2
duly executed by Borrower, Agent and Banks. ------------------------
(1) Debt Service Maintenance Agreement. An executed copy of the Debt
Service Maintenance Agreement. ----------------------------------
(1) Other Documents. Such additional documents as Agent may reasonably
request. ---------------
i. Affirmations. Borrower hereby: (i) affirms all the
provisions of the Credit Agreement, Security
Agreement, Pledge Agreement and Contribution and
Indemnification Agreement, as amended by this
Amendment No. 2, and (ii) agrees that the terms and
conditions of the Credit Agreement, Security
Agreement, Pledge Agreement and Contribution and
Indemnification Agreement shall continue in full
force and effect as supplemented and amended hereby.
i. Miscellaneous.
(1) Borrower agrees to pay or reimburse Agent
for all reasonable fees and expenses
(including without limitation reasonable
fees and expenses of counsel) incurred by
Agent in connection with the preparation,
execution and delivery of this Amendment No.
2.
(1) This Amendment No. 2 shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania. 135 (1) All terms and
provisions of this Amendment No. 2 shall be for the benefit of and be binding
upon and enforceable by the respective successors and assigns of the parties
hereto.
(1) This Amendment No. 2 may be executed in any number of counterparts with
the same effect as if all the signatures on such counterparts appeared on one
document and each such counterpart shall be deemed an original.
(1) Except as expressly set forth herein,
neither the execution, delivery and
performance of this Amendment No. 2, the
Bank's consent or waiver set forth herein,
nor anything contained herein shall be
construed as or shall operate as a consent
to or waiver of any further provision of, or
any right, power or remedy of Banks under
the Credit Agreement and the agreements and
documents executed in connection therewith.
The consent and waiver granted hereby is
limited to the matters set forth herein.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 2 the day and year first above written.
PENN NATIONAL GAMING, INC.
By: /s/Robert S. Ippolito__
Name: Robert S. Ippolito
Title: Chief Financial Officer/Secretary/Treasurer
FIRST UNION NATIONAL BANK, as Agent
By: _/s/Lynn Eagleson__________
Name: Lynn Eagleson
Title: Vice President
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SUMMIT BANK
By: _/s/Mary Balciar__________
Name: Mary Balciar
Title: Vice President
Accepted and Agreed:
MOUNTAINVIEW THOROUGHBRED
RACING ASSOCIATION, as a Subsidiary
Guarantor
By: __/s/Robert S. Ippolito________
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PENNSYLVANIA NATIONAL TURF
CLUB, INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PENN NATIONAL SPEEDWAY,
INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary
STERLING AVIATION, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PENN NATIONAL HOLDING
COMPANY, as a Subsidiary
Guarantor
By: _/s/Robert S. Ippolito___
Name: Robert S. Ippolito
Title: Secretary/Treasurer
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PENN NATIONAL GAMING OF WEST
VIRGINIA, INC., as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito__
Name: Robert S. Ippolito
Title: Secretary/Treasurer
PNGI POCONO, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito__
Name: Robert S. Ippolito
Title: Secretary/Treasurer
TENNESSEE DOWNS, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito__
Name: Robert S. Ippolito
Title: Secretary
THE DOWNS RACING, INC.,
as a Subsidiary Guarantor
By: _/s/Joseph A. Lashinger
Name: Joseph A. Lashinger
Title: President
NORTHEAST CONCESSIONS, INC.,
as a Subsidiary Guarantor
By: __/s/Robert S. Ippolito
Name: Robert S. Ippolito
Title: Vice President
BACKSIDE, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito_
Name: Robert S. Ippolito
Title:Assistant Secretary
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MILL CREEK LAND, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito_
Name: Robert S. Ippolito
Title: Assistant Secretary
WILKES BARRE DOWNS, INC.,
as a Subsidiary Guarantor
By: _/s/Robert E. Abraham
Name: Robert E. Abraham
Title: President
PENN NATIONAL GSFR, INC.,
as a Subsidiary Guarantor
By: _/s/Robert S. Ippolito____
Name: Robert S. Ippolito
Title: Secretary/Treasurer
139
*Portions of this Agreement have been omitted and filed seperately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
AGREEMENT
This Agreement made and entered into this __9__ day of July, 1999, by
and between Penn National Gaming, Inc., a Pennsylvania corporation ("Penn") and
American Digital Communications, Inc., a Wyoming corporation ("TrackPower").
BACKGROUND
The parties have entered into a binding Letter of Intent dated April
29, 1999 pertaining to the subject matter hereof. The parties intend to more
fully set forth herein the rights and obligations of the parties under the
binding Letter of Intent.
Penn, through its subsidiaries, Mountainview Thoroughbred Racing
Association and Pennsylvania National Turf Club, Inc. (the "Racing
Associations") owns and operates Penn National Race Course ("Penn National"), a
thoroughbred racetrack located in Grantville, Pennsylvania. In connection with
the racing activities at Penn National, the Racing Associations import and
export simulcast signals of races conducted at Penn National as well as races
conducted at other racetracks throughout the United States and its territories,
possessions and commonwealths (the "Territory"). In addition, Penn, through the
Racing Associations, conducts a telephone account wagering system pursuant to
Section 218 of the Pennsylvania Race Horse Industry Reform Act, and the rules
and regulations thereunder (the "Pennsylvania Racing Law") pursuant to which
patrons place wagers on Penn National races and simulcast races from throughout
North America. TrackPower has entered into an agreement with Loral SpaceCom
Corporation dated January 26, 1999 (the "Skynet Agreement") pursuant to which
TrackPower may distribute programming on up to 4 channels on Loral's Echostar
Satellite. TrackPower has determined not to distribute its programming under the
Skynet Agreement. TrackPower has entered into an agreement with Transponder
Encryption Service Corporation dated June 4, 1999 (the "TESC Agreement" and
together with the Skynet Agreement, the "Satellite Agreements") pursuant to
which TrackPower may distribute encrypted programs on four video channels and
one data channel on certain designated satellites. Penn National desires to
engage TrackPower as the non-exclusive distributor of races conducted at Penn
National or simulcast through Penn National pursuant to the terms and provisions
hereof. TrackPower desires to engage Penn National as its exclusive hub through
which all betting on racing programs conducted by or through TrackPower to any
venue in the Territory including direct television broadcast, cable television,
Internet or other forms of distribution of such programming (the "TrackPower
Network"), will be conducted by or through the Penn National telephone account
wagering system conducted by Penn National pursuant to the applicable laws.
TrackPower has also agreed to grant Penn National a right of first refusal to
serve as the hub for the TrackPower Network outside the Territory. NOW
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows: 1. Distribution 1.1 TrackPower represents and warrants to Penn that
attached hereto as (i) Exhibit A and made a part hereof is a true and correct
copy of the TESC Agreement. TrackPower will promptly forward to Penn any
amendments or modifications to the TESC Agreement. TrackPower agrees to pay and
perform all of its obligations under the TESC Agreement as and when the same
become due and will promptly notify Penn of any defaults that exist or, upon the
giving of notice or the running of time would exist by any party, under either
the TESC Agreement. 1.2 During the term hereof, TrackPower shall maintain all
technology and equipment required or necessary to produce a television program
of each race conducted at Penn National and to distribute the same on the
TrackPower Network as well as to receive simulcasting from other racetracks and
distribute the same on the TrackPower Network. The hardware and software
required in connection with the operation of the TrackPower Network is described
on Schedule 1.2, attached hereto and made a part hereof. In that regard,
TrackPower will maintain all such software and hardware in a condition meeting
prevailing industry norms so that the programming on the TrackPower Network will
be competitive with programming produced by other racing networks and
racetracks.
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1.3 TrackPower shall, at its cost, maintain and operate the TrackPower
Network and all equipment and software relating thereto, twenty fours hours per
day, three hundred sixty five days per year on at least four channels on the
designated Satellite (subject to acts of God, labor disputes and other events
beyond the control of TrackPower).
1.4 TrackPower agrees that the TrackPower network signal shall be
encoded or otherwise broadcast in a manner consistent with applicable laws, the
Interstate Horse Racing Act of 1967, and the requirements of Penn and other
originating racetracks.
1.5 TrackPower shall furnish, at its cost, decoders to each recipient
of the encoded TrackPower Racing Network signal from or through Penn National.
1.6 TrackPower agrees that Penn National will be the exclusive hub
operator for the TrackPower Racing Network and all races disseminated or
distributed by TrackPower to any venue (open TV, cable television, Internet or
other form of telecommunication) in the Territory and that all betting on such
races distributed by TrackPower shall be conducted through the Penn telephone
account wagering network. In addition, should TrackPower determine to distribute
the TrackPower Network outside the Territory, Penn National shall have a right
of first refusal, exercisable for 20 business days after notice from TrackPower,
to serve as the hub for the area beyond the Territory. Notwithstanding the
foregoing, in the event Penn cannot or decides not to offer any wagering product
proposed by TrackPower in any jurisdiction, TrackPower may, if such declination
continues for seven business days after written notice from TrackPower to Penn,
within the following 20 business days, agree with another hub operator to offer
such wagering product in the jurisdiction specifically rejected by Penn.
1.7 TrackPower shall be entitled to receive all subscriber fees paid by
subscribers enrolling in the TrackPower Racing Network. TrackPower agrees to use
its best efforts to maximize the number of subscribers by advertising, marketing
and promotions campaigns. TrackPower and Penn agree to use their best efforts to
develop a marketing/advertising/promotions campaign plan by not later than 90
days after the date hereof.
1.8 TrackPower agrees to pay Autotote, as and when due, any fees that
are incurred as a result of the interface between the TrackPower Network system
and the Autotote system utilized at Penn National. In the event Penn terminates
Autotote, TrackPower shall make such payments to Autotote's successor or to Penn
if such services are provided directly by Penn. TrackPower agrees to use its
best efforts to continue to develop software to be used in the TrackPower Racing
Network, which shall meet prevailing industry norms, all of which costs shall be
the responsibility of TrackPower. TrackPower and Penn shall, from time to time,
set minimum standards and goals for such software developments.
2. Obligations of Penn
2.1 Penn shall, at its cost, and in consultation with TrackPower,
negotiate simulcast agreements with thoroughbred and harness racetracks
throughout North America to be distributed on the TrackPower Racing Network.
Penn shall also be responsible for submitting such simulcast agreements to the
Pennsylvania State Horse Racing Commission for approval in accordance with the
Pennsylvania Racing Law, if required to do so, or for complying with any other
applicable laws.
2.2 Penn shall take all action necessary to seek all regulatory
approvals from the Pennsylvania State Horse Racing Commission and any other
government regulatory body having jurisdiction over the distribution of the
TrackPower Racing Network.
2.3 Penn shall assist TrackPower in formatting and scheduling the
content of the TrackPower Racing Network programming. 2.4 Penn shall
use its best efforts to cause the customers registered on its telephone
account wagering network to
become subscribers on the TrackPower Racing Network and, in that regard, to
actively solicit and market such transition. 2.5 Penn shall make
available to the TrackPower Racing Network the new Penn Players Choice
player tracking system and,
at its cost and expense, upgrade and expand such system to accommodate the needs
of the TrackPower Racing Network. Penn shall make available to TrackPower all
available wagering data pertaining to wagering on the races distributed on the
TrackPower Racing Network.
2.6 Penn shall, at its cost, secure handheld automated devices (Tiny
Tim's) distributed through Autotote to be leased, without cost, to premium
players identified by Penn and TrackPower.
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3. Fees to TrackPower
Penn shall pay or cause to be paid to TrackPower for the signal and
data sent to the TrackPower Network subscribers the following payments:
3.1 While the TrackPower Racing Network operates on an operator assisted
(telephone) basis, the following fees shall be payable:
SITUATION FEE PAYABLE AS A % OF AMOUNT WAGERED
*
3.2 When the TrackPower Racing Network operates on an automated basis (no
operator), the following fees shall be payable:
SITUATION FEE PAYABLE AS A % OF AMOUNT WAGERED
*
3.3 The fee shall be payable monthly, by the tenth day of the following
month. At the time the fee is paid, Penn shall furnish to TrackPower an
accounting and reconciliation for all customer accounts.
4. Warrants. TrackPower shall grant to Penn a warrant (the "Warrant") in the
form attached hereto as Exhibit "C" pertaining to the purchase of an aggregate
of 5,000,000 shares of TrackPower's common stock, par value $0.001 per share
(the "Common Stock"), upon the terms and conditions more fully set forth in the
Warrant. The Warrant shall vest, and shall be exercisable at the exercise
prices, as set forth in the following table:
From and after: Number of Shares Exercisable Exercise Price
--------------- ---------------------------- --------------
April 29, 1999 1,000,000 $1.58/share
April 29, 2000 1,000,000 $1.82/share
April 29, 2001 1,000,000 $2.05/share
April 29, 2002 1,000,000 $2.29/share
April 29, 2003 1,000,000 $2.53/share
The Warrant shall expire on April 30, 2004.
5. Representations and Warranties
5.1 TrackPower represents and warrants to Penn as follows: 5.1.1
Organization. TrackPower is a corporation duly organized and existing under the
laws of Wyoming and is qualified and in good standing under the laws of each
other jurisdiction in which such qualification is necessary. 5.1.2 Authority.
TrackPower has the requisite power and authority to own its properties and
assets and carry on its business as presently conducted and to execute and
deliver and perform this Agreement. All requisite corporate action has been
taken by TrackPower to authorize the execution, delivery and performance of this
Agreement.
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5.1.3 No Contravention. TrackPower is not prevented by any
law, rule, regulation, order or decree from entering into this Agreement or
performing its obligation hereunder. No consent, approval or authorization of
(or declaration or filing with) any governmental agency on the part of
TrackPower is required in connection with the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of its obligations hereunder.
5.1.4 Licenses. TrackPower holds and will maintain all
licenses required by any governmental body having jurisdiction over TrackPower
and the TrackPower Network with respect to the operation of the TrackPower
Network and the exercise by TrackPower of its duties and obligations hereunder.
5.1.5 Legal Compliance. During the term hereof, TrackPower
shall at all times abide by all applicable federal, state and local laws,
regulations, rules and orders pertaining to the operation of the TrackPower
Network and the performance of its obligations hereunder.
5.1.6 Litigation. TrackPower is not a party to nor threatened
by any civil or criminal litigation which could have a material adverse effect
on the financial or business condition of TrackPower or limit, in any material
way, the ability of TrackPower to perform its obligations hereunder.
5.1.7 Satellite Agreements. The TESC Agreement is in full
force and effect and none of the parties thereto is in default thereof. No party
to the TESC Agreement has given any formal or informal notice that another party
is in default or that any party intends to default under or terminate the TESC
Agreement.
5.1.8 No Proceedings. None of the officers or directors of
TrackPower are or within the past five years have been, the subject of any
government or court proceedings which could impact the ability of TrackPower or
such officers and directors to operate the TrackPower Network and perform their
obligations hereunder without being in violation of any applicable law, rule or
regulation of any governmental body or any ruling of any court.
5.1.9 Warrants. TrackPower has taken all corporate action
necessary to authorize the grant of the Warrants to Penn pursuant to paragraph 4
hereof and, during the term hereof, will reserve such number of shares of its
Common Stock for issuance under the Warrants as are necessary or appropriate,
from time to time.
5.1.10 SEC Compliance. TrackPower has complied, and during the
term hereof will continue to be in compliance, with the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, but
not limited to, filing all reports and other documents required to be filed
thereunder.
5.1.11 Continuing Representations. TrackPower agrees that the
foregoing representations and warranties shall be deemed to be continuing
representations and warranties and shall remain in full force and effect and
shall pertain to the facts and circumstances existing during the entire term
hereof. TrackPower shall promptly notify Penn of any facts or circumstances
which arise after the date hereof which would constitute a violation or breach
of any such continuing representations and warranties.
5.2 Penn represents and warrants to TrackPower as follows:
5.2.1 Organization. Penn is a corporation duly organized and existing
under the laws of Pennsylvania and is qualified and in good standing under the
laws of each other jurisdiction in which such qualification is necessary.
5.2.2 Authority. Penn has the requisite power and authority to own its
properties and assets and carry on its business as presently conducted and to
execute and deliver and perform this Agreement. All requisite corporate action
has been taken by Penn to authorize the execution, delivery and performance of
this Agreement.
5.2.3 No Contravention. Penn is not prevented by any law, rule,
regulation, order or decree from entering into this Agreement or performing its
obligation hereunder. No consent, approval or authorization of (or declaration
or filing with) any governmental agency on the part of Penn is required in
connection with the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby and the performance of its obligations
hereunder, except as provided in Section 8.5 below.
5.2.4 Licenses. Penn holds and will maintain all licenses
required by any governmental body having jurisdiction over Penn and the exercise
by Penn of its duties and obligations hereunder.
5.2.5 Legal Compliance. During the term hereof, Penn shall at
all times abide by all applicable federal, state and local laws, regulations,
rules and orders pertaining to the operation of the TrackPower Network and the
performance of its obligations hereunder.
5.2.6 Litigation. Penn is not a party to nor threatened by any
civil or criminal litigation which could have a material adverse effect on the
financial or business condition of Penn or limit, in any material way, the
ability of Penn to perform its obligations hereunder.
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5.2.7 No Proceedings. None of the officers or directors of Penn are or within
the past five years have been, the subject of any government or court
proceedings which could impact the ability of Penn or such officers and
directors to perform their obligations hereunder without being in violation of
any applicable law, rule or regulation of any governmental body or any ruling of
any court.
5.2.8 Continuing Representations. Penn agrees that the
foregoing representations and warranties shall be deemed to be continuing
representations and warranties and shall remain in full force and effect and
shall pertain to the facts and circumstances existing during the entire term
hereof. Penn shall promptly notify TrackPower of any facts or circumstances
which arise after the date hereof which would constitute a violation or breach
of any such continuing representations and warranties.
6. Term and Termination 6.1 Term. The term of this Agreement shall be for
five years ending April 30, 2004. Penn shall, at its sole discretion, have the
option to extend the Term hereof for an additional five years commencing May 1,
2004. Notwithstanding anything herein to the contrary, the term hereof shall end
upon the termination of the TESC Agreement due to no fault of TrackPower. 6.2
Termination by Penn National. Penn National may terminate this Agreement for any
of the following reasons: 6.2.1 TrackPower shall be in default in any material
respect in the performance of any of its obligations hereunder or otherwise
commits any material breach of this Agreement and such default continues uncured
for a period of thirty days after notice thereof from Penn to TrackPower. 6.2.2
TrackPower shall fail to maintain the TESC Agreement in full force and effect or
shall commit any breach thereunder which would permit any other party thereto to
terminate such Agreement. 6.2.3 Immediately upon the occurrence of the filing by
TrackPower of a petition in bankruptcy, filing a petition seeking any
reorganization, arrangement, composition or similar relief under any federal or
state law regarding insolvency or relief for debtors or making an assignment for
the benefit of creditors or the appointment of a receiver, manager, trustee or
similar officer for the business or property of TrackPower, or, if any
involuntary petition or proceeding in bankruptcy or insolvency is instituted
against TrackPower and not stayed or enjoined or discharged within sixty days
thereafter. 6.2.4 Immediately upon the occurrence or filing of an action,
whether administrative, regulatory or otherwise, seeking the suspension or
termination of any racing or gaming license in any jurisdiction in which
TrackPower requires a license in order to maintain the TrackPower Racing Network
and to perform its duties and obligations hereunder. 6.3 Termination by
TrackPower. TrackPower may terminate this Agreement for any of the following
reasons: 6.3.1 Penn shall be in default in any material respect in the
performance of any of its obligations hereunder or otherwise commits any
material breach of this Agreement and such default continues uncured for a
period of thirty days after notice thereof from TrackPower to Penn. 6.3.2
Immediately upon the occurrence of the filing by Penn of a petition in
bankruptcy, filing a petition seeking any reorganization, arrangement,
composition or similar relief under any federal or state law regarding
insolvency or relief for debtors or making an assignment for the benefit of
creditors or the appointment of a receiver, manager, trustee or similar officer
for the business or property of Penn, or, if any involuntary petition or
proceeding in bankruptcy or insolvency is instituted against Penn and not stayed
or enjoined or discharged thereafter. 6.3.3 Immediately upon the occurrence or
filing of an action, whether administrative, regulatory or otherwise, seeking
the suspension or termination of any racing or gaming license in any
jurisdiction in which Penn requires a license in order to maintain and to
perform its duties and obligations hereunder.
7. Intellectual Property Rights
7.1 All intellectual property rights, including but not limited to
rights in and to patents, copyrights, mask work rights, trademarks, and trade
secret rights, related to the equipment, hardware, software, tradenames or
trademarks directly or indirectly provided by either party under or in
connection with this Agreement at any time during the term (including extensions
thereof), belong and shall continue to belong exclusively to the party providing
the same.
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7.2 Each party shall immediately notify the other if it ever becomes
aware of any impairment or infringement, or imminent threat of impairment or
infringement, of the other's rights. Neither party shall take any steps against
any alleged infringer unless and until requested to do so in writing by the
provider of the rights; provided, however, that if the owner of the rights fails
to take action as to any infringement that has or is likely to have a material
adverse effect on the operation of the TrackPower Network, the other may, after
the giving of at least fourteen days prior written notice to the owner, take
reasonable action to stop or abate the infringement at the owner's expense and
the owner will cooperate in any such action.
7.3 This Section 7 shall survive the termination or expiration of this
Agreement without time limitation.
7.4 License of Intellectual Property.
7.4.1 Each party hereby grants to the other the
non-exclusive right, license and authority to use each such
party's respective trademarks, service marks, trade names, logotypes and
variances thereof (collectively, "Marks") in connection with the advertising and
promotion of the TrackPower Network.
7.4.2. Penn and TrackPower have each granted the other the non-exclusive
right, license and authority to use each such party's Marks and acknowledge and
agree that it is essential to the proper marketing of the products and services
offered by each of them and to the preservation and promotion of the excellent
reputation and acceptance by the public at large of the goods and services
offered by each of them, and the goodwill and integrity of each party's
respective Marks that high uniform standards of quality and service be
maintained, and that uniform display of each party's respective Marks be used in
the distribution of such products and services to the public at large.
Accordingly, Penn and TrackPower each covenant and agree, as part of the
consideration for the execution of this Agreement, as follows:
7.4.2.1 The right to use the Marks of the other
party granted under Section 7.4.1 above are personal
to such party and cannot be sold, assigned, transferred, hypothecated, pledged,
liened, charged or encumbered, in whole or in part, except in accordance with
the terms of this Agreement;
7.4.2.2 Each party has the sole and exclusive
right to use its Marks (except for certain rights
granted under existing and future license agreements and for the rights granted
hereunder) and neither party shall, during the term of this Agreement nor after
the expiration or termination hereof, directly or indirectly impugn, contest, or
aid or permit any act impugning or contesting the validity of the other party's
Marks or take any action whatsoever in derogation of the other party's Marks nor
shall either party assert any claim to the goodwill, reputation or ownership
thereof by virtue of the license granted hereunder.
7.4.2.3 Each of Penn and TrackPower will advertise,
promote and display the Marks of the other only in the
manner specified or approved in writing by such other party. Each party shall
advertise the Marks of the other only in a professional and responsible manner
and no advertising or other use of such other party's Marks shall contain any
statement or material which may, in the sole subjective judgment of such other
party, be misleading, in bad taste or inconsistent with such other party's
marketing strategy or public image.
7.4.2.4 Each of Penn and TrackPower acknowledge
and agree that nothing contained in this Agreement
shall give either of them any right, title or interest in or to the Marks of the
other, except the right to use such Marks in strict accordance with the terms of
this Agreement. Each party further agrees that any and all goodwill associated
with the Marks, including any goodwill which may be deemed to arise from the use
by a party of the Marks of the other party, inures directly and exclusively to
such other party and no monetary amount shall be assigned or attributed to any
goodwill associated with a party's use of the Marks of the other party.
7.4.2.5 Each party will promptly notify the
other, in writing, of any infringement or potential
infringement of such other party's Marks of which it has become aware. Neither
party shall have any right to bring any action or proceeding relating to such
infringement or potential infringement of the other party's Marks or which
involves, directly or indirectly, any issue the litigation of which may affect
the interest of such other party in its Marks, without the express prior written
consent of such other party; and
7.4.2.6 On the termination of this Agreement,
each party shall immediately and completely discontinue
all use of the other party's Marks and shall not thereafter operate or do
business under any trademark, service mark or trade name or in any manner or
style that may tend to give the general public the impression that it is, either
directly or indirectly, associated, affiliated, licensed by or related to the
other party.
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8. Miscellaneous 8.1 Entire Agreement. This Agreement contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior or contemporaneous agreements
with respect to such subject matter. 8.2 Binding Nature. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither party shall assign any of its
obligations hereunder, without the express written permission of the other
party, except to an affiliate of such party. 8.3 Amendments. This Agreement may
not be modified or amended except in writing signed by each of the parties
hereto. 8.4 Dispute Resolution. Any dispute arising hereunder shall be resolved
by arbitration in Philadelphia, Pennsylvania before a single arbitrator in
accordance with the rules of civil arbitration of the American Arbitration
Association. The decision or award of the arbitrator shall be final, binding and
conclusive on the Parties hereto and may be entered for enforcement in any court
having jurisdiction. 8.5 Racing Commission Approval. This Agreement shall not be
binding upon either party unless and until the same shall have been filed with
the Pennsylvania State Horse Racing Commission and, if necessary, approved by
such Commission. 8.6 Notices. All notices, demands and requests of any kind
which either party may be required or may desire to serve upon the other party
hereto in connection with this Agreement shall be delivered only by courier or
other means of personal service, which provides written verification of receipt
or by registered or certified mail return receipt requested (the "Notice"). Any
such Notice or demand so delivered by registered or certified mail or courier
shall be deposited in the United States mail, or in the case of courier,
deposited with the courier, with postage thereon fully prepaid. All Notices
shall be addressed to the parties to be served as follows: (a) If to Penn: Copy
to:
Joseph A. Lashinger, Jr., Esquire Robert P. Krauss, Esquire
Penn National Gaming, Inc. Mesirov Gelman Jaffe Cramer & Jamieson, LLP
825 Berkshire Boulevard
Suite 200 1735 Market Street
Wyomissing, PA 19610 Philadelphia, PA 19103
Fax No.: (610) 373-4966 Fax No.: (215) 994-1111
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(b) If to TrackPower: Copy to:
___J. Graham Simmonds_____________ _______John G. Simmonds____
___TrackPower Inc._____________ __________Same_______________
___580 Granite Court___________ _____________________________
___Pickering, Ont Canada_______ _____________________________
LIN 324
Either of the parties hereto may at any time and from time to
time change the address to which notice shall be sent hereunder by notice to the
other party given under this Section. All such notices, requests, demands, and
other communications shall be effective when received at the respective address
set forth above or as then in effect pursuant to any such change.
8.7 Governing Law. This Agreement shall be construed in accordance with
and governed by the internal laws of the Commonwealth of Pennsylvania with
respect to contracts made and performed in the Commonwealth.
8.8 Relationship of the Parties. This Agreement does not constitute
TrackPower and Penn as partners, joint venturers or make TrackPower or Penn an
agent of the other.
8.9 Public Announcements. No public announcement relating to the
existence of this Agreement or the matters contemplated by this Agreement will
be made without the prior approval of the other party, which approval shall not
be unreasonably withheld. Notwithstanding the foregoing, either party may make
such public announcements, after notifying the other, as are required by the
securities laws pertaining to the trading of the Common Stock of either party.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed will be deemed an original and all
of which when taken together shall be one in the same instrument. One or more
counterparts of this Agreement may be delivered by facsimile transmission with
the intention that it or they will have the same effect as the delivery of an
original counterpart hereof.
8.11 Force Majeure. Neither TrackPower nor Penn will be liable to the
other for any failure or delay in performance hereunder if and to the extent
such failure or delay was due to a cause beyond the reasonable control of
TrackPower or Penn, as the case may be, including, without limitation, acts or
failure to act of governmental authorities or others whose actions are required
by law, strikes, lockouts and other labor disturbances, riot, insurrection or,
electrical or cable failure, and/or acts of God (force majeure). The party whose
performance is prevented or delayed by an event of force majeure will promptly
give notice to the other of the occurrence of such an event and will use
commercially reasonable efforts to remove such event as soon as possible and
thereafter resume performance in accordance with the terms and provisions
hereof.
8.12 Severability. In the event any term or provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
invalid or unenforceable, such provision shall be deleted and this Agreement
shall continue in full force and effect without such provision; provided that no
such deletion will be effective if it materially changes the economic benefit of
this Agreement to either party hereto.
8.13 Further Assurances. The parties acknowledge that the subject
matter hereof pertains to a new and developing technology. Accordingly, each
party agrees to cooperate with the other, in good faith, to resolve any disputes
between themselves or with third parties arising out of or in connection with
the performance of any duty or obligation hereunder.
8.14 Audit. TrackPower shall permit Penn or any governmental agency
having jurisdiction over the conduct of the TrackPower Network to review, audit
and copy any records of TrackPower pertaining to TrackPower subscribers and the
betting activity of such subscribers upon reasonable notice to TrackPower.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
PENN NATIONAL GAMING, INC.
BY:__/s/William J. Bork________
AMERICAN DIGITAL COMMUNICATIONS,
INC.
BY:_/s/John G. Simmonds_________
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VOID AFTER 5:00 P.M., PHILADELPHIA, PENNSYLVANIA TIME, ON APRIL 30, 2004 OR
IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA,
PENNSYLVANIA TIME ON THE NEXT FOLLOWING BUSINESS DAY. WARRANT TO PURCHASE
5,000,000 SHARES OF COMMON STOCK OF AMERICAN DIGITAL COMMUNICATIONS, INC. NO.
_______ TRANSFER RESTRICTED -- SEE SECTION 8.02 For good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged by
American Digital Communications, Inc., a Wyoming corporation (the "Company"),
and intending to be legally bound hereby, the Company hereby grants to Penn
National Gaming, Inc., a Pennsylvania corporation, and its registered, permitted
assigns (collectively, the "Warrantholder"), subject to the terms and conditions
hereof, the right and option to purchase the number of fully-paid and
nonassessable shares of the Company's common stock (the "Common Stock") set
forth on the signature page of this Warrant. ARTICLE I Section 1.01: Definition
of Terms. As used in this Warrant, the following capitalized terms shall have
the following respective meanings: (a) Business Day: A day other than a
Saturday, Sunday or other day on which banks in the Commonwealth of Pennsylvania
are authorized by law to remain closed. (b) Common Stock Equivalents: Securities
that are convertible into or exercisable or exchangeable for shares of Common
Stock or of which Common Stock is a part. (c) Exercise Price Per Share: The
Warrant shall vest, and shall be exercisable at the exercise prices as set forth
in the following table: From and after: Number of Shares Exercisable Exercise
Price
April 29, 1999 1,000,000 $1.58/share
April 29, 2000 1,000,000 $1.82/share
April 29, 2001 1,000,000 $2.05/share
April 29, 2002 1,000,000 $2.29/share
April 29, 2003 1,000,000 $2.53/share
(d) Person: An individual, partnership, joint venture, corporation, trust,
limited liability company, unincorporated organization, government or any
department or agency thereof, or any other entity.
(e) Securities Act: The Securities Act of 1933, as amended.
(f) Warrant: This warrant, and all other warrants that may be issued in its
place or in exchange or satisfaction therefor, including without limitation, any
issued pursuant to Section 2.02(c) hereof. (g) Warrant Expiration Date: 5:00
P.M., Philadelphia, Pennsylvania time, on April 30, 2004 or, if such day is not
a Business Day, the next succeeding day which is a Business Day. (h)
Warrantholder: The person(s) or entity(ies) to whom this Warrant is originally
issued, or any successor in interest thereto, or any assignee or transferee
thereof, in whose name this Warrant is registered upon the books to be
maintained by the Company for that purpose.
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ARTICLE II
Duration and Exercise of Warrant
Section 2.01: Duration of Warrant. Subject to the terms contained herein, this
Warrant may be exercised from time to time, on or before the Warrant Expiration
Date. If this Warrant is not exercised in full on or before the Warrant
Expiration Date, it shall become void to the extent not exercised, and all
unexercised rights hereunder shall thereupon cease. Section 2.02: Exercise of
Warrant. (a) The Warrantholder may exercise this Warrant, in whole or in part by
presentation and surrender of this Warrant to the Company at its corporate
office at [______________________________________], with the Subscription Form
annexed hereto duly executed and accompanied by payment (by certified or
official bank check payable to the order of the Company) of the Exercise Price
Per Share for each share to be purchased hereunder. (b) Upon receipt of this
Warrant with the Subscription Form duly executed and accompanied by payment of
the aggregate Exercise Price Per Share as set forth in Section 2.02, for the
shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates for the total number of whole shares of Common Stock
which constitute the number of shares for which this Warrant is being exercised
(adjusted to reflect the effect of the antidilution provisions contained in
Article III hereof, if any, and as provided in Section 6.04 hereof) in such
denominations as are requested for delivery to the Warrantholder, and the
Company shall thereupon deliver such certificates to the Warrantholder. (c) In
case the Warrantholder shall exercise this Warrant with respect to fewer than
all of the shares which may be purchased under this Warrant, the Company, at the
expense of the Warrantholder, shall execute a new warrant in the form of this
Warrant for the balance of such shares and promptly deliver such new warrant to
the Warrantholder. (d) The Company shall pay any and all documentary, stamp,
transfer or other transactional taxes attributable to the issuance of this
Warrant or any shares issuable upon exercise. The Company shall not, however, be
required to pay any tax imposed on income or gross receipts of the Warrantholder
or any tax which may be payable by the Warrantholder in respect of any transfer
involved in the issuance or delivery of this Warrant in a name other than that
of the Warrantholder at the time of surrender and, until the payment of such
tax, shall not be required to issue such shares.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Exercise Price
The Exercise Price Per Share and the number and kind of shares of capital stock
issuable upon exercise hereof shall be subject to adjustment from time to time
upon the happening of certain events as provided in this Article III. Section
3.01: Mechanical Adjustments. (a) If at any time prior to the exercise of this
Warrant in full, the Company shall (i) pay a dividend or make a distribution on
its shares of Common Stock in shares of Common Stock or Common Stock
Equivalents; (ii) subdivide, reclassify or recapitalize its outstanding Common
Stock into a greater number of shares; (iii) combine, reclassify or recapitalize
its outstanding Common Stock into a smaller number of shares; or (iv) issue by
reclassification of its Common Stock any shares of capital stock of the Company,
the Exercise Price Per Share in effect at the time of the record date of such
dividend distribution, subdivision, combination, reclassification or
recapitalization shall be equitably adjusted to the extent (if any) necessary so
that the Warrantholder shall be entitled to receive, upon exercise of this
Warrant, the aggregate number and kind of shares of Common Stock which, if this
Warrant had been exercised in full immediately prior to such time, such
Warrantholder would have owned upon such exercise(s) and been entitled to
receive upon such dividend, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this Section 3.01(a) shall be made
each time an event listed in this Section 3.01(a) shall occur.
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b) If at any time prior to the exercise of this Warrant in full, the Company
shall issue or distribute to all holders of shares of Common Stock evidences of
its indebtedness, any other securities of the Company or any cash, property or
other assets (excluding a dividend distribution, combination, reclassification
or recapitalization referred to in Section 3.01(a), and excluding cash
dividends
or cash distributions paid out of surplus, earnings or net profits legally
available therefor if the full amount thereof, together with the value of
other dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes
payment thereof, is equivalent to not more than 5% of the Company's net
worth) (any such nonexcluded event being herein called a "Special Dividend"),
the Exercise Price Per Share shall be decreased immediately after the effective
date of such Special Dividend to
a price equal to the then current Exercise Price Per Share on such effective
date less the fair market value (as determined in good faith by the
Company's Board of Directors) of the evidences of indebtedness, securities
or property, or other assets issued or
distributed in such Special Dividend applicable to one share
of Common Stock. Any adjustment required by this
Section 3.01(b) shall be made each time the
effective date of any such Special Dividend
occurs.
(c) Whenever the Exercise Price Per Share payable upon exercise of this Warrant
is adjusted pursuant to this Section 3.01, the number of shares purchasable
hereunder shall simultaneously be adjusted by multiplying the number of shares
immediately prior to the event giving rise to such adjustment by the Exercise
Price Per Share in effect on the date thereof and dividing the product so
obtained by the Exercise Price Per Share, as adjusted. (d) No adjustment in the
Exercise Price Per Share shall be required unless such adjustment would require
an increase or decrease of at least one cent ($0.01) in such price; provided,
however, that any adjustments which by reason of this paragraph (d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 3.01 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
(e) If at any time, as a result of any adjustment made pursuant to Section
3.01(a), the Warrantholder shall become entitled to receive any shares of the
Company other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 3.01.
(f) If, as a result of an adjustment made pursuant to this Article III, the
Warrantholder shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company
(other than as may be contemplated by this Warrant), the Board of Directors
(whose determination shall be conclusive, absent manifest error, and shall be
described in a written notice to the Warrantholder promptly after such
adjustment) shall determine in good faith the allocation of the adjusted per
share price between or among shares or such classes of capital stock or shares
of Common Stock and other capital stock. Section 3.02: Notice of Adjustment.
Whenever the number of shares purchasable hereunder or the Exercise Price Per
Share is adjusted as herein provided, the Company shall prepare and deliver to
the Warrantholder a certificate signed by its President and its Treasurer or
Secretary of the Company, setting forth the adjusted number of shares
purchasable upon exercise of this Warrant, and the Exercise Price of such
securities after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Section 3.03: No Adjustment for Dividends. Except as
provided in Section 3.01 (b) of this Agreement, no adjustment in respect of any
cash dividends shall be made during the term of this Warrant or upon the
exercise of this Warrant.
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Section 3.04: Preservation of Purchase Rights in Certain Transactions. In case
of any capital reorganization or reclassification, or any consolidation or
merger to which the Company is a party, or in case of any sale or conveyance to
another entity of all or substantially all of the property of the Company, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Warrantholder shall have the right thereafter
to: (i) immediately exercise the Warrant in full, irrespective of whether any or
all of the shares have vested, and at their Exercise Price Per Share; or (ii)
receive on the exercise of this Warrant the kind and amount of securities, cash
or other property which the Warrantholder would have owned or have been entitled
to receive immediately after such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance if this Warrant
had been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Article III
with respect to the rights and interests thereafter of the Warrantholder to the
end that the provisions set forth in this Article III shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant. The provisions of this Section 3.04 shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, statutory exchanges, sales or conveyances which occur
prior to the exercise, repurchase or expiration of this Warrant. The issuer of
any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant shall be jointly and severally responsible for all
of the agreements and obligations of the Company hereunder. Notice of any such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and of such provisions so proposed to be made, shall be
mailed to the Warrantholders not less than 30 days prior to such event. Section
3.05: Form of Warrant After Adjustments. The form of this Warrant need not be
changed because of any adjustments in the Exercise Price Per Share or the number
or kind of shares purchasable hereunder.
ARTICLE IV
Demand Registrations
Section 4.01: Requests for Registration. Warrantholder may
request not more than two registrations under the Securities Act of all
or part of its registrable securities (i) on Form S-1 or S-2 or any
similar long-form registration statement or (ii) on Form S-3 or any
similar short-form registration statement, if the Company qualifies to
use such short form (all such registrations described in clauses (i)
and (ii), "Form Registrations"). Thereafter, the Company will use all
reasonable efforts to effect the registration under the Securities Act
on the form requested by the Warrantholder and to include in such
registration all registrable securities which the Warrantholder has so
requested to be included therein within 30 days after receipt of notice
by the Company. Any request for a Demand Registration shall specify the
number of registrable securities proposed to be sold by the
Warrantholder and the intended method of disposition thereof. Provided
that, if the Company shall furnish to the Warrantholder a certificate
signed by the Chief Executive Officer of the Company stating that in
good faith judgment of the Board of Directors it would be detrimental
to the Company or its shareholders for a registration statement to be
filed in the near future, then the Company's obligation to use all
reasonable efforts to effect the registration under this Section 4.01
shall be deferred for a period reasonably necessary, but not to exceed
one hundred and twenty (120) days from the date of receipt of notice
from the Warrantholder; provided that the Company may not exercise this
deferral right more than twice per twelve month period.
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Section 4.02: Registration Expenses. The Warrantholder will pay all
external incremental costs in connection with all such Form Registrations.
Section 4.03: Revocation of Demand Registration. The Warrantholder may, at any
time more than 30 days prior to the effective date of the registration statement
relating to such Demand Registration, revoke such request by providing written
notice to the Company. ARTICLE V Piggyback Registration Rights Section 5.01:
Piggyback Rights. Whenever the Company proposes to register any of its equity
securities under the Securities Act, whether for the Company's own account or
for the account of any other Person (a "Piggyback Registration"), for the
purpose of the sale of such equity securities newly issued by the Company or
owned by any present or future holder of equity securities, or the Company has
any other obligation to register equity securities on Form S-1, S-2 or S-3, or
any successor to such Forms, the Company will give prompt written notice to the
Warrantholder of its intention to effect such a registration at least forty days
prior to the filing of the registration statement covering the equity
securities, and such notice shall offer the Warrantholder the opportunity to
register on the same terms and conditions such number of the Warrantholder's
registrable securities as the Warrantholder may request. If the Warrantholder
elects to so register any or all of its registrable securities, it shall, within
thirty days of the date of delivery of notice to the Warrantholder of the
Company's proposal to register equity securities, deliver to the Company a
notice of election (i) specifying the number of shares of equity securities to
be sold; and (ii) describing the proposed manner of sale or transfer thereof
under the Securities Act. The Company will include in such registration all
registrable securities with respect to which the Company has received timely
written requests for inclusion therein by the Warrantholder. Section 5.02:
Piggyback Expenses. All of the Registration Expenses of each Piggyback
Registration shall be paid by the Company. ARTICLE VI Other Provisions Relating
to Rights of Warrantholder
Section 6.01: No Rights as Shareholders; Notice to Warrantholders. Nothing
contained in this Warrant shall be construed as conferring upon the
Warrantholder in its position as such or upon its transferees the right to vote
or to receive dividends or to consent or to receive notice as a shareholder in
respect of any meeting of shareholders for the election of directors of the
Company or of any other matter, or any rights whatsoever as shareholders of the
Company. The Company shall give notice to the Warrantholder if, at any time
prior to the expiration or exercise in full of this Warrant, any of the
following events shall occur: (a) the Company shall effect any transactions
subject to Section 3.01 with respect to the holders of shares of Common Stock;
(b) the Company shall offer to all holders of shares of Common Stock any
additional shares of Common Stock or Common Stock Equivalents or any right to
subscribe thereto; (c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale of all, or
substantially all, of its property, assets, and business as an entirety) shall
be approved; or (d) any consolidation of the Company with or merger of the
Company into another corporation, or in the case of any sale or conveyance to
another entity of the property of the Company, as an entirety or substantially
as an entirety. Such notice shall be given not later than ten days prior to the
date fixed as a record date or the date of closing of the Company's stock
transfer books for the determination of the shareholders entitled to such
dividend, distribution or subscription rights, or for the determination of the
shareholders entitled to vote on such proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up. Such notice shall specify
such record date or the date of closing the stock transfer books, as the case
may be, the date of any shareholder meeting scheduled in connection therewith,
and the anticipated payment or closing date in connection therewith. Failure to
provide such notice shall not affect the validity of any action taken in
connection with such dividend, distribution or subscription rights, or proposed
merger, consolidation, sale, conveyance, dissolution, liquidation or winding up.
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Section 6.02: Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its reasonable discretion impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
at the expense of the Warrantholder a new Warrant of like denomination and tenor
as, and in substitution for, this Warrant. Section 6.03: Reservation of Shares.
(a) The Company shall at all times reserve and keep available for the exercise
of this Warrant such number of authorized shares of Common Stock as are
sufficient to permit the exercise in full of this Warrant. (b) The Company
covenants and agrees that all shares of Common Stock issued on exercise of this
Warrant will, upon payment of the respective Exercise Price Per Share therefor
in accordance with the terms hereof, be validly issued, fully paid,
nonassessable and free of any preemptive or similar rights. Section 6.04: No
Fractional Shares. Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share in connection
with the exercise of this Warrant, and in any case where the Warrantholder
would, except for the provisions of this Section 6.04, be entitled under the
terms of this Warrant to receive a fraction of a share upon the exercise of this
Warrant, the Company shall, upon the exercise of this Warrant and receipt of the
Exercise Price Per Share, issue the smaller number of whole shares purchasable
upon exercise of this Warrant and shall make an equitable cash adjustment in
respect of such fraction of a share to which the Warrantholder would otherwise
be entitled.
ARTICLE VII
Treatment of Warrantholder
Prior to due presentment for registration of transfer of all or any portion of
this Warrant in compliance with Section 6.02 hereof, the Company may deem and
treat the Warrantholder as the absolute owner of this Warrant (notwithstanding
any notation of ownership or other writing hereon) for all purposes and shall
not be affected by any notice to the contrary. Upon such due presentment, the
Company shall register the transfer and the assignee on its books and records.
ARTICLE VIII
Split-Up, Combination.
Exchange and Transfer of Warrants
Section 8.01: Split-Up, Combination, Exchange and Transfer of Warrants. Subject
to the provisions of Section 8.02 hereof, this Warrant may be split up, combined
or exchanged for another Warrant or Warrants containing the same terms to
purchase a like aggregate number of shares of Company Common Stock. If the
Warrantholder desires to split up, combine or exchange this Warrant, it shall
make such request in writing delivered to the Company and shall surrender to the
Company this Warrant and any other Warrant to be so split up, combined or
exchanged. Upon any such surrender for a split up, combination or exchange, the
Company shall execute and deliver to the person entitled thereto a Warrant or
Warrants, as the case may be, as so requested. The Company shall not be required
to effect any split up, combination or exchange which will result in the
issuance of a Warrant entitling the Warrantholder to purchase upon exercise a
fraction of a share of Common Stock. The Company may require such Warrantholder
to pay a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any split up, combination or exchange of Warrants.
This Warrant may be transferred by a Holder in whole or in part, at any time and
from time to time, subject to the restrictions set forth in Section 8.02.
Section 8.02: Restrictions on Transfer. Neither this Warrant nor any of the
shares of Common Stock issuable upon the exercise hereof may be sold,
hypothecated, assigned or transferred (any such action, a
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"Transfer"), unless (i) the Company has received from counsel satisfactory to
the Company an opinion reasonably satisfactory to the Company that such Transfer
may be made without compliance with the registration provisions of the
Securities Act and that the proposed transfer may be made without violation of
the Securities Act and any applicable state securities law, or (ii) a
registration statement filed by the Company covering the securities to be
transferred is in effect under the Securities Act and there has been compliance
with the applicable state securities laws.
ARTICLE IX
Other Matters
Section 9.01: Expenses of Transfer. The Company shall from time to time promptly
pay, subject to the provisions of Section 6.01 and paragraph (d) of Section
2.02, all documentary, stamp, transfer or other transactional taxes that may be
imposed upon the Company in respect to the issuance or delivery of shares
issuable upon the exercise of this Warrant. Section 9.02: Successors and
Assigns. All the covenants, obligations and provisions of this Warrant by or for
the benefit of the Company and the Warrantholder shall bind and inure to the
benefit of their respective successors and assigns hereunder. Section 9.03:
Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without regard to the law of
conflicts. Section 9.04: Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
Section 9.05: Integration/Entire Agreement. This Warrant is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Warrant supersedes all
prior agreements and understandings between the parties with respect to such
subject matter. Section 9.06: Notices. Notice or demand pursuant to this Warrant
to be given or made by the Warrantholder to or on the Company shall be
sufficiently given or made if sent by registered or certified mail, postage
prepaid, or by overnight courier, addressed, until another address is designated
in writing by the Company, as follows:
American Digital Communications, Inc.
==============================
Any notice or demand authorized by this Warrant to be given or made by the
Company to or on the Warrantholder shall be sufficiently given or made if sent
by registered or certified mail, postage prepaid, or by overnight courier to the
Warrantholder at his last known address as it shall appear on the books of the
Company. Section 9.07: Headings. The headings herein have been inserted for
convenience of reference only and are not part of this Warrant and shall not
affect the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company as of the
29th day of April, 1999.
AMERICAN DIGITAL COMMUNICATIONS, INC.
By:_/s/John G. Simmonds_______________
Name: John G. Simmonds
Title: President
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Number of Shares Purchasable Pursuant to this Warrant: 5,000,000.
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _________________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________ attorney, to transfer said Warrant
Certificate on the books of American Digital Communications, Inc. with respect
to the number of shares set forth below, with full power of substitution in the
premises:
Name(s) of No. of
Assignee(s) Address Shares
If such number of Warrants shall not be all the shares purchasable by the
Warrant Certificate, a new Warrant Certificate shall be issued in the name of
the undersigned for the balance remaining of such shares.
Name ____________________________________
(Please Print Name, Address and Social
Security No.)
Signature
_____________________________________
Note: The
above
signature
should
correspond
exactly
with the
name on
the first
page of
this
Warrant
Certificate.
Dated: __________________, _________
- -------------------------------------------------------------------------------
Note: The above signature should correspond exactly with the name on the face of
this Warrant Certificate.
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SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
To: American Digital Communications, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
_____________________ shares of Common Stock as provided for therein, and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $____________.
Please issue a certificate or certificates for such shares of Common Stock in
the name of:
Name ____________________________________
(Please Print Name, Address and Social
Security No.)
Signature _____________________________________ Note: The above signature
should correspond exactly with the name on the first page of this Warrant
Certificate. Dated: __________________, _________
If such number of shares shall not be all the shares of Common Stock purchasable
under the within Warrant Certificate, a new Warrant Certificate shall be issued
in the name of the undersigned for the balance remaining of the shares of Common
Stock purchasable thereunder.
157
SUBORDINATION AND INTERCREDITOR AGREEMENT
This Subordination and Intercreditor Agreement (this AAgreement@) made
this 29th day of July, 1999, by and among Commerce Bank, N.A., a national
banking association having an address at 1701 Route 70 East, Cherry Hill, New
Jersey 08034 (the ASenior Lender@),Penn National Gaming, Inc., a Pennsylvania
corporation having an address at 825 Berkshire Boulevard, Suite 200, Wyomissing,
Pennsylvania, 19620 ( the ASubordinate Lender@), and FR Park Racing, L.P., a New
Jersey limited partnership having an office at 3001 Street Road, Bensalem,
Pennsylvania 19010, Attention: Harold G. Handel, President (ABorrower@).
Recitals
A. Borrower is the owner of the fee estate in the premises located in
Monmouth County, New Jersey, commonly known as Freehold Raceway and more
particularly described on Schedule A annexed hereto and made a part hereof, and
the buildings and improvements located thereon (collectively, the AProject@).
B. Senior Lender and Borrower, together with GS Park Racing, L.P.
(ACo-Borrower@), entered into that certain Loan Agreement dated of even date
herewith (as hereinafter amended, modified, restated or supplemented from time
to time, the ASenior Loan Agreement@), pursuant to which Senior Lender made a
loan to Borrower and Co-Borrower in the original principal amount of
Twenty-Three Million and 00/100 Dollars ($23,000,000.00) (the ASenior Loan@),
all of which remains outstanding as of the date hereof, on the terms and
conditions set forth in the Loan Agreement.
C. The Senior Loan is evidenced by a certain Term Loan Note dated of
even date herewith made by Borrower and Co-Borrower in favor of Senior Lender
(the ASenior Note@) in the original principal amount of Twenty-Three Million and
00/100 Dollars ($23,000,000.00), which is secured by, among other things, a
first priority security interest in all of Borrower=s existing and future
personal property (including, without limitation, accounts, inventory,
equipment, general intangibles, fixtures, investment property, deposit accounts
and all proceeds thereof (collectively, AUCC Collateral@)), a certain Mortgage,
Security Agreement, and Fixture Filing dated of even date herewith made by
Borrower in favor of Senior Lender and encumbering the Project which shall be
forthwith recorded in the Clerk/Register of Monmouth County, New Jersey (the
AClerk=s Office@) (the ASenior Mortgage@) and an Assignment of Rents and Leases
of even date herewith given by Borrower in favor of Senior Lender which shall be
forthwith recorded in the Clerk=s Office (the ASenior Assignment of Rents@) (the
Senior Mortgage, together with the Senior Loan Agreement, the Senior Note, the
Senior Assignment of Rents and any other Loan Document (as said term is defined
in the Senior Loan Agreement), as any of the same hereafter may be modified,
extended or restated from time to time, collectively, the ASenior Loan
Documents@).
D. On January 28, 1999, Subordinate Lender made a loan to Borrower in
the original principal amount of Eleven Million Two Hundred Fifty Thousand and
00/100 Dollars ($11,250,000.00) (the ASubordinate Loan@), which Subordinate Loan
is evidenced by a certain Subordinated Secured Promissory Note dated January 28,
1999, made by Borrower in favor of Subordinate Lender (the ASubordinate Note@)
in the principal amount of Eleven Million Two Hundred Fifty Thousand and 00/100
Dollars ($11,250,000.00).
E. The Subordinate Note is secured by, among other things, a certain
Mortgage and Security Agreement dated January 28, 1999, made by Borrower in
favor of Subordinate Lender and encumbering the Project which was recorded in
the Clerk=s Office on February 4, 1999, in Mortgage Book 6694, Page 638 (the
ASubordinate Mortgage@) (the Subordinate Mortgage, together with the Subordinate
Note and any other instruments or agreements executed in connection with any of
the same may be modified, extended or restated from time to time, collectively,
the ASubordinate Loan Documents@).
F. Under the terms of the Senior Loan Agreement, it is a condition
precedent to Senior Lender=s obligation to make the Senior Loan that Subordinate
Lender agree to subordinate any lien now held by Subordinate Lender in respect
of the Project, and to subordinate its rights and interests under the
Subordinate Loan Documents, to the Senior Lender in respect to all or any assets
of Borrower, all in accordance with the terms and conditions of this Agreement.
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NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, Senior Lender, the Subordinate Lender and the Borrower
hereby agree as follows:
1. The Subordinate Loan Documents and all advances and amounts (for
principal, interest, or otherwise) owing thereunder are hereby, and shall
continue to be, subject and subordinate in lien and in payment to the lien and
payment of the Senior Loan Documents and all advances and amounts owing
thereunder, together with all interest, commitment fees, termination fees and
all other sums due under the Senior Loan Documents. The foregoing shall apply,
notwithstanding the availability of other collateral to the Senior Lender or the
actual date and time of execution, delivery, recordation, filing or perfection
of any Senior Loan Documents, or the actual date and time of execution,
delivery, recordation, filing or perfection of a lien or priority of payment
thereof, and notwithstanding the fact that the Senior Loan or any other claim
for the Senior Loan is subordinated, avoided or disallowed, in whole or in part,
under Title 11 of the United States Code (herein called the ABankruptcy Code@)
or other applicable federal or state law. In the event of a proceeding, whether
voluntary or involuntary, for insolvency, liquidation, reorganization,
dissolution, bankruptcy, or other similar proceeding pursuant to the Bankruptcy
Code or other applicable federal or state law, the Senior Loan shall be deemed
to include all interest accrued thereon, in accordance with and at the interest
rates specified in the Senior Loan Documents, both for periods before and for
periods after the commencement of any such proceedings, even if the claim for
such interest is not allowed pursuant to applicable law.
2. In addition, without limiting the foregoing, the Subordinate Lender
agrees that all rights of the Subordinate Lender under the Subordinate Loan
Documents in and to the UCC Collateral, the Project and the proceeds thereof
(including, without limitation, principal repayment, interest, issues and
profits and rights with respect to insurance proceeds, condemnation awards and
foreclosure proceeds), if any, shall be expressly subject and subordinate to:
(a) the rights of the Senior Lender in and to the UCC Collateral, the Project
and the proceeds thereof (including, without limitation, principal repayment,
interest, issues and profits and rights with respect to insurance proceeds,
condemnation awards and foreclosure proceeds) on the terms now or hereafter set
forth in the Senior Loan Documents; and (b) any and all advances made and other
expenses incurred under, and as permitted in, the Senior Loan Documents or any
permitted extensions or modifications of the Senior Loan Documents.
3. Subordinate Lender and Borrower hereby covenant, warrant and
represent that: (a) Borrower has delivered to Senior Lender true, complete and
correct copies of all of the Subordinate Loan Documents; (b) Subordinate Lender
is now the sole owner and holder of any and all interests in, to or under the
Subordinate Loan Documents except that the Subordinate Loan Documents have been
assigned by Subordinate Lender to First Union National Bank (AFirst Union@),
including an assignment of mortgage recorded in the Clerk=s Office in Mortgage
Book 818, Page 375; (c) the Subordinate Loan Documents are now in full force and
effect; (d) the Subordinate Loan Documents have not been modified or amended and
will not be modified, amended or restated without the prior written consent of
the Senior Lender which consent shall not be unreasonably withheld; provided
that in no event may any such amendment increase the principal amount of the
Subordinate Loan, increase the interest rate of the Subordinate Loan, increase
the principal amortization of the Subordinate Loan or shorten any maturity date
under the Subordinate Loan Documents; (e) Borrower has not at any time made any
drawings, or received any loans or other advances under the Subordinate Loan
Documents, and no sums are owed by Borrower to the Subordinate Lender, in each
instance, other than as set forth in the Subordinate Loan Documents; (f) the
maximum principal balance of the Subordinate Loan may not exceed $11,500,000.00
and (g) the Subordinate Lender=s rights in and to the lien, estate or other
interest in the Project, if any, is not subject to the rights of any third
parties by way of subrogation, indemnification or otherwise.
4. Borrower shall not make to or for the benefit of the Subordinate
Lender any payment or prepayment of principal, interest, default rate interest,
or any other payment whatsoever due or to become due under the Subordinate Loan
Documents, in each case, unless and until all obligations of Borrower to the
Senior Lender in respect of the Senior Loan Documents shall have been paid in
full, excepting only that Borrower may, unless and until any of the matters
described in clauses (i), (ii) or (iii) of Section 6(c) hereof occurs, or unless
giving effect to such payment and with the giving of any required notice and the
passage of any applicable grace period an Event of Default (as said term is
defined in the Senior Loan Agreement) would occur under the Senior Loan
Agreement, a) pay the regular scheduled interest payments due under the
Subordinate Loan Documents and b) may also reimburse Subordinate Lender for
reasonable and necessary business expenses incurred by Subordinate Lender on
Borrower=s behalf.
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5. The Subordinate Lender hereby acknowledges and agrees that the
Subordinate Lender shall not accept from or on behalf of Borrower any payment of
sums whatsoever due under the Subordinate Loan Documents unless and until the
Senior Loan has been paid in fully, except as expressly permitted under Section
4 above.
6. The Subordinate Lender hereby further agrees that, so long as any
sum shall remain outstanding under any of the Senior Loan Documents
(collectively, the ASenior Loan Obligations@):
(a) the Subordinate Lender shall simultaneously send to the
Senior Lender due notice of all defaults under the Subordinate Loan Documents
and copies of all notices relating to the Subordinate Lender=s intention to
exercise remedies under the Subordinate Loan Documents. Notice under the
Subordinate Loan Documents shall not be deemed effective until such notice has
been delivered to the Senior Lender in the same manner as notices are required
to be delivered to Borrower under the Subordinate Loan Documents. The Senior
Lender shall have the right, but shall not have any obligation whatsoever, to
cure any default on the part of Borrower under the Subordinate Loan Documents
within thirty (30) days after the expiration of the applicable grace period
permitted to Borrower under the Subordinate Loan Documents. Nothing contained in
this Agreement shall be deemed or construed to require the Senior Lender to
commence or continue to prosecute any such cure to completion or prevent the
Senior Lender from discontinuing such cure;
(b) Subordinate Lender shall not commence any Enforcement
Action (as hereinafter defined) for a period of two hundred seventy (270) days
after written notice to Senior Lender that a default has occurred under the
Subordinate Loan Documents and any grace period has expired. As used herein, the
term AEnforcement Action@ shall mean the acceleration of all or any part of the
Subordinate Loan, any foreclosure or enforcement proceeding under any of the
Subordinate Loan Documents, the exercise of any power of sale, the conduct of a
Uniform Commercial Code sale, the execution upon any judgment, the acceptance by
the Subordinate Lender of an assignment in lieu of foreclosure, the obtaining of
a receiver, the taking of possession or control of the UCC Collateral, the
Project, the commencement of any lawsuit, action or proceeding on the
Subordinate Note and/or any of the other Subordinate Loan Documents, the
exercising of any banker=s lien or rights of set-off or recoupment, or the
taking of any other enforcement action against the UCC Collateral, the Project,
Borrower, any other collateral for the Subordinate Loan, and/or any other person
under any Subordinate Loan Document;
(c) in the event (i) the Subordinate Lender receives any
payment of principal or interest or any other payment, in part or in whole,
under the Subordinate Loan Documents, other than as expressly permitted under
the terms of this Agreement and does not turn over such payments to Senior
Lender in accordance with the terms of this Agreement, (ii) there shall have
occurred and be continuing beyond any applicable grace and/or notice periods
under the Senior Loan Documents an Event of Default (as defined in the Senior
Loan Documents), or (iii) of any distribution or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the Project or the proceeds thereof, in whatever form, to any
creditor or creditors of Borrower or to any holder of indebtedness of Borrower
by reason of any liquidation, dissolution or other winding up of Borrower or its
business, or of any receivership or custodianship for Borrower of all or
substantially all of its property, or of any insolvency or bankruptcy
proceedings or assignment for the benefit of creditors or any proceeding by or
against Borrower for any relief under any bankruptcy, reorganization or
insolvency law or laws, federal or state, or any law, federal or state, relating
to the relief of debtors, then, and in any such event, any payment or
distribution of any kind or character, whether in cash, property or securities,
which shall be payable or deliverable with respect to the Subordinate Loan or
any of the Subordinate Loan Documents or which has been received by the
Subordinate Lender, shall be held in trust by the Subordinate Lender and shall
forthwith be paid or delivered directly to the Senior Lender for application to
the payment of the Senior Loan Obligations. In any such event, the Senior Lender
may, but shall not be obligated to, demand, claim and collect any such payment
or distribution that would, but for these subordinate provisions, be payable or
deliverable with respect to the Subordinate Loan. In the event of the occurrence
and continuation of any matter described in clauses (i), (ii) or (iii) above and
until the Senior Loan Obligations shall have been fully paid and satisfied and
all of the obligations of Borrower to the Senior Lender have been performed in
full, no payment whatsoever shall be made to or accepted by the Subordinate
Lender in respect of the Subordinate Loan;
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(d) in the event the Senior Lender shall release, for purposes
of restoration of all or any part of the improvements located at the Project,
Senior Lender=s right, title and interest in and to the proceeds under the
policies of insurance thereon, and/or its right, title and interest in and to
any awards, or its right, title and interest in and to other compensation made
for any damages, losses or compensation for other rights by reason of a taking
in eminent domain, the Subordinate Lender shall release for such purpose all of
the Subordinate Lender=s right, title and interest, if any, in and to all such
insurance proceeds, awards or compensation and the Subordinate Lender agrees
that the balance of such proceeds remaining shall be applied as set forth in the
Senior Loan Agreement, and if the Senior Lender holds such proceeds, awards or
compensation and/or monitors the disbursement thereof, the Subordinate Lender
agrees that the Senior Lender shall also hold and monitor the disbursement of
such proceeds, awards and compensation to which the Subordinate Lender is
entitled. Nothing contained in this Agreement shall be deemed to require the
Senior Lender to act for or on behalf of the Subordinate Lender or to hold or
monitor any proceeds, awards, or compensation in trust for or on behalf of the
Subordinate Lender, in any way whatsoever, and all or any of such sums so held
or monitored may be commingled with any funds of the Senior Lender;
(e) except for its lien on the Project pursuant to the
Subordinate Mortgage, and so long as the Senior Loan Obligations remain unpaid,
the Subordinate Lender hereby subordinates any lien, estate, right or other
interest in the Project and/or in Borrower, including any rights or interests in
the Project or Borrower which may arise by way of indemnification, subrogation
or otherwise, and, in furtherance thereof, agrees not to exercise any of such
rights unless and until all of the Senior Obligations have been unconditionally
pain in full;
(f) intentionally omitted;
(g) the Subordinate Lender hereby expressly consents to and
authorizes, at the option of the Senior Lender, the release of all or any
portion of the UCC Collateral and/or the Project from any lien of the Senior
Loan Documents and hereby waives any equitable right the Subordinate Lender may
have in respect of marshaling, in connection with any release of all or any
portion of the UCC Collateral and/or the Project by the Senior Lender from the
lien of the Senior Loan Documents to require the separate sale of any portion of
the UCC Collateral and/or the Project or to require the Senior Lender to exhaust
its remedies against any portion of the UCC Collateral and/or the Project or any
combination of the portions of the UCC Collateral and/or the Project or any
other collateral, or to require the Senior Lender to proceed against any portion
of the UCC Collateral and/or the Project or combination of the portions of the
UCC Collateral and/or the Project or any other collateral, before proceeding
against any other portion of the UCC Collateral and/or the Project or
combination of the portions of the UCC Collateral and/or the Project or any
other collateral, and further, in the event of foreclosure or other enforcement
proceeding by the Senior Lender, the Subordinate Lender hereby expressly
consents and authorizes, at the option of the Senior Lender, the sale, either
separately or together, of all or any portion of the UCC Collateral and/or the
Project;
(h) after request by the Senior Lender from time to time, the
Subordinate Lender shall, within thirty (30) days following any such request,
furnish the Senior Lender with a statement, duly acknowledged and certified,
setting forth the original principal amount of such Subordinate Loan, the unpaid
balance, all accrued but unpaid interest, and any other sums due and owing
thereunder, the rate of interest, the monthly payments and other payments, and
that there exists no default (or describing any existing defaults) under the
Subordinate Loan Documents;
(i) the Subordinate Lender shall not commence or join in any
case by or against Borrower under the Bankruptcy Code or any similar provision
thereof or any similar federal or state statute (herein called a AReorganization
Proceeding@), however nothing shall prevent Subordinate Lender from filing a
claim in any Reorganization Proceeding or, subject to the terms of this
Agreement, seeking to protect its rights after a Reorganization Proceeding has
been filed by or against Borrower;
(j) intentionally omitted;
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(k) without limiting the generality of the foregoing Section
6(i), in any Reorganization Proceeding with respect to Borrower, (i) the
Subordinate Lender may file a proof of claim in respect of the Subordinate
Lender=s claims against Borrower and shall send the Senior Lender a copy thereof
together with evidence of the filing with the appropriate court or other
authority, (ii) if the Subordinate Lender should fail to file such proof of
claim by the tenth (10th) business day before the last day for filing of proofs
of claim, or if the Senior Lender reasonably believes that the proof of claim so
filed is less than the proper amount thereof, then the Senior Lender may file
such proof of claim, or corrected proof of claim, on behalf of the Subordinate
Lender, and (iii) if objection is made to the allowance of any claim of the
Subordinate Lender, the Senior Lender shall have the right to intervene and
fully participate in such proceedings and if such rights are denied and the
Subordinate Lender fails to defend such claim in the name of the Subordinate
Lender; and
(l) to the extent any payment under the Senior Loan Documents
(whether by or on behalf of Borrower, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to a trustee, receiver or other similar party
under any bankruptcy, insolvency, receivership or similar law, then if such
payment is recovered by, or paid over to, such trustee, receiver or other
similar party, the Senior Loan Obligations or part thereof originally intended
to be satisfied shall be deemed to be reinstated and outstanding as if such
payment had not occurred.
7. The Senior Lender, the Subordinate Lender and Borrower shall
cooperate fully with each other in order to promptly and fully carry out the
terms and provisions of this Agreement. Each party hereto shall from time to
time execute and deliver such other agreements, documents or instruments and
take such other actions as may be reasonably necessary to effectuate the terms
of this Agreement.
8. No failure or delay on the part of any party hereto in exercising
any right, power or remedy hereunder shall operate as a waver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder.
9. Each party hereto acknowledges that to the extent that no adequate
remedy of law exists for breach of such party=s obligations under this
Agreement, in the event any party fails to comply with such party=s obligations
hereunder, the other parties shall have the right to obtain specific performance
of the obligations of such defaulting party, injunctive relief or such other
equitable relief as may be available.
10. Any notice, report, demand or other instrument authorized or
required to be given or furnished hereunder (ANotices@) shall be in writing and
shall be given as follows: (a) by hand delivery; (b) by deposit in the United
States mail as first class certified mail, return receipt requested, postage
paid; (c) by overnight nationwide commercial courier service; or (d) by telecopy
transmission with a confirmation copy to be delivered by duplicate notice in
accordance with either of clauses (a) or (c) above, in each case addressed to
the party intended to receive same to the following address(es):Senior Lender:
Commerce Bank, N.A.1701 Route 70 East
Cherry Hill, New Jersey 08034
Attention: Gerard Grady
Phone No.: (609) 751-9000
Facsimile No.: (609) 751-6884
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Steven M. Miller, Esquire
Phone No.: (215) 569-5500
Facsimile No.: (215) 569-5522
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Borrower: FR Park Racing, L.P.
3001 Street Road
Bensalem, Pennsylvania 19020
Attention: Harold G. Handel, President
Telecopier: (215) 639-8678
with a copy to: Fox, Rothschild, O=Brien & Frankel, LLP
2000 Market Street, 10th Floor
Philadelphia, Pennsylvania 19103
Attention: Theodore A. Young, Esq.
Telecopier: (215) 299-2150
Subordinate Lender: Penn National Gaming, Inc.
825 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Attention: Joseph A. Lashinger
Telecopier: (610) 373-4966
with a copy to: Mesirov, Gelman, Jaffe, Cramer & Jamieson, LLP
1735 Market Street
Philadelphia, Pennsylvania, 19103
Attention: Robert P. Krauss, Esquire
Telecopier: (215) 994-1111
Any party may change the address to which any such Notice is
to be delivered or mailed, by furnishing ten (10) days written notice of such
change to the other parties in accordance with the provisions of this Section
10. Notices shall be deemed to have been rendered or given on the date they are
actually received; provided, that the inability to deliver Notices because of a
changed address of which no Notice was given, or rejection or refusal to accept
any Notice offered for delivery, shall be deemed to be receipt of the Notice as
of the date of such inability to deliver or rejection or refusal to accept
delivery. Notice for any party may be given by its respective counsel.
Additionally, notice from Lender may also be given by its servicer or agent, or
their respective counsel.
11. In the event of a conflict between the provisions of this
Agreement, on the one hand, and the provisions of the Subordinate Mortgage or
any of the other Subordinate Loan Documents, on the other hand, the provisions
of this Agreement shall prevail.
12. No person other than the parties hereto and their respective
successors and permitted assigns shall have any rights under this Agreement.
Subordinate Lender may assign its rights under the Subordinate Loan Documents
only if the assignee executes a subordination and intercreditor agreement
identical to this Agreement in favor of Senior Lender.
13. This Agreement may be executed in two or more counterparts each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
14. This Agreement may not be amended, supplemented, modified, waived
or terminated, in whole or in part, except in a written instrument executed by
the Senior Lender and the Subordinate Lender, it being understood and agreed
that no such amendment, supplement, modification, waiver or termination shall
require the signature or approval of Borrower in order to be fully enforceable.
15. In case any one or more of the provisions contained in this
Agreement, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and any other application thereof, shall
not in any way be affected or impaired thereby.
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16. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New Jersey applicable to contracts made and to be
performed therein (without giving effect to conflict of laws principles).
17. This Agreement shall bind and inure to the benefit of the Senior
Lender, the Subordinate Lender and Borrower and their respective successors,
permitted transferees and assigns.
18. BORROWER, THE SUBORDINATE LENDER AND THE SENIOR LENDER EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) , OR ACTIONS OF BORROWER, THE
SUBORDINATE LENDER OR THE SENIOR LENDER RELATING TO THE SUBJECT OF THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SENIOR LENDER
ENTERING INTO THIS AGREEMENT.
19. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT, AT SENIOR LENDER=S OPTION, IN THE COURTS OF THE STATE OF NEW JERSEY,
CAMDEN COUNTY OR MONMOUTH COUNTY, OR OF THE UNITED STATES OF AMERICA FOR THE
DISTRICT OF NEW JERSEY. EACH OF BORROWER AND THE SUBORDINATE LENDER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UN
CONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH OF
BORROWER AND THE SUBORDINATE LENDER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO IT AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 10 HEREOF. EACH OF
BORROWER AND THE SUBORDINATE LENDER HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF SENIOR LENDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST BORROWER AND/OR THE SUBORDINATE LENDER IN ANY OTHER
JURISDICTION PERMITTED BY LAW.
20. None of the following shall in any manner impair, negate or affect
the agreements of the Subordinate Lender set forth herein, all of which may be
done in the Senior Lender=s sole discretion (with the consent of Borrower, to
the extent required under the Senior Loan Documents): (a) any amendment,
modification, restatement, extension or consolidation of any of the Senior Loan
Documents other than to increase the principal amount of the Senior Loan
Obligations, (b) any change in the payment terms of, the Senior Loan, (c) any
release of any collateral for the Senior Loan, (d) any release of any person or
entity liable, in whole or in part, for the Senior Loan, and/or (e) any other
act or omission which might, but for this provision, impair, negate or affect
any agreement of the Subordinate Lender set forth herein other than to increase
the principal amount of the Senior Loan Obligations.
21. Notwithstanding anything to the contrary contained herein or
elsewhere, Subordinate Lender agrees that in the event that the Project or any
portion thereof, or any other property of Borrower that is subject to security
interests, liens, mortgages or other security arrangements to secure the Senior
Loan, is sold, transferred or otherwise disposed of (i) as permitted by the
Senior Loan Documents (including by exercise of Senior Lender=s rights or
remedies under the Senior Loan Documents) or (ii) in connection with any sale,
transfer, conveyance or other disposition to a party other than Borrower that is
otherwise consented to by Senior Lender and Borrower, or subject to the rights
of
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Subordinate Lender set forth in the immediately succeeding three (3)
sentences, for a price that Senior Lender determines is commercially reasonable
in light of the circumstances at the time, Subordinate Lender shall release,
without consideration, all rights in and interests to the UCC Collateral and/or
the Project or portion of the UCC Collateral and/or the Project or other
property so that the same may be transferred free and clear of all liens and
security interests in favor of Subordinate Lender, provided that Subordinate
Lender shall have a security interest in the proceeds of any property so sold,
transferred, conveyed or disposed to the extent that such proceeds exceed the
amount necessary to pay in full the Senior Loan Obligations. Senior Lender shall
promptly upon its receipt of any written offer (AInitial Offer@) to purchase the
UCC Collateral and/or the Project, provide a copy of the Initial Offer to
Subordinate Lender. If Senior Lender has not received a written offer from GRI
pursuant to Section 21 of the RV Subordination and Intercreditor Agreement (as
defined in the Loan Agreement), then Subordinate Lender shall have five (5)
Business Days from the expiration of GRI=s offer period under the RV
Subordination and Intercreditor Agreement, to submit an offer (ASubsequent
Offer@) that is for a purchase price at least five percent (5%) in excess of,
and on terms substantially similar to, the Initial Offer. If Subordinate Lender
submits a Subsequent Offer , the Senior Lender shall accept such Subsequent
Offer, it being understood that the requirement for commercial reasonableness as
to a Subsequent Offer is waived. If Subordinate Lender fails to consummate a
closing pursuant to a Subsequent Offer( it being understood that any closing
shall occur no more than ninety (90) days after the acceptance of the Subsequent
Offer), then Senior Lender=s obligation to grant any subsequent right of
purchase to Subordinate Lender is hereby waived. To effectuate the intent of
this Section 21, Subordinate Lender shall execute such termination and release
documents as Senior Lender may reasonably request to effectuate the terms
hereof, and Subordinate Lender hereby irrevocably appoints Senior Lender as
Subordinate Lender=s attorney in fact, which appointment is coupled with an
interest, to execute such termination and release documents.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
SENIOR LENDER:
Commerce Bank, N.A.
By: _/s/Jerry Grady____________
Name:Jerry Grady
Title:
SUBORDINATE LENDER:
Penn National Gaming, Inc.
By: _/s/Robert S. Ippolito_____________________________
Name:Robert S. Ippolito
Title: Secretary
BORROWER:
FR Park Racing, L.P.
By: Pennwood Racing, Inc., its General Partner
By: /s/Hal Handel________________________
Name:Hal Handel
Title:President
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JOINDER AND CONSENT
The undersigned First Union National Bank (AFirst Union@), being the
Assignee of the Subordinate Loan Documents, which Assignment is evidenced in
part by that certain Assignment of Mortgage dated ___________, 1999, and
recorded in the Clerk=s Office in Mortgage Book 818, page 375, for good and
valuable consideration, and with intent to be legally bound hereby, hereby joins
in and consents to all of the provisions of the foregoing Subordination and
Intercreditor Agreement, and hereby agrees to be bound by all of the provisions
of the foregoing Subordination and Intercreditor Agreement with the same force
and effect as if First Union had executed and been a party to the foregoing
Subordination and Intercreditor Agreement as owner and holder of the Subordinate
Loan Documents.
The provisions of this Joinder and Consent shall be binding upon First
Union and its successors and assigns, and shall inure to the benefit of Senior
Lender and Borrower and their respective successors and assigns. First Union
hereby represents and warrants to Senior Lender that First Union has not amended
any of the Senior Loan Documents nor has First Union assigned, pledged or
hypothecated any of the Senior Loan Documents.
All terms used in this Joinder and Consent shall have the same respective
meanings given to such terms in the foregoing Subordination and Intercreditor
Agreement.
IN WITNESS WHEREOF, First Union has executed this Joinder and Consent the
__29__ day of July, 1999.
First Union National Bank
By: _/s/Lynn Eagleson______
Name:Lynn Eagleson
Title: Vice President
Attest: __________________________
Name:
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NOTARY ACKNOWLEDGMENT
COMMONWEALTH OF PENNSYLVANIA :
: ss
COUNTY OF :
On the ___ day of ________________, 1999, before me, the subscriber, a
Notary Public in and for the Commonwealth and County aforesaid, personally
appeared _____________________________, who acknowledged himself/herself to be
the ________________ of Penn National Gaming, Inc., a _____________ corporation,
and that he/she, as such officer, being authorized to do so, executed the
foregoing Subordination and Intercreditor Agreement for the purposes therein
contained by signing the name of the corporation by himself/herself as such
officer, and desired that this Subordination and Intercreditor Agreement be
recorded as such as the act and deed of said corporation.
WITNESS my hand and seal the day and year aforesaid.
Notary Public
My Commission Expires:
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<PAGE>
NOTARY ACKNOWLEDGMENT
- --------------------- :
_____________________ : SS
- --------------------- :
On the ___ day of ________________, 1999, before me, the subscriber, a
Notary Public in and for the Commonwealth and County aforesaid, personally
appeared _____________________________, who acknowledged himself/herself to be
the _______ President of Pennwood Racing, Inc., a New Jersey corporation, the
said Pennwood Racing, Inc. being the sole general partner of FR Park Racing,
L.P., a New Jersey limited partnership, and that he/she, as such officer, being
authorized to do so, executed the foregoing Subordination and Intercreditor
Agreement for the purposes therein contained by signing the name of the
corporation by himself/herself as such officer, and desired that this
Subordination and Intercreditor Agreement be recorded as such as the act and
deed of said limited partnership.
WITNESS my hand and seal the day and year aforesaid.
Notary Public
My Commission Expires:
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<PAGE>
NOTARY ACKNOWLEDGMENT
- --------------------- :
_____________________ : SS
- --------------------- :
On the ___ day of ________________, 1999, before me, the subscriber, a
Notary Public in and for the Commonwealth and County aforesaid, personally
appeared Gerard Grady, who acknowledged himself to be the Vice President of
Commerce Bank, N.A., a national banking association, and that he, as such
officer, being authorized to do so, executed the foregoing Subordination and
Intercreditor Agreement for the purposes therein contained by signing the name
of the association by himself as such officer, and desired that this
Subordination and Intercreditor Agreement be recorded as such as the act and
deed of said association.
WITNESS my hand and seal the day and year aforesaid.
Notary Public
My Commission Expires:
170
DEBT SERVICE MAINTENANCE AGREEMENT
To: Commerce Bank, N.A. July 29, 1999
1701 Route 70 East
Cherry Hill, NJ 08034
To induce you to establish and/or continue financing arrangements with
and consider making or continuing certain loans and extending or continuing to
extend credit from time to time to FR Park Racing, L.P. and GS Park Racing, L.P.
(collectively, ABorrowers@), the Undersigned, intending to be legally bound, and
subject to the limitations of Section 2 and the other terms and conditions of
this Agreement, hereby jointly and severally agree to make available to
Borrower, by way of loans, capital contributions, advances or otherwise, such
funds to enable Borrowers to pay to you fifty percent (50%) of all of the
Obligations of Borrowers to you; provided, however, that unless the undesigned
has agreed in writing , the principal amount of the Debt Service Maintenance
Obligations (as defined herein) shall not exceed Eleven Million Five Hundred
thousand Dollars ($11,500,000) (as may be adjusted in writing from time to time,
the ACap@) (herein, the undersigneds= ADebt Service Maintenance Obligations@).
AObligations@ shall have the meaning set forth in the Loan Agreement. The
Undersigned shall also pay or reimburse you on demand for all reasonable costs
and expenses, including without limitation reasonable attorneys' fees, incurred
by you at any time to enforce, protect, preserve, or defend your rights
hereunder and with respect to any property securing this Agreement. Any funding
by the undersigned hereunder that is utilized by Borrowers to pay the
Obligations (and that is indefeasibly retained by you) shall be credited against
the undersigned=s Debt Service Maintenance Obligations; further, the undersigned
agree to make all such fundings directly to you at the office and in the manner
designated by you at any time. All payments hereunder shall be made in lawful
money of the United States, in immediately available funds. Unless otherwise
defined herein, all capitalized terms shall have the respective meanings given
to such terms in that certain Loan and Security Agreement dated the date hereof
among Borrowers and you (as it may hereafter be amended, supplemented or
replaced from time to time, the "Loan Agreement").
Each of the Undersigned further undertakes and agrees as follows:
1. Each of the Undersigned represents and warrants that:
a. The Undersigned's execution and performance of this
Agreement shall not (i) violate or result in a default or breach (immediately or
with the passage of time) under any contract, agreement or instrument to which
any of the Undersigned is a party, or by which any of the Undersigned is bound,
including, without limitation, under (A) that certain Second Amended and
Restated Credit Agreement among PNG, various banks and First Union National Bank
dated January 28, 1999, (as amended from time to time, ACredit Agreement@) and
(B) that certain Indenture among PNG, certain of PNG=s Subsidiaries and State
Street Bank and Trust Company, as Trustee, dated December 17, 1997 (as amended
from time to time, AIndenture@); (ii) violate or result in a default or breach
under any order, decree, award, injunction, judgment, law, regulation or rule;
(iii) cause or result in the imposition or creation of any Lien upon any
property of any of the Undersigned; or (iv) violate any of the Undersigned=s
articles of incorporation or by-laws or any other organizational document of any
of the Undersigned.
b. Each of the Undersigned has the full power and authority to
enter into and perform under this Agreement and to incur the obligations
provided for herein. The execution, delivery and performance of this Agreement
has been authorized by all proper and necessary actions of each of the
Undersigned.
c. No consent, license or approval of, or filing or
registration with, any Governmental Authority is necessary for the execution and
performance hereof by the Undersigned.
d. This Agreement constitutes the valid and binding obligation
of each of the Undersigned enforceable in accordance with its terms as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors= rights generally and by general equitable principles.
e. This Agreement promotes and furthers the business and
interests of each of the Undersigned, and the incurrence of the Obligations by
Borrowers and creation of the obligations hereunder will result in direct
financial benefit to each of the Undersigned.
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2. In the event that Borrowers fail to pay any of the Obligations
(including, without limitation, any failure to pay principal upon maturity or
acceleration), then the Undersigned shall, jointly and severally, on written
demand by you immediately fund (at the time and in the manner designated by you)
the Debt Service Maintenance Obligations arising from Borrowers= failure (any
such payment of the Debt Service Maintenance Obligations by the Undersigned is
referred to herein as a ADebt Service Maintenance Payment@), so long as the
making of the Debt Service Maintenance Payment, or any portion thereof, would
not cause an event of default under the Indenture (or if the making of the Debt
Service Maintenance Payment would cause an event of default under the Indenture,
then the chief financial officer of the Undersigned shall certify such fact to
you in writing). As soon as circumstances permit the Undersigned to make a Debt
Service Maintenance Payment (or any portion thereof) without causing an event of
default under the Indenture, the Undersigned shall (subject to this Section 2),
without further demand, immediately make the Debt Service Maintenance Payment
(or permitted portion thereof) to you. If the making of the Debt Service
Maintenance Payment will not cause an event of default under the Indenture but
an event of default has occurred and is continuing under the Credit Agreement
or, after giving effect to the making of the Debt Service Maintenance Payment by
the Undersigned an event of default would exist under the Credit Agreement (in
either case as certified to you in writing by the chief financial officer of the
Undersigned), then the Undersigned=s obligation to make the Debt Service
Maintenance Payment shall be suspended until the earliest of (a) one hundred
eighty (180) days after your demand to the Undersigned; (b) the curing or
waiving of any such event of default under the Credit Agreement; or (c)
acceleration of the obligations under the Credit Agreement; provided that no
more than one payment suspension on account of an event of default (or
prospective event of default) under the Credit Agreement may be instituted in
any given three hundred sixty (360) day period.
3. Each of the Undersigned hereby waives notice of (a) acceptance of
this Agreement, (b) up to the Cap, the existence or incurring from time to time
of any Debt Service Maintenance Obligations required hereunder, (c) the
existence of any Event of Default, the making of demand, or the taking of any
action by you, under the Loan Agreement, and (d) except as expressly set forth
herein, demand and default hereunder.
4. Each of the Undersigned (in its capacity hereunder) hereby consents
and agrees that you may at any time or from time to time in your discretion (a)
extend or change the time of payment, and/or the manner, place or terms of
payment of any or all Obligations, (b) amend, supplement or replace the Loan
Agreement or any related agreements, (c) renew, extend, modify, or decrease
loans and extensions of credit to Borrowers, (d) modify the terms and conditions
under which loans and extensions of credit may be made to Borrowers, (e) settle,
compromise or grant releases for liabilities of Borrowers, and/or any other
person or persons liable with Undersigned for, any Obligations, (f) exchange,
release, surrender, sell, subordinate, or compromise any Collateral of any party
now or hereafter securing any of the Obligations, and (g) apply any and all
payments received by you at any time against the Obligations in any order as you
may determine; all of the foregoing in such manner and upon such terms as you
may see fit, and without notice to or further consent from the Undersigned, who
each hereby agrees to be and shall remain bound upon this Agreement
notwithstanding any such action on your part. Notwithstanding anything to the
contrary in this paragraph 4 or anywhere else in this Agreement, you may not
increase the principal amount of the Obligations without the prior written
consent of the Undersigned.
5. Subject to Section 2 of this Agreement and the Cap, the liability of
each of the Undersigned hereunder is absolute and unconditional and shall not be
reduced, impaired or affected in any way by reason of (a) any failure to obtain,
retain or preserve, or the lack of prior enforcement of, any rights against any
person or persons (including Borrowers, the Undersigned or any other obligor) or
in any property, (b) the invalidity or unenforceability of any Obligations or
rights in any Collateral, (c) any delay in making demand upon Borrowers or any
delay in enforcing, or any failure to enforce, any rights against Borrowers or
in any Collateral even if such rights are thereby lost, (d) any failure, neglect
or omission on your part to obtain or perfect any lien upon, protect, exercise
rights against, or realize on, any property of Borrowers, the Undersigned or any
other party securing the Obligations, other than as a result of your gross
negligence or willful misconduct (e) the existence or nonexistence of any
defenses which may be available to Borrowers with respect to the Obligations
(other than the defense of payment), (f) any failure to proceed against
Borrowers or any Collateral in a commercially reasonable manner, or (g) the
commencement of any bankruptcy, reorganization, liquidation, dissolution or
receivership proceeding or case filed by or against any Borrower.
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6. If any or all payments made from time to time to you with respect to
any Debt Service Maintenance Obligation hereunder are recovered from, or repaid
by, you in whole or in part in any bankruptcy, reorganization, insolvency or
similar proceeding instituted by or against any Borrower, this Agreement shall
continue to be fully applicable to such obligation to the same extent as if the
recovered or repaid payment(s) had never been originally made on such
obligation.
7. All rights and remedies hereunder and under the Loan Agreement, and
related agreements, are cumulative and not alternative, and you may proceed in
any order from time to time against Borrowers, the Undersigned and/or any other
obligor of Borrowers= Obligations and their respective assets. You shall not
have any obligation to proceed against, or exhaust any or all of your rights
against, Borrowers prior to proceeding against the Undersigned hereunder.
8. Any and all rights of any nature of the Undersigned to subrogation,
reimbursement or indemnity and any right of the Undersigned to recourse to any
assets or property of Borrowers for any reason shall be unconditionally
subordinated to all of your rights under the Loan Agreement and the Undersigned
shall not at any time exercise any of such rights unless and until all of the
Obligations have been unconditionally paid in full.
9. Your books and records of any and all of Borrowers= Obligations,
absent manifest error, shall be prima facie evidence against the Undersigned of
the indebtedness due you or to become due to you hereunder.
10. This Agreement shall constitute a continuing obligation with
respect to all liability of the Undersigned under this Agreement and may not be
revoked or, except in connection with payment in full of the Obligations or
payment in full of the Debt Service Maintenance Obligations, terminated.
11. Subject to Section 2 of this Agreement, the Undersigned agrees that
you shall have a right of setoff against any and all property of any of the
Undersigned now or at any time in your possession, including without limitation
deposit accounts, and the proceeds thereof, as security for the obligations of
the Undersigned hereunder.
12. Subject to Section 2 of this Agreement, if an Event of Default
occurs and is continuing under the Loan Agreement, then all of the Debt Service
Maintenance Obligations of every kind or nature to you hereunder shall, at your
option, become immediately due and payable and you may at any time and from time
to time take any and/or all actions and enforce all rights and remedies
available hereunder or under applicable law to collect the Undersigned's
liabilities hereunder.
13. Failure or delay in exercising any right or remedy against the
Undersigned hereunder shall not be deemed a waiver thereof or preclude the
exercise of any other right or remedy hereunder. No waiver of any breach of or
provision of this Agreement shall be construed as a waiver of any subsequent
breach or of any other provision. The invalidity or unenforceability of any
provision hereof shall not affect the remaining provisions which shall remain in
full force and effect.
14. This Agreement shall (a) be legally binding upon the Undersigned,
and the Undersigned's successors and assigns, provided that the Undersigned's
obligations hereunder may not be delegated or assigned without your prior
written consent and (b) benefit any and all of your successors and assigns.
15. This Agreement embodies the whole agreement and understanding of
the parties hereto relative to the subject matter hereof. No modification or
waiver of any provision hereof shall be enforceable unless approved by you in
writing.
16. Intentionally Omitted.
17. This Agreement shall in all respects be interpreted, construed and
governed by the substantive laws of the Commonwealth of Pennsylvania. The
Undersigned irrevocably (i) submits to the jurisdiction of the Courts of the
Commonwealth of Pennsylvania and the United States District Court for the
Eastern District of Pennsylvania for the
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<PAGE>
purposes of any litigation or proceeding hereunder or concerning the terms
hereof and (ii) together with you, waives the right to a jury trial with respect
to any litigation or proceeding hereunder or concerning the terms hereof.
18. a. In any action or proceeding brought by you to enforce the terms
hereof, the Undersigned waives personal service of the summons, complaint, and
any motion or other process, and agrees that notice thereof may be served by
registered or certified mail, return receipt requested or by nationally
recognized overnight courier at the address of the Undersigned set forth on the
signature page hereof. Such service shall be deemed made on the date of delivery
at such address.
b. Any and all notices which may be given to the Undersigned
by you hereunder shall be sent to the Undersigned at the address of the
Undersigned set forth on the signature page hereof and shall be deemed given to
and received (on the date delivered) by the Undersigned if personally delivered
or if sent by facsimile transmission or if sent in the manner provided for
service of process in paragraph 18(a) above.
19. So long as the Obligations are outstanding, none of the Undersigned
shall sell, transfer, convey or dispose of any assets, other than in the
ordinary course of business, if the net sale proceeds from all assets sold by
all of the Undersigned exceed, in the aggregate, $3,000,000 in any fiscal year.
20. a. Subject only to the terms of Section 20 (b) of this Agreement,
each of the Undersigned shall be jointly and severally liable for all Debt
Service Maintenance Obligations.
b. Without limiting the effect of Section 13 of this
Agreement, to the extent that mandatory and non-waivable provisions of
applicable law (including but not limited to any applicable business corporation
laws) otherwise would render this Agreement invalid or unenforceable, each of
the Undersigned=s obligations hereunder shall be limited to the maximum amount
which does not result in such invalidity or enforceability.
21. Subject to Section 6 of this Agreement, upon payment in full of the
Debt Service Maintenance Obligations, this Agreement shall terminate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Debt Service Maintenance Agreement is hereby
executed on the date first written above.
Penn National Gaming, Inc.
Attest: _/s/Patricia G. Cramer____________ By: /s/Robert S. Ippolito________
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd. Suite 200___
Wyomissing, PA 19610
Backside, Inc.
Attest: /s/Patricia G. Cramer____________ By: _/s/Robert S. Ippolito___
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Robert S. Ippolito
Address: 825 Berkshire Blvd. Suite 200___
Wyomissing, PA 19610
The Downs Racing, Inc.
Attest: /s/Patricia G. Cramer_____ By: /s/Joseph A. Lashinger______
Name: Patricia G. Cramer Name: Joseph A. Lashinger
Title:President
- --------------------------------------------------------------------------------
175
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[SIGNATURES CONTINUED ON NEXT PAGE]
SIGNATURES CONTINUED FROM PREVIOUS PAGE]
Mill Creek Land, Inc.
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
Mountainview Thoroughbred Racing Association
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd.
Wyomissing, PA 19610
Northeast Concessions, Inc.
Attest:/s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Name:Robert S. Ippolito
Title:
Address: 825 Berkshire Blvd.
Wyomissing, PA 19610
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
176
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
PNGI Pocono, Inc.
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G.Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd.
Wyomissing, PA 19610
Penn National Gaming of West Virginia, Inc.
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
Penn National GSFR, Inc.
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G. Cramer Name: Robert S. Ippolito
Title: Secretary
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
[SIGNATURES CONTINUED ON NEXT PAGE]
177
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
Penn National Holding Company
Attest: /s/Patricia G. Cramer By: Robert S. Ippolito_
Name: Patricia G. Cramer Name: Robert S. Ippolito
Title: Secretary
Address: 825 Berkshire Blvd.
Wyomissing, PA 19610
Penn National Speedway, Inc.
Attest: /s/Patricia G. Cramer By: _/s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title: Secretary
Address: 825 Berkshire Blvd.
Wyomissing, PA 19610
Pennsylvania National Turf Club, Inc.
Attest: /s/Patricia G. Cramer By:/s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
Sterling Aviation, Inc.
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
Tennessee Downs, Inc.
Attest: /s/Patricia G. Cramer By: /s/Robert S. Ippolito
Name: Patricia G. Cramer Name:Robert S. Ippolito
Title:Secretary
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
Wilkes Barre Downs, Inc.
Attest: /s/Robert S. Ippolito By: /s/Robert E. Abraham
Name: Robert S. Ippolito Name: Robert E. Abraham
Title: Vice President
Address: 825 Berkshire Blvd
Wyomissing, PA 19610
179
Penn National Gaming, Inc., as Company,
each of the Subsidiary Guarantors named herein
and
State Street Bank and Trust Company,
Trustee
___________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of May 19, 1999
Supplementing the Indenture Dated as of December 17, 1997
___________________________
$80,000,000
10 5/8% Senior Notes due 2004, Series B
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FIRST SUPPLEMENTAL INDENTURE, dated as of May 19, 1999, between Penn
National Gaming, Inc., a Pennsylvania corporation (the "Company"), each of the
Subsidiary Guarantors that are signatories to this Supplemental Indenture and
State Street Bank and Trust Company, as trustee (the "Trustee").
WHEREAS, the Company and the Trustee executed and delivered that certain
indenture, dated as of December 17, 1997 (the "Indenture"), providing for the
issuance thereunder by the Company, and the authentication and delivery by the
Trustee, of the Company's 10 5/8% Senior Notes due 2004 (the "Notes"). Any
capitalized terms used herein and not otherwise defined shall have the meanings
given thereto in the Indenture.
WHEREAS, Section 9.02 of the Indenture authorizes the Company and the
Trustee, with the consent of the holders of not less than a majority in the
aggregate principal amount of then outstanding Notes excluding Notes held by the
Company and its affiliates (the "Requisite Consent"), to enter into a
supplemental indenture, except for the matters listed in Section 9.02 which
require the consent of each of the Holders effected thereby.
WHEREAS, the Company has solicited all registered holders of record of the
Notes as of the close of business on May 7, 1999 and obtained at least the
Requisite Consent of such holders.
WHEREAS, the Company and the Trustee have determined to amend and
supplement the Indenture in the manner described below, and all acts and
proceedings required by law and by the Indenture necessary to authorize and
constitute this Supplemental Indenture, and the amendments set forth herein, a
valid and binding agreement in accordance with the terms hereof, have been done
and taken.
WHEREAS, the Company has formed Penn National GSFR, Inc., a New Jersey
corporation and wholly-owned Restricted Subsidiary of the Company (AGSFR@);
WHEREAS, following the execution of this Supplemental Indenture, the
Company expects GSFR to have total consolidated assets with a book value in
excess of $500,000;
WHEREAS, consistent with the provisions of Section 4.18 of the Indenture,
GSFR shall herein execute and deliver this Supplemental Indenture for purposes
of becoming a Subsidiary Guarantor under the Indenture;
NOW, THEREFORE, in consideration of the foregoing, the Company covenants
and agrees with the Trustee, for the equal and proportionate benefit of the
respective holders from time to time of the Notes, as follows:
1. Modification or Addition of Certain Definitions in Section 1.01 of the
Indenture. The following definitions are hereby added to Section 1.01 of the
Indenture:
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AContingent Notes@ means the (i) $5,000,000 Contingent Promissory Note,
(ii) $3,000,000 Contingent Promissory Note and (iii) $2,000,000 Contingent
Promissory Note, each (w) dated January 28, 1999, (x) made payable to the order
of International Thoroughbred Breeders, Inc., a Delaware corporation, as agent,
(y) executed and delivered by GS Park Racing, L.P., a New Jersey limited
partnership, and FR Park Racing, L.P., a New Jersey limited partnership, and (z)
as in effect on such date, and any Refinancings thereof of (i), (ii) or (iii)
(provided that such Refinancing does not have any of the results specified in
clause (1) of the definition herein of ARefinancing Indebtedness@).
ADevelopment Costs@ means the costs to the NJ Entities to develop or
further develop NJ Racing or Gaming Locations incurred after May 19, 1999.
A40%-Owned Entity@ means (i) any corporation of which the outstanding
Capital Stock having at least 40% of the votes entitled to be cast in the
election of directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by the Company or a Wholly-Owned Restricted Subsidiary,
or (ii) any other Person of which as least 40% of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned by the
Company or a Wholly-Owned Restricted Subsidiary.
AGarden State Park Lease@ means the Lease Agreement dated January 28, 1999
between Garden State Race Track, Inc., a New Jersey corporation and GS Park
Racing, L.P., a New Jersey limited partnership, and all amendments and
supplements thereto that do not increase or result in an increase in the rental
or other financial obligations of GS Park Racing, L.P. or any other NJ Entity,
pertaining to the lease by GS Park Racing, L.P. of the premises known as Garden
State Park in Cherry Hill, New Jersey.
ANJ Entities@ means Pennwood Racing, Inc., a Delaware corporation, GS Park
Racing, L.P., a New Jersey limited partnership, FR Park Racing, L.P., a New
Jersey limited partnership, GS Services, L.P., a New Jersey limited partnership,
FR Services, L.P., a New Jersey limited partnership, and each of their
subsidiaries, affiliates, successors and assigns, in each case, if and for so
long as such Person is and remains at least a 40%-Owned Entity.
ANJ Racing and Gaming Activities@ means the purchase, improvement and
operation (including, but not limited to, any expanded operations such as
telephone wagering and off-track wagering) of the NJ Racing or Gaming Locations
by the NJ Entities.
ANJ Racing or Gaming Locations@ means Freehold Raceway in Freehold, New
Jersey and Garden State Park in Cherry Hill, New Jersey and such other locations
within the State of New Jersey owned, leased or operated, now or hereafter, by
the NJ Entities.
182
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APut Agreement@ means the Subordination, Nondisturbance, Attornment and Put
Option Agreement dated January 28, 1999, between Credit Suisse First Boston
Mortgage Capital LLC, a Delaware limited liability company, and GS Park Racing,
L.P., a New Jersey limited partnership, as in effect on such date.
APut Obligations@ means the obligations of GS Park Racing, L.P., a New
Jersey limited partnership, under Section 5 of the Put Agreement.
2. Amendment of the definition of APermitted Investments@. The definition
of APermitted Investments@ as contained within Section 1.01 of the Indenture is
hereby amended by (i) deleting the word Aand@ and replacing it with a semicolon
before clause (x), (ii) replacing the period at the end of clause (x) with A;
and@ and (iii) adding a new clause (xi) to such term as follows:
(xi) any Investment in the NJ Entities for the NJ Racing and Gaming
Activities at the NJ Racing or Gaming Locations (A) in an aggregate Investment
amount (including the principal amount of Indebtedness guaranteed as provided by
clause (xv) of the definition of Permitted Indebtedness) not to exceed at any
one time outstanding: (1) $8.75 million to fund (or to replenish moneys or
liquidity used to fund) up to one-half of the Put Obligations, (2) $5 million to
fund (or to replenish moneys or liquidity used to fund) up to one-half of
Contingent Note principal payments and (3) $4 million to fund (or to replenish
moneys or liquidity used to fund) Development Costs; provided, however, that the
amounts under the foregoing clauses (1), (2) and (3) shall be reduced on a
dollar for dollar basis by the amount of any guarantee of Put Obligations,
Contingent Notes or Development Costs, respectively, of the Company or any
Restricted Subsidiary on behalf of the NJ Entities that subsequent to May 19,
1999, expires or terminates without the Company or any Restricted Subsidiary
having advanced, paid or contributed to the NJ Entities or guarantee beneficiary
any amounts with respect to such obligations, and (B) consisting of a guarantee
of the obligations of GS Park Racing, L.P. under the Garden State Park Lease.
3. Amendment of the definition of APermitted Indebtedness@. The definition
of APermitted Indebtedness@ as contained within Section 1.01 of the Indenture is
hereby amended by (i) deleting the word Aand@ and replacing it with a semicolon
before clause (xiv), (ii) replacing the period at the end of clause (xiv) with
A; and@ and (iii) adding a new clause (xv) to such term as follows:
183
<PAGE>
(xv) any Indebtedness (A) of the Company or any Restricted Subsidiary
consisting of the guarantees of Indebtedness of the NJ Entities for the NJ
Racing and Gaming Activities at the NJ Racing or Gaming Locations in an amount
not to exceed at any one time outstanding: (1) $8.75 million or one-half
(whichever is less) of outstanding Put Obligations, (2) $5 million or one-half
(whichever is less) of the outstanding principal balance of the Contingent
Notes, and (3) $4 million of Development Costs; provided, however, that the
amounts under the foregoing clauses (1), (2) and (3) shall be reduced on a
dollar for dollar basis by the amount of any Investment by the Company or any
Restricted Subsidiary in any NJ Entities made (x) under subclause (1), (2) or
(3) (respectively) of clause (xi) of the definition herein of APermitted
Investments@ or (y) under Section 4.10 for purposes described in such subclause
(1), (2) or (3) (respectively), or (B) consisting of a guarantee of the
obligations of GS Park Racing, L.P. under the Garden State Park Lease.
4. Amendment of the definition of APermitted Liens@. The definition of
APermitted Liens@ as contained within Section 1.01 of the Indenture is hereby
amended by (i) deleting the word Aand@ and replacing it with a semicolon before
clause (xv), (ii) replacing the period at the end of clause (xv) with A; and@
and (iii) adding a new clause (xvi) to such term as follows:
(xvi) any Liens on the capital stock of or other ownership interests in the
NJ Entities held by the Company or any Restricted Subsidiary to secure
Indebtedness of the NJ Entities not prohibited hereunder.
5. Amendment to the Obligation to become a Subsidiary Guarantor. Section
4.18 of the Indenture is hereby amended to add a new sentence at the end of this
section as follows:
The provisions of this Section 4.18 shall only apply to a NJ Entity in the
event such NJ Entity becomes a Wholly Owned Restricted Subsidiary.
6. Addition of GSFR as a Subsidiary Guarantor. Pursuant to Section 4.18 of
the Indenture, GSFR hereby agrees to unconditionally guarantee all of the
Company=s obligations under the Notes and the Indenture, as amended, on the
terms set forth in the Indenture.
7. Full Force and Effect. The Indenture, as amended and supplemented by
this First Supplemental Indenture, shall be and remain in full force and effect
as of the date hereof; provided, however, in the event that the Company does not
acquire an ownership interest in the NJ Entities, the amendments set forth in
Sections 1, 2, 3, 4, 5 and 6 of this First Supplemental Indenture shall cease to
have effect and shall be void and this First Supplemental Indenture shall
thereupon have no effect on the Indenture.
8. Governing Law. This First Supplemental Indenture shall be governed by
and construed in accordance with the laws of the State of New York.
9. Duplicate Originals. This First Supplemental Indenture may be executed
in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
184
<PAGE>
10. Trustee Disclaimer. The Trustee has accepted the amendment of the
Indenture effected by this First Supplemental Indenture and agrees to execute
the trust created by the Indenture as hereby amended, but only upon the terms
and conditions set forth in the Indenture, including the terms and provisions
defining and limiting the liabilities and responsibilities of the Trustee, and
without limiting the generality of the foregoing, the Trustee shall not be
responsible in any manner whatsoever for or with respect to any of the recitals
or statements contained herein, all of which recitals or statements are made
solely by the Company and the Subsidiary Guarantors, or for or with respect to
(a) the validity or sufficiency of this First Supplemental Indenture or any of
the terms or provisions hereto, (b) the proper authorization hereby by the
Company and the Subsidiary Guarantors by corporate action or otherwise, (c) the
due execution hereof by the Company and the Subsidiary Guarantors, (d) the
consequences (direct or indirect and whether deliberate or inadvertent) of any
amendment herein provided for, and the Trustee makes no representation with
respect to any such matters and (e) the validity or sufficiency of the
Solicitation or the consent solicitation materials or procedure in connection
therewith.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the date first written above.
COMPANY:
PENN NATIONAL GAMING, INC.
By: /s/ William J. Bork
Name: William J. Bork
Title: President
SUBSIDIARY GUARANTORS
MOUNTAINVIEW THOUROUGHBRED RACING
ASSOCIATION, as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Chief Financial Officer
PENNSYLVANIA NATIONAL TURF CLUB, INC.,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
185
<PAGE>
PENN NATIONAL SPEEDWAY, INC.,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
PENN NATIONAL HOLDING COMPANY,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
PENN NATIONAL GAMING OF WEST VIRGINIA,
INC., as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
STERLING AVIATION INC., as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
POCONO DOWNS, INC., as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Assistant Secretary
NORTHEAST CONCESSIONS, INC.,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Assistant Secretary
186
<PAGE>
THE DOWNS OFF-TRACK WAGERING, INC.,
as Subsidiary Guarantor
By: /s/ Joseph A. Lashinger
Name: Joseph A. Lashinger
Title: President and Treasurer
THE DOWNS RACING, INC., as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
PENN NATIONAL GAMING OF INDIANA,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
PNGI POCONO, as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
PENN NATIONAL GSFR, INC., as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
Name: Robert S. Ippolito
Title: Treasurer
TRUSTEE:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Mark A. Forgetta
Name: Mark A. Forgetta
Title: Vice President
187
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<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Jun-30-1999
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<PP&E> 139,014
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0
0
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